Evaluating Options
Facing these problems, the Purcell
administration ordered a complete review of
the Thermal plant as part of an overall solid
waste management plan. The study to determine Thermal’s future, begun in July 2000,
focused on the evaluation of logical alternatives for the Thermal facility. The ultimate cost
of each Thermal option was included in the
analysis of Metro’s overall waste management
costs as well as Metro’s cost to continue producing and selling steam and chilled water for
its own buildings, either through district energy or other means.
The net cost of Thermal to Metro also
included the potential alternative uses of the
Thermal site, if it were no longer needed.
When the Thermal facility was built, it
replaced a variety of unsavory industrial uses
far from the heart of downtown. Over the
years, however, the downtown expanded to
engulf the facility’s site, and Thermal became
less acceptable as a neighbor. From an environmental perspective as well, the Thermal
location raised issues of odor, air quality, traffic
generation and aesthetics.
Three alternatives emerged from the
analysis of Thermal:
1. Continue using Thermal as a WTE facility,
or build a new WTE plant, providing steam
and chilled water;
2. Cease Thermal operations and replace it
with a new fossil fuel-based facility on a new
site to provide steam and chilled water; and
3. Cease Thermal operations and have each
building currently served be responsible for
its own heating and cooling services.
The option of continuing Thermal
included adding a transfer station to rationalize waste hauling and ascribed no value to
the property as a site for redevelopment. For
the fossil fuel option, Metro needed to find
alternative ways to dispose of its waste and
assumed out-of-county landfilling for this scenario. Under the cease-operations alternative,
customers were to be on their own after a
two-year transition period (2000-2002) allowing them to install their own equipment. It
was noted by the local utilities serving downtown Nashville, however, that replacing
Thermal with natural gas and electricity services
for what were then 39 new self-heating and -
cooling customers would prove logistically difficult; they made no guarantees about their
ability to accomplish required interconnection
upgrades nor the cost to do so.
Net present value analyses were run for
each of these energy alternatives. The least-cost option, continuing Thermal operations
with only a $15 million rehabilitation, was also
the highest-risk alternative, requiring Metro to
rely on a ‘
patched-up’ facility over the
long term. When
costs for solid waste
collection, processing
and disposal were
added into the analysis, the WTE alternative faded in value.
The analysis ultimately concluded that the
WTE plant resulted
in high-cost waste
disposal, undesirable
environmental
impacts, unacceptable constraints on
recycling and high
risk factors.
Before
Courtesy Metropolitan Government of Nashville and Davidson County.
The Nashville Thermal Transfer Corp. site before and after plant demolition.
After the plant was demolished in 2004, the site was cleared and is slated to
become the new home of Nashville’s AAA baseball team, the Sounds.
Self-Sufficient
New System
These factors
led the Purcell
administration to
decide to end
Thermal operations.
Keeping Thermal
operational didn’t
offer any long-term
savings to Metro,
and it posed the risk
of continued major
financial losses if
solid waste tonnages
fell short or equipment failed. As a result, the
Mayor’s solid waste plan called for phasing
out Thermal as soon as practicable; implementing a new district energy system, based
on natural gas firing and electrical use at a
site other than the existing Thermal site; and
long-term contracting for solid waste landfilling. It was estimated this solution would save
Metro almost $200 million over the next 20
years.
The goal for the new district energy system was to have it be financially self-sufficient
so there would be no cost for Metro over
and above the cost of heating and cooling its
own buildings. A related goal was to make
the pricing for steam and chilled water for all
customers less than the cost projected under
continued Thermal operations or through
self-heating and -cooling alternatives. In addition, the plan made available for redevelopment a choice, 11-acre riverfront property in
a key downtown location.
Metro saw this transition as an opportunity to get out of the business of publicly
providing heating and cooling services and
move toward finding a competent private-
After
Courtesy Metropolitan Government of Nashville and Davidson County.
sector partner for the system – either to sell
the system and just buy services for its buildings, or to maintain ownership and delegate
the construction and operations functions to
the private partner. To enlist the support and
participation of the existing customers in this
solution, Metro promised them that they
would be protected from uncontrolled price
increases and other perceived risks of system
privatization.
Because the procurement of a public-private redevelopment of a district energy system is uncommon in the United States,
Metro was wary about making procurement
choices without knowing the nature and proclivities of the private district energy system
development community. To address this
problem, Metro adopted a two-step procurement process with several opportunities for
feedback from the respondents and a great
deal of flexibility in its requirements.
The initial step included both a request
for expressions of interest (RFEI), which
sought answers to questions about the technical, business and contractual preferences of
the private bidders, and a request for qualifi-
