Energy Sector Management Assistance Programte

NoV. 1,14t

Prospects for Biomass Power Generationwith Emphasis on Palm Oil, Sugar,

Rubberwood and Plywood Residues

Report No. 167/94

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JOINT UNDP/ WORLD BANKENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP)

PURPOSE

The Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) waslaunched in 1983 to complement the Energy Assessment Programme, established three years earlier.ESMAP's original purpose was to implement key reconmendations of the Energy Assessmentreports and ensure that proposed investments in the energy sector represented the most efficient useof scarce domestic and external resources. In 1990, an international Commission addressedESMAP's role for the 1990s and, noting the vital role of adequate and affordable energy ineconomic growth, concluded that the Programme should intensify its efforts to assist developingcountries to manage their energy sectors more effectively. The Commission also recommended thatESMAP concentrate on making long-term efforts in a smaller number of countries. TheCommission's report was endorsed at ESMAP's November 1990 Annual Meeting and prompted anextensive reorganization and reorientation of the Programme. Today, ESMAP is conducting EnergyAssessments, performing preinvestment and prefeasibility work, and providing institutional andpolicy advice in selected developing countries. Through tiese efforts, ESMAP aims to assistgovernments, donors, and potential investors in identifying, funding, and implementing economicallyand environmentally sound energy strategies.

GOVERNANCE AND OPERATIONS

ESMAP is governed by a Consultative Group (FSMAP CG), composed of representatives of theUNDP and World Bank, the governments and institutions providing financial support, andrepresentatives of the recipients of ESMAP's assistance. The ESMAP CG is chaired by the WorldBank's Vice President, Finance and Private Sector Development, and advised by a TechnicalAdvisory Group (TAG) of independent energy experts that reviews the Programme's strategicagenda, its work program, and other issues. ESMAP is staffed by a cadre of engineers, energyplanners and economists from the Industry and Energy Department of the World Bank. TheDirector of this Department is also the Manager of ESMAP, responsible for administering theProgramme.

FUNDING

ESMAP is a cooperative effort supported by the World Bank, UNDP and other United Nationsagencies, the European Community, Organization of American States (OAS), Latin AmericanEnergy Organizati,'n (OLADE), and countries including Australia, Belgium, Canada, Demnark,Germany, Finland, France, Iceland, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway,Portugal, Sweden, Switzerland, the United Kingdom, and the United States.

FURTHER INFORMATION

For further information or copies of completed ESMAP reports, contact:

ESMAPc/o Industry and Energy Departnent

The World Bank1818 H Street N.W.

Washington, D.C. 20433U.S.A.

INDONESA

PRJ)SPECTS FOR BIOMASS POWER GENERATIONWITH EMPPHASIS ON

PALM OIL, SUGAR, RUBBERWOOD AND PLYWOOD RESIDUES

November 1994

EXCHANGE RATE

1 US$ = 1975 (November 1991)

HEATING VALUES

Fuel MCw (%) LHVW (KJ/kg)

Palm Oil: EFB 60 6190Fibre 40 11000Shell 15 14800

Bagasse 50 7838

Plywood Residues 40 10500

Logging Residues 0 18000

ACRONYMS

ADO Automotive Diesel OilCPO Crude Palm OilDGENE Directoate General of Electricity and New EnergyEEB Empty Fruit BunchFEB Full Pruit BunchGOI Government of IndonesiaHTI Timber Estate ProgramIDO Industrial Diesel OilERR Intemral ate of ReturnLHVw Lower Heating Value, Wet BasisLNG Liquefied Natural GasMCw Moisture Content, Wet BasisMME Ministry of Mines and EnergyPKO Palm Kernel OilFLN State Electricity CorporationPPT Private Power Team

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V. FINANCIAL-ECONOMIC EVALUATION ......................................................... 27Overview ......................................................... 27PLN Implemented and Operated Systems .......................................................... 27

Basic Approach ......................................................... 27Large Scale Systems (PLN Developed) ......................................................... 27Medium Scale Systems (PLN Developed) ......................................................... 28Mill Implemented Systems for Captive Power and Private Power

Export to PLN or third Parties .......................................................... 28Mill-Specific Palm Oil Residue Systems for Sales to PLN .................................... 29Mill Specific Bagasse Generation for Sales to PLN ............................................... 30Rubberv, d Sawmills Generation for Sales to PLN ............................................ 30Plywoo. 'l Generation for Sales to PLN ......................................................... 31HTI Resiaue Generation ......................................................... 31

Summary ......................................................... 32

VI. INSTITUTIONALISSUES ......................................................... 35Overview ......................................................... 35

Energy Sector Institutions ......................................................... 35Power Shortages ......................................................... 36Hindrances for the Development of Private Power .............................................. 36Stimuli for the Development of Private Power ..................................................... 37Institutional Recommendations ......................................................... 37

ANNEXES1: Financial/Economic Evaluation ......................................................... 402: Net-Back Values ......................................................... 453: Bibliography.57........................ 574: Cogeneration: Perspectves and Problems ......................................................... 605: Calculation Model for Net-Back Values ......................................................... 72

TABLES1: The Economic and Market Potential of Biomass Residues by Geographical Area ................. ii2: Summary of Practical Scales of Implementation or Selected Biomass

Based Power Options .......................................................... vii3.1: Quantities and Energy Value of Residues Produced at Palm Oil Mills .................................. 133.2: Distribution by Province of Surplus Power Capacity Base; ^ Palm Oil Revenues ................ 143.3: Location and Size of Sugar Mils in Indonesia .......................................................... 153.4: Bagasse Production in Indonesia ........................ 163.5: Log Production and Usable Logging Residues in Indonesia ................................................ 173.6: Plywood Production in Indonesia (1990) ...................................................... 183.7: Log Production and Usable Logging Residues in Indonesia .................................................1 l93.8: Biomass Based Power Availability By Province From Selected Resources ............................. 205.1: Baseline Parameters of Biomass Fired Power Plant ...................................................... 275.2: The Technical, Economic and Market Potential of Biomass Residue by

Geographical Area ...................................................... 335.3: Summary of Practical Scales of Implementation for Selected Biomass Based

Power Options ...................................................... 34

SUMMARY AND RECOMMENDATIONS

Rationale

1. Indonesia is richly endowed with large primary energy resources that can meet bothdomestic demand as well as export requirements 'n the form of oil, LNG and coal. LNG and oilexports provided earnings of more than US$9 tillion (1990), amounting to some 40% of exportearnings. Although coal exports are as yet insignificant the REPELITA V target has been set at 6million tons in 1993/94.

2. Indonesia's domestic energy consumption has grown considerably with 5.5% per yearduring 1984-89, and has reached about 292 milion barrels of oil equivalent (boe) in 1Q89. W-ith theexpected rapid growth of the economy, domestic energy consumption will grow even faster thanduring Repelita IV. Although the share of oil in domestic energy consumption has fallen from 73%in 1984/85 to 62% in 1988/89 there still was an annual increase in domestic oil consumption of 2%during the same period. Oil production declined during the 1980s, partly due to gradual depletionof the resource base.

3. In response to the situation described above the Government of Indonesia (GOI) hasadopted a policy to conserve its liquid petroleum reserves and thereby prolong the availability of anexportable surplus, and diversification of domestic energy consumption away from petroleumproducts towards alternative fuels that are non-exportable (gas and coal) or non tradeable (hydro,geo-thermal and biomass). The objective is to stimulate domestic economic activity in a cost effectivemanner and to deliver affordable energy to consumers, in particular households, to improve theireconomic welfare. Given both the energy potential of biomass and focus of current national energypriorities, the GOI is looking to develop strategies and specific projects designed to promoteagricultural and industrial biomass residue for energy conversion.

4. This study, therefore, examines the potential role of biomass based electricitygeneration and cogeneration for the development of the power sector in Indonesia. The study wasmotivated by the fact that waste biomass from forestry, wood processing, agriculture and other relatedactivities holds the potential -- as demonstrated in various studies executed by official multilateral andbilateral financing sources -- to be an abundant and prospective resource for commercial, domesticenergy substitution. What has been lacking, however, is a consistent national or regional systematicapproach to identifying, assessing and, in turn, developing strategies which actively promote thedevelopment and utilization of these biomass resources. In relative terms, and given the tremendousresource availability, biomass is currently used in only limited quantities for commercial energygeneration. Generally, biomass residues are discarded or burned where they are produced, i.e.plantations, agricultural and village lands, mills, etc.

5. In light of GOI macro objectives, the four main activities conducted for this study aresummarized as follows:

(a) Identify and define specific and sustainable surplus biomass resources, withemphasis on the Outer Islands, e.g. Sumatera, Kalimantan;

(b) Identify specific current and projected energy demands in these areas whichcould technically and economically be met by substitution of biomassresources;

(c) Assess at the pre-feasibility level the technical and financial-economicviability of appropriate conversion technologies; and

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(d) Outline the policy and institutional constraints confronting the developmentof any prospective project implementation.

The Biomass Resource Base

6. On the basis of existing regional data and calculations, the prospective availability ofbiomass for energy substitution in Indonesia is enormous. The study ummarizes data on residueavailability at a national level and follows with a review of specific, key biomass reF urces wheresupplies and effective utilization appear most promising. The data presented utilizes informationfrom existing studies and expands upon this data with findings from field visits.

7. While briefly reviewing agricultural residues like rice husk and coconut waste, thestudy concentrates on palm oil residues, sugar cane bagasse, rubberwood as well as forestry andtimber residues. These are considered the most promising biomass resources. For Sumatera it isconcluded that the technical electric power potential on these residues, depending on the powergeneration efficiency, is in the order of 1,000-4,000 MW, for Java it is 300-1,000 MW, forKalimantan 800-6.500 MW. Also Sulawesi, Maluku and Irian Jaya show reasonable resources. Thetotal aggregate technical capacity under consideration is 14,000 MW, of which 1,200 MW to 12,200MW can serve both rural electrification as well as grid connected schemes in an economically cost-effective manner. The range of the economic potential is determined by the combustion efficiencyand load factor of the technologies selected. However, this economic potential may be overstated dueto a possible mismatch between supply and demand. The large economic potential of Kalimantan,for example, is not met by a similar economically viable demand. Therefore, total market potential,which includes an appreciation of likely demand, is much lower than possible economic supply, isestimated at 1800 MW.

Tablei: The Economic and Market Potential ofBiomass Residues by Geographical Area

Categoiy Sumatera Java Kalimantan Other

Economic 553-3669 125- 854 493-6912 36-796Market 520 380 800 100

Framework of the Financial and Economic Evaluations

8. This study considers the electricity generation capabilities and technial options forpalm oil and bagasse residues (agricultural sector) and rubberwood, plywood and logging residues(forestry sector). The advantage of these residues is that they are already available on-sitc (except forlogging residues) and thus no additional costs for their transportation are incurred. Only in case oflarge sized dedicated power plants would it be necessary to transport residues, which only applies toHTI operations. In Indonesia, this would be possible in the same way as the harvested wood for theplywood factories is being transported, by river transportation. Consequently, all HTI locations aresituated near relatively easily accesible sites. Collection and transportation of other agriculturalresidues is not recommended.

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9. Although the available quantities of agro-industrial wastes are considerable, usuallynot all are available for additional energy production. Some of the sesidues are already used togenerate captive power and heat or are nised for non-energy purposes. The remainder are treated asworthless refuse, although their disposal may constitute an environmental hazard. If used for energypurposes their use often is purposely very inefficient to get rid of the residues as much as possible.Also, some agricultural residues need to be dried to obtain higher energy values.

10. In the study two options of producing electricity using biomass wastes are analyzed,to wit: [a] co-generation in an existing mill; and [b] erection of a dedicated power plant. In the firstcase, excess or "dump" power is produced for the grid, while in the second case both grid-feeding aswell as stand-alone power systems are considered. In both instances, power could also be supplied tothird (non-PLN) parties. In case of stand-alone systems, we have either a case of an isolated demandcenter or small local grid, or the generation of captive power.

11. This study is characterized by the fact that the projects under consideration areextremely site specific in terms of investment required and/or cost of the biomass fuel. Nevertheless,an attempt has been made to draw general conclusions. For this reason the analyses do not use thetraditional approach of determining internal rates of return, which would have been appropriate ifparameters had been more uniform. Instead, net-back values of the investment or the biomass fuel(whichever was more appropriate) have been calculated, assuming realistic prevailing production unitcosts and rate of interest. Rather than being investment oriented (determining IRR, NPV, PBP, etc. todecide on the optimal use of a given amount of money) the study, therefore, is cost orienteddetermining the least-cost alternative for a given demand.

12 This means that the biomass fuel value or the investment value for which the unitproduction cost are equal to the unit p:oduction cost for the existing alternative (base case system)have been determined. The calculated fuel or investment value, therefore, are threshold costs foreconomic viability of the various power generation options that have been analyzed. If actual fuelvalues or investment costs are lower than those values a project is feasible. (In case of the traditionalIRR method the IRR would be higher than the prevailing interest rate and result in the sameconclusion). The base case unit production costs with which the biomass based systems have beencompared are region specific. These depend strongly on the particulars of the systems installed andon prevailing load factors. It has been, therefore, necessary to explore a range of base case unit costs(this method has the same function as the traditional sensitivity analysis). (See Annex I and V).

13. The economic environment has been found to be largely determined by interest ratesubsidies p vided to PLN by the GOI and the existence of inter-island cross-subsidies, both factorsdistorting tne economic perceptions of potential clients (PLN, third parties) and producers ofelectricity. For this reason a strict system was applied in the financial and economic evaluations.

Hindrances for the Development of Private Power

14. Private power can only play a substantial role in the development of the power sectorif realistic power purchase tariffs are applied. Tariffs should not only reflect the operating costcomponent but include the capital component as well. This is not only necessary from theentrepreneurs point of view, it is also justified. Private power is recognized as an alternative forsubstantially contributing to the increase of the Indonesian power generating capacity. Theimplication of this policy is that the public sector (PLN) can avoid the installation of the equivalentcapacity. Therefore PLN's avoided cost include a capital component. Principally the maximum pricethat PLN is prepared to pay for electricity from any particular source should be determined on the

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basis of PLN's avoided costs, i.e long term marginal cost at specific location or in the case of anemergency supply the cost of electricity not served. Convcrsely, the minimum price that the privateproducers should be prepared to accept is the LRMC of private supply (at a reasonable rate ofreturn). This principle is employed throughout the analyses of this report.

15. A second factor determining the role of biomass is the prevailing interest rate subsidyfor PLN and the system of cross-subsidies. The main consequence of this interest rate subsidy is thatelectricity appears cheaper than it act-17' ;v fr °0T N and its customers alike. At the outer islandsthis and the cross-subsidiy results in PLN electricity prices which do not reflect the actual cost of itsproduction. As a consequence the financial feasibility of biomass based electri-icy projects for captivepower as well as for the delihery of private power to parties other than PLN, as experienced by theprivate producer, diminishes. In economic terms such projects may, however, very well be feasible.

16. While provisions for the establishment of private and cooperative bodies in the powersector were already issued in 1985, the guidelines and regulations necessary to implement theprovisions are still lacking. Partly due to this reason, participation of the private sector as stipulated inthe Electricity Act, except for captive plants, is still lacking. The existing regulations or guidelinesissue,d in 1983 and derived from the 1979 regulation are basically administrative in nature. Provis ni'sregarding the processing of proposals, especially on the pricing and guarantee issue have not yetbeen defined. The study includes an outline of a regulatory framework that would stimulate theproduction of private sector generated, including biomass based, power (Annex IV).

Conclusions

Feasibility of Considered Projects

17. For the various types of residues a variety of technical and nianagerial options isdetermined and evaluated with reference to financial and economic perspectives. The analysis showsthat small to medium scale biomass power production options are much more viable than the largerscale options. In brief the conclusions are as follows:

(a) PLN implemented system: Large (> 30 MW) biomass based power plants aregenerally not feasible. Medium (1-5 MW) biomass based power plants are a viablealternative to diesel power plants, especially for near base load operation. For theelectrification of isolated villages (50-100 kW) where biomass is abundantly available(HTI programmes), biomass is an excellent alternative for which no subsidies wouldbe needed.

(b) Ealm Oil Mills: Delivery of surplus electricity (generated at low efficiency) can beimplemented immediately without large investments. This is financially andeconomically feasible. Optimized highly efficient energy systems would be feasiblewhere palm oil mills can replace power otherwise generated in medium scale dieselpower plant. A prerequisite for the implementation of optimized energy systems is thepayment of a power purchase tariff that reflects PLN's avoided cost. Large scalepower plants are financially and economically preferred over this type of palm oilmill based power plant. Since the majority of the palm oil mills is concentrated onNorth Sumatera which is supplied by large PLN power plants, the scope for highlyefficient energy systems is small.

.V.

(c) Suar Mills: Since the potential power of energy efficient stugar Mills is relativelylarge in comparison to PLN grid capacities, the considered systems must compete withlarge PLN power plants and, therefore, against rather low unit electricity cost. Giventhe anticipated size of the investments required for existing sugar mills, suchoptimization does not appear financially or economicallv feasible. This is differentfor newly planned sugar mills. Energy optimization would be attractive if a premiumwere paid for the higher cost of capital for those projects.

(d) Rubberwood Sawmills: Gasification for electricity delivery to PLN or third parties iseconomically feasible. However it car, only be implemented with power purchasetariffs that reflect PLN's avoided cost. Gasification is also an attractive option for thereplacement of captive power.

(e) Plywood mills: In comparison with large PLN power plants the optimization ofplywood mills for electricity self-sufficiency and deli-iry of surplus power does notappear feasible, neither financially nor economically. Where the erection of small tomedium diesel power plants can be avoided, the implementation of such powersystems is feasible.

Reommendai

20. The GOI should place emphasis on project identification in the following sector:

- 'Medium scale (1-5 MW) dedicated power plant fuelled with palm oil residuesor plywood mill residues in regions where medium scale diesel power plantsare projected.

Low investment (low efficiency) electricity co-generation with surpluselectricity delivery to the grid by palm oil mills in regions with large PLNoperated systems.

- High investment (high efficiency) electricity auto-generation at plywood millsand palm oil mills in regions where medium scale diesel power plants (1-5MW) are projected.

- Rubberwood gasification for electricity self-sufficiency and surplus electricitydelivery at sawmills, based on an inventory of rubberwood sawmills in orderto assess the scope of a rubberwood gasification project.

- Promote high-efficiency electricity production with power export to the gridfor newly planned sugar and palm oil mills.

- Investigate the financing possibilities based on avoided C02 emissions forlarge biomass fuelled power plants.

21. Considering the total aggregate economically feasible capacity of more than 1,200MW, as well as the capabilities of the private sector, it is recommended that the GOI pursues allpossibilities for private participation in economically feasible biomass based power projects. Keyfindings are summarzed below:

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For sales to the PLN grid, the key issue is the electricity pricing. Basically themaximum price that PLN is prepared to pay for electricity from any particular sourceshould be determined on the basis of PLN's avoided costs, i.e long term marginal costat a specific location or, in the case of an emergency supply, the cost of electricity notdelivered. Conversely, the minimum price that the private producers should beprepared to accept is the LRMC of private supply at a reasonable rate of return.

Biomass based power will result in reduced C02 emissions. Under certain conditions anumber of govemrrents and private and multilateral institutions are willing to pay forsuch reduction (e.g. the Global Environmental Facility). In principle financial supportcan therefore be sought with those bodies.

To encourage private power supply to the PLN grid the GOI should develop a pro-active policy and regulatory framework to promote attractive private biomass basedprojects for surplus electricity delivery. Such a regulatory framework should includethe guarantee of contract sanctity. Also, the ass, rance of a purchase agreementshould oe developed and well defined. Contractual arrangements that need to beconsidered include (see Annex IV):

A guaranteed electricity price in the form of a pricing formula.Payment guarantees.A firm power contract.

This pro-active should be accompanied by an adequate technical and financialsupport package.

Technical support may include:

- Publication of a guide containing the addresses of producers and traders ofrelevant new and second hand equipment;

- Publication of magazine describing existing biomass based power projectsand containing advertisements for relevant new and second hand equipment;

- Organization of a trade fair for biomass conversion equipment;- Establishment of a team for the preparation of site specific feasibility studies,

tender evaluation and plant acceptance.

Financial support by the GOI can be organized along a combination of the followingprinciple:

Investment credits based on the installed capacity (/kW) through partlycovering investment cost, facilitation of concessional loans, accele,ited fiscaldepreciation and other tax incentives.

Although the practical experience collected from the large GOI-PLN pilot projectcould be used as an important input for the preparation of standard regulations, it issuggested that PPIT also consider the various possibilities of surplus private powerdelivery, both at small and medium scale.

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labe 2: Summary of Practical Scales of Implementationfor Selected Biomnass Based Power Options

In comparison Financial EconomicType with evaluation (a) evaluation (b)

Systems operated by PLN

Medium scale biomass Medium diesel Feasible near Feasible nearfuelled power plant power plant base load base load(collected palm oil or operation. operation.wood residues)

Small biomass fuelled Small diesel Feasible above Feasible abovepower plant (Isolated power plant 2000 operating 2000 operatingvillage electrification) hrs/yr. hrs/yr.

Captive and private power delivery

Palm oil New optimized Medium diesel Matginally Feasible(CPO) power system power plant feasiblemills (1.5-3.6 MW

excess power)

Palm oil Low efficiency Large to medium Feasible Feasible(CPO) power generationscale powermills for grid delivery plant

(0.8-1 MW excesspower)

Sugar New mills (7- Large scale Feasible Feasiblemills 16 MW excess power plant

power dependingon season)

Rubberwood sawmills (a) Medium to small Gasification: Gasification:MW installed, of which diesel power plant not feasible; marginally0.5 MW exported) Steam system: feasible; Steam

not feasible system: notfeasible

Rubberwood sawmills (a) Small scale Gasification: NAMW installed, of which captive power feasible; Steam0.5 MW exported) system: not

feasible

Plywood Cogeneration Medium to small Feasible Feasiblemills (2.5 MW diesel power

installed of plantwhich 1.8 MWsurplus)

(a) Conditions of financial evaluation: Real interest rate 7% for PLN, 14% for privateentities.

(b) Conditions of economic evaluation: Real interest rate 14% for both private and publicentities.

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22. Finally, in order to operationalize the above recommendations it is suggested that theDOENE organize a round table with interested parties (PLN, private and public sector industries) todiscuss the perspectives of biomass based power generation as well as the objectives and terms of apro-active GOI policy and the contents of the required regulatory framework. Such a discussion mayhelp DOENE in accelerating its preparatory work in this area, while it will give Indonesian industrythe opportunity to voice its desiderata in an open forum. Also, at the same time pilot projects shouldbe initiated to demonstrate the GOs commitment to private power development.

IL BACKGROUND

ec =eveQomnt

IntrQduction

1.1 With 180 million citizens, Indonesia is the fourth largest nation in the world afterChina, India and the United States, as well as the largest economy in Southeast Asia. It is also theworld's largest archipelagic nation with 13,667 islands stretching between Australia and mainlandAsia, over a distance roughly equal to the distance between London and Moscow. Yet despite the vastland area, the population is disproportionately placed. Approximately 110 million of the nation'sinhabitants (61%) are located in the inner islands of Java, Madura and Bali which constitute only asmall part (8%) of the composite land area, while 70 million people (39%) inhabit what are known asthe Outer Islands. Reflecting great diversity, the population is also comprised of over 300 ethnicgroups speaking numerous native languages.

