Lesson Learned from High Efficiency

Biomass Power Plants in China

Achieving lower risk and higher profitability
Anders Brendstrup Global Head of Sale
April 2012

China biomass today

Current capacity vs Potential
2 GW installed capacity
(75% agricultural residues)
800 million tons of waste
agricultural and forestry
residues produced annually
of which still only 5% used.
Potential for 100 GW

China biomass today

Government
RMB 0.75/kwh feed-in-tariff (=0.119 USD/kWh incl.
VAT)
Government targets 30 GW by 2020
Increasing adoption of high efficiency HPHT
technology (government to enforce)
Environment and Social
Millions USD injected into rural economy every year
Rural electrification Renewable Base load power
3

China biomass industry began in 2006

Very little government support
Zero collection infrastructure
Volatile price of fuel
Small scale farmers
Unpredictable crop cycles

Overcoming the challenges Reducing risk and increasing profitability

Plant owners

Technology Providers

Low EPC costs

Improve efficiency
Improve fuel flexibility
Improve availability and
reliability.

Fuel management

Case study: NBE lessons learned

Founded in 2004

Built Chinas first biomass plant in

2006, have built on average one

every 2 month since then.

Currently have 1200 MWe

capacity, largest biomass power

generating company in the world

Adapted European HPHT

technology: DP CleanTech

Partnership with State Grid.

Case study: NBE lessons learned

Many of the mistakes and

successes made along the
way

1.

laid the foundation for

Chinas current fuel
collection

2.

influenced current
government policy

3.

And taught us a lot about

lowering risk and increasing
profitability.
7

DP CleanTech - 50 references in China

Leveraging low cost EPC

European technology adapted to China market

Manufacturing in China: Reduction of EPC cost from 2,5

MUSD/MWe in Europe to 1-1,2 MUSD/MWe for the

same base technology

Breaking the China standard project execution mold -

Providing a complete biomass tailored solution.

DPCT focused on what is special for biomass (fuel

handling and fuel feeding, combustion, boiler, flue gas

cleaning)

Remainder was handled by standard Chinese suppliers

Biomass Cost Structure

Note: Above is based on a reference 30MW Power Plant in China

Fuel Management
NBE initiated Chinas first fuel logistics framework.
Prices were very volatile to begin with.
Agents helped stabilize the price.
Farmers began to benefit significantly.
A 30 MW Power Plant require 700 T/Day 220 000 T/Y
CC

Collection 50 KM
CC

120 Agents

AG

Power Plant

CC

AG

CC

8 Collection Centers/PP
CC

400 Farmers/ AG

Quality
control
Fuel
Weight
Fuel
storage

High Performance Technology

NBE were able to reduce fuel supply risk and allow better operability

Fuel flexibility
Moisture Content up to 60 %
Different types of Biomass - Mix
straw type and wood chip
Vibrating grates can adjust to
fuel type

Availability

7,500-8000 hours a year

Boiler designed to handle
corrosion and fouling
Good maintenance

WATER COOLED VIBRATING GRATE

High Performance Technology

High Efficiency

High Pressure ,
High Temperature boiler
92% , 92 Bar , 540 C
Plant efficiency up to 32 %

Reduce the plant fuel consumption

by more than 20% compared with

classical technology

Allow big Capacity 12 MWe to 30

MWe

High Pressure High Temperature Boiler

HTHP vs MTMP

A HTHP boilers is far more expensive to produce than a MTMP boiler

due to the following reasons

The materials used for the last super heaters have to be alloyed
steels. In Sh3+SH4 DP uses TP347H stainless steel which is both due
to the high temperature and pressure but also for corrosion
protection.

The high furnace temperature causes more slagging which means

that the boiler must be relatively larger in size in order to have the
similar thermal effect.

The higher pressure requires higher wall thicknesses of all materials,

hence higher overall material cost

HTHP vs MTMP

HTHP boilers provide us with better efficiencies with lower feedstock costs

The feedstock costs for a HTHP are nearly 20% lower than MTMP

Lower feedstock costs would in return lead to lower price fluctuations and
risk

HTHP is able to generate much higher cash flows which can be used to
service a greater amount of debt

15

HTHP vs MTMP
Cost Assumptions

Investment cost for a 30MW power plant USD

30 mm (HTHP)

Investment cost for a 30MW power plant - USD 27 mm (MTMP)

Boilers and turbines are expensive for a HTHP based plant

HTHP vs MTMP
Performance Assumptions

HTHP

Temperature: 535oC / Pressure: 8.83MPa

Uses 9,821 kj / kWh i.e. turbine efficiency of 36.65%
For HTHP the boiler efficiency is c.89% - implies a theoretical plant efficiency
of 32.6%

MTMP

Temperature: 450oC / Pressure: 4.90MPa

Uses 11,087 kj / kWh i.e. turbine efficiency of 32.47%
For MTMP the boiler efficiency is c.83% - implies a theoretical plant efficiency
of 27.0%
Fuel Handling and flue gas cleaning are more expensive due to more fuel
( lower efficiency) and therefore more flue gas

