Amandla Resource Development Consortium (ARDC) Presentation to NERSA for REFIT Programme May 2011 Solid Biomass to Electricity (BTE)

Transcription

1 Amandla Resource Development Consortium (ARDC) Presentation to NERSA for REFIT Programme May 2011 Solid Biomass to Electricity (BTE) 1

2 ARDC TABLE OF CONTENTS 1. Introducing ARDC 2. Differentiating COFIT/ REFIT 3. Tariff comparison Cofit/Refit 4. Biomass Types as feedstocks 5. Biomass Sources of Supply 6. ARDC s BTE Project Sites 7. ARDC Biomass Feedstock Pricing ( ) 8. Refit Price Solid Biomass 9. Indicative Biomass Costs 10. Biomass BTE costs/ KWh 11. Biomass BTE project Employment creation 12. ARDC Project Economics (12MW plants) 13. ARDC Proposal to Nersa 14. ARDC BTE Project Benefits 15. End slide credits Submission to Nersa 5/6 May

3 Who are; Amandla Resource Development Consortium? ARDC & its Associates are active in Renewable Energy & Local Community Development. Mainly in KZN, for 12 years, since Mission : Renewable Energy, Community & Sustainable Project Development. Amandla: Empowerment - through Renewable Energy! 3

4 Differentiating between REFIT & COFIT Rationales: ARDC s Renewable Energy projects are focused on REFIT, using underutilised biomass resources that will still need to be harvested, collected, transported, delivered and pre-processed (chipped, shredded and dried. COFIT projects are supposed to utilise biomass and other residues from existing manufacturing processes, where the renewable energy fuel resource has already been delivered to site and processed & therefore does not carry an additional cost burden, in terms of a comparison with the REFIT projects. 4

5 Comparing Solid Biomass REFIT & COFIT Tariffs: REFIT (i) was set at R1,18/ KWh and would have provided a reasonable R.O.I. of around 17 to18% Recently announced COFIT for solid biomass has been suggested at R1.83/ KWh that seems to ignore the fact that they fuel source is already pre-processed and on-site. REFIT (ii) has now been reduced to R1,06/ KWh that will result in a reduction of the operating margin for the project developer/; owner to less than 15% R.O.I. and does not adequately recognise the costly harvesting and transport logistics burdens. This reduced price level for biomass solid will impact negatively on the project s ability to create new jobs 5

6 ARDC Biomass Types - REFIT Forestry: Currently unutilised Forest Brushwood, post-harvest toppings, stumps etc. for REFIT Solid Biomass Forest smaller diameter logs (arising from more-efficient whole tree harvesting). for REFIT Solid Biomass Sugar Cane: (not Bagasse that is already delivered to a mill acceptable for COFIT not REFIT). Post-harvest Sugar Cane tops & Trash for REFIT Solid Biomass. General Agricultural Biomass residues: Vine clippings, Orchard prunings, Stover and cobs, Bush-clearing waste residues, Alien plant eradication biomass, Animal wastes etc. for REFIT Solid Biomass Short-rotation Energy Crops: (Bamboo, Moringa, Miscanthus etc that can be out-grown ). for REFIT Solid Biomass Municipal: Green biomass (garden) waste. for REFIT Solid Biomass Dried sewage plant sludge, dried abattoir waste/ effluent. General Municipal house-hold garbage (can only be processed in specialised equipment). Landfill site solid bio-degradable mass (can only be processed in specialised equipment). Landfill gas extraction (qualifies for a different REFIT tariff rate than solid biomass) 6

7 ARDC (Solid) Biomass Sources Commercial forest owners & companies Community forest / wood-lot owners and (rural) Traditional Authority entities Commercial Cane-grower consortiums Small-scale cane growers (Rural communities) Municipalities (for green garden waste) Contract Future energy-crop out-growers Other agricultural waste i.e. prunings etc 7

8 Biomass Sources: Sugar Cane Tops 8

9 Relative Proportions of Tree Components (Avg. Trees) Branch wood & Tops Foliage Stem wood Stump wood Root wood 9

10 Biomass Sources: Bamboo. Short-rotation new Biomass plantations Bamboo is the top 3 biomass producer amongst all plants. Multiple uses; Energy/ food/ furniture/ flooring/ poles/ bio-char/ fodder. Irrigated in optimal growing conditions minimum 150 tons (dried) per ha per annum on maturity or on dryland 40 to 60 tons (dry) per ha per annum or more in many recorded cases. Water usage = 50%/ kg, compared to Gum tree or Sugar Cane years without replanting. Allows Inter-cropping (food crops). Carbon absorption 35% greater than trees = 100 tonne/ ha and up to 223 tonne/ Ha / annum. D o A & E Species - Type Approval Can grow on marginal soils and is useful for soil fertility, soil-binding for erosion control. 10

