The Dollars and Sense of Bioenergy Presented by Dr. William Strauss - - PowerPoint PPT Presentation
The Dollars and Sense of Bioenergy Presented by Dr. William Strauss President, FutureMetrics October 9, 2012 International Bioenergy Days, 2012 Who is FutureMetrics? We are Globally Respected Consultants in BioEnergy 8 Airport Road Bethel, ME
Presented by Dr. William Strauss President, FutureMetrics October 9, 2012
International Bioenergy Days, 2012
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We are Globally Respected Consultants in BioEnergy
8 Airport Road Bethel, ME 04217, USA
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FutureMetrics Services:
Research, analysis, and strategic guidance for the bioenergy sector. We combine data driven analysis with a depth of knowledge across the bioenergy sector to provide full spectrum reporting that enables our clients to make optimal decisions. ______________________________________________________
Selection of Clients
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Prefeasibility and feasibility studies Due diligence Financial modeling Risk analysis Economic impact analysis Expert advice
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Recipient of the 2012 International Excellence in Bioenergy Award
Does Bioenergy Make Sense?
If minimizing price of electricity is the objective, then green electricity in the current market is challenging.
Costs amortized over 25 years Natural Gas at at 6.00% $3.5 per MMBTU Construction Cost per kW Size (MW) Capacity Factor Install Cost Annual Capital Cost Amortization Annual Output (kWh) Fixed Capital Cost per kWh Fixed Maintenance and other per kWh Variable Cost per kWh Total Cost per kWh Hydro 2,180 $ 1000 90.0% 2,180,000,000 $ 170,534,246 $ 7,884,000,000 0.0216 $ 0.0140 $ 0.0010 $
0.0366 $
Natural Gas Combined Cycle 1,170 $ 200 90.0% 234,000,000 $ 18,305,052 $ 1,576,800,000 0.0116 $ 0.0160 $ 0.0210 $
0.0486 $
Coal 2,749 $ 500 85.0% 1,374,500,000 $ 107,522,624 $ 3,723,000,000 0.0289 $ 0.0180 $ 0.0270 $
0.0739 $
Landbased Wind 1,485 $ 50 23.0% 74,250,000 $ 5,808,334 $ 100,740,000 0.0577 $ 0.0340 $ 0.0100 $
0.1017 $
Nuclear 4,930 $ 1000 90.0% 4,930,000,000 $ 385,657,721 $ 7,884,000,000 0.0489 $ 0.0470 $ 0.0400 $
0.1359 $
Biomass (electricity only) 3,294 $ 200 85.0% 658,800,000 $ 51,535,762 $ 1,489,200,000 0.0346 $ 0.0710 $ 0.0450 $
0.1506 $
Offshore Wind 2,890 $ 50 34.0% 144,500,000 $ 11,303,761 $ 148,920,000 0.0759 $ 0.0770 $ 0.0100 $
0.1629 $
Solar PV 5,750 $ 100 30.0% 575,000,000 $ 44,980,363 $ 262,800,000 0.1712 $ 0.0150 $ 0.0050 $
0.1912 $
analysis by FutureMetrics
Price at the Generator
If minimizing CO2 is the objective…
Thousands of Years Era of Combustion of Fossil Fuels
Source: NOAA
CCSR/NIES: Center for Climate System Research [1] & National Institute for Environmental Studies, [2], CCSR/NIES AGCM + CCSR OGCM Models 1890-2100 CCCma: Canadian Center for Climate Modelling and Analysis [3], CGCm2 Model 1900-2100 CSIRO: Commonwealth Scientific and Industrial Research Organisation [4], CSIRO- Mk2 model 1961-2100 Hadley Centre: Hadley Centre for Climate Prediction and Research [5], HADCM3 model 1950-2099 GFDL: Geophysical Fluid Dynamics Laboratory [6], R30 Model 1961-2100 MPI-M: Max Planck Institute für Meteorologie [7], ECHAM4/OPYC coupled model 1990-2100 NCAR PCM: National Center for Atmospheric Research [8], PCM model 1980-2099 NCAR CSM: National Center for Atmospheric Research [9], CSM Model 2000-2099
How do we combine the economics of low cost energy with the environmental benefits carbon neutral or very low carbon energy? The focus has to be on Thermal applications not Electricity generation (more on transportation later).
