Council investigates sale of $1.7m plant
A $1.7m gas-to-electricity plant that city council managers have spent five years and millions of dollars struggling to make work as planned could be sold.
The plant is barely used for up to four months a year because it is cheaper to buy electricity in warmer months than run it on imported natural gas.
"Big Yell", a high-performance 2000kW Caterpillar gas engine bought five years ago, was meant to generate cheap electricity and heat from blended biogas at the Pukete sewage treatment plant. But Hamilton City Council is investigating selling or leasing the plant, and concedes it lacks the generation expertise to maximise its operation.
Co-generation plants produce electricity and heat, but after a series of problems since 2007, heat for the city's sewage treatment is still significantly reliant on its own boiler.
The Caterpillar's electricity generation is being deliberately limited because it is often cheaper to buy it.
Infrastructure general manager Chris Allen and city waters manager Tim Harty, in their response to questions from The Waikato Times, hailed the plant a success that was delivering "significant" cost savings to the council.
But while staff have struggled to make the "co-gen" plant viable, the cost to ratepayers has kept mounting.
Initial annual finance costs for the loan-funded engine were $320,000 for seven years, and operating costs of $972,000. The debt is now amalgamated with other civic debt but still costs $170,000 a year, and annual operating costs have hit $1.3m.
Due to "data availability issues" and pricing changes, council managers could not provide comparative energy costs for the previous co-gen plant.
But an independent review completed two years ago found the council would save hundreds of thousands each year by simply importing electricity.
That consultant in 2010 confirmed staff were still struggling to make the plant run on blended gas, and bio-gas production was being flared off.
The review recommended management instead use the bio-gas to power the site's boiler for heat, which it predicted would save about $300,000.
Figures Mr Allen provided to substantiate its success compare the current regime of part-time electricity generation and using bio-gas for the boiler, with importing all the sewage plant's electricity and natural gas for the boiler.
"Things do change, and they have changed over time, including energy pricing and the emissions trading scheme, but in general, the engine is still providing our electricity needs."
A non-binding heads of agreement has been signed with a Meridian Energy-owned company to explore sale and lease options for the plant, with a business case to come back before the council.
"They can bring expertise we don't have, we're wastewater treatment plant operators, we're not experts in electricity generation," Mr Allen said.
The project's major shortcoming has stemmed from the failure of efforts to blend biogas from the sewage treatment process with natural gas for the engine, despite a $600,000 "scrubbing" system to remove corrosive hydrogen sulphide. However, it has been plagued with problems: savings looked promising early on, until it was discovered that the gas supplier was only invoicing for half the gas used because of a metering error.
Management negotiated a settlement which significantly reduced the resulting bill, understood to have run to hundreds of thousands of dollars.
- © Fairfax NZ News
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