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HomeMy WebLinkAboutfeasibility CC and NKI Preliminary Feasibility Assessment for High Efficiency, Low Emission Wood Heating In Coffman Cove and Naukati, Alaska Prepared for: Liz Mosenthin Southeast Island School District Prepared by: Daniel Parrent, Wood Utilization Specialist Juneau Economic Development Council Submitted November 3, 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 for Liz Mosenthin, Southeast Island School District. 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 2 Table of Contents Abstract Section 1. Executive Summary 1.1 Goals and Objectives 1.2 Evaluation Criteria, Project Scale, Operating Standards, General Observations 1.3 Assessment Summary and Recommended Actions 1.3.1 General Observations 1.3.2 Naukati School 1.3.3 Coffman Cove School Section 2. Evaluation Criteria, Implementation, Wood Heating Systems 2.1 Evaluation Criteria 2.2 Successful Implementation 2.3 Classes of Wood Heating 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 and Potential Savings 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 HELE Cordwood Boilers 6.6 Present Value, Net Present Value and Internal Rate of Return Values for Various HELE Cordwood Boiler Installation Options 6.7 The Case for Fuel Purchase Planning and Fuel Storage 6.8 Life Cycle Cost Analysis Section 7. Economic Feasibility of Bulk Fuel Systems Section 8. Conclusions References and Resources 3 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 Calculation of Present Value, Net Present Value and Internal Rate of Return Appendix H Garn Boiler Specifications List of Tables and Figures Table 4-1 HELE Cordwood Boiler Suppliers Table 4-2 Emissions from Wood Heating Appliances Table 5-1 Comparative Cost of Fuel Oil vs. Wood Fuels Figure 5-1 Effect of Hemlock Cordwood Price on Cost of Delivered Heat Table 5-2 Reported Annual Fuel Oil Consumption, Coffman Cove School Table 5-3 Estimate of Heat Required in Coldest 24-Hour 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 Non-fuel OM&R Cost Estimates Table 6-4 Simple Payback Period Analysis for HELE Cordwood Boilers Table 6-5 PV, NPV and IRR Values for Various HELE Cordwood Boiler Options Table 6-6 Estimated Life Cycle Costs of Cordwood System Alternatives 4 Key words: HELE, LEHE, bulk fuel, cordwood ABSTRACT The potential for heating the Coffman Cove School in Coffman Cove, AK and the Naukati School in Naukati, AK with high efficiency, low emission (HELE) cordwood boilers is evaluated for the Southeast Island School District. Early in 2008, organizations were invited to submit a Statement of Interest (SOI) 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. AWEDTG representatives visited Coffman Cove and Naukati during the summer and fall of 2008 and information was obtained for the school facilities. 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 • Identify the school facilities in Coffman Cove and Naukati as potential candidates for heating with wood • Evaluate the suitability of the facilities and sites 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/processing residues, sustainability of the wood supply, community support, and project implementation, operation and maintenance. • Using an estimate of 10,000 gallons of fuel oil per year for each of these school facilities, these projects would be considered medium-sized in terms of their relative scales. • 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. However, 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 5 1.3 Assessment Summary and Recommended Actions 1.3.1 General Observations The Naukati School was built in 2004 and opened in the fall 2005. The Coffman Cove School is currently under construction (nearing completion) and is scheduled to open in the late winter or spring 2009. The two facilities are nearly identical in design, footprint and layout (approximately 10,000 square feet). And although there are some differences in the heating systems, the gross fuel oil consumption at each facility is expected to be very similar (approximately 10,000 gpy). 1.3.2 Naukati School The Naukati School consists of single structure, approximately 10,000 square feet in size. Current enrollment is about 16 students, but the facility is large enough to accommodate as many as 75. There is a separate structure behind the main school building that serves as teacher housing (approximately 1,000 sf), with its own oil-fired heating system. Heat (in the school) is provided by two Weil McLain model 680 boilers, rated at 551 MBH (net, each), in nearly new condition. Heat is distributed via air handlers in the gymnasium, cabinet heaters at entranceways, and hot water fin tube/baseboard elements in the classrooms. Domestic hot water is supplied by an 80-gallon Amtrol WHS80ZCDW Boilermate unit. There are some potential elevational/topographic challenges in the area around the Naukati School, and the site is a bit constrained for wood/fuel storage. However none of these limitations are so severe as to preclude the construction of wood-fired heating plant. One notable difference between the Naukati School and the Coffman Cove School is the potential to partner with the local power company, AP&T, to capture waste heat from the diesel generators located approximately 140 feet away from the school’s boiler room. Given this potential, it is probably inappropriate to pursue a wood heating plant for the Naukati School until that situation is resolved; the waste heat from the generators could significantly reduce the school’s fuel oil consumption, which would result in a significantly smaller wood-fueled heating plant. 