White Mountain Apache Tribe - 1994 Project

Project Overview
Tribe/Awardee: White Mountain Apache Tribe
Location: Whiteriver, AZ
Project Title: Feasibility Study - Potential for Biomass Energy Use
Type of Application: Feasibility
DOE Grant Number: DE-FG48-94R810515
Project Amounts:
DOE: $129,047
Awardee: $39,482
Total: $168,529
Project Status: Complete  More
Project Period
of Performance:
Start: September 1994
End: December 1996

Project Description

Introduction

The Fort Apache Timber Company (FATCO) has the opportunity to cogenerate electricity and thermal energy for the provision of its internal energy requirements. The proposed fuel supply for the cogeneration system would be biomass resources comprised of mill and forest residues. In 1993-1994 a report was prepared to assess the biomass fuel supply. The report determined that there were sufficient biomass resources to support a power plant of up to 37 mW In size. In the Spring of 1994 the White Mountain Apache Tribe applied for funds from the U.S. Department of Energy (DOE) under the Title XXVI program to perform a technical, regulatory, and economic feasibility analysis of a cogeneration system. The White Mountain Apache Tribe was awarded funds in late 1994. This report is an account of the investigation into the potential cogeneration system at FATCO.

Objectives

The overall goal of this project is to evaluate the technical, economic, and institutional potential for biomass-fueled cogeneration (i.e., production of power and thermal energy) or biofuels production at the FATCO Whiteriver and Cibecue sawmills. Specific objectives include evaluation of current energy use patterns, biomass fuel characteristics, environmental permits regulations, power generation technology assessment, power sales contractual opportunities, financing options, and economic analysis. Biofuels will only include preliminary estimates.

Description of Project

DOE funded a feasibility analysis of a cogeneration system at the White Mountain Apache tribe's Fort Apache Timber Company lumber mill in northeastern Arizona. A previous resource assessment, funded by the Western Regional Biomass Energy Program, had confirmed that a plant up to 37 mW could be fueled from lumber mill and logging waste. The economic feasibility study, conducted for the tribe by the NEOS Corporation, examined a number of cogeneration options and predicted energy costs ranging between 4.4 cents and 9.34 cents/kWh. Waste steam would be used to power the plant's lumber kilns. The tribe is considering the construction of a pulp mill, which would justify a 15-20 mW plant; otherwise, a 2.4 mW facility would be adequate. Establishment of a tribally owned utility would be an advantage because (1) it would permit wheeling to non-tribal customers on the reservation and (2) it would make the tribe eligible for an allocation of inexpensive hydropower from the Western Area Power Administration.

The photos show scenes of lumbering operations and piles of wood waste and sawdust that could be used as fuel for a co-generation plant.

The Fort Apache Timber Company, owned by the White Mountain Apache Tribe of Arizona, has extensive lumbering operations on its land that generate substantial amounts of wood waste and sawdust. The project studied the feasibility of using this waste for a co-generation facility to produce electricity and process heat.

Project Actions and Resultant Data

Electricity Profile

FATCO presently spends approximately $1.6 million per year for electricity service from Navopache Electric Cooperative, Inc. for three main sites: (1) main mill, (2) remanufacturing plant, and (3) Cibecue. Two points are especially relevant to the data derived from the study. First, the blended cost of electricity (blended refers to all energy, demand, and other service charges added together) is high, especially for a commercial/industrial load in the Southwest. The second point concerns the low load factor for each of the three sites. The load factor is a measure of the extent to which the total energy consumption is distributed over a period of time. A low load factor indicates that equipment is not fully utilized over a twenty-four hour period. In terms of FATCO operations, the load factor illustrates that FATCO operates one shift on a Monday - Friday rotation at all sites with the majority of energy consuming equipment being shutdown during non-working hours.

Biomass Fuel Supply

The biomass resource base on the White Mountain Apache Tribe reservation is diverse and plentiful. Biomass resources for fuel purposes may be obtained both from mill operations and from the forest operations. For many years, FATCO has burned its wood residues to supply steam for the dry kilns. It is estimated that a total of 125,778 bdt per year are available for fuel. Of this total, 72,098 bdt are available at Whiteriver (including the Reman plant), 16,339 bdt are available at Cibecue, and the collection of forest residues would add an additional 37,341 bdt per year.

Power Generation Technology

Existing FATCO Boiler Characterization

All of the current boiler equipment is located at the main mill in Whiteriver. Neither the Reman plant nor the Cibecue site have energy conversion equipment. The Whiteriver sawmill has a total of seven boilers. Units 1, 2, and 3 are retired. Units 4 and 5 were installed in 1978 and units 6 and 7 were installed concurrently several years later. The boilers are fed wood fuel from the main fuel bin located adjacent to the boiler house. The boilers are the "pile burner" type, which burn wood in a large pile on the floor of a refractory lined furnace box. Combustion efficiency with this type of boiler is generally low but pile burners are simple and therefore relatively inexpensive. Low combustion efficiency also means that emissions such as particulates and carbon monoxide are relatively high. One notable advantage to these systems is that high moisture content fuels can be burned as well as "dirty" fuels containing debris.

