ppd

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1 CDM Executive Board

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CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM- PDD)

Version 03.1 - in effect as of: 28 July 2006

CONTENTS A. General description of project activity B. Application of a baseline and monitoring methodology C. Duration of the project activity / crediting period D. Environmental impacts E. Stakeholders comments

Annexes Annex 1: Contact information on participants in the project activity Annex 2: Information regarding public funding Annex 3: Baseline information

Annex 4: Monitoring plan Annex 5: Copy of Newspaper advertisement for Local stakeholders meeting Annex 6: Photographs of local stakeholders meeting Appendix 1 : Ex-ante CER estimates and Investment analysis


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SECTION A. General description of project activity A. 1. Title of the project activity:

25 MW biomass based power plant in Lahad Datu in Sabah, Malaysia Version : 01 Date : 10/01/2009 A. 2. Description of the project activity: (1) Purpose of project activity The main purpose of the project activity is to establish a greenfield power plant using Empty Fruit Bunches (EFB), an abundantly available palm oil mill biomass residue, as fuel and supply the net electricity after inhouse consumption to the state electric grid for sale displacing fossil fuel dominated grid electricity .

(a) Scenario existing prior to the start of the project activity The project activity is a Greenfield power plant from renewable biomass. The palm oil mills process Fresh Fruit Bunch (FFB) from palm plantations to produce Crude Palm Oil (CPO) as the main product. In the process, a number of solid and liquid residues are produced as follows: Solid biomass residues : Mesocarp fibre, Palm Kernel Shells and Empty Fruit Bunches (EFB). Liquid waste : Waste water generally known as Palm Oil Mill Effluent (POME).

S. D. Resources Sdn. Bhd. (Project Proponent) proposes to establish a greenfield 25 MW power plant in Lahad Datu utilising EFB as fuel . The project proponent would also be establishing a new 120 ton / hour palm oil mill in the same premises. Therefore most of the EFB required for the project activity would be sourced from its own mill and the balance would be sourced from other palm oil mills. The proposed palm oil mill is also a Greenfield project to be implemented in two phases.

Project Scenario

The project activity is installation of a new 25 MW power plant implemented in two phases as shown in the table A-1:

Table A-1- Details of phases of the project activity Phases Components of the project activity Expected commissioning date I phase - Fuel preparatory system

- One 75 ton / hour boiler - One 25 MW fully condensing

turbine

01 January 2010

II phase One 75 ton / hour boiler 01 July, 2010 EFB is the biomass residue from the palm oil mill which is generally disposed in palm plantations and allowed to decay in aerobic conditions. Other biomass residues of the palm oil mill such as mesocarp


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fibre and palm kernel shells are good sources of energy and are generally used for energy generation purposes. EFB is produced at a rate 21- 23 % of FFB processed in the mill and disposed in the palm plantations and subjected to aerobic decay. Therefore, EFB is abundantly available in Malaysia. But EFB had been a difficult biomass to handle due to its high moisture content and bulky nature. The project proponent proposes to utilise only the difficult EFB as fuel source. EFB would be combusted in a furnace and the heat would be used in a boiler to produce high pressure steam. The steam is passed on to the turbine to produce electricity. The net electricity after the parasitic load of the power plant would be exported to the Sabah grid of Sabah Electricity Supply Berhad (SESB), the state electric utility in Sabah state of Malaysia. Pre project scenario: This is a Greenfield biomass based power project.

(b) Baseline scenario

The baseline scenario is that the power generated by the project activity would in the absence of the project activity be generated by the power plants in the grid and biomass residues would in the absence of the project activity be left to decay.

Reduction of greenhouse gases by the project activity

The project activity would supply the electricity to the East Coast grid of Sabah Electricity Supply Berhad (SESB). The installed power capacity of Sabah grid as of 31 December 2006 is given in Table A-2

Table A-2- Installed power capacity mix of Sabah grid

Power source Available capacity 1 % share

Gas based generation 226 MW 34.82 %

Oil based generation 372 MW 57.32 %

Hydro electric generation 51 MW 7.86 %

Total 649 MW 100.00 %

From the above table, it may be noticed that about 92.14% of the available capacity of the Sabah grid is thermal generation with fossil fuel based sources and only 7.86 % of available capacity is from hydropower. That is, the Sabah grid is powered predominantly by fossil fuels based generation. Hence, the electricity supplied by the project activity would displace equivalent amount of electricity supplied predominantly by fossil fuel based sources and associated CO2 emissions. View of project participants on the contribution of project activity to sustainable development Environmental sustainability

The project activity generates electricity from solid biomass wastes a renewable source of energy. The project activity will lead to reduced disposal of waste products from the palm oil mills and increase the utilisation of the energy content in wastes. The energy generation from a renewable source of energy contributes for environmental sustainability.

1 Source : National Energy Balance 2006, Ministry of Energy, Water and Communications, Malaysia


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Additionally, the project activity would prevent the methane emissions due to aerobic decay of EFB in the palm plantations and produces electricity without much greenhouse gas (GHG) emissions. Thus, the following environmental benefits are derived from the project activity:

Produces electricity from a renewable energy source. Prevents methane emissions due to decay of EFB in the palm plantations. Produces electricity without or very less GHG emissions. Has very little negative impact on the environment.

The project activity would install necessary pollution control equipment to minimise the emissions of particulates and other pollutants. Social sustainability The project activity would contribute for the following social benefits: Contributes to meet Malaysia s Ninth Plan target of 350 MW generation from renewable energy New employment oppurtunities for the local population improving the social living standards of

the local community Improve the technical skills of staff in the operations and maintenance of an efficient electricity

generation plant New jobs for skilled manpower during operation of the project activity Increase in local business like transportation, maintenance, parts supply, food and other services

which would improve the social living standards of the local community

Economical sustainability Decreasing the countrys dependence on imported and fast depleting fossil fuels for generation of

electricity Improvement in local economic activity During operation of the project, direct and indirect employment opportunities would be available

for the local community leading to economical benefits. Savings in precious foreign exchange due to reduction in import of fuels.

Technological sustainability

The project activity would establish a 69 bar pressure boiler probably for the first time in palm oil biomass power plant in Malaysia and therefore would employ a technically better system than that of generally used in Malaysia.

The project activity would contribute for the countrys policy to promote the use of renewable energy.

All the above would contribute for the sustainable development. A.3. Project participants:

Name of Party involved (*) ((host) indicates a host Party)

Private and/or public entity(ies) project participants (*) (as applicable)

Kindly indicate if the Party involved wishes to be considered as project

participant (Yes/No)

Malaysia (Host) S.D. Resources Sdn.Bhd. (Private entity)

No


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United Kingdom Natsource Europe Ltd No

(*) In accordance with the CDM modalities and procedures, at the time of making the CDM-PDD public at the stage of validation, a Party involved may or may not have provided its approval. At the time of requesting registration, the approval by the Party (ies) involved is required.

A.4. Technical description of the project activity: A.4.1. Location of the project activity: A.4.1.1. Host Party(ies):

Malaysia

A.4.1.2. Region/State/Province etc.:

Sabah state

A.4.1.3. City/Town/Community etc: Lahad Datu

A.4.1.4. Detail of physical location, including information allowing the unique identification of this project activity (maximum one page):

The project activity would be located in the Kwantas complex in Lahad Datu town in Tawau division in Sabah state in East Malaysia on the Borneo island. Lahad Datu is in eastern part of Sabah state. Lahad Datu has an airport for domestic flights with connections to state capital Kota Kinabalu and other parts of the country. The physical co ordinates of the location of the project activity are in 5 01 21 N latitude and 118 2142 E longitude The location of the project activity is given in the following figures.

Figure A-1 : Map showing location of Sabah state in Malaysia map

Sabah state


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Lahad Datu Location of the project activity

Figure A-2 : Map showing location of Lahad Datu in Sabah state

A.4.2. Category(ies) of project activity: The project activity is categorised as follows: Scope number : 1 Sectoral Scope : Energy industries (renewable - / non-renewable sources)

A.4.3. Technology to be employed by the project activity: The project activity is the installation of new Greenfield 25 MW EFB based power plant. The fuel for the new power plant would be EFB from the palm oil mills. EFB due to its high moisture content and bulky nature has to undergo some preparation to obtain better combustion properties before being used as fuel in boilers. EFB is at first fed to a roller crusher where it is crushed and the moisture content of EFB is reduced from 63 67 % (considered 65 % for calculation purposes) to about 43 47 % (considered 45 % for calculation purposes). Then EFB is taken through a conveyor to a height of 23 metres from ground level to feed buffer silos that in turn feed EFB into the boiler furnace. Two boilers of 75 ton / hour one would be established in the first phase and one would be implemented in the second phase of the project activity- operating at 69 bar pressure would utilise the heat to produce high pressure steam. The steam is passed on to a 25 MW fully condensing steam turbine to produce electricity. The net electricity after auxiliary consumption and electricity for the proposed palm oil would be exported to the grid.


