13 Using LFGcost model to perform financial study of LFGE projects

Outline
Intro LFGcost model description Input Output Example

Using LFGcost model to perform financial study of LFGE Projects

Lapyan Chan Organic Waste Technologies (HK) Limited April 2010 2

Introduction
A LFGE project involves both financial costs and benefits Timing of costs and benefits differ A financial analyses can determine whether a project is financially feasible Common measures of financial feasibility
Internal rate of return (IRR) Net present value (NPV) Payback period Cash Flow
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Other factors may have to be considered3

LFGcost Model
Developed by USEPA Version 1.4 (2006); Version 2.0 (2009) Excel Spreadsheet In English only at this time

13 Using LFGcost model to perform financial study of LFGE projects

LFGcost Model
Includes all direct and indirect costs Direct costs:
Equipment Installation

LFGcost Model
Includes various sources of revenue: Sales of electricity and LFG Renewable Energy Credit Other government creditsi.e.grid connection credit Direct ER or ER resulting from displacement of fossil fuel

Indirect costs:
Engineering, design, and administration Site surveys and preparation Permits, right-of-ways, and fees Start up costs, mobilization/demobilization of construction equipment, and working capital

LFGcost Model
Underlying data are based on engineering practice and costs in USA Allows some degree of customization for use in other countries Estimated for an average project site Accuracy of +/-30 to 50% Available to LMOP Partners only

Some of the General Assumptions

Conventional vertical well systems are used for collecting gas One well per acre (about 0.4 hectare) Wells extend to 10 feet above bottom liner

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Input
Required User Input Optional User Input

Required User Input

Basic Landfill Data Basic LFGE Project Data

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13 Using LFGcost model to perform financial study of LFGE projects

Required User Input

Basic Landfill Data Year landfill opened Year of landfill closure Waste acceptance data

Required User Input

Basic LFGE Project Data Area of LFG wellfield LFGE Project Type Will LFG energy project cost include collection and flaring costs? Year LFG energy project begins operation

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Types of LFGE Projects

LFG collection and flaring Direct LFG utilization Electricity generation With standard turbines With standard reciprocating engines With microturbines With small reciprocating engines Electricity generation and hot water production with CHP reciprocating engines Electricity generation and steam production with CHP turbines with CHP microturbines Liquified natural gas production plants Leachate evaporators
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Required User Input

For special projects only
Amount of leachate collected (for leachate evaporator projects only) Distance between landfill and direct end use or CHP unit (for direct use and CHP projects only) should be less than 10 miles Distance between CHP unit and hot water/steam user (for CHP projects only) should be less than 1 mile

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Optional User Input

LFGE project-related technical data General economic data Specific economic data Initially set to suggested defaults (based on US engineering practice, financial practice, and costs) Should use values suited for China and the project site
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Technical Data
LFGE project size (maximum for direct use; average for most others) Design flow rate (if project size is user defined) Methane generation rate constant, k Potential methane generation capacity of waste, L0 Methane content of landfill gas (45 to 60%) Average depth of landfill waste Landfill gas collection efficiency Utilization of CHP hot water/steam potential Expected LFG energy project lifetime (10 to 15 years) Operating schedule (used 24 hrs on each day?)

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13 Using LFGcost model to perform financial study of LFGE projects

General Economic Data

Loan lifetime (10 years) Interest rate (charged by bank) General inflation rate (for O&M labor) Equipment inflation rate Marginal tax rate Discount rate (10%) Down payment

Specific Economic Data

Energy tax credits Direct credits
GHG reduction credit / CER (Euro/tCO2e) Renewable electricity credit (RMB0.25/kWhr) Avoided leachate disposal Construction grant

Royalty payment for landfill gas utilization Cost uncertainty factor (how much costs in China are lower than those in the USA) Initial year product price Annual product price escalation rate Electricity purchase price for projects NOT generating electricity Annual electricity purchase price escalation rate

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Customization for China

Grid emission factor Office of Leadership Group for National Response to Climate Change, NDRC

2008 China Baseline Emission Factors for Regional Power Grids

4. Values of Grid Emission Factors

Northern Region Grid Northeastern Region Grid Eastern Region Grid Central Region Grid Northwestern Region Grid Southern Region Grid Hainan Island Grid

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Remarks: The OM values in this table is the weighted average of OM values from 2004 2006. BM values shown are 22 2006 values.

Other Customization
ER crediting period, does it cover the entire project lifetime? Or does it end at year 2012? Economic Analysis Environmental Benefits

Output

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13 Using LFGcost model to perform financial study of LFGE projects

Economic Analyses
Average project size for projects NOT generating electricity (in million cf/year) Average project size for projects generating electricity (in kWhr/year) Average project size for CHP projects producing hot water/steam (in mmBtu/yr) Total installed capital cost for year of construction Annual costs for initial year of operation Internal rate of return Net present value at year of construction Net present value payback (years after operation begins)

Environmental Benefits
Total lifetime amount of methane collected and destroyed Average annual amount of methane collected and destroyed GHG value of total lifetime amount of methane utilized GHG value of average annual amount of methane utilized Total lifetime carbon dioxide from avoided energy generation Average annual carbon dioxide from avoided energy generation

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Uncertainties
Standard equipment sizes may be discrete Unusual site conditions Environmental or permitting constraints Regional construction cost differences Variations in the rate and types of incoming waste, site operating conditions, and moisture and temperature conditions Typical project designs and for typical landfill situations

Disclaimer
Project cost estimating tool Uses a first order decay equation to estimate LFG generating rates Analyses performed are considered preliminary and should be used for guidance only

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Sensitivity analyses using LFGcost are performed for landfill assessment under M2M assistance

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13 Using LFGcost model to perform financial study of LFGE projects

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Major Factors affecting Financial Feasibility

LFG quantity
Collection efficiency Waste composition and quantity

Product price GHG credit

GHG/CER price Crediting period (2012 or beyond?) Baseline emissions (interpretation of GB16889) Percent of CERs issued vs requested
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13 Using LFGcost model to perform financial study of LFGE projects

Conclusions
To gain access to LFGcost and use it to analyze your potential LFGE, you can sign up as a partner of LMOP Or you can complete the landfill questionnaire and return it to M2M, and M2M could perform an assessment of the landfills LFGE potential for you Thank you
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