Loading...
HomeMy WebLinkAboutKPBSD_ReferenceReportsPreliminary Feasibility Assessment for Wood Pellet Heating at KPBSD Schools In Seward, Alaska Prepared for: Dave Jones Kenai Peninsula Borough School District Prepared by: Daniel Parrent Biomass Coordinator USDA Forest Service, State & Private Forestry Submitted July 11, 2011 Notice This Preliminary Feasibility Assessment for Wood Pellet Heating at KPBSD Schools in Seward, Alaska wa s prepared by Daniel Parrent, Biomass & Forest Stewardship Coordinator, USDA Forest Service, State & Private Forestry, Alaska Region for Dave Jones, Kenai Peninsula Borough School District. The Forest Service makes no warra nty, express or implied, and assumes 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 the Forest Service nor has the Forest Service passed upon the accuracy or adequacy of the information in this report. Feasibility assessments are a "snapshot in time." Fuel oil prices are volatile and unpredictable. Financial metrics must be re-evaluated accordingly. Table of Contents Introduction 4 Section 1. Summary 4 I. I Goals and Objectives 4 1.2 Evaluation Criteria, Project Scale, Operating Standards, General Observations 4 1.3 Assessment Sununary and Recommended Actions 4 1.3.1 Seward Elementary School 4 1.3.2 Seward Middle School 5 1.3.3 Seward Elementary and Middle School (combined) 5 1.3.4 Seward High School 6 Section 2. Evaluation Criteria, Implementation, Wood Heating Systems 6 2.1 Successful Implementation 6 2.2 Classes ofWood Heating Systems 7 Section 3. The Nature of Wood Fuels 7 3.1 Wood Fuel Forms and Current Utilization 7 3.2 Heating Value of Wood 7 Section 4. Wood-Fueled Heating Systems 8 4.1 Low Efficiency Cordwood Boilers-Omitted 8 4.2 High Efficiency Low Emission Cord wood Boilers -Omitted 8 4.3 Bulk Fuel Boiler Systems 8 Section 5. Selecting the Appropriate System 9 5. I Comparative Costs of Fuels 10 5.2 Cost per MMBtu Sensitivity-Pellets 10 5.3 Assessing Demand I 1 5.4 Sununary of Findings and Potential Savings 13 Section 6. Economic Feasibility ofCordwood Systems-Omitted 14 Section 7. Economic Feasibility of Bulk Fuel Systems 14 7 .l Capital Cost Components 14 7.2 Generic OM&R Cost Allowances 17 7.3 Calculation of Financial Metrics 19 7.4 Simple Payback Period for Generic Pellet Fuel Boilers 19 7.5 Present Value, Net Present Value and Internal Rate of Return Values for Pellet Fuel Boilers 20 Section 8. Conclusions 21 References and Resources Appendices Appendix A Appendix B Appendix C Appendix D List of Abbreviations and Acronyms Financial Metrics Potential Pellet Suppliers Grant Information 2 List of Tables and Figures Table 4-1 Table 5-l Figure 5-1 Table 5-2 Table 5-3 Table 7-1 Table 7-2 Table 7-3 Table 7-4a Table 7-4b Table 7-5a Table 7-5b Table 7-6a Table 7-6b Bulk Fuel Boiler System Vendors Comparative Cost of fuel Oil vs. Wood Pellets Effect of Pellet Price on Cost ofDelivered Heat Estimate of Heat Required in Coldest 24-Hour Period Estimate ofTotal Wood Consumption, Comparative Costs and Potential Savings Initial Investment Cost Components for Pellet Fuel Systems Darby, MT Public School Wood Chip Boiler Costs Charac teristics of Biomass Boiler Projects Total OM&R Cost Allowances for a Small Pe llet System Total OM&R Cost Allowances for a Medium and Large Pellet System Simp le Payback Period Analysis for Small Pelle t Heating Systems Simple Payback Pe riod Analysis for a Medium and Large Pellet Heating System PV, NPV and fRR Values for a Small Pellet System PV, NPV and IRR Values for a Medium and Large Pellet System 8 10 11 12 13 15 16 17 18 18 19 19 20 20 3 INTRODUCTION The potential for heating vario us facilities in Seward, Alaska with pellet-fired boilers is evaluated for the Kenai Peninsula Borough Schoo l District (KPBSD). SECTION 1. SUMMARY 1.1 Gilals and Objectives • Inspect KPBSD facilities in Seward, AK as potential candidates for heating with wood • Evaluate the suitability of the facilities and sites for installing biomass boilers • Assess the type(s) and availability of wood fuel(s) • Size and estimate the capital costs of suitable wood-fired system(s) • Model the annual operation and maintenance costs of a pellet-fired system • Model t he potential economic benefits from installing a pellet-fired heating system 1.2 Evaluation Criteria, Project Scale, Operating Parameters, General Observations • Given a nnual fuel oil consump tion estimates of 15,700 and 19,000 gallons (Elementary School and Middle School respectively), these facilities would be considered fairly s mall in terms of their relative sizes. • Given an annual fuel oil consumption estimate of99,200 gallons per year (High School), this facility would be considered large in terms of its relative scale. • Medium and large energy consumers have the best potential for feasibly installing a wood- fired heating system. Where preliminary feasibility as sessments indicate positive financial metrics, detailed engineering analyses are usually warranted. • Manual cordwood systems are generally appropriate for applications where the maximum heating demand ranges from 100,000 to 1,000,000 Btu per hour. Automated "bulk fuel" sys tems a re generally applicable for situations where the heating demand exceeds l million Btu per hour. However, these are general guidelines; local conditions can exert a strong influence on the best system choice. 1.3 Assessment Summary and Recommended Actions NOTE: For purposes of this report, "cost effective" infers a simple payback period of less than 10 years. "Marginally cost effective" infers a simple payback period between 10 and 20 years. Four facility/options ar e considered in this report: 1.3.1 Seward Elementary School • Overview. The Seward Elementary School consists of a single story structure occupying approximately 52,199 square feet. The facility is heated by a pair ofKewanee KW 4.5-220-X oil boilers that are approximately 22 years old, located on the mezzanine level adjacent to the gymnasium. These boilers are rated at 1704 MBH (net, each) based on a firing rate of 15 .9 gallons per hour. They have been well maintained and appear to be in good condition. Heat (hot water) is distributed via a combination of unit heaters and air handlers. The boiler system also provides heat for domestic hot water. [NOTE: The 4 production of Kewanee boilers ceased in 2002, although replacement parts are still available.] • Fuel Consumption. The Seward Elementary School consumes approximately 19,000 gallons of#l fuel oil per year. • Potential Savings. At the projected price of about $4.00 per gallon, KPBSD spends approximately $76,000 per year for fuel oiL The pellet fuel equivalent of 19,000 gallons of fuel oil is approximately 159 tons, and at $300/ton represents a potential annual fuel cost savings of$28,300 (debt service and non-fuel OM&R costs notwithstanding). • Required boiler capacity. The estimated required boiler capacity (RBC) to heat the Seward Elementary School is approximately 536,000 Btu!hr during the coldest 24-hour period. • Recommended action regarding a pellet system. Given the assumptions used in this report and the relatively small heating demand, a pellet system appears to be marginally cost effective for the Seward Elementary SchooL However, the economics improve significantly with rather modest increases in the price of oil; a I 0 percent increase in the price of fuel oil would yield a simple payback ofless than I 0 years. 1.3.2 Seward Middle School • Overview. The Seward Middle School consists of a single story structure occupying approximately 37,500 square feet The facility is heated by a pair of Hurst FB300-30 oil boilers that are approximately 6 years old. These boilers are rated at 1876 MBH (net, each) based on a firing rate of 17.5 gallons per hour. The system has been well maintained and appears to be in excellent condition. Heat (hot water) is distributed via a combination of unit heaters and Haakon air handlers. The boiler system also provides heat for domestic hot water. • Fuel Consumption. The Seward Middle School consumes approximately 15,700 gallons of #1 fuel oil per year. • Potential Savings. At the projected price of about $4.00 per gallon, KPBSD spends approximately $62,800 per year for fuel oil. The pellet equivalent of 15,700 gallons of fuel oil is approximately 131 tons, and at $300/ton represents a potential annual fuel cost savings of $23,500 (debt service and non-fuel OM&R costs notwithstanding). • Required boiler capacity. The estimated required boiler capacity (RBC) to heat the KPBSD Elementary School is approximately 443,000 Btulhr during the coldest 24-hour period. • Recommended action regarding a pellet wood system. Given the assumptions used in this report and the relatively small heating demand, a pellet system appears to be marginally cost effective for the Seward Middle School. However, the economics improve significantly with increases in the price of oil; a 15 percent increase in the price of fuel oil would yield a simple payback of less than 11 years. 1.3.3 Seward Elementary AND Middle School (combined) It may be possible to install one pellet-fired heating system to serve both the Elementary School and Middle School. However, the distance between the two facilities ( approx. 1,100 feet) and the elevation difference could tax the limit of a modest hydronic heating system, or be cost prohibitive. 5 Given the assumptions used in this report, a pellet system appears to be marginally cost effective for a combined system to serve the Seward Elementary and Middle Schools. However, the econo mics improve significantly with increases in the price of oil; a l 0 percent increase in the price of fue l oil would yield a simple payback of 10.67 years on a system costing $700,000. 