HomeMy WebLinkAboutSitka Alaska Low Emission Wood Heating Daniel Parrent 08-06-2008
Preliminary Feasibility Assessment for High
Efficiency, Low Emission Wood Heating
In Sitka, Alaska
Prepared on behalf of:
City and Borough of Sitka, Alaska
Jim Dinley,
Municipal Administrator
Prepared by:
Daniel Parrent,
Wood Utilization Specialist
Wednesday, August 06, 2008
Notice
This Preliminary Feasibility Assessment for High Efficiency, Low Emission Wood Heating was prepared by
Daniel Parrent, Wood Utilization Specialist, Juneau Economic Development Council on behalf of the City and
Borough of Sitka, AK. This report does not necessarily represent the views of the Juneau Economic
Development Council (JEDC). JEDC, its Board, employees, contractors, and subcontractors make no
warranty, express or implied, and assume no legal liability for the information in this report; nor does any party
represent that the use of this information will not infringe upon privately owned rights. This report has not been
approved or disapproved by JEDC nor has JEDC passed upon the accuracy or adequacy of the information in
this report.
Funding for this report was provided by USDA Forest Service, Alaska Region,
Office of State and Private Forestry
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Table of Contents
Abstract
Section 1. Executive Summary
1.1 Goals and Objectives
1.2 Evaluation Criteria, Project Scale, Operating Parameters, General Observations
1.3 Assessment Summary and Recommended Actions
Section 2. Evaluation Criteria, Implementation, Wood Heating Systems
2.1 Evaluation Criteria
2.2 Successful Implementation
2.3 Classes of Wood Energy Systems
Section 3. The Nature of Wood Fuels
3.1 Wood Fuel Forms and Current Utilization
3.2 Heating Value of Wood
Section 4. Wood Fueled Heating Systems
4.1 Low Efficiency High Emission Cordwood Boilers
4.2 High Efficiency Low Emission Cordwood Boilers
4.3 Bulk Fuel Boiler Systems
Section 5. Selecting the Appropriate System
5.1 Comparative Costs of Fuels
5.2(a) Cost per MMBtu Sensitivity – Cordwood
5.2(b) Cost per MMBtu Sensitivity – Bulk Fuels
5.3 Determining Demand
5.4 Summary of Findings
Section 6. Economic Feasibility of Cordwood Systems
6.1 Initial Investment Cost Estimates
6.2 Operating Parameters of HELE Cordwood Boilers
6.3 Hypothetical OM&R Cost Estimates
6.4 Calculation of Financial Metrics
6.5 Simple Payback Period for Multiple HELE Cordwood Boilers
6.6 Present Value, Net Present Value and Internal Rate of Return Values for Multiple
HELE Cordwood Boilers
Section 7. Economic Feasibility of Bulk Fuel Systems
7.1 Capital Cost Components
7.2 Hypothetical OM&R Cost Allowances
7.3 Calculation of Financial Metrics
7.4 Simple Payback Period for Generic Bulk Fuel Boilers
7.5 Present Value, Net Present Value and Internal Rate of Return Values for Hypothetical
Bulk Fuel Boiler Installations
Section 8. Conclusions
8.1 Cordwood Systems
8.2 Bulk Fuel Systems
References and Resources
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Appendix A AWEDTG Evaluation Criteria
Appendix B Recoverable Heating Value Determination
Appendix C List of Abbreviations and Acronyms
Appendix D Wood Fuel Properties
Appendix E Financial Metrics
Appendix F Operational Parameters of HELE Cordwood Boilers
Appendix G Garn Boiler Specifications
List of Tables and Figures
Table 4-1 HELE Cordwood Boiler Suppliers
Table 4-2 Emissions from Wood Heating Appliances
Table 4-3 Bulk Fuel Boiler System Vendors
Table 4-4 Bulk Fuel Boilers in Alaska
Table 5-1 Comparative Cost of Fuel Oil and Electricity vs. Wood Fuels
Figure 5-1 Effect of Hemlock Cordwood (MC30) Price on Cost of Delivered Heat
Figure 5-2 Effect of Hemlock Bulk Fuel (MC50) Price on Cost of Delivered Heat
Table 5-2 Reported Annual Fuel Oil Consumption, Hames PE Center
Table 5-3 Estimate of Heat Required in Coldest 24 Hr Period
Table 5-4 Estimate of Total Wood Consumption, Comparative Costs and Potential Savings
Table 6-1 Initial Investment Cost Scenarios for Hypothetical Cordwood Systems
Table 6-2 Labor/Cost Estimates for HELE Cordwood Systems
Table 6-3 Summary of Total Annual OM&R Cost Estimates
Table 6-4 Simple Payback Period Analysis for HELE Cordwood Boilers
Table 6-5 PV, NPV and IRR Values for Multiple HELE Cordwood Boilers
Table 7-1 Initial Investment Cost Components for Bulk Fuel Systems
Table 7-2 Darby, MT Public School Wood Chip Boiler Costs
Table 7-3 Characteristics of Biomass Boiler Projects
Table 7-4 Cost Breakdown for the Least Expensive Wood Chip Boiler System Installed in a New Free-
Standing Building
Table 7-5 Total OM&R Cost Allowances for a Bulk Fuel System
Table 7-6 Simple Payback Period Analysis for Bulk Fuel Heating Systems
Table 7-7 PV, NPV and IRR Values for Bulk Fuel Systems
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Key words: HELE, LEHE, bulk fuel, cordwood
ABSTRACT
The potential for heating the Hames Physical Education (PE) Center in Sitka, AK with high
efficiency, low emission (HELE) wood-fired boilers is evaluated for the City and Borough of Sitka.
Early in 2008, local governments and organizations were invited to submit a Statement of Interest
(SOI) in wood heating to the Alaska Wood Energy Development Task Group (AWEDTG). Task
Group members reviewed all the SOIs and selected projects for further review based on the
selection criteria presented in Appendix A. An AWEDTG representative conducted a site visit of
the Hames PE Center in Sitka in July 2008 and information was collected and recorded.
Preliminary assessments were made and challenges identified. Potential wood energy systems
were considered for the project using AWEDTG, USDA and AEA objectives for energy efficiency
and emissions. Preliminary findings are reported.
SECTION 1. EXECUTIVE SUMMARY
1.1 Goals and Objectives
• Inspect the Hames PE Center facility and physical site in Sitka as a potential candidate
for heating with wood
• Evaluate the suitability of the facility and site for siting a wood-fired boiler
• Assess the type(s) and availability of wood fuel(s)
• Size and estimate the capital costs of suitable wood-fired system(s)
• Estimate the annual operation and maintenance costs of a wood-fired system
• Estimate the potential economic benefits from installing a wood-fired heating system
1.2 Evaluation Criteria, Project Scale, Operating Parameters, General Observations
• This project meets the AWEDTG objectives for petroleum fuel displacement, use of
hazardous forest fuels or forest treatment residues, sustainability of the wood supply,
project implementation, operation and maintenance, and community support
• Using an estimate of 51,000 gallons per year, this project would be considered relatively
large in terms of its scale.
• Medium and large energy consumers have the best potential for feasibly implementing a
wood-fired heating system. Where preliminary feasibility assessments indicate positive
financial metrics, detailed engineering analyses are usually warranted.
• Cordwood systems are generally appropriate for applications where the maximum heating
demand ranges from 100,000 to 1,000,000 Btu per hour. “Bulk fuel” systems are generally
applicable for situations where the heating demand exceeds 1 million Btu per hour. How-
ever, these are general guidelines; local conditions can exert a strong influence on the best
system choice.
• Efficiency and emissions standards for Outdoor Wood Boilers (OWB) changed in 2006,
which could increase costs for small systems
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1.3 Assessment Summary and Recommended Actions
• Overview. The Hames PE Center reportedly occupies 33,700 square feet and is
approximately 22 years old, constructed of masonry, wood and steel. The Center houses a
large heated swimming pool (approximately 200,000 gallons), full size basketball court,
two racquetball/handball courts, weight room, two exercise rooms, locker rooms with
showers, and restrooms.
The existing heating system consists of 2 large, oil-fired steam boilers that were designed
to supply the heating needs of the entire Sheldon Jackson College campus. Since the
campus is largely shut down, the steam pipes to most of the buildings have been capped,
leaving the existing boilers to serve only the Hames PE Center, for which they are grossly
over-sized.
NOTE: At the time that this project was being evaluated, issues regarding long-term
ownership, operation and maintenance of the facility were in flux. Those issues will
probably have to be resolved before a significant investment in any wood-fired heating
system can be considered.
• Fuel Consumption. The Hames PE Center is reported to consume approximately 51,000
gallons of #2 fuel oil per year.
• Potential Savings. With fuel prices at or near $5.00 per gallon and a projected
consumption of 51,000 gallons of fuel oil per year, the annual cost of heating the Hames
PE Center is roughly $255,000. The HELE cordwood fuel equivalent of 51,000 gallons of
fuel oil is approximately 567 cords, and at $200/cord represents a potential annual fuel
cost savings of $141,600 (Debt service and OM&R costs notwithstanding). The bulk fuel
equivalent of 51,000 gallons of fuel oil is approximately 1,437 tons, and at $80/ton
represents a potential annual fuel cost savings of $140,040 (Debt service and OM&R costs
notwithstanding).
• Required boiler capacity. The estimated required boiler capacity (RBC) to heat the Hames
PE Center during the coldest 24-hour period is undeterminable, since an unknown portion of
the fuel is used to maintain consistent water temperatures in the swimming pool. If all the
fuel was used to provide space heat, the estimated required boiler capacity (RBC) would be
approximately 1.4 million Btu/hr during the coldest 24-hour period.
• Recommended action regarding a cordwood system. The financial metrics of installing
multiple large HELE cordwood boilers are strongly positive, with simple payback periods
ranging from 3.48 to 5.65 years. Net present values are strongly positive and the internal
rates of return at 20 years range from 12.92 to 22.96%. Formal consideration for a HELE
cordwood system for the Hames PE Center is warranted.
• Recommended action regarding a bulk fuel wood system. A “bulk fuel” system appears
financially feasible for the Hames PE Center, given a consistent and reasonably-priced fuel
supply and moderate initial investment costs. Formal consideration of a bulk fuel system
for the Hames PE Center would be warranted if the fuel supply issue can be addressed. See
Section 7.
SECTION 2. EVALUATION CRITERIA, IMPLEMENTATION, WOOD HEATING SYSTEMS
The approach being taken by the Alaska Wood Energy Development Task Group (AWEDTG)
regarding biomass energy heating projects follows the recommendations of the Biomass Energy
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Resource Center (BERC), which advises that, “[T]he most cost-effective approach to studying the
feasibility for a biomass energy project is to approach the study in stages.” Further, BERC advises
“not spending too much time, effort, or money on a full feasibility study before discovering whether
the potential project makes basic economic sense” and suggests, “[U]ndertaking a pre-feasibility
study . . . a basic assessment, not yet at the engineering level, to determine the project's apparent
cost-effectiveness”. Biomass Energy Resource Center, Montpelier, Vermont. www.biomasscenter.org
2.1 Evaluation Criteria
The AWEDTG selected projects for evaluation based on the criteria listed in Appendix A. The
Hames PE Center project meets the AWEDTG criteria for potential petroleum fuel displacement,
use of forest residues for public benefit, use of local residues (though limited), sustainability of the
wood supply, project implementation, operation and maintenance, and community support.
In the case of a cordwood boiler system, the combination of wood supplied from forest-derived
fuels, local processing residues (though limited), and potential, non-traditional municipal sources
appears adequate and matches the application. Currently, the “bulk fuel” infrastructure is virtually
non-existent locally. To supply bulk fuel to the Hames PE Center would entail developing that
capability locally, or obtaining that supply, in the form of mill or forest residues, from Hoonah,
Wrangell, Ketchikan, Prince of Wales Island or Canada.
