Testimony of
Henry C. Kelly
Associate Director for Technology (acting)
Office of Science and Technology Policy

before the Senate Committee on Agriculture

July 16, 1997

It's a pleasure to have the opportunity to talk with this Committee about an enterprise that a growing number of Americans recognize is critical for the long term health of the nation's economy and its environment. This is a technology that will be particularly important to America's rural economy both because it offers an opportunity to add a new commodity crop that can produce revenue from land that might otherwise not be economically useful, and because most of the value added activities must occur close to the areas where the crops are grown. A new cash crop would make it easier to maintain a vigorous farm and rural economy within shrinking federal budgets.

The White House is involved in helping craft a national initiative in biomass for two reasons. First, the benefits that may result from competitive biomass energy touch on the missions of many different agencies, and second, the technologies needed to enable a competitive industry will come from USDA, DoE and other agencies. Capturing the potential must be a truly national effort involving a partnership linking businesses, universities, and many parts of the federal government, state and local governments.

There are, of course, major uncertainties involved in the future economics of biomass energy used to produce either electricity or liquid fuels and there are large uncertainties about the domestic and international energy markets in which biomass must compete. But the US faces a limited number of choices in finding substitutes for the fossil energy sources we rely on so heavily today. The benefits of developing a competitive biomass industry in the US are so great that we are convinced that it's worth a significant investment to find out whether these benefits can be captured. I'd like to spend a few minutes reviewing why we think the investment is worthwhile and why we remain optimistic about the outcome.

Oil Imports

Historically low energy prices mean that US demand for energy continues to grow, and is likely to continue growing for some time absent some change in policy. While improvements in technology mean that US oil production has not declined as rapidly as we once expected, demand will outstrip production during the next few decades meaning that oil imports will exceed all recorded levels. The large reserves in OPEC nations and level or declining production in most other areas mean that an increasing fraction of oil imports will be coming from OPEC nations in coming decades. Well over half of all US oil will be coming from OPEC by 2015; nearly a third of our imports will be from the Persian Gulf. Biomass derived fuels are among the few practical alternatives to continued imports.

Environmental Benefits

In addition to our growing challenge in energy imports, the environmental consequences of continued use of conventional energy sources are increasingly apparent. In spite of years of progress in reducing the production of pollutants like nitrogen oxides and sulfur oxides, many areas of the nation are still not able to contain problems like acid rain and urban pollution. Regulations responding to the new particulate and ozone standards will put even greater pressures on producers of conventional fuels. Biomass production and use results in great reduction in the precursors of urban ozone.

Fossil fuels are the dominant source of greenhouse gases that most scientists now believe threaten changes in the world's climate. While the impact on current weather is hard to extract from normal variations, virtually no one disputes the fact that we are headed for a world where the concentrations of greenhouse gas emissions in the earth's atmosphere are the highest they've been for 50 million years. The impact of a 2-6 degree (F) increase in the planet's climate and a 1-3 foot rise in sea level would be dramatic. Clearly there is no precision in these estimates and there is understandable controversy about how to respond. At a minimum we must be concerned that we are in the midst of an experiment on the world's climate unprecedented in human history. One of the benefits of biological energy sources is that they produce no net greenhouse gasses. The carbon dioxide emitted when the material is consumed is precisely equal to the carbon dioxide captured by the plants grown as biomass.

Other Benefits

Biomass production could also be combined with projects designed to achieve other public benefits. These benefits are varied and are very sensitive to local conditions. For example, biomass plantings such as switchgrass or trees can stabilize erodable land as well as providing a buffer and filter for streams. Trees planted as biomass along rivers can slow floods and hold banks at low cost and can survive prolonged floods -- many of the trees being considered for the Midwest can survive several months with their roots underwater.

Forest management and fire suppression activities in forests may result in a source of wood that can be used as an input to biomass facilities. The Quincy Library Group in the Pacific Northwest and the Front Range group in Colorado have active projects to investigate the potential for combining forest fire management with biomass production. The Tennessee Valley Authority has investigated ways of combining tree-thinning operations with biomass production. A study in Tennessee suggests that while some of the wood being harvested can be used for paper or other products, about 75% if the wood is wasted and could be used as an energy source.

Efficient bioprocessing facilities could also provide an economic way to dispose of waste from paper, food processing, forest products, and other industries that produce large amounts of organic waste. These waste materials can burden disposal sites, and contribute methane and other greenhouse gases when they decompose. The Andersen Window Corporation, for example, produces a large amount of wood waste from its window frame manufacturing. It found that sending waste to Northern States Power -- the local utility -- for use in electric generation was an attractive alternative to other forms of disposal. It was certainly much better for the environment.

