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Distributed Power in Dairy Country America’s Dairy Cows are Doing Their Part to Generate Renewable Energy

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The future of fuel Transforming corn and other grains into biofuels is a major industry today. But what about tomorrow? The future of biofuels will also rely on the next generation of raw materials – biomass. At Novozymes we’re taking a fresh look at all types of biomass, and © Novozymes A /S · Customer Communications · No. 2007-35469-02

considering how we can turn it into something useful. And you know what? Corn cobs and wheat straw are just the beginning. Who knows what other types of waste we can transform into fuel? Novozymes is the world leader in bioinnovation. Together with customers across a broad array of industries we create tomorrow’s industrial biosolutions, improving our customers’ business and the use of our planet’s resources. Read more at

Novozymes North America, Inc. 77 Perry Chapel Church Road · Franklinton, NC 27525 Tel. +1 919-494-3000 · Fax +1 919-494-3485 ·






FEATURES ..................... 24 ANAEROBIC DIGESTION From Digestion to Distribution Power companies and dairy farmers are working together to find ways to raise funds for anaerobic digesters and the means to distribute the energy that’s produced. By Ryan C. Christiansen

30 TECHNOLOGY A ‘Torrefic’ Energy Solution Torrefaction is on the brink of commercialization. The technology will be used to turn biomass into a fuel that is easier to transport and store, and is carbon neutral. By Anna Austin

36 MARKET Closing the Wood Pellet Gap The U.S. could learn something from Europe when it comes to the use of wood pellets in commercial and utility applications. By Ron Kotrba

42 FINANCE Project Finance: Lender Perspectives and Development Trends While much of the world is in the midst of an economic slowdown, credit markets are still supporting biomass-to-energy projects. By Thomas M. Minnich TECHNOLOGY | PAGE 30

DEPARTMENTS ..................... 07 Advertiser Index

46 PROCESS Anaerobic Options The positive environmental impacts and easy scalability of anaerobic digesters make them a wise choice for small-scale waste reduction and energy production projects. By Barnett Koven

08 Editor’s Note Making a Mountain of Biomass Out of a Snowbank By Rona Johnson

10 CITIES Corner Hoping for the Best of Times By Tim Portz

11 Legal Perspectives Algae Bloom at the Patent Office By Philip Goldman and Todd Taylor

15 Industry Events 16 Business Briefs 18 Industry News 51 EERC Update Biofuels Sustainability: A Nonfood Feedstock Primer By Brad Stevens

52 Marketplace

Correction from our November 2008 issue: On page 52 of the Process contribution titled “Producing the Next Generation of Green Hydrocarbons,” the U.S. DOE’s Biomass Program Web site should read


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advertiser INDEX



2009 Canadian Renewable Energy Workshop



2009 Fuel Ethanol Workshop



2009 International BIOMASS Conference & Expo

12 & 13





STAFF WRITERS Jerry W. Kram Susanne Retka Schill Kris Bevill Erin Voegele Anna Austin Ryan C. Christiansen


2009 RETECH Conference 2010 National Ethanol Conference 4B Components Ltd.

ONLINE EDITOR Hope Deutscher

ACCOUNT MANAGERS Clay Moore Jeremy Hanson Chip Shereck Tim Charles Marty Steen Bob Brown

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GRAPHIC DESIGNERS Elizabeth Slavens Sam Melquist Jack Sitter


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NOTE Making a Mountain of Biomass Out of a Snowbank


s I look out my office window on a dull, dreary Tuesday afternoon, I’ve observed several grain trucks full of snow rolling down the street. As you may have heard, North Dakota has had record snowfall this year, receiving more than 30 inches of the white powder. It’s gotten to the point here in Grand Forks, N.D., where there aren’t enough places in town left to pile the snow without causing hazardous driving conditions. At times like this, when I wonder what we could do to take advantage of all this snow before it melts and runs into the Red River, which forms the border between North Dakota and Minnesota. In a way, snow is like biomass. Just like switchgrass, which has to be mowed, snow has to be shoveled, and like municipal solid waste, people pay to have it removed. Unfortunately, that’s where the similarities end. The definition for biomass says it has to be living or recently dead biological matter that can be used as fuel for industrial production. OK, maybe snow can’t be used directly as a fuel for industrial production, but in some areas of the country, it melts and runs into rivers and streams that are dammed for hydropower. I know I’m making a huge leap here. On the other hand, like biomass, snow is renewable because when it melts in the spring, it increases soil moisture and raises aquifer levels. That water, in turn, is used in crop production, factories, municipalities and homes. I think we can safely say that having snow cover in the winter is a good thing in the Midwest, especially if it was dry going into the fall. However, it wasn’t dry going into this fall, and already the news media is using the “f” word, which, of course, stands for flood. Snow also comes in handy if your water pipes freeze up in the winter. You can just go outside, collect some snow and boil it for drinking water. I looked up “snow biomass” on the Internet and unfortunately couldn’t find anything to support my claim. I did, however, find some information about biomass in snow, and snow algae. Both were in reference to snow cover on the Tateyama Mountains in Japan. After my short search, I concluded that I am either way ahead of the scientific curve when it comes to identifying biomass, or I’ve just spent way too much time in subzero temperatures shoveling snow.

Rona Johnson Features Editor


Register now : Knowledge, Technology & Connections The 2009 Canadian Renewable Energy Workshop is the first stop on the path to optimizing your strengths and realizing your renewable energy ambitions. Attendees will enjoy world-class presentations at the only conference in Canada that combines emerging biofuels and biomass power in one.

Join us March 10-12, 2009 at the Regina Inn to… • Discover energy opportunities to supplement natural gas and electrical bills; • Utilize promising future feedstocks including wood, algae, waste, cellulose, and more; • Interact with industry professionals to build your bioenergy network.


Phone: (888) 501-0224

To engage in a business opportunity with the CREW please contact Lionel Grant at

(519) 576-4500 E-Mail:

2nd Annual | March 10 – 12, 2009 | Regina Inn Hotel and Conference Centre | Regina, Saskatchewan

Canada Wide US and International

CITIES corner Hoping for the Best of Times


t was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness …” The opening line of Charles Dickens’ “A Tale of Two Cities” goes through my head whenever I think about the current state of the renewable energy industry. Anyone who wants to find bad news in our industry (or any other industry in the world), doesn’t have to look far. An incredibly tight credit market has tabled or outright foiled many good initiatives and projects. Volatile corn prices coupled with downward trending ethanol prices have forced some producers to seek Chapter 11 protection. Throw in a well-funded propaganda campaign suggesting that the ethanol industry is responsible for world deforestation and high food prices and the picture looks bleak. I remember hearing about deforestation when I was in grade school in the early 80’s—long before the development of the ethanol industry—but today it’s suddenly all being blamed on ethanol. In an economy peppered with hardluck stories our industry has taken its share of lumps in 2008. That being said, whenever things look bleak— and I’ve heard talking head after talking head bemoan the death of the innovative spirit, or our collective inability to really address the energy crisis in our country—I take solace in the many renewable energy conferences I have attended. I invite anyone who needs a strong dose of optimism to choose a renewable energy conference, sign up and attend. I’ve had the privilege of being surrounded by many “glass is half-full” types at


renewable energy conferences. If you haven’t, I’ll tell you why it’s so uplifting. There are many, highly intelligent people in our country developing renewable, clean energy, and it feels good to hear them talk about it. I remember the times I’ve listened to Steve Flick of Show Me Energy Co-op in Centerview, Mo., talk about his pellet cooperative. The cooperative is providing quality, renewable, clean energy pellets to a Missouri utility and delivering a profit to its members. He always ends his presentation by saying “this is about our kids and our country.” His optimism and hope is infectious. I also think about Jerry Jennisen of JerLin Farms in Brooten, Minn., who ventured into the world of anaerobic digestion on his dairy operation because he thought it was the right thing to do. In addition to running a full-time dairy operation, Jennisen takes time to share his experiences with anyone who’s interested. I don’t have a crystal ball, so what’s going to happen in 2009 will remain a mystery until Jan. 1, 2010. However, because the Jennisens and Flicks of this world are out there, I have a feeling that we may be on the verge of the best of times. Tim Portz is a business developer with BBI International’s Community Initiative to Improve Energy Sustainability. Reach him at tportz@ or (651) 398-9154.



Algae Bloom at the Patent Office By Philip Goldman and Todd Taylor Goldman


lgae may have finally arrived if the rising number of patent applications for algae technologies is any indication. The growth in algae has been spurred by its potential to provide an abundant and sustainable feedstock for fuels, biomaterials, feed and other products. Major investments in algae technologies have been made by the U.S. government, research universities and venture capital firms, driving algae from a backwater topic a few years ago to a major player today. In 1988, there were only four international patent applications published having the word “algae” in their abstract, as compared to 37 in 1998 and more than 90 during 2008. Similarly, only three U.S. patents were issued in 1988 containing the words “algae” and “bioreactor” somewhere in their text, as compared to 22 in 1998 and 51 in 2008. This can mean longer processing times and higher costs because all these new filings in a field that was previously uneventful add to the inevitable backlog that exists in the course of getting patent applications to the point of actually being examined and issued. For instance, a new “art unit” dealing with chemical separation and purification (including algae bioreactors) was recently formed in the U.S. Patent and Trademark Office in order to coalesce what had been several different examination groups.

Though this reorganization might make sense in the long run, the immediate result will likely further delay the examination of new applications concerned with algae and similar technologies. Bioreactors, algae strains, open pond designs, and harvesting, separation and processing equipment are among the things being patented in the world of algae. Indeed, one can potentially patent a variety of things, living and non-living, and from a variety of perspectives. It is important to realize that you might be able to patent more than you think. For instance, were an inventor to develop a new bioreactor-based method of growing algae, he or she would be wise to consider claiming as his or her invention not only the method itself, but also equipment that might need to be customized in order to perform the method, as well as novel intermediates or reagents that might arise. The inventor could also claim the resulting algae biomass, per se, as well as downstream products that might be derived from or based upon such biomass—all in the course of a single application. Here are some strategies you need to consider: First, file early and often. There are more advantages than disadvantages in being first to the patent office, and it is far easier to later let an application go than to kick yourself for not having filed at all. You can use the long examination backlog to your advantage by deciding whether the ap-


plication you first filed is indeed still worthy of time and effort. Expedite patent examination when necessary. There is generally no urgency to getting a patent issued, unless of course to attract investors or pursue infringers. Yet there are ways in which the inevitable lag time in the patent process can be curtailed from on the order of several years to on the order of several months or more. Don’t assume that your product or process could not be patentable. While the final steps in solving a technical problem can often seem obvious and unpatentable to the inventor, a good patent attorney can often help look at the overall problem that initially existed in order to find ways in which the eventual solution can indeed be considered inventive and potentially patented. Having strong patent protection is a key to attracting investors and ultimately helping establish and protecting your place in the competitive environment. Do it right, and you could grow as fast as an algae bloom. BIO Phil Goldman is a shareholder at Fredrikson & Byron, focusing on intellectual property matters through the life sciences. Reach him at or (612) 492-7088. Todd Taylor is a shareholder in Fredrikson & Byron’s corporate, renewable energy, securities and emerging business groups. Reach him at or (612) 492-7355.



