VIE PFS Rice Power Plant

Final Draft Report

PROMOTION OF RENEWABLE ENERGY,

ENERGY EFFICIENCY AND GREENHOUSE GAS ABATEMENT (PREGA)

Viet Nam

Demonstration of Rice Husks-fired Power Plant in An Giang Province

A Pre-Feasibility Study Report1

May 2004

1 Prepared by the PREGA National Technical Experts from Institute of Energy, Viet Nam.

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TABLE OF CONTENTS

1. Brief description of project........................................................................................5

1. Brief description of project........................................................................................5

2. Location of power station...........................................................................................5

3. General description of project area ..........................................................................5

3.1. Geographical and Socio-Economic features of An Giang province ..............5 3.2. Need for building the combinations of rice preservation- mill systems ........7

4. Rationale of building a demonstration rice husk- fired power plant ....................7

4.1. Potential of power generation from rice husk in Vietnam .............................7 4.2. Government policy on renewable energy and electrification.........................8

5. General description of project...................................................................................9

5.1. Present situation of infrastructures in the area and power station .............9 5.2. Hoa Binh Food Purchasing and Processing Unit.......................................9 5.3. Layout area and expected capacity of power station....................................11 5.4. Technological Procedures for rice husk power generation......................13

6. Project Implementation Plan...................................................................................18

7. Contribution To Sustainable Development............................................................18

8. Project Base Line and GHG Abatement Calculation............................................18

8.1. Methodology for calculation of base line of emission.............................18 8.2. Calculation of baseline.............................................................................18 8.3. GHG Abatement Calculation...................................................................20 8.4. Reduction of CO2 emission from paddy drying.......................................21 8.5. Total CO2 emission reduction..................................................................21

9. Financial Analysis.....................................................................................................21

9.1. Total investment cost evaluation .............................................................21 9.2. Financial Analysis....................................................................................24

10. Economic analysis.....................................................................................................33

10.1. Poverty alleviation effect ....................................................................33 10.2. Environmental impacts........................................................................33

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10.3. Economic Analysis of the Project .......................................................33 11. Conclusions ...............................................................................................................39

LIST OF TABLES

Table 3.1. Current situation of power supply and consumption in AnGiang Province 7

Table 4.1: Potential of rice husk for power generation in Vietnam ..............................8

Table 5.1. List of equipment at Hoa Binh Food Purchasing and Processing Unit.......11

Table 5.2. Local fuel availability.......................................................................................12

Table 5.3. Technological characteristics ..........................................................................12

Table 5.4. Chemical composition......................................................................................12

Table 5.5. Energy and power balance ..............................................................................12

Table 5.6. Thermal energy balance ..................................................................................13

Table 5.7. Technical and economic parameters of the project ......................................17

Table 8.1: Electricity production in the period 2000 - 2010 - 2020 (base case) ............18

Table 8.2: Fuel demand for electricity production (base case)......................................19

Table 8.3. Coefficients of CO2 emissions (according to IPCC) .....................................19

Table 8.4. Heat value of fuel types....................................................................................19

Table 8.5: CO2 emissions in years of 2002 - 2020 and baseline......................................20

Table 8.6: CO2 emission reduction by AnGiang Rice Husk Power Plant in years of 2002 – 2020 (Based on the Whole Vietnam Electricity System Baselin)................................20

0.5 MW rice husk – fired cogeneration plant ..................................................................23

Table 9.2. Summary of the technical and financial results (adjusted to current price) for a 0.5 MW rice husk – fired cogeneration plant ..................................................................24

Table 9.3. Components of capital source for project......................................................26

Table 9.4. Results of financial analysis with WACC of 7.325 %...................................26

from the point of view of investor.....................................................................................26

Table 9.5. Results of financial analysis with WACC of 7.325%....................................27

from the point of view of project ......................................................................................27

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Table 9.6. Sensitivity Analysis with indicators from the point of view of project......27

Table 9.7. Sensitivity Analysis with indicators from the point of view of investor .....28

Table 9.8. Revenue of project...........................................................................................29

Table 9.9. Financial Analysis from the point of view of investor with WACC of 7.325%, CO2 emission reduction taken into account....................................................................30

Table 9.10. Financial Analysis from the point of view of project with WACC of 7.325%, CO2 emission reduction taken into account....................................................................31

Table 10.1. Data input of Economic analysis...................................................................34

Table 10.2. Economic Analysis results with electricity price of 5 UScent/kWh...........35

Table 10.3. Economic Analysis with CO2 emission reduction taken into account .....37

Table 10.4. Economic Analysis without CO2 emission reduction taken into account .38

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1. Brief description of project

Project "Pre-feasibility study of Demonstration Rice Husk-fired Power Plant in An Giang province" was prepared with the following tasks:

• To identify the site appropriate for building the power station and its capacity; • To select technologies, which are suitable to current specific conditions in rice mills

as well as socioeconomic development trends in An Giang province in particular and in Mekong river delta provinces in general, mainly for meeting the future power and heat requirements of rice mills;

• To evaluate the civil works and investment cost; • To evaluate the economic and financial effectiveness; and • To calculate CO2 emission reduction.

The results of calculation and analysis of the project can be summarized as follows:

(i) Project will be put in operation in 2005 and end in 2024 (ii) Total amount of CO2 emission reduction within project lifetime will be 20,194

tons.

The financial and economic indicators of project are: FIRR = 19.5 % FNPV = 1 mil. US$ B/C = 1.74 EIRR = 25.72% ENPV = 0.926mil. US$ B/C = 1.96 The project is considered as one of the first models of power generation from rice husk in Vietnam aimed at demonstrating, introducing, propagandizing and expanding the application of technology to other rice mills or group of mills in An Giang province as well as in other provinces/ areas in Mekong River Delta, and finally contributing to economic development, job creation, ensuring a reliable power and heat supply, sufficiently meeting the requirement of rice mill and providing excess electricity to the grid. 2. Location of power station The rice husk - fired power station is expected to be built at Hoa Binh Food Purchasing and Processing Unit in An Hoa commune, Chau Thanh district, An Giang province. The anticipated site of TPP is situated by the Road to Cambodia, 16 km far from Long Xuyen city (see the attached map). 3. General description of project area 3.1. Geographical and Socio-Economic features of An Giang province An Giang is located at the southwest frontier of Vietnam, bordered on the Southeast by Can Tho province, on the North - East by Dong Thap province, on the northwest by the common frontier between Vietnam and Cambodia. With a natural area of 3,406.2 km2 and average population of 2,082,838 persons (density of 609 persons per km2), An Giang has one city (Long Xuyen), one provincial Town (Chau Doc) and 9 districts (Chau Phu, Chau Thanh, Cho Moi, Phu Tan, Tinh

