Korea’s Bio-energy Perspective : Potential Collaboration...

Copyright ⓒ 2012 Eco-Frontier Co. All rights reserved. 0

Biomass Asia Conference 2013, Malaysia, 21th May 2013

JP(Jae-Pil) Song / President of Southeast Asia Division

Korea’s Bio-energy Perspective : Potential Collaboration with Malaysia


Contents

Contents Introduction of Eco-Frontier

Korea’s Bio-energy Perspective

Collaboration Experience in Global Market

Potential Collaboration with Malaysia


Introduction to Eco-Frontier


Eco-Frontier Introduction

Carbon credits business • Volumes: Over 20Mt of carbon credits • Project types: Energy efficiency, coal mine methane, biomass power, hydro power, landfill gas, HFC

Sustainable finance business • Advisory for sustainable funds at US$1.5 billion • Clients: Korea Development Bank AM, Samsung AM, Shinhan BNP Paribas, Hana UBS, Woori Bank, Industrial Bank of Korea, etc.

Biomass power business • Malaysia: 23MW + 150t/hr steam • China: 30MW, 60MW(fuel switching) • Korea: 40MW(fuel switching) • UK: 300MW (biomass power plant) • Others: Europe, Brazil and USA Global Brain & Business Group

Korea, Malaysia, Indonesia, China, USA, UK

Sustainability consulting business • Industry: Construction, petrochemical, pulp & paper, electronics, finance, etc. • Utility: Electricity, district heating, transportation, housing, landfill, etc. • Governments: Korea, Indonesia, World Bank, ASEM, etc.


World Largest Biomass

Power Plant 300MW

USA (1) Eco-Frontier Global Capital Subsidiary for Green and Carbon Financing Asia Sustainability Research Alliance Joint venture for sustainable and responsible investment advisory service

Eco-Frontier has developed biomass power plants in Asia, and is developing the world largest biomass power plant(300MW) in the UK, which requires over 2Mt/yr of biomass pellets or wood chips.

Currently, Eco-Frontier is trying to develop biomass pellet business in Indonesia and Malaysia and is searching for more opportunities expending procurement capacity. The pellets can be supplied to Korean utility companies or the UK's biomass power plant project.

Global Carbon and Biomass Business

Global Carbon and Biomass Business of Eco-Frontier

Malaysia (1) Eco Biomass Energy Sdn Bhd Affiliate for POIC Biomass CHP

Indonesia (1) PT EcoPellet8

Biomass Pellet Development JV

Headquarter Seoul, Republic of Korea

China (1) Shandong Pingyuan Han Yuan Green Energy Biomass Power JV

UK (2) Biomass Power Plant Development stage Eco-Frontier Carbon Partners Subsidiary for Carbon Trading


Clients & Partners (1)

Manufacturing and Service

Industry

Utility Industry

Government and Public

Sector


Clients & Partners (2)

Bank, Insurance,

and Securities

Companies

Asset Management Companies

Other Partners

Samsung Life, Samsung Fire and Marine Insurance, Samsung Securities

http://www.nonghyup-ca.co.kr/eng/index.asp�

http://www.asria.org/�


Company’s Core Competitiveness

Sales Network Owner and developer of biomass power plants in Asia and Europe Close relationship with Korean Gencos through sustainability consulting

Know-how Successful development of biomass power projects Development and production experience of biomass pellet projects

Technology Equipped with commercially proven pelletizing technology Networking with state of the art technology providers

Expertise Successful financing to overseas projects Expertise of biomass market status, trends and players


Korea’s Bio-energy Perspective


Main Policy Related with Low Carbon & Green Growth

Ex-President of the Republic of Korea. Lee, Myung-Bak

“Reducing GHG emissions” to cope with climate change issue (1) Expand supply and use of renewable energy (2) Enhance energy efficiency in the existing industry, etc.

Low Carbon

“Developing new momentum for economic growth” through climate change reaction (1) Expand R&D investment (2) Strength export competitiveness for climate-friendly industry, etc.

Green Growth

“Establishing infrastructure” for promoting Low Carbon & Green Growth (1) Promote green finance (2) East Asia climate partnership, etc.

