Wind energy utilization represents the largest progress. The graphs below relate to its state at the end of 2008.

growing output of energy obtained in wind power plants

The largest increase is observed in the USA, about 8.4 GW. In China, installed capacity had doubled by the year 2008. There are also African and Asian countries investing in wind energy. The increase is also observed in plants built on the seas. At the end of 2008 the installed capacity reached 1.5 GW, mainly in Europe, where Britain is the leader. Denmark obtains more than 30% of the energy from wind power installations.

10 countries with the highest share of wind energy

The success of wind energy stems from both: its economic attractiveness, as well as the decline in the industries that can be easily switched to the production of windmills. 10 firms covering more than 85% of demand for wind turbines are listed from the largest: Vestas (Denmark), GE Wind (USA), Gamesa (Spain), Enercon (Germany), Suzlon (India), Siemens (Denmark), Sinovel ( China), Acciona (Spain), Goldwind (China), Nordex (Germany). The most commonly used are turbines of 2 MW. Recently even bigger - 3 MW turbines are being used. In 2010 the generating industrial capacity for wind turbines reached 20 GW.

Evidence suggests that energy from the solar installations grows at the fastest pace.

installed electric capacity of photovoltaic cells

WIn 2008, global installed capacity of solar cells grew by 70% compared to the previously measured total solar power; about 13 GW was connected to electricity networks. The leader is Spain, where 0.55 GW in 2007 grew to 3.2 GW in 2008. Non-grid connected local installations grow even faster. The total power generated by photovoltaic cells reached a level of 16 GW in 2008. There is a new trend in the construction of photovoltaic installations:

- Cells integrated into the buildings,
- Thin-film cells with greater efficiency,
- Solar photovoltaic power plants exceeding 200 kW.

The world's largest solar power plant of 60 MW is located in Spain. Even greater plants of this type are built in the U.S. , China, India and Japan. The largest producers of solar cells are China ( 1.8 GW of potential capacity/ year), Germany (1.3 GW) and Japan (1.2 GW). The fastest growing is thin-film cell production, with USA in forefront - manufacturing thin-calls able to deliver about 270 MW in 2008.

In addition to the production/research of photovoltaic cells, solar power plants are being built and upgraded extensively. This type of plants convert directly solar energy into heat, and then generate electricity in a conventional steam turbines. Concentrating Solar Power (CSP) is a system promising a great future if it will be integrated with complementary natural gas-powered installations. In 2008 we observed construction of such systems having 50MW or more. Total installed capacity exceeded 8GW. Even bigger installations are under construction, having a total summarized power of 6GW. CSP technology is one of the most technologically advanced. It uses a very diverse systems. A significant number of new global producers surfaced in 2008. The largest are: Ausra, Bright Source Energy, eSolar, FPL Energy, Infinia, Sopergy and Stirling Energy Systems in the USA: Abengoa Solar, Acciona, Iberdrola Renovables, and Sener in Spain, and Solar Millennium in Germany.

total global producers of solar energy and their share

Solar heating systems have found wide application in all countries that support and are involved in developing renewable energy. At the end of  2008 the total output of these systems exceeded 145GW_t, where “t" refers to thermal power output. This means doubling the capacity when compared to 2004. Nearly 70% of global installed capacity comes from China, where the pace of development of these solar installations is fastest. In general, the extraction of heat from solar radiation is the most efficient and utilizes the simplest technologies. Spectrum of applications for solar energy has a greatest range (one example is the market for small devices for local use). Back to heating: in Germany  200 000 solar heating systems were installed having total power of  1.5GW_t. At the same time, China reached 14GW_t. This technology has contributed to expansion of “green” constructions and buildings in Europe, while in developing countries is likely to play the role of a primary source of heat.

Solar energy plays an important part of the rural electrification programs in developing countries. Charitable grants, government and international support help to erect cheap and easy to use photo-and thermoelectric systems providing electricity to the most remote settlements. This applies particularly to places where classic electrification is uneconomic or impossible to achieve. In India, so called Remote Village Electrification Program supplied the photoelectric power to 5400 villages and settlements, provided 435000 houses with light , installed 700 000 street and aerial lights, 7000 water pumps and delivered 637000 solar ovens/cookers (2009 data). This Program should provide solar energy for 600000 villages by 2032. In Bangladesh, the World Bank funded the electrification of 400 000 households, and ultimately this project will provide energy for 1.3 million households. Danish-German program, known as "Energizing Development" (EnDev), provided modern energy for 5 million people, and by 2015 plans predict to extend the program to supply 10 million people.

Hydroelectricity

Large hydroelectric plants are still being built - scale of construction growing, despite the protests of environmental organizations. Just in 2008 China launched more than 25GW of power, and India more than 5GW. Much greater support is behind small hydropower installations, currently estimated at 85GW. China is a leader in this field, increasing the installed capacity in small hydro plants with 4 - 6GW per year.

Geothermal Energy

The installed capacity of geothermal systems reached level of 10GW (2008 data). Most progress has been made in the USA where 120 projects delivered a total capacity of 5GW. About 40 countries are engaged in building and using geothermal energy installations of more than total 3GW output. In 2008, geothermal heating plants equipped with heat pumps reached a total power of about 30GW_t. Total municipal and industrial direct geothermal heating (greenhouses, drying systems, etc.) reached 15GW_t.

Bioenergetics

Power plants using biomass as a primary or secondary fuel, reached around 52GW of power. The biggest increase was recorded in the European Union and in China, estimated at 2GW. The largest share of biofuels consumed in power plants consists of waste from agriculture and forestry. Working installations are able to use biogas from the fermentation of waste from animal farms and sludge from sewage treatment plants. In Brazil, and Philippines, new installations consume residues from bioalcohol. Biofuel sector is growing at an accelerating pace. Compared with the year 2004 production of bioethanol doubled, and biodiesel production observed six-fold increase. In 2008, the amount of bioethanol used as a transport fuel, reached 67bln liters. More than half of this amount is produced in the United States from corn and other cereals. In 2008 Brazil increased two times the supply of bioethanol from sugar cane; amounting to 27bln liters. Biodiesel production reached a level of 16bln liters, of which nearly 70% is produced and consumed in Europe.

The possibility of producing energy from biomass is limited by photosynthesis potential. It is estimated that the total energy on the land converted into biomass is currently 4.560 EJ/year (GPP - Gross Primary Production). Half of it is consumed in the process of autotrophic respiration, so the quantity of energy available in the form of biomass is only 2.280 EJ (NPP - Net Primary Production). Many studies during last 20 years have been devoted to assess and increase global bioenergy output. The criterion limiting this output (or potential) is formed as a forecast for food needs of growing populations. Considering this factor and assuming unchanged advancement in bioenergy technologies - total potential can be estimated between 200 and 500 EJ per year. However complete halt of expansion of energy crops (meaning waste biomass consumption only) will reduce the global potential of bioenergy to about only 100 EJ.

Multiplication of bioenergy/area can and will be obtained by: improved agrotechnology, effective logistics of harvesting, efficient technologies of converting/connecting biomass energy to electricity grids. In U.S. corn crops may more than double by 2030. Considering the current technological capacity of biofuel production, this will allow to generate 240 mlnT of alcohol and 27 mlnT of biodiesel from the current unexpanded land area. Subsequent changes will bring progress in biotechnology and in genetic engineering. Industrial scale of converting green biomass into ethanol will generate extra inventory of this fuel estimated at 80 mlnT, plus 150 mlnT of feed. The amount of these products will exceed today's demand, so we may expect significant alternations in the market for fuels and agricultural products. [8]

Waste Disposal

Use of domestic and industrial waste for energy production creates controversies mostly due to bad experience with incinerators’ emissions. Since ancient times, incineration has been the choice for neutralization of unnecessary combustible materials. But today's enormous amount of waste contains substances that generate toxic compounds during the combustion. In response to this dilemma, strict and enforced regulations limit amount of toxic substances that can be emitted into environment. Necessity for waste disposal methods other than unlimited storage, combined with limiting regulations drive current incineration technology to the highest technical level.

Landfills in Europe and in the U.S. have increased difficulties with the location and the environmental requirements imposed by protective engineering agencies. To the contrary, production of energy from waste in modern installations brings income. In the European Union and in other industrialized countries, strong economic incentives and legal framework are in place to discourage and eliminate landfills. Directions as to how waste should be disposed, landfill taxation, extended producers’ responsibilities - these are examples of the legal economic policies of the governments. This difference between the waste storage and use of waste energy, still gives economical advantages to landfill operators. The main goal therefore, is to eliminate such difference in order to make production of energy from waste more attractive (if not profitable).

regional rate of waste generation between 1971-2002 in Mt/year [10]

It is estimated that the global domestic waste load exceeds 900 Mt/year. Energy from municipal waste incineration is between 6 to 14 MJ/kg, which is comparable to combustion of peat and brown coal. It follows that the power based on waste, may generate 5 - 13EJ of heat and electricity per annum. The recent global consumption of waste for energy production exceeds 130 Mt/year, that equals around 1 EJ. Biogas that is collected from landfills and sewage sludge fermentation is burned to produce more than 0.2 EJ/year. Significant quantities of biogas are collected by using the mechanical-biological waste transformation. This technology becomes more and more significant and increasingly involved in the waste utilization market. [11]

capacity of waste processing by bio-mechanical method

Issue of greenhouse gas emission becomes noticeable when it comes to waste management industry. This dictates appropriate changes. Waste management industry is responsible for the largest (after agriculture) stream of anthropogenic emissions of methane representing about or more than 5% of the total impact of the human economy on the greenhouse effect. Waste disposal that creates energy, has the least impact on the greenhouse effect, because it eliminates the potential methane emissions from the landfills. In the near term, preference for waste incineration can be expressed in the form of special economic restrictions imposed on methane and other noxious gases being released from the landfills.

