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HomeMy WebLinkAboutYakutat Draft Wood Fuel Generation 2008DRAFT ANALYSIS - YAKUTAT WOOD FUEL GENERATION PLANT !9] 1Arbq Prepared for: Alaska Mental Health Lands Trust By: William A. Corbus August 11, 2008 Table of Contents Executive Summary Scope of Analysis Yakutat Power, Inc. The Concept Conventional Steam Boiler/Turbine Gasifier/Boiler/Steam Reciprocating Engine Gasifier/Gas Reciprocating Engine Plasma Technology Wood Fuel Issues Wood Fuel Requirements Capital Costs Diesel Generation, Personnel Costs for Wood Fuel Generation Financing Economic Analysis Other Considerations Conclusion and Recommendation Bibliography Contacts Appendixes A - Wood Fuel Requirements B - Diesel Engine Replacement Schedule And Cost Estimate C - Wood Fuel Generation Preliminary Cost Estimates D - Diesel Depreciation Schedule E - Personnel Costs Wood Fuel Generation F - Financing Schedule - Wood Fuel Steam Boiler/Turbine G - Economic Analysis - Diesel vs. Wood Fuel Steam Boiler/Turbine H - Economic Analysis - Diesel vs. Wood Fuel Gasifier/Boiler/Steam Reciprocating Engine I - Economic Analysis - Diesel vs. Wood Fuel Gasifier/Gas Reciprocating Engine J - History of Southeast Alaskan Wood Fuel Generation Plants August 11, 2008 Draft ANALYSIS - YAKUTAT WOOD FUEL GENERATION PLANT Executive Summary This Analysis has been prepared for the Alaska Mental Health Lands Trust (AMHLT) who has requested I investigate technical and economic feasibility of utilizing wood as fuel for an electric generation plant at Yakutat, Alaska. AMHLT owns previously logged lands at Icy Bay and nearby downtown Yakutat. It is considering using residual scrap wood from previously logged land as well as wood from thinning standing timber for a wood fuel electric generation plant to be located in Yakutat. This Analysis is based upon investigations which included a visit to Yakutat, discussions with engineering consultants, generation equipment representatives, an operator of a wood fuel steam electric generator, the U.S. Forest Service, the Edison Electric Institute and references found in the Bibliography. Four wood fuel generation options were reviewed - conventional steam boiler/turbine generation plant, gasifier/boiler/steam reciprocating engine, gasifier/gas reciprocating engine and plasma technology. Only the last three options were analyzed. The default option of I continuing to operate with existing diesel generation was also analyzed. Graph 1 shows the annual nominal bus bar cost per KWH for the 2010-2039 study period for three wood fuel alternatives and status quo diesel alternatives. Customer Costs cents per KVVH 180 160 140 - Desel 120 100 —Ream ants/ IWH Boiler/ 80 - - - Turbine —Gasifier/ 60 - Boiler/3am (bdp Fny ne 40 —Gasifier/Gas 20 Rip Big ne 0 . . ti ti ti ti ti ti ti ti `� ti ry ti ti ti ti ti ti ti ti ry ti ti ti ry ti ti ti ti ti ti Year Cost benefit ratios for the three wood fuel alternatives vs. continuing with the status quo diesel alternative and annual wood fuel requirements are summarized in Table l: 2 Tablel Summary Benefit Cost Analysis/Wood Fuel Requirements Benefit Levelized Wood Cost Annual Cost Fuel Req Alternative Ratio x 1000 Cents/KWH CordNr Diesel 4423 70.0 Steam boiler/turbine 0.66 6702 106.0 12280 Gasifier/Boiler/Steam Recip Engine 0.87 5095 80.6 12656 Gasifier/Gas Recip Engine 1.60 2756 43.6 5526 Based upon nominal bus bar cost per KWH shown in Graph 1, the Benefit Cost Ratios summarized in Table 1 and other results in the Economic Analyses shown in Appendixes G, H and I Section as well as qualitative factors discussed in the Other Considerations Section, it is recommended further investigations be pursued for the gasifier/gas reciprocating engine and be dropped for gasifier/boiler/steam reciprocating engine and the steam boiler/turbine be dropped. The attached disk contains an EXCEL computer model file which can be utilized to analyze the economic feasibility of installing a wood fuel generation plant in other Alaskan communities where a wood fuel might be an applicable electric generation source. 3 Scope of Analysis This Analysis has been prepared for the AMHLT to assist in their investigation of the technical and economic feasibility of utilizing wood as fuel for an electric generation plant at Yakutat, Alaska. AMHLT owns timber lands nearby downtown Yakutat and at Icy Bay. It is considering using residual scrap wood from previously logged land as well as wood gathered from thinning of standing timber as fuel for a wood fuel electric generation plant located on its land located close to the YP diesel generation plant. The author of this Analysis has been charged with assessing available technologies for wood fuel electric generation, determining the annual wood fuel requirements and assessing economic feasibilty. Assuming a 30 year supply is available to satisfy a wood fuel generation plant requirements, the critical variables to the analytical economic outcome is the long range price of diesel fuel, the cost to gather and transport wood fuel to a new Yakutat generation facility, the initial moisture content of the wood fuel and the capital costs associated with each food fuel generation technology considered. This Analysis should be considered as preliminary. Many assumptions have made which need verification. El Before a go/no go decision can be made, the wood fuel generation technologies recommended for further investigation need to be more fully understood and parameters for existing operating wood fuel technologies