Minnesota Biomass Projects Squeezed by Low Natural Gas Prices, Leaves Some Hoping for Higher Gas Prices

Michael Giberson

The Minneapolis Star Tribune reports that low natural gas prices are putting the squeeze on biomass-based energy projects in Minnesota, in some cases including biomass projects supported by direct taxpayer or ratepayer subsidies. One example, an ethanol plant once gained about 20 percent of its heat from a $20 million biomass gasification system. The system has been idle for a year while the plant relies on cheaper natural gas.

The article notes that the biomass investment was initiated in 2008, a year when gas prices topped $13/mmbtu and before it was clear what the shale gas boost was going to do to gas prices. (Current gas prices are below $3/mmbtu.)


The operators of two recent biomass projects — at the University of Minnesota Morris and Rahr Malting Co. in Shakopee — say they probably would be saving money if they had stayed with natural gas. Neither had decided to abandon biomass, however.

“We are stuck in a situation where I start wishing for the price of natural gas to go up, which is not good for everyone else,” said Stacy Cook, vice president of operations for Koda Energy, a $60 million privately financed joint venture of Rahr and the Shakopee Mdewakanton Dakota Community.

Cook said the Rahr family and the Dakota community are committed to the combined heat and power plant that burns agricultural byproducts, wood or energy crops. It supplies electricity to Xcel and process heat to the malt plant.

“They are looking at a 30-year picture,” Cook said of the plant’s owners. “If you start looking too short-term, it gets too depressing.”

The article then tries to offer a bit of hope to the biomass investor in the way of citing, without almost no context, the highest price projection out of the Energy Information Administration’s study of the effects of natural gas exports on price.  (Namely, the 54 percent price increase by 2018. As discussed here before, the 54 percent outcome is just one of many export and production scenarios that EIA tested with their economic models. It isn’t the most likely scenario by any stretch of the imagination.)

Here is how the Star Tribune cast the possibility: “Natural gas prices may not stay low. Last week, the U.S. Energy Department projected that gas prices could rise 54 percent by 2018 if liquefied natural gas becomes a major export commodity.”

The owner of biomass-producing or consuming assets can wish, but I wouldn’t put my money on it.

One thought on “Minnesota Biomass Projects Squeezed by Low Natural Gas Prices, Leaves Some Hoping for Higher Gas Prices

  1. What is certain is that the taxpayers are being raped and pillaged, but what else is new.

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