The Register-Herald, Beckley, West Virginia

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March 24, 2013

Alloy plant: Plan for recycled energy on hold

— A project could reduce by one-third the energy consumption of a metallurgical plant in Fayette County by turning wasted heat into electricity. But for now, at least, the project has stalled due to several factors.

The company, WVA Manufacturing in Alloy, produces silicon metal and says it is “actively talking” with Recycled Energy Development (RED), a company that would install the equipment necessary to make the switch to cleaner energy and sell the extra back to the grid.

The hesitation about the project, according to corporate energy manager Russ Lang, comes down to the large capital expenditure it would require, which is estimated at $100 million.

RED, for its part, says the project is “on hold” until they can find a long-term purchaser of the extra power it would generate.

“RED would love to develop this job-creating, pollution-reducing project. Unfortunately, the region offers no long-term market for power, so we have no place to sell our clean electricity,” says Heather Shadur, the company’s spokesperson.

Projects such as the one proposed at Alloy are generally referred to as co-generation or “combined heat and power.” They involve capturing wasted heat from industry to generate electricity. Often there is more electricity produced than the manufacturer needs, which can then be sold back to the grid — that is, if a buyer can be found.

Companies like RED need long-term contracts in order to secure financing for their projects.

Cathy Kunkel of Energy Efficient West Virginia said this project hurdle is a good example of how West Virginia could be doing more to incentivize clean energy.

“It sounds like a really great way to improve the efficiency at the Alloy plant and provide some additional manufacturing jobs in developing this project,” she says.

“There’s really no justification for why they can’t get a fair price for their power.”

RED could sell the power to PJM, which operates the region’s transmission grid and administers the wholesale electricity market. But PJM only allows such generators to bid their electricity in real time or one day ahead, not at a stable, long-term price.

The other option is contracting with an electric utility like American Electric Power (AEP). But Kunkel said that utilities have no incentive to buy power from independent producers.

Producing electricity on a small scale close to where it is used is referred to as “distributed generation.”

Kunkel would like to see more of these kinds of projects become viable in West Virginia so that independent generators get a fairer chance at developing projects and selling to the grid.

She sees a couple of policy changes that could make a difference.

One would be development of a Clean Energy Standard Program (CESOP), which would establish a long-term contract price for the development of distributed generation resources.

Another would be to change the state’s existing Alternative Renewable Portfolio Standard to require West Virginia’s utilities to meet a certain fraction of their sales through distributed generation.

Jeri Matheny, a spokesperson for AEP, said that the utility spoke with RED and Alloy about the project concept but that no particular price was ever discussed.

“We’re supportive of the idea of using waste heat, but it’s a matter of the economics of it and that’s really something that the companies involved have to figure out,” she says.

“We would buy power at the best price we can get power because we have an obligation to our customers not to buy power at a higher rate than we need it.”

AEP says it does not currently generate enough power to meet demand and is proposing the purchase of several older power plants from a sister company. Matheny says such a scenario wouldn’t affect customer rates, but that buying renewable energy at a higher price would.

Lang says the market for renewables is different now than it was in 2008, when the project was first being developed.

Back then, with a booming economy, there was talk of an electricity shortage, he said. Plus, with the amount of shale gas for electricity generation now flooding the market, there’s a lower premium on renewables. Some incentives for government and utilities to purchase renewables have dried up.

In short, he said, the electricity generated from the project today would not be as valuable as in 2008, and that affects its overall economic viability.

Lang also said that the project would involve some risk on the operations end of the business. Right now, the company is using its furnaces to make metal, not produce electricity.

“It’s not as simple as recovering the heat and making free power. ... The furnaces have to be shut down to install the technology, so you have lost productivity. It’s also maybe a bit of unproven technology in our business. If it wasn’t, there would be recovery systems on every furnace in the world, and there’s not,” he said.

In the case of Alloy, the waste heat would be converted at a rate of approximately 40 megawatts.

— E-mail: cmoore@register-herald.com

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