greenhouse gas emissions from waste management between 1990-2020, expressed in Mt/year of CO₂ equivalent

Summary and final conclusions:

The total renewable energy production reached 280GW of installed capacity in 2008 (75% increase when compared to 2004). The largest producers are China (76GW), USA (40GW), Germany (34GW), Spain (22GW), India (13GW), and Japan (8GW). In the U.S. and European Union increase of power from renewable energy was greater than from conventional systems (energy from gas, coal, oil and nuclear altogether). However, renewable energy still represents a small fraction of total energy production.

shares of installed capacity of renewable energy for selected countries (large hydro system not included)

When including large hydropower installations, renewable energy production reached 1,140GW. Within the world’s total energy generated by humans, the most primitive households kitchen hearths continue to produce five times more energy than technologies based on renewable energy. If we could improve the efficiency of home heating equipment in third world countries, the consumption of biomass for these purposes would be significantly reduced. Along these lines, the World Bank has implemented a support program, facilitating the purchase of 1 million efficient kitchen stoves for Ethiopia's population. More than 500 manufacturers of such appliances have been trained as experts in energy efficient hearth stoves. However, we are just beginning to probe and utilize advanced renewable energy technologies worldwide. Desired and awaited technical solutions are still at the stage of research and implementation. Without the strong support from governments and international institutions, renewable energy sector will not be able to replace fossil fuels in the global energy market.

biomass and energy

Biomass is a versatile raw material that can be used for production of heat, power, transport fuels, and bioproducts. [12]When produced and used on a sustainable basis, it is a carbon-neutral carrier and can make a large contribution to reducing greenhouse gas emissions. Currently, biomass-driven combined heat and power, co-firing, and combustion plants provide reliable, efficient, and clean power and heat. Production and use of biofuels are growing at a very rapid pace. Sugar cane-based ethanol is already a competitive biofuel in tropical regions. In the medium term, ethanol and high-quality synthetic fuels from woody biomass are expected to be competitive at crude oil prices above US$45 per barrel.

Feedstocks for bioenergy plants can include residues from agriculture, forestry, and the wood processing industry, as well as biomass produced from degraded and marginal lands. Biomass for energy may also be produced on good quality agricultural and pasture lands without jeopardising the world's food and feed supply if agricultural land use efficiency is increased, especially in developing regions. Revenues from biomass and biomass-derived products could provide a key lever for rural development and enhanced agricultural production. Certification schemes are already established to ensure sustainable production of forest biomass and could be adopted to guide residue recovery and energy crop production. Biomass utilisation will be optimised by processing in biorefineries for both products and energy carriers.

Given these possibilities, the potential contribution of bioenergy to the world energy demand of some 467 EJ per year (2004) may be increased considerably compared to the current 45-55 EJ. A range from 200-400 EJ per year in biomass harvested for energy production may be expected during this century. Assuming expected average conversion efficiencies, this would result in 130-260 EJ per year of transport fuels or 100-200 EJ per year of electricity. Most countries have biomass resources available, or could develop such a resource, making biomass a more evenly spread energy supply option across the globe. It is a versatile energy source, which can be used for producing power, heat, liquid and gaseous fuels, and also serves as a feedstock for materials and chemicals.

Current use of biomass for energy

On average, in the industrialised countries biomass contributes less than 10% to the total energy supplies, but in developing countries the proportion is as high as 20-30%. In a number of countries biomass supplies 50-90% of the total energy demand. A considerable part of this biomass use is, however, non-commercial and relates to cooking and space heating, generally by the poorer part of the population. Part of this use is commercial, i.e., the household fuelwood in industrialised countries and charcoal and firewood in urban and industrial areas in developing countries, but there are very limited data on the size of those markets. An estimated 6-9 EJ are included in this category [WEA 2000, WEA 2004].

Modern bioenergy (commercial energy production from biomass for industry, power generation, or transport fuels) makes a lower, but still very significant contribution (some 7 EJ per year in 2000), and this share is growing. It is estimated that by 2000, 40 GW of biomass-based electricity production capacity was installed worldwide (producing 0.6 EJ electricity per year) and 200 GW of heat production capacity (2.5 EJ heat per year) [WEA 2000]. Biomass combustion is responsible for over 90% of the current production of secondary energy carriers from biomass. Combustion for domestic use (heating, cooking), waste incineration, use of process residues in industries, and state-of-the-art furnace and boiler designs for efficient power generation all play their role in specific contexts and markets.

Biofuels, mainly ethanol produced from sugar cane and surpluses of corn and cereals, and to a far lesser extent biodiesel from oilseed crops, represent a modest 1.5 EJ (about 1.5%) of transport fuel use worldwide. Global interest in transport biofuels is growing, particularly in Europe, Brazil, North America, and Asia (most notably Japan, China and India) [WEA 2000, WEA 2004, IEA 2006b]. Global ethanol production has more than doubled since 2000, while production of biodiesel, starting from a much smaller base, has expanded nearly threefold. In contrast, crude oil production has increased by only 7% since 2000 [WorldWatch Institute 2007].

Bioenergy policies and market

Biomass and bioenergy are now a key option in energy policies [Schlamadinger 2006]. Security of supply, an alternative for mineral oil and reduced carbon emissions are key reasons. Targets and expectations for bioenergy in many national policies are ambitious, reaching 20-30% of total energy demand in various countries. Similarly, long-term energy scenarios also contain challenging targets. Sufficient biomass resources and a well-functioning biomass market that can assure reliable, sustainable, and lasting biomass supplies are crucial preconditions to realise such ambitions. To date, various countries have considerable experience with building biomass markets and linking available resources with market demand. Examples are found in Brazil, Sweden, Finland, Canada, and the Netherlands. Relatively recently, international trade in biomass resources has become part of the portfolio of market dealers and volumes traded worldwide have increased at a very rapid pace with an estimated doubling of volumes in several markets over the past few years [Faaij 2005].

Biomass resources

Various biomass resource categories can be considered: residues from forestry and agriculture, various organic waste streams and, most importantly, the possibilities for dedicated biomass production on land of different categories, e.g., grass production on pasture land, wood plantations and sugar cane on arable land, and low productivity afforestation schemes for marginal and degraded lands. The potential for energy crops depends largely on land availability considering that worldwide a growing demand for food has to be met, combined with environmental protection, sustainable management of soils and water reserves, and a variety of other sustainability requirements. Given that a major part of the future biomass resource availability for energy and materials depends on these complex and related factors, it is not possible to present the future biomass potential in one simple figure.

Table provides a synthesis of analyses of the longer term potential of biomass resource availability on a global scale. Also, a number of uncertainties are highlighted that can affect biomass availability. These estimates are sensitive to assumptions about crop yields and the amount of land that could be made available for the production of biomass for energy uses, including biofuels. Critical issues include:

- Competition for water resources: Although the estimates presented in Table 1 generally exclude irrigation for biomass production, it may be necessary in some countries where water is already scarce.
- Use of fertilisers and pest control techniques: Improved farm management and higher productivity depend on the availability of fertilisers and pest control. The environmental effects of heavy use of fertiliser and pesticides could be serious.
- Land-use: More intensive farming to produce energy crops on a large-scale may result in losses of biodiversity. Perennial crops are expected to be less harmful than conventional crops such as cereals and seeds, or even able to achieve positive effects. More intensive cattle-raising would also be necessary to free up grassland currently used for grazing.
- Competition with food and feed production: Increased biomass production for biofuels out of balance with required productivity increases in agriculture could drive up land and food prices.

Table 1: Overview of the global potential of biomass for energy (EJ per year) to 2050 for a number of categories and the main preconditions and assumptions that determine these potentials [Berndes 2003, Smeets 2007, Hoogwijk 2005a].

* Heating value: 19 GJ/tonne dry matter.

Focussing on the more average estimates of biomass resource potentials, energy farming on current agricultural (arable and pasture) land could, with projected technological progress, contribute 100 - 300 EJ annually, without jeopardising the world's future food supply. A significant part of this potential (around 200 EJ in 2050) for biomass production may be developed at low production costs in the range of $2/GJ assuming this land is used for perennial crops [Hoogwijk 2005b, WEA 2000]. Another 100 EJ could be produced with lower productivity and higher costs, from biomass on marginal and degraded lands. Regenerating such lands requires more upfront investment, but competition with other land-uses is less of an issue and other benefits (such as soil restoration, improved water retention functions) may be obtained, which could partly compensate for biomass production costs. Combined and using the more average potential estimates, organic wastes and residues could possibly supply another 40-170 EJ, with uncertain contributions from forest residues and potentially a significant role for organic waste, especially when biomaterials are used on a larger scale. In total, the bioenergy potential could amount to 400 EJ per year during this century. This is comparable to the total current fossil energy use of 388 EJ. Key to the introduction of biomass production in the suggested orders of magnitude is the rationalisation of agriculture, especially in developing countries. There is room for considerably higher landuse efficiencies that can more than compensate for the growing demand for food [Smeets 2007]. The development and deployment of perennial crops (in particular in developing countries) is of key importance for bioenergy in the long run. Regional efforts are needed to deploy biomass production and supply systems adapted to local conditions, e.g., for specific agricultural, climatic, and socio-economic conditions.

Conversion

Conversion routes for producing energy carriers from biomass are plentiful. Figure 1 illustrates the main conversion routes that are used or under development for production of heat, power and transport fuels. Key conversion technologies for production of power and heat are combustion and gasification of solid biomass, and digestion of organic material for production of biogas. Main technologies available or developed to produce transportation fuels are fermentation of sugar and starch crops to produce ethanol, gasification of solid biomass to produce syngas and synthetic fuels (like methanol and high quality diesel), and extraction of vegetal oils from oilseed crops, which can be esterified to produce biodiesel. The various technological options are in different stages of deployment and development. Tables 2 and 3 provide a compact overview of the main technology categories and their performance with respect to energy efficiency and energy production costs. The end-use applications of section discusses the likely deployment of various technologies for key markets in the short- and the long-term.

