WOOD ENERGY IN THE SOUTHEASTERN UNITED STATES: A STRATEGY FOR SUSTAINABLE GROWTH. By: David Palange. Dr. Richter, Advisor.

Transcription

1 WOOD ENERGY IN THE SOUTHEASTERN UNITED STATES: A STRATEGY FOR SUSTAINABLE GROWTH By: David Palange Dr. Richter, Advisor May 2009

2 Abstract Economic and environmental concerns over fossil fuels are placing the Southeast United States in a position to expand its use of wood biomass for energy. The region s productive forestland, growing population, and wood products industry can help provide a sustainable, diverse and abundant supply of woody biomass much of which is currently unutilized. While federal and state policies are steering the use of wood toward large scale production of cellulosic ethanol and electricity in the Southeast, the generation of thermal energy, the most efficient use of wood, appears to be undervalued. Three market segments that can benefit economically from biomass thermal energy are highlighted: institutions, agriculture, and industry. These segments are selected based on sustainability criteria that include a rapid payback period, high demand for thermal energy, efficient use of woody biomass, proximity to fuel source, and potential for repeatability across the region. Sensitivity analyses and case studies are used to support these findings. Critical factors for implementation of biomass thermal energy in the Southeast are also identified, revealing key economic, political and social barriers and drivers. Central barriers include the lack of a formal biomass market, competition with conventional fossil fuels, and poor public perception of wood energy. Drivers that favor the expansion of wood energy systems are renewable energy tax credits, an established forestry infrastructure, and the mutual relationship between biomass removal for energy and forest management practices. The findings can be used to support government, business, and agricultural clients that are looking to invest in affordable and renewable energy projects. 2

3 Acknowledgements Thanks to Dan Richter for advising me during my project. Special thanks to John Karakash, Michael Boyette, Devon Dartnell, Michael Czarick, Dave Atkins, Garald Cottrell, Dennis Hazel for providing me with valuable information to support my research. 3

4 Table of Contents Abstract...2 Acknowledgements...3 Table of Figures...5 Introduction...6 Materials and Methods...9 Results...11 Challenges and Opportunities for Wood Fired Boiler System Implementation...11 Integration...13 Scale Effects...13 Competition in the Bioenergy Sector...14 Competition with other businesses...15 State and National Policy...16 Local Opinion...19 Potential Market Segments...19 Public Institutions...20 Agricultural Applications...28 Industry...35 Conclusions...37 References...39 Figures...42 Appendix

5 Table of Figures Table 1: Criteria for selecting market segments for wood fired boiler implementation Table 2: Names and affiliations of contacts that provided information for the case studies Table 3: Factors influencing wood fired boiler implementation in the Southeast...12 Table 4: Renewable energy incentives in the Southeast by state Table 5: Rankings of facility types by facility use factor (FUF) Table 6: Profile of Central State Hospital case study...24 Table 7: Abundance and distribution of North Carolina public and private institutions by county...27 Table 8: Percentage of North Carolina counties arranged by wood residue supply and a set of small, medium and large facilities that can be supported...28 Table 9: Profile of tobacco drying case study...29 Table 10: Sensitivity analysis for payback period depending on fuel prices and # of tobacco barns per wood fired boiler system Table 11: Overview of Georgia poultry house case study...32 Table 12: Sensitivity analysis for payback period depending on fuel prices and # of growouts per wood fired furnace system Table 13: Overview of industry case study...35 Table 14: Sensitivity analysis for wood fired steam system payback period depending on fuel prices

6 Introduction In the United States, economic, political and environmental factors are focusing national attention on renewable energy. Rising energy demand in developing countries are increasing the volatility of fossil fuel prices and adding uncertainty and risk to the US energy supply. Meanwhile, the global community has recognized the connections and risks between fossil fuel combustion, greenhouse gases, and global warming. The effects of climate change on the world s economy, health and ecosystems are expected to worsen unless greenhouse gas emissions are cut quickly in a cost effective and sustainable manner. Since 2000, biomass has been the largest contributor to the US renewable energy supply. Currently, wood and wood derived fuels comprise 2.2% of the US energy consumption and represent the largest source of biomass energy (EIA 2008). Wood is used across the residential, commercial, industrial and electrical utility sectors. Industry represents the dominant user of wood biomass, consuming 70% of US wood energy supply (EIA 2006). Within the sector, lumber and paper product facilities are the largest energy users. Residential and commercial uses of wood energy are responsible for 19% and 3%, respectively. Estimates of US wood fuel supply indicate that there is considerable potential to expand wood energy. Many studies have found that wood fuels are being underutilized. This underutilized woody biomass is comprised of small diameter wood that can be removed during fuel treatments and forest restoration projects, noncommercial timber (rotten trees, insect and disease killed trees, trees killed by natural disasters), wood residues generated from timber harvests and wood manufacturing processes, timber removed for land clearing and stand improvement, and municipal waste (construction/demolition waste and landfill) (Zerbe 2006). 6

