Page 66 - Biomass Gasification, Pyrolysis And Torrefaction Practical Design and Theory

Chapter | 2 Economic Issues of Biomass Energy Conversion 45

The depreciation may be linear over the projected lifespan or as defined
by regulatory bodies. The tax T is sometimes built into the return of the equity
when the latter is expressed as before-tax-return on equity. These items remain
constant and are independent on the financial operation of the plant.

2.4.3.2 Revenue Requirement
The biomass conversion plant must sell its product at a price such that it
would cover all expenses (direct or indirect) and the cost of carrying the
investment. The first part (TOE) of the expense is technical in nature. One
calculates it based on the technical design of the gasification plant and its
performance characteristics. The second part, known as carrying charge (C c ),
is more based on how the plant is financed. It includes all financial obliga-
tions including the expected profit or return on investment. The total revenue
required from sales of all products from the plant (RR) is the sum of carrying
charge and operating expenses.

RR 5 C c 1 TOE (2.18)

Total revenue 5 price of electricity (other product) 3 electricity (or other
product) generated/year 1 credit earned for CO 2 and so on 1 revenue from
by-product sales.

Example 2.1
A 40 MWe IGCC plant has an availability of 85% and 100% capacity factor.
The total capital requirement (TCR) per kW installed including all is $1353/kW.
Debt capital is 70% of TCR. Fixed component of the yearly O&M cost is
$31/kW/year. The variable component is $0.0031/kWh/year. Return on debt,
capital is 12%, and that on equity before-tax is 16%. Book life of the plant is
30 years. Find the revenue required for the plant.
Solution
Let us start the calculation on a 1 kW capacity basis.
Since the return on equity is before the tax, Eq. (2.17) is modified as:

C c 5 R D 1 R E 1 D B
Depreciation (assuming linear) over the booked life, D B 5 1353/305 $45.1/year
Debt capital 5 0.7 3 $1353 5 $947
R D 5 ð$947Þ 3 0:12 5 $113:6=year
Equity capital 5 (1 0.7) 3 $1353 5 $405.9. Return on equity is 16%. So,
R E 5 $405:9 3 0:16 5 $64:9=year
Total carrying charge 5 $45.1 1 $113.6 1 $64.9 5 $223.6/year
Availability being 85%, the actual time the plant in operation in a year
5 365 3 24 3 0.85 5 7446 h/year