1.2 Of particular importance for the nation's economy, over the past two decadesIndonesia has worked to develop its abundant oil and gas reserves. Currently, the nation is the world's14th largest petroleum producer and the greatest single supplier of liquefied natural gas (LNG) On amacro level, the energy sector in Indonesia accounts for roughly 21% of Gross Domestic Product(GDP), over 40% of export earnings and 38% of the Government of Indonesia's (GOI) domesticrevenues.

1.3 While Indonesia is classified as a rapidly industrializing/developing nation --experiencing a growth based in large part on energy development and exports -- the country as awhole possesses relatively limited infrastructure in basic services, e.g. health, drinking water, transport,education. Furthermore, a disproportionately large percentage of economic growth, population andinfrastructure is located in the urban areas of a few provinces (mostly on the island of Java). Theannual economic growth of the nation has, however, been impressive averaging 6-8% per year overthe last decade and the economy is expected to maintain a 7% real GDP growth through the year2000.

1.4 Accompanying the expected economic growth, GOI and World Bank economicindicators forecast an associated rapid increase in domestic commercial energy consumption, with an8% per year projected increase in domestic petroleum products consumption, a 15% increase peryear in electricity consumption and a 20% per year increase in coal consumption. While theGovernment remains strongly committed to economic growth, it also endorses a policy whichpromotes regionally balanced growth throughout the country. At the same time, and a particularchallenge for national and regional energy planning, the Government is strongly committed todiversification away from the relatively large domestic consumption of exportable petroleumproducts, towards the utilization of alternative and more economrcal energy resources. This includesthe promotion and development of resources indigenous to the regions in which they are located.

Energy Substitution Policy

1.5 Specifically, and in view of the projected energy demand growth, the GOI hasadopted policy guidelines in its current five year development plan (known as REPELITA IV) toconserve its liquid petroleum reserves and, thereby, prolong the availability of an exportable srplus.

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To help meet these objectives, the Government seeks to promote the development of alternativeenergy resources which can provide an economic substitute for oil and gas. In addition to indigenouscoal, geothermal and hydro resources, which are in abundant supply, biomass has been identified asone of the alternative energy resources to be actively developed. Waste biomass from forestry, woodprocessing, agriculture and other -elated activities holds the potential -- as demonstrated in variousstudies executed by official multilateral and bilateral financing sources -- to be an abundant andprospective resource for commercial, domestic energy substitution. What has been lacking, however,is a consistent national or regional systematic approach to identifying, assessing and, in turn,developing strategies which actively promote the development and utilization of these biomassresources.

Biomass Resource Bas

1.6 By any standards, the biomass resource potential for commercial energy generation inIndonesia is large and, crucial for current energy planning purposes, indigenous and renewable. TheWorld Bank's 1981 Energy Assessment of Indonesia estimated total sustainable forest biomass yieldat 650 million tonnes per year (non-Java).l In addition, the same study estimated that 90 milliongreen tonnes of agricultural residues is generated annually (mostly in Java). By World Bankcalculations, this represents a primary energy equivalent of approximately 225 million tonnes of oilequivalent per year (mtoe/yr) in sustainable yield forest resources and 23 mtoe/yr in agriculturalresidues.2 In comparison, the World Bank Energy Options Review for Indonesia (1987) estimatednational commercial primary energy demand for 1990 at 27 mtoe.3

1.7 While the potential for biomass-based energy generation is, therefore, enormous, thegeneral problem remains that crucial data, financial-economic assessments, institutional infrastructure,as well as sustained planning, financing options and the applied use of appropriate conversiontechnologies are all poorly lacking.

1.8 While projections vary substantially, the general data available in studies indicate thatthe use of biomass could, ideally, contribute a significant portion of commercial energy generation.From a practical standpoint, however, there are impediments to its macro utilization. For example, thebiomass resources are unevenly distributed throughout the large nation and, as noted, accuratenational or regional resource data, demand and supply patterns, as well as environmentalsustainability analyses are inadequate.

1.9 Limited Commercial Applications. In relative terms, and given the tremendousresource availability, biomass is currently used in only limited quantities for commercial energygeneration. Generally, biomass residues are discarded or burned where they are produced, i.e.plantations, agricultural and village lands, mills, etc. No biomass is currently being transportedbetween islands or any large distance within island;s. A 1985 Asian Development Bank (ADB)regional rural energy study on Kalimantan shows tha. even in rural areas where distribution costs forfossil fuels are high and biomass resources abundant, very few industrial and commercial enterprises,

I Indonesia: Issues and Options in the Energy Sector Report No. 3543-IND, World Bank, November, 1981.

2 Issues and Options in the Energy Sector.

3 Indonesia: 3nergy Options Review. Report No. 6583-IND, World Bank, August 1987.

e.g. sawmills, rubber plantations, ice factories, utilize biomass for commercial energy generation.4

1.10 Rural Biomass Consumption. Yet while biomass plays no significant role incommercial energy production, direct combustion of wood or other biomass in Indonesia forcooking, water heat and process heat is common in rural areas, specifically for households and ruralindustry. More revealing, United Nations Energy Balances calculate that in terms of total nationalenergy consumption, over one-half of primary national energy supply is derived from fuelwood,which remains the most important source of energy for the vast majority of rural inhabitants.Regional studies conducted for both the U.S. Agency for International Development (USAID) andthe ADB concur that over 75% of rural household fuel demand is met principally by wood, as well asagricultural residues. 5 6 Yet despite the biomass contribution to total national energy consumptionand the prospect for its broader integration in energy substitution, national and international effortsand resources have concentrated primarily on fossil fuels for commercial energy supplies. That is, incomparison there has been relatively little focus and consistent analytical work in terms of systematicbiomass inventories or, as noted, developing coherent nationaVregional strategies for its applied use incommercial energy generation.

Govermment ObJectives

1.11 Given both the energy potential of biomass and focus of current national energypriorities, the GOI is looking to develop strategies and specific projects designed to promoteagricultural and industrial biomass residue for energy conversion. Specifically, this orientationreflects two overall objectives of the GOI and is consistent with its approach to developing alternadveenergy resources, namely:

(a) to decrease national petroleum consumption and improve the balance of payments byencouraging substitution of indigenous biomas energy resources for petroleumbased fuels; and

(b) to promote the balanced development of interior, Outer Island areas, such as Sumateraand Kalimantan, which ir. addition to other resources, will require the use of local,accessible fuel resources -- including biomass - for regional growth.

1.12 In light of the dearth of reliable national and/or regional inventories on biomassresources and complementary energy supply/demand patterns -- and consistent with GOI macroobjectives -- the present document is a synthesis of key findings from a technical studycommissioned for the World Bank/UNDP focused specifically on the principal issues related toenhanced biomass utilization, i.e. resource quantification, prospective system applications, relatedpreliminary financial-economic assessments and the institutional parameters necessary for promotingbiomass resource utilization for commercial energy generation.

4 Indonesia: Rural and Renewable energy Devdopment Study in K"aina. Main Report, Asian DevelopmentBank, 1985.

5 A Prefeasibility Assessment of the Potential of Wood Waste Power Systems for the Indonesian Wood ProductsIndustrv. Phase 1. USAID, Bioenergy Systems and Technology Report No. 88-17, November 1988.

6 A Framework Studv for Rural Energy Development in KaliMIantan ADB, 1985.

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Scope of Studv

1.13 In light of GOI macro objectives, the four main activities conducted for this study aresummarized as follows:

(a) Identify and define specific and sustainable surplus biomass resources, with emphasison the Outer Islands, e.g. Sumatera, Kalimantan;

(b) Identify specific current and projected energy demands in these areas which couldtechnically and economically be met by substitution of biomass resources;

(c) Assess at the pre-feasibility level the technical and financial-economic viability ofappropriate conversion technologies; and

(d) Outline the policy and institutional constraints confronting the development of anyprospective project implementation.

1.14 Summarv Presentation. Within the context of these national energy guidelines, andfocusing on the study activities listed above, the key findings from the technical study are presentedin this brief under the following Section headings:

- Energy Overview;- Biomass Availability Assessment;- Prospective Scales of Implementation;- Financial-Economic Viability; and- Key Institutional Issues

1.15 Particular emphasis in this report is placed on the quantification of major biomassresources in key outlying regions, the prospective scales of implementation and, in turn, the projectedfinancial-economic viability of the outlined interventions. This systematic approach is consistent withand a logical follow-up to other resource studies in the field of biomass utilization. A survey of thekey related studies on Indonesia, conducted as a part of this study (see: Bibliography, Annex III),indicate that there are critical perceptions and obstacles that imp-de the expanded development ofbiomass utilization, namely:

(a) The presumed unreliability of a continuous biomass fuel supply;

(b) The low returns that private enterprises can seemingly receive on energy production- compared to other investment options existing in the Indonesian economy;

(c) The high investment costs needed for biomass-based electricity production togetherwith prevailing high interest rates and the lack of long-term loan facilities;

(d) The unfamiliarity of both the State Electricity Corporation (PLN) and privatecompanies in terms of the technologies involved; and

(e) The underdeveloped regulatory structure for private power supply to the national gridand/or third-parties.

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1.16 In sum, focusing on both GOI objectives and the above-outlined issues and actvities,the report synthesizes key findings in the relevant areas, i.e. resource availability, prospecti le scopeand scale of applications, preliminary financial-economic assessments, and key institutional issuesrelated to the promotion and development of biomass utilization, with the goal of building criticaldata and information.

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I. ENERGY SECTOR OVERVIEW

)verview

2.1 Indonesia has a wide variety of indigenous energy resources including petroleum,natural gas, coal, hydropower, geothermal, as well as forest and agricultural biomass residues.Consistent with population densities and regional economic growth, an estimated three-quarters of allcommercial fuel usages and two-thirds of electricity sales are in Java, with the balances primarilyconsumed in Sumatera and Kalimantan. In terms of commercial fuel resources, Java is endowedbasically with (limited) oil and gas, geothermal and hydro potential, while Sumatera and Kalimantanhave larger resources in the form of oil, natural gas and coal. In terms of biomass, abundant andprospectively available agricultural residues, e.g. bagasse, are found throughout Java and bothagricultural and forest biomass throughout Sumatera and Kalimantan. For overview purposes, SectionII. briefly summarizes the technical findings with reference to national commercial and traditionalfuel resource supplies in Indonesia.

Commercial Energy Supply

2.2 PetroleIum. Petroleum resources in Indonesia (which are found in large quantities inSumatera and Kalimantan) consists of an estimated 8-10 billion barrels of proven reserves withannual production of approximately 550 million barrels per year (1990). Of this amount,approximately 288 million barrels are exported, while domestic consumption accounts forapproximately 200 million barrels per year. In the latter case, domestic petroleum consumption hasbeen growing at approximately 7-8% per year (1986-1990) and the pattern is expected to continue atthis accelerated rate unless substitution options are implemented.

2.3 Natural Gas. Natural gas is found in major quantities in Indonesia (in or near Java,Kalimantan and North Sumatera) and is, after commercial utilization in Java, largely exported asLNG. As noted, Indonesia is the world's largest supplier. Estimated natural gas resources are 106trillion cubic feet (tcf), with 84 tcf of proven reserves. Production of gas has been increasing rapidlyand is approximately 2.0 tcf per year. LNG, with .8 tcf available for export, is also a major foreigncurrency earner for the 001 and constitutes approximately 50% of total petroleum and gas exports.Given the prospect for even larger exports, the GOI is actively shifting from the domestic utilizationof natural gas in light of the higher values that can be gained in international trade.

2.4 CoAl. Coal resources, the bulk of which are located in South Sumatera andKalimantan, are estimated to be as high as 28 billion tons, of which over 4.4 billion constitute provenand probable reserves. Approximately 4.55 million tonnes of coal were produced in 1989, of whichabout 30% was exported. With limited international market potential -- in relation to productioncapacity -- domestic utilization for energy is likely to be the main option for the expanded use ofcoal. In addition, the low sulfur content of Indonesian coal reduces the negative environmentalimpacts affiliated with its use and the related costs. Yet while GOI policy is to maximize on thedomestic utilization of coal in power generation, improved infrastructure and market mechanisms willbe required prior to any vastly expanded use at the national level.

2.5 Hxydrowower. Hydropower potential in Indonesia is estimated at approximately32,000 MW, almost all of which is located outside of Java. This geographic consideration, combinedwith the heavy concentration of economic activity in Java, has meant that only a small fraction of this

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potential is currently developed. Specifically, in Java 2,000 MW of hydro is already developed or inthe process of being developed.

2.6 Geothermal. While geother.nal development has been limited, the resource potential issizeable at an estimated 10,000 MW. The first geothermal power plant was established in Java in 1982and other fields are now being developed. From the outset, however, the lack of viable market signalsto steam producers has failed to promote a sizeable private sector development of the resource. Theselling of electricity has been proposed although the market signals to prospective producers need tobe more thoroughly addressed. According to a World Bank assessment in 1991, while the long-runmarginal costs of geothermal appear higher that electricity generated from natural gas or coal, it ispossible that sites might be competitive in areas where the cost of fossil fuel generation are likely tobe high, i.e. Outer Island regions.7

Power Sector

2.7 Nationally, the power sector in Indonesia is comprised of approximately 8,900 MW ofinstalled capacity run by PLN In addition, captive power plants installed and operated by privateentities constitute about 8,500 MW, of which approximately 2,400 MW are connected to PLN andoperated oni a stand-by basis. In addition, there are a number of Government-sponsored rural electriccooperatives along with a substantial number of micro enterprises providing electricity to rural areasand villages not served by PLN. Generating capacity on the PLN system is projected to increasesharply, however, to approximately 23,000 MW within Java and 7,300 MW outside Java by the year2000. Major expansions are projected for coal generation, from 1,700 MW to 13,500 MW, gas firedcombined cycle plants additions of over 5,300 MW, and an increase in hydroelectric plants to over6,000 MW. According to the GOI's official development plan for 1994/95-1998/99, about 46% ofthese new power stations are projected to be built and operated by the private sector.

2.8 Grid Electrification. In general terms, the national level of electrification in Indonesiais low at approximately 28%. Electric coverage extends to about 62% of urban households and 16%of rural households. Despite the relative low coverage, however, PLN sales grew at a rate of 15% peryear during the decade of the 1980's, a growth driven by increased income and economic activities, aswell as aggressive grid extension to new residential and industrial consumers. With 80% of thedemand for electricity located in Java, GOI projections call for the annual increases in demandgrowth to continue at approximately 15% per year in Java and 14% per year for the rest of thecountry. In part, this projected growth is a function of the GOI's commitment to continue to raiseurban electrification (50% in 1987) to 81% by the year 2000. In addition, expected increased in ruralelectrification coverage from 16% to 40% are expected to stimulate enhanced electricityconsumption.

Rural Energy Demand

2.9 As noted, in rural areas in Java and the Outer Islands, energy demand is met primarilythrough traditional fuels. In most rural areas, fuelwood and agricultural biomass constitute theprincipal sources of traditional energy for cooking and water heating. In terms of commercialenergy, kerosene, LPG and diesel-based electricity are used to a lesser extent depending onavailability and income patterns. Clearly the rural energy situation varies from region to region and islinked to population, land use, resource disposition and climate, e.g. in fertile regions where there arelimited competing demands, fuelwood for home cooking is generally used. The imbalance between

7 "Staff Appraisal Report - Indonesia Power Transmission Project", World Bank, May 1991.

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the traditior-llcommercial fuel ratio for rural areas is demonstrated in 1986 regional data showingthat approximately 87% of rural household cooking needs are derived from biomass and less that12% from kerosene, although kerosene remains the predominant fuel for lighting in ruralhouseholds.8

2.10 Section III. outlines the key biomass resource base as calculated throughoutIndonesia. In tarn, prospective areas of availability are outlined along with their specific biomassresidues and their prospective energy values.

8 Indowea En= gyOtns Review World Bank, 1987.

III. BIOMASS RESOURCE BASE

Overview

3.1 On the basis of existing regional data and calculations, the prospective availability ofbiomass for energy substitution in Indonesia is enormous. This section briefly summarizes data onresidue availability at a national level and follows with a review of specific, key biomass resourceswhere supplies and effective utilization appear most promising. The data presented utilizesinformation from existing studies and expands upon this data with findings from field visits.

3.2 First, emphasis is placed on agricultural residues from palm oil and sugar production.While biomass from rice and coconut production constitute the other major agricultural residues inIndonesia available in large quantities, they are only briefly outlined here as their potential expandeduse for energy generation is analyzed in other pre-investment studies.9 Second, in terms of forestresidues, emphasis in the technical report is placed on rubberwood production and plywood millwaste as the forest residues that appear abundantly available and in located in regions wherecommercial energy generation appears consistent with GOI objectives.

Major AgDculture Residues

3.3 As outlined, the agricultural sector in Indonesia offers a potentially abundant supplyof biomass residues for energy conversion. In terms of major indigenous residues, rice, coconut, palmoil and sugar cane production offer the most immediate prospects for significant quantities ofresidues for commercial energy generation. These four residues supplies, along with their regionalavailabilities and macro energy potentials, are summarized below.

RiceWas

3.4 Indonesia is self-sufficient in rice production. According to a 1989 joint WorldBank/UNDP analysis, total paddy production was estimated at approximately 40 million tonnes(1986).10 Production is concentrated mainly in Java/Bali (54%) and Sumatera (24%), with theremaining balance spread throughout other regions. The same World Bank/UNDP technical studyalso calculates that processing the paddy to rice yields approximately 8 million tonnes of rice husks-- the relevant residue of interest - with an estinated equivalent energy value of approximately 2.4mtoe/yr. As with biomass residues in general, however, a problem is that the husk wastes are availableon a decentralized basis. At present, the majority of the rice husks in the key producing areas aredisposed of by open burning.

9 For a detailed discussion of the resource base and energy conveision potential of rice waste and coconut residue,see: Indonesia BioMass Gasifier PeM-Investment Study. Volume I & 11, World Bank, 1989.

10 Indonesia Biomass Gasifier PeM-lnvestment Study. Volume I & 11, World Bank, 1989.

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Coconut/Copra Waste

3.5 Coconut cultivation constitutes approximately 3 million ha. in Indonesia with themost important areas being North Sumatera, the Java/Bali region, as well as Sulawesi. In Sulawesi andNorth Sumatera the coconuts are almost exclusively used for copra production, while in the Java/Baliregion a considerable portion of the coconuts are used to produce coconut milk-powder and milk fordirect consumption. The relevant coconut residue consists of the coconut husk and shell. Generally,whole nuts are harvested and are then de-husked at field locations with the husks usually left in thefield. In the case of copra production, the de-husked nuts are transported to the copra dryer wherethe meat is removed from the shell for processing.

3.6 Given an annual production in Indonesia of approximately I 0,000 million nuts,World Bank/UNDP study data indicate that the annual output of coconut slhells and husks amounts toapproximately 3 million and 5.6 million tonnes respectively.1 ' In turn, calculations prepared for theWorld Bank/UNDP study indicate that the prospective energy value of the resulting shells alone couldbe equivalent to 1.2 mtoetyr. If the husks are considered this adds an additional 1.6 mtoe/yr. In termsof practical utilization, however, the problem remains that the vast majority of these residues areavailable in a decentralized manner, i.e. in small landholdings and throughout numerous commercialestatilishments.

EaiQ Oi

3.7 The main products of the palm oil sector are crude palm oil (CPO) and palm kerneloil (PKO), as well as various subsidiary products. According to 1990 data collected for the technicalreport, a total of 83 CPO and PKO mills exist in Indonesia. In terms of geographic location, two-thirds of palm oil products are produced in North Sumatera where 55 mills are located. Totalproduction at the CPO mills is estimated at approximately 2.5 million tonnes of crude palm oil peryear, of which about 60% is used for domestic consumption. The relevant residues of interest consistof empty fruit bunches (EFB), fibers and shells. The calculated, composite energy conversionpotential from the residue base is outlined below in summary form in Table 3.1.

Sugar Cane

3.8 Indonesian sugar production grew from 1.73 million tonnes in 1985 to 2.05 milliontonnes in 1989, a growth of approximately 4.5% per year. According to 1990 data collected for thetechnical report, there are 67 sugar mills ranging in capacity from 42 to 417 tonnes of cane/hr., withthe average mill processing approximately 125 tonnes of cane/hr. Production is currentlyconcentrated on Java, but new plant capacity is planned for Sulawesi and Sumatera. The basic residuewith energy conversion potential is bagasse, i.e. the fibrous material produced as a result of grindingfresh cane. Babasse is also, however, the primary energy source utilized by the sugar mills duringtheir seasonal operation. The relevant issues for expanded, commercial energy generation aretwofold; the prospective surplus quantity of bagasse available for commercial generation, andoptimum uses of bagasse at the mills themselves so as to permit an enhanced utilization of surplusbagasse. The calculated, national energy potential from the bagasse conversion is presented insummary form in Table 3.3 below.

11 Indonesia Biomass Gasifier Ehl-Investment Study. Volume I & n, World Bank, 1989.

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Major Forst Seto Residutes

3.9 More than half of Indonesia or approximately i45 million hectares (ha.) isconstituted by forests. Of this, approximately 30 million ha. are designated as protected forest, 20million as nature reserves, 65 million as production forest and 30 million as conversion areas.(Production forests are scheduled for exploitation by means of selective cutting and replanting).It isalso estimated that nearly 900,000 ha. in Indonesia are deforested each year. Approximately half ofthe land clearings throughout Indonesia can be attributed to logging activities, while the other half isdue to clearance for settlements, agriculture and other purposes. As the world's principal supplier oftropical hardwoods, forest related production accounts for nearly 7% of export earnings making it,after petroleum and gas exports, the GOI's second most important foreign exchange earner.

Log-Prodution

3.10 According to World Banc/UNDP study data, total log production in 1985 wasestimated at 14.6 million cubic meters (m3), with the resulting forest residue calculated at 6.8 millionm35 However, official figures of log production tend to be conservative in that a significant portion oflogging is carried out without proper concessions and these quantities fail to appear in officialstatistics. In fact, data collected for the technical report show higher total log production calculations(Table 3.6).

Sawmill Residue

3.11 In an effort to increase forest productivity and product value, in 1985 the GOIimposed a total ban on raw log export with the result that logs in Indonesia are processed into eitherfinished timber, plywood, veneer or pulp for domestic consumption or export. The total number ofsawmills in Indonesia is hard to estimate. However, in 1985 there were 250 to 300 large (>30,000m3/yr) and medium (10,000 - 30,000 m3/yr) sawmills, nearly all in Kalimantan and Sumatera.

3.12 In the composite wood production and processing system, particularly at larger mills,large quantities of wood residues are generated. According to World Bank/UNDP calculations basedon 1985 log groduction, 5.3 million m3 of residue are produced from sawn timber production and5.2 million m- from plywood and veneer production. The composite energy value of all logging andwood industry residues -- calculated at an average density of 700 kg/m3 and an estimated lowerheating value of 11.25 MJ/kg for wet wood -- is in excess of 3.2 mtoe/yr.

Land Clearings

3.13 In addition to wood production residues, it is estimated that even greater quantities ofwood residues are produced in the process of land clearings. However, most of these residues areeither simply left in fields, burned or, in some cases, sold for fuelwood or cotiverted to charcoal.While exact data on the quantities of wood residues generated from land clearings are not available,estimates (World BanklUNDP) place these figures at 27 million m3 per year or the equivalent of 5.1mtoe/yr.

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Rubber ProductionlResidue

3.14 Total area under rubber production in Indonesia constitutes approximately 2.5 - 3million ha., of which about 2.0 million ha. is owned by small landholders and the remainderbelonging to larger estates (both state and private). Sumatera is by far the largest producer of rubberaccounting for 72% of the total Indonesian areas under cultivation. Kalimantan is second with nearly21%, and the Java/Bali region is third with 7%. Annual production of rubberwood is approximately47.5 million (oven dry) tonnes per year. In 1989, national rubber production amounted to anestimated 1.2 million tonnes of dry rubber.

