Pre-feasibility comparison of the economic efficiency of a new district heating plant with 4.9 MW p fired with natural gas or solid biomass

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1 Pre-feasibility comparison of the economic efficiency of a new district heating plant with 4.9 MW p fired with natural gas or solid biomass Horizon 2020 Coordination and Support Action number : Bioenergy4Business A project for the uptake of solid biofuels in promising European heat market segments Deliverable No. Dissemination Level Partner Name Work Package Status D5.11 (2 nd model feasibility study) Public Austrian Energy Agency WP5 Capacity building activities targeting main stakeholder groups Final Version Task 5.4 Author Herbert Tretter (Austrian Energy Agency) Client European Commission Innovation and Networks Executive Agency (INEA) Horizon 2020, LCE-14, 2014 Date

2 LEGAL DISCLAIMER This project has received funding from the European Union s Horizon 2020 research and innovation programme under grant agreement No Any communication activity related to the action reflects only the author s view. The European Union and its Innovation and Networks Executive Agency (INEA) are not responsible for any use that may be made of the information any communication activity contains. The Bioenergy4Business consortium members shall have no liability for damages of any kind including, without limitation, direct, special, indirect, or consequential damages that may result from the use of these materials. IMPRINT Published and produced by: Österreichische Energieagentur Austrian Energy Agency Mariahilfer Straße 136, A-1150 Vienna, Phone +43 (1) , Fax +43 (1) office@energyagency.at, Internet: Editor in Chief: DI Peter Traupmann Project management: DI Herbert Tretter Produced and published in Vienna Reprint allowed in parts and with detailed reference only. Printed on non-chlorine bleached paper The Austrian Energy Agency has compiled the contents of this study with meticulous care and to the best of its knowledge. However, we cannot assume any liability for the up-to-dateness, completeness or accuracy of any of the contents.

3 Content EXECUTIVE SUMMARY INTRODUCTION BEST PRACTICE EXAMPLE A REALIZED AUSTRIAN CENTRALIZED BIOMASS DISTRICT HEATING PLANT OVERVIEW OF ASSUMPTIONS General Technical Investment Receipts Runningcost Economics Results ABOUT THE B4B BIOHEAT COST CALCULATOR REFERENCES III

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5 Executive Summary This pre-feasibility study compares the economic efficiency of a natural gas fired with a wood-chip fired district heating plant. The district heating plant has a peak heat load of 4.9 MW and supplies 10.6 GWh/a heat (sold energy) to 94 heat consumers. The grid has a trench length of nearly 8 km (and a pipe length of nearly 16 km). The economic assessment is performed by means of the B4B BioHeat Profitability Calculator, developed within the project Bioenergy4Business (B4B). The study is based on a real wood-chips fired district heating plant, where construction work in a Tyrolean village started in April It was put into operation in October 2013 and was finalized in November In this report the project is assessed again, under current situation, i.e. construction start in 2016 and start of operation at the beginning of The investment / cost / price data used for the natural gas fuelled district heating (fossil DH) system are based on Austrian default values for investment components, outgoing and incoming payments. It is assumed that the fossil DH plant has installed two boilers with 3.7 MW nominal heat load each. The investment / cost / price data used for the wood-chip district heating (biomass DH) system are based on real figures taken from the final invoice of the project. 1 Price increases from 2014 to 2016 are considered for investment components, outgoing and incoming payments (April 2016). The realized biomass DH plant has installed a biomass boiler with 2.3 MW and a further with 1 MW nominal heat load, an electro filter and a fossil fuel oil fired back-up boiler with 5 MW. The latter, according to planning data, requires 1% of total fuel input p.a. Both systems are equipped with a 90 m³ hot water buffer storage and a flue gas condensing unit with a heat recovery capacity of 0.46 MW. Both plants are designed as condensing systems. The total investment for the biomass DH system in 2016 is 5.13 Mio. EUR excl. VAT (see table below). The investment for the fossil DH system is 3.78 Mio. EUR excl. VAT. The investment for the biomass DH system is 35.8% (or 1.35 Mio. EUR) higher than for the fossil DH system (see table below). Both, the normally higher up-front investment and re-investment of bioheat systems are offset by investment subsidies lowering the surplus upfront investment (Austria conditions) and lower outgoing fuel or lower outgoing total payments (in many countries), respectively. Under Austrian conditions 104.8% of the initial surplus investment of the biomass DH system would be covered by investment subsidies. Here it is assumed that 30% of eligible investment 2 are subsidised 1 Instead of the realized 40 days of capacity 30 days were assumed in this study. 2 Not eligible are: investment area development, wheel loader, fossil peak load / back-up boilers, cost of lawyers and approval cost, etc. 5

