CDM/JI PROJECT STUDY FY2003

Feasibility Study on Cogeneration Business in Thailand

Utilizing the Bagasse and Rice Husk

Summary Report

March 2004

Kansai Environmental Engineering Center, Co., Ltd.

 Contents

1. Purpose of the study ........................................................................................................... 1

2. Summary of findings .......................................................................................................... 1

2.1 Basic information on Thailand....................................................................................... 1

2.2 Outline of the project..................................................................................................... 2

2.3 Project site .................................................................................................................... 3

2.4 Outline of the use of biomass as fuel............................................................................ 5

2.5 Facility design ............................................................................................................... 6

2.6 Income and expenses of the project ............................................................................. 9

2.7 Implementation method of the project......................................................................... 10

2.8 Evaluation of the project ..............................................................................................11

3. Others .............................................................................................................................. 13
1 Purpose of the study

In the recent times, global warming has been growing into an issue requiring urgent attention, and
promoting projects under the scheme of clean development mechanism (CDM) approved by the
Kyoto Protocol is expected to be one of the most effective ways to address this issue.

The purpose of this project is to contribute to the anti-global warming efforts through biomass-fired
power generation. In addition to dead leaves (trash) of sugar cane produced as a post-harvest
waste from sugar cane cultivation, rice husk will be utilized as a biomass fuel.

The Rajburi Sugar Factory that produced 1,040,000 tons of cane (sugary stem of sugar cane) in
the crop year 2002-2003 has been selected as a possible project site (harvest time: December
2002~April 2003). Trash collected from sugar cane farms that are under contract with the factory
is used as biomass fuel for the project. Trash is planned to be used as the primary fuel during the
sugar production period. Rice husk will be purchased to continue the biomass-fired power
generation during the non-production period in order to sell electricity to the Electricity Generating
Authority of Thailand (EGAT). Not all trash is available as fuel since it currently serves as fertilizer
that is plowed into the soil. A realistic quantity that will be allocable for biomass fuel and also be
within a range such that it will not have an adverse effect on the yield of sugar will be determined in
order to set up a system of sustainable development of agriculture and energy.

Molasses or syrups produced during the refining of sugar as residual liquid which retain some
sugar content can be resourced into the brewing process. The project also discusses
cogeneration that enables the supply of part of the steam produced in the power generation into
alcohol plants.

This feasibility study explores the potential of the above-mentioned system to satisfy the
requirements of a CDM project introduced in Thailand.

2 Summary of findings
2.1 Basic information on Thailand

Thailand is a kingdom. Prime Minister Thaksin has established a strong political power base and
displays aggressive leadership among the ASEAN countries. Although the country is relatively
stable from the political, economical and religious points of view, the harsh reality of a sharp
increase in murder, robbery, narcotics, crimes, and terrorism also exists.

1
Located in the Tropical Zone, Thailand is rich in agricultural resources and produces sugar cane
(annual yield in 2003: 74,070,000 tons) and rice (annual yield in 2003: 27,000,000 tons).

Thailand is a developing country, and growth at a significant rate is expected not only in the
economy but also in the demand for electricity. After the currency crisis in 1997, the country
entered a recovery phase in 1999. Rapid economic growth is likely to continue in future (including
an estimated rate, the average growth rate of real GDP from 1999 to 2003 is 4.6%). A high growth
in electricity demand may reflect such a positive economic situation. According to the EGAT, the
annual growth in electricity demand in Thailand is estimated to be around 6% from 2007 through
2016. While the government is yet to privatize power stations, it plans to further encourage the
purchase of electric power from independent power producers (IPPs) and small power producers
(SPPs) in order to facilitate the entry of private sector into the power industry.

At the same time, the country is also faced with growing concern regarding environmental issues of
water and air pollution.

The government of Thailand ratified the UN Framework Convention on Climate Change (for
prevention of global warming) in March 1995 and the Kyoto Protocol in August 2002. The
government has adopted a liberal approach toward CDM and has shown willingness to approve
any business if it can demonstrate its capability to serve the interests of the nation and contribute to
the country’s sustainable social and economical development.

2.2 Outline of the project

To satisfy the requirements of a CDM project, the project plans to mainly utilize trash during the
harvest period and rice husk during the non-harvest period as fuel for biomass-fired power
generation. The mechanized collection of trash can reduce costs as well as labor. The process
of mechanized harvesting of cane using a harvester involves collecting trash in a container
mounted on the rear part of the harvester. It is difficult to secure trash in the necessary quantities
for power generation throughout the year. Therefore, in addition to trash, rice husk will be
purchased from rice mills for use during the period when trash is not sufficient to maintain electricity
sales. To utilize steam more efficiently, part of the steam used at the power station is to be
supplied to an alcohol plant constructed on an adjoining site, provided that the operation of the
alcohol plant is outside the scope of this project.

