Understanding Wood- Fuelled Power Generation and Combined Heat and Power. Scottish Enterprise

Transcription

1 Understanding Wood- Fuelled Power Generation and Combined Heat and Power Scottish Enterprise 1

2 Understanding Wood-Fuelled Power Generation and Combined Heat and Power Introduction to Electrowatt-Ekono The case for bio-energy, the story so far Description of key drivers Variation of key parameters Wood-fuel supply contracts 2

3 Electrowatt-Ekono Company Introduction 3

4 Electrowatt-Ekono (UK) Limited Peter North Project Manager Renewables Electrowatt-Ekono (UK) Limited Century House 100 Station Road Horsham West Sussex RH13 6TB Tel: Mobile: Fax:

5 Electrowatt-Ekono, the Energy Business Group of the globally operating Jaakko Pöyry Group Group Profile Client and technology-oriented globally operating consulting and engineering company The core competence is based on three know how clusters: Forest industry Energy Infrastructure & Environment Global market leader in the forest industry Leading position in energy, infrastructure & environment worldwide 5

6 The Jaakko Pöyry Group has shown a continuous growth rate for decades Key figures JPG 1) 2003 Founded in Helsinki in 1958 Turnover JPG M 412 Employees JPG Average growth rate of 15% since 1985 Listed at the stock exchange of Helsinki since ) JPG: Jaakko Pöyry Group 6

7 Electrowatt-Ekono, a Leading International Consulting and Engineering Group in the Energy Field Management Consulting, Power and Heat, Renewables, Hydropower, Oil & Gas; 1109 energy specialists in 20 countries; Net sales 2003: 98 million. 7

8 Jaakko Pöyry Group Companies Uniquely Servicing the Entire Bio-Energy Value Chain Forestry Consulting Biofuel Raw Materials Sourcing Strategies Forest Industry Bio-energy Strategies Harvesting & Transport Systems Sector, Producer Strategies Plant Design and Operations Costing and Feasibility Turnkey Entry Strategies Markets and competitors Pricing Policy Framework M&A Energy Technology & Markets 8

9 The Case for Bio-energy, the Story so far 9

10 Renewables Initiatives in the UK Climate change Kyoto, 1997: commitment to reductions in green house gas emissions, including CO 2 Several EU initiatives, including the directive to promote electricity generation from renewable energy sources (RES-E) UK target to supply 10% of electricity from RES-E by 2010 (38 TWh) UK initiatives: The Non-Fossil Fuel Obligation (NFFO), a tariff-based system. Replaced on 1 April 2001 by the Renewable Obligation (RO), a market based system. Licence Exempt Certificates - Climate Change Levy (CCL) exemption (electricity, 0.43p/kWh) Capital Allowances and grants Emissions trading 10

11 Industrial Model - Biomass Power Generation Air emissions Biofuels Forestry residues Wood residues Wood products Energy crops Fluidised Bed, Condensing Steam Turbine, Power Plant Wood: Power: t/a (58% MC) 30 MWe MWh/a Export (SROCs) Electricity Consumables Bed material Water Support fuel Chemicals Residues Bottom ash, fly ash, effluents Dimensions Bioenergy Resources BSKP Power generation, MWe 30 Wood, t/a 430,000(* Water in, m3/a 950,000 Bed materials, t/a 435 Direct Personnel ca. 25 Investment, M GBP 26 *) mix of various wood waste 11

12 Industrial Model - Biomass CHP Air emissions Process Biofuels Forestry residues Wood residues Wood products Energy crops Fluidised Bed boiler Wood: t/a (58% MC) Power: 15 MWe MWh/a HP Steam IP Steam Back-pressure steam turbine generator LP Steam Consumables Bed material Water Support fuel Chemicals Heat: 55 MWth Residues Bottom ash, fly ash, effluents HP Steam To site Standby/ top-up Electricity Export (SROCs) Secondary fuel Auxiliary boilers Local distribution network Consumables Water Chemicals Effluents Dimensions Bioenergy Resources BSKP Power generation, MWe 15 Heat generation, MWth 55 Wood, t/a 376,000(* Water in, m3/a 215,000 Bed materials, t/a 380 Direct Personnel ca. 25 Investment, M GBP 23 *) mix of various wood waste 12

