JCM Feasibility Study (FS) 2014 – Final Report

MOEJ/GEC JCM Feasibility Study (FS) 2014
Summary of the Final Report“Introduction of Co-generation System Using Bagassein a Sugar Factory”(Implementing Entity: Japan NUS Co., Ltd.)
1．Overview of the Proposed JCM Project
Tohoku Electric Power: advice on grid connection and negotiation with EVN
Takuma: provide suggestion on bagasse fired boiler
Shinko: provide suggestion on turbine
Jpan Quality Assurance Organization (JQA): provide suggestion on developing

Study partners

MRV methodology
Nishishiba: provide suggestion on generator
JGC Vietnam: establish EPC structure and estimate project costNghe An Sugar Company: provide information on sugar factory and make projectplan
IMC: discuss financing

Project site
Category of
project

Nghe An Province, Vietnam
1. Energy Industries (Renewable sources) and 13. Waste handling and disposal
Nghe An Sugar Company (NASU), one of the largest sugar companies in Vietnam,
is planning to replace boiler of the factory that has been running more than 15 years
and introduce 20MW ~ 35MW co-generation system that runs with bagasse from

Description ofprojectsugar process. All vapor from the system is consumed for sugar process. 6MW ofelectricity generated is used for internal process and the rest is to be sold to EVN(VietNam Electricity). GHG emissions reduction is achieved by substituting gridelectricity by electricity from biomass.

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JCM Feasibility Study (FS) 2014 – Final Report

Vapor
Electricity

EPC: JGC Vietnam
ボイラー：タクマ
タービン：シンコー
発電機：西芝電機

BagasseSugar Factory

Expected project
implementer

JGC Corporation

Host country

Nghe An Sugar Company (NASU)

50,000,000 USD

Annualmaintenance cost

100,000 USD
Investment by NASU

Power System

Co-generation System

Japan

Initial investment

Willingness toinvestment

Electricity

Date ofgroundbreaking

2016

Construction
period18 month

Date of projectcommencement

2018

Financial plan ofproject

Finance is under discussion with several financial institutions including IFC.

GHG emission
reductions

144,751 (tCO2/year)2

JCM Feasibility Study (FS) 2014 – Final Report

2. Study Contents(1) Project development and implementation
1) Project planningThis project is for introducing high-pressure boiler that uses the whole amount of bagasse discharged fromthe plant and to introduce a cogeneration system to supply steam and generate electric power for the plant inaccordance with the renewal of the boiler equipment of the plant. The scale of power generation is estimatedbetween 20 MW to 35 MW in which about 6 MW is used within the plant and the rest will be sold to EVN.
The capacity of existing bagasse power generation equipment is 10 MW that has been operating since 1997.
During the operation period of the plant (November to April), the power demand of the plant of about 6 MW
is covered mainly by the bagasse power generation equipment and the auxiliary by a diesel power generator.
The receiving voltage from the existing electric power system is 10 kV in which the electricity is used not forthe plant but as light-load power source used in the office, dormitory, etc. during periods when plant is notoperating. The amount of bagasse (strained lees of sugarcane) combusted by the boiler for supplying steam isabout 30% of the total emissions. Most of remaining bagasse is supplied for a fee to a farm owned by theparent company TH Milk as a bed material for cows.

Project implementation structure is shown as below (figure 1). The parent company of NASU is TH Milk, amajor food company in Vietnam. IMC (Investment Management Company) in TH Milk will decide theimplementation of this program. IMC is the company specifically in charge of managing funds forinvestment business of the TH Milk Group.

JAPAN

Vietnam- NASU
- IMC

JGC
EPC
supportJGC
Vietnam

EPC
Bagasse fired
Co-generation
Project

Japan NUS
MRV methodology
Monitoring support

Validation
Verification

Third Party
Entity（TPE）
Figure 1: Project implementation structure

The construction plan will be prepared by JGC Vietnam, the EPC contractor, and the construction period is3

JCM Feasibility Study (FS) 2014 – Final Report

estimated at around 18 months.

As for economical evaluation, three patterns were examined, namely; (i) Implementing without equipment
assistance from JCM, (ii) Only equipment (boiler, turbine, and power generator) assisted by JCM, and (iii)
Equipment and construction cost assisted by JCM (Table 1). Project IRR of 15 years of the case (i) is 12%,which seems not to be attractive enough. If the project was decided to implement without using JCM support,
there will be higher possibility of adopting one or all facilities of the boiler, turbine and/or power generator
manufactured in India or China in order to increase economic efficiency.
Table 1 Results of examination of economical evaluation(i) Implement without (ii) Only equipment (iii) Equipment
andequipment support
supported by JCM
construction costof JCM
supported by JCM
Equipment grant amount
Project IRR (10 years)
Project IRR (15 years)
Investment payback period

3%12%
7.9 years

9%16%
6.0 years

16%22%
5.3 years

The investment policy places importance in leverage in which the capital is 30% and loan is 70% in principle.
Various options including domestic and overseas banks are examined for loan. IFC (International FinanceCorporation), who is already initiating discussion with IMC, is taking a positive stand for loaning. Therefore,
it is assumed that the amount of loan estimated for this project can be obtained.