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(a) Details of main manufacturing equipment Specification of Boiler Capacity : 75 ton / hour Working pressure : 69 bar Type : Water tube Temperature : 485 C super heated steam Efficiency : 86% Type of grate : Inclined vibrating grate combined with moving grate Quantity of boiler : 2 Make : Jinan, China Boiler would be complete with following accessories:

Boiler drums, tubes and headers One draft air fan, one Induced draft fan, one secondary air fan Roots blower Boiler feed water regulator Deaerator, feed water pumps, distribution header Drainage pump. Drainage flush tank Furnace dosing device Super heater Economiser Air pre heater Bag filter Boiler control system Boiler water sampling cooler Interconnecting piping 50 metres high stack

Specification of Turbine Capacity : 25 MW Turbine Type : Fully Condensing, horizontal, impulse,

Multistage, axial flow and geared Working pressure : 69 bar Voltage of generation : 11 kV Quantity : 1 (b) Type and levels of services The project activity would be implemented in two phases. One boiler and the 25 MW turbine would be established in the first phase of the project activity and the second boiler would be implemented in second phase of the project activity. Although 25 MW turbine would be installed in the first phase of the project activity, the actual capacity of generation would be 12.5 MW only, as only one boiler would be installed in the first phase of the project activity. The second boiler would be installed in the second phase of the project activity.


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Expected generation of electricity by the project activity The expected quantity of net electricity generated by the project activity in both the phases is given in Table A-3.

Table A-3 Expected generation of the project activity

Description I phase ( first 6 months of operation)

II phase

Installed capacity 12.5 MW 25 MW

Plant utilisation factor 75% 85%

Gross generation 41,063 MWh during first 6 months 186,150 MWh/ year

Auxiliary consumption and electricity supplied to the mill

6,345 MWh during first 6 months 27,132 MWh/ year

Net electricity supplied to the grid 34, 7187 MWh during first 6 months 159,018 MWh/ year

(c) Greenhouse gases involved in the project activity Baseline emissions The project activity prevents the quantity of EFB utilized in the project from decay (mainly aerobic decay) and supplies electricity to the grid. Therefore the project activity would claim credits for emission reductions to avoidance of aerobic decay of biomass and due to the electricity displaced by the project activity. Therefore project activity would reduce CO2 emissions and methane emissions. Project emissions The emissions due to the project activity would be mainly

CO2 emissions due to consumption of diesel during start up of the boilers CO2 emissions due to consumption of diesel for transportation of EFB to the project activity CO2 emissions due to consumption of electricity for fuel preparatory system and CH4 emissions due to combustion of biomass in the project activity.

A.4.4. Estimated amount of emission reductions over the chosen crediting period:

Table A- 4: The total GHG emission reductions in t CO2e over the crediting period

Years Annual estimation of emission reductions in tonnes of CO2e

Year 1 83,780 Year 2 128,297 Year 3 128,297


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Year 4 128,297 Year 5 128,297 Year 6 128,297 Year 7 128,297 Year 8 128,297 Year 9 128,297

Year 10 128,297 Total estimated reductions (tonnes of CO2e) 1,238,454

Total number of crediting years 10

Annual average over the crediting period of estimated reductions (tonnes of CO2e) 123,845

A.4.5. Public funding of the project activity: The project activity does not have any public funding from the Annex I Parties. The project activity is financed by internal resources and loan from commercial banks in Malaysia. SECTION B. Application of a baseline methodology B.1. Title and reference of the approved baseline methodology applied to the project activity: The project activity applies the following approved baseline methodology: Title : Version 06.2 of ACM0006 - Consolidated methodology for grid-connected electricity generation from biomass residues The methodology also refers to the following tools for specific parts of the calculations:

Version 02.2 of Combined tool to identify the baseline scenario and demonstrate Additionality Version 04 of Tool to determine methane emissions avoided from disposal of waste at a solid

waste disposal site Version 01 of Tool to calculate baseline, project and /or leakage emissions from electricity

consumption Version 02 of Tool to calculate project or leakage CO2 emissions from fossil fuel combustion

B.2. Justification of the choice of the methodology and why it is applicable to the project activity This consolidated methodology covers a number of different project types for power generation with biomass residues. The consolidated methodology ACM 0006 (version 06.2) has a number of applicability criteria discussed in the table B.1 below.


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Table B-1 Justification of methodology

Applicability criterion Project compliance with the criterion The methodology is applicable to biomass residue fired electricity generation project activities, including cogeneration plants

The project activity is a biomass residue fired electricity generation project activity.

The project activity may include the following activities or combinations of these activities : The installation of a new biomass residue fired

power plant at a site where currently no power generation occurs (greenfield projects); or

The installation of a new biomass residue fired power plant, which replaces or is operated next to existing power plants fired with either fossil fuels or the same type of biomass residues as in the project plant (power capacity expansion projects); or

The improvement of energy efficiency of an existing power plant (energy efficiency improvement projects), e.g. by retrofitting the existing plant or by installing a more efficient plant that replaces the existing plant; or

The replacement of fossil fuels by biomass residues in an existing power plant ( fuel switch projects)

The project activity is installation of a new biomass residue fired power plant at a site where no power generation occurs (greenfield project) ;

No other biomass types than biomass residues as defined (Biomass residues are defined as biomass that is a by-product, residue or waste stream from agriculture, forestry and related industries. This shall not include municipal waste or other wastes that contain fossilized and/or non-biodegradable material - small fractions of inert inorganic material like soil or sands may be included) are used in the project plant and these biomass residues are the predominant fuel used in the project plant (some fossil fuels may be co- fired)

The biomass residues used as fuel in the project activity are Empty Fruit Bunch (EFB) from palm oil mills. These residues contain no fossilized waste or municipal solid waste. EFB, the biomass residues are the predominant fuel used in the project activity. Other types of residues, other than that covered by the definition of biomass residues would not be used in the project activity.

For projects that use biomass residues from a production process (e.g. production of sugar or wood panel boards), the implementation of the project shall not result in an increase of the processing capacity of raw input (e.g. sugar, rice, logs, etc) or in other substantial changes (e.g. product range) in this process;

The utilisation of the biomass residues does not affect the production process of the palm oil mills as the production of crude palm oil is guided by the harvesting and demand in the market. The project activity will not result in any change in the processing capacity or product.

The biomass residues used by the project facility should not be stored for more than one year;

The biomass residues used by the project facility are not stored for more than a year

No significant energy quantities, except from transportation or mechanical treatment of the biomass residues, are required to prepare the

There is only simple mechanical treatment of the biomass residues before they are used as fuel. Therefore, energy quantities required are not


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Applicability criterion Project compliance with the criterion biomass residues for fuel combustion, i.e. projects that process the biomass residues prior to combustion (e.g. esterification of waste oils)

significant.

In addition to the above, approved consolidated methodology ACM0006 - version 06.2 also specifies that the project activity should comply with baseline scenario in Table 2 of the methodology. As per table 2 of the methodology, the project activity fully complies with the scenario 2 as given below in Table B -2:

Table B-2 Justification of scenario

Scenario 2 of Table 2 Project activity compliance The project activity involves the installation of a new biomass residue fired power plant at a site where no power was generated prior to the implementation of the project activity. The power generated by the project plant is fed into the grid or would in the absence of the project activity be purchased form the grid. The biomass residues in the absence of the project activity be dumped or left to decay or burnt in an uncontrolled manner without utilizing it for energy purposes. In case of cogeneration plants, the heat would in the absence of the project activity be generated in boilers fired with fossil fuels, or by other means not involving the biomass residues. This may apply, for example, where prior to the project implementation heat has been generated in boilers using fossil fuels.

