November 2000 • NREL/SR-570-28805 Biomass Energy Production in California: The Case for a Biomass Policy Initiative Final Report Gregory Morris Green Power Institute Berkeley, California National Renewable Energy Laboratory 1617 Cole Boulevard Golden, Colorado 80401-3393 NREL is a U.S. Department of Energy Laboratory Operated by Midwest Research Institute • Battelle • Bechtel Contract No. DE-AC36-99-GO10337 November 2000 • NREL/SR-570-28805 Biomass Energy Production in California: The Case for a Biomass Policy Initiative Final Report Gregory Morris Green Power Institute Berkeley, California NREL Technical Monitor: Richard Bain Prepared under Subcontract No. AXE-9-18132 National Renewable Energy Laboratory 1617 Cole Boulevard Golden, Colorado 80401-3393 NREL is a U.S. Department of Energy Laboratory Operated by Midwest Research Institute • Battelle • Bechtel Contract No. DE-AC36-99-GO10337 NOTICE This report was prepared as an account of work sponsored by an agency of the United States government. Neither the United States government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States government or any agency thereof. Available electronically at http://www.doe.gov/bridge Available for a processing fee to U.S. Department of Energy and its contractors, in paper, from: U.S. Department of Energy Office of Scientific and Technical Information P.O. Box 62 Oak Ridge, TN 37831-0062 phone: 865.576.8401 fax: 865.576.5728 email: [email protected] Available for sale to the public, in paper, from: U.S. Department of Commerce National Technical Information Service 5285 Port Royal Road Springfield, VA 22161 phone: 800.553.6847 fax: 703.605.6900 email: [email protected] online ordering: http://www.ntis.gov/ordering.htm Printed on paper containing at least 50% wastepaper, including 20% postconsumer waste Biomass Energy Production in California: The Case for a Biomass Policy Initiative Page Executive Summary....................................................................................................... 1 Introduction...................................................................................................................... 5 The California Biomass Energy Industry................................................................. 6 Development of the California Biomass Energy Industry .................................................. 6 The 1980s: Decade of Growth ............................................................................... 7 The 1990s: Maturity, Consolidation .................................................................... 10 Characteristics of California’s Biomass Power Plants ........................................ 15 Fuel Use and Alternative Disposal Options for Biomass Residues in California............. 16 Wood Processing Residues.................................................................................... 17 In-Forest Residues................................................................................................. 18 Agricultural Residues............................................................................................ 19 Urban Wood Residues........................................................................................... 21 The California Biomass Fuel Market ............................................................................... 22 Biomass Fuel Market Price Trends....................................................................... 24 The Environmental Costs and Benefits of Biomass Energy Production...... 28 Disposal Alternatives for Biomass Residues ................................................................... 28 Sources of Impacts Associated with Biomass Residue Disposal...................................... 30 Open Burning ........................................................................................................ 30 Burial..................................................................................................................... 31 Spreading and Composting ................................................................................... 33 In-Forest Accumulation......................................................................................... 33 Energy Production ................................................................................................ 34 i Biomass Energy Production in California: The Case for a Biomass Policy Initiative Magnitude of the Impacts of Biomass Disposal Alternatives........................................... 35 Conventional Air Pollution ................................................................................... 35 Greenhouse Gases and Climate Change............................................................... 38 Greenhouse Gas Model......................................................................................... 39 Landfill Disposal................................................................................................... 50 Forest Ecosystem Deterioration ........................................................................... 50 Rural Employment and Taxes ............................................................................... 51 The Benefits of Energy Diversity and Domestic Supply........................................ 52 The Economic Value of the Benefits of Biomass Energy Production .............................. 52 Values of Environmental Impacts ......................................................................... 53 Value of the Social Benefits of Biomass Energy Production ................................ 57 Net Value of the Ancillary Services of Biomass Energy Production..................... 58 The Economic Predicament for Biomass Energy Production ......................... 61 Cost of Energy Production from Biomass......................................................................... 61 The Market for Energy Generated from Biomass Resources ........................................... 62 The Magnitude of the Need for Biomass Policy Support ................................................. 64 Biomass Energy Policy............................................................................................... 68 Approaches to Crafting a Biomass Energy Policy............................................................ 68 Broad-Based Policies for Biomass.................................................................................... 70 Targeted Biomass Policies ................................................................................................ 74 Measures Applicable to Urban Biomass Fuels..................................................... 74 Measures Applicable to Agricultural Biomass Fuels............................................ 76 Measures Applicable to In-Forest Biomass Fuels ................................................ 78 The Costs and Benefits of Policy Support for Biomass Energy Production..................... 80 Conclusion..................................................................................................................... 87 References ..................................................................................................................... 91 ii Biomass Energy Production in California: The Case for a Biomass Policy Initiative Page List of Tables 1 California Biomass Power Plants.......................................................................... 14 2 Alternative Fates for Biomass Residues................................................................ 29 3 Emissions Factors for Energy Production and Biomass Disposal ........................ 37 4 Emissions from Biomass Power Plants................................................................. 37 5 Biomass Greenhouse Gas Emissions Model......................................................... 43 6 Greenhouse Gas Emissions Factors ...................................................................... 47 7 Values of Environmental Pollutants...................................................................... 54 8 Environmental Benefits of the California Biomass Energy Industry.................... 58 9 Value of the Environmental Benefits of the California Biomass Energy Industry..................................................................... 59 10 Average Cost of Biomass Fuel Production in California...................................... 62 11 California Power Purchase Rates .......................................................................... 63 12 Cost Shifting Needs for Biomass Power Production ............................................ 65 13 Biomass Energy Production Economics ............................................................... 66 14 Biomass Energy Production Economics, Post Transition..................................... 67 15 Policy Measures for Biomass Energy Production................................................. 69 16 Magnitude