Environmental Power Corporation’s (NASDAQ: EPG) subsidiary, Microgy, Inc. and Xcel Energy (NYSE: XEL) announced a long-term renewable natural gas (RNG®) supply agreement on Tuesday.
Microgy will use an anaerobic digestion process to break down animal
waste from a local dairy farm and other organic waste products, such as
food processing residuals, from along the Front Range of Colorado. The
waste stream will be converted to methane gas using the anaerobic
digesters. In turn, the methane will be used by Xcel Energy to help produce
electricity at its Fort St. Vrain natural gas-fired power plant near Platteville, Colorado.
Pending regulatory approval, the agreement will help Xcel Energy continue to meet its mandates under the state’s Renewable Energy Standard (RES).
The ten-year agreement with Xcel Energy has an option to renew for an
additional ten years. Under this agreement, Microgy’s RNG® will be sold
on a fixed-price basis at a premium to the current market price for
traditional natural gas.
Microgy expects to begin construction on its first Colorado RNG® facility during the first half of 2010, when it currently estimates that all permits, design and funding for the project will have been completed. Microgy’s initial project in Colorado is expected to produce 915,000 MMBtu of RNG® per year, enough to generate 125,000 megawatt-hours of electricity, or the equivalent power use of 17,000 homes in Colorado on an annual basis.
“Our relationship with Xcel Energy is very exciting for Environmental Power, as it demonstrates continued confidence in our ability to develop and operate renewable energy projects that produce a sustainable, high-volume renewable energy product,” said Rich Kessel, President and CEO of Environmental Power.
Tim Taylor, President and CEO of Public Service Co. of Colorado, an Xcel Energy company, said, “Microgy’s solution also gives us the added benefit of conserving traditional fossil fuels at one of our largest power plants.”
The renewable natural gas from this process is considered “carbon neutral,” and will count toward Xcel Energy’s RES mandate to produce 20% of its annual electricity from renewable resources, by 2020.
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