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Guidebook Supports Small-Scale Biomass Project Development in NY

The New York State Energy Research and Development Authority has sponsored the production of a guidebook to assist developers of biomass-power projects that produce less than 10 megawatts.
By Mark Boustouler and Alison Reynolds
New York has an abundant supply of biomass resources that, if used effectively, could help the state meet both its electricity supply needs and its environmental goals. Currently, 21 percent of New York's electricity generation comes from renewable resources, with biomass comprising 1.4 percent. By 2013, according to the state's renewable portfolio standard (RPS), 25 percent of electric generation should come from renewable resources. Encouraging small, biomass-based distributed generation would help the state meet this goal, while reducing greenhouse gas emissions and dependence on fossil fuels, increasing grid stability and stimulating local economies. However, developers of small biomass projects face many barriers, including informational barriers, permitting requirements, and financing challenges.

The New York State Energy Research and Development Authority has sponsored the development of a guidbook to assist developers of small biomass-fueled electricity generation plants that produce less than 10 megawatts (MW). Under contract with NYSERDA, Pace Energy and Climate Center has written the "Guide for Siting Small-Scale Biomass Projects in New York State." The guidebook focuses on three technologies: agricultural waste biogas (anaerobic digesters), biomass direct-fire or cofire facilities and biomass gasification. These technologies were selected based on their viability and potential for development in New York.


Choice of Biomass Technologies

Of the three biomass technologies addressed by the guidebook, anaerobic digesters are the most well-established in New York, where they have historically been a feature of dairy farms. Animal waste (manure) is stored within a sealed environment and broken down through anaerobic decomposition, producing biogas. This gas, after treatment, can be used as a replacement for natural gas. The basics of this technology have been around for some time, however, state-of-the-art complete mix systems, widely used in Europe, are only now becoming generally accepted in the U.S. These systems offer higher efficiencies than the plug-flow systems traditionally used in New York.

There is great potential for a build-out of digester technology in New York, which is home to the nation's third-largest dairy cow population. Agricultural digesters have proven to be useful manure management tools, minimizing environmental impacts, reducing odors and reducing risks associated with manure-borne bacteria and pathogens, while providing farms with an effective method of generating on-site heat and electricity. The U.S. EPA estimates that it is feasible to operate anaerobic digesters on 157 dairy operations in New York. This potential remains largely unrealized, however, with fewer than 20 digesters currently operating in the state. Part of the reason for this underdevelopment may be that traditionally, in the U.S., farmers carry the entire burden of financing the digester and maintaining its operation. But this "farm-financed" model is not the only option. The guidebook suggests a new model of third-party ownership, or farm/developer partnership, similar to that which has helped support the rapid deployment of digester systems across Europe. Under this model, third parties (generally digester manufacturers and/or installers) share the costs of operations and maintenance with the system owner, thereby placing a smaller burden on the farm. Typically, such a partnership will include an operating agreement covering system and process monitoring. Additional contracts may include laboratory support, system maintenance and technology upgrades. With such a partnership in place, financing may become easier to obtain, and system component warranties can sometimes be extended.

Direct combustion and cofiring is perhaps the most technologically mature of the three technologies addressed by the guidebook. The biomass fuel, typically wood, is burned in a boiler, either alone or in combination with a fossil fuel, such as coal. A variety of combustion systems are currently available, but stoker and fluidized bed systems are the most commonly used. This technology is appealing because of New York's plentiful supply of wood, municipal solid waste and industrial waste products; and due to the ease with which existing coal-burning systems can be converted to accept wood. In central New York, the State University of New York College of Environmental Sciences and Forestry is reviving New York's historic willow cultivation industry for the purpose of producing biomass for electricity generation. In addition, a variety of alternative biomass fuels, such as pelletized grasses and waste materials, are undergoing commercialization and may soon be available in sufficient quantity. New York is currently home to two major cofiring facilities, the Niagara Mohawk Power Corporation Project and the Greenridge Generating Station. There are also significant opportunities for industrial- and institutional-scale projects using this technology.

The third technology addressed in the guidebook, biomass gasification, is newly emerging within the small-scale energy production marketplace. To date, gasification has primarily been used by industrial and large commercial energy users; however, as technology costs decrease and the technology is proven, gasification is anticipated to become affordable for smaller-scale applications. Significant research and development has already scaled down the size requirements of gasification systems. Fixed-bed gasifiers in particular have been adapted for the small-scale market, providing a simplified design and lower capital costs, which makes them more attractive to potential distributed energy producers.

Gasification, in its simplest form, produces energy through a two-stage process. First, the feedstock is burned in an atmosphere containing little oxygen; this prevents complete combustion and results in compounds consisting largely of carbon and hydrogen. The second combustion stage uses these compounds to form syngas, a clean-burning gas with high energy content.

Gasification facilities are more costly than direct-combustion facilities; however, the marketability of gasification technology to small-scale distributed energy production has increased due to higher efficiency rates, lower emissions and fewer slagging problems. Gasification produces fewer nitrogen oxide, carbon monoxide and particulate emissions than direct combustion, which has implications for the state's air quality goals, and can be twice as fuel efficient. Another advantage of gasification is that a wider array of fuels can be used. Gasification feedstocks can consist of anything organic based, without much added emissions risk, making this technology highly adaptive.

