The bioenergies development: the role of biofuels and the CO2 price

Pierre-André Jouvet, Frédéric Lantz and Elodie Le Cadre

No 2011/02, Working Papers from INRA, Economie Publique

Abstract: Reduction in energy dependancy and emissions of CO2 via renewables target in the European Union energy mix and taxation system might trigger bioenergy production and competition for biomass utilization. Pretreated biomass could be used to produce second generation biofuels to replace some of the fuels used in transportation and is also suitable as feedstock to produce electricity in large quantities. This paper examines how the CO2 price affects choices of biomass supply in the power sector and its consequences on the profitability of second generation biofuel units (Biomass to Liquid units). Indeed, the profitability of the BtL units which are supplied only by biomass is related to the competitive demand of the power sector driven by the CO2 price and feed-in-tariffs. We propose a linear dynamic model of supply and demands. On the supply side, a profit-maximizing torrefied biomass sector is modelized. The model aims to represent the transformation of biomass in biocoal which could be sold to the refinery sector and the power sector. A two-sided (demanders and supplier) bidding process let us to arrive at the equilibrium price for torrefied biomass. The French case is used as an exemple. Our results suggest that the higher the CO2 price, the more stable and important the power sector demand. It also makes the torrefied biomass production less vulnerable to uncertainty on demand coming from the refining sector. The torrefied biomass co-firing with coal can offer a near-term market for lignocellulosic biomass, which can stimulate development of biomass supply systems. The torrefied biomass demand can be triggered by the power sector for a low cost of CO2 and until no investment in gas power plants is necessary to replace the decommissioned nuclear power plants. Over 2020, the demand for torrefied biomass from the power sector could be substituted by the refining sector one if the oil price goes up. Thus the green power production could pave the way to BtL production.

Keywords: Bioenergy; CO2 price; Refinery market; Electricity market; Optimization (search for similar items in EconPapers)
JEL-codes: C61 Q16 Q41 Q42 Q58 (search for similar items in EconPapers)
Date: 2011-04-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: The bioenergies development: the role of biofuels and the CO2 price (2012)
Working Paper: The bioenergies development: the role of biofuels and the C02 price (2011)
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