Figure 1: Main conversion options for biomass to secondary energy carriers [WEA 2000].

Table 2: Overview of current and projected performance data for the main conversion routes of biomass to power and heat and summary of technology status and deployment. Due to the variability of technological designs and conditions assumed, all costs are indicative [van Loo 2002, Knoef 2005, USDOE 1998, Dornburg 2001].

Table 3: Overview of current and projected performance data for the main conversion routes of biomass to transport fuels. Due to the variability of data in the various references and conditions assumed, all cost figures should be considered as indicative [Hamelinck 2006, IEA 2006b, Ogden 1999, IEA 2004, Lynd 1996].

- Assumed biomass price of clean wood: $2/GJ. RME cost figures varied from $20/GJ (short-term) to $12/GJ (longer term), for sugar beet a range of $8 to $12/GJ is assumed. All figures exclude distribution of the fuels to fuelling stations.
- For equipment costs, an interest rate of 10%, economic lifetime of 15 years is assumed. Capacities of conversion unit are normalised on 400 MW_th input in the shorter term and >1000 MW_th input using advanced technologies and optimised systems in the longer term.
- Diesel and gasoline production costs vary strongly depending on the oil prices, but for indication: recent cost ranges (end 90s till 2010) are between $4 and $9/GJ. Longer term projections give estimates of roughly $6 to $10/GJ. Note that the transportation fuel retail prices are usually dominated by taxation and can vary between $0,50 and $1,30 /litre depending on the country in question.

Short-term represents best available technology or the currently noncommercial systems which could be built around 2010. Long-term represents technology with considerable improvement, large-scale deployment, and incorporation of process innovations that could be realised around 2040. This is also the case for the biomass supplies, assuming biomass production and supply costs around $2/GJ for plants which are close to the biomass production areas

Biomass-based energy carriers are competitive alternatives in situations where cheap, or even "negative-cost", biomass residues or wastes are available. In order to make large-scale bioenergy use competitive with fossil fuels, the conversion technologies, biomass production (especially from dedicated biomass crops), and total bioenergy systems require further development and optimisation. Table 4 gives an overview of the perspectives for bioenergy processes combined with main biomass resources.

Table 4: Generic overview of performance projections for different biomass resource, technology combinations and energy markets on shorter (~5 years) and longer (>20 years) timeframes. [WEA 2004, IEA 2006b, Faaij 2006, IPCC 2007, Knoef 2005, van Loo 2002]

Heat and power from biomass

Production of heat and electricity dominate current bioenergy use. At present, the main growth markets for bioenergy are the European Union, North America, Central and Eastern Europe, and Southeast Asia (Thailand, Malaysia, Indonesia), especially with respect to efficient power generation from biomass wastes and residues and for biofuels. Two key industrial sectors for application of state-of-theart biomass combustion (and potentially gasification) technology for power generation are the paper and pulp sector and cane-based sugar industry. Power generation from biomass by advanced combustion technology and co-firing schemes is a growth market worldwide. Mature, efficient, and reliable technology is available to turn biomass into power. In various markets the average scale of biomass combustion schemes rapidly increases due to improved availability of biomass resources and economies of scale of conversion technology. Competitive performance compared to fossil fuels is possible where lower cost residues are available particularly in co-firing schemes, where investment costs can be minimal.

Specific (national) policies such as carbon taxes or renewable energy support can accelerate this development. Gasification technology (integrated with gas turbines/combined cycles) offers even better perspectives for power generation from biomass in the medium term and can make power generation from energy crops competitive in many areas in the world once this technology has been proven on a commercial scale. Gasification, in particular larger scale circulating fluidised bed (CFB) concepts, also offers excellent possibilities for co-firing schemes. With biomass prices of about $2/GJ, state-of-the-art combustion technology at a scale of 40-60 MW_e can result in electricity costs of around $0,04 to 0,06/kWh produced. Co-combustion, particularly at efficient coal-fired power plants, can result in similar or lower cost figures, largely depending on the feedstock costs. When Biomass Integrated Gasification/Combined Cycle technology becomes available commercially, electricity costs could drop further to about $0,03 to $0,04/kWh, especially with higher electrical efficiencies. For larger scales (i.e., over 100 MWe) cultivated biomass will be able to compete with fossil fuels in many situations [Knoef 2005, Williams 1996] The benefits of lower specific capital costs and increased efficiency may in many cases outweigh the increase in costs and energy use for transport for considerable distances once a reasonably well-developed infrastructure is in place.

Decentralised power (and heat) production is generally more expensive due to higher capital costs and lower efficiencies than large-scale systems, but could be economical for off-grid applications. The costs that could ultimately be obtained with e.g., gasifier/diesel systems are still unclear and depend strongly on what emissions and fuel quality are considered acceptable. CHP generation is generally attractive when heat is required with high load factors. Traditional use of biomass, in particular, is for production of heat for cooking and space heating. It is not expected that this traditional use will diminish in coming decades. Nevertheless, modernising bioenergy use for poorer populations is an essential component of sustainable development schemes in many countries. This creates opportunities and major markets - for example, for improved stoves, and production of high quality fuels for cooking (e.g., biofuel-based such as ethanol and Fischer-Tropsch liquids) - with considerable efficiency and health advantages. Furthermore, digesters producing biogas on a village level, can prove very effective in various countries (such as China and India) in solving waste treatment problems and supplying high-quality energy carriers (clean gas and power when used in gas engines) along with hygienic bio-fertilisers. For commercial heat production, reliable technology (e.g., boilers, advanced stoves, etc.) is commercially available for many industrial, district and domestic heating applications. Also, combined heat and power generation seems attractive to various markets. The production of heat and process steam from biomass for specific industrial applications is an economically attractive option, as is evident in the paper and pulp and sugar industries worldwide.

Liquid and gaseous fuels from biomass

Generally, the economics of "traditional" fuels like rapeseed methyl esther and ethanol from starch and sugar crops in moderate climate zones are unlikely to reach truly competitive price levels, although trade barriers such as tariffs and quotas can be used to increase the economic performance of these fuels [IEA 2004]. Also, the environmental impacts of growing annual crops are not as good as perennials because per unit of product considerably higher inputs of fertilisers and agrochemicals are needed. In addition, annual crops on average need better quality land than perennials to achieve good productivities. Perennial crops can also be grown on marginal lands, thereby achieving other potential benefits such as soil quality improvement. A key exception under "conventional" biofuels is production of ethanol from sugar cane in tropical regions where good soils are available. For countries where sugar cane production is feasible, commercially available technology allows for production of relatively low-cost ethanol. Brazilian experience shows that ethanol production is competitive with gasoline at oil prices over US$60/barrel [Goldemberg 2004].

Ethanol production capacity based on sugar cane is increasing substantially in African, Latin American, and Asian (e.g., India, Thailand, and China) countries. Furthermore, better use of cane residues (e.g., for power generation or use via hydrolysis processes) can further improve the performance of cane-based ethanol production. The production of methanol (and di-methyl esters or DME), hydrogen, Fischer-Tropsch liquids, and ethanol produced from lignocellulosic biomass offers much better perspectives and competitive fuel prices in the longer term, i.e., between 2010 and 2020. Partly, this is because of the inherently lower feedstock prices and versatility of producing lignocellulosic biomass under varying circumstances. Furthermore, the (advanced) gasification and hydrolysis technologies under development have the potential for efficient and competitive production of fuels, sometimes combined with co-production of electricity [Hamelinck 2006]. Comprehensive research and development strategies for such technologies are required, though. Such strategies should focus not only on development of technologies but also on long-term deployment and building the infrastructure and markets required for those technologies.

Market development and international trade

Biofuel and biomass trade flows are modest compared to total bioenergy production but are growing rapidly. Trade takes place between neighbouring regions or countries, but increasingly trading is occurring over long distances. The possibilities for exporting biomass-derived commodities to the world's energy markets can provide a stable and reliable demand for rural regions in many developing countries, thus creating an important incentive and market access that is much needed. For many rural communities in developing countries such a situation would offer good opportunities for socio-economic development.  Sustainable biomass production may also contribute to the sustainable management of natural resources. Importing countries on the other hand may be able to fulfil cost-effectively their GHG emission reduction targets and diversify their fuel mix. Given that several regions of the world have inherent advantages for producing biomass (including lignocellulosic resources) and biofuels in terms of land availability and production costs, they may gradually develop into net exporters of biomass and biofuels. International transport of biomass (or energy carriers from biomass) is feasible from both the energy and the cost points of view. The import of densified or pre-treated lignocellulosic biomass from various world regions may be preferred, especially for second generation biofuels, where lignocellulosic biomass is the feedstock and large-scale capitalintensive conversion capacity is required to achieve sound economics. This is a situation comparable to that of current oil refineries in major ports which use oil supplies from around the globe.

Very important is the development of a sustainable, international biomass market and trade. Proper standardisation and certification procedures are to be developed and implemented to secure sustainable biomass production, preferably on the global level. Currently, this is a priority for various governments, market players, and international bodies. In particular, competition between production of food, preservation of forests and nature and use of land for biomass production should be avoided. As argued, this is possible by using lignocellulosic biomass resources that can come from residues and wastes, which are grown on non-arable (e.g., degraded) lands, and in The Barra Grande alcohol and sugar production plant in Brazil produces ethanol from sugar cane on a commercial scale particular by increased productivity in agricultural and livestock production. Demonstration of such combined development where sustainable biomass production is developed in conjunction with more efficient agricultural management is a challenge. However, this is how bioenergy could contribute not only to renewable energy supplies and reducing GHG emissions, but also to rural development [Faaij 2006].

