July 2012 Biomass Magazine

July 2012

The Sequence of Success

Why Power Purchase Agreements Should Still

Come FirstPage 30

Plus:Contract Dynamics All Wood Pellet Suppliers Should KnowPage 24

And:Perspective From New York State’s Biogas Empire Builder Page 36

A Market Entry Goal Advanced Biofuels Companies Can IgnorePage 40

www.biomassmagazine.com

JULY 2012 | BIOMASS MAGAZINE 3

PELLETS Contract ConceptsThe global biomass export and import market will expand as suppliers and end users recognize the dynamics of a supply agreement. By Luke Geiver

POWERPower Purchase Plays Cheap natural gas and onshore wind mean biomass power producers must rely on base load reliability, long-term affordability—to get power purchase deals done. By Anna Simet

BIOGASCreating a Biogas EmpireDevelopers of New York state’s largest on-farm anaerobic digester share advice for anyone exploring similar co-digestion projects. By Anna Simet

ADVANCED BIOFUELSForget First to MarketThe advanced biofuels sector may not reward the fi rst companies to enter the market because proven technology trumps consumer mindshare. By Luke Geiver

INSIDE¦

JULY 2012 | VOLUME 6 | ISSUE 7

FEATURES DEPARTMENTS04 EDITOR’S NOTE

Contracts as Industry Marching OrdersBy Tim Portz

06 INDUSTRY EVENTS

08 POWER PLATFORMThe Role of State Governments in Supporting Biomass Power By Bob Cleaves

11 ADVANCED ADVOCACYRenewables Fight Underway in WashingtonBy Michael McAdams

13 LEGAL PERSPECTIVEThe Financing of Feedstock SupplyBy Mark Hanson

14 BUSINESS BRIEFS

16 FIRED UP

44 MARKETPLACE

24

30

36

40

ADVERTISER INDEX¦

2012 Algae Biomass Summit 47

2012 National Advanced Biofuels 46Conference & Expo

2013 International Biomass Conference & Expo 2

Algal Biomass Organization 12

BBI Consulting Services 48

Biomass Magazine 4

Continental Biomass Industries, Inc. 19

CPM Roskamp Champion 6 & 17

Dieffenbacher 23

Factory Sales and Engineering Inc. 26

Fagen Inc. 15

Fike Corporation 22

Haldor Topsoe A/S 9

Hurst Bioler & Welding Co. Inc. 43

ICM, Inc. 39

Indeck Power Equipment Co. 14

KEITH Manufacturing Company 27

Keller and Heckman 32

Mid-South Engineering Company 34

Millard Maritime 7

Pellet Fuels Institute 45

Pellet Mill Magazine 10

PRODESA 5

RUD Chain 38

Sud-Chemie AG 42

ThermoEnergy Corporation 29

Timber Products Inspection/ 35Biomass Energy Laboratories

Twin Ports Testing 20

U.S. Department of Energy, Biomass Program 33

West Salem Machinery 21

Wolf Material Handling Systems 18

Biomass Magazine: (USPS No. 5336) July 2012, Vol. 6, Issue 7. Biomass Magazine is published monthly by BBI International. Principal Offi ce: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offi ces. POSTMAS-TER: Send address changes to Biomass Magazine/Subscrip-tions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

36

4 BIOMASS MAGAZINE | JULY 2012

Contracts as Industry Marching OrdersI am continually struck by the number of professionals, and the variety of their responsibilities, that

are involved in the development of any biomass-to-energy project. From the fi rst spark of an idea for a project’s development through the commissioning phase, the assembled body of professional expertise is staggering. Furthermore, every project that succeeds and begins delivering renewable power, heat or fuels is testimony to the expertise and commitment of every professional involved.

This month in Biomass Magazine, we examine the professionals who pursue, shape and fulfi ll the off take agreements, contracts and power purchase agreements (PPAs) that ultimately are the driving force behind this industry. Any sales professional will remind you that “nothing happens until somebody sells something,” and the energy sector is no exception. Featured this month is a close look at the role contracts play in not only any specifi c project’s development, but also how contracts and PPAs collectively form a foundation of a steady and reliable energy product supply.

Luke Geiver’s article “Contract Concepts” outlines the role of pellet supply contracts in providing surety to waiting utility customers who cannot tolerate any supply interruption or quality inconsistency. He features insights from contract experts including Henry Pease, a senior biofuel portfolio manager for RWE, who sources nearly 3 million tons of wood pellets annually from all over the globe.

In Anna Simet’s story “Power Purchase Plays,” she establishes the relationship between a PPA and a project’s ability to attract and convince a conservative lending community. The professionals she spoke with remind us that biomass energy competes with other renewables but, as evidenced by her conversa-tions with South Carolina utility Santee Cooper, biomass can and does win its fair share of the market because of its reliable and consistent base-load qualities.

Finally, I’d like to draw your attention to the expanded biomass coverage you can expect in Biomass Magazine. This month’s issue focuses on the conversion of biomass into not only renewable kilowatts and Btu, but also liquid fuels and next- generation renewable chemicals. In covering the industry, we’ve often found that stories about inputs, conversion technologies and projects couldn’t be confi ned to heat or power but had applicability in fuels and chemicals as well. To tell the whole story, the fuel and chemi-cal components had to be discussed. And so it is with the biomass industry as a whole. To tell the entire biomass story, we have to talk about all of its energy product possibilities. In fact, perhaps the strongest argument for the continued advancement of the biomass-to-energy industry is biomass’s ability to be converted into every energy product the U.S. and world consume. No other renewable energy input can boast that, and Biomass Magazine’s new editorial scope should be construed as a celebration of biomass’s unrivaled output fl exibility.

TIM PORTZVICE PRESIDENT OF CONTENT & EXECUTIVE [email protected]

¦EDITOR’S NOTE


EDITORIAL

PRESIDENT & EDITOR IN CHIEFTom Bryan [email protected]

VICE PRESIDENT OF CONTENT & EXECUTIVE EDITORTim Portz [email protected]

EDITORSAnna Simet [email protected] Geiver [email protected]

Erin Voegele [email protected]

COPY EDITOR Jan Tellmann [email protected]

ARTART DIRECTOR

Jaci Satterlund [email protected]

GRAPHIC DESIGNERElizabeth Burslie [email protected]

PUBLISHING & SALESCHAIRMAN

Mike Bryan [email protected]

CEOJoe Bryan [email protected]

VICE PRESIDENT, SALES & MARKETINGMatthew Spoor [email protected]

EXECUTIVE ACCOUNT MANAGERHoward Brockhouse [email protected]

SENIOR ACCOUNT MANAGER Jeremy Hanson [email protected]

ACCOUNT MANAGERSMarty Steen [email protected] Bob Brown [email protected]

Andrea Anderson [email protected] Austin [email protected]

CIRCULATION MANAGER Jessica Beaudry [email protected]

ADVERTISING COORDINATORMarla DeFoe [email protected]

SENIOR MARKETING MANAGERJohn Nelson [email protected]

Subscriptions Biomass Magazine 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 Magazine 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 [email protected]. Advertising Biomass Magazine provides a specifi c topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To fi nd out more about Biomass Magazine advertising opportunities, please contact us at (701) 746-8385 or [email protected]. Letters to the Editor We welcome letters to the editor. Send to Biomass Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or email to [email protected]. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

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Please recycle this magazine and remove inserts or samples before recycling COPYRIGHT © 2012 by BBI International


Algae Biomass SummitSeptember 24-27, 2012Sheraton Denver Downtown HotelDenver, ColoradoAdvancing Technologies and Markets Derived from AlgaeOrganized by the Algae 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. Early bird registra-tion rates expire August 13, 2012.(866)746-8385www.algaebiomasssummit.org

National Advanced Biofuels Conference & ExpoNovember 27-29, 2012Hilton Americas - HoustonHouston, TexasNext Generation Fuels and ChemicalsProduced by BBI International, the National Advanced Biofuels Conference & Expo is tailored for industry professionals engaged in producing, developing and deploying advanced biofuels, biobased platform chemicals, polymers and other renewable molecules that have the potential to meet or exceed the performance of petroleum-derived products(866)746-8385www.advancedbiofuelsconference.com

International Biomass Conference & ExpoApril 8-10, 2013Minneapolis Convention CenterMinneapolis, MinnesotaBuilding on InnovationOrganized by BBI International and produced by Biomass Magazine, 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 gas-ifi cation to pyrolysis and combined heat and power. This dynamic event unites industry professionals from all sectors of the world’s in-terconnected biomass utilization industries—biobased power, ther-mal energy, fuels and chemicals. (866)746-8385www.biomassconference.com

¦INDUSTRY EVENTS

International Fuel Ethanol Workshop & ExpoJune 10-13, 2013America’s CenterSt. Louis, MissouriWhere Producers MeetNow in its 29th year, the FEW provides the global ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-to-business environment. The FEW is the largest, longest running ethanol conference in the world—and the only event powered by Ethanol Producer Magazine.(866)746-8385www.fuelethanolworkshop.com

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In early June, I had the privilege of at-tending a tour of the Burgess Biomass Power Project in Berlin, N.H., sponsored by Babcock & Wilcox, the engineering, procurement and construction contractor. I am sharing their story as an example of a biomass facility at the center of a revitalizing town—where the market and the local government have similar needs that are being met by biomass.

