Biomass or biomess?

Dec 25 - Michael Sasso Tampa Tribune, Fla.

Paul Quinn thinks he has an answer for America's energy problems, and it starts with eucalyptus.

The Australian tree with the oily, dagger-shaped leaves nibbled on by koalas would make perfect fuel for an electric plant, Quinn says. He envisions putting in 10,000 acres of trees in the vicinity of this Polk County community.

"Florida could be the Saudi Arabia of biomass because there are just so many resources out there," Quinn said.

Quinn is part of a Florida boom in "biomass," the business of turning organic materials into energy. Proponents of at least a dozen new electric plants hope to one day create power by burning eucalyptus, debris from logging operations or solid waste.

But nearly a decade after Florid-ians first dabbled in this renewable energy option, and with hundreds of millions of dollars hanging in the balance, the jury is still out on whether biomass is a new gold rush or the pipe dream of entrepreneurs and idealists.

Recently, two big projects near Bradenton and the Florida Panhandle collapsed after failing to secure funding. A few other proponents won't reveal their sources of funding, and skeptics believe they may not have any. And some proposals are relying on landing $100 million or more in federal subsidies.

Still, as he looks out over a sea of cheap, barren pasture land once mined for phosphate, Quinn sees opportunity.

Quinn is the Florida man for U.S. EcoGen of Maryland, which thrilled Polk County and Fort Meade leaders with its $250 million plan to turn eucalyptus into electricity and sell the power to Progress Energy.

The proposal would create at least 75 jobs running the electric plant, and growing and transporting its eucalyptus fuel.

And the operation would release fewer pollutants into the local skies than coal or natural gas, the traditional fuel sources for power plants, Quinn said. He and his brother, William, looked into growing sorghum and switchgrass, but eucalyptus needed the least maintenance and no fertilizer.

One lesson biomass proponents are learning is that what you throw into the power plants' boilers may be less important than how much you have on hand to throw in.

In Dover, a rural area east of Brandon, a team of shopping center developers formed Imperium Energy to convert municipal solid waste into electricity. Their proposed $650 million energy generator and industrial park needs about a million tons a year.

In Gainesville, a consortium of companies plans to convert tree tops and branches from logging operations into electricity.

How many companies are getting into the biomass business is a moving target, but a Florida Public Service Commission list from Dec. 31, 2010, shows 12 proposals in Florida.

In Fort Meade, U.S. EcoGen has signed a 29-year deal with Progress Energy to generate 60 megawatts of electricity. The company hopes to build three more plants across the state at a total cost of $1 billion.

As to its source of funding, U.S. EcoGen said only that it will come from pension funds and endowments.

The company is confident of success because it has a utility on board in advance.

"It's like building a Walmart and having your customers lined up for 30 years," Quinn said.

Still, renewable energy entrepreneurs in Florida are in a precarious state.

Florida statute requires investor-owned utilities to buy power from biomass plants, but only if the plants can beat the utilities' cost to produce it, said Tamara Waldmann, who oversees Progress Energy's renewable energy operations.

Many renewable energy companies are hoping the Florida Legislature will change the rules by requiring utility companies to buy renewable energy even when it costs more.

For now, biomass proponents are forging ahead with financial models showing how they theoretically can make their projects work.

According to documents filed with the Public Service Commission, U.S. EcoGen says the present value of its contract with Progress Energy is about $359 million over 30 years.

That is about $60 million less than Progress Energy's cost to produce the energy, when adjusted for present value.

But much of U.S. EcoGen's contract is redacted because of state trade secret laws, so the public has no way of knowing how much it will receive each year from the deal.

Many renewable energy companies also are counting on millions from Uncle Sam, especially from a federal stimulus program that would reimburse them up to 30 percent of their start-up costs.

In Gainesville, American Renewables wants about $120 million in stimulus money for its wood-burning biomass plant. It is one of the few biomass projects willing to reveal its financing, which includes loans from European banks.

And in Dover, Imperium Energy hopes to get $150 million, although it fears it may miss the Dec. 31 deadline for qualifying.

The scandal over Solyndra, the failed solar energy company that got more than $500 million in federal loan guarantees, casts a long shadow over subsidies.

"I don't think Solyndra has helped their case as developers trying to push renewable energy," Progress Energy's Waldmann said. "I think it's kind of human nature to question things in light of what we've seen."

Rick Jensen of St. Petersburg has run the financial numbers on biomass firsthand and suggests many projects will never be built.

Two years ago, Jensen proposed a $185 million biomass plant near Bradenton that would have turned woody materials into electricity. He arranged a deal to sell power to Progress Energy, secured land near Port Manatee and got government approval to issue tax-exempt bonds.

Then his company, FB Energy, abandoned the Manatee County project this summer.

The tax-exempt bond program expired too quickly for his timetable. And he never could offer private investment funds the high 15 percent or 16 percent annual financial returns they demanded.

"It was hard attracting money into the project," Jensen said. "Or if they did come into the project, the amount they want to take leaves the original investors with essentially nothing."

Today, Jensen is planning a new biomass plant in Brooksville. There, he will try to convert a coal-fired power plant into a biomass plant that burns wood and vegetation. Hopefully, it will be more viable than building a new plant.

In the Panhandle city of Port St. Joe, a second company scrapped plans for a $225 million biomass plant on Nov. 30. Financing was a challenge, including unattractive terms of a federal loan guarantee.

Quinn insists that U.S. EcoGen's initial plant in Fort Meade and three future ones are financeable.

They have found a way to make eucalyptus into power without relying heavily on government subsidies, he says. They aren't looking for a cash grant from the federal stimulus program or loan guarantees, unlike other companies, but may seek tax credits on the power they produce.

"The underlying economics of the plan," he said, "have to be viable without those."