2.2 Successful Implementation
In general, four aspects of project implementation have been important to wood energy projects in
the past: 1) a project “champion”, 2) clear identification of a sponsoring agency/entity, 3) dedica-
tion of and commitment by facility personnel, and 4) a reliable and consistent supply of fuel.
In situations where several organizations are responsible for different community services, it must
be very clear which organization would sponsor or implement a wood-burning project. (NOTE:
This is not necessarily the case with the Hames PE Center, but the issue should be addressed.)
With manual systems, boiler stoking and/or maintenance is required for approximately 5-10
minutes per boiler several times a day (depending on the heating demand), and dedicating
personnel for the operation is critical to realizing savings from wood fuel use. Though automated,
bulk fuel systems also have a daily labor requirement. For this report, it is assumed that new
personnel would be hired or existing personnel would be assigned as necessary, and that “boiler
duties” would be included in the responsibilities and/or job description of facility personnel.
NOTE: Another option would be to hire a local vendor/contractor to provide such services.
The forest industry infrastructure in/around Sitka is limited to a few part-time loggers/sawmill
operators. However, for this report, it is assumed that wood supplies are sufficient, as evidenced by
a letter of support from the District Ranger, USDA Forest Service, Tongass National Forest, Sitka
Ranger District.
2.3 Classes of Wood Energy Systems
There are, essentially, two classes of wood energy systems: manual cordwood systems and
automated “bulk fuel” systems. Cordwood systems are generally appropriate for applications
where the maximum heating demand ranges from 100,000 to 1,000,000 Btu per hour, although
smaller and larger applications are possible. “Bulk fuel” systems are systems that burn wood chips,
sawdust, bark/hog fuel, shavings, pellets, etc. They are generally applicable for situations where the
heating demand exceeds 1 million Btu per hour, although local conditions, especially fuel
availability and cost, can exert strong influences on the feasibility of a bulk fuel system.
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Usually, an automated bulk fuel boiler is tied-in directly with the existing oil-fired system. With a
cordwood system, glycol from the existing oil-fired boiler system would be circulated through a
heat exchanger at the wood boiler ahead of the existing oil boiler. A bulk fuel system is usually
designed to replace 100% of the fuel oil used in the oil-fired boiler, and although it is possible for a
cordwood system to be similarly designed, they are usually intended as a supplement, albeit a large
supplement, to an oil-fired system. In either case, the existing oil-fired system would normally
remain in place and be available for peak demand or backup in the event of downtime (scheduled
or unscheduled) in the wood system.
One of the objectives of the AWEDTG is to support projects that would use energy-efficient and
clean-burning wood heating systems, i.e., high efficiency, low emission (HELE) systems.
SECTION 3. THE NATURE OF WOOD FUELS
3.1 Wood Fuel Forms and Current Utilization
Currently, wood fuel supplies in Sitka are fairly limited; the result of relatively inexpensive
alternatives (i.e., hydro-electric power). However, that picture is changing as a result of
significantly higher fuel oil costs and finite amounts of hydro power. Wood fuels in Sitka are most
likely to be in the form of cordwood or other stick-wood, as there is currently no demand for bulk
fuels in the immediate area. However, that situation could change as large energy consumers, such
as the Hames PE Center and others, consider converting to biomass fuels.
3.2 Heating Value of Wood
Wood is a unique fuel whose heating value is quite variable, depending on species of wood,
moisture content, and other factors. There are also several ‘heating values’ (high heating value
(HHV), gross heating value (GHV), recoverable heating value (RHV), and deliverable heating
value (DHV)) that may be assigned to wood at various stages in the calculations.
For this report, hemlock cordwood at 30 percent moisture content (MC30) and hemlock bulk fuel
at 50 percent moisture content (MC50), calculated on the green wet weight basis (also called wet
weight basis), are used as benchmarks. NOTE: Drier wood will have greater heater value, and less
of it would be required to deliver a given amount of heat.
The HHV of hemlock at 0% moisture content (MC0) is 8,515 Btu/lb1. The GHV at 30% moisture
content (MC30) is 5,961 Btu/lb, and the GHV at 50% moisture content (MC50) is 4,258 Btu/lb.
The RHV for cordwood (MC30) is calculated at 13.26 million Btu per cord, and the DHV, which
is a function of boiler efficiency (assumed to be 75%), is 9.945 million Btu per cord. The delivered
heating value of 1 cord of hemlock cordwood (MC30) equals the delivered heating value of 90.08
gallons of #2 fuel oil when oil is burned at 80% efficiency and wood is burned at 75% efficiency.
The RHV for bulk fuel (MC50) is calculated at 5.61 million Btu per ton, and the DHV, which is a
function of boiler efficiency (assumed to be 70%), is 3.927 million Btu per ton. The delivered
heating value of 1 ton of hemlock bulk fuel (MC50) equals the delivered heating value of 35.57
gallons of #2 fuel oil when burned at 70% conversion efficiency.
A more thorough discussion of the heating value of wood can be found in Appendix B and
Appendix D.
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SECTION 4. WOOD-FUELED HEATING SYSTEMS
4.1 Low Efficiency High Emission Cordwood Boilers
Most manual outdoor wood boilers (OWBs) that burn cordwood are relatively low-cost and can
save fuel oil but have been criticized for low efficiency and smoky operation. These could be called
low efficiency, high emission (LEHE) systems and there are dozens of manufacturers. In 2006, the
State of New York instituted a moratorium on new LEHE OWB installations due to concerns over
emissions and air quality5. Other states have also considered or implemented new regulations6,7,8,9.
Since there are no standards for OWBs (“boilers” and “furnaces” were exempt from the 1988 EPA
regulations10), OWB ratings are inconsistent and can be misleading. Prior to 2006, standard
procedures for evaluating wood boilers did not exist, but test data from New York, Michigan and
elsewhere showed a wide range of apparent [in]efficiencies and emissions among OWBs.
In 2006, a committee was formed under the American Society for Testing and Materials (ASTM)
to develop a standard test protocol for OWBs11. The standards included uniform procedures for
determining performance and emissions. Subsequently, the ASTM committee sponsored tests of
three common outdoor wood boilers using the new procedures. The results showed efficiencies as
low as 25% and emissions more than nine times the standard for other industrial boilers.
Obviously, these results were deemed unsatisfactory and new OWB standards were called for.
In a news release dated January 29, 200712, the U.S. Environmental Protection Agency announced
a new voluntary partnership agreement with 10 major OWB manufacturers to make cleaner-
burning appliances. The new Phase I standard calls for emissions not to exceed 0.60 pounds of
particulate emissions per million Btu of heat input. The Phase II standard, which will follow 2
years after phase one, will limit emissions to 0.30 pounds per million Btus of heat delivered,
thereby creating an efficiency standard as well.
To address local and state concerns over regulating OWB installations, the Northeast States for
Coordinated Air Use Management (NeSCAUM), and EPA have developed model regulations that
recommend OWB installation specifications, clean fuel standards and owner/operator training.
(http://www.epa.gov/woodheaters/ and http://www.nescaum.org/topics/outdoor-hydronic-heaters)
Implementation of the new standard will improve air quality and boiler efficiency but will also
increase costs as manufacturers modify their designs, fabrication and marketing to adjust to the
new standards. Some low-end models will no longer be available.
4.2 High Efficiency Low Emission Cordwood Boilers
In contrast to low efficiency, high emission cordwood boilers there are a few units that can
correctly be considered high efficiency, low emission (HELE). These systems are designed to burn
wood fuels cleanly and efficiently.
Table 4-1 lists three HELE boiler suppliers, all of which have units operating in Alaska. TarmUSA
and Greenwood have a number of residential units operating in Alaska, and a Garn boiler,
manufactured by Dectra Corporation, is used in Dot Lake, AK to heat several homes and the
washeteria, replacing 7,000 gallons per year (gpy) of fuel oil.14 Two Garn boilers were recently
installed in Tanana, AK to provide heat to the washeteria and water plant, and two others were
installed near Kasilof. Several more are being planned.
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Table 4-1. HELE Cordwood Boiler Suppliers
Btu/hr ratings Supplier
Tarm 100,000 to 198,000 HS Tarm/Tarm USA
www.tarmusa.com/wood-gasification.asp
Greenwood 100,000 to 300,000 Greenwood
www.GreenwoodFurnace.com
Garn 350,000 to 950,000 Dectra Corp.
www.dectra.net/garn
Note: Listing of any manufacturer, distributor or service provider does not constitute an endorsement.
As indicated, cordwood boilers are suitable for applications from 100,000 Btu/hr to 1,000,000
Btu/hr, although both larger and smaller applications are possible.
Table 4-2 shows the results for a Garn WHS 1350 boiler that was tested at 157,000 to 173,000
Btu/hr by the State of Michigan using the new ASTM testing procedures, compared with EPA
standards for wood stoves and boilers. It is important to remember that no wood-fired boiler is
entirely smokeless; even very efficient wood boilers may smoke for a few minutes on startup.4,15
Table 4-2. Emissions from Wood Heating Appliances
Appliance Emissions (grams/1,000 Btu delivered)
EPA Certified Non Catalytic Stove 0.500
EPA Certified Catalytic Stove 0.250
EPA Industrial Boiler (many states) 0.225
GARN WHS 1350 Boiler* 0.179
Source: Intertek Testing Services, Michigan, March 2006.
Note: *With dry oak cordwood; average efficiency of 75.4% based upon the high heating value (HHV) of wood
4.3 Bulk Fuel Boiler Systems
Commercial bulk fuel systems are generally efficient and meet typical federal and state air quality
standards. They have been around for a long time and there is little new technological ground to
break when installing one. Efficient bulk fuel boilers typically convert 70% of the energy in the
wood fuel to hot water or low pressure steam when the fuel moisture is less than 40% (MC40,
calculated on a wet basis). NOTE: It is possible to incorporate fuel dryers when dealing with
wetter feedstocks.
Most vendors provide systems that can burn various bulk fuels (wood chips, sawdust, wood pellets
and hog fuel), but each system, generally, has to be designed around the predominant fuel form. A
system designed to burn clean chips will not necessarily operate well on a diet of hog fuel, for
example. And most vendors will emphasize the need for good quality wood fuel as well as a
consistent source, i.e., fuel with consistent size and moisture content from a common source is
considerably more desirable than variations in chip size and/or moisture content from numerous
suppliers. Table 4-3 presents a partial list of bulk fuel boiler system vendors.
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Table 4-3. Bulk Fuel Boiler System Vendors
Decton Iron Works, Inc
Butler, WI
(800) 246-1478
www.decton.com
New Horizon Corp.
Sutton, WV
(877) 202-5070
www.newhorizoncorp.com
Messersmith Manufacturing, Inc.
Bark River, MI
(906) 466-9010
www.burnchips.com
JMR Industrial Contractors
Columbus, MS
(662) 240-1247
www.jmric.com
Chiptec Wood Energy Systems
South Burlington, VT
(800) 244-4146
www.chiptec.com
Note: Listing of any manufacturer, distributor or
service provider does not constitute an endorsement
Bulk fuel systems are available in a range of sizes between 300,000 and 60,000,000 Btu/hr.
However, the majority of the installations range from 1 MMBtu/hr to 20 MMBtu/hr. Large energy
consumers, consuming at least 35,000 gallons of fuel oil per year, have the best potential for
installing bulk fuel boilers and may warrant detailed engineering analysis. Bulk fuel systems with
their storage and automated fuel handling conveyances are generally not cost-effective for smaller
applications.
Although there are several options, bulk fuel (chips, sawdust, bark, shavings, etc.) is best delivered
in self-unloading tractor-trailer vans that hold about 22 tons of material. A facility such as the
Hames PE Center, replacing 51,000 gallons of fuel oil with hemlock bulk fuel (MC50) would use
an estimated 1,437 tons per year, or about 1 tractor-trailer load every 5 to 6 days, year round.
