Content Page

Content Page.............................................................................................................................1 List of tables and figures..........................................................................................................4 Figures..................................................................................................................................4 Tables...................................................................................................................................5 Energy consumption of Singapore...........................................................................................6 National................................................................................................................................6 Regional................................................................................................................................7 International..........................................................................................................................7 Analysis of Singapores energy consumption trend............................................................8 Threat to natural gas source security.................................................................................11 Significance of Kina Biopowers EFB-fueled plant..............................................................13 Utilisation of disposed agricultural waste..........................................................................13 Meeting the electricity demands of the Sabah Electricity Sdn Bhd (SESB) System ......14 The logistics of EFB sourcing................................................................................................16 Study of EFB as a resource................................................................................................16 Transportation of EFB for Kina Biopower........................................................................17 Technical discussion on the difficulties faced by the plant owners..................................22 Extraction of residual oil from empty fruit bunches..........................................................22 Inefficient transportation of EFB in terms of energy density............................................25 Takeaway lessons...............................................................................................................27 Plant technology.....................................................................................................................28 Thermal Power Plant Cycle...............................................................................................28 Boiler Technology..............................................................................................................30 A brief introduction to the Clean Development Mechanism.................................................32 Recent changes to CDM at Durban Summit......................................................................33 Demonstration of additionality in the Kina Biopower biomass power plant project.......35 Establishing environmental additionality..........................................................................35 Establishing financial additionality....................................................................................38 Difficulties while achieving CDM qualification for the proposed biomass plant in Singapore............................................................................................................................39 The pitfalls of demonstrating additionalities.................................................................40 Market value of CERs....................................................................................................41 Analysis of Kina Biopower EFB Plant Project Finance Model............................................44 Difficulties in establishing the model................................................................................44 Assumptions ......................................................................................................................44 Discussion on the results....................................................................................................46 Sensitivity analysis.............................................................................................................47 Hypothetical plant in Singapore.............................................................................................49 Determination of biomass fuel quantity needed................................................................49 Plant equipment cost..........................................................................................................51 Labour cost.........................................................................................................................53 Cost of biomass..................................................................................................................53 Biomass transportation cost...............................................................................................54

Biomass resource origination.............................................................................................55 Looking for biomass overseas............................................................................................56 Establishment of an EFB treatment plant in Malaysia......................................................57 Conclusion..............................................................................................................................59 Bibliography...........................................................................................................................60

List of tables and figures

Figures
Figure 1. Oil usage for Singapore (adapted from Nation Master) Figure 2. Natural gas usage for Singapore (adapted from Nation Master) Figure 3. Energy fuel mix for Singapore (adapted from Energy Market Authority) Figure 4. Cost of Process EFB Fuel depending on transport distance in RM/GJ and RM/ton (adapted from Enclosure 5) Figure 5. Biomass power plant cycle and corresponding Temperature Vs. Entropy diagram (adapted from Wikimedia Commons) Figure 6. Cross-sectional view of a water cooled step grate tail end type boiler (adapted from FAO Corporate Document Repository) Figure 7. Process Flow for CDM qualification (Adapted from B. Metz et al) Figure 8. Historical price chart for iPath Global ETN (adapted from Yahoo Finance) Figure 9. Cost curves of various components of biomass plant cost (adapted from Biomass CHP Catalog, EPA, 2007) Figure 10. Possible sites for biomass origination within Malaysia (adapted from Malaysia Palm Oil Board, Economics and Industry Development Division) Figure 11. Possible site of EFB treatment plant within Malaysia (adapted from Malaysia Palm Oil Board, Economics and Industry Development Division)

Tables
Table 1. Emission reduction calculations (adapted from PDD) Table 2. Costing breakdown of EFB transportation (adapted from Enclosure 5) Table 3. Costing per unit of EFB, comparison between processed and unprocessed (adapted from Enclosure 5) Table 4. Weighted average of conventional electricity production means to calculate baseline scenario (adapted from SESB) Table 5. Emission calculations Table 6. Sensitivity Analysis for Kina Biopower EFB Plant Table 7. Procedure for calculating biomass consumption of biomass plant Table 8. Extrapolated values for equipment cost according to plant capacity (adapted from Biomass CHP Catalog, EPA, 2007) Table 9. Singapores Annual Waste Statistics (adapted from NEA, 2010)

Energy consumption of Singapore

Singapore is an island country with no natural resources and is a country that produces no energy. Although Singapore does have plants that convert fuel to electricity, fuel origination of Singapore is not localised. All of the fuel that Singapore uses to satisfy energy consumption is imported.

With Singapores complete reliance on imports for fuel sources, it is imperative that Singapores energy demands are satisfied in a strategic manner. This is to ensure that in the long run, Singapore does not form an over-reliance on a certain form of fuel that the country will be crippled in the event of a global crisis. Crises such as strong negative impact of rising oil prices whilst Singapore has a strong reliance on oil imports will only result in escalating electricity tariffs. As such, the Singapore government has cautiously diversified the reliance of Singapores energy needs over the last decade. The strategic outcome is achieved by the Singapore government by pursuing energy security, which is done at three separate levels.

National
At the national level of achieving energy security, the domestic energy consumption is satisfied by a diversified mix of fuels. State agencies and think tanks are also established to propel research regarding energy. Electricity is also traded in an open market to ensure price competitiveness and promote efficient methodologies of converting fuel to electricity. Additionally, viable alternative

forms of energy are researched upon to establish feasibility of applying them in Singapore.

Regional
Singapore actively engages in a policy of cooperation and integration with members of ASEAN. A manifestation of this cooperation is Singapores involvement in a Memorandum of Understanding to be part of the ASEAN Power Grid.

International
Singapore also acceded to the regulations of the Kyoto Protocol in 2006, solidifying its stance to shift its energy consumption to be based on more environmentally friendly sources. The benefit here is two fold; Singapore is able to diversify its energy sources and also give due attention to environmental conservancy.

The national and international angles of approach for Singapores aim for energy security can be complemented by a move towards establishing a stronger presence for CHP using biomass in Singapore.

Analysis of Singapores energy consumption trend

It is helpful to perform an analysis on the changing portfolio of Singapores energy mix. This will allow an extrapolation or prediction on the ease of increasing the presence of CHP using biomass in the energy mix of Singapore.

Figure 1. Oil usage for Singapore (adapted from Nation Master)

Evidently from the graph, it can be seen that some time before the turn of the 21st century, Singapore began a steep decrease of electricity production from oil sources. Electricity production from oil sources saw a decrease of around 62%.

Figure 2. Natural gas usage for Singapore (adapted from Nation Master)

Conversely, we can see that at about the same point in time where oil usage saw the beginning of a steep decline, electricity production from natural gas sources saw a sharp increase. An increase of around 440% was observed, meaning to saw the portfolio occupation of natural gas in the fuel mix increased by about 4.4 times.

Clearly, the government has made a strong move from around year 2000 to 2010 to replace most of its oil demand with natural gas. The resulting energy mix for the past few years can be observed below.

Figure 3. Energy fuel mix for Singapore (adapted from Energy Market Authority)

Again evidently, the Singapores government stance on energy diversification is observed. Oil has been reduced to a mere 17% on the portfolio, with a dominant portion going to natural gas and alternative energies occupying 6%.

However, there may be a greater need for diversification away from a natural gas dominated energy mix.

10

Threat to natural gas source security

Despite diversifying the energy portfolio with natural gas, energy security for Singapore may still not be achieved.

Indonesias top economic minister Hatta Rajasa yesterday urged the government to cut what he called excessive natural gas shipments to Singapore because they were hurting domestic industries, which do not have enough supplies to meet their growing needs.

Indonesia needs its own gas, he told a parliamentary commission that oversees the energy sector.

