1. Capital District Heating Project
A Partnership of the City of Montpelier and the
State of Vermont
June 8, 2011
2. District Heat --
Project History
Early 1990s – Montpelier Community Energy System
first conceived and discussed with City Council.
Late 1990s – Community Renewable Energy (CORE) ; a
collaboration of Chittenden County Regional Planning
Commission, Central Vermont Regional Planning
Commission and others work to develop and advance
the concept of district energy in Vermont.
2000/2001 -- CORE worked with City of Montpelier to collect
energy use information on buildings located in the Montpelier
downtown area.
A preliminary study of a district energy system was completed
by CANMET. The report found that community scale project
was feasible.
…
3. District Heat --
Project History, cont.
Also in 2000, the Montpelier City/State Commission completed the
Capital District Master Plan – district energy was one of ten key
elements identified in the plan.
2002 to 2004 – Three studies were carried out with funding from
the USDA Forest Service and the Department of Energy.
- 2003 – City of Montpelier votes a $250,000 bond for district
energy.
2005 to 2006 State of Vermont completes engineering studies of
the existing boiler plant. The first study analyzed the available
capacity; second study preliminary design and cost for
modernizing and expanding.
2006 – BERC with DOE funding updates the Montpelier downtown
building/energy survey of 2000.
…
4. District Heat --
Project History, cont.
2008 – BERC updates CANMET study, considers ‘Montpelier Only’
design.
- 2009 – Community re-votes the District Energy Bond
- 2010 – City of Montpelier awarded $8Million DOE Community
Renewable Energy grant.
5. District Heat --
What have been the goals of these studies?
To evaluate the feasibility of
• Use community-scale technology
• Replace fossil fuels with local biomass
• Use efficient, clean technology
• Harvest fuels with sustainable practices
15. Timeline
May 6, 2011 – Governor Signs Charter Change
May 19, 2011 – Draft Final EA – FONSI
May 20, 2011 – Governor Signs Capital Bill
June 14, 2011 - City Bond Vote
Summer 2011 - Preliminary Design of Plant and Distribution
System
Fall 2011 -
Final Design Heat Plant and Distribution System
Permitting Central Heat Plant
Order Major Equipment
Initiate Construction
2012 – Main construction period
Spring 2013 – Project Comes Online
16. Current Fuel Costs
Currently MHS & UES consume ~ 80,000 gallons of
fuel oil each year
Union Elementary School
Average Price Per
Fiscal Year Total Gallons Total Cost Gallon
FY11 to date 31,613 93,096 2.94
FY10 42,126 98,254 2.33
FY09 36,580 65,262 1.78
FY08 39,467 118,165 2.99
FY07 45,782 94,051 2.05
FY06 45,355 93,857 2.07
Montpelier High School
Average Price Per
Fiscal Year Total Gallons Total Cost Gallon
FY11 to date 30,005 86,927 2.90
FY10 40,515 94,096 2.32
FY09 36,653 64,662 1.76
FY08 28,709 89,760 3.13
FY07 25,510 48,165 1.89
FY06 41,807 84,883 2.03
FY12 Budget: UES = $108,264; MHS= $104,124
21. Crude oil is generally tracked as West Texas
Intermediate (WTI) or Cushing OK
Pricing of WTI, a commonly referenced ‘benchmark’ for fuel oil pricing
Harold Garabedian Energy & Environmental Analytics 21
22. WTI Pricing is variable , but follows a general increasing trend
Harold Garabedian Energy & Environmental Analytics 22
27. Comparison of actual oil prices paid to
forecasts
High Oil Case
City Hall Actual Reference
Case
“Moody’s”
EIA Actual
Low Oil Case
The actual price being paid for fuel oil is running ahead of EIA’s high
forecast Harold Garabedian Energy & Environmental Analytics 27
28. Paul Frederick , 2009 VT School Wood Chip Users Conference, February, 2008
29. Financial Impact:
• Among the 5 City and School Buildings an
estimated $300,000 is budgeted in FY12 to
purchase Fuel Oil
• The cost of Fuel Oil can only be expected to go
up in future years; the question is by how much?
