From High Hazard to Bioenergy Boost

In California, several large-scale biomass power plants have new leases on life via five-year power purchase agreements and stipulations to use high-hazard forest material. Meanwhile, a new wave of small-scale plants continues to navigate developme
By Anna Simet | September 04, 2017

The total number of dead trees in California’s drought-stricken, beetle-kill ravaged forests has surpassed 102 million since 2010, spread across 7.7 million acres. In 2016 alone, according to a recent U.S. Forest Service aerial survey, more than 62 million trees died, a 100 percent-plus increase from 2015. And millions more are expected to die in the coming months and years.   

Recognizing the crisis and dire need to take action, Gov. Jerry Brown issued a State of Emergency Proclamation in January 2014, addressing the tree mortality crisis and laying out action plan framework that included several components focused on getting the material to bioenergy plants. Though the process hasn’t been as swift as desired, for some older, large-scale plants with expiring power purchase agreements and the inability to compete with cheap natural gas and solar, it came just in time. Now, six large-scale plants that either had, or would soon, shut down have five-year power purchase agreements (PPA) under the program, dubbed BioRAM, and it’s likely two more plants will soon join them to fulfill the utilities’ mandates of 125 MW.

On the other side of the equation is a small army of new, 3- to 5-MW plants—many of which were in some development stage even prior to the emergency declaration—working tirelessly to get built under the other program driving high-hazard zone bioenergy use. BioMAT, a feed-in tariff program for small bioenergy renewable generators, requires the state’s three major utilities to purchase 50 MW from sustainable forest management, including high-hazard forest material. While these smaller-scale plants have a multitude of challenges to work through to get built–even with the mandate in place—the big guys are taking care of immediate business. However, there may be some challenges in store for them, too.

New PPAs, New Challenges
IHI Power Corp. is the owner of three biomass power plants operating in California—Rio Bravo Rocklin, Rio Bravo Fresno, and Chinese Ultra Pacific Station. All three received new, five-year PPAs with Southern California Edison, says Rick Spurlock, IHI Power west region director of operations. “Chinese Ultra started its contract on March 1, and Fresno and Rocklin will begin theirs on Sept. 1,” he says. “The contracts have mandated a fuel procurement component requiring the use of trees from high-hazard zones designated by CalFire—the bark beetle infestation and the massive tree die-out—and there are two designated tiers—public safety and infrastructure, which are trees in danger of falling on power lines, homes and schools, things like that, and tier two,  watershed areas.”

The BioRAM contracts require IHI to purchase 50 percent of the biomass plants’ fuel supply from tier one or two in 2017. From then to the end of the contract, that percentage ramps up. “Next year, it goes to 60 percent, and to 80 percent in 2019 through the end of the contract,” Spurlock says. Right now, next to none of that material is coming from federal lands. Rather, according to Spurlock, it’s been sourced from utility company line clearing, CalTrans roadside clearing, or county clearing. “Probably 95 percent is coming from those—maybe five percent from private land,” he says.

That BioRAM fuel procurement model is working—for now. But in the coming years, with the percent of high-hazard fuel required increasing, there is cause for concern. “The cost of high-hazard fuel is significantly higher than what these plants have traditionally received,” Spurlock says. “Right now, our PPA rates cover that cost, and it works in the first year. But our concern as that, when these three primary sources finish up their jobs, and the largest amount of dead trees are on U.S. Forest Service land, our PPAs won’t allow us to pay cost of removal and transport, so the forest service will have to have additional funding to offset the cost for the biomass plants. It’s a huge problem for them [forest service], and it’s a huge problem for us.”

The USFS agrees with Spurlock on the challenges ahead, according to Marcus Taylor, USFS Pacific Southwest Region wood and biomass utilization specialist.  “In the first few years, meeting the BioRAM contracts will be more achievable because of the immediate availability of material from hazard mitigation treatments, and it may become increasingly difficult as even greater quantities from high-hazard zones will be required,” he says. “Biomass power plants are an important resource for forest health restoration across California. We expect that many projects on national forest system lands will be supplying biomass to BioRAM facilities.”

But, as Spurlock says, as forest restoration projects expand beyond those areas easily accessible by highways and community streets, it’s likely that costs for extracting and moving the biomass will increase with the longer haul distance, according to Taylor. “Financial support and incentives for off-setting these higher costs are currently limited, and may impact the amount of material a biomass facility is able to acquire,” he says. “The forest service is developing a biomass utilization strategy that will identify biomass opportunities on the national forests and their proximity to biomass facilities to assist in the industry’s planning process.”

