Biomass leaders provide state of the industry at int’l event

By Ron Kotrba | February 04, 2020

The 13th Annual International Biomass Conference & Expo drew nearly 900 industry stakeholders to Nashville, Tennessee, where, following an awards ceremony, a roundtable discussion with biomass association leaders covered topics including the state of the industry, tax and renewable energy policies, carbon markets, politics, and the message those in the biomass sector should be espousing to encourage more public support.

 “It’s been a good year and people are doing well,” said Tim Portz, executive director of the Pellet Fuels Institute, about the U.S. pellet industry. While not all the data from last year is in, projections based on the U.S. Energy Information Administration indicate roughly 2.2 million tons of pellet production in 2019. “The year before, 2018, was just shy of 2.1 million tons,” Portz said. “We’re looking at $380 million in total revenue for the bag market compared to $325 million last year and only $280 million just four years ago,” he said. “In four years that’s an additional $100 million in revenue.”

Bob Cleaves, president and CEO of the Biomass Power Association, said, “I wish we could share Tim’s report for our industry. We use wood residues for baseload power, which is challenged from a market and policy standpoint.”  Natural gas prices are low and the cost of installation for solar has come down considerably. “What this has meant for our industry is the smaller plants, under 20 megawatts, have idled. Also, plants have idled in states that are not stepping up to support biomass power.”

Patrick Serfass, executive director of the American Biogas Council, said, “The past year was really good for our industry, but it’s not been without tons of challenges. Competition for electric prices are so tough, and that’s very true for the biogas industry as well. It’s hard to get a power purchase agreement from an electric utility to sell your electricity.” While the electric market has been tough, according to Serfass, the renewable natural gas market has policy and climate change on its side. “On the policy side, the RFS and LCFS are really driving growth,” he said. “Twenty-two projects went online last year, representing $620 million of investment. But this should be way higher. One company left $200 million on the table because the RFS is not working the way it should. If it were, there’d be much more significant growth. But the LCFS is driving a lot of project development. You can get $20 to $90 per MMBtu with the LCFS, which is obviously a huge game changer.”  

Dan Wilson, board chairman of the Biomass Thermal Energy Council, said biomass for clean, efficient heat and combined heat and power for the commercial and industrial sector has been steady. “We remain a niche industry, but our goal is moving beyond ‘steady’ and to really drive this industry,” he said. “We’re seeing a big uptick in interest in carbon, and people putting money on carbon—large businesses spending money addressing carbon.” He said while the industrial and commercial sector has found ways to increase renewable electricity use, they are having a “hard time addressing thermal energy,” Wilson said. State activities and thermal renewable energy credits (RECs), however, are driving some investments on the thermal and combined heat and power side.

Wood pellet inventory is low, Portz said, and that is a concern. “But record production and modest temperatures have allowed us to avoid regional outages and shortages,” he added. “There’s a lot more demand for our product, but we need to better understand how many appliances are out there, that is difficult information to get our arms around. We need to figure out a way moving forward how to get this information, on heating and barbecue appliances.”

The tax extenders legislation included in the budget bills President Trump signed into law Dec. 20, which reinstated a whole host of industry tax provisions that had already either expired or soon would, was discussed at length.

“The biogas industry did well with the end-of-year tax extenders,” Serfass said. “It provided for extension of the production tax credit and the option to take a 30 percent investment tax credit (ITC) for projects that generate electricity from biogas. It was a three-year extension—two years back and one year forward through 2020. We also got the alternative fuel excise tax credit reinstated, which provides 50 cents for every gallon of RNG produced. We didn’t get the 30 percent ITC for RNG. The focus on electricity is only so helpful to certain parts of the industry. But it was a great shining star for the biogas industry to start 2020.”  

Cleaves added two points. “For tax policy to move, we need long-term extensions—five years forward,” he said. Otherwise, it’s “a game for lobbyists and donors” rather than furthering the needs of renewable energy, Cleaves added. “On the whole, it’s been a successful year for us on tax, given the hand dealt to us.”  

The Biomass Thermal Utilization (BTU) Act, however, has not yet been passed. “That’s been our signature thing we’ve been pushing for a while,” Wilson said. “It provides a 30 percent ITC if you use biomass for heat. A year ago, however, we did get authorization for $25 million for the Community Wood Energy and Wood Innovation Program. That will pay for 35 percent of project costs, up to $1 million, or in special cases, up to $1.5 million. That was a big win for getting projects off the ground.”  

With biomass electricity receiving a 30 percent ITC and biomass heat not eligible, Serfass said, “That’s not fair. We need a level playing field.”

Portz said on average it takes 12 years between the time a new piece of legislation is introduced and when it might actually become law. eRINs, or RINs generated from renewable electricity used as transportation fuel in electric vehicles, is the “perfect example” of the patience needed to wait out legislation and regulation, Cleaves said. “This was part of RFS2 in 2007 and here we are in 2020 still talking about it. It’s a bipartisan problem too, because the Obama administration sat on this for years. You can’t pass a law, put your thumb on the scale and exclude one part. Electricity is the poor stepchild of renewable energy.”

What is stopping eRINs from moving forward, according to Serfass, is the Trump administration. “EPA has registrations sitting on its desk that it’s not processing,” he said. “EPA was told by the White House not to process them. That’s how easy this is to solve—the White House can tell EPA to process them.”

Cleaves said with the “tectonic battles between Big Oil and Big Corn over the RFS there is not enough oxygen left in the room for us.”

Next on the agenda was carbon policy. “When done wrong, biomass policy is catnip for the environmental community,” Cleaves said. “The idea of having a debate on stage with the Dogwood Alliance on whether this small-diameter tree from some woodlot in North Carolina is carbon neutral—I’m not interested in that.”

Most of the speakers were in agreement that the carbon market is moving forward with or without U.S. government input. “Buyers of carbon could care less whether the U.S. government says biomass is carbon neutral,” Wilson said as head of Wilson Engineering Services—not as a BTEC representative. “The guys trading for them rely on volunteer, verifiable, third-party certification standards, which generally state that biomass is carbon neutral. They want to know where it’s coming from and how sustainable it is. They don’t take what EPA says at face value. Wood residues used to be a revenue generator for the forest products industry, and now it’s a problem. Keeping forestland as forestland is a huge deal. We need markets for low-value material to keep it from becoming agricultural land, a shopping center or a parking lot.”

To grow, Serfass said the industry must get companies to understand how biomass and biogas benefit them. “For biogas, people care about food waste and the amount of manure generated in the U.S. from 8 billion animals combined,” he said. “One full-size dairy cow produces a full person of manure a day, upward of 150 pounds.”

A rhetorical question was posed by Cleaves to the general public and government at large: “We handle a waste problem, so what would you suggest as an alternative? We avoid an environmental problem with use of wastes and create products out of them that displace dirtier ones. It’s a simple message. Historically, my industry has not talked about waste for a variety of reasons. But in the end, that’s the message.”