Development of District Energy Supply Business by Introducing Co-generation

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Bennett Farmer
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1 JCM Feasibility Study (FS) 2015 Summary of the Final Report Development of District Energy Supply Business by Introducing Co-generation ( Implementing Entity: JGC Corporation ) 1.Overview of the proposed JCM Project Company X: Studies on policy, regulation and actual cases of co-generation system Study partners Company Y: Basic design of co-generation system Company Z: Studies on permits related to co-generation system Project site Description of project Expected project implementer Jakarta, Indonesia This project is to introduce highly-efficient co-generation system fueled by city gas into complex buildings consisting of office, apartment and hotel in central Jakarta, and to develop a model of district energy supply that contributes to carbon dioxide (CO2) emission reduction and stable energy supply. Japan JGC Corporation Host country Local Real Estate Developer (Company A) Initial investment Annual maintenance cost Willingness to investment 139 billion rupiah 5 billion rupiah All-equity financed by JGC Corporation Date of groundbreaking Year 2019 Construction period 18 months Date of project commencement Year 2020 Financial plan of project CO2 emission reductions GHG emission reductions In accordance with the negative list of foreign investment, 49% of initial investment is to be made by JGC corporation while the rest made by a local real estate developer. 194,880(tCO2) =Annual Reduction 12,992(tCO2/year) Durable Years 15 (years) Since the emissions from this project are mainly from carbon dioxide, the GHG emission reductions are the same as above mentioned CO2 emission reductions. I - 13

2 2. Target Project of the Study (1)Outline of the Project The objective of this project is to introduce highly-efficient city gas fuelled co-generation system into complex buildings consisting of office, apartment and hotel in central Jakarta, and to develop a model of district energy supply that contributes to CO2 emission reduction and stable energy supply. (2)Background of the Project A local real estate developer, Company A plans to develop complex buildings consisting of office, apartment and hotel in central Jakarta. JGC plans to introduce a co-generation system into the buildings. The advantage of co-generation system are as follows Highly-efficient operation by utilization of waste heat in the presence of heat consumer in nearby area. Cost-competitive system compared with grid electricity by utilization of city gas whose price is lower than that Contribution to environmental friendliness (CO2 emission reduction) Stable energy supply Contribution to BCP (Business Continuity Planning) 3. Study Plan (1) Subject and Contents of the Study In order to meet this objective, the feasibility study focused upon the following points. Current situation of gas engines in Jakarta Perspective of stakeholders (central government, local government, PLN and PGN) on co-generation system Energy price trend Regulation and licenses Business scheme Condition for the feasibility study Feasible co-generation system Economic performance CO2 emission reductions I - 14

3 (2) Organizational Plan of the Study Organization Relationship Plan of Study JGC Corporation Head of this Feasibility Study Coordination and management of overall study Company X Outsourcing Investigation on policy, regulations and actual partner examples of co-generation systems in Jakarta. Company Y Outsourcing partner Basic design support of co-generation system Company Z Outsourcing partner Basic studies on co-generation system business (3)Schedule of the Study Task Aug Sep Oct Nov Dec Jan Feb Investigation Trip Study on Policy, Regulations, Permits Study on existing co-generations Condition of co-generation business Basic design of co-generation Project Plan Economic Analysis Conference, Reporting, etc. Preparation of Final Report Kickoff Meeting Progress Report Final Report Reporting Meeting in Bogor I - 15

4 4.Study Results (1)Feasibility of the Project 1) Co-generation System The co-generation system applied in this project is indicated in the following figure. Fig.1 Co-generation System Flow Grid Electricity Gas Engine Electricity: 35 GWh/yr Absorption Chiller City Gas Cooling Tower Complex Buildings Gas Engine Absorption Chiller Water Cooling Tower Gas fired Absorption Chiller Cooling Tower Cold water: 27 GWh/yr (Difference between Supply and Return) Electricity City Gas Cold Water (Supply) Cold Water (Return) Clean Water 2) Project Scope Fig.2 Scope of the Project Complex Buildings (Office, Apartment, Hotel) FCU FCU FCU Meter Meter Meter Project Scope FCU Meter Electricity (PLN) Gas (PGN) Water (PALYJA) Elec. Meter Gas Meter Water Meter PIP, Elec. Gas Engine Hot Water Facility Building Chiller Chiller Elec. Cold Water PFP Header PFP FCU: Fan Coil Unit : Distribution Board PFP: Power Feeder Panel PIP: Power Incoming Panel I - 16

