Economic Case Studies of Woodchip Heating Projects

1
Economic Case Studies of Woodchip Heating
Projects
Smallwood 2008 and Bioenergy Wood
Products Monona Terrace Community Conference
Center Madison, Wisconsin May 14, 2008
Adam Sherman, Program Manager Biomass Energy
Resource Center
2
Biomass Energy Resource Center (BERC)
BERC is a national not-for-profit organization
working to promote responsible use of biomass for
energy. BERCs mission is to achieve a healthier
environment, strengthen local economies, and
increase energy security across the United States
by developing sustainable biomass systems at the
community level.
3
Presentation Overview

• Heating fuel values
• Heating fuel price history
• Woodchip system capital costs
• Case studies of systems in operation
• BERC economic feasibility methods
• Conclusion
• QA

4
Comparative Cost of Heat -Various Fuels
Assumes bulk delivery to institutional scale
applications
5
Comparative Cost of Heat -Various Fuels
6
Annual Fuel Savings
7
Wood and Oil Energy Price History
2003-04 Wood 32/green ton. 2 Oil
1.01/gal 2004-05 Wood 36/green ton. 2 Oil
1.40/gal 2005-06 Wood 40/green ton. 2 Oil
1.96/gal 2006-07 Wood 43/green ton. 2 Oil
2.29/gal
8
Biomass Heating Systems Basic Components

• Building
• Chip bin
• Automated fuel handling systems
• Boiler
• Control equipment
• Stack
• Particulate control devices

9
Economic Case Studies
Crotched Mountain Rehabilitation
Center Greenfield, New Hampshire
10
Economic Case Studies

• Fuel Supply Contract
• 5 year contract
• Flat price annual increase
• Diesel fuel price surcharge contingency

Crotched Mountain Rehab Center Greenfield, New
Hampshire
11
Economic Case Studies
Installed 2006 System 8 4 MMBtu Heated
space 250,000 sf Prior oil use 115,000 gal Chip
use 92 Chip use 1,500 gt/yr Capital cost 2
million Annual fuel savings 250,000 Est. Simple
Payback 8 years
Crotched Mountain Rehab Center Greenfield, New
Hampshire
12
Economic Case Studies
Leavitt High School Turner, Maine
13
Economic Case Studies
Installed 1999 System 4.5 MMBtu Heated
space 166,000 sf Prior oil use 55,000 gal Chip
use 84 Chip use 770 gt/yr Capital
cost 395,000 Annual fuel savings 27,000 Est.
Simple Payback 14.6 years
Leavitt High School Turner, Maine
14
Economic Case Studies
Darby Schools Darby, Montana
Fuels For Schools First school in western states
15
Economic Case Studies
Installed 2003 System 3MMBtu Heated
space 82,000 sf Prior oil use 47,600 gal Chip
use 89 Chip use 755 tons Capital
cost 515,000 Annual fuel savings 61,000 Est.
Simple Payback 8.4 years
Darby Schools Darby, Montana
16
Economic Case Studies
University of Idaho, Moscow
17
Economic Case Studies
Installed 1986 System 60MMBtu Capital
cost 3.5 million Heated space 3 million
sf Nat. Gas use (therms) 3.6 million Chip
use 38,000 gt 1st year fuel savings 500,000 Simp
le payback 7 years Current fuel savings 4.5
million
University of Idaho, Moscow
18
Economic Case Studies
Green Acres Family Housing
19
Economic Case Studies
Installed 1992 System 2.2MMBtu Heated
space 55,000 sf Chip use 82 Chip use 425
tons Capital cost 200,000 Starting oil
price 0.60/gal Starting wood price 25/ton Annua
l fuel savings 47,000 Est. Simple Payback 4.25
years
Green Acres Family Housing
20
Economic Case Studies
Boulder County Parks and Open Space Agency
21
Economic Case Studies

• Installed 2005-2006
• System 4MMBtu
• Heated space 100,000 sf
• Fossil fuel used Natural Gas
• Fossil fuel use 67,000 therms
• Chip use 650 tons
• Capital cost 400,000
• Annual fuel savings 34,000
• Est. Simple Payback 12 years

Boulder County Parks and Open Space Agency
22
What methods can be used to determine economic
feasibility?

• Comparative fuel price analysis
• Simple payback analysis
• Cash flow analysis
• Life-cycle cost analysis

23
Life-cycle Cost Analysis

• Accounts for finance costs
• Accounts for OM costs
• Accounts for repairs replacements
• Accounts for price inflation over time
• Reduces all cost streams to net present value
• Calculates the overall net present value

24
Life-cycle Cost Analysis

• BERC LCCA Tool
• Inputs
• Capital cost
• Fossil fuel usage
• Fossil fuel price
• Wood fuel price
• General inflation rate
• Salvage value
• Financing interest rate
• Fossil fuel price escalation rate
• Wood fuel price escalation rate
• OM and annualized major repairs

• Outputs
• Simple payback
• Cash flow
• Net Present Value (NPV) of Savings

25
Example Life-cycle Cost Analysis

• Assumptions
• Big school, 65,000 gal. oil per year
• 4 MMBH wood system costs 300,000 installed
• Total project budget is 980,000
• 40/ton first year wood price
• 2.75/gallon first year oil price
• Results of 30-Year LCCA
• Life-cycle cost of heating with oil 6,000,000
• Life-cycle cost of heating with wood 2,980,000
• Life-cycle cost savings 3,020,000

Not doing the project is like walking away
leaving 3 million on the table.
26
Final Remarks

• Best projects are oil and propane heated
  facilities but natural gas prices are going up
• Projects with large heating loads look best on
  paper for simple payback but smaller projects can
  perform well based on NPV
• Wood prices are going up slowly (due to higher
  diesel costs and higher demand) but the value gap
  is widening
• As fossil fuel prices continue to rise and if
  cost share funds are available these projects
  economic performance will look even better

27
Contact Information
Adam Sherman Program Manager Biomass Energy
Resource Center 43 State Street Montpelier,
Vermont 05601 [phone] x128 asherman_at_biomass
center.org
www.biomasscenter.org