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Preliminary Feasibility Assessment for
High Efficiency, Low Emission
Wood Heating In Haines, Alaska
Prepared for:
Robert Venables, Manager
Haines Borough
Haines, Alaska
Prepared by:
Daniel Parrent,
Wood Utilization Specialist
Juneau Economic Development Council
Notice
This Preliminary Feasibility Assessment for High Efficiency, Low Emission Wood Heating was prepared by
Daniel Parrent, Wood Utilization Specialist, Juneau Economic Development Council for Robert Venables,
Borough Manager, Haines, AK. This report does not necessarily represent the views of the Juneau Economic
Development Council (JEDC). JEDC, its Board, employees, contractors, and subcontractors make no
warranty, express or implied, and assume no legal liability for the information in this report; nor does any party
represent that the use of this information will not infringe upon privately owned rights. This report has not been
approved or disapproved by JEDC nor has JEDC passed upon the accuracy or adequacy of the information in
this report.
Funding for this report was provided by USDA Forest Service, Alaska Region,
Office of State and Private Forestry
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Table of Contents
Abstract
Section 1. Executive Summary
1.1 Goals and Objectives
1.2 Evaluation Criteria, Project Scale, Operating Standards, General Observations
1.3 Assessment Summary and Recommended Actions
Section 2. Evaluation Criteria, Implementation, Wood Heating Systems
2.1 Evaluation Criteria
2.2 Successful Implementation
2.3 Classes of Wood Heating Systems
Section 3. The Nature of Wood Fuels
3.1 Wood Fuel Forms and Current Utilization
3.2 Heating Value of Wood
Section 4. Wood Fueled Heating Systems
4.1 Low Efficiency High Emission Cordwood Boilers
4.2 High Efficiency Low Emission Cordwood Boilers
4.3 Bulk Fuel Boiler Systems
Section 5. Selecting the Appropriate System
5.1 Comparative Costs of Fuels
5.2(a) Cost per MMBtu Sensitivity – Cordwood
5.2(b) Cost per MMBtu Sensitivity – Bulk Fuels
5.3 Determining Demand
5.4 Summary of Findings
Section 6. Economic Feasibility of Cordwood Systems
6.1 Initial Investment Cost Estimates
6.2 Operating Parameters of HELE Cordwood Boilers
6.3 Hypothetical OM&R Cost Estimates
6.4 Calculation of Financial Metrics
6.5 Simple Payback Period for Small and Large HELE Cordwood Boilers
6.6 Present Value, Net Present Value and Internal Rate of Return Values for Small and
Large HELE Cordwood Boilers
6.7 Life Cycle Cost Analysis
Section 7. Economic Feasibility of Bulk Fuel Systems
7.1 Capital Cost Components
7.2 Generic OM&R Cost Allowances
7.3 Calculation of Financial Metrics
7.4 Simple Payback Period for Generic Bulk Fuel Boilers
7.5 Present Value, Net Present Value and Internal Rate of Return Values for Bulk Fuel Boilers
Section 8. Conclusions
8.1 Cordwood Systems
8.2 Bulk Fuel Systems
Footnotes
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Appendix A AWEDTG Evaluation Criteria
Appendix B Recoverable Heating Value Determination
Appendix C List of Abbreviations and Acronyms
Appendix D Wood Fuel Properties
Appendix E Financial Metrics
Appendix F Operational Parameters of HELE Cordwood Boilers
Appendix G Calculation of Present Value, Net Present Value and Internal Rate of Return
Appendix H Garn Boiler Specifications
Appendix I Copper River School Field Inspection Report
Appendix J Kenny Lake School Field Inspection Report
List of Tables and Figures
Table 4-1 HELE Cordwood Boiler Suppliers
Table 4-2 Emissions from Wood Heating Appliances
Table 4-3 Bulk Fuel Boiler System Vendors
Table 4-4 Bulk Fuel Boilers in Alaska
Table 5-1 Comparative Cost of Fuel Oil vs. Wood Fuels
Figure 5-1 Effect of White Spruce Cordwood (MC30) Cost on Cost of Delivered Heat
Figure 5-2 Effect of White Spruce Bulk Fuel (MC40) Cost on Cost of Delivered Heat
Table 5-2 Reported Annual Fuel Oil Consumption, CRSD Facilities
Table 5-3 Estimate of Heat Required in Coldest 24 Hr Period
Table 5-4 Estimate of Total Wood Consumption, Comparative Costs and Potential Savings
Table 6-1 Initial Investment Cost Scenarios for Hypothetical Cordwood Systems
Table 6-2 Labor/Cost Estimates for HELE Cordwood Systems
Table 6-3 Summary of Total Annual OM&R Cost Estimates
Table 6-4 Simple and Modified Simple Payback Period Analysis for HELE Cordwood Boilers
Table 6-5 PV, NPV and IRR Values for HELE Cordwood Boilers
Table 6-6 Estimated Life Cycle Costs of Cordwood System Alternatives
Table 7-1 Initial Investment Cost Components for Bulk Fuel Systems
Table 7-2 Darby, MT Public School Wood Chip Boiler Costs
Table 7-3 Characteristics of Biomass Boiler Projects
Table 7-4 Cost Breakdown for the Least Expensive Wood Chip Boiler System Installed in a New Free-
Standing Building
Table 7-5 Total OM&R Cost Allowances for a Bulk Fuel System
Table 7-6 Simple and Modified Simple Payback Period Analysis
Table 7-7 PV, NPV and IRR Values for Bulk Fuel Systems
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Key words: HELE, LEHE, bulk fuel, cordwood
ABSTRACT
The potential for heating the school facilities in Haines, AK with high efficiency, low emission
(HELE) wood-fired boilers is evaluated for the Haines Borough
Early in 2006, organizations were invited to submit a Statement of Interest (SOI) to the Alaska
Wood Energy Development Task Group (AWEDTG). Task Group members reviewed all the SOIs
and selected projects for further review based on the selection criteria presented in Appendix A.
AWEDTG representatives visited Haines during the summer of 2006 and information was obtained
for the Haines School facility. Preliminary assessments were made and challenges identified.
Potential wood energy systems were considered for each project using AWEDTG, USDA and
AEA objectives for energy efficiency and emissions. Preliminary findings are reported.
SECTION 1. EXECUTIVE SUMMARY
1.1 Goals and Objectives
• Identify school facilities in Haines as potential candidates for heating with wood
• Evaluate the suitability of the facility(s) and site(s) for siting a wood-fired boiler
• Assess the type(s) and availability of wood fuel(s)
• Size and estimate the capital costs of suitable wood-fired system(s)
• Estimate the annual operation and maintenance costs of a wood-fired system
• Estimate the potential economic benefits from installing a wood-fired heating system
1.2 Evaluation Criteria, Project Scale, Operating Parameters, General Observations
• This project meets the AWEDTG objectives for petroleum fuel displacement, use of
hazardous forest fuels or forest treatment residues, sustainability of the wood supply,
project implementation, operation and maintenance, and community support
• At the time that this project was being evaluated, a new school building was just
beginning to be built; there were many “unknowns” regarding the new heating system and
the projected fuel consumption. Using an estimate of 60,000 gallons per year, this project
would be considered relatively large in terms of its scale.
• Medium and large energy consumers have the best potential for feasibly implementing a
wood-fired heating system. Where preliminary feasibility assessments indicate positive
financial metrics, detailed engineering analyses are usually warranted.
• Cordwood systems are generally appropriate for applications where the maximum heating
demand ranges from 100,000 to 1,000,000 Btu per hour. “Bulk fuel” systems are generally
applicable for situations where the heating demand exceeds 1 million Btu per hour.
However, these are general guidelines; local conditions can exert a strong influence on the
best system choice.
• Efficiency and emissions standards for Outdoor Wood Boilers (OWB) changed in 2006,
which could increase costs for small systems
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1.3 Assessment Summary and Recommended Actions
• Overview. At the time of the AWEDTG field inspection, the Haines School consisted of
three separate buildings, located some distance from one another. Site preparation work for
the new K-8 school, adjacent to the existing high school, had just begun.
• Fuel Consumption. At the time the Haines Borough submitted a Statement of Interest in
wood energy heating projects (early 2006), #2 fuel oil consumption was given as
approximately 58,000 gallons per year at a cost of approximately $2.20 per gallon.
