In energy terms the 20th century clearly belonged to oil. At all levels of society, save the most basic, this century is notable not only for the growth in the overall demand for energy but in particular, for the increasing share of total energy demand supplied by oil. Growth in the use of oil has been accompanied with predictions of the dire consequences to come when the finite fuel supply of this fuel has finally been exhausted. For a period of almost thirty years from the mid-1940s until the early 1970s though as with new discoveries, oil supplies expanded and fuel prices fell. In real terms these warnings were both muted and almost completely ignored. The oil crisis of 1973/4 changed all that. Suddenly doomsayers were in the ascendancy and a dramatic surge in interest and in research of alternatives to, and preferably renewable alternatives, oil occurred. Interest in wood, the oldest fuel, increased.
Apart from studying the direct use of wood as a solid fuel the literature relating to growing and conversion of wood into other fuel forms was re-examined. Funding of research to add to the existing pool of knowledge increased. However, after the first flush of technical success from these programs, concern about the cost of biofuels coupled with falling oil prices saw some diminution in both interest and investment in wood energy systems. However, the decline in interest from that of the heady days of the late 1970s and early 1980s did not result in a reduction of research levels to the pre-oil crisis levels. Rising environmental concerns as well as issues relating to aspects of national security worked to sustain interest and the level of research. So too did an increase, compared to the 1950s and 1960s, volatility in the price of crude oil.
Currently growing awareness of woodfuels as a potentially environmentally friendly source of energy is leading to an increased number of initiatives and projects in the wood energy field. Evaluation of the economic aspects of fuel systems though serves to highlight the site and circumstance the specific nature of results. In general the direct cost of energy cost from wood is greater, and in some cases substantially greater, than the direct cost of energy from conventional fossil fuel based systems. It would also appear probable, based on the projections of the pre-tax costs of oil and other fossil fuels, that woodfuel systems are as a general rule likely to produce more expensive energy, in pre-tax terms, than fossil fuel systems, at least for the next 20 years. This conclusion would seem to be somewhat at odds with the undoubted upsurge in development of woodfuels systems. However, it in fact serves to highlight the site-specific nature of many of the economic conclusions.
The growing interest in woodfuels reflects not simply a focus on the direct cost of producing energy from various fuels, but also includes a growing appreciation of the externalities associated with the use of various fuels and, in a number of cases, of the costs of disposing of material if it is not used as a fuel. Only by allowing for all costs and benefits, both of which can be expected to vary significantly from one site to another, can the economics of any wood energy system be truly measured. The costs and economics of woodfuel systems vary markedly depending on whether the resource being used by the system is a residue from some other process - a residue that would otherwise have to be disposed of at some net cost to its producer - or whether because it has been purpose grown for the energy system its cost is the full economic cost of its production. The site-specific nature of the economics of wood energy systems is in many cases reinforced by attitudes towards, and relevancy of, externalities to any analysis. Some externalities and their costs/benefits are site specific. Others, notably the cost of fossil fuel use, induces climate change, which it might be though, should apply equally to projects regardless of where they are sited, as yet lack universally agreed value.
At present taxes and subsidies have had a considerable influence in shaping the renewable fuel industry. Some support of renewable energy is undoubtedly warranted because of externalities associated with use of fossil fuels. However, the evidence that official support for wood and other renewable energy forms has in general been determined by the economic cost of externalities of fossil fuel is limited. It seems reasonable to assume that taxes and subsidies will continue to dictate the future shape of the industry.
While the Clean Development Mechanism (CDM) holds the promise of significantly impacting on the level of investment in bio or renewable energy systems before this potential can be translated into actuality there are a number of details relating to the working of the mechanism that have to be agreed. Until this occurs the CDM will remain little more than a potentially important mechanism for increasing investment by the developed nations in renewable energy technologies in the developing world.
World energy has entered a period of profound change e.g. globalisation, privatization, and liberalization have opened up energy markets. The changes in global energy markets can have major impacts of renewable energy in general and bioenergy in particular. In addition, developing countries have entered a period of rapid growth in energy use. To realize economic, political, and social development, all people need to have access to affordable, modern energy services and all the services they can provide, while at the same time protecting the environment and providing energy security. In many remote locations, renewable energy in general and biomass in particular, can be the only cost effective option if electricity or fossil fuel infrastructure does not reach the users. On the whole, however, there are no new technologies in the short or medium term that will reduce significantly the share of fossil fuels in the world’s primary energy mix. Thus renewable energy will continue to complement rather than replace fossil fuels.