Building the Biomass Industry

The recent surge in the biomass market has sparked demand for plant construction, and builders expect the boom to last, despite the challenges and intricacies that can surprise developers.
By Lisa Gibson | November 23, 2010

When asked if he expects 2011 to be a good year for biomass project construction, Bert Bennett, biomass gasifier principal scientist for ICM Inc., responds with an enthusiastic “Definitely yes.” He’s not the only one with such a positive outlook on development in the industry and some attribute it to policies that are in the works to encourage a switch from fossil fuels.

“In 2011 and beyond, we may see an upswing in conversion projects as utilities move away from coal and convert to wood-fired renewable energy,” says Rick Cantor, vice president of business development for construction firm Fagen Inc. “This shift could be driven by the U.S. EPA proposed MACT (Maximum Achievable Control Technology) standards. Biomass cogeneration projects co-located with industrial plants could also become more active in the future.” The MACT rules set a limit on the amount of pollutants that can be released into the air and new proposals strictly limit several hazardous air pollutants (HAPs). As Cantor suggests, those proposals could mandate cleaner technologies at hundreds of power generating stations.

That demand for biomass construction and engineering, no matter the drivers, could last five to eight years, according to Bob DeKoch, chief operations officer for Boldt Construction. “Beyond that, it’s hard to say,” he adds. “These things cycle.” Boldt has taken full advantage of that cycle, with involvement  in three Midwest biomass power projects. DeKoch says Boldt is not just entering an existing market, but caught it during resurgence. “The market is just developing,” he says. The company sees enormous opportunity in the biomass power industry and DeKoch has noticed an increase in chatter about new projects.

Significant Southeast

In the U.S., the biomass industry is perhaps developing most significantly in the Southeast, with its plentiful wood resources. “The Southeast U.S. continues to appear to be the most active as far as projects currently in development go,” Cantor says. “This would be expected based on the concentration of wood biomass in this region of the country.” Outside of the Southeast, however, projects are also being developed throughout the country including in New England, Texas, the Northwest and the Midwest, he adds.

“It’s a growing trend in the Midwest,” DeKoch says as he describes Boldt’s project in Minnesota and two in Wisconsin. “The upper Midwest has a lot of areas where pulp and paper mills thrived and they have a proximity to forest waste materials.” He adds that he doesn’t see a trend in size of recent biomass projects and it just depends on the customer’s needs. “Whether it’s large or small, it spans the full range,” he says.

ICM has focused on waste-to-energy and wood chip-to-energy projects for electricity generation ranging in size from five to 30 megawatts (MW), Bennett says. “Interest is very robust,” he adds. “And while we only started marketing our gasification technology this past March, we are very excited about the interest we have received.” The company has one contracted project in the final stages of detailed engineering and a second recently signed a letter of intent. Bennett expects a third project to follow soon. “Hopefully by this time next year we will be combining a very robust interest with a very robust effort in manufacturing equipment and constructing biomass-to-energy projects,” he says.


Obstacles and Intricacies

Those projects, however, won’t come without challenges and unpleasant surprises. Bennett, DeKoch and Cantor all agree that funding can be a major obstacle, but that’s not news to biomass developers. “The weak credit market has certainly been a key challenge to developers in their ability to obtain financing,” Cantor explains. For projects that have secured financing, lenders have, in many cases, mandated the selection of a technically skilled contractor who can also provide a strong balance sheet, large bonding capacity and the ability to provide guarantees involving performance and schedule.

These projects are typically delivered under an engineering, procurement, construction (EPC) approach, where the contractor is responsible for all three elements. “The bottom line: in addition to construction expertise and experience, contractor financial strength is a key attribute for obtaining financing,” Cantor says.

For the customer and the EPC supplier, money from lending sources is still tight and the terms and conditions required by financing sources tend to be very onerous, DeKoch says. “The surprise might be whether the EPC builder will accept the terms or walk away,” he adds. “I think there’s more walking away these days in the interest of managing risk on the delivery side. In my opinion, this area needs much more of a collaborative solution than we have today.”