2) Permits and License for the project development and implementation
Main licensing procedures required to implement the project are procedures for connection of transmission
system and sales contract in which it is assumed to be proceeded by the procedure as follows; (1)Transmission system information check, (2) Prior consultation, (3) Request of connection examination, (4)Basic agreement, (5) Contract.
(1) Transmission system information check
It is necessary to conduct a hearing with EVN to identify the estimated transmission system connection point,
etc. when the plan concept is decided before examining details of the project since construction of newaccess equipment for selling electricity is planned in this project. There is a high possibility that theconnection of transmission system of this project will be interconnected to 110 kV. If the voltage class andposition of the power transmission line listed as a candidate for the contact point can be confirmed at thisphase, devices (transformer, circuit breaker, etc.) necessary as access equipment can be estimated and task to
select an area to install the transformer substation can be proceeded. In addition, if the number of channels
can be identified, auxiliary channels can be examined and risks in selling electricity can be examined in casethe power transmission line is shutdown.
(2) Prior consultation
It is necessary to request a detailed technical examination to the electric utility when requesting a reply of thepossibility of connecting transmission system at the final phase to the electric utility. As prior phase of4

JCM Feasibility Study (FS) 2014 – Final Report

requesting examination of connection, it is necessary to confirm with the electric utility the presence ofinterconnection limit evaluated by capacity, direct distance between the power generation equipment
installation area and desired connection point for laying the access power transmission line, and the party
bearing responsibility of laying the access power transmission line.
(3) Request of connection examination
Detailed technical examination by EVN is required to receive information of possibility to connecttransmission system and of conditions for selling electricity from EVN. The examination covers items
described below.

(4) Basic agreement
Although negotiating of purchasing price is unnecessary by FIT, approaches will be conducted tonegotiate the construction of access equipment in the basic agreement of the electric power sales
contract.
(5) Contract
Contract procedure status of the feed-in tariff (FIT) system will be judged after the basic specification isdecided and economic evaluations that are detailed to a certain extent are conducted.
Although this project is a project to generate electricity, environmental impact assessment is not included asa regulatory procedure since it is installed in the site of NASU plant.

3) Advantage of Japanese technology
About 40 sugar manufacturing plants in Vietnam are either joint venture with a foreign firm or state-owned
enterprises. All boiler equipment used at these sugar manufacturing plants is manufactured in China
excluding plants of joint ventures with foreign firms and one large state-owned enterprise. Boilers introduced
at joint ventures and the large state-owned enterprise are manufactured in Australia, India and Republic ofSouth Africa. NASU is using the boiler manufactured by ABB Australia as well.

Complete replacement of the 10MW BTG (Boiler-Turbine-Generator) system operating from initiating of theplant to equipment manufactured in Japan is considered in this project. Introduction of turbine of Takuma
Co., Ltd. as well as turbine by Shinko Ind., Ltd. and power generator by Nishishiba Electric Co., Ltd. isplanned by request of NASU.

As for competing products of the high-temperature high-pressure boiler (pressure: 105 bars and temperature:
520°C) proposed by Takuma, there are high-temperature high-pressure boiler (pressure: 125 bars andtemperature: 545°C) manufactured in China and a boiler for cogeneration using bagasse (pressure: 67 bars to
110 bars and temperature: approx. 470°C to 500°C) manufactured in India.

Current products installed by Japanese manufacturer such as turbine of Shinko and power generator of
Nishishiba have the high reliability of the products based on the fact that the products including the shredder

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JCM Feasibility Study (FS) 2014 – Final Reportturbine have never malfunctioned since the initiation of the operation at the plant. In general, the sugar
manufacturing plant has to gain profit by concentrating the operation only during five months. Malfunction
during the sugar manufacturing can be critical and therefore, the reliability of the equipment is the utmost
importance for the plant. The largest issue of Japanese products against competitive products manufactured
in India and China is the high price. It is often said that products manufactured in Japan is estimated ataround 1.5 to 2 times higher in price than that manufactured in India and China. It is difficult to use original
numeric standard for the turbine and power generator used for cogeneration system since types andspecifications are decided after deciding the boiler specification.

4) MRV structure
System as shown in Table 2 is assumed at present as the system to implement MRV in this project. The
project owner NASU measures and records the system operation data where Japan NUS (JANUS) checks
and records the basic unit of electric power system as well as prepares and submits the monitoring report.
After monitoring performed for a certain amount of time, TPE (third party entity) verifies the emission
reduction amount based on the monitoring report submitted by JANUS.

