A national laboratory of the U.S. Department of Energy

Office of Energy Efficiency & Renewable Energy

National Renewable Energy Laboratory 

Innovation for Our Energy Future 

Initial Market Assessment for 

Small-Scale Biomass-Based CHP 

E. Brown and M. Mann 

White Paper 

NREL/TP-640-42046 

January 2008 

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Contract No. DE-AC36-99-GO10337

White Paper 

NREL/TP-640-42046 

January 2008 

Initial Market Assessment for 

Small-Scale Biomass-Based CHP 

E. Brown and M. Mann 

Prepared under Task No. WF6N.1050 
NOTICE

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Acknowledgments 

This work is made possible by funding from the Environmental Protection Agency. The 

authors would like to thank Laura Vimmerstedt and Doug Arent of the NREL Strategic 

Energy Analysis and Applications Center, Anelia Milbrandt of the NREL GIS team, as 

well as Tom Frankiewicz and Kim Crossman of EPA for input and review of multiple 

versions of this report. The authors are also grateful to the insightful comments on 

previous drafts from Chris Lindsey of Antares, Chris Recchia of BERC, and Rick 

Handley of the NRBP. Stephanie Woodward, Jennifer Josey, and Michelle Kubik of 

NREL’s Communications Office edited the report. Of course, any remaining errors are 

the responsibility of the authors.

iii
iv
Table of Contents

List of Figures ....................................................................................................vi 

List of Tables......................................................................................................vi 

Executive Summary............................................................................................1 

Introduction.........................................................................................................3 

Section 1. Opportunities and Challenges for Small-Scale Biomass CHP......5 

Biomass CHP and Environmental Drivers ............................................................5 

 Air Quality........................................................................................................6

 Land Use Impacts............................................................................................7

 Forest Fire Reduction......................................................................................7

Biomass CHP and Meeting Economic Drivers......................................................7

Biomass CHP and Fuel Diversity..........................................................................8 

Section 2. Identifying Primary Markets for Small-Scale Biomass CHP..........9 

The Supply Market................................................................................................9

The Demand Market ...........................................................................................10

The Markets: Intersection of Supply and Demand ..............................................10 

 Rural/Agricultural Applications.......................................................................11

 Municipal/Urban Applications ........................................................................13

Section 3. Summary and Next Steps...............................................................15 

References ........................................................................................................17 

 v
List of Figures 

Figure ES-1. Crop and forest residues available in the United States and 

Counties with farm sales below $100,000 per year.................................................... 2 

Figure 1-1. Crop and forest residues available in the United States and Counties 

with farm sales below $100,000 per year................................................................. 132 

Figure 1-2. Map of U.S. Counties for reference to counties with less than 

$100,000 annual average farm sales.......................................................................... 13 

Figure 2. Urban biomass resources available in the United States ..................... 134 

List of Tables 

Table 1. Feedstock Sources Appropriate to Small-Scale Bioenergy................... 130 

 vi
Executive Summary

The current focus on liquid biofuel production has lessened attention on biomass for heat 

and electricity production, including biomass combined heat and power (CHP). The 

purpose of this white paper is to reexamine the energy generation market opportunities 

for biomass CHP applications smaller than 20 MW. Using relevant literature and expert 

opinion, this paper provides an overview of the benefits of and challenges for biomass 

CHP in terms of policy and economic drivers, and identifies the primary characteristics of 

potential markets. The paper does not quantify the market size, although possible analytic 

projects to identify market size are suggested for future analyses. 

The literature reflects a growing consensus that the cost of biomass feedstocks will rise as 

biofuels demand increases. Centralized energy crops and those crops near biofuels 

production facilities may be used in biofuels development. Areas with diffuse biomass 

resources that are distant from biofuels production facilities and nearby small- to 

medium-sized electricity loads are likely markets for cost-competitive biomass CHP. 

