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					                                                                             Draft Final Report



                       PROMOTION OF RENEWABLE ENERGY,
          ENERGY EFFICIENCY AND GREENHOUSE GAS ABATEMENT
                                          (PREGA)

                                       Indonesia




 Repowering / Optimizing the Use of
Biomass Waste in Sugar Industries in
            Indonesia

                         A Feasibility Study Report1




                                         May 2006


1
    Prepared by the National Technical Experts from P.T. Chazaro Gerbang Internasional.




                                                                                            1-1
Acknowledgements


PT Chazaro Gerbang Internasional (CGI) implemented this study on commission by the Asian
Development Bank (ADB) as part of the promotion of renewable energy, energy efficiency and
greenhouse gas abatement (PREGA) program of ADB.

The study is carried out to examine the economic prospect of optimising the use of bagasse to
re-power sugar plant industries. The objective of this study is to develop biomass-based power
generation as an alternative source for electricity generation in Indonesia. It was aimed at the
formation of a project with linkage to the Clean Development Mechanism (CDM).

The team would like to express its gratitude to those who provided information, time, and
contribution to this study. In particular, the team wishes to thank to the Technical Head of PT
Perkebunan Nusantara X (Persero), Mr. Dalyadi W Sukarto, which provided support to the
team’s work.

In addition, the team would like to thank to Mr. Djoentoro (General Manager of PT PG Rajawali
II Unit PG Jatitijuh), Mr. Widodo Rahardja (General Manager of PT PG Rajawali II Unit PG
Tersana Baru), Mr. Ariadi Kussaseno (General Manager of PT PG Rajawali II Unit PG
Sindanglaut), and other persons for their assistance for conducting the survey.

It is hoped that this document will contribute to the increased business roles that lead towards a
market mechanism to raise added value, to promote renewable energy and to reduce
greenhouse gas emission and to increase an overall efficiency in sugar industry.




                                                                                               1-2
Table of Contents


Draft Final Report ........................................................................................................... 1-1
Indonesia............................................................................................................. 1-1
Acknowledgements .................................................................................................... 1-2
Table of Contents ....................................................................................................... 1-3
List of Tables ................................................................................................................ 1-5
List of Figures .............................................................................................................. 1-6
Glossary of Acronyms ............................................................................................... 1-7
1. MAP SHOWING THE SITUATION OF THE PROJECT STUDY ............................... 1-1
2. INTRODUCTION........................................................................................................ 2-1
   2.1.      Background ....................................................................................................... 2-1
   2.2.      Energy situation in Indonesia ............................................................................ 2-1
      2.2.1.       Energy balance .......................................................................................... 2-1
      2.2.2.       Energy Supply and Demand ...................................................................... 2-2
   2.3.      National Energy Policy ...................................................................................... 2-1
      2.3.1.       Targets ....................................................................................................... 2-1
      2.3.2.       Strategies ................................................................................................... 2-1
3. SUGAR INDUSTRY ................................................................................................... 3-1
   3.1.      General Description of Indonesian Sugar Factories .......................................... 3-1
   3.2.      Sugar Production Process................................................................................. 3-9
   3.3.      Current Waste Utilization................................................................................. 3-12
   3.4.      Energy Use and Potential in Indonesian Sugar Factories ............................... 3-12
   3.5.      Factory Case Studies ...................................................................................... 3-14
      3.5.1.       Gempolkrep Sugar Mill............................................................................. 3-14
      3.5.2.       Lestari Sugar Mill...................................................................................... 3-15
      3.5.3.       Watutulis Sugar Mill.................................................................................. 3-15
4. REVIEW ON THE IMPLEMENTATION OF BAGASSE ELECTRIC POWER GENERATION
   TECHNOLOGY .......................................................................................................... 4-1
   4.1.      Position of industries in Bagasse Electric Power Generation ............................ 4-1
      4.1.1.       Bagasse Electric Power Plant Project ........................................................ 4-1
      4.1.2.       Independent Power Producer..................................................................... 4-1


                                                                                                                                         1-3
      4.1.3.       Renewable Energy Small Scale Power Plant............................................. 4-2
   4.2.      Selection of an Appropriate Power Generation Technology.............................. 4-3
      4.2.1.       Bagasse Combustion Technology.............................................................. 4-3
      4.2.2.       Application of Biomass Power Plant in Foreign Country ............................ 4-4
      4.2.3.       Applicable Power Plant Technology for Indonesia ..................................... 4-7
   4.3.      Case Study of Applicable Electricity Generation Technology............................ 4-7
      4.3.1.       Study on Sugar Factory.............................................................................. 4-7
      4.3.2.       Review Proposal Pilot Project .................................................................. 4-12
5. OPTIMIZATION OF BAGASSE UTILIZATION IN SUGAR FACTORIES .................. 5-1
   5.1.      Biomass Power Plant Equipment ...................................................................... 5-1
   5.2.      Profitability Analysis........................................................................................... 5-2
      5.2.1.       Cost Calculation ......................................................................................... 5-2
      5.2.2.       Pre Conditions............................................................................................ 5-3
   5.3.      Cost of Equipment ............................................................................................. 5-3
      5.3.1.       Unit Price of Electricity Sale ....................................................................... 5-4
      5.3.2.       Steam Unit Price ........................................................................................ 5-4
      5.3.3.       Fuel Cost Saving ........................................................................................ 5-5
      5.3.4.       Calculation of Annual Income (real income and imaginer income) ............ 5-5
   5.4.      Economic Evaluation ......................................................................................... 5-5
      5.4.2.       Effect of GHG emissions reduction ............................................................ 5-8
      5.4.3.       Calculation of IRR ...................................................................................... 5-9
   5.5.      Analysis ........................................................................................................... 5-10
   5.6.      Analysis of Sensitivity ...................................................................................... 5-11
   5.7.      Proposal Pilot Project ...................................................................................... 5-16
6. CONCLUSIONS....................................................................................................... 6-16
Annexes ........................................................................................................................... 1
Annex 1. Heat Balance of Sugar Factory........................................................................... 1
Annex 2. Flow Sheet.......................................................................................................... 2




                                                                                                                                         1-4
List of Tables


Table 1.1. Bagasse Power Plant Facility ....................................................................................... 1-9
Table 1.2. System Comparison...................................................................................................... 1-9
Table 1.3. Cost of Equipment (US$) ............................................................................................ 1-10
Table 1.4. GHG Emission Reduction in Gempolkrep Sugar Mill ................................................. 1-10
Table 1.5. GHG Emission Reduction in Jatitujuh Sugar Mill........................................................ 1-11
Table 1.6. IRR at GHG Emissions Trading Price of 0, 5 & 10 US$/t-CO2 ................................... 1-11
Table 1.6. IRR at GHG Emissions Trading Price of 0, 5 & 10 US$/t-CO2 (cont..)....................... 1-12
Table 3.1. Indonesia Energy Balance 2000 ................................................................................... 2-3
Table 3.2. Share of Energy Supply and Consumption................................................................... 2-4
Table 4.1. Main Sugarcane-producing Countries .......................................................................... 3-2
Table 4.2. Area and Production of Sugar Cane ............................................................................. 3-3
Table 4.3. Sugar Factories and its Capacity Production in Indonesia year 2002 .......................... 3-5
Table 4.4. Typical Steam and Power Demands Per Tonne of Cane Crushed ............................ 3-11
Table 4.5. Sugar Mill Data............................................................................................................ 3-17
Table 5.1. 7 MW Bagasse Power Plant ......................................................................................... 4-1
Table 5.2. Example of steam boiler condition of a biomass power plant in Japan ........................ 4-5
Table 5.3. Example of Economic Facility Biomass Power Plant in Japan..................................... 4-5
Tabel 5.4. Outline System of Pietarsaari Power Plant................................................................... 4-7
Table 5.5. Total Employees of Gempolkrep Sugar Factory........................................................... 4-9
Table 5.6. Number of Employees in Jatitujuh Sugar Factory ...................................................... 4-12
Table 5.7. Pre Design of Pilot Project Gempolkrep Sugar Factory ............................................. 4-14
Table 5.8. Pre Design of Pilot Project Jatitujuh Sugar Factory.................................................... 4-15
Table 6.1. Bagasse Power Plant Facilities..................................................................................... 5-1
Table 6.2. Comparison of system .................................................................................................. 5-2
Table 6.3. Preconditions in the economic analysis of Gempolkrep and Jatitujuh.......................... 5-3
Table 6.4. Cost of Equipment (unit US$) ....................................................................................... 5-4
Table 6.5. Unit Price of Electricity Sale of the Gempolkrep Sugar Factory ................................... 5-4
Table 6.6. Calculation of Steam Price............................................................................................ 5-5
Table 6.7. Annual Income of Gempolkrep Sugar Factory.............................................................. 5-6
Table 6.8. Annual Income of Jatitujuh Sugar Factory.................................................................... 5-7
Table 6.9. CO2 Reduction Due to Implementation of Power Generation Plant in Gempolkrep Sugar
            factory .......................................................................................................................... 5-8
Table 6.10. CO2 reduction due to implementation of power generation plant in Jatitujuh Sugar Factory
             .................................................................................................................................. 5-9



