May 2012 Biomass Power & Thermal

INSIDE: HOW SWEDEN TAKES ACTION ON ENERGY POLICY

May 2012

Cash Crop Alternatives to Disappearing Federal Funding Page 26

Plus:

Busting RES Myths Page 32

www.biomassmagazine.com

INSIDE ¦ ADVERTISER INDEX¦ MAY 2012 | VOLUME 6 | ISSUE 5 2012 Algae Biomass Summit

47

2012 Fuel Ethanol Workshop & Expo

19

2012 National Advanced Biofuels Conference & Expo

48

Ace Glass

28

Agra Industries

22

Andritz

13

BBI Consulting Services

46

BRUKS Rockwood

40

Continental Biomass Industries, Inc.

16

CPM Roskamp Champion CPM Wolverine Proctor, LLC Detroit Stoker Company

5

Dieffenbacher

35

Eide Bailly, LLP

29

Elliott Group

15

Factory Sales and Engineering Inc.

21

Fagen Inc.

2

Himark bioGas

18

Hurst Boiler & Welding Co. Inc.

41

ICM, Inc.

34

Mid-South Engineering Company

37

Pellet Fuels Institute

9

PRODESA

39

Retsch, Inc.

11

Schutte-Buffalo Hammer Mill

45

Sustainable Development Technology Canada

24

ThermoEnergy Corporation

31

Timber Products Inspection/ Biomass Energy Laboratories

43

Vecoplan LLC

17

Vogelsang

36

West Salem Machinery

25

Williams Crusher Wolf Material Handling Systems

26

6 23

7 30

FEATURES

DEPARTMENTS 04 EDITOR’S NOTE

26 FINANCE Viable Options Project developers are exploring more funding possibilities, as government programs such as BCAP fade away.

By Luke Geiver

Maps, Money and Mandates

By Lisa Gibson

06 INDUSTRY EVENTS 08 POWER PLATFORM

32 POLICY Setting an Energy Standard

Biomass and 1603 Grants

By Bob Cleaves

While state-level renewable energy standard implementation slows, Congress ponders a national standard.

By Anna Austin

10 THERMAL DYNAMICS Highlights from Saratoga Springs

By Joseph Seymour

12 ENERGY REVIEW Biopower and Biofuels: State of Disarray or Opportunity?

By Chris Zygarlicke

CONTRIBUTIONS 38 INTERNATIONAL Energy Policy Lessons from Sweden

14 LEGAL PERSPECTIVE

Sweden’s ambitious energy policy and quick implementation sets a great example for the rest of the world.

By William Strauss

PARTNERSHIPS

42 USDA Repowering Assistance Program: Underutilized Pot of Gold?

Crowdfunding Biomass Projects

By Bert Ranum and Todd Taylor

16 BUSINESS BRIEFS 20 FIRED UP 44 MARKETPLACE

By partnering with biorefineries, biomass power and heat developers can access certain USDA grants.

By Sarah Beth Aubrey

Biomass Power & Thermal: (USPS No. 5336) May 2012, Vol. 6, Issue 5. Biomass Power & Thermal is published monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices.

POSTMASTER: Send address changes to Biomass Power & Thermal/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

MAY 2012 | BIOMASS POWER & THERMAL 3

¦EDITOR’S NOTE

Maps, Money and Mandates

LISA GIBSON Editor lgibson@bbiinternational.com

Traditionally, Biomass Power & Thermal has released two Biomass Power Maps each year, one in the spring and one in the fall. But in light of the exponential growth in the pellet sector driven by small policy changes here in the U.S., and more so by huge policy changes overseas, we thought an annual Pellet Mill Map might be necessary for the industry.

So the Biomass Power & Thermal team researched and compiled detailed information to create the 2012 U.S. & Canada Pellet Mill Map. It is included for you with this issue. We were able to confirm the operational status of 174 mills, idle, proposed, under construction or operating. It turns out the U.S. East is a hotbed of pellet production, spreading a bit into the Midwest. A number of ports in the East, Southeast and in Texas are helping those pellet mills supply European demand. Thirty-eight percent of pellet mills on the map in the U.S. and Canada combined are exporting, have exports in their project proposals, or are export-ready, but lack the customers. With such an evolving industry, I expect big changes for the 2013 map.

In fact, a recent analysis by Wood Resources International LLC shows that the U.S. and Canada exported equal volumes of wood pellets to Europe in the fourth quarter of 2011. Canada has long been the foremost North American pellet exporter; the U.S. has recently been right on its heels, and now we’re in stride.

The focus of this issue is policy, which has been the main driver in all those pellet exports. Unfortunately, U.S. renewables policies haven’t been as steadfast as Europe’s. Associate Editor Luke Geiver explores ideas for U.S. developers who might be left high and dry after benefiting from federal incentives, such as the Biomass Crop Assistance Program, that are now on the chopping block. But not to worry. As Luke shows, successful projects are still possible through a number of options, some a bit creative.

We also get a peek at other financing options from columnists and contributing writers this month.

Associate Editor Anna Austin steers away from financial policy and provides an update on state-level renewable energy standards since we last visited them. Other than expansions for qualification in states with existing standards, not much has changed. No race is underway to implement energy standards, as we’d hoped.

But a National Clean Energy Standard is now on the table in Congress and has us wondering how such legislation, if passed, would affect state-level mandates. Anna will clue us in.

If you’re a developer wondering about the lull in state standards, or looking for new ways to fund projects, you’ll want to read this issue cover to cover.

4 BIOMASS POWER & THERMAL | MAY 2012

Detroit Stoker Company

® “Our Opportunities Are Always Growing”™

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

ART ART DIRECTOR Jaci Satterlund jsatterlund@bbiinternational.com GRAPHIC DESIGNER Elizabeth Burslie bburslie@bbiinternational.com

PUBLISHING & SALES CHAIRMAN Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com VICE PRESIDENT Tom Bryan tbryan@bbiinternational.com VICE PRESIDENT, SALES & MARKETING Matthew Spoor mspoor@bbiinternational.com EXECUTIVE ACCOUNT MANAGER Howard Brockhouse hbrockhouse@bbiinternational.com SENIOR ACCOUNT MANAGER Jeremy Hanson jhanson@bbiinternational.com ACCOUNT MANAGERS Marty Steen msteen@bbiinternational.com Bob Brown bbrown@bbiinternational.com Andrea Anderson aanderson@bbiinternational.com Dave Austin daustin@bbiinternational.com CIRCULATION MANAGER Jessica Beaudry jbeaudry@bbiinternational.com ADVERTISING COORDINATOR Marla DeFoe mdefoe@bbiinternational.com

TM

SENIOR MARKETING MANAGER John Nelson jnelson@bbiinternational.com

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

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

Please recycle this magazine and remove inserts or samples before recycling

COPYRIGHT © 2012 by BBI International

MAY 2012 | BIOMASS POWER & THERMAL 5

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

(866)746-8385 www.fuelethanolworkshop.com

You deserve consistency and quality through your entire biomass pelleting process —from chips to load-out.

Get it with CPM. U Equipment for your total biomass process U Integrated biomass expertise U Engineered for quality, durability and consistency U Energy efficient Look to your Partner in Productivity—CPM—for your biomass pelleting solutions.

Algae Biomass Summit September 24-27, 2012 Sheraton Denver Downtown Hotel Denver, Colorado Advancing Technologies and Markets Derived from Algae Organized by the Algal Biomass Organization and coproduced by BBI International, this event brings current and future producers of biobased products and energy together with algae crop growers, municipal leaders, technology providers, equipment manufacturers, project developers, investors and policy makers. Register today for the world’s premier educational and networking junction for the algae industry.

(866)746-8385 www.algaebiomasssummit.org

National Advanced Biofuels Conference & Expo November 27-29, 2012 Hilton Americas - Houston Houston, Texas Next Generation Fuels and Chemicals Make plans to attend the 2012 National Advanced Biofuels Conference & Expo in Houston, Texas. Understand the latest techniques being developed in the industry and continue building relationships that last. Contact a knowledgeable account representative to reserve booth space now.

(866)746-8385 www.advancedbiofuelsconference.com

International Biomass Conference & Expo April 8-10, 2013

800-428-0846 6 BIOMASS POWER & THERMAL | MAY 2012

Minneapolis Convention Center Minneapolis, Minnesota Building on Innovation Organized by BBI International and coproduced by Biomass Power & Thermal, the International Biomass Conference & Expo program will include 30-plus panels and more than 100 speakers, including 90 technical presentations on topics ranging from anaerobic digestion and gasification to pyrolysis and combined heat and power.

This dynamic event unites industry professionals from all sectors of the world’s interconnected biomass utilization industries—biobased power, thermal energy, fuels and chemicals.

(866)746-8385 www.biomassconference.com

Your Single-Source System Provider Biomass Handling Equipment Complete Engineered Systems

We offer complete systems for grinding and/or drying a wide variety of biomass materials including wood chips, algae, switchgrass, & kenaf.

