Biocoal for Renewable. Copyright Bepex International 2011 All Rights Reserved

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1 RD3-4 Biocoal for Renewable Biomass Power Generation

2 Acknowledgement Project funding provided by customers of Xcel Energy through a grant from the Renewable Development Fund.

3 Why Biocoal? Coal is the largest source of energy for electricity $340B Global Market Coal use is expected to continue to grow for many years Coal use is the second largest greenhouse gas source Regulatory mandates to increase renewable energy and curb greenhouse gas emissions Large existing infrastructure and generation capacity Over 1,200 coal powered plants in the U.S. alone 1

4 Raw Biomass: Challenges Pulverized coal power plant modifications required Transportation and storage modifications required Poor Hardgrove Grindability Index (HGI) Propensity of raw biomass to rot Pellets fall apart when exposed to moist environments Relatively low bulk and energy densities 2

5 Opportunity Opportunity for an industrial scale process technology that produces a product from raw biomass that is compatible with existing coal infrastructure and supply chains: Torrefaction 3

6 Biocoal Torrefaction mild pyrolysis: C without oxygen Upgrades raw biomass into a coal-like substance or biocoal Increased energy (30%) and bulk density Increased grindability (HGI 2.5X) over raw biomass Less biologically active easier import / export More hd hydrophobic hb lacks ability to readily absorb bmoisture Leverages coal transportation and storage infrastructure No chemicals or binders required to produce biocoal 4

7 Project Scope Develop, optimize and demonstrate a torrefaction and densification ( biocoal ) process to improve storage capabilities, handling, usability and uniformity for the production of renewable baseload electricity, heat, or syngas. Develop a fundamental understanding di of the underlying economics of the overall process from the field to post combustion ash analysis. 5

8 Fall 2008 Biomass Collection 6

9 Pilot Scale (10 MT/Day) Mass Balance BIOMASS: 641 KGS/HOUR WATER: 641 KGS/HOUR WATER: 641 KGS/HOUR DRYING HEAT RECOVERY GAS BIOMASS: 641 KGS/HOUR INERT GAS TORREFACTION TORREFIER OFF GAS VOLATILES: 224 KGS/HOUR HEAT RECOVERY TORREFIED BIOMASS 417 KGS/HOUR DENSIFICATION TORREFIED BIOMASS 417 KGS/HR COOLING MEDIUM COOLING COOLING MEDIUM FINAL PRODUCT 417 KGS/HR NOTE: Representation of 10 MT / day pilot plant TO CUSTOMER 7

10 Biocoal: Similar to Coal Biocoal (Corn Stover) Sub-Bituminous Coal Caloric Value (btu/lb.) Fixed Carbon (%) 26.8% 34.6% Volatiles (%) 64.6% 6% 28.7% Ash (%) 7.6% 8.2% Sulfur (%) 0.1% 0.7% Moisture (%) 1.1% 28.5% Bulk Density (lbs/ft 3 ) >45 >45 Hardgrove Grindability Index >35 50 All Values are on an "As Received" basis 8

11 Pilot Scale Pulverized Coal Co-Firing Trial Successfully completed in August 2009 Tested torrefied and densifed corn stover Co-firing at 10% & 30% with sub-bituminous coal Flue gas composition (O 2, CO 2, CO, SO 2, NO x ) Fouling gpotential through the use of fouling gprobes Heat flux measurements & electrostatic precipitator ash collection 9

12 Emissions Reduction vs. Baseline (100% Coal) SO 2 (lb/mmbtu) b NO x (lb/mmbtu) b 10% Biocoal (Corn Stover) 17.0% 15.6% 30% Biocoal (Corn Stover) 30.0% 28.3% 10

13 Stoker Grate Co-firing Trials: District Energy 10% trial successfully completed in March % trial successfully completed in July 2010 Torrefied and densifed corn stover biocoal tested Co-firing at 10 & 30% ratio with high rank eastern subbituminous coal Flue gas composition (O 2, CO 2, CO, SO 2, NO x ) Boiler operating parameters (heat rate, over-fire, etc.) Visual empirical inspection in stoker against baseline 11

14 Emissions Reduction vs. Baseline (100% Coal) SO 2 (lb/mmbtu) b NO x (lb/mmbtu) b 10% Corn Stover Biocoal 11.7% 34.3% 3% 30% Corn Stover Biocoal 23.81% 41.30% 12

