JCM/BOCM Feasibility Study (FS) 2012 Final Report Small-scale Biomass Power Generation with Stirling Engine (implemented by Pro-Material Co, Ltd.) FS Partners Location of Project/Activity Category of Project/Activity Description of Project/Activity Eligibility Criteria Reference Scenario and Project/Activity Boundary Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Meisei University, Angkor Bio Cogen Co., Ltd Provinces of Kandal, Kampong Cham, Kampong Speu, Cambodia Biomass Utilisation The purpose of the Project is to reduce Green-house gas (GHG) emissions by displacing diesel fired power generation at small rice mills thorough dissemination of low-cost and easy-to-operate stirling engines that use biomass as fuel in Cambodia where rice mills largely depend on captive power generation using diesel fuel due to limited development of grid electricity. (1) The technology introduced involves installation of a biomass electricity generation technology in rice mills where there was no such technology installed prior to the implementation of the project activity. (2) The project activity shall replace fossil fuel used in a captive power plant not connected to grid. (3) The fuel used in the project activity consists solely of renewable biomass. (4) The technology installed under the project activity does not generate toxic substance as byproduct through processes, such as reforming of gas. (5) Project participants are able to monitor the amount of net electricity generated by the project activity. Reference scenario is electricity that would be replaced by the renewable energy unit installed under the project activity is generated by the fossil fuel based power generation system. The project boundary includes industrial, commercial facilities consuming energy generated by the system. Calculation Method Options Fuel Source Renewable Biomass Fuel/Technology replaced Captive power generation using fossil fuel Emission factor Historical data on fuel consumption and electricity generation are available Calculation Metho Yes Calculation Method 1 No Calculation Method 2 Default Values set in Methodology Monitoring Method Based with comparative analysis with outcomes from other research activities and CDM methodologies, the conservative default value of 0.8kgCO2/kWh is established for diesel power generation. The main item to be monitored is net electricity generated by the biomass power generation unit installed under the Project. It will be measured by an instrument capable of continuous measurement. aggregated monthly GHG Emissions 17.52 tco2/year Data will be <1>
and Reductions Method Verification Environmental Impacts Financial Plan Promotion Japanese Technology its of of Sustainable Development in Host Country Accuracy of monitoring equipment will be confirmed by manufacturer s guarantee. If the guaranteed accuracy level is within the range accepted by JCM/BOCM Manual, no calibration is required. A stirling engine is not expected to cause any negative impact on the environment as it does not produce any harmful substance such as tar as byproduct and it produces lower level noise and emits lower amount of NOx and SOx compared to conventional technologies. The stirling engine to be installed is expected to be priced at around 12,000 USD for 3.5kW unit. The cost will be 170,000 USD for 50kW. Micro-financing is being considered as a source of fund. Japan will provide core technologies for stirling engine generator and generation control system. On the other hand, in order to minimise cost, best-mix of technologies by partnering with Chinese, Korean and Japanese manufacturers is being considered. The first batch of engines is expected to be introduced for promotion purpose in 2013 and subsequent batches will be introduced for sales in 2014. Easy operation and optimization are required for dissemination and control technologies and know-how from Japan will be introduced to achieve such goal. The Project will contribute to climate change mitigation by GHG reduction through displacing fossil fuel with biomass fuel for power generation. At the same time, the Project is in line with energy policy of Cambodia as it supports low-cost energy development and rural electrification, therefore contributing to sustainable development of Cambodia. <2>
FS Title: JCM/BOCM Feasibility Study Small-scale Biomass Power Generation with Stirling Engine FS Entity: Pro-Material Co., Ltd. 1. FS Implementation Scheme Angkor Bio Cogen, Ltd. Co (Sub-contractor) Data collection on rural electricity entities and rice mills, support for organizing workshops, support for communication with Cambodian government agencies and business associates. Mitsubishi UFJ Morgan Stanley Securities Co, Ltd. (Sub-contractor) Support for MRV development, consideration of default values, support for organizing workshops, support for communication with Cambodian government agencies and business associates. Meisei Universisy (Sub-contractor) Consideration of biomass composition, such as heating value and moisture content. 