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Incentivizing Renewable Energy in the US Northeast

The Northeast U.S. with its massive demands for heat and electricity is cognizant of the need to adapt ambitious and smart renewable energy policies. Roles, definitions and perceptions of biomass energy, however, differ from state to state.
By Anna Austin
With its bitterly cold winters and extremely dense population, it's no surprise that the Northeast U.S. leads the nation in electricity consumption. Heavily dependent on fossil fuels (nearly all of which are imported from other regions) for heat, power and transportation needs, renewable portfolio standard (RPS) implementation has been a no-brainer for Northeastern states. In fact, all nine states in the region have an RPS.

With no national RPS, all state mandates have been designed and implemented differently, many of which have been increased, amended or extended in recent years. Though all have a common goal of embracing cleaner, natively produced energy, there is little parity amongst Northeastern state policies in terms of what is eligible for RPS credit, what kinds of materials are considered renewable biomass resources or acceptable conversion technologies and emissions limits.

For example, while Connecticut's statute clearly defines and encourages renewable sources of biomass including urban wood, wood waste, forest thinnings and municipal solid waste (MSW), Maine excludes MSW from its extended RPS and New York and Vermont ban it completely. Massachusetts, however, encourages MSW combustion yet has a suspension in place on woody biomass technologies. Connecticut allows cogeneration/combined-heat-and-power (CHP) facilities over 1 megawatt (MW) to receive credit, but Maine has scrapped it from the new portion of its RPS.

While some states in the Northeast may be attracting new project proposals with an RPS, they must be careful not to drive them away with frequent changes, extreme restrictions or inconsistent policies.

Structuring and Amending Policies

Maine is in the lead with RPS implementation, which is fitting, as the Pine Tree State spends the most on energy per person in the country, yet is among the lowest in the U.S. for net electricity generation, according to the U.S. DOE.

The state originally set its RPS at 30 percent. In 2006, the goal was raised to 40 percent by 2017, adding restrictions on MSW and CHP while providing a 1.5 multiplier credit for community-based energy projects. Mitchell Tannenbaum, deputy general counsel of the Maine Public Utilities Commission, explains that the new provisions were decided upon by the legislature, as are most states' RPS policies, although there are a few exceptions. Out of the 29 states that have an RPS, New York and Arizona's were established through regulatory channels, and Colorado, Missouri and Washington's were ballot initiatives.

Though the Southeast is commonly touted as the country's vast forest resource, Maine actually possesses the highest wood and wood waste power generation capacity in the U.S., and is home to nine wood-fired power plants that, according to the Biomass Power Association, create $108 million a year in economic value and employ 1,000 people in direct operations, wood harvesting and other jobs. Maine's forest resources are carefully monitored through the use of biomass harvesting guidelines. Developed over several years and released in 2010 as a result of a collaborative effort of the Maine Forest Service, University of Maine and the Trust to Conserve Northeast Forestlands, the guidelines serve to avoid negative impacts of biomass removal.

Like Maine, which Tannenbaum says is currently on track to meet its goals, many other states have made changes to their initial RPS targets and language over the years by increasing them, dividing existing and new renewable energy generation into different classes and adding restrictions. Most recently, Massachusetts has proposed changes to its RPS (15 percent by 2020) that may have resounding negative implications for woody biomass power development not just in Massachusetts, but in neighboring states as well.

In November, the state Department of Energy Resources suspended consideration of biomass plants utilizing wood under the RPS and commissioned a study to analyze the sustainability of woody biomass. The study was completed in June, and DOER is working to amend the RPS based on the study's results and additional stakeholder input (see page 18).

Though amendments can often be good, ever-changing RPS policies and renewable energy credit (REC) price variability can be troublesome for developers. Since RPS policies created by a state legislature or regulatory authority are subject to legislative and regulatory changes such as those made in Maine, Massachusetts and elsewhere, uncertainty tends to deter financers of new (and always capital intensive) renewable energy projects. A few states have caught on, however, and have developed ways to prevent that.

To date, RPS implementation experience demonstrates that industry growth has been most successful in states such as Texas, where developers have been able to secure long-term contracts with creditworthy counterparties. In fact, several U.S. states require utilities to sign long-term power purchase contracts with eligible renewable energy developers, but it hasn't caught on in the Northeast, where renewable energy resources are typically most expensive.

Rhode Island is an exception. The state now requires electric distribution companies to solicit proposals and enter into long-term contracts for capacity, energy, and attributes from new (not yet operational) renewable energy facilities. In New York, the New York State Energy Research and Development Authority purchases generation from energy producers through auction, requests for proposals or standard offer contracts of varying lengths, through an RPS fund gathered from a surcharge on each kilowatt-hour sold by the state's investor-owned utilities.

