OLONETS PEAT POWER PLANT

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Name of Project	Construction of a peat-fired heat and power plant in Olonets
Location	Olonets, Republic of Karelia
Project Type	Energy / construction.
Project Status	Russian feasibility study and Finnish appraisal of this study have been carried out. Awaiting financing decisions.
Project Owners	IVO Power Engineering (Finland), AO Karelenergo (Russia)
Project Partners	Committee of Fuel and Energy Supply of the Republic of Karelia and Municipal Administration of Olonets
Scope of Work	The aim of the project is to construct a combined heat and power plant (CHP) with a fluidized bed boiler including a reheater and a back-pressure turbine. Fluidized bed combustion technology for peat-fired plants enables these plants to meet emission requirements. The plant will be fuelled mainly with milled peat. The peat handling system will store peat sufficient for 24 hours operation at the site. Heavy fuel oil will be used as auxiliary fuel during start-ups and periods of low load. The most viable concept is a centralised 10.2 MW/29 MWth thermal peat-fired base load back-pressure power plant. Currently, the Republic of Karelia is dependent on imports of electricity (43% of demand was covered by imports in 1996) and fuels (heavy fuel oil, diesel, coal, gas). As a result of changes in the Russian economy and its energy system, the future availability of electricity, coal, and oil at affordable prices for the Republic of Karelia is expected to diminish. This kind of development would cause a major shift towards the utilisation of natural gas and, in deficit regions such as the Republic of Karelia, local energy resources such as peat, both in power generation and as substitutes for other forms of energy. The construction of the Olonets power plant would make use of local fuel resources and improve the level of self-sufficiency in energy production. The Finnish appraisal of the Russian feasibility study showed the viability of base load peat-fired CHP plants of selected sizes. In selecting the plant concept, attention was paid to efficiency, availability, requirements for proven technology, easy maintenance, positive environmental impacts, and operational flexibility. The site selected by the municipal authorities for the plant is about 2 km south of the town of Olonets. The site is considered acceptable. It is close to peatland areas, which guarantees unproblematic peat transport, but it is far from the town border. District heat transmission investment costs would be lower for a site closer to town.
Implementation Time / Schedule	3,5 years estimated delivery time for power plant.
Project Cost and Financing	The financial and economic analysis compared two different future district heat production alternatives, and determined their financial and economic feasibility. The base concept is a centralised 10.2 MW/29 MWth thermal peat-fired base load back- pressure power plant, and the other concept a centralised option, local heat-only boilers using light fuel oil as fuel. The financial analysis showed that the financial internal rate of return (FIRR) of the CHP plant alternative on total capital (equity and debt) is approximately 13%, at an 8% discount rate. The FIRR for heat only boiler plants was negative. A vital issue for the profitability of this project is formed by the possible changes in sales prices of electricity and district heat in relation to fuel prices and changes in the sales volumes of electricity and district heat. The total cost of the project is 36 million USD. The Finnish-made appraisal study proposes that 30% of the Olonets peat power plant should be financed with equity and 70% with credit. The debt would be serviced, and the operation of the plant would be paid by income from heat and electricity sales.