2.Overview of Project/Activity (1) Description of Project/Activity Contents: The purpose of the Project is to reduce Green-house gas (GHG) emissions by displacing diesel fired power generation at small rice mills thorough dissemination of low-cost and easy-to-operate stirling engines that use biomass as fuel in Cambodia where rice mills largely depend on captive power generation using diesel fuel due to limited development of grid electricity. By utilizing surplus rice husk produced in the rice milling process as renewable energy source, the Project aims to contribute to sustainable development of Cambodia The capacity per unit of stirling engine is expected to be around 3.5 kw. By combining several units, the Project expects the total capacity per installation to be around 50kW. The counterpart of the Project is expected to be local rice millers. (2) Situations of Host Country: Climate Change Policy The Cambodian government is currently developing Cambodia Climate Change Strategic Plan (CCCSP). The aims of CCCSP are adaptation to climate change as well as sustainable development through various measures including GHG emission reduction. As one of its core areas, CCCS has chosen energy sector highly related to the Project. CCCSP lists as one its action plans renewable energy development including biomass, which applies to the Project. Energy Policy Cambodian government also promotes rural electrification through renewable energy utilization as a low-cost option with small impact on the environment. The following targets for access to grid-level electricity are established as goal. 100% access at community level by 2020 70% access at household level by 2030 <3>
Based on these circumstances, it is clear that the Project that utlises biomass, which is locally available at lower cost compared to fossil fuel, conforms with the objectives of climate change and energy policies of Cambodia. (3) Complementarity of the CDM: Many electricity generation projects using renewable sources have been implemented as CDM and there are also many methodologies developed and approved by UNFCCC. Nevertheless, when looking at project types, it is evident that compared to wind or hydropower projects, the number of biomass CDM projects both in terms of registration and issuance records, is extremely low due to some problems they face. The biggest issues are leakage and monitoring. In CDM, it is required to justify there is no competing use of biomass. It requires demonstration of adequate amount of surplus biomass in addition to what is required in the Project in the respective region, however, such demonstration is highly difficult as many countries lack official supporting data and it is difficult to keep track of biomass utilization when transactions are often done informally without legal contracts. With regards to monitoring, monitoring of moisture content and calorific value of fuel is required in biomass projects while it is not required in wind or hydropower projects. In Cambodia, for example, there are no laboratories capable of conducting such measurements and it has become a big burden on project participants as they have to ship samples to a neighboring country each time. Additionally, although CDM methodologies make no differentiation among various biomass power generation technologies, the MRV methodology proposed in the Study aims to only target those technologies with minimum impact on the environment. As such, although both the CDM standardized baseline proposed by Cambodian Ministry of Environment with support from Institute of Global Environmental Studies (IGES) and the MRV methodology proposed in the Study are similar in their target industry, the former is applicable to any biomass energy generation technology while the latter is applicable to technologies with further improvement in co-benefit aspect. 3. Study Contents (1) Issues to be Addressed in FS: 1 Literature research and data collection through interviews for grasping the situation of Rural Electricity Enterprises (REEs) and rice mills 2 Development of draft MRV methodology 3 Study of rice husk composition 4 Study of the feasibility of emission reduction verification 5 Consideration of ensuring environmental integrity 6 Study of stakeholder comments 7 Study of financial plan including the possibility of using microfinance 8 Study of promotion of introducing Japanese technologies (2) Process to Solve the Issues in FS: 1 Literature research and data collection through interviews for grasping the situation of Rural Electricity Enterprises (REEs) and rice mills Information collection was conducted through the first field work involving visits to REEs <4>