The gas supply to Singapore is too much ... Exports to Singapore should stop, he added. -

Excerpt from Straits Times

Indonesia, September 22, 2011

The regional Indonesian assembly of Batam threatens to block the gas flow pipes from ConocoPhilips via Batam to Singapore unless Perusahaan Gas Negara (PGN) normalizes gas supply to the industrial island.We and the people of Batam will block gas flow to Singapore," a regional assembly leader Batam Ruslan Kasbulatov said. Ruslan said the state-owned gas distributor has increased supply to Singapore at the expense of supply to Batam. "As an Indonesian state company PGN should give priority to Batam instead of Singapore," he said.

Excerpt from

TradingMarkets.com, May 23, 2008 11

Singapores supply of natural gas has time and again come under threat in the face of changing foreign interests. With natural gas forming 80% of Singapores energy mix, it is imperative that Singapore seeks additional diversification of fuel sources, on top of diversifying away from oil.

Consequently, this feasibility study will underscore the degree of applicability of establishing a strong biomass-driven power generation technology presence through taking into account the various aspects of the technology in terms of financial and technical factors.

12

Significance of Kina Biopowers EFB-fueled plant

Kina Biopowers plant serves a multitude of purposes. With the notoriously low efficiency of EFB-fueled plants, coupled with the high capital expenditure of the construction of such a biomass plant, it is imperative that other possibly intangible and tangible positive externalities are factored in to justify the existence of the plant. This section shall take a look at the benefits arising from the construction of the plant.

Utilisation of disposed agricultural waste

The region surrounding Sandakan is a region with strong palm oil production. As such, the associated agricultural waste is also voluminous. In the absence of a plant that uses EFB for fuel, plantation owners would have to find disposal methods for the waste generated after palm oil extraction. As stated in the project design documents (PDD,2008), by and large, EFB is left to decay in open air, possibly as a measure of cost reduction as this method of disposal incurs no cost for the plantation owners. However, what is not considered is the high environmental cost, which comes in the form of biogas emitted from the decomposition, which is high in methane. Methane that is not regulated in emission poses as a high risk due to its status as a greenhouse gas and flammability. The threat of flammability is not to be disregarded, given the regions high propensity for forest fires, which usually results in hazes that affect neighbouring countries.

13

Consequently, an EFB-fueled plant is very much welcomed as an alternative waste management system. Not only is the disposal of the waste managed, the residual energy that is trapped in the EFB is also extracted to produce useful work and electricity.

Meeting the electricity demands of the Sabah Electricity Sdn Bhd (SESB) System
The SESB grid has seen tremendous growth over the years. According to a brief by SESB (SESB, 2010), there has been a rapid strengthening of the grid in Sabah as a whole. From the weak grid present in 1984 powered by a few dieselfueled generators and a hydropower plant, the grid has increased its capacity to arrive at a portfolio of energy generation inclusive of diesel, gas and hydropower in 1998. While this is a commendable achievement from SESB, the energy network robustness is only restricted to the west coast of Sabah. There is still a gap in the supply of energy in the east coast of Sabah.

Consequently, to meet this gap of energy demand in the east coast, on top of further strengthening the grid, SESB also featured power transmission facilities to link up energy transmission from the east to the west coast, as observed in the SESB grid in 2010. While in the short term, this link-up does reallocate surplus electricity in the west coast to meet shortages in the east coast, it is not a feasible long term solution. The link-up is vulnerable to issues such as energy leakages and the occasional break down, leading to the east coast starved of electricity since 25 to 50% of the east coast demand is met through this linkage

14

(SESB, 2010). From a macroscopic perspective, the long term development of Sabah will also imply that as the west coast achieves more development, the ability of the west coast to supply this energy may not be guaranteed.

Consequently, it is imperative that there is an organic generation of energy on the east coast, as a dependence on the west coast for energy is not sustainable in the long term due to future developments and energy wastage in transmission. Kina Biopowers EFB-fuelled plant has been integral in the east coasts attempts to meet the regions energy demand. The plant is part of a cluster of plants located in Sandakan, inclusive of Seguntor Bioenergys EFB-fuelled plant, as well as plants from SPC, LBUK, BSPS, LBRN and GANT.

In conclusion, we can see the importance of Kina Biopowers plant as a waste disposal method and a measure to plug gaps in energy demands. These factors, on top of the CERS granted from the CDM qualification of the plant, are very strong push factors for the establishment of the plant.

15

The logistics of EFB sourcing

This section of the report seeks to clarify the factors regarding EFB sourcing that were taken into consideration in the locating of the biomass plant.

Study of EFB as a resource

In 2010, Malaysia produced close to 16.99 million tons of palm oil (FAOSTAT, 2010). Of this amount of palm oil, 5.8 million tons were produced from the island of Sabah (POIC, 2011). The production of 1 ton of palm oil yields 1.07 ton of EFB (Asia Biomass Office, 2010). Consequently, it can be seen that about 6.2 million tons of EFB are generated in the island of Sabah. In a report by Andrew Feng, operator of Kina Biopower and Seguntor EFB biomass plants, it is stated that 5 million tons of EFB is able to power 170 MW of EFB plants (Feng, 2010). It is also stated in the same report that at present, only 45 MW of biomass plant is established in Sabah.

Conclusively, we can see that there is no shortage of EFB as a resource. The capacity of established biomass plant is at a point that is far below maximum capacity which can be supported by the existing EFB production in Sabah. With quantity of supply not being an issue, it is far more important to consider the locating of the EFB plant itself to minimize transport cost, as well as ensuring qualification for Clean Development Mechanism (CDM) by observing emissions from EFB transportation.

16

Transportation of EFB for Kina Biopower

EFB is a fuel with low energy density. Typically, a ton of coal would have two to three times the calorific value of EFB. Consequently, energy generators that use EFB as a fuel tend to sustain higher fuel transportation costs than other types of fuel. EFB for Kina Biopower is also sourced from numerous mills situated in the vicinity. As such, this prevents the usage of dedicated transport systems such as rails or pipelines to reduce fuel transport cost. Given the terrain in Sandakan, the only logical mode of fuel transport is through the use of trucks. Therefore, it is crucial to study the impact of transportation cost of EFB for the study.

EFB cost is considered in largely two ways. The first way is a composition of Distance Fixed Cost (DFC) and Distance Variable Cost (DVC) (Searcy et al, 2007). The former is independent of distance travelled while the latter is dependent on the distance travelled. DFC accounts for purposes such as loading and unloading of the EFB and the treatment of the EFB. DVC would take into account costs of diesel, which increases with increasing distance, payment of drivers salaries and rental of vehicles. A project similar to Kina Biopower modeled the cost of transportation for EFB (Enclosure 5, 2007). A linear relationship between cost and distance travelled is achieved, with a y-intercept axis delineating the DFC of the transportation of the EFB.

17

Figure 4. Cost of Process EFB Fuel depending on transport distance in RM/GJ and RM/ton (adapted from Enclosure 5)

This method of valuation of EFB transportation places an emphasis on the operational cost of running a biomass plant. As a plant operator, Kina Biopower would strive to find distances along the graph where accessibility to biomass and profit margin (after considering the cost of transporting the EFB) of selling yielded electricity to the grid are the greatest.

In contrast to the above method, the second method of documenting transportation cost of EFB is intimately related to the operating companys desire to qualify for CDM, which will in turn grant financing to the project in the form of

18

openly traded CERS, thus increasing the IRR of the project. One of the criteria for CDM qualification is that the carbon dioxide emission from the utilization of EFB as a fuel must not be more than the carbon dioxide emission avoided from using EFB as a fuel. Emission of carbon dioxide through the use of EFB comes from mainly two sources; the combustion of EFB in the plant and the transportation of EFB from the source to the plant site.

