TECHNICAL REPORT UCED 2007/08-04 TAHOE REGION BIOMASS

Transcription

1 TECHNICAL REPORT UCED 2007/08-04 TAHOE REGION BIOMASS UNIVERSITY OF NEVADA, RENO

2 TAHOE REGION BIOMASS Elizabeth Fadali Thomas R. Harris Elizabeth Fadali is a Research Associate in the University Center for Economic Development in the Department of Resource Economics in the College of Agriculture, Biotechnology, and Natural Resources at the University of Nevada, Reno. Thomas R. Harris is a Professor in the Department of Resource Economics in the College of Agriculture, Biotechnology, and Natural Resources; State Extension Specialist in the College of Cooperative Extension; and Director of the University Center for Economic Development at the University of Nevada, Reno. September 2007 UNIVERSITY OF NEVADA RENO The University of Nevada, Reno is an Equal Opportunity/Affirmative Action employer and does not discriminate on the basis of race, color, religion, sex, age, creed, national origin, veteran status, physical or mental disability, or, sexual orientation, in any program or activity it operates. The University of Nevada employs only United States citizens and aliens lawfully authorized to work in the United States.

3 This publication, Tahoe Region Biomass, was published by the University Center for Economic Development in the Department of Resource Economics at the University of Nevada, Reno. Funds for this publication were provided by the United States Department of Commerce Economic Development Administration under University Centers Program contract # This publication's statements, findings, conclusions, recommendations, and/or data represent solely the findings and views of the authors and do not necessarily represent the views of the U.S. Department of Commerce, the Economic Development Administration, University of Nevada, Reno, or any reference sources used or quoted by this study. Reference to research projects, programs, books, magazines, or newspaper articles does not imply an endorsement or recommendation by the authors unless otherwise stated. Correspondence regarding this document should be sent to: Thomas R. Harris, Director University Center for Economic Development University of Nevada, Reno Department of Resource Economics Mail Stop 204 Reno, Nevada Phone: 775/ UCED University of Nevada, Reno Nevada Cooperative Extension Department of Resource Economics

4 CHAPTER I: NATIONAL BIOMASS ENERGY TRENDS 1

5 Introduction Communities are searching for new and alternative economic development and diversification strategies to promote local economic activity and stability. At the same time, communities along urban-wildland interfaces, such as those in the Sierra Nevada foothills, live with the high fire danger posed by a large build-up of woody type fuels. This fire danger could be reduced by appropriate thinning techniques. One potential strategy for both economic development and fire risk reduction would be the industrial use of local biomass resources. This chapter discusses the past, current, and future national biomass energy trends that will be of importance in any regional biomass development efforts. Biomass Energy in the United States Biomass may be used as a fuel for electric power generation, space heating, cogeneration of heat and electricity, or for feedstock in the production of ethanol and other liquid bio-fuels. In 2005, the amount of biomass energy used in the United States was 2,780 trillion Btus or approximately 2.8% of total energy consumption in the United States 1. Of the 2,780 trillion Btus, about 1,896 trillion Btus were supplied by wood energy, with the remaining 885 trillion Btus supplied by non-wood biomass such as corn, agricultural byproducts or municipal solid waste. During 2003, close to 60% of energy supplied by wood biomass was obtained through cogeneration technologies and used in pulp and paper industry operations. Although biomass energy represented only a small proportion of the current total energy consumption in the United States, biomass energy represented almost half of the total renewable energy supply (Energy Information Administration, 2005, Haq, 2002). Figure 1 shows consumption of wood energy in the United States by end use. In 2004, 73% of the energy produced from wood was used in industry, largely for cogeneration at paper, pulp and lumber mills where the energy from wood residues leftover from primary production processes can be used on-site. Residential use, primarily for home heating, made up 17% of total wood energy use. 1 Preliminary estimates. 2

6 Figure 1. United States Wood Energy Consumption by End Use, 2004 U.S. Wood Energy Consumption by End Use, 2004 Residential Commercial Industrial Electric Power 8% 17% 2% 73% Data source: Table 6, Renewable Energy Trends 2004, Highlights. Energy Information Administration, Historical Trends in Renewable Energy From 1949 to 2005 total U.S. energy consumption rose 212% from 32.0 to 99.9 quadrillion Btu (see Figure 2). Over the same period, U.S. energy production rose by 118% from 31.7 to 69.2 quadrillion Btu. Consumption increased at a faster rate than production. The growing gap between consumption and production was filled by increased net energy imports. Total renewable energy production includes hydroelectric, geothermal, solar, wind, wood and biomass and is equal to renewable energy consumption. Renewable energy production rose by 104% over the same period from 3.0 to 6.1 quadrillion Btu. 3

7 Figure 2. U.S. Total and Renewable Energy Production and Consumption, 1949 to 2005 U.S. Energy Overview, Quadrillion Btus Year Production or consumption orf renewable energy Total energy production Total energy consumption Source: Table 1.1 Energy Overview, , State and U.S. Historical Data, Energy Information Administration, 2006, UCED calculations. Figure 3. U.S. Biomass Energy Production, U.S. Biomass Energy Production 3.5 Quadrillion Btus Year Source: Table 1.1 Energy Overview, , State and U.S. Historical Data, Energy Information Administration, 2006, UCED calculations. 4

