Technical and Cost Characteristics of Dendrothermal Power...

Energy Department Paper No. 31

Technical and Cost Characteristics ofDendrothermal Power Systems

December 1985

World Bank Energy Department

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TECHNICAL AND COST CHARACTERISTICS OF DENDROTHERMAL POWER SYSTEMS

December 1985

Prepared by:

Ernesto N. TerradoEnergy Department

Copyright (c) 1985The World Bank1818 H Street, N.W.Washington, D.C. 20433U. S. A.

This paper is one of a series issued by the Energy Department for theinformation and guidance of Bank staff. The paper may not be published orquoted as representing the views of the Bank Group, nor does the Bank Groupaccept responsibility for its accuracy or completeness.

ABSTRACT

A dendrothermal power system consists of a wood burning power plantand a dedicated plantation of short-rotation tree species. The paperprovides a brief but comprehensive assessment of the technology, physicalrequirements and costs of such systems at three plant sizes. It findsthat dendrothermal power systems are more likely to be competitive atscales of 10 MW or so. Capital intensity results in high generationcosts for smaller sizes while sizes much larger than 10 MW, althoughresulting in lower generation costs, would become impractical due to verylarge land area requirements. The generic cases studied showedgeneration costs of about 12.1, 8.4 and 6.6 cents/kWh; base capital costsof 2,100, 1,700 and 1,300 $/kW installed; and plantation areas of 2,000,6,700 and 31,000 hectares for 3, 10 and 50 MW, respectively. Thegeneration costs were found to have the-strongest sensitivity to biomassyield, plant capacity factor and labor cost.

Overall, the economic desirability of a dendrothermal power systemis highly dependent on geographic and site-specific socio-economicfactors. The arguments which favor it such as foreign exchange savingsdue to the use of an indigenous fuel, employment generation in ruralareas and environmental benefits must be carefully weighed against thedisadvantages of long lead times, high capital intensity, need for largeland areas and the continued need for high value fossil fuels totransport lower value biomass.

CONTENTS

PAGE

I. INTRODUCTION................... ......... 1

II. TECHNICAL CONSIDERATIONS..... .... ....... 3

Technology OptionsThe Dendrothermal Power PlantWood Firing Systems

Silvicultural ConsiderationsEnvironmental ImpactsPlantation Development Scenario

III. COST ANALYSIS.......o. ... ... ... . ... ..... 14

Baseline CasesAssumed Physical ParametersCapital CostsElectricity Generation CostsSensitivity Analysis

IV. COMPARISON WITH ALTERNATIVE SYSTEMS.........31

Comparison with Diesel Generation

Comparison with Grid Electricity Costs

Other Considerations

V. CONCLUSIONS..............................37

VI. ANNEXES...... ........................... 39

ACKNOWLEDGEMENT

The author is grateful for the important contributions made by thefollowing persons: David von Hippel, David Yardas, Salvador Rivera,Donald Duke and Matthew Mendis. Also deeply appreciated are the adviceand constructive comments by Richard Dosik and James Fish.

Thanks are also due to Rodrigo Leiva who helped develop thecomputer programs needed for the work. These programs, which use "Lotus1-2-3", enable quick recalculation of generations costs with changes inphysical or cost parameters and are thus useful for making country orsite specific estimates. They are available on diskettes for copying byany interested staff.

Ernesto N. Terrado

I. INTRODUCTION

1.01 Generation of electricity by burning biomass materials in steampower plants is by no means a new concept. It has been widely practisedin the forest, sugar, and food industries where biomass in the form ofwood wastes, bagasse, rice hulls, and other crop residues are routine by-products of the principal processing activities.

1.02 What is not so common is the idea of generating electricity fromwood purposely grown for fuel in managed plantations. An integratedpower plant - dedicated wood plantation system is sometimes called a"dendrothermal power" system, from the Greek word "dendro" for wood.There is little experience worldwide with such systems. Among recentactivities, the most significant appear to be those in the Philippines,where the Government has embarked on a program to establish dendrothermal

power plants as part of its rural electrification plan (Reference 1).The Philippines dendrothermal program is concerned with small powerplants (3 to 5 MW) sustained by plantations of fast-growing treescovering 1,000 to 2,000 hectares. The program which targets theestablishment of 14 power plants over a 5 year period, commenced in1980. Four 3 MW dendrothermal power plants have so far been completedand are in varying stages of operation.

1.03 The arguments that have been advanced in favor of establishingdendrothermal power plants where resources are available and electricitydemand exist include the following:

a) since establishing a managed plantation is requisitein the scheme, the system enhances rather thandepletes forest resources;

b) since the woodfuel is a local resource, there couldbe significant foreign exchange savings incomparison with conventional power plants that useimported fuel;

c) a dendrothermal system is labor intensive and couldgenerate significant employment opportunities inrural areas.

1.04 On the other hand, there are clearly a number of disadvantages todendrothermal power plant systems. The plantation requires very large landareas, which may have higher economic value if not used as a wood plantationor if planted with commercial wood species. Also, the initial investment perinstalled kW for dendro power plants is much higher than for comparably-sizedthermal plants fueled with oil, due mainly to the additional costs ofestablishing the woodfuel plantation. Finally, the purported foreign exchangesavings in boiler fuel may be offset by the large amounts of transport fuelneeded for wood hauling.

1.05 Until recently there has been a dearth of literature about dendrosystems, especially on the economic aspects of system establishment and

operation.* The purpose of this paper is to examine the technical and costcharacteristics of dendrothermal power plants on the basis of several pre-feasibility studies done between 1977 and 1982 by various organizations. Mostof these studies were for sites in the Philippines. One project study, for a10 MW plant intended for a Papua New Guinea site, includes no provisions forestablishing a plantation; the woodfuel would be harvested from an existingforest until all the wood is consumed (Ref. 6). A study for a 50 MW plantalso does not call for a supporting plantation; it was for a US location wherefuel is supplied by residues generated in nearby wood industries and by treesculled from forests in the region (Ref. 7).

1.06 Most of the references provide information on the power plantcomponents only, not complete. systems with all the components of adendrothermal power plant. Those that treat both power plant and woodplantation often do not offer information in sufficient detail to be of usefor generic cost estimates of a dendro system. This study therefore has beenconstructed by compiling information from the various references and makingappropriate adjustments to estimate data for generic systems. A number ofassumptions, in both system design and component costs, have been made inorder to arrive at final energy cost estimates. These assumptions arepresented along with the cost analysis in Section III.

1.07 Overall, the paper provides a brief but comprehensive look at thetechnology, physical requirements, and financial costs of dendrothermal powerplant systems. It presents estimates for cost of components at three plantsizes (3, 10, and 50 megawatts) and examines the sensitivity of the cost ofwood-derived electricity to location-specific factors and operatingconditions. However, except for some first-cut "economic" calculations (para.3.54) where land rental cost is added and unskilled labor costs are shadow-priced, the paper does not go into the valuation of economic and social costsand benefits.

* The most recent publication dealing with this specific topic is F. H.Denton's, Wood for Energy and Rural Development: The Philippine Experience,September 1983. The Philippine project discussed was able to take advantageof many location specific cost-reducing features for small-scale dendroplants, resulting in generation costs much lower than the estimates obtainedin the present report.

II. TECHNICAL CONSIDERATIONS

Technology Options

2.01 The chemical energy in wood can effectively be transformed toelectrical energy, for the scales being considered in this study, by: a)direct combustion in a thermal power plant; or b) first converting the wood to

an intermediate fuel such as producer gas, ethanol, or methanol. The thermalpower plant raises steam in a boiler and obtains shaft power by means of steamturbine or steam engine. In the conversion method, the intermediate fuel isburned to generate electricity, either in an internal combustion engine of thecompression-ignition type or in a gas turbine to obtain shaft power that canbe coupled to an electric, generator. Theoretically, the higher-valueintermediate fuel could also be burned in the boiler of a steam plant, butthis obviously would not be economically desirable in a normal situation.

2.02 Compression-ignition engines could be run on ethanol or methanol withsome engine modifications, or by using additives (such as amyl nitrate andtetra hydro furfuryl nitrate, THFN) to improve the ignition characteristics ofthese low cetane alcohol fuels. Most of the work in this area is in the R&Dstage, with cost and availability of the additives still unsolved problems(Ref. 8).

2.03 A similar situation exists with respect to the use of wood-derivedgaseous fuels in gas turbines. Use of these ash-laden, high-impurity fuelscan be made only by employing an external combustor and a heat exchanger, such

that the turbine gas path is exposed only to clean air and not to thecombustion gases. The technology is still under development and no producergas or other biomass fueled gas turbine systems are commercially available atpresent.

2.04 The use of producer gas from wood in a dual-fuel (gas/diesel oil)compression-ignition engine for power generation appears to be in a moreadvanced stage of development. A number of companies in fact presently offergasifier power systems in the 50 to 750 kW range for use with wood or charcoalfeedstocks. Overall, operating experience with such systems has been ratherlimited (Ref. 10).

2.05 The overriding consideration for choosing direct combustion systemsover gasifiers in the larger sizes is the longer and proven track record ofthe direct combustion technology, which has been successfully used for decadesin the forest products industry. In plant sizes of about 1 MW and below,however, it is likely that the gasifier power system would have an economicadvantage due to its lower capital cost and higher thermal efficiency.

The Dendrothermal Power Plant

2.06 The generalized power plant diagram is shown in Figure 1. Wood inthe appropriate form (chipped, hogged, etc.) and moisture content (usually nomore than 50% of wet weight) is metered into the furnace section of the boilerwhere it is burned. The hot combustion gases raise steam in the heat--exchanger usually a shell-and-tube type, with the water flowing either insidethe tubes (water tube boiler) or on the shell side (fire tube boiler). High

FLYASHCOLLECTOR

AIR STACK

HEATRECOVERY

- ASH

GENERATOR ELECTRICITY

WOOD CHIPS

METERING BOILER RE RBIN COOLING

TOWER

ASH

AATERW ATER FROM TREA TN

RIVER OR DEEPWELL

Figure 1. GENERALIZED DIAGRAM OF DENDROTHERMAL POWER PLANT

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pressure superheated steam is expanded to lower pressures in the steamturbine, producing mechanical work to drive the electrical generator.

2.07 , The heat recovery system shown in the diagram could be a condenser,an economizer, or an extractor bleed point. The heat recovered can be used toraise the temperature of feedwater or combustion air for the boiler or asprocess heat for other plant operations, such as kiln drying. Heat recoveredfrom the flue gas may also be used for pre-drying the wood. Particulateemission is controlled by a mechanical flyash collector.

2.08 Cooling water and boiler makeup water are obtained from a river orgroundwater and are clarified, filtered, demineralized, de-aerated, and pH-adjusted prior to introduction into the boiler and condenser. Bottom ash andflyash from the boiler, air heater, and mechanical collector hoppers aredischarged into portable ash bins. The ashes are returned to the plantationsoil.

2.09 The electricity generated is fed into transformers at the switchyard,where part of the power is returned for use in the plant and the rest istransmitted to the grid.

2.10 Most components of the dendrothermal plant are standard equipmentcommon to any thermal plant fired with conventional fuels. An importantexception is the steam raising equipment. Wood has very different physicalproperties from oil, resulting in a much lower energy density. Consequently,a wood-burning boiler must be designed for higher excess combustion air,higher fuel moisture content, and the removal of char and ash. Wood-firedboilers are bulkier, include larger combustion chambers, and have moreauxiliary components than oil-fired boilers of equivalent thermal capacity,and consequently have higher capital costs. Fuel feeding equipment, the fuelpreparation system, and fuel handling techniques are also very different fromequipment used with liquid fuels.

2.11 Some plant designs incorporate drying the wood fuel with waste heatfrom stack gases thereby significantly increasing overall energy conversionefficiency. The extent to which the economics of the project is improveddepends upon the added capital cost in specific designs.

2.12 Figure 2 is a simplified flow chart that follows the logs from themoment they are brought in by truck or by cableway (Philippines) to the woodstorage yard of the power plant until they emerge as chips ready for feedinginto the boiler's furnace.

Wood Firing Systems

2.13 There are four general types of commercial furnaces for firing woodand other biomass materials in boilers (Refs. 11, 12):

- Pile Burners

- Stoker-fired grate burners- Suspension burners -

- Fluidized bed burners

2.14 Pile burners include Dutch ovens, fuel cell burners and cyclonic

TRUCKS LOADED LOG LOGWITH WOOD STORAGE CONVEYOR

WOOD

CHIP

SIOWOOD CHIP 4 .. CHIPPER LOG WASHERCHIP CONVEYOR

F

PILE

CHIP RECLAIMING BOILER FEED CONVEYOR METERING BIN

Figure 2. CENERALIZED WOOD HANDLING AND PROCESSING SCHEME

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burners. As the name implies, burning occurs mostly on the surface of a pileof fuel on a grate, with combustion air fed in from above or below the grate,or from both directions. The cyclonic burner has fuel fed at the bottom ofthe furnace with a screw. The steam generator of the boiler is usually in asecond compartment.

2.15 Stoker-fired grate burners have fuel blown in or thrown in (pneumaticor mechanical stokers) and distributed thinly on the grate surface. The gratemay be flat or inclined, stationary or travelling. Most of the combustion airis fed through pinholes in the grate blocks. The finer fuel particles burn insuspension as they fall while the larger ones are burned on the grate.

2.16 Both pile burners and stoker-fired grate burners use hogged wood,wood chips, bark, etc. at sizes from about 3/4" to 1-1/2". Fuel of up to 50%moisture content could be burned, although a water content of 25% to 35% ismore typical.

2.17 Suspension burners use finer and drier fuel particles (less than 1/4"size, not more than 14% moisture content), which are blown through burnerssuch that full combustion is accomplished in suspension. Sanderdust andsawdust are typical fuels. Since the fuel is almost fluid, the system canfollow rapid load swings so that automatic power control approaches that ofoil fired burners.

2.18 Fluidized bed burners burn fuel suspended in a turbulent bed of airand crushed mineral material (e.g., sand, limestone). Fuel is fed at the topof a grate and air at the bottom. The bed temperature is ggnerally lower thanin the previously described types of burners (about 1600 F or below). Themain advantage of the fluidized bed burner is its ability to use dirty fuelswith high moisture content.