1.3.2 Coffman Cove School • Overview. The Coffman Cove School consists of single structure, approximately 10,000 square feet in size. Current enrollment is about 14 students in grades K-12, but the facility is large enough to accommodate as many as 75. Heat is provided by three Weil McLain Gold model A/B-WGO-8, Series 3 boilers, rated at 231 MBH (net, each), in new condition. Heat is distributed via air handlers in the gymnasium, cabinet heaters at entranceways, and radiant heat floors in the classrooms. Domestic hot water is supplied by an 80-gallon Amtrol WHS80ZCDW Boilermate unit. The area around the school is level to gentle. The most desirable location for a wood-fired boiler appears to be toward the front of the lot, although there are other viable options. There is suitable space on site or nearby for wood storage. It is also worth noting that the designers have already considered the possibility of connecting an external hydronic heating system to the oil-fired boilers. Plumbing 6 connections are already in place in the boiler room and underground plumbing has been run, for a short distance, to the building exterior. • Fuel Consumption. The Coffman Cove School is expected to consume approximately 10,000 gallons of #2 fuel oil per year. • Potential Savings. At the current price of $4.50 per gallon, the Coffman Cove School will spend approximately $45,000 per year for fuel oil. The HELE cordwood fuel equivalent of 10,000 gallons of #2 fuel oil is approximately 111 cords, and at $150 per cord represents a potential annual fuel cost savings of $28,350 (debt service and non-fuel OM&R costs notwithstanding). • Required boiler capacity. The estimated required boiler capacity (RBC) to heat the Coffman Cove School is approximately 274,000 Btu/hr during the coldest 24-hour period. One large or two medium high efficiency cordwood boilers could theoretically supply 100% of that RBC. • Recommended action regarding a cordwood system. Given the initial assumptions and cost estimates for the alternatives presented in this report, this project appears to be viable and cost-effective. Further consideration is warranted. (See Section 6) • Recommended action regarding a bulk fuel wood system. Given the relatively small heating demand and the probable costs of the project, a “bulk fuel” system is not cost-effective for the Coffman Cove School. 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 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 Coffman Cove School meets the AWEDTG criteria for potential petroleum fuel displacement, use of forest residues for public benefit, use of local processing residues, sustainability of the wood supply, community support, and the ability to implement, operate and maintain the project. In the case of a cordwood boiler system, the wood supply from forest fuels or local sawmill processing residues (i.e., slabwood) appears adequate and matches the application. “Bulk fuel” (bark, sawdust, chips) is available in Klawock, but the relatively small demand and the cost of a bulk fuel system makes a bulk fuel heating system, like the one at the Craig Schools & Pool, cost- ineffective for the Coffman Cove School. 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. 7 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) dedication 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 clear which organization(s) would sponsor or implement a wood-burning project. (NOTE: This is not necessarily the case with the Coffman Cove School project but this issue should be addressed.) With manual systems, boiler stoking and/or maintenance is required for approximately 5-15 minutes per boiler several times a day (depending on the heating demand and size of the boiler(s)), and dedicating personnel for the operation is critical to realizing savings from wood fuel use. 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. It may also possible to hire those services locally if facility personnel are not available for such duties. There is some pre-existing forest industry infrastructure in/around Coffman Cove and a great deal more on Prince of Wales Island in general. The existing infrastructure appears sufficient to support the proposed project with the cooperation the USDA Forest Service and Alaska Division of Forestry. For this report, it is assumed that wood supplies are sufficient to meet the demand. 