6 within the framework of the Federal Environmental Subsidy Scheme (UFI), where up to 35% of eligible investment can be granted in optimal cases. It is calculated that the total subsidy (1.42 Mio. EUR) is transferred to the owner of the biomass DH system in year three of operation Economic efficiency - results of the profitability calculation using the discounted cash-flow method Biomass Heating System Fossil Fuelled Reference System 7007 Fuel type Wood Chips & Fuel Oil Fuel type Natural Gas Technical Parameters 7010 Max. peak load to be covered by the heat plant4,9 MW Max. peak load to be covered by the heat plant 4,9 MW 7011 Total nominal biomass boiler capacity 3,8 MW Total nominal fossil fuelled boiler capacity 7,4 MW 7012 Fossil fuelled peak/back-up boiler capacity 5,0 MW 7013 Heat Grid - Trass/trench length m Heat Grid - Trass/trench length m 7014 Annual heat sold MWh/a Annual heat sold MWh/a 7016 Investment 7017 Total initial Investment (year 0-3) EUR Total initial Investment (year 0-3) EUR 7018 Surplus investment year EUR Surplus inv. compared to fossil fuelled Ref-System 35,8 % 7019 Thereof investment subsidy (if any) EUR 7020 Suplus investment cost covered by subsidy 104,8 % 7022 Figure(s): Shares of initial investment components 1% 9% Heat grid Investment 18% Boiler + fuel feeding system Investment 48% Boiler house, fuel storage and boiler related electric, hydraulic and steelwork installations Other initial Investment 24% Planning and Approval Cost 0% 9% 12% 14% 65% 7032 Effect of the bioheat plant on annual fuel and total outgoing payments 7033 Fuel price (NCV, year 1) 22,8 EUR/MWh Fuel price (NCV, year 1) 25,9 EUR/MWh 7034 Saving of outgoing fuel payments (year 4) EUR/a Saving compared to fossil fuelled Ref-System 8,9 % 7036 Saving of all outgoing payments (year 4) EUR/a Saving compared to fossil fuelled Ref-System -8,3 % For the first year of operation (2017) a natural gas purchase price (free heating plant, excl. VAT) of 25.9 EUR/MWh HCV 3 (28.8 EUR/MWh LCV 4 ) and a corresponding wood-chip price of 22.8 EUR/MWh HCV (24.4 EUR/MWh LCV) was set. It is assumed that both fuel prices equally increase by 2.0% p.a. for the calculated service life of 25 years (until 2041). In year four of operation 5 the outgoing fuel payments are calculated to be 8.9% lower for the biomass DH system (see above). Total outgoing fuel payments are much higher for the biomass DH system, however (i.e. 65,461 EUR/a lower for the fossil DH system). Biomass DH systems involve higher personnel, service and maintenance and other running cost. Regarding project financing an equity capital share of 25% is assumed. For the biomass DH system this share applies to the net present value (NPV) of the investment 6 reduced by the NPV of the investment subsidy (as the subsidy is transferred after 2016). For the fossil DH system the equity capital share applies to the NPV of the full investment, as no subsidy is granted. Interest for equity is assumed to be 5% (after tax) for both systems. 3 HCV Higher Calorific Value; natural gas is invoiced per MWh higher calorific value (HCV). In April 2016 natural gas supplied from the Austrian network level 3 (low pressure grid) costs about this amount. At network level 2 (medium pressure) grid transportation fees are lower. 4 Lower Calorific Value. 5 The year four was chosen as, according to the design of the tool, this is the year when the DH grid is finalized at the latest. 6 Most of the investment happens in 2016; in 2017 the final parts of the heating grid are realized.

7 Net Present Value (EUR) Net Present Value (EUR) The equity capital is 1.1 Mio. EUR for the biomass DH and 1.0 Mio. EUR for the fossil DH system. The loan interest rate is 4% (effective rate, after taxes) with a lent term of 20 years for both systems. Debt capital is 3.3 Mio. EUR for the biomass and 3.0 Mio. EUR for the fossil DH system. The profitability assessment is based on a discounted cash-flow analysis (based on VDI Guideline 2067) with a calculated service life of 25 years. The main assumptions and results can be seen in the table and figure below. The calculations take care of re-investment of plant components according their technical service life, the latter are assumed in line with VDI Guideline In year 21 of operation reinvestment is assumed to be 1.6 Mio. EUR for the biomass DH and 0.8 Mio. EUR for the fossil DH system. Theoretically the technical service life of the plant would be extended for another 20 years because of the re-investment. The calculated service life is 25 years only, however. This period is sufficient to show, whether the project is able to finance re-investments by itself Discounted Cash-flow analysis (based on VDI Guideline 2067) - Assumptions overview 7040 Cost of equity capital (interest rate) - pre-tax 6,7% Cost of equity capital (interest rate) - pre-tax 6,7% 7041 Loan interest rate (pre-tax) 5,3% Loan interest rate (pre-tax) 5,3% 7042 Tax rate 25,0% Tax rate 25,0% 7043 Heat sales price, excl. VAT (in year 1) 79,90 EUR/MWhsold Heat sales price, excl. VAT (in year 1) 79,90 EUR/MWhsold 7044 Calculatory service life (t) 25 years Calculatory service life (t) 25 years 7046 Discounted Cash-flow analysis (based on VDI 2067) - Results Biomass Heating System Fossil Fuelled Reference System 7048 Discounted Payback Time 21,1 yrs Discounted Payback Time 8,5 yrs 7049 Net Present Value (NPV, t=25 yrs.) EUR Net Present Value (NPV, t=25 yrs.) EUR 7050 Internal Rate of Return (IRR, t=25 yrs.) 6,70% Internal Rate of Return (IRR, t=25 yrs.) 9,53% q 7051 Calculatory Heat Generation Cost 77,08 EUR/MWhsold Calculatory Heat Generation Cost 71,04 EUR/MWhsold 7053 Energy and greenhouse gas related effects of the bioheat plant Reduction compared to fossil fuelled Ref-System 7054 Fossil fuel subsituted by bioheating system MWh/a Reduction compared to fossil fuelled Ref-System 98,9 % 7055 Greenhouse gas saving 2.585,4 t CO 2-eq/a Reduction compared to fossil fuelled Ref-System 97,8 % 7056 Energy saving (total fuel input, NCV) -304 MWh/a Reduction compared to fossil fuelled Ref-System -2,3 % 7058 Figure(s): Development of the NPV for a calculated service life of 25 years - visualization of the dynamic payback time Net Present Value Net Present Value (EUR) The heat sales price is 79.9 EUR/MWh (excl. VAT) in 2017 and is set to increase by 2% p.a. That means that the development of incoming payments is exactly the same for both systems. Based on the assumptions shown in detail in chapter 3 for both systems, the biomass DH system has calculatory heat generation cost of EUR/MWh, the fossil DH system of EUR/MWh heat sold. This corresponds to (dynamic) discounted payback times of 21.1 years (biomass DH system) and of 8.5 years (fossil DH system). The net present value of the biomass DH system is 0.43 Mio. EUR. The NPV of the fossil DH system is 1.36 Mio. EUR. Both systems would have equal calculatory heat generation cost of EUR/MWh heat sold, if the natural gas purchase price increases to 30.8 EUR/MWh instead of 25.9 EUR/MWh HCV (+18.7%). 7

