The Current - February 2010
Articles In This Issue:
- Homegrown Fuel: Chesapeake Biofuels Endeavor Could Create Nearly 19,000 Jobs
- Legislators Tackle Raft of Clean Energy Bills
- Learning Curve: Entrepreneur Aims to Help Firms Avoid Mistakes, Seize Clean Energy Opportunities
- Chicken Power: Digester Would Produce Energy and Protect the Bay
- Energy Wise Info from Pepco and Delmarva Power
- Waste Nothing: Lars Energy Focuses on Waste-to-Energy Opportunities
- From Baby Formula to Biofuel: Martek Biosciences
- Last Chance to Register for Clean Energy Legislative Reception 2010
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HOMEgrown Fuel
Chesapeake Biofuels Endeavor Could Create Nearly 19,000 Jobs
One effort to improve the health of the Chesapeake Bay could spawn a clean energy sector capable of creating nearly 19,000 jobs and 500 million gallons of biofuel annually. That’s the conclusion of a newly released study by the Chesapeake Bay Commission and the state of Pennsylvania.“Chesapeake Biofuels Policies: Balancing Energy, Economy and the Environment” outlines a plan to raise next generation biofuel crops – such as switchgrass, barley, willow and poplar – on some of the 8 million acres of unused cropland in the watershed.
Matthew Mullin, the commission’s Maryland director, said the plan uses an old and basic scientific concept to produce environmental benefits. “If you put a plant in the ground – whether it is a tree or a perennial grass – that doesn’t require a whole lot of fertilizer, has an extensive root system and sucks up nutrient runoff, then you get significant water quality benefits.”
That environmental effort, however, could capitalize on the growing market for biofuels, he said.
“Currently, most gasoline sold in the state contains 10 percent ethanol. It was an additive that replaced MTBE when it was outlawed,” Mullin said. “But most of that ethanol is produced from corn and it is almost exclusively produced in the Midwest.”
A Chesapeake biofuels sector could both provide a local supply of gasoline additive and help the region meet the Environmental Protection Agency’s new National Renewable Fuel Standard, which will require the country to produce 36 billion gallons of biofuel annually by 2022.
“The next generation biofuels industry could be the biggest thing the agricultural community has seen in 100 years,” Mullin said. “We have strong support for this plan from the farming community, the renewable energy community, the environmental community, the natural resource community, and the small business community.”
The biofuels plan, however, does face some financial hurdles.
Creating essential infrastructure for a biofuels sector would include building several bio-refineries to convert feed stocks into liquid fuel, such as cellulosic ethanol or bio-diesel. That conversion technology, which was not commercially viable just a few years ago, has advanced to the point of being feasible but still pricey.
On average, the capital cost for building a cellulosic ethanol plant runs nearly $4 for every gallon of capacity. Consequently, the 25 million gallon per year plants envisioned for the Chesapeake Bay region would cost $90-100 million each to build, said John Urbanchuk, the economic analyst for the Chesapeake biofuels report.
“That is about twice what it costs to build a traditional, grain-based, ethanol plant,” he said.
The high capital expense is offset by substantially lower operating costs for cellulosic plants, Urbanchuk added. On average, cellulosic plants cost one-third less than corn-based ethanol plants to run, partly due to the cost of feedstock and partly due to cellulosic plants’ ability to power themselves. Unlike traditional ethanol manufacturing, the cellulosic process generates bagasse – highly fibrous waste that can be burned to produce electricity.
“So if you are using cellulose, you have the opportunity to co-generate your own power, which will cut down significantly on your operating costs. In many cases, plants will be able to sell power back to the grid. That represents an additional revenue stream for them,” Urbanchuk said. “Co-generation will be a key benefit for the cellulosic industry in the United States.”
Rapid advances in cellulosic biofuel technology will likely cut operating costs further in the next few years, he added.
The Chesapeake Bay Commission is urging bay states to help growers and processors entering the biofuels sector to tap existing incentives. It is also recommending that states create some new incentives.
However, “the real challenge is going to be finding the capital to finance the processing facilities and that has more to do with the health of the financial sector in the United States than anything else,” Urbanchuk said. “It really comes down to the willingness and ability of the financial sector to step up and fund this expansion.”