More challenging to identify, but even more likely, are markets with appropriate thermal 

loads that make CHP a clear economic choice. In this report, the former and the latter 

markets are generally identified as: 

• Small- to Medium-Sized Agricultural. This rural market can use crop, animal, 

and household residue, or collect nearby forest residue to minimize waste streams 

and stabilize electricity costs. Figure ES-1 illustrates areas with high numbers of 

small-scale (less than $100,000 annual sales) agricultural businesses that coincide 

with high levels of forest and crop residues. These farms and businesses are the 

likeliest to be markets for smaller scale CHP because they are likely to have both 

the fuel and the necessary electric and thermal loads for demand. This preliminary 

assessment shows areas of high small-scale biomass CHP in the Northeast, 

Northwest, and central corridors. 

• Municipal. This market can use urban wood, secondary mill, and landfill gas 

resources to provide electricity on a small scale for buildings within 

municipalities. This may reduce landfill expenses and space constraints, alleviate 

pressure on the grid, and provide more diversified electricity resources. This 

market benefits from the waste management system, an in-place infrastructure for 

collecting and distributing biomass that may be able to deliver fuel economically. 

The areas of highest potential for these markets surround densely populated urban 

areas, especially in southern California and the Northeast. 

1 
Figure ES-1. Crop and forest residues available in the United States and Counties* with 

farm sales below $100,000 per year 

*Note: Outlined counties are those with average annual farm sales below $100,000. For a full 

map of counties, see body text. 

The final section of the paper offers suggestions for further research and supportive 

policies to identify and encourage appropriate markets for biomass CHP. Specifically: 

1) Provide more detailed geographic or regional analysis for targeted identification 

of markets 

2) Conduct a review of regulatory and legislative policies in appropriate markets to 

identify policy opportunities 

3) Identify incentive programs for appropriate markets based on positive experiences 

in other states 

4) Develop a “best choice” fuel and technology guide for interested developers to 

help identify projects. 

 2
Introduction 

Biomass is plant matter such as trees, grasses, agricultural crops, and other biological 

material. It can be used as a solid fuel or converted into liquid or gaseous forms to 

produce electric power, heat, chemicals, and fuels. The biomass power industry grew 

rapidly from the late 1970s through the mid-1990s—from less than 200 MW of biomass 

power capacity in 1979 to 6,000 MW in 1989 and to 6,500 MW today. This dramatic 

growth was spurred by the Public Utilities Regulatory Policy Act of 1978, which required 

utilities to enter into power purchase contracts with qualifying facilities for excess power 

at the utility’s avoided cost. In recent years, low avoided cost has slowed the growth rate 

of the biomass power industry. As long-term contracts have expired or been repurchased 

by utilities, some biomass power facilities have closed. 

Despite the diminished activity, waste streams need to be addressed and local electricity 

and disposal costs offset. Mill residues and other wood wastes (e.g., from municipal solid 

waste) are used to generate electricity to avoid landfilling and to generate power for onsite use. Agricultural residues are used to control wastes. This use has been encouraged, 

in part, to reduce the air quality impacts of open-field burning and the water impacts of 

applying wastes to fields. Landfill methane projects use methane that would otherwise be 

vented or flared, and displace conventional electricity generation.1

Using biomass to generate heat and power reduces net greenhouse gas emissions 

compared to fossil fuel-based generation. It can also offer air quality benefits compared 

to open burning of agricultural residues and coal-fired power plants. Because many 

biomass feedstocks—including residues from mill, forest, and agricultural operations, 

and manure from animal feeding operations—are concentrated in rural areas, biomass 

power facilities can benefit local, rural economies by creating jobs and tax revenues. 

Biomass power displaces fossil and alternative fuels used for generation and can 

contribute to a diversified energy mix. 

Policy makers are focusing their efforts on the rapid development of the biofuels market 

rather than biomass-generated electricity or biomass CHP. This focus has raised 

feedstock competition and increased the price for feedstocks used in today’s bioenergy 

facilities. Current and emerging research has been published about biofuels and their 

feedstocks (e.g., Paustian et al. 2006; Brown et al. 2007). The biofuels market is expected 

to expand significantly to meet national security and rural development goals in the next 

10 years. Currently, biofuels market research activities focus on determining the costs 

and benefits of collecting and transporting feedstocks. Several important questions are 

being asked. Among these: How far can feedstocks be shipped for economic biofuels 

production? Which primary feedstocks will be used to develop biofuels? Where will 

these feedstocks be grown? Will they be dedicated energy crops or will alternative 

feedstocks be developed? The market will undoubtedly face these complicated feedstock 

and production issues in the coming decades. 

