cofit comments to · pdf filefeasibility studies have identified power ... methanol and soap)...

| [Presentation title] | [Client Name] | 10 May 20111

COFIT Comments to

NERSAPresented by Guy Spindler

3 May 2011

2 COFIT Presentation to Nersa 3 May 2011

COFIT COMMENTS TO NERSA

• INTRODUCTION TO SAPPI

• BACKGROUND

• SAPPI REGIONAL PERCENT FOSSIL ENERGY

• SAPPI REGIONAL POWER SELF SUFFICIENCY

• FEASIBLE COFIT PROJECTS IN SAPPI SA

• SAPPI VIEW ON COFIT AND COGENERATION

• POWER GENERATION EXPERIENCE IN SAPPI

• QUALIFYING PRINCIPLES

• COFIT RATES

• HEAT RATES AND FUEL COSTS

• FIBRE BEFORE ENERGY

• RECOMMENDATIONS AND SUMMARY

CONTENTS OF PRESENATATION


INTRODUCTION TO SAPPI


INTROUCTION TO SAPPI

21%

55%

24%

3 Fine Paper Mills

4 Sales Offices

1 Sales Office

1 Sales Office3 Fine Paper Mills

4 Forests Product Mills

10 Sales Offices

Manage 555,000ha Forests

1 Sales Office

9 Fine Paper Mills

16 Sales Offices

1 Fine Paper Mill (JV)

4 Sales Offices

1 Sales Office

22%

48%

13%

18%

Sales By Destination1 (US$)Sales By Source1 (US$)

North America

Europe

Southern Africa

Asia & other

Sales for the year ended September 2010 US$ 6,572 million


INTROUCTION TO SAPPI

Sappi Southern AfricaSappi Fine Paper Sappi Trading

Jiangxi Chenming

(China JV)

Sappi Fine Paper

Europe

Sappi Fine Paper

North America

Alfeld, Biberset, Ehigen,

Gratkorn,Kirkniemi, Lanaken,

Maastricht, Nijmegen, Stockstadt

Cloquet, Somerset, Westbrook

Saiccor

Paper and Paper Packaging

Sappi Fine Paper

South Africa

Forests

Ngodwana, Tugela, Cape Kraft &

Coater, ReFibre (Waste)

Enstra, Stanger, Adamas

Plantations in RSA and Swaziland

(pulpwood and sawlogs)

34% ownership

Sales in over 100 countries

13 Sales offices on 6 continents

Chemical Cellulose

Kraft

sappi



BACKGROUND

Sappi appreciates the opportunity to present their comments.

Sappi has submitted written comments for REFIT and COFIT.

Sappi views the COFIT as a positive step towards creating an enabling

environment.

Sappi is an industry based on the utilisation of renewable resources, Combined

Heat and Power and Own Generation, thus COFIT is closely aligned with our core

business.

Sappi has traditionally used renewable resources for our internal energy needs

Our Chemical Recovery Process, but very limited biomass from the

forestry operations and our mills is used, mainly due to the economics

and viable quantities.



BACKGROUND – Continued.

• The Sappi South African Region is 45 to 50% self sufficient for our total electrical

requirements.

• Sappi is focussed on efficient, renewable and sustainable energy utilisation.

• There are opportunities in our SA operations that can generate up to 120MWe of

additional (new) own or cogenerated power from renewable and non renewable

fuels.

• There are further opportunities from our Forestry operations that can also be pursued but

have been excluded in the current REFIT and COFIT qualifying rules – The economics

must also be right.


SAPPI REGIONAL PERCENT FOSSIL

ENERGY

COFIT Presentation to Nersa 3 May 20119

SAPPI REGIONAL PERCENT FOSSIL ENERGY

Figure 2.10 Regional Percent Fossil Energy

0

10

20

30

40

50

60

70

80

90

Southern Africa Europe North America Global

Perc

en

t

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Sappi SA can

move from a

65% fossil fuel

usage to

levels

comparable to

North America

if the correct

REFIT or

COFIT rates

are provided


SAPPI REGIONAL POWER SELF SUFFICIENCY

Fig 2.11 Regional Power self Sufficiency

0

10

20

30

40

50

60

70

80

90

100

Southern Africa Europe North America Global

Pe

rce

nt

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Note – Little

Pulping

Operations in

Europe which

produces a

large amount of

energy

Gap

Sappi SA can assist

the National Power

Shortage in the short

to medium term with

another 120MWe of

Co-generated and

Renewable Power.

