Opportunities for biomass heating solutions (The Carbon Show 2012)


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AEA’s Oliver Edberg discusses opportunities for biomass heating solutions: presentation slides from the Carbon Show (October 23, 2012) in London.

With the inclusion of biomass sustainability standards in the Renewable Heat Incentive (RHI) scheme, there are questions around how this might affect the associated costs and efficiency of installed biomass boilers.

Oliver shares AEA’s insight into the RHI. His presentation will cover the latest developments in the biomass industry and provide an overview of the advantages of integrating boilers into a business energy strategy.

The Carbon Show is an annual event for sustainability professionals from industry, government, energy and finance who are working to increase energy efficiency and meet UK and European emissions targets. Oliver’s presentation will feature in the event’s green technology seminar programme.

Oliver has been involved in the renewable energy sector for a number of years working on biomass and renewable heating technologies. During this time he has supported a range of AEA projects including the company’s work on the RHI for DECC, and for Ofgem on the auditing of RHI installations.

In addition, Oliver has undertaken technical assessments and monitored a range of biomass heating projects (50-15000kWth) on the UK and South West Bio-energy Capital Grants programmes. He has also been involved in the development of the Bio-Energy Assessment Tool and undertaken several studies for the Environment Agency on biomass lifecycle emissions.

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Opportunities for biomass heating solutions (The Carbon Show 2012)