and rice mills. The following basic data collection was also subcontracted to Angkor Bio Cogen (ABC) and survey results have been reported. A) Survey of rice mills: location, amount of paddy milled, amount of rice husk produced, utilization of rice husk, interest in stirling engine, etc. B) Survey of REEs: location, generator type, fuel consumption, number of licensees, electricity sale/purchase price, interest in sirling engine Matching of rice mills with REEs was tried, but the survey results show that many REEs no longer generate their own electricity and as such, their interest in adopting a new technology is very low. It has been determined that there is more potential in introducing stirling engines to rice mills that have higher interest in new technologies and capacity for business expansion. 2 Development of draft MRV methodology Studies were conducted on existing CDM methodologies, other studies as well as characteristics of the Project to develop an MRV methodology that takes into consideration eligibility conditions, calculation options, default values for diesel generation, monitoring and leakage regimes aimed at simplification. 3 Study of rice husk composition Power generation test using rice husk has been conducted with support from the engineering team of Meisei University. The results of the test showed consistency in moisture content, ash content, carbon sequestration and volatility. The test also shows that inorganic matter contained in rice husk impact combustion speed and temperature increase compared to wood fuel. In order to minimize such impact and achieve consistent combustion of rice husk, adjustments have been made to the hardware in terms of (1) maintaining consistency in rice husk supply through combustion chamber tray and (2) maintaining consistency in supply of combustion air to the same tray. 4 Study of the feasibility of emission reduction verification In accordance with draft JCM/BOCM Verification Manual, verification of emission reduction of the Project was considered. An interview with a third party verifier was also conducted in relation to the feasibility of verifying remotely monitored parameters using micro-grid controllers. 5 Consideration of ensuring environmental integrity Legal framework and characteristics of the project technology were studied. There are no legal obligations in Cambodia applicable to exhaust gas emission control of stirling engines. Exhaust gas was also tested and it was fund there are no problematic level of emissions of NOx, SOx, PM and CO. 6 Study of stakeholder comments Comments were invited to government representatives and rice millers interviewed during the first field work. In addition, survey was conducted on interest in stirling engine as well emphasis points by rice millers and REEs. Comments were also invited at the host country committee and workshop held in February 2013. <5>
7 Study of financial plan including the possibility of using microfinance Based on assumptions of the unit price of stirling engine (12,000 USD for 3.5kW), payback period was estimated. Through surveys and interviews, effort was also made to seek optimal price range expected by local business community. Consultation was made with partners in Korea and China to minimize manufacturing cost. 8 Study of promotion of introducing Japanese technologies Japan will provide core technologies for stirling engine generator and generation control system. On the other hand, in order to minimise cost, best-mix of technologies by partnering with Chinese, Korean and Japanese manufacturers is being considered. The first batch of engines is expected to be introduced for promotion purpose in 2013 and subsequent batches will be introduced for sales in 2014. Easy operation and optimization are required for dissemination and control technologies and know-how from Japan will be introduced to achieve such goal. 4. Results of JCM/BOCM FS (1) GHG Emission Reduction Effects by the Implementation of Project/Activity: The project activity contributes to reduction of GHG emissions through installing biomass power generation system that displace diesel-fired engines used in rice mills. By utilizing carbon-neutral biomass fuel, it reduces GHGs emitted by combustion of diesel fuel, which is fossil-fuel. (2) Eligibility Criteria for MRV Methodology Application: This proposed MRV methodology is applicable to projects that fully satisfy the following cases. In case the project activity is implemented in multiple number of project sites (referred to as component project activity), each component project activity is required to meet the following criteria. Case 1 Case 2 Case 3 Case 4 Case 5 The technology introduced involves installation of a biomass electricity generation technology in rice mills where there was no such technology installed prior to the implementation of the project activity. The project activity shall replace fossil fuel used in a captive power plant not connected to grid. The fuel used in the project activity consists solely of renewable biomass. The technology installed under the project activity does not generate toxic substance as byproduct through processes, such as reforming of gas. Project participants are able to monitor the amount of net electricity generated by the project activity. Check (3) Calculation Method Options: <6>