There were several noticeable problems during a site visit. Control sensors, combustion air dampers, deaeration system components, water treatment components, lighting systems, steam lines, steam traps, and heat exchangers are in poor operational condition. The boilers are operated in the best fashion possible by existing personnel but substantial improvements are needed both to ensure the safety of personnel as well as to enhance efficiency of the operation.

A cogeneration project was undertaken at the Whiteriver mill in the late 1970s. According to plant personnel, the project was abandoned due to numerous ongoing operational problems. One major problem was that the cooling tower was located next to the boiler house on the east side between the boiler house and the fuel house. Many open conveyors operate in this area and high winds are frequent. The cooling tower and the circulating water became laden with particulates, eventually leading to pluggage in the heat exchangers that were used to condense turbine exhaust. It was also noted that plant operators were not adequately trained in the proper start up and operation of the new equipment resulting in confusion and overall poor plant operation and performance. The entire project was eventually abandoned and the equipment was mothballed.

Power Generation Options

A review of current state-of-the-art energy conversion equipment was conducted. The review focused on gasification and combustion systems. Gasification technology offers FATCO fuel flexibility, energy conversion efficiency, modularity, and environmental compatibility. Gasiflcation is more efficient than combustion, thereby reducing the resource supply costs. Environmental emissions related to air and water pollution will be lower or non-existent, when compared to combustion systems.

Efficient energy conversion by a gasification system will be accomplished if the fuel moisture content is 25% or less. To achieve this moisture content at Whiteriver, a dryer would need to be added at substantial cost. Additionally, about 1,600 btu of heat are required for every pound of water that is removed in a rotary drum dryer and there are permitting hurdles concerning dryers and their emissions of volatiles. A uniform particle size is also advantageous when utilizing gasification. In some cases, supplemental firing is required to ensure name stability and constant flame temperatures. Since natural gas is not available at Whiteriver, oil firing might be required and the costs of operation would increase accordingly.

Gasification systems are not technologically mature and there is only a limited commercial industry to provide technical support. The firms offering gasifiers that were contacted for this report represent all that could be identified in the domestic U.S. None of the firms has produced more than 50 commercial units for sale and most have only sold a handful or have not made a commercial sale and are only in the late research and development phase for their product. Further, most of the large firms (e.g., Westinghouse, GE, or ABB) involved in gasification technology development are not focused on small-scale systems. Thus, there is risk involved in becoming involved with a technology that is not yet commercially well-accepted. Given these issues associated with gasification, gasification does not appear to be the best energy conversion alternative for the Whiteriver mill.

Combustion systems represent a mature technology with substantial vendor support and commercial expedience. Combustion systems are available at competitive capital costs and operating costs are generally low, especially in comparison to gasification. Further, most combustion systems are relatively uncomplicated and hence easy to operate and maintain. Direct combustion is a proven means for generating electricity from wood. All equipment required for the efficient, economical and environmentally prudent combustion of wood is readily available from many sources and equipment suppliers.

Combustion technology offers the best opportunities for the FATCO installation. Efficiency, cost, and environmental emissions are competitive for this technology relative to other energy conversion systems. Within the realm of combustion technology, a spreader stoker with a fixed grate cooled by ambient primary air has considerable merit. The spreader stoker is backed by substantial commercial field experience, as it has been the workhorse of industrial wood burning equipment. Another appropriate combustion technology would be fluidized bed units.

Preliminary Environmental Analysis

In general, environmental regulations should not present any major impediments or obstacles to the successful implementation of the cogeneration project. However, before any cogeneration plant can be built at FATCO, a formal environmental assessment (EA) of the proposed project must be conducted. Although the U.S. Environmental Protection Agency has regulatory jurisdiction over the reservation, the tribe is not required to notify EPA of the project if the Tribal Environmental Planning Office determines that the project will meet or exceed all federal standards.

With the installation of pollution control equipment and modern boilers, the overall emissions from FATCO are likely to decline significantly, resulting in net air quality improvement in the Whiteriver area. Water pollution can be minimized through construction of settling ponds and designing for closed loop recirculation. Also, because only federal environmental regulations apply, there are fewer levels of bureaucracy for environmental review than encountered by other biomass projects.

Joint Venture Partners

FATCO management has indicated that a partner will be required for the cogeneration facility. FATCO management has determined that a partner providing skilled operations services would enhance the viability of the cogeneration facility. At a minimum, the partner would operate the boilers and generators at the new facility. FATCO also has the opportunity to team with outside organizations for the purchase, installation, and/or ownership of the cogeneration facility, in addition to the daily operation of the cogeneration Installation.

