Should the city fund a municipal utility that relies on solar, wind, biomass and other unconventional techniques?
Southwest City Councilmembers Scott Benson (11th Ward) and Lisa Goodman (7th Ward) are kicking around ways to put renewable energy higher on the city's priority list in their new four-year term.
At this point, their plan is more concept than concrete. But for starters, the two Councilmembers, re-elected Nov. 8, say they would like to recast the current Health Committee as the Health, Energy and Environment Committee. That would give it a clear charge to tackle the issue, they say.
In the election run-up, Goodman has even talked about creating a municipal utility, prompted in part by electrical interruptions in her ward during the past year (SW Journal, Aug. 1-14). She believes Xcel Energy, the Minneapolis-based private company that provides electricity citywide, has not done enough to develop alternative energy, a contention the utility disputes.
“We have to lead,” Goodman said. “Government can't just say, ‘Private sector, you do it.'”
The term “municipal utility” could be a hot button for Xcel.
The state has 127 municipal utilities, wherein the local government owns and runs the utility, just like Minneapolis operates garbage and recycling business.
Benson said he didn't want to take over Xcel's system. But if the state's municipal utility law would allow Minneapolis to own its own small-scale alternative energy plants, whether solar, wind or hydro, he thinks the city should pursue it.
“For security reasons, and given the vulnerability of the grid, I think it makes sense for the city to have generation sources right in the city,” he said.
The municipal utility law would allow the city to issue revenue bonds outside the city's bonding limits, he said.
Dan Pfieffer, Xcel's manager of community and local government relations, said Xcel has neither problems with its grid nor an electrical-capacity shortage. The system had built-in redundancies. Southwest did not have an unusual number of problems compared to the rest of the system, he said.
The company has some of the strongest energy conservation programs in the nation, Pfieffer added. Further, Minneapolis is a leading area wherein customers pay extra to support wind-generated electricity, with more than 4,000 participants.
Xcel has spent millions of dollars in Minneapolis to improve the grid, he noted. The outages experienced in Southwest were weather-related, Pfieffer said. Either trees blew down on power lines or hot weather put a high load on the system, and fuses blew.
Pfieffer said he knew Minneapolis officials were interested in doing more with alternative energy. “We are more than willing to come to the table and see where their interests lie,” he said.
Goodman said it is unclear whether or not Minneapolis would need to change its city charter so it could own a solar, biomass or wind energy plant.
Benson added that it's unclear whether the city would need a state law change to operate alternative energy plants. The city would need to hire outside utility law experts to understand its options.
The city also has a franchise agreement with Xcel that gives the utility the exclusive right to provide electricity in the city. In 2004, Xcel paid $12.9 million to Minneapolis as part of that deal. (Xcel charges the fee back to customers on their electric bills.)
The franchise agreement runs to 2014. Asked if the agreement would preclude Minneapolis from pursing independent alternative energy plants on its own, Pfieffer sidestepped the question. “We would always be interested in having the conversation,” he said.
The model is not without precedent. The Hennepin Energy Recovery Center - better known as the downtown garbage burner - sells electricity back to Xcel.
Steve Downer, associate executive director of the Minnesota Municipal Utility Association, said the cities of St. Cloud and Hastings own hydroelectric plants and sell power to Xcel, short of operating their own utility distribution system.
Pfieffer said such arrangements have to have a power purchase agreement and get approvals from the state Public Utility Commission. Such plans are reviewed to see if they are environmentally sound and cost-competitive, he said.
What are the options?
Downtown resident Michael Krause, former executive director of the Minneapolis-based Green Institute, refers to Xcel's efforts to promote alternative energy as “a good start.”
He has floated the idea of using city revenue bonds to install solar panels on 1,000 city homes. The value of the power generated would more than pay off the bonds in 20 years, according to his calculation. It would make the city more energy self-reliant in case of massive outages. It could produce city power, and do it in a less environmentally damaging way.
The 1,000-home solar panel model would generate 4 megawatts and cost approximately $34 million for a high-quality system with converters. With bulk discounts in purchasing and contracting, and state and federal rebates for solar power - if money is available - the cost would drop to $15 million, or $15,000 per home.
At the current 8.6 cents per kilowatt hour that Xcel charges, the system should pay for itself in less than 15 years, Krause said.
It could be part of a broader effort to create city alternative energy capacity, he said. The city could choose to do a much smaller test.
Xcel's Pfieffer said the alternative energy would help in the event of a massive outage only if it were connected directly to an individual building or buildings. If the power instead feeds Xcel's grid, it would not help in an outage because it is all connected in a network.
Krause calls the plan a long-term project to build local energy self-reliance. “The idea is, you would take and build these systems across the city, and do them in lots of locations,” he said.
Krause recently created a new consulting firm to work on alternative energy and green building issues (see sidebar). The company does not plan to push a municipal utility, but Krause said he would like to work on the issue as a volunteer.
“The first goal with the municipal utility would be to sit down and say, “OK, what does the city want its energy use profile to look like 20 years from now, or 30 years,” he said. “What kind of power sources do we want? How much renewable? What kind of reliability?”
Wind, water and waste wood
Where else might the city turn for alternative energy?
Benson said the only Minneapolis spot he's heard about to support a wind turbine generator is a Northeast Minneapolis ridge, near I-35W before one gets to Highway 36.
“That has been Xcel's frustration,” the Councilmember noted. “Where the wind blows is not where the people are.”
Crown Hydro has proposed building a 3.2-megawatt generator, enough to power approximately 3,200 homes, on the downtown riverfront. It would be located in Mill Ruins Park and require support from the Minneapolis Park and Recreation Board, which has not been forthcoming.
Riverfront neighbors opposed Crown Hydro for aesthetic and financial reasons. Benson said he supported the hydro project and would again. A smaller and less controversial hydroelectric project is also planned for the lower St. Anthony Falls lock, Benson added.
The Green Institute and the Phillips Community Energy Cooperative are working on a 20-plus megawatt biomass plant in the southeast corner of the Phillips neighborhood, enough to power approximately 20,000 homes.
It would burn clean waste wood, such as diseased trees or waste lumber from construction sites and demolitions, and some agricultural products, such as corn stalks and oat hulls, said Carl Nelson, community energy program director for the Institute.
It has many hurdles yet to clear. The Institute has secured nearly $2.5 million for the $50 million project. The Institute is still evaluating whether it has a predictable fuel supply to support the proposed size. It still needs to raise money and get a power purchase agreement with Great River Energy, so that it has a guaranteed revenue stream.
The Green Institute plans to make a proposal to the Great River Energy Board next spring, Nelson said. If construction, permitting and agreements all went smoothly, the earliest the project could go online is late 2008 or early 2009, he said.