 

1 Larger scale bioenergy is also popular in certain applications, but is outside the scope of this effort. For 

example, the pulp and paper industry has been using on-site power systems to recover valuable chemicals 

from the black liquor and generate steam and electricity for the plant. 

 3
This white-paper report identifies the characteristics of markets that would be appropriate 

for small-scale biomass CHP that will likely persist in the context of high-demand of 

biomass feedstocks for biofuels. The report does not quantify the size of the market, or 

attempt to make a case for the use of biomass feedstocks for CHP over biofuels, but 

instead identifies the characteristics of likely CHP markets. The dispersed biomass 

feedstocks are the focus for these markets because they may be too expensive to collect 

and transport for biofuels production. For this analysis, we assume that centrally-located 

feedstocks and energy crops will be dedicated to biofuels, and that cellulosic biofuels 

technologies will be commercially viable. These assumptions, while conservative, allow 

for a discussion of the opportunities for biomass CHP under highly competitive 

conditions. The discussion, then, centers on the remaining likely markets for small-scale 

biomass CHP. This report does not attempt to quantify the benefits of biomass CHP 

versus biofuels. Instead, we assume room for both markets because they use different 

primary choice feedstocks and because both can help to achieve national energy, 

environmental, and economic goals. 

The report is divided into three sections: 

• Section 1 includes a discussion of the drivers behind, and constraints on, the 

small-scale biomass CHP market. 

• Section 2 provides a summary discussion of the available biomass supply types 

and technologies that could be used to feed this market. This section outlines the 

two primary markets—rural/agricultural and urban—for small-scale biomass 

CHP, and illustrates the primary intersections of supply and demand for those 

markets. 

• Section 3 summarizes the potential markets and suggests next steps for 

identifying and utilizing small-scale biomass. 

 4
Section 1. Opportunities and Challenges for Small-Scale 

Biomass CHP 

Historically, biomass feedstocks have been used for electricity through distributed and 

centralized generation. However, biomass CHP generation fell out of favor during the 

20th century when the coal transportation and delivery infrastructure matured to the point 

where coal could economically reach even the most remote areas. More recently, 

however, concerns about rural economic development, environmental protection, and 

national security have become important political drivers for biomass CHP development. 

Environmental drivers include local and global concerns. At the local level, air and water 

quality have a large impact on opportunities for biomass use. Globally, electricity 

generation is a major contributor to the emissions of climate-changing greenhouse gases. 

National security concerns include reducing our reliance on foreign petroleum imports. 

This driver is currently more relevant in the fuels sector than in the electricity sector, but 

the focus on self-reliance can still influence policy development for electricity generation, 

especially with respect to the importation of liquefied natural gas, and is particularly 

attractive to rural communities. Finally, economic development is an increasingly 

important driver for many energy policies, especially in terms of biomass energy in the 

fuels and electricity sectors. The primary interest is that biomass can increase supply 

markets and meet demand markets by keeping resources within a local economy. 

These general drivers can create incentives for energy policy development, shape specific 

aspects of energy policy, or provide incentives and add urgency to its implementation. 

Considering different levels of government, national security is a driver for energy policy 

at the national level. At state and local levels, fuel diversity is seen as a way to protect 

consumers from price volatility. 

The importance of any specific driver for energy policy varies by geographic region. Like 

most renewable resources, the drivers for biomass energy are closely related to the 

available resources. A clear example of this is the interest in corn-based ethanol in large 

corn-producing states like Iowa and Nebraska. Other states and localities, such as those 

with large forested areas or high-density urban areas, might focus on energy policy that 

includes forest fire reduction or local air quality impacts, respectively. 

