With the European Commission calling for an increase in biopower, Wärtsilä is stepping up efforts to manufacture biofuelled engines for small scale combined heat and power (CHP) plants.
Jussi Heikkinen, Wärtsilä Bio Power Unit, Finland
The European Commission has set the goal of doubling the percentage of total primary energy production provided by renewable energy from six to 12 per cent, and of raising its share of electricity production from 14 to 22 per cent between now and 2010. Electricity production based on biofuels is to be increased ten times above its present level.
In response to this demand, Wärtsilä Biopower has developed new small-scale combined heat and power (CHP) plants plant concepts based on biofuels, and in 2002 launched two new modular products for decentralized cogeneration.
TheBioPower CHP plant in Tranas
The BioPower plants are modular and will be increasingly prefabricated by Wärtsilä. This makes installation fast and easy, saving both time and money. In addition, since these power plants run unmanned under continuous remote control, operation costs are minimized.
Biofuels are going to change the combined heat and power scene. The natural first place for CHP is where biomass, such as sawdust and bark, is an inexpensive by-product, and where the heat produced in the CHP process can be recovered and used efficiently in industrial processes or as district heat for the local community.
Another EU goal is to strongly increase the percentage of heat and power cogeneration based on biofuels and gas.
In 1994 CHP accounted for about nine per cent of electricity production, this figure should double by 2010.
The interior of a BioEnergy thermal plant
The investment needed to achieve these targets has been estimated to total g165 billion by 2010. To increase electricity generation based on biofuels to the 2010 target level will require a commitment of at least g25 billion on equipment and systems, much of which will be spent on small-scale CHP projects relying on local fuel supplies.
The combined output of biomass fuelled power plants currently under construction in Europe totals approximately 1000 MW; in North America this trend is also developing, especially in Canada where half the world’s production of wood fuel can be found. Due to extensive fuel supply management issues, biomass fuelled power plants are typically smaller in power output, and they favour distributed energy production. These small size biopower units have been rarely feasible without governmental subsidies due to the high investment costs.
Now, with the trends of increasingly volatile fossil fuel prices and an increased awareness of environmental issues, the means are developing to support low fuel price, CO2-free energy technologies. Globally, organic biomass and combustible fuels from municipal waste are available in huge quantities. There is a strong political will worldwide to increase the use of renewable energy in power and heat generation.
The BioEnergy thermal plant in Koskinen
The ultimate goal in making a biomass plant feasible in small-scale units is to reduce the investment cost to the level where subsidies are no longer necessary.
Small-scale biofuel-fired CHP plants provide a major opportunity for steering energy production more in the direction of sustainable development. However, the problem facing European Union (EU) countries today, is how to provide incentives for industry to build and operate such plants?
The main energy-related challenge for the EU is to meet the Kyoto targets. Under the Kyoto Protocol, the EU is committed to reducing its overall greenhouse gas emissions over the period 2008-2012 by eight per cent compared with 1990 levels. Further reduction of greenhouse gas emissions must also be in line with the principles of sustainable development.
The EU is giving priority to the development and implementation of technology based on new and renewable energy such as bioenergy, wind power, hydropower and hydrogen-based energy. All these play an important role in the strategy for reducing carbon dioxide emissions and slowing climate change.
Although renewable energy sources, are competitively priced and the technology itself is proven and established, high plant investment costs have made electricity production based on biofuels in many cases unprofitable. Serial manufacturing can cut investment costs dramatically and make the plants competitive. To start this process, the initial introduction of new technology requires external aid.
The EU has not given any particular framework to its member states on how they should achieve the desired levels of renewable energy production. Each country is looking at its local situation, including the local budget, and defining its own models for introducing and expanding renewable energy. As a result, the EU has no uniform model, and different countries have everything from direct subsidies for capital expenditure to various, often energy based market instruments such as special taxation, tariffs and certificates. In this free-for-all arena two main models, outlined below, can be distinguished.
The principle of an investment subsidy to boost long-term competitiveness is used in Finland, for example. The Finnish Ministry of Trade and Industry has decided to raise the maximum limit for direct subsidies on biopower plant investments to 40 per cent – the same level as for wind power.
