NEW BIOMASS AND WASTE TO ENERGY CHP IN VILNIUS - THE LAST STEP TO GET OUT FROM THE GAS DEPENDENCE IN DH SECTOR OF LITHUANIA

Dr. Nerijus Rasburskis„Lietuvos energija“, UAB Director of the Cogeneration Projects Division2016-04-19

AGENDA

I. STATE OF PLAY OF ENERGY SECTOR IN LITHUANIA

II. NEW BIOMASS AND WASTE TO ENERGY CHP IN VILNIUS

III. FUEL SUPPLY AND INFLUENCE TO THE MARKET

3

STATE OF PLAY OF ENERGY SECTOR IN LITHUANIA

ENERGY OUTLOOK (electricity sector)

• One of the biggest importer ofelectricity among EUcountries (~ 70% from thecountry‘s demand)

• CHP plants are being closeddue to non competitive fossilfuels and have been alreadydepreciated

• RES in local electricityproduction ~20% fromcountries demand

Electricity supply balance

12%

2016-04-09 10:35

SE LV

RUS

PL

BY

ENERGY OUTLOOK (district heating)

• Ineffective use or no use ofcogeneration based heatproduction in district heating

• Biomass sector is still in thetransition from a few playersinto the biomass exchangebased market

• The majority of the heatproduction capacities‘ aredesigned to use white woodchips

Fuel balance in district heat production(cogeneration power plants and heat only boilers)

Source: LDHA (2015 preliminary)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Other fuels

Firewood, municipal and wood waste for fuel

Naturas gas

12%

~60%

6

STRICTLY PRIVATE AND CONFIDENTIAL

I. COUNTRY ENERGY OUTLOOKENERGY OUTLOOK (district heating)

District heat production ~ 8,3 TWhVilnius city ~ 2,6 TWh (~31%)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Firewood, municipal and wood waste for fuel Naturas gas Other fuels

Government target up to 2021

Source: LDHA (preliminary data for 2015)

7

21

%

8%

7%

64

%

28

%

17

%

54

%

2%

19

%

13

%

42

%

25

%

33

%

16

%

50

%

1%

RECYCLED COMPOSTED INCINERATED LANDFILLED

Lithuania Denmark Finland Sweden

Source: Eurostat (2013)

ENERGY OUTLOOK (waste management)

• Ineffective waste management - 60% of waste containing energy value is still landfilled

• Lack of WtE capacities to incinerate RDF/SRF locally produced by MBTs(mechanical biological treatment plants)

• EC ambitions for recycling (65 %, 2030) push to optimize WtE capacities in the conservative manner

ENERGY OUTLOOK (energy dependence)

-20

0

20

40

60

80

100

Lithuania ranks 6th among most energy dependent EU members

Lithuanian socio-economic environment is favourable for implementing projects reducing the country’s energy dependence

EU STRATEGY ON HEATING AND COOLING

It (strategy) should help to reduce energy imports and dependency, to cut costs for households and businesses, and to deliver the EU's greenhouse gas emission reduction goal and meet its commitment under the climate agreement reached at the COP21 climate conference in Paris.

The strategy aims are maximizing the efficiency and sustainability of heating and cooling systems

Communication on 2016.02.16

CO-GENERATION - A TOOL FOR ENERGY EFFICIENCY AND SUSTAINABILITY

• It has ~ 40% higher primary energy utilization rate compared to separate conventional energy (electricity and heat) production

• Country’s energy dependency can be significantly reduced by the use of local municipal waste (RDF/SRF) and renewable fuel

11

Agenda

1. Introduction

2. Market overview

3. CHPs project

4. Financial forecast

NEW BIOMASS AND WASTE TO ENERGY CHP IN VILNIUS

Vilnius city

Population 540 000

District heating 90%

Annual district heat demand 2,6 TWh

Annual RDF/SRF potential

in the region for energy ~145 000 tons

Waste landfilled ~85%

LOCATION OF THE NEW BIOMASS AND WtE CHP

OBJECTIVES OF THE PROJECT

Implementation of CHPprojects will contributeto pursue the objectivesand tasks of the NationalEnergy IndependenceStrategy – the natural gasas a fuel for heat andelectricity production willbe replaced with biomassand waste resulting inenhancement ofLithuanian energyindependence from fossiltype fuel (import of thenatural gas).

