JCM Feasibility Study (FS) 2014 – Final Report

MOEJ/GEC JCM Feasibility Study (FS) 2014
Summary of the Final Report“Introduction of Energy-Efficient Old Corrugated Cartons Process at
a Paper Factory”
Implementing Entity: Nomura Research Institute, Ltd.
AIKAWA Iron Works Co.,Ltd
1．Overview of the Proposed JCM Project
Study partners

Climate Experts (ClimeX), Ltd. worked as advisory on the methodology
Suncosmo, Co. Ltd. was responsible for local logistics

Project site

Bekasi, Indonesia

Category of
project

Energy Efficiency
The project introduces Japanese highly efficient system to an old corrugated cartons

Description ofproject

process (OCC) of a carton production line (1,000t/day) to be built into the plant of
Fajar Paper, the nation’s second largest company in the paper industry. This would
achieve the unit electricity consumption reduction, approximately by 10%, thereby
contributing to carbon dioxide emission reduction.

Expected project
implementerJapan

Kanematsu Corporation

Host country

Fajar Paper, PT FAJAR PAPER SURYA WISESA Tbk.

Initial investment

800,000 thousand yen

Date ofgroundbreaking

Annualmaintenance cost

50,000 thousand yen

Construction
periodWillingness toinvestment
Financial plan ofproject

Investment determined

Date of projectcommencement

August, 2015 –December, 2016
April, 2017

Fajar Paper already finalized loans totaling USD 240 million from a syndicate
including HSBC and other banks, for the total expansion project of the paper plant
which includes the current project.

GHG emission
reductions

August, 2015

14,885 tCO2/year

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JCM Feasibility Study (FS) 2014 – Final Report

2. Study Contents(1) Project development and implementation
1) Project planning
Fajar Paper (holding the second largest share of paper manufacturing in Indonesia) plans to expand
production facilities for the process of corrugating medium, which is the material of corrugated board, to
1,000 tons/day. As a pre-process of corrugated board production, Fajar plants to adopt “Old CorrugatedCartons process (hereinafter referred to as “OCC process”), which is a treatment process to prepare raw
material from used corrugated board.
Whole paper making process

Old paper

Sheet f orming
process

OCC process

Product

waste waterelectricity

Treatment
equipment

Generator

This subsidized project aims to achieve electricity usage reduction per ton produced (by about 10 %) by
introducing a Japanese high-efficient system to the OCC line, thereby contributing to CO2 reduction.
Fajar Paper is currently in the process of deciding a source to place their order, which is to be selectedfrom candidate sources including non-Japanese OCC line manufacturers. In its comprehensive
evaluation and selection, price is considered to be highly important. Therefore, it is expected that theJapanese technology will be adopted with the support of a JCM subsidized project.

2) Permits and License for the project development and implementation2)-1 Approval on capital investment
Approval on capital investment corresponds to approvals on ccapital investment to besubmitted to the provincial government. Since this project is an expansion of an existing plant,
we applied as an extension of the existing approval on capital investment. (The applicatioin isfor an extension of the approval on capital investment of Line 5, the most recent past expantion
plan.)
Investment Permit Principle number 21/32 /IP/II/PMDN/2011, dated 08 April 2011, wasextended to Extended Permit number 07/32/IP-PB/PMDN/2014, dated 03 March 2014, andafter a few ammendments were demanded, it was hitherto amended to Amendment Permit
Principle Domestic Investment number 53/32/IP-PB /PMDN/2014, dated 03 October 2014.
Although the guidelines for the approval on capital investment were revised in 2013, thelatest version of approval reflects the revision. They are the detailed rules on the approval on
capital investment and are compliance with the “Regulation of The Chairman of The
Investment Coordinating Board No 5 of 2013, regarding guidelines and procedures forlicensing and non-licensing investment”, which was later amended to the Regulation of The
Chairman of The Investment Coordinating Board No 12.
We completed all of the applications necesssary for the approval of the Capital Investmetn
Committee of the government. The permit was issued by the Integrated Permit Service unitof the West Java Provincial government. (Refer to the attachment for the copy of the license.)
This unit has the authority to issue licenses and non-licenses such as approval on investment
and issue approvals on all forms of services including fiscal ans non-fiscal facilities and also
investment information.
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JCM Feasibility Study (FS) 2014 – Final Report2)-2 Approval on environmental impact assessment
The Indonesian environmental impact assessment report (UKL-UPL) consists of fivechapters; [I] Introduction, [II] Business and/or activity plans, [III] Environmental impact tooccur, [IV] Environment management effort, and [V] Environment monitoring effort (detail tobe provided on the next page), especially emphasizing the contents of Environmental
Management Effort (UKL) and Environmental Monitoring Effort (UPL), whcich make thetitle of the report.
UKL-UPL is divided into two forms; one to report continuously impact which production
activities at existing facilites have on the environment and one to submit the analysis
projection of impact which investment on new facilities has on the environment.
The former is requried to submit every 6 months . Fajar submitted the latest one in July of
2014.
The latter is requried to submit extraordinarily only when a new cnostruction is planned.
Fajar prepared the report for the new construction of Line 8 and it is under review by an
external consultant, as of January of 2015. It is planned to get ready for submission within
half a year.
The construction cannot be done without the sbumission of UKL-UPL for the new
construction and the ensuing license. As mentioned in the section of environmetal integrety,
the impact on the enviroment by the new construction is not much changed. So, the possibilityof licensing is high. Meanwhile, UKL-UPL reports are to be submittted to the following
offices.
UKL-UPL (or EIA) report is submitted to:a.
Board of Environment Monitoring – Bekasi Regencyb.
Board of Environment Monitoring Region – West Java Provincec.
Environmental Ministry, Division Integrated Service – Jakarta

