United States

Department of

Agriculture

Forest Service

Pacific Northwest

Research Station

General Technical

Report

PNW-GTR-533

May 2002

Feasibility of Using Wood

Wastes to Meet Local Heating

Requirements of Communities

in the Kenai Peninsula in Alaska

David L. Nicholls and Peter M. Crimp
Authors David L. Nicholls is a forest products technologist, Wood Research and Development

Center, 204 Siginaka Way, Sitka, AK 99835-7316; and Peter M. Crimp is the section

head, Alternative Energy, Alaska Energy Authority/AIDEA, 813 West Northern Lights

Boulevard, Anchorage, AK 99503.
Nicholls, David L.; Crimp, Peter M. 2002. Feasibility of using wood wastes to meet

local heating requirements of communities in the Kenai Peninsula in Alaska.

Gen. Tech. Rep. PNW-GTR-533. Portland, OR: U.S. Department of Agriculture,

Forest Service, Pacific Northwest Research Station. 17 p.

Wood energy can be important in meeting the energy needs of Alaska communities that

have access to abundant biomass resources. In the Kenai Peninsula, a continuing

spruce bark beetle (Dendroctonus rufipennis (Kirby)) infestation has created large

volumes of standing dead spruce trees (Picea spp.). For this evaluation, a site in the

Kenai-Soldotna area was chosen for a small, industrial-scale (4 million British thermal

units (BTUs) per hour) wood-fired hot water heating system, which could be fueled by

salvaged spruce timber and also by sawmilling residues. Thirty-six different scenarios

were evaluated by using wood fuel costs ranging from $10 to $50 per delivered ton,

alternative fuel costs from $1 to $2 per gallon, and fuel moisture contents of either 20

percent or 50 percent (green basis). In addition, two different capital costs were

considered. Internal rates of return varied from less than 0 to about 31 percent, and

project payback periods varied from 4 years to greater than 20 years. Potential barriers

to the long-term sustainability of a wood energy system in the Kenai Peninsula include

the availability of biomass material once current spruce salvage activities subside. The

estimated wood fuel requirements of about 2,000 tons per year are expected to be easily

met by spruce salvage operations over the short term and by sawmill residues after

salvage inventories diminish. It is expected that a wood energy system this size would

not significantly reduce overall fuel loads in the area, but instead would be a good

demonstration of this type of system while providing other community benefits and

energy savings.

Keywords: Economics, wood energy, biomass, wood products, Alaska.

Abstract
1

Biomass energy can be important in meeting the heating needs of facilities that currently

depend on fossil fuels. The Kenai Peninsula region of Alaska has abundant forest resources, which include a substantial amount of spruce (Picea spp.) wood killed by bark

beetles (Dendroctonus rufipennis (Kirby)). This region of Alaska holds promise for the

development of biomass energy projects not only because of its timber resources but also

the presence of an existing timber industry (both processing and logging infrastructure).

Salvaged material could be used to produce energy to heat buildings, although its longterm supply might be questionable. Many sawmill facilities in the region would be well

positioned to supply wood wastes for fuel if the availability of beetle-killed wood declines.

This paper evaluates the economic feasibility of using local forest and sawmill residues

to supply a wood-fired hot water system that would provide space heating or process

heat at a centrally located site within the Kenai Peninsula.

In the Kenai Peninsula, there are about 10 to 15 sawmill facilities currently producing an

estimated 4.5 million board feet (MMBF) of lumber per year, primarily spruce (Kilborn

2000, Parrent 2000b). During the past several decades, improved technologies in Pacific

Northwest sawmills—including thinner sawkerfs, smaller green lumber target sizes, and

more accurate log positioning systems—have resulted in higher lumber recovery along

with corresponding reductions in residue production (Keegan et al., n.d.). Although mill

technologies and lumber recovery rates in Alaska are likely not at the same level as

mills in the Pacific Northwest, recent work has assessed the lumber recovery of sawmills

in most regions of Alaska (Kilborn, in press). Based on the sawing efficiency and lumber

recovery expected within the Kenai Peninsula from known wood products producers, an

estimated 4,4001 tons per year of manufacturing residues, including green sawdust, slabs,

and edgings, are currently being generated (table 1). After considering minor uses for

these residues, such as animal bedding and firewood for residential heating, it is estimated

that an amount closer to 4,000 tons per year (11 tons per day, year-round basis) could

potentially be available to fuel one or more hot water building heating systems.

Although most, if not all, of the active sawmills in the region are within an economically

feasible commuting distance of the Kenai-Soldotna area (about 75 miles), several

factors could limit the actual wood waste availability. Many of the smaller sawmills

producing less than 1 MMBF of lumber per year may operate intermittently and therefore

might not be steady fuel suppliers. Because transportation of small amounts of residue

to a wood energy facility might not be practical for some of the smaller sawmills, alternative arrangements to collect wood wastes, perhaps through the facility owners, should

be considered. Most sawmills do not have the equipment needed to reduce slabs and

edgings to a size needed for automatic fuel handling systems and therefore might be

limited to supplying only sawdust as a fuel source. For slabs and edgings to be used as

a fuel source, it would be beneficial to have fuel-reduction equipment at a centralized

location, or possibly at the biomass energy site itself. In this analysis, we assumed that

equipment of this type would be purchased separately from the wood energy system

and therefore was not included in the stated project cost.