                                                                                                                                                      1-5
Table 6.11. IRR at GHG emissions trading price of 0, 5 & 10 US$/t-CO2 ..................................... 5-9
Table 6.11. IRR at GHG emissions trading price of 0, 5 & 10 US$/t-CO2 (cont..)....................... 5-10
Table 6.12. IRR at GHG emissions trading price of 0, 5 & 10 US$/t-CO2 ................................... 5-15
Table 6.12. IRR at GHG emissions trading price of 0, 5 & 10 US$/t-CO2 (cont..)....................... 5-15
Table 7.1. Results of Study of Bagasse-based Power Generation and Cogeneration in Gempolkrep
            Sugar Plant Proposal 1.............................................................................................. 6-16
Table 7.2. Results of Study of Bagasse-based Power Generation and Cogeneration in Gempolkrep
            Sugar Plant Proposal 2.............................................................................................. 6-17
Table 7.3. Results of Study of Bagasse-based Power Generation and Cogeneration in Jatitujuh Sugar
            Plant Proposal 1 ........................................................................................................ 6-18
Table 7.4. Results of Study of Bagasse-based Power Generation and Cogeneration in Jatitujuh Sugar
            Plant Proposal 2 ........................................................................................................ 6-19




List of Figures


Figure 3.1. Indonesia’s Energy Supply .......................................................................................... 2-2
Figure 4.1. Flow sheet of sugar processing 3000 TCD (Subang Sugar Factory)........................ 3-10
Figure 4.2. The Bagasse Cogeneration Process......................................................................... 3-11
Figure 5.1. Yard lagoon system ................................................................................................... 4-10
Figure 5.2. Wet Scrubber ............................................................................................................. 4-10
Figure 6.1. Sensitivity of IRROI of Gempolkrep Sugar Mill Proposal 1 ....................................... 5-12
Figure 6.2. Sensitivity of IRROI of Gempolkrep Sugar Mill Proposal 2 ....................................... 5-13
Figure 6.3. Sensitivity of IRROI of Jatitujuh Sugar Mill Proposal 1.............................................. 5-13
Figure 6.4. Sensitivity of IRROI of Jatitujuh Sugar Mill Proposal 2.............................................. 5-14




                                                                                                                                              1-6
Glossary of Acronyms

ADB               Asian Development Bank
ADO               Automotive Diesel Oil
BOE               Barrels oil equivalent
BPPT              Badan Pengkajian dan Penerapan Teknologi (Agency for the
                  Assessment and Application of Technology)
CDM               Clean Development Mechanism
CER               Certified Emission Reduction
CGI               Chazaro Gerbang Internasional, PT (Limited)
CO2               Carbon dioxide
EFB               Empty Fruit Bunch
FAO               United Nations Food and Agriculture Organisation
FO                Fuel Oil
GEF               Global Environment Facility
GHG               Greenhouse Gas(es)
HA                Hectare
HPP               Harga Pokok Produksi (Basic Production Price)
IDO               Industrial Diesel Oil
IEA               International Energy Agency
IEEJ              Institute of Energy & Economics Japan
IRR               Internal Rate of Return
IRROE             Internal Rate of Return on Equity
IRROI             Internal Rate of Return on Investment
kJ / MJ / TJ      Kilo Joule / Mega Joule / Ton Joule
KOPENINDO         Koperasi Peduli Energi Indonesia (Indonesian Energy Cooperative)
KW                Kilo Watt
KWh               Kilo Watt-hour
KVA               Kilo Volt Ampere
LNG               Liquefied Natural Gas
LPG               Liquefied Petroleum Gas
MW / GW           Megawatt / Gigawatt of electricity capacity
MWh / GWh / TWh   Megawatt-hour / Gigawatt-hour / Terawatt-hour of production
O&M               Operation and Maintenance
OECD              Organisation for Economic Cooperation and Development
P3GI              Pusat Penelitian Perkebunan Gula Indonesia (Indonesian Sugar
                  Plantation Research Centre)
PG                Pabrik Gula (sugar factory)
PLN               Perusahaan Listrik Negara,PT (PERSERO) (State Electricity Enterprise)
PTPN              Perseroan Terbatas Perkebunan Nusantara (State Estate Enterprise)
RP                Rupiah (Indonesian currency)
SPP               Small Power Producer
T                 Ton
TRI               Tebu Rakyat Indonesia (Indonesian Smallholder Sugar Canes)
TCD               Tonnes of Cane Crushed per Day
UNFCCC            United Nation Framework Convention on Climate Change
US$               United Stated Dollar (currency)




                                                                                      1-7
EXECUTIVE SUMMARY

There are 59 sugar factories in Indonesia with crushing capacities ranging from 1,000 to 12,000
metric tons cane per day (TCD). The total crushing capacity of sugar factories in Indonesia is
196,775 TCD, with 124,263 TCD or 63 percent on Java and 72,512 TCD on the outer islands.
The sugar cane harvested in 2004 was around 27 million MT, and sugar production was over 2
millions MT.

Most sugar milling factories are concentrated in Java Island, and particularly in East Java. The
total sugar milling factories capacity in East Java is amounted to 88,538 tons/day. Some sugar
mill factories in the Java Island are old factories, which operate inefficiently due to the old
machines used.

The process of sugar production from cane is very energy-intensive, requiring inputs of both
heat and power in many stages. Sugar mills produce a range of by-products, including bagasse,
filter mud and molasses. A typical sugarcane complex with a capacity of 3,000 tonnes crushed
per day (this is about the same capacity as the Subang Sugar mill) could produce around 182
tonnes of refined sugar.

Each tonne of sugarcane would yield around 320 - 370 kg of bagasse. In the sugar industry,
bagasse is usually combusted in furnaces to produce steam for power generation.

Historically, sugar mills have been designed to meet their energy requirements by burning
bagasse. This was seen as an economic means of producing electricity whilst cheaply disposing
of bagasse. Since there was little potential for the sale of electricity to grid, efficiency in the
process was a hindrance rather than a bonus. In addition, over the years the energy
requirements of sugar mills have increased, both in peak- and off seasons. The establishment
of settlements around mills, with their related social, educational and commercial activities, has
contributed to the increase of electricity demand. In countries such as Indonesia, this has
compelled sugar mills to buy electricity from utilities and use non cane-based fuels to meet
energy requirements, particularly during off-season. In the least energy-efficient mill, such
requirements can be quite high.

Meanwhile, Indonesia is struggling with a chronically tight supply of electrical power. An
increase in the power reserve margin and an improvement of the transmission system are
urgent tasks. In this connection, therefore, a study entitled "Re-powering/optimizing the use of
biomass waste (bagasse) in Sugar Industries in Indonesia" is made.

The objective of the study was to examine the use of bagasse-based power and cogeneration in
sugar industries. The study has included the prospect of installing a power generation system at
high boiler temperature and pressure and turbo generator unit. More specifically, the system
would make use bagasse for electricity generation by applying steam turbines. Besides
improving the efficiency of the system and reducing fossil fuel consumption in sugar factory, this
study would evaluate GHG emissions reduction and utilize energy alternatives to fossil fuels.

This study was made aiming at implementation of an effective model project concerning
utilization of bagasse as biomass energy in Indonesia. The purpose of this study is to evaluate
the plural number of possible model project proposals. In order to achieve such purpose, basic
information on energy supply and demand, energy policy, current situation on bagasse
utilization and on-site needs is fully studied and analyzed.


