Do-It-Yourself Supply Curve: Tools to Help You Get Involved ..., Schemes and Mind Maps of Forestry

Download Do-It-Yourself Supply Curve: Tools to Help You Get Involved ... and more Schemes and Mind Maps Forestry in PDF only on Docsity! 55WOODY BIOMASS DESK GUIDE & TOOLKIT CHAPTER Do-It-Yourself Supply Curve: Tools to Help You Get Involved in an Entrepreneurial Woody Biomass Project 6 6.0 INTRODUCTION The feasibility of woody biomass utilization projects depends, in part, on the cost and availability of the wood resources. Identifying and communicating the availability and cost of biomass in an area is often the fi rst step in gaining interest in and support for a biomass project. One way to illustrate the economic availability of biomass resources is with a supply curve. This chapter introduces several tools that you can use to con- struct supply curves for woody biomass resources in your area of interest (AOI). These tools may be useful to potential suppliers and users of biomass or to communities considering using biomass. A supply curve is a basic economic tool used to determine the price of a resource at a given quantity of demand. For example, Figure 1 illustrates a hypothetical woody biomass resource supply curve. In this example, a small amount of biomass (Quantity 1) is available at low cost (Price 1) in the form of urban wood waste. When this supply runs out, more biomass (Quantity 2) can be acquired in the form of logging residues, though at a higher price (Price 2). If logging residues are also not suffi cient to meet the demand, even more biomass (Quantity 3) can be purchased from commercial timber suppliers, though it would be the most expensive (Price 3). Thus, a supply curve shows the price of biomass at various levels of demand. If enough biomass (the x-axis) can be delivered continuously at a low enough price (the y-axis) then enough wood Urban wood waste Price 1 Quantity 1 Quantity 2 Supply (Btu/yr) Quantity 1 Price 2 Price 3 Logging residues Commercial timber P ri ce D el iv er ed Figure 1: Hypothetical supply curve illustrating price at various levels of demand. 56 Chapter 6: Do-It-Yourself Supply Curve: Tools to Help You Get Involved in an Entrepreneurial Woody Biomass Project may be available to supply a bioenergy project. A more complete supply curve might include other available resources and account for transportation costs in ranking the economic availability of these resources of different types at dif- ferent travel times. The following sections provide you with various tools, that when used to- gether, can help you construct a “pre- liminary” biomass supply curve for a particular AOI. Using these tools and this approach, it is possible to develop a preliminary supply curve in just a few hours. This process is valuable because it allows you to get an initial assessment of the economic availability of various biomass resources in an AOI. It also al- lows you to make comparisons between different AOIs, which is an important step in site selection for bioenergy proj- ects. Some of the individual tools or steps in the process may be useful in evaluating biomass resources. After a preliminary supply curve has been constructed, the actual supplies and costs can be verifi ed by contacting local suppliers. During this process of verifying the pre- liminary supply analysis, do not be surprised to fi nd that the actual supply of biomass resources is shown to be higher or lower than that shown in the preliminary analysis. This will likely be because local supply and cost conditions vary and because you may identify additional resources not included in the preliminary assessment. These instructions are provided using Microsoft® Excel 2007, though the basic ap- proach could be applied by other means. The preliminary process includes the follow- ing: 1.Identify a potential bioenergy facility location. 2.Survey quantities of locally available biomass resources. 3.Estimate costs of locally available biomass resources. 4.Rank resources from cheapest to most expensive. 5.Create the supply curve. 