HomeMy WebLinkAboutBiomass Best Practices Guide Renewable Energy Fund Application 07-17-2020-BIO
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Biomass Best Practices Guide
Renewable Energy Fund Application
Introduction
The following guide contains items that are critical to the success of a Renewable Energy Fund
(REF) application and project. The intent of the guide is to aid particularly rural applicants in the
submission of a comprehensive project proposal, and is meant to add additional details specific
to biomass projects. Smaller and simpler projects may not have to address all of the items
below. Larger systems, more complex, and Combined Heat and Power (CHP) systems will be
expected to have a more thorough analysis of the system.
Since the inception of REF, the Alaska Energy Authority (AEA) has managed dozens of grants
for biomass projects across the state. Over time, a number of common planning issues have
been identified. Recognizing that each project is unique, this best practice guide does not
prescribe a one-size-fits-all approach for project development. Instead the guide poses a series
of questions and prompts to help an applicant and project developer work through the process
of developing a successful application and project. A well planned project is more likely to be a
strong proposal and benefit the community.
The guide does not follow the REF application precisely, but the application provides references
to this document. The guide is organized to address these factors:
(1) Site selection,
(2) Understanding the existing system,
(3) Proposed system design,
(4) Economic analysis and optimization,
(5) Financing and operations planning, and
(6) Common planning risks.
Project design and optimization is not generally a straight line, but an iterative process where
new information will require that plans be reevaluated. An applicant is expected to have
performed the data collection and analysis appropriate for all phase(s) that precede the
proposed phase. The applicant should likewise use this guide to help develop the scope of work
for the proposed phase(s).
Each phase of project development investigates two main questions: “Can the project be built?”
and “Should the project be built?” Answering these questions requires an investigation of the
technical, economic, environmental, and business aspects of the project. Every project has
development risks; a thorough plan will identify these risks as early as possible, investigate
possible ways to mitigate the risks, and ultimately determine if the expected benefits outweigh
the risks. Where possible, the guide provides information on the detail and content for each
phase (reconnaissance to construction).
1. Reconnaissance studies are a “desktop” study and the analysis should use resource,
economic, and operational data that is readily and/or publicly available. The study should be
sufficient to identify high-level flaws in the use and integration of the resource.
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2. Feasibility and Conceptual Design studies should include site specific data collection and
analysis. The conceptual design (also called a 35% design) will not be sufficient to give to a
construction company, but will be of sufficient detail that a thorough economic and feasibility
analysis can be accomplished. Planning for the business and financial aspects of operating
the project will be started.
3. Final Design and Permitting will make the project “shovel-ready”. The conceptual design
will be refined and improved. The specific operational conditions and parameters will be
finalized. All business, operational, and financial plans will be finalized.
4. Construction and commissioning activities are not specifically addressed in this
document.
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Contents
INTRODUCTION ....................................................................................................................... 1
1 SITE SELECTION & ASSESSMENT .................................................................................. 4
1.1 RESOURCE ASSESSMENT ............................................................................................... 4
1.2 SITE CONTROL ............................................................................................................... 4
1.3 ENVIRONMENTAL AND PERMITTING RISKS ....................................................................... 5
2 UNDERSTANDING THE EXISTING SYSTEM ................................................................... 5
2.1 CONFIGURATION OF EXISTING SYSTEM ............................................................................ 6
2.2 OPERATIONS OF EXISTING SYSTEM ................................................................................. 6
3 PROPOSED SYSTEM DESIGN ......................................................................................... 7
3.1 PROPOSED BIOMASS SYSTEM ........................................................................................ 7
3.2 PROPOSED OPERATIONS ............................................................................................... 9
4 PERFORM ECONOMIC ANALYSIS & OPTIMIZATION ....................................................10
4.1 COSTS FOR THE EXISTING SYSTEM .................................................................................10
4.2 ECONOMIC OPTIMIZATION ..............................................................................................11
4.3 BENEFIT-COST ANALYSIS ..............................................................................................11
5 FINANCIAL AND OPERATIONAL PLANNING .................................................................12
5.1 FINANCIAL MANAGEMENT ..............................................................................................12
5.2 OPERATIONAL MANAGEMENT ........................................................................................13
6 COMMON PLANNING RISKS ...........................................................................................13
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1 Site Selection & Assessment
A biomass project begins with selecting and understanding a site: the available resource, the
potential restrictions in accessing and controlling the site, and any environmental or other
permits that may be needed for project activities.
