Important: Special Meeting on District Energy Project Monday

After Meeting Update – Catalyst will be approach to provide steam – Next Decision at Regular Meeting on Feb 23rd – Don’t forget the poll on the side.

We had an excellent meeting on Monday afternoon.  Mr. Deakin (Economic Development Manager) and Mr. Salter (District Energy consultant) provided a very good update on where the project stands exactly and Council peppered them with questions.  Council decided to wait until the regular meeting on Monday to actually address the recommended course of action presented by Mr. Deakin so that the issue was out in the public for that much longer and it could be discussed and decided under the full scrutiny of the regular public council meeting on the 23rd.

If you would like more background information on the project, check out the Feasibility Study from 2012 (which was not previously available to the public).  It provides a very comprehensive rundown of the system though some of the facts are a little out of date now 3 years on including the price of natural gas which has dropped (as was identified in the report as a risk) and thus the profit to the City if it ran it self has potentially dropped as well.

However, there is no scenario where this project costs the taxpayer money.  The project is designed and the business plan is set to include the debt servicing costs within the operating budget of the facility.  So currently, if the project is done as a Private Public Partnership, the City will receive an unspecified (likely small) royalty as part owner, and if the project is done as a wholly City owned venture, it would see revenue of around $100,000 which if that revenue stream was in place this year would be the same as eliminating 0.8% from any residential tax rise.  So instead of a 2.8% increase, we would have a 2.0% increase.   This is in addition to savings the City would gain from paying much less for heating its facilities if they were hooked up to the District Energy system.  After the “mortgage” is payed off in 25 years or less, the system would deliver revenues of around $500,000 (in 2012 dollars).  The infrastructure (pipes etc) would last around 50-60 years.

There is a bit of urgency to moving on with the decision as the grant providers that agreed to give grants for the project way back in 2012 are getting a little impatient with us.  So now is the time to move things to a next step.

Council decided to immediately send Catalyst a letter to see if they would be interested in providing the steam for the system from the excess in their operations.  It is unclear whether they will or not, but Council thought it would be best so as to be able to support this important business in our City.  Note that this is *only* for the Steam supply of the system.  It is understood that Catalyst has no intention of building or operating the district energy system itself.

On Monday, Council will decide whether to put out a Request for Proposals (RFP) to private companies to build and operate the system in partnership with the City or to forego that and simply build and operate it as a service or corporation wholly controlled by the City. However, even if Council decides then to send out RFPs, it will still have the opportunity to examine those RFPs and come to a decision on whether to go with a PPP or do it as a wholly owned and operated municipal service or corporation.

I’m currently leaning toward what I see as the simplest approach with the least operating complexity/cost and maximum City benefit: a municipal service.  However, I’ll be keeping my eyes and ears open to all the options in what I believe is a very exciting proposal.

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Initial Post…

There is a poll on the righthand side of the page to register what you would do…. below is the beginning of the explanation.  I highly recommend coming on Monday, 3PM, to hear the full up-to-date info that will be presented in full then.

You likely know that there has been a project in the works at the City for a number of years to create a biomass (wood chip) fired energy system in the City to provide heat to local large customers like VIHA, City facilities, and others.

Here is a map… one thing that has apparently changed is involvement of Catalyst.

It appears that a number of factors including low natural gas prices are now bringing that project to a crossroads.

http://www.portalberni.ca/content/meeting-agendas-minutes

Download the  agenda and explanation here for the February 16 meeting at 3PM in City Hall Council Chambers.  The agenda includes a brief explanation of where the City is at, how we got here, and what the options are.

Here is the explanation from the 2014 Sustainability Report:

7.3 District Energy System

In early 2010 the City retained Stephen Salter P.Eng of Farallon Consulting to undertake an evaluation of Integrated Resource Recovery Options for Port Alberni. This evaluation was completed in mid-2010 and indicated that there were two very viable options to convert biomass to energy and circulate it to institutional, civic and large private sector residential facilities. These options had the potential to reduce GHG emissions by 4000 to 13,000 tonnes/yr, create cost savings for customers and provide new non-tax revenue for the City. The executive summary of the Farallon report is included in Appendix 12.

Initially an option incorporating a partnership with the Catalyst Paper mill was pursued. Ultimately a City stand-alone option proved to be more workable. The project will incorporate three technical innovations: a three-line district heating distribution system, a direct contact condensing economizer, and an adsorption chiller that will make use of heat from the system to replace the Hospital’s existing chiller.

Funds are identified in the City’s current five year financial plan to undertake this project d Funding grant applications have also been approved by FCM’s Green Municipal Fund and the Gas Tax Innovation Fund in the amount of $1.9 million.

Once constructed this project, as currently envisaged, would:

• conserve 60,000 GJ/year of natural gas,
• conserve 122MWh/year of electricity,
• divert 2,800 tonnes/year of wood waste from landfilling,
• reduce greenhousegas emissions by 5,100tonnes/year
• reduce the City’s corporate emissions by a further 38% and, retain greenhouse gas offsets of $65,000/year currently paid by public organizations in Port Alberni to the Pacific Carbon Trust.

However, the bottomline now is this, like (and related to) oil prices, the market has changed both for what we can expect to sell the energy for, and how much will be consumed.

Here are the options included in Monday’s agenda. (Sorry they are images, click for larger)

 

The Economic Development Manager is recommending that if Council still wants to pursue the project, that it do so in a partnership with a private company, Option 2 above.

If we choose to receive the maximum benefit by building it fully by ourselves as a City Utility or corporation (Option 1 above) then we shoulder the cost, and that would mean borrowing over $7 Million which would trigger a referendum to make that happen.

Or, we can walk away.

I am not going to state right now what I believe the City should do but I will say that I have watched this project for many years and have been a supporter of it.  It is clear market conditions are not as good as they once were…. but where are they going to be?

I want to hear what Mr. Deakin has to say on Monday and will have questions.

Below are some links to information about the system. What do you think?  Come to the meeting this monday.  It will be important.

• A description of the project on the City’s website here.
• Here is an AV Times report about the system in town from 2013.
• Here is a report about a similar system proposed in Courtenay but that City did not have some of the built-in advantages we have (location and facilities)

Below are FortisBC Natural Gas prices. These are residential rates though, not commercial but they should give an idea of trends.