                                                                                                1-8
The on-site study was made at the following companies and factories concerning company
outline, situation on utilization of bagasse, etc.:

a.             sugar mill factories of PTPN 10 (parent company of the following 6 factories), Watoetoelis
               sugar mill factory, Gempolkrep sugar mill factory, Lestari sugar mill factory, Pesantren
               Baru sugar mill factory, Ngadiredjo sugar mill factory, and Mojopanggung sugar mill
               factory (all are located in East Java province)
b.             sugar mill factories of PT Rajawali II (parent company of the following 4 factories),
               Jatitujuh Sugar Mill, Sindanglaut Sugar Mill, Subang Sugar Mill and Tersana Baru (all are
               located in West Java province)

Principal results of the study are summarized as follows:

                                    Table 1.1. Bagasse Power Plant Facility

                                                Sugar Mill                     Sugar Mill
 Item
                                         Proposal 1    Proposal 2       Proposal 1      Proposal 2
 Name of Sugar Mill                            Gempolkrep                       Jatitujuh
 Biomass Fuel                             Bagasse       Bagasse          Bagasse         Bagasse
 Bagasse utilization / hour                   28.5 t/h      31.0 t/h         28.5 t/h       31.0 t/h
 Bagasse utilization / year               259,616 t/y  259,616 t/y       191,698 t/y     191,698 t/y
 Boiler steam production                      65.1 t/h      66.9 t/h         65.1 t/h       66.9 t/h
 Gas turbine output                         9,100 kW      6,200 kW         9,100 kW       6,200 kW
 Electricity sell to grid                   4,930 kW      2,265 kW         4,900 kW       2,235 kW
 Electricity sell to grid / year         19,996 MWh 9,187 MWh           14,553 MWh      6,637 MWh


                                        Table 1.2. System Comparison

                                                               Proposal 1          Proposal 2
                             Item                   Unit       Jatitujuh &         Jatitujuh and
                                                               Gempolkrep          Gempolkrep
                     Type                           Natural circulation
                     Steam pressure                  MPA               7.16               2.5
                                                      O
                     Steam temperature                 C               515                350
     Boiler




                     Steam production               Kg/hour          65,100             66,900
                                                      O
                     Feed water temperature            C               142                110
                     Bagasse consumption            Kg/hour          28,500             31,000
                     Bagasse calorie value           KJ/kg            7,330              7,330
                     Type                           Back pressure turbine
     Steam Turbine




                     Power plant out put              kW             9,100              6,200
                     Inlet steam pressure            MPa               6.86              2.38
                                                      O
                     Inlet steam temperature           C               510               345
                     Steam flow rate                Kg/hour          65,100             60,000
                     Outlet steam pressure           MPa               0.28              0.25
                                                      O
                     Outlet steam temperature          C               210               131




                                                                                                       1-9
                              Table 1.3. Cost of Equipment (US$)

      Item                                    Proposal 1            Proposal 2
      Boiler and auxiliaries                      6,135,000              5,257,000
      Turbine, generator and auxiliaries          3,410,000              1,772,000
      Steam transformer                           2,315,000                      -
      Electricity equipment/controller            2,330,000              1,429,000
      Design and technology                       1,238,000                952,000
      Total                                      15,428,000              9,410,000


Evaluation of Profitability

Profitability was evaluated for the case in which the same facility as that for possible model
project is operated on a normal business basis.

Assuming that a CDM scheme is adopted, selling price unit of electricity is 4.5-7 cent US$/kWh
and CDM credit price unit is 0-10 US$/t-CO2, IRROI (internal rate of return on investment) and
IRROE (internal rate of return on equity) were calculated. Criteria for IRR are set at 10% or
higher for IRROI and 15% or higher for IRROE.

Every facility is economically feasible for Gempolkrep sugar mill Proposal 2, and is not
economically feasible for Jatitujuh sugar mill Proposal 1.

              Table 1.4. GHG Emission Reduction in Gempolkrep Sugar Mill

                        Item                    Unit               Proposal 1     Proposal 2
A1      Electricity sell to grid                MWh                     19,996          9,187
A2      Emission factor for Java Bali grid      t-CO2equ/MWh              0.67           0.67
A3      CO2 Emission reduction                  t-CO2                   13,397          6,155
A4      Fossil fuel (IDO) consumption           liter                1,455,083      1,455,083
A5      Calorific value of fossil fuel          kJ/liter                41,709         41,709
A6      Energy of fossil fuel                   TJ                       60.69          60.69
A7      Carbon emission factor                  t-C/TJ                     21.1           21.1
A8      Fraction of carbon oxidized                                       0.99           0.99
A9      CO2 emission reduction                  t-CO2                    4,648          4,648
A10     Methane gas/year                        m3                            0              0
A11     Methane gas density                     m3-CO2/t-CO2           0.00071        0.00071
A12     Methane gas emission reduction/year     t-CH4                         0              0
A13     CO2 emission reduction                  t-CO2                         0              0
A14     Total of CO2 emission reduction         t-CO2                   18,046         10,804




                                                                                           1-10
              Table 1.5. GHG Emission Reduction in Jatitujuh Sugar Mill

                  Item                        Unit               Proposal 1      Proposal 2
A1    Electricity sell to grid                MWh                     15,876           7,241
A2    Emission factor for Java Bali grid      t-CO2equ/MWh              0.67            0.67
A3    CO2 Emission reduction                  t-CO2                   10,637           4,851
A4    Fossil fuel (IDO) consumption           liter                  833,200         833,200
A5    Calorific value of fossil fuel          kJ/liter                41,709          41,709
A6    Energy of fossil fuel                   TJ                       34.75           34.75
A7    Carbon emission factor                  t-C/TJ                     21.1            21.1
A8    Fraction of carbon oxidized                                       0.99            0.99
A9    CO2 emission reduction                  t-CO2                    2,662           2,662
A10   Methane gas/year                        m3                            0               0
A11   Methane gas density                     m3-CO2/t-CO2           0.00071         0.00071
A12   Methane gas emission                    t-CH4                         0               0
      reduction/year
A13   CO2 emission reduction                  t-CO2                         0               0
A14   Total of CO2 emission reduction         t-CO2                    13,299           7,513


         Table 1.6. IRR at GHG Emissions Trading Price of 0, 5 & 10 US$/t-CO2

                                                             GHG emission trading price
                  Electricity selling price                         (US$/t-CO2)
Sugar Mill
                      Cent US$/kWh                                     (%)
                                                              0          5         10
Gempolkrep                  4.5                IRROI           8.36       8.81       9.26
Sugar mill                                     IRROE          11.60     12.46       13.32
Proposal 1                   5                 IRROI           8.86       9.31       9.75
                                               IRROE          12.55     13.42       14.28
                            5.5                IRROI           9.36       9.80      10.23
                                               IRROE          13.51     14.37       15.24
                             6                 IRROI           9.84     10.28       10.71
                                               IRROE          14.47     15.34       16.21
                            6.5                IRROI          10.32     10.75       11.18
                                               IRROE          15.43     16.31       17.19
                             7                 IRROI          10.80     11.22       11.64
                                               IRROE          16.40     17.28       18.17
Gempolkrep                  4.5                IRROI          12.39     12.78       13.17
Sugar mill                                     IRROE          19.80     20.66       21.52
Proposal 2                   5                 IRROI          12.72     13.11       13.49
                                               IRROE          20.53     21.39       22.26
                            5.5                IRROI          13.05     13.43       13.81
                                               IRROE          21.26     22.13       23.01
                             6                 IRROI          13.38     13.76       14.14
                                               IRROE          22.00     22.88       23.76
                            6.5                IRROI          13.70     14.08       14.46


                                                                                            1-11
                                             IRROE          22.75       23.63      24.51
                               7             IRROI          14.02       14.40      14.77
                                             IRROE          23.49       24.38      25.27
Jatitujuh                     4.5            IRROI           4.28        4.68       5.06
Sugar mill                                   IRROE           4.45        5.11       5.75
Proposal 1                     5             IRROI           4.75        5.14       5.52
                                             IRROE           5.23        5.88       6.52
                              5.5            IRROI           5.21        5.59       5.96
                                             IRROE           6.00        6.64       7.28
                               6             IRROI           5.66        6.03       6.39
                                             IRROE           6.76        7.40       8.03
                              6.5            IRROI           6.10        6.46       6.82
                                             IRROE           7.52        8.16       8.79
                               7             IRROI           6.53        6.89       7.24
                                             IRROE           8.28        8.91       9.54


      Table 1.6. IRR at GHG Emissions Trading Price of 0, 5 & 10 US$/t-CO2 (cont.)

Jatitujuh                     4.5            IRROI          10.10       10.38      10.67
Sugar mill                                   IRROE          14.97       15.55      16.13
Proposal 2                     5             IRROI          10.45       10.73      11.01
                                             IRROE          15.68       16.26      16.84
                              5.5            IRROI          10.79       11.07      11.35
                                             IRROE          16.39       16.97      17.55
                               6             IRROI          11.13       11.41      11.69
                                             IRROE          17.10       17.68      18.27
                              6.5            IRROI          11.47       11.75      12.02
                                             IRROE          17.81       18.40      18.99
                               7             IRROI          11.81       12.08      12.36
                                             IRROE          18.53       19.12      19.72


The internal rate of return on investment (IRROI), which shows the internal rate of return of the
project as a whole taking into account revenues from emission credits trading through GHG
reduction at US$ 5 per t-CO2 and electricity tariff of 0.05 US$/kWh was found to be 9.31%,
13.11%, 5.14%, and 10.73% (Table 1.6). It is concluded, therefore, that the project of
Gempolkrep and Jatitujuh Proposal 2 are sufficiently profitable for private sector investment.
This also demonstrates that the effect on revenues of the reduction of GHG emissions is
considerable. A key point is thus whether the project can be undertaken in such a way as to
obtain stable revenues using the CDM framework, based on a variety of forms of cooperation
between Annex I Country (Kyoto Protocol) and bodies in the host country of Indonesia, such as
the Indonesian Government and the sugar plant industries.