2.19 The choice of furnace equipment depends first of - all on certaintechnical factors such as desired capacity, type and quality of fuelavailable, and efficiency required. The non-technical factors include themanufacturer's track record, the operator's experience, and the initial costof the equipment. Stoker-fired grate burners are available in a wider choiceof sizes in the range greater than 50 million Btu/hr (about 1500 boiler hp).Despite the apparent advantages of fluidized bed systems, operating experiencewith them has been much more limited than with the other types of furnaces.The three baseline cases discussed in this study (3, 10, 50 MW) all usespreader stoker grate burners with water-tube steam generators. All of thewood preparation and power plant equipment described above is commerciallyavailable.

Silvicultural Considerations

2.20 The choice of tree species to be used in the dendro plantation isobviously an important technical and economic consideration. It is clear fromthe biomass supply requirements that the biomass yield, or bone dry tonnes ofcombustible fuelwood produced each year per hectare of plantation land, iscrucial to the economics of the system. Different species perform well indifferent climates and soils and, clearly, some parts of the world are bettersuited than others to high-yield tree growth--and thus to dendro systems ingeneral.

2.21 Wet, tropical lowland areas like those in Brazil and the Philippines,or moist tropical highlands like those of southwestern Kenya, are suitable forhigh yield fuelwood plantations of such species as Eucalyptus grandis,Eucalyptus globulus, and Acacia mearansii. There are reasonably fast-growingspecies which thrive in semi-arid regions as well. Various Acacia Eucalyptusand species, and Prosopis juliflora or alba, are suited to drier climates,such as those prevailing in parts of the Sudan, Argentina, and Paraguay (Ref.15). The Philippines' tree planting program is based mainly on Leucaenaleucocephala ("ipil-ipil"), a medium-hard wood that produces annual growthincrements ranging from 10 to more than 50 bdt/ha-yr. In sunny areas whichaverage more than 1000 mm of average rainfall per year, such as Papua NewGuinea, Fiji, and Indonesia, it will not be difficult to select tree speciesproducing more than this report's assumed base yield of 10 bdt/ha-yr, on well-managed plantations.

2.22 Plantations in drier areas, receiving 300 to 600 mm of rainfall peryear, may require some irrigation and/or choice of a tree species with a rootsystem, like that of Prosopis juliflora (mesquite), capable of tapping sub-surface water. Because a plant must lievapo-transpire"--that is, evaporateinto the air--a substantial amount of water for every kg of dry biomass itproduces, areas with rainfall much below 600 mm/yr cannot be consideredpotential sites for non-irrigated dendrothermal plantations. Trees may befound for such sites which produce biomass yield of 1 to 5 bdt/ha-yr, adequateto provide the firewood needs of a sparse local population, but the hugeamount of land these low yields would dictate renders the dendrothermal systemconsiderably less economically desirable.

2.23 Besides yield, another important consideration is rotation period, orhow often a given piece of land is cropped. Theoretically, if a crop yields aconstant number of tonnes per hectare per year, the same annual wood supplycould be achieved by harvesting a tenth of a given area every year for tenyears, a third every three years, or the whole area every year. In practice,however, yield is not constant and other factors come into play. Some speciesof trees reach maturity earlier than others. Calliandra, for example, is asmall tree which matures very quickly and can be cut at or near its maturesize after only one year, and every year after that. Leucaena grows slowly atfirst, and increases its growth rate as its root system becomes established.It is more suited to a rotation cycle of 3 to 5 years. The size of the woodwhen it is cut is a factor in choosing a rotation period. Larger trees mightbe easier to handle for the harvest/transport systems available, thus favoringthe use of longer rotation periods.

2.24 Many of the species currently under consideration for fuelwoodplantations form root nodules containing bacteria able to "fix" atmosphericnitrogen (N2 ). These species essentially provide nitrogen fertilizer forthemselves and surrounding vegetation, adding to the soil sometimes up to 300kg of nitrogen per hectare annually. This is important not only from theeconomic standpoint of avoided nitrogen fertilizer costs, but also in thatnitrogen added to the soil can, over time, substantially boost soil fertility,and allow high value food crops to be grown concurrently or in rotation withthe dendro crop (Ref. 16). All Legumes, such as Leucaena and Acacia, arenitrogen-fixers, as are some other trees including some species of Alnus and

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Casaurina2.25 Occasionally the optimal species for a plantation site may turn outto be a non-nitrogen fixer, perhaps a Eucalyptus species. In this casenitrogen fertilizer, must be added to the soil on a regular basis.Alternatively, Eucalyptus may be interspersed with nitrogen-fixing plants suchas Leucaena or Acacia species; or rotations of Eucalyptus could beinterspersed with rotations of nitrogen-fixers. In US field trials, plots ofnitrogen-fixing red alder (Alnus rubra) grown together with black cottonwoodproduced better yields than either species growing alone (Ref. 17). Ingeneral, plantation planners working with areas that do not have good soil oraccess to cheap fertilizer should strongly consider utilizing a leguminoustree species or another nitrogen-fixing species.

2.26 A tree species with the ability to coppice, or sprout new shoots fromthe stump left after harvest, has the twin advantages that the expensive jobof replanting need not be undertaken as often and that the second growth andsubsequent "coppice crops" enjoy a fully formed root system with which toobtain nutrients and water for new biomass growth. Because of this, the firstcoppice crops generally have higher yield than the initial planting. Yieldgenerally declines after a few harvest cycles, and replanting is eventuallynecessary. Some areas in northwestern Europe, however, have reportedly beensuccessfully coppice-cropped for three centuries (Ref. 15).

2.27 Coppicing species often considered for plantations include Leucaena,Eucalyptus and Acacia species. Circumstances in which one might choose a non-coppicing crop include those when such a species is far superior to acoppicing alternative for the specific plantation conditions; when a specialproperty (such as production of a marketable co-product, e.g., food, animalfodder, or timber) of the non-coppicing species makes replanting economicallyacceptab-le; or as an alternate during periods of rotation to avoidmonoculture difficulties.

2.28 Ultimate choice of tree species depends on combinations of these andother factors. The program in the Philippines is based on Leucaena because itis a legume, has the ability to coppice, and produces high annual growthincrements. Trees only 8 years old have been measured to have heights of 60ft and diameters of 8 to 15 inches at breast height (Ref. 14). Also, itsrequirements for rainfall, terrain, and soil quality match up well with thecharacteristics of areas in the Philippines which are not of agriculturalquality but are targeted for reforestation.

Environmental Impacts

2.29 The environmental impacts of a dendrothermal system are difficult toaddress for the generic case; the effects are interrelated, site-specific,and dependent on the equipment and methods of operation used at the specificinstallation. To attain a reasonably accurate quantitative estimate of theimpacts, they must be assessed for the individual site under considerationusing methods similar to those available for traditional forestry and powerplant environmental assessments.

2.30 The woodfuel plantation is managed for maximum biomass yield.Alternatively, a forest stand, harvested for traditional commercial products,collects only tree boles. The harvest of a dendro plantation removes the

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tops, branches, and leaves--collectively referred to as "slash". Slash is notcommercially valuable as timber, but is useful as fuel. Harvesting slash hasbeen shown to add between 30% and 50% to the yield of combustible biomass of aunit of land (Hewett & High p.4). Also, timber logging typically is selectivefor the most useful trees, leaving immature, rough and rotten wood in thestand, while the dendro plantation is more likely to harvest by clear-cuttinglarge areas for convenience. The crop rotation period of a dendro plantation

is typically three to five years, much shorter than that of commercial forestoperations. This implies a greater frequency of harvesting and transportingthe wood, and a greater density of semi-permanent roads than in most foreststands.

2.31 The principal environmental problems that may be faced by adendrothermal plant are discussed below.

2.32 Nutrient depletion. Intensive removal of biomass from the land,characterized by both the short rotation 'period and removal of a high percentof biomass produced, may deplete the soil's organic materials and nutrients.Potassium, phosphorous, or nitrogen can become limiting, requiringfertilization if the land is to remain productive. The loss of organics withthe biomass is a problem in the long run. If a species that does not fixnitrogen is used, nitrogen fertilizer must be added regularly, even if boilerash is returned to the soil. Tree components typically left as slash by theforestry industry are disproportionately high in nutrient content. Thus,intensive removal of slash will impact the nutrient cycles in the forestsoil. The literature on the subject shows no apparent consensus, and thepractice of whole-tree chipping has emerged too recently to provide adequatefield data. This problem may be the most difficult environmental impact toassess and forestall, but it could have important effects on the long-termviability of the forest soil and the short-term economics of the dendro plant(Refs. 18, 19).

2.33 Soil damage and erosion. Unlike natural forests, new stands of treesin uniform formations can Lead to significant water-transported soil erosion,especially in the hilly areas and rainy climates seen as most likely fordendro plantation. This is exacerbated by clear-cutting and slash removal,which periodically leave large areas suddenly without ground cover. Also, themechanics of working the plantation damage its soil. Cutting roads disturbsthe land profile, and skidding trees compacts broad swathes of soil. Bothtypes of damage accelerate erosion in the plantation (Ref. 18).

2.34 Runoff water quality. Forest hydrology is relatively well-understoodin general, but accurately predicting the effects of a woodfuel plantationrequires analysis of its specific watershed. Turbidity of the runoff andreceiving streams may be sharply increased by erosion changes. Nutrientlevels in the water may rise if topsoil enters the steams in significantamounts, especially if fertilizer is added to the plantation. In addition,planting large stands of nitrogen-fixing species may cause nitrogen to beleached into local streams at higher rates and lead to downstreamnutrification.

2.35 Ash disposal. Ash content of wood is generally higher than that ofother fuels, so ash is produced in somewhat greater quantity than it is byother solid-fired power plants. The ash tends to be lighter and finer than

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coal ash, leading to possible wind-blowing problems and difficulty in handlingwhen wet (Ref. 11). Spreading the ash over the plantation has been suggestedas a means of returning nutrients to the soil. (Ref. 9) The alkalinity ofthe ash makes it an adequate substitute for lime as a soil conditioner, and itcontains enough potassium and phosphorous to be useful as a low-gradefertilizer although nitrogen compounds are dispersed in the stack gases duringcombustion and do not remain in the ash. Keeping the ash in place on theplantation soil may be difficult, especially on sloping terrain. This couldaffect the turbidity and alkalinity of the runoff water and receiving streams(Ref. 18).

2.36 Damages to plantation trees. Dense stands of a single crop speciesrun the risks of devastating attack by insects and of unchecked outbreaks ofmicrobial diseases. Large areas of monoculture--especially clonal groups,such as coppiced growths--provide a perfect habitat for pests and diseasesthat depend on a particular species. The other great danger is fire,especially difficult to check in dense tree stands and capable of destroyingseveral years' fuel in a single outbreak. Adjacent forests and inhabited aresare also at risk if fires spread out of control from the plantation (Ref.20).

2.37 Other impacts. Installing and operating a plantation may disruptwildlife habitats, and large areas of monoculture plant growth may reduce thevariety of animal life in the area. Biological hazards of the monoculturealso place existing forests at risk from the spread of any diseases orinfestations that may begin and thrive in the plantation (Ref. 19).

2.38 Stack emissions from a wood-fired power plant are similar to thosefrom fossil power plants, with some differences in composition--far fewersulfur oxides, more nitrogen oxides, and a higher concentration ofparticulates. Particulates are seen as the major undesirable constituent(Ref. 11). Removal of particulates from the effluent generates flyash thatmust be disposed of as solid waste. Thermal pollution of streams by the powerplant's condenser cooling water must be evaluated for each particular site.

2.39 Strategies can be developed to mitigate the likely environmentalimpacts, but some are of uncertain effectiveness and some can be quiteexpensive. A few preventative strategies are discussed below.

2.40 Harvesting the woodfuel by patch-cutting, which clears trees from theland in a checkerboard pattern instead of clear-cutting large areas, wouldimprove resistance to erosion and soil damages without significant extra costor operational changes. Well-planned and maintained firebreaks and carefulfire-control and fire-fighting policies are essential to reduce the risk oflosing biomass to forest fires. Leaving some slash in the harvested field isoften recommended as a means to improve the nutrient cycle and to avoid themost severe erosion by providing some ground cover (Ref. 19). This doesreduce the yield of combustible biomass, to which the short-term economics ofthe dendro system are extremely sensitive; but may be necessary to sustain theLong-term productivity of the forest land, including the biomass yield ofsuccessive generations of woodfuel.

2.4.1 Use of fertilizer at each new generation to prevent nutrientdepletion adds to plantation operating expenses, and adversely affects the

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quality of runoff water. Dispersing boiler ash on the plantation as a regularmethod of disposal helps the soil as a conditioner and a low-grade fertilizer,returning some potassium and phosphorous to the soil. However, the ash may bedifficult to keep in place if spread atop the soil, and could lead toturbidity problems and some alkalinity in the runoff.

2.42 Some environmental problems can be reduced by rotating the cropspecies, both in time and in space. Sections of the plantation that areproducing woodfuel at a given time are alternated with sections that are leftfallow. When a second planting is to be undertaken, after several generationsof woodfuel are produced by coppicing from an initial planting, the sectionsthat have been producing are left fallow or planted in other appropriatespecies, while the sections that have been undisturbed are planted inwoodfuel. This would inhibit the problems related to monocultures, regeneratenutrients and organics, and allow the land to return to a stable profile. Itsdisadvantage is in adding to the land area required for the plantation,already a very high demand for the dendro system.

Plantation Development Scenario

2.43 This paper assumes a low to medium mechanized scenario for sitepreparation, planting, weeding, and harvesting developed from costs andmethods cited in the literature (Refs. 3, 4, 11, 20). The generic plantationterrain is assumed to be typical of a reforestation area in the Philippines:hilly but varied, and covered with a combination of shrubs and weeds. Shrubremoval and weeding are to be done manually by laborers with "bolos". A fewtractors aid, when the terrain makes it possible, in. heavy jobs such asremoving logs and stumps, and breaking up hardpan-soil. A few chain saws areprovided for shrubs and larger undesirable trees. An average laborrequirement of 30 man-days per hectare cleared is assumed. This type of sitepreparation is rather labor intensive but is adaptable to almost anycombination of existing vegetation and terrain.