5 07/ / / / / / / / / /2015 PLN's Electricity Tariff [Rp./kWh] 3) Current Condition in Indonesia Co-generation system is still unpopular in Jakarta especially commercial market. Spread of energy saving system also contributes to sustainable society in parallel l to power plant expansion. The following figure shows the past trend of electricity tariff. After the tariff increased with government subsidy cut by around 2014, the tariff fluctuated due to tariff adjustment based on ICP(Indonesian Crude Price), exchange rate and inflation Fig.3 Trend of Electricity Tariff (PLN) Household(R-1, 2200VA) Household(R-2, kVA) Household(R-3, 6.6kVA) Business(B-2, kva) Business(B-3, 200 kva 超 ) Month/Year I - 17

6 To understand stakeholders perspectives, our study conducted interview with central government, local government, PLN and PGN. Each stakeholder s perspective is shown below. Fig.4 Stakeholders Perspectives ESDM PLN PGN ESDM anticipates private sector's investment on electricity business as the electricity generation capacity is not sufficient in Indonesia. Basically one electricity company shall be in one business area for public electricity supply under the current electricity regulation. If current electricity company's supply is not enough, other company is able to obtain business area license. PLN supposes the electricity capacity is sufficient in Jakarta. Business area license may be given to private company where it is difficult for PLN to supply. PGN is supportive for installing co-generation system. 4) Business Scheme The following three business schemes are possible for this project. Fig.5 Supposed Business Scheme for the Project Business Scheme Permit Remark In-house Electricity Generation Permit of Electricity for Own Use (IUKS) Supply area is limited to company-owned area. Business Area License and Need to obtain business area Electricity Generation Permit of Electricity for license. It is possible if PLN and Selling Public (IUKU) agrees on it. Independent Power Producer (IPP) Permit of Electricity for Public (IUKU) 100 % of generated electricity is supplied to PLN. Since IPP scheme can supply only to PLN, it does not meet the project s purpose. Although the scheme of In-house Electricity Generation is easier to obtain permits, the supply area is limited to the area owned by the company. In this feasibility study, the scheme of Electricity Generation and Selling is selected under the assumption that the business area license is obtained from PLN. If the business area license were open to private company, more business opportunity born and energy efficient technology could be adopted. I - 18

7 5) Implementation Plan of the Project Fig.6 Business Scheme PLN PGN Elec. City Gas Real Estate Development Company Area for Rent Selling of Elec and Heat Area for Sale Tenant of Rental Office Resident of Rental Apartment PALYJA Water Tenant of strata Office Resident of Strata Apartment Energy Service Operator Operation of Cogeneration Manufacturer Fig.7 Organization structure General Manager (1 person) Technical Division Manager (1 person) Financial Division Manager (Combined with General Manager) Operator Team Maintenance Team (2 persons x 3 shift ) (Outsourcing) 6) Financial Plan of the Project The conditions and results for the feasibility study are indicated below. <Investment> Equipment [billion Rp] 64 Building [billion Rp] 5 Total [billion Rp] 69 <Other Conditions> Corporate income tax 25% Depreciation Period Buildings: 20 years Facilities: 16 years Exchange Rate UDR-USD: 13,333 IDR/USD IDR-JPY: 110 IDR/JPY Business Period Construction: 2 years Operation: 15 years I - 19

