Utilities’ Perspectives on Biomass-to-Power Opportunities

by Cindy O'Connor (Advanced Biofuels USA) Washington, DC Biomass Finance & Investment Summit, October 13-15 2010: Friday Session Highlights

The physical location of the utility plants determines the biomass –to –power opportunities.

Reed Willis, President, ADAGE (Duke Energy investor) said currently power is being generated with nuclear, coal, gas, and solar energy sources. The Southeastern portion of the United States has abundant natural resources providing significant amounts of biomass fuel stocks for utility plants. Wind and hydro utility plants are being utilized and developed in the Northwest. Utility power facilities are making technological advances to integrate wind into energy production process.

Dominion Resources’ Director of Business Emil Avram said Virginia is the second largest power importer, 2 million megawatts per day. In the future, Virginia power plants will be utilizing offshore wind turbines to generate energy providing significant job opportunities for turbine builders. Dominion owns the largest biomass plant utilizing wood waste as the fuel stock. The facility has 250 suppliers of wood. These suppliers do not want to enter into long term contracts because of the changing fuel prices that increase the cost of production and delivery of the biomass fuel stock to the power plant.

David Gammon, Lead-Renewable Energy Contract Negotiator, Progress Energy Florida said Florida biomass crop producers are able to harvest biomass crops 2 to 3 times per year producing significant and sustainable amounts of biomass fuel stock for Florida utility facilities. Currently, Florida has two viable renewable sources biomass (almost exclusively) and solar sources to provide fuel stock to utility plants.

Nevada Energy, Manager Barbara Doble said Nevada power plants use pine wood from the National Forest and geothermal as base load fuel stocks. The issue all power generating companies share is whether the guaranteed renewable biomass source will be continuous and large enough to produce energy.

William McMullen, Manager of Renewable Development & Green Strategies Georgia Power/A Southern Company stated that natural gas use is being focused on. Biomass crops that can be used to co-fire may be more economical than conversions of plants to total biomass fuel stocks.

According to Bill Hagey, US Department of Agriculture (USDA), Office of Rural Development there are various USDA agencies offer funding sources for the development and commercialization of renewable energy sources.

Federal Rural Development employees found in every state can provide information about the various funding sources and information can be also found at the US Department of Agriculture website: www.usda.gov.

John May, Managing Director, Stern Brothers, discussed bond financing renewable biomass and biofuel enterprises as another source of funding. “By themselves, the bonds might not qualify as investment grade-but if financed in conjunction with the US Department of Agriculture or U.S. Department of Energy loan guarantees, the bonds become investment grade.” May stated that in the current market, bonds are a realistic alternative to bank debt and offer structural advantages that improve equity returns. Illiquidity of bank syndication markets and the disappearance the tax equity market have made tax-exempt and taxable bonds an exciting and independent source of debt capital for renewable enterprises.

The most important issues of the Biomass industry are the cost of producing energy using biomass fuel stock and the consistent delivery and availability of these fuel stocks. Utility facilities compare the access to financing opportunities funding the construction of new biomass facilities versus the costs of converting an existing facility to utilize biomass fuel stock. Another shared concern of all the participants at Friday’s session was whether biomass fuel stock utility facilities will be profitable after the promulgation and implementation of new state and federal regulations of new emission standards which could require utility companies to make structural and processing changes if they are not in compliance.