Harnessing the power of barley

A company that's an integral link in the beer brewing chain teaming up with an Indian tribe to build a power plant fueled by barley hulls?

It might seem an unlikely partnership. But together, Rahr Malting Co. of Shakopee and the Shakopee Mdewakanton Sioux Community hope to cure their fossil fuel headaches, and help the environment while they're at it.

Rahr and the tribe have announced plans for an eco-friendly, $40 million power plant that would generate 15 megawatts of electricity and 125 million BTU of heat per hour -- enough heat and electricity to run Rahr's malting operation, and then some.

Construction could begin as early as this fall, with power flowing by December of 2007.

Why would a 159-year-old, family-owned business in Shakopee want to generate its own biomass power? Easy, said Rahr Malting chief operating officer Bob Micheletti.

"The price of natural gas," he said, "is through the roof."

The malting process requires an enormous amount of heat, and Micheletti said that the company's natural gas costs have tripled in the past three years.

According to the federal Energy Information Administration, the average industrial price of natural gas rose from $3.12 per thousand cubic feet in 1999 to $8.47 in 2005.

Locked into long-term contracts with many of its main customers -- including brewers such as Anheuser-Busch, Miller, and Summit -- Rahr pays through the nose for every spike in energy prices.

"The reason we're doing this is not because we want to go into the energy business," Micheletti said. "We're doing this so we can retain 100 jobs here and keep this plant operating."

A natural fit

Rahr's business -- turning barley into the malt that brewers use to make beer -- uniquely suits the company to generating its own renewable energy.

The malting operation runs 24/7, which means that the power plant supplying it could generate electricity as steadily as a coal-fired or nuclear plant. That is an advantage that sets it apart from many renewable energy projects, such as those powered by wind.

Plus, Rahr already produces a third of the fuel that the power plant would need. The company makes enough malt each year for close to 30 million barrels of beer. That's about 7.5 billion pints.

"If you planted barley on every square inch of Hennepin County, that's about how much barley we use in a year," said Paul Kramer, Rahr's vice president of malt operations. The malting process produces tons of natural waste products -- barley hulls, chaff dust, and weed particles -- that the company now sells as low-grade animal feed but could use to fuel the plant.

Rahr plans to buy the remainder of the fuel it needs from grain elevators and other agricultural businesses within 50 miles of its plant. Down the road, the company hopes to entice local farmers to plant biomass crops such as switchgrass for the plant, especially in areas along the Minnesota River where, because of erosion from agriculture, farmers have lost traditional crops such as soybeans to flooding.

Tribe is an eager buyer

For the tribe, the power plant could be a step toward energy self-sufficiency. Hoping to generate its own power, it has set up a tribal utility commission.

"We are a sovereign nation, and we believe in sustainability and controlling our own future," said tribal administrator Bill Rudnicki.

Kramer said that the partnership was essential to getting the project off the ground.

To make it work Rahr had to find a buyer willing to pay a reasonable price for the power it didn't need, and Rahr couldn't find a utility willing to commit in the project's early stages, Kramer said.

Then the tribe, he said, "came forward and said, 'We'll take what energy you don't take.' "

Rahr and the tribe formed Koda Energy to build and operate the power plant, with the tribe as the majority owner. In the Dakota Language, "koda" means "friend." Rahr will use the heat, and Rahr and the tribe will share the electricity.

Rudnicki said that the tribe may use its portion to run some of its enterprises, including Mystic Lake Casino, which is seven miles from Rahr's malting plant.

"It's so unique to be able to partner with an organization like Rahr that's essentially in our back yard," he said.

Xcel may also partake

Both parties also are exploring the option of selling electricity.

Xcel Energy is interested in being a customer, but Koda has not completed final engineering reports that would enable it to set a price on its electricity, said Betsy Engelking, who manages resource planning and bidding for Xcel.

"Until they know," she said, "we can't discuss a power purchase contract." Engelking said Xcel is "very excited about the prospect of getting some stable-price renewable energy that could be delivered around the clock to us." The biomass project could help Xcel meet a state mandate to buy 10 percent of its energy from renewable sources by 2015.

Koda is still in the process of securing permits for the plant from the state and the city of Shakopee, as well as contracting with biomass fuel suppliers. Koda must also work with the state and Xcel Energy to get around regulations that prevent independent power producers from selling energy to customers other than utilities. Kramer said that the parties reached a tentative agreement last week.

Overall, Kramer said, the project has generated more praise than controversy.

"There isn't any reason anybody in their right mind would say this shouldn't be built," he said.

Edward Garvey, deputy commissioner for energy and telecommunications at the Minnesota Department of Commerce, said that Koda is on the vanguard of renewable energy projects that his office hopes to foster in Minnesota.

"It's not being run by any kind of legislative mandate," Garvey said. "It's being driven by business and its own economic value, and those are exactly the kind of projects that we're excited to see."