8 In 1949, the United States produced 1.55 quadrillion Btus of biomass energy (Figure 3), all from wood. Levels of biomass energy production leveled off and even decreased until the 1970s when oil price shocks and changing regulation encouraged increased use of biomass energy. The peak production year for biomass energy was in 1989 when 3.11 quadrillion Btus were produced. By this time total biomass energy production included small amounts produced with non-wood sources such as corn and agricultural or landfill wastes. Since 1989 biomass energy use as a whole has declined to 2.78 quadrillion Btu in 2005 (preliminary estimate). Decreased use of wood energy was responsible for this decline (see Figure 5). The non-wood components of biomass energy production increased from 1989 to 2005 with ethanol production up nearly four-fold and energy produced from wastes increasing about 50%. As seen in Figure 4, in 1949, biomass energy, including wood and waste materials, made up almost 5% of total U.S. energy production. This decreased to a low in 1971 and 1972 of 2.3% of total energy production. After two oil shocks in the 1970s and changes in energy regulations, biomass energy production increased to 4.5% of total energy production in Since 1983 biomass energy production has fluctuated from 3.7% to 4.5% of total energy production. Sharp rises in oil prices over the past two years may again lead to a renewed interest in biomass energy production. Figure 4. Biomass Energy as a Percentage of Total U. S. Energy Production, 1949 to 2005 Biomass Share of U.S. Total Energy Production 5.0% 4.5% 4.9% 4.5% 4.5% 4.2% 4.0% 3.5% 3.0% 2.5% 2.0% % % Biomass as % of total production 3.7% Source: Table 1.1 Energy Overview, , State and U.S. Historical Data, Energy Information Administration, 2006, UCED calculations. 5

9 Total U.S. wood energy production is estimated to have bottomed out in 1961 at 1.3 quadrillion Btus. A dramatic increase in wood energy production took place after the first oil shock in From 1975 to 1983 wood energy production increased by almost 80% from 1.5 to 2.7 quadrillion Btu. Since 1983 wood energy production decreased 29% from 1983 to 2005 from 2.7 to 1.9 quadrillion Btu (see Figure 5). By 1995, half of the California biomass power industry shut down as a cost reduction strategy, according to the Energy Information Administration Biomass Milestones. Low prices for fossil fuels over much of the 1990s, reductions in logging operations in some areas, the unwieldy and localized nature of some wood fuels, electric market deregulation and many other factors may play a role in the reduced wood energy production over the period (Morris, 2002). Figure 5. Total U.S. Wood Energy Production U.S. Wood Energy Production Quadrillion Btus Year Source: Table 10.1 Renewable Energy Consumption by Source, , State and U.S. Historical Data, Renewable Energy, Energy Information Administration, 2006, UCED calculations. National Fuel Price Trends Figure 6 compares the nominal direct price for a million Btu of energy for different fuel sources from 1970 to As seen in the figure, wood competes with coal as a low cost source of energy, particularly for electrical generation and industrial or commercial use. Coal is abundant and more energy dense than wood. Wood is also abundant, but is typically harvested over a larger acreage than coal. These factors tend to increase the cost of harvesting and transporting wood fuels in relation to mining and transporting coal. Exceptions occur where wood is already transported 6

10 due to its demand for other purposes such as lumber or paper pulp. In these cases, wood residues leftover from primary production may be available at very low or even negative prices, since there may be a disposal cost of the wood otherwise. Paper and lumber mills may use wood residue from their production process to generate electrical energy and heat. This type of wood energy use typically has already been exploited and represents the largest proportion of wood energy use in the United States today. In a similar way, wood residues may also be available at lower cost when collection and transportation of the wood residue serves other socially desirable goals, such as the reduction of fire risks or increase in forest health, as may be the case in Tahoe National Forest and surrounding Nevada and California counties. In this case, government entities such as the Bureau of Land Management or the United States Forest Service may produce wood fuels as a byproduct of these other goals. Supplies of wood residues in this case will depend on government decision making processes. An additional market in which wood may successfully compete is as a fuel to replace currently expensive natural gas, propane, or oil for space heating. Figure 6. Comparison of Nominal Direct Fuel Costs in the United States, Direct Fuel Price, Nominal Dollars per Million Btus Year Coal Natural Gas Petroleum Nuclear Fuel Wood and Waste Data source: "Table 1: Energy Price and Expenditure Estimates by Source, Selected Years, , United States" State Energy Data 2003, Energy Information Administration, October

11 The environmental benefits of using biomass may lead to increased use in the future. Because coal, as a competing energy source, will often be a lower cost option than wood, demand for wood energy may be driven more by environmental considerations and regulations than by factors such as higher prices for oil. Advantages of wood fuel include: It is a renewable resource. Burning wood produces fewer sulfur dioxide, nitrogen oxide and carbon dioxide emissions than does burning coal. Burning wood is believed to produce no net increase in carbon dioxide because plants remove carbon dioxide from the atmosphere as they grow. 2 Any regulations adopted that increase renewable energy portfolio requirements for electricity generation will likely increase the demand for wood energy and the prices paid for wood fuels. The state of Nevada currently has a renewable energy portfolio law that requires that 20% of all electricity sales be derived from renewables by the year The state of California portfolio law requires the same goal to be reached by 2010 and the state would like to reach 33% renewable generation by These are some of the most ambitious goals in the nation regarding renewable energy. Regional Fuel Prices Table and 2012 Projected Average Fuel Prices, California and Northwest Supply Regions Type of Fuel Average Fuel Price (2005 dollars per million Btu) 2007 Projected 2012 Projected CA NW CA NW Coal Natural Gas Distillate Fuel Residual Fuel Biomass Sources: Table 74. Electric Power Projections for EMM Region Western Electricity Coordinating Council / California Table 72. Electric Power Projections for EMM Region Western Electricity Coordinating Council / Northwest Power Pool Area 11, Supplemental Tables to the Annual Energy Outlook 2007, Electricity and Renewable Fuel Tables. Energy Information Administration, February Any fossil fuel energy used to process or transport the wood will add to carbon emissions however. 8

