HomeMy WebLinkAboutPeat Commercial Feasibility Analysis Executive Summary 1983PEAT COMMERCIAL FEASIBILITY ANALYSIS
Executive Summary Prepared For:
The State of Alaska, William Sheffield, Governor
E Department of Commerce and Economic Development
Richard Lyon, Commissioner
Division of Energy and Power Development
William Beardsley, Director
AX Mheelabrator-Five Ine.
Liberty Lane
Hampton, New Hampshire 03842
January 31, 1983
ALASKA PEAT COMMERCIAL FEASIBILITY ANALYSIS
I. Executive Summary
A. Overview
Wheelabrator-Frye Inc. in combination with a project team highly
experienced in peat technologies, has conducted a peat commercial
feasibility analysis for the Alaska Department of Commerce and
Economic Development, Division of Energy and Power Development. The
primary purpose of this analysis was to identify and document the
commercial prospects for alternative methods of peat utilization for
energy production in South Central Alaska. Primary emphasis was
placed upon technology deemed suitable for near tem
commercialization. Technologies showing significant promise but
needing additional development work were also identified.
Resource estimates prepared by the U. S. Department of Energy
suggest that peat is the nations second largest fossil energy resource
with potential reserves exceeding those of crude oil, natural gas, and
Western oil shale. The U. S. ranks third behind Canada and the Soviet
Union in terms of peat resources worldwide. It has been estimated
that as much as half of U. S. peat resources are in Alaska. Energy
peat production in the Soviet Union, Ireland, and Finland is estimated
at 80 million tons per year, 6 million tons per year, and 4 million
tons per year respectively. There is currently no significant peat
energy production in the U. S. or Canada. Alaska's peat reserves
exceed the State's oil and gas resources. Successful establishment of
a peat processing industry in Alaska can play a significant role in
mitagating the economic impact of expected future declines in Alaskan
oil and gas production. We feel that this study puts commercial
alternatives for peat energy utilization in Alaska into perspective
relative to other Alaskan energy sources.
Our study was conducted in two phases. In Phase I we analyzed
alternative peat harvesting and processing technologies, product
slates, markets and product values, and alternative plant sites and
scales. Our contract was limited to an evaluation of peat usage in
South Central Alaska. The methodology utilized, however, will permit
extension of our results to other areas in Alaska with little addi-
tional effort. Phase I evaluated both traditional peat harvesting
methods currently being practiced in the Soviet Union and Finland as
well as newer harvesting methods based on the extraction of wet peat
with subsequent water removal in a processing facility. A number of
alternative dewatering processes were evaluated with respect to
process economics and technological maturity. End-products considered
included electricity, methanol, ammonia, high volatile fuel briquettes
and low volatile granules (a semi-coke or charcoal like material) and
co-product oil. In Phase I several South Central Alaska potential
plant sites were evaluated with respect to peat quantity, quality, and
plant logistical considerations.
PROPERTY OF:
Alaska Power Authority
334 W. 5th Ave.
Anchorage, Alaska 99501
In the second phase of the project, a more detailed analysis of the selected project concept showing the greatest commercial promise was evaluated in greater depth. A potential plant site was selected,
resource samples from the site were extracted and tested at laboratory scale for the proposed process. A preliminary assessment of permit- ability and environmental impact of the proposed project was made.
Finally, an engineering cost estimate and economic analysis of the project was prepared.
B. Phase I, Results
Table I-1 lists the alternatives evaluated in the first phase of
the study. Plant sites in the Susitna Basin (Trapper Lake area), Beluga (near power plant) and Kenai (between Kenai and Cohoe) were
evaluated. The Trapper Lake region appears able to support 500,000 to
750,000 tons/year of primary peat production. The Beluga area was disappointing with respect to both peat quality and quantity. The
Kenai site was chosen for Phase II evaluation. It has somewhat less
peat resource then the Trapper Lake area but appears capable of
supporting 500,000 tons/year of production. Kenai permits a plant to
be built on Tidewater reducing transit and fuel handling costs to export markets. A Tidewater plant site also allows use of a pre-
constructed ocean barge transported process plant, possibly built in
an Asian shipyard, which would significantly reduce plant capital costs and construction time.
A broad range of potential energy products producable from peat
were evaluated. Electric power production from peat is not competi- tive with gas fired combustion turbines in the near term, and hydro- electric or coal fired plants in the future. Likewise, methanol or
ammonia can be produced more cheaply from natural gas today, and
Alaskan coal within two decades. Currently available technology does
not allow processed peat (dried and densified) to compete with Alaska
coal in export utility steam coal markets. The most favorable alter-
native identified using developed technology is the co-production of
peat semi-coke and coker-oil competing with anthracite or wood char-
coal and heavy fuel oil respectively.
Fully developed and newly proposed harvesting and processing
technologies were evaluated. Traditional peat harvesting relying on
field drying is not economic under Alaskan climatic conditions and
produces fuel of very low quality. Wet harvesting of peat with high
volume floating excavation equipment and subsequent pipeline transport
of excavated peat to a dewatering plant appeared most attractive.
