Biomass Supply Chain Project

Transcription

1 CABINET Biomass Supply Chain Project Report of Executive Director Economy, Place and Skills Portfolio Holder : Cllr J McCann Environment and Regeneration 24 th November 2010 Officer Contact : Nik Anderson, Senior Arboricultural Officer Ext Purpose of Report The report seeks the approval for the commencement of works in relation to the setting up of a biomass supply chain. Works involve the design and build of a purpose built shelter in Alexandra Park and the supply of a large wood conversion machine to convert wood waste into suitable grade biomass woodchip fuel. Executive Summary A full business case has been submitted and accepted by the Capital investment Programme Board and the investment of 65,000 in 10/11 and 55,000 in 11/12 agreed in the report submitted to Cabinet on 8 September The report seeks approval in the first instance to engage architects to design the building and gain planning permission (professional fees and planning costs estimated) It then seeks approval for the construction phase (estimated 60,000.00) and the purchase/installation of the plant (estimated 55,000.00). All works to fully comply with procurement procedures to derive best value. Recommendations That the business case as given at appendix A is fully supported and the funding of 65,000 in 10/11 and 55,000 in 11/12 be approved.

2 MODERN.GOV RECORDING SYSTEM Cabinet 24 th November 2010 Biomass Supply Chain Project 1 Background 1.1 A full business case has been submitted and accepted by the Capital investment Programme Board and the investment of 65,000 in 10/11 and 55,000 in 11/12 agreed in the report submitted to Cabinet on 8 September Current Position 2.1 A sum of 120, has been agreed from the capital funding budget to start a biomass supply chain in Oldham and with a view to taking material from Rochdale, Tameside and North Manchester. Oldham produces a minimum of 600 tonnes of wood waste every year in the normal course of works. Converted this is worth up to per tonne. By re engineering our approach this will comfortably reach 1200 tonnes per annum with additional tonnages to be gained by working with other neighbouring authorities tonnes of material has now been stockpiled in anticipation of the plant becoming operational and ready for supply in Material is being sourced from Tameside, North Manchester and Rochdale along with material from local contractors contained on our framework agreement. The supplies sourced together with Oldham s waste provide sufficient capacity to exceed the original 600 tonne estimate. Talks are at an advanced stage with several potential customers regarding an outlet for the woodchip to ensure full market value for the product. 3 Options/Alternatives 3.1 Not to proceed with the scheme and continue to spread woodchip on shrub beds around Oldham which adds to the methane production and fails to reduce the Council s carbon emissions for which the Council is responsible, and the opportunity to maximise income. 3.2 Proceed with the scheme as outlined in the business case which is estimated to reduce the Council s CO2 emissions by 798 tonnes per year and provide additional income. Page 2 of 20 [385 Biomass Project] November 2010

3 4 Preferred Option 4.1 To proceed with the scheme and give approval in the first instance to engage architects to design the building and gain planning permission (professional fees and planning costs estimated). Approval will then be sought for the construction phase (estimated 60,000.00) and the purchase/installation of the plant (estimated 55,000.00). All works to fully comply with procurement procedures to derive best value. 5 Consultation 5.1 A wide variety of consultation has already taken place. Those consulted include, Planning Officials, FCHO, Rochdale MBC, Red Rose Forest, the Countryside Service, elected members, Greater Manchester Waste, Kier Group, GM Tree Station, Forestry Authority, Environment Agency, Area Regeneration Teams. 6 Financial Implications 6.1 Revenue It is anticipated that initially one full time employee at manual grade 5 could run the project under supervision from the arbor team. This will be done by reallocating existing staff members, tractors and tippers etc with no additional costs to the authority. If the project achieves the expected growth levels then further recruitments may be needed to meet customer demand, however it is proposed that this will be funded from the additional income generated. A separate report will be required if this option is pursued further. The following costs will also be incurred: Prudential Borrowing repayments of 138,000 over 5 years = 27,600 per annum. Machinery 2,000 per annum 1,500 per annum PPE and sundry 1,500 per annum. Total Additional Costs - 32,600 per annum The proposed implementation date for the project has been set at October / / /13 (Pro Rata) Expenditure None 2,500 32,600 (Estimated) Page 3 of 20 [385 Biomass Project] November 2010