To calculate the reference emission, the project developer must refer to the calculation method best-suited for his/her project using the flow chart below. Fuel Source Fuel/Technology replaced Emission factor Calculation Metho Renewable Biomass Captive power generation using fossil fuel Historical data on fuel consumption and electricity generation are available Yes No Calculation Method 1 Calculation Method 2 (4) Necessary Data for Calculation: The data that requires presetting at the registration stage of the project or monitoring after the start of the project is determined below based on the calculation method selected in section 4. If the data shown below is imported, a calculation tool is provided in this methodology that will allow you to measure emission reductions. (1) Calculation method 1: Replacing Captive Power Plant using historical data on fossil fuel consumption and electricity generation 1. Monitoring and input after project start Description of data Value Units Net electricity generated by renewable generation unit in year y kwh/y 2. Data input at the planning stage to estimate reference CO2 emissions Description of data Value Units Consumption of reference fossil fuel (3-year historical average) ton Electricity generated by fossil fuel captive power plant (3-year historical average) kwh Net calorific value of fossil fuel replaced* GJ/t CO2 emission factor of fossil fuel replaced* kgco2/gj (2) Calculation method 2: Replacing Captive Power Plant using Default Value 1. Monitoring and input after project start Description of data Value Units Net electricity generated by renewable generation unit in year y kwh/y 2. CO2 emission reductions CO2 emission reductions 0 tco2/y Units (5) Default Value(s) Set in MRV Methodology: The default value for the CO2 emission factor of fossil fuel used by captive power generation was studied. CDM methodologies and previous studies including one conducted by Japan NUS Corporation and the default values established under the standardized baseline proposed by the Cambodian Ministry of Environment were used as reference. Since the project activity plans adopt monitoring of electricity generation by advanced controller system, the proposed MRV also introduces an algorithm based on the amount of electricity generation to account for emission reduction. As such, default values under small-sale CDM <7>
methodologies AMS-I.A and AMS-I.F, the CDM Tool to calculate baseline, project and/or leakage emissions from electricity consumption as well as the default value proposed by Japan NUS which are all based on electricity generation have mainly been taken into consideration. Based on the data collected through the survey conducted on 34 rice mills, default value was established as follows. Methodology AMS-I.A AMS-I.F 1 Japan NUS Survey of this Study Default CO2 emission Note factor for fossil fuel power generation 0.8 kgco 2/ kwh Captive power generation using diesel 0.4 kgco 2/ kwh Used for baseline emissions calculation or project emission calculation if electricity consumption in baseline is greater than that of project scenario. 1.3 kgco 2/ kwh Used for project emissions calculation or baseline emission calculation if electricity consumption in baseline is less than that of project scenario. 0.81 kgco 2/ kwh For off-grid projects 1.1 kgco 2/ kwh Based on data from 34 rice mills in 3 provinces. (The lower end of the 95% confidence level) The emission factor calculated based on the Survey is 1.1kgCO 2 /kwh, which is close to the default values provided in AMS-I.A and CDM Tool to calculate baseline, project and/or leakage emission from electricity consumption, which can be applied to baseline emission calculation in some cases. However, as normally the case, the default values need to be conservative. The emission factor developed by Japan NUS is based on the fuel economy of diesel the Cambodian government aspires to achieve and therefore, clearly conservative. It is also important to maintain the concept of conservativeness bearing in mind the international acceptance of JCM/BOCM. Based on the above analysis, the Study proposes to adopt 0.8 kgco 2 /kwh as the default emission factor for diesel captive power generation. (6) Setting of Reference Scenario and Project/Activity Boundary: Reference scenario is continuous use of fossil fuel based fuel by existing electricity generation for the duration of the proposed project. The project boundary includes industrial, commercial facilities consuming energy generated by the system. The project boundary shall include the following GHG emission sources and GHG emissions. Source Gas Included? Justification/Explanation GHG emissions from electricity generation using CO 2 Yes Main emission source CH 4 No Minor emission source 1 Based on Tool to calculate baseline, project and/or leakage emissions from electricity consumption <8>
fossil fuel that is replaced due to the project activity N 2 O No Minor emission source (7) Monitoring Methods: The project developers must monitor the parameters described in the table below based on the calculation method of the selected project emission. In case the project activity is implemented in multiple number of project sites (referred to as component project activity), a single entity shall be responsible for the entire project and the same monitoring regime applies to each component project activity. 13.1. Calculation method 1: Replacing Captive Power Plant using Project Specific Value Parameter Description Measurement Procedure (e.g.) Quantity of net electricity Measurements are undertaken using generated by the renewable a metering device that can operate energy unit installed under the continuously. The net electricity project activity (MWh) displaced is the gross energy generation by the project activity power plant minus the auxiliary electricity consumption. Data may EG PJ,y NCV i,y EF CO2,y Net calorific value of fossil fuel i consumed during period t (mass or volume) Emission factor of fossil fuel replaced by the project activity (tco2/mwh) be compiled remotely. If national/regional factor is used, the value needs to be verified annually for possible update. If IPCC default value is used, he value needs to be updated whenever there is an update. If national/regional factor is used, the value needs to be verified annually for possible update. If IPCC default value is used, he value needs to be updated whenever there is an update. 