Decision Support for Small-scale Biomass CHP Development

Transcription

1 Decision Support for Small-scale Biomass CHP Development Daniel Wright, Prasanta Dey, John Brammer ESRC CASE Studentship Project

2 Format Current CHP in the UK Project development and uncertainty Project stakeholders and contracts Economic viability measures CASE Studentship company Proposed solution

3 Introduction: Renewable Heat 50% of the UK s final energy consumption is for heating (77% if you exclude all transport sectors) 1.5% heat is generated from renewable sources (Eurostat, 2011)

4 Introduction: schemes by size and fuel type 13; 10% 3; 2% 5; 4% 3; 2% 5; 4% 6; 5% 9; 7% 14; 11% Renewable fuels 6% Other fuels 20% Coal 3% Fuel oil 1% 20; 16% 94; 74% 15; 12% ; 21% 4 3 Natural gas 70% 2 8; 6% 1 74% of schemes are <10MWe 6% of total fuel from biomass

5 Introduction: operational bchp schemes Plant Company Location Net Cap Technology Feedstock Use for Heat Additional Information Operational Balcas Timber Biomass CHP 1 Balcas Bioenergy Limited County Fermanagh, Northern Ireland 2.45MW - Bi-product wood chip Production of wood pellets for domestic/ commercial boilers Operational Bentwaters CHP 2 REG Bio-Power Suffolk 4.8MW Engine Vegetable oil - Operational Merthyr Biomass CHP 3 Merthyr Industrial Services Glamorgan, Wales 1MW Gasification Waste wood - Construction Heathrow airport CHP 4 BAA Airports 1.8MW ORC Wood chip Heating and Cooling to the airport terminals BskyB 5 BSkyB London 1MW ORC Wood chip BSkyB premises UEA University of East Anglia Norfolk Newry 7 Kedco plc County Down, 2MW Gasification Waste wood Northern Ireland Development REG Bio-Power Leeds REG Bio-Power Yorkshire 2MW Engine Vegetable oil - Commissioned 2011 North 2 R Plevin & Sons 6 R Plevin & Sons Nottinghamshire 1.6MW Waste wood Twinwoods Twinwoods Heat and Bedfordshire 2.5MW Gasification Waste wood Partner dissolved Power Ltd (status unclear) RedHill Road Biomass Barnes Wallis Heat & 2.5MW Gasification Waste wood Partner dissolved Power Ltd. (status unclear) Enfield 7 Kedco plc Greater London 12MW Gasification Waste wood Achieved planning permission Failed Georgemas CHP 8 Georgemas Biomass CHP Limited Surrey 6.3MW Gasification Forestry arisings Dissolution notice in Gazette Aug Taken from ; 2 Taken from [22] ; 3 Taken from [23] ; 4 Taken from [24] ; 5 Taken from [25] ; 6 Taken from [26] ; 7 Taken from [27] ; 8 Taken from [28] ; 9 Notice from [29] ; 10 Taken from

6 Project Development Lifecycle High Risk and uncertainty Degree low Cost of changes Project development timeline Development Construction Operation Decommission

7 Key Stakeholders Lender Investor (8) (5) (6) (7) (4) (1) (2) (3) PPA: EPC: Heat: Finance: O&M: PP: Feedstock: DNO: Possible Mainly Market All Not Most Obligated More risk always are expensive driven with local project to offer by opposition incentive uncertainty contractor bankable financed connection than power value (may only slows (NIMBYism) over feedstock fail, e.g. power ARBRE) supply DHN Lenders Cost plants of cost connection require up to High development End Large 1000 long overly of term numbers risk a expensive the metre and ROC of planning scheme Drives contingency secure c. 100k toward per revenue granted MWe up to Long payback by sustainable 20% streams appeal because CAPEX of DHN feedstocks under costs the RO & RHI may cause shortages Contractor Local Authority Feedstock Supplier EPC Contract Debt Planning Permission Feedstock Contract Project Finance bchp Scheme PPA Power Purchaser Equity Grid Connection Agreement Heat Contract O&M Contract DNO Heat User Operator

8 Cost ( /MWhe) Economic Viability: Spreads Market price Bark Spread Spark Spread Gas Wood chip Straw MSW Production incentives are required incentivise biomass use If bark spread is greater than spark spread? Bark spread is the difference between the cost of biomass with the associated incentives and the price of electricity

