created by Sustainable Energy Ireland, REIO 2004www.sei.ie, REÌO 2004 Page 1/59 Pellet Production_V08.doc Preliminary Study of Preliminary Study of Pellet Production Pellet Production in Ireland in Ireland Wood Pellet Production in Ìreland 1 Management Summary 4 1.1 Business in brief 4 1.2 Factors of success 4 1.3 Economic side in brief 4 1.4 Vision 5 1.5 Targets 5 2 Product strategy 6 2.1 Product portfolio 6 2.2 Product sustainability 7 2.3 Know How resources 7 2.4 Quality Management 7 2.5 Possible substitute products 8 2.6 Product Uniqueness 8 3 Market strategy 9 3.1 Market Analysis 9 3.1.1 Pellet Market Development 9 3.1.2 Potential of the Ìrish Heating Market 11 3.1.3 Export market 14 3.1.4 Segmenting market 15 3.1.5 Current situation in Ìreland 15 3.1.6 Relevant market 16 3.1.7 Target group 18 3.2 Competitor Analysis 18 3.2.1 Competitors 18 3.2.2 Position in the market 18 www.sei.ie, REÌO 2004 Page 2/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 3.2.3 Competitor behaviour 19 3.3 Supply Analysis for Pellet producers 19 3.3.1 Sawmill residues 19 3.3.2 Equipment 19 3.4 Distribution possibilities 19 3.5 Unique selling proposition (USP) 19 3.6 Price strategy 20 3.6.1 Development of the prices 20 3.6.2 Price Policy & Potential 20 3.7 Communication / Marketing 21 3.7.1 Advertising 21 3.7.2 Public Relations 22 3.8 Start-up Strategy 23 3.9 Company and Ìndustry 24 3.9.1 Competency 24 3.9.2 Ìnput for the future 24 3.9.3 Motivation 24 4 Business 25 4.1 Business Participants 25 4.2 Strength/weakness of the other Ìrish Pellet Market participants 25 4.2.1 Pellet consumers 25 4.2.2 Pellet boiler supplier 25 4.2.3 Ìnstallation & Maintenance 25 4.2.4 SEÌ 26 4.2.5 Financial backer 26 www.sei.ie, REÌO 2004 Page 3/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 4.2.6 Supporting Organisations 26 4.3 Cooperation with SEÌ 26 4.3.1 Competency 26 4.3.2 Experience and Ìnput of SEÌ 26 4.3.3 Motivation 27 5 Description of the method in brief 28 5.1 Process line 28 5.1.1 Efficient pre/treatment of raw materials 28 5.1.2 Pelleting 28 5.2 Technical Demands for success 29 5.2.1 Pellet supply 29 5.2.2 Pellet delivery 29 5.2.3 Pellet storage room 29 5.2.4 Pellet silos 29 5.2.5 Pellet storage with container 31 5.2.6 Ìnstallation and Service 31 5.2.7 Pellet boiler 31 6 Financial program 33 6.1 Production costs 33 6.2 European Examples 35 6.3 Scenario 36 6.3.1 for sawmills (34,800 tonnes of pellets/year) 36 6.4 Financial Resources 38 6.4.1 SEÌ RD&D Programme 38 6.5 Risk analysis 38 www.sei.ie, REÌO 2004 Page 4/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 6.5.1 Most sensitive cost factors 38 6.5.2 Typical technical problems of poor products: 38 7 Our recommendation 40 7.1 Boiler LEASÌNG and Fuel buying 41 7.2 Heat contracting 43 8 Reference & useful links 45 9 Appendix A: Heating Costs Comparison for a customer 46 10 Appendix B: Summary of benchmarks 49 11 Appendix C: Pellet Production Equipment supplier 51 12 Appendix D: wood pelleting process in detail 53 13 Appendix E: Specification of Properties for Pellets. 56 Based on: COFORD Strategic Study, Maximizing the Potential of ood !se for "nergy #eneration in $reland %he de&elo'ment of (ood 'ellet mar)ets in "uro'e *Ch Ra)os+",-,. the .ustrian "nergie .gency/ and 'resentations from the S"$ ood "nergy Conference 0110 and 0112 http://www.sei.ie/*rene(a3le energy, reference centre/ For further information please contact: Sustainable Energy Ireland Renewable Energy Information Office, Shinagh House, Bandon, Co. Cork el.! ""#$# %# %& '%( &# )a*! ""#$# %# %& ($' www.sei.ie, REÌO 2004 Page 5/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 1 Management Summary 1.1 Business in brief This paper represents a brief summary 'How and/or Why to implement pellet production' in Ìreland. Ìt offers information and support for the creation of this new market, with an innovative product, called wood pellets. 1.2 Factors of success 1. Upgrading of waste residues to high quality product with the possibility of selling it at an adequate price level 2. Leader in a new market with few competitors 3. Achievement of payback within target period 4. Provide a bigger range of products and decrease the risk of downturns in one particular product 5. Contribution to emission reduction and opportunity to engage in emission certification trading 6. A Green Ìmage in the consumer and business markets Wood pellets are CO 2 neutral This means when you burn biomass you cause CO 2 emissions, but the same abount will have been absorbed by the tree when it was growing. 7. Better connections with international companies. 8. Ìmproved info exchange due to international trading 1.3 Economic side in brief The current retail price of the sawmill residues are C10-C25/tonne to the panel mills. After starting with the wood pellet production the price level of wood pellets will be between C90-C100/tonne ex works and around C170/tonne home delivery. A scenario is developed for a pellet plant in an existing sawmill the NPV (Net present value) would be C5.5 million and a positive cash flow is reached after 2 years. www.sei.ie, REÌO 2004 Page 6/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 1.4 Vision Become a leader in a new market segment and establish the company as a professional partner for wood pellet supply 1.5 Targets Develop sales and customer base with a new innovative product Have a good payback of the investment Ensure the survival of the company in future years Sustain existing jobs and develop new one Have an adequate production output to deliver to the new market Successful development of new markets: 1 st step ÷ larger buildings and industrial heat market Ìreland 2 nd step ÷ consumer heat market Ìreland in parallel with 1 and 2 ÷ export market Development of partnership / distributors / joint ventures with boiler and stove suppliers, distribution /haulier companies www.sei.ie, REÌO 2004 Page 7/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 2 Product strategy 2.1 Product portfolio BIO!"" !# $%C$&&$#' B("I#$"" Raw materiaIs of pellets from own residues of the existing production The peIIets processing line fits into the existing production process Ensured future suppIy of raw material at competitive prices due to huge Ìnvestment in Ìrish forestry in the last years The technical Know –How of wood is available and can used immediately Existing market structure of solid fuels can be adapted for pellet sales PotentiaI Export market No Energy taxes ÷ Currently proposals are at government consultation stage, which involve new taxes on natural gas, coal and peat and additional taxes on the other fossil fuel products. The promise underlying a carbon energy tax is that taxation would be applied according to the carbon content of those (fossil) fuels that produce CO 2 . Ìt is envisaged that carbon energy taxation together with emission trading would act as a price signal by applying across all sectors of the economy and to all relevant fuels. The rational for this approach is the polluter pays principle, which is defined in the National Climate Change Strategy as one that 'correctly allocates the cost of pollution, energy consumption and environmental resources use and the production and disposal of waste to the responsible polluters and consumers, rather than to society at large or future generations'. Source: http://www.finance.gov.ie/News/jul03/mcc1190consult.htm )$&&$'" *!C'" +ry matter content 90-92% !sh content 0.5% +iameter 6-8mm &ength 4*diameter, +ensity 650 kg/m 3 , ,olume 1.54m 3 /tonne pellet, $nergy 4.9kWh/kg pellet Benefit 1kg wood pellet replaces 0.41kg of light fuel oil Wood pellets are upgraded or refined wood fuels which have been produced from sawdust, grinding dust, shavings, bark or cutter chips by drying and pressing with air. No additives are needed to produce them. Lignin released in the pressing process binds the wood material. They are compact and easy to store and use for fully automatic burning in wood pellet boilers or stoves. www.sei.ie, REÌO 2004 Page 8/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 2.2 Product sustainability The heating market is generally a market which contains guaranteed long term customers. Ìf a customer makes a decision about the investment for future heating system he wants to 'buy' satisfaction for years. The key issues are to convince the customers at the point of decision of the new heating option and to provide them the best services during the live cycle of the wood pellet heating system. 