CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006 CONTENTS

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1 CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006 CONTENTS A. General description of the small scale 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 proposed small scale project activity Annex 2: Information regarding public funding Annex 3: Baseline Information Annex 4: Monitoring Information Annex 5: Financial Analysis Annex 6: Layout of Refinery 1

2 Revision history of this document Version Date Description and reason of revision Number January 2003 Initial adoption 02 8 July 2005 The Board agreed to revise the CDM SSC PDD to reflect guidance and clarifications provided by the Board since version 01 of this document. As a consequence, the guidelines for completing CDM SSC PDD have been revised accordingly to version 2. The latest version can be found at < December The Board agreed to revise the CDM project design 2006 document for small-scale activities (CDM-SSC-PDD), taking into account CDM-PDD and CDM-NM. 2

3 SECTION A. General description of small-scale project activity A.1. Title of the small-scale project activity: BIOENERGY PLANT SAWIT KINABALU A.2. Description of the small-scale project activity: This project involves in the installation of a modern, high efficient biomass-fired boiler plant to supply steam to the refinery, owned by Kunak Refinery Sdn. Bhd. (part of Sawit Kinabalu Group), in Kunak, Sabah, Malaysia. This biomass boiler plant will be coupled with a condensing steam turbine to generate power for the refinery. The project will be implemented in a single stage, where the steam generated from the biomass boilers will be channelled directly to the refinery and to the steam turbine. The project activity will be able to reduce emissions in by displacing fuel oil, which is used to generate steam at present and by displacing a portion of diesel consumed by diesel engines to generate electricity for the refinery. The palm oil refinery is currently operating two fuel oil fired boiler plant to supply steam for the refining process. Space has been allocated for a third oil fired boiler in the boiler room and is planned to be installed if the steam demand increases in the future. Powered is generated using 4 diesel engines, each with a capacity of producing 1.5MW power. The biomass boiler is expected to produce around 33 tonnes of steam every hour, where 14 tonnes will be consumed for process and 19 tonnes will be used to generate power using the steam turbine. The power generated by the steam turbine with a 1.4 MW capacity will be channelled to areas within the refinery. The biomass boiler is only expected to consume approximately 450kW of power and it will come directly from the diesel generators. The energy plant will be sourcing biomass waste from the neighbouring palm oil mills, which are owned by the same group as the palm oil refinery. Biomass is abundantly available in the region and was earlier incinerated, but since the ban on open air burning entered into force, the biomass must be disposed in the plantations and left to decay. From the palm oil milling process, three types of biomass waste is generated; mesocarp fibres (MF), palm kernel shells (PKS) and Empty Fruit Bunches (EFB), which can be used as fuel for energy generation. The project will reduce the negative environmental impact of the current utilization of fossil fuel to generate steam. The project will also provide an opportunity to manage the biomass waste in an environmental friendly way. The following describes how the project could be viable in terms of sustainable development, environmental sustainability, social sustainability and economic sustainability. Environmental sustainability 3

4 The Project is in line with the Malaysian Government s decision to intensify the development of Renewable Energy as the fifth fuel resource under the country s Fuel Diversification Policy, as stipulated in the objectives of the Third Outline Perspective Plan for (OPP3) and the Ninth Malaysia Plan ( ). Utilising biomass energy as the fifth fuel resource in this project is reducing the use of fossil fuel (fuel oil) and increases the use of local renewable resources such as biomass waste. Social sustainability The biomass energy system is developed and manufactured in Malaysia. The boilers will be designed by Boilermech Sdn. Bhd, a local company. Nevertheless, some of the major components for this boiler would be imported from a foreign counterpart, which leads to an inflow of technology and knowledge transfer to Malaysia. Also, the operations of this new system will require additional skills as it differs in terms operations with the conventional oil-fired boilers. The current workforce will be trained to operate the new plant and new qualified staff will be employed. This will improve the employees skills and provides an opening for employment or recruitment of skilled staff, particularly in the project region. Economic sustainability The project is expected to develop the energy related industries such as promoting the local company Kunak Refinery Sdn. Bhd. as an energy efficient biomass boiler technology user. As a long-term effect this will create higher demand for and spur the supply of efficient biomass boilers in the local market. Furthermore, the project will strengthen Malaysia s regional position in the biomass technology market. The project will lead to economic sustainability, as the fuel source is a sustainable, indigenous resource, which reduces fuel imports and negative impact on the foreign exchange. The project also have a positive impact on the economic performance of the palm oil refinery as their energy production will become more reliable and efficient and eliminate the risks of fluctuating oil prices, which will enable a more economic reliable production in general. 4

5 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) Kunak Refinery Sdn.Bhd No Denmark Nordjysk Elhandel No A.4. Technical description of the small-scale project activity: The project will displace steam generation from oil fired boilers and power generation on diesel engines by installing a biomass boiler and steam turbine. Baseline Scenario: The refinery s boiler plant has 2 fuel oil fired boilers each of a capacity of 11.3 TPH installed with space allocated for a third boiler to be installed. These boilers supplies steam for the refining process in the refinery. The power supply is from the power plant, where 4 diesel engines are installed and generate all the power required for the refinery. Each engine has a maximum power output of 1.5MW (total 6MW). Figure 1: Flow Chart for Baseline Scenario MFO as combustion fuel Fuel-Oil fired boilers Steam (process) Refinery Power from diesel generator 5

