# Presentation: 708915

## Economics of Forest Biomass and Bioenergy

**Jianbang Gan**
- Texas A&M University
**Matthew Langholtz**
- SFRC UF/BioResource Management Inc.
**Alan W. Hodges**
- University of Florida

- Woody Biomass Outreach Training
- September 11-12, 2007

## Objectives

- Understand the costs and benefits of forest biomass and bioenergy (Jianbang Gan)
- Create supply curves using local information (Matthew Langholtz)
- Understand the economic impact of using woody biomass for bioenergy production on local communities (Alan W. Hodges)

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
This portion of the biomass training synthesizes what we know about the economics of forest bioenergy products.

Specifically, this economics section presents the status of bioenergy products availability and use in the Southern United States with some additional material offering national and international perspectives.  Much of the data and information is time sensitive as noted throughout the presentation. Specific objectives include:

Identify the supply of woody biomass in the South – What woody biomass is available and in what quantities
Describe the costs related to woody biomass production and utilization – How does biomass compare with other fuel sources?

## Costs and Benefits of Forest Biomass and Bioenergy

- Jianbang Gan
- Texas A&M University

## Outline

- Production costs and cost comparisons
- Feedstocks
- Biofuels (electricity, ethanol, etc.)
- CO2 offsetting
- Benefits to landowners
- Summary and implications

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
There are several factors that affect supply including technology, demand, alternative fuel sources, other uses of forest resources, and policy incentives.

First, technologies for forest production, biomass harvest and transport, and energy conversion will dictate the production costs of forest biomass and bioenergy. Thus, research and development will have an important role to play in forest biomass and bioenergy development. The costs will also vary with scale of operation, biomass spatial density, terrain conditions, average stem diameter, and transport distance, among other things.  The most cost-effective production of biomass for energy occurs when it is produced simultaneously with other higher valued forest products (sawlogs, pulping chips). 

Second, there also must be a demand for (buyers of) forest biomass in local markets, which interacts with the supply to determine the market price. Though there are some local buyers in limited locations currently, large buyers have not emerged region-wide. Potential buyers include independent developers, utility companies, biorefineries, larger-scale users of biomass for space heating and chilling, and the producers of other bio-based products in the future.

Third, prices of other types of energy such as fossil fuels will have an influence on the supply of forest biomass. Increases in the price of oil or natural gas will favor bioenergy. Forest bioenergy will also face competition with other renewable energy sources such as agricultural crops and crop residues, solar, wind, and hydro energy, among others.

Fourth, competing or complementary uses of forest resources for pulpwood, timber, and ecological services will also interact with the supply of forest biomass for energy. Recent adjustments in the forest products industry, particularly in the pulp and paper sector may present an opportunity for using small-diameter trees for bioenergy. Production of forest biomass for energy, for example, thinning over-stocked stands, may enhance the production of high quality logs and reduce fire risk whereas there is some concern about the potential loss of soil productivity resulting from excessive removals of biomass. Demand for ecological services such as biodiversity may have a negative or positive impact on the supply of biomass from forests.

Finally, policies pertaining to energy, forest management and utilization, environmental protection, and land use, as well as assistance and incentive programs to forest landowners and bioenergy producers and consumers will also affect the supply of forest biomass. Some of these policies include carbon emission taxes, the renewable portfolio standard, etc. 

These factors combined will determine the profitability of producing forest biomass and bioenergy, a key determinant for developing and sustaining a forest biomass and bioenergy industry.

## The Fact

- Costs and benefits vary from case to case.

## Costs of Delivered Logging Residues

- Average:
- $28/dry ton or $5.80/MWh (marginal cost)
- $33/dry ton or $6.80/MWh (full cost)

- Source: Gan and Smith 2006

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Logging residues, harvested using the integrated harvesting system that combines timber harvest with residue procurement, appear more economically competitive than SRWC. 

Based on the procurement costs reported by Puttock (1995) and after making adjustments to better reflect biomass transporting, processing, and handling costs, Gan and Smith (2006a) estimated the production cost of logging residues in the United States. 

The average cost of delivered logging residues (within 60 miles) was estimated at $28/dry ton ($5.80/MWh) using the marginal cost method and $33/dry ton ($6.80/MWh) using the full cost method, respectively. 

The marginal cost method counts only additional costs from the conventional logging operation as the biomass production cost. The full cost method, on the other hand, allocates the total production cost across biomass and conventional wood products. 

## Cost Composition of Delivered Logging Residues (Chipping at Roadside)

- Source: Oijala et al. 1999

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Forwarding, chipping, and trucking consist of almost 90% of the total procurement cost.

## Costs of Other Forest Biomass

- Biomass from fuel reduction thinnings (USDA Forest Service 2005)
- $30-40/dry ton or $6.20–8.30/MWh (cut & skid)
- $34-48/dry ton or  $7.00–9.90/MWh (cut/skid/chip)
- Short-rotation woody crops (Gan and Smith 2006)
- $52/dry ton or $10.84/MWh

- Woody Biomass Outreach Training
- September 11-12, 2007

## Comparison to Coal

- Delivered Coal   -   $5.32/MWh (national average)
- Logging residues are almost as competitive as coal.
- Fuel reduction thinnings and short-rotation woody crops are more expensive than logging residues.