3) Advantage of Japanese technology
The OCC line is a process to prepare clean raw materials containing dissolved paper fibers by mixing
used corrugated board into water for defiberizagion and removing foreign substances. Since a large
amount of material (water) is used, electricity is significantly consumed to power motors.
Energy saving can be achieved by 2 technologies: 1, by system configuration, and 2, by individual systemequipment.
1,

Energy conservation by system configuration
Whole OCC line by AIKAWA

・A total amount of raw materials are usually input into a rough selection screen, and then into a
fractionator which separates between long fibers and short fibers. In the subsidized project, afractionator is installed before the rough selection screen so that long fibers and short fibers are
separated in advance. This reduces a throughput of the post process. Reduction of a throughput makes
the capacity of equipment and motor power smaller, contributing to energy conservation.
・Cleaning to eliminate foreign substances is usually conducted in 3 stages at high concentration,

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JCM Feasibility Study (FS) 2014 – Final Reportmedium concentration and low concentration. In this subsidized project, the ability of themedium-concentration cleaner to eliminate foreign substances is improved. This obviates the need for ahigh-concentration cleaner, for which energy can be saved.
2, Energy conservation by individual system equipment
・Each system equipment has functions to eliminate foreign materials and loosen fibers well. The
equipment to be introduced in this subsidized project has improved parts and structures, thereby being
enabled to deliver the same performance as the conventional system, with less power than ever before.

4) MRV structure
Daily monitoring and preparation of monitoring report are done by Fajar. Much of capacity building andso on seems not necessary because Mr. Hardy, the project manager, has managed the CDM project(Project Number：6691) run by the company, generating monitoring reports for verification several
times.
Also, Aikawa visited Fajar three times in half a year for after-sales services of the existing lines andchecked the devices. It has a system to do follow-up regularly. So, it is planned to support for data
integrity checking (deviation from the spec value, etc.) and so on timely.
Project Director
Roy Teguh

Project Manager
Marco Hardy

全体監督
Overalldirection
各種意思決定Various
decision-makings

Windowof the projectプロジェクト窓口
Generationof monitoring report
モニ タリングレポート作成
Aikawa Iron Works
Kazuo Aoshima

日々のモニタリング
Daily monitoringモニ タリングデータの提出Submission of monitoring dataSupport ofモニ タリングレポート
generationof
作成支援
monitoring reportCheck of monitoring data

モニ タリングデータのチェック
Arrangement of monitoring data for filing inモニ タリングレポート記載用に成形

the monitoring report

Source) Created by NRI based on internal information of Fajar<Measuring apparatuses for monitoring>This project uses specific consumption method calculated by converting energy reduction of the entire
OCC line into CO2. AT this factory, each line has its energy monitoring room as shown below,
monitoring electricity consumption of each element device of the OCC line every hour. So, it is easy to
grasp reference and project energy consumptions.
Line 8 to be added will be given the similar energy monitoring room.
Energy management/reporting system “SCADA system and EXAQUANTUM report system”

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JCM Feasibility Study (FS) 2014 – Final Report

Energy display monitor ofEnergythe entire Line 5 (OCC &monitor of the OCC

PM)

line

<How to store monitoring records>
The energy consumption data taken around the clock 365 days ofthe past one year is stored both electronically and on paper. The
same method will be introduced for Line 8.