confirmed. Yakutat Power, The 2007 YP electric load averaged about 0.8 MW and during the fishing season occasionally peaked at 1.5 MW. It is not currently nor in the foreseeable future expected to be electrically connected with an electric grid or other long distance electric energy source. YP presently serves a district heating load with heat from its diesel generators. Water is heated by a heat exchanger at the YP power plant and pumped through pipes to the nearby middle school and high school. The heat transmitted by the heat exchanger is not metered. The YP generation facilities, all located at a single power plant, include four slow speed (1200 rpm) Caterpillar diesel electric generators with a total capacity of 3925 KW. Three of the four generators have long remaining operating lives. The forth unit is in a run down condition and may have to be replaced soon. YP generation maintenance personnel consist ofnechanic(s). The generation plant is M :hours, but a YP employee is on call and routinely checks the plant every evening and early morning. Table 2 YP Electric Statistics MWH MWH Aver Year Sales En Reg Load-MW 2007 6320 6951 0.79 2006 6168 6730 0.77 2005 5962 6562 0.75 2004 6104 6663 0.76 2003 6208 6758 0.77 2002 6691 7217 0.82 2001 7313 7791 0.89 2000 7490 8023 0.92 1999 7748 8378 0.96 1998 8192 8312 0.95 Peak Aver Aver Load-MW Population Cust 1.50 618 410 1.48 649 413 1.33 685 407 1.40 .707 402 1.53 738 396 1.42 808 393 1.75 755 391 1.80 729 367 2.00 803 358 1.87 833 348 As of the date of this Analysis YP residential electric customers pa -ents per KWH for electricity. State of Alaska Power Cost Assistance reduces this rate to JIFJI&MUTR-ts per KWH for the first 500 KWH each month. The ever escalating cost of diesel fuel and resulting higher electric rates has a stifling affect on YP rate payer personal disposable income and the Yakutat economy. The Concept There are at least four known technologies for using wood as a fuel source of electric generation - conventional steam boiler/turbine, gasifier/boiler/steam reciprocating engine, gasifier/gas reciprocating engine and plasma technology. IN Conventional Steam Boiler/Turbine The steam electric boiler/turbine utilizes a boiler which converts water to steam. The steam drives a turbine connected a generator which produces electricity. There are numerous wood fuel steam generation plants in the United States, Canada and Europe. Boiler efficiency and emission technology have notably improved in recent years. In many cases wood fuel plants operate in connection with a forest product operation and of much larger capacity (i.e. 20 MW or greater) than Yakutat's needs. Examples narrow for wood fired steam generation plants below 5 MW. The nearest known small operating facility in the United States is a 4 MW wood fired generation plant owned an operated by Vaagen Lumber Company at Colville, Washington. It operates in combination with its sawmill and sells electric energy in excess of sawmill needs sold to the local electric utility. Normally, new wood fired steam generation plants are not available for purchase as a complete package. The suggested capacity for a Yakutat wood fuel facility is 3 MW. 3 MW was selected so as to satisfy potential growth of the Yakutat electric load (2007 average load 0.8 MW, peak load 1.5 MW), to serve an expanded district heating load and as the energy source for processing and drying the wood 7 fuel for combustion. As previously stated YP does not have the luxury of access to a grid and selling excess energy. The rudimentary wood fired generation plant components would include: a covered structure where the logs and shredded and dried fuel would be placed, a wood processor which shreds and dries the wood fuel, a fuel feed system that carries the processed wood fuel into the boiler, a steam boiler, steam turbine, generator, switch gear, condenser, power transformer and heat exchanger for the district heat load. Electricity would be utilized to operate the wood processor. Wood fuel steam boiler/turbine plants are quite sensitive to moisture fuel content and impurities such as mud, sand and rocks which typically contaminate the fuel during logging. Exhaust emissions and ash disposal are issues which must be addressed.' In the event this alternative is further pursued, a good example to follow is the Alaska Power & Telephone Company (APT), which in 1996 issued a Request for Proposal to satisfy its electric energy requirement with a coal fired steam electric generation plant sized for Tok, Alaska. APT owned the rights to a nearby coal deposit and Holz Fuel Boiler/Wood Ash Action Plan, Technical Report (Publication No. 01-04-008), Washington Stae Department of Ecology, Olympia, Washington, revised February 2004 0 considered constructing a 2-3 MW plant to serve that load. Six consortiums of engineering, construction and permitting firms responded including some very respected names in this field of endeavor. A review of these Proposals reconfirms that such small steam electric generation plant will require a customized design and will not be built as an "off the shelf" plant such as generally would be expected for a diesel generation plant. Gasifier/Boiler/Steam Reciprocating Engine AES Alternative Energy Solutions, Inc.2 of Wichita, Kansas offers a gasifier/boiler/steam reciprocating engine system in a variety of small sizes as a complete package. A gasifier is a device which converts biomass, into relatively low heat content gas. AES combines the gasifier with a steam boiler. In Europe