Introduction

Kenai Peninsula

Wood Products

Industry

1 Production of manufacturing residues assumes a regional lumber

recovery factor of 7.5 from an estimated 12 sawmills operating in the Kenai

Peninsula. Three size classes were considered to estimate the actual

production from these sawmills (as indicated in table 1).
2

In addition to the freshly cut sawmill residues, a relatively small amount of dry manufacturing residues could be available from secondary manufacturing operations. This fuel

source could include planer shavings and dry sawdust and would be primarily limited to

white spruce (Picea glauca (Moench) Voss), although small volumes of paper birch

(Betula papyrifera Marsh.) would potentially be available. The inclusion of minor amounts

of dry residues lowers the overall fuel moisture content and therefore produces a somewhat greater heat output (British thermal units [BTUs] per pound). Small additions of dry

residues would most likely not have a major effect on fuel handling properties, emissions,

or other areas of system operation.

During the past few decades, a spruce bark beetle infestation has resulted in large

amounts of unmerchantable timber in the Kenai Peninsula. In many cases, the timber is

still standing but is losing value for lumber or other solid wood products. Since the mid1980s, bark beetle populations have increased to epidemic levels, thereby resulting in

about 400,000 affected acres by the mid-1990s (Kenai Peninsula Online 2000). In many

of the timber stands, up to 95 percent of the trees have been killed. The condition of this

resource differs considerably from recently killed material, which might be suitable for

sawtimber, to more severely deteriorated material, which might be suitable only for wood

fuel. Other estimates indicate the spruce bark beetle in the Kenai Peninsula had spread

to close to 2.3 million acres by the late 1990s (Kenai Peninsula Spruce Bark Beetle Task

Force 1998). Over the longer term, it is estimated that more than 2 billion board feet of

timber have been lost because of spruce bark-beetle attacks over the last 25 years

(Kenai Peninsula Spruce Bark Beetle Task Force 1998).

Lumber recovery of standing dead timber has been evaluated for beetle-killed spruce

trees (Lowell and Willits 1998). In this study, logs were divided into four deterioration

classes based on visual inspection, and log value was found to decrease through each

successive deterioration class. As logs from beetle-killed trees become less valuable

for lumber production because of deterioration, alternative uses for them, such as wood

energy, will become more attractive. Indeed, timber sales (including salvage of beetlekilled material) reported by the Kenai Peninsula Borough have increased from about $2.2

million in 1991 to almost $26.1 million in 1998 (Kenai Peninsula Online 2000). Timber

sales from Alaska state-owned lands have shown a similar trend, with projected offerings

ranging from about 2 MMBF to more than 81 MMBF over the next few years within the

Kenai-Kodiak region (Alaska Department of Natural Resources 2000).

Fuel Availability from

Beetle-Killed Trees

Table 1—Estimated production of wood wastes from known sawmills in the Kenai

Peninsula, Alaska

Sawmills by Number Estimated wood

size class of sawmills waste production

MBFa per year Tons per yearb

50-250 6 592

250-1,000 4 477

1,000-5,000 2 3,342

 Total 12 4,411

a Thousand board feet.

b Assumes a regional lumber recovery factor of 7.5.
3

Estimates differ as to the “shelf life,” or length of time available, to use beetle-killed trees.

Some estimates initially suggested an 8- to 10-year window for harvesting trees. Other

estimates, based on practical experience, are closer to 4 to 5 years (Kenai Peninsula

Online 2000). Other sources indicate any material intended for sawlogs needs to be

harvested within the first 3 years after trees are killed. From the fourth to seventh year

after mortality, spruce can be used for chips and, to some extent, for house logs. By the

eighth year, most of the economic value of beetle-killed trees has been lost, to the extent

that even reforestation costs might not be recovered (Committee on Resources, Subcommittee on Forests and Forest Health 1999). Beetle-killed trees that are not removed

will eventually become woody debris, contributing to the potential for wildfire. Over the

past 10 years, woody debris volumes have, in some cases, increased by a factor of 20

(resulting in up to 40 tons per acre of debris) (Rozell 1997). Based on this information, it

seems that much of the beetle-killed spruce is no longer suitable for lumber production

but may still have some residual value for biomass energy.

