Northern Exposure

Many remote northern communities face energy challenges due to their location, weather and high fuel costs, but wood pellets offer an affordable source of reliable, on-demand heat.
By Anna Simet | August 22, 2012

Living in the Arctic—or close to it— isn’t for the weak-willed. Temperatures during the seven-month-plus winters can occasionally drop to 40 below zero, the sun’s appearance is sporadic for months at a time, road access can be severely limited, and for most towns, the closest neighboring community could be hundreds of miles away.

These are challenges that natives of northern communities have learned to deal with, but rising fuel costs are prompting them to find alternatives to their traditionally-used fossil fuels and methods of accessing them. In rural Alaska, which Thomas Deerfield, CEO of Dalson Energy Inc., describes as a completely different state than southeast Alaska, communities are at a point where paying $400 per ton of pellets is now competitive with heating oil, the most commonly used heating fuel. “Outside of the Anchorage bowl, natural gas isn’t available,” Deerfield says. “All of the rest of Alaska uses heating oil for thermal purposes, backed up by wood.”

A very limited road system throughout the Alaskan interior means most communities are located along rivers, and heating oil comes in once a year on barges. “There are big tank farms in most of these places, and there’s been an enormous amount of money put into these farms to upgrade them, because the old ones that were 20-30 years old were pretty decrepit,” Deerfield says.

Fuel shipments are made in the middle of the summer after spring run-off, and there’s a narrow window of time for delivery. “During spring run-off there’s too much ice and debris in the river, but it also has to be done before the river’s dropped too low in the summer, because then the barges can’t get through,” Deerfield explains.

 If the delivery window is missed, emergency shipments must be sent in at a high price. “Last January, it [a heating oil shortage] happened, and they had to send in a shipment in by Russian tanker, accompanied by a U.S. Coast Guard ice breaker.” That occurred in the town of Nome, Alaska, where 1.3 million gallons of diesel and gasoline were delivered after the last scheduled barge shipment of fuel supplies was cancelled due to bad weather. It took the delivery  team an entire month to get there in the winter.

In the worst cases, the fuel has to be flown in via cargo plane, which adds 50 cents to a dollar per gallon of fuel, according to Deerfield.

The prospect of shipping pellets upriver faces some of the aforementioned challenges, but is cost competitive—potentially cheaper—if certain parameters are right. It hasn’t yet, however, been done to any great degree. “A few communities closer to the coast by rivers have gotten some pellet deliveries, and it’s an emerging market because of its cost-competitiveness, especially with Canadian pellet production [expanding],” Deerfield says, adding that it’s initially only a couple hundred dollars a ton, but roughly doubles that by the time it reaches the interior.

There is a commercial pellet mill in the interior near Fairbanks, but it’s only producing at one-third of its 30,000-ton annual capacity, according to Deerfield. “The market wasn’t developed very well before the mill was built,” he says. “There are some residential markets for pellet stoves, but very little for institutional or commercial thermal systems or community-scale pellet mills.”

While shipping residential pellet stove equipment may be cost prohibitive in far northern areas, other attractive options include building minisize pellet mills or community-scale biomass energy systems in these towns, all of which could lower the cost in part by avoiding transportation challenges.

Surveying Potential

There are people who are interested in those concepts, but almost everything in Alaska is state or federally funded, according to Deerfield, and very few renewable energy projects are privately funded. “There’s a lot of interest in developing small pellet mills, but it’s been nothing more than talk for three or four years. That’s primarily because the state hasn’t stepped up to fund it, and no entrepreneurs are willing to do a cost share, which the state would likely be inclined to do.”

Along with a University of Alaska Southeast researcher and a colleague from Dalson Energy, Deerfield recently embarked on a 100-mile boat trip to visit communities up and down the Kuskokwim and Yukon Rivers. The team is working on feasibility studies for biomass thermal energy systems in the communities of Galena, Koyukuk, Nulato and Kalthe, and on the trip were assessing  the accuracy of satellite and aerial maps of forestry resources in and near these communities. Certain factors are carefully evaluated in these towns when the potential of a biomass thermal project exists, the main two being availability of resources and whether there is an existing forest industry. “Generally, the answer is not really,” Deerfield says. “There are a lot of these small, module mills that have been around for 30-40 years and people make house logs out of them, but that’s usually the extent of the timber or milling industry.”

