March 2012 Biomass Power & Thermal

INSIDE: THE BENEFITS OF SOLID BIOFUEL STANDARDIZATION

March 2012

Feedstock Flow An Oregon Tax Credit Boosts Biomass Supply Page 18

Plus:

Anaerobic Digestion Holds Vast Potential in the U.S. Midwest Page 24

www.biomassmagazine.com

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You’ll Join 1,500 Professionals Focused on Biomass – Be a part of the largest gathering of biomass professionals in North America. The best biomass industry products and sservices will be there.

P Producers Will Be Attending – 33% of 2011 attendees identify themselves as an existing or future biomass producer of power or fuel. You’ll get the perspective of biomass o producers and network with them throughout the event. p Focused Sessions – With five tracks focused on pellets & densified biomass, industrial & commercial thermal energy, biomass power, biogas & landfill gas and advanced biofuels & biobased chemicals, you’ll be able to go in-depth, on the topics that best interest you. b Business Connections – Based on our surveys, attendees connect with the right people and make business deals happen. 94% of all exhibitors and attendees made valuable ccontacts at last year’s event.

Multiple Networking Sessions – As an attendee, you’ll meet people and share your experience, product and/or service multiple times throughout the show. e Conference Social Media Site – You’ll be able to gain access to attendees and ccommunicate with them directly on Biomass Connect, a social media site exclusive only to cconference attendees.

Why W hy Yo Y You ou Should Shou ulld Attend Attend d This Year’s Event

F Food and Drinks are Included – As an attendee of the conference, you’ll enjoy breakfast, lunch and dinner in the expo hall prepared by the renowned chefs at the Colorado Convention Center.

Agenda Now Online

“ “

I think the International Biomass Conference & Expo is the best conference in the world for sharing information and recent trend relative to biomass products.

”

- Chang Oh Hong, Post Doctoral Research Associate, South Dakota State University

The International Biomass Conference & Expo has already had a substantial impact on our business. From contacts that we made at the conference, we have already landed contracts that exceeded our investment in the conference many times over.

”

- Tom Kimmerer, PhD, Moore Ventures LLC

A New Era in Energy: The Future is Growing Contact us today!

866-746-8385 service@bbiinternational.com Follow Us: twitter.com/biomassmagazine

“

The International Biomass Conference & Expo has grown in attendance and exposure. This conference is useful to identify new technologies and players in the market. The sessions are informative and help to get an insight to the future development of fuels and energy through biomass.

Join the discussion | #IBCE12 www.biomassconference.com

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- Christopher Hutson, Director of Business Development and Marketing, Abener North America

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INSIDE ¦

ADVERTISER INDEX¦

MARCH 2012 | VOLUME 6 | ISSUE 3

2012 Algae Biomass Summit

31

2012 Fuel Ethanol Workshop & Expo

30

2012 International Biomass Conference & Expo Amandus Kahl GmbH & Co. KG

2 26

BioEnergy Systems, LLC

28

BRUKS Rockwood

22

Centre for Research and Innovation in the Bio-Economy

23

Continental Biomass Industries, Inc.

12

CPM Roskamp Champion Dieffenbacher

5 13

Fagen Inc.

32

Indeck Power Equipment Co.

21

Jeffrey Rader Corporation

18 ECONOMY Biomass Sustains Business Oregon’s biomass producer and collector tax credit stimulates jobs, the supply chain, and the state’s economy.

By Luke Geiver

24 STUDY The Breadbasket’s Biomass Belt Multiple studies tout the capacity and economic value of anaerobic digestion in the U.S. Midwest.

By Anna Austin

6

KEITH Manufacturing Company

15

Mid-South Engineering Company

29

Pellet Mill Magazine's Pellet Producer Map

FEATURES

7

PRODESA

27

Studium Conferences

16

West Salem Machinery

17

Wolf Material Handling Systems

20

DEPARTMENTS 03 ADVERTISER INDEX 04 EDITOR’S NOTE An Abundance of Opportunities

By Lisa Gibson

06 INDUSTRY EVENTS Biomass Power & Thermal: March 2012, Vol. 6, Issue 3. Biomass Power & Thermal is published monthly. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Application to Mail at Periodicals Postage Rates is Pending at Grand Forks, ND and additional mailing offices. POSTMASTER: Send address changes to Biomass Power & Thermal/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

08 POWER PLATFORM Small Government, Big Changes to Biomass Regulations

By Bob Cleaves

09 THERMAL DYNAMICS Fueling America: The Need for Standardization of Solid Biofuels

By Joshua Holmes

10 ENERGY REVIEW Economic Analysis of a Mobile Indirect Biomass Liquefaction System

By John P. Hurley

11 LEGAL PERSPECTIVE Arranging Debt Financing for Biomass Projects

By David Benson

12 BUSINESS BRIEFS 14 EVENT COVERAGE 17 FIRED UP 30 MARKETPLACE

MARCH 2012 | BIOMASS POWER & THERMAL 3

¦EDITOR’S NOTE

An Abundance of Opportunities

LISA GIBSON Editor lgibson@bbiinternational.com

The word sustainability has broad definitions, but many of us in the bioenergy industry associate it with ensuring the health and vitality of the feedstock source after a biomass harvest, whether it’s cropland, forestland, forestry residue, or another resource.

It certainly isn’t a new concern and is a vital aspect of every biomass project’s feasibility study. But sustainability doesn’t only revolve around feedstock. A successful, well-planned and well-executed biomass project can bring economic sustainability, also. A biomass producer and collector tax credit in Oregon has done just that, and therefore, has been extended through 2018. The credit has created jobs along the woody biomass supply chain, enhanced forest health, and brought revenue to the state. A research team discovered the positive impacts while analyzing the economy with and without the tax credit. The results are clear.

Read more about it in a feature article by Associate Editor Luke Geiver, beginning on page 18.

Elsewhere, however, the biomass industry is facing the loss of many incentives supporting development. In February, leaders from the Biomass Power Association, National Hydropower Association and Geothermal Energy Association wrote a letter to Congress urgently calling for an extension of the renewable energy production tax credit, set to expire in 2013. Don’t wait until the end of this year to extend it, they say, as it would mean the loss of an entire construction season for all their industries. I like to see renewables groups pushing together for support and I see it happening more, as concern about incentives mounts among all of us. The federal government could take a lesson from Oregon.

As the state has shown, the biomass industry has an abundance of advantages to offer citizens, communities, states and even entire regions. The U.S. Midwest, for example, could benefit from existing resources in agriculture and purpose-grown biomass. In another feature in this issue, beginning on page 24, Associate Editor Anna Austin explores and expands upon existing research into the region’s cropland biomass resources and their ability to jumpstart a robust bioenergy industry that stimulates the economy.

The biomass industry is continually discovering more potential to flourish and make a difference in the U.S. domestic energy sector. This issue of Biomass Power & Thermal highlights just a few intriguing opportunities in a growing list that includes feedstock options, as well as expansions of successful financial incentives.

For more news, information and perspective, visit www.biomassmagazine.com Contributors

BOB CLEAVES

In this month’s Power Platform column, Bob Cleaves, president and CEO of the Biomass Power Association, delves into the consequences of a federal policy that would classify certain types of woody biomass as waste instead of fuel. The implications are far-reaching and would affect not just the biomass industry, but also the environment.

4 BIOMASS POWER & THERMAL | MARCH 2012

DAVID BENSON

David Benson, partner at law firm Stoel Rives LLP, writes in the Legal Perspective column about the complexity of obtaining debt financing for biomass projects.

He addresses the different sources, details their characteristics, and shares advice for developers on how to simplify the process and increase the probability of success.

