Developers have to juggle at least a dozen issues in order
to turn a project into a reality. They need an offtake agreement, a feedstock
agreement, land for the facility, air permit, financing, etc. It’s enough to
make anyone’s head swim and frequently begs the question “what do you
concentrate on first?”
Like the timeless question of which came first, the chicken
or the egg, you can make a similar query with regard to biomass projects. Do you
determine the output and then try to find the feedstock and technology to fit
or do acquire feedstock first and then focus on finding the best technology to
process it and suitable applications?
There is no right way to approach a project and developers
tend to begin with one of three angles: the feedstock, the output or the site.
While it makes sense that end users would look at output first (an example
would be a factory looking to use biomass to make steam), a third-party
developer has more freedom with where to begin. Since there are several project
developers with a background in commercial real estate, we see that as a
popular starting point.
The purpose of this blog post is to discuss the importance
of feedstock and encourage project developers to pay more attention to it
earlier in the process. We’ve seen
too many examples of entrepreneurs becoming excited by an offtake agreement,
only to find several years down the road that it can’t deliver because they
can’t secure a large enough feedstock agreement at an economical price.
Determining the
quality of gas you can produce and the application of your output are crucial
factors in project planning. For example, if you want to put the gas in a
genset, you would ideally try to use MSW, end-of-life plastics or shredded
tires. While still possible, woody biomass and agricultural waste produce a
lower BTU gas regardless of the technology used to process it and is better
suited for use in a boiler.
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| Loose pile of chopped material next to bales of biomass feedstock to be used for bioenergy projects. Courtesy: U.S. Department of Energy |
Feedstock is extremely important for three reasons:
1. You can’t get a project financed without a feedstock
agreement.
2. The chemistry of the feedstock should affect the
technology you choose.
3. The economics of a feedstock can determine feasibility of
an entire project.
Now let us tell you the story of Joe*, a developer
attempting to start a second career:
Joe is a project developer who learned the importance of
feedstock the hard way. After more than 20 years at a manufacturing plant, Joe
lost his job when the recession forced the plant to close. Joe has lived in the
same town his whole life and through his connections he learned that another
facility 50 miles away was looking to become involved in a sustainable energy
project.
After doing some research and crunching numbers, Joe worked
up a proposal for the plant. He suggested using the agricultural waste that was
readily available from nearby farms to make a syngas that could be put in a
genset. The facility signed an offtake agreement for 1 MW of electricity as
well as any heat waste that was created in the process.
Joe spent the next year touring the country to check out
prospective technologies, filing permits and drafting formal feedstock and
power purchase agreements. It wasn’t until the engineering firm that he hired
to help with the design pointed out that the gas produced wouldn’t be of high
enough quality to use in a genset that Joe realized he had a problem. He tried
to alter his plans to incorporate a boiler and use steam to make electricity
but found the project was too small to be economically viable for a steam
system.
Joe spent another year trying to find additional customers
for his output so he could increase the size of the project and make it
economically feasible. He found he wasn’t able to secure the additional
feedstock needed and the entire project fell through, but not before it took
half of Joe’s savings.
Joe’s predicament isn’t an unusual one and it could have
been prevented had he done a more thorough feedstock analysis at the beginning.
A feasibility study and full feedstock analysis in addition to a mass and
energy balance at the beginning will save time and money as it determines the
likelihood of the project succeeding.
*Name has been changed to protect the embarrassed former
developer, who now serves fries at the local McDonalds.
One great place for determining the best regions for biomass
resources as well as the location of existing biopower and biofuels plants is
the interactive map on the National Renewable Energy Laboratory’s website. Check
it out here.