6 Project Scenario: The project will comprise the installation of one 35 TPH biomass boiler, which will generate steam for the refinery and additional steam for power generation in a steam turbine. The generated process steam will fully displace the process steam generated in the baseline scenario apart from periods of breakdown and maintenance where the existing fuel oil fired boilers are used as back-up. The power generated by the project will partly displace the power generation from diesel engines, as the power generation capacity is less than the refinery s power consumption. All power from the biomass plant will be supplied to the refinery and the biomass plants own consumption of power will be supplied from the existing diesel engines. Figure 2: Flow Chart for Project Scenario Biomass Biomassfired Boiler Steam (power) Steam (process) Steam Turbine Refinery Power from diesel generator Stage 1 Biomass is prepared and stored at the mill sites Stage 2 The biomass is transported from the mills into the project site (biomass plant) Stage 3 Biomass is utilized as fuel to the boiler plant to generate steam and power, which will be consumed by the refinery Stage 4 Ash from the combustion process will be utilized as soil conditioner (fertilizer) and as a medium to resurface the internal roads at the plantation area. 6

7 The new biomass boiler plant will also be powered by the same source, requiring about 450 kw of power. Also, a steam turbine will be installed to generate power from the balance steam produced at 19t/hr, after the consumption for refinery s process. The power generated will be supplied directly to dedicated areas within the refinery. As such, this power generated using steam turbine will be used to displace the power generated by using diesel generators. At the moment, the refinery consumes power around 3MW, where a portion of it will be supplied from the steam turbine which has a design capacity of 1.4MW. Nevertheless, the local grid electricity provider, Sabah Electricity Sdn. Bhd., may supply electricity to Kunak Refinery Sdn. Bhd. in the near future, but there is no written confirmation to date. As such, as long as the biomass plant consumes power from the diesel generators, the consumption of diesel for this activity would be accounted for as project emissions. The diesel generators are equipped with sufficient meters to record consumption. If Kunak Refinery Sdn. Bhd. obtains electricity from the grid, electricity consumption would be metered separately and accounted as project emissions. Table 1 below sums up the baseline and project scenarios through comparison of the two. Baseline and CDM Project Scenarios Characteristics Baseline Scenario Project Scenario Operating Boilers Two units of 11.3 t/hr One unit of 35 t/hr Fuel Input Fuel Oil Biomass Steam Turbine None 1 unit (Condensing Turbine) Waste None Boiler Ash 7

8 A.4.1. Location of the small-scale project activity: The project site is located in an area designated for palm oil refinery process approved by the Malaysian government in the town of Kunak (Pekan Kunak). The project site is approximately 86 km away from Tawau. As the plant is located in a designated area approved by the Malaysian government, the project blends in with the other operations in the area. Figure 3: Location of Kunak Town Longitude and Latitude location of Kunak town: N E A Host Party(ies): Malaysia is the host party for this project. A Region/State/Province etc.: Sabah A City/Town/Community etc: Kunak 8

9 A Details of physical location, including information allowing the unique identification of this small-scale project activity : Kunak Refinery Sdn Bhd Jalan Pangkalan, Off Jalan Kastam, Pekan Kunak, Kunak, Sabah, Malaysia A.4.2. Type and category(ies) and technology/measure of the small-scale project activity: The project is a small scale project activity and falls under the category I.C, Version 13 according to the Appendix B of the Simplified Modalities and Procedures for Small-Scale CDM project activities. It is a Thermal energy for the user with or without electricity project, displacing steam generation from oilfired steam boilers by biomass (EFB) combustion boilers. The energy in the form of steam will be for refinery consumption and power generation using a steam turbine. A.4.3 Estimated amount of emission reductions over the chosen crediting period: Annual estimation of emission reductions in tonnes Year of tco2 eqv 1 28, , , , , , , , , ,682 Total estimated reductions (tonnes of CO2 eqv ) 286,820 Total number of crediting years 10 Annual average over the crediting period of estimated reductions (tonnes of CO2 eqv ) 28,682 Detailed calculation is given in Annex 3. 9

10 A.4.4. Public funding of the small-scale project activity: The project will not receive any public funding that will result in a diversion of official development assistance. A.4.5. Confirmation that the small-scale project activity is not a debundled component of a large scale project activity: The project activity is not a debundled component of a larger project activity and there is no registered small-scale CDM project activity and there will not be applied to register another small-scale CDM project activity: With the same project participants; and In the same project category and technology/measure; and Registered within the previous 2 years; and Whose project boundary is within 1 km of the project boundary of the proposed smallscale activity at the closest point of a larger project activity. 10

11 SECTION B. Application of a baseline and monitoring methodology B.1. Title and reference of the approved baseline and monitoring methodology applied to the small-scale project activity: Title of baseline methodology: Thermal energy for the user with or without electricity, Type I.C Ver. 13 of the Simplified Modalities and Procedures for Small-Scale CDM project activities. B.2 Justification of the choice of the project category: The project activity qualifies to use the simplified methodology type I.C covers systems where the energy output is not exceeding 45 MW thermal. The boiler rating is 35 TPH. This corresponds to about 22 MW thermal and is lower than the prescribed threshold. Thus the simplified baseline and monitoring methodology of type I.C can be applied. B.3. Description of the project boundary: Referring to the Appendix B of the Simplified Modalities and Procedures for Small-Scale CDM project activities, project boundary is the physical, geographical site where the fuel combustion affected by the fuel-switching measure occurs. In this case the project boundary refers to the biomass plant itself. The biomass plant supplies steam to the refinery by combustion of biomass fuel. The waste product of the biomass boiler plant will be ashes. Figure 4 below defines the project boundary. 11

