Joint UNDP/World Bank Energy Sector Management Assistance Program Activity Completion Report No. 088/88 Country: JAMAICA Activity: FIDCO SAWMILL RESIDUES UTILIZATION STUDY. SEPTEMBER 1986 Report of the joint UNDP/Woxd Bank Energy Sedor Management Assistance Program This document has a restricted distribution. Its contents may not be disclosed without authorization from the Govemment, the UNDP or the World Bank. ENERGY SECTOR NAGEENT ASSISTANCE PROGRAM Purpose The Joint UNDP/World Bank Energy Sector Management Assistance Program (ESMAP) was started in 1983 as a companion to the Energy Assessment Program, established in 1980. The Assessment Program was designed to identify and analyze the most serious energy problems in developing countries. ESMAP was designed as a pre-investment facility, partly to assist in implementing the actions recommended in the Assessments, Today ESMAP carries out pre-investment activities in 45 countries and provides institutionsl and policy advice to developing country decision-makers. The Program aims to supplement, advance, and strengthen the impact of bilateral and multilateral resources already available for technical assistance in the energy sector. The reports produced under the ESMAP Program provide governments, donors, and potential investors with information needed to speed up project prepar- ation and implementation. ESMAP activities fall into two major groupings: Energy Efficiency and Strategy, addressing the institutional, financial, and policy issues of the energy sector, including design of sector strategies, improving energy end-use, defining investment programs, and strengthening sector enterprises; and Household, Rural, and Renewable Energy, addressing the tech- nical, economic, financial, institutional and policy issues affecting energy supply and demand, including energy from-- traditional and modern sources for use by rural and urban households and rural industries. Funding The Program is a major international effort supported by the UNDP, the World Bank, and bilateral agencies in a number of countries including the Netherlands, Canada, Switzerland, Norway, Sweden, Italy, Australia, Denmark, France, Finland, the United Kingdom, Ireland, Japan, New Zealand, Iceland, and the USA. Inquiries For further information on the Program or to obtain copies of the completed ESMAP reports listed at the end of this document, contact: Division for Global and OR Energy Strategy, Management Interregional Projects and Assessment Division United Nations Development Industry and Energy Department Programme World Bank One United Nations Plaza 1818 H Street, N.W. New York, N.Y. 10017 Washington, D.C. 20433 JAMAICA vIDCO BAIILL RESIDURS TILIZATIOW STUDY SIpT3IDU 1988 ACRO ALCOA Aluminum Corporation of Amercia CBI Caribbean Basin Initiative CDB Caribbean Development Bank CIDA Canadian International Development Agency FIDCO Forest Industries Development Company Ltd. GOJ Government of Jamaica GTZ Cesellschaft fur Technische Zusammenarbeit (Federal Republic of Germany) JBL Jamaica Broilers Ltd. JPS Jamaica Public Service Company MMET Ministry of Mining, Energy and Tourism PCJ Petroleum Corporation of Jamaica (Petrojam) PURPA U.S. Public Utilities Regulatory Policies Act of 1978 SIRI Sugar Industry Research Institute UNDP United Nations Development Programme USAID U. S. Agency for International Development ABBREVIATIONS bbl barrel 1IRR Economic Internal Rate of Return Fin Financial Internal Rate of Return fHV Higher Heating Value hr hour Igal Imperial gallon IRR Internal Rate of Return JS Jamaica Dollar kg kilogram km kilometer kW kilowatt kWh kilowatt-hour LHV Lower Heating Value mcwb moisture content wet basis MJ megajoule mo month MW megawatt MWh megawatt-hour OF degrees Fahrenheit O & M Operations and Maintenance psig pounds per square inch gauge pressure RFO Residual Fuel Oil t metric tonne toe tonnes of oil equivalent tonne metric tonne US$ U. S. Dollar yr year CUR CY -MD FUEL SQUIVALTS Currency 1 US$ = 5.46 J$ Energy Conversion Factors 1 HJ 984 Btu 239 Kcal U 0.278 kWh Heating Values Fuel mcwb (Z) LHV (NJ/kg) Pine Residues (green) 48 9.7 Diesel Oil - 43.3 Residual Fuel Oil -- 42.4 Volume/Weight Conversions Fuel Density Pine Residues (green ) 879 kg/m3 Residual Fuel Oil 156 kg/bbl TABLE OF CONTENTS Page No. RUCTIEclr SUMMARY .............. Backgroundt..... ........ ....... .............. l.... Otjectives ............................... 2 Scope .............................. 2 HI. SUPPLY OF FIDCO RESIDUES.. .............................fi 4 FIDCO Forest Resource Base ............................ 4 Residues Production.......ooe ...... . ....................5 Logging Residues....... .. ... ... ........... ....**.. . S Sawmill Residues .......... . .... 5 Residues Disposition .................. . 5 Non-Energy Uses ..................... e 5 Energy Uues ............... ... 7 III. FIDCO RESIDUES ENERGY UTILIZATION OPTIONS ............... 9 Background ............................................. . 9 Direct Residue Combustion..................................9 Backgrond ..0.06.0.0..................... ll00000~0~00 0001 Biomass Supply.........................11 Cogeneration .................................... 12 Power Productiono ...............................oo..o 14 Power Valuationo......o.o.oo.o.......l5 Financial Analysis................ 000000000000006006.0.16 Economic Analysis... 0060000000.040.00.6.0....... ...*...18 Evaluationo.....................o.................e . .0.18 Jamaica Broilers Limited. ....................0000600..000.6. 19 Background. ............... 0.000o . 6.000o.0.0.oo.o.o... 19 New Boiler System................................o.0...20 Boiler Retrofit ... ..oo o.......*000..oo.ooo..oo..o.21 Cogenerationo.. o.00.0....... .0.0o.0..... .0.0o.o.0.oo .22 FIDCO o oo.6o.o....... ....0oo0o o.. .............. 0.66..23 Backgroundo...............o.o.o..o.......00060oe0.0.0.0.23 Cogeneration System .00o.......0.6oo0....0.0...o.....o..o23 Contingency Residue Marketso............................. ..24 Charcoal Briquetting ........ .o*..0000006.00000000o00o0.025 Background .o............................ 0o0o*0ooo0o0oo25 Production Economics.........................o...........26 IV. CONCLUSIONS AND RECOMMENDATIONS.o .......... ..*oo*oe99.... 27 Conclusionsoo ooooooo.*oo**o***oo....................27 Recommendations. ..***o*.....o.00......o...o.....ee.....28 Areas for Further Investi9'ation. .00000000000006.........28 Bibliography 1. List of Contacts... .................. ......e....... .. .30 2. PIDCO Yield Projections...... ................ ......... .31 3. Petronol Energy Balance ........................... , ...e32 4. Estimated JPS Long Run Avoided Cost - Coal Fired Plant ... 34 5. Levelized Cost of Power Production at Petronol.............35 6. Financial and Economic Analysis of JBL Wood Fired.........37 Process Steam Plant 7. JBL Boiler Retrofit..........e........ ..................... .40 8. West Indies Pulp and Paper................................41 TABLES 2.1 FIDOO Residue Production and Utilization...................6 2.2 Pine Heating Vslues.....................................* 7 3.1 Financial and Economic Cost of RPO........................10 3.2 Financial and Economic Value of Wood Residues Based on Equivalence with RFO .................o........10 3.3 Estimated Fiancial and Economic Avoided Cost for Oil Based Steam Capacity. ......... 000000000o 00.0.0.0.0..15 3.4 JPS Long-Run Avoided Costs-Coal Fired Plant..............16 3.5 JBL Potential Residues Demand.............................21 3.6 Capital Cost per Unit for JBL Cogeneration Option.........22 FIGURE 3.1 Petronol Cogeneration System Schematic....................13 MAP IBRD 18111R: Jamaica Overview 1. The Forest Industries Development Company Ltd. (FIDCO) is a government-owned company producing forest products from plantation-grown pine logs. Since construction of a new sawmill complex in 1984, FIDCO has experienced financial difficulties and has just reached full single- shift operation at a log inputs level of 40,000 m3 per year. While there are plans to expand the operation to two shifts in mid-1990, the mission feels that resource constraints will limit production to a single shift until the year 2000. At thio production, FIDCO produces an estimated 19,000 tonnes of wood residues annually (422 log recovery factor), half of which are being disposed of as landfill at substantial cost. The mission investigated the potential uses for these underutilized residues as boiler fuel for nearby industries and at FIDCO itself, as wvll as for charcoal production. Quantity of Residues Available for Energy Use 2. There are high value non-energy uses for a significant quantity of the sawmill residues, including horticultural use of bark chips (J$50/tonne), poultry bedding from shavings and hogged wood (J$70- 100/tonne) and artisanal furniture making from larger slabs (J$72/tonne). The price obtained for residues in all of these non-energy uses is as high or higher than the price that is likely to be received for energy uses. Therefore, the total residues available for energy use must be calculated after subtracting residues supplied to higher value uses, which account for about 40 percent of the total. This leaves approximately 11,000 tonnes/year for energy use. Previous studies overlooked or underestimated higher value uses and overstated the residues available for energy use. Charcoal Production from FIDCO Residues 3. FIDCO saws only pine logs, and the solid pine residues would not make suitable charcoal for the traditionally hardwood charcoal market. The volume of residues is too small to consider production for an itidustrial market. While there is some potential for producing charcoal from sawdust as part of SIRI's charcoal briquetting project, this would represent a very small and low value market for the residues because of the high processing costs. Therefore, the best potential energy use of the residues is as a substitute for Residual Fuel Oil (RFO) in industrial boilers. - ii - Direct Burning of Residues 4. FIDCO itself is not in a good position for self-generation of power and/or sales to JPS using sawmill residues because of low scale and capacity factors. The FIDCO levelized cost of production, based on the scale appropriate to the resource base, will be at least equal to or exceed that of JPS. 5. After examining several other potential customers, the mission concluded that the best prospect for use of all of the available residues is the Petronol integrated sugar mill and molasses-based ethanol distillery project. Petronol is located less than ten kilometers from FIDCO, and is installing biomass burning equipment to fuel its operations. Petronol is planning to start-up in early 1988 and will require fuel to supplement bagasse for process heat and power generation for sale to JPS. When bagasse and wooe. residues are combined, a 7.6 MW cogeneration cycle can be operating with resulting efficiencies and economies of scale. The alternative to wood residues is RFO. 6. There are other technically viable uses for the FIDCO residues but none are expected to absorb as much of the residue at as high a financial value. Financial Value of Residues 7. The financial value of residues to Petronol depends on several factors, the main ones being the price obtained from JPS for surplus power and the assumptions about costs at the Petronol plant (e.g. the value assigned to bagasse). At an estimated JPS power buy-back price of J 35 to 40 cents/kWh and valuing bagasse equal to residues, the financial value of residues loaded at FIDCO's gate is estimated to be J$25-48/tonne. 