1.3.4 Seward High School • Overview. The Seward High School consists of a two-story structure occupying approximate ly 75,373 square feet. The facility is h eated by a pair of Cleaver-Brooks oil boilers that are approximately 28 years old. These boilers are rated at 1983 MBH (net, each) based on a firing rate o f 18.5 gallons p er hour (each). Though approaching the end of its s ervice life, the system has been well maintained and appears to be in good condition. Hettt (hot w ater) is dis tributed via a combination of unit heaters and a ir handlers. The boiler system also provides heat for domestic hot water and the swimming pool. • Fuel Consumption. The KPBSD High School, which also ho uses a large indoor swimming p oo l, consumes approximately 99,200 gallons o f#l fuel oil per year. • Potential Savings. At the proj ected price of about $4.00 per gallo n, KPBSD spends approximately $3 96,800 per year for fuel oil. T he pellet equivalent of99,200 gallons of fuel oil is approximately 831 tons, and at $300 /ton represents a potential annual fue l cost savings of $147,500 (debt service and non-fuel O M&R costs notwithstanding). • Required boiler capacity. The estimated required boiler capacity (RBC) for space h eating at the Seward High School is approximately 1.1 2 MMBtu/hr during the coldest 24-hour period. Additio nal h eat is re quired for the swimming pooL • Recommended action regarding a pellet system. Give n the assumptions used in this report and the high heating demand, a pellet-fired system appears to be cost effective for the Seward High School. Further evaluation is warranted. SECTION 2 . EVALUATION CRITERIA, IMPLEMENTATION, WOOD HEATING SYSTEMS This report agrees with the approach recommended by the Biomass Energy Resource Center (BE RC), which suggests that, "[1]he m ost cost-effective approach to studying the feasibility for a biomass en ergy project is to approach th e study in stages." Further, BERC advises "not spe nding too muc h time, effort, or money on a full feasibility study before discove ring whether the potential p roject makes basic economic sense" and suggests, "[ Ujndertaking a p re-feasibility study ... a basic assessm ent, not yet at the engineering level, to determine the project's apparent cost-effectiveness". [Biomass Energy Resource Center, M ontpelier, Vermo nt. www.biomasscenter.org] 2 .1 Successful Implementation In gen e r al , four aspects of project implementation have been important to wood e n ergy projects in the past 1) a project "champion", 2 ) clear identification of a sponsoring entity, 3) dedication of and commitment by faci lity personnel, and 4) a r e liable and consi stent s upply of fuel. Bulk fue l system s, th o ugh automated, gen erally r equire some attention on a daily basis, but p e llet systems are generall y less troublesome than other types o f b ulk fuel systems. For this report it is assumed that existing maintenance personnel would be trained to operate the system and would b e capable of perfonning routine maintenan ce as n ecessary. 6 The forest industry infrastructure in/around Seward is not well-developed and biomass fuels are not readily available in appreciable quantities. For this report, it is assumed that wood pellets would be shipped in from elsewhere in Alaska, the Lower 48 or Canada. 2.2 Classes of Wood Heating Systems There are, essentially, two classes of wood heating systems: manual cord wood 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, a lthough smaller and larger applications are possible. "Bulk fuel" systems are systems that bum 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 feasibi lity of a bulk fuel system. Usually, an automated bulk fuel boiler is tied-in directly to the existing oil-fired system. They can be designed to replace 100% of the fuel oil used in the oil-fired boiler, although they are often designed to meet about 90 percent of peak demand load. In either case, the existing oil-fired system would usually 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 Currently, wood fuels in Seward are generally limited to cordwood. Locally generated dunnage, C&D (construction and demolition) materials, land clearing and other woody debris are also present in un-quantified amounts. There is also a chance that whole tree chips might be developed as a fuel in the future if they can be produced to specification and the market (demand) is large enough to warrant the investment in processing equipment. Currently, there is no local supply of bulk pellets, a lthough there are pellet plants in Fairbanks and Delta Junction. There are also numerous pellet plants in Washington, Oregon, California, Idaho, Montana, Alberta and British Columbia (see Appendix C). A small plant is also under construction in Gulkana (near Glennallen) a nd another in Ketchikan. 3.2 Heating Value of Wood Wood is a unique fuel whose heating value is variable, depending on moisture content, species of wood and other factors. There are also several recognized heating values: high heating value (HHV), gross heating value (GHV), and delivered heating value (DHV) that may be assigned to wood at various stages in the calculations. For this report, generic wood pellets with a IlliV of 8,602 Btu per bone-dry pound (MCO) are used as the benchmark. The GHV at 7% moisture content (MC7) is 8,000 Btu/lb or 16 million Btu per ton. DHV, which is a function of boiler efficiency (assumed to be 80%), is 12.8 million Btu per ton. The delivered heating value of 1 ton of generic wood pellets (MC7) equals the delivered heating value of 119.4 gallons of#l fuel oil when both the wood and oil are burned at 80% conversion efficiency. 7 - SECTION 4. WOOD-FUELED REA TING SYSTEMS 4.1 Low Efficiency Cordwood Boilers This section omitte d. 4.2 High Efficiency Low Emission Cordwood Boilers This section omitted. 4.3 Bulk Fuel Boiler Systems Industrial bulk fuel systems are generally efficient and meet typical federal and state air quality standards. They have been around for a long time and there is little new technological ground to break when installing one. Efficient bulk fuel boilers typically convert 70 to 80+ percent of the energy in the wood fuel to hot water or low pressure steam when the fuel moisture content is 40 percent (MC40) or less. Most boiler vendors provide systems that can bum various bulk fuels (wood chips, sawdust, wood pellets and hog fuel), but each system, generally, has to be designed around the predominant fuel form. A system des igned to burn clean sawmill chips will not necessarily operate well on a diet of hogged fuel, for example. Large commercial pelle t boilers are a fairly new addition to the alternatives available to institutional facility operators. While most existing bulk fuel designs can be adapted to bum p e llets, there are not many systems that have been designed specifically for pellets, and there only a few North American pellet boiler manufacturers or distributors. European firms have been building high efficiency pellet boilers for years and that technology is just begiiUling to find its way into the U.S. market. Pellets are a uniform fuel manufactured to consistent specifications and are nearly universally interchangeable. 'Combination' or multi-fuel systems capable of burning pellets and chips are possible, but with some fairly strict limitations. Table 4-1 presents a partial list of bulk fuel boiler system vendors. v~i{tl .. , T.ffle 4-1. BulkFuel llQU~ Syste~ Vendors · . "'~"""' "' .· . ~ ;· ~:~ . D ecton Iron Works, Inc New Horizo n Corp. Butler, WI Sutton, WV (800) 246-14 7 8 (8 77) 20 2-5070 www.decton.com www.newhorizoncorp.com M essersmith Manufac turing, Inc . JMR Industrial Contractors Bark River, MI Columbus, MS (906) 466-9010 (662) 240-1247 www.bumchips.com www.jmric.com C hiptec Wood Energy Systems Advanced Climate Technologies, LLC South Burlington, VT Sc hen ectady, NY (800) 244-4146 (51 8) 377-2349 www.chiptec.com www.actbioenergy.com Note: Listing of any manufacture r , distributor or service provider does not constitute an endorsement. 8 Bulk fuel systems are available in a range of sizes between 300,000 and 60,000,000 Btu/hr. However, the majority of the installations range from about 1 MMBtulhr to 20 MMBtulhr. Bulk fuel systems with their automated storage and fuel handling conveyances are generally not cost-effective for small applications. Large energy consumers (i.e., consuming at leas t 40,000 gallons of fuel oil per year) have the best potential for installing chip-fired boilers. Pellet-fired systems, with lower initial costs than chip-fired systems, are fairly scalable. They can b e used in applications ranging from residential to industrial. However, given the higher cost of pellets versus other bulk fuels, economic returns are more sensitive to the price of the fossil fuel alternative. For pellets, there are several delivery options. Bulk pellets can be delivered in a self-unloading tractor-trailer van, a shipping container attached to a dump body, or a specialized delivery truck equipped with an auger-elevator or pneumatic delivery system. On-site storage and the delivery system must be compatible, and storage capacity should be 1 ~ to 2 times greater than the delivery truck's capacity. For destinations in Alaska, additional consideration should also be given to the barge or train delivery schedule(s). (NOTE: pellets must be protected from rain, snow, sea spray, etc. at all times. Pellets that get wet deteriorate quickly.) There are several bulk fuel boilers installed in industrial applications in Alaska, but in recent years several have been installed in institutional situations. The most recent were installed at the Tok School in Tok and Sealaska Corp. office building in downtown Juneau; both in 2010. A large chip- fired system is under construction at the Delta Junction School in Delta Junction, and a 3.6 MMBtu/hr pellet-fired system is under construction at the U.S. Coast Guard base in Sitka. Both of these systems will replace more than 100,000 gallons of fuel oil per year, each. Two more are being installed in Ketchikan; one at the Forest Service Discovery Center and the other at the Federal Building. A chip-fired system has been heating the schools and pool in Craig, AK since 2008. It is similar in size to boilers installed in several Montana schools. 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, fmancial 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 b e weighed against initial investment cost s 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, the fuel cost, and the other costs associated with operating and maintaining the heating system, especially labor. 