- Source: Gan and Smith 2006, USDA Forest Service 2005

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
These cost estimates do not account for the benefits or cost savings related to forest management and health that traditionally accrue to landowners and forest industries and even to society.  These benefits include:

Forest bioenergy production will promote thinning of overstocked forest stands.  Such operations will allows us to produce high-quality timber and/or reduce wildfire risk.  Providing better opportunities to manage for higher-value products will encourage landowners to retain land in forests.

Many hardwood and mixed pine-hardwood stands are badly degraded due to poor past logging practices.  A biomass market will allow landowners to at least see these low-value materials pay their way out of the woods so that the stands can be improved to produce high-value products.

Removal of logging residues will reduce site preparation costs (Gan and Smith 2006) and enhance the survival and growth of seedlings.

## Electricity Production(New plants using integrated gasification combined cycle)

- Conventional coal system  -  $35/MWh
- Biomass systems

- Source: Gan and Smith 2006

- Note: In some other cases, biomass may be more competitive.

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Electricity production and heating have been a major use of forest biomass in many developed countries and appear to be promising in the U.S. as well. In addition, technology for generating electricity from forest biomass is more mature than that for converting forest biomass to liquid fuels as the commercial production of bioelectricity and heat from biomass has existed for a while. For these reasons and given the lack of cost data on the commercial-scale production of cellulosic ethanol, this section focuses on the cost competitiveness of bioelectricity compared with coal-generated electricity.

Electricity generation costs using the integrated coal gasification combined cycle system and the conventional pulverized coal system were estimated to be about $35/MWh with the fuel price in 2005. This cost estimate is consistent with the current national average cost of electricity generated from coal. The cost may be higher if more stringent environmental standards have to be met. 

## Electricity Production (cont’d)

- Logging residues (average cost)
- $47/MWh (marginal cost)
- $50/MWh (full cost)

- Source: Gan and Smith 2006

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Logging residues appear to be somewhat competitive. Costs ranged from $47/MWh (marginal cost) to $50/MWh (full cost). Similar cost estimates have also been reported in other regions of the U.S. and Canada. 

## How Can Biomass Be More Competitive?

- Reduce fuel costs by improving the efficiency in growing, procuring, transporting, and processing forest biomass
- Reduce non-fuel costs through improving efficiency in energy conversion (from biomass to secondary energy)
- Tax CO2 emissions or provide incentives/credits for carbon displacement

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
There are several ways to make biomass more economically competitive with fossil fuels. 

One is to reduce the non-fuel costs of biomass power generation via improving the efficiency and effectiveness of current biomass conversion technology. Another way is to reduce fuel costs. This can be accomplished through improvements in feedstock productivity and biomass harvesting and transportation systems. 

Imposing a tax on carbon dioxide emissions or providing an incentive for biomass energy that displaces carbon dioxide emissions would also enhance the competitiveness of biomass energy. 

For logging residues to be competitive with coal in electricity generation, an emissions tax of $25/ton of carbon dioxide or higher would be needed (below left). Alternatively, global greenhouse gas emissions would need to be curtailed by 20-30% for logging residues to become competitive. For poplar plantations to be competitive with coal, emissions reductions and taxation would have to be further increased. Emissions would need to be reduced by at least 40% to make poplar plantations competitive in electricity production, while taxation would have to be at least $65 per ton of carbon dioxide.

## Co-firing Biomass with Coal

- A near term, low cost option of using biomass for electricity production
- Up to 15% of fuel input (in heat) can be substituted with biomass.
- Installation costs:
- $50 per kW of biomass generation in cyclone boilers
- $150 to $300 per kW in pulverized coal boilers
- Drawbacks: slagging, etc.
- Utility experience has been mixed.

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Co-firing biomass with coal is a near term, low cost option for utilizing woody biomass for electricity production. With some modifications of the feed intake system and burner in most existing coal power plants, up to 15% of the energy input can be substituted with biomass. The co-firing installations costs are about $50 per kW of biomass generation in cyclone boilers and range from $150 to $300 per kW in pulverized coal boilers. To be cost effective, the biomass cost should be at least as low as the cost of coal per unit of energy.

## Ethanol Production Costs

- Current average ethanol production costs
- Corn ethanol: $1.25/gl
- Cellulosic ethanol: $2.50/gl

- Source: Stanley Bull 2006

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Cellolusic ethanol production is still in its infancy. Its current production cost is about $2.50/gl. This cost is expected to reduce to $1.25/gl in 2012, similar to the current production cost of corn ethanol. Though cellolusic ethanol costs more to produce than corn ethanol, the former is much more energy efficient than the latter in terms of the ratio of energy output to energy input in the product life cycle.

## Wood Pulp, OSB vs. Ethanol

- Wood pulp or OSB is still more profitable and less risky than ethanol.

- Source: Peter Ince 2007

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
A slim possibility might exist for using some pulpwood for energy production with further weakening in the pulp and paper market and continued rises in energy prices. Yet, currently it is still more profitable to use pulpwood for making paper or OSB than for producing bioenergy (ethanol).