There are three known bulk fuel boilers in Alaska (Table 4-4), all of which are installed at
sawmills. The most recent was installed in Copper Center in 2007. A 4 MMBtu/hr wood chip
gasifier is under construction at the Craig School and Aquatic Center to replace the equivalent of
36,000 gallons of fuel oil per year. It is similar in size to boilers recently installed in several
Montana schools.
Bulk fuel systems are discussed in greater detail in Section 7.
Table 4-4. Bulk Fuel Boilers in Alaska
Installation Boiler
Horsepower* MMBtu/hr Heating
Degree Days** Supplier
Craig Aquatic Center
Craig, AK 120 4 7,209a Chiptek
Icy Straits Lumber & Milling
Hoonah, AK 72 2.4 8,496b Decton
Regal Enterprises
Copper Center, AK N/A N/A 13,486c Decton
Logging & Milling Associates
Delta Junction, AK N/A 2 12,897d Decton
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Table 4-4 Notes:
* Heat delivered as hot water or steam. 1 Boiler Horsepower = 33,475 Btu/hr or 34.5 pounds of water at a temperature of
100°C (212°F) into steam at 212°F
** assumes base temperature = 65o F
a NOAA, July 1, 2005 through June 30, 2006, Ketchikan data
b NOAA, July 1, 2005 through June 30, 2006, Average of Juneau and Yakutat data
c NOAA, July 1, 2005 through June 30, 2006, Gulkana data
d NOAA, July 1, 2005 through June 30, 2006, Big Delta data
ftp://ftp.cpc.ncep.noaa.gov/htdocs/products/analysis_monitoring/cdus/degree_days/archives/Heating%20degree%20Days/Monthly%20City/2006/jun%202006.txt
SECTION 5. SELECTING THE APPROPRIATE SYSTEM
Selecting the appropriate heating system is, primarily, a function of heating demand. It is generally
not feasible to install automated bulk fuel systems in/at small facilities, and it is likely to be
impractical to install cordwood boilers at very large facilities. Other than demand, system choice
can be limited by fuel availability, fuel form, labor, financial resources, and limitations of the site.
The selection of a wood-fueled heating system has an impact on fuel economy. Potential savings
in fuel costs must be weighed against initial investment costs and ongoing operating, maintenance
and repair (OM&R) costs. Wood system costs include the initial capital costs of purchasing and
installing the equipment, non-capital costs (engineering, permitting, etc.), the cost of the fuel
storage building and boiler building (if required), the financial burden associated with loan interest
(if any), the fuel cost, and the other costs associated with operating and maintaining the heating
system, especially labor.
5.1 Comparative Costs of Fuels
Table 5-1 compares the cost of #2 fuel oil and electricity to hemlock cordwood (MC30) and
hemlock bulk fuel (MC40). In order to make reasonable comparisons, costs are provided on a “per
million Btu” (MMBtu) basis.
Table 5-1. Comparative Cost of Fuel Oil and Electricity vs. Wood Fuels
FUEL RHVa
(Btu)
Conversion
Efficiencya
DHVa
(Btu)
Price per unit
($)
Cost per MMBtu
(delivered, ($))
4.50/gallon 40.761
5.00 45.29 Fuel oil, #2,
(per 1 gallon) 138,000 80% 110,400
per gallon 5.50 49.819
Electricity
(per kilowatt-hour) 3,412 100% 3,412 $.092/kWh 26.964
175/cord 17.597
200 20.111 Hemlock,
(per 1 cord, MC30)
13.26
million 75% 9.945
million 225 22.624
70/ton 17.825
80 20.372 Hemlock
(per 1 ton, MC50)
5.61
million 70% 3.927
million 90 22.918
Notes:
a from Appendix D
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5.2(a) Cost per MMBtu Sensitivity – Cordwood
Figure 5-1 illustrates the relationship between the price of hemlock cordwood (MC30) and the cost
of delivered heat, (the slanted line). For each $25 per cord increase in the price of cordwood, the
cost per million Btu increases by about $2.514. The chart assumes that the cordwood boiler
delivers 75% of the RHV energy in the cordwood to useful heat and that oil is converted to heat at
80% efficiency. The dashed lines represent fuel oil at $4.50, $5.00 and $5.50 per gallon ($40.761,
$45.29 and $49.819 per million Btu respectively) and electricity at the current rate of 9.2 cents per
kWh ($26.964 per million Btu).
At high efficiency, heat from hemlock cordwood (MC30) at $450.27 per cord is equal to the cost of
oil at $5.00 per gallon, before considering the cost of the equipment and operation, maintenance
and repair (OM&R) costs. At 75% efficiency and $200 per cord, a high-efficiency cordwood
boiler will deliver heat at about 44.4% of the cost of fuel oil at $5.00 per gallon and 75% of the cost
of electricity at $.092 per kWh ($20.111 versus $45.29 and $26.964 per MMBtu respectively).
Figure 5-1 indicates that, at a given efficiency, savings increase significantly with decreases in the
delivered price of cordwood and/or with increases in the price of fuel oil and/or electricity.
Cost ($) per MMBtu as a Function of
Cordwood Cost
0.000
10.000
20.000
30.000
40.000
50.000
60.000
150 200 250 300 350 400 450 500 550
Cordwood cost, $ per cordCost ($) per MMBtu
Fuel Oil at $5.50 per gallon
Fuel Oil at $5.00 per gallon
Fuel Oil at $4.50 per gallon
Electricity at $0.092 per kWh
Figure 5-1. Effect of Hemlock Cordwood (MC30) Price on Cost of Delivered Heat
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5.2(b) Cost per MMBtu Sensitivity – Bulk Fuels
Figure 5-2 illustrates the relationship between the price of hemlock bulk fuel (MC50) and the cost
of delivered heat, (the slanted line). For each $10 per ton increase in the price of bulk fuel, the cost
per million Btu increases by about $2.55. The chart assumes that the bulk fuel boiler converts 70%
of the RHV energy in the wood to useful heat and that fuel oil is converted to heat at 80%
efficiency. The dashed lines represent fuel oil at $4.50, $5.00 and $5.50 per gallon ($40.761,
$45.29 and $49.819 per million Btu respectively) and electricity at the current rate of 9.2 cents per
kWh ($26.964 per million Btu).
At high efficiency, heat from hemlock bulk fuel (MC50) at $177.85 per ton is equal to the cost of
oil at $5.00 per gallon, before considering the investment and OM&R costs. At 70% efficiency and
$80/ton, an efficient bulk fuel boiler will deliver heat at about 45% of the cost of fuel oil at $5.00
per gallon and 75.5% of the cost of electricity at $.092 per kWh ($20.37 versus $45.29 and $26.964
per MMBtu respectively). Figure 5-2 shows that, at a given efficiency, savings increase
significantly with decreases in the delivered price of bulk fuel and/or with increases in the price of
fuel oil or electricity.
Cost ($) per MMBtu as a Function of
Bulk Fuel Cost
0.000
10.000
20.000
30.000
40.000
50.000
60.000
50 75 100 125 150 175 200
Bulk fuel cost, $ per tonCost ($) per MMBtu
Fuel Oil at $5.50 per gallon
Fuel Oil at $5.00 per gallon
Fuel Oil at $4.50 per gallon
Electricity at $0.092 per kWh
Figure 5-2. Effect of Hemlock Bulk Fuel (MC50) Price on Cost of Delivered Heat
14
5.3 Determining Demand
Table 5-2 shows the reported approximate amount of fuel oil used by the Hames PE Center.
Table 5-2. Reported Annual Fuel Oil Consumption, Hames PE Center
Reported Annual Fuel Consumption Facility Gallons Cost ($) @ $5.00/gallon
Hames PE Center 51,000 255,000
TOTAL 51,000 255,000
Wood boilers, especially cordwood boilers, are often sized to displace only a portion of the heating
load since the oil system typically remains in place, in standby mode, for “shoulder seasons” and
peak demand. Fuel oil consumption for the Hames PE Center was compared with heating demand
based on heating degree days (HDD) to determine the required boiler capacity (RBC) for heating
only on the coldest 24-hour day (Table 5-3), even though much of the heat is used to maintain the
pool water temperature, not for space heating. While there are many factors to consider when
sizing heating systems it is clear that, in most cases, a wood system of less-than-maximum size
could still replace a substantial quantity of fuel oil.
Typically, installed oil-fired heating capacity at most sites is two to four times the demand for the
coldest day. However, this information was not immediately available for the Hames Center.
Given that the existing boilers were intended to supply heat to the entire Sheldon Jackson College
campus, their “capacity” would far exceed the needs at the Hames Center alone.
Manual HELE cordwood boilers, equipped with special tanks for extra thermal storage, can supply
heat at higher than their rated capacity for short periods. For example, while rated at 950,000
Btu/hr (heat into storage*), a single Garn® WHS 4400 can store nearly 3 million Btu, which would
be enough to heat the Hames PE Center during the coldest 24-hour period for more than two hours
(2,932,000 ÷ 1,406,000).
Table 5-3. Estimate of Heat Required in Coldest 24 Hr Period
Facility Fuel Oil Used
gal/yeara
Heating
Degree Daysd Btu/DDc Design
Tempd F
RBCe
Btu/hr
Installed
Btu/hra
Hames PE Center 51,000 8,011 702,834 17 1,406,000 Not
available
Table 3-7 Notes:
a From SOI and site visit; net Btu/hr
b NOAA, July 1, 2005 through June 30, 2006:
ftp://ftp.cpc.ncep.noaa.gov/htdocs/products/analysis_monitoring/cdus/degree_days/archives/Heating%20degree%20Days/Monthly%20City/2006/jun%202006.txt
c Btu/DD= Btu/year x oil furnace conversion efficiency (0.85) /Degree Days
d Alaska Housing Manual, 4th Edition Appendix D: Climate Data for Alaska Cities, Research and Rural Development
Division, Alaska Housing Finance Corporation, 4300 Boniface Parkway, Anchorage, AK 99504, January 2000.
e RBC = Required Boiler Capacity for the coldest Day, Btu/hr= [Btu/DD x (65 F-Design Temp)+DD]/24 hrs
* Btu/hr into storage is fuel dependent. The data provided for Garn boilers by Dectra Corp. are based on the
ASTM standard of split, 16-inch oak with 20 percent moisture content and reloading once an hour.
5.4 Summary of Findings Table 5-4 summarizes the findings thus far: annual fuel oil usage, range of annual fuel oil costs, estimated annual wood fuel requirement, range of estimated annual wood fuel costs, and potential gross annual savings for the Hames PE Center. [Note: potential gross annual fuel cost savings do not consider capital costs and non-fuel operation, maintenance and repair (OM&R) costs.] Table 5-4. Estimate of Total Wood Consumption, Comparative Costs and Potential Savings Annual Fuel Oil Cost (@ $ ___ /gal) HAINES SCHOOL Fuel Oil Used gal/yeara 4.50 5.00 5.50 Approximate Wood Requirementb Annual Wood Cost (@ $ ___ /unit) Potential Gross Annual Fuel Cost Savings ($) W. Hemlock, MC30, CE 75% 175/cord 200/cord 225/cord Low Medium High Cordwood system 567cords 99,225 113,400 127,575 101,925 141,600 181,275 W. Hemlock, MC50, CE 70% 70/ton 80/ton 90/ton Low Medium High Bulk fuel system 51,000 229,500 255,000 280,500 1,437 tons 100,590 114,960 129,330 100,170 140,040 179,910 NOTES: a From Table 5-2 b From Table D-3, Fuel Oil Equivalents 15
SECTION 6. ECONOMIC FEASIBILITY OF CORDWOOD SYSTEMS
6.1 Initial Investment Cost Estimates
DISCLAIMER: Short of having an actual Design & Engineering Report prepared by a team of
architects and/or engineers, actual costs for any particular system at any particular site cannot be
positively determined. Such a report is beyond the scope of this preliminary assessment. However,
several hypothetical systems are offered as a means of comparison. Actual costs, assumptions and
“guess-timates” are identified as such, where appropriate. Recalculations of financial metrics, given
different/updated cost estimates, are readily accomplished.