The project activity involves installation of a new biomass residue fired power plant at a site where no power was generated prior to the implementation of the project activity.

The power generated by the project plant is fed into the grid.

The biomass residues would, in the absence of the project activity, is left to decay.

The project activity is not a cogeneration plant and therefore rest of the criteria is not applicable.

Since all the applicability conditions of the methodology and the baseline scenario are fully met, this methodology is applicable for the project activity. B.3. Description of how the sources and gases included in the project boundary

Table B.3: Sources and gases included in the project boundary

Source

Gas

Justification / Explanation

CO2 Included Main emission source and calculated as per version 06.2 of ACM 0006.

CH4 Excluded For the purpose of simplification this is conservative.

Grid electricity generation

N2O Excluded For the purpose of simplification this is conservative.

CO2 Excluded Not applicable as the project activity is a power plant

CH4 Excluded Not applicable

Bas

elin

e

Heat generation

N2O Excluded Not applicable


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Source

Gas

Justification / Explanation

CO2 Excluded Biomass is considered to be carbon neutral.

CH4 Included Methane emissions for aerobic decay of EFB are considered.

Uncontrolled burning or decay of biomass residues

N2O Excluded For the purpose of simplification this is conservative. CO2

Included Emissions due to use of fossil fuel in the project activity and using electricity for fuel preparation would be included as emissions.

CH4

Excluded It is assumed that CH4 emissions to be very small.

On-site fossil fuel and electricity consumption due to the project activity (stationary or mobile)

N2O Excluded It is assumed that N2O emissions to be very small.

CO2 Included Emissions due to consumption of diesel used for transportation of EFB would be included as emissions.

CH4 Excluded Not considered for the purpose of simplification

Off site transportation of biomass

N2O Excluded Not considered for the purpose of simplification

CO2 Excluded CO2 emissions from biomass are considered carbon neutral.

CH4 Included Methane emissions from the utilisation of the biomass as fuel are calculated and included in the project emissions.

Combustion of biomass residues for renewable electricity and/or heat generation

N2O Excluded For the purpose of simplification. It is assumed that N2O emissions to be very small.

CO2 CH4

Storage of biomass

N2O

Excluded The biomass will only be stored for a short period of time.

CO2

Excluded

CH4

Excluded

Proj

ect e

mis

sion

s

Waste water from the treatment of biomass residues

N2O Excluded

The waste water quantity is expected to be very less. The wastewater from the project activity would be sent to the treatment plant and treated along with the wastewater from the mill in closed anaerobic digesters to recover methane and methane would be destructed in the boilers or flared off. Since there are no methane emissions due to this, these methane emissions are not included.


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Project boundary The project boundary of the project activity is shown in Fig B-1.

Fig B - 1 Project boundary

75 ton / hr Boilers

Fuel preparation system

25 MW Turbine

Steam

Electricity to the mill

To SESB Grid

Project Boundary

Empty Fruit Bunch from

own palm oil mill and other palm oil mills

To Consumers


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B.4. Description of how the baseline scenario is identified and description of the identified baseline scenario: The identification of the baseline scenario is in accordance to ACM 0006 (version 06.2) with demonstration of additionality as per version 02.2 of the Combined tool to identify the baseline scenario demonstrate additionality hereinafter referred to as Combined Additionality Tool. The Combined Additionality Tool prescribes four steps to establish the baseline scenario and demonstrate additionality: STEP 1. Identification of alternative scenarios STEP 2. Barrier analysis STEP 3. Investment analysis (if applicable) STEP 4. Common practice analysis The first and second steps would be used to identify the baseline scenario of the project activity. STEP 1. Identification of alternative scenarios Step 1a. Define alternative scenarios to the proposed CDM project activity Pursuant to the Combined Additionality Tool, project proponent shall identify all alternatives scenarios that are available to the project proponent and that provide outputs or services with comparable quality, properties and application areas as the proposed CDM project activity. In applying Step 1 of the Combined Additionality Tool, ACM0006 (version 06.2) requires realistic and credible alternatives should be separately determined regarding:

How power would be generated in the absence of the CDM project activity; What would happen to the biomass residues in the absence of the project activity; and In case of cogeneration projects: how the heat would be generated in the absence of the project

activity. Since this is not a cogeneration project, baseline scenario for heat is not relevant and hence not identified for heat. The plausible baseline scenarios for power generation identified in ACM0006 (version 06.2) are set out in Table B4 with comments and conclusion for each plausible baseline scenario discussed in the corresponding right columns.

Table B.4: Realistic and credible alternatives for power generation:

Plausible baseline

scenarios for power

generation

Description Comments Realistic and

credible alternative?

(Yes/No)


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Plausible baseline

scenarios for power

generation



(Yes/No) P1

The proposed project activity not undertaken as a CDM project activity.

This could be an alternative but would not be a baseline scenario as this option is economically attractive as seen in subsequent section.

Yes.

P2 The continuation of power generation in an existing biomass residue fired power plant at the project site, in the same configuration, without retrofitting and fired with the same type of biomass residues as (co-)fired in the project activity.

There is no existing power plant in the project site. Therefore, this is not a realistic alternative

No.

P3 The generation of power in an existing captive power plant, using only fossil fuels.

There is no existing captive power plant using fossil fuels.

No

P4 The generation of power in the grid.

In absence of the project activity, the power generated by the project activity would be generated in the grid.

Yes

P5 The installation of a new biomass residue fired power plant, fired with the same type and with the same annual amount of biomass residues as the project activity, but with a lower efficiency of electricity generation (e.g. an efficiency that is common practice in the relevant industry sector) than the project plant and therefore with a lower power output than in the project case.

The project activity does not claim to be an energy efficiency project. There is no common practice of installing lower efficiency electricity generation in grid connected electricity generation plants. Thus the installation of a lower efficiency power plant at the site would not be a realistic and credible alternative.

No.

P6 The installation of a new biomass residue fired power plant that is fired with the same type but with a higher annual amount of biomass residues as the project activity and that has a lower efficiency of electricity generation (e.g. an efficiency that is common practice in the relevant industry sector) than the

The project activity does not claim to be an energy efficiency project. There is no common practice of installing lower efficiency electricity generation in grid connected electricity generation plants. Thus the installation of a lower efficiency power plant at the site would not be a realistic and credible

No.


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Plausible baseline

scenarios for power

generation



(Yes/No) project activity. Therefore, the power output is the same as in the project case.

alternative.

P7 The retrofitting of an existing biomass residue fired power, fired with the same type and with the same annual amount of biomass residues as the project activity, but with a lower efficiency of electricity generation (e.g. an efficiency that is common practice in the relevant industry sector) than the project plant and therefore with a lower power output than in the project case.

Since there is no existing power plant, this is not an alternative.

No

P8 The retrofitting of an existing biomass residue fired power that is fired with the same type but with a higher annual amount of biomass residues as the project activity and that has a lower efficiency of electricity generation (e.g. an efficiency that is common practice in the relevant industry sector) than the project activity.

Since there is no existing power plant, this is not an alternative

No

P9 The installation of a new fossil fuel fired captive power plant at the project site.

The objective of the project activity is to establish a grid connected power plant and not a captive power plant. Moreover, there is a huge availability of biomass residues in and around the project area. Hence, to establish a captive power plant using fossil fuels is not a realistic and credible alternative.

No

Pursuant to Table B4, the realistic and credible alternatives identified for power generation are:-

P1 and P4


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Alternatives for use of biomass residues Since only one type of biomass residue - EFB - would be used in the project activity, alternatives are identified only for EFB.

Table B.5: Realistic and credible alternatives for use of EFB

Plausible baseline

scenarios for EFB

Description Comments Realistic and credible

alternative? (Yes/No)

B1 The biomass residues are dumped or left to decay under mainly aerobic conditions. This applies, for example, to dumping and decay of biomass residues on fields.

The common practice in the palm oil industry is to dump the EFB in palm plantations where EFB decays mainly in aerobic conditions. Therefore, this is a realistic and credible alternative

Yes

B2 The biomass residues are dumped or left to decay under clearly anaerobic conditions. This applies, for example, to deep landfills with more than 5 meters. This does not apply to biomass residues that are stock-piled or left to decay on fields.

The common practice is dump or leave to decay in fields. There are no landfills with a depth of more than 5 metres to dispose EFB. Therefore, this is not a realistic and credible alternative.

No.

