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1 sources executive summary Wood Biomass for Energy & Biomass for Small-Scale Heat and Power By Forest Products Laboratory April 2004 Vermont Wood Fuel Supply Study 2010 Update Pellet Feasibility Study November 2009 Roadmap to a Sustainable Energy Future for the Northern Forest Region January 2009 Vermont 25 x '25 Initiative Preliminary Findings and Goals By Spring Hill Solutions January 23, 2008 Northern Forest Biomass Energy Action Plan 2007 Heating the Northeast with Renewable Biomass: A Bold Vision for 2025 The Biomass Thermal Energy Council (BTEC) Executive Summary 2010 The Opportunity of Biomass Thermal Energy The Biomass Thermal Energy Council (BTEC) July 2010 Clean Heat: Comfortable Homes, Affordable Future By Vermont Public Interest Research Group March 2011 Where Wood Works: Strategies for Heating with Woody Biomass By the National Renewable Energy Laboratory Biomass heating in Upper Austria Green energy, green jobs O.O. Energiesparverband of Linz, Austria 2010 Silo being filled with pellets Vermont was named for its green forest-covered mountains. These forests, according to a recent study by the Biomass Energy Research Center (BERC), are growing every year and creating an annual estimated surplus of about 900,000 green tons of low grade biomass above and beyond current forest harvesting rates. If this surplus is managed sustainably, it presents a great opportunity to provide Vermont with a locally sourced renewable fuel. The best use for this fuel is to address Vermont's greatest need; heating of our homes, schools, and businesses. At only 20% efficiency, burning biomass solely for electrical generation is a poor use of this resource and something that could be better served by renewables such as hydro, wind, and solar. Using this wood for heating buildings is much more prudent because current wood chip and pellet central heating systems reach over 80% efficiency and can provide Vermont with an affordable alternative to imported heating fuel. Even though Vermont consumes 100 million gallons of heating fuel each year, very few state incentives address the issue of affordable, renewable central heating. Lighting, for example, which only consumes 1/20th the energy as heating, is supported by heavily funded programs. Fortunately, Vermont already has an entire business infrastructure in place to make a significant impact on this disparity. We have companies that manage and harvest the raw materials(trees); that refine, produce, distribute, and deliver the fuels(wood chips and pellets); as well as those which manufacture, install, and maintain the heating systems. Supporting pellet central heating systems can reduce our energy dependence on foreign oil, generate local jobs, and enhance Vermont s own renewable resource, the forests. According to the 2009 census, there are about 125,000 homes in the state that burn oil and could easily be converted to burning wood pellets. If just 10% of the homes in the state converted to pellet central heating systems, Vermont could save $18 million in fuel costs each year, put $55 million into our local economy annually, and generate over 1,000 new jobs. More importantly, these jobs would be in a variety of fields, from engineering to trucking, and many would be in the forest products industry which has seen a dramatic decline in recent years. This booklet was assembled by Vermont-based businesses in the pellet central heating sector. It has been produced with the intent of providing an overview of the many benefits that could be realized if the state embraced Vermont s potential for using biomass as an affordable and sustainable heating fuel source. With the support of our legislators and state policy makers, we can create jobs, stimulate our economy, and help stabilize our energy future.