8 Outgoing Payments (EUR) Outgoing Payments (EUR) There are some aspects, immanent for the bioheat DH system that should not be neglected in this economic assessment. The biomass DH system saves 98.9% of the fossil energy input (in GWh) and therefore avoids 2,585.2 t CO 2 -eq/a compared to the fossil DH system (see table above). 7 The greenhouse gas avoidance and other positive effects of a biomass DH system (e.g. on the local economy, energy system security / energy system resilience) is not always taken account for adequately to establish a level playing field (e.g. by investment subsidies, CO 2 -taxes) with a fossil DH system. The next two figures show the development of the outgoing payments (compare the columns) over the calculated service life of 25 years Figure(s): Development of outgoing payments (operating and capital expenditures) for a calculated service life of 25 years Outgoing Payments Outgoing Payments (EUR) Biomass fuel Fossil fuel Electricity Rent for land use Staff 0 Repair & maintenance Other running cost (insurance etc.) Capital expenditures (interest & redemption) Capital expenditures (interest & redemption payments) Other running cost (insurance etc.) Repair & maintenance Staff Rent for land use Electricity Fossil fuel Biomass fuel Capital expenditures (interest & redemption) Other running cost (insurance etc.) Repair & maintenance Staff Rent for land use Electricity Fossil fuel 7091 Figure(s): Share of outgoing payments (Opex and Capex) in year 4 (full capacity operation) for a calculated service life of 25 years 32% 39% 32% 47% 3% 9% 3% 1% 1% Biomass fuel 12% Fossil fuel Electricity Rent for land use Staff Repair & maintenance Other running cost (insurance etc.) Capital expenditures (interest & redemption) 3% 7% Biomass fuel 9% 1% 1% Fossil fuel Electricity Rent for land use Staff Repair & maintenance Other running cost (insurance etc.) Capital expenditures (interest & redemption) The bottom pie charts show the outgoing payments for the column of year four of operation 8 (in this case 2020) for both systems. 7 The biomass DH system needs 1% of its annual fuel input as of fuel oil for the peak load boiler. The annual fuel input, due to somewhat lower energy efficiency, is 3.5% higher than those of the fossil DH system. 8 The year four was chosen as, according to the design of the tool, this is the year when the DH grid is finalized at the latest.

9 Price [EUR/MWh HCV] The right pie chart shows that 47% of all outgoing payments of the fossil DH system are related to fuel payments. In the case of the biomass DH system this share is 40% (39% for biomass plus 1% for fuel oil). This shows that the fossil DH system is more vulnerable for fuel price increases. The natural gas purchase price, generally speaking, consists of the energy price (e.g. natural gas import price), a wholesale margin and gas grid related fees. For the fossil DH plant for 2017 a purchase price of 25.9 EUR/MWh HCV 9 and an energy price of 15.0 EUR/MWh HCV is assumed (excl. VAT), which is rather low compared to the development of prices over the last ten years (see figure below). It is assumed that this purchase price increases by 2% p.a. from 2017 to 2041 (i.e. constant real prices, if inflation is 2% p.a.). 35,0 30,0 25,0 20,0 15,0 10,0 5,0 Natural gas import price AT Energy price assumed in this study for ,0 In 2008 and 2013 the energy price of natural gas had twice the level of 15 EUR/MWh HCV (see figure above). If the energy price would reach 25.0 EUR/MWh HCV by 2017, the natural gas purchase price would be 35.9 EUR/MWh HCV, excl. VAT. This would be a purchase price increase of 38.5% compared to the 25.9 EUR/MWh HCV assumed for If the purchase price of 35.9 EUR/MWh HCV would increase by 2% p.a. until 2014, the calculatory heat generation cost would reach EUR/MWh. 10 This is +17% beyond the originally calculated calculatory heat generation cost of EUR/MWh heat sold in If the biomass fuel price would increase by 38.5% from 2016 to 2017, which has not happened in Austria for solid biomass so far (see figure below), the calculatory heat generation cost would reach EUR/MWh. 9 Higher Calorific Value natural gas as commodity is traded per MWh HCV 10 In this case the project would have to achieve a heat sale price of EUR/MWh heat sold in This price would have to be increased by 2% p.a. for a period of 25 years. Only then the project would achieve a payback time of 25 years. 9

10 This is +14% beyond the originally calculated calculatory heat generation cost of EUR/MWh heat sold in With +14% the price increase is lower than +17% for the fossil DH system. If the natural gas price level set for 2017 would be higher, this effect would be even more significant. The two scenarios show that a fossil DH system is more vulnerable to fuel price increases than a biomass DH system. Regarding fuel price increases a natural gas fuelled district heating system, generally speaking, is a less resilient business compared to a biomass fuelled one. As discussed above, both systems would have the same calculatory heat generation cost of EUR/MWh heat sold in 2017, if the natural gas purchase price would be 30,80 EUR/MWh HCV. This natural gas purchase price would mean an energy price of EUR/MWh HCV in This is 32.4% more than the 15.0 EUR/MWh HCV assumed for The figure with the natural gas import price development in Austria (see above) shows that an energy price beyond 20 EUR/MWh HCV was usual over the last 10 years. At both systems re-investment of plant components according to their technical service life is considered. The biomass DH system achieves its first positive NPV after 13 years of operation. When the re-investment occurs, in 2037, the plant has gained enough reserves to finance the re-investment by itself. Municipalities as investors might get along with both, a lower equity share (originally 25%) and lower interest for equity (originally 5%). In case of equity share of 20% and an interest for equity of 4%, for both systems, the cash flow calculation shows the following result.