Urbanchuk estimates that planning for cellulosic biofuel plants will increase over the next 24 months, and the region could see its first production within three to four years.
Legislators tackle raft of clean energy bills
At the outset of the 2010 legislative session, Gov. Martin O’Malley introduced four bills to increase clean energy use in the state.Extending the Renewable Energy Production Tax Credit. This program, which offers Marylanders a state income tax credit for generating renewable energy, is set to expire at the end of 2010. The governor’s bill would extend the program through 2014.
Enabling Offshore Wind Developments. The governor’s bill aims to facilitate offshore wind power developments by eliminating certain regulatory hurdles and uncertainties. Specifically, it would permit some developers to lay submerged/buried energy lines from offshore wind facilities to land, passing through the beach erosion district. It would also give the Public Service Commission jurisdiction over those lines.
Promoting Plug-in Electric Vehicles. To entice Marylanders to buy electric cars, the governor’s bill would exempt such purchases from the vehicle excise tax for three years. The exemption, which would be capped at $2,000 per vehicle and limited to one vehicle per person or 10 vehicles per company, is expected to cost $270,000 in fiscal 2011. It would be funded by proceeds from the Regional Greenhouse Gas Initiative
“The Maryland Clean Energy Center is supporting all of these bills. They all serve to lessen our dependence on fossil fuels,” said Donald Hogan, an attorney specializing in legislative issues and an advisor to MCEC.
Since passing the governor’s bills is a high priority in the legislature, the bills are likely to become law this year. However, policy-watchers don’t yet know how significantly they will be amended.
Members of Maryland’s solar industry have voiced strong support for the governor’s Renewable Portfolio Standard (RPS) legislation. But they are also looking to build on it.
Specifically, they are looking to pass legislation that would compel energy companies to sign long-term contracts to purchase Solar Renewable Energy Credits (SRECs) from solar power generators.
“Fundamentally, this is the issue that has blocked the solar business from really flourishing,” said Peter Lowenthal, executive director of the Maryland-DC-Virginia Solar Energy Industries Association.
Existing legislation requires power generators to purchase SRECs to cover solar quotas. Generators, however, work on a short business cycle (typically one to three years), and don’t extend SREC purchase agreements beyond that period.
That situation has deprived the solar sector of a stable, long-term income stream and the growth opportunities that go with it, Lowenthal said.
Solar industry leaders are proposing to amend the RPS legislation to shift the obligation for purchasing SRECs from power generators to power distributors, such as BGE, Pepco and Allegheny Power, and require them to enter into long-term agreements (10-15 years) to purchase SRECs. Distributors, Lowenthal said, tend to do long-term business deals. Power distribution is also still regulated by the Public Service Commission, so distributors could offset the cost of SREC agreements through rate changes.
“We have quite a lot of support for this approach,” Lowenthal said. “However, I fear any legislation that threatens to raise utility rates will be in peril.”
- Bills proposing to alter the net-metering system so that a business or residence that has, for example, a solar array would be credited at peak rates for generating electricity in the midst of summer afternoon and would be able to get a payment back from the utility if its energy production exceeded its consumption;
- A bill establishing annual goals for biofuels use in Maryland;
- A bill adding televisions to the list of products regulated under the Maryland Efficiency Standards Act.
“We are creating a broad network for pursuing solutions in environmental and clean energy issues,” Hecht said.
The biggest challenge that legislators face in passing any clean energy legislation this session, she said, is that budget constraints could preclude any bill with a significant fiscal note.
“We don’t have a lot of money, but we are using this time to be creative about how can we move things forward to create clean energy jobs, to help people save money, to save our environment, and to be smarter about our energy use. It’s exciting to be part of that.”
LEARNING CURVE
Entrepreneur Aims to Help Firms Avoid Mistakes, Seize Clean Energy Opportunities
A nuclear physicist, serial entrepreneur and veteran of Silicon Valley’s ambitious high-tech sector, Bjorn Frogner says if he was starting his career today, he would focus on clean energy and the smart grid.
