CO2 mitigation costs of large-scale bioenergy technologies in competitive electricity markets

In this study, we compare and contrast the impact of recent technological developments in large biomass-fired and natural-gas-fired cogeneration and condensing plants in terms of CO2 mitigation costs and under the conditions of a competitive electricity market. The CO2 mitigation cost indicates the minimum economic incentive required (e.g. in the form of a carbon tax) to equal the cost of a less carbon extensive system with the cost of a reference system. The results show that CO2 mitigation costs are lower for biomass systems than for natural gas systems with decarbonization. However, in liberalized energy markets and given the socio-political will to implement carbon extensive energy systems, market-based policy measures are still required to make biomass and decarbonization options competitive and thus help them to penetrate the market. This cost of cogeneration plants, however, depends on the evaluation method used. If we account for the limitation of heat sinks by expanding the reference entity to include both heat and power, as is typically recommended in life-cycle analysis, then the biomass-based gasification combined cycle (BIG/CC) technology turns out to be less expensive and to exhibit lower CO2 mitigation costs than biomass-fired steam turbine plants. However, a heat credit granted to cogeneration systems that is based on avoided cost of separate heat production, puts the steam turbine technology despite its lower system efficiency at an advantage. In contrast, when a crediting method based on avoided electricity production in natural-gas-fired condensing plants is employed, the BIG/CC technology turns out to be more cost-competitive than the steam turbine technology for carbon tax levels beyond about $ 150/t C. Furthermore, steam turbine plants are able to compete with natural-gas-fired cogeneration plants at carbon tax levels higher than about $ 90/t C.