ImageOne of the most abundant forms of renewable energy available in the United States is wood residue from forestry operations. The carbon in wood residue is bound to go back to the atmosphere, either as carbon dioxide (CO2) as a result of combustion (natural or controlled fire), or through methane (CH4), as a result of decomposition. Methane is actually more than 30 times worse in terms of greenhouse effect, so burning wood is by and large better than leaving it there. If you capture the energy produced in the process, you have got a renewable energy source.

There are over 3,000 MWs of wood-to-energy power generation capacity in the U.S., about half of which is linked to industrial facilities (sawmills and paper mills), and half is stand-alone facilities. However, in the current economic environment of low electric demand, low gas prices, and uncertain renewable energy policies, stand-alone facilities are struggling to compete and attract financing, and industrial facilities are also struggling due to low wood products demand and offshoring.

So, what do we do with all this renewable resource? Well, how about liquefying the wood and using it as a substitute in old power plants that are currently fueled by residual fuel oil? Residual fuel oil is the heavier component that comes out of crude oil refining; unlike diesel and gasoline, it cannot be used for transportation and is therefore used mostly for power generation and for maritime engines. And it’s dirty.

Does it sound far-fetched? It’s not. The technology to make “liquid wood” has been around for a long time. It’s called pyrolysis and several companies have used for many years, using it mostly for other applications, or to chase the holy grail of converting biomass into liquid transportation fuels, which demand a higher price point, but create technological challenges. On the other hand, burning the liquid wood in a boiler for power generation is fairly easily accomplished, and it is even possible to use liquid wood in low-speed reciprocating engines with some relatively small modifications.

So, let’s do the math. The cost of procuring wood residue comes to about $ 3-4 / MMBtu in most parts of the country. Processing (pyrolysis) and transportation could be another $ 6-7 / MMBtu. So, can we sell this oil for more than $ 10 / MMBtu and turn a tidy profit?  Well, market prices for residual fuel oil, in 2011, were around $ 2 / gallon, or $ 13-14 / MMBtu, which is a nice spread, especially if you believe that basement low oil prices are not coming back any time soon.  And that price does not include the renewable energy value, which can be monetized through renewable credits and federal incentives and guarantees.

And where can this be done? Florida and Hawaii are big markets and account for the majority of the $ 3 billion / year U.S. residual oil market. Massachusetts, New York, and Virginia also show significant consumption. All of these states have abundant wood supplies, and Northern Florida has a vibrant forestry industry.