8 <Result of Economic Analysis> Pay Back Periods : 11 years ROI: 6% (2) Permits and Licenses for the Project The main permits necessary for the project is shown in the table below. Fig.8 Main Permits Necessary for the Project Time to Apply Before and After Company Foundation Before and After Construction After Construction Name of Permit IP, Location Permit, etc. SIPPT, etc. Where to Apply BKPM DKI Jakarta Content Permits of Foreign Investment and Company Foundation Permits related to land development AMDAL, etc. DKI Jakarta Environmental Permits IMB, etc. DKI Jakarta Construction Permits SLO, IUKU, Permits related to Electricity Business Area DKI Jakarta Business License, etc. (3) Contribution from Japan The human resource is limited in Indonesia in terms of development, design, engineering, operation and maintenance of co-generation systems. Since some co-generation systems like this project s one need high spec skill to handle, related technologies developed by Japanese companies could be differentiated from foreign competitors. This model project could be applied into many other sites. It could result in transfer of some technologies. It could also lead to maintenance skill transfer if Japanese high efficient gas engines and chillers that require the skill are introduced. The initial investment of this project is approximately 100 billion rupiah. If the number of similar projects becomes 50 sites, the total investment could reach 5 trillion rupiah. Since the operation and maintenance staff are needed for stable operation of the co-generation, the job creation also be expected. (4) Environmental Integrity and Sustainable Development in Host Country 1) Environmental Integrity According to the hearing investigation from Ministry of Environment Indonesia, AMDAL is to be applied as one project that combines co-generation project and complex building development project since co-generation is located on the area where the complex buildings are to be built. AMDAL consists of KA, ANDAL RKL-RPL. According to the hearing investigation from Ministry of Environment Indonesia and Environmental Division of DKI Jakarta, the following environmental standards shall be respected. I - 20

9 Category Air Emission Waste water Noise Vibration Fig.9 Environmental Standards Name PERATURAN MENTERI NEGARA LINGKUNGAN HIDUP NOMOR 21 TAHUN 2008 PERATURAN GUBERNUR PROVINSI DAERAH KHUSUS IBUKOTA JAKARTA NOMOR 69 TAHUN 2013 KEPUTUSAN GUBERNUR PROPINSI DAERAH KHUSUS IBUKOTA JAKARTA NOMOR 551/2001 KEPUTUSAN MENTERI NEGARA LINGKUNGAN HIDUP NO. 49 TAHUN ) Sustainable Development in Host Country Since this co-generation operates with higher efficiency than mono-generation including large scale fossil fuel fired power plant, it contributes to energy saving and CO2 emission reduction. 5. JCM methodology Development (1)Data Collection and Analysis The reference scenario of the project is that the electricity is supplied from the national power grid, and that cold-heat is produced by centrifugal chiller, which is operated by electricity from the national power grid. The characteristics of this project is that (1) to produce electricity by gas-engine, which is operated by natural gas, to supply electricity to the complex buildings, and (2) to produce cold-heat by absorption chiller, which is operated by waste heat out of the gas-engine, to supply air-conditioning service to the complex buildings. Insufficient electricity demand of the complex buildings is planned to be supplied from the national power grid, and the insufficient cold-heat demand is covered by gas-fired absorption chiller, which will be operated by natural gas. I - 21

10 The figure below shows the project scheme and reference scenario with energy balance. Fig.10 Project Scheme in Reference Scenario Project Scheme Grid Electricity 6.5 GWh/year Natural gas 68 GWh/year Natural gas 6 GWh/year Gas Engine Absorption Chiller Gas-fired Chiller Complex Buildings Electricity Demand Cold-heat Demand 35 GWh/year 27 GWh/year Complex Buildings Reference Scenario Grid Electricity 35 GWh/year Grid Electricity 4 GWh/year Electric Chiller Electricity Demand Cold-heat Demand 35 GWh/year 27 GWh/year The reference emissions are calculated based on the following conditions; ITEMS VALUE SOURCE CO2 Emission Factor for The latest value released by t CO2/MWh JAMALI Indonesian Government ID_AM002 Energy Saving by COP of Centrifugal Chiller 5.94 Introduction of High Efficiency Centrifugal Chiller Electricity Demand of the complex Buildings 35 GWh/year FS Study Team Cold-heat Demand of the Complex Buildings 98 TJ/year FS Study Team Reference emissions: Electricity consumption; MWh/year t CO2/MWh 29,466 t CO2/year Electricity consumption associated with cold-heat supply; 98TJ/year / TJ/year 16 TJ/year kwh/mj 4.6 GWh/year MWh/year t CO2/MWh 3,847 t CO2/year TOTAL; 29,466 t CO2/year + 3,847 t CO2/year = 33,313 t CO2/year The project emissions are calculated based on the following conditions; ITEMS VALUE SOURCE Electricity received from the 6.5 FS Study Team national power grid GWh/year Consumption amount of natural gas for gas-engine m 3 FS Study Team /year FS Study Team Calorific value 38.2 MJ/m 3 Calculated by FS Study Team based on information received Consumption amount of natural gas for gas-fired absorption chiller m 3 /year I - 22

CO2 emission factor for JAMALI CO2 emission factor for natural gas 0.843 t CO2/MWh 56.