3.15 The relevant residue is the rubber tree that has reached its useful economic life. With afinancially productive life of between 25 and 30 years, approximately 2 to 4% of the total areasunder cultivation must be replanted each year. (As a potential biomass resource, the average tree has aheight of 18 meters and a diameter of approximately 70 cm. at ground level). Based upon energycalculations developed by the World Bank/UNDP, total residue conversion would be equivalent toapproximately 20 mtoe/yr. Given, however, that there is a growing utilization of the larger logs forlumber, and assuming that approximately half of the branches are not easily recovered, this wouldstill result in 50% of the rubberwood residue being available for energy conversion or approximately10 mtoe/yr. A key problem with these aggregate figures, however, is that the residues are scatteredthroughout provinces and such centralized conversion is logistically impossible.

Aericulture Residues/Energy Applications

3.16 Focusing on key, major agricultural residue supplies (excluding rice and coconutwaste which are detailed in the previously cited study), this report elaborates on palm oil and sugarproduction residues. Emphasis is placed on the prospective application of the residues at theproduction mills themselves for commercial power generation. In the case of palm oil residues,regional and centralized plants are considered, assuming that collection and transport systems arefeasible. At the sugar mills, only mill-specific applications for surplus energy are considered.

Palm Oil Mills

3.17 The palm oil factories generating significant quantities of residues are locatedprimarily in Sumatera and are characterized by four types of energy needs:

(a) Electric power for processing purposes, i.e. strippers, digesters, screw presses,clarifiers, fibre/nut separators, crackers, etc;

(b) Electric power for general administration, i.e. lighting, equipment;

(c) Process heat, i.e. steam for sterilizers, digesters, clarifiers, etc; and

(d) Liquid fuels for factory start-up, electricity system back-up and local transport.

3.18 Energy Demand. Based upon data collected for the technical report, the averagepower demand at the palm oil plants varies from 13 kWh per tonne of fresh fruit bunches (KWh/tFFB) for large mills (30 - 60 t FFB/hr.), to 18 kWh/t FFB for small mills (5 - 30 t PPB/hr.) operating at

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nominal capacity. In general, power is generated by means of back-pressure steam turbines. Processheat demand varies between 420 - 550 kg. of stean/t FFB for large and small mills respectively, and isusually generated by burning shells and fibre. (Occasionally EFB or fuelwood are also fired). Processsteam consumption is not constant, however, since the FFB sterilization is a batch process. The resultis that power and heat consumption are not synchronized. For this reason a steam vessel is installedwhich can be filled either by exhaust steam from the back-pressure turbine or directly from the boilerthrough a pressure reduction valve.

3.19 Assessing the potential for energy self-sufficiency and/or generation of surpluselectric energy, the report calculates both average factory energy demand and the available residuesupply. The fuel consumption for the cogenerating systems applicable in palm oil mills is determinedby the process steam demand with the related fuel demand being derived from this indicator.

3.20 Typical efficiencies for boilers installed are about 75%. Under the operatingconditions of these boilers, the fuel consumption is equivalent to 3,427 kJlkg. steam. Fuel demandtherefore ranges from 1.44 million to 1.88 million kJ/t FFB for large and small factories respectively.Comparing these requirements with the energy values of the residues produced -- as summarized inTable 3.1 -- re' eals that the fibres, supplemented by shells, are sufficient to meet internal energydemand. At a production level of 9-10 t FFB/hr. or more, a palm oil factory can be self-sufficient byfueling fibres and shells, while EFB will be available for other uses. At a higher production, a surplusof shells and or fibre usually develops. At low production levels, however, it might be necessary toburn additional EFB from stockpiles.

.Tble 3.1: Quantities and Energy Value of Residues Produced at Palm Oil Mills

Quantities Energy valueResidue Type MCw (t/t FFB) LHVw g) (Wit PR)

EFB 20% (Afterdrying) 0.10 14640 1.4630% (After drying) 0.11 12528 1.4340% (Afterdrying) 0.13 10415 1.3950% (After drying) 0.16 8303 1.3360% (As produced) 0.20 6190 1.24

Fibre 40% (Asproduced) 0.12 11000 1.32Shells 15% (As produced) 0.045 14800 6.66Total primary (Minimum) 3.45enerRy available (Minimum) 3.22

3.21 Surplus En otential. The data indicate that at a national level the palm oil sectorproduces 3.22 - 3.45 million kJ/t FFB, while using only an average of 1.66 million kJ/t FFB, leavingan amount of 1.56 - 1.79 million kJ/t FFB not utilized for energy. With reference to the 1990 palmoil production level, this implies qpproximately 18 - 20 million GJ/yr of non-utilized primary fuel.Depending on generation efficiency (varying between 15% - 35%), this would imply that non-utilized palm oil residues could be employed for generating between 90 to 250 MW of power.Regionally this amount varies from .3 to 63 MW (utilizin. low-efficiency technologies) and up to168 MW (employing high efficient technologies). Table 3.2 outlines a summary of the potentialdistribution surplus power generation by province based on palm oil residues.

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Tble 3.2: Distribution by Province of Surplus Power CapacityBased on Palm Oil Revenues

Total capacity byprovince Surplus power capacity based on

Province (t PFB/hr) CPO residues (MW)Lower estimate Higher estimate

Aceh 230 7.0 19

North Sumatera 2070 63 168

Riau 300 9.1 24

Jambi 10 0.3

Bengkulu 30 0.9

SouthSumatera 120 3.6 10

Lampung 70 2.1

WestJava 30 0.9

West Kalimantan 90 2.7

East Kalimantan 30 0.9

SESulawesi 30 0.9

Irian Jaja 30 0.9

Total 3040 92 247

Note: Calculated on the basis of 7884 operating hours per year. The lower estimate takes account ofan efficiency of 15% and a surplus of 1.56 M kiJ/t PFB of unused energy.

The higher estimate takes account of an efficiency of 35% and an amount of 1.79 M IJ,t FFBavailable fuel.

3.22 The data in Table 3.2 indicate that the provinces where medium and large scalecentralized power generation might be considered are North Sumatera -- clearly the province with thehighest potential -- Riau, Aceh and South Sumatera. In brief, the concept is that more appropriateenergy management at the palm oil mills could make available an amount of primary fuel which, inprinciple, would be used for the generation of surplus electric power. In addition to the medium andlarge scale applications, this could also be done at individual factory estates. Technical applicationsfor mill-specific generation are outlined in Section IV.

Slsga Mil

3.23 The issue of bagasse utilization and prospective surplus at the mills is related tofactory-specific conditions, i.e factory design and production procedures. The data indicate that themajority of the mills are located on Java. The composite location and size of the mills aresummarized in Table 3.3.

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jble 3.3: Location and Size of Sugar Mills In Indonesia

Total capacityAverage capacity by by island

Capacity Total nr. by island (1000 tIsland Nr. (t canelhr) island (t canebrt) caneftr)

Java 22 0 - 75 57 99.5 5.6726 75 - 1507 150 - 2252 225-

Sumatera 0 0- 75 8 205.3 1.641 75 - 1505 150 - 2252 225-

Sulawesi 0 0- 75 2 95.3 1.912 75- 1500 150 - 2250 225-

Source: Mission estimates.

3.24 Prospective Energy Potential. Based upon data collected for the technical report,bagasse production at a national level and the primary energy value is quantified and summarized inTable 3.4. In 1990 an equivalent of 7.24 10/13 - 8.02 10/13 kJ/yr (primary fuel) was produced.Based upon continuous operation (7,888 hr./yr) and an efficiency of between 20 - 40%, thiscalculates to a power generation potential ranging from 510 to 1,030 MW. These figures, however,are illustrative considering that centralization of the composite bagasse supply is impossible forlogistic al reasons and since it is used for the primary energy requirements of the sugar industry itself.The prospective power capacity figures are illustrative of the energy potential, however, whencompared to the total installed power generation capacity at the sugar mills in Indonesia, whichamounts to approximately 165 MW.

3.25 Given the mill sizes and bagasse residue at existing mills, the technical findingsindicate a potential for surplus power generation at 16 to 45 mills. Sizing and types of equipmentinstallations would obviously vary from factory to factory but data and calculations imply anaggregated capacity at these mills of between 160 to 300 MW. (A USAID-funded site specific studyin 1991 analyzed the prospect for power generation at four individual mills, where surplus electricpower capacities at these mills alone ranged from 6 to 33 MW)12 . An outline view of the technicalapplications for surplus energy generation at individual mills are outlined in Section IV.

12 "Diversification of Sugar and Palm Oil Industries: Indonesia. Part 11: Case Studies of Sugar Industry ElectricityProduction For Export. Winrock Intenational, for USAID, 1991.

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Forest Sector Rensidues/EnD y Aplications

Rubberwvood Residues

3.26 In general, reliable national or regional statistics on rubberwood residue areincomplete. The problem is that the share of small producers in rubber cultivation is large andcentralized data is, therefore, difficult to collect. Assuming, however, a certain production system --regular thinnings and a final harvest -- a regional study in 1987 estimates an amount of 14.4 tonstha.of rubberwood becoming available each year. On a national basis, and given an area of 3 million ha.under cultivation, this would imply an amount of 43 million tons of rubberwood production per year.(Exact quantities of final output can vary according to formulas used). For the large rubberwoodestates, the technical report concurs with the production figure of 14.4 tons/ha. of rubberwood peryear.

Table 3..A: Bagasse Production in Indonesia

Bagasse ProductionCane Ptoduction Sugar Production (lOOWyr)

Year (lOOOtJyr) (lOOOt/yr) (at MCw = 50%) Primary Eng Producdon, LHVw Based (TJ/yr)Bagasse asProduced Dried Bagasse(MCW=50%) (MCw=20%)

1985 20.12 1.7 6.99 5.48 60.81986 20.51 2.0 8.29 6.50 72.01987 20.60 2.1 8.58 6.73 74.51988 20.52 1.9 8.33 6.53 72.31989 20.68 2.0 8.85 6.94 76.81990 20.80 2.2 9.24 7.24 82.2 Projection1991 20.88 2.2 9.52 7.46 82.7 Projection1992 20.96 2.3 9.77 7.66 84.8 Projection1993 30.00 2.3 9.90 7.76 85.9 Projection

Source: DewanGula DewanGula Est. Est. Est.LHVw bagpse (klikg), at MCw = 50%: 7838LliVw bagme lkg, at MCw = 20%: 13897Source: Mission estimates.Note: When drying from MCw = 50% to 20% the absolute amount of bagasse is reduced by a factor of (140.5)1(1-0.2) as

compared to as-produced bagasse.

3.27 Enorgy Potential. For the large estates, the composite supply of rubberwood assummarized in Table 3.5, is calculated at 7.2 million tons/yr. This consists of approximately 1.9million tons/yr available in Java, and 5.2 million tons/yr in other regions, primarily Sumatera. At anenergy value of 18 GJIton, this would be equivalent to 129 million GJ/yr of primary energy. In termsof electric power, this would represent an aggregated potential capacity of 680-1,600 MW, assuming7,880 hr/yr and efficiencies between 15 - 35%.

3.28 RWgkb w Procesging- Sawsmis. Given the large quantities of rubberwood residuegenerated, numerous mbberwood sawmills have been established over the last decade. Representativemills produce finished wood prodacts, e.g. furniture, with logs from rubberwood estates. Based oncase study data from a representative mill, the average electric power demand is 320 kW, with aninstalled capacity of 400 kW - supplied with grid connection from PLN and a stand-by system. The

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yearly log input of the mill approaches 30,000 m3. Of this amount, 15% remains in the final product,leaving 85% of residue in the form of sawdust, slabs, off-cuts and shavings. Approximately 50% ofall these residues are used in a plant boiler for process heat requirements, while a total of 43%remains unused by the sawmill. Of this amount, the majority is incinerated, while a small portion wassold as fuelwood. Calculations show that at a representative site, approximately 22,400 tons/yr of awaste stream could be utilized per year for energy generation, whether for centralized, regional ormill-specific energy. The entire waste stream is calculated at approximately 224,000 GJ/yr of energy.

Table 3.5: Log Production and Usable Logging Residues In Indonesia

Logging residuesLog production (,000 m3/yr) Energy equivalent of

Province (,000 m3l/yr) residues (GJ/yr) (a)

Aceh 673 67 844North-Sumatera 362 36 454West-Sumatera 813 81 1020Riau 2151 215 2710Jambi 1261 126 1590South-Sumatera 814 82 11030Bengkulu 228 23 290Lampung 137 14 176West-Java 271 27 340Central-Java 480 48 605East-Java 71 7 88West-Kalimantan 2942 294 3700Central-Kalimantan 5949 595 7500South-Kalimantan 894 90 1130East-Kalimantan 6189 619 7800Central-Sulawesi 141 14 176Maluku 1357 136 1710Irian 301 30 378Total 25034 2504 3160

Source: Mission estimates based on [ESMAP. 19901 and [Haerruman, 1991].(a) Based on an average density of 700 kg/m3 and LHV = 18 GJ/t.

Logging Residues (Excluding Rubberwood)

3.29 As noted, commercial log harvest in Indonesia is processed in sawmills, plywoodfactories, moulding and particle board mills, as well as furniture factories. Figures on total logproduction by region with calculated energy equivalents are outlined in summary form in Table 3.6.(P,oduction figures appear higher that official data presented in other studies cited). Useful loggingresidues are estimated at 10% of log volume. The total of 2.5 million m3/yr. of residues represents32 million GJ/yr of primary energy or 390 MW.

Plywood Waste

3.30 Data from 1990 indicate a total of 132 plywood mills in Indonesia with an aggregateproduction capacity of 10 million m3/yr. Composite figures on of plywood production in Indonesiaby province, along with residue quantities (m3) and primary energy values are summarized in Table3.6.

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3.31 In mill operations which require process heat, i.e. plywood, as well as moulding andparticle board production, residues are usually used on site for heat demand, but with limitedapplications in cogeneration. Based on representative data, approximately 48% of log input ends upas waste in plywood factories. The quantity of primary energy represented by this waste material isestimated in the composite technical report at 64 million GJ/yr -- the majority of which is available inKalimantan. The option of cogeneration offers the potential energy in the forms of heat and powergeneration. At a conversion ration of 5% (electricity versus thermal energy input), the compositeresidue stream would represent approximately 113 MW of power capacity.

Table 3.6: Plywood Production in Indonesia (1990)

Primary energyPlywood Residue equivalent of

production production residues (PlIyr)Province (.OOO m3/yr) (,000 m3/yr) (a)

Aceh 85 78 0.57

North-Sumatera 349 322 2.37

West-Suniatera 98 90 0.66

Riau 959 885 6.51

Jambi 412 380 2.80

South-Sumatera 316 292 2.14

Bengklulu 0 0 0.00

Lampung 102 94 0.69

West-Java 163 150 1.11

Central-Java 490 452 3.32

East-Java 253 234 1.72

West-Kalimantan 1344 1,241 9.12

Central-Kalimantan 444 410 3.01

South-Kalimantan 1523 1,406 10.3

East-Kalimantan 2026 1,870 1.37

South-Sulawesi 166 153 1.13

Maluku 671 619 4.55

Total 9401 8,678 63.8

Source: (Mission estimates based on [ESMAP 1990] and [Haerruman 1991]).(a) Based on an average density of 700 kg/m3 and LHV = 10.5 GJ/t (MCw = 40%).

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Forest Clearing Residues - Commercial Timber Estates

3.32 Precise calculations on total land clearings and the resulting residues in Indonesia areextremely difficult to develop. However, in 1989/1990 the 001 initiated a timber estate program(Hutan Tanaman Industri - HTI) calling for the establishment of 1.5 million ha. of commercialtimber estates. Projections are that usable residues from HTI areas will be in the orders of 100 - 200m3 /ha. Assuming 300,000 ha. are cleared each year - as called for in Repelita V -- a total of 30 - 60million m3 or 378 million GJ of primary energy would be available. At conversion ratios between 5 -35%, this would represent an aggregate power capacity ranging from 666 - 9,330 MW. Table 3.7presents an estimate of residues that could become available through the HTI. (While the plannedarea distribution of HTI is not available, the calculations in Table 3.7 assume the same provincedistribution as for logging residues). In sum, the data indicate that Kalimantan, with 63% of total HTlresidues, would clearly be the most promising areas from a supply perspective.

Table 3.7: Log Production and Usable Logging Residues In Indonesia

Province Land clearing residues (,000 Primary energy equivalent of residuesm3lyr) (PI/yr) (a)Range Range,

Aceb 807 1,613 10.2 20.3North-Sumatera 434 868 5.47 10.9West-Suniatera 974 1,949 12.3 24.6Riau 2,578 5,155 32.5 65.0Jambi 1,511 3,022 19.0 33.1South-Sumatera 975 1,951 12.3 24.6Bengkulu 273 546 3.44 6.89Lampung 164 328 2.07 4.14West-Java 325 650 4.09 8.18Central-Java 575 1,150 7.25 14.5East-Java 85 170 1.07 2.14West-Kalimantan 3,526 7,051 44.4 88.8Centtal-Kalimantan 7,129 14,258 89.8 180.0South-Kalimantan 1,071 2,143 13.5 27.0East-Kalimantan 7,417 14,833 93.5 187.0Central-Sulawesi 169 338 2.13 4.26Maluku 1,626 3,252 20.5 41.0Irian 361 721 4.54 9.09Total 30,000 60,000 378.0 756.0

Source: Mission estimates based on (ESMAP, 1990) and (Haenuman, 1991).(a) Basedonanaveragedensityof700#kgm 3 andLHV= 18 GJ/t

3.33 Major Supply Areas. As outlined above, in terms of the agricultural residues frompalm oil and sugar production, Sumatera and Java are the key areas for large quantities of theserespective residues. In terms of rubberwood, plywood and (prospective) commercial logging residue,North Sumatera and Kalimantan, respectively, would be key areas of focus. Given the technical data,Table 3.8 summarizes prospective biomass-based power availability by province for the resourcesmentioned. Section IV proceeds to outline technical options for mill-specific energy applications.

Table 2 k DBased PIwer AvaiabIikty By Proiliae From Selected Rasvurces

Surplus pOwer capacity (MWe)Cane sugar

Island/Province CPO residues bagasse Rubberwood Logging EMI Wood TotaRane Rawne Range residues Range processn Range

Sumatera 70 75 905 4820Aceh 7 19 56 131 10 18 251 1NSumatera 63 168 280 653 6 10 135 4W Sumat ea 2 6 13 22 303 1Riau 9.1 24 38 88 33 57 801 11Jambi 0.3 7 15 20 34 470 5Bengkulu 0.9 10 23 4 6 85 0S Sumatera 4 10 22 51 13 22 303 4Lainpung 2 36 83 2 4 51 1Java 90 220 318 1289WJava 0.9 105 244 4 7 101 2C Java 42 99 7 13 179 6E Java 34 80 1 2 26 3Kalimantan 784 7260 ,W Kalimntan 3 11 26 46 78 1096 16 0C Kalimantan 2 5 92 158 2217 5S Kalimantan 23 53 14 24 333 18E Kalimantan 0.9 7 16 96 165 2306 24Sulawesi 0 10 17 102C Sulawesi 2 4 53

SE Sulawesi 0.9S Sulawesi 8 19 2Maluku 21 36 506 8 65 607Idan Jaya 0.9 0 0 5 8 112 14 134

Total 92.9 221 160 305 683 1592 389 668 9328 111 2103 14212

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IV. PROSPECTIVE SCALES OF IMPLEMENTATION

Oveview

4.1 Given the biomass residue resources of interest and the areas of concentration, SectionIV summarizes findings in terms of the prospective scale and technical options for energy generation.Generating capabilities and technical options are considered for palm oil and bagasse residues(agriculture sector) and rubberwood and plywood residues (forest sector). Technical options areoutlined for generation at the mill sites themselves, and specifically cogeneration. (Medium and largescale dedicated power systems would vary according to location, resources, generation capacity, etc.and technical configurations are outside the scope of the technical study). Preliminary financial-economic evaluations for all options, i.e. plant specific and dedicated medium and large-scalesystems, are summarized in Section V.

Scales for Specific Sectors

Pal Oil Setor

4.2 Given the availability of palm oil residues for energ} conversion, prospective optionsfor generation capacity are summarized as follows:

(a) Large centralized systems (30 MW and up) utilizing EFB as residues and a centralcollection system;

(b) Medium size regional systems (3 - 5 MW) utilizing EFB from a number of mills in adesignated radius; and

(c) Decentralized systems (500 kW - 3.5 MW) for individual palm oil mills.

4.3 As indicated in Section m, the key areas of concentration of palm oil production arein the provinces of north and south Sumatera. For large and medium scale options, the involvementof PLN in system development and operation would probably be required, given the size of theprospective plants and the fact that energy generation is not the commercial priority of the mills. Forthe smaller, decentralized systems implementation and operation would be by the respective mill forinternal energy use and/or electricity sale to PLN or third-party groups. Since plant configurationsfor decentralized systems are very specific technical options are outlined below.

Sugar Miffs

4.4 Surplus power capacities for existing sugar mills are in the range of 10 MW, whilesurplus capacities for the larger, newly planned sugar mills may approach 35 MW. Areas of focuswould primarily be on Java at the existing mills, or in the new plants scheduled for Sumatera andSulawesi. Given the size potential for individual plants, centralized or regional systems for bagasse-based generation are not considered. Specific technical outlines for technical additions andgenerating systems on a mill-specific level are outlined below.4.5 In addition to technical enhancements/additions for generating capacity, a number of

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technical efficiency options could be implemented to allow surplus bagasse to become available at themills, namely:

(a) Decrease process steam demand in the boiling houses;

(b) Improve boiler efficiencies by employing economizers and combustion air pre-heaters;

(c) Improve electricity generation efficiency by increasing boiler pressure and/orinstalling condensing turbines with condensers;

(d) Improve fuel quality by decreasing the bagasse moisture content; and/or

(e) Improve cane supply management.

4.6 These measures would be taken within individual sugar milis for energy efficiencyand for providing surplus bagasse. The prospective and crucial role of PLN in the case of the millswould be to purchase excess power generated. In addition, power sales to third parties, i.e. othernearby industries, could also initiated.

Rubberwod

4.7 Rubberwood suitable for power generation becomes available at two principallocations, rubber estates and rubberwood processing sawmills. As outlined in Section HI, estates arecapable of supplying large quantities of rubberwood which could be supplied to dedicatedrubberwood-fired power plants, particularly in North Sumatera and Western Java. Since the estates aretypically agricultural enterprises, and given the size potential of dedicated plants (3 - 30 MW), PLNinvolvement in system implementation and operation would probably be called for. Prospective plantsizes would be similar to those of the palm oil mills, namely:

(a) Larger centralized systems (30 MW range) that employ a centralized collection ofrubberwood and transport system; and

(b) Medium size regional systems (3 - 5 MW range) serving a designated zone or area.

4.8 In addition to the regional or central generation facilities, a third possibility, similar tothe palm oil and sugar mills, is cogeneration at individual rubberwood sawmills. In the productionprocess the mills require process heat for wood preservation and cogeneration is currently notapplied. Typical, average power consumption capacities at these mills range from 300 to 400 kW,while technical data indicate a sufficient fuelwood supply for systems in the 900 kW range.Generating at these smaller, mill-specific levels, the mills would be the logical catalysts for plantimplementation and operation, assuming surplus sales to PLN and/or third parties. Technical optionsfor the mill-specific cogeneration systems are also outlined below.

