Time is running out to secure commitments from enough potential clients so that the Cook County Local Energy Project (CCLEP) can take its request to the Minnesota State Legislature in February 2014 for $4.5 million in funds to help build a biomass heating plant for Grand Marais.
More than two dozen people gathered at the Cook County Community Center on Thursday, December 12, 2013 to listen to a presentation about the proposed biomass heating plant that, if approved, would be built and go online in 2016 for 18 prospective clients.
Mark Spurr, president of FVB Energy Inc., a Swedish biomass consulting firm with 40 years of experience in biomass heating systems with offices in Sweden, the U.S. and Canada, gave the presentation.
Spurr said FVB was working in Grand Marais at the direction of the CCLEP Grand Marais Heat Task Force, which to date has spent $750,000 to gather information about prospective clients’ needs and to conduct cost analysis for the proposed $10 million system.
Biomass versus oil and propane
“Why do this?” Spurr asked. He answered that a biomass heating plant would stabilize and reduce long-term energy costs, reduce dependence on imported fossil fuel resources, improve forest management including wildfire mitigation efforts, create jobs, keep more energy dollars in the local economy and reduce carbon dioxide emissions.
Spurr presented a series of graphs that showed the historical weekly fuel oil prices for Minnesota residents from November 1990 to November 2013. The price for home heating fuel oil climbed from just under a dollar to more than $4 in November 2012.
The price for propane through the same time period also climbed from 75 cents to almost $2.50 in 2009, but it has since fallen to about $1.75. Spurr said he was using figures supplied by the U.S. Energy Information Administration.
“Over the last 20 years annual average increases for fuel oil have averaged 7.4 percent while propane has increased 4.5 percent over that same time,” Spurr said, noting that fuel oil has increased 12.9 percent over the last 10 years and propane climbed 6.3 percent the last 10 years.
Biomass fuel from Hedstrom Lumber
Biomass to fuel the plant would come from Hedstrom Lumber Company. Currently Hedstrom Lumber sells its waste wood to a plant in Thunder Bay. By selling to the plant in Grand Marais, the mill would save on the transportation costs of delivering its product to ship it an extra 150 miles round trip.
“There are 4,500 green tons of fuel annually being shipped to Thunder Bay by Hedstrom’s right now. That’s more than enough to supply the proposed biomass plant in Grand Marais,” said Spurr.
When asked what might happen if Hedstrom Lumber was unable to supply the necessary waste wood for the plant, Spurr said there was an estimated 56,000 dry tons of biomass within 60 miles of Grand Marais and the fuel requirement for Grand Marais district heating plant is 2,700 dry tons per year.
Nuts and bolts of biomass
If funded, a biomass heating plant would be built in the Cedar Grove Business Park in Grand Marais and would supply hot water used to heat buildings. Each building supplied would also include an energy transfer station that would forward the water on to the next stop. The first 18 initial customers are expected to use 27,000 million BTUs of annual heat, with a peak system demand at 13 million BTUs per hour. The plant’s ultimate capacity is about double the initial load, said Spurr
The biomass heating plant would consist of a biomass boiler, exhaust stack, flue gas cleaning including an electrostatic precipitator and an ash removal system. A back-up hot water boiler fueled by propane would be used when necessary. Spurr said that propane would run about 10 percent of the energy costs per year.
Heated water would travel through steel pipes that would be wrapped with factory-applied polyurethane foam insulation that is bonded to the pipe wall. The pipe would be buried about three feet below the ground, and sometimes deeper when necessary, said Spurr, adding that there would also be a built-in leak detection system. Energy transfer stations with heat exchangers would help keep the water moving and heated as it travels from building to building.
Emission questions
When it came time to discuss the plant’s emissions, Spurr said the biomass boiler systems are extensively used in Europe under strict air quality regulations, and while the proposed plant is too small to have emissions limits on particulate matter or other emissions, an electrostatic precipitator (ESP) can be added to achieve significant reductions in particulate matter at a later date. As far as carbon dioxide, some CO2 will be emitted from the burning of biomass, but it is reabsorbed by the regrowth of forest over time. Spurr said the U.S. Forest Service and the Minnesota Department of Natural Resources are also in support of reducing the biomass in the local forests.
Construction costs
The cost to build the facility is still unknown, and until bids come back in February 2014, only an estimate can be made, said Spurr. Right now the plant is expected to cost $3.3 million, distribution $4.8 million and the engineering process and construction (design to build) cost is estimated at $4.9 million for a total of $10 million. Annual operating costs are estimated at $455,000.
To finance the facility clients would have to sign 25-year contracts so the bonds needed to build the plant could be purchased and guaranteed.
Right now the bigger hotels, law enforcement center, school, community center, hospital and courthouse are being sought as customers. Should any of the bigger facilities opt out, say the school or hospital—it is unlikely that the plant could be built.
Spurr noted that there will be no connection costs for initial customers and that the charge [from their current heating bills] is expected to remain the same for the first year. Starting in year five, costs could increase up to 4 percent per year if necessary, and starting in year 10, costs could increase up to 5 percent per year if necessary.
“If and when the system grows, fixed costs will be spread over a wider base, thus reducing need for capacity charge escalation,” he said.
Financing will be sought from a $4.5 million state funding bond bill that would have to be approved by the Legislature. Revenue bonds and lease purchase financing, U.S. Department of Agriculture USDA programs and Rural Economic Development loans and grants will also be sought, Spurr said.
Community concerns
When asked who would be responsible if the system fails like the earlier biomass heating plant used in Grand Marais for the school, Spurr answered that the Grand Marais Public Utilities Commission would own and operate the plant, and he admitted there were always risks involved.
Steve Sande asked about the particulate that would be generated from the 80-foot stack, and George Wilkes, CCLEP member, said there would potentially be some days that would be worse than others, but because of the plant’s location, not many people should be affected.
“But there would be potentially some people affected by this?” Sande asked, and Wilkes said yes, potentially the smoke could affect some people.
Lloyd Speck asked about the availability of getting slash and other biomass from the woods in light of the U.S. Forest Service and the Minnesota DNR not always cooperating with loggers. Spurr said that both units of government had expressed strong support for the taking of biomass from the forest, but Speck said that support could disappear in an instant if environmental groups opposed to logging put enough pressure on them.
Doug Sanders asked about the falling price in propane and wanted to know how biomass would compete if the prices continued to drop. Spurr countered by saying that the costs of fossil fuels mostly go up, and generally don’t stay low for long.
Grand Marais City Administrator Mike Roth said the big question was a $10 million one. An audience member asked what would happen if the construction costs went over the $10 million figure. No one is sure right now about all of the potential costs, and a lot of questions will be asked before the matter can be taken to the Minnesota Legislature in February, said Spurr.
Spurr said there would be another meeting for the public in early January 2014.
Leave a Reply