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Tracking Economic and Environmental Indicators of Exported Wood Pellets to the United Kingdom from the Southern United States: Lessons for Policy?

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Abstract

This study estimates the abatement cost of greenhouse gas (GHG) emissions for a unit of electricity generated in the UK from wood pellets imported from Southern USA. We assumed that only pulpwood obtained from loblolly pine (Pinus taeda) plantations was used for manufacturing exported wood pellets. The use of imported wood pellets for electricity generation could save at least 69.9 % of GHG emissions relative to coal-based electricity in the UK. The average unit production cost of electricity generated from imported wood pellets (US$222.3 MWh−1) was higher by 30.0 % than the unit production cost of electricity generated from coal (US$171.0 MWh−1) without any price support. In the presence of payments from the established price support mechanisms of Renewable Obligation Certificates (ROCs) and Levy Exemption Certificates (LECs), the unit production cost of electricity generated from imported wood pellets (US$142.9 MWh−1) was lower by about 16.0 % than the unit production cost of electricity generated from coal. Policy makers should consider 1 MWh of electricity generated from imported wood pellets equivalent to 0.58 ROCs or 0.71 ROCs in presence and absence of payments from LECs, respectively. This will ensure zero abatement cost and lead to economic efficiency in reducing GHG emissions. However, a more in-depth analysis focusing on the market risks for power-generating companies and other wood pellet supply chains is required before modifying existing equivalency factors for ensuring continuous use of imported wood pellets for displacing coal-based electricity in the UK.

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Notes

  1. Generators of renewable electricity receive ROCs for each MWh of electricity. These ROCs can be sold separately allowing generators to receive a premium to the wholesale electricity price [32].

  2. Climate Change Levy (CCL) is a specific energy tax on the supply of gas and electricity to non-domestic users in the UK. Most electricity generated from a renewable source is exempt from the CCL. LECs are issued to the generators of renewable source energy for each MWh of electricity produced. LECs transfer along with the electricity and can be used by electricity suppliers to support the CCL exemption and so, like ROCs, they have a value which a renewable generator can realize [32]. The UK has closed payments through LECs since August 1, 2015.

  3. We used Goal Seek Tool present in the MS Excel to determine the optimum level of price support mechanisms.

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Authors and Affiliations

  1. Warnell School of Forestry and Natural Resources, University of Georgia, 180 E Green St, Athens, GA, 30602-2152, USA

    Puneet Dwivedi & Dale Greene

  2. Atlantic Consulting, Obstgartenstrasse 14, 8136, Gattikon, Switzerland

    Eric Johnson

  3. Forisk Consulting, P.O. Box 5070, Athens, GA, 30604, USA

    Shawn Baker

Authors
  1. Puneet Dwivedi
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  2. Eric Johnson
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  3. Dale Greene
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  4. Shawn Baker
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Correspondence to Puneet Dwivedi.

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Dwivedi, P., Johnson, E., Greene, D. et al. Tracking Economic and Environmental Indicators of Exported Wood Pellets to the United Kingdom from the Southern United States: Lessons for Policy?. Bioenerg. Res. 9, 907–916 (2016). https://doi.org/10.1007/s12155-016-9749-8

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