Biomass and Biopower: What’s the Outlook?
Now that the Obama administration has another four-year window and the hotly-debated fiscal cliff has been avoided, scuttlebutt around office bubblers (a Midwestern term for water fountain) surrounds the outlook for biomass and biopower. In one of my columns last year, I was cautiously optimistic about biopower projects. So what’s my outlook today? I remain cautiously optimistic. It appears that projects related to biomass and biopower have a chance to make a contribution to the U.S. energy mix, and my reasons for this follow.
First, the Obama administration’s drive for renewable energy production and research will continue, as was vividly pointed out in the passing of fiscal cliff legislation. The bill extended the production tax credit by one year, which is valid not only for wind power projects, but also for biomass and waste-to-energy projects. Several other tax credit extensions for various biofuels and new eligible feedstocks, such as algae, telegraph the pro-biomass intent of the Obama administration. This will definitely keep some biomass projects on the table.
The administration’s intent in respect to certain biopower competitors, such as low-cost natural gas, is less obvious. Natural gas prices have been on a downward skid since January 2012, and currently they hover a little over $3 per MMBtu. This is a challenge for biomass, especially since the administration’s most effective carbon reduction method has been the replacement of coal power generation with natural gas generation. The fact remains that the U.S. has built only a handful of new power plants over the past several years, and now that some sectors of the economy are recovering, there is a strong possibility that new generation will be needed. Significant biopower supply is still relegated to either large coal-fired utilities cofiring small fractions of regional biomass feedstocks, small industrial plants burning large amounts or 100 percent regional biomass feedstocks, or new 100 percent-biomass industrial boiler installations.
So the concurrent innovation of American oil and gas explorers and the administration has indirectly made new natural gas power generation the winner. This inadvertently hurts biopower, since the cost of biomass-derived power simply cannot beat out that derived from natural gas produced and sold for less than $5 to $6 per MMBtu.
A good case in point is a project in California. About 15 years ago, the Energy & Environmental Research Center was working with several California entities to utilize biomass in new and existing power generating systems, as California was slowly weaning itself from coal-fired generation. Most of these in-state biopower efforts ultimately died off because of a lack of sustainable biomass supply, high biomass costs, onerous permitting and environmental processes, and loss of state incentives for biopower. Contrast that scenario with today, where electricity demand is still high in California, and the base load power choices are down to natural gas or biomass, as coal is out because of state laws aimed at prohibiting greenhouse gasses, sulfur oxide, nitrogen oxide and trace metal emissions. Biomass is out for some of those same emission reasons, with attendant environmental reasons involving agriculture and the lack of a low-cost sustainable supply. Natural gas is in because of the plentiful supply, lower emissions, competitive capital cost for generating platforms, and projected hope for sustainable fuel prices. Just in late 2012, the new 255-MW Lodi Energy Center natural gas power plant was commissioned at a cost of $452 million.
The federal government is not exclusively driving the bus on making natural gas a winner over biomass and other renewable energy forms, however. Industry and economics are playing a role. At a recent energy conference, I was caught off guard slightly when several energy executives representing utility, power plant equipment and services, and energy regulatory entities all believed that abundant North American natural gas resources would most likely hover between $4 and $6 per MMBtu for decades. For these folks, that makes natural gas very competitive, with ample room for coal to remain a major player. Biomass remains a player only when state or regional incentives come into play, or when feedstocks are fairly cheap.
Whether these trends continue remains to be seen. I am still, however, cautiously optimistic for biomass and biopower.
Author: Chris J. Zygarlicke
Deputy Associate Director for Research