Bioenergy and Public Policy in North Carolina

1. Bioenergy and Public Policy in North Carolina Stephen S. Kalland, Director The North Carolina Solar Center at NCSU www.ncsc.ncsu.edu August 28, 2007

2. Today’s Talk • The Solar Center • The Big Picture • Energy Policies for NC

3. North Carolina Solar Center • Operated by College of Engineering at NC State University • Created in 1988 as a Clearinghouse for RE Information, Training, Technical Assistance and Applied Research • Sponsored by • Other Funding: Industry, Federal Labs, US DOE, USDA, IREC, Foundations, Other State Agencies & NGOs

4. Solar Center Technology Areas Solar Photovoltaics Solar hot water Passive solar Daylighting Hydrogen & Fuel Cells Biomass Animal waste Energy crops Landfill gas AFVs and Fuels Ethanol Biodiesel AFVs Energy Efficiency CHP & Distributed Generation Wind Energy Green Buildings & Sustainable Design

5. Solar Center Programs • Technology Research, Development, Demonstration & Tech Support • Renewable Energy • Distributed Power & Industrial Processes • High Performance Building Systems • Alternative Transportation Fuels & Technologies • Extension Services – Education, Outreach, Policy • K-12 Programs • Conferences & Workshops • Workforce Development • Policy & Analysis for government agencies & non-profits

6. Goal is to get “repeat” trainees In 2005, trained 137 participants, including 18 graduates of the three week series Classes in Biofuels, Solar Thermal, PV, Small Wind, Residential Green Building Winner of the 2005 Innovation Awards from IREC New Green Building “Diploma” Series for commercial & residential launching in fall 2006 Workforce Development Renewable Energy Diploma Series

7. Database of State Incentives for Renewable Energy • The NC Solar Center hosts DSIRE - a comprehensive source of information on state, local, and utility incentives that promote renewables • www.dsireusa.org

8. Solar Center Biomass Research Partners at NC State University • CALS Animal & Poultry Waste Management Center • Partners with NCSC on biomass initiatives - 1 shared staff person • CNR Department of Forestry • Partners on successful USDA-DOE Joint Solicitation on Biomass • COE Chemical & Biomolecular Engineering • Partners on 2005 USDA-DOE Joint Solicitation – Biodiesel Pilot Plant • CIBR – New Golden Leaf Cellulosic Ethanol Pilot Plant

9. Current Biofuels Related Projects Clean Transportation • Clean Fuel Advanced Technology Project (NC DOT, DAQ, SEO) 3 yr / $2 M to education, outreach and grants including biofuels infrastructure • Serve as lead for SEO implementation of 20% petroleum reduction plan for state fleet Other Solar Center Programs • Biomass to Biofuel Screening Facility • Cellulose to ethanol plant to process under 500lbs per day to test how various feed stocks will run in equipment (highly flexible) • Expect to be operational in 18 months • Contact- Dr Steve Peretti, Alex Hobbs • Energy Crops for NC Program • Evaluate agronomics, economics, processing capacity for Canola, Switchgrass, Hulless Barley, Coastal bermuda grass, and Woody biomass

10. NC Biofuels Technical Support • Carolina Soy • FarmTech of Duplin, LLC • NC Grain Grower Co-op • Piedmont Biofuels Co-op • Carolina Biodiesel, Inc. • TS Designs • Filter Specialty Bioenergy, LLC

11. Southeast CHP Application Center • Multiple US DOE SEP Special Project Awards • Partnership between NC Solar Center & Mississippi State University • Efforts also involve university and business partners in FL, SC, GA, TN, AL, KY

12. Mission: To promote economic development, a reduction in greenhouse gas and other emissions, and energy security through the utilization of biomass, including both bioproducts and bioenergy, in the State of North Carolina. Made up of members from Industry, State Government and Academia

13. Primary Task: Prepare Biomass Roadmap for North Carolina Three committees: Biofuels, Biopower and Policy, Education & Outreach Support staff: Council organizer, writer and roadmap facilitator Integrate with Biofuels Strategy being developed by this group? NC Biomass Council

14. Today’s Talk • The Solar Center • The Big Picture • Energy Policies for NC

15. What is going on with energy?! Energy Independence! SBF RPS Rate Structures NewNuclear Reactors?! Incentives Carbon Marketplace Energy Diversity What’s Sustainable? Efficiency Potential Biomass Avoided Cost Rate Real Costs? Performance Contracting Demand-side Management IRP Subsidies JOBS!!! Interconnection Standards Regulated Energy Market Rate Decoupling Social Responsibility? Net Metering Baseload Guaranteed Profit Guaranteed Monopoly NC GreenPower