9 5.1 Comparative Costs of Fuels Table 5-1 compares the cost of#l fuel oil to generic wood pellets (MC7). In order to make reasonable comparisons, costs are provided on a "per million Btu" (MMBtu) basis. . . ' .. ""'' '_fable 5-1. Comparative Cost ofFuel Qil vs. Wood. Pellets .·"" . . FUEL HHV GHV Conversion DHV Price p er unit Cost per MMB tu (Btu) (Btu) Efficiency (Btu) ($) (DHV, ($)) 3.50/gal 32.65 Fuel oil, # 1, 134,000 134,000 80% 107,200 4.00 37.31 (per I gallon) 4.50 41.98 250/ton 19.53 Wood pellets 17.2 16.0 80% 12 .8 300 23.44 (per I ton , MC7) million million million 350 27.34 5.2 Cost per MMBtu Sensitivity -Pellets Figure 5-l illustrates the relationship between the price of wood pellets (M C7) and the cos t of delivered heat, (the slanted line). For each $10 per ton increase in the price of pellets, the cost per million Btu increases by about $0.78. The chart assumes that the pellet boiler converts 80% of the GHV energy in the wood to useful heat and tha t fuel oil is converted to heat at 80% efficiency. The dashed lines represent #I fuel oi l at $3.50 , $4.00 and $4 .50 per gallon ($32.65, $37.31 and $41.98 per million Btu respectively). At hig h efficiency, heat from pellets (MC7) at $477.60 per ton is equal to the cost of#l fuel oil at $4.00 per gallon, (i.e., $37.31 per MMBtu), before considering the investment and OM&R costs. At 80% efficiency and $300/ton, an efficient pellet boiler will deliver heat at about 63% of the cost of #1 fuel oil at $4.00 per gallon ($23.44 versus $37.31 per MMBtu), before considering the cost of the equipment and OM&R. Figure 5-1 shows that, at a given efficiency, savings increase significantly with decreases in the price of pellets and/or with increases in the price of fuel oil. 10 45.00 40.00 35.00 ::::J .... 30.00 a:l ~ ~ 25 .00 .... Q) c.. v; 20.00 .... "' 15.00 0 u 10.00 5.00 0 .00 Cost l$) per MMBTU as a Function of Pellet Price 200 225 250 275 300 325 350 3 75 400 425 450 475 500 Pellet price, S per ton -----··--·---- Fuel Oil at $4.50 per gallon Fuel Oil at $4.00 per gallon Fuel Oil at $3.50 per gallon ___ ,., .......... _. _____ ../ Figure 5-1. Effect of Pellet Price on Cost of Delivered Heat 5.3 Assessing Demand Fuel oil conswnption for the Seward School facilities was compared with heating demand based on heating degree days (HDD) to determine the required boiler capacity (RBC) for space heating on the coldest 24-hour day (Table 5-2). Typically, installed oil-fired heating capacity in most facilities is two-to-four times the demand for the coldest day. It appears that the Seward Elementary and Middle Schools fall within this range with just one of the installed boilers (with the second available for back up). It appears that the installed capacity at the High School, while adequate, is less than double th e required boiler capacity. However, much of that capacity at is apparently used to heat the swinuning pool, which has different heating dynamics than the rest of the building. If the space heating requirements at the High School are comparable to those at the Elementary and Middle Schools, then much (60+ percent) of the oil consumption is used to heat the pool. For the purposes of calculating RBC for space heating at the High School, an estimate o£39,680 gallons (40% of the total) is used. 11 '·• ; . "'. ." 'fable 5-2. Estimate of Heat R~quired in Coldest 24:..Hour Period ·· . ·. . . .-, Facility Fuel Oil Used Heating Design RBCe Installed Btu/DDc gal/year" Deg ree Days b.d Tempd F Btulhr Btu/hr• Elem. School 19 ,000 f 221,680 536,111 2 @ 1,704,480 ea Middle School 15,700f 9 ,188 183,178 7 443 ,063 2 @ 1,876,000 ea High School 99,200 ( g 39,680 (40% of total) 462,962 1,119,208 2@ 1,983 ,200 ea Table 5-3 Footnotes: • From site visit information b NOAA, July I, 2005 through June 30, 2006: ~-¥ ocep noaa.eovih~roductslanalys~-. monitoringlcdus/dq1rr& dim/archiv~ting%20dcgreeY•20DayslMonthlyA'~fui2._006/jun%'02QQ6 1~1 c Btu/DD= Btu/year x oil furnace conversion effi c iency (0.80) /Degree Days d Alaska Ho us ing Manual, 4th Edition Appendix 0 : C limate Data for Alaska C ities, Research and Rural Development Di vision, Alaska Hou sing Finance Corporation, 4300 Boniface Parkway, Anchorage, AK 99504, January 2000. e RBC = Required Boiler Capacity for s pace heating on the coldest Day. BtU!hr= [(Btu/DO x (65 F-Design T emp))+DD}/24 hrs f Inc ludes fuel oil used to provide domestic hot water in addition to space heatin g needs g Inc ludes heating the swimming pool in addition to space heating needs According to these calculatious (Table 5-2), it appears that the Elementary a nd Middle Schools could be heated individually with s mall pellet systems. Although some savings would seem obvious a nd it appears possible, whether the two buildings would be better served b y a single, central boiler to serve both buildings cannot be positively determined at this d e gree of analysis. Given the distance between them (approx 1,100 feet) and the elevation difference it may or may not be cost-effective. At 99,200 gpy, the Hig h School appears to be a good candidate for its own pellet h e ating system. Consultation with a qualified engineer for all facilities is strongly recomme nded. 12 ,, 5.4 Summary of Findings and Potential Savings Table 5-3 summarizes the findings thus far: annual fuel o il usage, range of annual fuel oil c os ts, estimated annu al pellet fuel requirement, r ange of estimated annual pellet fuel costs, and potential gross annua l sav ings for the school fac iliti es in Seward. [No te: pot ential gross annu al fuel cost savings do not consider capital costs and non-fuel operat ion , maintenance and repair (OM&R) costs.] ' ' l .,~ • ' Table 5-3. Estimate of Total Wood Consumption, Comparative Cos t s and Potential Savings Fuel Oil Used Annua l Fuel O il Cost Approximate Annual W ood Pe llet Cost Poten ti al Gross Annual gal/year (@$_/gal) Wood Pell et (@$_/ton) Fuel Cost Savings Requiremen t • ($) .. ' -"'' FACILITY 3.50/ga/ 4.00/ga / 4.50/gal Wood pellots, MC7, 2 50/con 300/ton 350/ton Low Medium High ,, CI::SO% Elementary School 19,000 66,500 76,000 85,500 159 tons 39,750 47,700 55,650 10,850 28 ,3 00 45,750 Middle Schoo l 15 ,700 54,950 62,8 00 70,650 131 tons 32,750 39,300 45,850 9,100 23,500 37,900 High School 99,200 347,200 396,800 446,400 831 tons 207,750 249,300 290,850 56,350 147,500 238.650 T otal 133,900 468,650 535,600 602,550 1,121 tons 280,250 336,300 392,350 76,300 199,300 322 ,300 NOTES : a Assumes I ton of pellets is equal to 119.4 gattons of#l fud oil at MC7 and 80% CE SECTION 6. ECONOMIC FEASffiJLITY OF CORDWOOD SYSTEMS This section omitted SECTION 7. ECONOMIC FEASIBILITY OF BULK FUEL SYSTEMS A typical pellet boiler system includes pellet storage, a boiler room or separate boiler building, fuel delivery system, combustion chamber, boiler, ash removal system, cyclone, exhaust stack and electronic controls. The variables in this list of system components include the use of silos of various sizes for pellet storage, boiler buildings of various sizes, automated versus manual ash removal and cyclones or electrostatic precipitators for particulate removal.17 STORAGE SILO STOKER REFRACTORY LINED FIRE BOX AS H RECEPTAClE INDUCED DRAFT FAN Thi~ ~chem~tic di~gram of a wood pel et <~cem <how< the component< of a typical btoma<< boiler <ptem tncludtng a p lace to sto·.:: t he lu~l. equi pment to move it to the bo1 e· and equt pment to m anage the byproduct~-a sh and (ombustion gases. 7.1 Capital Cost Components Biomass fuel systems, in general, are larger, more complex and typjcally more costly to install than oil or gas systems. Before a true economic analysis can be performed, all of the actual costs (capital, non-capital and OM&R) must be identified, and this is where the services of professional engineers and/or consultants are necessary. Table 7-1 outlines the various general components for a hypothetical pellet system, however jt is beyond the scope of this report to offer estimates of individual co sts for those components. As an alternative, a range ofli.kely to tal costs is presented and analy zed for comparative purpos es. PI ,, .· "'· -. ' Tabie 7-1. Inif:!ei Investment,.~ost Comp~nents for Pellet Fuel Systems Facility Seward ElementarySchool, Seward Middle School, Seward High School Capital Costs: Building and Equipment (B&E) Fuel storage silo ? Pellet fuel delivery system ? Boiler room/building ? Boiler: base price ? shipping Plumbing/connections ? Electrical systems ? Installation ? Contingency ? Non-capital Costs Design & Engineering, Pennitting, etc. ? Initial Investment Total ($) $350,000 to $2,500 ,000 The initial investment cost of bulk fuel systems can range from less than $300,000 to over $3 million. Pellet syst ems are typically much less expensive (for a given RBC) than their wood-chip or hogged-fuel equivalents, and tend to occupy the lower end of the cost spectrum. Table 7-2 shows the total costs for the 2004-5 Darby School (Darby , MT) wood-chip system at $1 ,001 ,000 including $268,000 for repairs and upgrades to the pre-existing heating system. Integration with any pre-existing system will like ly require some changes that must be included in the wood system cost. Adding the indirect costs of engineering, p ermits, etc. to the equipment cost put the total cost at Darby between $716,000 and $766,000 for the 3 million Btulhr system to replace 47,000 gallons of fuel oil per year. Since the boiler was installed at Darby, building and equipment costs have increased from 10% to 25%. A new budget price for the Darby system might be closer to $800,000 excluding the cost of repairs to the existing system.4 15 ---'.