this technology finds many applications in food production. Other fuel sources applicable to this technology include annual wastes, non edible portions of agricultural products and other forms of biomass fuels. For example, peanut shells fuel a gasifier whose resulting gas supplies a steam boiler. The resulting steam heat dries the peanut. The steam driven reciprocating engine apparently is common used in Europe and Russia. Although the AES a See http:/www.aesenergy.com E gasifier/steam boiler can be linke o small steam turbine, AES recommends the steam reciprocating engine as its preferred method for converting gas boiler steam heat output to electrical energy applications such as Yakutat that because of the operating and maintenance similarities with diesel engines. A telephone discussion with AES sales representatives indicated there are neither operating gasifiers/boilers nor reciprocating steam engines in operation in North America today. Gasifier/Gas Fuel Reciprocating Engine The gasifier/gas fuel reciprocating engine/generator is based upon extracting gas from wood fuel with a gasifier and using the gas as the fuel for reciprocating engine similar to a diesel engine. This technology was successfully used by Germans during World War II. The Hoonah Wood Generation Feasibility Study3 dated March 1, 1981 considered both wood fuel small steam plant and the gasifier, gas reciprocating and recommended it as the preferred option. Today Thermogenics, Inc.4 of Albuquerque, New Mexico offers this option as a package. Both of the above technologies that use gasifiers have many advantages compared to the conventional boiler/steam ' Galliet, Harold, Jr. et al, Hoonah Wood Feasibility Study, prepared for the Alaska Power Authority and the U.S. Forest Service, Anchorage, Alaska, March 1, 1981 See www.thermogenies.com/default.html 10 turbine. They are available in small sizes that can be added in increments should load requirements increase where as practically steam boiler/turbine generator should be initially sized, designed and constructed to the ultimate configuration. Thus, the gasifier alternatives have significantly lower initial capital investment compared to the steam boiler/turbine alternative. Air emissions and ash disposal issues for the gasifier alternatives are minimal. YP, and other rural electric utilities, have expertise in operating and maintaining reciprocating engine/generators. Conventional boiler/steam turbine systems are very sensitive to fuel moisture content and impurities. A brief description of the experiences of wood fuel steam boiler/turbine generators for the Southeast Alaska logging industry in Appendix J and illustrates this problem. Gasifiers are relatively more forgiving regarding moisture fuel content issues. Plasma Technology Plasma technology primary application is to incinerate wastes normally associated with sanitary land fills. It uses high electric voltage and current which with an electrical arc like gasifier creates very high II temperaturesS. This high temperature arc breaks down waste primarily into elemental gas and sold waste, in a device called a plasma converter net generator of electricity The process is intended to be a Silver Bay Logging Company initially considered plasma technology for disposal of wood wastes and generate electricity at its Wrangell saw mil "XI during the 1990s. Ultimately, the proposed project grew to include disposal of wastes from most Southeast Alaskan communities. Other developments at Silver Bay Logging precluded further investigations and possible development a plasma facility. This Analysis concludes that plasma technology is too complex and of too large a scale to be appropriate for Yakutat. Although AMHLT has indicated preference for locating a wood fuel generation facility on its own land, this Analysis suggests it would be preferable to place it on a YP owned 5 acre parcel of land immediately adjacent to the existing diesel powerhouse. This location would save some costs for duplication of portions of the existing district heating system as well as eliminate the need for a transmission line connection with the existing distribution breaker panel at the YP plant. 5 See http://en.wikipedia.org/wikUP]asma_arc_gasification 12 Wood Fuel Issues D Issues related wood fuel quality, both moisture content and impurities, as well as the cost to gather and F»2rj+��,ad le transport to the generation plant are fie. Discussions with those associated with previously operated wood fired steam electric generation plants in Southeast Alaska suggests the most commonly encountered problem was the quality of wood fuel. (see Appendix J for summary of Southeast Alaska wood fuel steam boiler/turbine generation experience). Formable logistics associated with gathering and transporting wood fuel from Icy Bay to Yakutat for this level of analysis make it difficult to estimate gathering and transportation costs. Once gathered, the wood fuel must be shredded or made into chips. This could be accomplished at Icy Bay or at the Yakutat wood fuel generation plant. If performed at Icy Bay, it will be necessary to use diesel fuel to run the processing machine. If located at Yakutat the processing machine could be run with the electric output from the wood fueled generator. The price of fuel oil delivered to Icy Bay would be higher than Yakutat. Despite the higher barging costs of shipping bulky whole logs and other wood residue, wood fuel processing at Icy Bay would partially defeat the purpose of a wood fuel generation