At 75 MW, the project brings almost 500 jobs to a region of New Hampshire that's been hit hard by the economic downturn. This would not have been possible without a long-term contract for the power, negotiated between the developers and the local utility, Public Service of New Hampshire.

It all began in May 2006, with the clos-ing of a 150-year-old-plus paper mill. For most of the northern New Hampshire town's recent history, the mill had been the center of economic activity and—despite the mill's shrinking size as the dawn of the Internet decreased demand for paper—remained the top employer for the town of 10,000 residents, until the day it shut down.

For several years, the lot that had been home to the historic paper mill remained empty as the town debated what to do with the land, and more importantly, how to restore the jobs that were lost with the mill.

In 2010, after four years of debate dur-ing which the buildings and the former paper mill began to fall into disrepair, a developer purchased the land and buildings to build a biomass plant.

In addition to putting to use a vacant lot that had once been the center of the communi-ty, the new biomass plant would employ former paper mill workers who would do jobs that fall within their expertise. Additionally, the new bio-mass plant would use the very same boiler that had been implemented by the paper mill.

The biomass plant project, which has been permitted and is being developed by Cate Street Capital, is currently in the construction phase. The project enjoys lots of support from local government and residents in Berlin. In Septem-ber 2011, upon Cate Street Capital's closing for project fi nancing, Berlin Mayor Paul Grenier said, "I think this is the beginning of a new economic era for the city of Berlin."

Berlin’s story is just one example of the market and regulatory environments aligning to support a project that will provide much-needed jobs and clean energy. Another is in Washington state, where government recently passed a law that reaffi rms the jobs potential and carbon neutrality of biomass, and extends renewable energy status to previously unrecognized, older biomass facilities. And there are many other examples across the country.

The lesson here is that, with regards to energy, market needs and government needs are not mutually exclusive—and biomass can often help overcome both the economic and environ-mental challenges.

Author: Bob CleavesPresident and CEO, Biomass Power Association

[email protected]

The Role of State Governments in Supporting Biomass Power

¦POWER PLATFORM

BY BOB CLEAVES

Renewable drop-in diesel, jet and naphtha fuels

Capitalizing on bio-oils

Haldor Topsøe has developed licensed process technology – HydroFlex™ – and specialized catalysts for producing drop-in renewable fuels from a large variety of second-generation feedstocks such as:

- animal fat - waste cooking oils - tall oil (paper and pulp industry) - other glyceride oils - various renewable crude oils

We are currently involved in more than a dozen plants producing renewable drop-in diesel, jet or naphtha. Topsøe’s renewable fuels catalysts are optimized to provide substantially better product yields of both diesel and jet improving the profi tability for our clients.

Contact us to learn more about how Topsøe technology may benefi t your company.

W W W. T O P S O E . C O M


In columns I have authored during the last two years, I have described the increased challenges facing the advanced biofuels industry. Today, I welcome the opportunity to now share with you the political, leg-islative and regulatory landscape we face in Washing-ton; the challenges, opportunities and achievements of our industry, and to a greater degree, the renewable energy sector. Usually I like to take a closer look at a particular issue, whether that’s tax policy, the Biomass Crop Assistance Program, or even the challenges fac-ing the renewable fuel standard (RFS). But this past month in Washington could best be described as an avalanche, on all fronts, against all biofuels.

Let’s start with the recently announced program from the U.S. Department of Defense, the U.S. DOE and the USDA. Folks, this is the fi rst year the gov-ernment was attempting to prudently invest $510 mil-lion federal dollars over the next three years from the Defense Production Act to assist, on a match basis, with the building of new plants to manufacture drop-in renewable fuels for use by America’s Armed Forc-es. The avalanche I mentioned began as the House Armed Services Committee, by a vote of 32 to 29, placed a measure into play that requires the Penta-gon’s purchase of advanced biofuels to be at parity cost with existing fuels. That action can’t be mistaken for anything else but an unreasonable hurdle in the road to further developing and commercializing ad-vanced biofuels.

The action continued in the House Appropria-tions Committee, where the majority removed any money for use by the DOE and DOD through the DPA. Though following signifi cant assistance from the White House, their colleagues on the other side of the Capitol in the Senate Appropriations Commit-tee agreed to keep full funding of the DOE’s compo-

nent. Now we await the full Senate Appropriations Committee vote on the DOD portion, which as of press time appears to be intact, despite substantial ef-forts to remove it.

With all of the legislative maneuvering that po-tentially could delay our future commercial success, we had some encouraging action as lawmakers agreed on the funding of the energy title in the Senate Ag-riculture Committee, to the tune of $800 million for BCAP and other elements for biofuels in the Farm Bill. Though a handful of amendments would have discontinued the energy title and the entire RFS, the Senate voted against them and the Farm Bill was passed with our renewables programs unscathed. Now it's a waiting game, as the energy title must sur-vive the House.

Through all of this there is good news, as a sig-nifi cant number of entities from the airline industry, the environment community, the U.S. Farm Bureau, the military establishment and the biofuels indus-try, to name just a few, have circled the wagons and worked together like no other point in our history. We can all see the potential leadership position the U.S. has before it; our nation could once again be an industry-changing innovator that the rest of the world would follow. Developing renewable energy alterna-tives is an inevitable part of our shared global future, and America should help lead the way, not turn its back on it. Time for us all to get to work.

Author: Michael McAdamsPresident, Advanced Biofuels Association

(202)[email protected]

Renewables Fight Underway in Washington

ADVANCED ADVOCACY¦

BY MICHAEL MCADAMS


When developing biomass feedstock projects, there is one area that challenges the project through completion—feedstock supply and pricing. In some biomass electric-ity projects, the feedstock is compared to a fuel such as coal, for which risk is minimized by long-term contracts with large companies. There are multiple sources of coal, and large producers reduce or minimize counterparty risk. The energy in coal, or Btu that can be extracted, is typically within a predictable range.

Assuming adequate supply, key factors in sourcing feedstock are energy density and price. Feedstocks that are produced for fuel tend to have more predictable energy densities, but also have higher pricing and production pro-fi les. Many feedstock projects focus on waste feedstock because they are paid to take it or pay a low cost, and that can drive profi table projects. In fi nancing such a project, there is a higher risk that needs to be addressed, related to production for an alternate purpose, lack of contractual consistency, price escalation for transportation and han-dling, and price risk, if there is competition for the waste.

A number of projects designed around feedstock waste streams have not been fi nanced due to waste feed-stock risk. Commercial waste for feedstock sourcing car-ries the inherent risk of no supply if the producing indus-try changes, as happened with housing market production and its construction waste. To counter that risk, some projects have sought consistent supplies through munici-pal wastewater and solid waste. While those waste streams require processing to become useful feedstocks, the con-stant supply of no-cost or low-cost feedstock can be con-tracted with little risk of the waste-producing industry failing. Further, as the use for the waste becomes more developed, brokers enter the market to capture supply and margin. While most recently discovered feedstocks carry some of that risk, the waste feedstocks can be more vola-tile in supply and price.

Biomass feedstock projects can be fi nanced when the risk is approached strategically, with awareness of:

Multiple Feedstock Sources. Multiple sources of the same type of feedstock and different sources of differ-ent feedstocks reduce supply and counterparty risk. Feed-stocks tend to have seasonal variances in availability and price that also should be addressed.

Processing and Output Capacity for Different Blends of Feedstocks. Tests should be performed and data collected on different feedstock blends and the im-pact, if any, on output capacity.

Counterparty Risk. The feedstock sources and pro-viders, including the industry that provides the feedstock.

Impact of Regulatory Requirements. Regulatory issues concerning the source, handling, and storage of the feedstocks as well as the regulatory requirements that ap-ply to the use of the feedstock.

Feedstock Requirements. For acceptable process-ing, the feedstock must meet the regulatory and processing requirements to produce the output capacity. Standards or requirements should be set that can be measured against the available supply.

Developers should be prepared for fi nanciers to ex-pect third party review and reports addressing the various risks of feedstocks. The following should be considered:

Feedstock Supply Agreements. At a minimum, use a form of purchase agreement acceptable to feedstock providers that sets out the feedstock requirements or stan-dards, as well as remedies for not meeting the standards. For example, the presence of hazardous substances will likely cause rejection of the feedstock, but higher moisture may cause a price discount instead of rejection.

