Case-study location: Battaglia Terme\Galzignano Terme

Transcription

1 Economic modelling of low-temperature geothermal energy Case-study location: Battaglia Terme\Galzignano Terme Activity 4.3 in WP 4 Partner: PADUA Coordinated by: UM

2 Index 1. INTRODUCTION ASSESSMENT OF REVENUES AND EXPENSES Initial - Investment costs Operating & Maintenance costs (O&M costs) Revenues Energy savings Sources of financing Cash flow plan INDICATORS OF INVESTMENT Financial viability CLOSURE REFERENCES List of figures Figure 1 - Example of the main components of geothermal and biomass power plants Figure 2 - Example of the main components of the hybrid plant Figure 3 - Cumulative cash flows graph List of tables Table 1 - List of main data Table 2 - List of main initial costs Table 3 - List of annual costs and debt payments Table 4 - List of annual savings and income Table 5 - List of sources of financing Table 6 - Cash flow plan Table 7 - Basic financial parameters Table 8 - Financial viability

3 Summary Case-study locations have been identified in the municipality of Battaglia Terme and Galzignano Terme; below the main characteristic of the system and purpose for the economic modeling of the present document are mentioned. o RES used: Geothermal and Biomass Figure 1 - Example of the main components of geothermal and biomass power plants o o o o Case study location for evaluations of the proposed system: Municipality of Galzignano and Battaglia Terme, in the Province of Padova in the area of geothermal interest of the Euganean Hills. System aim Production of electricity; it is eventually possible to exploit residual heat for a local district heating network (not consider in the present economic modelling). Electricity uses Grid connected plant; it is assumed that the electricity is sold to the grid. Operating mode of the hybrid system designed to work all year; annual operating hours assumed; 2

4 1. Introduction In Act 4.2, the hybrid system involves the combined use of geothermal and biomass energy, has been described, and the simplified hydraulic scheme for the proposed solution has been developed and shown below. 3 Figure 2 - Example of the main components of the hybrid plant The economic analysis in this paper, with reference to Case-study system, has been developed on the basis of the technical specifications laid down in the mentioned Act 4.2, and according to the assumptions set forth below. In order to assess and enhance energy production of the system, we started from the data of electrical power resulting from the calculations performed, and in particular: In the document 4.2 we had defined the thermal power output from the turbine of the system, amounting to 3.974,8 kw. Using a net efficiency of conversion of the thermal power to electricity in the generator of 20%, we calculated the electric power of the system equal to 3.974,8 kw x 20% = 794, 96 kw el. For the calculation of the energy production of the system of operation hours per year for the system was assumed.

5 For economic simulations reported below RETScreen software was used; RETScreen software has been developed and maintained by the Government of Canada through the research center Canmet ENergy of the department of Natural Resources Canada and supported by an international network of industry experts, government and academics. Among the main partners there are the American National Aerospace Agency (NASA), the Renewable Energy and Energy Efficiency Partnership (REEEP), the United Nations Environment Program (UNEP) and the Organisation Global Environment Facility (GEF). The software and all the informations about it is available on the website Case study location s data are shown below: reference locality for climate data Padova Main data Unit Valore Latitude N 45,3 Longitude E 11,9 Elevation m 309 Heating design temperature C -5,9 Cooling design temperature C 25,4 Earth temperature amplitude C 18,5 4 Climatic data Heating degreedays Cooling degreedays Month Air temp. Relative humidity Daily solar radiation Atm.c pressure Wind speed C % kwh/m²/d kpa m/s C-d C-d January -1,0 78,7% 1,59 95,4 3, February 0,5 72,5% 2,59 95,2 3, March 4,8 67,4% 3,81 95,1 3, April 9,1 64,5% 4,40 94,8 3, May 14,6 60,2% 5,41 95,0 2, June 18,2 58,2% 6,08 95,1 2, July 20,7 56,4% 6,18 95,1 2, August 20,5 59,6% 5,37 95,1 2, September 15,9 64,0% 3,94 95,2 2, October 10,7 74,1% 2,48 95,3 3, November 4,4 79,3% 1,60 95,2 3, December 0,2 79,8% 1,29 95,3 3, Annual 9,9 67,9% 3,73 95,2 2, Table 2 List of main data

6 2. Assessment of revenues and expenses 2.1. Initial - Investment costs Project's initial costs are shown in the table below. Initial costs (credits) Unit Quantity Unit cost Amount Relative costs Feasibility study, Development and Engineering Feasibility study, Development and Engineering kw 794, Subtotal: ,0% Power system Power Plant, Road, Transmission Subtotal: line, Substation kw 794, ,0% Balance of system & miscellaneous Spare parts, Transportation, Training & commissioning cost Subtotal: - 0,0% Total initial costs ,0% Table 2 - List of main initial costs Operating & Maintenance costs (O&M costs) Below are shown Operation & Maintenance costs for the project: The operating costs comprise all the data on the disbursements foreseen for the purchase of goods and services, which are not of an investment nature since they are consumed within each accounting period, and includes: - the direct production costs (consumption of materials and services, personnel, maintenance, general production costs); - administrative and general expenditures; - sales and distribution expenditures. These components together comprise the bulk of the operating costs. The maintenance costs incurred to keep an item in good condition and/or good working order.

