Milestone Step Forward to Phase 2 of Updated District Energy System Project
U.S. Senator Patrick Leahy Secures Significant Federal Funds for District Energy Projects
Burlington, VT – Mayor Miro Weinberger, Burlington Electric Department (BED), University of Vermont Medical Center (UVMMC), VGS, and the Burlington District Energy System (BURDES) Committee, a group of interested local citizens, today announced a milestone step forward to Phase 2 of an updated district energy system (DES) project. The DES would bring Burlington the potential for significant energy savings and meaningful climate action. After decades of work toward this system, Phase 2 will mark the first time that BED, VGS, and UVMMC will reach the stage of engaging in detailed engineering analysis and refined economic modeling.
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 using those sources to provide thermal energy to UVMMC via steam pipe. This system would reduce fossil fuel use and greenhouse gas emissions in Burlington, and mark a significant step toward Burlington’s goal to become a Net Zero Energy city. DES also has the potential to make McNeil more efficient and to modestly diversify the market for the energy produced at the station. In addition, U.S. Senator Patrick Leahy recently has secured millions of dollars of federal funds for district energy projects, including ones like Burlington’s DES project.
“Creating a District Energy System is one of the most significant local strategies available to us to respond to the climate emergency and meet our ambitious climate goals here in Burlington,” stated Mayor Weinberger. “It is exciting that, for the first time in 35 years of exploring such a system, we are advancing to the stage of detailed engineering and economic analysis. While much work remains, today’s news represents a major breakthrough.”
“It’s not enough to wish solutions to climate change into being,” stated Senator Patrick Leahy (D-Vt.) Vice Chairman of the Senate Appropriations Committee. “It takes determination, creativity, and hard work to deliver on the bold visions that will impact our future. Cities like Burlington are leading the way in these efforts, and I applaud Mayor Weinberger and BED for moving this project from vision toward action. I fought to include funding for the Department of Energy to support community-scale projects because I believe the federal government needs to be an active partner in local initiatives like this one.”
Leahy has strongly supported district energy over the years and worked successfully to include language in the Fiscal Year 2020 appropriations bills that provides $10 million in competitive grants for community district energy projects such as Burlington’s proposed system. The funds are part of the U.S. Department of Energy budget, and the available grants focus on systems that are renewably-fueled like Burlington’s DES.
“As confirmed by our Net Zero Energy Roadmap, a district energy system remains perhaps the single greatest opportunity to reduce thermal sector greenhouse gas emissions in Burlington,” stated Darren Springer, BED General Manager. “While we have more work ahead to ensure that this project can pencil out economically and is technically feasible, BED is proud to commit today to continue that work with VGS and UVMMC. Today’s announcement that the partners are advancing this important project to Phase 2 represents the most significant progress to date toward making district energy a reality for our City.”
“VGS is creating an ambitious and comprehensive strategy to eliminate greenhouse gas emissions by 2050, with a near-term goal of 30 percent reduction in the next decade,” stated Don Rendall, VGS President and CEO. “Partnering with Burlington Electric Department, the City of Burlington, and the University of Vermont Medical Center to provide renewable heat to large customers will help significantly reduce our carbon footprint. Today’s announcement marks significant progress towards making this project a reality.”
“As part of our commitment to environmental responsibility, the UVM Medical Center seeks out cost effective opportunities to reduce energy consumption while reducing our carbon footprint,” stated Dawn LeBaron, Vice President, Hospital Services, University of Vermont Medical Center. “In the past several years, we have continued to improve our environmental profile by optimizing HVAC systems, implementing LED lighting upgrades, and initiating a limited purchase of renewable natural gas. Our new Miller Building is an example of this commitment. Phase 2 of the DES project presents an exciting opportunity to explore going even further by taking advantage of an existing resource that holds great promise. The UVM Medical Center’s vital next step is to do a thorough analysis to be sure the project will help us meet our sustainability goals while continuing to provide the highest quality care to our patients and families. We will complete this analysis with our partners, work together to determine what is possible, and build on that knowledge to continue working toward climate change solutions into the future.”
Phase 2 process brings Burlington one step closer to DES
Advancing this work to Phase 2 is a significant milestone in the exploration of DES that began in 2016. During Phase 2, which will span approximately five months, the parties will:
- Conduct street-level engineering analysis, examine rights of way, and coordinate with Burlington’s Department of Public Works to explore potential synergies between DES and planned street work;
- Refine the economic analysis, review available incentives and grants, and develop a final DES cost estimate;
- Include in the economic modeling a proposed revenue structure to compensate the McNeil joint owners for the production and sale of thermal energy;
- Examine multiple regulatory, financing, and ownership structures to determine which model would provide the greatest benefit, as well as appropriate operational and financial risk mitigation; and
- Analyze operational protocols for dispatch and integration of McNeil thermal energy and the existing UVMMC thermal system to ensure the reliability of a DES.