13 Investment Model Two cases have been modelled a power only plant of 30 MWe and a CHP plant of 15 MWe and 55 MWth Fuel: Biofuel (wood) Biofuel (wood) Coal fired Coal fired Gas fired Plant type CHP (3bar back pressure) Condensing plant with cooling tower CHP (3bar back pressure) Condensing plant with cooling tower CHP (GT+HRSG) (3bar back pressure) Power (net) MW e Heat MW th Operating hours hours Boiler output MW th Inputs: Wood(bark and saw dust, 58% MC) / Ct/a m3/day MWh/a Water m3/a Limestone t/a Other chemicals various chemicals for water treatment Bed materials t/a Investment (capex) Mn Outputs: Power MWh/a Heat MWh/a Labour (employees) Residues (ash, gypsum) t/a Value: value of output (plant gate), value of ROCs ROC (2 year fixed price) /MWh LEC /MWh Market price of electricity /MWh Heat /MWh? -? -? Embedded benefits p/kwh negotiate negotiate negotiate negotiate negotiate Site requirements: Area m Other Grid connection, Good transport access, Level area, Nearby heat consumer Grid connection, Good transport access, Level area Grid connection, Economical coal transportation, Level area, Nearby heat consumer Grid connection, Economical coal transportation, Level area Gas pipe connecrion, Near by heat consumer, Level area 13

14 Bio-electricity Competitiveness Wood-fired CHP The price is an average electricity price for a large industrial buyer (opportunity cost for an industrial investor). Electricity sold to pool trades at around 15 GBP/MWh 100 -GBP/MWh - Modelled production costs of a hypothetical new production line in Scotland Electricity Cost after heat sales cost benefit Fuel (@Euro20/t del, 50% mc) Water Bed materials Personnel Capital charges Heat sales benefit ROC 40/MWh 0 Heat sales modelled at cost Capital charges consist of depreciation and 10% ROCE Gains through ROCs, Heat sales etc. 14

15 Bio-electricity Competitiveness Wood-fired Power Only The price is an average electricity price for a large industrial buyer (opportunity cost for an industrial investor). Electricity sold to pool trades at around 15 GBP/MWh 60 -GBP/MWh - Modelled production costs of a hypothetical new production line in Scotland Electricity Fuel (@Euro20/t del, 50% mc) Water Bed materials Personnel Capital charges ROC 40/MWh 10 0 Capital charges consist of depreciation and 10% ROCE Gains through ROCs 15

16 Description of Key Project Drivers 16

17 Project Contracts Turnkey Contractor Operator Fuel Supply Bio-energy Project Equity Lenders Site Lease Electricity Off-take Heat Off-take 17

18 Project Cash-flows EXPENDITURES Capital Investment: Construction costs Development costs Annual Costs: Fuel costs O&M Periodic overhauls Bio-energy Project INCOME Electricity sales Heat Sales CCL exemption (LECs) ROCs Emissions trading Administration and personnel costs etc. Debt Service 18

19 Financial Appraisal Whole Life Costing (WLC) A financial appraisal technique Uses discounted cash-flow methods to analyse the expenditures and incomes arising over the project life Accounts for the performance of revenues streams over time Well established technique Discounted cash-flow technique Net Present Value (NPV) provides the net value of revenue streams at the end of the project period in today s value Uses the organisation s interest or discount rate 19

20 NPV Example Small Scale CHP Year Capital 5000 O&M Operation Maintenance Fuel Top-up electricity Other costs Total Costs Revenue Heat Sales Electricity Sales Other Benefits Total Income Cost Income Net Revenue NPV Discount rate 6.0% NPV 1,313 20

21 Variation of Key Parameters 21

22 Turnkey Costs Smaller the plant, the higher the specific cost ( /kwe) economy of scale applies CHP plant of similar physical size to power plant has higher specific cost A proportion of the energy goes to heat supply rather than Electricity generation Electricity has a higher value than heat 4000 /kwe Typical Investment Cost of Biomass-Fired Power Municipal CHP Industrial CHP Condensing Power: Heat: GRATE 1 MWe FBB FBB GRATE FBB FBB FBB ,

23 Bio-fuel CHP Project Annual Costs Other/Investment Costs 35% Fuel Costs 45% O&M Costs 25% 23

24 Sources of Income Electricity Wholesale market or long-term off-take contract (<2p/kWh, but prices rising) Renewable Obligation Certificates (ROCs) (buy-out price 3.051p/kWh, but market price higher) Licence Exempt Certificate (Climate Change Levy (CCL) Exemption worth 0.43p/kWh) Emissions trading Commences 2005 for plants with net thermal input >20 MW Emissions target set under the National Allocation Plan (NAP) Emit less than target trade carbon credits (national schemes trading at 5 10 per tonne CO 2 ) Exceed limits pay a penalty ( 40 per tonne CO 2 ) or buy credits from those in surplus Heat sales 24

