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Reports of CDM/JI Feasibility Studies: FY2009

Title of Feasibility Study (FS)Programmatic CDM Feasibility Study for Biomass (Gliricidia) Utilisation for Thermal Energy to Be Used at Industrial Facilities
FYFY 2009
Main Implementing EntityEX Corporation
FS Partner(s)Hokkaido Electric Power Co., Inc.; E2 Engineering Corporation; Nanpo Shokai.Ltd; Sri Lanka Bioenergy Association of Sri Lanka (BEASL); Ener Fab (Pvt) Ltd.; and Mahatma Gandhi Centre (MGC)
Location of Project ActivitySri Lanka
Summary of FS ReportPDF (200KB)
Description of Project ActivitySri Lanka is a fossil fuel importing country whose energy demand is on the rise resulting in a large pressure to the financial state of the country. This project aims to use collected wood chips of Gliricidia (Gliricidia sepium), a fast growing tree, and use it as a source of industrial heat under the framework of Programmatic CDM as an alternate to fossil fuel (furnace oil, diesel) and in addition to reduction of GHG and co benefits resulting from the prevention of atmospheric pollution, contribute to self reliance in terms of energy and development of rural villages and areas in Sri Lanka. The total amount of reduction of CO2 from 3 projects (Lion Brewery, Premium Exports Ceylon, and Ceylon Cold Stores) chosen for the first phase in this study is expected to be 13,882tCO2/year and a total of 138,820tCO2 in the 10-year period of 2011 to 2020. After second phase onwards, in sites with annual usage of furnace oil of about 300kL, the reduction amount is expected to be about 800-900tCO2/year per site and as about 2,000 big and small scale heat using enterprises are expected within the country, the applicability of the project is expected to be high.
Regarding the implementation schedule, the framework of PoA needs to be agreed to by the stakeholders after the completion of this study. Further, along with negotiations between 3 companies chosen as CPA for the first phase and Ener Fab (Pvt) Ltd. regarding towards signing a business contract, actions to start the validation for the registration of PoA should be initiated as soon as possible.
Targeted GHGCO2
Category of Project ActivityBiomass Utilisation
CDM/JICDM
Duration of Project Activity/ Crediting PeriodPoA: 28 years/ Crediting period: 10 years
Methodology to be appliedThis project applies SSC AMS-I.C. "Thermal energy production with or without electricity (Ver.16)". In addition, based on this methodology, AM0042 "Grid-connected electricity generation using biomass from newly developed dedicated plantations (Ver.02)" was applied for biomass utilization.
Baseline ScenarioBaseline Scenario:
    The baseline of the proposed project is that the industrial thermal energy is continued to be supplied by the usage of fossil fuels such as furnace oil and diesel. Biomass, mainly Gliricidia branch, which is pruned periodically, is left at backyards of farms or farmlands to decay and is not sold or utilized. In cases where biomass such as Gliricidia (which can be harvested on short rotations) is newly grown in unutilized land and the harvested biomass is supplied to industry for thermal purpose, the baseline scenario is the continual soil degradation due to the unused state of the land to be continued.
Project Boundary:
  • PoA boundary: within Sri Lanka
  • CPA boundary: the physical and geographic location of each biomass thermal energy generating facility
Demonstration of AdditionalityAdditionality is established based on "Tool for the demonstration and assessment of additionality (Version 05.2)" (EB39, Annex10) according to the following steps: Step-1) Identification of alternatives to the project activity consistent with current laws and regulation, Step-2) Investment Analysis, Step-3) Barrier Analysis, and Step-4) Common Practice Analysis.
  • Investment Analysis:
      Benchmark analysis was applied to investment analysis for this PoA. Interest rate on loans of the Sri Lanka central bank can be thought of as data available in public domain that can act as a benchmark for judgement of investments although the rate, which was 19% in December 2009, was decreased to up to 8% in January 2010 by the decision of the Government. IRR assessment was conducted assuming that the expected lifetime of the facilities to be installed was 15 years. For sensitivity analysis, parameters such as investment cost, fuel procurement cost of biomass, price of fuel to be replaced, operating ratio of the plant were set as plus or minus 10% from the basis assumption. In addition, assessment was also conducted assuming that project period was 20 years. In case where the IRR is beyond benchmark, CPA needs to demonstrate the "Step-3 barrier analysis" in accordance with the "Tool for the demonstration and assessment of additionality (Version 05.2)".
