Biomass Power Generation Project in the State-owned Palm Oil Mills

Sub-title Biomass Power Generation Project in Sei Mangkei Special Economic ZoneSEZ, North Sumatra (Studies for Project Development and Organization )

Shimizu Corporation GHG Project Department Hiroyuki KURITA

NEDOs Feasibility Studies with the Aim of Developing a Joint Crediting Mechanism (JCM) Country Indonesia SectorBiomass

Biomass Power Generation Project in Indonesian State-owned Palm Oil Mills (Studies for Project Development and Organization )
Company proposed Shimizu Corporation EFB (empty fruit bunch) is an unused biomass resource in palm oil mills. It will be collected and utilized to generate power, which is supplied to industrial estates. As a result, the ratio of biomass used in domestic primary energy will be enhanced and this will contribute to NAMAs.

Survey in Summary
The target of study is to plan the introduction of Indonesias first small CFB (circulating fluidized bed) boiler technology and to realize commercial biomass power generation.

Survey Items
(1) Planning of overall facilities and evaluation of project profitability (2) Study of project scheme, project plan and risk countermeasures (3) Preparation of MRV methodology and review of methodology applicability (4) Environmental impact and stakeholders comments (5) Discussions with related agencies

Partner / Site
(Indonesia) PTPN Host Country Counterpart (Indonesia) North Sumatra Province

Estimated Reduction amount

Reference scenario
- Power is supplied from the grid or generated by fossil fuels at the industrial estates. - EFB is returned to palm fields close to the palm oil mill. CO2 emissions
Purch ased power

Reduction amount57,500tCO2/y
Emission reductions by project
Reduetion of CO2 emissions

Fossil fuel
Current situation Afterintroduction

- Since part of the purchased power is substituted by power generated from biomass, emissions of CO2 derived from fuel at grid power stations is reduced. - Auxiliary fuel for boiler and fuel for transportation of biomass are the project emissions.

Amount of Palm-oil Production

60000

50000

Amount (1000t)

40000

30000

Other Malaysia Indonesia

20000

10000

0 2005 2006 2007 2008 2009 2010 2011 2012

Year

Industrial Waste from Palm-oil Mill

FFB EFB Shell Fiber CPO Product PKO
FFB : Fresh Fruit Bunch EFB : Empty Fruit Bunch CPO : Crude Palm Oil PKO : Palm Kernel Oil FFB

Use Rate 0% 3040% 100%

EFB

Treatment 50% Water Content 75% LHV 7.75MJ/kg

Shell

Fiber

NEDOs Feasibility Studies with the Aim of Developing a Joint Crediting Mechanism (JCM) Country Indonesia SectorBiomass

Summary of Introduced Technology

Small CFB boiler power generation system: 12 MW

This Japanese low-carbon technology, which is unprecedented in the world, utilizes a compact (6 MW per boiler) fluidized bed (CFB) boiler for generating power from biomass. This has been developed for efficient power generation based on stably combusting EFB (empty fruit bunch of palm), which is fuel comprising high water content (50%) and large size (around 30 cm). The technology has undergone continuous combustion testing on the pilot level and is at the point where it can stand up to commercial operation. Conventionally, fibers and shells comprising low water content (20~30%) and small size (no more than a few centimeters) were used in small private generation stokers in mills, however, such equipment sometimes cannot be used with EFB because much of the fuel is not combusted and it is necessary to make frequent maintenance stoppages. The abovementioned CFB boiler has been packaged and its costs have been cut until it is now deemed to be internationally competitive in general assessments of technology, price and environment. The area around Medan in North Sumatra has been selected as the project site because it offers excellent road conditions and a high concentration of palm mills that will make it possible to achieve the cheap and stable transportation of fuel. Moreover, through conducting a joint project with a state-owned plantation corporation, it is intended to remove barriers to the biomass power generation business and realize stable commercial operation.

