RELIABILITY OF RENEWABLE ENERGY: BIOMASS Jordan Lofthouse, BS, Strata Policy Randy T Simmons, PhD, Utah State University Ryan M. Yonk, PhD, Utah State University The Institute of Political Economy (IPE) at Utah State University seeks to promote a better understanding of the foundations of a free society by conducting research and disseminating findings through publications, classes, seminars, conferences, and lectures. By mentoring students and engaging them in research and writing projects, IPE creates diverse opportunities for students in graduate programs, internships, policy groups, and business. come to depend on incentives, making biomass RELIABILITY OF RENEWABLE economically unreliable. ENERGY: BIOMASS RELATIVE COST OF BIOMASS Although biomass fuels are more expensive than coal INTRODUCTION on average, the two fuels can be cost-competitive, making them more economically reliable than many As Americans have grown more concerned with fossil renewable electricity sources. Researchers use what is fuels, policymakers have responded to their called the “levelized cost of electricity” (LCOE) to constituencies by mandating and subsidizing estimate the lifetime costs associated with generating renewable energy sources like biomass. Biomass is electricity. In 2015, the Energy Information organic material that can be used for energy Administration estimated that the LCOE from a production. Environmentally-focused policies have conventional coal plant was $95.10 per megawatt- helped the biomass market grow as an electricity hour, and the LCOE from a biomass plant was $100.50 source in the United States and internationally. In per megawatt-hour. 2 Because biomass electricity is 2014, 1.7 percent of the the United States’ electricity generally not a viable alternative to fossil fuel powered was generated from biomass, and as state electricity, lawmakers in the United States have governments mandate higher amounts of renewable established mandates and subsidies to ensure that energy, more electricity will be generated using states explore options beyond fossil fuels. biomass fuels. 1 The Institute of Political Economy evaluated the environmental, economic, and physical MANDATES reliability of biomass-generated electricity. To be considered reliable, biomass-generated electricity Biomass is currently only mandated by state must be: governments, not the federal government. Renewable Portfolio Standards (RPS), the most common type of • Economically viable and profitable without renewable energy mandate, outline what portion of a government mandates, subsidies, or incentives. state’s energy must come from renewable resources. • Less harmful to the environment than traditional Some states’ RPS have mandates for specific amounts forms of energy. of its energy come from a particular energy source. • Able to consistently meet energy demands These mandates are called carve-outs. without disruption. Most carve-outs are for wind or solar power, but some states have carve-outs for biomass. While biomass has ECONOMIC RELIABILITY fewer carve-outs than wind or solar power, it is still eligible to satisfy the general renewable requirements Biomass-generated electricity is, on average, slightly for all twenty-nine states that have adopted RPS. 3 more expensive than coal power, so it is used less as Because biomass is one of the most reliable ways to an electricity source. Governments attempt to meet RPS, these mandates drive the growth of the circumvent high costs of biomass by subsidizing and biomass energy industry. mandating biomass electricity production. Biomass incentives are effective, but the biomass industry has 1 U.S. Energy Information Administration. (2015, March 31). What Resources in the Annual Energy Outlook 2015. Retrieved from is U.S. Electricity Generation by Energy Source? Retrieved from http://www.eia.gov/forecasts/aeo/electricity_generation.cfm http://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3. 3 Department of Energy. (2014). Renewable Portfolio Standards. 2 U.S. Energy Information Administration. (2015, April 14). DSIRE. Retrieved from Levelized Cost and Levelized Avoided Cost of New Generation http://www.dsireusa.org/resources/detailed-summary-maps/ Read the full report at usu.edu/ipe SUBSIDIES industry. To incentivize farmers to harvest more agriculture and forest residues, the U.S. Department of In addition to mandates, governments use subsidies to Agriculture matches payments made to farmers by impact the biomass industry. Biomass subsidies biomass energy companies through the BCAP. The increase the cost of electricity for taxpayers and BCAP provides matching payments up to $12.5 million redistribute wealth to biomass producers. Taxpayers per year.9 Many biomass energy plants have come to for Common Sense, a 501(c)(3) non-profit organization rely on the BCAP to stay in operation.10 Proposed BCAP that acts as a budget watchdog, estimates that tax cuts discourage farmers from entering the industry, credits for biomass will cost taxpayers more than $2.2 showing that biomass suppliers are unconfident that billion over the next ten years.4 the biomass industry could sustain itself if the industry were to lose government support.11 The Production Tax Credit (PTC) is a key government subsidy for most types of biomass. 