  1. 1. Opportunities For BiomassHeating SolutionsOliver Edberg – 23rd October 2012
  2. 2. AEA Advised DECC on Auditor for the RHI scheme Global bio-energy resource, CHP Quality Assurance RHI, FIT, CRC Guidance on Air Quality & Biomass Bioenergy Capital Grants Major provider of Scheme environment and energy South West Biomass Capital consultancy and advice Grants Scheme to the private sector
  3. 3. Overview  Biomass heating under the RHI  What is biomass?  When is biomass heating attractive?  Points to be aware of when considering biomass:  Fuel Supply  Air Quality  Sustainability
  4. 4. RHI Installations 120 400 Installed Capacity (MW) No of installations 350 100 300 80 No of installations 250 Capacity (MW) 60 200 150 40 100 20 50 0 0 Biogas Solid Deep GSHP Municipal Solar WSHP Bio-Methane Biomass Geothermal Solid Waste Thermal Boiler Source: Ofgem public RHI report (based upon accredited sites up to October 2012)
  5. 5. RHI Tariffs Table Tariff Name Eligible Technology Eligible Sizes Tier New tariff (pence/ kWhth) - from 1.4.12 Small Commercial Solid biomass Less than 200 Tier 1 8.3 biomass including solid kWth Tier 2 2.1 Medium biomass contained in 200 kWth and Tier 1 5.1 Commercial municipal solid waste above; less than Tier 2 2.1 Biomass (incl. CHP) 1,000 kWth Large Commercial 1,000 kWth and N/A 1 Biomass above Small Commercial Ground-source heat Less than 100 N/A 4.7 heat pumps pumps; Water Source kWth Large Commercial heat pumps; deep 100 kWth and heat pumps geothermal above N/A 3.4 All solar Solar collectors Less than 200 N/A 8.9 collectors kWth Biomethane and Biomethane injection Biomethane all biogas and biogas scales, biogas N/A 7.1 combustion combustion, except combustion less from landfill gas than 200 kWth
  6. 6. Why is biomass attractive?  The economics of biomass heating under the RHI are favourable under the right conditions.  Illustrative example in table below, site specifics influence cost significantly RHI RHI Additional Biomass fuel Fossil fuel Fuel payments payments Annual Simple CAPEX cost cost saving Tier 1 Tier 2 saving PaybackBiomass wood chipv natural gas £202,500 £16,050 £22,500 £6,450 £33,507 £1,953 £41,910 4.8Biomass wood pelletv natural gas £202,500 £32,550 £22,500 -£10,050 £33,507 £1,953 £25,410 8.0Biomass wood chipv oil £202,500 £16,050 £41,250 £25,200 £33,507 £1,953 £60,660 3.3Biomass wood pelletv oil £202,500 £32,550 £41,250 £8,700 £33,507 £1,953 £44,160 4.6 Assumptions: Boiler size 500kW Gas 3p/kWh Oil 5.5p/kWh Woodchip 2.1p/kWh Pellets 4.3p/kWh
  7. 7. Proposed New Developments Under RHIConsultation on proposed introduction of ‘new technologies’(response deadline 7th December 2012): Biomass and Bioliquid Combined Heat and Power  Heat from biomass CHP of 4.1p/kWh based on our current evidence.  Biomass CHP to include bioliquids at the same tariff of 4.1p/kWh.  Must meet CHPQA requirements Biomass Direct Air Heating  Tariff of 2.1p/kWh under 1MW.  Tariff over 1MW of 1p/kWh or less.
  8. 8. Biomass heating: Types of Drivers Reduce energy bills Invest capital and generate financial returns Reduce greenhouse gas emissions Improve corporate image Enhance energy security Address fuel poverty
  9. 9. Biomass Heating: Types of Risk Financial risks, capital costs, energy prices, credit risks and inflation Development risks, the costs of undertaking feasibility and the risk of planning Construction risks, construction costs and long lead in times Technology risks, particularly around efficiency and reliability of the technology Operational risks, operational and maintenance costs, fuel availability Policy risks, changes to renewable energy policy and incentive structures = investment returns
  10. 10. What is biomass? – Fuel CharacteristicsFeedstock Issues Alternative marketsVirgin wood Premium fuel suitable for all applications but expensive. Handles and Nonepellet burns predictably. V low ash. Internationally traded commodity. Closest Bioenergy gets to oil convenienceVirgin Wood Not all virgin wood is same quality/ specification. Paper sector; Furniturechip Price influenced by specification and processing. Construction; Panel boardEnergy Crops Not suitable for very small boilers due to ash sintering: Alternative use for land for other Miscanthus has high ash content. agricultural crops. Miscanthus: equine beddingAgricultural Straw - high alkali metal and ash content, not suitable for smaller boilers Animal Bedding; some agriculturalresidues (dry) Variable resource – price lower than wood but harvest & weather residues are used in animal feed. dependentFood residues Consider Anaerobic Digestion for wet residues. Animal feed Storage of waste products on a food production site (smell, degradation, vermin). Too wet for combustionWaste wood Level of wood treatment such as fungicides and paints. Treated wood Animal bedding & mulch (high falls under the Waste Incineration Directive value markets) Dust may be an issue in processing. Low price Panelboard (for better quality waste wood)Mixed waste, Only biomass content eligible for incentives and biomass content difficult Often already in long termSRF to demonstrate. contract to landfill or incineration. Chlorine content, high ash, metal content, variable CV. SRF production increasing - may Low or negative price be opportunities.
  11. 11. Specific issues for biomass Wide range of biomass fuels BUT characteristics differ and influence processing and conversion Clear specification of fuel is important The larger the boiler the more fuel flexible it is. Laxå Sweden (2010) Collapse of storage silo due to a fire. The silo collapsed Feedstock properties because the fire was put out by water that made the pellets swell. Storage facilities are important Need to consider degradation, dust, sparks, self heating and contamination in storage Air Quality Internal heating resulting in fire in pellet storage Images courtesy of IEA Bioenergy Task 32
  12. 12. Choice of Project Site Highest heat utilisation rate – best payback andsystem performance Type of fuel replaced – sites using LPG and oil are best to replace in terms of financial savings and Increasing payback, but replacing gas now effective due to the biomass heating Cost of fuel suitability RHI Feedstock  Regional capacity  The fuel will need to be processed/seasoned – how Heat demand will it arrive from the supplier Available space and access – sufficient room for boiler to be housed and feedstock to be stored and accessed
  13. 13. The impact of fuel type, size and load factor on thecost of heatThe cost of biomass heating is a strong function ofscale Domestic small commercial large commercial large industrial Size 15kW 140 500 5000 Fuel mix 100% pellets Pellets or clean 100% Clean chips 70% Clean chips chips/30% waste chips Capex £/MW 620 523 387 288 installed Load factor 20% 30% 30% 60% Typical cost of 12 9.5 6 2.4 heat