2.3 no! "o! resources Existing Know How at the sawmill and/or AGRÌ-CO-OP Wood pellet production is approximate to animal pellet feed mills Developing Know How of Pellet Boiler Ìnstallers in Ìreland Sustainable Energy Ìreland (Experience of other international companies, Ìnformation, Training, Results, Reports, Study Tours.) COFORD, the National Council for Forest Research and Development, are supporting a number of supply/chain projects in the area of biomass energy BÌOHEAT ÌÌ ÷ a European effort to stimulate the use of biomass for heating large buildings. The total budget of the BÌOHEAT projects is C1.8Mio.17 countries including member states and accession countries participate in the project, (((,3ioheat,info 2.4 #uality $anagement Successful development of an Ìrish market for wood pellets relies on production of high quality pellets so as to ensure reliability and customer satisfaction. The quality aspect is very important from the consumer's point of view. Defined quality types of pellets are necessary for comparison different suppliers, to find the optimal solution for each heat requirement and to ensure the functionality of the wood pellet heating system. Only the right quaIity to each consumer will guarantee an expanding of this new market. This fact was recognised rashly by the first European pellet producers and so the national wood pellet co operations developed different common standardisation system. e.g. "wedish )ellet Club in Sweden and the )ellets-erband !ustria in Austria www.sei.ie, REÌO 2004 Page 9/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland EUROPEAN COMMITTEE FOR STANDARDISATION STANDARD (CEN) As result of integrating and optimising of these several local standards the European Committee is present working on an European standard. The developed standards for solid biofuel specifications and classes will be adopted here in Ìreland. The present version is available at "uro'ean Organization: C"4, %C 225, Solid 3iofuels, Likewise, certification of wood pellet stoves and boilers will assure development of heating systems of the highest quality, which will encourage customers to change over to wood pellet heating systems. 2.5 Possible substitute products Many Old Ìrish Boilers & Power Plants could easily be re-powered with wood pellets. Pellets are an alternative for existing fuels like coal and oil. The competition of wood heating systems would reduce Ìreland's dependence on imported fossil fuels and redirect C1.7 million back into the Ìrish economy. This includes a reduction of 85,000 tonnes of CO 2 -emissions. 2.% Product &ni'ueness An innovative, high quality product from Ireland for a new market with few competitors www.sei.ie, REÌO 2004 Page 10/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 3 Market strategy 3.1 $ar(et )nalysis ./1/1 ./1/1 )ellet arket +e-elopment )ellet arket +e-elopment a) In Europe Pellets are product with a proven trade record and sustainable and growing markets across Europe. The following figures underline the rapidly growth of the pellet market in different European countries over the last years. +$,$&O)$#' O* )$&&$' !01$' I# "W$+$# www.sei.ie, REÌO 2004 Page 11/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland +$,$&O)$#' O* )$&&$' !01$' I# +$#!01 Source: 6e''e B7erg, D) %e)ni) +$,$&O)$#' O* )$&&$' !01$' !("'0I! Source: "-., ., 0112 Also in Austria, the market for wood pellets has exploded in the last five years. Ìn 1997 over 400 wood pellet boilers were sold whereas in 2001 this figure was almost 5000. b) In the nited States of America Today, over sixty pellet mills across North America produce in excess of 680,000 tons of fuel per year, a figure that has more than doubled in the last five years. Source: Pellet fuel $nstitution + (((,'elletheat,org www.sei.ie, REÌO 2004 Page 12/59 Pellet Production_V08.doc P e I I e t s i n t o n n e s Wood Pellet Production in Ìreland ./1/2 ./1/2 )otential of the Irish Heating arket )otential of the Irish Heating arket &!02$ B(I&+I#2 H$!' !01$' The Large Building Heat Market is represented by the potential of buildings with existing heating systems and a high annual average of heating consumption above 250000kWh per annum. (Buildings like education centres, companies, office buildings, hotels, leisure centres, hospitals, prisons, guest houses,...) Figure: Fuel Used for Heat in the Commercial and Public Sector - Excluding Electricity Ìn the Commercial & Public sector there has been strong growth in use of oil and gas. The Office of Public Works (OPW) have responsibility for maintenance and utility supplies for all public buildings in Ìreland. COFORD has approached OPW seeking to have some buildings fuelled with wood pellets. A response is awaited. However the initial installations are most likely to come from the private sector. If we assume that up to the year 2334 135 of oil heating systems are replaced by wood pellet heating systems6 an annual amount of 2376892 tonnes of pellets would be re:uired/ To evaluate the resulting potential of this market segment, please go to point 3.1.6. Relevant market www.sei.ie, REÌO 2004 Page 13/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland I#+("'0; "$C'O0 H$!' !01$' Figure: Fuel Used for Heating in the Industry Sector (Excluding Electricity Ìn the Ìndustry sector, there was strong growth in heat usage during the boom years of the late 90s, but a slight decline is expected in the next 10 years. Use of oil and gas for heat has expanded at the expense of coal, and this trend is expected to continue. Wood used for process heat in the wood processing industry accounts for the usage of renewables. Though small, this has grown overall by 47% since 1990, although the ESRÌ projection assumes it will remain constant in future. www.sei.ie, REÌO 2004 Page 14/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 0$"I+$#'I!& "$C'O0 H$!' !01$' Figure: Fuel Used for Heat in the !esidential Sector (Excluding Electricity The residential sector reflects an annual growth of ~50.000 new buildings per year. (Ìn the year 1998 the number of households in the state was 1.12 million) 1 The absolute amounts and proportions of coal and peat have fallen in the last 10 years, and the absolute amounts and proportions of oil and gas have increased. The small consumption of renewables has remained constant over the last 10 years. Most opportunity exists in households currently using oil or bottled gas. If we assume that up to the year 2313 135 of oil heating systems and 235 of peat heating systems are replaced by wood pellet heating systems6 an annual amount of 16<=3644. tonnes of pellets would be re:uired/ 1 Estimate from the Quarterly National Household Survey, Housing and Households, Central Statistics Office. www.sei.ie, REÌO 2004 Page 15/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland ./1/. ./1/. $>port market $>port market Great potential is given by entering the international pellet market. That's an existing market with established competitors and will require high efforts to get there a market player. Especially at beginning of the Ìrish market development it's of a high attractiveness to export the pellets in other European countries. Major European importers of pellets: Denmark: current consumption 400 000 ton/year (of this app. half is imported) Sweden: Ìmports between 50 000 and 150 000 ton/year (and exports 40 000 ton) Ìtaly: imports app. 100 000 ton/year Major European exporters of pellets: Finland: Exports 90 000 ton/year www.sei.ie, REÌO 2004 Page 16/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland ./1/8 ./1/8 "egmenting market "egmenting market &!02$ "C!&$ H$!'I#2 )&!#'" +/- not sensitive to pellet quality + low prices &!02$ B(I&+I#2 !#+ I#+("'0; !01$' + lower specific costs of the boiler + fewer actors that can be directly addressed + less resources for fuel logistics and service network + can become a niche for developing the structures to support diffusion in the domestic sector I#+I,I+(!& HO("I#2 + option: pellet stoves as "low barrier system¨ + higher prices of competing fuels + large market - high marketing costs - high initial requirements for fuel supply and service logistics - high requirements for education of professionals A domestic heating system with an Output of ca. 17 000kWh per annum needs 3-4 tonnes pellets. ./1/4 ./1/4 Current situation in Ireland Current situation in Ireland Wood pellets are imported 1 st wood pellet burner installed (University of Limerick) 1 st wood pellet boiler installation (Laois Sawmills) Partnership between Ìrish and European wood stove and boiler manufacturers and suppliers 1 st Wood Pellet Stove Distributor opened August 2003 4 Wood Pellet Production Feasibility Studies The first pellet production starts in Co. Fermanagh, at BaIcas Timber Ltd. in 2004 Balcas Ltd, a timber company near Enniskillen, is to build a new wood pellet production facility. The plant will use local sawmill by-products and forestry residues, with the potential use of energy crops. A wood-fired combined heat and power (CHP) plant will provide heat and electricity for the pellet production. The pellet production due to start in 2004 will produce 50,000 tonnes annually thus providing heating for 10,000 homes. The new generator will benefit the company through reduced electricity costs; the environment through reduced emissions and the production of a new source of green fuel; and the local economy and community through the safeguarding of jobs in the forestry sector. www.sei.ie, REÌO 2004 Page 17/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland ./1/7 ./1/7 0ele-ant market 0ele-ant market For the early implementation of the new pellet market, the &!02$ B(I&+I#2 !