4 Income None 36,000* 72,000* (Estimated) Net effect on the Authority None 33,500 39,400 (Surplus) (Surplus) *N.B. The income has been estimated based on the sale of 600 tonnes per annum. (Matthew Kearns) 8.2 Capital The Biomass Supply Chain will be capital expenditure and a charge against the Economy, Place and Skills capital programme. The project is part of the Capital Investment Programme 2010/ /14 and will be financed by Prudential Borrowing. 120,000 has been approved in total for this project (EDRS ) profiled over 2 financial years as shown below 2010/ /12 Total Biomass Supply Chain 65,000 55, ,000 The repayment of this borrowing is to be financed from the Economy, Place and Skills revenue budget. As detailed at paragraph 8.1, the estimated income generated by this project should cover the costs of borrowing and provide surplus income for the Council. It is estimated that the design fees and planning application are to be in the region of 5,000 and will be a charge in the current financial year 2010/11. Further reports will need to be submitted as the scheme progresses to request the release of funds following the receipt and evaluation of detailed costings for the build of the Biomass shelter and procurement of the required machinery. These additional costs should not exceed 115,000, the balance of the approved capital expenditure and depending on the timing of the expenditure, the profile of the scheme may require amendment. (Justine Cunniffe) 7 Legal Services Comments 7.1 Under the Local Authorities (Goods and Services) Act 1970, the Council has the power to enter into agreements with other local authorities for the supply of any goods or materials, so it will be possible to acquire wood waste from other local authorities to use as fuel. In addition, under section 2 of the Local Government Act 2000, the Council has the power to do anything it considers likely to achieve the improvement of the environmental well being of all or part of its area. Government guidance in respect of the use of section 2 requires that in deciding whether to use this power, the Council should be satisfied: a) that the proposed action is likely to promote or improve the environmental well being of its area; b) that the primary purpose is not to raise money and c) that it is not explicitly prohibited on the face of other legislation. All those requirements are met in respect of this project as currently proposed, Page 4 of 20 [385 Biomass Project] November 2010

5 although further consideration may be required if the processed material is sold externally in large quantities. (Alan Evans) 8 Human Resources Comments 8.1 None 9 Risk Assessments 9.1 See section 9 in attached stage 2 detailed bid. SECTION 9 - RISK MANAGEMENT Risk Failure to get planning approval Likelihood (high medium low) Low Impact Scheme will not go ahead at chosen location Tree resource is unavailable Low Revenue generated could fall short of requirement Customers don t want product. Low Stockpile of woodchip. An area that could be of risk to the project is the continued cuts to Arboricultural and Countryside staff. Current levels will allow 600 tonnes to be produced but further cuts and/or lack of investment will jeopardize growth of the project. Medium Level of output remains static and growth does not reach expected levels. Mitigating action Informal consultations have already taken place with Planners and they see no problem with a particular site in Alexandra Park compound area. Use short rotation coppice, woodlands are constantly growing and in need of work. Sustainability targets dictate that there will always be a great demand for this product Allow revenue to be returned to the project. No further cuts to Arboricultural and Countryside front line staff. 10 IT Implications Page 5 of 20 [385 Biomass Project] November 2010

6 10.1 None 11 Property Implications 11.1 None 12 Procurement Implications 12.1 Once building is designed a procurement exercise will be necessary for construction. A procurement exercise will also be necessary for the purchase of any machine. 13 Environmental and Health & Safety Implications 13.1 The environmental implications are all positive with the scheme taking an unknown but substantial quantity of Methane out of the atmosphere and, based on 1200 tonnes, by taking 798 tonnes of CO2 out of the atmosphere each year. 14 Equality, community cohesion and crime implications 14.1 None 15 Equality Impact Assessment Completed 15.1 The project will have beneficial implications for all sectors of the community and doesn t impact upon equality. 16 Key Decision 16.1 Yes 17 Forward Plan Reference 17.1 EPS Background Papers 18.1 None 19 Appendices 19.1 Stage 2 detailed capital bid 19.2 Table of fuel costs from Biomass energy centre 19.3 Table of fuel costs from other suppliers Page 6 of 20 [385 Biomass Project] November 2010

