HomeMy WebLinkAboutHaines Borough Pellet Feasibility Study Comment - Final 20129/11/2012
Darcie Culbeck
Haines Borough
P.O. Box 1209
Haines, Alaska
www.hainesalaska.gov
Dear Darcie,
The Alaska Energy Authority and our technical partners with the United States Forest Service and the
United States Coast Guard have peer reviewed the Wood Heating Analysis for the Haines Borough
performed by Alaska Energy Engineering, LLC. This feasibility report was funded through the State of
Alaska Renewable Energy Fund grant #402036 and the U.S. Forest Service Jumpstarting Wood Energy in
Alaska grant through the Juneau Economic Development Council.
The intent of a feasibility/conceptual design report is to provide a detailed evaluation intended to assess
technical, economic, financial, and operational viability of a project and to narrow the focus of final
design and construction. Alaska Energy Engineering, LLC provided their opinion of the viability of
utilizing pellets as a wood heating option for various buildings within Haines Borough. While their
assumptions can be defended, we have significant concerns with many of the assumptions that were
used to develop the Life Cycle Analysis. These concerns were communicated to Alaska Energy
Engineering, but the consultant chose not to make any changes to his analysis.
Scope
• The fundamental issue is the assumption of the scope of work. The RFP states that the existing oil
boilers will remain in place as a back-up system. This may be a prudent practice when a fuel oil
boiler has remaining life, depending on the broader economic considerations of such a decision.
However, where an oil boiler is at the end of its useful life, a facility considering wood heating would
generally not replace the fuel oil system with new oil boilers. By adding the additional oil boiler to
the analysis, this study grossly inflates the life cycle cost of the analysis and leads to very distorted
recommendations. In the circumstance where an oil system is at the end of its useful life, a pellet
boiler would be installed to support 100% of the building load. This strategy is consistent with
standard installations throughout the United States and Europe. If the community is concerned
about the reliability of the system, an emergency back-up electric boiler might be installed at
significantly lower capital costs if adequate electrical service is readily available. This scenario could
eliminate the need for an additional building or containerized pellet boiler because the pellet boiler
may fit into the footprint of the existing boiler. Another option for redundancy would be to procure
a portable oil-fired boiler which could be deployed as a backup boiler for any of the Borough’s
buildings. If an oil boiler still has remaining life, the pellet boiler would be designed for 75-90% of
the load, and the oil boiler would only operate on the coldest days. Elaborate controls are not
required for this scenario. The boilers are sequenced based on set-point temperatures using
existing controls. Careful consideration should be given to whether the remaining economic life of
an existing oil-fired boiler is balanced by the additional cost and complexity of constructing a
separate structure to house a wood-fired boiler.
• Under the Haines Borough Request for Proposals, Scope of Work, Item #1 calls for “A current
resource assessment for finished wood pellets.” We could find no information on this subject matter
in the report.
System Design
• The feasibility report recommends "All of the wood heating systems will require an anti-freeze
solution so the outdoor piping and wood boiler do not freeze if it is shut down for service or
repairs." This is not necessary if the boiler is located in the existing boiler room. Even if the boiler is
located in a structure adjacent to the building, there are easy designs to protect the piping without
the very significant added costs of a segregated glycol system.
• Given the proximity of the Administration Building and the Library (approximately 175 feet center-
to-center), an opportunity was missed to consider a small “heat loop” whereby one pellet boiler
could easily serve both buildings. Unfortunately, the Borough’s RFP did not include such an option,
but it should have been obvious to the consultant and he should have recommended modifying the
scope of work to include this option.
• There were a number of misstatements involving the requirement and availability of premium
pellets.
o Premium-grade pellets are usually required in residential pellet stoves because these
systems are designed for very low ash fuels (< 1%). Commercial pellet boilers can easily use
Standard-grade pellets, and most could use Utility-grade pellets, though there may be some
implications for boiler maintenance frequency with lower grades of fuel.
o ACT Bioenergy boilers are also capable of burning a refined “chip” that is partially dried (30%
MC) and closely screened for size conformance. Chips could potentially be sourced from
local supplies at a much lower cost than $360/ton pellets. That should be stated in the
study.
o There were no citations of sources related to the claims of quality control issues and the
formation of clinkers from pellets produced at Superior Pellets in North Pole.
Economic Analysis
• There were the inconsistencies in the feasibility report in developing the costs and inflation of oil
and pellets. The report uses a 25-year range to develop an averaged fuel oil inflation rate of 6.6%.
Pellet fuel inflation uses a 20-year range to project an average inflation rate. If pellet inflation is
going to be calculated over the past 20 years, oil inflation should be calculated using the same
timeframe. Additionally, the years between 20 and 25 years ago represent a rare period in recent
oil price history where oil prices were exceptionally stable, as compared to subsequent years. This
would suggest a lower rate of inflation than the most recent 20 years indicate. Average oil inflation
rates over the past 20 years (since 12/92) yields a rate of 7.5%. That should be the base rate used in
this analysis.
• The report uses a high-cost scenario fuel oil inflation rate of 8%. The past decade has seen fuel oil
inflation rates average over 13.5%. Given that these high rates are documented for an extended
timeframe, it appears that an 8% high-scenario rate of inflation is exceedingly conservative.
• Using 5% as the high inflation case for pellets reflects a 39% increase over the base rate of 3.6%,
while the high case for oil of 8% reflects only a 21% increase over the base rate of 6.6%. Historically,
oil prices have been far more volatile than pellet prices, so there is no justification for these
assumptions.