7 In 2002, the US Forest Service estimated that approximately 240 million metric tons of woody forest residues and solid waste wood were generated in the United States. While over half was used for wood products and fuel, 47% of the total waste generated was considered recoverable for further uses (McKeever 2002). Perlack s billion ton study (2005) estimated that the 142 million dry tons of fuelwood and residues currently used in the United States could be expanded sustainably to 368 million dry tons. This 260% increase in supply would come from residues left behind at logging and land clearing sites, increased fuel treatments, and unutilized mill and urban waste residues. Multiple technologies are available that can turn wood into energy. Currently, most wood biomass is used as a feedstock for electricity generation via a condensing steam turbine. However, this technology has high capital costs along with relatively low operating efficiency. The highest yield of energy per unit of biomass is found in thermal energy or heat (Rakos 2008). Thermal energy can be created through wood combustion, wood gasification, and combined heat and power (CHP) (USDA 2004). The heat from the wood is transferred to a steam or hot water boiler and then piped to various buildings. The Southeast United States is in a position to potentially expand the use of biomass thermal energy. The region s population and its demand for energy are growing quickly. According to the 2000 US Census, the population is projected to grow 15.5% between 2000 and This numbers clearly require the region to increase its energy supply to meet rising demand. The extent to which wood energy can be expanded in the Southeast depends on the availability of woody biomass in the region. The Southeast region s productive and abundant 7

8 forestland, active forest industry, and development are a strong base for woody biomass supply. With its temperate climate and soils, the forestland demonstrates a relatively high potential growth rate compared to other US regions. As of 2006, the Southeast was responsible for 15% of the nation s net annual growth (U.S. Forest Service, 2007). With a highly productive resource base, the region s forests can sustainably generate more biomass per acre per year than other regions and thus meet a higher demand for biomass energy. The Southeast also has an active forest products industry. In 2006, the region was responsible for 28% of the nation s annual removals by volume (U.S. Forest Service, 2007). This activity consistently generates wood residues at harvest sites and mills that are or can be used for wood energy. A 2005 National Renewable Energy Laboratory (NREL) study by Milbrandt estimated that approximately 17.8 million dry tons of woody biomass are available from forest residues generated from logging operations, unused residues generated at both primary and secondary mills, and urban wood residues (Figure 1). This number was limited to five Southeastern states: Virginia, North Carolina, South Carolina, Georgia, and Florida. While the Southeast has the opportunity to benefit from wood energy, few investments have yet been made in project construction. Many states have quantified the potential supply but do not address how to utilize the resources efficiently and sustainably. The few studies that do focus on renewable energy focus on the role of wood residues in meeting state and national renewable energy standards for electricity and liquid fuels. The objective of this report is to present the status of the biomass thermal energy market and highlight opportunities for businesses, institutions and individuals for investment in small scale wood fired boiler systems. 8

9 Figure 1: Volume and type of wood residues available in the Southeast United States. The Southeast United States was defined as Virginia, North Carolina, South Carolina, Georgia and Florida. Materials and Methods In this report, I focus on opportunities to expand the use of wood residues for thermal energy applications. In my analysis, I identify drivers and barriers for implementing wood fired boiler systems in the Southeast United States and identify market segments where wood energy systems could be deployed economically and sustainably. For the study, the Southeast region was defined by the USDA Forest Service and consists of five states: Virginia, North Carolina, South Carolina, Georgia and Florida. The drivers and barriers of deploying wood fired boiler systems were identified through a literature review and informal interviews with experts. They were categorized into six factors of bioenergy implementation adapted from Roos et al (1999). The six factors of the framework are scale effects, integration, competition in the bioenergy sector, competition with other businesses, national and state policy, and local opinion. 9

10 Opportunities for market expansion were identified by examining non wood processing market segments that currently operate boiler systems to generate thermal energy. Wood processing facilities were not considered many of them converted to wood energy during the energy crises of the 1970 s (Sedjo 1997). Each sector had to fulfill five criteria to be considered a viable option for wood fired boiler systems (Table 1). The new market segments must recover capital costs quickly through locally sourced fuel and high thermal energy demand, minimize risk by limiting the supply needed for operation and demonstrating success through current projects, and have many similar facilities across the entire region that could be converted to wood energy. A time period of 0 15 years was used as an acceptable simple payback period and low wood demand was assumed to be less than 25,000 green tons per year. Case studies were described for three market segments that matched the criteria. Information for the case studies was compiled using phone and face to face informal interviews as well as correspondence. The contact person for each case study is listed in Table 2. After identifying the market segments, sensitivity analyses were conducted to determine their payback periods as affected by fuel prices and project specific variables. Assumptions for the analyses are described in detail in Appendix. 10

