News | June 2019

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Nacogdoches Facility Isn’t Done Yet

Austin Energy, a publicly owned utility and a department of the city of Austin, Texas, reached an agreement with Southern Power, a whole­sale energy operation and subsidiary of Southern Company, to acquire the Nacogdoches Generating Facility, a wood biomass-fueled power plant at Sacul in east Texas, for $460 million.

The 115 MW plant, which commenced commercial operation in 2012, was established with the capability to provide 100 MW of renewable power to Austin Energy under a 20-year power purchase agreement (PPA). The transaction, which is expected to close in mid-2019, will allow Austin Energy to avoid approximately $275 million in additional costs it would have incurred over the remaining term of the PPA through 2032.

“Acquiring the biomass plant relieves our obligation to make escalating capacity payments to a third party and, over time, reduces the associated cost impacts to our customers,” says Jackie Sargent, Austin Energy General Manager.

While Austin Energy will take ownership of the plant, no immediate changes to the operation of the facility are expected, and its long-term status will be addressed in Austin Energy’s future resource planning efforts.

Southern Power conducted a brokered, negotiated sale of its 115 MW biomass generator with multiple bidders. Austin Energy was invited to participate in that confidential sale process. Austin Energy anticipates that this purchase will eventually have a positive impact on customer bills.

Austin Energy will transfer all the acquired plant assets to the city of Austin immediately after the close of the transaction and will likely contract operation of the plant to a firm that specializes in this type of work. Austin Energy says it will achieve significant cost reductions through refinancing, taking control of the plant’s operations, and no longer having to make payments to a third-party.

In 2008, the Austin City Council approved a 20-year PPA to buy 100 MW of renewable energy from a 115 MW biomass power plant to be constructed near Nacogdoches. At the time, the price of natural gas was at an all-time high and projected to go higher due to supply concerns and the possibility of a cap on carbon emissions. Since then, according to Austin Energy, several factors have changed, dramatically lowering energy prices. The widespread adoption of hydraulic fracturing technology increased natural gas supplies which, in turn, drove prices down. Also, the cost of other forms of renewable energy like wind and solar saw significant reductions. The effect of lower prices for natural gas and renewables has been that energy prices have fallen from their 2008 highs to much lower levels.

Austin Energy will no longer be required to make escalating capacity payments which are paid whether the plant runs or not. “We will issue debt with a fixed payment for the next 13 years, allowing us to avoid the increasing payments—like exchanging an expensive escalating lease for a lower cost fixed-rate mortgage,” Austin Energy states. “Lastly, we will seek operational and fuel management efficiencies which will directly result in lower costs for our customers.”

Austin Energy says it would be premature to speculate about any long-term plans, and in the near term anticipates continuing to use the plant. “That being said, we’ll continue to monitor and assess this facility, just as we do all the assets in our system, and will be prepared to make adjustments as the situation warrants.”

 The City Council, as the governing body of the public power utility, has already deliberated and approved the transaction. The deliberation and vote occurred in executive session, pursuant to state law, because the seller’s competitive bidding process required confidentiality as a condition of participating in the process.

The project was conceived by Energy Management Inc. and Bay Corp. Holdings. The joint venture was named Nacogdoches Power. In October 2008, Tyr Energy joined Nacogdoches Power to form American Renewables to build and operate biomass generation plants. Tyr Energy provided the development capital for Nacogdoches Power. EPC contracts and necessary permits were obtained by March 2007. Southern Power appointed Fagen for the engineering, procurement and construction of the Nacogdoches plant. Minneapolis-based Zachry Engineering was sub-contracted by Fagen to provide overall site design, balance of plant engineering and design coordination.

Prior to actual construction of the plant, American Renewables LLC sold its Nacogdoches Power LLC biomass project to Southern Power.

At the same time, American Renewables and its entities were developing a similar wood biomass electricity plant in Gainesville, Fla., called Gainesville Renewable Energy Center (GREC), which encompassed a 30-year PPA with Gainesville Regional Utilities. Not long after completion in 2013, the $500 million plant ran into similar competitive energy price declines, also forcing it to run intermittently if at all, mainly to maintain system reliability.

In November 2017, GRU purchased the plant for $750 million, saving the city $700 million of payments over the remainder of the original 30-year PPA. The plant is now in operation as Deerhaven Renewable.

Pellet Shipments Jumped In 2018

More than 22 million tons of wood pellets were shipped globally in 2018, up 21% from 2017. The U.S., Canada, Vietnam, Latvia and Russia accounted for 69% of global exports in 2018, reports the North American Wood Fiber Review.

Europe continues to be the major destination for globally traded wood pellets. However, Asia has increased its importation of pellets over the past three years, with Japan and South Korea importing a record volume of 4.5 million tons in 2018. A majority of the volume is sourced from pellet manufacturers in southeastern Asia.

Following the “big five” in 2018 were Estonia, Austria, Malaysia, Denmark and Germany.

The U.S. ships practically all of its pellets to three countries: the United Kingdom, Belgium and Denmark.

Demand for imported pellets in Japan and South Korea continued a three-year growth trend. In fourth quarter 2018 Japan averaged $182/ton, up almost 6% from the 4Q/17. Pellet import prices to South Korea, which were nominally lower than those in Japan, rose almost 25% during the same period. The lower average cost for South Korea can be explained by that country’s reliance on pellets from low-cost countries in nearby Vietnam and Malaysia. This is unlike Japan, whose major pellet sup­plier is British Columbia, a more expensive producer of high-quality FSC and SFI certified pellets.