This is

dependant on fair

COFIT rates and

qualifying rules


FEASIBILE COFIT PROJECTS IN

SAPPI SA


FEASIBILE COFIT PROJECTS IN SAPPI SAFig 2.11 Power Self Sufficiency

0

10

20

30

40

50

60

70

80

90

100

AD

AM

AS

CA

PE

KR

AF

T

BIB

ER

IST

MA

AS

TR

ICH

T

NIJ

ME

GE

N

WE

ST

BR

OO

K

EN

ST

RA

ST

AN

GE

R

AL

FE

LD

EH

ING

EN

GR

AT

KO

RN

KIR

KN

IEM

I

LA

NA

KE

N

ST

OC

KS

TA

DT

NG

OD

WA

NA

TU

GE

LA

CL

OQ

UE

T

SO

ME

RS

ET

SA

ICC

OR

Perc

en

t

2000-5

2006

2007

2008

2009

2010

Sappi SA Operations

Feasibility

studies have

identified power

generation

projects in SA

that could

produce up to

120 MWe of

Cogeneration

and Renewable

Power

30MWe

45MWe

45MWe


SAPPI VIEW ON COFIT AND COGENERATION


SAPPI VIEW ON COFIT AND COGENERATION

• Power generation is not Sappi’s core business.

• Co-generation in Sappi has a load factor of at least 80% as a result of Sappi’s business being 24hours/day x 365days/year. (It is a function of our core business)

• As a result - Time of Use is not a significant deciding tariff factor but what is more important is the average energy rate for the feed in tariff.

• Distributed generation will reduce the national Tx and Dx infrastructure costs including roads. (KZN and Mpumulanga)

• Forest residue is at least 2 to 3 times the current cost of D grade coal delivered ($1.67/GJ) – dependant on region and logistics – However it is renewable and is competitive to the other renewable technologies.

• Co-generation (CHP) has an efficiency of 60 to 80% efficiency – this needs to be promoted – smaller carbon foot print than Eskom.


POWER GENERATION EXPERIENCE

IN SAPPI


SAPPI MILLS CONNECTED DIRECTLY TO ESKOM

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

01/04/2011 01:00 AM

02/04/2011 01:00 AM

03/04/2011 01:00 AM

04/04/2011 01:00 AM

05/04/2011 01:00 AM

06/04/2011 01:00 AM

07/04/2011 01:00 AM

08/04/2011 01:00 AM

09/04/2011 01:00 AM

10/04/2011 01:00 AM

11/04/2011 01:00 AM

12/04/2011 01:00 AM

13/04/2011 01:00 AM

14/04/2011 01:00 AM

15/04/2011 01:00 AM

16/04/2011 01:00 AM

17/04/2011 01:00 AM

18/04/2011 01:00 AM

19/04/2011 01:00 AM

20/04/2011 01:00 AM

21/04/2011 01:00 AM

22/04/2011 01:00 AM

23/04/2011 01:00 AM

24/04/2011 01:00 AM

25/04/2011 01:00 AM

26/04/2011 01:00 AM

27/04/2011 01:00 AM

28/04/2011 01:00 AM

29/04/2011 01:00 AM

DATE AND TIME

kW

Total Gen kW Total Imports kW Total Exports kW Total Load kW

POWER GENERATION EXPERIENCE IN SAPPI

• Cogenerated and Own generated Power is not new to the Pulp and Paper Industry and in

particular to Sappi – Sappi SA has an installed capacity of 230.5MWe and Sappi Limited

has an installed capacity of 850MWe.

Total (MWh)

Max (MW)

Min (MW)

Avg (MW)

There is currently

33MW of our installed

Capacity Contracted to

Eskom under the

MTPPP PPAGeneration Eskom Imports / Exports Total (Eskom

Imports + Generation -

Eskom Exports)

91,978.94 94,495.02 977.38 185,496.58

156.59 186.55 32.78 306.05

80.71 93.30 0.00 203.79

135.46 139.17 1.44 273.19



Sappi’s Turbines

5 Hydro

2 Gas

31 Steam

14 sites

7 Countries

850 MW Installed



Sappi Saiccor, KZN

T/G No. 5

July, 2008

85 b, 490 0C

back-pressure

46 MW @ 3000rpm

SAPPI’S NEWEST INVESTMENT

SAICCOR SOUTH AFRICA


QUALIFYING PRINCIPLES



QUALIFYING PRINCIPLES

The qualifying principles eliminates a number of opportunities that exist in our industry.

Upgrades to existing assets – e.g. boilers and turbines.

The collection of biomass from our forest operations.

The mixing of high pressure steam from renewable and non renewable primary fuels.

Co firing of different primary fuels in a multi-fuel boiler.

The Fuel cost and Heat Rate for Type III renewable cogeneration “Wood Chips” cannot

cover the different LCOE for all cogenerations opportunities in the Paper and Pulp

Industry and Forest Products.