• Potential Savings. Today, at $3.00 per gallon and a projected 60,000 gallons of fuel oil
consumption per year, the school pays approximately $180,000 per year for fuel oil. The
HELE cordwood fuel equivalent of 60,000 gallons of fuel oil is approximately 700 cords,
and at $100/cord represents a potential annual fuel cost savings of $110,000 (Debt service
and OM&R costs notwithstanding). The bulk fuel equivalent of 60,000 gallons of fuel oil
is approximately 1,365 tons, and at $40/ton represents a potential annual fuel cost savings
of $125,400 (Debt service and OM&R costs notwithstanding).
• Required boiler capacity. The estimated required boiler capacity (RBC) to heat the
Haines School is approximately 2 million Btu/hr during the coldest 24-hour period. Two
950,000 Btu/hr HELE cordwood boiler operated at maximum capacity could, theoretically,
supply about 90% of that RBC and provide a significant annual economic benefit, however
one or two additional cordwood boilers would improve operational metrics.
• Recommended action regarding a cordwood system. The financial metrics of installing
multiple large HELE cordwood boilers are strongly positive, with simple payback periods
ranging from 5 to 8 years. Net present values are strongly positive and the internal rates of
return at 20 years range from 7.70 to 13.36%. Formal consideration for a HELE
cordwood system for the Haines School is warranted.
• Recommended action regarding a bulk fuel wood system. A “bulk fuel” system may be
financially feasible for the Haines School, given a consistent fuel supply and moderate
initial investment costs. Formal consideration of a bulk fuel system for the Haines School
may be warranted.
SECTION 2. EVALUATION CRITERIA, IMPLEMENTATION, WOOD HEATING SYSTEMS
The approach being taken by the Alaska Wood Energy Development Task Group (AWEDTG)
regarding biomass energy heating projects follows the recommendations of the Biomass Energy
Resource Center (BERC), which advises that, “[T]he most cost-effective approach to studying the
feasibility for a biomass energy project is to approach the study in stages.” Further, BERC advises
“not spending too much time, effort, or money on a full feasibility study before discovering whether
the potential project makes basic economic sense” and suggests, “[U]ndertaking a pre-feasibility
study . . . a basic assessment, not yet at the engineering level, to determine the project's apparent
cost-effectiveness”. Biomass Energy Resource Center, Montpelier, Vermont. www.biomasscenter.org
2.1 Evaluation Criteria
The AWEDTG selected projects for evaluation based on the criteria listed in Appendix A. The
Haines School project meets the AWEDTG criteria for potential petroleum fuel displacement, use
of forest residues for public benefit, use of local residues (though limited), sustainability of the
wood supply, project implementation, operation and maintenance, and community support.
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In the case of a cordwood boiler system, the wood supply from forest fuels or local processing
residues appears adequate and matches the applications. Currently, the “bulk fuel” infrastructure is
virtually non-existent locally. To supply bulk fuel to the school would entail developing that
ability locally, or obtaining that supply, in the form of mill residues, from Hoonah, Wrangell,
Ketchikan, Prince of Wales or Canada.
2.2 Successful Implementation
In general, three aspects of project implementation have been important to wood energy projects in
the past: clear identification of a sponsoring agency/entity, dedication of personnel, and a reliable
and consistent supply of fuel.
In situations where several organizations are responsible for different community services, it must
be clear which organization would sponsor or implement a wood-burning project. (NOTE: This is
not necessarily the case with the Haines School, but the issue must be addressed.)
With manual systems, boiler stoking and/or maintenance is required for approximately 9-15
minutes per boiler several times a day (depending on the heating demand), and dedicating
personnel for the operation is critical to realizing savings from wood fuel use. Though automated,
bulk fuel systems also have a daily labor requirement. For this report, it is assumed that new
personnel would be hired or existing personnel would be assigned as necessary, and that “boiler
duties” would be included in the responsibilities and/or job description of facility personnel.
The forest industry infrastructure in Haines is small, but appears to be stable. For this report, it is
assumed that wood supplies are sufficient, as evidenced by a letter of support from the Area
Forester, Alaska Department of Natural Resources.
2.3 Classes of Wood Energy Systems
There are, basically, two classes of wood energy systems: manual cordwood systems and
automated “bulk fuel” systems. Cordwood systems are generally appropriate for applications
where the maximum heating demand ranges from 100,000 to 1,000,000 Btu per hour, although
smaller and larger applications are possible. “Bulk fuel” systems are systems that burn wood chips,
sawdust, bark/hog fuel, shavings, pellets, etc. They are generally applicable for situations where the
heating demand exceeds 1 million Btu per hour, although local conditions, especially fuel
availability, can exert strong influences on the feasibility of a bulk fuel system.
Usually, an automated bulk fuel boiler is tied-in directly with the existing oil-fired system. With a
cordwood system, glycol from the existing oil-fired boiler system would be circulated through a
heat exchanger at the wood boiler ahead of the existing oil boiler. A bulk fuel system is usually
designed to replace 100% of the fuel oil used in the oil-fired boiler, and although it is possible for a
cordwood system to be similarly designed, they are usually intended as a supplement, albeit a large
supplement, to an oil-fired system. In either case, the existing oil-fired system would remain in
place and be available for peak demand or backup in the event of a failure or other downtime
(scheduled or unscheduled) in the wood system.
One of the objectives of the AWEDTG is to support projects that would use energy-efficient and
clean burning wood heating systems, i.e., high efficiency, low emission (HELE) systems.
SECTION 3. THE NATURE OF WOOD FUELS
3.1 Wood Fuel Forms and Current Utilization
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Wood fuels in Haines are most likely to be in the form of cordwood and/or large, unprocessed
sawmill residues, primarily slabwood. There is little supply and little demand for bulk fuel in the
immediate area. Other than sawdust and shavings, there is relatively little bulk fuel available; no
one is operating a chipper or debarker. As there are no pellet plants nearby, pellets were not
considered a viable fuel option. Potential supplies of bulk fuel from Canada were not considered.
3.2 Heating Value of Wood
Wood is a unique fuel whose heating value is quite variable, depending on species of wood,
moisture content, and other factors. There are also several ‘heating values’ (high heating value
(HHV), gross heating value (GHV), recoverable heating value (RHV), and deliverable heating
value (DHV)) that may be assigned to wood at various stages in the calculations.
For this report, hemlock cordwood at 30 percent moisture content (MC30) and hemlock bulk fuel
at 40 percent moisture content (MC40), calculated on the green wet weight basis (also called wet
weight basis), are used as benchmarks.
The HHV of hemlock at 0% moisture content (MC0) is 8,515 Btu/lb1. The GHV at 30% moisture
content (MC30) is 5,961 Btu/lb, and the GHV at 40% moisture content (MC30) is 5,109 Btu/lb.
The RHV for cordwood (MC30) is calculated at 12.75 million Btu per cord, and the DHV, which
is a function of boiler efficiency (assumed to be 75%), is 9.56 million Btu per cord. The delivered
heating value of 1 cord of hemlock cordwood (MC30) equals the delivered heating value of 86.6
gallons of #2 fuel oil when burned at 75% conversion efficiency.
The RHV for bulk fuel (MC40) is calculated at 6.92 million Btu per ton, and the DHV, which is a
function of boiler efficiency (assumed to be 70%), is 4.84 million Btu per ton. The delivered
heating value of 1 ton of hemlock bulk fuel (MC40) equals the delivered heating value of 43.9
gallons of #2 fuel oil when burned at 70% conversion efficiency.
A more thorough discussion of the heating value of wood can be found in Appendix B and
Appendix D.
SECTION 4. WOOD-FUELED HEATING SYSTEMS
4.1 Low Efficiency High Emission (LEHE) Cordwood Boilers
Most manual outdoor wood boilers (OWBs) that burn cordwood are relatively low-cost and can
save fuel but have been criticized for low efficiency and smoky operation. These could be called
low efficiency, high emission (LEHE) systems and there are dozens of manufacturers. The State of
New York recently instituted a moratorium on new LEHE OWB installations due to concerns over
emissions and air quality5. Other states are also considering regulations6,7,8,9. Since there are no
standards for OWBs (wood-fired “boilers” and “furnaces” were exempted from the 1988 EPA
regulations10), OWB ratings are inconsistent and can be misleading. Standard procedures for
evaluating wood boilers do not exist, but test data from New York, Michigan and elsewhere
showed a wide range of apparent [in]efficiencies and emissions among OWBs.
