June 21, 2015
BY Ben Bell-Walker and Joseph Seymour
Summer is a difficult time to discuss thermal policy. Homeowners are thinking about summer vacations and spreading mulch, while businesses are executing midyear performance reviews. The inevitable return of the heating season is low on most people’s priority list, but naturally, it’s at the top of the Biomass Thermal Energy Council's agenda, and we’re making it a priority for Congress, too. There are three legislative options before the Senate and House of Representatives that could break open the market for biomass thermal technologies and fuels. All three vehicles would use the Business Investment Tax Credit to incentivize thermal projects, but achieve market growth using substantially different strategies and constituencies.
The first bill would have the strongest direct economic effect on the biomass heating industry. The Biomass Thermal Utilization Act or BTU Act packages a 30 percent residential renewable energy tax credit with a 30 percent business ITC for commercial and industrial high-efficiency biomass thermal technologies. It would avoid 1.3 million tons of carbon dioxide production, create approximately 35,000 jobs, and increase renewable energy by nearly a gigawatt hour by 2017. More importantly, the BTU act is revenue-positive for the U.S. Treasury (creating more economic activity from the credit than it costs), and its cost pales in comparison to that of other energy ITCs and residential credits.
Interest in combined-heat-and-power (CHP) industrial energy efficiency currently commands a larger, though complex, base of political and industry support. CHP currently enjoys a 10 percent ITC for commercial and industrial applications through 2016. ICF International has estimated that 698 biomass-fueled CHP sites comprise 3,837 MW of electrical generation capacity (4.6 percent of total U.S. capacity), with another 630 MW under development. The POWER Act, S.1516 and H.R.2657, would boost the existing CHP ITC from 10 to 30 percent of installed costs and extend the credit through 2018. On its face, this bill would appear to support broader deployment of biomass thermal systems that also generate electricity. However, the new CHP bill maintains a subrequirement that qualifying systems must also have a minimum electrical efficiency of 20 percent. Athough biomass thermal-led CHP systems can surpass the 60 percent minimum overall efficiency requirement for this ITC, even the best-designed thermal-led systems find it difficult to meet the 20 percent electrical efficiency target when using backpressure steam turbines and organic Rankine cycles (among other technologies). BTEC's position, which may appear counterintuitive, is that reducing the minor electrical efficiency criterion to 5 or 10 percent would yield a greater number of more efficient projects.
Waste heat to power (WHP) is the newest entry in the congressional energy tax policy, and it benefits from broad general support among industrial efficiency champions. S.913 would provide a 30 percent ITC for WHP equipment. WHP technologies capture exhaust heat, gas pressure drops, rejected system heat, and mechanical heat, and converts them to electricity. ICF International estimates U.S. potential for WHP installations to be 14.6 GW, with approximately 7 percent from the forest products and pulp and paper industries. Wasted heat appears to be a significant opportunity to avoid greenhouse gas emissions and encourage more efficient commercial and industrial operations, however, we often encounter misunderstandings about the differences between WHP, CHP and biomass thermal systems amongst think tank experts, congressional staffers and others. According to the U.S. DOE, a WHP system is also considered a CHP system when energy is recovered from an industrial process (a CHP bottoming cycle). In fact, we have seen this in operation at Integrated Biomass Resources in Wallowa, Oregon, where excess biomass heat from a lumber kiln generates power through twin ElectraTherm Organic Rankine Cycles. From our perspective, the WHP bill improves upon the CHP ITC by removing the arbitrary minimum electrical efficiency level, while recognizing the importance of thermal energy from a broad range of fuels. Certainly, S.913 is no panacea for biomass thermal systems, but it may prove beneficial to thermal-led CHP systems.
With these three irons in the fire during the waning legislative days of 2015, what are biomass advocates to do? First, we must continue supporting the most beneficial bill to our industry, the BTU Act. We still feel the adverse effects of our industry's past lack of coordination when thermal technologies like geothermal and solar entered the tax code in 2008 and biomass did not. We should also be aware of our technology and fuels' eligibility in other energy tax proposals, like the new CHP and WHP tax credits, and offer our support—or at least lack of opposition—when key votes come. Thermal energy is at last receiving recognition in tax policy, and we ought to link arms with other industries to propel these legislative efforts across the finish line. We can't do much about summer temperatures, but together we can change the conversation this congressional season.
Authors: Joseph Seymour
Executive Director, Biomass Thermal Energy Council
Ben Bell-Walker, Technical Affairs Manager, BTEC
info@biomassthermal.org
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