5display

Energydisplay

monitor of the PM line

JCM Feasibility Study (FS) 2014 – Final Report

5) Environmental integrity and Sustainable development in host country
As positive effects in environment through implementing this project, improvement of worksafety/working environment is given. In the new OCC line, removable foreign matters will be finer evenon pulper, fractionator, rough screen, and fine screen. Therefore, the amount of fine fibers floating in
air originated from the process decreases. This makes wearing masks by workers non-mandatory,
contributing the working environment inside the factory and health and safety of workers. The
assurance of health and safety of workers not only raises the motivation of workers and productivity,
but also contributes reduction of medical cost and prolongation of life expectancy of the population of
the host country.
Adverse effects in environment compared to the existing equipment are not seen at present and not
anticipated in the future. Waste water drained from papermaking factory contains heavy metals, etc.
But, the levels are much lower than the authority standards in the existing lines. Improvement ispossible, but it is unlikely that it deteriorates. However, when the production itself of the host company
increases, it is possible that the amounts of various emissions increase even if various specificconsumptions are improved.
As contribution to sustainable development of the host country, the following five points are given.
Firstly, the reduction of CO2 emission of the main object of this project enables decreasing the total
amount of carbon social costs of the host country.
Secondly, the improvement of health and safety of workers mentioned above leads the improvement of
human capital through the prolongation of life expectancy of the host country.
Thirdly, in the existing lines, 87 out of 100 old corrugated cartons purchased become final products
while 3 out of 100 are fiber wastes and 10 are other wastes. Reducing the fiber wastes from 3 to 1.7 ~ 8leads to the less amount of wastes, higher yield, less old corrugated cartons purchased while keeping
the same amount of production, and less amount of woodcutting inside and outside of the host country.
The decrease of amount of woodcutting results in the net increase of forest resources stock. This means
the water-retaining function and prevention of degradation of recreation function of forests of the hostcountry. Moreover, it saves CO2 sink at the global level. Also, since the host company burns wastes asfuel using a furnace on its compound, the decrease of the percentage of fiber wastes for fuel results inenhanced fuel efficiency and lower carbon emission factor.
Fourthly, to continue regularly giving meetings to explain the equipment for workers of the hostcompany promotes transferring knowhow and technique of energy-saving to human resources of thehost country. This allows contributing to long-term sustainable developments while human resources
who have accumulated knowhow use other similar equipment inside and outside their company andtransmit the knowhow to other human resources.
Fifthly, the reduction of fossil fuel consumption contributes to the reduction of air pollution, thecontribution to resource security and the avoidance of electricity shortage, etc. To get the long–term
energy reduction effect to initial investment known through the success of this project and to spreadthis technology to other businesses and other companies of the same category enable more contribution
to sustainable development in Indonesia.
The 1st through 3rd points above expressly contributes to the sustainable development of the hostcountry by improving the comprehensive wealth (new country wealth) index which is recently receivingmuch attention.

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JCM Feasibility Study (FS) 2014 – Final Report6) Toward project realization＜Proposed implementation schedule＞
Here, we show the schedule (draft) relating to operation after the completion of the subsidy project andimplementation of MRV, together with the researches of the introduction of the equipment and MRV for
obtaining the credit under the assumption that a granting as a subsidy project is decided.
Main contents to implement and assumed timing
Project starts with the decision ofMay, 2015
subsidy (order placement)
September, 2015

Construction starts

February, 2016

Install Major equipment (followed by
GEC intermediate inspection)

November, 2016

Construction completes

December, 2016

Test runDecember, 2016

GEC final inspection

April, 2017

Monitoring starts

September, 2015

Methodology finalized

December, 2015

Apply for registration of methodology

June, 2016

Create PDD,
Apply for registration as JCM project

July, 2016

Conduct Validation

April, 2017~

Credit transferred to the account of theGovernment of Japan

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JCM Feasibility Study (FS) 2014 – Final Report
Expected project schedule
2015

2016

January

March

July

October

2017

January

April

July

OctoberJanuary

Af ter 2018
April～▲

Until March,
2021

Suggestion Grant determination
Suggestion ofsubsidiary project Adjustments（Consortium）