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, can exert strong influences on the feasibility of a bulk fuel system. 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 remain in place and be available for peak demand or backup in the event of downtime in the wood system. SECTION 3. THE NATURE OF WOOD FUELS 3.1 Wood Fuel Forms and Current Utilization Wood fuels to be found around Coffman Cove generally take the form of cordwood or large sawmill residues (slabwood, primarily). A supply of bulk fuel (chips, hog fuel) is available in Klawock, and even given new paved roads, it is fair distance to haul wood fuel, given the expected sized of the project. There is no local supply of bulk pellets. 8 Residential use of cordwood has increased in the past 18 months due to higher fuel oil costs, but residents of Coffman Cove (and Prince of Wales Island at large) have traditionally burned quit a bit of wood for home heating. Given that higher demand, prices for firewood have gone up somewhat, but a large, reliable commercial account could be expected to induce some economies of scale and keep cordwood prices reasonable. 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 recognized ‘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. A variety of species can be found in/around Coffman Cove, including Sitka spruce, western hemlock, alder, and red and yellow cedar. Hemlock is the most common and for this report, hemlock cordwood at 30 percent moisture content (MC30), calculated on the wet weight basis (also called green weight basis), is used as the benchmark. 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. 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 9.942 million Btu per cord. The delivered heating value of 1 cord of hemlock cordwood (MC30) equals the delivered heating value of 90.05 gallons of #2 fuel oil when oil is burned at 80% efficiency and wood is burned at 75% efficiency. A more thorough discussion of the heating value of wood can be found in Appendix B and Appendix D. SECTION 4. WOOD-FUELED HEATING SYSTEMS 4.1 Low Efficiency High Emission (LEHE) Cordwood Boilers Most outdoor wood boilers (OWBs) are relatively low-cost and can save fuel but most 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. The State of New York instituted a moratorium in 2006 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. But since there are no standards for OWBs (wood-fired boilers and furnaces were exempted from the 1988 EPA regulations10), OWB ratings are inconsistent and can be misleading. Until recently, 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 industrial boilers. Obviously, these results were deemed unsatisfactory and new boiler standards were called for. 9 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 1 standard calls for emissions not to exceed 0.60 pounds of particulate emissions per million Btu of heat input. The Phase 2 standard, which will follow two years after Phase 1, will limit emissions to 0.32 pounds per million Btus of heat delivered, thereby creating an efficiency standard as well. (NOTE: Phase 2 was announced on October 23, 2008. More information can be found on the EPA website noted below.) 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 (HELE) Cordwood Boilers In contrast to low efficiency, high emission cordwood boilers there are a few units that can be considered high efficiency, low emission (HELE). These systems are designed to burn cordwood fuel cleanly and efficiently, mostly by incorporating some degree of gasification technology. Table 4-1 lists three HELE boiler suppliers, all of which have units operating in Alaska. BioHeatUSA (formerly TarmUSA) and Greenwood and have a number of residential units operating in Alaska. A number of Garn boilers, manufactured by Dectra Corporation, have been installed in larger institutional applications in Dot Lake, Tanana and Kasilof, and several others are in the planning stages. Table 4-1. HELE Cordwood Boiler Suppliers Supplier Btu/hr ratings Brands Bio Heat USA www.bioheatusa.com 100,000 to 198,000 Tarm, Scandtec, Froling Greenwood www.greenwoodusa.com 100,000 to 300,000 Greenwood Dectra Corp. www.garn.com 350,000 to 950,000 Garn Note: Listing of any manufacturer, distributor or service provider does not constitute an endorsement. Other gasification-style wood boiler manufacturers and/or suppliers include Econoburn, Wood Gun, and EKO-Line. (And there may be others.) However, there are no known operating units by these suppliers in Alaska, and it is unknown whether any of the appliances sold by these suppliers meet the efficiency or emission standards discussed in Section 4.1. Table 4-2 shows the test results for a high efficiency boiler (Garn WHS 1350) that was tested at 157,000 to 173,000 Btu per hour using standardized testing