Wednesday, June 02, 2010

Biomass Co-Firing in Coal Power Plants

Renewable Energy World has a current article on the benefits of biomass co-firing. While we agree that co-firing makes economic and environmental sense -- In our opinion any significant use of co-firing will not happen because of institutional barriers that exist within Federal and State government and regulation of the electric utility industry.

Problem 1: The Section 45 Tax Credit allows for a tax credit of 1.5¢ per kWh for the generation of electricity from a qualified biomass fuel. But the U.S. Treasury has a guideline called the 80/20 Rule which effectively eliminates qualifying for the Tax Credit under biomass co-firing. For example, if a current coal power plant had a book value of $1 billion, biomass co-firing capital expenditures of $4 billion would be necessary to qualify the retrofitted power plant under the 80/20 Rule.

Problem 2: Currently, there is no economic cost associated with carbon emissions. Why should an electric utility incur capital costs to address an environmental issue which has no economic cost associated with it?

Problem 3: Biomass co-firing is simply fuel switching and does not involve new generation. Electric utilities make money by including capital investments (like new nuclear power plants) in their rate base earning a return.

Problem 4: Electric utilities are allowed to recover fuel costs (such as the cost of high priced oil) through a "fuel clause recovery" component of customer billing.

Problem 5: Coal ash is sold as an amendment for concrete. It has never been resolved that ash containing ANY percentage of biomass would be acceptable.

1 comment:

Kolby said...

Problem 5 should not be a problem. "Comprehensive study of biomass fly ash in concrete: Strength, microscopy, kinetics and durability" -Wang SZ; Baxter L
However, we'll have to wait for policy to catch up.