#+ I#+("'0; !01$' is the best segment/ The advantages of this market are a perfect fit for setting up the pellet market in Ìreland. Lower specific investment costs than detached family houses or district heating plants Local market with close partnerships to everyone in this structure, like boiler equipment, operation & maintenance companies, bulk delivery Product quality is determined by the CEN standards The development in this market will be supported by an European programme, called BÌOHEAT www.bioheat.info BÌOHEAT promotes the development of wood heating in large buildings. Ìts activities include research current market conditions, barriers, opportunities, the organisation of study tours and seminars and the carrying out of feasibility studies into wood heating for large buildings. www.sei.ie, REÌO 2004 Page 18/59 Pellet Production_V08.doc WH!' !0$ ?&!02$ B(I&+I#2"@A The Large Buildings market segment provides a wide spectrum of different building types with a high heat requirement during the year like Hospitals, Shopping and Leisure centres, ... The "Large building¨ starts at an annual fuel consumption of app. 50 tonne wood pellets or an annual fuel demand of 900 GJ (250 000 kWh) which in turn corresponds to a 100 kW (fuel input) boiler with 2 500 equivalent full capacity operational hours. At this point we want to show some examples, calculated from benchmarks taken from $nergy $fficiency Best )ractice )rogramme )ublications of UK. !ll benchmarks are shown in !ppendi> B/ Reference ModeI benchmarks typical Floor area Energy consumption Equivalent to pellets BuiIding types Reference ModeI [kWh/m2] [m2] [kWh] [tonnes/a] University UCD BELFÌELD 164 200000 32,800,000 6,694 HospitaI-acute and maternity, MATER PRÌVATE HOSPÌTAL 492 55000 27,060,000 5,522 Shopping Centre -department store 220 15000 3,300,000 673 HoteI -hoIiday 50m2/room*100 room 400 5000 2,000,000 408 Offices -naturaIIy ventiIated office, open pIan FÌNGAL COUNT• HALL 151 11170 1,686,670 344 Sports Swimming pool centre 866 1500 1,299,000 265 IndustriaI -Iight manufacturing 300 2000 600,000 122 Supermarket -retaiI outIet LÌDL 290 1500 435,000 89 Nursing and residentiaI homes 40m2/room *2bed/room*30 bed 417 600 250,200 51 www.sei.ie, REÌO 2004 Page 19/59 Pellet Production_V08.doc ./1/< ./1/< 'arget group 'arget group For existing Large BuiIdings Building owners, company managing directors and facility managers can be targeted with the wood pellet heating proposal. A calculation of investment costs and fuel price comparison would be important tools in the sales approach. For new Large BuiIdings Here Architects, Engineers and Consultants are the real decision makers. The building owners are given advice by them to the best solutions for their heating system. So it is important to convince also this decision makers of the advantages of a pellet heating system. An economic argument for pellet heating systems is that: the wood fuel systems investment costs are higher, however the operational costs are generally lower than for conventional heating systems. 3.2 *ompetitor )nalysis ./2/1 ./2/1 Competitors Competitors Competitors of the pellet supplier will be every other heat fuel supplier, especially the oil, peat and gas suppliers in future years other pellet producers and international import companies of pellets ./2/2 ./2/2 )osition in the market )osition in the market The pellet supplier should determine its position in the market as a professional partner, which is able to provide the best experience in this sector in Ìreland. www.sei.ie, REÌO 2004 Page 20/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland ./2/. ./2/. Competitor beha-iour Competitor beha-iour Ìt is assumed that the big international coal, oil, gas suppliers won't be able to vary their prices for the Ìrish market in the same way like a local supplier who is able to adapt the pellet price to the customer market. Other pellet producers in future years will probably cause more price pressure. Ìmporter of pellets are maybe interested to receive Ìrish pellets to better conditions 3.3 +upply )nalysis for Pellet producers ././1 ././1 "awmill residues "awmill residues the supply of sawmill residues in Ìreland is secured in future years The market potential for wood pellets in Ìreland is considerable owing to the ready availability of sawdust, from the mechanical forest industry. Moreover, while the current level of forestry cover is 9%, this is projected to increase to 17% by 2035, which will produce an associated growth in the mechanical forestry industry and subsequently the quantity of wood residues available for the production of refined wood fuels. Source: "nergy u'date R"$O, Sustaina3le "nergy $reland ././2 ././2 $:uipment $:uipment On the international market exist several of companies, which are able to deliver pellet production equipment for Ìrish pellet producer. Some of them are shown at the Appendix C. 3.4 ,istribution possibilities Ìt will recommend using the existing fuel supply network i.e. to distribute the pellets through different fuel suppliers. On the other side the pellet producer can make the pellet distribution itself. Ìf adequate networks are available Ì.e. animal feed network of CO-OPS 3.5 &ni'ue selling proposition -&+P. The following USP can be proposed to the heat customer !ocal heat fuel supply on your doorstep " Easy to order E#cellent Service, personal contact !ocal demonstration sites and visit of an installed pellet boiler www.sei.ie, REÌO 2004 Page 21/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 3.% Price strategy ./7/1 ./7/1 +e-elopment of the prices +e-elopment of the prices $%I"'I#2 !01$'" *O0 "!WI&& 0$"I+($" Represented Data on current markets and prices for sawmill residues was provided by the Ìrish Timber Council (2002). "ar#ets and Prices for Sa$mill !esidues Product Princi%al "ar#ets Price %er &et tonne Ex-'ard Chi,s -anel board mills . %# Sawdust -anel board mills0 use in sawmills for heating0 animal bedding. . (" Bark Horticulture0 ,anel board mills 1including as boiler fuel2 . 34564 7 .38 ./7/2 ./7/2 )rice )olicy B )otential )rice )olicy B )otential Ìt is important to keep the price of pellets on a competitive level with the other fuel possibilities. Wood pellets are most competitive with oil. Ìt will be difficult for wood pellets to compete with natural gas. However there is a large market outside the gas network. Also pricing strategy can be structured to take larger profit margin when competing with oil, lower margins when competing with gas. www.sei.ie, REÌO 2004 Page 22/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland Fuel must be completive priced in particular because the pellet boiler investment costs are significantly higher then other heating boilers. And the major argument for pellet heating systems is the fuel cost savings over the economic life. 'H$ "$&&I#2 )0IC$ O* )$&&$'" C(00$#'&; 0!#2$"C at the Austrian market between C1€0-150 per ton without delivery and around C170 per ton including delivery• at the ‚wedish market around ƒ C215 per ton „C€€ per M…h) Bulk delivery and ƒC2†0 per ton „C€7 per M…h) ‚ack delivery at the US market anywhere from ‡120-200 per ton and averages ‡150, Price varies by region, availability, and season, just like other heating fuels. Because bags of pellets stack and store easily, many prudent customers take advantage of lower off season prices and ensure their winter fuel supply by buying early. Selling price, of course, is only a part of the cost picture. The primary issue is the cost of energy, which is measured in Euro per MWh. (see 3.7.1 Fuel cost per unit of energy)ˆellets purchased at the average C 170 per ton are competitive with average energy costs of oil. 3./ *ommunication 0 $ar(eting ./</1 ./</1 !d-ertising !d-ertising ?)