50MW Biomass Fired Project Proposal Aldwych International June 2008

Transcription

1 50MW Biomass Fired Project Proposal Aldwych International June Power Sector Background 1.1 Power Deficit and Cost Owing to the low levels of Lake Victoria, the hydro capacity of Uganda has dropped from 380MW to approximately 180MW. Even with the additional100mw of electricity from Aggreko priced at US$29 cents (USh 464)/kWh, customers are load shed 50% of the time. To accommodate the higher power costs resulting from the introduction of thermal power, the tariffs are USh 410 (US$23 cents) for residential customers and USh 357 (US$20 cents) per kwh for medium scale industry. This includes a subsidy paid through the electricity regulator. Power prices are likely to increase further as more oil-fired thermal plant is introduced to the system. The planned commissioning of the 200MW Bujagali hydro project will not occur for 48 months and even then demand for electricity will still outstrip supply. There remains the question of how much electricity the hydro station will be able to produce, which, of course, will depend on the lake levels. Even after the commissioning of the Bujagali and Karuma hydro projects, demand projections suggest there will still be an energy deficit beyond In addition to the power supply constraints, the current account of Uganda is suffering as a result of the outflow of hard currency required to purchase higher volumes of hydrocarbon fuel. 1.2 Future Supply Potential Following the development of the Bujagali and Karuma hydro projects, the viable, large hydro generation options outside of Murchison Falls National Park will be exhausted, while demand will continue to outstrip supply and thus hinder the economic growth of the country. 1.3 Thermal Mix Hydro Complement Future power supply options will need to consider thermal options. As the price of the Aggreko oil fired thermal plant suggests, the GoU is wise to consider biomass fired thermal power. Thermal power if priced competitively is a needed complement to an otherwise all hydro dependent system relying on steady Lake Victoria levels. Aldwych International Biomass Project 1

2 2. The Project 2.1 The Project Concept Owing to this energy crisis, Aldwych has taken up the challenge to evaluate biomass fired electricity, which will displace the more expensive emergency thermal plants, reduce the reliance on imported oil, stimulate agriculture and forestry, and provide a diversified supply to an otherwise 97% hydropower system beyond Following extensive studies, Aldwych International proposes to build a 50MW biomass fired power plant in northern Uganda. A commercial forest covering 30,000 hectares will be developed in order to produce the wood chipped biomass required to fuel the generating plant baseload over 25 years. The power plant will be technically capable of operating for 40 years at a very low cost once the capital costs are paid off over the 25 year PPA. Aldwych will develop, finance, construct, and operate the power plant and partner with a forestry management company to grow and supply the biomass required. The project will require a bankable Power Purchase Agreement with the UETCL supported by the GoU. 2.2 Work Done to Date In July 2006, Aldwych evaluated the various sustainable thermal options for Uganda. It became clear that the concept of a biomass fired power plant made the most sense. Aldwych worked with a group of forestry and biomass power consultants, procured by competitive tender, over four months to explore the feasibility of the investment, choose the optimal technology, locate the most suitable area in Uganda, and model the costs. During this time, Aldwych narrowed down the preferred land options based on land availability, sufficient rainfall, soil quality, and proximity to the national grid. Aldwych offered to lease up to 30,000 hectares of land from a group of large titled land owners in northern Uganda. Discussions are ongoing and a Letter of Intent granting Aldwych exclusive negotiating rights was signed. In parallel, Aldwych applied for and received a Permit from the Electricity Regulatory Authority to undertake the feasibility study. Aldwych also began a tree trial on site and installed a weather station and river gauge in April Aldwych International Biomass Project 2