                                                                                             1-12
1.   MAP SHOWING THE SITUATION OF THE PROJECT STUDY




                                                      1-1
2.         INTRODUCTION

2.1.       Background

Fossil Fuel, especially oil, is the main source of energy and a source of foreign exchange for the
state. It has been identified that the Indonesian fossil fuel reserves are limited. Meanwhile, the
energy consumption is constantly increasing in line with the rate of economic growth and
population growth.

Renewable energy, such as biomass, geothermal, solar energy, hydro energy, wind energy, and
ocean energy, until now has not been widely used.

The National Energy Policy 2003 - 2020 of Indonesia has adapted a policy to promote the use
of biomass, such as wood waste, bagasse, rice husks, and oil palm residues as fuel for
electricity and steam production in industries. This National Energy Policy is formulated
particularly to ensure a sustainable national energy security of supply and an efficient
consumption of energy. The benefits of this policy include reduction of petroleum imports,
conservation of natural resources, and strengthening of rural economies.

Efficient biomasses to energy projects are actively being encouraged in Indonesia.
Technologies that are being considered include: conventional combustion, pyrolysis, anaerobic
digestion, gasification, and energy efficiency management.

Projects are likely to be viable if the combination of large quantities of biomass waste, demand
for energy in the form of heat and electrical power and interconnection to PLN for sale of surplus
electrical energy coexists.

From the period of May 2005 to August 2005 CGI has conducted a study in some sugar plant
industries in Indonesia. The objective of the study was to examine the use of bagasse-based
power generation and cogeneration in sugar industries. The ultimate objective of this study is to
develop biomass-based power generation as a source of electricity in Indonesia.

The specific goals of this study are as follows:

       •    To review the existing status of bagasse as fuel in Indonesia.
       •    To conduct pre feasibility studies on sugar industries in order to assess their potential
            for bagasse-based power generation and cogeneration.
       •    To demonstrate the financial viability of bagasse-based power generation or
            cogeneration at the facilities in order to encourage investment decisions of the owners
            towards implementation of the projects.

2.2.       Energy situation in Indonesia

2.2.1. Energy balance

Table 3.1 shows Indonesian energy balance in 2000. Indonesia is one of Asia’s leading energy
producers, and exports coal, crude oil, petroleum products and natural gas. At the same time,
however, the country is importing petroleum products such as kerosene and light oil, and now is
becoming a net importer of petroleum products.



                                                                                                  2-1
2.2.2. Energy Supply and Demand

Figure 3.1 shows the domestic primary energy supply, which grew at an annual rate of 9.4% in
1970s, 8.5% in 1980s, and 4.2% in 1990s.

While oil accounts for the bulk of the domestic primary energy balance, the oil dependency has
declined from 95% in 1971 to 54% in 1990. Biomass, a traditional energy source, is still an
important energy source, accounting for around 30% of the domestic energy supply, and energy
thus produced is consumed largely in households in rural districts and in suburbs. Table 3.2
shows share of energy supply and consumption.

                                  2,500                                                                                                                     5,000

                                                                                                                                                            4,500




                                                                                                                                                                    Total Consumption (10^9 Mega-Joule)
                                  2,000                                                                                                                     4,000
  Consumption (10^9 Mega-Joule)




                                                                                                                                                            3,500
                                                                                                    Total Consumption

                                  1,500                                                                                                                     3,000

                                                                                                            Oil                                             2,500

                                  1,000                                                                                                                     2,000

                                                                                                                                                            1,500
                                                                                                                   Natural Gas

                                   500                                                                                                                      1,000
                                                                                                                                     Coal
                                                                                                                                                 Hydro      500
                                                                                                                                 Geothermal
                                     0                                                                                                                      0
                                     1970   1972   1974   1976   1978   1980   1982   1984   1986    1988   1990   1992   1994      1996      1998   2000
                                                                                      Period (Year)



(source: Energy Statistics)


                                                                        Figure 3.1. Indonesia’s Energy Supply




                                                                                                                                                                                                          2-2
                                                            Table 3.1. Indonesia Energy Balance 2000




Source: CIE / EAPO Calculation (Handbook of Indonesia’s Energy Economy Statistic 2002)




                                                                                                       2-3
                                           Table 3.2. Share of Energy Supply and Consumption




Source: CIE / EAPO Calculation (Handbook of Indonesia’s Energy Economy Statistic 2002)




                                                                                               2-4
2.3.    National Energy Policy

2.3.1. Targets

        •   Increase business roles that lead towards a market mechanism to raise added
            values so as to deliver larger contributions to the national economy and to creating
            an efficient national industry.
        •   Achieve 90% electrification in the year 2020 with increasing investments to build
            power plants, transmission and distribution grid in light of the fact that power plant
            development is a capital-intensive activity.
        •   Increase energy share, particularly renewable energy, with the exception of large-
            scale-hydro, to at least 5% in the year 2020. The renewable energies expected to
            fulfil the target are geothermal, biomass and micro/mini hydro power plants.
        •   Develop energy infrastructures, which could maximize public access to energy and
            exploitation of energy for export.
        •   Increase strategic partnerships between domestic and international energy industries
            for discovering domestic and foreign sources of energy. It is expected that domestic
            energy companies will go international and capable of competing in global markets
        •   An annual energy intensity reduction of 1%
        •   Increase utilization of local contents and increased roles of national human
            resources in the energy industry are resulting a reduction of dependence on foreign
            sources of energy.

2.3.2. Strategies

        •   Restructuring energy sector
        •   Adoption of a market economy in constant consideration of the low income groups
        •   Empowerment of the regions in developing energy
        •   Developing energy infrastructures
        •   Increasing energy efficiency
        •   Increasing the roles of the national energy industry
        •   Increasing the number of industrial and services businesses that support the national
            energy industry
        •   Empowerment of the people

3.     SUGAR INDUSTRY

3.1. General Description of Indonesian Sugar Factories

Sugarcane is currently cultivated under a wide range of conditions, in tropical and sub-tropical.

As water requirement for the crop is 1.2 - 1.6 m3/year, good distribution of rainfall is required if
there is no irrigation. Sugarcane harvesting generally occurs every 9 - 14 months, depending on
crop variety. Table 4.1 presents production and yield figures of top 11 sugar-growing countries.




                                                                                                 3-1
                        Table 4.1. Main Sugarcane-producing Countries

                                Area              Production             Yield            Production
    Country
                              Harvested            ranking            (tonnes/ha)           (tonnes)
    Australia                      423,000            8                  85.13               36,012,000
    Brazil                       5,303,560            1                  73.83              386,232,000
    China                        1,328,000            3                  70.71               93,900,000
    Colombia                       435,000            7                  84.14               36,600,000
    Cuba                         1,041,200            9                  33.33               34,700,000
    India                        4,300,000            2                  67.44              290,000,000
    Indonesia                      336,257                               70,57               23,730,635
    Mexico                         639,061              6                70.61               45,126,500
    Pakistan                     1,086,000              5                47.93               52,055,800
    Philippines                    385,000             11                67.10               25,835,000
    Thailand                       970,000              4                76.36               74,071,952
    USA                            403,390             10                77.29               31,178,130
    Other                        4,091,132                                                  244,581,738
    Total                      20,405,343                                                 1,350,293,120
    Average                                                               68,53
Source: FAO Database

Sugar has long been known as the main agriculture commodity in Indonesia along with sugar
cane production which has becoming the target of government policies.

Sugar industries have becoming one economical basis and national economic movers as well
as sugar producers and creating employment. The development of the industries fluctuated
within the last decades in line with the world’s economic growth, the national economic growth
and the government policies.

During the past 7 years (1995-2003) the sugar production declined from 2.10 million tons in
1995 to 1.63 tons in 2003. The production was only 2.05 million tons in 2004. This was caused
by the reduction of land productivity and a significant efficiency reduction of the factories. The
greatest reduction occurred in 1998 when the national sugar production was recorded at 1.49
million tons or only half of the domestic demand2.

As one of many aspects that had caused the reduction of sugar production was the land
conversion in the Java Island. Cane cultivation has been facing to other food crops cultivation
competition, particularly paddy. This was done in order to self-sufficient the country’s demand
on rice. Outside the Java Island there is yet land available for cane plantation. It has been a
policy that the cane cultivation would be developed outside Java. But at the same time, land
utilization has facing some obstacles such as limitation of financial, -employees and -technology.
With all these limitations private companies have been encouraged to take their participation
more actively to develop the industry outside Java.

