biomass - procuring & contracting for success

Procuring and Contracting

for Success

Lessons from Tipperary’s Projects

Paul Kenny, B.E. C. Eng.

Chief Executive

Tipperary Energy Agency

Smart Eco Hub 26/03/14

• Biomass installed as subcontract to large

construction project in 2008 in Tipp.

• Subcontractor and main contractor not aligned.

• Biomass design, integration and execution poor.

• Still “managing” and upgrading.

There has to be a better way!!

“biomass is crap” – Ireland

“biomass is the norm” – EU

TEA & LESC: initial

• TEA directly contracted 4 Biomass LESC since

2011. (550,360,400 and 80 KW)

• Aided a further 1.6MW (1.1MW built).

• All biomass boilers running well, on budget

delivering 60% saving.

• Lots of problems

that ESCO solved.

• ESCO’s rewarded for

high quality work.

• 80% RES-H for NTCC

TEA & LESC

Thurles Leisure Centre & Source Arts Centre

Heat load in kWh 1,500,000

Biomass cost €47,000

Equivalent LPG cost @55c/litre €115,000

Saving €68,000

Simple Payback in Months 30

10 Yr NPV €377,035

10 Yr IRR 59%

• Contract: Design, Supply & Install plant & supply all heat & operate & maintain

Case Studies

Coolbawn Water Treatment Plant (EE & RE)

Net Heat load in kWh 140,000

Biomass & EE ESCO cost for first 7 years €16,000

Equivalent Oil Cost €18,000

Saving over first 7 years of ESCO €20,300

Capital Cost to client €0

BEW Grant 35%

CO2 Saving in Tonnes 47

• 7 yr Contract: Design, Supply, Finance & Install plant & supply all heat & operate &

maintain (Energy efficiency and Renewable Energy)

Case Studies

• Short form for build + heat supply contract.

• 2 stage – shorten to 2-4 players with

demonstrated capability.

• Life cycle procurement to get cheapest life cycle

cost.

• Let contractor size biomass / fossil share/ backup.

• Let contractor provide fossil backup within price.

• Let contractor maintain, fuel and worry.

• Be clear you will pay for offloading this risk and

get great value.

• Contractor finance is not cheap.

TEA advice on LESC

• Risk Map. “known unknowns”

• Assign risk to party best placed to deal with it.

• Fuel price risk is expensive to offload. Index

model?

• Should supplier benefit/ suffer for changes

beyond their control/ influence?

• “unknown unknowns”

• Clauses to manage

• Renegotiate/ arbitrate

• Floors/ ceilings

• Termination

Lessons - Risk

TEA Projects

0

50,000

100,000

150,000

200,000

250,000

LIT Tipperary Thurles LeisureCentre

Nenagh LeisureCentre

GurteenAgricultural

College

Coolbawn WaterTreatment Plant

Roscrea LeisureCentre

Eu

ros p

er

an

nu

m (

€)

Annual Heat Supply Cost (Oil vs Biomass)

Annual heating cost – Biomass

Annual Heating Cost Oil

63% savings,

3 year payback

• Non profit, public good enterprise

• Partnership approach

• Energy management

• Renewable energy and energy

efficiency

• Procurement, project mgmt.

• Cost effective, value driven

• Paul Kenny

• Chief Executive

• T: 052 7443090

• F: 052 7443012

• E: pkenny@tea.ie

• W: www.tea.ie

Tipperary Energy Agency