Lesson Learned from High Efficiency
Biomass Power Plants in China
Anders Brendstrup– Global Head of Sale
April 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 efficiency
•Improve fuel flexibility
•Improve availability and
reliability.
5
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.
• 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
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 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 – 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 MTMP
2012 2013 2014 2015 2012 2013 2014 2015
Net power revenues mUSD 0 9.4 19.1 19.7 0.00 9.25 18.91 19.47
Feedstock costs mUSD 0 -5.4 -11.1 -11.5 0.00 -6.58 -13.45 -13.86
Other costs mUSD -0.51 -1.7 -1.9 -1.9 -0.51 -1.72 -1.86 -1.90
total 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 3.72
margin 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 1.72
margin 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 Flow
Net income mUSD -1.08 0.3 2.8 3.0 -1.08 -1.14 0.47 0.65
add depreciation mUSD 0 0.8 1.5 1.5 0.00 1.01 2.00 2.00
less changes in NWC mUSD 0 -0.9 -0.9 -0.1 0.00 -1.10 -1.15 -0.07
Cash flow from operations mUSD -1.08 0.1 3.3 4.4 -1.08 -1.23 1.33 2.59
add net interest expenses mUSD 0 1.9 1.9 1.9 0.00 1.89 1.89 1.89
Capex mUSD -27 0.0 0.0 0.0 -27.00 0.00 0.00 0.00
Free 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 /kWh
Adjusted 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 cost
Water cost
Plant 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 MTMP
2012 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 9.27
Feedstock costs mUSD 0.00 -2.24 -4.71 -4.99 0.00 -2.71 -5.70 -6.04
Other costs mUSD -0.16 -0.82 -0.90 -0.94 -0.16 -0.82 -0.90 -0.94
total 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 2.29
margin 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 0.29
margin 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 Flow
Net income mUSD -0.66 -0.80 0.23 0.38 -0.62 -1.19 -0.60 -0.48
add depreciation mUSD 0.00 1.01 2.00 2.00 0.00 1.01 2.00 2.00
less changes in NWC mUSD 0.00 -0.37 -0.41 -0.05 0.00 -0.45 -0.50 -0.06
Cash flow from operationsmUSD -0.66 -0.17 1.82 2.33 -0.62 -0.63 0.90 1.47
add net debt repayment mUSD 0.00 0.56 0.56 0.56 0.00 0.51 0.51 0.51
Capex mUSD -12.00 0.00 0.00 0.00 -11.00 0.00 0.00 0.00
Free 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
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
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.
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