12 In the California region, average prices for biomass as a fuel were projected to be about $1.98 per million Btu and to increase slightly to $2.04 per million Btu by 2012 (see Table 1). This implies an average price of about $34 per bone dry ton of wood chips used for fuel wood in 2007 and projections for a slight increase to $35 per bone dry ton in Actual specific quotes were an estimated average of $35 to $40 per delivered bone dry ton for the Sierra Pacific Industries wood-fired electric plant in Loyalton, California (Carlton 2005). Projections of Future Biomass Energy Production The Energy Information Administration at the Department of Energy produces projections of energy use and production by fuel type with the National Energy Modeling System (NEMS). In Figures 7 two NEMS scenarios of future U.S. energy consumption and production are displayed in chart format. The first scenario represents the reference projections while the second represents a case in which oil prices are assumed to be much higher. The reference scenario projects energy consumption to increase by about 1.1% a year to quadrillion Btu in Energy production is projected to rise by about 1.0% a year to 88.6 quadrillion Btu with the shortfall in energy needs met by rising imports. Under the high oil price scenario, consumption in 2030 is projected to be lower at quadrillion Btu. Under high oil prices, energy production would be expected to increase at a faster rate of 1.3 percent to 96.6 quadrillion Btu. Figure 8 shows biomass energy production for the two scenarios. Biomass energy consumption, which is assumed to be equal to biomass energy production, is forecast to rise 2.7% per year, a higher rate than the predicted growth rate in overall consumption. Total biomass production in 2030 is predicted to be 5.3 quadrillion Btu. Biomass energy production under a high oil price scenario is projected to be slightly higher by 2030, at about 5.6 quadrillion Btu. 3 The calculation is made using the conversion weight to energy equivalents heat value (100 percent efficiency) of 8,600 Btu per pound of dry wood suggested in Haq, Z. (2002). Biomass for Electricity Generation. Washington, D.C., Energy Information Administration, Department of Energy. 9

13 Figure 7. Projections for U.S. Energy Production and Consumption for Reference and High Oil Case, 2004 to 2030 U.S. Energy Projections, Quadrillion Btus Year Total Projected Production, Reference Case Total Consumption, Reference Case Total Consumption, High Oil Price Scenario Total Production, High Oil Price Scenario Source: Table 1. Total Energy Supply and Disposition Summary. Year-by-Year Reference Case Tables ( ) and High Price Case Tables ( ), Annual Energy Outlook 2007 with Projections to Energy Information Administration, Figure 8. Projections for U.S. Biomass Energy Production for Reference and High Oil Case, 2004 to 2030 U.S. Biomass Energy Projections, Quadrillion Btus Year Biomass Production, Reference Case Biomass Production, High Oil Scenario Source: Table 1. Total Energy Supply and Disposition Summary. Year-by-Year Reference Case Tables ( ) and High Price Case Tables ( ), Annual Energy Outlook 2007 with Projections to Energy Information Administration,

14 References Carlton, M. (2005). Wood Chips, Sierra Pacific Industries. Phone conversation. Energy Information Administration. "Table 1.1. Energy Overview, ". State and U.S. Historical Data, Department of Energy, Energy Information Administration. "Table 6. Renewable Energy Trends 2004, Highlights." Department of Energy, Energy Information Administration. Table Renewable Energy Consumption by Source, , State and U.S. Historical Data, Renewable Energy. Department of Energy, Energy Information Administration. "Table 1: Energy Price and Expenditure Estimates by Source, Selected Years, , United States" State Energy Data Department of Energy, Energy Information Administration. : Table 74. Electric Power Projections for EMM Region Western Electricity Coordinating Council / California Table 72. Electric Power Projections for EMM Region Western Electricity Coordinating Council / Northwest Power Pool Area 11, Supplemental Tables to the Annual Energy Outlook 2007, Electricity and Renewable Fuel Tables. Department of Energy, Energy Information Administration, Table 1. Total Energy Supply and Disposition Summary. Year-by-Year Reference Case Tables ( ) and High Price Case Tables ( ), Annual Energy Outlook 2007 with Projections to Department of Energy, Haq, Z. (2002). Biomass for Electricity Generation. Washington, D.C., Energy Information Administration, Department of Energy. Morris, G. Biomass Energy Production in California 2002: Update of the California Biomass Database. National Renewable Energy Laboratory, Golden, CO. Available on-line at 11