Apart from that, the development of the world’s sugar industries has been identified to show an
inclining phenomenon. The world’s sugar industries have been experiencing an improving


2
 Estate Crop Statistics of Indonesia 2001-2003, Department of Agriculture, Direktorat Jenderal Bina Produksi
Perkebunan, Jakarta, 2004.


                                                                                                         3-2
efficiency. If the country’s sugar production continues to drop and no serious actions are being
taken, then the national sugar industry would certainly underdeveloped. If this occurs it is feared
to cause a wide impact on social and economy of the country.

Having realized this condition, sugar industry player has committed to maintain the existence of
the industry and improve national sugar industry performance. A step being conducted for this is
to commit and establish “the Acceleration Program for the National Sugar Productivity
Increment” as a strategic step being implemented since 2002 up to 2007. This program has
been set up by considering available potencies and capabilities and obstacles as well as
required supporting factors. The goal is to improve the performance of the national sugar
industries in order to meet self-sufficient sugar production at a competitive production cost with
the world’s sugar price.

Total sugar cane area in Indonesia was 336,257 ha. Table 4.2 shows that sugar canes are
mainly produced by smallholders (farmers) either supplying the canes to the private companies
or to the state-owned companies (PTPN). The total area under plantation has been decreasing
in time, possibly changed into rice field or other food crops field and even for housing.

                          Table 4.2. Area and Production of Sugar Cane


                              Area                                          Production
                              (ha)                                             (ton)
  Year
         Small                                               Small
                 Govt  Private Total                                      Govt       Private       Total
        Holders                                             Holders
  1994 276,581 107,570 44,585 428,736                      1,673,246     509,047    271,588     2,453,881
  1995 263,157 120,162 52,718 436,037                      1,350,476     422,300    286,800     2,059,576
  1996 304,047 79,269  63,217 446,533                      1,512,131     316,660    265,404     2,094,195
  1997 218,201 85,086  83,591 386,878                      1,196,409     365,313    630,264     2,191,986
  1998 195,048 83,069  98,972 377,089                       759,094      305,332    423,843     1,488,269
  1999 176,733 82,106  83,372 342,211                       738,893      284,782    470,258     1,493,933
  2000 171,279 64,133 105,248 340,660                       790,573      234,288    665,143     1,690,004
  2001 178,887 87,687  77,867 344,441                       813,538      310,949    600,980     1,725,467
  2002 196,509 79,975  74,238 350,722                       967,160      297,685    490,509     1,755,354
 2003*) 181,198 77,858 77,201 336,257                       908,620      301,677    424,263     1,634,560
Note:*) Preliminary
Source: Estates Crops Statistic of Indonesia (Sugar Cane) 2001-2003, Departemen Pertanian, Direktorat Jenderal
Bina Produksi Perkebunan, Jakarta, 2004


There are 59 sugar factories operating in Indonesia with crushing capacities ranging from 1,000
to 12,000 metric tons of cane per day (TCD). The total crushing capacity of all sugar factories is
196,775 TCD, with 124,263 TCD (63 %) in Java and 72,512 TCD on the outer islands. In 2004
harvested sugarcane was around 27 million MT while sugar production was over 2 millions MT.

Most sugar factories are concentrated in the Java Island, particularly in East Java Province with
its total milling capacity of 88,538 tons/day (by year 2000). Some sugar factories in this area are
old factories having machines with inefficient performance. Some sugar plantations are located
outside Java and most of these are under the management of private companies. Large private
sugar companies are identified in Sumatera.



                                                                                                           3-3
The capacity production of sugar milling factories in Indonesia is to be found in Table 4.3. Some
sugar milling factories were not in operation in 20023.

Canes milling season in Indonesia occurs from April through October in Sumatera and May
through October in the Java Island, Kalimantan and Sulawesi. Milling time varies from 80 to 180
days. Most factories in Indonesia is adopting sulphitation process for producing white crystal
sugar while 11 other factories are notified applying double carbonation process.

As one of other important byproducts from the sugar industry is molasses. Current total
molasses production in Indonesia is about 1.1 MT. In the past a great proportion of molasses
production was exported. The export is expected to decline in line with the increasing of
molasses domestic demand.

Another co-product or waste product from cane sugar production is cane bagasse. At a bagasse
production of totaling approximately 32 percent of the total sugar cane production, over 8
millions MT bagasse is currently being produced in Indonesia. About 90 percent of the total
bagasse is being utilized as fuel for boiler. Some bagasse is either being used for paper
production or for mushroom cultivation. The rest is presently left unutilized.




3
    “Ikhtisar Angka Perusahaan Tahun Giling 2002”; P3GI; Pasuruan, 2003.


                                                                                              3-4
                         Table 4.3. Sugar Factories and its Capacity Production in Indonesia year 2002


                                                                                              MILLING CAPACITY
                                                                                                  Year 2002                    Install
                                                                    Category
                                                                                                                             Capacity
                                                                    of
Company Factory Name             Province        Location                               Excluding Stop    Including Stop     Year 2000
                                                                    Producer
                                                                                            Hours             Hours           Ton/day
                                                                                             Ton               Ton
PTP NUSANTARA II                 North
                                                                    Government estate
(PERSERO)                        Sumatera
    Sei Semayang                                 Deli Serdang                                    3,357              3,013           4,000
    Kualamadu                                    Langkat                                         3,538              2,931           4,000
PTP NUSANTARA VII                South
                                                                    Government estate
(PERSERO)                        Sumatera
                                                 OKI (Ogan
    Cintamanis                                                      BUMN                                                            5,023
                                                 Komering Ilir)
PTP NUSANTARA VII
                                 Lampung                            Government estate
(PERSERO)
    Bungamayang                                  Negara TB                                      5,235.3           5,057.5           5,979

PT GUNUNG MADU
                                                                    Private Estate
PLANTATIONS
                                                 Terbanggi Besar-
    Gunung Madu                                                                                                                    11,432
                                                 Middle Lampung

PT GULA PUTIH MATARAM                                               Private Estate
                                                 Mataram Udik-
    Gula Putih Mataram                                                                                                             12,124
                                                 Middle lampung
    Indolampung Perkasa                          Lampung
                                                 Menggala-North
    Sweet Indo Lampung                                                                                                             10,539
                                                 Lampung
PT RAJAWALI II                   West Java                          Private Estate
    Gempol                                       Gempol-Cirebon                                                 No Milling          1,200
    Jatitujuh                                    Majalengka                                                                         4,045
                                                 Jatiwangi-
    Jatiwangi                                                                                                   No Milling          1,050
                                                 Majalengka


                                                                                                                             3-5
                                        Kadipaten-
   Kadhipaten                                                                             No Milling         1,171
                                        Majalengka
                                        Karangsuwung-
   Karangsuwung                                                                 1,322.3     1,250.7          1,334
                                        Cirebon
                                        Sindang Laut-
   Sindanglaut                                                                                               1,780
                                        Cirebon
    Subang                              Subang                                                               2,852
    Tarsana Baru                        Cirebon                                 2,735.4       2,572          3,015
PTP NUSANTARA IX
                        Central Java                        Government estate
(PERSERO)
    Banjaratma                          Brebes                                            No Milling         2,000
    Jatibarang                          Brebes                                  2,049.1     1,718.8          2,000
    Ceper Baru                          Klaten                                            No Milling         1,350
    Gondang Baru                        Klaten                                  1,529.2     1,319.6          1,452
    Cepiring                            Kendal                                            No Milling         1,750
    Colomadu                            Karanganyar                                       No Milling
    Tasikmadu                           Karanganyar                             3,208.2     2,731.6          3,218
    Kalibagor                           Banyumas                                          No Milling
    Mojo                                Sragen                                  2,710.3       2,460          2,726
    Pangka                              Slawi (Tegal)                           1,709.1     1,538.6          1,772
    Rendeng                             Kudus                                   2,290.8     1,775.6          2,520
    Sragi                               Pekalongan                              3,164.1     2,805.7          3,184
    Sumberharjo                         Pemalang                                1,813.3     1,577.2          1,798

PT KEBON AGUNG                                              Private Estate
    Trangkil                            Pati                                                                 3,267
PT LAJU PERDANA INDAH                                       Private Estate
    Pakis Baru                          Pati                                              No Milling         2,765
PT RAJAWALI I           DI Yogyakarta                       Private Estate
    Madukismo                           Bantul-Yogyakarta                       2,954.5     2,768.1          3,100
PTP NUSANTARA X
                        East Java                           Government estate
(PERSERO)
    Cukir                               Jombang                                 2,669.2     2,368.1          2,897
    Jombang Baru                        Jombang                                 2,027.6     1,664.7          2,187
    Gempolkrep                          Mojokerto                               5,257.7     4,860.1          5,742
    Krembung                            Sidoarjo                                1,469.8     1,358.7          1,446