12 Palm Oil Refinery Plant Steam to Refinery (Process) Steam to Turbine (power generation) Biomass Fuel Storage Transportation Biomass Boiler Plant Biomass Fuel from Palm Oil Mills Ash Electricity from Diesel Genset/Grid Soil Application/ Road Resurfacing Figure 4: Project Boundary B.4. Description of baseline and its development: >> The most plausible baseline scenario has been identified considering the following factors: A. Current utilization of MFO (medium fuel oil) as fuel for boilers B. Current operations compliance with laws and regulations C. Feasibility of investing in alternative technologies A) MFO is utilized as a fuel source in the boiler plant to generate steam for the refinery. This is a common scenario within the industry. B) Replacing MFO as fuel source for boiler plants is not a requirement under existing laws and regulations. 12

13 C) Financial findings of the project activity with a low IRR shows no feasibility of the project activity. Please refer to Annex 5 for further details. Assumptions in the baseline scenario include the following: - Laws and regulations will not require replacing MFO as fuel source for boiler plants in the palm oil refinery plants within the project period. - No alternative technologies of fuel source in connection steam energy generation within the refinery become feasible as stand-alone projects within the project period. Key information, assumptions and data to determine the baseline scenario and the project scenario are presented in Table 2 below. Key Parameters and Assumptions N o Parameters Value Unit Source 1 Net Calorific Value of biomass, 4.85 MJ/kg Local Study* NCV biomass 2 Fuel efficiency of transport Litres/100km Local Study** 3 Fuel efficiency of pay-loader, 10 Litres/hr Project proponent η payloader 4 Turbine Specific Steam Consumption, SC turb 17 kg/kwh Project Proponent 5 Density of MFO, ρ MFO kg/l Project Proponent *PTM Study, Feasibility Study on Grid Connected Power Generation Using Biomass Cogeneration Technology, Pusat Tenaga Malaysia (PTM) **University of Malaya (2005) Energy Used in the Transportation Sector of Malaysia, Page 230, Technology used in absence of proposed project activity The refinery was commissioned in November 2006 and was furnished with 2 MFO fired boilers to generate steam for the process. Space is allocated in the boiler room for a third MFO fired boiler. The boilers are therefore less than two years old and would be able to operate for a long period before the need for major overhaul or replacement. The oil-fired boiler plant complies with existing laws and regulation and is operating without any illegal emissions and the plant is not under any legal or capacity pressure to install new technology to replace the existing oil-fired boilers. Continuation of the present practice does not involve any new investments. Considering the above, the most plausible baseline scenario is the continued use of oil-fired boiler plants to generate steam to the refinery. 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 small-scale CDM project activity: This section describes how the emissions are reduced below those that would have occurred in the absence of the project activity using the version 2.1 of Combined tool to identify the baseline scenario and demonstrate additionality to define the baseline scenario and the project activity. 13

14 Step 1: Identification of alternatives to the project activity consistent with current laws and regulations Sub-step 1a: Define alternatives to the project activity: Possible alternatives are defined and discussed in table 3 below. Table 3: Alternatives to the project activity No. Alternatives to the project activity 1 Project activity carried out without being registered as a CDM project 2 Utilization of biomass resource other than palm based 3 The continuation of the current situation, i.e. utilizing oil-fired boilers to generate steam to the refinery Sub-step 1b. Consistency with mandatory applicable laws and regulations: All the alternatives proposed in Table 3 above are in compliance with the Malaysian environment, safety and health law(s). 14

15 Step 2: Barrier analysis Sub-step 2a: Identify barriers that would prevent the implementation of alternative scenarios Table 4: Plausibility of implementation of the proposed alternatives No Alternatives to the Plausibility of implementation project activity 1 Project activity carried out without being registered as a CDM project Barrier: Financial There are no rules or regulations demanding of the palm oil refineries to use biomass and/or reduce the consumption of fossil fuels. The project activity is capital intensive and the project must be competitive to the use of medium fuel oil (MFO) in the existing plant. Sourcing biomass is also a more difficult and cumbersome than the purchase of MFO and therefore a more unreliable energy source, which requires 2 Utilization of biomass resource other than palm based 3 The continuation of the current situation, i.e. utilizing oil-fired boilers to generate steam to the refinery Not plausible Plausible back up facilities to avoid interruption in the energy supply. Barrier: Technological Oil palm plantation has been practiced widely throughout Malaysia and has been the main export commodity. At present, Malaysia is the second largest nation in terms of crude palm oil (CPO) producer. As the project owner is also a owner of a number of palm oil plantations and mills, it will be the most viable and reliable solution to source the biomass at palm oil mills. Biomass from palm oil mills are also considered to be cheap, compared to e.g. wood waste. In the absence of the CDM project activity the current situation will continue, as this is an effective and proven way of generating steam. There are no rules or regulation opposing the current practice. The plant only needs to comply with Std C of Environmental Quality Act, Clean Air Regulation which is 0.4g/Nm 3, which it fully complies at present.. As the boiler plant was commissioned in November 2006 the plant still has a long technical lifetime left to operate. Table 4 elaborates further on the alternatives to a CDM project activity, with only one plausible alternative: The continued generation of steam energy through the utilization of oil-fired boilers. Sub-step 2b: Eliminate alternative scenarios which are prevented by the identified barrier From the table above, it is evident that the alternatives of project activity carried out without being registered as a CDM project and utilization of biomass resource other than palm based are scenarios which are not plausible to be implemented. As such, the only plausible scenario would be to continue the current practice of using MFO boilers. 15

