final project report - sica pressure steam turbine and an open cooling tower. this plant is designed...

FINAL PROJECT REPORT

60D05152.01.Q060.002

POWER PLANT FEASIBILITY STUDY Exportadora Atlantic S.A. The ECOM Group

ELECTRIC ENERGY GENERATION WITH BIOMASS, NICARAGUA

EXECUTIVE SUMMARY............................................................................................................... 4

1 INTRODUCTION.................................................................................................................. 12

2 BACKGROUND AND BASIC IDEA MARKETS ............................................................. 132.1 Business Concept ..................................................................................................................... 132.2 Operation Objectives................................................................................................................ 132.3 Location and Site ..................................................................................................................... 142.4 Plant Capacity .......................................................................................................................... 142.5 Fuel Supply .............................................................................................................................. 142.6 Finance and Economic Criteria................................................................................................ 152.6.1 Financial Structure.........................................................................................................................................152.6.2 Contractual Arrangements .............................................................................................................................152.6.3 Parties Involved .............................................................................................................................................16

3 ELECTRICITY SYSTEM AND MARKETS IN NICARAGUA...................................... 183.1 Current Electricity Production System .................................................................................... 183.2 Electricity Consumption and Demand ..................................................................................... 203.3 Customer Development............................................................................................................ 223.4 Current Electricity Price........................................................................................................... 233.5 Foreseen Investments in Production in Nicaragua................................................................... 243.6 Electricity Transmission and Distribution Network ................................................................ 243.6.1 Comments Regarding Spinning Reserve .......................................................................................................26

4 FUEL AVAILABILITY ........................................................................................................ 284.1 General about Biomass Production in Nicaragua .................................................................... 284.1.1 Forestry and Forest Industry ..........................................................................................................................284.1.2 Agriculture and Agro Industry Production ....................................................................................................324.1.3 Animal Breeding & Processing Industries.....................................................................................................344.2 Fuel Availability and Suitability .............................................................................................. 344.2.1 General...........................................................................................................................................................344.2.2 Availability ....................................................................................................................................................414.2.3 Total Availability / Summary ........................................................................................................................50

ELECTROWATT-EKONO OY P.O. Box 93 (Tekniikantie 4 A) FIN-02151 Espoo Finland Domicile Espoo, Finland Business ID. 0577450-7 Tel. +358 9 469 11 Fax +358 9 469 1981 E-mail: [email protected] Date October 26, 2004 Ref. 60D05152.01.Q060 Nicaragua Doc. 60D05152.Q060.002 (100)

ELECTROWATT-EKONO OY Doc.No 60D05152.01.Q060.002 Date October 26, 2004 (100)

4.2.4 Biomass Procurement Logistics.....................................................................................................................52

5 SITE CONDITIONS.............................................................................................................. 545.1 Site Preparation........................................................................................................................ 555.2 Climate Conditions .................................................................................................................. 565.3 Topographical and Geological Conditions .............................................................................. 585.4 Underground Raw Water ......................................................................................................... 605.5 Availability of Infrastructure ................................................................................................... 60

6 PLANT TECHNOLOGY...................................................................................................... 616.1.1 Plant Operation ..............................................................................................................................................616.2 Main Equipment and System ................................................................................................... 616.2.1 Main flow and Layout – Diagrams ................................................................................................................656.2.2 Plant Performance..........................................................................................................................................656.2.3 Plant Rating ...................................................................................................................................................666.2.4 Connections ...................................................................................................................................................676.2.5 Site Plan .........................................................................................................................................................686.2.6 Flue Gas Emission Limits..............................................................................................................................696.2.7 Reliability ......................................................................................................................................................696.3 Plant Dimensioning.................................................................................................................. 696.3.1 Mass and Energy Balances ............................................................................................................................69

7 COSTS .................................................................................................................................... 717.1 Investment Cost Estimate......................................................................................................... 717.1.1 Biomass Fired Power Plant............................................................................................................................717.2 Operating and Maintenance Costs ........................................................................................... 727.2.1 Fixed O&M Costs..........................................................................................................................................737.2.2 Variable O&M Costs .....................................................................................................................................747.2.3 Other Variable O&M Costs ...........................................................................................................................74

8 POWER SALES..................................................................................................................... 768.1 Power Purchase Agreement (PPA) .......................................................................................... 768.2 Back-Up Power Supply Agreement......................................................................................... 77

9 IMPLICATIONS OF CO2 TRADING AND CDM POSSIBILITIES .............................. 789.1 General ..................................................................................................................................... 789.2 CDM Eligibility Criteria .......................................................................................................... 799.3 The CDM Project Cycle........................................................................................................... 799.4 Costs Related to CDM Project Cycle....................................................................................... 829.5 Selling the CERs in the Carbon Markets ................................................................................. 829.6 Environmental Issues ............................................................................................................... 83

10 FINANCING .......................................................................................................................... 8410.1 Financing Power Plant Projects in Central America and Nicaragua. ................................ 84

11 FEASIBILITY ANALYSIS................................................................................................... 84

11.1 General .............................................................................................................................. 8411.1.1 Methodology..................................................................................................................................................8411.1.2 Sales Volume .................................................................................................................................................8511.1.3 Basic Assumptions.........................................................................................................................................8511.1.4 Price Adjustment............................................................................................................................................8511.1.5 Capital Requirement ......................................................................................................................................86

12 FEASIBILITY OF THE PROJECT .................................................................................... 86

12.1 Results ............................................................................................................................... 87

ELECTROWATT-EKONO OY Doc.No 60D05152.01.Q060.002 Date October 26, 2004 (100) 12.2 Sensitivity Analysis ........................................................................................................... 8812.3 Conclusions ....................................................................................................................... 90

13 EFFECTS OF THE NEW RENEWABLE ENERGY GENERATION LAW (Added on April 19, 2005) ........................................................................................................................ 92

13.1 Results ............................................................................................................................... 9213.2 Sensitivity Analysis ........................................................................................................... 94

14 RECOMMENDATIONS....................................................................................................... 9814.1 Possible Continuation of the Project to a Bankable Feasibility Study .............................. 9814.2 Small-scale Bio-Fuel Gasification..................................................................................... 98 Appendices

1. Investment cost estimation brake down 2. Electricity market tables and figures. 3. Energy and mass balance sheets 4. Preliminary main flow diagram 5. Preliminary lay-out diagram 6. Electric transmission grid map 7. Table of fixed and variable O&M costs 8. Fuel analyses, Rice husk, Rice straw and Coffee husk 9. Profit and loss account 10. Preliminary site lay-out 11. Forest chips production technology 12. Rice straw procurement technology 13. Fuel supply contract (draft)

Distribution Exportadora Atlantic S.A. THE ECOM GROUP / ANK / TTU / PPV /

E.ark


EXECUTIVE SUMMARY

Introduction This Project financed by the Energy and Environment Partnership with Central America and Exportadora Atlantic S.A. includes the elaboration of the Feasibility Study to demonstrate the economic and technical viability for the development of the 5 MW power plant project to generate electric energy, prompting by the company Atlantic, S.A. The intended power plant would be based on the high-pressure saturated steam production from agro industrial residues (coffee and rice husk, rice straw and sawmill waste), which would be collected within a reasonable transportation distance from the plant located in the Valley of Sebaco in the center of the country.

The target was to study the feasibility of a 5MW condensing biofuel fired power plant. Because of the lack of suitable and reasonably priced biofuel we had to reduce the size of the plant to 2.6MW. All the calculations are made for a 2.6MW power plant.

Electrowatt-Ekono Oy with Proleña as a sub-consultant was awarded the contract to carry out the study.

Objective of the study

The objective of this study is to evaluate the technical and economic viability of a small scale biofuel fired power plant located in Central Nicaragua. The alternative fuels to be used in this power plant have been identified by Exportadora Atlantic S.A.

To meet the objective of the study the consultant has:

• assessed the quality, quantity, availability and price estimations of the existing biofuels available in the Sebaco Valley area;

• investigated and documented local operation opportunities, conditions and restrictions;

• calculated project feasibility; and

• made recommendations for the project continuation.

Power demand

Nicaragua’s electricity production system is highly dependent on imported energy sources like heavy fuel oil and diesel. The following figure shows that about 27% (752 GWh) of the total electricity generated in Nicaragua in 2004 (2830 GWh) originated from renewable energy sources. The share of hydropower was about 11%, geothermic 10% and bagasse in cogeneration approximately 6% of the total electricity production.


Geothermic10 %

Hydro power11 %

Cogeneration6 %

Thermic73 %

Renewable27 %

Today’s electricity production capacity is quite sufficient. However according to the National Commission on Energy (CNE) the country it is expected to face with serious power production deficit already before the next decade. The following figure demonstrates that the gap between the maximum power demand and the installed capacity is narrowing considerably in the future. This will inevitable lead to power supply interruptions. The reason to this development is that power consumption rises steadily, but there are any new large scale power plant investments in the investment pipeline. This will naturally also have an influence on the development of the electricity prices as well.

Electricity production capacity versus maximum demand

400

600

800

1000

1200

1400

1600

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

[year]

[MW

] Demand max [MW]Installed capacity [MW]

The Government of Nicaragua wants to change the composition of the current energy mix by developing incentives to promote the use of renewable energy sources for the future electric installations. The Government is carrying out actions to change the regulatory framework, and also promoting incentives for the utilization of renewable energy sources.


The Government of Nicaragua, through the National Commission on Energy (CNE), is formulating a new energy policy, the main objective of which is to offer confidence to the renewable energy -sector investors, to enlarge the rural electrification (the index of electrification is the lowest in Latin America 50%), and to permanently promote the use of the clean and renewable sources in a sustainable way.

Power plant The chosen power plant solution is a small-scale compact solid biomass fuel fired condensing power plant with a simple closed water-steam circulation system, a high- pressure steam turbine and an open cooling tower.

This plant is designed to operate as a base load power plant. The minimum load of the new power plant will be about 50%, although this depends highly of the selected boiler manufacturer.

The following table presents the performance and main operation values of the proposed power plant.

Live steam 3.85

13.86 48.0 420

kg/s t/h bar(a) °C

Feed water 3.9 57.6 115

kg/s bar(a) °C

Flue gas temperature 180 °C (estimation)

Fuel power 12.5 MW

Fuel consumption 1.1 kg/s

Boiler efficiency 85 %

Electricity generation capacity 18.1 GWh/a

Power gross 2.61 MWe

Power net 2.38 MWe

Auxiliary power consumption 0.23 MWe

Total plant efficiency 18-19 %

Site

The proposed 2.6 MW biomass fired power plant would be located in the municipality of Sebaco located in the province of Matagalpa. Valley of Sebaco is located about 100 km north-east from the Managua city and it covers an area of 282 km2 and has a population of 28,000.

The intended power plant site is owned by Exportadora Atlantic S.A. The site is located at a distance of less than 1 km from the coffee processing plant “Beneficcio Atlantica” and approximately 4 km from the town of Sebaco.


Fuel availability The total realistic availability of different biomass types would be about 53,000 tonnes (equivalent to 155 GWhfuel), as shown in the following table, if the price would not be considered to be a limiting factor. Coffee and rice husk would account for 47% of the total energy content of the biomass.

Table: Maximum availability of different biomass types to the intended power plant.

Total energy

(GWh/year)

Rice husk (<50km) 13 165 10 3,48 46 29Rice straw (<50km) 12 509 53 1,49 19 12Coffee husk (<50km) 6 179 10 4,61 28 18Sawdust (all Nicaragua) 7 468 40 2,90 22 14Other saw waste (all Nic.) 13 778 40 2,90 40 26Pinus chip (<50km) 375 50 2,30 1 1Total 53 474 155

MC%NCV, as recieved

(MWh/ton)%Waste type Available

waste (ton)

The total realistic availability of all the biomass types delivered to the intended power plant is summarized in figure below. The x-axis shows the cumulative quantity of fuel expressed in energy unit (GWh) and the y-axes is the price of the fuel delivered to the power plant.

Fuel supply curve (quantity: GWhfuel vs. price: $/MWh ex power plant)

0123456789

101112131415161718192021

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160

Cumulative amount of fuel, GWh

Fuel

pric

e, u

sd /

MW

h

In the base case the fuel use of the power plant was limited to 100 GWh (average price $8.93/MWh) due to the very high purchase price of the biomass fuel. 100GWh annual fuel energy is sufficient for a 2.6 MW power plant.


The cheapest 100 GWh fuel would consist of 74% of coffee and rice husk, 14% rice straw, 12% of sawmill residues and 1% of forest harvesting residues as shown in the following table.

Table: Composition of the cheapest 100 GWh biomass fuel types (delivered to the power plant).

Rice husk (<50km) 46 46Rice straw (<50km) 14 14Coffee husk (<50km) 28 28Sawdust (all Nicaragua) 6 6Other saw waste (all Nic.) 6 6Pinus chip (<50km) 1 1Total 101

%GWhfuelWaste type

Investment and O&M costs The power plant investment costs have been estimated based on the consultant’s knowledge and experience of similar projects and budgetary proposals previously made worldwide. As the consultant has good information about similar projects from the last few years, no budgetary proposals have been asked for this project. The estimates are based on the utilization of proven modern technology and equipment and suitable level of automation. The special conditions in Nicaragua have been considered.

The estimated total investment cost of the biomass fired power plant is $6,650,000 ($2,558/MW).

The following table present estimated O&M costs of the power plant.

O&M cost Unit Amount %

Fixed cost Manpower $c/kWh 0,16 4,6 Other fixed cost $c/kWh 0,44 12,6 Fixed total $c/kWh 0,6 17,1 Variable Fuel $c/kWh 1,91 54,6 Other variable $c/kWh 0,50 14,3 Electric market fee $c/kWh 0,43 12,3 Ash disposal $c/kWh 0,06 1,7 Variable total $c/kWh 2,90 82,9 Total $c/kWh 3,50 100


Power purchase agreement (PPA) The PPA, which secures the project’s revenue streams, is the most important commercial agreement.

It is recommended that the power plant developer would make a letter of intent with the most suitable customer(s) alternative(s) before the investment decision to in order to be able to estimate feasibility in the first operation years with enough accuracy. Also, making a long-term Power Purchase Agreement (PPA) would make the investment decision easier for the investors.

Financing Constructor(Project developer) is usually requested to participate in the plant investment with their own financing of at least 30% of the total investment cost. In this study, based on the local conditions, the equity ratio of 25% has been chosen for the constructor. Exportadora Atlantic would also provide a suitable site for the power plant. These contributions would probably assure adequate interest of the potential financiers to admit loan to the investment.

Feasibility

The financial calculations for the power plant are based on the investment cost estimate, power plant operating costs, financing, taxation, depreciation, the selling price of electricity and other obligations and terms regulated by the law or lending institutions and proposed long term 20-year of operation time.

Values used in the financing calculations are presented in the following table.

Subject Unit Value

Investment $ 6,650,000

Selling price increase % 3.15

O&M costs increase % 2.74

O&M costs total $c/kWhfuel 3.50

Holding time a 20

Interest rate % 6

Selling price of electricity $/MWh 46

The results of the feasibility calculations are presented in the table below.

Subject Unit Value

Operating margin [k$/year] 208

IRR [%] -0.4

Current investment value [k$] -3,280

Pay-back time [year] 40


The pay-back time of 40 years and IRR of -0.4% shows clearly that the power plant is not feasible.

Power sales price, fuel price and investment cost were included in the sensibility analyses the results of which are shown in the following figure. The sensitivity calculations indicate that the most sensitive function related to the power plant feasibility is the selling price of electricity.

Sensitivity Analysis Current Investment Value

-10000

-8000

-6000

-4000

-2000

0

2000

-40 % -30 % -20 % -10 % 0 % 10 % 20 % 30 % 40 %

Precentage change

[k$]

Power sale pricefuel priceinvestment

The investment could be profitable if the selling price of electricity, direct investment support and fuel price would simultaneously change in a favorable way. For example, reasonable feasibility could be achieved if the power plant could be able to receive 30% direct investment support from the government, 20% higher selling price of electricity and 10% lower fuel price as presented in the following table. In this table the reasonable feasibility case is compared to the base case.

Subject Unit Base Case Reasonable feasibility

Operating margin [k$/year] 208 408 IRR [%] -0.4 9.6 Current investment value [k$] -3,280 1,660 Pay-back time [year] 40 15

On the basis of the input data agreed to be used in the feasibility calculations the feasibility of the project does not reach any acceptable level.

The realistic amount of available biofuel is less that expected and this shall lead to a smaller power plant and to higher production costs.


To gain feasibility the selling price of electricity should be at least 30% higher, the fuel price should be at least 10% lower and the direct investment support from the government should reach a level of about 20% of the total investment.

The fuel purchase procedure would become rather complex because of the high amount of different biomass types and large number of small-scale biomass producers/suppliers in the study area.

Other biofuel fired electricity production systems should be studied to find out a more feasible way to produce electricity in an environmentally friendly manner.

Recommendations The fuel procurement system should be made simple. There could be a separate company that would take care of the fuel compilation and delivery to the power plant. However it seems likely that establishing this kind of company would also require financing incentives in order to be able to operate.

If there can be changes in the input data values on which this study is based, it might be useful to start to negotiate with customers. It is recommended that the power plant developer make a letter of intent with the most suitable customer(s) alternative(s) before the investment decision. With a price agreement the feasibility of the project can be calculated with a smaller risk and the outcome of the project would be positive.

If the negotiations with the customers show’s bright light to the total project feasibility, the power plant procurement process can be started with call of bids for suitable plant suppliers. Again if it can be seen that the project is feasible we have to proceed to the negotiations with financing companies. For these negotiations there would need to be letter of intent from customers and selected supplier, to give enough credibility.

Small-scale biofuel gasification plant Because the amount of suitable fuel is limited, especially, if we want to reduce the number of biofuel producers, we are in a situation where small scale biofuel gasification plants with gas engines are attractive choices. This plant would produce electricity with maximum power per unit of 125kW. For example Ankur scientific energy technologies pvt. ltd. from India has a complete product for biofuel gasification and electricity production. Their product range Ankur Gasifier Based Power Generation Systems (standard ratings of 3kW, 10kW, 40kW, 100kW, 150kW, 200kW, 300kW and 500 kW net electrical outputs).

We recommend that a new feasibility study be made for small scale bio-fuel gasification plants, for the Beneficcio Atlantica coffee mill and possible other large biomass producers.


1 INTRODUCTION This Project financed by the Energy and Environment Partnership with Central America and Exportadora Atlantic S.A. includes the elaboration of the Feasibility Study to demonstrate the economic and technical viability for the development of the 5 MW project to generate electric energy, prompting by the company Atlantic, S.A.