June 15 - 18, 2009 Denver Convention Center | Denver, Colorado, USA

WHERE E T HANOL’S NE W ERA BEGINS No longer is the world of ethanol confined to grain. C ellulosic ethanol and advanced biofuels are the future, and that future star ts now. For a quar ter centur y, the International Fuel Ethanol Workshop & Expo has delivered not only the largest ethanol event in the world, but the finest. Join the industry this summer for the FE W ’s 25th Anniversar y in Denver. I t ’s where the ethanol industr y ’s new era begins.

industry events BioPower Generation

Plant Bio-Industrial Oils Workshop

Feb. 12-13, 2009

Feb. 25-26, 2009

Renaissance Brussels Hotel Brussels, Belgium This second event will provide a platform for companies to learn about the latest trends and international developments in biomass power generation. Agenda topics will include policy, financing and investing, sustainable feedstocks, cofiring, combined-heat-and-power plants, and gasification, among others. A preconference seminar will detail how to build a biopower portfolio. +9714 813 5212

Delta Bessborough Hotel Saskatoon, Saskatchewan This event will address bioenergy, bioproducts and biofuels, including biomass. International and local experts will give overviews of current and potential biobased applications and feedstocks from the perspectives of producers, breeders and businesses. Confirmed speakers include representatives from DuPont Co. and the Donald Danforth Plant Science Center, among many others. (306) 975-1939

Renewable Energy Technology Conference & Exhibition

Canadian Renewable Energy Workshop

Feb. 25-27, 2009

Regina Inn Hotel and Conference Center Regina, Saskatchewan This second conference will facilitate the continued development of Canadaâ&#x20AC;&#x2122;s renewable energy industry. Confirmed speakers include Denis Arguin, vice president of engineering and implementation at Enerkem; Gerry Kutney, chief operating officer of Alterna Energy Inc.; and Rob Woodward, chief executive officer of Forest First, among many others. A complete agenda will be available as the event approaches. (888) 501-0224

Las Vegas Convention Center Las Vegas This event includes a business conference, a trade show and several side events. The business conference will address the status and outlook of renewable energy. Breakout sessions will address sustainability, feedstocks, financing, ethanol production technology, biobased products, biopower and biorefineries, among other topics. (805) 290-1338

March 10-12, 2009

The Future of Biofuels

International Biomass Conference & Expo

April 4-8, 2009

April 28-30, 2009

Snowbird Resort Snowbird, Utah The goal of this meeting, supported by DuPont Co., will be to share a broad perspective defining the critical needs for biofuels, and to highlight cuttingedge research and development efforts that are defining the next generation of biofuel product and process advances. Agenda topics will include next-generation advanced biofuels, including cellulosic ethanol; and the feedstocks needed for those fuels. (800) 253-0685

Oregon Convention Center Portland, Ore. This event, sponsored by BBI International Inc., will focus on six major biomass sectors: crop waste, food processing residue, urban organic wastes, forest and wood processing residues, livestock and poultry wastes, and dedicated energy crops. Attendees will also be able to tour the Columbia Wastewater Treatment Plant, the Cornelius Summit Foods ethanol plant and the Beaverton Material Recovery Facility. A more detailed agenda will be available as the event approaches. (701) 746-8385

International Fuel Ethanol Workshop & Expo

European Biomass Conference & Exhibition

June 15-18, 2009

June 29-July 3, 2009

Denver Convention Center Denver This will mark the 25th anniversary of the worldâ&#x20AC;&#x2122;s largest ethanol conference, which was recently recognized by Trade Show Week magazine as one of the fastest-growing events in the United States for the second consecutive year. The event will address conventional ethanol, next-generation ethanol and biomass. More details will be available as the event approaches. (701) 746-8385

CCH-Congress Center Hamburg, Germany This 17th annual event is expected to bring in more than 1,500 participants from more than 70 countries. Participants will learn about the latest breakthroughs in the biomass field. There will also be an exhibition featuring various companies and products in the industry. More information will be available as the event approaches. +39 055-5002174



BRIEFS Metabolix cofounder receives award Canadian tissue manufacturer to install biomass gasification system Canadian tissue manufacturer Kruger Products Ltd. plans to install a biomass gasification system at its tissue mill in New Westminster, British Columbia. Vancouver, British Columbiabased Nexterra Energy Corp. will supply the gasification system, which will convert biomass into a clean-burning synthesis gas that will be used to offset the use of natural gas at the facility. The system will take in local wood waste and allow Kruger Products to displace the use of approximately 445,000 gigajoules (400 million cubic feet) of natural gas annually, equivalent to the amount of natural gas needed to heat 3,500 Canadian homes for one year. Construction of the project is expected to begin in early 2009. BIO

Cambridge, Mass.-based Metabolix Inc. cofounder and Chief Scientific Officer Oliver Peoples received the 2008 Personal Contribution to Bioplastics Award during the 10th Annual Bioplastics Conference’s Bioplastics Awards ceremony in Munich, Germany. Peoples is credited with the development of Mirel, a family of biobased, sustainable and Peoples biodegradable plastics that will be marketed by Telles, a joint venture formed in 2007 by Metabolix and Archer Daniels Midland Co. BIO

Syntec explores biomass-based chemicals

Ceres offers Blade energy crop seed varieties Ceres Inc. in Thousand Oaks, Calif., has begun selling switchgrass and high-biomass sorghum seed under the Blade Energy Crops label, including two switchgrass varieties—EG 1101 and EG 1102—adapted for the southern and middle areas of the U.S. with high rainfall. Ceres’ two sorghum hybrids—ES 5200 and ES 5201—won’t produce grain heads until very late in the season, and will therefore continue growing and producing more biomass until early autumn. BIO

Green Energy Resources continues seeking acquisition New York-based Green Energy Resources Inc. is looking to upgrade its stock listing on the pink sheets via an acquisition. The move would create a fully reporting and audited company, according to a company spokesman. Green Energy Resources was reviewing two potential deals, but the results of those discussions weren’t available at press time. The debt-free company obtains wood supplies through sustainable practices, collecting recycled wood, wood from municipal maintenance operations and storm damage. It primarily exported wood chips and pellets to Europe, but recently began directing its supply toward the U.S. renewable energy market. BIO 16 BIOMASS MAGAZINE 2|2009

Syntec Biofuel Inc. launched a research program to develop catalysts and processes to produce biobutanol and biopropanol from biomass. Based in Vancouver, British Columbia, Syntec boasts a yield of 110 gallons per ton from its proprietary catalysts that convert municipal solid waste and biomass into ethanol, methanol and propanol. The company is seeking partners to help finance the estimated $2.5 million, three-year research and development program that will adapt the technology for biobutanol and biopropanol production. BIO

Honeywell supplies technology to power plant, biofuel refinery Honeywell International Inc. announced that two European facilities plan to install the company’s Experion Process Knowledge System, which streamlines output by allowing a facility to unify process, production and business management. NSE Biofuels Oy Ltd. plans to use the system at its Varkaus, Finland-based research facility, where work will focus on the process of producing biofuels from wood residue. Meanwhile, Dutch energy company Nuon will install the system at its Magnum plant, a 1,300-megawatt-per-hour combined-cycle power station under construction in Eemshaven, Netherlands. The facility, capable of using biomass, will supply electricity to approximately 2 million homes. BIO


BRIEFS India-based renewable energy company Orient Green Power Ltd. announced it has raised $55 million in funding to establish and acquire power generation assets involving biomass, cogeneration, biogas and more. The company operates two 7.5-megawatt biomass plants in Tamil Nadu and Rajasthan, India, and is in the process of implementing a 7.5-megwatt poultry-litter-fired biomass power plant in Andra Pradesh, India. It plans to construct additional biomass power plants ranging from 7.5 to 10 megawatts in several Indian states. The company said it aims to build more than 500 megawatts in assets over the next five years. BIO

Chinese bio-oil plant to use Dynamotive technology Dynamotive Energy Systems Corp. in Vancouver, British Columbia, announced it will receive $2.3 million for licensing its pyrolysis technology to Great China New Energy Technology Services Co. Ltd., which is building an 11.2 MMgy bio-oil plant in the Henan province of China for Hubei Xinda Bio-oil Technology Co. Ltd. Construction of the facility, which will convert corn stover to heating oil, is slated to take two years. Dynamotive plans to license its technology to 15 Chinese plants within five years. BIO

DOE extends loan guarantee application date Extensive interest in the U.S. DOE’s June 30 solicitation for efficient renewable energy and advanced transmission and distribution technologies prompted the DOE to extend its due date for applications from Dec. 31 to Feb. 26. This includes application due dates for stand-alone and manufacturing projects, and Part I applications for large-scale integration projects. The April 30 deadline for Part II applications for large-scale integration projects is unchanged. For more information, visit BIO


Orient Green Power raises $55 million

West Salem Machinery’s wood fiber preparation system can handle up to 100 dry tons of fiber per hour.

WSM offers wood fiber preparation system West Salem Machinery Co. is offering a wood fiber preparation system that can mechanically densify 100 dry tons of wood fiber per hour, including wood chips, sawdust and other forest product residuals. Equipment such as WSM’s wood fiber system could help revitalize the U.S. wood biomass market, which RISI Inc. projected may be on the rise. In a Wood Biomass Market Report released in December, the global forest products information provider estimated that provisions included in the Emergency Economic Stabilization Act of 2008 could generate approximately 120 million tons of wood demand, not to mention additional jobs. BIO

New Year starts off well for N-Viro N-Viro International Corp. formed a joint venture with SouthSide Environmental Group LLC to build and operate an N-Viro Fuel manufacturing plant in Ohio, which will produce a coal substitute made from sewer sludge. The U.S. EPA recently qualified N-Viro Fuel technology as an alternative energy source that can be used in commercial power generation, giving the company the opportunity to qualify for renewable energy incentives. The plant is expected to be complete in mid- to late 2009. N-Viro also announced a second purchase order agreement with the Tohopekaliga Water Authority in Daytona Beach, Fla., which will procure biosolids for the production of a soil amendment called N-Viro Soil. BIO

Helius Energy receives Scottish Green Energy award U.K.-based Helius Energy PLC received a Scottish Green Energy award for the Best Environmental Initiative at the seventh annual Scottish Green Energy Awards in Edinburgh, Scotland, on Dec. 4. The award honored the company’s small-scale combined-heat-and-power biomass plant, which is being built under an agreement with The Combination of Rothes Distillers Ltd. in Morayshire, Scotland. BIO 2|2009 BIOMASS MAGAZINE 17


NEWS Low oil prices haven’t stalled growth in the European wood pellet markets, as evidenced by new construction and expansion projects taken on by Intrinergy LLC and its German subsidiary CompacTec KG. In November, Intrinergy announced it was doubling capacity at its CompacTec wood pellet plant in Straubing, Germany, taking production from 60,000 metric tons (66,139 tons) to 120,000 metric tons (132,277 tons) per year. To facilitate the production hike, a new combined-heat-andpower (CHP) plant was built adjacent to the pellet mill. It’s designed to burn wood residues and produce 16 megawatts of thermal energy, which is then used to heat the dryers and generate 1.1 megawatts of electricity for sale to the local grid. Intrinergy Executive Vice President Thomas Meth said the CHP plant is complete and the added dryer capacity, along with the expanded pellet press line, should be installed by March. The pellets are


Intrinergy boosts German, Belgian wood pellet markets

Intrinergy’s CompacTec wood pellet plant and combined-heat-and-power facility in Germany

made from sawdust and other types of wood residues. Intrinergy also further developed a €34 million ($47.1 million) wood pellet CHP plant in Belgium by closing financing, and signing an engineering, procurement and construction contract with France-based Areva. Meth said the project will produce up to 5 megawatts of electricity for sale to the

grid, and enough thermal energy to run the on-site wood dryers. The facility is expected to produce between 50,000 and 60,000 metric tons (55,116 and 66,139 tons) per year. Groundbreaking is expected by April, and plant commissioning is anticipated in the second quarter of 2010. Both pellet mills are intended to serve the European domestic heating markets, along with the “medium-sized” market of hotels, hospitals and apartment buildings with a centralized heating unit, Meth said. “Most of our buyers are families that use four to five tons of pellets per year for heating and hot water,” he said. “We’ve focused on the domestic market because it allows us to lower our price when our raw material costs go down but also to increase our prices when our costs go up. In pure industrial markets, it’s very, very difficult to do that.” -Ron Kotrba