Management・Proceduresupervision▲
Deal adjustments Order▲
Payment
Project completion
Management and procedure
supervision of MRVManagement・Procedure supervision（Kanematsu）

Maintenance of
OCC Line

DesignMaterials
procurement Facilities production（AFT）

Delivery

Installation
Test operation

Operating・
Monitoring

Order, installation operation, inspection of other production lines（Fajar Paper）▲
Outsourcing research contract

Methodology・
PDD▲
Outsourcing research contract▲
Inspection▲
Operation start

Overalladjustment
Monitoring
Implementation of MRV,
Credit delivery▲
Outsourcing research contract

Methodology development and registration
PDD creation and registration

OthersSupport for MRV implementation（NRI）
Support for subsidiary project

Research related to probability of project development

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JCM Feasibility Study (FS) 2014 – Final Report＜Capacity building to the host country＞
Most of the capacity building will be implemented in next phase.
One of the most important Capacity Buildings is the way of optimizing energy consumptions. Amount ofcredit depends on the optimization, so KNOWHOW implementation from AIKAWA to Fajar in daily
after service is expected in monitoring phase.
Secondly, MRV Capacity Buildings should be also implemented in next phases. Even though Fajar havecapability of monitoring theirselves, modifying methodology and reference, PDD making and gathering
default data, communication with other stack-holder should be supported, because Fajar is a business
entity who should pursuit profit, and it is difficult to do all of them by themselves for the return ofsubsidy. (If the JCM credit could be selled, the situation might be changed.)
At last, the expansion of this emission reduction concept or JCM concept in Paper/Pulp sector isimportant. Our final purpose is the emission reduction in whole Paper/Pulp sector, so, in addition tocreating No.2, No.3 ...projects with other local companies, we need to PR the concept and merit tostack-holder in Paper/Pulp sector.

＜Current conditions and Next Steps＞
In this research, we have assessed the feasibility of the implementation of the JCM project, together
with the local partner Fajar Paper and Aikawa, the manufacturer of the OCC line. At present, withwhom to place an order for the OCC line is not decided, but we received a positive answer from Fajar
Paper concerning the implementation of the JCM subsidy project. On the other hand, because of theoverall preparation schedule of the line (#8) which Fajar Paper is working on, it became necessary tojudge whether to implement the JCM subsidy project the JCM early.
So, we propose for the second public offering of subsidy project 2014, while keeping implementing thisresearch. The implementation plan of the JCM project is as mentioned previously. The following items
are to be carried out within the fiscal year 2014.
Schedule of the remaining fiscal year 2014 (immediate future)：Submission of the proposal for the second public offering of the subsidy
project 2014↓
“Examination/Adoption”↓(When adopted)
・After adopted ~ February
Study/arrangement relating to the international consortium contract
Study/arrangement relating to the implementation plan of the subsidy project
Study/arrangement of specifications relating to contract research on MRV (other than the subsidy
project)
Other study/arrangement relating to transaction, system, etc.
・Within March
Conclusion of the international consortium, granting decision
Contract conclusion of contract research relating to MRV (other than the subsidy project)
The line addition by Fajar Paper is a decision they have made. Although coordination is under way, on
the assumption that Aikawa OCC line is to be introduced using the JCM subsidy project, we assume thefollowing issues and solutions from the perspective of realization of the subsidy project.
<International consortium contract>
Since this is a subsidy project 2014, an international consortium contract must be concluded within thisfiscal year. At present, the contract has not concluded.
We have given a sample of an international consortium contract to Fajar Paper early December of 2014,

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JCM Feasibility Study (FS) 2014 – Final Report
to get it concluded within this fiscal year. It is studying/arranging the contents with the chair company,
Kanematsu.
Because the contract is to be concluded in a short-time, no matter whether the proposal is adopted ornot, we aim at concluding the contract within this fiscal year by keeping on arranging the contents ofthe contract in parallel , after the proposal of the second public offering.
<Implementation plan of the subsidy project>
The OCC line is a part of the line expansion plan of Fajar Paper, so changes/revisions of the planschedule are inevitable due to various factors. On the other hand, the subsidy project prescribes
restrictions (requirements) relating to the implementation period of the project, etc.
Therefore, we study in detail the implementation plan of the subsidy project so as to complete itsmoothly, while keeping consistency with the overall line expansion plan.

