BIOMASS STUDY
5.4 SELECTION CRITERIA AND METHODOLOGY .1 Introduction
5.4.2 Development and Commercialisation Issues
These criteria will be handled in a step by step manner as depicted below:
1 Resource and feedstock costs will be as at plant gate or equivalent 2 Standard energy units will be used throughout to aid comparison.
Issues to be considered under each of the four sections are as follows:
i) Biomass Resources and Feedstocks Competitive demands/markets for resources
Present and future costs of delivered biomass, reflecting predicted changes in growing, harvesting and transport costs
Storage
Reliability of supply, including potential mixes and substitutes Resource volumes on a regional/local basis, present and future Impact of plant scale
Environmental impacts including sustainability and greenhouse impacts
ii) Conversion Technologies
Capital and operating costs, present and future Capacity and plant scale
Status of development, commercial, demonstrated; emerging;
comparison with world's best Resource requirements (eg water) Relevance of by-products Environmental impacts
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iii) Biomass Derived Products
Present cost of energy from biomass (8.75% and 15% return on investment)
Impact of plant scale
Expected issues and trends in future costs.
Attractiveness of biomass projects to investors (eg lead times;
return on investment; cash flows; risk) Environmental impacts
iv) Competing Product
Present and future cost of energy supply and delivery Special issues (oxygenates, bottle-necks, imports, security of supply)
Status of development of technology Reliability of supply
Impact of plant scale Environmental impacts 5.4.3 Biomass Systems Possibilities
A wide range of biomass systems options were considered in the study up to this point. The broad range candidate systems, within an Australian context at least, appear to be as set out in Table 5.4.1. These were put through the selection criteria defined above and an initial selection shortlisted for further evaluation.
Included in this evaluation will be an assessment of the export potential of the selected systems in a number of countries, principally in the Asia Pacific region. Any significant opportunities outside of these countries will be highlighted.
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Table 5.4.1 : Candidate System Options
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A table of summarised data and commentary is included at the end of this chapter for each system option along with footnotes. The tables include commentary on the resources/feedstock position, technology, product pricing and competitive positioning and on the potential alternative uses of the resources. The tables also cover, in a general sense, commentary on all of the proposed selection criteria.
The systems cover a diverse range of resources and markets and each may require a somewhat different approach, for example:
- the production of oxygenates will require a national strategy because a large scale market will be necessary to justify investment in such a plant;
- by contrast, the production of electricity from biomass will be quite consistent with a strategy of regional development. While new policies to reduce cross subsidies by major electricity authorities may be required to underpin this strategy, there are numerous niche market applications.
All prices are in Australian dollars (1994), unless otherwise stated ($A = 71 cents US).
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System 1 - Lignocellulose Residues to Electricity
This system has t w o features highly advantageous for competition in the market place in the next 15 years:
a current cost of production already within range of established electricity technologies;
• significant potential for reduction in the cost of energy from the biomass feedstock.
In the case of the Orbost sawmill residue plant, electricity costs are estimated at 5-8cents a kWh, depending on the feasibility of cogeneration-generation at this site. Other studies indicate that conversion efficiency in plants for biomass combustion could rise from 2 0 % to 30-35%.
The feedstock is a waste product, hence its low cost but also its relatively low resource volume available. Clearly, much larger volumes of lignocellulose could be available, for example from purpose-grown plantations, but these would be more costly. Sawdust and woodchip residues are estimated to have a delivered cost of less than $10 to about
$19 a tonne, while purpose grown woody biomass would be at least $35 a tonne.
Lignocellulose gasification technologies also show promise with estimates around 5 cents a kWh from feedstock at $15 a tonne and 1 5 % ROI Investors seem likely to require high returns, especially as combustor fouling problems remain.
Regional niche markets seem most likely for this technology, with plants unlikely to be much above 5.0 MW. Biomass-fuelled plants may be particularly attractive in regions remote from conventional electricity generation; those regions may face substantially increased transmission charges in future.
System 2 - Municipal Solid Wastes (MSW) to Electricity
This system has some characteristics in common with System 1, in that combustion or gasification of a waste product is used to produce electricity. Landfill gasification is already commercial both in Australia and overseas.
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Advantages of this system include:
• MSW is an increasing problem, as existing landfill sites become fully utilised and community opposition to new sites gets stronger. The net result of this is an increasingly negative cost of the feedstock, giving the processes involved a "head start".
