High Efficiency Biomass Power Plants in China
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Transcript of High Efficiency Biomass Power Plants in China
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Lesson Learned from High Efficiency
Biomass Power Plants in China
Anders Brendstrup Global Head of SaleApril 2012
Achieving lower risk and higher profitability
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China biomass today
Current capacity vs Potential
2 GW installed capacity
(75% agricultural residues)
800 million tons of waste
agricultural and forestry
residues produced annually
of which still only 5% used.
Potential for 100 GW
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Government
RMB 0.75/kwh feed-in-tariff (=0.119 USD/kWh incl.
VAT)
Government targets 30 GW by 2020
Increasing adoption of high efficiency HPHT
technology (government to enforce)
Environment and Social
Millions USD injected into rural economy every year
Rural electrification Renewable Base load power
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China biomass today
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China biomass industry began in 2006
Very little government support
Zero collection infrastructure
Volatile price of fuel
Small scale farmers
Unpredictable crop cycles
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Overcoming the challenges Reducing risk and increasing profitability
Plant owners
Low EPC costs
Fuel management
Technology Providers
Improve efficiencyImprove fuel flexibilityImprove availability and reliability.
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Case study: NBE lessons learned
Founded in 2004
Built Chinas first biomass plant in
2006, have built on average one
every 2 month since then.
Currently have 1200 MWe
capacity, largest biomass power
generating company in the world
Adapted European HPHT
technology: DP CleanTech
Partnership with State Grid.
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Many of the mistakes and
successes made along the
way
1. laid the foundation for
Chinas current fuel
collection
2. influenced current
government policy
3. And taught us a lot about
lowering risk and increasing
profitability.
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Case study: NBE lessons learned
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DP CleanTech - 50 references in China
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Leveraging low cost EPC
European technology adapted to China market
Manufacturing in China: Reduction of EPC cost from 2,5
MUSD/MWe in Europe to 1-1,2 MUSD/MWe for the
same base technology
Breaking the China standard project execution mold -
Providing a complete biomass tailored solution.
DPCT focused on what is special for biomass (fuel
handling and fuel feeding, combustion, boiler, flue gas
cleaning)
Remainder was handled by standard Chinese suppliers
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Biomass Cost Structure
Note: Above is based on a reference 30MW Power Plant in China
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Fuel Management NBE initiated Chinas first fuel logistics framework.Prices were very volatile to begin with.Agents helped stabilize the price.Farmers began to benefit significantly.
A 30 MW Power Plant require 700 T/Day 220 000 T/Y
Power Plant
CC
AG
F
CC
CC
CC
CCAG
FFFF
8 Collection Centers/PP
120 Agents
400 Farmers/ AG
Collection 50 KM
Quality control
Fuel Weight Fuel
storage
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High Performance Technology
Fuel flexibility
Moisture Content up to 60 %
Different types of Biomass - Mix
straw type and wood chip
Vibrating grates can adjust to
fuel type
Availability
7,500-8000 hours a year
Boiler designed to handle
corrosion and fouling
Good maintenanceWATER COOLED VIBRATING GRATE
NBE were able to reduce fuel supply risk and allow better operability
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High Efficiency High Pressure ,
High Temperature boiler
92% , 92 Bar , 540 C
Plant efficiency up to 32 %
Reduce the plant fuel consumption
by more than 20% compared with
classical technology
Allow big Capacity 12 MWe to 30
MWe
High Performance Technology
High Pressure High Temperature Boiler
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HTHP vs MTMP
A HTHP boilers is far more expensive to produce than a MTMP boiler
due to the following reasons
The materials used for the last super heaters have to be alloyed
steels. In Sh3+SH4 DP uses TP347H stainless steel which is both due
to the high temperature and pressure but also for corrosion
protection.
The high furnace temperature causes more slagging which means
that the boiler must be relatively larger in size in order to have the
similar thermal effect.