From the Kina Biopower project documents (Enclosure 1-4, 2005), we can see that EFB is sourced from 18 different mills in the vicinity, situated from between 20 to 200 km to the plant. Additionally, the ash that is left from the EFB combustion is sent to a storage yard next to Sabah Port, which is situated around 21 km from the plant. The project emissions from biomass transport is calculated through the following formula:

Transport Emissions = Average round trip distance (km) x Total number of trips (number) x Emission factor of diesel truck (kgCO2e /km)

19

Table 1. Emission reduction calculations (adapted from PDD) Total estimated emission reduction Baseline emissions (tCO2) Project emissions from biomass combustion (tCO2) Project emissions from biomass transportatio n (tCO2) Total emission reductions (tCO2)

Monitoring period

13th January 2009 - 31st July 2009

90,860.64

4,849.83

481.86

85,529.00

Based on the abovementioned parameters, the emissions of carbon dioxide from EFB transportation accounts for a very small portion of the baseline emissions, or emissions avoided through the use of EFB as fuel.

Hence, from the two methods of transportation cost assessment, it is evident that the situation of the plant is an important parameter in designing an EFB plant. According to highly regarded literature (Corley et al, 2003), the maximum distance to be considered for EFB transportation should be 150 km. This value of 150 km is the result of an analysis amalgamating several factors (not limited to): Baseline emission reduction of EFB Emission factor of diesel-run vehicles Emission factor of EFB combustion Price of electricity sold to grid Price of diesel

20

Taxation incurred

The analysis of EFB transportation cost is not trivial due to the many variables present in the calculation. Consequently, the rough estimate of 150 km is derived from a variety of sources, from trial and error, simplified transportation models to industrial best practices. While the value of 150 km is not explicitly derived, industrial players do follow this distance requisite strictly. As seen in an investment presentation by EnBW Energie Baden-Wrttemberg AG (EnBW, 2011), there exists a precondition for biomass plant investments to be situated at most 150 km from the sources of biomass for a biomass plant project to be considered for investment.

Kina Biopowers EFB plant achieved an average distance of about 90 km from its EFB sources (Enclosure 2, 2005) and 20 km from its depository site for ash. Therefore, we can also conclude that Kina Biopower adhered to the 150 km distance condition, thereby achieving sustainable transportation costs as well as comfortably qualifying for CDM based on emission calculations.

21

Technical discussion on the difficulties faced by the plant owners

This section will elaborate through a technical discussion on the difficulties faced by the plant owners during the course of their plant operation. These problems were not anticipated during the pre-feasibility studies of the plant and as such, Kina Biopowers EFB plant is an excellent case study for the pre-emption of such problems. There are mainly two problems that will be highlighted in this study. The two problems are interrelated to a certain degree as they are both concerned with the quality of the empty fruit bunches.

Extraction of residual oil from empty fruit bunches

For the purposes of this discussion, it is important to understand how the EFB were stored in the various plantation owners where the EFB were stored. The EFB were stored by the plantations owners out in the open, exposed to the elements. Consequently, we see how these can pose as a problem when the EFB are transported to Kina Biopower. First of all, the EFB gathers a lot of impurities as debris and dirt are trapped within the organic matter inside the EFB. As these impurities are not combustible, they would have to be removed prior to burning. Secondly, the EFB is laden with a high level of moisture concentration, which in turn reduces the energy per unit mass of the EFB. This is because as the EFB is put through combustion, part of the energy used for the combustion is used up to vaporise the moisture within the EFB, which manifests as water. As energy is wasted in evaporating the water, this in turns results in Kina Biopower

22

chalking up higher expenses for energy, as more energy is required to completely burn the EFB which is only after possible after evaporating the moisture. It is thus very much in the interest of Kina Biopower to treat the EFB before combustion takes place.

Commercially available machinery has combined the purposes of drying and removal of impurities, making the treatment of the EFB simple to implement within the confines of a biomass plant. A typical drying method would be through the use of diesel-fired drum dryers. The resultant EFB which is dried and cleaned are then shredded and burnt.

The main problem for Kina Biopower comes in the production of effluent from the treatment of the EFB. The effluent is a result of the evaporated and subsequently condensed moisture in the EFB, and is very similar to Palm Oil Mill Effluent (POME) in terms of chemical composition. As a result, this subjects Kina Biopower to regulatory action by the Malaysian government, as POME is a significant contributor to environmental pollution due to its high level of high acidity, high biological demand (BOD) and chemical oxygen demand (COD) (Siew, 2011). The Malaysian government has a strict enforcement of 100 mg/l for BOD levels for the effluent released into the sewerage system (UNESCAP). This in turns compels Kina Biopower to reduce BOD levels in the effluent resulting from the treatment of the EFB.

23

A contributing factor that led to an exacerbation of the problem is the lack of a formal agreement that dictated the quality of the EFB supplied by the various plantation owners. As there was a lack of quality control of the EFB, Kina Biopower found itself possessing batches of EFB with fluctuating quality levels. This caused Kina Biopower to be unable to apply a standard set of parameters to treat the incoming batches of EFB with during the demoisturisation process and possibly additional steps of sorting was needed. This in turn contributed to the manpower and cost required to treat the EFB, on top of the fixed cost of purchasing equipment for the treatment initially.

Although Kina Biopower was saddled with the complication of having to treat the EFB, they were also rewarded with an unexpected result. The effluent produced from the demoisturisation of the EFB was to be chemically treated before release into the sewerage system. This process also happened to allow Kina Biopower to be able to extract sludge oil from the effluent as the chemical process was able to separate the sludge oil from the rest of the effluent. Therefore, not only was the effluents BOD levels brought down to a safe level for disposal, Kina Biopower was also rewarded with the sludge oil, which was of significant commercial value.

According to a study done by H.K Jorgensen (Joregensen, 1984), the situation experienced by Kina Biopower is not uncommon. Jorgensen arrived at a value of 1.5% when calculating how much of EFB is sludge oil by mass. With Kina

24

Biopowers EFB consumption rate of 259,200 metric tons per annum, it should be looking at an average sludge oil production rate of 3888 metric tons per year. This is a significant amount of by product with a tangible commercial value, and this is reflected by the revenue experienced by Kina Biopower. The revenue driven by sludge oil for Kina Biopower is RM 16.4 million per year.

The success of Kina Biopower in turning a crisis into a fortune has also not been unnoticed. The plantation owners supplying the EFB found out about the additional revenue generated by Kina Biopower, which triggered a couple of reactions. The first reaction was that some of the owners tried their hand at extracting the sludge oil, with varying degrees of success. The second reaction, inclusive of those who exhibited the first, was that the plantation owners began charging higher prices for the EFB, knowing that the additional revenue from the sludge oil had increased the profit margin for Kina Biopower, which meant that Kina Biopower is in a position to purchase EFB at a higher price, even if it was not willing to.

Inefficient transportation of EFB in terms of energy density

With the moisture laden EFB being transported, Kina Biopower also faces a different but related problem; the cost of transportation per gigajoule of energy is significantly higher for unprocessed EFB than processed EFB. According to a similar study conducted by a project (Enclosure 5, 2007), the cost differentiation of processed EFB and unprocessed EFB are as follows.