11 Table 1: Criteria for selecting market segments for wood fired boiler implementation. Criteria Description Proximity to fuel source Facilities and industries that are located within 50 miles of their wood supply Capacity for rapid payback Focus on facilities with uniform thermal heat demand and payback periods of 0 15 years Low Demand Target projects that require less than 25,000 green tons/year Proven Track Record Demonstrate success of similar projects using demonstration projects, case studies and research. Replicable Technology can be replicated at similar facilities across the region Table 2: Names and affiliations of contacts that provided information for the case studies. Sector Subsector/facility Contact Organization/Business Institution Central State Hospital Devon Dartnell Georgia Forestry Commission Agriculture Tobacco drying Michael Boyette North Carolina State University Agriculture Poultry houses Michael Czarich Devon Dartnell University of Georgia Georgia Forestry Commission Industry Chemistry/Food Industry Garald Cottrell Enerphase Industrial Solutions Inc. Results Challenges and Opportunities for Wood Fired Boiler System Implementation Successfully implementing wood fired boiler systems in the Southeast will depend on many economic, political and social factors. While there have been significant advancements in boiler technology in the past decades, the market remains small. Using the Roos et al (1999) framework, drivers and barriers for biomass boiler system implementation were organized into 11

12 six factors (Table 3). The central barriers are taken to be the lack of a formal biomass market, competition with conventional fossil fuels, poor public perception of wood energy. Key drivers that favor the expansion of wood boiler systems are renewable energy tax credits, an established forestry infrastructure, and the synergy between biomass removal for energy and forest management practices than enhance forestland. Table 3: Factors influencing wood fired boiler implementation in the Southeast. Factor Integration Scale Effects Competition in the bioenergy sector Competition with other businesses State and National Policy Local Opinion Description Fuel is a waste product from wood processing and urban waste Forest management activities can be combined with wood biomass removal Integration with forestry industry s full infrastructure Wood fired boilers are coproduced with other boiler systems Wood chip prices vary by geographic area Standards have not yet been established for wood chips, boilers, installation, emissions, or safety Domestic boiler market is limited to few locations on East Coast Marketing of wood boiler technology is needed to expand wood fuel business Little competition in domestic boiler industry market Dependence on informal biomass market increases risk Competition for feedstock with utility companies and cellulosic ethanol plants Competition from natural gas in the heating market Declining pulp and paper market frees up wood supply Renewable tax credits for biomass Renewable energy standards for electricity and liquid fuels Potential air quality regulation for small wood fired boiler systems Positive local opinion of biomass for job creation and rural economic development Public perception that wood energy is unreliable and dirty Ecological concerns over biomass removal 12

13 Integration Integration is valuable in driving down the costs of the technology by reducing transaction costs. Some of the best examples of integration are the generation of feedstock by current industries, the infrastructure used by the forest industry (i.e. personnel, mills, transportation), and the co benefits to be derived from forest management and biomass use for energy. Wood residues are currently produced by the forestry and wood products industries and serve as the input for wood boiler systems in exchange for costs of chipping and transportation. Similarly, the urban wood residues sent to landfills can be diverted to energy use at minimal cost and perhaps for a benefit to municipalities. The mutual dependence of forest management efforts and biomass harvesting for energy provides a great opportunity for wood energy development. The Fuels for Schools program in the Intermountain West has helped support mechanical treatments of fire prone areas thereby magnifying the impact of the National Fire Plan funding to reduce wildfire risk. In return, schools have been able to benefit from economic savings from using biomass for thermal energy. Forest management practices such as restoration and thinning can offer benefits while improving the health and productivity of forestland. Tens of millions of hectares of Eastern forest can benefit from restoration and conservation forestry (timber stand improvement thinnings) due to a legacy of high grading and general mismanagement. Scale Effects Cost advantages can be achieved by expanding both the scale of the biomass and boiler market. The lack of a biomass market in the Southeast has resulted in the absence of standard pricing for wood chips, a common fuel for wood fired boiler systems. Prices for wood chips 13

14 vary widely depending on the quality, source of the wood, and local competition with other buyers and sellers. As in the case with wood pellets, developing standards for wood chips is a critical first step in stabilizing prices and ensuring quality. An active market would tend to encourage consumer confidence in fuel reliability. With more vendors of fuel, buyers would have backups in times of supply disruptions. Fuel dealers and brokers can play a critical role in connecting local markets up until the area that still makes wood economically competitive. The market for biomass boiler systems can also benefit from economies of scale. Boiler manufacturers are not widely distributed in the region and competition is limited. Establishing formal biomass markets and driving demand would increase competition for equipment, decrease prices, and open up opportunities for further research and development. Marketing and education of the biomass boiler technology would also facilitate connection between consumers and the technology. Competition in the Bioenergy Sector Currently, there is a lack of committed sellers and buyers of woody biomass and small biomass boiler systems in the Southeast. Hurst Boiler of Georgia is one of the few established biomass boiler manufacturers in the Southeast and some buyers have had to turn to manufacturers outside of the region (Michael Boyette 2009, pers. comm., Raleigh, NC). As the demand for wood fired boiler systems increase, regional competition will likely arise and force equipment prices down. At this time, informal biomass markets, which involve individual foresters and mills, are the main venue of buying woody biomass. These small markets are more likely to experience fluctuations in price than large ones and place buyers at higher risk of securing a consistent energy supply. A larger network of biomass buyers and sellers would be 14