(2) JCM methodology development
1) Eligibility criteria
This was prescribed, considering ① having higher environmental quality than the regular technology to
be introduced, ② being a site/technology which enables MRV and able to obtain data required by themethodology, ③ that Japanese technologies are preferentially chosen (spec-in), and so on.
Requirement
Reason for the requirement
It shall be equipped with a monitoring system To assure the reliability of monitoringthat allows measuring electricity consumptionof an OCC line periodically.
The energy efficiency of an OCC line shall be The industry average is 140kWh/ton of paper. The
140kWh/ton of paper or less.
requirement higher than the average can be adifferentiation factor.
Engineers can periodically (once every three Old corrugated cartons which are material are notmonths as least) do maintenance/replacement uniform in quality, so the machines wear greatly,
and instruction for improvements of machines.
requiring appropriate maintenance.
Aikawa has a base there and its engineer visits once
every three month for maintenance. It can be adifferentiation factor from other companies.
The fiber yield shall be 87% or higher.
The fiber yield of 87% or higher is the industry
average. To set the lowest line to 87% can exclude
manufacturers from Taiwan and China which sellequipment cheap but low quality.
The water consumption of OCC lines of 10tons/ton of
paper or less is the industry average.
The water consumption of an OCC line shall be It is reasonable to set the numerical value, taking into
10tons/ton of paper or less.
considerations data dispersion when calculating thereference amount of emission based on past data. For
that purpose, it is necessary to have a certain amountof data. That is why this requirement is set.
The object companies shall have more than 2 It is reasonable to set the numerical value, taking intolines which have been operated for more than 1 considerations data dispersion when calculating theyear and the kind of products of those lines is reference amount of emission based on past data. For
the same as that of the new line.
that purpose, it is necessary to have a certain amountof data. That is why this requirement is set.

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JCM Feasibility Study (FS) 2014 – Final Report

2) Calculation of GHG emissions (including reference and project emissions)＜Reference scenario setting＞
In this methodology, we decided to obtain BAU and the reference based on the past record of lines of
Fajar. The appropriateness of using past data is on the assumption that it is natural for companies toselect systems with the same operational technology and proven performances.
Since it is regarded as prerequisite that the same product item is made, PM5 and PM7 can be the objects
of BAU and reference. For this research, the weighted average of PM5 and PM7 is considered to be
BAU and we decided to take PM5 which is good in energy-efficiency from the perspective of serviceability
as the reference object of specific energy consumption.
Although it is possible to subtract the standard deviation from the average (minus 1σ), etc. as a conceptof serviceability assurance, here, we judge that the principle of serviceability is assured because we took
the average of PM5 and PM7 as BAU and taking PM5 with a good energy-efficiency from the perspectiveof serviceability as reference.
The difference between the specific energy consumption spec value and actual data from operation is
ascribed to yield. Although almost all of causes to stop papermaking processes are paper jamming andrun-out of paper, the OCC line keeps running even while paper is not made after the papermaking
process has stopped. Thus, the energy consumption of the OCC line does not change even when theamount of production goes below the expectation due to yield. As a result, the specific energy
consumption per product of the OCC line becomes lower than the spec value.

＜Project emissions＞
In this methodology, the project amount of production and electricity consumption are obtained by actual
measurements after monitoring.

＜Quantification of GHG emissions and their reductions＞
Line 8 is supposed to produce 490,000t yearly. The CO2 reduction prospect is 14,885t CO2 yearly, as aresult of estimation of reduction based on the specific consumption spec value of Line 8’ OCC line.

3) Data and parameters fixed ex ante
Fajar has a private electric generator using gas turbines. It does not supply enough electricity to theexisting lines. So it buys grid electricity. Therefore, the grid emission factor of the area where Fajar islocated is used because it is considered that the entire electricity to use will be bought from the gridwhen Line 8 is built.
The grid emission factor of each area is already given by the National CDM which is the IndonesianDNA. We will use it.
排出係数
電力系統地域公表年(ton CO 2 eq. / MWh)

ジャワ-マドゥラ-バリ(ジャマリ)

スマトラ

西カリマンタン
南および中カリマンタン
東カリマンタン
コタモバグ、 ミナハサ
南、西スラウェシ

バタン

2010

0.73

2007

0.539

2008

0.577

2009

0.717

2010

0.749

2009

0.738

2010

0.733

2009

1.345

2010

0.96

2009

1.2

2010

0.861

2009

0.378

2010

0.332

2009

0.397

2010

0.605

2008

0.625

2009

0.625

2010

0.549

Source) National Committee on Clean Development Mechanism

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