4. ECCSR 10-17-2007Lake Orono Dam Assessment Report
Prepared for
Elk River Municipal Utilities
Elk River, Minnesota
September 2007
4700 West 77th Street
Minneapolis, MN 55435
BAR R phone: (952) 832-2600
Fax: (952) 832-2601
1.0 Introduction
Elk River Municipal Utilities is considering redevelopment of hydroelectric generation at the Lake Orono
Dam project. The Lake Orono Dam formerly generated electricity. It has been reported that the
powerhouse formerly had two 150-KW generating systems. When the dam was rehabilitated in the early
1980s, all of the equipment was removed and the powerhouse intakes and outlets were filled with
concrete. Presently the dam impounds water that creates Lake Orono that is a valuable regional resource.
This report presents the results of a preliminary evaluation of issues related to redevelopment of
hydroelectric generation. Redevelopment of hydroelectric facilities requires an economically viable site
and careful attention to the permitting issues. The following sections present the results of preliminary
assessment of the following categories:
• Relicensing Process
• Assessment of Generation Capability
• Economic Factors
• Summary and Conclusion
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Based on our recent experience with the relicensing of a hydroelectric facility in Michigan, it is estimated
that the process could cost between $500,000 and $2,000,000. The actual costs will be highly dependent
upon the position of the stakeholders and the studies that are required.
Attached as Appendix 2-2 are the table of contents and some selected sections from a Draft License
Application for Minor Water Power Project, Minnesota Falls Hydroelectric Project, FERC Project No.
10336-00 and Initial Consultation Package Orienta Hydro Project FERC Project No. 10781-00.
The City of Granite Falls held the preliminary permit for the Minnesota Falls dam at the time the draft
license application was submitted. Dahlberg Light and Power Company was seeking the preliminary
permit when the initial consultation package was submitted. These two documents provide examples of
the level of effort that was required for these two projects and might represent the level of effort required
for the Lake Orono Dam.
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4.0 Economic Factors
Economic factors will be the overriding issue to determine the viability of the project. Development of
hydropower is capital intensive to license, permit, and build the project. Once the project is completed
and online, the ongoing operation and maintenance costs are minimal. Like wind power and landfill gas,
the fuel is essentially free. However, the availability of the fuel to run the plant is generally outside of the
Utilities' direct influence. The power plant would be run-of--river with a very narrow operating band on
the headwater. Once the project is constructed and operational, power will be generated when water is
available. Detailed costs for dam improvements and generating equipment have not been completed for
this report. However, previous assessment of the equipment was completed by Elk River Municipal
Utilities. Review of the costs indicates that they are on the low side. Based on our initial assessment of
the project, we have developed a cost summary that is presented as Table 4-1 below. Values that were
included in the ERMU cost estimate were based on the Engineering New Record (ENR) cost indices from
2000 to present. The cost of the turbine generator, electric feeder, switchgear, and to modify the
discharge and riprap were increased for the upper bound value based on a ratio of the highest generation
capacity/lowest generation capacity. Engineering was assumed to be 8% of construction. A contingency
of 25% was added to the estimated total cost of permitting and construction.
Table 4-1
Cost Summary
Estimated Cost
Item Description Lower Bound Upper Bound
Permitting 1 Preliminary Filing to FERC $20,000 $50,000
2 Engineering Through RFQ $150,000 $250,000
3 Environmental Studies $500,000 `* $2,000,000
4 Follow-up Studies $80,000 $150,000
Subtotal Permitting $750,000 $2,450,000
Construction 5 Trash Racks " $25,000 $38,000
6 Clear Draft Tube " $65,000 $100,000
7 Modify Deck $30,000 $50,000
8 Modify Discharge and Riprap $95,000 $210,000
9 Turbine Generator $125,000 $280,000
10 Electric Feeder $30,000 $70,000
11 Switch Gear $30,000 $70,000
12 Engineering & Inspection (8%) $32,000 $65,000
Subtotal Construction Cost $432,000 $883,000
Subtotal $1,182,000 $3,333,000
Contingency (25%) $295,000 $833,000
Total $1,477,000 $4,166,000
* Source of cost is ERMU Cost Estimate 1/18/00
''* Estimated to be in the range of
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5.0 Summary and Conclusion
Redevelopment of the Lake Orono Dam is dependent upon the requirements of state, federal, and local
agencies, the cost of studies and construction, and the revenue the project can develop as well as the
desire of the Elk River Municipal Utilities to redevelop the project. While the current sentiment is for
renewable energy, regulations of water-based structures including dams and hydroelectric activities can
be a detriment in the process. Two hydroelectric projects are currently in process for development in the
city of Minneapolis. One is the Crown Mill site, located on the right bank adjacent to the St. Anthony
Falls, Upper Lock and the other is the Lower St. Anthony Falls site, located on the left bank and to the
left of the Lower St. Anthony Falls Lock and Dam. Both sites are located on the Mississippi River.
Water rights differ between the two sites that will impact the volume of water that is available for
generation. The upper Crown site has about 50 feet of head while the lower St. Anthony Falls site has
about 25 feet of head. Neither site has an existing powerhouse or any other generation equipment.
Development within the city of Minneapolis can be challenging, the Crown site has been in the
development process for over a decade and the lower dam site has been idle since 1985 when the dam
failed. These sites have favorable head (50 feet and 25 feet) and flow but still remain undeveloped-
indicating the difficultly with the overall process.
Development of Lake Orono for hydroelectric generation will be costly and may not have favorable
economic factors. A preliminary net present worth of the annual revenue from generation ranges from
$500,000 to $1,000,000 using an annual interest rate of 5% for a period of 20 years, and $600,000 to
$1,370,000 for a period of 40 years. The range of estimated costs to permit and construct the project is
$1,477,000 to $4,166,000. This initial cost estimate and assessment of revenue shows that the project will
not provide a 20-year return on investment. These revenues and costs are highly variable and may change
over time. The revenue/cost comparisons are meant to provide an order-of-magnitude comparison. If
hydroelectric development at the Lake Orono Dam remains of interest to Elk River Municipal Utilities,
the following are recommended:
• Send a letter to the local, state, and federal stakeholders seeking their input regarding
development of hydropower at the Lake Orono Dam.
• Complete a Phase 1 inspection to determine the condition of the facilities and suitability for
development.
• Refine the selection of the turbine generator capacity/output.
• Evaluate optional turbine generator supplies to better determine cost and required site
modifications.
• Revise the economic assessment to consider the revenue per Kw-hr and an annual interest rate for
the capital expenditures.
• Reassess the estimated cost and revenue.
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