Primary Hogs Secondary Hammer Mills Apron Pan Feeders Mass Loading Feeders Disc Screens Screw Conveyors Pneumatic Conveying Silos

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¦POWER PLATFORM

Biomass and 1603 Grants

BY BOB CLEAVES

Lately, there has been a small controversy surrounding the Department of the Treasury’s 1603 Grant Program. Like just about anything relating to the federal budget, the 1603 program is undergoing close scrutiny to determine whether the federal government is getting the most out of its increasingly scarce funds.

This program provides tax benefits for new and under-construction renewable energy facilities. The vast majority of these grants are awarded to wind and solar projects, but the comparatively small biomass grants added up to about $115 million for our industry last year. While the program is not perfect, it has been instrumental in helping biomass grow and provide power to hundreds of thousands more Americans each year.

Biomass projects across the country, including in Berlin, N.H., and Gainesville, Fla., have been able to secure 1603 grants, which in turn have strengthened their pitches to private investors and made their projects a reality.

Now that the presidential election is well underway, much is being made of the nation’s current economic situation and how it should be improved. Part of this conversation is whether the renewable energy industry, biomass included, is accountable for the new jobs that were projected from the 1603 program and other similar

8 BIOMASS POWER & THERMAL | MAY 2012

initiatives. The now-infamous stories about solar failure Solyndra have made the situation worse, creating more skeptics than there ordinarily would have been.

A Wall Street Journal article last month piled on the issue, pointing out several projects across the renewable spectrum that did not seem to live up to their job creation pledge.

What the Journal and many other critics of the program have failed to mention, though, is indirect jobs. Biomass projects in particular create and support construction, trucking, logging, supplier and many other jobs in addition to the full-time positions created at the facilities. Some estimates indicate that as many as seven jobs per megawatt are created or supported when a new biomass facility is built.

Luckily, the U.S. departments of Energy and the Treasury are fighting back against the skepticism of 1603 as a job generator.

If you have any firsthand stories about jobs created or supported with 1603 grants, I’d love to hear them and share them with administration and elected officials. Please contact me.

Author: Bob Cleaves President and CEO, Biomass Power Association www.USABiomass.org bob@biomasspowerassociation.com

• Educational Sessions • Industry Exhibits • Networking Opportunities

Register Now Conference and Hotel Registration now open.

For more information, visit the PFI website.

www.pelletheat.org

Key Topics:

• State and Local Initiatives in the Pellet Industry • Marketing Strategies for the Promotion of Pellet Fuels • Pellet Fuel Markets--Beyond Residential • PFI Standards Program Compliance • Federal Legislative and Regulatory Developments

Who should attend:

• Pellet Fuel Manufacturers • Industry Suppliers • Retailers and Distributors • Federal, state and local government biomass experts • Anyone interested in learning more about the densified biomass industry

For more information, contact PFI at pfimail@pelletheat.org.

The Pellet Fuels Institute, located in Arlington, Virginia, is a North American trade association promoting energy independence through the efficient use of clean, renewable, densified biomass fuel. For more information about pellet heat, contact the Pellet Fuels Institute at (703) 522-6778 or visit www.pelletheat.org.

¦THERMAL DYNAMICS

Highlights from Saratoga Springs

BY JOSEPH SEYMOUR

“Outstanding sessions. Extremely well-organized event,” wrote one attendee. “No better opportunity to have focused time with collaborators working to build the infrastructure for biomass heating,” wrote another. And one of my favorite comments, “Biomass has come a long way in the last 4 conferences...”

These three attendees were among roughly 500 who gathered at the fourth annual Northeast Biomass Heating Expo in Saratoga Springs, N.Y., March 21-23. The success of the three-day heating-centric event speaks to the interest from suppliers, vendors, and customers in the Northeast; attendees arrived from as far as California, 29 other states, three Canadian provinces, and a few European countries. Further, registration increased by 30 percent from 2011’s expo, the vendor floor space was doubled to meet exhibitor request, and over 97 percent surveyed reported they would consider attending or would definitely attend a similar show in 2013.

Numbers are one thing, but content is another. Organizers of the 2012 conference pursued more targeted technical sessions and a different location from the past three shows in Manchester, N.H., and it proved a wise wager. Saratoga Springs offered new opportunities to engage geographically close state partners like the New York Biomass Energy Alliance, Pennsylvania Biomass Energy Association, and the New York State Energy Research and Development Authority, to name a few. From speaker contributions to their presence on the conference program committee, the local delegation brought fresh regional perspectives to the Northeastern view on biomass heating technologies, applications, and fuels.

As is the case at most conferences, some sessions were better attended than others. The two top-rated sessions involved key principles for biomass boiler sizing and financing. These ratings come as no surprise. Vendors and customers alike often have the same top three questions when it comes to getting biomass thermal projects done: how big a system do I really need? How much will it cost? And how am I going to pay for it? Industry stakeholders should take note of these concerns as they extend far beyond New England states.

10 BIOMASS POWER & THERMAL | MAY 2012

Session attendees also came from a wider array of professional backgrounds than in previous years. For the first time, the conference offered professional development hours for New York state engineers, and many attendees took advantage of them. In one session alone, I personally completed certificates of participation for about 30 attendees pursing technical credit. While a majority of those surveyed reported that the New York state credits were not the sole reason they attended, many inquired about the role of additional industry credits for the 2013 show. Facilitating professional development for separate but related industries and trades helps demonstrate that biomass thermal technologies can compete for installation considerations among other commercial heating options.

Finally, the enhanced exhibitor floor and outdoor vendor fair brought the expo’s case studies and seminar topics to life in ways presentations simply could not convey. Component suppliers, boiler and stove vendors, and manufacturers mingled, networked and connected with competitors and customers alike. Outside, bulk pellet delivery trucks and a slew of commercial and residential heating systems revved up and down, communicating their systems’ efficiency, cleanliness, and convenience.

After seeing the pellet delivery trucks, one passerby approached me and asked about the expo’s purpose. Upon hearing my explanation, she replied, “Well I’m glad we’re manufacturing these things [fuel and equipment] here and not shipping more money overseas.” That comment succinctly captured a goal of the Northeast Biomass Heating Expo: demonstrate and reinforce biomass heating’s viability, right now, right here.

I should have asked for the woman’s email information, so I could tell her we’ll be back. See you in 2013, Saratoga Springs.

Author: Joseph Seymour Executive Director, Biomass Thermal Energy Council (202) 596-3974 ext. 302 joseph.seymour@biomassthermal.org

MORE QUALITY EQUIPMENT FOR QUALITY CONTROL

Rotor Beater Mill SR 300 Batchwise or continuous grinding for standard analyses such as NIR, Kjeldahl, Soxhlet etc. www.retsch.com/sr300

Planetary Ball Mill PM 100 Extremely fast and reproducible grinding down to the submicron range www.retsch.com/pm100

CryoMill Cryogenic grinding of samples with volatile components www.retsch.com/cryomill

Sample Dividers Sample splitters and rotation dividers available for up to 10 samples at a time www.retsch.com/assisting

SAMPLE PREPARATION FOR THE BIOMASS INDUSTRY

with RETSCH’s high quality laboratory mills and grinders.

Within the RETSCH range of mills and sieve shakers there is a specialist for every application. But what they have in common is that they produce a perfectly homogeneous, unaltered and uncontaminated sample so that the subsequent analysis is always trustworthy and meaningful. If you require professional solutions that combine high performance, ease of use, a maximum of operational safety and a long lifetime, then RETSCH’s equipment is your only choice!

CUTTING MILL SM 300 Powerful pre-cutting of heterogeneous materials Q perfect adaptation to application requirements by variable speed from 700 to 3,000 rpm Q quick and easy cleaning without tools due to fold-back housing and push-fit rotor and sieves Q moisture content is preserved www.retsch.com/sm300

ULTRA CENTRIFUGAL MILL ZM 200 Analytical Sieve Shakers Widest range of sieving equipment for particle size analysis of bulk goods from 10 μm to 125 mm www.retsch.com/sieving

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ÂŚENERGY REVIEW

Biopower and Biofuels: State of Disarray or Opportunity?

BY CHRIS ZYGARLICKE

An entire quarter of 2012 has gone by, and it is time to evaluate where the U.S. is headed with the development of biobased fuels and energy.

A quick review of news articles could lead one to surmise that bioenergy is in complete disarray because of the sluggish energy economy, a weak set of federal incentives, and a fairly sudden development of huge natural gas resources. Further analysis, however, reveals that the real state of the bioenergy industry is fairly complex and not as bad as it seems.

Today, the primary driver for biofuels development in the U.S. is the second version of the 2007 U.S. Energy Independence and Security Act, commonly referred to as the Renewable Fuel Standard II (RFS2). The production tax credit incentive for ethanol is gone, and a similar tax credit for biodiesel is set to expire at the end of this year.

The RFS2 rule is the only federal incentive remaining for biofuels, and corn ethanol and vegetable oil-derived biodiesel are the only commercially available biofuels in the U.S. Compounding the issue is lower demand in general for gasoline, so naturally the 10 percent blend of ethanol that is in most gasoline today is also in less demand. Overall, there is some amount of disarray in the biobased fuels business this year.

