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.
1

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
• Electricity from Coal times more acidic
– US electricity from coal-firing>50% of electricity generated
– Southeast 60% from coal-firing (DOE/EIA, 2001)
• Share of air emissions from coal burning
– 2/3 sulfur dioxide (SO
2
– 1/3 carbon dioxide (CO
)
– 1/4 nitrogen oxide (NO
2 x
)
)
– 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
2

• 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 SO 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 CO for greenhouse gas mitigation. Replacing coal (a net
CO emitter) with biomass (a net zero CO emitter) while maintaining
3

• 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
4

Feedstocks forest residues primary mill residues agricultural residues dedicated energy crops (switchgrass) urban wood wastes
Base $0
2% Co fire 15% Co fire
Low Carbon
Tax $70
High Carbon
Tax $120
Economic
Impacts
• producing/collecting/transporting the feedstock
• retrofitting the coal-fired utilities for burning the feedstock
• operating co-fired utilities
• coal displaced from burning the feedstock
5

• 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
84
76
83
73
77
72
75
82
69
70
49
48
17
16
13
15
47
74
78
71
43
79
39
44
40
45
46
42 23
18
41
24
27
26
19
22
25
38 28
21
80
36
35
37
29
/
13
14
20
20
20
Economic Trading Areas
Plants AL, GA, KY,
MS, NC, SC, TN, VA
6

ORIBAS
• GIS-based transportation model
• estimates delivered costs of biomass to power plant facilities
Price of
Feed
Stock
Cost and Location of Bio-based Resource
Transportation Expense
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
Location of
Power plant
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
7

• 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
8

• 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
• Each ton of SO x produced has a negative value of $142 meet the amount demanded by the co-fire scenario also, there is a $2,374 per ton
NO x pollutant value in addition

• 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 sector’s 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
1) Electrical generation
2) Growing/collecting of the bio-based feedstock
3) Transportation
4) Coal mining
10

• 2 % co-fire → $50/kw
• 15% co-fire → $200/kw
• Plant capacity x capacity factor=kilowatts produced.
• Kilowatts produced x co-fire level assumed (2% or 15%) x either the $50 or $200 investment cost=total 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
11

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
1) 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
12

• 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
13

• A new model was created for each biobased feedstock with adjusted production function coefficients reflecting the new activity in the economy
14

• 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
15

• 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 sector’s 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
16

• 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 BEA’s in which the power plants are located were then used to estimate the impact on the economy, the job market, and valueadded
17

• Decrease in coal use with co-firing
• Decrease in final demands on coal mining sector
18

• Residue Use and Energy Production
• Characteristics of Coal Replaced
• Economic Impacts
– Total Industry Output
– Jobs
– Value-added
19

Feedstock
Energy
Content
Total
Residue
Low Carbon/Co-fire
2%
Ag. Residue
Forest Residue
Mill Waste
Dedicated Crop
Urban Waste
MMBtu/ton metric dry tons
15
16.5
16.5
15.5
16.5
Total
Low Carbon/Co-fire 15%
Ag. Residue 15
17,537
931,078
722,643
1,658,249
791,379
4,120,886
90,950
Forest Residue
Mill Waste
Dedicated Crop
Urban Waste
16.5
16.5
15.5
Total
16.5
High Carbon/Co-fire 2%
Ag. Residue 15
Forest Residue
Mill Waste
16.5
16.5
7,773,136
5,860,687
6,321,000
3,688,579
23,734,352
18,945
Dedicated Crop
Urban Waste
High Carbon/Co-fire 15%
Ag. Residue
Forest Residue
Total
15.5
16.5
15
16.5
861,089
705,602
1,625,695
748,939
3,960,271
143,958
7,012,248
Mill Waste
Dedicated Crop
Urban Waste
16.5
15.5
Total
16.5
7,315,194
11,021,469
3,537,423
29,030,290
Total energy
Content
MMBtu
263,051
15,362,794
11,923,610
25,702,860
13,057,755
66,310,069
1,364,246
128,256,751
96,701,331
97,975,497
60,861,558
385,159,383
284,178
14,207,975
11,642,426
25,198,279
12,357,493
63,690,351
2,159,363
115,702,088
120,700,694
170,832,762
58,367,474
467,762,380
Electricity
Produced
From
Residues
Kwh
4,163
3,411
7,383
3,621
18,661
633
33,901
35,365
50,054
17,102
137,054
77
4,501
3,494
7,531
3,826
19,429
400
37,579
28,333
28,707
17,832
112,852
83
20