Let’s look at the US and Sweden’s aggregate numbers
R² = 0.7059
$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 2.5 3 3.5 4 4.5 5 5.5 6
GDP/Capita Competitiveness Index
GDP/Capita vs. Competitiveness
source: World Economic Forum, analysis by FutureMetrics
Sweden United States
GDP/Capita Luxembourg 113,533 $ Qatar 98,329 $ Norway 97,255 $ Switzerland 81,161 $ United Arab Emirates 67,008 $ Australia 65,477 $ Denmark 59,928 $ Sweden 56,956 $ Canada 50,436 $ Netherlands 50,355 $ Austria 49,809 $ Finland 49,350 $ Singapore 49,271 $ United States 48,387 $
How can we generate heat reliably, cleanly, and sustainably with fuel from our forests. We follow in the footsteps of many European countries.
Sources: Internal Revenue Service, U.S. Department of Energy (Energy Information Administration), Congressional Joint Committee on Taxation, Office of Management and Budget, & U.S. Department of Agriculture, via Environmental Law Institute.
Source: “The Historical Role of Federal Subsidies in Shaping America’s Energy Future”, DBL Investors, Sept. 2011.
We think low prices are very temporary.
LNG export will open the US natural gas market to world prices.
$- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 $11.00 $12.00 $13.00 $14.00 $15.00 $16.00 $17.00 $18.00 $19.00 $20.00 Canada Russia United States New Zealand Romania Thailand United Kingdom Finland Belgium Bulgaria Spain Turkey Netherlands Estonia Ireland Luxembourg Poland Lithuania Italy France Greece Croatia Czech Republic Slovakia Portugal Slovenia Chinese Taipei (Taiwan) Korea Hungary Japan Switzerland Sweden Denmark
Natural Gas Price per MMBTU at Market Exchange Rates
(prices from data between 2010 to 2012 and may not be exactly correct for some countries today )
source: EIA, 2012, analysis by FutureMetrics
Median $11.46
Current residential natural gas prices in the US are around to $10/MMBTU ($14 in Maine!) or the equivalent of about $1.20/gallon gasoline.
We expect that by 2020, a significant proportion of the world’s rolling fleet will have converted to natural gas.
Okay, so what is the US Energy Policy and can Biomass play a role?
Source: 2012 Maine Energy Profile, Governors Energy Office, analysis by FutureMetrics.
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2,681,923 1,270,308 572,573 1,294,524 975,159 1,158,449
1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 Illinois (35%) Indiana (33%) Iowa (22%) Michigan (32%) Minnesota (34%) Wisconsin (52%)
Number of Homes and Businesses NOT connected to Natural Gas
(proportion of total locations in parenthesis) source: US Energy Information Administration, US Census, 2012, analysis by FutureMetrics
Total NOT Connected = 7,952,935
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899,640 520,320 1,248,990 400,800 3,558,339 2,390,090 206,550 210,840
2,000,000 3,000,000 4,000,000 Connecticut (68%) Maine (96%) Massachusetts (51%) New Hampshire (80%) New York (45%) Pennsylvania (49%) Rhode Island (51%) Vermont (84%)
Number of Homes and Businesses NOT connected to Natural Gas
(proportion of total locations in parenthesis)
source: US Energy Information Administration, US Census, 2012, analysis by FutureMetrics
Total NOT Connected = 9,435,569
17.6 million households in NE and MW with no natural gas.
35 0% 10% 20% 30% 40% 50% 60% 70% 80%
Maine New Hampshire Vermont
Percent of Households using Heating Oil and Natural Gas
US ranking for heating oil and natural gas use in parenthesis Lower rank is more reliant, higher rank is less reliant Heating Oil Natural Gas source: EIA 2012, analysis by FutureMetrics - data excludes Alaska and Hawaii (1) (50) (2) (47) (4) (48)
The gap between high heating oil use and low natural gas availability makes Maine and the other NE states unique in the nation. But wherever there is no natural gas infrastructure AND is it cold AND there are forests that can sustainably supply wood…
Residential pellet boilers can replace central heating systems and replace heating oil.
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Wood pellet fuel is common in Europe where more than a million homes have home heating systems automatically fueled with refined solid biofuel.
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The owner never touches or sees the fuel. It is delivered in bulk by truck.
