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Bio-energy is expected to become increasingly attractive in the future owing to its potential to contribute to lowering greenhouse gas emissions, increasing rural and regional employment and improving energy security through substituting for oil imports. The volume of sustainable biomass resources that are economically competitive but do not significantly impact on food production is expected to slowly expand as new feedstock varieties and refining pathways are developed. However, these volumes will remain limited relative to total energy and transport sector fuel demand. Limited biomass resources will be allocated to the sector that is most able to afford them. This will depend on the price of existing fossil fuel products and the relative cost of converting biomass into substitute final fuels such as bio-derived electricity, ethanol blends, biodiesel and bio-derived jet fuel. It will also depend on factors such as the availability and cost of alternative fuel and energy sources, government policies including excise rates, and the emission intensity of each sector. This paper presents a number of alternative cost curves for bio-energy resource to final energy costs and applies a partial equilibrium model of the electricity and transport sectors, called the Energy Sector Model (ESM), to determine where the limited biomass resources are likely to be allocated under various scenarios. Preliminary projections are presented for biomass uptake in each of the electricity, road and aviation sectors to 2050.

Bottom up partial equilibrium modelling of the energy sector has tended to focus on the electricity sector given its typically large share of total emissions, the deregulation of that market in many countries and the relatively well understood technology options. In contrast, this paper employs a model of the energy sector to investigate the proportion electricity and transport may contribute given the relative cost of abatement in those sectors, for specified emission targets. A related issue is the potential convergence of the two sectors through greater uptake of electrically powered transport.