OWEA Biosolids Specialty Workshop Renewable Energy ...Presentation Outline Brown and Caldwell 6....

Renewable Energy Projects: Appropriate Financial Evaluations and Financing Alternatives

OWEA Biosolids Specialty Workshop

December 5| 2013

The Big Picture

• Majority of WW flow in the US goes to plants with digesters, but significant digester gas is not utilized to recover either heat or power

• 1238 US water resource recovery facilities have digesters

2

* EPA CHPP January 2011

Draft Report

http://www.biogasdata.org/

401

837

Without Recovery

With Heat or Energy Recovery

292

545

Digesters with Gas Used to produce Electricity

Digesters with Gas Used for Heat

Cogeneration is key to

approaching net-zero status

Screw Blowers

Stevens Point, Wisconsin

• 3 mgd

• Process efficiency upgrades• New blowers• New plant air compressor• LED lighting• DO 0.7 mg/L• Optimized thickening to reduce digester

heat• Low energy digester mixing

• Operational awareness

• Codigestion • Brewery waste• FOG

• 180 kW engine – Net Zero

Brown and Caldwell 3

• 7 mgd

• Codigestion

• Ten 70 kW Microturbines

• Two 200 kW Microturbines

• 90% energy self-sufficient

Sheboygan, Wisconsin


• 13.8 mgd

• Incremental process improvements• Aeration

• Belt Filter Presses

• Codigestion –• Whey

• Dewatering issues

• Two 350 kW engines

• Net Zero

Gloversville-Johnstown, New York


• Economic Feasibility Analysis• Capital Costs

• Electrical Savings

• O&M Costs

• Communicating Financial and Sustainability Benefits to Stakeholders

• Financing Alternatives

Presentation Outline


Financial Feasibility Analysis



Gas Pretreatment

Containerized CHP

Capital Cost Considerations

• Cogeneration system size (kW):• Codigestion and biogas growth

projections

• Redundant capacity often not cost effective

• Gas treatment

• Containerized systems minimize costs


Engine Selection vs. Historic Gas Production Rates


Equipment Costs: $500-1700/kW


WERF/Wiser:

Evaluation of

CHP

Technologies,

2010

Prime mover

package

purchase only

Lean Burn

IC Engines

Recent Project Costs

Brown and Caldwell11

All projects

include gas

treatment

ReWa, Bucklin

Pt, and

Midway are

containerized

• Ohio Industrial Average: $0.0623 per kWh (Sept 2013, US Energy Information Administration)

• National Average $0.0712

• Consumption Charges

• Demand Charges

• Peak/Off-Peak

Electrical Savings: Rates


Consumption Savings ($/kWh)

• 90% utilization for IC Engines (7884 hrs/yr)

• 95% utilization for combustion turbines

• Gas Availability • Digester load variations

• Future conditions – sludge growth or codigestion

• Natural gas supplementation

• Specific engine electrical efficiencies

Electrical Savings


37.50%37.10%

36.70%

33.20%

100% Load 80% Load 60% Load 40% Load

Engine Part Load Efficiency Reduces at Partial Engine Loadings


Demand Savings (monthly $/kW)

• Typically based on 15-minute rolling average peak utility kW

• Oil changes every 1000 hours

• Gas treatment and other maintenance outages• Stand-by generators can mitigate demand impacts

• Schedule maintenance for off-peak hours

• Multiple prime movers also increase demand savings

Electrical Savings Assumptions


Check utility for hidden fees

• WLSSD Example

• Rate schedules for distributed generation

• Possibly negotiable –Coordinate with electrical utility

Electrical Savings Assumptions


Table 4-2. Energy Cost Assumptions.

Value Units

Electricity

Consumption1 0.0434 $/kWh

Demand1 6.50 $/kWh

Taxes and Franchise Fees2 7.5 percent

Blended Rate3 0.058 $/kWh

Standby Reservation Fee4 3.08 $/kW

Standby Energy Usage Fee4 0.0157 $/kWh

Natural Gas

Purchase5 6.50 $/MMBtu

Sale (Diesel Equivalent)5 2.00 $/gallon

1. Minnesota Power 2009 Proposed Rates

2. From WLSSD April 2009 Minnesota Power bill

3. Calculated rate. Assumes plant demand levels are unchanged from current

4. Standard Minnesota Power electric service agreement for distributed generation service

5. Engineer’s estimate. Refer to natural gas and diesel sections below.

• Engine Maintenance ≈$0.015/kWh

• Natural Gas Costs• Heating

• Natural gas blending to maximize output

• Parasitic electrical loads• Gas treatment, boosters

• Gas Pretreatment Media Changes ≈$0.01-0.02/kWh

• Codigestion • Tipping revenue (future ??)

