Agri-pellets as alternative fuels for coal-fired power plants in Canada

Purpose Lignite coal-fired power plants are the main electricity generators in the province of Saskatchewan, Canada. Although burning lignite coal to generate power is economical, it produces significant greenhouse gases making it a big challenge to Canada’s international commitment on emission reduction. However, abundant agricultural crops and sawdust produced in Saskatchewan put the province in a good position to produce and use agri-pellets as an alternative fuel to generate electricity. This study aims to conduct an economic and environmental analysis of the replacement of lignite coal by agri-pellets as the fuel for Saskatchewan’s coal-fired power plants. Design/methodology/approach The study estimates the economic and environmental costs and benefits of two alternative fuels for power plants. The economic analysis is based on the pellet production and transportation costs from farms to production sites and from the production sites to power plants. In the production process, biomass precursors are densified with and without additives to produce fuel agri-pellets with appropriate mechanical durability and high heating value per volume unit. The environmental analysis involves estimation of greenhouse gas emissions and their social costs for lignite coal and different types of agri-pellets under different scenarios for pellet production and transportation. Findings The results show that although the total cost of electricity is lower for coal than agri-pellets, the gap shrinks when social costs and specifically a carbon price of $50/tonne are included in the model. The cost of electricity in lignite coal-fired power plants would also be on par with agri-pellets-fired power plants if the carbon price is between U$68 and $78 per tonne depending on the power plant locations. Therefore, a transition from coal to agri-pellet fuels is feasible if a high-enough price is assigned to carbon. The method and the results can be generalized to other places with similar conditions. Research limitations/implications There are a few caveats in this study as follows. First, the fixed costs associated with the transformation of the existing coal-fired power plants to pellet-fired plants are not considered. Second, the technological progress in the transportation sector, which would favor the net benefits of using pellets versus coal, is not included in the analysis. Finally, the study does not address the possible political challenges facing the transition in the context of the Canadian federal system. Practical implications The study results indicate that the current carbon price of $50 per tonne is not sufficient to make the agri-pellets a feasible source of alternative energy in Saskatchewan. However, if carbon pricing continues to rise by $15 annually starting in 2022, as announced, a transition from coal to agri-pellets will be economically feasible. Social implications Canada is committed to reduce its emission according to the Paris agreement, and therefore, needs to have a concrete policy to find alternative energy sources for its coal-fired power plants. This study examines the challenges and benefits of such transition using the existing agri-pellet resources in Saskatchewan, a province with abundant agricultural residues and coal-fired power plants. The findings indicate that a significant emission reduction can be achieved by using agri-pellets instead of coal to produce electricity. The study also implies that the transition to renewable energy is economical when social costs of carbon (carbon tax) is included in the analysis. Originality/value As far as the authors know, this is the first study providing a socio-economic analysis for a possible transition from the coal-fired power plants to a more clean and sustainable renewable energy source in one of the highest carbon dioxide (CO2) producer provinces in Canada: Saskatchewan. The study builds upon the technical production of three agri-pellets (oat hull, canola hull and sawdust) and estimates the economic and environmental costs of alternative fuels under different scenarios.