CFB Boiler over Grate Boiler

CFB : Circulating Fluidized Bed

NEDOs Feasibility Studies with the Aim of Developing a Joint Crediting Mechanism (JCM) Country Indonesia Sector Biomass

Contents of the Feasibility Studies

Planning of overall facilities and evaluation of project profitability

Project site: Sei Mangkei Special Economic Zone , Industrial Estate

Designated under the Indonesia Economic Development Acceleration and Expansion Plan (MP3EI) The first phase zone of 104 ha, out of the overall estate area of 2,002 ha, is under construction. 3.8 ha is planned as a biomass power plant area

Power : Sold to the industrial estate management company Fuel (EFB):Colleced from 5 nearby mills (250,000~300,000t/y) Equipment : (CFB boiler + 6MW steam turbine generator) x 2 Pretreatment equipment (dewater, cutting) Power sale price: around 975Rp/kWh (FIT is projected) Preferential measures: Reduction of import tax, partial exemption of profit tax, etc.

Study of project scheme, project plan and risk countermeasures

CounterpartPTPN3 Project style: Joint venture by PTPN3 and the Japanese consortium Partner selection: Direct Selection

Potential Map in 2011-FS

KEK SEI MANGKEI

Meliau H. Rimba Beliau Ngabang Parindu PTPN PTPN RNI Samuntai Mungguk Long Pinang Luwu, PTPN14 400km

200

Initial Project Area Suitable

Phase
Generating Capacity Emission Reduction

(2013-2014) 47MW
274,000 t-CO2/y

(2015-2020 38MW
221,000 t-CO2/y

(2021-2025) 50MW
291,000 t-CO2/y

Total 135MW
786,000 t-CO2/y

Excluding own consumption

February 2012: PP No.29/2012 for KAWASAN EKONOMI KHUSUS SEI MANGKEI

PP : Peraturan Pemerintah (Governmental Regulation)

SITE LOCATION
MEDAN Port Kuala Tanjung Regency of SIMALUNGUN North SUMATERA Province, INDONESIA

KEK SEI MANGKEI Area of Phase 104HA)

140km from MEDAN 40km from Port Kuala Tanjung 2,002Ha approved as KEK (SEZ : Special Economic Zone)

Possible Power Plant Area A= 3.8HA

Existing Entity and Facilities in KEK Sei Mangkei

PTPN Headquarter in Medan

Office of Management Unit for Sei Mangkei

Intake from River Bar Borong Main Street of KEK

POM Sei Mangkei75/

Under Construction of MOI Center

Plant side view

Boiler

Fuel supply facility

NEDOs Feasibility Studies with the Aim of Developing a Joint Crediting Mechanism (JCM) Country Indonesia SectorBiomass

Key Result and Outcome

MRV Methodologies and Estimated Emission Reduction
The base CDM methodology (ACM0006) is complicated and hard to understand due to its general applicability. MRV Focused only on green field projects Simplified the calculation of fuel consumption for transportation Used the methodology format for domestic emissions trading Expected reduction in emissions: 57,500t-CO2/year

Economic Viabilities, Financial Approaches, Prospect for the Project etc

Results of examination implemented (tentative): Initial investment cost $33.1M Operational cost : $3.48M/y Revenue Income from power sales: $7.67M/y Credit income 10/t-CER : $0.7M/y IRR = 9without Carbon Credit 12 with Carbon Credit
Pay back period : 7.1 years (without Carbon Credit 6.2 yearswith Carbon Credit

Finance: Own funding + other company funding + Government of Japan aid system BOT system is to be proposed

Issues in project actualization JCM capacity building Support from the governments of Japan and Indonesia

Reference Scenario : BAU

All Fiber and a part of Shell are utilized for power and steam at almost all the POMs(Palm Oil Mills) by stoker type boiler, and EFB is returned to Palm plantation by its high water contents Composting projects and waste-to-energy projects for EFB with Shell have been commenced in a few POMs, but EFB(100%)-CFB Boiler is not introduced