15 CHAPTER II: REGIONAL BIOMASS ENERGY TRENDS 12

16 Introduction In Section II, Nevada, California and Tahoe Region energy supply and demand trends are compared with national trends and the place of biomass and particularly wood energy in these regional energy profiles is examined. Renewable and Biomass Energy Consumption in Nevada and California The Energy Information Administration develops state level estimates of total energy consumption and energy consumption by source. The estimates in this section are for all primary energy use including transportation and production of electricity. Primary energy used in the production of electricity is counted towards consumption totals in the state where the electricity plant is located. For example, for the purposes of these estimates, a wood biomass plant in Loyalton, CA would consume energy in California only even if electricity produced at the plant was later sold to Nevada customers. As shown in Table 2, total energy consumed in California in 2003 was estimated to be 8,130 trillion Btu. Of this amount, about 159 trillion Btu were estimated to be from biomass sources. This was over 6% of all biomass energy consumed in the United States. Nevada was estimated to consume a total of 654 trillion Btu of which 3.3 trillion Btu was biomass energy. The proportion of total energy consumption using any type of renewable energy (including hydroelectric, biomass, solar, geothermal and wind power) was estimated to be 10.7%, 7.1% and 6.0% respectively for California, Nevada and the United States. Biomass energy was the source of 43% of total renewable energy consumed for the U.S. as a whole, but only 18% of renewable energy consumption in California and 7% in Nevada. Figures 9, 10 and 11 compare the share of energy consumption by source in 2003 for California, Nevada and the U.S. Biomass energy was estimated to make up 2.0%, 0.5% and 2.6% of total energy consumed for California, Nevada and the United States. In California, energy produced from biomass was a larger share of total energy use than energy produced from coal, according to Energy Information Administration estimates. The share of energy use 13

17 Table 2. Energy Consumption Estimates by Source, State Hydroelectric Biomass Other Renewable Total Renewable Total Energy Consumption Renewable Share of Total Consumption Biomass Share of Total Renewable Trillion Btu % California , Nevada United States 2, , , Source: Table S3. Energy Consumption Estimates by Source, 2003, State Energy Consumption, Price and Expenditure, Energy Information Administration and UCED. Figure 9. California Energy Consumption by Source California Energy Consumption by Source Net Interstate Flow of Electricity, 8.8% Coal, 0.9% Other, 4.2% Biomass, 2.0% Natural Gas, 27.9% Hydro, 4.6% Nuclear, 4.6% Petroleum, 47.2% Source: Table S3. Energy Consumption Estimates by Source, 2003, State Energy Consumption, Price and Expenditure, Energy Information Administration and UCED. 14

18 Figure 10. Nevada Energy Consumption by Source Nevada Energy Consumption by Source Hydro, 2.7% Biomass, 0.5% Other, 3.8% Nuclear, 0.0% Coal, 27.6% Petroleum, 36.6% Natural Gas, 1% net outflow of electric power 28.8% Source: Table S3. Energy Consumption Estimates by Source, State Energy Consumption, Price and Expenditure, Energy Information Administration and UCED calculations. Figure 11. United States Energy Consumption by Source US Energy Consumption by Source Hydro, 2.9% Biomass, 2.6% Other, 0.5% Nuclear, 8.1% Coal, 22.6% Petroleum, 39.6% Natural Gas, 23.6% Source: Table S3. Energy Consumption Estimates by Source, State Energy Consumption, Price and Expenditure, Energy Information Administration and UCED calculations. 15

19 produced from coal was very low for California at 0.9% versus 22.6% for the nation as a whole. A portion of this difference can be explained by California net imports of electric power. The share of energy use from petroleum sources was much higher in California than the nation as a whole at 47.2% compared to 39.6% for the national average. This may be because California uses the lowest amount of electricity energy per capita in the nation, partly because of climate and partly through support of energy conservation. This may increase California s share of energy used for transportation and therefore the share of energy use from petroleum sources. Nevada energy consumption by source is closer to the national profile except that there is no nuclear component, energy produced by other renewable sources is a higher share at 3.8% versus 0.5% for the United States as a whole, and energy from biomass sources is lower at 0.5% versus 2.6% in the nation. Estimates in Table 2 and figures 9, 10 and 11 do not include an estimated use of 51 trillion Btu and 3.6 trillion Btu of ethanol in California and Nevada. Biomass Energy Trends in Nevada and California Estimates of biomass energy consumption by major sector for California are shown in Figure 12. The estimates do not include ethanol consumption. About a quarter of biomass energy is wood used for home heating. The largest share of biomass energy consumption in California was 48% or 76.6 trillion Btu used to produce electrical energy. About 30% of biomass energy consumption was produced for internal use by commercial, government or industrial sectors. In Nevada, an estimated 2.3 trillion Btu of biomass energy, or 70% of the total was wood energy used to heat home residences. An additional 30% of the biomass energy was self supplied electricity or heat used by commercial or industrial businesses or government entities. The consumption of 3.6 trillion Btu of ethanol is not included in the chart. 16

20 Figure 12. California Biomass Energy Consumption Estimates by End-use Sector, 2003 California 2003 Biomass Energy Consumption by Sector 24% 48% 7% 21% Residential wood heating Industrial self-supplied Commercial self-supplied Electric power production Source: Tables 7 to 12, State Energy Consumption, Price and Expenditure, Energy Information Administration and UCED chart. Figure 13. Nevada Biomass Energy Consumption Estimates by End-use Sector, 2003 Nevada 2003 Biomass Energy Consumption by Sector 18% 12% 70% Residential wood heating Industrial self-supplied Commercial self-supplied Source: Tables 7 to 12, State Energy Consumption, Price and Expenditure, Energy Information Administration and UCED chart. 17

