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However, if biomass prices rise significantly, they can make an important contribution to income and influence landowner decisions.9 The second issue is the age structure of the inventory in Massachusetts. Many empirical studies consider inventory levels in a broad sense, but none directly consider the age struc- ture of the inventory. A large percentage of the private forests in Massachusetts are now over 60 years old and are ready—if not overdue—to be thinned for landowners interested in commercial timber production10; financial incentives could have an important effect on the decisions of these landowners. These concerns have led us to an approach for the High-Price Biomass scenario that recognizes landowner characteristics, the age structure of the inventory, and the importance of per-acre income levels. While we believe this method provides a better estimate of forest biomass supply than traditional economic approaches, a good deal of uncertainty concerning landowner responses cannot be eliminated since we are considering behavior that is well beyond our historical experience. As demand and prices increase, the confidence intervals grow wider and it is important to recognize and acknowledge this uncertainty. Biomass Supplies for Thermal and CHP Plants It is relatively straightforward to extend the above scenarios to evaluate the availability of forest biomass supplies for wood-fired thermal and CHP plants. The cost structure of thermal and CHP plants and their competition with facilities that use oil and natural gas allow them to pay much higher prices for wood than electric power plants. For example, in current markets (assuming oil prices of $3 per gallon), thermal and CHP plants could pay up to $85−$95 per green ton of wood (45% moisture content) and still cover their full cost of capital (based on the analysis in Chapter 2). In terms of wood supply, one important difference between electric power and thermal/CHP plants is that the latter prefer higher-quality chips that are uniform in size and shape and have low ash content (Maker, 2004; P Squared Group and Biomass Energy Resource Center, 2008). Clean chips and chip specifica- tions in general may add about $10−$15 per green ton to the cost of chip production. Thus, thermal and CHP plants would need to pay $40−$45 per delivered green ton compared to $30 for 9 Landowners may also respond differently to an equivalent amount of income from harvesting biomass and sawtimber because the removal of low-value biomass may have a different impact on the value of non-timber amenities than the removal of large trees. 10 Kelty et al. (2008) reference silvicultural research that indicates that 50 years is the recommended age for first thinning (cited from Hibbs and Bentley, 1983), but indicate that first thinnings in Massachusetts are commonly delayed until stands reach 70 years of age. an electric power plants.11 Importantly, in the same woodshed, thermal and CHP plants can pay this difference—and much more if necessary—and remain profitable. At the high end of the supply curve, if the market price of delivered wood for electric power plants is $50−$60 per green ton, thermal and CHP plants would face wood prices in the range of $65−$75 per green ton. This price level is still below the range that these plants could afford to pay today and cover their full costs. Of course, if electric power prices increase due to macroeconomic factors and fuel costs, it is a safe bet that oil prices would be much higher as well; in fact, most forecasts indicate that oil prices will increase faster than electricity prices (which are tied more closely to the cost of coal and natural gas). In sum, higher-quality chip specifications for thermal and CHP plants shift the supply curve for delivered wood chips upward relative to that of electric power plants. Under reasonable energy price scenarios, when these plants compete for the same wood supply, thermal and CHP plants will be able to outbid electric power plants due to their production economics and the competi- tive environment of the energy markets in which they operate. Harvesting Systems and Logging Costs We have conducted our assessment of wood biomass supply in Massachusetts with and without the harvesting restrictions— particularly with respect to the removal of tops and limbs—that are provided by the guidelines in Chapter 4 of this report. Our assessment of biomass supply in Massachusetts suggests that if demand increases due to the expansion of electric power plants, it will almost certainly be accompanied by increases in whole-tree harvesting due to the limited supply of other forest biomass and the cost advantages of whole-tree methods. Generally, we assume that whole-tree harvesting can be used on private lands as long as it meets the forest practices standards required by the state. Given the uncertainty regarding the acceptance of whole-tree harvesting (particularly mechanical systems) in Massachusetts, our supply projections allow for the fact that many landowners, foresters, and loggers will still favor alternative harvesting methods. Thermal and CHP plants are not constrained to use whole-tree harvesting methods because of their ability to pay higher prices for delivered wood chips. These facilities could buy wood procured with log-length methods, in which trees are delimbed and bucked at the stump and the logs are forwarded or skidded to the landing. Log-length methods may be selected over whole-tree methods if management plans call for leaving tops and limbs scattered on the site and/or there is concern about damage to soils or to the 11 While thermal and CHP plants will compete for bole chips, electric power plants can use whole-tree chips from tops and limbs. However, given the wood supply situation in Massachusetts, it appears that electric power plants would need to obtain most of their wood from whole trees and thus could face the prospect of competing directly with thermal and CHP plants for bolewood when operating in the same woodshed. 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