Minnesota s Woody Biomass Industry and Resources

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1 Minnesota s Woody Biomass Industry and Resources Sources of available wood Put in context of current industry and new technology Do opportunities exist? Where and to what extent?

2 Drivers Energy security CO2 concerns Economics Legislative Actions

3 Current Energy Prices Fuel $/unit unit $/mmbtu efficiency net cost Natural Gas $7.80 mmbtu $ $8.66 Heating Oil $2.79 gallon $ $22.55 Propane $1.98 gallon $ $24.23 Round Wood $75.00 cord $ $7.35 Wood Chips $25.00 gr. ton $ $4.90 PRB Coal $10.00 ton $ $0.94

4 Legislative Action in Minnesota NSP then Xcel Energy Mandate Renewable energy targets in lieu of dry cask storage at the Prairie Island Nuclear Facility Forced to solicit RFPs for renewable power 2007 MN Legislature 25 X 25 passed with bipartisan support Target of 25% of electrical generation by 2025

5 Development of the Ethanol Industry The industry has grown rapidly in response to RFS requirements and MTBE replacement Currently 5 billion gallons corn ethanol going to 8 billion by 2012 State of the Union Target 35 billion gallons by 2017 Lofty goal only cellulosic could fill the need

6 How Much Starch-Based Ethanol? 8 billion gallons of ethanol = 24% of U.S. corn crop Price is rapidly making corn ethanol expensive $3.30/bushel local price (~ $3.80 CBOT) $1.20 in feedstock $3.30/bushel 8 billion gallons X 85% = <5% of our gasoline needs Bottom line corn ethanol won t make us energy independent MN - Currently 16 plants producing roughly 500 million gallons/year, 18% of corn crop

7 DOE/USDA Billion Ton Study indicated need for dedicated energy crops Of the agricultural resources: 428 million tons are crop residues, 377 million tons from perennial energy crops on 55 million acres of land

8 Some context: Scale of Energy Issues U.S. demand for gasoline is approximately 150 billion gallons/year President s State of the Union speech U.S. target of 35 billion gallons of cellulosic ethanol 300 million dry tons just to hit that target 20% of national demand

9 Implications of Cellulosic Ethanol 1.4 billion tons X 90 gallons/ton = 86% of current U.S. gasoline demand Rapidly becoming cost-competitive Could change geopolitical landscape/energy security Create jobs and retain income in the U.S. Carbon neutral - Meet Kyoto targets Revive rural America (already happening)

10 Possible Technologies Cellulosic Ethanol Biochemical Thermochemical Pyrolysis Synthetic Oil Further refining to other products Biobutanol Biodiesel Choren in Germany

11 Biochemical Cellulosic Ethanol Technology Driven by acid separation of lignin and breakdown of cellulose and hemicellulose sugars Use the unfermentable lignin to meet the thermal needs of the process (10:1 vs. 1.4:1 with starch) Enzyme costs were too high to justify expense, resulting in $5.00/gallon ethanol Recombinant DNA technology has led to precipitous drop in enzyme costs (white rot fungi, termite guts)

12 Cellulosic Ethanol Process - Iogen

13 Cellulosic Ethanol Technology

14 Thermochemical Processes Gasification more robust than biochemical Terpenes in pine can be a problem in biochemical Gasifier can use bark Potential to scale technology down for distributed employment

15 Current and Proposed Biomass Projects Municipal Heat and Electricity Laurentian Energy 250,000 green tons St. Paul District Energy 280,000 green tons Gasifiers corn ethanol plants at Little Falls and Benson Minnesota Power Syl Laskin Plant undergoing evaluation including resource availability 500,000 green tons in response to the 25 X 25 target Bois Forte Indian Tribe White Earth Indian Tribe Central MN Project Potential Conflict for Resource (low cost)?

16 Laurentian Energy Project Municipalities of Virginia and Hibbing Serving 5,000 customers heat and electricity Aging system either upgrade or everyone has to install new systems - residential and commercial Developed PPA agreement under Xcel Energy Biomass Mandate Woody biomass is the primary source NRRI cooperating on the $1.6 million project with LEA

17 Minnesota s Forest Products Industry $6 billion industry Employs 22,000, high paying jobs in pulp and paper, board and logging industry High value-added products

18 Minnesota s Forest Products Industry Reliant on local resources for raw material Resource availability a critical issue Current use 4.2 million cords 3.7 million cords harvested in Minnesota Possible greater reliance on in-state sources

19 Oriented Strandboard and Stumpage Price 600 North Central Region Oriented Strandboard Price ($/msf - 7/16" basis) 70 Aspen Pulpwood Stumpage Price (source: MNDNR Forestry Division) USD/msf - 7/16" basis Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Oriented strandboard prices have fluctuated widely and stumpage price increased Difficult competitive environment Plant shutdowns $/cord

20 Logging Industry Affected 3,000 employed in the logging industry 60% of the timber is harvested by the top 25% Downturn has resulted in more consolidation Future investments in logging infrastructure will likely require longer-term contracts to ensure payback in equipment

