The bottom line sealed the deal for the city in cancelling its district energy heating system project before it was fully realized.
High costs of facility construction and the price tag associated with the work needed to re-furbish customer buildings to facilitate the heat — as well as creating connecting supply lines — derailed efforts to develop the district energy heating system in Nelson’s downtown, according to Nelson Hydro’s general manager.
“The City of Nelson aspires to achieve 100 per cent renewables by 2040, and the district energy concept was a desirable option to reduce greenhouse gases produced by heating from natural gas,” said Scott Spencer in a release from the city.
“Unfortunately, it isn’t an economically viable solution at this time.”
City manager Kevin Cormack noted that access to low-cost biomass was also “a project risk,” considering other larger-scale facilities in the region were creating a similar product, such as the REN Energy renewable natural gas facility in Fruitvale and Mercer’s biomass gasification project in Castlegar.
Cormack said in the press release that he was “happy there is potential that the private sector will step up to build these facilities in our area, and that has allowed us to step back and be a customer versus the developer. These facilities will help the region meet its greenhouse gas reduction goals and allow Nelson Hydro to focus on serving its customers.”
Around 10 years ago the city first started to investigate the creation of a centralized heat source to supply heat to multiple buildings in the downtown core.
Six years ago Nelson Hydro advanced the biomass plant project to the creation of a business case and preliminary design, but customer reception for the biomass project was characterized as “warm,” said the then Nelson Hydro manager, Alex Love.
Utilizing biomass from locally collected wood waste, the district energy system was expected to be a low carbon alternative to heating with natural gas. The district energy system proposed for Nelson was to use a central heating plant, an underground piping system that would transport heated water to buildings within the community, and energy transfer stations at each building that would transfer the heat from the water to the facility.
The central energy plant was projected to have a biomass boiler used wood waste from the local area as a fuel source. The system was for heat only and not electricity generation.
The full project had a capital cost of about $6 million, with a payback of 15 years or less based on a combination of financing rates, grant funding and customer connections.
However, several subsequent feasibility studies showed the potential greenhouse gas (GHG) reduction benefits did not offset the high cost estimates.
According to the city, other energy options were explored — like heat pumps that use lake water, geo-exchange and sewer waste heat — but proved either not obtainable or the cost was too high.
The cancellation slightly derails the city’s vision.
“Nelson Hydro will continue to monitor developments in district heating; however, its primary focus will continue to be providing low cost, reliable, renewable electricity,” said Spencer.