- School of Public Policy
- Climate and Energy Policy Laboratory
- The Economics of Four Virginia Biomass Plants
Global electricity generated from biomass more than tripled between 2000 and 2016, and it is forecast to grow at an increasing pace through the year 2040. Electricity generation from biomass is also expanding in the United States, particularly in the Southeast. Given the continued growth and policy support for biomass electricity generation, this paper assesses the economics of four Virginia biomass plants, three converted from coal plants in 2012 and one purchased and expanded in 2004. The goal is to estimate the levelized cost of electricity (LCOE) generated from the plants as a metric of their level of competitiveness with respect to alternative ways of meeting electricity demand in the region. The LCOE of the four plants range from $93 to $143/MWh, about 40-53% more expensive than new solar and wind today. Even with the inclusion of federal subsidies and environmental credits, Dominion’s biomass conversions are not competitive with several other established sources of electricity and affordable energy-efficiency options. Overall, our analysis underscores the risks associated with investing in large, long-lived generation assets at a time when technologies and markets are rapidly evolving.