                                                                                                       3-6
    Krian            Sidoarjo                                         No Milling         1,500
    Tulangan         Sidoarjo                               1,195.3     1,012.1          1,287
    Watutulis        Sidoarjo                               2,030.4     1,880.4          2,085
    Lestari          Nganjuk                                3,359.1     2,489.3          3,529
    Merican          Kediri                                 2,233.4     2,000.7          2,515
    Ngadirejo        Kediri                                 5,101.8     4,287.1          5,615
    Pesantren Baru   Kediri                                 5,265.4     4,408.0          5,607
    Mojopanggung     Tulungagung                            2,329.4     2,239.3          2,521
PTP NUSANTARA XI
                                        Government estate
(PERSERO)
    Asembagus        Situbondo                              2,287.5     2,172.2          2,365
    De Maas          Situbondo                                        No Milling           838
    Panji            Situbondo                              1,624.7     1,485.8          1,573
    Oleaan           Situbondo                                  953         884            963
    Wringinanom      Situbondo                                952.7       884.2          1,084
    Gending          Probolinggo                              1,431       1,356          1,305
    Pajarakan        Probolinggo                            1,109.5     1,057.2          1,117
    Wonolangun       Probolinggo                            1,266.2     1,205.9          1,199
    Jatiroto         Lumajang                               5,644.1     5,120.3          5,762
    Kanigoro         Madiun                                   1,539       1,391          1,729
    Kedawung         Pasuruan                               2,227.7     2,056.2          2,194
    Pagottan         Pagotan (Madiun)                       2,379.7     2,301.4          2,084
    Prajekan         Bondowoso                              2,468.8     2,267.8          2,532
    Purwodadi        Magetan                                1,931.1     1,870.9          1,946
    Rejosari         Magetan                                1,724.1     1,629.1          1,814
    Semboro          Jember                                 4,386.3     3,904.3          4,515
    Sudhono          Ngawi                                  2,068.0     2,198.0          2,289
PT KEBON AGUNG                          Private Estate
    Kebon Agung      Malang                                 4,656.2     4,084.2          3,698

PT RAJAWALI I                           Private Estate
    Krebet Baru I    Malang                                 3,184.9     2,663.3           7,000
    Krebet Baru II   Malang                                 3,533.7     3,174.4          (7000)
    Candi Baru       Sidoarjo                                 1,736     1,403.3           1,700
    Rejoagung Baru   Madiun                                                               3,900


                                                                                   3-7
 PTP NUSANTARA XIII                         South
                                                                                       Government estate
 (PERSERO)                                  Kalimantan
                                                               Kabupaten Tanah
           Pelaihari                                                                                                       3,553               3,244.1          3,862
                                                               Laut
 PTP NUSANTARA XIV                          South
 (PERSERO)                                  Sulawesi
     Bone                                                      Kabupaten Bone          Government estate                 1,987.3               1,570.9          2,194
     Camming                                                   Kabupaten Bone                                                                                   2,517
     Takalar                                                   Takalar                                                   2,219.3               1,698.2          2,842
 PT RAJAWALI III                            Gorontalo                                  Private Estate
     Tolangohula                                               Paguyaman                                                                                        8,000
Source:
    (i)          Ikhtisar Angka Perusahaan Tahun Giling 2002, Pusat Penelitian Perkebunan Gula Indonesia (P3GI), Samsul Ihadi, Sutrisno, Pasuruan, 2003
    (ii)         Webside of Ministry of agricultural, Diretorate General of Estate




                                                                                                                                                          3-8
Other policies and programs have been prepared to increase sugar production in Indonesia
including implementation of Indonesian smallholders sugar canes (Tebu Rakyat Indonesia/TRI),
intensification of smallholder plantations, rehabilitation of sugar factories in the Java Island,
install new sugar factories outside Java, improvement in the marketing methods as well as
strengthened government estate enterprises. The increase of sugar production has been
performed by increasing productivity, factory efficiency as well as support of government policy.
In achieving those goals, a short term strategy is applied for consolidating of areas,
rehabilitation of cut plants, supply good quality seeds and quality improvement of cultivation,
application cut-load-transported management, sugar factories performance and import tax
adjustment. A long term strategy is adopted to improve (build) the following : farmers institution
and improvement of quality of research agencies employees as well as developing product
efficiently.

The stages followed for the improvement of sugar factories performance include :

       •   reparation and replacement of equipments and factories machines selectively fitted
           to available company financing
       •   improve milling capacity for factories with sufficient supply of canes and reduce idle
           capacity for factories with insufficient canes
       •   applying efficient utilization of fuel and factories operational cost
       •   improve quality of sugar
       •   developing product diversification.

3.2. Sugar Production Process

The process of sugar production from canes is given in Figure 4.1. The process is very energy-
intensive, requiring both heat and power at many stages of the process. This has made the
process to suit to the application of cogeneration.

A sugar processing produces a range of by-products, including bagasse, filter mud and
molasses. A typical sugarcane complex with a capacity of 3,000 tonnes crushed cane per day
(this is about the same capacity as the Subang Sugar mill) could produce around 182 tonnes of
refined sugar (Gempolkrep produces around 366 tonnes refined sugar per day). Bagasse is a
fibrous residue of cane stalk obtained after cane crushing process and extraction of its juice.
Every ton of sugarcane would produce around 320-370 kg bagasse. The composition of
bagasse depends on the variety and maturity of sugarcane as well as harvesting methods
applied and efficiency of the sugar processing.




                                                                                               3-9
Figure 4.1. Flow sheet of sugar processing 3000 TCD (Subang Sugar Factory)




                                                                             3-10
In sugar industry, bagasse is usually combusted in furnaces to produce steam for power
generation. It is also possible being utilized as the raw material for production of paper and as
feedstock for cattle. The value of bagasse as a fuel depends largely on its calorific value, which
in turn is affected by its composition, especially with respect to its water content and to the
calorific value of the sugarcane crop, which depends mainly on its sucrose content.

Sugar mills have been designed to meet their energy required by burning bagasse. This has
been seen as an economic means of producing electricity whilst cheaply disposing of bagasse.
Since there was little potential for the sale of electricity to the grid, however, efficiency in the
process was a hindrance rather than a bonus.

In addition, over the years the energy requirements in sugar mills have increased, both in and
off-season. The establishment of settlements around mills, with their related social, educational
and commercial activities, has contributed to increased electricity demand. In countries such as
Indonesia, this has compelled sugar mills to buy electricity from utilities and use non cane-
based fuels to meet energy requirements, particularly out of season. In the case of the least
energy-efficient mills, such requirements can be quite high.

About one third of the bagasse produced in a mill can provide enough steam and electricity for
the mill’s requirements. Table 4.4 summarises the typical energy requirements of cane mills.

        Table 4.4. Typical Steam and Power Demands Per Tonne of Cane Crushed

     Sugar Mill Efficiency                        Low to High
     Steam requirement                            420-660 kg
     Electricity requirement                      20 kWh to 27 kWh

Boilers employed in non-cogeneration sugar mills have historically been rather inefficient,
applying pressures of only 20-25kg/cm2 with matching backpressure turbine generators. In such
mills, steam produced at comparatively higher pressures pass through steam turbines,
generating electrical power for milling process. Backpressure steam at 1.5kg/cm2 and small
quantities of medium-pressure backpressure steam (7kg/cm2) are used for process
requirements. The process of bagasse cogeneration is presented in Figure 4.2.



                                         Steam turbo           Steam &                  Sugar
                                          generator             Power                  Process

      Bagasse            Boiler


                                          Steam mill
                                            drives
                                                                        Surplus electricity
                                                                          to grid if any




                       Figure 4.2. The Bagasse Cogeneration Process


                                                                                                 3-11
3.3. Current Waste Utilization

Byproducts resulted from sugarcane production seem to have a potential value for significant
increasing overall return from processing of its raw material and yet positive environmental
effects.

Current sugar processing in Indonesia produces 8 millions MT bagasse and 11.5 millions MT
canes top and leaves. Nearly 100 percent of bagasse is being utilized in the factories as fuel for
boiler. However, there is a considerable scope for increasing efficiency of this type of energy
production which enables a sizeable proportion of bagasse for other utilization or for energy
production.

An indetermination quantity of the canes tops and leaves being produced in Java is to feed
cattle, while its production off Java goes to wastes. Regarding those mentioned above, it
appears that there is a considerable scope for more efficient utilization of waste products from
sugar factories in Indonesia. The following paragraph gives a review of some products which
could be produced from the wastes.