Reference Plant

NBE has now constructed and is operating more than thirty 30MW plants all

of which are being benchmarked against Generic Model, therefore we

believe this is the right reference point for our Analysis

For our analysis we have only altered 2 variable, the cost of the plant and

the plant efficiency which then has a resultant effect on the amount of
feedstock consumed per ton of power generated

30 Mwe Reference Plant

NBE has now constructed and is operating more than thirtyy 30MW plants all of which are being benchmarked against Generic Model,
therefore we believe this is the right reference point for our Analysis

For our analysis we have only altered 2 variable, the cost of the plant and the plant efficiency which then has a resultant effect on the amount of
feedstock consumed per ton of power generated

Metrics

Assumptions

Metrics

Assumptions

Utilization hours

7,500

Depreciation

Generic

Tariff

Generic:

Income tax

25%

O&M cost

0.2

Working
Capital
Assumptions

Inventory

Debt Funding

Assume

Efficiency factor

hours in each year

USD 0.09 /kWh

Adjusted with benchmark desulfurized coal-fired tariff

Approx.

32.6% efficiency for HTHP and 27.0 for

MTMP

Efficiencies

1st year
2nd year
3rd year
4th year
(Overhaul at the end of 4th year)
5th year

USD

Internal Power
Use

11%

mUSD per year

adjusted for plant degradation as given

below:

Feedstock heat
price

30MW plant - 15 years straight-line depreciation

0.25%
0.50%
0.75%
1.00%

Interest

0.25%

0.0042 / MJ = 50 USD/ton at NCV = 12000 kJ/kg

Capital
Expenditure

16.7% of Feedstock costs

70% debt financing on capital expenditure

rate of 6%

100%

Capital expenditure spent in the year prior to year of

operations

Assumed

total capital expenditure

30MW HTHP USD 30 mn

30MW MTMP USD 25 mn
Construction
period

18 months

HTHP vs. MTMP Side by Side

30 Mwe
Net power revenues
Feedstock costs
Other costs
total COGS

mUSD
mUSD
mUSD
mUSD

HTHP
2012 2013
0
9.4
0
-5.4
-0.51
-1.7
-0.51
-7.2

2014
19.1
-11.1
-1.9
-13.0

2015
19.7
-11.5
-1.9
-13.3

MTMP
2012 2013 2014 2015
0.00
9.25 18.91 19.47
0.00 -6.58 -13.45 -13.86
-0.51 -1.72 -1.86 -1.90
-0.51 -8.30 -15.31 -15.75

EBITDA
margin

mUSD
mUSD

-0.51
0%

2.20
23%

6.14
32%

6.35
32%

-0.51
0%

0.95
10%

3.59
19%

3.72
19%

Depreciation

mUSD

-0.8

-1.5

-1.5

-1.01

-2

-2

EBIT
margin

mUSD
mUSD

-0.51
0%

1.4
15%

4.6
24%

4.8
25%

-0.51
0

-0.06
-0.01

1.59
0.08

1.72
0.09

Net income

mUSD

-1.08

0.3

2.8

3.0

-1.08

-1.14

0.47

0.65

Cash Flow
Net income
add depreciation
less changes in NWC
Cash flow from operations
add net interest expenses
Capex
Free cash flow

mUSD
mUSD
mUSD
mUSD
mUSD
mUSD
mUSD

-1.08
0
0
-1.08
0
-27
-28.1

0.3
0.8
-0.9
0.1
1.9
0.0
2.0

2.8
1.5
-0.9
3.3
1.9
0.0
5.2

3.0
1.5
-0.1
4.4
1.9
0.0
6.3

-1.08
0.00
0.00
-1.08
0.00
-27.00
-28.08

-1.14
1.01
-1.10
-1.23
1.89
0.00
0.66

0.47
2.00
-1.15
1.33
1.89
0.00
3.22

0.65
2.00
-0.07
2.59
1.89
0.00
4.48

IRR
ROCE

%
%

20%
37%

13%
22%

Feedstock
casts of
HTHP are
about 17.5 %
lower than
that of MTMP
due to higher
plant
efficiency

Project IRR
20 % vrs 13
%.
And ROCE is
37 % vrs 22
%

Indian 12 Mwe plant

Metrics

Assumptions

Metrics

Assumptions

Utilization hours

7,500

Depreciation

12

Tariff

Generic:

Income tax

25%

O&M cost

0.2

mUSD per year adjusted by inflation

Water cost

0.1

mUSD per year adjusted by inflation

Plant SG&A

0.2

mUSD per year adjusted by inflation

Working
Capital
Assumptions

Inventory

Debt Funding

Assume

Efficiency factor

hours in each year

USD 0.10 /kWh

Adjusted with 3 % per year

Approx.