facility, to 13 minimize the diesel fuel requirement. Hence, for this Analysis wood processing will occur at Yakutat. Not only is the per cent level of moisture content unknown, but also the consistency of the moisture content, the mixture of various wood species with differing heat contents, the state of decay of the wood fuel as well as other impurities incurred during logging such as mud, sand and small rocks imbedded in the logs, slash or bark. Ideally, wood fuel would be an impurity free with untreated moisture content of 45% or less. Depending on the generation technology the moisture content must be lowered. Power Master Corp.6 of San Antonio, Texas markets a device, called a wood processor, which shreds and dries wood fuel to a sufficiently low the moisture content for efficient combustion. In 2006 the Juneau Economic Development Council prepared a report entitled Feasibility for Assessment for Wood Heating7. Extracted from the Report is Table 3, which breaks out the heat content of wood for various species: 6 See http://www.powermastercorp.com/index-6.html ' T.R. Miles Technical Consultants, Inc.. Feasibility for Assessment for Wood Heating, August 10, 2006. 14 Table 3 Wood Fuel Properties GHV MMbtu/ GHV HHV Btu/lb Cord Btu/lb Species Bt?/lb MC20 MC20 MC 50 West Red 8620 6896 12.8 4310 Cedar Hemlock 8338 6670 13.9 4169 Sitka 8200 6650 13.4 4100 Spruce White 8401 6721 13.7 4201 Spruce Where HHV - higher heating value GHV - gross heating value MC - % moisture content GHV = HHV x (1 - 50% MC) For the purpose of this Analysis the proxy for wood fuel properties will be 50% moisture content Sikta Spruce with a heat content 4100 BTU per lb. In the event AMHLT or others decides to move to the nex 2'in the feasibility analysis level, statistical samples should be taken of the wood fuel lying on the ground and that available for thinning to determine the mix of wood species, moisture content, the state of the wood decay and the extent of impurities lodged in the wood. Discussions with personnel associated with wood fuel generation plants which previously operated in Alaska (see Appendix J) suggests that rafting wood fuel through salt water should be avoided due resulting plant corrosion problems. Transportation of wood fuel from sources 15 separated by salt water bodies from Yakutat should be by barge, not rafted. Although hypothetical studies have used fuel cost estimates of $50 to $150 per cord8, relevant cost information for gathering and transporting for quantities of wood fuel in the 10,000-25,000 tons per year range has not been found. The closest comparable would be fire wood which is normally sold for heating purposes by the cord. Current prices for small volumes range from $150 per cord in Ketchikan to $240 in Juneau. For this Analysis $200 per cord will be used. According to Consumer Energy Center, California Energy Commission9, the average weight per cord of green (40-60% moisture content) Sikta Spruce is 3190- 4100 lbs. Interpolation suggests 3645 lb per cord or 1.823 tons (=3645/2000) per cord. $200 per cord equato $110 per ton (=200/1.823). Since this cost estimate methodology is crude at best in the Economic Analysis Section, a sensitivity analysis for a range of wood fuel costs is included. Wood Fuel Requirements Annual wood fuel requirements are a function of the annual electric energy requirement, the efficiency of the s Renewable Power In Rural Alaska: Improved Opportunities for Economic Deployment by Peter M. Crimp et al, Institute of the North, Anchorage, Alaska dated February 2008, page 3. 9 See http://www.consumerenrgycenter.org/home/heating_cooling/firewood.html 16 wood fired electric plant and the heat content of the wood fuel. For the gasifier steam boiler/steam reciprocating engine and gasifier/gas reciprocating engine the marketing representative provided this information. But for the steam boiler/turbine it must be calculated. Key YP generation statistics for years 1998-2007 are displayed in Table 2. Please note that over the years the annual energy requirement (electric sales, line losses and company use) has trended down generally in tandem with Yakutat's decreasing population. Please refer to Appendix A. For a wood fuel steam boiler/turbine it is recommended that the electric plant be sized to carry the electric load for a wood processor that converts wood logs and other residue to and dry to a combustible form, to accommodate an increased district heating load and allow for unexpected growth of the electric load. The average electric load for 2007 was 0.79 MW. The wood fired steam electric plant will require about 0.24 MW10 to for the wood processor. An additional 0.2 MW is included for district heating and other unknowns. The total of these loads (0.79+0.24+0.2) comes to 1.23 MW. The 0 See email dated August 7, 2008 from Lila York, Power Master Corp., San Antonio, Texas, tel: 866-459- 7289 17 corresponding annual energy requirement is 10,757 MWH (24 hour/day x 365 days/year x 1.23 MW). For generation plant efficiency, discussions with those familiar with wood fired generation plants that previously operated in Southeast Alaska as well as the presently operating Vaagen Lumber Company wood fuel generation plant at Colville, Washington provided little guidance on expectations for Yakutat. Several of the Southeast Alaska wood fuel generation plants in the past operated with used equipment and measurement devices, if any, were crude. Crimpll suggests a range of 15-200. If a wood fuel steam boiler/turbine generation plant is to be