2.44 Planting of tree seedlings is also done manually. Laborers carryingseedlings, fertilizer, and lime (soil conditioner) make holes with a groovedhoe or "hoedad", distribute fertilizer and lime, insert a seedling, tamp downthe earth around the seedling, and continue to the next planting spot. Unlikeaerial planting, this method produces fairly even rows, facilitatingharvesting and, unlike mechanical planting, it is applicable even on fairlysteep slopes.

2.45 Seedlings are produced in an on-site nursery from seeds derived froma small (100 ha) trial plantation, set up a year or so prior to the start offull scale planting. Leucaena trees produce seeds at one year of age. Thisnursery will continue to function on a limited basis after year 3 (whenplanting is completed) to provide seedlings to replace trees which do notsurvive, and perhaps to export young trees for other reforestation efforts.

2.46 Tractors, trailers and forest crawlers are provided to supply theplanting workers with seedlings from the nursery, and to carry fertilizer andsoil conditioner from the central storehouse.

2.47 Manual weeding of the plantation area is carried out yearly to ensurethat young seedlings and coppice shoots are not choked out by weeds, to thin

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out over-dense areas when necessary, and to reduce the number of coppiceshoots per stump from the natural dozen or more to two or three. Thispromotes straight-boled, thicker-stemmed trees rather than bushy specimens.These workers will, in addition, spread boiler ash from the power plant aroundthe plantation to return essential nutrients. In contrast, mechanized weedingwould require very evenly spaced rows and relatively gentle terrain to beeffective.

2.48 There is a large latitude of choice in harvest systems, ranging fromextremely labor-intensive to extremely capital-intensive systems. In the mostmechanized alternative, a large harvester-chipper grasps the trees, clips themoff at the base, and feeds them to a chipper mechanism; chips are collectedin a hopper and transferred to a chip truck for transport to the powerplant. At the other extreme, trees can be cut by hand and skidded .to alanding using draught animals.

2.49 In the present study, a middle ground between these systems isenvisioned. Wood cutting is to be done by two-man teams. One worker lops thetree off at an angle with a chain saw at a suitable height; the other guidesthe falling trees so that they lie on the ground in bunches convenient forskidding. Since the terrain is assumed to be varied, several different typesof equipment are supplied for skidding. Tractors , trailers and forestcrawlers are included for areas in which the slope is gentle enough to allowtheir operation. When the slope is too severe, logs are moved to the landingsusing portable cable transport systems and "power take-off" (P.T.O.) winches,driven by a tractor's diesel engine.

2.50 At the landing, logs are lifted by diesel-driven truck loaders anddeposited in the back of stake-bed diesel trucks with capacities of about fivemetric tonnes. These trucks transport wood to the power plant, where it isunloaded in the wood yard. The truck size must be small enough that thetrucks can negotiate plantation roads (especially if fitted with dual wheelsfor soft or muddy areas), yet large enough that increasing the plantation-to-power plant distance does not lead to an unacceptable increase in truck milestravelled, and thus fuel consumed.

- 14 -

III. COST ANALYSIS

Baseline Cases

3.01 This section examines the costs of establishing and operating adendrothermal power plant system. The costs of specific components areestimated for generic dendro systems of three sizes: 3 MW, 10 MW, and 50MW. Where possible, this analysis uses data from studies conducted for actualprojects, relying chiefly on three studies for power plant component costs(Ref. 2, 6, and 7). These were pre-feasibility studies for plants of 3, 10and 50 MW in the Philippines, Papua New Guinea, and Vermont (US)respectively. A 3MW dendropower plant is currently operating in thePhilippines and the 50 MW power plant has been constructed and is nowoperating in Vermont.

3.02 The costs for components related to the plantation have beendeveloped by the authors, based on the low to medium-mechanized procedures forland preparation, planting and harvestings described in the previous

section. Costs available in the three principal references are of little use

for plantation costs: the 50 MW. and 10 MW studies are based on the use ofexisting forest resources, and the 3 MW study does not include plantation costitems in sufficient detail to allow extrapolation to other sizes.

3.03 The range of sizes chosen for this study is helpful for comparing the

physical requirements and economics of dendrothermal power plants. The

enormous plantation area required by a 50 MW system--considered a small powerplant by standards for conventional fossil-fueled plants--suggests thatsystems larger than 50 MW are not desirable or feasible. Analysis of the 50MW system is included here primarily to gain information on economies ofscale. The 50 MW configuration under -the assumptions of this analysisrequires a plantation of over 30,000 hectares or 300 square kilometers. Asimilar ratio of about 600 hectares per megawatt is implied for any dendrosystem under these assumptions.

3.04 At the other extreme, systems of 1 MW and below are probably notdesirable because of the high power plant capital costs per installed kilowatt

and correspondingly high electricity generation costs. The 3 MW system underthe assumptions of this study has a power plant capital cost of about $1,400per kilowatt. In comparison, a 500 kW wood-fired power plant has a 1980installed cost in the Philippines of $2,100 per kilowatt (Ref. 22). Agasifier-generator system of equigalent size imported from France, would cost$900 per kilowatt installed (Ref. 6).

3.05 The Philippines is used as the baseline site for the three analysesbecause most of the existing studies and available reference materials arebased on Philippine conditions. However, the three cases are generic in thatthey do not fully correspond to actual projects on Philippine sites. Power

plant component cost data from the reference studies have been adjusted to1982 Philippines costs where appropriate, to include items such as shippingcosts and installation labor. It must be stressed at the outset that landacquisition or leasing costs were not included in the analysis on theassumption that--as is true in the Philippines--the sites are public non-

agricultural lands earmarked for reforestation. For generic estimation

purposes, it is difficult to identify a "suitable" range of land costs;

- 15 -

however, the impact of buying or leasing large tracts of land fordendrothermal power purposes on capital and electricity generation costs isclearly adverse. For example, for the 3 MW plant which requires some 2000hectares of land, an acquisition cost of say, $2,500/hectare or about $1,000per acre would raise capital requirements by 60% and increase generation costby about 40%. A similar effect on generation costs is obtained if land has tobe leased at about $100 per hectare per year.

3.06 The cost data obtained from the calculations described in the nextsections are to be regarded as first-order estimates from which actual costsmay vary by as much as 25%.

Assumed Physical Parameters

3.07 Table 1 lists the physical parameters used for the three baselineanalyses.

3.08 The power plant construction period is assumed to be 2 years for the3 MW and 10 MW plants, and 3 years for the 50 MW plant. Power plantcommissioning is planned to coincide with the first harvest year, soconstruction is to begin during year 3 for the 3 MW and 10 MW power plants,and year 2 for the 50 MW power plant.

- 16 -

Table 1: Dendrothermal Power Plant SystemPhysical Parameters

3MW 10MW 50MW

I. Power Plant

Gross Capacity, kW 3,100 10,000 50,000Annual Operating Time, hrs 5,500 6,500 6,576Capacity Factor, % 62.8 74.2 75.1In-Plant Electrical Use, % 12.5 10.8 9.2Global Energy Conversion Efficiency, % 16 18 20Net Annual Generation, GWh 14.92 57.98 298.55Ash production, tonnes/da .2-4 8-16 35-70Power Plant Lifetime, years 25 25 25Project Year Construction Begins 3 3 2Project Year On-Stream 5 5 5

II. Wood Plantation

Net Producing Area, ha 1,996 6,764 30,790Biomass Density, trees/ha 10,000 10,000 10,000Biomass Production, bdt/yr 19,960 67,640 307,900Biomass Yield, bdt/ha-yr 10 10 10Energy Value of Woodfuel, GJ/bdt 19.22 19.22 19.22In-Plantation Roads, km 50 169 770Plantation Road Density, km/ha .025 .025' .025Average Wood Transport Distance, km 4.5 8.2 17.5Rotation Period, years 4 4 4Project Year Development Begins 1 1 1Project Year First Harvest 5 5 5

III. Wood Hauling

Number of Trucks 8 24 104Average Round Trip Distance, km 30 36 56Distance Plantation-Power Plant, km 10.5 10.5 10.5Biomass delivered, truckloads/day 32 109 493

(average)Diesel Fuel Used, mt/yr 90 330 1,500

-17 -

3.09 Power plant specifications and performance parameters are taken fromthe three principal reference studies. Overall energy conversionefficiencies, or joules of electricity generated per joules of heat content inthe wood fuel, are drawn from performance data of equivalently sized plantscited in the literature which use air-dried fuelwood inputs!/ The assumedannual operating hours correspond to the design operating hours of the threeprincipal references.2

3.10 The annual woodfuel consumption required by each of the baselineplants is calculated from the conversion efficiency and the annual kWhgeneration-assumed for each case. A heat content of 19,220 million joules perbone dry tonne of woodfuel is used.

3.11 The plantation area needed to support each power plant is calculatedfrom the fuel requirements using a biomass yield of 10 bdt/ha-yr, consideredto be reasonable for most species on a Philippine site (see discussion inSection 2). The overall plantation area, including unplantable terrain andland for roads and firebreaks, will be somewhat larger; net or plantable areais typically 60% to 85% of gross area, depending on terrain. The plantableland is to be planted at a density of 10,000 trees per hectare, or with auniform spacing of 1 meter between trees. With a rotation period of 4 years,the woodfuel requirements are met by harvesting each year one-fourth of theplantation, starting in year 5.

3.12 Roads are to be provided to a density of about 0.025 linear km perplantable hectare of plantation. Of these, 0.015 km/ha are to be foresttrails (1.5 meters wide) and 0.01 km/ha are to be plantation roads (2.5 meterswide, minimum radius 8 meters, maximum slope 7%). This density implies accessto a trail or road at about every 400 meters, so that the maximum log skiddingstump-to-road distance is about 200 meters. If the entire plantation areacould be planted in biomass, the total in-plantation length of trails androads together would be 49.9 km for the 3 MW plantation, 169 km for the 10 MWplantation, and 770 km for the 50 MW plantation. Actual distances will besomewhat longer, depending on the amount of unplantable land that must becrossed by roads, but this is not predictable for the generic case, and isexpected to be a very small cost increase. In-plantation wood transport isperformed by light trucks on the roads, and forest tractors and crawlers onthe trails.

3.13 Trucks are to be used to haul the woodfuel from the plantation to thepower plant. For convenience, it is assumed that the distance from theplantation border to the power plant is 10.5 km in all cases, and that thepoint of loading wood onto the trucks is roughly at the center of a squareplantation. Thus, total hauling distance from the point of loading to thepower plant wood yard is 15 km for the 3 MW case, 18 km for the 10 KW case,and 28 km for the 50 MW case. About 10 km of high-quality, truck-passableroad is to be constructed and maintained for all cases.

1/ Pre-drying the woodfuel with flue gases would obviously improve theseefficiencies but this variation is not treated in the present report for Lackof information.

2/ Changing to identical operating hours would improve comparison but wouldalso necessitate extensive recalculation of many affected parameters.

- 18 -

3.14 Trucks will also haul ashes from the power plant to the plantation tobe spread on the soil. The amount of ash produced by a wood-burning boilervaries widely, depending on wood type and the amount of soil collected duringharvesting. If the boiler ash is hauled 250 days/yr, the ashes transportedwill be about 2 to 4 dry tonnes/day for the 3 MW plant, 8 to 16 bdt/day forthe 10 MW, and 35 to 70 bdt/day for the 50 MW. If some of the wood haulingtrucks of about 2.5 bdt capacity can be fitted to carry ashes on their returntrip to the plantation, no extra fuel costs will be incurred. The ashquantities expected would comprise about 2 truckloads/day for the 3MW plant, 6truckloads/day for the 10 MW plant, and 25 truckloads/day for the 50 MWplant. The ashes can be distributed manually during weeding and harvesting.Some difficulties (and expenses) may arise in storage and handling of the ashbefore distribution, especially if it is wet.

Capital Costs

3.15 Table 2 summarizes the estimated base capital requirements for the 3MW, 10 MW, and 50 MW plants.

3.16 Power plant capital costs include all expenditures forinfrastructure, electro-mechanical equipment, architecture and engineering,installation labor and initial outlay for recurring equipment items. Thecapital costs for establishing the plantation and wood hauling capacity aredefined to include all one-time costs in preparation for the first harvestcycle. In addition to the costs for buildings, heavy equipment for harvestingand transportation, and construction of roads and other infrastructure, thecosts include all labor and materials for ground clearing, planting, weeding,and application of fertilizers for the initial cycle.

3.17 Considering only the power plant itself, the capital cost perinstalled kilowatt is comparable to or even less than that of fuel-oil firedsteam plants below 50 MW (about $1,800/kw for the 20-30 MW range). It issignificantly higher than small diesel plants in the 1-20 MW range (about$700-800/kw). However, the total dendrothermal system is clearly verycapital-intensive, reaching about $2,100 per kilowatt for the 3 MW system anddeclining only to $1,300 per kilowatt for the 50 MW system. This arises fromthe unusual feature that the dendro plant's fuel component includessubstantial capital costs. Establishment of the plantation and the wood-hauling system account for about 40% of capital requirements; comparableexpenses for fuel handling in fossil-fired plants are relatively small.

- 19 - -

Table 2.DENDROTHERMAL POWER PLANT SYSTEM

ESTIMATED BASE CAPITAL COSTS(1984 US Dollars)

3 MW 10 MW 50 MW

I. Power Plant

1. Buildings & Civil Works 537,330 1,590,450 4,325,370

2. Power Plant Equipment,Electricals, Installation 2,224,760 6,558,260 26,262,390

3. Wood Handling Equipment 928,080 1,541,450 4,160,330

4. Architecture and Engineering 298,670 642,310 1,798,710

5. Shipping 314,458 809,145 3,041,033

Subtotal 4,303,298 11,141,615 39,587,833

$/Kw installed 1388 1114 792

II. Plantation

1. Buildings 126,320 262,530 808,430

2. Light Vehicles, Hardware,Large Equipment 499,690 1,087,250 3,209,360

3. Land Preparation,Planting 710.,020 2,153,630 10,461,280

4. Roads 123,522 508,158 2,289,235

5. Fertilizer 312,706 1,088,079 4,938,496

6. Shipping 49,969 108,725 320,936

Subtotal 1,822,227 5,208,372 22,027,737

$/Kw installed 588 521 441

III. Wood Transport

1. Trucks & Parts 120,650 360,000 1,525,300

2. Road: Plant to Plantation 301,350 301,350 301,350

3. Shipping 11,733 35,800 152,530

Subtotal 433,733 697,150 1,979,180

$/Kw installed 140 70 40

GRAND TOTAL 6,559,258 17,047,137 63,594,750

Total $/Kw installed 2,116 1,705 1,272

- 20 -

Electricity Generating Costs

3.18 Project lifetime cost summaries are shown in Tables 3, 4, and 5. Thestart-up year 5 is considered the reference year for the cash flow analysis.All costs are inflated or discounted to their present values at Project Year5, i.e., costs before start-up, or during Years 1 through 4, are inflatedusing an interest rate of 12% and costs incurred beyond Project Year 5 arediscounted to Year 5 values using a discount rate of 12%. The annualized costfor each component is obtained using a capital recovery factor correspondingto an interest rate of 12% and a total project life of 29 years. This methodof discounting is somewhat arbitrary, and has the effect of making projectcosts appear somewhat higher than if all were discounted to Project Year 1. 3/The method was chosen because it is felt that all expenses'prior to start-up,when the power plant begins generating electricity, should be considered aspart of the capital investment and treated differently from costs incurredwhile the power plant is operating and generating a salable product. Theelectricity production-cost for each case, in US cents per kWh, is calculatedbased on the assumed annual power plant operating hours. The figuresrepresent busbar cost of net electricity generated by the power plants.

