Biomass Feasibility Project Final Report - Xcel Energy

feedstock prices, and those higher prices could have a devastating short-run effect on both
current consumers of biomass and potential new entrants to the marketplace. If substantial
portions of the state’s biomass production were diverted to bio-power facilities, the pulp and
paper and livestock industries would have trouble finding the reasonably priced fiber and feed
they need to stay in business. On the other hand, new companies entering the biomass power
business on the assumption they can buy feedstocks at current prices may discover that current
biomass consumers are willing to outbid them in order to maintain supply. When the Fibrominn
plant began construction, concerns were heard that its consumption of 31 to 40% of Minnesota’s
poultry litter would take that fertilizer away from organic farmers (EQB. 2001b).
Response to Information Gaps
The solution to problems of this kind lies in modeling the response of biomass markets to the new
bio-power plants, as well as continuing efforts to quantify the state’s biomass inventories and
production. Information tools like BioPET can reduce the gap in information on the availability
and costs of biomass resources for power generation.
The advent of several new bio-power facilities and the maturity of the state’s corn ethanol and
soybean biodiesel industries indicate that biomass development is understood better in
Minnesota than in most states. Where gaps remain, potential policy and market-based solutions
can help meet the challenge. Minnesota’s departments of Agriculture and/or Commerce
could give farmers guidance in developing anaerobic digesters, and the Pollution Control
Agency could standardize approval processes. Utilities have a stake in partnerships with farmers,
too. Dairyland Power Cooperative works with third-party contractors to build and operate
digesters and generating equipment on farms. Farmers receive payments for biogas the
digesters generate (less management fees), and they don’t have to assume the risks and the
responsibility of managing the systems.
Some information gaps can be filled only by experience – by doing – because, in the words of
Yogi Berra, it’s hard to make predictions, especially about the future. Time will determine the
highest and best use of Minnesota’s unused biomass and the most efficient means of harvesting
and processing it. They might become a feedstock for bio-based manufacturing, bio-refining,
and cellulosic ethanol.
Studies have shown that the costs of residue collection are sensitive to a number of variables,
including road quality, success in reducing contamination by rocks and dirt, and the integration
of processing with logging operations (Rawlings, Rummer, Seeley, Thomas, Morrison, Han, et. al.
2004). These questions of operating costs and commercial success in using Minnesota’s biomass
can be answered only by experience. For the entrepreneurial developer, insufficient information
and unforeseen consequences are unavoidable risks. When everybody knows how to do
something, they all do it and that floods the market.
High Capital Costs
Not only does biomass fuel currently cost more than coal, plants that use biomass also cost more
to build than coal-fired plants. With the possible exception of syngas in a peaking plant,
biomass fuels may be best suited to firing base load generating power plants. Unfortunately, a
biomass-only, base-load power plant will cost significantly more per MW than a comparable
coal plant. It will most likely be smaller (< 60 MW) because the cost of transporting biomass fuels
over long distances militates against a larger plant. A biomass plant can’t take advantage of
economies of scale enjoyed by coal-fired plants.
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Identifying Effective Biomass Strategies:
Quantifying Minnesota’s Resources and Evaluating Future Opportunities