The intended power plant would be based on the high-pressure saturated steam production from agro industrial residues (coffee and rice husk, rice straw and possibly sawmill waste), which would be collected within a reasonable transportation distance from the plant, located in the Valley of Sebaco in the center of the country. The agro industrial residues are produced throughout the year thus enabling the production of electric energy to continue every month of the year, totaling 19,000 MWh. The purchase of the energy generated is guaranteed for the “Market of Occasion” (spot), as established by the National Electric Market. It is calculated that a saving in greenhouse gas emissions would amount approximately to 15,000 TM CO2 annually.

The target was to study the feasibility of a 5MW condensing biofuel fired power plant. Because of the lack of suitable and reasonably priced biofuel we had to reduce the size of the plant to 2.6MW. All the calculations are made for a 2.6MW power plant.

Electrowatt-Ekono Oy with Proleña as a sub-consultant was awarded the contract to carry out the study.


2 BACKGROUND AND BASIC IDEA MARKETS The Electric System in Nicaragua is constituted mainly by the Interconnected National System (SIN), which serves to all the Pacific, north and central zones of Nicaragua. It covers more than the 90% of the territory where the population of the country is. The remainder is covered by small remote systems of generation. The SIN providers are 14 power plants, gas thermal, turbines, geothermic, diesel motors, hydroelectric and two of co-generation plants fired with sugar cane bagasse. The energy consumed in a year is 2,300 GWH, which is produced mainly (80%) from fossil hydrocarbons imported. The nominal value of the power installed is 642 MW.

The Government of Nicaragua desires to change the tendency of the composition of the energy mix, promoting the use of renewable energy sources for the future electric installations. The government is carrying out actions to change the regulatory framework, and also promoting incentives for the utilization of renewable energy sources.

The Government of Nicaragua, through the National Commission on Energy (CNE), is formulating a new energy policy the main objective of which is to offer confidence to the sector investors, to enlarge the rural electrification (the index of electrification is the lowest in Latin America 50%), and permanently to promote the use of the clean and renewable sources in a sustainable way.

2.1 Business Concept The project is aimed to verify the production of reliable and renewable energy at a lower price than in the fossil fuel based energy production. Energy production with biomass would also reduce the greenhouse gas emissions in Nicaragua.

The intended power plant will provide “clean” electricity to the customers in the Sebaco valley area. The power plant would utilize local, solid biomass-based fuels, such as rice and coffee husk and rice straw, in electricity production. Today these materials are burned as waste material in concrete ovens with the objective to get rid of the waste. All the heat produced is wasted to the atmosphere. Some of the coffee processing mills however utilize a small part of the waste material in the coffee drying process.

2.2 Operation Objectives Currently there are not any incentives for biomass based electricity generation in Nicaragua. However, there is already an incentive for wind and hydro energy, which shows the Government’s policy to promotion renewable energy, in order to at least equalize the financial conditions with those generated with hydrocarbons. The most obvious arguments for electricity generation with biomass are:

• Reduce the imports of fossil fuels thus gain currency savings for the country

• Utilization of indigenous biomass resources that currently are destroyed as waste material


• Diversification of the country’s electricity generation mix

• Generation of job opportunities

• Clean Energy

• Firm Energy

Country’s energy official (CNE)1) has implemented programs and political discussions about how part of renewable energy production needs to be developed and supported.

The objective of this study is to evaluate the technical and economic viability of a small scale biofuel fired power plant located in Central Nicaragua. The alternative fuels to be used in this power plant have been identified by Exportadora Atlantic S.A.

To meet the objective of the study the consultant has:

• assessed the quality, quantity, availability and price estimations of the existing biofuels available in the Sebaco Valley area;

• investigated and documented local operation opportunities, conditions and restrictions;

• calculated project feasibility; and

• made recommendations for the project continuation.

2.3 Location and Site The proposed biomass fired power plant would be located about 100 km north of Managua in the municipality of Sebaco in the province of Matagalpa.

2.4 Plant Capacity The net output of the power plant is 2.6 MW of electricity with fuel power of 12.5 MW and the total plant efficiency 19-21 % with 100% load. Planned operating capacity is assumed to be 91.3 %, which means operation hours of 8000h/a. The power plant will operate as a base load plant.

2.5 Fuel Supply The plant would be fuelled with rice husk, coffee husk and rice straw available from the coffee and rice processing mills within a fuel supply area of 50 km (= distance) the fuel supply area from the intended power plant). There are seven operational rice processing plants and 19 coffee processing plants within the fuel supply area.

Additionally the availability of sawmill waste has been taken into account covering some 30 sawmills in Nicaragua.

ELECTROWATT-EKONO OY Doc.No 60D05152.01.Q060.002 Date October 26, 2004 (100) 2.6 Finance and Economic Criteria

The project involves various companies and institutions connected to the project through financing or supply or other agreements. The basic contractual and financial set up of the project is presented in Figure 1. The key stakeholders in the project are the financiers, the power purchaser and the governmental institutions of Nicaragua authorizing the necessary permits and agreements and further guaranteeing the obligations. The financial structure and 1the companies and institutions are presented in the following paragraphs.

Figure 1 Parties involved in project development, implementation and power plant operation

(EXAMPLE)

2.6.1 Financial Structure The pla is to finance the project by long-term debt (75% of the total investment). Atlantic S.A. or some other private investor will provide the site area and equity (25% of the total investment).

The number of potential power plant project investors in Nicaragua today is very limited. However, if Nicaraguan’s commercial and economic relationship with the western countries continues to improve it can be expected that foreign investors would show interest in the project.

2.6.2 Contractual Arrangements The contractual structure and draft contracts have not yet been identified.

1 Comisión Nacional de Energía de Nicaragua.

financing

financing

Construction contract

Consultancy contract

Permissions and licences O&M –

contract

Owner Operator

PPA-, supply-, generator- contract

Power plant 5MWe

Atlantic S.A.

Other Investors

Investor (e.g. bank)

Power purchaser 2

Power purchaser 1

Power purchaser 3

O&M supplier

Contractor (e.g. epc)

Consultant

CNE, INE, others


2.6.3 Parties Involved

Project developer EXPORTADORA ATLANTIC S.A. THE ECOM GROUP

The company Atlantic S.A. has been operating in Nicaragua for many years as the exporter of coffee, obtaining and industrializing this product in the north zone of the country. Atlantic S.A. has studied for several years the opportunity to develop an electricity generation project utilizing industrial residues from the coffee and rice processing and from rice husk. Atlantic S.A. implemented a pre-feasibility study of the project, concluding that it should take the next step and make a feasibility study to show the economic and technical viability of the project.

Energy and Environment Partnership with Central America

The Energy and Environment Partnership with Central America is an initiative launched by the Finnish government, SG-SIA and CCAD during the world summit in Johannesburg 2002, and the participants are governmental entities and private institutions.

The objectives of the program is to make possible that the renewable energy resources have a major participation in satisfying the energy needs of the isthmus, contributing in this way to their sustainable development, the reduction of the increase of greenhouse gases effect and the mitigation of negative effects of global climate change.

The operation components for the programme are: (i) removal of legal and institutional barriers hindering more participation of renewable energy at low scale in the region, (ii) promotion and strengthening of renewable energy development in the emerging markets of electric power, as well as the rational use of bio energy resources, and (iii) strengthening human resource and institutional capacity in renewable energy issues.

Consultant Electrowatt-Ekono Oy The company is part of the Jaakko Pöyry Group, which is a client- and technology-oriented globally operating consulting and engineering firm. The Jaakko Pöyry Group is a listed company, whose net sales in 2004 were EUR 479 million. The Group employs about 5200 experts and it has offices in over 30 countries worldwide. The Group has three core areas of expertise: forestry & forest industry, energy and infrastructure & environment.

The Energy business group, operating under the name Electrowatt-Ekono, is a diversified international consulting and engineering company, who combines the know-how of energy business, technology and environmental issues. Services cover all phases of the energy value chain. The range of expertise encompasses services from strategic and energy business development to all energy business, via project development and implementation to power plant operation and maintenance. Electrowatt-Ekono is one of the world-leading experts in hydropower, renewable


energy, combined heat and power generation and district heat including waste to energy.

Sub-contractor Prõlena

Prolena operated as a sub-contractor for the consultant. Prolena specialised in field studies made in biofuel supply area Vallye of Sebaco. They investigated possible biofuel producers and transport opportunities and costs.


3 ELECTRICITY SYSTEM AND MARKETS IN NICARAGUA Changes in the energy laws regulating the power generation, distribution and transmission in 1998 opened the markets to privatisation. Two governmental bodies i.e. Instituto Nicaragüense de Energía (INE) and Comisión Nacional de Energía (CNE) were established to implement new regulations in the electricity sector.

In Nicaragua the electricity producer have three different ways to sell electricity:

• producers/generators can sell all the electricity that they produce through the SPOT markets to big consumers who want to buy electricity,

• producers can make an agreement with Union Fenosa, who would distribute the electricity to the customers. Union Fenosa would also take care of the spinning reserve or

• producers can sell electricity directly to big energy consuming customers.

Market data presented in this chapter 3 is based on the following technical and political studies as well as on the consultant’s own estimations. The calculation tables are presented in appendix 2.

1. CNE; Plan Indicativo de la generacion sector electrico de Nicaragua

2. Diagnostico de la Reforma del sector electrico, informe final, Vivianne Blanlot Soza, Diciembre 2003

3. Opciones de politica para la reforma del sector electrico; Manuel I Dussan and Different tables

3.1 Current Electricity Production System Nicaragua’s electricity production system is highly dependent on imported energy sources like heavy fuel oil and diesel. Figure 2 shows that about 27% (10% hydro, 10% geothermic, 6% bagasse in cogeneration) of the total electricity generated in Nicaragua in 2004 originated from renewable energy sources.


Geothermic10 %

Hydro power11 %

Cogeneration6 %

Thermic73 %

Renewable27 %

Figure 2 Electricity production in Nicaragua (total 2830 GWh in 2003)

All major operative power plants, fuel type used, commissioning year and production data in 2004 are listed in the following table 1.

Table 1 Operating power plants in Nicaragua in 2004

Power Plants Operator Number Start-up Fuel Power Power Gene-ration

in Nicaragua of Units Year Nominal Actual MW MW GWh

Hydro power

Santa Barbara Hidrogesa 2 1972 water 54.4 50 120.9

Centro America Hidrogesa 2 1965 water 50 48 177.7

Wabule Wabule 3 2000 water 1.5 1 3.5

Las Canoas Las Canoas 3 2000 water 1.5 1 3.5

Geothermic

Momotombo Ormat 2 1999 Geot. 77.5 31.2 270.5

Fossil fuels

Managua Gecsa 3 1971-95 HFO 57.4 53 224.7

Nicaragua Geosa 2 1976 HFO 106 100 559.6

Amfels/censa Amfels 13 1999 HFO 63.9 62.6 297.8

Chinandega Geosa 1 1985 Diesel 14 13.5 3.3

Las Brisas Gecsa 2 1992-98 Diesel 65 55 47.6 Empr.energetica de corinto Enron 3 1999 HFO 74 70.5 533.5 Tipitapa power company ltd Coastal 5 1999 HFO 52.5 50.9 411.4


Cogeneration

Monte rosa Monte rosa 1 2000 Bagasse 26 26 66.77 Nic.sugar estates ltd

Nic.sugar estates 1 2000 Bagasse 39.3 35 115

Total 683 597.7 2,836

Heavy fuel oil is mainly used in medium speed diesel engine plants and diesel oil in gas turbines. There are some exceptions like unit 3 Gecsa Managua where HFO is burned in a normal steam boiler.

There are only two cogeneration plants in Nicaragua. They both are operated by local sugar industry. Plants use bagasse as fuel, thermal energy is provided with several temperature and pressure levels like steam and hot water to the sugar manufacturing processes. For these plants the primary product is heat, and electricity is generated from the surplus fuel.

Geothermal power production is rather new in Nicaragua even though the connection with two continental platforms is located in the west coast area of Nicaragua. Electricity is produced with geothermal heat obtained from the lower layers of the ground. Water is heated in pipes, which are placed into the heating layer. Generated steam is provided to the turbine that turns the heat into mechanical rotation and further to electricity.

Some part of the energy generation equipment is rather old. The first power plants have been in operation for almost 20 years. For example the fossil fuel plants Gecsa Managua, Geosa Nicaragua and Chinandega have combined production capacity of almost 140 MWe. This is about 20% of the total installed capacity. These older plants need to be removed or modernized quite soon or they need to be replaced. Also, some water turbine plants have been in operation for some 40 years, but because of the slow rotation speed the turbines usually last longer that fossil fuel fired plants.

3.2 Electricity Consumption and Demand

Figures 3 and 4 show that Nicaragua can have severe problems with the adequacy of electricity by the year 2010. The rapid growth of the electricity consumption will put the existing production capacity to its operational limits. This will cause more and more production interruptions and shortage in the supply electricity, which can directly be seen in higher electricity prices in the near future if no power plant investment decisions are made.

One of the most significant problems Nicaragua is facing today, is the technical and non-technical losses in electricity transmission and distribution. According to the CNE, some major improvements are to be expected within this decade so that the total value of losses should decrease from 30% to 18.5%. In the long run the objective is to decrease the losses to less than 10%.


Estimated development of electricity production in Nicaragua 2001 - 2024

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Figure 3 Electricity production estimation

Today’s production capacity is quite sufficient, but problems will occur before the next decade according to the CNE. From figure 4 we can see that the available production capacity is narrowing significantly to the end of this decade. The problem is that the consumption rises steadily, but there are no new large power plant investments. This will affect the development of the electricity price.

Electricity production capacity versus maximum demand

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Figure 4 Electricity production estimation for installed capacity and maximum demand.

From the figure 3 the CNE has estimated that at the beginning of next decade there would be new capacity available enough to satisfy the consumption growth in the future.

ELECTROWATT-EKONO OY Doc.No 60D05152.01.Q060.002 Date October 26, 2004 (100) 3.3 Customer Development

Customers are divided into five different categories according to the “Nicaragua, Diagnostico de la Reforma del sector electrico informe final; Vivianne Blanlot Soza, Diciembre 2003” as follows:

• Households: normal private personal accommodations.

• General: Commercial users like offices, commercial centers, etc.

• Industry: Industrial users.

• Others: Water pumping stations, government offices, churches, etc.

The role of different customer categories in Nicaragua is presented in table 2 and in figure 5.

Table 2 Number of clients and electricity consumption by customer type, 2000- 2004.

Customer development in Nicaragua

0

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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consumption GWh/aClients total thousands

Figure 5 Electricity consumption forecast in Nicaragua 2004 – 2014.

2000 2001 2002 2003

Consumer type:

Number of

clients 1000

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Number of

clients 1000

GWh

Number of

clients 1000

GWh

Number of

clients 1000

GWh

House holds 410.7 439.6 427.5 449.4 436.6 463 447.3 499.6

General 20.3 421.3 21.5 449.5 23 482.5 24.9 522.5

Industry 4.7 336.9 4.9 351.9 4.7 358.7 4.7 364

Others 1.7 290.1 1.3 298.9 1.4 268.8 1.3 291

Total 437.4 1,487.9 455.2 1,549.7

465.7 1,573 478.2 1,677.1


The number of electricity consuming customers seems to increase steadily in the future. This creates solid ground for work done in electricity generation and market development. Electricity producers can estimate what type of investment decisions should be made in the near future to meet the increasing demand for electricity.

3.4 Current Electricity Price Current average consumer prices are presented in table 3. The consumer prices are quite high compared to the western countries, especially for household users. Although power requirement for one normal household is sufficiently lower if monthly energy usage is lower than 50 kWh.

Table 3 Current electricity customer prices in Nicaragua in 2005.

Customer type unit average price

House holds $/kWh 14.46General $/kWh 12.99Industry $/kWh 10.82Others $/kWh 10.19

The Market of Occasion initiated functions in Nicaragua in October 2000, and since then the prices have been defined according to the criteria mentioned. Average monthly SPOT prices for electricity are presented in figure 6.

Precios promedios mensuales SPOT energia Nicaragua US$/MWh

-10.0020.0030.0040.0050.0060.0070.00

Oct, 00

Dic-00

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1Ab

r-01

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US$

Figure 6 Monthly electricity prices on the SPOT market

Based on the above figure and the acceptance of Atlantic we estimate that the price for the electricity sold to the customers can reach as high as $46/MWh. According to Atlantis the price can fluctuate between $46/MWh to as high as $60/MWh. In the sensitivity analysis we can calculate the viability of the plant with a higher electricity price.

The tariff for the sold electricity has to be divided into two parts: fixed and variable. The proportion of fixed costs of total cost has to be so big that it covers the cost of


spinning reserve. In this way the power plant does not suffer from the required 5 % lack of total capacity.

As discussed earlier in subsection 3.2 we can make the following assumption from figure 4. When consumption rises and production capacity does not, we can be quite sure that the price available today is low and the rise of the price will accelerate before the end of this decade. These assumptions are based on the study made by CNE “Plan indicative de la generacion sector electrico de Nicaragua”.

3.5 Foreseen Investments in Production in Nicaragua According to the CNE, during the next five years there will be new “Green Field” investments in electricity production capacity. Estimations on the total invested power vary from 317 MWe to 793 MWe. In this study we did not investigate how accurate information this is, because it would have been very difficult and time consuming to find out the plans of future power producers.

3.6 Electricity Transmission and Distribution Network The electric grid in Nicaragua is divided into two parts: southern DISSUR and northern DISNORTE shown in figure 7. The eastern part of Nicaragua is not yet covered by the electric grid except a few towns in the Atlantic coast. These towns have their own local grid, but they are not connected to the national grid.

Figure 7. DISSUR and DISNORTE electric grid areas.

DISNORTE

DISSUR


The electricity grid of Nicaragua is a part of Central American transmission network. Electricity can be imported or exported to the north (Honduras) or to the south (Costa Rica). Electricity is mainly bought to fulfil the momentary needs.

The development of the united Central American grid has developed during the past 30 years: in 1976 shared connection between Nicaragua and Honduras, in 1979 connection between El Salvador and Guatemala, in 1982 connection between Costa Rica and Nicaragua, in 1986 connection between Costa Rica and Panama and in 2003 connection between Honduras and El Salvador. This united grid balances the total electricity grid because each country can buy electricity from the neighbor countries if necessary. Transmission capacity is still limited and it should be increased in the future. In figure 8 transmission lines are shown in Nicaragua.

