The bioenergies development: the role of biofuels and the C02 price

Reduction in energy dependancy and emissions of CO2 via renewables targeted in the European Union energy mix and taxation system, might trigger the production of bioenergy production and competition for biomass utilization. Torre ed biomass could be used to produce second generation biofuels to replace some of the fuels used in transportation and is also suitable as feedstock to produce electricity in large quantities. This paper examines how the CO2 price a ects demand of torre ed biomass in the power sector and its consequences on the pro tability of second generation biofuel units (Biomass to Liquid units). Indeed, the pro tability of the BtL units which are supplied only by torre ed biomass is related to the competitive demand of the power sector driven by the CO2 price and feed-in tari s. We propose a linear dynamic model of supply and demand. On the supply side, a pro t-maximizing torre ed biomass sector is modelized. The model aims to represent the transformation of biomass into torre ed biomass which could be sold to the re nery sector and the power sector. A two-sided (demanders and supplier) bidding process led us to arrive at the equilibrium price for torre ed biomass. The French case is used as an example. Our results suggest that the higher the CO2 price, the more stable and important the power sector demand. It also makes the torre ed biomass production less vulnerable to uncertainty on demand coming from the re ning sector. The torre ed biomass co- ring with coal can o er a near-term market for the torre ed biomass for a CO2 emission price lower than 20 euros/tCO2, which can stimulate development of biomass supply systems. Beyond 2020, the demand for torre ed biomass from the power sector could be substituted by the re ning sector if the oil price goes up whatever the CO2 price.