Monitoring

Reporting
Verification

Table 2 MRV implementation system
Content
Implementing party
Monitor and record the cogeneration NASU
system operation data
Check and record the basic unit of JANUS
electric power system
Preparation of monitoring report
JANUS
Submission of monitoring report
JANUS
Verification of emission reduction TPE (third party entity)
amountThere are three parameters in scope of monitoring in this project based on the proposed MRV methodology.
Three parameters are; annual electric power supply output (EGy) to external system by the installed
cogeneration system using bagasse, consumption amount (FCi,y) of fossil fuels (igniting agent) used whenstarting the bagasse combustion boiler, and CO2

emission factor (EFgrid) of the electric power system

supplying the electric power in the project.

Monitoring structure is considered as below (Figure 2).

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JCM Feasibility Study (FS) 2014 – Final Report

Figure 2 Monitoring structure5) Environmental integrity and Sustainable development in host country
This project uses bagasse, waste generated in sugar manufacturing process, as fuel. Use of bagasse
contributes to decreasing of air pollutant such as nitrogen oxide and sulfur oxide considering the componentof sugarcane. Furthermore, although carbon monoxide and suspended particulate matter may be generated atincomplete combustion, generation of incomplete combustion is not assumed since bagasse is combusted bysingle fuel combustion boiler with appropriate environmental measures in existing equipment.

In addition, as indirect environmental impact in implementing the business, excessive bagasse from the sugar
manufacturing plant is conventionally used as the bed in cowsheds for dairy cattle owned by TH Milk, theparent company of NASU, in which it is later used as compost. However, when bagasse used in cowsheds of
TH Milk is supplied to cogeneration equipment by implementation of this project, woodchip will most likely
be used as substitute of bagasse. Although various types of woodchips are available and are produced invarious countries, there is a possibility that they are produced in a method that inhibits forest conservation
and biodiversity conservation causing concerns of indirectly but negatively affecting the environment.
Attention is required in the selection of woodchip by TH Milk when implementing this project.

6) Toward project realization (planned schedule and possible obstacles to be overcome)In December 2014, agreement between stakeholders was made in terms of this project as described below.
Start preparation to apply for JCM PS investigation in FY2015.

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JCM Feasibility Study (FS) 2014 – Final ReportComplete the engineering within FY2015 and initiate construction in FY2016 as scheduled in the initial
plan.
NASU and TH Milk Group will finance the project and no external investor is permitted to enter.

Consultation with NASU/IMC as well as IFC of the World Bank Group was held in December for financing
where IFC showed high interest in provision of finance to this project and agreed to exchange further
information.

As for the schedule in the future, first, application to JCM PS will be made in FY2015, contents of work andperson in charge will be assigned by the end of January 2015 among three companies of NASU, JGC
Vietnam and JANUS for initiating pre-engineering of the project, work will be started in February 2015, andthe completion is aimed in April. Along with this work, consultations with PECC1, a subsidiary of EVN anda consulting company for electric businesses, are held regarding connection of transmission system to EVN.
Issue is the short term left until initiation of public offering of JCM PS investigation of the next fiscal year.
Information obtained at pre-engineering is essential for applying to JCM PS. We will address our efforts tohave smooth communication with persons concerned to complete the investigation as fast as possible.

(2) JCM methodology development
1) Eligibility criteria
This methodology is applicable to projects that satisfy all of the following criteria.
Criterion 1

Criterion 2

Criterion 3

Criterion 4
Criterion 5

The bagasse used as fuel by the project shall be a waste from the sugar factory whichis the project site. It shall not include municipal wastes or the other wastes. Fossil
fuels can be used as an ignition accelerator and the amount of them is lower than 5%of the bagasse on the basis of calorific value.
The project includes the installation of new co-generation system, capacity
expansion of existing co-generation system, and/or replacement of existingco-generation system. If the project site has an existing co-generation system, theproject must expand the capacity of power generation more than the original
capacity.
The bagasse used as fuel by the project shall not be stored for more than a year inorder to avoid the fermentation of bagasse under anaerobic conditions and thesucceeding release of methane gases.
The project must not only supply electricity and heat to the sugar factory, but also
provide most of electricity generated by the project to the grid.
The pressure of steam from the boiler installed by the project to combust bagasse
shall be 10 MPa or more. The temperature of that shall be 520℃ or more.

2) Calculation of GHG emissions (including reference and project emissions)
Estimated use of fossil fuel in this project to introduce cogeneration using bagasse in Vietnam is the ignition
agent used to help ignition when starting the bagasse combustion boiler. Amount of emission of greenhouseeffect gas using this ignition agent is calculated as described below.