Although the impact of drivers varies by stakeholder or region, they all play a role in 

shaping approaches to biomass use. Thus, understanding the challenges of and 

opportunities for alternative electricity and thermal resources is critical to creating 

meaningful policies. The following subsections relate the capabilities and drawbacks of 

biomass electricity to each driver. They are presented in the order that is most likely to be 

important to prospective customers and local policymakers, because these markets will be 

highly localized. 

Biomass CHP and Environmental Drivers 

This section discusses the impacts that are most closely associated with biomass 

feedstock production and electricity as well as combined heat and power generation, 

including air quality and land use impacts and forest fire risk. The primary fuels for 

small-scale biomass CHP generation are residues that would otherwise need to be 

 5
disposed of or alternatively used. Therefore, the impacts of biomass residues are 

compared to their alternate fates. Likewise, the impacts associated with growing energy 

crops for power generation should be considered in light of impacts associated with 

extracting and processing fuels such as coal, uranium, natural gas, and petroleum. 

Air Quality 

Electricity generation creates local and global air quality concerns. Local and regional air 

quality impacts include electricity generation emission of particulate matter and other 

pollutants that can cause human health problems. Note that the use of biomass for CHP 

can be largely more efficient and less polluting than biomass electricity generation 

without the thermal component. 

Global impacts revolve around emissions of carbon dioxide as a greenhouse gas from 

fossil fuel combustion. Although biomass electricity involves carbon dioxide emissions, 

life cycle assessment studies confirm that sustainably-managed resources would reabsorb almost as much carbon because of the absorption of CO2 by the biomass during its 

growth, or the avoidance of decomposition emissions following biomass disposal. The 

net greenhouse gas emissions for biomass power are significantly less than those 

compared to fossil-based power systems (Bluestein 2000; Gagnon et al. 2002; Natural 

Scotland 2006; Spath and Mann 2001). Although some greenhouse gas emissions are 

released because of fossil fuel use during the planting, harvesting, and transporting stages 

of the life-cycle, total emissions are lower, regardless of the scale of production. 

Information about local air quality impacts of small-scale biomass CHP generation is 

limited. The challenges associated with these types of studies are the assumptions that 

need to be made regarding the nature of the resource (e.g., municipal residue or wood 

residue) and assumptions regarding the efficiency of the technology and installed 

pollution control equipment. Some resource- or technology-specific research projects 

have been conducted (Natural Scotland 2006, for example), but a broad overview has not 

been published. In addition to the challenges associated with having many resources and 

technologies, the relative importance of local air quality varies depending on the area 

being served, and the relative impact of electricity generation technologies depends on 

the current local generation mix. 

A number of studies offer general information on the local air quality impacts of smallscale biomass electricity. Both the EPA Web site (EPA 2007) and an independent 2002 

paper summarizing life-cycle analyses of large-scale electricity generation plants find that 

biomass plants often produce lower sulfur emissions but higher nitrogen oxides than 

other generation types (Gagnon et al. 2002). This indicates that nitrogen oxide emissions 

consideration is especially important for siting small-scale biomass CHP plants, 

especially in urban areas that are already—or approaching—non-attainment for pollutants 

such as ground-level ozone or particulate matter. 

Since small-scale biomass CHP will be located closer to the load center than central 

plants, effective total emissions will be reduced because of the elimination or reduction of 

transmission line losses. However, local air emissions impacts may be exacerbated if 

 6
units that are responsible for greater emissions than central plants are located within more 

pollution-sensitive populated areas. Further research on these and other issues such as 

fuel cycle efficiency need to be addressed in future work quantifying the environmental 

impact of small-scale biomass-based CHP. 

Land Use Impacts 

Using wood or other biomass wastes to generate power can reduce the landfill space 

required for waste disposal. Waste wood generation and availability data for 1996 can be 

used to illustrate the potential benefits of using any of the biomass residues that are 

currently landfilled. Of the 193.5 million tons of waste wood generated that year, only 

37.4 million tons, or 19.3%, were available for use. The difference between what is 

generated and what is available is attributed to waste wood that is combusted, not usable 

(in some cases because of chemical contamination), or is already recovered for use 

(McKeever 1998). If this wood waste were diverted from landfills, about 250 fewer 

average-sized landfills would be needed in the Unite States (assuming a 144,540 ton-peryear intake rate per landfill). To put this number in perspective, in 1996 there were 2,417 

landfills in the U.S. (Thompson 1998). Thus, diverting 37.4 million tons of wood waste 

would reduce the required U.S. landfill capacity by about 10%. Additionally, utilizing 

these biomass resources could help reduce local waste disposal costs in urban areas. 