25 Renewable Obligation Certificates (ROCs) Obligation for Licensed Electricity Suppliers (LES) to supply over 10% of supply capacity from Eligible Renewable sources by 2010 Introduced 1 April % in first year, increasing to 10.4% by 2010 ROC (SROC in Scotland) - evidence of compliance with Obligation - ROCs tradable By Out Payments alternative to meeting Obligation. Initial price 3 p/kwh - indexed Payments may be recycled to compliant suppliers Indicative price of renewable electricity: Market Electricity Price + CCL + Buy Out Price i.e., = 5.33 p/kwh (8.00 /kwh) 25

26 Wood Pellets Case Study (Finland) 8-10 tonne per hour wood pellet plant Pellet size 8mm dia, 5-30 mm long Heat content 4.8 MWh/t Moisture content 8-10% Ash content 0.5% Material Cutter shavings Bulk density 660 kg/m3 Prices 2001 ex factory: Bulk supply 93/t ( 19.38/MWh) Large bags ( kg) 113/t ( 23.54/MWh) Small sacks (15 kg) 3.36 per sack ( 46.67/MWh) 26

27 Electricity Production Costs Power-only Plant New Power Plant Electricity Production Costs % discount rate 15 years operation Target Price 4.4 p/kwh Operation: 8000 hours per annum 8.0 Electricity Production Cost ( /kwh) Target price Delivered green wood price 30/gtonne 25/gtonne 20/gtonne 15/gtonne /gtonne Generating Capacity (MWe) 27

28 Electricity Production Costs - CHP CHP Plant Electricity Production Costs % discount rate 15 years operation Heat selling price, 1 p/kwh Target price, 4.4p/kWh Operation: 8000 hours per annum 8.0 Electricity Production Cost ( /kwh) Target price Delivered green wood price 25/gtonne 20/gtonne 15gtonne /gtonne 1.0 5/gtonne Generating Capacity (MWe) 28

29 Wood-fuel Supply Contracts 29

30 Typical Wood-fuel Supply Issues Fuel characteristics dictate power plant design (log, chip, saw dust etc) One year wood-fuel supply contracts to ensure supply remains competitive although this may not be appropriate for bank-financed projects Buyer wants a few wood supply contracts as possible to reduce the administration burden Biomass fuel pricing based on energy content. Net calorific of dry material almost independent of tree species ( MJ/kg) Key wood-fuel parameters Calorific value of dry matter Moisture content Weight kwh/kg Moisture-% 30

31 Typical Wood-fuel Quality Issues Quality system adopted depends on size of power plant Larger plant, a more sophisticated system is appropriate Smaller plant (1 10 MW thermal output), basic parameters can be classified as follows: As received energy density (MWh/m 3 ) minimum value specified Moisture content (% of weight) maximum value specified Ash content Particle size 95% of delivered wood to be less than agreed maximum size Quality Assurance Manual by the Finnish Bioenergy Association (FINBIO) used as an appendix to delivery agreements in the wood-fuel trade. 31

32 Features of a Typical Wood-fuel Contract (Finland) Parties involved The Buyer and the Supplier Objective of the contract Supplier delivers agreed quantities and qualities of wood-fuel to the place agreed to the delivery terms specified in the agreement. Supply period Length of the supply period (usually one year & framework agreements up to 5 years) Definition of fuel types and quantities Typically a table showing the fuel types, quality classes and quantities Average fuel characteristics and allowed variation Fuel Type Logging residue chips Stump chips Whole-bark chips Bark Sawdust Quality Class Quantity (MWh) 32

33 Features of a Typical Wood-fuel Contract (Finland) continued Terms of fuel delivery Destination (address) of deliveries Delivery equipment specifications (type of lorries used etc) Delivery frequencies Security of supply Determination of fuel energy content and quality Methods to be used to verify energy content and quality Level of accuracy to be used Quality standards to used Fuel sample analysis procedures Pricing of the fuel and terms of invoicing Force majeure Discrepancies Actions in the event of deviations in deliveries Validity time and termination Transfer of contract Signatures 33