8JCM Feasibility Study (FS) 2014 – Final Report

PEy = å FCi,y * EFFuel,i,y
i

FCi,y

= The quantity of fuel type i combusted as a firework fuel in year y(mass or volume unit/year)
EFFuel,i,y = CO2 emission coefficient of fuel type i in year y (tCO2/mass or volume unit)i= Fuel types combusted as a firework fuel in year y

EFFuel,I,y which is the CO2 emission coefficient of fossil fuel used as the ignition agent is expressed in theequation described below.

EFFuel,i,y = NCVi,y * EFCO2,i,yNCVi,y = The weighted average net calorific value of the fuel type i in year y(GJ/mass or volume unit)
EFCO2,i,y = The weighted average CO2 emission factor of fuel type i in year y(tCO2/GJ)i= Fuel types combusted as a firework fuel in year y

Use of heavy oil as the ignition agent and annual usage of 3 t is assumed. Values of “The 2006 IPCC
Guidelines on National GHG Inventories”, the guideline provided by IPCC, are referred for the net calorificvalue (NCVi,y) of heavy oil and CO2 emission coefficient (EFCO2,j,y). According to this guideline, the net
calorific value of heavy oil is 41.7 TJ/Gg (residual fuel oil, upper value) and the CO2 emission coefficient ofheavy oil is 78,800 kg-CO2/TJ (residual fuel oil, upper value). Therefore, the CO2 emission coefficient ofheavy oil used as ignition agent is calculated as described below.

EFFuel,i,y= NCVi,y × EFCO2,i,y= 41.7 (TJ/Gg) × 78,800 (kg-CO2/TJ)= 41.7 (TJ/1,000,000kg) × 78,800 (kg-CO2/TJ)= 3.28596 (kg-CO2/kg)

Since the annual usage of ignition agent is 3 t (FCi,y), the CO2 emission is calculated as described below.
PEy = FCi,y × EFFuel,I,y= 3,000 (kg) × 3.28596 (kg-CO2/kg)= 9857.88 (kg-CO2)
Therefore, the annual emission (PEy) by this project is 10 tCO2.
The amount of reduction of greenhouse effect gas by this project is calculated by the difference between thereference emission amount and the project emission amount since this is a project to introduce cogenerationequipment using bagasse in a sugar manufacturing plant where leakage will not occur due to the activity.

Annual GHG emission reduction = Reference emission - Project emission

9JCM Feasibility Study (FS) 2014 – Final Report= 144,761 (tCO2) – 10 (tCO2)= 144,751 (tCO2)
The amount of reduction of greenhouse gas emission is estimated as 144,751 tCO2/year by this project
according to the calculation based on the proposed MRV methodology.

3) Data and parameters fixed ex ante
There are five parameters necessary for calculation of GHG emission reduction amount according to the
proposed draft of MRV methodology. Those parameters are; electric energy supplied to the transmission
system among electricity generated by the cogeneration system introduced by the project, basic unit of CO2
emission of electricity of the transmission system supplied by the electricity generation, consumption amountof fossil fuel used as firework fuel, net calorific value of the fossil fuel, and CO2 emission coefficient of thefossil fuel.

The amount of electricity supplied to the transmission system by electricity generation of the introduced
cogeneration is measured by 24-hour monitoring. Furthermore, crosscheck of documents is possible when apower generation operator in Vietnam is selling electricity to a transmission system since payment is madeaccording to the invoice sent from the operator to EVN, the state-owned enterprise, who is managing thesystem.
The latest version of the “Study, definition of Vietnam grid emission factor” published by the Department ofmeteorology, Hydrology and Climate Change, MONRE and Ozone Layer Protection Centre, a government
ministry of Vietnam, is referred to for the basic unit of CO2 emission of the transmission system electricity in
Vietnam. The latest version at present is the value of FY2011.
The consumption amount of fossil fuel used as an ignition agent will be recorded in the same manner aselectric energy by monitoring.

The value of relevant fossil fuel is to be quoted from the IPCC default values at the upper limit of uncertainty
at a 95% confidence interval as provided in Table 1.2 of Chapter 1 of Vo.2 (Energy) of the 2006 IPCC
Guidelines on National GHG Inventories proposed by the Intergovernmental Panel on Climate Change(IPCC) for the net calorific value of fossil fuel used as an ignition agent. In addition, CO2 emission
coefficient of the ignition agent is to be quoted from the IPCC default values at the upper limit of theuncertainty at a 95% confidence interval as provided in Table 1.4 of Chapter 1 of Vo.2 (Energy) of the 2006
IPCC Guidelines on National GHG Inventories.

Examination of the appropriateness of using the basic unit of CO2 emission of system electricity in Vietnam
published for CDM and use of net calorific value of fossil fuel and CO2 emission coefficient published by
IPCC for calculation of emission reduction amount by the project is required as future tasks.

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