Planning and financing of Biomass & Biogas Energy Projects

Transcription

1 Energy Planning and financing of Biomass & Biogas Energy Projects Renewable Energy in Perú and Technology Made in Germany Lima, November 17 th, 2010 Dirk Volkmann

2 content renewable energy cost of renewable energy feedstock technology of supply and preparation legal framework cost and economics set-up of a renewable energy project first project evaluation implementation and finance of the project

3 Energy renewable energy

4 SCENE different sources of renewable energy hydro power solar wind power & heat biofuels biogas biomass

5 potential of of renewable energy world energy demand solar geothermal hydro biomass wind

6 biomass as a source of energy Energy Crops Miscanthus, Triticale etc. Agricultural Residues Straw, Forest Residues etc. Organic By- Products Manure, Industrial wood residues etc. Harvesting, Collecting, Treatment, Storage, Transport Organic Waste Sewage Sludge, Slaughterhouse waste etc. Thermo-chemical Conversion Carbonization Gasification Pyrolysis Physical-chemical Conversion Pressing/Extraction Transesterification Bio-chemical Conversion Alcoholic Anaerobic Fermentatio Digestion Composting n Solid Fuel Coal Product gas Pyrolysis oil Vegetable Oil PME Ethanol Biogas Solid fuel Gaseous fuel Liquid fuel combustion Electrical Energy (Fuel Cells) Thermal Energy Thermo-mechanical Conversion Power Heat

7 resource base annual global primary production of biomass is approx. 220 billion to DS or 4,500 exajoules theoretically harvestable are 2,900 exajoules, of which 270 exajoules (equivalent to 2,300 GW) are considered technically available on a sustainable basis. the challenge is logistics: sustainable management, conversion and delivery to the market 1 exajoule is equivalent to 2.78 x 108 MWh

8 raw material for bio-energy biogenic solid fuels pellets (wood) wood chips logs (wood) industrial fuel (wood) agricultural biomass (straw) gaseous fuels (biogas) liquid bio-energy sources (vegetable oil, RME, ethanol)

9 utilization of biomass in CHP plants biogenic solid fuels - wood - straw - grain combustion steam turbine steam engine power heat power gasification gas turbine heat vegetable oil plants - canola - sunflower - palm liquefaction engine power heat

10 Energy cost of renewable energy feedstock

11 political impact on the oil price

12 retail purchase prices for used timber in Germany April 2010 prices in /to April 10 Jan 10 October 09 April 09 untreated used wood, abs. clean, wood chips (0-150 mm) untreated used wood, abs. clean, wood chips (0-300 mm) treated used wood wood chips (0 150 mm) treated used wood fractured (0 300 mm) contaminated used wood wood chips (0 150 mm) contaminated used wood fractured (0 300 mm) source: EUWID 09/2010

13 system comparison with other RE electrical energy from wind electrical energy from PV electrical energy from hydro electrical energy from biomass/biogas time in days during 1 year time in hours during 1 day

14 load distribution peak load mid-load base load power plant output

15 Development of FIT and Prices for Conventional Energy Sources production cost feed-in tariff for new plants delivery cost power exchange Bundesverband erneuerbare Energien

16 influence of speculation on raw material prices speculation wheat 98% crude 95% 2% 5% foreign exchange 93% real trade contracts 7% only a fraction only a few really want to buy raw material and FX most gamble on price volatility

17 Energy technology of supply and preparation of fuels

18 treatment, storage and transport classification of size unit goods log wood bales of straw bulk goods wood chips chopped material saw dust straw

19 treatment, storage and transport storage outside under rooftop bale storage flat storage silo

20 treatment, storage and transport drying processes natural ventilation drying outside (unit goods) under rooftop (coarse & bulk with high air permeability) cold air drying hot air drying vertical aeration (flat grate) horizontal aeration (hay tower) unit or bulk goods bulk goods