Despite these benefits, there is only one operational gasification technology project in New York. More demonstration projects are needed in the state in order to prove this technology's viability, which will make it easier for gasification project developers to obtain financing.

Regardless of the biomass technology selected, the guidebook assumes that small biomass facilities will employ combined-heat-and-power (CHP) systems, since this is the most economical way to produce electricity on a small scale. CHP systems capture the thermal energy created as a byproduct of the electricity generation process. Capturing the waste heat increases biomass fuel efficiency from approximately 20 percent to about 75 percent. Because it is more efficient to produce heat than electricity, CHP systems are generally sized to match the heat load of their host facilities or a nearby heat purchaser.


From the Ground Up

The guidebook provides a detailed outline of project development, from the planning phase to energy production. It is important to remember, however, that individual projects must be uniquely tailored to meet site-specific needs and opportunities. Space requirements, financing opportunities and community impacts will all factor into project design and help determine which technology is best suited to a particular location.

Many project development decisions will revolve around the availability of appropriate and affordable feedstocks in the area. Biomass feedstocks in New York include wood, grasses, manure, urban and industrial waste streams, and crop residues. Wood sources include waste wood (for instance, from construction projects), forest products and dedicated woody crops. Grasses are currently not available for industrial-scale use in New York, but there are test plots of dedicated grassy energy crops, such as switchgrass and other perennial grasses. Waste streams include municipal solid waste, mill waste and food processing waste.

Although each technology has its advantages and disadvantages, all three offer the environmental benefits of biomass-based distributed energy production. Replacing fossil fuels with biomass significantly reduces net (life-cycle) CO2 emissions, because the only CO2 released is that which had previously been taken up during the growth of the biomass feedstocks. These emissions will then be recaptured by the next generation of biomass. Biomass-fueled power plants also produce little sulfur dioxide and toxic metals.

As with other industrial-scale development projects, proposed biomass facilities in New York are subject to multiple environmental regulations and permitting requirements. Each project must undergo a State Environmental Quality Review and may also be subject to various environmental compliance measures administered by the New York State Department of Environmental Conservation, the New York City Department of Environmental Protection and federal agencies. Because New York is a home rule state, land-use regulation is largely controlled by local municipalities. Therefore, project development will be subject to local laws, which vary from municipality to municipality. Examples of environmental regulations that a biomass project may be subject to are storm water, solid waste, air and wastewater regulations. Because biomass technologies may be unfamiliar to regulators, boards and agencies, the process of navigating regulations and permitting may take longer and involve more detailed plans than might be required for a similar-sized fossil fuel project in the same location.

The guidebook assists biomass developers in navigating this complex regulatory background by identifying potential environmental impacts of biomass projects and the key permits that must be obtained. Since SEQR can be a complicated process, the guidebook also provides a SEQR process summary.

The guidebook also aids developers in assessing the financial viability of their projects. Obtaining financing is key to successful biomass project development. Developers must be able to determine whether the expected revenues and savings resulting from the project would cover its costs while providing an acceptable return on investment.

To obtain financing, developers will likely have to demonstrate a secure and reliable fuel supply, energy off-take contracts, grid interconnection agreements, contracts for additional revenue streams, and investment commitments from the developer and/or a third party. Alternate revenue streams may come from financial incentives, including investment and production tax credits and renewable energy credits. Further, New York developers may be able to acquire emission reduction credits under the Regional Greenhouse Gas Initiative, the Northeast's cap-and-trade program. Power purchase agreements (PPAs), or long-term contracts between electricity purchasers and electricity generators, can also provide an alternative revenue stream for developers. When looking at a developer's PPA, a lender will evaluate the contract's duration, the purchaser's creditworthiness, and the penalties that would result from a contract breach. Avoided costs, such as from net metering and on-site heat use, will also contribute to the project's financial profile.

The guidebook organizes and discusses the stages of financing for biomass project developers. For example, during the early stages of development, developers must assemble their project team, determine costs, create a financial model, and initiate the permit/approval process. During the secondary stage of development, developers must identify potential financing partners, create a more detailed analysis of design and engineering feasibility, and progress on project agreements and contracts that were previously initiated. During the advanced stages of development and implementation, developers must finalize agreements, solicit equity and debt financing, and begin the due diligence process. Due diligence for biomass projects, especially those using relatively new technologies, can take much longer than one might expect.

Developing small- to mid-sized biomass-fueled electricity generation projects can be complicated. In order to ensure the economic viability of their projects, developers must be well acquainted with the technological, regulatory and financial complexities involved. "The Guide for Siting Small-Scale Biomass Projects in New York State" can assist developers by providing guidance in navigating these complexities. The guidebook can be found at: http://www.nyserda.org/publications/Report09-07SitingSmallBiomassProjects.pdf. BIO

Mark Boustouler and Alison Reynolds are student interns at the Pace Energy and Climate Center in White Plains, N.Y. Their work on this article was supervised by Todd Olinsky-Paul, energy policy analyst at Pace Energy and Climate Center, and a member of the biomass guidebook project team. Information about the Pace Energy and Climate Center is available at www.law.pace.edu/energy.
 

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