1.1 Resource assessment
1.1.1 Data to collect & how to collect
(Reconnaissance and feasibility grants should address all of these factors. Design and
construction grants should have already addressed these topics.)
In the following section a “Large Project” is assumed to be of a size that would require a permit
from the state forestry (such as under the Forest Resources and Practices Act), or other
appropriate permitting agency. A “Small Project” would not be required to get a permit.
1.1.1.1 Resource Assessment - Small Project
Long-term harvest sustainability assessment that shows allowable harvest for the life of the
project
The plan should incorporate all land ownership involved in the project
5-year harvest schedule
Required harvest equipment
Access/transportation plan
Harvest assessment should use high resolution classified systems – 10-m or less resolution
Requirements of the Forest Practices Act are considered in the wood harvest plan. A plan
of operations should be submitted to The State of Alaska Department of Natural Resources
– Division of Forestry.
1.1.1.2 Resource Assessment - Large Project
Long-term harvest sustainability assessment
The plan should incorporate all land ownership involved in the project
Detailed 5-year harvest schedule with identified plots
Assessment of anadromous streams if required
Verify timber volumes with field sampling
Required harvest equipment
Access/transportation plan
GIS – SDMI or other high resolution classified systems – 10-m or less resolution
Requirements of the Forest Practices Act are considered in the wood harvest plan. A plan of
operations should be submitted to The State of Alaska Department of Natural Resources –
Division of Forestry.
1.2 Site control
The applicant must be able to have legal right to use and access the site(s) for the biomass
project. Applicants should identify potential issues as soon as possible. Legal and/or financial
agreements may be required to resolve site control issues. Site control must be finalized before
construction funds are committed. Do not underestimate the complexity of land ownership in
Alaska.
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The grantee shall be responsible for resolving any land ownership disputes between state
and/or federal entities, local landowners, native corporations, municipalities, boroughs and
community organizations, or other entities.
Proof of valid title to the land and/or written documentation of any private agreements is
required.
The landowner must guarantee that there are no liens or encumbrances on the property.
Final proof of ownership shall be the certificate to plat.
Site control for transmission or distribution power lines may be established using easements
or utility right-of-ways so long as the period of the agreement meets or exceeds the intended
life of the project.
If the project expects secondary loads to be placed in non-utility facilities, ownership and
access of infrastructure must be agreed to by all parties.
If the project site is adjacent to or near an airport or runway, the grantee must research FAA
permit requirements, existing or pending leases and easements, and DOT expansion or
relocation plans
Land transfers required for project development shall be recorded with the appropriate
District Recording office and a copy of the recordation provided to the AEA grant manager
1.3 Environmental and Permitting Risks
Permitting, environmental or otherwise, may stop projects or require change in size, location, or
operations. It important that any potential permitting issues are identified early so that the scope
of the project can be changed, mitigation measures are taken, or the project can be ended
before significant funds have been spent.
In addition to understanding which permits are required, and the studies and/or modifications
(either in infrastructure or operations) required for the permits, the amount of time required to do
the necessary work must be included in the project plan.
Document communications and approval from US Fish & Wildlife Service, FAA, Army Corp of
Engineers, DNR, local government and any other appropriate agencies.
o Contaminated sites database
o Threatened or endangered species
o Habitat issues
o Wetlands and other protected areas
o Archaeological and historical resources
o Land development constraints
o Telecommunications interference
o Aviation considerations
o Visual, aesthetics impacts
o Wood harvest permits from appropriate authority
o Identify and describe other potential barriers
2 Understanding the existing system
Having a detailed understanding of the existing system (also called the base case) is key to
knowing if the proposed system will be beneficial. The base case will be used both to
understand the economics and the feasibility of integrating the biomass system.