9 LCOE ( /MWhe) Levelised Cost by Technology

10 Cash in Economic Viability: Cash Flow Projection Cash out + - Devex Construction Equity Debt Debt service Profit Opex EBITDA Time (yrs)

11 CASE Studentship Company: Themes Developer and operator of small-scale bchp schemes in the UK 1.5MWe bchp scheme Mixed residential and light industrial heat users Themes: Project development and viability Risk and uncertainty

12 Proposed Solution Aimed at developers Project planning and risk analysis model for small-scale bchp systems Greater focus on the levelised energy cost for a plant Incorporate project financing terms in model financials Allows for uncertainty and vagueness in forecasting

13 Membership (μ) LCOE ( /MWhe) LCOE ( /MWhe) Fuzzy LCOE with Heat Uplift At 60% Debt and 40% equity LCOE for project including revenue generated from heat sales Outputs: Finance Expected % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Debt Gearing Abs. Min Expected Abs. Max P r o j e c t F i n a n c e Minimum LCOE for project at range of debt to equity gearings Debt: 50% 60% 65% 70% 71% 72% 73% 74% 75% Abs. Min Exp. Lower Exp. Upper Abs. Max

14 Membership (μ) Outputs: Heat Revenue Heat Contract Sales of heat and supporting incentives significantly reduce the LCOE LCOE Initial No Heat LCOE Initial Heat Uplift LCOE ( /MWhe) LCOE No Heat LCOE with Heat Uplift Project financiers require security over the period of the debt term. They often require contracts to match the debt term to reduce their risk Onsite heat sales do not require a contract and can be therefore deemed not secure

15 Outputs: Incentive Choice PPA Onsite heat and electricity prices are fixed and so is the PPA. Shows the minimum unit cost of heat (per MWhth) at increasing heat utilisation levels Unit Value ROCs 1 ROC/MWh 1.5 e ROC Price /MWhe 47 LEC 2 Price /MWhe 4.7 RHI /MWhth 10 1 Renewable obligation certificates; 2 Levy exemption certificates.

16 PPA ( /MWhe) Outputs: PPA PPA Heat Utilisation (MWhth/pa) Onsite heat and electricity prices are fixed and so is the PPA. Shows the minimum unit cost of heat (per MWhth) at increasing heat utilisation levels % 10% 20% 30% 40% 50% 60% Initial Scenario Heat Utilisation (%) Abs. Min Expected Abs. Max Achieved Potential

17 Change in LCOE (%) Change in LCOE (%) 50% Abs. Min Expected Abs. Max 40% PPA Outputs: Sensitivity Analysis 40% Abs. Min Expected Abs. Max 30% Feedstock Contract 30% 20% 20% 10% 10% 0% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 0% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% -10% -10% -20% -20% -30% Change in Electricity Production (%) -30% Change in Feedstock Price (per ODT)

18 Crit. Task Pre-feasibility Site acquisition Concept design Financial modelling Planning permission Find investors Detailed design Component tender and HOT Feedstock tender and HOT EPC tender and HOT Grid connection HOT PPA HOT Due diligence Financial close Award contracts Ground work Construction CHP installation Handover Membership (μ) Outputs: Scheduling Project Duration (months) Fuzzy Duration Exp. Lower Exp. Upper ID A B C D E F G H I J K L M N O P Q R S Maps the project duration when there is uncertainty Critical paths and task duration criticality

19 Risk Analysis and Response No. Uncertain Effect LCOE or Duration Impact Risk event Abs. min Exp. Abs. max Abs. min Exp. Abs. max Development 1 Planning permission (PP) Development cost 8,000 10,000 12, Planning permission (PP) Duration task E (months) 3 Underestimated cost Development Cost Construction 4 Construction Duration task Q (months) ,000 10, Operation 5 Feedstock cost Feedstock cost (ODT) 6 Fire Availability 5% 5% 10% ROC value ROC value Feedstock quality MW/ODT Equipment failure Availability 0% 5% 5% Onsite residential heat demand Heat demand (kwhth/d)

20 Further Application Continue demonstrating the methodology / software to industry practitioners Finish the PhD BioenNW Interreg project, led by EBRI, which aims to deliver several small to medium scale commercial bioenergy CHP projects across NW Europe.

21 Thank you for listening