25

Table 2. Costing breakdown of EFB transportation (adapted from Enclosure 5) Cost at site 1 Raw EFB Process cost (from 2 raw EFB to moisture content of 45%) 3 Handling cost Total Processe d EFB 10 20 Unprocesse d EFB 10 0 Unit RM RM Price of processed EFB on-site with RM10 raw material cost is RM30 Raw material loading fee, etc Remarks

30 60

30 40

RM RM

It can be observed that processed EFB is 50% more expensive at site; this is to take into account the cost of processing the EFB. However, it is also imperative that one takes into account the energy density of processed and unprocessed EFB. Table 3. Costing per unit of EFB, comparison between processed and unprocessed (adapted from Enclosure 5) Overall Cost 1 2 1 a 2 a Overall cost per ton for processed EFB Overall cost per ton for unprocessed EFB Overall cost per GJ for processed EFB Overall cost per GJ for unprocessed EFB Unit RM/ton RM/ton RM/GJ RM/GJ Value 97.00 77.00 11.03 16.36 Value with inflation* 103.54 82.19 11.77 17.46

For a distance of 150 km and with respect to Figure 4, it can be seen that the overall cost per GJ for transportation of processed EFB is much lower than that for unprocessed EFB. This is due to the fact that processed EFB has a much 26

higher energy density than that of unprocessed EFB, due to the removal of moisture and debris which brings about a reduction in mass of EFB. This means that as less moisture and debris is transported when transporting EFB, the transportation cost per GJ of energy goes down.

Kina Biopower transports its EFB from the plantations with no processing and as such, Kina Biopower incurs a transportation cost that is higher than what it could have enjoyed should the EFB been processed before transportation.

Takeaway lessons
It is important that during the implementation of the EFB plant in Singapore that plant operators take into account the abovementioned difficulties faced by the plant operators in Sandakan. As the hypothetical plant will be sourcing EFB from Malaysia as well, it is quite likely that such thorny issues surface during the course of operation. In the section focusing on the hypothetical plant, there will be exploration of measures to circumvent the mentioned issues.

27

Plant technology
Kina Biopower biomass plant uses a standard thermal power plant cycle which is powered by a boiler running on biomass. Figure 5. Biomass power plant cycle and corresponding Temperature Vs. Entropy diagram (adapted from Wikimedia Commons)

Thermal Power Plant Cycle

The boiler heats up water till it boils and undergoes isothermal change of state to steam. The steam is passed through to a high pressure turbine and expanded,

28

resulting in a drop in pressure. The drop in pressure results in a partial liquefaction of the steam and this liquid water is fed through to the feed-water heater. In the absence of actual plant design documents, it is difficult to ascertain the total number of stages of regenerative heating of feed water. Generally speaking, the greater the number of stages of regenerative heating, the higher the coefficient of performance, though this is balanced by the increased in cost of plant facility as the system becomes more sophisticated with a greater number of stages of regenerative heating.

The remaining steam is expanded through the low pressure turbine and completely turned to liquid in the condenser. This liquid water is the feed water that is heated, then pumped into the boiler to be turned into steam and hence, repeating the process.

The high pressure and low pressure turbines are powered by the steam and both of the turbines drive the generator, which produces electricity. The electricity is then used to power the plant facility or sold to the SESB power grid.

The amount of electricity produced can be calculated by studying Figure 5. The amount of electricity produced is a function of the mass flow rate of the water and the difference in enthalpy values at points 5 and 7, as well as the efficiency of the turbines.

29

Electricity produced (kw) = mass flow rate of water (kg/s) * (change in enthalpy from 5 to 7) kJ/kg * turbine efficiency (%)

Boiler Technology
While traditionally a thermal power plant cycle is powered by a boiler running on coal or oil, Kina Biopower biomass plant runs on the combustion of empty fruit bunches.

Thus, this is the main difference that differentiates the biomass plant from a more traditional coal or oil fired plant. The boiler used by Kina Biopowers biomass plant is a water cooled step grate tail end type boiler supplied by Vyncke Energietechniek N.V of Belgium. A generic cross sectional view of such a boiler is shown in Figure 6.

Figure 6. Cross-sectional view of a water cooled step grate tail end type boiler (adapted from FAO Corporate Document Repository)

Sufficiently dried biomass is thrown into the furnace through feeders located 1 to 4 meters above the grate. The biomass falls onto the travelling grate; it dries further, ignites and burns. The ash is conveyed to the front of the grate from

30

where it falls into the ash pit. Depending on how much the combustion air is preheated the maximum fuel moisture is between 40 and 55 %. The heated air then travels upwards due to convection and heats up tubes containing water. The water in the tubes is then converted into steam and used to expand within turbines as a working fluid to generate electricity.

The main advantages of the travelling grate system are its versatility and great combustion capacity. Several different types of fuels may be burnt on it and ash removal is continuous.

31

A brief introduction to the Clean Development Mechanism

In line with United Nations Framework Convention on Climate Changes (UNFCCC) agenda for preventing the occurance of dangerous climate change, the Clean Development Mechanism (CDM) was established. CDM is a key initiative established within the Kyoto Protocol (B. Metz et al, 2007) to encourage emission reductions through facilitating financial transactions of Certified Emission Reductions (CERs) between industrialized and developing nations. The procedural layout of CDM is depicted in Figure7. Figure 7. Process Flow for CDM qualification (Adapted from B. Metz et al)
Industrialised country emitting CO2 due to industrial activity

Industrialised nation is required to purchse CERs to offset emissions

Industrialised country approaches developing country for consent that hosted project will result in sustainable development

Industrialised country must demonstrate additionality in the project

EB issues CERs if approved, with 1 unit of CERs representing one metric tonne of CO2e, e.g CO2 or its equivalent

CDM Executive Board (EB) decides whether to approve project

Verification of additionality by a Designated Operational Entity (DOE)

Developing country receiving capital from sale of CERs to industrialized country

32

Recent changes to CDM at Durban Summit

The Durban climate summit recently concluded late 2011 in December. Numerous amendments to the Kyoto Protocol and CDM were made to ensure the objectives of UNFCCC were not disrupted or abruptly ceased (Nichols, 2011). These resolutions were instituted to ensure a continual confidence of both industrialized and developing countries in CDM as a way of ensuring environmental responsibility and also proliferation of green technology, such as wind energy, solar energy and energy derived from biomass.

For conciseness, two major resolutions would be highlighted in this section. First of these is the extension of the Kyoto Protocol. Slated to expire by 2012, the Kyoto Protocol was given an extension through an agreement in the Durban Summit. This extension implies that the carbon trading market will have no fear of a suspension of trading, thereby resulting in investors confidence in the viability of carbon trading as a financing method to fund renewable energy projects. The extension of the Kyoto Protocol, and thus that of CDM, was of great importance for it to be legislated as the validity of traded carbon (CERs) rode on the extension of the Kyoto Protocol. The suspension of carbon trading would result in a highly illiquid market for carbon permits. Consequently, financial institutions that took up trading positions in the carbon market were fearful of a trading suspension and hence, devalued carbon permits. This was observed to take place globally, from Wall Street to Singapore (Blas, 2011), as carbon permit prices tumbled to record lows. Financial institutions in Wall Street exited their carbon trading positions, while trading houses such as Noble Group, based in

33

Singapore, reduced exposure in carbon trading due to lack of market liquidity. It is therefore apparent that the Durban Summit provided a peace of mind through an extension of the Kyoto Protocol.

The second resolution to be highlighted is the finalization of contributions from various countries to the Green Climate Fund (GCF), which was created two years ago in the Copenhagen Summit. The aim of the fund is to provide capital for developing countries to kick start green projects. It was originally intended for USD $100 billion to be amassed per year for developing countries, with an additional sum of USD $ 30 billion to be provided by developed nations (Nichols, 2011). The Durban Summit saw the Saudi Arabia, Latin American countries and the USA disagreeing with an earlier draft of the fund structure (Khor, 2011). Citing reasons such as the global financial turmoil brought about by the Eurozone debt criss and the slow pace of recovery in America, these countries found it unfeasible to provide the funding required for the GCF. After rounds of deliberation, the structure of the GCF was finalized prior to the conclusion of the Durban Summit, with a greater emphasis on private sector contribution to the fund, resembling a form of public private partnership.