$&&$'" !0$ ! #IC$ *($&@ Major Environment Benefits ÷ Emission neutral, no oil pollution, no additional Energy tax Energy Price Stability ÷ Stable supplies at competitive and affordable prices; local fuels rather than costly import Energy Security &, Flexibility ÷ Reduces our over dependence on imported energy, ensures our future energy supply and gives options. Energy for our children's children ÷ bio energy will not run out Prosperity ÷ New investment in modern equipment for long term benefits www.sei.ie, REÌO 2004 Page 23/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland $heaper % &reen FueI costs per unit of energy (energy content based on the lower heating value of f resh matter) 36.0 28.1 41.9 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 PeIIets FueI oiI NaturaI gas [ E u r o / M W h ] Source: (((,3ioheat,info *870C/ton of delivered wood pellets• ‰ateŠ ‹uly200†) An example for a heating cost comparison for customer is shown in Appendix A. WH; )$&&$'"A Ìncreased density Simpler handling, less volume to transport and store Reduction of cost of transportation Possibility to store energy without risk of moldering or self-ignition The storage time is unlimited and the energy content does not change during storage Homogenous fuel leads to more stable combustion Environmental advantages ./</2 ./</2 )ublic 0elations )ublic 0elations The leaders in pellet production will certainly get a lot of public attention. Ìn particular Sustainable Energy Ìreland will support the information interchange about this new product in Ìreland. Also the green image of a company will enhance the goodwill of the public. www.sei.ie, REÌO 2004 Page 24/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 3.1 +tart2up +trategy D+$&I,$0 'H$ +I**$0$#' !01$'" "'$) B; "'$)/ Ìt's recommended to start with an initial project to collect experience and get in contact with this market. Therefore the pellet supplier should search a customer and/or partner for a local pellet market. This close partnership business will be able to demonstrate How the Irish pellet "upply chain will work. The next important milestone is to sign the contract with fixed prices for delivery over a defined period. (Ìt should be possible to fix the price as the sawmill is familiar with the price development of the raw materials over the last number of years and can assess the future raw material cost and their planned production) The Pellet Start-up Strategy should be pIanned very carefully and therefore all participants of the future market (sawmill, building owner, boiler supplier, installation and maintenance, financial backer, supporting organisations, SEÌ, COFORD and other Ìnformation resources like universities...) should establish a suitable information interchange platform. During setting up the Start-up project also the export market and the 1 st segment market should be alike addressed. www.sei.ie, REÌO 2004 Page 25/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 3.3 *ompany and 4ndustry ./9/1 ./9/1 Competency Competency The Ìrish sawmills are part of a good developed market sector. They have a strong voice in Ìreland through the Ìrish Timber Council (ÌTC), which was founded in 1918 and represents all the major sawmills. The sawmilling sector plays a key role in ensuring that the annual output for Ìrish forestry is now close to C€€0 million and the industry has to date processed all logs supplied by State and private growers. ./9/2 ./9/2 Input for the future Input for the future The business with wood is an established sector and will continuously improve. Ìrish sawmills have invested over C87.0m in new and replacement technology in the three years 1999-2001 and these developments, in conjunction with existing capacity will ensure that the sawmilling sector will be capable of processing all the available logs coming on the market up to the end of this decade. ./9/. ./9/. oti-ation oti-ation The ÌTC plans to further develop and expand domestic and export markets, to continue to promote the image of Ìrish timber and timber products and to co-operate with other organisations and sectors in the production of a strategic plan for the forest industry in Ìreland. The ÌTC's mission is: To promote and represent members' interests on all key issues those affect the profitability and competitiveness of their businesses To grow the timber processing sector in partnership with customers, suppliers and other processors To continuously improve quality standards to maximise the use of Ìrish timber t the domestic and export markets To co-operate with research, education and training agencies in developing add value products www.sei.ie, REÌO 2004 Page 26/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 4 Business 4.1 Business Participants Pellet supplier Pellet consumers Boiler supplier Financial backer Ìnstallation & Maintenance service company Other product/service suppliers: transport, storage suppliers, insurance services SEÌ 4.2 +trengt50!ea(ness of t5e ot5er 4ris5 Pellet $ar(et participants 8/2/1 8/2/1 )ellet consumers )ellet consumers Supported by a EU ALTENER programme, 'ipperary $nergy !gency6 produced in Sept 2002, 7 Ìmplementation Plans, which detail the technical and financial requirements for the installation of the wood pellet heating system. 8/2/2 8/2/2 )ellet boiler supplier )ellet boiler supplier European Pellet boiler suppliers are high interest to encourage the development of the Ìrish pellet Market. Therefore they provide good support in each context with Pellet Heating. Retailer in Ìreland* e.g. Windhager Œentralheit•ung AG, www.windhager.com offered by: Total Energy Management Kevin Devine, Galway Tel.: +353 091769174 Oekofen Hei•technik, www.pelletshei•ung.at KWB from CONNESS, www.kwb.at GÌLLES Produktion und Handel GmbH www.gilles.at Viessmann www.viessmann.at Baxi A/S www.baxi.dk BioEnergy Devices Ltd. UK http://www.dantrim.com .. .. 9%his list is not an accreditation of the Rene(a3le "nergy $nformation Office of the com'anies named 8/2/. 8/2/. Installation B aintenance Installation B aintenance Given high standards that most of suppliers identified operate to many raised concerns regarding the issue that they have not suitably trained personnel to install and maintain any system at the moment. www.sei.ie, REÌO 2004 Page 27/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland The consequence is that they in general prefer to sell well-known heating boiler systems. So it is important for the whole development of the market to train Ìrish personnel in the heating industry. 8/2/8 8/2/8 "$I "$I Training programmes in Austria have proved to be very successful and preliminary discussions have been made with regard to linking with these programmes in the future to formulate at training programme in Ìreland. Ìn the short term, it will be necessary to train some key individuals for installation/maintenance of wood pellet heating systems for a demonstration programme. 8/2/4 8/2/4 *inancial backer *inancial backer Ìt is also necessary to convince the financial backer of the utmost probability of success of this project. The pellet supplier should also try to develop cooperation i.e. a bank investment with the financial backer, whereby the boiler financing is arranged as a lease agreement between the financial institution and customer or indeed between the pellet supplier (as Heat Service Provider) and the customer. 8/2/7 8/2/7 "upporting Organisations "upporting Organisations Universities and Research Ìnstitutions might be also very interested to support and overview the initial demonstration Project of the Start-Up-Strategy. 4.3 *ooperation !it5 +E4 8/./1 8/./1 Competency Competency Sustainable Energy Ìreland has a central role to play including involvement in the following: Promotion, information, training and advice Aid market identification, increase awareness and promote best practice demonstration projects and further market development 8/./2 8/./2 $>perience and Input of "$I $>perience and Input of "$I Production of information brochures, facts sheets, conferences, training seminars, Specific biomass campaign for Ìnformation/workshops/PR/Education material and events, Establish group of key personnel from biomass energy plants put into operation in the coming years to exchange information and experiences as well as to bring new knowledge to the market Wood Fuel Ìndustry Forum Visits to other countries to collect information about pellet production there E.g. Austrian pellet plants visited in June 2003 1) Leitinger Hol•industrie E43 333t of pellets/annumF Mr. Lex Peter Preding www.sei.ie, REÌO 2004 Page 28/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 2) Loit•l-Hol• E= 333t of pellets/annumF Mr. Hannes Loit•l Steinach 8/./. 8/./. oti-ation oti-ation Sustainable Energy Ìreland (SEÌ) is Ìreland's national energy agency, established on May 1 st 2002 under the Sustainable Energy Act 2003. SEÌ has a mission to promote and assist the development of sustainable energy. This encompasses environmentally and economically sustainable production, supply and use of energy, in support of Government policy, across all sectors of the economy. Ìts remit relates mainly to improving energy efficiency, advancing the development and competitive deployment of renewable sources of energy and combined heat and power, and reduction the environmental impact of energy production and use, particularly in respect of greenhouse gas emission. www.sei.ie, REÌO 2004 Page 29/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 5 Description of the method in brief The technology of pellet heating & production is improved continually. The results are automatically heating systems with the comfort of a heating oil system and the advantages for the environmental. 5.1 Process line L. Bloch_ Sprout Metador_Wood Energy 2003_July 2003 Storing ÷ raw materials Drying Grinding Pelleting Cooling Sieving Storing ÷ pellets 4/1/1 4/1/1 $fficient pre/treatment of raw materials $fficient pre/treatment of raw materials Ìt is recommended to grind the raw materials in a hammer mill to get homogeneous pellets. The large surface and open fibres of the ground products facilitate absorption of team in the cascade mixer. Steam and increased temperatures in the cascade mixer soften the wood lignin. 