7 Appendix 1 OLDHAM COUNCIL CAPITAL PROGRAMME STAGE 2 DETAILED BID Initial Received by Date For use to provide detailed information for approval of funding against the Capital Programme for the period April 2009 to March To be completed in accordance with Guidance Notes. Version Draft Submission Approved (tick/initial) SECTION 1 - SCHEME DETAILS Scheme Title Biomass supply chain Reference no Corporate Objective Reduction of CO2 emissions, generation of income, possible creation of jobs and economic development. Supply of woodchip to CEN/TC335 for use in biomass boilers Service Area Parks and Countryside 1.07 Responsible officer N Anderson 1.08 Phone X nik.anderson@oldham.gov.uk 1.10 Other partner(s) SECTION 2 - DESCRIPTION OF WORKS 2.01 Brief description of what the proposal will do and the requirement for works, including legal requirement to carry out the works, health and safety issues, environmental impact, etc. If this proposal is on an invest to save basis, provide details here. Oldham Arboricultural unit produces an estimated 600 tonnes of woodchip per annum. At present this woodchip is chipped back into woodlands or spread on Page 7 of 20 [385 Biomass Project] November 2010

8 shrub beds as mulch. This was generally accepted as good practice, but more recent research suggests that this practice produces large quantities of methane, one of the worst greenhouse gasses. To burn the woodchip is Carbon Neutral and with biomass boilers being installed all over Oldham notably Failsworth and Radcliffe Academies, there is a real opportunity to not only reduce Oldham s carbon footprint, but to earn some much needed income. Agreement has been reached to take wood from our private partners to increase production to over 1200 tonnes per annum. With further resources and some changes in the way we manage our woodlands we could increase our tonnage to many thousands. Woodchip. Woodchip for sale as biomass has to achieve a certain standard (CEN/TC335). This standard mostly relates to particle size and moisture content. Moisture content should be less than 35% and chips should be between 5mm-25mm. Currently our wood chipping machines do not produce uniform enough chip size, and we have no suitable storage area in which the chip can season (Dry-out). Woodchip conforming to the above standard can be sold for per tonne, which equates to 3.5p/kwh. Gas is 5.0p per kwh. Capital Investment. A site in Alexandra Park has been highlighted as an ideal location for a purpose built, roofed, open sided building for storage of woodchip. A field trip to Barnsley showed us that such a building would cost 60,000 plus architect planning fees etc. A suitable machine to chip large bore timber to the required standard consistently will cost 50,000. Future investment will have to be made to develop the project. This can be achieved by re- investing income and looking at grant aid. Revenue Costs It is anticipated that initially one full time employee at manual grade 5 could run the project under supervision from arbor manager and using existing tractors, tippers etc for loading and transportation at 20, % = 30,000 (I understand that when factoring in a salary you allow for 1.5 times the gross salary) Machinery 2000 per annum 1500 per annum PPE and sundry 1500 per annum Total 35,000 per annum Income and Expenditure Based on 1200 tonnes income of 120,000 per annum could be achieved. This would comfortably allow the capital investment to be repaid within 5 years, pay revenue costs, and allow for some future investment. Income can be increased by extending the project to include the material from other local contractors and perhaps even neighboring authorities. Many contractors and authorities will at present be paying a minimum of per tonne to dispose of their waste, so there is a possibility here Page 8 of 20 [385 Biomass Project] November 2010

9 2.02 Description of how the proposal links to the Corporate Plan and the Local Area Agreement, including relevant national indicators. Page 9 of 20 [385 Biomass Project] November 2010