## Pellet Production Costs

- $25/ton without drying
- $36/ton with drying

- Source: Sudhagar Mani 2006

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Average wood pellet production costs range from $25/t to $35/t (metric ton), depending upon whether drying is required. These costs exclude biomass costs.

## Carbon Credits

- Forest bioenergy is carbon neutral.
- Using forest biomass for electricity generation can displace CO2 emissions from coal-fired power plants.
- Carbon markets are still under development (Chicago Climate Exchange, http://www.chicagoclimatex.com).

- Source: Chicago Climate Exchange

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Carbon markets are in their infancy. The price of carbon is around $4 per ton of CO2 at Chicago Climate Exchange in March 2007. Because forest bioenergy is carbon neutral, it can displace CO2 emissions from burning fossil fuels. As such, forest bioenergy deserves some carbon credits.

## CO2 Emission Displacement

- CO2 price: $3.50/ton (Chicago Climate Exchange)
- Average displacement cost using logging residues for electricity generation:
- 	$16/ton CO2 (marginal cost)
- 	$19/ton CO2 (full cost)

- Source: Gan and Smith 2006

- Woody Biomass Outreach Training
- September 11-12, 2007

## Impact of Global CO2 Emission Reduction on Cost Competitiveness

- 20-30% CO2 emission reduction

- Source: Gan and Smith 2006

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Emissions would need to be taxed at least at $25/ton of carbon dioxide.

## Impact of Carbon Taxes on Cost Competitiveness

- CO2 emission taxation - $25/ton CO2

- Source: Gan and Smith 2006

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Greenhouse gas emissions would need to be taxed at least at $25/ton C.

## Potential Benefits to Landownersfor Forest Biomass/Bioenergy Production

- Revenue from biomass sales
- Savings on site preparation costs in forest regeneration (logging residues)
- Reduction in the risk of wildfire and disease/pest outbreaks
- Opportunity for stand improvement and restoration of damaged stands
- Potential carbon credits

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
By engaging in forest biomass/bioenergy production, a forestland owner can benefit directly or indirectly in terms of:
	Revenue from biomass sales
	Savings on site preparation costs in forest regeneration
	Reduction in fire and disease/pest (e.g., beetles) risks
	Opportunity for stand improvement
	Potential carbon credits

These benefits may encourage the landowner to participate in biomass/bioenergy production.

## Summary

- Production costs, in general, remain a major barrier to forest biomass and bioenergy development.
- Some market niches for biomass/bioenergy exist.
- Co-benefits could be significant.
- Using forest biomass for electricity generation is a viable option for mitigating CO2 emissions.
- Logging residues are a less costly biomass source from conventional forests (except for mill residues).

- Woody Biomass Outreach Training
- September 11-12, 2007

## Implications for R, D&D

- Find market niches for forest biomass/bioenergy
- Reduce costs
- via **technology development/improvement** (including technologies for both feedstock and energy production)
- via **management**
**Integration **of forest biomass/bioenergy production with existing forest management
**Coordination** of forest bioenergy production with the production of fiber and wood products
- Policy: Get co-benefits counted
- Incentives for biomass/bioenergy production and consumption
- Better coordination and integration of energy, environmental, agricultural, forestry, and rural development policies

## Local Biomass Supply Curve Construction

- Woody Biomass Outreach Training
- September 11-12, 2007

- Matthew LangholtzSFRC UF/BioResource Management Inc.

## Outline

- Supply curve introduction.
- Example supply curve construction in Excel

- Woody Biomass Outreach Training
- September 11-12, 2007

## Related Documents

- Community Economic Profiles
- Fact Sheet: *Sources and Supply*
- Appendix: *Do-It-Yourself Supply Curves*
*	**Assessing the Economic Availability of Woody **	**Biomass*
- _[www.interfacesouth.org/woodybiomass](http://www.interfacesouth.org/woodybiomass)_

- Woody Biomass Outreach Training
- September 11-12, 2007

## Background: two axes for two questions

-  How much supply?
-  At what price?

- Woody Biomass Outreach Training
- September 11-12, 2007

## Background: two axes for two questions

- Woody Biomass Outreach Training
- September 11-12, 2007

## Background: two axes for two questions

- 50,000 tpy

- 150,000 tpy

- 300,000 tpy

- Woody Biomass Outreach Training
- September 11-12, 2007

**Background: two axes for two questions**

## Example Supply Curve

- Woody Biomass Outreach Training
- September 11-12, 2007

## Twenty-eight Supply Curves

- Woody Biomass Outreach Training
- September 11-12, 2007

## DIY Supply Curves Example

- From: *Do-It-Yourself Supply Curves, *available at www.interfacesouth.org/woodybiomass

- Woody Biomass Outreach Training
- September 11-12, 2007

## Economic Impacts of Biomass Electric Power Generation

**Alan W. Hodges**
**University of Florida**

- Woody Biomass Outreach Training
- September 11-12, 2007

## Woody Biomass Outreach Training

- September 11-12, 2007

**Notes:**
Wood-fueled power plants benefit communities by using locally available resources rather than fuels imported from other countries or regions, thus retaining more money to circulate in the local economy.
New industries or activities may have broad impacts that extend to other sectors of a local economy, through the linkages between local industries, households, governments, and the rest of the world economy.
Inputs purchased by forestry firms and wood energy producers from local suppliers give rise to secondary effects representing additional economic activity.
Spending by industry employees also lead to secondary impacts.
These impacts may be estimated using with economic models.

