Under current market conditions, except for a few special cases like mill residues, forest biomass in general is still hard to compete with coal and oil for energy production in terms of production cost. Even the relatively economical source of biomass, logging residues, is not yet cost competitive with coal for electricity production. However, electricity generation using logging residues represents an economically viable option for carbon dioxide emission mitigation. With proper incentives provided to producers and/or consumers, forest biomass and bioenergy markets are likely to emerge.

The production costs of delivered logging residues are about $30/dry ton with a transportation distance of less than 100 km, compared to about $50/dry ton for short rotation woody crops and $30-50/dry ton for fuel treatment thinning. The cost of electricity generated from logging residues is estimated at a range from $50/MWh to $80/MWh depending upon the technologies used and the scale of power plants, significantly higher than that of coal-generated electricity. A minimum carbon tax of $25 per ton of carbon dioxide or a 25% reduction in global greenhouse gas emissions would be needed in order to make bioelectricity generated from logging residues competitive.

This section delves into the production costs of forest biomass and bioenergy and their cost competitiveness with similar products on the market. Topics include the costs associated with:

• Feedstock Production: Biomass harvesting, transporting, and processing 
• Electricity Production: Bioelectricity as compared to coal-generated electricity 
• Carbon Displacement: Carbon dioxide emission displacement from bioelectricity relative to other carbon dioxide mitigation options

Cost of Delivered Feedstocks

The cost of biomass feedstock is an important component of the overall production cost of forest bioenergy. Therefore, it may be worthwhile to estimate the production cost of forest biomass alone and compare it with that of other types of feedstocks though the cost competitiveness of forest bioenergy will be determined by its overall production cost. Gan and Smith (2006) estimated and compared the amortized costs of delivered biomass with the price of delivered coal on a per unit energy basis. Based on the information on biomass yield and production costs derived from the Oak Ridge Energy Crop County Level Database (Graham and others 1997), they estimated the biomass production costs for short rotation woody crops (SRWC), specifically poplar plantations, to be about $52/dry ton ($10.80/MWh, the cost estimates in this section were based on the energy contained in the feedstock, not the final energy product), while the national average price of delivered coal was $5.32/MWh in 2005. The cost estimates were based on the assumption of a biomass yield of 5 dry tons/ac/yr and a land rent of $50/ac/yr.

Cost of Logging Residues

Logging residues, harvested using the integrated harvesting system that combines timber harvest with residue procurement, appear more economically competitive than SRWC. Based on the procurement costs reported by Puttock (1995) and after making adjustments to better reflect biomass transporting, processing, and handling costs, Gan and Smith (2006) estimated the production cost of logging residues in the United States. The average cost of delivered logging residues was estimated at $28/dry ton ($5.80/MWh ) using the marginal cost method and $33/dry ton ($6.80/MWh) using the full cost method, respectively. The marginal cost method counts only additional costs from the conventional logging operation as the biomass production cost. The full cost method, on the other hand, allocates the total production cost across biomass and conventional wood products. Their estimates are similar to those reported in Europe, $29-39/dry ton ($6-8/MWh) (Asikainen and others, 2002).

Costs for procuring biomass from fuel treatment thinnings were estimated for two different treatments (USDA Forest Service 2005). Using the cut and skid treatment, the cost was $30-40/dry ton ($6.20-8.30/MWh). It increased slightly to $34-48/dry ton ($7.00-9.9/MWh) when the cut/skid/chip method was adopted.

These cost estimates do not account for the benefits or cost savings related to forest management health that traditionally accrue to landowners and forest industries and even to society. These benefits include:

• Forest bioenergy production will promote thinning of overstocked forest stands. Such operations will allow us to produce high-quality timber and/or reduce wildfire risk. Providing better opportunities to manage for higher-value products will encourage landowners to retain land in forests.
• Many hardwood and mixed pine-hardwood stands are badly degraded due to poor past logging practices. A biomass market will allow landowners to at least see these low-value materials pay their way out of the woods so that the stands can be improved to produce high-value products.
• Removal of logging residues will reduce site preparation costs (Gan and Smith 2006) and enhance the survival and growth of seedlings.

Electricity production and heating have been a major use of forest biomass in many developed countries and have shown to be promising in the U.S. as well. In addition, technology for generating electricity from forest biomass is more mature than that for converting forest biomass to liquid fuels as the commercial production of bioelectricity and heat from biomass has existed for a while. For these reasons and given the lack of cost data on the commercial-scale production of cellulosic ethanol, this section focuses on the cost competitiveness of bioelectricity compared with coal-generated electricity.

