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Economics of co-firing coal and biomass: An application to Western Canada

Craig Johnston and Gerrit van Kooten

Energy Economics, 2015, vol. 48, issue C, 7-17

Abstract: Co-firing biomass and coal in retrofitted power plants is an efficient means to reduce carbon dioxide emissions in the energy sector. Under IPCC reporting rules, the impacts of energy produced from biomass would not be reported in the energy sector, thereby effectively lowering the emission intensity of a power plant. In this study, a carbon tax is compared to a feed-in tariff for incentivizing conversion of coal plants to co-fire with biomass. In the application, a model of the Alberta electrical grid with an intertie to British Columbia is linked to a fiber transportation model for these provinces. Results indicate that there is an upper threshold on a carbon tax after which retrofitting of coal plants is less efficient than increasing natural gas generating capacity. This is not the case with a feed-in tariff as it specifically targets biomass energy. Although the optimal generating mix achieved with a carbon tax leads to lower aggregate emissions than the mix achieved using a feed-in tariff, it will result in higher average generating costs. Results indicate that it is optimal for Alberta to retrofit approximately 500MW of current coal capacity (8.6%) to co-fire with biomass, although Alberta wood pellet production acts as a constraint on further conversions.

Keywords: Climate change; Co-firing; Biomass energy; Mathematical programming; Carbon tax; Feed-in tariff (search for similar items in EconPapers)
JEL-codes: Q23 Q27 Q42 Q52 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
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DOI: 10.1016/j.eneco.2014.11.015

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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