BIOMASS FUEL SUPPLY - A METHODOLOGY FOR DETERMINING MARGINAL COSTS

Energy from biomass fuels is used in the electric utility, lumber and wood products, and paper and pulp industries. The objective of this paper is to discuss a method of constructing marginal cost curves for biomass fuel where there are multiple sources differing in availability. Most research has focused on the feasibility of a single source of fuel to supply a plant. A least-cost approach would consider wood fuel supplies from several sources. The methodology for determining the marginal cost of biomass fuel supply for a wood-fired electrical generating plant is described and an example is provided. Marginal cost curves allow decision-makers to 'observe' the effective cost to supply power plants. The methodology is useful because it frees feasibility studies from artifical one-source assumptions.