Three dewatering processes showed economic promise. The peat wet
carbonization process, developed by J. P. Energy Oy at their pilot
facility in Finland was selected based on its state of development and
economic performance.
C. Phase II, Results
An in-depth analysis was performed on the most promising
plant/product concept identified in Phase I. Phase II results are
summarized in Table I-2. The proposed plant, located at a shore site
between Kenai and Cohoe would cost $180 million if site erected (in
1983 dollars) and produce 500,000 tons/year (dry basis) of wet
carbonized peat subsequently converted into 262,000 tons/year of
semi-coke and 100,700 tons/year (552,000 BLS/year) of fuel oil. The
plant would employ approximately 115 full-time personnel. As
proposed, it would produce about half of it's electric power and
purchase about 8 megawatts. The plant could be designed for electric
power self-sufficiency if necessary.
Our marketing studies suggest that approximately 100,000 tons of
output could be briquetted and sold to Alaskan space heating markets.
This fuel would primarily displace No. 2 fuel oil and cord wood in
residential, commercial, institutional, and small _ industrial
applications not currently serviced by natural gas supplies. The
balance of the solid fuel produced and production from subsequent
plants would have to rely primarily on export markets to the
Northwestern U. S. and Pacific Rim countires. The use of anthracite
and wood charcoal for cooking and space heating is well established in
Asian countries especially in Korea where 25 million tons per year of
anthracite are consumed for residential space heating briquettes. It
appears that they will have to purchase at least 3.5 million tons per
year of anthracite for the remainder of this decade to supplement
their declining domestic production.
The co-product oil produced from devolatilizing wet carbonized
peat should be suitable as a boiler fuel for industrial and commercial
users currently burning residual oil (No. 6 oil). This oil product
cannot be mixed with No. 6 oil but has comparable heating value and
viscosity and lower sulfur content. We have assumed that several
dedicated users of this product could be found in Alaska to consume
the 552,000 barrels per year produced.
We are concerned that peat at both the Trapper Lake and Kenai
areas might be too high in ash content to meet the ash specification
required by Korean and Japanese anthracite purchasers. Several peat
de-ashing methods were investigated at laboratory scale as part of our
study. The only method which proved effective in reducing peat ash
content was a new method not currently commercially utilized. We have
projected that the use of this method would raise the end-product
price by $10 per ton but have not included this additional cost in our
economic analysis. Alternatively, the project as described could be
sited at other locations such as Dillingham which appear to have
significant quantities of peat at substantially lower ash content. If
coastal peat deposits in more remote Alaskan tidewater areas are
utilized, a pre-constructed barge transported plant would be a
necessity. Even in South Central Alaska it would significantly reduce
plant costs.
It appears that the proposed plant can meet applicable State and federal air and water emissions standards. Several post-harvesting
reclaimation alternatives appear feasible. These include the creation of flooded or semi-flooded wildlife habitat and fisheries. Peatlands
could also be drained after production at some sites and utilized for
agricultural production.
D. Conclusion
The study concludes that the economic analysis for the proposed plant under various financing assumptions resulted in a 10-20% after tax return on investor equity (13.4% under base case assumptions). While the production and recovery of products in addition to the char and oil were considered, these recovery technologies and markets are not well developed at this time, and, therefore, their effects were not included in the base economic analysis. The projected return on equity would equal or exceed corporate investment hurtle rates for some companies involved in mature technologies and mature markets. This project, however, involves technology which has been fully developed but not demonstrated at this scale. The project also involves products which are slightly different from the anthracite,
wood charcoal, and residual oil they displace. Long term purchase
contracts at the prices indicated above are probably not obtainable
until sufficient test quantities of fuel have been produced and tested by target customers. Given the technological and market risks
involved, our firm and others like it would probably require in excess
of a 30% return on investors equity to proceed with such a plant on a first-of-a-kind basis.
Construction and operation of a plant such as that proposed could prove more attractive in other parts of the world where peat resources
contain less ash, climatic conditions are less severe, construction
and operating labor costs are lower, and the plant products can command a higher market value (or less transportation costs). If technical and market risks were reduced, via construction of a prior project elsewhere, than the projected return of the proposed project
should be acceptable to investors. It should also be noted that
technological improvements and/or the use of a _ pre-manufactured
modular plant concept could improve the returns on this project. The
base economics assumed 25% equity, 75% debt financing at normal
commercial rates. Low interest financing or other incentives would also boost returns on the proposed project.
It should be restated that the base case economics assumes that
sufficient quantities of peat with less than 15% ash proximate to a plant site are available or alternatively that higher ash peat
feedstock can be de-ashed at nominal cost. This condition can be
satisfied for such a project at numerous locations in Alaska but
possibly not within South Central Alaska. If de-ashing is required, it
would reduce the return on investment by at least 5%. It would also
require significant additional technical development and
demonstration.
