(Bio)Mass Confusion

by Jim CarltonThe Wall Street Journal
October 18th, 2010
This biomass plant at a prison in Carson City closed last month after three years of operation because it was adding to the facility's energy bill.

CARSON CITY, Nev.—With all the plants and trees in the world, biomass energy would appear to have boundless potential.

Yet in the U.S., biomass power—generated mainly by burning wood and other plant debris—has run into roadblocks that have stymied its growth.

Here at the Northern Nevada Correctional Center, officials in 2007 built a $7.7 million biomass plant to meet all the power needs of the medium-security prison. But last month, two years after the plant opened, prison officials closed it, citing excessive costs.

"This was a project that was well intentioned, but not well implemented," says Jeff Mohlenkamp, deputy director of support services for the Nevada Department of Corrections.

Across the U.S., other biomass projects have met similar fates.

In Loyalton, Calif., Sierra Pacific Industries Inc. on Aug. 20 announced it would close a 16-megawatt plant, citing federal logging restrictions that made it more difficult to get wood from surrounding forests.

In Gunnison, Colo., Western State College of Colorado in July shelved plans to install a biomass boiler on its campus amid high costs for supply and operation. And in Snowflake, Ariz., a local utility, the Salt River Project, canceled a long-term power-buying contract with a 24-megawatt plant after the plant's operator filed for Chapter 11 bankruptcy protection in July. Another operator has since taken over the facility.

Is It 'Green?'

Biomass power costs more to produce than power derived from fossil fuels, largely because it requires more labor to chip up wood and truck it to plants, industry executives say. They argue that unless the U.S. adopts a national renewable-energy policy requiring utilities to obtain a certain percentage of their power from renewable sources such as biomass, the industry will continue to struggle.

"As long as the biomass industry is forced to compete with coal and natural gas, we will not grow this industry," says Bob Cleaves, chief executive officer of the Biomass Power Association, a trade group based in Portland, Maine.

But also threatening the industry's growth are concerns that biomass power isn't as "green" as supporters say it is.

Backers say biomass power is a carbon-neutral form of energy: The trees that feed biomass plants sequester carbon when they are growing, offsetting the carbon that's released when they are burned for fuel. But some environmental groups have complained that biomass plants spew too much pollution into the air, while others worry that an expansion of biomass energy could lead to excessive logging, claims the industry denies.

Partly driven by those concerns, the Massachusetts Department of Energy Resources on Sept. 17 proposed a rule requiring that biomass incinerators become 60% more efficient to qualify as a renewable resource. If adopted, industry executives say, the rule could cripple biomass production in Massachusetts and spread to other states.

A Brighter Outlook

The outlook for biomass is much brighter in other parts of the world, especially in Europe. The European Union in 2008 issued a directive requiring member nations to produce 20% of their power from renewable sources. That helped fuel biomass demand on a continent that already was leading the world in its use, says Gordon Murray, executive director of the Wood Pellet Association of Canada, a trade group that represents biomass suppliers to Europe. "They started taking energy security seriously back in the '70s," he says.

Biomass production also has been picking up in Asia. Japan, for example, purchased 200,000 tons of wood pellets from Canada last year, compared with one million purchased by European countries, says Mr. Murray. And China's biomass market also is starting to take off, he says, although that country provides most of its own wood and plant materials.

Biomass's star began rising in the U.S. following the 1970s energy crisis, when Congress in 1978 passed a law encouraging adoption of biomass, solar and other forms of alternative energy. The industry got another boost in 2004 when Congress passed the American Jobs Creation Act, which provided five years of production tax credits for biomass generation.

Since 2000, biomass generation on the electrical grid has risen 25% to about 2,500 megawatts, according to the Biomass Power Association. Still, that amounts to only about 1% of the U.S.'s total grid capacity, compared with 3% in Europe.

A Feb. 2 study by Chicago-based Navigant Consulting Inc. projected that 60,000 more biomass jobs would be created in the U.S.—more than four times the current total of 14,000—if Congress required 25% of the nation's electricity to be derived from renewable sources by 2025. A bill that would have set that as a standard was introduced in 2009 but has since been shelved.

In the meantime, the high cost of operating biomass plants continues to constrain the market.

In California, for example, 61 plants were built from 1980 to 1992, when utilities were willing to pay high prices for biomass power because they expected the cost of energy from conventional sources to soar more than it did. When the original contracts began expiring in the late 1990s, prices were reset so low that only 29 plants survived, says Phil Reese, chairman of the California Biomass Energy Alliance.

Hampered by Costs

Transportation costs were a factor in Sierra Pacific's decision to close its biomass plant in the Sierra Nevada mountains. Built in the 1970s and remodeled in the 1990s, the plant was designed to use wood waste from an adjoining sawmill. After Sierra Pacific closed the sawmill in 2001 amid federal restrictions on logging in surrounding national forests, it had to truck in chips and landfill waste from as far as 100 miles away to keep the biomass plant running, says Mark Pawlicki, spokesman for the Redding, Calif.-based company. "It became uneconomic," he says.

At the Northern Nevada Correctional Center, meanwhile, officials hoped the biomass plant they built with help from a federal grant would eventually wipe out their $40,000-a-month power bill and even allow them to profit by selling excess power. Situated at the base of the Sierras, they counted on downed trees and other wood debris from the nearby Lake Tahoe Basin to help power the one-megawatt plant.

But wood turned out to be harder to get than the prison had anticipated, because of the regulatory bureaucracy at Lake Tahoe, says Damon Haycock, the prison's business manager.

Local officials also demanded that the plant install a "baghouse," or extra filtration system, to meet clean-air standards far more rigorous than the federal government's, which raised costs and reduced efficiency, Mr. Mohlenkamp says.

The plant began losing $500,000 a year, leading officials to close it.

Mr. Carlton is a staff reporter in The Wall Street Journal's San Francisco bureau. He can be reached at jim.carlton@wsj.com.

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