Feedstock Resource Assessment. A third-party as-sessment describing the availability of the feedstocks will need to be prepared, including competition for the feed-stocks and pricing information.

Fuel Management Plan. A plan or agreement with a third party will be required, which will describe how the various feedstocks will be procured, handled and stored, and the working capital necessary to maintain a high-qual-ity fuel supply.

Pricing Collars or Guarantees. Ultimately the best plans may not cover the perceived risks of feedstocks. Project developers should contemplate fi xed-price guar-antees or price collars (high-low) under which the project can be operated.

Many fi nancing sources require a higher degree of project risk reduction. Feedstock projects should develop a focused approach to reduce the perceived risks relating to the feedstock, its providers, and long-term pricing. A strategic approach with properly negotiated agreements can cover many perceived risks.

Author: Mark HansonPartner, Stoel Rives LLP

(612) 373-8823

Financing of Feedstock Supply

LEGAL PERSPECTIVE¦

BY MARK HANSON

Covanta appoints Waffenschmidt to advisory council

Covanta Energy Corp., owner and op-erator of numerous waste-to-energy proj-ects, appointed John G. Waffenschmidt, vice president of environmen-tal science and communi-ty affairs, to the Product Stewardship Institute Advisory Council.

The council advises PSI on reduc-ing the health and environmental impacts throughout the life cycle of a consumer product.

As the vice president of environmental science and community affairs at Cova-nta Energy, Waffenschmidt is responsible for building community outreach strate-gies, reducing waste stream toxicity under Covanta’s Clean World Initiative, developing

environmental justice policies and working with various academic and NGO organiza-tions. He also serves as a member of the Pennsylvania Environmental Justice Advi-sory Board and the Regional Plan Associa-tion, Long Island chapter.

SCS is first U.S. ISCC certification body

Scientifi c Certifi cation Systems is the fi rst certifi cation body in the United States to be accredited by the International Sus-tainability & Carbon Certifi cation system. SCS has been approved to conduct biofuel certifi cations, as well as ISCC Plus certifi ca-tion for food, animal feed and derivative chemicals produced from any feedstock.

ISCC certifi cation qualifi es biofuels sold into the European Union for recogni-tion under the Renewable Energy Directive, which sets targets and minimum sustainabil-ity requirements for biofuel use throughout

the EU. About 1,300 certifi ed companies have already been certifi ed under the ISCC system, making it one of the world's fastest-growing biofuel certifi cations.

To earn certifi cation, a biofuel must have a reduced carbon footprint as com-pared to the conventional fossil fuel it replaces. Biomass and biofuel production must also meet minimum social, environ-mental and traceability criteria.

Turboden to provide ORC generators for two London companies

Turboden, manufacturer of biomass fueled Organic Rankine Cycle turbogen-erators, was awarded an order for a 1 MW ORC plant for British broadcasting group BSkyB and a 1.8 MW ORC plant for airport owner BAA, both located in London.

Turboden has an ORC plant operating in France, as well an order for another 1.4

PEOPLE, PRODUCTS & PARTNERSHIPSBusiness Briefs

Waffenschmidt

MW trigenerative ORC plant in Poland that will provide power, heat and cooling for a fi ve-star luxury hotel.

Barko Hydraulics acquires Norco assets

Forestry and material handling company Barko Hydraulics LLC has acquired the assets of Norco Equipment Co. of Oconto Falls, Wis. The acquisition will enable Barko to signifi cantly expand customer options in the forestry, bioenergy, recycling and right-of-way maintenance markets while complement-ing Barko’s existing line of material handlers.

Norco currently manufactures prod-ucts under the Puma Equipment brand headquartered in Oconto Falls, Wis. Puma builds four- and six-wheel forwarders, track harvesters, processing heads, and fi rewood processors.

In addition to Norco’s Puma line, the company also offers a full line of wood processing equipment from hand-fed brush chippers, high horsepower whole-tree chippers and grinders under the Dynamic Manufacturing label.

Martin Engineering introduces new return roller

Martin Engineering has introduced a new return roller for its conveyor system technologies. The new design is a track-mounted, pivoting, return-side idler that al-lows service and replacement from one side of the conveyor. The Evo Return Roller’s track-mounted assembly utilizes one-pin

quick change functionality to make service fast and easy. As a result, the roll can be re-placed by one person in less time, reducing the risk of injuries.

Evo Return Rollers help improve safety and prevent injuries by minimizing suspen-sion and heavy lifting, while reducing the time and resources needed for service or replacement. The return roller also features an integrated fi ne adjustment to completely square the belt.

Return rollers can be employed any-where there is belt sag on the return side of the conveyor, or in situations where there are seizing issues that require frequent roll replacement.

BUSINESS BRIEFS¦

SHARE YOUR INDUSTRY NEWS: To be included in the Busi-ness Briefs, send information (including photos and logos, if available) to Industry Briefs, Biomass Power Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also email information to [email protected]. Please include your name and telephone number in all cor-respondence.


FiredUp

Hawaii currently supplies about 90 percent of its energy with imported oil at a cost of about $7 billion spent outside the state’s economy. This makes Hawaii the most oil-dependent state in the U.S. The state is taking some major initiatives to try to change that.

That includes S.B. 2785, which has passed the Hawaii House and Senate and is now awaiting the governor’s signature. Once signed, the bill will allow for an inter-island undersea cable system that would connect the islands with power and high speed broadband. Right now, Hawaii has six relatively small and separate electric grids, which do not have neighboring grids to draw power from as do mainland utilities. The islands are already connected with many telecom cables, but no power cables.

Unfortunately for Hawaiian ratepayers, when the price of oil skyrockets, so do elec-tricity prices. However, backers of S.B. 2785 believe that connecting the islands would allow the state to use more of its own re-newable resources at fi xed, predictable prices that won't be tied to the price of foreign oil.

Based on similar cables elsewhere, Hawaiian energy offi cials project the cost to deliver power via an 80- to 100-mile cable to be less than 10 cents per kilowatt-hour (kWh) at 40 percent capacity. At a higher ca-pacity, it drops below 7 cents per kWh. With low sulfur fuel oil at $135 per barrel, the cost of just the oil burned in oil-fi red generators is 24 cents per kWh, according to the Hawaii State Energy Offi ce.

While investors and private developers would pay for the upfront costs, ratepayers would have to pay generation and transmis-sion costs, but they would no longer have to deal with drastically fl uctuating electricity rates.

There is no question of whether the project will work, as similar projects have been successfully implemented in other locations, including the Baltic Cable that connects Germany and Sweden, which spans 155 miles and has a 500 MW capacity. In order for this whole scenario to effec-tively play out, however, the state’s renewable energy industry needs to grow in a big way, and it seems as though it’s on the right track.

There are currently more than 20 bio-mass or biofuel projects in planning stages or under development on the islands, and they will use feedstocks such as algae, euca-lyptus and municipal solid waste to produce products from biodiesel to renewable gaso-line and jet fuel to renewable energy.

Under development in Pepe'ekeo on the Hamakua Coast of Hawaii, Hū Honua Bioenergy has scored a 20-year, 21.5 MW power purchase agreement (PPA) with Ha-waii Electric Light Co., and now just needs approval of the PPA by the Hawaii Public Utilities Commission. The company is converting a former sugar mill into a power plant, and will use locally grown biomass, including eucalyptus, as fuel.

Another project well on its way to fruition is being carried out by Honeywell’s UOP, Envergent Technologies and several other partners. The project will be imple-mented in two phases, with phase one al-ready complete. At the integrated biorefi nery in Kapolei, Hawaiian crops such as macada-mia nuts and sugarcane will be sent through a rapid thermal pyrolysis process (RTP) and converted into a liquid biofuel.

Located at the Tesoro Corp. refi nery, the integrated biorefi nery will be used to

Aloha BiomassHawaii strives to stabilize its energy prices with renewables

CONTEMPLATING CONNECTIONS: Hawaii already has an underwater telecommunication cable system.PHOTO: BUREAU OF OCEAN & ENERGY MANAGEMENT, NATIONAL OCEANIC & ATMOSPHERIC ADMINISTRATION


demonstrate viability of the RTP technol-ogy, test the fuels produced and evaluate the environmental footprint of the fuels and process technology. Dave Cepla, managing director for Envergent Technologies, says phase one of the project focuses on produc-ing a direct substitution for heavy fuel oil. “We will operate that phase for some period of time, and the second phase—engineering, which is ongoing—will upgrade the technol-ogy, probably beginning during the middle of next year.”