•,.: ,-y ' - Table 7-2. Darby, 1\U' Public School Wood Cltip Boiler Costs a Boiler Capacity 3 MMBtu/hr Fuel Oil Displaced 47,000 gallons Heating Degree Days 7,186 System Costs: Building, Fuel Handling $230,500 Boiler and Stack $285.500 Boiler system subtotal $ 516,000 Piping , integration $ 95,000 Other repairs, improvements $268,000 Total, Direct Costs $ 879,000 Engineering, permits, indirect $ 122,000 Total Cost $1,001,000 a Bi omass Energy Resource Center, 2005 4 The Craig Schools and Aquatic Center proj ect in Craig, AK was originally estimated at less than $1 million to replace propane and fuel oil e quivalent to 36,000 gallons of fuel oil, but the results of a January 2007 bid opening brought the estimate to $1.85 M . It was ultimately built for around $lAM employing a force account. A pe llet system would h ave been less expensive, but with a large sawmill less than 10 miles away, wood chips were the right fuel choice. The following is an excerpt from the Montana Biomass Boiler Market Assessment17 : "To date, CTA [CTA A rchitects and Engineers, Billings, Ml] has evaluated more than 200 buildings througho ut the northwestern United Sta tes and designed 13 biom ass boiler projects, s ix of which are now operational. Selected characteristics of these proj ects, including tota l project cost, are presented in Table 1 [Ta ble 7-3]." "As can be seen from Table 1 [Table 7-3], total costs for these projects do not correlate directly with boiler size (emphasis added). The least expensive biomass projec t completed to date cost $455,000 (not including additional equipment and site improvements made by the school district) for a wood-chip syst em in Thompson Falls, Montana. The least expensive wood pellet system is projected to cost $269,000 in Bums, Oregon." 16 Facility Name Thompson Falls School Dis trict Glacier High School Victor School District Philipsburg School District Darby Sc hool District City of C raig Univ. MT Western Harney Dis trict Hospital ' , Table 7-3. Chara~teristics ·of Biomass B6iter ~rojects 17 Location Thompson Falls, MT Kalispell , MT Victor, MT Philipsburg, MT Darby, MT Craig, AK Dillon, MT Bums, OR Boiler Size (MMBtulhr output) L6MMBtu 7MMBtu 2.6 MMBtu 3.87 MMBtu 3 MMBtu 4MMBtu 14 MMBtu 0 .75 MMBtu Project Type Stand-alone boiler building tied to ex isting steam system New facility with integrated wood chip and natural gas hot water system Stand-alone boiler building ti ed to ex isting steam system Stand-alone boiler building tied to existing hot water syst em Stand-alone boiler building tied to existing steam & hot water system S tand-alone boiler building tied to existing hot water systems Addition to existing steam sys tem Major renovation. New pelle.t system tied to a new heat pump system Wood :Fuel Type Chips Chips Chips Chips Chips Chips Chips Wood Pellets Total Project Cost $455,000 $480,000 $615,000 $684,000 $970,000 $1,400,000 $1,400,000 $269,000 "' +' These pellet-i1red syst~·rt..s have been (or are being) mstaU"d·since the Montana Biomass-Boiler Market Asiessment was writt~n in 2006. ' • • ' "' 'i· "i 'in Sealaska Corp. USCG Air Statio n Si tka Troy School District Townsend School District Jac kson Laboratory Juneau ,AK S itka, AK Troy,MT Townsend, MT Bar Harbor, ME 0.75 MMBtu 3.6MMBtu 0.65MMBtu 2.2 MMBtu 15 MMBtu 7.2 Generic OM&R Cost Allowances New pellet system to replace a n o ld oil system; space heat Distributed replacement of o ld central oil system ; space heat and DHW New pellet system in existing boil er room (low _Qressure steam) Conversion of one exis ting o il-fired boiler to pellets Co-generati on system; d is pl acing L2 million gallons of o il annually Wood Pelle ts Wood Pellets Wood Pellets Wood Pellets Wood pellets $600,000 (approximate) $800,000 (estimated) $298,755 $425,000 $4.4 M The primary operating cost of any heating system is fuel. The estimated pellet costs for the Seward Schoo ls we re presented in Table 5-3 . Other O&M costs include labor, electricity, and maintenance and repair costs. For purposes of this analysis, it is a ss umed that the boiler will operate every day for 210 days (30 weeks) per year between mid-September and mid-April. Daily labor would consist of monitoring the system and perfonning daily inspections as prescribed by the system manufacture r. Jt is assumed that the a ve rag e daily lab or requirement is ';4 hour. An 17 additional 1 hour per week is allocated to pe rform routine maintenance tasks, and 20 hours for annual maintenance. Therefore, the tota l annual labor r e quirement is (210 x 0 .25) + 30+20 = 102.5 hours per year. At $30 per hour, the annual labor cost would be $3,075. There is a lso an electrical cos t component to the boiler operation. Typically, electrically-powered conveyors of various s orts are used to move fue l from its place of sto rage to a metering bin and into the boiler. There are a lso numerous other e lectrical systems that operate various pumps, fans, etc. For a small system, an arbitrary allowance of $1,000 i s made to cover these costs. For a medium system the allowance is $2,000, and for a large system, the allowance is $4,000. Lastly, there is the cost of m aintenance and repair. Bulk fuel systems with their conveyors, fans, b earings, motors, etc. have more wear parts. For a s mall system, an arbitrary allowance of$1,500 is made to cover these costs . For a medium system the allowance is $3,000, and for a large system, the a llowance is $6,000. Total annual operating, maintenance and repair cos t estimates for pellet heating s ys tems at the Seward Schools are summarized in Tables 7-4a and 7-4b. ..... " .,..q,,,,,,,,,,,,,,,,,,,, '"''"'"" • """'"" ............ ,. . ··--·· ,, ...... "" '_'''/'"' · .. Table 7-4a. Total OM&R Cost Allowan~tes for a Small Pellet System Item Cost/ Allowance Seward Elementary School Seward Middle School (19,000 gpy, 159 l])y) (15,700gpy; 131 tp y) Non-Fuel OM&R Labor($) 3,075 E lectricity ($} 1,000 Mainte nance ($) 1.500 Total, no n-fuel OM&R 5 ,575 Woo d fuel ($) 47 ,700 39 ,300 Total OM&R ($) 53,275 44,875 ., \ • . • :0 ..• Table 7-4b~,Tptal OM&R Cost, Allowances for~ ¥edium and ~~.~ge Pellet System Item Cost/ Allo wance Seward Elementary & Middle Schools Seward High Sc hoo l (3 4 ,700 gpy, 290 tpy) (99 200 gpy; 83 1 tpy) Non-Fuel O M&R Labor($) 3,075 E lectricity ($) 2,000 4,000 Maintenance ($) 3 .000 MJJ2Q Total, non-fuel OM&R 8,075 13,075 Wood fuel($) 87,000 249,300 Total OM&R ($) 95,075 262,375 •' '~t' 18 7.3 Calculation of Financial Metrics A discussion of Simple Payback Period can be found in Appendix B. A discussion of Present Value can be found in Appendix B . A discussion ofNet Present Value can be found in Appendix B. A discussion of Internal Rate of Return can be found in Appendix B. 7.4 Simple Payback Period for Generic Pellet Fuel Boilers Tables 7-5a and 7-5b present Simple Payback Period aualysis fo r a range of initial investment cost estimates for small, medium and large pellet fuel boiler systems at the Seward Schools. "' "' ... "' Jable 7-S.a. Simple Payback Period AnalYsis for Small Pellet Heating Systems . Seward E le mentary School Seward Middle School (19.000 gpy, 159 tpy) ( 15 .700 gpy; 13 1 tpy) Fuel oil cost 76,000 62,800 ($pet· year@ $4.00 per ga llon Pellet fuel 47,700 39,300 ($ per year@ $300 per ton) Annual Fuel Cost Savings($) 28,300 23,500 Total Investment Costs($) 350,000 500,000 650,000 350,000 500,000 650,000 Simple Payback (yrs)" 12.37 17.67 22.97 14.89 2 1.28 27.66 a SimBle Pa:tback equals Totallnv~tment CQ~ts divided by Allll Ul!l Fuel !:;Q~l Savin~ ~ttble 7-Sb .. Simple.fayback Perlod Aoal~is for" a Medium a~d Lar~~PeUet He';ting System Seward Elementary & Middle Schools Seward High School {34,700 gpy, 290 tpy) {99 ,200 gpy; 831 tpy) Fuel o il cost 138 ,800 396,800 ($ per year @ $4 .00 per gallon Pellet fuel 87,000 249,300 (S per yea r @ $300 per ton) Annual Fuel Cost Savin gs($) 51,800 147,5 00 Total Investment Costs{$) 550,000 700,000 850,000 1,000,000 1,500,000 2,000,000 S imple Payback (yrs)" 10.62 13 .5 1 16.41 6.78 10.17 13.56 a Sim11le Pa:tback equals TQtalln v~tm!<nl Cost<; divided by Annual [uel Cost Savings While simple payback has its limitations in terms of project evaluations, one of the conclusions of th e Montana Biomass Boiler Market Assessment was that viable projects had simple payback periods of 10 years or less.17 19 7.5 Present Value (PV), Net Present Value (NPV) and Internal Rate of Return (IRR) Values for Pellet Fuel Boilers Table 7-6a presents PV, NPV and IRR va lues for hypothetical small pellet boilers at the Seward Elementary and Seward Middle School s. . .,. ' . ""' ' ', . ' . . ~ Table 7-6a. PV, NPVand IRR Values for a Small Pellet System (Seward Elementary aJ!d Seward Middl;e Schools) Seward Elementary School Seward Middle School (19,000 gpy, 159 tpy) (15,700gpy; 131 tpy) Discount Rate 3 Time, "t", (years) 20 lnjtial Investment ($)a 350,000 500,000 650,000 350,000 500,000 Annual Cash Flow ($) b 22,725 17,925 Present Value (of expec ted cash 338,09 1 266,679 flows),($ at "t" years) Net Present Value($ at "t" year s) -11 ,909 -161,909 -31 1,909 -83,321 -233,32 1 Internal Rate of Return(%) 2.63 -0.89 -3.19 0.23 -2.98 Notes : a from Tabl e 7-Sa b Equals rumlli!l cos! Qf fuel oil minus annyal cost of wood minu s annual non-fuel QM&R costs Table 7-6b present s PV, NPV and IRR values for hypothetical me dium and large pellet boilers at the Seward Elementary and Middle Schools (combined) and the Seward High SchooL Table 7-6b. "PV, NPVand IRRValues for a Medirlm an<J Large PellefSystem ' (Seward Elementary and Middle SchooJS};c ., ' ,; Seward Elementary & Middle Schools Seward High School (34,700 gpy. 290 tpy) (99,200 gpy; 83 1 t p y ) Discount Rate 3 Time, "t", (years) 20 650,000 -383,321 -5.10 Initial Inves tment ($)a 550,000 700,000 850,000 1,000,000 1,500,000 2,000,000 b Annual Cash Flow ($) 43,725 134,425 Present Value (of exp ected cash 650,5 18 1,999,905 flows}, ($at "t" years) Net Present Value($ a t "t" years) 100,5 18 -49 ,482 -199,482 999,90 5 499,905 -95 Internal Rate of Return(%) 4.89 2.22 0.27 12.07 6.34 3.00 Notes: a from Table 7-S b b Eq uals annual cost of lu el oi l minus rumual cost of wood minus annl!ll l non-fu el QM&R costs 20 SECTION 8. CONCLUSIONS This report discusses conditions found "on the ground" at KPBSD School facilities in Seward, Alaska, and attempts to demonstrate, by use of realistic, though hypothetical , examples the feasibility of ins talling high efficiency, low emission pellet boilers to heat these facilities. The facilities in Seward consist of several distinct entities and are describe d in greater detail in Section 1.3 . They include: 1 . Seward Elementary School 2. Seward Middle School 3. Seward High School In term s of individual sites, none of the proposed project sites appear to present any major geo- phys ical constraints for the construction of individual wood-fired heating plants. In fa c t , the conditions in the general area of the projects appear to be fairly favorable for construction proj ects. However, when considering a common system that would provide heat to both the Elementary School and Middle School, the distances between the buildings and the elevation difference may begin to test the limits of what may be technically possible and/or economically feasible. The heating demands at the E lementary and Middle Schools, though significant, are relatively small when considering conversion to an automated biomass heating system, and are "marginally cost-effect ive" given the stated assumptions. Financial metrics are improved somewhat when considering a common heating system to serve both facilities if the cost of a common system is less than the cost of two individual systems. The heating demand at the Seward High School is large and the projected cost savings with pellets are sufficient for a biomass heatiug system t o be considered "cost-effective." That conclusion is based on a total initial inves tme nt cost of $1.5 million or less, with fuel oil at $4.00 per gallon, wood pellets at $300 per too, and a simple payback period l ess than 10 years. This fac ility warrants formal feasibility analysis regarding the installation a pellet fuel heating system. 