constructed, it should be a state of the art facility. Thus, this Analysis assumes the plant at the high end of the range, 20o efficiency. As previous stated the wood fuel heat content proxy will 50% moisture Sitka Spruce with a 4100 BTU/lb heat content. In order for a wood fuel steam plant to operate a satisfactory and consistent combustion level, the moisture content must be reduced to 450 or less. Hence, a portion M. et al, Renewable Power In Rural Alaska: Improved Opportunities for Economic Denlovment, nstitute of the North, Anchorage, Alaska dated February 2008, page 4. E. of the steam boiler or electric generator output will be required to dry the wood fuel. ert wce�&#'� The annual wood fuel supply requirement is calculated with the following formula: = ((BTU/KWH)/efficiency) / ((BTU fuel/lb) x (Ibs/ton)) x (1000 KWH/MWH) x (MWH ener req) For a wood fuel generation plant with 20% efficiency, 50% wood fuel with heat content of 4100 BTU per pound and an annual energy requirement of 10,757 MWH the annual wood refuel requirement would be 22,387 tons or 61 tons per day: = (3413/.20) / (4100 btu/Ib x 2000 lb/ton) x 1000 KWH/MWH x 10,757 MWH/yr = 17065/(4100 x 2000) x 1000 x 10,757 tons/yr = 22,387 tons/yr AES Alternative Energy estimates that a 1 MW gasifier boiler/steam reciprocating engine will burn 23071 tons of 30% moisture wood with heat content of 5660 btu/lb (see page 4 of AES proposal included in Appendix A). The heat content for 30% moisture content Sitka Spruce is 5740 btu/lb.12. The wood fuel processing equipment which shreds and dries the wood is expected to be capable of reducing Sitka Spruce moisture content from 50% to 30%. Thermogenics, Inc. for its gasifier/gas reciprocating engine, by telephone, stated the wood fuel requirement for ", Feasibility Assessment for Wood Heating, Alaska Wood Energy Development Task Group, Juneau Economic Development Council/Wood Products Development Service, August 2006, Table 4-2, page 4-2: (heat content dry Sitka Spruce 8200 btu/Ib x (100%-30% moisture content))=5740 btu/lb M 50% moisture content 4100 btu/lb Sitka Spruce would be 2300 lb/hour (or 1.15 tons/hour). Annually, wood fuel 2 requirement equates to 10,074 tons. Again, wood fuel p-" 'Y~ processing equipment which shreds and dries the wood is expected to be capable of reducing moisture content to a satisfactory level. The 23,071 ton annual fuel requirement for the gasifier/boiler/steam reciprocating engine is more than double that of the gasifier/gas reciprocating engine. The reason for this major difference should be understood. ital Costs The estimate for a wood fuel steam boiler/turbine is based upon a recent estimate prepared for a 14 MW wood fuel steam boiler/turbine to be located in the Pacific Northwest. The estimated cost per KW was in the $6000-7000 range per KW including provision small scale and the higher rural Alaska construction factor. Included in this estimate is the cost of a processor for shredding and drying the wood fuel to boiler combustible standards, substation, fuel handling facilities, a covered wood structure for drying and switch gear. For this Analysis an installed cost of $20 million (3 MW x $6667 per MW) was used. 20 AES Energy Alternative Energy Solutions, the company marketing the gasifier boiler/reciprocating steam engine, provided a preliminary estimate of $4.0 million for an installed 1 MW unit. The adjusted cost estimate of $6.2 million includes a wood fuel processor, fuel handling equipment and the Alaska factor. Thermogenics of Albuquerque, New Mexico, provide an estimate over the telephone of $2.45 million for the gasifier/gas A'� reciprocating engine. This number was adjusted to $3.6 million to include a wood fuel processor, fuel handling equipment and the Alaska factor. Backup information for each alternative, including a brochure on wood fuel processors is shown in Appendix C. Diesel Generation For YP today diesel fuel is the predominant component of the cost of electric energy. other costs include operation and maintenance of the existing generation plant, transmission and distribution facilities, administrative costs and the cost of capital. If YP were to decide to purchase energy from or own a wood fuel generation facility to be constructed at Yakutat, it would be prudent to keep its existing diesel generation plant for backup and for peaking. 21 Under any of the three wood fuel alternatives with the diesels in standby status, several existing major expenses would be avoided: diesel fuel, most diesel maintenance and some diesel operation costs. Non avoided expenses would include those associated with exercising the engines to insure continued reliability. For the purposes of this Analysis it will be assumed that the existing diesel plant would not require replacements if left in a standby status. For continuing to satisfy Yakutat's annual energy requirement with diesel generated energy, referred to as the diesel or status quo alternative, it will be necessary to periodically replace engine/generators. A replacement schedule and cost estimate13 is include in Appendix B for the status quo alternative. Appendix D includes the annual depreciation schedule for replacement diesel engines/generators with an assumed 20 year service life. Personnel Costs for Wood Fuel Generation A wood fuel steam boiler/turbine generation plant operates 24 hours per day, 365 days per year. For each 8 hour shift, two people will be required - an operator and most of the time a person responsible for wood fuel supply and maintenance. Assuming 