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Reports of CDM/JI Feasibility Studies: FY2008

Title of Feasibility Study (FS)Feasibility Study on Wood Biomass Power Generation CDM Project in East Java, Indonesia
FYFY 2008
Main Implementing EntitySumitomo Forestry Co., Ltd.
FS Partner(s)PT. KUTAI TIMBER INDONESIA
Location of Project ActivityIndonesia (East Java)
Summary of FS ReportPDF (403KB)
Description of Project ActivityThis project activity involves the installation of cogeneration equipment fueled by renewable biomass at PT. Kutai Timber Indonesia (hereinafter, "KTI"), located in Probolinggo City in Indonesia's East Java province.
KTI is a general timber processor manufacturing plywood, building materials, and particle board (PB). In its plywood and building materials plants, KTI owns three boilers fired entirely by wood biomass generated by the plants. KTI draws electricity for its plants from Indonesia’s largest electricity network, the Java-Madura-Bali (JAMALI) grid. The plywood/building materials plants and PB plant each use 3.5MW at peak periods.
The new equipment will consist of a cogeneration system able to generate 4.5MW of electricity and 6.5MW of thermal energy that will displace electrical energy used by the PB plant and thermal energy used by the building materials plant.
The renewable biomass fuel will be wood biomass and agricultural waste either generated by KTI plants or collected from the surrounding region.
Targeted GHGCO2
Category of Project ActivityBiomass Utilisation
CDM/JICDM
Duration of Project Activity/ Crediting Period2010-2030/ 2011-2018 (first crediting period)
Baseline Scenario (including Methodology to be applied)AMS I.C. and AMS I.D. small-scale methodologies will be applied.
Of the baseline options given in the AMS I.C. small-scale methodology, "(e) Electricity is imported from the grid and/or produced in an on-site captive power plant (with a possibility of export to the grid); steam/heat is produced from renewable biomass" shall be the baseline. This is identical to the current system and specifies the baseline as the electricity imported from the grid and the steam/heat produced by the wood biomass boilers.
The project boundary is delineated by the "The physical, geographical site of the renewable energy generation" as stated in small-scale CDM methodology.
Demonstration of Additionality1. Investment barriers
    An IRR estimate does not support establishing the project activity at the current stage as the IRR is expected to fall below the weighted average cost of capital even when revenue from CER sales is included.
2. Barriers due to prevailing practices
    There are many barriers to the use of renewable biomass. Compared to coal, for example, renewable biomass must be collected in large volumes from quite a wide range of sources and then stored. It also requires labor and time, and securing a stable supply of waste materials depends on the economic conditions facing timber processors.
    If the project activity were to be implemented, KTI would be the first timber processing plant on Java to introduce efficient cogeneration facilities for producing heat and electricity.
Estimation of GHG Emission Reductions12,172tCO2 (annual average)
Monitoring Plan (including Methodology to be applied)KTI has already acquired ISO 9001 certification for its plywood/building materials plants. Certification of the PB plant is expected in 2009. Therefore, controls will be upheld through the monitoring frameworks described in ISO procedures.
The PB Production Division will tabulate parameters such as production cost and electricity usage for the PB plant at the end of each month and file a monthly report that the general manager of the Administration Division will confirm and deliver to the company president. Reporting for this project activity will follow the same format. With implementation of the project activity, a Biomass Power Plant Section will be newly established within the PB Production Division.
Environmental Impact AnalysisKTI carries out environmental management in compliance with the environmental management and monitoring documentation (DPPL). KTI has already acquired ISO 14001 certification for its plywood/building materials plants. Certification of the PB plant is expected in 2009. Applying ISO 14001 environmental management methodology, KTI has already put in place systems, for formulating and implementing plans to reduce environmental impact and improve plant working environments with respect to health and safety.
Additionally, greater reductions of particulate matter and carbon monoxide emissions are achievable when compared to the utilization of fossil fuels.
Issues and Tasks for Project MaterialisationAn estimate of project feasibility performed under current conditions does not support establishing the project activity.
Parameters with a major influence on the results of the feasibility estimate are electricity prices set by PLN and renewable biomass purchasing costs. The activity would be potentially workable were PLN's electricity prices to rise and renewable biomass purchasing costs to fall. Information received from PLN points to a likely increase in electricity prices in the near future. It is thus necessary to negotiate to keep renewable biomass purchasing costs down and secure collection routes so that the activity can be implemented.
Co-benefits Effects1. Emissions of particulate matter
    The boiler to be substituted for the project activity has occasionally been seen to emit black smoke due to incomplete combustion caused by, for example, a shortage of oxygen during combustion or low internal temperatures. The new equipment will have a combustion system that does not emit black smoke from incomplete combustion, and a dust collector, which will suppress emissions of particulate matter.
2. Effective use of renewable biomass
    Utilizing unused agricultural waste as fuel is not only an effective use of resources, but also prevents smoke pollution otherwise caused by simple incineration. It also contributes toward avoiding methane emissions.

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