Burton English, Jamey Menard, Marie Walsh, and Kim Jensen

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ECONOMIC IMPACTS RESULTING FROM CO-FIRING
BIOMASS FEEDSTOCKS IN SOUTHEASTERN UNITED STATES
COAL-FIRED PLANTS

• Burton English, Jamey Menard, Marie Walsh, and
  Kim Jensen
• Professor, Research Associate, Adjunct
  Professor, and Professor, University of Tennessee.

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BACKGROUND
Acid rain damage to forests-Great Smoky Mountains
higher elevations rainfall is up to 10 times as
acidic as normal precipitation in the park and
fog is often 100 times more acidic

• Electricity from Coal
• US electricity from coal-firinggt50 of
  electricity generated
• Southeast 60 from coal-firing (DOE/EIA, 2001)
• Share of air emissions from coal burning
• 2/3 sulfur dioxide (SO2)
• 1/3 carbon dioxide (CO2)
• 1/4 nitrogen oxide (NOx)
• also adds particulate matter in the air
• Biomass feedstocks
• agriculture residues
• dedicated energy crops
• forest residues
• urban wood wastes
• wood mill wastes
• have lower emission levels of sulfur or
  sulfur compounds and can potentially reduce
  nitrogen oxide emissions

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BACKGROUND

• Biomass crops raised for the purposes of energy
  production is carbon neutral
• With co-firing, rather than 100 percent biomass
  use, continuous supply of biomass is not as
  critical (Demirbas)
• Credits for offsetting SOx emissions, currently
  priced at 100 per ton, provide an incentive for
  co-firing (Comer et al.)
• Costs of conversion of power plants for co-firing
  are relatively modest, depends on percent
  co-fired
• Power companies also have potential to obtain
  marketable value through offsetting CO2 for
  greenhouse gas mitigation. Replacing coal (a net
  CO2 emitter) with biomass (a net zero CO2
  emitter) offers means to reduce CO2 while
  maintaining operational coal generating capacity
  (Comer et al.)

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BACKGROUND

• DOE projects that by 2025, biomass electricity
  production will increase from 38 billion to 78
  billion kWhs
• Electricity from municipal solid waste, including
  waste combustion and landfill gas, is projected
  to increase from 22 billion to 34 billion kWhs
• Factors likely to facilitate this growth include
  
• changing air pollution standards
• potential benefits to rural economies
• capacity pressures on solid waste facilities
• forest fire control policies to limit the amount
  of understory brush

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Study Scenarios
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Study Area

• Power plants studied were associated with
  Southeastern Electric Reliability Council (SERC)
• 8 states AL, GA, KY, MS, NC, SC, TN, VA
• Trading regions within the eight states were
  identified. These regions were based on the
  Bureau of Economic Analysis Trading Areas

Plants AL, GA, KY, MS, NC, SC, TN, VA
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Modeling System

• ORCED
• dynamic electricity distribution model estimates
  price utilities can pay for biomass feedstocks
• models the electrical system for a region by
  matching the supplies and demands for two seasons
  of a single year

• ORIBAS
• GIS-based transportation model
• estimates delivered costs of biomass to power
  plant facilities

Price of Feed Stock
Location of Power plant
Cost and Location of Bio-based
Resource Transportation Expense

• IMPLAN
• uses input-output analysis to derive estimated
  economic impacts
• creates a picture of a regional economy to
  describe flows of goods and services to and from
  industries and institutions

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ORIBAS

• GIS-based transportation model used to estimate
  the delivered costs of biomass to hypothetical
  power plant facilities (Graham et al., Noon et
  al.)
• Complete road network for each state
• Waste, residues, and dedicated crop feedstocks
  are distributed across each county for a given
  state
• Location and level of demand for residue
• Attempts to supply the bio-based feedstocks to
  the power plant at lowest cost

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ORCED

• Dynamic electricity distribution model estimates
  price utilities can pay for feedstocks
• Models electrical system for region by S and D
  for two seasons of a single year
• Supplies are defined by up to 51 plants,
  extensive definitions of their operations, costs,
  and emissions
• Demands are defined by load duration curves for
  each season, with gradually increasing demands
  based on hourly demands
• As amount of residues demanded increases, cost
  of fuel for generation increases
• Coal costs at each plant vary by scenario
  depending on emission costs prescribed by a given
  scenario
• A maximum price is determined for residue at the
  plant gate
• Price then used to determine if
• sufficient quantities of residue exists to
• meet the amount demanded by the co-fire scenario
  

• Each ton of SOx produced has a negative value of
  142 also, there is a 2,374 per ton NOx
  pollutant value in addition to the low or high
  carbon tax