3.19 The cost components are defined in detail in Annex 1.

3.20 The percent contribution of each component to the system's totalannualized cost is also shown in tables 2A, 2B, and 2C. Sub-totals forannualized costs and percent of total show the proportional contribution ofeach of the three categories' costs: power plant, woodfuel plantation, andwood transport. In addition, the tables display. annualized cost per netkilowatt hour for each item, and the annualized cost per bone dry ton ofbiomass delivered to the plant for the plantation and wood transportcomponents.

3.21 For plant sizes of 3 MW, 10 MW, and 50 MW the baseline electricitygeneration costs range from 12.1 C/kWh to 6.6 C/kWh. The baseline cost forbiomass delivered to the power plant yard ranges from $37.1/bdt to $46.9/bdt,or about $2.04 to $2.57 per million Btu. These production cost figures appearto be reasonable, falling below known market prices for firewood in thePhilippines at the time of the study.

3.22 If the production of wood--that is, plantation and wood transportcosts--is seen as the fuel component cost for operating the dendro plant, itis clear that the fuel costs for dendro plants are substantial. The two wood-production categories account for 6.3c/kWh, or 52% of the total generationcost, in the 3 MW case and 3.80/kWh, or 58%, in the 50 MW case. The economiesof scale of equipment and infrastructure items permit decreasing unit costsfor delivered biomass as plantation size increases. However, some items--labor, fertilizer, and roads, for example--are dependent on plantation size,which is derived directly from biomass production needs, which in turnincreases nearly linearly with kWh generation. The power plant category shows

3/ Generating costs for the 3 plant sizes calculated bythis approach come out to be about 13% higher than those obtainedby the usual method where all cash flows are discounted to yearone.

- 21 -

greater economies of scale than do the plantation and transport catego'ries.For this reason, the percent contribution.to total costs of the plantation andtransport categories increases with increasing plant size, though unit cost ofthe fuelwood decreases.

3.23 Unit costs of the power plant category decrease from 5.8,/kWh for the3 MW case to 2.8-/kWh for the 50 MW case, as nearly all components showimportant economies of scale. The power plant category's contribution tototal costs decreases from 48% in the 3MW case to 42% in the 50 MW case.

3.24 The wood hauling category includes only costs that pertain totransporting the woodfuel from the plantation to the power plant. Thissomewhat artificial treatment makes wood transport costs appear to be a smallproportion of generation costs, as the category accounts for about 10% ofgeneration costs in all three plant sizes. However, important additionalexpenses arise from transporting biomass within the plantation, including roadconstruction and vehicle purchase, operation, and maintenance. These areincluded in components of the plantation category. In addition, substantiallabor and equipment costs are incurred for loading and unloading vehicles inthe plantation, and unloading trucks at the power plant. These are includedin the labor and equipment components of the plantation and power plantcategories.

3.25 Increasing power plant size shows interesting effects on wood haulingcosts. Road construction and maintenance cost remains constant at all plantsizes, while fuel, labor, and equipment costs are proportional to the changingamount of biomass transported. In the 3 MW plant, the cost for constructingand maintaining the road is the largest component in the wood haulingcategory, and the category's total biomass costs are $9.4/bdt of deliveredwoodfuel. In the 50 MW plant, motor fuel for the hauling trucks is thelargest component, and the category as a whole adds $7.1/bdt to the cost ofthe woodfuel. In the 10 MW plant both of these components are smaller in$/bdt, and the total biomass cost of the wood hauling category is smaller at$6.8/bdt. For all three cases, the sensitivity analysis shows that. thecomponents' costs are dependent on the hauling distance between the plantationand the power plant, assumed in the baseline analysis to be relatively shortat 10 km.

3.26 The in-plantation transport costs increase with plantation sizealthough this behaviour is not readily apparent from the tables. Thetransport-related costs of some plantation components, such as motor fuel andvehicle costs, increase with increasing plantation size, because the averagestump-to-truckbed transport distance increases. In the 3 MW plant, theaverage in-planttion transport distance is 4.5 km; in the 10 MW plant, 8.2 km;and in the 50 MW plant, 17.5 km.

- 22 -

Table 3Financial Analysis

3 MW Dendro Thermal Power Plant SystemAnnualized Costs and Energy Cost

1984 U.S. Dollars

AnnualizedCost $ % c/kwh $/bdt('000 $)

I. Power Plant

1. Buildings & Civil Works 79.8 4.9 0.592. Power Plant Hardware &

Installation 329.2 20.2 2.443. O&M, Motor Fuel 80.6 4.9 0.604. Wood Handling Equipment 160.3 9.8 1.195. Labor 41.0 2.5 0.306. Architecture & Engineering 44.4 2.7 0.337. Shipping 48.9 3.0 0.36

Subtotal 784.2 48.0 5.81

II. Woodfuel Plantation

1. Buildings 25.3 1.6 0.19 1.402. Hardware, Large Equipment

Light Vehicles 122.0 7.5 0.90 6.753. O&M, Small Tools,

Motor Fuel 103.8 6.4 0.77 5.754. Roads & Maintenance

Materials 33.4 2.0 0.25 1.855. Fertilizer 59.4 3.6 0.44 3.296. Labor 321.3 19.7 2.38 17.787. Shipping 12.2 0.7 0.09 0.68

Subtotal 677.4 41.5 5.02 37.50

III. Wood Hauling

1. Trucks & Parts 30.6 1.9 0.23 1.692. Motor Fuel 36.7 2.3 0.27 2.033. Repair & Maintenance 19.6 1.2 0.14 1.084. Labor 12.5 0.8 0.09 0.695. Road: Plant to

Plantation Border 66.6 4.1 0.49 3.696. Shipping 3.0 0.2 0.02 0.17

Subtotal 169.0 10.5 1.25 9.36

TOTAL 1630.6 100.0 12.08 46.85

23 -



1984 U.S. Dollars

AnnualizedCost $ % C/kwh $/bdt('000 $)

I. Power Plant

1. Buildings & Civil Works 236. 5.3 0.452. Power Plant Hardware &

Installation 973. 22.0 1.853. O&M, Motor Fuel 327'. 7.4 0.624. Wood Handling Equipment 236. 5.3 0.455. Labor 51.9 1.2 0.106. Architecture & Engineering 95.4 2.2 0.187. Shipping 121. 2.8 0.23

Subtotal 2040. 46.2 3.88



Light Vehicles 284. 6.4 0.54 4.633. O&M, Small Tools,

Motor Fuel 292. 6.6 0.56 4.774. Roads & Maintenance

Materials 131. 3.0 0.25 2.145. Fertilizer 196. 4.4 0.37 3.206. Labor 974. 22.1 1.86 15.917. Shipping 28.4 0.6 0.05 0.46

Subtotal 1958. 44.3 3.73 31.97

III. Wood Hauling

1. Trucks & Parts 91.9 2.1 0.18 1.502. Motor Fuel 150. 3.4 0.29 2.443. Repair & Maintenance 59.7 1.4 0.11 0.974. Labor 39.1 0.9 0.07 0.645. Road: Plant to


Subtotal 416. 9.5 0.80 6.80

TOTAL 4414.0 100.*0 8.41 38.77

- 24 -



1984 U.S. Dollars

AnnualizedCost $ % C/kwh $/bdt

('000 $)

I. Power Plant


Installation 4216. 23.5 1.563. O&M, Motor Fuel 1142. 6.4 0.424. Wood Handling Equipment 683. 3.8 0.255. Labor 68.5 0.4 0.036. Architecture & Engineering 289. 1.6 0.117. Shipping 490. 2.7 0.18

Subtotal 7584. 42.3 2.81


1. Buildings 162. 0.9 0.06 0.582. Hardware, Large Equipment

Light Vehicles 929. 5.2 0.34 3.333. O&M, Small Tools,


Materials 593. 3.3 0.22 2.135. Fertilizer 938. 5.3 0.35 3.366. Labor 4470. 24.9 1.65 16.047. Shipping 92.9 0.5 0.03 0.33

Subtotal 8,353. 46.6 3.09 29.98

III. Wood Hauling

1. Trucks & Parts 392. 2.2 0.14 1.412. Motor Fuel 668. 5.9 0.25 2.403. Repair & Maintenance 254. 1.4 0.09 0.914. Labor 178. 1.0 0.07 0.645. Road: Plant


Subtotal 1988. 11.1 0.74 7.13TOTAL 17,925. 100.0 6.63 37.11

- 25 -

Sensitivity Analysis

3.27 The sensitivity of fuel production and electricity generation costsfor the 3 MW and 10 MW dendrothermal systems was tested against the variationsof 8 sets of parameters with ranges that might reasonably be expected forprojects in the Philippines and elsewhere. The results are presented in Annex2 and 3. The following detailed discussion focuses primarily on the 10 KWcase, but similar behaviour can be noted for the other two cases.

A. BIOMASS YIELD

3.28 The greatest sensitivity of both fuel and generation costs is tobiomass yield, or the amount of fuelwood produced per hectare of plantationcultivated. The cost per unit of fuel delivered ($/bdt) changes sharply withvarying yield (bdt/ha-yr), as shown in Figure 3. Doubling the yield from theassumed 10 bdt/ha-yr would reduce cost by 35% in the 10 MW system, from$38.8/bdt to $24.8/bdt. The accompanying reduction in generation cost isnearly 20%, from $8.4C/kWh to 6.8 C/kWh, as shown in Figure 4. On the otherhand, a reduction in biomass yield would lead to a fuel cost increase that iseven more pronounced; if yield fell to 5 bdt/ha-yr fuel cost to the 10 MWplant would rise to over $66/bdt and generation costs would rise by 38%, to11.6 c/kWh.

3.29 The change in generation cost with varying biomass yields isattributable to plantation expenses. Figure 4 shows that power plant and woodtransport costs are unaffected by changes in biomass yield. Among theplantation. components both capital and operating costs vary sharply withyield. Capital components such as labor for initial site clearing, roads andfertilizer depend on plantation area cultivated, which is reduced as yieldincreases. Many operating costs, particularly labor for weeding andharvesting, are also related to plantation area. Figure 5 shows thecontributions of capital and operating components to changing generation costas a function of biomass yield.

B. CAPACITY FACTOR

3.30 Generation cost is also very sensitive to the power plant's capacityfactor. The baseline analysis assumes the 10 MW plant will operate 6,500hours per year, for a capacity factor of 74%, and the 3 MW plant will operate5,500 hours per year, for a capacity factor of 63%. If the plantation andpower plant are designed to produce and burn biomass sufficient to operate at74% capacity factor, but the plant operates fewer hours because of operationaldifficulties or smaller load demand than anticipated, then nearly all costswill remain fixed while kWh production will be less than expected. Figure 6shows the effects on generation costs if the capacity factor falls below theplanned level. For example, if the 10 MW power plant were to operate only5,0100 hours per year (a capacity factor of 57%), generation cost wouldincrease by 26% from 8.4c/kWh to 10.6 c/kWh.

C. LABOR COSTS

3.31 Labor costs account for about 40% of the delivered fuel costs andover 20% of the total generation costs in the dendro system. The greatestpart of this is plantation labor for weeding and harvesting. Figure 7 shows

- 26 -

changes in generation costs attributable to each category as a function oflabor costs. An increase of 50% in the baseline labor costs (1980 Philippineslabor costs) would lead to an increase of 12% in generation costs, mostly dueto the impact on costs in the plantation category.

3.32 If labor costs double, cost of biomass fuel for the 10 MW plant wouldrise by 43% (from $38.8/bdt to $55.3/dbt) and generation costs would rise by24% (from 8.4/c/kWh to 10.44c/kWh). If labor costs are significantly lessthan the baseline assumptions woodfuel and generation costs would be reducedin similar proportions. For example, labor costs of 50% less than baselineassumptions would lead to a reduction of 21% in fuel costs (from $38.8/bdt to$30.5/bdt) and 12% in generation costs (from 8.4c/kWh to 7.4c/kWh).

D. POWER PLANT CAPITAL COSTS

3.33 Sensitivity of electricity generation costs to changes in the powerplant capital costs is shown in Figure 8, The power plant components accountfor about 60% of the system's total capital expenses, which translates to 40%of the system's total generation costs. This is a larger proportion than thecost of the labor components, so the percent change in generation costs with aunit change in power plant capital costs is greater than with a unit change inlabor costs. Given the basis for estimates in this analysis, the likelyvariation from baseline estimates for power plant capital costs is expected tobe within +/- 25%. However, the cost of labor may vary considerably moredepending on the location of the dendro system and other factors.

3.34 A 25% increase over baseline cost of power plant capital costs of the10 MW system would lead to a 9% increase in generation costs (from 8.4 c/kWhto 9.2 c/kWh) and a 15% increase in overall capital costs (from $21.1 millionto $24.3 million). An equivalent reduction would result from a 25% decreasein power plant capital costs.

