Draft bill seeks to enable industry to generate own power in WV - WOWK 13 Charleston, Huntington WV News, Weather, Sports

Draft bill seeks to enable industry to generate own power in WV

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In our world of big, centralized power plants, proposals for the many kinds of small plants distributed here and there pose challenges.

"Distributed generation could bring a lot of benefits, but our regulatory structure just isn't set up to handle it," said James Van Nostrand, director of the Center for Energy and Sustainable Development at the West Virginia University College of Law. "The utilities aren't required to buy their power from them and, if they do agree to buy it, it isn't clear what is a fair price."

West Virginia policy allows residential-scale generators to run their meters backward, up to the point of offsetting all purchases. 

The challenge is really about the big small plants: installations of tens of megawatts that industrial facilities put in to take advantage of efficiencies that are specific to their industrial processes — and often generate more electricity than the facility itself needs. 

Plants like these have benefits well beyond the facilities they serve, Van Nostrand said. 

Because the plants are of significant size and they're located on-site, they help utilities — and that means ratepayers — postpone the need for both generation and transmission investments. 

Because they often rely on renewable or highly efficient fossil fuel technologies, they support economic activity with little or no additional emissions of pollutants. 

And when the industrial facilities capture the heat that is typically wasted in power generation and use it, for example, to heat a greenhouse — a practice known as "combined heat and power" — efficiency skyrockets, from a typical 35 to 40 percent of the fuel's energy content put to work to upwards of 75 percent. That reduces industry's costs, increases competitiveness and preserves and creates jobs.

But such investments face two major, and related, barriers, according to a distributed generation working paper drafted by Energy Efficient West Virginia and Industries of the Future – West Virginia: It's hard for businesses to finance projects with an indeterminate payback period. And existing regulations make it hard to find favorable markets for excess power.

A West Virginia project illustrates. The example was presented at a conference in Charleston last year, where the name of the company was withheld, and was reviewed in the working paper.

The company proposed to burn a biomass waste-product stream to generate heat and power, according to the white paper. Sized to provide the right amount of heat for the facility's needs, the project would have 14 megawatts' more generation capacity than the company could use. But because the rate offered by the local utility for the excess power was insufficient to attract financing and the law prevents sales directly to third parties, the project did not go forward. 

What can be done to enable job-creating projects like these?

A study resolution drafted by EEWV and IOF-WV for introduction in the coming legislative session would direct the Joint Committee on Economic Development to study policies that could remove the barriers to distributed generation in West Virginia.

State policies could specify which generation technologies qualify, the working paper states. They could set the size of eligible projects and the terms of power-purchase contracts. 

And they also could outline a means of arriving at a fair price for the power. That could be different, specific prices for different generation technologies, or it could be based on some calculation of costs avoided on the parts of the utilities.

While the intent of this legislation is, in part, to open up cost-saving opportunities for industry, Derrick Williamson, attorney for the West Virginia Energy Users Group of large industrial users, cautioned lawmakers to look carefully at cost in any study that would be done.

"While it may be true that individual industrial users could benefit from combined heat and power initiatives," Williamson said, "if a utility is required to purchase the excess electricity at a cost that is in excess of current rates, then other ratepayers will end up paying for that."

The study resolution would have the committee report to the Legislature in 2014 with recommendations and draft legislation.