After a pause to shuffle commissioners, the Arizona Corporation Commission will again ponder whether to try to create a market for biomass, to boost faltering forest thinning efforts in the state.
Specifically, the agenda item at the next ACC meeting involves whether to let Arizona Public Service boost its rates by a couple dollars a month for the average homeowner in order to convert a coal-burning unit of the Cholla Power Plant in St. Johns to biomass.
The board has already voted support in principal for requiring power companies to generate 60-90 megawatts (MW) of electricity annually from burning wood scraps, including small trees, branches, brush and other debris from forest thinning.
Such a mandate could salvage stalled forest thinning efforts. This would reduce the risk of devastating megafires and protect the watersheds that sustain both rural areas and the Valley. However, it would also effectively force electricity customers to subsidize forest thinning operations in the form of slightly higher electricity costs.
The corporation commission was on the brink of adopting the mandate and approving the conversion of one of the Cholla units when Commissioner Andy Tobin resigned to go work for Gov. Doug Ducey.
In May, Ducey appointed Lea Marquez Peterson, a Tucson businesswoman and leading Hispanic business advocate. In 2018, Peterson lost the District 2 Congressional race to Democrat Ann Kirkpatrick.
Prior to Tobin’s resignation, the corporation commission had adopted a policy statement generally supporting a biomass mandate on a 4-1 vote, with Commissioner Justin Olson in dissent.
A staff report on the issue said a biomass mandate would bolster forest restoration efforts, reduce short-term carbon emissions, promote rural economic development, benefit the environment, reduce the risk of wildfires, comply with existing ACC policies and benefit public health and safety. However, the mandate would also boost electric bills, especially if other agencies that benefit from the policy like the state and federal governments don’t chip in to help reduce the excess costs.
The staff report speculated inconsistent Forest Service policies may deny any such power plant the steady supply of biomass needed to operate profitably.
APS did a feasibility study of conversion of Cholla to biomass.
The company said if it could ensure a steady, long-term supply of wood it could burn enough biomass to support the thinning of some 50,000 acres annually.
The conversion would require the ACC and the federal government to issue the company what amounts to an air pollution waiver, since biomass releases carbon and other gases that would end up in the atmosphere anyway as a result of recomposition or wildfires. The company also wants permission to add the extra costs to its rates, since it would cost more to burn wood scraps than natural gas.
The commission would like to require the utilities it regulates — like APS — to generate 60 MW of power from biomass annually. The policy also envisions trying to convince the power companies it doesn’t regulate — like the Salt River Project — to buy another 30 MW of biomass energy annually.
SRP already buys 15 MW of biomass generated power annually from NovoPower in Snowflake, the only biomass plant in the state. The power company has also partnered with the Forest Service and others to encourage thinning projects on the watersheds that feed into SRP’s chain of reservoirs on the Verde and Salt rivers.
ACC Commissioner Olsen dissented from the May vote, based on the higher cost of generating electricity with biomass. The ACC staff report put the annual excess cost at about $67 million. Olsen said customers should not bear the cost of producing other social benefits, no matter how worthy.
The four other commissioners — including Tobin — voted in favor of the policy, but the board has not yet voted on whether to approve the conversion of Cholla.
That makes the next meeting potentially vital to future forest restoration efforts.
Advocates for the Four Forest Restoration Initiative (4FRI), supporters of the timber industry and local officials like the Navajo, Gila and Apache boards of supervisors have waged a campaign to convince the Corporation Commission to require power companies to generate 60-90 megawatts of electricity annually from burning the scraps, brush and debris generated by forest thinning projects.
The Forest Service has struggled for a decade to thin some two million acres of overgrown forests in Northern Arizona.
The Forest Service has handed a sequence of contractors a decade-long contract to thin hundreds of thousands of acres. The contract has repeatedly changed hands when each company discovers it can’t make money on thinning projects, given the lack of infrastructure and markets. Those contractors have thinned 15,000 acres. The saplings, brush, branches and debris constitutes about half of the material removed, effectively overwhelming the profit in the larger trees given the lack of a market for the scraps.
A group of local officials and local contractors in the White Mountains has managed to thin a lot more acreage than the 4FRI contractors in the past decade, partly due to the tenuous survival of a handful of wood-processing businesses.
The key contractors include NovoPower, a paper mill converted to a biomass burning power plant in Snowflake. The 27 MW power plant has soon-to-expire contracts to deliver power to Arizona Public Service (APS) and Salt River Project (SRP) The plant now burns enough biomass to sustain the thinning of about 15,000 acres annually.
The 4FRI project envisions thinning at least 50,000 acres annually.
Advocates say a corporation commission mandate could not only keep NovoPower in business, but prompt APS to convert the coal-burning Cholla Power Plant in St. Johns to generate 30-60 MW of power from biomass. Cholla is currently slated to shut down in a few years, partly because coal now costs more than natural gas or solar to operate. In addition, the prospect of tougher federal air pollution standards could make coal-fired plants even more expensive.
The APS feasibility study concluded it could cost-effectively convert a unit at Cholla to biomass. However, Cholla’s close to the existing NovoPower plant. The study didn’t address the problem of trucking biomass from a wider area, like the Grand Canyon and Flagstaff.
The ACC staff report noted that conversion of Cholla would create about 2,100 jobs in the short term, plus 140-long term jobs to operate the plant.
The ACC staff report raised some red flags about the biomass mandate, although generally supportive.
For instance, the report questioned whether the power plants could count on a steady and reliable source of wood, given the difficulties the Forest Service has experienced in finding a reliable 4FRI contractor who could operate at the necessary scale.
Moreover, generating power from biomass could prove much more expensive than generating the same amount of energy from natural gas, currently benefiting from low prices globally. In addition, natural gas plants can fire up and shut down quickly — making them especially valuable for meeting peak demand. Biomass plants would have to operate almost continuously, so they’re not as useful in generating peak-demand power.
The ACC report noted that NovoPower has struggled to stay in business, although it’s now the only biomass burning plant in the state.
“The plant is only 10 years old and has already undergone two ownership changes. Initially, the plant was designed to process residues from an adjacent paper mill — at one point recycling paper fibers resulting in 25 percent of the plant’s energy generation — until the paper mill went through its own economic hardships, finally ending in bankruptcy in 2015.”
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