Economics of Plantation-grown Fuels for Power Generation

Feasibility studies tend to show that plantation-grown biomass to electricity projects can be financially viable provided local resource conditions are favorable and that the cost of conventional power supplies are expensive. Improving the competitiveness of plantation-grown fuels for power generation will require:

• lower cost and sustainable feedstock production systems,
• and more efficient and lower capital cost conversion technologies at scales appropriate for biomass energy applications.

This final chapter discusses the costs of producing plantation-grown biomass and the costs of generating electricity from these fuels.

The Costs of Producing and Harvesting Plantation Fuels

Key to producing low-cost plantation feedstocks is the land base and the quality of sites. The land base and the quality of sites determine to a significant extent the degree of site preparation necessary; the choice of species, spacings, and rotations (cutting cycles); required cultural management and soil amendments (fertilization, weed control, animal control, and pest management); and fuel transport and logistics.96 Land and site quality also defines biomass productivity, the major determinant of total feedstock cost. Productivity is also a key factor in determining the total size of the plantation, annual feedstock production, and the size of the conversion facility that can be supported. Some of these land and site quality tradeoffs are illustrated in Fig 5.1. , the effect of biomass plant scale on feedstock requirements and transport distances.

The right-hand portion in Fig. 5.1 shows how the total plantation area required to meet a given feedstock requirement is affected by productivity (dry tonnes/ha/yr). Greater plantation productivity directly translates into reduced land requirements. Alternatively, a given plantation land area will be capable of supporting more conversion facility capacity at higher levels of productivity. The left-hand panel shows a similar relationship with net plant efficiency. Higher conversion efficiency translates into more installed plant capacity for a given feedstock requirement or less required plantation area for a given installed capacity.

In North America and Europe, developers of short-rotation plantation forestry initially assumed that marginal cropland, poorly stocked forest land, and pasture would be the land base for growing energy crops. This focus gradually changed when it became apparent that there was excess and underutilized cropland not needed for food production, and plantation-grown feedstocks could be a potentially important alternative crop to conventional agriculture.97 Economic studies also showed that the use of good cropland for energy plantations was more cost-effective than using marginal cropland or poorly stocked forest land. The additional cost of the land was offset by lower establishment costs and, more importantly, higher biomass productivity. In addition, the use of cropland for energy plantations is thought to have positive environmental benefits in terms of reduced erosion and chemical use relative to the marginal row crop agriculture it would displace. And, in some locations, the use of cropland could improve habitat and biodiversity.98

In contrast, the land base for plantation-grown feedstocks in tropical, developing countries is primarily cleared and degraded forest lands, forest lands occupied by low-value commercial species or brush, marginal forest lands that have many physical limitations (e.g., poor soils, low rainfall, high elevations and steep slopes) and, possibly, non-forest land including extra-marginal cropland, savannah, and arid wastelands.99 Growing populations and increasing needs for food production makes it unlikely that plantation feedstocks will be grown on cropland.100 The biomass productivity potential of marginal land is likely to be lower, and may not be sufficient to warrant investments in trees crops for power generation unless the opportunity cost or land rent of these lands is also low.

In a recently completed assessment of the economic status of energy crops in the U.S., total plantation establishment costs on cropland were estimated at about $580/hectare.101 This estimate included factor costs for site preparation (plowing and disking), planting, and weed control (cultivation and herbicide spraying). Planting is the single largest establishment cash expense. The estimate is generally applicable for a variety of woody crops (hybrid poplar, silver maple, sweetgum, black locust, and sycamore) grown in the Northeast, Southeast, Midwest, Lake States, and Pacific Northwest.

The relatively low-cost of plantation establishment is because the land does not require clearing or extensive tillage and weed control, and there are essentially no site limitations or the need for significant quantities of soil amendments, such as fertilizers. However, when extensive site preparation and fertilization is required, establishment costs can easily exceed $1000/hectare.102 For plantations in Hawaii, establishment costs approach $1400/hectare.103 Because land is a combination of recently harvested sugar cane land, abandoned cane land, and waste land that is steep, poorly drained, and rocky, factor costs for clearing and weed control are high (about 55% of total establishment costs). Labor and fuel costs are also higher relative to the U.S. mainland. However, high establishment costs can be economically justified provided productivity is also commensurately high.

After the second year of growth, the management of plantations is not intensive requiring only one or two applications of fertilizer to maintain soil nutrient levels. These costs are minimal for the U.S. on good cropland (about $80/hectare during each rotation of 5 to 7 years). Because of the poorer site conditions, higher factor costs, and the need for greater quantities of nutrients to support higher biomass productivity, fertilization costs are nearly $500/hectare over a five-year rotation for plantations in Hawaii. Prior to harvest, total establishment and maintenance costs (undiscounted) are about $660/hectare on good cropland on the U.S. mainland and about $1850/hectare on caneland in Hawaii.

In Brazil, plantation establishment practices for large-scale industrial operations involve the use of disks and the construction of tree beds and check dams to prevent erosion.104 Following preparation, sites are planted and watered. As in the industrialized temperate regions, weed control is critical and done at least twice each year until canopy closure occurs. These establishment practices usually involve manual labor except in larger-scaled operations where herbicides are used for weed control. The costs of plantation establishment in Northeast Brazil range from about $580 to $1170/hectare with maintenance costs varying from about $140 to $860/hectare over a seven-year rotation.105 Much of the variation in establishment costs is due to planting costs. Carpentieri et al. cite planting costs ranging from $371 to $811/hectare for Northeast Brazil.106