Source: Pellets@tlas.com
120 425 1,746 3,874 7,234 12,272 16,764 21,957 28,034 36,908 47,375 61,635 74,804 83,250 91,391 100,753 119,253 20,000 40,000 60,000 80,000 100,000 120,000 140,000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Pellet Boilers in Austria
source: the EU’s Intelligent Energy Program, 2012, Analysis and 2012 forecast by FutureMetrics 39
Modern Wood Pellet Boilers are CLEAN and completely automatic
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To put this into perspective, compare using one cord of wood in a fireplace with one cord of wood’s worth of energy from wood pellets in a modern pellet boiler.
375 pounds
0.28 pound
Particulate emissions (SMOKE!)
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20.1 million tons of green wood can make enough pellets for about 1.26 million homes and businesses.
Note that these numbers do not include an analysis of the potential for dedicated energy crops
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State Wisconsin 4,964,000 Minnesota 2,494,000 Michigan 6,112,000 North Dakota 155,000 South Dakota 135,000 Iowa 1,195,000 Illinois 2,393,000 Indiana 2,675,000 Total 20,123,000
analysis by FutureMetrics
Estimated Annual Sustainable Production
(50% of estimate of total sustainable wood harvest)
forestland (green tons). Merchantable biomass is the main stem of all species > 5” d.b.h. between a 1-foot stump height and a 4” top diameter (outside the bark), including rough and rotten culls.
from http://fiatools.fs.fed.us/Evalidator401/tm attribute.jsp
A very rough estimate of sustainable biomass available for energy based on Forest Inventory Analysis (FIA) data.
New England and PA also are markets.
The values for biomass below do not include current use by pulp and paper.
25.8 million tons of green wood can make enough pellets to heat about 1.8 million homes and businesses.
Forest Biomass Production per Year for BioEnergy Potential Crop Biomass Production per Year Total Biomass Production per Year (green tons) Connecticut 100,000 354,000 454,000 Maine 3,190,000 450,000 3,640,000 Massachusetts 110,000 498,000 608,000 New Hampshire 400,000 294,000 694,000 New York 3,330,000 8,766,000 12,096,000 Pennsylvania 2,800,000 3,894,000 6,694,000 Rhode Island 10,000 156,000 166,000 Vermont 300,000 1,134,000 1,434,000 TOTAL 10,240,000 15,546,000 25,786,000 analysis by FutureMetrics 43
If we assume that each state provides biomass for its own needs, the table below shows the conversion rates. Wisconsin is highest proportionally with 10.12% of its homes and businesses converting. Michigan is highest in absolute numbers with 424,000 homes and businesses converting.
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Occupied Households Equivalent Number of Businesses and Other Total Number
Equivalents Total Biomass for Pellets Production per Year (green tons) Wisconsin 2,624,358 782,846 3,407,204 4,964,000 10.12% 344,722 Minnesota 2,347,201 700,170 3,047,371 2,494,000 5.68% 173,194 Michigan 4,532,233 1,351,965 5,884,198 6,112,000 7.21% 424,444 North Dakota 317,498 94,710 412,208 155,000 2.61% 10,764 South Dakota 363,438 108,414 471,852 135,000 1.99% 9,375 Iowa 1,336,417 398,653 1,735,070 1,195,000 4.78% 82,986 Illinois 5,296,715 1,580,010 6,876,725 2,393,000 2.42% 166,181 Indiana 2,795,541 833,910 3,629,451 2,675,000 5.12% 185,764 TOTAL 19,613,401 5,850,678 25,464,079 20,123,000 1,397,431 analysis by FutureMetrics Total Number Converting in each State if the is NO Interstate Transport of Pellets (based on 8 tons per user per year average)
Maine and Vermont could convert almost half of their homes and small businesses from heating oil to pellet fuel with no significant impact on wood pricing to the traditional wood using industries.