Wood heating systems include the cost of the fuel storage building (if necessary), boiler building
(if necessary), boiler equipment (and shipping), plumbing and electrical connections (including
plumbing, heat exchangers and electrical service to integrate with existing distribution systems),
installation, and an allowance for contingencies.
Before a true economic analysis can be performed, all of the costs (investment and OM&R) must
be identified, and this is where the services of qualified experts are necessary.
Table 6-1 (next page) presents hypothetical scenarios of initial investment costs for several
cordwood systems in a large heating demand situation. Five alternatives are presented.
Building(s) and plumbing/connections are the most significant costs besides the boiler(s). Building
costs deserve more site-specific investigation and often need to be minimized to the extent
possible. Piping from the wood-fired boiler is another area of potential cost saving. Long
plumbing runs and additional heat exchangers substantially increase project costs. The high cost of
hard copper and/or iron pipe normally used in Alaska now precludes its use in nearly all
applications. If plastic or PEX® piping is used significant cost savings may be possible.
Allowances for indirect non-capital costs such as engineering and contingency are most important
for large systems that involve extensive permitting and budget approval by public agencies. This
can increase the cost of a project by 25% to 50%. For the examples in Table 6-1, a 25%
contingency allowance was used.
NOTES:
a. With the exception of the list prices for Garn boilers, all of the figures in Table 6-1 are
estimates.
b. The cost estimates presented in Table 6-1 do not include the cost(s) of any upgrades or
improvements to the existing heating/heat distribution system currently in place.
16
17
Table 6-1. Initial Investment Cost Scenarios for Hypothetical Cordwood Systems
Fuel oil consumption
(gallons per year) 51,000
Required boiler capacity (RBC),
Btu/hr 1,406,000f
Garn model Cordwood boiler
Btu/hre
(1) WHS 3200g
950,000
(2) WHS 3200
1,900,000
(3) WHS 3200
2,850,000
(4) WHS 3200
3,800,000
(5) WHS 3200
4,750,000
Building and Equipment (B&E) Costs (for discussion purposes only)
Fuel storage buildinga
(fabric bldg, gravel pad, $15 per sf)
$170,100
(567 cords; 11,340sf)
Boiler building @ $150 per sf
(minimum footprint w/concrete pad)b
$30,000
(10’ x 20’)
$60,000
(20’ x 20’)
$90,000
(30’ x 20’)
$120,000
(40’ x 20’)
$150,000
(50’ x 20’)
Boilers
Base price
Shippingd
$33,000
$4,000
$66,000
$8,000
$99,000
$12,000
$132,000
$16,000
$165,000
$20,000
Plumbing/connectionsd $50,000 $60,000 $70,000 $80,000 $90,000
Installationd $25,000 $30,000 $35,000 $40,000 $45,000
Subtotal - B&E Costs 312,100 394,100 476,100 558,100 640,100
Contingency (25%)d 78,025 98,525 119,025 139,525 160,025
Grand Total 390,125 492,625 595,125 697,625 800,125
Notes:
a A cord occupies 128 cubic feet. If the wood is stacked 6½ feet high, the area required to store the wood is 20 square feet per cord.
b Does not allow for any fuel storage within the boiler building
c List price, Alaskan Heat Technologies
d “guess-timate”; for illustrative purposes only
e Btu/hr into storage is extremely fuel dependent. The data provided for Garn boilers by Dectra Corp. are based on the ASTM standard of split, 16-inch oak
with 20 percent moisture content and reloading once an hour.
f Assumes all fuel oil used is used to provide space heat, which is NOT the actual case; a significant though undetermined portion is used to maintain pool water
temperatures
g A single Garn WHS 3200 would have to be fired 11 times per day, every day, in order to consume 567 cords of fuel. Since it requires at least 2 hours to
consume a fuel charge, the boiler would essentially have to be fired continuously, which is not a viable operating scenario.
6.2 Operating Parameters of HELE Cordwood Boilers
A detailed discussion of the operating parameters of HELE cordwood boilers can be found in
Appendix F.
6.3 Hypothetical OM&R Cost Estimates
The primary operating cost of a cordwood boiler, other than the cost of fuel, is labor. Labor is
required to move fuel from its storage area to the boiler building, fire the boiler, clean the boiler
and dispose of ash. For purposes of this analysis, it is assumed that the boiler system will be
operated daily, year around.
18
Table 6-2 presents labor/cost estimates for various HELE cordwood systems. A detailed analysis of
labor requirement estimates can be found in Appendix F.
Table 6-2. Labor/Cost Estimates for HELE Cordwood Systems
Facility
System (Garn Model) (1) WHS
3200c
(2) WHS
3200
(3) WHS
3200
(4) WHS
3200
(5) WHS
3200
Total Daily labor (hrs/yr)a
(hrs/day X 210 days/yr) 567.00 600.27 611.37 616.91 620.24
Total Periodic labor (hrs/yr)b
(hrs/wk X 30 wks/yr) 567 567 567 567 567
Total Annual labor (hrs/yr)b 20 40 60 80 100
Total labor (hrs/yr) 1154.00 1207.27 1238.37 1263.91 1287.24
Total annual labor cost ($/yr)
(total hrs x $20) 23,080.00 24,145.40 24,767.40 25,278.20 25,744.80
Notes:
a From Table F-2
b From Appendix F
c A single Garn WHS 3200 would have to be fired 11 times per day, every day in order to consume 567 cords of fuel. Since it requires at least 2
hours to consume a fuel charge, the boiler would essentially have to be fired continuously, which is not a viable operating scenario.
There is also an electrical cost component to the boiler operation. An electric fan creates the
induced draft that contributes to boiler efficiency. The cost of operating circulation pumps and/or
blowers would be about the same as it would be with the oil-fired boiler or furnaces in the existing
heating system.
Lastly, there is the cost of maintenance and repair items, such as fire brick, door gaskets, water
treatment chemicals, etc. It is reasonable to assume that the more a given boiler is used, the more
maintenance/repair it will require. However, some maintenance items, such as water treatment
chemicals will breakdown regardless of usage. For this exercise, a flat rate of $2,000 is used, and
that amount could all be spent on two intensively-used boilers, or spread out over several, less
intensively-used boilers. (See Table 6-3 on the next page.)
19
Table 6-3. Summary of Total Annual Non-Fuel OM&R Cost Estimates
Cost/Allowance ($)
Item (1) WHS
3200c
(2) WHS
3200
(3) WHS
3200
(4) WHS
3200
(5) WHS
3200
Labor 23,080.00 24,145.40 24,767.40 25,278.20 25,744.80
Electricity 505.40
Maintenance/Repairs 2,000
Total non-fuel OM&R ($) 25,585.40 26,650.80 27,272.80 27,783.60 28,250.20
Notes for Table 6-3: a From Table 6-2
b Electrical cost based on a formula of horsepower x kWh rate x operating time. Assumed kWh rate = $0.10
c A single Garn WHS 3200 would have to be fired 11 times per day, every day in order to consume 567 cords of fuel. Since it requires at least 2
hours to consume a fuel charge, the boiler would essentially have to be fired continuously, which is not a viable operating scenario.
6.4 Calculation of Financial Metrics
Biomass heating projects are viable when, over the long run, the annual fuel cost savings generated
by converting to biomass are greater than the cost of the new biomass boiler system plus the
additional operation, maintenance and repair (OM&R) costs associated with a biomass boiler
(compared to those of a fossil fuel boiler or furnace).
Converting from an existing boiler to a wood biomass boiler (or retrofitting/integrating a biomass
boiler with an existing boiler system) requires a greater initial investment and higher annual
OM&R costs than for an equivalent oil or gas system alone. However, in a viable project, the
savings in fuel costs (wood vs. fossil fuel) will pay for the initial investment and cover the
additional OM&R costs in a relatively short period of time. After the initial investment is paid off,
the project continues to save money (avoided fuel cost) for the life of the boiler. Since inflation
rates for fossil fuels are typically higher than inflation rates for wood fuel, increasing inflation rates
result in greater fuel cost savings and thus greater project viability.17
The potential financial viability of a given project depends not only on the relative costs and cost
savings, but also on the financial objectives and expectations of the facility owner. For this reason,
the impact of selected factors on potential project viability is presented using the following metrics:
Simple Payback Period
Present Value (PV)
Net Present Value (NPV)
Internal Rate of Return (IRR)
Total initial investment costs include all of the capital and non-capital costs required to design,
purchase, construct and install a biomass boiler system in an existing facility with an existing
furnace or boiler system.
A more detailed discussion of Simple Payback Period, Present Value, Net Present Value and
Internal Rate of Return can be found in Appendix E.
6.5 Simple Payback Period for Multiple HELE Cordwood Boilers
Table 6-4 presents a Simple Payback Period analysis for hypothetical multiple HELE cordwood
boiler installations.
20
Table 6-4. Simple Payback Period Analysis for HELE Cordwood Boilers
(1) WHS 3200f (2) WHS 3200 (3) WHS 3200 (4) WHS 3200 (5) WHS 3200
Fuel oil cost
($ per year @ $5.00 per gallon) 255,000
Cordwood cost
($ per year @ $200 per cord) 113,400
Annual Fuel Cost Savings ($) 141,600
Total Investment Costs ($)b 390,125 492,625 595,125 697,625 800,125
Simple Payback (yrs)c 2.76 3.48 4.20 4.93 5.65
Notes:
a From Table 6-3
b From Table 6-1
c Total Investment Costs divided by Annual Fuel Cost Savings
d Total Investment Costs divided by Net Annual Savings f A single Garn WHS 3200 would have to be fired 11 times per day, every day in order to consume 567 cords of fuel. Since it requires at least 2 hours to
consume a fuel charge, the boiler would essentially have to be fired continuously, which is not a viable operating scenario.
6.6 Present Value (PV), Net Present Value (NPV) and Internal Rate of Return (IRR)
Values for Multiple HELE Cordwood Boilers
Table 6-5 presents PV, NPV and IRR values for hypothetical multiple HELE cordwood boiler
installations.
Table 6-5. PV, NPV and IRR Values for Multiple HELE Cordwood Boilers
(1) WHS 3200 (2) WHS 3200 (3) WHS 3200 (4) WHS 3200 (5) WHS 3200
Discount Ratea (%) 3
Time, “t”, (years) 20
Initial Investment ($)b 390,125 492,625 595,125 697,625 800,125
Annual Cash Flow ($)c 116,015 114,949 114,327 113,816 113,350
Present Value
(of expected cash flows, $ at “t” years) 1,726,010 1,710,151 1,700,897 1,693,295 1,686,362
Net Present Value ($ at “t” years) 1,335,885 1,217,526 1,105,772 995,670 886,237
Internal Rate of Return (% at “t” years) 29.57 22.96 18.57 15.38 12.92
See Note # _ below 1 2 3 4 5
Notes:
a real discount (excluding general price inflation) as set forth by US Department of Energy, as found in NIST publication NISTIR 85-3273-22, Energy
Price Indices and Discount Factors for Life Cycle Cost Analysis – April 2007
b From Table 6-1
c Equals annual cost of fuel oil minus annual cost of wood minus annual non-fuel OM&R costs (i.e. Net Annual Savings)
Note #1. A single Garn WHS 3200 would have to be fired 11 times per day, every day in order to consume 567 cords of fuel. Since it
requires at least 2 hours to consume a fuel charge, the boiler would essentially have to be fired continuously, which is not a viable
operating scenario.