11 Net Present Value (EUR) Net Present Value (EUR) Discounted Cash-flow analysis (based on VDI 2067) - Results Biomass Heating System Fossil Fuelled Reference System 7048 Discounted Payback Time 10,7 yrs Discounted Payback Time 7,0 yrs 7049 Net Present Value (NPV, t=25 yrs.) EUR Net Present Value (NPV, t=25 yrs.) EUR 7050 Internal Rate of Return (IRR, t=25 yrs.) 6,70% Internal Rate of Return (IRR, t=25 yrs.) 9,53% q 7051 Calculatory Heat Generation Cost 75,63 EUR/MWhsold Calculatory Heat Generation Cost 69,68 EUR/MWhsold 7058 Figure(s): Development of the NPV for a calculated service life of 25 years - visualization of the dynamic payback time Net Present Value Net Present Value (EUR) This shows the sensitivity of equity capital parameter variations on the result. As the currently comparable low natural gas prices are considered in the analysis, a biomass DH system would become more attractive, if natural gas prices increase to the levels Austria had during the last ten years. In Austria biomass DH systems became widespread over the last 30 years. In 2014 Austria had 2,108 biomass DH plants (> 100 kw) installed in Austrian villages. These DH plants supplied 4.65 TWh heat in Austria has 2,122 villages. 11

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13 Introduction 1. Introduction Bioenergy4Business involves partners from twelve EU Member States and Ukraine. Eleven of these project partners (AT, DE, BG, HR, FI, EL, NL, PL, RO, SK and UA, except BE and DK) are target countries, where tailor-made activities for the most promising market segments are taking place until the end of the project in August Figure 1: Countries where Bioenergy4Business is implemented and their actual biofuel market status. Bioenergy4Business helps exploit the considerable economic and sustainable potential of European bioenergy sources for heating, which are locally available at reasonable prices. These can offer a viable alternative to vulnerable European businesses currently depending on fossil resources, which are often imported from politically unstable regions. Bioenergy4Business makes new market segments for solid biomass usage accessible and enhances the use of both more solid biomass sources and so far not used ones (e.g. pellets, straw etc.) in European heat markets. The website of the project is 13

14 Bioenergy4Business A project for the uptake of solid biofuels in promising European heat market segments Introduction to this report This report was written within the frame of task 5.4 Assessment of the economic pre-feasibility of bioenergy heating systems of the project Bioenergy4Business. The objectives of this report are to provide a 2 nd model feasibility study for an district bio-heating system based on an existing best practice example. to demonstrate the usage of the Excel-tool developed in task 5.4 the B4B BioHeat Profitability Calculator. The B4B BioHeat Profitability Calculator enables users to assess and compare the economic efficiency of a bioheat with a fossil fuelled reference (district & in-house) heat-only plant (with 0.1 to 20 MW nominal plant heat load) by a profitability calculation using the discounted cash-flow method for both systems. The 1 st model feasibility study (D5.10 of Bioenergy4Business) assessed a fuel switch from fuel oil to wood-chips at a 0.4 MW heat load plant and was based on the Austrian best practice example hotel Tulbingerkogel in Mauerbach, close to Vienna (see downloads at 14

15 Best practice example a realized Austrian centralized biomass district heating plant 2. Best practice example a realized Austrian centralized biomass district heating plant The details of the study shown in chapter 3 are based on a real district heating plant, which was put into operation with wood-chips as fuel in a Tyrolean village in October The following figures shows a schematic layout of a biomass district heating plant, a wood-chip delivery by truck and a schematic figure of the recycling economy, realized by biomass district heating. Figure 2: Schematic layout of a biomass district heating plant (Source: aigner energie contracting gmbh). Figure 3: Wood-chip delivery by truck and schematic figure of the recycling economy realized by biomass district heating (Source: aigner energie contracting gmbh). The heating plant delivers district heat for space and domestic hot water purposes to 94 private, public and commercial consumers (which use the heat for process heat purposes too). The annual heat sales volume is 10.6 GWh at a total connected consumer heat load of 7,267 kw. Heat generation runs throughout the year is based on a dual system of two biomass boilers (2.3 MW and 1 MW nominal heat load) and a flue-gas condensation unit for heat recovery with a capacity of 0.46 MW. For peak heat load coverage a 90 m³ hot water buffer storage and a fossil, fuel oil fuelled 5 MW peak load / back-up boiler are installed. An electro filter ensures Austrian air quality standards. On-site both, a roofed wood-chip fuel storage and an open air log storage were realized. The district heating trench length is 7,980 m. The grid has double isolated steel pipes. Transport heat losses were calculated to be 10.54% of injected heat. 15

16 Bioenergy4Business A project for the uptake of solid biofuels in promising European heat market segments In this report the project is assessed again, under current situation, i.e. construction start in 2016 and start of operation at the beginning of The finalization of the heating grid takes effect in is the first year of full operation of the plant. All details of the comparison of the economic efficiency of a natural gas fired with a wood-chip fired alternative are given in the following chapter 3. The data are shown as screenshots of the B4B BioHeat Profitability Calculator used for assessing both systems. Every sub-chapter equals an Excel-sheet of the calculation tool (for more details of the calculation tool see chapter 4). 16

17 Overview of assumptions 3. Overview of assumptions 3.1 General In this Excel-sheet the language to be used for the tool (line 1012, see table below, 9 languages are available), in line 1013 the country the project is realized in (and for which country-specific reference values are loaded; data of 12 countries are available), in line 1016 the project start year, in line 1017 the start of plant operation is fixed. Furthermore the fuels for the bioheat system (line 1018 and 1019) and the fuel of the fossil fuelled system (line 1020) can be chosen. Table 1: General project information 1010 GENERAL PROJECT INFORMATION Help Parameter Input Value Reference Value 1012 Language to be used for the tool English 1013 Country the project is realized in (and for which country-specifi reference values are loaded) 1014 National Currency EUR 1016 Project Start (Year), 1 year before operation starts Start of Operation Biomass Fuel Type Wood Chips 1019 Fossil fuel used for the biomass heat plant (for the peak/back-up boiler) Fuel Oil 1020 Fossil fuelled reference system: Fuel type Natural Gas AT 17