15 critical in mitigating these risks. While supply contracts can help decrease price volatility, longterm contracts are rare at the level of small facilities. They are far more common with electrical utility companies. Competition with other businesses Competition from other industries and from other fuel sources can be major barriers to implementing wood fired boiler systems. There is growing demand for woody biomass by the wood pellet industry, electrical utility companies, and ethanol plants. The largest expansion in wood utilization for energy is for cogeneration and electricity production in the Southeast. Thirteen current and proposed projects in Florida, Georgia and North Carolina will consume 8.7 million tons of wood to generate an average of 63 MW of electricity (Timber Mart South 2008). Four of these thirteen projects will generate 100 MW or more. Multiple wood pellet plants are being built and are predicted to consume between 2.6 and 3.5 million tons of woody biomass. While wood pellets can be sold for energy use, it is unclear how much will be used for other common uses including animal bedding. Additionally, four cellulosic ethanol plants in Georgia, Florida, and South Carolina are expected to consume 2.3 million tons of wood to produce 180 million gallons of fuel. Even with ample supply of woody biomass, wood fired boiler systems still have to face competition from the well entrenched natural gas industry. Natural gas is the most common heating fuel in the Southeast and is used in the majority of boiler systems. Since 1999, commercial natural gas prices have been rising in the Southeast (Figure 2). The recent economic downturn, however, has led to a drop in price (EIA 2009). Given that investments for biomass combustion systems are currently about % greater than fossil fuel system, 15

16 conversion of boilers from natural gas to wood will be difficult to justify when natural gas prices are low (Bergman 2008). Figure 2: Commercial natural gas prices in Southeast, 1980 to State and National Policy Government policies can play a critical role in promoting or hindering wood fired boiler systems in the Southeast. Renewable energy standards, targets set by state or federal government to produce a minimum percentage of renewable energy, may act as barriers to technology adoption. The Renewable Portfolio Standard (RPS) and Renewable Fuel Standard (RFS) are both types of renewable energy standards that are driving biomass use by electricity utility companies and ethanol producers respectively. As of 2007, twenty five states and the District of Columbia had adopted an RPS, a requirement that utilities displace a certain percentage of fossil fuel based electricity sales with renewable energy (EIA 2007). The only 16

17 Southeastern states to adopt an RPS are North Carolina and Virginia. However, a Federal Renewable Electricity Standard is being proposed in Congress that would require 25% of US electricity generated to come from renewable sources by Demand for woody biomass is likely to rise considerably in response to the Renewable Fuels Standard (RFS). Established in 2005, the RFS is a national mandate to displace 36 billion gallons of fossil fuel based with biofuels by 2022 (EPA 2008). While the United States currently meets a majority of its target through corn ethanol production, advances in cellulosic ethanol technology will allow industry to exploit wood biomass as a feedstock. When implemented together, a national RFS and RPS is projected to have a pronounced effect on woody biomass demand. A study by Galick et al. (2008) estimates that North Carolina could meet its state RPS of 12.5% renewable energy through forest biomass residues up until Given a national RPS/RFS of 25%, however, the state s supply would only be projected to last until 2012 before other sources of wood could be tapped. Compared to other regions, the Southeast receives few biomass harvesting subsidies from the federal government to mitigate fire damage. The National Fire Plan (NFP) was enacted in 2000 following a severe wildfire season that resulted in millions of dollars in damages, especially along the wildland urban interface (DOI and USDA, 2008). The NFP has allocated more funding towards mechanical treatments of forest areas to reduce the risk of fire. In 2008, around 25,000 acres of land were mechanically treated by federal agencies across the five Southeastern states, which equated to only half of the area treated in Montana (DOI and USDA, 2009). This trend can be attributed to the relatively small percentage of federally 17

18 owned forestland in the region (US Forest Service, 2007). In some areas, the harvested wood is being sold to local institutions to use for thermal energy production. While there are many drivers for electricity and cellulosic ethanol production, Southeastern states offer renewable tax credits that can drive the purchase of wood fired boilers. Four of the five states offer incentives to use biomass for energy and three of the five support the use of biomass for thermal energy applications (Table 4). South Carolina was one of the only states to develop a tax credit focused solely on biomass. It was far more common for states to offer the renewable energy credits for a wide range of sources including solar, wind, hydroelectric, etc. Florida only provided incentives to use biomass for electricity production (DSIRE 2009). Table 4: Renewable energy incentives in the Southeast by state. STATE Incentive Benefit Sectors Thermal NC Renewable Energy Tax Credit 35% Commercial and Industrial Y SC Biomass Energy Tax Credit 25% Industrial Y GA Clean Energy Tax Credit 35% Commercial and Industrial Y FL Renewable Energy Production Tax Credit $0.01/kWh Commercial N VA None N/A N/A N Advanced woody combustion technology has addressed many issues around air quality for wood boiler systems. While wood combustion emits less greenhouse gases, CO and sulfur dioxide than fossil fuels, it is responsible for emitting particulate matter at a higher rate than natural gas and oil (EPA 2003). The US Environmental Protection Agency is planning to define standards for small commercial and institutional boilers that would set limits on the amount of hazardous air pollutants under the Clean Air Act. The ruling will most likely affect wood boilers 18

