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BIOMASS ELECTRICITY PLANT ALLOCATION THROUGH NON-LINEAR MODELING and MIXED INTEGER OPTIMIZATION by Robert Kennedy Smith a Disser

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BIOMASS ELECTRICITY PLANT ALLOCATION THROUGH NON-LINEAR MODELING and MIXED INTEGER OPTIMIZATION by Robert Kennedy Smith a Disser BIOMASS ELECTRICITY PLANT ALLOCATION THROUGH NON-LINEAR MODELING AND MIXED INTEGER OPTIMIZATION by Robert Kennedy Smith A dissertation submitted to Johns Hopkins University in conformity with the requirements for the degree of Doctor of Philosophy Baltimore, Maryland June, 2012 © 2012 Robert Kennedy Smith All Rights Reserved Abstract Electricity generation from the combustion of biomass feedstocks provides low-carbon energy that is not as geographically constricted as other renewable technologies. This dissertation uses non-linear programming to provide policymakers with scenarios of possible sources of biomass for power generation as well as locations and types of electricity generation facilities utilizing biomass, consistent with a set of policy, technology and economic assumptions. The scenarios are obtained by combining the output from existing agricultural optimization models with a non-linear mathematical program that calculates the least-cost ways of meeting an assumed biomass electricity standard. The non-linear program considers region-specific cultivation and transportation costs of biomass fuels as well as the costs of building and operating both coal plants capable of co- firing biomass and new dedicated biomass combustion power plants. The results of the model provide geographically-detailed power plant allocation patterns that minimize the total cost of meeting the generation requirements, which are varying proportions of total U.S. electric power generation, under the assumptions made. The amount of each cost component comprising the objective functions of the various requirements are discussed in the results chapter for all cases, and the results show that approximately two-thirds of the total cost of meeting a biomass electricity standard occurs on the farms and forests that produce the biomass. Plant capital costs and biomass transportation costs comprise the largest share of the remaining costs. A conclusion section that places the findings in a policy-setting context follows the results. The most important policy conclusion is that biomass use in power plants will require significant subsidies, perhaps as much as half of their cost, if they are to achieve significant penetrations in U.S. electricity markets. ii Advisor: Professor Benjamin Hobbs, Johns Hopkins University, Department of Geography and Environmental Engineering. Readers: Professor Cila Herman, Johns Hopkins University, Department of Mechanical Engineering and Professor Maqbool Dada, Johns Hopkins University, Carey Business School iii Acknowledgments Ad Maiorem Dei Gloriam I would like to acknowledge my parents Rick and Joan, in appreciation of their constant love and support. I would also like to acknowledge my colleagues at EIA for their professional advice and assistance with the NEMS model. I want to thank Dr. Robert Perlack of Oak Ridge National Laboratory and Dr. Daniel De la Torre Ugarte of the University of Tennessee for sharing data with me, without which this research would not be possible. I appreciate the financial support offered by the U.S. Department of Energy and Johns Hopkins University. In addition, special appreciation goes to Benjamin Hobbs my advisor at Johns Hopkins University and to Candice Ekstrom and Kyle Belott of R.A. Smith National who helped with GIS mapping and formatting. iv Table of Contents 1. Introduction ...................................................................................................................................................... 1 1.1 Research Motivation ................................................................................................................................... 1 1.2 The Role of Biomass Within the Energy System .............................................................................. 3 1.3 Research Approach ...................................................................................................................................... 5 1.4 Cost and Value Tradeoffs in Location and Technology Choice for Biomass Electricity .. 7 1.5 Scope of the Dissertation ........................................................................................................................ 11 2. Literature Review ........................................................................................................................................ 13 2.1 Overview ....................................................................................................................................................... 13 2.2 Current U.S. Renewable Energy Policies .......................................................................................... 13 2.3 Sources of Biomass Supply .................................................................................................................... 16 2.4 Biomass Carbon Emissions and Environmental Impact ........................................................... 19 2.5 A Comparison of POLYSYS to Other Models ................................................................................... 24 2.5.1 Bottom-Up Agricultural and Forestry Models ...................................................................... 25 2.5.2 POLYSYS Structural Assumptions .............................................................................................. 26 2.6 Transmission ............................................................................................................................................... 30 2.7 Land Competition Issues ........................................................................................................................ 32 3. Biomass Modeling Assumptions ............................................................................................................ 37 3.1 Overview ....................................................................................................................................................... 37 3.2 Exclusion of Plant-Specific Transmission, Inclusion of Regional Transmission ............. 37 3.3 Power Plant Characterizations ............................................................................................................ 40 v 3.3.1 Dedicated Plant Technology and Size ....................................................................................... 40 3.3.2 Carbon Sequestration ...................................................................................................................... 42 3.3.3 Co-firing ................................................................................................................................................ 42 3.3.4 Cost Data ............................................................................................................................................... 43 3.3.5 Co-firing Sites...................................................................................................................................... 45 3.4 Avoided Coal Use Savings and Dedicated Plant Capacity Credits .......................................... 46 3.4.1 Coal Prices ............................................................................................................................................ 46 3.4.2 Electricity Prices ................................................................................................................................ 50 3.5 Co-firing in Nonattainment Areas ....................................................................................................... 54 3.5.1 Nonattainment Areas ...................................................................................................................... 54 3.5.2 Coal Plant Retirements ................................................................................................................... 56 3.6 Biomass Transportation and Interregional Utilization ............................................................. 57 3.7 Feedstock Energy Content, Usage and Competition with Transportation Demands .... 60 3.7.1 Energy Content .................................................................................................................................. 60 3.7.2 Competition in the Electric Power Sector with Cellulosic Ethanol............................... 61 4. Modeling Methodology .............................................................................................................................. 64 4.1 Overview ....................................................................................................................................................... 64 4.2 Biomass Fuel Supply Curve Derivation Using POLYSYS ............................................................ 64 4.3 Power Plant Allocation Model Structural Considerations ........................................................ 68 4.3.1 Discounting .......................................................................................................................................... 68 4.3.2 Decision Variables of the Generation Model .......................................................................... 70 vi 4.3.3 Conversion of Multiyear Formulation into Recursive Formulation ............................ 71 4.4 Power Plant Allocation Model Structure ......................................................................................... 74 4.4.1 Decision Variables ............................................................................................................................ 74 4.4.2 Objective Function ...........................................................................................................................
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