The fuel will then be upgraded into transportation fuels to produce a blend of gasoline, diesel and jet fuel, according to Cepla. Regarding feedstock, Cepla says the objective of the project is to produce a wide variety of biomass material native to Hawaii—grasses, some bagasse, certain trees—and some that are not indigenous as well. “Are resources limited on the island? Certainly,” Cepla says. “There is only so much land mass. But we’re working with commercial developers who are looking

toward the future, looking at either acquiring or leasing land on a number of the islands to plant purpose-grown crops in a sustainable fashion. We believe there’s enough land mass to be able to sustain a long-term commercial operation on the land.”

Cepla says most of the resources needed for the project requires capabilities not commonly found on the islands, so most are being shipped in. “The Hawaiian Islands don’t really have a heavy industrial presence, and so most of the skill sets needed from individuals and manufacturing facilities don’t exist,” he continues.

Cepla says the project site was chosen for a number of reasons, but mostly because of the partners involved, particularly Tesoro Refi ning. “They’ve given us land space on which to build the facility, and that was an important element,” he says. There are more partners, including the University of Hawaii, and to a great extent the project was driven by those partners and their location.

Cepla adds that Hawaii is welcoming of projects such as this one. “They’re very dependent on bringing oil in, which is an expensive proposition, so they are heavily in-vested in trying to fi nd alternatives,” he says.—Anna Simet

FIREDUP¦

BEGINNING WITH BIO-OIL: Phase one of the integrated biorefi nery in Kapolei, Hawaii, has been completed.

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¦FIREDUP

BCAP Back in Action Project area funding is awarded in New York, North Carolina and Arkansas

In June, Agriculture Secretary Tom Vilsack announced that two new Biomass Crop Assistance Program project areas will be developed and another existing BCAP project area will be expanded through the help of a $9.6 million funding round.

In New York, ReEnergy Holding LLC will enroll 3,500 acres in a fast-growing shrub willow that will be used to help the biomass power developer generate more than 100 MW. The biomass company already has three facilities that have committed to purchasing the shrub feedstock. Part of the project will include support from the “Come Farm With Us,” campaign, a program that targets new and beginning farmers from the St. Regis Mohawk reservation located only 15 miles from one of the committed facilities.

Chemtex International, a division of Gruppo Mossi & Ghisolfi , an advanced biofu-els, biobased chemical and renewable energy developer based out of Italy, has been awarded roughly $4 million from the USDA to develop 4,000 acres of miscanthus and switchgrass

in North Carolina. The energy crop project areas will be spread throughout 11 counties, and the energy crops will be used, in part, for Project Alpha, a 20 MMgy cellulosic ethanol biorefi nery that will also produce onsite biogas for power generation, set for startup in 2014 in Sampson County, N.C. The feedstock plant-ing, mitigation and monitoring will be led by Repreve Renewables LLC, a Georgia-based energy crop developer. Farmers will receive both establishment assistance and fi ve years of annual production support from the BCAP funding, according to the USDA.

A northeast Arkansas project area already established through BCAP support will expand acreage for giant miscanthus grown throughout three counties to almost 8,000 acres. The project area is sponsored and run by the partnership of MFA Oil and Aloterra Energy LLC called MFA Oil Biomass LLC. The energy crops will be used for fuel pellets for export and in-farm heating and biobased packaging, according to the USDA. —Luke Geiver


Advanced biofuels and biochemical company LS9 Inc. reached a new benchmark with the June 12 opening of its demonstration-scale biorefi nery in Okeechobee, Fla. A retrofi t of the plant was completed in May, with large-scale production expected to com-mence during the third quarter of 2012.

The facility features 1,000- and 35,600-gallon fermenters, which are expected to produce approximately 75,000 gallons of product annually. LS9’s technology is capable of producing a wide variety of products, including biodiesel, biobased jet fuel, specialty esters and fatty alcohols. The process has been demonstrated with several feed-stocks, including biomass hydrolysate, glycerin, molasses and sweet sorghum syrup. The company has announced that biodiesel will be one of the fi rst products produced at the plant.

According to LS9, the demonstration-scale plant will be used to enhance production capabilities and generate large commercial samples for testing and product qualifi cation. The company also intends to use the facility to test and optimize new process condi-tions in the future.

“The opening of our demonstration plant in Florida moves LS9 from a development company towards becoming a fully inte-grated commercial organization,” saysEd Dineen, LS9 president and CEO.

The Florida Opportunity Fund’s Clean Energy Investment Pro-gram invested $4.5 million to help fund the retrofi t of the facility. In

addition to making the necessary adjustments to implement LS9’s production technology, the company notes that retrofi t activities also focused on reducing energy consumption through the use of technologies such as variable speed drivers and advanced computer control systems. —Erin Voegele

Demonstrating Progress New LS9 Inc. biorefi nery in Florida will produce biodiesel fi rst

FIREDUP¦

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RIBBON CUTTING : (L-R) LS9 Vice President of Operations Greg Rood, Florida State Representative Steve Perman, LS9 President and CEO Ed Dineen, Florida Opportunity Fund President Louis Laubscher, and Florida Opportunity Fund Program Manager Jennifer Dunham celebrate the opening of LS9’s demonstration-scale plant on June 12.

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¦FIREDUP

Biopulping’s Role in Bioenergy Lignin degradation research is hip, and it could cut costs on biomass processing

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Something special is happening with a research project focused on two white rot fungi genomes. Led by the U.S. DOE’s Joint Genome Institute, a team of international researchers is col-laborating on a project to sequence and analyze the fungi strains to understand how enzymes present in the fungi break down plant biomass. It’s not the research that is special, however, it’s the num-ber of people working on the project, revealing that the continual quest for super enzymes used to break down biomass is not only a strong trend in the fi eld of bioenergy research, it’s a popular area of research to be in.

“The fact that we have such a large group of people involved in this project is a clear demonstration that there’s certainly inter-est in enzyme discovery,” says Dan Cullen, senior author of the research study and a member of the USDA’s Agricultural Forest Service’s Forest Products Laboratory.

In the study, “Comparative genomics of Ceriporiopsis sub-vermispora and Phanerochaete chrysosporium provide insight into selective ligninolysis,” Cullen and his huge team analyzed C. subvermispora and P. chrysosporium, fi nding large differences in the way each breaks down lignin. According to Cullen, few fungi have the capability to degrade lignin in the fi rst place, and even fewer have the ability to selectively remove lignin at such an ef-fi cient rate. “C. subvermispora is one exception in its ability to do just that,” he said.

Interest in the lignin degrading fungi didn’t start with this research project, however. Kent Kirk, a former researcher at FPL says work with the fungi strain fi rst started at the University of Minnesota, where researchers were working to improve the con-cept of biopulping, a method of turning woody biomass into pulp for the pulp and paper industry by exposing the woody biomass to the C. subvermispora fungi for two weeks, a process that reduced

energy processing costs of the biomass by 30 percent. Although the process was only completed at a 50-ton scale, Kirk says rising energy costs could make biopulping more popular. The work will also help researchers understand the process and the applicable enzymes that can help reduce the costs to process biomass feed-stock for bioenergy purposes.

The research by Cullen’s team certainly won’t hurt. Angel Martinez, a researcher at the Spanish National Research Council in Madrid may have found the reason why the fungus works well to degrade lignin. According the Martinez, the C. subvermispora fun-gus has more manganese peroxidases and laccase, enzymes that speed lignin degradation. On top of that, the team also discovered new enzymes not previously recognized in the C. subvermispora strain.

Although Cullen points out that the cellulose degrading por-tion of the fungi could be repressed and requires further study, he believes more of the same will continue the progress the team has made in understanding the power of the biopulping fungus C. submvermispora. “To really make direct progress on understand-ing the mechanism of selective lignin degradation,” he says, the development of more experimental tools and the use of more genetic analysis are needed.

That shouldn’t be a problem given the role of Igor Grigoriev. Grigoriev leads the JGI Fungal Genomics Program, where he says his team is currently working on 20 similar fungi strain genome analysis projects. “This should provide us a better understanding of the diverse and complex mechanisms of lignocellulose deg-radation in fungi, the infl uence of these mechanisms on carbon cycling in the forest ecosystem, and ultimately,” he says, “lead to improvements in biopulping.” —Luke Geiver


Sweden’s subarctic forest range is setting records. A research team consisting of six Swedish scientists has found that over roughly the past 15 years, forest density and the average tree-line height in the region has increased by 19 percent. In addition, a new survey of shrub, tree and vegetation data on 549 plots in 61 forest clusters originally collected and analyzed in 1997 was performed by the team using in-fi eld testing and remote sensing, revealing that over the past 43 years, “tree biomass has doubled.”

