What are we going into debt for? $21 million for a “Greener” 80-year-old Duluth steam plant

Duluth Steam Plant via Duluth Energy Systems


The city of Duluth wants to convert its 1930’s coal-fired steam plant to a hot-water system fueled by wood and later renewable energy sources, with the help of a private for-profit company, Ever-Green Energy.  But rather than come up with local money for the project, they’ve asked state taxpayers to foot part of the bill with a $21 million bonding request.  Last week, Governor Dayton unveiled his monster $1.4 billion borrowing proposal, which has been branded as a “Jobs Bill”, and many Duluth-area projects made the cut, including the full $21 million request for the green-steam plant conversion.

The city of Duluth has two lobbyists at the state Capitol to help the dollars pass the legislature when it reconvenes in March.   The $21 million from state taxpayers would only cover part of the cost for the plant conversion, with the project estimate ranging from $40.2-$52.3 million according to planning documents.  Duluth is unique, and like St. Paul, wants to maintain an “energy district”– essentially a centralized plant to provide heating and across a downtown area, rather than individual systems, paid for by individual businesses. Rather than let go of the antiquated system, Duluth seeks to “go green” and it will take a lot of taxpayer green make it happen.

Last week, according to The Duluth News Tribune, Duluth City Councilor Jay Fosle questioned the city’s ability to come up the rest of the money for the project saying “I will not support this $21 million without the full plan and money in place.”  He further questioned the benefit to taxpayers,  “I disagree wholeheartedly because of the fact that this is only going to benefit maybe a hundred businesses downtown or buildings that could go on their own heating source. The entire city of Duluth will have to pay these bills back, and not just those 100 businesses or building.”  But Fosle was the lone dissenting voice, and the council voted 8-1 to support the bonding request.

Councilor Joel Sipress applauded the project, “This is going to be good for our downtown businesses. It’s going to be good for our infrastructure. And it’s going to be good for the planet, because it’s going to make a significant contribution to reducing carbon emissions in our city.”The city plans to tear up Superior Street for improvements in 2017 and wants to coordinate the projects.

Steam energy is pretty clean energy, with the city of Duluth pumping water out of nearby Lake Superior for decades to heat the downtown area.  About 2,000 buildings in New York City still use steam heat from a central plant.  There’s just one problem, it’s produced by burning coal, which the Obama administration and climate-change activists have labeled as a 21’s century no-no.  So the plan is to dump that fossil fuel and follow the city of St. Paul’s lead by burning wood to make hot water instead of hot steam.  This new upgrade will also recycle the water, resulting in less water pumped out of the Great Lake.

The city spent $4.3 million on the existing plant just nine years ago, to improve efficiency.  That project included investment in the coal pulverizers  and repaired the smokestack.  At the time, the city said that “coal is tough to beat” and that it would be too expensive to burn wood biomass according to the Duluth News Tribune.

The steam plant is owned by the city of Duluth, but managed and operated by for-profit private company Ever-Green Energy, out of St. Paul.  The city pays a $20,600 monthly consulting fee to the company, and paid $130,000 in June of 2012 to develop a 5-year plan for the steam plant.  In addition, the city reimburses Ever-Green for expenses to run the operation, approximately $7 million per year per the most recent city budget which also showed the city losing $530,700 annually on the operation.  Businesses in downtown Duluth pay for the heat gained from the district energy operation.

Ever-green is for profit, but is a wholly owned subsidiary of non-profit District Energy of St. Paul according to a company spokesperson.  District Energy St. Paul and District Cooling, St. Paul which together brought in $31 million in revenues in 2014.

Ever-green operates North America’s largest hot water district energy system in St. Paul and the nation’s largest wood-fired combined heat and power plant, according to the company.  The spokesperson shared that as the company sought to replicate the success of the public-private partnership in St. Paul, it created Ever-Green approximately fifteen years ago.  Ever-Green has its own lobbyists at the capitol to support the Duluth bonding request.

The company’s CEO, Ken Smith, will speak at a Climate change conference later this month, being sponsored by more of your tax dollars via the Met Council, various state agencies, and the University of Minnesota.  Smith was also chosen by Governor Dayton to take a trip to 10-day trade trip to Germany, Sweden, and Norway in 2013.

The idea of “District Energy” is promoted by the United Nations and St. Paul’s district-style heating and cooling was featured by the UN in a recent report “Unlocking the Full Potential of Energy Efficiency and Renewable Energy, which they touted on their website.

The motivation to change over the steam plant from coal is environmentally based, and the current manager of Duluth Energy Systems has acknowledged it’s not the most cost effective move. “Instead of using the lowest cost fuel, which is typically not the greenest fuel, we would have money to be able to use for cleaner fuel whether that’s some sort of renewable like biomass or more natural gas,” Duluth Energy Systems manager Jim Green told Northland News.   Green also told radio show “Green Visions” in May “the thing that’s really exciting to me is, let’s say that the customers paid exactly for the same for their energy as they pay today, what that would allow is for us to go to a cleaner — admittedly more expensive fuel– but a cleaner fuel.”

The new plant “will displace between 15-25% of the current fossil fuel mix by co-firing woody biomass, derived from local sources” according to Ever-Green.  The project has already been awarded a $150,000 taxpayer grant from the Minnesota Department of Agriculture for planning, despite no secured funding.