The operator for the national grid is the government owned company Union Fenosa. They are responsible for the transmission and distribution network in Nicaragua. They make the decisions on extending the grid to cover new customers. They are also responsible for the operating, maintenance and projecting costs.

Figure 8. Electricity transmission grid lines in Nicaragua .(CNE, Analisis de barreras ambientales para el desarrollo de proyectos de energia removable)

The Dispatch Center located in Managua supervises the balance between producers and consumers in the total national grid, especially, big consumers and all the generators who are connected to the national grid. Those independent producers that are connected directly to a certain customer and not to the national grid are not under the supervision of the Dispatch Center. The function of the Dispatch Center is to make sure that the balance between generators and consumers is allright. The Dispatch Center have direct connection to a sufficient amount of power plants where they can adjust the production capacity by them selves. They also supervise that all those producers that are obligated to have a spinning reserve do not overload their generation capacity. The Dispatch Center can also buy electricity directly fromm the neighboring countries.

Transmission lines Blue grid: 230kV Black grid:138kV Red grid: 69kV


The electricity transmission and distribution network was designed according to US standards. The close partnership with the US government made it easy and simple for the Nicaragua government to implement the US standards into the country’s electric grid design, construction and operation objective.

The operation values of the national transmission and distribution grids are from 230kV /138kV / 69kV transmission, 24.9kV / 13.8kV / 440V / 220 V / 110V distribution. The frequency of the grid is 60Hz.

3.6.1 Comments Regarding Spinning Reserve Spinning reserve is back-up energy production capacity which can be made available to a transmission system with ten minutes' notice and can operate continuously for at least two hours once it is brought online.

Non-spinning reserve is generating capacity which is capable of being brought online within 10 minutes if it is offline, or interrupted within 10 minutes if it is online, and which is capable of either being operated or interrupted for at least two hours.

Spinning is derived from hydroelectric and combustion turbine terminology. Reserve generator turbines can literally be kept spinning without producing any energy as a way to reduce the length of time required to bring them online when needed.

MANAGEMENT OF SPINNING RESERVE

The amount and management of spinning reserve is the domain of the system operator, ENTRESA. The system operator must arrange for what spinning reserve should be available at any given moment and manage (real time) the costs thereof. It is ultimately impractically (though possible) and not cost-effective for each generator to provide a specific level of spinning reserve.

The theory of economic dispatch suggests that the lowest marginal cost plants should be running at full load or base loaded (plants such as biomass, hydro, nuclear, wind and geothermal) and spinning reserve should be provided by low capital (higher marginal cost) plants. The technical difficulty of utilizing biomass fired power plant for spinning reserve: Base load power plant like biomass fired steam generator is usually designed to give its highest efficiency with 100% load. If it is required that the plant can only operate with 95% of the capacity, we reduce the income dramatically and use more fuel. High investment cost compared to diesel engine or gas-turbine per MW is one reason for not have spinning reserve. Also this type of base load plant needs time to change its level of power. The time needed to increase the power from 95 % to 100% can be as long as 30 minutes.

As much as anything, this is a cost consideration. Consider that, if a biomass fired power plant (which costs are mostly capital costs, with normal or little operating costs such as fuel) is to constantly provide 5% spinning reserve, all of its project capital costs and generated power will be approximately (1/0.95 = 1.0526) 5.26% higher. Consider a diesel or thermal plant, with high marginal fuel cost. The cost of not generating the 5% spinning reserve will save the marginal cost of fuel.


We have the conclusion that having all units in the system provide an equal 5% spinning reserve margin is not consistent with providing the least cost of service to the customers. It is also not the norm in the industry.

COST OF SPINNING RESERVE

The costs of spinning reserve (as well as all other so-called ancillary services) are ultimately paid by the customers and if the generator(s) are asked to pay for the need for spinning reserve, they will build these costs into the price of their power. There are two basic needs for spinning reserve – first the need to ramp up power to meet load demands and second the need to replace power from an operating plant which as been forced to reduce load partially or entirely. The former is a cost of demand and the later a cost related to the lack of supply. It is this later cost which stems (at least statistically) from the non-performance of individual power generating units. It is reasonable to ask individual generating units to (i) reduce the extent to which spinning reserve is necessary based on the performance of the individual units, or the forced outage rate; and (ii) pay for the costs associated with the spinning reserve utilized based on the unit(s) performance.


4 FUEL AVAILABILITY

4.1 General about Biomass Production in Nicaragua

4.1.1 Forestry and Forest Industry

Forestry

Nicaragua has extensive forests, and despite the large-scale clearing for agricultural use, about 39% of the surface, some 5,108,400 ha is still covered by tropical broadleaf forest. It is mainly located on the Atlantic Coast. Some 3 million ha are declared protected areas, mainly in humid zone. Some 1.5 million ha are declared for productive uses. The location of the forested areas can be seen in figure 5 and the types of forest cover in table 4.

Table 4 Nicaragua forest cover in 2004 (km2)

Currently Use Surface Km2 Percent %

Open Tropical Broadleaf 19,401 14.88

Closed Tropical Broadleaf 31,683 24.30

Open Pinus Forest 3,950 3.03

Closed Pinus Forest 1,160 0.90

Secondary Forest (barbecho) 4,836 3.73

Savanna vegetation 4,619 3.54

Agro-pecuarian uses 48,875 37.49

Mangroves forest 690 0.53

Inunded lands 1,420 1.00

Herve vegetation 2,379 1.82

Palm forest 486 0.37

Without cover land 569 0.44

Urban areas 270 0.21

Water 10,034 7.77

Total 130,375 100 Source: INAFOR Statistics 2004

Important areas of the forest cover, included protected areas, are currently under pressure for agro-pecuarian activities.

During the last ten years, more than 60% of the total round wood harvested originated from the Nueva Segovia region, which comprises the following departments: Nueva Segovia, Madriz and Esteli. In this mountain region, wood production is based on pinus and logging is authorized under management plans.


Table 5 Nicaragua Major zones for wood logs supply in Nicaragua 1994-2004 (m3)

Department 1997 % 1998 % 2003 % 2004 %

Boaco 392 0.15 2111 0.85 62.89 0.03 534.15 0.31

Carazo 7402 2.78 5070 2.05 2401.17 1.36 621.45 0.36

Chinandega 7934 2.98 8447 3.41 660.98 0.37 118.19 0.06

Chontales 2177 0.82 4829 1.85 3019.13 1.71 1493.96 0.88

Esteli 11146 4.18 7834 3.16 2100.28 1.18 759.51 0.44

Granada 4712 1.77 3901 1.58 1198.27 0.67 140.96 0.08

Jinotega 874 0.33 3932 1.59 3851.15 2.18 444.15 0.26

Leon 16650 6.25 14228 5.75 654.50 0.37 0.00 0.00

Madriz 10125 3.80 7285 2.94 6298.12 3.56 2450.62 1.44

Managua 2013 0.76 12731 5.14 576.50 0.32 0.00 0.00

Masaya 3643 1.37 3214 1.30 2254.49 1.27 493.19 0.29

Matagalpa 4360 1.64 4925 1.99 364.44 0.20 80.01 0.04

N. Segovia 164222 61.62 132584 53.54 76785.92 43.49 98777.90 58.29

RAAN 6314 2.37 9966 4.02 36360.53 20.59 16150.25 9.53

RAAS 13528 5.08 5035 2.03 16336.12 9.25 0.00 0.00

RioSanJuan 5405 2.03 17904 7.23 21707.79 12.29 654.89 0.38

Rivas 5624 2.11 3634 1.47 1915.42 1.08 718.22 0.42

Total 266521 100 247630 100 176548 100 169454 100

Source: INAFOR Statistic data,1999, 2004

Despite of the fact that some portion of roundwood comes from the forests under the management plans, the Nueva Segovia region has been overexploited in the last 10 years. Additionally, during 2001 and 2002 the pinus forest has suffered from a Dendroctonus attack at the most severe level that obligate to lose some 20,000 ha in order to preserve the rest of the pinus forest. The current situation has stressed the milling industries located in the zone.


Figure 9 Coverage of forested area in Nicaragua

Sawmill industry

There are some 33 industrial scale and approximately 40 smaller scale sawmills in operation in Nicaragua. Annual sawnwood production from the industrial scale sawmills was estimated to be 89 000 solid-m3 in 2004. The average size of the industrial scale sawmills is very small (about 2 800 m3/year) and only one sawmill produced more that 10 000 m3 of sawnwood in 2004 (table 4). The biggest concentration of the sawmills is in the Nueva Segovia and RAAN regions. Sawmills are typically located near the wood source. The biggest sawmills are usually band type sawmills and most of the rest are circular type sawmills. In some regions portable saws are also still of importance (table 6).

In the Nueva Segovia region, the sawmilling process for lumber production is linear and simple, frequently dominated by the primary breakdown where final products are: lumber, slabs and edges. Some of the sawmills were processing slabs in a secondary breakdown to produce wood sticks and small pieces of wood. However, only one of the companies (MADESA) has arranged its equipment for primary and secondary breakdown.

According to the Proleña study for Ocotal Power generation 2000 1, the utilisation rate for roundwood saw logs to ready lumber varied typically between 70% to 50%. The highest conversion factor 70% was obtained by the MADESA company, while the

1 PROLENA has developed two studies 1999, 2000, concerning the potential for power generation in the Nueva Segovia region.


lowest conversion factor was for CECOFOR with a circular main saw. However, the total average factor conversion in lumber for seven sawmills was 55.9 %.

According to a very rough estimation, the raw log intake to all sawmills in Nicaragua totalled almost 200 000 m3. This means that the total amount of process waste (consisting of sawdust, bark and other e.g. offcuts, trimming waste etc.) was approximately 110 000 m3 in 2004. Only one of these sawmills has a sawn wood dryer.

Table 6 List of operative sawmills, sawn wood production in 2003 and estimated production in 2004 Sawmill Sawmill Drier Production Estimated prod.

Region Town type m3/year (2003) m3/year (2004)Maderas Segovianas Nueva Segovia Ocotal band not 19 316 17 385Industria Maderera San Martin Nueva Segovia Ocotal band not 7 104 6 393San Miguel Nueva Segovia Mozonte circular not 6 071 5 464San Judas Tadeo Nueva Segovia Ocotal circular not 5 273 4 746Emp. Maderera Nicaraguense Nueva Segovia Mozonte circular not 4 433 3 990Serreria SULA Esteli Esteli circular not 4 310 3 879Emp. Maderera Bermudez Nueva Segovia circular not 3 943 3 549Segovian Lumber SA Nueva Segovia Mozonte band not 3 806 3 425Aserradero Macarali Nueva Segovia Jalapa circular not 3 795 3 415Inversiones Maderera Nueva Segovia circular not 3 542 3 188Pinotea SA Nueva Segovia Ocotal band yes 3 421 3 079Maderas Alternativas Renovables Nueva Segovia circular not 3 089 2 780Santa Emilia Nueva Segovia Mozonte circular not 2 993 2 694Jalil Zavala Ponce Nueva Segovia Ocotal band not 2 932 2 639Fabrica de Cabos y Escobas Nueva Segovia circular not 2 825 2 542Aserrío San Vicente Esteli Esteli circular not 2 645 2 380Aserrío Jose B. Madariaga Nueva Segovia circular not 2 281 2 053La Esperanza Esteli Esteli circular not 2 213 1 991Maderas de Nicaragua Nueva Segovia circular not 1 889 1 700Yo Tengo Fe Esteli circular not 1 885 1 697El Caribe Esteli band not 1 758 1 582Central de Cooperativas Forestales Nueva Segovia circular not 1 582 1 424Aserradero La Unión Nueva Segovia El Jicaro circular not 1 027 924Aserradero San Jose Nueva Segovia Jalapa circular 947 852Villa Quezada Nueva Segovia Jalapa circular 930 837San Rafael Esteli circular no 905 815Coop. De Serv.Multiples, Cordillera Dipilto Nueva Segovia Dipilto circular 837 753Maderas y Transporte de Nicaragua Nueva Segovia Jalapa circular 699 629Madera Santa Ana Nueva Segovia Jalapa circular 698 629Aserradero Pasmata Nueva Segovia Jalapa circular 621 558Instituto Tecnico Forestal Esteli circular no 593 534APROFOSC Nueva Segovia Sta. Clara circular no 593 534Total 98 957 89 061

Location


0 3 000 6 000 9 000 12 000 15 000 18 000 21 000 24 000 27 000

León

Jinotega

Chontales

Chinandega

Rivas

Granada

Madriz

Río San Juan

Matagalpa

RA A S

Masaya

Managua

Esteli

RA A N

Nueva Segov ia

Lumber, s -m3

Figure 10 Estimated production of sawn wood by region in 2004 (solid-m3)

4.1.2 Agriculture and Agro Industry Production A number of official documents mention that Nicaragua is a traditional agropecuarian country. The cultivated area has been increased from some 500,000 ha in 1990 to some 1,000,000 ha in 2003 meaning an annual increment of 9%. Mainly increased cultures are beans, coffee, peanuts and rice. The other cultures like ajonjoli, sorgum and tobacco experimented a decrement. From the following table we can see that rice, beans and coffee share more than 70% of total cultivated area in 2003. Table 7 Agriculture Surface Evolution in Nicaragua during 1990 - 2003 (1000 ha)

Cultivos 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003

Sesame 35.4 36.9 26.9 12.4 8.0 8.3 11.7 8.52 2.4 8.5

Bananas 2.2 1.7 1.8 1.8 2.0 1.7 1.9 2.0 1.1 1.0

Café 74.2 84.2 86.9 95.7 96.1 103.2 111.4 112.4 118.9 118.9

Sugar cane 42.4 44.8 51.4 53.7 55.0 57.4 52.7 41.9 42.4 45.2

Beans 105.0 138.5 123.3 138.9 194.7 214.8 229.9 237.6 257.6 298.5

Peanuts 4.9 8.6 11.2 15.2 14.9 23.7 23.0 22.2 16.5 23.8

Tobacco 1.4 1.33 2.2 3.9 1.6 0.8 0.9 1.4 1.3 1.6

Rice 175.0 279.8 286.9 239.7 259.8 268.9 335.7 327.4 385.8 406.3

Maize 25.2 13.6 37.0 37.9 31.5 33.3 25.1 26.5 38.7 32.6

Sorghum 2.4 9.3 10.5 14.0 18.7 9.3 3.3 2.2 2.3 3.9

Other 38.1 62.0 69.8 77.0 86.3 63.3 95.9 86.8 95.1 96.8

TOTAL 506.4 681.1 707.6 690.3 768.8 784.9 891.6 869.0 962.4 1037.1

Source: MAGFOR, Informe de la Situación Alimentaria Nutricional 2004


Under approved CAFTA 1 some of the Nicaraguan basic grains production like sugar cane, fruits and legumes will be protected. Imports from the USA will be in corn (white and yellow) and rice (paddy and gold grain).

Coffee The coffee production has increased during the 1994-2004 period, from 50,000 tons to 90,000 tons (gold grain). Expected production for 2004-2005 is about 80,000 tons.

The major coffee production zones in 2003-2004 cycle were, the Jinotega, Nueva Segovia, and Madriz, departments, which covered 88% of the production. Carazo, Chinandega, Esteli have also contributed but in small quantities.

Rice The rice production (not includes rice imports) in Nicaragua has increased from 125,000 tons to 200,000 tons during the period of 1994-2004. Expected production for 2004-2005 is about 170,000 tons.

In the year 2004 some 80% of the total rice processing in Nicaragua was concentrated on four regions: Matagalpa (Sebaco), Nueva Segovia (Jalapa), Managua (Malacatoya) and Granada (Nandaime). Other rice production regions are: Chinandega, Boaco and Rio San Juan. In 2004 it was estimated (La Prensa November 24, 2004) that a total number of rice producers were 50,000 most of which were very small producers.

Beans The beans production has also increased during the period of 1994-2004, from some 100,000 tons to near 250,000 tons.

The major zones in 2003-2004 were the Nueva Segovia and Esteli departments accounting for some 70% of the total production in Nicaragua. Small quantities of beans are also produced in the regions of Matagalpa, Boaco and Rio San Juan.

Other potential cultures for fuel are sugar cane and peanuts, concentrated in the Pacific zone. All sugar mills (4 pcs) are already utilising bagasse for energy production. The peanuts waste is partially used as a fuel in the mill process for oil extraction in Chinandega.

Milling industries

Coffee

In the year 2000 there were 85 coffee production mills (dry process) in Nicaragua producing 100,000 tons of coffee (gold grain). As many as 38 of these mills were located in Matagalpa, 2 in Jinotega, 9 in Esteli, 6 in Madriz, 17 in Nueva Segovia and 13 in the Pacific zone (Chinandega, Carazo).

By the end of the year 2004 there were 19 mills operating in the zone of Matagalpa. Many mills have been broken and others have been merged with Atlantic and CISA, two of the major coffee mills in the zone.

1 U.S.-Central America Free Trade Agreement


Rice

There were more than 50 rice mills in operation in 2003 producing more than 180,000 tons of rice. By the year 2004 some of these mills were broken down and others merged with the biggest rice mills like Agricorp, which is the major importer of paddy and which trades almost 50% of the total amount of rice production. Agricorp also owns and operates for rice mills and also controls more than eight rice mills.

It has been estimated that in 2004 there were 51 rice mills in operation and some ceased production in Nicaragua. The mills were located as follows two in Chinandega, ten in Rivas, three in Granada, two in Boaco, six in Rio San Juan, nine in Nueva Segovia, twelve in Matagalpa, five in Masaya and four in Carazo.

Peanuts

There are four peanut mills located in Nicaragua (Chinandega, Manisa, Posoltega, SEMPRO and Cukra hill).

4.1.3 Animal Breeding & Processing Industries From the point of view of biomass power generation, animal breeding activities are important not only as generator for abundant biomass waste like dung, sewage sludge, pig slurry, etc, but also as consumer sector of biomass waste derived from agriculture and agro-industries. For example, rice husk has always been used for chicken bed, a fine rice husk has been used for feeding pigs and cows and rice straw has been used to feed cows during a dry season. Sawdust has also been used for chicken bed.

4.2 Fuel Availability and Suitability

4.2.1 General

4.2.1.1 Fuel Supply Area The municipality of Sebaco1 has a surface area of 28,200 ha. 3,500 ha of which is dedicated exclusively to rice cultivation. Sebaco’s economic activities are based on agriculture (rice, coffee and legumes cultivation), rice and coffee milling and textile industries.