The vast majority of potential projects in the north are thermal only, because electricity loads aren’t big enough in smaller communities. Most aren’t even 1 MW, often ranging from 300-500 kilowatts. “One place where we’re working on a feasibility study is the town of Tok, Alaska, for a combined-heat-and-power facility that is 2 to 4 MW scale,” Deerfield says. “The reason it might very well work there is because even though Tok is on the road system it’s not connected to any grid so all of its power comes from diesel and depending on a premium for that, they’re paying over $4 per gallon.”

That equates to about 50 cents per kilowatt-hour (kWh), the highest price amongst towns along the Alaska road system. In some rural villages, it is nearly double that, up to 90 cents. “You turn on a light bulb and you can practically count the dimes being spent,” Deerfield jokes. And that’s largely because of the piping, refining and shipping rigmarole Alaskan oil goes through to get to these communities—which includes being shipped to California or Washington, back up to Anchorage and then to its destination from one of three main ports on the south side of Alaska.

In an effort to further develop the use of biomass-based power and thermal, Deerfield and a committee are working with the state to develop a biomass energy policy that would follow the model of what New Hampshire has done: add a thermal element to a renewable portfolio standard. “We don’t have any biomass energy policy at all,” he says. “Alaska has been focused on oil, coal and gas forever; it’s what drives the economy here and the political horsepower in the state.”

Though the state has had a renewable energy fund for the past several years, only about 10 percent has gone toward biomass projects, according to Deerfield. “There’s a surprising amount of solar, and that’s because in the winter there may be less sun but there is enough reflection off the snow and ice to where you achieve greater returns than anyone expected.”

Though solar and wind are great addition’s to Alaska’s energy portfolio, Deerfield points out that they aren’t energy sources for on-demand power. “Certainly not demand heat, and biomass is the only thing that will meet that need,” he says, predicting that within the next two years, the state will see many more small and community or regional-scale pellet and briquette mills, as well as the development of transportation corridors up and down the rivers to carry densified wood products.

 To the east of Alaska in Canada's Northwest Territories, the use of wood pellets has, however, been growing steadily in both residential and industrial applications. Green Arctic Energy, a company that serves Yellowknife and other communities in the Northwest Territories, got into the business early and has not only made a name for itself in the region, the company has provided a glimpse of how and why wood pellets make sense in Alaska.

Leading the Way

Arctic Green Energy had been operating as a fiberglass company for 20 years when owner Bruce Elliot realized the cost of energy was getting too high. “We were paying about $44,000 a year for heat, and for a small company, that’s just too much,” he says.  After trying a number of different solutions that didn’t work out, Elliot contacted a nearby saw mill that was using a coal boiler for heat to see if he could initiate something similar at his company. “When I called, they asked me why I didn’t want to use wood pellets,” he says. “I bought a Canadian-made boiler and ran it for a year, but it wasn’t quite good enough because the efficiencies weren’t there and it was cheaply made,” he says.

Knowing he was on the right track, however, Elliot purchased a better-quality, Austrian-made boiler, and things turned around for the company. Soon after, it partnered up with the local jail to install a biomass heating system, which it has been operating and selling heat from for the past seven years. “We were basically one of the first companies in North America to do this; the whole [pellet boiler] industry in the north has expanded from that original idea,” he says.

Now installing boilers, doing energy contracting and delivering pellets, Arctic Green Energy has put in a proposal to the government to convert some Northwest Territory communities to local biomass. “It’s very isolated up here,” he says. “For a lot of these communities, just shipping oil to generate power can cost $1.47 per kWh. We could take the money saved and create a new industry from it.” To further validate the economic sensibility of utilizing wood pellets for heat and power, Bruce adds that he isn’t on an environmental mission. “I’m not a tree hugger; pellets just make financial sense.”

Author: Anna Simet
Contributions Editor, Biomass Magazine
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