E. OTHER FACTORS

3.35 Other factors which have relatively smaller impacts on generationcost include road construction cost, fertilizer amounts, and wood haulingdistance. As displayed in Figure 9, reducing to zero any one of these factorswould reduce as-delivered fuel costs 8% to 9% and overall generation costs by4% to 5%. Increasing these costs would have similar minor effects, with theexception that costs for delivered biomass can rise substantially if woodhauling distance (plantation to power plant) is much more than the baseline 10km. If plant siting necessitates a hauling distance of 50 km, the cost ofdelivered biomass fuel rises to $52/bdt (a 34% increase) and generation costto nearly 104/kWh (an 18% increase) for the 10 MW plant. The unit changes ingeneration cost with changes in power plant capital costs, labor costs, anddiscount rate are added to Figure 9 for comparison, clearly showing relativeimpacts of all these factors.

- 27 -

FIGURE 3

FUEL COST VS BIOMASS YIELD

Ie -

.-. 3l

10 MW

6 1e 1 20 25 38 5

B=KMASS YIELD. BDT/HÅ-YR

- 28 -

FIGURE 4

KWH Cost vs Yield: 10 MW

14 •

12 -

6 • •Plantation

Power Plant2

6 1 i 1

B=MAS3 YELD, ODT/MA-YR

FIGURE 5

KWH Cost vs Yield: 10 MW

14 -

12 -

6 - Operating-

Capital

2-

BZOle0 tL 2 2530

BIDASYMED, JBDT/MA-YR

- 29 -

CAPACMTY FACTOR2E;

2el

201 - -

3Ø 4e 5 6 78

CAPACITY FACTORtFigure 6

FIGURE 7

LABOR COSTS

w Plantation

5---_____ ---______----___--- ._----..._---=Transport

Power Plant

-2 5 10

CHANSE IN LABOR COST FROM DASELI.NEi X

- 30 -

FIGURE 8

POER PLANT CAPITAL COSTS

10

6 -Power Plant

Transport

Plantation

2-

-25 -20 -15 -10 -5 9 S 10 Is 20 25

CHANGE DN POWER PLANT CAPITAL COST& a

FIGURE 9RELATIVE COST CHANGES WITH VARIOUS FACTORS

12

11-Labor

Discount CostRate

10-PowerPlant

gCapita--C-- - - Wood

we -etiert lizer; HaulRoad Construction Distance

8 -" Costs-

7 /

6 --

-100 -50 0 50 100 150 200

CHANE FROM BASELINE COSTi X

31

IV. COMPARISON WITH ALTERNATIVE SYSTEMS

3.36 Any comparison of the estimates developed here for a generic dendrothermal power plant's generation costs with the costs of a competing systemcan only be made in a general way. The sensitivity analyses have shown howour generation cost estimates can vary with various site-specific factors.The assumptions on which our estimates are based also may be different fromthe conditions of a particular project site. The generation costs of anysystem with which the dendro plant may compete also varies widely from countryto country, from remote to accessible areas, and among choices of generatingtechnology.

Comparison with Diesel Generation

3.37 Estimates for the generation costs of one possible alternative, a 9MW low-speed diesel oil power plant, are developed in the same generic fashionfor comparison to the generation cost estimates. for the 10 MW dendro plantgiven baseline assumptions. This analysis is intended only to give a generalidea about the relative advantages of each of these two systems.

3.38 A diesel plant of 9 MW capacity would approximately equal the netoutput of the 10 MW dendro plant, where about 11% of installed capacity isused internally. A one-year installation period is assumed, commencing at thestart of year 4. Both diesel and dendro plants are assumed to startgeneration at the beginning of year 5 and continue for a period of 25 years.

3.39 This type of diesel plant has a typical expected life of 20 years.To reach the 25-year lifetime of the dendrothermal plant, it is assumed thatafter 20 years of operation a new diesel unit will be installed. It willoperate for 5 years and then be credited with a residual value of roughly two-thirds of the initial cost (straight line depreciation). As in the dendrocase, the present values of all capital and operating costs are obtained bydiscounting at 12% to year 5, and the annualized costs are computed using acapital recovery factor corresponding to 12% interest rate and a 29 yearproject duration. The total generation cost in US cents per kWh is calculatedassuming 6,500 operating hours yearly.

3.40 Other assumptions include:

-- Capital cost of $1100 per installed kW;-- Fuel oil price of $0.20/liter;-- Annual 0 & M cost ofabout 2% of capital cost;-- Fuel oil price escalation of 2% yearly, leveling off after 10

years

3.41 The annualized costs and the resulting electricity generation costare shown in Table 6.

- 32 -

Table 6 Annualized and Generating Costs for 9 MW Diesel Power PlantAnnualized % of

Item Cost C/kWh Total Cost

1. Equipment 1,500,155 2.59 33.02. 0 + M 198,000 0.34 4.33. Fuel 2,843,271 4.91 62.6

TOTAL: 4,541,427 7.85 100.0

3.42 It is seen that under the above assumptions, the resulting generationcost is roughly comparable to the 10 MW dendro case (7.90kWh vs 8.4c/kWh fordendro). The fuel component costs are also comparable at about 5c/kwh(although in the dendro case some of this amount go into capital expendituresfor plantation establishment and wood hauling facilities.) If the diesel fuelis imported, it is clear that the dendro system has an important advantageover a diesel generating station. Fuel expenditures are recycled into thelocal economy, and the power plant's management has control over the supplyand price of its fuel.

3.43 Sensitivity of the baseline diesel generation cost to departures fromthe assumed capital costs, fuel oil price, and fuel oil price escalation rateare shown in Table 7. As may be expected from the respective contributions tothe total costs, the diesel plant generating cost is affected primarily by thefuel costs and only slightly by capital cost variations.

Table 7: Sensitivity AnalysisBase Cents/kWh

Equipment Cost, $/IKW 1,100 7.9Fuel Oil price, Cents/It 0.20 7.9Fuel Price Escalation 2% 7.9

LowEquipment Cost, $/IKW 900 7.3Fuel Oil Price, Cents/It 0.15 6.6Fuel Price Escalation 0 7.4

HighEquipment Cost, $/IKW 1,250 8.3Fuel Oil Price, Cents/It 0.3 10.3Fuel Price Escalation 3% 8.1

3.44 A similar comparison was made at the 3 MW level. The equivalentdiesel plant is a medium-speed diesel run on fuel oil with a lifetime of 15years. The assumed capital cost is $800 per installed-kW and the annualoperating and maintenance cost taken to be roughly 3% of the equipment cost.At 5,500 operating hours per year, the diesel generation cost is about 7.7cents/kWh as compared to the dendro plant's 12.1C/kWh. It would appear thenthat the "breakeven" size for the dendrothermal system is in the vicinity of10 MW.

3.45 At sizes below 10 MW, it is possible that site-specific factors couldcombine to lower generation cost to a point where it becomes competitive with

- 33 -

diesel. A biomass yield much greater than the conservative baselineassumption of 10 bdt/ha/yr would be the most important single factor. Other

cost components that can be reduced include:

-- Fertilizer: If soil conditions include sufficient amounts ofphosphorous and potassium, if boiler ash is returned to thesoil, and if a nitrogen-fixing tree species is used, initialfertilization may be omitted without significant effects onbiomass yield.

-- Road Construction and Maintenance: If roads within theplantation and the plant-plantation road are laid, down andmaintained by funds from another project, then road costs to thedendro plantation project are zero.

Labor: Operational changes that would reduce labor requirementsinclude: weeding only during the first year of tree growthinstead of annually as assumed; and reducing fire control crewsduring daylight hours when field workers are available to spotand fight fires.

-- Wood Hauling: If the power plant can be located 5 km from theplantation border instead of 10 km as assumed, motor fuel usedin hauling would be reduced by 1/2.

Comparison with Grid Electricity Costs

3.46 Assuming the availability of the biomass resource is not at issue, adendrothermal power plant in isolation, such as on a remote island or in anarea not serviced by the national grid, has to compete with other stand-alonealternatives such as the diesel systems discussed above. However, if thedendrothermal plant is to be integrated into the grid, it must be evaluatedagainst all other system expansion alternatives with the objective ofminimizing the systems's long run marginal cost (LRMC) of electricity. Thedendrothermal power plant is designed to serve as a base load plant. Itssize, location and reliability will affect the system's overall generation mixand transmission and distribution requirements. For example, an option may bebetween a dendro plant or additional hydro capacity.with gas turbines for thedry season. A simple comparison with other baseload alternative will bemisleading since it will not reflect the true cost of the other alternatives.

3.47 Given that the objective for system expansion is to minimize theLRMC, it is not possible to simply determine if a dendro plant is economicallyattractive within a system without undertaking an extensive analysis of allavailable system expansion options. This type of analysis is clearly notwithin the scope of this report. As an alternative, a first order comparisonof the dendro plant generation costs to the average system generation costsshould provide a preliminary indication of the economic potential of thedendro plant within the system. Systems with average generation costs thatare well above the generation costs of a dendro plant (12.1 c/kWh for a 3 MWplant and 8.4 c/kWh for a 10 MW plant) should indicate an economic potentialfor dendro plants. However, reliable data for the average generation costs ofelectricity systems in developing countries are not available. An alternateindicator, that has been compiled for over 100 developing countries by the

-34-

Power Advisory Unit of the World Bank, is the syst*em average revenue per kWh

generated (Annex 5). While the system average revenue may not accuratelyreflect system average generation costs, it, in most cases provides a second-best indictator to compare against the dendro plant generation costs. Annex 5

presents a list of the estimated average revenue per kWh for the electricitysystems of a few developing countries in the "green belt". Of the 48countries listed, 14 have system average revenues in excess of 12.0 c/kWh and26 are in excess of 8.0 c/kWh. However, grid systems with lower averagerevenues should not automatically be eliminated without determining theprimary reasons for the low value. In many cases, tariff subsidization,system losses and uncollected revenues contribute to lower system averagerevenues. Thus, in addition to the potential of dendro plants in isolatedareas not connected to a national grid, a potential may exist in somedeveloping countries for dendro plants to economically compete with otherconventional alternatives that are connected to the grid.

Other Considerations

3.48 The fuel costs of a dendrothermal power plant can be drasticallyreduced if it is sited near an industrial operation that produces largeamounts of biomass by-products that are not fully utilized. Wood wastes andcoconut residues, for instance, can be reduced to the appropriate size andmoisture content for burning and serve as boiler fuels of equal quality to thewood chips produced from the dendrothermal plantation. Some wastes are lesssuitable for mixing-with or displacing dendrothermal plantation biomass: ricehulls, for example, have a high ash content and are usually burned in furnacesspecifically designed to suit their different physical characteristics.

3.49 Public electricity generating plants have in fact been built without

a supporting plantation, relying solely on purchased wood residues from theforest industries. Such residues are essentially a waste disposal problem,and are generally available at a lower price per ton than wood from a managedplantation--often only the costs of handling and transport. The cost ofelectricity generation thus may be reduced below the baseline estimates if thefuel supply can be augmented with industrial wastes. The costs to transportthe fuel can become appreciable, as the sensitivity analyses have shown, ifthe power plant is sited at some distance from the fuel supply source--a

particular dilemma if multiple sources are to be used.

3.50 Forest thinnings, logging wastes, and senile coconut trees are otherlarge potential sources of biomass fuel for a power plant. These materialsdiffer from industrial by-products because they must be collected from a widearea and the higher labor intensity usually leads to a higher cost per ton of

delivered fuel. Whether such residues can be obtained at lower cost thanplantation wood depends largely on site-specific factors such as the type ofbiomass, gathering methods that can be employed, and distance over which theymust be transported.

3.51 Site preparation costs for both power plant and plantation arestrongly dependent on terrain. The major cost component here is roadconstruction, both for the in-plantation network and the better-grade truck-passable connection between the power plant and the plantation. A plantationsited on difficult terrain could also lead to cost increases for labor needed

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to weed and harvest biomass, and for motor fuel to transport wood within theplantation.

3.52 Transmission and distribution of electricity becomes a substantialadditional cost if the power plant is located far from the grid substation.Transmission costs are estimated at about $30,000 per kilometer based on 1980Philippines costs. A grid connection is advantageous to the dendrothermalpower plant even if electricity is produced for a dedicated customer becauseit can avoid the additional investment in a standby diesel generator and

supply power for start-up and maintenanc e downtime periods. On the otherhand, siting the plant nearer the grid substation and farther from the woodplantation or other fuel source would mean longer wood-haul roads. This would

mean higher road installation costs and increased wood hauling costs,estimated at $26,700/km of road constructed and $0.15/truck-mile travelled.

3.53 Environmental costs were not considered in the analysis, with theexception of emission controls. Only long-term studies conducted at specificsites can identify and quantify such biophysical impacts as the effect ofthermal pollution on aquatic life and the net impact of the forest managementscheme on soil fertility.

3.54 Land acquisition costs were not included in the baseline estimates onthe assumption that the sites are public non-agricultural lands earmarked forreforestation. This is true at the sites under consideration in thePhilippines. First order economic analyses for the 3, 10, and 50 MW cases,which imputes a land rental and shadow-prices labor costs, are presented inAnnexes 7 and 8. Because of the offsetting effects of the two changed costcomponents, the bottom-line capital, biomass fuel, and generation costs inthese economic analyses are very close to those of the financial analysis ofthe baseline cases.

3.55 Land availability is an important constraint in implementing adendrothermal power plant system. The ideal situation is where public landunsuitable for agriculture or earmarked for reforestation is used. However,some basic land requirements must be met for the dendro plantation. Soilquality must be high enough to produce an acceptable biomass yield, which thesensitivity analysis has shown to be crucial to economic viability of thesystem. The land's slope must be sufficiently moderate for access by laborcrews, harvesting equipment, and hauling vehicles. Rainfall must be adequateto support the design yield, since irrigation expenses would add severely tooperating costs. These conditions may rule out lands that are of highpriority for reforestation, such as mountainous terrain or areas of thintopsoil. On the other hand, land that thoroughly meets these requirements canalso serve well as agricultural land, and the potential arises for difficultpolicy decisions over land use.

3.56 When land is made available for a wood plantation, another questionis whether products of higher economic value than electricity could beobtained from a wood plantation on the specific site. With the proper choiceof tree species, the land could produce salable products such as sawtimber,pulpwood for paper, wood material for industrial charcoal (metallurgicalcharcoal, activitated carbon, etc.), feedstock for methanol production, orfuelwood for domestic use (Ref. 11).