What are some examples of export-based activities in your home communities?
How are the two principal strategies for economic development depicted in this model?

## Regional Input-Output (I-O) Economic Models

- Model constructed for a specific region.
- Represents economic linkages between industries, households, and governments in terms of purchases and expenditures.

**Regional Input-Output (I-O) Economic Models**

- Parts and transportation

- Utilities

- Labor

- Exports

- Household consumption

- Value added remanufacturing

**Backward**
**Linkages**

**Forward**
**Linkages**

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Economic impact analysis is based on a structural model of the regional economy known as input-output.
Mature subject in economics, since 1930’s, not widely taught in graduate economics programs.
Has become widely used by engineers and applied economists.
Discovery of I-O Credited to Leontief (Nobel prize).
Question during WWII was how would increased demand for steel, machinery and munitions affect overall economy.
Represents specific region, using data for a base year using data from national income & product accounts.
Represents linkages in the market chain. 
Backward links between businesses, input suppliers, labor force
Forward linkages between businesses and household consumers, exports, and local industries (intermediate and final demand)
Circular flow of money.

## IMPLAN  System

-  Microcomputer system for I-O model construction and impact analysis.
-  Software licensed by MIG, Inc. since 1995 (www.implan.com) at low cost ($450).
-  Regional economic database for US states and counties, updated annually, purchased separately ($500-$2600).
-  Data includes Industry Output, Employment, Value Added (509 Industry sectors), Labor income, Property income, Taxes, Final Demands, Transfer payments, Commodity trade, Capital investment.

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Implan is a leading system for I-O analysis in the U.S.
A commercially available software tool and database commonly used to construct input-output models for any region.
We used IMPLAN to evaluate the potential economic impacts of wood power plants for the selected communities in the southeast U.S.
Supports regional models for any state, county or multi-county area in U.S.
Over 500 users in Universities, government agencies, and consultants.
Originally developed by US Forest Service for forest management planning.
Privatized in mid-1990’s, now licensed by MIG.
Impact analysis module has made user friendly-sometimes dangerously.
Low cost for software ($450).
Regional databases updated annually, purchased separately at $500 to $2600 depending upon number of counties.
Produces results very similar to RIMSII (USDOC).

## Economic Multipliers

- _Indirect Effects:_ change in input purchases (supply chain) due to direct effect
- _Induced Effects:_ change in employee household personal consumption expenditures due to direct and indirect changes
- _Type I_: (direct + indirect) / direct
- _Type II_: (direct + indirect + induced) / direct (income or employment based)
- _SAM_: includes income effects of household s, government spending, investment, transfer payments

**Economic Multipliers**

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Multipliers are the primary result of constructing an I-O model.
Represent the additional economic activity associated an original change in output, spending or employment, the “direct effect”.
Available for economic measures of output (revenue), employment, value added, labor income, indirect business taxes.
Indirect effect is activity in supply chain.
Induced effect is employee household consumer spending.
Multipliers can be indexed to output or stated as a multiple of direct effect (type I, type II).
Social Accounting Matrix (SAM) multipliers are derived from advanced models that incorporate  social accounts for households, governments, transfer payments, capital investment (closed models).
Magnitude of multiplier depends on size and structure of regional economy.

## Functional Economic Areas of the United States

**Functional Economic Areas of the United States**
- Source: US Dept. Commerce (2004)

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
For economic impact analysis it is important to choose an appropriate region for study.

The US Dept. Commerce has defined functional economic areas for the United States, also known as labor market areas, which represent natural regions for analysis.

## Woody Biomass Outreach Training

| Typical Capital Costs for a 20 or 40 MW 
Wood-Fired Power Plant |  |  |  |  |
| --- | --- | --- | --- | --- |
|   | IMPLAN Sectors | Expense Description | 20 MW ($) | 40 MW ($) |
|  | 39 | Site preparation (heavy industrial) | 800,000 | 1,000,000 |
|  | 40 | Water, sewer, and pipeline construction | 100,000 | 150,000 |
|  | 238, 285 | Power boiler, heat exchangers, turbine and generator set manufacturing | 44,500,000 | 81,000,000 |
|  | 394 | Initial fuel delivery (trucks) | 300,000 | 500,000 |
|  | 429 | Financing cost (Funds, trusts, and other financial vehicles) | 1,500,000 | 2,500,000 |
|  | 431 | Site acquisition (Real estate) | 1,000,000 | 1,000,000 |
|  | 445 | Permitting (Environmental and other technical consulting) | 500,000 | 600,000 |
|  |   | Total | 48,700,000 | 86,750,000 |
| Source: Carlson Small Power Consultants, Redding, CA. |  |  |  |  |

- September 11-12, 2007

**Notes:**
Economic impacts were estimated for a typical 20MW and 40MW wood-fueled power plant using conventional stoker boiler technology.

