Bloomberg Brings Good News for Biomass
Last month, Bloomberg and the Business Council for Sustainable Energy released their Sustainable Energy in America 2013 Fact Book, a comprehensive overview of the state of sustainable energy in the U.S. This joint project is an annual evaluation of the entire sustainable energy industry and its many sub-industries, including biomass, which delves into changes over the past year and projects what’s ahead.
I wanted to share with you some of the highlights contained in this year’s report. Overall, biomass fares pretty well, especially when compared to the other renewables. The news is not all good, but the trends show a resilient biomass industry that, despite some challenges, fights and achieves growth.
The best news from the report is that it seems that the federal and state support the industry has fought for and earned is paying off. This support, mostly in the form of federal tax credits and state renewable portfolio standard programs (RPS), has translated into significant investment in the biomass sector. Though significantly lower than solar and wind due to high capital costs and the need for long-term power purchase agreements (PPA), annual investment in the biomass sector averaged just over $900 million between 2008 and 2012.
The report notes the importance of the federal Production Tax Credit and the Investment Tax Credit, both of which are available to biomass, observing that “These tax credits are truly the lifeblood of the renewables industry as they allow renewable energy technologies to be more cost competitive with other sources of generation. Thus any potential expiration of these credits inevitably unsettles the industry.” Fortunately, these credits were recently enhanced as part of the fiscal deal package, allowing new facilities to qualify if construction is begun by the end of 2013, rather than completed by the end of this year. The Biomass Power Association is working toward an extension of the PTC deadline this year as part of our government relations efforts.
Equally important was the American Recovery and Reinvestment Act which, through the 1603 grant program administered by the Department of the Treasury, provided a much-needed strategy for developers to fund the ITC in an efficient manner.
While not every state policy has been supportive of biomass in recent years, the fact book indicates that many states are truly looking to biomass as a realistic and reliable alternative to fossil fuels, and their policies are contributing to overall growth. The report correctly notes that while “support for renewables at the federal level has had its dramatic ups and downs over the past five years,” state-level support has been more reliable and uniform, with 29 states enacting an RPS. Importantly, each of the 29 states’ RPS programs embrace biomass energy. The report also notes, “Since 2008, interest in dedicated biomass combustion has started to pick up, driven by attractive state subsidies or feedstock availability.”
The report made some interesting observations relating to biomass and utilities. First, utility-scale projects are responsible for the largest percentage of new renewable generating capacity in recent years. The reasons cited for this include declining capital costs coupled with the availability of federal and state incentives. While growth across the renewable sector varies widely by technology, the growth of utility-scale biomass continues, albeit haltingly.
On the other hand, biomass growth appears relatively small when compared to other renewables. According to the fact book, annual asset finance for biomass generation was substantially lower than the funding received by the wind and solar sectors, due to the smaller number of bankable projects. Capital tends to be available for biomass projects that have in place a PPA, and also an experienced engineering, procurement and construction contractor and some protection against feedstock availability and price risk. None of these factors are deal breakers on their own, but finding the right combination of funding and expertise can be a challenge, as so many biomass entrepreneurs are aware.
For biomass, the biggest takeaway in the fact book is this: while it’s great news to see that the federal funding we’ve been working so hard for has indeed contributed to industry growth, it’s all the more crucial for us to keep advocating for biomass on the federal and state levels. I encourage everyone reading this to continue sharing your biomass stories with your elected officials.
Author: Bob Cleaves
President and CEO, Biomass Power Association