There is even the possibility that biomass can be used to clean contaminated soils by concentrating pollutants in ways that simplify their removal. Research is being undertaken by Oak Ridge National Labs and others on the cost-effectiveness of this application.

The potential use of biomass as an energy source is even greater abroad than it is domestically. A recent Shell International Petroleum Company study suggests that biomass could exceed worldwide oil and gas use by the middle of the next century. South America, Africa, and parts of Asia are facing even more serious energy problems that the US and have fewer alternatives. They also have large tracts of unused agricultural and forestland -- much of it abused by past misuse -- which could be restored by using biomass. US producers could enjoy significant export opportunities by selling advanced harvesting and conversion technologies -- such as high-efficiency turbines and fuel cells.

Rural Economic Benefits

The most immediate benefit of new biomass production, of course, would be finding economic uses for land that is now fallow for economic reasons or for environmental or other reasons. Large areas of the US are potentially available for a new crop. The greatest potential is in the North Central area where some of the more than 200 million acres are potentially available, but there are significant opportunities throughout the US. The development of a biomass industry can help to add significant income to rural areas by providing additional sources of income. Rural areas will not only grow the crops, by they can also own and gain benefits from the energy conversion plants – supplying their own energy from their own feedstocks. A critical question, of course, is what fraction of this land can be used to produce competitive biomass. The answer is very sensitive to assumptions made about the success of ongoing research, the price of competing energy, and the ability of producers to internalize the public benefits of biomass -- energy security and the many areas of environmental benefits. The inventory of possible benefits listed earlier indicates that these benefits could be very real and very large.

Becoming Competitive

Wide ranges of technical options have been proposed for using biomass materials to produce energy sources. Few have been fully tested. The biological materials can come from waste streams (e.g. wood scraps), or from grasses, herbaceous crops, trees, or other crops grown specifically as a biomass commodity. A variety of technologies for harvesting and converting these crops to forms that can be transported and processed as a fuel are being investigated. At a processing facility the material can be: Added to coal and used in a conventional coal-fired plant to make electricity Gasified and used in an gas turbine or a fuel cell Gasified and converted to liquid methanol fuel Converted to sugars which can be fermented to produce ethanol Used in a combination of these processes in a cogeneration facility that produces produce a mixture of electricity, liquid fuels, and heat that can be used in an industrial process. In considering the economics of any of these systems, it's best to consider three distinct timeframes:

In the near-term, we can expect to find economic uses of biomass to generate electricity in areas where the cost of the resource is very low because its available as a waste product from an operation like pulp and paper or food processing. The scrap from Anderson Windows is an example. The Minnesota Valley Alfalfa Producers will integrate alfalfa processing with an advanced power plant system in Granite Falls, Minnesota. The city of Gridley California is looking for a partnership with a local utility to utilize rice straw since new environmental regulations in California prohibit traditional disposal methods. These near-term projects will use available technology and be relatively small. The size of the opportunity depends heavily on the cost of transporting the biomass to an available site. In the mid-term new technologies may reduce the cost of producing biomass power to the point where relatively modest benefits derived from forest-fire management, erosion or flood control programs could make liquid fuels from biomass competitive in significant areas. The most attractive early way to use biomass will be co-firing -- simply adding it to coal in an existing coal plant. Another mid term option involves providing new equipment to the large number of biomass plants already operating. About 8 GW of biomass generation capacity is now operating at paper mills and forest product industries. Many are old and estimates suggest that 70% will need to be replaced in the next 10-15 years. Liquid fuels made from biomass are likely to be able to compete only as a blending component for gasoline by 2010. It is possible that demand could reach 5 billion gallons/year by 2010 if a price of 80 cents per gallon is reached and 9 billion gallons/year if technology reduces costs to 65 cents per gallon.

In the long-term investments in new types of crops and high efficiency conversion methods will make biomass production competitive without any environmental or other credits. This long-run potential depends critically on successful research programs both in production and use of biomass.

Given current forecasts of oil and coal prices it will be difficult to have large competitive markets for biomass in the US without finding ways to credit biomass energy sources for environmental and other benefits that they create in specific areas. The external benefits are real and measurable but few are reflected in today's energy markets. As we move towards more competitive energy markets, some of these technologies may begin to penetrate as consumers use their power of choice and choose to buy more environmentally benign energy sources.

The Research Program Capturing the potential of biomass requires advances in four distinct areas: increasing the yields of biomass crops and reducing the cost of a "dry ton" of biomass delivered to a production site; increasing the efficiency and reducing the cost of converting biomass to a fuel or electricity; designing practical long-term contractual relationships between producers and consumers, and; understanding how to share the costs of biomass production with programs having other goals -- such as environmental improvement or fire management. We have designed an interagency program that attacks each of these issues.