Typical capital and operating costs for wood-fueled power plants provided by Carlson Consultants.

Total capital cost are around $49 million for 20MW, $87 M for 40 MW

Boilers, turbines and generators are the largest capital cost items

What is the effect of scale on capital costs?

## Slide 40

| Typical Operating Costs (1st Year) for a 20 or 40 MW 
Wood-Fired Power Plant |  |  |  |  |
| --- | --- | --- | --- | --- |
|   | IMPLAN Sectors | Expense Description | 20 MW ($) | 40 MW ($) |
|  | 14, 18 | Wood fuel cost (logging  ag. & forestry support services) | 4,409,166 | 9,827,229 |
|  | 30 | Utility interconnection  | 100,000 | 155,000 |
|  | 31 | Start up fuel-gas (natural gas) | 25,000 | 50,000 |
|  | 32 | Utilities-electric | 50,000 | 75,000 |
|  | 150 | Consumable chemicals | 330,000 | 660,000 |
|  | 238 | Power boiler and heat exchanger maintenance | 50,000 | 90,000 |
|  | 285 | Turbine and generator set maintenance | 50,000 | 90,000 |
|  | 428 | Insurance | 160,000 | 260,000 |
|  | 434 | Mobil equipment lease | 90,000 | 120,000 |
|  | 439 | Other routine and periodic maintenance | 1,000,000 | 1,650,000 |
|  | 445 | Environmental costs | 100,000 | 160,000 |
|  | 451 | Management overhead | 100,000 | 120,000 |
|  | 452 | Office expenses | 110,000 | 140,000 |
|  | 460 | Ash disposal  | 60,000 | 120,000 |
|  | 499 | Property tax | 470,000 | 800,000 |
|  | 10006 | Salaries and benefits (Value added) | 1,260,000 | 1,820,000 |
|   |   | Total Operating Costs | 7,964,166 | 16,137,299 |
| Source: Carlson Small Power Consultants, Redding, CA. |  |  |  |  |

**Notes:**
Operating costs for first year.

Total expenses averaged $5.4 million for 20MW, $9.1M for 40 MW.

What are the largest operating expense items?

Amount for wood fuel is an average across all communities.

For impact analysis, wood supply expense is divided between logging and ag/forestry services sectors.

How would you expect operating expenses and impacts to change over time (after first year)?

What is the effect of scale in operating costs (difference between 20 and 40 MW)?

## Wood Fuel Costs for Biomass Power Plants in Selected Communities in Southern States

| State | 20 MW |  |  | 40 MW |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Average | Max | Min | Average | Max | Min |
|  | $ million  |  |  |  |  |  |
| AL | 4.02 | 4.03 | 4.00 | 9.96 | 10.37 | 9.55 |
| AR | 4.94 | 5.02 | 4.85 | 11.18 | 11.44 | 10.91 |
| FL | 4.03 | 4.70 | 3.37 | 9.92 | 11.23 | 9.05 |
| GA | 3.39 | 4.76 | 2.47 | 8.04 | 11.65 | 5.70 |
| KY | 3.94 | 4.48 | 3.57 | 9.72 | 10.52 | 8.79 |
| LA | 3.62 | 3.62 | 3.62 | 9.10 | 9.10 | 9.10 |
| MS | 4.09 | 4.62 | 3.56 | 10.16 | 10.52 | 9.80 |
| NC | 2.88 | 2.88 | 2.88 | 7.37 | 7.37 | 7.37 |
| OK | 5.88 | 5.88 | 5.88 | 12.97 | 12.97 | 12.97 |
| SC | 3.91 | 4.08 | 3.74 | 9.83 | 10.30 | 9.37 |
| TN | 4.60 | 4.64 | 4.53 | 11.88 | 12.10 | 11.58 |
| TX | 2.81 | 2.81 | 2.81 | 6.43 | 6.43 | 6.43 |
| VA | 3.93 | 4.06 | 3.81 | 10.13 | 10.22 | 10.04 |
| All | 4.01 | 5.88 | 2.47 | 9.83 | 12.97 | 5.70 |

**Wood Fuel Costs for Biomass Power Plants in Selected Communities in Southern States**

**Notes:**
Wood fuel costs taken from supply analysis by calculating area under supply curve (M. Langholtz & D. Carter).

Fuel costs are an indication of the abundance of woody biomass resources and the quality of the transportation infrastructure.

Note overall average values: $4.0M for 20 MW, $9.8M for 40 MW.

Which states have the lowest average fuel costs? The highest?

## Economic Impact Measures

- _Total output impacts_—the effect on sales revenues of all businesses in a local economy resulting from a change in industry activity.
- _Value added impacts_—the effect on personal and business income in the local area.
- _Employment impacts_—the effect on the total number of fulltime, part-time and seasonal positions in the local area.

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Output represents the sales revenue generated.

Value added represents personal and business owner income generated.

Employment impacts are number of jobs.

Impacts include supply chain (indirect) and employee spending (induced) multiplier effects.