32.6% efficiency for HTHP and 27.0 for

MTMP

Efficiencies

adjusted for plant degradation as given

below:
1st year
2nd year
3rd year
4th year
(Overhaul at the end of 4th year)
5th year
Feedstock heat
price

USD

Internal Power
Use

11%

MW plant - 15 years straight-line depreciation

0.25%
0.50%
0.75%
1.00%
0.25%

0.0033/ MJ = 40 USD/ton at NCV = 12000 kJ/kg

adjusted with 6 % per year (inflation)

Interest

Capital
Expenditure

16.7% of Feedstock costs

70% debt financing on capital expenditure

rate of 13%

100%

Capital expenditure spent in the year prior to year of

operations

Assumed

total capital expenditure

12 MW HTHP USD 12 mn
12 MW MTMP USD 11 mn
Construction
period

18 months

Indian HTHP vs. MTMP

Indian 12 Mwe
Net power revenues
Feedstock costs
Other costs
total COGS

mUSD
mUSD
mUSD
mUSD

HTHP
2012 2013
0.00
4.24
0.00 -2.24
-0.16 -0.82
-0.16 -3.06

EBITDA
margin

mUSD
mUSD

-0.16
0%

1.18
28%

3.22
36%

3.34
36%

-0.16
0%

0.71
17%

2.23
25%

2.29
25%

Depreciation

mUSD

0.00

-1.01

-2.00

-2.00

0.00

-1.01

-2.00

-2.00

EBIT
margin

mUSD
mUSD

-0.16
0%

0.17
4%

1.22
14%

1.34
14%

-0.16
0%

-0.30
-7%

0.23
3%

0.29
3%

Net income

mUSD

-0.66

-0.80

0.23

0.38

-0.62

-1.19

-0.60

-0.48

Cash Flow
Net income
mUSD
add depreciation
mUSD
less changes in NWC
mUSD
Cash flow from operations mUSD
add net debt repayment mUSD
Capex
mUSD
Free cash flow
mUSD

-0.66
0.00
0.00
-0.66
0.00
-12.00
-12.66

-0.80
1.01
-0.37
-0.17
0.56
0.00
0.39

0.23
2.00
-0.41
1.82
0.56
0.00
2.38

0.38
2.00
-0.05
2.33
0.56
0.00
2.89

-0.62
0.00
0.00
-0.62
0.00
-11.00
-11.62

-1.19
1.01
-0.45
-0.63
0.51
0.00
-0.12

-0.60
2.00
-0.50
0.90
0.51
0.00
1.41

-0.48
2.00
-0.06
1.47
0.51
0.00
1.98

IRR
ROCE

20.8%
39.7%

%
%

2014
8.83
-4.71
-0.90
-5.61

2015
9.27
-4.99
-0.94
-5.93

MTMP
2012 2013
0.00 4.24
0.00 -2.71
-0.16 -0.82
-0.16 -3.53

2014
8.83
-5.70
-0.90
-6.60

2015
9.27
-6.04
-0.94
-6.98

15.0%
28.0%

Margins
are lower
due to
higher
interest
rate

Project IRR
20.8 % vrs
15 %.
And ROCE
is 39.7 % vrs
28 %

Biomass Cost Structure

Sensitivity
At fuel cost of 20
USD/ton IRR is similar.
HTHP is more stable
with varying fuel cost

IRR not very

sensitive to
operating hours
as fuel cost is
very high part of
OPEX

Sensitivity
Going from 10 mUSD
to 15 mUSD will lower
IRR from 26 % to 17 %.
Investment cost is
important but not most
important

15mUSD for
HTHP will have
same IRR as 11
mUSD for MTMP.

Financing Ability

Generally banks are cash flow based lenders and will determine sustainable

debt levels based on there free cash flow available to service debt and the
variability of those cash flows

As explained above, feedstock is by far the greatest variable cost for a plant

In a stable situation HTHP is able to generate greater cash flow available to

service debt

Further in a situation where feedstock varies, HTHP cash flows are less sensitive

India Market Overview

Market similarities
Current situation in India
India produces about 450-500 million tones of biomass per year.
EAI estimates that the potential in the short term for power from biomass
in India varies from about 18,000 MW, when the scope of biomass is as
traditionally defined, to a high of about 50,000 MW if one were to expand
the scope of definition of biomass.
Govt incentives - capital subsidy, renewable energy certificates and Clean
Development Mechanism (CDM) which can be utilized effectively to make
the project economically attractive

Challenges India Market

Supply chain bottlenecks that could result in nonavailability of feedstock. A related problem is the
volatility in the feedstock price.
Lack of adequate policy framework and effective
financing mechanisms
Lack of effective regulatory framework
Lack of technical capacity
Absence of effective information dissemination
Limited successful commercial demonstration model
experience

Agricultural residues in India (MT)

Rice Straw
It is estimated that 150 Mt of rice straw residue are
produced in India every year.
In India, 23% of rice straw residue produced is surplus
and is either left in the field as uncollected or to a large
extent open-field burnt. About 48% of this residue
produced is subjected to open-field burning
However Rice Straw is a difficult fuel to burn and
requires the right technology to avoid high long-term
costs.

Fouling

Ash Fusion Temperature

Conclusion
India is in a very similar position to where China was 5 years
ago
India has huge potential particularly with rice Straw.
Due Diligence Walk before you can run
Reliable technology that deals with specific fuel will always
work out cheaper in the long run
Use HPHT to get the best out of your fuel and improve IRR