10 1 NI 186 Per capita CO2 emissions in the Local Authority area. 2 NI 185 CO2 reduction from Local Authority operations. 3 NI 188 Adapting to climate change 4 5 NI 194 Level of air quality reduction in NOX and PM10 emissions through Local Authority estate and operations. NI 197 Improved local biodiversity active management of local sites. The supply chain will allow several biomass boilers in civic buildings to operate in a carbon neutral way, thus reducing the amount of CO2 and other greenhouse gasses by many hundreds of tons per annum. Smarter working and conversion of material in bulk will reduce the amount of diesel burned by Council vehicles. The production of material will also allow gas and coal boilers to be replaced with carbon neutral biomass boilers. Reduction in use of gas/ Coal boilers and the release of many hundreds of tons of greenhouse gasses into the atmosphere. Reduction in Methane because woodchip would be burned in a carbon neutral way rather that breaking down on shrub beds and producing Methane. Ultimately all trees and woodlands would be managed in a sympathetic, more traditional way. This would have the result of increasing and improving biodiversity. 1. Oldham s community Strategy Improved and valued environment Oldham Beyond Unitary Development Plan Sustainable energy Affordable Warmth Strategy Biomass is a fraction of the cost of gas. Home Energy Conservation Act Leading by example will encourage private house owners to adopt biomass. GM Municipal Waste Strategy Reuse of council waste in an environmentally and cost effective beneficial way. Greenspace strategy Better more focused management of Oldham s trees Woodland Strategy Better more focused management of Oldham s woodlands. Air quality management Plan Less CO2 and other greenhouse gasses released into the atmosphere. Biodiversity Action Plan More focused and sympathetic management of Oldham s trees and woodland will be done to improve biodiversity. Page 10 of 20 [385 Biomass Project] November 2010

11 2.03 What links does this proposal have with other activity and plans, including directorate plans, SIP, etc. Oldham Council Corporate plan states; We are passionate about finding ways to live more sustainably. At 5.5 tonnes per capita we have the lowest levels of CO2 emissions in the sub-region and the second lowest in the North West. We have many plans in place to help us further reduce this. Parks and Countryside SIP talks about maintaining a healthy clean environment and the biomass [project fits in with that very nicely. Forest Stewardship Council Oldham has over 20 certified woodlands with management plans in place and ready to be implemented. With a coordinated approach large volumes of biomass could be generated as a result of these works. At the same time woodland quality will be improved along with biodiversity. SECTION 3 - CONSULTATION 3.01 What consultation has taken place, or is planned, with residents, elected members partner agencies, local businesses, other stakeholders (as appropriate)? Failsworth and Radcliffe Schools Local tree work contractors Planning department Councillors Regeneration Kier Will the proposal deliver/facilitate any local economic benefit? The proposal with generate substantial income to Oldham MBC, and may in the future result in creation of jobs. SECTION 4 - EXPENDITURE AND FUNDING * Refer to Scheme Finance Form (attached) 4.01 Provide details of project expenditure and funding on the accompanying spreadsheet and enter summary details below. 2010/ /12 TOTAL Expenditure Funding Capital Strategy Other (specify) Confirmed? 65,000 55, ,000 Total funding Page 11 of 20 [385 Biomass Project] November 2010

12 4.02 What attempts have been made to secure contributory funding, either public or private, in addition to the above and what was the outcome? A LAA bid was made unsuccessfully. We are on the mailing list for several organizations that do grants for this sort of thing but no grants are being given at the present time What would happen if funding was not available, partly or wholly? The opportunity to reduce CO2 would disappear, as would the ability to generate substantial income. Woodchip would continue to be spread on shrub beds at great labour cost and at great cost to the environment (Production of Methane). Page 12 of 20 [385 Biomass Project] November 2010