17. Our Energy Future Will Cost More, with or without Renewable Energy • Fuel price increases • Coal: $28/ton 2002 is $64/ton in 2005 • Natural Gas: $2/MMBtu in 1998, $7.39 in 2005 • Uranium: $7.10 in 2000, $23 in 2005 • Fluctuations mean uncertainty (and higher costs) • bad for policymakers, shareholders, consumers • Utilities: 10,000 MW new capacity by 2013 • Both new nuke and coal plants proposed

18. Price Trends in Conventional Fuels +250% +225% +425% +325% Sources: Aggregated from US Energy Information Administration Fuel Price Weeklies and Uranium Spot Market

19. Projected oil peak worldwide in next 10+ years

20. Growth in Vehicle Miles Traveled

21. The Problem in the Southeast • NC exports $15 Billion/year for fuel • Little Change = Little Opportunity • No deregulation = no new programs/incentives • Very different than the West, Midwest, and Northeast where RE is thriving • “Rules of the Game” favor incumbent technologies • No simplified interconnection or encouragement of independent power production

22. Is There Hope in the Southeast? YES! Four Major Drivers for Renewable Energy • Politically strong agricultural community wants to promote renewable energy • Economic development opportunities for depressed regions that need jobs • Air quality and climate change issues makes strange bedfellows (see NC Clean Smokestacks) • Energy security and independence perceived as critical

23. The Big Picture: Agriculture • Rural economic development – particularly biomass, biofuels, wind energy • New markets for agricultural commodities, but possible increased costs for food & feed • New ways vs. cheap, old way

24. The Big Picture:Jobs & Economic Development • NC spends over $15 billion annually to import energy fuels • Manufactured technologies – not construction based • Tends toward smaller scale with replication • Fossil vs. Renewables • No fossil fuels are produced within the state • Clean, High Tech Quality Jobs

25. The Big Picture: Environment & Human Health • Environment • Air Quality Enforcement – SOx, NOx, Particulates, Mercury • Air pollution has reduced the average visibility in the Smoky Mountains from 113 miles to 25 miles • Climate Change – CO2 Regulation • Water Quality • Human Health • CDC estimates that 8% of women of childbearing age have unsafe levels of mercury in their blood streams, which can lead to birth defects and brain damage in babies. • Mercury is one of the most toxic forms of pollution released during fossil fuel combustion and is most commonly passed onto humans through consumption of fish. North Carolina frequently issues consumption advisories for largemouth bass, chain pickerel (jack fish) and bowfin (blackfish) caught East of I-95.

26. Ozone Pollution in NC • American Lung Association 2006 America’s 25 Most Ozone Polluted Cities • #15 Charlotte, Gastonia, Salisbury • #19 Raleigh, Durham, Cary • Deemed non attainment areas by the EPA, affecting federal highway finding. • Especially impacted: • 1.9 million adults over 65 & 14 and under • Over 685,370 asthma, bronchitis & emphysema patients • 1.2 million with cardiovascular disease

27. World’s 50 largest GHG producers

28. The Big Picture: Energy Security • Extreme weather events • Hurricanes, Ice Storms • Existing infrastructure failures • Blackout of 2003 • CA Energy Crisis • Threat of terrorism, both domestic and foreign • Rising costs of fossil energy supplies associated with politically unstable places • Persian Gulf, Venezuela, Russia

29. Today’s Talk • The Solar Center • The Big Picture • Energy Policies for NC

30. NC Incentives - Residential • Renewable Energy Tax Credit - Personal • Active Solar Heating and Cooling Systems Exemption • Interconnection Standards & Net Metering • NC GreenPower Production Incentive • TVA - Green Power Switch Generation Partners Program

31. NC Incentives - Commercial • Renewable Energy Tax Credit - Corporate • Energy Improvement Loan Program (EILP) • Interconnection Standards & Net Metering • NC GreenPower Production Incentive • TVA - Green Power Switch Generation Partners Program

