Morice Land and Resource Management Plan

Location Analysis

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  Project Proponent: First and foremost, there must be a proponent with the capital resources necessary to construct a plant, and a source of local use, in this case a mill with steam and electrical needs. The presence of major manufacturing facilities in Houston is one reason why past cogen studies have focused on this community.
  
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  Feedstock: Approximately 1.6 million m³ of wood waste is burned annually in regional tier 1 and 2 waste burners. Previous feasibility studies have shown that there is ample wood waste in the Bulkley-Nechako region to support a cogeneration facility.
  
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  Establishing an Environmental Premium: Since burning wood waste cannot generate electricity at a rate lower than BC Hydro’s average cost, the public utility was always reluctant to contract new facilities. But the avoidance of social accounting has always made cogen electricity appear more costly than it actually is. There are obvious health, environmental and social benefits to removing burners from the region and creating a more livable environment. BC Hydro’s historical unwillingness to account for environmental premiums when purchasing electricity from cogeneration plants was the main stumbling block to their establishment. An environmental premium entails BC Hydro accepting some flow-through costs thereby paying a higher price for the waste wood fired plant’s electricity. Unfortunately, proponents of waste wood fired cogeneration plants rarely quantified the economic rationale behind an environmental premium. To substantiate the worthiness of their projects, proponents of waste wood fired cogeneration plants have to document the economic benefits of an environmental premium.
  
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  Grid Access: Historically, the stumbling block for local cogeneration, and many other cogeneration proposals, was the need for BC Hydro to wheel and purchase excess electricity that is the power that mill operators do not use. Since a cogeneration plant’s financial cost of producing the electricity is higher (on a kwh basis) than BC Hydro’s least-cost alternative, this additional cost is viewed as an environmental premium because it eliminates most of the negative consequences associated with burning the waste wood and adds productive capacity to the economy. Now that BC Hydro and the province have established green energy targets, there are more clearly defined opportunities for being approved as a customer based generation project, or an independent power producer. One or other of these designations is required to attain grid access.
  
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  Access to Nearby Use: It is impractical to transport heat over any distance, so a cogeneration facility must be located physically close to its heat user. The greater the potential uses within proximity to the facility, the more likely it is to be feasible. While this appears to favor higher density population areas, it can also be appropriate for single users if their process heat (e.g. steam) needs are great enough. Most cogeneration projects in the last 10 years in BC have been linked to wood processing facilities.
  

Market Analysis

As previously noted, the opportunities for wood waste cogeneration in BC are linked to recognition of the environmental value of power sources. In British Columbia, the province has been historically dependent on hydroelectricity generated by large hydroelectric dams built and operated by BC Hydro. Since these facilities could produce power more cheaply than wood waste cogeneration there has been no interest or desire to see cogeneration used until very recently.

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  Renewable – the energy must be replenished by natural processes within a reasonable length of time.
  
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  Licensable – The project must meet all relevant regulations and standards.
  
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  Socially Responsible – The project must be developed in a socially responsible manner.
  
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  Low Environmental Impact – The project must avoid unacceptably high environment risks.
  

BC Hydro is working to enable the development of green energy here in BC. BC Hydro has set a target of ten percent of new demand through to 2010 to be met by new green sources. Under the green power initiative wood waste cogeneration will be able to receive upwards of 4.5 cents a kilowatt-hour for energy generated, this is almost double the traditional rate paid to power producers in BC.

Current Production Trends

For renewable electrical energy the market is North America with the focus in Canada on the potential that can be supplied to the United States. Figure 1 highlights the change in energy consumption using wood waste.

Figure 1: Wood Waste Energy Consumption in the US – 1975 to 2002

Source: Energy Information Administration – Monthly Energy Review.
In the United States, renewable technologies are anticipated to grow slowly because of the relatively low costs of fossil-fired generation and because competitive electricity markets favour less capital-intensive natural gas technologies over coal and base load renewables in the competition for new capacity.
However, total renewable generation, including conventional hydroelectricity, wood waste, alcohol, geothermal, solar and wind is projected to go from 298 billion kilowatts in 2001 to 476 billion kilowatt-hours by 2020, an increase of 2.5 percent per year.

Market Demand and Price Trend

highlights the average retail price of electricity in the United States between 1975 and 2002. In general, the rates for all US customer types rose sharply between 1975 and 1985. In 2002, the industrial rate remained approximately 57 percent that of residential rates. In BC rates are significantly lower than those generally found in the United States. Adjusted into US dollars, the 2002 rates for BC Hydro rates for BC customers where 4.6 cents a kilowatt hour for residential, 4.0 cents for commercial, and 2.6 cents for industrial customers. BC Hydro rates have remained constant between 1999 and 2003.


Figure 2: Average Retail Prices for Electricity in the US – 1975 to 2002

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