Metro Vancouver New Waste to Energy Capacity Business Case

Transcription

1 FINAL April 24, 2014 Submitted to: Metro Vancouver 4330 Kingsway Burnaby, BC V5G 4M5 Submitted to Metro Vancouver by: CDM Smith, Inc Canada Way, Suite 300 Burnaby, British Columbia V5G 4M5 Robert L. Hurdle, Project Manager Prepared and submitted to CDM Smith by: NPA Infrastructure Financial Services Ltd. 870 Braeside Street West Vancouver, BC V7T 2K8 Greater Vancouver Sewerage & Drainage District

2 Table of Contents 1. Executive Summary and Recommendation Waste Management Requirements Capital Costs, O&M Expenses and Revenue Values Comparison of Costs/Tonne of WTE and Landfill Conclusions and Next Steps Purpose and Approach Purpose Approach Strategic Context Background Waste Management Requirements Procurement Process Project Analysis Project Description and Assumptions Capital and Operating Cost Estimates Landfill Disposal Costs Financial Analysis and Comparison of Costs/Tonne of WTE and Landfill Conclusions and Next Steps List of Figures Figure 1 1 WTE Cost Relative to Landfill over Facility Lifecycle for 250,000 Tonnes per Year... 4 Figure 1 2 WTE Cost Relative to Landfill over Facility Lifecycle for 370,000 Tonnes per Year... 5 Figure 4 1 Capital Cost Regression Curve Showing Economies of Scale Figure 4 2 O&M Cost Regression Curve Showing Economies of Scale Figure 4 3 Nominal Costs WTE vs Landfill at 370,000 and 250,000 tpa Figure 4 4 WTE Cost Relative to Landfill over Facility Lifecycle for 250,000 tpa Figure 4 5 WTE Cost Relative to Landfill over Facility Lifecycle for 370,000 tpa List of Tables Table 1 1 Summary of Cost Analysis for Proposed WTE Capacity (2014$ and Capital Costs Escalated to Mid Point of Construction (early 2018) and O&M Escalated to Commissioning (mid 2019))... 3 Table 1 2 BC Landfill Transportation and Disposal Costs... 3 Table 4 1 Project Financial Assumptions Table 4 2 WTE Capital Costs without Additions or Contingencies (2014 CAD) Table 4 3 Estimated Owner s Costs (2014 CAD) Table 4 4 Additional Capital Costs and Contingency Amounts (2014 CAD) Table 4 5 Capital Costs (2014 CAD) Greater Vancouver Sewerage & Drainage District ii

3 Table 4 6 Base O&M Costs/year (2014 CAD) Table 4 7 Direct O&M Costs/year (2014 CAD) Table 4 8 Enhanced NO x Control O&M Costs (2014 CAD) Table 4 9 Total O&M Costs/year (2014 CAD) Table 4 10 Estimated Energy Revenues Table 4 11 Metals Recovery Revenues (2014 CAD) Table 4 12 Summary of Cost Analysis for Proposed New WTE Capacity (2014 CAD) Table 4 13 Escalated Capital Costs for Proposed New WTE Capacity Table 4 14 Escalated O&M Costs for Proposed New WTE Capacity Table 4 15 Escalated Annual Electric Power Revenues for Proposed WTE Capacity (Mid 2019 CAD) Table 4 16 Escalated Metals Revenue for Proposed WTE Capacity Table 4 17 Disposal Costs for Washington and Oregon Landfills Greater Vancouver Sewerage & Drainage District iii

4 1. Executive Summary and Recommendation In 2009, Metro Vancouver s consultant AECOM conducted an extensive review of options to manage residual garbage for Metro Vancouver, Management of Municipal Solid Waste in Metro Vancouver A Comparative Analysis of Options for Management of Waste After Recycling, June AECOM compared the financial, environmental and social implications for various waste management scenarios and concluded that the development of waste to energy (WTE) would provide the least cost and most environmentally and socially sustainable method of managing residual waste. AECOM s work was based on requirements for up to 500,000 tonnes per annum (tpa) of new WTE capacity. In the fall of 2012, the Metro Vancouver Board set new WTE capacity requirements at 370,000 tpa. This is intended to update financial projections related to the development of new WTE capacity for Metro Vancouver and compare the financial cost of the development of new WTE capacity to landfill disposal of residual waste based on 370,000 tpa and 250,000 tpa of new WTE capacity or landfill disposal capacity. This provides updated capital cost estimates, operating cost estimates and revenue estimates and compares WTE to landfill disposal. Based on this updated comparison, the confirms that, subject to the value of energy, the development of new WTE capacity is the least expensive method to manage residual waste for Metro Vancouver Waste Management Requirements The Metro Vancouver Integrated Solid Waste and Resource Management Plan (ISWRMP) targets achieving 70% diversion by 2015 and 80% by In 2012, the diversion rate for the region was 58%. Once 80% diversion is achieved, approximately 700,000 tpa of residual garbage will still remain. The Metro Vancouver Board has selected new WTE capacity of 370,000 tpa, which is the required capacity if 70% diversion is achieved by 2020 and 80% by The also presents an additional scenario whereby 80% diversion is achieved by 2020 and no future increase in waste generation is experienced regardless of expected increasing population level. Under this scenario the required new WTE capacity would be 250,000 tpa. In absence of a defined technology 1 and approved site location, a project base case for the WTE project was created that is neutral to technology and site location. The project base case is considered sufficient to meet the functional requirements of the proposed WTE capacity in a manner that is consistent with Metro Vancouver s objectives for the project. Key assumptions: The assumes a one facility solution. Proponents will propose solutions for the full new WTE required capacity that could be based on one or multiple facilities. Analysis has shown that expected capital and operating costs for a one facility solution will be at least 35% less expensive on a unit operating and capital basis than a two facility solution. However a two 1 Multiple technologies have already been shortlisted as part of the Request for Qualifications No. 1 (RFQ1) process conducted by Metro Vancouver in Greater Vancouver Sewerage & Drainage District