7 In addition to the O&M ones, costs for the supply of electricity needed for plant operation (extraction pumps, circulators, component...) are outlined. Annual cost of financing, at the conditions assumed below, was also indicated; such cost in the cases provided has a duration of 15 years. Annual costs and debt payments O&M Electricity consumption cost Debt payments - 15 years Total annual costs Table 3 - List of annual costs and debt payments In addition to the O&M operations provided and quantified above, a planned maintenance for the extraordinary replacement of parts of the plant was scheduled at year 10; the amount of this operation is estimated below. Periodic costs Planned Maintenance year Revenues 6 Projects generate their own revenues which are shown and explained below. Revenues of the project are mainly of two types: 1 Revenue from the sale of electricity for which we have assumed an average selling price of 150 / MWh 2 Revenue from the national incentive system for the production of electricity from renewable sources (Green Certificates); In particular, for the current system the incentive fee is 99 /MWh for a period of 20 years. Annual savings and income Electricity export income Clean Energy production income - 20 yrs Other income 0 Total annual savings and income Table 4 - List of annual savings and income

8 2.4. Energy savings An annual production of electricity for operation hours per year was calculated to be: Annual Electricity production = 794,96 kw x h/year = kwh/year Considering a GHG emission factor of 0,406 tco 2 /MWh, CO 2 emissions for reference Baseline case are calculated as shown below: MWh/year x 0,406 tco 2 /MWh = 2.099,50 tco 2 /year The proposed system, considering the power consumption of auxiliaries, has CO 2 emissions of MWh/year x 0,406 tco 2 /MWh = 583,20 tco 2 /year Therefore, CO 2 emissions reduction of the proposed system compared to the reference Baseline case is equal to: 1.516,3 tco 2 /year 2.5. Sources of financing The different sources of financing are identified below in order to calculate the total financial resources of the project. 7 Sources of financing Incentives and grants - Equity Debt Debt ratio % 80,0% Debt interest rate % 7,50% Debt term yr 15 Debt payments /yr Table 5 - List of sources of financing 2.6. Cash flow plan On the basis of estimates revenues and expenses the following cash flow plan has been defined. Year Pre-tax Cash flow After-tax Cash flow Cumulative Cash flow

9 n Table 6 - Cash flow plan 8 Figure 3 - Cumulative cash flows graph 3. Indicators of investment Basic financial parameters:

10 General Finance Fuel cost escalation rate % 2,0% Inflation rate % 2,0% Discount rate % 7,0% Project life yr 20 Incentives and grants - Debt ratio % 80,0% Debt Equity Debt interest rate % 7,50% Debt term yr 15 Debt payments /yr Income tax analysis Effective income tax rate % 32,5% Depreciation rate % 9,0% Table 7 - Basic financial parameters 3.1. Financial viability The results of the financial analysis are shown below, calculated on the data set out in the document and with the technical, economic and financial parameters, hypothesized above. Pre-tax IRR - equity % 37,6% Pre-tax IRR - assets % 5,9% 9 After-tax IRR - equity % 19,9% After-tax IRR - assets % 0,3% Simple payback yr 6,1 Equity payback yr 4,8 Net Present Value (NPV) Annual life cycle savings /yr Benefit-Cost (B-C) ratio 2,40 Debt service coverage 1,83 Energy production cost /MWh 127,88 GHG reduction cost /tco2 (60) Table 8 - Financial viability

11 4. Closure The preliminary results of this economic analysis show that the integration of the geothermal resources at Galzignano Terme and Battaglia Terme with biomass to produce electrical energy can be carried out with profitability. This is confirmed by the fact that the internal rate of return (IRR) of the project (pre-tax and after-tax) is greater than an established minimum acceptable rate of return, assumed 10% and of weighted average cost of capital (WACC) considered equal to 7%. Furthermore, a payback time of around 5 years and a positive Net Present Value (NPV) confirm that the project is financially sound and that a promising and interesting economic return can be achieved. This analysis has been inevitably carried out with a number of assumptions that at the time being cannot be avoided due to the lack of additional parameters. A more precise quantification of the economic returns is necessary but can only be carried out once these additional elements are made available. However, the availability of further data will not affect the main outcome of the research but will instead serve to fine tune the preliminary results. 10

12 5. References RETScreen International, Natural Resources Canada, 11