16 Utilising empty fruit bunches for combustion and energy production is still new in Malaysia. Especially the technology for handling and drying the biomass is still undergoing research and development. The biomass used in this project will be pressed and shredded by using electricity sourced from the existing biomass plant at the mill. As the technology for biomass boilers is still new available in Malaysia and the capacity to design and manufacture some of the parts does not exist, there is a technology barrier that leads to higher risk and higher costs for the project than in a situation where more conventional technologies was to be used. Scepticism about performance and reliability of new biomass boiler technology is one of the factors limiting project development. Kunak Refinery is able to process approximately 40,000 metric tonnes of crude palm oil (CPO) on monthly basis, which leads to a revenue of RM 1.6 billion a year. The amount of MFO utilized in the baseline scenario amounts up to RM 60 million a year. By comparing both the figures, the percentage of MFO used in terms of monetary value is only about 3.5% of the total revenue gained from refining CPO. As such, it is a high risk venture for Kunak Refinery to install a biomass boiler to generate steam supplied to refinery, which is technologically new and leads to lower reliability than conventional MFO boilers. Step 3: Investment analysis Determine appropriate analysis method The steam generated by the project activity will displace steam from the oil fired steam generation in the baseline, which result in a saving from mainly oil consumption. Option III Benchmark analysis is appropriate, as the cost and benefit of the project should be compared with the cost and benefits of the alternative. To determine if the project activity is financially less attractive than the alternatives without the revenue form the sale of CERs, a financial indicator has been identified along with a relevant benchmark value. Option III. Benchmark analysis Kunak Refinery Sdn Bhd, part of the Sawit Kinabalu group, uses a financial indicator as a benchmark to execute a project. The financial indicator used in this project is Return on Asset (ROA) calculation based on the Sawit Kinabalu s annual financial report. Sawit Kinabalu has an average ROA of 10 %, from year As such, Sawit Kinabalu would be expecting a Internal Rate of Return (IRR) of 10% from this project. Calculation and comparison of financial indicators The project utilizes biomass wastes which are abundantly available in the mills. But in order to obtain it, the project proponent needs to purchase it under an agreement and transport it to the biomass plant, which involves costs. The table below summarises the financial analysis by providing the IRR values with respect to the CER prices. The project becomes feasible with a CER price of

17 Table 5: IRR at different CER prices Financial indicator/cer price IRR-Project Activity (%) 10.3% 11.4% 12.5% 13.5% Sensitivity analysis: The refinery has two oil-fired boilers and a diesel generator plant installed, which are still in good operating condition. The boilers and the generator set were only installed in November 2006, which is considerably new compared to the technical life span of these units. Thus the current supply of steam from the boiler plant and power from the diesel plant meets the requirements of the refinery and is expected to do so in the future years. Therefore, there is no immediate need to change the current practice. The bio-energy plant with steam turbine involves the installation of new equipment and an investment cost of approximately RM 23 Million (refer Annex 5) for the equipment, installation and commissioning. As the bio-energy projects of this type are relative new in Malaysia there is no special finance scheme available and the bank finance must normally be based on the financial performance and collaterals of the borrower. The investment risk is fully undertaken by the project proponent Kunak Refinery Sdn. Bhd. The existing oil-fired boilers will be used for back up in periods where the bio-energy plant is unable to generate steam due to maintenance, breakdown or other disruptions. By applying the guidance from Annex 35: Guidance on Assessment of Investment Analysis, the sensitivity analysis is summarized as below. The table below shows that either with a decrease of 10% in the total biomass cost (savings) or decrease of 10% in the MFO s price, the IRR without CDM income is still below Kunak Refinery s project benchmark of 10%. For all other scenarios, variation of +/- 10% results in negative IRR. Table 6: Summary of Sensitivity Analysis (IRR without CDM) No Scenario BAU - 10% +10% 1 Sensitivity : Total Biomass Cost Negative 8.3% Negative 2 Sensitivity : Capex Negative Negative Negative Sensitivity : MFO Price (Diesel 3 Negative Negative 6.2% Price)* *The sensitivity for MFO price and Diesel price is considered to be the same as both are petroleum derived fuel. In order to achieve a 10% IRR without the income from CDM, the total biomass cost should be 13% lower than the assumed price. This is not considered to be realistic to obtain as the market demand for biomass is increasing and the price is expected to further increase and not decrease. MFO should increase by 17%, which is possible but would have an impact on the biomass value as an increase in fuel prices would lead to increase biomass demand. The higher cost of biomass will decrease the project s IRR. As for Capex, only a decrease of 37% from the assumed price will result in an IRR of 10%. 17

