Iron Range Biomass Plant
Various news outlets are reporting that the Iron Range Biomass Energy Project is nearing completion and will begin test burns in November:
"Making Biomass a Reality" Mesabi Daily News, 10.30.06
"Bring on Biomass" Hibbing Daily Tribune, 10.31.06
"Iron Range biomass projects unveiled" StarTribune, 10.31.06
The $82 million project with the cities of Virginia and Hibbing has a 20 yr contract with Xcel Energy for 35 megawatts, to fulfill in part, the Biomass Mandate from the Prairie Island Nuclear Power Plant compromise from 1994. Notably, 25% of the fuel must come from closed-loop biomass, aka tree farms specifically grown for this project. The project will also provide district heating for the two cities. Word on the street is that the electricity contract is in excess of 10 cents/kWh.
Biomass $$
I wonder how 10 cents/kWh compares to District Energy in St. Paul, given that they claim biomass is their lowest cost fuel. It doesn't seem too excessive given that the average price of electricity in MN is roughly 8 cents/kWh. It would be interesting to see what the total cost of energy is once heating is factored in as well.
10cents wholesale
That's 10 cents wholesale, not retail. The 8 cents you quote is retail. Our electricity system in MN is primarily coal-fired power plants selling wholesale electricity for around 2 cents. The difference between 2 cents and 8 cents retail is transmission and distribution.
Its kind of insane that we have policy mandating 10 cents/kWh renewable energy when we live in a state with such an abundant wind resource. I estimate (without checking - top of my head) that wind sells for around 4-6 cents/kWh. So you get twice as much wind as biomass electricity for the same money. Our biomass electricity mandate was a well-intended policy that failed to take into account economics.
Biomass should not be sold into electricity markets - it just doesn't compete well with coal. It competes very well, on the other hand, with natural gas and petroleum. Policy should focus on those markets, not electricity.
I have no insights on district energy. I think they're unique because they can sell heat as a value-added product with a better market price than electricity. Plus they're a small plant, which means they'd have to pay more for their coal. Large coal plants get very cheap coal because it comes in by the unit train, and unloading is automated and efficient (among other reasons - like owning the coal supply).
But...
Wind isn't firm power; biomass is. The better comparison is new coal to new biomass - I don't know the prices of Big Stone II or Mesaba Gasification, but they aren't 2 cents or even 5 cents - 6? 8? The average system cost isn't a "market" price for a biomass plant to compete against - it's new additions (or on the MISO market, the final bid price for that hour/day). But I think there is a) value in a diversity of renewable technologies and b) value in pushing the envelope on a variety of new technologies.