Lgg lesidues

4.9 Generally, there is no substantial, commercial electric power demand in the directvicinity of the logging sites where the residues become available. Application of these residues indedicated wood-fired power plants would be a logical destination, assuming a collection and transportsystem for the logging residues. Where power shortages are problematic m wood processing plants,

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cogeneration could also be considered at these mills, However, collection and transport of theresidues would still be necessary. As with the systems mentioned above, it would be logical for PLN tobe involved in any medium to large scale dedicated wood-fired power plants, whereas cogenerationwould more logically be a proprietary activity of the wood processing plants.

4.10 The summary data outlined in Section III. reveal that medium to large scalegeneration potential on Sumatera is fairly limited, depending on the specific provinces. Kalimantan,however, shows a far better potential for medium to large scale dedicated wood-fired applications (3 -30 MW), with the best prospect for large scale applications in East Kalimantan.

Plywood Proessing

4.11 As outlined in Section III., plywood mills use their residues for process heat and alsomake it available as raw material for the manufacture of mouldings and particle board. Theremaining quantities of waste are limited (43% log input) and, therefore, large and medium scalesystems would not be feasible. However, since these mills obtain their electricity from captive dieselplants, it would be possible to generate residue-based electricity from cogeneration. Specific technicaloptions for mill-specific cogeneration systems are also outlined below.

HT R"esid=e

4.12 As outlined in Section III, considerable quantities of wood are projected to beavailable from commercial timber estates. Three different power applications are prospectivelyavailable:

(a) Small-scale village electrification in the HTI regions;

(b) Fuelwood for medium to large scale dedicated power plants; and

(c) Residues for cogeneration for specific mills.

4.13 Typical electric power capacities for small systems for villages in an HTI area wouldbe 100 - 200 kW. (Village electrification could be executed under the management of villagecommunities or by rural cooperatives. Alternatively, the concession holding companies under theHTI could be involved along with the participation of PLN). However, given the quantities of HTIresidues, the installation of larger, dedicated wood-fired power plants for a specific area would befeasible. In theory, capacities would range from 10 - 100 MW on locations in both Kalimantan andSumatera. As noted above, plants of these magnitudes would require the involvement of PLN. Thededication of HTI fuelwood for cogeneration at the wood processing facilities would only beconsidered for those industries currently using their own residues for process heat and experiencingpower shortages. Under such circumstances electrical energy would be used by the mills and/or forsales to PLN or third parties. Given the projected large supplies, typical power capacities forindividual mills and plants could be as high as 5 MW.

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Technical Options for Mill-Specific Systems

Pam Oil Mis

4.14 At palm oil factories usually a complete back-up boiler and turbo-genset is installed.These stand-by systems can be made available, however, to generate surplus electrical power. Inaddition, due to the fact that electricity demand and steam demand in a palm oil factory do notfluctuate synchronously, the use of steam is not optimized. Rather than being expanded in the turbineto the required pressure, and thus producing electricity, steam is often taken directly from the boilerand quenched since there is no place to deliver the electricity. Electricity production schemes at apalm oil factory can be realized in different ways. Two technical options are outlined:

Option 1: The total amount of residue could be allocated to generate electricity athigh efficiencies in medium-pressure boilers (60 bar) and condensing units, whileprocess steam is extracted at required pressures when needed. Surplus electricity isdelivered to the grid or third parties. (Ash, which cannot be used anymore as afertilizer as it is now, should be replaced by a commercially acquired fertilizer). Withvarying in-factory electricity demand, a fluctuating amount of electricity could besold. For a standard palm oil mill (30 t FFB/hr), surplus power would vary from 1,500to 3,600 kW. The power plant would be operated in base load during 7,880 hr/yr, the1,500 kW surplus power sold during operating hours of the CPO plant and the 3,600kW sold during non-operating hours.

Basically, all CPO residues would be utilized for power production. (13B based fertilizer would haveto be replaced, however, and its value attributed to the operating cost of the power plant). A totaiquantity of 19 GWh/yr could be sold, while 2.5 GWh/yr could be utilized for CPO production.Investments would involve a new 60 bar boiler (25 t/hr), a condensing turbo-genset, a waterpreparation unit and a condenser (6 t/hr). Special consideration would have to be given to EFBdrying (from MCw 60% to 40%) and an EFB preparation unit.

Option 2: The energy supply system for this back-pressure option remains basicallythe same, but the efficient use of generated steam is maximized by its expansionthrough the turbo-gensets, also when the produced electricity is not required in thepalm oil factory. To avoid an investment in a large condenser (20 t steam/hr) for theexhaust steam from the turbines, the system would be operated during the normalfactory operating hours only (4,500 hr/yr, based on 300 days/yr, 15 hr/day). Thisoption implies that with fluctuating in-plant electricity demand, a varying amount ofsurplus electricity is sold. The back-up turbo-genset can be fully employed withoutusing the spare boiler. For a standard palm oil mill of 30 t FFB/hr, surplus electricitycould be delivered at fluctuating capacities ranging from 800 to 1,000 kW.

As outlined, not all EFB would be utilized for power production. A quantity of 11,600 t/yr (MCw60%) would remain for the production of fertilizer, with 10,000 tlyr (at MCw 40%, which isequivalent to 15,000 t/yr at MCw 60%) being used for the power plant. Hence slightly more than halfof the fertilizer would have to be supplied from other sources. An amount of 3.6 GWh/yr would besold, while, again, 2.5 GWb/yr would be consumed by the CPO plant itself. The only investmentrequired is a step-up transformer and the power line to the plant's client, e.g. PLN, third party.Variations on the latter option can also be conceived. Increasing the number of annual operatinghours to 7,884 (10% down-time for maintenance) at the same maximum turbine capacity. This would

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imply the investment in a large condenser (20 t/hr for the same standard palm oil mill) for thepressurized exhaust steam from the back-pressure turbines, or the use of considerable amounts ofmake-up water. The maximum power capacity for surplus electricity would be in the order of 1,350kW outside factory hours and 800 kW when the palm oil mill is in operation. The option to utilize theinstalled turbines to produce surplus electricity at a constant power rate, say 950 kW for a standardpalm oil mill, also exists. Again, the number of operating hours is determined by the desirability toinstall a condenser for pressurized steam or the availability of larger amounts of make-up water. In allthese options more efficient use is made of the installed turbo-gensets. The back-up boiler remainsavailable as stand-by system.

Suggr Sector

4.15 A case from the Gunung Madu Sugar Mill (USAID, 1991) is taken here as anexample since it represents a typical mill with a capacity of 150 t/hr. Minor technical adjustments aremade for installed capacities and fuel consumption. Two options are as follows:

Qptjion 1: Replacement of the existing boiler with a 25 MW boiler and installation of a15 MW topping turbine. In-plant power consumption during the crushing season is 9MW (electricity) plus 6.5 MW (direct shaft power). Varying with the crushing season,surplus power capacity thus ranges from 16 to 25 MW. The plant would be run inbaseload, with bagasse being fuelled during the crushing season, oil during off-season. With reference to the boiler capacity, required investments are estimated at1,250 US$/kW.

Qnion: Installation of a new 16 MW boiler and a 6 MW topping turbine. Duringthe crushing season no surplus power would be exported, while stored bagasse wouldbe used to deliver 16 MW off-season. Investments needed with reference to the newboiler capacity are estimated at 1,750 US$/kW (Including bagasse storage facilities).

Rubberwood Processing Sawmills

4.16 Technically two options exist to make use of rubberwood residues for cogenerationelectricity production at these sawmills. These options are:

Qpion I: To install a steam boiler of larger pressure (e.g. 20 bar) and an extractionturbine which enables the extraction of process steam of sufficient pressure and acondenser to expand the remaining steam to sub-atmospheric pressure (0.2-0.6 bar,determined by the condensing temperature) and thus maximize electricityproduction. All residues produced can be utilized in this manner. For the sawmillconsidered and described above, the electrical power capacity would be 1 MW. ITesurplus power not consumed by the sawmill can be exported to PLN or a third party.

Option 2: To install a gasifier which delivers producer gas to the existing steam boiler-- which would need some modification to accept gas rather than chips and sawdust --and to a dual fuel diesel/gas engine. (Sawdust and chips cannot be utilized in thegasifier and need to be dumped, incinerated or briquetted, that latter of which may bean attractive option). Only slabs and off-cuts can be gasified, after proper sizing. Inthis option the generation is not optimized like in the steam alternative. Therefore, thecapacity of the electrical power produced is smaller, i.e. 250 kW. Additional diesel

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power would be required for the sawmills self sufficiency in electricity (Total powerrequired: 400 kW). The dual fuel technology (gas/diesel in one engine) would be thebest solution. In both alternatives, the energy system would operate 3,500 hrs/yr,parallel to the operation of the sawmill.

Plyiood Mi

4.17 Plywood mills usually operate more than 7,000 hours per year, 24 hr/day. The highervalue of 6,500 full load equivalent operating hours should, therefore, be used in evaluating energyoptions in this sector. The two technical options are:

Oplign 1: To install a boiler of relatively high pressure (60 bar), an extraction turbinewhich enables the extraction of process steam at the required pressure (± 15 bar), anda condenser which enables expansion to pressures below 0.2 bar depending oncooling temperature. Efficiencies thus achieved are 5% for the steam expanded to 15bar and 17% for the steam expanded from 60 to 0.2 bar. Taking into account themill's process steam requirements and waste wood production, an average efficiencyof 13% can be calculated. For a medium sized plywood mill with a power demand of750 kW, a total installed power capacity of 2.5 MW can be derived. The surpluscapacity is, therefore, 1.8 MW.

Option 2: To install a condensing steam power plant in addition to the existingprocess steam boiler. Data conclude that there is a potential for a number of dedicated3 MW power plant at larger plywood mills.

Expanded Generation Capacity

4.18 The options for biomass generation exist in the various sectors. If viable, biomass-based power generation for surplus sales could contribute to the growth of the power availability inregional grids. The basic financial and economic viability assessments of these systems are outlined inthe following Section. The analyses include the large, medium and mill-specific applicationsdiscussed and are based on a comparison of the unit production costs of biomass-based options, andthose of fossil fuel alternatives.

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V. FINANCIAL-ECONOMIC EVALUATION

Overview

5.1 In the previous section, a number of technical options are identified for biomass-firedpower plants. The energy systems considered would be based on residues derived from palm oil andsugar production, as well as rubberwood, plywood and HTI residues. Section V. presents a financial-economic evaluation for the applications discussed. First, the analyses and findings are outlined forlarge, centralized systems (30 MW and above range), and second for regional, medium-scaleapplications (2 - 5 MW) with the assumption that the systems would be implemented, owned andoperated by PLN. Finally, the analyses and findings for the mill-specific systems are discussed interms of both captive power and/or sale to PLN or third parties.

5.2 The baseline financial parameters relevant for biomass energy systems are given inTable 5.1. (A description of the methodological approach and background data on prevailingfinancial and economic prices and costs for the energy sector are presented in Annex I). The baselineparameters used in the analyses are derived from data collected for the technical report, as well as datafrom biomrs3s energy studies previously executed in Indonesia.

PLN Implemented and Operated Systems

BasicAppnrnh

5.3 In addition to the price and cost assumptions (Annex I), the assumption is made thatgiven the size of the centralized and regional plants, PLN involvement would be required. Therefore,based on the unit cost for fossil fuel power plants of PLN and the standard parameter values forbiomass power plants (Table 5.1 and Annexes I and IV), net-back values for the biomass fuelapplications have been calculated. (Annex II)

Table 5.1: Baseline Parameters of Biomass Fired Power Plant

Capacity (MW) 0.75 4 30Investment cost (US$/kW) 2200 2000 1800Efficiency (%) 12 20 30O & M costs (flxed, % of inv.) 2 2 2O & M costs (variable, US$c/kWh) 0.7 0.5 0.4System life time (yr) 15 15 15

Large Scale Systems (PLN Developed!

5.4 Large biomass-based systems, e.g. palm oil and plywood mill residue systems, arecompared to PLN's gas and coal fired power plants operated in base load. The PLN systems typicallyshow unit production costs ranging between 80 - 100 RplkWh (at 7% interest rate) and 95 - 120Rp/kWh (at 14% interest rate). Under these conditions, the financial analyses show that a biomassbased system would exhibit net-back values between 95 - 1,760 Rp/GJ and from -1,074 to +1,010

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Rp/GJ at the respective interest rates. (Figure 1, Annex II graphically displays the related net-backvalue). With large transport distances (>100 km) required for a centralized plant, the costs definitelyexceed 2000 Rp/GJ. The analyses indicate, therefore, that large scale, dedicated biomass power plantsoperated by PLN do not appear feasible in financial or economic terms.

5.5 Carbon Dioxide Emissions. For the above findings it must be noted, however, that ifthe avoidance of carbon dioxide (CO2) emissions is credited to these types of power plants --sustainably produced biomass used for energy avoids C02 emissions -- the calculations show that, ineconomic terms, a value of 1,900 - 4,000 Rp/GJ can be afforded for the biomass fuel (see annex I,para 17) while producing electricity at acceptable cost. (Figure 2, Annex II displays the net-backvalue). With the estimated transportation costs included and considering avoided C02 emissions, theanalyses show that large scale biomass power systems would be economically feasible.

Medium Scale Systems (PLN Developed!

5.6 For medium scale, biomass-based power plants implemented and operated by PLN,both palm oil residues or wood processing residues would represent a suitable fuel under theconditions of reasonably close transport areas. Previous reports estimate transportation costs atapproximately 500 Rp/GJ for an EFB-fired medium size power plant -- typically the EFB of two CPOmills would be sufficient -- while opportunity costs of EFB are in the order of 450 Rp/GJ. PLN'smedium size power plants show unit production costs ranging from 136 - 257 Rp/kWh (7% interest)and 152 - 327 Rp/kWh (14% interest) with varying operating hours. Base load biomass system with6,500 hours equivalent of full load operation would bear a biomass fuel net-back value of 2,600Rp/GJ (7% interest). (Figure 3, Annex II displays the net-back value). The calculations shows that,financially, there is potential for medium size systems in regions where similar scale diesel stations areplanned.

5.7 In the economic analyses (14% interest, without C02 benefits), biomass fuel net-backvalues appear less favorable (1600 Rp/GJ at 6,500 annual operating hours). This is due to the higherinterest rate and the larger capital investments required for biomass systems (Figure 5, Annex IIgraphically displays the net-back value). However, if these capacity factors cannot be reached,biomass fuel net-back values decrease sharply due to the lower effective utilization of the incrementalcapital investments. While PLN's production cost in medium size diesel power plants increase to 194or 236 Rp/kWh (7% and 14% interest) at 2,500 operating hours/yr, the fuel net-back value goes downto a negative value of -1100, -3540 or -1570 Rp/GJ (7% interest, 14% interest and 14% interest plusC02 benefits, respectively). The economic analyses, therefore, show that the biomass-fired, mediumsize power plant is only economically viable when the fuel is available in a concentrated manner, e.g.palm oil residues, and in near base load operation.

Mill Implemented Systems for Captive Power and Private Power Export to PLN or Third Parties

5.8 In principle, the PLN grid would be the ideal purchaser of excess power from mill-based systems implemented and operated by the respective mill. This is premised on the technicalassumption that the PLN grid exists in the area and has the buffer capacity and flexibility to absorb avarying capacity of delivered power. In the mill-specific applications considered (palm oil .5 -3.5MW, sugar mills 10 MW, rubberwood processing 350 kW captive 550 kW sales, plywood mill 2 - 10MW) the unit production costs for the larger PLN power systems serve as a rcference value for thebiomass-based systems discussed below. These values are in the range of 81 - 101 and 95 - 120Rp/kWh with interest rates of 7% and 14%, respectively.

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5.9 Other potential clients for electricity sales are nearby industries which often haveinstalled small to medium scale captive diesel power plants. Since the associated unit production costsfor this sector would be much higher than for PLN, it is assumed that a system that is feasible underPLN criteria would be feasible for these industries. A third application would be for small industries,e.g. sawmills, to provide for their own electric power needs, i.e. captive power. These various optionsare considered below.

Mill-Specific Palm Oil Residue Systems for Sales to PLN

5.10 The viability of the mill specific application of 3.6 MW for sales to PLN are analyzedunder two scenarios, comparison to existing large-scale fossil fuel generation on the part of PLN andmedium-size fossil fuel generation on the part of PLN.

5.11 Comparison to Large-Scale PLN Generation. An amount of 2,000 US$/kW isprojected for the equipment investments required for the palm oil mill outlined in Option I (SectionIV) for surplus generation. The full load equivalent is 5,360 hr/yr, with 19,300 MWh/yr sold/3.6 MWinstalled. Given a biomass fuel value of 450 Rp/t, an investment net-back value must be as low as 975-1,291 US$/kW if unit production costs encountered by PLN (large scale power production, 7%interest) are to be achieved. (Figure 6, Annex II displays the net-back assessment). The analysesindicate that in areas where PLN operates a large scale power plant, this option is not financiallyfeasible if PLN's long term marginal costs are assumed.

5.12 In economic terms, Option I is more viable with investment net-back values rangingfrom 1,197 to 1,568 US$IkW. This is due to the fact that with a 14% interest rate, PLN will produce athigher unit cost. However, the calculated net-back value is still not sufficiently high. Hence, for theeconomic evaluation, the mill-implemented system is not feasible either.

5.13 Comparison to Medium-Scale PLN Generation. PLN's medium-sized power plantsshow unit production costs in the order of 140 Rp/kWh (7% interest, 6,500 annual operating hours)and 152 RP/kWh (14% interest). Under these conditions, calculated investment net-back values of1,864 US$/kW for 140 Rp/kWh (7% interest) and 2,013 US$/kW for 152 Rp/kWh (14% interest), showsufficient space for system investments in the part of the mills.

5.14 The analyses also indicate that for newly planned CPO mills, it would be economicallyfeasible to optimize their energy operations in view of electricity production. This would beapplicable in the case of medium size generation on the part of PLN as well as for systems whichinvolve electricity sales to PLN grids fed from large scale power plants. This is due to the fact that theinvestments need not be recovered from electricity sales alone, but are paid back through the millscomposite activities.

5.15 Investment in Option 2 (Section IV), involves a step-up transformer and switch board(US$ 500/kW). The Option provides for an average surplus power of approximately 900 kW (annualelectricity delivered 3.6 GWh/yr). At an interest rate of 14%, investment net-back values for thisOption vary from 584 to 1,026 US$/kW, which are very high in comparison to the investmentrequired. (Figure 7, Annex II graphically displays the net-back value). Under existing commercialloan facilities, i.e. effective interest rate of 14%, if PLN's current long run marginal cost were paid forthe electricity exported (81 - 101 Rp/kWh for large scale generatled electricity, 7% interest), deliveryto the grid would be feasible. Delivery to third parties, who expectedly are willing to pay more thanPLN for the replacement of captive diesel power, can also be attractive.

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Mill Specific Bagasse Generation for Sales to PLN

5.16 In the 81 - 101 Rp/kWh regime applicable to large scale PLN operations (7% interest),calculated investment net-back values for bagasse-based generation vary between -311 and 37US$/kW and 708 and 918 US$/kW for Options I and 2 (Section IV.), respectively. (Figure 8, AnnexII graphically displays the net-back value). Financially, and assuming PLN's long run marginal costs,neither of the options outlined for bagasse generation for grid sales are feasible.

5.17 Economically, assuming 14% interest, the investment net-back values for the twoOptions are -50 - 385 and 866 - 1129 US$/kWh. These values indicate that the investments requiredare not viable (Figure 9, Annex It displays the net-back analysis).

5.18 In addition to negative net-back values for the bagasse-based Options, locations wherePLN operates grids capable of absorbing power capacities projected for the sugar mills, andexperiencing the high long run marginal costs, cannot be found in Indonesia. Captive power of thiscapacity is generated for prices ranging from 120 to 150 Rp/kWh, based on diesel or furnace oil. Theanalyses therefore indicate that investments in these types of power systems for delivery to either PLNor third parties is not attractive under the conditions assumed.

5.19 Bagasse-Based Generation. In general the analyses show that although there may beexceptions, energy optimization of existing sugar mills for electricity delivery to PLN (or thirdparties) is not financially or economically feasible. It may be expected, however, that newly plannedsugar mills show a much larger economic potential, since the investments required would notnecessarily need to be compensated by electricity exports alone but are also recovered from the in-plant energy consumption.

Rubberwood Sawmills Generation for Sales to PLN

5.20 As discussed in Section III, rubberwood sawmills sell a portion of residues asfuelwood. (Prices generally vary from 500 to 625 Rp/GJ). The amount sold is estimated at 16% of thetotal residues produced. For the flnancial-economic analyses, only a minor value of 80 - 100 Rp/GJmay be attributed, therefore, to the fuel as an average value.

5.21 The financial and economical analyses show that neither of the two generationsystems (Options I & 2, Section IV) contemplating sales to PLN, is viable within the 81 - 101 Rp/kWhregime (7% interest) or 95 - 120 Rp/kWh (14% interest), which is typical for the larger PLN operatedsystems. (Figures 10 and 11, Annex II display the net-back calculations). Only when unit productioncosts are above 110 Rp/kWh (14% interest), the gasifier option proves marginally economicallyattractive. The analyses thus show that in regions where large power plants are in operation, Options I& 2 cannot be recommended where sales to PLN are concerned. Neither would it be attractive toreplace power purchased from PLN in these regions. For replacement of PLN delivered electricity inregions where PLN operates small and medium capacity diesel systems, the gasification option isviable, however application of the steam-based cogeneration system is not economically feasible.

5.22 C:ative Power. Two options for captive power, direct combustion/steam andgasification/internal combustion engine are analyzed. Replacement of diesel based captive power isparticularly interesting, especially with the gasifier option. Here, fuel net-back values as high as 5,000- 8,000 Rp/GJ are achieved (200 - 250 Rp/kWh, at 14% interest) prior to calculation of C02 emissionbenefits. The option of direct combustion/steam is only marginally attractive.

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5.23 Due to the higher energy efficiency of the gasification/internal combustion engine forthe conversion of chemical energy to electricity, the fuel net-back value and hence, economic andfinancial feasibility is more sensitive tn the unit electricity production cost. This is more favorable inthe case of gasification. In terms of economic viability, this implies that the gasification option --when replacing captive power at unit production costs ranging from 200 Rp/kWh and above -- ismore attractive than direct combustion. In terms of quantities of electricity produced, the directcombustion option is preferred. Although the energy efficiency is lower, the amount of electricityproduced is larger due to the fact that more residues are suitable for this application.

Plywood Mil: Generation for Sales to PLN

5.24 The analyses for plywood mill generation outlined in Option I (Section IV) show thatonly if unit production costs above 135 Rp/KWh can be assumed, sufficiendy high biomass net-backvalues are achieved. (Figure 12, Annex II illustrates the net back values). Under prevailing interestconditions, PLN produces at these high costs only in locations where medium to small scale dieselpower plants are employed. (In these areas, however, the grids are generally not capable of absorbingthe power considered for a single plywood mill). However, assuming long run marginal productioncosts, a plywood mill power plant for surplus sales can be a financially feasible alternative to anisolated, small diesel station (assuming technical grid capacities) or a series of plywood mill powerstations are a viab'e financial alternative to a mecium scale diesel power plant.

5.25 Economically, with an interest rate of 14%, small to medium scale diesel power plantproduce at prices varying from 152 to 193 Rp/kWh (6500 operating hours per year). Associatedbiomass net-back values range from 1,000 to 2,500 Rp/GJ. Hence, in economic terms a series ofcoupled plywood mill power stations are a viable alternative to a medium scale diesel power plant(Figure 15, Annex II displays the net-back value calculation).

