Tom Cushman’s not an energy trader. Not exactly.
Every morning before heading into the woods, he checks the going rate for electricity, estimating whether the wood-to-energy plants he supplies are going to break even.
“If they haven’t got that, then they have to cut back production,” Cushman said. “And that means I’m going to have to cut back my production, which isn’t good.”
Cushman’s concerns from his southern Maine operation in Durham echo through places like the Aroostook County town of Ashland, where the same low power prices are dogging standalone wood-to-energy plants.
Taxpayers bailed out Maine’s six such biomass facilities last year, offering them $13.4 million in subsidies to maintain employment and in-state wood purchases.
Even with that, those facilities have hit rough patches. The state’s largest biomass operator, ReEnergy, cut its prices to loggers.
The other operator, Stored Solar, has missed out on hundreds of thousands in above-market costs under that deal and, in the first months, loggers alleged they went unpaid for weeks. Stored Solar hired a Bangor public relations firm to deal with some of the fallout, but that arrangement ended after three months, according to a former spokesman.
Both companies are now in competition with similar survival plans. They are trying to lure new businesses that could sidle up to their biomass boilers, buying behind-the-meter electricity and heat energy that would otherwise dissipate up a cooling tower.
That effort to get the companies past the state subsidy that expires after two years has the attention of public officials outside the State House.
“Hopefully, it’s not too late,” said Don Tardie, chairman of the Ashland Area Economic Development Committee.
Tardie, a former mill manager, said the push is about making those mills more self-reliant, and about keeping around all the people and equipment to get wood out of the forest and ready to go to market, whichever market that might be.
The search for a future
The Ashland committee Tardie leads started out addressing a very different problem. They wanted to know how to keep education costs under control.
“The problem was that we’re losing population,” Tardie said.
The 2010 census shows it. The population in Ashland and Aroostook County is older than the rest of the state, with a lower share of young people and a greater share of people in their 60s and older.
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The numbers led the committee in a different direction. So, instead of laying out a plan for education savings, Tardie on Wednesday asked the Ashland Board of Selectmen for $25,000.
The committee wants the town to hire a part-time coordinator for its economic development plan, leading a search for federal grants to improve infrastructure at the town’s industrial park and for new potential customers at the biomass plant run by ReEnergy.
Tardie said the volunteer committee has the ear of “a number of folks” interested in moving to the property, but it has no deals yet to report.
The same goes for the five other standalone biomass facilities in the state, where investors are hoping for a similar outcome. ReEnergy, owned by the global energy investment firm Riverstone Holdings, is searching for new business partners at all four of its Maine facilities.
Stored Solar, led by investors Fahim Samaha and Bill Harrington, has laid out a similar plan. In March, the company said it had a letter of intent with a pepper grower interested in building a greenhouse next to its West Enfield plant.
Sarah Boggess, spokeswoman for ReEnergy, said talks are moving along with several customers, with some in “advanced discussions.” The company’s particularly bullish on its prospects in Ashland, she said, partly because of local involvement.
Bob Cleaves, president of the national Biomass Power Association, based in Portland, said plants need to do what they can to capture new revenue, but far-flung plants have some additional challenges in finding customers for waste heat or steam.
“They were built in rural areas where having a steam host wasn’t necessarily or immediately available,” Cleaves said.
Regrets and tough times
Tony Charette urged lawmakers last year to pass the $13.4 million bailout program ReEnergy and Stored Solar eventually won. After a contract dispute with ReEnergy, he said he regrets it.
“They tried to keep all these suppliers happy and as soon as they got that bill passed, it was cut and burn,” said Charette, general manager at the Bethel-based contractor Douglas W. Jones Inc.
The company no longer supplies ReEnergy, after claiming the price decrease violated its contract. ReEnergy fired back, arguing Douglas Jones separately violated those terms by falling short on minimum monthly wood deliveries, according to letters the parties exchanged.
Charette said the company’s been able to shift to other lines of business, but the ReEnergy contract supported about eight of the company’s 60 jobs.
“We’re just going to have to ride it out,” Charette said.
Douglas Jones was not supplying the subsidized Ashland or Fort Fairfield plants, but Charette said the price cut was out of line with the spirit of the biomass law, which aimed to help suppliers and sustain logging jobs.
Other suppliers hit with the price decrease said they don’t regret pushing the bailout to lawmakers.
Cushman, the logger in Durham, said he couldn’t speak to Charette’s contract with ReEnergy, but his allowed for such price fluctuations.
“It was a big hit,” Cushman said. “But at the same time, we’re still plugging along and still able to stay in business.”
His company’s trying to rely less on biomass, which has made up about half of its revenue.
A tenuous lifeline
Boggess, at ReEnergy, said the wholesale electricity market has only gotten more challenging since it won the subsidy contract for its Aroostook County facilities.
The company gets subsidies when the market price is lower than $46.50 per megawatt-hour. When the market price is higher than that amount, ReEnergy’s subsidy tally runs backwards.
To break even, Boggess said the company needs somewhere from $80 to $100 per megawatt-hour from all revenue sources, which are primarily selling the electricity itself and associated renewable energy credits.
She said the state subsidy arrangement has allowed those plants to “remain viable.”
From March through July, ReEnergy netted more than $2 million in state subsidies for power generated at those facilities, according to regulatory filings.
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Even with that, Boggess said revenue for both facilities has been significantly lower than projected, partly because the price for Class I renewable energy credits in Connecticut has continued to fall.
Last year, those renewable credits averaged $30 per megwatt-hour, down from $35 in 2015 and $51 in 2014, according to ReEnergy. This year, they’ve averaged $23.
“Due to these challenging market conditions, we have been forced to reduce our expenses in order to remain open for business,” Boggess wrote in an email “We revisited all operational expenses, including wood fuel prices.”
For now, Cushman hopes it’s just another bad cycle of unfavorable power prices that will pass.
“Like I tell the folks at ReEnergy,” Cushman said, “there’s no crying in biomass.”