2 min read

Boosting Biomass Utilization Rates

Picture of Suz-Anne Kinney Suz-Anne Kinney : July 11, 2011

In the US, the rate of logging slash removal varies from region to region and even wood basin to wood basin. In markets where demand for biomass is well established--the upper Northeast where existing biomass power plants have been around for decades, for instance--the utilization rate is as high as 80%. Where demand is still developing, however, low utilization rates are a significant impediment to the biomass energy industry.

Demand is a primary driver of utilization rates. Unfortunately, it’s a bit of a chicken-and-egg story. On one hand, until biomass facilities are operational, loggers will be cautious about investing in the equipment and training needed to harvest biomass. On the other hand, bioenergy companies will struggle to receive permits, financing and off-take agreements without credible supply guarantees. Lower utilization rates mean that new biomass energy facilities will be forced to procure higher cost material to replace the lower cost of wood waste products.

Ultimately, a higher biomass utilization rate will require a mixture of public and private initiatives to boost the supply of biomass.

Many states have adopted a series of policies designed to boost biomass utilization rates. A new study published in the journal, Biomass and Bioenergy,* counted and categorized these policies as part of an effort to provide a framework for assessing forest biomass utilization. The study counted all policies that were current state law and that “explicitly focused on forest biomass in a list of approved feedstocks, or broadly include biomass from which woody material was not explicitly disallowed.” Using these guidelines, the study’s authors found 370 state policies spread across all 50 states as of November 2008 that in some way incented or supported the use of forest biomass for a full spectrum of products, including solid wood, engineered, pulp and paper, and energy.

The scope of these policies ranged across 6 categories: cost-share and grant programs, 59 policies; technical assistance—67 policies; financing—31 policies; procurement—66 policies; rules and regulations—52 policies; and tax incentives—95 policies. The study also divided the policies into categories based on which part of the biomass supply chain they supported: harvesting—20 policies; transportation—1 policy (Oregon); manufacturing—215 policies, and consumer markets—134 policies.

This dual categorization of the policies allowed the study’s authors to identify harvesting and transportation—the two largest barriers to biomass utilization—as the ones states tend to overlook. States interested in boosting utilization should turn their legislative attention to these areas, according to the study: “Recognition of such gaps in the supply chain can help policy makers consider the effectiveness and interaction of individual policies in a broader context. For instance, the failure of a particular policy, such as a mandate to deliver a certain percentage of renewable energy by the year 2025, may be unduly influenced by high transportation costs. Misdirected resources at the state level towards enforcing regulatory mandates could retard opportunities for providing tax incentives directed at transportation.”

By filling the gaps left by government policies, bioenergy companies can help move biomass utilization rates higher. For loggers, adopting the technology and processes necessary to harvest and transport biomass requires a significant investment in equipment, training and additional employees. Especially now, during one of the worst markets for the forest products industry in decades, the risk for loggers in acquiring new assets that may not pay for themselves is high. By offering equipment financing programs and long-term supply agreements, bioenergy facilities can reduce this risk to loggers, as they will have a guaranteed market for a volume of material that will allow them to pay for the new assets. For key suppliers, this program might entail the bioenergy facility providing capital for the contractor to purchase equipment. The contractor would then be under obligation to haul biomass to that facility under a long-term supply agreement to meet its loan covenants. Equipment payments would then be deducted from the supplier’s payments on a per ton basis. This arrangement could quickly increase the biomass utilization rate in a particular wood basin.

*Becker, D.R., C. Moseley, and C. Lee. 2011. A supply chain analysis framework for assessing state-level forest biomass utilization policies in the United States. Biomass and Bioenergy 35:1429-1439.