Reports highlight benefits of CHP technologies A report issued by Tennessee-based Oak Ridge National Laboratory in December names combined-heat-and-power (CHP) solutions as one of the most promising options to increase energy efficiency in the United States. CHP technologies, also known as cogeneration technologies, increase energy efficiency through the capture and utilization of waste heat produced during the power generation process. This allows CHP systems to use less fuel than would be required to operate separate heating and power systems. Despite the fact that CHP is a proven and effective source of energy, the report, titled “Combined Heat and Power: Effective Energy Solutions for a Sustainable Future,” said CHP technologies remain one of the most underutilized sources of energy efficiency in the country. According to a separate report issued by Washington, D.C.-based Worldwatch Institute in December, two-thirds of the 18 BIOMASS MAGAZINE 2|2009

energy contained in the fuel used by most power plants is lost in one of two ways: through the production of waste heat or through the power transmission process. The report, titled “Low-Carbon Energy: A Roadmap,” estimates that the waste heat lost annually at U.S. power plants contains enough energy to power Japan for a year. Worldwatch Institute’s report estimates that CHP systems could increase the energy efficiency of power generation from 33 percent to up to 90 percent. While some countries, such as Finland and Denmark, obtain 40 percent to 50 percent of their electricity from CHP systems, only 8 percent of electricity in the U.S. is generated by CHP technology. ORNL’s report detailed ways CHP can benefit the United States. Increased energy efficiency would reduce greenhouse gas emissions, and lead to lower business costs and the development of green-collar jobs. In addition, most of the energy produced through CHP is used locally, which reduces

grid congestion and limits the amount of energy lost in the power transmission process. Virtual Media Holdings Inc. is one company with plans to move forward with the installation of CHP technology in the U.S. The company recently acquired Biomass Secure Power Inc., a company that develops biomass-fueled cogeneration power plants. In December, the company announced its biomass cogeneration system had been approved by the California South Coast Air Quality Management District, which is the pollution control agency for Orange, Riverside and San Bernardino counties, as well as Los Angeles. According to Biomass Secure Power Chief Executive Officer Jim Carroll, details of his company’s plan to construct a cogeneration facility in California will be released once the project is finalized. -Erin Voegele


NEWS Generated from manure and municipal solid waste to name a few, biogas is the backbone of multiple power applications and technologies across the globe. To that end, California-based BioEnergy Solutions has received approval from the Kern County Board of Supervisors to construct a biogas distribution network in the Central Valley of southern California. Eventually becoming a nine-farm network, the underground pipeline system will transport methane gas captured from cow manure to a purification facility in Shafter, Calif. After being upgraded to utility-standard natural gas, it will be delivered to Pacific Gas & Electric Co.’s nearby pipeline for distribution. BioEnergy Solutions spokesman Steve Duchesne said so far four dairy farms have signed onto the project, and engineering design work has begun. Project construction is slated to begin in 2009. Georgia-based Great Lakes Biogas Technologies Inc. recently entered an agreement with Canada-based Zero Waste Energy Systems Inc. to market its waste compaction technology. The Revolution Compactor is designed to remove liquids and air from


In US and abroad: Biogas on the rise

The Revolution Compactor is designed to remove liquids and air from wastes, reducing transportation costs and the need for landfill space.

wastes prior to being loaded and transported, which reduces transportation costs and the need for landfill space. According to the company, it has a 50-to-1 compact ratio for plastics. The first unit was recently completed, and it’s awaiting final testing, according to GLBT Chief Operating Officer Bruce Coxhead. The company has received letters of intent for the digester from a fruit and vegetable processor, a meat processor/ packer, and a large dairy operation. Researchers at Cornell University in Ithaca, N.Y., announced they have devel-

oped a process that uses undigested manure and chemical fertilizers to remove hydrogen sulfide gas from biogas produced from the anaerobic digestion of manure at farms, sewage treatment plants and landfills. To be marketed as SulfaMaster, the process pipes biogas through barrels containing a medium of manure mix, which removes the hydrogen sulfide. The researchers believe it will be a cheaper alternative to industrial scrubbers that aren’t feasible for smaller farms. In other global biogas news, U.K.-based Global Renewables Ltd. and Bovis Lend Lease contracted with Kirk Environmental on a project to build two anaerobic digesters that will serve to reduce landfill needs by treating household waste in Lancashire County, and produce biogas for electricity generation. Meanwhile, in Asia, the World Bank announced it will invest $120 million in China’s National Rural Biogas Program, which aims to help farmers and residents improve living conditions by using the anaerobic digestion of waste to generate biogas for cooking. -Anna Austin

The 74-acre, 300,000-square-foot Museum of Science and Industry in Tampa, Fla., plans to build a hands-on educational exhibit about energy that will include a 6-megawatt biomass gasification plant that provides power to the museum. According to Wit Ostrenko, president of the Hillsborough County, Fla.-owned facility, the museum is requesting proposals from developers that might be interested in building a gasification plant at the proposed $14 million Energy Center exhibit, which will occupy a 10,000-square-foot building on three to five acres of the museum campus. The gasification plant will include an educational component so that visitors can see how the gasification plant works and how biomass gasification is more beneficial than burning fossil fuels.


Tampa science museum to feature biomass gasifier

Museum of Science and Industry in Tampa, Fla.

“We’re looking for a company that needs to demonstrate that they have the technology to do this,” Ostrenko said. “We will have a million people a year coming from all over the world to see their power plant.” He said the facility will take in 150,000 tons of wood waste per year from Hillsborough County and possibly the city of Tampa.

Ostrenko described the Energy Center as an idea tossed around for 30 years. “The idea has more legs now,” he noted. “I don’t think anybody is letting go of the fact that by spending even $1.75 on a gallon of gas, a lot of that money is going to other countries.” The museum has a committee dedicated to seeing the Energy Center happen. “We looked at it practically,” Ostrenko said. “We consume 1 megawatt of power that costs us almost $700,000 per year. So how can we get rid of that $700,000-per-year bill?” Other plans for the Energy Center include tapping methane gas from a nearby landfill. -Ryan C. Christiansen



NEWS Princeton, N.J.-based power generation company NRG Energy Inc. announced its intention to use woody biomass as a fuel source at its Montville Generating Station in Uncasville, Conn. The biomass-based energy would provide approximately 30 megawatts of the unit’s annual 82-megawatt electrical generating capacity. NRG intends to use wood chips and other woody biomass to cogenerate electricity currently being produced with oil and natural gas. According to NRG spokeswoman Lourie Newman, the company expects to begin integrating biomass into the Uncasville facility in mid-2011. This would be its fourth “Repowering NRG” project in Connecticut. The initiatives aim to integrate renewable and sustainable power sources at NRG’s 48 plants across the U.S. The company has a


Connecticut power plant plans wood biomass integration

NRG’s Montville Generating Station in Uncasville, Conn., aims to produce approximately 30 megawatts of power using woody biomass.

total generation capacity of approximately 24,000 megawatts. According to Michael Liebelson, NRG chief development officer of low-carbon technology, finding ways to reduce the carbon footprint of its existing electrical generation plants is what prompted the

company to incorporate biomass as a fuel source. “When this biomass project comes on line, it will be another step in helping Connecticut reach its goal of creating 20 percent Class 1 renewable power generation by 2020,” he said. “In addition to providing clean, renewable energy to Connecticut residents, we are obtaining the biomass from nearby foresters and sawmills, which will provide economic benefits to the region.” In mid-2008, NRG added 40 megawatts of ultra-low-sulfur-diesel-based power generation at its Cos Cob site in Fairfield County, Conn., bringing the plant’s total output to 100 megawatts, while reducing overall emissions from the site. -Bryan Sims

Several wood pellet manufacturers are opening new plants in 2009. Here, EPM details the latest projects. Indeck Energy Services Inc. in Buffalo Grove, Ill., plans to open the Indeck Magnolia Biofuel Center wood pellet production plant in Magnolia, Miss., in September. The company has a contract with a local provider for wood within 50 miles of the plant, according to Nunzio Maniaci, manager of business development for Indeck. He said presales for pellets have primarily been to customers in the northeastern U.S., including New England, New York and Pennsylvania. However, Indeck anticipates significant bulk sales to European markets, as well. In the heart of the northeastern U.S. wood pellet market, Geneva Wood Fuels LLC plans to open its Strong Maine Wood Pellet facility in Strong, Maine, in early 2009. It will produce wood pellets for the homeheating market under the brand Maine’s


Biomass fuel pellets show promise

Pellets of DDGS mixed with wheat middlings were made using the Hi-Tech Agro PL500 flat-die pellet mill at the Agricultural Utilization Research Institute in Waseca, Minn.

Choice, which will be sold exclusively by Foxborough, Mass.-based International Forest Products to distribution outlets in the Northeast and possibly Pennsylvania, according to Peter Keyes, president of solid

products for International Forest Products. He said demand for wood pellets in the Northeast is strong, fueled by a 500 percent increase in wood pellet stove sales in 2008. Meanwhile, researchers at the Agricultural Utilization Research Institute in Waseca, Minn., continue to test how energy crops in the U.S. can be made into pellets for combustion. In December, AURI and representatives from Hi-Tech Agro Projects Private Ltd., a biomass densification system manufacturer based in New Delhi, India, demonstrated the Hi-Tech Agro PL500 flat-die pellet mill that AURI is using in its lab. AURI demonstrated pelletizing distillers dried grains with solubles (DDGS) and also DDGS mixed with wheat middlings. According to AURI, DDGS provides an average of 9,600 British thermal units (Btu) of energy per pound, and wheat middlings provide as much as 8,200 Btu per pound. -Ryan C. Christiansen




Obama forms green cabinet With the inauguration of President Barack Obama, the future of the U.S. energy industry appears bright, especially with the nominations of several cabinet members that have a history of supporting renewable energy and advanced biofuels. Former Iowa Gov. Tom Vilsack was nominated as secretary of agriculture, a choice which has been positively received by multiple groups including Growth Energy, the National Corn Growers Association and the National Biodiesel Board. He served as governor from 1999 to 2007, was a founding member and chairman of the Governors Biotechnology Partnership, and a former chairman of the Governors’ Ethanol Coalition (now called the Governor’s Biofuels Coalition), the Midwest Governor’s Conference and the National Governors Association’s Natural Resources Committee. “Vilsack is keenly aware of the benefits of agricultural biotechnology, and the role that science and innovation can play in helping farmers grow more food in a more environmentally friendly manner,” the Biotechnology Industry Organization stated. “He is a strong




proponent of ethanol production, and we are confident he will work to further diversify our nation’s biofuels supply.” Steven Chu, professor of physics, and molecular and cellular biology at the University of California, Berkeley, has been nominated as secretary of energy. Since 2004, he has been director of the Lawrence Berkeley National Laboratory, a U.S. DOE-funded center of research into biofuels and solar energy technologies. He was awarded a Nobel Prize in Physics in 1997 for the development of methods to cool and trap atoms with laser light. He is also a former chairman of Stanford University’s physics department. “We believe that aggressive support of energy science and technology, coupled with incentives that accelerate the development

and deployment of innovative solutions, can transform the entire landscape of energy demand and supply,” Chu said in his acceptance speech. “What the world does in the coming decade will have enormous consequences that will last for centuries. It is imperative that we begin without further delay.” U.S. Sen. Ken Salazar, D-Colo., has been nominated as secretary of the interior. He has supported the creation of a clean and renewable energy economy, having successfully pushed for the passage of the Renewable Fuels, Consumer Protection and Energy Efficiency Act of 2007, and the introduction of a tax measure to support cellulosic biofuel producers. “Senator Salazar is uniquely qualified and experienced to serve as secretary of the interior,” said Bob Stallman, president of the American Farm Bureau Federation. “He serves on the Energy and Natural Resources Committee, and has been a strong proponent of expanding the development of renewable fuels.” -Anna Austin

