Maine Committee Torn on Whether to Prop Up Biomass Energy

– by Tux Turkel, March 30, 2016, Portland Press Herald

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Photo: Industcards.com

It’s a simple question without an easy answer: If Maine electricity customers pay millions of dollars more on their bills, can they be guaranteed that the state’s six biomass energy plants, which have become crucial to retaining hundreds of forest industry jobs, will keep running?

The legislative committee that handles energy issues tried to nail down that commitment on Wednesday from representatives of the plants, but it recessed for the day before getting sufficient clarity. Members are scheduled to take up the matter again Thursday, but their hard line of questioning foreshadowed the misgivings that many lawmakers may have about putting ratepayers’ money at risk without more assurances.

Biomass power plants burn waste wood and low-grade forest products to generate roughly one-quarter of the state’s electricity. But they are inefficient and costly to operate.

What to do about the state’s struggling biomass industry presents a dilemma for both lawmakers and the administration of Gov. Paul LePage.

Earlier this week, a line of loggers and truck drivers stepped to the Energy, Utilities and Technology committee podium and pleaded with lawmakers to save their livelihoods. And there was plenty of concern expressed for the plight of a workforce that, perhaps next to lobster fishermen, best represents the Maine tradition of wresting a living from the state’s natural resources.

But empathy was tempered with the knowledge that raising electricity rates to prop up biomass could have unintended consequences for other employers, including paper mills and large manufacturers, including Bath Iron Works. Projections vary widely, but based on the latest proposal, customers could pay anywhere from $8 million to $41 million more a year. That could translate on the high side to an increase of $2.29 a month on a typical home bill, according to Central Maine Power, and up to $54,613 a month for a large business.

With time running out in the legislative session, the challenge will be finding a sweet spot, with enough money to keep the biomass industry alive in some form to benefit loggers and sawmills, but not so much that it creates an unreasonable burden for electricity customers.

Recently, the combination of low natural gas prices and the loss of renewable energy credits in Massachusetts led Covanta Energy to announce that it would shut down its two Maine biomass plants. The company said Wednesday that the plant in Jonesboro went off line this week, but the one in West Enfield was still operating for now. Four other plants owned by ReEnergy Holdings LLC are at risk of closing if similar credits in Connecticut are phased out starting in 2018. They are in Ashland, Fort Fairfield, Stratton and Livermore Falls.

Facing opposition from utilities, manufacturers and the state’s public advocate, the industry has been scaling back its request. On Wednesday, the two plant owners presented a proposal for the Public Utilities Commission to conduct bids and negotiate five-year contracts for 120 megawatts of power, enough to serve roughly 110,000 homes. The proposal also indicated that the PUC would aim to determine both the cost and benefit to ratepayers, and maximize the overall benefit to the state.

In exchange, ReEnergy vowed to spend $514 million on wood purchases, operating expenses, maintenance and capital investments. The company also said it was pursuing opportunities to increase efficiency by finding partners to use waste heat from the plant, mentioning a potential $100 million deal in Aroostook County.

“Two or three years from now, I see this as a great investment for the state of Maine,” said Mark Thibodeau, a facilities manager for ReEnergy.

But committee members like independent Rep. Larry Dunphy of Embden weren’t satisfied. He wanted assurances that the plants would stay open while the PUC conducted any bid process, which could take up to a year. Thibodeau said ReEnergy plans to keep operating. But Ken Nydam, a business manager for Covanta, said he couldn’t answer that question.

Reflecting concerns shared by LePage, two Republican members of the committee said the amount of power sought in the contracts and the time periods were simply too much. Rep. Beth O’Connor, R-Berwick and Sen. Garrett Mason, R-Androscoggin, said five years was too long and 120 megawatts was more than they could support. They also pushed for annual reviews by the PUC, to determine if the companies were following through with their investment promises.

The loss of the biomass market would be a huge blow to the logging industry, according to the Professional Logging Contractors of Maine. The group has estimated that the complete loss of the biomass industry in Maine would cost 400 jobs at the biomass plants and at least another 900 related jobs. Total economic losses to the state from the losses could be as high as $300 million per year, the group says.

But Joel Harrington, representing CMP, said that adding $130,000 to $540,000 a year to the bills of large customers could force some of them to lay off workers or shut their doors. Harrington also noted that biomass plants have received more than $2.6 billion in ratepayer subsidies over the past 20 years, and despite that, half of them have closed since the 1990s because they weren’t competitive.

As lawmakers consider what to do, their task will be further complicated by differing assessments of future energy markets.

Plant owners say they need help now as a “bridge,” to keep them operating at a time when natural gas, used for power generation in New England, is priced low. Both Thibodeau and Nydam said power will be worth more when gas prices inevitably go up again.

But Tony Buxton, a lawyer representing industrial energy users, noted that wholesale natural gas prices on commodity markets are remaining low, even five years out. He also said the market prices for renewable power were volatile, and that the plant’s value projections might not pan out.

As the session ended, a final note of skepticism came from Tim Schneider, the public advocate. He noted the emphasis on saving jobs. If this is a jobs bill, he asked, why should ratepayers shoulder the risk.

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