21 REFERENCES AND RESOURCES 1 Wilson, P.L., Funck, J.W., Avery, R.B., Fuelwood Characteristics of Northwestern Conifers and Hardwoods, Research Bulletin 60, Oregon State University, College of Forestry, 198 7. 2 Briggs, David, 1994. Forest Products Measurements and Conversion Fa ctors, University of Washington Institute of Forest Resources, AR-1 0 , Seattle, Washington 98195. 3 Wood with moisture greater than about 67% MC will not support combustion. Wood-Fired Boiler Syste ms For Space Healing, USDA Forest Service, EM 7180-2, 1982. 4 Feasibility Assessment for Wood Heating, T.R. Miles Techni cal Consultants, Inc., Portland, OR, 2006. http://www.jedc.org/forms/ A WEDTG WoodEnergyF easibility.pdf 5 Smoke Gets in Your Lungs: Outdoor Wood Boilers in New York State, October 2005, New York State Attorney General http://www.oag.state.ny.us/prcss/2005 /aug!August%202005.pdf 6 Proposal For A Particulate Matter Emissions Standard And Related Provisions For New Outdoor Wood-fired Boilers, Vermont Agency of Natural Resources Department of Environmental Conservation Air Pollution Control Division January 20,2005 (revised July 6, 2005) http://www.vtwoodsmoke.org/pdf/TechSupp.pdf 7 http://www.nescaum.org/topics/outdoor-hydronic-heaters/other-model-regulations 8 http://www.nescaum.org/topics/outdoor-hydronic-heaters/state-and-federal-information 9 Assessment of Outdoor Wood-Fired Boilers, Revised May 2006, NESCAUM, the Clean Air Association of the Northeast States http://www.nescaum.org/documents/assess ment-of-ourdoor-wood-fired-boilers 10 Electronic Code of Federal Regulations, Title 40, Protecti on of Environment, Part 60, Standards of Performance for New Stationary Sources. http://ecfr.gpoaccess.gov/cgi/t/text!text- idx?c=ecfr&sid=IDd500634add4fl 7c656e9d55ce0d0cf&rgn=div6&view=text&node=40:6.0.1.1.1.63&idno=40 11 WK5982 Standard Test Method for Measurement of Particulate Emissions and Heating Etliciency of Outdoor Wood-Fired Hydronic Heating Units, Committee E06.54 on Solid Fuel Burning Appliances American Society of Testing and Materials. www.astm.org 12 U.S. En vironmental Protection Agency news release, http:/ /yosemite.epa.gov/opaladmpress.nsf/4b729a23b 12fa90c852570 I c005e6d 70/007f2774 70e64 7 4585257272005 7 3 53c! Op en Document 13 http://www.tarmusa.com, Tarm USA Inc. P.O. Box 285 Lyme, NH 03768 14 http ://www.gam.com Dectra Corporation, 3425 33'd Ave. NE, St. Anthony, MN 55418 15 Test of a Solid fuel Boiler for Emissions and Etliciency per lntertek's Proposed Protocol for Outdoor Boiler Efficiency and Emissions Testing . lntertek report No. 3087471 for State of Michigan, Air Quality Department. lntertelc Testing Services NA Inc. 8431 Murphy Drive , Wisconsin 53562. March 2006. 16 Keun7.el, Ne w Horizon and Alternate Heating Systems are sometimes recommended for high etliciency boilers, however none are installed in Alaska and no e fficiency or emissions data was available for this report. www.n ewhorizoncorp.com, www.kuenzel.de/English/indexE.htm, www.altemateheatingsystems.com/Multi-Fuel_boilers.htm 17 Biomass Boiler Market Assessment, CTA Architects and Engineers, C hris topher Allen & Associates, Montana Community Development Corp., and Gcodata Services, [nc. 2006. http://www.fuelsforschools.info/pdf!Final Report Biomass Boil er Market Assessment.pdf 18 Darby Fuels For Schools Second Season Monito ring Report, 2004-2005. http ://www.fuel sfors chools.info/pdti'Darby FFS_Monitoring Rpt 2004-2005 .pdf 19 Life Cycle Cost Analysis Handbook, Ala ska Department of Education and Early Development, Education Support Services, l " Edition, 1999. Appendix A. List of Abbreviations and Acronyms AEA Btu CE Cord DB DD (HDD) EPA U.S. GHV Gm Gpy HHV KBtu KWe KWt MC MBtu MMBtu NHV NPV OD O&M OM&R PV RHV WB CONVERSIONS Alaska Energy Authority British Thermal Unit Conversion Efficiency (fuel to heat) 85 ft3 of solid wood; 100 cubic feet of wood + bark; 128 cubic feet of wood, bark and air space Dry Basis ((wet weight-dry weight)/ dry weight* 100)) Degree Days (Heating Degree Days) Environmental Protection Agency, U.S. Gross Heating Value Gram Gallons per year High[er] Heating Value Thousand Btu Kilowatts, electric Kilowatts, thermal Moisture Content (e.g. MC30 = 30% moisture content) Thousand Btu (also kBtu) Million Btu Net Heating Value Net Present Value Oven Dry Operating and Maintenance Operation, Maintenance and Repair Present Value Recoverable Heating Value Wet basis ((wet weight-dry weight)/wet weight* 100) 1 grams= 0.00220462262 pounds 1 pounds = 453.59237 grams Btu: A BTU is defined as the amount of heat required to raise the temperature of one pound (approx. 1 pint) of water by one degree Fahrenheit APPENDIX B-FINANCIAL METRICS 6.1 Simple Payback Period From: www.odellion.com: The [Simple} Payback Period i s defined as th e length o f time r e quired t o recover an initial investment through cash flows generated by the investment. The Paybac k Period lets you see the level of profitability of an investment in relation to time. The shorter the time period the better the investment oppo rtunity: ....------..... ---~-... ·----'•• ---,..._. ... ·----· ... 1 · investment 'i i Paybac·k 1 l Period cash flow (year} ~ \.,___,_ .... ~--~~··' --·~· --·. -- As an example, consider th e implementation of a Human Resources (HR) software application that costs $150 thousand a nd will generate $50 thousand in annual savings in four years (the project duration): HR Application Example Initial Year 1 · Year 2 Year 3 V:ear 4 cost: $150K benefit: $50K benefit: $50K benefit: $50K'· benefit ~ $SOK Us ing the formula above, the Payback Period is ca lculated to be three years by div iding the initial investme nt of $150 thousand over the annual cas h flows of $50 thousand. This equation i s only appli ca ble when the investment produces equal cash f low s each year. Now co nsider the software i m pl e mentation w ith the same initial cost but with variable ann ual cash flows: HR Application Example Initial Year 1 Year 2. Year 3 Year 4 cost: $150K benefit: $60K benefit: $60K benefit: $40K benefit: $20K Given the variable cash flows, the payback is ca lc ulated by looking at the cash flows a nd establi shing the year the investment is paid off. At the begi n n ing of Ye a r 2, the company has recove r ed $120 thousand of the original $150 thousand. At the end of Yea r 2, t h e remaining $30 tho usand is r ecov e r ed with the cash flow of $40 thousand earned during thi s period. The payback period i s the n 2 + ($30 thou sand/$40 thousand) or 2.8 yea rs. The Payback Period i s a tool th at is easy to u se and understa nd, but it does have its limita tio n s. Payback pe riod analysis d oes not address the time value of money, nor does i t go beyond the recovery of the initia l investment. 6.2 Present Value From: www .en. wikipedia.org: The prese nt value o f a single or multiple future payments (known as cas h flow(s)) is the nominal amounts of money to change ha nds at some future date, discounted to account f o r the time value of money, a nd othe r f actors su ch as investmen t ris k . A given amount of m o ney is always more va lu a ble soon er than lat e r since this e n a bl es one to t a k e advantage of investment o ppo rtunities. Present valu es are therefore s m a ller than corres ponding future values. Present value calculations are widely used in business and economics to provide a means to compare cash flows at different times on a meaningful "like to like" basis. One hundred dollars 1 year from now at 5% interest rate is today worth: Present value -future a1nount 100 95.23. (1 +interest rate)te·m (1 + .05)1 6.3 Net Present Value From: http ://www.odellion.com: The Net Present Value (NPV) of a project or investment is defined as the sum of the prese nt values of the annual cash flows minus the initial investment. The annual cash flows are the Net Benefits (revenues minus costs) generated from the investment during its lifetime. These cash flows are discounted or adjusted by incorporating the uncerta inty and time value of money. NPV is one of the most robust financial evaluation tools to estimate the value of an investment. The calculation of NPV involves three simple yet nontrivial steps. The first step is to identify the size and timing of the expected future cash flows generated by the project o r investment. The second step is to d etermine the discount rate or the estimated rate of return for the project. The third step is to calculate the NPV using the equations shown below: . NPV ::: . inttal +Cash flow Year 1' + ... Cash now Yearn ; InVestment {1+r) 1 (1+r} n Or, ......... .. · NPV inftal + investment Definition of Terms . ' ·--, .. ,...,.~ ... ,,., ..,:.