Keppler Says Time For Energy Overhaul

John Keppler, chairman and CEO of the world’s largest producer of industrial wood pellets, Enviva, says Americans are tired of half measures on climate change, that seven in 10 Americans want utility companies to overhaul their operations and generate 100% of the nation’s electricity from renewables in the near future.

Keppler in a guest column in the Richmond (Va.) County Daily Journal said renewable energy accounts for just 17% of electricity generation today. “Utility companies often claim an all-renewable future is impossible, since wind and solar only generate power when the wind is blowing and the sun is shining,” Keppler says. “Fortunately, there’s an environmentally friendly alternative to fossil fuels that utilities can use around the clock. Wood biomass, trees and the parts of trees that the timber industry can’t use, is plentiful and reliable. And it helps utilities dramatically reduce their carbon footprint on a lifecycle basis. Replacing fossil fuels with wood biomass should be part of our approach to preventing catastrophic climate change.”

Keppler said The United Nations’ Intergovernmental Panel on Climate Change recently released a report detailing the potential consequences of global temperatures rising 1.5°C above pre-industrial levels. It warned of more extreme weather events, rising seas, and risks to water supplies.

“That level keeps rising as we burn more fossil fuels,” Keppler says. “We don’t have much time left to prevent further temperature increases. That’s why Americans are embracing renewable energy.”

Keppler says it would be relatively inexpensive to incorporate wood biomass into the existing energy infrastructure. Many coal plants would only need a few upgrades to use this cleaner form of energy.

For more proof of biomass’ potential, according to Keppler, look to the United Kingdom. The UK cut its carbon emissions 38% between 1990 and 2017. Biomass was responsible for about a third of those reductions.

“Money may not grow on trees, but the solution to climate change does. It’s time for Americans to embrace clean, sustainable biomass,” Keppler concluded

AZ Utility Doing Biomass Testing

In a potential break in the Arizona forest thinning and lack of biomass markets logjam, Arizona Public Service Co. (APSC) is testing whether pine trees can be substituted for coal that is burned at its Cholla Power Plant.

The coal plant is scheduled to close in 2025, but converting some of its capacity to biomass generation could help with forest restoration and also save some jobs, APSC officials say.

The facility is currently operating three of its four power-generating units, and plans are to test the feasibility of converting one of the units from coal to biomass fuel. Burning lower BTU biomass, the converted unit would produce 70-80 MW.

Converting the unit would greatly help the state’s efforts to thin and reduce fire risks on more than 2 million acres, with a couple of current stewardship contracts having trouble reaching forest treatment goals because of a lack of biomass markets.

Arizona 4FRI Seeks Traction

Investors in a company that owns a major Forest Service stewardship contract to treat 300,000 acres in Arizona is changing yet again, as the large volume of biomass generated and a lack of utilization infrastructure and markets in the state continue to pose a challenge to the far-reaching project.

The contract’s implementation by Good Earth Power is taking another turn as a new group of investors is now involved to try and develop the infrastructure required to handle and utilize such a large amount of boiler fuel biomass coming off the stewardship projects. The new investors include private equity sources and logging interests from Washington state.

Started as a response to the devastating fires that hit Arizona soon after the turn of the century, the 4FRI has sought to bring once opposed organizations to the table to develop solutions to forest health and fire prevention in the state.

The contract was initially awarded in 2012 to Pioneer Forest Products of Montana, which wasn’t able to gain financing for its plan to build a pine cutting mill, small log sawmill and biofuel plant to process the material coming off the forests. In 2013 Pioneer sold the contract to Good Earth Power, which had little experience in such ventures and ended up bringing in a new set of investors in 2017.

Biofuels Business Eyes Port St. Joe

The BioCarburante Co. (TBIOCC), a Wisconsin-based energy company, wants to build a biofuel plant near Port St. Joe, Fla. to convert 2,000 tons per day of woody biomass into synthetic gasoline, diesel and aviation fuel through a thermo-catalytic conversion.

Larry Hess, CEO of TBIOCC, says the technology was purchased from Shell Oil Company. The fuel is produced more cost-efficiently and with less of a CO2 footprint, Hess says.

The total investment into the county, according to TBIOCC, would be $450 million over 10 years while creating 564 long-term employment positions from the wood supply to the refinery.

Support from the Board of County Commissioners came in two forms. One is support of TBIOCC’s pre-application for a $25 million grant from Triumph Gulf Coast, Inc., the entity established to disburse $1.5 billion in BP fine dollars into eight northwest Florida counties.

The second is to begin the process, likely through a private-public partnership, to facilitate with the St. Joe Company acquisition of the 116-acre site, which once was home to an L&P facility. The L&P site had a particular attraction: an adjacent rail spur. Once operational, the biorefinery’s output would be shipped primarily to New Orleans for “blending.”

Elmia Wood 2021 Announces Location

Elmia Wood will be hosted May 18-21, 2021 in the timberlands of Småland, 30 km south of Jönköping, Sweden. The land and infrastructure of the Bratteborg venue meets the high demand for access and exit roads, plenty of parking space, open areas for stands as well as for service functions such as electricity, wifi and broadband. But most importantly, the timberland available for live demonstrations is unprecedented, according to show officials. Sandahlsbolagen (Sandahl Group) is the landowner.

Bratteborg is a large property. The fair ground comprises 150 hectares of timberland, farmland and open areas.

“Further information on how we will utilize the potential that reside within the Bratteborg venue will follow after the conduction of SkogsElmia on June, 6-8 2019,” organizers say.


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