‘Methane to Markets’ report indicates growth The U.S. EPA released its third annual Methane to Markets report in November, in which the agency documented global partnerships that resulted in the reduction of methane emissions from coal mines, oil and gas systems, agriculture, and landfills. The report also stated that in 2005 global methane production from livestock manure that could be used for anaerobic digestion totaled approximately 230 million metric tons of carbon dioxide equivalent. The EPA’s current work in reducing methane emissions from global agricultural industries includes reducing swine farm methane emissions in three provinces near Bangkok, Thailand. The agency is also partnering with the Chinese Ministry of Agriculture to expand the number of village-scale digesters in rural China, and helping to provide technical training to villagers. Similar efforts are expected in Vietnam, the Philippines, Thailand and Korea. In India, the EPA is helping

to deploy digesters in the dairy sector, and in the wine and distillery industries. Instances of livestock manure discharging directly into surface waters still occurs in Mexico, where the EPA said it’s helping to advance anaerobic digestion technology through collaboration with Mexico’s environmental agency that will develop demonstration projects and raise awareness. In the report, the EPA stated the U.S. has been a leader in the recovery of landfill gas and is leveraging that leadership by helping the global community get up to speed. Projects of varying stages in Ecuador, Ukraine, Brazil, China, Colombia, Korea, India and elsewhere are benefiting from the Methane to Markets partnerships. The EPA is also partnering with the International Energy Agency. The team developed a case study, titled “Turning a Liability Into an Asset: Landfill Methane Utilization Potential in India.” The agency stated that India is transitioning from open dumps to

more managed landfills, and new Indian landfills should consider landfill gas management and capture as part of the design. “In order to launch a landfill gas energy industry in India, the study recommended utilities should offer green power premium pricing for landfill-gasgenerated electricity, and landfills should take advantage of existing government subsidies for landfill gas energy,” the Methane to Markets report stated. All told, when current Methane to Markets projects are fully implemented, the EPA estimated it will result in the annual reduction of methane emissions by more than 24 million metric tons of carbon dioxide equivalent, tripling the reductions achieved in 2006. The partnership now includes 27 governments and more than 800 private sector entities, financial institutions, nongovernmental agencies and other organizations. -Ron Kotrba



NEWS TechWorks incubator opens in Iowa PHOTO: CEDAR VALLEY TECHWORKS

and testing laboratory. An entrepreneur A new bioplastics business incubator or development company will be able to housed on a former Deere & Co. campus produce their bioplastic formulations, opened in Waterloo, Iowa. Sponsored by make sample parts and test the physical Waterloo Development Corp., Cedar Valproperties. ley TechWorks will be a virtual and physiThere has been keen interest in the cal regional center for the development of incubator. A Biomass Magazine Web exbioproducts and the bioenergy industries. clusive announcing the center’s opening Bioplastics developer MCG BioComposgenerated 15 inquiries within a few days, ites LLC has been hired to provide marAn artist’s rendering of Cedar Valley TechWorks McCord said. Two prospective companies keting and industrial recruitment services were scheduled to inspect the center right for the business incubator. “The TechWorks concept has been in development for over five after New Year’s Day. In addition to entrepreneurs and start-ups, Cedar years in partnership with Deere & Co., which provided the land, build- Valley TechWorks expects to work with existing companies interested ings and various resources,” said Sam McCord, president and chief ex- in replacing conventional materials with biomass-based materials. The first tenant ready to move into the facility is the University of ecutive officer of MCG. “[Deere & Co.] has an interest in the project to explore additional opportunities in the commercialization of biomass Northern Iowa’s National Ag-Based Lubricant Center, McCord said. into bioproducts, bioprocesses and bioenergy.” MCG will become one There is room to house 12 to 15 businesses in the first 150,000-squareof the tenants at Cedar Valley TechWorks, and MCG staff and techni- foot building, with a second building available for an equal number of cal staff from Deere will help with the testing and commercialization businesses as Cedar Valley TechWorks grows. of bioplastic and bioenergy applications. -Susanne Retka Schill McCord said one of the first projects underway at Cedar Valley TechWorks is the development of a bioplastics pilot production facility

Biomass board takes in-depth look at feedstocks The Biomass Research and Development Board has taken an in-depth look at agricultural and forestry feedstocks for both conventional and advanced biofuels, with the goal of informing investors of the research and development needed to expand biofuel production. The economic analysis looked at several scenarios for different conventional biofuel production levels in 2016 and 2022, as well as several cellulosic ethanol production scenarios, forecasting a range of prices for bioenergy crops and residues from $40 to $60 per dry ton for biomass, depending on the scenarios. The report also considered greenhouse gas (GHG) impacts but acknowledged the models used in the analysis didn’t capture the full lifecycle impacts of increased biofuel production. “Carbon markets could be an effective approach to simultaneously increasing biofuels production and improving the GHG footprint of these fuels,” the report said. A $25-per-metric-ton carbon dioxide equivalent that resulted in the largest decrease in GHG emissions was among the alternative scenarios analyzed. The report suggests three potentially fruitful research areas: raising crop productivity without additional fossil fuel inputs, reducing uncertainties in GHG emissions associated with nitrogen fertilizer use and upgrading 22 BIOMASS MAGAZINE 2|2009

the capabilities of the USDA’s in-house economic models to analyze the GHG implications of various policies. The report also discussed the consequences of bioenergy’s economic, environmental and social sustainability. Because the models used to evaluate the feedstock scenarios were inadequate and not designed to provide information on variables that measure sustainability directly, the report recommended further research on sustainability, as well as research on a broad portfolio of feedstocks that offer geographic diversity and greater resilience. The report, “Increasing Feedstock Production for Biofuels: Economic Drivers, Environmental Implications and the Role of Research,” is one of a series of initiatives detailed in the interagency action plan unveiled by the Biomass Research and Development Board in October. The board, cochaired by officials from the USDA and U.S. DOE, coordinates the efforts of nine federal agencies and two executive-branch offices in advancing the research and development of biobased products and bioenergy. The 137-page report is available at -Susanne Retka Schill


NEWS Roquette Frères, Europe’s largest starch and starch-derivatives company headquartered in Lestrem, France, signed a licensing agreement with Rice University in Houston that will enable Roquette to commercially produce biobased succinic acid. Succinic acid is a valuable four-carbon molecule that serves as a viable replacement for its petroleum-derived cousin: maleic anhydride. It’s commonly used in the plastics, textiles and pharmaceutical industries. The technology for efficiently producing biobased succinic acid was developed and patented by Rice University Bioengineering professor Ka-Yiu San, and Biochemistry and Cell Biology professor George Bennett. Their process employs the principles of “white biotechnology,” meaning production without the use of petroleum, according to Bennett. Until recently, the only way to produce succinic acid in industrial quantities involved petroleumbased products. Because maleic anhydride and succinic acid are chemically similar and succinic acid is produced by all living things through the fermentation of sugars, succinic acid could also serve as a platform chemical for the synthesis of a multitude of compounds. “[Succinic acid] is a very useful molecule because it has two ends that are carboxylic acids, so those can be used to cross-link different compounds,” Bennett said. “That makes it a moderately highvalue chemical.” Under the agreement, Roquette obtained the right to commercialize the technology developed by San and Bennett, who genetically engineered E. coli bacteria that produce high quantities of succinic acid via a fermentation process. “The process is actually carbon-negative,” Han said. “It uses about 0.75 molecules of carbon dioxide for every molecule of succinic acid it produces from glucose.” Roquette intends to develop a demonstration plant in France later this year. After successful demonstration of the technology, the company expects to begin large-scale production by 2011.


-Bryan Sims

San, left, and Bennett


Rice University signs deal to commercialize succinic acid

BHS Energy’s small-scale briquette press can be loaded on a trailer for mobility.

Companies develop new biomass briquette presses Pennsylvania-based BHS Energy LLC and California-based Biomass Briquette Systems LLC each announced the availability of new biomass briquette presses in December. BHS Energy has developed a small-scale briquette press designed to compress switchgrass and other biomass materials such as wood waste. The machine produces round briquettes approximately 1.5 inches in diameter and up to one inch in length. “They are roughly the size of a golf ball,” said Bryan Reggie, an electrical engineer and managing member of BHS Energy. The press can be powered by a tractor’s power takeoff or by a three-phase motor. It’s compact and can be loaded onto a trailer for mobility. When fed switchgrass, it produces approximately 600 pounds of briquettes per hour. When fed wood, it can produce up to 1,000 pounds of briquettes per hour. According to Reggie, the press is designed to benefit individual farms and other small-scale entities interested in producing their own heating fuel without the expense of investing in an industrial-scale product. He estimates the product will retail for between $35,000 and $48,000. Commercial production of the press is expected to begin in the summer of 2009. The company is taking orders for discounted preproduction machines, which will be used to finalize the design. Biomass Briquette Systems’ new mechanical press, the BP1500, can produce up to 1,500 pounds of briquettes per hour. It’s an automated electrical press that produces briquettes approximately two inches in diameter. It was designed to process wood waste but can handle other kinds of biomass, as well, according to Biomass Briquette Systems President Dave Schmucker. “The size and consistency of the material is very important … in order to have the optimum performance and product output,” he said. The press can handle biomass with a moisture content of up to 15 percent. -Erin Voegele




Digestion Power companies in dairy regions have known for years that there is a distributed source of energy underfoot: cow manure. Using anaerobic digestion, manure can be converted into biogas and combusted in a generator to produce electricity. However, anaerobic digesters aren’t cheap. It takes collaborative funding and diligent project management to bring multiple anaerobic digesters on line within a power district—and that’s just the beginning. By Ryan C. Christiansen


t’s enough to drive a dairy farmer crazy. After years of hearing neighbors complain about the smell coming from his lagoon, a farmer installs an anaerobic digester, effectively reducing the odor. But now instead of driving the extra mile to circumvent his farm, people keep knocking on his door wanting to see where he put the poop. “Once people hear about this, they want to see it,” says Dave Dunn, coordinator for Central Vermont Public Service Corp.’s CVPS Cow Power program. “We usually drive the farmer crazy with requests for tours. I’m not talking about just Vermonters. I’m talking 15 busloads from Montreal on the same day. You hold an open house and a couple thousand people show up. It’s people who live in California, who come to Vermont during foliage season, and they remember reading an article in their local paper and they just drive up to the farm


and say, ‘Hey, do you mind if I come and take a look at it?’ That can be a challenge for some of our farmers.” CVPS, an investor-owned utility based in Rutland, Vt., with 159,000 customers in 152 communities, currently has five farms with anaerobic digesters and power generators on line producing 10,000 megawatt hours of total electricity per year. The company expects to have four new farms on line in 2009 producing an additional 6,500 megawatt hours annually. Short-term, CVPS desires to generate 20 megawatts of energy from digesters by 2012. Its volunteer customerfunded CVPS Cow Power program began in August 2004 and when its first farm, the Blue Spruce Farm, began producing electricity in January 2005, more than 1,000 customers already had signed up to contribute an additional $0.04 cents per kilowatt hour to help pay for the operation.



Distribution Approximately 1,200 miles to the west, Dairyland Power Co-op, a generation and transmission cooperative based in La Crosse, Wis., that provides wholesale electrical requirements and other services for 25 electric distribution cooperatives and 19 municipal utilities in the Upper Midwest, currently has three farms with anaerobic digesters and power generators on line producing 11,000 megawatt hours of total electricity annually. The utility purchases electricity from three additional farms with digesters and generators, but total power generation for those new additions has not been fully quantified. Long-term, Dairyland desires to generate 25 megawatts of electricity from digesters. Dairylandâ&#x20AC;&#x2122;s volunteer customer-funded Evergreen program helps to finance digester power generation. Customers within Dairylandâ&#x20AC;&#x2122;s 25 member cooperatives can pay $1.50 per 100 kilowatt hours each month to fund the program.




