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Heat or power: How to increase the use of energy wood at the lowest cost?

Author

Listed:
  • Sylvain Caurla

    () (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UL - Université de Lorraine - UNISTRA - Université de Strasbourg)

  • Vincent Bertrand

    (Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres, UBFC - Université Bourgogne Franche-Comté [COMUE])

  • Philippe Delacote

    () (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UL - Université de Lorraine - UNISTRA - Université de Strasbourg)

  • Elodie Le Cadre

    (Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres)

Abstract

We compute the optimal subsidy level for fuelwood consumption that makes it possible to achieve the French biomass energy consumption target. For this purpose, we model the competition and trade-offs between the consumption of fuelwood for heat (FW-H) and the consumption of fuelwood for electricity (FW-E). To do so, we couple a forest sector model with an electricity simulation model, and we test different scenarios combining FW-H and FW-E that account for contrasting potential increases in the carbon price and the potential reduction in the number of nuclear plants. We assess the implications of these scenarios on (1) the budgetary costs for the government, (2) industrial wood producers' profits, (3) cost savings in the power sector for the different scenarios tested, and (4) the carbon balance. We show that the scenario with the highest carbon price and the lowest number of nuclear plants is the least expensive from a budgetary perspective. Indeed, when associated with a high carbon price, co-firing may increase FW-E demand with a lower subsidy level, which makes it possible to reduce the cost of reaching the target. However, in this case, FW-E crowds out part of FW-H, which may cause political and economic issues. From a carbon balance perspective, an FW-H-only scenario performs better than any other scenario that combines FW-H and FW-E due to the relatively low emissions factors of alternative technologies for electricity generation and, in particular, nuclear energy.

Suggested Citation

  • Sylvain Caurla & Vincent Bertrand & Philippe Delacote & Elodie Le Cadre, 2018. "Heat or power: How to increase the use of energy wood at the lowest cost?," Post-Print hal-02018424, HAL.
  • Handle: RePEc:hal:journl:hal-02018424
    DOI: 10.1016/j.eneco.2018.08.011
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-02018424
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    More about this item

    Keywords

    Forestry sector; Bioenergy; Biomass-based electricity; Carbon pricing; Nuclear power; fuelwood; shadow prices overhead costs; subsidies; nuclear power station; heating; carbon balance; profit; consommation d'électricité; prix du carbone; bois de chauffage; coût; subvention; économie; budget de l'état; centrale nucléaire; chauffage; bilan de carbone; France; biomasse végétale; bénéfice;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

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