Biobased electricity is a different story, however, as the level of biopower output/consumption in the U.S. has remained stable for several years. Biomass continues to provide about 3 percent of electricity and heat. The primary driver for biomass power and heat remains individual state-promoted renewable portfolio standards (RPSs).

Twenty-nine states mandate renewable energy production by their utilities. That leaves 21 states either with no RPS or an alternate energy production standard which includes energy from biomass technologies or from advanced fossil fuel technologies such as coal gasification. Most renewable electricity production in the country still comes from hydroelectric or wind resources.

For some states, an RPS has attracted development of baseload biomass power plants between 20 and 50 MW. For other regions, communities have incentivized new

12 BIOMASS POWER & THERMAL | MAY 2012

biomass plants using local venture drives and grassroots support. These new biomass power plants have essentially replaced older units related to the pulp and paper industry.

This offset, or build one close one scenario, is one reason the level of biopower remains at 3 percent nationally.

One unexpected impact on biomass-derived power is the fairly sudden increase of low-cost natural gas. In some states, RPSs are written to stimulate the development of wind, solar, and hydroelectric power, leaving biopower to compete in the electricity market against well-established coal generation and ever-increasing natural gas combinedcycle generation. With the upswing of low-cost natural gas, biomass has a more ferocious competitor. Some will say that we have seen these upswings and downturns before so nothing is different, but the data being presented seem supportive of a long-term sustained level of growing natural gas supplies with costs remaining stable. Of course, some new wrench could be thrown into this argument tomorrow, and these projections could all become nonsensical.

The bottom-line message is one of caution, not disarray. RPS incentives and green-minded communities are stirring up business for biomass. At a recent conference, several presenters from the Northeastern U.S. described nine different biopower projects, six of which were all fully funded, all completely permitted and in some phase of construction. In each case, the biomass supply was well resourced at a reasonable cost for sustainable supply; the local communities were behind the projects; pollutant emissions were well within limits and certainly lower than comparable coal or oil-fired plants; and investors were satisfied with the margins of return. In these types of niche opportunities, biomass power systems are finding ground and proving their worth both environmentally and economically. This is not a picture of disarray.

Author: Chris Zygarlicke Deputy Associate Director for Research, EERC (701) 777-5123 czygarlicke@undeerc.org

Biomass to Biofuel Sustainable energy technologies

Process technologies and complete plant solutions. Choose from a full range of single equipment to complete turnkey plants.

ANDRITZ derives over 50% of its total revenue from technologies and processes that generate energy from sustainable resources.

www.andritz.com/renewableenergy

ANDRITZ has a solution with diverse capabilities: Biomass processing Storage and feeding *asi¿cation 2nd generation biofuels Biomass boilers Drying and torrefaction Grinding and pelleting

LEGAL PERSPECTIVEÂŚ

Crowdfunding Biomass Projects

BY BERT RANUM AND TODD TAYLOR

Bert Ranum

Todd Taylor

The times of funding biomass-based projects easily are long gone, and project deals have been a hard sell recently. But a new law may make it much easier for companies to find investors. The bipartisan Jumpstart Our Business Startups (JOBS) Act contains some of the most significant changes in decades to the rules governing how small companies raise money.

As a general rule, offerings of securities that are not done through an IPO are prohibited from using any means of general solicitation or general advertising, which includes communications in newspapers, magazines, television, radio, the Internet, public meetings and more. For example, the current rules do not allow the distribution of letters to everyone in a co-op about a new investment opportunity, and violation of the rule can lead to a Securities Exchange Commission or state enforcement action that requires investor money to be returned.

The JOBS Act removes this barrier for offerings conducted under SEC Rule 506 if all purchasers are accredited investors. Once the SEC adopts the new rules, companies can hold public meetings, advertise, do interviews, post online, and mail letters to large groups. This will make it significantly easier for a company to find and meet with potential investors.

Crowdfunding generally refers to raising money from lots of people, each contributing a small amount, typically via the Internet. The practice has been used to raise money through donations for nonprofits or artistic projects, but now it can be used for the sale of securities. The JOBS Act allows companies to sell securities, provided four criteria are met: the aggregate amount sold by the issuer during the preceding 12-month period cannot exceed $1 million; the aggregate amount sold to any investor during the preceding 12-month period cannot exceed certain limits tied to the income or net worth of the investor, with a maximum of $100,000; the transaction must be conducted through an intermediary that is either a broker or a funding portal that complies with registration, disclosure and other requirements, and is registered with any applicable stock exchange or self-regulatory organization; and the issuer must comply with various filing and disclosure requirements.

14 BIOMASS POWER & THERMAL | MAY 2012

Issuers seeking to take advantage of the crowdfunding exemption must file with the SEC and provide key information about the company and its financial condition, large shareholders, officers, use of proceeds and anything else the SEC deems necessary to protect investors.

Every crowdfunding offering must also include a minimum amount determined by the issuer that must be reached before any proceeds are delivered to the issuer.

This target offering amount must be disclosed to investors, and the intermediary is obligated to ensure that all offering proceeds are provided to the issuer only when the target offering amount is reached.

The aggregate amount sold to any investor is subject to limits based on the income or net worth of the investor. If either the annual income or the net worth of the investor is less than $100,000, the investor may not purchase more than $2,000 or 5 percent of the annual net income or net worth of the investor. If either the annual income or net worth of the investor is equal to or more than $100,000, the investor may not purchase more than 10 percent of the annual income or net worth of the investor, up to $100,000.

While the SEC has to write and adopt formal rules for each of these provisions, they are no doubt significant positive changes for companies trying to raise money.

While crowdfunding may not help build a large plant, it will help raise seed capital to start developing projects. Permitting, advertising and public meetings for larger offerings will help companies raise the larger equity required to conduct serious research and development, or build plants.

Authors: Bert Ranum Shareholder, Fredrikson & Byron (612) 492-7067 rranum@fredlaw.com Todd Taylor Attorney, Fredrikson & Byron (612) 492-7355 ttaylor@fredlaw.com

Q

Customer: Palm oil mill, Southeast Asia.

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Challenge: Add biomass power generation and process steam on a limited budget.

Q

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They turned to Elliott for innovative thinking.

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C O M P R E S S O R S

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Business Briefs PHOTO: DUST CONTROL TECHNOLOGY

PEOPLE, PRODUCTS & PARTNERSHIPS

Dust Control Technology develops new suppression system Dust Control Technology has introduced a new low-turbulence design dust suppression application. The DustBoss DB-M generates an umbrella-shaped cloud of atomized droplets averaging 50 to 200 microns in size, projecting the mist about 30 feet under calm conditions.

The new design features selectable flow settings and the company’s proprietary Variable Particle Sizing Technology to improve capture efficiency. Nozzles can be added, removed or resized as the application dictates.

An in-line 30 mesh filter stops any solids 600 microns or larger. If using potable water, nozzles can be inspected just once a year.

The DB-M can also be supplied with an optional dosing pump for precise metering of odor control additives, surfactants to improve binding to dust particles, or tackifying agents to help seal groundlevel dust and prevent it from becoming airborne.

Fecon announces Northwest regional manager Brian Tinker is Fecon’s new regional manager for the Northwest U.S. His terri-

tory includes Washington, Oregon, Idaho, Montana, northern California, Alaska, Hawaii and a portion of Nevada.

Tinker has extensive experience with new and used equipment in the Northwest and specializes in the recycling and biomass industries.

Hach Co. introduces biogas monitor Hach Co. has launched in the U.S. its Biogas Titration Manager, designed specifically for monitoring biogas production.

The equipment is preprogrammed with three common methods, and has space for seven more user-defined methods, to help biogas plant operators run their plants more efficiently.

Hach’s Biogas Titration Manager provides real-time onsite analysis. Developed in Germany, the titrator is preprogrammed with a dedicated application package.

THE

Biofuel Experts CBI Magnum Force 6400 Our Magnum Force 6400 is one of the most productive, and reliable drum chippers in the global market today!

Features Include: • Unique Clamshell Design Provides Service-Friendly Full Access for Daily Maintenance at the push of a button!

• Available in Stationary, Wheel or Track-Mounted Versions • Produces Uniformly Precise Chips from 4-30 mm • Suitable for Biofuel, Pulp, and Wood Pellets

With throughput of up to 200 tons per hour it will challenge even your best loader operators!

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

Continental Biomass Industries, Inc. • 22 Whittier Street, Newton, NH 03858 USA 16 BIOMASS POWER & THERMAL | MAY 2012

BUSINESS BRIEFSÂŚ

PHOTO: DIEFFENBACHER

These features and an intuitive interface guide operators through the testing process for reliable results.

New pellet press from Dieffenbacher Dieffenbacher has developed a new type of pellet press that will considerably reduce pellet production cost, according to the company. The press will provide a

throughput capacity of up to 25 tons per hour in a single unit. It is designed for the higher pressures required when producing wood pellets and provides additional safety systems for pressing torrified materials.