Crops: A balanced research program is essential to capture the potential of new biomass crops. We plainly need basic research to improve our understanding of the way the photosynthetic process operates and the way plants can be designed to tolerate areas stressed by drought or pests. This requires new techniques in molecular biology as well as applying the techniques that have done so much to improve the productivity of commodity crops in the US. New genetic engineering methods, of course, make it much easier to experiment with improvements to trees and other plants that are slow to mature.

Work is actively underway in a number of areas funded by the Department of Energy and USDA's Forest Service. Results are promising. For example, a new switchgrass variety recently developed by University of Nebraska appears to offer both better forage values for livestock and high biomass yields. Experiments on Conservation Reserve land in the Pacific Northwest have demonstrated high productivity for growing clones of poplars (8-12 tons per acre or nearly ten times the productivity of native Douglas firs). Nearly 33,000 acres are in the experiment.

Conversion Technology for converting biomass to liquid fuels has supported work for converting biomass to both ethanol and methanol. The work on ethanol production focuses on new breakthroughs in converting wood, grass and other cellulosic materials to a form where they can be fermented to ethanol and distilled like traditional sources of sugar. Promising new techniques now permit simultaneous conversion to sugar (saccharification) and fermentation. The lignin materials that remain after this process can be used to generate electricity for operating the facility and will produce a surplus that can be sold.

Biomass can also be converted to hydrogen or to methanol by gasifying the material and using the resulting gas as a feedstock. A number of experiments have demonstrated that up to15% of coal in conventional coal fired electric plants can be replaced with biomass without major changes in the facility other than adding new fuel handling equipment and retooling the boilers. Early tests suggest that this can be done without fouling the boiler, reducing the flame temperature or lowering the ratings of the boiler. The challenge here, of course, is that the biological fuels need to compete directly with the delivered cost of coal – this is possible only when fuel is free or inexpensive and transport costs are low. Advanced gas turbines being developed by the Advanced Turbine Systems program can achieve conversion efficiencies over 60% (far above the 35-37% efficiencies typical of existing coal plants). These engines, which draw in part on America's long investment in advanced aircraft engines, are highly reliable and relatively inexpensive. The high technology equipment will, however, require a gas cleaned of particulates and other contaminants. In the longer term, it may be possible to use fuel cells as a conversion device. Fuel cells have the potential for very low cost, high reliability, and high efficiency. Moreover, they can be built economically in a variety of size ranges. The optimum size for biomass powered liquid fuel or electric generation is still a matter of intense research. It appears that large facilities taking 5-10% of the potential production in an area 100 miles in diameter may be optimum for both electric and liquid fuels (this would produce 300 million gallon/year of ethanol – about the capacity or largest existing ethanol plant).

Demonstrations A number of small demonstrations are now underway to test both the technology of producing and converting biomass and the kinds of contractual relationships that can provide a stable market for both producers and consumers of biomass materials. The National Renewable Energy Lab is investigating partnerships with a variety of private firms to commercialize its ethanol production facility. Three demonstration projects for using biomass to produce electricity are being managed jointly by USDA and DoE. These include a Niagara Mohawk experiment using willows to co-fire an existing coal plant, the Iowa project using switchgrass, the Minnesota Valley Alfalfa Producers project.

Analysis

The EPA, DoE, and USDA are also working on a number of analytical tasks designed to understand both the economic potential of biomass in the US and around the world and to define the environmental impacts of its use. These analyses are attempting to quantify the benefits biomass can produce by reducing sulfur and nitrogen oxide emissions, greenhouse gas benefits, and other benefits ranging from fire management to flood control. This will be critical for understanding the real value of biomass energy sources. The work also focuses on identifying any potential problems associated with widespread use of biomass. Clearly one of the greatest challenges will be to understand how expanded use of biomass crops on fallow land is compatible with conservation goals such as soil management and protection of wildlife.

Expectations

We shouldn't minimize the fact that finding a way to produce a biomass energy product that can compete with conventional sources of fuels and electricity, while providing an acceptable income to farm producers, is a major challenge. Energy prices in the US are at historically low levels and prices of oil, gas, and coal will not rise significantly in the near future. Deregulation of electricity will further contribute to the difficulty of making biomass competitive. Competition should lead to lower costs at least in the near term and uncertainties are likely to be a major concern for new investment and to utility sponsored research. The gap separating the clear long-term need for a product like biomass energy and the signals being sent to investors in the near term provides a clear rationale for federal interest. We look forward to working with this committee to craft an effective program.