Burger, Not Well Done

by Richard T. Stuebi

Last week, First Energy (NYSE: FE) announced that it was pulling the plug on a planned biomass conversion of its R.E. Burger coal powerplant.

This proposed project had been a source of controversy since it was first unveiled in April 2009.  At that time, special favorable treatment was being offered by the state of Ohio to the proposed project, wherein First Energy was to have received additional renewable energy credits (RECs) for agreeing to burn woody biomass instead of coal at the Burger plant.  This granting of so-called “bonus RECs” was accomplished by tucking a line-item into a completely unrelated bill, which was passed by the Ohio Assembly and signed into law by Governor Ted Strickland as part of a brokered deal with First Energy and local officials and labor leaders seeking to preserve employment at the beleaguered plant in depressed southeastern Ohio.

Alas, to many observers, the deal smelled a lot more like manure than burning wood:  a recent analysis by Bloomberg New Energy Finance hinted that the bonus REC provisions associated with the planned Burger biomass repowering could have potentially “obliterated” the Ohio renewable energy markets — a market that had only been created the prior year with the passage of SB 221 including the creation of a renewable portfolio standard (RPS) requirement for Ohio utilities.  The glut of extra RECs associated with the Burger biomass repowering would likely have fulfilled First Energy’s RPS requirements for years to come, thereby kneecapping the development of other worthy renewable energy projects in Ohio — which was, after all, the intent of the SB 221 RPS.

Assessing the aftermath of the Burger debacle:  Ohio lawmakers have created an unfortunate precedent for making exceptions to the RPS bill for politically-preferred projects.  First Energy spent a reported $15 million on engineering work for a project that has now died — and I’m guessing that First Energy’s customers will likely foot the bill for work that turns out to be irrelevant.  Lastly, plant employees find out that the grand pronouncements of the past year turned out to be hollow, and the economic promises were in vain. 

All in all, a story with no real winners and lots of losers.

6 replies
  1. Christiaan Beekhuis
    Christiaan Beekhuis says:

    I agree the politics smell very bad here. But I'm curious – let's imagine for a moment that burning wood instead of coal and preserving jobs in Southern Ohio was both possible and environmentally advantageous. Are there better ways that this project could have been supported & funded, without taking out the rest of the industry in Ohio? Or are the economics simply not (yet) good enough for such a project?

  2. Nathan Johnson
    Nathan Johnson says:

    First Energy's Burger facility was going to burn 3 million tons of trees each year as its "biomass" fuel source. A recent Clean Air Act permit application submitted for Burger confirms this. That much wood equates to roughly 66,000 acres of forest land cleared and burned each year for only about 300 MW of electricity. Burger wasn't going to get its fuel from logging residues, either. There are only about 38MW worth of such residues available in Ohio on an annual basis.

    For perspective, Ohio's only national forest, Wayne National Forest, is approximately 240,000 acres in size. Burger would cut and burn through an area that large in about 4 years time. Ohio's forests and forest ecosystems are certainly winners in terms of the cancellation.

    The same goes for Ohio's emerging renewables market, which, as noted above, could well have been destroyed by the Burger REC multiplier. The multiplier would have flooded the market with "bonus RECs," with the multiplication factor increasing as the market value of RECs declined (the multiplier was the cost of a compliance payment divided by the market value of 1 REC) — thereby leading to a hypothetical REC "death spiral" in the state.

  3. waltinseattle
    waltinseattle says:

    Great numbers crunching with the trees tons and acreage. How green were their lies!!! About as green as cornfed peterbuilts, which we know can't compete with Brazilion fuel without our tax dollars underwriting the boondogle. Funny how the buck never stops where its suposed to, but it alway flow from our pockets so easily!

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