5 facility solution may provide benefits related to reduced transportation costs as well as transportation impacts, reduced transfer station requirements, increased district heating opportunities, potential for implementation of multiple technologies, etc. The specific technology for the new WTE capacity will not be determined until the ultimate selection of the successful Technology Proponent at the end of the procurement process; however the sum of lifecycle capital and operating costs used as the basis for this can be achieved by any of the technologies identified during Metro Vancouver s RFQ1 technology review. The capital and operations and maintenance cost estimates are based on the use of modern technology that meets or exceeds all environmental standards while achieving high energy recovery rates and providing reliable operation. A sum has been added to the estimated capital and operating costs to account for anticipated additional costs and a contingency has been added to the cost estimates to account for unanticipated requirements. At this time there is no certainty regarding energy revenues and therefore the provides a reasonable energy revenue assumption of $100.00/Mega Watt hour (MWh)) to allow calculation of overall project revenues. 2 District heating or other energy uses are not considered in this analysis because they are technology and site dependent Capital Costs, O&M Expenses and Revenue Values Table 1 1 provides a summary of the capital costs and O&M expenses for the proposed WTE capacity at 250,000 and 370,000 tpa based on 2014 Canadian currency and escalated to expected date of completion and commissioning (mid 2019). The capital cost estimates have been escalated at 2% per year times 3.75 years, which is the time between mid 2014 and early 2018, which is halfway through the design and construction period to provide a realistic understanding of the capital costs the Proponents will submit with their bids in early The O&M costs have been estimated based on 2014 costs and escalated at 2.5% to the date the capacity would be commissioned. The O&M escalation rate equals Metro Vancouver s O&M escalation for the existing Waste to Energy Facility (WTEF) in Burnaby over the last 10 years. 2 Energy rate of $100/MWh is same as 2009 AECOM report Greater Vancouver Sewerage & Drainage District

6 The capital costs and O&M expenses are presented in Table 1 1. Table 1 1 Summary of Cost Analysis for Proposed WTE Capacity (2014$ and Capital Costs Escalated to Mid Point of Construction (early 2018) and O&M Escalated to Commissioning (mid 2019)) Cost Component 250,000 tpa 370,000 tpa Year: (2014$) (2014$) Capital Cost $394,000,000 $424,000,000 (2018$) O&M Cost/year $18,000,000 $20,300,000 (2019$) Capital Cost/annual tonne of capacity $480,000,000 $517,000,000 (2018$) $24,700,000 $27,900,000 (2019$) $1,700 $1,400 O&M Cost/tonne processed $81 $76 The analysis shows that a 250,000 tpa facility has lower total capital and operating costs than a 370,000 tpa facility, but higher capital and operating costs on a unit cost (i.e.: per tonne processed) basis Comparison of Costs/Tonne of WTE and Landfill The comparative assessment of technologies undertaken by AECOM in 2009 established that WTE provided a lower life cycle cost solution than landfill. The AECOM analysis was based on a 500,000 tpa facility and $100/MWh electrical price. This updates the AECOM analysis based on 250,000 and 370,000 tpa capacity requirements and $100/MWh energy rate. Landfill costs are calculated based on Metro Vancouver experience over the last number of years. Metro also surveyed landfill disposal costs experienced by communities in British Columbia as well as Washington State and Oregon State shipping residual waste to landfills in eastern Washington and eastern Oregon. The Comparative Landfill scenario analysis is based on disposal at a dedicated landfill in central British Columbia. Costs shown in Table 1 2 are the calculated incremental BC landfill transportation and disposal costs and do not include costs for transfer station operation and local transportation costs to allow comparison to in region WTE assuming all garbage is transferred to the WTE facility. Table 1 2 BC Landfill Transportation and Disposal Costs Annual Capacity Cost/tonne 250,000 tpa $75 370,000 tpa $65 3 Greater Vancouver Sewerage & Drainage District

