DISTRICT ENERGY ST. PAUL. Achieving Energy Independence

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1 Overview District Energy St. Paul Inc. (DESP) currently provides heating to 80 percent of St. Paul s central business district and adjacent urban areas. The system uses a 65-MWth municipal wood waste combined heat and power plant with an electric capacity of 33 MW, two 44-MW low-sulphur coalfi red boilers, four 25-MW gas-fired boilers, four 106-MW gas- and light oil fired boilers, with a total capacity of 106 MW and an emergency, portable 5- MW boiler, for a total capacity of 289 MWth. DISTRICT ENERGY ST. PAUL Achieving Energy Independence Located in the core of a vibrant and compact municipality is North America s largest combined heat and power biomass-fuelled district energy system. Incorporated in the 1980s as a private not-for-profit corporation, District Energy St. Paul (DESP) promotes energy independence and conservation, local community economic investment, as well as reurbanization in the downtown area. After 25 years of service, DESP remains an industry leader and innovator, offering St. Paul residents and businesses an affordable green-fuelled thermal and electricity service. At the same time, the district energy system is contributing to economic development, reurbanization, and sustainable development. Each district energy customer has its own heat exchanger and control valve, allowing for the trans- fer of thermal energy from the district hot water system to a customer s in-building closed heating loop. The cold water left after the heat extraction is returned to the main plant to be reheated and circulated back to customer buildings. Combined heat and power plant Ownership Sectors served Private ownership Plant capacity 289 MWth heating 1.2 MW electricity Residential Commercial Institutional Industrial 1

2 Overview, cont... An affi liate of DESP, District Cooling St. Paul offers air-conditioning to over 90 customers occupying 17.5 million ft2. The system incorporates nine electric chillers, two steam absorption chillers, and two chilled water storage systems located at plants around the municipality providing a total installed cooling capacity of 33,000 tonnes. Context In the late 1970s, the District Heating Development Corporation (DHDC) the developer of District Energy St. Paul was formed to carry out the replacement of St. Paul s existing steam heating system. Championed by the Mayor at the time, George Lattimer, a detailed feasibility study was conducted for implementing a hot-water district heating system that would facilitate the conversion of buildings fitted for steam heat, oilburning furnaces, or natural gas boilers. The feasibility study was favourable. Economic restructuring allowed for the financing of the project and with the support of multiple agencies, a comprehensive and modern $45.8-million, coal-fi red, hot-water district heating project was launched. The project was financed by $30.5 million in 30- year tax-exempt revenue bonds, $9.8 million in 20- year loans from various government agencies, and $5.5 million in an equity loan from the Municipality of St. Paul. As well as the distributed heating system, there is an extensive cooling system with 6.5 million gallons of chilled water storage capacity. A closedloop distribution system provides air-conditioning to customers. The storage tanks are cooled at night using off-peak electricity. The total system cost $55 million to develop and was funded by revenue bonds plus a $3.0 million subordinated loan from St. Paul Housing and Redevelopment Authority. Timeline Feasibility study commissioned by the U.S. Department of Energy and the Minnesota Energy Agency District Heating Development Company incorporated Feasibility studies and marketing complete; financing arranged First customers receive service Nearby industrial park receives service Name changed to District Energy St. Paul Inc. with over 400 customers Expands system to include cooling services Chilled water storage introduced Largest municipal biomass-fueled combined heat and power system becomes operational Expansion of the chilled water system. In 1999, the construction of a combined heat and power (CHP) system fuelled by municipal biomass was initiated by an affiliate company of DESP, Market Street Energy Company and Trigen Cinergy Solutions. The $75-million CHP facility became operational in 2003 and now supplies 75 percent of the thermal energy required by district heating and cooling customers in downtown St. Paul. With the start of the CHP plant, the DESP has significantly reduced its reliance on coal- and natural gas-fired boilers, which are now operated mainly to support peak periods of thermal heating and cooling demand. 2

