Large utility customers have outsized impact on Northland – Reuters

DULUTH — The activity or inactivity of some of Northland’s largest utility customers significantly shapes the systems that provide water, natural gas and electricity to all residents of the region.

Perhaps nowhere has that influence been clearer in the past year than in Duluth, where Verso Corp. – by far the biggest consumer of water in the city – stopped production at its local paper mill.

In 2019, the plant consumed an average of more than 3.7 million gallons of water per day, or more than 1.35 billion gallons per year, according to city records.

In 2021, the idle Duluth plant averaged just 351,982 gallons per day, or just under 128.5 million gallons for the full year. This represents a 90.5% reduction in usage, leaving the plant the second largest water customer in the city.

Verso Corp.’s Duluth paper mill, pictured July 9, 2020.

Tyler Schank/File/Duluth News Tribune

Eric Shaffer, chief engineer for Duluth’s water and gas departments, said Verso’s water bill dropped by about $1 million, which significantly slashed the utility’s budget. Meanwhile, a six-year plan to raise water rates across the city was intended to fund system upgrades, but Shaffer said many planned capital improvements had to be put on hold, given loss of income following the closure of the paper mill.

Fortunately, ST Paper has purchased the stationery and aims to restart it in modified form later this year.

top five water and gas.jpg

Gary Meader/Duluth News Tribune

This is good news for the Duluth water utility, but also for Minnesota Power, which counted Verso as one of its 21 largest electricity accounts. The company does not disclose more detailed information about its individual customers.

Frank Frederickson, Minnesota Power’s vice president of customer experience, said many of Minnesota Power’s large industrial customers are experiencing sometimes dramatic ups and downs in business.

He noted that Verso had produced supercalendered paper – a lightweight glossy paper widely used in catalogs and advertising flyers. But demand for this product has declined as more consumers turn to online shopping.

Now ST Paper plans to convert the mill to produce tissue paper, a product that remains in high demand.

Frederickson said other forest products companies in the region are responding to strong market opportunities, noting Minnesota Power’s recent work with Huber Engineered Woods, a company that hopes to soon open an oriented strand board plant in Cohasset.

“We’ve all seen the amount of construction that’s going on across the country and how important it is to have access to high-quality building materials,” he said.

Shaffer said demand for water in Duluth has gradually declined as the city continues to replace and repair leaky pipes and customers make progress on conservation.

Duluth Energy Systems.
Some of the pipes, valves and other equipment at the Duluth Energy Systems plant.

Steve Kuchera/Duluth News Tribune

Ever-Green Energy, which operates Duluth’s district heating and cooling system, including the steam plant, has been one of the top performers in improving efficiency and reducing consumption .

Ever-Green still ranks as the fourth-largest water user in Duluth, consuming 50.6 million gallons in 2021. But Terry Nanti, Ever-Green’s general manager of operations in Duluth, said usage had decreased by more than 20 million gallons compared to 2015.

He said there are two main developments that have enabled Ever-Green to reduce its water consumption so significantly. One of them was the fact that the steam plant no longer used coal as its main fuel. As it replaced more of its boilers with cleaner-burning natural gas, the plant had to grind much less coal. Nanti explained that the steam turbine mill used to grind this fuel accounted for a significant portion of the plant’s water bill.

Duluth Energy Systems.
The Duluth Energy Systems plant, located near Lake Avenue and I-35, serves 149 buildings totaling 6.45 million square feet in downtown Duluth.

Steve Kuchera/Duluth News Tribune

The other major change was the replacement of the old steam lines with a closed circuit hot water heating system — a project that coincided with the reconstruction of Superior Street.

With the old system, Nanti said, “All that steam that leaves the building never comes back.”

“But with the closed-loop hot water system, when we send the water out, it’s turned into useful energy in a building and then it goes straight back to the plant,” he said.

“With a hot water system, you can send the water out at 200 degrees and get it back at 160. So you’re only heating it to 40 degrees, ‘vs. steam’, where you get lake water at around 40 degrees and sending it 360 degrees. So you’re using a lot more energy and a lot more water,” Nanti said.

Duluth Energy Systems.
Large insulated pipes from Duluth Energy Systems are labeled according to what they carry and the direction of flow.

Steve Kuchera/Duluth News Tribune

Duluth’s largest water customer in 2021 was Hermantown, consuming more than 200 million gallons of water, followed by Proctor, which used more than 104 million gallons in the same year.

Shaffer said the city spends about $1 million annually on electricity to get water to its final destination, a process that often requires multiple pump runs.

“To pump those hills, you need a lot of power,” he said.

Where water use in Duluth has trended downward, natural gas use continues to increase slightly as additional customers continue to connect to the system, Shaffer said.

But the growing customer base is again moderated by conservation as people invest in high-efficiency furnaces.

The University of Minnesota Duluth is the city’s largest natural gas customer, consuming more than 2.8 million CCF (equivalent to 280 million cubic feet) of fuel. But the campus has been working to cut its bills, reducing its natural gas consumption by 7.4% from 2019 to 2021.

Currently, ME Global would actually surpass UMD as the city’s largest natural gas customer, but it does not source its fuel from Duluth. Instead, the Gary/New Duluth smelter directly purchases its own natural gas supply — about 3 million CCF (300 million cubic feet) per year — paying the city just to transport it.

ME is also one of Minnesota Power’s 21 largest customers. But Duluth customers represent less than a quarter of the company’s business.

mn power top 21.jpg

Gary Meader/Duluth News Tribune

Minnesota Power’s biggest customers are mining giants Iron Range US Steel Corp. and Cleveland-Cliffs Inc., together accounting for 54% of its total business in 2020.

Frederickson said mining has always been a cyclical industry that fluctuates with domestic and global demand for steel.

He said that despite the initial economic shock of the COVID-19 pandemic in 2020, “the steel industry has really rebounded quite strongly in 2021.” He cited recent strong consumer demand for durable goods, including major appliances and vehicles.

Fredrickson said Minnesota Power enjoys an unusually large base of industrial customers, compared to a greater reliance on residential and commercial customers whose power usage varies widely by time of day.

“Higher load factor customers who use power more continuously use the system a bit more efficiently,” he said.

mn power by class.jpg

Gary Meader/Duluth News Tribune

These large industrial customers often operate around the clock, and Frederickson said they help the utility make better use of wind assets because turbines typically generate more electricity at night than during the day.

“It’s the opposite of how a homeowner or small business uses energy. So businesses that use power at night are actually able to use wind power more efficiently, which is actually an improvement in the sustainability of the system as well,” Frederickson said.

Some large customers also have the option to upgrade to on-demand backup power systems, which allows Minnesota Power to control its system costs during peak periods.

“So we’re unique in that having this large industrial base and working with them helps reduce overall costs for customers,” Frederickson said.

Comments are closed.