EDITORIAL EDITOR Lisa Gibson lgibson@bbiinternational.com ASSOCIATE EDITORS Anna Austin aaustin@bbiinternational.com Luke Geiver lgeiver@bbiinternational.com COPY EDITOR Jan Tellmann jtellmann@bbiinternational.com

ONE SOURCE, ONE AUTOMATED SOLUTION

ART ART DIRECTOR Jaci Satterlund jsatterlund@bbiinternational.com

You can count on our knowledge and experience for a cost-effective, integrated solution for your green energy plant.

GRAPHIC DESIGNER Elizabeth Burslie bburslie@bbiinternational.com

PUBLISHING & SALES

Our engineered system combines quality equipment and process management to control product flow from start to finish, with automated solutions for: • Grinding • Conditioning • Pelleting • Cooling • Sifting

CHAIRMAN Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com VICE PRESIDENT Tom Bryan tbryan@bbiinternational.com VICE PRESIDENT, SALES & MARKETING Matthew Spoor mspoor@bbiinternational.com

Call us today, and hold us accountable for your cost-effective solution.

EXECUTIVE ACCOUNT MANAGER Howard Brockhouse hbrockhouse@bbiinternational.com SENIOR ACCOUNT MANAGER Jeremy Hanson jhanson@bbiinternational.com ACCOUNT MANAGERS Marty Steen msteen@bbiinternational.com Bob Brown bbrown@bbiinternational.com Andrea Anderson aanderson@bbiinternational.com Dave Austin daustin@bbiinternational.com CIRCULATION MANAGER Jessica Beaudry jbeaudry@bbiinternational.com ADVERTISING COORDINATOR Marla DeFoe mdefoe@bbiinternational.com

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SENIOR MARKETING MANAGER John Nelson jnelson@bbiinternational.com

Subscriptions Biomass Power & Thermal is free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside of the United States, Canada and Mexico. To subscribe, visit www.BiomassMagazine.com or you can send your mailing address and payment (checks made out to BBI International) to Biomass Power & Thermal Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to (701) 746-5367. Back Issues & Reprints Select back issues are available for $3.95 each, plus shipping.

Article reprints are also available for a fee. For more information, contact us at (701) 746-8385 or service@bbiinternational.com. Advertising Biomass Power & Thermal provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Biomass Power & Thermal advertising opportunities, please contact us at (701) 746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. Send to Biomass Power & Thermal Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or e-mail to lgibson@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

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MARCH 2012 | BIOMASS POWER & THERMAL 5

¦INDUSTRY EVENTS

U N I T E D STATES STATES UNITED

CCANADA ANADA

SSWEDEN WEDEN

Material Handling for Biomass Power Generation

Rocky Mountain Forest Restoration & Bioenergy Summit April 16, 2012 Colorado Convention Center Denver, Colorado The Rocky Mountain Forest Restoration & Bioenergy Summit will bring together diverse thought leaders to share their perspective on forestry, bioenergy and public policy. This one-day, content-rich event will outline the current condition of the Rocky Mountain forests and detail how the health of these forests can be improved through collaborative efforts with bioenergy producers.

(866) 746-8385 www.biomassconference.com

International Biomass Conference & Expo April 16-19, 2012

Biomass Handling Equipment Complete Engineered Systems Pulverized Coal Boiler Conversions CFB Boiler Feed Systems Silos Wood Hogs Disc Screens Open Storage Closed Storage Truck Dumpers

Chain Conveyors Bucket Elevators Screw Conveyors Screw Reclaimers Pneumatic Conveying

USA: CORPORATE HEADQUARTERS Jeffrey Rader Corporation 398 Willis Road Woodruff, SC, USA 29388 Phone: 864.476.7523 Fax: 864.476.7510

SWEDEN: Stockholm Jeffrey Rader AB Domnarvsgatan 11, 163 53 SPÅNGA Stockholm, Sweden Phone: +46 8 56 47 57 47 7 Fax: +46 8 56 47 57 48

CANADA: Montreal, Quebec Jeffrey Rader Canada 2350 Place Trans-Canadienne Dorval, Quebec H9P 2X5 Canada Phone: 514.822.2660 Fax: 514.822.2699

CANADA: Vancouver, BC C Jeffrey Rader Canada Unit 2, 62 Fawcett Road Coquitlam, BC V3K 6V5 Canada Phone: 604.299.0241 Fax: 604.299.1491

www.jeffreyrader.com 6 BIOMASS POWER & THERMAL | MARCH 2012

Colorado Convention Center Denver, Colorado A New Era in Energy: The Future is Growing Organized by BBI International and coproduced by Biomass Power & Thermal and Biorefining Magazine, this event brings current and future producers of bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. Register today for the world’s premier educational and networking junction for all biomass industries.

(866) 746-8385 www.biomassconference.com

International Fuel Ethanol Workshop & Expo June 4-7, 2012 Minneapolis Convention Center Minneapolis, Minnesota Evolution Through Innovation Now in its 28th year, the FEW provides the ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-to-business environment. As the largest, longest-running ethanol conference in the world, the FEW is renowned for its superb programming—powered by Ethanol Producer Magazine. Early bird registration rates expire April 23.

(866) 746-8385 www.fuelethanolworkshop.com

International Biorefining Conference & Trade Show November 27-29, 2012 Hilton Americas - Houston Houston, Texas Organized by BBI International and produced by Biorefining Magazine, the International Biorefining Conference & Trade Show brings together agricultural, forestry, waste, and petrochemical professionals to explore the value-added opportunities awaiting them and their organizations within the quickly maturing biorefining industry. Contact a knowledgeable account representative to reserve booth space now.

(866) 746-8385 www.biorefiningconference.com

Announcing Pellet Mill Magazine’s 2012 Pellet Producer Map

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Contact us today to learn how you can reach 8,000 Pellet and Biomass industry professionals.

Deadline: Monday, March 26th, 2012 Pellet Mill Magazine’s Pellet Producer Map is the only comprehensive and up-to-date producer map created today. This map identifies and documents current pellet producers in the U.S. and Canada.

Listings include name of facility, city, state, feedstock and capacity.

Pellet Producer Map is distributed to: • Biomass Power & Thermal subscribers • Pellet Mill Magazine subscribers • All International Biomass Conference & Expo attendees. (In attendee bags) • Pellet mill owners, operators & management

Become a part of the premier trade journal for the biomass industry.

Contact an account representative today.

866-746-8385 | service@bbiinternational.com | www.biomassmagazine.com/pellets

COMING SOON!

¦POWER PLATFORM

Small Government, Big Changes to Biomass Regulations

BY BOB CLEAVES

In the age of abundant calls for smaller government and consolidated agencies, you’d think that government agencies would be heeding the calls to scale back and cut unnecessary regulations that would cost significant time and funding for very little gain.

The U.S. EPA is proposing to do just the opposite.

The agency has refused to classify the waste wood used to generate biomass energy as a fuel, its historical classification. Instead, EPA may treat the material as a waste in the same category of material that goes to a landfill.

This seemingly small change has surprisingly large implications for our industry. It would render unusable several types of traditionally accepted materials used for biomass power generation. Materials like urban waste wood, such as pallets after they are used for construction, would be redirected from biomass facilities to landfills. This would cause the twin consequences of clogging up the precious little space in landfills, and the release of methane gas, a greenhouse gas that’s 25 times more harmful than carbon dioxide, into the atmosphere.

Using these materials in the generation of biomass energy, however, allows for the capture of harmful gases along with the support of hundreds of jobs and the production of thousands of megawatts of renewable energy. This is why many states, including Maine, New York and California, recognize urban waste wood and other similar materials as fuel instead of waste,

8 BIOMASS POWER & THERMAL | MARCH 2012

allowing the biomass industry to use them to their full potential.