8. The financial value of the residues will be subject to the actual price JPS is willing to pay and negotiations between FIDCO and Petronol, but a likely maximum is J$50/tonne. This compares with residue values for non-energy uses that range from J$50-100/tonne. Economic Value of Residues 9. While in FIDCO's viewpoint the residue sales price is certainly of great concern, from a national planning perspective the transfer price is of no import so long as the residues are put to their highest and best economic use. Should the Petronol cogneration project proceed as designed, the net national benefit due to reduced electricity production costs from substitution of residues for petroleum would range from US$65,000 to US$230,000 annually. The economic value of the replaced residual fuel oil, nominally burnt in JPS boilers, would be US$182,000 - ift - per year. When transport and handling costs are accounted for, this translates to an economic value of the wood residues of J$65/tonne. Recommendations 10. In order to maximize the utilization of FIDC0 residues, the mission recommends thatv (a) FIDCO attempt to negotiate a long-term residue supply agreement with Petronol as soon as possible. (b) Any sales of residues for energy purposes be indexed to an appropriate energy price indicator, such as the refinery gate price for residual fuel oil. (c) FIDCO re-evaluate its handling of the residues to maximize sales for higher value uses such as poultry bedding. Jamaica Broiler Ltd. would like to purchase a total of 3,410 tonnes of residues per year, including some percentage of sawdust mixed with the hogged material so that the supply can be made more reliable and regular. FIDCO may wish to accept a long-term contract to supply the 3,410 tonnes per year at a price at least equal to the current sales prices, i.e. J$100/tonne for shavings and J$70-80/tonne for hogged material. I. INTRODIICTICI Background 1.1 The Joint UNDP/World Bank Energy Sector Assessment Program conducted a comprehensive review of the Jamaica energy sector in March, 1985. The results of that review were contained in a final report issued in April, 1985 entitled, Jamaicat Issues and Options in the Energy Sector. The assessment determined that end-use energy demand in the economy was primarily met by imported petroleum, which accounted for 89 percent of all of the energy supplied to the country in 1983. The remaining energy was supplied by bagasse (7X), woodfuels (31) and hydro power (1X). The foreign exchange cost for imported petroleum places a heavy burden on the economy, and in 1984 was equivalent to 54 percent of merchandise exports. As a result, the government is making strenuous attempts to increase the use of indigenous energy, including bagasse as fuel in the sugar industry; solar energy for hot water heating; and ethanol from sugar, molasses or cassava. Overall, however, these indigenous energy resources are limited and could only contribute a fraction of total energy supply. 1.2 Of the indigenous energy resources, perhaps the most important is the wood that is found in Jamaica's forests. In addition to the forest reserves, significant quantities of wood are available from existing forestry and forest industry-related activities. These include: (a) land clearing; (b) harvesting; and (c) saw milling. It is estimated that the above forestry-related activities yield about 1.0 million tonnes of wood per year. However, the fuelwood resulting from the first two operations is normally dispersed over a wide area, and collection and transportation of this material to end-use locations will be difficult. This is particularly true for the waste available from harvesting, and in some degree, from land-clearing operations. 1.3 Sawmill wastes, on the other hand, represent a physically concentrated and easily collectable source of biomass. Only a portion of these residues are currently used for firewood, charcoaling and limited industrial applications. The Jamaica Energy Assessment thus recommended detailed site-specific assessments in order to determine the economically recoverable potential for different end-use applications. 1/ 1.4 Discussions in September, 1986 between representatives of the Bank's Energy Sector Management Assistance Program (ESMAP) and Government of Jamaica (GOJ) officials recognized the existence of under-utilized wood residues and wastes from the GOJ-owned FIDCO sawmill, the largest 1/ Jamaica: Issues and Options in the Energy Sector, Report No. 5466- JM, UNDP/World Bank, April 1985. - 2 - wood processing operation in the country. Agreement was reached that ESMAP would carry out an investigation of the best energy uaes for PIDOO's sawmill waste. 1.5 The project was co-financed by the Canadian International Development Agency (CIDA) and was initiated in September 1987. The main mission fielded that month consisted of a mission leader, an energy economist and a biomass combustion specialist. 2/ The mission worked in close collaboration with the Ministry of Mines, Energy and Tourism (MMET) as the coordinating agency and the Forest Industries Development Company (FIDCO) as executing agency. The data collected by the mission have been extensively evaluated and the results are documented in this report. Objectives 1.6 The goal of this study was to identify the most economically beneficial option for the use of FIDCO wastes and to assist FIDCO in implementing this option. Specific objectives addressed by the study include: (a) Conduct of a market survey for the sawmill residues in raw or processed form; (b) Financial, economic and technical evaluation of of utilization options; (c) Preparation of a plan for the economic utilization of FIDCO wastes; and (d) Provision of implementation assistance, if necessary, to the GOJ through FIDCO. Scope 1.7 Activities carried out by the mission in support of the objectives included: (a) An assessment of the quantity and nature of the residues that will be available from future production; 2/ This report is based on the findings of a mission which visited Jamaica from September 13 to 23, 1987. The mission members were Charles [einstein (Mission Leader), V. Susan Bogach (Consultant - Energy Econamist), and Robert Chronowski (Consultant - Biomass Combustion Specialist). Secretarial support was provided by Ms. Evelyn Cortez-Fusco. - 3 - (b) An estimate of the quantity of the residues available for energy uses, taking into account higher value non-energy uses; (c) An evaluation of the following options for energy use of the sawmill residues: (i) On-site combustion for electricity generation or process heat raising at FIDCO; (ii) Off-site cogeneration and process heat generation at nearby industrial plants; (iii) Carbonization of solid residues for charcoal production; and (iv) Briquetting of carbonized sawdust residues. (d) A recommendation as to residue utilization based on the above evaluation, including any follow-up actions for FIDCO. 1.8 The study is based on extensive discussions with FIDCO management concerning the mill's present and future operations as well as site visits to several potential users including Petronol's Bernard Lodge facility, the Sugar Industry Research Institute (SIRI) charcoal briquetting project and Jamaica Broilers Ltd. (JBL). Discussions were also held with engineers and managers of five other potential biomass consumers located near the FIDCO plant. A complete list of institutions and persons contacted by the mission appears in Annex 1. The field data collection was supplemented by reviews of studies on biomass utilization sponsored by the Caribbean Development Bank (CDB), the U.S. Agency for International Development (USAID) and CIDA. - 4 - II. SUPPLY OF PIDCO RESIDUES Background 2.1 The Forest Industries Development Company Ltd. (FIDCO) is a government owned company that produces forest products from plantation- grown pine logs. It has been operating since 1979, but has experienced financial difficulties since the construction of a new sawmill complex in 1984. One possible way to generate additional revenue for the sawmill, while increasing national self-sufficiency, is to make full use of the mill residues which include bark, offcuts, slabs/edgings, sawdust, and planer shavings. At present, over fifty percent of the residues are disposed of as landfill, at substantial cost to FIDCO. PIDCO Forest Resource Base 2.2 FIDCO was incorporated in 1978, as a subsidiary of what is now the National Tnvestment Bank of Jamaica. Its major objective is to achieve self-sufficiency for Jamaica in timber and timber products. Since 1978, FIDCO has initiated a planting program (mainly Pinus caribbea var. hondurensis - Caribbean Pine) and began saw operations in an existing mill in 1979. Production shifted to a new sawmill complex in Spanish Town in 1984. Since then, logging and sawing operations have been increasing yearly in an attempt to meet the full single-shift mill capacity of 40,000 m . Current estimates indicat4 that FIDCO is close to reaching this production level, Vith a 40,000 mi input to the mill log yard and a reject rate of 1,500 mi before sawing. 