21 Minnesota s Forest Resource FIA inventory data: 16.2 million total forested acres, 14.9 million timberland acres Diversity of ownership Mixed species composition

22 Minnesota s Cover Type Type-MnDNR Acreage Proportion Total 14,988,760 Aspen 4,849,747 32% Balsam fir 393,381 3% Balsam poplar 464,007 3% Birch 999,186 7% Black spruce 1,335,033 9% Cottonwood / 107,074 1% Eastern redcedar 25,623 <1% Eastern white pine 151,107 1% Jack pine 356,355 2% Lowland hardwoods 1,104,834 7% Non stocked 228,235 2% Northern hardwoods 2,050,457 14% Northern white-cedar 571,915 4% Oak 724,512 5% Other 79,694 1% Other softwoods 5,665 <1% Red pine 562,656 4% Tamarack 868,215 6% White spruce 111,063 1%

23 Minnesota s Forest Resource Ownership 17% 5% Forest Industry Private 21% 40% Federal State 17% County and Municipal Availability affected by ownership, proportion of available timber

24 Minnesota s Forest Resource GEIS and Sustainable Harvest 7 million cords annual net growth 3.8 million cords mortality GEIS evaluated harvest levels at 4.0, 4.9 and 7 million cords 5.5 million cords identified as sustainable with mitigation Governor s Task Force recommended a goal of 5.5 million cords annual harvest Report Card Report general agreement with expectations

25 Minnesota s Forest Resource GEIS and Sustainable Harvest 5.5 million cords assumed to be sustainable 4.2 million cords expected demand by forest products industry Effect of energy production on timber imports 1.3 million cords potentially available assuming imports of roundwood are curtailed due to competition for all species

26 Other Sources - Red Pine Thinning Periodic thinning to increase diameter and value Typical first thinning at age 25, 8 to 10 years thereafter

27 Red Pine Acreage Tiimberland Acreage Red Pine Timberland Acreage Age Distribution natural regen plantation 0-5 years years years years years years years Stand Age Class years years years Highly productive stands 1.7 cords/acre/year using SI65 Large acreage planted since the 1960s 5,000 acres annually for first thinning (high pulpwood percentage)

28 Red Pine Thinning 270,000 cords available compared to current harvest of 160,000 cords 356,000 cords by ,000 dry tons Additional 256,000 tons available

29 Red Pine Thinning Research Studies underway under the Minnesota Forest Productivity Research Cooperative Tailor thinning recommendations to meet landowners objectives Options to remove a portion of larger trees and more of the stand to improve economics of first thinning

30 Red Pine Thinning Research Early stage of research will find out over next five years

31 Aspen Thinning Stand Size and Density in a Typical Aspen Stands (site index 75) Average DBH(in) Trees/Acre Average DBH (in) Trees per Acre Stand Age 0 Stands undergo mortality throughout life of the stand Opportunities to capture a portion of this mortality without consequence to final harvest volume?

32 Aspen Thinning Strip Thinning of Aspen Blandin Site Age 25 Aspen Stand Strip thinning trials began by NRRI on industry lands in 1989 After 16 years, no difference in total volume, larger tree size in thinned Strip thinning could produce 10 dry tons/acre if feasible Commercial thinning in older stands needs to be tested 100,000 acres/year X 10 tons = 1,000,000 cords Environmental impacts, economics and equipment unknown

33 Brushland Resource and Harvesting Potential source of biomass Highly variable Amount and costs Important to identify highbiomass sites to defray expenses over greater volume

34 Brushland Biomass Study done in 1995 of brushland density and biomass Estimated biomass of 400,000 dry tons/year Efficient forwarding of windrowed material the issue DOE-supported project through LEA to develop and test equipment

35 Brushland Harvesting for Energy Tested an unmodified forwarder 15 green ton capacity only loaded three tons/load six tons/hour obvious need to densify material as loading simple trash compactor concept similar to CBI Hahn equipment is building a modified version for testing next winter

36 Dedicated Energy Crops DOE/USDA Billion Ton Study Of the agricultural resources: 428 million tons are crop residues, 377 million tons from perennial energy crops on 55 million acres of land

37 Hybrid Poplar Plantations/Energy Crops 20,000 acre program in central MN to support Sartell mill CRP program had 15 year provision for trees Approximately 1.6 million acres of CRPacreage Demonstrated yield floor of 3.5 tons/acre/year 5.6 million dry tons annual potential lots to do

38 MFPRC Genetic Improvement of Poplar 160 Ratio of top 10 clones to NM6 = 1.82 Ratio of top 10 families to NM6= Diameter sq Family Top Ind. Family One of the largest programs in the world Significant yield gains and cost reductions (80% yield increase in some cases)

39 Forest Harvest Residues Top and limb material, not easily debarked Easily integrated into current harvesting systems Largest, most immediate source of biomass Use has increased recently Thanks to Chuck Baxter for photo