According to the team, “tree basal area and biomass increased by 19 percent between 1997 and 2010 with the main increase oc-curring in established birch forest.” The results concur with the results of other studies that suggest that there has been a general increase in cover and biomass of trees and shrubs in subarctic and Arctic areas. Those studies were performed in 2001, 2006, 2007, two in 2010 and another in 2011.

So what does all this mean? According the research team, in spite of increased browsing pressure from a growing reindeer population and the occasional outburst from moths that eat away at birch trees located in the study region, there is simply more tree growth and biomass availability in the region now than before. The group calls the situation a “welcome phenomenon,” and says that, “increased nutrient availability associated with higher soil temperatures and a longer growing season,” could continue the expansion of the forest.

For biomass developers and biomass users in Sweden, the obvious impact of a growing woody biomass resource could mean anything from cheaper feedstock for biomass-based power, or an expansion of more bioenergy use in the region. However, for the Center for the Study of Carbon Dioxide and Global Change, a

group that also took notice of the study, the work of the Swedish research team might help explain a theme supported by the center. In its quest to provide their version of non-emotionally charged, unbiased information regarding the rise of carbon dioxide in the atmosphere, the center believes that a warming earth will benefi t plants, not cause their extinction. Right or wrong, six Swedish sci-entists who’ve shown a 19 percent increase in biomass density and tree line height that is linked to warmer soil and a longer growing season might help their argument. —Luke Geiver

Sweden’s Growing Wood Basket Since 1997, subarctic forests are thicker and taller than ever before

FIREDUP¦

Greater Growth: Biomass-based power stations in Sweden, such as the one pictured here, will benefi t from a greater abundance of regional biomass.

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Several measures that could impact the biorefi ning industry have recently been addressed by Congress. One such initiative aims to create a federal production tax credit for biochemicals. The legislation, titled the Qualifying Renewable Chemical Production Tax Credit Act of 2012, or H.R. 4953, would establish a production tax credit of 15 cents per pound of eligible content of renewable chemicals produced during the taxable year. The measure was introduced by Rep. Bill Pascrell, D-N.J., and has been referred to the House Ways and Means committee.

Under the bill, the term “eligible content” is defi ned to include the biobased percentage of the total mass of organic carbon within a renewable chemical, while a renewable chemical is defi ned as one produced using biomass that is sold or used in the production of polymers, plastics, or formulated products not used in the production of food, feed or fuel. The tax credit would not apply to chemicals that contain less than 25 percent biobased content, or to biochemical that were produced at rates of 10 million pounds or more during 2000.

Another measure introduced by Reps. Glenn Thompson, R-Pa., and Kurt Schrader, D-Ore., aims to modify the defi nition of biobased materials to include forest products in the USDA’s BioPreferred program. The bill is titled the Forest Products Fairness Act of 2012, or H.R. 5873.

The BioPreferred program was created by the 2002 Farm Bill and includes two primary initiatives; product labeling and federal procure-ment. The labeling portion of the program allows products meeting

certain biobased content specifi cations to label their product with a BioPreferred seal, which is designed to help consumers make informed purchasing decisions. The federal procurement component gives pref-erence to the purchase of biobased products by government entities.

Under the current program guidelines, paper, wood and pulp products are not considered qualifi ed biobased materials for either labeling or federal procurement. H.B. 5873 would change those guide-lines to make products like pulp, paper, paperboard, pellets, wood prod-ucts and any recycled products derived from forest materials eligible for the program.

However, not all congressional actions have been in support of the biobased industry. The U.S. Senate and House recently took action to undermine military efforts to reduce dependence on foreign oil by stripping funding for biofuels initiatives in their respective versions of the defense authorization bill.

The House version prohibits the U.S. Department of Defense from pursing a public-private initiative for advanced biofuels, and would repeal Section 526 of the 2007 Energy Bill. The Senate Com-mittee on Armed Services included legislative components that limit the military from buying biofuel using fi scal year 2013 funds if the cost is higher than that of petroleum-based fuels in its version of the legislation. In addition, the bill would bar the DOD from entering into a contract plan to design or construct a biofuels refi nery or any other facility or infrastructure used to refi ne biofuels, unless specifi cally authorized by law. Additional amendments could be offered when the bills are subject to fl oor debate later this year. —Erin Voegele

¦FIREDUP

Congressional Action Federal lawmakers address biomass, biochemicals and biofuels

While some advanced biofuel projects have struggled to reach construction goals, construction of KiOR Inc.’s fi rst commercial-scale plant has proceeded ahead of schedule. In late May, the com-pany announced that its Columbus, Miss.-based plant is 100 percent mechanically complete.

The announcement was delivered as part of the company’s fi rst quarter 2012 fi nancials. Under the original construction schedule, the plant would have been 90 percent mechanically complete at that time.

“Earlier this year I challenged [KBR Inc.] and our construc-tion management team to fi nd ways to accelerate our construction within our defi ned budget,” says Fred Cannon, KiOR president and CEO. “As they have at every turn throughout this history-making project, the Columbus team delivered beyond my expectations in a safe, environmentally conscious and effective manner. I am pleased to report that Columbus is 100 percent mechanically complete and we have commenced our commissioning plan.”

Despite the accelerated construction schedule, Cannon says that the project also appears to be coming in slightly below the anticipated $222 million budget. “All of us here at KiOR are under-standably proud not only to have delivered what we promised, but to have exceeded even our own internal expectations.” Although some speculated that it would take two years to complete the proj-ect, the Columbus plant took only 13 months to build.

According to Cannon, commissioning and startup activities are expected to take between 12 and 16 weeks. He also notes that consider-ing this is a fi rst-of-kind commercial plant, it is possible the schedule could be delayed. However, Cannon stresses that he fully expects the new plant to be producing cellulosic biofuels during the second half of 2012, with full capacity reached within six to 12 months. Once that level of production is reached, Cannon says that KiOR will focus its ef-forts on optimizing the production process to maximize yields, initially targeting 67 gallons per ton sometime in 2013. —Erin Voegele

FIREDUP¦

Accelerated DevelopmentKiOR announces completion of fi rst plant

EXPEDITING PRODUCTION: KiOR Inc. completed construction of its fi rst plant ahead of schedule. Once operational, the facility will convert biomass into biobased crude oil.

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¦PELLETS

AFTER TILBURY: An explosion at the Tilbury Power Station earlier this year forced biomass suppliers to alter their trading and procurement plans. PHOTO: RWE


PELLETS¦

From spot purchases to multi-year deals, producers, buyers and brokers must know their way around supply agreements. BY LUKE GEIVER

Contract Concepts


Wood pellet producers and biomass providers searching for a North America-to-Europe export supply

contract will eventually fi nd Henry Pease. As the senior biofuel portfolio manager for RWE’s Supply & Trading division, Pease leads a biomass trading and procurement group for the giant German utility provid-er. “We source between 2 to 3 million tons of wood pellets (annually) from all over the world,” he says, and because of his place in the global biomass market and his contin-ual search for biomass, Pease says his team is familiar with all of the established pro-ducers and most of the companies close to startup, whether they operate in Finland or Florida.

When Pease and his European coun-terparts talk about biomass trading and procurement, and generally comprehending the wood pellet export/import market, two things become clear: experience is favored, yet change is inevitable. They explained the basics of wood pellet supply contracts, the truths of long-term agreements, and why, even though fi rms like Pease’s prefer to work with established bio-mass suppliers, the wood pellet supply contracts of the future will be formed with companies that don’t yet exist in the marketplace today.

Pellet Contract BasicsTo start, all biomass and pellet suppliers based in North Amer-

ica need to know that as the biomass fuel heads towards Europe, as

Pease explains, “the boat doesn’t always fi nish where it said it was going to fi nish.” The fi nal destination of a cargo ship loaded with biomass however, should be of little concern to those who produced the biomass. From Pease’s perspective, a pellet producer or biomass supplier should be concerned with two things only: producing, and continuing to drop the price of production. “Our role as a trader is to optimize the supply chain,” Pease says, “to have a portfolio of sup-

¦PELLETS

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plies. Producers do what they do, whether they are a large producer or a small producer, their job is to make pellets as economically as they can.”

For contract agreements, the ability of a producer to do his job is also a main staple of how contracts are formed. “A company that already exists and knows what he is doing isn’t looking for the same offtake contract as someone that is coming to the market new,” he points out. “If you need equity or you need debt then you need different things in the offtake.” The main point Pease makes about forming a contract however, is that his fi rm tries to match up what it can offer with what its investors (power plants and end users) need.

Different buyers can do different things, he explains. Some can offer longer tenure, some can buy more on a tons/year basis, others can manage the freight from the production facility to the port to the

end location, and, he adds, where an end user buys the biomass can greatly vary from the physical power station to a specifi c port or in some cases, even a specifi c boat.