Where sites have been degraded or have physical limitations, site preparation must be more intensive. For example, severely degraded plantation sites in Southwest China require the construction of pits and terraces to halt further erosion and hold moisture.107 Composts are also used to supply nutrients and condition the soils.108 On grasslands and brushy sites in the Philippines, site preparation involves extensive land clearing (slashing and burning) prior to digging tree pits and planting. Owing to the scarcity of capital, equipment, and materials, site preparation and maintenance is done manually with hand tools. The number of labor days required to establish and maintain a wood energy plantation in Southwest China can range between 150 to 300 workdays/hectare depending on the degree of site degradation.109 In the Philippines, the average labor requirements for establishment and maintenance are about 170 days/hectare with most of this for clearing and brushing.110

The productivity and costs of plantation harvesting systems were discussed previously. These costs can be variable, generally ranging from about $18 to $35/dry tonne for mechanized felling, skidding, and chipping. For manual operations, the amount of labor required to harvest one hectare can vary considerably among sites. For the Southwest China and Philippines examples, these rates range from about 75 to over 130 workdays/hectare on average. The costs of harvesting (felling, cutting, and forwarding to a landing) for both examples are about $5/dry tonne. In the case of Brazil, harvesting costs (not including chipping) are slightly higher (about $7/dry tonne).

A summary of the costs of growing plantation fuels is shown in Table 5.1.112 Also shown is average productivity.

Because of different factor input and financial assumptions, these estimates are not entirely comparable. For example, the developing country examples do not include chipping. Feedstock size reduction is part of the fuel preparation process at the conversion facility. The Southwest China example does not include land rent since there is little opportunity cost associated with degraded hillside land. In spite of these caveats, these estimates can be used to provide a general indication of cost and how competitive plantation feedstock production is likely to be. On the basis of the costs of coal, currently at less than $2.00/GJ in most of the world, these feedstocks are not competitive. Where coal is unavailable at low cost, plantation feedstock production can be competitive with other alternatives.

The costs of plantation-grown feedstocks in any given country will vary considerably because of localized variations in land quality or biomass productivity, land rents, and other factor inputs. This localized variation in delivered feedstock costs can be illustrated by the data from Northeast Brazil, where average wood costs range from a low of about $1.00/GJ to $4.60/GJ across five bioclimatic regions. This relationship is displayed in Fig. 5.2 for the five bioclimatic regions.

The high and low estimates of delivered feedstock costs are based on the use of high and low estimates for land, planting costs, and productivity differences, which range between 3 and 21 dry tonnes/ha.111 The costs of producing biomass in each bioclimatic region can be associated with land availability to determine the average cost of supplying plantation-grown feedstocks in Northeast Brazil. This feedstock supply curve is shown in Fig. 5.3. 114

The curve is upward sloping indicating the quantities of feedstock that are available at any given delivered cost are limited. For example, about 5000 GJ of feedstocks are potentially available at costs of about $1.25/GJ. An additional 7000 GJ are available annually for costs of about $1.60/GJ. Due to the scarcity of land, the cost of plantation feedstocks increase sharply beyond annual production of 12000 GJ.

The Costs of Power Production from Plantation Fuels

Biomass-based power generation is often competitive with fossil alternatives provided a low-cost supply of feedstock is available. This fact tends to hold true even considering that conventional biomass steam-turbine technology is capital intensive and inefficient at scales appropriate for biomass. Figure 5.4 illustrates the relationship betwen the cost of power ($/kWh) and fuel cost ($/GJ). The low efficiency line in Fig. 5.4 represents a conventional steam-turbine facility having an installed cost of about $1900/kW with an efficiency of about 23%. Generating power at costs (busbar) of $0.05/kWh would require a feedstock supply costing less than $1/GJ.

Fig. 5.4 The effect of fuel costs for low-efficiency (conventional steam turbine) technology and a high-efficiency, low-capital cost technology.

In the U.S. and Europe, efforts are underway to develop lower capital cost and higher efficiency biomass conversion technology. This technology would make the use of plantation-grown fuels much more competitive with currently available fossil-fired alternatives. Figure 5.4 illustrates the effect of lower capital cost and higher efficiency technology. This example is based on biomass integrated gasifier/combined cycle (BIG/CC) technology currently under development and demonstration in Northeast Brazil. The line labeled high efficiency is for a plant costing $1300/kW installed with a system efficiency of slightly more than 35%. Comparing this high efficiency technology with the conventional, low effieciency technology shows a difference of about $0.02/kWh in power costs or about $2/GJ in terms of fuel cost. This example indicates that power could be produced at $0.05/kWh with fuel costs of about $2.80/GJ. At this fuel cost, plantation-grown feedstocks would be much more competitive with conventional alternatives even before considering the other environmental and developmental benefits of biomass energy.

Conclusions

In this report, the biologic, environmental, economic and operational issues were stressed for plantation-grown woody crops. The report did not stress conversion technology. Those interested in learning more about conversion processes may want to consult the references contained in the end-notes to this Report. It is hoped that this Report will help planners and decision makers when they consider the use of woody crops for power generation as a either a dedicated feedstock or as a supplement to an existing residue or waste fuel.

The background used in highlighting the worldwide experience with plantation-grown feedstocks was drawn from firsthand observations, personal contacts, and secondary information and data sources. Although the authors have attempted to incorporate as much as information as possible on the status of plantation-grown fuels for power generation, there is, no doubt, that some relevant experiences with plantation fuels should have been included in this report. Oak Ridge National Laboratory would greatly appreciate receiving any information that would be relevant to include in an updated version of this report. As can be inferred from this report, biomass systems (feedstock production, handling and logistics, and conversion) are very complex and potentially difficult to implement; however, biomass energy offers many benefits both locally and globally. Sharing common experiences is one-way to overcome the inertia in getting plantation-grown fuels from the research and demonstration stage to initial commercialization and eventually wide-scale use.