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Bien, Tri Ton, Tan Chau, Thoai Son and An Phu). In recent years, socio-economic development of the province has been continuously developing (in the period 1996-2000 the average growth rate of GDP is of 7.4% per year) of which the essential is agriculture development, followed by sea-aquatic product processing. Within the province area, beside two main river branches Tien Giang and Hau Giang, there are a lot of rivers and canals, evenly distributed. The grand amount of alluvium annually provided by the rivers and canals makes land fertilized, that is an important factor promoting the development of agriculture. With this advantage, An Giang is considered one of the large rice cultivation areas in Vietnam. Thus, the investment in building the storage systems in isolated communes or in the localities having large rice production area for temporary preservation of rice and installing advanced facilities for producing and processing export rice at lower cost are very important measures to maintain the crucial role of agriculture sector. Having more than 200 rice mills with capacity above 100 tons of paddy per day, An Giang is one of potential markets for disseminating cogeneration technology using rice husk as fuel. Climate An Giang is a tropical zone with monsoon and two clearly different seasons, dry and rainy. Average temperature in the year is of 27oC. The number of sunny hours is 2,521 hours per year, and the average rainfall is 1,132 mm. During rainy season from August to November, the water in Mekong River rises and causes flood. The water level during flood can reach 1-2.5 meters, to as high as 3.5 m, and always negatively impacts on the socioeconomic activities in the province. Hydrology - water resource There are 280 rivers and canals distributed at a density of 0.72 km/km2, the highest river density in Mekong River Delta provinces, which can sufficiently supply water for productive and domestic activities in plain areas of the province. However, the hydrological regime in An Giang heavily depends on the level of water in Mekong River. Every year, 70% of land area in the province is flooded less than 1-2.5 meters of water during 2.5 - 4 months. This is a big problem affecting socioeconomic development in An Giang province. Power supply system In recent years, beside the annual financial capital sources coming from the Government, An Giang Authorities have mobilized other sources and local people to invest in developing provincial power supply system in order to provide national grid electricity to isolated and mountainous districts and communes. Since the end of 2002, 100% of communes have been electrified. The amount of electricity sale reached 395 million kilowatt-hours. Up to now, 80% of rural households are connected to the national power grid. The use of electricity from national power grid by industries and small scale industries, especially in rural private rice mills, is still at limited level due to some reasons like the habit of using diesel motor and the concern about high grid investment cost or unstable and insufficient power supply. Table 3.1 presents current situation of power supply and consumption in An Giang in the period 2000-2002 and estimated for 2005.

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Table 3.1. Current situation of power supply and consumption in An Giang Province

No Items Unit 2000 2001 2002 2005 1 Power generation* MWh 10,403 2,410 1,343 2 + Commercial

electricity MWh 286,006 334,401 395,371 587,300

+ Agro-forest-aquatic production

MWh 7,246 7,709 9,135

+ Industry - Construction

MWh 64,724 81,387 140,205

+ Commercial - Service

MWh 8,172 8,809 10,864

+ Administration- residential

MWh 193,870 222,394 254,576

+ Others MWh 12,594 14,102 16,591 Note: * The electricity produced by diesel sets with installed capacity is of 7.6 MW installed capacity is of 7.6 MW, belonged to the Provincial Power Company.

3.2. Need for building the combinations of rice preservation- mill systems

An Giang is one of Mekong River delta provinces with good local conditions, favorable for agriculture development, especially rice production. As it was mentioned in the socioeconomic Master Plan for the period up to 2010, agriculture will remain the key sector in the economic development of the province, of which rice production is the most important. It is planned to produce 2.5 - 2.6 million tons of rice in 2005, and to increase white rice export from 460 thousand tons in 2001 to 650 thousand tons in 2005.

To achieve these objectives, beside the activities for improving rice species in terms of quality, productivity and usable value, improving post-harvest conditions, especially in cases when bad weather causes overload of old storage systems and high losses ratio, there is a need to invest in building and installation of combined preservation systems and modern rice mills.

4. Rationale of building a demonstration rice husk- fired power plant

4.1. Potential of power generation from rice husk in Vietnam

Vietnam has abundant and diverse biomass sources such as bagasse, rice husk, coffee husk, coconut and woody residues but only a small portion of bagasse has been used as fuel for power generation. Apart from bagasse, rice husk and straws are important biomass sources, which could be also used for biomass - based power generation and cogeneration in Vietnam.

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Vietnam is rice-exporting country but most of its rice mills are of small capacity. It is estimated that 2.5 million tons of rice husk is available and can be used for energy generation. Potential of rice husk for power generation is presented in Table 4.1.

Table 4.1. Potential of rice husk for power generation in Vietnam

Type of biomass

Potential* (1000 tons)

Use factor Available for use (1000 tons)

Expected power capacity (MW)

Rice husk 6,400 0.39 2,500 100-200 Note: + According to Yearbook, 2001.

The rice mills having longer hulling period and additional revenue from ash sale could attract the investors in rice husk fired power plant with unit investment cost of 1500-1600 US$/kW, even when electricity tariff is one component (electricity but not capacity). However, since most of existing rice mills are of small capacity, efficient transportation would be very important in collecting rice husk from rice mills and supplying it to a big power plant.

The results of recent survey on rice husk sources at rice mills in Vietnam showed that most of public owned rice mills have changed their operation mode in rice production. The mills in the north have only function for rice preservation. In the south, the same situation is observed but less popular. Also from this survey, the areas with highest potential of power generation from rice husk are in the Mekong River Delta provinces such as Long An, Tien Giang, An Giang, Kien Giang, Can Tho, Soc Trang, Dong Thap and Tra Vinh. In An Giang province, the preliminary survey identified about 200 rice mills having milling capacity of 2.5 tons of paddy per hour, most of which are operated by diesel engine.

4.2 Government policy on renewable energy and electrification

At present, the major barrier is the absence of energy policy and institutional framework strong enough to promote the exploitation and use of renewable energy, especially for power generation in the areas where the rural electrification and grid connection is least-cost. Lack of financial mechanism for establishing and operating the trading enterprises on renewable energy, for instance, technology market, investment, policy on credit and loan has negatively affected and restricted the renewable energy development in Vietnam for years. There still exist a lot of crucial issues and difficulties in selecting the ownership pattern for renewable energy projects (public or private) as well as providing necessary support when the socioenvironmental benefits from the investment in renewable energy technologies development were identified. Financial sources and the way to access the measures encouraging investment in energy technologies through taxation (e.g. priority, incentive or exemption) are not clearly announced. There exist some policies, which have positive effects on promoting the development and application of renewable energy technologies in Vietnam. Being market oriented, the policy on rural electrification will be a good base encouraging the investors in development of renewable electricity in order to meet the on site energy requirements (own use) or providing to the grid through private utilities, cooperatives or other owners. These units will invest in small power stations. Recently, the diverse modes of investment have brought in the encouraging effects.

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Since early 2000, the Ministry of Industry has approved the policy on rural electrification and issued the main principles for diversifying the ownership, providing the incentives to power trading utilities and encouraging the distributed power source. Rural electrification will be considered in two options: on-grid or off-grid, based on the least-cost criteria. 5. General description of project

Objectives: Project "Demonstration of rice husk-fired power plant in An Giang has the following objectives:

(i) Demonstration for dissemination and expansion of technology application to other rice mills within An Giang or other provinces in Mekong River Delta.

(ii) Focus on exploitation of rice husk available at Hoa Binh Unit and some surrounding private rice mills for producing heat and electricity to meet sufficiently the energy need of the mill and to supply the excess electricity to grid or neighboring consumers.

Project title: Demonstration of rice husk fired power plant in An Giang province Project Owner: An Giang Food and Agriculture Product Import & Exporting Company Location: Hoa Binh Food Purchasing and Processing Unit

5.1. Present situation of infrastructures in the area and power station

5.1.1. Transportation system The place for building power station is located in the center of high quality rice cultivation area. Additionally, it has the advantage of superficies and lies beside the National Road 91 and river Hau, convenient for fluvial shipping by high shipload boats. 5.1.2. Power grid A medium voltage line of 15 kV from Chau Thanh to Tri Ton district was built; it will facilitate the grid connection of expected power station. 5.1.3. Water supply Water from river Hau is sufficiently supplied for production process.