The Government of theRepublic of Lithuaniaacknowledged that CHPprojects have nationaleconomic significance tothe Republic of Lithuania.

Investments into high efficiency

(CHP)

Primary energy savings

compared to HOB installations

Heat and power energy

produced from RES

CO2 reduction, increased share of

RES, decreased energy poverty

Reduced landfill

Waste management, CO2 reduction

BioCHP unit

MWe MWt~70 ~174

WtE CHP unit

MWe MWt~18 ~53

Vilnius high efficiency CHP installation

MWe MWt~88 ~227CAPEX ~325 mEur

Ministry of EnergyMinistry of FinanceMinistry of Environment

Ministry of Finance

100% - control

100% - control

EU funding

<164mEUR

OWNERSHIP OF THE PROJECT

SPV

Preparatory works

Partner selection

Construction work

2015 2016 2017 2018

Securing of financing

EPC contractor(s) work(s)EPC tender

Selection, negotiation

Financing structure

Environmental Impact Assessment

Territory planning (height allowance)

State Aid/ EU Funding

\

Works at the site

First fireFinal

completion

Commissioning

Selection, negotiation

Completion

VILNIUS CHP PROJECT TIMELINE

NewWtE

NewBioCHP

BioCHP

BioHOB

BioCHP

BioHOB

Fossil

CHP INTEGRATION INTO VILNIUS DH SYSTEM

Current situationRES ~ 40-45%

After implementation of the projectRES+RDF(SRF) ~ 75-80%

Fossil

17

Vilnius high efficiency CHP installation

Electricity production, GWh(share of LT demand)

400 (~3,7%)

District heat production, GWh (share of Vilnius demand)

1.240 (~50%)

CO2 reduction, tones/year ~ 230.000

Primary energy savings ~40 % Overall efficiency of the units

≥ 101 %

I. EXPECTED RESULTS OF VILNIUS CHP PROJECTEXPECTED RESULTS OF VILNIUS CHP PROJECT

Vilnius city has chosen a land plot for the New CHP by approving general city plan and heating sector special plan

The site is Jočionių str. 13, located onthe southwest part of Vilnius, 8kilometers away from city center.

LOCATION

• Well developed infrastructure for connectionto engineering infrastructure – natural gas,electricity and district heating;

• Well developed transport infrastructure. Itlocated next to highway between Vilnius andKaunas, also there is railway branch;

• Site is not located in protected territory orNATURA 2000 territory boundaries, does notcontain any cultural heritage;

• Blends in the current Vilnius layout,concentrating energy infrastructure at thesame place.

LAND PLOT STRUCTURE

MBT Energy production area

Biofuel handling area

TECHNICAL CONCEPT

Completed Environmental Impact Assessment

Completed Topographical surveying

Completed Geological surveying

Completed concept project of connections to existing infrastructure

EPC tender still in progress (initial offers received, finishing negotiations, contract –mid 2006)

Finishing negotiations with bank

PROGRESS OF THE PROJECT

22

FUEL SUPPLY AND INFLUENCE TO THE MARKET

23

PRIMARY ENERGY TO THE CHP PLANT

Biomass ~450.000 tons a year

(~97 000 toe)

Municipal waste -RDF/SRF

up to 160.000 tons a year

(~41 000 toe)

~30%

~70%

24

II. COUNTRY OVERVIEW

Municipal waste treatment in the European Union countries

Currently, the vast majority of municipal waste is disposed of in landfills 58% (2014) Only about 8% of treated municipal solid waste was used for energy recovery in