2 economic development it is time for action IN VERMONT Growth in this industry would directly lead to increased revenue for the state on many levels. If, for example, 25% of the building stock was converted to pellet central heating, Vermont could save $45 million in fuel costs each year, put $135 million into our local economy annually, and generate over 2000 new jobs. In addition to these direct financial gains, each of these stimuli will in turn increase the tax revenue for the state. From 2008 to 2009, Vermont's renewable energy and energy efficiency companies attracted $38.7 million in venture capital and private equity investment. (Bloomberg New Energy Finance) In 2009, the renewable energy industry supported 414 direct and indirect renewable energy jobs in Vermont; 324 from bio-energy. (Navigant Consulting, Inc.) Last year alone, Vermont Wood Pellets brought $500,000 of federal funds in the form of direct taxable income into Vermont. Millions of $ into Vermont s Economy Vermont Jobs Created INCREASED REVENUE 0 0% 2% 10% 25% 50% Percentage of Homes Converted EMPLOYMENT GROWTH Today, Vermont is again facing rising fuel prices, 24% higher than a year ago, with heating oil approaching $4 per gallon, a trend that is only expected to continue. Despite the fact that we spend most of our energy dollars on imported petroleumbased fuels, we ignore our local renewable fuel resource and have not yet established incentives that support the installation of pellet central heating systems. While the recommendations made by BERC, NEBTWG, VPIRG and BTEC in their reports are certainly valid, we feel that they do not assert the urgency of Vermont's need for action. Here are specific action items which we, as businesses leaders in Vermont's pellet central heating sector, hope will prompt changes in state policy. We endorse converting or replacing petroleum-based heating systems with pellet central heating systems. We encourage the state to provide incentives aimed at growing the woody biomass market. Every day that passes is simply a further drain on our economy. Redefine Efficiency Vermont's oil burner conversion incentive to include pellet central heating systems Provide a 30% up front rebate of installed costs of pellet central heating systems Offer a low interest loan program for all pellet central heating systems and qualify them for PACE Classify pellet central heating systems as renewable energy and include them in the Small-Scale Renewable Energy Incentive Program Classify all pellet central heating system components as tax free equipment VERMONT HOME HEATING SOURCES % 15% 15% 15% 49% ,000 20,000 30,000 40,000 50,000 Buildings Converted Fuel Oil Natural Gas Propane Other Wood Bagging operation at Vermont Wood Pellet

3 the research has been done vermont business growth = jobs There has been much research performed and many reports generated in recent years regarding the potential of Vermont's woody biomass resources. Some noteworthy reports include BERC's Northern Forest Biomass Energy Action Plan, Spring Hill Solutions' The Vermont 25x'25 Initiative, VPIRG's Clean Heat, and BTEC's A Bold Vision for While these reports have been generated by different entities, they all agree that Vermont must support its biomass central heating sector. Create and/or expand federal and state grant programs, tax incentives, and other financial mechanisms to help develop and bring to market clean, efficient biomass energy technologies. (BERC) Stimulate the purchase and use of a variety of clean, efficient biomass energy technologies and develop biomass energy projects that enhance local economies. (BERC) Develop public policy mechanisms and financial incentives that support the use of clean and efficient biomass technologies in thermal applications for institutions, communities, and businesses. (BERC) Vermont biomass in the form of cord wood, wood chips and wood pellets can provide 24 percent of our state's heating needs. (VPIRG) Fund the Community Wood Energy Program to develop wood energy plans and to acquire and upgrade community wood energy systems in communal facilities, such as schools, town halls, and libraries. (Spring Hill) Vermont is fortunate to have all the business infrastructure in place to reduce our dependence on imported heating fuels. The pellet central heating sector is diversified, ripe for growth, and awaiting support from the state. These are brief biographies of some of Vermont s pellet central heating businesses. Towns with existing businesses (not including forestry) that will prosper from growth in the pellet heating sector include: North Clarendon, Barre, Dorset, Waitsfield, Waterbury, Barnett, Derby, Bristol, Newbury, Montpelier, Manchester, East Dorset, Pownal, West Topsham, Middlebury, Colchester, and Winooski. As this industry grows, this growth will spread to other communities as well. Vermont s only pellet manufacturer. Vermont Wood Pellet provides super premium wood pellets made from local softwoods that are available in bags or bulk. North Clarendon, Vermont Tel VermontWoodPellet.com Vermont Renewable Fuels delivers wood pellets in bag and bulk, installs bulk pellet storage systems and converts heating systems from oil to pellet. Manchester Center, Vermont Tel VermontRenewableFuels.com P e l l e r g y i s Ve r m o n t s o n l y manufacturer of oil to pellet central heating conversion systems for h o m e s a n d l i g h t i n d u s t r i a l