Addressing Obstacles in the Biomass Feedstock Supply Chain
Biomass is one of the oldest energy sources, and there are compelling arguments for its use to generate electricity. First, unlike fossil fuels, the regenerative capacity of biomass provides for a renewable fuel source. Second, a significant amount of viable feedstock is considered waste, the use of which serves the dual purposes of energy production and waste management. Third, the use of sustainable biomass displaces the use of fossil fuels. Though both fuel sources emit CO2, the CO2 emitted by biomass would occur anyway through the process of decomposition, so there is a net reduction in CO2 emissions. Finally, the combustion of biomass also reduces methane emissions associated with the naturally occurring process of decomposition.
Despite the significance and potential of biomass as an energy source, development of a reliable feedstock supply chain has not occurred. Developers understand that a stable, long-term feedstock agreement is essential to procuring financing for any biomass project. Demonstrating to a landowner or farmer that the economic and other benefits of producing biomass (the production of which is often a multi-year commitment) outweigh the current land use can be a challenge without an established demand for the feedstock. Current land use, such as row crops, hunting habitat or Conservation Reserve Program acres, competes with biomass crops. Creating demand for feedstock also requires construction of conversion facilities, which require financing in addition to the financing of the generation facilities. And, in the true spirit of the chicken and the egg conundrum, lenders and investors require a reliable, long-term feedstock source before financing a project.
Prohibitively high costs are often cited as a major driver behind decisions to abandon biomass projects. Research into cost saving processes is currently underway. For example, it has been shown that denser fuel pellets offer cost savings but the drawback is that often the pelletization process results in significant feedstock loss. At the same time, the storage and transportation costs of denser pellets are significantly lower than other densification options, such as baling. Efforts to integrate biomass with traditional agriculture, for example through the use of crop rotation and agricultural intensification may lead to yield increases and price reductions. Sustainable harvesting techniques, such as one-pass harvesting, can reduce harvest site fuel consumption significantly. Further, developing synergies between harvest and transport, for example by using self-compacting wagons for both harvesting and transportation, may also provide cost savings.
Satellite processing may save costs by allowing certain preprocessing of the biomass to occur before transportation to the conversion facility. Drying and densification of the feedstock with mobile equipment that can be located close to the feedstock can reduce transportation costs. The establishment of regional processing centers that aggregate, process, store and supply biomass to the region could also provide significant cost reductions. In addition to drying and densification, regional centers could perform other preprocessing procedures to homogenize feedstock from several sources. Developers could decrease expenses associated with having multiple feedstock contracts. The aggregator, given its size, should be able to provide a more reliable supply, as a result of the large quantities it can handle.
According to the chief executive officers of several major biofuel companies, advanced biofuel commercialization is only a few years away, even though many argue that this is overly optimistic. Biomass projects will need to find the right combination of the type and location of feedstock, cost effective harvest and transportation methods and demand for output.
With an increasing number of states adopting or expanding their renewable portfolio standards, utilities can help drive demand for biomass projects. Often utilities assign more value to biomass projects because unlike wind or solar, it is base-load power. As technology evolves, we will see maturation of the supply chain through the introduction of satellite and regional processing facilities. These advances, in conjunction with more effective harvest techniques, the development of high-yield energy crops and advancements in processing and conversion technology can all work to move the industry forward.
Author:Kate L. Bechen
Member, Michael Best & Friedrich LLP’s Renewable Energy,
Health Care and Business Practice Groups