The two improvements upon the existing Kyoto Protocol heralds a future with greater confidence in the investment and development of green energy projects through the support from CDM.

34

Demonstration of additionality in the Kina Biopower biomass power plant project

To qualify for CDM, the Kina Biopower biomass power plant project had to demonstrate additionality in two main ways; environmental additionality and financial additionality. Environmental additionality is defined as the project being instrumental in offsetting the emissions. Without the project, the amount of emissions would not have been reduced. This requirement is to guard against projects that do not necessarily reduce emissions, but basically proclaim reduction of emissions through other means that would have happened regardless of the existence of the project and consequently benefitting from the CDM qualification, also known as the free-ridership problem.

Establishing environmental additionality

The first step to establishing environmental additionality is to first conceptualise a baseline scenario, which is what would take place in the absence of the project. Following which, the emissions reduction of the project is calculated, and environmental additionality is achieved if the emissions reduction of the project reduces more than what the baseline scenario emission amounts are.

For the Kina Biopower biomass power plant project, the baseline scenario chosen is a combination of Electricity generation from renewable energy sources and Avoidance of methane production from biomass decay through controlled combustion, which is one of the many baseline scenarios outlined in UNFCCCs appendix for acceptable baseline measures

35

The baseline for electricity generation is the kWh produced by the renewable generating unit multiplied by the weighted average emissions (in kg CO2equ/kWh) of the current generation mix (PDD, 2005). For environmental additionality to be demonstrated here, the emissions for Kina Biopowers project has to be lower than that of the generation of electricity through conventional means in the same environment based on a weighted average of emissions of various electricity generation methods. The calculations to demonstrate environmental additionality through electricity generation is shown.

Table 4. Weighted average of conventional electricity production means to calculate baseline scenario (adapted from SESB) Grid Generatio n (MWh) 462,556 1,418,749 996,439 499,468 14,004 3,391,216 Conservativ e Thermal Efficiency (%) 0.50 0.33 0.33 Carbon Emission Factor 15.3 21.1 20.2 CO2 Emission (tCO2) 570,196 832,585 399,534 1,802,315 Individual CEF (tCO2/MWh) 0.402 0.836 0.800 0.531

Fuel Type

Oxidatio n Factor 0.995 0.990 0.990 -

Hydroelectric Natural gas Heavy oil Diesel oil Renewable energy Total

According to the project plans, the maximum gross capacity of the power plant is 11.5MW and the net electricity output to the SESB grid is 10MW. With the annual operating hours of 8,059 hours, the electricity generated by the Project is calculated as follows:

36

Electricity generated by the Project = 10 MW x 8,059 h/yr = 80,592 MWh/yr Applying the weighted average emission factor of SESB grid as shown in Table 4, the baseline emission for grid electricity is:Baseline emission for grid electricity = 80,592 MWh x 0.531 tCO2/MWh = 42,832 tCO2/yr

The second form of environmental additionality demonstration lies with the calculation of offset emissions by avoidance of emissions from decaying biomass through combustion. The concept behind this demonstration is that through combustion, emissions from biomass that would have been left to decay when left out in the open by plantation owners are avoided by burning the biomass in a power plant. Environmental additionality is demonstrated when the avoided emissions are greater than the sum of the emissions of treating the biomass in such a manner and the emission produced through the decay of biomass when left in the open.

The baseline emission for methane avoidance is calculated as follows: Methane avoidance emission avoidance = (MCF * DOC * DOCF * F * 16/12) Where, MCF: methane correction factor (fraction) (default is 0.4) DOC: degradable organic carbon (fraction) (default is 0.3) DOCf: fraction DOC dissimilated to landfill gas (default is 0.77)

37

F: fraction of CH4in landfill gas (default is 0.5) Therefore, Baseline emission factor for methane avoidance, CH4_IPCCdecay = 0.4 x 0.3 tC/t biomass x 0.77 x 0.5 x 16 tCH4/12 tC = 0.0616 tCH4/t biomass The amount of EFB, that would otherwise be dumped and left to decay in the absence of the Project, is estimated to be 153,125 tonnes per year. Hence, Baseline emission for biomass decay = 153,125 t/yr x 0.0616 tCH4/t x 21 tCO2e/tCH4 = 198,083 tCO2e/yr Therefore, the final total baseline emissions that is reduced is: Table 5. Emission calculations Baseline emissions for displacement of grid electricity 42,832 (tCO2/yr) + Baseline emissions for methane avoidance 198083 (tCO2/yr) =

Total baseline emissions 240,914 (tCO2/yr)

Establishing financial additionality

To establish financial additionality, it is crucial to look at the scenario where the percentage of the project funded by CDM financing is reduced to 0, resulting in the entirety of the project being funded by capital and debt. Assuming that the

38

ratio of capital to debt is kept constant, for the Kina Biopower EFB plant, the capital required would be 20% and the debt required would be 80%. This will result in a payback period of 8 years and 2 months. The IRR of the project would be 9%. While this means that the project will still be able to pay for itself after 8 years and 2 months, it has to be noted that the IRR of the project is very low for the type of risk profile the project is, which is a greenfield energy producing plant project. As mentioned earlier in the project finance analysis, the return for a relatively much lower risk investment vehicle such as REITs is 7% while fixed deposits are capable of generating 1% returns easily. Without CDM financing, it would be difficult to attract investors in parking capital and convincing financial institutions to provide debt financing to allow the project to take place. In short, the small difference of 2 to 8% in return with other less risky forms of investments does not justify the monumental risk incurred by financing the project. Consequently, financial additionality is established.

Difficulties while achieving CDM qualification for the proposed biomass plant in Singapore
CDM qualification is expected to be possible for the proposed biomass plant in Singapore. This is because the proposed biomass plant is similar in functionality to the one belonging to Kina Biopower. As long as both environmental and financial additionality can be demonstrated, it is unlikely that CDM qualification will not be accorded to the Singapore plant. However, it is imperative that due diligence is given while aiming to demonstrate both additionalities. Originally, financial additionality and investment additionality were both used

39

interchangeably until the negotiations of the Marrakesh Accords took place, making financial additionality the main component to be demonstrated. The aim therefore is to show that a project is financially non-viable prior to the accordance of CDM-backed financing, as opposed to showing that a project surpasses a certain risk-adjusted profitability threshold, which shows a lack of investment additionality.

The pitfalls of demonstrating additionalities

Demonstrating financial additionality is not without its difficulties. The idea has been tainted with suggestions of vulnerabilities resulting in fraud. Since financial additionality is to demonstrate the non-viability of the project in the absence of CDM qualification, it is possible that project developers structure projects in a particular manner that results in non-viability in the absence of CDM financing. One way to achieve this would be to artificially increase your cost of operation such that without CDM financing, the internal rate of return would be unreasonably long. As such, in the development of the biomass plant project in Singapore, due diligence must be paid to ensure the accounting and financial modeling for the project is transparent and legitimate, to prevent the falsified demonstration of financial additionality, when it does not exist in reality.

It is also likely that fraud can be committed while attempting to demonstrate environmental additionality. Due diligence should be given to ensure project developers do not claim emission reduction that is greater than that which is

40

provided by the project. This will prevent fraudulent accreditation of CERs awarded to projects, since CERs is dependent on the emission reduction levels of the project.

Market value of CERs

During the course of the construction of the biomass plant in Singapore, it is important to keep a close watch on the market for the trading of carbon credits.