applications. Barre, Vermont Tel Pellergy.com SunWood Biomass supplies and installs wood pellet and chip systems and wood gasification systems. They also provide planning and feasibility services. Waitsfield, Vermont Tel SunWoodBiomass.com Increase All Fuels Funding for Efficiency Vermont. (VPIRG) The government must address fossil fuel use in the thermal sector. (BTEC) BBAF of Vermont provides State-wide delivery of bagged and bulk pellets, from its warehouse in Barre. A Vermont based Co-op to develop local fuel production, including biomass heat and transportation fuels. Friends of the Sun are installers of wood pellet stoves, furnaces, fire place inserts and pellet boilers. BTEC s Bold Vision report Waterbury, Vermont Tel Middlebury, Vermont Tel AcornEnergyCoop.com Manchester Center, Vermont Tel FriendsOfSun.com

4 biomass central heating today state incentive comparison NRG Systems- Hinesburg, Vermont Fire Department- East Montpelier, Vermont There are already many biomass central heating success stories in Vermont. Today there are 44 public schools, numerous state buildings, three college campuses, one hospital, and dozens of businesses and residences all using our biomass resource responsibly by burning woodchips and pellets as their primary heating fuel. "Fuels for Schools" is a good example. It was established as an initiative to help public schools and other public facilities reduce their heating costs while increasing forest health. The program promotes the use of woody biomass as a renewable resource. Last year alone, these schools used 23,271 tons of wood chips, saved $1,746,164 (about 50%) in heating costs, and offset the equivalent of 1,425,948 gallons of heating oil. (VT Forest & Parks) These encouraging examples show the potential pellet central heating systems could have on Vermont s future. The chart below shows how Vermont compares to nearby states for biomass heating related incentives. INCENTIVES BY STATE ELIGIBLE PRODUCTS AMOUNT GIVEN Maine Grants Renewable-Energy Resources $50,000 Low-Interest Loan Small Business Efficiency Measures Up to $35,000 at 1% Interest Rebates Commercial Energy Efficiency Furnace $400-$650, Boiler $500-$5000 Massachusetts Financial Assistance of Development Renewable-Energy Companies Awards of up to $500,000 Personal Income Tax Deduction Patent for Energy Conservation Any Income Received State Income Tax Credit Furnace Replacement Burners 15% Credit up to $1000 Grant Program Community Renewable Energy Maximum Incentive- $1,000,000 No-Interest Financing Water Heaters, Furnaces, Boilers 0% Loan up to $15,000 New Hampshire Residential Property Tax Exemption Wood-Fired Central Heating Systems Value of a Renewable Energy System Revolving Loan Renewable Energy Installations Financing less than the Energy Savings Business Loan Program Energy Reduction Equipment Prime Rate minus 1% of $10,000 + System Rebate Program Boilers, Furnaces Rebates of between $100 and $1000 Rebate Wood-Pellet Central Heating Systems 30% of Installed Cost up to $6000 New York Funds to Manufacturers Eligible Renewables $1.5 Million per Project Reduced Interest Rate Loans Energy Efficient Home Improvements Up to $20,000 Customized Rebates Equipment and Installation 50% of Costs, Water Boiler $600-$3500 Efficiency Incentives Program Furnace, Water Boiler Furnace $200-$600, Boiler $500-$1000 VERMONT Sales Tax Exemption Most Renewable-Energy Systems* Sales Tax Rate of 6% * Biomass only applies to new projects that utilize anaerobic digestion of agricultural products, byproducts or wastes to produce electricity. US Department of Energy Database of State Incentives for Renewables and Efficiency Mount Anthony Union Middle School- Bennington, Vermont Green Mountain College- Poultney, Vermont January 25, 2011 "The New Hampshire Public Utilities Commission has made improvements to its biomass boiler rebate program, which should encourage more system installations...the Residential Bulk-Fed Wood-Pellet Central Boiler and Furnace Rebate Program offers a 30 percent...to those who install high-efficiency, bulkfed biomass central heating systems." Biomass Magazine

5 why pellet central heating? case study Besides being manufactured here in Vermont, pellets can be used at a residential scale (for stoves and central heating) as well as in smaller commercial facilities (less than 2 MMBtu per hour). Because of their lower moisture content, pellets have a higher heating value and operate at percent efficiency. They are suitable for locations with limited space, including retrofits, and their higher energy density means a smaller fuel storage area. (Deborah Barney, P.E., BERC project manager) ADVANTAGES Local, affordable, renewable heating fuel Minimal operation and maintenance Whole-building heating systems Clean-burning renewable fuel source Price stable compared to fossil fuels Uniform for automatic fuel handling Biomass is Vermont's greatest potential for renewable energy development Almost 78% of the state is covered in 3,051,562 acres of appropriate forest land (BERC) An additional 900,000 green tons of low grade biomass is available in Vermont (BERC) Greater energy security and self-sufficiency can be achieved The energy value of biomass harvested for fuel must be utilized as fully as possible Biomass provides a stable, affordable, and clean energy supply using local resources The purchase of wood fuel keeps energy dollars circulating in the local economy 