The feasibility of installing and operating a wood-based energy system also depends on

many other factors including system size, fuel costs, wood moisture content, and labor

rates. Whether or not the facility will be used year-round or only during peak heating

seasons is also an important consideration. In addition, daily usage requirements can

differ; for example, schools, residences, and industrial facilities might all have different

heating demands. In this feasibility evaluation, biomass from standing dead trees or

harvesting residues would be transported to a centrally located energy facility that would

include a steam or hot water heating system fueled by wood chips. Heat then would be

provided to one or more facilities near the wood energy system, whereas local electrical

needs would continue to be met by current systems. The cost of harvesting and transporting

salvaged spruce to a centralized energy facility is expected to be one of the key factors

influencing the feasibility of this project.

The economic feasibility of wood energy systems depends primarily on wood fuel being

less expensive to obtain than heating oil on a long-term basis. For financially attractive

systems, this energy savings would offset the higher initial investment and higher maintenance costs associated with wood-fired systems (vs. fossil fuel systems). In general,

larger wood energy systems operating continuously at higher energy loads are more

economical than smaller systems operating intermittently. The economic suitability of

using wood fuel to provide space heat for educational and industrial facilities has been

evaluated for several different system sizes (Lin 1981). If wood fuel is available for less

than $20 per ton and the price of alternative fuels such as natural gas or fuel oils is about

$8 per million (MM) BTU’s, then conversion of systems from fossil fuel-based to woodbased is economically feasible.

Biomass energy is often used for wood products producers to generate low-pressure

steam for industrial processes, such as heating lumber dry kilns. Here, systems are

often run 24 hours per day under steady fuel loads and operating conditions, and steam

is usually transported short distances to the point of application. By contrast, wood

energy systems for many residential, institutional, and light commercial uses often run

intermittently on a daily and seasonal basis. Many of these systems are designed to

provide hot water rather than low-pressure steam as the heat transfer medium. Because

many wood energy systems cannot be easily turned off to accommodate short-term

demand fluctuations, there is often a need for supplemental heating (typically fossil fuel)

as a system backup or used in conjunction with the wood energy system during normal

Wood Energy

Feasibility

Problem Overview
4

operation. Alternatively, some systems are characterized by their ability to operate at

less than rated capacity and may include automatic ignition features to turn the systems

on or off under certain conditions. Systems having lower “turn-down” ratios would be

better suited for situations having nonuniform energy demands. Thermal storage systems

(for example, insulated hot water tanks) would be another alternative for providing heat

when it is needed. Several important site-specific factors about the design of wood

energy systems for space heating have been identified (USDA FS 1982):

• Annual energy demands

• Maximum heating requirements

• Supply and cost of wood fuel

• Availability and cost of labor

• Equipment layout and other site factors including the availability of auxiliary

equipment

• Current or existing space heating system

Once these factors have been evaluated, system components can then be designed.

These typically include fuel handling and storage systems, fuel firing system, emission

control, and ash disposal systems.

The Kenai Peninsula Borough covers about 26,000 square miles and is located south of

Anchorage, Alaska (fig. 1). Along the westernmost and southern parts of the peninsula

are areas of private land, several population centers, and much of the region’s wood

products industry. About half of the population of the Borough’s 47,000 people live near

several communities, including Seward, Homer, Kenai, and Soldotna (fig. 2). This population

center is centrally located within the western part of the Kenai Peninsula and is bordered

to the west by the Cook Inlet. The population center is within convenient commuting

distances of most area sawmills, and because it is also close to large tracts of beetlekilled timber, it was chosen as the study area of a conceptual wood energy system in

this evaluation.

Computer programs such as the wood energy financial analysis model (WEFAM) can be

used to obtain a preliminary analysis to evaluate the feasibility of converting to wood energy

from an alternative fuel source (Michigan Department of Commerce, Public Service

Commission 1988a). The program uses 10 inputs that relate to the proposed wood energy

system (table 2). Results include cash flow and energy savings information over a 20-

year planning horizon as well as internal rate of return and project payback period. Inputs

that cannot be measured accurately can be estimated at different levels for separate

computer runs. In this way, any number of scenarios can be modeled by adjusting the

levels of selected inputs. In the current evaluation of the Kenai Peninsula, the three

primary variables of interest were wood fuel cost (dollars per ton), cost of alternative fuel

(dollars per gallon), and wood fuel moisture content (percentage, green basis). It was

expected that these factors would differ with transportation distance, harvesting costs,

time since infestation, and fluctuations in fuel oil prices. Several factors were held

constant in the financial model, including the discount rate (7 percent) and the inflation

rate (4 percent per year for years 1 to 10 and 7 percent per year for years 11 to 20).

Wood Energy

Feasibility

Kenai Peninsula Sites

Wood Energy

Feasibility

Computer Evaluations
5

Table 2—Wood energy system information needed for computer

evaluations

Input Units

Wood energy system size Million BTUsa per hour

Current fuel used Fuel type

Current fuel (annual usage) Units appropriate for fuel type

Current fuel cost Dollars per year

Wood moisture content Percentage of total weight

Cost of wood Dollars per ton

System operation Hours used per day

System operation Days used per year

Employee wage rate Dollars per hour

Capital cost of wood energy system Dollars

a BTU = British thermal unit.