Frogner (pictured below) is the newly appointed Entrepreneur-in-Residence for the Maryland Clean 
Energy Technology Incubator (CETI), a joint venture between the Maryland Clean Energy Center and bwtech@UMBC. Formerly a professor of entrepreneurship in MBA programs, Frogner will help incubator companies overcome early stage challenges, such as refining business plans, developing marketing strategies, attracting private investment, and competing for government grants.
He intends to help fledgling companies both seize the opportunities created by the clean energy economy and learn from his hard-won lessons as an entrepreneur.
Frogner didn’t start his professional life intending to start his own companies. A Norwegian-trained nuclear physicist, Frogner decided in the 1970s that he needed to do something practical so he entered and completed a Ph.D. program in nuclear engineering at the University of California, Berkley.
“Those were good days for nuclear energy,” Frogner said. “However, then we had two unfortunate accidents – Chernobyl and Three Mile Island. After those, myself and my peers had to go find other jobs. There has been no new nuclear power plant contracts since that time.”
But opportunities abounded in Silicon Valley for experts in power plants and the software used to run them. From 1984 to 1998, Frogner founded three high-tech companies that conducted software development for electric utilities, developed cross-platform graphical user interfaces, and optimized Internet operations for clients ranging from Fortune 5000 companies to the U.S. Department of Energy.
“I was very good at proposal writing and competing on a technical basis,” Frogner said, noting that he landed Small Business Innovation Research funding for two of his companies. “But our ability to market was not correspondingly high. Our success rate on proposals [to finance] commercialization was not all that impressive.”
Although two of the three companies were profitable and generated multi-million dollar earnings, Frogner failed to attract major investment from venture capitalists. The problem, he said, was simple: “I talked like a technical guy.”
Venture capitalists, however, wanted to hear an ambitious marketing vision for the company that showed the principals had identified a market potential of several hundred million dollars and they were competing to capture a healthy portion of it.
“I didn’t say those things because I can’t count that far,” Frogner said with a chuckle. “When it came to business and marketing, I had zero background or training. I didn’t take classes of any kind. I was too busy and I felt I didn’t need them. So I learned some things the hard way.
“Now when I teach, I say if you have a good technical guy, then please find an experienced marketing and business guy. When I was starting out, I was too proud to accept that kind of lesson and it hurt me.”
Financing, Frogner noted, is becoming increasingly available for trailblazers in the clean energy sector.
“I noticed a substantial change in the alternative energy market starting about a year ago,” he said.
The Obama administration’s heightened interest in clean energy and the smart grid generated more federal funds for energy companies. That triggered new interest in clean energy among venture capitalists. “Some of the VCs are even talking about changing their focus; reducing their focus on biotechnology and putting more money into energy,” Frogner said.
The smart grid, he said, “could generate many new business opportunities that we can’t even imagine yet” as power generators, distributors and others try to build, optimize and secure the grid.
“Biofuel is not quite economically attractive yet,” he said. However, some fledgling biofuel companies are already working to develop multiple revenue streams by adapting their technology to produce fuel, clean water and capture carbon dioxide. That approach is both making them viable and attractive to investors.
Frogner who has worked on smart grid and energy efficiency projects in China, added that the United States hasn’t come close to fully exploring options for energy efficiency in everything from power plants to ordinary homes. “There is almost an endless supply of business opportunities to go after,” he said.
The advent of mass-produced, plug-in electric cars also presents countless business opportunities for technology innovators, he added.
Frogner is currently assessing companies for tenant slots at the Clean Energy Technology Incubator.
“I know a good business story when I see it,” he said. “I want to be the backseat driver and the coach for these companies. I want to see these companies try new things. Some of them will succeed by working on projects that I cannot even imagine.”
Chicken power
Digester Would Produce Energy and Protect the Bay
Officials with the Maryland Environmental Service (MES) are in the final stages of selecting a developer for a thermophilic anaerobic digester on the grounds of the Eastern Correctional Institution in Westover. The digester would use thermophiles – organisms that thrive in high-temperature environments such as hot springs and deep-sea thermal vents – to break down poultry litter and sludge from chicken-processing plants. The digester would convert the waste into fertilizer and a biogas that can be used in energy production.