Small-scale biofuel-fired CHP plants are now a competitive proposition in Finland. Until recently, all smaller projects were built as heat-only boiler plants and only larger projects (20 MW and upwards), were sometimes constructed as CHP plants.
According to Mr Jussi Heikkinen, vice president of the Finnish company Wärtsilä Biopower, the Finnish model has the advantage that it removes the only real barrier, the excessive investment costs for tailor-made small plants.
The subsidies resolve the initial cost problem at once, encourage companies to carry out projects, and open the door to serial production. “The variable and operating costs for Wärtsilä’s technology are already at a competitive level,” Heikkinen stresses, “So the projects can compete on their own merits, without needing life-long tariff or tax-based subsidies.”
Financial support is offered for produced energy (EUR/MWh), in two ways:
- Direct tariff model. Responsibility for the subsidy is passed on to the electricity distributors, who must purchase renewable energy at a higher price. Hence, end-users may be forced to pay extra in their bills.
- Certificate model. Electricity distributors, which are typically regional, must produce a certain percentage of their total power capacity using renewable energy sources. If a producer does not or will not maintain adequate renewable capacity, he may purchase a green certificate from another company that has produced the required amount (MWh) of renewable energy.
Heikkinen believes that the certificate and tariff models introduce a degree of uncertainty for investors, since to keep the projects alive, those investors will need to take a long term view, and political strategies may change over the ensuing years.
The tariff model is in use in Germany for plants with an output of up to 20 MW. The price of electricity produced using biofuels is now so high that as condenser plants are profitable, they are chosen instead of CHP. The result is that almost 70 per cent of the valuable biofuel energy is not utilized at all, hardly a desirable situation; in fact these plants have an electrical efficiency of just over 30 per cent, the rest is wasted.
Heikkinen explains: “There is not much point in designing a series product for Germany on its own. The plants there differ immensely from the back pressure steam power products needed in CHP applications.”
The certificate model is in use in the UK, Italy and elsewhere. The idea behind this model is that the end-users of electrical power pay extra for the renewable part of electricity that the country has set as a target for the electricity distributors; in other words, the distributors pass on the costs to the end-users directly.
The certificates should settle at a ‘market value’, which will result in the profitable construction of renewable energy plants. The principal models are in place but discussion for the moment is mainly focusing on the ‘penalty’ issue, i.e. what will be the penalty for those who do not produce enough renewable power and do not hold certificates either.
Heikkinen cites Sweden as an example, where a certificate model will be introduced next year. Here, the proposed ceiling certificate price, which determines the level of penalty for the years 2004 and 2005, is so low that energy companies are more interested in paying up than in building new capacity.
Suppliers of small biopower plants have to face the fact that there is no optimum product for all the subsidy structures in different countries. They need to prioritize their markets according to their business potential and other related factors.
Accordingly, Wärtsilä Biopower’s first customers for its new power plant concepts have been Finnish sawmills. Using biopower technology, sawmills can convert 15 to 25 per cent of the energy content of the biomass byproducts to electricity, and 55 to 70 per cent to usable heat, depending on the process requirements and connections. Wärtsilä Biopower has its sights firmly set on global exports of its technology. Its mission is to be the first global supplier of small-scale combined heat and power plants. Wärtsilä aims to increase sales of biopower solutions to five times the present level by 2005, at the same time becoming the clear market leader.
Wärtsilä’s BioEnergy thermal plant in Tammisaari
The diversity of forms of subsidy is not the only challenge. Heikkinen points out: “Turning new technology into commercial products suitable for serial manufacture raises many other issues, given the wide variety of biofuels and the relatively small average size of the fuel sources. This offers enormous business potential for small products.”
Biofuel plant orders
In recent months, Wärtsilä Biopower has gained orders for seven bio fuelled energy plants, which will involve supplying complete bio energy plants and process equipment to Sweden, Russia and the Baltic countries. These new orders will result in a total heat output of 56 MW, and are an important step towards Wärtsilä’s strategy of becoming the first global supplier of small-scale bio power plants.