The main cost saving features of the Dieffenbacher pellet press include: roller bearings separated from the wood flow and heat, eliminating the need for constant lubrication; a roller featuring a replaceable sleeve with a typical lifetime of more than 2,500 hours, depending on type of raw material pressed; and rollers each equipped with their own metering device to ensure an even wood flow between rollers and die.

Greensmith offers distributed energy storage systems Greensmith Energy Management Systems has installed its distributed energy storage systems (DESS) for 14 customers, including eight electric utilities. Green-

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

Please include your name and telephone number in all correspondence.

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FiredUp Leaving a Legacy As of mid-March, Washington state’s biomass energy production facilities that began operating before 1999 are classified as renewable energy producers under the state’s renewable portfolio standard (RPS). That sounds like a relatively simple modification to regulations, but the Legacy Biomass bill (Senate Bill 5575) is poised to have a big impact on bioenergy in Washington.

The first U.S. power plant built to produce electricity from wood is just one facility that will significantly benefit from the new legislation. Avista Corp.’s Kettle Falls, Wash., plant began operation in 1983, so it was far from qualifying as a renewable energy producer under the state’s RPS, even though it uses hog fuel.

The RPS, enacted in 2006, requires large utility providers to generate at least 9 percent of their energy from renewable sources by Jan. 1, 2015, and at least 15 percent by 2020. Power facilities built before 1999, however, were not considered renewable energy producers and therefore ELIGIBLE ENERGY: Under the Legacy Biomass bill, Avista Corp.'s Kettle Falls, Wash., plant qualifies as a renewable energy producer. had difficulty selling power to electric utilities. In addition, electric utilities that own older plants were forced to come up with alternative ways to meet the RPS mandate.

35 MW of electricity to power its operations, with excess sold to “As a result of Senate Bill 5575, energy generated at Avista’s the grid.

Kettle Falls biomass plant will [now] qualify to meet our renewSarah Taydas, Longview Fiber Paper and Packaging affairs able requirements in Washington, beginning in 2016,” says Anna director, says passage of SB 5575 strengthens the economy of Scarlett, spokeswoman for Avista Corp. southeast Washington by supporting jobs at its mill site, and the Passage of the bill is good news for local communities, particularly those in and around Kettle Falls, according to Scarlett. “It forest products industry across the supply chain. She points out that the bill will keep renewable resources in the state, and also will promote employment and preserve jobs at a time when rural economies are suffering,” she says. “Kettle Falls provides work to aligns Washington with green energy qualifications in surrounding states—Oregon and California—as well as at the federal level. local sawmills, fuel delivery businesses, transportation companies The Legacy Biomass bill, which passed with an overwhelmand forest workers.” ing majority, 41-6 in the Senate and 89-9 in the House, takes effect The plant generates 50 MW of power from biomass—about June 1. Not only does it expand qualification for older power 70 tons of wood waste per hour during full operations—and an additional 6.9 MW through a natural gas-fired combustion turbine. production facilities, but also adds materials such as yard and food “It went online in 1983, and pioneered a technology that has been waste, food processing residues, hog fuel and black liquor generated from pulping and wood manufacturing processes as eligible replicated around the world,” Scarlett adds. “We’re pleased it will biomass products. finally be given the recognition it deserves.”

Senators who sponsored the bill echo the sentiments of the Another example of a facility positively impacted by the legaforementioned companies, saying that without it, hundreds of islation is Longview Fiber Paper and Packaging Inc. in Longview, jobs would have been threatened in communities where doubleWash., one of the state’s largest biomass energy producers. The digit unemployment has been a problem for years. —Anna Austin mill uses waste from its manufacturing process to generate 32 to

20 BIOMASS POWER & THERMAL | MAY 2012

PHOTO: AVISTA CORP.

A Washington biomass bill is touted as a job-saver, bioenergy booster

FIREDUP¦

And the Awards Go To: Add the Excellence in Bioenergy Award to the list of accomplishments in 2011-2012 for William Strauss, president of FutureMetrics, a biomass energy consulting and econometrics firm.

For the first time, the International Biomass Conference & Expo included the presentation of industry specific awards, honoring the dynamic policy leaders, members of academia, project developers or organizations that have helped biomass energy establish a presence throughout the country.

Strauss, chosen by a number of industry peers, received the award based on his role in debunking the inaccurate statements presented in a controversial study completed in 2011 by the Manomet Center for Conservation Sciences. The study found that in some cases, woody biomass used for electrical generation emits more greenhouse gases per unit of energy than coal does because of its debt-than-dividend model. But Strauss provided a comprehensive, accurate view of those assertions and showed the positive benefits of woody biomass.

But that isn’t Strauss’ only accomplishment. He also played a key role in ensuring

Maine and New Hampshire include wood pellet pricing for home heating fuel in weekly energy reports.

And Strauss and his team at Maine Energy Systems contributed to the success of a wood pellet boiler installation program in New Hampshire. Several boilers have been installed and more are in the works.

And, on top of all of that, BUILDING BIOMASS: The Savannah River Site Biomass Strauss has helped develop Cogeneration Facility in Aiken, S.C., is the recipient of the a risk assessment and hedg- Grounbreaker of the Year Award. ing tool for project developers and current biomass facility operators, S.C. The 20 MW combined-heat-and-power identifying the role woody biomass prices facility created roughly 800 jobs during play in operation, and how to hedge against construction. The project had a number of price risk. partners, including the U.S. DOE and the The Groundbreaker of the Year Award, state of South Carolina. bestowed on a company or organization that “Together with the DOE, we’ve built has made meaningful headway on a biomass- an award-winning, large-scale, sustainable to-energy project, went to Ameresco Inc. power resource,” says George Sakellaris, After two and a half years of development, president and CEO of Ameresco. the company held its ribbon-cutting cer—Luke Geiver emony in 2011, opening the Savannah River Site Biomass Cogeneration Facility in Aiken,

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A biomass economist and the Savannah River CHP facility win bioenergy awards

¦FIREDUP

A Handle on Heating Value A German company aims to bring biomass power plant innovation to the U.S.

Along with the German Chamber of Commerce, Heinrich Unland, managing director of German technology developer APOS, recently visited the U.S. to survey the country’s biomass power market. Aware that the German bioenergy industry is much more mature than that of the U.S., Unland’s visit was mainly to determine the potential level of interest in a new biomass boiler tool APOS has developed. Unland says there is a global need for the FuelOPT system, which has been on the market for almost two months.

When fuel is pushed into a biomass boiler—whether it’s wood chips or hog fuel—the operator faces the challenge of an ever-changing heating value. “That’s simply because the material has greatly varying water, sand and ash content,” Unland explains, adding that it can have a significant impact on the heating value of the fuel.

Typically, a boiler management system pushes in a consistent amount of fuel, assuming the heating value is even. “The amount of energy going into the boiler varies considerably, however, because of that rapidly changing biomass heating value,” Unland says. This creates an unwanted effect on boiler steam production.

“What you want is a turbine running at maximum production all the time to generate the most power to make the most money,” Unland says. He was faced with the problem years ago, as managing director of a company that ran biomass power plants in Germany, and never found a technical solution. Unland formed his own team and developed a solution: an optical system that analyzes biomass fuel online without affecting the fuel flow in the power plant. “It uses spectrocity as its basis,” Unland explains.

“Light is put on the fuel somewhere in the conveyors during the transportation process, and a reflection comes back that we’re able to analyze.”

That reflection or light is displayed on a spectrometer where a statistical analysis is performed. Water and sand content can be identified in real time, as well as other parameters, according to Unland. Using APOS software that is integrated into the existing plant control systems, the heating value is calculated. “This enables the plant to decrease the ups and downs that it usually has, allowing for a smoother boiler operation, and at the end of the day, it increases power production using the same amount of fuel.”

While the system could work for any kind of biomass boiler, Unland says it may not make economic sense in small boilers.

“The payback period isn’t as attractive then, and our goal is a period of two years or less. A 5 MW boiler would take five years to reach pay off, so for two years, it would take a 10 MW boiler with an annual consumption of 30,000 metric tons (33,000 tons) of wood fuel.”

Since the FuelOPT has only been on the market a short time, the only installation is a pilot application at a 30 MW power plant in Brunsbüttel, Germany, but performance data is available, according to Unland. Interest and feedback from the market has been very positive, he adds. “[Varying heating value is] really a core problem of all biomass plants, especially ones running fresh wood, or a combination of fresh wood and demolition wood.”

—Anna Austin

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FIREDUP¦

Heating the Northeast with Ag The Northeast Heating Expo opened with an agricultural seminar

MIGHTY MISCANTHUS: Perennial grasses and crop-based biomass dominated discussion at the Northeast Agricultural Biomass Heating Seminar.

The Northeast Agricultural Biomass Heating Seminar kicked off the Northeast Heating Expo, held March 21-23 in Saratoga Springs, N.Y. Seminar attendees wanted to know one thing: how to make agriculture-based biomass in the Northeast more efficient, more economical, and above all, more viable.

