Laying another cobblestone on the path to Torrefaction

Pennsylvania recently came up with a $1 Million Dollar grant for American Refining and Biochemical, Inc.

The race for which region will control the torrefaction development within the US is heating up.

From Integro Fuels, to Agri-Tech, to American Refining, to Topell, to NewEarth... it seems that a number of companies and states are seeing the potential of Torrefaction.

You know what's wrong with Torrefaction?  Its not the science.  Its not the economics.  Its the NAME.  Seriously, how do you sit around a holliday party and say "I'm into Torrefaction!".

As a community, we need to think about coming up with a better name for this process (bio-coal is the best alternative out there right now).

While we work on that, its good to see investment by PA, SC, and NC as well as the growing ranks of entrepreneurs focusing on the very pragmatic potential of bio-coal or torrefaction or what ever we can come up with to call it!

The long and Winding Road

Well, my journey to figure out the economics of biomass and torrefied biomass continues with twists and turns.

Seems to me it should be a simple task.  But it turns out that the answer is a big "Depends".  

That indicates to me that there is at least an 'expertise barrier' to success which might be a good thing.

Here is a summary of the data I have:

1)  Torrefaction at the point of harvest could yield a cost of $ 80 to $ 85 per ton.  However it has not been proven that the model scales, and the field deployable units are not coming to market quickly.

2) Regional Units (or mini-mills as I refer to them) can produce biocoal at $ 110 to $ 130 depending on who you talk to and the underlying price of the feedstock. Obviously folks can play with the depreciation schedule to make the number better or worse. The technology for mini-mills is either A) expensive and proven or B) not quite to the point of mass commercialization. 

3) Green Chips (which is what I understand the recently announced biomass power plants are based on) are economical when the feedstock can be harvested within about 25 miles of the plant. Green Chip prices range from $ 20 to $ 40 depending on the location.  A high percentage of the cost is transportation. My guess is that the utilities are trying to lock up local supply before they start building the plants. From what I understand from a forestry expert, forestry land is starting to rise but I haven't seen it yet in stump prices.

4) Pelletization (without torrefaction) only makes sense because torrefaction has not yet developed.  It has a relatively high capital cost and uses a lot of energy to deliver its densification benefits.  Also, depending on the climate, you have to worry about pellets absorbing moisture during transport. But it is the best the industry has today and it is currently a thriving business based on high prices.

Can't we solve the technical problems and deliver a torrefaction unit that is reasonably low cost and reliable?  From my current vantage point that seems to be the barrier to development of the industry.  The thing that is so frustrating is that if one posits a viable biomass industry worldwide the benefits are so huge -- greater energy independence, jobs, the environment, a path to help developing countries,etc.

BioMass Business Model Update

So we now have a reasonably good idea on when torrefied wood is economically viable:  When it can replace coal priced above $ 80 per short ton.

Now we have to compare the cost of torrefied wood against the cost of wood pellets, because a power plant could always just decide to buy pellets or wood chips.

From prior research, we know that biomass from wood chips is "transportation sensitive" -- the economics start degrading pretty quickly after about 25 Miles of transportation because you're moving a lot of water in those chips. And the higher the price of oil, the worse the economics become. (we want the inverse)

But wood pellets get rid of between 85 to 93% of the moisture and are more compact thus driving up the all important energy density and BTU/mile of transportation metrics.

We're going to run models on where pellets make sense, and where torrefaction makes sense.

But also of keen interest to us is blended pellets.  Torrefied wood is hydrophobic which means it repels moisture.  Moisture is the enemy of wood pellets.  Perhaps a hybrid pellet (50% wood, 20% torrefied wood, 30% switchgrass) or something like that will optimize the enconomics of long haul biomass.

Busienss Model Update: Clearing the first hurdle

Clearing  hurdle #1.

We have struggled to find the hard data necessary to determine the equivalent price of coal at which torrefied wood is economic, without subsidies or a premium for the derived carbon benefits.

We now have a model, and our first answer to the question.

$ 80 dollars

(Actually a range of $ 70 to $90 depending on certain conditions).