## Construction Impacts of 20 and 40 MW Wood Power Plant in Selected Counties

| County, State | 20 MW Plant |  |  | 40 MW Plant |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Output (Mn$) | Jobs | Value Added (Mn$) | Output (Mn$) | Jobs | Value Added (Mn$) |
| LEE, AL | 4.96 | 60 | 2.90 | 5.95 | 72 | 3.42 |
| SHELBY, AL | 40.89 | 317 | 18.86 | 71.18 | 549 | 32.48 |
| SALINE, AR | 4.14 | 52 | 2.30 | 4.93 | 61 | 2.67 |
| UNION, AR | 4.04 | 46 | 2.31 | 4.84 | 55 | 2.72 |
| ALACHUA, FL | 8.04 | 81 | 4.27 | 10.78 | 107 | 5.46 |
| CLAY, FL | 7.58 | 74 | 3.75 | 10.26 | 98 | 4.82 |
| LEON, FL | 7.80 | 74 | 4.11 | 10.68 | 100 | 5.38 |
| NASSAU, FL | 6.66 | 63 | 3.29 | 9.01 | 82 | 4.19 |
| SANTA ROSA, FL | 37.66 | 335 | 15.42 | 65.45 | 578 | 26.32 |
| COWETA, GA | 7.55 | 49 | 2.67 | 5.60 | 59 | 3.15 |
| DOUGLAS, GA | 7.59 | 69 | 3.64 | 10.16 | 90 | 4.60 |
| MURRAY, GA | 3.13 | 31 | 1.74 | 3.77 | 39 | 2.05 |
| UNION, GA | 4.02 | 47 | 2.23 | 4.84 | 57 | 2.64 |
| CLARK, KY | 5.02 | 54 | 2.98 | 7.91 | 85 | 4.67 |
| LAUREL, KY | 4.48 | 54 | 2.59 | 5.40 | 64 | 3.06 |
| TRIMBLE, KY | 2.83 | 36 | 1.54 | 3.37 | 43 | 1.77 |
| LIVINGSTON, LA | 34.97 | 328 | 17.19 | 61.17 | 504 | 29.87 |
| DE SOTO, MS | 4.83 | 59 | 2.65 | 5.81 | 70 | 3.14 |
| WARREN, MS | 4.35 | 54 | 2.41 | 5.23 | 64 | 2.83 |
| BUNCOMBE, NC | 7.89 | 74 | 3.90 | 10.72 | 98 | 5.06 |
| ORANGE, NC | 45.27 | 379 | 25.95 | 78.73 | 653 | 44.88 |
| LA FLORE, OK | 5.79 | 65 | 2.46 | 7.83 | 83 | 3.04 |
| OCONEE, SC | 4.18 | 45 | 2.35 | 5.01 | 54 | 2.77 |
| ANDERSON, TN | 6.68 | 57 | 3.59 | 9.09 | 76 | 4.72 |
| BLOUNT, TN | 4.94 | 48 | 3.00 | 5.93 | 58 | 3.58 |
| SEVIER, TN | 6.74 | 59 | 3.51 | 11.54 | 229 | 7.00 |
| MONTGOMERY, TX | 7.80 | 64 | 4.15 | 10.63 | 85 | 5.45 |
| CHESTERFIELD, VA | 43.83 | 222 | 22.14 | 76.22 | 372 | 38.24 |
| FLUVANNA, VA | 3.93 | 40 | 2.14 | 4.72 | 50 | 2.51 |

**Notes:**
Impacts were estimated separately for the construction phase and for ongoing operations.

Results for construction impacts in all counties evaluated.

Total capital construction impacts varied widely depending on the structure of the local economy.

For example, impacts were greater in Santa Rosa County (Panhandle) because of the presence of local manufacturers that can provide some of the key plant equipment, boilers and turbomachinery.

Do any of these results surprise you?

