February 18, 2018
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Maine’s $13M bailout of biomass plants will mean jobs, but at a cost of $23,700 each

By Darren Fishell, BDN Staff
Updated:

PORTLAND, Maine — To keep their share of a $13.4 million bailout over the next two years, two Maine biomass plant operators have promised to keep 87 people employed, according to agreement details disclosed for the first time this week.

The bailout, which was sought by the logging industry after several paper mill and biomass plant closures, also promises to restore employment in the woods. In addition, the companies — ReEnergy and Stored Solar, which purchased two Covanta plants in Maine — will invest a combined $4.5 million into their plants.

Each of those 87 biomass plant jobs, according to estimates from the Professional Logging Contractors of Maine in legislative testimony, support about more than two logging jobs. Roughly, this estimate means the bailout could support about 283 jobs, directly and indirectly.

This means about $23,700 in taxpayer dollars will support each job, per year of the agreement.

That’s more than one-third the industry average wage for jobs in biomass generation and about half of the annual wage for jobs in forestry and logging, in 2015. Those wage estimates include pay and benefits for payroll employees — not for independent loggers or other sole proprietors.

While the economic study detailing those exact benefits remains confidential, the order released Wednesday summarized a consultant’s findings that each dollar of bailout should generate $18.52 back in economic benefits to the state.

Regulators relied on that economic assessment from consultants with London Economics International to compare and identify the bids with the best economic boost.

Harry Lanphear, spokesman for the Maine Public Utilities Commission, said the commission is discussing whether it can make public all or parts of that report. He said that the commission will hold both companies to their economic benefit promises, which include quotas for buying wood from Maine loggers.

“We can contractually hold them accountable for those direct jobs,” Lanphear said.

The law allows the commission to reduce payments if it determines the agreed-upon economic benefit goals are not met.

The law allowed the commission to use $13.4 million in taxpayer dollars to supplement the price in-state biomass generators get from selling their power to the regional wholesale market.

It also allows regulators to mandate proven economic benefits, such as direct employment and wood purchases, as a condition for getting the subsidies. The contracts project a total above-market cost of $14.3 million, which is in excess of the total fund, but the law allows the commission to curtail payments if the fund runs out of money.

Assessing the costs and benefits

Lawmakers decided on the deal before knowing the economic benefits the deal would provide. And their charge to regulators called only for supporting the biomass industry, which regulators noted in the order issued Wednesday.

“[T]he analysis in this proceeding does not address a basic policy question as to whether the benefit of using $13.4 million to support the biomass industry in the proceeding provides the maximum benefit of that money compared to other possible uses,” the order states.

The commission also noted that it’s not used to handling taxpayer dollars, but it followed the Legislature’s orders.

“The Commission does not typically administer taxpayer funds and we only do so now in accordance with the directives of the Act,” the commission wrote, referring to the Act to Establish a Process for the Procurement of Biomass Resources.

In addition to direct jobs, the contract requires that both companies purchase a combined 1.1 million tons of Maine wood waste each year.

For ReEnergy, its wood purchasing requirement works out to almost three-fourths of all the wood it used to generate electricity in 2015. The quota for Stored Solar amounts to an 11 percent increase in the volume of wood it purchased in 2015, according to reports to the U.S. Energy Information Administration.

The deals

Under the deal, both generators will provide about enough electricity to power 84,500 Maine homes over the two-year term. Both companies bid in 40 megawatts of capacity, meaning they can deliver a maximum of 40 megawatts per hour under the contract.

The winning bidders were ReEnergy’s Ashland and Fort Fairfield plants and the West Enfield and Jonesboro plants that Stored Solar purchased after former owner Covanta shut them down.

The bid represents all of Stored Solar’s capacity at its West Enfield and Jonesboro plants, which would need to operate for 71 percent of the two-year period to meet its expected generation under the contract, or 520 of 730 days.

ReEnergy’s two winning facilities have a combined capacity of 76 megawatts. According to the PUC order, the company anticipates putting 40 megawatts of that capacity toward the subsidized contract for 87 percent of the two-year period, generating an expected 615,228 megawatt-hours of electricity. That means operating around the clock for 640 of 730 days.

Under its contract, ReEnergy will get a fixed price of $46.50 for each megawatt-hour of electricity it produces. When the market price for its electricity is below that rate, the state fund will pay the difference. If the market price is above that level, ReEnergy would reimburse the state for the difference.

Stored Solar’s contract operates differently, giving it a fixed subsidy per megawatt-hour of $13.40, which it will get on top of the market price.

The average wholesale market price for Maine in 2016 was $34.71 per megawatt-hour, according to data from the regional grid operator, ISO-New England.

The legal question

To give money to the Jonesboro and West Enfield plants at all, regulators had to negotiate a portion of the biomass bailout law that appeared to exclude the plants that had stopped operation since the spring.

Stored Solar, a subsidiary of the French energy firm Capergy, closed on its purchase of the former Covanta plants on Oct. 18. Maine regulators noted the company was in negotiations to purchase the facilities at the time of its bid.

The law specified that eligible bidders had to operate at least at half capacity for 60 days before the PUC soliciting bids and then continue to operate at that level afterward, “except for planned and forced outages.”

Regulators accepted an argument from Stored Solar that lawmakers also meant to allow bidders who had forced or planned outages in the 60 days before bidding began, an interpretation the commission wrote was backed by guidance from the U.S. Supreme Court on how to interpret the language in laws.

On top of those reasons, they also wrote the restriction would violate the general intent of the act, to support the biomass industry.

“The commission would be handcuffed in its ability to carry out its responsibilities under the Act if it were unable to consider two of Maine’s major biomass resources,” the commission wrote. “Such a result would be absurd, especially given the obvious goal of the Act to support the biomass industry.”

 

Correction: An earlier version of this story omitted a unit of measurement for the deal's wood waste purchasing requirement.


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