In 2006, a committee was formed under the American Society for Testing and Materials (ASTM)
to develop a standard test protocol for OWBs11. The standards included uniform procedures for
determining performance and emissions. Subsequently, the ASTM committee sponsored tests of
three common outdoor wood boilers using the new procedures. The results showed efficiencies as
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low as 25% and emissions more than nine times the standard for industrial boilers. Obviously,
these results were deemed unsatisfactory and new standards were called for.
In a news release dated January 29, 200712, the U.S. Environmental Protection Agency announced
a new voluntary partnership agreement with 10 major OWB manufacturers to make cleaner-
burning appliances. The new phase-one standard calls for emissions not to exceed 0.60 pounds of
particulate emissions per million Btu of heat input. The phase-two standard, which will follow 2
years after phase-one, will limit emissions to 0.30 pounds per million Btus of heat delivered,
thereby creating an efficiency standard as well.
To address local and state concerns over regulating OWB installations, the Northeast States for
Coordinated Air Use Management (NeSCAUM), and EPA have developed model regulations that
recommend OWB installation specifications, clean fuel standards and owner/operator training.
(http://www.epa.gov/woodheaters/ and http://www.nescaum.org/topics/outdoor-hydronic-heaters)
Implementation of the new standard will improve air quality and boiler efficiency but will also
increase costs as manufacturers modify their designs, fabrication and marketing to adjust to the
new standards. Some low-end models will no longer be available.
4.2 High Efficiency Low Emission (HELE) Cordwood Boilers
In contrast to low efficiency, high emission cordwood boilers there are a few units that can
correctly be considered high efficiency, low emission (HELE). These systems are designed to burn
cordwood fuel cleanly and efficiently.
Table 4-1 lists four HELE boiler suppliers, two of which have units operating in Alaska. HS Tarm
Co./Tarm USA, Inc. has a number of residential units operating in Alaska, and a Garn boiler
manufactured by Dectra Corporation is used in Dot Lake, AK to heat several homes and the
washeteria, replacing 7,000 gallons per year (gpy) of #2 fuel oil.14 Two Garn boilers were recently
installed in Tanana, AK (on the Yukon River) to provide heat to the washeteria and water plant,
and two more are being installed near Kasilof on the Kenai Peninsula.
Table 4-1. HELE Cordwood Boiler Suppliers
Btu/hr ratings Supplier
EKO-Line 85,000 to 275,000 New Horizon Corp
www.newhorizoncorp.com
Tarm 100,000 to 198,000 HS Tarm/Tarm USA
www.tarmusa.com/wood-gasification.asp
Greenwood 100,000 to 300,000 Greenwood
www.GreenwoodFurnace.com
Garn 350,000 to 950,000 Dectra Corp.
www.dectra.net/garn
Note: Listing of any manufacturer, distributor or service provider does not constitute an endorsement.
Table 4-2 shows the results for a Garn WHS 1350 boiler that was tested at 157,000 to 173,000
Btu/hr by the State of Michigan using the new ASTM testing procedures, compared with EPA
standards for wood stoves and boilers. It is important to remember that wood fired boilers are not
entirely smokeless; even very efficient wood boilers may smoke for a few minutes on startup.4,15
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Table 4-2. Emissions from Wood Heating Appliances
Appliance Emissions (grams/1,000 Btu delivered)
EPA Certified Non Catalytic Stove 0.500
EPA Certified Catalytic Stove 0.250
EPA Industrial Boiler (many states) 0.225
GARN WHS 1350 Boiler* 0.179
Source: Intertek Testing Services, Michigan, March 2006.
Note: *With dry oak cordwood; average efficiency of 75.4% based upon the high heating value (HHV) of wood
Cordwood boilers are suitable for applications from 100,000 Btu/hr to 1,000,000 Btu/hr, although
both larger and smaller applications are possible.
4.3 Bulk Fuel Boiler Systems
Commercial 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% of the energy in the
wood fuel to hot water or low pressure steam when the fuel moisture is less than 40% moisture
content (MC40, calculated on a wet basis).
Most vendors provide systems that can burn 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 designed to burn clean chips will not necessarily operate well on a diet of hog fuel, for
example. And most vendors will emphasize the need for good quality wood fuel as well as a
consistent source, i.e., fuel with consistent size and moisture content from a common source is
considerably more desirable than variations in chip size and/or moisture content from numerous
suppliers. Table 4-3 presents a partial list of bulk fuel boiler system vendors.
Table 4-3. Bulk Fuel Boiler System Vendors
Decton Iron Works, Inc
Butler, WI
(800) 246-1478
www.decton.com
New Horizon Corp.
Sutton, WV
(877) 202-5070
www.newhorizoncorp.com
Messersmith Manufacturing, Inc.
Bark River, MI
(906) 466-9010
www.burnchips.com
JMR Industrial Contractors
Columbus, MS
(662) 240-1247
www.jmric.com
Chiptec Wood Energy Systems
South Burlington, VT
(800) 244-4146
www.chiptec.com
Note: Listing of any manufacturer, distributor or
service provider does not constitute an endorsement
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 1 MMBtu/hr to 20 MMBtu/hr. Large energy
consumers, consuming at least 40,000 gallons of fuel oil per year, have the best potential for
installing bulk fuel boilers and may warrant detailed engineering analysis. Bulk fuel systems with
their storage and automated fuel handling conveyances are generally not cost-effective for smaller
applications.
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Although there are several options, bulk fuel (chips, sawdust, bark, shavings, etc.) is best delivered
in self-unloading tractor-trailer vans that hold about 22 to 24 tons of material. A facility such as
the Haines School, replacing 60,000 gallons of fuel oil with hemlock bulk fuel (MC40) would use
an estimated 1,365 tons per year, or about 2 tractor-trailer loads per week during the heating
season.
There are three known bulk fuel boilers in Alaska (Table 4-4), all of which are installed at
sawmills. The most recent was installed in Hoonah in 2006. A 4 MMBtu/hr wood chip gasifier is
under construction at the Craig Aquatic Center to replace the equivalent of 36,000 gallons of fuel
oil per year. It is similar in size to boilers recently installed in several Montana schools.
Table 4-4. Bulk Fuel Boilers in Alaska
Installation Boiler
Horsepower* MMBtu/hr Heating
Degree Days** Supplier
Craig Aquatic Center
Craig, AK 120 4 7,209a Chiptek
Icy Straits Lumber & Milling
Hoonah, AK 72 2.4 8,496b Decton
Regal Enterprises
Copper Center, AK N/A N/A 13,486c Messersmith
Logging & Milling Associates
Delta Junction, AK N/A 2 12,897d Decton
Notes:
* Heat delivered as hot water or steam. 1 Boiler Horsepower = 33,475 Btu/hr or 34.5 pounds of water at a temperature of
100°C (212°F) into steam at 212°F
** assumes base temperature = 65o F
a NOAA, July 1, 2005 through June 30, 2006, Ketchikan data
b NOAA, July 1, 2005 through June 30, 2006, Average of Juneau and Yakutat data
c NOAA, July 1, 2005 through June 30, 2006, Gulkana data
d NOAA, July 1, 2005 through June 30, 2006, Big Delta data
ftp://ftp.cpc.ncep.noaa.gov/htdocs/products/analysis_monitoring/cdus/degree_days/archives/Heating%20degree%20Days/Monthly%20City/2006/jun%202006.txt
Bulk fuel systems are discussed in greater detail in Section 7.
SECTION 5. SELECTING THE APPROPRIATE SYSTEM
Selecting the appropriate heating system is, primarily, a function of heating demand. It is generally
not feasible to install automated bulk fuel systems in/at small facilities, and it is likely to be
impractical to install cordwood boilers at very large facilities. Other than demand, system choice
can be limited by fuel availability, fuel form, labor, financial resources, and limitations of the site.
The selection of a wood-fueled heating system has an impact on fuel economy. Potential savings
in fuel costs must be weighed against initial investment costs and ongoing operating, maintenance
and repair (OM&R) costs. Wood system costs include the initial capital costs of purchasing and
installing the equipment, non-capital costs (engineering, permitting, etc.), the cost of the fuel
storage building and boiler building (if required), the financial burden associated with loan interest,
the fuel cost, and the other costs associated with operating and maintaining the heating system,
especially labor.
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5.1 Comparative Costs of Fuels
Table 5-1 compares the cost of #2 fuel oil to hemlock cordwood (MC30) and hemlock bulk fuel
(MC40). In order to make reasonable comparisons, costs are provided on a “per million Btu”
(MMBtu) basis.