Note #2. With a real discount rate of 3.00% and after a span of 20 years, the projected cash flows are worth $1,710,151
today (PV), which is greater than the initial investment of $492,625. The resulting NPV of the project is $1,217,526 and
21
the project achieves an internal rate of return of 22.96% at the end of 20 years. Given the assumptions and cost estimates,
this alternative appears financially feasible, although the operational parameters are not ideal, i.e., approximately 5.5
firings per day.
Note #3. With a real discount rate of 3.00% and after a span of 20 years, the projected cash flows are worth $1,700,897
today (PV), which is greater than the initial investment of $595,125. The resulting NPV of the project is $1,105,772 and
the project achieves an internal rate of return of 18.57% at the end of 20 years. While these metrics are less favorable
than alternative 2, given the assumptions and cost estimates, this alternative appears quite feasible and provides improved
operational parameters, i.e., approximately 3.6 firings per day.
Note #4. With a real discount rate of 3.00% and after a span of 20 years, the projected cash flows are worth $1,693,295
today (PV), which is greater than the initial investment of $697,625. The resulting NPV of the project is $995,670 and
the project achieves an internal rate of return of 15.38% at the end of 20 years. While these metrics are less favorable
than alternatives 2 and 3, given the assumptions and cost estimates, this alternative still appears quite feasible and may
provide ideal operational parameters, i.e., approximately 2.7 firings per day.
Note #5. With a real discount rate of 3.00% and after a span of 20 years, the projected cash flows are worth $1,686,362
today (PV), which is greater than the initial investment of $800,125. The resulting NPV of the project is $886,237 and
the project achieves an internal rate of return of 12.92% at the end of 20 years. While these metrics are less favorable
than alternatives 2, 3 and 4, given the assumptions and cost estimates, this alternative still appears quite feasible and may
provide some system redundancy and capacity for expansion. Required daily firings would average approximately 2.2.
SECTION 7. ECONOMIC FEASIBILITY OF BULK FUEL SYSTEMS
A typical bulk fuel boiler system includes bulk fuel storage, boiler building, wood-fuel handling
systems, combustion chamber, boiler, ash removal, cyclone, exhaust stack and electronic controls.
The variables in this list of system components include the use of silos or bunkers of various sizes
for wood fuel storage, chip storage areas of various sizes, boiler buildings of various configura-
tions, automated versus manual ash removal and cyclones for particulate removal (if necessary).17
7.1 Capital Cost Components
As indicated, bulk fuel systems are larger, more complex and often more costly to install and
integrate with existing boiler and distribution systems. Before a true economic analysis can be
performed, all of the costs (capital, non-capital and OM&R) must be identified, and this is where
the services of architects and civil and mechanical engineers are necessary.
Table 7-1 (nest page) outlines the various general components for a hypothetical, small bulk fuel
system; however it is beyond the scope of this report to offer estimates of costs for those
components. As an alternative, a range of likely total costs is presented and analyzed for
comparison purposes.
22
Table 7-1. Initial Investment Cost Components for Bulk Fuel Systems
Facility Hames PE Center
(51,000 gallons/year; 1,437 tons/year, (MC50))
Capital Costs: Building and Equipment (B&E)
Fuel storage building ?
Material handling system ?
Boiler building ?
Boiler: base price
shipping ?
Plumbing/connections ?
Electrical systems ?
Installation ?
Non-capital Costs
Engineering , Permitting, Contingency, etc.?
Initial Investment Total ($) $1,000,000 to $2,000,000
The investment cost of bulk fuel systems installed in institutional settings can range from $500,000
to over $2 million, with about $350,000 to $900,000 in equipment costs. Fuel handling and boiler
equipment for an 8 MMBtu/hr (300 BHP) system was recently quoted to a school in the northeast
USA for $900,000. The cost of a boiler and fuel handling equipment for a 3 to 4 MMBtu/hr system
is about $350,000 to $500,000. The 2.4 MMBtu/hr system in Hoonah was installed at a sawmill
for around $250,000, but an existing building was used and there were significant economies in
fuel preparation and fuel handling that would be unacceptable in a non-industrial setting. Fuel and
boiler equipment for a 1 MMBtu per hour system is estimated at $250,000 to $300,000 (buildings
are extra). Several schools in New England have been able to use existing buildings or boiler
rooms to house new equipment and realize substantial savings, but recent school projects in
Montana were all installed in new buildings.4
The Craig Schools and Aquatic Center project in Craig, AK was originally estimated at less than $1
million to replace propane and fuel oil equivalent to 36,000 gallons of fuel oil, but the results of a
January 2007 bid opening brought the cost to $1.85 million. The fuel storage and boiler building,
fuel dryer, and system integration costs for the pool and two schools increased the project costs.
NOTE: The City of Craig subsequently undertook construction of the project themselves using a
“force account” and brought the final cost down to about $1.5 million.
Table 7-2 shows the total costs for the Darby School (Darby, MT) project at $1,001,000 including
$268,000 for repairs and upgrades to the pre-existing heating system. Integration with any pre-existing
system will likely require repairs and rework that must be included in the wood system cost. Adding the
indirect costs of engineering, permits, etc. to the equipment cost put the total cost at Darby between
$716,000 and $766,000 for the 3 million Btu/hr system to replace 47,000 gallons of fuel oil per year.
Since the boiler was installed at Darby, building and equipment costs have increased from 10% to 25%.
A new budget price for the Darby system might be closer to $800,000 excluding the cost of repairs to the
existing system.4
23
Table 7-2. Darby, MT Public School Wood Chip Boiler Costs a
Boiler Capacity 3 MMBtu/hr
Fuel Oil Displaced 47,000 gallons
Heating Degree Days 7,186
System Costs:
Building, Fuel Handling $ 230,500
Boiler and Stack $ 285,500
Boiler system subtotal $ 516,000
Piping, integration $ 95,000
Other repairs, improvements $ 268,000
Total, Direct Costs $ 879,000
Engineering, permits, indirect $ 122,000
Total Cost $1,001,000
a Biomass Energy Resource Center, 2005 4
The following is an excerpt from the Montana Biomass Boiler Market Assessment17:
“To date, CTA [CTA Architects and Engineers, Billings, MT] has evaluated more than 200
buildings throughout the northwestern United States and designed 13 biomass boiler projects, six of
which are now operational. Selected characteristics of these projects, including total project cost,
are presented in Table 1 [7-3]. As can be seen from Table 1 [7-3], total costs for these projects do
not correlate directly with boiler size. The least expensive biomass projects completed to date cost
$455,000 (not including additional equipment and site improvements made by the school district)
for a wood chip system in Thompson Falls, Montana. The least expensive wood pellet system is
projected to cost $269,000 in Burns, Oregon. The general breakdown of costs for these two projects
is presented in Tables 2 [7-4] and 3.”
NOTE: Information related to wood pellet systems was not included in this report as wood
pellets are not readily available as a fuel in southeast Alaska.
24
Table 7-3. Characteristics of Biomass Boiler Projects17
Facility
Name Location Boiler Size
(MMBtu/hr output) Project Type
Wood
Fuel
Type
Total
Project
Cost
Thompson
Falls School
District
Thompson
Falls, MT 1.6 MMBtu Stand-alone boiler building
tied to existing steam system Chips $ 455,000
Glacier High
School
Kalispell,
MT 7 MMBtu
New facility with integrated
wood chip and natural gas
hot water system
Chips $ 480,000
Victor School
District Victor, MT 2.6 MMBtu Stand-alone boiler building
tied to existing steam system Chips $ 615,000
Philipsburg
School District
Philipsburg,
MT 3.87 MMBtu
Stand-alone boiler building
tied to existing hot water
system
Chips $ 684,000
Darby School
District Darby, MT 3 MMBtu
Stand-alone boiler building
tied to existing steam & hot
water system
Chips $1,001,000
City of Craig Craig, AK 4 MMBtu
Stand-alone boiler building
tied to existing hot water
systems
Chips $1,500,000
Univ. MT
Western Dillon, MT 14 MMBtu Addition to existing steam
system Chips $1,400,000
Table 7-4. Cost Breakdown for the Least Expensive Wood Chip Boiler System Installed in a
New Free-Standing Building 17
System Component Cost % of Total
Wood Boiler System Equipment $136,000 30%
Building $170,000 38%
Mechanical/Electrical $100,000 22%
Mechanical Integration $15,000 3%
Fees, Permits, Printing, Etc. $34,000 7%
Total* $455,000* 100%
* not including additional equipment and site improvements made by the school district
7.2 Hypothetical OM&R Cost Allowances
The primary operating cost is fuel. The estimated bulk fuel cost for the Hames PE Center is
$114,960 (1,437 tons @ $80/ton). Other O&M costs would include labor, electricity, and
maintenance and repair costs. For purposes of this analysis, it is assumed that the boiler will
operate daily, year round.
Daily labor would consist of monitoring the system and performing daily inspections as prescribed
by the system manufacturer. It is assumed that the average daily labor requirement is ½ hour. An
additional 2 hours per week is allocated to perform routine maintenance tasks. Therefore, the total
annual labor requirement is (365 x 0.5) + 104 = 286.5 hours per year. At $20 per hour, the annual
labor cost would be $5,730.
25
There is also an electrical cost component to the boiler operation. Typically, electrically-powered
conveyors of various sorts are used to move fuel from its place of storage to a metering bin and into
the boiler. There are also numerous other electrical systems that operate various pumps, fans, etc.
The Darby School system, which burned 755 tons of bulk fuel in 2005, used electricity in the
amount of $2,035,18 however the actual kWh or cost per kWh were not reported. Another report17
proffered an average electricity cost for Montana of $0.086 per kWh. If that rate is true for Darby,
then the electrical consumption would have been about 23,663 kWh. The Hames PE Center is
projected to use 1,437 tons of bulk fuel (1.9 times the amount used at Darby). If it is valid to
apportion the electrical usage based on bulk fuel consumption, then the Hames PE Center would
use about 44,960 kWh per year. At $0.10 per kWh, the annual electrical consumption would be
$4,496.
Lastly, there is the cost of maintenance and repair. Bulk fuel systems with their conveyors, fans,
bearings, motors, etc. have more wear parts. An arbitrary allowance of $5,000 is made to cover
these costs.
Total annual operating, maintenance and repair cost estimates for a bulk fuel boiler at the Hames
PE Center are summarized in Table 8-2
Table 7-5. Total OM&R Cost Allowances for a Bulk Fuel System
Item Cost/Allowance
Non-Fuel OM&R
Labor ($) 5,730
Electricity ($) 4,496
Maintenance ($) 5,000
Total, non-fuel OM&R 15,226
Wood fuel ($) 114,960
Total OM&R ($) 130,186
7.3 Calculation of Financial Metrics
A discussion of Simple Payback Period can be found in Appendix E.
A discussion of Present Value can be found in Appendix E.
A discussion of Net Present Value can be found in Appendix E.
A discussion of Internal Rate of Return can be found in Appendix E.
7.4 Simple Payback Period for Generic Bulk Fuel Boilers
Table 7-6 presents Simple Payback Period analysis for a range of initial investment cost estimates
for generic bulk fuel boiler systems.