procedures, compared with EPA standards for wood stoves and boilers. It is important to remember that wood fired boilers are not entirely smokeless; even very efficient wood boilers may smoke for a few minutes on startup.4,15 10 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 The term “bulk fuel” refers, generically, to sawdust, wood chips, shavings, bark, pellets, etc. Since the cost of bulk fuel systems is so high (i.e., $1 million and up), and the potential savings are relatively small (i.e., $25-30,000/yr), the discussion of bulk fuel boiler systems has been omitted from this report. SECTION 5. SELECTING THE APPROPRIATE SYSTEM Selecting the appropriate heating system is, primarily, a function of heating demand. It is generally not feasible to install automated bulk fuel systems in/at small facilities, and it is likely to be impractical to install cordwood boilers at very large facilities. Other than demand, system choice can be limited by fuel availability, fuel form, labor, financial resources, and limitations of the site. The selection of a wood-fueled heating system has an impact on fuel economy. Potential savings in fuel costs must be weighed against initial investment costs and ongoing operating, maintenance and repair (OM&R) costs. Wood system costs include the initial capital costs of purchasing and installing the equipment, non-capital costs (engineering, permitting, etc.), the cost of the fuel storage building and boiler building (if required), the financial burden associated with loan interest (if applicable), the fuel cost, and the other costs associated with operating and maintaining the heating system, especially labor. Cost-effective systems generally have simple payback periods of 10 years or less, (See section 6.5) 5.1 Comparative Costs of Fuels Table 5-1 compares the cost of #2 fuel oil to hemlock cordwood (MC30). In order to make reasonable comparisons, costs are provided on a “per million Btu” (MMBtu) basis. Table 5-1. Comparative Cost of Fuel Oil vs. Wood Fuels FUEL RHVa (Btu) Conversion Efficiencya DHVa (Btu) Price per unit ($) Cost per MMBtu (delivered, ($)) $4.00/gal 36.232 4.50 40.761 Fuel oil, #2, (per 1 gallon) 138,000 80% 110,400 per gallon 5.00 45.29 $150/cord 15.088 175 17.602 Hemlock, (per 1 cord, MC30) 13.26 million 75% 9.942 million per cord 200 20.117 Notes: a from Appendix D 11 5.2(a) Cost per MMBtu Sensitivity – Cordwood Figure 5-1 illustrates the relationship between the price of hemlock cordwood (MC30) on the horizontal axis, and the cost of delivered heat on the vertical axis, (i.e., the slanted line). For each $10 per cord increase in the price of cordwood, the cost per million Btu increases by $1.055. 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 #2 fuel oil at $4.00, $4.50 and $5.00 per gallon ($36.232, $40.761 and $45.29 per million Btu respectively). At high efficiency, heat from hemlock cordwood (MC30) at $405.37 per cord is equal to the cost of #2 fuel oil at $4.50 per gallon (i.e., $40.761 per MMBtu). At 75% efficiency and $150 per cord, a high-efficiency cordwood boiler will deliver heat at about 37% of the cost of #2 fuel oil at $4.50 per gallon ($15.088 versus $40.761 per MMBtu). Figure 5-1 indicates that, at a given efficiency, savings increase significantly with decreases in the delivered price of cordwood and/or with increases in the price of fuel oil. Cost ($) per MMBtu as a Function of Cordwood Cost 0.000 5.000 10.000 15.000 20.000 25.000 30.000 35.000 40.000 45.000 50.000 100 150 200 250 300 350 400 450 Cordwood cost, $ per cordCost ($) per MMBtu Fuel Oil at $5.00 per gallon Fuel Oil at $4.50 per gallon Fuel Oil at $4.00 per gallon Figure 5-1. Effect of Hemlock Cordwood Price on Cost of Delivered Heat 12 5.2(b) Cost per MMBtu Sensitivity – Bulk Fuels Not included in this report 5.3 Determining Demand Table 5-2 shows the projected amount of fuel oil to be used by the Coffman Cove School. Table 5-2. Reported Annual Fuel Oil Consumption, Coffman Cove School Reported Annual Fuel Consumption Facility Gallons Cost ($) @ $4.50/gallon Coffman Cove School 10,000 45,000 TOTAL 10,000 45,000 Wood boilers, especially cordwood boilers, are often sized to displace only a portion of the heating load since the oil system will remain in place, in standby mode, for “shoulder seasons” and peak demand. Projected fuel oil consumption for the Coffman Cove School was compared with heating demand based on heating degree days (HDD) to determine the required boiler capacity (RBC) for heating during the coldest 24-hour period (Table 5-3). 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. Table 5-3. Estimate of Heat Required in Coldest 24-Hour Period Facility Fuel Oil Used gal/yeara Heating Degree Daysd Btu/DDc Design Tempd F RBCe Btu/hr Installed Btu/hra Coffman Cove School 10,000 8,104 136,723 17 (Ketchikan, AK) 273,783 693,000 Table 3-7 Notes: a From SOI and site visit; net total 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 Typically, installed oil-fired heating capacity at most sites is two-to-four times greater than the demand for the coldest day. The installed capacity at the Coffman Cove School falls within this range. 