40 hour weeks for 52 weeks a 13 2008 replacement costs provided by a telephone conversation with Doug Bloomer, NC Machinery Company, Anchorage, Alaska 22 year 4.21 operators would be required to operate the wood fuel steam plant around the clock. With vacations, 10 operating personnel positions and plant manager would be required to keep the plant running continuously. The skill level of a steam boiler operator14, in my assessment, would be equivalent to a Snettisham Thane Substation Operator at the Alaska Electric Light and Power Company whose total wage package cost approximates $120,000 per year. Appendix E includes total wage cost for a plant superintendent, operators and fuel supply/maintenance personnel. Total 2010 personnel cost for this alternative are estimated to be $900,000. For the gasifier/boiler/steam reciprocating engine and gasifier/gas reciprocating engine alternatives operator skill and manning levels requirements are lower. The 2010 annual personnel costs for each alternative is $536,000 as shown in Appendix E. Financing For the three wood fuel alternatives, the generation investment monies will be borrowed under the project finance concept. The total amount of the loan will be 100% of the total construction cost plus a maintenance fund " Steam boiler operators are not required to be certified per a June 17, 2008 telephone conversation with Chris Bolton, Chief Boiler Inspector, Department of Labor, State of Alaska, Anchorage, Alaska, tel: 907- 269-4934. 23 equal to of the construction cost, debt service reserve equal to one year of level debt service and financing cost of 2% of all borrowings. Interest was calculated at 60 with a single debt service payment each year for the 30 year bond life. Appendix F shows the debt service schedule for the steam boiler/turbine alternative. Although schedules are not shown for the other two wood fuel alternatives, the methodology computing interesh is the same as Appendix F. For the status quo diesel alternative it is assumed 20 year loans will be arranged for each diesel engine/generators when replaced. The interest rate is 60 with no requirements for a maintenance fund, debt service reserve or financing fees. Appendix B shows the annual interest payments for the diesel alternative. Economic Analysis For each alternative, including the diesel or status quo alternative, this economic analysis both addresses the actual impact on the electric rate payer as measured by the nominal cost of energy delivered to the bus bar in cents per KWH and from the long term perspective with consideration given to the time value of money with the benefit cost ratio analysis and closely related levelized annual costs. The benefit cost analysis utilizes the 24 methodology and procedures specified by the Federal Regulatory Energy Commission (FERC) for licensing hydroelectric projects. For the benefit cost ratio analysis the total present values of the annual costs for each proposed wood fuel alternative is compared with continuing with diesel or the status quo alternative. Benefit Cost Ratio = Sum PW of diesel annual costs Sum PW of wood fuel annual costs A benefit cost ratio of greater than one suggests further investigation into that wood fuel generation alternative is warranted, a ratio of less than one suggests that it should be dropped. Levelized annual costs, expressed in either total costs or cents per KWH, is a related method for comparing costs over the study period that takes into account the time value of money and attempts to compare on a representative annualized basis the total smoothed costs for each alternative under consideration. Table 4 summarizes the key assumptions used in this analyses: 25 Table 4 Key Economic Assumptions Capital Expenditures - year 2010 except for diesel Diesel - 2010 present worth $1,709,000 Steam boiler/turbine 20,000,000 Gasifier/boiler/steam recip engine 6,209,000 Gasifier/gas recip engine 3,624,000 Annual Energy Requirement - MWH for 2010-2039 Diesel 6,951 Steam boiler/turbine 10,757 Gasifier/boiler/steam recip engine 9,005 Gasifier/gas recip engine 9,005 Financing - 6% interest rate Diesel - 20 year loans Wood fuel alternatives - project finance, 30 year bonds Discount Rate for benefit cost analysis - 60 Cost of fuel - Year 2010, $5 per gallon Escalation rate for cost of fuel - 40 Inflation rate for construction, operation and maintenance and wood fuel cost - 3.50 Depreciation lives Wood fuel alternatives - 30 years Diesel alternative - 20 years Wood fuel cost - $200 per cord or $110 per ton Annual Fuel Requirements Diesel 466,365 gal Steam boiler/turbine 5,526 cords Gasifier/boiler/steam recip engine 12,656 cords Gasifier/gas recip engine 12,280 cords Operation and maintenance costs - year 2010 Diesel (2.5 cents/KWH) $171,000 Steam boiler/turbine 900,000 Gasifier/boiler/steam recip engine 536,000 Gasifier/gas recip engine 536,000 Appendixes G, H and I include the analysis for the status quo diesel alternative versus the steam boiler/turbine, gasifier steam boiler/reciprocating engine and gasifier/gas reciprocating engine, respectively. ►9 The nominal bus bar cost of for energy calculated in Appendixes G, H and I, expressed by year in cents/KWH, is summarized in Graph 1. On a nominal basis it shows conclusively that the steam boiler/turbine alternative and gasifier/boiler/steam reciprocating will be substantially more expensive for Yakutat rate payers than diesel or gasifier/gas reciprocating engine. Yet, for each year continuing with the status quo diesel is more expensive than the gasifier/gas reciprocating engine. Extracted from Appendixes G, H and I and displayed in Table 5 are the respective benefit cost ratio, total bus bar levelized annual cost and bus bar levelized annual cost per KWH: Alternative Diesel Steam boiler/turbine Gasifier/Boiler/Steam Recip Engine Gasifier/Gas Recip Engine Table 5 Summary of Benefit Cost Analyses Benefit Levelized Annual Cost Cost Ratio x 1000 Cents/KWH 4423 70.0 0.66 6702 106.0 Q.