5.2. Hoa Binh Food Purchasing and Processing Unit.

5.2.1. Overview

One part of land area proposed for building power station is in the area of Hoa Binh Food Purchasing and Processing Unit, in An Hoa Commune, Chau Thanh district, An Giang province. This unit is bordered as follows:

• On the North by private rice mill Hoang Son • On the West by National Road 91

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• On the East by river Hau • On the South by canal Lang

Superficies: Total land area is 5,000 m2 of which: • Rice storehouse No.1: 1,300 m2 • Rice storehouse No.2: 700 m2 • Hulling machine: 500 m2 • Administration hall: 70 m2 • Rice husk storehouse: 320 m2

At the moment, the mill operates only one shift per day but during crop seasons or when the rice supply contract is signed, the mill will operate during 24 hours per day.

There are only 9 workers permanently working in the mill. Most of the workers are seasonably hired. The product loading and transporting are done manually by porters who are poor farmers living in the vicinity of the mill.

5.2.2. Equipment status The rice mill was put in operation in 1999. All the initial equipment is locally manufactured. The general technological scheme of plant is as follows: Drying plant ⇒ Paddy hulling machine ⇒ Rice whitening machine ⇒ Rice polishing machine ⇒ Rice storehouse and rice husk storehouse. The stevedores deliver Paddy from the boat to the rice mill. The paddy hulling chain has been designed with an electric motor of 132 kW capacities. Another motor of 37 kW was installed for white rice polishing chain. After the hulling chain, rice is polished in polishing machine driven by two electric motors of 75 kW each. In addition, there exists a sorting table with one electric motor of 11 kW and 8 others of 1 kW each.

5.2.3. Power Consumption

List of equipment at Hoa Binh Food Purchasing and Processing Unit is presented in Table 5.1. According to the site audit, power capacity based on the installed capacity of the whole plant when operating is of 338 kW.

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Table 5.1. List of equipment at Hoa Binh Food Purchasing and Processing Unit

Equipment Unit Quantity Total Design capacity

(kW)

Capacity reserved

factor (%)

Total real

capacity (kW)

Manufacture. country

I. Paddy hulling Plant Rice hulling chain Motor 1 132 20 112 Japan Screens Motor 6 6 15 5.1 Vietnam Grading machine Motor 1 11 20 8.8 Vietnam Total I II. Rice whitening system Rice Whitening system

Motor 1 37 20 29.5 Japan (old)

Total II III. Polishing machine Rotary drum dryer Motor 2 2 10 1.8 Vietnam Polishing machine Motor 2 150 20 120 Japan (old) Total III 4 152 Total I+II+III 13 338 270

5.2.4. Power supply Hoa Binh Food Purchasing and Processing Unit are powered from national grid through the own power sub-station of 320 kVA at 15/0.4kV. 5.2.5. Milling capacity The designed milling capacity of the mill is of 5 T/h. Additionally, there is a private rice mill of 100 tons of paddy per day located just beside it, that is a good condition for supplementary rice husk supply to the power station when needed. 5.3. Layout area and expected capacity of power station The power station is expected to be built on the area of present husk storehouse and reserved area of Hoa Binh Unit. This area is located next to private rice mill Hoang Son and Hau river, convenient for transportation and collection of rice husks from neighboring rice mills by water way. The location in the center of zone supplying raw paddy would ensure the continuous operation of power station (see the map). Power capacity of rice husk fueled power station was calculated based on the milling capacity of Hoa Binh Unit. This parameter will be unchanged. Expected power capacity of power station is 500 kW. The analysis and calculations of rice husk source, fuel characteristics and power balance are presented in following parts.

5.3.1. Technical Analysis

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Table 5.2. Local fuel availability

Type of residues Actual Designed

Rice husk Rice husk / paddy ratio 20% 20% Rice husk produced 1 T/h 1 T/h Available rice husk 1 T/h 1 T/h

Table 5.3. Technological characteristics

No Characteristics 1 Moisture content % 8.84 2 Volatile matter % 57.95 3 Ash content % 15.24 4 Fixed carbon % 18.64 5 High heating value kcal/kg 3800

Table 5.4. Chemical composition

No Characteristics 1 C (%) 31.65 2 H (%) 6.12 3 O (%) 36.08 4 N (%) 1.87

Table 5.5. Energy and power balance

Load balance

Load of rice mill (kW) Capacity supplied from rice husk power plant (kW)

Rice milling of 5 T/h 270 Gross output 500 Parasitic load 50 Expected excess capacity (-180) Total 320 320

Energy balance Energy demand (MWh/year) Supplied electricity (MWh/year)

Rice milling of 5 T/h 1,300 Generation potential 2,500 Parasitic load 250 Expected excess (-950) Total 1,550 1,550

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Heat requirement for paddy drying According to the report of An Giang Department of Agriculture and Rural Development, the heat demand for paddy drying in the province is very big but until now, there exist only 633 drying machines of small capacity, 4 ton/shift on average. The total capacity of these systems can meet only 15% of the demand. In order to meet the need for paddy drying, An Giang has planned to build the paddy / rice preservation / drying network in the province. However, like most rice mills in An Giang, Hoa Binh Food Purchasing and Processing Unit still has no paddy drying system of big capacity due: (i) power supply from national grid is insufficient and not covering the need for milling; and (ii) high price of other fossil fuels such as oil, mine coal resulted from transportation cost in long distance. In this project, the steam exhausted from turbine is proposed to be reused to meet the need for paddy drying.

Table 5.6. Thermal energy balance Unit: MWh/year

Use Generation Net export 35 (*) 8333 (**) 8298 Note: (*): -useful energy from burning 10 tons anthracite coal with efficiency of 60% (**) - thermal energy generation from cogeneration plant with steam back-pressure turbine

and rice husk boiler

Conclusions Installed capacity of the rice husk fired power station will be 500 kW, of which 320 kW will be used for rice milling process in Hoa Binh Unit and surplus amount of 180 kW will be supplied to the power grid or neighboring consumers.

5.4. Technological Procedures for rice husk power generation

5.4.1. Base for Selection of technology for cogeneration from rice husk

The selection of rice husk combustion technology for producing energy (heat and power) is based on the following criteria:

• Production cost • Recovery of capital and financial benefit • Rice husk availability and fuel characteristics • Overall efficiency of the cycle (cogeneration plant) • Equipment manufacturing and supplying capability • Environmental impacts and measures for mitigation.

Some worldwide proven technologies are described below for analyzing and selecting the most appropriates to small-scale rice mills that are popular in Vietnam.

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The existing six main biomass conversion technologies are: (i) direct combustion; (ii) gasification; (iii) anaerobic; (iv) pyrolysis; (v) briquetting and (vi) liquefaction. At present, the most common technologies are direct combustion and gasification from rice husk to produce electricity. An analysis of these two technologies is carried out below in order to select the more appropriate in terms of capacity and practical application.

Before selecting the technology, an analysis of fuel characteristics is needed.

