Bioenergy in the USA - Appropriate Bioenergy Development

The U.S. is facing a critical energy problem. This is the third of three sections exploring the problem, and actions being taken: The U.S. Energy Problem, Bioenergy in the USA, and this section (Appropriate Bioenergy Development). You can also download and/or view the full text and PowerPoint slides for this paper in pdf format.

Appropriate Bioenergy Development
Determining what is appropriate in terms of bioenergy development requires first an assessment of what various bioenergy technologies can and cannot do relative to the fossil-energy source problem, followed by refinement of methods for deploying those technologies in ways that best produce economic benefits and security. Obviously that will be an enormous undertaking. An overview of some factors to consider and some first case studies are presented below.

The vision goals set by government's technical advisory committee would increase biomass consumption to nearly 3800 million MWh by 2030, which is about 12 percent of current U.S. energy consumption and less than 10 percent of expected 2030 consumption based on EIA projections. Even replanting the entire cropland of the U.S. with energy crops would yield, using the ORNL factors for biomass energy per unit land area [7], about 6800 million MWh - which is 15 percent less than the energy consumed annually by the transportation sector. Analyses such as this are not only folly (where would we grow our food?), they are erroneous because they use gross, rather than net, energy production. If producing biofuel is more energy intensive than producing gasoline (and all indications are that it is, regardless of which study you believe), then the gap between supply and demand would be even worse.

Appropriate Project Criteria
Since bioenergy cannot replace fossil-fuel energy, rather than setting targets for increased national consumption of bioenergy, it may be more appropriate to set goals for the combined thermodynamic and economic efficiency of bioenergy projects. This would help ensure that the limited supply of bioenergy is used for projects that produce the greatest amount of useful work and economic benefits possible. In this way, the economic hardships of fossil energy decline are optimally addressed. The criteria for evaluating projects would be based on the following:

Production Efficiency:
Calculation of the energy profit ratio, defined as the ratio of produced fuel energy to process energy, must be calculated by a neutral third-party using standardized protocols.

Utilization Efficiency:
The amount of useful work done per unit of fuel consumed must be calculated by a neutral third-party using standardized protocols.

Economic Efficiency:
The value to consumers must be calculated not only based on changes in current and projected energy expenditures, but more importantly based on local multiplier impacts. The local character of capital costs, fuel costs, and operating costs must be evaluated over the life of the project to determine the net long-term benefits to the community hosting the project.

First Case-Study Projects
The efficiency criteria above are being used to develop biomass projects in Santa Fe, New Mexico, USA. The projects are currently under development by Local Energy (Santa Fe, New Mexico, USA) in cooperation with BIOS BIOENERGIESYSTEME GmbH (Graz, Austria) and with several economists, including local-economic specialist Michael Shuman (Washington D.C., USA).

The main project is a district-energy system designed to provide space heating and domestic hot water to about 550 commercial and residential customers in downtown Santa Fe using woodchip biomass from forest and woodland thinning projects surrounding the community. A variety of scenarios are under investigation, including two proposed locations for the heating plant, and a cogeneration option. For brevity, only one option (the most likely one) is presented here, which is the heat-only scenario with the heating plant located 2 miles (3.2 km) from downtown.

Four smaller micro-grid systems are being studied simultaneously with the main project in order to begin demonstrating the technology within the community and to develop the local capacity to provide biomass fuel for larger projects. The four sites of the micro-grid projects are an apartment complex, a government office complex, a private college, and a community college. This last project, at the Santa Fe Community College, is expected to go to construction in summer 2005 in order to be operational for the 2005-06 heating system.

Fuel Production Efficiency
Sources of biomass fuels within a 50-mile radius were investigated, including sawmills and other commercial operations, municipal green-waste stations, and forest-thinning projects. Conservative estimates from that investigation found a 53 percent surplus of fuel available on a sustainable basis for the main project, with most of the fuel coming from commercial sawmills. This bodes well under the Production Efficiency criterion given above, since mill wastes have been shown to have a 50:1 energy profit ratio in studies conducted in Austria [9]. Wood chips from forest projects in the same study showed a 20:1 energy profit ratio. The many different methods used in life-cycle analyses limits the usefulness of comparisons with other studies, but with that limitation in mind, biodiesel from soybeans has been shown to have an energy profit ratio of 3.2:1 [10], and ethanol from corn has a reported energy profit ratio of between 0.6:1 [11] and 1.3:1 [12]. Since relatively little processing is required for woodchip biomass, it is expected that the energy profit ratio should be higher than for liquid fuels, at least for cases in which the transport distance is small.

Utilization Efficiency
The heating plant design for the main project is a moving-grate furnace with a horizontal pressurized hot-water boiler. Based on chemical analyses of the locally available biomass and their past experience with optimizing biomass combustion performance using computational fluid dynamics modeling, BIOS BIOENERGIESYSTEME projects an overall efficiency at the heating plant of 91.6 percent. The design of the 30,000 meter delivery network is similarly optimized using software designed by BIOS and calibrated with empirical data from their database, and has a projected overall efficiency of 84.1 percent. The overall efficiency of the heating system is therefore 77 percent or, if the electricity needed to run the pumps is considered, 75 percent.