13.2. Calculation method 2: Replacing Captive Power Plant using Default Value Parameter Description Measurement Procedure (e.g.) Quantity of net electricity Measurements are undertaken using generated by the renewable a metering device that can operate energy unit installed under the continuously. The net electricity project activity (MWh) displaced is the gross energy generation by the project activity power plant minus the auxiliary electricity consumption. Data may be compiled remotely. EG PJ,y (8) Quantification of GHG Emissions and its Reductions: Reference emissions is the annual electricity generated by the fossil fuel based power generation system that would be replaced by the renewable energy unit installed under the project activity and is expressed in the equation below. <9>
RE y = EGPJ, y EFFF, y RE y: Reference emissions in year y (tco 2 ) EG PJ,y : Quantity of net electricity generated by the renewable energy unit installed under the project activity (MWh) EF FF,y : Emission factor of fossil fuel replaced by the project activity (tco 2 /MWh) Emission factor The emission factor is either default value based on diesel fired power plant of 0.8kgCO2/kW or calculated in accordance with the following formula. EF FF,y = FCn, t NCV t i, i, n i n EG n, t EF CO2i, t EF FF,y = FC, n, i t = NCV i, t = EF, CO2 i, t = EG n, t = Emission factor of fossil fuel replaced by the project activity (tco 2 /MWh) Amount of consumption of fossil fuel i by captive power generation equipment n during period t (mass or volume): Determined ex-ante based on historical record Net calorific value of fossil fuel i consumed during period t (mass or volume): Selected from fuel specific, national/regional, or IPCC default values. If fuel specific value is used, it is determined ex-ante based on measurement in accordance with national legislation/regulation/guideline or international standard as appropriate. CO2 emission factor of fossil fuel i consumed during period t (tco 2 /GJ): Selected from fuel specific, national/regional, or IPCC default values. If fuel specific value is used, it is determined ex-ante based on measurement in accordance with national legislation/regulation/guideline or international standard as appropriate. Electricity generated by captive power generation equipment n during period t (MWh): Determined ex-ante based on historical record No project or leakage emissions are included in the proposed MRV methodology, therefore, emissions reduction by the project activity equals reference emissions. (9) Verification of GHG Emission Reductions: All monitored parameters will be subject to verification. The most important monitoring parameter of the Project is net electricity generated by the project activity. In accordance with JCM/BOCM Verification Manual, accuracy level of the monitoring equipment used will be confirmed and only if it is beyond ±5% range, calibration will be required. Regarding net calorific value and CO2 emission factor of diesel fuel measured by project participants, measurement method will be confirmed with the project participants. When these values are based on official data, conformity with official data will be checked. <10>
(10) Ensuring Environmental Integrity: Through Environmental Protection and Resource Management Act and Cabinet Sub-decree No 72 on Environmental Impact Assessment Process, the Cambodian government requires environmental impact assessment to be conducted for all power generation projects with 5 MW installed capacity or higher. As such, the Project, which will be under 5 MW is not required to conduct environmental impact assessment. In general, stirling engines have the following environmental benefits compared to conventional biomass power generation systems. No harmful substance, such as tar, is emitted Minimal noise Minimal NOx and SOx emissions Nevertheless, in order for the Project to be accepted by local communities and to contribute further to sustainable development, environmental impact needs to be carefully considered and actively addressed. The technology will be designed so that exhaust will be kept to minimum. (11) Comments from Local Stakeholders: Stakeholders of the Project are rice mills who are biomass energy supplier and recipient, business associates such as ABC who is a potential business partner and government departments that support the system. Comments received from business associates and government agencies during the field trip have been largely positive. Government agencies welcome projects that conform with Cambodian policies and business associates have expressed that the most important point is to meet the needs of energy requirement and cost expectation of buyers. A survey was conducted to ascertain the level of interest by REEs and rice mills in stirling engine technology as well as their emphasis. The results show that interest by rice mills is high and once again, it has been clarified that the most important aspect is technology cost. (12) Structure to Implement Project/Activity: Biomass power generation service using stirling engine will be supplied by a joint venture between Japanese investor group including Pro-Material and local counterpart. The supplier group will take into consideration demands of local project owners and plan, design, oversee appropriate installation work and maintain relations with construction companies while promoting the Project. <11>
