Financing Biomass Fuel

Power Plants: A Fuel Supply

Perspective
Pacific West Biomass Conference
and Expo – January ‘10

JD Lindeberg, PE, LEED AP, CFO and Principal

Resource Recycling Systems, Inc.
416 Longshore Dr.
Ann Arbor, MI 48105
734-996-1361 ext. 241
jdl@recycle.com

www.recycle.com
 Biomass Compared to
Other Green Energy
Mature Technologies Commercial
High WTE3 (combustion)
Geothermal
Low-
Land- Impact
Anaerobic Digester Gas Based Hydro
Biomass Co-Firing (direct) Wind Landfill
Gas Biomass Direct
Crystalline Silicon PV Combustion
Parabolic Offshore Wind
Technology Maturity

Trough
Landfill Gas (microturbines & fuel
Low- cells)
Head Thin-Film PV
Hydro
Tidal Barrage
Emerging Concentrating PV
Biomass1 (gasification)
Dish Stirling
Wave
Power Tower

Biomass pyrolysis
1. Biomass integrated
Tidal gasification combined cycle
Nano Solar Cells
Current 2. OTEC = ocean thermal
OTEC2 energy conversion
Low 3. WTE = waste to energy

Low Market Maturity High

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 So You Want to Build a
Biomass Power Plant!?
Get a Power • Biomass is Green Power
Purchase • Will Fit Within RPS
Agreement • Make a Long Term Deal (20 yrs)

• Build a New Plant (2- 40 MW)

Build/Convert a • Convert a small coal plant
Power Plant • Co-fire with Coal

Contract Fuel • Determine Fuel Type

Supply • Contract for Supply
 Project Finance Primer
• Two Kinds of Money will be Invested in your Project
– Equity – The “down payment” in the form of
cash for which investors gain ownership in the
project
– Debt – The “loan” from a major bank whose
return is “interest”
• Project Financial Partners Have Distinct Needs
– Equity – Gains return from the growth in value
of the company and other business related
benefits => More Entrepreneurial
– Debt – Gains return SOLELY from interest
payments => More Risk Averse

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 What Does this Tell Us?
• Power Purchase Agreement
– Very Important – Creates Revenue Certainty
– Relatively Easy – Or Not!!
• Power Plant Construction and Operation
– Very Important – Creates Operational Certainty
• EPC Contract for Engineering and
Construction
• Guaranteed Operation Efficiency
• Tedious but Relatively Straight Forward
• Fuel Supply
– Where is it? What does if Cost?
– If this were coal, gas or oil this would be Easy
But its not…….This is Why I am Here Today
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 Fuel Supply is Key to
Biomass Plant Success
• What’s a Developer to Do?
– Long Term Contracts are Difficult for Non-MSW
Biomass
– Wood Chip/Manure Futures are “Hard to Find”
– We Have a Spot Marketplace
• That Where a Fuel Consultant Job Starts
– Prove the Supply - Supply is Often Limited
– Determine the Competitors
– Identify the Disposal Economics
– Model Supply Economics
– Study the Impact of External Forces
– Determine the Carbon Benefits
– Create a “Bankable” Story
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 Fuel Supply
Development - Supply
• Population and Economic Census Data Drives the
Effort
• NAISC Classifications Identify Industries that
Generate Biomass Waste (e.g.):

Forests and Forest Products C&D Contractors

Farms Major Manufacturers
Beverage Manufacturers Food Manufacturers
Furniture Industry Renderers
Wholesale/Retail Grocery Restaurants

• Develop Total Biomass Quantity

• Determine Availability (not 100%)
• Identify Coverage Ratio - (3:1) is VERY GOOD
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Fuel Supply Development
- Competitors
• Other Similar Biomass Plants
• Competitive Alternative Uses (for woodwaste)
– Pulp Manufacture – High Value
– Board Manufacture – High Value
– Cellulostic Ethanol – High Value
– Pellet Fuel – Moderate Value
– Animal Bedding – Low Value
– Firewood – Low Value
– Mulch/Compost – Low Value
– Landfilling – No Value
• Foresee Future Competitive Uses – PERHAPS
THE MOST IMPORTANT
• Evaluate the Change in these Competitive Uses
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 Fuel Supply
Development - Disposal
• Disposal (usually landfilling or incineration) Provides
a Baseline Cost/Price against which fuel is measured

