Biomass Versus Natural Gas

Something to remember for project developers contemplating natural gas or biomass.
By Luke Geiver | July 26, 2012

There is no pause button with a productive natural gas well. Once a well has been tapped and recovery starts, the gas will flow until the operations costs (including additional well treatment) exceed the profits made from selling the recovered product. In places where infrastructure allows for the financially plausible transport of the gas, it’s better to sell it then flare it. If a well is operated in the U.S., then chances are that gas will stay in the U.S. With a yet to evolve liquefied natural gas (LNG) refinery infrastructure in place, one that is large enough to equip commercial long-haul fleets with LNG or fill overseas tankers with product bound for natural gas thirsty countries like Japan, U.S.-based natural gas will remain U.S.-based natural gas at the startling low price it is today.

Prices for natural gas are low, hovering in the range most of us wish our gasoline price per gallon was at in the $2 to upper $3 dollar range. A recently posted piece by my colleague Anna Simet about the link between low natural gas prices and low woody biomass prices has sparked my curiosity about the correlation between natural gas use (and unfathomable abundance) and project developers considering woody biomass versus natural gas as a feedstock for power production, transportation fuel production or thermal and steam applications.

Eric Kingsley, vice president of Innovative Natural Solutions, provided some perspective on the role natural gas has on biomass project development for me. Although Kingsley has, and is capable of supplying a lengthy report full of metrics, data, and an algorithm if needed, his commentary was simple (sort of). Where natural gas is available, natural gas for electricity generation will most likely be used in favor of biomass, he says. Why? (See natural gas prices).

For places that don’t have access to natural gas via pipeline the situation is much more complex. In Everett, Massachusetts, a port is receiving LNG and shipping large tankers via truck to urban campuses and hospitals for use in power and heat generation, according to Kingsley. So, the idea that natural gas-void locations will have to use an energy source like woody biomass for power or heat is, unfortunately, not true. And, there are LNG refineries under construction right now in the U.S. that will most likely give people in places far away from Pennsylvania’s natural gas rich landscape, a chance to use Pennsylvania-sourced LNG. Why a campus in the heart of biomass country or a fleet owner in South Carolina would want to use LNG is because again, of the low price of natural gas.

But, the allure of a stable and cheaply-priced (when compared to fuel oil) natural gas product as a main piece of future transportation fuel or power or even heat project development planning, just doesn’t, and won’t, show up for every project. The price of natural gas will fluctuate more in the future. And U.S.-based LNG will become a staple of other countries. Look at Japan again as an example, a place where natural gas sells for roughly four to five times the price than it does in the U.S. Anyone in the U.S. selling product for $3 today that could sell it for $15 today somewhere else would do so in a heartbeat.

Natural gas recovered in the U.S. will eventually go global. We know what the global demand (and all the ups and downs associated with that) can mean for an energy commodity's price volatility, just look at the price of a barrel of oil three months ago compared to yesterday. With a larger global market for LNG, the price rollercoaster will come.

But, as Kingsley points out, that same volatility and huge price swing factor that makes project development difficult to figure out from a fuel procurement standpoint, will not necessarily apply to biomass. The idea that low natural gas prices mean low woody biomass, or that in correlation, high natural gas prices mean high woody biomass prices is a stretch because the main variable in the price of biomass is the cost of diesel.

And, in many cases, woody biomass or other biobased feedstock alternatives for heat or steam purposes are priced the same or similar to an LNG product would be. Throw in policy that pushes for a biobased product or the call for biobased drop-in replacements, and the cheap, uber-abundant supply of natural gas in the U.S. doesn’t trump the use of biomass in future projects.

Disagree with my biomass point of view or have more to add? I’d embrace perspective on natural gas versus biomass.