Wind farm developers protest calling blast furnaces green energy

Ohio lawmakers are considering a measure that would call blast furnaces a source of green energy and instantly pit steel makers against wind farm developers.

AK Steel of Middletown wants to build a $310 million power plant that would use the foul gases from its blast furnace as a fuel rather than a waste gas that it must by law now flare.

ArcelorMittal in Cleveland is interested in the technology, said a spokeswoman.

AK Steel has already won a $30 million grant from the U.S. Department of Energy for this first-of-its-kind U.S. power generator that could help U.S. steel makers with power bills.

The proposal also has the blessing of the U.S. Environmental Protection Agency because it would produce something of value from a dangerous waste gas.

AK Steel and its partner, Air Products of Allentown, Pa., which would own and operate the facility, say the power plant would cost about twice as much as a similar-sized plant that burns natural gas.

The company therefore has asked lawmakers to amend Ohio’s green energy law and classify the electricity generated with blast furnace gases as "renewable energy," even though the blast furnace itself is fueled with coke, a substance made from coal.

"We tailored this bill to include just waste gas from blast furnaces," said state Sen. William Coley, a Republican from Southwest Ohio whose district includes AK Steel.

"We are in Ohio," Coley said. "Blast furnaces are as natural as wind power and solar energy in Ohio."

That idea has the wind turbines industry and a major wind power developer, Iberdrola Renewables Inc., warning that the change would kill any further wind farm development in Ohio.

Iberdrola built and operates Ohio’s largest wind energy project, the 304-megawatt Blue Creek Wind Farm in Van Wert and Paulding counties. The company is the second largest owner of wind farms in the United States.

The warning comes because the proposed amendment would allow AK to sell "renewable energy credits," known as RECs, to Ohio’s electric utilities struggling to meet ever-more-stringent renewable energy mandates. AK Steel plans to use all of the power it generates, reducing its bills with Duke Energy Ohio, but it also could sell the RECs to a utility, helping to finance the project.

The context for AK’s request is buried in Ohio’s 2009 revamp of utility and energy laws.

By 2025, Ohio’s investor-owned electric utilities must either generate 12.5 percent of the power they sell with renewable technologies, buy that power from a company that does or buy RECs from those companies. RECs are figured as 1 credit for every megawatt-hour generated. (A megawatt-hour is what it sounds like – 1 million watts for one hour.)

The same 2009 law also requires that the power companies generate a second 12.5 percent of the power they sell with advanced energy technologies – such as fuel cells, advanced nuclear plants or a project like AK Steel is proposing – though such technology was never mentioned in the original law.

So far, there is only a market for renewable energy credits, not one for advanced energy credits. Environmental critics say that has occurred because the law does not provide for annual benchmarks in advanced energy like its renewable twin does. Instead, the 12.5 percent requirement will kick in all at once, in 2025.

In a partnership with Air Products of Allentown, Pa., AK Steel would fire a high-tech gas combustion turbine with most of the gases to generate 100 megawatts (100 million) of power and 70 more megawatts with a steam boiler and steam turbine.

Eric Thumma, director of Policy and Regulatory Affairs for Iberdrola, told lawmakers that the AK project would flood the REC market, slashing the value of the credits, lessening their value to wind developers trying to finance their projects.

The change "could fundamentally undermine future renewable energy investments in Ohio by flooding the market with renewable energy credits from these projects and/or by creating uncertainty as to the state’s commitment to fostering a sound, reliable market for renewable energy."

Several environmental groups have waded into the argument – with support both for using blast furnace gas to generate power but reserving renewable energy credits for truly renewable energy.

Nolan Moser, staff attorney and director of energy and clean air programs for the Ohio Environmental Council, said the group supports "co-generation" projects such as the AK Steel projects.

But the credits it would generate would disrupt wind farm development and could hurt its own financing plans because of the extreme number of credits it would produce, Moser said.

Julian Boggs, director of Environment Ohio, recommended that lawmakers create annual benchmarks for advanced energy development like those for renewable energy, allowing a market to develop as it has for renewable credits.

And Dylan Sullivan, staff scientist for the Natural Resources Defense Council, said Ohio must move to create a market for advanced energy credits, not raid the renewable energy market, to fund the project.

"We think this is a good project," he said of the AK Steel plan. "And we want to see it get off the ground, but we don’t want to pull the rug out from people who have been making investments in Ohio."

The spokeswoman for Arcelor-Mittal said the company would consider registering its Ohio sites "if the opportunity provided higher value than those offered by existing states, such as Pennsylvania, where this type of REC can already be registered and sold."

Primary co-sponsor Joe Schiavoni, a Youngstown Democrat, said the wind industry’s concerns are legitimate but are misplaced.

"I understand that wind and solar industries are feeling pressure because this could be a big chunk of the 12.5 percent they have to invest. But AK Steel would account for just 15 percent of the total REC marketplace in 2016, if this goes through.

"There are not a lot of $300 million projects that come along," he said. "So, I think we have to be flexible and make this work."