Timothy Volk, a research director from the State University of New York College of Environmental Science and Forestry and a presenter at the event, summed up in one word the key to making perennial grass and cropbased biomass viable on all fronts: yield.

The event featured presentations and discussions related to developing grass and agricultural biomass as a viable heating fuel, the agronomic and harvest influences on biomass production, how to best utilize grass pellets for thermal applications, and more.

“Driving down the price of production will create an impact,” Volk said of agricultural biomass for thermal applications. “But that isn’t the place we are going to make the greatest gains. Cutting corners on our management in order to squeeze five bucks an acre off the price is not, in my opinion, the way to go, because you are probably going to have other problems in the long run, or you are going to impact your yield.”

Jerry Cherney, a researcher from Cornell University, presented on the effects of agronomics and harvesting practices on feedstock quality, as well as the best ways to burn grass pellets. He named a number of practices that will improve or worsen feedstock quality. “You really can’t afford losing any yield,” he said. “We have to be able to deal with a product that is not so good.”

Mike Newtown, a researcher at SUNY Canton, explained his findings from research into several biomass boilers that could be used to fire agricultural pellets. Newtown found that low-ash pellets are rare, and that in most cases, agricultural biomass did the same job a wood pellet could do.

Closing the event, Dan Conable of Cato Analytics LLC, outlined five key areas grass and other agricultural pellet sectors need to focus on now and in the future: robust equipment, better yields, a better densification process for grass pellets, preprocessing for grass pellets or hybrids of wood and grass pellets, and standardization of grass pellets. All five areas need to be addressed, he said, but eventually the agriculture-based pellet industry will grow and succeed. “The industry will take time,” he said. —Luke Geiver

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MAY 2012 | BIOMASS POWER & THERMAL 23

¦FIREDUP

Grass Growth Farmers discuss their transition to fuel pellet developers

When Enviro Energy LLC’s founder, Bob Miller, began making pellets in upstate New York, he was a farmer. The same can be said about Kevin Sumner and John Brown, both with Hudson Valley Grass Energy in New York. All three individuals presented a history of their paths from farmer to fuel pellet developers during the Northeast Agricultural Biomass Heating seminar held March 21 in Saratoga Springs, N.Y. They all highlighted the growth of the perennial grass and agricultural-based pellet sector.

Miller explained how his team engineered a pellet manufacturing facility capable of switching from one feedstock to another in a matter of two hours. The operation, he said, was built with waste parts from junk yards. “We didn’t really know what would work, but we were thoroughly convinced of what wouldn’t.”

Although Miller makes his operation sound amateur, his facility in New York has not only paved the way for others in the region, but it has also attained a high level of success providing bulk pellet options from both grass and woody biomass.

In Pennsylvania, Ernst Biomass is working with switchgrass to make its pellets. “What we tried to do with Ernst Biomass was fill in the gap between the concept of grass energy and realizing it on a commercial scale,” said Dan Arnett, manager of Ernst Biomass. The company is building a pellet mill and aims to answer a series of questions, including whether the market will support switchgrass pellets, what the price point will be, and what the

required capital will be for building a commercial facility, in comparison with the financial returns.

Ernst Biomass is also building its facility to meet the heating needs of the region. The plant will produce 35,000 tons of pellets per year from both switchgrass fiber and wood fiber, and will also experiment with a hybrid of the two. Several presenters during the conference noted switchgrass for its difficulty as a pellet feedstock, so Arnett gave a summary of the benefits, including its prevalence.

Sumner and Brown presented a $150,000 portable pelleting system for biomass that can be used onsite at farms and energy crop plantations.

The operation can produce one to two tons per hour, and the pair has tested the system at 10 different farms, making pellets out of feedstock ranging from perennial grasses to soybean stubble.

“Our goal was to use U.S.-made equipment,” Brown says. Most of the equipment used on the system was new, except for the truck, the genset and the pellet mill, all of which were refurbished. “Our cost is essentially how much diesel fuel you use in the generator and we use roughly 13 to 14 gallons of diesel per hour.” On a per-ton basis at one hour of operation, Brown estimates the total cost for the system at $83 per hour.

It seems all agricultural pellet projects come with a trial-anderror period. “It’s been a continual process of finding the weak link in our chain,” Sumner said of his project. “We upgrade it.”

—Luke Geiver

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FIREDUP¦

A New Perspective Keynote speaker Carlton Owen said the traditional hurdles aren’t the big ones

The 2012 Northeast Biomass Heating Expo in Saratoga Springs, N.Y., March 21-23 featured a keynote address that shed new light on the challenges facing the industry. Carlton Owen, president and CEO of the U.S. Endowment for Forestry and Communities, told the crowd that typical problems like project finance or feedstock availability, are simply “local weather events.”

Those events, he said, are not the real challenges facing the industry.

Instead, Owen referenced three areas that present the biggest challenges for biomass thermal. The first is that it has too many voices, he said. A veteran of the forest industry, Owen explained that the biomass sector is doing exactly what the traditional forest sector has done. The forest industry has roughly 440 associations that represent it, and while they are all important, he said many are too small and underfunded.

The second challenge, as he explained, is that many developers are letting the perfect stand in the way of the good. As an example, Owen pointed to a biomass energy project his endowment is funding in Georgia. Opponents of the $60 million project say it is not as efficient as it could be. But he argues that the project is still accomplishing a great task in the county: creating jobs. “We need to grow the industry,” he added.

The last challenge Owen discussed is the focus on what and how, not why. Biomass companies need to align themselves and their message to customers with the values of their audience. That message, he added, should be about forest health and sustainability, and job retention.

In addition to his sentiments regarding the real challenges facing the industry, Owen said woody biomass projects need to be right-sized to the resource and to the community in which they will operate.

Along with Owen’s address, the opening morning of the Northeast Biomass Heating Expo, hosted by 24 different biomass-based entities and organizations from both the public and private sectors, included remarks from Frank Murray, president and CEO of the New York State Energy Research and Development Authority. He referred to the organization as the mini DOE. Murray reminded the audience that although the Northeast is unable to heat with natural gas in most places, and that one-third of the homes are heated with heating oil, there are no quick fixes or silver bullets to provide alternatives. The challenges Murray pointed out for biomass-based thermal applications include competition with low-sulfur diesel heating oil. He added, however, that biomass heating systems will be a part of New York’s future heating supply.

Through a partnership between NYSERDA and the U.S. EPA, Murray said his team are developing a test method for staged combustion thermal storage units. He said the project is emphatically supported by wood pellet boiler manufacturers, and several have already supplied their boilers for testing. NYSERDA is also developing a pneumatic pellet delivery truck that Murray said will help craft a best practices guideline for pellet-based heating systems. —Luke Geiver

MAY 2012 | BIOMASS POWER & THERMAL 25

ÂŚFINANCE

A FINE LINE: Aloterra's miscanthus planting has leaned on BCAP, but the funding program's future is uncertain.

PHOTO: ALOTERRA ENERGY

26 BIOMASS POWER & THERMAL | MAY 2012

FINANCE¦

Viable Options

Several government bioenergy incentives are expiring, but other opportunities remain

BY LUKE GEIVER

U

.S. Endowment for Forestry and Communities Inc. works to maintain forested acres across the country and the communities that depend on those acres. But it’s a tough task to carry out.

“We are a very underfunded sector for how important we are,” says Carlton Owen, president of the South Carolina-based organization. He says part of that sector includes biomass utilization that could not only help sustain the forested acres in a certain region, but also the pocketbooks of those who live there. The good news for Owen is that the majority of the biomass industry would agree that the sector is important and needs funding streams from the federal and local levels, as well as the private sector. The bad news is much more complex.

First, a funding source or subsidy provider who recognizes the importance of the biomass sector is needed. That source then has to find a way to navigate through the current political atmosphere and economic climate, and that’s a difficult goal. But that’s not even the bad news.

MAY 2012 | BIOMASS POWER & THERMAL 27

Many federal biomass-based programs that provide financial or project development aid are set to expire or already have. Although Sen. Tom Harkin, D-Iowa, Sen. Kent Conrad, D-N.D., and others have introduced legislation that would continue portions of the energy title under the current Farm Bill, including the Biomass Crop Assistance Program, there are no clear indications of whether the legislation will pass.

Currently, BCAP has no funding beyond a mere $17 million allocated for 2012.

Aloterra Energy has thrived the past two years on its ability to utilize BCAP funding in Ohio, Missouri and Arkansas for its miscanthus fields.