Figure 2—Proposed site of the wood energy facility (Kenai, Alaska) and other points

of interest.

1. Anchorage, AK

2. Kenai/Soldotna, AK (site of proposed

facility)

3. Chugach National Forest

4. Kenai National Wildlife Refuge

5. Cook Inlet

6. Gulf of Alaska

7. Kenai Fjords National Park

8. Homer, AK

9. Seward, AK

Figure 1—State of Alaska, with Kenai Peninsula indicated by the arrow.
6

Wood moisture plays an important role in combustion efficiency, which in turn determines

how much usable heat can be produced from the wood fuel. Fuel with more moisture is

also heavier and therefore can be more difficult and costly to transport than drier fuels.

Moisture content also influences fuel handling properties, and within the wood energy

system, this would include conveyors, augers, and fuel storage bins. Fuel moisture may

also affect chipping and other mechanical reduction processes, especially as relates to

particle size distributions, which in turn can influence wood combustion properties. In

this evaluation, it was assumed that all fuels would be reduced to chip-sized particles

before being burned (that is, the energy system would not be able to accommodate

slabs, edgings, or branches in their original sizes).

The moisture content for freshly cut Sitka spruce (Picea sitchensis (Bong.) Carr.) sapwood

is typically greater than 50-percent moisture content, green basis (Forest Products

Laboratory 1999). In the Kenai Peninsula region, beetle-killed timber and slash would be

expected to be considerably drier than these values. Based on these conditions, we

evaluated two moisture content classes: (1) 45-percent moisture content green basis

(typical of recently killed trees) and (2) 20-percent moisture content green basis (typical

of trees that have been standing dead for a while) (fig. 3). It was expected that given the

length of time since the beetle infestation, this range of wood fuel moisture would

encompass most of the currently available slash and harvesting residues in the Kenai

region. One advantage of using fuels with low moisture content, such as partially dried

beetle-killed timber, is that it produces a greater heat output per pound of fuel when

compared to wetter fuels, such as freshly cut sawmill residues. Typically, net heating

values2 for green (freshly harvested) fuels with 50-percent moisture are close to 3,650

BTUs per pound, whereas net heating values for dry fuels with 10-percent moisture are

about 6,100 BTUs per pound (USDA FS 1982). The heating advantages of using drier

beetle-killed timber, however, need to be weighed against the possibility of wood decay

and loss of wood integrity, which could negatively affect fuel values. In addition, mixing

high and low moisture content fuels potentially could affect the performance of wood

energy systems, including fuel handling and combustion efficiency, and would therefore

require careful monitoring. Specifically, drier fuels could be more difficult to chip than

green fuels, unless decay has occurred.

Although abundant wood wastes are locally available in the Kenai region, harvesting,

transportation, and unloading costs need to be considered to determine the actual

(delivered) fuel cost. Even when low cost fuel is available in salvage operations, the

remaining costs could be significant. Given the expected fuel availability and transportation costs in the Kenai region, the sensitivity analysis we used considered wood fuel

costs ranging from $10 to $50 per delivered ton (at 20- or 45-percent moisture content,

green basis). The wood fuel cost per bone dry ton varied over a wide range, depending

on moisture content and delivered fuel price. We assumed that sawmill residues, such

as sawdust, slabs, and edgings would be available at the lower end of the price spectrum

and that harvested residues and beetle-killed salvage material would be more expensive.

Based on a similar evaluation for a wood-fired system in northern climates, we estimated

that the system on the Kenai Peninsula would require nearly 2,000 tons per year of fuel

Review of Key

Economic Variables

Wood Fuel Properties and

Availability

2 Net heating value is the potential energy available in the wood fuel as

received, taking into account the energy that will be lost in evaporating

and superheating the water when the wood fuel burns (Jahn 1985).
7

at about 50-percent moisture content (Nicholls et al. 1992). Although precise estimates

of salvage fuel inventories are not available, we expect that the relatively small volumes

of residue needed (2,000 tons per year) could be easily supplied from nearby salvage

activities. If the current inventory of beetle-killed material is used over the next several

years, sawmilling residues such as sawdust and edgings could be used to a greater

degree from that point onward, assuming that current levels of lumber production

continue in the Kenai region. This illustrates, however, one of the potential liabilities of

making capital investments in wood energy systems without the assurance of a longterm fuel supply.

In the Kenai Peninsula, fuel oil is a common fuel for residential heating. Current delivered

price for no. 2 fuel oil in the Kenai Peninsula is about $1.43 per gallon as of March 2001

(table 3) (Anon. 2000). This value was used as the basis for alternative fuel cost comparisons in the computer economic evaluation. Two additional values ($1 and $2 per

gallon) were used in the sensitivity analysis to allow for significant movements in the

price of no. 2 fuel oil (fig. 3). Natural gas is also readily available as a heating fuel in the

Kenai Peninsula but was not considered in this evaluation.