18 Bioenergy4Business A project for the uptake of solid biofuels in promising European heat market segments 3.2 Technical Table 2: Technical details of the biomass heating system. Biomass Heating System Help Parameter Unit Input Value Reference Value 2016 Heat Demand 2017 Thermal energy delivered/sold to end consumers MWh/yr Total consumer nominal connection capacity MW 7, Number of connected consumers # Simultaneity factor of the heating plant % 60% 60% 2022 Heat Grid Expansion plan 2023 Grid Trass/Trench length incl. trasses to households (at 100% grid expansion) m Grid Expansion Year 1 (start of operation) % 80% = 6384 m 2025 Grid Expansion Year 2 % 100% = 7980 m 2026 Grid Expansion Year 3 % 100% = 7980 m Grid Expansion after Year 3: 100% 2029 Grid related Heat Losses 2030 Old (existing), new or no district heating grid New Heat Grid 2031 Heat grid consumer structure (Category A, B or C - See Manual) B 2032 Grid related Heat Losses % 10,54% 18% 2034 Heat Plant 2035 Total nominal capacity of the heating plant (max. peak load to be covered) MW 4, Biomass Boiler(s) Biomass boiler nominal heat generation capacity MW 2,30 2, Biomass boiler nominal capacity (if applicable) MW 1,00 0, Biomass boiler nominal capacity (if applicable) MW 0, Total nominal biomass boiler capacity MW 3,76 3, Average annual energy use efficiency biomass boiler(s) % 88,0% 83% 2044 Fossil fuelled Stand-by / Peak Load Boiler Fossil fuelled stand-by boiler 2045 Fossil fuelled Stand-by/Peak Load boiler, nominal capacity (if applicable) MW 5,00 2, Actually installed total thermal capacity of the heating plant (must be >= cell value MW 8, MW needed 2047 Old (existing) or new fossil fuel boiler (if applicable) New 2048 Average annual energy use efficiency Fossil fuel Boiler (if applicable) % 85,0% 85% 2049 Heat fraction generated with fossil fuels % 1,0% < 10 % 2050 Heat fraction generated with Biomass % 99,0% OK 2053 Biomass Fuel Storage 2054 Utilizable fuel storage room (equivalent to x days of full load operation á 16 h/d) d 30,0 10, Fuel Storage Size (including un-utilizable room) m³ Utilizable fuel storage room in comparison to the annual biomass consumption - 15,4% 2058 Electricity Consumption 2059 Specific Electricity Consumption heat grid kwh el /MWh th_gen 6,00 6, Specific electricity consumption biomass boiler(s) kwh el /MWh th_gen 10,00 11, Specific electricity consumption fossil fuel boiler kwh el /MWh th_gen 4,00 4,00 In line 2040 (Biomass Boiler number three) the heat capacity of the flue gas condensation unit (for heat recovery) is stated (no third biomass boiler is installed). 18

19 Overview of assumptions Table 3: Overview of technical performance data biomass heating system Calculated energy flow Parameters 2066 Thermal energy delivered/sold to end consumers MWh sold /a , Total heat produced by plant (injected into the heat grid) MWh generated /a , Fuel Heat Input Biomass (net calorific value, NCV) MWh fuel, BM /a , Fuel Heat Input Fossil Fuel (NCV) MWh fuel, fossil /a 139, Total fuel heat input (NCV) MWh fuel /a , Electricity: 2072 Annual Electricity Consumption heat grid (100% heat delivery) MWh el /a 71, Annual Electricity Consumption biomass boiler MWh el /a 117, Annual Electricity Consumption fossil fuel boiler MWh el /a 0, Annual Electricity Consumption plant (100% heat delivery) MWh el /a 189, Performance benchmarks of the biomass heating plant Benchmark figures for Austrian conditions 2078 Network heat utilization ratio kwh/(m*a) min. 900 better > Network utilization ratio kw/m 0, Average annual full-load operating hours of installed biomass boilers h/a Average annual full-load operating hours of connected consumers h/a Annual energy use efficiency of the biomass boilers % 88,0% 2083 Annual energy use efficiency of the heating grid % 89,5% >80% 2084 Annual energy use efficiency of the heating plant % 78,7% > 70% Table 4: Technical details of the fossil fuelled reference system Fossil Fuelled Reference System Help Parameter Unit Input Value Reference Value 2090 This section determines the parameters of the alternative fossil fuelled heating system for comparison with the biomass heating system (characterized by the technical parameters above) Nominal heat capacity fossil fuelled boiler 1 MW 3,7 3, Nominal heat capacity fossil fuelled boiler 2 MW 3,7 3, Nominal heat capacity fossil fuelled boiler 3 MW 2094 Fossil fuelled boilers' total installed nominal heat capacity MW 7, , Specific Electricity consumption fossil fuel boiler(s) kwh el /MWh th 4 4, Average annual energy use efficiency of fossil boilers % 90,0% 86% 2098 Total Fuel Heat Input (net calorific value) MWh produced, FossilFu Investment In line 3008 the annual price increase rate for reference investment values contained in the tool for plant equipment and building related investment (based on 2015 price-figures) can be varied. The investment reference values are increased from 2015 to the chosen project start year, after 2015, by entering a positive price increase rate. 19

