Date: November 12, 2012
Source: News Room
The developer of a planned $150 million, 50-megawatt biomass plant in Massachusetts has cancelled the project due to a strict new state rule to curb greenhouse gases (GHGs) from bioenergy plants. Russell Biomass LLC sent a letter to Russell, MA on Oct. 23 to "regretfully inform" them that following an analysis of the Massachusetts Department of Energy Resources' (DOER) renewable energy biomass rules, "we must terminate and abandon the project. . . [which] is not technically and economically viable" because of the regulation's mandate that bioenergy have at least a 50 percent efficiency rate to qualify as renewable energy. "The combined electric and thermal power economics of our -- or any -- biomass plant, even a highly efficient combined heat and power plant, would not be price competitive with onshore wind -- the cheapest renewable energy technology," the developer said in its letter.
Some environmental groups are hoping that the DOER biomass rule could serve as a template for EPA as it crafts a lifecycle GHG accounting rule for bioenergy. The new standards in Massachusetts were influenced by a Manomet Center for Conversion Sciences study, published in June 2010, which concluded that biomass energy is not carbon neutral, does not reduce greenhouse gasses, and releases more CO2 for every kilowatt of energy produced than some fossil fuels. The biomass industry contests these findings and argues that burning biomass is essentially "carbon neutral" because plants absorb the same amount of CO2 while growing as is released when burned.
See also: "Massachusetts Tightens Rules on Biomass Plants; Other States Could Follow," (www.wasteinfo.com/news/wbj20120821F.htm), August 17, 2012.
See also: "Massachusetts Plans Restrictions on Energy from Biomass," (www.wasteinfo.com/news/wbj20100921D.htm), September 20, 2010.
LETTER TO RUSSELL, MA
Russell Biomass LLC
101 Hampton Road, Route 97
Pomfret Center, CT 06259
October 23, 2012
Mr. Keith Cortis
Chairman, Board of Selectmen
Town of Russell
65 Main Street
Russell, MA 01071
Dear Mr. Cortis:
With this letter the Russell Biomass sponsors regretfully inform the Town of Russell that, following an analysis of the recent final DOER renewable energy biomass regulations, we must terminate and abandon the project. Under the final DOER regulations the project is not technically and economically viable because of the regulations' required 50-percent efficiency, coupled with the new forest biomass fuel supply limitations. We are unable to modify the plant design as permitted. Some of our main findings are:
The required waste heat supply from the plant would necessitate a significant steam-turbine system redesign to use steam for a thermal application, thus making the air permit and certain other permits we obtained no longer applicable.
It would be difficult to find a year-round thermal energy requirement (space heating only applies for about half the year) from users who could financially guarantee the purchase of the thermal energy for at least 15 years - the minimum time frame required for the electric and thermal power purchase agreements needed in order to finance the plant.
The combined electric and thermal power economics of our - or any- biomass plant, even a highly efficient combined heat and power plant, would not be price competitive with on-shore wind - the cheapest renewable energy technology. It is not clear that a long-term electric and thermal power purchase agreement with viable pricing could be obtained. If it could, strong local and state political support would be essential.
Our wood suppliers informed us that the cost of supplying forest biomass under the new forest waste wood physical and administrative limitations would require an increased fuel delivery cost (which would vary widely depending on the location or source of the forest biomass, and the amount recoverable). They clearly see the regulations as burdensome and do not understand how they can be enforced in practice.
Lastly, potential lenders and equity investors revealed that they have become very risk-averse to financing almost any renewable energy project in Massachusetts because of the regulatory uncertainty vis-a-vis the political arena. Hence it is not clear that we could obtain financing. More broadly, it appears that the financing viability of other projects, including Cape Wind, could be affected by the regulatory climate that has developed. If so, this would be a regrettable - and unnecessary -loss for the state.
Ironically, the calculation of the greenhouse gas (GHG) benefits using the methodology specified by DOER in the final regulations shows that, for the all-electric plant we designed and the fuel supply mix we proposed, the GHG benefits over a 20-year period would be greater than those of a wind or solar project with the same output. However, the required 50-percent efficiency precludes an all-electric biomass plant from qualifying in Massachusetts for renewable energy credits (RECs). The primary focus of the Manomet Study commissioned by DOER and used as the science for the new regulations was, in fact, on GHG impacts/benefits. Unfortunately, the biomass fuel mix assumed in the Manomet study was significantly different from the typical fuel mix of a New England biomass plant, leading to a misleading GHG benefits conclusion now reflected in the final regulations. However, this is now history and the new regulations apply.
Perhaps the most important consideration for the Town of Russell going forward is how the site - now of little value - can be utilized to produce any meaningful tax value. A power project is inherently the type of project with the greatest taxable value.
While we wish we could have responded in an acceptable way to the project opposition that occurred, we would be remiss if we did not express our utmost appreciation to the residents and Town officials of Russell who were willing to work with us to shape and improve the project over time.
Respectfully yours,
(ORIGINAL SIGNED)
William Hull
For the Russell Biomass sponsors
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