Losing that funding is a major concern. “We think this is going to be a PROGRESS PLUG: Without more BCAP funding, Aloterra's miscanthus advancements would be severely slowed. massive industry,� says Scott CoyeHuhn, senior vice president of corporate development and the chief legal officer for Aloterra Energy. The company has made significant progress BCAP is a sleeper program that is really going to change this country,� in its miscanthus development, decreasing the price per acre from thou- he says. sands of dollars to roughly $750, in just one year. But without BCAP, Unfortunately, Coye-Huhn and his team at Aloterra may never get progress could be stagnant and any further price decline limited. a chance to sign that three-year contract. But other options for project Coye-Huhn says the company believes BCAP can transform the funding do exist, and his team has begun to explore a few. energy crop industry into a truly viable market, if only it could stick around to finish what it started. Aloterra has even offered to sign a con- Say Goodbye to Risk tract for only three more years of BCAP funding, agreeing to operate William Strauss, president of FutureMetrics LLC, and Eric without it after that period. “We believe more strongly than ever that Kingsley, vice president of Innovative Natural Solutions, have de-

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FINANCE¦ veloped a tool to not only predict the risk Accuracy of Woody Biomass Price Prediction Model associated with woody biomass feedstock pricing, but also provide a way to hedge against that risk.

Kingsley has worked in the biomass industry for more than 17 years and admits he’s been part of several large projects that have failed. “I’ve had a number of perfectly good projects die,” he says.

So Kingsley decided to figure out what financers really want. He explains that they always want projects with 20-year feedstock supplies from known entities with little risk, but that’s not in the cards. “You can’t have that,” he says. “It’s simply not possible.” Instead, he says, those project financers really need to know if they can manage and understand price risk.

“I spent a couple of years looking all over the country to figure out what moved biomass prices and why,” Kingsley says. That work helped him uncover six variables that impact biomass prices.

Diesel pricing is an obvious one, he says, Actual Price Predicted Price Residual and the other five are secrets to the tool’s accuracy. “I took the six variables and put SOURCE: FUTUREMETRICS together a mathematical model.” That model can predict actual biomass prices out for five to seven years in federal support. In Kingsley’s perspective, programs like BCAP at nearly 94 percent accuracy. Anything over 80 percent is very are good, but a left-right pocket strategy is better.

Each of the six variables used to make the tool effective have good, according to Kingsley.

But a project developer needs more than just a prediction for an existing over-the-counter hedge, which allows a user to hedge the price of woody biomass. The hedging aspect of the tool shows price risk on biomass. For example, a biomass facility operator or an innovative way for project developers to overcome the reduction developer would buy diesel futures in August. “If diesel prices go

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¦FINANCE up, and they may, you would sell that future in August and it would be that much more,” Kingsley says. “So you would be paying more for your wood out of your left pocket.” The higher the diesel price, the higher the wood price, he explains. “But at the same time, you would be getting the equivalent sum into your right pocket.” That money is made from the difference gained between the August future’s price of diesel, and the price of diesel at the time the hedge on diesel is sold. “You paid more for the wood, but by using the hedge, you made that money back,” he says.

The important part of a hedge, he adds, is that it works both ways. If diesel prices in the example above turned out differently— if the price of diesel in August actually dropped below the price of the purchased August diesel future hedge—then the purchaser is actually paying less for the wood, while losing money when the diesel future is sold. “But by putting together the right basket (of hedges), we can show clients how to manage 90-plus percent of the risk involved in biomass purchases,” Kingsley explains.

The tool is designed for large project managers, Kingsley says, and right now some people are using the predictive portion of the tool and others are using some of the hedging aspects. Companies using the hedging must have access to an active trading desk because Kingsley and Strauss can’t legally trade for a client. But they are already in talks with a number of brokers to partner on the hedging. Looking for a way to make a project more attractive or save money? There’s a tool for that.

30 BIOMASS POWER & THERMAL | MAY 2012

Forget GHGs, Think Jobs Not all federal funding for biomass applications face the possibility of expiration. The New Market Tax Credit is one that is enduring.

But in order to access NMTCs, project developers need to retune their message from a greenhouse gas benefit and carbon footprint focus, to jobs. “You have to keep coming up with new ideas,” says John May, managing director at Stern Brothers and Co. His firm is making a new push to help clients access NMTCs for project development. “The old ideas just don’t work anymore,” he says.

May explains that almost all the tax credits available at the federal level are under attack, and loan guarantees offered by the U.S. DOE and USDA are being questioned. NMTCs, however, are predated before any renewable energy tax package, and perhaps more important, are not predicated on a project’s ability to reduce GHG’s or produce renewable energy. NMTCs are simply used to provide certain census track areas across the country with economic help to develop jobs and improve the community.

The truth about NMTCs is that they are on the upper echelon of paperwork complexity, application comprehension and company usability. But, as May says, it’s not about how NMTCs work; it’s about what they do. “Renewable energy has become one of the major industries in the U.S., and green jobs have become one of the major categories of new jobs that are available to people,” he says. So, this tax credit offers economic help for renewable energy project developers, as long as the project can create or sustain jobs. And it doesn’t matter that the tax credits will be going to a renewable energy project.

FINANCE¦ NMTCs aren’t just viable for project developers. Both May and Kingsley imply that the tax credit is almost free money. The credits are administered through the U.S. Department of the Treasury every year. The agency accepts applications from community development entities (CDEs). CDEs are essentially brokers or middlemen who take in and review applications from project developers, and allocate the amount of funding the project proposal should be given by the treasury. But it’s all based on the project’s ability to create jobs in a given census track.

After an application is approved by the treasury for a given amount, the CDE then finds a private investor, such as a wealthy person, corporation, or hospital. The private partner is then awarded the amount of funding approved for the developer in the form of tax credits that can replace the taxes of the private partner dollar-for-dollar. In addition, the private partner provides a matching fund to the project developer totaling the amount of tax credits allotted to the project developer.

For project developers, the tax credits behave like free money for several reasons. The money is given as a subordinated loan that doesn’t require the developer to relinquish any ownership stake in the project, or any resulting profits from that project. After seven years, the loan is forgiven. “The developer doesn’t have to pay back the principal amount of the loan,” May says. “They only have to pay interest.”

He explains it as a subordinated, forgivable, nondilutive piece of debt subsidized by the federal government that replaces equity that would otherwise have to be raised by a project developer. “It is essentially not free money, but it is nearly free.”

The tax credit is best suited for companies that have seed money available, or have received angel funding or an A round of funding, May says. And, aside from the complexities of setting up the tax credit in a way that reduces risk for all parties involved, May says this tax option could be very important to an energy crop developer or a biomass company. “Let’s say they are struggling to raise equity, not because the money isn’t there, but because the economics of their project are such that the returns aren’t high enough to interest the equity investor,” he says. “One way to alleviate that is to take a portion of the capital costs of the project and pay for it with the New Market Tax Credit, which essentially is nearly free money. That boosts the economics of the project, meaning it requires less debt or less equity, or provides a higher return to equity, however you want to look at it.”

May offers yet another perspective. “If I say to you, ‘let’s go build a project and we can get $5-10 million in free money from the government,’ you are going to say, ‘we are off to a good start.’”

Parties interested in the NMTC can get help from firms like Stern Brothers and Co. and Innovative Natural Resource Solutions to find out how to utilize the tax credit. For the risk tool, contact Kingsley or Strauss.

And don’t panic. People like Strauss, May and Kingsley will be around to find ways to make projects happen in the absence of federal funding programs.

Author: Luke Geiver Associate Editor, Biomass Power & Thermal lgeiver@bbiinternational.com (701) 738-4944

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32 BIOMASS POWER & THERMAL | MAY 2012

POLICYÂŚ

Setting an Energy Standard While 29 states and Washington, D.C., individually work toward their own renewable energy standards, the U.S. considers a national clean energy standard

BY ANNA AUSTIN

MAY 2012 | BIOMASS POWER & THERMAL 33

¦POLICY

W

hen it comes to renewable energy goals, Colorado keeps raising the bar. It was the first state to implement a renewable energy standard (RES) back in 2004 and has twice raised it, now boasting one of the highest in the nation at 30 percent by 2020.

While Colorado and over half of the other states have embraced renewable energy goals and continue to raise and polish them, some have not acted at all. That’s particularly true in the Southeast. While a few southern states have been quietly investigating the possibilities of their own standards, some will likely never adopt an RES, unless they are required by federal law.

It is unclear whether that will happen any time soon. It seems more likely that a national clean energy standard (CES) is in the cards, but in the meantime, renewable energy advocates are working to debunk the myths surrounding RESs. According to Richard Caperton, director of clean energy investment at the Center for American Progress, the most common misperception is that RESs raise consumer electricity prices, and it’s a big reason that law and policymakers in the south have opposed RES legislation.

Fact vs. Myth “Colorado, California and New Jersey are fantastic examples of successful RESs,” Caperton says. “They have driven a significant amount of investment and renewables there, and there is no data that indicates RESs drive up electricity rates; that is totally a myth, and the most common one.”

John Bonitz, farm outreach and policy advocate for the Southern Alliance for Clean Energy, agrees. “They [myths] have all been effectively exposed as half-truths by numerous studies, most recently by researchers from Duke University’s Nicholas Institute and the Georgia Institute of Technology,” he says. The November 2011 study, “Myths and Facts about Electricity in the U.S. South,” finds that energy efficiency and renewable energy are able to work hand-in-hand to meet the projected growth of electricity demand in the South without escalating electricity rates. Aside from price increases that would occur over time without an RES, the study’s modeling shows that over the next two decades, the average household in the South would see less than a $2 increase in its monthly energy bills under an RES. The other most common misperception surrounding an RES is that many states don’t have renewable energy sources, according to Caperton. That myth is especially perpetuated in Georgia and parts of the Southeast, where the coal industry has convinced legislators that using traditional resources is the only option.