2
2.3 Project site
In the proposal stage of this feasibility study, the following decisions were made regarding the
project based on the information that the Rajburi Sugar Co., Ltd. had plans to improve the facility in
the future. This was revealed by a fact-finding survey at the possible project site:
- Existing boiler, turbine, and generator will be improved to generate high-pressure power and
high-temperature steam. Since excess bagasse is used as fuel for biomass-fired power
generation, the project can be deemed as one aimed at preventing global warming. In
order to export electricity throughout the year, rice husk is purchased to maintain
biomass-fired power generation.
- Measures to control methane gas that might be generated from the bagasse in open stock
area have been included in the discussion.
- Excess steam is utilized for cogeneration.

Recognizing that a part of the generating facility has become obsolete and the need for urgent
modification, Rajburi decided to construct a new power generation facility with a capacity of 10 MW
in May 2003. On completion of the new facility in December 2003, the plan was reviewed and
amended as follows:
- Biomass fuel used in the project is replaced with trash since excess bagasse is used as fuel
in the new 10-MW facility constructed by Rajburi.
- The discussion on controlling methane gas emission is called off since the bagasse is
consumed by the Rajburi Sugar Factory.

Despite the project being subjected to a slight change, the Rajburi Sugar Co., Ltd. has continued to
be interested in the new biomass power generation business. As shown in Figure 1, Rajburi is
located in Ban Pong in the Ratchaburi Province. The company produced 1,043,477 tons of sugar
cane in the 2002-2003-harvest season from 108,250 Rai of planted area (1 Rai = 1,600 square
meters). The overall sugar cane production in Thailand in the 2001-2002 season was 59,490,000
tons, while the company’s performance during the same harvest year was 860,000 tons. In other
words, the company’s domestic share in sugar cane production was 1.4%.

3
Project site

Project site

Figure 1 Project site（Rajburi sugar factory）

4
Rajburi Sugar Co., Ltd. was established in December 1985 with a capital of 200 million Bahts
(average exchange rate from November 2003 through January 2004 is JPY2.81 = B1). The
company engages in the following activities related to sugar production:
- In order to support and assist sugar cane cultivation by improving harvesting efficiency and
reducing costs, the company employs a harvester, cane picker, tractor, and other
agricultural machineries.
- The company launched a new irrigation system called the Norng Punchan Project. This
project was financed by the Asian Development Bank with an investment of 96 million Bahts.
The irrigation system covers more than 630 acres of land and 147 farmers.
- Under the Financially Secured Cane Farmers Project and in cooperation with research
institutions, the company initiated an educational program for the farmers that involved
harvest planning, technical improvements, laborsaving by mechanization, and shifting from
chemical to organic fertilizers for improving the soil quality and preventing damage to the
environment.
- The company was certified by ISO 9002 and ISO 14001 in March 1999 and April 2001,
respectively and pays considerable attention to quality and environment control.
- The company has supplied electricity to the EGAT since 1994.

2.4 Outline of the use of biomass as fuel

Trash, which is potential fuel for the project, is currently treated in either of the following ways by
the contract farmers of Rajburi:
- Trash is burned prior to harvesting by 25% of the contract farmers. This pre-harvest
burning is mainly in order to assist in the harvesting operation and is employed by farmers
in places where sugar cane is harvested manually. Approximately 5% of the burning is
accidentally caused by flames from cigarette butts and husk burning.
- Trash is plowed back into the soil by 75% of the contract farmers. This trash can
contribute to enhancing the quality of soil by increasing its content of organic matter, air
permeability, water-holding property, cation exchange capacity and so on.

Organic consumption of the soil is estimated to be 595 kg/ha based on data such as humus content
of the Rajburi contract farms, which is 2.38% (result of our field study), annual decomposition rate
of soil organic carbon—1% (reviewed literature), and trash organic content—40% (reviewed
literature). Half the volume of biomass applied to the soil is considered to be decomposed into
organic matter. Therefore, at least 1,190 kg/ha should be returned to the field in this case.

