by Daniel Ciolkosz, P.E.
Assistant Professor and Research Associate
Electricity production from biomass has had a long history in Pennsylvania, including small scale “combined heat and power” facilities and test burns of wood in coal power plants. However, it has struggled to succeed as a business venture, in part due to the low cost and high availability of fossil fuels such as coal and natural gas. By contrast, many countries in Europe have been using large volumes of biomass fuel to produce electrical power for many years. Interestingly enough, European biomass fuel for power has primarily consisted of wood pellets manufactured in the southeastern United States. Pennsylvania’s wood pellet producers, by contrast, primarily sell their pellets within the USA for home heating.
Who will pay for these eRINS? Ultimately, eRIN payments will be funded by a slight increase in everyone’s energy costs. This is very similar to the current system of incentives for ethanol production, which also uses a “RIN” system.
How valuable would these eRINs be? Well, that’s the big question. Ultimately, the sale price of eRINS will depend on the balance between supply (number of eRINS created) and demand (federal mandates for renewable fuel production and use, relative to electric vehicles). Projections for electric vehicle use vary, but current trends suggest continued growth. According to the International Energy Agency, global sales of electric vehicles almost doubled in 2021, and while 2022 data are not yet available, the expectation was for over 10% of the new car market to be for electric vehicles.
If we look at the current value of liquid fuel RINS for cellulosic biofuel (Category D3 RINS), they have sold in the past year for as much as $3.00 per equivalent gallon of gasoline. If eRINS were to sell at an equivalent value, they would correspond very roughly (let me emphasize the word “very”) to about $0.23 per kWh of bio-based electricity. Keep in mind that the selling price has also been much lower than that, and future prices of RINS are always a subject of speculation.
The idea of eRINs is not a new one, and there have been attempts in the past to obtain approval for their production and sale. The move by the EPA in December, though, appears to be the first real sign that they may actually become a functional mechanism for incentivizing renewable energy.
People that are already producing bio-based electricity are likely to be well positioned to take advantage of eRINs if and when the eRIN system rolls out. This includes farmers with biogas digesters that generate electricity, as well as facilities that generate electricity from woody biomass. Over time, we may see new biomass power plants built or coal power plants converted to biomass power in order to take advantage of this incentive. However, the specifics of how the program is implemented could make it easier or more difficult to participate. Hopefully, the paperwork will not be so expensive and complex that it effectively excludes smaller businesses.
Keep in mind that the current rules only allow for “biogas based” electricity to qualify, so digesters are the only systems that would be initially eligible. However, as electric vehicle production continues to grow, it is likely that there won’t be enough biogas digesters to supply all of the renewable electricity that is needed. Thus, the rules could be adjusted to allow other forms of bio-based electricity to qualify as well.
How could this affect Pennsylvania? We could see new opportunities for farmers to generate income from manure based methane digesters. In the past, digesters have only been practical for larger farms. The income from eRINS could make digesters economical for mid sized farms as well. Innovative strategies like that of the Grass2Gas project (a research and extension project by Penn State and Iowa State Universities) may become more attractive.
Looking at woody biomass, we could one day see some of the state’s mothballed wood power plants re-activated, and new plants might be constructed. As a result, the market for wood chips in Pennsylvania could increase, allowing forest owners to be able to afford managed harvests for timber stand improvement (a long standing forestry need in the region). If power production occurs locally, the wood is likely to remain in the form of chips. If the power production occurs far away, we may see increased demand for densified wood pellets manufactured in Pennsylvania.
How could this affect the forests of the state? There’s certainly room to debate this question, but forest viability in Pennsylvania stands a good chance of benefiting rather than being harmed, due in part to the sustainability requirements built into the proposed program rules. However, care may be needed to ensure that increased market demand for sustainably produced biomass doesn’t lead to a side effect of creating demand for unsustainably produced biomass. Higher prices for woody biomass fuel are likely to encourage forest owners to keep their land as forest, rather than turning it over to development for housing, solar photovoltaic systems, or other uses.
How much biomass power could Pennsylvania produce? This depends on a variety of factors. Pennsylvania’s forests have been estimated in the past to be able to produce as much as 6 to 9 million tons of wood fuel on an annual sustainable basis. Agricultural crop residues are pretty thoroughly used in the state for animal bedding and other purposes, but additional production of biomass crops on marginal land, such as switchgrass or shrub willow, could be economical depending on the size of the eRIN incentive.
At present, this scenario for Pennsylvania is pretty much just speculation, but the EPA rule could roll out relatively quickly, as it includes implementation projections for as early as this year. Those who are well positioned and ready for it stand the best chance to benefit. The EPA rule is No. EPA-HQ-OAR-2021-0427, and public comments were being accepted through February 10, 2023, after which point the review and approval process will commence.
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