21 Energy legal framework

22 factors which influence the utilization of renewables POLITICS geographics, energy policy - level of precipitation - solar radiation - wind velocity - availability of fossil resources - existence of nuclear power - age of power plants - overcapacities economic environment - level of oil and gas prices - subsidies for fossil-nuclear energy - internalization of external cost - targets and definitions - administrative responsibilities - green parties in government - approval processes - international guidelines (EU, Kyoto etc.) promotion instruments: feed-in tariffs, quotas, bids, tax holiday,...) technology - yields / plant efficiency - grid accessibility and working condition cognitive environment - public awareness - compatibility with the dominant belief system about the superiority of bigger units source: ffu Berlin

23 Energy cost and economics

24 economic requirements the plant has to flexible for the production of power and heat the plant has to produce power with the highest degree of efficiency, as payments for power are better than for heat as biomass storage is limited due to the low energy density, the plant should be capable to process different type of fuel

25 structure of revenues & expenditures for biomass plants CAPEX - net investment cost - extra expenses for planning, approvals and expertise - prepaid tax / VAT - interest during construction - miscellaneous revenues -earnings from sale of power and heat - grants, bonuses, subsidies, and the like promotion and incentive programs - feed-in tariffs OPEX - fuel cost - cost of O & M - cost of insurance and tax - employment cost - cost of materials & supplies

26 Energy set-up of a renewable energy project

27 borderlines for the energetic utilization of biomass fuel main criteria the specific characteristics of the bio fuel to be utilized the specific properties with regard to the energy demand and the best available technology for the energy production from solid biomass the selection of the combustion system depends, as the size of the plant, on the type of fuel (chips, chopped material, pellets or bales) available

28 from idea to implementation Idea project sketch preparation of implementation Yes results of project sketch positive? No implementation (feasibility study, planning, approvals, construction) stop of project

29 content of a project sketch technical aspects (technical rough concept) definition of project conditions/limitations identification of biomass quantities rough concept for the biomass supply chain technical plant requirements economical aspects (economic estimate) rough estimate of the capital requirement rough estimate of the plant feasibility evaluation of possible subsidies nontechnical/noneconomical aspects preliminary appraisal of project partners assessment of duties to obtain permits valuation of acceptance preparation of next steps to implementation

30 relevant environmental permits, e.g. in Germany effective output relevant directive Oxygen Vol.% CO (g/nm 3 ) total C (mg/nm 3 ) No x (mg/nm 3 ) dust (mg/nm 3 ) emission values for the combustion of untreated wood kw 1. BImSchV kw 1. BImSchV kw 1. BImSchV kw 1. BImSchV 13 0, MW TA Luft 11 0, MW TA Luft 11 0, emission values for the combustion of straw and similar plant material kw 1. BImSchV kw 5MW TA Luft 11 0, MW TA Luft 11 0,

31 Energy first project evaluation

32 necessary steps for the technical concept definition of project conditions / limitations identification of available biomass quantities rough concept for the biomass supply chain plant site data of energy consumer, including heat requirements biomass quantities average radius during one year time curve of supply fuel characteristics type of delivery kind of long term storage kind of necessary treatment

33 necessary steps for the technical concept rough plant concept civil concept number, type and size of plant(s) for the production of heat, power and/or cooling energy type of combustion technology type of power production flue gas cleaning design and operating parameters data of main components necessary floor area construction volume

34 necessary steps for the technical concept concept of heat distribution concept of power to the grid length of main heat trench diameter of heat trench number of transfer stations feed-in access point to the grid and level of voltage agreement with the grid operator about the technical requirements for power feed-in

35 Energy implementation and finance of the project

36 ways of influencing a project during the execution The better you plan in the beginning the less you pay during execution! in % O Baseline of declining influence OPTIMIZATION PHASE 1 evaluate clients needs 0 1 Project development 35 % OPTIMIZATION PHASE 2 Proof of concept 22 % 38 % OPTIMIZATION PHASE 3 Transfer of ideas into reality Baseline of increasing cost Tender/Prequalification for technology and supplies / negotiations/contracts etc Project cycle In 9 Phases