11 ARDC BTE Project Sites Mainly in Rural KZN but also in E Cape and southern Mpumalanga provinces. Next to / close to existing Eskom Sub stations. Will contribute to decentralised grid stability. Have access to water or specialised water recycling and treatment plants. Have advanced or In progress Environmental approvals. Situated at epicentres of bulk biomass supplies. Contribute to job-creation, SMMEs and BBBEE development. 11

12 ARDC Biomass Pricing Objectives BTE Plants should generate electricity continuously, without need for electricity storage & must contribute to decentralised base-load grid-stability. Should provide Incentives to; recover & deliver currently underutilised biomass to BTEs Grow new energy crops such as Bamboo/ Moringa etc Create long-term sustainable employment in this process Establish new SMME & BBBEE entities as service entities Provide training & Mentorship for all the above 12

13 REFIT Price Setting REFIT price level for solid biomass should recognize there are competing forces, even though historically the biomass may have been wasted or burnt-off as waste. Capital: New, labour-intense & technically appropriate biomass collection, pre-treatment and logistics solutions will require considerable additional capital investment The refit price per kwh should cover; A reasonable delivered cost for biomass The factory conversion-to-electricity costs, including the cost of water and its treatment required for the operating plants The Cost of Treatment and disposal of any residual ash or waste products A reasonable return, for the institutional and equity investors. 13

14 Indicative Delivered Biomass Costs The following costs per tonne, include recovery, compaction, delivery & incentive margin (2010/11): Forest brush wood toppings R 240 Forest round log wood (used for Pulp) Sugar cane tops and trash R 240 Bamboo energy crop (new) R 420 & rising! R 220 at source Municipal garden waste (mainly Del cost) R 70 to R 140 In addition, this biomass must be further baled, pre-processed (shredded or chipped), and dried, to render it suitable for processing (add-on cost range approx. R 30 to R 80/tonne for chipping/ shredding and drying). 14

15 ARDC Biomass Power Plant Costs: per KWh Biomass feedstock 40,1% Salaries & Wages 15,5% Other factory expenses 10,6% Sub total 66,2% Fixed asset repayments 33,8% Total cost break down % 15

16 ARDC Employment, SMME / BBBEE Opportunities Each 12 MW plant, including plant operation, biomass supply side logistics, biomass growing & recovery will create 1,200 jobs (including 12 SMME / BEEs each employing 10 persons) in the complete supply-chain. Capital investment cost per job R 365,000 averaged These jobs are sustainable for 12 months of the year, for the full operational life of the project(s). Excludes plant manufacturing construction & build costs that create additional, interim project-development employment. 16

17 ARDC Project Economics & Returns The reduced price of R1.06 / kwh for 2011 shows a reduced IRR of 13,3% & an ROE of 15,1% where equity is 30% of CAPEX. These returns are inadequate to meet requirements of equity investors given the risks and 20 year operational time-frame. Project development fees are minimal at 6,25% considering its complex scope. 17

18 ARDC Proposal to NERSA for Biomass NERSA should not reduce its originally published 2009 tariff of R1,18/kWh for biomass solid and Should have this escalated by PPI, from the date of first publication in 2009, in order to retain the intended 17% returns and therefore; to enable, unlock & encourage new investment in this relatively new and locally-untried economic sector that can make a meaningful contribution; both to electric power stability and especially to rural employment creation and development. 18

19 Additional Benefits to Economy Decentralised Grid-stability in remote / rural areas Continuous power output - without need of storage Environmental benefits from less in-field/ postharvest burning-off of wasted resources Additional community / SMME income from currently wasted resources = Substantial new job / SMME / BBBEE creation Rural economic development that will provide security of supply for the needed feedstocks for the plant(s). Uplifted rural communities that can also drive and grow food-security. 19

20 Amandla Resource Development Associates: Zululand Centre for Sustainable Development [ZCSD] Section 21 co. Ecosystems cc. Rainbow Millennium Power Corporation Envirovest Bioproducts (Pty) Ltd; Bamboo development Various Biomass grower-suppliers: Commercial/ Local Community and Traditional Authorities that have already signed cooperation agreements Realising Africa s Natural Potential, through Renewable Resource Management