13 SECTION 5 - OUTPUTS 5.01 Provide details of summary outputs below. Description 2009/ / /12 TOTAL Professional Fees (Building design) Building 60,000 60,000 Machinery 55,000 55,000 SECTION 6 - OPTION APPRAISAL 6.01 Describe what alternative courses of action have been considered for achievement of the intended outcomes, including any implications for costs. N/A SECTION 7 - VALUE FOR MONEY 7.01 How does the proposal demonstrate value for money? What alternatives have been considered and with what conclusions? How might the proposal achieve more impact for no additional funding? What efficiency gains can the proposal achieve? At present woodchip is spread on shrub beds at great cost both financially and environmentally. This project not only helps to achieve the council s CO2 emissions reduction, but generates income, and creates jobs. There are no realistic alternatives. Greater impact can be achieved by extending the scope of the project and increasing throughput and production, this will all be achievable by re-investing revenue How does the project demonstrate additionality? (I.e. the impact achieved would not occur without the proposal taking place.) Without the investment woodchip would continue to be spread on shrub beds at great cost both in labour terms and in harmful greenhouse gasses. Without the investment the woodchip cannot be turned into a usable product. Failure to produce biomass fuel to the correct standard will result in fossil fuels being burnt instead, producing large quantities of CO2. Page 13 of 20 [385 Biomass Project] November 2010

14 SECTION 8 - DELIVERY 8.01 Provide monthly milestones to demonstrate progress. Add extra rows as necessary Date April 2010 June 2010 August 2010 April 2010 April 2011 Jan 2011 March 2011 May 2011 June 2011 July 2011 October 2011 Activity / key event Architect engaged to design building Go to tender for construction works Appoint contractor and commence building works Stockpile wood waste in the round ready for conversion to woodchip Expression of interest for machinery supply Put out tender for machinery supply Award contract for machinery supply Take receipt of Machinery Chip and grade wood waste and store undercover Deliver first assignments of woodchip to local biomass boilers Aside from achievement of spend and outputs, how will performance indicators be used in order to measure and manage the success of delivery? Give examples of PIs. What review mechanisms will be used and how will they improve performance? Production targets will be set initially at 50 tonnes per month increasing over the first three years to 120 tonnes per month. This will be monitored strictly and appropriate changes made to achieve production. Customers will only be taken on when a ready supply of seasoned and graded biomass wood chip is available. Delivery of the resource will be monitored closely and customers will be regularly consulted for their feedback Give details of any management arrangements to oversee the delivery of the proposal. Nik Anderson can oversee all matters relating to the production, storage, and delivery of woodchip/biomass. He will be responsible for the quality of product and customer satisfaction. He will manage the capital expenditure and the ongoing revenue issues Who will be responsible for the management and monitoring of the proposal? Are resources and skill levels adequate to ensure successful delivery? Nik Anderson. Yes Is the successful delivery of this proposal dependent in any way on any other activity, or approval? Page 14 of 20 [385 Biomass Project] November 2010

15 The successful delivery of this project depends greatly on the continuation of the Oldham Arb Unit and its partners. It also depends greatly on our proposals to introduce long needed woodland management work into countryside areas. SECTION 9 - RISK MANAGEMENT 9.01 Provide details of the main risks to the successful delivery of the proposal and measures intended in order to address their impact Risk Likelihood Impact Mitigating action (high medium low) Failure to get planning approval Low Informal consultations have already taken place with Planners and they see no problem with a particular site in Alexandra Park compound area. Tree resource is unavailable Low Use short rotation coppice, woodlands are constantly growing and in need of work. Customers don t want product. Low Sustainability targets dictate that there will always be a great demand for this product SECTION 10 - SUSTAINABILITY, FORWARD STRATEGY and EVALUATION How will the outcomes of this proposal be sustained after it has finished? What mechanisms are in place/proposed to evaluate the impact of the proposal? Page 15 of 20 [385 Biomass Project] November 2010

