Frequently Asked Questions
What is Biomass?
Biomass is any organic material made from plants or animals. Domestic biomass resources include agricultural and forestry residues, municipal solid wastes, industrial wastes, and terrestrial and aquatic crops grown solely for energy purposes.
Biomass can be converted to other usable forms of energy and is an attractive petroleum alternative for a number of reasons. First, it is a renewable resource that is more evenly distributed over the Earth’s surface than are finite energy sources, and may be exploited using more environmentally friendly technologies.
Agriculture and forestry residues, and in particular residues from paper mills, are the most common biomass resources used for generating electricity and power, including industrial process heat and steam, as well as for a variety of biobased products. Use of liquid transportation fuels such as ethanol and biodiesel, however, currently derived primarily from agricultural crops, is increasing dramatically. (Source: USDOE)
The immediate focus of BCEX is woody biomass; that is, trees and woody plants including limbs, tops plus aboveground and belowground forest residues, wood manufacturing residues and closed-loop forest products such as willow and poplar. (Source: USDA)
What is Bioenergy?
Bioenergy is energy that is derived from biomass. Bioenergy is composed of two primary areas—biofuels and biopower.
Biofuels are any fuel derived from biomass. Agricultural products specifically grown for conversion to biofuels include corn and soybeans. R&D is currently being conducted to improve the conversion of non-grain crops, such as switchgrass and a variety of woody crops, to biofuels.
The energy in biomass can be accessed by turning the raw materials of the feedstock, such as starch and cellulose, into a usable form. Transportation fuels are made from biomass through biochemical or thermochemical processes. Known as biofuels, these include ethanol, methanol, biodiesel, biocrude, and methane. (Source: USDOE)
Biopower, or biomass power, is the use of biomass to generate electricity, or heat and steam required for the operation of a refinery. Biopower system technologies include direct-firing, cofiring, gasification, pyrolysis, and anaerobic digestion.
Most biopower plants use direct-fired systems. They burn biomass feedstocks directly to produce steam. This steam drives a turbine, which turns a generator that converts the power into electricity. In some biomass industries, the spent steam from the power plant is also used for manufacturing processes or to heat buildings. Such combined heat and power systems greatly increase overall energy efficiency. Paper mills, the largest current producers of biomass power, generate electricity or process heat as part of the process for recovering pulping chemicals. (Source: USDOE)
What is an Exchange?
An exchange is an association of individuals and/or companies that have agreed upon standards, rules of conduct and membership requirements that reduced the risk associated with trade. That risk was primarily associated with practices of misrepresentation in performance on a contract to sell or purchase a commodity—be it default in the quality/quantity of the commodity delivered, timing or point of delivery and/or terms of payment. Exchanges in the Midwest first developed at major transit points for grain such as Milwaukee, Chicago, Minneapolis and Duluth.
Exchanges first focused on the rules of trade, but later developed systems that facilitated trade such as auctions, trading arenas, and today are electronic systems. In addition, many also developed clearing systems that lowered the financial costs associated with multiple trading partners and contracts.
Traditionally members of the association owned the exchange. During the last 10 years, exchange ownership has evolved to be almost exclusively operated as for-profit enterprises with an ownership structure that extends beyond the members of the association.
How would the Biomass Commodity Exchange help the biomass/bioenergy marketplace?
Although significant progress is being made in the development of technologies to convert biomass to bioenergy, commercialization of such technology faces a different set of hurdles. Commercial deployment of these technologies requires significant investment. Investments will be made only if such commercial projects are financially viable. This requires not only a reasonable expectation of the demand and price of final bioenergy products but of the supply and price of biomass inputs.
The demand price of bioenergy can be reasonably estimated by the price of its substitutes. Electrical power generated from biomass has a value comparable to electricity generated from coal. The value of cellulosic ethanol can be approximated by the value of corn-based ethanol.
The supply price of biomass is more uncertain. For many of these products there is little or no demand and hence no market. Much forest residual is burned or allowed to decompose; some is converted to landscaping material. There is virtually no market for closed-loop energy products such as hybrid willow, hybrid poplar and switchgrass.
The mission of the Biomass Commodity Exchange (“BCEX”) is to foster the development of such markets through standards, trading forums, and rules of conduct and price information. The development of a trading framework will encourage production/selling and consumption/buying of biomass commodities. This in turn will reduce the uncertainty associated with inputs for commercial bioenergy and enhance the environment for its development.
How would an exchange benefit small producers or consumers?
The Biomass Commodity Exchange (“BCEX”) will benefit all market participants whether they directly trade through BCEX or not. BCEX will facilitate the development of standards and grading that will enhance general trade. Price information will allow all producers and consumers to assess the economics of biomass production and consumption. An active trading market will lead to brokers or assemblers of biomass that will actively solicit product based on public prices.
Note a parallel can be found in the agricultural markets where all producers and consumers do not directly participate in the market but all realize benefit from their existence.