Dave Dunn, left, coordinator for Central Vermont Public Service Corp.’s CVPS Cow Power program, along with Amanda and Mark St. Pierre, examine the power generator at the couple’s Berkshire Cow Power facility at their Pleasant Valley Dairy Farm in Richford, Vt.

Incentives for Utilities Both utilities have had some success with “cow power,” but funding for electrical distribution requirements and digester technology challenges continue to be hurdles. Nevertheless, state renewable portfolio standards (RPS) specifying that electric utilities must generate a certain amount of electricity from renewable resources by specific dates—and also customer and farmer interest—continue to drive utilities with dairies in their service areas to tap those resources. Because Dairyland’s service area straddles Wisconsin, Minnesota, Iowa and Illinois, the utility must juggle meeting the various RPS in those states. According to the Pew Center on Global Climate Change, both Minnesota and Illinois have mandated all utilities produce 25 percent of their energy through renewable resources by 2025. Wisconsin requires 10 percent by 2015. “Iowa is mulling over what is going on in [neighboring states] and they will come up with something that’s similar,” says Neil Kennebeck, director of planning services for Dairyland. “That drives us to some extent,” he says, “but we’re also driven by enhancing the success of the farms that we serve—our name is Dairyland. It’s in our best interest to 26 BIOMASS MAGAZINE 2|2009

enhance the success of those that we serve because, as a cooperative, we’re owned by those we serve.” Vermont, meanwhile, doesn’t have a RPS and will only implement one in 2012 if its utilities have not met certain renewable energy requirements, according to Pew. “We don’t have that mandated yet in Vermont because we have a significant amount of renewable energy already,” Dunn says. “And so what we do is register our projects in Massachusetts. That gives us a way to account for these (projects with) renewable energy certificates.” Dunn says the emerging carbon credit market is also an incentive. “Methane destruction is a big part of these projects,” he says, noting that CVPS estimates its farms prevent 18,000 metric tons of carbon per year from entering the atmosphere. “That could have significant value,” he says.

Incentives for Farmers Farmers know the benefits of anaerobic digestion: odor control, pathogen reduction, fewer flies, conversion of groundwater-polluting organic nitrogen into manageable ammonia fertilizer, and the production of bedding for their cows. “Farmers are absolutely

ANAEROBIC DIGESTION enamored with the idea,” Kennebeck says. “The bedding these days for a 1,000-head herd is probably worth $100,000 per year. That (alone) is a fairly good incentive.” Farmers must also appease the U.S. EPA. In October 2008, the EPA finalized revisions to its National Pollutant Discharge Elimination System permitting requirements for concentrated animal feeding operations. Because the Clean Water Act prohibits large dairies from discharging nutrients into U.S. waters without a permit, those farmers must seek a permit and must also submit a nutrient management plan to the EPA. Kennebeck notes that anaerobic digestion provides farmers with a tool to manage those nutrients. But operational benefits and regulatory incentives aren’t enough to bring more cow power generation to the grid. Digesters, generators and electrical interconnections cost more than what wholesale electricity prices will pay for. “The challenge has been— not only in Vermont, but I think across the country—that farmers are not offered a reasonable price for the energy that they can produce,” Dunn says. When CVPS first explored anaerobic digestion in 2003, he says the average wholesale price for electricity in Vermont was approximately $0.045 cents per kilowatt hour. However, digester project costs showed that a farmer would have needed at least $0.08 cents per kilowatt hour to break even. It was vital for CVPS to establish the volunteer customer-funded $0.04-cent-per-kilowatt-hour premium for farmers, Dunn says. The premium has provided up to $175,000 to individual farmers to help with startup costs. Funds are also available through state programs, but the lion’s share of funding for new digester projects has come from the USDA through its Renewable Energy and Energy Efficiency program. Dunn says without the USDA’s financial backing, digesters would not be feasible. “I can honestly say without that 25 percent share from the USDA—even with all that we’re doing here in Vermont—it would really be hard to get a project built,” he says. “That’s a key component.”

Getting onto the grid Incentives and funding are not enough to get a digester built, however, if the local electrical distribution system cannot support a power generator. Dunn says there are inherent problems that must be overcome to get cow power onto the grid. “Utilities design their systems to have a large central generating plant and radial arms of distribution that just go out into the country,” Dunn says. “They were never designed to have generators at the other end, only at the center. It takes a creative interconnection scheme that will allow a generator to run productively for a farmer, but also have minimal impact on the power quality for all of his neighbors. [A generator] turning on or off can have a fairly significant effect on the local distribution system. There are mechanisms that can help solve that.” Dunn explains that CVPS uses what is essentially a high-quality circuit breaker with some computer controls to help balance the load. Even with fancy interconnection schemes, adding a generator to the grid simply doesn’t make sense in some situations. “If we need to build 15 miles of distribution or transmission to do it, the economics don’t work out,” Kennebeck says. Dunn says in some instances, even fairly large farms are served by single-phase lines, which may be a deterrent if they have to bring three-phase electrical distribution to the farm. “That could be a big enough expense that it negatively affects the economics of the project,” he says.

Red Tape Even if a digester project is desirable, fundable, and feasible, there is a lot of red tape to cut through before the farmer can put a shovel in the ground. The USDA grant application alone fits into a three-ring binder that is 2 inches thick, Dunn says. Water, air, electrical and even archaeological assessments must be dealt with, Kennebeck says. “You can’t just build it,” he says. “Everything is regulated.” Neighbors, too, must be convinced that the project is a good idea. “Farmers need to do a lot of communicating,” Dunn says. 2|2009 BIOMASS MAGAZINE 27

ANAEROBIC DIGESTION To help the farmer, CVPS Cow Power has a full-time project manager to help identify funding opportunities, obtain permits, fill out paperwork and work with the digester technology provider. “Dairy farmers (already) have a million other things that they are doing,” Dunn says.

Digester Technology Challenges GHD Inc. of Chilton, Wis., has been the primary anaerobic digester technology provider in Vermont, Dunn says. According to GHD, the smallest dairies served by its

technology have approximately 650 head of cattle. In Wisconsin, Dairyland’s three primary digesters use Microgy-branded technology provided by Environmental Power Corp. of Tarrytown, N.Y.; each of Dairyland’s digesters process manure from approximately 900 cows. However, CVPS and Dairyland digester operations pale in comparison with many of GHD’s and Environmental Power Corp.’s projects, which serve farmers with thousands of cattle. Smaller farmers have been virtually eliminated from cow power programs. To meet this challenge, Kennebeck says

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Dairyland has been working with a company that develops systems for sewage treatment plants and potable water systems to develop a technology that would be feasible for a farmer with as few as 250 head of dairy cattle. He says the smaller reactor is more efficient and costs less. “Working on the development of this smaller tank for smaller herds is something that we’re very interested in doing,” Kennebeck says. “We don’t want to turn our back on the smaller farms.” However, continued research and development is on hold because of the recession. “Nobody has got a lot of walking-around-money anymore,” Kennebeck says. CVPS is in the same situation. “In Vermont, our biggest farm is 1,500 cows and so, compared with the rest of the country, we’re relatively small by comparison on the dairy scale,” Dunn says. He says what is needed are systems that are cost-effective for dairies in the 200- to 300-cow range. To offset the need for more cows, smaller farmers can partner with food companies to process food waste with their manure. Dunn says all CVPS digesters use additional food waste, including whey from cheese-makers, ice cream waste from Ben & Jerry’s, and leftover grease from meat preparation. Kennebeck says he sees Dairyland tapping into sources of whey, turkey manure and vegetable waste for anaerobic digestion. “We have an incredible amount of agricultural waste streams that can be turned into something beneficial that now is not,” Kennebeck says. In the future, operational benefits and regulatory incentives might be enough to get farmers to build anaerobic digesters, even if they can’t install generators to sell power to utilities, Kennebeck says. “Farmers will do this on their own without an electrical component,” he says. “They will do it for bedding, to get the pathogen kill and to generate the gas, which they may be able to use on the farm to heat the home and to heat the barn. “The regulatory world loves these digesters,” Kennebeck says. BIO Ryan C. Christiansen is a Biomass Magazine staff writer. Reach him at rchristiansen@ or (701) 373-8042.



A â&#x20AC;&#x2DC;Torreficâ&#x20AC;&#x2122; Energy Solution Similar to cellulosic ethanol, there have been challenges to overcome in developing and advancing torrefaction. Now on the brink of commercialization, the thermochemical treatment process has the potential to serve as a substantial upgrade for coal and biomass combustion, co-combustion and gasification applications. By Anna Austin 30 BIOMASS MAGAZINE 2|2009





orrefaction, a process commonly used to dry and roast coffee beans, has evolved into a promising bioenergy innovation. Traditional biomass and coal may soon be playing second string to torrefied feedstocks, if companies striving to commercialize torrefaction technologies are successful. Torrefaction involves using extreme heat on biomass—most companies developing torrefaction technologies are currently centered on wood—in a low-oxygen environment, during which volatile organic compounds, water and hemicellulose are separated from the cellulose and lignin. These changed properties produce a fuel that is easier to transport and store and is carbon neutral. Several companies say they will soon achieve commercialization. One of those companies is South Carolina-based AgriTech Producers LLC, which expects to have a torrefaction technology commercialized within the next year.


Agri-Tech Advances According to Agri-Tech, torrefaction can overcome the challenging logistics associated with using woody biomass as an energy source. Utilizing a technology developed at North Carolina State University in Raleigh, Agri-Tech is in the midst of scaling up a torrefaction technology that the company believes is more cost effective than typical torrefaction processes. “This process densifies, adds value to and improves the characteristics of woody biomass, making it a much better feedstock to co-fire with coal, and producing superior pellets and briquettes to use in gasifier operations,” says Joseph James, president of AgriTech. “It also allows treated biomass to be shipped more economically, and for greater distances.” Agri-Tech expects to have an exclusive license for NCSU’s process before the end of the year. Agri-Tech completed a prototype in the summer of 2008, and is now engaging outside engineering and manufacturing capabilities to scale the technology up for commercial use.

“We are in discussions with companies that could potentially produce these machines for us,” James says. “Everyone we are talking to says they could increase the throughput and enhance the workability of the machine— and we’re hopeful that after we make an engagement, we will have machinery available for sale within six to 12 months.” James James says AgriTech’s technology is relatively simple and straightforward. “Our research shows we have fewer moving parts compared with others that are making torrefaction technologies,” he says. The process is also attractive because it’s powered by the products extracted from the wood, making it nearly self-sufficient. “We use some of the organic and volatile compounds in the wood—the gases—as a fuel to run the process, so it is very fuel efficient,” James says. “We use very little outside fuel for the process.”

TECHNOLOGY Bringing the Heat In Agri-Techâ&#x20AC;&#x2122;s torrefaction process, wood is heated to 300 to 400 degrees Celsius (572 to 752 degrees Fahrenheit), in a low-oxygen environment. The volatile organic compounds and hemicellulose, which are separated from the cellulose and lignin along with water, are combusted to generate 80 percent of the torrefaction process heat. The remaining warm lignin acts as a binder once the torrefied wood is pelletized. Water removal is a key factor in the economical use of wood as a biomass source. The moisture content of fresh biomass is about 50 percent, according to NCSU and Agri-Tech. Transporting water requires 20 percent to 50 percent of the delivered cost; 10 percent to 25 percent of the total delivered cost. Water may also reduce the heating value of biomass by roughly 50 percent. Torrefied wood is dense when itâ&#x20AC;&#x2122;s pelletized, reducing transportation costs of the otherwise bulky material. NCSU and Agri-Tech have found that it costs 23 cents per ton per mile to transport chips and torrefied wood.