19 less than 20 million MMBtu/hour and could require installation of extra pollution devices estimated at an additional $100,000 (Dave Atkins 2009, pers. comm., Missoula, MT). Depending on the final standards, the wood boiler market could suffer a large economic setback and escalate the already high upfront costs. Local Opinion Wood energy is valuable to local communities for its ability to support local business and create jobs. Woody biomass must be collected locally to remain economically competitive with fossil fuels. In general, most studies recommend that a maximum transport distance of about 50 miles though some operations may be profitable up to 100 miles (Arnosti 2008). As a result, commercial users contract with local foresters, mills, and wood processing facilities to secure their energy supply. Skeptics of wood energy include environmental groups that question the impacts of removing residues from forest ecosystems and individuals that associate wood energy with bad air pollution. Potential Market Segments Three market segments with potential for wood fired boiler implementation were identified using economic and sustainability criteria defined in the methodology, research on state and federal government wood energy programs, and informal interviews with government and industry representatives. They were public institutions, agricultural applications, and industry. The sections that follow provide background and analysis for each segment s viability. 19

20 Public Institutions Background Generating thermal energy from wood biomass at public institutions is not a new concept. Back in the early 1980 s, Southeastern states looked to public institutions as a strong candidate for wood fired boiler systems. Between 1979 and 1985, the Georgia Forestry Commission installed 11 wood boiler systems at five schools, three state correctional institutions, two hospitals and at its central facility. Given the cost of wood at the time, wood energy was projected to save the state $1.4 million annually (Allen 1984). In North Carolina, at least two facilities Dorothea Dix Hospital and Southern Correctional Facility were converted to wood boiler systems during the 1980 s (Garald Cottrell 2009, pers. comm., Greensboro, NC). Today, almost all of these facilities have ceased the use of wood boilers. Although the Southeast deployed the technology in a short span of time and across many institutions, a majority of these facilities eventually replaced wood with natural gas when fossil fuel prices dropped. Interviews with employees at the facilities indicate that the older wood boiler systems required more effort to operate than natural gas boiler systems. At the time, wood boiler systems were not automated and required extra labor and maintenance to sustain the operation. Furthermore, more logistics were involved with wood energy in coordinating the delivery of the wood chips. While Southeast institutions gave up on wood energy at institutions, Vermont forged ahead and established itself as a national leader. The state first installed a wood fired boiler system in 1986, beginning the first of what are now 35 wood boiler installations at its public K 12 schools (BERC, 2009). The Vermont Fuels for Schools program has been responsible for 20

21 converting 20% of the state s schools to wood energy and over $2 million in annual savings. This model was used to develop the Fuels for Schools and Beyond program in 2001, a regional initiative based in the Intermountain West region of the United States. Launched in 2001, the Fuels for Schools and Beyond program is a multi state effort to deploy small scale wood biomass combustion systems. The goal of the partnership has been to promote and facilitate the use of forest biomass from government owned lands for heating, cooling, and powering small scale facilities (Fuels for Schools and Beyond, 2009). As of 2009, sixteen wood boiler systems have been installed at facilities including K 12 schools, correctional facilities, and universities (Dave Atkins 2009, pers. comm.). Montana has embraced the technology more than any other state, hosting eleven of the sixteen projects completed to date. Lessons from Fuels for Schools Programs The Vermont and Intermountain West programs are valuable case studies to understand the feasibility of implementing wood fired boiler systems at public institutions in the Southeast. They have established that many different types of institutions have demand for thermal energy and demonstrate economic savings and quick payback periods. These initiatives provide valuable knowledge and support for deploying wood boiler systems in the Southeast, though climactic and economic differences must be taken into account. Both programs have primarily focused on K 12 schools and the use of wood as a source for space heating. This strategy is feasible in the Northeast and Intermountain West regions due to climate and the prices of fossil fuels relative to wood energy. With regards to climate, states like Montana and Vermont are located in the higher latitudes of the United States and 21

