Biomass Feasibility Project Final Report - Xcel Energy

power plants burning coal, not fly ash from co-firing applications. And conversely fly ash from
coal can’t be used as a soil amendment. ASTM is considering a change in the standard, but
data on co-fired fly ash is ambiguous. Studies have indicated that some fly ash from some cofiring
facilities meets the standards while that from others does not (Dockter and Eylands, 2003
and Baxter and Koppejan, 2004).
Marketability of fly ash is a serious matter. Losing that revenue stream can be a deal breaker for
some coal plants interested in co-firing. Economic analysis of one experimental co-firing project
found that losing ash sales would have to be offset by switchgrass prices lower than farmers
could deliver it for (Antares Group Incorporated, 2002).
Response to Co-Firing Challenge
Adapting the ASTM standard to allow fly ash from co-firing applications would clarify its
marketability. Expanding the standard to a performance standard would increase flexibility for
using various ash resources. Research could establish a performance standard that plants
interested in co-firing could refer to. Questions whether fly ash from co-firing meets the standard
then would be settled on a facility-by-facility basis.
LEGISLATIVE AND REGULATORY CHALLENGES
Lessons Learned from the Biomass Mandate
The state’s original biomass mandate contained several provisions that proved to be impassible
barriers to cost-effective development of biomass power in Minnesota. The two most
problematic were: (1) that biomass power plants be powered by “farm-grown closed-loop
biomass” and (2) that those biomass-powered plants be new ones using biomass for most of
their fuel.
These provisions are largely responsible for the fact that none of the biomass power used to fulfill
the mandate has actually met its original terms (Morris, 2005). By declaring that the mandate
could only be met by biomass-only power plants firing farm-grown closed-loop biomass, the
original legislation dictated the use of the highest cost/highest risk fuel in the highest cost/highest
risk power plants. Years after the original biomass mandate, “farm-grown closed-loop” biomass
sources are still non-existent. Growers find excessive the risk of experimental crops with long lead
times and high costs of establishment – especially when a market for them doesn’t exist.
This history teaches lessons relevant to both policy makers and potential project developers and
investors.
Misguided Biomass Mandates
Poorly considered mandates defy commercial or economic solutions. The Department of Public
Service (DPS) captured some of the problem at work between Xcel Energy and project
developers in their comments on the proposed PPAs of District Energy and EPS/Beck. As DPS saw
it, Xcel Energy was put under pressure to fulfill the mandate quickly with very few options to
choose from. Lacking options, Xcel Energy was at a disadvantage in bargaining for better
prices. And, in the end, Xcel Energy had little incentive to bargain anyway because the
mandate let them pass through higher costs to ratepayers.
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Identifying Effective Biomass Strategies:
Quantifying Minnesota’s Resources and Evaluating Future Opportunities