• Disposal Policy Determines Nature and Size of

Recovery Opportunity for Urban/Industrial Generated
Biomass Waste

• Timber Practices and Forest Products Industry

Competition Drive Forest Wood Waste Availability

• Type of Disposal Opportunities (C&D landfills,

incineration, MSW landfills, C&D Recovery Facilities,
Organics Recovery) Indicate Market Maturity and
Appetite for Recovery
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Fuel Supply Development
– Supply Economics
• Five Steps of Supply Pricing
– Production (logging, waste stream)
– Processing (size reduction, dewatering,
pelletizing)
– Loading (loaders, conveyors, pumps)
– Transport (chip vans, tankers, compactor boxes)
– Reclaim (conveyors, pumps, drying, mixing)
• Final number(s) is a Blended Cost of Fuel
Procurement ($/bdt)
• Production Dominates (production vs. waste
economics)
• Transport is Proportional to Distance from
Plant

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Fuel Supply Economics*
Process Step Cost Range Comments
($/ton)
Production $2 - $5/ton Logging or fire prevention
(forest only)
C&D $25-$30/ton Would be tipfee
Separation subsidized
(urban only)
Processing $10 - $15/ton Centralized, horizontal
grinders
Loading $1 – $5 /ton At marshalling area

Transport $7.50 - $10/ton @ 50 miles one-way

($0.15 - $0.20 No backhaul
/ton/mile) $4/gallon diesel cost
Total Cost $20.5 - $35/ton

* Will vary depending on location www.recycle.com

Fuel Supply Development
– External Events
• Looking into the Crystal Ball of the Future is VERY
DIFFICULT
• When Project Life Exceeds Twenty Years, Prediction
Becomes Important
• Fuel Supply Economics are Often Impacted by
External Forces like:
– Diesel Fuel Cost
– Competition for Biomass
– Change in Disposal Laws (increasing or
decreasing supply)
• Regression Analysis of Factors that Impact Supply is
a USEFUL TOOL
• Modeling Predicts Effect in Case of Certain
Events – IT CANNOT PREDICT THE FUTURE!
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Fuel Supply Development
– Carbon Balance
• Carbon Value May Drive The Future of Biomass Power
Development
• Carbon Has Other Impacts as Well
– Removing Organics from Landfill Has a HUGE
Benefit to the Environment
– Replacing Long-Term Carbon Cycle Fuel (e.g. coal
or petroleum) with Short-Term Carbon Cycle Fuel
(e.g. biomass) also has Benefits
– These Benefits Can be Quantified => And
Monetized!
– The Project Benefits From Avoided Carbon
Gasses Will Create Immense Wealth if “Cap
and Trade” Legislation is Passed by Congress!

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Fuel Supply Development
– The Story
• Bankers are Risk Averse - Equity Partners Take Higher
Risks with Higher Returns
• They Will Fund Risk, but it Must be Well-Defined
• Developers and Entrepreneurs Are Risk Takers
• A Good Fuel Consultant Can Help with That by:
– Getting Started Early on the Fuel Plan
– Telling the Fuel Story in Plain English
– Realizing Additional Questions will Always Come Up
– Knowing the “Story” is Always Needed Quickly
• A Consultant May Work for the Bank, but the
Developer Pays the Bill!

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 A Few Trends in the
Industry
• Most Interest is Coming in the Wood Waste Power
Plant World (fuel can be gotten in most places for
$20 - $30/ton)
• Many Wood Waste Plants are Small Coal (20-30 MW)
Conversion Projects
• Refuse Derived Fuel (RDF) is Staging a Bit of
Comeback (because its waste economics driven the
cost of fuel can be quite low – on paper)
• Co-Firing with Larger Coal Plants is Attractive as Well
(emissions benefits, fuel cost reduction)
• Methane Generation with Anaerobic Digestion is
Gaining a Foothold with the AG/Food Manufacturing
Community (universal feasibility has yet to be
proven)

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Questions/Discussion

Thank You for your time and attention!

JD Lindeberg
Resource Recycling Systems Inc.
734-996-1361
jdl@recycle.com

www.recycle.com