20 Bioenergy4Business A project for the uptake of solid biofuels in promising European heat market segments Table 5: Investment figures of the biomass heat system. Biomass Heating System Help Parameter Unit Input Value Reference Value 3008 Annual price increase rate for reference investment values used for all plant components (price-base: 2015) 1,5% 3010 Heat grid investment (100% grid expansion) 3011 Heat Network Design: 3012 Grid Trass/Trench length incl. trasses to households (at 100% grid expansion) m % sealed surface % 42,00% 3014 % green field % 58,00% 3015 % DN 20 or 25 % 19,03% 3016 % DN 50 % 51,61% 3017 % DN 100 % 26,13% 3018 % DN 200 % 3,23% 3019 Pipe and Earthwork EUR Energy Transfer Stations (ETS) 3021 ETS - Average investment per MWh/a sold (depending on plant size) EUR/MWh 25,00 25, Energy Transfer Stations Investment EUR Total heat grid related investment EUR Boiler investment, incl. furnace, fuel feeding, measuring and control technology as well as 3029 flue gas cleaning equipment (the latter if required) Biomass Boiler 1 EUR Biomass Boiler 2 EUR Biomass Boiler 3 EUR Fossil fuelled Back-up/Peak Load Boiler EUR Total Boiler Investment of Biomass heating plant EUR Construction & development investment (assumed are stand-alone, new buildings) 3037 Boiler house (incl. area development and outdoor related investment) EUR Boiler related electric, hydraulic and steelwork installations EUR Fuel Storage (incl. area development and outdoor related investment) EUR Sum of building cost EUR Other initial Investment 3043 Other Investment EUR Sub-Sum: Physical investment (Hardware) EUR Planning & Approval Cost 3048 Planning and Approval (fraction of physical investment) % 10,0% 10,0% 3049 Planning and Approval (absolute number) EUR The investment of the two biomass boilers in line 3030 and 3031 is higher than the reference values as the boilers are designed for a condensing system. In line 3032 (Biomass Boiler number three) the investment for both, the flue gas condensation unit and the 90 m³ hot water buffer storage is stated (no third biomass boiler is installed). Line 3043 shows the investment for a wheel loader, which was purchased at this site. The next table gives an overview of the re-investment of plant components according their service live according to VDI Guideline

21 Overview of assumptions 3052 Re-Investment and other future investment 2017 EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR - The next table gives an overview of the assumed investment for the biomass heating system shown per year and per main plant component Overview of investment by time of payment date (nominal values) 3084 Total initial investment (year 0-3) EUR Total investment year 0 EUR Total investment year 1 EUR Total investment year 2 EUR Total investment year 3 EUR Total investment year 3 to 25 (incl. Re-investments according to VDI guideline 2067) EUR Overview of initial investment by category (without reinvestments) 3092 Heat grid Investment EUR Boiler + fuel feeding system Investment EUR Boiler house, fuel storage and boiler related electric, hydraulic and steelwork installations EUR Other initial Investment EUR Planning and Approval Cost Unit Total initial investment (year 0-3) EUR

22 Bioenergy4Business A project for the uptake of solid biofuels in promising European heat market segments Table 6: Investment figures of the fossil fuelled reference system 3101 Fossil fuelled Reference System Parameter Unit Input Value Reference Value 3104 Grid investment (100% grid expansion) EUR Boiler Investment 3107 Selected fuel type: Natural Gas 3108 Fossil fuelled Boiler 1 EUR Fossil fuelled Boiler 2 EUR Fossil fuelled Boiler 3 EUR N/A 3111 Total Boiler investment of fossil fuel Reference System Boiler house, fuel storage and boiler related supplementary installations Investment 3114 Boiler house (incl. area development and outdoor related investment) EUR Boiler related electric and hydraulic installations EUR Fuel oil Storage tank volume (equivalent to x days of full load operation) d N/A 3117 Oil storage tank volume (if Applicable) l Investment for fuel oil storage tank EUR Gas grid connection investment, in % of total gas boiler investment % 15% 15% 3120 Gas grid connection investment Coal storage facility investment EUR N/A 3122 Other initial investments EUR 3125 Planning and Approval Cost 3126 Planning and Approval (fraction of physical investment) % 10% 10% 3127 Planning and Approval (absolute number) EUR Re-Investment and other future investments 2017 EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR - 22

23 Overview of assumptions 3155 Overview of investment by time of payment (nominal values) 3156 Total initial investment (year 0-3) EUR Total investment year 0 EUR Total investment year 1 EUR Total investment year 2 EUR Total investment year 3 EUR Total investment year 3 to 25 (incl. re-investments according to VDI guideline 2067) EUR Overview of initial investment by category (without reinvestments) 3164 Heat Grid Investment EUR Boiler Investment EUR Boiler house, fuel storage and electric and hydraulic boiler-related installations EUR Other initial Investment EUR Planning and Approval Cost EUR Total initial investment (year 0-3) EUR

24 Bioenergy4Business A project for the uptake of solid biofuels in promising European heat market segments 3.4 Receipts Table 7: Receipts of the biomass heating system Biomass Heating System Parameter Unit Input Value Reference Value for 2017 of Heat Sales Development 4010 Heat-sales - based on grid expansion in year 1 % 80,0% 80% 4011 Heat-sales - based on grid expansion in year 2 % 95,0% 100% 4012 Heat-sales - based on grid expansion in year 3 % 100,0% 100% 4013 Heat-sales - based on grid expansion after year 3 % 100% 4015 Heat Price 4016 Average net heat sales price (excl. VAT), in year 1 EUR/MWh sold 79, Heat-price escalation rate % p.a. 2,0% 2,00% 4019 Other Revenues Open category to consider eventual additional revenues, e.g. CO2 certificate sales, additional subsidies, other revenues etc. (See Manual for 2016 EUR 2017 EUR 2018 EUR 2019 EUR 2020 EUR 2021 EUR 2022 EUR 2023 EUR 2024 EUR 2025 EUR 2026 EUR 2027 EUR 2028 EUR 2029 EUR 2030 EUR 2031 EUR 2032 EUR 2033 EUR 2034 EUR 2035 EUR 2036 EUR 2037 EUR 2038 EUR 2039 EUR 2040 EUR 2041 EUR The average net heat sales price (see line 4016, above) is 79.9 EUR/MWh heat sold. This is the revenue for both the biomass and the fossil DH system. 24