B3 The biomass residues are burnt in an uncontrolled manner without utilizing it for energy purposes.

Open burning of biomass residues is prohibited according to the Malaysian Legislation Environmental Quality Act 1974 (amended 2000).This is not a realistic and credible alternative.

No

B4 The biomass residues are used for heat and/or electricity generation at the project site

The raw material for the project activity is EFB and usual practice of disposing EFB is either dumping in palm plantations for aerobic decay. Therefore, this is not a realistic and credible alternative.

No

B5 The biomass residues are used for power generation, including cogeneration, in other existing or new grid-connected power plants.

EFB is a difficult fuel to handle. All the existing cogeneration plants utilise other biomass residues such as palm kernel shells and mesocarp fibre as these have a good calorific value and easy to handle. Few projects use EFB as fuel and all

No


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Plausible baseline

scenarios for EFB



these project activities are either CDM projects or under validation process for registration. Therefore, this could not be a baseline scenario.

B6 The biomass residues are used for heat generation in other existing or new boilers at other sites.

EFB is a difficult fuel to handle due to its high moisture content and bulky nature. Costs of fuel preparation and associated risks involved are big and rendering such projects not commercially feasible. Thus this is not a realistic and credible alternative and could not be a baseline scenario.

No

B7 The biomass residues are used for other energy purposes, such as the generation of biofuels

The technology to convert palm oil mill biomass residues into biofuels is still in a laboratory scale2 and thus it is not a realistic and credible alternative for the project proponent.

No

B8 The biomass residues are used for non-energy purposes, e.g. as fertilizer or as feedstock in processes (e.g. in the pulp and paper industry)

The common practice of palm oil industry was to dump EFB in fields. Due to the nature of EFB, EFB could not converted into fertilizer. But technologies are available to convert it as Compost. Few projects are being developed to convert EFB into compost but all these projects are being developed as CDM projects. Manufacture of compost from EFB has several technical and financial barriers as several projects of EFB conversion to compost are registered as CDM projects. Few of the barriers listed in CDM registered projects are :

- No established market for

No

2 Danish Technical University, 2006: Ethanol potential for Empty Fruit Bunches pre-treated by Wet-Explosion downloaded from www.eib.ptm.org.my


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Plausible baseline

scenarios for EFB



organic compost in Malaysia

- Farmers mindset to use organic compost as against inorganic fertiliser

- Long distances of transport of compost to the mills due to remote location of the mills

EFB to paper There is no project operating which utilizes EFB to manufacture paper although researches are being undertaken for such conversion. This clearly shows that the utilization of EFB to produce compost or paper would not be part of baseline scenario.

Pursuant to Table B.5A, the realistic and credible alternative identified for use of EFB is:-

B1 Sub-step 1b. Consistency with mandatory applicable laws and regulations Baseline scenario B3 in Table B.5 refers to uncontrolled burning of biomass residues. This baseline scenario is not in compliance with existing Malaysia legislation. Open burning of biomass residues is prohibited according to The Malaysian Legislation Environment Quality Act 1974 (amended 2000). Thus, these baseline scenarios have thus been disregarded as realistic and credible alternatives. Following Step 1 of the Combined Additionality Tool i.e. Identification of alternative scenarios, the following realistic and credible alternatives are identified: For power : P1 and P4. Heat is not relevant for the project activity For biomass residues : B1 Based on the above discussions, the most credible combinations of baseline scenarios are as follows:-


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1. Generation of power in the grid (P4) and biomass residues left to decay (B1) which is consistent with Scenario 2 of Table 2: Combinations of project types and baseline scenarios applicable to this methodology prescribed in ACM0006 (version 06.2) (Alternative 1);

2. The proposed project activity not undertaken as a CDM project activity (P1 and B1)

(Alternative 2) STEP 2. Barrier analysis This step serves to identify barriers and to assess which alternatives are prevented by barriers discussed in Sub-step 2a below. As prescribed in ACM0006 (version 06.2), the barrier analysis consists of two sub-steps namely: Sub-step 2a: Identify barriers that would prevent the implementation of alternative scenarios identified

in Step 1 above. Sub-step 2b: Eliminate alternative scenarios which are prevented by the identified barriers Sub-step 2a. Identify barriers that would prevent the implementation of alternative scenarios Sub-step 2a requires the establishment of a complete list of realistic and credible barriers that may prevent alternative scenarios to occur. The complete list of realistic and credible barriers that may prevent implementation of alternative scenarios are analysed as follows:

Investment barriers Technology barriers Lack of prevailing practice Market barriers

Sub-step 2b. Eliminate alternative scenarios which are prevented by the identified barriers This step identifies alternative scenarios which are prevented by at least one of the barriers listed in Sub-step 2a above and eliminate those alternative scenarios from further consideration. Alternatives to power generation: Out of the nine (9) alternatives to power generation analysed in Sub-step 1a and Sub-step 1 b above, only alternative P1 and P4 can be considered as realistic and credible baseline scenarios and are subjected to barrier analysis prescribed in Step 2.

Table B.6: Barrier analysis for alternatives to power generation

Alternatives to power generation Barrier P1: Proposed project activity not

undertaken as a CDM project activity.

P4 : Generation of power in the grid


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Investment Power production based on biomass for grid has met strong investment barriers in Malaysia. The barriers are mainly the following3:

i. Tariff not meeting market IRR expectations as explained in Investment analysis;

ii. Lack of long term fuel supply; iii. Lack of financing; and iv. Certain provisions in Renewable

Energy Power Purchase Agreement (REPPA) unacceptable to project developers.

It may also be seen from Investment analysis in next step Investment Analysis that the returns from the project activity are not sufficient to make the project financially attractive. The EFB based power projects that have been implemented or under implementation are either registered as CDM projects or under validation process. Following is the list of EFB based power projects: Lahad Datu Edible Oil (Reg. No.

395) Sandakan Edible Oil (Reg. No. 402) Sahabat Empty Fruit Bunch Biomass

(Reg. No. 288); and Kunak Bio Energy Project (in

process for registration as a CDM project activity)

Kina Biopower plant (Reg. No. 0385) CDM project

Seguntor Bioeenrgy plant - (Reg. No. 0386) - CDM project.

Bandar Baru Serting Biomass project Regn. No. 1091 CDM project

No investment barriers

3 Erik Dugstad et al 2007: Options for implementation of the RE target in 9th Malaysia Plan. Page 3 Summary Downloaded from www.eib.ptm.org.my


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Distance of the grid interconnection point Usually palm oil mills are located in remote places and the distance from the mill to the grid interconnection point is quite far. This calls for high investment cost for the transmission line from the generation point to the interconnection point.

Technology Difficulties in employing EFB as fuel4

Clinkers and slags are formed in the surface of the boilers using EFB as a fuel and this has the following effects:- Damage to boiler tubes by direct

abrasion; Damage to boiler tubes due to impact

of dropping large mass of clinker/slag; and

Reduction in boiler efficiency due to formation of slag/clinker layer on boiler tubes

Fuel preparation The EFB is a bulky biomass and has high moisture content. Therefore it is necessary to subject EFB to some pre treatment before being used as fuel. The equipment used in the preparation of the EFB fuel would generally experience significant wear and tear due to the presence of high silica content in the EFB resulting in an increase in the maintenance cost. High Pressure boilers It is the common practice in the palm oil industry to employ low pressure boilers usually operating at 20 23 bar pressure and low efficient electricity conversion system just enough to cater to the energy requirements of the mill. The project

No technology risk

4 Experience from operating plant


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activity would employ high pressure boiler operating at 69 bar pressure. There is not much experience with high pressure boilers in palm oil industry. To the best of our knowledge, there is no project activity using palm oil biomass residues which employs 69 bar pressure boiler. The project activity would probably be the first of its kind to employ 69 bar pressure boiler in Malaysia. Risk of technological failure: In light of the above, the project activity faces significant risks in performance of the technology.