Competing markets for biomass

Total primary (the presumed mix of fossil fuels, renewables and nuclear) energy demand in 2050 varies between about 800 EJ and 1,400 EJ. As discussed previously, the total primary biomass supplies in 2050 could amount to 200-400 EJ. This is conservative relative to the increased availability of primary biomass. Assuming conversion to transport fuels with an expected average conversion efficiency of 65%, this would result in 130-260 EJ fuel. This is up to double the current demand and a similar range to the expected demand. Conversion to power with an assumed average efficiency of 50% logically results in 100-200 EJe, also a similar range to the expected future demand. Additional future demand for (new) biomaterials such as bio-plastics could add up to 50 EJ halfway through this century [Hoogwijk 2003]. It is clear, therefore, that biomass can make a very large contribution to the world's future energy supply. This contribution could range from 20% to 50%. The higher value is possible when growth in energy demand is limited; for example, by strongly increased energy efficiency.
Biomass cannot realistically cover the whole world's future energy demand. On the other hand, the versatility of biomass with the diverse portfolio of conversion options, makes it possible to meet the demand for secondary energy carriers, as well as biomaterials. Currently, production of heat and electricity still dominate biomass use for energy. The question is therefore what the most relevant future market for biomass may be.

For avoiding CO2 emissions, replacing coal is at present a very effective way of using biomass. For example, co-firing biomass in coal-fired power stations has a higher avoided emission per unit of biomass than when displacing diesel or gasoline with ethanol or biodiesel. However, replacing natural gas for power generation by biomass, results in levels of CO2 mitigation similar to secondgeneration biofuels. Net avoided GHG emissions therefore depend on the reference system and the efficiency of the biomass production and utilisation chain. In the future, using biomass for transport fuels will gradually become more attractive from a CO2 mitigation perspective because of the lower GHG emissions for producing second-generation biofuels and because electricity production on average is expected to become less carbon-intensive due to increased use of wind energy, PV and other solar-based power generation, carbon capture and storage technology, nuclear energy, and fuel shift from coal to natural gas.  In the shorter term, however, careful strategies and policies are needed to avoid brisk allocation of biomass resources away from efficient and effective utilisation in power and heat production or in other markets, e.g., food. How this is to be done optimally will differ from country to country.

The use of biomass for biomaterials will increase, both in wellestablished markets (such as paper, construction) and for possibly large new markets (such as bio-chemicals and plastics) as well as in the use of charcoal for steel making. This adds to the competition for biomass resources, in particular forest biomass, as well as land for producing woody biomass and other crops. The additional demand for bio-materials could surpass the current global biomass use (which is some 10% of the global energy use) [Hoogwijk 2003]. However, increased use of bio-materials does not prohibit the production of biofuels (and electricity and heat) per se. Construction wood ends up as waste wood, paper (after recycling) as waste paper, and bio-plastics in municipal solid waste [Dornburg 2005]. Such waste streams still qualify as biomass feedstock and are available, often at low or even negative costs. Cascading biomass over time in fact provides an essential strategy to optimise the CO2 mitigation effect of biomass resources. The reports [IPCC 2007] that the largest sustained mitigation benefit will result from a sustainable forest management strategy aimed at maintaining or increasing forest carbon stocks, while producing an annual sustained yield of timber, fibre, or energy from the forest. This could for example involve conventional forests producing material cascades (e.g., solid wood products, reconstituted particle/fibre products, paper products) with wood or fibre that cannot be reused/recycled being used for energy.

Comparison with other energy supply options

Table 5 provides a general overview of the current use, and the technical and theoretical energy potentials of various renewables: biomass, wind energy, solar energy, hydropower, and geothermal energy. Current and potential future energy production costs of electricity, heat, and fuels are given in Table 6.  State-of-the-art scenario studies on energy supply and mitigation of climate change agree that all climate-friendly energy options are needed to meet the future world's energy needs and simultaneously drastically reduce GHG emissions. Intermittent sources such as wind and solar energy have good potential, but their deployment is also constrained by their integration into electricity grids. In addition, electricity production from solar energy is still expensive. Hydropower has a limited potential [IPCC 2007] and commercial deployment of geothermal and ocean energy, despite their large theoretical potentials, has proved to be complex. Biomass in particular can play a major and vital role in production of carbon-neutral transport fuels of high quality as well as providing feedstocks for various industries (including chemical). This is a unique property of biomass compared to other renewables and which makes biomass a prime alternative to the use of mineral oil. Given that oil is the most constrained of the fossil fuel supplies, this implies that biomass is particularly important for improving security of energy supply on the global as well on a national level. In addition, competitive performance is already achieved in many situations using commercial technologies especially for producing heat and power. It is therefore expected that biomass will remain the most important renewable energy carrier for many decades to come.

Table 5: Overview of current use, and the technical and theoretical potentials of different renewable energy options [WEA, 2000].

Table 6:  Cost ranges (Euro-cents per unit) for production of electricity, heat, and fuel from various renewable energy options at present and longer term [WEA, 2004].

Conclusion

Biomass is the most important renewable energy option at present and is expected to maintain that position during the first half of this century and likely beyond that [IPCC 2007, IEA 2006a]. Currently, combined heat and power (CHP), co-firing and various combustion concepts provide reliable, efficient, and clean conversion routes for converting solid biomass to power and heat. Production and use of biofuels are growing at a very rapid pace. Although the future role of bioenergy will depend on its competitiveness with fossil fuels and on agricultural policies worldwide, it seems realistic to expect that the current contribution of bioenergy of 40-55 EJ per year will increase considerably. A range from 200 to 400 EJ may be expected during this century, making biomass a more important energy supply option than mineral oil today. Large enough to supply one-third of the world's total energy needs.

Bioenergy markets provide major business opportunities, environmental benefits, and rural development on a global scale. If indeed the global bioenergy market is to develop to a size of 300 EJ over this century (which is quite possible given the findings of recent global potential assessments) the value of that market at $4-8/GJ (considering pre-treated biomass such as pellets up to liquid fuels such as ethanol or synfuels) amounts to some $1.2-2.4 trillion per year. Feedstocks can be provided from residues from agriculture, forestry, and the wood industry, from biomass produced from degraded and marginal lands, and from biomass produced on good quality agricultural and pasture lands without jeopardising the world's food and feed supply, forests, and biodiversity. The pre-condition to achieve such a situation is that agricultural land-use efficiency is increased, especially in developing regions.

Considering that about one-third of the above-mentioned 300 EJ could be supplied from residues and wastes, one-quarter by regeneration of degraded and marginal lands, and the remainder from current agricultural and pasture lands, almost 1,000 million hectares worldwide may be involved in biomass production, including some 400 million hectares of arable and pasture land and a larger area of marginal/degraded land. This is some 7% of the global land surface and less than 20% of the land currently in use for agricultural production. There are rapid developments in biofuel markets: increasing production capacity, increasing international trade flows, increased competition with conventional agriculture, increased competition with forest industries, and strong international debate about the sustainability of biofuels production. Biomass is developing into a globalised energy source with advantages (opportunities for producers and exporters, more stability in the market) and concerns (competing land use options, sustainability).

Biomass trading and the potential revenues from biomass and biomass-derived products could provide a key lever for rural development and enhanced agricultural production methods, given the market size for biomass and biofuels. However, safeguards (for example, well-established certification schemes) need to be installed internationally to secure sustainable production of biomass and biofuels. In the period before 2020 substantial experience should be obtained with sustainable biomass production under different conditions as well as with deploying effective and credible certification procedures. Especially promising are the production of electricity via advanced conversion concepts (i.e., gasification, combustion, and co-firing) and biomass-derived fuels such as methanol, hydrogen, and ethanol from lignocellulosic biomass. Ethanol produced from sugar cane is already a competitive biofuel in tropical regions and further improvements are possible. Both hydrolysis-based ethanol production and production of synfuels via advanced gasification from biomass of around E2/GJ can deliver high quality fuels at a competitive price with oil down to US$45/ barrel. Net energy yields per unit of land surface are high and GHG emission reductions of around 90% can be achieved, compared with fossil fuel systems. Flexible energy systems, in which biomass and fossil fuels can be used in combination, could be the backbone for a low risk, low-cost, and low carbon emission energy supply system for large-scale supply of fuels and power, providing a framework for the evolution of large-scale biomass raw material supply systems.

Economies of Bioenergetics

A variety of factors were found to contribute to the cost data will include both the capital and installation costs associated to the installation of actual capacity for generation, typically provided in $/W(capacity), and the production cost, which is the cost of producing electricity over the lifetime of a given project, typically provided in $/kWh. The main factors that affect these costs include:

- Feasibility Study Costs;
- Economies of Scale;
- Equipment/technology Options;
- Installation Requirements and Site Characteristics;
- Financing Terms;
- Cost of Land;
- Impact Assessment and Permitting;
- Project Renewable Resource Characteristics and Capacity Factors;
- Operating and Maintenance costs;
- Fuel Costs;
- Property Taxation and Land Lease Costs;
- Co-products and Co-benefits;
- Transmission and Grid Connection Costs; and
- Government Policy Factors

Factors that directly affect the cost of electricity are factors that have a direct impact on the capital cost of a project (and as such the installed capacity cost and generating cost of a project) or the factors that have a direct impact on the operating cost of a project (and consequently the generating cost only). Factors that indirectly affect the cost of renewable electricity are generally policy factors that lead to a reduction of the effective cost of various elements of a project. The particularly significant cost variation over time associated with some renewable electricity technologies was found to be the result of increased commercialization and maturity of markets for these technologies in recent years.

In principal, there are considered to be two generations of commercialized renewable electricity technologies if we consider technology development over the last 120 years. First generation technologies emerged from the industrial revolution at the end of the 19th century and include hydropower, biomass combustion and geothermal plants. Biomass combustion technologies generally use steam turbines to generate electricity. For smaller scale applications, internal combustion engines are used to generate electricity from biomass. Steam turbine and internal combustion engines are very mature. Hence, capital costs and electricity generating costs for these technologies have not changed significantly with reference to other conventional fossil fuel and nuclear based platforms over the years.

