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Biomass Fuel Study

A new report released last week assesses approaches to expanding community-scale clusters of wood-to-energy facilities in the US. The US Endowment for Forestry and Communities (Endowment) report, “Financing Woody Biomass Clusters: Barriers, Opportunities, and Potential Models for the Western US”, looks specifically at how community-scale wood-fueled facilities could aid in addressing burgeoning forest health issues and expanding losses due to wildfires. The production of energy using a renewable material such as wood can have positive impacts on all three legs of the sustainability stool -- society, the economy, and the environment, says the report.

The Endowment is a not-for-profit corporation established at the request of the governments of the US and Canada in accordance with the terms of the 2006 Softwood Lumber Agreement. The Endowment’s vision is that America’s forests are sustainably managed to meet broad societal objectives such as marketable products, clean waters, wildlife habitats and other ecological services, while ensuring healthy and vibrant forest-reliant communities.

“Biomass energy development has the potential to foster economic development, address wildfires and associated risks and costs, and reduce dependence on fossil fuels,” says Jeff Howe, President of Dovetail Partners and a contributing author of the report.

“There are critical strategic, organizational, and financial issues that need to be addressed in order to realize the considerable potential of biomass energy. First and foremost, biomass energy needs to become an attractive and financially viable investment alternative. This can be aided by strategically applying a wide array of market-based, as well as incentive- and grant-based financial tools.”

The report is part of a series of works produced by the Endowment in a collaborative effort with the USDA Forest Service to assess the potential of markets for low-value wood to enhance forest health while advancing energy security.

Below are some of the fascinating findings of this report:

US Endowment for Forestry and Communities Report

" There is an old saying in the lumber business to the effect that “lumber sales keep the lights on, sawdust makes the profits.” The historical interpretation has been that the commodity lumber business is so low margin, that the few dollars the business receives for waste products are critical to profitability. The emerging focus on energy resources and exploration of biomass energy opportunities has the potential to significantly influence this viewpoint. The continued interest in renewable fuels, combined with opportunities for forest restoration and innovations in biofuel technologies (e.g., liquid fuels, torrefied wood, etc.) offer the opportunity for wood products companies to rethink and redesign their operations to produce new products and serve new markets. There is the potential to foster creative ways of thinking about wood products that can affect profitability and traditional views of commodity-oriented lumber workers. Changes in how wood is viewed as a fuel resource can foster a cash flow, a reduced seasonality, and a new mindset in regard to utilization throughout the product channel that could have broad ramifications for the forest products sector.

Globally, wood and charcoal are the main energy sources for more than two billion people. Production of energy using a renewable material such as wood can have positive impacts on the environment and the economy. It can also contribute to the nation’s energy security in a significant way by reducing dependence on imported fossil fuels. Despite these positive impacts and abundant, in some cases overstocked, forest resources, woody biomass makes up only about 2 per cent of primary energy production in the US.

A final outcome of the project was the identification of major findings and recommendations that can support the further development and performance of biomass fuels and biomass energy facilities. These findings were divided into the main categories of: Finance; Biomass Project Development Practices; Aggregated and Clustered Projects; Biomass Technology; Biomass Fuel Competitiveness; Fuel Supply ; Fuel Delivery; Biomass Energy CoBBenefits; Policy; and, Noteworthy Regional Differences.

To better understand how biomass energy could be more widely adopted in the US, this project focused on identification of factors contributing to success or failure of biomass energy projects. These findings were used to identify barriers to and opportunities for achieving more extensive use of such systems. This project focused on addressing four primary questions:

• What are the opportunities and barriers to wood-to-energy facilities?

• What are the lessons learned from existing projects?

• What are the potential impacts of non-traditional revenue sources (e.g., payments for environmental services)?

• What models could be economically viable for development of wood-to-energy facilities in a western public lands environment? The results of the interviews and surveys carried out aided in the identification of key opportunities, barriers, and lessons learned from current operations. The primary drivers in wood energy investments were also explored.

For many facilities, funding is a primary roadblock. Biomass energy systems may provide significant annual heating cost savings, but potential investors may desire a shorter payback than is realistic without low interest financing. Biomass energy systems may also be more capital intensive than alternatives. In many instances, there is broad recognition of the potential environmental and socio-economic benefits of adopting a biomass energy system, but the system still needs to make financial sense as an investment.

Based on interviews, survey results, site visits, case study development, and a financial analysis that involved biomass energy facilities across the US, a number of barriers to wider adoption of biomass energy production in the US were identified. Recognition that economic factors and financial concerns on the part of potential purchasers and investors are critical elements in biomass energy adoption and long-term success led to close examination of the economics of biomass energy production. The result was the development of the Biomass Investment Multiplier (BIM) as an additional tool for use in economic assessment of bioenergy project potential. [insert graph] This, in turn, was used to evaluate a number of model scenarios in which biomass energy was compared with more traditional energy sources. This evaluation illustrated how biomass energy investments compare with alternatives and opportunities to design financially competitive biomass energy systems. The availability of payments for environmental services can contribute to improving the financial performance of associated biomass energy systems. Applying biomass energy development as a more economically efficient wildfire risk reduction activity could provide opportunities to access non-traditional revenue sources.

The production of energy using a renewable material such as wood can have positive impacts on all three legs of the sustainability stool. Biomass energy development has the potential to foster economic development, address wildfires and associated risks and costs, and reduce dependence on fossil fuels. There are critical strategic, organizational, and financial issues that need to be addressed in order to realize the considerable potential of biomass energy. First and foremost, biomass energy needs to become an attractive and financially viable investment alternative. This can be aided by strategically applying a wide array of market-based, as well as incentive and grant-based financial tools. "

The full report is available here: http://www.usendowment.org/news/latestnews.html