Lack of prevailing practice

The grid connected electricity generation projects is not a common practice in the region. There are about 112 palm oil mills and 9 palm oil refineries in Sabah state. Out of these, only following 7 projects have implemented / are implementing grid connected palm oil biomass based electricity generation projects and all these projects are either registered as CDM projects or under CDM validation:

i. Lahad Datu Edible Oil biomass steam and power plant -CDM Regn. No. 395

ii. Sandakan Edible Oil biomass steam and power plant - CDM Regn. No. 402

iii. Sahabat Empty Fruit Bunch Biomass -CDM Regn. No 288);

iv. Kina Biopower plant - CDM Regn. No. 0385

v. Seguntor Bio energy plant CDM Regn. No. 0386.

vi. Kunak Bio Energy Project (in process for registration as a CDM

Power from the grid is the prevailing practice

5 Speech by The Minister for Energy Water and Communication Y.B. Dato' Sri Dr. Lim Keng Yaik at the National Renewable Energy Forum 21/09/2006. Downloaded from www.ktak.gov.my


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project activity) It may be noted that just 4.59 % of the industries have implemented / are implementing grid connected biomass based power projects and all these projects are implemented as CDM projects. Therefore, it is clear the biomass based grid connected electricity generation plant is not common business practice in Malaysia. The experience to generate grid connected biomass power is very limited in Malaysia as explained in earlier sections. The negative perception of the major players is one of the major barriers according to Minister for Energy, Lim Keng Yaik5: What can we do to tap the high potential of renewable energy in our country? While there are barriers that need to be ironed out, I strongly believe that the biggest barrier is our mindset and perceptions. In this instance, all of us are victims to the old way of thinking.


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Market There are significant market barriers in utilising EFB as fuel for biomass power plant. In a major study for the EFB supply chain6 one of the conclusions is as follows: The demand of EFB fuel is subjected to various barriers such as accessibility of fuel due to high transportation costs, uncertainty of EFB fuel prices difficulty in handling as well as fluctuation of supply due to cropping seasons (peak/off peak)

Grid power is readily available

It may be observed in Table B.5 that there are very significant barriers for the proposed project activity to be undertaken not as a CDM project activity (P1) as compared to generation of power in the grid (P4). It is well known that the generation of power in the grid has low technology, investment and market risks. For the biomass type (EFB,) identified in Sub-step 1a and Sub-step 1b, only one alternative was identified for each biomass type as discussed in Sub-step 1b. Thus, no barrier analysis was conducted in relation to this alternative. Outcome of Step 2b From Sub-step 2a and Sub-step 2b, it is observed that Alternative 2 (P1 and B1) identified in Step 1 experiences significant barriers. Following Sub-step 2b, alternatives scenario to the project activity that is not prevented by any barrier is (Alternative 1):-

P4 : The generation of power in the grid and B1: The biomass residues are dumped or left to decay under mainly aerobic conditions.

Alternative 1 is not prevented by any barrier and Alternative 2 faces significant barriers. As per Additionality tool, if there is only one alternative scenario that s not prevented by any barrier and this alternative is not the proposed project activity undertaken without being registered as CDM project activity, then this alternative scenario is identified as the baseline scenario. Thus, Alternative 1- P4 and B1 is the baseline scenario for the project activity. 6 Eco-Ideal Consulting & Mensilin Holdings, 2005: Barrier Analysis for the Supply Chain of Palm Oil Processing Biomass (Empty Fruit Bunch) as Renewable Fuel. Page 43 Downloaded from www.eib.ptm.org.my


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Thus, explanations using qualitative and quantitative arguments on how the registration of the CDM project activity will alleviate the barriers that prevent the proposed project activity from occurring in the absence of the CDM are set out below as per Combined Additionality Tool. Qualitative arguments As set out briefly in Step 2, the project activity experiences investment and technological barriers and risks. The project activity would also face considerable financial barriers as explained in subsequent section. The registration of the project activity as a CDM project activity allows the project proponent to accept the inherent risks of the project activity arising from investment and technology risks. The income from sale of CERs may also assist in overcoming the barriers posed by employment of new technology to ensure the project activity is reasonably viable from commercial perspective. In addition, it can be justified that CDM will help to overcome the major barriers based on the financial contribution to the project activity. Such additional revenue also enables the project proponent to accept risks associated with the inherent technological and investment risks of the project activity. Quantitative arguments From the quantitative viewpoint, the financial indicator set out below has been identified as most suitable for the project type and decision making context:

Project internal rate of return (Project IRR) In demonstrating how registration of the project activity as a CDM project activity will alleviate the barriers that prevent the proposed project activity from occurring in the absence of the CDM, the Project IRR of the project activity is calculated for further discussion. The basic information for calculation of Project IRR is given below in Table B.7

Table B.7: Project IRR of the project activity without and with CDM registration

Parameters Value Data Source

Installed capacity (MW) 25 Project proponent

Project cost (RM Million) 100 Project proponent

Rate of interest for debt component % 8.5% Project proponent

Annual power supplied to grid (MWh / year)

159,018 During normal year of operation based on 85 % capacity utilisation after deducting electricity supplied to the mill and auxiliary consumption

Electricity tariff (RM/kWh) 0.215 As per existing policy for purchase of renewable energy policy

Budgeted CER price (Euro/tCO2e) till end 2012

12 As per signed Term Sheet

Budgeted CER price (Euro/tCO2e) post Kyoto commitment period (2013 onwards)

6 Budgeted


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IRR Calculation period (years) 21 PPA is for 21 years. Technical life time of the project.

Project IRR without CDM incentives 3.66 % IRR Calculations

Project IRR with CDM incentives 11.07% IRR Calculations The Project IRR was calculated as per latest Guidance on the Assessment of Investment Analysis - version 02.1 of CDM EB 41. The internal rate of return of the project activity was calculated for 21 years ( 1 year construction period + 20 years operation period) which is also the term of Power Purchase Agreement . The Project IRR is calculated to be 3.66 % for 21 years. The IRR for the project activity is - 1.36 % for 10 years. The spreadsheet of IRR calculations are attached as Appendix- 1. It may be seen that the returns from the project activity from the sale of electricity alone are very low. This IRR is lower than the borrowing rate for the project which is 8.5 %. The latest Guidance on the Assessment of Investment analysis suggests that commercial borrowing rate to be one of the benchmarks for Project IRRs7. This is a very conservative benchmark as the calculations also includes equity component where the rate of returns expected are generally higher than the lending rates. The project activity would not be able to even service the debt component of the project with sale of electricity to the grid. This has been one of the main reasons for many projects not coming up in Malaysia inspite of availability of huge quantity of biomass in the country. In spite of Government initiative to promote renewable energy, there has been a reluctance on the part of the electric utility to offer better prices to facilitate establishment of such projects on a commercial scale as the purchase price offered by the electric utility does not make the projects commercially viable. The project activity is clearly not attractive economically and has a clear investment barrier. 1.1 Sensitivity analysis: A sensitivity analysis with variations as suggested by Guidance on the Investment Analysis was carried out as below:

1. Variations in Investment cost 2. Variations revenue from the project

As per guidance, sensitivity analysis for investment costs has to be carried out for the components that constitute more than 20 % of the investment costs. In this case, the cost of boiler and turbine would constitute for more than 20 % of the investment cost. These two items contribute for about 50 % of the project cost. Therefore, the variation is considered for 50 % of the project cost with 10 % variation. The project IRR with +10 and -10 % variations for variables listed above are presented in the Table B-8.

Table B-8 Project IRR without CDM revenues for various variations

S. No. Parameters Variation

IRR for 20 years without CDM revenues

Comments

7 Guidance 11 of Version 02.1- Guidance on Investment Analysis, EB 41 Annex 45


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+10% 2.77 % The IRR of the project activity is very less than the benchmark. 1. Variation in Investment costs -10% 4.63 % Lower than the benchmark

+ 10% 10.33%

10 % increase in revenue is very unlikely as this would mean that the plant has to be operated with a utilisation factor of 85% during first year and 95 % during subsequent years. This is very unlikely as with all forced maintenance shutdowns, festival holidays and unexpected down time, 95% capacity utilisation factor is not possible and not realistic. Especially high pressure boilers operating with EFB which is a very difficult fuel, even 85 % plant utilisation factor is quite high. Considering 8000 hours of operation (91.3 % Utilisation factor) which is difficult but still possible theoretically, IRR becomes 7.25 %, still lower than the benchmark.