18 Other financial risks in the project can be summarised as follows: Price of biomass fuel: Biomass waste is abundantly available in Malaysia, but in order to use it for energy purposes it will require processing in terms of shredding and pressing, furthermore the biomass must be transported from the source to the biomass energy plant. As such the biomass has a price, which is based on both costs for processing and transporting as well as a market value due to demand. It is expected that the price for biomass will increase in the future as fossil fuel prices are increasing. Operation and maintenance: The technology is new and will require more maintenance than a conventional oil-fired boiler plant. Furthermore the staff to operate and service the bio-energy plant must be skilled in biomass boiler coupled with steam turbine operation, which is more specialised than conventional oil-fired boiler operation. It also requires more manpower for the fuel (biomass) handling process, both from the mill and refinery site. Step 4: Common practice analysis The common practice in the Malaysian palm oil refinery industry is to medium-fuel oil or fossil fuel to generate steam for the refinery s use. There are also some refineries which opt for natural gas if the refinery is located within the natural gas distribution network. The reason for refineries to use this fuel is because the supply is stable and the energy obtained by combustion is high. As such, it is very important for refineries to have a stable fuel supply and sufficient energy production to produce refined oil. Based on the step-by-step additionality analysis carried out above, the project is proven to be additional. 18

19 B.6. Emission reductions: B.6.1. Explanation of methodological choices: >> The project uses small-scale methodology Thermal energy for the user, Type I.C Ver. 13 of the Simplified Modalities and Procedures for Small-Scale CDM project activities. The project activity qualifies to use the simplified methodology type I.C covers systems where the energy output is not exceeding 45 MW thermal. The boiler rating is 35t/hr. This corresponds to about 22 MW thermal and is lower than the prescribed threshold. Thus the simplified baseline and monitoring methodology of type I.C can be applied. The power (energy) generated using steam turbines will be fully consumed by the areas within the refinery. This power (energy) generation will be calculated for its emission reductions. Project emissions: This section will explain on the methodological choices made in connection with calculating the project emissions. PE y (tco 2eqv ) = PE transp (tco 2eqv ) + PE diesel (tco 2eqv ) + PE elec (tco 2eqv ) Where; PE y = total project emission in the year y PE transp = emission from incremental transportation PE diesel = project emission from diesel consumption PE elec = project emission from electricity Project emissions from transportation, PE transp The biomass fuel is transported from two mills using trucks. Each truck has been estimate to carry a maximum weight of only 20 tonnes per trip. Therefore, this activity has been accounted for under project emissions. Step 1: Project Emissions from Transportations PE transp tco 2eqv /yr = N (trip) x DAF (km/trip) x EF km_co2 (kgco 2 /km) 1000 (kg/t) Where; N DAF EF km_co2 = total number of trips from mills (trip) = Average Distance per Trip for Transportation (km/trip) = kg CO 2 emitted per km for transportation (kgco 2 /km) 19

20 Project emissions from diesel, PE diesel Diesel is consumed as fuel to handle the biomass fuel at the mill and refinery. At the mill, the biomass fuel will be handled by two payloaders (frontloaders) in order to arrange them prior to being transported to the refinery. When the fuel arrives at the refinery, another set of two payloaders (frontloaders) will be dedicated to manage the biomass fuel; segregating them before being utilized as fuel to the boiler. In addition, the payloaders at the refinery will also be utilized to handle boiler ash (by product) generated by the boiler. The ashes will be utilized as soil conditioners. The payloaders will be working approximately 8 hours a day to handle the biomass fuel and the ashes. The payloaders are estimated to have a minimum fuel efficiency of 10litres/hour. PE diesel (tco 2eqv ) = Q diesel (l) x ρ diesel (kg/l) 1000 (kg/t) x NCV diesel (TJ/t) x EF CO2_diesel (tco 2eqv /TJ) Q diesel ρ diesel NCV diesel EF CO2_diesel = quantity of diesel consumed by the payloaders (mill and refinery) (l) = diesel density at standard temperature and pressure (kg/l) = net calorific value for diesel (TJ/t) = CO 2 emission factor for fuel (diesel) use due to transportation (tco 2eqv /TJ) Project emissions from electricity, PE elec The biomass boiler would require power of approximately 450kW. Diesel generators with an efficiency of 0.26 litres/kw ratio, would be utilized meet this demand. With reference to I.D, Version 13 according to the Appendix B of the Simplified Modalities and Procedures for Small-Scale CDM project activities, the emission factor for diesel generators with a load factor of more than 200kW and operating time of 24hr will be 0.8tCO 2eqv /MWh. PE elec (tco 2eqv ) = EC bio (MWh) x EF elec_diesel (tco 2eqv /MWh) EC bio EF elec_diesel = power consumed by the bio-energy plant (MWh) = emission factor for electricity generated by using diesel (tco 2eqv /MWh) Emission Reductions from Steam Turbine Energy Generation, ER EG,y : ER EG,y (tco 2eqv ) = EG turb (MWh) x EF CO2_elec (tco 2eqv /MWh) EG y EF elec_diesel = energy generated from steam turbine in the year y (MWh) = emission factor for electricity generated by displacing diesel (tco 2eqv /MWh) 20