7 Nine of the ten Qualified Technology Respondents shortlisted under RFQ1 have proposed projects that would generate heat that could be used for electricity or other uses such as district heating. Opportunities for use of energy for other purposes than electricity generation are site specific, and therefore the calculations are based on the generation of electricity. B.C. Hydro has communicated that they cannot provide an energy purchase price for WTE electricity until the project is more developed (e.g. technology, location, electrical power production). The 2009 AECOM analysis assumed a $100/MWh electricity purchase price. In this, WTE electricity revenues are also calculated based on $100/MWh. This assumption is considered reasonable given information on the value of electricity to B.C. Hydro from a number of sources, and is within the range of values for electricity that B.C. Hydro is investing for both publicly and privately supplied electricity. Securing a reasonable power rate from B.C. Hydro is critical to the financial success of the development of new WTE capacity. Inflation rates in the model are set based on expected Consumer Price Index (CPI), and Metro Vancouver landfill experience and the WTEF inflation rates over the last ten years. The WTEF has historically had lower inflation costs than landfilling because landfill costs are tied to more volatile cost drivers such as fuel. On this basis, landfill disposal escalation rate is set at 3.6% whereas the WTE escalation rate is set at 2.5%. Figures 1 1 and 1 2 provide Net Present Value (NPV) and nominal comparisons for WTE compared to landfilling based on $100/MWh energy rate. Lifecycle Cost Landfill to WTE 250,000 tpa $M 2,000 1,500 Landfill WTE 1, Nominal NPV (2014Q3) Figure 1 1 WTE Cost Relative to Landfill over Facility Lifecycle for 250,000 Tonnes per Year Greater Vancouver Sewerage & Drainage District

8 Lifecycle Costs Landfill to WTE 370,000 tpa $M 2,500 2,000 Landfill WTE 1,500 1, Nominal NPV (2014Q3) Figure 1 2 WTE Cost Relative to Landfill over Facility Lifecycle for 370,000 Tonnes per Year WTE shows a positive benefit compared to landfill both on a present value (NPV) and nominal basis (current year cash basis) for both 370,000 tpa and 270,000 tpa. Present value analysis is appropriate for decision making purposes given that revenues and expenditures are realized over a long time period. Nominal analysis is presented to allow comparison to financial information presented in the ISWRMP. The estimated costs for landfill disposal to the United States are not included in the analysis above. Based on a review of remote landfill transportation and disposal costs for communities in Washington and Oregon as well as B.C., the estimated cost of landfill disposal to the US is in the range of $55 per tonne including transportation. This cost is not used for analysis purposes because large scale disposal of Metro Vancouver residual waste to the United States was not part of the public and stakeholder consultation process conducted during development of the ISWRMP, and disposal of residual waste to landfills in the United States creates new risks including currency risk and risk of regulatory change that are difficult to quantify and uncertain. In 2009, Metro Vancouver sought to amend the 1995 Solid Waste Plan to allow disposal of up to 600,000 tpa of garbage to the United States for up to five years. The Ministry of Environment rejected Metro Vancouver s request to amend the 1995 Solid Waste Management Plan for this purpose. WTE costs are based on the assumption that all residual waste would need to be short haul transferred to a new WTE facility. This overestimates the cost for in region options because some residual waste could be direct hauled by waste haulers similar to the existing WTEF, and potentially underestimates costs for out of region sites due to additional transportation requirements. Metro Vancouver has applied for capital funding for new WTE capacity from PPP Canada. PPP Canada has a merit based fund that supports public sector infrastructure developed and operated in partnership with the private sector. Metro Vancouver s WTE project has already been screened into two rounds of PPP Canada s process. If funding is secured from PPP Canada, project debt will be reduced by $100 Greater Vancouver Sewerage & Drainage District

9 million and debt servicing reduced by approximately $9 million/year or $24 per tonne of waste processed over the expected debt term (15 years). In order to comply with PPP Canada funding requirements, a value for money analysis of different procurement options is being developed and will be provided to the Board for consideration in coming months Conclusions and Next Steps The analysis confirms that new WTE capacity is cost effective at both a 250,000 and 370,000 tpa scale, subject to securing a power purchase agreement with B.C. Hydro in the range of current B.C. Hydro investments. Potential contributions from PPP Canada, which are currently not included in the analysis, would further improve the NPV of WTE. The following next steps are proposed: Metro Vancouver will continue to liaise with B.C. Hydro and Ministry of Energy and Mines staff to better define electricity purchase rates. The value for money analysis will be finalized to report to the Board to determine the project procurement approach in advance of completing a detailed PPP Canada. 2. Purpose and Approach 2.1. Purpose Metro Vancouver directed its WTE consulting team to prepare a business case for additional WTE capacity to serve the region. This is intended to update capital and operating costs for the development of new WTE capacity and compare the overall cost of developing new WTE capacity to the cost of remote landfill disposal Approach This builds upon previous decisions regarding the expanded utilization of WTE as a waste management tool for Metro Vancouver. The draws upon analysis undertaken by Metro Vancouver and their WTE consulting team (Project Team) to define the requirements for new WTE capacity. Specifically, the Project Team undertook the following activities in support of this review: 1. Reviewed the WTE technologies within the local Metro Vancouver context and identification of the ten Qualified Technology Respondents qualified through the RFQ1 process; 2. Developed a project concept to satisfy specific regional design and performance requirements in terms of energy recovery and environmental compliance; 3. Estimated the capital and operating costs associated with the project concept; 4. Reviewed information on the value of electricity to B.C. Hydro for public and private projects; 5. Estimated the potential revenues from the sale of electricity based on $100/MWh energy price Greater Vancouver Sewerage & Drainage District

