After hopeful start, renewable energy initiative struggles through recession

In 2003, when the General Assembly created what is now known as Project 150, it was widely anticipated that most if not all of the renewable energy projects it was supposed to spawn would be operational or close to it by now.

Today none of Project 150’s 13 plants is even under construction, and only one shows promise of moving forward any time soon. The main hang-up has been financing following the Wall Street meltdown.

“It is frustrating,” said Lise Dondy, president of the Connecticut Clean Energy Fund, the electric customer-funded quasi-governmental organization that oversees most of the renewable and other alternative energy efforts in the state. “I don’t think anyone anticipated the economic crisis we’re all enduring right now, and that had a lot to do with it.”

Add to that the state’s budget crisis and a pending change in energy policy, and some fear the prospects of building a renewable energy infrastructure in Connecticut are considerably dimmer than they seemed seven years ago.

With no sun-soaked swaths of desert to support massive solar arrays and the best property for wind farms-the shoreline-unaffordable, Connecticut is not a likely site for large-scale renewable energy projects. Recognizing that, the legislature created Project 150 to produce 150 megawatts of renewable power generation capacity in the form of small plants.

The energy put into the grid by Project 150 plants also would help Connecticut achieve an ambitious and nationally lauded requirement that its utility companies — Connecticut Light and Power and United Illuminating — get 20 percent of their power from renewable sources by 2020. That’s known as a renewable portfolio standard or RPS.

But with the state facing massive deficits now and for the next several years, Governor M. Jodi Rell is seeking to borrow against about a third of the revenue expected to go the Clean Energy Fund and the Energy Efficiency Fund for 10 years to use for other purposes. A similar effort last year failed.

And state legislators are reconsidering the 20 percent RPS, in part because of the lack of progress on development of renewable energy in Connecticut. A bill now under consideration would roll back the RPS requirement to 11.5 percent in 2020, and use the savings to support energy-efficiency measures by utility customers, such as installation of solar water heaters or high-efficiency windows.

Backers of the measure-including both co-chairs of the committee now considering the bill–say that only 3 percent of the renewable energy purchased by CL&P and UI now comes from in-state sources. Rather than fund development of large renewable projects elsewhere, they say, the state should shift its emphasis to small-scale conservation efforts that will keep the money in Connecticut.

At a hearing on the bill last week, the Clean Energy Fund along with environmental and renewable energy organizations told the legislature’s Energy and Technology Committee that while they favor efforts to encourage conservation and energy efficiency, those efforts should not come at the expense of the RPS.

Christopher Phelps, program director of Environment Connecticut, said the rollback of the RPS would make Connecticut “the only state in the nation moving away from a commitment to expanded renewable energy generation.”

In its own statement, the Energy Fund said the bill “may have the unintended consequences of discouraging the very renewable development that the RPS was intended to encourage… Making changes to the current policy could impact private sector investment for projects due to reach commercial operation both in the near term as well as up to five years or more into the future.”

The RPS was supposed to be a key to the financial viability of Project 150 renewable energy plants. After being approved by the Energy Fund and the Department of Public Utility Control, plant operators were to negotiate long-term power purchase contracts with the utilities.

“The idea was if they had a contract they could obtain financing and that ain’t the case,” said Dale Hedman, director of project development for the Clean Energy Fund. He too had expected most of the projects – all of which estimated actual construction would take no more than two years – to be operating.

Hedman said he also felt some of the projects had underbid their true costs, which also may have put off potential financiers. “Believe me I’ve reflected on this more than once,” he said of the lack of progress. “The thing that I keep coming back to is that the competitive RFP process may have also had some culpability.”

The Fund has already spent $650,000 — $50,000 for each project when it finalized its utility contract. Another nearly $10 million is earmarked in various amounts for each once plants become operational. The original estimated cost for all 13 projects was $659 million, but that price tag likely has increased given the delay.

The projects as approved in three rounds in 2005, 2006 and 2008 total more than 152 megawatts, enough to power more than 133,000 homes. Even stalled, the Fund has been pushing for a fourth round to make up for what they now expect will be a shortfall in the power requirement. One project, a 30-megawatt landfill gas recovery plant in South Norwalk is all but dead, having lost its source of landfill gas in addition to having no financing.

Four of the projects are biomass, one of which – Plainfield Renewable Energy — is the only project showing signs of life. More than a year ago it received final permits from the Department of Environmental Protection, but remained stalled until mid-February when its development option was sold to the large Paris-based energy company GDF Suez.

Suez, best known in the region as the operator an LNG facility in Everett, Mass., in 2008 purchased 11 hydro-electric plants in Connecticut totaling 120 megawatts, and is also the third largest biomass operator in the country with seven plants. Plainfield, at 37.5 megawatts, would be its largest. Suez presently is evaluating contractors.

The other three biomass plants, which includes one in Bozrah that would combine wood with chicken manure from the massive Kofkoff egg operation there, are trying to alter the terms of their utility contracts to make them more favorable to financiers. A DPUC hearing is scheduled for April 6.

Biomass plants typically face a more difficult financial path. Each tends to be unique, unlike the more cookie-cutter solar installations for example. Biomass also typically requires more permits for things like emissions and it’s not unusual for them to run into local opposition.

“Everyone’s trying get financed and everyone’s trying to figure out how to structure a project so it is financable,” said James Potter president of New Hampshire-based Clearview Power, owner of Bozrah and another project in East Canaan. “These projects are really good for the state and it’s not happening,” he said noting the dozens of startup jobs and many other permanent ones that would be created.

Most perplexing for Connecticut energy officials, however, has been the remaining eight plants – all fuel cells proposed by Fuel Cell Energy of Danbury. As the world’s fuel cell company capital, with many installed for individual generation around the state, Connecticut is anxious to demonstrate that cells are suitable where classic power plants are not and can operate large-scale, putting power directly into the grid. It would be a double-win for the state, by creating jobs and expanding existing companies.

“In a normal world, there are plenty of financial houses with energy operations where we would be in their financial sweet spot,” said Frank Wolak, vice president of business development at Fuel Cell Energy, noting that the $200 million total price tag for the eight projects was not out of the ordinary. “Unfortunately the capital markets were a desert. The number of players has shrunk and the appetite for anything that wasn’t plain vanilla was limited.”

Fuel Cell Energy’s manufacturing facility now is running at about half its capacity, supported by contracts mainly from South Korea. While there have been no layoffs, Wolak said, the expected additional jobs have not materialized. Fuel Cell Energy is now seeking funding through a recently revived federal loan guarantee program, which means many more months awaiting approvals.

Meanwhile, environmental and clean energy advocates say the state has to maintain a reliable market for renewable energy if its investment in Project 150 is to bear fruit.

“Connecticut’s RPS created a market for renewable energy, (which) can only be successful if it has stable, consistent and transparent rules,” Eric Thumma, president of Renewable Energy New England Inc., said in a statement to the energy committee. “The renewable energy industry, and the environmental advocates who recognize the value of renewable energy, would ask for the business certainty and continuity that all enterprises need to thrive and grow.”