After a fi rm such as Pease’s hashes out the needs of a buyer (a two-year contract for 200,000 tons delivered to a Belgium port through monthly shipments, for example), the next step in the pro-cess is to match up the ability of the producer with the need of the buyer to form the contract, all based on that dynamic.

A typical supply agreement links a biomass trader or procure-ment specialist like Pease, with the biomass producer. In most, if not all cases, a producer will not be working directly with the end user.

The typical cargo ship can carry 25,000 to 45,000 tons per load and a pellet provider or woodchip supplier will get paid every time a shipment arrives at port. Although most North American biomass suppliers would prefer a contract supply length of 10 or more years, Pease says the norm is anywhere from two to fi ve years. The average installed capacity of a pellet mill participating in a supply contract can vary widely, (most are above 70,000 tons/year), and although the nature of biomass makes quick shipments or the presence of a large spot market a major portion of the overall supply market, there are enough companies or people currently operating in the market to show why single shipment and short-term contracts (months not years) do exist.

Simon Christensen, storage, logistics and sales specialist for Copenhagen Merchants, a biomass trading and procurement fi rm, knows all about short term contract basics. Christensen says his com-pany began operating in the pellet supply markets after a number of smaller mills in the Baltic markets voiced their need to aggregate their volumes in order to meet the needs of buyers with demands too large to be met by a single producer. “There is always a market for long-term contracts,” he points out, “but there is also always a place for spot contracts.”

PELLETS¦

GREEN STORAGE: Wood pellet storage silos like this are a staple of all Copenhagen Merchant’s receiving locations.

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Christensen’s fi rm trades more than 500,000 tons per year of biomass, half of which are spot- or short-term contracts that are for one- to three-month supply shipment periods. Another large portion of his business is what he considers a long-term contract, a term of roughly one to one and a half years in length. No mat-ter what the length of the contract term is however, Christensen points out that a contract agreement can be initiated from both sides of the value chain and most importantly, “the process is never a one off.”

Biomass Trader TruthsAlthough Christensen’s assertion about

the repeatability of the supply contract for-mation process makes it sound as if every pellet producer entering into an agreement will be operating under a set of unique and potentially problematic circumstances each time product is ready for shipment, don’t worry.

Christensen, like Pease, can cite nu-merous examples of how or why contracts are formed. Consider this, Christensen says, sometimes it is the producers who approach fi rst, explaining their de-sire to sell around a specifi c price. In other cases, the opposite is true, and a buyer will approach a biomass trader seeking a specifi c tonnage at a specifi c price, by of course, a specifi c date.

Luckily for pellet producers or biomass suppliers, people like Christensen and Pease have an extensive portfolio of producers to meet the changing demands of larger buyers, which in turn, Chris-tensen points out, makes the appeal of biomass to large European utilities greater due to the constant and readily available supply of biomass that is tracked, secured and ready because of trading and procurement fi rms. The best part is that with more biomass usage, more will only follow because of the stability of the supply market.

“As a trader we like having products with different specifi ca-tions with different load ports with vessels that have different sizes,” Pease says, “because that means different power stations in different countries can have different demands and needs and we can try and match it all together.”

“We always have stores in different places,” Pease says, “We can sort of balance out the needs of small producers,” and, according to Christensen, large buyers. Throughout most of the year, a small producer he says, needs to have a low stock on hand and have access to fast cash loads.

“When you are building a pellet plant,” Pease explains, “you are trying to sell 80 to 90 percent of what you think you are going

to produce upfront, so there is not a lot of wiggle room there.” Unfortunately, problems arise for either side. Both Pease and Chris-tensen had to deal with the backlash of a massive fi re at a massive biomass power plant, Tilbury Power Station, this year that Pease says, “severely disrupted the whole supply chain.” The job of Pease and Christensen is to manage that, sell product to other end users, store product or in some cases, pay people not to produce. “Our job is to sit in the middle of the ripples and try to smooth them out a little bit,” Pease says.

Smoothing out the process only helps the procurement fi rms shore up the future, according to Christensen, who says that any notion that a procurement fi rm will not pay out on a contract or fail at some point in the process is a nonsensical assertion, because as the middleman, two sides need to stay happy, not just one. “If I don’t deliver (for the producer or the buyer) I’m out of it. I would argue that the main risk is on my side.”

To reduce that risk, both Christensen and Pease have a few thoughts on how to de-risk, or as Pease implies, to de-ripple the supply contract process. First and foremost comes stability by the producer, in both production and quality of the biomass supplied, something they look for in every contract. Then, Pease explains, producers need to think hard about how they operate. “A lot of new companies operate with very few people,” he points out, a situation that is usually diffi cult because there are so many aspects

¦PELLETS

NEW BIOMASS NORM: Members of the Derwenthorpe Community stand before a biomass-based energy center that will power an entire housing community in York, England. The plan for the future is to build more centers similar to this.

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to the industry that a handful of people can’t typically perform.

As for payment plans, Pease says they prefer to pay North American producers in U.S. dollars instead of Euros because a pel-let production team typically is not going to convert the money because of the amount of money required to do so, or the time. As for biomass supply aggregation models that bring multiple pellet producers or biomass suppliers together to fi ll a tonnage request of a large buyer, both Pease and Christensen say the model can and will work. “It is perfectly feasible,” Pease says, “there are some issues

they need to get past like sustainability and standardizing quality, but they can certainly do it.”

And that is exactly what Christensen hopes will happen. His fi rm is working with a group in Florida to form an aggregation model, because as he says, “We see a big rise in demand, and a big rise in supply,” regarding their outlook on the industry.

Nicole Forsberg, a researcher at Lund University in Sweden studying the opportunities and barriers to growth in the European biomass market, reminds us why pellet producers or biomass sup-pliers should be bothering to link up with traders and procurers. “In

the EU,” Forsberg says, “demand far outweighs the EU’s domestic forest supply capabilities, so,” and this should be a clear enough reason, “import is the only answer, even long-term.” One should also keep in mind, she says, that if the imported pellets turn out to be cheaper than the EU’s domestic supply, the import demand will be even higher.

Currently, she says, imports from North America are mainly headed to the Netherlands, the U.K. or Belgium, due to the big harbors where large amounts can be imported.

But, even though Forsberg’s entire research platform is based on understanding the atmosphere of the export/import of bio-mass to/from Europe, the best reminder of why contract supply agreements matter comes from the person with the greatest risk, the middleman in this case, people like Christensen who have to appease two parties to make money. “I believe if we are good,” he says, “if we follow this market, there will be plenty of opportunities for skilled traders.”

Author: Luke GeiverFeatures Editor, Biomass Magazine

(701) [email protected]

PELLETS¦

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BIOMASS ON THE BRAIN: Forsberg is researching the opportunities for biomass imports into Europe at the University of Lund.


¦POWER

BIG PICTURE VIEW: Russell Biomass's project in Russell, Mass., has not yet secured a power purchase agreement.PHOTO: RUSSELL BIOMASS


POWER¦

Securing the right power purchase agreement is essential to the success of a bioenergy project. BY ANNA SIMET

Power Purchase Plays

The fate of Russell Biomass, a biomass power proj-ect under development in Russell, Mass., revolves around a power purchase agreement (PPA) that

hasn’t yet been secured. Project partner Peter Bos admits the PPA is the most important component in bringing a project to fruition, but he says it’s unattainable for now, at least until the fi nal Massachusetts Department of Energy Resources renewable portfolio standard (RPS) regulations are out.

This isn’t Bos’s fi rst renewable rodeo, however. He is the founder and CEO of ARS Group, formed in 1982 to develop and own independent power plants. ARS’s New England projects include a hydropower plant and a 40 MW wood-fi red power plant. Russell Biomass has been in development since 2005, and though it has faced a myriad of obstacles along the way, Bos and his part-ners have forged ahead.


¦POWER

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While Massachusetts released its long-overdue proposed fi nal RPS legislation in early May, the law is still looming, leaving develop-ers like Bos, foresters and anyone else who has a stake in the bio-mass industry anxious and frustrated. But Bos says a new bill being proposed in the state appears to be good for renewable energy, as it would double the amount of green power that would be supported by long-term PPAs.

But there’s a catch. Unless it specifi es a certain amount of energy to be derived from each renewable resource, it will be ex-tremely diffi cult to compete with cheap onshore wind. “The aver-age [gross] cost of onshore wind per kilowatt hour (kWh) [in Mas-sachusetts], for a 15-year contract, might be in the 10- to 11-cent range, 9 cents at the best,” Bos says. “The average biomass power cost over 15 years is around 17 to 18 cents, the average offshore


The United States Department of Energy’s Biomass Program works with industry, academia, and our national laboratory partners to accelerate development of a sustainable U.S. bioindustry. Through targeted research, demonstration, and deployment, the Biomass Program is helping to transform the nation’s renewable and abundant biomass resources into cost-competitive, high-performance biofuels, bioproducts, and biopower.