21 The Energy Information Administration also has constructed time series estimates of total energy consumption by source at the state level (see Figure 14 and 15) 4. The use of biomass energy, especially wood, was at historic lows in the 1960 s and 1970 s. High oil and gas prices during the oil crises of 1973 and 1974 renewed interest in residential wood heating and in paper industry use of wood residuals for on-site heat and power. In 1978, the Public Utility Regulatory Policies Act was passed. This bill guaranteed nonutilities generating power would have a market for that power, creating a better incentive structure for small biomass energy plants. California biomass took-off in the 1980s in part in response to policies that guaranteed power purchase rates with an escalation clause. As California biomass plant capacity rose, the price for biomass fuelstocks increased, which along with expiration of the favorable guaranteed rates contracts, eventually produced a crash in the California biomass industry. By 1995 half of the California biomass plants had closed (Energy Information Administration 1995). Figure 14. California Biomass Energy Consumption Estimates, California Biomass Energy Consumption, Trillion Btus Year Source: Table 7. Energy Consumption Estimates by Source, Selected Years, , California., State Energy Consumption, Price and Expenditure, Energy Information Administration and UCED chart. Notes: In 1989, more extensive coverage of renewable energy sources create a discontinuity in the time series between 1988 and Ethanol is not included in this series. 4 A very large amount of data from a large number of sources is needed to form these estimates. The reader should be aware that this very difficult task necessarily involves making assumptions and estimates where data is missing or inadequate. This caveat particularly applies to earlier years of time series estimates. For more information see State Energy Consumption, Price, and Expenditure Estimates, Technical Notes at 18

22 Figure 15. Nevada Biomass Energy Consumption Estimates, Nevada Biomass Energy Consumption, Trillion Btus Year Source: Table 7. Energy Consumption Estimates by Source, Selected Years, , Nevada, State Energy Consumption, Price and Expenditure, Energy Information Administration and UCED chart. Note: In 1989, more extensive coverage of renewable energy sources create a discontinuity in the time series between 1988 and Ethanol is not included in this series. Renewable Electric Energy Generation in California and Nevada In the section above, we looked at the picture for all energy uses and sources. In this section, we look at energy use and source for electrical energy only. Table 3 shows renewable electric energy generation by energy source for California, Nevada and the United States. The state of California is the top producer (by amount produced) in geothermal, solar, wind and wood/wood waste and other biomass energy production. It produces the 5 th largest amount of energy from municipal solid waste and landfill gas and it is the second highest producer of hydropower after Washington State. It is also the 2 nd highest producer of total renewable energy after Washington State, producing an estimated 17% of total renewable electricity generated in the United States. Nevada is the 2 nd highest producer of geothermal energy in the nation. After the new Nevada Solar One and Solar Star projects go on-line sometime this year, Nevada will be the number one state for per capita solar energy production (Nevada Power website). Table 4 shows estimated market shares of total electricity generation for California, Nevada and the United States in Renewable energy generation made up over 31% of capacity in California in 2003 and over 8% in Nevada. 19

23 Table 3. Total Renewable Net Electricity Generation by Energy Source and State, 2003 State Geothermal Hydroelectric MSW / Other Wood / Landfill Solar Wind Biomass Wood Waste Gas Total (Thousand Kilowatt hours) California 12,981,763 36,370,703 1,737, , ,606 3,895,431 3,880,037 60,153,118 Nevada 1,065,711 1,756,705 2,822,416 Total U.S. 14,424, ,806,329 20,179,386 3,556, ,001 11,187,466 37,529, ,216,799 Table 20. Total Renewable Net Generation by Energy Source and State, 2002 and 2003., Renewable and Alternate Fuels, Energy Information Administration. Table 4. Renewable Market Share of Net Generation by State, 2003 State Total State Generation Percent Renewable Percent NonHydro Renewable (Megawatts) (%) (%) California 192,788, Nevada 33,194, Total U.S. 3,883,185, Table 27. Renewable Market Share of Net Generation by State, 2002 and 2003., Renewable and Alternate Fuels, Energy Information Administration. Renewable Energy Portfolio Standards for California and Nevada Renewable energy portfolio standards (RPS) have been adopted by twenty states. The standards require that electricity providers obtain a given percentage of their energy from renewable sources by a certain date. Nevada and California both have ambitious RPS (Energy Efficiency and Renewable Energy 2006). In Nevada, the portfolio requirement requires a 3% increase every two years in energy produced with renewable technologies, or through energy savings from increased efficiency. By 2015, energy supplied through renewable sources or new utility subsidized energy savings must make-up 20% of total sales. These requirements currently apply to Nevada energy sales of Sierra Pacific Power, Nevada Power and Avista Energy. The utilities may buy portfolio energy credits or PECs from renewable energy producers to meet the standards. To help establish renewable projects, the Temporary Renewable Energy Development (TRED) Program has been formed by the Public Utilities Commission. The program facilitates prompt payment to renewable energy project investors to encourage project completion (North Carolina Solar Center & Interstate Renewable Energy Council 2006). In California, legislation was passed in 2002 requiring retail sellers of electricity to increase purchases of renewable energy by 2% a year beginning in 2003 to reach a goal of purchasing 20% of their electricity from renewable sources by A perception that significant 20