5.26 Captive Powe. For Option 1 (Section IV), electricity generation costs for captivepower plants in the capacity ranges considered (0.5 - 5 MW) are between 152 and 193 Rp/kWh(6,500 operating hours per year). The analyses show that biomass fuel net-back values of the unitproduction costs are far above the estimated fuel value where captive power is concerned (at 14%interest). (Figures 14 & 15, Annex II displays the net-back value analysis). Option 2 (Section IV)consists of a complete condensing steam system which, as a small dedicated power plant does not bearthe advantages of cogeneration where heat and power are optimized.

5.27 The analyses indicate that both technical options for captive power are feasible underthe specific conditions indicated. The cogeneration option with steam extraction (Option 1) istechnically more complicated but it has a larger power potentipl. It is also financially andeconomically more attractive. At locations where plywood production is integrated with themanufacture of mouldings and particle board, the value of 410 Rp/GJ may not be enough tocompensate withdrawal of the residues involved from moulding and particle board production.However, where residues are sold to other factories for this purpose, these are certainly options worthconsideration.

HTI Residue Generation

5.28 Village electrification is typically associated with low capacity factors since it is, at theinitial stages, utilized for residential purposes. For the low interest rate applicable to PLN'sinvestments, unit production cost for small diesel systems are between 243 and 319 Rp/kWb, for 2,500and 1,500 operating hours, respectively. Alternatives for diesel gensets are small wood-fuelled steam

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power plants or gasifier power plants. HTI residues could be used in both these applications.Forpower capacities of 50 and 100 kW, both technologies have been evaluated -- assuming standardizedvalues for operation and maintenance cost, efficiencies and specific investments.

5.29 At 2,000 operating hours per year and a production cost of 240 Rp/kWh, steam andgasifier plants permit biomass fuel costs of 734 and 841 Rp/GJ, respectively. In HIITT programs woodfuel costs approximately 7 Rp/kg, which is equivalent to 500 - 600 Rp/GJ. By increasing the numberof operating hours to 4,500 hr/yr the fuel net-back value nearly doubles for the steam alternative. Thegasifier becomes even much more attractive, with a fuel net-back value rising to almost 6,900 Rp/GJ.(Figures 17 and 18, Annex II display the net-back analyses). The more favorable performance of thegasifier is due to the higher efficiency of this technology (21 %, versus 3%, for small steam plant). Inthe 100 kW range, gasification implies positive and sufficiently high biomass fuel net-back values forthe conditions investigated.

Summary

5.30 In Table 5.2 conclusions drawn from the analyses of the applications are outlined. Itshould be noted that the analyses are based on long term marginal cost rather than on tariffs whichPLN is willing to pay for purchased electricity or on tariffs which are currently experienced by theprivate sector. Therefore the influence of inter-island cross-subsidies does not appear explicitly in theanalysis.

PLN implemented systems: Large (> 30 MW) biomass based power plants aregenerally not feasible unless the argument of avoided C02 emissions is validated. Ifthis argument is recogpized by financing institutions this type of power systems canbe implemented. Medium (1-5 MW) biomass based power plant are a viablealternative to diesel power plant, especially near base load. For less annual operatinghours a C02 credit would be required, which can be justified by the avoided C02emissions. For the electrification of isolated villages (50-100 kW) where biomass isabundantly available (HTI programmes), biomass is an excellent economically viablealternative.

Palm Oil Mill: Delivery of surplus electricity (generated at low efficiency) can beimplemented immediately without large investments. This is financially andeconomically feasible. Optimized highly efficient energy systems would be feasiblewhere palm oil mills can replace power otherwise generated in medium scale dieselpower plant. A prerequisite for the implementation of optimized energy systems is thereallocation of the interest rate subsidy currently given to PLN. Large scale powerplant is financially and economically preferred over this type of palm oil mill basedpower plant. Since the majority of the palm oil mills is concentrated on NorthSumatera which is supplied by large PLN power plants, the scope for highly efficientenergy systems is small.

Sugat Mills: Since the potential power of energy efficient sugar mills is relativelylarge in comparison to PLN grid capacities, the considered systems must compete withlarge PLN power plants and, therefore, against rather low unit electricity cost. Giventhe anticipated size of the investments required for existing sugar mills, suchoptimization does not appear financially or economically feasible. This is different

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for newly planned sugar mills. Energy optimization would be attractive if the sameinterest rate subsidy as given to PLN is applied to those projects.

Rubberwood Sawmills: Gasification for electricity delivery to PLN or third parties iseconomically feasible. However it can only be implemented if power purchase tariffsapproach PLN's avoided cost. Gasification is also an attractive option for thereplacement of captive power.

plywood mil: In comparison with large PLN power plant the optimization ofplywood mills for electricity self-sufficiency and delivery of surplus power does notappear feasible, neither financially nor economically. Where the erection of small tomedium diesel power plant can be avoided, the implementation of such power systemsis feasible.

Table.5.2: The Technical, Economic and Market Potential ofBiomass Residues by Geographical Area

CateRory Sumatera Java Kalimantan Other

Technical 905-4820 318-1289 784-7260 96-843Economic 553-3669 125- 854 493-6912 36-796Market 520 380 800 100

5.31 In practical terms this means that the use of HTI and palm oil residues, bagasse, sawand plywood mill residues for power generation is economically feasible, albeit in the small powerrange (mostly 1-5 MW). This translates into an economic potential ranging frem 1,200 MW to12,200 MW that can serve both rural electrification as well as grid connected schemes. The reasonfor the wide range between the minimum and maximum economic potential is the difference inassumptions as to load factor and combustion efficiency of the technologies selected. The smallpower range should not be regarded as a disadvantage, in fact, it has the additional benefit of loss-reduction on the power system due to the use of a large number of dispersed producers, which willenhance reliability of supply. However, this economic potential may be overstated due to a possiblemismatch between supply and demand. The large economic potential of Kalimantan, for example, isnot met by a similar economically viable demand. Therefore, market potential, which includes anappreciation of likely demand, is much lower,

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Table 5.3: Summary of Practical Scales of Implementation for Selected Biomass Based Power OptionsNo. Type In comparison with Financial evaluation (a) Economic evaluation (b)Systems operated by PLNI Large biomass fuelled Large diesel, gas Not feasible Not feasible

power plant (>30 MW) and coal powerplant

2 Medium scale biomass Large diesel, gas Not feasible Not feasiblefuelled power plant and coal power(collected palm oil or plantwood residues)

3 Medium diesel Feasible near base load Feasible near base loadpower plant operation. operation.

4 Small biomass fuelled Small diesel Feasible above 2000 Feasible above 2000power plant (Isolated power plant operating hrs/yr. operating hrs/yr.village electrification)

Captive and private power delivery5 Palm oil New optimized Large diesel, gas Not feasible Not feasible

(CPO) power system and coal powermills (1.5-3.6 MW plant

excess power)6 New optimized Medium diesel Marginally feasible Feasible

power system power plant(1.5-3.6 MWexcess power)

7 Low efficiency Large to medium Feasible Feasiblepower generationscale powerfor grid delivery plant(0.8-1 MW excesspower)

8 Sugar Existing mills, Large scale Not feasible with Not feasible withmills with bagasse power plant investments above 900 investments above 1450

storage (4.5-6.5 US$IkW US$/kWMW excess powerdepending onseason)

9 New mills (7-16 Large scale Feasible FeasibleMW excess poweipower plantdepending onseason)

i 0 Rubberwood sawmills (a) Large diesel, gas Not feasible Not feasibleMW installed, of which and coal power0.5 MW exported) plant

11 Medium to small Gasification: not feasible; Gasification: marginallydiesel power plant Steam system: not feasible; Steam system: not

feasible feasible12 Small scale Gasiflcation: feasible; NA

captive power Steam system: notfeasible

13 Plywood Cogeneration Large diesel, gas Not feasible Not feasiblemills (2.5 MW and coal power

installed of plantwhich 1.8 MWsurplus)

14 Medium to small Feasible Feasiblediesel powerplant

15 Medium scale Large diesel, gas See 2 See 2dedicated wood and coal powerfuelled power plantplant (3MW)

16 Medium diesel See 3 See 3power plant

(a) Conditions of financial evaluation: Real interest rate 7% for PLN, 14% for private entities.(b) Conditions of economic evaluation: Real interest rate 14% for both private and public entities.

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VI. INSTITUTIONAL ISSUES

Overview

6.1 Past experiences and current trends in the energy sector in Indonesia show thatcommercial energy, and particularly power demand, will likely continue to grow at an acceleratedrate. Due to this projected growth, the GOI, through PLN and through the private sector, is pursuingways to encourage private sector participation, particularly for generation based on alternative andrenewable energy. Proper institutional support is crucial in promoting private sector participation.While acknowledging the limited funding capacity of PLN to expand and meet the growing powerdemand, in 1979 the government permitted, through Regulation 36, other entities (private enterpriseor cooperatives) to supply electricity especially to regions where demand could not be met by PLN.

6.2 However, as currently envisaged by the GOI, private and cooperative bodies are tocomplement PLN, concentrating on areas not served by PLN, and on consumers where they canprovide electricity at lower cost than PLN (Regulation 36 (1979), Law 15 (1985)). This shows that theGOI intends to maintain a strong presence in the sector and reflects the emphasis placed by the GOIon the social objectives of electricity development. This is reinforced in the Indonesian Constitutionwithin the declaration "Those economic sectors which are strategic to the country and have a greatimpact to the life of the majority of people shall be governed by the state".

6.3 Section VI presents a summary view of institutions in the energy sector and outlineskey recommendations for promoting biomass-based energy generation. (An outline of the regulatoryframework in the energy sector of Indonesia, is presented in Annex IV).

Energy Sector Institutions

6.4 The main agency responsible for implementation of GOI energy policies is theMinistry of Mines and Energy (MME). MME coordinates all activities in the energy sector andsupervises state energy enterprises: PERTAMINA (oil, gas and geornermal), P.T. Batubara (coal),PGN (gas distribution) and PLN (electricity). Other agencies which impact energy policies includethe Ministry of Public Works, responsible for hydropower resource surveys and operation ofmultipurpose hydro plants, the Ministry of Forestry, which oversees forestry projects, and theNational Atomic Energy Commission (BATAN) responsible for nuclear development. An inter-ministerial National Energy Board (BAKOREN) coordinates energy policies and development withother sectors, and is supported by a Technical Committee (PTE), chaired by the Director General ofElectric Power and New Energy (DGENE).

6.5 The electricity subsector is regulated by the MME, assisted by the DOENE. TheDGENE is the chairman of the Supervisory Board which oversees PLN's operations and review PLNsinvestment plans, budgets and tariffs. The Directorate General of Oil and Natural Gas (MIGAS) of theMME supervises PERTAMINA in their respective areas, i.e. exploration, transmission and distributionto bulk users, etc. as well as PGN (State Gas Corporation) which is responsible for supply anddistribution of manufactured and natural gas to medium-sized and small industries, commercialestablishments and domestic consumers. The Directorate General of Mines (DGM) is responsible forcoal resource development , and it supervises PT Batubara, as well as other domestic, foreign and jointventure contractors. The Ministry of Forestry (ME) has responsibility for forest areas.

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Pwer Shortags

6.6 The industrial sector has experienced rapid growth and PLN's inability to keep pacewith such growth, due to financial constraints and delayed expansion projects, has been the cause ofthe prevailing power shortage. The shortage is most severe in the Java region. The industrial sectordemand from FY 1991/1992 increased by approximately 2,500 MVA, and PLN could only increasesupply by an estimated 800 MVA. Therefore, the energy supply shortfall for this fiscal year alonewas (68 %). The shortage was aggravated by the long dry season in 1991 when the hydro plants(22% of Java capacity) could not operate optimally. The reliability of Java's power supply system iscritical since the PLN plants operates with a reserve capacity of 16%.

6.7 To not hamper industrial development, the government has been advising new largeindustrial estates to install captive power plants. PLN will not be able to provide additional supply in1993 when the large combined-cycle plant in East Java is expected to come on-line. To speed up theavailability of power, these industrial estates primarily rely on diesel plants. In order to not burden thegovernment with a subsidy, these industrial estates are required to pay imported fuel at internationalprices.

__ndCnces for the Development of Private Power

6.8 Private power can only play a substantial role in the development of the power sectorif economic electricity tariffs are applied. Tariffs should not only reflect the operating costcomponent but include the capital component as well. Private power is recognized as an alternativefor substantially contributing to the increase of the Indonesian power generating capacity. Theimplication of this policy is that the public sector (i.c. PLN) can avoid the installation of theequivalent capacity. Therefore PLN's avoided cost include a capital component. Principally themaximum price that PLN is prepared to pay for electricity from any particular source should bedetermined on the basis of PLN's avoided costs, i.e long run marginal cost at spec.ific locations or, inthe case of reserve capacity, the losses due to electricity not supplied. Conversely, the minimum pricethat the private producers should be prepared to accept is the LRMC of supply (at a reasonable rateof return).

6.9 Other factors which have a negative influence on the feasibility of biomass basedpower systems are the interest rate subsidy for PLN and the system of cross-subsidies. The mainconsequence of this subsidy is that electricity appears cheaper than it actually is, for PLN and itscustomers alike. For the outer islands, this results in PLN electricity tarriffs which do not reflect theactual cost of its production. As a consequence, biomass based electricity projects for captive poweras well as for the delivery to parties other than PLN are not financially feasible. In economic termssuch projects may be feasible.

6.10 While provisions for the establishment of private and cooperative bodies in the powersector were already issued in 1985, which were further enhanced by the Presidential Decree No. 37 ofJuly 1992, the guidelines and regulations necessary to implement the provisions are still lacking.13

Due to this reason, participation of the private sector as stipulated in the Electricity Act, is still lacking.

13 In 1990, the GOI has established a Private Power Team (PPT) in charge of developing the necessary regulationsand guidelines as well as promoting and handling private power projects. PPT is an interministerial committeechaired by the Director General of DCENE and includes officials from PLN, the Directorate General of Oil and Gas,the Investment Coordination Board (BKPM), the Agency for the Assessment and Implementation of Technology(BPPI), the Directorate General of Taxation, and Directorate General of Monetary of the Ministry of Finance.

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The existing regulations or guidelines issued in 1983 and derived from the 1979 regulation arebasically administrative in nature. Provisions regarding the processing of proposals, especially on thepricing and guarantee issue have not yet been defined.

Stimuli for the Development of Private Power

6.11 Presently the PPT team is supervising the first private power project i.e a 1200 MWpower plant in Paiton (East Java) under a Build-Own-Operate type of contract. The lessons learnedfrom this project will be further studied and used to develop comprehensive regulations for variousranges of plant scale.

6.12 The growth of captive power capacity was caused by PLN's inability to supply thedemand, both in terms of quantity and quality. Some industries installed captive generators asmakeshift solutions until PLN could supply their need. This presents an opportunity to relativelycheaply extend PLN's capability to deliver more adequate quantities and qualities of electric power.This is well understood by the GOI. GOI envisages that the following anrangements can be achievedbetween PLN and the private sector:

Utilization of existing captive capacity to support the PLN grid reliability on anemergency basis;

-Utilization of existing captive capacity to enlarge PLN's power supply capacity on along term basis.

The GOI and PLN have moved toward those directions and are planning to implement selected pilotprojects for those arrangements. The practical operating experiences gathered from these projects willbe used to develop standard arrangements on a wider scale.

Institutional Recommendationa

6.13 Considering the capacity potential, as well as the capabilities of the private sector, it isrecommended that the GOT pursues all possibilities for private participation in economically feasiblebiomass based power projects. Key findings are summarized below:

For sales to the PLN grid, the key issue is the electricity pricing. Basically themaximum price that PLN is prepared to pay for electricity from any particular sourceshould be determined on the basis of PLNs avoided costs, i.e long run marginal costat a specific location or, in the case of an emergency supply, the cost of electricity notdelivered. Conve-rsely, the minimum price that the private producers should beprepared to accept is the LRMC of supply at a reasonable rate of return.

Biomass based power will result in reduced C02 emissions. Under certain conditions anumber of governments and private and multilateral institutions are willing to pay forsuch reduction (e.g. the Global Environmental Facility). In principle, financialsupport for eligible projects should be sought from those bodies.

To encourage private power supply to the PLN grid the GOI should develop a pro-active purchasing strategy as well as a policy to promote attractive private biomassbased projects for surplus electricity delivery. Legal supports, to wit: an enforceableregulatory framework, that include the guarantee of contract sanctity and the

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assurance of a purchase agreement should be developed. Contractual arrangementsthat need to be considered include (see Annex IV):

- Acceptable electricity purchase pdcing fourmulas.- Power purchase guarantees.- A firm power contract.

6.14 Before a pro-active policy and a regulatory framework allowing the sale of surpluselectricit; to the grid may be developed, the concerns of the national utility, public policy officials,and industry/cogenerators must be addressed. Nations throughout the world, both developed anddeveloping, have successfully faced these issues and integrated supply from cogenerators into theirnational ener*y systems. Once the utility, policy makers, and industry representatives are able tosettle the preluinary issues through discussion, a policy beneficial to all involved may be developed.It is therefore necessary that DGENE organize a Round Table discussion between the partiesconcerned to get agreement on the perspectives of biomass based power generation in Indonesia aswell as on the modalities of the implementation arrangements.

6.15 Although the practical experience collected from the large GOI-PLN pilot projectcould be used as an important input for the preparation of standard regulations, it is suggested thatPPT also consider the various possibilities of surplus private power delivery, both at small andmedium scale. Also, the successful implementation of this project could incresase the interest in otherpower generation projects, such as biomass based ones, among investors in Indonesia. The GOI alsoshould provide incentives to potential investors such as preferential tax treatment as well as providetechnical assistance such as plant operation and interconnection training and assistance in finding lowinterest long-term credit. It could also take the form of a GOI credit or even Governmentparticipation in the risk capital.

6.16 To make possible investors aware of the private power generation prospects, the GOIshould disseminate information on its new policy and regulatory framework. In particular,information on Government financial incentives, technical assistance as well as on availabletechnologies and on-going projects.

Financial support by the GOI could be organized along a combination of thefollowing principles:

- Investment subsidies based on the installed capacity (/kW) through partly coveringinvestment cost, facilitation of concessional loans, accelerated fiscal depreciation andother tax incentives.

- Subsidies based on actual delivered electricity (/kWh) through relatively highelectricity purchase prices.

6.17 This policy should, therefore, be accompanied by an adequate technical and financialsupport package:

- Technical support could include;- Publication of a guide containing the addresses of producers and traders of relevant

new and second hand power generating equipment;- Publication of reports describing existing biomass based power projects;- Organization of a trade fair for biomass conversion equipment;- Establishment of a team for the preparation of site specific feasibility studies, tender

evaluation and plant acceptance.

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6.18 The recommended Round Table discussion will be but the first step into thatdirection. DGENE should follow-up with the policy formulation and the development of theregulatory framework in collaboration with representatives of the participants. To that end it isrecommended that a working group be formed at the end of the Round Table consiting of DGENE,PLN, and interested private and public sector industries. This working group should be given the taskto produce both policy and regulatoiry framework within a reasonable timeframe of one year.Annex IV provides background material to guide the working group's activity. Meanwhile, pilotoperations could be initiated in areas where there is a shortage of electricity and a considerable co-generation potential. This will demonstrate that the GOI is serious about private sector powergeneration and will facilitate the speedy development of the various policy and technical instrumentsnecessary to ensure a successful beginning of private power development ia Indonesia.

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Annex I: Financial/Economic Evaluation

Overview

1. The financial-economic analysis of the technical study concentrates on unitproduction cost (Rp/kWh). Effective interest rates have been determined. When unit production costsare covered, IRRs are equal to assumed interest rates. In other cases, as indicated, investment net-backvalues or fuel net-back values have been determined. If these values were covered exactly, again IRRswould be equal to interest rates. The basic questions here are whether unit production cost, investmentor fuel net-back values are realistic, where unit production cost can be paid, and whether necessaryinvestments or fuel cost can be covered by the net-back values determined. In the case of coveringunit production cost for power exported to the grie, clear statements can be made. In other cases,estimates based on projections are provided.

Netback Value Method

2. To determine the economic viability of a project two type of calculations can bemade: investment oriented calculations (determining NPV, PBP, IRR, etc.) and cost orientedcalculations (determining unit costs, break even points, etc.). Investment oriented calculations aremade to determine how to make optimum use of a given sum of money, cost oriented calculaitons aremade ot determine the lowest cost alternative for a given demand. For the analysis of biomass powersystems in Indonesia an economic model using a cost oriented approach has been developed.

3. To be economically viable, the unit costs of biomass based electricity systems have tobe equal to, or lower than, the unit costs of electricity generated with fossil fuels. Average PLN unitproduction cost are very site-specific and depend heavily on the average load factor. In principle, theanalysis is meant to reflect PLN's avoided cost at the production site. The point at which the unit costsof biomass systems equal the unit costs of fossil fuel based systems is called the break-even point.This break-even point seperates the viable from the non-viable projects. The break-even point isdetermined by many variables such as: [a] investment costs; lb3 O&M costs; lc] fossil fuel prices; [dlinterest rate; [e] number of operating hours, and [fl prices of biomass fuels.

4. When using these six variables two nationwide economic models have beendeveloped. Model 1 to determine biomass fuel net-back values. Model 2 to determine investment net-back values. They are supposed to be the same all over Indonesia. For the fourth variable, theinterest rate, two different values have been used. The fifth and sixth variables, the number ofoperating hours and the price of biomass fuels, vary from site to site. These variables have thereforebeen left open in the firs, economic model. In the second model the investment costs for biomasssystems have been left open. Here the biomass fuel price is considered to be known to the plantoperator.

5. The first economic model works as follows. For six different fossil fuel based powersystems unit costs have been calculated. The unit costs have been determined for two differentinterest rates and six different schedules of operating hours. Given these unit costs, the biomass fuelprice at which a biomass power system can produce eiectricity at the same cost as a fossil fuel basedpower system has been calculated. This biomass price is called the net-back value of a biomass fuel.This net-back value is the maximum amount that can be afforded for a biomass fuel given thealternative fossil fuel based power systems. If biomass fuel can be obtained for exactly this net-backvalue the biomass power system caries the same unit costs as the fossil fuel basewd alternative. The

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biomass net back values as shown in Annex 2. The biomass fuel net-back values have been used todetermine the economic potential of biomass power systems in specific situations and represent thethreshold costs for the economic viability of the project.

6. The second model works in a similar manner. The same unit costs for fossil fuelbased systems have been used as in the first model. For different biomass fuel prices, the investmentcost of biomass power systems have been calculated at which the latter can produce electricity at thesame unit costs as a fossil fuel based power system. These investment costs are called the net-backvalue of the investment in a biomass power plant. This net-back value is the maximum amount thatvcan be paid for a biomass based power system as compared with the alternative fossil fuel system.The investment net-back values are shown in Annex 2. The investment net-back values have beenused to determine the economic potential of biomass power system in specific situations. They are inparticular used in those situations where only incremental investments have to be made, as against aninvestment in an entirely new system, and where biomass fuel prices can be estimated with sufficientprecision.

7. In calculating the production costs two different interest rates have been used: 7% and14%. The 14% rate is the average real interest rate in Indonesia between 1985-1990 for private bankloans (World Bank, Indonesia Developing Private Enterprise, 1991). The 7% rate is anapproximation of the real interest rate faced by PLN, which obtains foreign loans, through the GOI,carrying interest rates of 11%. With an expected annual tariff increase of 4% after 1991, PLN's realinterest rate becomes 7% (World Bank, Staff Appraisal Report, Indonesia, Power Transmission Report,1991).