Infrastructure

Declared 8.15 Vision of “Low Carbon & Green Growth” in 2008


Target of reducing Greenhouse Gas (GHG)

2008.8 Low Carbon & Green Growth Vision declared

2009.1 17 new growth engine declared

2009.3 National strategy of green growth, five-year plan set by green growth committee

298

594

813

642 590 569

0

100

200

300

400

500

600

700

800

900

Emission (million tCO2e)

1990 2005 2020

Alt 1 Alt 2 Alt 3 BAU

2005 2020 2030 Annual average growth rate ’05〜’20 ’20〜’30

Total emission (million tCO2e) 594 (100%) 813 (137%) 888 (149%) 2.1% 0.9%

Emission per head (tCO2e/head) 12.3 16.4 18.2 - -

<Prospect of greenhouse gas emission and reduction goal>

2009.12 Low Carbon & Green Growth Law passed from the National assembly

Target of reducing GHG was set on 30% against BAU until 2020 ( in 2009.11) Highest band from the scope of 15~30% of BAU, recommended to developing countries by IPCC (Intergovernmental Panel on Climate Change )

2010.04 The Act put into effect


Management system of Energy & Greenhouse gas

Management system of Energy & Greenhouse gas came into force according to Low Carbon & Green growth Law (2010.4.14)

Ministry of Environment : general check/evaluation

Responsible (each ministry *)

Choice of target company

(every June)

Set target of emission (every September)

Target Company

Submission of Reducing target

implementation plan (every December)

Necessary actions including

enforcement notice

Reporting Performance (March, a year after next year)

Regulation criteria of energy consumption and GHG emission

2010 2012 2014~

Greenhouse gas base [GHG 1000t] (company) 125 87.5 50

Greenhouse gas base [GHG1000 ton] (facility) 25 20 15

Energy base [TJ] (company) 500 350 200

energy base [TJ] (facility) 100 90 80

*) Ministry of Environment Ministry of Land Transport and Maritime Affairs Ministry of Knowledge Economy Ministry of Food, Agriculture, Forestry and Fisheries


Korea’s NRE Policy – RPS (Renewable Portfolio Standard)

RPS background

2002 2012 2006 2008 2011

FIT Start 1st RPA Demo

RPS Legislation

RPS Implementation

2nd RPA Demo

2010 2009

Voluntary RPA 9 Power companies 2292MW Accomplishment

Voluntary RPA 2.7 billion USD subsidiary from Government 1331MW Accomplishment

13 Local Compliance Power Companies

2022


RPS (Renewable Portfolio Standard) was adopted in 2012 RPS obligates major electric power companies having its generation capacity more than 500MW. Obligation ratio of electronic supply shall be increased every year up to 10% by 2012.

Obligatory electronic supply of renewable energy

= Total electricity supply of electronic business X Obligatory rate

2% 2.5% 3% 3.5%

4% 5%

6% 7%

8% 9%

10%

'12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22

Obligatory Rate

NRE Generation (BAU)

Korea’s NRE Policy – RPS (Renewable Portfolio Standard)

More than 5% difference


Korean Major Coal Firing Power Companies

Korea Hydro and Nuclear Power Korea South-East Power Korea Midland Power

Korea Western Power Korea Southern Power Korea East-West Power

13 power companies have to comply with RPS ( more than 500MW) Governmental (6), Public Corp (2; K-Water, KHDC) IPP (5; SK E&S, GS EPS, GS Power, Posco Power, MPC)


New/Renewable Energy Power Generation Mix Total Power Generation Mix

Korea Power Generation (500 Million MWh/annum)

Renewable energy portion was 3.1% of total power generation volume. Biomass Pellet was only 0.22% consumed for power.

Waste 59%

Hydro 26%

Solar 5%

Wind 5%

Biomass-gas 3%

Feul Cell 2%

Ocean 0.3%

Biomass-pellet 0.22%

Coal 40.3%

Newclear 31.1%

LNG 20.5%

Bunker 5.0%

New Renewable 3.1%


Korea’s Bio-Energy Policy – RFS (under evaluation)

RFS (Renewable Fuel Standard) policy is under discussion . To promote renewable energy mix for transportation sector, renewable fuel shall be blended into transportation fuel in increasing amounts each year. The policy is under public hearing and planned to be implemented in 2014

2014 2015 2016 2017 2018 2019 2020 2021 (Target)

BD 3.0 BD3.5 BD4 BD4.5 BD5 BD7 BD 3.0 BD 3.0

E3 E3 E4 E5 E7 Bio Ethanol Pilot Project

Scenario

1

BD 2.5 BD3 BD3 BD3.5 BD4 BD5 BD 2.5 BD 2.5

E3 E3 E3 E4 E5 Bio Ethanol Pilot Project

Scenario

2

Phase in BE policy Phase in BD policy

Before 2012, 2% autonomous regulating by tax exemption

RFS is not ready for

implementation


REC Incentive for Renewable Energy in Korea

REC weight value

Type

0.25 IGCC

0.5 Waste, LFG

1.0 Biomass, Hydro, Wind(Inland), RDF Whole firing, Waste Gasification, Tidal(Seawall)

1.5 Woody Biomass Whole-firing, Offshore Wind(within 5km)

2.5 Offshore Wind(over 5km, Tidal(Non-Seawall), Fuel Cell

Non-Solar REC Price (Incentive for 1MWh)

