Daly, M.

English, B.C.

Graham, R.L.

Hewitt, W.J.

UNT Digital Library

r ,) I I i MA’KING A BUSINESS FROM BIOMASS IN ENERGY, ENVIRONMENT, CHEMICALS, FIBERS, AND MATERIALS / / PROCEEDINGS OF THE THIRD BIOMASS CONFERENCE OF THE AMERICAS I I VOLUME 2 I I EDITED BY R.P. OVEREND AND E. CHORNET SWITCHGRASS AS A FUEL STOCK FOR ELECTRIC POWER GENERATION IN TENNESSEE WILLIAM J. HEWITT*, BURTON C. ENGLISH*, ROBIN GRAHAM**, and MIKE DALY*** *Department of Agricultural Economics and Rural Sociology, University of Tennessee **Oak Ridge National Labatory, Oak Ridge, TN l ** Department of Management Science, University of Tennessee, Knoxville, TN., U.S.A. ABSTRACT This study examined the economic feasibility of switchgrass production and utilization for electric power production in Tennessee. Economic feasibility of switchgrass utilization as a feedstock for electric power generation is related to location of production area, electric facility location, production and transport costs, and harvesting method. Analysis of the feasibility of biomass includes the internalizing of environmental costs of SQ and CO2 into the coal price. A final comparison of the costs of using biomass plus a 1.5 cent/kilowatt hour subsidy is also examined. Finally, the cost savings of a reorganization of harvesting methods is evaluated and the impacts this reorganization might have on the breakeven cost of biomass is compared to the current harvesting methods. 1475 1476 . Making a Business from Biomass ‘>. ” INTRODUCTION .‘I. strategy in the United States. -- * One type of renewable resource is bioenergy crops,. Y.&Y :>* Bioenergy crops are crops produced specifically for their energy conter&~?& Bioenergy crops have fewer emissions when burned. These crops also have’73 potential to reduce soil erosion. Switchgrass is a bioenergy crop that can bc produced and utilized in Tennessee. Currently, there is no market for switchgra& and no commercial production. ,A, :;$T ? ‘jy$& Assessment of the feasibility of using switchgrass as a feedstock hinges oi r$ numerous factors. These factors include the following: ’ ,.,g ,&& i!“! $jg 1. Will farmers be able to grow switchgrass? ‘;:I>- _ -4.e .I .,,,A 2. What will the cost of growing switchgrass be? m<: .<,‘~’ r \” ‘,yg .$;“. 3. Is there enough profit to induce farmers to switch current cropping;ii:.,l practices to growing switchgrass? Each of these factors are examined in this analysis for the state of T Similar analyses will bq conducted for an eleven-state area including Florida, Georgia, Alabama, South Carolina and Tennessee in the so States; and North Dakota, South Dakota, Nebraska, Minnesot Missouri in the midwest United States. METHODS USED r;,‘>@& ” Ax: geographical information system, the Regional Integrated Biomass Assessrr (RIBA) model, established a link between soil types, anticipated yields, PC boundary data, natural boundary data, harvesting techniques, and cos&?$ production of switchgrass as well as costs of production of other tradi&- crops. Five scenarios were developed to examine the economic feasibility $ switchgrass utilization relative to coal as a fuel source for electric po generation in Tennessee. Three of these scenarios incorporated use of a subsidy examine economic feasibility of using switchgrass as a feedstock to electric p production instead of coal. These three subsidies were based upon studies $ abatement costs for sulfur dioxide and carbon dioxide emissions caused b’ . 1 . . . r _, * L-,C -L”% kilowatt hour rebate to electricity producers established by the 1992 Na$ I Making a Business from Biomass 1477 Energy Renewable Act. These scenarios analyzed two types of harvesting systems for three different size switchgrass electric generation plants-100,000, 600,000, and 1 , 100,000 tons per year. RESULTS Figure 1 illustrates the estimated switchgrass supply curves for Tennessee at the 100,000 tons per year. The 600,000 and l,lOO,OOO ton per year plant sizes are similarly shaped. These curves follow a textbook supply curve: as price increases, output increases. Within the same model, the supply curves have similar shape and am nearly identical in shape for all plant sizes. State Switchgrass Supply Curve 100,000 Tons Per Year Plant Size, Scenario V 70 60 Base Model Price. of Switchgrass (Dollars per Ton) Staggered Harvest Model Price of Switchgrass (Dollars per Ton) 0 5 10 15 20 25 Millions of Tons 50 ----_--- --_--_----_-----_-_____ 40 30 20 LzIIA- 0 5 10 15 20 25 Millions of Tons Figure 1. Tennessee switchgrass supply curves, 