  • Barrier Analysis:
    - Barrier due to prevailing practice:
      Currently there are eight (8) facilities in Sri Lanka that utilize gasification of Grilicidia all of which have received initial investment support from foreign governments and there are no facilities operating purely on investment solely from private investors. Further although some medium to large plants that use waste rubber or forest biomass as fuel for boilers exist, not even a single plant that uses Gliricidia as a main biomass fuel exists. Hence, as the ratio of medium to large scale heat using plants that uses biomass fuels based on Gliricidia is less than 1%, barrier due to prevailing practice is expected.
    - Barrier regarding procurement of biomass resources:
      In Sri Lanka, the areas with high demand of energy are located mainly along the western coast centred on Colombo. However, villages that can potentially act as supply regions for Glircidia are mostly located in other regions. When considering the usage of Gliricidia and other biomass fuel, in addition to transportation from supply area to demand area, a lot of effort and investment will become necessary in areas that are not the main business in order to provide a stable supply of biomass demanded by the client. This will not only put other non-financial pressure on manufacturers but will also result in additional load such as negotiations with farms. This fact is becoming the major factor that is preventing investment on biomass using facilities. Therefore, it is necessary to prepare a system for stable supply of biomass within the CDM framework by matching suppliers with people with demand.
    - Access-to-finance barrier:
      In Sri Lanka, companies that have been registered as ESCO service are generally of small to medium scale. When large consumers of fossil fuel that want an alternative to their energy source want a supply of renewable energy based on contracts with these ESCO service, it is expected that securing the initial and O&M cost becomes a large hindering factor for these ESCO companies. Further, providing guarantees is necessary when borrowing is necessary and for ESCO companies who are not well off financially it is very difficult to reach the stage of project formation although the demand for energy supply exists.
    During discussions with Sri Lanka Central Bank, it was understood that investment in businesses involving transformation of fuel from fossil fuel to biomass fuel was difficult because of the various uncertainties involved (especially if the company involved is a small to medium enterprises), but when the project becomes a CDM project and guarantee can be provided by a Japanese or other investors, the attitude toward the risk factors associated with the project was thought to improve and hence the chances of investment in the project improved too. This fact demonstrates the access-to-finance barrier and it can be concluded that making this project a CDM project drastically reduces the barrier
  • Common Practice Analysis:
      Other activities similar to the project activity are described as follows: i) Existing gasifier facilities using biomass fuel mainly Gliricidia, ii) Existing boiler facilities using fuel wood other than Gliricidia, iii) Biomass utilization for thermal use at very small scale. However additionality of all the CPAs under this PoA is demonstrated as there are clear distinctions between these activities similar to the proposed activity and CPAs under this PoA.
Estimation of GHG Emission Reductions13,882tCO2/year for the 3 projects of the first phase
Monitoring PlanThis PoA envisages the usage of Gasification facilities and Boilers. In the small scale methodology AMS-I.C(Ver16), the monitoring plan according to the type of facility is expected to be as follows.
