How Burning Wood, Once a Viable Power Source, Fell Out of Favor in the U.S.

Source: By Will Wade, Bloomberg • Posted: Wednesday, April 8, 2020

The EPA is considering labeling biomass—the burning of wood for energy— as carbon neutral. But the economics make it unlikely to gain domestic popularity.

The Aspen Power biomass plant operates in Lufkin, Texas in this undated photo.

The Aspen Power biomass plant operates in Lufkin, Texas in this undated photo. Source: EIN Presswire

The cold, dark facility in Lufkin, Texas, is a biomass plant. Biomass was once considered a moneymaker, but even in a region surrounded by four national forests, it’s no longer profitable. Biomass generates only 1% of the electricity in the U.S., and its downfall illustrates just how potent cheap natural gas and tax breaks are when it comes to shaping American electricity markets.

It’s a different story in other parts of the world, where biomass is supported by climate policies and government subsidies. Utilities in Europe are converting old coal facilities to burn wood, including the U.K.’s biggest power plant, and they’re building new ones in Japan and South Korea.

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Lufkin, Texas, a region surrounded by four national forests, was once home to the Southland Paper mill, seen here operating in 1943. Photographer: John Vachon/Getty Images

The European Union defines biomass as a renewable energy source that’s carbon neutral. It’s the main source of renewable energy there. At least 14 member countries as well as the U.K. have offered subsidies, along with Japan and South Korea. The nations say that burning wood for power is an important part of their efforts to shift away from coal and meet the targets they’ve set under the Paris climate agreement. The U.S. Environmental Protection Agency is proposing a rule to label it as carbon neutral.

The idea behind the “carbon neutrality” is the promise of more trees growing to replace the wood that’s incinerated for power. Valerie Thomas, a professor at Georgia Institute of Technology, has done research that estimates biomass emissions and accounts for the time it takes for trees to regrow. Assuming an 11-year growth cycle—typical for the U.S. Southeast—wood produces about 110 grams of carbon dioxide to generate a kilowatt-hour of electricity. That’s lower than coal, which emits about 1,000 grams of CO2 per kilowatt-hour, or natural gas, which comes in at about 500 grams. But, she says, “It’s absolutely not carbon neutral.”

Advocates for biomass say that the fuel is generally derived from waste wood leftover from logging and lumber mills, and its emissions are offset by the trees that eventually grow back, absorbing more carbon with every branch.

Critics say it’s neither environmentally friendly nor economically stable. “Burning forest residue isn’t a climate solution,” said Sasha Stashwick, a senior advocate with the Natural Resources Defense Council. “Subsidies make this a viable technology. Without subsidies it cannot compete.”

Shifting Economics 

The rise and fall of the Lufkin plant shows how biomass has become too pricey in most of the U.S.—but is still in demand as a “clean” energy source elsewhere.

It was developed by Aspen Power in 2005, when wholesale electricity prices in Texas were $60 a megawatt-hour or more, largely because gas prices were about $7.50 per million British thermal units. Those prices prompted Danny Vines, who was Aspen’s president, to build the plant without lining up a long-term contract to sell the power.

Once the plant was under construction, gas prices had almost doubled and so had electricity. That was good news for Vines, who estimated that the $120 million Lufkin plant would be able to break even if it could sell electricity for $42a megawatt-hour.

But by the time it was commissioned in 2011, the world had changed. Wind power surged during those years to 7% of the state’s generation from 1% (it’s now 16%), and the fracking boom was dragging down prices for gas. And power prices had tumbled to $15 a megawatt-hour, at peak periods, Vines says, well below his operating costs.

“The project went from a grand slam to a project that wasn’t economical,” he said.

It was idled in 2012, restarted again, then shut down for good in 2015. In 2016 it was sold at a public auction for about $5 million. Vines, a serial entrepreneur, is now president of Deepsea LLC, which provides water disposal services for gas drillers.

Supplying the Wood

The Lufkin Plant, like most other U.S. biomass facilities, burned wood waste from nearby logging operations. In Europe and Asia, plants typically burn wood that’s processed into pellets about half the size of your little finger. Maryland-based Enviva Partners LP, the world’s biggest producer, last year shipped 3.6 million metric tons of the pellets. Enviva says it uses waste wood and that much of those scraps and tree branches would otherwise end up decomposing on the forest floor or being burned on-site during the logging process. Either way, the carbon would be released, but it’s better to do it in a power plant and turn it into electricity.

Environmental groups are critical of this position, in part because burning wood in a power plant generates emissions a lot faster than the carbon can be reabsorbed by growing new trees. Wood isn’t as dense as coal, so you have to burn more of it to generate a megawatt of electricity, producing more emissions.

Even if the EPA labels biomass as carbon neutral, it’s unlikely to regain any popularity here. It’s “considerably more expensive” than electricity from gas, wind or solar, said Carrie Annand, executive director of the Biomass Power Association.

The Lufkin facility isn’t the only biomass plant that’s been challenged by competition from cheaper sources. Austin Energy signed a 20-year power-purchase agreement in 2008 to buy electricity from a Southern Co. plant about 50 miles north of the Lufkin site. But when it went into service in 2012, after Texas electricity prices had slumped, the municipal utility found itself stuck with an expensive contract. It agreed in April to buy the plant for $460 million and get out of the deal. And in Virginia, Dominion Energy Inc. last year closed the largest of its four biomass plants, saying it wasn’t economical and not expected to become so in the future.

There are a few places where biomass plants have thrived. Gainesville Regional Utilities in Florida operates a 103-megawatt plant that the company says is cheaper to operate than its coal-fired facility. Partly it’s because the facility is relatively new, built in 2013, and has a very efficient material-handling system. It also helps that fuel is readily accessible, forest waste that’s all sourced within 75 miles. But those are unique conditions that can’t easily be replicated elsewhere.

Back in Texas, the Lufkin plant has drawn interest from prospective buyers who’ve talked about moving it to Mexico, Guyana, Arizona or North Carolina, said Dee Winston, the local entrepreneur who bought it at auction in 2016.

“A biomass plant can’t compete in today’s world without some subsidies,” Winston said. “It would be a shame if it was sold for scrap metal. I keep thinking we’ll come across a person or place that will use it for its original intent.”

— With assistance by Chris Martin, and Ewa Krukowska