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Energy and Environment Partnership with Central America

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Energy and Environment Partnership with Central America ENERGY AND ENVIRONMENT PARTNERSHIP WITH CENTRAL AMERICA CENTRAL AMERICAN BIOPOWER PROJECT STAGE I PROJECT REPORT TABLE OF CONTENTS EXECUTIVE SUMMARY........................................................................................................................3 1. INTRODUCTION ............................................................................................................................5 2. PROJECT IDENTIFICATION......................................................................................................6 3. PRELIMINARY STUDY .................................................................................................................7 3.1 COUNTRY STUDIES.............................................................................................................7 3.1.1 Nicaragua ................................................................................................................................7 3.1.2 Honduras ..............................................................................................................................13 3.1.3 Guatemala.............................................................................................................................19 3.2 SITE VISITS ............................................................................................................................23 3.2.1 Nicaragua ..............................................................................................................................23 3.2.2 Honduras ..............................................................................................................................24 3.2.3 Guatemala.............................................................................................................................25 3.3 PRELIMINARY FEASIBILITY STUDIES.......................................................................29 3.3.1 Honduras ..............................................................................................................................29 3.3.2 Guatemala.............................................................................................................................33 3.4 CO2 REDUCTION POTENTIAL......................................................................................37 3.4.1 CDM opportunities in Honduras......................................................................................38 3.4.2 CDM opportunities in Guatemala ....................................................................................40 4. CONCLUSIONS AND FUTURE ACTIONS ...........................................................................44 ANNEX 1...................................................................................................................................................46 ANNEX 2...................................................................................................................................................48 ANNEX 3...................................................................................................................................................49 ANNEX 4...................................................................................................................................................51 2 EXECUTIVE SUMMARY Project idea and objectives The project idea is to demonstrate the feasibility of small-scale wood based biomass-fired power (or CHP) plants in the Central American region through commercial demonstration of this project. In addition to the technical and the commercial viability, the project will demonstrate the environmental and social sustainability of biomass-based power generation. Therefore, one of the key objectives is to reduce greenhouse gas emissions and fossil fuel dependency of the region. A specific objective is to create a financing model in order to replicate this project for several other identified projects in the area. Project group The project group consists of four Finnish companies: Gaia Group Oy, Green Stream Network, Wärtsilä Finland Oy Biopower and Pohjolan Voima Oy. In addition the project was carried out in a close cooperation with relevant local organisations and authorities. Manejo Forestal y Bioenergía (PROLEÑA) was the main partner in the study related to Nicaragua and Honduras and Cluster Forestal as well as INAB (especially Procafor contacts) were the local main contacts in Guatemala. Contents of project and results The project’s first stage included the identification of the potential sites especially in Guatemala, Honduras and Nicaragua and preliminary studies related to feasibility and CO2 emission reduction of the selected sites. The assessment was limited to sawmills and forest residues available close to the sawmills. The analysis of electricity markets in the selected countries was also included in the study. The following potential regions, where sawmill waste and/or forest residues availability is high, are located as follows: Nueva Segovia area in Nicaragua, Yoro area in Honduras and El Progreso area in Guatemala. After the initial assessment and the site visits preliminary feasibility and CO2 emission reduction study was carried out for two different sites (sawmills), one in Honduras and one in Guatemala. The fact that the payback time of a biopower plant investment is highly dependent upon the fuel availability and price, on-site energy demand and energy prices as well as the investment costs (power plant capacity) was clearly pointed out in the preliminary feasibility studies. Below is presented one example which indicates how fuel (wood waste) price affects on payback time with two different interest rates in a sawmill case located in Honduras. The price of wood waste used in basic case was 8 USD/MWh. 3 Interest 0% Interest 5% 40 35 30 25 20 15 Payback timePayback (years) 10 5 0 0123456789101112 Average price of wood waste (USD/MWh) The annual CO2 emission reduction potential in the selected cases was between 11,400 – 14,500 tCO2e which corresponds net present value (10 years) between USD 210,000 - 445,000. The price of Certified Emission Reductions (CER) are estimated to vary between 3 - 5 USD/ton CO2. Conclusions and proposed next steps Central America has excellent potential to increase the use of biomass for energy production, including the energy sources assessed in this study i.e. sawmill waste and forest residues. However, the feasibility and the set-up concept of the project have to be accurately defined. A suitable option for a biopower plant with a fuel burning capacity more than 10 MW would be a site having enough on-site thermal load available. In addition the feasibility and CO2 emission reduction are maximised in case biomass substitutes for fossil fuels (fuel oil etc.). As far as the potential sawmills are concerned one favourable option is to locate the manufacturers of smaller power plants (fuel capacity < 10 MW) or possible reconstructors of available existing steam boiler(s) with integrated superheaters and steam turbine. These options seems to be more suitable and viable for the selected sites. Ultimately, the interest of the sawmills has to be confirmed, too. It is also essential to find out the correct form of cooperation to be able to ensure the fuel availability and its reasonable price as well as selling prices of energy to the third party. 4 ENERGY AND ENVIRONMENT PARTNERSHIP WITH CENTRAL AMERICA CENTRAL AMERICAN BIOPOWER PROJECT STAGE I PROJECT REPORT 1. INTRODUCTION The goal of the Central American Biopower Project is to promote rational use of biomass and demonstrate the feasibility of small-scale biomass-fired power plant through a commercial demonstration project based on a suitable technical concept provided by Wärtsilä Biopower (BioPower 5 or BioPower 2). The project is divided in two stages: I Stage: 1. Project Identification 2. Preliminary Study II Stage: 3. Project Development 4. Plant Construction 5. Plant Operation This project report concerns the I stage covering the project identification work and preliminary studies of the most feasible sites. The focus is to find out the most suitable sites for biopower project especially in Honduras, Guatemala and Nicaragua. The availability of biomass (wood waste) is one the most essential decisive factor for site selection. The study was limited to the sawmills utilising mainly pine as raw material. The possibility to utilise the forest residues were also considered. The other possible biomass sources i.e. sugar mills were left outside of the study. The initial project plan is indicated in Annex 1. The project group consists of four Finnish companies: Gaia Group Oy, Green Stream Network, Wärtsilä Finland Oy Biopower and Pohjolan Voima Oy. In addition the project is carried out in a close cooperation with relevant local organisations and authorities. It is agreed between the project partners that Gaia Group Oy is the team leader for the Stage I. The Central American Biopower Project I Stage was approved during the Second Steering Committee meeting in Panama on 19th of June 2003. About 75 % of the total cost of the project’s I stage is financed by the Partnership. 5 2. PROJECT IDENTIFICATION Identification of feasible sites was firstly based on desk study which included the contacts to members of Steering Committee and representatives of respective Ministries of Environment in Central America. More detailed discussions with the members of Steering Committee related to the potential biopower projects and sites were carried out during
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