4/1/2 4/1/2 )elleting )elleting The energy consumed to operate the pellet mill and heat the steam corresponds to 2.5-3% of the energy content of wood. Cooling and finishing treatment (excluded the drying process) Due to the friction generated in the dry during the pelleting process, additional heat is developed in the pellets, and it must be removed before the pellets are sieved and stored. The pellets are cooled by air taken in from the surrounding room, and therefore the pellet temperature will always be 5-10 degree Celsius above room temperature. Cooler retention time and wood pellet diameter are decisive for the dimensioning of the cooler. 'he wood pelleting process in detail is shown in !ppendi> +/ www.sei.ie, REÌO 2004 Page 30/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 5.2 Tec5nical ,emands for success 4/2/1 4/2/1 )ellet supply )ellet supply Supply security: major concern of potential customers Quality of pellets: low dust content and mechanical stability is fundamental for small boilers 4/2/2 4/2/2 )ellet deli-ery )ellet deli-ery Delivery vehicles must evacuate the dust simultaneously with blowing in pellets must have adequate pumping force (not too strongŽ) should be able to weight the pellets delivered standardised connections to the house inlet necessary drivers must be trained (e.g. to inspect the storage room) 4/2/. 4/2/. )ellet storage room )ellet storage room Pellet storage rooms are common for the residential sector. The requirements are: dry no electrical installations (danger of dust explosion) solid walls dustproof door 4/2/8 4/2/8 )ellet silos )ellet silos For large buildings, industries and municipal councils it is recommended to us pellet silos. The main reason therefore it bulk delivery, which represent the most convenient, most efficient and cheapest way of handling fuel pellets in this si•e. www.sei.ie, REÌO 2004 Page 31/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland For the big consumer, there is a wide range of round or square silos for both indoor and outdoor use, with capacities up to 70 m3. Beside are some ideas how to place the silo, given from the Swedish company !*! i Gngelholm !B *(((,mafa,se/ www.sei.ie, REÌO 2004 Page 32/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland From Sweden AB AKRON-maskiner (Pellet silos) SE-531 04 J•RP•S Tel.: +46-(0)510-914 00 Fax: +46-(0)510-916 49 E-mail: info‘akron.se http://www.akron.se Brand/Mark: Alf Bjurenwall AB (Pellet silos) Box 55 SE-730 40 KOLB•CK Tel.: +46-(0)220 - 404 90 Fax: +46-(0)220 - 401 03 E-mail: bjurenwallab‘bjurenwall.se http://www.bjurenwall.se/ Brand/Mark: Bernt Sandberg AB (Pellet storages, silos) Korstr’sk SE-942 92 •LVSB•N Tel.: +46-(0)929-200 93 Fax: +46-(0)929-203 00 E-mail: info‘berntsandberg.com http://www.berntsandberg.com/ Brand/Mark: Expound AB (Automatical pellet handling systems) Tel.: +46-(0)514-391 90 Fax: E-mail: http://www.pellmag.com/ Brand/Mark: Pellmag Firefly AB (Systems for dust- and ignition detection) Box 92201 SE-120 09 STOCKHOLM Tel.: +46-(0)8-449 25 00 Fax: +46-(0)8-449 25 01 E-mail: info‘firefly.se http://www.firefly.se/ Brand/Mark: Detector GD, Detector FD, Detector OAD Ìng.firman Hans Koolman AB (Draw limiters, counter-draw hatches) Contact: Mr. Hans Koolman Skedet 7 SE-443 34 LERUM Tel.: +46-(0)302-135 90 Fax: +46-(0)302-174 34 E-mail: info‘koolman.se http://www.lantbruksnet.se/koolman Brand/Mark: KW, SÌD MAFA i •ngelholm AB (Pellet storages, silos) Framtidsgatan 3 SE-262 73 •NGELHOLM Tel.: +46-(0)431-44 52 60 Fax: +46-(0)431-41 15 01 E-mail: mafa‘mafa.se http://www.mafa.se/ Brand/Mark: Succ“, Mini, Maxi, UB, Kon Svenska Tr’pelletsf”rr•d (Pellet storages) AH F”retagsutveckling Svedjev’gen 52 SE-930 81 GLOMMERSTR•SK Tel.: +46-(0)960-200 95 Fax: +46-(0)960-201 71 E-mail: info‘trapelletsforrad.com http://www.trapelletsforrad.com Brand/Mark: PF6 Villa Termoventiler AB (Charging units, heat regulators, checkvalves, thermometers, thermostates) Nolhagav’gen 12 SE-523 93 MARB•CK Tel.: +46-(0)321-261 80 Fax: +46-(0)321-261 89 E-mail: info‘termoventiler.se http://www.termoventiler.se/ Brand/Mark: Laddomat, Thermomatic 9%his list is not an accreditation of the Rene(a3le "nergy $nformation Office of the com'anies named www.sei.ie, REÌO 2004 Page 33/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 4/2/4 4/2/4 )ellet storage with container )ellet storage with container Pellets are transported by normal trucks or by exchangeable, tiltable containers, which also serve as fuel storage. The pictures below show an example from Sweden 4/2/7 4/2/7 Installation and "er-ice Installation and "er-ice trained key personal for installation and maintenance of pellet equipment 4/2/< 4/2/< )ellet boiler )ellet boiler Quality control / Certification of boilers is fundamental Schemata of the pellet boiler www.sei.ie, REÌO 2004 Page 34/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland Example of pellet boiler from windhager www.sei.ie, REÌO 2004 Page 35/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 6 FinanciaI program %.1 Production costs )$&&$' )0O+(C'IO# CO"' CO#"I+$0 I# WO0&+WI+$ !,$0!2$ O*C (source: The! "#er#erger! 1st $orl% conference on pellets &00&' (h. )aos! *.+., the ,ustrian *nerg- ,genc-! The %evelopment of woo% pellet marets in *urope The greatest expense factor of production costs are: raw material costs drying costs The figure above shows clearly the dependence of costs on the moisture of the raw material and drying. Generally the residues of sawmills are relatively dry. The raw material costs should determined as the possible profit of the sale of the production residues to the panel mills. So in fact the variable costs of a pellet production are very low in sawmills. That consequence is that the most important factor at pellet production for sawmill in Ìreland will be the investment cost with the payback period. www.sei.ie, REÌO 2004 Page 36/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 'H$ $**$C' O* !##(!& O)$0!'IO# HO(0" O# )$&&$' )0O+(C'IO# CO"'" Source: M, "nglisch, Bioenergy .ustria, hite Coal 0110 Another fact that highly affects pellet production costs is the amount of operation hours per year. As the figure based on Austrian experiences shows the specific production costs decrease with the increase of operation hours. Operation hours Specific production cost 8 shift, 5 days:(ee) ;<<=>?@AAB 0 shift, 5 days:(ee) ;C;=>?@AAB 2 shift, 5 days:(ee) DC=>?@AAB 2 shift, E days:(ee) FG=>?@AAB )$&&$' )0O+(C'IO# CO"'" I# !# !("'0I!# )$&&$' )&!#' E286333 'O##$ )$0 ;$!0F !#+ ! "W$+I"H )$&&$' )&!#' E=36333 'O##$ )$0 ;$!0F Source: %he), O3er3erger, 8st orld conference on 'ellets 0110 The main differences of the general frameowrk conditons are shown in the table below. parameter unit Austria Sweden Production rate (plant capacity) T/h 3.0 10.0 Price for electricity C/MWh 50.9 27.1 Total electricity consumption GWh/a 3.6 11.0 Specific heat costs (steam) C/MWh 22.0 18.0 Profit from heat selling C/MWh - 21.7 Ìnvestment costs drying system C 470,000.0 2,400,000.0 Total Ìnvestment costs C 2,095,620.0 5,933,750.0 Specific electricity consumption kWh/tPellets 153.6 137.7 Specific heat consumption kWh/tPellets 1,020.0 504.4 www.sei.ie, REÌO 2004 Page 37/59 Pellet Production_V08.doc for a 436333 tonnes production plant Wood Pellet Production in Ìreland ResuIts: The direct comparison of typical pellet production costs shows the Swedish pellet production costs are considerably lower. Economies of scale Lager plant capacity of the Swedish pellet plant Cheap electricity price level in Sweden (50% less) Combination with CHP plant and recovery of heat for district heating %.2 European E6amples !("'0I!6 &$I'I#2$0 HO&HI#+("'0I$ Hol•industrie Leitinger is one of Austria–s leading timber processing companies and successfully combines tradition and innovation. Employees 500 Turnover of all products ~87 Mio C Pellets sales /year ~7 Mio C Pellet production/year 50 000 tonnes Pellet presses 2 tonnes Pellet per hour 3.5 tonnes per hour / press Ìnvestment costs for Pellet production 2.5-3 Mio C +Ìnvestment costs for drying plant 1-1.2 Mio C 24 hour operation Pellet price with delivery 170 C/tonnes Pellet price without delivery 145-150 C/tonnes Average annual Cash-flow (first 5 years) 4.2 Mio C "W$+$#6 !B *O0""IJ B0(1 Employees 24 new jobs in O & M Turnover of the sawmill 22 Mio C Turnover of pellet plant 5.5 Mio C Pellet production/year 45 000 tonnes Pellet presses 2 Pellet per hour 7 tonnes per hour / press Pellet price per bulk 215 C/tonnes Pellet price per sack 230 C/tonnes Drying plant 7 MW Annual savings 12 Mio C - Substitution for oil, replacing import of 430 000 barrels of oil per annum - Emission savings of 84 000 tonnes of Carbon Dioxide equivalent per annum www.sei.ie, REÌO 2004 Page 38/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland %.3 +cenario 7/./1 7/./1 for sawmills E.86=33 tonnes of pellets/yearF for sawmills E.86=33 tonnes of pellets/yearF )&!