$7 .6 1.60 2756 2756 4343.6 Table 6 includes the results of a sensitivity analysis of the benefit cost analysis for a range diesel fuel and wood fuel costs. 27 Table 6 Economic Analysis - Sensitivity Analysis 5 Benefit Cost Ratio - Diesel Fuel/Wood Costs Benefit Cost Ratio Benefit Cost Ratio Gasifer/ Gasifer/ St Wood St Fuel boiler/ boiler/st Gasifier/gas fuel boiler/ boiler/st Gasifier/gas recio redo recig recio / al turbine engine engine /cord turbine engine engine 3.00 0.42 0.55 1.03 25 1.26 2.45 3.35 3.50 0.48 0.63 1.17 50 1.12 1.94 2.90 4.00 0.54 0.71 1.32 75 1.00 1.61 2.56 4.50 0.60 0.79 1.46 100 0.91 1.38 2.29 5.00 0.66 0.87 1.60 125 0.83 1.20 2.07 5.50 0.72 0.95 1.75 150 0.76 1.06 1.89 6.00 0.78 1.02 1.89 175 0.71 0.96 1.73 6.50 0.84 1.10 2.04 200 0.66 0.87 1.60 7.00 0.90 1.18 2.18 225 0.62 0.79 1.49 7.50 0.96 1.26 2.33 250 0.58 0.73 1.40 8.00 1.02 1.34 2.47 275 0.55 0.68 1.31 8.50 1.08 1.42 2.62 300 0.52 0.63 1.24 9.00 1.14 1.49 2.76 325 0.49 0.59 1.17 9.50 1.20 1.57 2.91 350 0.47 0.56 1.11 10.00 1.25 1.65 3.05 375 0.45 0.53 1.05 10.50 1.31 1.73 3.20 400 0.43 0.50 1.01 11.00 1.37 1.81 3.34 425 0.41 0.47 0.96 11.50 1.43 1.89 3.49 450 0.39 0.45 0.92 12.00 1.49 1.96 3.63 475 0.38 0.43 0.88 engine alternatives not be investigated further. Other Considerations As AMHLT deliberates whether to proceed further with developing a Yakutat wood fired generation plant, there are qualitative factors which should be considered. im 1. AMHLT and YP must be assured that there is a 30 year supply of wood fuel that is available. Whether scrap timber laying the ground for a long period of time and remain there for another 15 years will be usable as a fuel source is debatable. It appears future commercial logging on remaining unlogged AMHLT land or nearby U.S. Forest Service or Native owned land appears unlikely. In short, the issue of wood fuel supply, over the long run, requires careful research and documentation. As an alternative wood supply source, YP should consider to investigate alder tree farming. Alder grows fast in Southeast Alaska, has a heat content similar to Sitka Spruce, Cedar or Hemlock. It could be grown on the flatlands within close trucking distance of a wood fuel generation facility and could be harvested in a manner to avoid impurities that normally come with commercial logging. 2. Although this Analysis is based upon installation of a wood fuel generation plant of sufficient size to satisfy all of YP annual energy requirement. It does involve risk - the 29 technology may not work or the bus bar cost of energy is more than projected. A less aggressive and safer approach would to build a smaller facility to cover only a portion of the YP annual energy requirement, reducing investment and perhaps offer the opportunity investigate other alternative energy technologies such as wind, tidal, wave, deep earth thermal, etc. Perhaps a smaller pro` type wood fuel generation plant could l be constructed on a barge and moved to Yakutat for testing. If successful it could be moved on the land and expanded in size. If unsuccessful it could be sent back. 3. A wood fuel steam boiler/turbine plant cannot be started and stopped on a regular basis such as diesel generators, hydroelectric projects, gas turbines and other types of generation. It needs to be continuous supplied with fuel and manned 24 hours a day, 365 days a year. There is no Alaskan statutory requirement that Certified Boiler Operators run the wood fired steam plant. Just the same the issue of qualified to personnel to operate suggests consideration. This will require the wage and benefits package to attract 30 qualified applicants to Yakutat or extensive training programs for existing Yakutat residents and may upset existing YP wage scale dynamics. 4. At least in Southeast Alaska there is no indication of any small wood fired steam generation plants that were not constructed adjacent to a wood processing facility whether it be a saw or pulp mill. All those who attempted to operate a steam generation plant adjacent to a saw mill ultimately closed i.e. Klawock, Haines and Wrangell. They did not close due to timber supply issues. The wood fired steam generation plant at Ketchikan was an integrated component of the pulp operation and also served necessary role of disposing of unusable wood waste. See Appendix J. 5. YP is and expects to remain an electrically isolated utility. Until complete confidence is gained in the operational and economic reliability of a wood fuel generation facility, prudence suggests that it properly maintain and exercise existing diesel generation facilities. 6. There are the permitting issues - air quality and ash disposal both of which with time become ever 31 more challenging. The two gasifier wood fuel generation alternatives considered claim to be cleaner burning technologies. Continued diligence is suggested. 