Pulp production from bagasse is an established commercial practice in a number of locations,
with early attempts dating back to the nineteenth century. Nevertheless, it was not until early
1900’s that pulp production from bagasse became an economically viable enterprise.

Canes tops have been utilized for animal feed in Java. In normal practice, family members of
cane cutters collect the tops during harvesting season and utilized it to feed their cattle. During
off season dry cane leaves can also be collected without any harm to growing plant. Yet, this is
usually discouraged due to the problems of preventing the collection of green leaves, which has
a detrimental effect to the growth of the canes.

3.4. Energy Use and Potential in Indonesian Sugar Factories

Sugar mills utilize large amounts of energy to extract sucrose and molasses from canes. Since
most mills utilize bagasse to provide both steam and electrical energy for the mill, this energy
requirement translates to 4.5 – 8.31 MT bagasse for each MT white sugar produced.

In 2002, the Indonesian sugar mills produced about 8 millions MT bagasse annually. About 0.31
MT excess bagasse was resulted from normal factories operations. Bagasse is normally sold to
paper and pulp mills or held over for starting up boiler in the following season. (source: Ikhtisar
Angka Perusahaan Tahun Giling 2002, Pusat Penelitian Perkebunan Gula Indonesia (P3GI),
Samsul Hadi, Sutrisno, Pasuruan, 2003). About 50% of this total is produced at one mill, the
Gunung Madu mill In Lampung province that produces more than 150,000 MT/yr of surplus
bagasse.

Cane processing efficiency varies widely from one mill to another. It depends largely on the type
and age of equipment used and efficiency of processing and extraction systems.

The efficiency of cane processing varies widely from one mill to another. This depends largely
on the type and age of equipment used, and the efficiency of processing and extraction. To
understand how bagasse could be made available for utilization outside the mill, it is important
to review the major uses of energy in those mills.



                                                                                               3-12
The composition of whole sugar cane varies greatly from one country to another and can be
affected by such variables as rainfall, fertilizer, harvest techniques, and cane cultivar, among
others. The composition of cane in Indonesia is roughly as follows:

                        Item                        Percent of Whole Cane
            Sucrose                                         10 - 17
            Water                                           65 - 75
            Reduction sugar                                0.5 - 1.5
            Organic acids                                    0.15
            Other substances                               0.5 - 1.5
            Fiber                                           11 - 19


In a sugar factory, canes are milled and pressed so that cane’s juice is separated from canes,
leaving fibrous residue bagasse. The juice is further processed (clarified) while the bagasse is
conveyed to boiler for fuel. The water content of the bagasse leaving last mill is high, usually 46
- 50 percent. Bagasse contains some sugar and other materials, in addition to its fiber as
follows:

            Water                                           46 - 50 %
            Fiber content                                  48 - 51.0 %
            Brix (including pol or soluble                    4.5 %
            sugar 1-3%)

A sugar mill which processes 4,000 metric tons of cane per day (TCD) where the cane has a 30
percent bagasse content will produce 30 percent x 4,000 MT or 1,200 MT bagasse per day.
Thus the total production of bagasse is equivalent to 2,300 barrels of oil in energy terms. Of the
total energy production from bagasse, about 95 percent goes to turbo generators or to
mechanical driven turbines. Only about five percent of the energy goes to the evaporators via a
pressure-reducing valve. Saving energy in a mill would then become a question of improving
combustion efficiency and making a better use of energy that is exhausted through existing
turbo generators.

In spite of a tremendous heating and grinding demands of a milling process, several mills
studied by teams have been able to reduce energy use substantially. These reductions have in
turn led to availability of significant volumes of excess bagasse for other uses, including
generation of electric power in the mill itself.

There are often several areas in which energy use can be reduced without making significant
modifications to mills or to the processing of canes. Some of these modifications involve modest
investments. There are some possible modifications include:

       •   Using continuous vacuum for low grade sugar extraction;
       •   Flue gas drying of excess bagasse to increase combustion efficiency;
       •   Installing pre-evaporators to conserve steam;
       •   Installing air preheaters and economizers on the boilers; and
       •   Closing pressure reducing valves to force additional steam through the turbo-
           generators and using the evaporators as "sinks" for the steam.
       •   Baling of surplus bagasse to improve its storability and use beyond the grinding
           season.


                                                                                               3-13
Other alternative modifications generally involve the use of higher temperatures and pressures
in boiler and turbo-generator units.

The increase of generating capacity of bagasse consumption in sugar mills have enable sugar
mills to export power or sell bagasse to mushroom cultivation, paper and pulp mills.

In the simplest case, such conservation measures consist of forcing additional steam through
turbo-generators. Installing additional equipment including deaerating feed water heaters, which
absorb turbo-generator exhaust, can conserve greater amounts of energy.

The next section outlines the types of technology and investments that are necessary to export
electricity from Indonesia's sugar mills. The team briefly visited ten sugar factories between
June-July 2005. No direct measurement of process variables was possible on this mission.

3.5. Factory Case Studies

The following case study has been developed from the data supplied by the mill (see Table 4.5.).

3.5.1. Gempolkrep Sugar Mill

The current equipment at the Gempolkrep Mill has a capacity to produce 5625 kVA of electricity
from bagasse-fired boilers and a backpressure steam turbine. The daily production of electricity
is around 45.5 MWh during the processing season, which is 161 days long per year. The mill,
therefore, generates around 8.5 kWh per tonne of cane, which is very low compared to best
practice. This is due to the low temperature and low pressure of the boilers. It is possible to
increase this electricity production up to 100 kWh per tonne of crushed cane, using high-
pressure boilers and high efficiency turbo-generator sets. To achieve this, a high electricity
production rate would require significant investment and would result in significant export of
electricity.


Existing Facility

Boilers: number 3 units

                                            Boiler 1

          Branch                       Cheng Chen
          Type                         Stoker
          Fuel used                    Bagasse and IDO
          Capacity                     26.63 tonnes/hr
          Steam pressure               20 bar
          Steam Temperature            325 0C
          Unit                         1




                                                                                            3-14
                                           Boiler 2 and 3

         Branch                          Yoshimine
         Type                            Stoker
         Fuel used                       Bagasse and IDO
         Capacity                        66.57 tonnes/hr
         Steam pressure                  20 bar
         Steam Temperature               325 0C
         Unit                            2


                             Turbines, Generator and Diesel Generator

         Turbines
         Rating                                      4.5 MW
         Type                                        Backpreasure @ 1 bar
         Operating pressure and Temperature          17 bar

         Generator
         Rating                                      5625 kVA

         Diesel Generator
         Rating                                      1440 kVA


3.5.2. Lestari Sugar Mill

Current equipment at Lestari Sugar Mill has a capacity to produce electricity of 7,674,800 kWh
resulted from bagasse fired boilers and a backpressure steam turbine. The daily production of
electricity is around 59.036 MWh during the processing season, which is 130 days long per year.
The mill, therefore, generates around 17.75 kWh per tonne of cane, which is very low compared
to best practice. This is due to the low temperature and low pressure of the boilers. It is possible
to increase this electricity production up to 100 kWh per tonne of crushed cane, using high-
pressure boilers and high efficiency turbo-generator sets.

3.5.3. Watutulis Sugar Mill

Boilers: 2 units
                                              Boiler 1

         Branch                          Cheng Chen
         Type                            Stoker
         Fuel used                       Bagasse and IDO
         Capacity                        32 tonnes/hr
         Steam pressure                  20 bar
         Steam Temperature               325 0C
         Unit                            1




                                                                                               3-15
                                     Boiler 2

Branch                           Stork
Type                             Stoker
Fuel used                        Bagasse and IDO
Capacity                         22 tonnes/hr
Steam pressure                   20 bar
Steam Temperature                325 0C
Unit                             1


                     Turbines, Generator and Diesel Generator

Turbines                                    2 unit
Rating                                      1.5 MW
Type                                        Back pressure @ 1 bar
Operating pressure and Temperature          17 bar

Generator                                   2 units
Rating                                      1875 kVA/400V/2725A

Diesel Generator                            2 units
Rating                                      450 kVA/650A

Purchase Electricity from PLN Grid
Power                                       345 kVA/450A




                                                                    3-16
                                                                                       Table 4.5. Sugar Mill Data