15 Commercialization Economics Production costs: $17.85 USD / ton Feedstock costs: $ USD / ton Price of biocoal: $ USD / ton (FOB Plant) Estimated commercial scale plant construction cost $31.28 M USD (Year 2011) turn-key without CHP system 150, ton / annum biocoal production capacity 60% debt 40% equity capital structure Interest Rate: 7.0% Debt / Required IRR: 15.0% Equity Estimates do not include land or site improvement costs 13

16 Biocoal Production Costs % USD / Ton $ Raw Feedstock 32.6% $ 5.75 Utilities 25.5% 5% $ 4.50 Salaries & Benefits 5.7% $ 1.00 General & Admin. 18.1% $ 3.20 Main. Expense 18.1% $ 3.20 Depreciation 100.0% $ Costs $ 1.02 mmbtu 14

17 Co-Firing Economic Sensitivity Analysis Negative Baseline Positive -20% -10% 0% +10% +20% Biomass Price ($/ton) (1) $57.90 $65.14 $72.38 $79.62 $86.86 Biomass Moisture (%) (2) 13.6% 15.3% 17.0% 18.7% 20.4% Natural Gas ($/mmbtu) (3) $3.50 $3.94 $4.38 $4.82 $5.26 Coal Delivered ($/mmbtu) (4) $1.51 $1.70 $1.89 $2.08 $2.27 Debt Interest Rate (%) (5) 5.6% 6.3% 7.0% 7.7% 8.4% Equity Required Rate (%) (6) 12.0% 13.5% 15.0% 16.5% 18.0% Biocoal Plant (M $USD) (7) $25.03 $28.15 $31.28 $34.41 $37.54 CO 2 Value ($/MT) (8) $1.60 $1.80 $2.00 $2.20 $2.40 SO 2 Value ($/ton) (9) $13.27 $14.93 $16.59 $18.25 $19.91 NO X Value ($/ton) (10) $36.02 $40.53 $45.03 $49.53 $54.04 Hg Abatement ($/lb.) )(11) $26,776 $30,123 $33,470 $36,817 $40,164 REC Value ($/MWh) (12) $2.00 $2.25 $2.50 $2.75 $

18 Sensitivity Analysis: 10% Co-Firing Cha ange in Price of Electricity ( /kwh) % -10% 0% 10% 20% Economic Model Input Variables 16

19 Est. Yearly Emission Reductions: Sherco Unit #1 10% Co-Firing 30% Co-Firing 480,464 1,441,391 (tons) CO % 30.8% (%) 1,074 1,937 (tons) SO % 28.4% (%) 668 1,181 (tons) NO x 17.0% 30.0% (%) Hg 9 28 (lbs.) 5.2% 15.6% (%) 17

20 Estimated Economic Impact: 30% Investments: $156.4 million debt and equity Annual Payments to Minnesota Biomass Suppliers: $103.2 million Direct Full-Time Jobs Created: 75+ Indirect Jobs Created: 75+ (Harvesting, Storage & Transport) Annual CO 2 Emissions Avoided: 1,441,391 tons CO 2 Annual Renewable Power Generated: 1,306,485 MWh Enough for 151,015 Homes Annual Increase in Residential Electric Customer Bill: $9.90 Average Price of Electricity for Xcel Customers: $ Increase in Electricity i Pi Prices: 110% 1.10% 18

21 Project Results: Proved technical feasiblity of collecting corn stover biomass Proved technical feasibily of continuous biomass torrefaction and densification to produce biocoal Proved biocoal finished i product specifications i meet known minimum requirements for use in pulverized coal boilers, stoker grates, and gasification systems Proved feasiblity and statistically relevant reductions in emission profiles during use in conversion technologies. Proved economics are feasible at lower inclusion i rates at existing pulverized coal electricity production facilities. 19

22 Project Conclusions: Biocoal (corn stover), while some technical questions remain, for the generation of renewable, near carbon neutral baseload electric power in existing pulverized coal electricity power generation facilities appears to be economically and technically feasible at lower inclusion rates. 20

23 Questions?

24 Contact Information: Kevin P. Grotheim, BSME, MBA Bepex International, LLC 333 Taft Street NE Minneapolis, MN