10 and metal recovery; and, 6. Estimated expected landfill disposal costs. 3. Strategic Context 3.1. Background In January 2008, the Metro Vancouver Board resolved to abandon plans to continue landfilling in the interior of BC and instead to focus its efforts on waste reduction initiatives. However, even with very aggressive reduction, reuse, recycling and recovery programs, a significant amount of residual waste remains. Following this resolution, the Metro Vancouver Board directed staff to commission a report by an outside consultant to compare and assess waste management options to treat the residual waste remaining after aggressive reduction, reuse, recycling and recovery programs were implemented. The report, "Management of Municipal Solid Waste in Metro Vancouver: A Comparative Analysis of Options for Management of Waste after Recycling", June 2009 (AECOM), presented the results of a comprehensive technical and financial comparison of waste management options including WTE, landfilling and MBT 3. The conclusions of this June 2009 report were key in developing actions in the ISWRMP including the establishment of new WTE capacity to manage the residual waste remaining after recycling and recovery initiatives. The comparative analysis was also used by Metro Vancouver to establish a capital budget of $470 million for a new 500,000 tpa WTE project based on 2009 cost estimates. The comparative assessment of technologies undertaken by AECOM in 2009 established that WTE provided a lower life cycle cost solution than landfill or other alternatives assuming a capacity of 500,000 tpa, a $100/MWh power sales rate and escalation of landfill costs over the life of the project. This report updates this analysis based on 370,000 and 250,000 tpa to reflect current estimates of future waste flows. Subsequent to this comparative options analysis and extensive public consultation, the Metro Vancouver Board approved the ISWRMP in July 2010, and submitted it to the Minister of Environment for consideration. The overriding principles of solid waste and resource management, as highlighted in the ISWRMP, include both the avoidance of waste through an aggressive waste reduction campaign, and the recovery of materials and energy from the residual waste that remains. The ISWRMP sets targets of 70% diversion by 2015 and 80% diversion by Mechanical biological treatment Greater Vancouver Sewerage & Drainage District

11 In July 2011 the Minister of Environment approved the ISWRMP. A number of conditions were placed on how Metro Vancouver was to implement new WTE capacity, which was one of the components of the ISWRMP, including that the process to develop new WTE capacity consider all WTE technologies and in and out of region sites in a fair and transparent manner Waste Management Requirements As of 2013, approximately 1,000,000 tpa of residential and commercial/institutional waste is disposed of from the Metro Vancouver region after diversion. The calculated 2012 diversion rate is 58% for all solid waste sectors including construction and demolition waste. Of the 1,000,000 tpa of residential and commercial/institutional waste, approximately 285,000 tpa is disposed at the WTEF with the remainder disposed to landfill. Residential and commercial/institutional waste not managed through the WTEF is sent to either the Vancouver Landfill or the Cache Creek Landfill. In 2013, an estimated 70,000 tpa of residential and commercial/institutional waste was delivered by private sector waste haulers to transfer stations in Abbotsford (out of region) for remote disposal. In October 2013, the Metro Vancouver Board gave third reading to the Greater Vancouver Sewerage and Drainage District Municipal Solid Waste and Recyclable Material Regulatory Bylaw No. 280, 2013, (Bylaw 280). Bylaw 280 would prevent private sector waste haulers from delivering residential and commercial/institutional waste to transfer stations and disposal sites located outside the Metro Vancouver region. Bylaw 280 has been submitted to the Minister of Environment for consideration. In the fall of 2012, the Metro Vancouver Board set new WTE capacity based on achieving 70% diversion by 2020 and 80% diversion by On that basis, an expected 700,000 tpa of residual waste will require disposal once 80% diversion is achieved. Combining capacity at the WTEF, and a small amount of residual waste continuing to be disposed to landfill, the required new WTE capacity is 370,000 tpa. The explores an additional scenario where 80% diversion is achieved by 2020 and there is no future increase in waste generation regardless of expected population growth. Under this scenario, an estimated 250,000 tpa of new WTE capacity is required Procurement Process In October 2012, the Metro Vancouver Board approved a multi stage procurement process that initially shortlists Qualified Technology Respondents based on the demonstrated experience of their proposed technology solution through Phase 1 (RFQ1), and then identifies potential sites for new WTE capacity under Phase 2. In June 2013, ten Qualified Technology Respondents were publicly announced following analysis of RFQ1. The ten Qualified Technology Respondents submissions included three technology approaches, mass burn, gasification and refuse derived fuel (RDF), with the RDF to be used in a local cement kiln under one proposal. The second phase of the procurement process is currently underway. In Phase 2, the Qualified Technology Respondents were able to identify potential WTE sites and land owners were invited to respond to a Request for Proposals for sites (Site RFP) to be made available to all proponents. To date, three sites have been identified by Qualified Technology Respondents including one in Port Mellon, one in Nanaimo and one in Delta. Additional communal sites available to all Proponents will be identified once options for purchase or lease are in place. Greater Vancouver Sewerage & Drainage District

