1. Natural Resources Research Institute To f oster economic development of Minnesota's natural resources in an environmentally sound manner to promote private sector employment Two Centers Center for Applied Research and Technology Development Center for Water and the Environment CARTD Mining and Economic Geology Peat/Environmental Processing Forestry and Forest Products

2. NRRI CARTD Forestry Program Program Purpose: Enhance forest productivity and wood supplies to industry through high quality research and development to support economic development in Minnesota - GROW TREES FAST Research Areas: Hybrid Poplar - Genetic Improvement, Yield Aspen Productivity and Silviculture Plantation Production of Conifers Biomass Energy

3. Minnesota Wood Markets Present and Future Present situation Harvesting 3.8 million cords of roundwood Estimated 400,000 green tons of energy chips Limited growth potential in additional roundwood -Thunderhawk project, past that? Energy markets are large and here to stay All biomass on the table President’s recent remarks: mentioned conversion of cellulose to ethanol

4. Warning: Any mention of price is strictly an estimate for example purposes only Depends on: logging operation “hot” processing of chips or grind from piles species part of tree future stumpage and competition location silvicultural management goals (thinnings) forest or brushland land use policies – harvesting guidelines

5. Biomass Energy Drivers High energy prices Xcel Energy biomass mandate Potential applications Laurentian energy Taconite plants Ethanol plants and other industrial Biomass resource in forest residues, brushlands Local impact - reduced import of fossil fuels No-net carbon dioxide increase using biomass Relatively clean - low ash fuel

6. Biomass Fundamentals Relatively low energy density (14-17 MMBTU/dry ton) Geographically-dispersed resource Transportation/sourcing a critical factor Moisture content relatively high Ash content low (variable depending on material) Agricultural Residues – 5 – 15% Wood (and Bark) – 2 – 4% Various physical forms Seasonal variation in availability and characteristics Not as straightforward as other energy sources

7. Current Energy Prices $/MMBTUEfficiencyReal Cost Natural Gas$7.000.9$7.80 Heating Oil #2$21.400.80$26.75 Heating Oil #2$21.400.65$32.93 Propane$21.020.9$24.03 Electric Heat$20.501$20.52 Wood (round)$5.000.5$10.00

8. Home Wood Energy Cost Calculations: Cord of energy wood – $90.00 (for example) Approximately 20 MM BTU/cord $90/20 = $4.50 per MMBTU Transportable and Stores Easily If converted at 60% efficiency = $7.50 per MMBTU Comparable to natural gas, 30% of oil/propane

9. Home Wood Energy Cost Calculations: $5,000 installation of new hot water system Burn 70 MMBtu per year (average home in MN) Potentially save $1,200 per year About 4 year payback Makes sense for many rural homeowners Loggers encourage/finance changeover and ensure wood price/supply?

10. Recent Natural Gas Price - Henry Hub

11. Gasification Replace natural gas in industrial applications Technology is understood Application in Little Falls More opportunity for growth May need other sources besides wood residues such as corn stover or wheat straw to ensure supply

12. Uses - Residential – 40%, Industrial – 28%, Commercial – 28%, Power – 4% Note: optimistic for both FHR and Ag Residues: Probably 60% of this total realistic FHR could replace roughly 10% of the industrial gas use

13. Example If chips are $22.00 per green ton (variable) Theoretical maximum energy = 8.5 MM BTU/green ton Deduction for driving off water – approx. 25% 8.5 MMBTU * 75% = 6.375 MMBTU $22.00 / 6.375 = $3.45/MMBTU ($3.50 differential from natural gas) Need to recoup equipment investment Worth it ? … depends on scale, investment cost and fuel costs

14. Statewide Residue Estimate 3.8 million cords X 2.3 green tons/cord = 8.7 million green tons harvested statewide 8.7 X 15% residue = 1.3 million green tons residue (no cull included) 1,300,000 X 75% = ~ 1,000,000 green tons 300,000 green ton/year operation not out of the question Statewide – could support 3 or 4 projects

15. Cellulosic Ethanol U.S. and the world undergoing dramatic shift All options are going to have to be used Cellulosic ethanol represents next major leap to supply transportation fuels Commercially ready to go – Iogen, pilot plant in Canada, commercial project starting in Idaho using wheat straw Ethanol yield – 80 gallons/ton now, shooting for 94 – white rot, termite guts

16. Reducing the Cost of Cellulosic Ethanol (NREL, 2006) $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 20002005201020152020 Minimum Ethanol Selling Price ($/gal) State of Technology Estimates Feed $53/ton 2005 Yield 65 gal/ton Feed $30/ton Yield 90 gal/ton Feed $30/ton Yield 94 gal/ton 10,000 TPD Costs in 2002 Dollars Enzyme Conversion Feedstock Current DOE Cost Targets President's Initiative

17. Transportation Fuels and Cellulosic Ethanol U.S. annual gasoline use: 150 billion gallons/year MN estimated consumption: 2.5 billion gallons/year 50% of the current corn crop for ethanol would produce 50% of our fuel needs Cellulosic ethanol - wood harvest – 4.0 million cords plus all residue = 20% of MN transportation fuel needs NRRI’s hybrid poplar program – dedicated energy crops such as poplar and switchgrass, Miscanthus

18. Biomass Crops Corn grain $2.50/bushel = $89.00/ton, $6.37 / MMBTU Corn/Wheat Straw $40.00/ton delivered, < $3.00 / MMBTU Hybrid Poplar higher yields in northern MN than corn lower input agriculture easy to store – unlike most other materials may apply even on soils in S. MN New directions in existing poplar research – shorter rotations, harvesting technology (bundling), cooperate with the Forest Service

19. Laurentian Energy Project Municipalities of Virginia and Hibbing Serving 5,000 customers – heat and electricity Aging system – either upgrade or everyone has to install new systems - residential and commercial Developed PPA agreement under Xcel Energy Biomass Mandate Woody biomass is the primary source NRRI cooperating on the $1.3 million project with LEA

20. Laurentian Analysis Location affects: species mix stand volumes transportation logging infrastructure competition land policies environmental concerns

21. Brushland Harvesting for Energy Shearing – technology and cost known Forwarding – unknown, needs testing Grinding/Chipping – technology and cost known

22. Brushland Resource Evaluation How much is available? At what price? Where is it?

23. NRRI Brushland Study GAP – 1.3 million acres in the LEA 100-mile zone average site: 120 acres average fully stocked: 32 acres 28% stocking average of 561 dry tons/site 13 tons in fully stocked areas 45 truckloads per site Could be managed on 10 to 15 year rotation

24. Brushland Harvesting Equipment Best collection system? Biomass density too low – can’t get full load without compression USDA/UC-Davis help – evaluating equipment and design of new equipment

25. Bandit Beast Recycler

27. THE FUTURE Energy perhaps the #1 national issue behind homeland security – not unrelated Cellulosic ethanol is going to happen All biomass is going to be used, rapidly economical Energy markets dwarf anything we’ve seen so far USDOE Energy Assistant Undersecretary Karsner - “This is War”