26
Table 7-6. Simple Payback Period Analysis for Bulk Fuel Heating Systems
Hames PE Center
(51,000 gpy; 1,437 tons/yr (MC50))
Fuel oil cost
($ per year @ $5.00 per gallon 255,000
Bulk wood fuel
($ per year @ $80 per ton) 114,960
Annual Fuel Cost Savings ($) 140,040
Total Investment Costs ($) 750,000 1,000,000 1,250,000 1,500,000 1,750,000 2,000,000
Simple Payback (yrs)a 5.36 7.14 8.93 10.71 12.50 14.28
a Simple Payback equals Total Investment Costs divided by Annual Fuel Cost Savings
While simple payback has its limitations in terms of project evaluations, one of the conclusions of
the Montana Biomass Boiler Market Assessment was that viable projects had simple payback
periods of 10 years or less.17
7.5 Present Value (PV), Net Present Value (NPV) and Internal Rate of Return (IRR)
Values for Hypothetical Bulk Fuel Boiler Installations
Table 7-7 presents PV, NPV and IRR values for hypothetical bulk fuel boiler installations.
Table 7-7. PV, NPV and IRR Values for Bulk Fuel Systems
Discount Rate 3
Time, “t”, (years) 20
Initial Investment ($)a 750,000 1,000,000 1,250,000 1,500,000 1,750,000 2,000,000
Annual Cash Flow ($)b 124,814
Present Value (of expected cash
flows), ($ at “t” years) 1,856,917
Net Present Value ($ at “t” years) 1,106,917 856,917 606,917 356,917 106,917 -143,083
Internal Rate of Return (%) 15.75 10.91 7.73 5.43 3.65 2.21
Notes:
a from Table 7-6
b Equals annual cost of fuel oil minus annual cost of wood minus annual non-fuel OM&R costs
27
SECTION 8. CONCLUSIONS
This report discusses conditions found “on the ground” at the Hames PE Center in Sitka, Alaska
and attempts to demonstrate, by use of realistic, though hypothetical examples, the feasibility of
installing high efficiency, low emission cordwood or bulk fuel wood boilers to heat this facility.
Wood is a viable heating fuel in a wide range of institutional applications, however, below a certain
minimum and above a certain maximum, it may be impractical to heat with wood, or it may require
a different form of wood fuel and/or heating system. The difference in the cost of heat derived
from wood versus the cost of heat derived from fuel oil is significant, as illustrated in Table 5-1. It
is this difference in the cost of heat, resulting in monetary savings that must “pay” for the
substantially higher investment and OM&R costs associated with wood fuel systems.
The Hames PE Center provides recreational/sports/fitness opportunities for the entire community
of Sitka, AK, population approximately 8,600. The facility consists of a single large building
(approximately 34,000 square feet) and houses a large swimming pool, two handball courts, full
size gymnasium/basketball court, weight room, two exercise rooms, locker rooms with showers,
restrooms and office space. Heat is provided by oil-fired steam boilers located on the site of the
former City incinerator. Heat is delivered within the Center via hot water and hot air distribution
systems. The Hames PE Center can be considered “relatively large” in terms of its fuel oil
consumption (51,000 gpy), and may be large enough to justify the installation of a bulk fuel wood
heating system if investment costs can be controlled and a reliable consistent fuel supply identified.
The topography around the school is gentle, albeit somewhat constrained, presenting relatively
minor physical impediments to a cordwood boiler installation. A bulk fuel heating plant would be
somewhat more difficult to site in close proximity to the existing mechanical room. If the site of
the former incinerator can be used, space constraints would not be a concern, although distances
over which plumbing would have to be run would increase significantly, but not prohibitively.
8.1 Cordwood Systems
To replace 51,000 gallons of #2 fuel oil per year would require approximately 567 cords of
reasonably dry (MC30) hemlock cordwood, other stick-type fuels or briquettes.
Examples of installing and operating multiple, large cordwood boilers are presented in Section 6.
At a minimum, two such boilers would have to be installed in order to replace 51,000 gallons of
fuel oil per year. However, such a minimal installation would mean firing those boilers every five
hours every day of the year, which is probably impractical. The installation of three boilers would
require an average of 3.6 firings per day; the installation of four boilers would require 2.7 firings
per day; and the installation of five boilers would require 2.2 firings per day (See Appendix F).
Initial investment costs for the installation of multiple cordwood boilers ranged from about
$493,000 to $800,000, with the cost of the 11,340 square foot fuel storage building being the single
most costly item ($170,000). However, each boiler installation scenario returned positive financial
metrics with simple payback periods ranging from 3.48 to 5.65 years, and internal rates of return
ranging from 12.92 to 22.96 percent.
8.2 Bulk Fuel System
To replace 51,000 gallons of fuel oil per year would require approximately 1,437 tons
(approximately sixty-five 40-foot tractor trailer loads) of bulk fuel (chips, sawdust, bark, shavings,
etc.), assuming such fuel runs 50% moisture content (MC50).
28
Although it is beyond the scope of this assessment to delve into the detailed costs associated with
the installation of bulk fuel systems, it is not unrealistic to say that, at 51,000 gallons of fuel oil per
year, it appears possible that a bulk fuel system could be cost-effective for the Hames PE Center
IF:
1. a reliable, consistent source of fuel can be identified
2. fuel can be delivered at a reasonable cost
3. total investment costs can be held to $1,750,000 or less
29
REFERENCES AND RESOURCES:
1 Wilson, P.L., Funck, J.W., Avery, R.B., Fuelwood Characteristics of Northwestern Conifers and Hardwoods, Research
Bulletin 60, Oregon State University, College of Forestry, 1987.
2 Briggs, David, 1994. Forest Products Measurements and Conversion Factors, University of Washington Institute of
Forest Resources, AR-10, Seattle, Washington 98195.
3 Wood with moisture greater than about 67% MC will not support combustion. Wood-Fired Boiler Systems For Space
Heating, USDA Forest Service, EM 7180-2, 1982.
4 Feasibility Assessment for Wood Heating, T.R. Miles Technical Consultants, Inc., Portland, OR, 2006.
http://www.jedc.org/forms/AWEDTG_WoodEnergyFeasibility.pdf
5 Smoke Gets in Your Lungs: Outdoor Wood Boilers in New York State, October 2005, New York State Attorney
General http://www.oag.state.ny.us/press/2005/aug/August%202005.pdf
6 Proposal For A Particulate Matter Emissions Standard And Related Provisions For New Outdoor Wood-fired Boilers,
Vermont Agency of Natural Resources Department of Environmental Conservation Air Pollution Control Division
January 20, 2005 (revised July 6, 2005) http://www.vtwoodsmoke.org/pdf/TechSupp.pdf
7 http://www.nescaum.org/topics/outdoor-hydronic-heaters/other-model-regulations
8 http://www.nescaum.org/topics/outdoor-hydronic-heaters/state-and-federal-information
9 Assessment of Outdoor Wood-Fired Boilers, Revised May 2006, NESCAUM, the Clean Air Association of the
Northeast States http://www.nescaum.org/documents/assessment-of-outdoor-wood-fired-boilers
10 Electronic Code of Federal Regulations, Title 40, Protection of Environment, Part 60, Standards of Performance for
New Stationary Sources. http://ecfr.gpoaccess.gov/cgi/t/text/text-
idx?c=ecfr&sid=f0d500634add4f17c656e9d55ce0d0cf&rgn=div6&view=text&node=40:6.0.1.1.1.63&idno=40
11 WK5982 Standard Test Method for Measurement of Particulate Emissions and Heating Efficiency of Outdoor Wood-
Fired Hydronic Heating Units, Committee E06.54 on Solid Fuel Burning Appliances American Society of Testing and
Materials. www.astm.org
12 U.S. Environmental Protection Agency news release,
http://yosemite.epa.gov/opa/admpress.nsf/4b729a23b12fa90c8525701c005e6d70/007f277470e64745852572720057353c!
OpenDocument
13 http://www.tarmusa.com, Tarm USA Inc. P.O. Box 285 Lyme, NH 03768
14 http://www.dectra.net/garn, Dectra Corporation, 3425 33rd Ave. NE, St. Anthony, MN 55418
15 Test of a Solid fuel Boiler for Emissions and Efficiency per Intertek’s Proposed Protocol for Outdoor Boiler Efficiency
and Emissions Testing. Intertek report No. 3087471 for State of Michigan, Air Quality Department. Intertek Testing
Services NA Inc. 8431 Murphy Drive, Wisconsin 53562. March 2006.
16 Keunzel, New Horizon and Alternate Heating Systems are sometimes recommended for high efficiency boilers,
however none are installed in Alaska and no efficiency or emissions data was available for this report.
www.newhorizoncorp.com, www.kuenzel.de/English/indexE.htm, www.alternateheatingsystems.com/Multi-
Fuel_boilers.htm
17 Biomass Boiler Market Assessment, CTA Architects and Engineers, Christopher Allen & Associates, Montana
Community Development Corp., and Geodata Services, Inc. 2006.
http://www.fuelsforschools.org/pdf/Final_Report_Biomass_Boiler_Market_Assessment.pdf
18 Darby Fuels For Schools Second Season Monitoring Report, 2004-2005.
http://www.fuelsforschools.org/pdf/Darby_FFS_Monitoring_Rpt_2004-2005.pdf
19 Life Cycle Cost Analysis Handbook, Alaska Department of Education and Early Development, Education Support
Services, 1st Edition, 1999.
30
Appendix A. AWEDTG Evaluation Criteria
The following criteria were used to evaluate and recommend projects for feasibility assessments:
1. The opportunity for displacing fuel oil, natural gas, propane or diesel-generated
electricity used by targeted facilities for heating needs (i.e., current fuel type, gallons of
fuel per year, annual cost per year);
2. Local presence of high-hazard forest fuels and potential for utilizing these fuels for
heating schools, other public facilities, and buildings owned and operated by not-for-profit
organizations;
3. Availability of local wood processing residues (e.g., sawdust, planer shavings, and
sawmill residues);
4. Project cost versus yearly savings (cost-effectiveness);
5. Sustainability of the wood fuel supply;
6. Community support and project advocacy;
7. Ability to implement the project;
8. Ability to operate and maintain the project.
31
Appendix B. Recoverable Heating Value Determination
The Recoverable Heating Value (RHV) of wood is equal to the Gross Heating Value minus various energy
losses (H1 through H8). Those losses are described as:
H1: Heat used to raise the temperature of water in the wood to the boiling point
H2: Heat required to vaporize the water in the wood
H3: Heat require to separate the bound water (water below fiber saturation point) from the cell walls
H4: Heat required to raise the temperature of the vaporized water to the temperature of the exhaust gases
H5: Heat required to evaporate water that forms when the hydrogen component of wood is combusted
H6: Heat from combustion other than water vapor (dry gases)
H7: Heat required to raise the temperature of wood to the combustion temperature
H8: Other heat losses (radiation, conduction, convection, incomplete combustion, etc.)
Each of these energy loss factors is a calculated value based on published formulae. For more information,
please refer to: Briggs, D.G., Forest Products Measurements and Conversion Factors (Chapter 9), College of
Forest Resources, University of Washington, 1994
In order to calculate RHV, certain factors must be known or assumed. In calculating RHV for this paper, the
following assumptions were made (Except for ambient temperature and exhaust temperature, the values used
here are the same as per Example 1 in Briggs):
• Higher Heating Values (HHV): as presented in Table D-1
• Moisture Content (MC): water content (calculated on wet basis). For calculations involving
cordwood, moisture (water) content was assumed to be 30 percent on a wet basis. For calculations
involving bulk fuel, moisture content was assumed to be 40% or 50%, as per the report.
• Wood Content: 100 minus moisture content percent (calculated on wet basis).
• Ambient Temperature (T1): assumed to be 25 degrees F
• Exhaust Temperature (T2): assumed to be 300 degrees F
• Combustion Temperature (T3): assumed to be 450 degrees F
• Fiber Saturation Point (FSP): assumed to be 23 percent (calculated on a green/wet basis), which is
equal to 30% calculated on a dry weight basis
• Excess Air (EA): assumed to be 20 percent
• Other Losses (OL): assumed to be 4 percent
32
Appendix C. List of Abbreviations and Acronyms
AEA Alaska Energy Authority
AWEDTG Alaska Wood Energy Development Task Group
Btu British Thermal Unit (MBtu, thousand Btu ; MMBtu, million Btu)
CE Conversion Efficiency (fuel to heat)
Cord 80 ft3 of solid wood; 100 cubic feet of wood + bark; 128 cubic feet of wood, bark and air space
DB Dry Basis ((wet weight – dry weight)/dry weight * 100))
DD Degree Days (Heating Degree Days)
EPA U.S. Environmental Protection Agency, U.S.
