Tag Archives: Price Escalation

Major Issues in Biomass Energy Projects

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Bioenergy projects are plagued by several problems. This article makes an attempt at collating some of the most prominent issues associated with biomass technologies and provides plausible solutions in order to seek further promotion of biomass energy technologies. The solutions provided below are based on author’s understanding and experience in this field.

Here are the top issues in biomass energy projects around the world:

Biomass Supply Chain

1. Large Project Costs

The project costs are to a great extent comparable to these technologies which actually justify the cause. Also, people tend to ignore the fact, that most of these plants, if run at maximum capacity could generate a Plant Load Factor (PLF) of 80% and above. This figure is about 2-3 times higher than what its counterparts wind and solar energy based power plants could provide. This however, comes at a cost – higher operational costs.

2. Lower Efficiency of Biomass Technologies

The solution to this problem, calls for innovativeness in the employment of these technologies. To give an example, one of the paper mill owners in India, had a brilliant idea to utilize his industrial waste to generate power and recover the waste heat to produce steam for his boilers. The power generated was way more than he required for captive utilization. With the rest, he melts scrap metal in an arc and generates additional revenue by selling it.

biomass gasifier

Although such solutions are not possible in each case, one needs to possess the acumen to look around and innovate – the best means to improve the productivity with regards to these technologies.

3. Immature Technologies

One needs to look beyond what is directly visible. There is a humongous scope of employment of these biomass technologies for decentralized power generation. With regards to scale, few companies have already begun conceptualizing ultra-mega scale power plants based on biomass resources. Power developers and critics need to take a leaf out of these experiences.

4. Lack of Funding Options

The most essential aspect of any biomass energy project is the resource assessment. Investors if approached with a reliable resource assessment report could help regain their interest in such projects. Moreover, the project developers also need to look into community based ownership models, which have proven to be a great success, especially in rural areas.

The project developer needs to not only assess the resource availability but also its alternative utilization means. It has been observed that if a project is designed by considering only 10-12% of the actual biomass to be available for power generation, it sustains without any hurdles.

Also Read: Ways to Fundraise for a Biomass Energy Project

5. Non-Transparent Trade Markets

Most countries still lack a common platform to the buyers and sellers of biomass resources. As a result of this, their price varies from vendor to vendor even when considering the same feedstock. Entrepreneurs need to come forward and look forward to exploiting this opportunity, which could not only bridge the big missing link in the resource supply chain but also could transform into a multi-billion dollar opportunity.

6. High Risks / Low Paybacks

Biomass energy plants are plagued by numerous uncertainties including fuel price escalation and unreliable biomass resource supply to name just a few. Project owners should consider other opportunities to increase their profit margins. One of these could very well include tying up with the power exchanges as is the case in India, which could offer better prices for the power that is sold at peak hour slots.

The developer may also consider the option of merchant sale to agencies which are either in need of a consistent power supply and are presently relying on expensive back-up means (oil/coal) or are looking forward to purchase “green power” to cater to their Corporate Social Responsibility (CSR) initiatives.

7. Resource Price Escalation

A study of some of the successful biomass energy plants globally would result in the conclusion of the inevitability of having own biomass resource base to cater to the plant requirements. This could be through captive forestry or energy plantations at waste lands or fallow lands surrounding the plant site. Although, this could escalate the initial project costs, it would prove to be a great cushion to the plants operational costs in the longer run.

biomass resource

In cases where it is not possible to go for such an alternative, one must seek case-specific biomass procurement models, consider help from local NGOs, civic bodies etc. and go for long-term contracts with the resource providers.

Issues Confronting Biomass Energy Ventures

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Biomass resources can be transformed into clean energy and/or fuels by thermal and biochemical technologies. Besides recovery of substantial energy, these technologies can lead to a substantial reduction in the overall waste quantities requiring final disposal.

Biomass_Cogeneration

However, biomass energy projects worldwide are often hampered by a variety of techno-commercial issues. The issues enumerated below are not geography-specific and are usually a matter of concern for project developers, entrepreneurs and technology companies:

Large Project Costs

In India, a 1 MW gasification plant usually costs about USD 1-1.5 million. A combustion-based 1 MW plant would need a little more expenditure, to the tune of USD 1-2 million. An anaerobic digestion-based plant of the same capacity, on the other hand, could range anywhere upwards USD 3 million. Such high capital costs prove to be a big hurdle for any entrepreneur or renewable energy enthusiast to come forward and invest into these technologies.

Low Conversion Efficiencies

In general, efficiencies of combustion-based systems are in the range of 20-25% and gasification-based systems are considered even poorer, with their efficiencies being in the range of a measly 10-15%. The biomass resources themselves are low in energy density, and such poor system efficiencies could add a double blow to the entire project.

Dearth of Mature Technologies

Poor efficiencies call for a larger quantum of resources needed to generate a unit amount of energy. Owing to this reason, investors and project developers find it hard to go for such plants on a larger scale. Moreover, the availability of only a few reliable technology and operation & maintenance service providers makes these technologies further undesirable.

Gasification technology is still limited to scales lesser than 1 MW in most parts of the world. Combustion-based systems have although gone upwards of 1 MW, a lot many are now facing hurdles because of factors like unreliable resource chain, grid availability, and many others.

Lack of Funding Options

Financing agencies usually give a tough time to biomass project developers as compared to what it takes to invest in other renewable energy technologies.

Non-Transparent Trade Markets

Usually, the biomass energy resources are obtained through forests, farms, industries, animal farms etc. There is no standard pricing mechanism for such resources and these usually vary from vendor to vendor, even with the same resource in consideration.

High Risks / Low Pay-Backs

Biomass energy projects are not much sought-after owing to high project risks which could entail from failed crops, natural disasters, local disturbances, etc.

Resource Price Escalation

Unrealistic fuel price escalation too is a major cause of worry for the plant owners. Usually, an escalation of 3-5% is considered while carrying out the project’s financial modelling. However, it has been observed that in some cases, the rise has been as staggering as 15-20% per annum, forcing the plants to shut down.