Sale of electricity and heat from biofuel

Project summary

Ladies and gentlemen!

In Ukraine, communal heat power engineering or centralized heat supply was developed in the 60-70s and by 2019 it serves about 55-60% of housing.

At the moment, this is the last not fully privatized energy sector in Ukraine with a turnover of tens of billions of UAH. (although there is a successful experience in the operation of private CHPPs and the heat and power company Tekh-nova, Darnitskaya CHPP, Cherkasskaya, Chernigovskaya). At the moment, the cost of heat and power is minimal, but due to changes in legislation, the development of technologies and the launch of the electricity market (including balancing services), processes similar to those of twenty years ago in oblenergo are underway, when equipment, networks and a customer base turn from a burden into very expensive profitable asset. The cost and capitalization of heat and power will grow many times over the next few years.

Profit in this market can be obtained through the sale of equipment for the reconstruction of boiler houses in CHPPs or privatization of heat and power, reconstruction and sale of electricity and heat to consumers. At the same time, it is possible to carry out the reconstruction due to cheap environmental crediting. Reconstruction, depending on local conditions, can be carried out with the transition to cogeneration from natural gas or biofuel, as well as using heat pumps.

In our company it is possible to produce:

biofuel combustion systems - biofuel furnaces (12 Gcal) for converting boilers from natural gas to biofuel. Production profitability is over 100%.

Block-modular CHPP - Estimated cost of a boiler unit of 10 tons of steam per hour 39 Atm 450C about $ 1 million or $ 120 per 1 kW of thermal power, at a price of foreign analogues from $ 350 per 1 kW. The production profitability is assumed to be about 100%. These CHP plants are in demand not only in Ukraine, but also abroad, especially in energy-deficient countries with an excess of biofuel: Africa, India, Indonesia, etc.

During the reconstruction of heating networks:

1. During the construction of a thermal power plant of 8 MW electric (40 tons of steam) on heating networks (for example, Pavlograd) with an investment of 180-200 million UAH. annual profit from UAH 150 million. in year. (app. Construction of a CHPP 40 tons of steam + financial calculation with various scenarios).
2. Privatization and reconstruction of existing thermal power plants (Nikolaev, Kherson, Kryvyi Rih, etc.) with an investment of 10-12 million dollars, an annual profit of 15-20 million dollars. (Appendix. Reconstruction of CHPP 25 MW + financial calculation with different scenarios).
3. Reconstruction of the existing CHP 2 MW for the combustion of RDF fuel.

High profitability can be achieved due to the cheapness of biofuels, even with a low gas price, the specific cost of Gcal of energy from biofuel is 20-50% of the cost of Gcal from natural gas.

Also, the production of electricity from biofuels is stimulated by the established Green tariff (0.124 Eurocents per kWh) and other preferences until 2030 by the law - On Alternative Energy Dzherela (Article 9) https://zakon.rada.gov.ua/laws/show/555-15 # n143 Already 14 CHPPs have received the Green Tariff.

The production of thermal energy from biofuels is stimulated by automatic tariff setting at the level of 90% of the tariff for thermal energy from natural gas, article 20 of the Law of Ukraine "On heat supply" https://zakon.rada.gov.ua/laws/show/2633-15

https://zakon.rada.gov.ua/laws/show/1391-14 - About alternative vidi paliva

Risks.

1. Reduction or Cancellation (End) of the Green tariff - when the Green tariff is canceled, the CHPP will cover its own consumption of electricity and heating networks. At the moment, the cost of electricity for heating networks is 2.5-3 UAH per kWh. Also, part of the energy will be supplied to neighboring enterprises 2.5 UAH per kWh minus 0.4-0.5 UAH per kWh tariff for electricity transmission. Also residual heat for heating urban consumers. With the consumption of 1-1.2 tons of husk per 1 MWh, the activity is still profitable.
2. A decrease in the price of natural gas and, accordingly, heating - a decrease in gas prices will lead to an even greater decrease in biofuel prices and, accordingly, an increase in the profitability of electricity generation, and thermal energy is still a by-product.
3. The refusal of the city authorities to pay the bills of budgetary institutions leads to an automatic increase in heating prices (thermal energy from biofuels is cheaper by at least 10%) in budgetary institutions (item for cost overruns) and the population (public discontent). At the same time, we are building parallel to the existing gas networks and are not de jure monopolists.
4. A work scheme of two companies is proposed - one is the owner of facilities and equipment, and the second is operating activity. The closure or obstruction of the operating company does not affect the main company.
5. The husk was exported - the equipment allows the use of local low-quality agricultural residues (dead waste of sunflower, rapeseed, corn residues), as well as crushed chips from forestry enterprises, harvesting plantings, etc. The operation of a powerful CHPP (25 MW) requires 10-20% of the available biofuel potential within a radius of 100 km.

Technical and economic airbags in the calculations:

1. It is assumed that the operating time of the equipment is 8000 hours, 10% of the time of the year for technological stops.
2. The cost of equipment is taken according to the pessimistic option (expensive). It also does not take into account the possibility of obtaining installments for equipment with the payment of part of the cost after the start of operation.
3. Fuel consumption for electric power generation according to the pessimistic option:
   1. The calorific value of the fuel according to the worst samples (husk 4 Gcal / ton, in reality 4.1-4.3 Gcal / ton).
   2. The efficiency of the boiler is 80%, the actual efficiency of solid fuel boilers is 80-90%.
   3. Steam consumption for 1 MW * hour is also with a margin of 2-5%.
4. Adopted an increase in the payroll by 5 per year in euros (in the 10th year of operation, the payroll is 150% of the existing level).
5. Adopted an increase in the cost of fuel by 5% per year in euros (in the 10th year of operation, the cost of fuel is 150% of the current level). The possibility of using cheaper crop residues is not taken into account.
6. In the third negative scenario, the initial cost of fuel is 150% of the existing one.
7. In the second negative scenario, the Green Tariff will be reduced to 11 euro cents.
8. For objects in the western regions, the cost of UAH 1,500 per ton of husk is accepted due to the lack of saturation of the region with oil extraction plants and local crop residues and timber are not taken into account.
9. Costs for transportation and sale of heat energy at the moment in tariffs at the level of 5-6%, we have a margin of 15%.
10. The average tariff for heat energy in Ukraine is UAH 1500. for Gcal in the calculations, 1000 UAH per Gcal was taken.
11. The release of heat energy in the calculations is underestimated due to a decrease in operating hours (3000, not real 3800), a utilization rate of 50-70% and a percentage of payment of 80%.