• Management costs

Electrical Savings Partially Offset by O&M


Natural Gas Costs – Plant Heating


-

2.00

4.00

6.00

8.00

10.00

12.00

He

at

De

ma

nd

, MM

Btu

/h

r

Total Heat MMBtu/hr

Digester Heat

Building Heat

Biogas Boiler

NG Purchase with

Biogas Boiler,

$110,000/year

Flare

Biogas Boiler

Natural Gas Costs – Plant Heating


-

2.00

4.00

6.00

8.00

10.00

12.00

He

at D

em

an

d, M

MB

tu/h

r

Total Heat MMBtu/hr

Digester Heat

Building Heat

Biogas Boiler

CHP Engine Heat

Additional NG

Purchase with Biogas

Engine

+$70,000/year

Engine

Boiler Heat

• Gas flow uncertainty• Loss of plant industrial loading

• Metering issues

• FOG, Codigestion uncertainty

• Energy Prices• Electrical

• Natural Gas

Risks


Communicating Financial and Sustainability Benefits to Stakeholders



Overview of Economic Analysis Approaches

• Primary approaches include:

• Net Present Value (NPV)

• Internal Rate of Return (IRR)

• Simple Payback

• Limitations to some Approaches

22

No one standard approach to determine a suitable Business Case

12/11/2013

Suggestions for Developing your Evaluations

• Fully Evaluate the “Do Nothing”

• Include planned/needed CIP elements

• Current costs should be known – but consider whether they’re “right” and warrant “adjustment”

• Boiler replacement example

23

12/11/2013

Fictitious Case Study Simplifies Assumptions

Do Nothing Upgrade

Capital Costs: $0 $1,000,000

Base Annual Cost: $500,000 $500,000

Added Annual Cost: $0 $100,000

Total Annual Cost: $500,000 $600,000

Annual Savings: $0 -$175,000

Net Annual Cost: $500,000 $425,000

Life Cycle Term: 20 Years

Net Discount Rate: 2.0%

Assumptions and Unknowns are rolled into this Simplified Case

• Capital costs are summarized

• Operational costs and savings are summarized

• Assumes no varied escalation or growth

• Uses 20-year life cycle at 2% net discount rate

25

Do Nothing Upgrade






Net Annual Cost: $500,000 $425,000



Internal Rate of Return (IRR) finds Rate at which PW of Savings equal Costs

26

• 4.22% is the rate that, discounted over 20 years, makes the annual savings equal the capital investment

• Criterion: If the IRR > net discount rate, then “go”

4.22% > 2.0%; “GO”

Do Nothing Upgrade






Net Annual Cost: $500,000 $425,000



Capital Costs: $1,000,000

Net Annual Savings: $75,000

IRR: 4.22%

PW of Annual Cost at IRR: $1,000,000

NPW of Upgrades at IRR: $0

Reviewing the results…

27

MethodologySummary of Results for

Upgrade CaseResult

Simple Payback: 13.3 Years Uncertain

NPW: $226,357 Savings “Go”

IRR: 4.22% > 2.0% “Go”

?

Sustainability Benefits

• Plant Energy Consumption Reductions

• Greenhouse Gas Reductions

• Example CHP Project• 10 mgd

• 500 kW engine in lieu of boiler

• 1/3 of plant energy production

• Carbon reduction equal to 450 cars

28

Example Sustainability Scorecard

29

Alternative 1Alternative 1 Alternative 2

Consider Identification and Inclusion of “Monetized Social or Environmental Value”

• Is there value to the public relations benefit of beneficial reuse of gas?• $$$/year benefit

• $$$ initial capital benefit at start-up

• Does increased truck traffic or noise represent a social cost?• $$$/year cost

30

Project Funding



Ideally…


• State

• Federal

• Renewable Energy Credits - Electrical and Bio-CNG

• Utilities

• Equipment Manufacturers

• Design Build Own Operate

Overview of Funding Sources


• Sales tax exemption (digestion,CHP)

• Energy Loan Fund• Advanced Energy Fund, USDOE State Energy Program

• 1-percent interest rate

• $1 million standard maximum

• Minimum 15% energy reduction

• Up to 90% of project cost

• Advanced Energy Job Stimulus Fund loans• $50,000-$2,000,000

State of Ohio Energy Financing Programs


• Alternative Energy Portfolio Standard• 25% by 2025 – Waste-to-Energy counts toward goal

• Solar carve-out 0.5% by 2024

• Driver for Renewable Energy Credits (RECs)

• SB 315 Energy Efficiency Resource Standard• Save 22.5% by 2025 – CHP counts toward goal

• Driver for utility rebate programs

Ohio Energy Legislation


Renewable Energy Credits (RECs)


Solar Renewable Energy Credits (SRECs)


Ohio

Solar

Bio-CNG Incentives


Time-fill fueling posts from Gas Equipment Systems Inc. (GESI)

$2.60/gallon “sale”

Plus $1.20/gallon for RINs

• Custom or Renewable Rebates

• Current programs focused on efficiency• CHP Included in 2012 state energy efficiency legislation

• PUCO rules not final

• Must pursue reasonable arrangement with at PUCO with utility

• Example: DPL has reserved $250,000 in pilot program for CHP

Utility Programs


http://www.dpandl.com/

http://www.dpandl.com/

Jenbacher

Cummins

Manufacturer Financing

• Typical Finance Period: 5-7 Years

• Minimum project size: 300 kW

• “Strong Economic Opportunity”• Electric prices > $0.08-0.09/kWh

• Other incentives could reduce this threshold

• 4 to 8% interest – tax exempt financing


http://power.cummins.com/onanpowerWeb/navigation.do?pageId=629&parentId=533&linkName=Lean Burn Generators

http://power.cummins.com/onanpowerWeb/navigation.do?pageId=629&parentId=533&linkName=Lean Burn Generators

• DesMoines Biogas CNG Station

• Miami-Dade Digester/Landfill gas cogeneration

• El Paso, TX 3 Plants

Design-Build or DBOO


• Accurately consider consumption and demand savings

• Implement operating strategies to maximize CHP savings

• Use long-range financial and sustainability metrics to communicate with stakeholders

• Monitor state and utility incentive programs

Conclusions


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