By Jim Van Valkenburgh
Until recently, a biomass boiler produced only heat while a solar PV array generated both electricity and Renewable Energy Credits, or RECs. With the advent of thermal RECs in New Hampshire, Massachusetts, and Connecticut, biomass looks even more attractive!
Renewable Energy Credits were created years ago, mainly as a way for power companies to comply with state government regulators who require utilities to provide a certain percentage of the electric power they sell from renewable sources. Should a utility not be able to meet this by itself, they must purchase RECs to meet the requirement.
New Hampshire requires power companies to generate 23.8% of the power they provide from renewable sources. Because most are not able to do this, they are forced to purchase thousands of RECs each year. They will pay between $10 and $29 for each REC they buy, depending on current market prices. Therefore, new biomass boiler sites which will burn many tons of wood pellets or chips can generate thousands of dollars’ worth of RECs each year. The financial benefit to a biomass boiler owner is significant.
The formula goes like this: 1 REC = 3.412 million BTUs (or 1 megawatt hour) generated from an approved source such as a wood pellet- or chip-fired boiler that operates within some fairly tight emissions standards. Those standards are an important part of the regulations.
For example, a school that is offsetting the burning of 40,000 gallons of fuel oil by burning 330 tons of wood pellets would generate about 1300 RECs each year. If RECs are sold for a net cost of $16 each, they would generate $20,800 of new income for the school. Bulk wood pellets typically sell for $235 a ton, so selling the RECs would reduce the annual pellet fuel cost by 27%, down to about $167 a ton.
If this same school burned PDCs (precision dry wood chips) instead of wood pellets, they would burn 427 tons which also generates about 1300 RECs each year. Similarly, if the RECs sold for $16 each, they would generate $20,800 of new income for the school. Where PDCs are usually sold for $120 a ton, RECs reduce their cost by 59%.
An actual thermal REC Example: Pellet boilers in the four public schools of SAU 62 in Canaan, New Hampshire generated over $18,200 of net profits from thermal RECs in their first year. Each was sold for $21. The second year was a milder winter with 29% less pellet fuel burned, so less money was generated from thermal RECs. SAU business administrator Deb Ford is very happy with their switch to biomass, which in two successive winters covered 84% and 91% of the space heating needs of their schools.
At a time of cheap fuel oil prices, thermal RECs are keeping biomass quite attractive. Thermal RECs drop the net cost of precision dry wood chips to the equivalent of 76 cents a gallon of oil while wood pellets drop to $1.45 a gallon. Pretty incredible!
New REC regulations in 2012 authorized thermal RECs in New Hampshire requiring that a percentage of a utility’s renewable energy portfolio come from thermal sources—including biomass boilers, solar thermal systems, and geothermal heat pumps. This is assured through December 31, 2025.
A bill passed in 2014 in Massachusetts (Mass S.2214) enables the generation and sale of AECs, Alternative Energy Credits (basically RECs) from these same thermal sources. Connecticut has also passed a similar law. Unfortunately, no such bill has passed in Vermont or Maine.
To measure RECs, special metering devices must be installed on the boiler system with their accuracy verified by an engineer. In order to sell RECs, further regulations must be followed, but for bigger biomass fuel users, these costs are dwarfed by the net income produced from thermal RECs.
If your building is burning large quantities of fuel oil each year, then now is the time to consider biomass!
Jim Van Valkenburgh is VP of Business Development at Froling Energy.