Table 5-1. Comparative Cost of Fuel Oil vs. Wood Fuels
FUEL RHVa
(Btu)
Conversion
Efficiencya
DHVa
(Btu)
Price per unit
($)
Cost per MMBtu
(delivered, ($))
3.00/gal 27.17
3.50 31.70 Fuel oil, #2,
(per 1 gallon) 138,000 80% 110,400
per gallon 4.00 36.23
100/cord 10.46
125 13.08 Hemlock,
(per 1 cord, MC30)
12.75
million 75% 9.56
million 150 15.69
30/ton 6.25
40 8.33 Hemlock
(per 1 ton, MC40)
6.92
million 70% 4.84
million 50 10.32
Notes:
a from Appendix D
5.2(a) Cost per MMBtu Sensitivity – Cordwood
Figure 5-1 on the next page illustrates the relationship between the price of hemlock cordwood
(MC30) and the cost of delivered heat, (the slanted line). For each $10 per cord increase in the
price of cordwood, the cost per million Btu increases by $1.046. The chart assumes that the
cordwood boiler delivers 75% of the RHV energy in the cordwood to useful heat and that oil is
converted to heat at 80% efficiency. The dashed lines represent fuel oil at $3.00, $3.50 and $4.00
per gallon ($27.17, $31.70 and $36.23 per million Btu respectively).
At high efficiency, heat from hemlock cordwood (MC30) at $259.80 per cord is equal to the cost of
oil at $3.00 per gallon, before considering the cost of the equipment and operation, maintenance
and repair (OM&R) costs. At 75% efficiency and $125 per cord, a high-efficiency cordwood
boiler will deliver heat at about 48% of the cost of fuel oil at $3.00 per gallon ($13.07 versus
$27.17 per MMBtu). Figure 5-1 indicates that, at a given efficiency, savings increase significantly
with decreases in the delivered price of cordwood and/or with increases in the price of fuel oil.
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Cost ($) per MMBtu as a Function of
Cordwood Cost
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
50 75 100 125 150 175 200 225 250 275 300 325 350
Cordwood cost, $ per cordCost ($) per MMBtu
Fuel Oil at $4.00 per gallon
Fuel Oil at $3.50 per gallon
Fuel Oil at $3.00 per gallon
Figure 5-1. Effect of Hemlock Cordwood Price on Cost of Delivered Heat
5.2(b) Cost per MMBtu Sensitivity – Bulk Fuels
Figure 5-2 on the next page illustrates the relationship between the price of hemlock bulk fuel
(MC40) and the cost of delivered heat, (the slanted line). For each $10 per ton increase in the price
of bulk fuel, the cost per million Btu increases by about $2.065. The chart assumes that the bulk
fuel boiler converts 70% of the RHV energy in the wood to useful heat and that fuel oil is
converted to heat at 80% efficiency. The dashed lines represent fuel oil at $3.00, $3.50 and $4.00
per gallon ($27.17, $31.70 and $36.23 per million Btu respectively).
At high efficiency, heat from hemlock bulk fuel (MC40) at $131.60 per ton is equal to the cost of
oil at $3.00 per gallon, before considering the investment and OM&R costs. At 70% efficiency and
$50/ton, an efficient bulk fuel boiler will deliver heat at about 38% of the cost of fuel oil at $3.00
per gallon ($10.32 versus $27.17 per MMBtu), before considering the cost of the equipment and
OM&R. Figure 5-2 shows that, at a given efficiency, savings increase significantly with decreases
in the delivered price of bulk fuel and/or with increases in the price of fuel oil.
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Cost ($) per MMBtu as a Function of
Bulk Fuel Cost
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
10 30 50 70 90 110 130 150 170 190
Bulk fuel cost, $ per tonCost ($) per MMBtu
Fuel Oil at $4.00 per gallon
Fuel Oil at $3.50 per gallon
Fuel Oil at $3.00 per gallon
Figure 5-2. Effect of Hemlock Bulk Fuel Price on Cost of Delivered Heat
5.3 Determining Demand
Table 5-2 shows the reported approximate amount of fuel oil used by the Haines School facility.
Table 5-2. Reported Annual Fuel Oil Consumption, Haines School Facility
Reported Annual Fuel Consumption Facility Gallons Cost ($) @ $3.00/gallon
Haines School 60,000 180,000
TOTAL 60,000 180,000
Wood boilers, especially cordwood boilers, are often sized to displace only a portion of the heating
load since the oil system will remain in place, in standby mode, for “shoulder seasons” and peak
demand. Fuel oil consumption for the Haines School was compared with heating demand based on
heating degree days (HDD) to determine the required boiler capacity (RBC) for heating only on the
coldest 24-hour day (Table 5-3). While there are many factors to consider when sizing heating
systems it is clear that, in most cases, a wood system of less-than-maximum size could still replace
a substantial quantity of fuel oil.
14
Typically, installed oil-fired heating capacity at most sites is two to four times the demand for the
coldest day. However, this information was not recorded for the Haines School buildings, and with
the construction of the new school this information was not yet available. It is very likely that the
existing and new installed heating capacity will be similar to that of other typical installations
Manual HELE cordwood boilers, equipped with special tanks for extra thermal storage, can supply
heat at higher than their rated capacity for short periods. While rated at 950,000 Btu/hr (heat into
storage), a single Garn WHS 4400 can store nearly 3 million Btu, which would be enough to heat
the Haines School during the coldest 24-hour period for nearly 1½ hours (2,932,000 ÷ 2,077,000).
Table 5-3. Estimate of Heat Required in Coldest 24 Hr Period
Facility Fuel Oil Used
gal/yeara
Heating
Degree Daysd Btu/DDc Design
Tempd F
RBCe
Btu/hr
Installed
Btu/hra
Haines School 60,000 8,505 778,836 1 2,077,000 Not
available
Table 3-7 Notes:
a From SOI and site visit; net Btu/hr
b NOAA, July 1, 2005 through June 30, 2006:
ftp://ftp.cpc.ncep.noaa.gov/htdocs/products/analysis_monitoring/cdus/degree_days/archives/Heating%20degree%20Days/Monthly%20City/2006/jun%202006.txt c Btu/DD= Btu/year x oil furnace conversion efficiency (0.85) /Degree Days
d Alaska Housing Manual, 4th Edition Appendix D: Climate Data for Alaska Cities, Research and Rural Development
Division, Alaska Housing Finance Corporation, 4300 Boniface Parkway, Anchorage, AK 99504, January 2000.
e RBC = Required Boiler Capacity for the coldest Day, Btu/hr= [Btu/DD x (65 F-Design Temp)+DD]/24 hrs
According to these calculations (Table 5-3):
• It appears that the Haines School could supply more than 90% of its heating needs
(2,077,000 Btu/hr during the coldest 24-hour period) with a pair of large or extra large
Garn boilers rated at 950,000 Btu/hr*. However, consultation with a qualified engineer is
strongly recommended.
* Btu/hr into storage is extremely fuel dependent. The data provided for Garn boilers by Dectra Corp. are
based on the ASTM standard of split, 16-inch oak with 20 percent moisture content and reloading once an
hour.
5.4 Summary of Findings Table 5-4 summarizes the findings thus far: annual fuel oil usage, range of annual fuel oil costs, estimated annual wood fuel requirement, range of estimated annual wood fuel costs, and potential gross annual savings for the Haines School. [Note: potential gross annual fuel cost savings do not consider capital costs and non-fuel operation, maintenance and repair (OM&R) costs.] Table 5-4. Estimate of Total Wood Consumption, Comparative Costs and Potential Savings Annual Fuel Oil Cost (@ $ ___ /gal) HAINES SCHOOL Fuel Oil Used gal/yeara 3.00 3.50 4.00 Approximate Wood Requirementb Annual Wood Cost (@ $ ___ /unit) Potential Gross Annual Fuel Cost Savings ($) W. Hemlock, MC30, CE 75% 100/cord 125/cord 150/cord Low Medium High Cordwood system 700 cords 70,000 87,500` 105,000 75,000 122,500 170,000 W. Hemlock, MC40, CE 70% 30/ton 40/ton 50/ton Low Medium High Bulk fuel system 60,000 180,000 210,000 240,000 1,365 tons 40,950 54,600 68,250 111,750 155,400 199,050 NOTES: a From Table 5-2 b From Table D-3, Fuel Oil Equivalents
SECTION 6. ECONOMIC FEASIBILITY OF CORDWOOD SYSTEMS
6.1 Initial Investment Cost Estimates
DISCLAIMER: Short of having an actual Design & Engineering Report prepared by a team of civil and
mechanical engineers, actual costs for any particular system at any particular site cannot be positively
determined. Such a report is beyond the scope of this preliminary assessment. However, several
hypothetical, though hopefully realistic, system scenarios are offered as a means of comparison. Actual
costs, assumptions and “guess-timates” are identified as such, where appropriate. Recalculations of
financial metrics, given different/updated cost estimates, are easily accomplished.