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wind costs around 24 to 25 cents, and solar is up around 40 cents.”

Prices are different in each state and re-gion and depend on multiple factors, includ-ing fi nancing, incentives, technology, project location and perhaps most signifi cant, fuel availability and logistics. According to U.S. DOE estimates, a typical U.S. direct-fi red biomass plant can produce electricity at a net cost of 9 cents per kWh, but that can vary greatly. For example, the Oregon Depart-ment of Energy reports that using conven-tional combustion technology without co-generation, the estimated net cost to generate electricity from biomass in Oregon and the Pacifi c Northwest ranges from as low as 5.2 cents per kWh to 6.7 cents, signifi cantly lower than in Massachusetts.

That may not be surprising to most, as electricity rates consumers pay in the North-east are generally the highest in the country. Costs in Massachusetts, New Hampshire, Connecticut and New Jersey are typically greater than 15 cents per kWh, according to 2010 National Renewable Energy Laboratory

data, and in other states such as Washington, Idaho and Wyoming, rates dip anywhere from 5 to 7 cents per kWh.

Bos says right now, 80 percent of re-newable energy proposals in Massachusetts are for onshore wind projects, and with gas-fi red power as cheap as it is, no power buyer wants to purchase renewable electric-ity that starts at 10 to 11 cents per kWh. It is possible to lower the price a little though, he adds, if the developer sells heat or low-pressure steam. “You can get more revenue and lower the price per kWh, but probably not more than 2 to 3 cents, not to the price of wind,” he says.

So with that disadvantage, how does a biopower project developer make its case to power buyers?

Convincing the Customers “You have to point out that it’s the

only 24/7 reliable power; wind and solar aren’t,” Bos says, explaining that with peak demand for electricity, a utility can count on biomass.

POWER¦

LONG-TERM POWER: For Taylor, PPA’s for 15 years or longer are preferred today to offset debt obligations of tomorrow.

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¦POWER

ONE OF MANY: The Berkeley County Landfi ll in Moncks Corner, S.C., is one of Santee Cooper's several biogas-powered landfi ll generating stations.

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Todd Taylor, energy and corporate at-torney with Fredrickson & Byron, agrees. “[It’s] reliability of power supply, coupled with alignment with power needs,” he says. “If the bioenergy project does not have the ability, in terms of both long-term feed-stock agreements and technical reliability, to consistently deliver power, a power buyer won’t be interested.”

Taylor reiterates that many power buy-ers have been acquiring wind PPAs to meet their RPS requirements, so bioenergy PPAs will need to fi t within existing RPS power PPAs.

It’s assumed that power buyers won’t buy renewable electricity unless it is man-dated, but Santee Cooper, a South Caroli-na-based power utility, is going against the grain. The state doesn’t have an RPS, yet the utility currently has more than 200 MW of biomass, biogas and landfi ll gas-derived electricity, mostly contracted through long-term PPAs, according to Mollie Gore of Santee Cooper. “That’s a key point—we’re doing all of this voluntarily,” she says. “In our part of the country, biomass is the most abundant renewable resource in terms of cost and availability. With solar, the technol-ogy is changing, but it’s still considerably


more expensive. We’ve had good luck fi nd-ing cost-effective biomass projects—it has been a good resource for us.”

Cost-effectiveness is one of two key attributes Santee Cooper looks for in a per-spective power supplier, Gore says, adding that the utility also needs to be able to get all of the environmental attributes with the project.

In his experience, Taylor says power buyers will be most concerned about pric-ing, as they are usually regulated entities and have to manage pricing to consumers. Long-term contracts are important as well, but that goes back to the price again—only if it is right. “The trend now is long-term contracts at lower prices, as bioenergy proj-ects must compete against low-cost natural gas,” Taylor says. “Power buyers are trying to lock bioenergy projects into long-term, low-price contracts, in part, because most long-term natural gas projections show the cost rising, and cheap bioenergy now will help offset those rising costs.”

For the developer, Taylor says both length of contract and price are critical, but length of contract is slightly more im-portant, as it gives assurances to fi nancing sources that there is a long-term revenue source, assuming the price is enough to pay all costs and generate a suffi cient return on investment for equity investors.

Bos says there is a trade-off between price and length of the contract. “The shorter the contract, the higher the price you need to have to cover the debt service you have,” he says. “If you have a 15-year contract, which is the max in Massachusetts, then you can only have debt for 15 years because the lender wants to see that your assured revenues will cover the debt of re-payment.” If one has a 20-year contract, he can spread that out and lower the price a little, but sooner or later when the length of the debt is stretched out, it doesn’t allow

POWER¦

you to lower your price as much with inter-est costs.”

A First Step

“A developer should begin seeking out potential PPA partners as one of the fi rst steps to any development projects,” Taylor says. “Understanding PPA pricing, structure and interest from potential PPA partners is critical to assessing the feasibility of any bio-energy project.”

Without a PPA, a project won’t be fi nanced, he adds, and bioenergy developers right now are facing a tough power market. “Power buyers have purchased or commit-

ted to purchasing a great deal of wind pow-er such that bioenergy projects have been squeezed hard,” Taylor says. “But wind en-ergy has signifi cant challenges due to trans-mission problems that distributed bioenergy projects often do not face.”

While large, utility-scale bioenergy has the same challenges as wind, the smaller, more local bioenergy projects are being developed far more rapidly. But the market varies by state and region. “Some states are hostile to bioenergy, usually based on a misunderstand-ing of bioenergy as simple burning versus more advanced bioenergy technologies such as gasifi cation or anaerobic digestion,” Taylor adds. “The key always is to fi nd a great cus-tomer willing to buy your power.”

Author: Anna SimetContributions Editor, Biomass Magazine

[email protected](701) 751-2756

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‘Power buyers are trying to lock bioenergy projects into long-term low price contracts, in part, because most long-term natural gas projections show the cost rising, and cheap bioenergy now will help offset those rising costs.’

—Todd Taylor, Fredrickson & Byron


¦BIOGAS

DELIVER WHEN READY: Frontend receiving tanks are used to provide food waste or manure at an equalized level during the process.PHOTO: CH4 BIOGAS


BIOGAS¦

Along with its partners at Synergy Biogas LLC and GE Energy, CH4 Biogas recently commissioned the largest on-farm anaerobic digestion project in New York state.BY ANNA SIMET

CREATING A BIOGAS EMPIRE

Synergy Dairy is located in western New York’s Wyoming County, one of the leading dairy production re-

gions in the U.S. The 2,000-head farm is now the site of an important milestone for the state’s biogas industry.

It hosts a recently completed 1.4 MW biogas plant, which takes in about 425 tons of waste per day from local food proces-sors, as well as the dairy’s cow manure. Not only is the facility the largest on-farm an-aerobic digestion (AD) project in the state, it’s also New York’s fi rst biogas project specifi cally designed for codigesting animal and food wastes.

It wasn’t a simple feat, and the project almost missed the deadline for $2.8 mil-lion in federal energy tax credits, which would have resulted in its demise. Last fall, the power purchaser notifi ed the project's owners that it would be unable to complete hook-up to the power lines until March, delaying startup and disqualifying the proj-ect for the tax credits. But with the help of Sen. Charles Schumer, D-N.Y., a strong proponent of renewable energy in the state, the project was able to get back on track and meet the deadline.

A ribbon cutting ceremony was held in early April, followed by a grand opening in May, and since then, it’s been smooth sailing for CH4 Biogas, which owns and operates the facility. With such a signifi cant success story under its belt, the company is ready to offer its experience, services and advice to other farms looking to implement simi-lar projects. Biomass Magazine discussed the project with Lauren Toretta, vice president of CH4 Biogas.

Biogas projects seem relatively simple at a glance, but often take a great deal of time and effort to imple-ment. What’s the most diffi cult aspect of bringing an on-farm digester project to fruition?

Toretta: Financing and legal paperwork are the most diffi cult aspects. They are the most time-consuming—lots of moving parts and steps to keep organized and stay on top of, in order to get the fi nancing fi -nalized and the project moving forward.

How much does a project like this one cost?

Toretta: Typically, the range is around $6 to 9 million. Financing and legal costs for our fi rst project were over $1 million. We hope to reduce this on future projects by developing standard agreements.

Let’s talk feedstock. Aside from manure, where is the food waste com-ing from, and what kinds of contracts (if any) are in place?

Toretta: The waste comes from local food processors. It is waste that would oth-erwise be landfi lled or land-applied with-out treatment. Most of our contracts are short-term, 3 to 5 years. The bulk of our feedstock at Synergy Biogas is manure that is pumped directly from the barns.