Project Activities
EFB will be collected from several POMs to one site, and then CFB Boiler Plant will supply power to SEZ Sei Mangkei Emission ReductionER of the Project is calculated by following (the reduction of fossil fuel in the Grid system) - (fuel use for EFB transportation)

Monitoring Plan for the Project

Project boundary
to GRID (PLN) Auxiliary Generator Diesel FF ag,y

Regulator

Turbine & Generator

Fossil Fuel FFaux,y

Boiler Crusher

Dryer & Stock-yard

ELPJ,y

Conveyer

QEFB,y

5 sites
Auxiliary Generator Diesel to GRID (PLN)

Regulator

Turbine & Generator

Boiler

EFB Fiber POM

Steam Electricity

Fossil Fuel

Shell

Formula 1 2 3 4 ELPJ,y FFag,y FFaux,y QEFB,y

Monitoring Items Project Generation of Electric Power(MWh) Fossil Fuel Use of Stand-by Diesel Engine Generator(ton) Fossil Fuel Use for Boiler Start-up(ton) Transportation Volume for EFB(ton)

Emission Reduction Reference emission (REy ): 60,103tCO2/y

REyELPJ,yEFgrid,y Power sales(ELPJ,y) : Emission factor(EFgrid,y) : 80,352 MWh/y 0.748 tCO2/MWh

Project emission(PEy) :

2,522tCO2/y

PEyPEtrans,yPEaux,yPEag,y Emissions arising from transportation(PEtrans,y) : 2,506tCO2/y Emissions arising from use of combustion improver(PEaux,y) : 5tCO2/y Emissions arising from operation of the auxiliary generator(PEag,y) : 11tCO2/y

Emission Reduction :

57,581tCO2/y

Expected Implementation Schedule

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Activities Items NEDO-FS Opening Seremony MOI Center Unilever Pile Driving Event FS Reporting Bilateral Agreement for JCM Capacity Build. of JC/Related Regulations Emarging a New Carbon Market Japanese Consortium Formation SHIMIZU Proposal to PTPN3 Selective Procedure by PTPN3 MOUConclusion Nego. and Conclusion/JV Agreement Preparation of UKL-UPL Procurement of EPC Detailed Design Manufacturing/Installment of CFB Boiler Plant Test-run/Inspection Operation Startof PLTBS Application to JC as a JCM Project Approvar and Registeration of the JV Jan Feb Mar Apr May 2013 Jun Jul Sep Oct Nov Dec J F 2014 2015 M A M J J S O N D J F M

JCM: Joint Crediting Mechanism between Indonesia and Japan JC : Joint Committee for JCM #20: Approval is necessary by Miniter of KBUMN for JV

Operation Start : January 2015 Commencement of Construction : September 2013

Development/Palm Oil Downstream Industry

SEZ Sei Mangkei Sumatra Economic Corridor MP3EI

Technology Transfer Renewable Energy 80 GWH/year

:Utilization :Contributions to be expected

Palm Oil Sector -EFB(=Fuel) -Land -H. Resources -Others Financial Mixture: SOEs, Private & (Gov.) 250 kt/y National Energy Mix 25/25

PLTBS:12MW
$33-35m. CFB Boiler with Environmental Integrity 345kt-CO2e Indonesia NAMAs ER:-41 by 2020

Rp.975/kWh

Financial Instruments Support; Taxes, Duty & Feed-in Tariff

Japanese Low-Carbon Technology

Further Supports by Indonesian and Japanese Government

How to Contact Us

Mr. Hiroyuki KURITA, General Manager kurita@shimz.co.jp Mr. Kazuhide MARUYAMA, Manager Kazuhide_maruyama@shimz.co.jp Mr. Sueo MORI, Manager moris@shimz.co.jp GHG Project Department Shimizu Corporation No.16-1, Kyobashi 2-chome, Chuo-ku, Tokyo 105-8007, Japan TEL+81-3-3561-4310 FAX+81-3-3561-8519 http://www.shimz.co.jp/english/index.html

Our new head office in Tokyo

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