Youngstown Thermal fires up $75M clean-energy project

By Kalea hall

khall@vindy.com

YOUNGSTOWN

From the looks of it, the leaders at Youngstown Thermal have their work cut out for them.

In a few months, the company will lose Youngstown State University as a customer. And the city is looking at alternative options for heating.

Also, the public utility company’s chief executive has faced bankruptcy, civil lawsuits and tough competition.

He also is tasked with explaining why his energy plan is better than others.

All of this hasn’t stopped Carl Avers, Youngstown Thermal’s CEO, from dreaming of a future energy network with district heating, district cooling and micro-grid electricity throughout the city.

To him, this makes sense from an economic development standpoint.

“Low-cost utilities spur economic development,” Avers said.

The company is losing some customers, but it has gained some, too. These include the newly renovated Wick Tower apartments and extended-stay housing units, and The Vindicator.

“I have been in this business for 40 years, and I have seen many building owners and institutions decide they can save money by getting off the steam system,” Avers said. “They all come back.”

Avers argues that competition has brought concerns to his customers, but he said Youngstown Thermal is doing just fine and remains financially stable.

“Economics drive things at the end of the day,” he said. “Since my price is lower, I think I win at the end of the day.”

Also, other good news came last October: The company was selected as the site by the Department of Energy and Energy Industries of Ohio for the design, procurement, construction and testing of the prototype $75 million Advanced Ultra-SuperCritical Component – or AUSC – steam turbine and related components.

The project is in a pre-construction phase with ground expected to be broken in about a year. Once in place, testing will be completed at the site until at least 2020.

The project aims to run steam at higher temperatures and pressures with materials that can handle it to decrease emissions and increase efficiency.

“We couldn’t ask for a better host,” said Robert M. Purgert, president of Energy Industries of Ohio. “The company has been exceptional to work with. They have been very adaptive to the needs of our program. Having it land in our state is a real home run.”

DISTRICT ENERGY

A district energy network is a steam-utility service. At Youngstown Thermal, and other steam systems in the U.S., a fuel input of varying kinds is used for boiling water to create steam that travels through a pipeline to heat buildings. At Youngstown Thermal, 6 miles of underground pipe carry steam from the steam-plant production facility on North Avenue, where there are four boilers. The company’s pipeline of energy supplies 50 customers and 75 buildings.

Youngstown Thermal also offers district cooling through a central chiller system that sends chilled water to remove heat from the buildings on the energy system.

Customers on the system, or pipeline, include Huntington Bank, First National Bank, Eastern Gateway Community College, OH WOW!, 20 Federal Place, The Vindicator, Youngstown Business Incubator, International Towers and churches and industrial customers.

Avers considers his pipeline utility an overall moneymaker that could save major energy users $30 million a year.

The problem, however, is Youngstown has not fully embraced the system – yet.

“We are focused on downtown,” Avers said. “All of the buildings downtown will be on the system eventually.”

The goal is to get all of the central business district and the two local hospitals on the system in 2016. Putting the entire city on the system would cost millions, but Avers contends it is a system that pays itself off.

Cost savings, reliability and green energy are three advantages Avers tells potential customers the company offers.

The cost savings come from the use of a pipeline system. The pipeline eliminates the need for a building to have its own boilers, furnaces, chillers or air conditioners. The more customers on the system, the less expensive the resources from it are.

Youngstown Thermal conducted a case study on downtown high-rise buildings. Compared with energy costs at the Realty Tower, which is not on the system, Avers says Wick Tower will save $57,000 annually.

Dominic Marchionda, chief executive officer at NYO Property group, which operates both Realty Tower and Wick Tower, said he has seen a 20 percent to 25 percent cost savings at the Wick Tower compared with the buildings he has that run on electric and not district energy.

“We have definitely seen, in comparison to where we use electric, some significant cost savings,” he said.

The “green” aspect of Youngstown Thermal comes in part from the fuel used to make the energy. In 2012, Youngstown Thermal started to burn wood waste at its North Avenue plant to reduce emissions.

WORKING WITH THE ALTERNATIVE

Avers, a mechanical engineer, has spent his career in public utilities. He worked in San Diego and then moved to Nashville to head a district heating and cooling system.

“It was used as a principal economic-development tool by the then-mayor of Nashville,” Avers said.

The very-low energy costs led to more investment in downtown Nashville. It was also a way for Avers to see the potential in the district.

In 1980, Avers and business partners purchased the Youngstown steam system for $800,000 from Ohio Edison. The company invested $8 million to modernize the system.

The partners bought more systems in Philadelphia, Boston, Cleveland, St. Louis, Youngstown and Baltimore to fix and eventually sell.