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 3200 can store more than 2 million Btu, which would be enough to heat the Coffman Cove School during the coldest 24-hour period for approximately 7½ hours (2,064,000 ÷ 273,783). However, this is not necessarily the correct or optimum boiler configuration; this only an example. Consultation with a qualified engineer is strongly recommended. * Btu/hr into storage is very 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 and Potential Savings 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 Coffman Cove School. [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) Approximate Wood Requirementb Annual Wood Cost (@ $ ___ /unit) Potential Gross Annual Fuel Cost Savings ($) Fuel Oil Used gal/yeara 4.00/gal 4.50/gal 5.00/gal W. Hemlock, MC30, CE 75% 150/cord 175/cord 200/cord Low Medium High Coffman Cove School 10,000 40,000 45,000 50,000 111.0 16,650 19,425 22,200 17,800 25,575 33,350 Total 10,000 40,000 45,000 50,000 111.0 16,650 19,425 22,200 17,800 25,575 33,350 NOTES: a From Table 5-2 b From Table D-3, Fuel Oil Equivalents; 90.05 gallons per cord (MC30) 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 professional 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, though hopefully realistic, system scenarios 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 relatively easy to accomplish. 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 heat exchangers, pumps, fans, 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 (on the next page) presents hypothetical scenarios of initial investment costs for cordwood systems in a medium heating demand situation. Two alternatives are presented. Buildings 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 exorbitant cost of hard copper pipe normally used in Alaska now precludes its use in most applications. If plastic or PEX® piping is used, significant cost savings may be possible. Allowance 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 gross 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. 15 Table 6-1. Initial Investment Cost Scenarios for Hypothetical Cordwood Systems Coffman Cove School Fuel oil consumption (gallons per year) 10,000 Required boiler capacity (RBC), Btu/hr 273,783 Cordwood boiler Model Rating - Btu/hr Btu stored (1) Garn WHS 3200 950,000 2,064,000 (2) Garn WHS 2000 850,000 combined 2,544,000 combined Building and Equipment (B&E) Costs (for discussion purposes only), $ Fuel storage buildinga (fabric bldg, gravel pad, $20 per s.f.) 44,400 (111 cords, 2,220 s.f.) Boiler building @ $150 per s.f. (minimum footprint, w/concrete pad)b 30,000 (10’ x 20’) 38,400 (16’ x 16’) Boilers Base pricec Shippingd 35,000 6,000 31,700 6,000 Plumbing/connectionsd 20,000 21,000 Installationd 10,000 10,500 Subtotal - B&E Costs 145,400 152,000 Contingency (25%)d 36,350 38,000 Grand Total $181,750 $190,000 Notes: a A cord occupies 128 cubic feet. If the wood is stacked 6½ feet high, the area required to store the wood is 20 square feet per cord. b Does not allow for any fuel storage within the boiler building c List price, Alaskan Heat Technologies, October 2008 d “guess-timate”; for illustrative purposes only 6.2 Operating Parameters of HELE Cordwood Boilers A detailed discussion of the operating parameters of HELE cordwood boilers can be found in Appendix F. 6.3 Hypothetical OM&R Cost Estimates The primary operating cost of a cordwood boiler, other than the cost of fuel, is labor. Labor is required to move fuel from its storage area to the boiler building, fire the boiler, clean the boiler and dispose of ash. For purposes of this analysis, it is assumed that the boiler system will be operated every day for 210 days (30 weeks) per year between mid-September and mid-April. 16 Table 6-2 presents labor/cost estimates for various HELE cordwood systems. A detailed analysis of labor requirement estimates can be found in Appendix F. Table 6-2. Labor/Cost Estimates for HELE Cordwood Systems Coffman Cove School (1) Garn WHS 3200 (2) Garn WHS 2000 Total Daily labor (hrs/yr)a (hrs/day X 210 days/yr) 160.44 187.96 Total Periodic labor (hrs/yr)b (hrs/wk X 30 wks/yr) 111 111 Total Annual labor (hrs/yr)b 20 40 Total labor (hrs/yr) 242 282.33 Total annual labor cost ($/yr) (total hrs x $20) 4,840.00 5,646.60 Notes: a From Table F-2 b From Appendix F 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. For this exercise, a flat rate of $1,000 per boiler per year is used. The non- fuel OM&R cost estimates are summarized in Table 6-3. Table 6-3. Summary of Total Annual Non-Fuel OM&R Cost Estimates Cost/Allowance ($) Item (1) Garn WHS 3200 (2) Garn WHS 2000 Labora 4,840.00 5,646.60 Electricityb 662.79 2,068.50 Maintenance/Repairs 1,000.00 2,000.00 