100,000 per year plant size The comparison of the models within the same plant size reveals two different supply curves. The supply curves for the staggered harvest models begin at a 1478 Making a Business from Biomass lower price and have a larger elastic portion than the respective base modeL Reduction of production costs through the staggered harvest model allows the increase in tons produced and a more elastic supply curve than the base model. The switchgrass indifference price for the scenarios with the sulfur subsidy and the electric power tax credit scenarios was sufficient to generate switchgrass production in TeMeSSee. The switchgrass indifference prices in without subsidy or solely considering the value of the carbon subsidy, $22.95 per ton and $24.19,,, per ton, respectively, are too low to initiatre switchgrass, production in Tennessee, I (Table 1). Table 1. Total tons of switchgrass produced: 100,000 tons per year plant size, Tennessee Scenario Base Model Staggered Harvest Model Percent Difference I’:: ,_’ No subsidv FromBase ->; 0.0 0.0‘ 0.0 Sulfer subsidy 13,141,135 23,999,171 82.26 l.... Carbon Subsidy 0.0 0.0 0.0 :-;:; Sulfur and carbon 13,141,600 24,000,002 82.63 subsidy Power tax credit An indication of possible gains for the system is economic rent. In this economic rent ranges from 12 million to 22 million dollars de subsidy and the harvest method (Table 2). As plant size increase economic rent available declines. Number of Plants As plant size increases, the total number of switchgrass plants decreases. staggered harvest model has approximately twice the number of plants as counterparts (Table 3). Tbis is due to the greater. output efficiency staggered harvest model. *t I. Making a Business from Biomass 1479 Table 2. Total unassigned economic rent: 100,000 tons per year plant size Staggered Change in Percent Scenario Base Harvest Economic Difference Model Model Rent From Base ” ..“.......  .  .  ..” .. . . I . . . . . . . . . . . . . . . . . * .. . . . . . 9 . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . I . . . . . . . . . . . . ..........................................., No Subsidy $0.00 $0.00 $0.00 0.00 sulfur Sub- $ 16,586,489 $22,760,109 $6,173,619 27.12 sidy Carbon $0.00 $0.00 $0.00 0.00 Subsidy sulfur $ 16,594,119 $22,760,165 $6,166,046 27.09 Carbon Subsidy Power tax $ 12,782,541 $22,242,876 $6,587,950 29.62 subsidy Economic feasibility of switchgrass production and utilization as a feedstock for electric generation was examined at the state level, regional level and plant level. The state and plant levels considerably reduced both production costs and transport costs of switchgrass by using the staggered harvest method instead of the base (traditional farming) method. The regional level analysis consisted of dividing Tennessee into three regions: east, middle, and west. The initial electric generation plant would be located in the lowest delivered cost region, East Tennessee. The West Tennessee Region has the highest delivered cost of three regions. A social cost analysis comparing the combined sulfur dioxide and carbon dioxide subsidy to the one and one-half cent per kilowatt hour rebate was performed. There was a greater .gain to society in using the combined sulfur dioxide and carbon dioxide subsidy than by rebating electric producers the $0,015 per kwh subsidy for using switchgrass as a fuelsource in electric power plants. Table 3. The maximum number of switchgrass fueled electric generation plant in Tennessee Maximum Plant Size 100,000 Tons Per Year Base Model 132. Staggered ..Harvest Model 240 l,lOO,OOO Tons Per Year 1480 Making a Business from Biomass CONCLUSIONS .R:r qg* ‘K& Conclusions of this study are that switchgrass production, harvesting, and I transport for end use in electric power generation is economically feasible in Tennessee if environmental impacts are included in the costs of competing fuels, The location of marginal land in east Tennessee allows the initial opportunity for 1” switchgrass production in the state. However, for switchgrass usage in Tennessee 7’ to approach its full potential for producing large amounts of electric power, land 5: in middle and west Tennessee are needed for switchgrass production. Compamd to traditional farming methods, the staggered harvest method provided an ..? : opportunity to greatly reduce costs and increase output of switchgrass. 

Switchgrass as a Fuel Stock for Electric Power Generation in Tennessee

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