Prepared by Ed Johnstonbaugh, Penn State Extension Westmoreland County
In September of this year, PJM (the organization that coordinates wholesale electrical power in the Northeast US) led an event in Columbus, Ohio, that among other things began a discussion about carbon credits in the PJM markets. The PJM market has left the existing coal-fired plants and nukes in a precarious position, where they are unable to pay for their operating costs at the current hourly market clearing price. PJM recognizes that these plants that maintain at least a 90 day supply of fuel provide resiliency to the marketplace that would go away if these generators went out of business. But key to this notion from PJM’s perspective is a carbon market. Shortly after the confab in Columbus, the Secretary of Energy asked FERC to establish tariffs for coal and nuke generators that have at least 90 days of fuel on hand so that they had an incentive to stay in business because of the resiliency they bring to the grid, recognizing that the existing market doesn’t properly value this benefit. The Secretary of Energy further noted that they are currently undercollecting their operating costs and may not stick around otherwise. That resulted in FERC issuing a Notice of Proposed Rulemaking (NOPR) that closed for public comment on October 23. It appears that the PJM Confab in Columbus and the Secretary of Energy’s request of FERC are linked.
If at PJMs request carbon emissions become regulated and a carbon credit market develops, biochar derived from biomass stands to be a major player in competition with convention coal to offset CO2 emissions either as a direct substitute or as a tradable commodity to be purchased by CO2 emitters who must or choose to exceed thresholds. Often referred to as biocoal biomass that is heated to between 300°C and 400°C in an oxygen-deprived atmosphere for about an hour earns the title. In this carbonized form with most of the moisture and volatile compounds driven off in the form of Syngas, the remaining biocoal is reduced in weight by 3/5 with a remaining heat capacity about three times the original BTUs per ton. Depending on the feed stock, the heat content can range from 20 MMBTU to 24MMBTU per ton. Free of moisture and volatile compounds, biochar is easily ground into a small particle size suitable for mixing with ground coal for injection into conventional coal boilers. In this small particle form, biocoal can be loaded pneumatically and transported in bulk tankers transported by truck, barge or train economically.
Storage of this largely pure carbon product can be inexpensive because it won’t compost like raw biomass and can be left in a hydrophobic state that resists the absorption of water.
The feedstock for biocoal can be any low-value woody material, much of which is currently discarded or used as mulch. There is also a large supply of wood chips like those formally used in the paper pulp industry that has, by in large, been off-shored. Many forest landowners could be engaged in this market that would sustainably harvest small round woods that have little to no value as saw timber and generally compete for water and nutrients with preferred species of value and superior genetics.
The business plan will build on the coming implementation of a carbon market and leverage the value of carbon neutral electric generation and the credits that it will originate. So biomass energy derived from primarily woody biomass converted to biochar and branded as Biocoal can be sold to traditional coal-fired generation plants where substitution of one ton of Biocoal for a ton of traditional coal constitutes one carbon credit. Likewise for smaller scale generators who may be operating a combined heat and power plant may choose to operate using only Biocoal. The combustion of one ton of Biocoal likely will originate one Carbon Credit that the plant operator can sell into the market to other coal-fired generators who are not cofiring Biocoal but still have an obligation to curtail CO2 emissions. That is provided the plant operator has met their CO2 reduction obligation.
Here is one possible scenario of how it could work:
- Woody biomass will be purchased at an average per ton price of $25.00 or about $3.00 per MMBTU ($25.00/8 MMBTU/Green Ton).
- At a number of Torrefaction facilities located throughout the PJM footprint (next to existing power plants) the assorted woody biomass supplies will be blended and torrefied into Biocoal. Locating these torrefaction facilities next to power plants allows them to use waste heat. This heat source in combination with the synthetic gas from the torrefaction process will provide all the process heat needed for the carbonization of the woody biomass to Biocoal.
- Once the biocoal conversion is complete, the tonnage will be reduced by a ratio of 5 to 2 but the BTU content will have increased by a ratio of about 1 to 3 with the post conversion heat content averaging 22 MMBTU/ton. Typical heat content for the coal being replaced is approximately 24 MMBTU so Biocoal is considered a “drop-in” renewable fuel when replacing coal1.
- Biomass purchased at $25 per ton reduced by a ratio of 5:2 with an increased heat content at a ratio of 1:3 would be valued at $67.50 per ton for a heat content of 22 MMBTU/ton or $3.07 per MMBTU. Coal prices at this time in Northern Appalachia are around $50/ton setting a baseline price of $2.08 per MMBTU2. The price difference therefore that needs to be bridged to make Biocoal equivalent to conventional coal is $17.50 per ton.
The complete combustion of one ton of coal produces 5,720 pounds of CO2 or 2.86 tons of CO2. If the combustion of one ton of Biocoal displaces one ton of coal and produces one Carbon Credit what should the price be to balance the market?
In 2016 Pennsylvania consumed 26 million tons of coal for electricity producing 74 million tons of CO2. To reduce that by ten percent would be to eliminate 7.4 million tons of CO2 or 2.6 million tons of coal. Paying the difference of $17.50 as the floor price for the Carbon Credits would incentivize the production of the 2.6 million tons of Biocoal to originate the 74 million Carbon Credits at a total floor price of $129,500,000 per year. In actuality the Carbon Credits would be a tradable commodity and the prices would fluctuate most likely for more than $17.50 depending on supply and demand. So the total woody biomass needed to lower the CO2 emissions in Pennsylvania by 10 percent on an annual basis would be 6.5 million green tons at a cost of $175,000,000. This assumes the conversion cost for the torrefaction of the woody biomass would be paid for by the reduction in other costs connected with conventional coal combustion such as fly ash disposal, Sox, Nox emissions expenses and reduction of emissions including mercury, chromium, nickel and arsenic.
The forest management practices, harvest, conversion and transport of Biocoal would also grow an industry that brings other tangible benefits to the host communities and region. Biochar, the core commodity, can also be used as a soil amendment, to capture nutrient runoff, sequester carbon in soil, as a substitute for activated carbon and as a filtration medium. So locating this industry in communities has the potential to spin off numerous business opportunities and create jobs.
This article is not meant to be the handbook for the industry, but rather puts some numbers and concepts out for consideration and possible future action. What actually emerges remains to be seen, but it is in your best interest to be ready for these opportunities if and when they arise.
References/For Further Reading:
- What to Burn, Thermal or Bio-Coal?, Biofuels Digest
- Current Daily Coal Prices, Quandl.com
- Carbon Dioxide Emission Factors for Coal, U.S. Energy Information Administration
- Coal Data Browser: Total Consumption, Annual, U.S. Energy Information Administration