Forest Fire Reduction 

Using forest residues, including thinnings, for energy production rather than leaving them 

to accumulate in the forest can help mitigate forest fires, which result in property damage, 

air pollution, habitat loss, and in some cases, flooding and erosion (Morris 1999). Over 

the last 50 years, there has been a steady increase in the number of wildfires in the 

western U.S., particularly during the late 1980s and again in 2000, 2002, 2005 and 2006. 

At the same time, vulnerable real estate development areas have increased, putting more 

people and property at risk. According to the U.S. Forest Service, this increase in forest 

fire activity is a result of two factors: 

1. Severe drought accompanied by millions of lightning strikes and windy 

conditions, and 

2. Long-term effects of a century-long effort to suppress wildfires, which has led to 

an unnatural increase in the amount of brush and small trees in the forest 

understory (USDA Forest Service 2000). 

Forest residues can provide a sufficient fuel supply for heat and power generation that 

can be harvested economically (NREL 2005). 

Biomass CHP and Meeting Economic Drivers 

The economic benefits of small-scale biomass CHP include increased local industry 

investment and reduced electricity price volatility for the on-site producer, and in some 

cases, the larger community. Those who produce power from local resources for on-site 

use benefit significantly from reduced price volatility. The benefits of long-term contracts 

for power purchasing of biomass CHP, however, are increasingly uncertain in an 

environment of increasing feedstock competition and may prove to be a significant 

 7
challenge for small-scale distributed generation facilities hoping to sell excess energy. By 

internalizing energy production, renewable energy may reduce overall community and 

state energy import costs. In addition to these benefits, small-scale biomass CHP can: 

• Recover waste for use in energy production and minimize and streamline waste 

disposal. This reduces waste management costs, including transportation and 

landfilling, which are often some municipalities’ greatest expenses. 

• Provide a use for underused fuels. Even as competition for mainstream energy 

crops intensifies with increasing biofuels production, crops and residues that are 

currently of low or no value, or too geographically distributed to be economically 

collected for biofuels use, are available to support the market for small-scale 

biomass CHP. Consumers that have the technology and the willingness to pay for 

these materials as they become more in demand will be able to make use of them. 

• Use cost-effective technologies for a variety of cost-effective resources and 

applications. Detailed descriptions of the technologies are beyond the scope of 

this study, but there is a wealth of recent information for policy makers and 

project developers about available technologies (EPA Biomass CHP Catalog of 

Technologies). Note that biomass CHP may not be cost effective in highly 

competitive areas or those with relatively low electricity and heating fuel cost.

Another economic driver for combined heat and power is the avoided costs of alternative 

fuels. That is, relative electricity and heating fuel prices can increase the economic 

drivers for CHP development. 

Biomass CHP and Fuel Diversity 

The use of biomass for power generation offers multiple fuel diversification benefits. In 

2000, biomass was used to produce 64.1 billion kWh of electricity, or 1.7% of the total 

electricity generated in the U.S. (Haq 2002). Having multiple fuels available for 

electricity strengthens the resiliency of the grid in the event of increased air quality 

concerns (biomass could support coal use reductions) or resource supply disruptions. 

 8
Section 2. Market Characteristics for Small-Scale Biomass 

CHP 

Identifying the potential markets for small-scale biomass CHP is critical to developing 

the resource and achieving the benefits described in Section 1. This section identifies 

markets that may be appropriate for small-scale biomass power, and provides an 

overview of where markets are located in the U.S. This estimate of resource availability 

and demand can serve as a guide for project investors and policymakers looking to 

maximize homegrown, economically viable, lesser polluting fuels for electricity use and 

provide a basis for further research. 