In the meantime, the volume of trash can be estimated as follows, given that the cane yield per unit
area is 62.5 t/ha (result of our field study) and based on the yield-to-weight ratio of trash on a dry
basis:

5
 62.5 t/ha × 29.5% ÷ 69.5% × 22.2% = 5.9 t/ha,
where 29.5%: percentage by dry weight of cane (i.e., 70.5% moisture content)
– reviewed literature
69.5%: yield-to-weight ratio of cane (dry basis) to sugarcane – reviewed literature
22.2%: yield-to-weight ratio of trash (dry basis) to sugarcane – reviewed literature

Therefore, the resulting difference of 4,710 kg/ha between 5,900 kg/ha of trash and the minimum
requirement of 1,190 kg/ha to be left in the field would be the maximum amount of trash available
for the project from the field. This percentage was determined to be 80%. Moreover, taking soil
fertility into consideration, the quantity of trash that should be left in the field is 2,380 kg/ha , which
is twice the minimum requirement of 1,190 kg/ha. In the latter case, the quantity available for the
project would be reduced to 60%. However, if the returning of the ash of trash to the field is taken
into account, it would still be safe to collect 70%, i.e., median value, of trash. With regard to the
ash of trash, Dr. Ampon of The Environment Department of Thailand concedes that the ash of
biomass such as trash is an outstanding soil fertilizer.

2.5 Facility design

The following prerequisites are taken into account in designing the project:
- The sugar cane yield is 863,200 t-c/year (t-c indicates deadweight tonnage of cane,
rounded off to the hundreds place) in the 5-year average at Rajburi contract farms
(minimum and maximum yields are 755,400 t-c/year and 1,043,400 t-c/year, respectively).
- The Rajburi Sugar Factory can treat 9,880 t-c/day of sugar cane. Thus, the harvest period
is calculated as follows:
863,200 t-c/year ÷ 9,880 t-c/day = 87 days.
- A new 10-MW power station fueled with biomass is constructed on a plot adjoining Rajburi.
- Considering the fact that water in the Rajburi area is hard water, the pressure and
temperature conditions of the steam used for the boiler are set at 33 barG and 425ºC.
- Electricity sales to EGAT is 8 MW during the daytime and 6 MW (75% of the daytime
capacity) during the nighttime (actual connection to the grid line is done by the Provincial
Electricity Authority – PEA). On Sundays and holidays, the amount to be sold is 6 MW.
- The major fuel for biomass power generation during the harvest period is trash, while
purchased rice husk is used during the non-harvest period.
- The collectable quantity of trash from the field should not exceed 70% of the total yield in
order to prevent the deterioration of soil fertility of the sugar cane fields. Ash of trash
burned in the new power station is to be returned to the fields for use as fertilizer.
- As shown in Image 1 and Figure 2, trash is collected using harvesters during the process of
mechanical harvesting of sugarcane and is packed in bags to be carried to the new power
station.

6
- A local special purpose company (SPC) established to implement the project will purchase
19 new harvesters and rent them to contract farmers. The capacity of the new harvesters
would be 240 t-c/day. On an average, the present capacity is 120 t-c/day since the
harvesters currently owned by Rajburi are secondhand. Mechanical harvesting planned
for the project will be done using a total of 35 harvesters, including the 16 existing
harvesters.
- A mechanization rate of 65% will be achieved with 35 harvesters. According to Rajburi, the
current ratio of sugar cane fields available for mechanization is about 40%. However, once
soil amendment by removal of the gravel is accomplished in order to introduce the use of
harvesters, and the farmers recognize the benefits of cost reduction through mechanization,
it will be possible to increase this ratio to 65%.

Current harvester Harvester

without a container

trash
trash

小さな
Fine
trashtrash

Cane
cane

Cane collecting truck trash

Trash 収集用コンテナ
collecting container
(a （ハーベスタの後部に取り付けるが、
removable container mounted
脱着可能な形式とする）
on the rear part of a harvester)
Image 1. Cane harvesting
with a current harvester. Figure 2. Means of trash collection
for the project.

- Water is obtained from a single other source in addition to the current ground water source
for Rajburi Sugar Factory. Effluent is to be discharged into the current drainage path of the
factory.
- Improving of equipment in Rajburi Sugar Factory is not planned.
- For effective utilization of heat, steam is partially supplied to an alcohol plant (the alcohol
plant is not included in the scope of the project).
- The alcohol plant produces ethyl alcohol from the molasses supplied by the Rajburi Sugar
Factory. Molasses produced at Rajburi constitute 4.3%~4.8% of cane (data from the
fact-finding survey). The annual yield of molasses should be 863,200 t-c/year × 4.3% =
37,100 t-m/year (t-m indicates deadweight tonnage of molasses). The volume of steam
supplied to the alcohol plant should be 7 t-s/h (t-s indicates deadweight tonnage of steam)
corresponding to the manufacturer’s designed capacity.

7
As shown in Table 1, the capacity of biomass power generation and the quantitative effect of the
abatement of climate change are estimated based on the above-mentioned design conditions.
Figure 3 shows the schematic diagram of the project system.