The parties have committed to reporting on their progress at the conclusion of Phase 2 and, at that point, determining whether the DES as currently envisioned ultimately will be economical and technically feasible. If that determination is positive, the parties will work to advance the project into the permitting and approval phase that would precede construction and operation of the DES.
“BURDES is excited to support the Phase 2 effort,” stated Jan Schultz, BURDES co-founder and former Burlington Electric Commissioner. “Systems such as Burlington’s DES can benefit from both state and federal support to help make them financially feasible. After many years of awareness raising and study, this is a concrete step to move the DES forward in Burlington. We are in the throes of a climate crisis, and an initial DES in Burlington will become a significant part of a major effort to mitigate the effects of fossil fuel use for building heating. I applaud the City and eagerly await the results of the Phase 2 study.”
“Sometimes the most innovative ideas must be driven into practice with courage, patience, and fortitude,” stated Karen Paul, Burlington City Councilor (Ward 6) and former Chair of the Burlington Electric Commission. “District energy was envisioned in Burlington a few decades ago; it is a testament to our community and our partners’ resilience in finding a way to bring this sustainable form of energy to the next step. Our commitment to our Net Zero Energy goal must mean a staunch and active responsibility to ‘walk our talk’ and aggressively address our global climate emergency. This latest development shows how critical it is for our community to work cooperatively and collaboratively with many partners so that, together, we can lower our carbon footprint and continue Burlington and BED’s proud tradition of energy efficiency, renewable generation, and sustainably growing our future.”
“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, and partnerships. Today’s announcement reflects these core tenets of our Queen City community.”
Bold climate goals strengthen the DES collaboration
Fall of 2019 marked a series of steps that led to the beginning of the Phase 2 process. First, in September 2019, Mayor Weinberger and BED released Burlington’s Net Zero Energy Roadmap, which confirmed that a DES is a significant component of reducing and eventually eliminating fossil fuel use in the thermal sector. VGS, a key partner in exploring the possibility of a Burlington DES since the beginning of the current feasibility work that began in 2016, announced in November 2019 a strategy to achieve 20 percent renewable natural gas by 2030, boost investment in weatherization, and support district energy projects in Burlington and Middlebury, all in an effort to reduce greenhouse gas emissions. Meanwhile, UVMMC is committed to becoming the most environmentally responsible health care organization in the country and has been recognized by Practice Greenhealth with a top 25 Environmental Excellence Award. UVMMC also recently joined Burlington 2030, a local partnership that aims to reduce transportation emissions, energy use, and water consumption by 50 percent by 2030. This collaborative is part of a national network of cities working to fight climate change. The BED, VGS, and UVMMC climate stewardship announcements strengthen the alignment of the parties and the commitment to advance DES in Burlington.
Background: BED and VGS re-engage with Ever-Green Energy
In the second half of 2019, BED and VGS initiated a new Phase 1 economic feasibility analysis with Ever-Green Energy. Previously, Ever-Green conducted a DES study for Burlington in 2014. The new Phase 1 feasibility analysis focused this time on a steam (instead of hot water) system, which would have the potential to make customer connections to the system less costly and complex, thereby reducing the initial capital investment required while still significantly reducing fossil fuel use and greenhouse gas emissions. To reduce the initial capital cost relative to potential thermal sales, it was determined that the steam system would not attempt to connect other downtown area customers at this time. BED and VGS shared the cost of Ever-Green’s new Phase 1 analysis, with BED’s share coming from Thermal Energy and Process Fuel (TEPF) program funds available to support DES under new legislation passed by the Vermont Legislature in 2018 and 2019, the details of which are explained further below.
The results of the 2019 Phase 1 analysis were positive, and demonstrated that a district energy steam system could reduce thermal fossil fuel use at UVMMC by approximately half, while also significantly reducing the cost to build a system by more than half compared to the former model. This Ever-Green version of DES would be an approximately $16 million capital project, or $24 million less than the approximately $40 million prior DES model. The most cost-effective steam system would focus on providing renewable thermal energy of approximately 125,000 MMBTU annually 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) – to UVMMC.
As a result of this Phase 1 analysis, as well as earlier work, it was determined that adding University of Vermont (UVM) buildings or CityPlace Burlington and the downtown corridor at this time would add to the initial capital cost without providing enough additional energy service to be economical. Therefore, now, DES is moving forward with plans to focus on UVMMC. However, as part of a future system expansion, it could be possible to consider adding UVM buildings or otherwise expanding the system to include new customers and sources of thermal energy.