In total, the facility would consume about 23,000 tons each of poultry litter and sludge
annually, and generate 1.5 – 2 megawatts of energy for the correctional facility. “As a source of renewable energy, the anaerobic digester is a very clean process,” said Carl LaVerghetta, an energy project manager with MES.
Officials at the Maryland Department of Energy have concluded that the digester would not generate air-quality issues and wastewater produced by the digester could be converted in liquid fertilizer, LaVerghetta said.
Establishing the digester is a risk-free proposition financially for the state, he added. The chosen contractor will be responsible for financing, building and operating the facility. The state, in turn, will assist the contractor with permitting and project management; lease the site to the contractor for $1 a year; and sign a long-term contract to purchase power generated by the digester.
MES officials hope the demonstration project at the Eastern Correctional Institute will also provide the state with a new means of reducing the amount of agricultural waste leaching into the Chesapeake Bay.
“Obviously poultry litter is a huge issue in the watershed,” LaVerghetta said. “Farmers tend to take poultry growers’ litter and put it in row crops, but they don’t do it in any measured way. Consequently, a lot of land in Somerset and Wicomico counties is laden with two much phosphorous and that leaches into the watershed.”
Efforts to transport some poultry litter out of state haven’t dramatically reduced the contamination of the bay, he added.
“As lot of it winds up in Lancaster County, PA for the mushroom industry. Lancaster County doesn’t have really tight nutrient management regulations, so a lot of the stuff leaches back into the Susquehanna River and returns to the bay again,” LaVerghetta said. “So we want to utilize the best attributes of anaerobic digestion to mitigate a lot of that situation.”
Digesters are sometimes used to treat wastewater. Companies in several European countries have built commercial-scale digesters to treat agricultural waste while some American farmers have erected digesters to treat waste on-site.
The Somerset County facility, however, would become the first commercial-scale, agricultural digester in the United States.
MES officials hope to award the contract for the digester in April and see the facility, which should take six to eight months to construct, in operation by year’s end.
ENERGY WISE INFO From Pepco and Delmarva Power
PHI MAKES GREEN ENERGY FROM LANDFILL WASTE
The idea behind landfill gas is simple. Capture the methane gas that is naturally created by decaying waste matter in landfills and burn that gas to power electricity generators. The end result has many benefits: reduced methane emissions into the atmosphere, a cleaner burning electricity generation process compared to fossil fuels (resulting in reduced sulfur dioxide and nitrogen oxides emissions, thereby creating less smog and acid rain), and reduced dependence on foreign sources of energy.
Baltimore County - Home to Successful PES Landfill Gas Project
The Baltimore County Department of Public Works operates the Eastern Sanitary Landfill approximately seven miles northeast of Baltimore. Opened in 1982, with an expected life of 40 years, it has a design capacity of 12.5 million cubic meters of waste. The landfill holds about 4.5 million tons of garbage, with more than 160,000 tons added annually. It is located on a 367-acre site with an anticipated waste footprint of 200 acres. The challenge: install an efficient landfill gas-to-energy system with no financial investment for Baltimore County.
The Baltimore Co. project includes an electric power generating system consisting of three massive engine/generator sets (with space and provisions for a fourth) that burn the collected landfill methane gas and generate up to three megawatts of electricity daily. This is equivalent to 79 railroad cars of coal per year, enough energy to power 1,900 homes annually. The reduction in greenhouse gases equals the removal of 3,000 cars from the county's roads every year.
“Given its potency and short-term climate characteristics (methane breaks down in the atmosphere after 12-15 years, while carbon dioxide persists for decades), it makes it a very effective gas to go after,” said Paul M. Gunning, a branch chief in the U.S. Environmental Protection Agency’s (EPA) climate change office
Construction activities at the site were confined to site preparation, installation of generators, connection to the electric grid and replacement of gas compressors. Combustion gases from each engine exit the building through a silencer-equipped exhaust stack approximately 20 feet above ground surface. The project uses existing overhead transmission lines to transfer power from the site to the power grid. The air emission rates meet all applicable federal and state emissions limitations. The system substantially reduces the operation of the existing gas burn-off flare, which represented both lost energy and increased greenhouse gas emissions.