Biomass transportation costs are high due to relatively low energy content per volume of biomass, occasionally low condition of roads and high maintenance costs of transportation equipment. In practice this means that the fuel supply area is determined by transportation distance to the intended power plant.

It has been assumed by the customer (Atlantic S.A.) that the coffee and rice processing plants located in the Valley of Sebaco (about 15 km radius) would be sufficient to meet the biomass based fuel needs of the biopower plant. However, in this study the rice and coffee processing waste related supply area has been extended

1 Sebaco municipality is a valley located 103 Km North of Managua, with an altitude of 469 meter, surface area of 282 km2, population of about 28,000, a tropical climate with average temperature of 25.7 ºC , average precipitation of some 889 mm and relative humidity of 78%.


to a radius of 50 km. Additionally the availability of sawmill residues has been studied from all industrial scale sawmills in Nicaragua.

50 km

30 km

Figure 11 Wide perspective of the fuel supply area (30 and 50 km radius)


Figure 12 Closer perspective of the fuel supply area (30 and 50 km radius)

4.2.1.2 Biomass Types to be Studied and Their Fuel Properties Biomass-based fuels to be studied are:

• rice and coffee husk

• rice straw

• sawmill by-products (sawdust, other waste incl. e.g. bark and trimming waste)

• (forest chips from 600 ha natural pine forest in the town of Totumbla)

Rice and coffee husk

A substantial amount of husk (shell) is accumulated at the site of the processing plant. Frequently this material is considered as a harmful waste that is burned in kilns to reduce the amount of waste without utilizing the heat. However some processing plants are already producing heat by combusting husks to dry coffee or rice. However this does not resolve the waste problem because each processing plant needs only approximately 10% of the total amount of husk to meet its energy demand.


Figure 13 Coffee husk at coffee processing plant


Figure 14 Rice husk at San Benito rice processing plant

Rice straw The rice cultivation area in the study region is about 5 000 ha. This area is only slightly bigger than in the Sebaco Valley 3 500 ha. The yield of the straw (stalk above 20 cm from the ground) is approximately 12 tons per ha. Although only a small portion of this biomass would be accessible at affordable price for the energy producer, it could provide substantial energy potential.


Figure 15 Rice field (straw potential: stem part > 20cm)

Sawmill residues Sawmill residues are widely used biomass fuels in energy production in the world. Although there are only a few small sawmills in the study region it offers a lucrative potential as a fuel source.

Fuel properties

Samples of rice and coffee husk and rice straw were analyzed by an accredited laboratory (AnalyCen) in Finland and Sweden. The laboratory reports are presented in a appendix 8.


Table 8 Laboratory analyses of selected biomass types

Coffee husk Rice husk Rice

strawPine log chips *)

Moisture % 10,0 10,0 52,9 40 - 55Ash cont. % db 0,6 23,1 23,3 0,5 - 2Sulphur S % db 0,04 0,05 0,09Chlorine Cl % db <0,01 0,2 0,51Carbon C % db 49,5 37 36,9Hydrogen H % db 6 4,7 4,8Nitrogen N % db 0,4 0,5 0,9Oxygen O (calc.) % db 43,5 34,5 33,5Aluminium Al Al mg/kg, dm 170 110 120Arsenic As As mg/kg, dm <0,05 0,25 0,76 0,04 - 0,4Barium Ba Ba mg/kg, dm 7,5 9,3 34Boron B B mg/kg, dm <5,2 5,7 7,8Calcium Ca Ca mg/kg, dm 1000 660 2900Cadmium Cd Cd mg/kg, dm <0,01 <0,01 0,01 0,1 - 0,4Cobalt Co Co mg/kg, dm 0,1 0,21 0,58Chromium Cr Cr mg/kg, dm 2,0 7,1 1,1 1 - 2Copper Cu Cu mg/kg, dm 8,9 5,2 6 0,6 - 6Iron Fe Fe mg/kg, dm 120 95 140Mercury Hg Hg mg/kg, dm <0,02 <0,02 <0,02 0,01 - 0,02Potassium K K mg/kg, dm 1400 5800 23500Magnesium Mg Mg mg/kg, dm 320 440 1700Manganese Mn Mn mg/kg, dm 14 240 290Molybdenum Mo Mo mg/kg, dm <1 0,91 0,85Sodium Na Na mg/kg, dm 59 58 1400Nickel Ni Ni mg/kg, dm 1,00 3,70 0,63Lead Pb Pb mg/kg, dm 0,22 0,10 0,06 0,6 - 14Phosphorus P P mg/kg, dm 74 630 1800Anthimony Sb Sb mg/kg, dm <0,21 <4,2 <0,21Selenium Se Se mg/kg, dm <0,05 <0,05 <0,05Silicon Si Si mg/kg, dm <1000 103400 81100Tin Sn Sn mg/kg, dm <0,05 <1,1 0,2Titanium Ti Ti mg/kg, dm <10 <11 <11Vanadium V V mg/kg, dm 0,34 0,11 0,51 0,3-5Zinc Zn Zn mg/kg, dm 18 21 21 5 - 40Net calorific value ar MJ/kg 16,586 12,525 5,372 6 - 10Net calorific value db MJ/kg 18,684 14,173 13,988 18,5 - 20 ar = as received; dm = dry matter; db = dry basis *) typical values for pine log chips (source: Electrowatt-Ekono Oy)

The net calorific value (NCV) as received of coffee husk is 16.6 MJ/kg, the moisture content 10% and the ash content in dry matter only 0.6%. The NCV of rice husk is lower (12.5 MJ/kg) due to the much higher ash content in dry matter (23.1%). The NCV of rice straw is very low because of the high moisture content (52.9%) and ash content (23.3%). The NCV in pine varies typically between 6 and 10 MJ/kg depending on the moisture content of the fuel.

Rice husk, with fine texture, has a bulk density of 112-136 kg/m3 at 10% moisture content. Rice straw has a bulk density of 250-300 kg/m3 at 25% moisture content and it is currently available in small packs (standard dimensions: 50x60x25 cm) from rice processing mills. Coffee husk has very fine texture with a bulk density of 302-310 kg/m3.

ELECTROWATT-EKONO OY Doc.No 60D05152.01.Q060.002 Date October 26, 2004 (100) 4.2.2 Availability

4.2.2.1 Coffee and Rice Husk

There has been a clear increase in green coffee and rice paddy production in Nicaragua during the last ten years as can be seen from figure 17. According to the latest statistical information and Proleña´s own data sources the estimated green coffee production in Nicaragua in 2004 was about 100,000 ton and in the study area approximately 71,000 tons. Rice paddy milling in Nicaragua totalled about 282,000 tons (share of imported rice paddy was 110,000 tons and share of paddy from own cultivation 172,000 tons). Rice paddy milling in the study area totalled 77,000 tons in 2004.

Most rice and coffee mills operate throughout the year, which is important for the even availability of fuel to the intended power plant during all months of the year.

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Figure 16 Production of rice paddy and green coffee in Nicaragua and in the study area 1980–2015, 1000 tons

In 2004 there were five major rice processing and 19 major coffee processing plants in operation in the study area producing 71,000 tons of green coffee and 77,000 tons of rice paddy. The amount of coffee husk has been estimated to be about 10% of the total volume of green coffee, and rice husk about 20% of the total volume of rice paddy. (figure 18)


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Figure 17 Production of rice paddy, green coffee and husk in the study area 1980–2016, 1000 tons

Coffee husk production in the study area totalled about 7,000 tons and rice husk about 15,000 tons (10% moisture content) in 2004. Some coffee and rice producers are currently using husk to dry their products and some others are considering to start utilizing husk in the future to dry coffee and rice. Approximately 10-11% of the accumulated husk of a processing plant would be sufficient to meet drying needs of the mills. Technical losses in husk storing and handling and potential other uses of husk have been estimated to be 5%.

In this feasibility study the future availability of husk to the intended power plant has been estimated on the basis of coffee and rice production in the year 2004 assuming that the processing plants´ own energy use, technical losses and other uses of husk in all processing mills had totalled 15-16% of the total husk production. This would mean that the total amount of excess husk would be approximately 6,200 tons or 28 GWh fuel of coffee husk and 13,200 tons and 46 GWh fuel of rice husk in 2004 as presented in table 9.


Table 9 Coffee processing activities in the study area, 2004

COFFEE HUSK IN 2004 Production in 2004

Total husk production

Own use of husk (11%)

Losses and other use

(5%)

Total amount of excess

husk


husk

Coffee, ton, dm ton, 10% MC ton, 10% MC ton, 10% MC ton, 10% MC GWhAtlantic 5 708 1 427 157 71 1 199 5,5CISA (San Carlos) 5 539 1 385 152 69 1 163 5,4VOLCAFE 0 0 0 0 0 0,0Bankcoffee 3 090 773 85 39 649 3,0Bencafe 2 624 656 72 33 551 2,5MAGSA 2 2 172 543 60 27 456 2,1Sajonia 1 543 386 42 19 324 1,5La Providencia 1 489 372 41 19 313 1,4La Esperanza 1 352 338 37 17 284 1,3SOLCAFE 1 288 322 35 16 270 1,2Lucas Aguilar 0 0 0 0 0 0,0Palacios o Totolate 927 232 25 12 195 0,9PICASA 785 196 22 10 165 0,8Thalia 742 185 20 9 156 0,7La Pita 644 161 18 8 135 0,6Alemania 581 145 16 7 122 0,6Eger 322 80 9 4 68 0,3Alzacia 201 50 6 3 42 0,2El Aliado 180 45 5 2 38 0,2Selva Negra 167 42 5 2 35 0,2San Antonio 68 17 2 1 14 0,1Total in study area 29 423 7 356 809 368 6 179 28

Rice paddy production in the study area totalled 77,400 tons and related husk production about 15,500 tons (10% moisture content) in 2004.

Table 10 Rice processing activities in the study area, 2004

RICE HUSK IN 2004 Production (milling) in 2004

Total husk production

Own use of husk (10%)

Losses and other use

(5%)


husk


husk

Paddy, ton ton, 10% MC ton, 10% MC ton, 10% MC ton, 10% MC GWhAgricorp 29 892 5 978 598 299 5 082 17,7AMADOR (San Benito) 21 138 4 228 423 211 3 593 12,5Mansell 19 814 3 963 396 198 3 368 11,7Gonvel 0 0 0 0 0 0,0San Rafael 0 0 0 0 0 0,0Rio Viejo 3 100 620 62 31 527 1,8Torrez Valle 3 500 700 70 35 595 2,1Total in study area 77 444 15 489 1 549 774 13 165 45,8

the location of the rice and coffee mills, Totumbla pinus forest area, electric substation can be seen in the following map.


Figure 18 Location of the rice and coffee mills and main rice cultivation areas

Table 11 Map legends

1 Gonvel Rice Mill Non Operated 2004 Managua-Sebaco 82 Las Mercedes Rice Mill Non Operated 2004 Sebaco-Esteli 43 Electric Sub Station Electric Sub Station Sebaco-Esteli 4,54 San Benito Rice Mill Operated 2004 Sebaco-Esteli 105 Rio Viejo Rice Mill Operated 2004 Sebaco-Esteli 106 Torrez Valle Rice Mill Operated 2004 Sebaco-Esteli 117 Agricorp Rice Mill Operated 2004 Sebaco-Esteli 148 Mansell Rice Mill Operated 2004 Sebaco-Esteli 15,59 San Rafael Rice Mill Non Operated 2004 Sebaco-Esteli 1710 Totumbla 600 ha Pinus Forest Managua-Sebaco 4011 Santiago Coffee Mill Non Operated 2004 Sebaco-Matagalpa 112 Atlantic Coffee Mill Operated 2004 Sebaco-Matagalpa 013 Bencafe Coffee Mill Operated 2004 Sebaco-Matagalpa 2,514 Conquistador Coffee Mill Non Operated 2004 Sebaco-Matagalpa 915 San Rafael Coffee Mill Non Operated 2004 Sebaco-Matagalpa 916 Aliado Coffee Mill Operated 2004 Sebaco-Matagalpa 917 Quebrada Honda / La Pita Coffee Mill Operated 2004 Sebaco-Matagalpa 11,518 Sajonia Coffee Mill Operated 2004 Sebaco-Matagalpa 10,519 Picasa Coffee Mill Operated 2004 Sebaco-Matagalpa 1120 Centroamericana Coffee Mill Non Operated 2004 Sebaco-Matagalpa 10,521 Providencia Coffee Mill Operated 2004 Sebaco-Matagalpa 1122 MAGSA 1 Coffee Mill Non Operated 2004 Sebaco-Matagalpa 1323 Solcafe Coffee Mill Operated 2004 Sebaco-Matagalpa 1424 CISA (San Carlos) Coffee Mill Operated 2004 Sebaco-Matagalpa 15,525 Lucas Aguilar Coffee Mill Non Operated 2004 Sebaco-Matagalpa 15,526 Esperanza Coffee Mill Operated 2004 Sebaco-Matagalpa 1527 MAGSA 2 Coffee Mill Operated 2004 Sebaco-Matagalpa 1528 Thalia Coffee Mill Operated 2004 Sebaco-Matagalpa 15,529 CISA (El Galpon) Coffee Mill Operated 2004 Sebaco-Matagalpa 1630 3M Coffee Mill Non Operated 2004 Sebaco-Matagalpa 1731 Alemania Coffee Mill Operated 2004 Sebaco-Matagalpa 1832 Kelly (Atlantic) Coffee Mill Operated 2004 Sebaco-Matagalpa 2133 San Antonio Coffee Mill Operated 2004 Sebaco-Matagalpa 2134 Palacios o Totolate Coffee Mill Operated 2004 Sebaco-Matagalpa 2435 Selva Negra Coffee Mill Operated 2004 Sebaco-Matagalpa 3436 Bankcoffee Coffee Mill Operated 2004 Sebaco-Matagalpa 1637 Eger Coffee Mill Operated 2004 Sebaco-Matagalpa 1838 Alzacia Coffee Mill Operated 2004 Sebaco-Matagalpa 18

Road rute Distance to power plant, kmMAP ID Company name Product type Observation

ELECTROWATT-EKONO OY Doc.No 60D05152.01.Q060.002 Date October 26, 2004 (100) 4.2.2.2 Rice Straw

The rice cultivation area in the study region is about 5 000 ha. The total yield of fresh straw could be as high as 20.6 tons/ha (mc 53%). This biomass can be divided according to the cut point to stalk (<20cm and >20cm). The stalk part that is under 20 cm is left to the soil to remain the nutrient balance and the upper part could be collected for possible other uses. In practice the availability of fuel straw is affected by the size of the farm (mechanical harvesting), type of the season (dry / wet), competing uses of straw and the vicinity of the truck accessible road. It has been estimated that most potential farms for rice straw production could generate some 25,000 tons (mc 53%) of “excess” straw for energy production purpose. However only the 50% of the amount i.e. 12,500 tons (18.7 GWh) could be available with zero cost, because of the high demand for the packed rice straw for feeding cows during the dry season. During the rain season the straw is burned in the rice field before starting the rice plantation.

Proleña has implemented several field surveys and market studies related to rice straw production in Sebaco Valley area. The results of these surveys and studies can be summarized as follows:

Sebaco municipality1 has a surface of 28,200 ha (282 Km2), which some 3,500 has (5,000 manzanas2) are dedicated exclusively to rice culture3. Sebaco economic activities are based on agriculture with rice and legumes (oignon, carrots and betterrage). Other industrial activities are rice and coffee milling and Textil industries (Two Zonas francas based on textil).

Economic activities in Sebaco are influenced by the fact of its location “near” to Matagalpa and Nueva Segovia regions were there are important areas for annually dedicated crops (coffee, rice and bean). It is also important to bear in mind that Sebaco is located on the road route to the Atlantic coast. Coming Esteli and Nueva Segovia road route, Sebaco is extended to the San Isidro municipality that is part of the valley of Sebaco, where rice culture is the major crop.

Table: Total rice culture & potential rice straw in Sebaco Valley (ton)

From Sebaco From San Isidro Size farm Are (mz) Rice straw ton Are (mz) Rice straw ton

1.01 to 2.5 0.00 4.00 7.00 2.51 to 5.0 6.00 10.5 4.50 7.87 5.01 to 10.0 3.00 5.25 36.00 63 10.01 to 20.0 19.00 33.25 120.00 210 20.01 to 50.0 431.00 754.25 188.50 329.8 50.01 to 100.0 718.00 1207.5 318.00 556.5 100.01 to 200 2784.00 4872 694.00 1214.5 200.01 to 500 1998.00 3496.5 3045.00 5328.7 > 500 728.00 1274 2502.30 4379.02 Total 6687.00 11702.25 6912.30 12096.52

1 Sebaco municipality is a valley located 103 Km North from Managua, with an altitude of 469.67 msnm, with 282 km2 of surface, accounts some population of 28,000, a tropical climate with average temperature of 25.7 ºC , some 889 mm of average precipitation and 78% of Relative humidity. 2 A territorial measure Manzana, is equivalent to 0.7 hectares. 3 According to 2001 Cense Agropecuario 6687 manzanas (4680 ha) were dedicated to rice culture with irrigation, with the following structure: 2.5 to 10 mz a total of 215 farms, with 10 to 100 mz a total of 233 farms, and more than 100 mz a total of 35 farms.


Table presents rice straw potential derived from the rice culture in Sebaco Valley, based on numbers of 2001 from CENAGRO III. The table shows that more than 90% (92 for Sebaco and 94 for San Isidro) of the areas cultivated were bigger than 50 mz, meaning that these areas could be more efficiently mechanically harvested. In those areas the estimated potential rice straw to use for power generation is about 22,328 ton1. However only the 50%, some 11,164 ton could be available with cero cost, because high demand for the packed rice straw for feeding cows during dry season. During rain season the straw is burned in the field rice before starting the rice plantation.

The cost of Packed rice straw could reach some US$ 15.002 per tone during dry season at road route border included loading.

Figure 19 Packed straw for sale in San Isidro area, 2005

1 We have been consider the data collected by Nadal Nuria 2002 and the mentioned estimation 2.5 Mg/ha in harvest at 40 cm of length (traditional system) 2 During December 2004 and February 2005 we have visited number of sellers in the border route. The average price for a packed rice straw of 18-20 kg was C$ 7.00-8.00 per unit, it means major of 50 units. But sellers confirm our data that prices at the farm reach some 5.00 C$ per unit, and farmers confirm that cost of unit could be C$ 3.00 per unit, some 9.00 US$/tone


Figure 20 Discharge system in CISA Coffee mill

Transportation costs

Biomass transportation costs are mainly affected by the energy density of the transported material, transportation distance, condition of the road, type of transportation equipment used, fuel costs and the availability of return cargo.