2.3 While FIDCO is now able to supply the sawlogs for full single shift operation of the mill, the forest resource base presents a serious problem for current and future operations. The forest logging areas are widely dispersed on difficult terrain, and the rate of afforestation falls short of what will be needed to achieve self-sufficiency or even to achieve planned production goals. Commonwealth Development Corporation (CDC) consultants suggested a 23 year-old optimum for harvesting in a March 1985 project review and evaluation, but FIDCO staff have based their harvesting plan on cutting 20 year log stands. ?IDCO is even cutting somq 18 and 19 year old stands to meet the log yard input quota of 40,000 ml. This is undoubtedly causing serious operational problems, such as: (a) Increased reject rate in the forest and at landings, since the harvesting method is clear felling; (b) Low timber recovery rate at the mill (currently 41-42 percent) caused by sawing smaller than optimum diameter logs; and (c) Reduction of future inventory to address current needs. - 5 - 2.4 The original FIDCO logging plan called for tapping new planta- tions in 1994 for expansion to two shift operation (log input of up to 80,000 m3 per year to the sawmill). However, discussions with FIDCO staff disclosed varying viewpoints on expansion. Production staff suggested two-shift operations would occur by 1996, while forest inventory staff suggested the year 2000 or later as a more reasonable target for expanded production based on their yield projections (Annex 2 contains the most recent yield projections by FIDCO forest inventory staff). The missiSn considers that increased availability of sawlogs beyond the 40,000 ma per year level is not likely before the year 2000, when new plantations come on-line with larger average log size die to proper spacing and management. Before this date, evea the 40,000 m. per year log input may be difficult to maintain without additional encroachment on future supplies 2.5 FIDCO has not yet reached a point of profitability, causing the push to increase sawlog input to the maximum possible on a single shift basis. One area that can generate valuable additional revenues is the full use of the mill residues which include bark, offcuts, slabs/edgings, planer shavings and sawdust. Residues Pro4uction Logging Residues 2.6 Because of the 190 kilometer average round trip between sawmill and logging site, it is not viable to consider hauling in either reject logs or logging residues. At 60 Jamaic&j cents per tonne-km, the transportation cost alone would be J$115 per tonne plus loading and unloading charges (FIDCO values sawlogs delivered to the mill at J$134 to J$170 per tonne). Sawmill Residues 2 7 The target yard lift of 40,000 m3/yr less approximatily 1,500 a /yr of reject logo gives an annual mill log input of 38,500 m . Since 58 percent of the log input ends up as waste material (42Z recovery factor), total pine residue output is 22,500 m /yr. On a greenwood basis (48Z mcwb), this translates to just unter 20,000 tonnes per annum. Residues Disposition Non-Energy Uses 2.8 FIDCO is faced with several options for the use of its residues as income-generating resources, including high value non-energy uses such as horticulture and poultry bedding and artisanal furniture feedstock, where the sales price appears to be profitable compared to additional - 6 - handling costs. Current disposal of residues is detailed in Table 2.1 and summarized below: (a) Bark Chips - Collected separately and sold to horticultural suppliers at J$50 per tonne loided at the FIDCO plant gate. (b) Slabs/Offcuts - Suitably large solids are hand-sorted and pulled manually off the main refuse conveyor leading to the chipper. They are stacked in 2.83 m3 (solid wood equivalent based on 401 void factor) bundles which are sold for J$180 per bundle, or about J$72 per green tonne. (c) Planer Shavings - Collected separately as kiln dried material and sold at J$100 per tonne to Jamaica Broilers Ltd. (JBL) as poultry bedding. (d) The balance of the offcuts, slabs and edgings are chipped, mixed with sawdust and sent to waste storage piles. This material is being sold sporadbnally at J$25 per tonne loaded at plant gate as boiler fuel, except for a fraction of the chips which are hogged to produce poultry bedding material at J$70 per tonne (as per JBL) or J$80 per tonne (as per FIDCO). Table 2.1: FIDCO RESIDUE PRODUCTION AND UTILIZATION Residue % of Sawlog Quantity Sales Price Type Input (Green t/yr) (J$/t) b/ Use Horticultural Bark 3.0 1,030 50 bedding Of fcuts/s labs (hand Artisanal sorted for bulk sale) 10.3 3,515 72 furniture Hogged Slabs/Edgings Poultry (Chips) 7.3 2,500 70-80 bedding Planer Shavings Poultry (kiln-dried) 5.3 a/ 910 100 bedding Remaining Chips and Dumped/ Sawdust 32.1 11,005 25 landfill Total 58.0 18,960 a/ Greenwood equivalent. b/ Loaded at plant gate. Source: FilO0; JBL; Mission estleates. -7- 2.9 The utilization of over 401 of the residue output for non- energy purposes appears justified considering handling costs and likely value as a petroleum substitute. For example, the manual collection of the offouts for sale at J$72 per tonne is quite financially positive. According to ptant personnel, six 2.5 tonne bundles are collected daily for sale. The operation is manual and assuming two laborers each earning J$27 per day for selection and stacking, the labor input is at a maximum J$3 per tonne. With a loading cost estimated by FIC0O for all residues of J$8 per tonne, the net is J$61 per tonne. The hogged material sold as poultry bedding at J$70-80 per tonne includes a hogging cost (electric power only as the hogger belongs to JBL), whose value directly reduces the profit margin for this material, but the profit is still likely to be higher than for residues sold for energy purposes. Energy Uses 2.10 For the purposes of this study, the assumption has been made that it is worth the administrative difficulties of multiple customers to obtain the maximum financial return. The conclusion, therefore, is that for at least the next ten years, the maximum availability of residues for energy purposes will be 11,000 green tonnes per year at a price less than J$50 per tonne, the lowest value of non-energy residues. 2.11 The log yard operates on a two week inventory, and the moisture content is estimated to remain at 48 percent mcwb going into the saws. The chips and sawdust are assumed to be at the same moisture content, since they are stacked in uncovered outdoor piles. The net energy content of the sawdust and chips at 48 percent mcwb is 9.7 MJ/kg based on a kiln-dry HHV of 20.7 MJ/kg. The gross heating value of the residues available for energy uses is thus 2,470 toe. 2.12 If any drying takes place the heating values shown in Table 2.2 are achieved, increasing the energy potential of the residues. Table 2.2: PINE HEATING VALUES Moisture Content Wet Basis Lower Heating Value (MJAJkg) 44 10.6 37.5 12.1 28 14.2 23 15.4 Source: Mission estimates. - 8 - 2.13 Vhen, and if, FIDCO goes to two-shift operation, they must install additional kln drying capacity as the current kilns can only handle the single shift of timber input. While the existing kilns employ very efficient electric heat pump energy systems, the electricity must be purchased. Therefore, the plant personnel intend to install a residue- fired system for any new kiln capacity. This must be considered when projecting residue availability in the future, but it appears safe to project that the residues produced by the single shift operation will be available for sales. 2.14 In previous years, the nearby Bernard Lodge sugar mill has bought up to 2,500 tonnes of residues per year to supplement bagasse. Now under Petronol Jamaica ownership as a combination sugar mill/ethanol factory, Bernard Lodge has again bought a portion of the chips and sawdust as a 1987/88 season start-up fuel supplementing bagasse. The balance of the sawdust and chips, presently disposed of as land fill at a cost to FIDC0 of J$20 per tonne, remains available for potential energy uses. - 9 - III. FIDWO RESIDUES EUMRGY UTILIZATION OPTIONS Background 3.1 Previous World Bank missions visiting FIDCO suggested that an ESMAP project be carried out to evaluate the potential energy uses of these residues, both as boiler fuel and as a raw material for charcoal production. 3.2 The option of charcoal production was suggested based on the assumption of a mixed hardwood/softwood sawlog input. However, the mill now saws exclusively pine logs. The maximum ha-.d.ood contribution in the past was less than five percent. Since future production will continue to be based almost entirely on pine, there is little potential for making charcoal from FIDCO's pine offcuts. The local market for charcoal (mainly for home and commercial cooking) is based on the qualities of hardwood charcoal. Additionally, it would be difficult to create industrial markets for softwood charcoal because the volume of residues is too small. For example, while the cement plant in Jamaica is converting to coal, consumption will be at the level of 100,000 tonnes per year while the maximum charcoal production from FIDCO's residues would be a few thousand tonnes per year. The only charcoal production option that might have some potential is to briquette carbonised pine sawdust. 3.3 The best energy use of the residues appears to be direct burning as an industrial boiler fuel for co-generation or process heat. Therefore, the focus of this study was directed at these options, plus an examination of briquetting possibility noted above. Direct Residue Combustion 3.4 Residual fuel oil (RFO) is the baseline fuel against which the FIDC0 residues must compete in industrial heat raising applications. If rezidues are not viable when compared to residual fuel oil, then any diesel oil burning steam/hot water applications are advised to consider only heavy oil for conversion purposes. 3.5 As a crude indication of viability, it is interesting to make a simple calculation of the value of wood residues on a gross heat equivalent basis to RPO. The financial and economic costs of RFO in Jamaica are calculated in Table 3.1 as J$957 and J$690 per tonne, respectively. The financial and economic values of wood, on a fuel equivalent basis, are then calculated in Table 3.2 to be J$177 and J$128 per tonne delivered on site. While this comparison indicates a high value for residues relative to alternative uses, it does not take into account capital cost for conversion to wood burning equirament and - 10 - handling costs for wood, or any additional utilization costs such as provision for storage. Table 3.1: FINANCIAL AND ECONOMIC COST OF RFO Financial Economic (JS/B1L) (JS/T) (JS/BL) (JS/T) Ex-refinery Price a/ 105.7 675.2 105.7 675.2 Transport & Surcharge 44.1 282.1 i/ 2.3 14.4 c/ Total 149.8 957.2 107.9 689.6 a/ Based on Caribbean import parity. =/ Based on the actual price paid by JBL of JS4.28/lgal. ci No marketing margin as Included In ex-refinery price. Transport cost calculated for distance of 24 km, at cost of JS0.60/t-km, 6.39 bbis RFO/tonne. Source: Petrojam; Mission estlmates. Table 3.2: FINANCIAL AND ECONOMIC VALUE OF WOOD RESIDUES BASED ON EQUIVALENCE WITH RFO sawill RFO Residues LHV (NJ/kg) 42.4 9.66 Cambustion Efficiency (%) 80 65 RFO Equivalent 1.00 5.40 Price (JS/t) Financial 957 177 Economic 690 128 Price (USS/t) Financial 175,32 32.45 Economic 126.29 23.36 Source: Mission estimates. - 11 - 3.6 In order to establish the actual viability of marketing residues for energy use, it is necessary to look at specific examples of fuel substitution in industries near the FIDCO mill. The specific cases documented in this report are: (a) The Petronol facility which will be both a cane-based sugar mill and a molasses-based ethanol distillery. The existing boilers and the new boiler under tender are capable of direct wood residue burning. (b) The Jamaica Broilers Ltd. chicken processing plant which has recently converted one of its two steam boilers from diesel oil to RFO. This facility was examined by CIDA-financed consultants for a totally new wood-burning energy plant. The CIDA analysis will be updated within this report. (c) FIDCO's own use of the wastes for cogeneration purposes. This case will be re-examined based on the Caribbean Development Bank feasibility study of December 1985. In the analysis, both simple steam raising and cogeneration options will be examined. For the cogeneration options, sell-back to the Jamaica Public Service (JPS) is considered along with self-generation to displace power purchased from JPS. Petronol Background 3.7 The largest single potential consumer of FIDCO residues is Petronol. The Petronol project is an undertaking of the Petroleum Corporation of Jamaica (PCJ), which bought the existing Bernard Lodge sugar factory and is installing an adjacent molasses-based ethanol plant that will share energy facilities. The ethanol distillery has a planned output of 47,500 gallons per day or 11 million US gallons per year. Since the sugar factory has a guaranteed price from the Jamaican government that makes sugar production for the Jamaican domestic market more profitable than diversion of the cane to alcohol making, the production of the desired alcohol output will require importation of molasses from the international market. Biomass Supply 3.8 The current plan calls for a year-round operation, with a grinding season for cane and non-grinding season devoted exclusively to ethanol production. Mill staff estimate that profitable operation requires an input to the mill of at least 400,000 tonnes per season. Available cane land will not allow such a level of production until 1989/90. Therefore, the actual sugar mill feedstock will be a mixture of - 12 - cane and sorghum, as shown in the PCJ prepared energy balance in Annex 3. This balance represents PCJ's low production or pessimistic scenario, which the mission believes to be the most realistic forecast of Petronol's operations. 