1910 home converted to wood pellets in 2007 From 1200 gallons of imported #2 home heating oil to 10 tons of Vermont made wood pellets per year Savings of over 35% in heat and hot water energy costs Montpelier, Vermont: On February 18, 2007 the first Pellergy wood pellet burner system was installed in a residential central heating system. The PB-3550 is a Vermont manufactured system that replaces an existing boiler's oil burner, converting the central heating system to wood pellets. The unit attaches to a boiler in the same manner as the oil burner and fires the boiler with wood pellets rather than fossil fuel. The technology was developed in Sweden and Finland where tens of thousands of similar systems are installed in homes and businesses. Since teaming up with one such Scandinavian company, a Vermont based business, Pellergy LLC has been manufacturing these burner systems right here in the United States. In the four years using this system, we have avoided burning nearly 5,000 gallons of oil to provide the heat and hot water for our home in Montpelier, Vermont" states Andy Boutin, founder of Pellergy. "This project started out as a personal venture to reduce our carbon footprint and burn a more locally produced wood pellet fuel." With the rising cost of home heating oil, and relatively low cost of wood pellets, the savings in dollars has become substantial. "The system requires some routine maintenance," says Mr. Boutin. "Just a few minutes of cleaning every week or two provides a big payoff." Pellergy system with automated bulk storage No permanent modification to existing heating system System manufactured in Barre, Vermont In just four years of installed operation, the system has saved an estimated $4,400 in heating costs and offset over 50 tons of CO2 emissions. "This year, I have paid the equivalent of $2.00 per gallon heating oil for my wood pellets" states Boutin. "They're produced right here in Vermont using our local resources and helping to keep local people employed. It's a win-win alternative."

6 why support pellet central heating? biomass central heating tomorrow Supporting pellet central heating systems can reduce our energy dependence on foreign oil, generate local jobs, and enhance our abundant renewable resource, the forests. If just 10% of the homes converted to heating with pellet fuel, Vermont could save $18 million in fuel costs, put $55 million into our local economy, and generate over 1000 new jobs. Using biomass for thermal energy makes efficient use of our abundant yet finite resource. Processing just half of our current surplus of 900,000 green tons of low grade biomass could sustainably replace the heating needs of 28% of Vermont's homes or 61% of its commercial buildings. Consumption kwh/yr VERMONT RESIDENTIAL ENERGY USE 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - Heating Appliances Lighting Vermont consumes 100 million gallons and spends about $300,000,000 a year on imported heating fuel. (US Energy Information Administration) Vermonters consume 20 times the energy heating our homes as we do lighting them. (US EIA) The Small Scale Renewable Energy Incentive Program provides rebates for new solar water heating, solar PV, wind, and micro hydro, but not for pellet central heating. (US DOE) Efficiencies of wood-fired power plants dedicated to generating electricity are only 18% to 24%. (Forest Products Laboratory) Every ton of pellets saves consumers $225, puts $250 into Vermont local economy and displaces 125 gals of imported oil. Nationally, billions of dollars of support have been spent on transportation fuel and electrical generation, yet not for pellet central heating. Significant reduction of greenhouse gas emissions. In March 2008, Vermont adopted a renewable energy goal to produce 25 percent of the energy consumed in the State from renewable resources, in particular from the State s farms and forests, by (US EIA) Upper Austria VPIRG s VISION OF VT HOME HEATING IN % 24% 12% 7% 4% 8% 33% Biodiesel Natural Gas Energy Efficiency Electricity/Other Solar Hot Water Grass (Pellet) Wood AN INTERNATIONAL EXAMPLE The state of Upper Austria with about twice the population of Vermont has thoroughly embraced the advantages of biomass central heating. A grassroots biomass movement of farmers, forest owners, entrepreneurs, and long-term state policy support has resulted in a vibrant biomass central heating industry in Upper Austria. Currently, biomass technologies provide 31% of their thermal energy. There are 40,000 biomass central heating systems in operation in residential, commercial and public sector buildings; half are fueled with pellets and half with wood chips. Manufacturing and sales of biomass boilers and stoves employs more than 3,600 people. The biomass central heating sector accounts for about 4,500 full-time jobs. (O.O. Energiesparverband of Linz, Austria) This example shows the potential of state supported pellet central heating. With 10 times the land mass, and 900,000 green tons of surplus biomass resources, Vermont has the opportunity to surpass Upper Austria s success and further reduce our dependence on imported heating fuels. BERC s Northeast Forest Biomass Energy Action Plan, Spring Hill Solution s The Vermont 25 x 25 Initiative, VPIRG s Clean Heat: Comfortable Homes, Affordable Future and BTEC s A Bold Vision for 2025 all provide insights into a future where Vermont embraces biomass central heating.