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Case Study: Mt. Poso Cogeneration Facility


3/18/14

The following article was issued as part of the New Markets Tax Credit Connection - Spring 2014 issue.

Conversion of Coal-Fired Plant to Biomass-Fired Renewable Energy

By James D. Howard, Jr., Dudley Ventures 

The Mt. Poso Cogeneration Facility, located in Bakersfield, California, is a 44-megawatt renewable energy power plant which operates 100% on biomass fuel. The plant uses urban and agricultural wood waste (construction waste, tree trimmings, and agricultural sources) as its fuel source. The plant was converted from a coal fired plant which was slated to close due to California’s strict new environmental standards. The woody-biomass fueled power plant significantly reduces emissions compared to the previous coal-fired facility. The Mt. Poso plant has a long-term agreement to sell renewable energy to Pacific Gas and Electric Company and helps PG&E meet California’s 33% renewable power requirement. 

The $43 million project was not a good candidate for conventional financing due to the risks associated with new green energy technology. New Markets Tax Credits (NMTC) allowed the project to bridge the financing gap and make the plant feasible. DV Community Investment provided $9,000,000 in NMTC allocation to the Project.  JPMorgan Chase provided the tax credit investment for the transaction

Saving the jobs which would have been lost due to the plant’s closure was a key objective of the NMTC financing. Bakersfield has a high unemployment rate of 15.9%, 1.67 times higher than the national average. The project was able to preserve 30 jobs and create eight new jobs at the facility, as well as creating 90 local jobs during construction and an estimated 100 long-term jobs at local firms supplying biomass fuel and providing maintenance and other services to the plant. This plant draws on the non-professional sector (high school educated/vocational training) for employment opportunities. Mt. Poso has partnered with the Employers Training Resource of Kern County which assists in locating and training local and/or low-income community residents to fill open positions.  There is also substantial spillover effect in that the fuel source will be trucked in resulting in substantial employment for the cultivation and hauling of the new fuel source.

The project has also begun to serve as a catalyst for job growth in the surrounding area, including a long-term contract with North Hills, its main fuel supplier. North Hills has reported that the contract with Mt. Poso has allowed them to purchase new equipment and hire additional staff to serve the long-term needs of the plant.

With the help of NMTC, the conversion was finished in February 2012 and was named "Best Industrial/Manufacturing Project of the Year" by ENR California. 


This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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