1. Closing the Biomass Power Cost-Price Gap
B.R. Bock
3/5/04
Southern Bio-Products Conference
Green Power Track
Biloxi, MS

2. Why Biomass Power? General Utility Perspective
Renewable (replenishable)
Cleaner than from fossil fuels—NOx, SOx, Hg, CO2
Rural economic development
Solve biomass by-product and waste management problems
Other environmental benefits (e.g., energy crops vs. row crops)
Utility Perspective
Possible renewable portfolio standards (RPS)
Limited wind and solar resources in SE US
Biomass—primary large-volume option in SE US
Other renewable mandates (e.g., Federal Executive Order 13123)
Demand for green power (i.e., willingness to pay premium)

3. Direct Combustion Technologies 1/
Technology
Capacity
Levelized COE MW
¢/kWh
Coal-fired steam turbine
100
1.8
Biomass options ($20/dry ton; ~$1.20/MBtu):
Co-firing with coal (100 MW plant) 15
3.0
Stand alone boiler-steam turbine
8.6
Combined heat and power (CHP)
6 MWe 72 MWt 2/
-1.0 1/
2/ Assumes $6.00/MBtu steam (~$4.80/MBtu natural gas)

5. ΔCOE: Biomass Co-firing vs. Coal
Biomass, $/dry ton
ΔCOE, ¢/kWh
-0.10 10
0.55 20
1.20 30
1.85 40
2.50

8. Options for Closing the Gap
Renewable energy incentives
Mandated use of renewable power (renewables competing with renewables)
Lower feedstock costs (technical, market, policy)
Energy conversion improvements
Increased revenue from co-products
Systems optimization
Environmental credits

9. Renewable Energy Incentives
Production tax credits (e.g., Section 45~1.8¢/kWh)
Closed loop
Open loop
Renewable energy production tax credit (REPI)
Tradable renewable energy credits
Green power premiums*
Green power tags*
Above generally are mutually exclusive
Other (e.g., accelerated depreciation)

10. Mandated Use of Renewable Power (renewables competing with renewables)
Federal or state renewable portfolio standards (RPS)*
Proposed levels generally in the 2 to 10% range
Federal Executive Order 13123
2.5% of Federal facility electricity consumption from renewables by 2005

11. Lower Feedstock Costs
Environmental pressures on wastes and by-products
Poultry litter
Swine manure*
Wood waste piles
Commodity surpluses (e.g., small diameter wood)
Higher energy crop yields (lower unit costs of production)
Agricultural policy options for improving energy crop economics*

12. Energy Conversion Improvements
Higher efficiency (e.g., gasification combined cycle)
Lower capital and O&M costs (e.g., lower cost gas clean-up)
Refining biomass co-firing with coal*

13. Increased Revenue from Co-products and By-products
Combined heat and power
Bio-refinery concept (power + fuels and chemicals)
Fertilizers and feed supplements from poultry litter ash
Other

14. Systems Optimization Economies of scale Continuous operation
Combined heat and power
Systems integration

15. Integrated Poultry and Ethanol Production
SE U.S.
Markets
Carbon Dioxide
Corn
Ethanol
DDGS
Poultry
Litter
Combined
Heat & Power
Poultry
Feed
Ash
Meat
Fertilizer

16. Energy Economics Ash value offsets poultry litter feedstock costs
5 MW 3.5¢/kWh
100,000 lb $3.50/MBtu NG eq.
65 MBtu hot $3.50/MBtu NG eq.
18% internal rate of return (before tax)

17. Environmental Credits
SOx
NOx
CO2

18. Value of CO2 Credits

19. Summary: Biomass Power
Wind resources very limited in SE US
Solar very expensive
Biomass is primary large-volume renewable option, but currently has a significant cost-price gap
Gap is smallest for co-firing and combined heat and power
Also relatively small gaps associated with some waste- management and systems-integration opportunities
Emerging incentives, premiums, policies, and environmental credits have good potential for closing the cost-price gap in short- to mid-term
Technological advances can help bridge the gap in the longer term