Beyond the RPS, Northeast biomass energy/biofuel operations will be potentially impacted by additional programs and policies, such as the Regional Greenhouse Gas Initiative and the Biomass Crop Assistance Program.


Other Policies, Programs and Pushes

All Northeast states are part of the RGGI, which went into effect Jan. 1, 2009, and serves to reduce global warming pollution from power plants through implementation of a carbon cap-and-trade system. RGGI caps the overall level of CO2 emissions allowed from power plants-including those powered by biomass-in the region starting in 2009 and continuing through 2014, then reduces emissions 2.5 percent annually over the next four years to achieve a 10 percent reduction by 2019.

RGGI rules consider sustainably harvested biomass as carbon neutral when it is converted into electricity, thus allowing power producers to exclude those emissions from their GHG reduction obligations. It's up to each individual state, however, to form its own definition of what constitutes "sustainably harvested" biomass. Currently, New York is experiencing controversy in terms of what the New York State Department of Environmental Conservation has defined as sustainably harvested biomass in its draft policy, compared with how it is defined in the state's RPS policy. One potentially problematic requirement is proof that forest biomass-including mill waste and construction and demolition debris-originated in forests which are under a permanent easement or other legal arrangement guaranteeing that the land will remain in forest for at least 100 years. This would place a large portion of the state's wood supply in the ineligible category, or cost owners of private forests that supply urban and other wood waste to spend upwards of $20,000 on land arrangements.

Aside from woody biomass and its varying definitions, the Northeast may have the potential to accommodate purpose-grown energy crops, and programs such as BCAP may help facilitate that. Maine currently has the second-most eligible material contracts, second only to Alabama. New Hampshire and New York each have more than 100 contracts.

Dan Conable, director of the New York Biomass Energy Alliance and partner in consulting firm Cato Analytics LLC, believes embracing closed-loop supply chains in the Northeast may be the key to growth of the region's bioenergy industry. "With the sustainability of forest biomass under fire, particularly as a source of renewable electricity, biopower producers are taking another look at closed-loop systems," Conable says. "The question for biopower producers in the Northeast is whether the agricultural land base in this part of the country can support production of cropped biomass on a scale sufficient to support even a 25 MW power plant. I think that the answer is yes, but with some important qualifiers." Conable says he doesn't think BCAP is likely to be the "silver bullet" for cropped biomass that most mid- to large-scale bioenergy project developers seem to be waiting for though, even if the final version includes the tilt toward cropped biomass that many people have predicted.
Further supporting evidence that some Northeastern states are adequate candidates for biomass crops, NYSERDA recently released a renewable fuel road map for New York that indicates there is potentially 1 million to 1.68 million acres of nonforest land that can be used for bioenergy feedstock production in the state. The road map also finds that New York-derived biomass could support four large-scale centralized lignocellulosic biorefineries (with capacity ranging from 90 MMgy to 354 MMgy) or up to 24 smaller capacity (60 MMgy) biorefineries.

Aside from energy crops, there is a new push in the Northeast to adapt a renewable thermal energy policy. The Biomass Thermal Energy Council, Alliance for Green Heat, Maine Pellet Fuels Association, New York Biomass Energy Alliance, and Pellet Fuels Institute have recently made public a proposal that calls for 25 percent of all thermal energy requirements in the Northeast to be met with renewable energy resources by the year 2025. The groups are currently working to form a northeast regional biomass thermal policy action team with representation from seven states, to monitor and influence state and local legislation, regulation and other policy matters that will impact the advancement of the goal.

The groups are using a study, "Heating the Northeast With Renewable Biomass: A Vision for 2025," as a basis of support for the proposal, which found that conversion to thermal biomass will displace more than 1.14 billion gallons of oil annually by 2025, representing more than 20 percent of all heating oil consumed in the Northeast, and by 2025 the Northeast would have more than $4.5 billion new dollars per year injected into the regional economy, according to the study.

From varying state policies and definitions to pushes for woody biomass power, dedicated energy crops, MSW utilization and thermal energy, it seems the only consensus in the Northeast is that there is a desperate need for renewable, domestically produced energy. Though a federal RPS might provide some parity, it has been on the distant horizon for several years and passage in the near future doesn't look promising. So for now, it's every state for itself.


Anna Austin is a Biomass Magazine associate editor. Reach her at aaustin@bbiinternational.com or (701) 738-4968.
 

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