2

Variation in revenues for the project cost

-10% Negative -

The results of the sensitivity analysis conducted confirm that the financial internal rate of return of the project activity without CDM revenues is much lower than the benchmark of commercial borrowing rate. It must be mentioned here that the commercial borrowing rate is a very conservative benchmark as the project IRR calculations also has equity component and it is very unlikely that investors would invest in the project with expectations to get returns as only that of commercial borrowing rates. In these circumstances, an IRR of 12 % 8 is considered to be more appropriate indicator for Malaysia. It is hereby requested that the IRR of the project activity to be compared with 12 % IRR as benchmark. As explained above, the CDM would improve the IRR to the level above the commercial lending rate making the project viable. Thus CDM would alleviate the barriers that exist for the proposed project activity and that would prevent the proposed project activity from occurring. As per Combined Additionality tool, next step is to proceed to Step 4 Common practice analysis. Step 4: Common practice analysis 4.1 Fuel usage Energy consumption in the industry accounts for close to 40% of total energy consumption in Malaysia. A broad variety of fuels is used currently, by far dominated by fossil fuels, and biomass is used only to a very small extent less than 0.5%, and not accounted for in official energy statistics.

8 Para 1, Page 21 of 28 of the report The IPP Investment Experience in Malaysia by Jeff Rector


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Figure B.2: Distribution of fuels used in the total industrial sector in Malaysia, 2003. (Source: National Energy Balance, PTM)

Figure B.2 depicts that the energy use in the industry in Malaysia is dominated by the use of fossil fuels. Very few companies have been using biomass residue as fuel. Most of the biomass fuel used is PKS i.e. cement industry whereas the use of EFB has been very limited (and mainly confined to CDM projects). The statistics clearly set out that the use of biomass in industrial application is very limited in Malaysia i.e. outside palm oil mills. 4.2. Similar project activities There are about 112 palm oil mills and 9 palm oil refineries in Sabah state. Out of these, only following 7 projects have implemented / are implementing grid connected palm oil biomass based electricity generation projects and all these projects are either registered as CDM projects or under CDM validation:

vii. Lahad Datu Edible Oil biomass steam and power plant -CDM Regn. No. 395 viii. Sandakan Edible Oil biomass steam and power plant - CDM Regn. No. 402

ix. Sahabat Empty Fruit Bunch Biomass -CDM Regn. No 288); x. Kina Biopower plant - CDM Regn. No. 0385

xi. Seguntor Bio energy plant CDM Regn. No. 0386. xii. Kunak Bio Energy Project (in process for registration as a CDM project activity)

It may be noted that just 4.59 % of the industries have implemented / are implementing grid connected biomass based power projects and all these projects are implemented as CDM projects. Therefore, it is clear the biomass based grid connected electricity generation plant is not common business practice in Malaysia. 4.3 High pressure boiler


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The project activity would employ boilers operating at 69 bar pressure which are very rarely used in Malaysia. To the best of our knowledge, such high pressure boilers are being employed for the first time for the combustion of palm oil industry biomass especially EFB. Therefore, the project activity is clearly not a Business as Usual scenario. With the above discussion, it may be concluded that the project activity is clearly additional. B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered CDM project activity (assessment and demonstration of additionality): The basic demonstration of additionality is handled in the previous section by means of the Combined Additionality Tool in section B4. This section is complementary to Section B4 and therefore, the discussions are not repeated here as suggested by recent Guidelines for completing the PDD. B.6. Emission reductions:

B.6.1. Explanation of methodological choices: The first methodological choice is to decide on the appropriate baseline methodology. In this PDD, ACM0006 (version 06.2) was applied as the appropriate baseline methodology based on justification discussed in Section B.2. The second choice is the baseline scenario described in detail in Section B.4 above. The conclusion is that this project should be evaluated under Scenario 2 of Table 2 of ACM 0006, (version 06.2). This scenario is relevant since the project activity is a greenfield power plant where the baseline scenario established in Section B.4 is Scenario 2 of Table 2 of ACM0006, (version 06.2) i.e.:

Power would be generated in the power plants in the grid and Biomass would be left to decay mainly in aerobic conditions

According to the applied methodology, the project boundary encompasses:

The power plant at the project site; The means for transportation of biomass residues to the project site (e.g. vehicles); All power plants connected physically to the electricity system that the CDM project power plant

is connected to. The spatial extent of the project electricity system, including issues related to the calculation of the build margin (BM) and operating margin (OM), is further defined in the Consolidated baseline methodology for grid-connected electricity generation from renewable sources(ACM0002)9.

The site where the biomass residues would have been left for decay. B.6.1.1 Emission reductions of the project activity 9 The reference to the ACM0002 is according to the EB 359 ACM0002 has been replaced with the Tool to calculate emission factors for electricity system (Version 1)


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The emission reductions in the year, y, will be calculated using the formula (1) in the ACM0006 (version 06.2):

ERy = ERheat, y + ERelectricity, y + BEbiomass, y PEy Ly (1) Where: ERy = Emissions reductions of the project activity during the year y in ton CO2/ year ER electricity, y = Emission reductions due to displacement of electricity during the year y in ton CO2/year ER heat,y = Emission reductions due to displacement of heat during the year y in ton CO2/ year BE biomass,y = Baseline emissions due to natural decay or burning of anthropogenic sources of biomass

during the year y in ton CO2 e /year PEy = Project emissions during the year y in ton CO2 / year, and Ly = Leakage emissions during the year y in ton CO2 / year

Emission reductions due to heat Since heat is not extracted from the plant, emission reductions due to heat are not applicable for the project activity. Hence, emission reductions is calculated as : ERy = ER electricity, y + BEbiomass PEy Ly B.6.1.2 - Project emissions As per ACM0006, version 06.2, project emissions include:

CO2 emissions from transportation of biomass to the project site (PETy) CO2 emissions from on-site consumption of fossil fuels due to the project activity (PEFFy) CO2 emissions from consumption of electricity (PE EC,y) CH4 emissions from the combustion of biomass (PE Biomass, CH4,y). CH4 emissions from wastewater

PEy = PETy + PE FF, CO2, y + PEEC,y + GWPCH 4 ( PEBiomass,CH 4, y + PEww,CH4,y) (2) Where: PETy = CO2 emissions during the year y due to transport of the biomass to the project

plant in ton CO2 / year PEFF, CO2,y = CO2 emissions during the year y due to fossil fuels consumed in the project

activity in ton CO2 / year PEEC,y = CO2 emissions during the year y due to electricity consumption at the project site

that is attributable to the project activity (ton CO2/year) GWPCH4 = Global Warming Potential for methane valid for the relevant commitment period

in ton CO2/ton CH4


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PEBiomass, CH4,y = CH4 emissions from the combustion of biomass during the year y in tCH4/ year. PE ww, CH4,y = CH4 emissions from waste water generated from the treatment of biomass

residues in year y (ton CH4/yr)

B.6.1.2. i) CO2 emissions for transportation of biomass

The project activity would consume EFB from its own palm oil mill and from palm oil mills in the surroundings. The fuel would be transported from a number of palm oil mills. An average distance of about 100 kilometres for round trip is considered for ex-ante estimates. The average distance per round trip would be monitored as per monitoring methodology and actual emissions would be calculated during monitoring.

Methodology gives two options to estimate the emissions due to transportation of biomass. The first option is adopted.

The formula to calculate the emissions from the transport is calculated by the following formula:

yCOkmyy

kykT

y EFAVDTL

BFPET ,2,

,,

=

(2a) of methodology

Where,

PETy = CO2 emissions during the year y due to transport of the biomass residues to the project site (t CO2/year)

TLy = Average truck load of the trucks used (tons) during the year y

BFT,k,y = Quantity of biomass residue type k transported to the project site during the year y (tons)

AVDy = Average round trip distance (from and to) between the biomass residue fuel supply sites and the site of the project activity during the year y (km)

EFkm,CO2,y = Average CO2 emission factor for the trucks measured during the y (t CO2/km)

B.6.1.2. ii) CO2 emissions for on site consumption of fossil fuels

The project activity does not co fire any fossil fuel for generation of electricity. However, some diesel would be consumed for effective operation of the power plant for the following purposes:

i) During start up of the power plant from cold condition. Cold condition is when the boiler is switched off for long time and becomes completely cold

ii) Sometimes boiler may be switched off for short time and may still be in warm condition when restarted again. Quantity of diesel required would be lesser than that required to start from cold condition.

iii) Diesel would be required for boiler and pressure vessel inspection every year.

The CO2 emissions due to consumption of diesel would be calculated as per Tool to calculate project or leakage CO2 emissions from fossil fuel combustion Version 1 as specified in the methodology.