  14. 14. Biomass boiler examples Step grate system Batch fired log boiler
  15. 15. Fuel Delivery
  16. 16. Fuel Storage
  17. 17. Fuel risk mitigation Financiers see supply and price as major risk factors in plant development. Cost of risk may have major impact on development costs To decrease risk contractual negotiation should consider:  Need to secure supply over long term  Contracts aimed at mitigating risks for ALL parties:  Need to ensure supplier can meet their costs, the need for investment in infrastructure and achieve attractive margin  Need to recognise that suppliers costs may change with time, as may market for biomass Other fuel risk mitigation options:  Spread supply across three or four suppliers  Build in flexibility for storage at peak times  Build in re-negotiation clauses triggered by changes in price indexes or on an annual basis  Include some option to buy on spot market  Build in flexibility to use different fuels in conversion stage
  18. 18. Fuel costs per kWhFrom Biomass Energy Centre Website
  19. 19. UK Bioenergy demand: Past and projection Projected wood fuel use under the RHI 3.0 7Cofiring 2.5 6 Million ODT per annum Million ODT per annum 5 2.0Biomass 4stand alone 1.5electricity 3Industrial 1.0heat 2 0.5 1Domesticheat 0.0 0 2005 2006 2007 2008 2009 2010 2020 2030 Data source: derived from DUKES Data source: Adapted from ‘The UK Supply Curve for Renewable Heat’ NERA/AEA 2009 Planned large biomass electricity projects Large growth in biomass (a 6.6 fold increase) for heating but are all looking to source biomass from quite small in terms of the potential resource overseas
  20. 20. UK Biomass Supply to 2030: total UK biomass potential UK Biomass resource including waste wood and energy crops 30.0 Energy Crops 25.0 Million ODT/p.a 20.0 Waste wood 15.0 UK forestry 10.0 derived resource 5.0 Projected biomass heating 0.0 RHI 2010 2015 2020 2025 2030 Source: Results based upon research conducted by AEA for DECC (2011), report publically available from DECC’s RHI webpage
  21. 21. Compliance with air quality legislation Right place in AQMA planning requirements will be stricter in Smoke Control Area must be exempt appliance less impact in rural areas Right kit Low emission technology Clean high quality fuel Larger boilers with enhanced cleanup Best configuration and operation – log boilers need accumulators. Right abatement >45.4 kg wood combustion/hour must be agreed with Local Authority Right chimney >45.4 kg wood combustion/hour height must be agreed with Local Authority Sufficient height to disperse emissions adequately, may need calculation
  22. 22. Guidance for LAs (and everyone else)www.lacors.gov.uk
  23. 23. Sustainable fuels and the RHI Bioenergy could contribute over 33% of the predicted seven-fold growth in renewable heat by 2020 BUT It must be Environmentally SUSTAINABLE  The need for sustainability is recognised and accepted by policymakers – incentives will not be paid for unsustainable fuel and corporate reputation could suffer. Requirements of RHI  Sustainable feedstocks will be a requirement of the RHI for all boilers over 1MW output.  Initial compliance is by reporting only with mandatory compliance and sanctions from 2013  Non compliant fuel will equal loss of incentive payments and damaged corporate reputationSustainability is a significant regulatory risk to the business
  24. 24. Sustainability risk of some fuels Risk of excessive impact Risk of excessive from land use change impact from Life cycle GHG balanceWood chip from N America low lowPellets from N America low mediumSmall round wood from UK woodland low lowEU grown and processed wood low lowproductsSE Asia/ undetermined origin high mediumWaste derived fuels zero zeroAgricultural residues zero zero
  25. 25. RHI sustainability Ofgem regulate RHI, including sustainability Reporting requirements for RHI are for schemes >1MWth: Type of biomass Format e.g. pellet Mass/Volume Whether or not it is a by-product/residue Country of origin Does it meet an Environmental QA scheme (energy crops only)
  26. 26. Sustainability Proposals in RHI Consultation (1) The greenhouse gas (GHG) emissions target for the lifecycle assessment of biomass heat should be 125.28 kg CO2eq per MWh For woodfuel the ‘land criteria’ should be as set as the criteria used for the UK public procurement policy for timber, For non-wood fuel the ‘land criteria’ should be as set out under the Renewable Energy Directive Perennial energy crops planted to meet the sustainability requirements set under the Energy Crops Scheme for England, or its equivalent, should be considered as meeting the land criteria The use of wastes for heat generation should be exempt from the sustainability criteria
  27. 27. Sustainability Proposals in RHI Consultation (2) To develop a registered suppliers scheme to provide a simple route for smaller biomass heat installations to demonstrate they meet the sustainability criteria To require biomass heat installations below 1 MWth to meet the sustainability criteria from April 2014 As part of the approved supplier list a level of boiler efficiency should be assumed The use of woody biomass sourced from the same estate as where the boiler is housed should be deemed sustainable, and this should be managed through a simple registration process
  28. 28. Sustainability Positives Sourcing from the locality strengthens company/ community links. Wood fuel creates employment in local forestry and agriculture and as a result wealth in the local community. There is no revenue leakage from the locality. Managing woodland for fuel is positive for its ecology. Opening the canopy increases biodiversity. All of the above can be used to enhance corporate reputation  A good neighbour?  A carbon neutral company?  Working together with your local community?
  29. 29. Conclusions Biomass is a growing market Not suitable for every organisation but can be highly attractive in reducing carbon, energy bills and for PR. Consider alternative fuel options, particularly any wastes or residues you produce Be flexible in fuel capability with your equipment choice if you can There are risks, but you should be able to adopt strategies to mitigate against them Fuel prices may vary but you should be able to negotiate contracts for large proportion of supply that mitigate against price fluctuations for all parties Do not ignore sustainability – it will become increasingly important
  31. 31. AEAOliver EdbergSenior ConsultantAEAMarble Arch Tower55 Bryanston StreetLondonW1H 7AATel: +44 (0)870 190 2945Mob: +44 (0)7425622772E: oliver.edberg@uk.aeat.comW: www.aeat.co.ukCopyright AEA Technology plcThis presentation is submitted by AEA. It may not be used for any other purposes, reproduced in whole or in part,nor passed to any organisation or person without the specific permission in writing of the Commercial Manager, AEA Technology plc.