12 4. Project Analysis 4.1. Project Description and Assumptions Metro Vancouver intends to procure a WTE solution that provides the optimal balance of technology, location, sustainability, and lifecycle costs. Through a competitive procurement process, Metro Vancouver will leverage the design, construction, operation and maintenance experience to implement new WTE capacity. The specific technology and site location for new WTE capacity 4 will not be determined until the ultimate selection of the successful Proponent at the end of the procurement process. This is consistent with the conditional approval of the Metro Vancouver s ISWRMP by the Minister of Environment, which among other things, requires Metro Vancouver to establish a process that gives equal opportunity and consideration to various WTE technologies as well as both in region and out of region solutions. To meet these conditions, Metro Vancouver has not pre selected a specific WTE technology but rather plans to select the preferred Proponent based on an evaluation of proposed solutions relative to a set of functional and performance requirements. These requirements will be described in the procurement documents and will ensure that the successful Proponent s design supports the project objectives, is compatible with local and regional sustainability goals, is in line with the estimated capital and operating costs, and is consistent with the Project Team s comprehensive assessment of project risks. In order to affirm the financial feasibility of a WTE project in absence of a defined technology 5 and approved site location, the Project Team created a project base case for the WTE project that is neutral to the technology and site location. The project base case is considered sufficient to meet the functional requirements of the proposed WTE capacity in a manner that is consistent with Metro Vancouver s objectives for the project. The key assumptions used to define the scope and financial viability of the project concept are described below Base Project Assumptions The Project Team developed a financial model to analyze various scenarios of capital expenditure and financing related to the implementation of the new WTE capacity with processing capacities of 250,000 tpa and 370,000 tpa. To undertake the comparative analysis, a base set of project assumptions were developed and are presented in Table The WTE procurement will allow Proponents to submit proposals to develop new WTE capacity through one or more facilities 5 Multiple technologies have already been shortlisted as part of the Request for Qualifications No. 1 (RFQ1) process conducted by Metro Vancouver in Greater Vancouver Sewerage & Drainage District

13 Table 4 1 Project Financial Assumptions Parameter Assumption Discount Rate 6% Base Date Q Inflation General Inflation Landfill WTE Inflation O&M 2% 3.6% 6 2.5% 7 Start of Operations mid 2019 Debt Repayment Term of Analysis 15 years 35 years Energy Sale Rate $100/MWh Energy Escalation 1% 8 For the purpose of comparison to landfill, it was assumed the WTE capacity would be procured under a Design Build Operate Maintain (DBOM) procurement process with construction financing provided through a short term Municipal Financing Authority (MFA) loan and longer term financing provided to Metro Vancouver through MFA upon completion of the project. This procurement option is reasonable and one of the procurement options that will be presented to the Board for review. In order to comply with PPP Canada requirements, other procurement options will be presented that include some level of private sector financing for the project Sites for Base Case The is based on a WTE site where all residual waste is short haul transferred to the site from Metro Vancouver s existing transfer station network. This approach overestimates the cost of an in region WTE facility given that some residual waste could be direct hauled to an in region WTE facility by waste haulers, and potentially underestimates the cost of out of region sites as additional transportation costs would be incurred. The Project Team has undertaken some preliminary analysis of land and transportation costs for out of region capacity and there is great variability between out ofregion sites as discussed in section However, when final project procurement occurs, Metro Vancouver will equally consider in region and out of region sites to select the most cost competitive solution from a lifecycle cost perspective that supports regional waste management objectives year inflation average for Metro Vancouver landfill and O&M cost estimates 7 10 year inflation average for Metro Vancouver WTE and O&M costs estimates 8 Half of estimated general inflation rate Greater Vancouver Sewerage & Drainage District

14 Technology The is based on capital and operating costs for WTE facilities implemented recently in both North America and Europe in order to establish a verifiable and reasonable cost basis 9 for the base case. The specific technology for the new facility or facilities will not be determined until the ultimate selection of the successful Proponent at the end of the procurement process; however the Project Team believes that capital and operating costs used as the basis for this can be achieved by any of the technologies identified during the RFQ1 technology review 10. Metro Vancouver intends to specify minimum functional and performance requirements including: Processing capacity (250,000 tpa or 370,000 tpa); On line availability; Energy recovery efficiency; Social sensitivity; and, Environmental compliance. The specific technology to be implemented will be determined through a competitive procurement process including participation by the Qualified Technology Respondents previously shortlisted through Metro Vancouver s RFQ1 process; these Qualified Technology Respondents will become part of the Proponent teams that will respond to Request for Qualifications No. 2 (RFQ2) under Phase 3. An evaluation of the RFQ2 responses will result in the selection of the three or four the most suitable Proponents who will be issued a Request for Proposals (RFP) under Phase 4, which will be the final phase of the WTE procurement process Emissions Standards The emissions standards for the new WTE capacity have not been established but, at a minimum, must equal or exceed the current BC Ministry of Environment standards. There is a continuing effort to examine emissions standards around the world and, through detailed environmental health impact studies for new WTE capacity, final emissions standards will be proposed that may be more stringent than the current BC Ministry of Environment standards. Once these evaluations are complete, including an analysis of the cost impacts, more detailed recommendations will be submitted to the Metro Vancouver Board for consideration. For the purpose of the, additional costs have been included for both the capital and operations and maintenance related to air pollution control equipment for NO x management that exceeds current BC Ministry of Environment standards. 9 Cost estimates include, capital, operating, maintenance and rehabilitation costs over the expected life of the project. 10 Metro Vancouver issued a Request for Qualifications 1 (RFQ1) in late 2012 to solicit qualifications from qualified technology providers. Metro Vancouver shortlisted nine firms representing ten varying technology solutions based on their waste processing capacity, emissions quality, and proven commercial scale application of proposed technology. Greater Vancouver Sewerage & Drainage District