This is a key advancement.  It helps explain why torrefaction has not taken off previously (Coal has historically been below this level) and provides a benchmark for assumption refinement.

Would you build a business and an industry off an assumption that Coal will stay above $ 80?  In fact many coal companies are making just that bet in their capital ex investments.  In fact, with the current price of coal, one could invest in biomass torrefaction (or torrefication depending on your preference) coupled with hedges against a precipitous decline in coal and still make money.

It’s getting interesting folks…..

It all comes down to this......

At what equivalent price of coal will biocoal make sense?

I'm really trying to get my hands around this rather simple question. Question Simple. Answer, not so simple.

So in an attempt to see through the noise, I developed a simple 'inverse calculation' to figure this out. View, and comment if you want, on my spreadsheet.

It appears to come down to three variables:
1) The long term underlying price of Coal
2) The fully amortized cost of converting biomass (woodchips) to Bio Coal through the nitrification process
3) The premium you think utilities or other buyers would pay for "green" fuel (which in a pure sense would be approximated by the value of any carbon credits, assuming the Bio Coal would qualify

The result yields a "cost per ton of biomass" that you would be willing to pay.

My numbers say that that the value is somewhere around $ 10 per ton on biomass.

Now I'll go on and see if biomass can be harvested for this amount.

Stay tuned. The puzzle is getting interesting...

New research - Still no conclusive answers: BioTorrefication, reality or blue sky

New study from England focuses on bio-torrefication of crops specifically grown for BTU content.

This study reports a 20% reduction in mass, which is less than the 40% figure that has been thrown out. What this industry really needs is a set of verifiable data from a large scale pilot project!

The report also points to a benefit of bio-torrefication that is under appreciated --

"Most interestingly, torrefaction also makes biomass more friable, making it far easier to grind. This opens the prospects of using existing coal pulverizers and of considerably lowering costs of co-firing biomass to generate electricity"

I'm tracking two things to help address the fundamental question: At what price does BioCoal become broadly economic:

1. The underlying business model (I'm circulating a draft to people in the inudstry). Let me know if you want a copy
   
2. What is the potential for co-firing milled tottefied biomass in an existing coal fired power plant.
   

IF ..... you can co-fire the stuff in a power plant then the price of torrefied wood or other biomass competes with the peak price of coal not the average price of coal and utilities can use it as an easy way to promote their environmental agendas without having to make large capital investments.

http://bioenergy.checkbiotech.org/news/2008-07-25/Torrefaction_gives_biomass_a_20_energy_boost,_makes_logistics_far_more_efficient/

Largest US Pellet Project - Revealing Economics

Green Circle Bio Energy Inc. has announced the opening of what they consider to be the largest wood pellet plant in the world. It is located in the panhandle of Florida and has an operating capacity of 550,000 tons a year.

The pellets will be shipped overseas to be used.

Huh? Why would you ship biomass half way around the world when the US is interested in increasing energy consumption through renewables? Can this be right?

What this says, is that the displaceable cost of energy in the consuming country is high enough to make this renewable source economical even when you factor in the cost of transportation or the consumer is a "renewable at any price" buyer.

I'm going to try and find out because:

1) The cost of electricity in the target country, minus the cost of transportation will give us an idea of the economical price point for large scale biomass.

2) This company must have compared the cost of torrefaction to the cost of just pelletizing the wood. One of the key advantages of the torrefaction process is that it dramatically reduces the size and weight of the biomass thus reducing transportation costs. Given that they have chosen to simply pelletize, one might conclude that the economics of torrefaction over pelletizing are not there.  If torrefaction doesn't pay when you are shipping half way around the world...... 

I'll report back. Stay tuned.

Here's a link to the full article

http://www.wmbb.com/gulfcoastwest/mbb/search.apx.-content-articles-MBB-2008-06-10-0006.html

US MicroGrid seeks to Fund Torrefied Wood Absorption Chilling Application

We're busy sifting through all the data and opinions to come up with (and publish) the reality behind the economics of Torrefied Wood.

