LD 1676: Biomass industry responds to misinformation

re-energyBy Eric Dumond, Wood Procurement Manager, ReEnergy    

Wholesale electricity prices in Maine and across New England have collapsed over the past year. In Maine, prices have dropped from 6.2 cents/kwh in 2014 to 4.1 cents/kwh in 2015 to 2.9 cents/kwh in 2016. A mixture of unsustainable events have led us to this situation: the historic low price of natural gas, low oil prices, and an abnormally warm winter that constrained both power and natural gas demand. However, these savings never quite make it to the consumer.

biomass power logoIt is good public policy for the state to step in and support a critical part of the forest products infrastructure for a defined and limited period of time. The state would receive a significant return on its investment. In addition to avoiding paying unemployment benefits to the employees at both the biomass plants and the logging companies who will lose their jobs, the state will continue to collect income taxes from these employees and sales taxes from purchases of goods and services that are needed to operate the facility. The six standalone biomass facilities spend $115 million per year annually  when they are operating, supporting 148 direct jobs and an estimated 900 indirect jobs.

Four of the six standalone biomass facilities are either idled, scheduled to be idled, or at risk of closure. LD 1676 would represent a short-term lifeline that would allow them to be viable until wholesale electricity prices improve and the plants are able to pursue alternative projects, such as co-location opportunities.

Some parties have been engaged in efforts to distort and falsify our industry, which provides significant economic and environmental benefits. Below, we offer facts in response to this misinformation.

FACT: Biomass Facilities Reduce Carbon Emissions – Regardless of Whether Their Heat Is Used.

The use of forestry residues as biomass fuel – the way every Maine facility operates – is widely accepted as an environmentally sound practice that is net carbon neutral. Biomass power plants serve as an end-market for leftover wood. Far from “wasting wood” as some opponents claim, we use materials that would otherwise be landfilled or left in the forest to release methane. There is no other viable end use for these residues. From a greenhouse gas perspective, methane gas that is produced as a result of wood rotting in a landfill or in the woods is far worse than emissions from a biomass power plant. According to the U.S. Environmental Protection Agency (EPA), “pound for pound, the comparative impact of CH4 (methane) on climate change is more than 25 times greater than CO2 over a 100-year period.”

Just last year, the Obama Administration included biomass facilities, just like the six in Maine, in the U.S. EPA’s Clean Power Plan as a carbon mitigation technology that states can use to reduce carbon emissions. Biomass facilities reduce carbon emissions by eliminating methane emissions from landfills and avoiding the burning of fossil fuels.

Facilities in Maine and around New England have demonstrated that their net carbon emissions on a life-cycle basis are zero, and thus have a substantially smaller carbon footprint than a combined-cycle natural gas plant. We are not aware of ANY scientific study completed on this subject – including from the Natural Resources Defense Council – that disputes this fact.

The boilers at the standalone biomass power plants are 70-75% efficient. As in all standalone power plants, the overall efficiency of a facility inherently declines as a steam turbine converts steam thermal energy into electrical energy. This law of thermodynamics is known as Carnot’s Efficiency Law and exists in all steam and gas turbines. Biomass power plants are similarly efficient to simple cycle gas plants.

While making the plants more thermally efficient makes good economic sense, a steam client must be the right fit based on very specific factors like size and location. We support combined heat and power (CHP) – but without the existing biomass infrastructure, significant CHP growth will be impossible to achieve.

FACT: Biomass Facilities in Maine Utilize State-of-the-Art Technology and Are Compliant with Stringent Environmental Regulations.

The facilities owned by ReEnergy and Covanta use advanced technology, and have invested over the years to improve that technology to meet stringent regulations imposed by Maine Department of Environmental Protection and by other New England states.

FACT: Paper Mills – Not Biomass Facilities – Received the Majority of $2.6 Billion in Ratepayer Subsidies Over the Past 20 Years.

Paper mills were significant beneficiaries of this long-expired program—as an example, the largest recipient was the Rumford mill with more than $500 million in total contract payments. Furthermore, it’s important to note that neither ReEnergy nor Covanta was the beneficiary of any of these programs.

FACT: Comparison to the Cate Street Project Is Inapt.

As part of this program, we are in favor of strong accountability provisions. As part of this proposed program, generators would be committing to meaningful future investment and would be subject to stringent accountability measures. If a generator fails to meet its investment commitments, the contract rate would be proportionately reduced.

In addition, this is not a scenario in which project owners would receive funding up front. This would be a contract with ongoing monitoring and reporting, and if the facility shuts down it would stop receiving any payments under this program (unlike the program used for the Cate Street project).

FACT: The Source of Capital Used to Purchase the Biomass Facilities Is Irrelevant and Mischaracterized.

ReEnergy’s primary investor is not a hedge fund; it is a private equity firm focused solely on the energy sector. This private equity firm has made investments in dozens of companies in the energy sector, of which ReEnergy is one.

ReEnergy has invested significantly in the state of Maine through the acquisition of its four biomass power facilities in 2011 and has made significant follow-on investments in these plants. At this point, ReEnergy is not earning any return on this investment and must be prudent with its limited resources and make sensible decisions to minimize losses, which have been mounting — particularly with its two Aroostook County facilities in recent years.

ReEnergy does not have unlimited access to additional capital and, unlike T&D utilities in Maine that are owned by international corporations, it does not enjoy a guaranteed rate of return on investment. It cannot simply request a rate increase at the Public Utilities Commission year after year.

Maine has already seen the closing of Covanta’s two biomass plants because of the crash in the wholesale electricity market, and ReEnergy’s facilities are at a critical juncture. Without some short-term stable contract­ing with the state of Maine, ReEnergy will be compelled to shut at least one of its facilities in northern Maine to stem the losses that the company has been experiencing