Case Study #2: Biomass Combustion of Forestry Mill Waste Sawdust
A mill located near Roanoke that produces furniture-grade lumber stock is investigating the installation of a biomass combustion system. Their interest in a biomass combustion system stems not just from the potential to reduce costs for heating their kilns and plant, but also from other factors:
1) They currently must pay to dispose of sawdust.
2) The sawdust is a fire hazard and complicates the purchase of insurance.
3) The sawdust contaminates shavings that it sells.
4) Variability in the price of natural gas creates budgeting uncertainty.
In order to address these problems, the plant would like to know whether it would make sense to install two 300 kW (1 million BTU/h) biomass boilers which would burn the sawdust, generating hot air that could be used in the kilns and the plant itself. The combined cost of the boilers, the heat distribution system, and the sawdust storage hopper and feedstock handling system would be $300,000. The boilers would have a seasonal efficiency of around 50%.
The operation’s heat requirement comes from a 50 kW continuous requirement for process heat for the kiln plus the plant space heating load. During the coldest times of the year, the plant heat load is around 20 BTU/h per square foot of plant floor area. The heated plant area is 40,000 ft2. The biomass combustion system would be operated at the output level required to consume the sawdust being produced by the operation, which averages around 30 tons per week. The sawdust is dry. Any excess heat would be vented to the atmosphere.
The biomass combustion system would operate 24 hours a day, with about a half-day off every week for scheduled maintenance, during which time the existing natural gas heating plant would supply any heat required by the operation.
When the direct cost for sawdust disposal, insurance premiums, and administrative hassles is combined, the plant considers that sawdust disposal costs $10 per ton. Maintenance, ash removal, and inspections will cost around $6000 per year; major repairs costing around $25,000 can be expected every 7 years or so. These costs are expected to inflate at 2% annually.
Their existing heating plant burns natural gas with a seasonal efficiency of 65%. Natural gas costs around $6/1000 cubic feet. Natural gas prices are expected to escalate at 3% annually.
Half of the biomass combustion system’s cost would be paid for with a 10 year loan at an interest rate of 5%. The equipment is expected to have a usable lifetime of 20 years.
1) Would this be a profitable investment? Would you invest in this based on the simple payback? Based on the internal rate of return? Would the bank be likely to provide a loan?
2) Does the biomass combustion system burn enough sawdust to fully eliminate the 30 tons produced each week? (Hint: you’ll have to do a calculation, but data from the RETScreen Heating Value & Fuel Rate tool may be helpful.)
Additional questions if you finish early:
3) How would you change this analysis for a poultry operation where:
- The biomass feedstock was poultry litter
- Poultry litter can be sold as a fertilizer for $30/ton of dry poultry litter.
- The farm did not have access to natural gas, but instead used propane at $2/gallon
- There was no process heat requirement, but only a space heating requirement
- The capacity of the biomass combustion system would be based on the average heat requirement in the coldest month of the year
- The cost of the biomass combustion system would be $500/kW of capacity
- The biomass system would be available to operate whenever there was a requirement for heat
- Any heat requirement not met by the biomass system would be met by propane
- Annual operation and maintenance costs would be 10% of the system purchase price, with no periodic costs