high efficiency biomass power plants in china

35
Lesson Learned from High Efficiency Biomass Power Plants in China Anders Brendstrup– Global Head of Sale April 2012 Achieving lower risk and higher profitability

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Biomass Presentations

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  • Lesson Learned from High Efficiency

    Biomass Power Plants in China

    Anders Brendstrup Global Head of SaleApril 2012

    Achieving lower risk and higher profitability

  • China biomass today

    Current capacity vs Potential

    2 GW installed capacity

    (75% agricultural residues)

    800 million tons of waste

    agricultural and forestry

    residues produced annually

    of which still only 5% used.

    Potential for 100 GW

  • Government

    RMB 0.75/kwh feed-in-tariff (=0.119 USD/kWh incl.

    VAT)

    Government targets 30 GW by 2020

    Increasing adoption of high efficiency HPHT

    technology (government to enforce)

    Environment and Social

    Millions USD injected into rural economy every year

    Rural electrification Renewable Base load power

    3

    China biomass today

  • China biomass industry began in 2006

    Very little government support

    Zero collection infrastructure

    Volatile price of fuel

    Small scale farmers

    Unpredictable crop cycles

  • Overcoming the challenges Reducing risk and increasing profitability

    Plant owners

    Low EPC costs

    Fuel management

    Technology Providers

    Improve efficiencyImprove fuel flexibilityImprove availability and reliability.

    5

  • Case study: NBE lessons learned

    Founded in 2004

    Built Chinas first biomass plant in

    2006, have built on average one

    every 2 month since then.

    Currently have 1200 MWe

    capacity, largest biomass power

    generating company in the world

    Adapted European HPHT

    technology: DP CleanTech

    Partnership with State Grid.

  • Many of the mistakes and

    successes made along the

    way

    1. laid the foundation for

    Chinas current fuel

    collection

    2. influenced current

    government policy

    3. And taught us a lot about

    lowering risk and increasing

    profitability.

    7

    Case study: NBE lessons learned

  • DP CleanTech - 50 references in China

  • Leveraging low cost EPC

    European technology adapted to China market

    Manufacturing in China: Reduction of EPC cost from 2,5

    MUSD/MWe in Europe to 1-1,2 MUSD/MWe for the

    same base technology

    Breaking the China standard project execution mold -

    Providing a complete biomass tailored solution.

    DPCT focused on what is special for biomass (fuel

    handling and fuel feeding, combustion, boiler, flue gas

    cleaning)

    Remainder was handled by standard Chinese suppliers

  • Biomass Cost Structure

    Note: Above is based on a reference 30MW Power Plant in China

  • Fuel Management NBE initiated Chinas first fuel logistics framework.Prices were very volatile to begin with.Agents helped stabilize the price.Farmers began to benefit significantly.

    A 30 MW Power Plant require 700 T/Day 220 000 T/Y

    Power Plant

    CC

    AG

    F

    CC

    CC

    CC

    CCAG

    FFFF

    8 Collection Centers/PP

    120 Agents

    400 Farmers/ AG

    Collection 50 KM

    Quality control

    Fuel Weight Fuel

    storage

  • High Performance Technology

    Fuel flexibility

    Moisture Content up to 60 %

    Different types of Biomass - Mix

    straw type and wood chip

    Vibrating grates can adjust to

    fuel type

    Availability

    7,500-8000 hours a year

    Boiler designed to handle

    corrosion and fouling

    Good maintenanceWATER COOLED VIBRATING GRATE

    NBE were able to reduce fuel supply risk and allow better operability

  • High Efficiency High Pressure ,

    High Temperature boiler

    92% , 92 Bar , 540 C

    Plant efficiency up to 32 %

    Reduce the plant fuel consumption

    by more than 20% compared with

    classical technology

    Allow big Capacity 12 MWe to 30

    MWe

    High Performance Technology

    High Pressure High Temperature Boiler

  • HTHP vs MTMP

    A HTHP boilers is far more expensive to produce than a MTMP boiler

    due to the following reasons

    The materials used for the last super heaters have to be alloyed

    steels. In Sh3+SH4 DP uses TP347H stainless steel which is both due

    to the high temperature and pressure but also for corrosion

    protection.