If the EPA were to codify this regulation, besides limiting the materials available to the biomass industry, the agency would be required to devote untold hundreds of hours of manpower to monitor and enforce these rules.

The EPA is, by any measurement, currently stretched thin. Administrator Lisa Jackson has repeatedly acknowledged that the agency does not have the resources available to properly monitor the process of hydraulic fracturing if the EPA finds it contaminates drinking water. “There is no EPA setup that allows us to oversee each and every well that’s drilled,” she said during a February teleconference hosted by the American Sustainable Business Council, before going on to say that the agency will continue to focus on the “big things.”

The re-regulation of certain types of wood waste as waste instead of fuel is a small thing that will reap very little in terms of improved air or water quality, at the big cost of removing a sizable portion of fuel used by the biomass industry.

Author: Bob Cleaves President and CEO, Biomass Power Association www.USABiomass.org

THERMAL DYNAMICSÂŚ

Fueling America: The Need for Standardization of Solid Biofuels

BY JOSHUA HOLMES

According to the U.S. DOE’s Billion-Ton Update, more than 500 million tons of solid biomass waste is produced in the U.S. annually, and that figure is estimated to expand beyond 1 billion tons by 2022.

As the country's energy policy evolves and the biomass waste industry continues to grow, solid biofuels will become a staple of American energy. In order for that to occur, biomass energy projects need to continue to be successful, and that requires consideration of several factors.

A successful biomass project should have a well-defined fuel source, as well as properly sized and selected equipment. The primary focus at the front end of every solid biofuels project is identifying the potential feedstock source. Currently, potential biomass sources must always be verified through chemical and physical analysis to ensure the fuel is compatible with the thermal equipment for achieving complete combustion and emissions compliance. Solid biofuels can vary in calorific value, moisture content, and ash content based on class, region, and climate, even on a load-to-load basis. Because of these variations, equipment performance and project economics are at risk of degradation without a proper, uniform definition for solid biofuels.

Currently, domestic feedstock sources are defined by thermal conversion equipment suppliers or by solid biofuel producers, generally according to different terms. Equipment suppliers are typically focused on a performance-basis, while solid biofuel producers are focused on a value-basis. Unfortunately, this leads to inconsistencies in definitions of solid biofuel quality, quantity, and value, creating uncertainty for both users

and providers. This uncertainty creates a level of perceived risk from an economic perspective.

At the Pacific West Biomass Conference & Trade Show in January, much discussion was focused on the standardization of a solid biofuels definition, with the goal of achieving commoditization. A proper definition on a standardized basis is needed to ensure that the user is able to source compatible solid biofuels of a consistent quality, quantity, and value. The European Commission has developed and implemented standardized specifications and classes for solid biofuels according to CEN/TC 335. They eliminate the ambiguity between users and providers for sourcing and selling solid biofuels. Establishing solid biofuels as commoditized products also allows for a consistent basis of trade throughout the U.S., independent of localized factors.

Universities and energy policy advocates are the most likely candidates to implement this level of standardization in the U.S. The development of terms and definitions is the first step, followed by advocacy and acceptance by the industry. When this occurs, consumers and producers will have a standardized basis to fulfill performance and value requirements while mitigating biomass energy project risks. This will accelerate the growth of the solid biofuel market and effectively utilize the 1 billion tons of solid biomass waste estimated to be produced annually over the next 10 years.

Author: Joshua Holmes Vice President for System Development Alternative Energy Solutions International, Inc. BTEC member www.aesintl.net

MARCH 2012 | BIOMASS POWER & THERMAL 9

ÂŚENERGY REVIEW

Economic Analysis of a Mobile Indirect Biomass Liquefaction System

BY JOHN P. HURLEY

As I described in my February Biomass Power & Thermal column, the Energy & Environmental Research Center has built and tested a mobile system for converting wood waste into liquid products such as methanol. The system uses a unique gasifier to convert the wood waste into synthesis gas, which is cleaned, compressed, and converted in a reactor to a variety of possible liquid products. We have initially focused on the production of methanol because it can easily be reformed into hydrogen to power fuel cells to make electricity at remote sites distanced from the biomass resource.

The gasifier was specifically designed by the EERC to handle wet wood waste with up to 40 percent moisture, thereby eliminating the need to separately dry the wood before gasification, as most commercial gasification units require.

We have found that the maximum wood feed rate of the system is largely determined by the size of the compressor that can fit on the trailer. The production rate of methanol is greatly enhanced at higher pressures, so we compress the gas to 900 pounds per square inch (psi) before it enters the gas-to-liquids reactor. Given our current configuration, we are limited to converting approximately 160 standard cubic feet per minute of gas into methanol liquids using a system mounted on a single trailer. This is the amount of gas produced from gasifying approximately 200 pounds of wet wood per hour. The information gained from recent tests was used to validate a computer model of the system based on gas production rates and composition. Using the model results, engineers have come up with several improvements to the system that should increase the hydrogen content of the syngas and permit production rates as high as 100 gallons per ton.

At that production rate, the 300,000 tons of unused forest residue produced each year in Minnesota could be converted to approximately 30 million gallons of methanol.

A fuel cell uses approximately 1 gallon of methanol to create 5 kilowatt hours (kWh) of electricity, so 30 million gallons of methanol could be used to create 150,000 megawatt hours (MWh) of electricity by fuel cell in remote locations.

The system is primarily operated via computer control that can be largely automated. This method, rather than continuous monitoring, significantly reduces labor requirements of handling upset conditions such as plugged filters.

10 BIOMASS POWER & THERMAL | MARCH 2012

Therefore, the system is designed for sites where labor is available sporadically from other ongoing activities, significantly reducing labor costs.

One of the biggest operating costs comes with the electricity needed to run the compressor. One way to reduce this cost is to use excess syngas to fire a modified generator to produce the electricity on-site, a technology that the EERC is currently developing in cooperation with a generator manufacturer. If we assume that electricity is purchased at 7 cents per kWh, then production cost predictions are $1.58 per gallon using grid power, but as low as 95 cents per gallon if electricity is produced using excess syngas. Both of these costs are based on using wood waste that has no commercial value and is, therefore, free of charge.

In addition to the operating cost, the capital cost of the system must be paid off. We estimate that the cost of the trailer-mounted system with an additional syngas-fired generator and other improvements to increase the production rate to 100 gallons per ton would be approximately $1 million. Assuming an 8 percent interest rate and payoff of the loan over 10 years, the combined capital and operating cost is approximately $3.05 per gallon using grid power, or $2.59 per gallon using onboard generation. These costs are considerably higher than the current delivered cost of methanol created from natural gas, especially because of the low cost of shale gas being produced. In some situations, however, even these relatively high costs are acceptable. This is particularly true of operation in remote locations where the delivered cost of methanol may be very high, or in cases where additional incentives, such as carbon credits, are available. More commonly, production of other liquids, such as Fischer–Tropsch fuels or other organic chemicals, might be more economical at this time than methanol, at least at the scale of a mobile system mounted on a single trailer.

Project funding is provided by Xcel Energy customers through a grant from the Renewable Development Fund and the U.S. DOE. Author: John P. Hurley Senior Research Advisor, EERC (701) 777-5159 jhurley@undeerc.org

LEGAL PERSPECTIVE¦

Arranging Debt Financing for Biomass Projects

BY DAVID BENSON

Biomass facilities are a great source of renewable energy, but difficult to develop and finance. Despite their typically smaller size (usually 50 MW or less) their complexity is significant. Developers must secure financeable fuel supply agreements outlining appropriate term, quantity, quality and price with a creditworthy counterparty, obtain a financeable power purchase agreement, and have a thick skin and capital to get through permitting and the inevitable public relations fight.