3 Following the receipt of a commercial proposal, the Government of Uganda signed a Memorandum of Understanding with Aldwych to jointly progress the project and further commercial discussions are scheduled for late June. 2.3 The Power Plant Power Plant Technology The biomass power plant will have a 50MW capacity and run at base load with an 85% load factor for 25 years. The biomass will be burnt in a Fluidized Bed boiler producing steam to drive a steam turbine generator. Several plants of this size and technology are functioning successfully across Europe and in the US. Further studies will evaluate whether the waste heat can be used to add value to local agriculture or be used to help dry the biomass wood chips before they enter the boiler. 2.4 Forest Development A forest of Eucalyptus Grandis and the indigenous tree, Markhamia Lutea, will be grown across 25,000 hectares (250km 2 ) in order to supply the power plant with the 500,000 tons of biomass required annually to produce 50MW baseload. This land includes the areas required for roads, fire breaks, and the social and living facilities that will be provided to support the local work force. The final land amount required will depend on whether the trees are harvested on a three, four, or five year rotation. Owing to the acute demand for electricity, balanced with the need for affordable pricing, Aldwych believes the 4 year tree rotation is the correct model to pursue. Aldwych is currently in discussion with credible forestry companies who are interested in supplying the biomass. The forestry will be developed to international standards and focus on generating local training and employment wherever feasible. 2.5 Benefits of Biomass Fired Power Plant Thermal Complement Once the expensive, emergency thermal plants are removed, Ugandan power supplies will once again be almost wholly dependent on hydroelectricity through the Nile River. The biomass plant will help Uganda diversify its energy mix, which can serve as hedge against changing lake levels. Least Cost Thermal The biomass fired thermal plant is the least expensive non-hydro source of electricity in Uganda. It will replace the emergency oil-fired thermal power, which is costing close to US$29 cents (USh 464)/kWh, despite using duty free fuel. Biomass fired power is not Aldwych International Biomass Project 3

4 much more expensive than hydro power in the early years, given the rising hydro construction costs and low river flows seen recently. Indigenous Fuel The project will use an indigenous fuel, wood chips, without relying on imports which drain the country s foreign reserves and exacerbate the current account and trade deficit. Renewable and Green Deriving fuel from trees, the project is green and renewable. Because the trees grown for the fuel absorb carbon dioxide and because the power plant will displace oil-fired, carbon emitting electricity, the power plant will be eligible to earn Carbon Emissions Reduction (CER) credits and help reduce global warming. These credits, accrued over the life of the project, will assist in reducing the tariff. Reforestation Deforestation is one of Uganda s greatest environmental challenges. The country loses 55,000 hectares of forest annually for this reason alone. The Aldwych project will forest 250 km 2 (25,000 hectares) of degraded grassland. The forest will be managed to international standards and be harvested in a sustainable way. Job Creation The forest development will create between 700 and 1000 direct, low skilled to medium skilled jobs for people in the North. Training, fair wages, and the commitment to hire as many local people as is feasible will be a major tenet of the Aldwych investment. Following the decades of civil unrest in the area, this significant source of jobs will stimulated economic growth in the region. Power to the North The project area is beyond the reaches of the national grid. The UETCL has plans to extend a 132kv line to Olwiyo, which is 15km from the project site. This will allow the power plant to serve both the national grid and expand distribution in the surrounding area as well as help tie the national grid to the isolated West Nile grid. Aldwych would like to work with Umeme to electrify the eleven towns along the southern border of the project area with a 33kv line, which will transform trade and development. It is estimated that 15,000 new connections will be possible across these towns. In addition to bringing power and stimulating growth and development in the North, the biomass power plant will help balance the national grid, which has virtually all of its generation overloading the southwest corner of the country. 50MW inserted from the north will improve the efficiencies of transporting power across the country. Adding Value to Agriculture Aldwych International Biomass Project 4

5 While the area is rich in agricultural potential, the difficulty in the transportation of raw food from the North to the prime markets in the South makes farming suboptimal at best. Bringing power into the region will allow agro-processing to add value while making transport viable. The overall development of the region will also increase consumption by local markets Outgrowers Scheme As the forest is developed, it is possible that the project could provide seed and training to local farmers, and they could grow and sell the trees to the power plant through an outgrowers scheme. This will increase forestation in the area and further stimulate the economy. 2.6 Timing Assuming the GoU is supportive of the proposed biomass-fired power plant and forest development, Aldwych believes the schedule below is feasible: January 2007 December 2009: Project Development January : Tree Planting to Plant Commissioning : Operation of Power Plant and Forest 2.7 Cost and Pricing Sensitivities The total cost of the power plant investment in addition to the forestry investment will be approximately US$215m. 2.8 Way Forward The Government of Uganda has expressed interest in the proposal and signed an MOU. The next step is to commence discussions on the Power Purchase Agreement in parallel with advancing environmental studies, land lease discussions, and further forestry feasibility work. Aldwych International Biomass Project 5