Moisture content of biomass fuel is one of its important characteristics because after collection from the field it is not homogeneous. Thus, a careful consideration should be made in selecting the suitable mode for fuel feeding and combustion technology. The presence of water in biomass fuel will reduce the portion of combustible substances. Biomass having high moisture content should be dried naturally under the sun or in a dryer before being used as fuel. On the other hand, too high moisture content always needs more time for heating biomass up to fire setting temperature. Nowadays, new existing technologies and techniques allow burning the fuels having high moisture content up to 60%. Thus, we have to consider and choose the moisture content in a range suitable to the technology. Heating value of fuel is the amount of heat liberated from the complete combustion of 1 unit of fuel. This is a basic feature, which will be used for calculating the parameters of combustion chamber like heat volume, surface of grates as well as combustion and mass/heat transfer processes in the furnace. In the technical documents on combustion of biomass in furnace / boiler from abroad, it was proved that the heat value of biomass having moisture content at 50% should be not less than 1,850 kcal/kg. Homogeneity of fuel: If the homogeneity of fuel in terms of size and type is not ensured, the combustion process in the furnace could not be stable. It needs to select an appropriate combustion technology. Ash content: From the above analysis, ash content has important effects on fuel properties: reducing heating value, causing dust and corroding the material of boiler, leading to decreased heat transfer intensity. For biomass fuel, ash content is very low and the ratio between fly ash and slag depends a lot on the shape and size of fuel as well as selected combustion technology, size and form of boiler / furnace. For conventional combustion on grate, this ratio is of 60/40 and even 80/20. During combustion process, the ash is usually entrained in the smoke stream due to suction effect of the fan. Consequently, in order to keep on the environmental allowable parameters it needs to use the ash traps, flue gas filters (dry, wet or bag). 5.4.2.Analysis and selection of technology biomass gasification Biomass gasification Biomass gasification is a process of converting solid biomass into a combustible gas by combustion with insufficient oxygen supply. There are 3 modes of biomass gasification, they are: (i) downdraft; (ii) updraft and (iii) gross draft.

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The composition of produced gas (mainly volatile matter) depends on the factors like temperature, pressure, heat transfer process and type of gasifier. In gaseous mixture, beside combustible gases, there exist also other substances such as steam, and tar.

This gaseous mixture should be cleaned (for removing tar and particles) and cooled before coming to the combusting appliance / furnace. For internal combustion engines, the content of tar in combustible gas should not be more than 50 ppm (part per million) while for gas turbine this feature should be well lower.

(i) In the case of down -draft gasifier, producer gas has to pass a zone with higher temperature so its temperature is rarely high, at 600-800 oC

(ii) In the case of updraft gasifier, producer gas should pass a bed of raw biomass fuel, which has very low temperature. That's why its outlet temperature is low, ranging from 100 to 300oC.

When using this type of gasifier for internal combustion engines (also for gas turbine), the produced gas needs to be cleaned due to higher content of tar. The up-draft gasifiers are suitable only for fuels having high moisture content. Both types of gasifier are designed with a "throat" to form a high temperature zone for cracking tar. However, this throat will restrict the biomass flow, especially for the biomass having very low bulk density (kg/m3). Direct combustion In current development trends, fluidized bed combustion (FBC) technology is used for combustion of solid fuels, including biomass, and particularly rice husk. FBC combustion is chosen when fuel particle size is less than 6 mm. The bed consists of inert particles, and commonly, sand is used. Two types of FBC, which could be used for combustion of rice husk fuel are bubbling fluidized bed combustion (BFBC) and circulating fluidized bed combustion (CFBC). They are described below:

(i) Advantages of BFBC • Reducing NOx emission • High heat transfer effect due to the increment of contact surface when the fuel

particles are sunk in the "boiling layer". It is important to note that biomass fuel has high volatile content (V ~ 70%); the heat liberated in the fire box is much higher than that on the grate as the volatile matter released from biomass fuel will burn in the space of combustion chamber. Based on this, FBC would be effected in the furnace with two combustion chambers. In the first chamber, fuel burns at low temperature. The generated volatile and unburned fuel particles are led to the second chamber, to which the secondary air is supplied sufficiently for complete combustion.

(ii) Circulating Fluidized Bed Combustion

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A typical feature of FBC is the great quantity of fly ash, which contains a considerable amount of unburned carbon (only volatile matter was burnt out). Fly ash recycle system should be used for improving the furnace efficiency. Fly ash, after being separated from flue gas precipitators (cyclone type), is returned back to furnace.

Combustion on grates Combustion chamber Based on the required capacity, the type of furnace and various fuels feeding mode van is selected. The main factors for this selection are:

• Fuel characteristics • Plant's capacity

For on-grate combustion furnace, there are some types of grate which might be chosen: fixed, flat grate, inclined step grate, moving grate (shocker grate) but only the inclined moving grates are in common use. The furnace may be divided into two separate parts: combusting and heating (pre - furnace) or direct. Fuel feeding could be done from the bottom or from the top, continuously or in batch. To facilitate the selection, two modes of fuel feeding are analyzed. Selection of technology Based on the above analysis, a conclusion is made on the possibility of using one of the following technological schemes for power generation from rice husk:

1. Rice husk → downdraft gasifier → internal combustion engine or small scale gas turbine → generator

2. Rice husk → Combined cycle (gas - steam) → gas and steam turbines → alternator 3. Rice husk → furnace / boiler → steam turbine → alternator

First scheme: Cleaned produced gas of biomass is preheated and led to gas turbine/I.C engine for combustion. Low investment cost and simple operation (few of facilities required) are the advantages of this scheme. However, it can be used for small scale power generation (up to 1000 kW) and it need tar removing process since along with operation, the dust / tar will accumulate on heat exchange surfaces. Second scheme: Rice husk is gasified in a gasifier. Produced gas is led to gas turbine for combustion and power generation. The temperature of gas exhausted from gas turbine is still high enough to produce steam. This superheated steam will be led to the steam turbine to drive the generator producing electricity. This scheme has some advantages like high overall efficiency and high electric capacity. Third scheme: Biomass is burnt in a furnace (fluidized bed / grate type) for preheating water and producing steam, which will be used in a steam turbine for driving the generator. This scheme has higher efficiency compared to the first one and easy to apply for cogeneration. It requires, therefore, higher investment cost and skilled operators.

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Conclusions on selection of technology Cogeneration plant consists of rice husk storehouse, conveying and automatic boiler feeding systems, furnace/boiler producing 9 tons of steam per hour at 32-bar pressure. The boiler is equipped with automatic ash removal system, heat exchangers and turbo-generator of 0.5 MW. The turbine used here is a backpressure. Heat provided for paddy drying is of 3,000,000 kcal/h. Rice mill will operate 5,000 hours per year. The milling period will be longer than usual thanks to the installation of power station, which will operate for the same period of time.

Table 5.7. Technical and economic parameters of the project

Parameter Unit Data

I. Data on rice mill Input capacity T. paddy/hour 5

Rice husk /paddy ratio % 20Mill power requirement KW 270Milling duration Hours/year 5,000Ash /rice husk ratio % 20

II. Data of rice husk–fired energy plant Biomass consumption Kg/kWh 2.0Installed capacity kW 500Load factor % 100Parasitic load % 10Operating time hours/year 5,000

Number of shift per day Shifts/day 3

Number of hours per shift Hours/shift 8Electricity generation kWh/year 2,500,000Investment cost

Equipment unit cost US$/KW 1570Civil works US$ 90,000Other costs (transmission etc.) US$ 60,000

Annual maintenance cost % of equipment cost 3Manpower requirements

Plant supervisor person/shift 1Skilled worker person/shift 1Unskilled worker person/shift 2

Labor cost US$/year 28,000Other annual operating costs US$/year 1.000

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6. Project Implementation Plan

• Preparation of PFS report, approval: 2003 • Survey, investigation, preparation of FS report, approval: 5/2004 • Preparation Technical Design: 2004 • Construction of plant: 2005 • Starting operation: 2006 • Ending operation: 2025

7. Contribution To Sustainable Development (i) Supply electricity and thermal energy for own use of rice mill, reduce cost price

of rice processing and preservation; (ii) Supply more power resource, meet electricity demand of Chau Thanh district, An

Giang province; (iii) Create new jobs for laborers; and (iv) Introduction of new electricity generation technology.

