NH plants petition for intervention in Laidlaw PPA

By Lisa Gibson | October 07, 2010

As Laidlaw Berlin BioPower LLC works to finalize its power purchase agreement (PPA) for its proposed 70-megawatt biomass power plant in Berlin, N.H., it’s struggling with opposition. Not the usual citizens or environmentalist opposition, but from existing biomass power and steam plants in the region.

That competition is something many market stakeholders and analysts anticipate will increase as more developers unveil plans near each other. Laidlaw’s Berlin project would source 750,000 tons of wood chips per year and hopes to have full approval for its PPA with Public Service of New Hampshire by the end of this year. But not if other plants in the region have anything to say about it.

Petitions for intervention in the PPA have come from Concord Steam Corp., Clean Power Development LLC, Bridgewater Power Co., Pinetree Power Inc., Pinetree Power-Tamworth Inc., Springfield Power LLC, Whitefield Power & Light, and Indeck Energy, all on behalf of their own wood-fired power plants. A petition from the latter six alleges fierce competition for the biomass fuel, saying their own plants have a substantial interest in its availability and pricing, and Laidlaw’s PPA, for which negotiations began in 2007, would directly affect them. It says that the wood price adjustment clause in the PPA affects fuel cost and economic viability of the other plants because it would allow Laidlaw to pay more for biomass.

But Louis Bravakis, vice president of development for Laidlaw, says the pricing complaints stem from misunderstandings. “There is no fuel pass-through adjustment,” he said. That type of adjustment would tie the amount Laidlaw is paid for electricity to the amount Laidlaw pays for fuel and would allow reimbursement for fuel costs. But the actual wood price adjustment ties the price of electricity to the market price public utility and wood-burning power facility Schiller Station in Portsmouth, N.H., pays for biomass, he said. “It doesn’t really affect [other plants] at all,” he said. He did add, though, that he thinks the Berlin Project will actually help other plants in the area, as its qualification for new market tax credits will mean more chippers in the forests and therefore more biomass fuel, which usually brings prices down. “I don’t think they fully understand that aspect of this project,” he said. Some of the existing plants also have their own fuel adjustment clauses, he added.  

Peter Bloomfield, president of Concord Steam Corp., Concord, N.H., and author of a petition for intervention, said technically there is no complete fuel pass-through, but the formulas and equations in the PPA mean Laidlaw will be reimbursed for its fuel costs. He says the plant is too big and Laidlaw’s reach for fuel will extend beyond others’, meaning Laidlaw will be trucking its fuel longer distances and paying higher prices. “It’s definitely going to increase the price of fuel for everyone,” Bloomfield said. “It’s not so much the total tonnage that’s being used. It’s the fact that it’s all in one location and the amount of trucking and transportation and the time involved and all those logistics of getting the material there.”

But the tremendous tonnage for the Berlin Project is a common complaint in other petitions, along with its imposition on the supply already being utilized by the other plants. Bravakis maintains Laidlaw’s plant will not take away supply from others, leaning on a study that found, assuming constant demands of existing plants, more than 1 million additional tons of sustainable biomass feedstock remain in the region each year. “There’s plenty of wood,” Bloomfield said. “It’s the fact that they’re going to have to truck it from150-200 miles to get it to their facility. If the same amount of wood was split amongst three or four plants more appropriately located around the state, then it would not have that kind of effect on fuel pricing.” Putting such a big draw in one location is the problem, he added, and it will increase fuel prices by $5 to $10 per ton.

Petitions have also come from the New England Power Generators Association Inc. and the City of Berlin. Every power plant that sources wood from the region has come forward during Laidlaw’s PPA proceedings, according to Bravakis. “They’ve all intervened,” he said. “I don’t think any have intervened on our behalf.” It’s a process, he cautioned, saying an intervention simply allows them to question the PPA in detail. “It remains to be seen at the end of this whether they really oppose it,” he said, adding that they just need more information to make their own decision.

Power plants have also petitioned to intervene on the grounds that the Berlin Project will be competition for renewable energy credits (RECs), which make such projects economic and clean. Again, Bravakis said the complaint lacks footing, as the Berlin project will not even be eligible for the same class of RECs as existing facilities, based on completion and operation dates. But Bloomfield sees their gripe. “They are even in more of a bind than we are because they’re trying to sell electricity and the price of power is so cheap right now that those guys are just barely surviving,” he said. “They’re just working hand-to-mouth trying to survive until the price of electricity and the price of RECs goes back up.”

Despite all the issues, Bravakis is convinced the plans will proceed as expected and the company simply needs to reach out to the other plants and clear up the misunderstandings. “What we really need to do, and will do, is talk to the other biomass plants and explain that our PPA does not represent a threat to them,” he said. “I think it will be cleared up in the PPA process.” Laidlaw will have opportunities in the PPA proceedings to address the problems with other plants, but Bravakis said he’ll reach out to them individually, as well. The other plants understand that there is enough wood, he said, but might not fully comprehend that Laidlaw’s electricity price is based on the market price of wood, not what it pays for its wood. It’s a good motivation to be competitive in the marketplace, he said.

The Public Utilities Commission expects to issue a final decision on the PPA at the end of December. “We fully expect to be through this by the end of the year and starting construction in the first quarter of next year,” Bravakis said.