##$+ "IH$ Ìt is difficult at present to determine what an economical scale of plant will be in Ìreland. But it has been noted at a number of wood pellet conferences that the minimum economic scale for a wood pellet plant is 10 000 tonnes per annum. I#,$"'$#' CO"'" Ìnvestment costs for ˆellet production are between C2.5 Mio and C† Mio plus Ìnvestment costs for drying plant• which are between C1 Mio and C1.2 Mio O)$0!'IO# !#+ !I#'$#!#C$ The specific operation — maintenance costs are here assumed with C25 per tonne. Of special importance is the electricity consumption in the pellet presses. 0!W !'$0I!& CO"'" Are calculated with the possible profit of the sale of the production residues to the panel mills. „C2†/tonnes) O)$0!'I#2 HO(0" )$0 !##( Ìrish sawmills operate at the moment 8 hours a day, 5 days a week. The pellet production is assumed with 3 shift operation for 5 days a week. Minus holidays and unavailable times, it's in average 5800hours of full production/year. So a pellet press output of 6 tonnes/hours is demanded. The sawmill should split the press output up on two pellet presses for a better secure. *($&" "!&$" )0IC$ Ìs assumed with C100/tonne „in Austria and ‚weden the price levels are higher) 'H$ CO#C&("IO# I" Net present vaIue of 5,509,000 Years to positive cash fIow 1 And years to positive cash fIow (disc. cum. cash fIow) 2 www.sei.ie, REÌO 2004 Page 39/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland description/name unit FUEL ONLY rated output tonnes of peIIets/h 6 anaIysed period (<=20) years 20 totaI initiaI investment (C) C 4,200,000 operation & maintenance costs (C) C 870,000 fueI + raw materiaIs (for fueI production) costs (C) C/a 1,600,800 cost increase/infIation (%/a) %/a 4.50% fueI + raw materiaIs price increase/infIation (%/a) %/a 2.00% operating hours per year h/a 5800 fueI saIes (tonnes/a) tonnes/a 34,800 fueI saIes price (C/tonne) C/tonne 100 fueI saIes price increase (%/a) %/a 2.30% equity in % of totaI initiaI investment % 20% Ioan in % of totaI initiaI investment % 80% equity (C)20% C 840,000 Ioan (C) 80% C 3,360,000 credit period (years) years 10 interest rate % 6.95% depreciation period (years) years 20 saIvage vaIue (C) C 0 generaI annuaI infIation rate % 4.50% reinvestment rate % 10.60% effective reinvestment rate % 5.84% finance rate % 6.95% effective finance rate % 2.34% WACC % 7.68% effective WACC % 3.04% discount rate % 7.00% tax rate % 12.50% IRR % 56.46% MIRR % 18.10% NPV C 5,509,842 PI (NPV/equity) 6.56 PI (NPV/totaI investment) 1.31 years to positive cash fIow years 1 years to positive cash fIow (disc. cum. cash fIow) years 2 www.sei.ie, REÌO 2004 Page 40/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland %.4 Financial 7esources 7/8/1 7/8/1 "$I 0+B+ )rogramme "$I 0+B+ )rogramme The Research, Development and Demonstration Programme of Sustainable Energy Ìreland contains C˜.25-C10 million to support …ind — Biomass projects. There are two different categories of Funding: Category 1: Demonstration Projects 10-25™ „scale of project C50•000-C500•000) Category 2: R&D incIuding feasibiIity Up to 40% of approved eligible costs ‚cale of ˆroject C10•000-C200•000 Shared Cost R&D R&D into innovative technology, systems or marketing approaches which support commercial exploitation of renewable energy Applied Research and Development technology transfer and adaptation market research and feasibility Combination Approach Several large high profile demo projects for mature technology (Wood/ Biomass CHP) Large number of small scale geographically spread biomass heat installation (wood chips and wood pellets) %.5 7is( analysis 7/4/1 7/4/1 ost sensiti-e cost factors ost sensiti-e cost factors Raw material costs Pellets throughput equipment availability heat demand for drying heat costs operating hours investment costs #ote the figureC "ensiti-e analyse of pellet production costs 7/4/2 7/4/2 'ypical technical problems of poor productsC 'ypical technical problems of poor productsC Overheating of the boiler: slagging of ashes High temperature corrosion ash deposition in poorly designed heat exchangers: up to 50% efficiency loss ash deposition in the burning •one serious back burn problems unreliable pellet delivery from the storage room to the boiler noise caused by wrong mounting www.sei.ie, REÌO 2004 Page 41/59 Pellet Production_V08.doc "ensiti-e analyse of pellet production costs Source! hek, Oberberger, (st 9orld conference on ,ellets %""% www.sei.ie, REÌO 2004 Page 42/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 7 Our recommendation Provide a “One-Stop-Shop !or heat Provide a “One-Stop-Shop !or heat Our recommended approach to ensure a market for the wood pellet fuel is for the fuel provider to take part in the entire supply chain of wood pellet heating. This means that the customer should have a one-stop-shop contract for heating. This requires setting up a new structure or the fuel supplier company to offer the following services: Wood fuel Boiler Operation and Maintenance Fuel storage Transport & delivery Energy auditing (option to expand on energy services) Financial services-leasing/insurance Legal services-heat contract, boiler leasing This means that the company either supplies these services or partners with providers of same. The best and most attractive ways to provide their cIients these services are: 1.the offer of a leasing contract for the boiIer or 2.to provide a singIe 5eating contract The big difference between these two opportunities in general are that in a leasing contract for the boiler the customer pays the leasing rent for the boiler and buys the fuel, but he is also responsible for the care and maintenance of the leasing asset. Whereas at the heating contract the customer doesn–t need to take care about anything, he only buys his required heat from the heat provider. The following is a detailed discussion of these two possibilities from the customer point of view and also from the pellet provider's side. www.sei.ie, REÌO 2004 Page 43/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland /.1 Boiler 8E)+49: and Fuel buying (((,raiffeisenHleasing,at, .ustria &$!"I#2 K 'H$ CO#C$)' Leasing is a special form of rental, in which the lessor (the leasing company) grants the lessee (the customer) the right of use of a capital asset for a defined period of time. 'H$ &$!"I#2 )!0'#$0"HI) Characteristically, leasing is a three-cornered relationship between lessor, lessee and manufacturer or supplier. The lessee decides on the assets to be acquired and agrees the terms and conditions of purchase with the manufacturer or supplier. The asset is however acquired by the lessor, who concludes the purchase agreement with the supplier. The lessor concludes the purchase agreement, and subsequently makes the asset available for the lessee's use. The lease agreement provides for use of the asset by the lessee for consideration and for a specific time. &$!"I#2 C!)I'!& !""$'" The lessor has the right of ownership in the asset, the lessee the right of use. The lessee derives economic benefit not from ownership of the asset but only from the right of use. Lessee has rights and duties similar to those of an owner of an asset: The lessee alone has the right of use of the leased asset The lessee is responsible for the care and maintenance of the asset The risk of loss (e.g., by fire or theft) is borne by the lessee, whereas in the case of rental it remains with the lessor. www.sei.ie, REÌO 2004 Page 44/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 'H$ &$!"I#2 !20$$$#' Typically, the points covered include: Relinquishment of the right of use in an asset Term of the agreement Leasing installments Responsibility for maintenance Burden of risk Sundry other matters. The lessor's principal obligation is to make the asset available for use by the lessee for a specified period. During this period the agreement is not terminable by notice. The lessee's principal obligation is to pay the leasing consideration. The lessor calculates the total consideration required and informs the lessee of the lease installments to be paid. !+,!#'!2$" O* &$!"I#2 *O0 'H$ &$""O0 Attractiveness of wood peIIets The pellet producer makes this new heating system interesting in more different ways than only the price competitiveness of the fuel itself. win Iong-term customers Ìn addition to the advantages of a pellet heating system, the pellet producer provides his customer with more convenience then other fuel suppliers. So he wins secured clients for his product over years. speed up the market deveIopment This helps to advance the development of an adequate Ìrish pellet market and to establish pellet heating system for the future. !+,!#'!2$" O* &$!"I#2 *O0 'H$ &$""$$ Investment without capitaI Leasing represents wholly external financing. The lessee's liquidity is not reduced. Straightforward caIcuIations The first leasing installment becomes payable when the leased asset is first taken into use: uniform installments spread over the life of the agreement are simple to use for the purposes of calculation. Low monthIy charges The monthly charge to the customer is lower than with other forms of financing. www.sei.ie, REÌO 2004 Page 45/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland /.2 "eat contracting Ieat Contracting (ith an electrical 'o(er su''lier, "JK Iinder Beat Heat contracting is the second possibility mentioned. 