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 04217, USA 2
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 3
FutureMetrics LLC Prefeasibility and feasibility studies Due diligence Financial modeling Risk analysis Economic impact analysis Expert advice 4
Recipient of the 2012 International Excellence in Bioenergy Award 5
Does Bioenergy Make Sense? It depends on the what you do with it… Price at the Generator Costs amortized over 25 years Natural Gas at at 6.00% $3.5 per MMBTU Fixed Annual Capital Fixed Construction Size Capacity Annual Output Maintenance Variable Cost Total Cost Install Cost Cost Capital Cost Cost per kW (MW) Factor (kWh) and other per kWh per kWh Amortization per kWh per kWh $ 0.0366 Hydro $ 2,180 1000 90.0% $ 2,180,000,000 $ 170,534,246 7,884,000,000 $ 0.0216 $ 0.0140 $ 0.0010 $ 0.0486 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 $ 0.0739 Coal $ 2,749 500 85.0% $ 1,374,500,000 $ 107,522,624 3,723,000,000 $ 0.0289 $ 0.0180 $ 0.0270 $ 0.1017 Landbased Wind $ 1,485 50 23.0% $ 74,250,000 $ 5,808,334 100,740,000 $ 0.0577 $ 0.0340 $ 0.0100 $ 0.1359 Nuclear $ 4,930 1000 90.0% $ 4,930,000,000 $ 385,657,721 7,884,000,000 $ 0.0489 $ 0.0470 $ 0.0400 $ 0.1506 Biomass (electricity only) $ 3,294 200 85.0% $ 658,800,000 $ 51,535,762 1,489,200,000 $ 0.0346 $ 0.0710 $ 0.0450 $ 0.1629 Offshore Wind $ 2,890 50 34.0% $ 144,500,000 $ 11,303,761 148,920,000 $ 0.0759 $ 0.0770 $ 0.0100 $ 0.1912 Solar PV $ 5,750 100 30.0% $ 575,000,000 $ 44,980,363 262,800,000 $ 0.1712 $ 0.0150 $ 0.0050 analysis by FutureMetrics If minimizing price of electricity is the objective, then green electricity in the current market is challenging.
If minimizing CO 2 is the objective… Era of Combustion of Fossil Fuels Thousands of Years 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
GDP/Capita vs. Competitiveness $120,000 $100,000 Sweden R² = 0.7059 $80,000 GDP/Capita United States $60,000 $40,000 $20,000 $0 2.5 3 3.5 4 4.5 5 5.5 6 Competitiveness Index source: World Economic Forum, analysis by FutureMetrics
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
The solution? The real “green” energy source: Biomass for Heat (and combined heat and power)
How can we generate heat reliably, cleanly, and sustainably with fuel from our forests. We follow in the footsteps of many European countries.
Biomass Thermal can be good for the suppliers, the users, and the economy if the right strategy is well executed. We think that the economic story is powerful enough. Carbon pricing is not necessary assuming a free market… But first, is it a free market?
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.
What about Natural Gas? We think low prices are very temporary.
LNG export will open the US natural gas market to world prices. $20.00 Natural Gas Price per MMBTU at Market Exchange Rates $19.00 $18.00 (prices from data between 2010 to 2012 and may not be exactly correct for some countries today ) $17.00 $16.00 $15.00 Median $11.46 $14.00 $13.00 $12.00 $11.00 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $- Canada Russia New Zealand Romania Thailand United Kingdom Finland Belgium Bulgaria Spain Turkey Netherlands Estonia Ireland Luxembourg Poland Lithuania Italy France Greece Czech Republic Slovakia Portugal Slovenia Chinese Taipei (Taiwan) Korea Hungary Japan Switzerland Sweden United States Croatia Denmark source: EIA, 2012, analysis by FutureMetrics
We expect that by 2020, a significant proportion of the world’s rolling fleet will have converted to natural gas. 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 the demand for natural gas as a transportation fuel will push prices significantly higher.
Okay, so what is the US Energy Policy and can Biomass play a role?
We do not have a strategic vision at the Federal level. We do have Renewable Portfolio Standards at the State Level (more on this later)
Why does biomass thermal make sense?
Source: 2012 Maine Energy Profile, Governors Energy Office, analysis by FutureMetrics.
Heat for homes and buildings is not made from electricity .
Number of Homes and Businesses NOT connected to Natural Gas (proportion of total locations in parenthesis) Wisconsin (52%) 1,158,449 Total NOT Connected = 7,952,935 Minnesota (34%) 975,159 Michigan (32%) 1,294,524 Iowa (22%) 572,573 Indiana (33%) 1,270,308 Illinois (35%) 2,681,923 - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 source: US Energy Information Administration, US Census, 2012, analysis by FutureMetrics 33
Number of Homes and Businesses NOT connected to Natural Gas (proportion of total locations in parenthesis) Connecticut (68%) 899,640 Total NOT Connected = 9,435,569 Maine (96%) 520,320 Massachusetts (51%) 1,248,990 New Hampshire (80%) 400,800 New York (45%) 3,558,339 Pennsylvania (49%) 2,390,090 Rhode Island (51%) 206,550 Vermont (84%) 210,840 - 1,000,000 2,000,000 3,000,000 4,000,000 source: US Energy Information Administration, US Census, 2012, analysis by FutureMetrics 17.6 million households in NE and MW with no natural gas. 34
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… Percent of Households using Heating Oil and Natural Gas Heating Oil US ranking for heating oil and natural gas use in parenthesis Natural Gas Lower rank is more reliant, higher rank is less reliant (1) Maine (50) (2) New Hampshire (47) (4) Vermont (48) 0% 10% 20% 30% 40% 50% 60% 70% 80% 35 source: EIA 2012, analysis by FutureMetrics - data excludes Alaska and Hawaii
Residential pellet boilers can replace central heating systems and replace heating oil. 36
Wood pellet fuel is common in Europe where more than a million homes have home heating systems automatically fueled with refined solid biofuel. The owner never touches or sees the fuel. It is 37 delivered in bulk by truck .
Source: Pellets@tlas.com
Pellet Boilers in Austria 140,000 119,253 120,000 100,753 100,000 91,391 83,250 74,804 80,000 61,635 60,000 47,375 36,908 40,000 28,034 21,957 16,764 12,272 20,000 425 1,746 3,874 7,234 120 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 source: the EU’s Intelligent Energy Program, 2012, Analysis and 2012 forecast by FutureMetrics We are here in the US (15 years behind Sweden and Austria)! 39
Modern Wood Pellet Boilers are CLEAN and completely automatic 40
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