There is not much experience of transporting fuel e.g. wood chips, sawmill waste, and agro-industrial waste to a power plant, however for example Nicaragua has experience of transporting commercial firewood for domestic use. The types of trucks that could be used to transport solid biomass fuels could be as follows:

- Truck without a trailer (type C3) with 36 m3 transporting capacity or - Truck with trailer with 51 m3 transporting capacity.

Nicaragua’s Minister of Transport has specified truck transportation so that any vehicle, loaded or empty, must not exceed the following sizes:

- Width: 2.50 m - Height: 3.90 m - Length: 2-axle 10.0 m, 3-axle 11.0 m, bus 11.0 m, with trailer 17.0 another

combinations 18.3 m.

In addition, any combination of vehicles must not exceed a length of 18.3m, and the total weight including all axles and combinations must not exceed 34,500 kg.

Transportation of wood and husk is usually limited by weight and not by volume whereas transportation of rice straw is limited by volume. The energy density of the transported material has very high impact on the total transportation costs. E.g. transportation of rice straw as a loose material is not only difficult but also very uneconomical. It is always recommended (if possible) to increase energy density of straw by compacting it in the field to small or large scale bales prior transportation.


The majority of the coffee mills are located next to the Sebaco – Matagalpa road route, which is a 30 km long paved road but nevertheless in a very bad condition. Allowable speed is 40 km/h.

The Managua-Sebaco road route is a paved road that is in a very good condition. Allowable speed is more than 60 km/h.

The Sebaco-Esteli-Nueva Segovia road route is a paved road and in a very good condition. However, the road is narrow and the allowable speed could be 40-60 km/h.

The transportation costs of biomass have been estimated in energy units ($/MWhfuel) assuming 8-ton payload and average transportation cost of $0.3/t per one km for rice and coffee husk, for sawmill waste and for forest chips and $0.5/t for rice straw. The loading and unloading costs have been estimated to be $2/t for coffee and rice husk and for sawmill waste and 3 $/t for rice straw and forest chips.

The production costs (e.g. baling, transportation to road side) for rice straw has been assumed to be $8/t of straw and $6/t for forest chip production.

Distances

Road transportation distances (km) have been estimated from each potential fuel supply point (sawmills, rice and coffee processing plants) to the intended bio power plant.

Supply curves

Biomass availability, in terms of quantity and fuel price, for the power plant under review can be presented in a supply curve.

Wood fuel supply curves have been drawn to the power plant for the years 2004 presenting the technical fuel potential. The x-axis represents the cumulative fuel energy volume (GWh) and y-axis the price level ($/MWh) of the fuel available.

Price levels have been calculated as follows:

Gate fee ($/MWh, at the fuel supply point) + loading and unloading costs + (transportation cost, $/MWh * transportation distance, km).

In this study it has been assumed that both rice and coffee husks and sawdust can be collected from the processing mills free of charge. The gate fee for other sawmill waste (e.g. trimming waste) is $2/t. The gate fee for rice straw has been considered to be $8/t. This sum includes harvesting, processing and transportation of straws from the field to the roadside or some other place where the trucks can come and collect it to be transported further to the biopower plant.


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Figure 21 Realistic availability of rice and coffee husk, rice straw and sawmill residues

4.2.2.3 Sawmill residues Estimated sawn wood production in the main sawmills in Nicaragua totalled to approximately 89,000 solid m3 (57,900 tons) in 2004. According to Proleña the total amount of excess residues was only about 21,000 tons in 2004 consisting of 65% trimming waste (incl. bark) and 35% sawdust. Small amount of sawmill waste can be explained because of very simple sawmill process, where majority of sawmills have only primary breakdown of round wood log producing lumber, slabs and edges. Some of the sawmills are processing slabs in a secondary breakdown to produce wood sticks and small pieces of wood.


Table 12 List of main sawmills in Nicaragua and estimated production data in 2004

Name Distance Sawmill Wood Theoretical km type Drier m3/y t/y t/y Trimming+bark Sawdust

Maderas Segovianas 117 bande not 17 385 11 300 13 560 2 689 1 458Industria Maderera San Martin 112 bande not 6 393 4 156 4 987 989 536San Miguel 122 circular not 5 464 3 552 4 262 845 458San Judas Tadeo 124 circular not 4 746 3 085 3 702 734 398Emp. Maderera Nicaraguense 124 circular not 3 990 2 593 3 112 617 335Serreria SULA 46 circular not 3 879 2 521 3 026 600 325Emp. Maderera Bermudez 114 circular not 3 549 2 307 2 768 549 298Segovian Lumber SA 124 bande not 3 425 2 227 2 672 530 287Aserradero Macarali 174 circular not 3 415 2 220 2 664 528 286Inversiones Maderera 114 circular not 3 188 2 072 2 487 493 267Pinotea SA 114 bande yes 3 079 2 001 2 401 476 258Maderas Alternativas Renovables 114 circular not 2 780 1 807 2 168 430 233Santa Emilia 124 circular not 2 694 1 751 2 101 417 226Jalil Zavala Ponce 114 bande not 2 639 1 715 2 058 408 221Fabrica de Cabos y Escobas 114 circular not 2 542 1 653 1 983 393 213Aserrío San Vicente 44 circular not 2 380 1 547 1 857 368 200Aserrío Jose B. Madariaga 114 circular not 2 053 1 334 1 601 318 172La Esperanza 44 circular not 1 991 1 294 1 553 308 167Maderas de Nicaragua 114 circular not 1 700 1 105 1 326 263 143Yo Tengo Fe 44 circular not 1 697 1 103 1 324 262 142El Caribe 54 Bande not 1 582 1 029 1 234 245 133Central de Cooperativas Forestales 114 circular not 1 424 926 1 111 220 119Aserradero La Unión 154 circular not 924 601 721 143 77Aserradero San Jose 112 circular 852 554 665 132 71Villa Quezada 182 circular 837 544 653 130 70San Rafael 42 circular no 815 530 636 126 68Coop. De Servicios Multiples, Cordil. 122 circular 753 489 587 116 63Maderas y Transporte de Nicaragua 172 circular 629 409 491 97 53Madera Santa Ana 172 circular 629 409 490 97 53Aserradero Pasmata 172 circular 558 363 436 86 47Instituto Tecnico Forestal 42 circular no 534 347 416 83 45APROFOSC 137 circular no 534 347 416 83 45

89 061 57 890 69 468 13 778 7 468

Waste, t/yProduction in 2004 Excess waste

4.2.3 Total Availability / Summary The total amount of fuel realistically available to the bio power plant is about 53,500 tons (equivalent to 155 GWhfuel) if price is not considered to be a limiting factor.

Table 13 List of total available fuel for the power plant

Total energy

(GWh/year)

Rice husk (<50km) 13 165 10 3,48 46 29Rice straw (<50km) 12 509 53 1,49 19 12Coffee husk (<50km) 6 179 10 4,61 28 18Sawdust (all Nicaragua) 7 468 40 2,90 22 14Other saw waste (all Nic.) 13 778 40 2,90 40 26Pinus chip (<50km) 375 50 2,30 1 1Total 53 474 155

MC%NCV, as recieved

(MWh/ton)%Waste type Available

waste (ton)

Total realistic availability of all the biomass types (coffee and rice husk, rice straw, sawmill residues and forest chips) can be summarised as presented in figures 22 and 23. The x-axis shows the cumulative quantity of fuel expressed in energy unit (GWh) and the y-axes is the price of the fuel delivered to the power plant.


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Figure 22 Fuel supply curve (quantity: GWhfuel vs. price: $/MWh ex power plant)

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Figure 23 Fuel supply curve (quantity: GWhfuel vs. price: $/ton ex power plant)

ELECTROWATT-EKONO OY Doc.No 60D05152.01.Q060.002 Date October 26, 2004 (100) 4.2.4 Biomass Procurement Logistics

Organizing the procurement of biomass is of essential importance to the power plant economy. Procurement must be arranged in a manner that guarantees a continuous (around-the-year), sufficient and suitable quality fuel flow to the power plant. Additionally fuel procurement costs must be kept as low as possible by the means of careful planning, using suitable production system and equipment and with minimal administration costs.

Forest chips

The availability of forest waste in the study region is so restricted (< 500 m3/year) that it is not possible to acquire special machinery for the production (compilation and chipping) of forest chips only.

A recommended manner for the biomass fuel buyer (power plant or special purpose fuel supply company) would be to contact the forest company that is responsible for the forest management and cutting operations and try to negotiate a contract with them for the compilation of waste wood that is left in the forest after removing commercial wood, chipping of the biomass and transportation of the material to the power plant.

The production technology and logistic chain for the production of forest chips has been developed in many countries with abundance of commercial forest resources and with a high solid fuel burning capacity. Most sophisticated and cost-competitive procurement systems have been developed in Finland. Description of alternative supply chains has been presented in appendix 11.

Sawmill by-products and coffee / rice husk

There are several possibilities to arrange the transportation of the wood waste or husks to the power plant. Usually biomass producers have their own transportation equipment and they might be willing to offer the transportation. If this is not possible then a “special purpose established fuel supply company” could take care of the transportation.

The truck platform type and cargo unloading systems must be designed taking into account prevailing circumstances at sawmill and coffee / rice processing mills.

Straw

Most significant factor affecting the availability of the straw in the field is the ability to harvest it. In practice the availability of straw is affected by the type of season (dry/wet), size of the farm, the vicinity of truck accessible road near the farm and the overall cost efficiency of the production method and technology used.

There are different types of machines commercially available for rice straw harvesting. However finding the most suitable and cost effective rice straw procurement system is not an easy task and would require field demonstration tests utilizing locally available know how, work force and ready available machinery in Sebaco region.

It might be possible to cut the straw productions costs by 20-40% by developing a suitable and cost effective mechanized production system. However the development of suitable production chain can take several years time and would require many field


demonstration tests. Based on the current information about soil conditions in the rice fields, local know how and machinery base, it is not possible to make any recommendations about valid production systems.

Numerous obstacles exist in rice straw preparation, baling, field removal, and storage. There are equipment limitations related to the availability of suitable machinery and the very high purchase prices to effectively collect rice straw from the rice fields in the Sebaco area. Field conditions with high soil moisture, elevated check ridges, rutted dirt roadways, and remote rice fields are problems that need to be addressed. Additionally, straw height after harvest and lodging of straw are further complications to be considered.

Description of some alternative supply chains has been presented in appendix 12.

Organizational aspects

As there will be several different fuel types and many (> 30) different biomass supply sources it is recommended that the power plant owner would establish a separate fuel company to deal with fuel supply. This would mean that power plant could concentrate to energy production and the special purpose fuel company would take care of all necessary steps to guarantee a continuous fuel flow to the power plant.

Power plant would make just one fuel purchase agreement with the fuel supply company. The fuel supply company would then make a separate fuel purchase agreement with each biomass producer (biomass supply source).

Biomass purchasing agreement

Fuel supply contracts should be made prior to the implementation of the power plant project. The commonly agreed fuel characteristics are the starting point of a design of the power plant.

A fuel supply contract usually includes at least the following items:

• Definition of the fuel types to be delivered • Average fuel characteristics and allowed variation in moisture and ash content,

and particle size • Annual volumes (MWh/yearfuel, ton/year) • Mode of delivery in terms of used equipment (unloading of cargo), time of the

day, quantity per delivered load, and delivery frequencies • Fuel sample analysis & procedures (frequency and method used) to be used to

determine the quality and quantity of the biomass when delivered to the power plant

• Actions in case of deviations in deliveries • Pricing of the fuel and terms of payment • Force major • Dispute resolution • Termination of agreement

Biomass fuel pricing is usually done according to the real energy content, taking into consideration calorific value of dry matter, moisture content and weight. In Nicaragua the pricing could be based on received tons taking into account the moisture content of the material delivered.


The accuracy and definition of a pricing system depends on size of the power plant, the smaller the plant, the more simplified system is appropriate.

Quality definition and control are especially important in the case of use of biomass fuels without previous experience. The system adopted for fuel quality control will depend on the size and type of the biomass-fuelled boiler plant. The basic parameters for biomass fuel quality assessment can be classified in terms of:

• Energy density as received MWh/m3 • Moisture content w-% • Ash content • Particle size

For an energy density as received, a minimum value (MWh/m3) is usually given, whereas for the moisture content, a maximum value (w-%) is usually given.

Draft fuel supply contract is presented in appendix 13.

5 SITE CONDITIONS The proposed plant 2.6 MWe biofuel fired power plant will be located in the municipality of Sebaco in the province of Matagalpa. The Sebaco Valley area is approximately 100 km from the Managua city inside Region VI in the central of the country (see Figure 24). Matagalpa is the capital of the Region VI.

The power plant site area is owned by Exportadora Atlantic S.A. The land is located less than 1 km from the coffee processing plant Beneficcio Atlantica and approximately 4 km from the municipality of Sebaco.

Figure 24, Location of the Power Plant site and Subestacionen Sebaco.

Subestacionen Sebaco

Power Plant

24,9 kV Transmission line (air)

ELECTROWATT-EKONO OY Doc.No 60D05152.01.Q060.002 Date October 26, 2004 (100) 5.1 Site Preparation

It should be noted that there is no detailed soil analysis available form the site area. Thus the bearing capacity of the sub-soil in this area must be confirmed to ensure that it is suitable for construction. The seismic conditions must also be taken into account.

The organic matter shall be stripped from the construction area. If there have been problems in high ground water levels the power plant are should be build-over as much as it is needed.

Figure 25. Power plant site area, direction to the west.


Figure 26. Power plant site area, direction to the east.

5.2 Climate Conditions Sebaco Valley has two different seasons, which are very clearly defined: Dry season and Rainy season. The dry season period is from November to April, while the rainy season period is from May to October.

The average temperature ranges from 24.6 C in January to 27.1 C in April. According to INETER’s (Instituto Nicaraguense de Estudios Territoriales) 2005 information, April seems to be the hottest month, with an average temperature of 27.1 C, being the recorded extreme 28.2 C, while January is placed like the coolest month, with an average temperature of 24.6, being the recorded extreme 23.9 C.

According to INETER, average annual precipitation is about 845.2 mm, but records ranges from 0.5 mm in February to 230.4 mm in October, being, September and October, usually the rainiest months. Its precipitation ranges from 57.1 mm (recorded in October 2004) to 885.4 mm (recorded in October 1998, Mitch hurricane). During the rainy season, which goes from May to October, we can see that the total precipitation is 809.7 mm, while during the dry season the total precipitation is just 39.8 mm. The extremes recorded by INETER are January, February and April 1998; December 1999; January and April 2000; January and April 2001; and April 2003 when no precipitation occurred. While the highest average precipitation recorded during the Mitch hurricane.

As we can see in table, the relative humidity is extremely associated with the lowest precipitation. Average relative humidity recorded for Sebaco Valley is 71.9 %, being the extremes recorded 60.7 % in April, and October with 82.5 %.

The average wet bulb temperature for 2003 was 21.9C, ranges from 19.1 in January to 24.2 in June. While the average dry bulb temperature for 2003 was 25.2 C, ranges from 22.3 in January to 26.9 in June.


It configures a tropical hot climate conditions1.

Table 14 Average temperature, relative humidity and precipitation

Parameter JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Average (C) Temperature

24.6 25.0 25.8 27.1 26.9 25.7 25.6 25.8 25.0 24.8 24.7 24.8

Relative Humidity(%)

66.3 64.6 62.7 60.7 69.7 77.5 75.3 75.3 82.4 82.5 76.9 69.2

Precipitation (mm)

1.7 0.5 4.5 3.8 129.2 122.5 72.0 77.8 177.8 230.4 28.2 1.1

Source: Information recorded for 1998 to 2004 provided by INETER, 2005.

To show the accuracy of our data we can see the figures 27 - 29 bellow to compare the average data with 1990 data (temperature, relative humidity and precipitation)from INETER.

Figure 27 Average temperature.

1 According the Kopen Climate classes Sebaco has the tropical Savane climate

Average Temperature Comparing 1990 to 1998-2004

24,6

25

25,8

27,126,9

25,725,6

25,8

2524,8

24,724,8

25,325,1

25,9

27,227

26,226

26,2

25,1

24,324,1

23,9

22

23

24

25

26

27

28

January February March April May June July August September October November December

Month

Cen

tigra

des

Average Temperature (C), '98-'04

Average Temperature (C), '90


Figure 28 Average precipitation.

Figure 29 Average relative humidity.

5.3 Topographical and Geological Conditions

Sebaco is one of the most important intra-mountain valleys in Nicaragua, located in the Matagalpa department, at 480 masl. The flated area soil has been formed as the

Relative Humidity Comparing 1990 to 1998-2004

66,364,6

62,760,7

69,7

77,575,3 75,3

82,4 82,5

76,9

69,272

79 7876

81

85 84

91 9092 91

83

0

10

20

30

40

50

60

70

80

90

100

January February March April May June July August September October November December

Month

Perc

enta

ge

Relative Humidity (%), '98-'04

Relative Humidity (%), '90

P r e c i pi t a t i on Compa r i ng 19 9 0 t o 19 9 8 - 2 0 0 4

1,7 0,54,5 3,8

129,2122,5

7277,8

177,8

230,4

28,2

1,10 0,5 0

21

118,6

78 75,867,8

110,9

143,6

107,6

7,30

50

100

150

200

250

Januar y Febr uar y Mar ch Apr i l May June July August September October November December

M ont h

Pr ecipi tation (mm), '98-'04

Pr ecipi tation (mm), '90


result of Coyol and Matagalpa volcanic rock groups1. It comprises a total of 289.81 km2, surrounded by the mountains area addressing to Esteli and Matagalpa in the north side, with population of 28,000. The valley of Sebaco horizontal soils are mostly formed by arcilla, sand and limed arcillous sand. The valley of Sebaco is located into a medium risk seismic area, according INETER Seismic risk map. However, no seismic activity has been reported in the hold valley of Sebaco recently, but near the edge of the mountains surrounding the valley; this activity has been reported to happen on the boarding area focal point ranging from 0 to 30 km underground. From the hydrographic aspect we can identify two major rivers, Rio Grande de Matagalpa and Rio Viejo, both flowing, almost parallel, from north to south, causing its flat fertile areas. Besides this, the valley of Sebaco records underground flooding systems that are located from 6.20 to 47.0 m in the valley’s area and surroundings. (See figure 30)

Figure 30 Flooding systems in the Valley of Sebaco.

