U.S. Biomass Prices Impacted by BCAP

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The cost for wood biomass fell in two of the major markets in the U.S. in the first quarter, partly because of the federal Biomass Crop Assistance Program (BCAP), according to the North American Wood Fiber Review, Seattle, Wash., USA. The federal government is currently considering different programs of how to contribute to an increased use of renewable energy sources, the Review notes.

Northern California is home to the largest concentration of stand-alone biomass plants in North America. In the 1970s the state witnessed an explosive rise in the number of plants because of a high interest in alternatives to fossil fuels. This period was followed in the early 1980's by a dramatic drop in the number of operating plants due to waning interest in green energy and falling oil prices, the Review says, adding that during the past few years there has been a resurgence in this sector as attitudes and regulations again have favored renewable energy. As a result, demand for biomass, including forest residues, urban wood, hog fuel, and agricultural waste, has increased. Northern New England is also home to a large number of stand-alone biomass plants, many of which have been operating for more than 20 years, the Review points out. Unlike the wide variety of biomass sources found in California, this region—primarily Maine and New Hampshire—has historically consumed low-quality forest thinning material.

The U.S. federal government initiated BCAP last year with the intention of alleviating biomass costs and bringing more raw-material to the market. This program is now in a holding pattern. The U.S. Department of Agriculture announced the "pilot" program had been suspended. Funds allocated during the second half of 2009 and the first quarter 2010 for the initial phase totaled more than $500 million. However, by late April, only $170 million had been paid out. BCAP is expected to be reinstated later this fall and full matching payments of up to $45/bone dry ton may target facilities converting biomass to cellulosic ethanol, new facilities, and plants that convert from fossil fuels to biomass fuel. Existing facilities may receive reduced payments.

California has been one of a few states where BCAP seemed to have had the intended effect, which was to bring out additional volumes of forest residues and reduce the delivered costs. In the first quarter, prices fell almost 30% from the previous quarter, according to the Review. Biomass prices in Northern New England peaked at about the same time as fossil fuel prices in 2008, which emphasizes the price sensitivity to total energy usage and prices of fossil fuels. As was seen in California, BCAP was instrumental in New England in moving biomass prices downward during the first quarter.

Much uncertainty surrounds the biomass market in the U.S. right now. However, two developments are certain: 1) demand for biomass will increase in the coming years, and 2) local and federal governments will surely continue to be involved in the gradual transition from fossil fuels towards an increasing usage of renewable energy. More information is available online.