Economic impacts of using woody biofuels in North Carolina

              NC Woody Biomass
“Nature’s renewable energy!”
http://www.ces.ncsu.edu/fore
stry/biomass.html
Extension Forestry
Campus Box 8008
NC State University
Raleigh, NC 27695-8008
Economic Impacts of using Woody
Biofuels in North Carolina
North Carolina has a vast sustainable woody biomass resource that
could be used to offset much of the fuel imported into our state. Woody
biomass can be used for small- to medium-scale power plants instead
of or along with fossil fuels. Connecting these to the “grid” reduces
dependency on centralized large scale electric generation facilities,
benefitting local resources, retaining money locally, and reducing
pollution and carbon emissions. While these facilities are costly
investments with an initial financial burden to the community, they
significantly benefit local economies by providing new opportunities
for forest landowners and creating diverse local jobs. NC policy
makers, industry leaders and the public at large should research the
feasibility of a facility in their communities. This publication provides
a synopsis of the basic information about local economic benefits and
impacts local woody biomass energy generates from a larger
southeastern project. (For more details on the project refer to Hodges
and Rahmani, 2007.)
Maintaining Local Economies – A General Model
Figure 1 illustrates a woody biomass energy sector and its linkages to the
local economy. Timber growers, loggers, and electric power producers
sell their products and services to consumers within the local (A) and
external (B) economies through wholesale and retail distributors. Inputs
and services from local suppliers to the wood biomass energy sector re-circulate
money in the local economy (C). Employees of the wood
biomass energy sector spend their earnings locally on food, clothing,
Figure 1. Structure and economic impacts of wood-fueled electric power generation in a local
economy.
2
Table 1. Typical Capital Costs for a 20 or 40 MW Wood-Fired Power Plant
Expense Description 20 MW
($1000)
40 MW
($1000)
Site preparation (heavy industrial) 800 1,000
Water, sewer, and pipeline construction 100 150
Power boiler, heat exchangers, turbine and generator set
manufacturing 44,500 81,000
Initial fuel delivery (trucks) 300 500
Financing cost (Funds, trusts, and other financial vehicles) 1,500 2,500
Site acquisition (Real estate) 1,000 1,000
Permitting (Environmental and other technical consulting) 500 600
Total 48,700 86,750
Table 2. Typical Annual Operating Costs (1st Year) for a 20 or 40 MW Wood-Fired Power Plant
Expense Description 20 MW
($1000)
40 MW
($1000)
Wood fuel cost (logging, ag. & forestry support services) 4,409 9,827
Utility interconnection 100 155
Start up fuel-gas (natural gas) 25 50
Utilities-electric 50 75
Consumable chemicals 330 660
Power boiler and heat exchanger maintenance 50 90
Turbine and generator set maintenance 50 90
Insurance 160 260
Mobil equipment lease 90 120
Other routine and periodic maintenance 1,000 1,650
Environmental costs 100 160
Management overhead 100 120
Office expenses 110 140
Ash disposal 60 120
Property tax 470 800
Salaries and benefits (Value added) 1,260 1,820
Total Operating Costs 7,964 16,137
housing, and transportation, further
increasing local economic activity (D).
Businesses and households pay taxes to local
governments (E). Money always leaves local
economies for goods and services not
available locally, outside investments or
federal taxes (F); this is known as “leakage.”
Using local raw materials for energy
production instead of importing fossil fuels
from other states decreases leakage and
bolsters the local economy.
Community Economic Impact Examples
Ways that local economies are affected by
development of a biomass energy facility will
vary widely depending on the community
economic structure. Two counties in North
Carolina, Buncombe, a mountain county, and
Orange, a piedmont county, provide
examples of these effects. Both are well
suited for some level of a woody biomass
energy production. A comparison of two
3
Table 3. Capital Construction and First Year Annual Operating Impacts for a 20 or 40 MW Wood-Fueled
Power Plant in Buncombe and Orange Counties, North Carolina.