'he customer doesnLt buy the heat system 6 only the heatM The most sophisticated model is that the energy service company not only looks at the fuel supply but also at energy efficiency in the building, and invests in energy efficiency measures and in the wood heating system as well. The customer keeps on paying the similar heating costs as before the improvement until the whole investment costs are recovered. Ch, Ra)os, ",-,. the .ustrian "nergy .gency H$!' CO#'0!C'I#2 I# B0I$* The Contractor (pellet producer) - builds and pays the heat production facility - operates and maintains the facility - commits himself for supplying the agreed volume (power, energy) The Contracting-Partner (customer) - commits himself to take over the agreed volume and to pay the fixed price WH; O**$0 ! H$!' CO#'0!C'I#2A EconomicaI aspect The Contractor benefits from fuel sales. By increasing the use of this heating system, the contractor can win good customers for many years and achieve a better use of their infrastructures. EcoIogicaI aspect Creation of ecological advantages by an optimal operation of the available heating technique and an increasing use of renewable energies !+,!#'!2$" O* ! H$!' CO#'0!C'I#2 : No investments for the owner : Discharge of risk (outsourcing) : Ecological concepts become economical : High plant quality in the interest of the contractor +I"!+,!#'!2$" O* ! H$!' CO#'0!C'I#2 : Long-term commitment to the contractor : Dependency of the customer on the contractor : Restriction of the decision autonomy However: Ending the contract is possible after repaying the current value. www.sei.ie, REÌO 2004 Page 46/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland CO"'" Basic price To cover the capital costs (depreciation, interest, etc.) has to be paid e-en if no heat is consumed Consumption price : covering the variable costs (electricity, fuel, etc.) depends on the effecti-e consumption Eheat counterF : Prices are adapted to the national index once a year www.sei.ie, REÌO 2004 Page 47/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 8 Reference & usefuI Iinks COFORD Strategic Study, Maximizing the Potential of ood !se for "nergy #eneration in $reland %he de&elo'ment of (ood 'ellet mar)ets in "uro'e+Ch Ra)os+",-,. the .ustrian "nergie .gency, .nd other 'resentations from the S"$ ood "nergy Conference 0110 and ood "nergy Conference 0112 (((,sei,ie *rene(a3le energy, reference centre / car3on energy taxation Source: htt':::(((,finance,go&,ie:4e(s:7ul12:mcc88L1consult,htm De&elo'ment of Pellet mar)et in Denmar) Source: 6e''e B7erg, D) %e)ni) De&elo'ment of Pellet mar)et .ustria Source: "-., ., 0112 "nergy "fficiency Best Practice Programme Pu3lications Fuel costs 'er !nit of energy (((,3ioheat,info Process line M, Bloch+ S'rout Metador+ood "nergy 0112+6uly 0112 Pellet 'roduction cost consider in (orld(ide a&erage of: *source: %he), O3er3erger, 8st orld conference on 'ellets 0110/ %he de&elo'ment of (ood 'ellet mar)ets in "uro'e Ch, Ra)os, ",-,. the .ustrian "nergy .gency, Pellet Production costs de'ended on the annual O'eration hours Source: M, "nglisch, Bioenergy .ustria, hite Coal 0110 R"$O Calculator:ChashFlo(:P". R"$O Calculator:%otal Ieating Cost Com'arison Sensiti&e analyse of 'ellet 'roduction costs Source: %he), O3er3erger, 8st orld conference on 'ellets 0110 Measing Raiffeisen 3an) .ustria, (((,raiffeisenHleasing,at Ieat Contracting Ieat Contracting (ith an electrical 'o(er su''lier "JK Iinder Beat Ch, Ra)os, ",-,. the .ustrian "nergy .gency $nformation a3out ood Pellets + (((,'elletheat,org and other $nformation currently a&aila3le of the $nternet www.sei.ie, REÌO 2004 Page 48/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 9 Appendix A: Heating Costs Comparison for a customer An Ìrish customer with a heating requirement of 260,000 kWh per year is considering retrofit to the existing oil heating system with a new 100kW boiler. (Large Building category) Therefore he compares two options with the 'Total Heating Costs Comparison' - Calculator available from the www.sei/reio.htm webpage. Option Ì: Oil Fired Boiler and a new tank Option ÌÌ: Wood Pellet Boiler plus the construction of a new pellet storage room The 'Total Heating Costs Comparison' was set up by SEÌ Renewable Energy Ìnformation office and uses average prices for the fuel and equipment. We have assumed that the wood pellet production has taken place in Ìreland to estimate the price level. ResuIts: www.sei.ie, REÌO 2004 Page 49/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland www.sei.ie, REÌO 2004 Page 50/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland www.sei.ie, REÌO 2004 Page 51/59 Pellet Production_V08.doc 10 Appendix B: Summary of benchmarks !/. O,$0!&& B(I&+I#2 B$#CH!01" he following benchmarks are taken from Energy Efficiency Best -ractice -rogramme ,ublications. able ;#.( )ossil and electric building benchmarks from Energy Consum,tion <uides Building ty,e Energy consum,tion benchmarks for e*isting buildings 1k9h=m%=yr 2 <ood ,ractice y,ical )ossil fuels Electricity )ossil fuels Electricity )loor area basis Offices!1ECO> (&2 . naturally ?entilated, cellular @& ## ($( $' reated . naturally ?entilated, o,en ,lan @& $' ($( A$ reated . air conditioned standard &@ (%A (@A %%B reated . air conditioned ,restige ((' %#' %(" #$A reated Industrial! 1ECO> (A2 C . general manufacturing (%$ $" #%$ A$ <ross . factory office ("" $$ %%$ ("" <ross . light manufacturing &" #( #"" @" <ross . storage and distribution A" %" (A$ '# <ross Retail! 1EEB"(", EEB2 . .DIE. stores ($" (#" (&$ (B" Sales . non+food sho,s A" %"" (#" %B" Sales . non+food sho,s 1;ll. electric2 + %#" + #"" Sales . de,artment stores ($" %'" %%" %&" Sales . de,artment stores 1;ll. electric2 + %&" + #@" Sales . small food sho,s A" '"" ("" $"" Sales . small food sho,s 1;ll. electric2 + ''" + $$" Sales . su,ermarket (B" B@" %&" &%" Sales . su,ermarket 1;ll. electric2 + @$" + ("$" Sales . ,ost offices ('" '$ %(" @" <ross . ,ost Office 1;ll. electric2 + A" + ('" <ross . banks F Building Soc. @" @" ("" ("" <ross . banks F Building Soc. 1;ll. electric2 + ("" + ('" <ross . high Street agencies ($" $$ %#" @$ <ross . high Street agencies 1;ll. electric2 + &" + (B" <ross Catering 1EEBGGG2 . Restaurants with bar (("" B$" (%$" @#" <ross . )ast food restaurants 'A" A%" B@" A&" <ross . -ub restaurants %@"" k9h= co?er (#"" k9h= co?er #$"" k9h= co?er ($"" k9h= co?er -er co?er . -ublic houses (.$ k9h=m%= H(,""" turno?er ".A k9h=m%= H(,""" turno?er #.$ k9h=m%= H(,""" turno?er (.A k9h=m%= H(,""" turno?er <ross Entertainment buildings 1EEBGGG2 . theatres '%" (A" B#" %@" <ross I . cinemas $($ (#$ B%" (B" <ross I . social Clubs ('" B" %$" ((" <ross I . bingo clubs ''" (&" $'" %#" <ross I -ublic buildings 1EEBGGG2 . churches A" (" ($" %" reated . libraries ($" $" %(" @" reated . museums and art galleries (#" &" (A$ (%$ reated www.sei.ie, REÌO 2004 Page 52/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland . ,risons '#" (%" $'" ($" reated . ,olice stations %&$ '$ '(" B" reated . fire stations #A$ $$ $'" A" reated . ambulance stations #$" $" 'B" @" reated . crown and county courts (B$ ("" %%" (#$ >et JOD buildings1ECO> @$2 . multi occu,ancy accommodation %%$ %& + + <ross G . worksho,s (@$ %& + + <ross G . motor trans,ort facilities #(@ %" + + <ross G . stores=warehouses 1occu,ied2 (A@ #' + + <ross G . stores=warehouses 1unoccu,ied2 $' # + + <ross G . hangars 1heated2 %%" %# + + <ross G . Officers mess '.' k9h=meal %.$ k9h=meal + + -er meal . Kunior mess %.$ k9h=meal (.' k9h=meal + + -er meal Hotels! 1ECO> #B2 . small %'" A" #B" (%" reated . holiday %B" A" '"" ('" reated . lu*ury #"" &" 'B" ($" reated Schools! 1ECO> @#2 . ,rimary (%B %" (@# %A reated G . secondary (#B %' (@' #" reated G )urther and higher education1ECO> $'2 . eaching s,aces @$ (A$ + + <ross . Residential areas A$ %'" + + <ross S,orts and recreation! 1ECO> @%2 . Local dry s,orts centre B' ($A ("$ #'# reated . %$m swimming ,ool centre ($% $@# %#@ (##B reated . Leisure ,ool centre (B' $@# %$A (#%( reated . Combined centre &B %B' ($% $&A reated . )itness centre (%@ %"( (&' ''& reated . S,orts ground changing facility &# ('( (B' %(B reated . Ice rink (B@ ("" %$$ %(@ reated >ursing and residential homes 1ECO> $@2 %'@ '' '(@ @& <ross Hos,itals! 1ECO> @A2 . teaching and s,ecialist . ##& AB '(( (%% Heated . acute and maternity . '%% @' $(" ("A Heated . cottage . ''# $$ '&% @A Heated . long stay . '"( 'A $(A @% Heated www.sei.ie, REÌO 2004 Page 53/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 11 Appendix C: PeIIet Production Equipment suppIier 9%his list is not an accreditation of the Rene(a3le "nergy $nformation Office of the com'anies named CPM Europe Ltd Whitemill Industrial Estate tel !3"3 "3 23#33 Whitemil $a% !3"3 "3 2&#&# We%$ord' Ireland http(())).cpm*europe.ie BÜHLER AG www.