Development of a renewable energy project is governed by circumstances specific to that site, and the reasons for building the generation are often just as unique. For the little town of Neligh (pop. 1,600) in northeastern Nebraska, renewable energy offered a creative path to avoiding high peak demand charges.
The city installed a 6.5 megawatt bio-diesel electric generation plant—one of a kind in the state—in 2012. The generation capacity allows Neligh to purchase economical electricity from outside entities while using the bio-diesel generators for peak electric demand and emergencies. Self-generation saves the city a wholesale electricity supplier demand charge.
“The bio-diesel generation has been a great savings for our community, and a safety net for Neligh and the surrounding communities,” commented former Mayor Jeri Anderson, who left office at the end of 2014. “Neligh can generate to help the capacity loads for other communities in emergency situations, and it is a great backup energy resource for us.”
Searching for solutions
For large electricity customers, demand charges—that fee your power provider adds to your bill for your highest energy use—can be notoriously tricky to control. Efficiency reduces the overall amount of energy a facility or community uses. However, an unexpected event like a large manufacturing order or extreme weather can cause the need for electricity to spike, and that need must be met. For years, Neligh bought expensive wholesale power to meet peak demand and emergencies, resulting in monthly supplier demand charges of around $50,000.
Besides reducing demand charges, the city also wanted to purchase low-cost “economy energy” from the Municipal Energy Agency of Nebraska (MEAN). Economy energy is the standby reserves that large generators always have on hand to meet sudden demand. To offset the cost of producing this energy, the generators sell it to various buyers on an hourly or day-by-day basis. Under the state Power Review Board (PRB) rules, a city may buy economy energy if it owns generation capable of producing 115 percent of its demand. Clearly, it was not difficult for Neligh to make a business case for building its own power plant.
Answer is green
The problem with that solution was that a private investor cannot own a generator in the all-public power state of Nebraska. Also, the PRB must approve all new generation, which places the burden on cities and villages to prove a verifiable need for additional generation. That is a difficult hurdle to clear in a state that has plenty of generation capacity.
A potential loop-hole opened several years ago, when a hog farmer installed a methane digester generator and petitioned the PRB to sell his excess power to Nebraska Public Power District . The board determined that since this energy was renewable—“green”—it was regulated by FERC, so the PRB had no authority to rule either way on the sale. “When I learned of the decision, I began researching green energy systems that Neligh could install,” said City Attorney Jim McNally.
A bio-diesel generator of less than 40 megawatts met the PRB’s criteria, and Neligh was issued a permit to build. Mayor Joe Hartz attributed the outcome to a strong relationship with NPPD and to cooperation between Neligh’s municipal utility, NPPD and MEAN. “That allowed us to provide the best of all worlds for our customers,” he said.
Logistically, economically feasible
The installation itself was a straightforward project, since the generators are conventional diesel equipment. It is the fuel—100-percent soy oil in Neligh, rather than fossil fuel—that qualifies the project as renewable. Only the rubber hoses had to be changed out on the four used Caterpillar generator sets. Because the fuel tends to jell when cold, the plant is housed in a heated building.
The city paid a little more than $3 million for the generators and some lightly used controls, financing the purchase on a 15-year bond. The power plant now qualifies Neligh to purchase economy energy from MEAN, but more importantly, having its own power supply has saved the city from paying demand charges. “In place of the $50,000-per-month demand charge, we have a monthly bond payment of about $17,000 for the equipment,” McNally explained. “The city nets around $30,000.00 a month in savings, or $300,000 annually after the bond payment. That is significant for a city of 1,600.”
The attorney added that Neligh’s new access to the economy energy market is what makes the renewable aspect of the project economically viable. “Wholesale power in Nebraska is less expensive than self-generation with either diesel or biodiesel,” McNally acknowledged.
Potential environmental regulations could change the equation, but McNally believes the bio-diesel generators will continue to be a net winner for the city budget. The little city of Neligh should not have any problems handling whatever the future holds. Volatile prices and new rules are no match for ingenuity and savvy planning.