Sign Letter of Intent Agreeing to Phase 3 Plan that Will Determine in 3-6 Months Whether DES Project Advances to Permitting and Construction; Propose Innovative New Structure Providing Community Participation in DES
Burlington, VT – Mayor Miro Weinberger, Burlington Electric Department (BED), VGS, University of Vermont Medical Center (UVMMC), Ever-Green Energy, and the Burlington District Energy System (BURDES) Committee, a group of interested local citizens, today announced another milestone step forward to Phase 3 of an updated district energy system (DES) project.
Phase 3 marks the first time that the City, BED, VGS, and UVMMC have signed a Letter of Intent (LOI), in which they agree to a three- to six-month scope of work that will determine whether the DES project will advance to the final permitting, financing, and construction phases. The Phase 3 work includes identifying financing, refining engineering work, identifying necessary permits and approvals, pursuing regulatory reviews, preparing a thermal energy services agreements for the McNeil Joint Owners and DES customers, and more.
Creating a DES in Burlington would meet the long-held goal of recovering waste heat and additional steam from BED’s McNeil Generating Station, and then using those sources to provide thermal energy to UVMMC via steam pipe. The DES also would be a significant step toward Burlington’s goal to become a Net Zero Energy city, and would bring meaningful climate action to Burlington, including significant energy savings and an impactful reduction in Burlington’s commercial sector natural gas related greenhouse gas emissions. After decades of work toward a DES, the most recent effort with Ever-Green Energy included a just-completed Phase 2 detailed engineering analysis and refined economic modeling that resulted in a proposed innovative new structure providing community participation in DES.
“With today’s announcement, we are closer to creating a district energy system in Burlington, which would be one of the most significant ways we can reduce thermal sector greenhouse gas emissions and make progress in our fight against the global climate emergency,” stated Mayor Weinberger. “I appreciate that, even while tackling the incredible challenges presented by our once-in-a-generation pandemic, we were able to complete the Phase 2 work and now are taking this next milestone step down the path to making Burlington a Net Zero Energy city.”
“Mayor Weinberger and the City team, along with their partners, have shown great determination to get one step closer to making their bold vision of a district energy system in Burlington a reality,” stated Senator Patrick Leahy (D-Vt.) Chairman of the Senate Appropriations Committee, who has strongly supported district energy over the years and worked to include language in federal appropriations bills to fund grant opportunities for biomass-based DES systems. “Battling climate change to protect future generations takes innovative and focused hard work. I’m glad we were able to create funding opportunities for Burlington’s district energy project, one that would benefit the entire community.”
“The updated district energy system proposal announced today simultaneously avoids financial risks for the City and, for the first time, would make this effort a true community project by having an option for Burlington households and businesses to actively participate by choosing to buy some or all of their thermal energy from district energy,” stated Darren Springer, General Manager (GM) of BED. “BED appreciates our continued partnership with VGS, UVMMC, and Ever-Green Energy, and is committed to doing all we can to move district energy forward.”
“This project highlights the power of partnerships and the kind of bold thinking we need in community leaders to advance our shared energy goals,” stated Neale Lunderville, President and CEO of VGS. “As VGS strives to reduce customer greenhouse gas emissions 30 percent by 2030, this work with Burlington is an important part of our plan. District energy is an innovative pathway to fighting climate change, while maintaining affordability for customers, and VGS is proud to be part of the project.”
“The University of Vermont Medical Center is committed to environmental sustainability as part of our mission to serve our patients and community,” stated Stephen Leffler, M.D., President and Chief Operating Officer of UVM Medical Center. “We are experiencing a challenging fiscal environment due to COVID-19, which had created uncertainty about our ability to participate in this project. I appreciate that through the work with BED, VGS, and Ever-Green, as well as our extraordinary facilities and engineering team, we have a district energy proposal focused on balancing emissions reductions with cost-effectiveness, which we know will need to include many more participants sharing in the financial commitments and benefits of bringing this project forward. The UVM Medical Center is pleased to continue to participate as this project advances to Phase 3, and appreciates this partnership.”