Review of Key

Economic Variables

Alternative Fuel Costs

Wood energy system Wood fuel variables

Fuel usage:a Wood fuel moisture content (green basis):

• 1 million BTUsb per hour average load • 25 percent

• 8,364 million BTUs per year • 40 percent

Annual cost of alternative fuel source: Cost of wood fuel:

• Fuel oil no. 2 • $10 per ton

• $1.43 per gallon—$85,798 per year • $30 per ton

• $1.00 per gallon—$60,000 per year • $50 per ton

• $2.00 per gallon—$120,000 per year

Cost of wood energy system:

• $500,000

• $700,000

a Equivalent of 60,000 gallons per year of no. 2 fuel oil.

b British thermal units.

Figure 3—Wood energy and wood fuel variables used in economic feasibility evaluation of system

proposed for the Kenai Peninsula.

Table 3—Current market prices for selected home heating fuels in the Kenai

Peninsula, Alaskaa

Current market price Minimum purchase Dollars per

Fuel (dollars per gallon) (gallons) BTUsb per gallon MM BTUsb

No. 1 fuel oil 1.54c 200b 135,500 11.37

No. 2 fuel oil 1.43c 200b 139,400 10.26

Propane 2.06d 100c 91,500 22.51

a All prices include home delivery.

b British thermal units.

c Anon. 2001.

d Hoagland 2001.
8

The total capital cost of installing a wood energy system is directly related to system

size, which in turn can be influenced by local fuel availability. Most small industrial systems

are classified according to their capacity to produce heat in MM BTUs per hour. To

ensure efficient operations, it is important to match the system size to the fuel supply

that is expected on a long-term basis. Typical planning horizons can be 20 years or

longer, which is the timeframe that our computer evaluation used.

The capital cost levels considered in this evaluation were based on expected purchase

and installation costs for all major system components for a 4-MM-BTUs-per-hour hot

water system fueled by wood chips (Diskin 2000). Two system costs were evaluated—a

base system that cost $500,000 and a system complete with backup energy source that

cost $700,000 (fig. 3). The more expensive system included an allowance for cost overruns and unexpected expenses that were not considered with the base system. These

costs are expected to be typical of stand-alone biomass energy facilities in Alaska and

include delivery and installation costs to the Kenai Peninsula location (Crimp and

Adamian 2000). Total project cost was for the complete system and included the thermal

system, fuel storage and handling systems, emission control equipment, plumbing and

wiring work, installation, and startup expenses. Site preparation and foundation costs also

were included in this evaluation, but land purchase costs were not.

The boiler utilization rate (BUR) is an important consideration in the use of wood-fired

boilers, especially for public buildings, offices, schools, and other buildings that do not

require around-the-clock heating. The BUR considers several factors including fuel consumption, fuel energy value, boiler efficiency, boiler rating, and hours of operation per

year (Sarles and Rutherfoord 1982). Because most offices and workspaces are heated

only 40 hours per week and do not require heat on a year-round basis, the average annual

BUR might be as low as 10 to 15 percent (Sarles and Rutherfoord 1982). Industrial facilities,

including dry kilns and other year-round wood products facilities, would be expected to

have considerably higher BURs than offices and workspaces. For this evaluation, the

BUR was an average of the BURs for office spaces and industrial facilities. We assumed

energy demands for the system to be equivalent to 60,000 gallons of no. 2 fuel oil per

year. This level of use would be close to operating the 4-MM-BTU-per-hour system at

about 25 percent of its capacity on a year-round basis; of course seasonal demands

would vary, ranging from high usage during winter to low usage (or none) during summer.

Building heating loads are given as a means of comparing different types of facilities

that might require space heating from biomass energy systems.

Several of the variables in the economic analysis were considered at only one level as

they could be estimated fairly easily. These included the system operation at 24 hours

per day, 240 days per year (based on an 8-month heating season). Note that commercial

and institutional facilities such as schools would probably have daily heating requirements

less than 24 hours, even during winter when energy demands would be greatest and so

our evaluation might overestimate actual needs. To compensate for this, we assumed

that the boiler, rated at 4 MM BTUs per hour, would operate at an average output of only

about 1 MM BTUs per hour throughout the course of a heating season. The computer

evaluation also required information about price increases due to inflation (since the base

year of 1982), which was estimated to be a 52-percent increase (Alaska Department of

Labor 2000). We also assumed that the wage rate for operators would be $20 per hour.

Review of Key

Economic Variables

Wood Energy System

Capital Cost

Review of Key

Economic Variables

System Operation and

Heating Season

Review of Factors

Remaining Constant

in Evaluation
9

In addition, the computer model assumed a discount rate of 7 percent throughout the 20-year

planning horizon, an inflation rate of 4 percent for years 1 to 10, and an inflation rate of

7 percent for years 11 to 20. The net heating values for wood fuel were assumed to be

5,282 BTUs per pound for 20-percent moisture content fuel and 3,275 BTUs per pound

for 45-percent moisture content fuel (Michigan Department of Commerce, Public Service

Commission 1988b).

