May 2005 eNews Bulletin

Recycling Wood Chips: Protecting Forests and Supporting Renewable Energy

by Angela Crooks
April, 2005

The density of U.S. forests has increased significantly in recent decades due to policies that allowed for continued forest growth, largely uninterrupted by natural fire cycles. Over the last 10 years, federal agencies have spent over 38.2 billion fighting forest fires, which have burned more than 49 million acres in the U.S.; this does not include property damage or other costs. In Colorado alone, more than 6.2 million acres fall within the "Red Zone." In this area, communities and homes are close to forests and would be threatened in the event of a forest fire.

In an effort to mitigate the threat of wildfire, which spreads quickly in overgrown forests, land management agencies and private landowners conduct hazardous fuels reduction work. Thinning operations leave tree stands intact but remove some trees and smaller diameter material in order to slow, and in some cases stop, the movement of fire. A major barrier to conducting hazardous fuels reduction work is the lack of reliable funding sources. One means of making forest thinning operations more economically viable is to develop market outlets for the biomass which is generated as a by-product. By enabling contractors to remove the material and sell it, the overall costs of thinning projects can be reduced. In support of this objective, the Colorado Governor's Office of Energy Management and Conservation (OEMC) and the U.S. Department of Energy (DOE) have sponsored a project at a generating station owned by Aquila, Inc. in Canon City, Colorado plant to cofire forest thinnings with coal to generate electricity.

Since the costs of biomass utilization are higher than using only coal, an important component of the project entails recovering the incremental costs associated with cofiring through the sale of Renewable Energy Certificates (RECs). Aquila, Inc. will be the first utility to sell RECs that are based on forest biomass power.

When forest restoration or hazardous fuels reduction work is done, contractors may either leave the fuels on-site or remove them. Biomass harvesting is done through a variety of processes, including felling, chipping, skidding, baling or curbing residue and bundling trees or logs for transport. According to Dr. Kurt Mackes of the Colorado State University's Department of Forest, Rangeland and Watershed Stewardship, there is no standard or optimal thinning system for the ponderosa pine zones in the state. Contractors charge between 3100 and $1,000 an acre for their work, depending on the treatments requested and the nature of the operations. Work generally costs more on steeper slopes, and therefore most harvesting occurs on grades of 0-20 percent.

A typical harvesting and processing operation could be described as fellows. A self-leveling fetter buncher is used to cut the trees and place them in bundles for removal by skidding operations; this mechanical bunching of trees is much more economical than handling individual, small diameter trees. A skidder is used to move ("skid") logs to an area for processing. The trees are separated into groups based on size and delimbed by a log processor. Materials that are at least 10 inches in diameter are sold to sawmills. Smaller pieces are chipped for biomass production. The chips are then loaded for transport. A typical shipment might include 25 green tons of biomass, enough for 12 MWh of electricity.

For projects where the biomass is left on-site, a "lop and scatter technique" is used, or the wood is chipped and blown across the forest flour. Most small diameter material is burned in piles. This is the quickest and most economical way to dispose of the by-product of forest thinning, which is necessary to prevent it from becoming a fuel ladder. Prescribed burns are another fire mitigation technique, used for targeting specific swaths of forest. The obvious benefit of biomass utilization in power plants is that it prevents the emissions from prescribed burns and pile burning: it also eliminates the decay of materials left in the forest, which contributes to global warming through the release of methane.

A thinning project at the U.S. Air Force Academy is the current feedstock source being used by Aquila. The thinning work was conducted by Morgan Timber Products, which treated 136 acres and removed 19 loads of wood chips. Aquila purchased approximately 840 tons of wood chips from Morgan Timber Products last fall.

PREPARATORY WORK AT AQUILA

The biomass cofiring at Aquila builds on previous tests conducted in cooperation with the USDA Forest Service and Colorado State University. During the testing, the plant used one to two tons of green wood chips per day between September 2001 and May 2002. This was equivalent to less than 0.5 percent wood by weight.

The material included green wood chips, along with bark and needles. Chips had to be smaller than 3.5 inches in length; long strands from residues processed with small chippers tended to clog the machinery. Chips containing little sawdust were preferred. Using dry chips was also preferable, since green chips resulted in lower electric power output. Even dry chips had the result of lowering plant capacity, since the energy output relative to volume in the system was lower relative to coal.

When Aquila tried to burn wood in its operations in the fall of 2004, it became necessary to screen the chips due to the fact that larger strands of wood were clogging the chutes. Eventually, Aquila decided to re-chip the pieces to ensure that they were small enough to work in their system. Aquila has a permit to burn up to five percent wood; if the process continues to work well with small amounts, it may go up to this limit or even apply for a permit to expand the amount of wood it can use.

THE ROLE OF RENEWABLE ENERGY CERTIFICATES

Biomass is more expensive than coal due to the harvesting, processing and transportation costs associated with getting the wood out of the forest and into the power plant. It also requires additional handling once it is on-site at the utility. In order to offset some of the incremental costs associated with the project, Aquila plans to sell RECs based on the biomass portion of the energy generated.