Wood heating systems include the cost of the fuel storage building (if necessary), boiler building
(if necessary), boiler equipment (and shipping), plumbing and electrical connections (including
heat exchangers, pumps, fans, and electrical service to integrate with existing distribution systems),
installation, and an allowance for contingencies.
Before a true economic analysis can be performed, all of the costs (investment and OM&R) must
be identified, and this is where the services of qualified experts are necessary.
Table 6-1 (next page) presents hypothetical scenarios of initial investment costs for several
cordwood systems in a large heating demand situation. Five alternatives are presented.
Buildings and plumbing/connections are the most significant costs besides the boiler(s). Building
costs deserve more site-specific investigation and often need to be minimized to the extent
possible. Piping from the wood-fired boiler is another area of potential cost saving. Long
plumbing runs and additional heat exchangers substantially increase project costs. The exorbitant
cost of hard copper pipe normally used in Alaska now precludes its use in nearly all applications.
If plastic or PEX piping is used significant cost savings may be possible.
Allowance for indirect non-capital costs such as engineering and contingency are most important
for large systems that involve extensive permitting and budget approval by public agencies. This
can increase the cost of a project by 25% to 50%. For the examples in Table 6-1, a 25%
contingency allowance was used.
NOTE: With the exception of the list prices for Garn boilers, all of the figures in Table 6-1
are gross estimates.
17
Table 6-1. Initial Investment Cost Scenarios for Hypothetical Cordwood Systems
Fuel oil consumption
(gallons per year) 60,000
Required boiler capacity (RBC),
Btu/hr 2,077,000
Garn model Cordwood boiler
Btu/hrf
(1) WHS 4400
950,000
(2) WHS 4400
1,900,000
(3) WHS 4400
2,850,000
(4) WHS 4400
3,800,000
(5) WHS 4400
4,750,000
Building and Equipment (B&E) Costs (for discussion purposes only)
Fuel storage buildinga
(fabric bldg, gravel pad, $20 per sf)
$280,000
(700 cords; 14,000 sf)
Boiler building @ $100 per sf
(minimum footprint w/concrete pad)b
$22,000
(24’ x 10’)
$44,000
(24’ x 20’)
$72,000
(24’ x 30’)
$96,000
(24’ x 40’)
$120,000
(24’ x 50’)
Boilers
Base pricee
Shippingd
$35,700
$5,000
$71,400
$10,000
$107,100
$15,000
$142,800
$20,000
$178,500
$25,000
Plumbing/connectionsd $35,000 $40,000 $45,000 $50,000 $55,000
Installationd $10,000 $15,000 $20,000 $25,000 $30,000
Subtotal - B&E Costs $387,700 $460,400 $539,100 $613,800 $688,500
Contingency (25%)d $96,925 $115,100 $134,775 $153,450 $172,125
Grand Total $484,625 $575,500 $673,875 $767,250 $860,625
Notes:
a A cord occupies 128 cubic feet. If the wood is stacked 6½ feet high, the area required to store the wood is 20 square feet per cord.
b Does not allow for any fuel storage within the boiler building
c List price, Dectra Corp, May 2006
d “guess-timate”; for illustrative purposes only
e Published list price not available; this represents list price for WHS 3200 + $5,000
f Btu/hr into storage is extremely fuel dependent. The data provided for Garn boilers by Dectra Corp. are based on the ASTM standard of split, 16-inch oak
with 20 percent moisture content and reloading once an hour.
NOTE: A single Garn WHS 4400 would have to be fired nearly continuously 24 hours per day during the heating season in order to consume 700 cords of fuel,
and could not meet the heating requirements on the coldest days. Therefore, it is the author’s opinion that a single boiler installation is not a viable alternative
for this application.
6.2 Operating Parameters of HELE Cordwood Boilers
A detailed discussion of the operating parameters of HELE cordwood boilers can be found in
Appendix F.
6.3 Hypothetical OM&R Cost Estimates
The primary operating cost of a cordwood boiler, other than the cost of fuel, is labor. Labor is
required to move fuel from its storage area to the boiler building, fire the boiler, clean the boiler
and dispose of ash. For purposes of this analysis, it is assumed that the boiler system will be
operated every day for 210 days (30 weeks) per year between mid-September and mid-April.
18
Table 6-2 presents labor/cost estimates for various HELE cordwood systems. A detailed analysis of
labor requirement estimates can be found in Appendix F.
Table 6-2. Labor/Cost Estimates for HELE Cordwood Systems
Facility
System (Garn Model) (1) WHS 4400 (2) WHS 4400 (3) WHS 4400 (4) WHS 4400 (5) WHS 4400
Total Daily labor (hrs/yr)a
(hrs/day X 210 days/yr) 1,260 1,008 924 903 861
Total Periodic labor (hrs/yr)b
(hrs/wk X 30 wks/yr) 240 240 240 240 240
Total Annual labor (hrs/yr)b 16 28 36 40 44
Total labor (hrs/yr) 1,516 1,276 1,200 1,183 1,145
Total annual labor cost ($/yr)
(total hrs x $20) 30,320 25,520 24,000 23,660 22,900
Notes:
a From Table F-2
b From Appendix F
There is also an electrical cost component to the boiler operation. An electric fan creates the
induced draft that contributes to boiler efficiency. One estimate predicted that, at $0.30 per kWh,
the cost of operating the fan would be approximately $100-$200 per year4. The cost of operating
circulation pumps and/or blowers would be about the same as it would be with the oil-fired boiler
or furnace in an existing heating system.
Lastly there is the cost of wear items, such as fire brick, door gaskets, and water treatment
chemicals. This has been suggested at $300-$500 per year4.
Table 6-3. Summary of Total Annual Non-Fuel OM&R Cost Estimates
Cost/Allowance ($) Item (1) WHS 4400 (2) WHS 4400 (3) WHS 4400 (4) WHS 4400 (5) WHS 4400
Labor 30,320 25,520 24,000 23,600 22,900
Electricity 400 400 400 400 400
Maintenance/Repairs 200 400 600 800 1000
Total non-fuel OM&R ($) 30,920 26,320 25,000 24,800 24,300
6.4 Calculation of Financial Metrics
Biomass heating projects are viable when, over the long run, the annual fuel cost savings generated
by converting to biomass are greater than the cost of the new biomass boiler system plus the
additional operation, maintenance and repair (OM&R) costs associated with a biomass boiler
(compared to those of a fossil fuel boiler or furnace).
19
Converting from an existing boiler to a wood biomass boiler (or retrofitting/integrating a biomass
boiler with an existing boiler system) requires a greater initial investment and higher annual
OM&R costs than for an equivalent oil or gas system alone. However, in a viable project, the
savings in fuel costs (wood vs. fossil fuel) will pay for the initial investment and cover the
additional OM&R costs in a relatively short period of time. After the initial investment is paid off,
the project continues to save money (avoided fuel cost) for the life of the boiler. Since inflation
rates for fossil fuels are typically higher than inflation rates for wood fuel, increasing inflation rates
result in greater fuel cost savings and thus greater project viability.17
The potential financial viability of a given project depends not only on the relative costs and cost
savings, but also on the financial objectives and expectations of the facility owner. For this reason,
the impact of selected factors on potential project viability is presented using the following metrics:
Simple Payback Period
Present Value (PV)
Net Present Value (NPV)
Internal Rate of Return (IRR)
Life Cycle Cost (LCC)
Total initial investment costs include all of the capital and non-capital costs required to design,
purchase, construct and install a biomass boiler system in an existing facility with an existing
furnace or boiler system.
A more detailed discussion of Simple Payback Period, Present Value, Net Present Value and
Internal Rate of Return can be found in Appendix E.
6.5 Simple Payback Period for Multiple HELE Cordwood Boilers
Table 6-4 presents a Simple Payback Period analysis for hypothetical multiple HELE cordwood
boiler installations.