    Table 1: Monitoring parameters for cases of installing boilers and gasification facilities of over 45kW
    Parameter
    Unit
    Measurement method
    Frequency
    QA/QC method
    Flow rate of produce energym3/year,
    t/year
    Flow meterContinuousCalibration of the measuring instrument, maintenance according to the manufacturer's recommendation
    Temperature of produced energy degree CThermometerContinuousCalibration of the measuring instrument, maintenance according to the manufacturer's recommendation
    Pressure of produced energy (only in case of steam energy)BarPressure gaugeContinuousCalibration of the measuring instrument, maintenance according to the manufacturer's recommendation
    Biomass input amount (type wise)t/yearVoucherDailyOn-site check by a third party
    Amount of fossil fuel used (when used)t/yearVoucherDailyOn-site check by a third party
    Table 2: Monitoring parameters for cases of gasification facilities of 45kW and less
    Parameter
    Unit
    Measurement method
    Frequency
    QA/QC method
    Biomass input amount (type wise)t/yearVoucherDailyOn-site check by a third party
    Amount of fossil fuel used (when used)t/yearVoucherDailyOn-site check by a third party
Environmental Impact Analysisi) Analysis of environmental impact assessment as required by the PDD:
    According to the Gazette on 772/22 of 24th June, 1993 and 859/14 of 23rd February 1995, the alternate heat source activities of this project are not subject to the requirements of EIA. However, in case where the project involves new cultivation of biomass, the project implementation sites, facility suppliers and energy replacing entities need to closely consider the fact that the conditions in the gazette mentioned above are met i.e. ensure that they do not carry out activities like reclamation of land or marshlands larger than 4ha (section 2), clearing of woods in land area over 5ha (section 3), non-forest use of forest area of over 1 ha (section 4), land clearance of over 50ha (section 5) etc.
ii) Analysis of environmental impact from this project:
    This project aims to introduce environment friendly facilities to cheap boilers that use fossil fuel and release air pollutants and hence is a business that contributes to the improvement of environment. Hence, alleviation of environmental load in the surrounding area from the replacement of equipment is expected.
    The desires of the 3 local partners chosen for PDD preparation to actually implement the project is very high and are seriously considering the implementation within a short time frame. Lion Brewery is strongly committed because it believes that the fuel conversion project as a CDM project not only helps to improve the image of the company, but will act as a risk hedge for energy management of the company in the future. Further, for Premium Exports and Cold Stores, procurement of fund from the commercial banks is a challenge. At present, Ener Fab has plans for implementing the project as a ESCO business. They are in negotiations with banks for the possibility of a loan. In order for the project to be actually implemented, the risk for registration as a Programmatic CDM project should be lowered as much as possible and hence every effort should be made to register the PoA.
Project FeasibilityThe desires of the 3 local partners chosen for PDD preparation to actually implement the project are very high, and the partners are seriously considering the implementation within a short time frame. Lion Brewery is strongly committed because it believes that the fuel conversion project as a CDM project not only helps to improve the image of the company, but will act as a risk hedge for energy management of the company in the future. Further, for Premium Exports and Cold Stores, procurement of fund from the commercial banks is a challenge. At present, Ener Fab has plans for implementing the project as a ESCO business. They are in negotiations with banks for the possibility of a loan. In order for the project to be actually implemented, the risk for registration as a Programmatic CDM project should be lowered as much as possible and hence every effort should be made to register the PoA.
Pollutants Emissions ReductionIn the evaluation of the co-benefit, the parameters chosen are SOx, NOx, dust and CO2. Baseline and the project scenario are expected to be as shown in Table 3. When the emission of the target substances is estimated when both the furnace oil and diesel are replace respectively, the emission of all the gases in consideration are expected to decrease in both the cases with the reduction being more when furnace oil is replaced.
    Table 3: Outline of Baseline and project scenario and its components
    Baseline scenario
    Project scenario
    Comment
    Scenario outlineHeat production through combustion of fossil foil in boilersGasification of Gliricidia by a equipment for Gasification of wood based biomass + heat production through the usage of the gas produced
    -
    Heat usage equipmentPre existing boiler
    [Boiler + (flue gas treatment facility) + heat supply related equipments]
    Equipment for Gasification of wood based biomass[gasification furnace
    + flue gas treatment facility + gas combustion boiler + heat supply related equipments]
    By using the same fuel, compactness of the gasification equipment and a improved heat efficiency can be expected.
    FuelFossil fuelWood based biomass (Gliricidia chips)Reduction of emission of CO2 and SOx can be expected through the usage of Gliricidia chips
    Heat productionCombustion of fossil fuelGasification and gas combustion
    -
    Heat exchangeSteam (water) etc.Steam from direct combustion gas etc.
