Four N.H. wood-burning plants warn they’ll shut down without purchase deal

Operators of four New Hampshire biomass plants that employ nearly 100 workers say they could face imminent closure if they’re not able to secure short-term energy contracts with Public Service of New Hampshire. The four wood-fired biomass plants – in Bridgewater, Bethlehem, Tamworth and Alexandria – have teamed up in an attempt to secure power-purchase agreements with the state’s largest electric utility, which has held firm against entering agreements with the plants. Plant operators say they cannot survive on the open market and will be forced to shut down operations if they cannot sell their energy, at least in the short term, to PSNH. “We’re not asking for much, we’re not asking for the world – we just need to get by for the next few years until the economy turns around,” said Mark Driscoll, manager of the Pinetree Power plant in Bethlehem. The plants have joined together in a grassroots lobbying effort with representatives from the state’s related industries – logging, forestry and farming – who they say would be affected if the plants were to close. Supporters have launched a website, called and written letters to state officials and held meetings across the state to raise awareness. “There’s a lot of interconnectedness within this industry,” said Shelagh Connelly, president of Holderness-based Resource Management Inc., which recycles about 20,000 tons of wood ash each year from the biomass plants. The ash is then sold to about 150 New Hampshire farmers a year, who use it as a low-cost and locally sourced fertilizer, she said. “You don’t realize how many people are involved and dependent on these plants,” said Connelly, who founded her company when the plants were built in the late 1980s. If the plants close, she would be forced to eliminate three equivalent full-time positions and sell one truck from a fleet of six, she said. “It will have a profound impact on forestry in the state and how the integrated forest products companies conduct forest operations,” said Bridgewater plant manager Mike O’Leary. According to supporters, the four plants directly and indirectly support about 400 jobs, including plant workers, loggers, distributors, farmers, ash recyclers and others. “They’re good jobs – they’re full benefits,” said O’Leary of Bridgewater’s 19 positions. “It’s an area of the state where the quality of the jobs we’re talking about are not easily replaced.”Supporters also estimate the four plants’ impact on the local and state economy to be at least $40 million annually, from the loggers who pay vehicle registration fees and buy supplies at area auto part stores to local farmers who purchase the recycled ash for fertilizer. Rising costsThe four biomass plants were built in the mid-to-late ’80s, when – in a push to promote home-grown and renewable energy – the state required PSNH to enter a 20-year rate order with them.But that was a loss for PSNH, because the long-term rate was significantly higher than the market value of the energy, said Martin Murray, spokesman for the utility. “Our customers suffered because they were forced to pay very high prices for the energy from these plants.” After the 20-year period was up, most of the plants were able to secure short-term contracts with other providers, which have since expired. Now the plants are attempting to sell energy on the open market, where they are essentially bleeding out. O’Leary said the Bridgewater plant has been operating at a loss nearly every month since its short-term contract expired last August. One reason for this is the rising cost of diesel fuel, which has driven up the cost of wood, he said. This is on top of the recession, which caused an overall drop in demand for energy. Another major impact on the industry has been the huge drop in energy prices, particularly the downturn in the cost of natural gas. In the Renewable Energy Credit market, natural gas is considered a Class III REC. (RECs can be traded like commodities and exist to encourage the use of renewable energy.)Because they use older technologies, most of the wood-burning plants also qualify for Class III RECs. Facilities with more updated and cleaner technology qualify for higher-class RECs.The relatively low cost and large supply of natural gas has outstripped the demand for Class III RECs. A small player when it first emerged, natural gas has become so ubiquitous it dominates about 50 percent of New England’s energy portfolio, said PSNH’s Murray. “The landfill gases have now jumped into the Class III REC market, and the price just continues to drop,” said Driscoll. The state Public Utilities Commission is currently reviewing the state’s Renewable Portfolio Standards, with a report of its findings to go to the Legislature in November and new standards to go into effect by July 2012. The current standards do allow for the four wood-burning plants to move up to the Class I REC market, but in order to qualify they would have to undergo significant capital upgrades. So to remain viable, the plants hope to see an increase in the percentage of Class III RECs utilities are required to obtain. However, said Driscoll, “we can’t make it through next July on the open market. That’s why we need a short-term contract from PSNH, or we won’t even be around to take advantage of any changes to the RPS.”O’Leary said the plants have offered PSNH rates at or below its default service rate, which is 8.7 cents per kilowatt-hour. But since the utility can purchase the energy for less on the spot market, it hasn’t bitten. “We are obligated to serve our customers at the lowest possible price,” said Murray. “Today, we cannot justify paying more for energy from the biomass plants than we would if we purchased the energy from the marketplace.” Plus, he pointed out, it’s not only PSNH that is not purchasing power from the plants, since they can sell their power and RECs to buyers throughout New England. “It’s very telling that they can’t find a buyer,” said Murray. “The question is not, ‘Why can’t they sell to PSNH?’ – the question is, ‘Why can’t they sell to anyone?’ At the moment, they can’t compete in the marketplace because their commodity is priced too high.” Murray also pointed to the fact that none of the plants are owned by New Hampshire entities. The Pinetree plants in Tamworth and Bethlehem are owned by GDF Suez, a multinational energy conglomerate based in France; the Bridgewater plant is majority owned by Public Service Enterprise Group of New Jersey; and the Alexandria plant is owned by Indeck Energy Services Inc. of Illinois. “The corporations that own these plants have large purse strings, but they don’t appear willing to help these guys get over the hump,” said Murray. “PSNH uses that – ‘Oh, you’re owned by a multimillion-dollar corporation’ – but people aren’t in business to lose money,” said Driscoll. “These jobs are in New Hampshire, these plants pay New Hampshire taxes.”O’Leary said that as long as there’s light at the end of the tunnel – in the form of a short-term contract to tough out the current market – the owners will keep the plant in business “to preserve that infrastructure.”For now, the plants are hoping for a hot summer, which would help market prices rebound while they continue to lobby the state and PSNH for short-term contracts. “We do have sympathy for the position they find themselves in,” said Murray. “We have always been open to discussions of how we can help if possible, but what we are looking for is fairness for our customers.”