The torrified wood is also dry and water resistant because at the high temperatures used in the process, the lignin becomes plastic and is transformed into a binder for individual wood particles. In addition, torrefied wood, which has a low sulfur and mercury content and is carbon neutral, can be easily crushed and doesnâ&#x20AC;&#x2122;t rot. Furthermore, torrefied wood has a heating value of 11,000 British thermal units (Btus) per pound, compared with coal at 12,000 Btus per pound, according to NCSU and Agri-Tech. Similar to coal, torrefied wood generates electricity at 35 percent fuel to electricity, compared with untreated wood which has a conversion rate of 23 percent fuel to electricity.

Quantity of Customers Although Agri-Tech is focused on supplying its technology for large, fixed facilities, it is also interested in providing mobile torrefaction equipment. â&#x20AC;&#x153;In regards to the mobile unitsâ&#x20AC;&#x201D;in terms of hurricane recovery or disaster recoveryâ&#x20AC;&#x201D;we think we could

deploy these units to areas with lots of downed trees to create value, which helps offset recovery costs,â&#x20AC;? James says. That would further expand the customer base for torrefaction, which is already considerably wide, James says. â&#x20AC;&#x153;We have several [potential customers],â&#x20AC;? he says. â&#x20AC;&#x153;One is electric utilities which currently burn coal. Typically, coal is pulverized. The material we produce will crush just as easily as coal and at the same particle size that coal is normally crushed to, for that same purpose.â&#x20AC;? Other customers, are those who are already involved in the pellet-making business, according to James. â&#x20AC;&#x153;Those customers are currently making pellets for U.S. consumption and for export,â&#x20AC;? he says. The third customer group, although small, are companies that are making cellulosic ethanol using gasification processes. â&#x20AC;&#x153;We think that will grow in the future,â&#x20AC;? he says. â&#x20AC;&#x153;Some are telling us that torrefied material is a superior feedstock to them, over and above the raw wood and raw cellulosic material;




On the Heels of Commercialization North Carolina-based Integro Earth Fuels says it has begun development and construction of a torrefaction facility in Roxboro, N.C., north of Durham in Person County. Integro has done extensive work with U.K and Southeastern U.S. utilities and combined heat-and-power users presenting test materials and the merits of torrefied biomass. Integro Roxboro LLC is expected to produce 87,600 tons of torrefied biomass or “green coal” annually, with expansion capabilities to 350,000 tons annually. Integro expects construction to be completed by the second quarter of 2009, and anticipates the facility will be on line by the third quarter of 2009. The plant will operate 24 hours a day, seven days a week for 50 weeks and will close for two weeks of scheduled maintenance annually. Integro’s torrefaction process subjects wood, forest materials and biodegradable waste to temperatures of 250 to 300 degrees Celsius (482 to 572 degrees Fahrenheit). Currently, Integro says it is finalizing off-take agreements with local utilities and universities with their own heat and

power plants to provide them with a majority of its supply beginning in 2009. Integro plans to build 10 more facilities over the next six years to meet the demand from coal-fired electricity producers. Across the nation, Washingtonbased NewEarth Renewable Energy Inc. recently announced it is closing in on funding that will allow the company to complete construction of a commercialscale biomass processing plant to host its ECO Pyro-Torrefaction technology. NewEarth produces what it calls ECoal and E-Oil, which the company says can be used at power stations as an alternative to coal, petroleum and natural gas, without utility retrofits or down time. It may also be used for heating homes and businesses. The company says it will use energy crops, agricultural waste, dead wood and seaweed as feedstocks. The company says it has signed seven contracts with major electricity producers in the U.S. and Europe, and is in discussion with others. NewEarth expects to begin operations within the next four months. The exact location of the Québec, Canada-based torrefaction plant will be unveiled once operations begin.

it’s drier and it has more carbons available for conversion. Now we now think there are other applications as well.” When it comes to competition, James says he’s not aware of any commercial torrefaction plants operating in the U.S., although many companies are developing research and working toward commercialization. In addition to wood, the company is also torrefying switchgrass. “We’ve been working with one of the largest switchgrass producers east of the Mississippi, and look forward to continuing that exploration of switchgrass as a source of torrefiable material,” James says. “We’re also looking at other biocrops, which are not food crops. We think that in addition to wood, these are the feedstocks of the future, along with other cellulosic material.” Although torrefaction may be new to some, it is really an old process that researchers are breathing new life into, James says. “Torrefaction research is old—30 to 40 years,” he says. “Similar to other research, such as biodiesel, it was sort of shelved when the not-so-renewable alternative fuels were entering the marketplace. We are looking for innovations to that basic research to make it a competitive process.” BIO Anna Austin is an Biomass Magazine staff writer. Reach her at aaustin@bbiinternational .com or (701) 738-4968.

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In Europe, wood pellets are used as fuel for utility, commercial and residential applications to produce electricity and heat, but in the U.S. pellets have largely been relegated to the residential markets. Effective policy drivers and a different mindset exist in Europe, while in the U.S. itâ&#x20AC;&#x2122;s hard to compete with cheap coal. By Ron Kotrba






ood pellets as a heating fuel originated in the U.S. during the 1970s in response to high energy prices and is now an increasingly popular co-fire and standalone feedstock for commercial and utility renewable energy applications especially in Europe. There is some pellet consumption in the U.S. In 2006, according to the Wood Pellet Association of Canada, there were approximately 60 U.S. wood pellet mills in operation, producing about 800,000 tons a year. Those pellets were sold exclusively into the residential bagged market, which is big in the Northeast and Pacific Northwest. For 2007, WPAC added 25 producer members to its organization, including three pellet plant projects in development to primarily serve industrial export markets in Europe. In 2008, Green Circle Bio Energy Inc. commissioned a 550,000 ton per year wood pellet mill in Cottondale, Fla., but until there is any real incentive in the U.S. to use pellets in utility-scale or any appreciable commercial operations, the company— owned by Swedish-based JCE Group AB—is exporting all of its product to Europe where pellet markets are insatiable. “We started production in May, and typically these plants take a few months to achieve full capacity, especially with this being the largest one in the world and one of the few that runs on solid wood instead of wood residues,” says Olaf Roed, president and chief executive

Indeck Energy Services held a ground-breaking ceremony for its 90,000-ton per year wood pellet plant in Ladysmith, Wis., named the Indeck Ladysmith Biofuel Center. The company recently broke ground on an identical plant in Mississippi.

officer of Green Circle Bio Energy. Roed says in the spring his company will be evaluating if, when and where to build additional wood pellet plants in the U.S. As for securing U.S. contracts for pellet sales, Roed says, “In the U.S. we still wait for new regulations, and we’re optimistic something will happen in the next Congress as far as carbon regulation is concerned.” A much smaller appetite for wood pellets exists in the U.S., but high prices recently experienced in the major competitive heating fuels such as fuel oil, propane and natural gas, has spurred growth in U.S. residential wood

pellet markets. According to the Pellet Fuels Institute, approximately 1 million pellet stoves and fireplace inserts are used in homes throughout the U.S. and Canada.

U.S. Not Ready for Utility-Scale Consumption To gain traction in U.S. electrical utility markets, where 50 percent of the power generation comes from cheap and abundant coal, however, a lot of work remains to be done, says Jim Thompson, vice president of Indeck Energy Services Inc. IES, in partnership with Midwest Forest Products Co., is in



New high-pressure turbines employed by Drax Power can help increase the efficiency of converting biomass, such as wood pellets, to electrical power.

the early stages of constructing a 90,000-tonper-year wood pellet plant in Ladysmith, Wis. The name of the pellet mill is the Indeck Ladysmith Biofuel Center. Thompson provides perspective on why there’s little interest in the U.S. to co-fire wood pellets with utility-scale power plants. “I don’t see any reason to sugarcoat this—coal is a cheap fuel,” he says. “Wood pellets compete extremely well with natural gas, propane and home heating oil but, on price, wood pellets don’t compete very well with coal. The whole CO2 (carbon dioxide) initiative is gaining momentum in our country, along with renewable portfolio standards (RPS), but not every state has one.” Wiscon-

sin does have a RPS, but Thompson says it hasn’t gained much traction. The Indeck Ladysmith Biofuel Center is expected to come on line in July 2009, and Thompson says the company has sold more than half the projected wood pellets for its entire first year of production. “Those are primarily going to the Northeast part of the U.S.—not to Europe,” he says, even though he admits he has seen an extraordinary amount of interest coming from Europe. “There’s a lot of interest overseas,” he says. Thompson says Northeast purchasers shored up lots of contracts for the facility’s premium residential pellets ahead of production next year, and

European buyers have already sent letters of interest. That doesn’t mean they are ignoring the potential markets in the mill’s host state of Wisconsin. “We’re reserving a significant amount of pellets for sale right here in northern Wisconsin, where it gets nice and cold— and that’s cold with a capital ‘C,’” Thompson jokes. “To be fair, we are talking with utility companies in Wisconsin, we are talking to the state of Wisconsin about three of their plants in Madison and we’ve done test burns with them—so I think eventually it’s going to happen.” He says within the next year or two there may be a shift in utility and commercial interest in wood pellets for electrical and thermal generation, but utility companies must begin to take carbon reduction seriously. Utilities also must be able to pass along the added cost to the consumer. “I believe you will begin to see this happen but where we are right now, people really don’t want to hear about premium costs for electricity—they just don’t,” Thompson says. “Carbon is trading at $5 a ton on the Chicago Climate Exchange, and that’s not much money. If it goes to $35, $40 or $50 a ton, as it is in Europe, the cost of doing this comes down because the cost of not complying with CO2 reduction goes up. When that happens, we’ll see the markets move.” IES has also broken ground on a plant identical to the Ladysmith, Wis., plant in Magnolia, Miss., where no RPS exists. “It’s on the


MARKET same railroad—and not just the same railroad but the same set of tracks—as the Ladysmith plant,” Thompson says, adding that project development is two months behind the Wisconsin pellet mill.

Europe’s Success In November 2007, the International Energy Association Bioenergy Task 40 released a comprehensive report titled, “Global Wood Pellets Markets and Industry: Policy Drivers, Market Status and Raw Material Potential.” According to the report, Sweden, Denmark, Germany and Austria have the most developed markets for wood pellets. In 2006, Europe produced 4.5 million tons of pellets compared with the 800,000 tons produced in the U.S. during that same year. In 2006 however, European pellet consumption topped off at 5.5 million tons, meaning that about a million tons were imported into Europe that year. Unlike U.S. pellet use, which again is largely accounted for in residential heating applications, the European markets absorb pellets for both electrical and heat generation. In Sweden, wood pellet production started in 1982, shortly after it did in the U.S., but according to the IEA’s Bioenergy Task 40 report, the fuel didn’t take off until 10 years later when the Swedish government introduced a tax on fossil fuels, which now stands at 59 percent tax on CO2 on all fossil fuels. “Virtually overnight it became cheaper for utilities and


private consumers to burn biofuels rather than oil, coal or gas,” the IEA report states. “An important factor behind the fast growth was the fact that big utility (Stockholm Energy) invested in a large-scale pellet plant to secure its requirements of pellets before a conversion of its boilers. Thus, the introduction of pellet use in large-scale boilers and later introduction of the green electricity certificate system in 2003 were major factors behind the pellet market growth in the country.” It’s as if there is an entirely different and unified mindset in Europe on carbon reduction and biomass utilization, compared with that of the U.S. Adherence to the Kyoto Protocol and more recently EU Directive 2001/77/EC, which requires member states to adopt national renewable energy and bioelectricity targets, bolstered the European biomass markets. According to the IEA report, annual growth rates “in the development of solid biomass accelerated significantly in 2004 and 2005. Annual growth rates in recent years amounted at EU-25 level to 20 percent in 2002, 13 percent in 2003 and 25 percent in 2004, reflecting the impetus those legislations gave to the markets.” In North Yorkshire, U.K., Drax Power Ltd. is building what the company says is the largest biomass co-fired power plant in the world. With a 4,000-megawatt (MW) coalfired power plant, Drax Power is planning to incorporate wood pellets and other biomass

materials to the tune of 400 MW, or 10 percent of its overall power generating capability at the site in North Yorkshire. Drax Power has signed an engineering, procurement, construction contract with Alstom Power Ltd., the company that will build the main processing works associated with the 1.5 million metric tons per year biomass co-firing facility near the existing mega-power plant. The processing works will receive, handle, store and process various biomass materials ready for direct injection into the power station’s coalfired boilers. “Delivering significant fuel diversification and carbon abatement is central to our business strategy,” says Dorothy Thompson, chief executive officer of Drax Power “Meeting our 10 percent co-firing target is key to achieving our goal of 15 percent carbon abatement, and this represents a major milestone in the execution of our co-firing project. At Drax, we are only too well aware of the need to tackle climate change, and we firmly believe that we are part of the solution. We have a role to play in the transition towards a low-carbon economy whilst delivering reliable supplies of electricity.” BIO Ron Kotrba is a Biomass Magazine senior writer. Reach him at rkotrba@ or (701) 738-4942.