15 Design Standards Detailed design standards have not been set for the project but the capital and operations and maintenance cost estimates are based on the use of best available technology that meets or exceeds environmental standards, while achieving high energy recovery rates and providing reliable operation. There are a number of potential site specific additional costs, including: local road improvements, enhanced architecture, enhanced landscaping, extended utilities and civil/site upgrades to provide a solid foundation that is not prone to flooding. A sum has been added to the estimated capital costs to account for anticipated additional costs and a contingency has been added to the cost estimates to account for unanticipated requirements (see Section ) Revenues At this time there is no certainty regarding energy revenues, however, consistent with the 2009 report, the has assumed an energy revenue assumption to allow calculation of overall project costs. As there is no current legislation mandating BC Hydro to purchase power from Metro Vancouver s new WTE capacity project, Metro Vancouver will be required to work with BC Hydro, the BC Ministry of Energy and Mines, and the BC Ministry of Environment to establish a power purchase rate that meets their common objectives 11. B.C. Hydro s Standing Offer Program, while not directly applicable to new WTE capacity, sets rates for projects other than high efficiency co generation at approximately $110/MWh for agreements signed in High efficiency co generation projects receive about $88/MWh. B.C. Hydro s Integrated Resource Plan, finalized in November 2013, includes the potential for use of energy from WTE, and estimates costs for acquisition of electricity at $85/MWh for the Lower Mainland projects and $117/MWh for projects on Vancouver Island. The new WTE facility under construction in Durham York has a contract with the Ontario Power Authority for the sale of electricity at $80/MWh. This rate was set by the Province of Ontario for the purchase of power from any WTE project in Ontario. B.C. Hydro s Site C business case calculates the cost of electricity produced from the project at $95/MWh based on 70 year amortization of capital. Based on this range of potential energy values, an estimated $100/MWh is used in this update. This is the same rate used for the 2009 AECOM study. The cost effectiveness and thermal efficiency of the WTE capacity would increase if steam or hot water could be exported to an offsite user, such as a paper mill or district energy system, in addition to, or instead of, producing electric power. However, such opportunities are site specific, and therefore energy generation estimates under the assume only electric power production. To calculate the revenue ranges expected, it was assumed that only net available electricity after in plant needs were met would be sold to B.C. Hydro. Based on recent Metro Vancouver s waste characteristics 11 A similar process was followed by the municipality of Durham York in Ontario to establish power purchase rates for their WTE facility. Greater Vancouver Sewerage & Drainage District

16 data 12, future energy content of the residual waste is expected to be in the range of 12.0 GJ/tonne. Revenue streams were analyzed for both the 370,000 tpa and 250,000 tpa size facilities and the revenues generated by the sale of electric power, as well as ferrous and non ferrous metals, are discussed in Section Capital and Operating Cost Estimates For the purpose of this, capital costs have been estimated based on key project scope assumptions described above and are based on an in region fully compliant new WTE facility. Capital costs used for this assessment are based on a review of the most recently completed WTE facilities in Europe and USA that satisfy similar functional and performance requirements and face similar design and operating restrictions. Based on these representative projects, the Project Team prepared capital and operating cost estimates for new WTE with 250,000 tpa and 370,000 tpa processing capacity. In addition to these base capital and O&M cost estimates, the Project Team also undertook preliminary analysis to estimate the incremental costs associated with variations from the concept project including: 1. Variations between sites; 2. Additional facility upgrades; and, 3. Out of region facilities. The capital cost estimates are summarized below Capital Costs Capital Cost Sources Capital cost estimates for this project were based on top down estimates from similar facilities since there are no detailed bottom up cost estimates available. All construction costs are in current (CAD$2014) and then escalated (see ) to the mid point of construction. The Project Team examined two potential sources for new WTE capacity capital costs in Europe and in North America. The two sources are: Three recent North American WTE facility costs; and, The Stantec Waste to Energy Report 13 which contains capital costs for many smaller sized WTE facilities in Europe. The WTE facility costs from the three North American WTE facilities were viewed as more relevant to the proposed new WTE capacity serving Metro Vancouver because they are more recent and were implemented under similar environmental, regulatory and societal requirements as Metro Vancouver s project. The three projects used to establish the base case new WTE capacity capital cost curve are: 12 Update on New WTE Capacity, Projected Waste Composition and Energy Content dated January 22, 2014 and presented to the Zero Waste Committee on February 13, Stantec. (2011). Waste To Energy: A Technical Review of Municipal Solid Waste Thermal Treatment Practices (Final Report). Burnaby, BC, Canada. Greater Vancouver Sewerage & Drainage District

17 Palm Beach, Florida, Unites States (910,000 tpa, under construction; bid in 2011); York Durham, Ontario, Canada (140,000 tpa, under construction; bid in 2009); and, Honolulu, HI, United States (270,000 tpa, commenced operation in 2013, bid in 2008). Each of these WTE projects is slightly different 14 having been procured at different times (2008, 2009, 2011), in different countries (Canada and US), and one involved more costly construction on an island (Hawaii). To normalize these projects to what will be implemented for Metro Vancouver, The Project Team adjusted the costs for inflation, variability between owner preferences, location, and currency differences; and then all costs were adjusted to become 2014 costs in Canadian currency (CAD). With the capital costs normalized and all capacities adjusted to 90% annual availability, the Project Team plotted the three data points and established a best fit trendline using exponential regression. Following in Figure 4 1 is the capital cost curve along the bottom is the annual facility capacity (tpa) and on the left is the capital cost expressed as CAD$. Figure 4 1 Capital Cost Regression Curve Showing Economies of Scale Once the capital cost curve was generated, the estimated base capital cost could be extracted from the curve to become the base capital cost for that size facility. The red and blue lines in Figure 4 1 indicate where the proposed new WTE capacities are located within the capital cost curve. These capital costs estimates are consistent with those estimated by Stantec in 2010, once adjusted for inflation Base WTE Indicative Design Facility Capital Costs Using the capital cost curve generated as described above in Section , the base capital was estimated. The capital costs for the three WTE facilities used to generate the capital cost curve were normalized assuming the use of selective non catalytic reduction (SNCR) systems to control NO x emissions and dry/semi dry 15 type systems to control acid gases. This type of air pollution control 14 Although all utilize mass burn technology 15 Wet air pollution control systems may be able to achieve higher acid gas control rates but there are several trade offs including the production of a wastewater to be treated on site and reduced energy production. Greater Vancouver Sewerage & Drainage District