Figure 8. Historical price chart for iPath Global ETN (adapted from Yahoo Finance)

Figure 8 shows the price movement of iPath Global Carbon ETN, an index traded fund that tracks the price movements of carbon credits traded in the open market. From the price movements, it is observable that the overall trend is downwards. There was a gentle increase in price from January 2010 to April

41

2011, but this was dwarved by the sharp decrease in prices from August 2008 to January 2009 and from April 2011 to January 2012. There are several reasons behind the declining trend of carbon credit prices. The European Union's carbon market, which was valued at $120 billion last year, is also oversupplied with hundreds of millions of permits. It caps the emissions of some 11,000 power generators and industrial plants in 30 European countries (Coelho, 2011). The large supply of credits in the market has a depressing effect on the trading price of carbon credits. The rise of alternative forms of energy, as well as technological advancements in fossil fuel utilization, results in a reduced dependency on traditional fossil fuel, which results in a lower level of emission for companies, which also reduces the demand for carbon credits. As such, by looking at the demand and supply side of the carbon credit markets, a combination of lower demand and rising supply brings about an overall reduction in price for traded carbon credits.

The trends observe signify a decrease in the market traded prices for carbon credits. Since the amount of CDM financing achieved by the project is dependent on the market value of the CERs accorded to the project, a low price for carbon credits will result in a low level of financing through CDM qualification. Consequently, for CDM qualification to achieve the highest level of financing possible, it is imperative that the timing of the Singapore biomass project be attuned with the market movements of the market traded price movements of carbon credit.

42

The Kina Biopower biomass plant was developed in 2006, with crediting period for CERs beginning in 2008. Based on the graph of iPath Global Carbon ETN, 2008 was the highest price ever reached for the fund, and by extension, indicating a peak for the value of traded carbon credits. This ensured that the CDM financing for the Kina Biopower project was efficiently carried out. It is in the interest of the Singapore biomass plant project to replicate this instance.

43

Analysis of Kina Biopower EFB Plant Project Finance Model

This section of the report will go into detailed discussions about the project finance model used for the EFB plant. The model itself will be attached in the appendix for referencing purposes. The model used is a customised model adapted from one offered for public use on Mofinet.com.

Difficulties in establishing the model

There was a number of informational barriers to work through when trying to source for information for the model. First and foremost, the staff of Kina Biopower were busy during our period of engagements and as such, exchanges over email were difficult and rare. Secondly, some of the information requested in the models macros were not obtainable even by the staff of Kina Biopower. Consequently, some simplifying and reasonable assumptions had to be made to allow the model to manifest.

Assumptions
The unit RM value of the components could not be assumed to be static. As such, it was assumed that there was a percentage increase over time. The purpose here is mainly to account for inflation. An increase of 1% was applied across the years. While this may seem a modest percentage increase, it has to be noted that the percentage increases are compounded. Should the increases

44

from year 0 to year 1 be annualized, a 1% annual increase is feasible and reasonable as an estimate.

Additionally, the revenue from the sale of CERs is also assumed to follow a declining trend. To achieve this, a 1% decrease was applied to it annually. The main reasons driving the assumption of a revenue decrease are increasing adoption of green technology globally and reducing demand for CERs. As more developing countries adopt green technology and qualify for CDM, more CERs will be sold on the secondary market. Also, developed countries that adopt green technology will reduce their dependency on traditional carbon dioxide-emitting fossil fuels. This will in turn reduce their requirements to buy CERs to justify their operations. With CERs supply increasing and CERs demand decreasing, the overall net effect is a reduction in the market clearing price per unit of CERs. Consequently, with a lower selling price, the revenue driven from the sale of CERs will reduce as well, leading to an overall declining trend for CERs revenue.

The CERs revenue is also modeled in the form of additional operating income after year 7. Year 0 to 7 is considered the crediting period of the UNFCCC, which provides a grant that is 33% of the total project value.

The cost of maintenance are assumed to be at around 4.2%. This is following a report that levied that industrial average for maintence cost of power plants to be 4.2%(IDCON Inc). It was also extremely challenging to obtain a credible

45

quotation for the cost of insuring a biomass plant without an obligation to purchase a policy from an insurance provider owing to the myriad of factors that go into pricing an insurance policy for a plant. As such, the insurance and related costs were assumed to be 10% annually of the entire value of the project.

The salary of personnel employed by the staff was derived from the assumption that each MWh of capacity in a plant is matched by 4.9 headcount. According to The Value of the Benefits of U.S. Biomass Power, 4.9 workers are needed per installed MW (Morris, 1999). The total number of personnel was then multiplied by the average annual wage of Malaysians, which is RM 46,053

(Averagesalary.com).

Lastly, it has been assumed for the depreciation of the plant assets to be linearly depreciated over the 20 years of its operation.

Discussion on the results

The project boasts an internal rate of return (IRR) of 23%. The high IRR is reasonable as this project, being a greenfield power plant project, entails a high degree of risk, especially when the plant is located in Sandakan where the project is also vulnerable to geopolitical stability risks. As such, an IRR of 23% will prove to be an adequate justification for the risk that investments into the project will be undertaking. As a comparison to how much more the IRR is compared to other more conservative modes of investment, a substantially less

46

risky investment in real estate investment trusts (REITs) yield an annual return of 7% on average annual, while on the least risky spectrum of the investment scope, we have fixed deposits providing yields of around 1% annually.

The payback period for the plant is 5 years and 5 months. This means that the project would have paid for itself, inclusive of interest compounded over the payback period, in 5 years and 5 months. This is a favourable duration as we consider that the entire lifespan of the project is 21 years, allowing a generous 15 years of profitable operation for the plant operators.

Sensitivity analysis
Lastly, sensitivity analyses were conducted to estimate the impact of a change in any of the major drivers that affect the gross margin of the plants operation and its subsequent effect on payback periods and IRRs. The results are as follows.

Table 6. Sensitivity Analysis for Kina Biopower EFB Plant Increase 10% Payback IRR Period Price of Biomass Personnel expense Electric tariff for sales to the network (RM/MWh) 5 years 9 months 5 years 6 months 4 years 5 months 21% 22% Decrease 10% Payback IRR Period 5 years 5 years 2 months 6 years 9 months 25% 23%

28%

17%

47

The default case for the plant has a payback period of 5 years and 5 months, with an IRR of 23%.

As seen from the table, the factor that results in the greatest impact on the gross margins of the plants operation is the electric tariff per unit of electricity sold. Relatively, price changes in the other aspects did not affect the payback period and IRR as much. It can be concluded that the viability of the plant is significantly dependent on the stability of electric tariff prices. This can also be said for the hypothetical plant in Singapore to be discussed subsequently. The success of the hypothetical plant largely hinges on the revenue driven by the sales of the electricity produced.

48

Hypothetical plant in Singapore

This section attempts to conceptualise and quantify the total cost of constructing and operating a biomass power plant of 20 MW capacity in Singapore, with EFB used as a fuel and sourced from southern Malaysia. Through referencing a variety of objective sources of information, reasonable and feasible estimates are achieved to forecast the relevant costs incurred from setting a 20 MW biomass plant in Singapore.

Determination of biomass fuel quantity needed

Primarily, it is essential to establish the amount of biomass fuel quantity required by the plant. Table 7. Procedure for calculating biomass consumption of biomass plant Parameters Quantity Identifier Wattage of biomass plant (MW) 20 (a) a Energy per metric ton of EFB (MJ) 6028 (b) b Conservative estimation of efficiency of biomass plant 0.25 (c) Rate of biomass consumption per second (tons/second): 0.013271 (d) (a)/(b)/(c) Rate of biomass (ton) consumption per month (tons/month): 32106.17 (e) (d) x 60 seconds x 60 minutes x 24 hours x 7 days x 4 weeks Annual rate of biomass consumption (tons): (e) x 12 385274.1 (f) c Capacity factor 0.92 (g) Effective annual rate of biomass consumption: (g) x (f) 354452.1 (h) a, b Values obtained from Empty Fruit Bunches Evaluation: Mulch in Plantation vs. Fuel for Electricity Generation (Menon et al, 2003)
c

Value obtained from PDD

49

From the calculations carried out, the amount of biomass needed to support a 20MW plant is 354,452 tons annually. Since the amount of biomass needed per year for the 11.5MW Kina Biopower plant is 259,200 tons, the estimated value of 354,452 tons for the 20Mw plant is within reasonable range of amount of biomass needed.