8. Project Base Line and GHG Abatement Calculation

8.1. Methodology for calculation of base line of emission

(i) Since capacity of anticipated rice husk thermal power plant will substitute

capacity of one coal-fired power plant, the baseline emission (without this project) will be calculated for the whole Vietnam power system.

(ii) Based on long-term power system development plan, electricity production in years of the planned period will be calculated.

(iii) The structure of produced electricity and fuel demands for electricity production will be calculated.

(iv) Based on the emission coefficients, annual CO2 emission from each fuel type will be calculated.

(v) Baseline is calculated: amount of CO2 per kWh

8.2. Calculation of baseline

1. In Electric Power Development Master Plan for Vietnam for the period 2001 - 2010 with outlook to 2020, calculated annual electricity production are as follows:

Table 8.1: Electricity production in the period 2000 - 2010 - 2020 (base case)

Year 2000 2005 2010 2020

Total electricity production, GWh

26594 53438 96125 201367

19

2. Total capacity of power plants in Vietnam in 2020 is estimated to about 41400 MW, of which hydro - 15000 MW (36.1%), gas thermal - about 14000 MW (33.0%), coal thermal - 6700 MW (16.2%), and imported fuel - 4000 MW (9.6 %).

In the structure of electricity production in 2020, hydro accounts for 28% (about 56 billion kWh), gas thermal, 39.1% (about 79 billion kWh), coal thermal, 17.9% (36 billion kWh), imported, 8.2% (about 16 billion kWh). With this structure of electricity production, demand of primary fuels for electricity generation in the period 2002 - 2020 is as follows:

Table 8.2: Fuel demand for electricity production (base case) Unit: thousand tons, mil. m3

Fuel structure

2002 2003 2004 2005 2006 2007 2008 2009 2010 2020

Coal 3101 3542 3415 4254 4129 5494 6947 8302 9959 15859

Gas 1966 3262 4963 5644 6418 6666 7935 8173 9278 16897

Oil, FO, DO

1048 473 187 319 568 826 81 73 73 -

3. Calculation of emissions and baseline

Table 8.3. Coefficients of CO2 emissions (according to IPCC)

Fuel type Emission coefficient (K), kg CO2/ GJ

Anthracite coal 98.3

Oil 74.1

Gas 56.1

Table 8.4. Heat value of fuel types

Fuel type Heat value (CV)

Coal, GJ/1000 tons 21000

Oil, GJ/1000ton 42300

Gas, GJ/tr.m3 38000

Emission amount is calculated by the following formula:

20

En = Σ (Bi x CVi x Ki)

Where: - En: Total CO2 emission in year n - Bi: Fuel amount consumed in year n by type (i = coal, oil, gas taken from table 2). - Ki: Emission coefficients (table 8.3) - CVi: Heat value (table 8.4)

The results of calculation are showed in table 8.5

Table 8.5: CO2 emissions in years of 2002 - 2020 and baseline

Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2020

Coal 6401394 7311751 7049585 8781532 8523495 11341264 14340692 17137819 20558364 32737734

Gas 4191119 6953932 10580123 12031879 13681892 14210579 16915833 17423201 19778840 36021025

Oil 3284883 1482585 586138.4 999883.2 1780356 2589039 253888.8 228813.4 228813.4 0

CO2 (ton) 13877396 15748268 18215846 21813295 23985743 28140882 31510414 34789833 40566017 68758758

Generation (GWh)

34275 53438 96125 201367

Kg of CO2/kWh

0.40488 0.39049 0.39248 0.40820 0.40019 0.41805 0.41623 0.42297 0.42201 0.34146

8.3. GHG Abatement Calculation

Based on the results presented in Table 8.5, the GHG emission reduction if the Rice Husk Power Project of 500 KW (2500 MWh annually) is implemented, compared to Whole Vietnam Electricity System Baseline can be calculated and showed in following table: Table 8.6: CO2 emission reduction by An Giang Rice Husk Power Plant in years of 2002

– 2020 (Based on the Whole Vietnam Electricity System Baseline)

Years 2002 2003 2004 2005 2006 2007 2008 2009 2010 2020

Baseline Emission

Coefficient (Kg of CO2/kWh

0.404 0.390 0.392 0.408 0.400 0.418 0.416 0.422 0.422 0.341

Reduction of non-biogenic CO2 (Ton of

CO2)

1000 1045 1040 1057 1055 852

21

From Table 8.6 with assumption that baseline emission coefficient will be unchanged from 2020 to 2025, the total CO2 emission reduction, which will be reduced during project lifetime (2006 - 2025) can be calculated. The calculation result is 19 800 tons of CO2. 8.4. Reduction of CO2 emission from paddy drying As mentioned above, the annual anthracite coal consumption for paddy drying of the rice mill is 10 tons. This energy process emits CO2 and other pollutants. The use of steam at low pressure generated by the project for paddy drying instead of using coal will result in reduction of non-biogenic CO2 emission, equaled to 19.72 ton of CO2/year. During project lifetime, the total reduction amount will be of 394 tons of CO2. 8.5. Total CO2 emission reduction From the above calculation, total CO2 emission reduction during project lifetime is 20194 tons. 9. Financial Analysis

9.1. Total investment cost evaluation

9.1.1. Legal backgrounds

• Works to be done and some unit costs based on results of survey at An Giang province.

• Project management costs according to the Circular No. 08/TT-BXD dated 16/11/1999 by Ministry of Construction.

• Unit costs of evaluation and construction consultancy according to the Decision No. 15/2001/QD-BXD dated 20/7/2000 by Minister of Construction.

• Project design costs according to the Decision No. 12/2001/QD-BXD dated 20/7/2001 issued by Minister of Construction.

• Circular No. 137/1999/TTLT-BTC dated 19/11/1999 by Ministry of Finance on guideline for construction project insurance.

• Unit costs of equipment and electric materials of foreign and domestic manufacturers. • Guideline on preparation of cost estimates, total cost estimate for basic construction

power projects No. 2281/EVN-KTDT dated 25/05/2001 by Electricity of Vietnam. • Government Decree No. 22/1998 /ND-CP dated 24/4/1998 on compensation when

the government uses land for purposes of defense, security, national and public benefits.

• Costs of preparation of procedures for getting land, construction license and land compensation according to paper No. 1307/BXD-VKT dated 29/08/1998.