5 10 3 MWh/year 0.843 t CO2/MWh 5,490 t CO2/year City gas consumption associated with cold-heat supply; (6.4 10 6 m 3 /year + 0.6 10 6 m 3 /year) 38.2 MJ/m 3 264 TJ/year 264 TJ/year 56.

11 CO2 emission factor for JAMALI CO2 emission factor for natural gas t CO2/MWh 56.1 t CO2/TJ from PLN The latest value released by Indonesian Government 2006 IPCC Guidelines for National Greenhouse Gas Inventories Volume 2 Energy Project emissions: Electricity consumption; MWh/year t CO2/MWh 5,490 t CO2/year City gas consumption associated with cold-heat supply; ( m 3 /year m 3 /year) 38.2 MJ/m TJ/year 264 TJ/year 56.1 t CO2/TJ 14,831 t CO2/year TOTAL; 5,490 t CO2/year + 14,831 t CO2/year = 20,321 t CO2/year Therefore, the reduction of GHG (CO2) emissions by this project is reference emissions minus project emissions. The calculation formula is as below; 33,313 t CO2/year - 20,321 t CO2/year = 12,992 t CO2/year hence, the annual reduction amount of GHG (CO2) emissions by implementing this project is 12,992 t CO2. (2)Organizational Plan for MRV Developer Fig.11 MRV Structure JCM Secretariat Co-Generation Operator Supervising, advising General Manager CO2 Emission Feasibility Check Technical Division Manager Checking data Managing monitoring equipment Natural Gas, Electricity, Maintenance Double Check Financial Division Manager Collecting invoices Reference data Natural Gas, Electricity, Maintenance Monitoring Staff Collecting data Natural Gas, Electricity Calibration Staff Daily Check Calibrating monitoring equipment Monitoring Staffs in the technical division mainly check the amount of electricity and natural gas purchased by the project as well as generating amount of electricity and cold-heat by co-generation system. The system will be operated 24 hours a day, so that 3 to 4 monitoring staffs will be assigned for operation and monitoring activities. Data collection shall be reported I - 23

12 to Technical Division Manager every month. Calibration staffs in the technical division calibrate for monitoring devices such as electricity and gas meters based on the national standard (or international standard, or a manual of device s maker). Technical Division Manager is in charge of supervising and managing these activities to ensure the data is accurate. Financial Division manages invoices of natural gas and electricity purchased by the project, which is very important data as the reference for cross check of electricity and gas meter s figures. JGC Corporation, the proposer of the project, receives and checks the original or copied data recorded through monitoring process for double-check and prepares for report to submit to JCM Secretariat. Also, JGC Corporation checks other monitoring parameters such as CO2 emission factor of national power grid as well as emission factor for natural gas time to time. Electricity meters are necessary not only for JCM project as its monitoring device, but also essential logging devices for measuring electricity amount supplied to tenants; therefore, the selected devices will be highly reliable and durable. From the viewpoint of JCM management, both monitoring data and invoices of electricity and natural gas are required to be stored in longer term, compared to the conventional operation of power stations. JCM Manager and staffs need to take a special care to handle and store those data. Therefore, the data handling and storage manual are planned to be prepared. In addition, an educational program for these monitoring activities and management method will be held once a year or after staff re-assignment. 6. Post Study Plan toward Project Realization This feasibility study has found that co-generation system in this project contributes to cost reduction and CO2 emission reduction. However, since there a few example of co-generation system installed in Jakarta, the benefit of co-generation is sometimes hardly understood. Once the business circumstances prepared, we plan to propose this system to the local real estate company then move on to the next step. The schedule expected under current condition is below. Fig.12 Proposed Schedule of the Project Fiscal Year Development of Complex Buildings Design Construction Leasing Business (Land/Floor) Permits Cogeneration System Basic Design Construction Detailed Design Energy Service Business JCM Project Feasibility Study JCM Model Project I - 24

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