20 MW Plant 40 MW Plant
County
Output
($1,000,000) Jobs Value Added
($1,000,000)
Output
($1,000,000) Jobs Value Added
($1,000,000)
Construction Impacts
Buncombe 7.89 74 3.90 10.72 98 5.06
Orange 45.27 379 25.95 78.73 653 44.88
Annual Operation Impacts (First Year)
Buncombe 12.84 242 7.59 26.65 546 15.77
Orange 10.81 177 6.91 22.08 393 14.07
levels of development (20 and 40 megawatt
(MW) power plants) for these counties
provides projections of direct and indirect
economic impacts. Fuel-stock for these plants
were county-wide estimations of urban wood
wastes, logging residues, and pulpwood
harvest rather than harvesting timber solely
for biomass energy. (See Langholz, 2007 for
more details on the economic analysis inputs)
Estimated costs of construction (Table 1) and
the generated economic impact (Table 3, top)
occur only one year. Site acquisition and
construction costs are valued at $48.7 million
(20 MW plant) and $86.8 (40 MW plant).
Annual operating costs (Table 2), and
economic impacts generated from plant
operations (Table 3, bottom) recur annually.
Total annual operating expenses (first year)
for a wood-fueled power plant averaged $8.0
million for 20 MW and
$16.1 million for 40
MW. Wood fuel
typically represents the
largest operating cost for
a facility. These costs
varied significantly
across the selected
counties due to diff-erences
in availability of
forest and wood waste
resources and transport-ation
infrastructure. Fuel
costs averaged $4.4 and
$9.8 million for the 20 or 40 MW plants,
respectively, representing 55% and 61% of
annual costs.
Capital Construction Impacts
The estimated economic impacts resulting
from the construction phase of power plant
development in each of the counties are
summarized in Table 3 (top). Total output
impacts for a 20 MW power plant ranged
from $7.9 million (Buncombe) to $45.3
million (Orange). This impact includes all of
the purchases (such as food, clothing, and
gasoline) that people are able to make
because their wages are tied to the power
plant (Box 1). Employment impacted varied
from 74 to 379 jobs; however, some of these
jobs were a result of the increased economic
activity that the facility and the use of local
fuel brought to the
community. The value-added
impacts, or change
in total personal and
business income, varied
from $3.9 million to $25.9
million for each county.
For a 40 MW power plant,
output impacts ranged from
$10.7 million to $78.7
million, employment
impacts from 98 to 653
jobs, and value added
Box 1 – Understanding the Terms
Total output impacts—the effect on
sales revenues of all businesses in a
local economy resulting from the
proposed change in industry activity.
Value added impacts—the effect on
personal and business income in the
local area.
Employment impacts—the effect on
the total number of full-time, part-time
and seasonal positions in the
local area.
4
Table 4. Average employment creation projection by industry sector resulting from development of 20 or 40
MW Wood-Fueled Power Plants. Average is based on projections of 28 counties throughout the
Southeastern US.
Aggregated Industry Sector 20 MW Plant 40 MW Plant
Jobs Percent Jobs Percent
Agriculture, Forestry, Fisheries,
Hunting
92 54.1% 226 61.2%
Mining 0 0.0% 0 0.0%
Utilities 1 0.5% 1 0.4%
Construction 4 2.4% 8 2.1%
Manufacturing 1 0.7% 2 0.6%
Wholesale Trade 2 1.0% 3 0.9%
Retail trade 10 5.9% 19 5.2%
Transportation & Warehousing 1 0.7% 2 0.6%
Information 1 0.4% 1 0.3%
Finance & Insurance 4 2.4% 7 1.9%
Real estate & rental 3 1.7% 5 1.4%
Professional- scientific & tech services 16 9.3% 27 7.2%
Management of companies 1 0.6% 1 0.4%
Administrative & waste services 4 2.4% 7 1.9%
Educational services 1 0.4% 1 0.3%
Health & social services 6 3.5% 12 3.1%
Arts- entertainment & recreation 1 0.5% 2 0.5%
Accommodation & food services 6 3.7% 12 3.2%
Other services 5 2.8% 9 2.6%
Government 12 6.8% 22 6.0%
Total 170 100.0% 370 100.0%
impacts from $5 million to $44.9 million.
