Community aims to develop district heating project in Minnesota

By Erin Voegele | September 19, 2014

A proposed biomass-fueled district heating project in Grand Marais, Minnesota, is one step closer to reality with the recent publication of a Step II study. Construction could begin as soon as 2016 if state bonding is secured during the next bonding cycle.

According to Paul Nelson, co-chair of the biomass committee of the Cook County Local Energy Project, interest in the project first developed several years ago when the community was looking for a productive way to use slash wood. Located in the remote northeast corner of Minnesota, the community is at risk of forest fires. The Cook County Firewise Group, which Nelson is a member of, was educating the local populous on the wisdom of cleaning brush from around their homes as a way to help mitigate the potential for fire damage. 

The program was met with a lot of enthusiasm, Nelson said. As a result, huge piles of slash were created, which were stored in U.S. Forest Service gravel pits until the Forest Service burned them each fall. The local logging industry also creates a high volume of slash material, which is currently disposed of by burning.

“Combining that slash with the piles of slash burned on logging sites, we felt we might be able to find a more sensible use for that slash, burning it in a district heating system. We approached Cook County Local Energy Project, a local non-profit to help us get the necessary study funded and working,” Nelson said.

Cook County’s remote location along Lake Superior also means the community is not served by natural gas pipelines. Rather, much of the region is reliant upon fuel oil and propane for heating. Recent shortages and price spikes in those fuels has helped drive interest in the district heating project.

Nelson estimates more than 20 community hearings have been held for the project. While some local citizens initially opposed the district heating project, that opposition has faded. Rather, he said, many people at these meetings are now expressing interested in getting hooked up the system.

With the support of county funding, CCLEP contracted with FVB Energy in 2012 through the BioBusiness Alliance of Minnesota to conduct two-step process to study, refine, design and develop a plan for the project. The Step I study included a full feasibility study and additional technical, marketing and business studies. The Step II study includes the development of a schematic design and full business plan.

According to the Step II study, the plant would be located in the Cedar Grove Business Park, with a 6.8 million Btu per hour biomass boiler and additional propane boilers for peak and back-up needs. The project is expected to be owned by the Grand Marais Public Utilities Commission. Potential customers include the local hospital and schools, along with several hotels, government buildings, and other community facilities.

The project is expected to be financed in part with revenue bonds. The Step II study also indicates the project will also likely rely on grant funding and low-interest loans.

Nelson said the CCLEP was unable to get bids in on time for the project to be addressed in the 2014 bonding cycle. He attributes the delay in receiving bids to Minnesota’s current industrial boom. Before those delays were experienced, he said the project was well on its way to securing funding from two primary sources; half from state bonding and half from revenue bonds. “We will continue to follow that track so that we can be involved in the next round of state bonding. We are also researching some private foundation and other government support,” Nelson said. “In the event we secure funding in the 2016 bonding, we would be breaking ground in late 2016 or early 2017 with startup late that year.”

A full copy of the Part II study is available here