32. NC Renewable Energy Tax Credit • Eligible Technologies Include • Solar, Wind, Hydroelectric, Biomass including Landfill Gas, Spent Pulping Liquor, Anaerobic Digestion, Ethanol, Methanol, Biodiesel • Amount:  35% • Max. Limit:  $2,500,000 • Terms:  Distributed over five years • Expiration Date:  1/1/2011

33. DSIRE: www.dsireusa.org July 2007 Renewables PortfolioStandards ME: 30% by 2000 10% by 2017 goal - new RE MN: 25% by 2025 (Xcel: 30% by 2020) VT: RE meets load growth by 2012 *WA: 15% by 2020 • NH: 23.8% in 2025 WI: requirement varies by utility; 10% by 2015 goal MT: 15% by 2015 MA: 4% by 2009 + 1% annual increase OR: 25% by 2025 (large utilities) 5% - 10% by 2025 for smaller utilities RI: 16% by 2020 CT: 23% by 2020 • NV: 20% by 2015 IA: 105 MW • NY: 24% by 2013 • CO: 20% by 2020 (IOUs) *10% by 2020 (co-ops & large munis) IL: 8% by 2013 • NJ: 22.5% by 2021 CA: 20% by 2010 • PA: 18%¹ by 2020 MO: 11% by 2020 • MD: 9.5% in 2022 *NM: 20% by 2020 (IOUs) 10% by 2020 (co-ops) • AZ: 15% by 2025 • *DE: 20% by 2019 • DC: 11% by 2022 *VA: 12% by 2022 TX: 5,880 MW by 2015 HI: 20% by 2020 State RPS State Goal • Minimum solar or customer-sited RE requirement * Increased credit for solar or customer-sited RE • ¹PA: 8% Tier I / 10% Tier II (includes non-renewables); SWH is a Tier II resource Solar water heating (SWH) eligible

34. What are RECs? • Renewable Energy Credits • Also called Tradable Renewable Certificates (TRCs) or "green tags" • created when a renewable energy facility generates electricity • each unique certificate represents all of the environmental attributes or benefits of a specific quantity of renewable generation,

35. Emissions Credits Includes SOx, NOx, CO2, others Tradable Most relevant to EPA cap & trade programs EPA currently grants these to utilities (offsets to smokestack) Tags Refers to the Use of RE to Generate the given electron Tradable Most relevant to RPS requirements, Green Power Programs Ownership unclear unless defined in power purchase agreement Emissions Credits vs. “Tags”

36. NC GreenPower for Consumers • Tax-deductible contributions go directly toward the purchase of renewable energy from independent generators located in North Carolina   • Each $4 block of NC GreenPower subscribed monthly will annually offset: • 2497 pounds of carbon dioxide (CO2) • 7 pounds of sulfur dioxide (SO2) • 3 pounds of nitrogen oxides (NOx) • 972 pounds of coal required to produce the same energy • The annual reduction of CO2emissions from one block of NC GreenPower subscribed monthly is equivalent to planting 192 trees, or not driving 3,039 miles or 73 days.

37. Pays a premium to RE generators for their “Renewable Energy Credits” (RECs), also called “green tags” Currently $0.01 - $.06/kWh for bioenergy NC GreenPower

38. NC GreenPower for Suppliers • Most suppliers are selected through a formal Request for Proposals (RFP) process. • When new generation is required to support NC GreenPower participant subscriptions, the program issues a RFP for specific resources needed to complete the current resource mix. • An exception to this process involves small wind and solar installations of 10 kW or less capacity. These installations are permitted to enter an expedited generation contract that forgoes the RFP process.

39. NC Energy Improvement Loan • Eligible Technologies: Solar, Wind, Biomass, Hydroelectric, Energy Efficiency • Applicable Sectors: Commercial, Industrial, Nonprofit, Schools, Local Government • Max. Limit:  $500,000 • Terms:  1% interest rate for RE, 3% for EE; 10-year max

40. Major RE-related NCUC Dockets • Interconnection E-100 Sub 101 • About to Reopen due to S3 • Will use FERC rules as model • Net Metering E-100 Sub 83 • Will look at possible rules for net metering up to 1 MW (S3)

41. Key Federal Policies Available in NC • Clean Renewable Energy Bonds (CREBs) • Federal Government - Green Power Purchasing Goal • Renewable Electricity Production Tax Credit • Renewable Energy Production Incentive • Tribal Energy Program Grant • USDA Renewable Energy Systems and Energy Efficiency Improvements Program

