In the 1996 UN Secretary-General’s report (Anon, 1996) the claim is made that growing environmental and ecological pressures, combined with technological advances and increases in efficiency and productivity, “are making biomass feedstocks more economically attractive in many parts of the world” (Anon 1996). Among technological advances identified in the UN report are:
(i) advanced steam cycle technology with co-generation;
(ii) co-firing with fossil fuels;
(iii) integrated gasification/advanced technology;
(iv) biocrude-fired combustion turbine technology;
(v) production of methanol and hydrogen from biomass; and
(vi) fuel-cell vehicle technology.
The UN report was categorical in stating that world energy demand will continue to grow. However, it also stresses that the pace of this growth will be dependent on population and economic growth and technological advances. The conclusion of this report is similar to that in many others, namely that bioenergy (both in its traditional and modern forms) has the potential to make a significant contribution to the sustainable energy supply, socio-economic development and cleaner environments. However, before bioenergy is able to take advantage of these opportunities it needs to cease being considered the “poor man's fuel”.
The major concern identified by most bioenergy studies of the 1970s and 1980s was not the ability to produce sufficient biomass to replace the energy currently supplied by fossil fuels. Nor did the concern relate to technologies for converting biomass into the energy types desired, (although most studies from that period and even the most recent ones continue to stress the need for research to turn these from bench to industrial scale). Rather, it was the relative cost of biofuels compared to the cost of their fossil fuel based equivalents (see for example Anon, 1979; Rawlins et al, 1982). Even today this remains the main concern, particularly in large national or regional studies, which have looked at the possibility of making significant quantities of transport fuels or electricity from wood or other biomass. These studies (e.g., NOVEM, 1992; OECD/IEA, 1994; EC, 1994) show that from a national viewpoint the cost of biofuels, particularly when compared to the present cost of non-renewable fossil fuels, does not appear to be particularly favorable. The NOVEM (1992) study concludes that:
“… fuel from biomass is (and will remain to be) relatively expensive compared to the present fossil fuels.”
Based on the latest official projections, it is unlikely that stocks of fossil fuels are insufficient to meet projected world energy needs over the next 20 years. Over this period real oil prices are expected to rise by about one third (from US$21/barrel to something like US$28 per barrel by 2020), and natural gas is expected to gain in importance as an energy source. However, even with the projected increase in fossil fuel prices wood based fuels are unlikely to prove cost competitive with fuels made from oil and gas. For biofuels to be competitive with oil based fuels (or other alternatives, both renewable and non-renewable) without any support their costs of production y would need to be much lower than they presently appear to be. Specifically, bio-fuels would need to be produced on a large scale at less than US$0.30 to US$0.36 per oil based liter equivalent.
Giving a greater weight to the goals of long-term economic and environmental sustainability than is presently accorded by the market, should favor alternatives to the fossil fuels that currently dominate the world’s energy supply. Making the fight against global warming a priority will undoubtedly give a boost to development of new and renewable energies (including biofuels). However, although giving a greater weight to ‘the environment’ in analysis, would certainly result in an increase of the share of renewables in the world’s energy supply it isn’t at all obvious that this means that the role of wood and wood energy systems is guaranteed to grow. There already exist a number of other competing technologies with the potential to supply projected energy needs. The technology or technologies that will eventually dominate cannot be determined by current knowledge and current costs.
In 1996, the UN Secretary-General reported “most biomass energy technologies have not yet reached a stage where market forces alone can make the adoption of these technologies possible” (Anon, 1996). That in a nutshell is the major stumbling block to a major expansion of the role of wood energy systems. The UN report goes on to state that among the many challenges, is the fact that costs are quite project specific and depend on a large number of variables ranging from the raw material, through the management practices, type of technology, and environmental considerations (Anon, ibid.). Some support provided for bioenergy can be seen simply as recognition of these issues and as demonstrating a realization that developing the use of renewables will require a substantial political and economic effort on the part of national authorities (Anon, 2000).
Barriers to the introduction of wood energy are much the same as the barriers faced by any ‘new’ technology and include:
• information barriers - the lack of familiarity with the technology and a lack of its promotion;
• financing barriers - high initial cost of the system and a lack of finance (affordable credit) mechanisms;
• institutional barriers - regulations, monopolies, import tariffs, subsidies, quality standards; and
• scale and cost barriers - lack of a sufficient market base to produce economies of scale in system manufacture, insufficient market base to warrant private investment, and lack of a local infrastructure for installing and maintaining systems (implying higher costs and questions about reliability).
Together, such barriers can often reinforce each other to create a vicious circle. High investment costs and a lack of financing mechanisms produce a low marketing budget and high transaction costs. That in turn results in a lack of infrastructure, and unfamiliarity with the technology and what it is capable of, which in turn may result in a lack of political commitment. From the potential user’s point of view, these translate into difficulties in getting information about the technology, higher costs in setting up a system, and greater difficulty in accessing spare parts and repair services.
Apart from the barriers listed above, some would claim that one of the principal roadblocks to the commercialization of renewable energy technologies (including bioenergy), is that existing energy markets mostly ignore the social and environmental costs and the risks associated with conventional fuel use. There may also in some cases be a number of hidden subsidies associated with the current fuels used (e.g., those associated with externalities that are specific to these fuels, tax breaks which encourage consumers to switch to use of a particular fuels, expenditure on security/defense to ensure current supply arrangements will continue to apply, or even manipulation of strategic reserves in a manner that guarantees riskless profits to the suppliers of particular fuels (see Horsnell, 2000)). It is claimed by some that the costs associated with these, in addition to the long-term costs of depletion of finite resources, are generally ignored or are simply, assumed to be adequately captured by the ‘market price’. Studies that attempted to systematically quantify and value these ‘market failures’, and test the claims that the allowance made for them is inadequate would be invaluable.
The importance of wood in the global energy balance is not known with any precision. Research which helps improve the quality of data on world wood energy use would also be very useful. So too would be research which synthesizes the results of those studies which have attempted to quantify the resource cost of producing woodfuels. Studies quantifying the cost of global warming can and should be used to help determine the level of economic intervention (e.g., subsidies, taxes) to be applied to renewables and biofuels.
Technology and improved understanding of the world’s energy needs has and will continue to shape the world’s energy supply curve. Analysis of wood energy systems clearly shows that they do not, nor are they ever likely to, supply cheap energy. The main benefit in such systems may in fact be as an option. The existence of such systems provides some strategic security for nations as well as a guaranteed ‘backstop’ (at a premium) insuring them against the possible consequences of ‘over-reliance’ on energy sources that are outside their control.
It is also important to recall that bioenergy and wood energy systems provide more than just strategic benefits. Other factors such as environment, sustainability, social/cultural factors also play an important role in the policy decision-maker’s overall analysis.