As per tool, CO2 emissions from combustion of fossil fuels are calculated based on the quantity of fossil fuel combusted and the CO2 emission coefficient of the fuel as follows: PEFF,j,y = FCi.j.y x COEFi,y


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Where: PEFF,j,y are CO2 emissions from fossil fuel combustion in process j during the year y (tCO2 / yr); FCi,j,y is the quantity of fuel type i combusted in process j during the year y (mass or volume unit /

yr); COEFi,y is the CO2 emission coefficient of fuel type i in year y (tCO2 / mass or volume unit); i are the fuel types combusted in process j during the year y. Diesel is the fossil fuel consumed in the project activity for start up and during annual pressure vessel inspection.

The CO2 emission co efficient of the diesel is calculated based on Option B in the tool as follows :

COEFi,y = NCVi,y x EFCO2,i,y

Where,

NCVi, y is the net calorific value of the fuel type i used in the year y in GJ/ ton

EFCO2,i,y is the CO2 emission factor of the fuel type i in year y in t CO2 / GJ.

As per the tool, the regional or national default value as per National Energy Balance could be used, if available for these values.

As per latest National Energy Balance, 2005 issued by Ministry of Energy, Water and Communications, Malaysia, the national default value is available for net calorific value of diesel oil which is 42.4960 GJ/ ton.

For CO2 emission factor of diesel, as per tool, latest IPCC default value at the upper limit of the uncertainty at a 95% confidence interval as provided in Table 1.4 of Chapter 1 of Vol.2 (Energy) of the 2006 IPCC guidelines on National GHG Inventories would be adopted. The value for diesel is 0.0748 ton CO2/ GJ

Hence, COEF,i,y = 42.4960 GJ/ ton x 0.0748 ton CO2/ GJ

= 3.1787 t CO2 / ton

Hence, PEFF,j,y = FCi.j.y x COEFi,y = FCi.j.y (ton) x 3.1787 t CO2/ ton

B.6.1.2. iii) Electricity consumption at the project site

According to ACM0006 (version 06.2) CO2 emissions from on-site electricity consumption (PEEC,y) should be calculated using the latest approved version of the Tool to calculate project emissions from electricity consumption. In applying the tool, the project plant as well as any other biomass-fired power plants at the project site should not be considered as captive power plants. As there is no on site fossil fuel fired power plant this means that all the electricity consumption on site in by the project activity should be calculated as project emissions based on import at electricity from the grid. As per methodology, the on-site electricity consumption attributable to the project activity (ECPJ,y) should include all electricity consumption that is consumed by the project activity (e.g. for mechanical treatment of the biomass), except for auxiliary electricity consumption by the project plant (e.g. for pumps, vans, etc.).


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Project emissions from consumption of electricity from the grid are calculated based on the power consumed by the project activity for the mechanical treatment of the biomass (fuel preparatory equipment) and the emission factor of the grid, adjusted for transmission losses, using the following formula: PEEC,y = ECPJ,y x EFgrid,y x (1 + TDLy ) Where: PEEC,y = Project emissions from electricity consumption by the project activity during the year y

(ton CO2 /year); ECPJ,y = Quantity of electricity consumed by the project activity for fuel preparation during the year y (MWh / year); EFgrid,y = CO2 Emission factor for the grid in year y (ton CO2/MWh) TDLy = Average technical transmission and distribution losses in the grid in year y for the voltage

level at which electricity is obtained from the grid at the project site

B.6.1.2. iv) Methane emissions from burning of biomass

The combustion of biomass would lead to methane emissions. The formula for calculating the emissions is:

PEBiomass,CH 4, y = EFCH 4,BF x BFk,y x NCVk (2c) Where: BFk,,y = Quantity of biomass type k used as fuel in the project plant during the year y in a volume

or mass unit, NCVk = Net calorific value of the biomass type k in TJ/ ton of dry matter of biomass, EFCH4,BF= CH4 emission factor for the combustion of biomass in the project plant tons CH4 per TJ.

According to Table 4 :Default CH4 emission factors for combustion of biomass residues of ACM 0006 version 06.2, the default methane emission factor for other solid biomass residues is 30 kg/TJ with an uncertainty level of 300 %. The conservativeness factor for uncertainly level above 150 % is 1.37.

Therefore, CH4 emission factor for solid biomass residues = 30 kg / TJ * 1.37

= 41.1 kg / TJ.

B.6.1.2. v) Methane emissions from waste water treatment (PEWW,CH4,y)

Small quantity of wastewater would be produced from the fuel preparatory system in the project activity. This wastewater would be treated in closed anaerobic reactors along with the POME from the mill. Methane generated from the closed anaerobic digesters would be destroyed in boilers or in flares. Therefore, there would be no methane emissions from the waste water. Hence, the methane emissions from wastewater are not estimated.

Therefore, Project emissions are,

PEy = PETy + PEFF,CO2 y + PEEC,y + GWPCH 4 * PE biomass, CH 4, y

B.6.1.3 Emission Reductions from electricity production

The emission reductions due to the displacement of electricity are calculated from the following formula:

ER electricity, y = EGy x EF electricity, y (4)


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Where: ER electricity, y = Emission reductions due to displacement of electricity during the year y in tons of CO2 /

year EGy = Net quantity of electricity generation in the project activity during the year y in MWh EF electricity, y = CO2 emission factor for the electricity displaced due to the project activity during the

year y in tons CO2/MWh

B.6.1.3.1 Determination of EF electricity, y

As per the approved methodology for scenario 2, the emission factor for the displacement of electricity of a project activity with more than 15 MW should correspond to the grid emission factor (EF electricity, y= EF grid, y) and EF grid, y should be calculated as follows:

If the power generation capacity of the project plant is more than 15 MW, EFgrid, y should be calculated as a Combined Margin (CM) following guidance in the section Baselines in the Consolidated baseline methodology for grid connected electricity generation from renewable sources (ACM0002). This guidance is to be replaced with Tool to calculate the emission factor for electricity system (version 01.1).

The emission factor of the grid as per tool is given in Annex 3 Baseline information.

B.6.1.3.2. Determination of EGy

As per version 06.2 of ACM0006, for scenario 2, EGy corresponds to the net quantity of electricity generation in the project plant (EGy = EG project plant)

Where,

EGy = Net quantity of electricity generation in the project plant (MWh)

B.6.1.3.3 Determination of methane emissions due to aerobic decay of biomass residues As per approved methodology, in the case of biomass residues are dumped or left to decay under mainly aerobic conditions or burnt in an uncontrolled manner without utilizing them for energy purposes, baseline emissions are calculated assuming for both the scenarios viz , natural decay and uncontrolled burning , that the biomass residues would be burnt in an uncontrolled manner. The baseline methane emissions due to aerobic decay of biomass residues is given by : BEbiomass, y = GWPCH4 * BFpj,k,y * NCVk * EF burning, CH4, k, y Where, BE biomass,y is the baseline emissions due to natural decay of biomass during the year y in ton CO2 e /

year GWPCH4 is the Global Warming Potential of methane in tCO2e/ tCH4 BFpj,k,y is the incremental quantity of biomass used in the project plant in tons of dry matter NCVk is the Net calorific value of the biomass type k in GJ/ ton of dry matter of biomass, EFCH4,BF is the CH4 emission factor for the combustion of biomass in ton CH4 per GJ.


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In the absence of accurate information, the methodology suggests a default value of 0.0027 t CH4/ ton of biomass for the product of NCVk and EF burning, CH4, k, y As per methodology, the uncertainty of methane emission factor for uncontrolled burning of biomass is more than 100 % and therefore the value of 0.0027 t CH4/ ton of biomass has to be adjusted with a conservativeness factor of 0.73. Hence, NCVk * EF burning, CH4, k, y = 0.0027 * 0.73 = 0.001971 t CH4/ t biomass Assessment of leakage:

As per methodology, where the baseline scenario is that the biomass residues are dumped or left to decay or burnt in an uncontrolled manner without utilising for energy purposes, leakage has to be assessed to demonstrate that the project activity does not increase the use of fossil fuel use.

Methodology suggests three options to assess leakage. Option 2 has been adopted due to availability of direct data. As per option 2, it should be demonstrated that the quantity of available biomass is at least 25 % larger than the quantity of biomass residue that are utilized.

