Renegy Holdings, a Tempe-based alternative energy company, said Monday it has started producing electricity at its $60 million biomass power plant near Snowflake. The company said it has sent electricity from the 24-megawatt plant to the utility power grid and is selling test power in preparation for full commercial operation by the end of June.
The plant - Arizona's largest renewable-energy plant outside of hydroelectric dams - runs on thinned waste wood gathered from national forests and wastepaper from a nearby newsprint mill. It will produce enough electricity at full operation to serve more than 13,000 homes, the company said.
"This achievement marks the successful completion of construction at the plant site and demonstrates continued advancement in our startup activities," said Hugh Smith, chief operating officer.
During the next several weeks, operators will complete performance tests and gradually ramp up electricity output to full power, he said.
The plant, which will sell its electricity to Arizona Public Service and Salt River Project, has accumulated an inventory of about 200,000 tons of wood fuel, equivalent to a two-year supply, the company said. Much of the wood was gathered from areas in national forests burned in the 2002 Rodeo-Chediski fire.
Renegy expects to receive about $16 million in annual revenue from the plant under 20-year contracts it has signed with the utilities, said spokeswoman Megan Maloni. The electricity is expected to cost about 8 cents per kilowatt-hour, which makes it slightly more expensive than power produced at coal-fired and nuclear plants, she said.
"When selling renewable energy, there usually is a premium because it is 'green' power," she said.
But the plant has the advantage of using fuel that is renewable. Also it does not contribute to climate change because the carbon dioxide - a greenhouse gas - released by combustion at the plant is offset by the carbon dioxide absorbed by the trees while they were growing, she said.
Arizona utilities are under a mandate from the Arizona Corporation Commission to acquire 15 percent of their electricity from renewable sources by 2025.
Commissioner Kris Mayes said the plant startup is "very exciting. ... This is exactly what we were hoping for when we passed the renewable energy standard."
Mayes expects other biomass plants will spring up across the state, adding "this is just the tip of the iceberg when it comes to renewable energy in Arizona."
The largest renewable energy project announced in Arizona so far is the 280-megawatt Solana solar thermal plant near Gila Bend planned by APS and Abengoa Solar, which is expected to start operating in 2011.