Economic and Policy Context of Woody Biomass Utilization for Electric Power Healthy Landscapes, Thriving Communities Bioenergy and Wood Products Conference January 21, 2004 – Denver Dr. Mark Nechodom, US Forest Service Pacific Southwest Research Station

Mapping the Biomass Territory With grateful acknowledgements to Bob Shleser

A Pricing Problem? Huh…? !

Costs From Forest to Bus Bar = 7.5¢/kWh Sources: Nechodom, Mason & Hartsough in press; TSS Consultants Unpubl.

Sources: Morris 1999; Nechodom & TSS (unpubl) ( Based on California Wholesale Markets, 2002 ) Potential Income and Avoided Costs (public benefits) = 18.7 cents/kWh

Sources: Morris 1999; Nechodom & TSS (unpubl) ( Based on California Wholesale Markets, 2002 ) Huh…? !

Environmental and Social Impacts and Costs of Wildfire: At What Price? Timber losses Watershed damage Water treatment Tourism and recreation Amenity values Wildlife habitat Disaster relief costs Lost jobs and wages Rehabilitation and restoration costs Transportation (movement of goods and services) Human health Evacuation and displacement Cultural and archeological sites

The Forest Thinning Problem: 1. How much does it cost? 2. How much do I get in return? 3. How do we calculate risk? 4. What is “it”? 1. (what is the level of public investment?) 2. (who benefits? who pays? 3. (what if we don’t invest?) 4. (what exactly are you planning to do out there?)

“Creating” Renewable Energy Markets 1. Public Goods Funds: taken off the top of ratepayer bills; allocated by govt or utility 2. Renewable Portfolio Standards: require the market (suppliers and consumers) to respond 3. Green Power Pricing: connecting demand (consumers) to supply (e.g., biomass plants) 4. Subsidies: transfers financial resources from taxpayers to ratepayers

Renewable Energy “Public Goods Funds” $127 mil. RI: $10 mil MA: $332 mil CT: $275 mil NJ: $271 mil. $85 mil. $80 mil. $32 mil. $94 mil. $1890 mil. $40 mil. $95 mil. $10 mil. $234 mil. 16 states with renewable funds $4.3 billion to be collected through 2012 DE: $11 mil. $20 mil. Source: Lawrence Berkeley National Laboratory

States with Renewable Portfolio Standards WI: 2.2% by 2011 IA: 105 MW MN: 825 MW by 2012 NV: 15% in 2013 TX: 2,880 MW by 2009 PA: varies by utility NJ: 6.5% by 2012 CT: 13% by 2009 MA: 4% new by 2009 ME: 30% by 2000 NM: 10% by 2011 AZ: 1.1% by states ~33% of total U.S. load covered Source: LBL, NREL, author CA: 20% by 2017

Almost half of US electricity customers have access to a green power product

Policy-Level Support MOU on Biomass Utilization – USDA, DOE, DOI – Signed June 16, 2003 Healthy Forest Restoration Act (HR 1904 – Title II: Biomass) Increased policy-level interest in translating forest investments into cost- savings and revenues