As Concord loses its steam heat, Montpelier’s system charges ahead

As downtown prepares for life without Concord Steam, fans of a citywide energy source generated by a wood-fired plant are casting wistful glances up Interstate 89.

In Vermont’s capital city of Montpelier, a brand-new biomass plant is burning wood chips and pumping the resulting steam heat into the state capitol and other historic government buildings, and is selling heat to private buildings throughout downtown. It opened four years ago, replacing a system that was at least as outdated, inefficient and expensive as Concord Steam.

“The old state plant used cast-iron boilers, same thing they used to use on old locomotives. They would have lasted forever but were very, very inefficient and it was impossible to get them fixed,” said Dan McLoughlin, plant supervisor of District Heat Montpelier. “The state was looking to replace it and the city wanted the state to build a bigger plant so it could tie in.”

The result is smaller than Concord Steam, serving about 40 buildings with steam and hot water heat compared to 180 using steam in Concord, but it appears to be thriving. So why was Montpelier able to modernize its district heat system while Concord Steam, which has been around for seven decades, is set to shut down in June?

Many factors contributed to the difference, including different configurations of the existing system, Vermont’s push for biomass energy as part of an initiative called Net Zero Montpelier, and financing details (an $8 million federal Department of Energy grant was critical).

But as with so much in the energy industry these days, a big reason for the difference is natural gas. No pipelines reach central Vermont, so Montpelier’s utility doesn’t have to slash rates to keep customers.

“Montpelier doesn’t have to compete with gas. It’s a pretty different situation,” said Stephen Frink, assistant director of the Gas and Water Division of the state Public Utilities Commission, which regulates Concord Steam. Frink has worked with Concord Steam since the 1990s and says the need to compete with gas-fired furnaces has meant the company has never been able to charge customers as much as it needed to pay for upgrading a system which dates back to before World War II.

Frink saw this every time the company came to the PUC to get permission to establish new rates.

“When I first started, I wondered why they were even doing rate cases,” Frink said. “They never asked for as much as they would be allowed … because they were competing with gas rates.”

Even so, steam rates have been higher than natural gas rates, luring away customers and making it that much harder for the company to get the money to upgrade.

In 2003, says Frink, the company’s annual sales were 220 million pounds of steam; by 2015, that figure had fallen by more than one-third, to 128 million pounds.

“Every time somebody converted a building, built a new building or renovated a building, they went with natural gas,” said Frick.

His office is a perfect example. When the building that houses the PUC on South Fruit Street was renovated in 2007, it switched to gas even though the Concord Steam plant is barely 100 yards away.

Concord Steam is an example of what is known as district heating – creating heat in a plant and sending it to other buildings through underground pipes, usually in the form of steam or hot water. Such systems were once common in cities but have often been replaced by localized heating, in which buildings use separate furnaces (for hot-air heat) or boilers powered by electricity, fossil fuels or wood.

But district heating still exists – it is popular on university campuses in particular – and in some cases is thriving in downtowns, said Leonard Phillips, Director of Business Development for the International District Energy Association, based in Massachusetts.

He pointed to District Energy St. Paul, which heats some 30 million square feet of building space in the Minnesota capitol city through hot water, mostly by burning wood chips, waste wood and other biomass.

“We heat approximately 85 percent of the downtown corridor. In 1990 we added cooling and cool about 65 percent of downtown,” said Mike Ahern, senior vice president of the St. Paul operation.

Unlike Montpelier, St. Paul does face cost competition from heating by natural gas. The operation’s local ownership gives it a boost in keeping customers, Ahern said, as does technical inertia: It is expensive and time-consuming for a building with steam heat to switch to a gas-fired boiler, so many don’t even look into it.

Still, Ahern said, price competition exists. “Things can be tight,” he said. On the other hand, he added, the volatility of gas prices can work in his favor: “In 2008 we couldn’t connect customers fast enough because gas prices were so high.”