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Occupied Households Equivalent Number
Other Total Number of Households and Businesses using Heating Oil Total Potential Wood Pellets Produced by each State Connecticut 1,323,000 394,651 872,567 252,222 3.61% 31,528 Maine 542,000 161,679 542,536 2,022,222 46.59% 252,778 Massachusetts 2,449,000 730,537 1,109,658 337,778 3.80% 42,222 New Hampshire 501,000 149,448 409,132 385,556 11.78% 48,194 New York 7,907,420 2,358,783 3,274,919 6,720,000 25.65% 840,000 Pennsylvania 4,877,735 1,455,028 1,836,501 3,718,889 25.31% 464,861 Rhode Island 405,000 120,812 208,221 92,222 5.54% 11,528 Vermont 251,000 74,873 200,738 796,667 49.61% 99,583 TOTAL 18,256,155 5,445,811 8,454,273 14,325,556 1,790,694 analysis by FutureMetrics Total Number Converting in each State if the is NO Interstate Transport of Pellets (based on 8 tons per user per year average)
Given these levels of penetration and assuming $20/ton profit for pellet manufacturing and $20/ton profit for pellet fuel delivery, the annual profit for pellet flow is more than $447 million. Installing 1.6 million pellet boilers with an assumed margin of $3500 per unit yields a total gross margin on boiler sales of about $4.9 billion.
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Annual Profits from Pellet Sales Total Gross Margin on Boiler Sales Wisconsin $110,311,111 $1,206,527,778 Minnesota $55,422,222 $606,180,556 Michigan $135,822,222 $1,485,555,556 North Dakota $3,444,444 $37,673,611 South Dakota $3,000,000 $32,812,500 Iowa $26,555,556 $290,451,389 Illinois $53,177,778 $581,631,944 Indiana $59,444,444 $650,173,611 $447,177,778 $4,891,006,944 analysis by FutureMetrics
Installing 1.8 million pellet boilers with an assumed margin of $3500 per unit yields a total gross margin on boiler sales of more than $6.2 billion across the northeastern states. Maine leads the nation in state of the art pellet boiler production. Modern pellet boilers are high tech clean and efficient fully automatic
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Annual Profits from Pellet Sales Total Gross Margin on Boiler Sales Connecticut 3.61% 31,528 $20,177,778 $110,347,222 Maine 46.59% 252,778 $161,777,778 $884,722,222 Massachusetts 3.80% 42,222 $27,022,222 $147,777,778 New Hampshire 11.78% 48,194 $30,844,444 $168,680,556 New York 25.65% 840,000 $537,600,000 $2,940,000,000 Pennsylvania 25.31% 464,861 $297,511,111 $1,627,013,889 Rhode Island 5.54% 11,528 $7,377,778 $40,347,222 Vermont 49.61% 99,583 $63,733,333 $348,541,667 1,790,694
$1,146,044,444 $6,267,430,556
analysis by FutureMetrics Total Homes Converting in each State if the is NO Interstate Transport of Pellets (based on 8 tons per user per year average)
At current heating oil prices, the Midwest states “export” more than 8 BILLION dollars per year*
*The US EIA data shows that 78% of every dollar spent on heating oil leaves the region and most of those dollars leave the country.
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Number of Households that use Heating Oil or Propane Average Gallons Used per Year by all Users Average Total Expenditure Per Year (#2 at $3.80/gal) Amount that Does not Stay in the State (EXPORTED) Wisconsin 647,000 533,775,000 2,028,345,000 $ 1,582,109,000 $ Minnesota 488,000 402,600,000 1,529,880,000 $ 1,193,306,000 $ Michigan 765,000 631,125,000 2,398,275,000 $ 1,870,655,000 $ North Dakota 103,000 84,975,000 322,905,000 $ 251,866,000 $ South Dakota 137,000 113,025,000 429,495,000 $ 335,006,000 Iowa 312,000 257,400,000 978,120,000 $ 762,934,000 Illinois 413,000 340,725,000 1,294,755,000 $ 1,009,909,000 Indiana 436,000 359,700,000 1,366,860,000 $ 1,066,151,000 $ Total 3,301,000 2,723,325,000 10,348,635,000 $ 8,071,936,000 $ Source: US Energy Information Administration, 2012, US Census, analysis by FutureMetrics
At current heating oil prices, about a half a million jobs are destroyed as money is drained from those states’ economies and sent to other places.
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#2 Distillate Fuel and Propane use in Residential, Commercial, and Industrial (not Transportation) Average Gallons per Year Money Exported from Regional Economy at $3.80/gal Permanent Job Destruction Wisconsin 533,775,000 ($1,582,109,100)
Minnesota 402,600,000 ($1,193,306,400)
Michigan 631,125,000 ($1,870,654,500)
North Dakota 84,975,000 ($251,865,900)
South Dakota 113,025,000 ($335,006,100)
Iowa 257,400,000 ($762,933,600)
Illinois 340,725,000 ($1,009,908,900)
Indiana 359,700,000 ($1,066,150,800)
2,723,325,000 ($8,071,935,300)
analysis by FutureMetrics
At last winter’s heating oil prices, about ONE MILLION NE jobs were lost in the northeast!