Volume (REC) Price (USD/REC)

REC weight value

0

20

40

60

80

100

120

0

5000

10000

15000

20000

25000

30000

35000

Volume Price-USD

One(1) MWh is equivalent to one(1) REC. In order to motivate compliance, Gov have penalties for the power companies that fail to reach the specified targets. Recently RECs price has upward trend because of increased demand in Korea.


Non-Solar Vs Solar

REC Incentive for Solar Power in Korea

Year ‘12 ‘13 ‘14 ‘15 ’16~ Target (GWh) 276 723 1,156 1,577 1,577

Solar REC Price

0 20 40 60 80

100 120 140 160 180

200

2011.9 2012.4

2012.9 2013.4

Price (USD/REC)

The price of Solar RECs is higher than RECs, but currently has downward trend because of over supply.

And SRECs can be sold a variety of easy ways, such as on the spot market, at auction, or by negotiating long-term contracts.

Solar (Over

Supply)

• Absolute target • Low hurdle : Private, Small & Big company • Short Term construction period • Easy for financing

Non-Solar (Increased Demand)

• Relative ratio target • Relatively Big Scale • License/Permit issue • Long Term construction period • Difficulty in financing


RPS Penalty for failed compliance

Target Accomplish Submit(2012)

Directly Construct

Sourcing from Outside

National REC

Solar 276,000 264,180 (95.7%)

63,502 (23.0%)

195,253 (70.7%)

5,425 (2.0%)

Non-Solar 6,144,279 3,890,047 (63.3%)

1,663,178 (27.1%)

332,426 (5.4%)

1,894,443 (30.8%)

Total 6,420,279 4,154,227 (64.7%)

1,726,680 (26.9%)

527,679 (8.2%)

1,899,868 (29.6%)

Penalty : Shortfall volume X Average REC Price X 1.5 = 24M USD just for 5 companies

13 companies has achieved about 65% of RPS target in 2012 and received huge penalties.

They are eager to find more REC sources from outside of Korea for the next compliance.

Shortfall Penalty

RPS Target Volume

What is easy & quick implementation of

possible bio-energy to achieve RPS

9.4

5.3

4

3.9 0.7 1

2

3

4

5 Unit : million USD


Renewable Energy Power Cost – Shot Term(’12~’14)

Biomass (Co-firing)

0.04

Biomass (Whole)

0.14

RDF

0.15

Fuel Cell

0.24

Shot-Term Power Cost Unit : USD/kWh

Wind (Inland)

0.12

+

The Cheapest and the fastest way to achieve renewable energy generation by power company will be to arrange co-firing of Biomass Pellet.

The pellet can be co-fired with coal in boilers.


Renewable Energy Power Cost – Long Term(’15~’22)

Biomass (Co-firing)

0.05

IGCC

0.14

Biomass

0.14

Offshore Wind (Grid)

0.15

Long-Term Power Cost Unit: USD/kWh

Wind (Inland)

0.11

RDF

0.15

Tidal (Non-

Seawall)

0.15

Offshore Wind

(Non-Grid)

0.17

Fuel Cell

0.24

Tidal (Seawall)

0.46

In the view of Long term period, co-firing with biomass pellet is solution to have most efficient way of RPS compliance.

+


Current Coal Co-firing & Biomass Plant in Korea

Tae-An Coal Power Plant 1,2,7,8 Unit : Wood Pellet Co-firing 3%(150,000 ton/yr )Co-firing Bid

Dong-Hae Biomass Power Plant Capacity 30MW , Wood Chip/Pellet Whole firing Under Construction

Ha-Dong Coal Power Plant Unit1~4 : Wood Pellet Co-firing 3% (180,000 ton/yr) Co-firing Bid

Recently, Major Power companies has equipped and arranged wood pellet co-firing equipment. These are plan for co-firing at the current plant and for new biomass power plant construction.

