A Cost-Benefit Assessment of Gasification-Based Biorefining in the Kraft Pulp and Paper Industry

Abstract

Production of liquid fuels and chemicals via gasification of kraft black liquor and woody residues (''biorefining'') has the potential to provide significant economic returns for kraft pulp and paper mills replacing Tomlinson boilers beginning in the 2010-2015 timeframe. Commercialization of gasification technologies is anticipated in this period, and synthesis gas from gasifiers can be converted into liquid fuels using catalytic synthesis technologies that are in most cases already commercially established today in the ''gas-to-liquids'' industry. These conclusions are supported by detailed analysis carried out in a two-year project co-funded by the American Forest and Paper Association and the Biomass Program of the U.S. Department of Energy. This work assessed the energy, environment, and economic costs and benefits of biorefineries at kraft pulp and paper mills in the United States. Seven detailed biorefinery process designs were developed for a reference freesheet pulp/paper mill in the Southeastern U.S., together with the associated mass/energy balances, air emissions estimates, and capital investment requirements. Commercial (''Nth'') plant levels of technology performance and cost were assumed. The biorefineries provide chemical recovery services and co-produce process steam for the mill, some electricity, and one of three liquid fuels: a Fischer-Tropsch synthetic crude oil (which would be refined to vehicle fuels at existing petroleum refineries), dimethyl ether (a diesel engine fuel or LPG substitute), or an ethanol-rich mixed-alcohol product. Compared to installing a new Tomlinson power/recovery system, a biorefinery would require larger capital investment. However, because the biorefinery would have higher energy efficiencies, lower air emissions, and a more diverse product slate (including transportation fuel), the internal rates of return (IRR) on the incremental capital investments would be attractive under many circumstances. For nearly all of the cases examined in the study, the IRR lies between 14% and 18%, assuming a 25-year levelized world oil price of $50/bbl--the US Department of Energy's 2006 reference oil price projection. The IRRs would rise to as high as 35% if positive incremental environmental benefits associated with biorefinery products are monetized (e.g., if an excise tax credit for the liquid fuel is available comparable to the one that exists for ethanol in the United States today). Moreover, if future crude oil prices are higher ($78/bbl levelized price, the US Department of Energy's 2006 high oil price scenario projection, representing an extrapolation of mid-2006 price levels), the calculated IRR exceeds 45% in some cases when environmental attributes are also monetized. In addition to the economic benefits to kraft pulp/paper producers, biorefineries widely implemented at pulp mills in the U.S. would result in nationally-significant liquid fuel production levels, petroleum savings, greenhouse gas emissions reductions, and criteria-pollutant reductions. These are quantified in this study. A fully-developed pulpmill biorefinery industry could be double or more the size of the current corn-ethanol industry in the United States in terms of annual liquid fuel production. Forest biomass resources are sufficient in the United States to sustainably support such a scale of forest biorefining in addition to the projected growth in pulp and paper production.