More than 50 firms were contacted to determine their interest in participation with FATCO in the development of the potential cogeneration project. Nine independent power producers and Native Power Corporation have been identified (others may be possible) to represent viable candidates for joint venture participation with FATCO. These firms bring technical, management, and financial expertise to the project. The non-FATCO organizations might have access to equipment and/or alternative financing not available to FATCO thereby making the economic attractiveness of the project more or less viable.

Power Production Options

To assist in the economic evaluation of the potential cogeneration facility at FATCO, multiple distinct options were created to assess different configurations of equipment and resource utilization. Option 1 represents FATCO generating as much power as possible by using all of the wood residues that are available from the multiple sources. Option 2 is a scenario in which the cogeneration system is sized to meet FATCO loads at Whiteriver only (includes both the main mill and the remanufacturing plant). Option 3, which is divided into two sub-options, 3(a) and 3(b), is a scenario in which existing, mothballed equipment is utilized to meet a portion of the FATCO Whiteriver load. Option 4 is a power generation scenario for the FATCO sawmill at Cibecue. Two pulp mill options represent an analysis of sales of electricity to a proposed pulp mill.

Economic Analysis

A 20-year economic analysis model was used to evaluate the five scenarios. The model performs annual cash flow calculations to arrive at three measures of economic vitality: (1) net present value (NPV), (2) levelized cost per kWh, and (3) year-two return on investment (ROI). The most useful measure, for investment purposes, is the NPV. As a general rule, if the NPV is positive then the investment should be undertaken. The higher the NPV, the better the investment.

In all cases, the analysis is from the perspective of FATCO as owner of the facility and an operator being on site and being responsible for the plant. The operator would hire trained personnel to operate and maintain the equipment. The operator would also write and enforce all safety plans, provide documentation to FATCO and regulatory bodies, and schedule and perform all maintenance.

Our approach was to define the base case for each of the options. The base case represents the most likely combination of capital and operating cost assumptions. Subsequent analyses were performed to evaluate the effect of changes in the base case assumptions.

Results, Conclusions, Findings and Recommendations

Conclusions

Current Energy Consumption

Electricity consumption at the mill is higher than it should be. Plains Electric Motor, in cooperation with Navopache, provided FATCO with an energy audit of the motors at the mill. Specific recommendations were made regarding the replacement of many motors with more efficient equipment. It does not appear that FATCO has responded to the results of the energy audit. Adoption of energy efficient equipment is the first step in reducing electricity costs.

Boiler House and Kiln Operation

With specific regard to wood fuel consumption by the boilers, it is difficult to obtain reliable estimates of fuel consumption. No metering equipment exists to indicate the amount of fuel being consumed. No sampling procedure exists to assess wood fuel characteristics. Without a measuring system, it is not possible to monitor the relative efficiency of the boilers over time and the cost of running the boilers.

Another concern regarding the boiler house is the poor condition of the boilers and the related equipment. The boilers and associated equipment (i.e., deaeration tank, water supply system, steam lines, kilns, and control systems) are poorly maintained and constitute both a source of economic loss due to inefficient operation as well as a safety concern. Substantial effort should be directed toward improving the training of personnel and funds should be set aside for capital improvements.

Power Generation Equipment

Combustion technology represents the logical choice for energy conversion. Spreader stoker and fluidized bed technologies represent the most appropriate systems for FATCO.

Environmental Considerations

The installation of upgraded boilers and pollution control equipment will significantly reduce the total particulate emissions from the mill, and water pollution can be minimized through construction of settling ponds and designing for closed loop recirculation.

Environmental regulations will not be a significant obstacle for the cogeneration project at FATCO. Before any cogeneration plant can be built at FATCO, a formal environmental assessment (EA) of the proposed project must be conducted. The U.S. Environmental Protection Agency (EPA) has regulatory jurisdiction over reservation, although the tribe is not required to notify the EPA of the project. The tribe does not have to contact the EPA if the Tribal Environmental Planning Office determines that the project will meet or exceed all federal standards.

Joint Venture Partners

There is considerable interest expressed by independent power producers (IPPs) in participating with White Mountain Apache Tribe/FATCO in a cogeneration project. The IPP firms have substantial operating history and are backed by reputable engineering and financial organizations. Many of the firms have participated in projects with other tribes and are sensitive to unique tribal concerns.