Based both on the progress made in the Ever-Green Phase 1 analysis and on the commitments of BED, VGS, and UVMMC to continue exploring and advancing a DES, the three partners have agreed for the first time to advance the work with Ever-Green to Phase 2. To formalize this step, BED, VGS, and UVMMC signed a letter agreement on February 3, 2020 outlining the roles and responsibilities of each party during the estimated four- to five-month DES Phase 2 process. BED and VGS have agreed to cost-share the Phase 2 Ever-Green work, which BED would fund through TEPF funds dedicated for this purpose.
HISTORY OF A BURLINGTON DES
Community stakeholders advocate for creating value from McNeil waste heat
The potential positive contributions of a DES in Burlington have been advocated for decades by a group of engaged community stakeholders. As far back as 1994, BED has studied and evaluated the district energy opportunity for Burlington. Feasibility studies were conducted and reports prepared for the City in 1994, 1996, 1998, and 2002 with little progress after the publication of those reports. Founded in 2007, BURDES has worked to move a Burlington district energy project forward through the development of both financial and technical feasibility studies for the downtown, UVMMC, UVM, and other Burlington customers. In 2014, BED, UVMMC, and UVM engaged Ever-Green Energy to complete a district energy feasibility study. The Ever-Green report concluded that, although the project was technically feasible, a number of other factors, including the low price of natural gas, made it infeasible at that time.
Mayor calls for one final effort to achieve a DES
In July 2014, Mayor Weinberger tasked BED with exploring one final effort to either find a way to move forward with the long-sought district energy plan or determine definitively that the effort was not feasible. BED, on behalf of the City of Burlington, worked closely with BURDES, UVMMC, and UVM to rigorously review previous studies and develop a comprehensive financial model to understand the economic issues. At that time the partners added the CityPlace Burlington redevelopment project with its projected new thermal load, as well as VGS with its extensive thermal experience, to the table. BED and its partners then sought an experienced outside partner to work with the City to explore models that would move a DES from conceptualization to design, building, financing, ownership, and operation by serving UVMMC, selected UVM buildings, CityPlace Burlington, and other Burlington customers using heat (in the form of hot water) from the McNeil biomass plant.
Corix Utilities selected as DES partner
In September 2016, the partners selected Corix Utilities, a privately held, community-focused corporation with international experience in providing utility infrastructure services, management, and products for municipal, institutional, military, and private-sector customers, to evaluate the structure and potential economics of a DES. Phase 1 of that effort involved a high-level economic and operational feasibility analysis for a DES.
A memorandum of understanding (MOU) between the City/BED and Corix detailing next steps, including the terms of the study and due diligence effort was signed. As noted in the Mayor’s September 28, 2016 announcement, the cost was shared evenly among BED and its key partners,including UVMMC, VGS, UVM, and CityPlace Burlington. Corix then worked with the partners and community organizations to evaluate and understand the technical and financial viability of a Burlington-based DES, including the optimal structure for implementation. The work under the MOU was completed by Corix, and a Phase 1 feasibility report was presented to potential DES customers and community stakeholders in July 2017. The report focused on a proposed hot water-based DES that would have extended both to the UVM and UVMMC campuses and the City’s downtown. The Corix study found this version of DES to be a cost-competitive heating option (at a high level) with a business as usual case, assuming customers partially or fully transitioned their existing thermal systems to DES and achieved significant capital and operating cost savings in the transition.
During the second half of 2017 and much of 2018, the BED team worked with its key partners and Corix to develop estimated customer costs to connect to the new system, and examined logistical and technical barriers to creating the system. Simultaneously, Corix developed a letter agreement for customers to consider, with terms and conditions for moving to a Phase 2 of DES scoping that would have involved performing detailed street-level engineering work, refining the system engineering and cost/rate estimates, and exploring and finalizing a regulatory-financing-ownership structure for the DES.
City of Burlington achieves favorable PUC ruling in support of DES
Also, during that same time period, the City of Burlington successfully sought a declaratory ruling from the Vermont Public Utility Commission (PUC) that the City could rate regulate a DES at the local level, similar to how the City of Montpelier manages its biomass DES. In addition, during the 2018 (Act 102) and 2019 (Act 31) legislative sessions, BED successfully sought changes to the TEPF program that it administers to allow funds to be designated to support a biomass DES and related feasibility work. Prior to these changes, TEPF funds could not be used for projects for customers heating with natural gas.
City relationship with Corix concludes
Despite the progress made during this period of time, the hard work of Corix and the local partners, and the general desire of our potential customers to be part of a DES, those customers did not agree to the terms of the letter agreement to move to Phase 2 for several reasons, including cost. By mid- to late-2018, further progress on this version of DES became unlikely and, by the end of 2018, the MOU with Corix officially ended, and the City relationship with Corix concluded.
Now, all partners are pleased to be taking this milestone step forward to Phase 2 of a district energy system.