· ........... ,":: t = end of p roject L (Cas.h Flows at Year t) (1+r} t t = 1 . . ·--.. : ........... ,.,__./. Initial Investment: This is the investment made at the beginning of the project. The value is u sually negative, since most projects involve an initial cas h outflow. The initial investment can include hardware, software lice nsing fees, and startup costs. (ash Flow: The n et cash flow for each year of the project: Benefits minus Costs. Rate of Return: The rate of return is calculated by looking at compar able investment alternatives having s imilar risks. The rate of return is often referred to as the discount rate, interest rate, or hurdle rate, or company cost of capital. Companies frequ e ntly u se a standard rate for the project, as they approximate the risk of the project to be on average the risk of the company as a whole. Time (t): This is the number of years representing the lifetime of the project. A company should invest in a project only if the NPV is greater than or equal to zero. If the NPV is less than zero, the project will not provide enough financial benefits to justify the investment, since there are alternative investments that will earn at least the rate of return of the investment. In theory, a company will select all the projects with a positive NPV. However, because of ca pital or budget constraints, companies usually employ a concept called NPV Indexes to prioritize projects having the highest value. The NPV Indexes are calculated by dividing each project's NPV by its initial cash outlay. The higher th e NPV Index, the greater the investment opportunity. The NPV analysis is highly flexible and can be combined with other financial evaluation tools such as Decision Tree models, and Scenario and Monte Carlo analyses. Decision Trees are used to establish the expected cash flows of multiple cash flows each one having a distinct probability of occurring. The expected cash flows are then calculated from all the possible cash flows and their associated probabilities. NPV and Scenario Analysis are combined by varying a predetermined set of assumptions to determine the overall impact on the NPV value of the project. Finally, Monte Carlo analysis provides a deeper understanding of the relationship between the assumptions and the final NPV value. The Monte Carlo analysis calculates the standard deviation or ultimate change of NPV by using a set of different assumptions that dominate the end result." 6.4 Internal Rate of Return (IRR)) From: http://en .wikipedia.org/wiki/Internal rate of return: The internal rate of return {IRR) is a capital budgeting method used by firms to decide whether they should make long-term investments. The IRR is the return rate which can be earned on the invested capital, i.e. the yield on the investment. A project is a good investment proposition if its IRR is greater than the rate of interest that could be earned by alternative investment s {investing in other projects, buying bonds, even putting the money in a bank account). The IRR should include an appropriate risk premium. Mathematically the IRR is defined as any disco unt rate that results in a net present value of zero of a series of cash flows. In general, if the IRR is greater than the project's cost of capital, or hurdle {i.e., discount) rate, the project will add value for the company. From http://www.odellion.com: The Internal Rate of Return {IRR) is d efined as the discount rate that makes the project have a zero Net Present Value {NPV). IRR is an alternative method of evaluating investments without estimating the discount rate. IRR takes into account the t ime value of money by considering the cas h flows over the lifetime of a project. The IRR and NPV concepts are related but they are not equivalent. The IRR uses the NPV equation as its sta rting point: Cash flow Year n j + ... . (1+fRR)" I ., NPV = 0 = inital +Cash flow Year 1 investment I ...... "' ..... ~ ... ,... .•. -~ ......... ____ ·----- Definition of Terms Initial investment: The investment at the beginning of the project. Cash Flow: Measure of the actual cash generated by a company or the amount of cash earned after paying all expenses and taxes. IRR: Internal Rate of Return. [1: Last year of the lifetime of the project. Calculating the IRR is done through a trial-and -error process that l ooks for the Discount Rate that yields an NPV equa l to zero. The trial-and -error calculatio n can by accomplished by using the IRR function in a spreadsheet program or with a programmable calculator. The graph below was plotted for a wide range of rates until the IRR was f ound that yields an NPV equal to zero (at the intercept with the x -axis). Internal Rate of Return (IRR} Discount Rat~ (r) As in the example above, a project that has a discount rate less than the IRR will yield a positive NPV. The higher the discount rate the more the cash flows will be reduced, resulting in a lower NPV of the project. The company will approve any project or investment where the IRR is higher than the cost of capital as the NPV will be greater than zero. For example, the IRR for a particular project is 20%, and the cost of capital to the company is only 12%. The company can approve the project because the maximum va lue for the company to make money would be 8% more than the cost of capita l. If the company had a cost of capital for this particular project of 21%, then there would be a negative NPV and the project would not be considered a profitable one. The IRR is therefore the maximum allowable discount rate that would yield value considering the cost of capital and risk of the project. For this reason, the IRR is sometimes referred to as a break-even rate of return. It is the rate at whi ch the value of cash outflow equals the value of cash inflow. There are some special situations where the IRR concept can be misi nterpreted. This is usually the case whe n periods of negative cash flow affect the value of IRR without accurately reflecting the underlying performance of the investment. Managers may misinterpret the IRR as the annual equivalent return on a given investment. This is not the case, as the IRR is the breakeven rate and does not provide an absolute view on the project return. Appendix C. Partial List of Potential Pellet Suppliers Note: Listing of any manufacturer, distributor or service provider does not constitute an endorsement. Superior Pellet Fuels, North Pole, AK Alaska Pellet, Delta Junction, AK Bear Mountain Forest Products, Brownville & Cascade Locks, OR Blue Mountain, Boardman, OR Frank Lumber, Lyons, OR West Oregon Wood Products, Columbia City; Banks; Riddle, OR Woodgrain Millwork/Nature's Pellets, Prineville, OR Ochoco Lumber, John Day, OR Pacific Pellet, Redmond, OR Integrated Biomass Resources, Wallowa, OR Kingsford Charcoal, Springfield, OR (briquettes?) Lignetics, Inc. Sandpoint, ID QB Corp., Salmon, ID Atlas Pellets-Post Falls, ID, Omak and Shelton, WA-closed? Manke Lumber Co., Tacoma, WA Weyerhaeuser, Federal Way, WA Treasure Valley Forest Products, Boise, ID Eureka Pellets -Superior MT and Eureka, MT Enligna USA. West Sacramento, CA Mr. Pellet, Anderson, CA Mallard Creek Pellets, Rocklin, CA (near Sacramento) Arbor Pellet, Salt Lake City, UT Dansons, Inc., Edmonton, Alberta LaCrete Sawmills Ltd./LaCrete Pellets, LaCrete, Alberta Armstrong Pellets Inc, Armstrong, British Columbia Biomass Secure Power, Abbotsford, British Columbia Cantor/Pinnacle, Houston, British Columbia Highland Pellet Manufacturing, Merritt, British Columbia New Age Pellet Products, Coquitlam, British Columbia Pacific BioEnergy, Prince George, British Columbia Pelltiq't Energy Group, Kamloops, British Columbia Pinnacle Pellet, Quesnel and Williams Lake, British Columbia Princeton Co-Generation, Princeton, British Columbia Viridis Energy/Okanagan Pellets/Westwood Fiber Products, Vancouver, British Columbia Premium Pellet Ltd., Vanderhoof, British Columbia Appendix D. Grant Information 1. ALASKA RENEW ABLE ENERGY GRANT FUND http://www.akenergyauthority.org/Renewable Energyfund/Round V July 20 11/Round-V RFA-v2.pdf The Alas ka Le gislature esta blished the Renewab le Energy Grant Fund and the Rene wable Energy Grant Re commendation Program in Chapter 3 1 SLA 2008 in 2008. This bill included a ne w s ta tute, AS 4 2.45.045 , o utlining the program and giving the Alask a Energy Authority respons ibility for administering the program. The legisla ture is resp onsible fo r final approval and funding of all grant proj ects, with the G overnor 's appro va l. Unde r guidance from the Renewable Energy Fund Advisory Commi ttee, Alas ka Ene rg y Authority ac tively solicits appli cations for heating projects, including heat recovery, bio mass, ground source h eat pumps, and direct-geothermal use. Projec t proposals must demons tra te a public bene fit. The Auth o ri ty m ay recommend grants for f easibility s tudies, reconnaissance studies, energy resource monitoring, and/or work re lated to the design and construction of an eli g ible project. Eli g ible applicants include certain e lectric utilities, ce rtain independent po wer producers, local governments and go vernment entities. NOTICE: THE REQUEST FOR GRANT APPLICATIONS (RFA) FOR ROUND 5 WAS ANNOUNCED ON JULY 1, 2011, AND POSTED ON THE AEA WEB SITE (ABOVE). Applications are due at the Alaska Energy Authority office by SPM ON FRIDAY, AUGUST 26, 2011. Faxed and emailed applications will not be accepted. Per Section 1.7 of this RF A, applicants are reminded that two hard copies and one electronic copy of each application must be submitted. Contact: Butch White, Phone: 907.771.3 048 , E -m a il: r e_fund@ aidea.org 2. USDA FOREST SERVIC E, WOODY BIOMASS UTILIZATION GRANT (WBUG, WBU GRANT, "WOODY BUG") In 2 011 , the WBU G rant pro gram offer ed cost-sh are (80/20) gran t s up to $250,000 to further the pla rming of facilitie s, whic h p rop osed t o u s e proven techno logies t o produce the rma l, e lectrical, liquid o r gaseous bio -e n e rgy, by fundin g the e ng ineering s ervices necessary fo r fi na l d esign a nd cost analys is. The program is aimed at h elpi n g app licants comple te the necessary d esign work ne eded to s e cure public and/or private investment for construction. Elig ible a pplicants are businesses , comp a nies, corpo r ation s, Stat e, local and triba l governme nts , school districts, communities, n o n - pro fit o rganizations o r specia l purpose dis tricts. For F FY 2011, an anno lU1c ement ap peared in the Federal Register o n Decembe r 9, 201 0 and applicatio ns were due at the R e gional Forest Servi ce O ffice on M ar ch 1, 2011 . 