25 Overview of assumptions Table 8: Receipts of the fossil fuelled reference system Fossil Fuelled Reference System Parameter Unit Input Value Reference Value for 2017 of Heat Price 4054 Average net heat sales price (excl. VAT) in year 1 EUR/MWh sold 79, Heat-price escalation rate % p.a. 2,0% 2,00% 4057 Other Revenues Open category to consider eventual additional revenues, e.g. CO2 certificate sales, additional subsidies, other revenues etc. (See Manual for Details) 2016 EUR 2017 EUR 2018 EUR 2019 EUR 2020 EUR 2021 EUR 2022 EUR 2023 EUR 2024 EUR 2025 EUR 2026 EUR 2027 EUR 2028 EUR 2029 EUR 2030 EUR 2031 EUR 2032 EUR 2033 EUR 2034 EUR 2035 EUR 2036 EUR 2037 EUR 2038 EUR 2039 EUR 2040 EUR 2041 EUR 25

26 Bioenergy4Business A project for the uptake of solid biofuels in promising European heat market segments 3.5 Runningcost Table 9: Outgoing payments of the biomass heating system Biomass Heating System Parameter Unit Input Value Reference Value for 2017 of Biomass Fuel Cost 5009 Selected fuel type: Wood Chips 5010 Biomass fuel price EUR/MWh 22, Biomass price escalation rate % p.a. 2,00% 2,00% 5012 Annual biomass cost (theoretically; in year 1, at 100% grid expansion) EUR/a Fossil Fuel Cost 5015 Selected system Fossil fuelled stand-by boiler / Fuel Oil 5016 Fossil fuel price EUR/MWh 52, Fossil fuel price escalation rate % p.a. 2,00% 2,00% 5018 Annual fossil fuel cost (theoretically; in year 1, at 100% grid expansion) EUR/a Electricity Cost 5021 Electricity purchase price EUR/MWh 90, Electricity price escalation rate % p.a. 2,00% 2,00% 5023 Annual electricity cost (theoretically; in year 1, at 100% grid expansion) EUR/a Staff Cost (excl. R&M) 5026 Weighted annual salary of staff categories required (year 1) EUR/a Total person years of staff required Person-year 2,10 2, Staff cost - escalation rate % p.a. 2,00% 2,00% 5029 Annual Staff Cost (in year 1) EUR Inflation Rate % p.a. 2,00% 2,00% 5033 Repair- and Maintenance Cost (R&M) according to VDI Guideline Annual R&M cost in % of total investment % 1,44% 1,44% 5035 Repair- & Maintenance cost (year 1) EUR/a Repair- & Maintenance cost - annual increase % p.a. 2,00% 2,00% 5038 Property Cost 5039 Annual property cost / rent / lease EUR/a 7.800, Annual property cost increase % p.a. 2,00% 2,00% 5043 Other annual cost Other annual cost (e.g. Insurance, ash disposal, wheel loader operation (excl. driver), % 5044 etc.) considered as fraction of the total investment 0,50% 0,75% 5045 Annual other cost (year 1) EUR/a Other cost - annual increase % p.a. 2,00% 2,00% The fossil fuel price (line 5016, above) is higher than in the table below (line 5056), as the required annual fuel volume is much lower. The reference value for the R&M cost (line 5032, above) are calculated according to VDI Guideline Other annual cost (in line 5044, above) are set lower than the reference value, as wheel loader operation in this case does not contain capital cost. The wheel loader investment is taken into account in line 3043 already. 26

27 Overview of assumptions Table 10: Outgoing payments of the fossil fuelled reference system Fossil Fuelled Reference System Parameter Unit Input Value Reference Value for 2017 of 2015 This section summarizes parameters that are specific to the fossil fuelled reference system. (Most parameters are adopted from the biomass system section above, e.g. electricity-, staff and property cost parameters) Fossil fuelled reference systems' fuel cost 5055 Selected fuel type Natural Gas 5056 Fossil fuel price EUR/MWh 25, Fossil fuel price escalation rate % p.a. 2,00% 2,00% 5058 Annual fuel cost (theoretically; in year 1, at 100% grid expansion) EUR/a Electricity Cost 5061 Annual electricity cost (theoretically; in year 1, at 100% grid expansion) EUR/a Staff Cost (excl. R&M) 5064 Total person years of staff required person years 1,58 1, Annual Staff Cost (in year 1) EUR Repair- and Maintenance Cost (R&M) according to VDI Guideline Annual R&M cost in % of total investment % 1,35% 1,35% 5069 Repair- & Maintenance cost (year 1) EUR/a Repair- & Maintenance cost - annual increase % p.a. 2,00% 2,00% 5072 Property Cost 5073 Annual property cost / rent / lease EUR/a 5.200, Annual property cost increase % p.a. 2,00% 2,00% 5076 Other annual cost 5077 Other annual cost (e.g. Insurance, office related cost, etc.) considered as fraction of the total investment % 0,50% 0,50% 5078 Annual other cost (year 1) EUR/a Other cost - annual increase % p.a. 2,00% 2,00% 27

