Renewable Energy Is it feasible in a distillery environment?

Transcription

1 Renewable Energy Is it feasible in a distillery environment? Andrew Bright, ITPEnergised

2 SWA Guide Published in 2012 Details on a range of technologies Information on subsidies Numerous examples of the use of renewable energy at a range of sites

3 Context SWA Strategy Objectives 1 20% of primary energy requirements from non-fossil fuels by 2020 & 80% by 2050 Scottish Government Target target of 50% of Scotland s energy consumption to be met by renewable energy. Source: 1 Scotch Whisky Association Environmental Strategy Draft Energy Strategy for Scotland January 2017

4 Assessing the feasibility Initial feasibility stage Resource availability for each technology (wind, solar, biomass, AD, hydro etc.) Proposed energy demand & profile (electricity & heat) Grid availability Commercial considerations (IRR hurdle rates, financing options) Site constraints (planning, access, ground conditions, building structures etc.)

5 Energy Data Analysis HH Electricity Data (Production) HH Electricity Demand for 1 week

6 Energy Data Analysis HH Natural Gas Data (Production) HH Production Natural Gas Demand for 1 week

7 Technology Analysis Solar PV Technology Description When is energy available? Interaction with other technologies Incentives Available Technology maturity/risk Supply chain maturity and after sales High Level Costs and Typical ROI Overall Technology suitability for the site Solar PV Solar Photovoltaic (PV) technology works on the principle that energy from the sun is converted to electricity. Hours of daylight only without storage with reduced output over winter Would need to be considered part of overall baseload of electricity supply technologies to avoid grid export and increase ROI. Initially sized at 400 kwp to fit with potential wind turbines. Feed in Tariff is available at a rate ranging between 4.36p and 0.35p per kwh produced depending on the size of the installation (up to 5 MW). A 400 kwp installation would have a tariff rate of ~1.6p per kwh. Note that this can change on a quarterly basis. Solar PV technology is well established and would be considered as relatively low risk. Supply chain and after sales are well established with competitive market space. Typical cost is 1,000 per installed kwp. Typical ROI is less than 8% with simple paybacks over ten years. It is likely that over 4,000 m 2 would be required in total. Budgets costs would be 400,000 to 500,000 subject to the scheme being roof or ground mounted. Potential yield would be ~340,000 kwh with a value of 30,600. MEDIUM

8 Technology Analysis Energy from Wood (Gasifier and AD) Technology Description When is energy available? Interaction with other technologies Incentives Available Technology maturity/risk Supply chain maturity and after sales High Level Costs and Typical ROI Overall Technology suitability for the site Energy from Wood Gasifier or Anaerobic Digestion Energy from wood systems convert the fuel source (wood) into useable energy. This can include electricity, heat and transport fuel. Waste streams are typically converted into energy by combustion (see section 4.8), gasification or anaerobic digestion. Available at all times as long as there is fuel (waste). Backup system required during maintenance periods. Energy from waste systems would require sizing so as not to clash with other LZC technologies. For example, if a biomass direct firing system has been sized for heat baseload, an energy from wood system would need to ensure that heat is not rejected to atmosphere. Depending on the system, Feed in Tariff could be available for electricity generated and RHI for heat. Relatively mature technology with a number of potential planning issues which make it a technology involving moderate risks. Potential odour issues would require mitigation. Well established technology which remains relatively expensive. Costs for a heat only system range from 1,500 to 2,000 per kw thermal output. On per kwe basis, AD CHP systems range from 2,500 to 5,000 per kw electrical output. A 1 MWe system would be in the region of 2.5M to 3M. Typical ROIs can range from 8% to 12% with simple paybacks ranging from 8-10 years. MEDIUM

