Federal RPS and Bioenergy Demand

From the October 2009 Forest2Fuel newsletter.

Everyone agrees that the federal renewable electricity standard in the American Clean Energy and Security bill now in Congress will, if passed, lead to dramatic increases in the number of wood-fired electricity plants. To our knowledge, however, no one has attempted to quantify what the impact of the federal standards might be for wood bioenergy.

Recently, we applied the proposed standards to data about projected electricity consumption published by the Energy Information Administration in the supplemental tables of the Annual Energy Outlook. While we had to make assumptions about the amount of the standard that will be met with wood, we think these numbers are somewhere in neighborhood of the ballpark.

The table describes the number of plants that will need to be operational by the date a new standard goes into effect, the additional green tons of wood fiber that will be needed to supply these additional plants annually, and the capital investment it will take to build the plants. This table does not include incremental increases in the amount of renewable energy that will need to be produced in order to keep up with increased electricity consumption in the intervening years. As a result, these numbers are on the conservative side.

We have teased out two scenarios: one in which 40 percent of the renewable standard is met with biomass and one in which 60 percent of the standard is met with biomass. Then, because 70 percent of all biomass energy was produced with wood or wood waste in 2007, we assumed 70 percent of the biomass would continue to be wood fiber.

While these numbers may seem high, we think that they are reasonable for the following reasons:

• The technology for converting wood to electricity is proven.
• The cost of producing electricity from wood is less than half the cost of electricity produced from wind and solar.
• The capital costs for building wood to electricity plants are significantly lower than capital costs for wind and solar.
• Wood is an on-demand power source and can be produced 24/7; wind and solar are less reliable.

As these numbers indicate, federal renewable electricity standards will have a significant impact on the wood bioenergy industry. States in which renewable electricity standardshave been enacted are starting to see the benefits of new investments, including more robust wood fiber markets and green energy jobs.

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