We compared the proposed energy system and an equivalent system for drying lumber.

The thermal system we describe could easily be used to provide heat for one or more

lumber dry kilns. Here, energy demands would be fairly constant and predictable throughout

the year. The 4-MM-BTUs-per-hour energy system could provide heat to a dry kiln about

60 thousand board feet (MBF) in size, reaching maximum drying temperatures of about

140 °F. Drying conditions typical for the Kenai Peninsula wood products industry would

include white spruce dimension lumber, which would be dried from initial (green) conditions

of 70- to 80-percent moisture content to final kiln-dried conditions of 15- to 19-percent

moisture content in about 4 to 5 days. Typical lumber thicknesses would range from 1 to

2 inches. Under these conditions, it is expected that the 4-MM-BTUs-per-hour system, if

operated on about a year-round basis, could dry up to 3,000 MBF of lumber annually.

A payback period represents the time necessary for a capital investment to accumulate

savings or income equivalent to the original investment. Payback periods for the most

and least favorable cases ranged from 4 to greater than 20 years, respectively, and

internal rates of return ranged from below 0 to about 31 percent (figs. 4 through 7). Complete

results for all 36 scenarios also are provided (see app., tables 5 and 6). Wood fuel prices

and wood moisture content were shown to be important economic considerations for

wood energy systems (table 4). The most favorable scenarios generally were those having

low wood fuel costs, low fuel moisture content, and high alternative fuel costs. By contrast,

the least favorable scenarios generally were those having high fuel costs, high fuel

moisture content, and low alternative fuel costs. Fuels with higher moisture content

would be expected to burn less efficiently than drier fuels and result in less usable heat

per delivered ton of wood. Fuel moisture content could become an important consideration

as woody debris and salvaged timber are used from beetle-killed spruce trees that have

been dead for several years and have experienced a certain amount of drying on site.

The lower project cost was generally associated with shorter payback periods and

higher rates of return, other variables being equal. This could be reasonably expected

because the normal operation of the two different systems would be the same, but the

more expensive system would have additional features, including a backup energy

system.

Our evaluation showed that beetle-killed salvage material should have strong economic

potential for use as wood energy. Regions within a convenient transportation distance of

the wood energy site should be able to easily supply the approximately 2,000 tons per

year fuel requirements over the short term. Any biomass shortfalls from the salvage

material could be compensated for with some of the estimated 4,000 tons per year of

locally available sawmilling residues.

Several additional factors could result in even greater economic potential for establishing

wood energy systems. Because this analysis assumed that no. 2 fuel oil was the

alternate fuel, at $1.43 per gallon, any future price increases in alternative heating fuels

would result in greater favorability for wood energy systems. If a nearby sawmill were

Results

Energy Alternatives—

Comparison to

Lumber Drying

Systems
10

Figure 5—Internal rate of return and payback period for wood energy system utilizing Kenai Peninsula

wood wastes under a scenario of 45-percent wood moisture and a system cost of $500,000.

Figure 4—Internal rate of return and payback period for wood energy system utilizing Kenai Peninsula wood

wastes under a scenario of 20-percent wood moisture and a system cost of $500,000.
11

Figure 7—Internal rate of return and payback period for wood energy system utilizing Kenai Peninsula

wood wastes under a scenario of 45-percent wood moisture and a system cost of $700,000.

Figure 6—Internal rate of return and payback period for wood energy system utilizing Kenai Peninsula

wood wastes under a scenario of 20-percent wood moisture and a system cost of $700,000.
12

Table 4—Most favorable and least favorable scenarios for wood energy computer

evaluations for proposed system in the Kenai Peninsula, Alaska

Most favorable scenarios Least favorable scenarios

Alternative fuel cost

 (dollars per gallon) 2.00 2.00 2.00 1.00 1.00 1.00

Wood fuel moisture content

 (percent) 20 45 20 45 45 20

Cost of wood fuel

 (dollars per ton) 10 10 30 50 50 50

System cost (dollars) 500,000 500,000 500,000 700,000 500,000 700,000

Project payback period (years) 4 4 4 20+ 20+ 14

Internal rate of return (percent) 30.66 29.816 27.88 -4.480 -2.518 5.33

This evaluation supports the economic and technical feasibility of using a small (4-MMBTUs-per-hour) wood-fired thermal system to meet a portion of the local heating needs

in the Kenai Peninsula. Project payback periods are as short as 4 years (using $10 per

ton fuel at 20-percent moisture content) to as long as 20 or more years (using $50 per

ton fuel at 45-percent moisture content). Fuel moisture content, which is influenced by

the length of time since bark-beetle infestation, would become an important consideration

for many of the technical aspects of the project including transportation, fuel storage

and handling, and heat output. Moisture content has an effect on project profitability but

to a smaller degree than wood fuel costs.