Another example is Florida, where forest biomass is said to be inadequate for strong growth in biopower. “The myth is that there is not enough biomass, as if the Sunshine State didn’t have a 12-month growing season,” Bonitz points out. “Do Floridians seriously believe that natural gas imports are going to be better for their state economy than home-grown energy crops?”

Aside from myths—and there are many more—other factors influence a state’s decision to implement an RES, including the requirements utilities must meet to prepare for the future. “Most states that

POLICY¦ haven’t deregulated their electricity markets have resource planning for utilities, which is when the public utility commission or state regulator makes utilities plan for different scenarios—say there’s a price on carbon—and how it would impact the utility and consumers, requiring planning for it,” Caperton explains.

“The states that deregulated electricity markets back in the 1990s don’t have that process, so they need other ways for utilities to plan for the future, and that’s why every state that has deregulated their electricity market has an RES.” While the policy to shoot for on a state level is an RES, on a federal level, it seems to be a CES. But would a CES better suit the country than an SOURCE: GEORGIA INSTITUTE OF TECHNOLOGY/DUKE UNIVERSITY RES, and would a federal policy outshine state-crafted standards?

“It really depends on your goal,” Caperton says. “If it’s to get also politically different because with a CES you bring in the nuclear more traditional renewable energy built, then an RES will do that bet- and natural gas folks, building a bigger base than with an RES.” ter. If your goal is broader investment in all sorts of technologies in the A CES such as the one being considered by Congress wouldn’t electricity sector and carbon reductions, then a CES may be better. It’s significantly help renewable energy, according to Bonitz. “With natural

¦POLICY

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gas at the lowest prices in a decade, it does not need any help and will only further weaken any opportunities for biomass,” he says. “What’s worse is that energy efficiency is the cheapest and most widely available resource, but the CES is an unlikely policy tool to help the full array of efficiency measures.”

Sen. Tom Bingaman, D-N.M., is the sponsor of recently introduced CES legislation. The Clean Energy Act of 2012 begins at 24 percent clean energy in 2015, increasing by 3 percent per year through 2035 to reach 84 percent. It includes renewables like biomass, biogas and landfill methane, but also natural gas and nuclear power, as Caperton points out. And while some renewables groups seem to be embracing the idea of a CES, others like SACE don’t think it’s enough. “SACE believes the country needs a strong national RES, and until then, it should extend and strengthen the tax credits,” Bonitz says. “We also need to level the playing field to allow a fair competition of renewables against entrenched subsidized fossil energy sources. In the very near term, the biomass community needs to counter attack against the Farm Bill Energy Title programs, demanding that our senators preserve and strengthen these programs—for our national security and economic recovery.”

POLICY¦ In addition, Bonitz notes that statewide RESs might be the better option in certain circumstances. “Our analysis is that North Carolina’s (RES), weak as it is, will probably be more effective than any of the national RES proposals we’ve seen,” he says. “And in some national RES scenarios, it’s possible that North Carolina might even export some renewable energy or renewable energy credits.”

Under a CES, however, it is likely that natural gas would gain more advantage relative to efficiency and renewables, causing more of North Carolina’s dollars to leave the state, Bonitz adds.

In 2009, the U.S. Energy and Information Administration performed an analysis on the impacts of a national RES of 25 percent by 2030, and its findings were promising. It found that the RES would lead to increased use of renewables and lower electricity sector carbon dioxide emissions, as well as coal and natural gas emissions. The analysis also found that such an RES would not affect national average electricity prices until after 2020, when they would increase by a maximum of 2.7 percent, but fall back to less than 1 percent after 2030.

Study co-author Christopher Namovicz says the effects of a national RES on electricity prices were minimal in this particular report, but points out that price impacts are largely dependent on the specific policies being proposed.

A final conclusion of the study names biomass and wind as key fuels that sellers will look to in order to comply with the RES. “In general, biomass and wind have the best combination of low cost and widespread availability,” Namovicz says. “Other resources like geothermal or landfill gas may be somewhat lower costs in some locations, but these are not widely available in sufficient quantity— or quantity at a low cost—to go very far toward complying with the proposed requirements.”

No federal RES legislation is currently in Congress, and while legislation for a CES has been introduced, it doesn’t look as though the bill will pass in the near future.

islation in both the Senate and the House, so I think it would be very reasonable for them to at least vote on it.”

He believes a CES would be much more likely to pass than an RES, because a CES provides more regional flexibility for states that haven’t invested in renewables, such as those in the Southeast. “Bringing in a lot of different resources is valuable,” Caperton says, adding that the concept of a CES has gotten a broad base of support.

But what would happen to state policies if a national policy is adopted? “There certainly is a fear that some states would say, ‘we have a national policy, we don’t need our state policy anymore,’” Caperton says. “That would probably be a mistake, because I think states would tend to have a stronger RES than a federal CES would lead to, and they are seeing a lot of investment and economic benefit through this.”

Regardless of what may happen, work on state-crafted energy policies continues. Bonitz says SACE’s allies in South Carolina are striving to get an RES or CES introduced in the state legislature, and efforts continue in Florida. “We are hopeful that the myth-perpetuators are beginning to see the beacon of local economic development via off-shore wind and small-scale sustainable biomass, among other clean energy technologies,” he says.

Meanwhile, the states that have implemented an RES will continue to reap the benefits. “All of the states that have them are seeing a lot more renewable energy being sold,” Caperton says. “And that’s good for consumers, businesses and workers in those states.”

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

Moving Forward “It’s a tough time in Washington to get anything to the president’s desk to sign, so it’s hard to see that happening,” Caperton says.

“At the same time there is support of the legMAY 2012 | BIOMASS POWER & THERMAL 37

ÂŚINTERNATIONAL

CONTRIBUTION

Energy Policy Lessons from Sweden 2012 Excellence in Bioenergy Award winner William Strauss shares a glimpse into his trip to a country that is light-years ahead of the U.S. in environmental policy

BY WILLIAM STRAUSS

T

he U.S. energy policy can be summed up in two words: cheap energy. For generations, the U.S. business model has been based on securing the flow of cheap fossil fuel.

Government policy has avoided taxation schemes that would make those fuels more costly. As a result, for most of our industrial history, we have been insulated from any motivation to become more efficient and to seek alternative energy sources.

Those days are coming to an end.

We seem to be on a one-way, dead-end street. And we continue to look for reprieves from the inevitable consequences of depleting resources in a growing world economy. The natural gas boom is the latest step in prolonging a long history of cheap energy policy and avoiding the price signals that would motivate us to become more efficient and less reliant on depleting resources.

Carbon Tax in Sweden $162

Per Ton of CO2

Heating Oil Coal Natural Gas Propane Diesel Gasoline

$1.75 $366.05 $32.28 $45.36 $1.42 $1.75

SOURCE: WILLIAM STRAUSS

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

38 BIOMASS POWER & THERMAL | MAY 2012

per gallon per U.S. ton per cubic foot per cubic foot per gallon per gallon

INTERNATIONAL¦

Biomass as Percentage of Total Energy

SOURCE: WORLD BANK, 2011, ANALYSIS BY FUTUREMETRICS

the Swedes have done and are doing.

My work with bioenergy has taken me many places. But my visit to Sweden was perhaps the most eye-opening. I knew things were different on my first day. On the way from the airport to Lidkoping, we stopped at a Max Burger (a fast food burger shop very similar to McDonald’s) and

PHOTO: SKOGFORSK

So after I delivered the keynote address at the International BioEnergy Days (IBED) conference in Lidkoping, Sweden, in late September—Sweden was chosen because it consistently ranks at the top of lists for energy efficiency and reduced dependence on fossil fuels—I decided to spend extra time in the country to see what

POLICY PIONEER: Sweden's renewable energy ambition has also positioned it as a leader in the development of forest residue harvest machinery.

MAY 2012 | BIOMASS POWER & THERMAL 39

ÂŚINTERNATIONAL

each menu item not only listed the price, but also the carbon footprint it had accumulated on its trip to a food tray. This was a glimpse into the cultural norms of consumption choices in the country that has been the highest ranked in the world for many years

by Germanwatch for its climate change performance. The U.S. is number 52 and China is number 54 in the rankings.

From listening to our policymakers discuss environmental policy, one would think

it is bad for the economy to be good to the environment. In Sweden, that is not at all the case.

Many of us in the alternative sector understand that the future of our society can be one of greater energy independence, sustainability, and efficiency, all coupled with economic growth and job creation. The U.S. is not there yet and perhaps is not even on the path yet, but in Sweden, that vision of the future is the reality.