40 Forest Harvest Residues Proportion of harvested roundwood the issue Individual-tree data biomass equations 25% hardwoods, 15-20% softwoods Aspen 15% based on NRRI sampling Site-level data DNR Logged Area Analysis

41 Logged Area Residue Analysis 124 logged sites transects to determine coarse and fine biomass Forest Cover Coarse and Fine Woody Debris (cords/acre) Coarse and Fine Woody Debris Biomass (green tons/ac) Aspen Other Hardwoods Lowland Conifers Upland Conifers Unknown

42 Logged Area Residue Analysis Data on pre-existing stand volume needed Cover Type LAA Group Acres Sold Roundwood cds/ac Group cds/ac LAA Biomass (cds) % Residue Aspen Aspen 29, % Northern Hardwoods Hardwoods % Oak Species Hardwoods Paper Birch Hardwoods 8, Black Spruce Tamarack Lowland Conifers Lowland Conifers 5, % 3, Balsam Fir Upland Conifers 1, % Jack Pine Upland Conifers 6, Red Pine Upland Conifers 4,

43 Harvest Residue Analysis Conversions used by the DNR similar to LAA result except softwoods Combined harvest data and DNR factors 1,000,000 dry tons of material potentially available based on 3.7 million cord annual harvest 25% reduction for environmental mitigation, 750,000 dry tons If 5.5 million cords, 1.5 million X 0.25 = 1.15 million dry tons

44 Forest Harvest Residues Cost-effective bundler development needed Trailer mounted system Allow storage and drying

45 Summary of Biomass Sources Biomass Source Current dry tons/yr Near-Term Achievable dry tons Future Potential dry tons Notes Roundwood 0 1,495,000 1,495,000 current: 3.7 million cord harvest, future 5.5 million cord harvest Harvest Residues 750,000 1,155,000 1,155,000 Red Pine 184, , ,400 Aspen Thinning 0 0 1,000, , tons/acre Brushlands 0 400, ,000 Energy Crops 0 0 5,600, tons/acre/year yield, 1.6 million acres Total 934,000 3,360,500 10,059,400

46 Some Context Estimated 30 million tons needed to move people 30 million tons needed to replace coal Numbers are staggering, not happening anytime soon Depending on analysis, million available, all sources Aggressive use of all forms of biomass Economics will drive the process forward

47 Cellulosic Ethanol Economics Phillips, et.al. - NREL Study Process flow diagrams Economic analysis

48 Assumptions in NREL Analysis Etoh yield of 80.1 gallons/dry ton Higher-chain alcohols 14 gallons/ton 61.8 million gallon/year plant 770,000 dry tons of biomass needed Delivered feedstock $35.00 per dry ton $1.01 per gallon ethanol breakeven price with 10% return

49 Adjusted Price for Feedstock Cost $35.00 feedstock (?) needs adjustment 80.1 gallons/ton $0.012 per gallon / $ of feedstock cost If wood chips are $48.00/dry ton ($24.00/green ton), then adjusted price is $1.17 per gallon Using $80.00/cord roundwood = $1.44 per gallon Average of $1.30 per gallon Yield not yet to 80.1 level, however Range Fuels expects 100 gallons of etoh and 20 gallons of higher-chain alcohols

50 Can $1.30 Ethanol compete with gasoline? Starting with $2.97 gasoline and removing taxes and distribution = $2.23/gal Reduction of 15% for reduced mileage using etoh Value of etoh = $1.89/gallon Cellulosic etoh with realistic feedstock = ~ $1.30 / gallon

51 Game Changer - Electric Vehicles Toyota RAV4-EV, GM EV 30 $3.00/gallon = $0.10/mile driven IC engine 4 $0.08/kwh = $0.02/mile driven Putting taxes back in = $0.033/mile driven electric Technology under development but not far away Final purchase cost uncertain

52 Conversion Comparison Cellulosic Ethanol-Fueled Vehicle Biomass Input (ton) 1 oven dry ton of biomass Conversion Efficiency 100 gallons ethanol per oven dry ton (future) Vehicle Mileage (gasoline) 30 mpg-vehicle using gasoline Ethanol Mileage % deduction for reduced energy Miles Driven 2550 miles driven per oven dry ton Plug-In Electric Vehicle Biomass Input (ton) 1 oven dry ton of biomass Conversion Efficiency 0.33 conversion efficiency biomass-to-electricity Electricity Produced 1,643 kwh produced per ton of biomass Vehicle Mileage 4 miles per kwh Miles Driven 6572 miles driven per oven dry ton 2.58 ratio of electric vehicle to etoh-powered vehicle

53 Conclusions Appreciation of the potential economics of emerging energy technology and effects on existing industry Continued research needed in: Energy crop development woody and herbaceous Brushland biomass assessments and feasibility Bundling technology for harvest residues Aspen thinning options and environmental effects Smaller scale, publicly available conversion technology Cellulosic ethanol from local wood sources may be cost competitive with current gasoline price Picking winners is difficult technology will change affect the energy mix