6.1 TOOL 1: USING GOOGLE EARTH TO IDENTIFY A POTENTIAL BIOMASS UTILIZATION FACILITY LOCATION You may be interested in identifying or may be asked to help identify a tentative loca- tion for a biomass utilization facility. Google Earth is a good tool to help you get start- Important questions to ask when considering an entrepreneurial woody biomass project: • Is there a market? • What are the product specifi cations? • Are there time and volume supply commitments and if so, can they be met? • Are there storage constraints at the facility planning to use biomass? • Are there loading and unloading constraints? Transportation challenges? • Are there environmental factors related to certifi cation programs such as the Forest Stewardship Council (FSC) or Sustainable Forestry Initiative (SFI) that must be considered? • Is the operation expected to be profi table? 59WOODY BIOMASS DESK GUIDE & TOOLKIT tion data. Enter these numbers in a second column (next to their corresponding county name) in your Excel spreadsheet. Multiply the population of each community by 0.203 green tons/person per year to fi nd an estimate of the green tons/commu- nity/year as shown in Figure 4. Quantify logging residues from FIA Data When trees are harvested, logging residues (unmerchantable trees, tree tops, and branches) are produced in the harvesting operation and may be a low-cost biomass resource. These resources must be quantifi ed if they are to be considered in a bioen- ergy project. Probably the best source of information on quantities of logging residues and other forest biomass is the Forest Inventory and Analysis (FIA) Program of the U.S. Forest Service. FIA collects, manages, and reports information on forests in the United States. The Timber Product Output (TPO) program of FIA generates county- level data on logging residues and forest products based on both FIA plot data and more frequent mill surveys (visit http://fi a.fs.fed.us/program-features/tpo/ for more information). This information is available for the entire lower forty-eight states, cov- ering both public and private lands. You may also contact your local forest service offi ce for assistance. This FIA and TPO data can be accessed in various ways. Raw data from the FIA da- tabase (FIADB) can be downloaded directly from the FIA DataMart (http://fi atools. fs.fed.us/fi adb-downloads/fi adb3.html) and can be imported to Microsoft Access or Microsoft Excel. Users’ Manuals for the FIADB are available at http://fi a.fs.fed.us/li- brary/database-documentation/. Alternatively, tools are available online to query the FIADB for data specifi c to a user’s needs and geographical area. The U.S. Forest Service FIA TPO program reports the amount of logging residues by county. The following steps show how you can retrieve quantities of logging residues produced in counties that are within fi fty miles of a proposed bioenergy facility. First, go to the U.S. Forest Service Timber Products Output Mapmaker2 at http://www.ncrs2.fs.fed.us/4801/fi adb/rpa_tpo/wc_rpa_tpo.ASP (Figure 5). Figure 5: U.S. Forest Service Timber Products Output Mapmaker home page. 2 At this writing, FIA Mapmaker is likely to be superseded by FIA Forest Inventory Data Online (FIDO). 60 Chapter 6: Do-It-Yourself Supply Curve: Tools to Help You Get Involved in an Entrepreneurial Woody Biomass Project Next, go to your state, and select the radial button marked SPECIFIC COUNTIES. Hold down the CTRL key as you select the counties within about fi fty miles of your pro- posed location. Then click on CONTINUE at the bottom of the page (Figure 6). From the next page, select VOLUME OF LOGGING RESIDUE (CUFT) and click CONTINUE (Fig- ure 7). Figure 6: Selecting counties from the U.S. Forest Service Timber Products Output Mapmaker. Figure 7: Select attribute of interest from U.S. Forest Service Timber Products Output Mapmaker. 61WOODY BIOMASS DESK GUIDE & TOOLKIT Accept with default Page, Row, and Column variables, and click CONTINUE (Figure 8). Select CONTINUE from the next page to retrieve your data (Figure 9). Finally, logging residues are reported as hardwoods and softwood for your selected counties (Figure 10). Figure 8: Default Page, Row, and Column variables of U.S. Forest Service Timber Products Output Mapmaker. Figure 9: Last page before retrieving data from the U.S. Forest Service Timber Products Output Mapmaker. Figure 10: Data reported from U.S. Forest Service Timber Products Output Mapmaker. 