• Assumptions in the Btu value of pellets are inconsistent. It appears that the calculations for each
building/complex use different conversion factors for pellets to gallons of fuel oil:
Admin Bldg: 990-100 = 890 gallons of oil ÷ 9 tons of pellets ~ 99 gallons/ton
Library: 3300-340 = 2960 gallons of oil ÷ 26 tons of pellets ~ 114 gallons/ton
Voc Ed Bldg: 1650-170 = 1480 gallons of oil ÷ 14 tons of pellets ~ 106 gallons/ton
School/Pool: 38400-3800 = 34600 gallons of oil ÷323 tons of pellets ~ 107 gallons/ton
DH System: 44000-2500=41500 gallons of oil ÷ 416 tons of pellets ~ 100 gallons per ton
The author’s stated energy content for pellets is 15,560 kBtu/ton. This should be at least 16,000
kBtu/ton, and independent testing of Tongass Forest Enterprises pellets has indicated energy
contents in excess of 17,000 kBtu/ton. The Forest Service’s Forest Products Laboratory lists the
average kBtu/ton value at 16,400.
• In the Wood Boiler section, the author uses an inexplicably low efficiency value of 70% for the wood
boiler, while he uses 72% for the oil boiler. At the very least, the two ought to be equal. A high/best
case scenario could see modern pellet boiler efficiencies at 75% to 80%.
• The feasibility study states that wood boilers last 18 years and fuel oil boilers 35 years. Both Maine
Energy Systems and ACT Bioenergy, the manufacturers of the boilers cited in this study, state that
their boilers have a minimum life expectancy of 25 years. Even though the author assumes the
wood boilers will survive for the 20 years of the analysis timeframe without requiring replacement,
it still gives the readers a false impression that pellet boilers have only half the lifespan of oil boilers.
• Maintenance and electrical costs that are unrealistically high and based on 365 days of operation.
o The feasibility report presents a litany of Daily, Weekly, Monthly, Biannual and Annual
inspections and maintenance tasks. However, it does not appear that these tasks are
distributed across both oil and pellet systems even-handedly. The differences may seem
relatively small, but when totaled over 20 years (for the life cycle cost analysis) they result in
significantly higher costs for the biomass systems. It is realistic to assume that pellet boiler
will require up to 20-25% more maintenance spending than a fuel oil system, but this report
estimates over a 100% increase in pellet boiler maintenance over fuel oil boilers.
o While it is true that the system operator for a pellet system will need some training to
perform maintenance tasks correctly, there is nothing overly technical or difficult that would
preclude any reasonably competent maintenance person from performing these tasks
successfully. Routine maintenance will not require contract labor; however, major repairs
(to either oil or pellet systems) may require hiring a specialist.
o The electricity consumption values of 400 kWh for the oil boiler and 2,200 kWh for the
pellet boiler do not seem to be valid, but add a surprisingly large component to the overall
LCC. It does not appear that all components of a fuel system were included in this analysis.
Pellet Boilers and Fuel Oil Boilers will have comparable electrical loads. Discussions with
Haight & Associates, the contributing electrical engineer on the study, indicated that the
electrical load factors were not determined by the consulting electrical engineer.
• Components of the construction costs are significantly higher in the feasibility report than previously
constructed projects have shown. It is interesting to note in one example that the total estimated
cost of replacing the heating plant amounts to $34,400, while the contingencies, most of which are
cumulative, amount to $42,600, or approximately 124% of the estimated replacement cost. Some
examples of inflated estimates in construction costs are:
o Pellets (3.5 tons) are not a “construction cost.” Furthermore, after adding in the
contingencies ($1,601.67), the total cost of 3.5 tons of pellets is $2,907.67, or $830.76/ton.
o The glycol system ($4,000 plus $5,922 in contingencies) is an unnecessary expense. If the
accumulator tank ($2,500 plus $3,066 in contingencies) is part of the anti-freeze system, it
too should be eliminated.
o $90,000 (without the added 100% overheads and contingencies) for controls for the district
heating plant is excessive and will result in an overly complex system to maintain.
o $350 per linear foot (without the added 100% overheads and contingencies) for direct
buried piping is extremely high.
The feasibility report states “While Alaska and all of the states in the Pacific Northwest recognize wood
heating as a viable heating option, none of them have performed research on long-term costs and
sustainability under various load growth scenarios”. A report prepared by Dan Parent of the Juneau
Economic Development Council in 2009 concluded that the Haines State Forest and the local loggers,
firewood dealers and sawmill operators would be capable of supplying cordwood in sufficient quantities
at competitive prices to heat the school and other borough buildings economically. Additionally, the
report prepared by CE2 Engineers in 2009 documented that the Haines State Forest is only harvesting
16% of its annual sustainable harvest and has been harvesting at that level for many years. The
additional amount of wood needed to heat the schools, pool and other buildings would only amount to
an additional 3% per year. The total harvest for all wood products from the Haines State Forest would
still only be about 20% of the sustainable harvest. Sustainability of the fuel supply is not an issue.
In southeast Alaska, the only currently viable alternative to pellets is fuel oil. Pellets have been
manufactured since the late 1970s, and their price increases have fairly mirrored the general cost of
living/inflation. Long term pellet prices, going forward, are certainly more predictable than the price of
oil. If this project spurs the development of a local biomass energy industry, costs will likely significantly
decrease due to the reduction of transportation expenses.
Oil is a severely constrained and 'finite' energy supply, so as oil supplies continue to be depleted,
renewable energy sources such as biomass will continue to be more competitive. The Haines Borough
has the opportunity to make significant changes to their energy portfolio to reduce their dependence on
non-renewable energy sources and utilize local resources to stabilize and reduce their future costs.
Sincerely,
Devany Plentovich
Program Manager – Biomass and CHP
Alaska Energy Authority