Biomass Feasibility Project Final Report - Xcel Energy

e calculated. Plants above 10 MW do not qualify for standard interconnection agreements, so
they may find transaction costs a barrier.
Other transaction costs for bio-power plants, regardless of size, are interconnection and standby
rates. In discussing standardized interconnection agreements between utilities and distributed
generation facilities, proponents of distributed generation (DG) often express a concern that
utilities could deliberately set rates high to discourage development of DG facilities (DOC,
2003b). Since the PUC chose not to regulate those costs under the generic standards, they
remain a potential barrier to the development of biomass power plants of any size.
Response to High Transaction Costs
Several policy solutions could lessen the negative effects of high transaction costs on the
development of bio-power projects. Standard offer contracts would ease the development of
renewable energy projects by removing the need to negotiate contracts and by enabling
potential bio-power investors to plan projects according to known contract terms. Another
solution would be the extension of distributed generation standard interconnection agreements,
or at least a portion thereof, to include all bio-power facilities.
An Inability to Monetize Benefits
Biomass power plants, like other environmental projects, have difficulty capitalizing on the
external benefits that they may confer on society. Anaerobic digesters (ADs) provide a good
example of this problem. Many large dairy facilities impact their neighbors with odors from
manure. More important, manure applied to farm fields and spills of untreated manure from
ruptured lagoons lead to high levels of runoff that increase the nutrient load in Minnesota’s rivers
and lakes.
ADs (whether used for energy or not) can dramatically reduce odors and virtually eliminate
nutrient runoff. Dairy operations with ADs in operation incur fewer complaints from neighbors
and less risk of regulatory actions for excessive nutrient runoff. But the benefits to society of
aerobic digestion far surpass those small benefits to dairy operators. If those societal benefits
could be monetized, they would improve the economics of AD biogas powered generators
(DOC, 2003a).
Response that Monetizes Benefits
Among policy solutions to remedy this market failure, the state (or local governments) could
offer additional incentives to bio-power projects that can demonstrate improvements to local
air or water quality.
Marketing of Waste Streams from Co-Firing
Biomass-only power plants can potentially sell fly ash as a soil amendment to foresters or farmers.
The Fibrominn poultry litter plant in Benson plans to do just then thereby turning a potential
disposal cost into a revenue stream. Coal plants typically sell their fly ash to the concrete
industry.
When plants co-fire coal and biomass, however, their fly ash is currently worthless. That’s
because it doesn’t meet the standard of the American Society for Testing and Materials (ASTM)
governing the use of fly ash in concrete. The standard (ASTM C618) refers only to fly ash from
Identifying Effective Biomass Strategies: Page 145
Quantifying Minnesota’s Resources and Evaluating Future Opportunities