With a financeable project, the developer can arrange permanent financing, which can be leveraged or unleveraged.

Recently, most transactions have been leveraged to achieve the desired returns, with the equity component comprising 30 to 50 percent of the total capital costs. The balance of the permanent financing will be debt financed.

Debt financing for biomass projects will usually be structured as non-recourse, relying on the project’s assets as collateral and looking to the cash flow for debt service. The lenders will generally not have any recourse to the sponsor or other equity investors. Leverage at the project level will increase equity returns but also require higher tax equity returns and increase complexity. For these reasons, sponsors will sometimes seek to instead back lever projects.

Banks or institutional lenders are the primary sources of debt financing. The lenders active in the space are experienced and knowledgeable, which is critical to successfully completing the debt financing. For banks, tenors have recently lengthened to as long as 15 to 17 years for a fully amortizing loan. Institutional lenders will typically be longer term, 20 to 25 years, but with higher rates.

Perhaps the cheapest debt, but easily the most time consuming, is commercial loans backed by the USDA and the U.S. DOE. The terms of the loan will be determined by the commercial bank but the loan guaranty increases the credit support and reduces the interest rate. Significant downsides to these loan guaranty programs include the time, upfront cost and complexity of getting them completed.

Other federal financing programs include tax-exempt bonds, such as Clean Renewable Energy Bonds, bonds backed by loan guaranties under USDA Section 9003, and New Market Tax Credits. The CREBS have not been widely used for various reasons. The Section 9003 program was not overly successful because lenders did not offer terms to successfully finance projects. As recently revised, Section 9003

loan guaranties can backstop bonds issued by the company in a private placement to qualified buyers. The funds are then held by a commercial bank as a trustee.

The New Market Tax Credits program allocates tax credits to community development organizations (CDO) to create jobs and economic development in low-income areas.

An investor will fund a developer’s project through the CDO in return for federal tax credits at 39 percent. A CDO typically allocates about $10 million to a single project. If a project needs $50 million of NMTCs, the sponsor will need five CDOs to participate. NMTC transactions are very complex and a developer needs to work with experienced advisors.

Equipment vendors and EPC (engineering, procurement and construction) contractors may also be a good source of permanent financing, as well as equipment or construction financing. Foreign vendors generally will have limited or no ability to use federal tax credits, so may not be a source of tax equity. Vendors who invest in the project may also have concerns about accounting treatment for various items, including consolidation of the project liabilities and the character and timing of revenue recognition.

Finally, debt financing through private placements of debt or bond offerings are gaining attention with very low rates and terms of 25 to 30 years. Securitization is difficult to combine with tax equity in a single project, so is more efficient for financing a portfolio of projects to achieve the scale needed by institutional investors.

With so much complexity, it can be nearly impossible to determine the right approach (or approaches) and to secure that particular type of financing. A sponsor would be well-served to focus on a few key items. First, make sure your project is solid and financeable. Second, understand your financial model and what cost of capital is needed to make the project successful. Finally, make sure your advisors and counterparties have experience with the development of biomass projects and the financial structures being proposed. Development and financing of a biomass project is complex. Don’t reinvent the wheel unless it is your only option, or there is a very real and significant benefit.

Author: David Benson Partner, Stoel Rives LLP (206) 817-7470 dlbenson@stoel.com

MARCH 2012 | BIOMASS POWER & THERMAL 11

Business Briefs PEOPLE, PRODUCTS & PARTNERSHIPS

Negroponte joins Greenwood Energy as senior advisor John Negroponte, former U.S. Deputy Secretary of State and Ambassador to the United Nations, has joined Greenwood Energy as senior advisor and board member. Negroponte will provide strategic advice and senior counsel to Greenwood’s management as it continues to build its platform of investment in both the renewable fuel and clean energy sectors.

Founded to repurpose industrial waste into fuel pellets, Greenwood Energy is now a growing provider in North America that incorporates a clean power division deploying the latest research in fuel cell technology and energy efficiency.

Negroponte also serves as an advisor to the board for the Libra Group, Greenwood’s parent company, which has additional renewable energy interests in EuroEnergy, the European operator of wind farms, solar parks and biomass plants.

DP CleanTech expands into the UK biomass market DP CleanTech has set up an office in Wolverhampton, U.K., the company’s fourth strategic investment in the past year.

The announcement follows the recent opening of new offices and manufacturing facilities in Thailand and Poland. DP CleanTech executives expect the U.K. market to be promising because of its energy initiatives, including the Renewable Heat Incentive.

The world's largest straw-fired plant, a 38 MW facility in Ely, Cambridgeshire, uses DP CleanTech’s highly acclaimed straw-firing technology.

Founded in 2004, DP CleanTech designs, engineers, manufactures and commissions biomass and waste-to-energy power plants, providing complete solutions for turning waste materials into clean energy.

Partners introduce gasification burner system Green Clean Heat of Newton, N.H., and Nord Energy Systems, Rowayton, Conn., have formed a joint venture aimed at providing economical, high-efficiency heating systems. The Nord Energy Gasification Burner is a heating unit designed to replace oil burners in furnaces and boilers used in residential and small commercial applications. Green Clean Heat will provide ready-to-install systems for schools, municipal buildings, hospitals, condominiums, and other commercial and industrial facilities.

The Gasification Burner uses computer controls to ensure the high-efficiency gasification and combustion of biomass resources such as pellets and wood chips.

Nord Energy Systems is a research and development organization specializing in high-efficiency biomass-based heating and power generating systems.

The Biofuel Experts CBI’s Magnum Force 6400 — one of the most productive and reliable drum chippers in the global market today. With the push of a button, the unique clamshell design of the hog box provides service-friendly full access for easy daily maintenance. Available in stationary, wheel or track-mounted versions, the 6400 produces a uniform, precision chip from 4-30 mm, suitable for biofuel, pulp and wood pellet production. With throughput of up to 200 tons per hour... it will challenge even the best loader operators!

To learn more about CBI’s rugged line of chippers, grinders, shredders and flails, please call 603-382-0556 or visit us online at www.cbi-inc.com.

Continental Biomass Industries, Inc. 22 Whittier Street, Newton, New Hampshire 03858 USA

BUSINESS BRIEFS¦

Ineos Bio chooses AMEC as license support engineering firm Ineos Bio has selected AMEC, an international engineering company, to be its global license support engineering firm, as the company rolls out its licensing program for the Ineos Bio advanced bioenergy technology. AMEC will work with Ineos Bio to develop engineering design packages for future Ineos Bio technology licensees.

AMEC was selected following an extensive evaluation process of qualified global engineering firms.

The value of the contract has not been announced.

AMEC’s experience in similar markets, along with its dedication to sustainable business practices makes it an ideal license support contractor for Ineos Bio. The two companies are currently working together on the first commercial-scale facility to deploy the waste-to-bioenergy technology.

Slated to come online this year, the Indian

River BioEnergy Center in Vero Beach, Fla., will produce 8 million gallons of advanced cellulosic ethanol and 6 MW of power, while providing a solution for dealing with waste that would normally end up in a landfill.

Koller joins Vecoplan as sales, project management engineer Lars Koller joined Vecoplan LLC, a size-reduction technology supplier, as a sales and project management engineer. Koller earned an advanced mechanical Lars Koller engineering degree from the University of Hannover, Germany, in 2001. He brings 10 years of engineering experience from Focke & Co., having first worked in research and

development at Focke’s Verden, Germany, headquarters and then as manager of the design department at Focke’s Whitsett, N.C., facility.