• the wastes are large in volume, already concentrated and almost by definition, close to major electricity load centres, ie. cities.
Initial financial analysis indicates that gasification of unsorted MSW for cogeneration could be economically attractive, with an ROI greater that 8.75% achievable with electricity sold at 3 cents a kWh. As always with cogeneration, a steam host would need to be found. The very large cost range indicates a need for further study to identify more clearly the most promising applications.
There will be a cost associated with sorting the materials which can be combusted or gasified from those which cannot, such as glass and metal.
Fortunately there is a synergy here with recycling, which tends to use some of the non-combustible materials.
Combustion has an environmental problem associated with community perceptions of hazards from emissions of dioxins and other toxins. The challenges here are firstly to find a technological solution at reasonable cost and secondly to convince the community that this is indeed an acceptable solution.
System 3 - Animal/Human Wastes to Electricity
Anaerobic digestion to stabilise sewage sludges has been done for many years. Use of the resultant methane to produce electricity is becoming commercial in Australia and is more established in some other countries.
Like MSW, animal and human wastes are already concentrated in many cases and, generally in those same cases, are a source of environmental concern. This leads to increasing cost of disposal, for example through sewage outfalls into the sea, which are themselves often seen as unsatisfactory. The net result of this is a feedstock which can have an increasingly negative cost. Animal wastes are concentrated in cattle feedlots, piggeries, battery poultry operations and abattoirs. This feedstock in some cases has an alternative use as fertiliser, in which case the feedstock cost would be low but not negative. Some piggeries in Australia are already operating small scale waste gasification to electricity plants.
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Animal waste plants recently built in Denmark are highly sophisticated and automated, using both the heat and power produced. Scales range from a few kWe up to about 4MWe.
The volumes of human waste are very large and located, essentially by definition, close to major electrical load centres. Animal wastes would aim more at regional niche markets.
Financial analysis was carried out on the basis of zero feedstock cost, for cogeneration with electricity buyback prices in the range 3-7 cents a kWh. This indicated that R O I greater that 8.75% was achievable with electricity sold at 7 cents a kWh and fertiliser by-product sold at 200 a tonne.
System 4 - Lignocellulose to Ethanol
The three systems so far have all been aimed at the electricity market and have been based on wastes of one sort or another, to minimise feedstock costs.
The remaining four systems aim at the liquid fuels market. This is the more traditional target for biomass-derived fuels, with well-known large- scale ethanol programs in Brazil and the USA.
However, it has to be observed that these programs have been heavily subsidised, driven by a mixture of energy security, environmental and agricultural policies.
Energy security is less prominent as a policy concern than it was in the 1980s. Conversely environmental issues, relating to both greenhouse and other emissions, have increased their profile. As discussed earlier, the costings in this study do not attempt to internalise externalities but rather to indicate how far the costs of biomass energy are from the conventional energy forms, and the potential for cost reduction of the biomass energy The study also attempts to separate out agricultural policy issues.
Against this background, biomass to ethanol processes have a target of unleaded petrol at about 20 cents a litre (Australian) ex-refinery, without tax. Costs of ethanol from present plants in Australia are hard to come by, but a recent IEA study has ethanol from biomass from current processes at around $1 a litre (Australian).
This large gap could be narrowed in two ways:
• an increase in the price of petrol; and
• reducing the cost of ethanol from biomass.
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Acknowledging the difficulties of oil price forecasting, there seem to be no resource availability reasons for substantial real increases in petrol prices over the 15 year period of this study. Political upheavals cannot be forecasted but even the 1991 Gulf War did not substantially increase the price of crude oil.
Reducing the cost of ethanol from biomass also has two main possibilities:
• lower feedstock costs; and
• lower conversion costs through technological improvements.
Lignocellulose (including the cellulose component of MSW) has been chosen, on the basis of the information in the Resources section of this study, as the lowest cost feedstock. Feedstocks which have alternative uses as food crops are simply too costly. For example, at the present world wheat price of about $180 a tonne, ethanol by the Vogelbusch process would be about 90cents a litre. It should be remembered that, although alcohol fuels burn somewhat more efficiently than petrol, they have only about half the energy content. Thus the equivalence is about 1.8, meaning that ethanol would have to be about 11 cents a litre to compete with petrol as an unblended fuel.
In addition, lignocellulose conversion technology appears to have better prospects for cost reduction than the technologies for conversion from sugar/starch feedstocks.