"The 350-acre landfill is expected to produce methane for at least the next 20 years. Pepco expects that methane output will increase, so there are plans to add a fourth generator within the next five years,” said David Weiss, President and Chief Operating Officer of Pepco Energy Services Energy Services Division.
"Landfill gas not only reduces pollution, but it can act as a fuel source,” said James S. Wang, a climate scientist with the group Environmental Defense. He said the federal government’s encouragement of landfill gas energy projects represents "kind of an easy way to reduce greenhouse gases in an economically viable way.”
Pepco and Delmarva Power, public utilities owned by Pepco Holdings, Inc. (NYSE: POM), provide safe and reliable energy to approximately 719,000 customers in Maryland. PHI welcomes the opportunity to join the Maryland Clean Energy Center in providing Maryland electric customers with the information they need to conserve energy, lower their electric bills and help create a clean and safe environment for Maryland. A member of the Maryland Green Registry, PHI is ranked number 134 in Newsweek magazine’s Greenest Big Companies in America, published October 2009.
waste Nothing
Lars Energy Focuses on Waste-to-Energy Opportunities
Quinlan is a managing director of Lars Energy in Severna Park. Along with Lars’ founder Randy Roy, Quinlan is aiming to install $100 million of small, waste-to-energy and renewable energy projects within the next five years.
“This kind of business hasn’t been around that long. We’re on the energy frontier,” Quinlan said. “But we think there is really good potential here. We see more and more opportunities as we dig into this field.”
A mechanical engineering graduate of the U.S. Naval Academy, Quinlan started his career as a “navy nuke,” running the energy systems on nuclear-powered submarines. After leaving the service, he worked in conventional power generation, transmission and financing for Bechtel Power Corp., PG&E National Energy Group, and The Shaw Group, where he built a business unit with 600 employees and $175 million in annual revenues.
He partnered with four other Annapolis graduates to create a company and finance energy projects. More recently, he became a founding partner of Argos Utilities Corp., a transmission and distribution construction and maintenance company. There, he raised $30 million in equity and $20 million in debt financing, and grew the company to 350 employees and annual revenues of $55 million.
While dabbling in a few renewable energy projects, Quinlan met Randy Roy who had created Lars Energy in 2001 to focus on renewable energy projects. “In 2001-2002, you might as well have had a third head as go out and talk to people about renewable and alternative energy. There wasn’t even a market for renewable energy,” Quinlan said.
But Quinlan saw energy markets begin to shift, so 18 months ago, he decided to move from Argos to Lars to focus on renewable energy opportunities.
The company focuses on a clear and unconventional niche: creating small energy projects (in the 10s of megawatts or smaller) from waste fuel sources, such as agricultural waste, landfill methane or waste heat produced by industrial facilities.
“There’s not a lot of serious competition in this market,” Quinlan said. “That’s one of the reasons that we liked it. If there were 50 guys doing this stuff, it wouldn’t be as appealing to us. We have been doing this a couple of years and we have as much experience as anyone.”
Lars’ approach to developing new projects follows a simple formula: Find a fuel source for a waste-to-energy project, approach the owner and offer to erect a waste-energy facility on site. Lars covers the cost of designing, building and operating the facility. In return, the site owner purchases the power generated through a long-term agreement for below-market rates. Quinlan estimates that Lars’ electricity prices will run 5-10 percent below the cost of grid power, while its thermal energy prices will average 15-20 percent below grid rate.
Over the past 18 months, Lars’ has analyzed dozens of prospective projects, including many that proved to be unfeasible or uneconomical, Quinlan said. “So now if someone comes to us and says they have this much waste heat and this much flow rate, we can pretty much say whether it is going to work right away. We try to get a handle on the economics very early on.”
Quinlan and Roy have identified several promising projects, which they hope to begin constructing in the next year. They include a 6-7 megawatt facility that would turn waste heat produced by a cement plant into energy, a 4-5 megawatt waste-heat facility at a refractory brick plant, a facility to generate power from landfill gas, and an anaerobic digester that would convert agricultural waste into energy.