3.57 For example, in some sections of the Philippines there is a marketfor firewood to be used in industrial boilers, as a secondary fuel or todisplace fuel oil as it becomes more expensive. Sawtimber has typicallyconsisted of hardwood species of longer growing periods, but some studiessuggest that fast-growing hardwoods such as leucaena and casuarina are alreadyused as building materials where locally available and are beginning topenetrate the commercial lumber markets. The greatest demand in manycountries may be for firewood as domestic fuel--not only a market demand thatmay bring a higher return than sale of electricity but a social need for fuelthat is becoming an increasingly scarce resource in some areas.

3.58 The economic choice depends on factors that are highly location-specific and cannot be addressed in detail in this generic treatment. Theimportant factors are the existing and forecast markets for the variousalternative products, and whether a political commitment has been made by thecountry in question to produce electricity from indigenous resources.

3.59 Use of a given plantation for multiple purposes is possible,expanding the cultivated area if land is available and selling the additionalwood produced for an alternate purpose. The purposes need not be incompatibleif proper foresight and planning are used: if timber is sent to a sawmill,the forest thinnings and mill residues can easily serve as boiler fuel for thepower plant. Similarly, tree stems and other preferred sections can bebundled for sale as cooking fuel, while slash is used as fuel for a powerplant.

3.60 These uses could improve the economics of the dendro power plantsystem in the same way as using industrial by-products or forest residues fromexisting operations, discussed earlier. Again, the cost aspects of theassociation of the dendro plant and the alternative uses are stronglydependent on transport requirements. Roads for distributing plantationproducts to more widely-flung markets, and transporting wastes back to thedendro power plant from industrial users, become the principal cost item.Motor fuel for hauling wood products and residues for fuel can also becomecostly if sites are far apart.

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V. CONCLUSIONS

4.01 The dendrothermal power plant is attractive because it can generatepower in sizable quantities, exploits a renewable and indigenous resource,delivers some environmental benefits and relies on technology that is alreadywell-established. Hydroelectric power appears to be the only othertechnology that has all these advantages. However, the dendrothermal systemcarries the disadvantages of high capital intensity, high labor intensity,long lead times between project initiation and power generation, and arequirement for very large amounts of land. Further, its economicdesirability depends strongly on location-specific parameters, both geographicand socioeconomic.

4.02 Using the parameters assumed for this study, the economics of adendro power system is shown to become less favorable at sizes below 10 MW.However, the minimum economic plant size may be lower where site-specificconditions make some key parameters, such as, biomass yield and cost of labormore favorable. For plants smaller than 3 MW, power plant capital costs risesharply as a proportion of overall generation costs; this component dominatesall other costs at about 1 MW and below. At sizes below 1 MW, alternativewood energy conversion schemes such as thermal gasification, becomeeconomically attractive.

4.03 A comparison of the 10 MW generic dendro plant to an equivalentdiesel generating plant shows that the diesel generating costs, at 7.9 c/kWh,is only slightly less than the baseline dendro generating cost of 8.4 c/kWh.At the 3 MW size, however, the diesel generating cost is significantly less at7.70/kWh as against 12.lc/kWh for the dendro plant. It would appear that the"breakeven" size for a dendrothermal power system is in the order of 10 MW.

4.04 The generic model illustrates the sensitivity of dendro electricitygeneration cost to particular cost items and parameters. Sensitivity tobiomass yield is very high: larger plantation areas are needed to supplybiomass if yield drops below 10 bdt/yr, and increased costs in both capitaland operating components lead to sharply increasing fuel costs in $/bdt.Also, a severely adverse impact on generation cost would result from a lowerplant capacity factor than planned. Generation cost (c/kWh) rises sharplybecause total capital cost are a large burden--over 60% of annualizedgeneration costs--and because plantation operating costs remain high, whileelectricity production (kWh) falls. A third sensitive parameter is laborcost. Increasing cost of labor would lead to increasing fuelwood costs, sincelabor comprises nearly 50% of the plantation cost and over 40% of all fuel-component costs.

4.C16 Wood transport costs, including capital cost for the plantation topower plant road, can become important if the plantation to power plantdistance is more than about twice the baseline 10 km. Similarly, cost for newtransmission lines from the power plant to an electrical grid substation isdependent on distance. But in the present study there is little value inoptimizing these distances, which frequently interact inversely, since terrainhas a greater effect on site preparation cost and generally decides theprecise plantation.and power plant locations.

- 38'

4.07 The cost analyses of this study treat the dendro installati .n as afree-standing system, with a dedicated woodfuel plantation supportcing adependent power plant. Generation costs and economic viability could begreatly improved if biomass residues from industrial or forestry operationsare available at low cost. Whether such materials are less costl'y thanplantation woodfuel is often dependent on transporta:ion cost, andtheirpotential availability as supplementary boiler fuel becomes anotherimportant factor in siting considerations.

4.08 Conversely, sale of some biomass from the dendro plantation onmarkets where it has a higher value than as fuel for electricity could improvesystem economics. If an expanded area is available so that the plantation isable to produce more wood than needed for the power plant, some of the biomasscan be sold as pulpwood, sawtimber, domestic fuel, on other products. Thisdepends on market prices and demands in the vicinity, and once again ontransportation costs if distant markets are considered.

4.09 A more difficult question is whether greater social benefits could bederived by devoting the area to producing domestic fuelwood. This is ofconsiderable importance if a supply crisis in cooking fuel is at hand orforeseen, as in many deforested areas. A desirable strategy may be tocultivate additional plantation land beyond the needs of dendro power plant,and make the additional wood available to the domestic firewood market,serving a social function without adversely affecting generation costs.

4.10 A socio.-economic analysis of the dendro system shows some benefits.Operating the system generates long-term employment opportunities, most ofthem requiring low or medium skills. These are in general available tootherwise unemployed or underemployed persons in the immediate area. About350 workers are employed by a 3 MW system, 1,050 workers by a 10 MW system,and 4,800 workers by a 50 MW system. This is a strong advantage over an oil-burning power plant, and can be quantified for the purpose of comparison to adiesel plant by using a shadow price for labor in the cost calculations.

4.11 The counterbalancing disadvantage is the land area requirement of thedendro system. The opportunity cost of the large amounts of land required maybe a strong deterrent to implementing a dendro system. Perhaps a dendro powerplant system is economically best justified in an area meeting two conditions:public lands are to be reforested, with no competing potential usesidentified, so that land can be considered to have zero rental costs; andemployment opportunities are severely lacking, so that the shadow price oflabor is well below the baseline market cost.

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Annex 1

DENDROTHERMAL POWER SYSTEM COST COMPONENTS

A. POWER PLANT

1.1 "Buildings and Civil Works" includes materials and labor for theconstruction of the power plant building, administrative offices, surveyingand soil testing, site preparation, earthwork, concrete work, equipmentfoundations, and pollution control.

1.2 "Power Plant Equipment and Hardware" includes material andinstallation labor for the boiler, turbine, generator, electrical substation,and all electrical lines.

1.3 "Operating and Maintenance"l refers to all non-labor items needed forroutine operation of the power plant. This ,includes office supplies, dieselfuel for wood-handling equipment, and expenses for maintaining equipment.

1.4 "Wood Handling Equipment" includes both fixed wood-handlingequipment--such as silos, conveyor belts, chippers and chutes--and mobileequipment. In the 3 MW plant, mobile equipment consists of two small "bobcat"tractors with front end devices for unloading the trucks, and a large frontend loader. In the 10 MW case, log handling is assumed to be done by logstackers, which move the logs to a loader which then moves them to thechipper.- In the 50 MW case, beside wood-handling equipment included in theoriginal study, chippers and log stackers were added to compensate for thefact that wood fuel arrives as chips in the conceptual Vermont plant. Chipreclaiming equipment is included in all three cases.

1.5 "Labor and Administration" includes all workers at the power plant:wood-handling machine operators, boiler and turbine operators, electricians,mechanics, administrators, clerks, janitors, etc. It covers labor needed forunloading trucks that haul wood from the plantation.

1.6 "Architectural and Engineering Fee" is assumed to be 7% of front endcosts for the power plant, i.e., items 1 and 2 and the non-mobile equipmentincluded in item 4.

1.7 "Shipping" is assumed to be 10% of items 2 and 4 (less installationLabor costs).

B. PLANTATION

1.8 "Buildings" includes administration building, storage/shop building,nursery building and fire towers (one tower per 115 ha).

1.9 "Heavy Equipment and Light Vehicles" includes tractors, trailers,machine shop tools, PTO winches, timbermasters, large and small truck loaders,fire fighting engines and equipment, and passenger vehicles (pickups). Theselight vehicles are assumed to be used by both plantation and power plantpersonnel.

- 40 -

1.10 "Operating and Maintenance" includes all non-labor items such aschainsaws, planting tools, bolos and nursery supplies; and repair andmaintenance of saws, heavy equipment, and light vehicles (excluding trucksused for hauling wood); and fuel and oil for the motor-driven equipment.

1.11 "Labor and Administration" covers all personnel costs for theestablishment and maintenance of the plantation, including all workers andsupervisors for site preparation, planting, nursery work, weeding, harvesting,road maintenance, and fire control. It also includes all administrativeworkers and laborers needed for loading trucks to deliver wood to the powerplant.

1.12 "Road Construction and Maintenance" covers all material and laborcosts for the road network inside the plantation. The assumed averageconstruction cost is $945/km for trails, and $4,723/km for plantation roads.Annual maintenance costs are estimated at 10% of initial construction costs.

1.13 "Fertilizer" refers to the purchase cost of the fertilizer which isapplied at the time of initial planting at the seedlings. The assumed rate ofapplication is 350 kg/ha of NPK fertilizer, with an appropriate rationitrogen, phosphorous and potassium, at a cost of $0.365/kg. The cost alsoallows for 250 kg/ha of lime as soil conditioner, at $0.133/kg, though thismay not be necessary at all plantation sites.

1.14 "Shipping" is assumed to be 10% of the cost of heavy equipment andlight vehicles.

C. WOOD HAULING

1.15 "Trucks and Parts" refers to the purchase cost of trucks and spareparts needed for hauling woodfuel, at $13,330/unit plus 10% for spare parts.Hauling is assumed to take place in two shifts per day of 6 to 8 hours, 250days per year, depending on weather and daylight availability. At a load ofabout 2.5 bdt/trip, each truck makes 2 or 3 round trips per shift.

1.16 "Fuel" covers cost of diesel fuel for the trucks, at $0.33/1. Thetrucks are assumed to average five miles per gallon (2.17 km/1).

1.17 "Repair and Maintenance" covers the cost of keeping the trucks on theroad, exclusive of fuel. This includes mechanics and laborers, tools,lubricants, etc. Its yearly cost is estimated at 16% of total purchase costof trucks and parts.

1.18 "Road and Maintenance Materials" refers to road construction materialand labor costs, and cost of maintenance. This is for the road from the powerplant to the plantation border, assumed to be a uniform 10.5 km in all cases.

1.19 "Labor" covers truck drivers and foremen, as well as labor for roadmaintenance. Labor for Loading and unloading of trucks is included under thelabor item for the power plant and plantation categories.

1.20 "Shipping" is assumed to be 10% .of the cost of trucks and parts.

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Annex 2

Dendrothermal Power Plant SystemSensitivity Analysis: 3 MW Plant

System Biomass ElectricityCapital Fuel GenerationCost Cost Cost('000 $) ($/bdt) (C/kwh)

Biomass YieldBaseline: 10 bdt/ha-yr 8170 46.9 12.1

5 bdt/ha-yr 9990 77.9 16.215 bdt/ha-yr 7570 36.6 10.720 bdt/ha-yr 7240 31.2 10.030 bdt/ha-yr 6900 25.6 9.2

Capacity FactorBaseline: 5500 hrs/yr (63%) 8170 46.9 12.1

5000 hrs/yr (57%) 8170 46.9 13.24000 hrs/yr (46%) 8170 46.9 16.13000 hrs/yr (34%) 8170 46.9 21.1

Labor CostsBaseline.: Philippines 1980 8170 46.9 12.1

+100% 9110 65.3 9.6+50% 8640 56.1 13.3-50% 7700 37.6 10.8

Discount RateBaseline: 12% 8170 46.9 12.1

8% 8170 39.9 9.816% 8170 54.5 14.7

Power Plant Capital CostsBaseline 8170 46.9 12.1

+25% 9370 46.9 13.3+10% 8650 46.9 12.6-10% 7690 46.9 11.6-25% 6970 46.9 10.9

Road Construction CostsBaseline 8170 46.9 12.1

0 cost 7532 41.3 11.3+100% 8808 52.4 12.8

Wood Hauling DistanceBaseline: 10.5 km 8170 46.9 12.1

0 km 7700 41.1 11.320 km 8590 52.0 12.830 km 9040 57.5 13.550 km 9930 68.4 15.0

Fertilizer Cost

Baseline 8170 46.9 12.10 cost 7710 43.6 11.6+100% 8640 50.2 12.5

42 -

Annex 3

Dendrothemal Power Plant SystemSensitivity Analysis: 10 MW Plant

System Biomass ElectricityCapital Fuel GenerationCost Cost Cost('000 $) ($/bdt) (o/kwh)

Biomass YieldBaseline: 10 bdt/ha-yr 2110 38.8 8.41

5 bdt/ha-yr 2670 66.4 11.6315 bdt/ha-yr 1920 29.6 7.3420 bdt/ha-yr 1820 24.8 6.7930 bdt/ha-yr 1720 20.0 6.22

Capacity FactorBaseline: 6500 hrs/yr (74%) 2110 38.8 8.41

6000 hrs/yr (68%) 2110 38.8 9.025000 hrs/yr (57%) 2110 38.8 10.614000 hrs/yr (46%) 2110 38.8 12.99

Labor CostsBaseline: Philippines 1980 2110 38.8 8.41

-50% 1970 30.5 7.40+50% 2250 47.0. 9.43+100 2390 55.3 10.44

Discount RateBaseline: 12% 2110 38.8 8.41

8% 2110 33.4 6.8616% 2110 44.6 10.12

Power Plant Capital CostsBaseline 2110 38.8 8.41

+25% 2430 38.8 9.20+10% 2240 38.8 8.73-10% 1980 38.8 8.10-25% 1790 38.8 7.62

Road Construction CostsBaseline 2110 38.8 8.41

0 cost 1950 35.6 8.04+100% 2260 42.0 8.78

Wood Hauling DistanceBaseline: 10.5 km 2110 38.8 8.41

0 km 2060 35.2 8.005 km 2080 36.9 8.19

30 km 2190 45.3 9.1850 km 2280 52.1 9.96

Fertilizer Cost

Baseline 2110 38.8 8.410 cost 1950 35.6 8.04+100% 2260 42.0 8.78

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Annex 4

1981 System Average Revenues in Selected Developing Countries (Ref. 25)Country System Average Revenue

(c/kwh)Barbados 13.8Belize 12.5Benin 12.0Bolivia 6.4Botswana 5.8Brazil 5.6Burma 3.4Cameroon 4.6Costa Rica 2.7Dominican Republic NDEl Salvador 4.1Fiji 14.3Gambia 14.5Ghana 1.35Guatemala 10.3Guyana 20.9Haiti 11.2Honduras 6.8Indonesia 6.5Ivory Coast 11.5Jamaica 14.4Kenya 8.2Liberia 13.8Madagascar 12.4Malawi 5.5Malaysia 8.7Mauritius 13.5Nicaragua 11.0Nigeria 11.9Panama 10.9Paraguay 8.2Philippines 7.5/5.31Rwanda 6.2Senegal 14.2Seychelles 20.4Sierra Leone 9.6Solomon Islands 20.0Sri Lanka 5.5Suriname 22.0Swaziland 3.4Tanzania 7.8Thailand 8.0Togo 9.2Uganda 1.0Uruguay 7.4Zaire 1.3Zambia 1.8Zimbabwe 2.1

1/ The system average revenue for MERALCO and NPC respectively.