3 Context, cont... After 25 years of service as a community-based non-profi t corporation, District Energy St. Paul Inc. remains an energy leader, serving the majority of downtown building owners, including many members of the St. Paul Building Owners and Manager Association, four hospitals, and several large downtown offi ce towers. Information at a glance Building types served: commercial, institutional, residential, industrial Building area served: Heating: over 31 million ft 2 ; Cooling: 18.5 million ft 2 Location: St. Paul, Minnesota, U.S.A. Completed: 1983 Operator: Market Street Energy Demand: 190 MW, annual sales of 302,000 MW/h Technology: Heating: 4 gas/oil-fired boilers, 2 coal/ gas-fired boilers, backup plant, and mobile boiler Cooling: 6 electric, 2 steam-absorption chillers and several satellite chillers; 6.7- million-gallon chilled-water storage systems Electricity: 33 MW Production capacity: Total 289 MWth (987 million Btu per hour) Fuel type: Wood waste, natural gas, lowsulphur Eastern coal, fuel oil Distribution system: Heating: 105,000 ft of twin supply and return piping Cooling: 33,500 ft of twin supply and return chilled-water pipelines Total cost of project: $45.8 million in 1982 for first phase; $55 million between for cooling; $75 million in 1999 for CHP system In 1979, the company told customers that although conversion costs for district heating may seem high in some cases, the future costs of gas and oil (will be) substantially higher in the long run. Hot water district heating can be an important investment in your building s economic future. Those words remain true. Benefits General DESP provides heating to 185 buildings (80 percent of the downtown market); cooling to 95 buildings (60 percent of the downtown market); and 300 single-family homes. Eventually 75 percent of annual energy needs will be met by the clean fuel source of the CHP plant. Plants are designed to blend in with the historic urban community. Environmental CHP plant uses half of the 600,000 tonnes of wood waste generated in the metro area of St. Paul. CHP plant will reduce sulphur dioxide emissions (SO 2 ) by 60 percent and carbon dioxide emissions (CO 2 ) by 280,000 tonnes per year relative to coal use. DESP has eliminated the need for 150 smoke stacks, 50 cooling towers, and 300 chimneys. Cooling system reduces reliance on chlorofl uo rocarbon refrigerants (CFCs). Closed loop cooling system does not use ground water. 3

4 Benefits, cont... Economic Cumulative savings for customers $7 million in 2005, compared to customers using natural gas with in-building heating and cooling systems. Charges for energy use (includes the energy rate and demand rate charge by DESP) have risen only 0.3 percent annually over a 23-year period, compared to an annual increase of 2.7 percent for natural gas users. Performance DESP has placed customer service fi rst obtaining a 99.9 percent reliability rate on the supply of heating, cooling, and electricity. DESP attributes its success to having an 80 percent market share of all downtown buildings. Unlike other utility and natural gas service providers, DESP has a strong business proposition for customers history has shown that customers save 20 to 25 percent in energy consumption just by switching to DESP s service. Lessons learned The old rule of measuring twice, cut once can also apply to the marketing of district energy. When St. Paul s District Heating Development Corporation was launched, the investment risk for the project was transferred to customers through a lengthy agreement. Customers were expected to sign a 30-year contract before the system was developed and to help underwrite the project. Not surprisingly, initial efforts to sign up customers were lacklustre, with only 8 customers totalling 14 MW signing the contracts, even though natural gas prices were rising rapidly and the old steam-based system was unreliable. DESP Structure DESP employees, with the exception of the president, are employees of Market Street Energy Company, a for-profit district energy company. Market Street Energy oversees the management of District Energy St. Paul Inc., as well as an affiliate company, District Cooling St. Paul. Both the heating and cooling companies remain non-profit community-based corporations. A board, made up of publicly appointed representatives and customer-elected representatives, oversees the DESP operations and all affiliate activities. worked closely with the St. Paul Building Owners and Management Association (BOMA) to create a more attractive contract. Within a year, customers representing the necessary 135 MW in demand required to make the project feasible had signed. Offering a turnkey or package service for converting existing systems can be an important marketing incentive to sway customers. For DESP, helping to convert customers existing heating systems was a critical factor in expanding the system. Conversion costs can be a strong deterrent for customers, especially those who own older buildings heated by steam systems. In the early 1980s, the District Heating Development Company established an Energy Reinvestment Fund for non-profi t organizations to help offset conversion costs for non-profi t building owners. Today, DESP continues to work closely with new customers to provide a full thermal (heating and cooling) package. DESP can offer savings and improve energy effi ciency in buildings. Offering a full range of thermal and monitoring services can help plant operators compete with local utilities while improving customer relations and building trust within the community. 4

5 Lessons learned, cont... Developing a range of services can take time and should be part of a long-term growth strategy. Early planning, community engagement, and addressing problems as they arise can help to smooth the development process. In 2003, DESP engaged in four major infrastructure projects in addition to completing the CHP plant. With the development of the CHP plant, DESP and its affi liate organizations engaged in extensive soundlevel monitoring before, during, and after construction to mitigate noise in the downtown core and nearby neighbourhoods. They also worked carefully with local offi cials, building owners, and other stakeholders to ensure minimal service disruption during construction. Urban areas provide challenges for district energy plants, but can be a catalyst for local economic and sustainable development. With the expansion of the CHP facilities, innovations were required to ensure the effi cient operation of the plant including access for more than 50 trucks a day bringing the biomass needed to fuel the plant. Solutions included special hoppers that allow two trucks to discharge simultaneously. In St. Paul, most downtown buildings have opted to connect to the DESP. Local developers in St. Paul view the DESP as an attractive component of marketing affordable commercial and housing development. Future DESP is expanding its reach beyond the core of downtown St. Paul and is exploring opportunities to increase its renewable energy portfolio. For more info, contact: DESP - (651) The opinions expressed in this document do not necessarily represent those of the plant operators or the project sponsors.