The level and type of detail required will be based on the proposed phase and the proposed
system’s complexity.
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This section allows for the applicant to determine if fixing or upgrading the current infrastructure
is the best option for the community. This is not required for the REF process, but is a good idea
nonetheless.
The following sections are divided into configuration and operation. The configuration is the
infrastructure that is currently in place. The operation is how that infrastructure is used.
2.1 Configuration of existing system
2.1.1 Heat—Info and data
The type, design and components of the existing heating system(s) is clearly described
including the operating temperature range in every proposed building/system.
What is the design load (the maximum Btu/hr of heat needed) of building(s)
and/or facility?
Will the existing heating system(s) be removed or maintained for backup or peaking?
Describe the existing control system(s) and if it will be useful for the proposed
system.
Is the existing heating system at or near the end of its design life?
Is there a heat recovery system on the diesel engines? What loads does it feed?
Where are the major heat loads located in the community? Which loads could connect to an
existing or planned heat recovery loop?
Are there additional potential heat loads in the community that are not currently being met?
Are any new heat loads being planned?
2.2 Operations of existing system
2.2.1 Heat—Data
Monthly heating data is available for each proposed building (Indicate if these are
actual or modeled data)
o Pull heating fuel consumption/purchase records (minimum one year) for the buildings
being considered and provide annual estimates (high/low) for each.
What is the operational thermal efficiency (tested, manufacturer, or estimate) of
the existing system?
Describe how the heating control system(s) is used for the existing system.
If there is a heat recovery system, how are those heat loads
monitored/quantified? What is the annual heating fuel purchased for each of
those loads?
Energy Efficiency improvements that have been completed on the proposed
buildings to date.
o Air infiltration: Caulk doors & windows, rim joist, weatherstrip doors &
windows, use foam gaskets on outlets and switches.
o Insulation: Attic, floor, basement, walls
o Upgrade windows
o Install a heat recovery ventilation system
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3 Proposed System Design
Designs should take into account the site-specific requirements of the energy resource, the
physical environment, and the system into which it will be integrated. The design should aim to
maintain or reduce costs to customers, while maintaining or improving service to customers.
Care should be taken that the biomass project does not adversely impact the operations of the
utility or customer service.
The level of design required is based on the phase. A Reconnaissance project may end with a
design based on a generic boiler, while a Feasibility & Conceptual Design will have a design
with actual boilers, and a Final Design project will end with plans sufficient to give to a
construction firm to build the project.
The proposed system design should include a description of any civil infrastructure (buildings,
roads, etc.) that will be built or changed for the biomass system as appropriate for the
application. In all cases, designs should meet or exceed state and federal standards and
regulations and be performed by people with proper credentials (such as a licensed
Professional Engineer) for the design.
All appropriate building permits must be received prior to construction. What follows are a
selection of common considerations that will need to be incorporated into the final design of the
project prior to construction.
3.1 Proposed Biomass System
The proposed biomass system must be described in sufficient detail consistent with the phase
of development. The configuration of the proposed system are the specific components that will
be built or installed for the project; the operations will explain how all of the components will be
designed to work together in the system.
Some of the important questions and ideas to consider while evaluating and designing the
biomass system include:
Fuel supply—how will it be delivered
Type of system—cordwood, chip, or pellet
Biomass storage—silo for pellets, shed for cordwood or chips
What is the optimally sized biomass system, including thermal storage, needed
to meet the design load of the system most economically?
o Are heat loads better served by connecting a biomass system to the existing heat
recovery loop or placing biomass boilers in other community buildings?
o Make/model, size (Btu/hr)
How is the system sized relative to average and peak loads? Would a hybrid system
improve the project economics?
The existing or proposed mechanical room has ample room to access the boiler
components for operations and maintenance.
Piping—what type, size, where will it be routed? What is the plan for leak detection, how will
it be protected? Will heat trace be used?
Will infrastructure upgrades be required due to psi increase, temp (gasket changes), bolt/ fit
up requirements, and/or support structures?