Project Finance: Lender Perspectives and Development Trends While economies around the world slow and credit options dwindle, the biomass-to energy industries keep churning forward. Capital exists for those looking to develop projects. By Thomas M. Minnich


he current credit crisis creates an inflated perception of credit risk when contemplating project financing in the biomass industry. This perception, however, is often inaccurate. Project finance lenders employ rigorous credit analysis methods to minimize risk when dealing with issues including stringent financial regulatory requirements, new biomass-to-energy power project sponsors, new independent power producer rules, and new biomass technologies and fuel sources. Lenders’ ability to conduct thorough due diligence and credit analysis with the assistance of expert consultants makes project finance transactions, particularly in the power and energy sector, one of the safest asset classes today. This article outlines the credit analysis process and provides insight into a typical lender’s credit rating methodology, with a focus on biomass-to-energy projects. The article identifies key factors attracting lenders to a project and offers insight into lenders’ credit analysis methodology and loan covenants. Finally, the article discusses project development trends relative to power infrastructure in emerging economies and specific efforts by leading banks and investors, particularly in the Asia-Pacific region.

Lender Perspectives Corporate finance quantitative analysis commonly uses internal rate of return and net present value as evaluation methods. These methods are useful in evaluating mutually exclusive projects—projects whose costs and economics are independent from

one another—from the perspective of the project sponsor. Both internal rate of return and net present value evaluation techniques require a basic understanding of the cost of capital, which is the opportunity cost of future cash flows made by the firm. For example, if the cost of capital to a firm is 10 percent, the firm can either reinvest future cash flows in other projects that yield a 10 percent return, or it can repay capital originally borrowed at 10 percent interest. Cost of capital is also known as opportunity cost of capital or investment hurdle rate. Companies typically determine their cost of capital by calculating the company’s weighted average cost of capital, which establishes a blended opportunity cost of capital based on equity holders’ expected return and the cost of borrowed capital. For a corporation with available financial metrics, weighted average cost of capital is typically calculated in several sequential steps. The first step is determining the project firm’s unlevered equity beta: Bunlevered = Blevered / [1 + (1-T) D/E], where T is the corporate tax rate, D is the value of corporate debt and E is the value of corporate equity. In many cases, the weighted average cost of capital method benchmarks unlevered equity betas from similar companies in the same business sector as an average sector weighted average cost of capital, then applies this average to the project company’s corporate structure: Bproject company = Bsector average * [1 + (1-T) D/E] project company . The cost of equity is determined by

adjusting normal equity capital markets’ expected returns for the project company’s equity beta: CE = Bproject company *(market risk premium) + (risk-free rate), where CE is the cost of equity, the risk-free rate is the return on a guaranteed instrument such as a U.S. Treasury bond, and market risk premium is the average return performance over the risk-free rate from the capital markets (e.g., Standard & Poor’s 500 20-year return over U.S. government bond). Weighted average cost of capital is then calculated as a weighted average of the cost of equity sources of capital and debt sources of capital: Weighted average cost of capital = , where CD is the cost of debt (ordinary borrowing rate on a similar bond rating class). Weighted average cost of capital reflects an expected return for future cash flows, assuming repayment of borrowed sources of capital and investment in projects with a return commensurate with the level of risk. However, the flaw in using weighted average cost of capital as a project hurdle rate is that it applies a corporate debt and equity structure, as well as an implicit risk factor, to a project that might have a much different debt, equity and risk profile. Firms wishing to maximize their leveraging may instead establish a project special purpose vehicle, which is a separate corporate entity held off balance sheet of the parent company. A special purpose vehicle may have a limited amount of equity capital contributed by the parent company but may raise a relatively large amount of debt capital by guaranteeing repayment from the

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biomass Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).


FINANCE project’s future cash flows and limiting recourse to the parent company. In this case, because debt is substantially higher than equity, calculated weighted average cost of capital would more closely approach the cost of borrowing rather than the cost of the parent corporation’s equity. Normally, though, weighted average cost of capital may not be calculated for a project special purpose vehicle because of the lack of prior performance data required for computing the equity beta. Weighted average cost of capital is commonly used as a reference return when corporations perform internal rate of return and net present value calculations to evaluate a project. Net present value, which is the sum of future discounted cash flows from a project minus the capital outlay, may use weighted average cost of capital as the discount rate: Net present value = - outlay. If a project’s net present value is greater than zero, the project’s future cash flows minus its capital outlay exceeds the weighted average cost of capital return rate. Typically, the project should therefore be approved. However, managers making decisions based on a project’s net present value should consider the differences in the debt and equity structures of the project versus the corporation. This is particularly true in the case of borrowing capital specifically for the project under a project finance transaction. Although net present value and internal rate of return are useful for project sponsors when selecting project investments, banks use a different set of metrics when evaluating the attractiveness of lending capital to projects. The benefits implied by net present value are relative to the project sponsor and its equity holders. The benefits relative to a bank or debt issuer, however, are defined by the risk-adjusted return on capital. The risk-adjusted return on capital is a method developed by Bankers’ Trust in the 1970s to measure the anticipated return on capital considering the cost of regulatory capital (reserve requirement for loan loss coverage) and the fees earned by the lender on issuing the loan. Regulatory capital is cash and equity the bank must 44 BIOMASS MAGAZINE 2|2009

keep in reserve to cover loan defaults and losses. It is therefore the opportunity cost of lending new capital. The risk-adjusted return on capital calculation enables banks to compute returns on regulatory capital by considering the borrower’s creditworthiness. This is usually determined by credit ratings and by historical default and recovery rates of similar entities. Because risk-adjusted return on capital bases return on the amount of regulatory capital held in reserve, how does a bank determine the amount of the reserve? This amount is related to the risk profile of the project, as explained in the following section.

Project Finance Credit The elements of determining credit risk for a project finance transaction can be used to attract favorable lending to projects, particularly in the biomass-to-energy power sector. Credit that makes sense to project sponsors can be difficult to obtain. Insufficient experience and an incompletely defined project may attract loans only from local banks with expensive interest rate terms. A properly defined project that can pass rigorous due diligence, however, can attract more favorable lending terms from international banks. Credit risk assessment of a project special purpose vehicle is addressed by the Bank for International Settlements Basel Committee on Banking Supervision Publication 118. The publication is the guideline for the Basel II accord, the principles that govern overall capital markets regulation. Annex 6 of the document addresses evaluation criteria for specialized lending, including project finance. A project feasibility study performed by a consultant specializing in biomass-toenergy projects typically identifies basic transaction characteristics. A more advanced consulting approach is usually required to identify other supervisory criteria.In addition, legal counsel is commonly engaged to draft basic security terms, and supply and offtake contract terms. Challenges to financing biomass-toenergy projects include providing evidence of sponsor strength and comprehensive

FINANCE offtake contract terms. Sponsor strength with common fossil fuel power plants is readily obtainable in most cases: legacy utility companies usually have an established regional presence and a deep management structure with relationships in the region. Biomass-to-energy power plants, on the other hand, are usually smaller, more entrepreneurial ventures whose sponsors may have little or no experience in running a small-scale utility business. Two factors are paramount for seeking biomass project finance. The first is transparent ownership. The project sponsor must have a corporate structure with registered capital that can be readily reported to lenders. The project sponsor must also clearly identify board members, equity contributors and key management to satisfy banks’ Know Your Customer rules. The second factor is a reputable management team. The feasibility study or project finance documents must outline a management organizational chart to address project commissioning, operations and maintenance. The organization chart should include detailed position descriptions and identify individual managers with established experience in the biomass-toenergy and power sectors.

Project Development Trends Two key trends pertinent to biomassto-energy project development are discussed below. The first is power infrastructure in emerging economies. Emerging economies, particularly in Asia-Pacific nations, are continually challenged by insufficient power supply to meet demand. The problem is magnified in nations where rural electricity is limited by physical barriers or political challenges. Accordingly, many nations have established independent power producer frameworks that promote smaller, private-sectorowned power plant development while guaranteeing a connection to the national power transmission grid. These applications, typically limited in size to approximately 10 to 50 megawatts, create many opportunities for small power producers. In heavy agricultural regions or in countries with national biofuels policies, the

availability of biomass fuel sources and the promise of independent power producer policy may create the ideal climate for investing in biomass-to-energy projects. The second key trend is in project finance markets. The first quarter of 2008 saw the highest-ever volume of project finance transactions worldwide, with more than 125 transactions totaling $56.4 billion, according to the Thomson Financial First Quarter2008GlobalProjectFinanceReview. Recently, two subsets of the global project finance market have demonstrated consistent strength: the Asia-Pacific region and the power sector. Although Europe, the Middle East and Africa lead the world in volume (67 issues, $26.7 billion in loans), the Asia-Pacific region, with $23.3 billion in volume, has been beating its own quarter-by-quarter records. In fact, the region’s rate of increase in project finance transactions is the highest in the world. In contrast, the Americas trail the global project finance market, with only $6.4 billion in loans. The important conclusion is to recognize that developing nations with relatively stable political climates, as in much of East Asia, are leading the deployment of project finance capital. The most active sector in recent quarters is the power sector. In the first quarter of 2008, project finance transaction volumes in the power sector increased by 7.2 market share points relative to other sectors (total borrowed volume of $23.4 billion). Despite the overall downturn in credit, biomass-to-energy project financing is surging. Project lenders’ and specialty consultants’ use of the analysis methods discussed herein ensure that financing for biomass-to-energy ventures will continue to provide stable returns on investment, particularly in the booming Asia-Pacific region. BIO Thomas M. Minnich is director of Prime Capital Services Ltd. Reach him at tminnich or (404) 425-7100.





Anaerobic Options The use of anaerobic digesters on a small scale could provide localized energy sources while reducing the negative effects of greenhouse gases. By Barnett Koven


oday’s volatile energy economy necessitates investment in viable, sustainable sources of energy. While many technologies appear to answer some of these requirements, anaerobic digestion is an especially promising technology as it is efficient, inexpensive and can be quickly scaled and implemented. In addition, anaerobic digestion is extremely environmentally friendly. All of these aspects make anaerobic digestion an ideal technology for our renewable energy future. Anaerobic digestion is a naturally occurring biological process that uses microbes to break down organic material in the absence of oxygen. In engineered anaerobic digesters, the digestion of organic waste takes place in a special reactor, or enclosed chamber, where critical environmental conditions such as moisture content, temperature and pH levels can be controlled to maximize gas generation and waste decomposition rates. Landfills generating noxious odors demonstrate the impact of organic waste digestion in a semi-enclosed environment with little or no oxygen. However, by using anaerobic digestion technology, odors are greatly reduced because the gases are captured. Commercial anaerobic digestion systems can replicate this natural process in an engineered reactor that produces methane gas much more quickly, in as little as two to three weeks compared to the 30 to 100 years required by the anaerobic conditions in a landfill.