24 progress had already been made towards this goal, caused the California Energy Commission and Public Utilities Commission to increase the goal to 20% by 2010 and 33% by As a part of the California program, certain renewable energy producers may be eligible for supplemental energy payments (North Carolina Solar Center & Interstate Renewable Energy Council 2006). Biomass is defined as one of the renewable energy technologies that fulfills the RPS in both Nevada and California. In California certain restrictions apply to biomass energy production eligibility for RPS credit and for supplemental energy payments. The fuel used is restricted to agricultural wastes, solid waste materials and wood harvested as part of an approved timber harvest plan or for the purpose of forest fire fuel reduction or stand improvement. In addition, the fossil fuel use of the operation cannot exceed a minimum of 5% of all fuel used, and facility use may not exceed 2% of total energy input (California Energy Commission 2007). In Nevada, a meter approved by the Public Utilities Commission is installed. Quarterly certificates for PECs will be issued to the producers of the biomass energy based both on electricity produced and any heating fuel displaced by heat energy in the case of cogeneration facilities. The PECs can then be sold to the highest bidder (Harris 2007). Progress towards RPS Goals in Nevada and California Table 3 and 4 do not measure progress towards RPS goals. Given imports of electrical power into California and exports out of Nevada as well as several other factors, total generation or generation capacity does not represent where the states stand in relation to the renewable portfolio standards (RPS) each state has adopted. RPS apply to retail sales figures only and how this relates to energy consumption at the state level is somewhat complex. Also, for both Nevada and California, energy produced with large scale hydroelectric plants does not count towards the RPS. For the purposes of roughly estimating how close the states are to RPS goals different calculations are necessary. According to the California Energy Commission, in 2004, about 10.2% of electricity used in the state was produced with renewable resources meeting RPS goals and an additional 14.9% was provided by large scale hydroelectric power. In Nevada in 2006, an estimated 6.5% of electricity used was produced with renewable resources that count towards RPS goals. 21

25 Wood Biomass Energy in Nevada and California Nevada currently has one biomass energy project on line in a White Pine County elementary school. The project provides about 2 billion Btu per year in heat energy and is eligible for PEC certificates in Nevada. Another biomass energy project is has just begun operations at the Northern Nevada Correctional Center in Carson City. It is a larger project that is expected to use about 16,000 tons of wood chips per year. This project is the only one within the Nevada Tahoe region. City of Sparks has a plant that uses methane produced from the Reno-Sparks Water Reclamation Facility. In California, a total of 28 wood biomass plants with a capacity of 680 MW are still in operation, down from a total of 70 with 1600 MW of capacity in the peak year of California Roadmap Goals for Biomass California executive order S issued by Governor Schwarzenegger in April 2006 sets out specific goals for the state s biomass production. By 2020 the state goal is to increase California biofuel production enough to meet 75% of its own demands and 20% of renewable electricity generation. The California Biomass Collaborative has determined the state has the potential to triple biomass electricity generating capacity and increase biofuels production 100 times current levels using resources now feasibly available with some increase in the percentage of crops used for energy production. Biomass electricity capacity could expand to 2,500 megawatts(california Energy Commission 2006). Supply Curves for Biomass Figures 16 and 17 demonstrate how biomass supply availability changes according to the price it can command. The data in the figures is in 1999 prices and for total biomass including forest residues, urban wastes, agricultural wastes, switch-grasses and mill wastes. It suggests that in California if prices for biomass increase 150% from $20/delivered BDT to $50/delivered BDT, biomass feedstock availability would increase over 600% from about 1,600,000 BDT to 11,300,000 BDT. For the same price increase in Nevada, biomass feedstock availability would increase only about 80% from 184,000 BDT to 337,000 BDT. Availability may not be as responsive to price in Nevada because limited water supplies constrain options for expansion of supply. All of the goods and inputs discussed in this report will be responsive to price. 5 Tom Amesbury . 22

26 Figure 16. Nevada Biomass Supply Curve Nevada Biomass Supply Curve $60 $ Per Dry Ton $50 $40 $30 $20 $ ,000 Dry Tons per Year (Walsh et al. 2000), UCED Chart Figure 17. California Biomass Supply Curve California Biomass Supply Curve $60 $ Per Dry Ton $50 $40 $30 $20 $10-2,000 4,000 6,000 8,000 10,000 12,000 1,000 Dry Tons per Yr (Walsh et al. 2000), UCED Chart Demand and Supply of Biomass Energy Some Basics There are some basic principals of economics to keep in mind when considering the demand for and supply of biomass electricity. Economic theory would tell us that demand for biomass energy will depend on its price, the price of substitutes such as electricity or heat produced with coal, natural gas or fuel oil, consumer income and taste. A shift to electric vehicles 23

27 would increase demand for electricity, while possibly decreasing demand for liquid fuels. Supply will depend on available technology, costs of inputs and the price for which the energy can be sold. In addition, government regulations at state, local, and federal levels regarding carbon taxes, air pollution, renewable sources, fire control and more can have a very significant effect on both demand and supply sides of biomass energy. 24