37 conditions for the implementation of RE projects data collection and analysis technological requirements stakeholders to be included investment plan for identification of: feasibility security finance of: equity debt capital

38 stakeholders to be included insurance tax advisor municipality/ local authority landlord Investor (equity) Bank (debt) commercial management Environmental expert Project Developer technical management surveyor Engineering Co. General contractor O&M service law firm civil construction supplier EPC contractor supplier supplier

39 typical cost structure of a project investment phase concept, expertise lawyers, supervision, permits compensation measures earth works, access roads cabling, grid connection foundation plant ex works transport & erection capital procurement preparation of fund prospectus placement guarantee fund supervision planning material cost soft cost expenses operation phase land lease (calc.) Commercial management Technical management O & M repair, spare parts energy consumption transformation cost debt interest insurance premium taxes, levies tax advisory, accounts, office deconstruction

40 sources of finance equity debt capital from local and international banks (ADB, WB, KfW etc.) emission certificates CDM / JI Gold Standard VER+

41 structure of finance Cash-Flow Related Lending Financing bank does not check past performance but the future values of an investment Off Balance Sheet Financing Spin-off of project into an SPV and therefore off the balance sheet of the project developer Risk Sharing Distribution of project risks to various stakeholders guarantees of the suppliers, insurance contracts, performance guarantees of the general contractor

42 network of stakeholders for risk sharing utility insurance feed-in and price guarantee according to FIT profit based payout liabilit y EQ Sales placement guarantee fixed interest rate fixed premium third party risk, breakdown, interruption landlord yield based lease fixed price Project Developer target date guarantee yield based payment technical management General contractor full service concept fixed price target date guarantee performance and availability guarantee civil construction EPC contractor

43 risk sharing in view of the capital providers Investor (equity) liability debt equity provider equity contribution placement guarantee EQ Sales controlling of funds fiduciary chattel mortgage pledge payout guarantee expert report, haircut assignment for security buy back guarantee preference surveyor land charge servitude liability limitation information liability references, performance record payment guarantee Project Developer liquidity management

44 different finance in different project stages planning phase pre-finance typical finance on balance sheet of the company construction phase bridge finance balance sheet or bank finance with collaterals with co. liability operation phase project finance off balance sheet, no liability of developer, trade sale to exit investors bank developer SPV

45 basic rules for project finance equity min. 20% collaterals necessary: cession of FIT assignment of the plant(s) cession of insurance payments Claims from EPC and O&M contracts equity is subordinate to debt capital bank rules when cash out to investor is possible, amount of cash reserve is negotiable, DSCR:

46 quality criteria cheap plants are very expensive in the long run limit exposure of liabilities keep promises for 20 years, which were given within minutes confidence creates long term relation with client

47 net cash flow finance earnings from FIT + interest earnings = cash effective payments - payments for service, repair and maintenance - insurance premium - lease - transformation - plant management - debt capital interest - miscellaneous = operating income - depreciation and accrued liabilities = pre-tax profit - income tax = after tax profit + depreciation and accrued liabilities = project cash flow (net)

48 The Challenge In the future all single options for the utilization of renewable energy have to be coordinated to a much higher extent AND have to be integrated a lot better into the existing energy system In Europe - and the rest of the world trade in renewable energy will grow tremendously; for this reason all necessary measures have to be taken (introduction of standards). German companies and contractors have cutting-edge technology in some areas; this competitive edge needs to be further strengthened. PLUS: cost for the production of renewable energy has to be reduced further, also through upgrade in technology.

49 Energy Volkmann Consult - Corporate Advisors - Joachimstrasse 24 D Düsseldorf dirk at volkmann-consult dot de