Heat from the operation of diesel electric generators is a by-product that can be tapped and sold to buildings near power plants in many Arctic communities. The first such commercial operation started in Fort McPherson in 1995, with a business partnership between the Gwich'in Development Corporation and the Northwest Territories (NWT) Power Corporation.

Located north of the Arctic Circle, the community of 900 people was using individual oil-fired heating systems in their downtown buildings, with electricity being supplied by the NWT Power Corporation's reciprocating diesel engines located nearby.

A Company, Aadrii Ltd., was formed to manage the project. The district heating system was constructed to recover waste heat from the diesel generating plant and distribute it to five customers, including a school, a water treatment plant, a Tent and Canvas Shop, a community office and, on a seasonal basis, the community swimming pool. The customers were not required to make any capital contributions to the system and were not charged a connection fee.

The project has been successful in reducing the community's overall fuel requirements by 12%, and over the long term, will reduce electrical rates as a result of the additional revenue stream. The system was expanded in 1998 to provide heat to more customers.

System description

In 1997, the first full year of operation, the district heating system delivered approximately 1,715 MWh of heat, thereby displacing approximately 251,000 L of heating fuel. Due to the difference between peak electrical demand and peak heat demand, the system was not able to provide 100% of the customers' heating energy demand. Peak heating load is met by the customers' existing oil-fired boilers. The district heating system was designed to provide approximately 75% of the heating energy load.

The initial pricing strategy adopted by Aadrii Ltd. focused on providing some benefit to the customers in the first year, while at the same time allowing the majority of the energy savings to go towards recovering the capital costs. The heating rates charged to the customers are tied directly to the avoided cost of heating oil. The customer's avoided heating fuel cost is calculated given the prevailing cost of heating oil and the average annual efficiency of their oil-fired heating system.

Lessons learned

Potential district heating customers must be taught to understand and accept the district heating system and be prepared to assist in making the system work.

If space is not available inside an existing electric power plant, housing the heat exchangers and pumps will raise the project cost.

The presence of an interested local development group adds to the economic benefits of a small district heating system.

The big picture

More than 30 other locations in the NWT could be viable for the sale of heat, and would also see substantial reductions in community greenhouse gas emissions.

The community's heating fuel is supplied by the Government of the Northwest Territories Petroleum Products Division (PPD). PPD's pricing structures do not necessarily reflect the full cost of providing fuel to the customer. Developing waste heat recovery systems in conjunction with district heating is feasible; accounting for the full cost of providing fuel would make renewable energy and energy efficiency projects more attractive financially.

© Minister of Natural Resources Canada 1997-2009
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