4~4

Annex 5Economic Analysis

3 MW Dendro Thermal Power PlantAnnualized Costs and Energy Cost

1982 U.S. Dollars


I. Power Plant


Installation 341.0 - 21.0 2.533. 0&M, Motor Fuel 80.6 5.0 0.604. Wood Handling Equipment 164.9 10.2 1.225. Labor 41.1 2.5 0.306. Architecture & Engineering 46.0 2.8 0.347. Shipping 50.6 3.1 0.37

Subtotal 807.0 49.8 5.98

II. Woodfuel Platation




Materials 35.9 2.2 0.26 1.985. Fertilizer 65.2 4.0 0.48 3.666. Labor 164.6 10.1 1.22 9.257. Shipping 13.0 0.8 0.10 0.738. Land Rental 103.7 6.4 0.77 5.83

Subtotal 644.0 39.8 4.77 36.18

III. Wood Hauling

1. Trucks & Parts 31.0 1.9 0.23 1.742. Motor Fuel 36.8 2.3 0.27 2.063. Repair & Maintenance 19.6 1.2 0.14 1.104. Labor 6.2 0.4 0.05 0.355. Road: Plant


Subtotal 170.0 10.4 1.26 9.53

TOTAL 1621.0 100.0 12.01 45.72

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Annex 6

Economic Analysis10 MW Dendro Thermal Power PlantAnnualized Costs and Energy Cost

1982 U.S. Dollars


I. Power Plant


Installation 1008. 23.0 1.923. O&M, Motor Fuel 327. 7.4 0.624. Wood Handling Equipment 244. 5.6 0.475. Labor 51.9 1.2 0.106. Architecture & Engineering 98.9 2.3 0.197. Shipping 125. 2.8 0.24

Subtotal 2100. 47.9 4.00



Light Vehicles 302. 6.9 0.58 5.173. O&M,.Small Tools,


Materials 138. 3.1 0.26 2.365. Fertilizer 212. 4.8 0.40 3.636. Labor 499. 11.4 0.95 8.537. Shipping 30.2 0.7 0.06 0.528. Land Rental 351. 8.0 0.67 6.01

Subtotal 1884.0 42.9 3.60 32.2

III. Wood Hauling

1. Trucks & Parts 93.3 2.1 0.18 1.592. Motor Fuel 150. 3.4 0.29 2.563. Repair & Maintenance 59.7 1.4 0.11 1.024. Labor 19.6 0.4 0.04 0.335. Road: Plant


Subtotal 404. 9.2 0.77 6.91

TOTAL 4388. 100.0 8.37 39.12

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Annex 7

Economic Analysis50 MW Dendro Thermal Power PlantAnnualized Costs and Energy Cost

1982 U.S. Dollars

AnnualizedCost $ % C/kwh $/bdt

('000 $)

I. Power Plant


Installation 4455.0 25.0 1.653. O&M, Motor Fuel 1142.0 6.4 0.424. Wood Handling Equipment 718.0 4.0 0.275. Labor 68.6 0.4 0.036. Architecture & Engineering 305.0 1.7 0.117. Shipping 517.0 2.9 0.19

Subtotal 7940.0 44.5 2.94





Materials 625.0 3.5 0.23 2.245. Fertilizer 1029.0 5.8 0.38 3.696. Labor 2300.0 12.9 0.85 8.257. Shipping 98.7 0.6 0.04 0.358. Land Rental 1595.0 8.9 0.59 5.72

Subtotal 7984.0 44.8 2.95 28.65

III. Wood Hauling

1. Trucks & Parts 397.0 2.2 0.15 1.432. Motor Fuel 1058.0 6.0 0.39 3.803. Repair & Maintenance 254.0 1.4 0.09 0.914. Labor 88.9 0.5 0.03 0.325. Road: Plant


Subtotal 1912.0 10.7 0.71 6.86TOTAL 17,836.0 100.0 6.60 35.51

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References

1. National Electrification Administration, 1980 Annual Report, Manila,1981.

2. Dendro Thermal Development Office.- Feasibility Study of Ilagan DendroThermal Power Plant, Ilagan, Isabella. National ElectrificationAdministration: Manila.

3. Murphey, W. K; U. G. Massey; T.W. Benersox; and P. R. Blankenhorn.Location of a Dendro-Thermal Plant in Antique-Aklon Provinces, Panay;Visayas, Philippines: A Biological Feasibility Study. Report to U.S.Agency for International Development, April 1979.

4. Ekono Oy and Lannen Project Co. Ltd. A Study Concerning Production ofSilvicultural Biomass and Its Utilization for Energy Production. Reportto Ministry for Foreign Affairs, Finland: August, 1981.

5. Semana, J. A. and P. V. Bawagan. A Feasibility Study of the Utilizationof Natural/Man-made Forests for Generating Electricity III. ForestProducts Research and Industries Development Commission, NationalScience Development Board,.Philippines: May, 1979.

6. Chas. T. Main International, Inc. Power Supply Study for Port Moresby.Report to Papua New Guinea Electricity Commission: Portland, Oregon,July 1981.

7. Henningson, Durham and Richardson, Inc. Burlington, Vermont Refuse-WoodPower Plant Aquaculture Greenhouse: A Conceptual Study. Washington,D.C., December, 1977.

8. de Aguiar, Cezar. "Nitrated Alcohols as a Substitute for Diesel Oil inVehicles." Seminar by SAAB-SCANIA do Brasil for World Bank, Washington,D.C., August 1982.

9. Bawagan, P.V. and J. A. Semana. A Feasibility Study of the Utilizationof Man-made Forests for Generating Electricity II. Forest ProductsResearch and Industries Development Commission, National ScienceDevelopment Board, Philippines: April 1979.

10. Groeneveld, Michiel J., et. al. "Production of a Tar-Free Gas in anAnnualar Co-Current Moving Bed Gasifier." In Symposium Papers: Energyfrom Biomass and Wastes VIII, Lake Buena Vista, Florida, January 24-28,1983. Institute of Gas Technology: Chicago, June 1983.

11. Chas. T. Main International, Inc. Study of Dendr6-Thermal Plant,Philippines: Final Report. U.S. , Agency for InternationalDevelopment: Boston, June 1980.

12. Biomass Energy Consultants and Engineers. "Biomass-fueled CombustionSystems." Al Almela, The Netherlands, ca. 1983.

13. Nor'west Pacific Corporation. Feasibility Study for a Forest Residue-Fueled Electric Generating Plant. Electric Power Research Institute:Palo Alto, California, May 1981.

14. National Academy of Sciences. Leucaena: Promising Forage and Tree Cropfor the Tropics. National Academy of Sciences: Washington, D.C. 1977.

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15. National Academy of Sciences. Firewood Crops. National Academy ofSciences: Washington, D.C. 1980.

16. National Academy of Sciences. Tropical Legumes: Resources for theFuture. National Academy of Sciences: Washington, D.C., 1979.

17. Alder/Cottonwood Co-culture Trials. In Journal, DVH ?

18. Hewett, Charles E. and Colin V. High. Environmental aspects of woodenergy Conversion. Resource Policy Center, Thayer School ofEngineering, Dartmouth College: Hanover, N.H, March 1979.

19. Smil, Vaclav. "Environmental Impacts of Biomass Harvesting", fromBiomass Energies: Resources, Links, Constraints. Plenum Press: NewYork, ca. 1978.

20. Forestry Energy Production Group. Feasibility Study of DendrothermalPlant in Thailand. National Energy Administ-ration: Bangkok, December1983.

21. Agency for International Development. Philippines Rural EnergyProject. United States Agency for International Development:Washington, D.C., 1982.

22. National Power Commission, Projects Development Department, MechanicalPlanning Division. Feasibility Report on the 500 kW Pilot DendrothermalProject: Magsaysay, Occidental Mindero. Manila, February 1981.

23. Mendis, Matthew S. Wood for Power Generation: An Assessment for theVirginia Electric Power Company. Task A Report. The MitreCorporation: McLean, Virginia, January 1983.

24. Dendro Thermal Development Office. Feasibile Study of Burgos DendroThermal Power Plant, Burgos, Ilogos Sur. National ElectrificationAdministration: Manila, June 1982.

25. Energy Department, Economic Advisory Unit/Power Advisory Unit. 1981Power/Energy Data Sheets for 100 Developing Countries. The World Bank:March 1984.

ENERGY DEPARTMENT PAPER SERIES

EGY PAPER No. I Energy Pricing in Developing Countries: A Review of theLiterature by DeAnne Julius (World Bank) and Meta SystemsSeptember 1981. 121 pages, includes classifiedbibliography.

Reviews literature on the theory of exhaustible resourcesand on sectoral, national and international models forenergy demand. Emphasis on project selection criteria andon pricing policy as a tool of energy demand management.

EGY PAPER No. 2 Proceedings of the South-East Asian Workshop on EnergyPolicy and Management edited by Michael Radnor and AtulWad (Northwestern University). September 1981.252 pages.

Contains the edited version of the lectures anddiscussions presented at the South-East Asian Workshop onEnergy Policy and Management held in Daedeok, South Korea,October 27-November 1, 1980.

Topics that are addressed include: the overall problem ofenergy policy and its relationship to economicdevelopment; the management of energy demand and relateddata; the role and value of models in energy planning, andthe use of energy balances. Transport and rural sectorsare also discussed in terms of their relationship toenergy planning.

EGY PAPER No. 3 Energy Pricing in Developing Countries: Lessons from theEgypt Study by DeAnne Julius (World Bank).December 1981. 14 pages.

Study on the effects of energy price change in adeveloping country. Provides insight into the mechanismsthrough which energy prices affect other prices in theeconomy and, therefore, the incomes of rich and poorconsumers, profitability of key industries, the balance ofpayments, and the government budget.

EGY PAPER No. 4 Alternative Fuels for Use in Internal Combustion Enginesby G.D.C., Inc. November 1981. 179 pages, includesappendices.

Presents several alternative fuels used as replacement forconventional (gasoline and diesel) fuels in internalcombustion engines. These alternatives, including LPG,natural gas, alcohol and producer gas, are derivable fromnatural resources that exist in so many developingcountries. Also provides up-to-date information on thenewest alternative fuel option currently available andthose that are being developed and tested.

EGY PAPER No. 5 Bangladesh: Rural and Renewable Energy Issues andProspects by Fernando R. Manibog (World Bank).April 1982. 64 pages, includes bibliography.

Analyzes subsector issues and recommends courses of actionfor energy project possibilities; identifies renewableenergy projects which could create a positive impact inthe short to medium term.

EGY PAPER No. 6 Energy Efficiency: Optimization of Electric PowerDistribution System Losses by Mohan Munasinghe(World Bank) and Walter Scott (Consultant). July 1982.145 pages, includes appendices.

Discusses the reasons for high existing levels of powerdistribution losses in developing countries. Identifiesareas within a power system where loss optimization wouldbe most effective. Shows that reducing losses is oftenmore cost effective than building more generationcapacity.

EGY PAPER No. 7 Guidelines for the Presentation of Energy Data in BankReport by Masood Ahmed (World Bank). October 1982.13 pages, includes 4 annexes.

The growing importance of energy issues in nationaleconomic management has led to increased coverage of theenergy sector in many types of reports. However, there isstill no clear, consistent and standardized format forpresenting energy sector information. This paper reviewsthe problem and proposes guidelines for policymakers andoperational staff who deal with energy issues. The paperis divided into three parts: part one sets out the basicframework for presenting aggregated energy data -- "thenational energy balance"; part two deals with the use ofappropriate units and conversion factors to construct sucha balance from raw -demand and supply data for the variousfuels; and part three briefly discusses special problemsposed by: (i) differences in end use efficiency ofvarious fuels; (ii) the inclusion of wood and othernoncommerical energy sources; and (iii) the conversion ofprimary electricity into its fossil fuel equivalent.

EGY PAPER No. 8 External Financing for Energy in the Developing Countriesby Althea Duersten (World Bank). June 1983. 66 pages,includes appendices.

Provides an overview of energy financing in the developingcountries. Identifies energy investment requirements andpast financing patterns. Discusses the historical rolesof multilateral and bilateral assistance programs inhelping to mobilize financing, particularly for low incomeoil importers and in providing economic and sectoradvice. Examines the role of official export

credit, and discusses lending by private financialinstitutions which has been the predominant source offinancing for energy projects in the middle and higherincome developing countries. ,

EGY PAPER No. 9 Guideline for Diesel Generating Plant Specification andBid Evaluation by C.I. Power Services, Inc. December1982. 210 pages, includes appendices.

Explains the characteristics and comparative advantagesand disadvantages of large low speed two-stroke dieselengines intended for electric generating plant service,and develops a bid evaluation procedure to permitcomparing of bids for both types.