Koller’s responsibilities will include coordinating the design and development of turnkey shredding systems for the recycling sector. He will also oversee the manufacturing and implementation of his projects once the engineering phase has been completed, ensuring continuous quality control throughout the process.

SHARE YOUR INDUSTRY NEWS: To be included in the Business Briefs, send information (including photos and logos, if available) to Industry Briefs, Biomass Power & Thermal, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also e-mail information to lgibson@bbiinternational.com.

Please include your name and telephone number in all correspondence.

MARCH 2012 | BIOMASS POWER & THERMAL 13

EventCoverage Golden Gate to Biomass The third annual Pacific West Biomass Conference & Trade Show, held in San Francisco, Calif., Jan. 16-18, welcomed more than 400 attendees, exhibitors, and presenters to examine and discuss the region’s most pressing, innovative and challenging bioenergy industry issues and ideas.

Keynote speaker Mike Hart, CEO of Sierra Energy, emphasized the versatility of synthesis gas, and how the value of biomass—particularly municipal solid waste (MSW)— will drastically increase over the next couple decades.

Hart believes trash will become a valuable commodity as waste conversion technologies become widely implemented. “As time goes on, we’re going to be buying it and making competitive bids,” he said, adding SETTING THE STAGE: Speakers on the first general session panel at the Pacific West Biomass that feedstock flexibility will become Conference & Trade Show included (from left) moderator Bruce Manchester, McGladrey Capital Markets a dominant factor in the biomass LLC; John May, Stern Brothers & Co.; Bill Lemon, Source Capital Group, Inc.; and Paul Tantillo, Enervation energy industry.

Advisors LLC. Hart sees a game changer on the Different types of investors are attracted to different aspects horizon for feedstock procurement: suppliers paying biomass plants of a project, Lemon said, and developers need to understand the to take feedstock, rather than plants paying for their feedstock. As type of investor they are hoping to attract. trash becomes a commodity, companies that designed technologies John May, managing director at Stern Brothers and Co., said based on a feedstock that was typically free will realize the econom- biomass projects have traditionally trailed behind other types ics of their system no longer work. “This is because people with of renewable energy when it comes to access to capital. He also waste products will realize they have another product to sell,” Hart noted that the bond market is wide open. “It’s a trillion dollar marsaid. “My expectation is that we will see this with garbage.” ket, it’s very liquid…and it’s a market that will look at projects that He added that landfills will become a thing of the past because are trying to get technology commercialized…or trying to scale,” of carbon taxes, decreased tip fees, and local governments looking he said. for ways to turn waste into a profit, or reduce the substantial cost of New biomass conversion and energy projects will seem risky paying somebody to take it. in an investor’s eyes, May continued. “The issue is how can we atFollowing Hart, the event’s opening general session featured tack the perception of that risk, and how do we mitigate that risk,” current trends in financing mechanisms. The panel, titled “Finanche said. “I think [the reason] we haven’t gotten that many biomass ing Strategies for Biomass-Derived, Energy, Fuels and Chemicals projects financed with non-recourse debt and with traditional instiin a Tight Capital Market,” offered three very different investment tutional equity is we haven’t solved that problem yet.” perspectives.

Paul Tantillo, managing member of Enervation Advisors Bill Lemon, senior vice president of investment banking at LLC, an alternative energy advisor and investor, finished up the Source Capital Group Inc., opened the discussion by noting that general session describing several ways a company can better biomass developers are in the big leagues now, and attracting invest- attract interest from his firm and other potential investors. Most ment will be a challenge. “There is a lot of money at stake, lots of important, he said developers should be bold, but also honest and technical complications, political complications, and lots of headdirect. “Don’t sugarcoat the situation,” he said. “If the pitch seems aches,” he said. “But, the basics of good projects haven’t changed.” too good to be true, it probably is.” —Anna Austin and Erin Voegele

14 BIOMASS POWER & THERMAL | MARCH 2012

PHOTO: DAVID BUSH, DAVID BUSH PHOTOGRAPHY

More than 400 professionals gather to talk biomass in The City by the Bay

EVENTCOVERAGE¦

Digesting California’s Innovations The Pacific West Biomass Conference & Trade Show kicked off with a day-long tour that featured one of the country’s most innovative wastewater treatment plants, as well as an on-farm dairy digester power system.

The city of Santa Rosa’s 21-million-gallon-per-day Laguna Wastewater Treatment Plant houses four 1-milliongallon anaerobic digesters that turn sludge separated from the water into Class B biosolids, which are sent across the street to a facility that transforms them into Class A biosolids.

Biogas emitted from the digesters is blended to a 50/50 mix with utility gas and is then combusted by three 0.8 MW engines to create a total of one-third of the plant’s electrical needs. A combined-heat- and-power (CHP) project to replace the existing facility is expected to be finished in December, according to Cayden Hare, city intern and aquatic biomass program lead researcher.

When that’s complete, four 1 MW engine generators will 'TANK' IT ALL IN: Anaerobic digesters at the Laguna Wastewater Treatment burn the biogas, and serve as standby power for the plant’s Plant process aquatic biomass, waste glycerol and winery leaves. needs during utility outages.

Uniquely, some of the plant’s wastewaster is diverted to With financial aid from the USDA and other government grant six channelized wetlands, where aquatic biomass cleans the programs, the digester has been operating 24/7 for the past two years, water, absorbs pollutants and is allowed to grow. The biomass according to digester technician Douglas Williams. Biogas emitted is eventually transferred into two 1,500-gallon vertical anaerobic from the digester is captured through a gas collection system and then digesters, Hare explained, along with waste glycerol and winery piped to a gas handling system. leaves. The resulting biogas is used to power small cars used on Electricity produced from the biogas via an 80 kilowatt generasite, according to Hare, and the remaining half of the materials are tor powers the farm’s operations, and excess electricity is purchased composted. by electric utility PG&E, according to Williams. “There’s also a CHP At the Giacomini Dairy at Point Reyes, Calif., tour attendees viewed an ambient temperature, covered lagoon anaerobic digester aspect, as heat coming off the engine is used in the dairy and creamery,” he said. —Anna Austin fueled with manure from about 350 cows.

MARCH 2012 | BIOMASS POWER & THERMAL 15

PHOTO: LISA GIBSON, BBI INTERNATIONAL

Conference tour visits wastewater treatment plant, dairy digester

¦EVENTCOVERAGE

The Carbon Conversation During the second-day plenary session of the Pacific West Biomass Conference & Trade Show in San Francisco, the hot topic was wood-to-energy carbon cycles and their relation to forest management.

Session speakers presented and dissected new research and the most recent studies relating to biomass carbon accounting, including a widely publicized report authored by Oregon State University College of Forestry researchers. Titled “Regional Carbon Dioxide Implications of Forest Bioenergy Production,” the study concluded that production of bioenergy from U.S. West Coast forests would increase carbon dioxide emissions from 2 to 14 percent over the next 20 years.

Although not one of the study’s authors, presenter Norm Johnson of the same OSU department discussed the findings, pointing out that the key phrase repeated in media headlines was “biofuel production will increase carbon emissions.” “Now that’s counter to what has been said and understood by many people, including myself,” he said.

Emphasizing that the report was performed by top-of-theline scientists, Johnson referred to it as “wild science,” but pointed out that if researchers didn’t do studies such as this one, people might still believe the sun revolved around the earth. “It opens up new avenues of thought, analysis and controversy, and it’s not going away soon; it’s not easily dismissed, it’s a serious work.”

