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

Pierre-André Jouvet, Frederic Lantz (frederic.lantz@ifpen.fr) and Elodie Le Cadre (elodie.le-cadre@ifpen.fr)
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Frederic Lantz: IFPEN
Elodie Le Cadre: IFPEN, Universite Paris Ouest Nanterre La Defense,

Working Papers from Chaire Economie du climat

Abstract: Reduction in energy dependancy and emissions of CO2 via renewables targeted in the European Union energy mix and taxation system might trigger the production of bioenergy production and competition for biomass utilization. Torrefied 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 aspects demand of torrefied biomass 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 torrefied biomass is related to the competitive demand of the power sector driven by the CO2 price and feed-in tarifis. We propose a linear dynamic model of supply and demand. On the supply side, a profit-maximizing torrefied biomass sector is modelized. The model aims to represent the transformation of biomass into torrefied biomass which could be sold to the refinery sector and the power sector. A two-sided (demanders and supplier) bidding process led us to arrive at the equilibrium price for torrefied biomass. The French case is used as an example. 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 the torrefied biomass for a CO2 emission price lower than 20 euros/tCO2, which can stimulate development of biomass supply systems. Beyond 2020, the demand for torrefied biomass from the power sector could be substituted by the refining sector if the oil price goes up whatever the CO2 price.

Keywords: Bioenergy; CO2 price; Re nery market; Electricity market; Optimization. (search for similar items in EconPapers)
JEL-codes: C61 Q16 Q41 Q42 Q58 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2012-01
New Economics Papers: this item is included in nep-agr, nep-ene and nep-env
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http://www.chaireeconomieduclimat.org/RePEc/cec/wp ... et_Lantz_LeCadre.pdf First version, 2012 (application/pdf)

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