Business Case
Replacement of Boilers at Woodend Hospital
Introduction
Woodend Hospital located on Eday Road Aberdeen AB15 6XS is presently heated by 2 oil fired steam boilers which have been in place since 1994 and fuelled with heavy fuel oil (HFO) as the only means to operate the boilers.
Present Situation
Woodend Hospital is presently heated using 2 HFO steam boilers which provide steam for the hospital and laundry.
HFO is not available locally and suppliers are aiming to phase it out over the next few years. A large amount of HFO has to be kept in reserve for emergencies especially during winter months. HFO has to be kept warm and circulated at all times. Woodend presently has storage capacity of 86,000ltrs for HFO.
The laundry is to be relocated and uses approx 20% of the energy produced.
The present system is capable of producing 12.2mw of energy from 2 x 6.12mw HFO boilers. A third boiler is in place but has been decommissioned. Our peak usage including a 25% safety net is 4.04mw (this includes the laundry) if we were to relocate the laundry our expected consumption would be 3.23mw which also includes a 25% safety net.
The current boilers are 20 years old and coming towards the end of their economical life. Expenditure on HFO is circa £900k per annum and maintenance costs are £2k per annum.
Use of natural gas is significantly cheaper than HFO per kWh and the supply is reliable within the UK. The use of gas oil as a back-up fuel is more expensive that both HFO and natural gas but is readily available from local suppliers so the need to keep large amount of reserves on-site is not required which improves safety within the site. An in-house risk assessment will identify the reserves needed to be held on site. Gas oil has a shelf life of approx 5 years before it needs to be replaced therefore by keeping smaller quantities waste is reduced.
Recommendations
It is recommended that the existing boilers are replaced with new smaller boilers installed in a modular configuration. 2 of the boilers to be gas only and the third boiler duel fuel. The overall cost of the boilers and associated enabling works is estimated at £1.52 million. The consequential saving on fuel costs is estimated at £454k per annum with only a small increase in servicing costs from £2k to £3k per annum. This action will also deliver a reduction in carbon emissions of 4% on the current total for NHS Grampian’s estate. Depreciation is estimated at £34k per annum.
Project Drivers
High cost of HFO and the support required to make it a viable energy solution along with supply issues
Reduce overall costs
Reduce our CO2 emissions
Look at alternative heat sources
Consumption
For ease of reference we have used the figures quoted in a report prepared by Mabbett’s, a firm of energy consultants employed by resource efficient Scotland to review the facilities on the Woodend Hospital Site. Note the figures quoted below are exclusive of VAT at 20%.
In the calendar year of 2013 the following fuels were consumed:
Electricity 3,671,709kWh at a cost of £321,275
Natural Gas 3,682,493kWh at a cost of £98,200
HFO 16,951,702kWh at a cost of £731,189
Totalling 24,305,904kWh at a cost of £1,150,664
Utility costs are:
Electricity 8.75p per kWh
HFO 4.13p per kWh
Natural Gas 2.67p per kWh
Gas Oil 6.13p per kWh
Energy CO2 emissions provided by DEFRA Carbon Factors
Electricity 0.48357kgco2e per kWh
Natural Gas 0.01404kgco2e per kWh
Heavy Fuel Oil 0.26876kgco2e per kWh
Gas Oil 0.27176kgco2e per kWh
Carbon emission charges are £16 per tonne of CO2e
Over the last five years the average heat requirement for the hospital has been an average of 1.98mw of energy peaking at 4.04mw, daily records are not available we have therefore added an additional 25%to our peak requirements to ensure that we cover any unforeseen anomalies. On site is a laundry which is a high user of energy.
The existing system that is already in place is 2 x 6.16mw boilers fired using HFO there is also a decommissioned boiler of a similar size, these are supplied by 3 oil tanks 1 x 36,000ltrs which is not in use and 2 x 25,000ltr which presently supply HFO fuel to the boilers. This fuel type needs to be continuously heated and circulated to ensure an efficient burn.
Option 1
Convert the present boilers from HFO to Natural gas
Option 2
Convert the present boilers from HFO to Gas Oil
Option 3
Convert the present boilers from HFO to dual fuel (natural gas and gas oil)
All 3 options are possible but due to the age of the boilers it would be seen as a stop gap solution and could cost in region of £200k to carry out any of the above. This does not include supply of gas and replacement chimney
The boilers that are presently in place would produce 12.2mw of energy if running at 100% where the highest demand in the last 5 years has been 4.04mw
Option 4
Install Bio-mass plant. This would cost in excess of £2m for a 4.5mw heat only Bio-mass and it does not seem to be a viable solution as we would need to install an alternative back-up system and would not give us any payback for 8-10 years.
Option 5
Install 2 natural gas boilers 1 @ 1.7mw and 1 @ 2.2mw (if the laundry is moved from Woodend the 2.2mw gas boiler could be replaced by a 1.7mw machine)and also install 1 x 2.2mw duel fuel gas oil boiler arranged in a modular system where each boiler supports the needs and demands of the hospital.
Preferred Option
Option 5 gives greater flexibility on the heating needs of an old style building, the present heating system contributes significant levels of co2 emissions due to the heavy fuel oil uses where gas fired boilers produce lower emissions therefore being a greener alternative. Running costs will be reduced and the availability of the fuel is guaranteed long term where the availability of HFO is becoming more limited and will be phased out over the next few years. It is therefore recommended that Option 5 be the way forward.
Project Costs assumptions
Costs have been added for the removal of the oil tanks but due to the high metal content of these items it is possible to get them removed at no cost and allowing the removal contractors to make their money by selling on the metals.
