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close this bookLow Cost Charcoal Gasifiers for Rural Energy Supply (GTZ, 1994, 49 p.)
close this folder9. Economics of gasifier operation
View the document9.1 How to compare gasifier costs
View the document9.2 Case study: Comparative costs of gasifier installations in Argentina and Malaysia

9.1 How to compare gasifier costs

It was previously said that the construction of gasifiers from ferrocement was promoted in order to enable a significant cost reduction. It is, however, not so easy to decide what "low cost" really means.

The common method to compare the investment costs of different gasifier systems is to divide the turn key equipment costs by the nominal power output in kW, resulting in "specific installation costs" (DM/kW, US $/ kW etc.). If, however, these specific installation costs are taken for comparison on an international scale, the result is often misleading. The conversion of national currencies by the conversion factors of the international financial market does not reflect the different level of production costs in different countries. If a 10 kW gasifier can be manufactured for 6000 US $ in a German workshop, an identical equipment can probably be offered by a workshop in India at a price of 1500 $, due to lower salaries of the workers as well as to lower prices for materials. The information "this gasifier costs 600 $ per installed kW" is therefore more or less meaningless: It is only valid under a given economic situation and is not compatible on an international scale.

Therefore, informations concerning the costs of gasifiers have to be used with great caution. Whereas low-cost conventional gasifiers (metal construction) are in the range of 200-600 US $/kW, R.Reines [9] gives a figure of 46 US $/kW for a ferrocement gasifier (without engine), and the World Bank monitoring report of the AIT gasifier [l0] estimates the costs for production in Indonesia even lower (28 US$/kW). It must be seen, however, that statements concerning costs of materials and labour are very site-specific.

The costs of the ferrocement gasifier, built in Bremen, may illustrate this: The expenses for construction materials, including metal parts, were US $ 1165. The man-power involved for ferrocement work was 420 hours. With an average salary of a construction worker of $ 10 per hour, this corresponds to labour costs $ 4200. The total costs for the ferrocement gasifier in Germany are thus $ 5365 or 563 $/kW-this is 12 times the costs in Thailand!

It is exactly the same system design, which results in totally different costs per kW. In Germany a ferrocement gasifier is not much cheaper than a conventional metal gasifier.

In India, a conventional metal gasifier of 5- 10 kW shaft power costs approximately between $ 1000 and 1500.

A metal gasifier in Thailand costs about 40 % of a correspondent German plant. Referred to the standard salary, however, this plant is much more expensive than the German plant.

Table 2 shows a comparison of system costs for ferrocement gasifiers as well as for compatible metal gasifiers in three countries (Thailand, Argentina, Germany).

Table 2: Comparative costs of gasifiers Ferrocement gasifier vs. metal gasifier I US $ = 2s Baht = 1.70 DM


Thailand

Argentina

Germany

1) Materials for ferrocement vessels ($)

120

250

400

2) External work (bunker, grate, filter bags) including labour ($)

100

150

765

(1 + 2) Total material and external labour ($)

220

400

1165

(3) Labour for ferrocement work ($)

245

900

4200

Total material and labour($)

465

1300

5365

Costs per kW, ferrocement

46

130

536

metal gasifier 10 kW ($)

2200

2200

6000

Costs per kW, metal

220

220

600

The conclusions, drawn from table 2, are:

In countries with cheap labour the ferrocement construction allows to lower gasifier costs considerably. The investment costs finally approach the range which will become attractive to the potential user, even without external subsidies. Assuming that biomass fuel for gasifiers is far cheaper than the traditional liquid fuels, an economical application of gasifiers will then become realistic.

Thus a necessary prerequisite for the further dissemination of gasifiers is met.

9.2 Case study: Comparative costs of gasifier installations in Argentina and Malaysia

The data, used for the cost comparison below, were collected recently ( 1991- 1992) in projects of the Deutsche Gesellschaft far Technische Zusammenarbeit (GTZ). All costs are subject to changes according to the actual economic situation of the countries (this is, for example, very pronounced in Argentina). The main objective of the case studies is it to demonstrate how the final economic viability of a gasifier installation depends on varying local cost parameters. Only the most important cost parameters are taken for comparison.

To make the calculation as simple as possible, capital loans for investments are neglected. This is justified by the rather low part, represented by investment costs within the total costs of operation. Investment costs are annualized by dividing them by the system lifetime (in years). 10 years of operation are taken as reference.

The energy plant is assumed to operate 5 hours daily on 250 days per year. This gives an annual operation time of 1250 hours.

The charcoal consumption of the gasifier system, running on 10 kW shaft power, is 10 kg per hour. This means a consumption of 12.5 tons of charcoal per year (12 500 kWh per year). Charcoal prices are 50 $/ton in Argentina and 114 $/ton in Malaysia.

The 10 kW shaft power ferrocement gasifier is manufactured locally by a team of craftsmen. After 10 years, the residual value is taken as zero.

Table 3: Annual costs of gasifier-engine systems and resulting energy costs
C = Investment costs
ACC = annualized investment costs (respectively annual costs)
(All costs in us Dollar)


Argentina

Malaysia


C

ACC

C

ACC

gasifier

1300

130

1152

115

engine

2000


400


overhaul after 5 years

1000


200


total

3000

300

600

60

electric generator

3000

300

3000

300

charcoal


625


1425

salary operator


1800


960

total costs per year


2855


2560

total costs per year, including generator


3155


2860

Energy costs, $/kWh





energy costs, mechanical energy


0.23


0.20

energy costs, electric energy


0.25


0.23

energy costs, grid electricity


0.50


0.08

energy costs, electric energy, gasoline operation


0.68


0.45

A second hand car engine is overhauled before installation (new pistons, bearings, some assessories). After 5 years of operation, another overhaul is necessary. After 10 years, the residual value is assumed to be zero.

Assumptions with respect to staff costs are difficult. In Argentina, the involved group was convinced that a part time job (150 $/ month) is adequate to run the gasifier, including fuel preparation (sieving of small size charcoal from nearby kilns). In Malaysia, this is considered as a full time job (80 $/month). In the case of liquid fuel operation, the assumptions are:

The same engine is used on gasoline, consuming 8 liters per hour. The gasoline price is 0.70 $/1 in Argentina and 0.48 $/1 in Malasia. Only half of the personnel costs are necessary.

The gasifier-engine-system is supposed to render mechanical energy, for example for direct propulsion of saw mill equipment (this is realized in the project in Argentina). For electricity production, approximately 300 $/ year have to be added as annual costs for the electric generator.

Discussion:

It is interesting to note that the installation costs for the gasifier are not the major part in the calculation of annual costs-this is definitely a success of the low costs of the ferrocement construction. Even the other hardware components (engine, eventually generator) are not too critical, even when considering the rather high engine costs in Argentina, compared to Malaysia. Important for the economic viability of gasifier systems are the operating costs, i.e. the costs for fuel and the operator salary. Both items are very different in both countries. An increase in the salaries for operators will have a pronounced impact on the rentability.

The difference in the resulting energy costs ($/kWh) in both countries is not too high. But, the energy costs of the gasifier system have to be compared with the energy costs of competing energy supply systems, that is grid electricity and liquid fuel operation. Rates for grid electricity in Argentina are 6 times higher than in Malaysia, and that makes a gasifier competitive in Argentina, but not viable in Malaysia, if it has to compete with grid electricity. Compared to gasoline operation, the gasifier has an economic advantage in both countries.