RECs have become increasingly popular as a green power product, enabling consumers to expand the amount of renewable energy on the grid by acting as a voluntary subsidy. Sold in kWh or MWh denominations, RECs embody the environmental and non-electrical attributes associated with renewable energy. In the Aquila project, RECs are created because biomass reduces air pollution relative to what would have been emitted by coal burning.

RECs, however, do not include the electricity itself. The separation of the environmental benefits from the power makes it possible for RECs to be sold anywhere in the country, even in places where local utilities do not offer green power options.

RECs can be sold on either voluntary or compliance markets. Customers on the voluntary markets might include individuals, federal government agencies, universities, nonprofit organizations or businesses. These customers buy RECs largely to meet environmental goals or support the expansion of renewable power. Compliance markets exist as a mechanism to fulfill the mandates set forth in state Renewable Portfolio Standards. Customers on these markets are usually utilities, seeking to fulfill minimum renewable energy requirements (calculated as a percentage of power generation or sales) through the purchase of green power products.

The market for RECs is growing. In 2003, approximately three million MWh of RECs were sold on the voluntary markets and 13 million MWh of RECs were sold on compliance markets. It is expected that by 2010, these numbers will rise to 20 million MWh and 45 million MWh respectively. Prices in February 2005 ranged from $0.70 to $171.00 per MWh, depending on the generation resource and whether the trading was on the voluntary or compliance markets. In general, prices tend to be higher on the compliance markets (where supply may be constrained) and for more expensive technologies (such as solar).

RECs based on generation from solar, wind, landfill gas and small hydro are well-established in the marketplace, but forest biomass is a new type of REC resource. Although biomass combustion is not 100 percent emissions free, forest biomass cofiring leads to a net reduction in air emissions and provides unique environmental benefits relative to other renewable energy technologies.

BIOMASS AS A RENEWABLE RESOURCE

Biomass resources include many forms of organic matter, including: agricultural residues, crops grown for energy purposes, manure, urban wood waste, residues from logging and biomass from fuel treatment operations to reduce fire hazards (referred to in this article as forest biomass). Biomass accounts for nearly three percent of total U.S. energy consumption, but it is the largest renewable energy resource (accounting for 47 percent of the renewable portion of total energy production).

Biomass could contribute a much larger share to the nation's power generating capacity, serving as a readily available and renewable form of energy. Using more biomass would improve the environment, enhance energy security and create jobs for rural economies. The Department of Energy estimates that 60 million dry tons of biomass could be available if all the lands in need of hazardous fuels reduction work were treated. If all forest biomass resources are included, as much as 368 million dry tons could be available annually. Current removals of the forest inventory - including for use by the timber industry - are less than growth.

Unlike wind and solar, biomass wood chips can be fed into the existing utility infrastructure, minimizing capital investment costs and providing an immediate source of renewable power. Biomass is also easily dispatchable; it is not an intermittent resource.

Biomass offers significant environmental benefits. By coloring wood with coal in a stoker boiler, Aquila is able to reduce its air emissions from power generation. Carbon dioxide (CO2), sulfur dioxide (S02), nitrogen oxides (NOX) and mercury are all reduced relative to what would have been emitted from burning coal. Biomass does produce slightly more methane and nitrous oxide (N2O) than coal, but the net global warming potential of biomass emissions is significantly lower than coal omissions. If one takes into account avoided emissions from pile burning or decay of forest thinnings, the global warming benefits of biomass utilization are even greater.

Based on the net environmental benefits of the project, Environmental Resources Trust (ERT) issued EcoPower certification for the biomass cofiring process. Aquila will be able to issue up to 1,395 MWh of RECs based on this initial certification. An audit of the plant will be required at least once a year, and any additional MWh of RECs will require a new certification.

BIOMASS AND COLORADO'S UPCOMING RENEWABLE PORTFOLIO STANDARD

In November 2004, Colorado voters approved Amendment 37, which mandates the adoption of a Renewable Portfolio Standard (RPS). Amendment 37 stipulates that utilities serving more than 40,000 customers must generate or cause to be generated, renewable energy, in the following minimum amounts: three percent for the years 2007-2010; six percent for the years 2011-2014; and 10 percent for the years 2015 and thereafter. Eligible resources include solar, wind, geothermal, small hydro and biomass. RECs may be used for compliance.

It is unclear how the rules for REC trading under the BPS will be established, but it is possible that a new type of state certification will be developed to meet the criteria of the state system. In most states, this authority has been vested in the Public Utilities Commission.

Once the RPS goes into force in Colorado, it is possible that Aquila will use the RECs to help meet its compliance targets. In the meantime, Aquila is offering the RECs to buyers on the voluntary market. The company is targeting larger customers - federal government agencies and major businesses - as opposed to launching a major marketing campaign geared to individual consumers. This is due to the fact that there is a relatively small number of RECs available, and a significant degree of public education would be needed to describe the concepts of biomass and RECs in power generation. Of course, anyone is welcome to buy Aquila's forest biomass RECs, which are currently being offered at $23/MWh.

Angela Crooks is with McNeil Technologies in Lakewood, Colorado which developed the marketing strategy and estimated emissions reductions from the project that included sale of Renewable Energy Certificates.