22 have a higher and more consistent demand for heating than the Southern regions. As a result, they rely on a larger supply of heating fuels per year. Besides climate, another critical factor in justifying the programs is the cost of thermal energy using fossil fuels compared to wood. Historically, Vermont has depended on electricity and fuel oil to provide heating. Electricity is one of the least efficient forms of energy to generate heat, and due to limited natural gas pipeline infrastructure, fuel oil is generally the only viable heating fuel readily available. As a highly forested state, Vermont was in a position to capitalize on its local wood resources to provide a more economical heating fuel substitute. Although the Intermountain West has access to heating fuels, the fire prone region generates a large supply of woody biomass through federally funded mechanical fuel treatments. This supply of low value biomass is integral to making wood an economical source of energy. The high demand for thermal energy combined with the abundant supply of woody biomass has justified the upfront costs of installing wood energy systems in the Northeast and Intermountain West regions. While the Southeast has an abundant supply of woody biomass, the largest barrier to biomass thermal energy is climate. Compared to the North Carolina, both Vermont and Montana have 2.3 times the number of heating degree days in 2008 (NOAA 2009). Located at a lower latitude, the Southeast has a shorter winter season and lower space heating demand than the North. Assuming all other factors are equal, facilities would require more time to recoup upfront capital costs of wood fired boiler systems. Thermal energy demand, however, is not equal across all facility types. Depending on how facilities use thermal energy, certain facilities can have heavier or more uniform thermal energy demand than others. The facility 22

23 utilization factor (FUF) refers to the fraction of time that a boiler system is operating at full capacity. A higher FUF indicates that the facility has more consistent or high demand. Facilities that have a sustained demand for multiple uses of energy, including space heating, hot water, and/or power will have a higher FUF. A report assessing Montana s opportunities for wood fired boiler expansion developed a list of facilities and their corresponding FUF (Table 5). The results indicate that hospitals, assisted living places, and rest homes have a FUF more than two times greater than schools (Emergent Solutions, 2004). Prisons and universities were not included in the analysis, but would also be ranked high on the list. These represent institutions that are more likely to use thermal energy for many purposes, and increase the heat demand and economical feasibility of wood energy systems. (FUF) Facility Type A scenario analysis confirmed that facility use factors are a significant factor in driving heat demand. The comparison revealed that on average hospital in the Southeast would have more demand for thermal heat than a school in the Northeast (Figure 3). While the Northeast has more than double the amount of heating degree days than the Southeast, the hospital facility use factor, which is 2.5 times that of the school, compensates for the difference. A case study of a Georgia based hospital provides a valuable example 0.15 Assisted Living 0.15 Hospital 0.15 Rest Home 0.06 Day Care 0.06 School 0.03 Church 0.03 Public Assembly 0.03 Retirement Center Table 5: Rankings of facility types by facility use factor (FUF). A higher FUF signifies more uniform demand for thermal energy. that institutions can achieve economic savings using wood boiler systems in the Southeast. 23

24 Figure 3: Comparison of hospital and school heat demand based on facility use factors and heating degree days. Case Study: Central State Hospital Table 6: Profile of Central State Hospital case study Facility Wood fired boiler system Wood supply Wood demand Annual Cost savings Central State Hospital, the largest mental hospital in Georgia Installed in 1985; produces 15,000 pounds of steam per hour Green wood purchased from local pallet manufacturing company at $14/ton 25 tons/day $1 million compared to natural gas The Central State Hospital (CSH) in Midgeville, Georgia is the state s largest facility for mental illness and developmental disabilities. In 1985, a wood fired energy system was installed as part of a statewide plan to increase woody biomass utilization in public 24

25 institutions (Allen 1984). The Georgia Forestry Commission (GFC) completed 11 projects in total at schools, correction facilities, and hospitals. The wood boiler system was installed at CSH to generate steam for space heating, hot water and for sterilization processes. According to the GFC, the steam plant currently produces 15,000 pounds of steam per hour (pph). With the addition of an emissions control device known as an electrostatic precipitator, the plant could run at its full capacity of 25,000 pph. Green wood chips are purchased from a pallet manufacturing company located approximately 35 miles away. On average, the wood fired system consumes 25 tons of wood chips a day or the equivalent of one tractor trailer load. The hospital stores 125 Wood chip storage area at Central State Hospital (Source: Dartnell) tons of wood chips on site, which equates to a five day supply. In addition to the wood boilers, the hospital also generates steam using natural gas boilers and has two backup systems utilizing fuel oil and propane. In 2003, 18 years after the initial installation of the wood fired system, Central State Hospital was still realizing savings by using woody biomass. With a delivery price of $14 per green ton of wood, the hospital saves $1 million per year compared to if it had used its natural gas boilers. In 2006, the cost of steam using wood was calculated as $2.50 per 1000 pounds at 95 psi, 67% less than natural gas. The CSH case study demonstrates how wood biomass can be a cost effective energy source at public institutions in the Southeast. The characteristics that make this project 25

26 successful are access to local and affordable wood fuel and the facility s year round thermal energy demand. Developing a relationship between the wood chip supplier has allowed the hospital to keep its storage capacity and costs low through weekly deliveries. While the dependence on one supplier does have its risks, the CSH has fossil fuel boiler systems to meet heat demand in times of supply disruptions. Potential to Supply North Carolina Institutions Compiling data for North Carolina s institutions reveals many opportunities to potentially deploy wood fired boiler systems. The data show that there are 351 high FUF institutions in the state. Hospitals are the most common and widely distributed with 160 facilities scattered across 85 of the state s 100 counties (Table 6). Likewise, at least one prison and community college is located in over half of the counties while one or more universities can be found in one out of every four counties. The total amount of institutions is a low estimate since the analysis excluded similar facilities such as assisted living and nursing homes. Not all facilities will be equal candidate for conversion. The availability of woody biomass supply is used to determine how many facilities each county can supply sustainably. North Carolina has many counties with woody biomass resources to supply wood to the state s institutions. The results of the GIS biomass analysis reveal that the majority of the counties have ample biomass supply to accommodate the conversion of multiple facilities to wood fired systems (See Figures section). The analysis revealed the number and size of facilities that North Carolina counties can support (Table 7). This analysis does not consider facilities located in counties with low biomass supply that are on the border of counties with high biomass supply. 26