• Format of Pre-Feasibility Study report prepared by PREGA team of ADB. • Related papers in force. • Exchange rate: US$ 1 = VND 15200

22

9.1.2. Breakdown components of investment cost

General techno-economic assumptions Rice milling capacity is 120 ton of paddy per day, major part of which is for domestic usage or export. Cogeneration plant consists of a rice husk storehouse, conveying and automatic boiler feeding system, a furnace/boiler producing 9 tons of steam per hour at 32-bar pressure. The boiler is equipped with automatic ash removal system, heat exchangers and turbo-generator of 0.5 MW. The turbine used here is a backpressure. Rice mill will operate 5000 hours annually. The milling period will be longer than usual due to the installation of power station, which will operate for the same period of time. Total investment cost of the project: 935 000 US$ Main costs of investment are:

Equipment: 785 000 US$ Installation, construction: 90 000 US$ Other costs: 60 000 US$

The following economic parameters will be taken into account in the analysis. Revenue: Rice husk disposal cost saving: consist of savings from not having to dispose rice husk, as it will be used for power generation for the whole year. Since the power plant and rice mill will run simultaneously, rice husk does not need to be stored, except for very short periods of time. This will lead to lessening rice husk storage and handling costs. Electricity cost savings: gained due to: (a) not use mined coal for paddy drying and (b) not have to purchase grid electricity during the milling season. Surplus power sale: revenue from the auto produced electricity in excess of the mill requirement and the excess amount is sold to the power grid or neighboring consumers. Surplus thermal sale: revenue from the auto produced thermal energy in excess of the requirement for paddy drying and the excess amount is used to dry for other mills around the area of Hoa Binh Food Purchasing and Processing Unit. Ash sale: ash is a by-product from rice husk combustion in the boiler. At present, European boiler manufacturers are able to develop incineration systems to produce rice husk ash of consistent quality. Rice husk of such quality can be considered as a valuable additional material in some industries such as glass and brick manufacturing, in the steel industry, and more recently, in semi-conductor industry. Thus, investment in equipment, which could produce good quality ash, will increase the additional revenue for end-users through the sale of ash. Whenever the equipment can produce ash of good quality, the additional income from ash sale is possible. This attractiveness, therefore, should be taken into account in the evaluation. A modest estimate of the profit from ash sale is about 50 US$ per ton.

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It is assumed that the above revenues will be generated only from the second year and the first year is the construction period. The depreciation cost of the equipment is calculated for 15 years. Possible income from sale of old equipment is not taken into account. Costs Capital investment cost: Based on current data, an equipment unit cost of 1570 US$/KW is used for the rice husk -fired power plant. This cost consists of investment cost of a boiler, a turbo-generator and other costs. Civil works and equipment import duties are also considered when analyzing. Annual operating costs of the cogeneration plant consist of maintenance costs and labor costs. Annual maintenance costs are assumed at 3% of the total equipment cost. In this study, the production should not only cover the need of rice mill itself (paddy drying and cooling cells for rice storage) but it also should meet the other electricity requirement of the mill and administrative buildings. The technical and financial assumptions used in the analysis are summarized in Table 9.1

Table 9.1: Summary of technical and financial parameters of the

0.5 MW rice husk – fired cogeneration plant

Parameter Unit Indicator I. Data on rice mill Mill Input capacity T. paddy/hour 5

Rice husk /paddy ratio % 20Mill power requirement kW 270Milling duration Hours/year 5,000 shift 3Ash /rice husk ratio % 20Consumption of anthracite coal Kg/year 10,000

Financial assumptions Exchange rate* VND/US$ 15,200Electricity purchase price out -of -pick load hours US$/kWh 0.0589Electricity buy-back rate US$/kWh 0.0566Market Price of anthracite coal US$/kg 0.022Ash selling price US$/ton 50CO2 Credit US$/ton 5Labor rate - Plant supervisor US$/month/shift 300 - Skilled worker US$/month/shift 200 - Unskilled worker US$/month/shift 150II. Data of rice husk–fired energy plant

Biomass consumption Kg/kWh 2.0Installed capacity kW 500Load factor % 100

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Parameter Unit Indicator Parasitic load % 10Operating time hours/year 5,000

Number of shift per day Shift/day 3Number of hours per shift hours/ship 8Power generation MWh/year 2,500Power Sales MWh/year 950Thermal Generation MWh/year 8333Thermal Sales MWh/year 9298Investment cost

Equipment unit cost US$/KW 1570Civil works US$ 90,000Other costs (transmission etc.) US$ 60,000

Annual maintenance cost % of equipment cost 3

Manpower requirements Plant supervisor person/shift 1Skilled worker person/shift 1Unskilled worker person/shift 2

Labor cost US$/year 28,000Other annual operating costs US$/year 1,000

Table 9.2. Summary of the technical and financial results (adjusted to current price) for a

0.5 MW rice husk – fired cogeneration plant

Parameters Unit ValueInstalled capacity kW 500Capital investment US$ 785,000

Annual operating costs of rice husk – fired power plant Labor costs US$/year 28,800Maintenance costs US$/year 23,550Other costs US$/year 1,000Annual total costs US$/year 53,350

9.2. Financial Analysis 9.2.1. Objectives Financial analysis is to evaluate the feasibility of the project at the point of view of the investor (project manager), from that to offer forms of capital mobilization, financial mechanisms in order to ensure balance in financial revenue - cost and efficiency of project.

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9.2.2. Financial analysis consists of the following: Project financial analysis, from the view of investor, is to define ability of capital mobilization, loan conditions (interest, payback time, grace period…), to reach the financial efficiency. 9.2.3. Financial Analysis includes following reports:

1. Report of Revenue: represents annual revenue, costs and net income of project during the

lifetime. 2. Table of Cash Flow: represents revenue flow, cost flow and net present value for the

project during lifetime with discount rate taken into account

Table of cash flow evaluates financial effect, defines financial indicators of project and investor, includes:

• Financial Internal Rate of Return: FIRR • Financial Net Present Value: FNPV • Ratio of Benefit and Cost: B/C

Borrowing capital: An Giang Food and Agriculture Product Import & Exporting Company is the investor. According to commercial loan conditions, project manager must contribute at least 30% of total investment capital (including interest during construction period), maybe stock or own fund, 70% capital remaining will be credit loan. It is anticipated to borrow loan with the terms and conditions as follows:

• Payback time: 3 years • Grace period: 1 year • Lifetime of project: 20 years

GHG credit of rice husk power plant: 5 US$/ ton CO2. It is taken into account during first ten years. Average electricity price is set up so that financial rate of return is at least equal or higher than WACC to ensure the feasibility of the project. The results of financial indicators of project investor (An Giang Food and Agriculture Product Import & Exporting Company) are as follows: Average interest rate of 7% and equity participation with expected interest rate of 10%, it is anticipated to have capital resources of project as in the table below:

26

Table 9.3. Components of capital source for project

Sources of Fund

Weighted Nominal cost

Income tax rate

Tax-adjusted nominal cost

Loan 70%

of which

ADB Loan

30% 6.7% 32% 5.556%

Other foreign loan

10% 7.5% 32% 5.1%

Domestic loan

30% 12% 32% 8.16%

Equity participation

30% 10% 10%

From the above sources of fund and interest rates with income tax rate of 32%

WACC =0.3*5.556%+0.1*5.1%+0.3*8.16%+0.3*10%= 7.325%

The results of financial indicators are in the tables below:

Table 9.4. Results of financial analysis with WACC of 7.325 %

from the point of view of investor

Indicators With CO2 emission reduction taken into account

Without CO2 emission reduction taken into account

NPV (mil. US$) 0.805 0.586

FIRR 28.56% 22.5%

B/C 1.45 1.35

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Table 9.5. Results of financial analysis with WACC of 7.325% from the point of view of project

Indicators With CO2 emission

reduction taken into account

Without CO2 emission reduction taken into

account

NPV (mil. US$) 1 0.79

FIRR 19.5% 17.07%

B/C 1.74 1.53

The analysis results show that FIRR of project would be higher than WACC. In case of GHG emission reduction taken into account the benefits of the projects will be higher. Project is financially feasible. 9.2.3. Sensitivity Analysis

This Study carried out sensitivity analysis based on the most likely changes. (i) An increase in investment cost by 10 percent Decreases in benefits:

• No benefit from ash sale • No benefit from thermal energy sale

(ii) An increase in costs of operation and maintenance by 10% (iii) A delay in the period of construction, causing a delay in revenue generation by one year. (iv) Combinations of variables: the effects on FNPV and FIRR of a simultaneous decline in benefits and an increase in investment cost and O&M costs can be computed. The effects of above changes are summarized in the following table.