I spent seven days there. The first two were at the IBED conference and the others were spent touring bioenergy facilities and meeting with bioenergy companies and government officials. The IBED conference will be held in the U.S. next year in Minnesota. I would urge those who are in the bioenergy sector to attend.

My keynote speech at IBED addressed my vision for the Northeastern U.S. and how we at Maine Energy Systems are using European biofuels technology in our corner of the country to lower heating costs, create jobs, increase energy self-sufficiency, and lower carbon footprints. I also spoke about how my company, FutureMetrics, is working with policymakers, community leaders, and industry to facilitate the growth of biomass-fueled heating and combinedheat-and-power (CHP) systems. A number of speakers talked about how Sweden has succeeded with energy policies in moving toward a much reduced reliance on fossil fuels for heating, electricity, and transportation. In the process, the country has also dramatically lowered its carbon footprint.

Looking Back

40 BIOMASS POWER & THERMAL | MAY 2012

The move away from fossil fuels in Sweden began in the 1970s after the oil shocks. But the more substantive transformation that has brought real structural change began in earnest in 1991 with the implementation of a carbon tax. I realize that in the political climate of the U.S. today, the word tax is a four-letter word. But let’s look at what has happened in Sweden.

The current tax on carbon emissions falls on petroleum-derived products, natural gas, and coal. The cost of wood pellets delivered to Europe is about $185 per ton for cost insurance and freight, which is less than the carbon penalty. Note also that the cost of a ton of coal in Rotterdam is about $120, according to Argus Biomass Markets.

One might think that these sorts of prices on energy and transportation fuels would cripple an economy. In fact, the Swedish economy did undergo a period of transition after the carbon tax was promulgated. As the use of alternative and

INTERNATIONAL¦

renewable energy sources increased, however, the new infrastructure and jobs associated with creating energy from what was once waste, and from other renewable sources, complemented by efficiency gains, drove the Swedish gross domestic product (GDP) per capita to become equal to or greater than the U.S.’s by the mid-2000s.

The policies promulgated after the oil shocks of the 1970s and the carbon taxes started in 1991 have greatly reduced Sweden’s reliance on fossil fuels. Energy independence is much closer to reality in Sweden than in the U.S., and a significant portion of that displacement has come from the use of biomass.

More recent laws require that every town have a biogas filling station for cars and trucks, with the biogas upgraded to at least 97 percent methane and almost no carbon dioxide. Biogas is produced in many local and regional biogas facilities from agricultural and food wastes.

This has not only created a market for wastes, but also jobs that support energy and transportation. Since biogas does not incur a carbon tax, it is about 30 to 35 percent less expensive to travel the same distance with biogas than with diesel or E85 gasoline.

Sweden also provides tangible benefits to biogas vehicle owners, such as free parking, exemption from city gate tolls, special lanes, and significant tax breaks for corporate purchases of biogas vehicles (40 percent reduction on valuation tax). The Volvo factory in Sweden cannot keep up with demand for green cars.

The byproduct of these policies is what wins Sweden the top ranking in environmental stewardship.

A real energy policy requires that energy users have a motivation to become more efficient, to use more of what we might consider waste, and to support an infrastructure for alternatives. But to really notice the dead end on the one-way street, we need to foster an awareness of the consequences of a continued reliance on fossil fuel ingrained as a cultural norm.

We have a long way to go, but at least we can look elsewhere and see how our fu-

ture could be different; even from simple acts like making a fast food choice based on minimizing the use of nonrenewable fossil fuel energy. Lowering carbon output is good for the planet’s future, but lowering our dependence on fossil fuel energy is good for our economic future.

Author: William Strauss President, FutureMetrics (207) 824-7428 williamstrauss@futuremetrics.com

Real Energy Policy So the message is that a real energy policy can work. A real energy policy can not only deliver greater self-sufficiency for the long-term, but also can be done without long-term harm to the economy. For example, a policy with future targets for carbon taxes incrementally applied over a five-year span would provide advanced notice and allow the renewable economy to develop ahead of the crisis.

MAY 2012 | BIOMASS POWER & THERMAL 41

¦PARTNERSHIPS CONTRIBUTION

USDA Repowering Assistance Program: Underutilized Pot of Gold?

Even biorefinery-focused programs can offer funding for biomass projects

BY SARAH BETH AUBREY

G

rant writers for agriculture and renewable energy projects are often very popular at cocktail parties.

Perhaps not the type of parties with ball gowns and tuxedos, but certainly at the after-the-session-free-cocktails-andsnacks sort of events common to trade show functions across the country. Yes, being the person who assists with finding and securing “free” funds tends to make grant professionals oft-engaged in conversation, if not necessarily the life of the post-session mixer.

It should be realized, though, that grant writing for biomass projects has its rewards and disappointments. Consultants are certainly rainmakers for many clients when they help secure hundreds of thousands of much needed dollars. But grant professionals can be heartbreakers when they advise against

applying for the big federal money because their client’s project doesn’t meet the guidelines well enough to get an award. No one enjoys that conversation, but it is an essential part of the funding search process.

It seems everyone is aware of the major grants for biomass projects and can name them easily. Anyone who worked through USDA’s Rural Energy for America Program tight grant deadline for 2012 is fully aware of just how many developers and technology providers have been browsing www.grants. gov. That being said, are there really any hidden gems left out there? Or are all of the good grants—the supposed secret pots of money—all used up?

Not Secret, But Underutilized There may not be any secrets, but there is one grant that could be considered at least

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

42 BIOMASS POWER & THERMAL | MAY 2012

underutilized: USDA’s Repowering Assistance Payments to Eligible Biorefineries, commonly called the Repowering Assistance Grant.

This program, accepting applications now through June 1, has up to $25 million available for eligible entities. Authorized as part of the Food, Conservation and Energy Act of 2009, this year's allotment includes carryover funds from 2011. Individual awards can be up to $10 million and a 50 percent match is required.

This funding is not exactly for biomass projects, unless you are working with an existing biorefinery. The payments will actually go to the biorefinery, similar to the way BCAP doesn’t pay the project developer directly. Sometimes having an order placed by a buyer with guaranteed funds is a grant in and of itself.

PARTNERSHIPS¦ According to Chris Cassidy, national renewable energy coordinator for USDA Rural Development, biomass could be eligible in a variety of ways. “Combined-heat-andpower using biomass is an obvious example where a plant could convert to electricity or gas to run the plant,” Cassidy says. He also mentioned that anaerobic digestion, pyrolysis, and gasification when using biomass are all technologies that could potentially fit. In reviewing the regulation, one will find that anything besides “feedstocks for repowering that are feed grain commodities that received benefits under Title 1 of the Food Conservation and Energy Act of 2009” are suitable feedstock sources. Cassidy says hybrid projects could qualify, too, meaning combinations of wind, solar, or geothermal resources with biomass feedstocks could work. “The aim is to move to second- and third-generation technologies to power these biorefineries,” Cassidy says.

He adds that the definition of biorefinery is often called into question. Apparently, the definition is intended to mean existing facilities that create liquid transportation fuels using biobased feedstocks such as ethanol and biodiesel plants. Another hang-up for some potential applicants is the word existing. USDA has parameters around this, too. To be eligible for the payments, the biorefinery where the improvements are being installed must have been in operation on or before June 18, 2008.

Eligible costs for the program are fairly broad and can include just about any capital costs associated with upgrading the existing facility so that it may be repowered with less dependence on fossil fuels. “Anyone considering an energy efficiency upgrade to a facility (could) be a good candidate for this program,” Cassidy advises, saying he looks forward to good quality, well-researched applications prepared with an eye toward understanding USDA’s specific needs for complete application packages.

Accurate Applications Besides the regulations and a partnership with a facility that has been in busi-

ness long enough, there are certain hurdles to overcome in the application process. First, good grant writers will advise allowing plenty of time to document and provide the correct detail. The Repowering Assistance Program also requires that an independent feasibility study (consistent with USDA’s published feasibility study guidelines) accompany the complete application package. Third-party feasibility documentation, especially the technical component, is critical to approval. Cassidy commonly sees compliance with feasibility study requirements, especially providing the level of detail and sophistication needed for a grant award, as an issue.

Emphasis on reducing fossil fuel use in liquid transportation fuels production appears to be the original intent of the program. The more fossil fuel the feasibility study indicates can be offset, the higher scoring the application. The guidelines even require a 40 percent reduction to get the minimum score in that category.

The Repowering Assistance Program may not be the pot of gold at the end of the rainbow, but if your organization’s technology can be used by an existing biorefinery, here is a program short on quality applications with $25 million to spend for the right projects. “It’s rare when we have funds available in these programs and this one has not historically used up its money in any given year,” Cassidy says.

This may be a wide-open door for the right project and technology. When thinking of grants, always have a creative angle in mind and don’t overlook partnering with businesses outside your immediate energy focus. For application information, visit www.rurdev.usda. gov/BCP_RepoweringAssistance.html.

Author: Sarah Beth Aubrey Certified Grant Administrator, Prosperity Ag & Energy Resources (317) 996-2777 sarah@prosperityagenergy.com.

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