1 Coyol and Matagalpa group were clasified as the third aged volcanic rock group (Fenzl, Norbert 1998, Nicaragua Geografia, clima e hidrologia).

ELECTROWATT-EKONO OY Doc.No 60D05152.01.Q060.002 Date October 26, 2004 (100) 5.4 Underground Raw Water

The chemical composition of underground water is about: 85-560 ppm with average of 300 ppm, of solids dissolved matter like Bicarbonatum Ca, Na, and Mg. Besides, Boro contents range 0 to 0.9 ppm, with average 0.2 ppm.

5.5 Availability of Infrastructure Only transportation possible is by road. The road to the site is coming directly from the main road (Sebaco - Matagalpa) or from the coffee processing factory Beneficcio Atlantica.

The water supply is handled be especially drilled wells in the site area. The Valley of Sebaco is surrounded by mountains that collects rain and affects in a high level of groundwater. It is estimated that there will not be any problems for having enough water. It can also take into a count that fresh and clean ground water can be sold to farmers or industry near to the site area. In this study this issue we did not investigated more of this.

There is no electric grid close to the site. The power plant investment requires a new transmission line to the closest transformation station.

Auxiliary fuel supply is not needed because the plant will be started manually and fuel oil is not required. If there shall be need for oil in future the supply shall be handled by tank truck.


6 PLANT TECHNOLOGY Chosen power plant solution is small scale compact biofuel fired condensing power plant. With simple closed water-steam circulation system, with high- pressure steam turbine and open cooling tower solution.

6.1.1 Plant Operation This plant is designed to operate as a base load power plant of power required by customers. The minimum load of the new power plant is about 50%, although this depends highly from the selected boiler manufacturer.

The new plant will have an annual shutdown period for maintenance of about 2 to 4 weeks. This shall cover almost all the planned maintenance and service that requires plant to shut down.

The Dispatch Center will supervise plant’s operation factor and they will expect a spinning reserve of 5 % from the plant. In future it is possible that this type of biomass fired base load plants do not need to provide spinning reserve, as the geothermic plants.

6.2 Main Equipment and System In this chapter we generally describe the operation of biofuel fired condensing power plant. The power plant produces electricity with net output of 2.38MWe.

Boiler

The boiler has a step or other grate system depending on the manufacturer. It is made especially for incineration of rice husk, coffee husk and rice straw type bio fuels. It can also combust small amounts of wood based fuel. The grate and the primary combustion chamber are dimensioned so that they prevent light fuel components to fly away from the grate before the incineration process has occurred.

The furnace and high pressure steam part are conventional membrane construction. The boiler is simply superheating boiler with an economizer. The first combustion chamber is covered with heat resistance brick’s and masses. The boiler is single drum natural circulation with one or two pass. In the first pass is the primary super heater and in the second pass is the economizer.

There are two combustion air fans, a primary and a secondary fan. Both are centrifugal fans. Primary air is led through the grate and to the top of the grate. The secondary air is led to an upper part of the combustion chamber. This also depends on the boiler manufacturer.

The boiler is equipped with one fuel silo. The fuel is fed from the silo into the furnace via one or two front wall feeding lines to the top of the grate.

Depending on the boiler manufacturer the boiler is attached to supporting steel structure form the top or it is supported from the ground. The boiler should be


designed to fit for outdoor installation with light rain cover attached to the supporting structure.

Anticipated boiler performance is presented in table 15.

Flue gas and ash systems

A multi - cyclone cleaning for the fly ash is required. The multi-cyclones separate the largest particles. A flue gas fan and a re-circulation fan are of centrifugal type. A stack consists of an inner chimney and an outer shell.

The bottom ash is cooled with the discharge water from the cooling tower. Wet bottom ash and fly ash are collected to an ash container.

It is important to design bottom and fly ash disposal systems so that the ash removal procedure is easy and do not require special operations. Also boiler furnace and flue gas channel contamination needs to be controlled and cleaning processes should be reliable and simple.

Turbine and steam water cycle

This plant has a condensing turbine with one bleed extraction. The turbine will be delivered by competitive turbine manufacturer. The turbine is multistage type with a horizontal spindle. The impulse type turbine has a top exhaust. Although the construction of the turbine varies depending from the manufacturer.

The turbine has a net electric output at a generator poles is 2.38 MWe at a guaranteed point. The gross power at the generator poles is about 2.61MWe.

The extraction steam (bleed) operation values are approximately (4.0 bar(a), 160°C). This depends highly from the turbine manufacturer. It is important that we can use base model turbine which does not require any modifications for this plant. Extraction or auxiliary steam enters to a feed water tank to provide enough heat for the oxygen removal from the feed water. Operating values at condenser depends on the heat removal system.

The auxiliary steam is normally taken from the turbine’s controlled extraction. During the plant’s start-up the auxiliary steam will be produced from the boiler live steam with a reduction station.

Condensing system

Turbine exhaust steam flows to a water cooled condenser. Low pressure condensate pumps will pump condensate from the condenser to the feed water tank. Condensate entering to the feed water tank is polished with a cartridge filter if required.

Cooling water system

Cooling water circulating through the condenser is cooled in a continuously operating cooling tower with air blower. Cooling water pumps circulate water also to sample coolers and to a possible gland vent condenser of the turbine.


Feed water system

The condensates are piped to a deaerator of the feed water tank. The needed make up water is treated in make-up water system and conducted to the deaerator. Medium pressure steam is used for heating the water and for removing non-condensable gases mainly oxygen from the feed water in the tank. Feed water pumps deliver the feed water to the boiler and to the reduction station.

The oxygen scavenger is fed into feed water tank to protect the piping and boiler from corrosion.

Water treatment

The raw water is pumped from well or well’s according to amount of raw water needed to operate the plant. The treatment system is divided in to two parts.

First the raw water is filtered to remove larger particles like soil from the water. Water consumed in the cooling tower is taken after the particle filtration. Secondly after the first filtration the raw water it is led into a membrane filter that removes harmful salts and alkalizes.

Capacity of the mechanical filtration system is calculated according to the cooling tower replacement and demineralised water system consumption. Cooling water flow is approximately 700 m3/h from 4 % needs to be replaced. Demineralised water consumption is calculated from the calculated capacity 3 % of the live steam flow. Actual demi-water consumption in operation is assumed to be approximately 2 % of the live steam flow.

Automation

The unit will be provided with an integrated distributed digital control system (DCS)1), which includes the control and supervision of all major unit systems and equipment. The DCS shall include also the soot blower controls and safety interlockings of the boiler. Separate PLC2) systems shall be avoided, as far as possible.

The DCS control system will be located to the power plants control room close to the turbine.

The process and equipment to be connected to the DCS for monitoring and control are:

• boiler

• steam turbine plant

• cooling system

1 Digital Control System 2 Programmable control logic


• switch gear

• fuel feeding system

The steam turbine will have it own control system and it will be connected to power plants DCS with hard wiring. This is easier to repair than bus system and the fairly low amount of IO1 keeps the price for hard wiring reasonable.

The DCS includes open and closed loop controls and alarms of processes and process equipment, interlokings and protections of individual process equipment.

Electrification

The generator voltage will be 6kV, and it will be connected to the 24.9 kV 60Hz transmission line via unit transformer. The unit transformer is placed outside from the electrification room.

The unit auxiliary transformer will serve unit auxiliaries. The motor drives and the distribution transformers will be connected to the 6kV / 60Hz switchgear.

The voltages 440 V, 240 V and 120 V are available for motors and lightning.

• 120 VDC system for the switchgear protections and controls and emergency oil pump.

• 24 VDC supply for the DCS system.

• UPS system for the computers, instrumentation, monitors, alarm and printers.

In figure 31 power plants electrification connections are presented.

Figure 31 Power plant electrification connections.

1 Input Output signal

6 kV Switch gear

24.9 kV

Generator

Unit transformer

Auxiliary unit transformer


The power plant shall not be equipped with emergency electric generation system like diesel generator.

Fuel handling

A fuel receiving system consists of measurement and identification station, outside storage yard, storage house, bucket loader and several conveyors.

The fuel will be transported by trucks to the power plant from the fuel producers. Trucks shall past measurement and identification station where the fuel amount is measured and listed properly.

After the measurement fuel trucks shall transport the fuel to outside storage yard close to the power plant. In the storage yard the fuel storages by piece size.

Fuel is mixed manually by bucket loader in the storage yard. Bucket loader shall transport the mixed fuel from the storage yard to the fuel storage house beside the power plant.

Beside the power plant there will be a fuel storage separated from the boiler house with fire proof walls. From fuel storage the fuel shall be transported with screw conveyor and closed drag conveyor to the boiler silo, from there the fuel is dosed by hopper feeder to the grate.

The fuel storage house has a light rain and sun cover and it has a storage volume of 12 hours of boiler usage.

6.2.1 Main flow and Layout – Diagrams The preliminary main flow diagram is presented in appendix 4.

The preliminary layout diagram is presented in appendix 5.

6.2.2 Plant Performance The performance of the new unit at full load is presented in table 15. Heat and mass balance is presented in appendix 3.


Table 15. Plant performance

Parameter Value Unit

Live steam 3.85 13.86 48.0 420

kg/s t/h bar(a) °C

Feed water 3.9 57.6 115

kg/s bar(a) °C

Flue gas temperature 180 °C (estimation)

Fuel Power 12.5 MW

Fuel consumption 1.1 kg/s

Boiler efficiency 85 %

Power Gross 2.61 MWe

Power Net 2.38 MWe

Auxiliary power consumption 0.23 MWe

Total plant efficiency 18-19 %

The calculations are based on the following assumptions:

• Boiler’s own steam consumption is negligible

• Cooling water inlet temperature is 32°C

• Cooling water outlet temperature is 42°C

• Feed water temperature is 115°C to prevent oxygen entering to boiler.

• Annual operation time is 8000h

• Annual available fuel energy is 100GWh

• No feed water pre heating systems is available

• Condensate return percentage is 98%.

• Live steam values are estimated according to the consultant’s experience

6.2.3 Plant Rating

The plant is designed to operate at the following electrical Plant Ratings:


Table 16. Plant rating

Parameter Value Unit

Transmission line voltage 24.9 kV

Generator voltage 6 kV

Frequency 60 Hz

Auxiliary voltage 440, 240. 120 V

Control voltage 120 and 24 V DC

Derating

The performance figures above are valid at the Anticipated Ambient Site Conditions.

The performance values will be derated if the plant is operated at conditions other than specified as Anticipated Ambient Site Conditions.

In this study ambient condition changes were not considered.

6.2.4 Connections

Electricity

The power plant will be connected to a transformer station (24.9 kV) named “Subestacion Sebaco” (Figure 32, 33 and appendix 6) located southwest from the power plant site. Transformer station is located in the municipality of Sebaco, province of Matagalpa at a distance of 103 km from the city of Managua (Figure 24).

The intended transmission line’s voltage would be 24,9kV and the recommended line would be airline and it is constructed to concrete posts in flat land conditions. The line is approximately 4 km long.

Figure 32. Transformer station where the power plant shall be connected.


Figure 33. Transformer station where the power plant shall be connected.

Road’s

The road to the site will be made from the main road to avoid unnecessary traffic trough the Beneficio Atlantic coffee processing plant.

Raw water

The raw water supply shall be provided by wells, which shall be drilled close to the power plant inside the site area. Well’s fulfil all the power plants raw water needs. The price of the well’s are included to the total investment price of water treatment.

Waste water

The liquid wastes of the power plant mainly consist of back-wash of the demineralised water plant and cooling tower circulation overflow. All the waste waters contain mainly high suspended solids value. The quality of boiler blow down water is very good because the pressure levels in the boiler are quite low. And the need for boiler chemicals is slight.

All waste waters shall be led after necessary cooling to an open container, from where Waste water will be pumped to the nearby coffee processing plants (Beneficio Atlantica) waste water system. Power plants waste water does not possess any significant risk for the coffee processing plant or the surroundings.

Ash

The bottom and fly ash can be used as a fertilizer in the fields locating close to the power plant. It must be remembered that there should be an annual circulation so that same field have the ash not more than every second year.

6.2.5 Site Plan The new power plant will have turbine house, control room, electrical room, office room and maintenance and service rooms. The boiler will be installed outside with


only a light rain cover. The fuel storage has fire proof wall against the boiler and with light rain and sun cover. Preliminary site lay-out is presented in appendix 10.

6.2.6 Flue Gas Emission Limits Only emission that may need more cleaning is the flue gas emissions and especially dust emissions. This can be dealt with more efficient dust filter like electrostatic precipitator (ESP). At this moment we have only designed a multi stage cyclone to clean the most harmful particles from the flue gas. Mainly there aren’t burned any such substances that could cause problems to the environment or people living close tot the power plant.

For the biomass fired condensing power plants there are no emission limits implemented to the Nicaragua’s legal system. It is likely that in the future there will be some limitations to the emission level, but in this study we calculate the project feasibility with these assumptions.

Biomass fired power plant’s emissions like CO and NOx can be dealt with highly developed and suitable burning circumstances. This requires such boiler manufacturer who has a suitable technique for burning fuels designed to use in this project.

6.2.7 Reliability Reliability of the plant is sum of large number’s of mechanical reliabilities and operation reliabilities. All single mechanical equipments have high reliability factor but together as a total plant the reliability factor is significantly lower. The unreliability caused by personnel is difficult to estimate, but we surely can say that during operation this value will rise with operating personnel’s experience. Simultaneously because of friction and wearing of mechanical equipment the total availability factor decreases. For this feasibility study it is estimated according to the experience of the consultant that availability factor is approximately 88%.

6.3 Plant Dimensioning

6.3.1 Mass and Energy Balances

The annual energy and mass balance calculations presented in appendix 3 are based on the power load forecast and power plant performance data explained earlier. The energy and mass balances have been reported only for the base case. According to this base case, power demand is estimated to remain the same every year after year 2007, when the power plant has started operation. Thus also the energy balances are forecast to remain the same every year.

The annual energy and mass balances have been prepared for one year period on monthly level, i.e. the operating data (power demand, generation, fuel consumption) has been estimated for each month in a year separately. This way the balances have been made as accurately as possible.

The balances have been calculated for Base case, new power plant with using only biomass fuel.


The first option is based on the assumption that electricity will be purchased form other producers. The second option is the base case for financial analysis, as based on the estimated biofuel price forecast made in this study.

Base case (Biomass fired power plant)

In normal operation situation power plant exports all that electricity capacity reduced with own consumption. During annual maintenance periods the plant needs to purchase electricity from the markets or other producers. This power is required for start upp’s, shut down’s, lightning and etc. The amount of electricity needed is estimated according to the consultant’s experience.

Annual energy balance presented in the following table (table 17) is based to energy and mass balance calculation sheet presented in appendix 3.

Table 17. Estimated annual energy balance in base case.

Energy Power Gross Power Net Annual average

MWhe/a MWhe/a MWe

Own generation 19,860 18,110 2.26

Import from other producers 100

Fuel MWh/a

Rice husk 45,800

Rice straw 22,700

Coffee husk 28,500

Sawdust 2,700

Trimming waste 5,100

The annual mass balance for the biofuel fired power plant is presented in table 18.

Table 18. Estimated annual mass balance in base case.

Fuel ton/a average

Fuel (rice husk, rice straw, coffee husk, sawdust, trimming waste)

38,000 (100GWh)

Water

Demineralised water 2,100

Filtered water 215,000

Others

Ash 4,600


7 COSTS

7.1 Investment Cost Estimate The estimated investment costs for the power plant are presented below.

The power plant investment costs have been estimated based on the consultant’s knowledge and experience of similar projects and budgetary proposals previously made worldwide. As the consultant has good information about similar projects from the last few years, no budgetary proposals have been asked for this project. The estimates are based on the utilization of proven modern technology and equipment and suitable level of automation. The special conditions in Nicaragua have been considered.

The investment cost estimates are based on the assumption that the project will be executed on an EPC basis, In an EPC project, the construction risk is passed on to the EPC contractor, which is shown as a higher price for the power plant than in some other project implementation methods. In case the project is implemented as multi package type project, where the construction risk is taken by sponsors, the investment cost could reduce by some 10 %.

The investment cost estimates are made using an assumed actual price level at the time of signing of the EPC contract. The investment cost estimates do not include working capital, possible export credit premiums or value added taxes (VAT), value used is US dollars.

7.1.1 Biomass Fired Power Plant The estimated total investment cost for the biomass fired condensing power plant is $6,650,000 and the specific investment would then be $5,558/kW. Accurate investment cost estimation breakdown is presented in appendix 1.

The boiler plant includes the mechanical and electrical equipment, supporting structure, electrification (motors), instrumentation (excluding wiring), boiler erection and commissioning of all equipment located in boiler room area. Piping from feed water pumps until boiler live steam stop valve are also included.

The turbine plant includes hardware, installation and commissioning of the turbine, generator, condenser, steam headers, desuperheating stations PRVs and all piping from boiler stop valve until feed water tank.

Cooling system includes cooling tower with a pumping station.

Water treatment station includes fresh water pumping system, well drilling costs and water treatment equipment.

Instrumentation and control system includes field instruments in BOP area, DCS control system, programming and computers.


Electrification includes all HV and LV electrification, which is not within other supply packages as well as transformers, emergency AD and DC system and cabling. For example all high voltage wiring from generator to the plants electric connection field is included.

Balance of plant (BOP) includes supporting mechanical equipment such as feed water tank, piping, condensate treatment, waste water piping and pumping. It also includes fuel transportation and crushing equipment from fuel feeding pocket in fuel storage yard until boiler silo feeder belt. Additionally it includes the feed water pumps and piping from feed water pumps until boiler live steam stop valve.

Civil works include buildings, construction includes the civil work such as clearance, pilling, HVAC, building construction work within the proposed project, necessary roads.

Electricity connection line is included in the power plant investment. The length of the connection line is approximately 4 km and according to the local information the investment cost for a 24.9kV line it is $14,000/km.

There are no land costs for the planned power plant.

Owner’s engineering costs include the following engineering cost, project management cost, Pre-operating and development costs, legal advisory and miscellaneous costs. Pre-operating and development costs provide for cost elements, which are related to the development of the project and operation before the actual start-up, but do not relate to the construction of the plant. Estimated owners engineering costs include hiring basic training and payroll cost of the new power plant’s operating and maintenance personnel, public relation services and materials and computer systems.

According to the industry electric law applied in Nicaragua, there would be no import duties for the machinery and equipment used in electricity generation.

7.2 Operating and Maintenance Costs In the following table 19 and Figure 34 we present the major values which compose the body of all O&M costs for the base case.


Table 19 Summary of all O&M costs.