GHV Gross Heating Value
Gm Gram
Gpy Gallons per year
HHV High[er] Heating Value
JEDC Juneau Economic Development Council
KBtu Thousand Btu
KWe Kilowatts, electric
KWt Kilowatts, thermal
MC Moisture Content (e.g. MC30 = 30 % moisture content)
MBtu Thousand Btu (also kBtu)
MMBtu Million Btu
NHV Net Heating Value
NPV Net Present Value
OD Oven Dry
O&M Operating and Maintenance
OM&R Operation, Maintenance and Repair
OWB Outdoor Wood Boiler
POW Prince of Wales [Island], Alaska
PV Present Value
RHV Recoverable Heating Value
WB Wet basis ((wet weight-dry weight)/wet weight * 100)
CONVERSIONS
1 grams = 0.00220462262 pounds
1 pounds = 453.59237 grams
Btu: A BTU is defined as the amount of heat required to raise the temperature of one pound
(approx. 1 pint) of water by one degree Fahrenheit.
33
APPENDIX D - Wood Fuel Properties
Heating values for Alaska species are presented in Table D-1. High Heating Values (HHV), which
are calculated on an oven-dry (OD) basis, are similar for most species on a weight basis, although
resinous species typically have slightly higher HHV1. The recoverable heating value (RHV),
which takes into account moisture content and other energy losses2, ranges from 4,067 to 5,347
Btu/lb at 30 percent moisture content (MC30) and 2,554 to 3,468 Btu/lb at 50 percent moisture
content (MC50) for species commonly found in southeast Alaska.
Ideally, cordwood should be air dried to 20% moisture content (MC20) or less, and one of the
benefits of using cordwood is that the user could, with good planning, realize a substantial
economic benefit by buying it green and allowing it to dry. However, the ideal situation is not
always reality, and for this report cordwood at 30% moisture content (MC30) has been used in the
calculations.
Bulk fuels (wood chips, sawdust, bark, etc.) are generally used ‘as delivered’ from the producer
with little opportunity for additional drying. Ideally, bulk fuels should contain 40% water (MC40)
or less, on a wet weight basis, but the in the real southeast Alaska world, 50% water content
(MC50) is more realistic. Bulk fuels are usually traded on a weight (ton) basis and the price may
be adjusted up or down to reflect the moisture content of the fuel.
The RHV of hemlock cordwood (the most common species in southeast Alaska) at MC30 is about
13.26 million Btu (MMBtu) per cord (assumed to contain 100 cubic of “fuel”, both wood and
bark). Hemlock bulk fuel at MC50 has a RHV of 5.61 million (MM) Btu per ton at MC50.
(NOTE: bark typically has a higher HHV than wood, but no allowance for that difference has been
made here.)
Table D-1. Heating Values of Selected Alaska Species
Cordwood Bulk Fuel (chips, sawdust, etc.)
GHV2 RHV2 GHV2 RHV2
SPECIES
HHV1
Btu/lb
(MC0)
Btu/lb
(MC30)
BTU/lb
(MC30)
MMBtu
per cordb
Btu/lb
(MC50)
Btu/lb
(MC50)
MMBtu
per ton
Alaska yellow-cedar 9,900 6,930 5,347 15.48 4,950 3,468 6.94
Western redcedar 9,144a 6,401 4,839 10.07 4,572 3,106 6.21
Western hemlock 8,515a 5,961 4,417 13.26 4,258 2,804 5.61
Sitka Spruce 8,100 5,670 4,138 10.83 4,050 2,604 5.21
White Spruce 8,890 6,223 4,669 12.22 4,445 2,984 5.97
Red Alder 7,995a 5,597 4,067 10.78 3,998 2,554 5.11
Paper (white) birch 8,334 5,834 4,295 15.44 4,167 2,717 5.43
Quaking aspen No data -- -- -- -- -- --
Black cottonwood 8,800 6,160 4,608 10.21 4,400 2,940 5.88
Black Spruce No data -- -- -- -- -- --
Notes:
HHV= Higher Heating Value, from Fuelwood Characteristics of Northwestern Conifers and Hardwoods
GHV = Gross Heating Value = HHV x (1-MCwb/100) MCwb = percent moisture content calculated on a wet basis
RHV = Recoverable Heat Value = GHV – Energy Losses (see Appendix B)
a average of published range of values1
b a cord is assumed to contain 100 cubic feet of “fuel” (wood plus bark)
34
Most bulk fuel boilers operate well when fuel(s) contain less than 40% water (MC40) and poorly or
very poorly if the moisture content is above 50%. Bulk fuels that are stored unprotected outdoors
can absorb rainwater and, in some areas, can reach moisture contents as high as 65%3, so some
consideration for dry storage or fuel drying may be appropriate. Schools in the northeast USA
using wood chips select suppliers carefully and often pay a premium for chips below 40% MC4.
D.1 Fuel Quality
Fuel quality, especially moisture content, has a large impact on the performance of wood-fueled
boilers. For this assessment, it is assumed that cordwood has been seasoned and dried to 30% MC
and bulk fuels average 50% water. As moisture content increases, heating values decrease, as
shown in Table D-2.
Table D-2. Effect of Moisture Content on Gross Heating Value of Western Hemlock
SPECIES
HHV
Btu/lb
Oven-dry (OD)
GHV
Btu/lb
(MC20)
GHV
Btu/lb
(MC30)
GHV
Btu/lb
(MC40)
GHV
Btu/lb
(MC50)
Western hemlock 8,515 6,812 5,961 5,109 4,258
Notes:
HHV= Higher Heating Value, from Fuelwood Characteristics of Northwestern Conifers and Hardwoods 1
GHV = Gross Heating Value = HHVx (1-MCwb/100); MCwb is moisture content (wet basis) 2
D.2 Recoverable Heat and Fuel Oil Equivalence/Displacement
Wood boilers are more expensive to install, own and operate than fuel oil boilers. Fuel cost
savings (the difference between the cost of wood fuel and the cost of fuel oil) must pay for these
higher investment and operating costs. The potential fuel oil displacement depends on the
recoverable heating value (RHV) of the wood and the efficiency with which the boiler converts
wood to energy (CE). Table D-3 shows the potential amount of fuel oil displaced by wood at
typical efficiencies with the heating values from Table D-1. Wood system boiler conversion
efficiency (CE) can be expected to vary from 25% for LEHE systems to 75% for HELE cordwood
systems.
Deliverable heating value (DHV) is calculated using the equation:
DHV= RHV X CE 2
Where DHV = Deliverable Heating Value
RHV = Recoverable Heating Value
CE = Conversion Efficiency
The fuel oil equivalence for hemlock bulk fuel (chips, sawdust, etc.) at MC50 is calculated at 36.63
gallons per ton (#1) and 35.57 gallons per ton (#2) at 70% conversion efficiency. The fuel oil
equivalence for hemlock cordwood at MC30 in a HELE cordwood boiler is calculated at 92.77
gallons (#1) and 90.08 gallons (#2); three times as much as a low efficiency boiler at 30.9 and 30.0
gallons per cord for #1 and #2 respectively.
35
Table D-3. Deliverable Heating Values and Fuel Oil Equivalence
Boiler and Fuel RHV CE DHV Fuel Oil Equivalent
(1 unit = X gallons)
Oil boiler, #1 Fuel Oil 134,000
Btu/gallon 80% 107,200
Btu/gallon 1 gallon = 1 gallon
Oil boiler, #2 Fuel Oil 138,000
Btu/gallon 80% 110,400
Btu/gallon 1gallon = 1 gallon
Electric water heater 3,412
Btu/kWh 100%
3,412
Btu/kWh
3.412
MMBtu/MWh
1 MWh = 31.83 gal. #1
1 MWh = 30.91 gal. #2
Wood chip boiler,
hemlock bulk fuel @
50% MC
5.61
MMBtu/ton 70% 3.927
MMBtu/ton
1 ton = 36.63 gal. #1
1 ton = 35.57 gal. #2
HELE cordwood
boiler, hemlock
cordwood @ 30% MC
13.26
MMBtu/cord 75% 9.945
MMBtu/cord
1 cord = 92.77 gal. #1
1 cord = 90.08 gal. #2
LEHE cordwood
boiler, hemlock
cordwood @ 30% MC
13.26
MMBtu/cord 25% 3.312
MMBtu/cord
1 cord = 30.9 gal. #1
1 cord = 30.0 gal. #2
Notes:
RHV = Recoverable Heating Value
DHV = Deliverable Heating Value
HELE = High efficiency. low emission
LEHE = Low efficiency, high emission
MMBtu = million British thermal units
36
APPENDIX E – Financial Metrics
6.1 Simple Payback Period
From: www.odellion.com:
The [Simple] Payback Period is defined as the length of time required to recover an initial
investment through cash flows generated by the investment. The Payback Period lets you see
the level of profitability of an investment in relation to time. The shorter the time period the
better the investment opportunity:
As an example, consider the implementation of a Human Resources (HR) software application
that costs $150 thousand and will generate $50 thousand in annual savings in four years (the
project duration):
HR Application Example
Initial Year 1 Year 2 Year 3 Year 4
cost: $150K benefit: $50K benefit: $50K benefit: $50K benefit: $50K
Using the formula above, the Payback Period is calculated to be three years by dividing the
initial investment of $150 thousand over the annual cash flows of $50 thousand. This equation
is only applicable when the investment produces equal cash flows each year. Now consider the
software implementation with the same initial cost but with variable annual cash flows:
HR Application Example
Initial Year 1 Year 2 Year 3 Year 4
cost: $150K benefit: $60K benefit: $60K benefit: $40K benefit: $20K
Given the variable cash flows, the payback is calculated by looking at the cash flows and
establishing the year the investment is paid off. At the beginning of Year 2, the company has
recovered $120 thousand of the original $150 thousand. At the end of Year 2, the remaining
$30 thousand is recovered with the cash flow of $40 thousand earned during this period. The
payback period is then 2 + ($30 thousand/$40 thousand) or 2.8 years.
The Payback Period is a tool that is easy to use and understand, but it does have its limitations.
Payback period analysis does not address the time value of money, nor does it go beyond the
recovery of the initial investment.
6.2 Present Value
From: www.en.wikipedia.org:
The present value of a single or multiple future payments (known as cash flow(s)) is the
nominal amounts of money to change hands at some future date, discounted to account for the
time value of money, and other factors such as investment risk. A given amount of money is
always more valuable sooner than later since this enables one to take advantage of investment
opportunities. Present values are therefore smaller than corresponding future values. Present
37
value calculations are widely used in business and economics to provide a means to compare
cash flows at different times on a meaningful "like to like" basis.
One hundred dollars 1 year from now at 5% interest rate is today worth:
6.3 Net Present Value
From: http://www.odellion.com:
The Net Present Value (NPV) of a project or investment is defined as the sum of the present
values of the annual cash flows minus the initial investment. The annual cash flows are the Net
Benefits (revenues minus costs) generated from the investment during its lifetime. These cash
flows are discounted or adjusted by incorporating the uncertainty and time value of money. NPV
is one of the most robust financial evaluation tools to estimate the value of an investment.
The calculation of NPV involves three simple yet nontrivial steps. The first step is to identify the
size and timing of the expected future cash flows generated by the project or investment. The
second step is to determine the discount rate or the estimated rate of return for the project.