Therefore, unlike photovoltaics and wind turbines, the costs of biomass combustion are not on a steep technology-driven downward curve due to their technical maturity. Advanced biofuels are considered to be a part of the second generation renewable technologies. Second generation technologies are only recently starting to be broadly commercialized as a result of research, development and demonstration efforts which started in the late seventies. The initial investment in these technologies was prompted by energy security concerns linked to the oil price crises of that time period, but the continued focus on these technologies was mainly due to their potential environmental benefits. Innovations and ramp-up to commercialization for these two second generation technologies has led to a major decrease in associated installed capacity and generating costs over the past 3 decades.

Terminology

Before proceeding to the analysis of cost data for bioenergetics and the factors that influence them, several terminology clarifications are appropriate. These include the definition of capital costs, fixed costs, variable costs, installed capacity cost ICC and electricity generating cost EGC.

Capital Costs

Capital costs are costs incurred on the purchase of land and equipment and installation and construction services to be used to reach the point of producing goods, in this case renewable electricity. Capital cost also include feasibility studies, project design, permitting and legal costs incurred to reach the point of initial production. In other words, capital costs represent the total cost needed to bring a project to a commercially operable status.

Capital costs do not include labor costs except for the labor used for feasibility analysis, project design and construction. Typically, capital costs are one-time expenses, although payment may be spread out over many years depending on financing arrangements. Capital costs are generally fixed for a given unit of installed electricity generating capacity (i.e., they don’t change over the lifetime of the project), although they do vary from project to project based on equipment configurations and project site specifics. Capital costs also do not vary depending on the actual level of electricity output occurring from a project.

Operating and Maintenance Costs

Operating costs are the recurring expenses which are related to the operation of a business. It is the amount of resources used or cost incurred by an organization just to maintain existence. These costs include overhead costs, which can include the payment of rent on the office space a business occupies or lease for land on which a generating plant is sited, administrative employee wages, insurance costs, financing costs such as interest or other financing charges, taxes, equipment depreciation etc. They also include non-overhead costs like supplies, such as biomass feedstocks used to create the electricity, and in some cases employee wages.

Operating costs generally fall into two broad categories:

- Fixed costs, which are the same whether the operation is closed, or running at 100% of capacity. Fixed costs are expenses whose total does not change in proportion to the activity of a business, within the relevant time period or scale of production. Fixed costs include, but are not limited to, overheads (rent, insurance, and such) and can include direct costs such as payroll (particularly salaries).

- Variable costs, which may increase depending on whether more production is done, and how it is done. For electricity projects, the most significant variable cost is typically the cost of fuel.

Because bioenergetic projects also entail the use of devices, components and pieces of equipment to make up overall generating facilities, maintenance costs must also be considered. Maintenance costs are incurred to keep equipment operating at an optimal level of performance. These costs included those associated with routine recurring work required to keep a facility (plant, building, structure, utility system, or other real property) in such condition that it may be continuously used, at its original or designed capacity and efficiency for its intended purpose. These costs also include the corresponding administrative, managerial, and supervision costs associated with this work. In the most simple production function, total operating and maintenance cost is equal to fixed costs plus variable costs plus maintenance costs

Installed Capacity Cost ICC

The installed capacity cost for a energy project is typically represented as dollars per unit of installed power generating capacity ($/W). This cost is calculated by totaling all capital costs incurred to bring the project to the point of production and dividing this total by the total installed rated capacity of energy generating equipment. The capital costs usually includes the following:

- Project feasibility studies;
- Engineering design;
- Impact assessment and permitting;
- Equipment procurement of fabrication;
- Site preparation (including site services and access roads);
- Plant construction and installation;
- Grid connection;
- Project management; and
- Commissioning and start-up

Energy Generating Cost EGC

Each technology used to produce electricity has specific characteristics which can vary significantly from one to another. Among these characteristics: equipment cost, construction time, electrical output, lifetime and operation and maintenance requirements. Due to these differences it is very difficult to perform a comparison between different technologies by only considering one of those characteristics. Furthermore, comparison of installed capacity costs alone can be misleading as some technologies have high initial capital costs but require very little operating and maintenance expenditures over their lifetime while other technologies demonstrate the reverse phenomenon. Fossil fuel plants, for example, have some of the lowest up-front capital costs but incur significant maintenance and fuel costs for the entire life of the plant. Conversely, photovoltaic projects entail high up-front capital costs but require minimal additional expenditures over their lifetime due to almost negligible operating and maintenance requirements. In order to provide a better overall lifecycle comparison between technologies, the electricity generating cost is a more representative figure.

Levelized Cost of Power LCP

The electricity generating cost for a given project is frequently referred to as the levelized cost of power production. It is typically presented in dollars per unit of electricity produced ($/kWh). The levelized cost of power production is the average cost of power production over the life of a power plant, taking into account all capital expenses and operating and maintenance costs. It is determined by dividing the total life-cycle costs, usually in present dollar values, by the estimated amount of electricity, in kWh, the project will produce over its operating life.

Feasibility Study Cost Variability

Although feasibility studies typically do not represent a major cost relative to other capital costs associated with renewable electricity projects, they can be significant in some instances. Feasibility study requirements, and consequently cost for such studies, vary greatly from technology to technology. They can also vary significantly between different projects using the same technology. For renewable electricity projects, a significant factor affecting the cost feasibility studies is the existence and quality renewable resource data for a proposed project site. Where no data exists or where data is of limited quality for a particular site, data must be collected and analyzed to the point of establishing the viability of developing an actual electricity generation project. The cost of acquiring reliable data depends on the renewable energy resource and the technology being used to harness it. Requirements for feasibility studies are typically fairly consistent from one biomass power project to another. Furthermore, these costs are low compared to equipment and construction costs.

Capacity/Economies of Scale

All renewable electricity technologies benefit from economies of scale in various ways. Generally, the larger the installation the more power generation capacity there is to amortize the various capital costs over. This means that these costs can be more rapidly recouped with a larger capacity project, and consequently yield a lower lifecycle cost for electricity generation ($/kWh) and a lower installed capacity cost ($/kW). Furthermore, any project that has financial transaction costs can recoup these costs faster if they are spread over more kilowatt-hours with a larger project. This can also hold true with operating and maintenance costs. A larger project will almost always have smaller operations and maintenance costs per kilowatt-hour because of various cost efficiencies than can be leveraged, such as management, maintenance equipment, monitoring etc.  Significant economies of scale exist for purchase of larger steam turbines or combustion engines, so impacts on capacity costs can be significant. Impact on electricity generation cost is lower because actual power production will depend more heavily on the cost of biomass feedstocks over the lifetime of the biomass power project.

Plant Availability

Plant availability, along with the quality of the renewable resource dictate how much of the installed capacity of a plant can actually be used and consequently how much electricity can be produced from a plant assuming a constant supply of fuel. The higher the availability of generating equipment, the more power can be produced. The more power produced, the greater the potential revenues, or displacement of cost of electricity from other sources, and the more rapidly capital and operating and maintenance costs can be repaid.

Depending on the nature of the biomass feedstock for a given electricity project, equipment costs can vary significantly. For example some feedstocks may require chipping, pelletizing, drying or long term storage for their effective use in combustion equipment. Equipment for each of these activities represents a cost that may not exist in other biomass electricity projects. Furthermore, where a suitable heat load exists at a project site, an additional cost can be incurred to install heat capture and transfer equipment, the cost of which may not always be completely offset by displaced heating fuel costs. In addition to equipment cost variations, characteristics of a renewable resource can affect technology choices which also have an impact on the project capital cost per unit of installed power capacity. For biomass projects these technology variations can be significant.

The great variability of bioenergy resources combined with the broad range of technical approaches to harnessing bioenergy contributes to a great variation in biomass electricity generating costs. Process routes for converting biomass into electricity include direct combustion, gasification, anaerobic digestion and pyrolysis. Direct combustion generally is a well established and relatively low cost technology that involves burning biomass directly to produce heat to produce steam to drive a turbine for electricity generation. Initial costs of a direct wood biomass energy system are generally 50% greater than that of a fossil fuel system, but this is mainly due to more complex fuel handling and storage system requirements. Generally, the higher the plant availability, the higher the cost. Although a cost premium may be justified over the lifetime of a project, it can lead to a higher installed capacity cost. Equipment costs on an installed capacity basis can vary significantly from one biomass conversion technology to another.

Anaerobic digestion involves decomposition of waste streams such as manure or municipal solid waste in the absence of oxygen to produce a combustible gas similar to natural gas which can be used to drive an a turbine or internal combustion engine generator. Although the actual generating technologies used in such systems are well established and have relatively low costs, manure handling and digesting equipment can add a significant cost which can be offset by economies of scale in larger projects.

Pyrolysis is a thermo-chemical process used to convert solid biomass to liquid and solid fuels that can be more easily stored, transported and burned than solid wood wastes. Although not yet fully commercialized, these systems are used to convert biomass streams in remote location or in locations where electricity is not required to fuels that can be easily transported to sites where electricity generation can be done using conventional turbine technology modified to use pyrolysis product fuels in more commercially viable environments. Little cost data is available on pyrolysis systems to date but they are only expected to be competitive in applications where feedstock are free or have a negative value due to disposal liabilities.

Finally, gasification technologies convert forestry, agricultural and municipal residues into syngas (similar to natural gas, but lower in energy content), which once cleaned and conditioned, can be burned in gas turbines and gas-powered engines to produce electricity. Although more expensive than direct combustion of biomass, these systems can improve emissions performance. Each of these biomass technologies represents different capital and operating and maintenance costs, but can be the only economically competitive option depending on the biomass resource and project location.

Cost of Land

Where land is not leased, the cost of purchasing land on which electricity generating facilities will be sited can vary drastically depending on the region and several other factors. Land costs can vary according to perceived value, which generally depends on proximity to urban centers, accessibility, esthetic value, ownership or perceived value of natural resources on land. The land cost circumstances for every renewable electricity project can therefore vary significantly. This can vary drastically from one jurisdiction to another. However, land is typically only a minor cost relative to other capital costs.