7. Grants - Investment in renewable wood fuel electric generation technology to satisfy Yakutat's electric requirements and the elimination of dependence on diesel fuel presents a persuasive case for financial assistance. Those Federal and State of Alaska agencies awarding energy grants, whether to prove emerging technologies, reduce dependence on fossil fuel or reduce electrical rates, should react favorable to the Yakutat case. An economic analysis such as included herein should play an important role in justification of a Federal and/or State grant application. 8. Although this Analysis is based upon installation of a wood fuel generation plant of sufficient \ (�! size to satisfy all of YP annual energy c \ requirement. It does involve risk - the technology may not work or the bus bar cost of energy is more than projected. A less aggressive and safer approach would to build a smaller 32 facility to cover only a portion of the YP annual energy requirement, reducing investment and perhaps offer the opportunity investigate other alternative energy technologies such as wind, tidal, wave, deep earth thermal, etc. Perhaps a smaller pro type wood fuel generation plant could be constructed on a barge and moved to Yakutat for testing. If successful it could be moved on the land and expanded in size. If unsuccessful it could be sent back. Conclusion and Recommendation In conclusion, this Analysis is infested with heroic assumptions and estimates that may not hold up well under rigorous scrutiny. With this in mind, the nominal bus bar cost of energy displayed in Graph 1 33 Customer Costs cents per MH 180 160 140 - —D esd 120 100 __— -. —fleam cents/ PWH Boiler/ 80 - - - - - - - - - Turbine —Gasifier/ 60 -- '� - - - - - Boiler/beam ladp Engne 40� - _. _ ___. ____ _ -_ _ __ - - —Gasifier/Gas Imp Eng ne 20 - (AeryA81 855pe§^ry�1ry�^p&19>rp 0�'ry�'ryll�"ry�'ry�'ry�`C j O&,,Pap�0.ry^hry A '—b Sb 6 Year and the benefit cost ratio data summarized in Table 5 presents strong arguments for and it is recommended that gasifier/gas reciprocating engine alternatives be further investigated and the steam boiler/turbine and gasifier/boiler/steam reciprocating be dropped. 34 Biblioaraoh Bergman, Richard et al, Primer on Wood Biomass for Energy, USDA Forest Service, State and Private Forestry Technology Marketing Unit Forest Products Laboratory, Madison, Wisconson, forestry.nacdnet.org/biomass/WoodBiomass.htm, revised January 2008 Crimp, Peter M et al, Renewable Power in Rural Alaska: Improved Opportunities for Economic Deployment, Institute of the North, Anchorage Alaska, www.articenergysummit.org, February 2008 Feasibility Assessment for Wood Heating, Final Report, Alaska Wood Energy Task Group, Juneau Economic Development Council/Wood Products Development Service, August 2006 Galliet, Harold, Jr. et al, Hoonah Wood Feasibility Study, prepared for the Alaska Power Authority and the U.S. Forest Service, Anchorage, Alaska, March 1, 1981 Graham, Daniel, Summary of Preliminary Findings Potential for Installing Solid Fossil Fuel Power Generation in Yakutat, Technical Field Services, Inc., Palmer, Alaska, April 20, 2006 Hog Fuel Boiler/Wood Ash Action Plan Technical Report, Department of Ecology, Hazardous Waste & Toxics Reduction Program (Publication No. 01-04-008), Washington State Department of Ecology, February 2004 Plasma arc waste disposal, Wikipedia, en.wikipedia.org/wiki/Plasma_arc_gasification Woody Biomass Utilization in Alaska, Issue Paper, U.S. Forest Service, Juneau, Alaska, July 2006 35 rnntArt c Bender, Bob, Owner/Manager, Chiptec, Inc., Williston, Vermont, tel: 800-244-4146 re: wood fuel boilers Bloomer, Doug, NC Machinery Company, Anchorage, Alaska, tel: 800-478-7000 Bolton, Chris, Chief Inspector, Steam Boilers, Department of Labor, State of Alaska, tel: 907-269-4934 Boutin, Tom, former Director, Division of Forestry, Alaska Department of Natural Resources, Juneau, Alaska, tel: 907- 789-7936 Burd, Sherman, retired consulting engineer, Bellevue, Washington, tel: 425-454-3581 Cartwright, AES Alternative Energy Solutions, Wichita, Kansas, tel: 316-201-4143 re: gasifier/boiler/steam reciprocating engine Crimp, Peter, Alaska Energy Authority, Anchorage, Alaska, tel: 907-771-3000 Fisher, Ed, retired President, Ketchikan Pulp Company, Ketchikan, Alaska, tel: 907-227-4962 Grimm, Bob, President, Alaska Power & Telephone Company, Port Townsend, Washington, tel: 360-301-3636 Lenderman, Chuck, Edison Electric Institute, Washington, D.C., tel: 202-508-5000 Miles, T.R., wood fuel boiler consultant, Portland, Oregon, tel: 503-292-0107 Newlun, Scott, Manager, Yakutat Powe Awe, Yakutat, Alaska, tel: 907-784-3242 Nicholls, Dave, Forest Product Technologist, U.S. Forest Service, Sikta, Alaska, tel: 907-747-4312 Parrents, Dan, forestry consultant, Sikta, Alaska, tel: 907-747-5688 M Pihl, Martin, retired President, Ketchikan Pulp Company, Ketchikan, Alaska tel: 907-617-0184 Ridout, Gary, President, AES Alternative Energy Solutions, Wichita, Kansas, tel: 316-201-4143 re: gasifier/boiler/steam reciprocating engine Ryman, Skip, Borough Manager, Yakutat, Alaska, tel: 907- 784-3323 Seley, Steve, President, Pacific Log and Lumber Co., Ketchikan, Alaska, tel: 907-617-7440 Taylor, Tom, President, Thermogenics, Inc., Albuquerque, New Mexico, tel: 505-463-8422 re: gasifier/gas reciprocating engine Templin, Brian, Planner, City of Craig, Craig, Alaska, tel: 907-3275 Woodberry, George, retired Wood Division Manager, Alaska Pulp Company, Wrangell, Alaska, tel: 907-874-4140 York, Lila, Sales Representative, Power Master, San Antonio, Texas, tel: 866-459-7289 re: wood fuel processing equipment Zyskowski, Robert, Manager, wood fuel steam generation plant, Vaagen Brothers Lumber Company, Colville, Washington, tel: 509-680-1230. 37