Some of these systems were sold, but Avers and his partners still run the Detroit and Youngstown systems.

The dominant utility today is electricity, but Avers points to the alternative in the energy system.

“If you want to solve our energy problem you have to do things differently,” Avers said. “We are aligning ourselves with the new reality.”

The Youngstown Thermal system is one of the oldest out of thousands of U.S. systems. It has been in existence since 1895.

This year, the focus is on the $75 million project coming to Youngstown Thermal. In addition, the company continually works to increase its number of customers.

“It should help us get new customers,” Avers said of the project. “Everyone in town should be joining this.”

Youngstown Thermal continually stays focused on getting more customers in downtown for both its district heating and cooling services. Last year, the company started to offer micro-grid electricity.

A micro-grid is a local energy grid with control capability, according to the Department of Energy. A grid connects homes, businesses and other buildings to a central power source. The grid makes all of the connected structures affected when a repair is needed, which is where a micro-grid comes in. A micro-grid can break off the grid and operate on its own using local energy sources.

CONCERN

The city of Youngstown, which receives heat from Youngstown Thermal, has proposals under review for a new way to heat its buildings. The city uses Youngstown Thermal for heating services at City Hall, the police department, 20 Federal Place, the city hall annex, and the downtown fire station. It also would like to expand the services to the Covelli Centre on Front Street, the water department engineering office on West Boulevard and its wastewater treatment plant on Poland Avenue. The contract would be for 20 years with a proposed starting date of Sept. 1.

Two responses have been received: from Youngstown Thermal and from Brewer-Garrett Co. of Cleveland.

The city decided to look at other options because of concerns about whether Youngstown Thermal will remain viable after it loses YSU as a customer. The university makes up 60 percent of its business, but Avers says the new project coming to the site will be a much-larger customer for the business.

“We are just trying to do some due diligence to make sure the energy services being provided are the best for our structures,” Youngstown Mayor John A. McNally said. “We are also mindful of the fact that YSU will be switching off of Youngstown Thermal.”

YSU has looked at switching back to using a boiler plant it has for the past 20 years, said John Hyden, executive director of facilities at the university. Instead of purchasing steam, YSU will purchase natural gas and make its own steam.

“We are still in the process of installing equipment,” Hyden said.

The equipment includes three new boilers and the ancillary services to hook them up.

This summer, YSU’s contract with Youngstown Thermal will end and the university will begin using a new steam system. A $16 million steam system is under construction by Milwaukee-based Johnson Controls. It is expected to save the university $2 million a year. YSU’s own steam will be put into buildings July 1.

“We just feel that it will be in the best interest of the university in terms of ongoing utility costs,” Hyden explained. “It’s guaranteed savings.”

GRAND PLAN

Avers isn’t concerned about losing his biggest customer in Youngstown.

“I have a grand plan for Youngstown, and I am moving forward with or without YSU,” Avers said. “What we are trying to do is join industry, hospitals and universities and downtown areas into the same energy network for mutual economic benefit. The most-energy-efficient country in the world is Denmark, and I am basically bringing that business plan to Youngstown.”

Denmark’s homes are heated through one massive, efficient, shared boiler. In other European homes, homeowners use individual boilers.

In Denmark, wasted energy is captured and redistributed. A network of pipes under towns and cities collect heat from factories, incinerators, transport systems and combine it with heat generated from solar thermal energy plants, wind turbines, and conventional gas and coal power stations to produce a low-cost and efficient heat supply, according to The Guardian.

Denmark’s adjusted greenhouse-gas emissions have been reduced by more than 30 percent since 1990 and are expected to be reduced by 40 percent in 2020, according to the Danish Energy Agency.

The Danish government would like to coal eliminated completely from power generation by 2030; the country’s electricity and heat supply covered by renewable energy by 2035; and a society without fossil fuels by 2050.

Avers is focused on adding buildings to the Youngstown Thermal system and growing into what Denmark has.

A costly lawsuit is what drove Avers into bankruptcy, which he filed in 2013 in the U.S. Bankruptcy Court of the Western District of Pennsylvania. His listed assets were $0 to $50,000 and his listed liabilities were

$50 million to $100 million with 12 creditors with claims against Avers.

One claim, which Avers has disputed, is the costly $55 million lawsuit filed by Sigma Capital Group Inc. for failed projects entered into with Avers. That lawsuit has been settled.

His competition “fans the flames” that there’s financial difficulties, but Avers is strictly business, he says, with the goal of saving communities, businesses and organizations money.

“This is a new idea and people are afraid of new things, but it is my task to educate,” he said. “I wouldn’t be wasting my time if it wasn’t a good idea.”