Quinlan estimates that capital costs for the facilities will run $3,000-5,000 for each kilowatt of capacity installed and generate an after-tax, 20-year return on investment percentage in the high teens to low 20s.
The company plans to finance projects by attracting co-developers: companies that would own the majority of the project but rely on Lars to properly design, build and operate the facility. And Quinlan predicts that some large energy companies might become interesting in financing Lars’ small, waste-energy projects.
“Large entities have no interest in doing these projects themselves,” he said. “They are too small for them for a couple of reasons. One is they like to put out larger amounts of money to work. The other is small projects carry so much overhead, they cost too much to manage. This is also unknown territory for them.
“For us, that’s an opportunity. If we can bring them a package of projects, then that’s a bigger piece of money that they can invest. And we will have done all the legwork. They know that we are a lean, mean shop, we’ve got good experience, and we can keep the costs down. So we think there’s a lot of opportunities here.”
from baby formula to biofuel
Lars Energy Focuses on Waste-to-Energy Opportunities
A Columbia-based producer of nutritional food supplements is branching into the biofuels sector.
Martek Biosciences Corp. has signed a joint development agreement with BP to establish proof of concept for large-scale, cost-effective production of microbial biodiesel.
Founded in 1985, Martek develops and produces high-value oils from algae and other microbial sources. Its two leading products are sources of omega-3 and omega-6 fatty acids – substances known to support heart, brain and eye health, as well as promoting healthy development in babies. Martek’s 2009 revenues, generated largely by sales of nutritional supplements for baby formula and other food products, topped $345 million.
Jon Hansen, executive director of fermentation science for Martek, said the company has proven its production technology for more than 20 years. “Now the challenge is to adapt that technology to the needs of the biofuels market.”
Martek and BP’s Alternative Energy team will use Martek’s “unique, algae-based technologies and intellectual property for the creation of sustainable and affordable technology” for biofuel production, said Steve Dubin, Martek’s CEO.
Essentially, researchers will use Martek’s biological process of using fermentation micro-organisms to convert sugars derived from biomass into lipids. Then they will work to convert the lipids into fuel molecules through chemical or thermocatalytic processes.
“As an alternative to conventional vegetable oils, we believe sugar-to-diesel technology 
has the potential to deliver economic, sustainable and scaleable biodiesel supplies,” said Philip New, CEO of BP Biofuels. “In partnering with Martek, we combine the world’s leading know how in microbial lipid production with our expertise in fuels markets and applications, and our more recent experience in biofuels production and commercialization.”
Beaker filled with Martek's DHA oil
BP has agreed to contribute up to $10 million to the initial phase of its partnership with Martek.
“This technology is also a perfect fit with our other strategic choices for biofuels, all based on sustainable feedstocks and fermentation,” New said.
Biodiesel produced from sustainable feedstocks through fermentation of sugars potentially can cut greenhouse gas emissions by as much as 90 percent when compared to traditional fossil fuels.
“It is our intention to develop advanced biofuels that can demonstrate significant CO2 emissions reduction on a lifecycle basis,” Hansen said.
Researchers do no yet know when fuel from the Martek-BP partnership will reach the market.
last chance to register for the clean energy legislative reception!
The first-ever Clean Energy Legislative Reception for the clean energy industry in Maryland will occur next Wednesday, February 24, in Annapolis. The event is free of charge, but advance registration is required by this friday February 19.
Come to Annapolis to network with others in the industry, meet your legislators, and help shape clean energy policy in 2010!
Confirmed speakers will include:
Senator Rob Garagiola (D - District 15, Montgomery County)
Delegate C. Sue Hecht (D - District 3A, Frederick County)
Department of General Services Secretary Al Collins
WHEN:
Wednesday, February 24th
8:00 AM
WHERE:
Miller Senate Office Building, West I
11 Bladen Street
Annapolis, MD 21401 [view map]
ADVANCE REGISTRATION REQUIRED:
Register online now
Join us in Annapolis! More information is on our website.