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IMPLAN

• Input-output analysis creates a picture of a
  regional economy to describe flows of goods and
  services to and from industries and institutions
• Direct impacts-changes in final demand for a
  sectors product
• Indirect impacts-change in inter-industry
  purchases due to the change in final demand from
  the industry directly affected
• Induced impacts-changes in the incomes of
  households and other institutions and the
  resulting increases/decreases in spending power
  as a result of the change in final demand

• Impacts are estimated for
• A. One-time only impact in the Construction
  Sector
• B. Annual Operating Cost Impacts
• Electrical generation
• Growing/collecting of the bio-based feedstock
• Transportation
• Coal mining

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A. One Time Conversion Costs

• 2 co-fire ? 50/kw
• 15 co-fire ? 200/kw
• Plant capacity x capacity factorkilowatts
  produced.
• Kilowatts produced x co-fire level assumed (2 or
  15) x either the 50 or 200 investment
  costtotal investment
• Million dollar investment was proportioned
  through the economy and assigned to the
  appropriate IMPLAN industry sectors (Van Dyke)
• Each ETA was then impacted with a million dollar
  investment for both the 2 and 15 co-firing
  scenarios
• To determine the impact of the investment stage
  within an ETA, the total investment required for
  all power plants within the ETA expressed in
  millions of dollars was multiplied by the
  multiplier for TIO, employment, and value added

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B. Annual Operating Costs

• Impacts of the change in operating costs for
  the facilities in the study also required the
  identification of the IMPLAN industry sectors to
  capture the change in annual costs that would
  occur at the power plant facility
• Power Generation -IMPLAN sector representing
  electricity production was modified to reflect an
  increase in annual machinery repair expenditures,
  and employment compensation was increased to
  reflect the additional labor requirements

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2) Bio-based Feedstock Costs

• For each of the feedstocks, costs were
  distributed across the appropriate IMPLAN input
  sectors
• Non-labor costs were used to adjust the current
  production function of the sector most likely to
  provide the output

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2) Bio-based Feedstock Costs

• A new model was created for each bio-based
  feedstock with adjusted production function
  coefficients reflecting the new activity in the
  economy

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2) Bio-based Feedstock Costs

• Total industry output, employment, and
  value-added multipliers were then generated for
  each bio-based feedstock
• These multipliers were multiplied by the cost of
  producing/collecting the feedstock that ORIBAS
  indicated would be used by the power plant and
  the economic impact that co-firing would have in
  the areas where the feedstock originated was
  estimated

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Proprietary Income Impacts

• Value paid for the bio-based feedstock was
  predetermined and based on the scenario
  characteristics
• The difference between the predetermined value
  and the cost of growing/collecting the residue
  was estimated and assumed to impact the sectors
  proprietary income that generated the feedstock
• An impact analysis on proprietary income was
  conducted in each ETA. The multiplier generated
  times the total change in proprietary income
  served as an estimate of the impacts that would
  occur as a result of an increase in profit with
  in the region

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3) Transportation

• Total transportation sector impacts were
  determined by summing costs of the amount
  transported to the facility over all trips and
  residue types
• The result was a change in total industry output
• Input-output multipliers for the BEAs in which
  the power plants are located were then used to
  estimate the impact on the economy, the job
  market, and value-added

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4) Coal Mining

• Decrease in coal use with co-firing
• Decrease in final demands on coal mining sector

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Results

• Residue Use and Energy Production
• Characteristics of Coal Replaced
• Economic Impacts
• Total Industry Output
• Jobs
• Value-added

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Residue Use and Electricity Production
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Agricultural Residues
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Forest Residues
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Mill Wastes
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Switchgrass
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Urban Wastes
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Characteristics of Coal Replaced by Bio-Based
Feedstocks
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Impacts by Sector and Scenario
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Key Findings

• 2 co-fire, some plants do find residue at lower
  costs than coal plus sulfur emissions costs
• 15 co-fire, paying sulfur emissions cost is more
  economical than burning residue
• Are areas now that would benefit from generating
  electricity using forest residues, mill wastes,
  and urban wastes
• In fact, nearly 2,500-kilowatt hours of
  electricity are produced using these residues
  replacing 355,000 tons of coal
• Each state, with the exception of Kentucky,
  consumes some residue

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Key Findings

• Low Carbon and High Carbon emissions cost
  scenarios-amount of residues consumed will
  significantly increase from 4 million metric dry
  tons (Base) to 23 (Low Carbon) and 29 (High
  Carbon) million metric dry tons
• Estimated 1.4 to 2.2 billion impact that occurs
  to the Southeast Region under the 15 co-fire
  levels with Low Carbon and High Carbon emission
  cost scenarios, respectively. Concurrent with
  this increase in economic activity is an
  estimated increase of 25,000 jobs