27 Table 7: Abundance and distribution of North Carolina public and private institutions by county. Facility Type Quantity % Counties with Facility Type Hospitals Prisons Community Colleges Private Universities Public Universities Total 351 While both facility use factors and wood supply will be critical for sighting, wood boiler systems, the number of facilities that would be converted would depend on many other sitespecific factors. Some of the main factors include the size, age, and fuel type of the current boiler systems. Additionally, other variables that would affect the feasibility of the projects include space constraints for wood fuel storage, accessibility to substitute heating fuels, and whether institutions have forestland under their control. 27

28 Table 8: Percentage of North Carolina counties arranged by wood residue supply and a set of small, medium and large facilities that can be supported. SMALL 6.7 MMBtu/hr (5,000 tons) MEDIUM 9.3 MMBtu/hr (10,000 tons) LARGE 33.5 MMBtu/hr (25,000 tons) Wood biomass (tons) % Counties Min Max Min Max Min Max Agricultural Applications Two activities within the agricultural industry are potential candidates for wood energy system deployment: crop drying and raising broiler chickens. Both activities currently rely on liquid propane gas (LPG), a fossil fuel, to provide thermal energy. The analysis revealed that they could recover the capital costs of converting to a wood energy system in the span of two to fifteen years depending on the price of the wood fuel relative to LPG. The activities met the criteria through their demand for thermal energy, low consumption of wood fuel, and potential for large deployment given the prominence of these agricultural activities in the region. All 28

29 information for the analysis was based on demonstration projects and initial research by government and university institutions. Case Study: Tobacco drying with wood in North Carolina Table 9: Profile of tobacco drying case study Current heating fuel Cost of Wood fired boiler system Number of potential facilities (North Carolina) Wood fuel demand Payback Liquid Propane Gas $55,000 + $1000 of infrastructure per structure 18,000 19,000 tobacco barns green tons per farm (up to 6 barns) 4 5 years Dr. Michael Boyette, a professor in the Biological and Agricultural Engineering Department at North Carolina State University, sees real potential in the use of small scale wood boiler systems to assist farmers in drying crops. Multiple commodities in North Carolina require drying, including tobacco, grains and peanuts. Additionally, the same technology can be used to heat greenhouses in the offseason. Historically, many farmers throughout the state rely on fossil fuel based energy to heat their drying barns and greenhouses. North Carolina is the number one tobacco producer in the United States. In 2008, the state produced nearly 385 million pounds of flue cured tobacco (USDA 2007). In general, farmers use liquid petroleum gas (LPG) to heat their tobacco barns, a week long process to cure tobacco. While LPG prices have dropped within the last year, there has generally been an upward trend. Boyette estimates that there are between 18,000 19,000 tobacco barns across the tobacco growing region, each curing barn is used 6 7 times per year, and each cure requires between 250 and 300 gallons of LPG. Overall, the total use of LPG for tobacco ranges between 27 and 40 million gallons per year. 29

30 Dr. Boyette s optimism in wood boiler systems is mainly due to advancements in boiler technology. The newest systems are automated, are designed for less than one MMBtu/hr, and have built in emission controls. Water stoves, the previous technology, were notorious for having limited fuel capacity, requiring high maintenance, and emitting high amounts of air pollutants. Under a grant, NCSU purchased a 900,000 Btu hot water boiler from a Pennsylvaniabased company for $55,000. The boiler technology can store 5 tons of wood chips, which can run a drying barn for a week without the need for any maintenance or upkeep. The wood boiler system can be used most efficiently if the farm operates multiple curing barns and has other facilities that could use thermal heat in the off season. Optimally, one wood boiler could operate up to six tobacco barns on a single farm, providing between cures a year. Outside of the drying season, which runs between February and April, the boiler could be used to heat greenhouses and provide space heating to a farm shop. According to Boyette, adding piping, radiators and pumps for each barn or greenhouse would add an additional $1000 per structure to the overall capital costs. Converting to wood boilers requires upfront capital costs, but this initial investment is quickly offset by the cost of wood energy. While boiler systems are dropping in price, the upfront costs still remain the biggest barrier to farmers. Unlike a used tractor, which can be sold by a farmer to subsidize a new one, LPG heating systems have no value once they are removed. However, assuming that 3 tons of wood chips are required per cure and a price of $20/ton for green wood, the cost per unit of energy is less than eight times that of LPG. Given that current propane prices are around $1 a gallon, Boyette estimates the simple payback period of the wood boiler system is in the range of 4 to 5 years. 30

