Sustainable biomass technology enhances Cambodia s rice milling sector

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1 IMPACT SHEET SWITCH-ASIA PROJECT WASTE TO ENERGY FOR THE RICE MILLING SECTOR IN CAMBODIA Sustainable biomass technology enhances Cambodia s rice milling sector Converting rice husk into energy to reduce solid waste and cut greenhouse gas emissions by tonnes per year This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of GFA Consulting Group GmbH and can in no way be taken to reflect the views of the European Union.

2 IMPACT SHEET SWITCH-Asia project Waste to Energy for the Rice Milling Sector in Cambodia The Challenge Rice husk is a by-product of milling rice paddy and, given Cambodia is a large producer of rice, it is considered a renewable and plentiful resource. Additionally, a contributor to the high operating cost of rice mills was the low electrification rate in Cambodia, requiring rice mills to operate expensive diesel generators to power their milling machinery. Rice husk gasification is not a new technology, having been used in Cambodia since 2006, but adoption has been limited due to a lack of financial support, uneven quality of locally-manufactured gasifiers, and concerns over negative environmental impacts. Objective The overall goal of the Waste to Energy (WtE) project was to contribute towards economic prosperity and poverty reduction and to mitigate the effect of climate change by supporting the adoption of rice husk gasification (RHG) technology by rice mills through improvements in awareness, access to finance, technical assistance, as well as in the regulatory environment for the operation and manufacture of RHGs. Specific objectives were: to promote sustainable production of milled rice through replication of existing WtE rice milling technologies; to promote sustainable transformation and consumption of rice by consolidating fragmented guidelines into a single operational industry standard with policy makers, small and medium-sized enterprises (SMEs) and financial sector actors together in a multi-stakeholder platform. Activities / Strategy Technology Testing, Upgrading and Transfer through Capacity Building The project established a local expert centre to assess and evaluate RHG systems, their field performance, and environmental and health impacts. Working with a local institute, a training package for rice millers, SMEs, local technology manufacturers and importers was created. Technology transfer, cost-effective and sustainable examples, and the availability of business services encourage the rice industry to apply a standardised RHG technology. For the supply and demand side, capacity was built of five local SMEs manufacturing RHGs and 150 rice millers. A local manufacturing facility was established and the local institute provided technical training and workshops to rice mills and SMEs to improve the operation and maintenance of the gasification systems, including occupational health and safety (OHS) aspects. Business Promotion and Access to Credit The project supported rice mills and technology manufacturers / importers in business planning and the promotion of RHG technology in order to enable the sector to have better access to investment. ACLEDA and Canadia banks supported the sector with agricultural equipment loans. (The interest rates offered by ACLEDA and Canadia banks were still relatively high with 10-12%, while rice mills generally look for interest rates of 7-9%.) The project also reached out to the Nexus for Development offering a revolving fund with attractive financing conditions. Furthermore, a small-scale Programme of Activities (PoA) under the Clean Development Mechanism (CDM) was developed in parallel to scale up the programme through the support of carbon finance. TARGET GROUPS WtE manufacturers / importers Rice millers with rice husk gasifier (RHG) systems and potential rice millers The Federation of Cambodian Rice Miller Associations (FCRMA) Government ministries, especially the Ministry of Industry and Handicraft (MoIH), its department, the Institute of Standard of Cambodia (ISC), and their technical and provincial departments in nine targeted provinces National Polytechnic Institute of Cambodia (NPIC) Financial institutions, initially ACLEDA and CANADIA banks National Guideline and Standard Development A national standard and a licensing procedure for RHG technology and its application in the industry were developed together with the partner government ministry. This licensing process ensures the quality and regulates the market, and is operated in close collaboration with both the Ministry of Industry and Handicraft (MoIH) and the Institute of Standards of Cambodia (ISC). ISC then produced an OHS Baseline Standard at the Work Place and a final draft of the National Standard of the Safety Manufacturing of RHG.

3 Scaling-up Strategy Strengthening Market-based Transactions The WtE project promoted and improved market-based transactions between RHG manufacturers/ importers and rice millers by enhancing their business capacity. It assisted existing local manufacturers/importers by introducing a more environmentally responsible application and technology through training and technology transfer. These local manufacturers/importers were linked with 150 targeted rice mills (120 new and 30 existing) to utilise the most appropriate technology. Promoting Financial Service Systems In order to link rice millers with investment capital for installation of high quality RHG technology, the project supported rice millers in developing bankable business plans and encouraged the project partners, the commercial banks, to establish special credit schemes. A bankable business plan in hand, coupled with the availability of government-regulated RHG systems and an additional guarantee by technology manufacturers strengthened the confidence of banks to provide credit to targeted millers. This resulted in the installation of quality technology financed through commercial loans. Establishing the Standardised and Regulated RHG Technology The introduction of industry standards and the annual licensing of RHG technology ensured the quality and environmental sustainability of the sector. The project, in close collaboration with MoIH, established guidelines for promotion of these RHG technologies and for a licensing process that ensures the quality and regulates the technology in Cambodia in the longer term. I established a rice mill factory in 1994 in Bat Doeng village, Khsem Khsan commune, Odong district, Kampong Speu. The rice mill was powered using diesel generators. Due to the high price of diesel, I decided to invest in a rice husk gasifier in Installing the gasifier cost me USD (EUR 9 100) with operating and maintaining costs of about USD (EUR 3 800) per year. The investment paid off because the rice husk produced in my factory could trade off the fuel use. Prior to gasifier installation, I used to buy around 500 tonnes of paddy and sold 300 tonnes of milled rice annually. Due to the cost savings brought by the gasifier, I could purchase tonnes of paddy and sell 600 tonnes of milled rice per year. Now my factory employs eight additional workers, totalling 14 personnel. Mr. Tang Woo Seng, a rice mill owner