9 Technology Analysis Biomass CHP Technology Description When is energy available? Interaction with other technologies Incentives Available Technology maturity/risk Supply chain maturity and after sales High Level Costs and Typical ROI Overall Technology suitability for the site Biomass CHP This technology is based on the combustion of biomass to create steam. The steam is then supplied to a steam turbine generator. This generates electricity which is typically used on site to reduce the import of grid electricity. This would typically be a back pressure steam turbine so that exhaust steam can be used with a process. Output is typically available at all times as long as there is fuel. Biomass CHP is also typically sized not to be the sole means of energy generation so backup systems such as gas fired burners and grid electricity will be required to cover energy demands during maintenance periods and unplanned outages. A biomass CHP system would require sizing so as not to clash with other LZC technologies. For example, if a biomass CHP has been sized for electrical baseload, then it may limit the opportunity for installing additional electricity generation such as wind turbines or solar PV. This means that the scope for biomass CHP would need to be considered in the context of any other LZC technologies selected for further analysis. RHI eligible - There is a dedicated Biomass CHP tariff of 4.29 p/kwh. This applies to qualifying heat produced from the turbine and used within a process rather than condensed. It is possible that the scheme could bid for a Contract for Difference (CfD) for electricity generated. Grant finding unlikely given technology maturity and RHI and CFD support. Biomass is considered to be low to medium risk. Technology is well established with successful examples in public and private sector. However, there are less examples of biomass CHP systems and this technology would be considered medium risk although examples are well established in other industries. It may be logical to procure on a turnkey basis for the two main elements of the project; the biomass boiler and the steam turbine. Maintenance contracts can be carried out under contract by the suppliers of boiler and turbine. It is essential that day to day maintenance is carried out in accordance with manufacturer s guidance. The nature of this LZC technology means that reference pricing is more difficult than other technologies such as wind and solar PV. 5 MWe biomass CHP package with grate boiler and steam turbine is likely to cost 15M to 20M dependent on technology used. Project economics will be sensitive to four main points; 1. being able to source further biomass fuel at a price similar to the internal costs for the current biomass dust. 2. Access to RHI for the new installation biomass CHP heat output 3. Access to Contract for Difference for electrical output 4. The price of gas. An increase in gas price would increase savings; a fall would reduce savings. Assuming that the project could source biomass at the same rates and obtain RHI and with gas prices at 2p/kWh, the ROI would be expected to be 13% to 15% with a simple payback of 6-8 years. However, these figures should be treated with caution given the uncertainties detailed in 1-4 above and that further investigation is required to determine if the site could potentially use sufficient steam within the process. HIGH

10 Other points to consider Accessing grants and external investment This can impact the schemes eligibility for subsidies so it is essential to consult with Ofgem to understand this. Carbon & other legislation Fully consider the legislative impacts; IPPC/IED, MCPD, EUETS, CCA Energy Security Over reliance on one technology may prove to be risky a balance of systems or a hybrid approach will reduce the risk Timescale for development Vary by technology, but don t underestimate the lead times for development, financing delivery of equipment. Ranges from 12 months to 3 years.

11 Contracting options Potential LZC Technology Funding Contract Option Company capital Brief Description Company to invest in LZC project from an agreed budget, and on balance sheet. If the project is developed and not operating in accordance with expectation this runs the risk of stranded assets. This model enables Company to maximise the savings and medium term financial benefits through the Renewable Heat Incentive and/or the Feed In Tariff (20 years). In contracting/managing the development, Company will have greater control of the process, including all aspects of the procurement and implementation programme. Straight Finance Loan (recourse) Power Purchase Agreement (PPA) A finance loan model is a straightforward model, however clarification is needed on the security against Company assets. Financially, the principal risk lies in any change in interest rate and length of term. A PPA is the sale of electricity through a direct (private) wire from an LZC that have been installed by a developer on the Company site or in close proximity. Whilst there will be a reduction in the financial benefit, this is offset with a limited risk on development capital and performance on operations by the developer. The financial benefits will be a point of negotiation with the developer (e.g. price for electricity), but there will be guarantees on energy pricing (less than existing supply price), greater stability in price, energy security and carbon reduction. Energy Services Company (ESCO) Joint Venture Shared Savings Special Purpose Vehicle (SPV) equity and/or loan financed An ESCO is a company that would be set up to finance and deliver energy services and generation at the Company site. Whilst it may not be the most appropriate model for a wind and biomass project, it could be something that can support delivery of a wider set of generation and efficiency measures across the business. Company could provide both finance and operational support to the ESCO (similar to a Joint Venture offering) as this is a reasonably flexible model and thus can satisfy flexibility in the amount of risk and reward required. This would be a strategic alliance with Company and a technology supplier. It will be a project with joint capital, operated and maintained by a technical partner, savings shared between parties. Consideration should be given in the contract specification on who bears certain risk, whether it is a true JV or where each company takes on different levels of liabilities dependent on the risk. A separate company set up by Company and a finance partner to deliver outsourced energy solutions. This model can be used to set up a separate ESCO body to delivery technology and wider energy savings. This route is common and one that is tried and tested and is used to attract debt into a scheme project finance. Due to scale, security will be on the PPA and the assets, rather than on the Company business.

12 Summary and key points Demand for renewable energy is still growing Costs are continuing to come down Greater interest in On-site generation Various bankable technologies, subject to site suitability Assess the commercial & technical viability Assess the planning risk Explore funding and/or investment options

13 Thank you for listening Andrew Bright, Director