Wärtsilä has been contracted to deliver three bio energy plants to Estonia; two plants for sawmills and one for district heating. AS Näpi Saeveski, part of Estonia’s largest sawmill company Sylvester Group, has ordered process equipment for a 6 MWth bio energy plant to burn sawmill waste in Lääne-Virumaa. AS Sauga Saeveski has ordered a 6 MWth bio energy plant for a sawmill in Sauga, this plant will produce heat from bark, chippings and sawdust for the sawmills drying process. A turnkey 8 MWth bio energy plant has been ordered by the third Estonian company, OU Pogi.
UAB Sylvester Alytus in Lithuania has ordered a turnkey 8 MWth bio energy plant for the town of Alytus. This is Wärtsilä’s breakthrough to Lithuanian energy markets.
The Finnish-Russian joint venture Zao Pestovo Novo will take delivery of a turnkey 10 MWth bio energy plant in Pestovo in the Novgorod region, where Finnish UPM-Kymmene will supply a sawmill in co-operation with a Russian timber company.
Focus on Sweden
On January 20 2003, Wärtsilä Biopower signed a contract with Vilhelmina Värmeverk, a Swedish district heating company. Four days later, the group signed an additional contract, with Swedish utility company Tekniska Verken.
Tekniska Verken, based in the Swedish city of Linköping, has opted for a compact BioEnergy boiler plant with a 3 MW capability and a 5 MW oil fired hot water boiler to be installed at the Borensberg site in the city. The design pressure of the boilers will be 10 bar, reaching temperatures of 140°C. The BioEnergy boiler will be fuelled using bark, chips and sawdust, whilst light diesel oil will be utilised by the oil boiler.
Manufacturing of the plant’s components will take place at the Kiuruvesi factory, with transportation to the site occurring in sections. Ground works, foundations, building, process equipment, installations as well as commissioning and training are all inclusive, resulting in a turnkey installation. The Borensberg plant will produce thermal energy to a new local district heating network by September 2003.
The contract with Vilhelmina Värmeverk will result in a plant producing 10 MW of power to a local sawmill, and like the plant at Borensberg, to a local district heating network. The deal consists of the delivery of all process equipment as well as commissioning and training; the completed installation will be assembled next to the existing boiler plant.
The new 10 MW Vilhelmina Värmeverk boiler will be capable of a 10 bar design pressure and temperatures of 150°C it will also run on bark, chips and sawdust. Component modules for this plant will be transported from the Kiuruvesi factory; heat production is planned to commence in October 2003.
Wärtsilä Biopower was invited to tender for the business as a result of the customers contacting a number of domestic contractors for quotations. In both instances, Wärtsilä Biopower was the supplier of choice because of the reliability and delivery concept of the Biograte Compact combustion technology, which spreads the fuel evenly, thus creating a more uniform and efficient fuel source. An additional factor was the wide control range of the boilers. Tekniska Verken also based its decision on the efficiency of the two Wärtsilä diesel engines that power its CHP plant. Whilst Vilhelmina Värmeverk was further persuaded by the environmentally conscious low NOx-design that Wärtsilä provided.
Wärtsilä focuses on the smaller scale sector of the biopower market. The Helsinki-based global power company is initially offering modular boiler plants in the range of 1 to 20 MWth and 1 to 5 MWe, burning wood based fuels. This strategy was chosen due to the wide availability of suitable fuel sources and feasible transportation costs of the fuel for smaller plants.
There is also significant market potential in tropical countries, which have a great deal of biomass suitable for energy production. In these countries the subsidy structures are not as developed as in the EU. Therefore that market will be accessible only when modularization is completed and decreased unit prices can be derived from volume-based sales in other markets.
Future developments will address an enlarged field of power generation, and Biograte technology will be adjusted for still lower emissions and different fuels like RDF, southern woods such as eucalyptus, and eventually agricultural biomasses like sugar cane bagasse and rice husk.
In the future, the competitiveness of on-site industrial power generation, stricter waste handling requirements and the increasing environmental care will drive the growth of renewable energy. Modular, decentralized bioenergy systems offer an interesting international market potential for companies such as Wärtsilä.