Samchunpo Coal Power Plant Unit3,4 : Sludge Co-firing Operation

Yeo-Su Coal Power Plant Wood Pellet Co-firing (F/S) 10%(150,000 ton/Yr ) Co-firing

Dong-Hae Coal Power Plant Wood Pellet Co-Firing (Test) 10%(150,000 ton/yr) Co-firing Plan

Ceremony for Co-firing equipment completion

Dangjin Biomass Power Plant Capacity : 100MW, PKS& Wood Pellet Under Construction

Ground Break Ceremony for Biomass Power Plant


Potential Pellet needs in Coal Power Plant

A. Boryeong Coal Power Plant Capacity : 5,800MW 5% : 1,631,000 ton/yr

B. Ha-Dong Coal Power Plant Total Capacity : 4,000MW 5% : 1,125,000 ton/yr

Pellet demand can be estimated by each scenario target ratio as follows. Considering NCV from Coal and wood pellet, obligation of 5% to five(5) major coal firing power companies will have a demand for 4.7Mt of biomass pellet per year.

C. Samchunpo Coal Power Plant Capacity : 3,240 MW 5% : 621,000 ton/yr

D. Dangjin Coal Power Plant Total Capacity : 3,000MW 5% : 843,750 ton/Yr

Unit : ,000(ton)

Power Plant

Capacity (MW)

Pellet Needs

RPS 1% RPS 3% RPS 5%

A 5,800 326,250 978,750 1,631,250 B 4,000 225,000 675,000 1,125,000 C 3,240 124,200 372,600 621,000 D 3,000 168,750 506,250 843,750

Others(Sum) 1,967 95,700 287,101 478,501 Total 18,007 939,900 2,819,701 4,699,501

0 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

RPS 1% RPS 3% RPS 5%

Pellet Demand

Others

D

C

B

A


Korean Power Company Pellet Demand in 2020

500 million MWh

Coal 40%

5%

3% 1%

940 1%

Annual Electricity Production

RPS

Coal Power

Biomass Pellet For RPS

(Unit : ,000 ton/yr)

Pellet demand in 2020

4.7M ton/yr 2,820

4,700

200 million MWh


Current Korean Pellet Market

Last year, industrial purpose wood pellet price was about USD 150/t CIF Korea.

The price level will have upward trend slowly as insufficient market supply compare to increased demand for the power companies who have a plan for co-firing this year.

Required volumes is estimated to be about 700,000 Mt this year.

Volume (ton) Price (USD/ton, CIF)

125

130

135

140

145

150

155

160

165

170

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1 2 3 4 5 6 7 8 9 10 11 12

Volume(ton) Price (usd/ton, CIF)

2012 Average CIF Price : USD149/ton

Industrial Pellet Price & Volume (Import CIF Korea in 2012)


Korea’s Collaboration Experiences in Global Market


Biomass Power : China

Project Outline

Type: Biomass Power Generation

(Fuel: Cotton trunk, fast growing tree, mulberry trunk)

Site: Shandong, China

Total Investment: 50M USD

Size: Power 30MW

CER: 150,000 tons/yr x 10 years

ECF’s Share (Co-Developer): 13.5% (paid-in capital: 2.5M USD)

Supported by Minister of Environment in Korea


Biomass Power : China

Development and Construction Partners

Operation Partners

Pre-Feasibility Study

Shandong Energy and Building Design Institute

Shandong Pingyuan Han Yuan Green Energy Co., Ltd.

(Project SPC)

Shareholders (33.4%)

GS EPS (31.5%)

Eco-Frontier (13.5%)

Pre-Feasibility Study Review

Jipyong&Jisung, Pöyry

Pre-Construction Consulting

Mott MacDonald

Construction PM

Mott MacDonald

EPC contractor

SEPCO 1

Shenzhen Han Yuan (55%)

Project Finance (66.6%)

Plant Operation

Project SPC

Fuel Supply

Fuel Supply SPC (JV of Project SPC &

Local Agri. Federation)

Power Purchase

Shandong Power Corp.

CER Purchase

Eco-Frontier Carbon Partners in UK

Advisor, Arranger, Agent, and Lender

Korea Development Bank

Feasibility Study

Korea Ratings, Lee&Ko, AON

ECA

Korea Trade Insurance Corp.