Fire suppression (if needed)
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BTU meters are required for heat sales agreements and for performance
reporting of total heat produced by the system.
3.1.1 Proposed Civil Infrastructure
The applicant should include a description of the civil infrastructure that will be built in support of
the project. The infrastructure must be built to perform as expected for the life of the project in
the particular environment of the preferred site. If the application is for a construction project, the
applicant’s schedule should reflect the seasonal and logistical constraints.
3.1.1.1 Designs for new or changes to existing buildings, towers, etc.
Design best practices include preparing logical, readable, and professional drawings and
specifications and other documents for construction and operation and maintenance phases of
the project. General goals of the design are as follows.
That the project is designed and constructed in a safe manner that minimizes the danger to
human life and harm to the environment.
The design results in a low project cost while serving the project purpose and need for its
useful life.
The design is sufficiently detailed and adequate to minimize change orders, cost deviation,
and reasonably minimizes risk of major repairs or modifications following construction.
The design appropriately balances cost of construction with lowered operation and
maintenance costs and the potential for expansion is considered.
The design incorporates energy efficiency and arctic design best practices.
At a minimum, prior to construction the applicant should expect to have the following things:
Project overview map(s) and general information
o At least one map showing full project extents and a vicinity map
o A map showing land ownership
o A sheet index for all drawings
Design Criteria and information
o Design codes and standards used along with a code analysis
o Design loadings
Structural loads
Foundation(s)
o Geotechnical investigations and reports to design for:
Permafrost and other geotechnical concerns
Earthquake
o Design analysis, calculations/report
o Future maintenance and expansion
Drawings showing horizontal and vertical design sufficient for layout and construction of
infrastructure. Typical methods include plan and profile drawings with stationing for
alignments, standard road cross sections, limits of grading, grades or slopes, and general
topography, drawing scale bars and north arrows, point or dimensional data, structural
sections showing embedment’s, equipment layout drawings, electrical and mechanical
schematics, and equipment lists, size, and locations.
Submittal requirements including drawings and basic design data for contractor design build
items, fabrications, and procured equipment with requirement for submittal and review of the
electrical switchgear engineered and shop drawings.
Technical specifications for materials and methods.
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Engineers cost estimate, updated feasibility report, owner’s business development and
operational plan, and schedule.
3.1.1.2 Construction requirements
Applicants should start planning for construction in the Feasibility phase—only by understanding
and preparing for site specific risks and logistics can accurate costs be determined. Final
Design and Permitting will end with all of the following logistics and plans must be worked out to
make sure the construction is safe, cost effective, and done properly. Earlier stages of
development can address the points below generally—that is identifying that a road may need
to be designed to handle the load of a crane, but not specifically how the road will be built.
Safety plan for construction activities.
Logistics for getting materials, supplies, machinery, etc. on-site
o Getting it in place—are new roads or trails needed?
Are there seasonal limitations on when materials can be delivered to the community and/or
delivered to the site?
General specifications governing execution of work.
When is labor available? Are there sufficient trained workers in the community, or will there
need to be contractors brought in from other places?
Are there DOL Rate requirements? Use most recent rate publications.
3.2 Proposed Operations
Planning for operations and understanding the expected outcomes should start early.
3.2.1 Operations of Proposed Biomass System
Model proposed system with local resource, load, and control strategy
o Does the system model verify that the boiler is not oversized?
o Can the backup boiler system handle peaking requirements?
o Have the shoulder seasons been modeled to estimate the timing of the start-up and
shutdown of the system?
o Parasitic power (pumps, etc.)
o Expected thermal efficiency in the operating environment.
o Amount of biomass consumed on a daily, weekly, monthly, and annual basis.
o The logistics required to deliver the required amount of biomass to the storage and the
boiler are detailed, including if there is sufficient room for equipment (loader, plow, etc.)
to maneuver safely.
o Continued fuel consumption in existing generation infrastructure.
Are there conditions—either economic, environmental, or technical—where the project will
not be feasible to operate?