28 CHAPTER III: TAHOE REGION SOCIOECONOMIC TRENDS AND ELECTRICITY DEMAND FORECASTS 25

29 This section will provide a short synopsis of socio-economic trends in the ten county Tahoe region. An understanding of these trends provides information as to how development of local biomass resources could impact the region s economic development and diversification activities. Tahoe Region Population and Employment Trends In this chapter, the Tahoe region is defined as the aggregation of Sierra, Nevada, Placer, El Dorado and Alpine Counties in California and Washoe, Lyon, Storey, Carson City and Douglas Counties in Nevada. The area is illustrated in Figure 18. The largest population centers in the region are Reno-Sparks-Carson City on the eastern side of the Sierra Nevada Mountains in Nevada and Roseville-Rocklin-Lincoln on the western side in California. The two population centers are about 115 miles apart on Interstate 80. Outside of these urban regions the rest of the area is more rural in nature, with lower population density and small population centers such as South Lake Tahoe, Tahoe City, Truckee, and Incline Village. The Tahoe region on both the Nevada and California sides is experiencing much faster population growth than the national average. Table 5 shows historic and projected population for the region. In 1986, the ten counties had a population of about 623,000. By 2003 the population had increased to 1,078,000 or 73%. Woods and Poole project population will increase to 1,677,000 by 2026 for a total increase of 169% since 1986, as compared to a total projected increase of 51% over the same time period for the United States. As seen in Figure 17, the Tahoe Region population has grown at an annual rate of 3.3% from 1986 to 2003, according to Woods and Poole estimates. The region is projected to grow more slowly over the next two decades at a rate of about 1.9% a year. In contrast, the United States as a whole grew at an annual rate of 1.1% over the period from 1986 to 2003 and is projected to grow at 1.0% a year over the next decades. Total employment in the region has increased even faster than has population growth. Total employment increased by 3.8% annually over the period from 1986 to 2003 (see Table 7). Employment growth is projected to slow to 1.9% annual growth from 2004 to 2026 reaching over 1,000,000 in 2026 (see Table 6). Again, these were substantially higher growth rates than experienced and projected for the nation as a whole. All sectors in the region experienced growth over the period except for mining and the federal military. The largest increase in number occurred in the service sector which experienced an employment increase of 105,500 from

30 Figure 18. Tahoe Region for Biomass Electricity Demand Analysis to The national service sector expanded dramatically over this time period as well. Tahoe region sectors experiencing the largest positive growth rate differential were manufacturing, wholesale trade, construction and the finance, insurance and real estate sectors. Increases in the service sector are projected to continue to be a major driver of employment, producing 152,000 jobs or 44% of all new projected jobs from 2004 to The greatest differentials between regional job growth and national growth are projected to occur in manufacturing and wholesale trade sectors. 27

31 Table 5. Tahoe Region Historical and Projected Population, 1986 to * 2006* 2016* 2026* Total growth, Thousands % CA Tahoe % Region NV Tahoe % Region Tahoe Region ,078 1,111 1,169 1,418 1, % US 240, , , , , , ,691 51% Source: Woods and Poole, 2006 State Profile, State and County Projections to 2030, UCED aggregation. *Projections Figure 17. Comparison of Annual Population Growth Rates and Projected Growth Rates, Tahoe Region and US Population Growth Rate 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% CA Tahoe Region NV Tahoe Region Tahoe Region Total US Historical growth rate, 1986 to 2003 Projected growth rate, Source: Woods and Poole, 2006 State Profile, State and County Projections to 2030, UCED. 28

32 Table 6. Employment by Sector, Tahoe Basin, Historical (1986, 1996) and Projected (2006, 2016, 2026) Sector/Year * 2016* 2026* Total Employment 337, , , ,606 1,001,803 Farm 4,634 4,631 4,943 5,247 5,552 Agricultural Services 3,277 6,368 9,577 11,710 13,860 Mining 1,752 2,115 1,735 1,913 2,094 Construction 24,780 39,285 60,104 72,539 84,959 Manufacturing 23,983 38,559 42,683 49,651 56,523 Transport, Comm. & Util. 16,599 20,969 24,389 27,804 31,215 Wholesale Trade 10,334 20,049 24,398 31,027 37,608 Retail Trade 57,656 88, , , ,482 Finance, Ins. & Real Estate 30,082 40,462 75,805 90, ,482 Services 122, , , , ,503 Federal Civilian Govt. 5,068 5,669 6,180 6,503 6,826 Federal Military Govt 2,180 1,992 2,075 2,010 1,942 State & Local Govt 34,310 53,205 69,839 83,808 97,757 *Projections Data Source: Woods and Poole with UCED aggregation. Table 7. Tahoe Region Projected and Historical Growth Rates in Workforce Sector Historical Compound Annual Growth Rate, 1986 to 2003 Projected Compound Annual Growth Rate, U.S. Historical CAGR, 1986 to U.S. Projected CAGR, Total Employment 3.86% 1.93% 1.63% 1.37% Farm 0.27% 0.58% -0.55% -0.02% Agricultural Services 6.08% 1.91% 3.86% 1.66% Mining -0.26% 0.96% -2.99% 1.06% Construction 4.96% 1.78% 1.86% 1.38% Manufacturing 3.14% 1.44% -1.04% 0.35% Transport, Comm. & Util. 2.03% 1.26% 1.63% 1.36% Wholesale Trade 4.66% 2.25% 0.98% 1.09% Retail Trade 3.92% 1.89% 1.70% 1.13% Finance, Ins. & Real Estate 5.21% 1.70% 1.92% 1.18% Services 3.72% 2.29% 3.18% 1.96% Federal Civilian Govt. 1.08% 0.50% -0.57% 0.28% Federal Military Govt -0.23% -0.33% -1.42% 0.06% State & Local Govt 3.89% 1.73% 1.81% 1.36% Data Source: Woods and Poole, UCED 29