Table 6-4. Simple Payback Period Analysis for HELE Cordwood Boilers
(1) WHS 4400 (2) WHS 4400 (3) WHS 4400 (4) WHS 4400 (5) WHS 4400
Fuel oil cost
($ per year @ $3.00 per gallon) 180,000
Cordwood cost
($ per year @ $100 per cord) 70,000
Annual Fuel Cost Savings ($) 110,000
Annual, Non-fuel OM&R costsa 30,920 26,320 25,000 24,800 24,300
Net Annual Savings ($) 79,080 83,680 85,000 85,200 85,700
Total Investment Costs ($)b 484,625 575,500 673,875 767,250 860,625
Simple Payback (yrs)c 4.41 5.23 6.13 6.98 7.82
“Modified” Simple Paybackd 6.13 6.88 7.93 9.01 10.04
Notes:
a From Table 6-3
b From Table 6-1
c Total Investment Costs divided by Annual Fuel Cost Savings
d Total Investment Costs divided by Net Annual Savings
20
6.6 Present Value (PV), Net Present Value (NPV) and Internal Rate or Return (IRR)
Values for Multiple HELE Cordwood Boilers
Table 6-5 presents PV, NPV and IRR values for hypothetical multiple HELE cordwood boiler
installations.
Table 6-5. PV, NPV and IRR Values for Multiple HELE Cordwood Boilers
(1) WHS 4400 (2) WHS 4400 (3) WHS 4400 (4) WHS 4400 (5) WHS 4400
Discount Ratea (%) 3
Time, “t”, (years) 20
Initial Investment ($)b 484,625 575,500 673,875 767,250 860,625
Annual Cash Flow ($)c 79,080 83,680 85,000 85,200 85,700
Present Value
(of expected cash flows, $ at “t” years) 1,176,511 1,244,947 1,264,585 1,267,561 1,275,000
Net Present Value ($ at “t” years) 691,886 669,447 590,710 500,311 414,375
Internal Rate of Return (% at “t” years) 15.39 13.36 11.07 9.19 7.70
See Note # _ below 1 2 3 4 5
Notes:
a real discount (excluding general price inflation) as set forth by US Department of Energy, as found in NIST publication NISTIR 85-3273-22, Energy
Price Indices and Discount Factors for Life Cycle Cost Analysis – April 2007
b From Table 6-1
c Equals annual cost of fuel oil minus annual cost of wood minus annual non-fuel OM&R costs (i.e. Net Annual Savings)
Note #1. A single Garn WHS 4400 would have to be fired nearly continuously 24 hours per day during the heating
season in order to consume 700 cords of fuel, and could not meet the heating requirements on the coldest days.
Therefore, it is the author’s opinion that a single cordwood boiler installation is not a very viable alternative for this
application.
Note #2. With a real discount rate of 3.00% and after a span of 20 years, the projected cash flows are worth $1,244,947
today (PV), which is greater than the initial investment of $575,500. The resulting NPV of the project is $669,447, and
the project achieves an internal rate of return of 13.36% at the end of 20 years. Given the assumptions and cost estimates,
this alternative appears financially feasible, although the operational parameters are not ideal.
Note #3. With a real discount rate of 3.00% and after a span of 20 years, the projected cash flows are worth $1,264,585
today (PV), which is greater than the initial investment of $673,875. The resulting NPV of the project is $590,710 and
the project achieves an internal rate of return of 11.07% at the end of 20 years. While these metrics are less favorable
than alternative 2, given the assumptions and cost estimates, this alternative appears quite feasible and provides improved
operational parameters.
Note #4. With a real discount rate of 3.00% and after a span of 20 years, the projected cash flows are worth $1,267,561
today (PV), which is greater than the initial investment of $767,250. The resulting NPV of the project is $500,311 and
the project achieves an internal rate of return of 9.19% at the end of 20 years. While these metrics are less favorable than
alternative 3, given the assumptions and cost estimates, this alternative still appears quite feasible and may provide ideal
operational parameters.
Note #5. With a real discount rate of 3.00% and after a span of 20 years, the projected cash flows are worth $1,275,000
today (PV), which is greater than the initial investment of $860,625. The resulting NPV of the project is $414,375 and
the project achieves an internal rate of return of 7.7% at the end of 20 years. While these metrics are less favorable than
alternative 4, given the assumptions and cost estimates, this alternative still appears quite feasible and may provide some
system redundancy and capacity for expansion.
21
6.7 Life Cycle Cost Analysis
The National Institute of Standards and Technology (NIST) Handbook 135, 1995 edition, defines
Life Cycle Cost (LCC) as “the total discounted dollar cost of owning, operating, maintaining, and
disposing of a building or a building system” over a period of time. Life Cycle Cost Analysis
(LCCA) is an economic evaluation technique that determines the total cost of owning and
operating a facility over a period of time. Alaska Statute 14.11.013 directs the Department of
Education and Early Development (EED) to review capital projects to ensure they are in the best
interest of the state, and AS 14.11.014 stipulates the development of criteria to achieve cost
effective school construction.19
While a full-blown life cycle cost analysis is beyond the scope of this preliminary feasibility
assessment, an attempt is made to address some of the major items and run a rudimentary LCCA
using the Alaska EED LCCA Handbook and spreadsheet.
According to the EED LCCA Handbook, the life cycle cost equation can be broken down into three
variables: the costs of ownership, the period of time over which the costs are incurred
(recommended period is 20 years), and the discount rate that is applied to future costs to equate
them to present costs.
There are two major cost categories: initial expenses and future expenses. Initial expenses are all
costs incurred prior to occupation (or use) of a facility, and future expenses are all costs incurred
upon occupation (or use) of a facility. Future expenses are further categorized as operation costs,
maintenance and repair costs, replacement costs, and residual value. A comprehensive list of
items in each of these categories is included in the EED LCCA Handbook.
The discount rate is defined as, “the rate of interest reflecting the investor’s time value of money”,
or, the interest rate that would make an investor indifferent as to whether s/he received payment
now or a greater payment at some time in the future. NIST takes the definition a step further by
separating it into two types: real discount rates and nominal discount rates. The real discount rate
excludes the rate of inflation and the nominal discount rate includes the rate of inflation.19 The
EED LCCA Handbook and spreadsheet focuses on the use of real discount rates in the LCC
analysis.
To establish a standard discount rate for use in the LCCA, EED adopted the US Department of
Energy’s (DOE) real discount rate. This rate is updated and published annually in the Energy Price
Indices and Discount Factors for Life Cycle Cost Analysis – Annual Supplement to NIST
Handbook 135 (www1.eere.energy.gov/femp/pdfs/ashb07.pdf). The DOE discount and inflation rates for
2007 are as follows:
Real rate (excluding general price inflation) 3.0%
Nominal rate (including general price inflation) 5.0%
Implied long term average rate of inflation 1.9%
Other LCCA terms
Constant dollars: dollars of uniform purchasing power tied to a reference year and exclusive of
general price inflation or deflation
Current dollars: dollars of non-uniform purchasing power, including general price inflation or
deflation, in which actual prices are stated
Present value: the time equivalent value of past, present or future cash flows as of the beginning of
the base year.
22
NOTE: When using the real discount rate in present value calculations, costs must be expressed in
constant dollars. When using the nominal discount rate in present value calculations, costs must be
expressed in current dollars. In practice, the use of constant dollars simplifies LCCA, and any
change in the value of money over time will be accounted for by the real discount rate.
LCCA Assumptions
As stated earlier, it is beyond the scope of this pre-feasibility assessment to go into a detailed life
cycle cost analysis. However, a limited LCCA is presented here for purposes of discussion and
comparison.
Time is assumed to be 20 years, as recommended by EED
The real discount rate is 3%
Initial expenses as per Table 6.1
Future expenses as per Table 6.3
Replacement costs – not addressed
Residual value – not addressed
Cordwood Boiler Alternatives
Alternative 1 represents the existing oil-fired boiler system. The initial investment was assumed to
be $100,000. The operation costs included 60,000 gallons of fuel oil at $3.00 per gallon and 80
hours of labor per year at $20 per hour. The annual maintenance and repairs costs were assumed to
be $2,000 and no allowances were made for replacement costs or residual value.
NOTE: The value of the exiting boiler system ($100,000), the amount and cost of labor (80 hours,
$1,600), and maintenance and repair costs ($2,000) are completely and totally arbitrary.