3.9 Petronol's operations are based on the use of biomass for fuel. However, with current and planned equipment, Petronol will not produce sufficient bagasse to meet the needs of the sugar mill and the distillery. Bagasse will need to be supplemented by other forms of biomass or, as a last resort, by residual fuel oil. 3.10 The spreadsheet in Annex 3 projects a wood residue demand of 20,000 tonnes per year for the first three years and 15,000 tonnes per year thereafter. For the first two years, this is not an absolute demand but one based on the perceived availability of FIDCO residues. There are anticipated additional annual fuel deficits requiring the burning of 36,000 barrels of fuel oil in year 1 and 22,000 barrels in year 2. In year 3, a new topping cycle boiler/turbogenerator set goes into full operation, freeing enough surplus bagasse tc eliminate fully the fuel oil burning, and limit the wood residue need to 15,000 tonnes per year. Since the total quantity of residues available for energy is estimated at 11,000 tonnes, Petronol can absorb all of PIDCO0s surplus residues. Cogeneration System 3.11 As shown in Figure 3.1, the Petronol energy system is currently made up of two 12.5 bar (185 psig), 55 t/hr steam boilers and two 12.5 bar inlet, 1 bar outlet non-condensing steam turbogenerators. The actual sugar mill demand is 1.6 MW suggesting the need for only one turbine at a time, and the new distillery demand is projected at 0.5 MW still requiring only one turbine. A topping cycle is being added via a new single 40 bar (600 psig), 600 7F steam boiler/turbogenerator combination having a turbine outlet pressure of 12.5 bar (185 psig). Both of the existing turbo generators will be kept operational. The new boiler will provide all of the process steam needs. At least one of the old boilers will be maintained for emergency standby service only. Figure 3.1: PETRONOL COGENERATION SYSTEM SCHEMATIC 40 bar Pressure -------------------- _R _ " duotion New HI-Preeeure s , |b - NX-^@@ " i .0 MW l j " " ax/at/ag Lo-P,ee.ui_ To shrodders/ 12 bar hi-pressure uses Boiler 3 Boller 2 Boller 1 96 t/hr 56 t/hr 65 t/hr Pressuro R*duction Cooling 2A NM2.8 MW 0-0M (I-0 Condenser Water ' Condensate I bar exhaust to sugar mill and distillery - 14 - 3.12 The topping turbine exhausts to both the high pressure plant and the old turbogenerator sets so that a portion of the steam passes through both a high pressure and a low pressure turbine, increasing the kWh produced per tonne of steam. To guarantee process steam needs, high pressure boiler steam can be passed through a reducing value to satisfy auxiliary demands. The single boiler/turbine topping cycle may experience some difficulties in the first year of operations and during the non-grinding season when the total steam demand will only be 20 percent of the new boiler capacity. At this capacity, both the boiler and turbine will be operating very inefficiently, close to their minimum practical operational points. The turbine efficiency would be extremely low and the tender document for the new equipment asks for efficiencies at these operations points. To address this obvious problem, a pressurized condenser is being installed to allow a higher steam flow through the turbines during the non-grinding season. This would bring the boiler up to 40 percent of design capacity which, while still not optimum, is sufficient to allow operations stability for both the boiler and the new turbine. 3.13 During the grinding season, assuming cane and/or sorghum is available as planned, the new boiler and turbine would be operating very efficiently, allowing the generation of significant surplus electricity for sale to JPS. One of the existing turbo generator sets will operate at essentially 2.1 MW throughout the year, handling both sugar and ethanol plant power needs. The only difference from season to season is that during the non-grinding time, the 1 bar steam normally used for low pressure sugar processing equipment must be condensed as there is no use for it in an only ethanol production mode. 3.14 Operation of the new units during the grinding season will dramatically increase the availability of bagasse, some of which can be baled and stored for non-grinding season ethanol production steam raising, eliminating the use of fuel oil and reducing the wood residue demand by 5,000 tonnes per year as noted above. Power Production 3.15 Based on the projected cane and sorghum deliveries in year 3 (1990) and the installation of the new boiler and turbogenerator, the Petronol facility could be in a position of having up to 5.07 MW of surplus capacity producing 14,339 MWh during the grinding season, and 10,450 MWh during the non-grinding season from 1990 on, or 24,789 MWh/year of surplus power. Based on a 186 day grinding season and 165 day non-grinding season, the average surplus capacity would be 3.2 NW during the grinding season and 2.6 MW during the non-grinding season, based on three-shift operations. This means that Petronol will be able to supply over 2 MW of power on a firm basis to JPS and should be eligible for some degree of capacity credit. - 15 - Power Valuation 3.16 Financial Valuation. JPS has historically entered only into power exchange agreements, i.e., on a one-for-one basis. However, it has been reported by several sources that JPS in 1982 or 1983 entered into a buy-back arrangement with ALCOA at US 6.8 cents/kWh, which while not necessarily full avoided cost, provides a precedent for other potential sellers of power. JPS appears ready to negotiate buy-back rates on the following criteria: (a) For units of under 2 MW of firm capacity, the avoided fuel cost; and (b) For units of over 2 MW of firm capacity, the avoided fuel costs plus some degree of capacity replacement credit. This is reported by USAID to be determined by a differential revenue requirement calculation that is performed with a JPS utility production cost simulation model run twice to determine the savings. No figure was available for avoided costs for oil based steam capacity, as found in the JPS system, but it can be estimated as shown in Table 3.3. The avoided costs for fuel only are estimated on a financial basis to be J 27 cents/kWh (Us 5 cents), with total avoided financial costs per kWh estimated at J 48 cents (Us 8.8 cents). Table 3.3: ESTIMATED FINANCIAL AND ECONOMIC AVOIDED COST FOR OIL BASED STEAM CAPACITY (1987 J t/kfW) FInancIal Economic Capital Cost Recovery a/ 16.5 16.5 Fuel b/ 27.3 19.7 Operating and Maintenance 4.1 4.1 Total 47.9 40.2 Converted to US t/kWh: 8.8 7.4 a/ Based on 2/3 coal cost. b/ Based on reported 12.1 NJ/kWh In Harbour No. 3 Unit, and 6,645 MJ/bbl for RFO. Source: JPS; Mission estimates. 3.17 The conclusion that can be drawn from these calculations is that, for firm capacity contracts supplying over 2 MW such as Petronol, JPS will most likely negotiate up to a price somewhere between J 35-40 - 16 - cents/kWh (US 6-7 cents), depending on the size of the block of power. For those under 2 NW, JPS is likely to negotiate for 25-30 J cents/kWh (4-5 US cents). However, these are estimates only. As there are no PURPA laws in Jamaica, JP8 should be expected to bargain firmly in negotiations, but to negotiate a "reasonable" purchase price so as to moderate the pressure for passage of PURPA-type legislation. 3.18 Economic Valuation. While JPS can be expected to look mainly at the financial picture, economic calculations apply to the national perspective. As shown in Table 3.3, on an economic basis JPS avoidad fuel costs for their present oil-fired steam generation units are J 20 cents/kWh (Us 3.6 cents), and total avoided costs are estimated at J 40 cents/kWh (US 7.4 cents). 3.19 Annex 4 contains a JPS long-run avoided cost calculation based on coal burning as the least-cost generation expansion option in the mid- 1990's. While these costs date from 1984 USAID studies, they are considered to be within ten percent of current costs and are summarized in Table 3.4. Table 3.4: JPS LONG-MN AVOIDED COSTS-COAL FIRED PLANT (1987 J Cents/kWh) Capital cost recovery 24.6 Part!al coal port cost recovery 3.8 Fuel 25.1 oaM 4.1 Total 57.6 Source: Annex 4. 3.20 Depending on the time horizon adopted for economic planning purposes, the economic value of firm power thus ranges between J 40 to J 58 cents/kWh (US 7.4-10.5 cents). Financial Analysis 3.21 While it is difficult to define a levelized cost of electricity production at the sugar factory, there is a legitimate capital cost recovery charge for the new energy system and its installation. A portion of the operating and maintenance costs can also be atlocated to the JPS power sales account. A fuel cost can be calculated based on the cost of wood residues and the value of the bagasse can be assigned an opportunity cost in a variety of ways, including parity with the wood residues or only allowing handling costs for the bagasse. - 17 - 3.22 JPS and Petronol will need to come to agreement on these and a host of other disputable matters. While this could be a very complex and interesting calculation, the agreed-upon levelized cost will most likely be comparable to or lower than that which JPS can achieve in its thermal plants, and is likely to be considerably lower than the J 55 cents/kWh rate charged by JPS to industrial customers. 