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A Model for the Economic Evaluation of Plantation Biomass Production for Co-firing with Coal in Electricity Production

Published online by Cambridge University Press:  15 September 2016

Sara Nienow ,
Kevin T. McNamara ,
Andrew R. Gillespie  and
Paul V. Preckel
Sara Nienow
Affiliation:
Department of Agricultural Economics, Purdue University
Kevin T. McNamara
Affiliation:
Department of Agricultural Economics, Purdue University
Andrew R. Gillespie
Affiliation:
Department of Forestry and Natural Resources, Purdue University
Paul V. Preckel
Affiliation:
Department of Agricultural Economics, Purdue University
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Abstract

Public and private electric utilities are considering co-firing biomass with coal as a strategy to reduce the levels of CO2, SO2 and NOx in stack emissions, as well as a response to state legislative mandates requiring the use of renewable fuels. This analysis examines the conditions under which biomass co-firing is economically feasible for utilities and woody biomass producers and describes additional environmental and community benefits associated with biomass use. This paper presents a case study of woody biomass production and co-firing at the Northern Indiana Public Service Company (NIPSCO) Michigan City Unit No. 12 power plant. A Salix (willow) production budget was created to assess the feasibility of plantation tree production to supply biomass to the utility for fuel blending. A GAMS model was developed to examine the optimal co-firing blend of coal and biomass while minimizing variable cost, including the cost of ash disposal and material procurement costs. The model is constrained by the levels of pollution produced. This model is used to examine situations where coal is the primary fuel and waste wood, willow trees, or both are available for fuel blending. Capital costs for co-firing were estimated outside of the model and are incorporated into the total cost of co-firing. The results indicate that under certain circumstances it is cost-effective for the power plant to co-fire biomass. Sensitivity analysis is used to test biomass price sensitivity and explores the effects of potential public policies on co-firing.

Type
Agricultural and Resource Dimensions of Global Environmental Change
Information
Agricultural and Resource Economics Review , Volume 28 , Issue 1 , April 1999 , pp. 106 - 117
Copyright
Copyright © 1999 Northeastern Agricultural and Resource Economics Association 

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