Construction and Location/Installation Variables

Specific construction and installation requirements, and related capital costs can vary significantly from one renewable electricity project to another, even within applications of the same technology. Accessibility can be a major factor affecting construction and installations costs for a project. Generally, the more remote and difficult to access the project site, the higher the installation costs. Although some potential sites may be accessible by existing roads, in many cases land has to be cleared and access roads have to be specifically constructed for the purpose of reaching a development site and erecting a facility.

Construction of access roads can be costly especially since they must be able to withstand significant heavy equipment transit and hauling of large volumes of construction material, such as concrete for foundations, mobile crane equipment, steel piping, drillers, turbines, etc. The cost of roads depends on soil conditions, land cover and a variety of other factors. Furthermore, the longer the access road required, the costlier it becomes. In some cases, land leases or access fees must be paid for some parts of access roads if they cross property not owned by the project developer. Overall travel distances to sites from regions of source labour and materials can also differ substantially from project to project.

Distance to power transmission infrastructure capable of handling project power outputs and power conditioning requirements can also vary significantly from project to project. Where projects are especially remote, distance to existing transmission infrastructure and the costs associated to installing connection lines can be enough on its own to make a project uneconomic. In many cases, easement rights for lines crossing non-owned land can require an additional cost outlay. Furthermore, depending on the output voltage of a power facility, a transformer may be necessary to convert the low voltage current to 10-30 kV current suitable for most local electrical grids. The cost of such equipment can vary significantly with size and suitability to local conditions.

Materials requirements can also differ from site to site. Regional construction labour and civil and electromechanical engineering costs can also vary significantly from jurisdiction to jurisdiction. Furthermore, construction time requirements, and consequently overall labour costs, can also differ drastically from one site or jurisdiction to another. Because exact siting of a biomass power installation is less critical than for wind, hydro and geothermal projects, location related construction and installation cost variability is generally less important for this technology.

Equipment Lifetime and Decommissioning Requirements

Equipment lifetimes and retrofit/replacement schedules partially define the total amount of electricity that can be produced from a project. Equipment from different vendors can have different warranty periods, and consequently different expected lifetimes. Furthermore, different technologies have different lifetimes. Biomass electricity system turbines and wind turbines typically have shorter expected lifetimes due to their substantial moving parts and the consequent inevitable wear and breakdown of turbine components. Decommissioning and disposal costs can also vary from technology to technology. Equipment lifetime and decommissioning requirements are expected to be fairly consistent from one manufacture to another and from one technology to another. Therefore this is expected to be only a low variability factor for installed capacity and generating costs.

Impact Assessment and Permitting

Different technologies have different environmental impact assessment and permitting requirements. These costs vary widely and often include significant fees for lawyers, public affairs/lobbyists, and engineers involved in the effort to gain community approval. Environmental assessment of fish habitat impacts for small hydropower projects, air emissions impacts for biomass electricity projects and landscape visual pollution for geothermal projects are required and represent varying costs depending on the project location. Where these projects are close to populated areas, community opposition can come into play. Impact assessment and permitting requirements are expected to be fairly consistent from one jurisdiction to another and from one technology to another. Some slight variability can be expected based on the scale of the installation and the nature of the biomass stream to be used as project fuel. However, the cost associated to these activities are low relative to the overall equipment and construction costs for biomass power installation

Factors that Have a Direct Impact on Net Cost of Generating Electricity

Generally, there are numerous factors that dictate the levelized cost of electricity from renewables, all of which can vary significantly from one project to another. The following provides a summary of the factors that affect the cost of renewable electricity by affecting operating and maintenance costs.

Quality of Renewable Energy Resource and Capacity Factors

For all electricity generating technologies, the availability of fuel is essential to produce electricity. With renewable technologies the quality and characteristics of the renewable energy resource at or close to project site define the amount of fuel available for electricity generation on an annual basis and when it can be used. The amount of fuel available has a huge impact on the net cost of generating electricity for all technologies, but the added factor of when or how often the fuel is available can have a particularly significant impact on costs for some renewable technologies as well.

Actual costs per kWh for renewables depend on the number of kWh of electricity actually produced. The capacity factor of a power plant is the ratio of the actual output of a power plant over a period of time and its output if it had operated at full capacity over that time period. This is calculated by totaling the electricity the plant produced and dividing it by how much electricity it would have produced at full capacity. This is a particularly important issue when considering photovoltaics, wind power and some small-scale hydropower projects. In these cases, the plant may be available to produce electricity, but its fuel, wind, sunlight or water, may not be available or enough of the fuel may not be available to allow the plant to operate at full capacity.

Geothermal and biomass generation projects generally deal with resources that are continuously available, assuming a project is appropriately designed, and hence have capacity factors approaching 100%. As long as a viable fuel source is available, such projects will only be limited by the capacity and availability factors their power equipment is rated for and will generally not be affected by temporal factors. That being said, for geothermal projects, the heat content of a geothermal reservoir will gradually decrease/decline over time, but this should be minimized for the planned life of the project if an appropriate water re-injection strategy is employed. Similarly, if a steady stream of biomass feedstock is not secured from the duration of a biomass generation project, the capacity factor issue may come into play, if production rate is reduced or interrupted. Consistency of availability of biomass fuel can have a significant impact on the cost of biomass power generation.

Operations and Maintenance

Aside from the requirement to replace some of the supporting power conditioning components over their lifetime, operating and maintenance costs are essentially can result from special attention and extra maintenance requirements. Operations and maintenance costs are generally fairly consistent from one jurisdiction to another. Some relative cost variability can occur based on scale of the biomass power installation.

Fuel Costs

For biomass projects, the cost of fuel defines economic competitiveness. Factors affecting biomass fuel costs, such as transportation distance and harvesting, preparation and storage requirements, can have drastic variability impacts on generating costs. Cost for biomass feedstocks can range from free, or even negative values in cases that involve waste streams with high disposal costs, to significantly higher when feedstocks must be grown, harvested, processed or transported to end-use sites. Types of biomass feedstock used for electricity generation include:

- Agricultural residues which are generated after each harvesting cycle of commodity crops. A portion of the remaining stalks and biomass material left on the ground can be collected and used for electricity generation purposes. Wheat straw and corn stover generally make up the majority of available crop residues.

- Energy crops are produced solely or primarily for use as feedstocks in electricity generation processes. Energy crops includes hybrid poplar, hybrid willow, and switchgrass, which are typically grown on idled or in pasture lands.

- Forestry residues are the biomass material remaining in forests that have been harvested for timber. Timber harvesting operations do not extract all biomass material, because only timber of certain quality is usable for processing into end products by facilities. Therefore, the residual material after a timber harvest is potentially available for electricity generation purposes. Forestry residues are composed of logging residues, rough rotten salvageable dead wood, and excess small pole trees.

- Urban wood waste/mill residues are waste woods from manufacturing operations that would otherwise be landfilled. The urban wood waste/mill residue category includes primary mill residues and urban wood such as pallets, construction waste, and demolition debris, which are not otherwise used. These streams can be particularly economical since they generally exist close to urban centers with established transmission infrastructure and represent a negative disposal cost.

- Landfill gas is produced from organic waste disposed of in landfills. The waste is covered and compressed mechanically and by the pressure of higher levels. As conditions become anaerobic the organic waste is broken down and landfill gas is produced. This gas builds up and can be used to drive an electric turbine.

- Agricultural manure and biological solids are streams of biomass that can be converted into biogas which can in turn be used to drive a steam turbine or an internal combustion engine to produce electricity. Manure can be collected from dairy farms, feedlots, pig farms and poultry farms. Waste biological solids are produced at waste water treatment facilities and food processing plants. Conversion of these wastes into combustible biogas occurs in anaerobic digesters, which present several key advantages beyond production of electricity including a reduction of waste volume, destruction of parasites and harmful organisms, and creation of high value fertilizer streams.

The characteristics and economics of harnessing each of these feedstock streams for power generation vary significantly, not only from stream to stream, but also from project to project. The cost of each fuel is defined by production, collection/harvesting, processing, transportation, storage, and in some cases, fuel handling requirements. Production costs can be especially high when dealing with dedicated energy crops and can vary drastically from one project to another. Variations stem from differences in the cost of agricultural land, soil conditions and climate and annual crop yields. Processing costs can also vary depending on the biomass stream. For example forestry residues may require chipping to be usable in combustion equipment and manure and biosolids require anaerobic digesters for production of biogas.

Where biomass feedstocks are by-products of other processes, such as forestry residues, manure and biosolids streams, crop residues and landfill gas, project economics can be significantly improved as long as electricity generation projects can be sited close to these streams and still have easy grid access. If not sited close enough, transportation costs alone can render projects uneconomical. Energy density of fuels can also affect the net transportation cost per delivered kWh of electricity. The amount of biomass available within a practical transporting distance generally determines the viable size of a biomass electricity generating project. The following figures can provide some context of the costs associated with some biomass streams.

- For forestry-produced biomass, the cost can range from US$0.5 to 3 per million Btu, with economically successful projects paying less than $1.5 per million Btu

- Urban wood waste and mill residues are often available at $1 per million Btu or less. However, the cost of collecting urban wood waste and mill residues can range from $0-8 per wet ton for mill residues and from $10-14 per ton for urban residues.

- Burnable municipal solid waste (MSW) is usually landfilled for a fee. Thus, it has a negative fuel price. However, plant operators must process MSW to eliminate toxics and generally need to install emissions control equipment, both of which can drive up costs of power generation.