Table 9.6. Sensitivity Analysis with indicators from the point of view of project

Item FNPV (mil. US$) FIRR (%) SI (FNPV) SV (FNPV)

Base case 1 19.5

Investment 0.935 mil. US$ 10% 0.91 17.52 0.900 -111%

No benefit from ash sale 50 US$/ton ash 0 US$/ton ash 0.42 12.74 0.580 172%No benefit from thermal energy sale 4.6 US$/MWh 0 US$/MWh 0.76 16.77 0.240 417%

O&M costs 0.0534 mil. US$ 10% 1.02 19.7 -0.200 500%

Construction delays 0.934 19.38 6.60% NPV 6.6% lower

Combination of variables 0.093 8.28

Base case Change

One year

28

SI: Sensitivity Indicator SV: Switching Value

Table 9.7. Sensitivity Analysis with indicators from the point of view of investor

Above results of sensitivity analysis show that, project still gets financial feasibility with independent changes. In case of combination of variables changed, from the point of view of investor, project is not feasible due to negative FNPV and FIRR lower than WACC.

9.2.4. Conclusions of project’s financial feasibility

• The project will be feasible and financial indicators will be higher if invested by borrowing capital.

• Financial indicators of the project will be higher if GHG emission reduction is taken into account.

• If project can get loan from WB, ADB with incentive interest, the feasibility will be better.

Item FNPV (mil. US$) FIRR (%) SI (FNPV) SV (FNPV)

Base case 0.805 28.56

Investment 0.935 mil. US$ 10% 0.747 25.09 0.720 -139%

No benefit from ash sale 50 US$/ton ash 0 US$/ton ash 0.179 11.83 0.778 129%

No benefit from thermal energy sale 4.6 US$/MW h 0 US$/MWh 0.557 21.75 0.308 325%

O&M costs 0.0534 mil. US$ 10% 0.768 27.53 0.460 -218%

Construction delays 0.75 28.49 6.83% NPV 6.83% lower

Combination of variables -0.189 2.09

Base case Change

One year

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Table 9.8. Revenue of project Unit: mil. US$

Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 Total

I. Electricity effectElectricity Sales (MWh) 931 931 931 931 931 931 931 931 931 931 931 931 18620

Electricity Sales Revenue (mil. US$) 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.1054

Electricity saving (MWh) 1300 1300 1300 1300 1300 1300 1300 1300 1300 1300 1300 1300 26000

Electricity saving revenue (mil. US$) 0.008 0.008 0.008 0.008 0.008 0.008 0.008 0.008 0.008 0.008 0.008 0.008 0.1508

II. Thermal Energy Effect

Sales (MWh) 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 157662Net Revenue(mil. US$) 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.7252

III Other Benefits 0.0052 0.0054 0.0054 0.0055 0.0055 0.0054 0.0053 0.0052 0.0051 0.0050 0.0045 0.0002 0.0946Benefit from not purchase coal for paddy drying (mil. US$) 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0044CO2 credit (mil. US$) 0.0050 0.0052 0.0052 0.0053 0.0053 0.0052 0.0051 0.0050 0.0049 0.0048 0.0043 0.0000 0.0902

Total Revenue 0.047 0.047 0.047 0.047 0.047 0.047 0.047 0.047 0.047 0.047 0.046 0.042 0.9253

II. Costs (mil. US$)

1. Total direct cost 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.053 2.00201.1. O&M cost 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.06701.2. Depreciation 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.93502. Interest payment 0.037 0.025 0.012 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.07463. Total cost 0.153 0.141 0.128 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.053 2.07664. Income before tax -0.106 -0.094 -0.081 -0.069 -0.069 -0.069 -0.069 -0.069 -0.069 -0.069 -0.070 -0.012 -1.15145. Income tax 0 0 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.00006. Income after tax -0.106 -0.094 0.000 -0.069 -0.069 -0.069 -0.069 -0.069 -0.069 -0.069 -0.070 -0.012 -1.0702

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Table 9.9. Financial Analysis from the point of view of investor with WACC of 7.325%, CO2 emission reduction taken into account

Unit: mil. US$

Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 Total1. Net Revenue (excluded VAT) 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.250 0.246 5.0081.1.Surplus power sales 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 1.1921.2.Surplus thermal sales 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.7251.3.Ash sales 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 1.7521.4. CO2 emsission reduction profit 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.004 0.000 0.0901.5.Benefit from not purchase electricity 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 1.5081.6.Benefit from not purchase coal for heating p 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0042. Total income 0.00 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.250 0.246 5.0123. Investment 0.2805 0.2814. Total costs before tax 0 0.095 0.234 0.220 0.206 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.6084.1. O&M cost 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.0674.2. Interest payment 0.042 0.028 0.014 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0 0 0.0834.3. Loan payment 0 0.15272 0.1527 0.1527 0 0 0 0 0 0 0 0 0.4585. Income tax 0.00 0.050 0 0 0 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.062 1.0886. Total cost 0.28 0.14 0.24 0.23 0.22 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 2.9777. Net income -0.28 0.11 0.01 0 0 0 0.13 0.13 0.13 0.13 0.13 0.13 0.13 2.036NPV 0.805IRR 28.56%B/C 1.45

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Table 9.10. Financial Analysis from the point of view of project with WACC of 7.325%, CO2 emission reduction taken into account

Unit: mil. US$

32

Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 Total1. Net Revenue (excluded VAT) 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.250 0.246 5.0081.1.Surplus power sales 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 1.1921.2.Surplus thermal sales 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.7251.3.Ash sales 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 1.7521.4. CO2 emsission reduction profit 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.004 0.000 0.0901.5.Benefit from not purchase electricity 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 1.5081.6.Benefit from not purchase coal for heating p 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0042. Investment cost 0.935 0 0.9353. O&M cost 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.067Total cost 0.935 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 2.0024. Income tax 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.062 1.2615. Net Income -0.935 0.188 0.188 0.188 0.188 0.188 0.188 0.188 0.188 0.188 0.188 0.187 0.184 2.812

NPV 1.00IRR 19.50%B/C 1.74

10. Economic Analysis

10.1. Poverty alleviation effect

The economic features bringing in the social profit like labor involvement, job opportunity creation and other benefits gained by the various sectors from the project will contribute in increasing the economy and create good conditions for agricultural and rural development towards direction of modernization and industrialization. Realization of this project will promote the development of rice industry with a competitive advantage through reducing the post-harvest losses and improving quality of goods, mainly rice for export.

10.2. Environmental impacts The expected impacts of the power plant are as follows:

• Bran dusts emitted during operation of rice mill. In this case, the mill will be located in a convenient place, far from the center of inhabitants.

