Adapting to new conditions has enabled power generator Biomass One to operate successfully since commercial operations began in 1987. Back then, the company was one of around 50 biomass power plants that sprang up in Oregon, Washington and California in response to the oil embargo of the 1970s and the need for homegrown renewable energy
At the time, attractive tax benefits and a 25-year contract led to construction of those plants. In many cases, generators were provided 10 years of guaranteed 10-12 cents/kW, followed by avoided cost rates on the remaining years of the contracts. When many of the contracts fell to less than half their original payments in the early to mid ’90s (when avoided costs were around 4 cents/kW), more than 40 of the plants went out of business.
But not Biomass One. With a 25-year power sales agreement that started out very low and escalates through the term of the contract, the company learned early on the need to operate smart and efficient, seeking out low-cost raw material alternatives and increasing efficiency and has succeeded despite swings in the power and fuel markets.
“We have $50 million tied into the plant, and it will be paid off in 2011,” says Biomass One Vice President Gordon Draper, a former International Paper procurement manager who’s been with Biomass One 16 years. “Ironically, we’re gong to pay the plant off the same year that our contract with Pacific Corp. expires.”
Already, Biomass One officials have been exploring the potentials of a new contract. The paid-off plant is in a good position to negotiate, since Draper estimates the cost now of building a stand-alone cogeneration plant is around $3 million/per megawatt capacity. (more...)