Although the amount of energy in 1 ton of EFB is 6,028 MJ, technical limitations result in systemic inefficiencies, such that the efficiency of a biomass plant can be estimated conservatively at 25%. Therefore the amount of energy extractable from EFB is about 1,507MJ, at a fraction of the original 6,028MJ.

The capacity factor is derived from the operating hours stipulated for the Kina Biopower biomass plant. The plant is set to operate for 8,059 hours annually, which gives rise to a capacity factor of 0.92. Multiplying this with the annual rate of biomass consumption will yield the actual annual rate of biomass consumption.

50

Plant equipment cost

Table 8. Extrapolated values for equipment cost according to plant capacity (adapted from Biomass CHP Catalog, EPA, 2007) Biomass Fuel Feed (tons/day) Characteristics Stoker boiler equipment cost Other equipment and installation cost Total installed boiler system cost Total installed biomass prep-yard cost 100 1,195,000 600 7,980,000 900 10,790,000 1055 11,394,000

795,000 1,990,000

10,020,000 18,000,000

12,460,000 23,250,000

12,449,000 23,843,000

2,640,000

5,430,000 23,430,000

7,110,000 30,360,000

9284000 33,127,000

Total install steam 4,630,000 plant cost All monetary values are in USD$.

The table demonstrates the infrastructure cost of the plant for the various categories of amount of biomass used. A significant simplifying assumption here is made that the energy content of EFB is close to that of biomass taken into consideration for Biomass CHP Catalog. With values for 100, 600 and 900 tons per day provided by the catalog, a relationship was established for the cost of various components of the plant relative to the amount of fuel used per day. This relationship is crucial in demonstrating the economies of scale that is present as

51

the size of a plant increases. By plotting out the relationship as seen in Table 8, it is possible to estimate the value of a 20 MW plant running on EFB. Figure 9. Cost curves of various components of biomass plant cost (adapted from Biomass CHP Catalog, EPA, 2007) USD$ per ton of biomass used per day $50,686,385.

Amount of biomass used per day

With the various cost curves established, the cost of the plant can be estimated. With the estimated annual consumption of EFB calculated, it is predicted that 1,055 tons of EFB will be consumed on a daily basis. From the horizontal axis, a vertical line for 1,055 is plotted to cut the 3 cost curves for the various plant components. The horizontal values are read off and multiplied with 1,055 to arrive at the estimated value of USD$ 33,127,000. As the data was collated in 2007, it is necessary to take into account inflation. With a conservative estimate of 4% inflation over 5 years priced to current value, the final cost of the plant in present value would be USD$ 40,304,060, which is equivalent to SGD

52

Labour cost
According to The Value of the Benefits of U.S. Biomass Power, 4.9 workers are needed per installed MW (Morris, 1999). Building upon this, with the plant wattage quantified at 20 MW, it is estimated that 98 people will be employed to operate the plant. Since this value is indicative of the total number of people employed, it is inclusive of personnel from senior to junior levels in the operating company. As such, it is feasible to take the average wage rate in Singapore as it is possible that the employment structure replicated in the operating company can give rise to the same wage distribution across the national demographic. The average salary for Singapore in the year of 2011 is SGD$ 38,988 (Ministry of Manpower, 2012). Consequently, labour cost for the plant annual will amount to SGD$ 3,820,824.

Cost of biomass
The amount of EFB required annually by the plant is about 354,452 tons. Currently, the cost of EFB incurred by Kina Biopower is RM 27 per ton. This translates to approximately SGD $ 10.80. Therefore, the annual cost for EFB is SGD$ 3,808,081.

53

Biomass transportation cost

A linear relationship between cost per ton and distance travelled during transportation has been established in Figure 4. To estimate the maximum cost of biomass transportation, it is assumed that transportation of EFB covers the maximum distance allowed to be travelled, which is 150 km. The linear relationship predicts a cost of RM 100/ton for travelling a distance of 150 km. As the information source is backdated to 2005, it is important to take into account inflationary effects. Assuming an inflation rate of 4% over 7 years, the cost of transporting a ton of biomass over 150 km in current value would be RM 131, approximately SGD $ 53. This would result in an annual cost of $SGD 18,657,386 incurred for transporting all of the required biomass over a distance of 150 km.

54

Biomass resource origination

Table 9. Singapores Annual Waste Statistics (adapted from NEA, 2010) Waste Statistics and Recycling Rate for 2010 Waste Disposed of (tonne) 538,100 645,700 662,300 9,400 80,000 151,800 67,100 12,400 3,800 114,400 60,700 106,200 4,000 303,600 2,759,500 Total Waste Recycled (tonne) 102,400 738,200 78,100 912,400 190,000 99,200 1,127,500 73,100 378,900 0 19,200 14,700 20,000 3,800 3,757,500 Total Waste Output (tonne) 640,500 1,383,900 740,400 921,800 270,000 251,000 1,194,600 85,500 382,700 114,400 79,900 120,900 24,000 307,400 6,517,000 Recycling Rate (%) 16% 53% 11% 99% 70% 40% 94% 85% 99% 0% 24% 12% 83% 1% 58%

Waste Type

Food Waste Paper/Cardboard Plastics Construction Debris Wood/Timber* Horticultural* Waste Ferrous Metal Non-ferrous Metals Used Slag Sludge Glass Textile/Leather Scrap Tyres Others (stones, ceramics & rubber etc) Total:

Waste produced in Singapore for the year 2010 is shown in Table 9. Highlighted in the table are figures for wood, timber and horticultural waste types. These are wastes that are suitable for combustion in a biomass power plant, as their

55

organic composition is similar to that of EFB. The total amount of waste produced in these categories is 438,800 tons. At present, there are two 1 MW plants in Singapore, namely cogeneration plants under Bee Joo Industries and ECO Special Waste Management Pte Ltd. Biofuels Industries is also slated to establish a 25 MW biomass plant in Singapore (Kelly, 2008). The hypothetical plant, with its estimated biomass intake of around 354,452 tons, will find it a challenge to establish a steady pipeline of biomass resource to ensure sustainable operations.

Looking for biomass overseas

With a tightening supply of biomass in Singapore in the near horizon, the hypothetical plant should consider sourcing for biomass from Malaysia.

Figure 10. Possible sites for biomass origination within Malaysia (adapted from Malaysia Palm Oil Board, Economics and Industry Development Division)

56

In Figure 10, the black circular line represents an approximate 150 km radius from Tuas Checkpoint in Singapore, represented by the black circle. Each small circle represents an area in Malaysia that has been dedicated to oil palm plantations. The 150 km radius is decided with reference to the point made in Transportation of EFB for Kina Biopower; 150 km was regarded as the distance that was able to achieve parity in terms of operational cost and revenue from the sale of utilities through processed EFB. According to the Malaysian Palm Oil Board, Johor produces 1,384,974 tons of crude palm oil annually. Again, the production of 1 ton of palm oil yields 1.07 ton of EFB (Asia Biomass Office, 2010). This results in a production of 1,481,922 tons of EFB in Johor, which is extremely abundant for sourcing of EFB to be carried out.