However, the report has a very specific point of view and looks out only 20 years—a very short time—and the outcome would be different if it accounted for a more expanded time period, according to Johnson. “They don’t look at the longer

16 BIOMASS POWER & THERMAL | MARCH 2012

PHOTO: LISA GIBSON, BBI INTERNATIONAL

Conference general session hashes out bioenergy carbon cycles

EXPLAINING EMISSIONS: Norm Johnson speaks to conference attendees about wood-to-energy carbon cycles.

picture, and it’s hard to argue that harvesting trees reduces carbon emissions in the short term, unless it results in greatly reduced mortality in the forests due to various threats, or through selection of building materials,” he said. “We have shorter-term goals that are important, and we’re headed into a pretty intense period of discussion of what all this means.”

Joining Johnson on the panel were Jeremy Fried, research forester at the U.S. Forest Service Pacific Northwest Research Station, and Bill Stewart, cooperative extension specialist at the University of California–Berkeley. —Anna Austin

PHOTO: FIRST BIOMASS

FiredUp

STOCKPILE UTILIZATION: First Biomass will help supply global bioenergy demand, using sugarcane bagasse stockpiles.

Global Supply Chain Glory First Biomass aims to be a global pellet supplier

Ask Markus Huwener, former investment banker from Germany and now CEO of First Climate, which biomass feedstock is best for power or thermal energy generation, and he might first tell you about First Biomass.

First Climate is a carbon funds management company that has invested roughly $309 million in emissions reductions technology.

Formed through an Australian joint venture between First Climate and Spar Capital, First Biomass functions as an equity investment fund

for pelletizing operations across the world.

It doesn’t matter what the biomass resource is. Huwener and his team at First Biomass plan to utilize pellets made from woody residues, straw, bagasse, rice husks and more.

The team views Europe as a great offtake user for its pellet supply, but the company also sees China and Japan as intriguing users. The company’s strategic investment plan is simple: acquire, hold, manage and trade interests in a portfolio of biomass pellet production invest-

ments, all while keeping that portfolio diversified by source biomass, end contractor and geographic location of plants. The company has already made investments in nearly 25 different pellet projects.

“Over the past several years, we have seen a lot of biomass projects that failed due to one or another factor,” Huwener says. “The main challenge for First Biomass would be to originate good, solid projects.” That means projects located in favorable areas that provide a sufficient source of feedstock and can be managed by a proven professional team.

Although Huwener’s perspective on creating a successful biomass feedstock supply chain seems to meet the status quo of project development in the biomass sector, his company’s willingness to overcome the unfavorable capital market conditions might be the main lesson.

Unfortunately, the pellet plants that would have supplied the demand of Japan or Europe are off the table. Instead, First Biomass has embarked on a $100 million pre-initial public offering (IPO) funding round that will net long-term investors a cash flow return per year of 15 percent, in advance of another shot at a successful IPO slated for 2013. Given that, and the upward trajectory of pellet demand in Europe, the company’s unwillingness to test the IPO market to raise the equity needed to create a global supply chain might be a good thing after all. —Luke Geiver

MARCH 2012 | BIOMASS POWER & THERMAL 17

¦ECONOMY

PROFITABLE ALTERNATIVE: Oregon's BPC tax credit encourages the use of biomass slash piles that would have otherwise been burned.

PHOTO: EMILY JANE DAVIS, ECOSYSTEM WORKFORCE PROGRAM

18 BIOMASS POWER & THERMAL | MARCH 2012

ECONOMY¦

Biomass Sustains Business

A producer and collector tax credit has improved economic sustainability in Oregon’s biomass industry

BY LUKE GEIVER

MARCH 2012 | BIOMASS POWER & THERMAL 19

¦ECONOMY

PHOTO: EMILY JANE DAVIS, ECOSYSTEM WORKFORCE PROGRAM

W

hen Cassandra Moseley, Max Nielsen-Pincus and the rest of the team at the University of Oregon’s Ecosystem Workforce Program (EWP) first started their research into the impact of the state’s biomass producer and collector (BPC) tax credit, they had no preconceived notions about whether the tax credit was good or bad.

They were interested in forest restoration and intrigued by the job creation possibility of a policy linked to biomass.

And they planned on letting Oregon’s policymakers decide whether a tax credit that awards $10 for every green ton of biomass delivered to a bioenergy facility is worth the money. But that was before the team, which also included members of Oregon’s Department of Energy, finished its work.

Now, after biomass prices and regression analyses simulating a world without the BPC tax credit, the results are in. And they show that policymakers have an easy choice to make.

HITTING THE TARGET: The BPC tax credit created biomass handling jobs in an otherwise slow 2010 economy.

20 BIOMASS POWER & THERMAL | MARCH 2012

ECONOMY¦

PHOTO: EMILY JANE DAVIS, ECOSYSTEM WORKFORCE PROGRAM

The Main Effects

Clean Forest Floor: The program incentivizes the removal of usable biomass from forest thinning.

When the team’s research into the BPC began in 2010, the amount of information on wood fuels markets and the economics of biomass collection was limited. With the help of Forest2Market, the research team compiled biomass prices dating back 10 years. The team also reached out to several Oregon businesses to discuss the typical costs of transporting woody biomass. “We tried to tie any information that did exist to this particular tax credit program,” Pincus says.

Moseley says the researchers had three goals. First, determine if the tax credit was actually financially affecting the wood fuels market. Second, find out if the amount of biomass flowing into the market was fluctuating in relation to the BPC. And the third goal was centered around employment. “We wanted to know whether it was creating or sustaining any new or existing jobs,” Moseley says.

To satisfy those goals, the team created a statistical model based on figures from before the tax credit, and then projected

the fuels market pricing out through 2010 as if the credit had never been implemented. The team then compared the fuel pricing market conditions, with the tax credit versus without.

“What we’ve learned is that the tax credit has helped prices in the wood fuels market,” Pincus says. But that’s only one of the ways the BPC tax credit impacted the state. The research by EWP shows the tax program also supported between 32 and 73 jobs in 2010. The most powerful testament to the effectiveness of a state’s commitment to the growth and health of the biomass industry, however, is a comparison between what the state got out of the BPC and what it had to put in.

At an average price of $30.11 per bone dry ton (BDT), the EWP calculated that 10,000 BDT equaled $301,000, and would be eligible for $178,571 in tax credits. That means 10,000 BDT of forest biomass delivered to a bioenergy facility would support roughly 5.1 jobs, $241,000 in wages and benefits, and $868,000 in direct, indirect and induced economic activity. The

¦ECONOMY net tax expenditure cost of all that is about $143,000.

“This study shows that the tax credit seems to have generated more economic activity than it cost the state in tax,” Moseley says. “The credit moderated the price increases that would have happened otherwise in the wood fuels market caused by the economic downturn.”

As of March 2011, 52 biomass providers and collectors requested nearly $6.6 mil-

lion in BPC tax credits for fiscal year 2010, according to the research. About $5.5 million of that came from more than 550,000 green tons of woody biomass. The average amount request by each participant totaled $126,931.

And it all came at a time of economic peril, during a downturn in the housing market that was creating typical sources used in bioenergy facilities, such as hog fuel and mill residues. But, decreased demand didn’t fol-

low the decrease in supply. “The demand (for biomass) was still growing because of our increasing demands for renewable energy,” Pincus says.

That steady demand for biomass-based energy was still met, however, through the BPC tax credit. “The credit essentially allowed for material to come out of the woods that wouldn’t have otherwise come out,” Pincus says. “It allowed that demand for wood fuels and for biomass to continue to grow.” And without the BPC in place, the price of woody biomass would have climbed during the decrease in supply. According to the research, the price of forest biomass would have been roughly 20 percent higher, and availability would have been 20 to 30 percent lower.