Absorption Chillers are amazing things. They might represent the best first application for Torrefied Wood. For more about how they work you can read http://tristate.apogee.net/cool/ccaa.asp.

They take in relatively low grade heat, and produce chilled water while displacing electric chillers that consume peak load electricity

We've had some experience with absorption chillers on the back end of a cogen project we developed. They work as advertised however it is difficult to find skilled maintenance workers (outside of the NYC area where they are more prevalent because they run off the underground steam loop).

Torrefied Wood input to a boiler which creates hot water or steam to drive an absorption chiller would have the following benefits:

1) Friendly conversion efficiencies: Electric chillers have an average efficiency of around 75%. When you compare full system efficiencies of biomass in a cooling application (vs. producing electricity) you pick up this 25% and that's significant. For more specifics, see and please feel free to comment on the attached spreadsheet.

2) Good scale of operation for a demonstration plant: We've learned to "learn small then scale".

So we are actively looking for a host industrial or commercial project to run the numbers on a torrefied wood boiler driven absorption chiller. Our company would fund the project and own and operate the equipment for a client who would agree to buy the chilled water at the then current equivalent cost of electric cooling.

In the first phase, we would probably purchase torrefied wood and/or pellets from an existing supplier to fully field test the system. With economic success, we'd purchase equipment and generate our own fuel. The benefit of a couple of torrefied wood absorption chilling clients would be that we could have captive demand for part of our torrefied wood production bringing in our break even point and reducing overall business model risk.

If you know of a company or institution that would be interested in the 'offtake' agreement (agreeing to buy the chilled water) please let us know. Contact info is on our website www.usmicrogrid.com.

Excellent Overview of Chemical Process of Torrefaction

Kristoffer Persson, Ingemar Olofsson and Anders Nordin from Umea University in Sweden have started publishing on the topic of Torrefaction.

Click on the Title of this Post or the link below for a good explanation of the chemical process, it's advantages, and some preliminary evaluation of biomass stocks.

http://www.techtp.com/Biomass%20Refinement%20by%20Torrefaction.pdf

Link updated 9/04/2009

Agri-Tech Producers Demonstration Plant

The SC Biomass Council http://www.scbiomass.org/ announced that Agri-Tech Producers has been awarded a grant to develop a demonstration project of portable bio torrefaction unit.

By moving 'the factory to the field' the benefits of torrefaction are amplified.

By removing the moisture and reducing the mass through torrefication, the economics are improved over approaches which truck green chips to a torrefaction facility.

Two test burns of torrefied wood are scheduled for this year. Stay tuned.

Torrefied wood chips project, Sumter National
Forest - Agri-Tech Producers, LLC ($200,000)

Bio Torrefication

Through all the noise out there right now, we look for ideas that could truly make a difference. Our criteria is:

1) The technology must be at least 35% Carbon Positive

2) The potential scale of operation must be large enough to deliver 10% of the current US Demand for electricity

3) The cost, post inflection point, must be 20 cents per kWH or less Without subsidies and tax credits (because the government can't afford to subsidize all our consumption).

+++++++++++++++++++++++++++++++++++++++++++++++++++

One that has real potential is Torrefied Plant Material. New work out of NC State is showing some interesting numbers for a unit which converts plant material into a powdery charcoal like material in the field.

The numbers look promising, because the cost of material handling is significantly reduced. In most waste-to-energy applications, the cost to move and handle low BTU material creates the barrier to economic viability.

Furthermore, the resulting fuel (think charcoal chips and powder) can theoretically be co-burned with coal in existing power plants. This is what makes it exciting. A power producer could have a renewable fuel which could be added based on the relative cost of delivered Torrefied BioMass to Coal.

Two 'test burns' are scheduled for 2008. We'll be monitoring this space. Check back or contact us for updates.

If current Torrefied Pine Wood can be utilized in a coal fired plant, the next step to viability would be developing plant species for BTU value vs. food value or fiber strength. The ideal feedstock would be the kind that grows on marginal land, avoiding the current ethanol "Fuel at the expense of Food" debate.