EGY PAPER No. 10 Marginal Cost of Natural Gas in Developing Countries:Concepts and Application' by Afsaneh Mashayekhi(World Bank). July 1982. 21 pages, includes appendices.

Defines the concept of marginal cost and averageincremental cost. Uses the detailed supply, demand andinvestment data to apply this concept to estimate theaverage incremental cost of natural gas supply to majormarkets in ten developing countries. Demonstrates thatthe cost of natural gas delivery to the city-gate in manydeveloping countries is far below the cost of competingfuels.

EGY PAPER No. 11 Power System Load Management Techniquesby Resource Dynamics Corp.November 1983. 132 pages.

In recent years, techniques referred to as load managementhave begun to play an important role in shaping thepatterns of electricity consumption in industrializedcountries. Along with pricing, a variety of hardware isused to control loads directly and save on energy and peakcapacity. This study reviews the state-of-the-art ofthese so-called "hard" techniques in light of recenttechnological advances, provides data on cost andmanufacturers of this equipment, and identifiescontrollable loads in developing countries.

EGY PAPER No. 12 LNG Export Opportunities for Developing Countries and theEconomic Value of Natural Gas in LNG Exportsby Afsaneh Mashayekhi (World Bank). November 1983.36 pages, includes appendices.

This paper reviews the LNG export opportunities fordeveloping countries and clarifies some of the issuesrelated to economic costs and benefits of LNG projectsfrom the point of view of an exporting country. Itidentifies the major technical parameters that affectcosts and analyzes factors affecting the economic size of

projects and the effect of scaling them down. Itsprincipal objective is to estimate, given explicitassumptions, the netback values for gas at various stagesin the LNG delivery system. It examines three basicscenarios of small and medium scale projects as well as amulti-destination project with several small markets. Italso tests the sensitivity of netbacks to the level ofinfrastructure, discount rates and the price of gasdelivered at the importing country.

EGY PAPER No. 13 Identifying the Basic Conditions for Economic Generationof Public Electricity from Surplus Bagasse in Sugar Millsby Syner-Tech Inc. October 1983. 167 pages, includesappendices.

The study identifies several ways, all using presentlyavailable technology-, to'greatly increase the overallenergy efficiency of existing mills, produce surplusbagasse and generate electricity for sale to the grid.These include installing pre-evaporators to conservesteam, drying wet bagasse with flue gasses to improvecombustion efficiency, installing high-pressure boilers toincrease steam generation efficiency and pelletizing orcompressing bagasse to enable it to be stored and usedbeyond the harvest season.

EGY PAPER No. 14 A Methodology for Regional Assessment of Small ScaleHydropower by Tudor Engineering Company.December 1983. 105 pages.

This paper presents a methodology for regional assessmentof small hydropower development potential involvingsampling procedures, study execution, energy planning,regional hydrology development, technical site evaluation,cost and economic analysis, environmental and socialconsiderations. Its use should result in reasonablyaccurate estimates in a short period of time of the viablesmall-scale hydroelectric projects in a particular regionor country. A development program based on such anassessment would be of sufficient reliability to supportrequests for financing assistance.

EGY PAPER No. 15 Central America Power Interconnection: A Case Study inIntegrated Planning English Summary by Fernando Lecaros(Consultant). April 1984. 55 pages.

This paper is a summary of the study, titled "RegionalElectrical Interconnection Study of the Central AmericanIsthmus", performed by the Regional Office in Mexico ofthe United Nations' Economic Commission for Latin America(ECLA) between 1975 and 1979. Its goal was to provide afirm economic and technical foundation to decisions aboutthe interconnection investments in the region. Thepurpose of this English Summary is to disseminate the

methodology retained by ECLA and to show an example ofintegrated system planning using models such as WASPdeveloped by the International Atomic Energy Agency. Thefigures reproduced in this report are limited to theextent necessary for these illustrative purposes.

EGY PAPER No. 16 An Economic Justification for Rural Afforestation: TheCase of Ethiopia by Ken Newcombe, (World Bank).June 1984. 23 pages, includes appendices.

It has proven difficult to quantify the economic benefitsof large-scale rural afforestation and to establish thepriority for public investment in traditional rural energysupply vis-a-vis investment in the supply for modern fuels(electricity, petroleum) to the urban industrial market.This paper outlines, in simple terms, the biological linksbetween deforestation and agricultural production at thesubsistence level, and quantifies the economic benefits ofincreased food production obtained by replacing animaldung as a fuel with firewood from rural forestry programs.

EGY PAPER No. 17 The Future Role of Hydroelectric Power in DevelopingCountries by Edwin Moore (World Bank), George Smith(Consultant). June 1984. 59 pages, includes annexes.

The study examines the role of hydroelectricity in thepower programs of 100 developing countries in the period1982-1995. The report indicates that hydro will continueto play a significant role, accounting for 43% ofelectricity production in 1995. Preparation andengineering expenditures of about $10 billion will beneeded in 1982-1990 for the projects required to supportthis growth. The study concludes that an intensifiedhydro program would add only 3% to the capacity otherwiseplanned because the main constraints to hydro developmentare economic and lack of poor markets rather than lack ofknowledge about resources and prospective projects.Nonetheless, the study identifies specific actions thatcan be taken in many countries to accelerate hydrodevelopment.

EGY PAPER No. 18 Guidelines for Marginal Cost Analysis of Power Systemsby Yves Albouy (World Bank). June 1984, 31 pages,includes annexes.

These guidelines provide hands-on but state-of-artinstructions for conducting a sound and quick analysisthat yields the marginal cost structure needed forapplications in the power sector and for the review ofrelated studies. These include not only pricing but alsothe less known marginal analysis of system planningdecisions. The paper does not give the detailedtheoretical background but draws on the referenceliterature. It illustrates the basic principles and

calculation methods with the help of many examples goingfrom the simplest to the more complicated systemconditions.

EGY PAPER No. 19 The Value of Natural Gas in Power Generationby Yves Albouy and Afsaneh Mashayekhi (World Bank).November 1984. 28 pages.

This paper is one of a series to examine the "netbackvalue" of natural gas in major domestic and export uses.The netback can be compared to the cost of gas to permit arough estimate of the net economic benefit to gas use invarious sectors.

With the help of case studies and simple calculations, thenetback value to power generation is found to be fairlyhigh on average even'thotigh it diminishes as the use ofgas spreads from peak to base load. The paper alsohighlights the important role of power in the natural gasmarket and the specific analytical framework in which anassessment of this role can be undertaken for preliminarygas utilization studies.

EGY PAPER No. 20 Assessment of Electric Power System Planning Modelsby Yves Albouy (World Bank) and Systems Europe, (Belgium).January 1985. 107 pages, includes annexes.

This paper addresses both the models and methods for powergeneration and transmission planning. It provides firstan overview of the methodology preferred by the Bank andof the promiment planning issues in developingcountries. On this basis the study attempts to assess theapplicability of forty five models now available fromleading utilities and consultants. The paper alsocontains recommendations on the development and use ofmodels. An extensive bibliography is given in the Annex.

EGY PAPER No. 21 Diesel Plant Performance Study by C.I. Power Services Inc.(Canada). February 1985. 83 pages.

The study was prepared under an EGY-sponsored researchproject as a guideline for use by Bank staff andconsultants. This report summarizes the results of aninvestigation of the performance and cost of operation offour stroke medium speed engines and two stroke low speedengines used as prime movers for electricity generation inboth developing and developed countries. Operating datafor units of 4,000 kW and larger was collected from 28countries and is analyzed here. Data from some 3000 -4000 kW units was also incorporated.

EGY PAPER No. 22 Economic Value of Gas in Residential and CommercialMarkets by Afsaneh Mashayekhi (World Bank), Sofregaz(Consultant). March 1985. 21 pages.

This paper sums up our current knowledge on the subject ofthe economics of gas use in residential and commercialmarkets. It clarifies some of the issues related to thedemand by the residential and commercial sector for gas,design of gas distribution networks and the economic costsand benefits of gas distribution to these sectors. Thenetback and NPV figures are estimated for 16 modelnetworks with different demand and density patterns andtypes of city. The conclusion is that many developingcountries with low cost gas reserves could benefit fromdeveloping and expanding their gas distribution networksto residential and commercial markets and displacing highcosts fuels such as LPG and kerosene.

EGY PAPER No. 23 Domestic Coal Pricing: Suggested Principles and PresentPolicies in Selected Countries by J. Roberto Bentjerodt,John Strongman, Jorge Barrientos (World Bank) andDeAnne Julius (Consultant). September 1985. 65 pages,includes annexes.

The paper addresses some theoretical issues concerning thepricing of coal and notes a number of practical mattersthat must be taken into consideration in applying thetheoretical framework to actual pricing policy. It firstanalyses the general pricing framework and conditionsunder which setting prices, rather than letting marketforces operate unobstructedly, makes sense from aneconomic viewpoint. It deals with the basic pricingmodel, the role of prices, and questions such astradeability and depletability of coal. Various generalpricing polocies are reviewed and their economic effectsanalyzed under different conditions of demand and supplyfor coal. The paper also reviews coal markets in sixteencountries, of which eleven are LDCs. In all but two ofthem (the US and Colombia) there is price intervention.It was found that intervention is generating severeeconomic distortions in several of these countries, wherepartial or total freeing of market forces is warranted.

EGY PAPER No. 24 Natural Gas Utilization Studies: Methodology andApplication by DeAnne Julius (Consultant).September 1985. 41 pages.

Particularly for countries at the early stages of gasdevelopment, it is important to develop a long-run,sector-wide strategy for the role that gas can play inmeeting energy needs. Such a perspective is needed tomake appropriate devices about individual gas-usingprojects and about the design and timing of lumpyinvestments in gas infrastructure. The Gas Utilization

Study has proven a useful vehicle for this type of sectorplanning and project identification. This paper is basedon the Bank's experience with such studies. It providesthe theoretical framework and a step-by-step methodologyfor addressing issues of gas utilization.

EGY PAPER No. 25 Economic Benefits of Power Supply by Michael Webb andDavid Pearce (World Bank). May 1985. 226 pages.

This report is concerned with the determination of theextent to which money valuations of economic benefits frompower projects can be estimated with an acceptable degreeof accuracy. It thus investigates (a) the theory ofbenefit measurement, with special reference to theliterature of the last decade; (b) existing practicewithin the Bank and other agencies; (c) the relationshipof benefit estimation to overall rules for the efficientallocation of resources in developing countries; and (d)simple and operational rules for benefit estimation in thecontext of power project appraisals. The thrust of thisreport is that benefit estimation should be attempted on awider scale than in the past.

EGY PAPER No. 26 The Commercial Potential of Agricultural Residue Fuels:Case Studies on Cereals, Coffee, Cotton and the CoconutCrops by Ken Newcombe (World Bank). June 1985. 79 pages.

The growing gap between annual fuelwood production anddemand in many Sudano-Sahelian zone countries, parts ofthe Indian sub-continent, the Middle East and SouthAmerica calls for the development of alternative fuelchoices in addition to aggressive programs of agroforestryand silvipastoralism to increase fuelwood supply. Thereport outlines the potential for the conversion ofsurplus crop residues from large-scale commercialagriculture into fuls for household and industry use. Thereport presents case studies on briquetting cereal,cotton, and coffee residues and improved management of thecoconut crop and copra processing to generate surpluscoconut biomass fuels for power generation and industry.The potential to use probability of consumer acceptance isnot the subject of several UNDP/World Bank-sponsored fieldtests in Addis Ababa.

EGY PAPER No. 27 Test Results on Kerosene and Other Stoves for DevelopingCountries by The Wood Burning Stove (the EindhoveUniversity of Technology in Netherland). September 1985.95 pages, includes annexes.

The main purpose of this investigation was to providereliable data on kerosene stoves of diverse designs as anaid to policy planners for product selection.

EGY PAPER No. 28 Optimizing Rural Electricity Supply (with case studies inCosta Rica and India) by Mohan Munasinghe (World Bank),Walter Scott (Consultant), Romesh Dias-Bandaranaike(Researcher). October 1985. 218 pages.

This study seeks to develop and test a practicalmethodology for optimizing the design of rural electric(R.E.) distribution systems in developing countries, withparticular emphasis on the quality of supply. Theeconomic-engineering approach presented also facilitatesthe evaluation of standards and design practices,construction, operation and maintenance of R.E. systems.The first part of the study involves the critical reviewchecklist of key aspects, based on visits to 12

representative developing countries. A model foroptimizing R.E. systems is described next, followed byapplication to case .studies in Costa Rica and India. Thespecial problems raised by the dynamic nature of R.E. arehighlighted, and the significant impact that quality ofsupply has on electricity demand, is demonstrated. Thelimitations imposed by data availability are discussed,and further work to extend and test the methodology isrecommended.

EGY PAPER No. 29 Managing the Development of Natural Gasby Nancy Gillespie (Consultant), based on backgroundpapers prepared by Philippe Bourcier, Mohsen Shirazi,Afsaneh Mashayekhi, Keith Palmer, Anthony Ody,(World Bank), DeAnne Julius (Consultant), Mostefa A. Ouki(Researcher). August 1985. 145 pages.

This paper integrates a number of studies on thedevelopment use of natural gas and is aimed to serve as ahandbook for officials of developing countries and theinternational business community who are involved with thedevelopment of energy resources in developing countries.

EGY PAPER No. 30 Portfolio of Selected Terms of Reference for Natural GasSector Studies by Afsaneh Mashayekhi (World Bank) andSchirin Pathi (Researcher). November 1985. 277 pages,includes Annexes.

The preparation of terms of reference (TORs) for studiesis a common and recurrent task within the Bank'soperational activities. The TORs, as wetl as the studies,however, are widely dispersed over various departments.The rationale for the collection of TORs for gas studiesand their organization into a portfolio is to provide areadily available reference for staff and consultants.This is particularly necessary in the gas sector sincenatural gas is a new and promising resource of energy formany developing countries. Many of these countries arebeginning to tap their gas reserves to substitute foroil. They are finding that the development and use of

natural gas raise complex questions of gas allocation andinvestment strategy that must be faced at an early stage.

This portfolio presents a wide range of selected TORs,dealing with various aspects of gas sector work, andprovides examples to facilitate the preparation of futureTORs. The TORs presented cover a wide range of studiesthat address issues related to gas development and use andsuggest policies and practices that would overcomeobstacles to gas development and enhance the benefits fromgas use for the country.

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