The BPC not only helped sustain the health of the woody biomass supply market in Oregon, but it also helped sustain jobs involved with the handling, delivering and storing of biomass.

The Future Matt Krumenauer is a senior policy analyst at the Oregon Department of Energy and an integral part of the BPC program. Krumenauer helped assemble the team tasked with analyzing the effectiveness of the tax program. He was responsible for implementing and evaluating the BPC credit, and says he’s happy it has been extended through 2018.

But a few changes have been made to the program. Most notably, the unit of measure will switch from green tons to bone dry tons. In addition, stand alone electricity generation sites will not be eligible for the tax credit because combined-heat-and-power facilities will better assist in reaching energy efficiency standards set by the state’s DOE. Krumenauer doesn’t envision any more changes to the BPC program in the foreseeable future, and is already working to implement more biomass programs. In the past, his department created incentives for equipment, or for the construction of new facilities, and now is looking at the biomass

22 BIOMASS POWER & THERMAL | MARCH 2012

ECONOMY¦ PHOTO: EMILY JANE DAVIS, ECOSYSTEM WORKFORCE PROGRAM

And, of course, the program will lower the BPC and the wood fuels market is more than merely Oregon’s carbon impact through the next casual, they say. They both be- six years of its life. But in today’s economic lieve the market would have climate that starts and ends with jobs, the been far less fiscally successful research by the EWP team proves bioenergy and sustainable over the past affects more than just greenhouse gas emisfew years without such a pro- sions. “(Legislators) extended it through two gram in place.

For Krumenauer, the other legislative cycles and I believe they choice to extend the program wanted to provide some assurance that the through 2018 was an easy one, program would be available so that they given its economic sustainabil- could begin to make business decisions,” ity factor. “I think that being a Krumenauer says. resource-dependant state, the SEE FOR YOURSELF: The results and products of the Author: Luke Geiver BPC program are clear, and are showcased during Oregon value that the legislature saw Associate Editor, Biomass Power & Thermal biomass resource tours. lgeiver@bbiinternational.com was really being able to put log(701) 738-4944 gers and farmers and contracthermal sector. “We are starting to focus more on our heating sector…trying to pro- tors back to work creating energy products vide our communities with access to bio- when the markets for housing products, timmass heating systems,” he says. That could ber and forest products markets declined.” include applications in hospitals, schools, commercial buildings and prisons.

But for now, Krumenauer and his EWP team have one more major task at hand: analyze the effect of the BPC tax credit in the absence of major federal incentives such as the USDA’s Biomass Crop Assistance Program. Although the analysis is still in progress, Moseley, Pincus and Krumenauer agree that the information for 2010, and most likely for 2011, shows that the BPC undoubtedly stimulates at least one important part of the market: the middle of the supply chain. “It doesn’t stimulate final demand, it doesn’t create more consumers, nor is it directly building any new production facilities,” Moseley says. “But it could potentially create some investment decisions.”

“One could imagine that with a time horizon of this particular tax credit being here until 2018, that that might impact somebody’s investment decision about building new biomass capacity,” Pincus adds.

And, although neither Pincus nor The forest industry isn’t just about lumber and paper. Wood can also be integrated Moseley believe the BPC program is a silseamlessly into products that are currently made using oil and other fossil fuels. ver bullet, they do adamantly argue for its From car parts to children’s toys, bio-composite materials are helping reshape strengths. The link the team found between the forest-based economy in Northern Ontario. By pairing forest materials with innovation, we create a brighter future for the North. CRIBE is proud to support bio-composite research and the commercialization of new uses for wood in Ontario.

Have an idea you’re looking to grow? Find out more at www.cribe.ca MARCH 2012 | BIOMASS POWER & THERMAL 23

ÂŚSTUDY

GROUNDWORK: A local farmer and researchers from Better Environmental Solutions, University of Wisconsin Soil Center, and Veridian Homes, work on a 2010 hybrid willow biomass restoration project in Wisconsin.

PHOTO: BRETT HULSEY, BETTER ENVIRONMENTAL SOLUTIONS

24 BIOMASS POWER & THERMAL | MARCH 2012

STUDY¦

The

Breadbasket’s

Biomass Belt The U.S. Midwest has considerable biomass energy potential, specifically in anaerobic digestion applications

BY ANNA AUSTIN

MARCH 2012 | BIOMASS POWER & THERMAL 25

¦STUDY

A

ny visitor to the U.S. Midwest knows the region isn’t recognized for glorious mountains, warm weather or sunshine. It does, however, boast flat and vast plains, long stretches of grassland, and highly productive soil that allows it to produce an abundance of cereal crops.

To some, that’s an ideal scenario for growing a biomass energy industry off the back end, and numerous industry experts are busy examining its viability and potential impacts. As with any emerging industry, there are some hurdles and kinks to be worked out, but there is a resounding consensus across the scientific community that Midwestern crop residue and cattle manure will play a key role in the region’s energy future. In fact, one recently published, USDAbacked study has determined that biomass alone could be used to produce 15 percent of the Midwest’s electricity.

Total Resources (10 dry tons) 6

Crop residues Corn stover

106

Soy straw

64

Wheat straw

7

Total

177

(%) Source 2000-’09 production averages, USDA NASS: Data and Statistics

81

Animal manure

2007 Census of Agriculture

Cattle

14

Swine

4

Poultry

2

Total

20

9

Forestry residue

11

5

Milbrandt, 2005

Primary mill residue

5

2

Milbrandt, 2005

Assessing Availability

Urban wood residue

6

3

Milbrandt, 2005

Authored by Chicago Council Senior Energy Fellow Steve Brick, “Harnessing the

TOTAL

219

SOURCE: CHICAGO COUNCIL

KAHL Wood Pelleting Plants

Quality worldwide.

AMANDUS KAHL USA Corporation · 380 Winkler Drive, Suite 400, Alpharetta · GA 30004-0736 Phone: 770-521-1021 · Fax: 770-521-1022 · sales@amanduskahlusa.com AMANDUS KAHL GmbH & Co. KG · SARJ Equipment Corp., Mr. Rick B. MacArthur · 29 Golfview Blvd., Bradford, Ontario L3Z 2A6 Phone: 001-905-778-0073 · Fax: 001-905-778-9613 · rbmacarthur@sympatico.ca · www.akahl.us

STUDY¦ Power of Biomass Residuals: Opportunities and Challenges for Midwestern Renewable Energy,” considers the residual biomass resources of Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin. According to Brick, the year-long project involved three main steps: preparing a regional residual biomass inventory, developing an assessment of conversion technology readiness and economics, and developing policy recommendations.

Brick’s team arrived at its 15 percent of Midwest electricity conclusion by converting all of the “ecologically available” biomass to dry tons, and assuming it would be burned in a conventional boiler. “This was done as a way to bind the total contribution that waste biomass could make to the regional energy supply,” he says. “We made the same calculation for ethanol—assuming all the biomass could be converted—and found that 17 percent of the region’s gasoline could be supplied from biomass residuals.”

Residuals included in the report are crop residues such as corn stover, soy straw and

wheat straw; manure from swine, cattle and poultry; and forestry, primary mill and urban wood residues. While corn stover leads in crop residue annual tonnage at 106 million tons, Brick points out that the logistics of harvesting, transporting and storing corn stover are uncertain. “Questions of how much stover can reasonably be harvested, who harvests it, how it is harvested, transported and stored must be addressed before a new industry can take shape,” he says. “We really need to consider biomass energy systems in the broader landscape contexts in which they occur. The land-water-air-wildlife-human interactions are critical, but easy to ignore if we just consider biomass as an energy resource. A landscape perspective is harder to develop and talk about, but it is really the key to smart protection and utilization of our natural resources.”