## Operations Impacts (1st yr) for 20 and 40 MW Wood Power Plant in Selected Counties

| County, State | 20 MW Plant |  |  | 40 MW Plant |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Output (Mn$) | Jobs | Value Added (Mn$) | Output (Mn$) | Jobs | Value Added (Mn$) |
| LEE, AL | 12.40 | 210 | 7.63 | 25.25 | 447 | 15.69 |
| SHELBY, AL | 11.35 | 125 | 7.28 | 24.33 | 276 | 15.76 |
| SALINE, AR | 11.75 | 239 | 6.98 | 24.24 | 522 | 14.47 |
| UNION, AR | 12.84 | 226 | 7.39 | 25.18 | 461 | 14.51 |
| ALACHUA, FL | 13.52 | 196 | 8.38 | 27.54 | 413 | 17.08 |
| CLAY, FL | 11.73 | 182 | 7.10 | 25.30 | 420 | 15.35 |
| LEON, FL | 13.41 | 156 | 8.55 | 27.14 | 318 | 17.35 |
| NASSAU, FL | 10.80 | 137 | 6.71 | 23.06 | 297 | 14.56 |
| SANTA ROSA, FL | 12.47 | 147 | 7.70 | 25.94 | 307 | 16.18 |
| COWETA, GA | 9.51 | 160 | 5.52 | 18.41 | 331 | 10.71 |
| DOUGLAS, GA | 7.96 | 75 | 4.46 | 14.21 | 130 | 7.84 |
| MURRAY, GA | 6.22 | 54 | 3.09 | 11.99 | 100 | 5.73 |
| UNION, GA | 11.28 | 214 | 6.81 | 24.34 | 482 | 14.82 |
| CLARK, KY | 5.02 | 54 | 2.98 | 7.91 | 85 | 4.67 |
| LAUREL, KY | 12.33 | 240 | 7.02 | 25.23 | 519 | 14.34 |
| TRIMBLE, KY | 2.83 | 27 | 1.71 | 4.57 | 43 | 2.75 |
| LIVINGSTON, LA | 9.64 | 158 | 5.73 | 20.38 | 349 | 12.19 |
| DE SOTO, MS | 8.27 | 155 | 5.18 | 16.70 | 356 | 10.83 |
| WARREN, MS | 11.87 | 182 | 7.12 | 23.74 | 375 | 14.30 |
| BUNCOMBE, NC | 12.84 | 242 | 7.59 | 26.65 | 546 | 15.77 |
| ORANGE, NC | 10.81 | 177 | 6.91 | 22.08 | 393 | 14.07 |
| LA FLORE, OK | 8.22 | 85 | 3.88 | 15.78 | 155 | 7.38 |
| OCONEE, SC | 10.76 | 220 | 5.98 | 23.16 | 508 | 12.86 |
| ANDERSON, TN | 11.51 | 216 | 6.94 | 24.96 | 510 | 15.08 |
| BLOUNT, TN | 14.40 | 266 | 8.63 | 31.48 | 629 | 18.91 |
| SEVIER, TN | 8.90 | 216 | 5.65 | 18.24 | 509 | 11.94 |
| MONTGOMERY, TX | 11.32 | 154 | 6.79 | 21.73 | 314 | 13.03 |
| CHESTERFIELD, VA | 13.08 | 187 | 7.84 | 28.46 | 437 | 17.07 |
| FLUVANNA, VA | 9.56 | 218 | 5.51 | 20.42 | 501 | 11.89 |

**Operations Impacts (1****st**** yr) for 20 and 40 MW Wood Power Plant in Selected Counties**

**Notes:**
Impacts of plant operations were estimated for first year.

Operating impacts were less variable than construction impacts.

Does higher expense mean greater economic impacts?

## Employment Impacts of Operations for 20 and 40 MW Wood Power Plant in Selected Counties

**Employment Impacts of Operations for 20 and 40 MW Wood Power Plant in Selected Counties**

## Direct, Indirect, and Induced Output (Revenue) Impacts of Operations  (1st yr) for 20 MW Wood Power Plant in Selected Counties

| County, State | Direct (M$) | Indirect (M$) | Induced (M$) | Total 
(M$) |
| --- | --- | --- | --- | --- |
| LEE, AL | 6.89 | 1.07 | 4.44 | 12.40 |
| SHELBY, AL | 6.94 | 1.03 | 3.38 | 11.35 |
| SALINE, AR | 7.65 | 1.02 | 3.08 | 11.75 |
| UNION, AR | 8.21 | 1.43 | 3.20 | 12.84 |
| ALACHUA, FL | 6.79 | 1.49 | 5.24 | 13.52 |
| CLAY, FL | 6.28 | 1.31 | 4.14 | 11.73 |
| LEON, FL | 7.49 | 1.40 | 4.52 | 13.41 |
| NASSAU, FL | 6.47 | 1.25 | 3.08 | 10.80 |
| SANTA ROSA, FL | 7.51 | 1.36 | 3.60 | 12.47 |
| COWETA, GA | 5.47 | 1.10 | 2.94 | 9.51 |
| DOUGLAS, GA | 4.13 | 1.07 | 2.76 | 7.96 |
| MURRAY, GA | 4.26 | 0.83 | 1.12 | 6.22 |
| UNION, GA | 7.30 | 1.26 | 2.71 | 11.28 |
| CLARK, KY | 2.92 | 0.57 | 1.53 | 5.02 |
| LAUREL, KY | 7.34 | 1.31 | 3.68 | 12.33 |
| TRIMBLE, KY | 2.22 | 0.26 | 0.36 | 2.83 |
| LIVINGSTON, LA | 6.36 | 1.08 | 2.20 | 9.64 |
| DE SOTO, MS | 4.67 | 0.68 | 2.92 | 8.27 |
| WARREN, MS | 7.49 | 0.98 | 3.41 | 11.87 |
| BUNCOMBE, NC | 6.76 | 1.44 | 4.64 | 12.84 |
| ORANGE, NC | 5.80 | 0.98 | 4.03 | 10.81 |
| LA FLORE, OK | 5.57 | 1.27 | 1.39 | 8.22 |
| OCONEE, SC | 6.81 | 1.20 | 2.75 | 10.76 |
| ANDERSON, TN | 7.55 | 0.96 | 3.00 | 11.51 |
| BLOUNT, TN | 7.88 | 1.70 | 4.82 | 14.40 |
| SEVIER, TN | 5.34 | 0.68 | 2.88 | 8.90 |
| MONTGOMERY, TX | 6.05 | 1.48 | 3.80 | 11.32 |
| CHESTERFIELD, VA | 7.10 | 1.55 | 4.43 | 13.08 |
| FLUVANNA, VA | 6.57 | 1.04 | 1.95 | 9.56 |
| Average | 6.27 | 1.13 | 3.17 | 10.57 |

**Direct, Indirect, and Induced Output (Revenue) Impacts of Operations  (1****st**** yr) for 20 MW Wood Power Plant in Selected Counties**

**Notes:**
Sometimes it is useful to consider the sources of economic impacts from direct, indirect and induced effects.

Note that induced impacts may be roughly half as large as direct impacts, on average.