3.23 A simplified analysis of the Petronol cost of electricty production is shown in Annex 5. The financial cist is estimated at J 35 cents/kWh (US 6.4 cents/kWh), including a cost for wood residues at the FIDCO gate of J$25/tonne. While this analysis can produce only approximate figures that are sensitive to such assumptions as the cost allowed for bagasse, and the share of the equipment and maintenance cost to be assigned to JPS power production, it does indicate that Petronol can produce power at a cost equal to or below the costs of JPS. 3.24 The price that FIDCO can obtain for its residues from Petronol will clearly depend on the price that Petronol will be able to obtain from JPS for its power. Annex 5 indicates that at a residue price at the FIDCO gate of J$25/tonne, Petronol would require a price from JPS of J 35 cents/kWh to break even on a financial basis. If JPS were to pay the full avoided cost for power of J 48 cents/kWh, Petronol could afford to pay J$83/tonne at the FIDCO gate and still break even. At the most likely JPS buy-back price of J 35-40 cents per kWh, the uaximum residue price would range from J$25 to J$48 per tonne at the PIDCO gate. 3.25 Agreement between Petronol and JPS will require considerable negotiation. There will be arguments to drive the residue price down (e.g. possibly lower power production efficiencies) and others to drive it up (e.g. allocation of maintenance to sugar and ethanol production). A more accurate levelized production cost cannot be constructed at this time as: (a) The new turbogenerator set will not be alone in supplying JPS power but will be supplemented by the existing turbogenerator set during the non-grinding season; (b) The value of bagasse is difficult to establish as it could legitimately have a higher opportunity cost for alternative purposes, i.e., poultry bedding, or in baled form for next season boiler start-up purposes, or a lower value based only on handling charges; (c) The efficiency of the topping cycle will be highly dependent on the new boiler and turbine (which have not been selected yet) and the amount of cane actually to be processed. It is possible that the tender responses will offer some interesting capital cost/efficiency trade-offs; and - 18 - (d) The operating and maintenance costs can be split between power generation and sugar/ethanol production in some imprecise ratio, Economic Analysis 3.27 It is clear that Petronol can produce power at a cost that is significantly less than JPS, while using an indigenous fuel. The eco- nomic levelized cost of production of power at Petronol is calculated in Annex 5 as J 33 cents/kWh, while the avoided economic cost of electricity production at JPS is estimated as J 40 cents/kWh (short-run) to J 58 cents/kWh (long-run). Net savings in electricity production costs thus range from US$65,000 to US$230,000 per annum. 3.28 These figures are conservative estimates of net national benefits of improved sawmill residues use, as no credit has been given for the avoidance of costs associated with dumping and landfill of presently unutilized residues. 3.29 Another measure of national benefits is the value of displaced petroleum products. If Petronol produces 5,030 MWh of power from sawmill residues for sale to JPS, approximately 1,434 tonnes of RFO will be saved. The total saving is J$1.0 million or US$0.18 million per year, composed almost entirely of foreign exchange. Evaluation 3.30 The combustion of FIDCO residues by Petronol is likely to represent the best application of these residues because of: (a) Existing equipment and exrerience in burning solid fuels; (b) Process steam generation and electric power production for both self-use and sale to JPS on a large enough scale to gain maximum financial and economic benefits; (c) Close proximity to the sawmill, minimizing transport costs; (d) Sufficient potential demand to take all of the available residues; and (e) Fulfillment of an existing project need instead of being a forced fit solution. 3.31 However, there are some factors that could threaten the overall viability of the Petronol project that must be considered, including: (a) Current low levels of cane production in captive land; (b) Limited private land in cane production; - 19 - (c) Competition in early years for cane supplies (e.g. with the Sugar Industry Research Institute at 60,000 tonnes/year); (d) Reliance on sorghum, with questionable availability, for process input needs; (e) Need to import molasses to guarantee ethanol production; (f) Reliance on Jamaican government price supports for sugar production; (g) Reliance on Caribbean Basin Initiative (CBI) incentives to guarantee profitability of ethanol production; and (h) Reliance on a new single boiler/turbogenerator to satisfy process needs while potentially having to operate at unsustainably low efficiency points if process feedstock supplies are limited. 3.32 As the project appears to be well planned, the mission believes that despite the risks, PCJ's pessimistic scenario will be achieved. That is to say that Petronol alone will create sufficient demand to take all of the available FIDCO residues. Jamaica Broilers Limited Background 3.33 Jamaica Broilers Limited (JBL) is a large poultry processing firm located near the FIDCO sawmill. JBL already buys residues from FIDCO for use as poultry bedding, but is also a potential customer for energy use of the residues. Current fuel usage is high, both to produce steam for the rendering process and in the form of power for flash freezing and refrigeration. Production is currently at the rate of 9,000 birds/hour with a planned increase to 12,000 birds/hour in three years time. 3.34 JBL runs two process steam boilers, with a total annual fuel consumption estimated at 1,330 tonnes of diesel oil per year. In early 1987, JBL converted one of its two process steam boilers from diesel oil to RFO, with very satisfactory results. As one boiler, supplemented by a 10,500 gallon solar water heating facility, can meet the current and predicted future peak steam demand, JBL may not convert the second boiler but keep it on standby with diesel oil firing. 3.35 Under a CIDA sponsored project conducted in 1985 by Canadian consultants, JBL was evaluated for implementation of a wood-fired cogeneration plant or process heat plant in their chicken processing - 20 - plant, then processing 7,000 birds per hour on a single shift (ten to twelve hours) basis. Diesel oil (22,000 Igal/mo) was used for steam raising and power purchased from JPS at about J 55 cents/kWh. The CIDA study evaluated several alternatives and finally recommended a phased project that started with wood-fired steam generation and progressed eventually to 500 kW self-generation of electricity based on captive fuelwood plantations. 3.36 However, the plantation concept was not acceptable to the JBL management. The study was also marred by several methodological weaknessest (a) It did not evaluate the technically viable and inexpensive conversion from diesel oil firing to 3FO firing, despite the fact that RFO is the obvious basis for comparison with woodfuels. (b) The consultant assumed that an increase in bird processing from 7,000 to 12,000 birds per hour would double the fuel oil consumption. In fact, JBL staff predict that when this level of processing is reached in three years, fuel consumption will increase only proportionately, i.e. by slightly over 70 percent. New Boiler System 3.37 The CIDA consultant evaluation of the new boiler optiou is corrected for the above factors in Annex 6. With a nominal price of residues at J$25/tonne at the FIDC0 gate plus transport, the "best case" of the CIDA study would have a payback period of nine years and a financial rate of return of 13 percent, making the project an unattractive one. (JBL has stated that they would require a financial return of 15 percent above the cost of capital in order to justify an investment.) The economic rate of return is even less at 7 percent. 3.38 There is an additional factor that will result in even less marginal benefit from conversion than calculated above in the corrected CIDA analysis. JBL is planning to send a major portion of the chicken offal to JBL's sister company, Content Agricultural Products Ltd., for use in the organic digestion processes of its feed and fertilizer factory. This will decrease the need for steam for rendering substan- tially, resulting in a decrease in total steam needs of roughly one- half. This in turn would reduce the potential fuel savings so that conversion to biomass fuels becomes even more unattractive. 3.39 It is unlikely that a new wood-fired option, especially two boilers as suggested by the CIDA consultant, can be justified at the JBL facilities when compared to RFO. A single wood fired boiler system would reduce the reported installed cost by J$l million, but this would only bring the return back to the 17 percent range with about a six year payback at the 12,000 bird per hour processing rate, and with current rendering steam usage. - 21 - Boiler Retrofit 3.40 There is another option that was not considered in the CIDA study, which is the retrofitting for residue firing of one of the existing boilers. Based on internationally available equipment, a residue burner can be flange mounted to the existing shell boiler with the oil burner removed. There are enough in'ernational suppliers to hold a competitive bid. The cost estimate for a retrofit of one of the JBL 250 horsepower shell boilers is shown in Annex 7 as J$2.9 million. 3.42 With fuel savings of J$1 million, based on processing 12,000 birds/hour, the simple payback would be 2.9 years and the financial IRR estimated at 33 per cent. These are attractive figures, but they are based on the current rates of steam consumption. Cutting the rate of steam consumption to the levels planned by JBL results in a six year payback and a financial IRR of 16 per cent, which is again unattractive. These rates of return are calculated using the current price for energy use residues at the FIDCO gate of J$25/tonne. 3.43 As shown in Table 3.5, if JBL were to convert one of its boilers for wood firing there is a high probability that it would consume only 5,125 tonnes of residues at planned steam rates, even at the high production level of 12,000 birds/hour. This is only about 45 percent of the residues available for energy purposes. Only if JBL were to increase production levels to the 12,000 bird/hour level and drop plans to reduce steam needs for rendering would JBL be a good customer for FIDCO's residues. Even under these conditions, FIDGO would be unlikely to receive a price significantly above J$25/tonne loaded at the sawmill gate. TABLE 3.5: JBL POTENTIAL RESIOUES CEMAND Diesel Residues LHV (NJ/kg) 45.3 9.66 Efficiency of Use so) 60 65 Annual Consuoptlon at Current Steam Demand (tonnes) 7000 birdsAhr a/ 1,036 5,990 9000 birds/hr 1,332 7,688 12000 birdsAhr 1,776 10,250 Annual Consumption at Planned Steam Demand (tonnes) 7000 birds/hr 518 2,990 9000 birds/hr 666 3,844 12000 birds/hr 886 S,125 a/ Based on consumption of 22,000 Igal of diesel oil per wonth. Source: JBL; Mission estimates. - 22 - 3.44 Considering a smaller sized retrofit to match the reduced steam demand is not recommended, although a better rate of return could be obtained. The trade-off would reduce reserve steam capacity to attain a better capacity utilization factor, and also to reduce capital cost. This suggests that any additional processing of offal (Content plant down, slow feed and/or fertilizer sales) by JBL would have to be done with fuel oil at a premium price. The best business decision would be to retrofit to the size of the existing equipment, but this retrofit appears unattractive on a financial basis as noted above. Cogeneration 3.45 The CIDA consultant also evaluated JBL as a cogeneration site based on development of fuelwood plantations. Use of sawmill residues was considered as a secondary but more desirable possibility. The payback in the best scenario was 2.8 years at the future bird processing rate of 12,000 birds per hour and 500 kV generation through a non- superheat, condensing reciprocating steam engine/generator. However, the overall power production cycle efficiency assumed at 15 percent is probably twice that which can reliably be reached with saturated steam as used. Also, the fuel savings were again compared with diesel oil instead of the less costly and technically feasible RPO. The payback and financial return on investment for this option, when corrected for the questionable assumptions, are clearly unattractive, i.e. greater than five year payback and lower than 15 percent rate of return. 