Taylor says he hopes that the forest service’s continuing discussions within the State Tree Mortality Task Force’s Bioenergy Working Group will yield solutions to overcome those limitations. The group, in concert with six other segments with different focuses, was formed to address problems such as these as they arise.

Made up of a range of stakeholders, from bioenergy plant personnel, developers, utilities, forestry groups, the California Energy Commission, California Public Utilities Commission and more,  the Bioenergy Working Group group formally convenes once a month, according to Angie Lottes, group leader. “We’re focused on the things we can do now to use biomass material, mostly from high-hazard zones,” she says. “Another group defines areas that have critical infrastructure impacted by dead and dying trees, and areas that just have a profound amount of dead and dying zones, not near critical infrastructure, but that have large impacts in terms of wildfire—this group focuses more on long-term utilization and product and market development.”

So far, says Lottes, the working group has been fairly successful. “We helped facilitate the new contracts for the existing plants with expiring contracts, and we’re also helping facilitate contracts for the new BioMAT power plants—overall, 175 MW of mandated contracts,” she says. “It’s significantly more progress than before—previously, I was under the impression that nothing could be done [for closing biomass plants]. The politics weren’t there. But this has been a big, unexpected win.”

For the new plants, it’s been hard, Lottes admits. “Mostly, during our meetings, we are outlining problems and finding subworking groups that can work on them. We have to work pretty closely with the PUC, because most of what is mandated is in their jurisdiction, and they have a lot of procedural requirements—those can take time to move along. Most recently, we’ve been working on the new plants. The PUC has been ordered to facilitate interconnection agreements, and through that order, we’ve been doing a lot to try to lower the cost of interconnection for these plants.”

For the renewed contracts, it was mostly a matter of getting them into place, Lottes says. “It was figuring out—legally—what the PUC could tell the utilities to do. Though those contracts are up and running, Lottes, too, mentions the future challenging of forest service funding to get material out of the woods. “They need the staff and the funding to be able to set up a restoration thinning project, or even a timber sale,” she says. “That’s actually a pretty big challenge—the forest service might identify an area that can be thinned, and one year, they might have the money to do it, but then they lose a staff person and can’t set up a sale or flag trees, or they don’t have a forester available to mark trees or set up a contract.”

 Many of the steps involved in a thinning project can be impacted, for an organization that gets a budget every year, Lottes points out. “They have a multiyear planning process, and so federal lands can be difficult. But one positive is that, when it’s material from federal lands, they can mandate in contracts that it get moved, but where really depends on market prices, and who has the money to do it. Usually, it’s that we’re trying to cover the cost of fuel in a power contract. The state is trying to subsidize it so we can reach farther into the forest, and in the cap-and-trade bill, one of the things on the table is putting money in for biomass transport. I don’t know how the mechanism will be set up, but often people talk about BCAP—a way to supplement a sale that’s already going.”

The new, much smaller facilities require less fuel, are strategically located near high-hazard zones, and don’t necessarily face the fuel-sourcing challenge that the larger, veteran plants do. But as Lottes mentions, they do have an Achilles’ heel—interconnection, and the accompanying cost. “Not even the PUC foresaw how high the interconnection costs would be,” she says.

Moving Along
For the 2-MW Mariposa Biomass Project, the interconnection process has been long, arduous and expensive. In late 2016, however, a rule rewrite by the California legislature, guided by the Tree Mortality Task Force, simplified the process, and allows projects to participate in the auction without the previously required interconnection down payment of 30 percent—a hefty chunk of change for a  projected $2 million interconnect cost. 

Since the rule rewrite, the process has been moving along. Not expeditiously, but Stephen Stephen Smallcombe, chief technical officer for the project, says it has made a big difference. “It was a real killer—a $600,000 or so down payment you had to make a year or two before you had any revenue,” he says. “Right after that was done, we had three people in the queue. That’s huge. And then, the price [PPA] started to creep up.”

Greg Stangl, president of Phoenix Energy, shares Smallcombe’s optimism about improving power prices. “They’re moving upward, and the group [task force] was really able to make some headway with the interconnection costs, which we feel are capricious and arbitrary,” he says. “We’ve done work in South Africa, Norway, Poland, Japan, and no other place has interconnection costs been what they are in California. But, in partnership with the utility, we’ve really been able to bring costs down. Not for everybody, and not equally, but when interconnection can be anywhere from 20 to 50 percent of the total project cost, saving those kinds of dollars is the difference between moving forward and not.”