18 technology would allow any WTE facility to meet the current BC Ministry of Environment standards. An allowance has been added to improve upon emissions control which might include the use a selective catalytic reduction (SCR) system to control NO x emissions. To account for this increased level of emissions control, the Project Team estimated the incremental cost of installing an SCR system to be about $16M for a 250,000 tpa facility and $20M for a 370,000 tpa facility. Therefore, for the, the total estimated base new WTE capacity capital cost is the cost predicted from the cost curve (see Section ) plus the incremental increase due to more advanced NO x control technology. These costs are presented in Table 4 2. Table 4 2 WTE Capital Costs without Additions or Contingencies (2014 CAD) Cost Component 250,000 tpa 370,000 tpa Capital Cost Without Additions or Contingencies $270,0000,000 $342,000,000 Additional Cost for Advanced NO x Control $16,000,000 $20,000,000 Total Base Case Capital Cost $286,000,000 $362,000, Owner Costs Some project costs are the Owner s direct responsibility and these include activities such as planning and procurement, permitting and financing, design and construction monitoring, and land costs. These costs are not dependent on waste throughput and remain constant for both capacities. For facilities of the proposed size and scope, proposed schedule and based on preliminary concepts regarding permitting and procurement process, the Project Team has estimated expenses that may be expected to be incurred separately by the Owner. Owner staff costs have not been included because Metro Vancouver staff costs for both WTE and landfilling operations are attributable to the annual Metro Vancouver operating budget. Following in Table 4 3 are the estimated Owner s costs: Table 4 3 Estimated Owner s Costs (2014 CAD) Component Time Period Estimated Cost Planning & Procurement: Technical & Environmental Consultant, Procurement Experts, and Legal Experts Up to and through selection of the preferred Proponent $11,300,000 Permitting & Financing: Technical & Environmental Consultant, Environmental Assessment and other Permitting, Financial Experts, and Legal Experts Design & Construction Monitoring: Technical & Environmental Consultant and Construction Oversight During the permitting process, followed by financial close before the commencement of construction After a notice to proceed has been issued to the selected Proponent to begin design and construction; provides oversight during design, construction and commissioning $6,300,000 $4,600,000 In addition to the expenses listed above, there will be a land cost associated with the project. Under different scenarios, some Proponents could propose a piece of land (called Technology Proponent sites) Greater Vancouver Sewerage & Drainage District

19 or Metro Vancouver may offer sites for consideration by all Proponents (called communal sites). Whether brought by a Proponent or furnished by Metro Vancouver, there will be a cost to the project for the land needed to construct new WTE capacity. If a Proponent s proposal includes their site, the cost of land can be expected to be part of their lump sum price. In the case of a communal site, Metro Vancouver will purchase or long term lease the land directly. Estimated land costs of $17.5 million have been included in the overall project capital costs Additional Capital Costs and Contingencies As the project is still in the developmental stage and many significant decisions remain to be made, there are a number of variables that could increase the capital cost. In addition, it is necessary to include a contingency to account for unanticipated costs that may occur during project implementation. Additional costs may accrue to the project as decisions are made during the procurement and environmental assessment (EA) processes. These additional costs may include: enhanced architecture, marine transport facilities for out of region locations, offsite electrical interconnection infrastructure, onsite improvements (e.g., fill for flood control), offsite roadway improvements and offsite community improvements. The exact nature and cost of these additional items cannot be quantified at this time, therefore, an estimate was made sufficient to cover the cost of the additions. Based on a design/build/operation/maintain (DBOM) procurement where all three entities coordinate efforts to complete the project, on time, on budget, and meets all Metro Vancouver requirements, the Project Team also included an appropriate contingency of approximately 17% of total project costs. Following in Table 4 4 is a summary of the additional costs and contingency amounts for the two WTE capacities. Table 4 4 Additional Capital Costs and Contingency Amounts (2014 CAD) 250,000 tpa 370,000 tpa Additional Costs $27,000,000 $27,000,000 Contingency Amount (17%) $41,000,000 $51,000,000 Total Additional Costs and Contingency $68,000,000 $78,000, Capital Costs for The Project Team construction cost analysis is intended to establish a reasonable capital cost for Metro Vancouver s without taking into account project technology and site specific conditions, which are not fixed at this time. Two new WTE capacity scenarios have been analyzed for the Business Case; these scenarios are identical in scope except for different waste throughputs of 370,000 tpa and 250,000 tpa. Following in Table 4 5 are the total estimated capital costs taking into account the base capital cost, Owner s costs, additions and contingencies. Greater Vancouver Sewerage & Drainage District

