September 29, 2008 | 5 Comments
In 2006, five months before signing the historic California Global Warming Solutions Act, Governor Arnold Schwarzenegger issued an Executive Order establishing a Bioenergy Action Plan. Those actions positioned California as a world leader in the race to develop renewable power and reduce greenhouse gas (GHG) emissions. But what is most troubling for those of us particularly in the biomass sector is that two years later, the complexities of implementation have become evident. Scientists and legislators, entrepreneurs and environmental activists, municipal agencies and utility managers, all with the best intentions, struggle for enough common ground to keep progress from grinding to a halt.
Biomass, alone among renewables, derives from numerous sources. Broadly these fall into three categories: agricultural, forestry residues and municipal wastes. Each category subdivides further into diverse feedstocks that may or may not be located close to each other, and can require different forms of pretreatment to unlock their energy potential. Agricultural sources, for example, include animal waste, animal renderings, food processing wastes, crop residues, and sugar- or starch-based or lignocellulosic energy crops. Since the product resulting from these feedstocks can be gas or liquid fuels, direct conversion to electricity or combined heat and power, as well as chemical process additives, the problem of devising a consistent approach becomes readily apparent.
This fragmentation has direct consequences. Forestry residues represent the largest potential source of biomass in California. Approximately half is wood waste produced in sawmill operations, and the other half is tree-cutting waste, brush and forest floor debris dispersed indiscriminately throughout forested areas. Sawmills were among the earliest adopters of biomass for process heat and power, but logging overall has declined in California, and with it, the amount of available fuel and the interest in new technologies for exploiting it. Collecting forest debris has the additional benefit of reducing fuel for the devastating wildfires that plague the state every year. But the labor and transportation costs to aggregate enough material to economically use it have so far stymied even fire-prone areas like San Bernardino.
The last example raises another critical point. Responsibility for biomass resources, and implementation of the policies that determine their use, falls primarily on city and county agencies; that's where the residues hit the road. These organizations are in the unenviable position of having to carry out state mandates, satisfy regulatory agencies, address citizens' and activists' concerns and manage wastewater treatment, municipal solid waste and landfill facilities, all at the same time.
Especially outside of large urban areas, these city and county agencies are almost always underfunded and understaffed. It's no wonder that many are wary of new technologies to capture energy and other products from waste. Most have first- or secondhand knowledge of projects that went wildly over budget, were mothballed for technical failures or made obsolete by ensuing air and water quality issues. Ironically, despite their central role in managing these resources, their voices are among the least heard in discussions of the direction for biomass use in the state. At a bare minimum, this is one oversight that must be addressed.
Biomass also has an advantage over wind and solar for renewable power generation. Unlike those intermittent sources, biomass-generated power is a "baseload" source, available at any time to utility providers. Since utilities have legal obligations to maintain sufficient reserves of power, one would think that baseload renewable power should be recognized as a value-added product, but it is not. To the contrary, utilities have generally viewed biopower as unreliable, and until recently, made little effort to work with legislators and generators to devise stable pricing schemes for power purchase agreements.
In California, the state's Renewable Portfolio Standard (RPS) has forced the investor-owned utilities (IOUs) to design standard biomass contracts based on a Market Price Referent (MPR), indexed over the term of the contract. The MPR is still largely based on the "avoided cost" of generating the same amount of power from fossil-fuel sources, and rarely approaches the actual costs to construct and operate facilities. Moreover, many "non-retail" power providers, like the Los Angeles Department of Water and Power, are not regulated by the state RPS mandate, and have not updated biomass contracts in several years. The predictable result is that existing biopower facilities are idled or on life-support, and applications to build new ones in LADWP territory are rare.
The rationale for such second-class treatment is straightforward. Biomass energy projects are usually smaller than conventional power plants, and smaller than many wind and solar projects as well. The average size of a new biomass plant under the RPS is less than 8 megawatts (MW). In contrast, a solar thermal project recently announced by PG&E will have a capacity of 900 MW. With some feedstocks such as forest residue located in remote locations, and power capacities of 5 MW or less, such biomass power projects qualify as distributed generation - anathema to most traditional power providers. From their perspective, to set up and service grid interconnection for so little power, even if the cost is borne by the generator, is a wasted effort.
Still, SCE and PG&E have executed agreements with some generators before a shovelful of dirt has been moved to build the facility, out of a cynical calculation that it will improve their RPS profile in the short term, even if the plant is never constructed. One alternative to this state of affairs is the development of CCAs, Community Choice Aggregators. Under the 2002 legislation, municipalities can band together to finance the construction of power plants that serve their residents. The law (AB117), gives them the right, and the risk, to determine the type of facility, and to control local retail electricity rates. An advantage of the program is that studies show that financing the capital costs is less than half as expensive for public entities than for private IOUs.
As I write, the long-delayed energy legislation that would extend federal incentives for renewable energy is up again for discussion in Congress. A proposed three-year production tax credit for biomass would open a welcome window of opportunity. The stakes are high. Without incentives, firms developing new technologies for biomass conversion face difficult financing decisions. Large corporate waste haulers like Waste Management, Allied and Republic, already skeptical of the viability of such projects, are unlikely to risk capital investing in outside companies. Venture capital has inherent short-term performance goals not well suited to the complex regulatory climate and siting requirements for power facilities in California. Tax-exempt bond financing, a strategy of dairy waste-to-power firm Microgy, is an example of the creative mechanism required to inject some stability into an uncertain business environment. Finally, the success of the state's Bioenergy Action Plan depends on an honest, ongoing assessment of the obstacles that impede its progress.
Joseph Kleinman is President of Skyhorse Media, a research and marketing firm in Los Angeles serving environmental and alternative energy companies. Clients have included Energy Conversion Devices in Rochester, Michigan, and FlexEnergy Inc., in Mission Viejo, CA, a developer of advanced biomass energy technology. Contact him at firstname.lastname@example.org.