Total non-fuel OM&R ($) 6,502.79 9,715.10 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 = $0.67, as reported by SISD facility personnel 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 17 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) Life Cycle Cost (LCC) 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 HELE Cordwood Boilers Table 6-4 presents a Simple Payback Period analysis for hypothetical multiple HELE cordwood boiler installations. Table 6-4. Simple Payback Period Analysis for HELE Cordwood Boilers (1) WHS 3200 (2) WHS 2000 Fuel oil cost ($ per year @ $4.50 per gallon) 45,000 Cordwood cost ($ per year @ $150 per cord) 16,650 Annual Fuel Cost Savings ($) 28,350 Total Investment Costs ($)a 181,750 190,000 Simple Payback (yrs)b 6.41 6.70 Notes: a From Table 6-1 b Total Investment Costs divided by Annual Fuel Cost Savings 18 6.6 Present Value (PV), Net Present Value (NPV) and Internal Rate or Return (IRR) Values for Various HELE Cordwood Boiler Installation Options Table 6-5 presents PV, NPV and IRR values for hypothetical various HELE cordwood boiler installations. Table 6-5. PV, NPV and IRR Values for Various HELE Cordwood Boilers Options (1) Garn WHS 3200 (2) Garn WHS 2000 Discount Ratea (%) 3 Time, “t”, (years) 20 Initial Investment ($)b 181,750 190,000 Annual Cash Flow($)c (Net Annual Savings) 21,847 18,635 Present Value (of expected cash flows, $ at “t” years) 325,028 277,242 Net Present Value ($ at “t” years) 143,278 87,242 Internal Rate of Return (% at “t” years) 10.34 7.50 See Note # _ below 1 2 Notes: a real discount rate (excluding general price inflation) as set forth by US DOE, as found in NIST publication NISTIR 85-3273-23, Energy Price Indices and Discount Factors for Life Cycle Cost Analysis, May 2008 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. With a real discount rate of 3.00% and after a span of 20 years, the projected cash flows are worth $325,028 today (PV), which is greater than the initial investment of $181,750. The resulting NPV of the project is $143,278 and the project achieves an internal rate of return of 10.34% at the end of 20 years. Given the assumptions and cost estimates, this alternative appears financially and operationally feasible. Note #2. With a real discount rate of 3.00% and after a span of 20 years, the projected cash flows are worth $277,242 today (PV), which is greater than the initial investment of $190,000. The resulting NPV of the project is $87,242 and the project achieves an internal rate of return of 7.5% at the end of 20 years. While these metrics are somewhat less favorable than alternative 1, given the assumptions and cost estimates, this alternative still appears quite feasible and may provide improved operational parameters. 6.7 The Case for Fuel Purchase Planning and Fuel Storage Too often a fuel storage building is omitted from a project in order to save the initial investment cost and improve the cost-effectiveness of the project. This is FALSE ECONOMY. The importance of a fuel storage building cannot be stressed enough, especially in southeast Alaska. With good planning, fuel could be purchased a year or more in advance and be given sufficient time to dry, while incurring no additional cost. And a fuel storage building can pay for itself in less time than the boiler! Protected from the elements and provided with good air circulation, it is not unreasonable to expect split and well-stacked cordwood to achieve moisture contents in the neighborhood of fiber saturation point (approximately 23% on the wet weight basis) or less. The difference in heating value between hemlock cordwood at MC30 (partially air-dried) and hemlock cordwood at MC23 (well air-dried) is 19 notable – about 13 percent more recoverable heat value (RHV) in the drier wood, which amounts to about 1,700,000 Btu per cord. And instead of a cord replacing 90.05 gallons of #2 fuel oil, it can now replace 101.5 gallons. For the Coffman Cove School, this would mean that instead of having to buy 111 cords per year, that fuel requirement becomes 98.5 cords, a savings of 12.5 cords and $1,875 per year (at $150 per cord). (NOTE: There is also a labor cost savings that can be realized due to fewer boiler stokings, less ash removal/disposal, and less fuel handling.) The opposite is also true. Cordwood left exposed to the elements in southeast Alaska will not dry much at all and may, in fact, gain moisture. The difference in total RHV Btu value between a cord of hemlock at MC30 (partially air-dried) and a cord of hemlock at MC50 (“dead green”) is more than 4.84 million Btu. The wetter wood has roughly 63.5% of the heating value of the drier wood. In terms of its #2 fuel oil equivalence, the value is 57.16 gallons per cord at MC50 compared to 90.05 gallons per cord at MC30. For the Coffman Cove School it would mean that instead of having to buy 111 cords (MC30) per year, that cordwood equivalent becomes 175 cords (“dead