Paula Mints

Job title:
Principal Analyst for Navigant Consulting’s PV Service Market Research Program

Areas of expertise:
Photovoltaic (PV) technologies and markets

Paula Mints is the principal analyst for Navigant’s PV Service Market Research Program, and executive editor of the Solar Outlook Newsletter, and is widely recognised as an industry expert on photovoltaic (PV) technologies and markets. She has 10 years of experience providing research products and insight about the photovoltaic industry.

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What is more economic - biomass power or biofuels?

Author: Guest Blogger Rakesh Radhakrishnan, Ph. D. | Associate Director| Energy | Navigant Consulting, Inc.

A short and very unsatisfactory answer to this question is, “Well it depends!”

In reality, there actually are some critical details that must be understood before a decision is made to deploy a biomass power or a biofuels production facility. Some of the details that factor into the final decision include:

  • Type of feedstock source, its availability and its proximity to the proposed project site;
  • Proximity of proposed site to transmission and/or major fuel pipelines/distribution infrastructure;
  • Proposed technology that will be used to produce electricity and/or fuel (and type of fuel for the biofuel production facility);
  • Local prices of electricity and/or fuels;
  • Future prices of electricity and fuels;
  • Local incentives for renewable electricity and/or fuels production and future outlook for these incentives; and
  • Environmental issues (permitting, impacts, emissions etc.) both current and future

A simple example can illustrate how some of these variables, namely, technology type and prices for electricity and/or fuels can impact overall economic attractiveness.

Assume you have a site that has access to 1 million dry tons of woody biomass (heat content ~8000 BTU/lb) per year. A 200 MW direct combustion plant (operating at 35% efficiency) could be powered with this source and at 90% capacity factor this facility would produce approximately 1.6 TWh per year.

At 10 cents/kWh, the revenue that can be generated by this facility is US$160m per year. If the same amount of biomass produces ethanol fuel at a clip of 70 gallons/ton (~35% conversion efficiency on an energy basis), the annual ethanol production would be 70m gallons per year annually which at $1.5/gallon would result in revenues of US$105m per year annually.

At face value the decision would seem obvious, which is to produce electricity, but it is also clear from the simple analysis above how changes in some of the other factors can change the results dramatically in favor of one approach over the other.

For example, if the technology used produced gasoline selling at US$3/gallon, the biofuel facility would generate revenues of US$210m annually. If the local power market only provided 5 cents/kWh electricity to the power producer, the revenues for electricity production would reduce to US$80m annually.

Enhancing the complexity is the incentive structure that could favor power production in some regions and fuel production in others. Additionally, capital costs for these facilities could be significantly different and this can change the internal rate of return picture as well.

Finally, from a net energy usage perspective, it is critical that these plants operate at efficiencies significantly greater than 35% leaving room for several additional revenue options including co-production of heating/cooling or even co-production of fuels in a power generation facility (e.g. through gasification) or vice versa.

In conclusion, it is imperative that investors in a biomass power or biofuel production facility carefully consider all of these competing (and at times complementary) alternatives/scenarios before making that final investment decision.

Posted 15/09/2010 by Paula Mints

Tagged under: Biomass , Biofuels , Navigant , Renewables , RE , climate change , renewable

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