Alternative 2 represents the existing oil-fired boiler system, which would remain in place, plus the
installation of two Garn WHS 4400 wood fired boilers. The initial investment was assumed to be
$675,500, which includes the hypothetical value of the existing oil-fired boilers (valued at
$100,000 as per Alternative 1) plus the initial investment cost of the Garn boiler system ($575,500,
as per Table 6-1). The operation costs include 700 cords of fuelwood at $100 per cord and 1,276
hours of labor per year at $20 per hour. The annual utility, maintenance and repairs costs were
assumed to be $800 for the wood-fired boilers and $1,000 for the existing heat distribution system.
No allowances were made for replacement costs or residual value.
Alternative 3 represents the existing oil-fired boiler system, which would remain in place, plus the
installation of three Garn WHS 4400 wood fired boilers. The initial investment was assumed to be
$773,875, which includes the hypothetical value of the existing oil-fired boilers (valued at
$100,000 as per Alternative 1) plus the initial investment cost of the Garn boilers ($673,875, as per
Table 6-1). The operation costs include 700 cords of fuelwood at $100 per cord and 1,200 hours of
labor per year at $20 per hour. The annual utility, maintenance and repairs costs were assumed to
be $1,000 for the wood-fired boilers and $1,000 for the existing heat distribution system. No
allowances were made for replacement costs or residual value.
Alternative 4 represents the existing oil-fired boiler system, which would remain in place, plus the
installation of four Garn WHS 4400 wood fired boilers. The initial investment was assumed to be
$867,250, which includes the hypothetical value of the existing oil-fired boilers (valued at
$100,000 as per Alternative 1) plus the initial investment cost of the Garn boilers ($767,250, as per
Table 6-1). The operation costs include 700 cords of fuelwood at $100 per cord and 1,183 hours of
labor per year at $20 per hour. The annual utility, maintenance and repairs costs were assumed to
23
be $1,200 for the wood-fired boilers and $1,000 for the existing heat distribution system. No
allowances were made for replacement costs or residual value.
Alternative 5 represents the existing oil-fired boiler system, which would remain in place, plus the
installation of five Garn WHS 4400 wood fired boilers. The initial investment was assumed to be
$960,625, which includes the hypothetical value of the existing oil-fired boilers (valued at
$100,000 as per Alternative 1) plus the initial investment cost of the Garn boilers ($860,625, as per
Table 6-1). The operation costs include 700 cords of fuelwood at $100 per cord and 1,145 hours of
labor per year at $20 per hour. The annual utility, maintenance and repairs costs were assumed to
be $1,400 for the wood-fired boilers and $1,000 for the existing heat distribution system. No
allowances were made for replacement costs or residual value.
The EED LCCA results for the Haines School cordwood boiler alternatives are presented in Table
6-6 on the next page.
Table 6-6. Estimated Life Cycle Costs of Cordwood System Alternatives Alternative 1 Alternative 2 Alternative 3 Alternative 4 Alternative 5 Initial Investment Cost $100,000 $675,500 $773,875 $867,250 $960,625 Operations Cost $2,701,749 $1,421,096 $1,398,483 $1,393,424 $1,382,117 Maintenance & Repair Cost $29,755 $26,779 $29,755 $32,730 $35,706 Replacement Cost $0 $0 $0 $0 $0 Residual Value $0 $0 $0 $0 $0 Total Life Cycle Cost $2,831,504 $2,123,376 $2,202,113 $2,293,405 $2,378,448
SECTION 7. ECONOMIC FEASIBILITY OF BULK FUEL SYSTEMS
A typical bulk fuel boiler system includes bulk fuel storage, a boiler building, wood-fuel handling
systems, combustion chamber, boiler, ash removal, cyclone, exhaust stack and electronic controls.
The variables in this list of system components include the use of silos of various sizes for wood
fuel storage, chip storage areas of various sizes, boiler buildings of various sizes, automated versus
manual ash removal and cyclones for particulate removal.17
7.1 Capital Cost Components
As indicated, bulk fuel systems are larger, more complex and may be more costly to install and
integrate with existing boiler and distribution systems. Before a true economic analysis can be
performed, all of the costs (capital, non-capital and OM&R) must be identified, and this is where
the services of architects and civil and mechanical engineers are necessary.
Table 7-1 outlines the various general components for a hypothetical, small bulk fuel system;
however it is beyond the scope of this report to offer estimates of costs for those components. As
an alternative, a range of likely total costs is presented and analyzed for comparison purposes.
Table 7-1. Initial Investment Cost Components for Bulk Fuel Systems
Facility Haines School
(60,000 gallons/year; 1,365 tons/year)
Capital Costs: Building and Equipment (B&E)
Fuel storage building ?
Material handling system ?
Boiler building ?
Boiler: base price
shipping ?
Plumbing/connections ?
Electrical systems ?
Installation ?
Non-capital Costs
Engineering , Contingency, Permitting, etc.?
Initial Investment Total ($) $1,000,000 to $2,000,000
The investment cost of bulk fuel systems can range from $500,000 to over $2 million, with about
$350,000 to $900,000 in equipment costs. Fuel handling and boiler equipment for an 8 MMBtu/hr
(300 BHP) system was recently quoted to a school in the northeast USA for $900,000. The cost of
a boiler and fuel handling equipment for a 3 to 4 MMBtu/hr system is about $350,000 to $500,000.
The 2.4 MMBtu/hr system in Hoonah was installed at a sawmill for $250,000, but an existing
building was used and there were significant economies in fuel preparation and fuel handling that
would be unacceptable in a non-industrial, institutional setting. Fuel and boiler equipment for a 1
MMBtu per hour system is estimated at $250,000 to $300,000 (buildings are extra). Several
schools in New England have been able to use existing buildings or boiler rooms to house new
26
equipment and realize substantial savings, but recent school projects in Montana were all installed
in new buildings.4
The Craig Schools and Aquatic Center project in Craig, AK was originally estimated at less than $1
million to replace propane and fuel oil equivalent to 36,000 gallons of fuel oil, but the results of a
January 2007 bid opening brought the cost to $1.85 million, not including probable cost overruns.
The fuel storage and boiler building, and system integration costs for the pool and two schools
increased the project costs.
Table 7-2 shows the total costs for the Darby School (Darby, MT) project at $1,001,000 including
$268,000 for repairs and upgrades to the pre-existing heating system. Integration with any pre-existing
system will likely require repairs and rework that must be included in the wood system cost. Adding the
indirect costs of engineering, permits, etc. to the equipment cost put the total cost at Darby between
$716,000 and $766,000 for the 3 million Btu/hr 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
Table 7-2. Darby, MT Public School Wood Chip 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 Biomass Energy Resource Center, 2005 4
The following is an excerpt from the Montana Biomass Boiler Market Assessment17:
“To date, CTA [CTA Architects and Engineers, Billings, MT] has evaluated more than 200
buildings throughout the northwestern United States and designed 13 biomass boiler projects, six of
which are now operational. Selected characteristics of these projects, including total project cost,
are presented in Table 1 [7-3]. As can be seen from Table 1 [7-3], total costs for these projects do
not correlate directly with boiler size. The least expensive biomass projects completed to date cost
$455,000 (not including additional equipment and site improvements made by the school district)
for a wood chip system in Thompson Falls, Montana. The least expensive wood pellet system is
projected to cost $269,000 in Burns, Oregon. The general breakdown of costs for these two projects
is presented in Tables 2 [7-4] and 3.”
NOTE: Information related to wood pellet systems was not included in this report as wood
pellets are not available as a fuel in southeastl Alaska.