St. Paul District Heating has one more advantage. “In 2000 we added a 30-megawatt (generator). We sell that electricity to the grid,” he said.

Such a system, called co-generation, involves burning fuel to create electricity and using the waste heat from the generator to create stem or hot water for district heating, rather than burning the fuel to create the heat directly. There are technical advantages to this system but even more financial advantages, since electricity sales provide income even when heating isn’t needed, which it why it has become common in district heating, said Phillips of the IDEA.

Concord Steam generates a small amount of electricity on site but has wanted to switch to co-generation for years. It came closest in 2007 with plans to build a new plant for roughly $100 million, a plan that foundered as the Great Recession hit.

“They basically wanted to flip it. That (plant output) would have been 80 percent electric, 20 percent steam,” said Frink. “That would have reduced operating costs; that would have reduced their rates, they were forecasting reduction of 30 to 40 percent.

“They were unable to get the financing they needed, so it didn’t get built.”

Another technology that holds out hope for biomass district heating is gassification, said IDEA’s Phillips. This system turns woods chips into a synthetic gas and then creates heat by burning this gas. It is being used at the University of British Columbia in Vancouver, Canada.

A major advantage to gassification is that moving gasses around is easier than moving wood around.

“A lot of the machinery in this plant, in any wood chip plant, is just going to be machinery to move the material. That’s where most of your breakdowns are going to be, and most of our problems have been,” said McLoughlin, of District Heat Montpelier.

District Heat Montpelier is smaller than Concord Steam, handling about one-quarter as many customers and burning about 7,000 tons of chips a year, one-seventh the figure in Concord. This partly reflects the fact that Montpelier, the nation’s smallest state capitol, is only one-third the size of Concord, as well as the increased fuel efficiency of newer equipment and hot-water heat.

District Heat Montpelier system was built after years of discussion about how to replace the old district-heating plant that took place between the state and the city of Montpelier, which is even more dominated by state government than is Concord.

As in Concord, a complicating factor was the historic nature of state buildings. Steam heat was cutting-edge technology a century ago but its inefficient compared to transmitting heat via hot water, not to mention it’s more dangerous. “If you have a steam leak it can hurt people. If you have a hot water leak – well, you have a hot water leak,” McLoughlin said.

Vermont and New Hampshire would like to switch old state buildings from steam heat to hot water, but the idea makes historians and budget-writers shudder.

“Could you imagine tearing all the steam piping out of the capitol and replacing it? That would be very expensive and difficult,” said McLoughlin.

So Montpelier’s upgrade had to maintain steam heat. Concord faces the same issue: The state is planning to build a small, gas-fired power plant downtown to maintain steam heat in buildings around the capitol even as other state, city and private buildings switch away from that system.

Newer buildings don’t have this piping issue, so private buildings in Montpelier are being served by a hot-water loop.

In Montpelier the only realistic fuel alternative to wood was oil, which became unacceptable for environmental reasons, so a new wood-fired plant was was built onto the old plant, across the street from the capitol building. That is a much more downtown location than the Concord Steam plant, which worsens one drawback of wood heat: It takes a greater volume of chips than of fossil fuels to create heat. Downtown Montpelier has its share of traffic issues, so deliveries can be dicey.

“Trucks only deliver chips late in afternoon,” said McLoughlin. “We try to get just one load per day, and pile it in on Saturday so we can use it during the week.”

For money reasons, the Montpelier system was not built with co-generation – that is, it has no electricity production – although it did leave room for it.

“The new system was built with co-generation in mind. At a future point we’ll put in a steam turbine to generate electricity, use waste heat to heat buildings. We didn’t do that now because of cost,” said McLoughlin.

In the meantime, he’s happy to offer tours – for those interested in biomass engineering or perhaps just a bit of steam-heat nostalgia.

(David Brooks can be reached at 369-3313 or dbrooks@cmonitor.com or on Twitter @GraniteGeek.)