2014

MUNICIPAL WASTE GENERATION AND TREATMENT

Source: Eurostat (2013)

0

100

200

300

400

500

600

700

800

Gen

erat

ed, (

kg p

er p

erso

n)

Landfilled Incinerated Recycled Composted

481433

25

Recyclables

Up to 20162016-

2018From 2018

Compost

22%

70%

8%

20%

32%

8%

6%4%

Vilnius 2020

VILNIUS WASTE TREATMENT STRATEGY

WtE CHP is the missing infrastructure link to treat refused derive fuel (RDF) fromMBT

26

0,0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

m. t

Vilnius CHP capacity Kaunas CHP capacity Klaipeda CHP capacity RDF for incineration

WASTE TO ENERGY CAPACITIES Optimal solution of WtE

capacities which suit waste management

targets

BIOMASS PRODUCTS FOR VILNIUS CHP

It is planned to use biomass ofclass P63 or P100 in accordancewith EN 14961 standard

Wood chips, bark and log woodwill be delivered by roads andrailway

Furthermore, part of woodchips will be prepared on thesite by chipping of wood logs

A possibility to add in the fuel mixture up to60% of the so called intermediate fuel - bark,forestry residues, energy crops, industrialwood chips (dry wood chips) and up to 10%of other low quality dusty biomass (straw).

BiomassInstantaneous portion

of fuel (mass basis)

Biomass - wood chips 40-100%Intermediate fuel, bark,willow and other energycrops, forestry residues.

30-60%

Straw 0-10%

27

BIOMASS IN LITHUANIA (SOLID WOOD)

Wood biomass consumption

(district heating) by products' 2014

Wood chips98,79%

Wood pellets0,67%

Straw pellets0,54%

Source: The Lithuanian District Heating

Association, Energy price regulator

Wood chips > 98 % of the market;

Regulated energy producers areobligated by law to acquire certainpart of biomass in Energy Exchange bythe year 2014 - 10%; 2015 – 50%; 2016– 100%.

Biomass typePotential in 2025 m3/year

Biomass from industrial waste 1.627.000 Firewood for energy 1.777.865 Logging waste 845.253Secondary wood, not forest logging 1.700.000 Biomass from gray alder logging 650.000 Biomass from forest young stands 400.000 Biomass from short turnover plantations 983,580 Biomass potential from stump wood 644.601TOTAL: 8.628.299

(1.482.526 toe)

Biomass potential in Lithuania internal market follow type of biomass

Source : Lithuania Energy Consultants Association

28

IMPACT TO THE BIOMASS MARKET

80 MW

90MW

270MW

145 MW

152MW

50MW30 MW

240 MW

100 MW120MW

100 MW

110MW115 MW

80 MW

90MW

410MW

160 MW

36 MW

Source: Baltpool, 2015

Installed biomass capacity 2015

Installed biomass capacity 2018

About ~4,5 TWh of biomass was consumed in DH in 2015

Annual biofuel potential is around 17 TWh only in Lithuania (LEKA)

Vilnius CHP is expected to increase biomass demand only by ~0,3 TWh (~6% of biomass consumed in DH sector in 2015)

TWh

0,00

0,20

0,40

0,60

0,80

1,00

1,20

Biofuel demand inVilnius CHP

Amount of biofuelreplaced by waste

Kaunas WtE

Vilnius WtE

0,28 TWh

WORKING BIOMASS EXCHANGE

More than 235 members currently registered at the Biomass Exchange

Monthly max order from Vilnius BioCHP ~ 2,6 M EUR (if biofuel price 15EUR/MWh)

30

2 1 3 46

11 9 10 13 11 10 7 7 1014

13

11

19

23

29

4448

37

59

3127

2026 26

49

0

20

40

60

80

Total order volumeM EUR

Monthly order volumes in auctions, year 2015-2016 (M EUR)

Sell orders Buy orders

THANK YOU FOR YOUR ATTENTION