Local stakeholders of the Project Supplier group of biomass power generation service Pro-Material (Investor side) Local JV (Local operation) Place order equipment Place order construction Engine/Burner producer Construction management company Deliver equipment Local construction company Instruct construction Project owner (Small-Medium rice mills) (13) Financial Plan to Implement Project/Activity: The following table demonstrates the outcome of estimation of initial cost, operation cost and income. Due to the nature of stirling engines that entails simple operation and maintenance, maintenance required is normal cleaning only and personnel required can be met by current personnel of rice mills, no maintenance or personnel costs are included. Estimation results in payback period of 2 years. Table 1: Estimation (50kW) Item Value Unit Source Unit cost 3,429 USD/KW Pro-Material Total initial cost 171,429 USD Pro-Material Output(1system) 50 kw Assumption Electricity generated 219,000 kwh Assumption Diesel fuel 0.6 L/kWh Survey economy Diesel price 1 USD/l Interview Rice husk price 0.015 USD/kg Survey Amount of rice husk required 311 ton/year Assumption <12>
Income Saving on diesel 83,220 US$ Initial cost 171,429 US$ Cost Lost opportunity 4,672 US$ to sell rice husk As for the source of financing, utilization of microfinance that is expanding in the agriculture sector of Cambodia as well as the conceptual public private fund established for BOCM are being considered. (14) How to Promote the Introduction of Japanese Technologies: Optimazation for Cambodian environment, easy operation and low cost are required for dissemination of small biomass power generation system. The operation aspect will be provided by micro-grid and stand/alone controllers that are capable of controlling voltage and current under development in conjunction with Shibaura Institute of Technology. The cost aspect will be achieved by best-mix of technologies from Japan, Korea and China. To minimize cost, mass production of engines is being discussed with Hudian Group of China. Hudain group is a major manufacturer of motors, generators and wind power technology in China. It has acquired Stirling Engine Corporation of USA and co-sharing of parts can be expected. The combustion equipment will be manufactured through OEM with Kiturami and Innoen Corporations, both major boiler manufacturers in Korea. Innoen is also a well-known developer of burner and heat exchanger. The stirling engines are planned to be introduced to Cambodia in accordance with the following timetable. FY 2012 FY 2013 Content 1 unit for demonstration 5 units per system for 10 sites 175kWh/50 units for F/S and Promotion FY 2014 Sales phase; 10 units per system for 100 sites 3500kWh/1000 units (15) Prospects and Challenges Onward: Reaching agreement on JCM/BOCM and development of the framework: Work is required in getting the MRV methodology approved with revision if necessary while closely watching the development of bilateral negotiation. Confirmation of monitoring technology: Need to clarify issues of telecommunication environment through visits to Cambodian regions by potential monitoring equipment supplier towards introduction of advanced controller to enable remote monitoring. Selection of project sites: Need to conduct detailed investigation on energy demand of rice mills as to seek the best-match with capacity of stirling engines through combining several units. Specific sites will be shortlisted through marketing activities. Lowering cost: In order to close the gap between cost of stirling engine and other generators of similar capacity currently in market, further consultation will be conducted with partners in China and Korea. Establishing the sales channel: Consultation will be launched towards agreement with local sales agent. <13>
5. Contribution to Sustainable Development in Host Country The Study found that the proposed Project conforms with the mitigation actions in energy sector stipulated in Cambodia Climate Change Strategic Plan as well as with the energy policy objectives including rural electrification. As such, the Project clearly contributes to sustainable development of Cambodia. The Study was also able to gain comments in support of the Project from Ministry of Environment, Ministry of Industry, Mines and Energy (MIME), Ministry of Rural Development, Ministry of Agriculture, Forestry and Fisheries. MIME, in particular, provided comments in support of the aspect where the Project meets the demand for low-cost energy in rural areas. <14>