    The high furnace temperature causes more slagging which means

    that the boiler must be relatively larger in size in order to have the

    similar thermal effect.

    The higher pressure requires higher wall thicknesses of all materials,

    hence higher overall material cost

  • 15

    HTHP boilers provide us with better efficiencies with lower feedstock costs

    The feedstock costs for a HTHP are nearly 20% lower than MTMP

    Lower feedstock costs would in return lead to lower price fluctuations and

    risk

    HTHP is able to generate much higher cash flows which can be used to

    service a greater amount of debt

    HTHP vs MTMP

  • HTHP vs MTMP

    Investment cost for a 30MW power plant USD 30 mm (HTHP)

    Investment cost for a 30MW power plant - USD 27 mm (MTMP)

    Boilers and turbines are expensive for a HTHP based plant

    Cost Assumptions

  • HTHP

    Temperature: 535oC / Pressure: 8.83MPa

    Uses 9,821 kj / kWh i.e. turbine efficiency of 36.65%

    For HTHP the boiler efficiency is c.89% - implies a theoretical plant efficiency

    of 32.6%

    MTMP

    Temperature: 450oC / Pressure: 4.90MPa

    Uses 11,087 kj / kWh i.e. turbine efficiency of 32.47%

    For MTMP the boiler efficiency is c.83% - implies a theoretical plant efficiency

    of 27.0%

    Fuel Handling and flue gas cleaning are more expensive due to more fuel

    ( lower efficiency) and therefore more flue gas

    Performance Assumptions

    HTHP vs MTMP

  • Reference Plant

    NBE has now constructed and is operating more than thirty 30MW plants all

    of which are being benchmarked against Generic Model, therefore we

    believe this is the right reference point for our Analysis

    For our analysis we have only altered 2 variable, the cost of the plant and

    the plant efficiency which then has a resultant effect on the amount of

    feedstock consumed per ton of power generated

  • 30 Mwe Reference Plant

    Metrics Assumptions

    Utilization hours 7,500 hours in each year

    Tariff Generic: USD 0.09 /kWhAdjusted with benchmark desulfurized coal-fired tariff

    Efficiency factor Approx. 32.6% efficiency for HTHP and 27.0 for MTMP

    Efficiencies adjusted for plant degradation as given below:1st year 0.25%2nd year 0.50%3rd year 0.75%4th year 1.00%(Overhaul at the end of 4th year)5th year 0.25%

    Feedstock heat price

    USD 0.0042 / MJ = 50 USD/ton at NCV = 12000 kJ/kg

    Internal Power Use

    11%

    Metrics Assumptions

    Depreciation Generic 30MW plant - 15 years straight-line depreciation

    Income tax 25%

    O&M cost 0.2 mUSD per year

    Working Capital Assumptions

    Inventory 16.7% of Feedstock costs

    Debt Funding Assume 70% debt financing on capital expenditure Interest rate of 6%

    Capital Expenditure

    100% Capital expenditure spent in the year prior to year of operations

    Assumed total capital expenditure 30MW HTHP USD 30 mn 30MW MTMP USD 25 mn

    Construction period

    18 months

    NBE has now constructed and is operating more than thirtyy 30MW plants all of which are being benchmarked against Generic Model,therefore we believe this is the right reference point for our Analysis

    For our analysis we have only altered 2 variable, the cost of the plant and the plant efficiency which then has a resultant effect on the amount of feedstock consumed per ton of power generated

  • HTHP vs. MTMP Side by SideFeedstock casts of HTHP are about 17.5 % lower than that of MTMP due to higher plant efficiency

