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Reports of CDM/JI Feasibility Studies: FY2005

Title of the researchUtilisation of Biomass at Palm Oil Manufacturing Factories in Sabah, Malaysia
FYFY 2005
Main research orgnisationHokkaido Electric Power Co., Inc.
Research partner(s)Taisei Construction Co., Ltd., Sawit Kinabalu Sdn. Bhd., Borneo Samudera Sdn. Bhd., SWE Co.
Location of the projectMalaysia (Sabah State)
Summary of the research report (PDF)200507.pdf
Description of the projectThe project, which targets a palm oil factory in Sabah, Malaysia, proposes to make effective use of palm oil mill effluent (POME) that is discharged from the said factory, with a view to generating electricity from biogas. The POME is currently treated in an aerobic and anaerobic open lagoon method, and biogas containing methane gas (CH4) is discharged from the anaerobic open lagoons into the atmosphere. In the project, a closed methane fermentation system will be introduced in order to collect this CH4, use it as the raw material (fuel) for generating electricity. As a result, the project will reduce emissions of methane gas discharged from anaerobic open lagoons, moreover, through connecting generated power to the grid, it will have a carbon dioxide (CO2) emissions reduction effect by offering a substitute for energy from thermal power plants. As is shown in Table 1, the commercial viability was assessed for three cases assuming differing COD values. Case 1 and 2 targets the said factory, and case 3 targets the factory with general value of COD.
Table 1 Project Cases
CaseCOD (ppm) of POME discharged from the factoryCOD (ppm) of POME put into the methane fermentation system
1
20,000
20,000
2
20,000
50,000
3
50,000
50,000
GHGCO2, CH4
Sector of the projectBiomass Utilisation
CDM/JICDM
Duration of the project activity/ crediting period2008 - 2023
Baseline methodology/additionalityThe approved methodology AM0013 Version 02 shall be adopted in the project.
Table 2 shows the results of examining each item in terms of the project. Both the diagram and the table conclude that the baseline for the project is the adoption of anaerobic open lagoons, i.e. maintenance of business as usual. And, additionality is demonstrated based on AM0013 Version 02.

Table 2 Examination Results concerning Baseline Setting
Examination Item
The Project
① Are anaerobic open lagoons used?
Yes
Anaerobic open lagoons are used.
② Are recent environmental standards satisfied?
Yes
It is managed by the Sabah Department of Environment (DOE) of the Ministry of Natural Resources and Environment and satisfies environmental standards.
③ Is there likelihood of environmental standards being strengthened in future?
Yes
The DOE has plans to strengthen wastewater standards in future.
④ Can environmental standards be satisfied through increasing the number of open lagoons?
Yes
The environmental standards can be satisfied by increasing the number of open lagoons.
⑤ Is there enough land to increase the number of open lagoons?
Yes
Since Sawit Kinabalu also owns land around the factory, the number of open lagoons can be increased.
Estimation of GHG emissionsTable 3 shows the GHG emission reductions in each project case. Total GHG emission reductions over the project life of 16 years are calculated as 246,145 CO2 in Case 1, 218,399tCO2 in Case 2, and 614,645 CO2 in Case 3.
Table 3 GHG Emission Reductions in the Project (tCO2/yr)
Year
2008
2009
2010
2011
2012
2013
2014
2015
Case 1
9,114
12,184
13,145
14,562
15,488
16,238
16,541
16,541
Case 2
6,796
10,915
11,776
13,046
13,876
14,537
14,745
14,745
Case 3
22,786
30,459
32,862
36,404
38,721
40,584
41,283
41,283
Year
2016
2017
2018
2019
2020
2021
2022
2023
Case 1
16,541
16,541
16,541
16,541
16,541
16,541
16,541
16,541
Case 2
14,745
14,745
14,745
14,745
14,745
14,745
14,745
14,745
Case 3
41,283
41,283
41,283
41,283
41,283
41,283
41,283
41,283
Monitoring methodologyAM0013 Version 02 shall be applied to the project. Figure 1 gives an illustrated view of the monitoring plan.

Figure 1 Monitoring Plan Drawing
Environmental impactUpon conducting a hearing with Department of Environment Sabah regarding environmental regulations, we were told that there is no need to implement an Environmental Impact Assessment (EIA). However, concerning air quality, water quality, stack and noise, we found that it is necessary to conduct assessment with respect to environmental regulations. The project is thought to basically satisfy all the regulatory values.
Issues and tasks for project implementation
Table 4 Internal Rate of Return (IRR): After Tax
Project Case
CER price
(USD/tCO2)
CER acquisition period
0 years5 years16 years
Case 1
5
MinusMinusMinus
10
MinusMinus4.3%
Case 2
5
0.3%1.0%3.0%
10
0.3%1.9%5.1%
Case 3
5
0.3%2.6%6.8%
10
0.3%5.2%11.6%

It can be seen that when there are no CERs (CER acquisition period is 0), the IRR is less than 1% in all cases. When there are CERs (CER acquisition period 5 years and 16 years), the IRR reaches a maximum level of around 5% in Cases 1 and 2. As for Case 3, the IRR is around 12% when the CER acquisition period is 16 years and the CER price is 10 USD/tCO2, and 5% when the acquisition period is 5 years. Accordingly, it was found that the project may be feasible as a private sector undertaking.

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