Global Costs of Biomass Power
The renewable energy industry may be labeled a pipedream by fossil fuel tycoons and stakeholders, but expert analysis is making it difficult to deny its potential, and not just in the U.S. On a global scale, the wind, solar and hydro industries are worth more than $1 billion annually, and developing countries continue to embrace the waste-based technologies of biogas and biomass power. While cost has typically been the biggest development hindrance, that is slowly starting to change. The International Renewable Energy Agency points out that recent years have seen dramatic cost reductions as a result of research and development and accelerated deployment, but unfortunately, policymakers are often exposed to outdated information. Since most are unaware of the latest cost data, progress is not where it could be.
In order to disperse and make available current renewable energy market data, IRENA has published a five-part renewable energy cost analysis series, with the hopes that it will assist in policymaking, especially in its 102 member countries. Michael Taylor, IRENA renewable energy cost status and outlook analyst, explains that the organization has a mandate from its members to accelerate the deployment of all types of renewable energy, and as part of this mandate, IRENA’s Innovation and Technology Centre has a specific program that focuses on the costs and performance of renewable technologies.
“The rapid growth in installed capacity of renewable energy technologies, coupled with technology improvements and associated cost reductions, means that even data from one or two years ago can significantly overestimate the cost of electricity from these technologies,” Taylor says. “The lack of accurate, reliable data on the cost and performance of renewable technologies is a significant barrier to their uptake.” Simply stated, renewable energy data becomes outdated in a hurry, and that isn’t widely known.
IRENA data collection for the cost analysis series included acquiring information from industry associations, project developers, development banks, consultancies, market research data, government reports and auction data. Additionally, IRENA worked with GIZ, a German-based sustainable development corporation, to collect detailed, real-world project data for 79 projects from 11 developing countries. And, data collection is still an ongoing effort.
One of the core conclusions of IRENA's research so far shows that the total installed costs of biomass power generation technologies vary significantly by technology and country, according to Taylor.
Technology and Feedstock Costs
“The challenge when talking about biomass power generation is to convey the idea that we are actually talking about a series of technologies,” Taylor says. “The simple combustion of biomass to generate steam requires a very different technology than that required to gasify wood chips and then burn that gas to provide steam to power a turbine, and these technologies vary substantially in technology terms and cost. The situation is also complicated by the fact that some technologies are more mature than others.”
For example, the total installed costs of stoker boilers ranged between $1,880 and $4,260 per kilowatt (kW) in 2010, while those of circulating fluidized bed boilers were between $2,170 and $4,500 per kW. Anaerobic digester power systems had a significantly wide range of capital costs from $2,570 up to $6,100 per kW, and gasification technologies had total installed capital costs of between $2,140 and $5,700 per kW.
While IRENA’s report recognizes that there are many possible influences on cost, its modeling is based off of three key drivers: equipment cost from factory gate to site delivery; total installed project cost, including fixed financing costs; and the levelized cost of electricity (LCOE), a calculation of the cost of generating electricity at the point of connection to a load or electricity grid.
The LCOE of biomass-fired power plants range from 6 to 29 cents per kWh based on capital costs and feedstock costs. Where low-cost feedstocks are available and capital costs are modest, biomass can be a very competitive power generation option, according to the analysis, and where low-cost agricultural or forestry residues and wastes are available, biomass can often compete with conventional power sources. Even where feedstocks are more expensive, the LCOE range for biomass is still more competitive than for diesel-fired generation, making biomass an ideal solution for off-grid or minigrid electricity supply.
There are four major components that largely determine the LCOE for biomass-fired power generation technologies, according to Taylor: feedstock cost and quality, equipment cost and performance, the balance of project costs and the cost of capital. “The feedstock costs and capital costs, including the cost of finance, primarily determine the LCOE for biomass-fired power generation,” he says. “Feedstock costs typically account for between 20 percent and 50 percent of the LCOE, but they can be even higher.”
Operations and maintenance (OM) costs can make a significant contribution to the levelized cost of electricity as well, accounting for 9 to 20 percent of the LCOE for biomass power plants. IRENA’s data indicates that it can be lower than this in the case of cofiring, but greater for plants with extensive fuel preparation or handling and conversion needs. Fixed OM costs typically range from 2 to 7 percent of installed costs per year for most biomass technologies, with variable OM costs of around one-half a cent per kW hour (kWh). Landfill gas systems have much higher fixed OM costs, which can be 10 to 20 percent of initial capital costs per year.
To bring down the cost of biomass power technologies over time, Taylor has some insight. “Part of the answer to this question lies in the fact that different technologies are at different stages of maturity,” he says. “Although we don’t expect significant cost reductions for mature technologies like stoker boilers, the opportunities for cost reductions from many of the gasification technologies are much better.”
On feedstock, Taylor says the use of agricultural or forestry residues at the site where they are processed often results in the lowest electricity costs, given the noted importance of feedstock costs relative to overall electricity generation costs from bioenergy. Current data shows that the most competitive projects using these feedstocks produce electricity for as low as 6 cents per kWh.
Technology and cost specifics aside, some countries are clearly trailblazing the renewable energy path, and there are a few stand-outs and up-and-comers.
Market Trends and Growth
Currently, Europe and North America account for around two-thirds of total installed renewable energy capacity, a result of a combination of supportive policies and low-cost feedstocks, notably agricultural and forestry residues, according to Taylor. A specific example of that is in Germany, which in 2011 had 7,090 digesters, and was the leading country for both the quantity of plants and the amount of installed capacity at 2,394 MW of electricity. Virtually all of this capacity is located in the agricultural sector where corn silage, other crops and animal slurry are used, according to IRENA, and this is driven by a feed-in tariff in Germany that supports electricity generation from biogas.
Outside of Europe and North America, Brazil stands out as an important market for renewable energy, with 9 percent of global installed capacity in 2011, Taylor says. “What we found particularly interesting [when collecting data] were some of the plans that smaller countries have for the future,” he remarks. “Uruguay, for instance, plans to add only renewable capacity over the next 10 years, including a mix of predominantly bioenergy and wind, with some solar. They project that by 2015 biomass will provide 18 percent of their electricity needs and will help reduce average electricity generation costs and reduce variability in those costs.”
Overall, data shows that between 2010 and 2030, global biomass and waste power generation could grow from 62 to 270 gigawatts, with investments totaling between $21 billion and $35 billion. China and Brazil appear to have the largest potential, but growth in Brazil is hinged on the continuing development of the biofuel industry and the possibilities for using waste bagasse for electricity generation. The amount of bagasse available, however, depends on the ethanol and sugar markets, which makes it difficult to negotiate long-term contracts that are designed to reduce price risk and guarantee security of feedstock supply, both of which will be required to allow access to financing. In China, growth potential depends on better utilization of the large quantities of agricultural residues and waste produced.
Now that the cost analysis series is complete and available, IRENA plans to supplement them over time with new project cost data collected from member countries, and will also add the costs of renewables in end-use sectors, such as transportation. While up-to-date data now confirms that power generation technologies are becoming increasingly competitive—it accounts for half of all new power generation capacity additions worldwide—building on existing biomass industry segments will be essential for continued growth, as well as nurturing the new and lesser-deployed technologies. "Further deployment, commercial experience, learning-by-doing and large scale production could all help bring down costs for these less mature technologies," Taylor adds.
Author: Anna Simet
Contributions Editor, Biomass Magazine