New EPA Regulation May Discourage U.S. Biomass Projects

The burning of biomass generates more electricity in the U.S. than wind, solar and geothermal energy combined, but a new regulation scheduled for implementation January 2, 2011 by the U.S. Environmental Protection Agency may discourage new biomass projects, including those proposing to convert from coal to biomass.

Although the environmental neutrality of burning biomass as a fuel has long been acknowledged by the EPA, biomass will be treated the same as fossil fuels when new greenhouse gas permitting regulations come into play in the New Year.


U.S. Energy Information Administration electricity production data: fossil fuels vs. renewable

The new regulation provides extra incentive to U.S. biomass fuel companies planning to export biomass pellets to the United Kingdom and other European countries where biomass-fueled power production is encouraged by governments. 

EnergyBoom reported Monday that high-priced coal is driving the UK to double its electricity generation from biomass in the next two years. According to a spokesperson for the owner of Western Europe’s largest coal-fired power plant, switching from coal to biomass is a win for everyone: “It will remove coal from the energy mix and replace it with significant, reliable, cost-effective and dispatchable renewable power.”

Power companies such as Duke Energy Corp. (NYSE: DUK) , which is awaiting permitting to use biomass to displace some coal at its coal-fired Buck Steam Station in North Carolina, weigh the economics carefully before adding biomass. Greenhouse gas regulations and permitting would be a strike against using biomass, the company has said. 

Another power company, The Southern Company (NYSE: SO), which is considering nuclear, biomass and natural gas to displace coal from several of its generation plants, has said the EPA’s regulation “could kill biomass in its tracks.”

Data from the U.S. Energy Information Agency (EIA) shows that biomass waste, wood-derived fuels and corn ethanol combined are the largest renewable fuel segment in the U.S., with conventional hydroelectric power in second place. If corn ethanol is excluded, conventional hydro is the largest renewable power sector. However, biomass waste and wood derivatives produce almost three times as much power as do solar and wind combined.

The EPA agrees with the EIA that biomass is a renewable fuel with no impact on the environment: “Although the burning of biomass also produces carbon dioxide, the primary greenhouse gas, it is considered to be part of the natural carbon cycle of the earth. The plants take up carbon dioxide from the air while they are growing and then return it to the air when they are burned, thereby causing no net increase.”

So, why include biomass with fossil fuels for purposes of greenhouse gas permitting?

Although this may be hard to believe, the EPA explains it all as a bureaucratic Catch 22.

EPA is tailoring the applicability criteria that determine which stationary sources and modification projects become subject to permitting requirements for greenhouse gas  emissions under the Prevention of Significant Deterioration (PSD) and Title V programs of the Clean Air Act (CAA or Act).

“We are mindful of the role that biomass or biogenic fuels and feedstocks could play in reducing anthropogenic GHG emissions, and we do not dispute … that many state, federal, and international rules and policies treat biogenic (biomass) and fossil sources of CO2 emissions differently,” says the EPA.

“Nevertheless, that … does not provide sufficient basis to exclude emissions of CO2 from biogenic sources in determining permitting applicability provisions at this time,” explains the EPA. 

This article was originally published on the media outlet EnergyBoom and was reprinted with permission.

EnergyBoom Capital Columnist Terry McDonald (tmcdonald@energyboom.com) is a veteran financial journalist. 

He is a former reporter, city editor and business editor for three daily newspapers, and a senior editor for a national financial newspaper. He has covered management strategies and investment prospects of companies in several sectors, including energy, mining, forest products, agriculture, and financial markets.

Terry has also been an in-house investor relations executive for a publicly traded oil and gas company and a software development company, as well as an external consultant helping companies articulate their business progress and prospects to shareholders and the investment community.

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