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Pulpwood Demand is Declining The wood-to-energy business will keep the largest manufacturing sector in Maine, the forest products industry, alive!
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6,000,000 6,500,000 7,000,000 7,500,000 8,000,000 8,500,000 9,000,000 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Maine Pulpwood Harvest (green tons) 1980 to 2011
source: Maine Forest Service, 2012, analysis by FutureMetrics Estimate
Ice Storm!
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Even the Pulp and Paper industry is leaving print behind!!
Here is a pathway to incentivizing biomass thermal that does not require any participation by state government.
Our states “export” billions of dollars a year to pay for heating oil.
The mechanism is a “carve-out” to the current RPS utility obligation that could be implemented beginning in 2013. We are proposing in Maine that the 2.6% thermal carve-out could be implemented at a rate of 0.2% per year for 13 years. The legislation could set the alternative compliance payment (ACP) for renewable thermal energy at $28/MWh (which would be by far the lowest level
Heat generated from renewable biomass is produced at very high efficiency: 87% or more for residential pellet boiler systems and 65% or better for industrial boilers. Electricity from biomass is produced at low efficiencies
Because thermal biomass applications are up to three times more efficient than biomass power, the lower cost
saving them money for power and, if they use biomass fuel, heat.
The permanent jobs created per REC generated per year are many orders of magnitude higher for thermal RECs as compared to electric RECs from wind power.
Wind produces 0.066 jobs per 1000 RECs/year. Biomass thermal from pellet fuel produces 21.17 jobs per 1000 RECs/year.
Year 2013 2025 TOTALS Class I Thermal Carve Out % 0.20% 2.60% MWH of thermal energy1 42,000 546,001 Projected Cost @ $14/MWh2 $602,701 $10,280,345 $65,435,276 Worst Case Projected Cost with ACP @ $28/MWh $1,205,402 $15,288,022 $107,045,556 Reduced Heating Oil Equivlent (Gallons)3 1,038,436 13,499,672 94,497,703 Retention of Heating Oil Expenditures in Minnesota Economy4 $3,059,903 $61,257,990 $375,791,648 Direct Savings on Heating Bills to Minnesota Homes and Businesses5 $1,529,952 $30,628,995 $187,895,824 Net Savings to Minnesota (@$14/MWh) $3,987,154 $81,606,640 $498,252,196 Net Savings to Minnesota (@$28/MWh) $3,384,453 $76,598,962 $456,641,916 Number of Homes Converted from Oil to Pellet Fuel at 900 gallons per year per home 1,154 15,000 104,997 Percentage of Homes in Minnesota that use Heating Oil that are Converted 0.24% 3.07% 21.52% Jobs Created (for biomass supply and using IMPLAN multipiers for indirect and induced jobs) 408 8,316 Jobs not "Exported" + multiplers 326 4,241 Jobs from increased disposable income + multiplers 155 3,094 Net Jobs Created 889 15,650 Heating Oil Price (increasing at 3.5% per year) 3.85 $ 5.82 $ analysis by FutureMetrics
5Assumes that geothermal, solar thermal, and biomass thermal reduce the annual heating bill by1/2
1Assumes carve out % of REC Qualified MN Load 2Since 2.6% is very small relative to the total heat used in MN, this assumes an oversupply ofthermal RECs and thus a REC value significantly below the ACP value
31 MWH = 3,412,000 btu, 1 gallon heating oil = 138,000 btu 4Using MN statewide average retail delivered price as of 9/20/2012 of $3.65/gallon; EIA estimates$0.78 of every $1.00 in heating oil expenditure leaves the MN economy
*Biomass thermal is carbon neutral in combustion. The harvest and transportation and some of the pellet refining uses fossil fuel so in aggregate it is a low carbon solution.
With Thermal RECs everyone, is a winner. It is already law in New Hampshire. Your support for this here and in the other states along the northern tier would be welcomed.
I would be happy to answer any questions…
Thanks. Bill Strauss President, FutureMetrics