27
Table 7-3. Characteristics of Biomass Boiler Projects17
Facility
Name Location Boiler Size
(MMBtu/hr output) Project Type
Wood
Fuel
Type
Total
Project
Cost
Thompson
Falls School
District
Thompson
Falls, MT 1.6 MMBtu Stand-alone boiler building
tied to existing steam system Chips $ 455,000
Glacier High
School
Kalispell,
MT 7 MMBtu
New facility with integrated
wood chip and natural gas
hot water system
Chips $ 480,000
Victor School
District Victor, MT 2.6 MMBtu Stand-alone boiler building
tied to existing steam system Chips $ 615,000
Philipsburg
School District
Philipsburg,
MT 3.87 MMBtu
Stand-alone boiler building
tied to existing hot water
system
Chips $ 684,000
Darby School
District Darby, MT 3 MMBtu
Stand-alone boiler building
tied to existing steam & hot
water system
Chips $ 970,000
City of Craig Craig, AK 4 MMBtu
Stand-alone boiler building
tied to existing hot water
systems
Chips $1,400,000
Univ. MT
Western Dillon, MT 14 MMBtu Addition to existing steam
system Chips $1,400,000
Table 7-4. Cost Breakdown for the Least Expensive Wood Chip Boiler System Installed in a
New Free-Standing Building 17
System Component Cost % of Total
Wood Boiler System Equipment $136,000 30%
Building $170,000 38%
Mechanical/Electrical $100,000 22%
Mechanical Integration $15,000 3%
Fees, Permits, Printing, Etc. $34,000 7%
Total* $455,000* 100%
* not including additional equipment and site improvements made by the school district
7.2 Generic OM&R Cost Allowances
The primary operating cost is fuel. The estimated bulk fuel cost for the Haines School is $54,600
(1,365 tons @ $40/ton). Other O&M costs would include labor, electricity and maintenance and
repair costs. For purposes of this analysis, it is assumed 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 performing daily inspections as prescribed
by the system manufacturer. It is assumed that the average daily labor requirement is ½ hour. An
additional 1 hour per week is allocated to perform routine maintenance tasks. Therefore, the total
annual labor requirement is (210 x 0.5) + 30 = 135 hours per year. At $20 per hour, the annual
labor cost would be $2,700.
28
There is also an electrical cost component to the boiler operation. Typically, electrically-powered
conveyors of various sorts are used to move fuel from its place of storage to a metering bin and into
the boiler. There are also numerous other electrical systems that operate various pumps, fans, etc.
The Darby High School system in Darby, MT, which burned 755 tons of bulk fuel in 2005, used
electricity in the amount of $2,035,18 however the actual kWh or cost per kWh were not reported.
Another report17 proffered an average electricity cost for Montana of $0.086 per kWh. If that rate
is true for Darby, then the electrical consumption would have been about 23,663 kWh. The Haines
School is projected to use 1,365 tons of bulk fuel (1.8 times the amount used at Darby). If it is
valid to apportion the electrical usage based on bulk fuel consumption, then the Haines School
would use about 42,600 kWh per year. At $0.30 per kWh, the annual electrical consumption
would be $12,780.
Lastly, there is the cost of maintenance and repair. Bulk fuel systems with their conveyors, fans,
bearings, motors, etc. have more wear parts. An arbitrary allowance of $5,000 is made to cover
these costs.
Total annual operating, maintenance and repair cost estimates for a bulk fuel boiler at the Haines
School are summarized in Table 8-2
Table 7-5. Total OM&R Cost Allowances for a Bulk Fuel System
Item Cost/Allowance
Non-Fuel OM&R
Labor ($) 2,700
Electricity ($) 12,780
Maintenance ($) 5,000
Total, non-fuel OM&R 20,480
Wood fuel ($) 54,600
Total OM&R ($) 75,080
7.3 Calculation of Financial Metrics
A discussion of Simple Payback Period can be found in Appendix E.
A discussion of Present Value can be found in Appendix E.
A discussion of Net Present Value can be found in Appendix E.
A discussion of Internal Rate of Return can be found in Appendix E.
7.4 Simple Payback Period for Generic Bulk Fuel Boilers
Table 7-6 presents Simple Payback Period analysis for a range of initial investment cost estimates
for generic bulk fuel boiler systems.
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Table 7-6. Simple Payback Period Analysis for Bulk Fuel Heating Systems
Haines School
(60,000 gpy; 1,365 tons/yr)
Fuel oil cost
($ per year @ $3.00 per gallon 180,000
Bulk wood fuel
($ per year @ $40 per ton) 54,600
Annual Fuel Cost Savings ($) 125,400
Annual, Non-fuel OM&R 20,480
Net Annual Savings ($) 104,920
Total Investment Costs ($) 750,000 1,000,000 1,250,000 1,500,000 1,750,000 2,000,000
Simple Payback (yrs)a 5.98 7.97 9.97 11.96 13.96 15.95
a Simple Payback equals Total Investment Costs divided by Annual Fuel Cost Savings
While simple payback has its limitations in terms of project evaluations, one of the conclusions of
the Montana Biomass Boiler Market Assessment was that viable projects had simple payback
periods of 10 years or less.17
7.5 Present Value (PV), Net Present Value (NPV) and Internal Rate of Return (IRR)
Values for a Hypothetical Bulk Fuel Boiler Installed at the Haines School
Table 7-7 presents PV, NPV and IRR values for hypothetical bulk fuel boilers.
Table 7-7. PV, NPV and IRR Values for Bulk Fuel Systems
Discount Rate 3
Time, “t”, (years) 20
Initial Investment ($)a 750,000 1,000,000 1,250,000 1,500,000 1,750,000 2,000,000
Annual Cash Flow ($)b 104,920
Present Value (of expected cash
flows), ($ at “t” years) 1,560,945
Net Present Value ($ at “t” years) 810,945 560,945 310,945 60,945 -189,055 -439,055
Internal Rate of Return (%) 12.71 8.4 5.54 3.43 1.80 0.46
Notes:
a from Table 7-6
b Equals annual cost of fuel oil minus annual cost of wood minus annual non-fuel OM&R costs
30
SECTION 8. CONCLUSIONS
This report discusses conditions found “on the ground” at the Haines School in southeast Alaska,
and attempts to demonstrate, by use of realistic, though hypothetical examples, the feasibility of
installing high efficiency low emission cordwood or bulk fuel wood boilers for heating these
facilities.
Wood is a viable heating fuel in a wide range of institutional applications, however, below a certain
minimum and above a certain maximum, it may be impractical to heat with wood, or it may require
a different form of wood fuel and/or heating system. The difference in the cost of heat derived
from wood versus the cost of heat derived from fuel oil is significant, as illustrated in Table 5-1. It
is this difference in the cost of heat, resulting in monetary savings that must “pay” for the
substantially higher investment and OM&R costs associated with wood fuel systems.
The Haines School provides K through 12 instruction for ____ students. The facility consists of
two large main buildings and the community pool. Heat is provided by ______________ oil-fired
boilers rated at _______ million Btu/hr (net, each), located ____________________________.
Heat is delivered via a _________________ system. The Haines School can be considered “large”
in terms of its fuel oil consumption (60,000 gpy), and it may be large enough to justify the
installation of a bulk fuel wood heating system if investment costs can be controlled and a reliable
consistent fuel supply identified.
The topography around the school is gentle, presenting no apparent physical impediments to an
external boiler installation. At the time of the AWEDTG site visit, at least two potential sites for a
wood-fueled boiler within reasonable distances to the school buildings were identified, but it is
unknown whether those sites are still available subsequent to the new school construction.
8.1 Cordwood Systems
To replace 60,000 gallons of fuel oil per year would require approximately 700 cords of reasonably
dry (MC30) hemlock cordwood and/or large sawmill residues (i.e., slabwood).
Examples of installing and operating multiple, large cordwood boilers (Garn WHS 4400) are
presented in Section 6. At a minimum, two such boilers would have to be installed in order to
come close to replacing 60,000 gallons of fuel oil per year. However, such a minimal installation
would mean firing those boilers every two hours for the entire heating season, which is probably
impractical. The installation of three boilers would require 8 firings per day; the installation of four
boilers would require 6 firings per day; and the installation of five boilers would require 5 firings
per day (See Appendix F).
Initial investment costs for the installation of multiple cordwood boilers ranged from about
$575,000 to $861,000, with the cost of the 14,000 square foot fuel storage building being the single
most costly item ($280,000). However, each boiler installation scenario returned positive financial
metrics with simple payback periods ranging from about 5 to 8 years, and internal rates of return
ranging from 7.70 to 13.36 percent. A cursory life cycle cost analysis indicated savings ranging
from an estimated $453,000 to $708,000 over 20 years.
8.2 Bulk Fuel System
To replace 60,000 gallons of fuel oil per year would require approximately 1,365 tons
(approximately sixty 40-foot tractor trailer loads) of bulk fuel (chips, sawdust, bark, shavings, etc.),
assuming such fuel runs 40% moisture content (MC40).
31
Although it is beyond the scope of this assessment to delve into the detailed costs associated with
the installation of bulk fuel systems, it is not unrealistic to say that, at 60,000 gallons of fuel oil per
year, it is possible that a bulk fuel system could be cost-effective for the Haines School IF
1. a reliable source of fuel can be identified
2. fuel can be delivered at a reasonable cost
3. total investment costs can be held to $1,500,000 or less