Quite evidently from Figure 10, it can be seen that if the hypothetical biomass power plant opts to source for biomass from Malaysia, there would be an abundant supply of biomass in the form of EFB to procure.

Establishment of an EFB treatment plant in Malaysia

At such a distance of transportation of biomass, special attention should be paid to the quality of the biomass being transported. As discussed in Technical difficulties faced by the plant owners, one of the key difficulties of transporting biomass is that a poor quality in EFB transported, characterized by moistureladen EFB, would result in a very low energy per unit cost, or high unit cost per unit of energy, with regards to the energy stored in the transported EFB. It is

57

therefore in the long-term interests of the hypothetical biomass plant to consider establishing an EFB treatment facility within Malaysia to treat EFB before sending it further down the route towards Singapore. Table 3 has clearly demonstrated the high amount of savings possible when EFB is treated before transportation. Figure 11. Possible site of EFB treatment plant within Malaysia (adapted from Malaysia Palm Oil Board, Economics and Industry Development Division)

The EFB treatment plant should then be established in such a way that the geographical location is equidistant from the sites that the hypothetical plant has decided to source EFB from. The plant should also be situated as far as possible, whilst lying in the route to Singapore, to ensure that the maximum possible amount of distance is covered by the transportation of EFB that has already been treated and improved in quality.

58

Conclusion
From the studies carried out on the Kina Biopower EFB plant and the study on the hypothetical plant in Singapore, it can be seen that there is a substantial degree of feasibility in constructing an EFB plant in Singapore, powered by EFB sourced from Malaysia. There is significant capital required in terms of establishing the plant and operating the plant. Yet, with the support of CDM financing, there is the possible future of an EFB powered plant in Singapore.

59

Bibliography
Nation Master, 2012. Singapore energy statistics Retrieved from: http://www.nationmaster.com/red/country/sn-singapore/eneenergy&all=1 Energy Market Authority, 2012. Fuel mix for electricity generation by energy products Retrieved from: http://www.ema.gov.sg Wahyudi Soeriaatmadja, 2011. Cut Natural Gas Exports to Singapore: Indonesian Minister Retrieved from: http://www.thejakartaglobe.com/business/cut-natural-gasexports-to-singapore-indonesian-minister/466959 Trading Markets, 2008. Batam threatens to block Indonesian natural gas supply to Singapore Retrieved from: http://www.post1.net/lowem/entry/batam_threatens_to_block_indonesian_natural _gas_supply_to_singapore UNFCCC, 2005. Clean Development Mechanism Simplified Project Design Document For Small-scale Project Acvities (SSC-CDM-PDD) Version 02: Kina Biopower 11.5MW EFB Power Plant (the Project) (Version 03) Retrieved from: http://cdm.unfccc.int/Projects/DB/DNV-CUK1145620815.98/view SESB, 2010. Sabah Energy Scenarios, SESB Open Day. Retrieved from: http://www.scribd.com/doc/50406041/SESB-PLANNING-SabahEnergy-Scenarios FAOSTAT, 2010. Production figures for Palm Oil for Malaysia Retrieved from: http://faostat.fao.org/site/567/DesktopDefault.aspx? PageID=567#ancor POIC, 2011. Palm Oil In Sabah Retrieved from: http://www.poic.com.my/Index.asp?p=palmoil_sabah Asia Biomass Office, 2010. Start of a Feasibility Study on a Project to Generate and Sell Power from Empty Fruit Bunches in Indonesia Retrieved from: http://www.asiabiomass.jp/english/topics/1110_03.html

60

Andrew Feng, 2010. Challenges faced when establishing biomass plants Retrieved from: Link has been removed.

. UNFCCC, 2007. Enclosure 5: EFB logistics Retrieved from: http://cdm.unfccc.int/UserManagement/FileStorage/IS0UKFZG8VNR3Q7J5T4D WPLY2M1AHO UNFCCC, 2005. Enclosures 1, 2 3 and 4 Retrieved from: http://cdm.unfccc.int/Projects/DB/DNV-CUK1145620815.98/view Corley et al, 2003. The Oil Palm Retrieved from: http://books.google.com.sg/books? id=NtCo1TdXuQkC&pg=PA465&lpg=PA465&dq=Corley+150km+oil+palm&sourc e=bl&ots=CAxEnM_mKl&sig=apx73ky4-8MG54cRKzWgkQGSoo&hl=en&sa=X&ei=yKBkT6LtK8yrrAfSw8G9Bw&ved=0CCIQ6AEwAA EnBW Energie Baden-Wrttemberg AG, 2011. International Climate Projects Retrieved from: http://indonesien.ahk.de/fileadmin/ahk_indonesien/PAST_EVENTS/RENERGY20 11/MONDAY/9_-_EnBW_EKONID-AHK_Presentation.pdf Siew Wai-Lin, 2011. Palm Oil Milling Process Retrieved from: http://lipidlibrary.aocs.org/processing/palmoil/index.htm UNESCAP, (No year listed). Measures For Integrating Environmental Considerations Into Agriculture Retrieved from: http://www.unescap.org/drpad/publication/integra/volume3/malaysia/3my04c02.ht m Jorgensen, H.K, 1985. Treatment of empty fruit bunches for recovery of residual oil and additional steam production Retrieved from: http://www.springerlink.com/content/0rm18xx1018t7504/ FAO Corporate Document Respository, 1980. Part Two of Power and Heat Plants Retrieved from: http://www.fao.org/docrep/P2396E/p2396e00.htm#Contents B. Metz et al, 2007. Annex I. In: Climate Change 2007: MReport of the Intergovernmental Panel on Climate Change Retrieved from: http://www.ipcc.ch/publications_and_data/ar4/wg3/en/annex1sglossary-j-p.html

61

Nichols, Will, 2011. World Future Energy Summit 2012 Retrieved from: http://www.businessgreen.com/bg/special/2137666/world-futureenergy-summit-2012

Blas Javier, 2011. Carbon prices tumble to record low Retrieved from: http://www.ft.com/intl/cms/s/0/29f0761c-1691-11e1-be1d00144feabdc0.html#axzz1pO4GHpMN Khor, Martin, 2011. Setback for Green Climate Fund Retrieved from: http://thestar.com.my/columnists/story.asp? file=/2011/10/24/columnists/globaltrends/9758337&sec=globaltrends Coelho, Jeff, 2011. Carbon crash spurs price bottom debate Retrieved from: http://www.reuters.com/article/2011/11/24/us-carbon-priceflooridUSTRE7AN0ZW20111124 Morris, G, 1999. The Value of the Benefits of U.S. Biomass Power Retrieved from: http://www.nrel.gov/docs/fy00osti/27541.pdf Averagesalary.com, 2012. Average Salary In Malaysia Retrieved from: http://www.averagesalarysurvey.com/article/average-salary-inmalaysia/24201422.aspx Menon et al, 2003. Empty Fruit Bunches Evaluation: Mulch in Plantation vs. Fuel for Electricity Generation Retrieved from: http://palmoilis.mpob.gov.my/publications/opiejv3n2-15.pdf U. S. Environmental Protection Agency Combined Heat and Power Partnership, 2007. Biomass Combined Heat and Power Catalog of Technologies Retrieved from: http://www.epa.gov/chp/documents/biomass_chp_catalog_part1.pdf Ministry of Manpower, Singapore, 2011. Income Retrieved from: http://www.mom.gov.sg/statistics-publications/national-labourmarket-information/statistics/Pages/earnings-wages.aspx National Environmental Agency, 2011. Waste Statistics and Overall Recycling Retrieved from: http://app2.nea.gov.sg/topics_wastestats.aspx Malaysian Palm Oil Board, 2012. Economics and Industry Development Division Retrieved from: http://econ.mpob.gov.my/economy/EID_web.htm

62