Biomass Energy Market Red Hot; Maine's on-Again Off-Again Wood-Fired Electricity Industry is Cooking
Apr 04 - Portland Press Herald
Three years ago, the fires were going out at Maine's multi- million dollar biomass energy industry.
Today, all the surviving plants are running near capacity, or undergoing
upgrades worth millions of dollars so they can restart. Developers are planning
a new $80 million plant with enough capacity for 40,000 homes, in the same
location that a smaller biomass plant was dismantled last year.
Soaring oil and natural gas prices, combined with state-mandated markets for
green power in southern New England, are restoking investment in wood-fired
electricity. It's an unexpected boost to Maine's rural economy.
"It was unthinkable two years ago that someone would build a new
plant," said Stephen Hall, plant manager at Stratton Power Station.
"The thought was that nobody's going to build in this industry for a
while."
Stratton Power is owned by Montreal-based Boralex Inc., which also operates
biomass plants in Livermore Falls, Fort Fairfield and Ashland. The company is
spending $20 million to retool its plants to compete in the revived market.
But Hall and other experts caution that the current expansion has limits.
These plants swallow more than 1,000 tons of a day of sawdust, waste wood and
construction debris, so a reliable supply is critical. Also, developers that
once before invested in biomass plants based on projected oil prices and
expected public-policy initiatives are weighing the risk of being stung again.
It was public policy that brought Maine a biomass industry in the first
place.
Foreign oil embargoes in the 1970s prompted the federal and state governments
to pass laws encouraging energy production from renewable resources, such as
wood and water. That spurred a new industry in Maine and the construction of
more than two dozen biomass plants.
Some are at paper mills, where they help supply energy for production. A few
are at sawmills for on-site power. The rest, like the Boralex units, are
stand-alone wood burners that won lucrative contracts with utilities.
But the market began to change in the late 1980s. The plants had negotiated
power rates with utilities on the assumption that oil prices would continue to
rise. But in the 1990s, oil prices fell. As customers complained about their
electric bills, utilities blamed biomass plants and other non-utility generators
for the rate hikes. Finally, Central Maine Power Co. and the other utilities
were forced to buy out long-term contracts at prices well above market rates at
the time.
The market changed again in 2000, after Maine restructured its utility
industry. Wood-fired power couldn't compete with the wholesale prices available
from newly built gas-fired power plants across New England. By 2002, five Maine
biomass plants were off line and two had shut for good.
Now the market is being transformed for a third time. Natural gas prices are
soaring, taking away the competitive advantage from newer gas plants. Meanwhile,
government policies aimed at encouraging the growth of environmentally friendly
power plants are once again favoring biomass. One boost came last year from
Congress, in the form of a production tax credit for renewable generation.
But the biggest push involves financial incentives recently created in
Massachusetts, Connecticut and Rhode Island.
Several states, including Maine, require that a percentage of power sales
comes from renewable energy sources. Because Maine generates more power than it
needs, it can ship excess electricity south. Recently, southern New England
states have begun to reward generators who can produce renewable power that
meets specific guidelines. They are eligible to earn a premium, on top of the
price they are paid for the electricity.
For instance: Connecticut offers a price premium through 2009 for biomass
plants that emit lower levels of air emissions. These premiums are so lucrative
that plant owners in Maine are investing millions of dollars for less-polluting
boilers and other upgrades, so they can qualify.
"It's a good thing for Maine," said Hall, who is president of the
Independent Energy Producers of Maine. "We get the benefit of cleaner air,
and these plants survive to be part of the economy."
The economic impact of these plants is large in rural Maine, although not
widely recognized in the southern part of the state.
Biomass plants often are the largest taxpayers in their communities,
according to Hall. Most plants employ 20-25 people directly. Another 75 jobs are
linked to wood harvesting and trucking.
Hall provided a more detailed look at the money recently in a report to the
biomass trade group. It covered the two Boralex plants in Aroostook County, at
Ashland and Fort Fairfield. The plants support 150 full-time jobs and pay $6
million a year in salaries. They pay $600,000 a year in property taxes and more
than $8 million for wood fuel. They generated 65 megawatts into northern Maine's
energy grid.
This sort of spending and employment disappeared a couple of years ago in
Athens, north of Skowhegan. That's where a 13 megawatt plant owned most recently
by Boralex shut down. Last year, Boralex dismantled the turbines and sold them
to Georgia Pacific, for use in its Old Town paper mill.
So it was a welcome surprise last fall when GenPower LLC of Needham, Mass.,
came to Athens with plans to build a larger plant on the site. GenPower says it
will spend $80 million on a 40-megawatt plant that would start up in 2008. The
plant would burn 350,000 tons a year of wood and have 22 full-time employees.
Today's biomass operators are looking for every financial edge to make their
projects viable.
In Athens, selectmen agreed to create a Pine Tree Zone to give GenPower tax
advantages for locating there.
Tom Emero, director of renewable energy projects for GenPower, said the plant
will seek short-term energy contracts for power supplies in New England. It's
also being designed to qualify for renewable energy premiums. And like most
modern biomass plants, it's being engineered to burn a range of wood waste while
controlling air pollution.
State environmental laws allow construction and demolition debris to make up
50 percent of the fuel mix at a modern biomass plant. Maine plants burn demo
waste from throughout New England, because it's less expensive than bark and
some other wood wastes.
But while cost cutting can help these plants survive, the forces reviving the
industry are volatile and unpredictable.
The elements of risk were highlighted in a just-released report on the
challenges facing Maine's forest products industry, called the Maine Future
Forest Economy Project. A section on biomass electricity outlines specific
incentive programs in Massachusetts, Connecticut and Rhode Island. Summarizing a
class of incentives in Connecticut, the report stated there was "a strong
possibility" that the current prices won't stay in place and
"facilities considering investments in order to participate in the
(renewable energy certificates) market should carefully analyze future supply
and demand risks."
Dave Wilby, executive producer at the Independent Energy Producers of Maine,
agreed that no one can predict how the market will evolve. And he suggested that
the existence of state-mandated green energy markets is more important to the
industry than oil and gas prices. Still, the level of investment taking place in
Maine today indicates plant owners are optimistic that biomass can find a niche
in New England's wholesale energy marketplace.
"Three years ago, talk of any new biomass facilities certainly never
crossed anyone's mind," Wilby said. "It does suggest a different
atmosphere for this industry."
Staff Writer Tux Turkel can be contacted at 791-6462 or at:tturkel@pressherald.com
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