Can you define the direct, indirect, and induced effects?

What would be the implied multiplier effect for these average results?

## Direct, Indirect, and Induced Output (Revenue) Impacts of Operations  (1st yr) for 20 MW Wood Power Plant in Selected Counties

**Direct, Indirect, and Induced Output (Revenue) Impacts of Operations  (1****st**** yr) for 20 MW Wood Power Plant in Selected Counties**

## Average Employment Impacts (Jobs) by Industry Sector for Wood Power Plant Operations in Selected Counties 

| Aggregated Industry Sector (NAICS) | 20 MW Plant  |  | 40 MW Plant  |  |
| --- | --- | --- | --- | --- |
|  | Jobs | Percent | Jobs | Percent |
| Agriculture, Forestry, Fisheries, Hunting   | 92 | 54.1% | 226 | 61.2% |
| Mining   | 0 | 0.0% | 0 | 0.0% |
| Utilities  | 1 | 0.5% | 1 | 0.4% |
| Construction    | 4 | 2.4% | 8 | 2.1% |
| Manufacturing    | 1 | 0.7% | 2 | 0.6% |
| Wholesale Trade    | 2 | 1.0% | 3 | 0.9% |
| Retail trade  | 10 | 5.9% | 19 | 5.2% |
| Transportation & Warehousing  | 1 | 0.7% | 2 | 0.6% |
| Information   | 1 | 0.4% | 1 | 0.3% |
| Finance & insurance  | 4 | 2.4% | 7 | 1.9% |
| Real estate & rental   | 3 | 1.7% | 5 | 1.4% |
| Professional- scientific & tech services  | 16 | 9.3% | 27 | 7.2% |
| Management of companies   | 1 | 0.6% | 1 | 0.4% |
| Administrative & waste services   | 4 | 2.4% | 7 | 1.9% |
| Educational services  | 1 | 0.4% | 1 | 0.3% |
| Health & social services  | 6 | 3.5% | 12 | 3.1% |
| Arts- entertainment & recreation   | 1 | 0.5% | 2 | 0.5% |
| Accommodation & food services  | 6 | 3.7% | 12 | 3.2% |
| Other services   | 5 | 2.8% | 9 | 2.6% |
| Government & non NAICs  | 12 | 6.8% | 22 | 6.0% |
| Total | 170 | 100.0% | 370 | 100.0% |

**Notes:**
It is often useful to break-down economic impacts by industry.

This breakdown is based on the NAICS.

Which sectors have largest impacts? Why?

## Employment Impacts by Occupational Group for Operations of a 40MW Wood-Fired Power Plant in Alachua County, FL

| Occupational Group | Jobs |
| --- | --- |
| Farming, Fishing, and Forestry | 98.7 |
| Other Non-specified | 48.8 |
| Office and Administrative Support | 34.2 |
| Transportation and Material Moving | 28.4 |
| Sales and Related | 20.3 |
| Food Preparation and Serving Related | 14.2 |
| Architecture and Engineering | 10.9 |
| Installation, Maintenance, and Repair | 10.0 |
| Management | 9.5 |
| Production | 9.2 |
| Healthcare Practitioners and Technical | 7.4 |
| Building and Grounds Cleaning and Maintenance | 6.5 |
| Business and Financial Operations | 6.3 |
| Construction and Extraction | 5.8 |
| Personal Care and Service | 5.4 |
| Healthcare Support | 4.0 |
| Computer and Mathematical | 3.3 |
| Education, Training, and Library | 2.6 |
| Life, Physical, and Social Science | 2.4 |
| Arts, Design, Entertainment, Sports, and Media | 2.2 |
| Community and Social Services | 1.5 |
| Legal  | 1.1 |
| Protective Services | 1.0 |
| Total | 333.6 |

**Notes:**
It is important to understand not only how many jobs may be created, but what kinds of jobs they are.

Using data from the Bureau of Labor Statistics, we estimated the number of jobs generated in each major occupational class.

The largest number of jobs, were in farming/forestry which provides the wood fuel to a power plant. 

There were also significant numbers of jobs in office/administration, transportation, sales, food services, architecture and engineering, maintenance and repair occupations, and management.

## Questions, concerns, or ideas?

- Woody Biomass Outreach Training
- September 11-12, 2007

**Notes:**
Any questions?

Some other questions to think about:
What are some other measures of economic impacts?
What are some caveats about economic impact analysis?
Which stakeholders are likely to be most interested in economic impacts?