The higher pressure requires higher wall thicknesses of all materials,
hence higher overall material cost
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HTHP boilers provide us with better efficiencies with lower feedstock costs
The feedstock costs for a HTHP are nearly 20% lower than MTMP
Lower feedstock costs would in return lead to lower price fluctuations and
risk
HTHP is able to generate much higher cash flows which can be used to
service a greater amount of debt
HTHP vs MTMP
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HTHP vs MTMP
Investment cost for a 30MW power plant USD 30 mm (HTHP)
Investment cost for a 30MW power plant - USD 27 mm (MTMP)
Boilers and turbines are expensive for a HTHP based plant
Cost Assumptions
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HTHP
Temperature: 535oC / Pressure: 8.83MPa
Uses 9,821 kj / kWh i.e. turbine efficiency of 36.65%
For HTHP the boiler efficiency is c.89% - implies a theoretical plant efficiency
of 32.6%
MTMP
Temperature: 450oC / Pressure: 4.90MPa
Uses 11,087 kj / kWh i.e. turbine efficiency of 32.47%
For MTMP the boiler efficiency is c.83% - implies a theoretical plant efficiency
of 27.0%
Fuel Handling and flue gas cleaning are more expensive due to more fuel
( lower efficiency) and therefore more flue gas
Performance Assumptions
HTHP vs MTMP
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Reference Plant
NBE has now constructed and is operating more than thirty 30MW plants all
of which are being benchmarked against Generic Model, therefore we
believe this is the right reference point for our Analysis
For our analysis we have only altered 2 variable, the cost of the plant and
the plant efficiency which then has a resultant effect on the amount of
feedstock consumed per ton of power generated
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30 Mwe Reference Plant
Metrics Assumptions
Utilization hours 7,500 hours in each year
Tariff Generic: USD 0.09 /kWhAdjusted with benchmark desulfurized coal-fired tariff
Efficiency factor Approx. 32.6% efficiency for HTHP and 27.0 for MTMP
Efficiencies adjusted for plant degradation as given below:1st year 0.25%2nd year 0.50%3rd year 0.75%4th year 1.00%(Overhaul at the end of 4th year)5th year 0.25%
Feedstock heat price
USD 0.0042 / MJ = 50 USD/ton at NCV = 12000 kJ/kg
Internal Power Use
11%
Metrics Assumptions
Depreciation Generic 30MW plant - 15 years straight-line depreciation
Income tax 25%
O&M cost 0.2 mUSD per year
Working Capital Assumptions
Inventory 16.7% of Feedstock costs
Debt Funding Assume 70% debt financing on capital expenditure Interest rate of 6%
Capital Expenditure
100% Capital expenditure spent in the year prior to year of operations
Assumed total capital expenditure 30MW HTHP USD 30 mn 30MW MTMP USD 25 mn
Construction period
18 months
NBE has now constructed and is operating more than thirtyy 30MW plants all of which are being benchmarked against Generic Model,therefore we believe this is the right reference point for our Analysis
For our analysis we have only altered 2 variable, the cost of the plant and the plant efficiency which then has a resultant effect on the amount of feedstock consumed per ton of power generated
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HTHP vs. MTMP Side by SideFeedstock casts of HTHP are about 17.5 % lower than that of MTMP due to higher plant efficiency
Project IRR 20 % vrs 13 %.And ROCE is 37 % vrs 22 %
30 Mwe HTHP MTMP2012 2013 2014 2015 2012 2013 2014 2015
Net power revenues mUSD 0 9.4 19.1 19.7 0.00 9.25 18.91 19.47Feedstock costs mUSD 0 -5.4 -11.1 -11.5 0.00 -6.58 -13.45 -13.86Other costs mUSD -0.51 -1.7 -1.9 -1.9 -0.51 -1.72 -1.86 -1.90total COGS mUSD -0.51 -7.2 -13.0 -13.3 -0.51 -8.30 -15.31 -15.75
EBITDA mUSD -0.51 2.20 6.14 6.35 -0.51 0.95 3.59 3.72margin mUSD 0% 23% 32% 32% 0% 10% 19% 19%
Depreciation mUSD 0 -0.8 -1.5 -1.5 0 -1.01 -2 -2
EBIT mUSD -0.51 1.4 4.6 4.8 -0.51 -0.06 1.59 1.72margin mUSD 0% 15% 24% 25% 0 -0.01 0.08 0.09
Net income mUSD -1.08 0.3 2.8 3.0 -1.08 -1.14 0.47 0.65
Cash FlowNet income mUSD -1.08 0.3 2.8 3.0 -1.08 -1.14 0.47 0.65add depreciation mUSD 0 0.8 1.5 1.5 0.00 1.01 2.00 2.00less changes in NWC mUSD 0 -0.9 -0.9 -0.1 0.00 -1.10 -1.15 -0.07Cash flow from operations mUSD -1.08 0.1 3.3 4.4 -1.08 -1.23 1.33 2.59add net interest expenses mUSD 0 1.9 1.9 1.9 0.00 1.89 1.89 1.89Capex mUSD -27 0.0 0.0 0.0 -27.00 0.00 0.00 0.00Free cash flow mUSD -28.1 2.0 5.2 6.3 -28.08 0.66 3.22 4.48
IRR % 20% 13%ROCE % 37% 22%
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Indian 12 Mwe plant
Metrics Assumptions
Utilization hours 7,500 hours in each year
Tariff Generic: USD 0.10 /kWhAdjusted with 3 % per year
Efficiency factor Approx. 32.6% efficiency for HTHP and 27.0 for MTMP
Efficiencies adjusted for plant degradation as given below:1st year 0.25%2nd year 0.50%3rd year 0.75%4th year 1.00%(Overhaul at the end of 4th year)5th year 0.25%
Feedstock heat price
USD 0.0033/ MJ = 40 USD/ton at NCV = 12000 kJ/kg adjusted with 6 % per year (inflation)
Internal Power Use
11%
Metrics Assumptions