green”), an increase of 64 cords and $9,600 per year (at $150 per cord). (NOTE: There is also a labor cost increase that would have to be incurred due to more frequent boiler stokings, more ash removal/disposal, and additional fuel handling.) Finally, cordwood purchased in the “off-season” can sometimes be purchased at a discount from the heating season price. If a seasonal discount of $25 per cord could be negotiated, the additional savings would amount to $13,937.50/yr. In summary: 175 cords of green wood per year at $150 = $26,250 versus 98.5 cords of dried wood per year at $125 = $12,312.50. Savings between green wood bought during the heating season and green wood purchased during the off-season and allowed to dry: $13,937.50. Given a fuel storage building costing $55,500 ($44,400 plus 25% contingency) as shown in Table 6-1, the simple payback would be about 4 years. 6.8 Life Cycle Cost Analysis The National Institute of Standards and Technology (NIST) Handbook 135, 1995 edition, defines Life Cycle Cost (LCC) as “the total discounted dollar cost of owning, operating, maintaining, and disposing of a building or a building system” over a period of time. Life Cycle Cost Analysis (LCCA) is an economic evaluation technique that determines the total cost of owning and operating a facility over a period of time. Alaska Statute 14.11.013 directs the Department of Education and Early Development (EED) to review school capital projects to ensure they are in the best interest of the state, and AS 14.11.014 stipulates the development of criteria to achieve cost effective school construction.19 While a full-blown life cycle cost analysis is beyond the scope of this preliminary feasibility assessment, an attempt is made to address some of the major items and run a rudimentary LCCA using the Alaska EED LCCA Handbook and spreadsheet. According to the EED LCCA Handbook, the life cycle cost equation can be broken down into three variables: the costs of ownership, the period of time over which the costs are incurred (recommended period is 20 years), and the discount rate that is applied to future costs to equate them to present costs. 20 There are two major costs of ownership categories: initial expenses and future expenses. Initial expenses are all costs incurred prior to occupation (or use) of a facility, and future expenses are all costs incurred upon occupation (or use) of a facility. Future expenses are further categorized as operation costs, maintenance and repair costs, replacement costs, and residual value. A comprehensive list of items in each of these categories is included in the EED LCCA Handbook. The discount rate is defined as, “the rate of interest reflecting the investor’s time value of money”, or, the interest rate that would make an investor indifferent as to whether s/he received payment now or a greater payment at some time in the future. NIST takes the definition a step further by separating it into two types: real discount rates and nominal discount rates. The real discount rate excludes the rate of inflation and the nominal discount rate includes the rate of inflation.19 The EED LCCA Handbook and spreadsheet focuses on the use of real discount rates in the LCC analysis. To establish a standard discount rate for use in the LCCA, EED adopted the US Department of Energy’s (DOE) real discount rate. This rate is updated and published annually in the Energy Price Indices and Discount Factors for Life Cycle Cost Analysis – Annual Supplement to NIST Handbook 135 (www1.eere.energy.gov). The DOE discount and inflation rates for 2008 are as follows: Real rate (excluding general price inflation) 3.0% Nominal rate (including general price inflation) 4.9% Implied long term average rate of inflation 1.8% Other LCCA terms Constant dollars: dollars of uniform purchasing power tied to a reference year and exclusive of general price inflation or deflation Current dollars: dollars of non-uniform purchasing power, including general price inflation or deflation, in which actual prices are stated Present value: the time equivalent value of past, present or future cash flows as of the beginning of the base year. NOTE: When using the real discount rate in present value calculations, costs must be expressed in constant dollars. When using the nominal discount rate in present value calculations, costs must be expressed in current dollars. In practice, the use of constant dollars simplifies LCCA, and any change in the value of money over time will be accounted for by the real discount rate. LCCA Assumptions As stated earlier, it is beyond the scope of this pre-feasibility assessment to go into a detailed life cycle cost analysis. However, a limited LCCA is presented here for purposes of discussion and comparison. Time is assumed to be 20 years, as recommended by EED The real discount rate is 3% Initial expenses as per Table 6.1 Future expenses as per Table 6.3 Replacement costs – not