3.46 At the capital cost projected by the CIDA consultant of J$8.63 million (over US$3,000/kW installed), the annualized capital cost per kWh of production is shown in Table 3.6 to be J 58 cents. The capital costs alone are higher than the cost of purchasing power from JPS (J 55 cents/ kWh). Even assuming baseload operations twenty-four hours per day will be marginal, since the fuel increment at poor cycle efficiency will almost offset the capital cost decrease per unit. Table 3.6: CAPITAL COST PER UNIT FOR JBL COGENERATION OPTION (1987 JS) Capital Cost (from CIDA study) ('OOOJS) 8,625 Annual Capital Cost a/ ('OOOJS) 1,155 Annual Production (based on 500 kV baseload, 12 hr/ day, 330 days/year) (M4h/yr) 1,980 Capital Cost/Jnit (JS/Wh) 0.583 (USS/kWh) 0.107 a/ At 12% over 20 years. Source: Biomass Thermal Utilities Inc.; Mission estimates. - 23 - 3.47 Consideration of a cogeneration option in this size range would require several mitigating factors: (a) Seven day a week operation for possibly two but probably three shifts per day; (b) Installed cost for the boiler/engine-generator between US$1,000 to US$2,000/kW depending on capacity factor to be experienced; and (c) A captive waste fuel with only disposal cost value. For kW scale applications, the above capital cost can be achieved with non-condensing Brazilian systems that have a maximum achievable power generation efficiency of 6 percent, but this would magnify the importance of the costs of the residue fuel. FIDCO Background 3.48 The potential use by FIDCO of sawmill residues for energy was examined in 1985 by the Caribbean Development Bank (CDB), who sponsored a feasibility study of the use of FIDCO residues for self-generation of power. The feasibility study recommended a 1,250 kW plant, assumed that 80 percent of total waste production was available for use as boiler fuel, and also assumed that JPS would buy power on an "at will" (non- firm) basis for a minimum of US 5.5 cents/kWh and a hoped-for US 7 cents/kWh. At the 5.5 cent price, the rate of return was projected as being between 11 and 17 percent while the plant would operate at a capacity factor of 38.5 percent, producing 1.35 million kWh for self-use and 2.85 million kWh for sale to JPS. This would continue until 1994 when FIDCO would go to two shifts and double the throughput. The capacity factor would improve to 72.5 percent once double shift operations start. Cogeneration System 3.49 The power plant cycle chosen was that of a single boiler, single condensing turbogenerator set using turbine inlet steam conditions of 27 bar (400 psig) and 615 'F. The estimated capital cost of the installed plant was US$3 million or US$2,400/kW, including engineering, interest during construction, and a 10 percent contingency. A two year time scale was adopted for getting the plant constructed and accepted. The levelized financial cost of production was estimated by the consultants to be J 49 cents/kWh (US 9 cents), only slighly less than the 55 J cents/kWh being paid for electricity from JPS at the time, suggesting only small potential savings. - 24 - 3.50 The CDB consultant was careful to use conservative estimates for such items as heating values, boiler and turbine efficiencies, and for capital and operating costs. The overall fuel pile to bus bar efficiency of the recommended plant design was estimated at 10.86 percent on a net available power output basis or 12.15 percent when plant parasitic losses are counted as output. These are reasonable estimates for this type and size plant even when operating at a relatively low capacity factor. 3.51 However, the assumption that 80 percent of the total FIDCO residues would be available for use as fuel is not valid. Anything beyond 11,000 tonnes requires a penalty for lost revenues from alternative uses. At that availability, only two-thirds of the estimated 4.2 million total annual kWh could be generated. Spreading the incremental production costs over this diminished power production base would clearly result in a cost of production above the J 55 cents currently paid by FIDC0 to JPS. Because of the closeness of the originally calculated production cost of J 49 cents/kWh to the rate paid, burning the additional residues and taking the lost revenue penalty will only serve to make a marginal situation even worse. 3.52 In conclusion, FIDCO is not in a good position for self- generation of power and/or sales to JPS using sawmill residues because: (a) The plant operates only one shift per day with two shifts at least ten years away; (b) The average days worked per year is about 220 versus a planned 250; (c) The residue resource base is too small to reach a firm capacity agreement with JPS at anything close to 2 MW, hence any buy- back price will be low, i.e. J 25-30 cents/kWh; and (d) The FIDCO levelized cost of production, based on the scale appropriate to the resource base, will be at least equal to or exceed that of JPS. Contingency Residue Markets 3.53 If Petronol first and JBL next cannot become a steady purchaser for FIDCO's "energy fraction" residues, there are some other options of of lower priority. These sites are not rated as having a high probabi- lity for a successful residue fired application, but they do have some characteristics that could qualify them for further evaluation on a contingency basis: (a) Process steam requirements, and power purchased from JPS; - 25 - (b) Within reasonable transport distance from FIDCO, i.e. less than 30 km; (c) Stable, basic need industries; and (d) Consumption of sufficient amounts of RFO to balance with the residue availability. 3.54 The reasons for not considering these alternative sites for first priority detailed analysis include one or more of the following: (a) Longer transport distances compared to Petronol and Jamaica Broilers; (b) Plant and property physical limitations concerning residue storage, handling equipment, and expanded boiler room requirements; Cc) Receptivity of management to the use of solid fuels; and (d) Inappropriate scale or timing to be of immediate value to FIDCO. 3.55 The contingency investigation list includes: (a) West Indies Pulp and Paper, Freetown (described in Annex 8); (b) Jamaica Food Specialties (Nestle), Bog Walk; Cc) Seprod Soap, Kingston; (d) Guiness Brewery, Kingston; and (e) Desnoes and Geddes Ltd., Kingston (soft drink bottling and Red Stripe brewery). Noticeably absent from the contingency list are any additional sugar mills. Other than the Petronol/Bernard Lodge mill, there are no other mills in operation within reasonable transport distance. Charcoal Briguetting Background 3.56 With a grant from GTZ, the Sugar Industry Research Institute (SIRI) is installing a charcoal briquetting plant at its facilities adjacent to the Bernard Lodge sugar mill. The main SIRI project is using a new cane processing method that strips the outer rind off the cane before processing into a host of sugar based products. The process will - 26 - handle 60,000 tonnes of cane per year. The specific GTZ charcoal component has resulted in the order of a Brazilian drying and baling system, a Portuguese carbonizing system, and a German briquetting machine that will produce up to 3,000 t/yr of charcoal briquettes, although there will likely be only enough cane rind/bagasse for 2,000 tonnes of charcoal. 3.57 SIRI/GTZ has already done market acceptance trials based on briquettes produced in Germany. The briquettes were competitive with traditionally produced charcoal and were well received by customers. Production Economics 3.58 The SIRI and GTZ representatives did not have data on the full production cost for the briquettes and are co:isidering the equipment costs which were covered as a grant as not applicable to product pricing. However, they acknowledge that wood residues, if used as feedstock, would have to be minimally priced because: (a) It will take two tonnes of green sawdust to make one tonne of dried material; and (b) The carbonization process will recover at best 40 percent of the input feedstock. 3.59 The conversion ratios imply that it would take upwards of five tonnes of sawdust to make one tonne of charcoal (carbonized solids). Taking the residue price delivered to Bernard Lodge for Petronol as a base of J$44 per tonne (including transport, unloading and handling at the receiving end), the sawdust input cost for producing one tonne of briquettes would be at least J$220. The total production cost would actually be a function of the char price plus the binder price in the correct proportion. The simple carbonized sawdust value is, however, a good indicator of the total raw materials cost. To this must be added the costs for briquetting which is energy intensive, plus the capital recovery for all the hardware whether or not it is a grant. 3.60 Because of the sensitivity to feedstock costs, FIDCO need not actively pursue the SIRI/GTZ project as a market for its sawdust residues. Only if there are no other customers would sale to SIRI be warranted, at any price above the cost for FIDCO to load the material. The SIRI charcoal activity at the present stage should be considered as a research and development project, which may or may not have good continuity as a customer. It represents a relatively small demand at a minimum value for the residue material. - 27 - IV. ON IN D a Conclusions 4.1 It is not financially viable for PIDCO to use its own residues for on-site energy use, even though there are technical options available. FIDCO thus needs to concentrate on obtaining long-term contracts with outside customers for sawmill residues, and must find or create a demand for this commodity. FIDCO has done this to some extent in both the energy and non-energy sectors, but needs to pursue available options more actively. 4.2 Two potential customers that were identified for detailed evaluation are Petronol with its integrated sugar mill and ethanol distillery, and the Jamaica Broilers Limited chicken processing plant. While both have technically viable uses for wood residues, Petronol has the best potential for being able to use all the 11,000 t/yr "energy fraction" residues that FIDCO can produce on a single-shift basis. JBL has some prospect for using close to the total energy fraction available, but a high probability of requiring only half the available amount. The foregoing assumes that the higher value, revenue generating non-energy markets FIDCO has established will be maintained. 