Bennett says prices for ICM's services largely depend on the scope and scale of the project. “If we consider converting biomass to electricity and include fuel and ash/char handling, gasifier, heat recovery steam generator, turbine and emissions control systems, our estimated costs are expected to range from $3.5 million to $4.5 million per megawatt for small 5 MW projects,” he cites. For larger systems between 10 and 30 MW, costs will likely range from $3 million to $3.5 million per megawatt, he adds.

“They aren’t cheap,” DeKoch says, but clarifies that any project with boilers and power facilities is going to be expensive, regardless of the feedstock. Prices can range from $100 million to $400 million, he says. “This isn’t any more uniquely expensive than other forms of power generation.”

Besides costs, obstacles and potential unpleasant surprises for developers can include intricacies dealing with the supply of biomass and how to get it to the facility, DeKoch says. “Proximity to biomass would make the cost of generation better,” he says. He also lists diligence, along with construction and design. “Customers have to be worried about whether they’re picking people who know what to do,” he cautions, adding that the interview and selection process is of paramount importance.

“The successful development of a biomass power project requires addressing project-specific commercial, technical and public relations issues, many of which can be especially challenging, if not deal breakers,” Cantor says. While project development can start with base design, every biomass project is different in areas including type of boiler, emission control, feedstock handling, plant size and layout, and site conditions. “The EPC contractor needs to work closely with the developer to finalize a cost effective design that meets the specific project goals including power output and air permit requirements,” he says. “Air emission permitting is an especially important design issue and several biomass power projects have been delayed until there is more clarity involving the EPA MACT standard ruling. In most cases, construction cannot start until the air permit is approved.”

He lists safety and quality as critical components to a plant’s success, as well as good community outreach, as locals will want to know that the biomass projects in their communities will have a positive economic impact. “It is therefore important that the contractor make every effort to hire local qualified vendors and subcontractors,” he says, adding that Fagen frequently attends public meetings with its project developers.

Finally, meeting schedule commitments is paramount to success of a project, Cantor says. The time crunch is exacerbated by a service date deadline of Dec. 31, 2013, in order to secure the investment tax credit. The EPC construction approach provides a method for fast-track project execution, he explains. “Procurement and construction can occur simultaneously as engineering progresses, as opposed to completing all engineering first and then going into construction.”

But developers can cut costs and schedules by using equipment catered to help specifically with that. Victaulic manufactures and supplies a mechanic coupling technology that can join pipe more quickly than welding, saving time and money on a biomass power project. The open flame-free technology forms and utilizes grooves at the end of the pipes, is environmentally friendly and can shave hours off piping installation time. “Part of the reason there is an interest in what we do is that in the construction process, we can pretty significantly reduce the total amount of labor that is required and thereby reduce the total amount of time and cost that is required to install piping at virtually any facility,” says Jim Renner, Victaulic’s vice president of biofuels and water systems technologies. “And given the vast amount of piping involved in biomass facilities, there are some pretty significant contributions we can make to the bottom line.” On a typical power and biofuels project, piping-related costs can account for up to a third of total capital cost, he cites. “So you’re talking about a pretty significant portion of the cost.” In addition, shortening the construction time allows the facility to open sooner, thereby operating sooner and gaining revenue sooner. The technology is used extensively in facilities like casinos, Renner says.

Staying on Schedule  

Building a project, especially from the ground up, takes time and requires a certain degree of patience and, in some cases, perseverance. Just like costs, timelines will depend heavily on the size, scope and other case-by-case intricacies, but DeKoch says to plan for a design, construction and engineering period of between two and three years.

Bennett offers an estimate of 12 to 16 months to construct a waste-to-energy facility using ICM’s gasification technology, again depending on size. ICM can manufacture its biomass gasifier in less than four months, he says, but heat recovery systems and turbines hold up the process, as they have longer lead times, in some cases more than a year after placing an order.

Regardless of timelines, costs and other hurdles, biomass power plant construction and conversion demand seems to be on an upswing. Half of Boldt’s $7 million firm is in power and energy including coal, wind, retrofits and biomass, DeKoch says, adding that biomass power is emerging as a common trend with a long history in the pulp and paper industry. “There’s a history of it and we were involved long ago,” he says. “[Biomass] isn’t the only trend in power and energy, but it’s becoming more significant.”

Author: Lisa Gibson
Associate Editor, Biomass Power & Thermal
(701) 738-4952