O&M cost Unit Amount

Fixed cost

Manpower $c/kWh 0.16

Other fixed cost $c/kWh 0.44

Fixed total $c/kWh 0.60

Variable

Fuel $c/kWh 1.91

Other variable $c/kWh 0.50

Electric market fee $c/kWh 0.43

Ash disposal $c/kWh 0.06

Variable total $c/kWh 2.90

In total $c/kWh 3.50

O&M Costs

17 %

55 %

14 %

12 %2 %

Fixed costsTotal fuel costsOther variablesElectric market feeAsh disposal

Figure 34 Summary of all O&M costs by precentage shares.

A specific table of fixed and variable costs is presented in appendix 7.

7.2.1 Fixed O&M Costs

The amount of manpower needed to operate and maintain the plant depends highly on the selected automation and control system. In a state-of-the-art plant in Finland corresponding plant is in remote controlled. Only one man in a day sift can operate the plants fuel feeding system in normal operation. Maintenance is done in regular basis once a year during production break in few weeks. Although there is maintenance group on standby for sudden production breaks, but they are not located at the plant.


It must be emphasized that the staff will require a lot of training to run the new power plant since it has such new technology which is not in use in existing plants in the site area.

It is recommended that an operating manager with good experience in power plant operation is hired to run the power plant and train the operation personnel. Since continuous good operation level of the new plant would be critical to the success of the project.

Manpower

The total number of personnel will fluctuate between 5 and 10 according to the skills and experience of the employees. The total manpower cost in 2007 is estimated at $28,800/year (6person). In addition the manpower costs are assumed to increase ( 3% /year) according to the local experts.

Other fixed costs

Other O&M fixed costs are estimated to be annually 1.2 % of the total investment cost of the power plant. This shall also include insurance costs. The costs have been estimated based on the Consultant’s experience.

7.2.2 Variable O&M Costs O&M variable costs used in this report are based on the actual costs of similar types of power plants with similar operation structure. The costs consist mainly of fuel, water, chemicals and electric network payment.

Fuel Costs Handling, reception, transportation and loading costs are estimated to be $8.93/tfuel for 100GWh of fuel. In respect the fuel costs for 70 GWh would be $5.58/tfuel and for 150GWh it would be $16.56/tfuel.

Fuel costs are calculated as weighted average for all fuel types. Of the chosen maximum fuel energy available of the power plant we have included the cheapest biomass sources for 100GWh of fuel energy. The available fuel energy is then calculated cumulatively from the most suitable producers. Each producer has its own price for the fuel that includes loading, unloading, transportation. The fuel price does not include any fee for the producers.

7.2.3 Other Variable O&M Costs

Other variable costs include all chemicals for demineralised water, boiler water, cooling water, lubricants, spare parts, mechanical raw water filtration, waste water pumping, etc. All chemicals are needed to prevent corrosion, erosion and sediment.

Waste water handling costs consist of pumping boiler blowdown water and cooling tower replacement water to the waste water system of Beneficio Atlantic. Estimated price for other variable cost is based on the consultant’s long experience of power plant feasibility calculations. The cost is $0.9/MWhpa.


Electric network payment In Nicaragua electricity generators are obligated to pay a market place fee calculated form the transported electricity. The fee is $0.0043 /kWhe.

Ash Disposal

The ash disposal costs consist of only transportation cost, which is estimated at $2.5/ton.

Electricity purchase cost

We have estimated that the plant will need electricity during maintenance, starting and shutting down phases and we estimate according to the local experts that it can be bought from the spot market at a price $60/MWh.


8 POWER SALES

8.1 Power Purchase Agreement (PPA) The PSA, which secures the project’s revenue streams, is the most important commercial agreement.

It is recommended that the power plant developer would make a letter of intent with the most suitable customer(s) alternative(s) before the investment decision, to be able to estimate feasibility in the first operation years with enough accuracy. Also, long term PPA contracts will make the investment decision easier for the investors.

The following contract alternatives are possible for this power plant:

• Contract alternative 1. (Generator contract) A generator contract with government-owned Union Fenosa (UF). UF shall purchase all the electricity produced in the power plant. UF would be responsible for spinning reserve. The price would cover the costs caused to UF for handling spinning reserve. UF shall make the contract for two products: energy and power. Basically the power plant will sell its electricity generating capacity and will also commit itself to delivering that specific capacity settled in the contract. If the power plant is not able to meet the demand in the contract there will be sanctions. The power plant will be paid according to the measured energy delivered to UF. With this contract alternative the power plant can operate with full capacity. INE and UF would agree how the spinning reserve should then be provided.

• Contract alternative 2. (Supply contract, multi customer, with connection) A supply contract with a few major customers and part of the capacity can be sold in a spot markets. 80% of the capacity to major customers and 15% to spot markets. In this alternative the power plant is obligated to provide this spinning reserve 5% of the capacity. The power plant must also cover the risk of delivery failure caused by the power plant’s unplanned shutdown. If the power plant can not deliver electricity according to the long-term contracts they have to buy that electricity from the spot markets and this causes financial problems because the price of the electricity purchased from the spot markets can be significantly higher than the selling price.

• Contract alternative 3. (Supply contract single customer, without connection) A supply contract with one large customer. All the electricity produced is sold to one large customer. The power plant is connected directly to the customer’s transformer station without a connection to the national grid. In this alternative spinning reserve is not required but the control of the production capacity and the customer’s consumption needs must be in a balance all the time. Because the biomass fired power plant is mainly used as a base load plant, the consumption needs to be steady without any sudden changes. Also, the power plant will need its own auxiliary power generation unit for shutdown periods.

ELECTROWATT-EKONO OY Doc.No 60D05152.01.Q060.002 Date October 26, 2004 (100) 8.2 Back-Up Power Supply Agreement

If the power plant does not have its own back-up power generation capacity for start-up and maintenance, a back-up power supply agreement is needed. That electricity has to be bought from the spot markets unless there is a specific agreement made with some supplier. This is easiest to do with UF.

In this study it is estimated that the back-up power is purchased from the markets.


9 IMPLICATIONS OF CO2 TRADING AND CDM POSSIBILITIES

9.1 General The Kyoto Protocol (“the Protocol”) to the United Nations Framework Convention on Climate Change (UNFCCC) aims at mitigating the climate change by reducing the greenhouse gas (GHG) emissions globally. The Protocol obligates the countries included in its Annex I to reach their country-specific GHG emission reduction targets between 2008 and 2012. The so called “Annex I countries” are in principle developed countries and economies in transition. Developing countries such as Nicaragua have been excluded from the “Annex I countries”, leaving them without any emission reduction targets (hereafter referred as “Non-Annex I countries”). The Kyoto Protocol specifies three flexible mechanisms for the Annex I countries in order to meet their carbon dioxide emission reduction targets (in addition to domestic emission reduction measures). One of these flexible mechanisms is called Clean Development Mechanism (CDM), and defined in the Article 12 of the Protocol. The aim of the CDM is to

- assist Non-Annex I Parties in achieving sustainable development and in contributing to the objective of the UNFCCC; and

- assist Annex I Parties in achieving compliance with their quantified emission limitation and reduction commitments under the Kyoto Protocol.

The Protocol enables the Annex I countries to purchase emission reductions from projects realised in developing countries and to use these reductions for their own compliance with the Kyoto Protocol. The emission reductions obtained from CDM projects are called Certified Emission Reductions (CERs). The CERs are created project-specifically, which explains also the typical classification of CDM as a “project-based mechanism”. If a project sponsors succeed in developing a project into a CDM project they are able to negotiate an emission reduction purchase agreement (ERPA) with potential buyers in principle similarly to the power purchase agreements. For the project sponsors the sales of CERs thus brings additional cash flows enhancing the profitability of the project.

The Kyoto Protocol entered into force on 16.2.2004 removing one considerable risk concerning the utilisation of so called Kyoto Mechanisms. Consequently the attractiveness of these mechanisms has increased considerably both within Annex I and Non-Annex I countries. At the moment the demand for CERs in the Annex I countries exceeds the supply of CERs in developing countries. Currently e.g. many of the European Union member countries and Japan are very active in purchasing CERs. Also the companies within the European Union’s Emissions Trading Scheme (EU ETS) are allowed for using the CERs for their compliance within the EU ETS. It is expected that both the private and public demand for CERs will increase in coming years.

The Clean Development Mechanism is administered by the CDM Executive Board (CDM EB). The CDM EB functions under the UNCFFF and is responsible for the final approval and registration of single CDM projects. It is also responsible for the


issuance and registration of the CERs as they are generated e.g. when the biomass power plant starts operation and displaces fossil fuels in electricity market.

9.2 CDM Eligibility Criteria In principle all measures that reduce the GHG emissions can be developed as CDM projects. These can include e.g. renewable energy, energy efficiency, fuel switch, waste management, land use, land use change and forestry projects. Renewable energy projects – including biomass-based energy production – typically reduce GHG emissions when they displace fossil fuels in energy production. Grid connected renewable energy based electricity production usually has certain GHG reduction impact. Nicaragua has at the moment total installed grid-connected capacity of 658 MW of which 436 MW is thermal production based on fossil fuels. Other capacity is mainly hydro and geothermal power with low variable costs. Thus a biomass-based electricity production in Nicaragua could have considerable GHG reduction potential.

An important point in the CDM eligibility criteria is the additionality of the project: emissions must be reduced below those that would have occurred in the absence of the registered CDM project. Thus the project developer must prove that in order to be implemented the CDM financing is a prerequisite for the project. The developer must indicate that an investment barrier, a technological barrier, a barrier related to prevailing practices or other barriers exist that prevent the project to be realised without the CDM. Both the host country and the buyer of the emission reductions must accept the additionality analysis. The final decision on the fulfilment of the additionality criterion is made by the CDM EB.

To be eligible for CDM a country must have ratified the Kyoto Protocol. Nicaragua has ratified the Protocol on 18 November 1999. Additionally, the countries must have a Designated National Authority (DNA) to approve the CDM projects. In Nicaragua the responsible ministry for climate change issues is the Ministry of the Environment and the Natural Resources (MARENA). The National Office of Climate Change and Clean Development (ONDL) were created in February 2002, acting as the DNA in Nicaragua. Thus Nicaragua has established the necessary framework for CDM activities in the country. The website of ONDL provides additional practical information on the use of CDM in Nicaragua (http://www.ondl.gob.ni/).

9.3 The CDM Project Cycle Developing an energy production investment project into a CDM project entails additional studies and documentation to be prepared and additional procedures to be followed – and thus also additional costs. Although the CDM project cycle is standardised for the most part, there are some country-specific features. In the following the main steps are briefly described in the Nicaraguan context.

Preparation of Project Idea Note

In the very early stage of project development the developer interested in CDM should prepare a Project Idea Note (PIN) on the project. The PIN includes general and basic information on the project (type, technology, location and size of project, stakeholders, financing, schedule etc.). It also includes an initial calculation of


emission reductions to be achieved by the project. In Nicaragua the PIN is submitted to the ONDL, where the Director of the Office will submit the “initial no objection letter” after review of the PIN. The PIN is not an official CDM document, but is often used as initial document when approaching the DNA and the potential buyers of CERs.

Preparation of Project Design Document

If the project seems eligible for CDM financing the project developer should prepare the Project Design Document (PDD). The PDD is an official CDM document including more detailed information on the project. For small-scale CDM projects a simplified PDD has been developed. The small-scale PDD includes the following aspects:

- General description of the project

- Baseline methodology

- Duration of the project and crediting period

- Monitoring methodology and plan

- Calculation of GHG reductions

- Environmental impacts

- Stakeholder comments

- Annex 1: Project participants

- Annex 2: Public financing

The baseline represents a scenario how the GHG emissions would develop in future if the project was not implemented. The baseline is thus a hypothetical estimation. A simplified standard baseline methodology has been developed e.g. for grid-connected renewable energy based electricity production, enabling savings in the CDM-specific project development costs. The biomass power plant project analysed in this document fulfils the requirement of small-scale CDM, being less than 15 MWe.

The PDD must also demonstrate the additionality of the project as described above. The crediting period means the period during which the project will generate emission reductions. There are two possible crediting periods to choose: either one 10 years’ crediting period or seven years’ crediting period, to be renewed two times (3 * 7 = 21 years). The emission reductions achieved by the project are then calculated as the difference between the emissions of the baseline scenario and the scenario where the project is implemented. The monitoring methodology includes a detailed description of methods and responsibilities of data collection, measurements and analysis in order to calculate the actual emission reductions during the crediting period. Small-scale projects have also simplified monitoring requirements. In case of renewable energy generation for a grid, monitoring shall consist of metering the electricity generated by the project. One of the aims of the CDM is to enhance sustainable development in the host country. Therefore the PDD shall also include an


assessment of other environmental impacts than the GHG reductions. Additionally, the project must be subject for public comments by local stakeholders, and the results of this stakeholder consultation must be made available in the PDD.

In Nicaragua the final endorsement of the project by the host country requires the approval of the Board of Directors of the ONDL. The project developer shall submit the PDD (having cleared a local public consultation) to the ONDL for review and approval.

Validation

The PDD must be validated by an independent organisation. Moreover, this organisation must be accredited by the CDM EB as a Designated Operational Entity (DOE). Also organisations seeking for DOE accreditation (applicant entities, AEs) can validate PDDs. Lists of AEs and accredited DOEs are available on the CDM website of the UNFCCC (http://cdm.unfccc.int), from which the project developer can freely choose a validator for its PDD. It must be noted that the DOEs may have sectoral restrictions. The DOE’s scope of accreditation must include the type of the project in question. In addition to the validation of the PDD and its annexes the validator must make the PDD open for public comments for 30 days.

Registration

The final approval of a CDM project is subject for registration by the CDM EB. The registration of CDM projects has so far been proceeding slowly because of the insufficient resources of CDM EB to review the PDDs submitted for registration. A the moment there are also still many unclear issues related to registration, and the procedures will develop and get clarified as more and more project will be registered.

Monitoring, verification, certification and issuance of CERs

The project participant responsible for emission reduction monitoring shall execute this responsibility according to the monitoring plan developed in the PDD. In case of small-scale CDM biomass condensing power plant the monitoring is based on the electricity production of the plant, multiplied by the CO2 emission factor of the electricity system. The project participant shall make a periodic (usually but not necessarily annual) monitoring report concerning the emission reduction monitoring, and submit it for a DOE for verification. In small-scale projects the validation of the PDD and the verification of the emission reductions can be done by the same DOE. The verification report shall also be made publicly available for comments. The DOE will prepare

Based on the verification report the DOE will prepare and submit for CDM EB the certification report. The certification report is the formal request for CDM EB to issue certified emission reductions (CERs).

The certification report will also be made publicly available. If no requests for review are presented during 15 days, the CDM registry administrator will issue the CERs to the CDM EB’s account. From the total amount of CERs specified in the certification report 2 % shall be forwarded to a special account to assist developing countries particularly vulnerable to climate change impacts in meeting the costs of adaptation. Additionally, a share (not yet determined) will be reduced in order to cover the


administrative costs of the CDM. The rest is forwarded to the account(s) of the project participant(s) as requested by them.

9.4 Costs Related to CDM Project Cycle The costs of CDM project cycle depend largely on the project size, complexity and other factors. Small-scale projects are generally less expensive. The following figure illustrates the World Bank’s estimation of the costs related to different phases of a small-scale CDM project cycle. It can be expected that these costs will lower as more experience is gained from CDM projects.

Preparation and review of the Project

Simplified Project Design Document

Validation process

Project Appraisal and Negotiation

Periodic verification & certification

Construction and start up

Project completion

3 months

2 months

2 mon

ths

3 months

1-3 years

Up to 2

1 yea

rs• Upstream Due Diligence, carbon risk assessment and documentation: $ 20K

• Baseline assessment: $10 K• Monitoring: $5K

• Contract, Processing •and documentation: $20k

• Consultation and Project Appraisal: $35K• Negotiations and Legal documentation: $20K

Total through Negotiations• All expenses: $110 K

• Initial verification at start-up: $3-5K

• Verification: $2-5K• Supervision: $2-10K

Cost Reduction with Stream-Lined Procedures

Figure 35 Costs related to small-scale CDM project cycle (Source: World Bank).

9.5 Selling the CERs in the Carbon Markets The CERs generated by a CDM project are usually sold by an emission reduction purchase agreement (ERPA). Usually the ERPA is negotiated already during the project development phase (as the power purchase agreement as well). The ERPAs can be freely negotiated between the buyer and the seller, but some standard formats for ERPA can be found e.g. in the internet.

The starting point in the payment schedule is payment-on-delivery. However, especially the governmental purchasers may be willing to make advance payments in order to participate in the up-front project development and investment costs, which often constitute a barrier for e.g. renewable energy investments. This option should, however, be compared with other financing sources, since this advance payment in principle also carries a cost. Thus, if the buyer of CER’s seems to apply high discount factor, and if the project is able to obtain cheaper financing, it should not use the advance payment provided by the CER buyer but naturally turn to cheaper options.


The payment schedule is one factor having influence on the CER unit prices. Generally, the price can vary considerably depending on the risk sharing between the buyer and the seller. The CER prices have lately been roughly between $3-6/tCO2. As an approximate value, however, a price of $5/tCO2 can be used in the calculations.

As stated before, the crediting period is either 10 years or 3 * 7 years. At the moment, however, the buyers are reluctant to make agreements beyond 2012, since the post-Kyoto targets and commitments are still unclear.

A typical way for governments to enhance CDm project development is to sign a Memorandum of Understanding (MoU). This may ease the CDM procedures, e.g. the approval of single projects can be given more quickly by the authorities. Nicaragua has signed MoUs with Finland, Netherlands, Canada and Denmark. The ERPA may be easier to negotiate with these countries (or companies in these countries), but of course also other countries eligible to use Kyoto Mechanisms can be potential buyers

9.6 Environmental Issues In Nicaragua power plant constructor does not need to apply environment permission when the power plant is under 5 MW.

In practice an official notice is given to the environmental officials (MARENA) where power generation is described and all waste’s and emissions are listed and estimated.


10 FINANCING

10.1 Financing Power Plant Projects in Central America and Nicaragua. For general power plant investments financing company’s usually demand some part of constructors own investment share. In western countries that share should be at least 30%. With the help of local knowledge concerning local financial markets we have chosen the equity rate to be 25%. Together with the fact that Atlantis shall provide the land for the power plant this is enough to assure the financing company’s to admit loan to the project.

We have estimated that shareholder equity has the same profit demand that the financing companies want for interest. There can be more than one financing company to provide loan to the project.