64 Chapter 6: Do-It-Yourself Supply Curve: Tools to Help You Get Involved in an Entrepreneurial Woody Biomass Project As with urban waste wood, assume that only 60 percent of the logging residue will be collected and available. Multiple your dry tons of residue by 0.6 and add these data to your chart with the urban waste data as shown here (Figure 14). After you have estimated the quantities of locally available biomass resources, you will need to estimate the price of these resources as shown in the next section. 6.3 TOOL 4: ESTIMATE COSTS OF LOCALLY AVAILABLE BIOMASS RESOURCES To evaluate the economic availability of biomass resourc- es, it is necessary to assign prices to the resources that were quantifi ed in the previous section. Future prices can- not be known with certainty, as economic conditions are constantly changing. However, if a project is to be consid- ered, some sort of cost estimates need to be made. The total delivered cost of forest products is the sum of (1) the price to purchase the wood from the landowner, (2) the price paid to the logger to gather the material, and (3) the price needed to haul the material from the forest to the processing facility. As gasoline costs rise, the price of hauling wood will also change. Table 1 shows typical costs of urban wood waste and log- ging residues in Florida in December 2007. You can use these costs in your cost analysis, or update them with costs you fi nd for your AOI. Local contacts, RC&D Coun- cil representatives, consultants, and extension agents may be able to provide local cost estimates. Note that the procurement cost of urban wood waste is negative in Table 1, because tree service companies pay to get rid of, rather than sell, their waste wood. Figure 14: Converting to available dry tons of logging residues. Table1: Summary of cost assumptions for woody biomass resources. Urban Wood Waste Logging Residues ($ dry ton-1) Purchase costa 25.00 3.00 Harvest and processb 30.00 33.00 Load and unload 1.98 1.80 Two-way haul (per hour)c 11.86 10.78 Example total delivered cost of a 1 hour hauld 18.84 48.58 a The cost of purchasing wood on site. Negative costs for urban wood waste refl ect disposal costs, known as “tipping fees.” b Includes the costs of bundling, collecting, and chipping c The cost per ton to transport wood for one hour and return with an empty truck (for a total of two hours of driving time). A truck can carry 23 tons and typically gets 6 mpg. d Equals the sum of the four cost categories. 65WOODY BIOMASS DESK GUIDE & TOOLKIT Copy the cost values from Table 1 into your Excel spreadsheet as shown in Figure 15. If you include additional biomass resources, you’ll need to include some cost assump- tions for these resources as well, either from local contacts, an extension agent, or a consultant. Transportation costs increase with both the distance of the haul and with time on the road. Transportation costs can be calculated based on the time truckers spend driv- ing. You can use Google Maps, Mapquest, or Yahoo Maps to estimate drive time from the forest to the proposed facility or site. Add the haul times to your Excel spreadsheet for each source county center to the proposed facility (Figure 16). Figure 15: Adding cost assumptions by resource type. Figure 16: Adding haul time. 66 Chapter 6: Do-It-Yourself Supply Curve: Tools to Help You Get Involved in an Entrepreneurial Woody Biomass Project Divide haul times by 60 to convert minutes to hours, and multiply by the two-way transportation cost to calculate a haul cost for each county (Figure 17). Add a new column titled TOTAL DELIVERED COST ($/DRY TON). Sum procurement cost, harvest and process cost, load and unload cost, and two-way transportation cost in this column (Figure 18). Figure 18: Sum costs to calculate total delivered costs by resource. Figure 17: Convert haul time to two-way transportation cost. 69WOODY BIOMASS DESK GUIDE & TOOLKIT Make the second cell in the column equal to the second quantity plus the original quantity (17,545 + 1,096 = 18,641) (Figure 