By Gordon Hamilton

Castlegar's Celgar pulp mill has received a $40-million federal grant for a green energy project that turns biomass into enough energy to supply 22,000 homes with power for a year, integrating the forest industry into the provincial initiative to become energy sufficient by 2016.

The Celgar project, the first to be funded under Ottawa's $1-billion Green Transformation Program, is expected to generate 48 megawatts of power when it comes online in September. Celgar intends to use 13 megawatts for the mill's energy needs and sell the rest, 35 megawatts, to BC Hydro.

"That's enough energy to power 21,636 households a year," said Susan Danard, manager of media relations at Hydro. "It guarantees a nice source of clean, reliable energy to BC Hydro and our customers."

The mill's green energy will replace imported energy from Alberta or the U.S. that is generally generated by burning fossil fuels.

Further, it will add a new source of revenue to the mill by adding a valuable bioenergy component to the pulp-making process. The extra revenue -- the exact amount is not being disclosed -- will enable the Celgar mill to be more competitive globally, said David Gandossi, vice-president at Mercer International, the Vancouver-based forest company that owns the Celgar mill. It is one of Canada's largest and most modern.

Gandossi said the Celgar mill is investing the $40 million primarily in a new condensing turbine and other steam-saving projects.

The steam is being generated by burning black liquor, a biofuel that is a byproduct of the pulp-making process. Pulp mills routinely use black liquor to generate their own heat and energy, but creating energy for the grid is a growing application in B.C.

Gandossi said European mills routinely generate power for electricity grids, enabling them to lower costs.

Mercer was one of four forest companies to sign electricity purchase agreements with BC Hydro in 2009 as part of the provincial policy to reach energy self-sufficiency by 2016. The Celgar project is the largest and will be the first to come online. Hydro already had agreements with two other forest companies, Tembec and Tolko Industries. All six contracts will provide Hydro with enough power for 85,000 homes.

The B.C. pulp and paper industry is generally considered to be on the verge of being replaced by lower-cost global competitors. Bioenergy production is giving the industry a new lease on life.

Gandossi said the provincial government is beginning to realize that pulp mills can be integrated into the energy system in a much more efficient way than other forms of bioenergy, such as simply burning wood waste to create energy. When the new turbine comes online, the Celgar mill will be not only making pulp but also capturing and using more than 75 per cent of the energy within its wood waste feed stock.

"A pulp mill takes what is otherwise a waste product -- the residuals of a sawmill or the residuals in the forest that previously didn't have a value -and creates value-added pulp from it, employing 500 people to make a product you can sell and make money at," Gandossi said.

"The other half is the energy component that we refine. You can sell [it] as electricity or biofuels or whatever else you can make out of the black liquor."