CDM Coordinator

Eco-Frontier

CDM Consultant

COWI


Biomass Power : UK Biomass

Type

Location

Project Period

Total Investment

Biomass power

UK

Construction: 36 months Operation: 20+ years (years of ROC issuance)

GBP 500M+

2008.04 SPC established

2008.08 Land Agreement signed

2009.02 Grid Connection Agreement signed

2009.07 S36 Consent (approval for construction and operation)

2009.12 EPR Permit (approval for ops and pollution control)

2010.01 RO Preliminary Accreditation acquired

2010.01 FEPA Permit acquired (approval for BERTH construction)

2010.12 Generation License acquired

2011.07 Planning Permission (approval for power line installation) Project Development Agreement

between UK Developer & Eco-Frontier


Biomass Power : UK Biomass

Project Participant

MGT TEESIDE

LTD

SPC

PPA Bid

vs.

FIT Counterparty

Offtaker

America Etc.

Biomass

Japan Korea

Logistics

• Korea Power Company • Biomass Provider • FI & CI

Investor

• Korea & International Bank

Bank

Power Company(Korea)

O&M

Global EPC

EPC

Co-Developer

MGT Power Eco-Frontier MGT Power Eco-Frontier


Global Collaboration in Renewable Energy

Solar Power Wind Power

Site North America

Type 40MW Solar Power

Korea’s Role

O&M EPC Finance

Site North America (Columbia)

Type 200MW Wind Power

Korea’s Role

PM, O&M, Financing EPC

Site Portugal

Type Solar Power

Korea’s Role

Finance (34M$) from Global Infra Fund : Public+ Private Fund (Total 360 M$)

Site Korea

Type 5GW Offshore wind Power

Korea’s Role Co-Investment (50:50)

Foreign Role

Co-Investment (50:50) Technical Partner


Korea’s Potential Collaboration Opportunity with Malaysia


Development of Biomass Pellet as a Bio-Energy in Malaysia

Resources of Biomass Pellet

Wood Pellet from Short Rotation Coppice Plantation

Wood Pellet from Logging industry chain

EFB Pellet & PKS from Oil Palm Plantation


Value Chain of Biomass Pellet Collaboration

JV for Biomass Pellet

O&M Marketing

Pellets from Planted Forest

(e.g. PFPP)

Pellets from SRC Plantation

(e.g. new forestation)

Pellets from Palm Residue

(e.g. oil palm frond)

Pellets from Timber Industries

Service companies

(logistics, storage,

maintenance, etc.)

Global Sales

Long & Short-term Off-Take Contract

Biomass power plants


Project Development Process

Process Financing

Construction Operation

Establishing SPC

Project Development

Agreement

Project Screening

Collaboration and Co-Investment Scope for Biomass Pellet Project

Raw Material Land for Factory

Operation License/Permit

Co-Investment

Co-Marketing

1

2

3 Korea

Structuring of Project Whole Project Development

Co-Investment, Financing Co-Marketing and Off-taking

Further Development and Expanding Project

1 2 3

Malaysia

http://www.google.co.kr/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=QIDazZjodxl0vM&tbnid=SUcnFz7axEGVyM:&ved=0CAUQjRw&url=http://unibranding.tistory.com/24&ei=46ORUY3yCbGUiAeF0oDACA&bvm=bv.46471029,d.aGc&psig=AFQjCNEVR06vgmLjUY2CdKEx19-qA68kJQ&ust=1368585531579769�


Eco-Frontier effort to develop biomass pellet with Malaysia

1 2

5

4 3

6

7

FS cooperation with Local Companies

Eco-Frontier is under feasibility study to confirm the biomass pellet business opportunity with Malaysia.

Tanjung Manis Port Tanjung Manis Resources Pellet Mill @Sibu Logistics @Sibu

Ply wood mill @Sibu Samalaju Port Site CPO Mill of SOP Oil Plam Plantation of SOP

Meeting with Local partner

Plywood mill Meeting with Local


Potential Collaboration between Malaysia and Korea

Korea

Malaysia

Experience in Global Bio-Energy Project

Financial Capability & Investment to Malaysia

Bio-Energy Market Demand

Huge Potential of Biomass Resources

Co-Project Development

Bio-Energy Supply to Korea


Thank You for Your Kind Attention!!!

Dedicated to making a difference today for a better tomorrow, we contribute to the world’s sustainable development, help healthy growth of businesses, and improve people’s quality of life.

Copyright ⓒ 2012 Eco-Frontier. All Rights Reserved.

JP(Jae-Pil) Song, President of Branch Office Indonesia 6F DMC Hi-Tech Industry Center #1580, Sangam-dong, Mapo-gu, Seoul, Korea (121-835) Menara Hijau Bldg. Fl. 12 (SR 1204) JL. MT. Haryono Kav. 33 Jakarta 12770 E: [email protected] H: www.ecofrontier.com

Korea’s Bio-energy Perspective : Potential Collaboration...

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