28 Bioenergy4Business A project for the uptake of solid biofuels in promising European heat market segments 3.6 Economics Table 11: Financing of the biomass heating system Biomass Heating System Parameter Unit Input Value Reference Value 6008 Investment Capital Structure 6009 Total initial investment (year 0-3) EUR Total investment eligible for subsidy EUR ,0% 6011 Investment subsidy share (of eligible investment) - if any subsidies are provided 6012 Investment Subsidy (nominal) EUR Investment subsidy payment year year 3 % 30,00% 30,0% 6015 Equity Capital Share (equity capital related to calculatory total investment minus subsidy) % 25,00% 30,0% Total calculatory investment (present value) 6017 Total calculatory investment (present value) EUR Investment Subsidy (present value) EUR Equity Capital EUR Debt Capital (long-term) EUR qdebt Captial 58,9% 21,5% 19,6% Investment Subsidy (present value) Equity Capital 6022 Debt Captial Conditions 6023 Long term Loan - effective interest rate (after tax) % p.a. 4,00% 3,00% Debt Capital (longterm) 6024 Long term Loan - lent term yr Long term Loan - effective interest rate (pre-tax) % p.a. 5,33% 6026 Long term Loan - annuity (interest + redemption) EUR/a Equity Capital Conditions 6032 Cost of equity Capital (interest rate) - after tax % p.a. 5,00% 7,50% 6033 Tax rate % p.a. 25,00% 25,00% 6034 Cost of Equity Capital (interest rate) - pre-tax % p.a. 6,67% 6036 WACC pre-tax % p.a. 7,00% The calculatory investment (see line 6017) is higher than the initial physical investment (see line 6009). In the calculatory investment the payment time of investments (e.g. grid extension in the years 0-3) is considered by its net present value, the same applies for re-investments. Table 12: Financing of the fossil fuelled reference system Fossil Fuelled Reference System Parameter Unit Input Value Reference Value Economic parameters for the fossil fuelled reference system. All parameters not specifically mentioned here are assumed to be similar to those of the biomass heat project Capital Structure 6045 Total calculatory investment (present value) EUR Total initial investment (year 0-3) EUR Equity Capital Share (equity capital related to calculatory 6047 total investment minus subsidy) % 25,00% 30,00% 6048 Equity Capital EUR Debt Capital (long-term) EUR % 25% Equity Capital Debt Capital (long-term) 6051 Debt Captial Conditions 6053 Loan - interest rate after tax % p.a. 4,00% 5,33% 6054 Loan - interest rate pre-tax % p.a. 5,33% 6055 Loan - lent term yr Loan - annuity (interest + redemption) EUR/a Equity Capital Conditions 6059 Cost of equity Capital (interest rate) - after tax % p.a. 5,00% 7,50% 6060 Cost of Equity Capital (interest rate) - pre-tax % p.a. 6,67% 6062 WACC pre-tax % 7,00% 28

29 Net Present Value (EUR) Net Present Value (EUR) Overview of assumptions 3.7 Results Table 13: Profitability calculation results for the bioheat and fossil fuelled reference system Economic efficiency - results of the profitability calculation using the discounted cash-flow method Biomass Heating System Fossil Fuelled Reference System 7007 Fuel type Wood Chips & Fuel Oil Fuel type Natural Gas Technical Parameters 7010 Max. peak load to be covered by the heat plant4,9 MW Max. peak load to be covered by the heat plant 4,9 MW 7011 Total nominal biomass boiler capacity 3,8 MW Total nominal fossil fuelled boiler capacity 7,4 MW 7012 Fossil fuelled peak/back-up boiler capacity 5,0 MW 7013 Heat Grid - Trass/trench length m Heat Grid - Trass/trench length m 7014 Annual heat sold MWh/a Annual heat sold MWh/a 7016 Investment 7017 Total initial Investment (year 0-3) EUR Total initial Investment (year 0-3) EUR 7018 Surplus investment year EUR Surplus inv. compared to fossil fuelled Ref-System 35,8 % 7019 Thereof investment subsidy (if any) EUR 7020 Suplus investment cost covered by subsidy 104,8 % 7022 Figure(s): Shares of initial investment components 1% 9% Heat grid Investment 18% Boiler + fuel feeding system Investment 48% Boiler house, fuel storage and boiler related electric, hydraulic and steelwork installations Other initial Investment 24% Planning and Approval Cost 0% 9% 12% 14% 65% 7032 Effect of the bioheat plant on annual fuel and total outgoing payments 7033 Fuel price (NCV, year 1) 22,8 EUR/MWh Fuel price (NCV, year 1) 25,9 EUR/MWh 7034 Saving of outgoing fuel payments (year 4) EUR/a Saving compared to fossil fuelled Ref-System 8,9 % 7036 Saving of all outgoing payments (year 4) EUR/a Saving compared to fossil fuelled Ref-System -8,3 % 7039 Discounted Cash-flow analysis (based on VDI Guideline 2067) - Assumptions overview 7040 Cost of equity capital (interest rate) - pre-tax 6,7% Cost of equity capital (interest rate) - pre-tax 6,7% 7041 Loan interest rate (pre-tax) 5,3% Loan interest rate (pre-tax) 5,3% 7042 Tax rate 25,0% Tax rate 25,0% 7043 Heat sales price, excl. VAT (in year 1) 79,90 EUR/MWhsold Heat sales price, excl. VAT (in year 1) 79,90 EUR/MWhsold 7044 Calculatory service life (t) 25 years Calculatory service life (t) 25 years 7046 Discounted Cash-flow analysis (based on VDI 2067) - Results Biomass Heating System Fossil Fuelled Reference System 7048 Discounted Payback Time 21,1 yrs Discounted Payback Time 8,5 yrs 7049 Net Present Value (NPV, t=25 yrs.) EUR Net Present Value (NPV, t=25 yrs.) EUR 7050 Internal Rate of Return (IRR, t=25 yrs.) 6,70% Internal Rate of Return (IRR, t=25 yrs.) 9,53% q 7051 Calculatory Heat Generation Cost 77,08 EUR/MWhsold Calculatory Heat Generation Cost 71,04 EUR/MWhsold 7053 Energy and greenhouse gas related effects of the bioheat plant Reduction compared to fossil fuelled Ref-System 7054 Fossil fuel subsituted by bioheating system MWh/a Reduction compared to fossil fuelled Ref-System 98,9 % 7055 Greenhouse gas saving 2.585,4 t CO 2-eq/a Reduction compared to fossil fuelled Ref-System 97,8 % 7056 Energy saving (total fuel input, NCV) -304 MWh/a Reduction compared to fossil fuelled Ref-System -2,3 % 7058 Figure(s): Development of the NPV for a calculated service life of 25 years - visualization of the dynamic payback time Net Present Value Net Present Value (EUR)