It is crazy how many time I have seen biomass plant operators burning out of spec fuel, thus destroying the warranty conditions and exposing plant owners to having insurance claims turned down. I am not talking simply about the main plant but also the auxiliary plant which includes conveyors etc.
So why does this happen?
Well at day one to get a biomass plant funded a developers has to have fuel contracts in place (simple – without these the plant can run and so cannot make money). So the way many developers do this is that they run around the local biomass suppliers in a specific area and try to get suppliers sign-up to a standard biomass supply contract with a standard fuel spec attached. Then what the developer then does is they go out to tender for a biomass plant that can burn the type of fuel that has been contracted ie. it could be virgin wood, it could be waste wood, it could be straw.
Tenders come in and invariably the cheapest supplier wins the job. What the equipment supplier will do is within their submission state the fuel spec for their plant, which may or may not match that which the developer has proposed. As price is a key driver, more often than not the developer will opt for the cheapest turnkey price for the plant offered (especially if the developer is going to flip the project ie. sell it to a third party as soon as they have consent – developer wants the economics to look as good as possible on paper), and in many occasion negate to ensure that the plant selected is designed to burn the fuel that has been contracted.
Now this is a day one issue that could be easily remedied simply by insuring that the plant selected and fuel going to be supplied match (should be an easy thing to do but many get this wrong). If the plant and fuel contract do match then the next area where a mismatch can happen is when the plant is actually in full operation.
Key to any biomass plant is the availability of fuel. If there is no fuel there is no output and so no money coming in (not a good situation). So the big temptation for any biomass plant operators is to diversify their fuel options, or in other words to take fuel as and when it is available even if it is slightly out of spec (bun waste wood instead of virgin wood or burn other biomass due to availability).
Now taking fuel slightly out of spec may not appear to be a big issue BUT by doing this the operator could be nullifying any warrant that is provided by the equipment supplier and perhaps even their insurance cover. i.e. it could be argued that by taking out of spec fuel the operator has not operated as a “prudent operator” and so caused damaged that could have been avoided.
Many plant operator run their plants on fuel that is not within the equipment specification due to them having to maintain plant availability. By doing this (which is commercially sensible) they my unknowingly breach their insurance cover, which if there is an event where the plant then fails (flue gas ash contamination – for example) then if investigated properly by the insurer they could refuse to pay for any repairs or even business interruptions (if such an insurance cover has been purchased).
To avoid warranty issues or insurance breaches, the plant developer and operate should ensure that the fuel purchased and delivered to the plant is indeed within the fuel specification stated by the equipment manufacturer. If at some point in the future operation of the plant the operator wishes to introduce another fuel into the plant they should seek confirmation from the equipment manufacture that their systems are designed to handle that fuel (this included any auxiliary plant manufacturer). If this cannot be obtained then the operator should talk with their insurer to explain that they intend to burn out of specification fuel and aim to receive confirmation that the insurance cover will not be breached as a result of this action.
Today many biomass plant operators are burning fuels that are not within spec simply because they need to maintain the plant economics. What they are not considering is the fact that by doing this they may be unknowingly breaching warranty conditions and nullifying their insurance cover which is akin to driving a car without insurance.
If insurance companies start to understand the biomass business better (by employing people who have biomass knowledge and experience rather than generic loss adjusters) then the entire industry will face a big challenge.
Food for thought!