Item Description:
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Neg Agmt PR00006149 with ACES to sell the electricity from HERC into wholesale electricity market, 04/15/24-12/31/33, NTE $1,500,000
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Resolution:
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BE IT RESOLVED, that the County Administrator be authorized to negotiate Agreement PR00006149 with Alliance for Cooperative Energy Services Power Marketing (ACES) to offer the electrical output of the Hennepin Energy Recovery Center (HERC) into the Midcontinent Independent System Operators (MISO) market and to enter Hennepin Energy Recovery Center’s (HERC) electrical energy capacity into MISO capacity auctions from April 15, 2024 through December 31, 2033, with a not-to-exceed amount of $1,500,000, be approved; and that following review and approval of the County Attorney’s Office, the County Administrator be authorized to sign the Agreement on behalf of the county, and that the Controller be authorized to disburse funds as directed.
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Background:
The county owns and operates the HERC, which processes approximately 365,000 tons of trash each year. From the trash, HERC recovers metals and energy in the form of electricity and steam. HERC has produced enough electricity to power 25,000 homes for 34 years and has recovered 350,000 tons of metal. Selling HERC’s electricity provides revenues for the county’s natural resources and forestry programming, as well as waste reduction and recycling initiatives.
The county contracts for various services related to operate the HERC, including selling electricity. Currently, electricity generated by HERC is sold to Xcel Energy pursuant to a Power Purchase Agreement (PPA) executed in 1986. The PPA is scheduled to terminate on December 31, 2024.
To allow for continuity of service and operations, this contract will replace the expiring PPA. Starting January 1, 2025, the county will sell HERC’s electrical output into the wholesale electricity market instead of selling directly to Xcel Energy. This wholesale market is functionally controlled and operated by the MISO. ACES will assist the county in registering for market participation and offering HERC’s electrical output into the MISO market. ACES will also coordinate all MISO capacity auction activities and submittals for HERC.
This agreement will contain provisions that allow the county to terminate the contract early, in the event the State Legislature or county board closes the facility prior to December 31, 2033.
Counties are responsible for managing their solid waste systems in accordance with the state’s Waste Management Act, which establishes a waste management hierarchy (Minn. Stat. § 115A.02). The hierarchy prioritizes, in descending order of preference: reduce, reuse, recycle, organics recycling, waste-to-energy, landfill with gas recovery, and landfill without gas recovery. In 2022, Hennepin County residents and businesses generated approximately 1.27 million tons of waste, with 42% of this waste recycled or composted. The material that remained amounted to more than 750,000 tons that was managed as trash.
The county’s Zero Waste Plan defines zero waste as preventing 90% or more of all discarded materials from being landfilled or incinerated. In 2024, the county also developed a plan to reinvent the county’s solid waste system to accelerate the closure and repurposing of HERC. This plan established a zero-waste dashboard that defines the criteria to be met to responsibly repurpose HERC and identifies 22 policies that need to be adopted by the State Legislature to realize this zero-waste future.
Current Request:
This request seeks authorization to negotiate an agreement with ACES to offer the electrical output of the HERC into the MISO market and to enter HERC’s electrical energy capacity into MISO capacity auctions with a contract period from April 15, 2024 through December 31, 2033.
The Agreement with ACES will replace the PPA with Xcel Energy to sell HERC’s electrical output and capacity at market prices. The county will pay ACES approximately $1.5 million over the term of the agreement for its services. Revenue from electrical sales will come directly from MISO to the county, resulting in annual revenue estimated to be from $3 million to $5 million. In 2024, nearly $4 million of HERC electricity sales will be used to fund county natural resources and forestry programs.
Impact/Outcomes:
This request allows continuity of operations at the HERC while the county aggressively pursues zero-waste goals and state-mandated recycling rates, this action supports progress toward climate action goals, generates revenue for natural resources programming, keeps trash bills stable for residents and businesses, and provides more than 350 high-wage jobs.
recommendation
Recommendation from County Administrator: Recommend Approval