Digester Prevalence Anaerobic digestion systems designed to process animal manure have been in widespread use for years in parts of the developing world. Several hundred thousand digester

systems are estimated to operate in India, and several million are in use in China. In Europe, government incentives in the form of grants, low- and no-interest loans, and mandates that utility companies purchase the energy produced at a premium (often two to four cents per kilowatt above market value), combined with rising energy prices have encouraged the development of anaerobic digestion plants, with more than 1,000 now in place. These digesters mostly serve waste management and odor control needs and provide limited energy generation, though several in Europe and Asia are net suppliers of energy to utility companies. Examples include the Kompogas plants in Kyoto, Japan, and Rostock, Germany, as well as the Valorga International plants in Barcelona, Spain, and Hanover, Germany. The use of anaerobic digestion technology is rapidly growing in the U.S. It is already a developing market within the agricultural industry. The technology is economically and environmentally beneficial. The country’s high demand for energy coupled with a concern for reducing its dependence on imported oil has driven the expansion in the use of electric power generated from methane. Other incentives include the desire to redirect organic waste from landfills. Anaerobic digestion optimizes the benefits of organic waste used for methane production and helps with the landfill shortage problem. Anaerobic digesters have a financially attractive payback period (dependent on energy prices, subsidies and a number of other factors) when the methane gas is used to generate energy in the form of heat, steam or electricity. A proposed 10,000 tons per year plant servicing the industries at the Brooklyn Naval Yard had an anticipated return on investment of just

seven years as a result of significant subsidization by the New York Sustainable Energy Research and Development Authority. Larger plants can be even more profitable.

The Anaerobic Process When using a thermophilic process (a higher temperature and more efficient bacteria), digestion takes place in four stages (Figure 1) plus a preliminary stage over 10 to 14 days. Prior to digestion, the feedstock enters the buffer or pretreatment tank where its temperature is raised and microbial activity begins. After one day of pretreatment, the feedstock is released into the main digestion tank where the first of the four steps—hydrolysis—occurs, during which complex organic molecules are broken down into simple sugars, amino acids and fatty acids with hydroxyl groups. The second stage is known as acidogenesis, during which further breakdown occurs producing ammonia, carbon dioxide and hydrogen sulfide. The third stage is acetogenesis during which the products of acidogenesis are further digested to produce carbon dioxide, hydrogen and acetates, along with some higher-molecular weight organic salts. Methanogenesis, the fourth and final stage, produces methane, carbon dioxide and water. Methane and carbon dioxide are the main components of biogas (Figure 2). Approximately 55 percent to 70 percent of the gas composition is expected to be methane.

Environmental, Other Benefits of Anaerobic Digestion From an environmental standpoint, anaerobic digestion has three main benefits. First, it is a waste-to-energy technology,

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biomass Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).



Complex organic matter Carbohydrates, proteins, fats 1. Hydrolysis Soluble organic molecules Sugars, amino acids, fatty acids 2. Fermentation

Volatile fatty acids CO2 + H2

Acetic acid 3. Acetogenesis 4. Methanogenesis

CH2 + CO2

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870/367-9751 x112 48 BIOMASS MAGAZINE 2|2009

Figure 1. The anaerobic digestion process typically consists of four steps. SOURCE: BARNETT KOVEN

meaning that it converts waste materials and not food supplies or other usable products into energy. As a result, demand for power generated from anaerobic digestion will not affect resource markets or lead to poor land management practices as producers attempt to produce more of a resource on a given area of land to satisfy increased demand. In addition, as anaerobic digestion uses waste as its fuel source, it has the potential to divert large quantities of biodegradable waste away from landfills. Second, anaerobic digestion is considered carbon neutral by the U.S. EPA. Even though anaerobic digestion results in greenhouse gas emissions from the use of the methane portion of the biogas it creates, the effect is zero-sum. This occurs because the same amount of greenhouse gases would be emitted as the waste materials rotted in a landfill. Finally, anaerobic digestion results in a fertilizer-like byproduct rich in nitrogen and phosphorus, making it ideal for land application. When created through a thermophilic process, the fertilizer-like byproduct receives

the U.S. EPA Class A Pathogen-Free designation. The high operating temperatures and 10-plus day retention time mean that it is safe for immediate land application even on fields that are growing crops for human consumption. The byproduct or effluent can be separated, using even a simple dewatering screw, into liquid and solid fractions. The liquid fraction can be applied using a farm’s existing irrigation system while the solid fraction must be applied manually. A study conducted by Cornell University’s Manure Management Program examined J.J. Farber Dairy, a farm located in the New York City watershed that produces approximately 11,000 pounds of effluent per year and is using both fractions of the effluent, saving an estimated $13,000 per year. The byproduct could potentially curb demand for commercial fertilizers, the production of which requires large amounts of energy and the use of which puts out greenhouse gases. In addition to the environmental benefits of anaerobic digestion, the technology benefits from being an extremely simple means of harnessing energy which is eas-


Biogas property component

Natural gas (percent)

Biogas (percent)

Waste-to-Energy & Biomass Boilers Customized Engineered Solutions




Carbon dioxide



Trace components



(include hydrogen, hydrogen sulfide, nitrogen, non-methane volatile organic compounds, halocarbons) Figure 2. Biogas properties as compared to the properties of pipeline-quality natural gas SOURCE: BARNETT KOVEN

ily scalable. From an economic standpoint, larger units that serve municipalities or large farms are more cost effective. Larger units benefit from economies of scale for two reasons. First, the material costs for a plant only double as a result of a fourfold increase in capacity. For example, a digester that’s 10 feet tall and 10 feet in diameter requires approximately 314 square feet of construction material and has a volume of approximately 785 cubic feet. A digester 10 feet tall and 20 feet in diameter requires approximately 628 square feet of construction material and has a volume of approximately 3,140 cubic feet. Second, as a result of automation, even an extremely significant increase in plant size requires minimal additional labor. Therefore, the marginal cost for each additional unit of capacity is much less than the marginal revenues resulting from the additional unit of capacity. However, units can be built efficiently to serve individual households. Regardless of the size, the general design is similar, the main difference being the level of automation. A municipal unit would likely be fully automated while a household unit would be manually operated. Because of the simplicity of the reactor design, a household-sized unit can be built by anyone with a basic knowledge of plumbing and access to a CNC router and sonic welder.

Household-sized units would run on food and garden waste (sewage could be viable but would be less efficient because of the high moisture content and will likely not be permissible under most health codes) and could provide for a small portion of the home’s electrical demand as the biogas can be combusted in a slightly modified reciprocating engine and easily converted into electrical energy. More significantly, the unit could provide for household heating requirements. The liquid fraction of the effluent, which comes off the process at approximately 125 degrees Fahrenheit (for thermophilic systems), is hot enough to be pumped under the floor of a small house to provide radiant heating. This has already been done on farms to heat livestock barns. It could also be used in a closed system to heat clean water. I anticipate that it would be possible to construct a household digester for approximately $1,000, not including the cost of the reciprocating engine or other generation equipment Small-scale digesters would be especially valuable in parts of the developing world where grid access is limited or nonexistent. BIO

Barnett Koven is a representative to the United Nations for World Information Transfer, an environmentally focused nongovernmental organization. Reach him at

Since 1976, Jansen Combustion and Boiler Technologies, Inc. (JANSEN) has provided customized engineered solutions to owners/operators of boilers in the Forest Products and Waste-toEnergy Industries. Our mission is to improve the operating performance (fuel burning capacity and economy, efficiency, and emissions performance) of existing boilers that burn difficult fuels such as biomass, chemical spent liquors, municipal solid waste (MSW), refuse derived fuel (RDF) and tire derived fuel (TDF). JANSEN has conducted engineering performance evaluations of over 300 boilers, worldwide, and has provided combustion system and/or superheater upgrades of over 80 biomass, chemical recovery, MSW, and RDF boilers. JANSEN has the capability and experience to function as your one-source solution to boiler retrofit projects. With the ability to define, engineer, contract and manage design-construct projects, we offer Engineer-Procure-Construct (EPC) capabilities. A synopsis of our broad range of services: > Full service engineering design for steam, power, and combustion systems > Biomass, MSW, RDF, TDF, fossil fuel, and chemical recovery boiler performance evaluations > Effective overfire air (OFA) delivery system upgrades on biomass and other waste-fueled boilers > Replacement or upgraded superheater design and supply > Boiler circulation analyses > Computational Fluid Dynamics (CFD) modeling > Feasibility studies and cost/benefits analyses > Emissions reduction (CO, NOx, PM, SO2, TRS, VOC) > Operations support and training

Find out how we can help you:

2|2009 BIOMASS MAGAZINE 49 (425) 952-2825


UPDATE Biofuels Sustainability: A Nonfood Feedstock Primer Much of the recent debate about biofuel viability has focused on the competition between crop use for food production and crop use for energy production. This has inspired a pursuit of nonfood biofuel feedstocks. The term â&#x20AC;&#x153;nonfood feedstocks,â&#x20AC;? although used by many to clearly define a better alternative to corn and soybeans as biofuel feedstocks, simply does not capture the complexity of the relationship between biofuel feedstocks and traditional agricultural production. It is easy to recognize that if a farmer raises corn or soybeans for the production of biofuels that those bushels will not be used to satisfy demand in the human food chain. What might not be so readily apparent is that if those same acres of land were utilized to raise industrial oil crops (e.g., jatropha or crambe) or energy crops such as switchgrass, there is an indirect impact on the human food chain. These impacts can range from complete substitution of acreage from food production to energy production, such as with switchgrass, to fractional food loss when oilseeds are used to supply industrial oils for fuel as well as oilseed meal for livestock feed. The following is a summary of some nonfood biofuel feedstocks and considerations regarding their impact on food production. When people think about oilseeds, crops such as soybean and canola typically come to mind. However, numerous other oilseed crops do not compete directly with soybeans. Typically, these nonfood oilseed crops have oil or meal characteristics that make them unpalatable or, in some cases, toxic. Crambe, camelina and jatropha are examples of oilseed crops that do not have a traditional food market. However, their oils can be used for biofuel production while supplying meal for livestock feed. In the case of jatropha, some varieties are known to have a toxic meal that animals will not eat. These crops have the potential to provide biofuel feedstocks while augmenting the food supply for animal feed.

Crop residue such as corn stalks and wheat straw are nonfood feedstocks that do not impact food production. They truly are coproducts of food production that can have utility for energy via combustion, gasification or enzymatic/fermentation to alcohol. Challenges with the widespread use of crop residue for fuel production are twofold: 1) the low-density nature of the material and 2) the impact on soil health. The time and cost associated with collecting and delivering crop residue will require careful evaluation. Studies conducted by the USDA and others Stevens focused on the relationship between crop residue and soil health have indicated that not all crop residue should be removed from the field. Crops grown exclusively for energy production include switchgrass and fast-growing species of poplar, among others. These crops directly replace acres that could otherwise be used for growing crops (except if grown on Conservation Reserve Program land). Typically, however, energy crops require fewer inputs such as water or fertilizer and can be grown on land not suitable for many food crops. Algae and aquaculture offer many advantages in the search for sustainable, renewable bioenergy feedstocks. Algae have the potential to provide orders of magnitude more oil per acre of land than traditional oil seed crops. Further, algae can be grown in arid climates with brackish water or sea water. Lastly, algae use as nutrients those things we typically view as pollutants, such as carbon dioxide from the air and nitrogen compounds in water. Unfortunately, the cost of growing algae today is too high to support fuel production alone. BIO Brad Stevens is a research manager at the EERC. Reach him at or (701) 7775293.





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Biomass Magazine - February 2009  
Biomass Magazine - February 2009  

February 2009 Biomass Magazine