    Project IRR 20 % vrs 13 %.And ROCE is 37 % vrs 22 %

    30 Mwe HTHP MTMP2012 2013 2014 2015 2012 2013 2014 2015

    Net power revenues mUSD 0 9.4 19.1 19.7 0.00 9.25 18.91 19.47Feedstock costs mUSD 0 -5.4 -11.1 -11.5 0.00 -6.58 -13.45 -13.86Other costs mUSD -0.51 -1.7 -1.9 -1.9 -0.51 -1.72 -1.86 -1.90total COGS mUSD -0.51 -7.2 -13.0 -13.3 -0.51 -8.30 -15.31 -15.75

    EBITDA mUSD -0.51 2.20 6.14 6.35 -0.51 0.95 3.59 3.72margin mUSD 0% 23% 32% 32% 0% 10% 19% 19%

    Depreciation mUSD 0 -0.8 -1.5 -1.5 0 -1.01 -2 -2

    EBIT mUSD -0.51 1.4 4.6 4.8 -0.51 -0.06 1.59 1.72margin mUSD 0% 15% 24% 25% 0 -0.01 0.08 0.09

    Net income mUSD -1.08 0.3 2.8 3.0 -1.08 -1.14 0.47 0.65

    Cash FlowNet income mUSD -1.08 0.3 2.8 3.0 -1.08 -1.14 0.47 0.65add depreciation mUSD 0 0.8 1.5 1.5 0.00 1.01 2.00 2.00less changes in NWC mUSD 0 -0.9 -0.9 -0.1 0.00 -1.10 -1.15 -0.07Cash flow from operations mUSD -1.08 0.1 3.3 4.4 -1.08 -1.23 1.33 2.59add net interest expenses mUSD 0 1.9 1.9 1.9 0.00 1.89 1.89 1.89Capex mUSD -27 0.0 0.0 0.0 -27.00 0.00 0.00 0.00Free cash flow mUSD -28.1 2.0 5.2 6.3 -28.08 0.66 3.22 4.48

    IRR % 20% 13%ROCE % 37% 22%

  • Indian 12 Mwe plant

    Metrics Assumptions

    Utilization hours 7,500 hours in each year

    Tariff Generic: USD 0.10 /kWhAdjusted with 3 % per year

    Efficiency factor Approx. 32.6% efficiency for HTHP and 27.0 for MTMP

    Efficiencies adjusted for plant degradation as given below:1st year 0.25%2nd year 0.50%3rd year 0.75%4th year 1.00%(Overhaul at the end of 4th year)5th year 0.25%

    Feedstock heat price

    USD 0.0033/ MJ = 40 USD/ton at NCV = 12000 kJ/kg adjusted with 6 % per year (inflation)

    Internal Power Use

    11%

    Metrics Assumptions

    Depreciation 12 MW plant - 15 years straight-line depreciation

    Income tax 25%

    O&M costWater costPlant SG&A

    0.2 mUSD per year adjusted by inflation 0.1 mUSD per year adjusted by inflation 0.2 mUSD per year adjusted by inflation

    Working Capital Assumptions

    Inventory 16.7% of Feedstock costs

    Debt Funding Assume 70% debt financing on capital expenditure Interest rate of 13%

    Capital Expenditure

    100% Capital expenditure spent in the year prior to year of operations

    Assumed total capital expenditure 12 MW HTHP USD 12 mn 12 MW MTMP USD 11 mn

    Construction period

    18 months

  • Indian HTHP vs. MTMPMargins are lower due to higher interest rate

    Project IRR 20.8 % vrs 15 %.And ROCE is 39.7 % vrs 28 %

    Indian 12 Mwe HTHP MTMP2012 2013 2014 2015 2012 2013 2014 2015

    Net power revenues mUSD 0.00 4.24 8.83 9.27 0.00 4.24 8.83 9.27Feedstock costs mUSD 0.00 -2.24 -4.71 -4.99 0.00 -2.71 -5.70 -6.04Other costs mUSD -0.16 -0.82 -0.90 -0.94 -0.16 -0.82 -0.90 -0.94total COGS mUSD -0.16 -3.06 -5.61 -5.93 -0.16 -3.53 -6.60 -6.98