The third step is to calculate the NPV using the equations shown below:
Or,
Definition of Terms
Initial Investment: This is the investment made at the beginning of the project. The value is
usually negative, since most projects involve an initial cash outflow. The initial investment can
include hardware, software licensing fees, and startup costs.
Cash Flow: The net cash flow for each year of the project: Benefits minus Costs.
Rate of Return: The rate of return is calculated by looking at comparable investment
alternatives having similar risks. The rate of return is often referred to as the discount rate,
interest rate, or hurdle rate, or company cost of capital. Companies frequently use a standard
rate for the project, as they approximate the risk of the project to be on average the risk of the
company as a whole.
38
Time (t): This is the number of years representing the lifetime of the project.
A company should invest in a project only if the NPV is greater than or equal to zero. If the NPV
is less than zero, the project will not provide enough financial benefits to justify the investment,
since there are alternative investments that will earn at least the rate of return of the
investment.
In theory, a company will select all the projects with a positive NPV. However, because of
capital or budget constraints, companies usually employ a concept called NPV Indexes to
prioritize projects having the highest value. The NPV Indexes are calculated by dividing each
project’s NPV by its initial cash outlay. The higher the NPV Index, the greater the investment
opportunity.
The NPV analysis is highly flexible and can be combined with other financial evaluation tools
such as Decision Tree models, and Scenario and Monte Carlo analyses. Decision Trees are used
to establish the expected cash flows of multiple cash flows each one having a distinct probability
of occurring.
The expected cash flows are then calculated from all the possible cash flows and their
associated probabilities. NPV and Scenario Analysis are combined by varying a predetermined
set of assumptions to determine the overall impact on the NPV value of the project. Finally,
Monte Carlo analysis provides a deeper understanding of the relationship between the
assumptions and the final NPV value. The Monte Carlo analysis calculates the standard deviation
or ultimate change of NPV by using a set of different assumptions that dominate the end result.”
6.4 Internal Rate of Return (IRR))
From: http://en.wikipedia.org/wiki/Internal_rate_of_return:
.
The internal rate of return (IRR) is a capital budgeting method used by firms to decide whether
they should make long-term investments. The IRR is the return rate which can be earned on
the invested capital, i.e. the yield on the investment.
A project is a good investment proposition if its IRR is greater than the rate of interest that
could be earned by alternative investments (investing in other projects, buying bonds, even
putting the money in a bank account). The IRR should include an appropriate risk premium.
Mathematically the IRR is defined as any discount rate that results in a net present value of zero
of a series of cash flows.
In general, if the IRR is greater than the project's cost of capital, or hurdle (i.e., discount) rate,
the project will add value for the company.
From http://www.odellion.com:
The Internal Rate of Return (IRR) is defined as the discount rate that makes the project have a
zero Net Present Value (NPV). IRR is an alternative method of evaluating investments without
estimating the discount rate. IRR takes into account the time value of money by considering the
cash flows over the lifetime of a project. The IRR and NPV concepts are related but they are not
equivalent.
The IRR uses the NPV equation as its starting point:
39
Definition of Terms
Initial investment: The investment at the beginning of the project.
Cash Flow: Measure of the actual cash generated by a company or the amount of cash earned
after paying all expenses and taxes.
IRR: Internal Rate of Return.
n: Last year of the lifetime of the project.
Calculating the IRR is done through a trial-and-error process that looks for the Discount Rate
that yields an NPV equal to zero. The trial-and-error calculation can by accomplished by using
the IRR function in a spreadsheet program or with a programmable calculator. The graph below
was plotted for a wide range of rates until the IRR was found that yields an NPV equal to zero
(at the intercept with the x-axis).
As in the example above, a project that has a discount rate less than the IRR will yield a
positive NPV. The higher the discount rate the more the cash flows will be reduced, resulting in
a lower NPV of the project. The company will approve any project or investment where the IRR
is higher than the cost of capital as the NPV will be greater than zero.
For example, the IRR for a particular project is 20%, and the cost of capital to the company is
only 12%. The company can approve the project because the maximum value for the company
to make money would be 8% more than the cost of capital. If the company had a cost of capital
for this particular project of 21%, then there would be a negative NPV and the project would not
be considered a profitable one.
40
The IRR is therefore the maximum allowable discount rate that would yield value considering
the cost of capital and risk of the project. For this reason, the IRR is sometimes referred to as a
break-even rate of return. It is the rate at which the value of cash outflow equals the value of
cash inflow.
There are some special situations where the IRR concept can be misinterpreted. This is usually
the case when periods of negative cash flow affect the value of IRR without accurately reflecting
the underlying performance of the investment. Managers may misinterpret the IRR as the
annual equivalent return on a given investment. This is not the case, as the IRR is the
breakeven rate and does not provide an absolute view on the project return.
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APPENDIX F – Operating Parameters of HELE Cordwood Boilers
Operating Parameters and Labor Requirements of HELE Cordwood Boilers
One of the most important OM&R costs associated with a HELE cordwood boiler is the labor
factor. There are three components:
Daily labor. The major labor requirement is the “daily” labor associated with firing (or
charging) the boiler.
Periodic labor. The second labor component is “periodic” (i.e., weekly) labor associated
with boiler cleaning, ash disposal, and fuel re-stocking.
Annual labor. “Annual” labor is the time associated with conducting annual maintenance
and/or repairs, such as firetube cleaning, firebrick replacement, flue cleaning and repair,
etc.
Daily Labor
Estimating the amount of daily labor is a function of the total amount of wood to be consumed and
the ability of the boiler to consume it. This analysis compares the capacities of multiple Garn
WHS 3200 boilers. It is assumed that the boiler will operate at full capacity every day for 365 days
(52 weeks) per year.
Table F-1. Operating parameters of Garn HELE cordwood boilers
Item (1) WHS 3200 (2) WHS 3200 (3) WHS 3200 (4) WHS 3200 (5) WHS 3200
Firebox volume, gross (cu.ft.) 36 72 108 144 180
Fuel volume per charge (cu.ft.)a 18 36 54 72 90
Fuel volume per charge (cords)b 0.14 0.28 0.42 0.56 0.70
Cords/year (fuel volume per
charge (cords) X 365 days/year)
at 1 charge per day
at 2 charges per day
at 3 charges per day
at 4 charges per day
at 5 charges per day
at 6 charges per day
51.1
102.2
153.3
204.4
255.5
306.6
102.2
204.4
306.6
408.8
511.0
613.2
153.3
306.6
459.9
613.2
766.5
919.8
204.4
408.8
613.2
817.6
1022.0
1226.4
255.5
511.0
766.5
1022.0
1277.5
1533.0
Notes:
a Equals ½ of gross firebox volume
b Equals fuel volume per charge (cu.ft.) divided by 128 (cubic feet per cord)
NOTE: A single Garn WHS 3200 would have to be fired 11 times per day, every day in order to consume 567 cords of fuel. Since it requires at least
2 hours to consume a fuel charge, the boiler would essentially have to be fired continuously, which is not a viable operating scenario.
Daily labor requirements are assessed in Table F-2.
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Table F-2. Daily labor requirements associated with HELE cordwood boilers
Assumptions:
1. 365 full operating days per year
(1) WHS
3200
(2) WHS
3200
(3) WHS
3200
(4) WHS
3200
(5) WHS
3200
Annual wood consumption (cords/yr) 567
Average daily fuel consumption (cords)
(annual wood consumption ÷ 365) 1.553
Average firings per day
(cords/day ÷ cords/chargea) 10.94 5.47 3.647 2.735 2.188
Labor required per firing (hours)b .142 .301 .459 .618 .777
Labor required per day (hours)
(time/firing X firings/day) 1.55 1.64 1.67 1.69 1.70
“Daily” labor per year (hours)
(hours/day X 210 days/year) 567.00 600.27 611.37 616.91 620.24
Notes: a Derived from Table F-1
b estimates based on operation of Garn boiler at Dot Lake, AK
NOTE: A single Garn WHS 3200 would have to be fired 11 times per day, every day in order to consume 567 cords of fuel. Since it requires at least 2
hours to consume a fuel charge, the boiler would essentially have to be fired continuously, which is not a viable operating scenario.
Periodic Labor
Periodic labor is the weekly labor associated with boiler inspection, boiler cleaning, ash disposal,
and fuel re-stocking. Of these, fuel re-stocking may be the most time-intensive. However, with
good planning, even that can be minimized.
Options for moving fuel:
a. The most labor intensive option would be hand-loading the fuel at the fuel storage area
into a wheelbarrow, cart, truck or trailer, transporting the fuel to the boiler building, and
then hand-unloading the fuel
b. Fuel can be hand-loaded onto a motorized conveyor belt and transferred from the fuel
storage area to the boiler building
c. Fuel can be either hand-loaded or scooped into a bucket with a backhoe, loader or tractor
equipped with a bucket
d. Fuel can be palletized or stored in racks that can be moved with a forklift.
In the case of such a large system, the weekly wood demand amounts to almost 11 cords (567 cords
per year ÷ 52 weeks per year). It is likely that a large system like this would have some degree of
fuel automation, as discussed above. This example allows 11 hours (1 hour per cord) per week for
periodic labor including boiler inspection, cleaning, fuel management, etc.
43
Annual Labor
Annual labor is the time associated with conducting annual maintenance and/or repairs, such as
firetube cleaning, firebrick replacement, flue cleaning, etc. It is difficult to anticipate and/or
estimate the annual time requirement. This example allows 20 hours per boiler per year.
Total Labor Requirements
Total daily, periodic and annual labor/labor cost assumptions associated with hypothetical HELE
cordwood systems are provided in Table F-3.
Table F-3. Total Labor/Cost Assumptions for Hypothetical HELE Cordwood Systems
System (# Garn WHS 4400) (1) WHS 3200 (2) WHS 3200 (3) WHS 3200 (4) WHS 3200 (5) WHS 3200
Total Daily labor (hrs/yr) 567.00 600.27 611.37 616.91 620.24
Total Periodic labor (hrs/yr) 567 567 567 567 567
Total Annual labor (hrs/yr) 20 40 60 80 100
Total labor (hrs/yr) 1154.00 1207.27 1238.37 1263.91 1287.24
Total annual cost ($)
(Hrs x $20/hr) 23,080 24,145.40 24,767.40 25,278.20 25,744.80
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APPENDIX G – Specifications of Garn Boilers
GARN WHS Specifications
1500 2000 3200 4400
Width x Height
(inches) 72”x75” 72”x75” 86”x93” 86”x93”
Overall Length 111” 135” 172” 192”
Recommended wood
length (in) 24-32 24-32 32-48 32-48
Weight, empty (lb) 3,550 3,980 7,500
Weight, filled (lb) 15,400 19,000 34,500
Approximate gallons
of storage 1,420 1,825 3,200 4,400
Firebox length (in) 41 41 50 50
Firebox diameter (in) 25 25 40 40
Firebox volume (cf) 11.65 11.65 36.36 36.36
Burn Rate
Btu/hr into storage* 350,000 425,000 950,000 950,000
Btu's stored
120º- 200º F 920,000 1,272,000 2,064,000 2,932,000
Btus/degree of temp.
rise 11,500 15,900 25,800
Time between firing = Btu/hr used divided into Btus stored
MSRP ($)
(boiler only) 12,400 14,900 32,900 No data
All material, 2008 Dectra Corp. and Alaskan Heat Technologies
*Btu/hr storage is extremely fuel dependent. These numbers based on the use of split, 16" oak with 20% moisture and a
reloading once an hour.
GARN® equipment is certified to burn; cord or slab wood; pallet and other scrap wood; densified wood briquettes; and
air dried corn on the cob. As part of a program of continuous product improvement, DECTRA CORPORATION
reserves the right to change models, specifications and pricing without notice. GARN® is a Registered Trademark.