Similar utilization efficiency calculations for the micro-grid at the Santa Fe Community College show overall system efficiencies of 87 percent without considering the pumping energy, and 85 percent if the pumping energy is considered.

Economic Performance
Most of the target customers for the main system currently use natural gas-fired boilers, for which fuel prices have tripled over the past six years. (The net increase to the consumer has been smaller, since the fuel is only one component of the bill.) The January, 2005 price for delivered gas to commercial customers in Santa Fe is US$8.20 per million BTU (US$0.028 per kWh), making the actual price for heat (considering an average 75% utilization rate) US$10.92 per million BTU (US$0.037 per kWh).

Capital costs for the main project are estimated by BIOS at US$23.7 million, and annual operating costs total about $2.9 million per year. This translates to a specific energy production costs of $17.91 per million BTU, 64 percent above current heating costs. Superficially, the project does not appear economic unless natural gas costs increase. Such an increase is certainly expected, but the timeframe for it is not known. A similar analysis for the project at the Santa Fe Community College predicts an energy production cost of US$8.53, 22 percent below current costs. This project appears to be economic immediately.

Economist Michael Shuman designed an ownership model for the main project with the objective of localizing the economic benefits. He furthermore calculated that under the current scenario, only about 20 cents of every dollar spent by Santa Fe residents on their natural-gas utility bills gets re-spent within the community, while the other 80 cents leaks out. Under his proposed community-ownership model, preliminary results show that the reverse is true, with 80 cents of every dollar remaining in the community. Using the RIMS-II economic model, he calculates that every dollar not spent on a utility bill with the investor-owned utility creates US$8.80 in output for Santa Fe County.

Under Shuman's ownership model for the project, the project would be built by a for-profit corporation with residency requirements on the stock to ensure local ownership. The County would agree to subsidize the project as needed to bring the price of heat from the system down to the equivalent price of natural gas. At some point the price of gas is expected to rise such that no further subsidy is needed. To determine the total subsidy required, Shuman took historical data for consumer prices of natural gas dating to 1987, and determined three possible price-rise scenarios, ranging from 1.09 percent per year to 13.84 percent per year. Preliminary results showing the subsidy required under each scenario and the respective multiplier benefit to the county over the fifty-year life of the project are shown below in Table 4.

There are limitations to this type of analysis, of course. No community could withstand the perpetual 14 percent annual rise in energy costs on which the resulting US$4 billion benefit is based. That’s part of the point, however: no one knows how high gas costs will go as the resource depletes, and a significant benefit of this project is that it limits the community’s exposure to the very real threat of runaway energy costs.

Summary
It is acknowledged that the work presented here, in its current state, may pose more questions than it answers. The process of determining the steps that are most “appropriate” with regard to bioenergy development is just that – a process. The hope is that this work will inspire the right questions, and that further work to answer those questions will ensure that we continue in the right direction. The fossil-energy supply problem facing us is serious, and its consequences are likely to be severe. Bioenergy alone cannot solve the problem, but strategic and appropriate bioenergy projects that emphasize high efficiency and local economic benefits can serve as models of sustainability for communities seeking to protect and improve the quality of life for their citizens now and in the future.

References

[1] BP Statistical Review of World Energy 2004.

[2] United States Country Analysis Brief, April 2004, U.S. Department of Energy, Energy Information Administration.

[3] Association for the Study of Peak Oil and Gas, ASPO-Stat-Rev-Tables.xls, available at www.peakoil.net.

[4] Balancing Natural Gas Policy – Fueling the Demands of a Growing Economy, National Petroleum Council, September 25, 2003.

[5] Renewable Energy Trends 2003, U.S. Department of Energy, Energy Information Administration, July 2004.

[6] Davis S, Diegel S, 2004 December. Transportation Energy Data Book: Edition 24. Available at http://www-cta.ornl.gov/data/Index.html

[7] Walsha M, Perlacka R, Turhollowa A, Ugarteb D, Beckerc D, Grahama R, Slinskyb S, Rayb D. 1999 April and 2000 January. Biomass Feedstock Availability in the United States: 1999 State Level Analysis. Available at http://bioenergy.ornl.gov/resourcedata/

[8] Walsh M, Ugarte D, Shapouri H, Slinsky S. April 2003. Bioenergy Crop Production in the United States: Potential Quantities, Land Use Changes, and Economic Impacts on the Agricultural Sector. Environmental and Resource Economics 24 (4):313-333

[9] Stockinger H, Obernberger I. June 1998. Life Cycle Analysis of District Heating with Biomass. Proceedings of the Tenth European Bioenergy Conference.

[10] Sheehan J, Camobreco V, Duffield J, Graboski M, Shapouri H. May 1998. An Overview of Biodiesel and Petroleum Diesel Life Cycles. National Renewable Energy Laboratories.

[11] Pimentel D. June 2003. Ethanol Fuels: Energy Balance, Economics and Environmental Impacts are Negative. Natural Resources Research.

[12] Shapouri H, Duffield J, Wang M. July 2002. The Energy Balance of Corn Ethanol: An Update. Office of the Chief Economist, Office of Energy Policy and New Uses. Agricultural Economic Report No. 813.