Two primary assumptions are associated with identifying the markets for small-scale 

biomass CHP: 

1. Biofuels demand, assuming cellulosic ethanol, will absorb much of the energy 

crop and economically transportable high quality biomass stocks. In addition, we 

assume that biofuels production, because of the economics, will be large and 

central scale, as has been the case historically (RFA 2007). 

2. Areas of electricity and heat demand are assumed to be very near to the 

distributed biomass resources remaining for use in small-scale biomass CHP. 

The Supply Market 

Biomass includes a broad category of feedstocks (EPA Catalog, Milbrandt 2005). We 

assume that competition for biomass feedstocks will increase as a result of increasing 

biofuels use. We further assume that energy crops are of high value in the competitive 

market and primarily used for biofuels production. Three primary sources for biomass 

can be used for biomass CHP (Milbrandt 2005): 

1. Agricultural 

a. Crop Residues – Unused portions of corn, wheat, soybeans, cotton, 

sorghum, barley, oats, rice, rye, canola, dry edible beans, dry edible 

peas, peanuts, potatoes, safflower, sunflower, sugarcane, and flaxseed. 

b. Manure Biogas – Manure management systems for dairy and beef 

cows, hogs and pigs, sheep, chickens and layers, broilers, and turkeys. 

2. Municipal 

a. Landfill Gas – Total methane emitted from landfills. 

b. Wastewater Treatment Biogas – Total emitted from wastewater 

treatment plants. 

c. Food Processing Residue – Organic food wastes from municipal solid 

waste. 

3. Wood 

a. Urban Wood – Wood residues from municipal solid waste, utility tree 

trimmings, and construction and demolition sites. 

b. Secondary Mill Residue – Wood scraps and sawdust from 

woodworking shops. 

c. Forest Residue – Logging and other removable materials. 

 9
Table 1 summarizes bioenergy residue sources, their availability nationwide, and 

magnitude of supply. This table does not represent an estimate of actual bioenergy or 

supply availability, which was beyond the scope of this report. The relative magnitude of 

the resource offers context to the demand discussion. 

Table 1. Feedstock Sources Appropriate to Small-Scale Bioenergy 

Residue 

Source Types Primary 

Location 

Magnitude of Supply 

(000 bone dry tons) 

157,194 Agricultural Crop residues 

Manure biogas Rural 

2,189 

12,380 

Municipal 465 

Landfill gas 

Wastewater treatment biogas 

Food processing residue 

Urban 

Unknown 

Urban wood, including cuttings and 

prunings 30,902 

Secondary mill residue* 

Urban 

Wood 2,615 

Forest residues Rural 56,612 

Source: Milbrandt 2005, EPA 2007 

*Primary mill residues and other resources not listed here are assumed to be used in biofuels 

applications. See text for assumptions. 

Power and heat production potential from small-scale biomass is technology and resource 

dependent. Each biomass type has different properties that will need to be addressed in 

developing system economics, technology choice, and use, but mature or demonstrated 

technologies are available. Detailed technology assessments are available (EPRI 1997; 

EPA 2007). 

The Demand Market 

Previous research illustrates that small-scale biomass CHP can be economically feasible 

when fuel does not need to be transported long distances (EPA Biomass CHP Catalog of 

Technologies). Therefore, demand must: 

• Be located close to the supply, and 

• Be correctly sized and applied to fit the supply amount, timing, and feedstock 

type available. 

 

The Markets: Intersection of Supply and Demand 

Under the supply and demand parameters, there are two primary applications for biomass 

CHP: agricultural/rural and municipal/urban. These applications are flexible enough to 

withstand significant changes in the biofuels market such as high demand and increased 

feedstock competition. These two supply markets create disparate resources, leading to 

high transportation costs that make them less valuable than centralized energy crops. 

Moreover, both markets have electricity demands that could benefit from reduced 

electricity price volatility and the opportunities for economic development and fuel 

diversity that result from local energy production and use. Given uncertain market 

fluctuations, however, the reader should keep in mind that the availability and cost of 

these resources may change. The remainder of this section details these markets. Figure 

1-1 illustrates the markets geographically on a national scale. 