21 Baseline emissions: From paragraph 10 BE y, (tco 2eqv ) = HG y (TJ) x EF CO2_MFO (tco 2eqv /TJ) η th (boiler efficiency) Where; BE y = baseline emissions from steam/heat displaced by the project activity in the year y (tco2 eqv ). HG y = net quantity of steam/heat supplied by the project activity during the year y (TJ). EF CO2_MFO = CO 2 emission factor per unit of energy of the fuel that would have been used in the baseline plant in (tco 2eqv /TJ) η th = efficiency of the plant using fossil fuel that would have been used in the absence of the project activity. Leakage emissions: The equipment in the biomass energy plant is new and is not transferred from other locations, so no leakage is occurring. The project sources biomass (EFB) from neighbouring palm oil mills, also owned by the Sawit Kinabalu Group. This biomass is abundantly available in the region and the amount consumed by the project activity will not deprive others from using biomass for their needs. Emission reductions: This section will expand on the methodological choices made in connection with calculating the emission reductions based on the methodological choices in the previous sections. ER y (tco 2eqv /yr) = BE y (tco 2eqv /yr) + ER EG,y (tco 2eqv /yr) - PE y (tco 2eqv /yr) Where; ER y = total emission reductions in the year y 21

22 B.6.2. Data and parameters that are available at validation: EF CO2_MFO Data / Parameter: Data unit: tco 2eqv /TJ Description: CO 2 emission factor Source of data used: IPCC 2006 Value applied: 77.4 Justification of the Value as defined in IPCC 2006 choice of data or description of measurement methods and procedures actually applied : Any comment: - EF CO2_diesel Data / Parameter: Data unit: tco 2eqv /TJ Description: CO 2 emission factor (diesel consumption) Source of data used: IPCC 2006 Value applied: 74.8 Justification of the Value as defined in IPCC 2006 choice of data or description of measurement methods and procedures actually applied : Any comment: - EF elec_diesel Data / Parameter: Data unit: tco 2eqv /MWh Description: CO 2 emission factor (energy generation by using diesel generators) Source of data used: CDM SSC ID Ver. 13 Value applied: 0.8 Justification of the Value as defined in I.D, Version 13 according to the Appendix B of the choice of data or Simplified Modalities and Procedures for Small-Scale CDM project activities. description of measurement methods and procedures actually applied : Any comment: - 22

23 NCV diesel Data / Parameter: Data unit: TJ/t Description: Net calorific value obtained by combustion Source of data used: IPCC 2006 Value applied: Justification of the Value as defined in IPCC 2006 choice of data or description of measurement methods and procedures actually applied : Any comment: - Data / Parameter: ρ diesel Data unit: kg/l Description: Diesel Density Source of data used: Caltex MSDS Value applied: 0.85 Justification of the Data obtained from MSDS for Caltex diesel. choice of data or ( description of measurement methods and procedures actually applied : Any comment: - EF km_co2 Data / Parameter: Data unit: kgco 2 /km Description: Fuel Efficiency Source of data used: Economic Planning Unit study Value applied: 0.9 Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: Based on IPCC 2006, 1 liter of diesel emits 2.73 kg CO2. A heavy duty truck can travel approximately 3 km using 1 liter of diesel according to the source of data mentioned above. Thus, the emission factor for heavy duty diesel engine is obtained by dividing 2.73 kg CO 2 /liter with 3 km/liter. *32.85 l/100km; Refer pg 230 of ENERGY USE IN THE TRANSPORTATION SECTOR OF MALAYSIA FINAL REPORT, FOR A DANIDA-FUNDED PROJECT ON RENEWABLE ENERGY & ENERGY EFFICIENCY 23

24 η th Data / Parameter: Data unit: % Description: MFO boiler efficiency Source of data used: Project Proponent Value applied: 85 Justification of the The value applied was obtained from the SIRIM boiler test report choice of data or description of measurement methods and procedures actually applied : Any comment: - 24

25 B.6.3 Ex-ante calculation of emission reductions: >> Baseline Emissions, BE y A B C D = A x B / C Net Quantity of Steam Supplied HG y EF CO2_MFO η th (boiler efficiency) Baseline Emissions BE y TJ/yr tco 2eqv /TJ tco 2eqv /yr ,759 Emission Reductions from Steam Turbine Energy Generation, ER EG,y These emission reductions are not part of the baseline emissions, where the baseline emissions would have been continuation of MFO boilers with diesel generator sets. The project activity is installation of biomass boiler coupled with a steam turbine, both to offset the MFO consumption and also to produce power from the turbine. A B C = A / B D Steam for Power Production SG y Specific Turbine Consumption SC turb Power Produced Runnin g Hours E = C x D / 1000 Energy Generated EG y F Emission Coefficient EF elec_diesel G = E x F Emission Reductions ER EG,y kg/h kg/kwh kw h MWh tco2eq/mwh tco2eq ,289 Project Emissions, PE y Project emission from diesel consumption due to transportation of the biomass fuel from neighbouring mills. Project Emissions from Transportation, PE transp A B C D E = A x B x C / D N DAF EF km_co2 PE transp Trip km/trip kgco2/km kg/t tco 2eqv /yr 7, Project emissions due to utilization of diesel (4 payloaders) to handle biomass fuel (and ash) at the mill and refinery 25

