Recycled energy, or "gray energy," is the process in which waste heat generated during the manufacturing process is captured and used to generate energy that is then fed back into the system. Advocates say such systems substantially reduce a plant's power demands and cut electricity bills and the facility's environmental impact.

Investment in recycled energy also can help power companies comply with a state law passed last year that requires 25 percent energy in the state to come from alternative or renewable resources by 2025. But companies cannot claim as many credits for recycled energy as they can from wind, solar or hydroelectric power, and its advocates believe that's a mistake.

"You can take (recycled energy) and produce electricity, you can produce heat for the building, you can use it productively," said Carl Irwin, director of West Virginia University's Industries of the Future-West Virginia.

State lawmakers passed legislation in 2009 creating an energy portfolio with the goal of reducing the state's overall carbon dioxide emissions during the next 25 years.

Most states have passed portfolios, but most focus only on renewable energy sources. West Virginia's portfolio includes non-renewable, "alternative" energy sources, such as coal-fired power plants that capture and store some of their carbon emissions.

All power companies selling energy in West Virginia must generate a quarter of their electricity from renewable or alternative sources by 2025 or purchase a number of credits equal to 25 percent of their energy generation.

Companies get one credit per megawatt-hour for alternative sources, two credits for renewable sources and three credits for renewable energy generated on top a reclaimed surface mine.

Critics of the legislation have pointed out that companies won't necessarily offset their emissions by 25 percent if they stack up projects worth two and three credits. There also has been much haggling over what constitutes "renewable" and "alternative" energy, with recycled energy shifted from renewable to alternative by a legislative committee last year.

Senate Bill 350 would shift it back. Such a move would be a boost to companies building alternative energy systems because it would give them twice the number of credits to sell to large companies than under current law, according to Irwin.

The bill had no trouble passing the Senate Economic Development Committee during a meeting Feb. 5, but before it did committee members undid another change that lawmakers made last year. The committee reinserted corn-based ethanol as a renewable energy source for which companies could claim credits.

Several studies have found that producing ethanol from corn is highly inefficient and perhaps produces more greenhouse gases than gasoline. Citing these concerns, the Senate removed it from the portfolio during the 2009 legislative session.

Sen. Bob Williams, D-Taylor, argued at the committee hearing that corn-based ethanol should be placed back in, although he didn't disagree that it was an inefficient fuel source. Still, he said companies should be allowed to apply for credits if they choose to build ethanol plants in West Virginia.

"Whether we like the idea that ethanol is produced from corn, there are renewable fuel requirements for gasoline," he said. "This just sends a bad message to corporations that we in West Virginia don't like this."

SB 350 unanimously passed the Senate Economic Development Committee and will next head to the Senate floor.