Biomass Feasibility Project Final Report - Xcel Energy

Capital Cost
Users must estimate the capital costs of a proposed facility. For new biomass powered plants
the Energy Information Agency (EIA) estimates the costs of a new facility to be $1,809 per kW.
For proposals to co-fire biomass with coal the EIA estimates that expenditures of $108 to $248 per
kilowatt of biomass capacity will be necessary.
Plant Capacity
The optimal capacity of a proposed plant will largely depend upon the low cost biomass
resources available to the plant. Building a plant that is too large for the local and regional
resource base to support will likely lead to high fuel costs, and potentially an inability to supply
sufficient fuel for the plant. As a general rule biomass plants are assumed to draw their fuel
supplies from a fifty-mile radius. Transporting biomass fuels for more than 50 miles by road may
be uneconomical. Procuring low cost fuels from greater distances may be possible if rail
transport is utilized. This will largely depend on a facility’s ability to take advantage of existing rail
infrastructure.
Capacity Factor
The capacity factor of an electric generating plant plays an important role in the plant’s
economics. More reliable plants have a greater opportunity to generate revenue than less
reliable plants because they operate for more hours out of the year, thus producing more
electricity to sell to the utility. The capacity factor measures reliability by representing the
average amount of time that the plant is expected to be operating at full capacity over the
course of a year, expressed as a percentage. A plant that operated at full capacity all year
would thus have a 100% capacity factor, while time spent operating at less than full capacity, or
time when the plant was shut down for maintenance (scheduled or unscheduled) would reduce
the capacity factor. For example, a plant that experienced 100 hours per year of maintenance
or other shutdown, and operated at 80% capacity the rest of the year, would have a capacity
factor of 79.1%
Net Electrical Efficiency
Net electrical efficiency is the ratio of electrical energy output from the plant to the energy
contained in the fuel input. This measures how efficiently the plant converts the fuel energy to
electricity.
Non-Electrical Energy Income
Capacity Payments
A plant’s reliability also presents opportunities to generate revenue through the capacity
payments paid by the utility. Plants that are more reliable have the potential to receive higher
capacity payments for the capacity that they provide to the system.
Independent power producers are paid by utilities based on the utility’s avoided energy and
capacity costs. Capacity payments are based on a utility’s avoided capital costs, fixed O&M
costs, and startup costs for a new capacity addition. Proposed facilities greater than 10 MW in
size must negotiate the rates that they will receive from the utility.
Identifying Effective Biomass Strategies: Page A-11
Quantifying Minnesota’s Resources and Evaluating Future Opportunities