42. Key Federal Policies Available in NC What is Farm Bill 9006? • U.S. Department of Agriculture program • Assists farmers, ranchers and rural small businesses with energy projects • Provides grants, loans and loan guarantees • Grants: 25% of eligible project costs; Guaranteed loans: 50% of eligible project costs • Max. Limit: Grants: $500,000 per renewable-energy project; Guaranteed loans: $10 million

43. USDA Rural Business-Cooperative Service Programs USDA Contactin North Carolina Rossie Bullock (910) 739-3349

44. 2007 Biofuels Legislative Action • Establish and fund the NC Biofuels Center of NC ($5M) • to implement the Strategic Plan for Biofuels Leadership, • to encourage the growth and production of biomass in rural areas, and • encourage and fund research, identify new crops, and conduct growth trials. • Green Business Fund ($1M) • Provides grants to encourage the growth of a green economy in the State • To encourage the development of the biofuels industry, green building industry and additional clean technology and renewable energy products and businesses. • Motor Fuels Tax Exemption for Biodiesel (S1272, Sponsor: Snow) • when produced by an individual for use in private (non-commercial) vehicle • State Biodiesel Vehicles’ Warranties (S1277, Sponsor: Snow) • State diesel vehicles must be covered by a warranty that allows the use of B‑20 fuel • School Buses to use Minimum B20 Fuel (S1452, Sponsor: Snow) • Requires that 2% of the annual diesel used by NC school buses be B20 by June ‘08 • Revenue Laws & Motor Fuels Tax Technical Changes (H258/S540) • Section 20 removes requirement for $2,000 bond for small Biofuels producers.

45. Clean Fuel Advanced Technology Project (NC Solar Center) $2M project funded by NCDOT, State Energy Office and Division of Air Quality Project components include: 3 year education & outreach efforts grants for emission reduction projects in 24 eligible counties. funds for incremental cost of AFVs, refueling infrastructure, idle reduction, diesel retrofits First round of awards $250,000 for 8 projects, 2nd round of proposals under review www.cleantransportation.org Mobile Source Emission Reduction Grants (Division of Air Quality) Purpose: to achieve actual reductions from on- and off- road mobile source related emissions in North Carolina Applications http://daq.state.nc.us/motor/ms_grants/ Typically $800,000 available funded through 1/64 cent per gallon of gasoline sold Annual grant deadline December 31, Award announcements March following year Grant Programs

46. Transportation:Renewable Fuel Tax Credits • Production/Processing • a facility for producing renewable fuel is allowed a credit equal to twenty‑five percent (25%) of the cost of constructing and equipping the facility • Distribution • a commercial facility for dispensing renewable fuel is allowed a credit equal to fifteen percent (15%) of the cost of construction and installation, including pumps, storage tanks, and related equipment www.ncsc.ncsu.edu

47. State Leadership - current policies • 2005 budget provision 19.5 requires state fleet to achieve a 20% reduction or displacement of current petroleum use by 2010 ~ Result: NC Dept of Transportation announcement that it is transitioning over 100 fueling sites to B20 = 11 m/g/y B20 to be used by state vehicles • 2004 & 2005 bills that: allow sale of excess EPAct credits to expand state alt fuel use, a 15% tax credit for biofuels refueling infrastructure & 25% tax credit for costs of constructing & equipping a renewable fuel production facilities

48. NC Department of Transportation • Used 2 M gallons of B20 in 22 locations in 2005 • Going statewide with B20 and E10 • Sponsored studies at NCSU on B20 emissions for on-road and off-road vehicles • CMAQ funding for 3 year $1.6 Clean Fuel Advanced Technology grant project in 23 NC counties for biofuel pumps & tanks

49. Motor Fleet Management • Motor Fleet Management: the “ rental car’ agency for the State • With its order of 877 E85 capable flex-fuel vehicles in 2006, MFM will have over 6,000 E85 vehicles • Will expand E85 availability by serving as an ‘anchor fleet,’ concentrating vehicles in locations across the state to encourage more private and government service stations to offer E10 & E85

50. Clean Cities Coalitions • National initiative to build public/private partnerships to accelerate the use of alternative fuels, idle reduction technologies and conservation • Brings local stakeholders together to work on infrastructure, awareness and conversion of fleets • 88 US coalitions; 3 in NC: Triangle, Charlotte (Centralina), and Asheville (Land-of-Sky)