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Reports of JCM/BOCM Feasibility Studies: FY2012

Title of Study JCM/BOCM Feasibility Study
Solar-Diesel Hybrid Power Generation to Stabilise Photovoltaic Power Generation
FYFY 2012
Main Implementing EntityHitachi Zosen Corporation
Study Partners[Japan] Mizuho Corporate Bank, Solar Frontier
[Host Country] Differ/ Eco Power
Location of Project/ActivityIndonesia (Nias Island, North Sumatra Province)
Category of Project/ActivityRenewable Energy
Study Report

Note: Preliminary drafts of MRV Methodology and Calculation Sheet are the result of the study. They have neither been officially approved, nor are guaranteed to be officially approved under the JCM/BOCM.
Description of Project/ActivityA power supply project to introduce a small to medium-scale MW class hybrid power generation system that combines Photovoltaic (PV) and diesel engine power generation. Introduction of this system will enable a reduction in fossil fuel consumption through PV power generation offset and increased diesel engine efficiency. Accordingly, this project through reducing fossil fuel consumption will result in a corresponding reduction in the amount of CO2 emissions. This hybrid system, through highly advanced integrated controls, compensates for output fluctuations in PV power generation by incorporating a low-load type diesel engine. The system optimizes power generation at the same time as stabilizing power output which in turn keeps the usage of high cost rechargeable batteries to a bare minimum and also minimizes both construction and running (fuel) costs.
Eligibility CriteriaThis methodology is applicable to a project activity that involves a power generation system that combines PV and diesel engine power generation and satisfies all of the followings:
  1. An activity that, through application of software that compensates for fluctuations in the PV power output, controls diesel engine power output, stabilizes the total PV and diesel engine power output and in particular uses stable power to provide base-load electricity for small or medium sized systems (MW class or smaller).
  2. An activity that uses a low-load type diesel power generator and one that uses a CIS type PV cell.
  3. An activity that by application of the software technology developed in Japan as described in (a) above to the diesel power generator output control component, reduces power output fluctuations.
Reference Scenario and Project/Activity BoundaryAs the reference scenario (small-scale grid connected power), while 100% of power is presently generated by diesel engines, it is envisaged that in the near future power generation will be supplied by a combination of coal, coal gas and diesel engine plants. (Replacement only as basically new establishment will not be approved.)
Calculation Method OptionsThe method of setting a grid's CO2 emission factor to calculate a reference emission factor (EF) varies according to the size of the grid.

Here the following two calculation methods have been selected:
    (1) Grid size; and
    (2) Use of default values.
To apply (1), the judgment criteria is whether or not it is a large-scale grid owned and managed by PLN which in Indonesia has a monopoly on power distribution.
Under (2), regardless of whether or not connected to a large or small-scale grid, the default values may be applied. If default values are used, the CO2 reduction amount must be calculated in a conservative manner.
Default Values set in MethodologyThe default emission factor values for a large-scale grid, that are regularly calculated and published by the Ministry of Energy and Mineral Resources (ESDM) and the National Council on Climate Change (DNPI), are applied. Having been supplied by the Indonesian government for use in CDM, these values are considered appropriate for use in JCM/BOCM.
Further, the default values for the CO2 emission factor of a small-scale grid power generation plant are calculated solely on the consumption of liquid fossil fuels. Under this scenario, and based upon a continuous 24hr/per day power supply, a mini-grid emission factor of 0.8 tCO2/MWh is deemed appropriate.
Monitoring MethodThe quantity of net electricity generation will be monitored under the following criteria:
  • The quantity of net electricity generated by the PV power generation system;
  • The quantity of net electricity generated by the diesel power generator;
  • The quantity of net electricity generated by the PV power generation system to calculate the reference emissions;
  • The grid EF; and
  • The diesel engine's fuel consumption.
GHG Emissions and its ReductionsWith a 4MW hybrid power generation plant assuming a capacity utilization for a PV power generation system on Nias island at 15.39% and an EF of 0.7 tCO2/MWh (In accordance with calculations provided by Wärtsilä) a reduction in GHG emissions to 7,243tCO2/yr is forecast.
Method of VerificationBased upon the MRV methodology as outlined herein, an on-site investigation has confirmed that the required third party verifications will be able to be performed. As implementing bodies, in addition to the Indonesian DOE, it is assumed that approximately 10 companies or other entities that perform ISO certification etc. will perform the verifications.
Environmental ImpactsIt is necessary to take into consideration that the installation of PV panels and diesel engine, through acquisition of a large amount of land for private use, will have an impact on land development, will influence the use of bio-fuels (in particular palm oils) as fuels for the diesel engine used as a part of this system, will as this project becomes more widespread strengthen the power supply on Nias Island and will also greatly expand those areas on the island with access to power.
Financial PlanIn the event that no subsidies are provided by the Japanese government, based upon repayment of loans together with interest on the same, profitability on investment over a 20-year period is considered to be IRR 5.21% which is the standard for consideration as an investment. If subsidies are provided it is considered that sufficient profitability for investors can be assured.

However, as fluctuations in diesel oil prices and retail electricity prices will have a major influence on cash flow, consideration of long-term hedging measures to minimize risk due to fluctuations at the time of actual investment is considered preferable.
Promotion of Japanese TechnologyIf stable PV power output can be used as the primary power generation source, this provides the best solution for places such as Nias Island that presently use independent systems which produce an inferior quality of power.

Further, the CIS type PV cell modules used in this system are able to minimize the loss of generation efficiency even in hot temperatures such as those that predominate in Indonesia. Accordingly it is expected that use of this type of PV cell will penetrate the market due to its compatibility with the climate characteristics.
Sustainable Development in Host CountryThrough expanding the electricity supply capacity on Nias Island, attracting factory rollouts by both Indonesian and foreign companies through improvements in electricity quality and also through use of bio-fuels creating employment opportunities on local plantations, this project will indeed contribute to local development.

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