• Based on price projections from EIA, the annual
cost to heat these 5 buildings in 2020 could
range from $372,000 to $632,000
• The Capital District Heating Project presents an
opportunity to stabilize costs, invest locally, improve
environmental quality and convert an operating
expense into a community investment
30. FUNDING SOURCES:
Federal Dept. of Energy $8.00 Million
State of Vermont Capital Bill $7.00 Million
Montpelier Bond/CEDF Loan $2.75 Million
CEDF Grant $1.00 Million
Total Cash $18.75 Million
State of Vermont “in kind” $1.20 Million
TOTAL project $19.95 Million
31. MUNICIPAL BOND/LOAN
Vermont Municipal Bond Bank $2.00 Million
Clean Energy Development Fund Loan $0.75 Million
(1% interest, repayment deferred until project is cash
positive)
TOTAL $2.75 Million
32. TWO PROJECTS IN ONE
STATE – Heating Plant Improvements and Expansion
$13.85 Million Cash
$1.20 Million In Kind
CITY – Distribution System $4.90 Million
Cash
Total $18.75 Million Cash
$19.95 Million overall
33. KEY FINANCIAL PARAMETERS
• City/School costs will consist of bond payment and wholesale
cost of biomass generated heat from the State.
• Annual expenses will fall within current annual City/School
expenses for oil heat. Will not require additional tax dollars
• Financial Projections do not include or rely upon potential
revenue from private customers. No speculation with regard to
future users.
• Revenues from future users will be set in reserve for future
capacity needs and/or distribution system expansion. Such
future costs should not come from tax dollars.
34. OPERATIONS
• Master Contract with state for rates, capacity and whole sale
purchase of thermal units
• City will resell heat to private customers using meters and
retail rates established to cover costs and future expansion.
• City already maintains subservice distribution systems with
metering and billing.
• City will engage firm with specific district heat expertise to
assist with system operation.
• Future option might include creation of separate utility or
independent non-profit to manage the system.
35. CONCERNS & CHALLENGES
• $18.75 Million in cash available for project, $1.2 million “in
kind”.
• Current combined estimates run as high as $19.7 to $20.5
with high contingencies and unknowns.
• MOU is complete but master contract is not.
• Impact of project overruns on scope and quality
• One project meets budget and the other doesn’t.
• Additional bonding for the city.
• Schools are key players but also high cost.
• Construction disruption.
36. ADDRESSING CONCERNS
• City and State engineers working cooperatively to develop
project within available funding.
• MOU discussions laid ground work for master contract. Many
topics have already been introduced and framed.
• Multiple opportunities to review estimates, internal funding
allocations and bid results. Will not proceed if it costs too
much.
• Cost of debt service on bond covered by current fuel costs,
should not preclude future bonding if desired. Council has
created committee to look at debt levels and policies. Annual
GF debt service to drop $88,000 (13%) over next five years.
• Potential alternatives for schools if necessary.
• All projects create disruption. Will be managed as tightly as
possible.
37. BIG DECISION!
Voting is on Tuesday, June 14th from 7:00 AM to 7:00
PM at City Hall
Absentee ballots available now
40. EIA --
Short-Term Energy Outlook
June 7, 2011 Release
(Next update July 12, 2011)
World benchmark crude oil prices reached their highest level of this year at the end of April, fell
by about 10 percent by May 9 and have changed very little since then. EIA still expects oil
markets to tighten through 2012 given projected world oil demand growth and slowing growth in
supply from countries that are not members of the Organization of the Petroleum Exporting
Countries (OPEC). The projected U.S. refiner crude oil average acquisition cost rises from $104
per barrel in 2011 to $108 per barrel in 2012, about the same as last month's Outlook.