The Mariposa project has submitted its system impact study and expects it will be complete sometime in September. It will provide an estimate as to what interconnection costs will be, and why. “There have been some very productive discussions, good exchanges of information as to why it’s so expensive in some cases, and not so much in others,” Smallcombe says. “There are a lot of variables—how far away you are from the substation, for example. “If you’re seven miles away, you will expect to spend a couple million on new wire. But if you’re right next door, that expense is gone. If it’s an old, rural substation that hasn’t been updated in a while, that’s probably going to cost more than one that’s been updated recently. And another one we’re learning about is how much your substation can affect the whole network—if you’re impacting the transmission system, you will have to pay to update some of the other substations. We’re hopeful we’re on the right side of all of those variables, and that our SIS will come fairly reasonable.”

Once Mariposa receives its SIS, which is performed by the utility, it will be reviewed by project team engineers to analyze—and, potentially challenge—considerations. Another major milestone the project recently hit was submitting its use permit application to the Mariposa County Planning Department, part of which included various cultural, biological, botanical, noise and traffic studies.

Smallcombe and Stangl say that with rising prices, it’s likely a contract will be struck soon. Once that happens, it takes five projects in the que to get it moving again, opposed to the initial three, and chances are that it could again take a while.

On fuel, Smallcombe says most of Mariposa County is currently a high-hazard zone, and in fact, on July 18, Gov. Brown Jr. issued an emergency proclamation for Mariposa County, due to the effects of the Detwiler Fire, which, as of late July at 98 percent contained, burned over 80,000 acres, damaged utility infrastructure, threatened homes and prompted evacuations. “We’ll be getting our fuel right here—that’s not a problem for us,” Smallcombe says. “Right now, logging and chip trucks are hauling biomass to Fresno or Senora, where there are biomass plants—we’re talking 100 miles one way. Most of the fuel that we’re going to be using is stuff that has been removed from around roads, around peoples’ houses, under utility power lines, stuff that has to come out, and can’t just be cut down and left. If we can provide a biomass plant that is 15 miles away and not 100, it makes it a lot more viable.”   

The Mariposa project is working to contract large suppliers who will be responsible for ensuring the fuel is high-hazard. “When people ask the cost, it just depends,” Smallcombe says. “If you’re getting it off a mountainside and a long way to the road, forget it. Then it’s hundreds of dollars per bone dry ton.”
Fuel brakes—easily accessible strips of land on which fuel density is reduced for fire control—are a major source of fuel in the area, Smallcombe adds. “One fuel break being done right now would supply us with nine months of fuel,” he says. “When we started this, the tree mortality crisis hadn’t happened yet—the game was that you worked with the forest service, you got a stewardship agreement and you found a third-party that would execute this—they would go in and under forest service supervision, and thin trees. It might happen again one day if there is funding, but right now, there’s not.”

Stangl says the price of fuel is all over the board. “I continue to be amazed by the craziness of fuel prices in California,” he says. “In the same week, I have people show up offering fuel at prices higher than I have ever seen before, and then also people who pay us to take whole trees—it’s puzzling. But part of what has caused this is that first there was a substantial decrease in prices, then a massive snapback when the old mainline plants got their new contracts—all of a sudden, these big guys have to come up with it to stay alive. So the pricing for that sort of shot back up.”

The North Fork plant is sited in an area where logs are already being decked,  and Stangl reiterates the importance of the new, localized plants under development. “They’re looking for places to put them [logs], because they have been unsuccessful in finding a way to use them,” Stangl says. “In the southern part of the state, which lost its power plant, there is nowhere for it to go. We could run a 24-MW plant, but we don’t know what the fuel situation will be 10 or 20 years from now, we don’t know what will grow back, or how many more fires we’ll have. That’s why BioRAM contracts are much shorter—and short-term solution to this glut of fuel, a sort of a bridge to the BioMAT projects.”

Lottes admits there have been many issues—one after another—getting BioMAT moving, but points out that it’s an entirely new generation system, and that, finally, the program is in a seemingly good position. “It does seem like we’re at a place where we might be able to say ‘this is it,’ and stop asking for help,” she says.  And probably we’ll see some contracts coming up, so that’s a milestone for the program.”

Stangl has mixed feelings on the process thus far, but remains optimistic about biomass energy and BioMAT. “All of this has created an incredible amount of political support for what we’re doing,” he says. “But it does not make it easier to work through the process with the utilities, and it doesn’t suddenly give the forest service, which has most of the wood, money to remove it. They have said it’s an emergency, but they haven’t acted consistent with that—all the goodwill in the world doesn’t build a bioenergy plant, a power purchase agreement does. We remain incredibly excited about the space and finally getting to the point of contracts issued, but moderately disappointed that it’s taken so long to get here.”

Author: Anna Simet
Managing Editor, Biomass Magazine