QUALIFYING PRINCIPLES - Continued

• The Natural gas/LNG under type 2 should include incremental MRG supply if it can be

demonstrated that there is no capacity expansion of the synthetic gas plant to supply the

incremental gas. (Ref. Methodology AM0049 of UNFCCC principals)

8 Methane Rich Gas


CHP, RENEWABLE AND OWN GENERATION – MIXING OF

FUELS AND STEAM


TYPICAL STEAM & ENERGY BALANCE

56.1 0.5 4.1 0.0

470.8

672.6

2.0

0.0 62.7

201.9 172.2 468.7

6.8

98.1 vent

43.1 MW 58.5 MW 98.1 7t

0.0

Vent

Feed Water Heating 3.838441 heater 2 heater 1 296.8 3.7

to PF DA 16.3 20.9 vent

37.1

172.2 296.8

293.1 98.2 55.8

293t 69 t 56 t

157

253 Eskom Imports

-5.1 MW

Condensate Ret from 52

#1 Fibreline & Evaps #1

Own Use/ - BFP - S/B

8965 Header 1520 Header

1100 Header

415 Header

PF

Boiler

CRF #2

1100 Users 1520 Users

CRF 1

415 Users

JTA’sIcal Yarrow

HP Condensate Ret

8965 / 1520

PRV’s

8965 / 1100

PRV’s

1520 / 1100

PRV’s

Demin

1100 Extract

415 Exhaust

TG 1TG 2

Own Use - IDF - S/B

Elect-Elect-

Demin Plant

Demin Regens

Gland steam

RCR

LP Boilers

Hotwell

Coal and Bark

Black LiquorCo-generation

Renewable

Mixing of Renewable and

fossil generated steamMixing of

renewable and

fossil primary

fuels

Black Liquor

Own Generation


COFIT RATES


COFIT COMMENTS TO NERSA - RATES

COFIT RATES

The COFIT Tariffs must provide Sappi with a reasonable

return.

Power generation projects compete against all projects in

our business and thus the returns must be competitive.


COFIT COMMENTS TO NERSA – LCOE INPUTS

• HEAT RATES AND FUEL COSTS

• The Heat Rate used in the LCOE computation is low.

• Sappi calculates the following Heat rates:

Heat Rate of 19,477 kJ/kWh for black liquor (Recovery boiler efficiency of 75%)

Heat Rate of 17,486 kJ/kWh for bio-fuels (PF boiler efficiency of 80%).

• From a number of feasibility studies that Sappi has recently concluded at our Saiccor,

Ngodwana and Tugela Mills, establishes that the true cost of fuel Type III renewable

cogeneration fuels are:

preparing liquid based fuels “black liquor” (the proposed new category including

methanol and soap) for combustion is $1.98 per GJ, and

for “Wood Biomass” (the renamed category) is $4.80 per GJ


AREAS OF COLLECTIONS OF FOREST RESIDUE



As a result forest residue is at

least 2 to 3 times the current cost

of D grade coal delivered

($1.67/GJ) – dependant on

region and logistics – However it

is renewable and is competitive

to the other renewable

technologies.

Large collection areas

(required for viable

volumes), moisture content,

labour and low bulk density

of forest residue are the

main inputs required to

determine the cost of this

renewable fuel.


FIBRE BEFORE ENERGY


COFIT COMMENTS TO NERSA - THREATS

FIBRE BEFORE ENERGY

It is Sappi’s concern that South Africa’s renewable energy policies, as they

presently exist, have the potential to divert wood and bagasse, which would

otherwise have been used to make pulp and paper products, to energy generation.

This would have the impact of increasing the fibre raw material cost, which would in

turn place severe pressure on the viability of the pulp and papermaking industry.


SUMMARY AND RECOMENDATIONS


COFIT COMMENTS TO NERSA - SUMMARY

• RECOMMENDATIONS AND SUMMARY

• An additional category for “Black Liquor” is added and the name of the existing “Wood

Chips” under Type III renewable cogeneration is changed to “Wood Biomass”.

• The Fuel Cost for the new category “Black Liquor” is adjusted to $1.98 per GJ.

• The Heat Rate for the new category “Black Liquor” is adjusted to 19,477 kJ/kWh.

• The Fuel costs for the renamed category “Wood Biomass” is adjusted to $4.80 per GJ.

• The Heat Rate for the renamed category “Wood Biomass” is adjusted to 17,486 kJ/kWh.

• A fair PPA (Risk allocation in particular) is concluded for the Co generator and the Buyer.

• Fibre should not be used primarily for generation of electricity, as it adds more

value and creates more jobs in the pulp and paper value chain.

| [Presentation title] | [Client Name] | 10 May 201133 COFIT Presentation to Nersa 3 May 2011

QUESTIONS


THANK YOU

cofit comments to · pdf filefeasibility studies have identified power ... methanol and soap)...

Documents