Depreciation 12 MW plant - 15 years straight-line depreciation
Income tax 25%
O&M costWater costPlant SG&A
0.2 mUSD per year adjusted by inflation 0.1 mUSD per year adjusted by inflation 0.2 mUSD per year adjusted by inflation
Working Capital Assumptions
Inventory 16.7% of Feedstock costs
Debt Funding Assume 70% debt financing on capital expenditure Interest rate of 13%
Capital Expenditure
100% Capital expenditure spent in the year prior to year of operations
Assumed total capital expenditure 12 MW HTHP USD 12 mn 12 MW MTMP USD 11 mn
Construction period
18 months
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Indian HTHP vs. MTMPMargins are lower due to higher interest rate
Project IRR 20.8 % vrs 15 %.And ROCE is 39.7 % vrs 28 %
Indian 12 Mwe HTHP MTMP2012 2013 2014 2015 2012 2013 2014 2015
Net power revenues mUSD 0.00 4.24 8.83 9.27 0.00 4.24 8.83 9.27Feedstock costs mUSD 0.00 -2.24 -4.71 -4.99 0.00 -2.71 -5.70 -6.04Other costs mUSD -0.16 -0.82 -0.90 -0.94 -0.16 -0.82 -0.90 -0.94total COGS mUSD -0.16 -3.06 -5.61 -5.93 -0.16 -3.53 -6.60 -6.98
EBITDA mUSD -0.16 1.18 3.22 3.34 -0.16 0.71 2.23 2.29margin mUSD 0% 28% 36% 36% 0% 17% 25% 25%
Depreciation mUSD 0.00 -1.01 -2.00 -2.00 0.00 -1.01 -2.00 -2.00
EBIT mUSD -0.16 0.17 1.22 1.34 -0.16 -0.30 0.23 0.29margin mUSD 0% 4% 14% 14% 0% -7% 3% 3%
Net income mUSD -0.66 -0.80 0.23 0.38 -0.62 -1.19 -0.60 -0.48
Cash FlowNet income mUSD -0.66 -0.80 0.23 0.38 -0.62 -1.19 -0.60 -0.48add depreciation mUSD 0.00 1.01 2.00 2.00 0.00 1.01 2.00 2.00less changes in NWC mUSD 0.00 -0.37 -0.41 -0.05 0.00 -0.45 -0.50 -0.06Cash flow from operationsmUSD -0.66 -0.17 1.82 2.33 -0.62 -0.63 0.90 1.47add net debt repayment mUSD 0.00 0.56 0.56 0.56 0.00 0.51 0.51 0.51Capex mUSD -12.00 0.00 0.00 0.00 -11.00 0.00 0.00 0.00Free cash flow mUSD -12.66 0.39 2.38 2.89 -11.62 -0.12 1.41 1.98
IRR % 20.8% 15.0%ROCE % 39.7% 28.0%
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Biomass Cost Structure
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SensitivityAt fuel cost of 20 USD/ton IRR is similar. HTHP is more stable with varying fuel cost
IRR not very sensitive to operating hours as fuel cost is very high part of OPEX
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SensitivityGoing from 10 mUSD to 15 mUSD will lower IRR from 26 % to 17 %.Investment cost is important but not most important
15mUSD for HTHP will have same IRR as 11 mUSD for MTMP.
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Financing Ability
Generally banks are cash flow based lenders and will determine sustainable
debt levels based on there free cash flow available to service debt and the
variability of those cash flows
As explained above, feedstock is by far the greatest variable cost for a plant
In a stable situation HTHP is able to generate greater cash flow available to
service debt
Further in a situation where feedstock varies, HTHP cash flows are less sensitive
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India Market Overview
Market similarities
Current situation in India
India produces about 450-500 million tones of biomass per year.
EAI estimates that the potential in the short term for power from biomass
in India varies from about 18,000 MW, when the scope of biomass is as
traditionally defined, to a high of about 50,000 MW if one were to expand
the scope of definition of biomass.
Govt incentives - capital subsidy, renewable energy certificates and Clean
Development Mechanism (CDM) which can be utilized effectively to make
the project economically attractive
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Challenges India Market
Supply chain bottlenecks that could result in non-availability of feedstock. A related problem is the volatility in the feedstock price.
Lack of adequate policy framework and effective financing mechanisms
Lack of effective regulatory framework
Lack of technical capacity
Absence of effective information dissemination
Limited successful commercial demonstration model experience
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Agricultural residues in India (MT)
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Rice Straw
It is estimated that 150 Mt of rice straw residue are
produced in India every year.
In India, 23% of rice straw residue produced is surplus
and is either left in the field as uncollected or to a large
extent open-field burnt. About 48% of this residue
produced is subjected to open-field burning
However Rice Straw is a difficult fuel to burn and
requires the right technology to avoid high long-term
costs.
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Fouling
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Ash Fusion Temperature
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Conclusion
India is in a very similar position to where China was 5 years ago
India has huge potential particularly with rice Straw.
Due Diligence Walk before you can run
Reliable technology that deals with specific fuel will always work out cheaper in the long run
Use HPHT to get the best out of your fuel and improve IRR