A radius of 50 km has been considered for assessment of leakage. Same distance of 50 kms has been considered for transportation of biomass to the project site although actually distance could be lesser during the operation of the project activity.

The names of the palm oil mills within a radius of 50 kms and their installed capacity is given in Table B-9.

Table B-9 Details of palm oil mills within a radius of 50 kms and their installed capacity

S.No. Name of the palm oil mill Installed capacity ( t. FFB/ hr) 1. Sabahmas Palm Oil Mill 60

2. Sebrang Palm Oil Mill 60

3. Rimmer Palm Oil Mill 60

4. Tongmanis Palm Oil Mill 60

5. Unico Desa Palm Oil Mil 60

6. Tamaco Mill II 60

7. Bell Sawit Palm Oil Mill 45

8. Sandau Palm Oil Mill 60

9. Haranky Palm Oil Mill 60

10. Tabung Haji Palm Oil Mill 60

11. Melewar Palm Oil Mil 60

12. Waris Selesa Palm Oil Mill 45

13. TSH (Sabahan) Palm Oil Mill 60


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14. Tong Len Mill II 60

15. S.D. Resources 120

Total 930 ton / hour Assuming at least 6000 hours of operation of each mill, total FFB processed by the mills in the region would be 5,580,000 tons of FFB/ year. There are no official statistics on the production and use of EFB, so the total available amount of EFB has to be calculated. Quantity of EFB produced ranges from 21 23 %. An average value of 22 % is considered as EFB production. Further it is assumed that the annual increase in FFB processed in Sabah will be 3.5% p.a.10. The escalation is not considered for leakage estimates for conservatism. The total quantity of FFB processed, EFB produced, demand for EFB and excess availability within 50 km radius is calculated and shown in Table B.10 below. The demand for EFB is estimated through the number of potential CDM projects in the region. The CDM projects considered are derived from the UNEP CDM-pipeline11. The CDM Pipeline contains a list of all CDM projects that have either been uploaded for Global Stakeholder Process under validation or has been submitted for registration at the UNFCCC. In addition, save and except for consumption by CDM project activities, there is not any known use for EFB in the region.

Table B.10: Calculation of leakage for biomass Description Value

FFB processing capacity of palm oil mills in the region 930 tons / hourRemoving mill no. 11 as this is proposing CDM project with EFB (Mill nos. 12 and 14 are proposing CDM projects mainly with mesocarp fibre) 60 tons/ hourFFB processed in balance mills 870 tons/ hourNumber of operating hours of the mills 6000 hours / yearTotal FFB processed 5,220,000 tons / yearEFB processed at 22 % 1,148,400 tons / year EFB required for other projects within 50 km radius Lahad Datu Edible Oils Sdn Bhd (Source : Registered PDD of the project activity) 122,500 tons / year EFB available 1,025,900 tons/ yearEFB required for the project activity 362,727 tons / yearExcess EFB 663,173 tons / year

10 Anders Evald et al 2005: Renewable Energy Resources (in Malaysia) Recalculated based in table 2.2 p 10 11 CDM pipeline downloaded from www.cdmpipeline.org 12/01/2008


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Percentage of excess 182.83 % Table B.10 conservatively affirms that there is approximately 182.83 % of unconsumed EFB in the region after deducting all the volume consumed by the (CDM) project activities in the region. This percentage exceeded the 25% unconsumed EFB benchmark required as the criteria to rule out leakage. Furthermore, there is still excess EFB to accommodate other minor uses without changing the conclusion.

B.6.2. Data and parameters that are available at validation: ID No. A Data / Parameter: GWPCH4 Data unit: t CO2 e /t CH4 Description: Global Warming Potential (GWP) of methane, valid for the relevant commitment

period Source of data: Decisions under UNFCCC and the Kyoto Protocol (a value of 21 is to be applied

for the first commitment period of the Kyoto Protocol) Value applied: 21 Justification of the choice of data or description of measurement methods and procedures actually applied :

21 for the first commitment period. This value shall be updated according to any future COP or MOP decision.

Any comment: - ID No. B Data / Parameter: EFCH4,BF Data unit: Kg/TJ Description: Source of data used: IPCC 2006 Value applied: 41.1 kg methane/TJ (calculated as the original 30 kg methane/TJ *

conservativeness factor of 1.37) Justification of the choice of data or description of measurement methods and procedures actually applied :

The methane emission is relatively uncertain, and thus a high conservativeness factor is used in calculating the annual emissions.

Any comment: Although methane emissions due to decay of biomass is not considered in the baseline, methane emissions due to combustion of biomass is considered for conservatism

ID No. C Data / Parameter: EFgrid,y Data unit: tCO2/ MWh Description: The emission factor of the Sabah grid


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Source of data used: Study by the Malaysian Energy Centre (Pusat Tenaga Malaysia) Value applied: 0.8 kg CO2/kWh Justification of the choice of data or description of measurement methods and procedures actually applied :

The data was collected from the best available source the local utility company

Any comment: The base years for the calculation are 2003-05, for which the latest statistics are available.

B.6.3. Ex-ante calculation of emission reductions:

As discussed in section B.6.1.1, emission reductions is calculated as : ERy = ER electricity, y + BE biomass PEy Ly Where: ERy = Emissions reductions of the project activity during the year y in tons of CO2, ER electricity, y = Emission reductions due to displacement of electricity during the year y in t CO2 ERbiomass = Emission reductions due to aerobic decay of biomass residues in t CO2 PEy = Project emissions during the year y in tons of CO2, and Ly = Leakage emissions during the year y in tons of CO2. Of these Ly are estimated to be zero. Therefore, ER y = ER electricity, y + BE biomass PE y

As mentioned in section B.6.1.3, emission reductions due to the displacement of electricity are calculated from the following formula:

ER electricity, y = EG y x EF electricity, y Where: ER electricity, y = Emission reductions due to displacement of electricity in the year y in tons of CO2 / year EGy = Net quantity of electricity generation in the project plant during the year y in MWh EF electricity, y = CO2 emission factor of the grid for the year y in tons CO2/MWh

B.6.3.1 Determination of EF electricity, y

As per the approved methodology, the emission factor for the displacement of electricity of a project activity with more than 15 MW should correspond to the grid emission factor (EF electricity, y= EF grid, y) and EFgrid, y should be calculated as a combined margin (CM) as per Tool to calculate the emission factor for electricity system (version 01.1).

The basis for determination of EF electricity, y is given in Annex 3 Baseline information


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EF electricity, y estimated as per methodology and applicable tool = 0.8 t CO2/ MWh

B.6.3.2. Determination of EGy

As per version 06.2 of ACM0006, EGy for scenario 2 is the net quantity of electricity generation.

EG y = EG project plant, y

The first phase of the project activity would be commissioned by January 2010 and second phase of the project activity would be commissioned by July 2010.

In the first phase, one 75 ton / hour boiler would be commissioned along with 25 MW turbine. This would produce about 12.5 MW of gross electricity.

The calculations of net electricity generated by the project activity are given in Annex 3- baseline information and in attached spreadsheet as Appendix 1.

The net electricity exported to the grid by the project activity in the first phase during first six months of the project activity is expected to be 34,427 MWh.

The net electricity exported to the grid by the project activity after commissioning the second phase would be 159,018 MWh / year.

Emission reductions ( baseline emissions) due to displacement of electricity for an year from second year would be ,

ER electricity, y = EG y x EF electricity, y = 159,018 MWh/ year x 0.8 t CO2 / MWh = 127,214 t CO2/ year from second year Emission reductions ( baseline emissions) due to displacement of electricity during operation of first year would be calculated as follows, Baseline emissions during first six months of the project activity

ER electricity, = EG x EF electricity, y = 34,718 MWh x 0.8 t CO2 / MWh

= 27,541.6 t CO2 during first six months of the first year Baseline emissions during next six months of the first year

ER electricity, = EG y x EF electricity, y = 69,435 MWh x 0.8 t CO2 / MWh

= 55,548 CO2 during next six months of the first year Baseline emissions during the first year due to displac ement of electricity is, ER, electricity, y = 27,774 + 55,548

= 83,322 ton CO2/ year


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B.6.3.3 Baseline emissions due to aerobic decay of biomass residues in a year BEbiomass, k, y BEbiomass, y = GWPCH4 * BFpj,k,y * NCVk * EF burning, CH4, k, y

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