33 Tahoe Region Electricity Consumption Trends An estimate of 2005 electricity consumption for the ten county Tahoe region is given in Table 8. The California Energy Commission has prepared as estimate of electricity consumption by county for all California counties (California Energy Commission 2005). Total electricity consumption for the five California Tahoe counties was estimated at 4,634 million KWh. No county level data is available for Nevada. Nevada estimates for the Tahoe region were created by taking shares of the 2005 Public Utilities Commission of Nevada electricity consumption figures for the entire northern Nevada region (Hirsch 2007). Total electricity consumption in 2005 was estimated to be 5,227 million KWh for the Nevada side. Total electricity demand for the Tahoe region was estimated at 9,862 million KWh in Commercial and industrial use made up a larger proportion of consumption on the Nevada side at 65% of the total versus 48% of total consumption for the California side. Table 8. Tahoe Region Electricity Consumption by County or Region in 2005 Residential Nonresidential Total County Number of Accounts kwh (million) Number of Accounts kwh (million) Number of Accounts kwh (million) ALPINE 1, , EL DORADO 80, , ,895 1,207 NEVADA 37, , , PLACER 136,296 1,258 18,003 1, ,299 2,737 SIERRA 1, , Subtotal CA Tahoe Region 257,382 2,404 33,733 2, ,116 4,634 Nevada Tahoe Region* 223,000 1,840 ** 3,387 ** 5,227 TOTAL 480,382 4,244 5,618 9,862 Sources: UCED, (California Energy Commission 2005; Hirsch 2006) *estimated using 2006 share for Washoe, Storey, Douglas, Lyon and Carson City as reported by Hirsch, personal communication. Accounts estimated using 2006 share for 2004 number of accounts. **Currently no information on number of industrial customers Existing Regional Electricity Demand Forecasts Table 9 lists prominent features for some existing electricity demand forecasts for regions of California or Nevada. These forecasts are derived from structural models, general equilibrium models, or econometric models which take into account many different variables such as price forecasts, demand side management, consumer characteristics, and heating and cooling degree days. The Energy Information Administration Electricity Market Module (EMM) forecasts a 1.5% annual growth in demand from 2005 to 2030 for the California region. For the region containing Nevada the EIA forecasts a somewhat higher growth rate in electricity demand of 30

34 1.8% per year. California Energy Commission 2006 to 2016 forecasts for areas near or containing the Tahoe counties ranged from 2.3% growth per year for the Sacramento area served by Sacramento Municipal Utility District (SMUD) to 1.25% for the area served by Pacific Gas and Electricity, an area which includes San Francisco. The Truckee-Donner region is included in the Other Planning Area which was forecast to increase at 1.25% a year. The most recent Public Utilities Commission of Nevada forecast for the northern Nevada region was a 2.68% annual increase in demand for the years 2005 to 2015 but the previous forecast from 2003 to 2013 forecast a much lower growth rate of 1.14% a year. The compound annual growth rates for all the forecasts listed in the table lie between these two estimates. Table 10 gives projections of electricity demand specifically for the 10 county Tahoe region using the highest and lowest annual growth rate estimates in Table 9 and the estimates of Tahoe region electricity use for 2005 given in Table 8. Starting at 9,861 million KWh of electricity consumption per year in 2005 and carrying out the growth rates to 2026, the low estimate of demand in 2026 would be approximately 12,512 million KWh and the high would be about 37% more at 17,184 million KWh. Table 12 presents electricity demand projections specifically for the Tahoe region. Household demands were extrapolated by using Woods and Poole projections of number of households in the region with a per Tahoe household estimate of electrical consumption of 9,539 KWh per year. Commercial and industrial electricity consumption were extrapolated using per employee electricity consumption data. According to this projection, electricity demand for the Tahoe region in 2026 would be 14,307 million KWh. The demand projection lies between the high and low estimates of 12, 512 KWh and 17,184 KWh per year in 2026 made using the existing forecasted growth rates for the overall region (see Table 8). Electricity consumption per employee specifically for the five county California Tahoe region for each 2 digit level NAICS sector is given in Table Highest per employee consumption of electricity was in the utility sector at 97,288 KWh per employee per year. The second highest per employee electric use occurred in the manufacturing sector at 28,041 KWh 6 Proportions of electrical energy consumption by NAICS sector were found using data provided by a special dataset requested and received from the California Energy Commission (CEC) and total electrical energy consumption for the 5 counties was from the CEC website The NAICS sector data came directly from electricity retailers and was not verified for completeness or accuracy by the CEC. 31

35 per employee per year. The service sector tended to have relatively low electric energy use. The lowest per employee electricity use was for the construction sector which may primarily use different sources of energy. The prevalence of seasonal and part-time workers may also influence these per employee estimates of energy consumption by sector. Since estimated California Tahoe region average per employee consumption was approximately 70% of the estimate of the average for Nevada and no information on energy use by sector was available for the Nevada Tahoe region, per sector employee use was readjusted upward to be more representative of estimated energy use in the entire region. Also, a different aggregation was used than is presented in Table 11 so that per employee estimates match Woods and Poole sectors. Woods and Poole projections of employment by sector were used to estimate total non-residential electricity use. By sector projections were 3.5% lower than estimates made extrapolating per employee average electricity use. This is because the two sectors Woods and Poole predicted to have faster than average growth, the service sector and the wholesale trade sector, both have below average per employee electricity consumption. Lack of sub-county data make it difficult to more narrowly target a tighter region around Lake Tahoe such as the WGA Tahoe Biomass Supply Assessment Area (Amesbury 2007). A rough estimate could be found by using the share of households in the smaller region. 32