Carbon Monoxide Emission

8. All projects considered potentially result in reduced emissions of C02. Givenworldwide concern about such reduction every tonne of C02 not emitted into the atmosphere has avalue. This implies that biomass based power projects which are hardly feasible under standardeconomic conditions may become viable if existing funds for environmental protfection are directedtowards these projects. The study has not taken this issue into account in case of the economicevaluation of biomass power options, because are feasible. In the non-feasible cases an attempt hasbeen made to assess the most impact of a market price of US$20 per tonne of C02 (Annex II).However, it needs to be pointed out that there is a great variety of opinion on the cost of C02 and theprice assumed here maybe an over-estimation.

Prevailing Financial and Economic Conditions

9. Indonesia's energy pricing policy aims at recovering the production and distributioncosts of its energy supplies. In the employed pricing system cross-subsidization takes place betweenthe different energy products, between different socio-economic groups and between geographicalareas. The basic principle of energy pricing is the assurance of supply security. Energy must beavailable continuously in amounts that meets demand and at affordable prices in order to stimulateeconomic growth. The objectives of cross-subsidization are to promote regionally balanceddevelopment and enable the people to afford the basic energy services (lighting, cooking, transport).

10. All prices of petroleum products are determined by the GOI. A World Bank energypricing review conducted in 1990 concludes that a substantial subsidization of petroleum productsexists. The GOI, however, believes it has addressed petroleum price subsidization after it enacted price

- 42 -

increases in July 1991. The differences between petroleum product subsidies estimates depends onhow economic production and distribution costs of petroleum products are determined.

11. Table 1 compares market prices and economic production and distribution costs ofpetroleum products. The economic costs have been calculated in accordance with a World Bankmethodology. 14 ADO, IDO and fuel oil are priced more or less in agreement with their economiccosts. The tax on fuel oil and the subsidies on ADO and IDO, approximately 10 %, fall within themargin that can be attributed to calculation differences, e.g. real refinery, transport and distributionmargins are in some cases lower in Indonesia than the world averages. Kerosene is stronglysubsidized which is paid out of taxes on gasoline, aviation gas and aviation turbo.

Tiable tI: Market Prices and Economic Costs of Petroleum Products

Petroleum Product Market Price (RPIl) Economic Cost (RplI)

Avgas 400 300Avtur 400 335Gasoline 550 291Kerosene 220 330Automotive diesel (ADO) 300 326Industrial diesel (IDO) 285 308Fuel oil 220 195

(a) Crude oil price at US$ 16/barrel.(b) Refinery margins and transport and distribution margins based on average world market

values and according to [World Bank, 1990].

12. Prices for natural gas and coal are determined in negotiations between the statecompanies, PERTAMINA and P.T. Batubara respectively, and their consumers.

13. Electricity prices are set by the GOI. In July 1991, all electricity tariffs were raised anaverage of 20% to bring the overall revenues more in alignment with the overall production anddistribution costs. PLN has nearly eliminated subsidies. Clients in rural areas and the off-Java regions,however, are cross-subsidized by the Java urban consumers. The electricity in the off-Java regions issold at a substantial loss.

14. In July 1991 a tariff adjustment of 30% for the industrial sector was implemented.Curent tariffs are reviewed in Table 2. These tariffs do not cover all costs in the off-Java regions.Here, unit costs (production and distribution included) were on average Rp 136/kWh in 1987/88. Withan average price increase of 6% this is equal to Rp 172/kWh in 1991/92.

14 One major exception has been made to the method used in the World Bank's energy pricing review. In this reviewthe economic costs of gasoline and automotive diesel include a road uset charge of 20% (above the economic costsof supply) in order to recover the costs of road development, maintenance and adminittration. In the opinion ofthe authors of this report the choice on how to recover the costs associated with road use, which can be recoveredin various ways (e.g. vehicle tax, general taxes, fuel tax or road toll), depends strongly on the socio-economicobjectives of the GOI. Especially the application of a road user charges on automotive diesel, which for 50% isused for non-transport purposes, is arguable. For this reason the review given here does not include a road usercharge in the economic costs of gasoline and automotive diesel.

- 43 -

15. With the current price levels and existing tariffs, PLN's revenues cover production anddistribution costs. In the near future, electricity prices are not expected to rise at the same pace. Ifinternational oil, coal and gas prices do not rise, real PLN prices might even decrease.

Table 2: PLN Tariffs, Category 5: Industry (July 11, 1991)

Demand charges Energy charges Average rateCategory Capacity range (kVA) (Rp/kVA/month) (Rp/kWh) (Rp/kWh)

Il/TR 0.45-2.20 3460 68.0 113121TR 2.20-13.9 3800 74.5 12413/TR 14.0-200 4500 220 (PH) 145

85.50 (NPH)14/TM >201 4200 212.00 (PH) 122

84.00 (NPH)ISTlT >30000 3950 188.50 (PH) 107

84.00 (NPH)6

16. For those projects where PLN is directly or indirectly involved, PLN's unit productioncosts are reviewed. Production cost differ from region to region and actual specific figures were notavailable to the technical mission. Making use of standardized parameter values, unit costs werecalculated for six typical PLN power plant types. These six plant types are: Small scale diesel gensets(0.5 - 1 MW), medium scale diesel gensets (I -30 MW), large scale diesel gensets (30 - 50 MW),natural gas fired combined cycle systems (50 - 100 MW), natural gas fired gasturbines (50 -100 MW) and coal fired steam systems (50-150 MW).

17. In Table 3 baseline parameters of the various electricity production systems are given.The values have been derived from [World Bank, 1991], [World BanklUNDP, 19901 and [NOVEM,1992]. Since a wide range of values is reported for most of the parameters, the situation in Indonesiacan differ from the below mentioned parameters. Efficiencies of diesel gensets measured in the fieldare sometimes half the value mentioned here [World Bank, 1989] and prices of new small dieselgensets can vary from 300 to 1,200 US$/kW [BOOM, 1986]. PLN often uses prices between 900 and1,200 US$/kW for small scale diesel gensets.

Table 3: Baseline Parameters of Fossil Fuel Fired Power Plants

Natural gas Natural GasPower plant type and Diesel Diesel Diesel (combined cycle) (turbine) Coalcapacity (MW) (.5-1) (1-5) (5-30) (50-100) (50-100) (50-100)

Investment cost (US$tkW) 1200 1000 1200 800 600 1600Efficiency (%) 25 32 40 50 35 38O & M costs (fixed, % ofinv.) I I 1 2 1 1.5O & M costs (variable,US$clkWh) 0.5 0.3 0.2 0.6 0.5 0.4Fuel cost (US$/GJ) 4.22 4.22 3 2.9 2.9 1.6System life time (yr) I5 15 15 20 20 20C02 emissions t/ktWh) 1.25 0.98 0.78 0.40 0.58 0.88

- 44 -

18. The unit cost of electricity generated from fossil fuels has been calculated based onthe above parameters. The cost per kWh depends to a large extent on capacity factors. Since thecapacity factor differs from site to site, unit costs have been calculated 'for six different capacityfactors (Table 4).

Table 4: Unit Cost of Fossil Based Electricity Production (Rp/kWh)

Operating Natural gas Natural Gashours (full load (combined (turbine)

equivalent) Diesel (.5-1) Diesel (1-5) Diesel (5-30) cycle) (50-100) (50-100) Coal (50-100)

Real interest rate 7%1500 319 257 247 174 151 2582500 243 194 171 125 118 1703500 211 167 138 105 104 1324500 193 152 120 93 96 1115500 182 143 109 86 91 986500 174 136 101 81 88 89

Real interest rate 14%1500 403 327 330 233 196 3772500 294 236 221 161 145 2413500 247 197 174 130 123 1834500 221 176 148 113 111 1515500 204 162 132 102 103 1306500 193 152 120 95 98 116

- 45 -

Annex n: Net-Back Values

Explanation of Figures

To determine for a particular situation the financial possibilities of biomass basedpower generation the relationships between (a) the number of full load plant operating hours, (b) unitpower production costs and (c) biomass or investment net-back values are illustrated in figures 1 to19.1 The figures are built up according to the following principles:

On the left hand axis either the biomass net back values or the investment netbackvalues for biomass power systems are displayed.

The net back values are always related to unit production costs of comparable fossilfuel based power systems. These unit production costs are either shown on the X-axisor are presented in the form of isocost curves: curves or lines along which theproduction costs remain the same.

In figures 3-5 and 16-19 unit production costs are depicted on the right hand axis.Tlhose costs refer to diesel based power plants and are related to the number ofoperating hours shown on the X-axis. By choosing a relevant number of operatinghours the unit production costs can be derived from the numbers on the right handaxis. On basis of this value an isocost curve, denoting approximately the same unitcosts, can be chosen. Taken again into account the number of operating hours andthe relevant isocost curve, the netback value can be found on the left axis.

In figures 1, 6-8, 10, 12 and 14 the relation between net-back values for biomasssystems and unit power production costs are depicted for different interest rates.

In figures 1, 2 and 6-15 intervals are shown, indicated by arrows. An interval refers tothe range of power production costs valid for fossil fuel based systems, operated byPLN or by private producers (captive plants). When an interest rate is displayed withthe interval, it refers to the interest rate the power producer is supposed to pay tofinance his power plant. An interest rate of 7% refers to the concessional loans PLNnormally obtains, while a rate of 14% refers to the market interest rate.

In figures 2, 5-7, 9, 11, 13 and 15 relationships between net-back values and unitproduction costs are also shown in case the value of avoided CO2 emission is added tothe value of the biomass fuel. In this case the line indicating the relationship betweenunit production costs and net-back value shifts upwards: at the same unit costs ahigher amount can be paid for the biomass fuel or for the investment in a biomasspower plant.

IThe biomass net-back value is the maximum amount that can be paid for biomass given the altemative powerproduction options. In the same way the net-back value of an investment in a biomass opwet plant is themaximum anount that cna be paid for an (incremental investment given the altemative power production optionsand given the value of the biomass.

- 46 -

A few examples can illustrate how the figures are to be read:

There is an investment option for a 4 MW biomass power plant. The investment canbe financed with loans carrying a 14% interest rate. The plant is expected to operateat 5000 full load hours per year. Figure 4 learns that unit production costs for adiesel fueled power plant of this scale are approximately 185 Rp/kWh. The isocostcurve with costs of 190 Rp/kWh comes closest to this value. With this isocost curveand 5000 operating hours the net-back value of the biomass is approximately 2400Rp/GJ. If biomass can be acquired and prepared for less than this value, a biomasspower plant is an economic viable undertaking.

Possibly there is an investment opportunity for a 30 MW biomass power plant. Theplant will be operated in base load, 6500 full load hours per year, and can be financedwith funds carrying a 14% interest rate. Figure 2 shows that PLN production cost fora large scale power plant operated in base load are in between 95 Rp/kWh and 120Rp/kWh. Taking the average value of 107.5 Rp/kWh, the figure demonstrates that a30 MW biomass power plant can only be competitive when the biomass can beacquired at no costs; the net-back value is zero. If, however, the benefits of CO2reduction are credited to the biomass value, the biomass net-back value becomesapproximately 3000 RplkWh.

A CPO mill optimized for energy production would have a 3.6 MW power plant to beoperated for 5360 hr/yr. To be financially viable this system should, in the regionunder consideration, be competitive with large scale PLN operated power plants.Figure 6 shows that, at a concessional interest rate of 7%, PLN production costs are inbetween 80 Rp/kWh and 100 Rp/kWh. Taken the average value of 90 Rp/kWh, thefigure demonstrates that the investment net-back value lowers to 1110 US$1kW. If onthe other hand the benefits of CO2 reduction are credited to the biomass value, theinvestment net-back value becomes approximately 1650 Rp/kWh, again assuming a14% interest rate.

The situation can also be looked upon from an economic perspective assuming thatPLN has to pay 14% interest on its capital. Production costs are then in between 95Rp/kWh and 120 Rp/kWh, or on average 107.5 Rp/kWh. At this production cost levelthe investment net-back value is 1490 US$/kW when the CPO mill can acquire capitalat 14% interest and 1950 US$/kW when capital can be acquired at 7%. If the benefitsof CO2 reduction are credited to the biomass value, the investment net-back valuebecomes approximately 1900 RpIkWh, assuming a 14% interest rate.

.47-

Annex Net-Rad VaIue

(30 MW, 6500 hr/yr)3000.

4000 0 10 t 120 0

3000 /

7 2000

1000

10

y -1000 - |=

-2000 -- n PwN pro cod-3000~ ~ ~ ~ > - low sede powr panl top

-4000 . s- srw...... -. v qw.""9wsIt."w 1

-4000

70 80 90 100 110 120 130_ wt pnfion am (ip/lWh)

gr. 1. ience of av-bookd vabt s v for la blmb I'm 0l Amcvp bIg. sialam auk p owdr o pe nt a two I hdue ta.

,30 MW, 6500 hr/yr, 14% hfsrosi)

-a-2000 1000 t_

-100 WhO iNd bwi_ PO di C02

-200 rooo woo cadp 3000 -kn acalm prwo eod md

-3000ih Io I I II II bi)

00 i 8 0i 100 110 120 ix o|b prodtbefer es (F¢,/kWh)

vamfo btp 1, eh blomo AWN pow Vim atNM aA

Pmdd

.48 -

(4 MW, 7% Intfrest)10000 - r"o od(pkt u 200

sono *000 aufl,n (R1A0iW 260

g4000 AT a:

-400 / !400

2500 3000 35S00 4000 UO0O 5000 550O $000 6500b_wd FrI" to (it/yr)

F3we, Ohm. & lekvatutiouabwdbhmsA.spmltpaatdImu-ut dI - bows Ain digbysd ltfMs poak I ft 1iowl*

dad dm1 pmrplaaa.L AppUhd au 75.

(4 MW, 14% Intret)

13

|, 10eIS

2500 3000 5100 4000 45100 SO1 5500 6000 1300bm,i oph am I Qr/r)

~, 4. 3mm haoM6bakvdlmhe inh.a1d ma dpswsvp i_MmM_P--B _1 q.s bm AlM dhpy.d Rehams wik pusdmin asM fo .1.1.f 1d dhaawn ph. Apph Imms m 14%.

-49-

(4 MW, 14% interest)

a 1ward sNt Attrbum ot o

2500 3000 .3500 4000 4500 5000 5500 6000 6500Aii opratin hes (t/pr)

Piss S, nlotb of avoided C4 e oao bionalss fe n vaL r diu abeaeailed power plai ae difFan unit pwoduoaion cotad awye boewd ose.

(<3.6 MW, 5360 hr/yr)3000-_

12500~~~~~~~~~~~~~1

I20 190

_1) .rouuia_ east tor lag u_dtOOO~~~ _u base hold OI v.1cm Wdmatrt11000 Ited hSO Wll, G02 hut to, bhs wew X_ ted pr ow plai

30000 0 100 110 120 130 140 150 160 170

Wi _1dele,cs (l*Ah)

I

mtO i in_bussd hr easegy p odu daMc

-50-

(0.8-1 MW, 4500 hr/yr)2500

t " tZ b hter"t rote: ?:C2000

i2 1500

11000wvsPLN pro&mf1an cos for argosOd

Soo_ put hb os load t vuus tueost rote.Je W0th C02 bensflt sr.ed to 1fajad pow pW.

80 90 100 110 120 ISO 140 150 160 170Udl protio aos (Rp/kWh)

lIs 7, vavoins m k velm of ecicity 8esseu "Mm forCPO mills makg ts t impswvoa to hr esisdg enowy syem.

2500. pred H aiot cust for lag sods

lo pkrd inb h o Of Vd W NOV b dre& 1

$ ~~~~~142Xo

1300- --a

-500 . ..... .............. so go 100 Ito 120 130 140 15oIWt produio oad (Rp/kWh)

JIg.rB. , nemn nubsk value to the optimndon of a hpial=B"a fanas.

-(midu (JCpq SUPMd ooso tiwa poauqqu wPMjdJ.mda*gpu8pw UUU3JMW&3SflA2Oq48jgy UD093 0f sainUg

(wq/do Po uquW jd epqO0? 01? 09? Oc Ott 06! oilO I 0Ott 0o1 06 DI

(q mq/d) PI oo~od4q

OpS, slag jj. t Nid S AJS$W

,,§_ =am= to JO #1no aml Jo mn '6 am%§

09t ovi Ott Ott oil OOl 06 08

pn * mod od e tibo 1Z

,ZI 10: 010. IN 10^ ;0 P""'4

so ebil jet o wpea wwe NW 4_ . OOSt002

-52-

12; NsGlob

10 ,of 5' oeC2 mW " 4cre8ited to po . v 14

21 __. Xo _ (d of etbua w

-4 0 2 1 3 Si i i i 30 2i! 2i 2i 90Lhit produn cost (Rp/kWh)

rem It, bd _ of edgsd tvoWae of CO mso, toblomas & d powerl- for um d asfler Webaobg at asobood smil (3500 op5udn bnyr) (RIG-

4000t. tEred rata 7

,,3000 / 4s

2000 PL /d /_

t 1000 nK >

]-20°00 . -

-1000 PL rt r foRdbln t for large scalr ~~U b bw b" at vem d fL_

800 to .' _. I . w , ,to ' ,o , ,io , 'l.

10 100 120 14 $ 180 200

Ibi production ot (Np/kWh)

Pd i

-53 -

4000 h~~~~~~~berst rate 141

3000 .

2000 PtN 12 4 O

LW psd ------ s (p/Wh

300 PL. 7% s wfi 14

}-1000 |2 blihs

_easrasion In ocgenem a medium scale pcraywoddtmiled l .-2000 ;Owb7. _

re14-3. 00 mtc le ec Production c n fsa l ergem ol pnl in baed io fsv W ri ratll

so to 120 140 ' too ISO '2 00Url pbucin cot(P/XkWh)

r*mu 13, Mwo in-#e of avokd COa eiis on tbe b bo no-back value of d eick-osmo in coenatoat a uodm saie plywood wAl.

6 0003bcz e:7

$00 kioo3 fe/4 0002 4,_1%

3 000 __/

2 000 .

-1000 _L

-2000 1 ol 1 xi 4XD

§-3000 _,._

-4000: on b pban h at vwim wet WOrutr

-5000~~~~~~~ . . . . . . . . I .110 too 120 140 ISO ISO 200

Utlf probml ees (R/#Wh)

0 __i mbplywo Ud,

.54-

400 ht

3000_

2000 1 1 1

-1000 _ > d $wt. Wth|_

-2000 lr dtoea t -

-3000 Pot. _O

ligae I, Wh i e of avoided CO1 emelnon di for neb sadu-4000 omr Inpant ioo of voto Wrt ref

-5000 ... . . ,...........'so too 120' 14,0, 16'0 ISO 200

'6! produdin ces (Rp/kW)-

Rpm IS. Mo b6m of avoWd COA aWW= on do bio_ utmk vk of deaftSmemia Ismai dedated powe pba as a cdbm male plywood oU.

(50 kW, 7% Interest).4 =W 35 *so

12. -340

100 s 0 3200

Mid operoBig mrs (tr/yr)

;g8 > < - *~~~~~~~~~~~300

} } 6 \ = - 2 0 0 X~~~~~~~~~28

] 22 / 390 ~~~~~~~~~Rp&kWh *240,

0- e t202000 2S00 3O;O 35ilO 4000 4s00

""_ 9" t r/yr)

IB 16.soadmmkwah om gaAfp opoto s<t M i" mm set

(50 kW. t4% interest)t6~~~~~~~~"it - . 400

14 - 380

IN~~~~~~~~~~~10,~~~~~~~~~~~~~~~~~~.200 2500 3000 3500 4000 5300

} ffA4 _20 . (tv/yr)j 2 ._ (00IW, 7260 )

-2 / , . ~ ~ 220

2000 2500 3000 3500 4000 450

(.50 kW, isx 'u 14%).

(ioo kW. 7% Interest)

i~~~~~~~~~cfw 22 t 40 {

tg 4 ~~~~~~~~~~~~~220

4 . IN

2X0 23O0 30,00 3300 4000 *9 i@^

(100 kW, b 1%)-

- 56 -

( (00 kW, 1 4% Interest)

t8 Cauffor, 400 -16 38

8 14 390

f Wfkr, 300 A4

0 2§ 2 _ S bAF ,2~~~~~~~40

a0 _ -220

200 2500 3000 35'00 4000 40Amurd wing haits (hr/yr)

Iauss saVW 145).

- 57 -

Annex HII: Bibliography

[Apkindo, 19901 Apkindo Directory 1990.

[Atlanta, 19871 Atlanta Hamburg and nproma Indonesia, Wood processing industrydector study Indonesia, Main report, for Directorate General ofMultifarious Industries, Jakarta, 1987.

[BOOM, 19871 Boom Development Consultants and Energy/DevelopmentInternational, Regional energy development project of West Java,REDEP II ETA-79, Energy potential from agricultural wastes,working paper no. 9, Directorate General of Electric power and NewEnergy, undated.

[BTG, 19901 BTG, Biomass gasifier pre-investment study, volume 1, findings, 1990.

[BTG, 19901 BTG, Biomass gasifier pre-investment study, volume 2, technicalreport, 1990.

[BTG, 1992] BTG, Indonesia: Biomass for commercial energy utiiization, prospectsfor energy ge'ieration with emphasis on palm oil, sugar, rubberwoodand plywood residues, Techno-Economical Study, for ESMAP (TheWorld Bank), 1992.

[CESEN. 19851 CESEN, Indonesia: rural and renewable energy development study inKalimantan; findings and conclusions, ADB, 1985.

lCESEN, 19851 CESEN, Indonesia: rural and renewable energy development study inKalimantan; main report, ADB, 1985.

[CESEN, 19851 CESEN, Indonesia: rmral and renewable energy development study inKalimantan; Technical report, Volume 1: A framework study for ruralenergy development in Kalimantan, ADB, 1985.

lCESEN, 1985] CESEN, Indonesia: rural and renewable energy development study inKalimantan; Technical report, Volume 2: Site visits and projectidentification, ADB, 1985.

[CESEN, 19851 CESEN, Indonesia: rural and renewable energy development study inKalimantan; Technical report, Volume 3: Project analysis andassessment of implementation strategies, ADB, 1985.

1DGENE, 1990] DGENE, Statistics and information on electricity and new energy,DGENE, 1990.

[COTE D'IVOIRE, 19871 Improved biomass utilization, pilot projects using agro-industrialresidues for the energy sector, ESMAP, 1987.

[J.C.I., 19391 Japan Consulting Institute, Feasibility study report on a palm oil wastefired mini thermal power plant in Republic of Indonesia, 1989.

- 58 -

[Krutilla, 1991j Krutilla, J.V., Environmental Resource Services of Malaysian MoistTropical Forests, World Bank, rev. 8/19/91.

[NOVEM, 1992] NOVEM, De haalbaarheid van de productie van biomassa voor deNederlandse energiehuishouding, Utrecht, 1992.

[Okken, 1991 A] Okken, P.A., et al., The Challenge of Drastic C02 Reduction,Netherlands Energy Research Foundation ECN, Petten, 1991

[Okken, 1991B] Okken P.A. et al., 20 % C02 emissiereductie in 2005: moeilijk maarhaalbaar (20% reduction of C02 emissions in 2005: difficult butachievable), Energiespectrum, Netherlands Energy ResearchFoundation ECN, Petten, September 1991

[SOW-VU,1991] Centre for World Food Studies, Long-term trends of agriculturalsupplies in Indonesia, Free University, Amsterdam, 1991.

[TJENG, OLIE1 J.J. Olie, T.D. Tjeng, The extraction of palm oil, Stork Amsterdam,Internal report.