So it’s a co-digestion plant. What’s different about co-digestion than single feedstock?

Toretta: The plant is designed to take in and process food-grade organic waste along with manure. The manure is the same from day-to-day in terms of volume and consistency, but the supply and con-sistency of the food waste is variable. The plant is designed to manage this variability and keep the digestion process (a biological process) running on an even keel. We have front-end receiving tanks to equalize deliv-eries, as well as grinders and debris traps. We can adjust the relative proportion of manure to food waste fed to the digester from hour to hour.

What about permitting? What per-mits did you need, and were they dif-fi cult to obtain?

Toretta: Typically, there are local zoning permits and environmental permits, and state level air and waste/water permits. The air permits are linked to the engine emis-sions, which we have good data on through GE Jenbacher. In the case of Synergy, the permits were not hard to obtain. We fol-lowed the guidelines, provided documenta-tion, and adhered to the fi ling and review procedures.

¦BIOGAS

Phone: 800-553-7993 • [email protected]

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The project generates 1.4 MW of power. Can you give us any details on your power purchase agreement (PPA)?

Toretta: Our plant is a participant in the regional power market administered by the New York Integrated System Opera-tor, which allows us to sell electricity and renewable energy credits to counterparties in New York and New England. We work with a broker, Evolution Markets Inc., to fi nd the best offer. We are currently negoti-ating a three-year PPA with a New England utility. In the meantime, the local utility National Grid is buying the electricity we generate.

What makes a location a good candidate for a project of this size and scope?

Toretta: When we think about an on-farm project, the most important thing is having a good partner. The Synergy dairy is well-managed and progressive. And size matters. We want a farm with at least 1,500 cows and a land base for handling the di-gested biomass. Next, we look at the avail-ability of food waste in the area and the cost of interconnecting to the power grid. In some rural areas, the cost of intercon-nection can be prohibitive. Existing infra-structure needs can be a critical limitation to the siting of a plant and for general eco-nomic development.

Has CH4 used a Jenbacher engine in existing projects? It seems they have a very good reputation and track record in the industry.

Toretta: For the size engines we’re look-ing at—1,000 kW/h (kilowatts per hour) to 2000 kW/h—GE Jenbacher is the market leader in terms of effi ciency and reliability. Our partner, Bigadan A/S, builds and oper-ates biogas plants in Europe and is having good success with Jenbacher engines.

How long, from beginning to end,

did the project take to complete? Toretta: From the time we close fi nanc-

ing and can order equipment the construc-tion period is less than 12 months. Synergy

BIOGAS¦

Biogas took nine months from groundbreak-ing to commissioning. The schedule is weath-er-dependent, but our facilities are modular, which makes site installation relatively quick. Permits, zoning approvals, site design, con-struction budgets, feedstock agreements, power purchase agreements and loan agree-ments have to be in place prior to the start of construction. It can take several months of development work to get all these docu-ments and approvals to bring a project to closing.

What other projects does CH4 own/operate? Any similar to this one?

Toretta: Synergy is our fi rst U.S. facility. Our partner, Danish company Bigadan A/S, has built 45 similar plants around the world, predominantly in Europe. We have several projects in development and plan to start construction on a facility in Ohio in July.

Author: Anna SimetContributions Editor, Biomass Magazine

[email protected](701) 751-2756


¦ADVANCED BIOFUELS

RISE ONLY WHEN READY: For companies like LanzaTech, market entry should come after commercially proven processes, never before.PHOTO: LANZATECH


ADVANCED BIOFUELS¦

Being fi rst on the scene is benefi cial in many markets, but advanced biofuels may not be one of them. BY LUKE GEIVER

Forget First to Market

The fi rst-to-market business strategy doesn’t re-ward advanced biofuels or biobased chemical companies because the race to provide drop-in

biofuel or renewable chemicals isn’t about brand loy-alty or opening a facility fi rst, it’s about a fl awless pro-duction process.For Amyris Inc., considered at one time a leader in the race to commercialize renewable chemicals and fuels, that is a good thing.

The company revealed earlier this year that it would reign in plans for production at two different facilities because of issues with biofuel production yields. For a company that has already gone public, formed major partnerships and proven that synthetic biology and the use of superbugs could potentially rank near the top of all fuels or chemicals production methods, the announcement was a setback for both stock prices and the assumption that if any company would succeed fi rst, it would be Amyris.

But don’t worry; no giant names such as Microsoft Corp. or Samsung are fi ghting for brand loyalty in the


¦ADVANCED BIOFUELS

we buy gas, we just want the physical prod-uct at the lowest price, regardless of the name that goes with it.

Still, there are benefi ts of entering the advanced biofuels and biobased chemicals market more quickly than others, Stone points out. Those early entrants will be in a better position to gather additional capital for future expansions and other projects, he says. If the segment of early entrants is profi table, however, some fi nancial back-ing will go to competitors.

Technology Over TimingLanzaTech knows exactly what Stone

means in more ways than one. When Range Fuels’ plan for an advanced biofuels ven-ture in Soperton, Ga., failed, New Zealand-based LanzaTech pursued the advanced bio-fuels market using the shuttered biorefi nery. Jennifer Holmgren, CEO of LanzaTech, notes that purchasing the plant made sense because of the existing infrastructure at the facility, as well as the opportunity to tap into the region’s available wood basket. Entering the market fi rst, however, holds little rel-evance to the company’s goals, which strive more toward delivering the best possible product through optimal technology. “Be-ing fi rst to market will present signifi cant business opportunities,” she says. “Howev-er, this is really only the case if your product is able to really deliver. There is no sense rushing through a sub-optimal technology at the expense of being the fi rst.”

In fact, for this industry, both Hol-mgren and Stone imply that more players in the market is better. “We are fortunate to be working in a space where there are mul-tiple players,” she says. More approaches and more information, especially from failed ventures, provide companies like LanzaTech with more perspectives that help develop processes further, she added. But failed tech-nologies or businesses are not the same as stalled or slowed ventures, she cautions. Be-cause most companies in the sector are often painted with the same brush, she says, the failure of similar companies can attribute to a fall in confi dence in the sector as a whole.

Stone adds a different point of view, saying that if a technology or company in the sector works, a signifi cant lift occurs in over-

bioenergy sector by a fi rst-to-market strat-egy. Just ask Rob Stone, a technology gener-alist admittedly burdened with an overactive curiosity about everything. Stone, the man-aging director of equity research for fi nan-cial services fi rm Cowen and Co., has been following the clean technology sector since 2005 to provide general investment insight for everything from solar arrays to catalytic hydrocracking methods and the companies that use them. “Being fi rst to market and establishing a brand has signifi cance in end markets where it matters to grab consumer

mind share,” he says, citing iPads or Tablet PCs. But in an enor-mous, trillion-dollar market like fuels and chemicals, he adds, there is room for multi-ple players and, in fact, customers want more than one supplier to le-verage price.

In simple terms, for the majority, when

MARKET WIZARD: As an equity research manager for a fi nancial services company, Stone has to understand the magic of syngas or solar arrays.


technology of most advanced biofuel fi rms presents an interesting opportunity that tradi-tional oil and gas companies cannot claim.

“If this stuff (technology like KiOR’s) works, unlike an oil well, it will produce level output if not rising output,” Stone says, at-tributing the statement to the fact that a bet-ter catalyst for a biofuel process can always be created and the process can be tweaked over the 40-year lifespan most plants will operate. With a traditional oil well, the start of the pro-duction process is high based on optimal well pressure, but will be depleted over time. An

operation has to use more enhanced recovery techniques to produce the same amount of product because of falling output and higher recovery costs.

So it seems as though following the lead-ers and learning from their mistakes might be the best strategy in the advanced biofuels and biochemicals sectors.

Author: Luke GeiverFeatures Editor, Biomass Magazine

(701) 738-4944 [email protected]

ADVANCED BIOFUELS¦

all valuation for the entire market. “That’s why venture backers and other funders will end up funding a number of companies in the space,” he says. Stone believes that that probability makes the advanced biofuels and biobased chemical sector appealing and in-teresting for investors. “There are so many opportunities and the markets are so large and diverse.”

The bioenergy industry does represent a real opportunity, and not just because of the huge fi nancial possibility, or the reality that being fi rst to market doesn’t apply. Stone says soon-to-be commercial advanced bio-fuel producer KiOR Inc. is a good example, with its work on southern yellow pine trees in Mississippi. The company is akin to a ver-tically integrated oil company that combines production, exploration and refi ning. Iden-tifying a wood basket is like discovering a well that may never run dry, he says, and the

TECHNOLOGY TITANS: Not only has Holmgren and LanzaTech planted roots in Georgia, the company has also formed partnerships with the number one and number three steel producers in China.

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