The magnitude of Alaska's peat resource dictates that it should
be utilized to maintain and improve Alaska's economy as oil and gas
production decline in the future. Peat's unique properties should be
exploited to avoid direct competion with Alaskan coal resources on a
BTU basis. Wet extraction of peat appears to offer both economic and
environmental advantages under Alaskan conditions. Wet carbonization
of peat appears to be the most cost effective commercially developed
dewatering method for wet harvested Alaskan peat. Additional research
work on less developed alternative methods might also prove fruitful.
Peat wet carbonization can also result in the generation of
significant potentially recoverable by-products such as furfural,
ketones and other resins and solvents. Yields and recovery of these
by-products are highly feedstock specific. By-product recovery
technologies when developed can produce significant additional plant
revenues improving overall economic prospects. Wet carbonized peat
results in a_ substantially higher liquid fuel yield upon
devolatilization than is achievable with untreated peat or coal (40%
BIU yield as liquid fuel). The char (semi-coke) resulting from
devolatilization is superior to coal or wood for space heating and
cooking (smokeless and even burning). Char produced from low ash or
de-ashed peat can command a premium for activated carbon or
metallurgical coke use. Peat wet carbonization improves peat
de-ashing properties.
The most cost effective method for near term commercialization of Alaskan peat appears to be co-production of peat char granules and industrial fuel oil at a substantial scale plant located near
tidewater utilizing peat feedstock averaging 12% ash or less. A
modular plant design, Asian construction of modules, and governmental
financing incentives could all improve economic prospects. Wet
carbonization by-products recovery, the co-harvesting of horticultural
peat, and/or solvent extraction of waxes from raw peat feed could
further enhance economics if developed. In the future, biological
conversion of peat cook liquor into liquid fuels, chemicals and food
using newly developed genetic engineering techniques offers exciting
promise if developed. Biological conversion should prove less
sensitive to the high ash content unique to many Alaskan peats.
Alaskan peat processing options are illustrated in an attached
schematic.
Technical progress and commercial experience in peat processing
technology will continue to improve the economic prospects for
commercialization of Alaskan peat. Alaska, with half of the nation's
peat resources, should seriously consider further participation with
federal and private efforts to further develop peat technologies.
Table I-1
Alaskan Peat Commercial Feasibility Analysis
Phase I - Summary of Alternatives Evaluated
Sites
1. Susitna Basin (Trapper Lake)
2. Beluga (near power plant)
*3, Kenai (between Kenai and Cohoe)
End-Products
Electric Power via Steam Boiler
Electric Power via Gasification Combined Cycle
Methanol 2,500 ton/day scale (Gasification/Synthesis)
Ammonia 1,200 ton/day scale
- High Volatile Solid Fuel Briquettes
- Low Volatile Granules with Co-Product Fuel Oil DU FPWNHE *
Harvesting/Transport Systems
1. Traditional Milled Peat with Truck Transport
2. Suction Dredging with Pipeline
3. Continuous Deep Cutting (Deep Milling) with Conveyor
4. Mechanical Wet Excavation with Truck Transport
*5. Floating Mechanical (Clamshell) Excavator with Pipeline Transport
Dewatering Technology
1. High Performance Press (Bell/Sulzer) with Various Thermal Drying
Alternatives
2. High Performance Press with Multiple Effect Evaporation
(Carver-Greenfield)
3. High Severity Wet Carbonization (Koppelman)
4. Partial Oxidation (Zimpro)
*5. Low Severity Wet Carbonization with Two-Stage Fluid Bed Drying
Plant Scales/Concepts
1. 250,000 ton/year High Volatile Fuel Output
2. 2,000,000 ton/year High Volatile Fuel Output
3. 262,000 ton/year Semi-Coke plus 100,700 ton/year Fuel Oil;
On-Site Construction
*4, 262,000 ton/year Semi-Coke plus 100,700 ton/year Fuel Oil; Float-—
On/Float-Off Modular Construction
*
*Alternative Selected
Table I-2
Alaska Peat Commercial Feasibility Analysis
Phase II - Summary
Target Market (s) Fuel Displaced Use Market Size Price (FOB Alaska)
A. Semi-coke granule
Korea Anthracite space heating 3.5 million TPY $60/ton
briquettes
U.S. (Lower 48) Wood charcoal 1 million TPY $60-80/ton
briquettes
Japan Anthracite space heating 1 million TPY $60/ton
briquettes
Alaska #2 011/wood/ space heating 0.1 million TPY $60/ton
coal
B. Co-product fuel oil
Alaska (Lower 48) #6 Residual oil utility and 3 million barrels $27/barrel
industrial fuel per day
oil
Economic Summary (in 1983 dollars)
Total Plant Costs $180 million
Semi-coke Production
Fuel Oil Production
Annual Plant Revenues
Full-Time Direct Employment
Outside Purchased Power
Return on Investor's Equity
262,000 tons/year @ $60/ton
100,700 tons/year (552,000 barrels/year) @ $27/barrel
$30 million/year
115 persons
8 megawatts
10-20% (depending on financing assumptions)
Alaskan Peat Refinery
Kenai/Cohoe Site
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