[TJENG, OLIE] T.D. Tjeng, J.J. Olie, "Some notes on the various aspects governing thechoice of an industrial palm oil mill for a large palm oil plantation",Stork Amsterdam, Internal report.

[TJENG, OLIE] T.D. Tjeng, J.J. Olie, Palm oil mill process description, In: Planter 50,527 - 556, 1978.

[UHESS, 1990] Household Energy Unit, Indonesia: Urban Household EnergyStrategy, Industry and Energy Department, World Bank, Washington,1990.

[USAID, 1988] A prefeasibility assessment of the potential of wood waste powersystems for the Indonesian wood products industry. Phase I report,1988

[WI, 199 1A) Winrock International, Diversification of sugar and palm oilindustries: Indonesia, Part I: Survey of Energy and product investmentoptions, USAID, 1991.

[WI, 1991B] Winrock International, Diversification of sugar and palm oilindustries: Indonesia, Part II: Case studies of sugar industry electricityproduction for export, USAID, 1991.

[WB, 1991A] World Bank, Indonesia: Developing private enterprises, 1991.

[WB, 1991B; World Bank, Identifying the basic conditions for economic generationof public electricity from surplus bagasse in sugar mills, Industry andenergy department working paper, energy series papet 34, 1991.

[WB, 1991C] World Bank, Prospects for gas-fueled combined-cycle power

- 59 -

generation in developing countries, Industry and energy departmentworking paper, energy series paper 35, 1991.

[WBI 19901 Energy pricing review, World Bank, 1990.

[WB, 1989] Power Sector Institutional Development Review, World Bank, 1989.

[Winrock, 1991] Baling Sugarcane Tops and Leaves, The Thai experience.

- 60 -

Annex IV: Cogeneration: Perspectives and Problems

Introduction

To encourage cogeneration from biomass resources and promote sales of surpluselectricity to the national energy grid or third parties the following issues must be considered:

1. Potential Benefits of Cogeneration.2. Reliability of Cogene ited Supply.4. Impact Upon Utility! Inning.5. Interconnection to the National Energy System.6. The Pricing of Purchased Power.7. The Feasibility of Cogeneration in Indonesia.

Examination of the perspectives of the utility, government officials, and private sector concerning theabove matters should lead to a clear policy.

Before a regulatory framework allowing the sale of surplus electricity to the grid maybe developed, the concerns of the national utility, public policy officials, and industry/cogeneratorsmust be addressed. Nations throughout the world, both developed and developing, have successfullyfaced these issues and integrated supply from cogenerators into their national energy systems. Oncethe utility, policy makers, and industry representatives are able to settle the preliminary issues throughdiscussion, a policy beneficial to all involved may be developed.

There are several major factors which have discouraged Indonesia from developing itsimportant biomass energy source. In Indonesia there is concern primarily with the perceivedunreliable supply of power produced by industrial cogeneration operators. PLN is also concernedabout the integration of cogenerated power into the national power system . It is presumed that erraticpower supply caused by an irregular source of biomass fuel and the agro industrial staff'sunfamiliarity with electricity production standards will negatively effect the power grid's operationand reliability. These concerns may also partially explain why Indonesia still does not have aregulatory framework that encourages private sector operators to sell and/or produce surplus power tothe grid.

The absence of such a proactive incentive system is at the core of the private sector'sreluctance to buy expensive biomass fueled power generation equipment. This reluctance may befurther reinforced by the financial situation of the relevant agro-industries. The absence of a cleartariff structure for cogenerated power, a transparent formula for its adjustment over time (taking intoaccount factors such as rate of exchange fluctuations and inflation), and financial incentives such astax exemptions and low-cost investment capital are major impediments to the development of privatesector electricity production. Also, the fact that the avoided costs, i.e., which potential higher costform of generation will be replaced by less expensive cogenerated power, are not known furtherenhances the uncertainty about a rational tariff level and the economics of investment in cogenerationequipment. Private sector interest is further dampened by a general lack of experience with theequipment and with power sector standards to produce power for the national grid. The industry,therefore, may fear that the possible high cost of learning due to this lack of experience willnegatively effect their investment's profitability as well as reduce the power sector's interest inpromoting cogeneration.

Issue I - Potential Benefits of Cogeneration

Many parties are involved in the development and implementation of a regulatoryframework encouraging the use of cogeneration technology and sale of surplus power to the grid.Each of the parties is concerned with the manner in which cogeneration positively and negatively

- 61 -

affects their operations.

Cogeneration can provide severaI benefits to the utility. Facilities which are properlydesigned and operated are able to provide a stable, reliable, and cost-competitive source of electricityto the national energy system. The utility is provided with a capacity addition without capitalexpenditure and additional build-up of debt. As the cogeneration project is single project vs. theutility's stable of projects, favorable project finance terms can lend the cogenerator a price advantage,a portion of which would be passed on to the utility.

Most project risk, which the utility would otherwise be forced to undertake, isabsorbed by the cogenerator. The utility avoids technology risk, the purchase of inappropriateequipment. The obtaining of financing for the project and inherent risks in this process arecompletely avoided. Risks of project completion caused by delays in construction, equipmentprocurement, and other factors are shifted away from the utility.

How does the industrialist (the purchaser of electric and thermal energy from thefacility) benefit? The industrialist may see improvements in reliability from a plant dedicated toserving its needs depending upon the comparable reliability of the national energy system.

The industrialist will demonstrate greater energy efficiency with a natural decrease inenergy expenditures. If the industrialist is both the owner and operator of the cogeneration facility, asecond, reliable revenue stream is developed from the sale of excess electric power. Such revenuestream will have a stable pattern partially offsetting the volatility of commodity-based operations. Thereward for the developer of a cogeneration project is the opportunity to earn a rate of returncommensurate with the level of risk taken. As all forms of risk are considered by the developer,includirng political and currency, additional incentives are sometimes necessary to lure developers toareas perceived as lacking political and economic stability.

Many policy regulatory officials have embraced cogeneration, with good reason. Thepurchase of excess electricity from cogenerators is the equivalent of off balance sheet nationalinfrastructure development. The risk of project failure and public response to such a failure is alsoeliminated by a purchase of electricity from a cogenerator. As cogeneration enhances the efficientutilizaton of energy, natural resources are conserved. In the case where he fuel for cogeneration isbiomass, foreign exchange is conserved through offlset petroleum expenditures, resulting in a netbenefit in balance of payments. Cogeneration projects also tend to assist in the development of localcapital markets during the financing stage. Private sector participation in power generation, agenerally government controlled sector, contributes to widening ownership of economic assets.

Issue 2 - Reliability of Cogenerated Electricity Supply

A significant roadblock in the development of regulatory policy may be the issue ofreliability. Both the utility and regulatory officials may perceive electricity purchase fromcogenerators as potentially destabilizing to the national energy system due to a lack of reiiability. Theutility cites two issues which could potentially affect reliability of the cogenerated supply ofelectricity; disruption of fuel supply and lack of familiarity with standards for providing electricity tothe national energy grid.

The risk of disruption of fuel supply can be eliminated through use of dual-fueledunits or the provision of a ready supply of back-up fuel. As biomass fuel is often only availableseasonally, dual-fueled systems such as oilVbiomass, gas/biomass, and coal/biomass have beendeveloped. As the palm oil and wood industry in Indonesia can supply biomass fuel year-round, thealternative fuel would most likely serve only as a back-up and ignition fuel.

Additionally, it should be noted that during the dry season, when hydroelectricresources need to be conserved, biomass fuel production is at its peak.

Biomass power generation and cogeneration technology is well-developed and has

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been employed heavily in both North America and Europe. In the United States, over 200 bionassprojects totaling greater than 3,000 MW have been developed by independent power producers. Thetechnology itself is considered very reliable. Of course, proper operation and maintenance of anycogeneration facility contributes a significant amount to overall system reliability, stability, andefficiency. The primary concern over reliability stems from the absence of power generationexperience in the local private sector. There are a number of ways to alleviate this concern related toinexperience:

* Training in biomass cogeneration O&M.* Secondment of utility O&M engineers to biomass cogeneration projects.* Utility sponsored workshops on operation and integration standards of the utility.* Invitation to the international private power community to participate.* Hiring of foreign O&M experts to operate facilities.

Educating the private sector on matters of power generation using these methodswould result in the transfer of technology and skills to local personnel and lead to greater reliabilityof electricity supply from cogenerators.

Issue 3 - Impact Upon Planning

The focus of most utilities is "least cost electric power development", defined as "theoptimum development plan for an electric system is one that provides the maximum reliability at thelowest cost, both monetary and environmental". Biomass facilities can easily fit within this definition:

i Properly managed, biomass cogeneration facilities are very reliable.* Biomass is one of the most environmentally sound technologies available.e Preliminary estimates of the costs of biomass cogeneration indicate that it is cost

competitive against current generating resources as well as proposed generationdevelopments in many cases.

Depending upon the geographical location of the cogeneration facility and the utility's transmissioncapabilities, the availability of additional supply could prove valuable to the utility.

The amount and terms of the sale of electricity to the national grid are dependentupon the structure and capabilities of the cogeneration facility. An industrial process requiringgreater amounts of steam than electricity, such as palm oil processing plants, generally can provide asupply of baseload electricity. Where industrial demand for electricity is commensurate with steamproduction, supplying baseload electricity is more difficult. Whether the cogeneration facility is fullydispatchable, under the operating control of the utility regarding amount of electricity produced, isdependent upon the nature of the steam sales agreement, amount of steam required by the industrial,and the impact which dispatching would have upon the cogenerator's ability to supply steam.

Issue 4 - Interconnection to Grid

Interconnection with the national energy grid must take place under definedstandards regarding synchronization, ranges of power supply, and voltage levels among others. Thegovernment and utility must create penalties and incentives to encourage compliance with suchstandards. The importance of clear standards of interconnection underline the importance of thediscussion above in section 2 - Reliability.

On a site by site basis, the transmission capacity of the lines into which electricityfrom the cogenerator will be fed must be examined. The cogenerator must be responsible forsupplying a fixed amount of capacity per month within agreed upon technical parameters.

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Issue 5 - The Pricing of Cogenerated Power

Many developing nations have faced the difficult question of how to pricecogenerated power. A variety of approaches have evolved, the most successful are clear, fair to boththe utility and the cogenerator, and have a basis in avoided cost. A system based upon these conceptsis able to provide sufficient incentive for developers of cogeneration facilities to operate whileproviding inexpensive power to the electric utility.

The tariff structure for the purchase of cogenerated power must be clear and free ofinconsistencies. Distinctions between supply during periods of peak, semi-peak, and off-peak demandas well as any seasonal tariff changes should be explained clearly. The tariff structure should containa transparent mechanism for the escalation of tariff rates over the period of the power purchaseagreement. The tariff should be sufficiently high to attract interest of developers while at the sametime providing competitively priced electricity while contributing to the least cost electric powerdevelopment plan of the utility. As demonstrated below, these requirements can be best met throughthe use of value-based pricing.

Cost Versus Value-Baqed Pricing

The tariff offered for the purchase of cogenerated power will have an obvious impacton the number of projects that are able to move forward. Two systems of pricing have beendeveloped and implemented with differing results; cost-based pricing and value-based pricing. Undera cost-based pricing system, the tariff for the purchase of surplus electricity is based upon thecogeneration facilities' cost of generation. A value-based system determines price on the value of theelectricity to the utility, "the cost that a utility would otherwise incur if it were not for a purchase ftoma non-utility generator".

When utilizing a cost-based system, there are a number of means of determining thecost of generation, which fall into two broad areas; 'engineering" method and "economic" method.The engineering method takes total cost and splits it into proportion to process/electricity load on aheat-consumed basis. The economic method takes additional (differential) capital and operating costsabove process-heat-only cost and determines the actual cost of generation of electricity for sale to theutility. Both of these methods incur a large administrative burden in that there must be individuacalculations and negotiations for each cogenerator. They are also inefficient in that there isinadequate incentive for low cost producers due to unattractive risks and rewards as well as excessivestimulus for high cost producers as there is no effective price ceiling.

Value based pricing, or "avoided cost"-based pricing, offers several advantages. It isefficient as power is purchased only from cogenerators having costs less than or equal to that of theutility. The avoided cost system is financially viable as it is revenue neutral for the utility, offersenhanced quality of service to customers, and profits to cogenerators in proportion to theirefficiency. There is also no large administrative burden as the costs are calculated only for the utilityand revised periodically by formula.

Average Versus Marginal Avoided Cost

There is some dispute whether employment of average or marginal avoided costproduces the best results . Average avoided cost takes into consideration average fuel costs andhistoric costs of capital plant which implies that future resources will be as cheap or as expensive as inthe past. There is ample evidence that the cost of fuels is increasing over time. It is unlikely thatutility historic costs would be the best guide to future costs. Marginal avoided cost is a more accuraterepresentation of true benefits as it is based on the cost of the utility's "last" (costliest) unit produced.Marginal avoided-cost is consistent with least cost generation expansion planning and economicallyefficient in that it replaces a more costly form of generation with a cheaper one.

Some problems with using marginal avoided cost as the purchasing price forcogenerated power are:

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* Surpluses are effectively captured by the cogenerators.* Use of incorrect calculation methods.

The utility, in effect, only receives power which is priced at the rate of its most costlyplant, while an efficient cogenerator may be able to produce electricity at a rate well below this level.Incorrect calculation of avoided cost can either under stimulate or overstimulate cogenerators tosupply electticity to the utility. In the case of an error to the higher side, the purchase may befinancially harmful to the utility. In the case of an error on the lower side, the utility may find itselfwith sigificantly less cogeneration capacity offered to help it meet expected electricity demand.

Problems encountered when using marginal avoided cost as a tariff for the purchaseof surplus electricity can be remedied by implementation of a bidding system, whereby cogeneratorsreveal their ability and price of supply in response to a utility request for proposals (RFP). Throughbidding, avoided cost becomes a ceiling to market-determined prices, efficient cogeneratorsparticipate and earn a "normal" profit given adequate competition. Utility and rate payers maycapture a portion of the surplus as the price is able to fall below the marginal avoided cost of theutility. With adequate competition, inefficient cogenerators are excluded. However, bidding systemsare still being developed and administrative difficulties and details are in the process of being workedout.

Avoided Cost Determinatio

There are two components to avoided cost; avoided energy costs and avoided capacitycosts. Avoided energy cost can be further broken down into variable fuel costs and variable O&Mcosts. Avoided capacity costs are the cost of fixed capital (capacity) to meet peak demands.Calculation of avoided energy costs is fairly straightforward, representing typically 60% of totalavoided cost. To calculate avoided energy cost:

* Examine daily and seasonal load curves.* Examine operation plan for economic merit order dispatch.* Determine least efficient unit-in-service (costliest) plant for each major rating period.* CCalculate variable fuel and O&M costs for the relevant plants.

Avoided capacity costs are somewhat more difficult to calculate and are typically 40%of total avoided cost. They are determined from:

- costs imposed on the electric system (including lowered reliability of service) due tomarginal increases in peak demand.

* The cogenerator's effective load carrying capacity (ELCC).

There are many methods for determining the first, the most accurate of which rely oncomputer-based probabilistic utility production cost simulation models. ELCC can also bedetermined probabilistically, once it is realized that distinctions between "firm" and "non-firm" areartificial in a world of uncertain demand and supply.

Issue 6 - Feasibility/Viability of Cogeneration

The feasibility of biomass cogeneration in Indonesia is dependent upon a number offactors:

* Demand for cogeneration services from industry.* Demand for purchased power by PLN.* Ability of the private sector to earn a reasonable rate of return. Tariff rate reasonable.* Technology must be proven and cost competitive.* Availability of primary fuel and backup fuel.

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* Ability to sell into national grid under clearly stated guidelines. Terms ofinterconnection must be reasonable.

o Availability of capital and debt.o Availability of goods and services related to power generation. Engineering and

design, construction equipment, O&M.* The initiative of the private sector in development of new industry.o Government policy stimulating private power generation.

Incentives designed to stimulate the production and sale of surplus electricity byprivate cogenerators are generally financial in nature and fall into three broad categories:

* Tax exemptions.* Concessionary Financing.* Guarantees.

These methodologies have been found effective in many developing nations, particularly those withdeveloping indigenous capital markets.

A broad range of tax exemptions have been offered to lure investors into privatepower generation. Exemption from income tax over a specified period has been ffered in severalnations such as the Dominican Republic. Eliminating import tariffs on power ge,.eration equipmenthas been utilized throughout Asia, including in Indonesia, as an incentive to private sector powerdevelopment. Removing taxes on income from power generation services, from design andengineering to consulting, is another incentive to the private sector. The investment tax credit, usuallyin the formn of accelerated depreciation has been applied in South-east Asia with considerable success,particularly in the Philippines.

Outline of Draft Text of the Rgulatory Frmewor

Definitigns

This section would define what is a qualifying cogeneration facility (QF) and what isthe public utility (PU).

Objectives

This section would describe the public policy objectives of the regulatory framework.These would include, encouraging the development of QFs, promoting the use of indigenous by-product energy sources and renewable energy for electricity generation, promoting more efficientuse of primary energy, and reducing the financial burden of government investment in electricitysector.

Characteristics of QF's

This section would describe a QF in more specific terms. These would include,generation using renewable energy, generation using biomasslagro-wastes, and cogeneration facilities.

E5lectric System Standards

This section would refer to the safety and interconnection standards in theRegulations for Synchronization

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Procedures for Purchasing Electricity from OFs

The procedures for purchasing electricity would depend oii whether or not therewould be a solicitation for proposals on the part of the PU. If electricity were to purchased on anunsolicited basis, projects would most likely be negotiated within criteria specific to each project.

Should the PU elect to solicit proposals for the purchase of electricity, this sectionwould describe the basic procedures and timetable for the PU's purchasing program from QF s. Thesewould include: the establishment of the PU's criteria for selecting QFs, the PU's announcement ofoffer to purchase power and its issuance of a request for proposals, the submission of proposals byQF's, the PU's evaluation of proposals based on determined criteria and time table, the PU'sannouncement of results of evaluation, and the QlP's signing a purchase/sales contract with PU within acertain time frame.

Conditions for Purchasing Electricity from OFs

This section would describe specific conditions necessary for the PU to purchasepower from QFs. These would include, whether or not the PU is the sole purchaser of electricity,whether or not the PU has to purchase excess generation, what maximum 'iMW level can be suppliedby a QF at any connection point, whether or not the PU has the right to inspect and request the QF toimprove its power distributing equipment it may adversely affect the PU's system and whether or notthe QF must post a performance bond and if so, at what value.

Purchasilng Point and Connection Point

This section would define what is nieant by "Purchasing Point" and "ConnectionPoint." This would include, whether or not the "Purchasing Point" is the metering point, whether ornot the "Connection Point" is the place where the QFs system is connected to the PU system, andwhether or not the Purchasing Point and Connection Point may be the same.

Exposes of the

This section would outline the expenses of the QF related to its sale of power to thePU. These would include, whether the QF or the PU shall pay the costs of interconnection to the PUsystem before supplying electricity to the PV and the expenses of the PUs inspection to QFequipment connected to the PU system, or if these expenses would be shared in some way.

Conditions for Eligibility of Capacitv Payment

In many cases, electricity from biomass generation systems is purchased on an energyonly basis, without a capacity payment. In these cases, the cogenerator is not obligated to provide anypower to the PU at specific times but may sell excess electricity when it is available and when the PUhas requested such electricity. However, when a cogenerator invests new capital in generation andinterconnection, and commits to make certain amounts of electricity available to the PU duringcertain periods, there is often a capacity payment from the PU to the QF.

If there were to be a capacity payment within this reguiatory structure, this sectionwould define the conditions that would make a QF eligible to receive a capacity payment in its sale ofpower to the PU. These would include, whether or not the contracted period lasts at least a certaintime period and whether or not the power supply meet the conditions below.

Requirements for Power Plant Operation and Shut-down for Maintenance for OFs Eligible forComaity Payment

This section would address operational requirements for QFs to be eligible forcapacity payments. These would include, whether or not the QF must supply during peak months andmust supply at least a certain number of hours per year, whether or not the QFs monthly capacityfactor must be above a certain level but below a certain level (except when otherwise requested by the

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PU), whether or not the QF must be able to supply in accordance with PU requirements (with powerfactors as instructed by the PU) and whether or not the PU must notify QF of its instructions withcertain advance notice. This section would also refer to requirements of quality of electricity thatwould be defined in the Regulations on Synchronization.

In addition this section would define the QFs requirements regarding shut downperiods. These would include, whether or not shut-down for maintenance must take place during off-peak months, what the maximum shut-down period for emergencies during peak hours or peakmonths is in a 12 month cycle, whether or not the QF must notify the PU in advance of a shut-downfor maintenance of certain lengths, whether or not such shut-downs must be approved by the PU,whether or not the total period of shutdown for maintenance must avoid exceeding a certain numberof hours or days in a 1 month cycle, whether or not the QF can carry forward unused shut-downhours to a following year, and whether or not the PU may disconnect QF from its system for securityor safety reasons.

Failure to Perform According to Electricity Purchase/Sales Contract

This section would address situations in which a QF fails to perform according to itscontract with the PU. For example, if the QF cannot supply the contracted amount according tospecified standards, whether or not the PU will pay a certain percent of capacity rates during thatperiod. If the situation continues for a certain number of months, whether or not the PU will reducethe capacity payment to actual capacity. Also, if the QF wishes to voluntarily reduce capacity suppliedto the PU during peak, (after having produced effectively for a certain percentage of the contract).whether or not the QF will be allowed to do so with advance notification to the PU.

Guarantee For Termigation of Contract b QFs Eligible for Caait Pament

This section would address the necessity, if any, of the QF providing a performanceguarantee equal to a certain value. Also this section would define what the PU would have rights todeduct from such a performance bond under specific conditions.

Trms of Pament

This section would define the payment schedule from the PU to the QF.

Damage to the Power System

This section would discuss whether or not the QF is required to install protectivedevices to prevent damage to the PU system and would refer specifically to the Regulations forSynchronization. This Section would also clarify whether or not the QF and PU are responsible fordamage that arise from their respective systems, to the others.

Request for Back-Up Power

This section would refer to the announcement on Back-up Power.

Dispute and Appeals

This section would define an appeal process that can be followed by a QF or an entitysubmitting a proposal to become a QF to resolve conflicts with the PU. The section would name theentity that would adjudicate such disputes and define its authority.

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Attachment 1: Tariff

Criteria in Determining Purchasing Rates for Supply of Electricity from QOs

subsections. The price structure proposed consists of three components described in the following

Canaity_ harge. The capacity charge is directed to recovery of capitalizeddevelopment and capital cost, interest during construction, and fixed operation and maintenance(O&M) costs such as taxes and insurance and, if applicable, fixed fuel charges. The capacity charge isa monthly charge for capacity payable regardless of the amount of energy taken by the PU.

Adjustment - It may be proposed that the capacity charge be adjusted to compensatefor movements in the local exchange rate relative to the currency of debt and equity. There may berequested further adjustments of fixed operating costs as impacted by appropriate price indices.

Vaiale Charg

The variable charge is directed to recovery of the cost of operating consumables, andother variable operating and maintenance costs. This charge is payable on a periodic basis accordingto the amount of energy taken by the PU.

Adjustalment - It may be proposed that variable charges be adjusted to compensate forchanges in the cost of materials based on appropriate price indices.

Fuel and Transportation Charge

The fuel commodity and transportation charge is proposed to be an as billed chargefrom the fuel supplier and transporter.

Other Adjustments to Charges

The QFs may expect clarification during discussion and negotiation may lead torequirements for other adjustments to reflect issues such as change in tax law.