Costs have been added for the removal of the old boilers but there may be an interest by a third party to buy them and refurbish them a sell to the overseas market. This needs further investigation. If that option is not possible the same could be done with the boilers as with the oil tanks.
The floors within the oil tank building will need to be sealed to contain the oil contamination that is in the floor. If the floor has to be removed this could be of significant cost as all soil and concrete will need removing to a depth of 1m beyond the last traces of the oil contamination. Further discussions with Remedious has revealed that there should not be an issues in relation to ground contamination as HFO does not leach into the ground in a similar way to light oils due to viscosity. A cost has been added to the project to carry out ground surveys.
The roof is of asbestos sheet and should be replaced as part of the works. See additional benefits below to follow our reason for removing the roof. Quotes from OCS show the removal of the roof over the Oil Store would cost £21362.40 which includes the scaffolding, the cost to put on a new roof would be £24,000 giving a total cost of £45,362.40.
An asbestos survey of the building is required before works commence this should cost between £1000 and £1500 any removal works would be additional.
Further Works to Enhance the Project
The roof to the oil store has a ridge line which runs east to west which is ideally suited to solar panel. A quote from Forster Energy Solutions is circa £53,809.14 to install and will give a payback in approx 5 years. It will also give a carbon reduction which would be beneficial to our HEAT targets.
Installing solar panels as part of the project will also save money on setup costs i.e. scaffolding, project management etc.
The usable roof area of the oil store is approx 145.59sq m giving us 35220kwh of energy per annum which costs 11p per kWh if we were to buy the electricity from the grid giving a total cost of £4353.26 we could also receive a Renewable Heat Incentive (RHI/FIT) which is worth 12.13 p per kWh for a project up to 50kWh for a 20 year period which has an annual Retail Price Index (RPI) uplift at the beginning of April each year, so that the amount we would receive year on year is inflation proof giving an annual income of £4272.25 In addition we would reduce our carbon emissions by 15.69 tonnes per annum giving a further saving of £251.04 at today’s prices. Carbon tax is subject to annual reviews also if we exceed our annual output in relation to carbon an additional £6.70 per tonne is added. This will give a payback on the initial investment of 5.52years. Benefit over a 20 year lifespan circa £141k based on 2013 figures.
Anticipated Project Costs
Item / Cost / CommentCCDP See quote below / £772,500 / Quote from Cameron Chisholm and Dawson
Roof Works / £125,000 / Roof trusses need replacing
Chimney Demolition / £120,000
Ground test / £5,000
Fees / £90,000
Asbestos Removal / £30,000 / Awaiting asbestos report
Solar Panels / £50,000
Removal of underground tank / £15,000
Sub-Total / £1,207,500.00
Contingency @5% / £60,375
Total less VAT / £1,267,875
VAT @ 20% / £253,575
Total / £1,521,450
These figures are provisional figures from the project team covering all aspects of work The asbestos report for the boilers is not yet available but there is a quote from OCS to remove the asbestos roof. In relation to the chimney we have a provisional sum from the project team of £150k.
Quote from CCDP
Element / Description / Budget1.0 / Conversion of existing 2No boilers from HFO to 35 sec oil (separate visits) / £15,000
2.0 / Supply and install 2 x 10,000 litre temporary bunded oil tanks inc of pipework / £30,000
3.0 / Re-commission existing boilers following conversion and completion of 35 sec oil installation / £2,500
4.0 / Degas and remove existing HFO tanks / £10,000
5.0 / M&E downtakings and removals / £17,500
6.0 / Supply and commission 3 x 1.6MW dual fuel boilers inclusive of economisers and boiler on-board control package / £225,000
7.0 / Supply and install boiler maintenance gantries / £10,000
8.0 / Supply and install 3 x boiler flues (assume fixed to structural support mast - cost of which is excluded here) / £25,000
9.0 / Install boilers, supply and install steam/condensate pipework, valves, metering etc (assumes retention of existing hotwell) / £200,000
10.0 / New blowdown provision / £50,000
11.0 / Supply and install make-up water pipework (via economisers) / £17,500
12.0 / Automatic controls including interfacing with new plant and providing remote status monitoring/alarm facilities / £40,000
13.0 / Relocation of temporary oil tanks to permanent location following completion of builderswork inclusive of new oil pipework to new dual fuel boilers (one at a time) / £15,000
14.0 / Off-site SGN gas works inclusive of new meter / £35,000
15.0 / On-site gas pressure boosting installation and gas service / £30,000
16.0 / Electrical works (power, lighting, fire alarms etc) / £50,000
M&E Section Total / £772,500
Anticipated savings
(a) / HFO Cost Inc VAT per annum (Information from Energy Manager) / £901667.14
(b)* / Natural Gas inc VAT per annum @ 85% boiler efficiency / £485853.68
(c)* / Cost avoidance based on 85% efficiency / £415813.46
(d) / HFO CO2 Cost per annum / £69237.73
(e) / Natural Gas CO2 cost per annum / £40340.40
(f) / Cost avoidance / £28937.33
(g) / Total cost avoidance = (c)+(f) / £444750.80
(h) / Solar RHI per annum / £4272.25
(i) / Cost avoidance CO2 from solar / £251.04
(j) / Annual electricity saving for not buying in power inc VAT / £5223.91
(k) / Total benefit annual from solar / £9747.20
(l) / Total cost avoidance and saving (g)+(k) / £454498.00
(m) / Cost of project / £1,521,450.00
(n) / Payback period / 3.34years (1219 days)
*Energy production is based on 85% efficiency.
Keith Williams
November 2014