 10
Rural/Agricultural Applications 

Biomass-fired small-scale distributed generation in this market can offset electricity costs 

with local and available resources. In small- to medium-sized agricultural markets (less 

than $100,000 in farm product sales annually), electricity costs can reach 10% of variable 

farm costs. Minimizing energy costs for this market segment can make the difference 

between economic success and failure (Brown and Elliott 2005). The primary supply in 

this market is accessible rural wastes such as crop residues, methane biogas, and forest 

trimmings. Of these, crop residues and methane biogas are more easily collected and 

centralized, improving the economics of electricity production. Forest thinnings are more 

dispersed but may still be economical to collect, especially in light of the forest fire 

prevention benefits. 

Figure 1-1 presents a rough visual overlap of rural supply and demand to represent this 

potential market. Counties (outlined in gray) with agricultural sales less than $100,000 

per year represent the demand market (Data supplied by NREL GIS 2007). Figure 1-2 

stands as a reference for comparison of all counties to those with less than $100,000 in 

farm sales. Supply is measured in dry tons of available biomass by type (feedstock 

specific supply maps and state are available in Milbrandt 2005). The coincidence of 

outlined counties and darker supply areas indicates the most likely markets for biomass 

CHP. In these areas, the electricity and likely thermal load demand of small farms 

correlates with the supply of residues from small farms, ranches, and forests. Counties 

with average annual sales per farm of $100,000 per year or less are used to approximate 

those areas where resource collection for conversion to biofuels might face greater 

challenges. While numerous small farms in a high yield region could produce resources 

for biofuels, we assume that as a first approximation biomass resource from counties with 

larger farms will prove more attractive due to logistical and contractual considerations. 

 11
Figure 1-1. Crop and forest residues available in the United States and counties with farm 

sales below $100,000 per year* 

*Note: Crop and forest residue coincidence with small average agricultural sales per business 

counties. Outlined counties are those with average annual farm sales below $100,000. For a full 

map of counties, see Figure 1-2. 

 12
Figure 1-2. Map of U.S. counties for reference to counties with less than $100,000 annual 

average farm sales 

Municipal/Urban Applications

The second potential market is municipal/urban applications. The supply for these 

applications comes from secondary mill residues, urban wood wastes, methane gas from 

landfills, and domestic water treatment. Multiple resources (Milbrandt 2005; EPA 2007) 

offer complete descriptions of the resource types as well as benefits and challenges of 

their use. Urban demand applications for combined heat and power include applications 

in buildings (e.g., industrial and large commercial) and backup electricity generation in 

congested areas. 

Figure 2 illustrates the regions of the country with the largest supply of this type of 

resource. The darker areas indicate large supplies of urban residues for fuel and a high 

demand for the electricity. Because of the nature of supply resources and demand 

locations, there is a great deal of overlap, and therefore, a great deal of opportunity for 

small-scale CHP in the large urban markets. 

 13
Figure 2. Urban biomass resources* available in the United States 

*Note: Resources include landfill gas, wastewater treatment biogas, food processing residue, 

urban wood, and secondary mill residue. 

 14
Section 3. Summary and Next Steps 

This report establishes that there are existing, viable markets for small-scale biomass 

utilization in terms of feedstock supply and demand for onsite, distributed thermal and 

electrical energy production. Stronger interest in biofuels production from 

lignocellulosics (woody and herbaceous biomass) will presumably reduce the availability 

of centralized biomass feedstocks for electricity use, but distributed feedstocks will 

remain available for use close to their source. The likely markets include urban demand 

areas coinciding with urban residue, landfill gas, and agricultural demand markets close 

to agricultural and forest residues. 

To capture these markets, further research and deployment activities, from basic 

understanding to program implementation and monitoring, are necessary. The following 

suggestions are presented as next steps needed for additional research and documentation 

of potential markets and best practices, to encourage biomass CHP: 

1. Develop a more detailed geographic and quantitative analysis to better 

understand the distribution and specific locations of favorable markets for 

small-scale biomass CHP development. A regional analysis of favorable 

markets that use more specific demand data and electricity prices would provide 

greater insight into the likelihood of economic adoption of existing technologies. 