20 Table 4 5 Capital Costs (2014 CAD) WTE Capacity (tpa) 250,000 tpa 370,000 tpa WTE Capacity (no contingency) $286,000,000 $362,000,000 Owner s Costs $40,000,000 $40,000,000 Additional Costs and Contingency Amount $68,000,000 $78,000,000 TOTAL CAPITAL COST $394,000,000 $480,000, O&M Costs O&M Costs Operations and maintenance (O&M) costs are the annual costs required to operate and maintain new WTE capacity during the life of the project. These costs are borne by either the Proponent or the Owner depending on project risk allocation and Owner preferences. Final decisions regarding which entity pays which costs for this project will be based on an evaluation to identify the most cost effective solution that allocates risk to the entity most able to control that risk, while incenting the Proponent to exceed the minimum performance requirements Base O&M Costs Base O&M costs for this project were estimated in a similar manner as the capital costs with the difference being that, instead of three facilities being used to generate the trendline curve, the costs were derived from vendor costs for thirteen existing WTE facilities in North America. To compare the operating fees between facilities, the Project Team separated out the costs that are typically a pass through to the Owner by the Proponent or paid directly by the Owner. The Proponent O&M costs were collated into five data points and plotted to determine a trendline for the data using exponential regression and covered labor, operations, maintenance, long term repair and replacement and miscellaneous operating costs. The R squared value for the exponential regressions is 0.940, which indicates that the data points used show very close agreement. The curve can be used to estimate the base WTE capacity O&M cost in dollars per tonne for any given daily waste throughput capacity. Figure 4 2 is the base O&M cost curve along the bottom is the capacity and on the left is the vendor O&M cost expressed as CAD$ per tonne of waste processed. The O&M cost curve shows the economies of scale which indicates that larger facilities can be operated and maintained more economically (lower cost/tonne). Greater Vancouver Sewerage & Drainage District

21 Figure 4 2 O&M Cost Regression Curve Showing Economies of Scale Once the cost curve was generated and the cost/tonne O&M costs identified for both 250,000 tpa and 370,000 tpa facility capacities (see the red and blue lines in Figure 4 2), costs were compared to similar direct costs currently incurred by Metro Vancouver for the WTEF. The base O&M costs are presented in Table 4 6. Table 4 6 Base O&M Costs/year (2014 CAD) WTE Capacity (tpa) Cost/tonne Base O&M Cost/year 250,000 tpa $44 $10,900, ,000 tpa $38 $14,200, Direct O&M Costs There are many direct costs related to the operation and maintenance of new WTE capacity which, depending on the contractual conditions, are divided between the Proponent and the Owner. These direct costs include: ash management, stack testing, insurance, treatment chemicals, water supply/wastewater disposal, purchased electricity and natural gas. Costs were collected from similar WTE facilities and, after meeting with Metro Vancouver staff responsible for the WTEF, adjusted to match the unit costs now experienced by the WTEF in order to normalize the costs. The direct O&M costs are presented in Table 4 7. Table 4 7 Direct O&M Costs/year (2014 CAD) WTE Facility Size (tpa) Direct O&M Cost/year 250,000 tpa $6,300, ,000 tpa $9,400,000 Greater Vancouver Sewerage & Drainage District

22 Enhanced O&M Cost As the base capital cost included the use of SCR technology to control NO x emissions, there is an additional O&M cost associated with the operation of SCR technology. The Project Team has assumed an additional O&M expense range of $2 to $4 per tonne of waste for the SCR system based on experience at other facilities and, for purposes of the, has used the median of $3 per tonne for the. The enhanced NO x control O&M costs are presented in Table 4 8. Table 4 8 Enhanced NO x Control O&M Costs (2014 CAD) WTE Capacity Size (tpa) Direct O&M Cost/year 250,000 tpa $800, ,000 tpa $1,100, O&M Cost Summary Following in Table 4 9 is a summary of the total estimated O&M costs in 2014$CAD. Table 4 9 Total O&M Costs/year (2014 CAD) WTE Capacity (tpa) 250,000 tpa 370,000 tpa Base O&M Cost $10,900,000 $14,200,000 Direct O&M Cost $6,300,000 $9,400,000 Additional O&M for Enhanced NO x Control $800,000 $1,100,000 TOTAL O&M COST/yr $18,000,000 $24,700,000 O&M Cost per tonne $72 $ Out of Region New WTE Capacity O&M Costs The base case for the project is an in region facility; however, out of region facilities will be considered in an equal and fair manner. An out of region facility could require long distance truck, rail, or marine hauling. At this phase of the project there are both in region and out of region sites being considered. The additional costs for an out of region location (primarily for transportation) are estimated to be approximately $20/tonne 16 based on a review of shipping costs in the Province of British Columbia. However, this direct cost addition for an out of region site might be fully or partially offset by other sitespecific requirements which could reduce the cost Revenues There are two major revenue sources expected from the proposed new WTE capacity: energy revenues from the sale of electricity and metal revenues from the sale of ferrous and nonferrous metals recovered from the raw waste stream or from the residue Energy Revenues Based on the expected power generation rate per tonne of waste processed and $100/MWh price for energy produced, Table 4 10 presents the potential energy revenues. 16 The actual cost will vary with the specific site location. Greater Vancouver Sewerage & Drainage District