Table 1. Equipment and the quantitative reduction effect of GHG emission of the project.
Item Result of trial calculation Remarks
1. Equipment
(1) Boiler 60 t/h Volume supplied to an alcohol
plant: 7 t/h
(2) Generator 9.64 MW Power to be sold: 8 MW (daytime),
6 MW (nighttime)
2. Fuel
(1) Trash 73,200 t/year Moisture content: 49%
Calorific value: 1,800 kcal/kg
(2) Rice husk 64,300 t/year Calorific value: 3,440 kcal/kg
3. Power generation and the quantitative effect of GHG emission reduction
(1) Power to be sold to the PEA 54,810 MWh/year
(2) Power to be sold to an 2,341 MWh/year
alcohol plant
(3) Quantitative effect of GHG 35,188 t-CO2/year
emission reduction

Daytime during weekdays

0.1barG 44.5t/h
Condenser

33barG
trash 425℃
26.3t/h 60t/h 44.5t/h Genera- (Power export) Power
Boiler Turbine tor companies
9.64MW

Exhaust gas
electric
precipitator
Stalk Power for internal use
New power
7.5t/h 1.28MW station
T IDF 0.36MW

1.5barG 7t/h
Alcohol plant

Figure 3. Schematic diagram of the system.

8
2.6 Income and expenses of the project
Income and expenses of the project are tabulated in Table 2.
Trial calculations are based on the following conditions:
- The cost estimated for the equipment is sufficient to cover the minimum necessities. A
30% discount on the manufacturer’s quotations is taken into account.
- Currently, the purchase price of rice husk is soaring due to excessive demand. For the
purpose of the trial calculations, the price is set at 400 Baht/t, which is considered to be a
reasonable price corresponding to a calorific value fixed in future. (Currently, the market
price of rice husk is 800–900 Baht/t. The views of the Association of Rice Mills in Thailand
were also taken into account while setting the price for the computation.)
- It is reported that rice husk ash can be traded at a high price as it acts as a raw material for
semiconductors due to the silica contained in it. Since making an accurate forecast of the
price is not possible under the circumstances, transaction of rice husk ash shall be excluded
from the budget consideration.

Table 2. Outline of income and expenses of the project.

(Unit: million yen)
Item Amount Remarks
1. Income 470
(1) Power sales 349 Calculated based on the terms and conditions of a
sales contract with EGAT
(2) Income from an alcohol 79 Power: yen 15 million, steam: yen 64 million
plant
(3) Harvester rental 42 Rental of 19 harvesters
2. Operating expenses 160
(1) Fuel 89 Trash: yen 12 million, rice husk: yen 72 million etc.
(2) Others 71 Including personnel, maintenance, consumables,
land lease, SPC management, and monitoring
expenses
3. Initial investment (facility) 2,064 Including an assumed 30% discount on
manufacturer’s quotations
(1) Boiler, turbine, generator 910
(2) Peripheral equipment 350 Conveyer, water supply/drainage system, shovel
loader, and truck scale
(3) Harvester 475 19 units
(4) Construction work 329 Including electric and piping work, transmission line
work, and transportation expenses
4. Others 20 SPC organization expenses

9
2.7 Implementation of the project
Shown below are the scope (Figure 4), implementation structure (Figure 5), implementation
schedule (Table 3), and financing plan (Figure 6) of the project.

Sugar cane Cane

Existing Power
Sugar companies
harvesters
f

Sugar cane trash

New Crushing Boiler Generator Power for
Turbine
harvesters 9.64MW Internal use
Harvest
period
Rice husk Steam Power
7t/h 0.36MW
Non-harvest period

Scope of the project

Alcohol plant

Figure 4. Scope of the project.

Transaction
of cane
Rajburi Sugar Factory Sugar cane farmers
Harvester
Transaction lease
Harvester Supplying Supplying ash
of molasses trash as fertilizer
lease

Power companies
Alcohol plant SPC for cogeneration (PEA, EGAT)
Transaction of Transaction
power & steam of power

Construction & equipment Fuel maintenance/power

procurement contract generation consultancy contract

Trading company Kansai Environmental

Engineering Center
Co., Ltd.

Plant maker Local construction Group company of Kansai

company Electric Power Co., Inc.

Figure 5. Implementation structure of the project (draft).

10
 Table 3. Implementation schedule (plan).
Item FY2004 FY2005 FY2006 FY2007
a) Detailed study, assessment
b) Acquiring investors and financing companies
c) Approval of PDD (Project Design Document)
d) Designing
e) Fabrication of equipment/machineries
f) Construction, transportation, installation
g) Performance tests, trial run
h) Kick off
i) Monitoring

Rajburi Sugar
Co. Ltd. 10% 20%
Investment SPC Investment
Japanese consortium
Investors in business
Thailand
entity

10% 60%
Loan 100% Initial Loan Japan Bank for International
Private bank(s) Investment Cooperation,
in Thailand private banks, etc.