However, it is important to note that there are no commercial lignocellulose to ethanol plants in operation and the dangers of estimating commercial costs from laboratory or pilot-scale plants are well-known.
These issues are covered in detail in Appendix 3.
The lower cost estimates for ethanol from these new technologies are still around 40cents a litre, around four times more costly on an energy- equivalent basis than petrol.
System S - Lignocellulose from Methanol
This system shares many characteristics with the previous one. However, it has another competitor. Even if methanol per se becomes an economic competitor (blended with gasoline or "straight") with petrol, that methanol could be produced from natural gas (or coal) rather than biomass. The natural gas processes are well-established and continually being improved.
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Lignocellulose feedstock availability, just as it does for conversion to electricity, will place an upper limit on the scale of plant for conversion to methanol. This indicates regional markets. It also implies that a potential investor would investigate whether electricity or methanol (or ethanol) would give better returns for a given availability of biomass.
Research and development of methanol synthesis from biomass may significantly reduce capital and operating costs, as well as improve process performance. The cost reduction estimates are necessarily tentative, given the commercial immaturity of the biomass-to-methanol route.
Our economic analysis indicates the lowest-cost future estimates for methanol from biomass at about 30 cents a litre, with methanol from natural gas at around half this cost, for the same ROI.
System 6 - Oilseed to Oilseed Esters
Unesterified vegetable oils can be used in some types of diesel engine but generally esterification is required for long-term reliable operation.
The technologies both for extracting vegetable oils, and esterification, are mature. There is in excess of 50 million gallons a year of biodiesel esterification capacity installed in Europe with another 120 million gallons a year planned by 1995. The equivalent capacity is planned in the USA.
The esterification of vegetable oil and animal fat is simple technology which can be done on farm at very small scale. Approximately 10%
glycerol is cogeneration-produced with the esterifies biodiesel. This glycerol can be used directly by the saponification market or it can be refined for the pharmaceutical market.
Our financial analysis indicates that small scale production of vegetable oil would cost at least 80 cents a litre, compared to the ex-refinery price of diesel at around 20 cents. There could be some possibilities for on- farm use, provided engines were compatible.
The price of vegetable oil esters covers a huge range. We have used a feedstock price range of $200-800 a tonne - IEA estimates range even higher, due to agricultural subsidies. In addition, prices are very sensitive to the price which can be obtained for the glycerol by-product. Thus, depending on the assumptions, vegetable oil excess could be hopelessly uncompetitive, at $1.25 to $1.45 a litre, or highly competitive, at 10 cents a litre or even less. At the lower end of the range, the vegetable oil esters could be regarded as the by-product and glycerol the product. Large scale processes could well oversupply the glycerol market and so force down
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its price. With no glycerol credit, vegetable oil esters would be at least 50 cents a litre, with little prospect for reduction through process improvement.
System 7- Biomass to Oxygenates
Oxygenates are a niche market for addition to petrol, eg. in lead phase- down and/or greenhouse gas reduction strategies.
MTBE and ETBE are normally made from methanol and ethanol, respectively, so the relative costs of these feedstocks from either conventional or biomass feedstocks are as discussed for Systems 4 and 5 above. MTBE and ETBE could also face competition as octane enhancers from methanol and ethanol themselves.
The viability of MTBE projects is dependent primarily on the availability of low cost butanes. Large scale MTBE plants are being planned with integrated methanol production which will take additional advantages of associated low cost natural gas sources.
A CSIRO process for making furans from bagasse or other cellulosic feedstock could overcome the limitations imposed by use of methanol or ethanol as oxygenate feedstocks. The process is only at laboratory scale but preliminary financial analysis indicates prices comparable with those of MTBE and ETBE from fossil fuels, at around 50 cents a litre.
Economic studies to date suggest that in order to compete with MTBE, furan production plant capacities will probably need to be greater than about 150,000 tonnes a year, equivalent to around 600,000 tonnes a year bone dry bagasse. Maximum plant capacities are likely to be limited by bagasse supply logistics and studies indicate a likely single plant maximum capacity of around 350,000 tonnes a year furans, equivalent to around 1.4 million tonnes a year of bone dry bagasse.
The development of this process is as yet at an early stage and there are identified areas in the current process concept that, with further research, have potential for reduction in capital cost that may impact on the range of viable plant capacities.
Looking at all systems using lignocellulose, an investor would wish to consider the relative economics of conversion to electricity, alcohols or furans.
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