23). Drag this cell down (or copy and paste it down the remainder of the table) to create a cumulative sum of quantities from cheapest to most expensive (Figure 24). You now have compiled important information about resource supply and cost. If desired, this information can be presented as a table, showing each resource, its cost per ton, the amount available per year, and the cumulative supply available up to a given cost per ton. A project planner looking for 100,000 dry tons equivalent of woody biomass per year, for example, would look down column L and fi nd that this quantity is probably available at a price of up to $44.63 per dry ton (cell K17). For comparison, examples of quantities used by actual projects are shown in Table 2. To show this information graphically, it can be converted into a supply curve, where the cumulative tons are shown as the x-axis, and the total cost per ton is shown as the y-axis. This is explained on page 73. Figure 23: Calculate cumulative tons. Figure 24: Finish calculating cumulative tons. 70 Chapter 6: Do-It-Yourself Supply Curve: Tools to Help You Get Involved in an Entrepreneurial Woody Biomass Project Another curve that may be useful is the “blended price” supply curve. This curve shows the weighted average price at the level of supply. For example: a buyer purchases 80 tons of biomass at $10.00 per ton, and then buys 20 additional tons at $20.00 per ton. The average price at the total of 100 tons is $15.00 per ton. But the blended price at the total of 100 tons is only $12.00/ton, because 80 percent of the supply was pur- chased at the lower rate. Showing the blended price is important because it explains the overall cost of biomass to a bioenergy producer. The following steps show how to add the data needed for a blended price supply curve, and then how to show both curves in an Excel graph. Add a column titled P*Q which stands for Price times Quantity. In this column, multi- ply dry tons by total delivered cost for each row (Figure 25). Table 2: Example bioenergy projects and quantities used. Example Use Resource Quantity used (dry tons/year) Energy produced Net energy produced Dakota Adventist Academy, Bismarck, ND Wood chips 517 Heat 12,100 MMBtu/year Rowan High school, Moorhead, KY Waste sawdust 756 Heat 0.15 Thermal MW McNeil Facility in Burlington, VT Wood chips 231,000 Electricity 50MW Range Fuels Ethanol, Soperton, GAa Waste wood 216,000 Ethanol 40 million gallons/yr Pyrolysis/Gasifi cationb Waste wood 1,000,000 Electricity 100 MW aUnder construction, July 2008. bAlex Green, personal communication, October 26th, 2008. Figure 25: Multiply price by quantity for each resource. 71WOODY BIOMASS DESK GUIDE & TOOLKIT Add a column titled CUMULATIVE P*Q. In this column, calculate the cumulative price from the column P*Q in the same way you generated the column CUMULATIVE SUM (Fig- ure 26). Add a column titled BLENDED DELIVERED COST. In this column, divide CUMULATIVE P*Q by CUMULATIVE COST to get the running average cost of the total supply (Figure 27). Figure 26: Calculate cumulative cost. Figure 27: Calculate blended delivered cost. 74 Chapter 6: Do-It-Yourself Supply Curve: Tools to Help You Get Involved in an Entrepreneurial Woody Biomass Project Now you should have a graph that shows the cost of a ton of biomass as well as the blended cost of a ton of biomass at any supply level along the x-axis. You can right-click on the data series and click on FORMAT DATA SERIES to add lines to the data points. Edit the graph as appropriate. Here’s an example product (Figure 33). Finally, you can convert these values into electricity generating capacity and energy units. One Megawatt (MW) of electricity is produced when about 6,600 dry tons of wood is burned. Add a column titled MW and calculate this column by dividing Cumu- lative Tons by 6,600. Add a column titled TOTAL DELIVERED COST ($/MMBTU3 ) and di- vide the original TOTAL DELIVERED COST by 16 (about a ton of dry wood produces about 16 million Btu) to get total delivered cost per million Btu. Add a column titled BLENDED DELIVERED COST ($/MMBTU) and divide the original blended by 16 to get blended deliv- ered cost per million Btu (Figure 34). Figure 33: Supply curve and blended cost supply curve. Figure 34: Calculating price/MMBtu. 