Last week, the Maine Public Utilities Commission (PUC) voted unanimously to deliver a $13.4 million taxpayer-funded bailout to four struggling wood biomass electricity plants in Aroostook, Penobscot and Washington counties. 

The biomass bailout comes at the direction of a law, passed by the Legislature and signed by Gov. Paul LePage, that authorizes the PUC to tap into $6.7 million per year of unallocated surplus funds to subsidize electricity rates for up to two years. Proponents of the measure say it will help prevent the loss of 400 biomass plant jobs and 900 indirect jobs while biomass companies figure out a way to operate without taxpayer money. 

The PUC decided to divert half of the $13.4 million to ReEnergy Holdings’ biomass plants in Ashland and Fort Fairfield and the other $6.7 million to two shuttered plants in West Enfield and Jonesboro. The latter two plants, formerly owned by Covanta Energy, were purchased by the company Stored Solar, a subsidiary of a French energy firm, earlier this fall. The Covanta plants shut down last spring after new Massachusetts efficiency standards made it impossible for the plants to receive lucrative renewable energy credits from the state.

The commissioners said it had been a competitive bidding process and that they had received a number of applications from out of state. Under the plan, the PUC is required to ensure that the contracts deliver maximum economic benefits to the state, although there is no guarantee that the companies will stay in business when the subsidies run out in two years. If the PUC determines that the benefits are not being achieved, the legislation allows state regulators to reduce contract payments. During the deliberations, Commissioner Bruce Williamson said he had concerns that other businesses that are paying for the bailout aren’t necessarily sharing in the benefits. He added that he believed that the modeling used to calculate net benefits of the bailout was “a narrow way to consider the impact of taxpayer funds.”

“This is a redistribution of tax revenue and one can only hope that in its brief two-year existence the biomass industry will find opportunities to become much more cost-effective to compete in power markets,” said Williamson. “In contrast, it would be far better if this were entirely funds coming from the private sector choosing to invest, in which case the investment in the plant and labor is a business decision rewarded by return on the investment.” 

The bailout bill was meant to address what supporters describe as a perfect storm for the wood biomass industry, which has suffered from low wholesale electricity prices as a result of low fossil-fuel prices, a low Canadian dollar, and new laws in Massachusetts and Connecticut that place stricter efficiency standards on biomass plants. 

However, critics say that it amounts to a $13.4 million give-away to New York-based Riverstone Energy Holdings, a $33 billion private equity firm that owns four Maine biomass plants under its company ReEnergy Holdings LLC.  Since 1995, biomass plants have received more than $2.6 billion from Maine electric ratepayers and have sold power for as much as 12.3 cents per kilowatt hour when wholesale markets were under 5 cents, according to Central Maine Power. The company estimates that electric ratepayers paid $2 billion more for energy than the wholesale market price from 1995 to 2015.

The bailout has also been criticized by environmental groups who say that biomass carbon emissions contribute to climate change. Industry groups cite their own research to argue that woody biomass is a “carbon neutral” resource because the carbon emissions from burning wood are captured by growing more trees. However, a Massachusetts-commissioned study by the Manomet Center for Conservation Sciences concluded that utility-scale biomass electric plants take much more time to pay off the “carbon debt” through forest regrowth because they’re so inefficient at making energy. Although wood biomass used for heat or combined heat and power is approximately 75 to 80 percent efficient, stand-alone biomass plants are only 20 to 25 percent efficient, according to the Vermont-based Biomass Energy Resource Center. Manomet concluded that burning forest biomass for energy could initially increase carbon in the atmosphere on a level comparable to fossil fuels. 

In a separate decision, the PUC decided to delay issuing the final decision until next month on a controversial draft rule that would phase out favorable energy credits grid-tied solar users receive for the excess electricity they produce. The Legislature is expected to consider a number of bills that would preserve some of the benefits for solar users, but they will likely face long odds because Gov. LePage only supports subsidizing natural gas biomass plants and is ideologically opposed to incentivizing solar power.