Summary
o Anticipated annual Btus
o Capacity factor
o Post-project fuel consumption estimate—both fossil and RE fuels
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4 Perform Economic Analysis & Optimization
Planning and designing a biomass project should be an iterative process, as new information is
learned the design is refined and improved, progressively more tailored to the site and system.
A project that receives REF funding must be both technically possible and economically viable.
A proposed system may be technically possible, but cost prohibitive—it will increase costs to
customers or the costs outweigh the benefits.
AEA will perform an economic analysis for all applications. In all cases, AEA compares the
proposed system against the base case (the current system configuration). The proposed costs
must be outweighed by the expected savings. For biomass projects, most of the economic
savings is in displaced fossil fuels. Communities may have additional values that are
important—increased local employment, decreased imported diesel, fire mitigation, or reduced
greenhouse gases.
Ideally an applicant will investigate multiple options, including improving the base case.
The economic evaluation assesses the economic viability of a project. The entire project
proposal is assessed, not each individual component. If the costs for the project are greater
than the expected benefits, then the project would not be economically viable. If the total
benefits to all parties outweigh the costs incurred by all parties, then the project is considered to
be economically viable. The economic analysis is indifferent to who receives benefits and who
pays costs.
Benefits: Savings to utility customers, non-utility customers, Power Cost Equalization,
and others
Costs: Expenses paid for by utility customers, grants from state, federal, and regional
governments; non-profits, non-utility
AEA uses an Excel-based economic model to provide the underlying assumptions (such as
expected fuel costs), calculations and analysis. The model is available to all applicants. While
AEA encourages applicants to perform and submit an economic analysis, AEA’s analysis is
used in the scoring process. Ideally, applicants would use the model to maximize the project’s
benefits and minimize the costs.
4.1 Costs for the existing system
Before analyzing the benefits of the proposed project, it is important to understand the existing
system (the base case). Any savings that can be realized by the project will come from
displacing costs from the base case. Keep in mind, there may be a number of costs that will not
be displaced, even with the best biomass project.
4.1.1 Heat
Capital costs (current depreciation/loans?)
Operational costs
o Efficiencies of the existing heating systems
o Cost of heating oil at the proposed secondary load customers
o Operations and Maintenance (O&M)
o Repair & Replacement (R&R)
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4.2 Economic optimization
Even if an applicant expects to receive grant funds for their project, the proposed project should
be designed to get the best economic return on the investment. By maximizing the savings from
the projects and keeping the cost as low as practical, the applicant will be more likely to be
awarded an REF grant. This may mean that a proposed project may not end up displacing the
maximum amount of diesel or heating oil, because the extra cost might not outweigh the costs.
4.2.1 Develop options based on generic or common boilers
It is encouraged that applicants use industry-standard modeling programs. Note that AEA’s
economic assumption may be different from the models, and the economic results may be
different. AEA does not require applicants to provide an analysis of all options that were
analyzed, but the applicant will need to be able to justify why the preferred alternative was
chosen.
Using generic boilers and high-level modeling programs are sufficient for early phase
development, but it is likely that more robust modeling will be needed for Final Design.
o Annual modeling including variables of demand and fuel price, financing and O&M
projections, and climate projections for both the existing/alternate and proposed
generation system. Note that these assumptions may differ from AEA’s assumptions.
Please check AEA’s economic model for additional guidance.
o Investigate how the economies of scale are effected by using different types and
quantities of boilers. How do these options impact the overall system cost?
4.2.2 Costs for the preferred alternative
Any savings that can be realized by the project will come from displacing costs from the base
case. Savings are expected to be found in displacing fuel and the potential of reduced O&M if
diesels can be turned off. Expect that the biomass project will increase some costs.
4.2.3 Heat
Capital costs (current depreciation/loans?)
o Estimates based on phase-appropriate cost estimates for boilers, heaters, heating
control systems, new metering, etc.
o Fuel storage
Operational costs
o Annual O&M
o New account management and billing
o Expected R&R and/or amortized R&R
o Include positive or negative impacts, if any, on an existing heat recovery system
o Biomass fuel
o Operator salaries and training
4.3 Benefit-Cost Analysis
REF evaluation process uses the benefit-cost ratio as its primary metric for economic viability.