- Studies have shown that transporting giant round bales of switchgrass costs $4.50 to $13.5 per dry tonne ($0.29 to $0.87 per million Btu) for distances of less than 50 miles

- Costs of landfill gas are less variable: these plants can typically produce electricity at 6 to 8 cents per kWh. Larger landfills are often required to install gas recovery systems - making the marginal cost of the energy recovery system the appropriate consideration for determining electricity production costs. Costs of energy recovery systems alone are typically about 5 cents per kWh.

Electricity Generating Costs and Installed Capacity Costs for Biomass Electricity Facilities

Transmission Costs

Transmission and market access constraints can significantly affect the cost of renewable electricity, especially with intermittent technologies such as wind and solar. Significant connections fees and annual transmission fees are required for photovotaic projects in many jurisdictions, regardless of the size of the system. Wind can be especially challenging because of its inherent unpredictability. Deviations from schedule can be penalized in certain jurisdictions without regard to whether they increase or decrease system costs. Furthermore, interconnection procedures are not standardized, and utilities have on occasion imposed such difficult and burdensome requirement on wind plants for connection to transmission lines that wind companies have chosen to build their own lines instead. These issues can contribute to significant variations in the cost of wind electricity from one project to another or one jurisdiction to another. Such issues are less significant with hydropower, geothermal and biomass projects because they can provide baseload power and are typically fairly large scale. Because biomass power projects are typically large scale, transmission related costs are typically small relative to other operating costs. As such, variation in these costs have minimal variability impacts on overall generating cost.

Financing Costs

Financing terms are a critical factor for all renewable electricity generation technologies. Different project developer categories will have access to different finance options, which translates to different financing costs. For example, a typical 50 MW wind farm that could deliver power at 5 cents/kWh, if financed by a wind developer through financial institutions, could generate electricity at 3.5 cents/kWh if the wind developer had access to the financing terms available to investor-owned utilities when they own wind projects . The main reason for this is that utility project developers have access to lower interest financing through access to funds from bond-style investments from investors.

When financing projects through financial institutions or private investors, interest rates are significantly higher. Utilities usually have access to financing at interest rates of roughly 7.5% compared to 9.5% for a developer and longer debt payment periods (20 years compared to 12 for developers). Utilities also don’t have a debt service coverage ratio (DSCR) requirement. The DSCR is a mechanism by which a lender reduces risk of default on a loan be requiring that a wind project generate enough cash each year to exceed loan repayments. Typically, this results in a smaller loan than would be most advantageous to the developer. Financing costs can be especially high for small photovoltaic installations.

In order to offset the higher interest rates that are usually required for renewable projects compared to traditional gas or other utility generation projects, several economic instruments can be employed. These include low-cost government loans, loan guarantee programs, and interest-rate buy-downs. Financing costs for biomass power projects are expected to only vary slightly from one jurisdiction to another.

Co-products and Co-benefits

Because biomass generation produces electricity by combustion, the possibility exists to use heat (or steam) not captured by the generator for process or space heating applications. This is commonly referred to as co-generation or combined heat and power (CHP). The key economic driver for developing a CHP project is the presence of a heat load onsite or within a close distance to the biomass generation project. If heat can be produced at a cost that is competitive with heating alternatives, typically from fossil fuel, and a steady heat requirement exists, a net cost saving, or profit from the sale of heat, can be credited to the project and serve to offset the cost of electricity production. The magnitude of the cost saving differs from project to project, from negligible to significant depending on how much heat can be economically used and the cost of fuel being displaced by the CHP system.

Other renewables generally do not have co-product opportunities, although some co-benefits may exist. For example, emission credits from displaced greenhouse gas or criteria air contaminant emissions reductions can translate to an increased value for renewable electricity projects that can offset costs and accelerate investment payback periods. Emission credit opportunities vary significantly from jurisdiction to jurisdiction, as does the value for these credits. Hydropower can provide further co-benefits such as facilitating irrigation, providing flood control, providing water supply and facilitating navigation. The cost impacts of such co-benefits are, however, difficult to quantify. The presence of a market for co-product heat from biomass power installations can have a significant impact in terms of creating a new revenue stream or offsetting operating costs.

Land Leases and Property Taxes

As with the cost of purchasing land, land leases can vary drastically from one jurisdiction to another. Lease rates vary with the perceived value for land. This value typically varies with proximity to urban centers, accessibility, esthetic value, ownership and perceived value of natural resources on land. The circumstances for every renewable electricity project can therefore vary significantly. As an example, land lease costs for small hydropower projects have been known to range from roughly $1,500 per MW of capacity to alleged offers as high as $15,000 per MW. Some are fixed payments and some vary with the amount of electricity produced.

Rates of taxation of renewable electricity projects also vary drastically from one jurisdiction to another, most notably at the municipal level. In Canada for example, municipalities in all provinces levy property taxes to raise additional revenues to cover the cost of local government services, with the intent to allocate these costs across all taxpayers, based on wealth as measured by the assessed value of property owned. There are two fundamental activities related to property taxes – assessment and taxation. Property assessment is simply the process of assigning a dollar value to a property for taxation purposes. This value is then used to calculate the amount of taxes that will be charged to the owner of a property. Taxation is the process of applying a local tax rate to a property’s assessed value to determine the taxes payable by the owner of a property.

Value attributed to renewable electricity projects differs from province to province and tax rates are different for every municipality. This means that renewable power projects are taxed differently in every municipality. This can be illustrated by the fact that the annual municipal rate of taxation for a 20 MW wind farm in Canada can range from almost US$ 400,000 in certain parts of Alberta to just US$ 50,000 in certain parts of Ontario. Land lease and property tax expenses are expected to be small relative to overall biomass power operating costs. As such, relative variability in these expenses from jurisdiction to jurisdiction will only slightly contribute to overall variability of biomass power generating costs.

Factors that Have an Indirect Impact the Cost of Electricity

Factors that have an indirect impact on the cost of renewable electricity mainly refer to the various government policies and economic instruments available for off-setting the increased cost of renewable electricity generation. These policies and economic instruments include: capital grants, consumer grants and rebates, corporate tax incentives, production tax credits, property tax incentives, sales tax rebates, third party finance and low interest loans, emission reduction credits and research and development incentives. These factors are seen as indirect because they do not immediately impact the initial capital outlay or reduce operating expenses and are generally not included in cost analysis data developed by groups such as the Energy Information Agency or public utilities. They do, however, allow a project developer to recoup a portion of these costs after they are incurred through rebates or tax incentives. These recouped costs can have several after investment impacts of the economics of a project, which include:

- Reduced taxation and increased net profit
- Increased revenues
- Reduced debt financing requirements
- Accelerated repayment of debt and reduced financing charges

All of these impacts translate to reduced investment payback periods, and over the lifetime of the project, reduced levelized electricity generating costs.

Capital Grants

With capital grants, a percentage of the investment cost in renewable electricity technology and equipment purchase and installation is covered by government-financed schemes directed towards commercial electricity suppliers. In North America, several states and provinces in the United States and Canada offer a variety of grant programs to encourage the use and development of renewable electricity technologies. Most programs offer support for a broad range of renewable electricity technologies, while some focus on promoting one particular type of renewable electricity such as wind technology or photovoltaics. These grants are typically primarily available to the commercial, industrial, utility, education, and government sectors. Programs vary in the amount offered--from $500 to $1,000,000 and some do not set any limits. Capital grants can help reduce initial capital investment for biomass power projects. However, due to the relatively small size of grants typically available for generally large biomass power developments, the impacts of grants are low over the lifetime of a project.

Consumer Grants/Rebates

Similar to capital grants, consumer grants and rebates allow for a percentage of the investment costs in renewable electricity equipment purchase and installation to be covered by government-financed schemes directed towards end-users of electricity (residents and businesses). Such programs are offered both at the state level and also at the local municipal level or directly from utility providers and are usually targeted at small scale installations of photovoltaics and in some cases small wind turbines. Due to the industrial scale of typical biomass power installations, consumer grants and rebates are not relevant.

Corporate Tax Incentives

Tax Credits

Corporate tax incentives allow corporations to receive credits or deductions ranging from 10% to 35% against the cost of renewable electricity project planning, equipment or installation to promote their increased use. In some cases, the incentive decreases over time. These tax credits exists in both the US and Canada. In most cases, there is no maximum limit imposed on the amount of the deductible or credit. Increased depreciation rates for biomass power equipment can greatly reduce the tax burden on biomass projects in the first years of their existence and allow for more rapid payback periods for initial investment and earlier debt retirement. Renewable project planning expense clauses in tax codes can also contribute to significantly lowered taxation. Consequently power production costs can vary drastically between regions with and without corporate tax incentives.

In Canada, the Canadian Renewable and Conservation Expense (CRCE) category of expenditure is intended to promote the development of conservation and renewable energy projects in the same way that is currently done for investments in other types of resource activities. Under CRCE, eligible expenditures are 100% deductible in the year they are incurred or can be carried forward indefinitely for deduction in later years. These credits can also be transferred to investors using flow-through shares. Eligible expenses typically include engineering and design, site clearing, feasibility studies, contract negotiations and regulatory approvals. For the wind industry, CRCE also includes the capital cost of "test wind turbines," which can constitute up to 20 per cent of the generating capacity in a wind farm.

In the US, the permanent extension of the standard investment credit (Section 1916), provides a 10% investment credit for most solar and geothermal technologies. In addition, the Energy Tax Act is a program of tax credits for households and businesses that purchase renewable energy equipment. Through this program, residential energy income tax credits for solar and wind energy equipment expenditures were set at 30% of the first $2 000 invested and 20% of the next $8 000.

The most important electricity sector incentive available in the US is 10% business energy tax credit for investments in various renewable energy technologies including solar, wind, and geothermal. This credit is in addition to the standard 10% investment tax credit previously mentioned. Public utility property was specifically excluded from eligibility for the tax credits that were to expire at the end of 1982.