We expect that over the short term, beetle-killed salvage material within an economic

transportation distance of Kenai can meet the approximately 2,000 tons per year fuel

requirement. Over the longer term, a portion of the region’s estimated 4,000 tons per

year of sawmilling residues could be used as needed. Given the large areas (estimated

at up to 2 million acres) and large timber volumes (up to 2 billion board feet) affected by

the spruce bark beetle, an individual wood energy project of the magnitude described in

this report would probably make only modest reductions in the available fuel. The existing

wood products industry, infrastructure, and location of communities within the Kenai

Peninsula could enable several facilities of the size described in this paper. Larger scale

projects, including electrical energy or cogeneration facilities would have the potential for

utilizing larger amounts of fuel but would require careful consideration of project economics

and long-term fuel supplies.

Conclusions

willing to supply waste residues in the price range of $10 per ton, project economics

would be favorable. Having a wood energy system near wood products manufacturers

who generate large amounts of wood waste might favor low wood fuel costs. Conversely,

if harvesting and transportation costs are more expensive than expected (and wood fuel

was available only at $50 or more per ton), this would result in less favorable project

economics than in the current evaluation. The analysis was based on operating conditions

typical to public facilities such as schools, which would be operating about 240 days per

year (8 months). For facilities operating year-round, shorter payback periods would be

expected because there would be no change in the original capital investment, but the

economic benefits would be accruing over 12 months per year rather than over a shorter

heating season.
13

1 mile = 1.609 kilometers

1 acre = 0.407 hectare

1 gallon = 3.785 liters

1 ton = 907.2 kilograms

We acknowledge the support of the U.S. Department of Energy Pacific Regional Biomass

Energy Program in preparing this paper.

Acknowledgments

Metric Equivalents
Anon. 2001. Personal communication. Petro Marine Company, 43442 K. Beach Rd.,

Soldotna, AK 99669.

Alaska Department of Labor, Bureau of Labor Statistics. 2000. Anchorage municipality

and U.S. consumer price index, 1960-present for all urban consumers (CPI-U). [Place

of publication unknown]. 1 p. http://www.labor.state.ak.us/research/col/cpiuann.htm

[Date accessed unknown].

Alaska Department of Natural Resources, Division of Forestry. 2000. Projected

timber sale offerings—fiscal years ’01-’03. [Place of publication unknown]. [Pages

unknown].

Committee on Resources, Subcommittee on Forests and Forest Health. 1999.

Witness testimony of Jack E. Phelps given on March 23, 1999. Executive director,

Alaska Forest Association, 111 Stedman St., Suite 200, Ketchikan, AK 99901. http://

www.resourcescommittee.house.gov. (December 2000).

Crimp, P.M.; Adamian, S.V. 2000. Biomass energy alternatives for a remote Alaskan

community. In: Proceedings of the 9th biennial bioenergy conference. [Place of

publication unknown]: [Publisher unknown]. 8 p.

Diskin, B. 2000. Personal communication: Wellons, Inc., P.O. Box 1030, Sherwood, OR

97140.

Forest Products Laboratory. 1999. The wood handbook—wood as an engineering

material. Gen. Tech. Rep. FPL-GTR-113. Madison, WI: U.S. Department of Agriculture,

Forest Service. 463 p.

Hoagland, B. 2001. Personal communication. Manager, Amerigas Company, 35992

Kenai Spur Highway, Soldotna, AK 99660.

Jahn, L.G. 1985. Wood energy guide for agricultural and small commercial applications.

Raleigh, NC: North Carolina State University, Department of Extension Forest

Resources. 39 p.

Keegan, C.E., III; Wichman, D.P.; Blatner, K.A. [and others]. [N.d.]. Mill residue and

volume factor changes in Idaho and Montana. [Place of publication unknown]:

[Publisher unknown]. 11 p.

Kenai Peninsula Online. 2000. Spruce bark beetle spurs timber industry. [Place of

publication unknown]: [Publisher unknown]. http://www.peninsulaclarion.com/stories/

042200/. (15 December 2000).

Kenai Peninsula Spruce Bark Beetle Task Force. 1998. An action plan for rehabilitation

in response to Alaska’s spruce bark beetle infestation—a model for Alaska. [Place of

publication unknown]: [Publisher unknown]. http://www.borough.kenai.ak.us/

sprucebeetle/Congress.htm. (15 December 2000).

Kilborn, K.A. 2000. Lumber recovery studies of Alaska sawmills, 1997 to 1999. Gen.

Tech. Rep. PNW-GTR-544. Portland, OR: U.S. Department of Agriculture, Forest

Service, Pacific Northwest Research Station. 15 p.

Kilborn, K.A. 2000. Personal communication. Forest products technologist, U.S. Wood

Utilization Center, 204 Siginaka Way, Sitka, AK 99835.

References

14
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Lowell, E.C.; Willits, S.A. 1998. Lumber recovery from beetle-killed spruce trees, Kenai

Peninsula, Alaska. Western Journal of Applied Forestry. 13(2): 54-59.

Michigan Department of Commerce, Public Service Commission. 1988a. Wood

energy financial analysis model (WEFAM). Lansing, MI: Office of Energy Programs.

