1. BIOMASS POWER IN THE U.S. AN ON THE GROUND LOOK AT THE EXISTING AND PROPOSED INDUSTRY Congressional Briefing May 25, 2010 Bill Carlson Carlson Small Power Consultants CSPC@Shasta.com

2. A Quick History Biomass power used in forest products industry for decades Average project size is 18-20MW Primarily utilizes residual materials: Bark, Sawdust, Spent Pulping Liquor Typically combined heat and power Industry exploded in 1980’s, contracted in 1990’s, now expanding again

3. Today’s Drivers for Biomass Power Mill owners deathly afraid of loss of residuals markets Mill owner wants to stabilize and perhaps enhance value of residual streams (bark, sawdust) Sees opportunity to replace aging boiler –Latest sawmill technology, 1940’s boiler –Can increase efficiency and lower emissions Must utilize all products of forest management to compete for future stewardship contracts Hates to burn slash piles following timber harvesting Use facility to assist with forest restoration efforts

4. What Do They Look Like When Done 10-20 MW combined heat and power project Largest rural community investment in many decades First new living wage jobs in decades Often offsets current fossil fuel use –Get carbon offsets Secondary industry emerges to provide fuel from slash piles and restoration efforts Community air emission inventory goes down! Mill operation is stabilized

5. Traditional Mill

6. Addition of Combined Heat & Power

7. Final Arrangement (Another User)

8. Noncarbon Emissions of Biomass Wood is very clean fuel vs. coal –Very low in sulfur and metals High moisture content can lead to inefficient combustion, high CO New plants typically equipped with electrostatic precipitator (PM), multiple levels of heated overfire air (CO), ammonia/urea injection (NOx) Result in most situations in reduction in emissions from smaller old boiler, urban wood, forest slash Pollution control often 25% of total cost

9. Limits to Growth! Since power sold to grid, always competing with fossil power and wind Economics always skinny, and depend on combination of positive factors for viability: –Grants/tax credits –Low cost fuel –RPS/High avoided cost –CHP opportunity –Companion state support There is a logical maximum size for every available resource – take ½ or less of available resource

10. Stopping The Industry In Its Tracks! Excessively narrow biomass definition in RES Counting biomass carbon like fossil carbon - EPA tailoring rule Current EPA boiler MACT proposal –Can’t they ever look at the big picture? Reversion to ½ production tax credit at end of stimulus bill grant period A mandated, over incentivized biofuels industry

11. An Industry in Transition – New Entrants Electric utility industry never interested before –Rightfully worried about future of coal –Coal conversions attractive until you look at logistics –Perhaps path is to grow fuel around former coal plants Many new entrants with splashy announcements –Finding an equity investor and site does not make a viable project –$20 wood is not $20 wood after your press release! –Must still find a power contract to support your proforma Interestingly, current major players are not those announcing projects.

12. Can You Build Too Many or Too Big? What happens is you overbuild for the available resource: The California example The trees still stand, it is the plants that fall Under any plausible scenario, biopower will not overuse the resource There are simply too many limits (other renewable competition, transportation logistics, utility appetite) If you want more biopower, establish realistic targets/incentives and let landowners respond with more supply.

13. Bottom Line/Bottom Feeder Biopower is what you make when all higher value has been rung out of the ag or forestry resource We are below the garbage collectors as we paw through what they haul to the landfill Forget that at your peril! Essential Lines for Biomass Fuel Managers: You’re not going to burn that pile, are you? You weren’t hauling that to the landfill, were you? How long have you had that pile of ____ out back?

14. Congress Should Recognize Biopower For What It Is It is the only renewable that can supply heat, power and transportation fuels It is a great route to rural economic development, green jobs and energy security It is straightforward and low tech enough to be utilized worldwide It can be the catalyst for keeping private forests intact and increasing wood supply It can help to restore the public forests to health From Congress it needs a clear long term direction, reasonable incentives, equal standing with other renewable technologies (both old and new plants), and a broad definition of biomass.