4.3 Petronol would also appear to offer the best opportunity for realizing a reasonable value for the sawmill residues as they can be blended with bagasse, enabling the operation of a 7.6 MW cogeneration facility at a good capacity factor (provided cane and molasses supplies are available to operate the system at its design throughputs). The scale of operations is many times larger than that of either JBL or FIDCO in a self-generation and/or cogeneration mode, and the efficiencies achievable are much greater. The capital investment can also be spread over sugar, ethanol, and electricity production. 4.4 As there is apparently no excess of competitors bidding-up the price of the residues for energy purposes, the market price to FIDCO is currently J$25 per tonne loaded at plant gate. This is the price that has been paid for seasonal start-up fuel needed by the Bernard Lodge sugar factory (now part of Petronol) to avoid using residual fuel oil. The maximum attainable market value in the Petronol case will be dependent on the sales price that Petronol can negotiate with JPS for electricity buy back. If Petronol can obtain over J 35 cents/kWh from JPS, then there is an opportunity for FIDCO to recieve a higher price than the J$25 per tonne for its presently surplus residues. This to Petronol is actually J$44 considering transport and handling. Sensitivity calculations have determined that J$48 per tonne to FIDCO (J$67 to Petronol) is probably a realistic maximum at this time with no competitive demand. 4.5 While in FIDCO's viewpoint the residue sales price is certainly of great concern, from a national planning perspective the transfer price - 28 - is of no import so long as the residues are put to their highest and best economic use. Should the Petronol cogneration project proceed as designed, the net national benefit due to reduced electricity production costs from substitution of residues for petroleum would range from US$65,000 to US$230,000 annually. The economic value of the replaced residual fuel oil, nominally burnt in JPS boilers, would be US$182,000 per year. Recommendations 4.6 Based upon the previous analyses of FIDCO residues utilization, the mission recommends that: (a) FIDCO attempt to negotiate a long-term residue supply agreement with Petronol as soon as possible. (b) Any sales of residues for energy purposes be indexed to an appropriate energy price indicator, such as the refinery gate price for residual fuel oil. (c) FIDCO re-evaluate its handling of the residues to maximize sales for higher value uses such as poultry bedding. JBL would like to purchase a total of 3,410 tonnes of residues per year based on 910 tonnes of planer shavings and 2,500 tonnes of hogged materials. JBL is also willing to accept some percentage of sawdust mixed with the hogged material so that the supply can be made more reliable and regular. FIDCO may wish to accept a long-term contract to supply the 3,410 tonnes per year at a price at least equal to the current sales prices, I.e. J$100/tonne for shavings and J$70-80/tonne for hogged material. Areas for Further Investigation 4.7 Some 13,000 tonnes per year of rice straw, and possibly some hulls, will become potentially available from an Agro 21 rice project in Amity Hall. While outside of the scope and time constraints of this mission, it is recommended that follow-up (by MMET; by USAID, who have an active rice residue utilization program; or by ESMAP) be initiated promptly to evaluate this apparently under-utilized (now burned in field) resource as feedstock for: (a) Making-up the biomass deficit in the Petronol project, estimated at up to 10,000 tonnes per year for the first three years and 5,000 tonnes per year thereafter; or (b) Supplying biomass boiler fuel for a retrofit steam raising project at the JBL chicken processing plant, substituting rice straw for wood residues. - 29 - 4.7 The problem of high silica content must be acknowledged along with the field collection costs that will have to be borne (e.g., baler). Rice wastes could, however, be an excellent biomass supplement to the wood residues. Both Petronol and JBL are now aware of this potential resource. - 30 - Annex I LIST OF CONTACTS FIDCO Mr. Guy A. Symes - Managing Director Mr. Owen B. Evelyn - Manager, Technical Services Mr. Don Bennett - Production Manager Mr. Bhudlall - Administrative/Marketing Manager Petronol (Petroleum Corporation of Jamaica) Mr. Lee Johnson - Plant Manager PCJ Engineering (Petroleum Corporation of Jamaica) Mr. John Cumper - Engineering Manager/Petronol Project Mr. Steve Marston - Sr. Project Engineer Jamaica Broilers Ltd. Mr. Richard Broderick - Plant Manager/Director Content Agricultural Products Ltd. (Owned by JBL) Mr. Andrew A. Wildish - Managing Director Mr. Thomas Scheutzlich - Advisor to SIRI Charcoal Project Sugar Industry Research Institute Dr. Ian Sangster, Chief, Factory Technology Division Mr. Michael Hylton - Manager, Factory Services Petroleum Corporation of Jamaica Ms. Avril C. Shirley - Manager, Energy Economics USAID Mr. Charles Matthews - Chief Engineer West Indies Pulp and Paper Mr. Michael A. Pickeragill - Managing Director - 31 - Anne: 2 PIDCo Yield Projections - Vol.t{m}) 350,000 340,000 330,000 320,000 Cob P_ F 310,000 Ii*1W qupp 290,000 280,000 2a0,000 260,0C0 0 250,000 240,000 230,000 220,000 210,000 200,000 4 I 90,00 0 160,000 110,000- 160,000. 150,000- 140,000 120,000 130,000/ 300,000 90,000 80,000/ ; 70,000 60,000 40,000 20,000 1967 68 89 g0 93 92 93 94 95 96 9? 98 99 1200020012002200320042=02006 Petronol Energy Balance ............ mue Km IS (a U) M6." 24.19 M." 24.91 RX.32 45.23 02.2S 45.6 TM 11mm ami aIa t 1.90 3%5. I9 2.40 2.60 . 2.0 2.0 2.0 nIo SMm M o 2.00 2.* 2.00 2.10 2.ft 2.10 2.10 2." Tom MsU 1 o nt 1.30 1.30 1.30 2.20 2.20 2.20 2.20 2.20 lI= fUo u JiSm) I"04.* 0 19". o 256., 62.454 23.169 50,S3I mm fno U (M 12,096 21.1W 21.144 23.2% 0 S4.000 0 40.04S sW fon (101) 0 6.131 0 41.1 0 1 0 0 w . .... .......... lS 01" 1 (VU) 6.44 13,SS2 11.312 0, 8. 0 20.000 0 15.523 *OIL CM=(ULS) 0 3,6.s1 0 22.231 0 r 0 0 ....................... 1twi au110 oS MrItlnU (U) 0.00 0.00 0.00 .46 S.01 2.6 S.01 2.0 "no Kul. UPi (Un) 0.00 0.43 0.00 I.93 S.01 4.26 S.1 4.31 "M ur lIrIiti (11) 0 15.56 0 S3=- 1433 0.450 IS.123 3.934 tM"n 1" 19 M0 1991 ...... . . ._ ............................................ M cSa (TIM) 20.000 20,000 20.000 15,128 fMt 0n (I)S 36,511 n.2233 I 0 0 llfs tECtlCI (.1) 15,2 5$.3S 24., 24,651 9tt'U s69t1'e oSZ N t w St UZU "tofu 50A'6 1s1Lui (mu) _ 1m Wu$ sot m*" ~~MSttSS twatI $9 t'tt 111*19 tic"'S Soon '" 'gSo 6it§ ..... ...._ ........................................................................................ ................ ..................... .., t1't Olt*1 S5'1 RUSS SS'S 0110*E' U1'* 531S - ius1t611 so,s:1 Ems. 9WUn9 OWN sHOW wl'la ssuwmum * we'. OWLS 0 wWIs * a;t o s a i it' $ C.' 0 LtoM 0 111*ZL to , " 0 '9t *t ha "4 (usdrn" PU l | X U'"so swissX *oto .Wi mi,t urt'^ Sis rn'w, su 09,015 0 SM's. 0 0 0 0 0 nUN~~~~~~~~~~~~~~~(S 0IW 110111Ju X 0 ....................................................................... ..... _. ...... ............. * mis 0 to) 51 R1o 0 Md 1 " IJ S 99* 99906 0o tosW, to' 983t 0t'l u16L 9311mif *1 50 1t0a W5S 6 5L113 1'S03 AISIWW "'1~~~~~~~~~~~~~~~~~~~~~~~hest mii si' *O OO Too" "Zoigt S9O'tS =0' Isola vt*' Su'lt Ilion t # " a Ol@C MISS O 095 S twit 5 WU au 111101 O mum 61 0 1016'mu m iSwum I 6U6'1 slum am SO U t8Wls O S il @505 RU IS IWO SM U VALI Ail(ust SUtO £1113 mam1 ............ ...... * ~~~~~~~(M) amwi ItSOt to 3 t It'owl ZU' Sn SM' 5'l SIM 1SItIWt3 m .................................. ......................................................... seime-on " tw wDlnWM PS11 51t5 1-1 mono $w a on* is w on MISes un a moa $1 s oss t j13003 IIM Iwain a1 1so *1t! Uls Wilms U 4W SIl"lIlI 11 SI S @3l law[1)31O 1 S3 UN OOO't US! III S1 WUSS a" S' 3U1N11113 t10 lot a 061 OwnsWI SW S 111 , li3t au CU'Zl. anWI-I w "an s ul i a swat 1319351533311 11135 ~~~~~~~~~~~~~~~~............... ..................................................... ............................... ............. ....... ............................ ................................ ........... II-1111-It onS"II 'S l man - I= 3m lMIt 111imi on Niles 4 Annex 4 -34 - ESTIMATED JPS LONG RUN AVOIDED COSTS - COAL FIRED PLANT (all monetary units in US$) A. Capital Cost of Plant cost per kV (1981$) 1412/kW (1984$) 1584 Interest during construction (211) 190 Total installed cost 1917 Annualized Cost 308 kW/year (15X interest loan, 30 years) Annual Generation 6.8 MWh per kV of capacity (78% capacity factor) Levelized cost of capacity (30 years) 4.5 O/kWh B. Capital Cost of Coal Port Old Harbour Port Facility (1981$) 52.2 $ million (1984$) 58.5 Interest during construction (212) 12.3 Total handling capacity of Old Harbour 835,000 metric tons/year Capacity needed for coal plant 250,000 metric tons/year (Q 75MW) Allocate 33X cost of coal port to coal power plant Levelized Cost of coal port allocated to electricity output 0.7 ¢/kWh C. Fuel Delivered price 2.50 $/106 Btu Levelized cost (6Z inflation, 4.6 C/kWh 2X real escalation, 15Z discount rate, 30 years) D. O&N Estimated 1984 0.5 O/kWh Levelized 0.75 (62 inflation, 02 real growth, 15% discount rate, 30 years) E. Total Levelized Cost Capital Cost coal plant 4.5 Capital Cost port 0.7 Fuel 4.6 O& M 0.75 Total 10.6 0/kWh Source: USAID (1984). -35- Annex 5 Page 1 of 2 Levelized Cost of Power Production at Petronol ASSUMPTIONS FOR CALCULATION OF LEVELIZED COST OF POWER PRODUCED BY PETRONOL FOR SALE TO JPS (All Costs in 1987 J*) Configurations 5 MW capacity consisting of non-condensing turbo-generator, 600 psi g bagasse-fired boiler with superheat outlet temperature of 600 Q F, fans, feed- pumps, controls, structural steel, foundations, and piping, installed in existing sugar factory plant. Installed Cost (000 is) 32760 Project Life (yrs) 20 Discount Rate (J) 12 Annualized Capital Cost (000 J*) 4386 Annual Production (MWH) 24789 O+M Cost (J$/kWh) 0.045 Annual O+M Costs (000*J) 1117 Fuel costs assume same value for bagasse as for delivered wood residues, as follows: -----…(*tonne)------ Financial Economic loaded at FIDCO gate 25 23 transport (16 km round trip) 10 10 handling at Petronol 9 7 __________________ Total 44 40 Fuel heating value (Mi/t) 9694 Conversion ratio * 17% efficiency (MJ/kWh) 21.2 Annual Consumption biomass (tonnes) 54211 Annual fuel cost Financial (000 i*) 2371 Economic (000 3*) 2146 Exchange Rate (J$/US*) 5.46 - 36 - Annex 5 Page 2 of 2 ESTIMATE OF LEVELIZED COST OF PRODUCTION FOR POWER AT PETRONOL (1987 J $) Annual Costs Financial Economic Capital cost 4386 4386 Operating and maintenance 1117 837 Fuel Cost 2371 2208 Contingency 610% 787 743 Total 8660 8174 Cost/kWh 0.349 0.330 converted to US* 0.064 0.060 SENSITIVITY OF MAXIMUM RESIDUE VALUE FOB FIDCO TO POWER PRICE J * US s Residue Value Residue Value Power ---------------- Power ---------------- Price Financ. Economic Price Financ. Economic (J*/kWh) (Q%/tonne) (US*/kWh) (US$/tonne) 0.300 2 11 0.055 0.44 2.09 0.325 14 23 0.060 2.54 4.18 0.350 25 34 0.064 4.63 6.27 0.375 37 46 0.069 6.73 8.37 0.400 48 57 0.073 8.82 10.46 0.425 60 69 0.07e 10.91 12.56 0.450 71 80 0.082 13.01 14.65 0.475 83 92 0.087 15.20 16.85 - 37 - Annen" 6 Page 1 of 3 Financial and Economic Analysis of JBL Wood Fired Process Steam Plant JAMAICA BROILERS WOOD PROCESS STEAM PLANT ASSUMPTIONS (All Costs in 1987$) Project Life (Yrs) 20 Discount Rate (I) 12 Capital Cost (OOOJ$) 5400 Annualized Capital Cost (OOOJ$) 723 Annual Operating Cost (OOOJ*) 115 Annual Wood Use Low Prod (tannes) 450%) Med Prod (tonnes) 5785 High Prod. (4:onnes) 7695 Base Price Residues OFIOCO Gate Financial (J$/t) 25 Economic (J*/t) 23 Transport Costs to JBL (Round trip 20 miles) Financial (J$/t) 19 Economic (J$/t) 19 Unloading+ Handling 0 JBL Financial (J$s/t) 8 Economic (J*/t) 6 Total Price Residues Financial (J*/t) 52 Economic (J$/t) 48 Annual Oil Displacement Low Prod (tonnes) 833 Med Prod (tonnes) 1071 High Prod. (tonnes) 1425 Value No 6 Oil Financial (J$/t) 957 Economic (J$/t) 690 -38- Annex 6 Page 2 of 3 JANAICA 8ROILERS VD PROCESS STERMA PLANT Calculation of Financial IRR bled on High Production Sconaio (000 1987J8) Capital 0 + H TOTAL Avoided NET CUII. Year Cost Cost Fuel COST Cost CABIFLON CARFLOI FIRR 1 4000 0 0 4000 -4000 -4000 0.134 2 1400 35 120 1553 409 -1146 -5146 3 115 401 516 1364 049 -4298 115 401 514 13U4 48 -3450 5 115 40t 516 1364 941 -2602 6 I1 O4 516 1364 948 -1755 7 1t5 401 516 1364 848 -907 B I15 401 516 1364 948 -59 9 115 401 516 1364 148 788 10o115 441 516 1364 848 1636 I1 115 401 516 1364 948 2484 12 115 401 516 1364 48 3332 13 1is 401 516 1364 848 4179 14 115 401 516 13U4 84 5027 i5 115 40! S16 1364 948 5975 16 115 401 516 1364 848 6723 17 115 401 516 1364 a4 7570 19 115 401 516 1364 848 9418 19 115 401 516 1364 84 9266 20 115 401 516 1364 849 10114 TOTAL 5400 2104.5 7339 14843 24956 10114 Senitivity of FIR to Price of Residues I FtICO FIDCO Pr. FIRR 0 0.170 5 0.163 1O 0.156 15 0.140 20 0.141 - 39 - Annex 6 Page 3 of 3 JAHAICA BROILERS WOOD POCESS STEAM PLANt Calculation of Economic IRR lased on High Production Skmnuio (000 199781) Capital a + N TOTAL Avoided NET CUp. Year Cost Cost Fuel COST Cost CASHFLOM CASHfLOM .ne,n eon- .,oe~~ ennnn _n. ._ EIRR 1 4000 0 0 4000 0 -400 -4000 0.06 2 1400 26 ItO 156 295 -1241 -5241 3 86 368 454 993 529 -4712 4 86 368 454 983 529 -4193 5 86 368 454 993 529 -354 6 96 368 454 983 59 -3125 7 86 368 454 983 529 -2596 a8 86 368 454 993 529 -2067 9 96 368 454 983 529 -1538 10 96 368 454 983 529 -1009 it 86 368 454 983 529 -490 12 86 369 454 983 529 49 13 86 368 454 983 529 m 14 96 368 454 983 529 1107 i 86 369 454 993 529 636 16 86 368 454 983 29 2165 17 96 368 454 983 529 2694 19 86 368 454 993 529 3224 19 96 368 454 983 529 3753 20 96 368 454 993 529 4292 TOTAL 5400 1579 6733 13712 17"93 4282 Sensitivity of EIRR to Price of Residues I FIDC FIOCO Pr. EIRM 0 0.105 5 0.096 to 0.061 15 0.079 20 0.070 23 0.070 - 40 - Annex 7 JBL Boiler Retrofit ESTIMATED COST OF RETROFITTING ONE OF JBL'S SOILERS FOR WOOD FIRING ( 000 1987 J3) 250 hp burner retrofit package 655 Overhead 25 tonne surge bin/hopper, transfer conveyors, 300 tonne sheltered storage area (concrete pad possibly, frame steel, roofing) loading conveyor, and safety sizing screen 1092 Storage site improvement 109 Fork lift with bucket 246 Sub-total 2102 Installation, engineering, spare parts and training 819 TOTAL INSTALLED COST 2921 Converted to USS 535 Financial Analysis 0 12000 b/hr, Current. Steam Rate Annual Fuel Cost (000 3s) 400 Annual Avoided Fuel Cost (000 J$) 1400 Net annual saving (000 J$) 1000 Financial Pay-back (yrs) 2.9 F IRR 33 Financial Analysis @ 12000 b/hr, Planned Steam Rate …----------------------------------------------------- Annual Fuel Cost (000 i$) 200 Annual Avoided Fuel Cost (000 J$) 700 Net annual saving (000 is) 500 Financial Pay-back (yrs) 5.8 -T RR (-x) 16 - 41 - Annex 8 West Indies Pulp and Paper West Indies Pulp and Paper is a major industrial processor in Jamaica. It has one paper plant based on imported pulp and two box plants. The company has had government participation, but has been in a divestiture process to become completely private since 1982. The total privatization will be accomplished very shortly with a buy back by a combination of company management and some U.S. private sector interests. The paper making facilities are on a 365 acre parcel in Freetown, about 20 to 25 km from FIDCO. The plant operates on a seven- day week, three shifts per day with two scheduled outages for maintenance: ten days in August and fourteen days in December. With unscheduled outages, the factory probably operates 330 days per year. The energy bill for all the operations is J$350,000 per month for electricity and J$250,000 for fuel oil. At an annual cost of J$7.2 million, energy is important as a cost component in their production A preliminary energy study was done by a Finnish aid group, however no hard copy was ever turned over to the company. Basically, the study looked at wood and residue based energy generation development on the captive 365 acres, and on extensive leased lands in close proximity of only marginal agricultural value. Nothing was ever done beyond that stage as under the divestiture process the government would not allow any major capital investment above that required to maintain operations. With finalization of the privatization, the corporate management is keen to tackle the firm's high energy costs. However, as a potential customer for the FIDCO residues they are safely three years from being considered, and are a contingency customer for consideration if Petronol and JBL prove unsuitable. West Indies Pulp and Paper has several options for proceeding, but until a pre-investment analysis is done they can only be considered as a potential future customer. As they do not appear to be able-to bear these pre-investment costs alone, little progress will be made without donor assistance of some type. - 42 - BIBLIOGRAPNY 1. "A Viability Study for a Wood Biomass Energy System, Jamaica, W. I.", Phase II Report, Biomass Thermal Utilities Inc., for CIDA, November 1985. 2. "The Generation of Electricity from Sawmilling Wastes: Feasibility Study for FIDCO", report by D. R. Spence and Associates to the Caribbean Development Bank, December 1985. 3. "Impediments to Off-System Electrical Generation in Jamaica: Summary of Findings", USAID, October 25, 1984. 4. "Non-Utility Generation of Electricity in Jamaica: Opportunities, Needs and Impediments", Energy/Development International for USAID, December 1984. IS,RD 1811 ~~~7;*00t7 7 ' ''LL C A R A~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~UO*, ~IAL MoleQ *fllrro r entd' 4 MoorPenn CoNrE MAMAIC -- - - rrotieZrrl9 f A /p 5 rn R4/7_wwaofrUl8X-rPn=' feet met$" CE R E~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~..erem.moF eeeCnrS. 0 - ineI° 00 IS V.ra A.,n,ne.e t_t_rrmh 2,9 - 6otroo8oore. r ALOM Pi - ' olM- EEMRGY SECTOR MANAGEMENT ASSISTANCE PROGRAM Activities Completed Country Project Date Number Energy Efficiency and Strategy Africa Regional Participants' Reports - Regional Power Seminar on Reducing Electric System Losses in Africa 8/88 087/88 Bangladesh Power System Efficiency Study 2/85 031/85 Botswana Pump Electrification Prefeasibility Study 1/86 047/86 Review of Electricity Service Connection Policy 7/87 071/87 Tuli Block Farms Electrification Prefeasibility Study 7/87 072/87 Burkina Technical Assistance Program 3/86 052/86 Burundi Presentation of Energy Projects for the Fourth Five-Year Plan (1983-1987) 5/85 036/85 Review of Petroleum Import and Distribution Arrangements 1/84 012/84 Costa Rica Recommended Technical Assistance Projects 11/84 027/84 Ethiopia Power System Efficiency Study 10/85 045/85 The Gambia Petroleum Supply Management Assistance 4/85 035/85 Ghana Energy Rationalization in the Industrial ector of Ghana 6/88 084/88 Cuinea- Recommended Technical Assistance Bissau Projects in the Electric Power Sector 4/85 033/85 Indonesia Energy Efficiency Improvement in the Brick, Tile and Lime Industries on Java 4/87 067/87 Power Generation Efficiency Study 2/86 050/86 Jamaica Petroleum Procurement, Refining, and Distribution 11/86 061/86 Kenya Power System Efficiency Report 3/84 014/84 Liberia Power System Efficiency Study 12/87 081/87 Recommended Technical Assistance Projects 6/85 038/85 Madagascar Power System Efficiency Study 12/87 075/87 Malaysia Sabah Power System Efficiency Study 3/87 068/87 Mauritius Power System Efficiency Study 5/87 070/87 Panama Power System Loss Reduction Study 6/83 004/83 Papua New Energy Sector Institutional Review: Proposals Guinea for Strengthening the Department of Minerals end Energy 10/84 023/84 Power Tariff Study 10/84 024/84 Senegal Assistance Given for Preparation of Documents for Energy Sector Donors' Meeting 4/86 056/86 Seychelles Electric Power System Efficiency Study 8/84 021/84' Sri Lanka Power System Loss Reduction Study 7/83 0071893 Sudan Power System Efficiency Study 6/84 018/84 Management Assistance to the Ministry of Energy and Mining .5/83 003/83 Togo Power System Efficiency Study 12/87 078/87 Wood Recovery in the Nangbeto Lake 4/86 055/86 Energy Efficiency and Stiategy (Continued) Uganda Energy Efficiency in Tobacco Curing Industry 2/86 049/86 Institutional Strengthening in the Energy Sector 1/85 029/85 Zambia Energy Sector Institutional Review 11/86 060/86 Zimbabwe Power Sector Management Assistance Project: Background., Objectives, and Work Plan 4/85 034/85 Power System Loss Reduction Study 6/83 005/83 Household, Rural, and Renewable Energy Burundi Peat Utilization Project 11/85 046/85 Improved Charcoat Cookstove Strategy 9/85 042/85 C8te Improved Biomass Utilization--Pilot Projects d'Ivoire Using Agro-Industrial Residues 4/87 069/87 Ethiopia Agricultural Residue Briquetting: Pilot' Project 12/86 062/86 Bagasse Study 12/86 063/86 The Gambia Solar Water Heatimng Retrofit Project 2/85 030/85 Solar Photovoltaic Applications 3/85 032/85 Global Proceedings of the ESMAP Eastern & Southern Africa Household Energy Planning Seminar 6/88 085/88 Kenya Solar Water Heating Study 2/87 066/87 Urban Woodfuel Development 10/87 076/87 Malawi Technical Assistance to Improve the Efficiency of Fuelwood Use in the Tobacco Industry 11/83 009/83 Mauritius Bagasse Power Potential 10/87 077/87 Niger Household Energy Conservation and Substitution 12/87 082/87 Improved Stoves Project 12/87 080/87 Peru Proposal for a Stove Dissemination Program in the Sierra 2/87 064/87 Rwanda Improved Charcoal Cookstove Strategy 8/86 059/86 Improved Charcoal Production Techniques 2/87 065/87 Senegal Industrial Energy Conservation Project 6/85 037/85 Sri Lanka Industrial.Energy Conservation: Feasibility Studies for Selected Industries 3/86 054/86 Sudan Wood Energy/Forestry Project 4/88 073/88 Tanzania Woodfuel/Forestry Project 8/88 086/88 Thailand Accelerated Dissemination of Improved Stoves and Charcoal Kilns 9/87 079/87 Rural Energy Issues and Options 9/85 044/85 Northeast Region Village Forestry and Woodfuel Pre-Investment Study 2/88 083/88 Uganda Fuelwood/Forestry Feasibility Study 3/86 053/86