Economic feasibility of biomass gasification for power generation in three selected communities of northwestern Ontario, Canada Thakur Prasad Upadhyay n , Chander Shahi, Mathew Leitch, Reino Pulkki Faculty of Natural Resources Management, Lakehead University, 955 Oliver Road, Thunder Bay, ON, Canada P7B 5E1 article info Article history: Received 9 July 2011 Accepted 22 January 2012 Available online 10 February 2012 Keywords: Bio-energy Integrated model Production costs abstract Biomass gasification is expected to be an attractive option among other competitive applications of biomass conversion for bio-energy. This study analyzes economic feasibility of biomass gasification power generating plants in three selected communities (Ignace, Nipigon and Kenora) of northwestern Ontario. The major variables considered in the model are harvesting and handling costs, logistic costs for biomass feedstock delivery and storage, capital costs of power plant by scales, operation and maintenance costs, labor costs, capital financing costs and other regulatory costs. GIS analysis was undertaken to estimate the distance class matrix to apportion the biomass feedstock supply side from different forest management units. Total cost per MW h power production at a 50 MW scale ranges from CAD 61.89 to CAD 63.79. Total cost per unit of electricity production decreases significantly as plant capacity increases due to economy of scale in the production system. Further, the locations of plants explained the cost variability. & 2012 Elsevier Ltd. All rights reserved. 1. Introduction In the present carbon constrained (limits posed to anthropo- genic carbon emission) world, the major drivers for newer bioenergy development are global warming and climate change, air quality, forest health, wildfires, rural development, and energy security. Biomass has great potential to be converted into renew- able bioenergy, which not only has the advantage of reducing greenhouse gas (GHG) emissions, but also ensures a sustainable supply of energy to provide energy security and increased rural economic activities (Berndes and Hansson, 2007; Gan and Smith, 2006; Ma and Hanna, 1999). In addition, replacing fossil fuels with bioenergy provides an excellent opportunity for the devel- oped countries to meet their Kyoto Protocol targets, wholly or partially (Bradley, 2006). Among many competing bio-energy technologies, biomass gasification is expected to be more attrac- tive option among other bio-energy technologies but the wide spread adoption of this technology has not been materialized yet due to various techno-economic and logistics constraints (Caputo et al., 2005; Klimantos et al., 2009; McKendry, 2002). Various studies have shown that energy, economic and envir- onmental benefits can be derived from the use of biomass for bioenergy and bio-based products. Yet, several barriers to wood bioenergy development remain, including cost, market formation, creating synergies with agriculture and the energy sector, and managing competition in terms of resource uses and markets. We can group the major benefits of bioenergy utilization as: (i) environmental – low greenhouse gas emissions, improved forest health, less forest-fire, and recovery of degraded lands; (ii) economic – boosting rural development, additional income from forest, and new markets for biomass feedstock; and (iii) energy related – less dependence on fossil fuels, renewable energy source, and increased national security. However, wide- scale adoption of bioenergy potential is burdened with such challenges as high initial production and utilization costs, market formation, collaboration along the value chain, transportation, research and development of utilization technology, production incentives, unknown market externalities, etc. In view of the Ontario Government’s ambitious plan for replacing the lignite coal with renewable forest biomass as feed- stock to produce electricity, and abundant forest biomass being the backbone of rural economy of northwestern Ontario (NWO), better utilization of small diameter trees, forest harvest residue and unutilized species are key components to a sustainable forest-based economic and environmental system in this region. In this context, Atikokan power plant in NWO is planning to replace its coal-based power generation with biomass combus- tion technology, and they have run several successful trails (OPG, 2012). Furthermore, construction of a wood pellet plant in Ignace is underway, which is planning to use underutilized species to make pellets. The pellets produced at Ignace plant will be used for combined heat and power operations in remote First Nation Contents lists available at SciVerse ScienceDirect journal homepage: www.elsevier.com/locate/enpol Energy Policy 0301-4215/$ - see front matter & 2012 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2012.01.047 n Corresponding author. Tel.: þ1 807 343 8123; fax: þ1 807 343 8116. E-mail address: tpupadhy@lakeheadu.ca (T.P. Upadhyay). Energy Policy 44 (2012) 235–244