Lesson Learned from High Efficiency Biomass Power Plants in China

Transcription

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

2 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

3 China biomass today 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

4 China biomass industry began in 2006 Very little government support Zero collection infrastructure Volatile price of fuel Small scale farmers Unpredictable crop cycles

5 Overcoming the challenges Reducing risk and increasing profitability Plant owners Technology Providers Low EPC costs Fuel management Improve efficiency Improve fuel flexibility Improve availability and reliability. 5

6 Case study: NBE lessons learned Founded in 2004 Built China s 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.

7 Case study: NBE lessons learned Many of the mistakes and successes made along the way 1. laid the foundation for China s current fuel collection 2. influenced current government policy 3. And taught us a lot about lowering risk and increasing profitability. 7

8 DP CleanTech - 50 references in China

9 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

10 Biomass Cost Structure Note: Above is based on a reference 30MW Power Plant in China

11 Fuel Management NBE initiated China s 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 T/Y Collection 50 KM CC CC CC Power Plant 8 Collection Centers/PP 120 Agents F AG F F AG F F CC 400 Farmers/ AG CC control Quality Fuel Weight Fuel storage

12 High Performance Technology NBE were able to reduce fuel supply risk and allow better operability 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, hours a year Boiler designed to handle corrosion and fouling Good maintenance WATER COOLED VIBRATING GRATE

13 High Performance Technology 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 Pressure High Temperature Boiler

14 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 vs MTMP 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 15

16 HTHP vs MTMP Cost Assumptions 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

17 HTHP vs MTMP Performance Assumptions HTHP Temperature: 535 o C / 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: 450 o C / 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

18 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

19 30 Mwe Reference Plant 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 Metrics Assumptions Metrics Assumptions Utilization hours 7,500 hours in each year Depreciation Generic 30MW plant - 15 years straight-line depreciation Tariff Efficiency factor Feedstock heat price Internal Power Use Generic: USD 0.09 /kwh Adjusted with benchmark desulfurized coal-fired tariff 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% USD / MJ = 50 USD/ton at NCV = kj/kg 11% Income tax 25% O&M cost Working Capital Assumptions Debt Funding Capital Expenditure 0.2 musd per year Inventory 16.7% of Feedstock costs Assume 70% debt financing on capital expenditure Interest rate of 6% 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

20 HTHP vs. MTMP Side by Side 30 Mwe HTHP MTMP Net power revenues musd Feedstock costs musd Other costs musd total COGS musd EBITDA musd margin musd 0% 23% 32% 32% 0% 10% 19% 19% Depreciation musd EBIT musd margin musd 0% 15% 24% 25% Net income musd Feedstock casts of HTHP are about 17.5 % lower than that of MTMP due to higher plant efficiency Cash Flow Net income musd add depreciation musd less changes in NWC musd Cash flow from operations musd add net interest expenses musd Capex musd Free cash flow musd IRR % 20% 13% ROCE % 37% 22% Project IRR 20 % vrs 13 %. And ROCE is 37 % vrs 22 %

21 Indian 12 Mwe plant Metrics Assumptions Metrics Assumptions Utilization hours 7,500 hours in each year Depreciation 12 MW plant - 15 years straight-line depreciation Tariff Efficiency factor Feedstock heat price Internal Power Use Generic: USD 0.10 /kwh Adjusted with 3 % per year 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% USD / MJ = 40 USD/ton at NCV = kj/kg adjusted with 6 % per year (inflation) 11% Income tax 25% O&M cost Water cost Plant SG&A Working Capital Assumptions Debt Funding Capital Expenditure 0.2 musd per year adjusted by inflation 0.1 musd per year adjusted by inflation 0.2 musd per year adjusted by inflation Inventory 16.7% of Feedstock costs Assume 70% debt financing on capital expenditure Interest rate of 13% 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

22 Indian HTHP vs. MTMP Indian 12 Mwe HTHP MTMP Net power revenues musd Feedstock costs musd Other costs musd total COGS musd EBITDA musd margin musd 0% 28% 36% 36% 0% 17% 25% 25% Depreciation musd Margins are lower due to higher interest rate EBIT musd margin musd 0% 4% 14% 14% 0% -7% 3% 3% Net income musd Cash Flow Net income musd add depreciation musd less changes in NWC musd Cash flow from operations musd add net debt repayment musd Capex musd Free cash flow musd IRR % 20.8% 15.0% ROCE % 39.7% 28.0% Project IRR 20.8 % vrs 15 %. And ROCE is 39.7 % vrs 28 %

23 Biomass Cost Structure

24 Sensitivity At 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

25 Sensitivity Going 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.

26 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 flowavailable to service debt Further in a situation where feedstock varies, HTHP cash flows are less sensitive

27 India Market Overview Market similarities Current situation in India India produces about 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 tomake the project economically attractive

28 Challenges India Market Supply chain bottlenecks that could result in nonavailability 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

29 Agricultural residues in India (MT)

30 Rice Straw It is estimated that 150 Mt of rice straw residue are produced in India every year. In India, 23% of rice straw residue produced is surplus and is either left in the field as uncollected or to a large extent open-field burnt. About 48% of this residue produced is subjected to open-field burning However Rice Straw is a difficult fuel to burn and requires the right technology to avoid high long-term costs.

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33 Fouling

34 Ash Fusion Temperature

35 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