310 Hardwood Lane  Princeton, WV 24720  (304) 487‐1510    Wood Education and Resource Center  www.na.fs.fed.us/werc  MEMORANDUM   DATE: July 26, 2011    TO: Lew McCreery, USFS    FROM: Don Marteeny; WES,     CC: Dan Wilson, PE; WES    RE: Seward, AK Project, Assessment Review and District Energy Concept Evaluation    1.0 Overview, Comments on Prefeasibility Study  This memorandum summarizes a review of the DRAFT Preliminary Feasibility Assessment for  Wood Pellet Heating in Seward Alaska (July 11, 2011).  As part of the review a concept‐level  analysis of a biomass district energy system serving Kenai Peninsula Borough School District  (Seward Elementary, Middle, and High Schools) and the Providence Seward Mountain Haven  (PSMH) Assisted Living Center was performed.  The analysis included both a thermal‐only and a  thermally‐led CHP option.  Analysis showed that the biomass district energy options had the  potential to provide $20,000 ‐ $30,000 in positive cash flow in the first year of project  operation. The analysis was performed at a conceptual level, and a site visit was not conducted.   Detailed study is required as the project progresses from the concept stage.  This section  provides comments on the report, and the remainder of the memorandum presents the results  of the biomass district energy analysis.    1. A biomass district energy system utilizing wood chips has a similar payback to pellet  options identified for individual buildings in the Preliminary Feasibility Assessment.  It is  recommended that a biomass district energy system be included as an option for  analysis as the project moves forward.  The high school would be the key load for the  project, and addition of other buildings should be evaluated for cost benefit.  2. Further evaluation of the existing building heating systems may yield opportunities for  equipment upgrades and use of VFD controlled pumps to improve efficiency and reduce  energy costs.  3. The pool load is a significant base load and should be identified and included in the  analysis of a biomass system involving the high school.  4. Additional analysis requires the following information:  a) Fuel oil usage, building areas, and a description of heat loads at the PSMH facility.  b) Details on pool size, operating conditions and schedule, and HVAC equipment.  c) Wood chip and pellet availability and cost.  d) Details on building envelopes and future plans for renovation or expansion.  e) Information on potential hot water piping routes, geotechnical, ownership, etc.  Seward, AK Project, Assessment Review and District Energy Concept Evaluation July 26, 2011  Wood Education and Resource Center  www.na.fs.fed.us/werc  2    2.0 Summary of District Energy System Analysis  Altogether, the eight (8) buildings in the proposed system are estimated to use 160,200 gallons  of fuel oil annually at a cost of $600,750 assuming a fuel oil cost of $3.75/gallon. A 4.5  mmBtu/hr biomass boiler system would offset over 80% of this fuel oil usage producing an  annual savings of $230,000. The addition of a backpressure steam turbine and the installation  of a steam boiler operating at 175 psig in place of a hot water boiler would produce an  additional $40,000 in annual savings from the value of electricity generated.  Concept‐level  capital costs are $2.5 million for the heat only system and $2.85 million for the CHP system.   The simple payback is 11 years for the heat only system and 10.5 years for the CHP system  assuming a wood chip cost of $100 per ton. It is recommended that this system be considered  along with the pellet systems presented for the individual school buildings in the “Preliminary  Feasibility Assessment for Wood Pellet Heating in Seward, Alaska” report.     3.0 Current Energy Use and Heating System  The buildings included in this project include Seward Elementary, Middle, and High Schools  (Kenai Peninsula Borough School District), along with the Providence Seward Mountain Haven  (PSMH) assisted living center. The assisted living center consists of a commons along with four  (4) identical residence units. Altogether, the eight (8) buildings use 160,200 gallons of fuel oil  annually at a cost of $600,750. The current fuel use for each building is shown in Table 1.     Table 1 – Annual fuel usage for each building.  Building Fuel Oil Usage  (gal/yr)  Building Footprint  (sf)  Energy Demand  (Btu/sf)  Seward Elementary 19,000 52,199 50,595  Seward Middle School 15,700 37,500 58,195  Seward High School 99,200 75,373      182,941**  PSMH Commons 15,000* 16,000* 130,000  4 PSMH Residences 11,300* 24,000* 65,500  * Fuel usage, building footprint, and energy demand for PSMH facility is estimated.  **High school energy demand includes heat for indoor pool.    Each building is equipped with a pair of hot water fuel oil boilers for full redundancy. The three  school buildings use a hot water distribution system with air handlers throughout the building.  Domestic hot water generation is included in the hot water distribution system for all of the  buildings along with pool heating at the high school. The PSMH residences use a radiant in‐floor  heating system. The boilers also generate hot water through two (2) indirect fired hot water  heaters and provide heat to sidewalks for ice and snow management during the winter season.  The only information available regarding the heating system at PSMH Commons at the time of  this analysis was that it supplied a portion of the domestic hot water in addition to space  heating. A 70 gallon direct fired hot water is also onsite. The manufacturer, installation date,  capacity, and assumed efficiency of the heating systems are summarized in Table 2. The  condition of all equipment in the schools was noted as good to excellent condition. The state of  the PSMH equipment was unknown at the time of this analysis.  Seward, AK Project, Assessment Review and District Energy Concept Evaluation July 26, 2011  Wood Education and Resource Center  www.na.fs.fed.us/werc  3    Table 2 – A summary of the heating systems in each building.  Building Number  of Boilers  Boiler  Manufacturer Boiler  Installation  Date  Capacity  per Boiler  (mBtu/hr)  Assumed  Efficiency  Seward Elementary 2 Kewanee 1989 1,704 77%  Seward Middle  School 2 Hurst 2005 1,876 77%  Seward High School 2 Cleaver‐ Brooks  1983 1,983 77%  PSMH Commons 2 Burnham Unknown 1,167 72%  4 PSMH Residences 8 Burnham Unknown 260 72%  mBtu/hr = thousand Btu per hour    3.0 Proposed Biomass System  A 4.5 mmBtu/hr wood chip fueled biomass boiler could supply over 80% of the heat demand.  Fuel oil would be used to satisfy the summer domestic hot water and pool heating loads along  with providing backup to meet peak demands. This would require 2,509 tons of wood chips and  32,040 gallons of fuel oil annually. The resulting potential energy savings for each building is  shown in Table 3 below. Altogether, this presents a total estimated system savings of $230,000  annually.    Table 3 – Annual energy savings for by building.  Building Annual Energy  Savings  Seward Elementary  $27,200   Seward Middle School  $22,500  Seward High School  $142,000   PSMH Commons  $21,500   4 PSMH Residences  $16,800   Total $230,000      The estimated capital investment for a 4.5 mmBtu/hr hot water system is $2.5 million including  the boiler, fuel handling system, boiler housing, and 3,500 feet of underground distribution  piping. Adding the capability for backpressure steam CHP adds $350,000 to the overall cost for  a total of $2.85 million and requires an additional 200 tons of wood chips annually. This  additional cost includes a steam boiler rated at 200 psig that operates at 175 psig coupled to a  backpressure steam turbine/generator. The steam pressure is reduced by the turbine from 175  psig to 5 psig. This capability introduces another $40,000 in annual savings for the electricity  generated. This value assumes that all of the $0.15/kWh retail electric cost is recovered.  Further investigation into the ability to utilize electric onsite and net metering rules in Alaska is  required to verify the actual value of electric generated.     Seward, AK Project, Assessment Review and District Energy Concept Evaluation July 26, 2011  Wood Education and Resource Center  www.na.fs.fed.us/werc  4  Financial analysis was performed on each of the options.  Simple payback was calculated and a  cash flow analysis was performed assuming financing of capital costs over 20 years at 5%.   Avoided costs for replacement of conventional heating equipment were not calculated as part  of the cash flow analysis, and would improve the overall economics of the systems.  The details  of the cash flow analyses are attached to this memorandum.  Table 4 shows the results of the  financial analyses.        Table 4 – Financial analysis results.  Configuration Simple Payback  Period (yrs) 1st Year Cash Flow 25‐yr Present  Value  Heat only  11  $19,089 $3,454,191 CHP 10.5  $27,468 $4,080,159   Table 5 displays the assumptions used in the analysis.    Table 5 – Assumptions used in analysis.  Item Value and Units Source  Fuel oil heat content 139,000 Btu/gal WERC assumption  Wood chip heat content 7.1 mmBtu/ton WERC assumption  Fuel oil price $3.75/gal Reported value  Wood chip price $100/ton Reported value  Biomass boiler efficiency 71% WERC assumption  Steam heat content 1000 Btu/lb WERC assumption  Average number of HDD 9,188 USFS Report*  Average temperature 35.5 °F National Weather  Service**  Electricity generated per 1000  lb steam 23 kWh WERC assumption  Value of electricity $0.15/kWh US EIA***  Financing Period 20 years WERC Assumption  Financing Rate 5% WERC Assumption  *Parrent, Daniel. “Preliminary Feasibility Assessment for Wood Pellet Heating in  Seward Alaska” US Forest Service. 