16 The project will become self financing and self sustaining and be an ongoing project. Dependent on the amount of woodchip/biomass that is produced and sold, we can calculate the amount of CO2 removed from atmosphere. The more woodchip we produce the less fossil fuel (Oil, Gas, Coal) is burned.. SECTION 11 - ASSET MANAGEMENT What assets, if any, will be created or acquired as a result of this project? How will they be managed / maintained to the benefit of the Councils objectives? Building will be very low maintenance as it is a very simple structure. Maintenance will come under the existing Repair and Maintenance arrangements. Machinery Will be maintained regularly to ensure highest quality of woodchip. Replacement machinery will be funded from revenue Will any capital receipts be generated by this proposal and how will they be accounted for? Are there any revenue implications as a result of this proposal, how will this be addressed? It is anticipated that initially one full time employee at manual grade 5 could run the project under supervision from arbor manager and using existing tractors, tippers etc for loading and transportation at 20, % = 30,000 (I understand that when factoring in a salary you allow for 1.5 times the gross salary) Machinery 2000 per annum 1500 per annum PPE and sundry 1500 per annum Total 35,000 per annum Revenue costs will be met from the annual income generated Estimates 60,000 in the first year rising over 3 years to 120,000. Page 16 of 20 [385 Biomass Project] November 2010

17 CERTIFICATION This form constitutes an application for funding from the Capital Programme. It is hereby certified that the information contained within this form is true and accurate and that the submitting Officer has the requisite internal approvals for the proposed works and expenditure any funding other than Capital Programme that is required for the successful delivery of the project has been secured or will be secured prior to commitment of expenditure SUBMITTING OFFICER NIK ANDERSON NAME POSITION ARBORICULTURAL MANAGER SIGNATURE DATE 26/1/10 FINANCE MANAGER NAME SIGNATURE DATE Page 17 of 20 [385 Biomass Project] November 2010

18 Appendix 2 Fuel Price per unit kwh per unit pence per kwh Wood chips (30% MC) 80 per tonne 3,500 kwh/t 2.3p/kWh Wood pellets 185 per tonne 4,800 kwh/t 3.9p/kWh Natural gas 4.1p/kWh 1 4.1p/kWh Heating oil 44p per litre 10 kwh/ltr 4.4p/kWh LPG (bulk) 40p per litre 6.6 kwh/ltr 6.1p/kWh Electricity 13.3p/kWh p/kWh Typical prices for bulk purchase of fuels at domestic scale, January 2010 N.B. These prices are intended for guidance only and represent the typical cost per unit of fuel energy for comparison. This is not the same as cost per unit of delivered heat which will depend on the efficiency of the boiler or stove, and may also include other charges such as service and maintenance for heat supply contracts. All prices are prone to significant variation with geographical region, order quantities, overall contract size and duration, time of year, delivery distance and time, etc. Woodfuels in particular are available at prices both significantly above and below those quoted, and bulk prices will be subject to a minimum delivery size of perhaps 3-5 tonnes. Wood pellets bought in bags may be significantly more expensive than those bought in bulk. Page 18 of 20 [385 Biomass Project] November 2010

19 Delivery method (speed of delivery) also has a pronounced impact on cost per tonne. It will be far easier, quicker and cheaper to tip a trailer into a chip store than to have to use a chip blower (for example). Additional expenditure on a chip store can have profound financial benefits over the lifetime of the installation. Page 19 of 20 [385 Biomass Project] November 2010

20 Appendix 3 Indicative prices only Energy Content Price per Unit* Price per kwh** Woodchips (35% MC) 3,000 kwh/tonne 105 per Tonne 3.5p per kwh Wood Pellets 4,965 kwh/tonne 200 per Tonne 4.0p per kwh Heating Oil 10.6 kwh/liter 48p per Liter 4.5p per kwh Domestic LPG 7.80 kwh/liter 40p per Liter 5.0p per kwh Electricity 9.0p per kwh Prices are based on quotes obtained Spring 2009 & include VAT **kwh is the common measure of energy - expressed here as kwh heat. Page 20 of 20 [385 Biomass Project] November 2010