Calculaion of Power Demand

1. Actual Capacity Calculation.

2. Billing Capacity Calculations.

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Attachment 2: Regulations for SynchonIzn on of Genabto to the PU Sysku

General Provision

Capacity constraintsDocumentationCosts of interconnectionProtective devicesMonitoringDisconnectionDistribution Modifications

Criter

Ranges of power supplyVoltage levels

FlickerFrequencyPower factorHarmonics

- Voltage harmonies- Current harmonics

Isolation transformerDistribution to the systemDisconne-ting switchEnergy recording equipmentPatterns of system interconnectionProtective devicesCommunication channels

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Attachment 3: Back-Up Power

Qualifications for Users of Back-Up Pwer

This section would define availability of back-up power for consumers who mainlyuse t' . r own sources for power buy need back-up in situations of emergency shut-down or shut-down for maintenance. Specifically defmed would be the maximum annual load factor for qualifyingpower consumers and the maximum terms of back-up power contracts.

Rates of Bak-Up Power

This section would describe specific rates for back-up power. These would consist ofa demand charge when during periods that back-up power is not required, and an electricity chargein addition to the demand charge during periods that back-ap power is required.

-1

An=eX V: Calculation Model for Net.Back Values

3VC4EPlfNr NMIAO VALUES4S FUid pauOts (EXAMPi

Exehaip me (Up/USS)J7 Depudattee poadn Isa Awid CO2 euIsa (kgC02/ ) 039 (_bighed a,Wg On tOa (co is b_u MN esbab*y podAlsa)

10 Sysa (EXAML__11 qe apd i 112 O & M Pd,% f l( u/yr)13 O A (VaM bls USS/Wb) i7,14 BaJ ,_ _:5 Vaua:l

16 l1tua no 21u +DI617 Op.mmt bea/yr (h) Ied) slit D_ _ _

11 fut pafu (Rp/cW) 450 *DU19 I Piduet at amcdni (Rp/kWb) t3DI=0 Value of eMdW C02 oo .../t aI2) 20

21 Cakw'adoa21 ToWsAWual I adi (MWhr)23 TOMl sdad C02 eM (US/Jr)34 Tml saong a am C02 boom" (USShr) =25 *1 awwo_ (CU/yr) *E22AXf26 W@i fled , (,,,/yr) *m, 2? O & MC c1 dld (USS/yr)3 A.mL op.rn + O d M (US$yM ) * 6.P0 laauamcum Wan,. CO I aob (URNADUOIG/l 1D*I

31 Witou* C02 bomft

33 Wit C02 bes_

34 - a aII (pkh))(W1035 Toel aInu OSs co Sr) +M291WE36 ,_._s: *bsuls(USSkW

373 O0er dlu aulonhbabt39 t u _ I W- ga-1O3P Inwuaman setbafk sul (MMSkW M_____

4041 IOMAS MM MM-LUX VALU4243 F_e pammas (WLAMP__M E43pm (Rp/=) 4 D_pdgtm -U___47 Avw* C02 mo ft Ch2 b 4t) on47 (wad O am ai. (g f nRN .idb) [40 S)mm(ECAML_4 . bdw w .",W) .17so O &I FM s 9 tawo r) ___.___Si 0 h M N(Vmbi, USkW) 07052 LFdo"A3 Spoft ina n (US$/kW) -

-72 -

All C D £-4 VaSi _AIL

Ss Ian=" me 055a6 Opeda bau/yi (fl 'O ' 5657 3-usia em siMCian (Dp/kW) +057a6 Vai of awide C02 auioa CUSS/I C2)A9 cdaleahim*0 Tomianoumi peadlia (MAWbhlr) +Ew549a1 Ibummllapie COQIB NadUas Csh) 41W946fl0W9W100

a b)amom +BWl

a A8OhL caG + lbmd OhM (WSS/yt) *MCi 5 5~4)

O 0 a d COm _WdIoe CUShf)65 Tod annua mm. 'x. C02 bemel (US/yr) .5/WW

BWDi.. NWl eM d. C02 bmasfi (US/vt) 3SE.3

* WVtm CO2 beAds31 Siam= (ad Mee8ae vdul (31/01) *W41671 Wkb C02 bmmd=

7a m m pism 6mWt~oa (U/k

73 Todl go" mm (tWS/r) m wn_4 Dim= cm (S/) In4is Dion fl *b IN" (Iap/i) +.44 /167a olbe_,) aleahima M1ti1 (mdel _ntau ./

Joint UNDP/World BankENERGY SECTOR MANAGEM1NT ASSISTANCE PROGRAMME (SMAP)

LIST OF REPORTS ON COMPLETED ACTITE

Region/Country Activity/Repeit lXk Date Number

SUB-SAHARAN AFtICA (AFR)

Africa Regional Anglophone Africa Household Energy Workshop (English) 07/88 085/88Regional Power Seminar on Reducing Electric Power SystemLosses in Africa (English) 08/88 087/88

Institutional Evaluation of EGL (English) 02/89 098/89Biomass Mapping Regional Workshops (English - Out of Print) 05/89Francophone Household Energy Workshop (French) 08/89 103/89Interafrican Electrical Engineering College: Proposals for Short-and Long-Term Development (English) 03/93 112/90

Biomass Assessment and Mapping (English - Out of Print) 03/90 --Angola Energy Assessment (English and Portuguese) 05/89 4708-ANG

Power Rehabilitation and. Technical Assistance (English) 10/91 142/91Benin Energy Assessment (English and French) 06/85 5222-BENBotswana Energy Assessment (English) 09/84 4998-BT

Pump Electrification Prefeasibility Study (English) 01/86 047/86Review of Electricity Service Connection Policy (English) 07/87 071/87Tuli Block Farms Electrification Study (English) 07/87 072/87Household Energy Issues Study (Englisi - Out of Print) 02/88 --Urban Household Energy Strategy Study (English) 05/91 132/91

Burkina Faso Energy Assessment (English and French) 01/86 5730-BURTechnical Assistance Program (English) 03/86 052/86Urban Household Energy Strategy Study (English and French) 06/91 134/91

Burundi Energy Assessment (English) 06/82 3778-BUPetroleum Supply Management (English) 01/84 012/84Status Report (English and French) 02/84 011/84Presentation of Energy Projects for the Fourth Five-Year Plan(1983-1987) (English and French) 05/85 036/85

Improved Charcoal Cookstove Strategy (Eaglish and French) 09/85 042/85Peat Utilization Project (English) 11/85 046/85Energy Assessment (English and French) 01/92 9215-BU

Cape Verde Energy Assessment (English and Portuguese) 08/84 5073-CVHousehold Energy Strategy Study (English) 02/90 110/90

Central AfricanRepublic Energy Assessement (French) 08/92 9898-CAR

Chad Elements of Strategy for Urban Household EnergyThe Case of N'djamena (French) 12/93 160/94

Comoros Energy Assessment (English and French) 01/88 7104-COMCongo Energy Assessment (English) G1/88 6420-COB

Power Development Plan (English and French) 03/90 106/90Cote d'lvoire Energy Assessment (English and French) 04/85 5250-IVC

Improved Biomass Utilization (Englisi± and French) 04/87 069/87Power System Efficiency Study (Out of Print) 12/87 --

Power Sector Efficiency Study (French) 02/92 140/91Ethiopia Energy Assess.nent (English) 07/84 4741-ET

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M MLnCeOuWs* Acty/Repeft Ttle Date Number

Ethiopia Power System Efficiency Study (English) 10/85 045/85Agricultural Residue Briquetfing Pilot Project (English) 12/86 062/86Bagasse Study (English) 12/86 063/86Cooking Efficiency Project (English) 12/87 -

Gabon Energy Assessment (English) 07/88 6915-GAMme Gambia Energy Assessment (English) 11/83 4743-GM

Solar Water Heating Retrofit Project (English) 02/85 030/85Solar Photovoltaic Applications (English) 03/85 032/85Petroleum Supply Management Assistance (English) 04/85 035/85

Ghana Energy Assessment (Engsh) 11/86 6234-GHEnergy Rationalization in the Industrial Sector (English) 06/88 084/88Sawmill Residues Utilization Study (English) 11/88 074/87Induial Energy Efficiency (English) 11/92 148/92

Guinea Energy Assessment (Out of Print) 11/86 6137-GUIHousehold Energy Strategy (English and French) 01/94 163/94

Guinea-Bissau Energy Assessment (English and Portuguese) 08/84 5083-GUBRecommended Technical Asshtance Projects (English &Poruwese) 04/85 033/85

Management Options for the Electric Power and Water SupplySubsectrs (English) 02/90 100/90

Power and Water Instituional Restructuring (French) 04/91 118/91Kenya Energy Assessment (English) 05/82 3800-KE

Power System Efficiency Study (Engish) 03/84 014/84Status Report (En"ih) 05/84 016/84Coal Conversion Action Plan (Ens - Out of Print) 02/87 --Solar Water Heaing Study (English) 02/87 066/87Peri-Urban Woodfuel Development (English) 10/87 076/87Power Master Plan (English - Out of Print) 11/87 -

Lesotio Energy Assessment (English) 01/84 4676-LSOLiberia Energy Assessment (English) 12/84 5279-LBR

Recommended Technical Assistance Projects (English) 06/85 038/85Power System Efficiency Study (English) 12/87 081/87

Madagascar Energy Assessment tEnglish) 01/87 5700-MAGPower System Efficiency Study (English and French) 12/87 075/87

Malawi Energy Assessment (English) 08/82 3903-MALTechnical Assistance to Improve the Efficiency of FuelwoodUse in the Tobacco Industry (English) 11/83 009/83

Status Report (English) 01/84 013/84Mali Energy Assessment (English and French) 11/91 8423-MLI

Household Energy Strategy (English and French) 03/92 147/92Idamic Republicof Mauritania Energy Assessment (English and French) 04/85 5224-MAU

Howehold Energy Strategy Study (English and French) 07/90 123/90Mmuritius Energy Assessment (English) 12/81 3510-MAS

Status Report (English) 10/83 008/83Power Systm Efficiency Audit (English) 05/87 070/87Bagasse Power Poteni (English) 10/87 077/87

Mozambique Energy Assessment (English) 01/87 6128-MOZHousehold Electricity Utllation Study (English) 03/90 113/90

Namibia Energy Assessment (English) 03/93 11320-NAM

-3 -

Region/Couny Act/port TD Date Number

Niger Energy Assessment (French) 05184 4642-NIRStatus Report (English and French) 02/86 051/86Improved Stoves Project (English and French) 12/87 080/87Household Energy Conservation and Substtution (Englishand French) 01/88 082/88

Nigeria Energy Assessment (English) 08/83 4440-UNIEnergy Assessment (English) 07/93 11672-UNI

Rwanda Energy Assessment (English) 06/82 3779-RWEnergy Assessment (English and French) 07/91 8017-RWStatus Report (English and French) 05/84 017/84Improved Charcoal Cookstove Strategy (English and French) 08/86 059/86Improved Charcoal Production Techniques (English and French) 02/87 065/87Commercializaton of Improved Charcoal Stoves and CarbonizationTechniques Mid-Term Progress Report (English and French) 12/91 141/91

SADCC SADCC Regional Sector: Regional Capacity-Building Programfor Energy Surveys and Policy Analysis (English) 11/91 --

Sao Tomeand Principe Energy Assessment (English) 10/85 5803-STP

Senegal Energy Assessment (English) 07/83 4182-SEStatus Report (English and French) 10/84 025/84Industrial Energy Conservation Study (English) 05/85 037/85Preparatory Assistance for Donor Meeting (English and French) 04/86 056/86Urban Household Energy Strategy (English) 02/89 096/89Industrial Energy Conservation Program 05/94 165/94

Seychelles Energy Assessment (English) 01/84 4693-SEYElectric Power System Efficiency Study (English) 08/84 021/84

Sierra Leone Energy Assessment (Engish) 10/87 6597-SLSomalia Energy Assessment (English) 12/85 5796-SOSudan Management Assistance to the Ministry of Energy and Mming 05/83 003/83

Energy Assessment (English) 07/83 451 1-SUPower System Efficiency Study (English) 06/84 018/84Status Report (English) 11/84 026/84Wood Energy/Forestry Feasibility (English - Out of Print) 07/87 073/87

Swaziland Energy Assessment (English) 02(87 6262-SWTanzania Energy Assessment (English) 11/84 4969-TA

Pen-Urban Woodfuels Feasibility Study (English) 08/88 086/88Tobacco Curing Efficiency Study (English) 05/89 102/89Remote Sensing and Mapping of Woodlands (English) 06/90 --

Indusal Energy Efficiency Technical Assistance(English - Out of Print) 08/90 122/90

Togo Energy Assessment (English) 06/85 5221-TOWood Recovery in the Nangbeto Lake (English and French) 04/86 055/86Power Efficiency Improvement (Engish and French) 12/87 078/87

Uganda Energy Assessment (English) 07/83 4453-UGStatus Report (English) 08/84 020/84Institutional Review of the Energy Sector (Englih) 01/85 029/85Energy Efficiency in Tobacco Curing Industry (English) 02/86 049/86Fuelwood/Forestry Feasibility Study (English) 03/86 053/86Power System Efficiency Study (English) 12/88 092/88

-4-

Region/County AcIiviReportkTie Date Number

Uganda Energy Efficiency Improvement in the Brick andTile Industry (English) 02/89 097/89

Tobacco Curing Pilot Project (English - Out of Print) 03/89 UNDP TerminalReport

Zaire Energy Assessment (English) 05/86 5837-ZRZambia Energy Assessment (English) 01/83 4110-ZA

Status Report (English) 08/85 039/85Energy Sector Institutional Review (English) 11/86 060/86

Zambia Power Subsector Efficiency Study (English) 02/89 093/88Energy Strategy Study (English) 02/89 094/88Urban Household Energy Strategy Study (English) 08/90 121/90

Zimbabwe Energy Assessment (English) 06/82 3765-ZIMPower System Efficiency Study (English) 06/83 005/83Status Report (English) 08/84 019/84Power Sector Management Assistance Project (English) 04/85 034/85Petroleum Management Assistance (English) 12/89 109/89Power Sector Management Institution Building

(English - Out of Print) 09/89 --Charcoal Utilization Prefeasibility Study (English) 06/90 119/90Integrated Energy Strategy Evaluation (English) 01/92 8768-ZIM

EAST ASIA AND PACIFIC (EAP)

Asia Regional Pacific Household and Rural Energy Seminar (English) 11/90 --China County-Level Rural Energy Assessments (English) 05/89 101/89

Fuelwood Forestry Preinvestment Study (English) 12/89 105/89Strategic Options for Power Sector Reform in China (English) 07/93 156/93

Fiji Energy Assessment (English) 06/83 4462-FIJIndonesia Energy Assessment (Engish) 11/81 3543-IND

Status Report (English) 09/84 022/84Power Generation Efficiency Study (English) 02/86 050186Energy Efficiency in the Brick, Tile and

Lime Industries (English) 04/87 067/87Diesel Generating Plant Efficiency Study (English) 12/88 095/88Urban Household Energy Strategy Study (English) 02/90 107190Biomass Gasifier Preinvestment Study Vols. I & II (English) 12/90 124/90Prospects for Biomass Power Generation with Emphasis on

Palm Oil, Sugar, Rubberwood and Plywood Residues 11/94 167/94Lao PDR Urban Electricity Demand Assessment Study (English) 03/93 154/93Malaysia Sabah Power System Efficiency Study (English) 03/87 068/87

Gas Utilization Study (English) 09/91 9645-MAMyanmar Energy Assewment (Engish) 06/85 5416-BAPapua New

Guinea Energy Assessment (English) 06/82 3882-PNGStatus Report (English) 07/83 006/83Energy Strategy Paper (English - Out of Prin) -- --lnstitutionzw Review in the Energy Sector (English) 10/84 023/84Power Tariff Study (English) 10/84 024/84

-5-

Region/Country ActIvIy/Repoi f Yw1e Date Number

Philippines Commercial Potential for Power Production fromAgricutual Residues (English) 12/93 157193

Solomon.Jands Energy Assessment (English) 06/83 4404-SOLEnergy Assessment (English) 01/92 979/SOL

South Pacific Petroleum Transport in the South Pacific (English-Out of Print) 05/86 --Thailand Energy Assessment (English) 09/85 5793-TH

Rural Energy Issues and Options (English - Out of Print) 09/85 044/85Accelerated Dissemination of Improved Stoves andCharcoal Kilas (English - Out of Print) 09/87 079/87

Northeast Region Village Forestry and WoodfuelsPreinvestinent Study (English) 02/88 083/88

Impact of Lower Oil Prices (English) 08/88 --Coal Development and Utilization Study (English) 10/89

Tonga Energy Assessment (English) 06/85 5498-TONVamauu Energy Assessment (English) 06/85 5577-VAVietnam Rural and Household Energy-Issues and Options (English) 01/94 161/94Western Samoa Energy Assessment (English) 06/85 5497-WSO

SOUTH ASIA (SAS)

Bangladesh Energy Assessment (English) 10/82 3873-BDPriority Investment Program 05/83 002/83Status Report (English) 04/84 015/84Power System Efficiency Study (English) 02/85 031/85Small Scale Uses of Gas Prefeasibility Study (Englisb -(Out of Print) 12/88 --

India Opportunities for Commercialization of NonconventionalEnergy Systems (English) 11/88 091/88

Maharashtra Bagasse Energy Efficiency Project (English) 05/91 120/91Mimi-Hydro Development on Irrigation Dams andCanal Drops Vols. 1, n and m (English) 07/91 139/91

WindFarm Pre-Investment Study (English) 12/92 150/92Power Sector Reform Seminar 04/94 166/94

Nepal Energy Assessment (Er.glish) 08/83 4474-NEPStatus Report (English) 01/85 028/84Energy Efficiency & Fuel Substitution in Industries (English) 06/93 158/93

Pakistan Houtehold Energy Assessment (English - Out of Print) 05/88 --Assessment of Photovoltaic Programs, Applications, andMarkets (English) 10/89 103/89

Sri Lanka Energy Assessment (English) 05/82 3792-CEPower System Loss Reduction Study (English) 07/83 007/83Status Report (English) 01/84 010/84Industrial Energy Conservation Study (English) 03/86 054186

ElROPE AND CENTRAL ASIA (ECA)

Eastern Europe The Future of Natural Gas in Eastem Europe (English) 08/92 149/92Poland Energy Sector Restructuring Program Vols. I-V (English) 01/93 153/93

- 6-

Regdon/Ceunby ActM*y/Reportl lTe Date Number

Portugal Energy Assessment (English) 04/84 4824-POTurkey Energy Assessment (English) 03/83 3877-TU

MIDDLE EAST AND NORTH AFRICA (MNA)

Morocco Energy Assessment (English and French) 03/84 4157-MORStatus Report (English and French) 01/86 048/86

Syria Energy Assessment (English) 05/86 5822-SYRElectric Power Efficiency Study (English) 09/88 089/88Energy Efficiency Improvement in the Cement Sector (English) 04/89 099/89Energy Efficiency Improvement in the Fertilizer Sector(English) 06/90 115/90

Tunisia Fuel Substitution (English and French) 03/90 --Power Efficiency Study (English and French) 02/92 136/91Energy Management Strategy in the Residential andTerdary Sectors (English) 04/92 146/92

Yemen Energy Assessment (English) 12/84 4892-YAREnergy Investment Priorites (English - Out of Print) 02/87 6376-YARHousehold Energy Strategy Study Phase I (English) 03/91 126/91

LATIN AMERICA AND THE CARIBBEAM (LAC)

LAC Regional Regional Seminar on Electric Power System Loss Reductionin the Caribbean (English) 07/89 --

Bolivia Energy Assessment (English) 04/83 4213-BONational Energy Plan (English) 12/87 --National Energy Plan (Spanish) 08/91 131/91La Paz Private Power Technical Assistance (English) 11/90 111/90Natural Gas Distribution: Econmics and Regulation (English) 03/92 125/92Prefeasibility Evaluation Rural Electrification and DemandAssessment (English and Spanish) 04/91 129/91

Private Power Generation and Transmission (Engfish) 01/92 137/91Household Rural Energy Strategy (English and Spanish) 01/94 162/94Natural Gas Sector Policies and Issues (English and Spanish) 12/93 164/93

Chile Energy Sector Review (English - Out of Print) 08/88 7129-CHColombia Energy Strategy Paper (English) 12/86 --Costa Rica Energy Assessment (English and Spanish) 01/84 4655-CR

Recommended Technical Assistance Projects (English) 11/84 027/84Forest Residues Utilization Study (English and Spanish) 02/90 108/90

DomiicanRepublic Energy Assessment (English) 05/91 8234-DOEcuador Energy Assessment (Spanish) 12/85 5865- EC

Energy Strategy Phase I (Spanish) 07/88 --

Energy Strategy (English) 04/91 --

Private Minihydropower Development Study (English) 11/92 --

Energy Pricing Subsidies and Interfuel Substivution (English) 08/94 11798-ECEnergy Pricing, Poverty and Social Mitigation (English) 08/94 12831-EC

Guatemala Issues and Options in the Energy Sector EnWish) 09/93 12160-GUHaiti Energy Assessment (English and French) 06/82 3672-HA

Status Report (English and French) 08/85 041V85

-7-

Region/Cor, Ac y t Awe Number

Haiti Household Energy Strategy (English and Prench) 12/91 143/91Honduras Energy Ass=em (English) 08/87 6476-HO

Petroleum Supply Managemen (English) 03/91 128/91Jamaica Energy Assessment (English) 04/85 5466-JM

Petroleum Procurement, Refining, andDistribution Study (Engish) 11/86 061/86

Energy Efficiency Building Code Phase I (English-Out of Print) 03/88 --Energy Efficiency Standards andLabels Phase I (English - Out of Print) 03/88

Management Information System Phase I (English - Out of Print) 03/88 --

Charcoal Production Project (English) 09/88 090/88FIDCO Sawmill Residues Utilization Study (Englsh) 09/88 088/88Energy Sectr Strategy and Investment Plamning Study (English) 07/92 135192

Mexico Improved Charcoal Production Within Forest Management for 08/91 138/91the State of Veracruz (English and Spanish)

Panama Power System Efficiency Study (English - Out of Print) 06/83 004/83Paraguay Energy Assessment (English) 10/84 5145-PA

Recomlmded Technical Assistance Projects (English-(Out of Print) 09/85 -

Stats Report (E0glish and Spanish) 09/85 043/85Peru Energy, Aswssme E3ngish) 01/84 4677-PE

Status Report (Engli - Out of Print) 0918/5 *0/85Proposal for a Stove Dbsemination Program inthe Sierra (En and Spanish) 02/87 064187

Energy Strategy (English and Spanish) 12/90 -

Study of Energy Taxation and Liberalizationof the Hydrocarbons Sector (Enish and Spanish) 120/93 159/93

Saint Lucia Energy Assessment (English) 09/84 Slll-SLUSt. Vincent andthe GrenaCine Energy Asssme (English) 09/84 5103-STVTrinidad andTobago Energy Assessment (English - Out of Print) 12/85 5930-TR

GLOBAL

Energy End Use Efficiency: Research and Strategy(English - Out of Print) 11/89 -

Guidelines for Utility Cumer Management andMetering (English and Spanish) 07/91 -

Women and Energy-A Resource GuideThe International Network: Policies and Experience (English) 04/90 -

Asemen of Personal Computer Models for EnergyPlanning in Developing Counties (English) 10191 -

Long-Term Gas ContaD Principles and Applications (English) 02/93 152/93Compative Bebavior of Pirms Under Public and PrivateOwnership (English) 05/93 155/93

10/31/94

* =

ESMAPc/o Industry and Energy DepartmentThe World Bank1818 H Street, N. W.Washington, D. C. 20433U.S.A.