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

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.