4 Results Established Local Manufacturing Facility and Developed National Guidelines The project established a local manufacturing facility where a local institute provided technical training and workshops to rice mills and SMEs to improve their operation and maintenance of the RHG systems, including OHS aspects. Some guidelines were developed for measuring performance indicators and the environmental impact of the RHG systems. ISC completed a study on existing industry standards where findings were used to draft a policy guideline on rice husk gasifier (RHG) technology. A national standard and a licensing procedure for RHG technology and its application in the industry were also developed. Conducted Investment Analysis The project collected information from rice mills to analyse investments required to achieve the highest rate of return on investment, with the required types of investment. This survey resulted in nine case studies and three business models for rice mills with different operations and energy needs. This analysis became the basis for preparing business plans for SMEs who wanted to install RHG technology. Most rice mills in Cambodia have high operating costs due to the country s high cost of electricity (which is almost triple that in Vietnam and Thailand). Moreover, many mills are not located near the electricity grid and instead produce their own electricity from diesel generators. Rice husk is a by-product of milling paddy rice. It is a renewable and plentiful resource, previously regarded as waste and only recently been treated as a commodity. Gasifiers produce electricity by burning rice husks which offsets a rice mill s diesel consumption by 65%. This leads to an annual saving of litres and a CO2 emission cut estimated at 60.2 tonnes per annum. The cost saving from the gasifier allows rice mills to invest in its operations, creating flow-on benefits. Profits are reinvested in additional value-added facilities, such as a colour sorter or an additional drying machine to improve milling quality, or a bigger warehouse to stock the paddy, all of which offer economic incentives from a better quality of milled rice. Ms. Ira Larasaty, Project Manager Increased Access to Finance for WtE Manufacturers Seven introductory workshops were conducted throughout the nine target provinces with 98 participants from rice mills, WtE manufacturers, banks and other relevant stakeholders, in order to motivate participants in applying for RHG systems. Seven commercial banks were involved in exploring loan conditions and requirements for the rice miller investing in RHG; four potential banks were identified that could provide credit schemes for rice millers via a special scheme. 395 rice mills in those provinces were surveyed to map out their location, milling capacity, operation capacity per year, with or without RHG installation, and their potential to invest in RHG. The project leveraged green finance for SMEs in a form of seed funding of USD (EUR ) from Nexus for Development. Increased Awareness of Gasifier Technology Based on the information collected from the 395 rice mills, a communication tool was developed to raise awareness of RHG technology among rice millers and to create future demand. Public awareness was raised through leaflet distribution and outreach to the local media.