31 Crop Drying Sensitivity Analysis A sensitivity analysis reveals how the payback period is directly tied into the price differential between LPG and wood chips as well as the number of barns (Table 8). The shortest payback period was achieved in Scenario 4 at 2.5 years. The price scenario was representative of 2006, when LPG cost $2 per gallon and delivered wood chips were available at $20/green ton. To achieve the cost savings, the farmer must operate the wood boiler system across six barns. Scenario 4 would require that the farmer live within close proximity to a wood fuel source and have a larger tobacco drying operation. If these conditions cannot be met and the price differential between LPG and wood shrinks, the payback could become as large as 18.2 years as seen in Scenario 9. While 2009 LPG prices have dropped down to $1 per gallon and below, there is a low probability of wood chips reaching $60/ton. Most delivered wood chips run between $20 and $50 per green ton. Therefore, Scenario 5 represents a more realistic worst case scenario at 13.3 years. The results are fairly conservative since the payback periods do not consider the economic savings of wood for heating greenhouses and farm shops in the off season. 31

32 Table 10: Sensitivity analysis for payback period depending on fuel prices and # of tobacco barns per wood fired boiler system. Scenario $/ton wood LPG ($/gallon) # Tobacco Barns Payback Period Annual cost savings $5, $11, $12, $24, $4, $8, $11, $22, $3, $6, $9, $19,793 Case Study: Wood furnaces in Georgia poultry houses Table 11: Overview of Georgia poultry house case study Current heating fuel Liquid Propane Gas Cost of Wood fired furnace system $25, Number of potential facilities (Georgia) 2,265 farms with poultry houses producing 1.4 billion heads a year Wood fuel demand tons/year per poultry house Payback 7 19 years Georgia is the top producer of broiler chickens in the United States, chickens raised specifically for meat production (USDA 2007). In 2007, the state produced approximately 1.4 billion heads of chicken on 2,265 farms. A majority of farms grow chickens in poultry Wood furnace unit in a Georgia poultry house (Source: Dartnell) 32

33 houses, buildings that measure about 500 feet long by 40 feet wide and house up to about 30,000 chickens. These poultry houses require various levels of heating throughout the development process of the birds, many of which reach full maturity after six weeks. The most common heating system on farms has been propane boilers. In August 2007, the Georgia Forestry Commission and University of Georgia received a USDA grant to test a wood furnace system on two commercial poultry houses. The demonstration site is located at the Aiken Poultry Farm, which produces poultry for the fast food market. Each house holds an average of 30,000 chickens that fully mature after six weeks. While various levels of heating are needed throughout the process, the poultry houses must be heated to the highest temperatures to promote the critical development of the population. The increase in propane prices over the past few years has caused poultry farmers to investigate alternative heating systems. Coal, used motor oil, and biomass all represent alternative fuels to propane. The main issue with switching to a non propane heating system is obtaining uniform and consistent temperatures throughout the poultry houses (University of Georgia, 2008). Propane systems have multiple brooders/furnaces dispersed throughout the house and each is controlled by temperature sensors. This setup enables each area of the poultry house to be individually regulated. On the other hand, alternative energy systems have less heat exchangers throughout the house, often resulting in a slower response to temperature changes and less uniform heating. Despite the apparent disadvantages of alternative energy systems compared to propane, improved management can mitigate the issues. The Georgia based demonstration project encountered obstacles early on in the project, but consistent monitoring and 33

34 adjustments have increased the efficiency and decreased the maintenance requirements of the system. Early on, slag, a material created from the combustion of wood pellets, was covering the igniters and required removal every 48 hours. A change in the design of the furnace was made to capture the slag and pushed back removal until the end of the flock cycle. Installation of a new ignition system and monitoring sensors improved the efficiency of the system from 40% to 70%. The wood pellet furnaces have since been developed to use more wood fuels, including wood chips, sawdust and shavings. Compared to the two propane based poultry houses on the farm, the research team is starting to see a clear cost advantage to using wood. While the cost per Btu favors wood over propane, the use of wood may also provide a heating environment more beneficial to the health of the flock. The combustion of propane generates a high volume of water vapor, thereby escalating the humidity in the barns. The researchers calculated a 20% increase in humidity when propane is used over wood, which produces a dryer heat. Extra humidity creates a damp environment in the houses and may result in an increase in respiratory issues and foot disease in the flock. Furthermore, it also has been shown to increase ammonia levels, which have been linked to reductions in feed consumption and weight gain (Kocaman et al. 2006). The next step in the process is to measure the live weight gain and mortality rates of the flocks in both the wood and propane heated poultry houses. The results will be used to quantify the impacts of the source of heat on the health and yield of the flocks. Poultry House Sensitivity Analysis As in the case of the crop drying scenarios, the price differential between LPG and wood chips and the consistency of use have a significant impact on the payback period. Scenario 4 34