addressed Residual value – not addressed 21 Cordwood Boiler Alternatives Alternative 1 represents the existing oil-fired boiler systems. The initial investment was assumed to be $50,000. The operation costs included 10,000 gallons of #2 fuel oil at $4.50 per gallon and 40 hours of labor per year at $20 per hour. The annual maintenance and repairs costs were assumed to be $1,000 and no allowances were made for replacement costs or residual value. NOTE: The value of the existing boiler system ($50,000), the amount and cost of labor (40 hours, $800), and maintenance and repair costs ($1,000) are fictitious, but are held constant for comparative purposes as appropriate. Alternative 2 represents the existing oil-fired boiler system, which would remain in place, plus the installation of one Garn WHS 3200 wood fired boiler. The initial investment was assumed to be $231,750, which includes the hypothetical value of the existing oil-fired boilers (valued at $50,000 as per Alternative 1) plus the initial investment cost of the Garn boiler system ($181,750, as per Table 6-1). The operation costs include 111 cords of fuelwood at $150 per cord and 242 hours of labor per year at $20 per hour (as per Table 6-2). The annual utility, maintenance and repair costs were assumed to be $1,663 (as per Table 6-3) for the system and no allowances were made for replacement costs or residual value. Alternative 3 represents the existing oil-fired boiler system, which would remain in place, plus the installation of two Garn WHS 2000 wood fired boilers. The initial investment was assumed to be $240,000, which includes the hypothetical value of the existing oil-fired boilers (valued at $50,000 as per Alternative 1) plus the initial investment cost of the Garn boiler system ($190,000 as per Table 6-1). The operation costs include 111 cords of fuelwood at $150 per cord and 282.33 hours of labor per year at $20 per hour (as per Table 6-2). The annual utility, maintenance and repair costs were assumed to be $4,068.50 (as per Table 6-3) for the system and no allowances were made for replacement costs or residual value. The hypothetical EED LCCA results for the Coffman Cove School cordwood boiler alternative are presented in Table 6-6. Table 6-6. Estimated Life Cycle Costs of Cordwood System Alternative Alternative 1 (existing boilers) Alternative 2 (existing boilers plus one large HELE cordwood boiler) Alternative 3 (existing boilers plus 2 medium HELE cordwood boilers) Initial Investment Cost $50,000 $231,750 $240,000 Operations Cost $681,388 $319,717 $331,717 Maintenance & Repair Cost $14,877 $24,741 $60,529 Replacement Cost $0 $0 $0 Residual Value $0 $0 $0 Total Life Cycle Cost $746,266 $576,208 $632,246 SECTION 7. ECONOMIC FEASIBILITY OF BULK FUEL SYSTEMS The term “bulk fuel” refers, generically, to sawdust, wood chips, shavings, bark, pellets, etc. Since the cost of bulk fuel systems is so high (i.e., $1 million and up), and the heating load for the Coffman Cove School is relatively small, the discussion of bulk fuel boiler systems has been omitted from this report. 22 SECTION 8. CONCLUSIONS This report discusses conditions found “on the ground” at the Coffman Cove School in Coffman Cove, AK, and attempts to demonstrate, by use of realistic, though hypothetical, examples the feasibility of installing high efficiency, low emission cordwood 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 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 Coffman Cove School is medium-sized in terms of its energy usage; consuming a projected 10,000 gallons of #2 fuel oil per year. With a single large HELE cordwood boiler being fired approximately 4 times per day, the simple payback period would be 6.4 years given current fuel costs and a cordwood boiler installation costing around $182,000. The present value, net present value and internal rate of return after 20 years, assuming a discount rate of 3%, are $325,028, $143,278 and 10.34% respectively. The theoretical difference in life cycle costs between the currently installed system and such a wood- fired system is more than $170,000 over 20 years. With a pair of medium HELE cordwood boilers being fired approximately 6 times per day, the simple payback period would be 6.7 years given current fuel costs and a cordwood boiler installation costing around $190,000. For a system consisting of a pair of medium boilers, the present value, net present value and internal rate of return after 20 years, assuming a discount rate of 3%, are $277,242, $87,242 and 7.5% respectively. The theoretical difference in life cycle costs between the currently installed system and a wood-fired system is more than $114,000 over 20 years. And while these results are not as strongly positive as the previous alternative, it is still a viable option, and may provide other, indeterminable, operational or cost advantages. Closer scrutiny of these projects by qualified professionals is warranted.