5 IMPACT SHEET SWITCH-Asia project Waste to Energy for the Rice Milling Sector in Cambodia Impact in Numbers Economic Impact Environmental Impact Social Impact Climate Benefits CO 2 Achieved potential fuel savings of 65%, through RHG technology application, with diesel offset equal to USD 2 340/month (EUR /month). At diesel s price of EUR 0.78/litre, a rice mill is able to save EUR per annum. With an initial capital investment of EUR per gasifier and tonnes of rice per annum (one tonne of paddy rice can produce approx. 200 kg rice husk), one rice mill produces an annual return of almost 37% with a payback period of less than three years. Expansion of green product portfolio of over 25%: a) pelletising of rice husk took off when a local biomass cook stove initiative was introduced; b) rice husk ash gains economic value as it can be processed into soil stabiliser to improve geotechnical properties of a soil for building construction purposes. Created additional business opportunities: rice husk export to neighbouring countries sold as feedstock or biomass for bigger independent power producers (IPPs), rice husk pellets and briquettes for cook stoves, and rice husk ash. Reduced energy consumption by 65% by offsetting diesel as fuel in rice mill production with the energy produced by rice husk gasifier. This led to production cost saving of USD per month, and saving of litres of diesel per annum. Reduced rice husk waste by the rice mill sector by % per annum. Implemented SCP measures reducing environmental damage, such as the use of rice husk ash as a soil stabiliser to further reduce solid waste, and development of a more advanced RHG technology using a dry system which produces significantly less wastewater. Created 104 new jobs as a result of 52 new installations of RHG systems between 2012 and Trained small and medium-sized rice mills in OHS measures (e.g. fire extinguishers, placement of safety boards and health kit, safety gears such as face mask, gloves, safety shoes, helmets, etc.) and monitored its implementation at production floor. Benefited local communities through the awareness of RHG technology and its benefits as an energy source and to reduce open dumping of rice husk. Initiated a pilot with the Cambodian Centre for Study and Development in Agriculture (CEDAC) to research the silica content of rice ash char. Reduced the use of diesel as fuel by the rice mill sector by litres per year. Achieved 12% CO2 reduction (7 732 tonnes CO2e) per year. Achieved 25% use of biomass as renewable energy source in the Cambodian rice milling sector. Initiated the development of Programme of Activity (PoA)* and installation of dry system in rice husk gasifiers. Carried on pilot test and field assessment to convince businesses and enhance their awareness of climate change risks. Types of measures introduced to reduce and adapt to climate change risks: Local Stakeholder Consultations, Focus Group Discussions, workshops, brochures, short documentary, handouts. Green Finance Target Group Engagement Women s Empowerment Policy Development Europe-Asia Cooperation asia Engaged with one potential investor (Nexus for Development) for RHG technology (one investment came through shortly after the project s completion). The revolving fund was designed to facilitate millers in order to create energy switch and the fund allocation is between USD (EUR ) depending upon the successful due diligence. Leveraged green finance for SMEs in a form of seed funding of USD (EUR ) from Nexus for Development. Green finance was enhanced through local stakeholder consultation, and workshops and meetings involving potential investors and financiers which allowed direct exchange and potential loans. Extended project outreach to 11 SMEs from ice, brick, garment/textile, and independent power producer (IPP) sectors that also use rice husk fuelled gasifiers as energy source. Involved with various stakeholders such as FCRMA, National Polytechnic Institute of Cambodia, International Standard of Cambodia, SMERenewable, Nexus, Entre d Etude et de Developpement Agricole Cambodge, Ministry of Industry and Handicraft, and Battambang Agriculture Faculty. Organised over 60 outreach activities, involving banks, renewable energy financiers, national TV channels, local media, social media, and the company websites. Conducted 13 technical workshops and training sessions, 17 mini workshops to raise awareness of RHG, and surveyed 395 mills to develop training materials and business tool for SMEs. Engaged with women in training and workshops (three female workers from rice mills were involved in a pilot project developing rice ash char). Staff from four rice mills participated in the technical training and workshops; three were involved in implementing the pilot project for studying the potential of ash-soil stabiliser. Organised 12 policy events to promote RHG technology, among others through a) Dissemination of the National Guideline for Biomass Gasifier Operation on OHS, b) Regional workshop on reflection and finalisation of public comments on OHS measures. Submitted a national guideline on OHS measures at rice mills and on RHG and safety standard in RHG manufacture. Once the policy recommendation is accepted by the Cambodian government, a National Standard on OHS and RHG Manufacturing will be introduced to enterprises manufacturing or using RHG technology. Organised events involving European and Asian participants through: three EU SWITCH-Asia networking events, two Green Energy events in collaboration with UNIDO, and two national workshops. Promoted SCP knowledge exchange through two study tours to rice mills and SMEs installing RHG. * Program of Activities (PoA) is an organisational framework to develop project under the Clean Development Mechanism (CDM) of the United Nations Framework Convention on Climate Change (UNFCCC).

6 Siem Reap Banteay Meanchey Kompong Thom Battambang Cambodia Kompong Cham Pursat Kandal Kompong Speu Prey Veng Legend Eligible countries for the SWITCH-Asia Programme Non-eligible Asian countries for the SWITCH-Asia Programme Project implementation area City Region Country The boundaries shown on this map do not imply on the part of the European Union any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. OBJECTIVES The project aimed at contributing towards economic prosperity and poverty reduction and to mitigate the effect of climate change by supporting the adoption of rice husk gasification (RHG) technology by rice mills through improvements in awareness, access to finance, technical assistance, as well as the regulatory environment for the operation and manufacture of RHGs. PROJECT CONTACT SNV Cambodia Premier Office Centre, #184, Street 217 (Monireth) P.O. Box 2590, Phnom Penh, Cambodia Mr. Dennis Barbian Tel.: DURATION PROJECT TOTAL BUDGET EUR (EU contribution: 89%) 01/ / Ms. Ira Larasaty larasaty@xs4all.nl PARTNERS SNV Netherlands Development Organisation Federation of Cambodian Rice Millers Associations (FCRMA) Institute of Standard of Cambodia (ISC) / Ministry of Industry and Handicraft National Polytechnic Institute of Cambodia (NPIC) Published in November This publication is printed on 100% recycled paper using an eco-friendly process. Photo source: Waste to Energy for the Rice Milling Sector in Cambodia project