The large differences between these two
counties were due to the fact that Orange
County had local sources for purchase of the
major capital items, while in Buncombe
County some of these items had to be
imported from other regions, representing
leakage from the local economy.
Annual Operation Impacts
The economic impacts of annual operations
in one year for power plants in each county
are summarized in Table 3 (bottom). Total
output impacts for the 20 MW plant ranged
from $12.8 million (Buncombe) to $10.8
million (Orange). Employment impacts
ranged from 242 for Buncombe to 177 jobs
in Orange. Value added impacts ranged from
$7.59 million in Buncombe to $6.91 million
in Orange. The impacts varied between the
two counties due to differences in the local
economies and to the greater wood-providing
sector in Buncombe County.
For a 40 MW plant, total output ranged from
$26.65 million (Buncombe) to $22.08 million
(Orange). Employment impacts for
Buncombe were 546 jobs and for Orange 393
jobs. The value added impacts for Buncombe
were $15.77 million and $14.07 million for
Orange. These results for plant operations
would be permanent recurring annual
impacts. The significant increase in jobs and
value added for rural areas with high amounts
of woody biofuel feedstock makes the 40
MW plant especially attractive for areas such
as Buncombe County, but there are
significant economic benefits from both sizes
and in both rural and urban areas alike.
5
Sector Based Impacts
Often it is helpful to predict the distribution
of economic impacts across various sectors
of the local economy. The estimated average
employment impacts of annual operations for
a 20 MW and 40 MW power plant for 28
southeast communities are shown by major
industry group in Table 4. For a 40 MW
plant, a large employment impact, averaging
226 jobs (over 60 percent of all jobs) would
occur in the agriculture and forestry sector
that supplies wood fuel to these plants. There
were also significant employment impacts in
the sectors for professional services (27 jobs),
retail trade (19 jobs), and government (22
jobs), reflecting the indirect and induced
effects on the local economy.
Conclusions
Construction and operation of wood-fueled
power plants have significant positive local
economic impacts. But, as seen from the two
examples, these impacts could vary widely
among counties, depending upon the
proposed plant size and the amount of
resources needed from outside the local
economy. Wood fuel represents one of the
largest expenditures for a power plant, and
results in large impacts in the local forestry
and forestry services sectors. Other sectors
of the local economy are also impacted
through supply chain purchases and
employee spending. In the example above,
economic impacts of a 40 MW power plant
are greater than for a 20 MW plant, although
not in proportion to the power output, due to
economies of scale. One thing is clear, local
economies vary in resources available
within them. These variations make it
imperative that communities seeking to
develop wood-fueled power generation
perform their own economic impact analysis
to accurately estimate the positive economic
impacts.
References:
Hodges, Alan W. and Mohammad Rahmani, 2007. Economic Impacts of
Generating Electricity In Biomass Ambassador Guide by Martha C. Monroe,
Lauren McDonell, and Annie Oxarart,. School of Forest Resources and
Conservation, Institute of Food and Agriculture Sciences University of
Florida.
Langholtz, Matthew; Douglas R. Carter, Alan W. Hodges, Annie Oxarart, &
Richard Schroeder, 2007. North Carolina: Buncombe and Orange Counties,
In Biomass Ambassador Guide by Martha C. Monroe, Lauren McDonell, and
Annie Oxarart,. School of Forest Resources and Conservation, Institute of
Food and Agriculture Sciences University of Florida.
www.ces.ncsu.edu/forestry/biomass.html
Published by North Carolina Cooperative Extension
Distributed in furtherance of the acts of Congress of May 8 and June 30, 1914. North Carolina State University and North Carolina A&T State University commit themselves
to positive action to secure equal opportunity regardless of race, color, creed, national origin, religion, sex, age, veteran status or disability. In addition, the two Universities
welcome all persons without regard to sexual orientation. North Carolina State University, North Carolina A&T State University, U.S. Department of Agriculture, and local
governments cooperating.
copies of this public document were printed at a cost of or per copy.
Original Authors
Alan W. Hodges & Mohammad Rahmani
Prepared by
James Jeuck, Extension Associate
WB-0006/2008