PHASE 2 LEADS TO MORE INNOVATIVE DES PROPOSAL
In 2019, BED and VGS re-engaged with Ever-Green Energy, a district energy system operator and advisor for projects around the United States that had conducted DES work for Burlington in the past. After a successful Phase 1 economic feasibility analysis, during which the partners determined that a DES could reduce thermal fossil fuel use at UVMMC by approximately half and be built for less than the prior capital cost estimate, the partners launched Phase 2 in February 2020. Phase 1 also determined that adding downtown buildings would not provide enough additional energy service to be economical. Phase 2 consisted of detailed engineering analysis and refined economic modeling. The Phase 2 results were positive and led to a new structure for a Burlington DES that would not require upfront municipal investment in or City financing of DES, and would not place any ownership, operations, or construction risks on the City. The updated DES from Phase 2 includes: updated pricing; increased renewable thermal energy and greater emissions reductions; and an innovative operating model.
The cost estimate for the DES remains far less expensive than the prior $40 million estimate, but has increased to approximately 60 percent of the 2018 level. The DES now is projected to cost $24 million, based in part on a request for proposal conducted by Ever-Green to get indicative pricing from contractors. Though more expensive, the project is estimated to provide more than 72 percent of the 2018 estimate for fossil fuel reduction, thereby representing a more cost-effective emissions reduction compared to the initial DES proposal.
Increased renewable thermal energy and greater emissions reductions
The proposed DES design resulting from Phase 2 would produce more renewable thermal energy (143,000 MMBTU per year) than was assumed in Phase 1 (125,000 MMBTU per year) from BED’s McNeil Generating Station, a 50-megawatt, biomass-powered (woodchip burning) plant owned and operated by three joint owners – BED (50 percent), Green Mountain Power (31 percent), and Vermont Public Power Supply Authority (19 percent). Further, the new DES proposal would lead to approximately 25,000 MMBTU in additional efficiency savings, providing nearly 170,000 MMBTU, or more than 9,400 tons of CO2 equivalent, per year in emissions reductions. Such reductions would represent a carbon value of $940,000 annually using the $100 per ton measure that the City currently applies to fleet and heating system purchases. These emissions reductions also would total a more than 11.5 percent reduction in Burlington commercial sector natural gas related greenhouse gas emissions, representing the single biggest step Burlington can take to reduce commercial sector emissions.
Innovative operating model
The new DES operating model includes the following elements:
· Operations/Financing: the Burlington DES would be structured as a not-for-profit entity that Ever-Green Energy would create, finance, own, and operate.
· District Energy Provider: pursuant to a purchase agreement, VGS would contract with Ever-Green for all the Burlington DES energy output, which would include two distinct attributes (similar to renewable electricity): (1) thermal energy; and (2) environmental/renewable attributes, known as DES Renewable Credits.
· Thermal Energy: UVMMC would serve as the host for the thermal energy, while additional institutions and buildings also are considered for the DES; VGS would take ownership of the thermal energy at the delivery point, as well as manage thermal energy billing directly with end use customers.
· DES Renewable Credits: the environmental/renewable attributes associated with the DES renewable credits would be available for purchase by any VGS customer, creating a scenario where UVMMC would not bear the burden of absorbing the DES cost premium compared to current fuel service cost. This model is based on popular electric sector renewable energy programs, such as Green Mountain Power’s Cow Power and community solar (as authorized by State of Vermont net metering laws) projects, as well as the current voluntary renewable natural gas offering by VGS. Even though the physical connection for DES would be hosted at UVMMC, DES renewable credits available for purchase from VGS would unlock a key benefit for the following potential purchasers:
o UVMMC – could purchase DES renewable credits over a given time period in an amount that works for their environmental and financial goals
o City of Burlington – could purchase DES renewable credits to reduce greenhouse gas emissions attributable to municipal buildings, thereby providing some amount of annual investment in the DES while achieving important emissions reductions as part of the City’s efforts to become Net Zero Energy
o Other Burlington businesses, organizations, school, and individual residents – could purchase DES renewable credits through the VGS billing system to help support this critical emissions reduction project
o VGS – if DES renewable credits available in a given year were not 100 percent subscribed by customers, VGS would provide a critical backstop to utilize the remainder for its system-wide energy portfolio to help meet its renewable energy goals.