26 Project Emissions from Diesel, PE diesel A B C D E F = A x B / C x D x E Q diesel ρ diesel NCV diesel EF CO2_diesel PE diesel l kg/l kg/t TJ/t tco 2eqv /TJ tco 2eqv /year 96, Project emissions due to power generation by diesel generators to power the biomass plant The project emissions from power generated from diesel generator to power biomass plant are calculated with reference to I.D., Version 13 according to the Appendix B of the Simplified Modalities and Procedures for Small-Scale CDM project activities. Project Emissions from Electricity, PE elec A B C = A x B EC bio EF elec_diesel PE elec MWh tco2eqv/mwh tco 2eqv /year ,416 Leakage As described in section B.6.1, there is no significant leakage in this project activity. Please refer to Annex 3 for more details on estimation of emission reductions throughout the crediting period. 26

27 B.6.4 >> Summary of the ex-ante estimation of emission reductions: Year Estimation of project activity emissions Estimation of emission reductions from energy generation Estimation of baseline emissions Estimation of leakage Estimation of overall emissions reductions tco 2eqv tco 2eqv tco 2eqv tco 2eqv tco 2eqv 1 3,366 6,289 25, , ,366 6,289 25, , ,366 6,289 25, , ,366 6,289 25, , ,366 6,289 25, , ,366 6,289 25, , ,366 6,289 25, , ,366 6,289 25, , ,366 6,289 25, , ,366 6,289 25, ,682 Total (tonnes of CO 2eqv ) 33,660 62, , ,820 27

28 B.7 Application of a monitoring methodology and description of the monitoring plan: Title of the approved monitoring methodology is: Thermal energy for the user, Type I.C. Version 13, in Appendix B of the Simplified Modalities and Procedures for Small-Scale CDM project activities. B.7.1 Data and parameters monitored: (Copy this table for each data and parameter) Data / Parameter: HG y Data unit: tonne (t)/yr Description: Net quantity of steam supplied to the refinery in a year y Source of data to be Flow meter data record sheet at the refinery used: Value of data 105,750 Description of Measurement will be taken from an installed flow meter at the refinery. measurement methods SCADA system will be installed at the boiler plant and readings will be obtained and procedures to be on a periodic (hourly/half-hourly) basis. The plant technician will electronically applied: archive the SCADA readings in a separate hard drive. The monthly and yearly quantity of steam supplied to the refinery will be calculated based on the QA/QC procedures to be applied: Any comment: available record sheet data. The refinery supervisor will verify the record sheets every day and all the data kept in both soft copy and hardcopy at the refinery for at least 2 years after the crediting period. The flow meter will also be calibrated as required by the manufacturer s recommendations. The data range given is based on an estimation derived from the historical data available from the refinery. The steam estimated is based on historical ratio of medium fuel oil (MFO) for every tonne of CPO (crude palm oil) produced. The uncertainty of the data for this parameter is expected to be low. The value above is a net quantity supplied to the refinery. The gross quantity of steam produced would be the steam supplied to the refinery added with the steam supplied to the steam turbine for power generation. 28

29 Data / Parameter: EG y Data unit: MWh Description: Energy generated by steam turbine in the year y Source of data to be Totalizer reading at the switch board panel for steam turbine used: Value of data 7,862 Description of Measurement will be taken from an installed totalizer meter after the measurement methods steam turbine. SCADA system will be installed at the boiler plant and and procedures to be readings will be obtained on a periodic (hourly/half-hourly) basis. The applied: plant technician will electronically archive the SCADA readings in a separate hard drive. The monthly and yearly quantity of energy supplied to areas within the refinery will be recorded based on the available record QA/QC procedures to be applied: Any comment: sheet data. Original data recorded by the weighbridge clerk will be counter tallied with data recorded at boiler plant Data / Parameter: N Data unit: trip Description: Number of trips Source of data to be Log book at weighbridge used: Value of data 7,775 Description of measurement methods and procedures to be The operator of the weighbridge will record each incoming truck s registry number to the boiler plant. applied: QA/QC procedures to be applied: Any comment: Original data recorded by the weighbridge clerk will be counter tallied with data recorded at boiler plant 29

30 Data / Parameter: Data unit: Description: Source of data to be used: Value of data Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: Any comment: Data / Parameter: Data unit: Description: Source of data used: Value of data Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: Any comment: DAF km/trip Average distance traveled by truck for biomass fuel delivery to the boiler plant Truck s speed/distance recording meter 98 km/trip The biomass fuel will be sourced from neighbouring mills; The two mills used for calculation of the value is Kunak Mill and Apas Balung Mill, where most of the biomass is intended to be sourced. Initially, the truck driver will record the meter reading pre and post trip. A database of point of delivery (look up table) and distance will be developed which can be used as a reference for calculating the project emissions from transportation. The distance travelled by the truck will be multiplied with fuel efficiency factor (0.9 kgco 2 /km) in order to calculate project emissions from transportation Confirmation by supervisor & bills/invoices for fuel purchased from fuel suppliers. All monitoring data will be electronically archived for a period of 2 years after crediting. EC bio MWh Energy requirement for mechanical equipment at the biomass boiler plant Measure energy requirement at the bio-energy plant 3020 (estimation) Actual quantity of energy will be calculated from the MWh totalizer reading at the biomass boiler plant. The figure will be multiplied with genset efficiency factor (0.29 l/kw) to obtain diesel consumption. The estimation is based maximum electricity demand of the biomass boiler plant operating hours of 7200 hours in a year. Confirmation by supervisor for on-site operation hours and totalizer meter reading. All monitoring data will be electronically archived for a period of 2 years after crediting. 30

