A. Effects of Fossil Fuel Prices

The practical value of biomass energy ultimately depends on the costs of salable energy and biofuels to the end users. Consequently, many economic analyses have been performed on biomass production, conversion, and integrated bio­fuels systems. Conflicts usually abound when attempts are made to compare the results developed by two or more groups for the same biomass feedstock or biofuel because the methodologies are not the same. The assumptions made by each group are sometimes so different that valid comparisons cannot be made even when the same economic ground rules are employed. Comparative analyses, especially for hypothetical processes conducted by an individual or group of individuals working together, should be more indicative of the eco­nomic performance and ranking of biomass energy systems. However, several generalizations can be made that are quite important. The first is that fossil fuel prices are well documented and can be considered to be the primary competition for biomass energy. Table 4.13 summarizes U. S. tabulations of average, consumption-weighted, delivered fossil fuel prices by end-use sector in the mid-1990s (U. S. Energy Information Administration, December 1995). It is evident that the delivered price of a given fossil fuel is not the same to each end-use sector. The residential sector normally pays more for fuels than the other sectors, and the large end users pay less.

In the context of virgin biomass energy costs, dry woody and fibrous biomass species have an energy content on a dry basis of approximately 18.5 MJ/kg (7959 Btu/lb) or 18.5 GJ/t (16 MBtu/ton). For comparison purposes, if such types of biomass were available at delivered costs of $1.00/GJ ($1.054/MBtu), or $18.50/dry t ($16.78/dry ton), biomass on a strict energy content basis without conversion would cost less than most of the delivered fossil fuels listed in Table 4.13. The U. S. Department of Energy has set cost goals of delivered virgin biomass energy crops at $1.90-2.13/GJ ($2.00-2.25/MBtu), which corresponds to $35.15 to 39.41/dry t of virgin biomass (Fraser, 1993).

In the mid-1990s, few virgin biomass species were grown and harvested in the United States specifically for energy or conversion to biofuels, with the possible exceptions of feedstocks for fuel ethanol and a few tree plantations. This is not difficult to understand from an economic standpoint, especially if conversion costs are included. The nominal price of natural gas in the United

States in 1994 at the wellhead (not end-use cost) was estimated to be $1.74/ GJ ($1.83/MBtu) (U. S. Energy Information Administration, July 1995). For virgin biomass to compete as a feedstock for methane production on an equiva­lent basis, it would have to be grown, harvested, and gasified to produce methane at the same or lower cost. Assuming a gasification cost of zero and biomass conversion to substitute natural gas at 100% thermal efficiencies, both assumptions of which are totally unrealistic but which will help illustrate the best-case economics, the maximum market price of the biomass feedstock cost at the conversion plant gate including profit is then $32.19/dry t (at 18.5 GJ/ dry t X $1.74/GJ). At an optimistic yield of 22.4 dry t/ha-year (10 dry ton/ac — year), the biomass producer who supplies the gasification plant with feedstock would then realize not more than $721/ha-year ($292/ac-year), a marginal amount to permit a net return on an energy crop without other incentives. Similar calculations for the production and conversion of virgin biomass to liquid petroleum substitutes at zero conversion cost and 100% thermal effi­ciencies at the average U. S. nominal wellhead price of crude oil of $13.19/bbl ($2.234/GJ) in 1994 (U. S. Energy Information Administration, July 1995) correspond to a maximum market price for virgin biomass feedstock of $41.33/ dry t ($37.49/dry ton). The average price of hay, for example, received by farmers across the United States in 1994 was $95.59/t ($86.70/ton) (U. S. Dept, of Commerce, 1996). This indicates that the production of hay, and probably most grasses, as energy crops for conversion to liquid biofuels in direct competi­tion with petroleum liquids was not economically feasible at that time. These simplistic calculations emphasize the effect of fossil fuel prices on dedicated biomass energy crops. Inclusion of gasification or liquefaction costs and conver­sion efficiency factors by the processor would result in still lower market prices that the processor would be willing to pay for biomass feedstocks. Negative feedstock costs (wastes), substantial by-product credits, captive uses, other markets and uses, environmental credits, and/or tax incentives would be needed to justify dedicated energy crop production on strict economic grounds.