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Economics of Biomass Fuels for Electricity Production: A Case Study with Crop Residues

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  • Maung, Thein A.
  • McCarl, Bruce A.

Abstract

In the past, studies on agricultural feedstocks for energy production were motivated by rising fossil fuel prices interpreted by many as caused by resource depletion. However, today's studies are mainly motivated by concerns for climate change and global warming. Currently, most studies concentrate on liquid fuels with little study devoted toward electricity. This study examines crop residues for electricity production in the context of climate change and global warming. We use sector modeling to simulate future market penetration for biopower production from crop residues. Our findings suggest that crop residues cost much more than coal because they have lower heat content and higher production/hauling costs. For crop residues to have any role in electricity generation either the carbon or carbon dioxide equivalent greenhouse gas price must rise to about 15 dollars per ton or the price of coal has to increase to about 43 dollars per ton. We find crop residues with higher heat content and lower production costs such as wheat residues have greater opportunities in biopower production than the residues with lower heat content and higher production costs. In addition, the analysis shows that improvements in crop yield do not have much impact on biopower production. However, the energy recovery efficiency does have significant positive impact but only if the carbon equivalent price rises substantially. The analysis also indicates the desirability of cofiring biomass as opposed to 100% replacement because this reduces hauling costs and increases the efficiency of heat recovery. In terms of policy implications, imposing carbon emission pricing could be an important step in inducing electric power producers to include agricultural biomass in their fuel-mix power generation portfolios and achieve greenhouse gas emission reductions.

Suggested Citation

  • Maung, Thein A. & McCarl, Bruce A., 2008. "Economics of Biomass Fuels for Electricity Production: A Case Study with Crop Residues," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6417, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea08:6417
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    File URL: http://purl.umn.edu/6417
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    References listed on IDEAS

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    1. Lyubov Kurkalova & Catherine Kling & Jinhua Zhao, 2006. "Green Subsidies in Agriculture: Estimating the Adoption Costs of Conservation Tillage from Observed Behavior," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 54(2), pages 247-267, June.
    2. Paul Gallagher & Mark Dikeman & John Fritz & Eric Wailes & Wayne Gauthier & Hosein Shapouri, 2003. "Supply and Social Cost Estimates for Biomass from Crop Residues in the United States," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 24(4), pages 335-358, April.
    3. F. J. Hitzhusen & Mohammed Abdallah, 1980. "Economics of Electrical Energy from Crop Residue Combustion with High Sulfur Coal," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 416-425.
    4. Gallagher, Paul W. & Dikeman, Mark & Fritz, John & Wailes, Eric & Gauthier, Wayne & Shapouri, Hosein, 2003. "Supply and Social Cost Estimates for Biomass from Crop Residues in the United States," ISU General Staff Papers 200304010800001493, Iowa State University, Department of Economics.
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    Cited by:

    1. Oliver, Anthony & Khanna, Madhu, 2013. "Renewable Energy Policies for the Electricity, Transportation, and Agricultural Sectors: Complements or Substitutes," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150406, Agricultural and Applied Economics Association.
    2. Maung, Thein A. & McCarl, Bruce A., 2013. "Economic factors influencing potential use of cellulosic crop residues for electricity generation," Energy, Elsevier, vol. 56(C), pages 81-91.

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    Keywords

    Resource /Energy Economics and Policy;

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