PHASE 3 PROCESS BRINGS BURLINGTON ONE STEP CLOSER TO DES
Advancing the district energy work to Phase 3 represents another significant milestone in the exploration of DES. The LOI, along with Attachment A, outlines the work and responsibilities of the partners over the next three to six months. During Phase 3, the partners will:
· Identify financing sources to advance DES to permitting and construction, including seeking any available grant funding assistance;
· Continue to refine engineering and interoperability work with UVMMC to ensure system reliability and full ability to integrate the thermal output with UVMMC’s normal operations;
· Identify all necessary permits and approvals that would be needed to advance DES to construction;
· Engage in consideration of regulatory/rate oversight models;
· Finalize pipe sizing to include consideration of current and/or future DES expansion by including the connection of additional institutions and buildings;
· Identify further incentives and the potential for use of existing incentive structures in support of DES;
· Identify additional anchor customers/participants for the DES renewable credits;
· Seek approval from the McNeil Joint Owners for McNeil’s provision of thermal supply; and
· Develop and present thermal energy supply agreements or rates to all necessary parties at the end of Phase 3 (subject to any required regulatory approvals that have been identified); and
· Petition the Vermont Public Utility Commission to gain approval for VGS to purchase and resell the DES energy and renewable energy credits.
Phase 3 will determine if the DES can proceed to permitting and construction. If the determination is positive and the project were to remain on schedule with no further pandemic-related or other disruptions, construction would commence as early as 2022, with a goal for system operation by 2023.
“This Burlington DES partnership shows what’s possible when multiple sectors work together to improve systems and infrastructure,” stated Michael Ahern, Senior Vice President (SVP) of System Development of Ever-Green Energy. “The utility systems we develop, operate, and manage across the country are known for their efficiency, innovation, and sustainability. We are eager to add Burlington to our portfolio of advanced energy systems, as this project stands out for integrating smart technology, resilient energy system, investment in decarbonization, and creation of a true community asset. We are glad to play our part in leading the implementation and helping the City of Burlington achieve its climate goals.”
“For the last 15 years, a citizens group known as BURDES (BURlington District Energy System) has helped to shape several viable plans for a district energy system,” stated Lisa Marchetti, Harry Atkinson, and Jan Schultz, BURDES Committee members. “The major stumbling blocks to accomplishing this has been the system’s upfront cost and the currently low price for natural gas. This next phase is a great opportunity to further the potential of developing a district energy system for Burlington. This system could, over time, include a great deal of the City. It would have the further advantage of being extremely close to the University of Vermont’s central heating plant, which would be a good match for the initial system proposed for the hospital.”
“For decades, the Burlington Electric Commission has endeavored to reflect the goals of our community in providing safe, reliable, affordable, and environmentally-sound energy,” stated Gabrielle Stebbins, Chair of the Burlington Electric Commission. “Continuing past BED’s achievement of 100 percent renewably-sourced electricity towards a Net Zero Energy city across nearly all energy consumption requires creativity, trust, partnerships, and an ongoing ‘plan-do-check-act’ approach. Today’s announcement reflects these core tenets of our Queen City community.”
Mayor Weinberger, BED GM Springer, and Ever-Green SVP Ahern will be present for the February 8, 2021 City Council meeting, at which time they will be available for feedback and questions from the Council about the Burlington DES project and/or about the DES update memorandum to the City Council prepared by Mr. Springer and dated February 4, 2021.