3 “Btu” stands for British thermal unit, a unit of energy. In the electric industry, “MMBtu” stands for “Thousand thou- sand Btu,” which is one million Btu. Cumulative dry tons/year $50.00 $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 D el iv er ed p ri ce ( $/ dr y to n) 20,000 40,000 60,000 80,000 100,000 120,000 Total delivered cost ($/dry ton) Blended delivered cost ($/dry ton) 75WOODY BIOMASS DESK GUIDE & TOOLKIT Copy the original graph and drag the data points to show MW capacity on the x-axis and price in $/million Btu on the y-axis as shown here (Figure 35). Now a new graph is generated showing MW capacity and price in units of energy (Figure 36). Coal currently costs an equivalent of about $3.00/MMBtu in many states. You can use this new graph to indicate how many MW of capacity might be produced from woody biomass on a sustainable basis at a price competative with conventional coal energy. Figure 35: Generating graph in cost per MMBtu and MW capacity. Figure 36: Graph showing cost/MMBtu and MW capacity. Total delivered cost ($/MMBtu) Blended delivered cost ($/MMBtu) MW capacity 5.0 10.0 15.0 20.0 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 D el iv er ed p ri ce ( $/ M M B tu ) 76 Chapter 6: Do-It-Yourself Supply Curve: Tools to Help You Get Involved in an Entrepreneurial Woody Biomass Project 6.5 SUMMARY AND CONCLUSION Producing forest biomass for energy and other bioproducts generates not only ad- ditional revenue from biomass sales but also a variety of other benefi ts to landowners and communities. Financing a bioenergy project requires demonstrating that feed- stocks are available in suffi cient quantity at a low enough price. This information may also be helpful for landowners considering biomass production, community leaders examining wood as a potential way to meet growing energy needs, or a venture capi- talist searching for a good investment. In this section, several tools for developing sup- py curves to evaluate the economic availability of biomass resources were presented. This general approach can be modifi ed to refl ect resources and costs in your AOI. For information about funding opportunities for biomas projects, see Handout 6: Financing a Bioenergy Project. For examples showing economic analyses of other woodsheds, see the Supply and Cost Profi les in Appendices D through F. The Supply and Cost Profi les represent analyses from three regions of the U.S.: Alaska, Florida, and Massachusettes. Profi les were adapted from existing projects and vary in terms of the types of wood resources con- sidered, the breadth of the data, and the characteristics unique to each area and pro- vide opportunities for comparison of methods and fi ndings. This chapter was adapted from the following source and used with permission. Langholtz, M., D. Carter, R. Schroeder, and M. C. Monroe. 2007. Do-It-Yourself sup- ply curves. In Wood to energy outreach program: Biomass ambassador guide, eds. M. C. Mon- roe, L. W. McDonell, and A. Oxarart. Gainesville, FL: Florida Cooperative Extension Service, Circa 1526, University of Florida. REFERENCES Coulson, B., G. Curry, et al. 2005. Utilization of plant biomass generated from south- ern pine beetle outbreaks. Multiple Benefi ts from Sustainable Bioenergy Systems. Perth, Western Australia. Prestemon, J., J. Pye, et al. 2005. U.S. wood-using mill locations. http://www.srs. fs.usda.gov/econ/data/mills/mill2005.htm (accessed July 15, 2008). Prestemon, J., J. Pye, et al. 2007. Locations of southern wood chip mills for 2000. http://www.srs.fs.usda.gov/econ/data/mills/chip2000.htm (accessed July 15, 2008). Schmidt, K. M., J. P. Menakis, et al. 2002. Development of coarse-scale spatial data for wildland fi re and fuel management. Fort Collins, CO: U.S. Department of Agricul- ture, Forest Service, Rocky Mountain Research Station: 41. Smidt, M., B. Silveira Folegatti, et al. 2005. Costs and cost trends for forestry prac- tices in the south. Forest Landowner 64(2): 25-31. Wiltsee, G. 1998. Urban wood waste resource assessment. Golden, CO: National Re- newable Energy Laboratory: 1-177.