Electricity Generation Costs

Electricity generation costs using the integrated coal gasification combined cycle system and the conventional pulverized coal system were estimated to be about $35/MWh with the fuel price in 2005. This cost estimate is consistent with the current national average cost of electricity generated from coal. The cost may be higher if more stringent environmental standards have to be met. The cost of using poplar biomass in a biomass gasification combined cycle system is considerably higher than that of using conventional coal or gasification systems. The electricity production cost using the biomass gasification system for hybrid poplar was estimated to be $58/MWh (Gan and Smith 2002) (at right).

Electricity Generation Using
Logging Residues

Logging residues appear to be more competitive than poplar plantations. Costs ranged from $47/MWh (marginal cost) to $50/MWh (full cost) (Gan and Smith 2006) (at left). Similar cost estimates have also been reported in other regions of the U.S. and Canada. Based on the optimal size (137 MW) of power plants for forest harvest residues in Canada, Kumar and others (2003) estimated the electricity production costs at US$63/MWh.

There are several reasons for this cost difference. First, the initial capital cost for a biomass gasification system is almost 50% higher than the costs for a conventional coal or gasification system (EIA 2001). The non-fuel costs of the biomass plant would be almost the same as the total cost of electricity generated at the coal plant. Second, fuel costs also play a role in the cost differential. Biomass fuel is more costly than fossil fuels on a per unit energy basis (Gan and Smith 2006).

There are several ways to make biomass more economically competitive with fossil fuels (Gan and Smith 2002). One is to reduce the non-fuel costs of biomass power generation via improving the efficiency and effectiveness of current biomass conversion technology. Another way is to reduce fuel costs. This can be accomplished through improvements in feedstock productivity and biomass harvesting and transporation systems. Imposing a tax on carbon dioxide emissions or providing an incentive for biomass energy that displaces carbon dioxide emissions would also enhance the competitiveness of biomass energy. For logging residues to be competitive with coal in electricity generation, an emissions tax of $25/ton of carbon dioxide or higher would be needed (below left). Alternatively, global greenhouse gas emissions would need to be curtailed by 20-30% for logging residues to become competitive (below right). For poplar plantations to be competitive with coal, emissions reductions and taxation would have to be further increased. Emisssions would need to be reduced by at least 40% to make poplar plantations competitive in electricity production, while taxation would have to be at least $65/ton of carbon dioxide.

Carbon Dioxide Emissions Tax Effect
on Electricity Generation Costs

Carbon Dioxide Emissions Reductions
Effect on Electricity Generation Costs

The above estimates were based on the electricity generation solely fueled by forest biomass and current general market and technological conditions. They reflect only electricity production costs not environmental or other costs/benefits. Note that electricity production costs vary with technologies used, production scale, fuel costs, and other factors. For instance, co-firing biomass with fossil fuels may help bring the electricity production cost down under certain circumstances; too small or too large power plants may increase the production costs as the costs of biomass transport and electricity generation depend on the scale of the power plant.

Carbon Cycle

Carbon sequestration, the removal of carbon dioxide from the atmosphere into long-lived pools of carbon is an important mitigation option for greenhouse gas emissions. Forest carbon sequestration pools can include above-ground living biomass (trees), living biomass in soils (roots, etc.), and products created from biomass (lumber) (CSiTE 2002). Forests store carbon dioxide as a result of photosynthesis though carbon in the wood (like in fossil fuels) will be released when it is burned. Thus producing and consuming bioenergy from forest biomass represents a carbon recycling process (at right), essentially a carbon neutral process that can displace carbon dioxide emissions from burning fossil fuels. In addition to displacing fossil fuel carbon emissions, producing bioenergy from forest biomass can reduce carbon emissions from the alternate fates of the biomass itself because forest biomass left to decompose, slash burning, prescribed fire, and wildfires release greenhouse gasses. Due to data limitations, this section focuses on the cost-competitiveness of offsetting carbon dioxide emissions via generating electricity from forest biomass.

Gan and Smith (2006) estimated that about 40 million dry tons of logging residues could be recovered annually in the U.S. If this biomass were used for electricity production, the amount of carbon displaced would reach 19.4 million tons C. This is equal to approximately 3% of total current carbon emissions from the U.S. electricity sector.

Carbon Displaced

The cost of carbon displacement is dependent upon the method used to calculate the production costs of logging residues. Using the marginal cost method, it would cost $60/ton C to displace carbon emissions from coal-generated electricity. Using the full cost method, the cost would rise to $70/ton C (Gan and Smith 2006) (at left).

Thus, using forest biomass, particularly logging residues, for electricity production appears to be a relatively cheap way to mitigate carbon dioxide emissions when compared with other mitigation options including agricultural practices and replacement applications. These other mitigation options can cost between $83-$164/ton C (IPCC 2001) (below).

Cost of Carbon Displacement