Because of the dispersed nature of the markets, very fine resolution data or 

individual site characteristics may be needed to identify and develop specific 

sites. For large areas that have a high likelihood for a market (such as the Los 

Angeles Basin), tools and education programs can help private industry identify 

and develop sites. Long term, a Web-based application developed for public and 

private industry could identify areas of available resources and demand for these 

facilities by incorporating impact analysis tools to providing market information. 

2. Thoroughly review regulatory and legislative policies in appropriate 

markets. Understanding the barriers to market development in select regions 

allows for programs to be tailored specifically to regional needs, and would 

contribute to program design for increased market penetration. In addition, 

identifying areas with policies that encourage economic development could help 

prepare the market for increased biomass CHP. 

3. Identify and evaluate incentive programs based on best practices and 

previous experiences of states with existing markets. Biomass CHP qualifies 

for a large percentage of state incentives for renewable energy, but these do not 

seem to be well known or publicized. In some states, biomass-specific policies 

and programs may offer best practices if they can be measurably shown to 

increase the market. For example, Alabama, Arizona, and Maryland have wood 

stove purchase deductions or exemptions. Michigan uses U.S. Department of 

Energy State Energy Program dollars to fund a dedicated biomass grant program 

for education and infrastructure development for biomass CHP and biofuels. 

Since 1998, 10 of the 36 grant projects have been related to smaller scale biomass 

CHP projects or education (Michigan Department of Labor and Growth 2007). If 

 15
other states understand these projects and incentives, they could learn how to 

develop and finance their own programs. 

4. Create “Best Choice” feedstock and technology development guidance for 

project developers. Once the markets are identified, it will be helpful to develop 

interactive tools, fact sheets, or reports for the public and developers about the 

combination of appropriate fuel choices, available technologies, and feasibility 

studies. 

NREL is working with the EPA to identify biomass utilization opportunities and provide 

state and local decision makers with tools to encourage biomass markets. Forthcoming 

resources include the EPA CHP Partnership’s Biomass CHP Catalog of Technologies, a 

Biomass Toolkit for state and local government officials, as well as additional biomass 

CHP resources. This white-paper report, along with these other resources, offers a 

starting point for state and local policymakers interested in exploring or increasing their 

leadership to advance development of biomass CHP and other bioenergy markets. 

 16
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Council for an Energy-Efficient Economy: Washington, DC. 

Conference: Biomass for Energy and Industry: Proceedings of the Conference held 5-9 

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Gagnon, L.; Belanger, C.; Uchiyama, Y. (2002). “Life-Cycle Assessment of Electricity 

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2007. 

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Michigan Department of Labor and Economic Growth. (2007). Project Funding. 

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Bio-Energy Crops.” New Zealand Journal of Forestry Science 30:138-149. 

 18
F1147-E(09/2007) 

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4. TITLE AND SUBTITLE

Initial Market Assessment for Small-Scale Biomass-Based CHP 

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NREL/TP-640-42046 

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WF6N.1050 

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E. Brown and M. Mann 

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14. ABSTRACT (Maximum 200 Words)

The purpose of this report is to reexamine the energy generation market opportunities for biomass CHP applications 

smaller than 20 MW. This paper provides an overview of the benefits of and challenges for biomass CHP in terms of 

policy, including a discussion of the drivers behind, and constraints on, the biomass CHP market. The report provides 

a summary discussion of the available biomass supply types and technologies that could be used to feed the market. 

Two primary markets are outlined—rural/agricultural and urban—for small-scale biomass CHP, and illustrate the 

primary intersections of supply and demand for those markets. The paper concludes by summarizing the potential 

markets and suggests next steps for identifying and utilizing small-scale biomass. 

15. SUBJECT TERMS

Biomass CHP; Agricultural Markets; Municipal Markets; Biofuels; Policy makers; NREL; Elizabeth Brown; Margaret 

Mann 

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