Special Depreciation Rules

Shortened or “accelerated” depreciation tax rules exist in all three North American Countries. In Canada, the federal Income Tax Act provides an accelerated capital cost allowance (30% capital cost allowance rate computed on a declining balance basis) for certain types of renewable energy equipment used to generate electricity or to produce thermal energy for direct use in an industrial process. A range of renewable energy conversion and energy efficiency equipment are eligible for inclusion, such as certain co-generation systems, small-scale hydropower installations, wind energy conversion equipment, certain photovoltaic and active solar heating equipment, and equipment used in certain landfill gas applications.

In the US, a five-year accelerated depreciation for renewable energy property (from a 150% to 200% declining balance method) is available. This accelerated depreciation applies to "small power production facilities", which includes facilities that produce electricity at a capacity of 80 megawatts or less. Public utility property is also eligible for the accelerated depreciation.

In Mexico, investments in environmentally friendly technology, including renewable energy technology can benefit from accelerated depreciation. Under the guidelines of this accelerate depreciation program, investors are thus allowed to deduct 100% of the investment after one year of operation, as long as the equipment operates for at least five years following the tax deduction declaration.

Production Tax Credits

In Canada and the US, private entities generating electricity from renewables that are normally subject to taxation are eligible for a federal production tax credit for the electricity they produce. Production tax credits are normally set as a price per kWh ($/kWh). Basing payments on performance rather than capital investments is seen as a more effective mechanism for ensuring quality projects are developed. Production tax credits help to offset the cost premium associated to biomass power production compared to traditional sources of electricity. As with other tax incentives, production tax credits can lead to more rapid payback periods and offset overall operating costs. Consequently net power production costs can vary significantly between regions with and without production tax credits.

In Canada, the Wind Power Production Incentive (WPPI) was designed to provide financial support for the installation of 1,000 megawatts of new capacity between April 2002 and March 2007. The incentive was intended to cover approximately half of the current cost of the premium for wind electricity in Canada compared to conventional sources. As of June 2006 almost 1000 MW had been supported by WPPI, signifying that the majority of financial resources designated to the program had been deployed to projects.

As the program’s success became evident and the targets began to appear in reach, interest groups began pressuring the federal government to extend WPPI. Consequently, Budget 2005 provided $200 million over 5 years and a total of $920 million over 15 years to expand the Wind Power Production Incentive target to 4,000 MW. Under the new tranche of the incentive and as with the original terms of the program, an incentive payment of 1 cent per kilowatt-hour of production for the first 10 years of operation would be made to eligible projects commissioned before April 1, 2010. The eligible production per project would be determined by Natural Resources Canada.

In addition to WPPI, in Budget 2005, the federal government announced a Renewable Power Production Incentive (RPPI) to stimulate the installation of up to 1,500 MW of new renewable electricity generating capacity, other than wind (small hydro, biomass and geothermal). RPPI’s application to solar energy was never fully formalized. Similarly to WPPI, an incentive payment of 1 cent per kWh of production would be awarded for the first 10 years of operation of eligible renewable energy projects commissioned after March 31, 2006 and before April 1, 2011. Budget 2005 provided $97 million over five years and a total of $886 million over 15 years for the RPPI.

Both the RPPI and WPPI programs were suspended until further evaluation in early 2006. On January 19th, 2007, a replacement program, entitled the ecoENERGY for Renewable Power program and similar to the original programs, was announced by the federal government that essentially combined both the RPPI and WPPI programs into a smaller funding envelope.

In the US, the Renewable Electricity Production Credit (REPC), also commonly referred to as the Production Tax Credit (PCT), is a per kilowatt-hour ($/kWh) tax credit for electricity generated by qualified energy resources. Enacted as part of the Energy Policy Act of 1992, the credit expired at the end of 2001, and was subsequently extended in March 2002 as part of the Job Creation and Worker Assistance Act of 2002. The tax credit then expired again at the end of 2003 and was not renewed until October 4, 2004, when it was extended through to December 31, 2005. Subsequently, the Energy Policy Act of 2005 modified the credit and extended it through to December 31, 2007. Finally, in December 2006, the credit was extended for yet another year, through to December 31, 2008.

Eligible electricity generation technologies under the REPC presently include geothermal energy, biomass energy facilities, including open-loop biomass systems (facilities that use agricultural livestock waste nutrients), small irrigation power, landfill gas, municipal solid waste combustion and wind energy. The Energy Policy Act of 2005 (EPAct 2005) further expanded the credit to certain hydropower facilities, but removed solar facilities from the list of eligible projects.

The original REPC provided a tax credit of 1.5 cents/kWh, adjusted annually for inflation, for wind, closed-loop biomass and geothermal. The inflation adjusted credit amount for projects in 2007 is roughly 2 cents/kWh. Electricity from open-loop biomass, small irrigation hydroelectric, landfill gas, municipal solid waste resources, and hydropower currently receive 1.0 cent/kWh. The duration of the credit is generally 10 years. However, open-loop biomass, geothermal, small irrigation hydro, landfill gas, and municipal solid waste combustion facilities placed into service after are eligible for the credit for only a five-year period.

Property Tax Exemptions

The majority of the property tax provisions for renewable energy follow a simple model that provides the added value of the renewable device is not included in the valuation of the property for taxation purposes. Property taxes are collected locally, so some states allow the local authorities the option of providing a property tax incentive for renewable energy devices. In the US, six states have such provisions: Connecticut, Iowa, Maryland, New Hampshire, Vermont, and Virginia. Property tax incentives can also take the form of exemptions to owners from paying all or a portion of their taxes on properties using renewable energies, therefore reducing their tax payments. This is, however, less common

Sales Tax Rebates

Sales tax incentives typically provide an exemption from the state or provincial sales tax for the cost of renewable energy equipment. Several provinces and states in North America have enacted such measures, mainly for solar technologies.

Personal Income Tax Incentives

Many states offer personal income tax credits or deductions to cover the expense of purchasing and installing renewable energy equipment. Some states offer personal income tax credits up to a certain percentage or predetermined dollar amount for the cost or installation or renewable energy equipment. Allowable credit may be limited to a certain number of years following the purchase or installation or renewable energy equipment. Eligible technologies may include photovoltaic energy systems, geothermal energy, wind energy, biomass, hydroelectric, and alternative fuel technologies.

Loan Programs and Third Party Finance

Loan programs offer financing for the purchase of renewable energy equipment. Low-interest or no-interest loans for energy efficiency are a very common strategy for demand-side management by utilities. However several state governments also offer loans to assist in the purchase of renewable energy equipment. A broad range of renewable energy technologies are eligible. In many states, loans are available to residential, commercial, industrial, transportation, public, and nonprofit sectors. Repayment schedules vary; while most are determined on an individual project basis, some offer a 7-10 year loan term.

As an example in the US, the Oregon Department of Energy makes low-interest loans for projects that produce electricity from renewable resources, that conserve energy resources or that use recycled materials to create products. The Small Scale Energy Loan Program (SELP) is a self-supporting loan program funded by the sale of Oregon general obligation bonds. Borrowers can use loan funds to pay most direct energy project costs and related project costs such as engineering and design, permit fees, loan fees and project management costs. Most Oregonians, Oregon businesses, non-profit organizations, state agencies, schools, cities, counties, special districts, state public corporations and federal agencies are eligible.

In Canada for example, the government established two complementary funds to stimulate investment in innovative municipal infrastructure projects and environmental practices, including renewable electricity development, for Canadian municipal governments and their public and private sector partners. The government is essentially providing CAN$ 250 million to encourage projects and studies in communities. These funds include the Green Municipal Investment Fund (GMIF) which has a total budget of CAN$ 200 million. GMIF supports the implementation of innovative environmental projects. Through GMIF, a municipal government can borrow at preferred interest rates of 1.5% below the Bank of Canada bond rate. Project partners are also eligible for loans at attractive rates. Where favorable interest rates are available through loan and 3rd party finance programs, lifetime financing costs can be greatly reduced for biomass power projects.

Emissions Credits

Several jurisdiction offer government regulated or voluntary incentives programs to reduce emissions such as sulfur dioxide (SO2) or carbon dioxide (CO2). Through typical emissions programs, utilities or industries may receive emissions credits or allowance for each tonne of SO2 or CO2 avoided through internal efficiency or renewable electricity projects or purchase such credits or allowances from independent renewable electricity projects that have been credited for their projects. This creates a new value stream for renewable electricity project developers, as long as project emission reductions are recognized by the allowance or credit program authority and a customer for credits or allowances exists.

Although emissions credits do not directly affect the cost of producing electricity from renewable resources, they do create a new revenue stream for the renewable electricity producers and can allow them to price electricity more competitively relative to traditional power sources. Furthermore, the revenues from emissions reductions can reduce payback periods and increases the profitability of a renewable electricity project. Where emissions credits are available, significant additional revenue streams for biomass power projects may exist, which can offset operating expenses.

Government R&D Support Programs

Several jurisdictions have research support program and schemes aimed at the technological advancement of renewable electricity technologies. These include grant programs or foundations for supporting pure research, demonstration activities or commercialization activities related to renewable electricity technologies. These initiatives can also include publicly funded projects such as education schemes or demonstration sites to create awareness about the opportunities and benefits of renewable electricity installations. Contributions from such programs can lead to reduced research and development cost amortization periods for technologies entering the market and consequently lower initial technology costs to renewable electricity project developers.

An example of such a foundation in Canada is Sustainable Development Technology Canada (SDTC). The objective of this foundation is to stimulate the development and demonstration of Canadian technologies related to climate change, clean air, water quality and soil through partial funding of eligible projects. Eligible recipients are partnerships that include the private sector and academic and non-governmental organizations. Eligible projects are aimed at advancing the development and demonstration of new sustainable technologies, many of which are renewable electricity technologies.

Similarly in the US, a bill passed in 1999, provides funding for research and development specifically targeted at advanced photovoltaic devices. Research areas covered under the bill include thin films, high-performance devices, silicon materials, characterization techniques, and other innovative concepts.