[Not paged].

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user’s manual. Lansing, MI: Office of Energy Programs. [Not paged].

Nicholls, D.L.; Cappelletti, B.; Stanton, T. 1992. Preliminary wood energy economic

feasibility analysis for the Clear Lake organization camp at Hiawatha National Forest.

Extension Bulletin E-2368. Lansing, MI: Michigan Energy Conservation Program for

Agriculture and Forestry. 6 p.

Parrent, D. 2000a. Alaska wood products manufacturers directory. Sitka, AK: Juneau

Economic Development Council, Wood Products Conservation and Development. 74 p.

Parrent, D. 2000b. Personal communication. Wood utilization specialist, Juneau

Economic Development Council, Wood Products Conservation and Development,

204 Siginaka Way, Sitka, AK 99835.

Rozell, N. 1997. Bark beetles take a bite out of southcentral. Alaska science forum,

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2000).

Sarles, R.L.; Rutherfoord, J.P. 1982. Converting small industrial boilers to burn wood

fuels. Res. Pap. NE-508. [Place of publication unknown]: U.S. Department of

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Appendix

Table 5—Results of wood energy financial analysis model computer evaluations for $700,000 system cost a b cScenario 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18Cost of alternative fuel (no. 2 fuel oil, dollars per gallon) 1.00 1.00 1.00 1.00 1.00 1.00 1.43 1.43 1.43 1.43 1.43 1.43 2.00 2.00 2.00 2.00 2.00 2.00Cost of wood fuel (dollars per ton) 10 10 30 30 50 50 10 10 30 30 50 50 10 10 30 30 50 50Wood moisture content (percent, green basis) 20 45 20 45 20 45 20 45 20 45 20 45 20 45 20 45 20 45Payback period (years) 9 9 11 13 14 >20 6 7 7 9 9 12 5 5 5 6 6 7Internal rate of return (percent) 12.18 11.28 9.08 5.67 5.33 -4.48 17.49 16.75 15.00 12.52 12.29 7.34 23.55 22.90 21.39 19.33 19.14 15.44a All evaluations assumed the following conditions:

• Average annual output of burner is equivalent to 25 percent of its maximum rated capacity.• Wage rate of boiler operator is $20 per hour.• Total price increases since base year of 1982 = 52 percent.• Assumes system operation of 24 hours per day, 240 days per year.• Dry basis moisture contents equivalents are: 20-percent green basis = 25-percent dry basis; 45-percent green basis = 81.8-percent dry basis.

b Constants:

• System size: 4 MM British thermal unit (BTUs) per hour.• Existing fuel usage: 8,364 MM BTUs per year.

c Alternative fuel properties:

• Alternative fuel: no. 2 fuel oil.• Current delivered cost of alternative fuel: $1.43 per gallon.• Sensitivity evaluation costs: $1 per gallon, $2 per gallon.• Heat output of alternative fuel: 139,400 BTUs per gallon.• Total amount of alternative fuel displaced by wood energy system: 60,000 gallons per year.

16
17

Table 6—Results of wood energy financial analysis model computer evaluations for $500,000 system cost a b cScenario 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36Cost of alternative fuel (no. 2 fuel oil, dollars per gallon) 1.00 1.00 1.00 1.00 1.00 1.00 1.43 1.43 1.43 1.43 1.43 1.43 2.00 2.00 2.00 2.00 2.00 2.00Cost of wood fuel (dollars per ton) 10 10 30 30 50 50 10 10 30 30 50 50 10 10 30 30 50 50Wood moisture content (percent, green basis) 20 45 20 45 20 45 20 45 20 45 20 45 20 45 20 45 20 45Payback period (years) 7 7 8 11 11 >20 5 5 6 7 7 10 4 4 4 5 5 6Internal rate of return (percent) 16.43 15.36 12.76 8.81 8.42 -2.52 22.94 22.02 19.86 16.84 16.56 10.72 30.66 29.82 27.88 25.25 25.01 20.391a All evaluations assumed the following conditions:

• Average annual output of burner is equivalent to 25 percent of its maximum rated capacity.• Wage rate of boiler operator is $20 per hour.• Total price increases since base year of 1982 = 52 percent.• Assumes system operation of 24 hours per day, 240 days per year.• Dry basis moisture contents equivalents: 20-percent green basis = 25-percent dry basis; 45-percent green basis = 81.8-percent dry basis.

b Constants:

• System size: 4 MM British thermal units (BTUs) per hour.• Existing fuel usage: 8,364 MM BTUs per year.

c Alternative fuel properties:

• Alternative fuel: no. 2 fuel oil.• Current delivered cost of alternative fuel: $1.43 per gallon.• Sensitivity evaluation costs: $1 per gallon, $2 per gallon.• Heat output of alternative fuel: 139,400 BTUs per gallon.• Total amount of alternative fuel displaced by wood energy system: 60,000 gallons per year.
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