Figure 6. Financing plan for the project (plan).

2.8 Evaluation of the project

In evaluating the project, the following points have been focused upon:

a. Methodology of the CDM project

Given that 1 kg/h of steam equals approximately 0.7 KW, 60 t/h of the rated output of the primary
boiler is converted into approximately 42 MW (< 45 MW) of electricity. In view of its capacity for
cogeneration, the project has been judged to conform to the requirements of the small-scale CDM.

b. Selecting a baseline
From the applicable simplified baselines in Type I.D for small-scale CDM projects, the “weighted
average emission of the current power generation mix” is selected as baseline for this CDM project.
In other words, the baseline should be “the weighted average emission from the power generation
mix” (a value obtained by multiplying the power to be sold under the project with the weighted
average emission factor of a grid power source) in 2007, when the operation is schedule to begin.

11
c. Discussion on carbon leakage
The Project activity’s renewable energy is produced by new equipment installed for the first time.
Therefore, no leakage calculation is required, per item 30 Appendix B of simplified M&P for this
small-scale CDM project activity.
For reference, regarding GHG emission caused by the implementation of this CDM project, there
was no knowledge of trash being used as a substitute for fossil fuel other than in this project. On
the other hand, rice husk has already been partly used as biomass fuel for power generation in the
host country. Since the estimated volume of rice husk to be used in the project is 64,300 t/year,
i.e., about 1.3% of the total rice husk produced in Thailand, the implementation of the project can
hardly hinder the rice husk supply and is unlikely to lead to an additional consumption of fossil fuel
outside of the scope of the project. The ash from trash that is used as fuel for the project is to be
returned to the sugar cane fields as it is used as fertilizer. After collecting trash, a follow-up
application of the chemical fertilizer is no longer necessary in these fields. Therefore, at this stage,
it can be concluded that there can be no carbon leakage or generation of nitrogen monoxide (N2O)
from such a follow-up application.

d. Technical basis for producing the reduction effect of GHG emission

The emission factor of the grid is not zero since the power source mix at the EGAT contains
thermal power utilizing fossil foil such as natural gas, petroleum, and coal, while the emission factor
of biomass fuel used in the project is zero (carbon neutral). Thus, the difference between these
two is the reduction of GHG emission.

e. The quantitative effect of GHG emission reduction

The estimated average CO2 emission factor of the EGAT in 2002 is computed to be 0.642
t-CO2/MWh, and electricity sold to the EGAT under the project will be 54,810 MWh annually. By
multiplying these values, the annual baseline emission is determined to be 35,188 t-CO2.
Regarding the sources of GHG emissions due to the Project Activity within the boundary, the IPCC
Guidelines stipulate that biomass combustion is assumed to equal its regrowth, and Appendix B of
the simplified M&P does not require monitoring of GHG emissions from ancillary activities.
Therefore, neither CO2 emission from biomass combustion nor annual CO2 emission of 3,804 t-
CO2 from the transportation of biomass fuel and trash ash are computed in relation to the major
activities under the Project. Finally, the reduction of CO2 emission realized by the project is
estimated at 35,188 t- CO2 annually.

f. Profitability study
From the study, it is deduced that the internal rate of return (IRR) over a 10-year credit period is
4.98%, which will increase by 1.15 percent to 6.13% when the carbon credit price is set at
US$ 5.00/t-CO2e.
The project will be able to recover the accumulated loss and go into black nine years after its start.

12
If profit from the sales of rice husk ash is included, the potential of the project as a business can be
drastically improved because rice husk ash is likely to be sold at a high price. At the same time,
rice husk introduces an element of uncertainty since an excess of demand generates a substantial
increase in the purchase price.

3. Others
The significance of the project lies in the fact that this is a new attempt to realize biomass power
generation through the sustainable development of sugar cane cultivation by securing biomass fuel
and utilizing and returning trash ash to sugar cane fields for use as fertilizer. In addition, the
project can be of help in promoting mechanization that will be employed to address the issue of
harvesting costs, which are likely to increase following the future increase in labor costs in Thailand
as its economy grows.
Considering the environmental impact of exhaust gas, effluents, noise, and vibration caused by the
new power station on the surrounding area, necessary countermeasures are to be devised. Since
no residential areas exist around the Rajburi Sugar Factory, the power station may not encounter
major problems.

13