A biomass-fired power station is technically similar to a coal-fired power plant and the economics of the two are based on similar principles. In both cases the cost of the electricity generated depends on two factors: the cost of building the plant and the cost of operating the plant. The first of these is usually dominated by the cost of the actual installation, although the cost of any loan required to finance the project can also have a significant impact. The second depends mostly on the cost of the fuel.

Technology Costs

The capital cost of biomass installations varies widely. The cheapest option for generating electricity from biomass is co-firing. Retrofitting a co-firing option to an existing coal-fired power plant costs between $50/kW and $500/kW of biomass generating capacity in the United States depending on the type of boiler. Prices are likely to be similar in Europe and these are the two regions where co-firing is most popular.

For direct-fired biomass systems, the cost depends on the size of the plant and whether it is for power generation alone or for combined heat and power generation. Figures from the U.S. Environmental Protection Agency (EPA)5 from the last decade put the cost of a 500 kW stoker boiler for CHP use at $9300/kW. For an 8 MW unit this falls to $4000/kW, while the same unit used for power generation alone has a cost of $1600/kW. Overall combustion power plant costs have risen steeply since these estimates were made and the U.S. Energy Information Administration (EIA) estimate for the capital cost of direct-fired biomass plant for power generation alone of $1700/kW in 2007 had risen to $3400/kW by 2011. Meanwhile, the U.S. EPA analysis suggested that biomass gasification was roughly twice as expensive as a direct-fired plant. Anaerobic digesters are also much more expensive than direct combustion plants, but plants designed to generate from landfill gas or waste treatment plants can be slightly cheaper than the direct-fired combustion plant.

Fuel Costs

The cost of biomass fuel depends on its source. Some agricultural and industrial wastes cost nothing. The same applies to landfill gas. In most cases, however, power plant operators will have to pay for their fuel whatever its source. Indeed, many of the best wastes are being converted into biomass fuel, such as pellets, that are then sold at a premium.

From a long-term perspective fuel crops are likely to be the most important source of biomass fuel. In Europe, particularly in the United Kingdom, wood chips are being used as biomass power plant fuel. Typical cost is around £100/tonne at 35% moisture content. In comparison, the cost of wood pellets is roughly £200/tonne (but energy content of the wood chips with 8% moisture content is significantly higher than wood at 35% moisture content). The fact that the latter is becoming a commodity means that prices are subject to greater com- petition and therefore could fall in line with other biomass fuel prices.

The other potential future energy is grass. Although little grass for biomass fuel is grown, estimates indicate that it may have a slightly lower cost per tonne to wood chips. However, the slightly lower energy content means that costs are likely to be more or less the same.

Cost of Electricity from Biomass

Electricity generation costs from biomass plants depend on the type of plant. Some, though of limited application, can have very low costs. For example, in California the electricity produced by the anaerobic digestion of food waste can be generated for about 10% of the cost of power from a direct-fired biomass plant. Power generation from landfill gas methane and waste treatment plants is also cost effective where the energy source is available.

For the more conventional, and more widely applicable, direct-firing bio- mass power plant, the U.S. EIA has estimated that the levelized cost of electric- ity in 2011$/MWh for a plant entering service in 2018 is $110/MWh.6 Meanwhile, estimates by the Oregon Department of Energy put the cost of generation today between $52/MWh and $67/MWh in the Pacific northwest. In the United Kingdom electricity costs of £35–40/MWh have been proposed by some wood chip suppliers.

In all cases the actual cost of generation will also depend on the level of subsidies available for electricity generated from renewable sources.

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