116 3rd St SE
Cedar Rapids, Iowa 52401
Home / News / Education / Higher Ed
University of Iowa looks at factory for making renewable fuel pellets
Public-private partnership would help UI get off coal
IOWA CITY — In its push to become coal-free by 2025 — or sooner — by adding more “green” to its energy palette, the University of Iowa is considering another public-private partnership, this one for the production of renewable fuel pellets to help generate power for its sprawling campus.
The university earlier this month issued a request for proposals from potential partners interested in collaborating on constructing a fuel pellet-production factory. The collaboration could manifest in one of two ways, according to the request:
The first option would be a public-private partnership — similar, in ways, to one the UI entered in March 2020 for the private operation of its utility system, which generates enough energy to power a town of 30,000 homes.
A new “renewable fuel services” public-private partnership — or P3, for short — would have the UI secure land to build a facility for the production of fuel pellets and a private partner operate it.
“The university would be the sole owner of the facility but may gather input from the supplier to design a facility,” according to the request.
A second option would be a “joint venture” in which the UI and a collaborator form a “third-party legal entity” allowing both to invest in and develop a facility capable of meeting the university’s fuel pellet needs while also potentially selling pellets to other buyers.
“The purpose behind this joint venture is to satisfy the university’s need for the fuel pellets,” UI Utilities Director Ben Fish told The Gazette. “A significant increase in fuel pellets is needed to offset reductions in coal use.”
The university in its request outlined eight required “characteristics” of a new fuel pellet-producing factory, including the ability to supply up to 65,000 tons a year “with seasonal fluctuation.” Currently, the UI uses about 30,000 tons a year through a contract to have pellets both manufactured and delivered.
“Although this relationship works well, the university is looking into the future and is interested in exploring alternative solutions that could minimize transportation costs and provide greater innovation,” according to the request.
'Tests are needed’
The campus since 2015 has been upping its capacity to farm giant miscanthus — a perennial grass that can grow up to 12 feet and be used as a renewable fuel source in the form of pellets. From its first commercial plot of 360 acres, the university has planted more than 1,200 acres in Eastern Iowa with the help of North Carolina-based AGgrow Tech.
The UI is on track to plant 2,500 acres capable of producing 22,500 tons of sustainable and renewable fuel — with each acre of grass displacing about four tons of coal.
Although the UI in 2017 set a goal of going coal-free by 2025, its new private utilities operator, ENGIE North America Inc. — in bidding for the 50-year contract as part of a UI Energy Collaborative — shared aspirations of accelerating that timeline to 2023, “two years ahead of target.”
“UI currently procures energy pellets from a facility in Wisconsin,” according to the collaborative’s 2019 bid. “In the long term, we understand that UI is also considering plans to open a local processing facility to reduce this overhead cost and further improve the carbon footprint (i.e. reduction in transportation emissions output) of this sustainable biomass supply. ENGIE looks forward to supporting this initiative.”
In a 2021 report checking in on sustainability goals the UI set in 2010, the campus reported 42 percent off its energy comes from renewable sources — exceeding its goal of 40 percent renewable energy consumption by 2020.
In addition to miscanthus grass as a renewable energy source, the report noted UI’s use of oat hulls through an agreement with Quaker Manufacturing. Introduced in 2003, that collaboration over the first decade replaced 183,000 tons of coal with oat hulls — saving about $7.6 million.
“The university is working with its P3 utility partner, ENGIE, to meet the university’s utility demand without burning coal,” Director Fish said. “Current test burns without coal have gone well and more test burns are scheduled.”
When asked whether the university could become coal-free by this year, Fish said, “Possibly, but continued tests are needed.”
'Flexibility and innovation’
Over the last five years, the UI has spent an average of $5 to $6 million a year on renewable fuels — including costs for the actual fuel sources, like pellets, and transporting them.
The university’s request for proposals to embark on either a P3 or joint venture for a fuel pellet factory doesn’t disclose suggested costs for building or operating the facility but asks potential partners to detail proposed fees for operation or investment structures.
The fee for operation should include personnel costs, profit, and price per ton of fuel produced and delivered to the UI.
“Provide a proposal for supply of fuel pellets to be provided above the current university volume of 30,000 tons per year,” according to the request. “Flexibility and innovation to ensure long-term successful operations are essential to the university.”
The UI, per the document, envisions a 10-year agreement with options to extend.
In addition to mandating the new factory produce 65,000 tons of pellets a year, UI officials offered a long list of fuel requirements, noting, “Regardless of the solution proposed, the quality of the pellets produced is of the utmost importance.”
The public-private partnership the UI entered into with the UI Energy Collaborative in 2020 involved the partner paying the university an upfront lump sum of $1.165 billion in exchange for the right to manage and operate its massive utility system for 50 years.
After paying off debts and bills, the university deposited $985.9 million into an endowment it plans to pull from annually to help supplement utility costs and offer grants that support the campus’ strategic goals.
As part of the deal, the UI must pay its new private operator an annual $35 million fixed fee plus costs to operate the system, maintain it and fuel it.
Just three years into the arrangement, the UI Energy Collaborative last month filed a federal lawsuit against the UI accusing it of “breaching its obligations” on several fronts — including by refusing to pay money it owes; rescinding approval to repair the system; and demanding payment for “unplanned” utility outages the private partner argues were planned in conjunction with UI representatives.
Responses to the university’s renewable fuel partnership request are due Feb. 28.
Vanessa Miller covers higher education for The Gazette.
Comments: (319) 339-3158; email@example.com