The benefit-cost ratio (B/C ratio) summarizes the all of the project’s benefits and costs into a
single number.
The total benefits of the project are found by taking the present value of all of the annual cost
savings. The cost is the present value of the project’s capital costs.
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B/C ratio=Project Benefits
Capital Costs
Understanding the B/C ratio
B/C ratios communicate the economic viability of a project as a single number making it ideal for
communicating the benefits and costs concisely.
A B/C ratio greater than 1 means that the benefits are greater than the capital costs. Even
without grant funds, the project should be cost effective and save the utility and customers
money.
A B/C ratio of 1 means that the benefits equal the Capital costs—the project just breaks
even.
A B/C ratio less than 1 means that the costs are greater than the benefits—economically
things would be worse than before the project was built. Without grant funds, the project
would not be cost effective and the utility and/or customers would lose money.
Since many projects will lead to savings for utilities and customers, even projects with B/C ratios
below 1, it can be confusing why AEA would use the benefit-cost ratio to rate projects. The state
wants to maximize its return on investment, its “bang for the buck”, and wants to promote cost
effective designs.
5 Financial and Operational Planning
Planning for the eventual operation of the biomass project is too frequently overlooked. The
training and skills needed to successfully operate and maintain a biomass boiler, district heat
loop, and the control system are different than what is needed for a fuel oil system. The
additional need to track and pay for the parts, maintenance, and other necessary things can
stress an owner if adequate preparation is not made. With proper planning, training, and
management, a biomass project can be a long-term benefit to a community.
Below are selected aspects of a business plan that should be included in the REF application.
Please see the phase appropriate business plan template for a complete version of what should
be included.
5.1 Financial Management
Since grant funds cannot be used to operate the biomass project, an applicant must know how
the maintenance and operations of the infrastructure is going to be paid for over its useful life.
Biomass projects face failure without a plan for paying for needed training, personnel,
contractors, materials, and supplies.
What follows is a short list of aspects that the applicant should address.
How will the applicant pay costs including expected capital costs and operations
and maintenance
Explain how O&M activities will be tracked for required performance reporting to
AEA
Heat sales agreement(s), if applicable – required for construction
Accounting system to track revenue and expenses
How will fuel purchases be tracked?
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Finalized delivered costs estimates, including stumpage
Preliminary Fuel supply contract – Final contract is required for construction
5.2 Operational Management
The business plan should identify who will have overall responsibility for all
components from wood purchase to heat delivery.
Inspections & Maintenance—include checklists for responsible personnel,
estimated time to completion, parts and supplies to keep in inventory, etc.
Employees—including a back-up operator, training
Fuel
o Drying strategy and time for biomass
o Further processing?
o Plan for the ensuring adequate supply and quality
6 Common Planning Risks
For cordwood systems, the proposed low temperature heating system will not
supply enough heat to a building designed for a high temperature heating
system.
There is not a plan for the daily stoking of cordwood systems, and there is not a
plan for a back-up operator.
There is no planning for the logistics of the supply of wood to the boiler system.
The biomass boiler is sized based on the existing oil boiler, and as a result, the
biomass boiler is oversized.
Thermal storage is not incorporated into the design of the boiler system.
There is no method to understand the amount of heat produced/consumed in the
new system.
The proposed boiler system is not third-party certified using ASTM test methods.
The estimated delivered fuel costs are unrealistic.
Ignoring the O&M challenges of a biomass system – Communities who have personnel that
are trained on biomass systems to perform maintenance have a better chance at meeting
the output projections of your design.
Not having a plan should costs exceed estimates
Not engaging agency stakeholders early-on and throughout project development
Making major changes without consulting agency stakeholders
Not receiving support and authorization from land owners prior to project development
Not including all infrastructure required during economic analysis
Proposing unproven boiler, storage or controls technology to REF – New technology falls
outside of the scope of the REF.