• Additionally, surrounding the mill, the trees have been planted for collecting dust. Inside the mill, vacuum cleaners and draft fans are also installed to improve the air in working area.

• The mill and polishing machine are located far from the road and inhabitant center so that the noise does not disturb the people living in surrounding.

• Impact on land use is not considerable • The issue of resettlement is not impacted.

10.3. Economic Analysis of the Project

Economic Analysis is aimed to evaluate feasibility of the project to national economy, to calculate and compare economic indicators for selecting solution and the best way of implementation. Economic analysis is to analyze social efficiency of the project to national economy. Economic indicators bring social benefits such as creating new jobs, making the development of other economic sectors, contributing to development of country. Therefore, it is necessary to consider social- economic benefits when defining economic electricity selling price and reduce labor cost and taxes in initial investment cost. Economic analysis also considers costs of damages by project impacts to other sectors, to environment and to national economy. Contents in economic analysis include cash flow table and economic indicators with each of technology and construction plans. Expenditure flow:

34

• Investment costs in economic analysis: This is investment cost without labor costs and taxes (benefits for society, brought jobs for society). This eliminated potion is estimated of about 10% of total investment cost of the project.

• Operation and maintenance cost (O&M cost) and other costs as in financial analysis. Income flow:

• Turnover from electricity sales • Turnover from thermal energy sales (using for drying rice for other customers around

plant area) • Turnover from selling ash • Other benefits gained from the project: reduction of negative impacts on economy,

environmental protection, benefit from not purchase coal for drying rice.

Table 10.1. Data input of Economic analysis

Export price of anthracite coal 30 US$/ton

Electricity price at LRMC at medium voltage

6.4 US$/MWh

Thermal Energy Price 4.6 US$/MWh

Amount of coal saving 10 000 ton/year

Amount of electricity saving 1300 MWh/ years

Amount of surplus electricity 950 MWh/year

Amount of surplus heat 8298 MWh Output of economic analysis is a statement of economic cash flow and economic indicators got from technology and construction option set out for selection of best alternative. Economic effectiveness is determined through following economic indicators:

• EIRR • ENPV • B/C • Discount rate of 10%

The standard model developed by EC-ASIAN COGEN Program is used here for economic analysis of utilizing biomass residues to produce energy.

35

Table 10.2. Economic Analysis results with electricity price of 5 UScent/kWh

Indicators With CO2 emission reduction taken into account

Without CO2 emission reduction taken into account

EIRR 25.72% 25.09%

NPV (mil. US$) 0.926 0.888

B/C 1.96 1.93

Table 10.3. Economic Analysis with CO2 emission reduction taken into account Unit: mil. US$

Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 TotalCost 0.842 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.909

Investment cost 0.842 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.842

O&M cost 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.067

Revenue 0.272 0.272 0.272 0.272 0.272 0.272 0.272 0.272 0.272 0.272 0.271 0.267 5.429

Surplus power sale 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 1.192

Surplus thermal energy sale 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.725

Benefit from not purchase electricity 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 1.664

Revenue from selling ash 0.0876 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 1.752

Environmental benefit 0.005 0.0052 0.0052 0.0053 0.005 0.005 0.005 0.005 0.005 0.005 0.004 0.000 0.090Benefit from not purchase coal for heating rice 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003

0.006

Net Income -0.842 0.219 0.219 0.219 0.219 0.219 0.219 0.219 0.219 0.218 0.218 0.218 0.214 3.521

NPV (mil. US$) 0.926IRR 25.72%B/C 1.96

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Table 10.4. Economic Analysis without CO2 emission reduction taken into account Unit: mil. US$

Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 TotalCost 0.842 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.909

Investment cost 0.842 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.842

O&M cost 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.067

Revenue 0.267 0.267 0.267 0.267 0.267 0.267 0.267 0.267 0.267 0.267 0.267 0.267 5.339

Surplus power sale 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 1.192

Surplus thermal energy sale 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.725

Benefit from not purchase electricity 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 1.664

Revenue from selling ash 0.0876 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 1.752Benefit from not purchase coal for heating rice 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.006

Net Income -0.842 0.214 0.214 0.214 0.214 0.214 0.214 0.214 0.214 0.214 0.214 0.214 0.214 3.430

NPV (mil. US$) 0.888IRR 25.09%B/C 1.93

11. Conclusions

There are two general trends characterizing the rice processing industry in the ASEAN countries: Firstly, rice production has been stabilized at certain levels, except Vietnam, whose paddy production still tends to increase. Secondly, agricultural lands for paddy growing have been decreasing, converting to other purposes for more profitable land use. This is expected to be stabilized in the coming years because the Government has started developing the wastelands for paddy production. With the use of high-yielding rice species, these wastelands are expected to significantly contribute to the total paddy production in the future.

Paddy production increases and at the end of rice milling process there will be a greater volume of rice husk produced, which in most cases is simply considered as wastes to be disposed off, commonly by dumping, open-burning or incineration. Use of rice husk for generating power and heat will be very meaningful for the biomass energy markets.

However, the first important thing is to recognize the following factors that would make rice husk – fired plant more viable: (i) firstly, at the special level, the geographic concentration of paddy production and the geographic location of rice mills, the distance to the power plant; (ii) secondly, on the technical level, the milling capacity and milling duration of rice mill and the best available technology; and (iii) thirdly, the economic viability of investing in the power plant; and finally, the institutional policies.

The important thing for the power plant is that it should be built close to the rice husk sources in order to minimize transport cost of rice husk from the rice mill and it needs also to consider the size of the rice mill as well. Milling capacity will determine the rice husk output from the paddy milling process.

In actual conditions, the existence of old backward milling technologies, the abundance of rice husk residue and the problems of its disposal lead to the necessity to apply the paddy drying and milling process at the mills. In some cases the mills meet their heat need for own process by using rice husk as fuel burnt in very inefficient manner, while the electricity was purchased from the power grid or self-generated using diesel gensets.

It is attractive for the rice mill operators or the potential investors when considering the economic effect from making the existing systems into the more efficient ones.

However, despite the big potential of power generation from rice husk in Vietnam, the major barrier to the uptake of cogeneration technologies has been the insufficient information on the projects carried out in the region or the bad experience from the rice husk energy projects set up in the past. The uncertainties on the use of technologies for the site and specific energy systems make appear a bad impression on the potential investors in the rice industry. The interested equipment and technology suppliers should pay attention on this issue in order to convince the potential investor of the benefit of cogeneration utilizing rice husk as fuel.

The experience of COGEN in the field of energy from biomass showed that for a 2.5 MW rice husk – fired power plant installation, the plant owner gains energy savings and other economic

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benefits, such as added income from the sale of excess electricity to the power grid and pay-back time of less than four years.

The well-proven technologies for biomass energy are currently available in the ASEAN market.

COGEN promotes the European technologies, which are proven, energy efficient and environment friendly. The rice mill owners who are uptake of the technology and interested in the application can take advantages of the available technical services.

Last but not least, the current national programs for energy security in most ASEAN countries actively promote the use of indigenous renewable energy sources, particularly biomass, and the governments encourage the private sector to participate in power generation. On the other hand, environment measures are being taken for all sectors, especially in the industries and energy sectors through environmental regulations and economic incentives. These policies, therefore, encourage the rice mill owners to venture into cogeneration technology using their rice husks as fuel. Moreover, they are able to solve the following issues: waste disposal management; compliance with environmental regulations; giving more value to their wastes by turning them into profit; and energy self- sufficiency in their mills.