Completing Maine’s Energy Independence Strategic Vision with Fuel from Its Forests

We have recently seen a significant increase in interest from business, state government and the public in helping Maine become energy independent. These discussions often center around weatherization, wind, solar, and tidal power which are all important parts of a strategy aimed at curtailing Maine’s oil addiction. I am still amazed however that home and small business heating is not as well addressed in the policy discussions.

The wind and tidal solutions revolve around electricity generation.  Electricity generation from wind or tidal energy is wonderful.  Using this energy to power Maine’s businesses and homes makes very good sense. But heating a home with electricity does not make sense unless the electricity is far less expensive than its current cost.

A typical Maine home using 900 gallons of heating oil per year would spend a little over $2,000 per year at current heating oil prices.  Central Maine Power Co. (CMP) currently charges homes about US $0.144 per kilowatt-hour so that same home would have to spend 2.65 times more ($5,470) to heat the home with baseboard electric heat.  By the way, transmission and distribution fees represent about $0.055 of the $0.144 cost.  The cost of energy therefore is $ 0.089 per kilowatt-hour.  If the wind or tidal projects require any more than $0.089 per kilowatt-hour to make a profit then the annual electric heating cost would be even higher.

Furthermore, Bangor-Hydro recently testified before the Maine Energy Futures Committee that a transmission system upgrade of 220 miles at a cost of $6-$10 million per mile would be required to deliver power from the wind and tidal projects.  These high costs suggest transmission fees will likely increase.

Of course baseboard heating is not the only way to use electricity for home heating. Geothermal is considered a very efficient solution for heating your home or business.  This is true once the geothermal system is built and installed.  But converting a home or business to geothermal in Maine costs between $12,000 and $60,000.  The relatively high cost of the horizontal heat exchange loop or vertical deep well makes up most of the difference in cost. 

Maine has a lot of unfriendly rocky ground for digging large shallow horizontal loops (a Maine home that demands 50,000 BTU/hour would require 600 to 900 feet of pipe buried below the frost line); so a lot of the installations require deep wells.  That is fine for some rural homes.  But a lot of the 440,000 homes that use heating oil in Maine do not have the option for geothermal for a number of reasons.   Urban locations are generally too closely spaced for deep wells for every home (much less horizontal shallow ground loops).  And even with tax incentives, many rural Maine households cannot afford the cost of constructing a deep standing column well.

Solar solutions are also a wonderful way to supplement the need for external heating energy.  But solar heating solutions also require a large investment that is beyond the means of most Mainers.

So what is the solution for those that cannot switch to geothermal or solar?  Heating oil is the standard in Maine (80% of our homes are now heated with #2 oil).  But a huge amount of the money spent on heating oil (or any petroleum based fuel) goes into a giant economic black hole.  Amazingly, 76% of each dollar a Maine homeowner spends on heating oil leaves the state.  Much of that money ends up overseas.  None of that 76¢ on the dollar circulates in Maine’s economy to create jobs from the wages and profits that should be paid here but are going over there.

Wood derived fuels are made right here in Maine and create direct manufacturing and materials supply jobs.  Money spent on heating fuel produced in the state stays in the state and the multiplier effects create even more jobs right here in Maine.  Furthermore, the use of wood pellet fuels to make heat in a fully automated central heating system is proven technology and is deployable right now.  In some European nations more than 75% of new homes are built to use pellet fuel to power the home’s primary central heating system. 

There are hundreds of thousands such systems in Europe and almost none here in Maine.  The systems are fully automatic and the pellet fuel is delivered through a hose from trucks that are just like the heating oil trucks.  These trucks even have legal-for-trade scales and billing systems that measure the delivery to the pound much like the oil truck measures gallons.  Bulk delivery trucks and fully automatic home heating systems are operating in Maine and New Hampshire right now.

The cost for an equivalent BTU at current pellet fuel prices works out to heating oil priced at about $2.05/gallon (note that at current prices heating oil in some locations is cheaper than pellet fuel for equivalent energy — but does anyone really think that will be true in a year or two?).

And remember, even at these cheap oil prices we are still sending $0.76 of every dollar of our money out of the state. 

As an added bonus, each home that converts to pellet fuel offsets 10 to 20 tons (or more) per year of CO2.  The size of the offset depends on the size of the home and the degree of weatherization.  The average home in Maine will offset about 12 tons per year.  This is important since Maine is the highest emitter of residential greenhouse gases per capita than any other state (3.72 tons per year for every man, woman and child — the next closest state is Vermont at 2.68 tons per year).  If Maine continues to use heating oil as it does now, it would take an efficiency improvement from weatherization for every home in Maine of about 29% just to reach the average greenhouse gas per capita emissions of the New England states. 

There is no doubt that weatherization is critical to reducing wasted energy but it only mitigates the symptoms of our addiction to heating oil; it does not cure the disease.
With tax incentives, the cost of a pellet boiler system can be put on parity with the cost of an oil boiler system.  An enlightened policy strategy should set a goal of making the cost of a new pellet fueled boiler the same as the cost of a new oil fueled boiler.  I recently calculated the positive economic effects of keeping heating fuel money in Maine and the jobs created will more than pay for the program.  If 10% of Maine homes convert to pellet fuels, tax revenues will increase by more than $55 million per year and more than pay for a policy that puts the cost of a modern pellet boiler on a level playing field with modern oil boilers.  

The economic effects of a 10% conversion would also create more than 8,000 jobs in Maine.  This represents more jobs created than the number of jobs that have been lost in the pulp and paper sector over the last decade.

What could be more “buy American” than to get our heat from regionally produced renewable, clean, and nearly carbon neutral fuel?   This year (at $2.20/gallon) we will send more than $668 million out of the state forever; much of that will end up in foreign hands.  Do we really want to continue to give our money to other countries or do we want our money to stay here and make our state independent and clean?

Our energy independence policy needs to recognize the fact that heating many homes in Maine will continue to require an in-house combustion system and boiler.  But the fuel should be Made-in-Maine, not made from away.

William Strauss, an economist, is a Director of Maine Energy Systems.  He is also the president of FutureMetrics, a Maine based financial and economic consulting firm.  William Strauss also served on the Maine Governor’s Wood-to-Energy Task Force in 2008 from its inception to the completion of its final report to the governor.  Dr. Strauss is also a member of the Maine Pellet Fuels Association.

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