The total capital for fixed investment sum is estimated to be injected within two years first 40% and second 60%.

In the equipment purchase, construction and installation contracts the payments should be made against deliveries and accepted installations. So we can reduce the financial and operational risks of the project. Also, when the suppliers and constructors are in the situation where they have money bound to the project they are more likely to reach acceptable results.

An example of the capital structure was presented in figure 1.

11 FEASIBILITY ANALYSIS

11.1 General The financial calculations for the power plant are based on the investment cost estimate, power plant operating costs, financing, taxation, depreciation and other obligations and terms regulated by the law or lending institutions and proposed long term 20-year of operation time.

The calculations are expressed in US dollars and correspond to the cost level and information as of October 1st, 2004.

11.1.1 Methodology The feasibility of the project has been calculated for a base case and the calculation results have been compared to the zero investment case.

The estimated annual energy and mass balance is presented in appendix 3 and the profit and loss account of the new plant is presented in appendix 9.

ELECTROWATT-EKONO OY Doc.No 60D05152.01.Q060.002 Date October 26, 2004 (100) 11.1.2 Sales Volume

Considering the power supply situation in the Valley of Sebaco area the planned operation of the power plant is assumed to be a base load plant. The annual volume of electricity supplied is assumed to be constant during the operating life span. With an anticipated capacity utilization factor of 91.3% and a spinning reserve factor 95% the annual net sales volume would be 18.1GWh.

11.1.3 Basic Assumptions The following assumptions have been made for the cash flow and financial projections:

• Inflation is 4 %

• equity/debt ratio is 25/75 for the capital requirement

• equity is injected first

• debt in 15 years with an interest rate of 6%

• repayment annually starting from operation

• depreciation 20 years straight line for the whole investment

• corporate income tax is 30%

• value added tax is not taken into consideration

• The calculations are presented in $.

• Internal rate of return is calculated for 20 operational years.

11.1.4 Price Adjustment The following price and cost adjustments have been agreed together with the project developer Atlantic S.A.:

Estimated O&M costs increase

Annual labor cost increase is estimated to be 3.0% according to the local experts interviews.

Annual fuel price increase is estimated to follow Nicaragua’s industrial average production growth average rate 3.5 %.

For other cost we estimate them to follow Nicaragua’s real GDP growth average rate 2.0 %.

For all O&M costs the increase rate is calculated as follows: The above values have been used for labor, fuel and other costs. The average growth rate is calculated by subject and added together, as weighted average.


For base case the average increase rate for O&M costs would then be 2.74 % annually.

Estimated power sale price increase

Power price increase is estimated to follow US PPI1 and oil price development. The US PPI is estimated to be 2.3% and the Brent oil price’s average annual growth for the last 20 years is approximately 4.0%.

For base case the average increase rate would then be 3.15%.

11.1.5 Capital Requirement The capital requirement is calculated separately for the investment and working capital. For the investment the needed capital is 75% of the total investment. The working capital is calculated from the cumulative cash balance. Capital requirement is presented in table 20.

Table 20. Total capital required for the power plant investment and operation.

Direct Investment Capital required Unit Amount

Investment (25% from the total investment) provided by Atlantic [$] 1,663,000

Investment ( 75% is loaned from financial institutions, banks) [$] 4,987,000

All together 6,650,000

Working capital required to provide normal plant operation (estimation) [$] 5,000,000

Together [$] 11,650,000

In this study we have not calculated the working capital required for the total project feasibility. It has only been mentioned that working capital will be needed and an estimation of that is provided.

12 FEASIBILITY OF THE PROJECT

Project feasibility is estimated through internal rate of return (IRR), pay-back period and investment current value.

IRR has been calculated from the following cash flow:

CashFlowtsMFixedOtsMVariableOvenueSales

=−− cos&cos&Re

1 The US PPI measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services.


Pay-back period has been calculated from:

ePaybacktimeHoldingtim

NPVInvestment

=

⎟⎠⎞⎜

⎝⎛

Current Investment Value has been calculated from:

ueestmentValCurrentInvInvestmentNPV

=−

NPV (Net Present Value) has been calculated from sales revenue with the loan interest.

( )

flowannualcashSeresti

periodInvestmentnWhere

NPVi

Sn

tt

t

===

=+

∑=

int

11

12.1 Results With the values presented in table 21 this power plant project is not feasible.

Table 21 Given values for the feasibility calculation in base case.

Subject Unit Value


Selling price increase % 3.15

O&M costs increase % 2.74

O&M costs total c$/kWhfuel 3.50

Holding time a 20

Interest rate % 6

The calculation results for the base case are presented for the first operating year in table 22.

Table 22 Feasibility calculation results for the base case at the first operating year.

Subject Unit Value


IRR [%] -0.4




The ratio of fixed investment to operating margin is close to 32. It should be under 12 for a feasible project.

The IRR is -0.4%. This is not acceptable. The IRR should be over 5%, which is a normal limit for municipal investments.

The pay-back period is 40 years, which is twice as long than the expected investment holding time 20 years.

This project is therefore not feasible with the given values. From figure 36 we can obtain that to be able to operate the power plant would need working capital almost as much as the total fixed investment.

Cash Balance

(7 000)

(6 000)

(5 000)

(4 000)

(3 000)

(2 000)

(1 000)

0

1 000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Operating year

1000

$

Cumulative cash balnce after tax

Profit after tax.

Loan capital development

Figure 36 Feasibility analysis result over holding time.

Without any real production incentives and direct investment supports there is no chance for a profitable project.

12.2 Sensitivity Analysis The sensitivity analysis indicates how the selling price of electricity, fuel price and investment cost is going to affect the project feasibility. Accurate sensitivity calculations are presented in appendix 9 (lost and profit calculations).

The sensitivity analysis has been made by focusing on the most important variables. The calculated sensitivities are the following:

• Sensitivity of IRR to the selling price of electricity.

• Sensitivity of IRR to the fuel price

• Sensitivity of IRR to the investment cost. Percentage of government support.


• Sensitivity of Current Investment Value to the selling price of electricity.

• Sensitivity of Current Investment Value to the fuel price

• Sensitivity of Current Investment Value to the investment cost. Percentage of government support.

The sensitivity analysis has been calculated only against the base case. The base case values are presented in table 23.

Table 23 Base case calculation values.

Subject Unit Value

Electricity selling price $/MWH 46

Fuel price $/MWH 8.93


Sensitivity calculations indicate that the most sensitive function related to the power plant feasibility is the selling price of electricity.

It can be seen from figures 37 and 38 that related to the selling price of electricity either the fuel price or the direct investment support does not have so high sensitivity to the current investment value and IRR.

-10000

-8000

-6000

-4000

-2000

0

2000

-40 % -30 % -20 % -10 % 0 % 10 % 20 % 30 % 40 %

Precentage change

[k$]


Figure 37 Sensitivity analysis on current investment value (in the base case the value is -3,280k$.)


-10,0 %

-8,0 %

-6,0 %

-4,0 %

-2,0 %

0,0 %

2,0 %

4,0 %

6,0 %

8,0 %

10,0 %

-40 % -30 % -20 % -10 % 0 % 10 % 20 % 30 % 40 %

Precentage change

IRR

[%] Power sale price

fuel priceinvestment

Figure 38 Sensitivity analysis on Internal Rate of return (in the base case the IRR is -0,4%)

The investment could be profitable if the selling price of electricity, direct investment support and fuel price would simultaneously change in a more favorable way.

For example, if the power plant could be able to receive 30% government direct investment support, 20% higher power sale price and 10% lower fuel price the calculation figures would show some profitability. The IRR and CIV values calculated above are compared to the base case in table 24.

Table 24 Comparison between base case and support case.

Subject Unit Base Case Reasonable feasibility

Operating margin [k$/year] 208 408

IRR [%] -0.4 9.6

Current investment value [k$] -3,280 1,660

Pay-back time [year] 40 15

Now we can obtain a sufficient IRR of 9.6%, current investment value of $1,660k and a pay-back period of 15 years.

12.3 Conclusions The main objectives of this study were to analyze the feasibility of a biofuel fired condensing power plant. The basic assumption was that the power plant would only use local biofuels, like rice husk, coffee husk, rice straw and wood. The primary business idea was that the electricity generated would replace the electricity generated from imported hydrocarbons.

The study has investigated the supply of local biomasses and suitable technical solutions for electricity generation. The following conclusions can be drawn from the study.


With the input data required from the client and agreed raw information used in the feasibility calculations the feasibility of the project does not reach any acceptable level.

The realistic amount of available biofuel is less that expected, which shall lead to a smaller power plant and to higher production costs.

To gain feasibility the selling price of electricity should be much higher (30%), fuel price should be lower (10%) and the direct investment support from the government should a reach level of 20% of the total investment.

The fuel purchase procedure is too complex because of the high amount of small-scale biomass producers in the area studied.

Other biofuel fired electricity production systems should be studied to find a more feasible way to produce so called clean electricity.


13 EFFECTS OF THE NEW RENEWABLE ENERGY GENERATION LAW (ADDED ON APRIL 19, 2005) On 13 April 2005 a new law (Ley para la promocion de generacion de energia con Fuentes renovables) came into force in Nicaragua. This law has huge effects on the feasibility of the power plant studied in this project. A new section where changes to the feasibility were investigated is added to the study.

We do not make any changes to the final report, because this information was not available while the report was under construction. This section is written because of the new information made available to us on 19 April 2005.

The main change is the selling price of electricity. Now the new law gives us the maximum and minimum limits 5.5…6.5 c$/kWh of electricity. The second feasibility calculation is done with selling price of 6 c$/kWh electricity as requested by Atlantic S.A.

Possible tax incentives have no effect on the feasibility, because the power plant is not capable of paying taxes in the first nine years of operation.

13.1 Results The calculation results for the first base case are presented for the first operating year in table 25. They have not changed from the previous calculations. The second calculation results are presented in table 26. When these are compared to the first results (table 25) we see that significant improvements have taken place:

• The operating margin has more than doubled;

• Internal Rate of Return has increased to 6.7 %;

• The Current Investment Value has also increased significantly to a positive value and ;

• Finally the pay-back time has decreased under the plant’s holding time;

Table 25 The results of the first feasibility calculation for the base case during the first operating year.

Subject Unit Value


IRR [%] -0.4




Table 26 The results of the second feasibility calculation for the base case during the first operating year.

Subject Unit Value


IRR [%] 6,7

Current investment value [k$] 463


The ratio of fixed investment to operating margin has dropped under 15, but it should be under 12 for a feasible project.

The IRR 6.7% is now reaching an acceptable level, but it is still too low for a profitable company.

The pay-back period is less than 19 years, which is almost as long as the expected investment holding time, 20 years. Simply, it is still too long.

This project is therefore just barely feasible or not feasible with the given values. From figure 39 we can obtain that the needed working capital has reduced from $5,000k to less than $2,000k, but it is still too much.

Cash Balance

(8 000)

(7 000)

(6 000)

(5 000)

(4 000)

(3 000)

(2 000)

(1 000)

0

1 000

2 000

3 000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Operating year

1000

$

Cumulative cash balance aftertaxProfit after tax.

Loan capital development

Figure 39 The second feasibility analysis result covering the total holding time.

Without any real production incentives and direct investment supports there is no chance for a profitable project.

ELECTROWATT-EKONO OY Doc.No 60D05152.01.Q060.002 Date October 26, 2004 (100) 13.2 Sensitivity Analysis

The new sensitivity analysis indicates how the selling price of electricity, fuel price and investment cost are going to affect the project feasibility. The sensitivity analysis has been made in the same way than previously.

The sensitivity analysis has been calculated only against the new base case. The base case values are presented in table 27.

Table 27 Base case calculation values.

Subject Unit Value

Electricity selling price $/MWh 60

Fuel price $/MWh 8.93


The sensitivity calculations indicate that the most sensitive function related to the power plant feasibility is the selling price of electricity.

It can be seen from figures 40 and 41 that compared to the selling price of electricity neither the fuel price nor the direct investment support has so high sensitivity to the current investment value and IRR.

Sensitivity Analysis of Current Investment Value

-7000

-5000

-3000

-1000

1000

3000

5000

7000

-40 % -20 % 0 % 20 % 40 %

Percentage change

[k$]


Figure 40 Sensitivity analysis of current investment value (in the new base case the value is $423k.)


Sensitivity Analysis of IRR

-15 %

-10 %

-5 %

0 %

5 %

10 %

15 %

20 %

-40 % -30 % -20 % -10 % 0 % 10 % 20 % 30 % 40 %

Percentage change

IRR

[%] Power sale price

fuel priceinvestment

Figure 41 Sensitivity analysis of internal rate of return (in the base case the IRR is 6.7 %)

The investment could be profitable if the selling price of electricity, direct investment support and fuel price would simultaneously change in a more favorable way.

With the new selling price of electricity we would still need some incentives from the government or other party. For example, if the power plant could be able to receive 10% government direct investment support, 10% higher power sale price and 10% lower fuel price the calculation figures would show crucial improvement in the profitability. The IRR and CIV values calculated above are compared to the new base case in table 28.

Table 28 Comparison between the new base case and the second support case.

Subject Unit Second Base Case Second support case

Operating margin [k$/year] 463 604

IRR [%] 6,7 11,2

Current investment value [k$] 423 3,214

Pay-back time [year] 19 13

Now we can obtain a sufficient IRR of 11.2 %, current investment value of $3,214k and a pay-back period of 13 years.

The project is now on the verge of profitability. With some help/incentives it can show certain profitable result, but this will require a bit lower investment cost, a bit cheaper fuel and a bit higher selling price for the electricity, which is possible according to the new law.

It may be possible to decrease the investment cost by constructing the power plant without any EPC suppliers. This requires a strong experience in power plant


construction projects and a successful procurement process for the equipment. This can be managed by Atlantic in a way of recruiting an experienced project manager who can show a solid resume in power plant project implementation in Central America.

The average fuel price in the base case was estimated to be about $9/MWh (delivered / unloaded to the power plant). This cost could possibly be lowered by some 10% in the coming years after gaining valuable experience in the fuel supply business and adapting new and more suitable and cost-effective transportation machinery and logistics systems than currently available from Nicaragua.

If the necessary actions can be taken and we see a profitable future for this project, it should be considered to take this study further into the phase two (Bankable Feasibility Study) described in the scope of work presented in the Electrowatt-Ekono Oy project profile. The purpose of phase two is to increase the degree of accuracy of the report of phase one to gain letter of intent for fuel procurement and power purchase agreement and to justify project profitability to the potential investors and banks.

The issues that could be dealt in phase two of the feasibility study are presented in the following table of contents:

1. Plant Technology

• Plant dimensioning (final mass and energy balance sheet, combustion calculations, steam cycle calculation and turbine dimensioning)

• Description of main equipment and auxiliaries (fuel handling, boiler, turbine, flue gas cleaning and stack, ash handling, cooling tower, water treatment, automation and instrumentation, synchronization to the grid, civil works)

• Identification of main equipment supplier candidates (turbine and boiler) • Budget offers for main such as turbine and boiler • Guarantees from the main equipment suppliers

2. Personnel

• Personnel Requirements, Training and Related Costs

3. Environment Impact analysis

• Social and Economic Implication (employment) • Fuel Procurement • Power Plant Performance and Emissions • CO2 Trading and CDM Possibilities

4. Feasibility Analysis

• Investment Cost Estimate • Fuel Costs • Operating and Maintenance Costs • Production Costs • Cash Flow Analysis • Feasibility of the Project


5. Financing

• Financing Structure

6. Power sales, fuel procurement

• Power Sale Agreements • PPA-contract Model • Fuel Supply Contract (Letter of Intent) • O&M-contract Model

7. Recommendations

• Updating the Plant Concept • Fuel Types to Be Used • Continuation to Project Implementation


14 RECOMMENDATIONS

14.1 Possible Continuation of the Project to a Bankable Feasibility Study The fuel procurement would need a more simple system. There should be a separate company that would sell the fuel to the power plant and the company would handle the procurement. In any case it seems that this company would also require support to be able to operate.

If there can be changes in the input data values on which this study is based, it might be useful to start negotiating with customers. It is recommended that the power plant developer make a letter of intent with the most suitable customer(s) alternative(s) before the investment decision. With a price agreement the feasibility of the project can be calculated with a smaller risk and the outcome of the project would be positive.

If the total project feasibility is given a green light after the negotiations with the customers, the power plant procurement process can be started with a call of bids from suitable plant suppliers. Further if the project is feasible, we have to proceed to the negotiations also with financing companies. For these negotiations we would need a letter of intent from the customers and selected suppliers, to give enough credibility.

14.2 Small-scale Bio-Fuel Gasification Because the amount of affordable fuel is limited to less than 100 GWh / year a small-scale biomass gasification plant with gas engines could offer a valid alternative to produce electricity.

Gasification of biomass is proven technology in the world. There are also many commercial power plants where the product gas originating from a gasifier is purified and used as a fuel to run an engine to produce electricity. The technologies involved are well established and commercially available at least from several European and Asian countries.

Gasifyer(gas produc-

tion unit)G Generator

Electricity

Air

Fuel

Process / District Heat

Gas EngineGas purifi-cation unit

Exhaust gasEngine Water and

Labrication OilCooler

Figure 42 Biogas Engine Power Plant


The unit size of gasification power plants range from 3kW to max. 500kW (net electrical output).

The gasifier would generate product gas to be used as a fuel for running a diesel engine in order to produce electricity. A modified diesel generating set would run with dual fuel arrangement of 70-75% of product gas and 25-30% of diesel oil. In case of maintenance breaks in rice production the electricity could also be sold to the local grid.

The main components of this plant are a gasifier with ash removal, a purification unit, a gas/air mixing device and a gas engine/generator set. The gasification plant has an electricity efficiency of around 20 per cent. Figure 43 presents a general flow chart.

Figure 43 Biofuel gasification plant, general flow chart. (example: Ankur gasifier)

Other possible gasifier technology was developed by a Finnish company called PuhdasEnergia Oy. They have a suitable technical solution for gas cleaning process and their first commercial plant is in operation in the Connecticut USA. This plant is sophisticated and fully automated, using general automation and electric equipment.


Figure 44 A 3D model of gasification power plant. 1 Fuel dryer and silos, 2 gasifier, 3 engine-generator, 4 electrostatic precipitator, 5 fuel feeding system and ash container.

We recommend that a new feasibility study would to be made for a small-scale biomass gasification plant, for the Beneficcio Atlantica coffee mill and possible for other large biomass producers.

final project report - sica pressure steam turbine and an open cooling tower. this plant is designed...

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