On August 11, 2010, the Public Utilities Commission of Ohio unanimously approved the certification of two units at FirstEnergy’s R.E. Burger facility as a renewable energy resource capable of generating and selling renewable energy credits (REC) in Ohio. Located in Belmont County, Ohio, the two 156 MW units at the Burger facility have been modified to generate electricity through the co-firing of biomass feedstock and coal. The Burger facility’s certification could have a major impact on the Ohio REC market and renewable energy development in Ohio. The reason: an amendment to SB 221 (the Renewable Portfolio Standard) allows for greater weight to certain RECs from the Burger facility under certain circumstances.
The Certification Ruling
Engaging in a brief analysis of the three statutory prerequisites to certification, the PUCO ruled that the Burger facility satisfied each of the elements. First, the PUCO concluded that the electricity generated at Burger is “deliverable” to the state of Ohio because Burger is located in Belmont County, Ohio. Second, the PUCO deemed the feedstock to be used at Burger as renewable because SB 221 specifically identifies biomass as a qualifying renewable energy resource. Finally, the PUCO held that the Burger facility satisfies the placed-in-service date based on necessary modifications that must be completed prior to its conversion to a co-fired biomass facility. For these reasons, the Burger REC application was approved.
Burger “Bonus” RECs
As mentioned above, an amendment to SB 221 allows for greater weight to RECs generated at the Burger facility if certain conditions are met. Specifically, the Burger statute states that for a:
generating facility of seventy-five megawatts or greater that is situated within this state and has committed by December 31, 2009, to modify or retrofit its existing generating unit or units to enable the facility to generate principally from biomass energy by June 30, 2013, each megawatt hour of electricity generated principally from that biomass energy shall equal . . . the product obtained by multiplying the actual percentage of biomass feedstock by heat input [in BTUs] used to generate such megawatt hour by the quotient obtained by dividing the then existing unit dollar amount used to determine a renewable energy compliance payment [for the non-solar benchmarks] by the then existing market value of one renewable energy credit.
In short, the use of this Multiplier will take a Burger REC – representing one megawatt-hour of electricity produced by burning biomass fuel – and multiply it by the RPS compliance penalty of $45 (levied for each MWh of electricity that the utility is short of its RPS benchmarks) divided by the current REC “market price.” The equation looks like this:
Amount of the alternative compliance payment
1 REC X Average market value of 1 REC = Burger “Bonus” REC
The American Wind Energy Association (AWEA) noted in its comments that this proposed REC calculation could result in the heavily weighted Burger RECs flooding the Ohio renewable energy marketplace and allowing FirstEnergy to satisfy its obligations under Ohio’s Renewable Portfolio Standard (RPS) for the entire duration of the RPS. For example, if the PUCO established the average REC market price at $22.50 (half of the amount of the $45 compliance payment), the Burger plant would receive two RECs for every megawatt hour.
However, recognizing the inherent difficulty in setting the average market value of a REC, the PUCO opened a 60-day window for interested parties to file comments on how that should be calculated. Comments must be filed by October 8, 2010.
Conditions Required for Bonus REC Calculation
R.C. 4928.65 states that “each megawatt hour of electricity generated principally from biomass energy” shall receive the weighted RECs based on the statutory calculation described in detail above. Once the Burger plant meets this “principally test,” the weighted REC provision is triggered.
To ensure that the weighted REC provision is triggered appropriately, the PUCO defined the term “principally” to mean when the Burger facility operates with “no more than 20 percent low-sulfur western coal and fuel oil.” This conclusion is derived from language in a modified consent decree filed in the United States District Court for the Southern District of Ohio on August 11, 2009 in which FirstEnergy agreed to “seek approval’ before “co-firing more than 20% low-sulfur western coal in Burger Units 4 and 5.” Therefore, Burger “bonus” RECs only apply if and when biomass accounts for at least 80% of the feedstock at the Burger facility. This definition of “principally” had been urged by AWEA and the PUCO staff.