#uhlergroup.com +or Ireland ,edler Limited ,edler -ouse .hil /il0ert Stroud pgil0ert1redler.com /los 2el !&& 34&"35 6#3#46 /L" 3E7 E8/L98: +a% !&& 34&"35 6#3#46 Compound Feed Engineering Ltd ;astleisland' ;o <erry tel!3"3 ## 64&2#"" ))).c$egroup.com Sprout-Matador A/S /lente=e> "*6 2el. !&" 62 4#0 300 :< #60" Es0>erg +a% !&" 62 4#0 304 :enmar? E*mail )elcome1sprout*matador.d? Vecoplan, LLL "60@ A)arrie ,oad B 9rchdale' 8; 262#3 2el. 333#5@#4* #060 ))).=ecoplanllc.com www.sei.ie, REÌO 2004 Page 54/59 Pellet Production_V08.doc "())&I$0" !#+ $N(I)$#' !#(*!C'(0$0 *0O ("! Bliss Industries Ponca City, OK /reg 9lles "@0(6#"*66@6 sales10liss*industries.com ))).0liss*industries.com .ellet' hammer mill eCuip. Bulldog Bag Ltd. ic!"ond, BC 8eil :a=ies #0&(263*@024 nda=ies10ulldog0ag.com ))).0ulldog0ag.com Bag supplier CPM Ac#uisitions $roup %aterloo, IA ,on +uller 34D(232*@&&& sales1cpmros?amp.com ))).cpmros?amp.com .ellet' hammer mills eCuip. Creati&e Pac'aging, Inc. Loo'out Mountain, () +red Schumpert &23(@2"*"344 $schumpert1)orldnet.att.net ))).$orestindustry.com(creati=epac?aging .ellet $uel pac?aging eCuipment' printed $ilms and 0ags *coStrat (oronto, O) :on Mc;lure &4#(D#@*@@@& don.mcclure1ecostrat.com ))).ecostratinc.com ,a) material supplier *SA Process *#uip"ent Vancou&er, %A Eric Smith 3#0("6#*2@2& ES9eCuip1aol.com .ellet' hammer mills eCuip. KS *#uip"ent Sales Kec!i, KS <e=in SchultEe 34#(6&&*D"&6 ?schultEe1co%.net .ellet' hammer mills eCuip. Laidig Syste"s, Inc. Mis!a+a'a, I) Mar? <esler 60&(D0&*D#62 mar??essler1laidig.com Bul? storage and reclaim systems MA,AM Pac'aging Colorado Springs, CO Mi?e FG;onnor 64D(22#*0042 M9H9M.9;<1aol.com .ac?aging eCuipment M-*-C )eodes!a, KS /ary +ollmer #20(32"*2#63 mec1m*e*c.com ))).m*e*c.com :ryers Plassein International (!o"as&ille, )C ;raig Miller @##(6"2*663& craigre%1attglo0al.net ))).plassein.com Bag supplier Polystar Pac'aging Pa+leys Island, SC :a=e /arloc? @&3(23"*00D& Bag supplier Pre"ier (ec! Pac'aging -ue.ec, Canada Simon ,oy &4@(@#6*@@@3 pac?aging1premiertech.com ))).premiertech.com .ac?aging eCuipment Pri"ary Pac'aging Boli&ar, O/ :a=e McIueeney 330(@6&*3434 ))).primarypac?aging.com Bag Supplier Salerno Plastics Corp. Paoli, PA +ran? .. ScorEetti #40(2"4*DDD0 $ran?scorEetti1sprintmail.com Bag Supplier S!ields Bag and Printing Co. 0a'i"a, %A John 8agle "0D(2&@*6"00 sales1shields0ag.com ))).shields0ag.com Bag supplier (e1tron 2inancial Corp. $olden Valley, M) Mi?e ;hinnoc? @00(32@*062& Mchinnoc?12+;.2e%tron.com ))).t$c.te%tron.com +inancial Ani=ersal Milling 2echnology Lene%a' <S Jim Joretic D43("&4*4603 sales.eCuipment.hull1umt*group.com ))).umt*group.com .ellet mill eCuipment www.sei.ie, REÌO 2004 Page 55/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 12 Appendix D: wood peIIeting process in detaiI By BNIM"R .# (((,3uhlergrou',com Soft wood waste is the raw material and has to be dried to about 10% moisture content and reduced in si•e to below 10x10x100mm, before it can be processed into pellets. The core process of the Wood Pelleting Plant comprises of 5 stages: milling, conditioning, pressing, cooling and screening +tage 1 2 $illing; The raw material is reduced to a particle si•e of about 3mm with a Hammermill DFŒC. The Hammermill DFŒC is protected with a Heavy Goods Separator DFAJ, which removes heavy objects such as stones, alloys, ferrous materials, etc. by separating the lighter product with an adjustable air current. The product flow rate is controlled to optimise the load of the Hammermill rotor with the Hammermill Control System DFAS, which regulates the feed gate of the Heavy Goods Separator DFAJ. Hammermill DFŒC with Heavy Goods Separator DFAJ +tage 2 2 *onditioning; The material is conditioned with dry steam and water to the required temperature and moisture content to activate the lignin as a pellet binding agent and to obtain the necessary malleability of the product. This is the most critical stage of the process to achieve an optimum performance of the Pellet Press RWPR and to minimise wear on the press die and rollers. Conditioning takes place in two stages, a dosing screw feeder and an agitator with adjustable paddles. Pellet Press RWPR with Conditioning Unit www.sei.ie, REÌO 2004 Page 56/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland +tage 3 2 Pressing; The conditioned product passes over a permanent magnet to remove any ferrous metal before it is fed into the press chamber of the Pellet Press RWPR. The pellets are formed by forcing the product through the rotating die with a pair of press rolls, achieving a compaction ratio of over 3:1. Ìt has to be appreciated that the specification of the die hole profile, die thicknessand corrugation of the press rolls are critical to produce top grade Wood Pellets and machine performance. The Pellet Press RWPR is equipped with the latest sensor, control instrumentation and PLC machine control system to guarantee the expected reliability and safety of a fully automated processing plant. View of Pellet Die and Press Rollers +tage 4 2 *ooling; Wood Pellets leave the Pellet Press RWPR at a temperature of about 100šC and need to be cooled down to about 25šC to harden the Wood Pellet and to maintain the quality of the product during storage and handling. The cooling down process takes place in the Counter Current Pellet Cooler DKFG, and is controlled with adjustable gates on the vibratory discharge hopper. Counter Current Pellet Cooler DKFG +tage 5 2 +creening; The finished Wood Pellets are finally passed over the Vibratory Pellet Screen DFTD to separate the fines from the pellets. The fines are returned to back into Stage 1, whereas the dust free Wood Pellets are ready for storage or packing. Vibratory Pellet Screen DFTD TypicaI Iayout of a Wood PeIIeting PIant www.sei.ie, REÌO 2004 Page 57/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland The unique modular concept of the Wood Pelleting Plant gives total flexibility to plant design and future extension of production capacity. The capacity of one module comprising of stages 1 to 5 is based on the throughput of one Pellet Press RWPR at 5 to 6t/ h. The most economical solution is multiples of double modules at 10 to 12t/h capacity, comprising of one Hammermill DFŒC, two Pellet Presses RWPR and Steam Conditioning Units, one Counter Current Pellet Cooler DKFG and one Vibratory Pellet Screen DFTD. The space requirement is about 18m in length for the first double module and 10m for any subsequent double module, 10m in width and 15m in height over 2 floors and a penthouse of about 7m height to accommodate the Air Jet Filters MVRS and Fans for the plant exhaust and pneumatic conveying systems. Flow diagram of a typical 20 to 24t/h Wood Pelleting Plant www.sei.ie, REÌO 2004 Page 58/59 Pellet Production_V08.doc Wood Pellet Production in Ìreland 13 Appendix E: Specification of Properties for PeIIets. Master tabIe Origin: According to clause 6.1 and Table 1 Woody Biomass (1), Herbaceous biomass (2), Fruit biomass (3), Blends and mixtures (4) Traded Form (see Table 2): Pellets N o r m a t i v e Dimensions (mm) L D Diameter (D) and Length (L)* D06 6 mm 0,5 mm and L 5 x Diameter D08 8 mm 0,5 mm, and L 4 x Diameter D10 10 mm 0,5 mm, and L 4 x Diameter D12 12 mm 1,0 mm, and L 4 x Diameter D25 25 mm 1,0 mm, and L 4 x Diameter Moisture (w-% as received) M10 10 % M15 15 % M20 20 % Ash(w-% of dry basis) A0.7 0,7% A1.5 1,5 % A3.0 3,0 % A6.0 6,0 % A6.0+ › 6,0 % (actual value to be stated) SuIphur (w-% of dry basis) S0.05 0,05 % S0.08 0,08 % S0.10 0,10 % Sulphur is normative only for chemically treated biomass and if sulphur containing additives have been used S0.20+ › 0,20 % (actual value to be stated) MechanicaI durabiIity (w-% of pellets after testing ) DU97.7 97,7 % DU95.0 95,0 % DU90.0 90,0 % Amount of fines (w-%, œ 3.15 mm) after production at factory gate* F1.0 1,0 % * Ìn last possible place in the production site F2.0 2,0 % F2.0+ › 2,0 % (actual value to be stated) Additives (w-% of pressing mass) Type and content of pressing aids, slagging inhibitors or any other additives have to be stated Nitrogen, N (w-% of dry basis) N0.3 0,3 % N0.5 0,5 % N1.0 1,0 % N3.0 3,0 % N3.0+ › 3,0 % (actual value to be stated) Nitrogen is normative only for chemically treated biomass I n f o r m a t i v e Net calorific value, q ,,net,ar (MJ/kg as received) or energy density, E ar (kWh/ m 3 loose) Recommended to be informed by retailer. Bulk density as received (kg/m 3 loose) Recommended to be stated if traded by volume basis Chlorine, Cl (weight of dry basis, w-%) Recommended to be stated as a category Cl 0.03, Cl 0.07, Cl 0.10 and Cl 0.10+ (if Cl ›0,10% the actual value to be stated) * NOTE: Maximum 20% of the pressing mass may have a length of 7,5 x Diameter Source: "uro'ean Organization: C"4, %C 225, Solid 3iofuels+ 6une 0112 www.sei.ie, REÌO 2004 Page 59/59 Pellet Production_V08.doc
Report "Preliminary Study of Pellet Production in Ireland"