North Carolina’s struggle to convert animal waste into energy has blown up into a legal spat between Duke Energy Progress and a New York private equity firm that plans to burn turkey droppings as an energy fuel supplied by more than a million birds in Duplin County.
The operators of the Coastal Carolina Clean Power facility in Kenansville warn if the N.C. Utilities Commission doesn’t resolve the 2-year-long dispute, CCCP’s power plant will shut down at the end of the year, wiping out 24 jobs and quashing a solution to North Carolina’s agricultural waste conundrum.
The Utilities Commission on Monday is scheduled to hear from lawyers representing Charlotte-based Duke, the nation’s largest electric utility company, and CCCP, which is owned by Riverstone Holdings, a global firm in New York with a $27 billion investment portfolio.
The dispute between the two financial giants leaves Duplin County turkey farmers waiting on whether they will have a year-round dump site for mounds of turkey waste. Currently the waste is used as an agricultural fertilizer but it has to be stored much of the year until area farms are ready to take it.
“It gives the farmer a place to go with their litter year-round – that may be the biggest thing,” said James Parsons, an agricultural extension agent in Duplin County. “They could haul that litter from the farm in covered trucks and be done with it.”
CCCP has been selling power to Duke Energy Progress, Duke’s Raleigh subsidiary, under a 2008 contract that’s set to expire Dec. 31. The 32-megawatt facility currently burns timbering waste – twigs and other scraps – as fuel.
But CCCP plans a $12 million retrofit that would equip the plant to burn 25 percent poultry waste.
The two sides have been negotiating a contract renewal since 2012; Duke refuses to sign, saying CCCP’s proposed costs are way too high. In a Monday filing with the Utilities Commission, Duke alleges the price CCCP wants to charge Duke for electricity generated from turkey droppings is 200 percent to 500 percent higher than comparable facilities.
The cost of generating electricity, regardless of the fuel source, is ultimately paid by Duke’s customers.
“In today's renewable energy landscape, the price being requested by CCCP is noncompetitive and would be a burden to Duke Energy customers,” said Duke spokesman Randy Wheeless.
Duke wants the Utilities Commission to toss out CCCP’s case, saying the commissioners have no authority to intervene in contract disputes and stalled negotiations unless all the parties request it. Siding with Duke are Dominion NC Power, Fayetteville’s Public Works Commission, GreenCo Solutions, EnergyUnited Electric Membership Corp. and Halifax Electric Membership Corp. – a consortium established for the purpose of buying renewable energy credits for power generated from poultry and swine waste.
Duke and other electricity providers are required to include poultry waste as part of their fuel mix under a 2007 state law, and the utilities are required to make a serious effort to try to comply and pay above-market costs if necessary.
The state’s renewable energy standard has specific set-asides for swine and poultry waste – making North Carolina the only state in the country with such requirements – but the state mandate for farm animal wastes has been delayed for two years because the technology is too expensive and impractical.
However, the utilities recently notified state officials that for the first time they are on course to meet the poultry set-aside in 2014. The utilities expect to include 170,000 megawatt hours of electricity from poultry waste this year, and the amount increases to 700,000 megawatt hours in 2015.
CCCP’s facility, if modified to burn turkey manure, would be so large by industry standards that it would supply 29 percent of statewide poultry-power goal this year and 7 percent of the standard in 2015, the first year CCCP would burn turkey waste.
“We’re not aware of any other facility that is generating that quantity of poultry [energy] in the state of North Carolina right now,” said Larry Richardson, CEO of ReEnergy Holdings, the New York firm that’s owned by Riverstone and manages the CCCP plant in Kenansville.
The terms of the negotiations between Duke and CCCP are confidential, and the amounts and costs of the state’s poultry waste resource are filed under seal, so it’s not possible to compare prices.
Duke is accusing CCCP of corporate greed and urging the Utilities Commission not to believe CCCP’s shutdown threat.
“The facility would not be required to cease operations as a result of a purchase power contract lapse as asserted by CCCP,” Duke wrote in Monday’s filing, “but rather, the facility’s lack of cost-effectiveness or, more likely, because of CCCP’s desire to ‘achieve premium returns on their invested capital’ for its investors.”
CCCP’s power plant was originally built by Cogentrix to burn coal in 1984. After changes in ownership and a foreclosure, CCCP bought the facility in 2006 and two years later it became the first in the state certified to sell renewable energy credits for biomass-generated electricity and for industrial steam.
The plant’s power output is sufficient to supply 28,000 homes, and it also supplies steam to the nearby Guildford Mills East facility, which manufactures fabrics used in car and truck interiors, shoe linings, casket liners and other applications.
The plant’s maintenance manager, Rex Batts, is one of several plant employees who submitted comments to the Utilities Commission.
“The pieces of the puzzle are falling into place in order to make this project a success. We have strong expertise, state-of-the-art technology, access to capital, and we have suppliers lined up,” Batts wrote. “We would be supporting the agribusiness community by offering an alternative outlet for poultry litter, and we also would be helping North Carolina and the utilities meet mandates to generate energy from poultry waste.”
The commission is not expected to issue a ruling at Monday’s hearing.