    -
    Table 4. Calculation (quantification) before the implementation of the project (furnace oil)
    Evaluation parameter
    Unit
    Indicator evaluation of the project line
    Emission of SOx
    t/year
    SOx pjs (t/year)-SOx bls (t/year) =0-51.4 =-51.4t/year
    Annual SOx reduction of 51.4t
    Emission of NOx
    t/year
    NOx pjs (t/year)-NOx bls (t/year)=14.0-21.2=-7.2t/year
    Annual NOx reduction of 7.2t
    Emission of dust
    t/year
    Dust pjs (t/year)-Dust bls (t/year)=43.2-62.0=-18.8t/year
    Annual reduction of 18.2t of dust
    Emission of GHG
    t/year
    GHG pjs (t/year)-GHG bls (t/year)=0-5,542=-5,542t/year
    Annual reduction of 5,542t of CO2
    Table 5. Calculation (quantification) before the implementation of the project (diesel)
    Evaluation parameter
    Unit
    Indicator evaluation of the project line
    Emission of SOx
    t/year
    SOx pjs (t/year)-SOx bls (t/year) =0-0.01 =-0.01t/year
    Annual SOx reduction of 0.01t
    Emission of NOx
    t/year
    NOx pjs (t/year)-NOx bls (t/year)=3.2-5.4=-2.2t/year
    Annual NOx reduction of 2.2t
    Emission of dust
    t/year
    Dust pjs (t/year)-Dust bls (t/year)=11.5-9.9=-1.6t/year
    Annual reduction of 1.6t of dust
    Emission of GHG
    t/year
    GHG pjs (t/year)-GHG bls (t/year)=0-1,216=-1,216t/year
    Annual reduction of 1,216t of CO2
    ※The underlined portions in the table are parameters that need to be measured.
    ※pjs: project scenario, bls: baseline scenario
Contribution to Sustainable Development in Host CountryIn addition to Effect of co-benefit evaluation (reduction of GHG gas, improvement of the environment), the following contributions to sustainable development is expected from this project.
  • Soil protection and derived effects from soil protection in the host country:
      Gliricidia belongs to the leguminosae family and has the ability to fix atmospheric Nitrogen. Its cultivation is possible in various different conditions except cases where there is absolutely no nutrient in the soil or the soil is highly acidic or alkaline. The leaf from this plant is full of Nitrogen and hence when it falls on the soil, the Nitrogen content is returned to the soil which helps improve the soil quality. The following effect can be expected be using Gliricidia in unused land and land with limited usage: i) Improvement of soil condition, ii) Prevention of soil erosion (cultivation areas and cultivation plot) , iii) Diversification of plants and living organisms and iv) Absorption of CO2.
  • Environmental improvement and pollution prevention measures in the host country:
      The fuel usage of Gliricidia chips, as compared to diesel and furnace oil, emits a lower amount of SOx, NOx, dust and SPM. The reduction is noteworthy especially when furnace oil is replaced. In coconut and tea farms which are the major agri products of Sri Lanka, many factories use furnace oil and hence by promoting the cultivation of Gliricidia in farms adjacent to factories and replacing the fuel, a big contribution can be made to prevent air pollution and also improve the health of the people residing in the surrounding areas.
  • Improvement of energy self sufficiently, improvement of trade balance:
      Sri Lanka relies heavily in the import of energy due to increase in domestic demand of energy and with the rise in price of fossil fuel, usage of Gliricidia is expected to contribute to help improve the self sufficiency of energy and also the trade balance.
  • Development of rural villages and remedy to regional disparity:
      Cultivation of Gliricidia can act as a mean of gaining hard cash for the people of rural areas. The effective usage of leaves (manure) can lead to a reduction in the usage of chemical fertilizers and the usage as animal feed can help improve the self sufficiency for rearing livestocks resulting in the reduction of operating cost of the farms. This is expected to contribute to a sustainable development of the rural areas.
  • Support to the war-ravaged areas and areas affected by natural disasters:
      The host country has experienced civil war for a long time and in the Northern, Eastern and North Eastern areas severely affected by the civil war, the people have run away from their homes leaving the farm lands which have become unused. In these areas and areas in the southern regions which are affected by Tsunami and other natural disasters and coastal areas which are dry and cannot be cultivated, the cultivation of Gliricidia is reported to be possible and the cultivation of Gliricidia can be expected to increase in these areas.   

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