7/11/11.  **National Weather Service Website:  http://pafc.arh.noaa.gov/climate/climPage.php?pId=temp  ***US EIA Website:  http://www.eia.gov/cneaf/electricity/st_profiles/e_profiles_sum.html      Attachment A1Concept‐level Financial AnalysisHeat‐OnlySeward, Alaska Project7/26/2011Input Variables Value Units YearReduction in Fuel Oil/Electric Costs  Biomass Fuel Costs Additional O&M Costs for Biomass System  Financing Payments  Net Cash Flow  Cash Flow  Present Value Cumulative Cash Flow (Present Value) Amount Financed 2,500,000        $ 1 480,600$                  (250,905)$           (10,000)$                 (200,606)$          19,089$                      19,089$                     19,089$              Finance Period 20 # years 2 499,824$                  (258,432)$           (10,300)$                 (200,606)$          30,486$                      29,598$                     48,686$              Interest Rate 0.05 decimal 3 519,817$                  (266,185)$           (10,609)$                 (200,606)$          42,417$                      39,982$                     88,668$              Fuel Oil Offset 128,160            gal/yr 4 540,610$                  (274,170)$           (10,927)$                 (200,606)$          54,905$                      50,246$                     138,914$            Fuel Oil Price 3.75$                $/gal 5 562,234$                  (282,396)$           (11,255)$                 (200,606)$          67,977$                      60,397$                     199,311$            Electric Offset‐                     kWh 6 584,723$                  (290,867)$           (11,593)$                 (200,606)$          81,657$                      70,438$                     269,749$            Electric Price 0.15$                $/kWh 7 608,112$                  (299,593)$           (11,941)$                 (200,606)$          95,972$                      80,375$                     350,124$            Wood Chip Usage 2509 tons/yr 8 632,437$                  (308,581)$           (12,299)$                 (200,606)$          110,950$                   90,213$                     440,337$            Biomass Price 100.00$            $/ton 9 657,734$                  (317,839)$           (12,668)$                 (200,606)$          126,621$                   99,956$                     540,293$            Oil/Elec Inflation Rate 0.04 decimal 10 684,044$                  (327,374)$           (13,048)$                 (200,606)$          143,016$                   109,610$                  649,902$            Biomass Inflation Rate 0.03 decimal 11 711,405$                  (337,195)$           (13,439)$                 (200,606)$          160,165$                   119,178$                  769,080$            General Inflation Rate 0.03 decimal 12 739,862$                  (347,311)$           (13,842)$                 (200,606)$          178,102$                   128,665$                  897,744$            Additional O&M Costs 10,000 $/yr 13 769,456$                  (357,730)$           (14,258)$                 (200,606)$          196,862$                   138,075$                  1,035,819$         14 800,234$                  (368,462)$           (14,685)$                 (200,606)$          216,480$                   147,413$                  1,183,232$         15 832,244$                  (379,516)$           (15,126)$                 (200,606)$          236,995$                   156,682$                  1,339,914$         16 865,533$                  (390,901)$           (15,580)$                 (200,606)$          258,446$                   165,887$                  1,505,800$         17 900,155$                  (402,629)$           (16,047)$                 (200,606)$          280,873$                   175,031$                  1,680,831$         18 936,161$                  (414,707)$           (16,528)$                 (200,606)$          304,319$                   184,118$                  1,864,949$         19 973,607$                  (427,149)$           (17,024)$                 (200,606)$          328,828$                   193,152$                  2,058,101$         20 1,012,552$               (439,963)$           (17,535)$                 (200,606)$          354,447$                   202,136$                  2,260,237$         21 1,053,054$               (453,162)$           (200,606)$          399,285$                   221,075$                  2,481,311$         22 1,095,176$               (466,757)$           (200,606)$          427,813$                   229,970$                  2,711,282$         23 1,138,983$               (480,760)$           (200,606)$          457,617$                   238,827$                  2,950,109$         24 1,184,542$               (495,182)$           (200,606)$          488,754$                   247,647$                  3,197,756$         25 1,231,924$               (510,038)$           (200,606)$          521,280$                   256,435$                  3,454,191$         Present Value 3,454,191$       WERC US Forest Service Wood Education and Resource CenterDate Printed: 7/26/2011 Attachment A2Concept‐level Financial AnalysisCHPSeward, Alaska Project7/26/2011Input Variables Value Units YearReduction in Fuel Oil/Electric Costs  Biomass Fuel Costs Additional O&M Costs for Biomass System  Financing Payments  Net Cash Flow  Cash Flow  Present Value Cumulative Cash Flow (Present Value) Amount Financed 2,850,000        $ 1 542,060$                  (270,900)$           (15,000)$                 (228,691)$          27,468$                      27,468$                     27,468$              Finance Period 20 # years 2 563,742$                  (279,027)$           (15,450)$                 (228,691)$          40,574$                      39,392$                     66,860$              Interest Rate 0.05 decimal 3 586,292$                  (287,398)$           (15,914)$                 (228,691)$          54,289$                      51,173$                     118,033$            Fuel Oil Offset 128,160            gal/yr 4 609,743$                  (296,020)$           (16,391)$                 (228,691)$          68,641$                      62,817$                     180,849$            Fuel Oil Price 3.75$                $/gal 5 634,133$                  (304,900)$           (16,883)$                 (228,691)$          83,659$                      74,330$                     255,179$            Electric Offset 409,731            kWh 6 659,498$                  (314,047)$           (17,389)$                 (228,691)$          99,371$                      85,718$                     340,897$            Electric Price 0.15$                $/kWh 7 685,878$                  (323,469)$           (17,911)$                 (228,691)$          115,807$                   96,987$                     437,884$            Wood Chip Usage 2709 tons/yr 8 713,314$                  (333,173)$           (18,448)$                 (228,691)$          133,001$                   108,142$                  546,026$            Biomass Price 100.00$            $/ton 9 741,846$                  (343,168)$           (19,002)$                 (228,691)$          150,985$                   119,189$                  665,215$            Oil/Elec Inflation Rate 0.04 decimal 10 771,520$                  (353,463)$           (19,572)$                 (228,691)$          169,794$                   130,133$                  795,348$            Biomass Inflation Rate 0.03 decimal 11 802,381$                  (364,067)$           (20,159)$                 (228,691)$          189,464$                   140,979$                  936,327$            General Inflation Rate 0.03 decimal 12 834,476$                  (374,989)$           (20,764)$                 (228,691)$          210,032$                   151,732$                  1,088,058$         Additional O&M Costs 15,000 $/yr 13 867,855$                  (386,239)$           (21,386)$                 (228,691)$          231,539$                   162,396$                  1,250,455$         14 902,569$                  (397,826)$           (22,028)$                 (228,691)$          254,024$                   172,978$                  1,423,433$         15 938,672$                  (409,761)$           (22,689)$                 (228,691)$          277,531$                   183,481$                  1,606,914$         16 976,219$                  (422,053)$           (23,370)$                 (228,691)$          302,105$                   193,909$                  1,800,823$         17 1,015,268$               (434,715)$           (24,071)$                 (228,691)$          327,791$                   204,268$                  2,005,091$         18 1,055,878$               (447,756)$           (24,793)$                 (228,691)$          354,638$                   214,562$                  2,219,653$         19 1,098,113$               (461,189)$           (25,536)$                 (228,691)$          382,696$                   224,794$                  2,444,447$         20 1,142,038$               (475,025)$           (26,303)$                 (228,691)$          412,019$                   234,969$                  2,679,416$         21 1,187,719$               (489,276)$           (228,691)$          469,753$                   260,091$                  2,939,506$         22 1,235,228$               (503,954)$           (228,691)$          502,583$                   270,163$                  3,209,669$         23 1,284,637$               (519,072)$           (228,691)$          536,874$                   280,190$                  3,489,860$         24 1,336,023$               (534,645)$           (228,691)$          572,687$                   290,176$                  3,780,035$         25 1,389,464$               (550,684)$           (228,691)$          610,088$                   300,123$                  4,080,159$         Present Value 4,080,159$       WERC US Forest Service Wood Education and Resource CenterDate Printed: 7/26/2011