The Burgess backfire
In its annual report to the Public Utilities Commission last year, Burgess Biopower outlined its numerous efforts to provide financial security by diversifying its revenue base.
Burgess pursued other regional economic development projects to reduce and offset the costs of Burgess’ power, such as co-development of a number of suitable businesses including a greenhouse, a data center, and a cryptocurrency mining operation; location of an on-site energy generation system using landfill gas; working with the City of Berlin on a waste heat recovery and municipal snowmelt project; and development of ground-mounted solar resources.
The common denominator among all potential co-location partners is simple: no one is willing to put capital at risk to develop a project which relies on a power plant with an uncertain future.
The word choice in the last line is interesting. No company has a certain future. What Burgess lacked wasn’t certainty, but reasonable probability of success.
This is every company’s problem at the start. Burgess tried to solve it by playing politics. It isn’t entirely to blame. The State of New Hampshire encouraged it to do this.
New Hampshire mandates that electricity providers buy a certain percentage of their power from “renewable resources.” This gave Burgess an opening. If it built a wood-fueled power plant, it could sell power at above-market rates to electricity producers compelled by the state to buy from companies that generated power from politically favored fuels.
The problem with building a business model on what amounts to a government subsidy is that one’s survival depends on favorable treatment by politicians. That’s never a good place to be.
Burgess wound up with a worse deal than it had initially anticipated. After ratepayers had been forced to pay it $100 million above market rates for electricity, any future payments above the market price had to be refunded. It hit that cap years earlier than expected, thanks to technological advances that lowered the price of natural gas. It then exceeded the cap, necessitating repayments to ratepayers, which it could hardly afford.
Its business model busted, it seemed only a matter of time until it found other sources of revenue or collapsed. Except, there was a third option. Convince legislators to pass a law forgiving its debt to ratepayers. Ongoing subsidies would be nice too.
On Thursday, legislators failed to override Gov. Chris Sununu’s veto of House Bill 142, a last ditch political bailout for the unprofitable plant. If the company can’t figure out how to balance the books with money from people who pay it willingly, it looks like curtains.
With so much trouble raising capital, maybe Burgess just needs a law requiring investors to fund it. Maybe, to keep the plant open, the Legislature could mandate that every retirement fund doing business in New Hampshire “invest” in the financially struggling plant.
Why not? After all, it would “create jobs.”
If you can see the flaws in such a scheme, then it should be equally obvious why ratepayer subsidies were unjustified. Neither investors nor ratepayers should be forced against their will to support a politically preferred business.
What about the benefits, though?
Burgess and its supporters claimed that paying more money for energy produced by burning wood made Granite Staters better off. But increasing numbers of academics who study such things conclude that biomass is not a net benefit for people or the planet.
A professor at Harvard’s Chan School of Public Health wrote last year that “air pollution from burning biomass can cause asthma exacerbations, hospitalizations for heart attack and respiratory disease, birth defects, neurodegenerative diseases and death, among many other health impacts.”
His research found that “burning biomass in buildings, industry, and power plants leads to more deaths than conventional coal-fired power plants.”
Britain’s left-wing Guardian newspaper reported in 2017 that the UK’s top climate researchers were turning against burning wood for power.
“But burning wood to produce electricity is a relatively inefficient process. In generating exactly the same amount of electricity, wood will release four times as much carbon into the atmosphere as gas would do, and one and half times as much as coal. In addition, energy is used in harvesting and transport while vast stretches of land are needed to create the forests to supply generating stations with the wood they need.”
It’s conceivable that the scheme to subsidize Burgess not only cost ratepayers north of $200 million, but also caused health problems and lowered life expectancy among the hard-working folks of the North Country—the very people it was intended to help.
The alleged economic benefits we addressed here.
Wasting people’s money on a project that probably doesn’t bring the claimed benefits, and possibly causes harm instead, is a “green energy” story being told over and over again. And because it’s being told about projects that government compels people to fund, it’s causing substantial political backlash.
Ford Executive Chairman Bill Ford put it this way in a recent interview:
“Blue states say EVs are great and we need to adopt them as soon as possible for climate reasons. Some of the red states say this is just like the vaccine, and it’s being shoved down our throat by the government, and we don’t want it. I never thought I would see the day when our products were so heavily politicized, but they are.”
Boy are they. Researchers at Berkeley published a paper this month in which they found “a strong and enduring correlation between political ideology and U.S. EV adoption. During our time period about half of all EVs went to the 10% most Democratic counties, and about one-third went to the top 5%. There is relatively little evidence that this correlation has decreased over time, and even some specifications that point to increasing correlation. The results suggests that it may be harder than previously believed to reach high levels of U.S. EV adoption.”
Politicizing the transition to alternative energy has produced, predictably, a big backlash. It’s turned what might have been a slowly growing consensus into a rapidly growing divide.
New Hampshire’s complicated scheme to compel people to fund a power plant they would not otherwise voluntarily support might have done more than waste hundreds of millions of dollars (and possibly worsen health outcomes in the North Country). It might also have delayed the transition to alternative energy by needlessly politicizing the issue. It’s a cautionary tale.