Agricultural Residues -- Low Carbon 2%
/
Agricultural Residues -- Low Carbon 15%
/
Agricultural Residues
(Tons)
0 - 2,500
2,500 - 5,000
5,000 - 10,000
10,000 - 25,000
25,000 - 50,000
Agricultural Residues -- High Carbon 2%
/
Agricultural Residues -- High Carbon 15%
/
21

Forest Residues -- Low Carbon 2%
/
Forest Residues -- Low Carbon 15%
/
Forest Residues
(Tons)
0 - 30,000
30,000 - 60,000
60,000 - 90,000
90,000 - 120,000
> 120,000
Forest Residues -- High Carbon 2%
/
Forest Residues -- High Carbon 15%
/
22

Mill Residues -- Low Carbon 2%
/
Mill Residues -- Low Carbon 15%
/
Mill Residues
(Tons)
0 - 60,000
60,000 - 120,000
120,000 - 180,000
180,000 - 240,000
> 240,000
Mill Residues -- High Carbon 2%
/
Mill Residues -- High Carbon 15%
/
23

Switchgrass Residues -- Low Carbon 2%
/
Switchgrass Residues -- Low Carbon 15%
/
Switchgrass
(Tons)
0 - 30,000
30,000 - 60,000
60,000 - 90,000
90,000 - 120,000
> 120,000
Switchgrass Residues -- High Carbon 2%
/
Switchgrass Residues -- High Carbon 15%
/
24

Urban Wastes -- Low Carbon 2%
/
Urban Wastes -- Low Carbon 15%
/
Urban Wastes
(Tons)
0 - 35,000
35,000 - 70,000
70,000 - 105,000
105,000 - 140,000
> 140,000
Urban Wastes -- High Carbon 2%
/
Urban Wastes -- High Carbon 15%
/
25

Characteristics of Coal Replaced by Bio-Based
Feedstocks
Base-2% co-fire
Low Carbon, 2% co-fire
Low Carbon, 15%co-fire
High Carbon, 2% co-fire
High Carbon, 15%co-fire
Coal Replaced tons
355,412
3,251,073
18,198,976
3,251,073
23,987,425
Sulfur
%
Coal Value dollars
0.94
$12,487,292
1.33
$91,389,091
1.24
$525,177,225
1.33
$91,389,091
1.32
$678,951,258
Sulfur Replaced tons
3,344
43,160
225,992
43,160
317,708
26

Impacts by Sector and Scenario
Base
Low Carbon
2%
Low Carbon
15%
High Carbon
2%
High Carbon
15%
Total Industry Output ($1,000)
Transportation
Operating
Coal Replacement
Bio-based Feedstocks
Total Annual Impact
Investment (Non-annual)
$2,995
$1,011
$29,862
$9,231
($15,512) ($110,063)
$18,854
$7,349
$7,577
$331,425
$260,455
$71,204
$432,973
$51,556
$1,516,413
$1,404,770
$1,830,102
$27,559
$9,231
($596,173) ($110,063)
$330,239
$256,967
$533,618
$68,154
($805,137)
$2,458,748
$2,255,383
$71,204 $2,367,249
Jobs
Transportation
Operating
Coal Replacement
Bio-based Feedstocks
Total Annual Jobs
Investment (Non-annual)
Value Added ($1,000)
Transportation
Operating
Coal Replacement
Bio-based Feedstocks
Total Annual Impact
Investment (Non-annual)
34.9
8
-126.9
180.8
96.8
67.8
342.1
71.7
-899.6
4,368.10
3,882.30
631
$1,514
$467
$15,042
$4,237
($7,980) ($56,193)
$9,031 $127,288
$3,032 $90,375
$3,344 $32,248
5,042.90
407.4
-4,881.90
20,195.40
20,763.80
19,210.40
315.7
71.7
-899.6
4,368.90
3,856.70
631
6,095.90
530.5
-6,586.50
32,570.60
32,610.50
24,559.10
$216,183
$23,632
$13,886
$4,237
$269,693
$31,298
($304,500) ($56,193) ($411,191)
$595,140 $126,773 $941,027
$530,456
$962,418
$88,704 27
$32,248 $1,249,153

• 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
28

• 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
29