5 Electricity Biomass is economically reliable when it exists producers that use energy crops, called closed-loop independently of government support, but when biomass, receive a tax credit of 2.3 cents per kilowatt- biomass is grown and used solely because of hour. Electricity producers that use farm and forest government intervention, as is often the case with waste, landfill gas, and other forms of waste biomass animal waste and closed-loop biomass energy sources, receive a smaller tax credit of 1.1 cents per kilowatt- biomass is not an economically reliable electricity hour.6 This is known as open-loop biomass. source. Although closed-loop systems receive a greater tax ENVIRONMENTAL RELIABILITY credit than open-loop systems, they are not as widely used because energy crops are expensive to produce.7 Wood is the principal fuel used in biomass electricity Open-loop biomass material, however, is less generation.12 Biomass power plants can be reliably expensive and easier for electricity companies to supplied from forest thinning operations and wood procure. Even without the PTC in effect, electricity waste from construction and municipalities, but wood companies use waste biomass to generate electricity. is often supplied by full scale logging operations. Incentivizing open-loop biomass provides additional According to a 2011 article by the Partnership For profits to companies that are already generating a Policy Integrity (PFPI), 55 million tons of wood (roughly profit by using waste biomass to generate electricity.8 650,000 clear-cut acres of forest) are needed each year to provide enough fuel for predicted biomass facilities The Biomass Crop Assistance Program (BCAP) is coming online over the next three years. That volume another federal subsidy used to help the biomass cannot be met by existing wood scrap and waste, 4 Taxpayers for Common Sense. (2013, August). Taxpayer power-of-association Subsidies for Biomass in the Federal Farm Bill. Retrieved from 9 Farm Service Agency. (2014, July). Conservation Fact Sheet. http://www.taxpayer.net/images/uploads/downloads/Taxpayer_ Retrieved from Supports_for_Biomass_in_Farm_Bill_Fact_Sheet_FINAL.pdf https://www.fsa.usda.gov/Internet/FSA_File/bcap_fact_sht_201 5 U.S. Department of Energy. (n.d.). Renewable Electricity 4.pdf Production Tax Credit (PTC). Retrieved from 10 The Washington Post. (2010, January 10). The Unintended http://energy.gov/savings/renewable-electricity-production-tax- Ripples from the Biomass Subsidy Program. Retrieved from credit-ptc www.washingto npost.com/wp- 6 Union of Concerned Scientists. (2015). Production Tax Credit for dyn/content/article/2010/01/09/AR2010010902023.html Renewable Energy. Retrieved from 11 Farm Industry News. (2012, February 7). Growth of Biomass http://www.ucsusa.org/clean_energy/smart-energy- Industry Dependent on Government Policy. Retrieved from solutions/increase-renewables/production-tax-credit- http://farmindustrynews.com/bioenergy/growth-biomass- for.html#.VSTPmxPF-Xx industry-dependent-government-policy 7 Kotrba, R. (n.d.) The power of association. Biomass Magazine. 12 Energy Systems Research Unit - University of Strathclyde. (n.d.) Retrieved from http://biomassmagazine.com/articles/1675/the- Biomass types. Retrieved from power-of-association http://www.esru.strath.ac.uk/EandE/Web_sites/03- 8 Kotrba, R. (n.d.) The power of association. Biomass Magazine. 04/biomass/background%20info4.html Retrieved from http://biomassmagazine.com/articles/1675/the- Read the full report at usu.edu/ipe meaning forests will need to be harvested to meet Environmental Protection Agency to obtain Prevention demand.13 of Significant Deterioration permits, which regulate emissions from energy generation. 19 Most biomass Logging and burning trees releases sequestered facilities do not face any restrictions regarding carbon into the atmosphere while diminishing forests’ hazardous air pollutants like hydrochloric acid, future ability to sequester carbon.14 Carbon lost from carcinogens, and heavy metals.20 Biomass plants are burning trees will not be recaptured until trees have incentivized by both mandates and subsidies, yet they reached maturity, even if the trees are replanted after are often dirtier than fossil fuels. being harvested. Because