Unlike corn stover-to-energy, the anaerobic digestion (AD) industry isn’t new to the Midwest. It is already home to 52 of the nation’s 169 anaerobic digestion projects.

Most of the digesters are concentrated in the

Total Resources

SOURCE: CHICAGO COUNCIL

ÂŚSTUDY Great Lakes region, but the 33 MW contribution to the regional energy supply represents only 2 percent of installed capacity, according to Brick. He believes AD energy potential in the region is huge, even though it is challenging financially. “AD is a great technology for producing biogas for use in a turbine, as a boiler fuel or a transport fuel, and a great way to reduce water quality issues associated with manure and reduce greenhouse gases,â€? he says.

Digest This Currently, only about 1 percent of the Midwest’s cattle manure is managed through AD, and digesters are found on only about 10 percent of the region’s largest dairy farms.

With the amount of manure available—14 million tons annually from cattle alone— why aren’t more farms taking advantage of the technology?

“I think there are several reasons why,� says Amanda Bilek, energy policy specialist for the Great Plains Institute. “Part has to do with public policy, and a lack of support in individual Midwestern states with the exception of Wisconsin, which is a shining example for the other states. They’ve done better than any other Midwestern state by collaborating with state agencies, producer associations, and leveraging some federal resources.�

Wisconsin has the most AD installations of any state in the country, according to Bilek.

Outside of the policy realm, another factor influencing the lack of AD projects is the low price of electricity in the Midwest. “A lot of AD project models have been focused on producing renewable electricity, but we have very low prices in the Midwest overall,�

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28 BIOMASS POWER & THERMAL | MARCH 2012

Bilek says. And because digesters require a large capital investment, selling the resulting electricity in the Midwest often means a really slow return on investment. “That deters some producers from installing them, because they can be viewed as risky.�

Biogas doesn’t have to be converted into electricity, though. “It can also be a source of renewable natural gas, cleaned and compressed even further into vehicle fuel, or a source of heat in certain applications,�

Bilek says. “If we only look at one specific type of utilization of the gas—electricity— we’ve really missed the potential opportunities there.�

The low price of natural gas is another AD hindrance, according to Brett Hulsey, president of Better Environmental Solutions, a Wisconsin-based clean energy consulting, managing and development firm. “Actually the biggest challenge in the biomass industry as a whole is cheap natural gas—at $2.50 per 1,000 cubic feet, energy efficiency barely pays,� he says. “I’ve been at this 30 years, and I’ve seen natural gas take a wild swing.�

Hulsey, also a Wisconsin state legislator and a Dane County board supervisor, served as an environmental policy advisor to President Bill Clinton and worked as an environmental educator and advocate for the Sierra Club for 17 years. He says another hurdle to widespread AD implementation and bioenergy in the Midwest is getting farmers to understand the right amount of manure and corn stover to put back on the soil. “Any more than [the right amount] results in more phosphorus and nitrogen pollution,� he explains. “This industry is also part of a water quality improvement solution, because when you have too much manure or corn stover on the soil it creates water pollution.�

For corn stover, the adequate amount is about two to three tons per acre, but manure varies greatly. “A lot of soil in Wisconsin doesn’t need more phosphorous,� he says. “So if we can separate the biomass out of the manure—we’re actually doing that at a pilot project in Dane County, separating liquids from solids after the digester—the phosphorus stays with the solids.�

Despite the aforementioned challenges, AD development has continued in the Mid-

STUDY¦ west over the past decade. “It’s been slowly increasing, and there are some real pockets of significant development, especially in Wisconsin,” Bilek says, adding that since the state is home to a manufacturer of an AD technology, producers likely feel more secure having someone in their backyard to help with trouble shooting.

In Minnesota, the number of digesters has tripled from two to six in the past 10 years, and other states in the region have had similar increases. “That’s not a huge amount of growth, but its growth,” Bilek says. “We just have to get the technology over the first hump. Creating more incentives would help, at least to get over the initial economic barrier until more systems are installed and the costs come down.”

And once the AD and biomass energy industry in general gets rolling in the Midwest, so will new employment.

associated with biomass energy is reduced flooding. “Many studies have shown that planting cropland to grasslands, combined with other conservation practices, can reduce 100-year floods by 15 to 39 percent,” Hulsey says. “Basically we’re restoring nature’s sponges—especially with grassy biomass—that store flood waters. I worked on a project two years ago where we restored a wetland area to both willow and switchgrass, and the idea there was to build more of nature’s sponges to reduce water on the land and in people’s living rooms.”

While biomass is usually snubbed in the energy portions of typical presidential speeches touting home-grown fossil fuels and other sources of renewable energy, it plays a significant role in the country’s current energy portfolio. “Biomass is the Rodney Dangerfield of energy—‘we don’t get

no respect,’” Hulsey jokes. “But really if you look at (U.S.) DOE numbers, it equals about half of renewable energy in the U.S., especially here in the Midwest and in Wisconsin.”

Overall, the important thing to remember about biomass fuel is that it’s all local.

“You have to set your fuel systems up according to what you have,” Hulsey adds. “For example, Iowa has corn stover. The Saudi Arabia of America is right here in the Midwest, and while we aren’t a Silicon Valley, we can be the ‘cellulose prairie,’ making our own energy and jobs.”

Author: Anna Austin Associate Editor, Biomass Power & Thermal aaustin@bbiinternational.com (701) 751-2756

Jobs and More A 2007 analysis performed by Hulsey found that the industry could create 100,000 jobs in Wisconsin alone. “We import $12.5 billion worth of energy per year for coal, oil, and natural gas, and conservatively that’s a 100,000 job loss,” he explains. That’s following a rule of thumb for one job created for every $50,000 kept in state. “Iowa generates about 39 million tons of corn stover per year, and they are already generating more fuel than they use,” Hulsey says. “They import about 20 million tons of coal a year, but they could be almost energy self-sufficient.

That’s one of the next studies I may do, an energy import study, to really hone in on the jobs question.”

Speaking of replacing coal, in another of Hulsey’s 20 studies, “Cellulose Prairie: Biomass Fuel Potential in Wisconsin and the Midwest,” he found 12 Midwestern states generate up to 231 million tons of potential excess biomass each year that could replace 37 percent of the coal used in those states, 50 percent in Wisconsin alone. Hulsey says coal replacement conversions were a key concept in the study, as previous data hadn’t put information in such real terms.

Moving on to other Midwestern benefits, one environmental advantage not often MARCH 2012 | BIOMASS POWER & THERMAL 29

¦MARKETPLACE Biomass Power & Thermal Marketplace

Biomass Pollution Control

UltraCat Catalyst Filter • One system for PM, NOx , SO2 , HCl, dioxins, mercury, or any combination • Low temp NOx control by catalyst-embedded filters eliminates costly SCR • Project up to 100 MW

Call or email today...

Ph: 801.294.5422 kevin.moss@tri-mer.com ®

Since 1960

Tri-Mer

CORPORATION

Factory Headquarters: Owosso, Michigan

Ceramic Fiber Filter, New 10 ft. Length

Controls NOx at 350°F to 700°F Particulate to less than 0.001 lbs/MMBtu

®

6 in.

Meets Boiler & CISWI MACT Regulations

www.tri-mer.com © 2011 Tri-Mer Corp.

DO IT RIGHT THE FIRST TIME

Projects don’t have room for error.

www.bbiinternational.com 866-746-8385 | service@bbiinternational.com

30 BIOMASS POWER & THERMAL | MARCH 2012