Electricity Sales

Wood resources on the reservation are sufficient to provide energy for the production of electricity far in excess of FATCO requirements. At the present time, sales of electricity outside of FATCO would be accomplished under the provisions of the Public Utility Regulatory Power Act (PURPA). Navopache would purchase electricity from FATCO at rates below the cost of production, leading to substantial losses for FATCO. Alternative scenarios such as wholesale wheeling are not likely because the FATCO cost of production is considerably higher than alliterative, competitive sources such as coal and combined-cycle natural gas. Retail wheeling is also not likely both because it is not legally permissible at this time (although changes in the regulatory status are possible in the next several years), as well as other competitors will have access to less expensive electricity to sell at the retail level. The most likely market for FATCO-produced electricity will be to an end user on the White Mountain Apache Tribe Reservation. A tribal utility operation will help to establish the feasibility of such a market.

Power production by FATCO with sales to the electricity grid maintained by Navopache has the potential to improve Navopache operations. For example, voltage drop in Cibecue can be ameliorated by addition of power generation at the end of the feeder. Similarly, power generation in Whiteriver may lead to reduced line losses for Navopache. For a variety of reasons, the economic analysis does not include the potential benefits to Navopache that may accrue from FATCO power generation.

Economic Analysis

Two different sets of conditions exhibit strong economic returns. For a business as usual case, Option 3 (b) is a clear economic choice. The economic analysis Indicates strong returns to the tribe that cannot be ignored. Substantial changes in the base assumptions that would have a negative effect on the economic analysis (e.g., doubling the capital cost, Increasing the discount rate 50% beyond current market conditions) are required to alter the net present value calculation. In the current economic climate, such negative effects are unlikely.

A pulp mill located on the FATCO industrial site, a large power plant on the order of 15-20 mW, also has positive economic returns - greater than the economic returns for Option 3(b).

Recommendations

Priority Recommendations

Immediate implementation of the recommendations of the Plains Electric Motor audit is a priority. FATCO will realize electricity and dollar savings and short-term paybacks of its investment. A retrofit of existing motors will improve the day-to-day operations, help lower electricity consumption, which will also help the cogeneration system.

A decision needs to be reached on the proposed pulp mill before a decision is appropriate for the cogeneration facility. The decision should clearly identify, from the perspective of the power generation project, ownership of the pulp mill. If the pulp operation is categorized as a non-tribal enterprise, then a tribal utility authority is necessary to avoid the prohibition on retail wheeling of electricity. If the pulp mill is a tribal enterprise, then a tribal utility might not be necessary.

If the tribe decides that a pulp mill will be installed on the reservation, then the tribe should begin steps to secure a bid for a large, 15-20 mW, cogeneration installation. If the tribe decides against a pulp mill then the tribe should begin steps to secure a bid for a 2.4 mW cogeneration facility. The income potential of both cogeneration projects is sufficiently large that the tribe should begin the steps in the near future to capture the income as soon as possible.

Secondary Recommendations

With specific regard to wood fuel consumption, the overall efficiency of the kilns may be dramatically increased by retrofitting the steam lines, improving the water treatment system, and repairing the kilns. These efforts will complement a new cogeneration system operation.

The feasibility of establishing a tribal utility authority should be explored. The larger sized cogeneration facility may only be feasible with sales of electricity on the reservation to non-tribal customers. This is the market where White Mountain Apache Tribe/FATCO has a competitive advantage. The benefits of a larger operation such as Option 1 will mean increased employment, increased tribal revenues, improved forest conditions, and control over electricity prices. It is unlikely that these benefits will be realized without a tribal utility authority because of the legal prohibition against retail sales of electricity.

Independent of the cogeneration facility, White Mountain Apache Tribe should explore a tribal utility authority because of the status of the tribe with respect to the Western Area Power Administration. White Mountain Apache Tribe may be considered a preference customer because of tribal status. Preference customers of the Western Area Power Administration are entitled to low-cost allocation of power produced from federal resources, principally hydroelectric facilities. Western Area Power Administration allocations of power occur on an infrequent basis. A new power marketing initiative is beginning with allocations expected near the turn of the century. Related to the sale of electricity to the pulp plant, the White Mountain Apache Tribe should carefully consider ownership of the pulp mill. If FATCO is the owner of the pulp mill, then sales of electricity will not be legally curtailed. However, if the ownership of the pulp mill is another entity, then retail wheeling considerations will affect the sale of electricity. Retail wheeling is not permissible in Arizona and thus sales by FATCO to the pulp mill would not be possible without a tribal utility authority.

The interruptible rate offered by Navopache to FATCO is advantageous to both operations. FATCO will save operating dollars as will Navopache. Similar arrangements that have joint beneficial merits and should continue to be explored. The evolution of the electric power industry suggests that competitive pressures will foster greater cooperation between electricity providers and end users.

Project Status

For current project status or additional information, contact the project contacts.

Project Contact

White Mountain Apache Tribe
PO Box 700
Whiteriver, AZ 85941
Telephone: (520) 338-4346