31 Data / Parameter: Data unit: Description: Source of data to be used: Value of data Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: Any comment: Q biomass Tonnes Quantity of biomass that are utilised for biomass boiler Weighbridge station at project site 155,502 tonnes/yr The amount of biomass going into the boiler will be weighed at the weighbridge station located at the storage area daily. Each type of biomass will be weighed before fired into the new biomass boiler. All the data will be kept for at least 2 years after the crediting period in both hard and softcopy. M biomass Data / Parameter: Data unit: % Description: Moisture content of biomass utilised in the bio-energy plant Source of data to be Lab analysis at the project site (or any accredited lab) used: Value of data On site measurement Description of The moisture content of the biomass fuel will be measured daily using samples measurement methods taken before fired into the new biomass boiler. and procedures to be applied: QA/QC procedures to All the data will be kept for at least 2 years after the crediting period in both hard be applied: Any comment: and softcopy. Reference for some of the biomass residue values: Fresh EFB@64%, fibres@36% moisture, PKS@16%. (Feasibility Study On Grid Connected Power Generation Using Biomass Cogeneration Technology, p.g.13) 31

32 Data / Parameter: Data unit: Description: Source of data to be used: Value of data Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: NCV biomass GJ/ton of dry matter Net calorific value of biomass utilised Measurement from accredited laboratories On site measurement (PDD applied: 4.85 GJ/ton) Measurement shall be carried out at accredited laboratories and according to relevant international standard. NCV should be measured quarterly taking at least 3 samples for each measurement. The biomass samples should be taken before fired into the new biomass boiler Check consistency of measurement by comparing the measurement results with measurement of previous years, relevant data sources (e.g values in literature, values used in national GHG inventory) and default values by IPCC. If the measurement results differ significantly (more than 20%) from previous measurement or other relevant data sources, conduct additional measurements. All the data will be kept for at least 2 years after the crediting period in both hard and softcopy. Any comment: Reference for some of the NCV values : 4.85 GJ/ton Fresh EFB@64% moisture, GJ/tonne fibres@36% moisture, GJ/ton PKS@16% moisture. (Feasibility Study On Grid Connected Power Generation Using Biomass Cogeneration Technology, p.g.13) Data / Parameter: Data unit: Description: Source of data used: Value of data Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: Any comment: Q diesel liters/year Quantity of diesel utilized to handle biomass fuel (and ash) at the mill and refinery Measure volume of diesel consumed by biomass fuel and ash handling process 96,000 (estimation) Actual quantity of diesel used will be monitored from the monthly bills or invoices for diesel purchase. The value is based on efficiency of fuel efficiency payloaders. Confirmation by supervisor & bills/invoices for diesel purchased from fuel suppliers. All monitoring data will be electronically archived for a period of 2 years after crediting. 32

33 B.7.2 Description of the monitoring plan: >> Operation of biomass boiler The operating conditions of the biomass boiler plant will be determined by the project proponent, Kunak Refinery Sdn. Bhd. These conditions, as the baseline oil-fired boilers, will be monitored thoroughly in order to obtain optimum steam output from the boiler. Steam Production The steam production will be recorded through an incoming flowmeter at the refinery. This flowmeter records the value in totalizer form and will be compared to CPO production as a cross-check process. The steam generated will be used to power the refinery plant. Diesel Consumption Diesel consumption will be monitored at the refinery and the mills, where diesel will be used by payloaders (machinery) to handle biomass fuel and ash from the boiler. These consumptions will be monitored directly from the invoices. Power Consumption The power consumption will be monitored at the biomass boiler plant with a totalizer flowmeter. This meter will provide a reading of the amount of power consumed by the biomass plant. Biomass Plant Maintenance The biomass boiler plant, which will be replacing two oil-fired (MFO) boilers, produces an annual steam amount of approximately 100,000 tonnes. These steam generation needs to be produced continuously to be supplied to the refinery plant. In the case where the biomass boiler plant is down for maintenance, the MFO boiler plants will be operated to produce steam. These steam generation will not be accounted for under emission reductions. Operation and Management Structure Kunak Refinery Sdn Bhd. has an operational and management structure in place to monitor emission reductions from the project activity. Specific personnel will be assigned to be responsible for project management as well as for all the different parameters to be monitored and reported. Specifically, the following roles and responsibilities will be assigned: General Manager Financial and policy matters Refinery Manager Overall support and operation of all the CDM Project Project Coordinator Design, training, system establishment and managing the CDM project Refinery Engineer Design, training, system establishment and managing the CDM project Technicians/Supervisors Daily operations including sampling, recording of readings and filing of records. The headquarters of Kunak Refinery Sdn. Bhd. will receive and screen monthly monitoring reports from the project site and assign a third party consultant or in-house expertise to calculate the emission reduction and prepare annual monitoring reports. All the raw data available at project site will also be available at the head quarters. 33