Burgess BioPower passes the cost-benefit test
The plant’s economic benefits far exceed any additional costs for the power it produces
New Hampshire recently updated its energy strategy. It correctly emphasizes the need to reduce electricity rates, but it also calls for lawmakers to carefully weigh costs versus benefits when making decisions about energy projects where subsidies may impact the energy prices.
I have analyzed Burgess BioPower’s economic benefits and costs in depth, and it is clear that the Berlin biomass plant’s economic benefits to the North Country and the state far exceed any additional costs for the power it produces.
According to data published by the U.S. Energy Information Administration, Burgess BioPower is the fourth largest electricity generating facility in New Hampshire on the basis of power produced, with a capacity to produce 75 megawatts of renewable, locally-sourced energy.
The costs related to Burgess represent less than 1 percent of the $1.7-plus billion dollars spent on electricity annually in New Hampshire. There are many reasons why electricity is expensive in our state, but the costs related to Burgess’ power are not a significant contributor.
My analysis, which can be found at advancenh.com, documents how the benefits of Burgess BioPower outweigh the costs associated with its operation. Those benefits include 221 jobs in the state, 184 of which are in Coos County, a region devastated by the loss of jobs in the pulp and paper industry.
In addition, Burgess BioPower’s operations produce $14 million in annual labor income and over $4 million (and rising) in annual state and local tax revenue. In total, Burgess BioPower injects over $63 million into the New Hampshire economy each year.
In 2018, I estimate that the over-market costs associated with Burgess will account for a total of between $15 and $21 (or less than 50 cents a week) of the annual electricity bills of residential customers. As importantly, those costs fall annually while Burgess’ benefits increase.
Using a sophisticated economic model of New Hampshire, and assuming the absolute worst-case scenario, Burgess results in three times as many jobs as potentially could be lost (if businesses cut production rather than simply paying about 1 percent more for electricity) due to its small impact on electricity prices. That initial 3-1 benefit-to-cost ratio rises to 10-1 the longer the facility operates.
Public policy debates on most issues in New Hampshire typically give full consideration to both potential costs and benefits.
Recently, lawmakers voted to provide business tax incentives to all companies associated with the Advanced Regenerative Manufacturing Institute in Manchester. This is an exciting project with great promise to spur economic activity in the region.
Local communities have long provided property tax breaks for seniors or for land in conservation because the public benefits of these policies are seen as outweighing any of the costs they impose.
Still, some suggest that only costs should be considered when evaluating legislation that will assure that Burgess continues to operate. Because Burgess uses wood waste and byproduct, a locally purchased, sourced and transported fuel (unlike natural gas or coal) to generate electricity, the facility produces economic benefits that are three times as large as a comparable fossil fuel generation facility.
New Hampshire and New England are challenged by a reliance on electricity generated from natural gas plants. These plants cannot always get the fuel they need to operate and can be especially constrained during periods of extreme cold weather, as we experienced this past winter. Fuel diversity, in Burgess’ case locally produced wood fuel that also benefits the state’s forestry and wood products industries, is increasingly viewed as a critical objective of regional energy policy.
Nobody wants to pay more for electricity, and if the price of natural gas had not recently dropped to 30-year lows, the cost of electricity generated by Burgess BioPower would not be an issue. The drop in natural gas prices has made electricity generated by coal, oil and most renewables more expensive relative to electricity generated by natural gas. But New England can’t count on a reliable supply of natural gas, and that makes having local sources of electricity generation even more important.
While Burgess supplies only a portion of New Hampshire’s electricity needs, it is a source that we control locally in the face of fossil fuel and energy markets over which we have little or no control, all while making large contributions to the state’s and the North Country’s economy. Rather than finding ways to shut it down, New Hampshire should be looking for ways to secure its continued long-term operation.
Brian Gottlob is principal of PolEcon Research in Dover.