    EBITDA mUSD -0.16 1.18 3.22 3.34 -0.16 0.71 2.23 2.29margin mUSD 0% 28% 36% 36% 0% 17% 25% 25%

    Depreciation mUSD 0.00 -1.01 -2.00 -2.00 0.00 -1.01 -2.00 -2.00

    EBIT mUSD -0.16 0.17 1.22 1.34 -0.16 -0.30 0.23 0.29margin mUSD 0% 4% 14% 14% 0% -7% 3% 3%

    Net income mUSD -0.66 -0.80 0.23 0.38 -0.62 -1.19 -0.60 -0.48

    Cash FlowNet income mUSD -0.66 -0.80 0.23 0.38 -0.62 -1.19 -0.60 -0.48add depreciation mUSD 0.00 1.01 2.00 2.00 0.00 1.01 2.00 2.00less changes in NWC mUSD 0.00 -0.37 -0.41 -0.05 0.00 -0.45 -0.50 -0.06Cash flow from operationsmUSD -0.66 -0.17 1.82 2.33 -0.62 -0.63 0.90 1.47add net debt repayment mUSD 0.00 0.56 0.56 0.56 0.00 0.51 0.51 0.51Capex mUSD -12.00 0.00 0.00 0.00 -11.00 0.00 0.00 0.00Free cash flow mUSD -12.66 0.39 2.38 2.89 -11.62 -0.12 1.41 1.98

    IRR % 20.8% 15.0%ROCE % 39.7% 28.0%

  • Biomass Cost Structure

  • SensitivityAt fuel cost of 20 USD/ton IRR is similar. HTHP is more stable with varying fuel cost

    IRR not very sensitive to operating hours as fuel cost is very high part of OPEX

  • SensitivityGoing from 10 mUSD to 15 mUSD will lower IRR from 26 % to 17 %.Investment cost is important but not most important

    15mUSD for HTHP will have same IRR as 11 mUSD for MTMP.

  • Financing Ability

    Generally banks are cash flow based lenders and will determine sustainable

    debt levels based on there free cash flow available to service debt and the

    variability of those cash flows

    As explained above, feedstock is by far the greatest variable cost for a plant

    In a stable situation HTHP is able to generate greater cash flow available to

    service debt

    Further in a situation where feedstock varies, HTHP cash flows are less sensitive

  • India Market Overview

    Market similarities

    Current situation in India

    India produces about 450-500 million tones of biomass per year.

    EAI estimates that the potential in the short term for power from biomass

    in India varies from about 18,000 MW, when the scope of biomass is as

    traditionally defined, to a high of about 50,000 MW if one were to expand

    the scope of definition of biomass.

    Govt incentives - capital subsidy, renewable energy certificates and Clean

    Development Mechanism (CDM) which can be utilized effectively to make

    the project economically attractive

  • Challenges India Market

    Supply chain bottlenecks that could result in non-availability of feedstock. A related problem is the volatility in the feedstock price.

    Lack of adequate policy framework and effective financing mechanisms

    Lack of effective regulatory framework

    Lack of technical capacity

    Absence of effective information dissemination

    Limited successful commercial demonstration model experience

  • Agricultural residues in India (MT)

  • Rice Straw

    It is estimated that 150 Mt of rice straw residue are

    produced in India every year.

    In India, 23% of rice straw residue produced is surplus

    and is either left in the field as uncollected or to a large

    extent open-field burnt. About 48% of this residue

    produced is subjected to open-field burning

    However Rice Straw is a difficult fuel to burn and

    requires the right technology to avoid high long-term

    costs.

  • Fouling

  • Ash Fusion Temperature

  • Conclusion

    India is in a very similar position to where China was 5 years ago

    India has huge potential particularly with rice Straw.

    Due Diligence Walk before you can run

    Reliable technology that deals with specific fuel will always work out cheaper in the long run

    Use HPHT to get the best out of your fuel and improve IRR