No.            Description                Unit         W atoetoelis    Gem polkrep     Lestari       Pasantren Baru   Ngadiredjo     M odjopanggoong     PT.PN10       SindangLaut          Subang            Jatitujuh
  1 Area sugarcane plantation                    Ha         3,395.5         8,937.9       5,258.8           8,504.6        8,600.9            4,102.4       38,800.1             2,383             4,716                  7,274
     - Sm all holder (farm ers)                  Ha         2,992.1         8,778.3       4,874.8           7,420.8        7,799.2            3,738.6       35,603.8                                57.2
     - Own sugarcane                             Ha           403.5           159.6         384.0           1,083.8          801.7              363.7        3,196.3                             4,658.7
   2 Ton sugarcane per Ha                      t/Ha          100.83           96.82         82.25             93.62          86.71              92.16          89.80                 71.2           63.1                   71.4
     - Sm all holder (farm ers)                t/Ha           98.85           96.52         81.77             94.77          87.92              92.39          89.80                               45.02
     - Own sugarcane                           t/Ha          115.57          113.63         88.32             85.73          74.99              89.73          89.76                               63.33
   3 Ton of sugarcane                              t      342,388.1       865,384.8     432,521.0         796,174.3      745,785.7          378,057.7    4,982,452.5           169,669           297,588             519,648
     - Sm all holder (farm ers)                    t      295,755.6       847,246.0     398,606.7         703,258.3      685,672.1          345,419.3    4,610,526.7                               2,575
     - Own sugarcane                               t       46,632.5        18,138.8      33,914.3          92,916.0       60,113.6           32,638.4      371,925.8                             295,012
   4 Yield                                       %             6.74            7.17          6.63              7.44           7.14               7.60           7.03                 7.65           7.64                    7.6
     - Sm all holder (farm ers)                  %             6.55            7.13          6.58              7.33           7.06               7.44           6.95
     - Own sugarcane                             %             7.39            8.99          7.22              8.25           8.13               9.26           8.04
   5 Ton sugar cristal per Ha                  t/Ha            6.80            6.94          5.46              6.96           6.19               7.00           6.31              5.45                 4.82             5.43
   6 Num ber of ton of sugar cristal               t      23,073.50       62,029.00     28,692.70         59,205.70      53,263.30          28,714.70     350,358.22            12,988               22,741           39,467
     - Ex Farm ers                                 t      19,377.73       60,398.78     26,244.90         51,542.20      48,374.27          25,691.56     320,441.58                                  186.1
     - Ex Own sugarcane                            t       3,695.73        1,630.22      2,447.80          7,663.50       4,889.03           3,023.14      29,916.64                                 22,556
     Sugar cristal quotient                        t      23,073.50       62,029.00     28,692.70         59,205.70      53,263.30          28,714.70     350,358.22
     - For farm ers                                t      13,277.92       40,599.01     18,021.39         34,869.61      33,297.55          17,339.65     218,675.46
     - For Sugar Mill                              t       9,795.58       21,469.99     10,671.31         24,336.09      19,965.75          11,375.05     131,682.76
     Sugar cristal quotient
     - For farm ers                             %             68.52           67.15         68.67             67.65         68.83               67.49          68.24
     - For Sugar Mill                           %             31.48           32.85         31.33             32.35         31.17               32.51          31.76
   7 Num ber of SHS                               t       23,027.90       61,840.60     28,682.20         59,041.50     53,269.20           28,616.50     349,534.60           12801.6               22,690           39,214
     - Ex farm er                                 t       19,416.49       60,519.58     26,297.39         51,645.28     48,471.02           25,742.94     321,082.47
     - Ex own sugarcane                           t        3,611.41        1,312.02      2,384.81          7,396.22      4,798.18            2,873.56      28,452.13
     SHS quotient                                 t       23,027.90       61,840.60     28,682.20         59,041.50     53,269.20           28,616.50     349,534.60
     - For farm ers                               t       13,304.48       40,640.13     18,057.43         34,939.35     33,364.15           17,374.33     219,112.81
     - For Sugar Mill                             t        9,723.42       21,200.47     10,624.77         24,102.15     19,905.05           11,242.17     130,421.79
   8 Molasses quotient                            t       15,751.80       35,561.50     20,376.30         44,941.60     35,926.00           18,872.50     240,499.60             7,264               14,210           23,514
     - For farm ers                               t        7,393.89       21,181.15      9,965.17         17,581.46     17,141.80            8,635.48      92,210.53
     - For Sugar Mill                             t        8,357.91       14,380.35     10,411.13         27,360.14     18,784.20           10,237.02     148,289.07
   9 Stop hours % m illing hours                %                6.8            4.36        10.58             10.29         14.34                 5.32          8.26              12.46            17.67               11.08
     a. Stop hours A                             h              44.5             8.0          57.5             41.0            8.8                54.0          53.3              12.43              93.5                11.5
     b. Stop hours B                             h           217.50           160.5         239.3             328.0         484.0               128.0          234.6             229.76            408.5              319.96
  10 Milling Days                              day               172            169           130               165           164                 151            158                101               125                 135
  11 Start of Mill Season                                 5/10/2004       5/14/2004     5/26/2004          5/6/2004     5/10/2004           5/19/2004                         5/14/2004        5/16/2004           5/22/2004
  12 End of Mill Season                                  10/28/2004      10/29/2004     10/2/2004        10/21/2004    10/21/2004          10/16/2004                          9/4/2004        9/17/2004          10/10/2005
  13 Milling Capacity                          TCD            2,250           5,775         3,600             5,250         5,500               2,500                             1,650            3,000               4,000
  14 Bagasse content                             %            35.55           33.07             31            32.86            32                   33                            33.92            36.51               36.69
  15 Fuel utilization
       - Residue                       liter              1,588,241       2,910,166      540,460          2,138,718      2,493,477          1,303,600     13,796,642          1,431,700        2,000,000           1,666,400
       - Moulding/daduk                kg                   253,000         886,910       25,000             85,000        535,090             73,220      3,883,420                  0                0                   0
       - W aste wood                   kg                         0               0            0                  0              0            377,360        530,829                  0                0                   0




                                                                                                                                                                                                       3-17
4.    REVIEW ON THE IMPLEMENTATION OF BAGASSE ELECTRIC POWER
      GENERATION TECHNOLOGY

4.1. Position of industries in Bagasse Electric Power Generation

Sugar industries in Indonesia usually develop electrical power generation utilizing bagasse to
cover its own electric consumption. Up to now, there is no single industry selling its generated
electricity to PLN, even from its excess electricity generated. Only one industry was identified,
i.e. PT Gunung Madu Plantation, having a plan for generating electricity to be sold to PLN.

4.1.1. Bagasse Electric Power Plant Project

Recently, there is only one bagasse project being planned in Sumatera, a 7 MW bagasse power
plant at PT. Gunung Madu Plantation, Lampung. A summary considering this project is
presented in Table 5.1.
                            Table 5.1. 7 MW Bagasse Power Plant4

      Location          Central Lampung
                        Lampung Province, 90 km northern of Bandar Lampung
      Industry/company - PT Gunung Madu Plantation Sugar Industry
      involved          - Tokyo Electric Power Company, Electric Power Company
                        from
                          Tokyo, Japan
      Project Outline   - Bagasse Power Plant at 7 MW capacity, combustion process,
                          planning to sell electricity generated to PLN
                        - Equipment facilities consist of stoker boiler and turbine.
                        - All Bagasse required is provided from PT Gunung Madu
                        Plantation.
                        - Additional equipment for electricity generation are condensing
                          turbine, generator, cooling tower and connection line of 20kV
                        to PLN.
                          Steam is generated from existing boiler in the factory.
                        - Investment 7,1 x 106 US$
                        - The price of electricity has not yet been negotiated with PLN,
                          estimated CO2 emission reduction is about 41,800 t-CO2/year.
      Current condition Under negotiation


The project was postponed since there is still no agreement between both parties regarding its
business scheme.

4.1.2. Independent Power Producer

Back in the 1990 when the Indonesian economic grew very well, there were totally 27
Independent Power Producers closing a long term power purchase agreement (PPA) contract.
Normally PLN never publish electricity price approved, yet the price was published at that time


4
 “The Project of the Repowering Bagasse Power Plant at the Sugar Factory in Sumatera, Indonesia”, Presentation
Material.


                                                                                                          4-1
at 7 cent US$/kWh. When crisis hit Indonesia in 1997, the PPA was terminated by PLN. After
the involvement of the Indonesian government for rounding this, renegotiations were carried out
between both parties. Currently, there are 9 IPP projects listed.

The highest electricity selling price according to PLN is the electricity from Paiton Steam Power
Plant which is purchased at 4.9 cent US$/kWh.

4.1.3. Renewable Energy Small Scale Power Plant


Up to now, no biomass based power plants that sells the generated electricity to PLN. The
development planning of biomass power plants were postponed because no agreement was
met upon the selling price and the purchase price of PLN. This condition is not only valid to
biomass power plant but also to other renewable power plants.

Distributed small scale power generation using renewable energy sources is as one of
government policies to encourage utilization of renewable energy. Through a “PSK Tersebar”
regulation, the government has obliged PLN to purchase generated electricity using renewable
energy at a capacity up to 1 MW and owned by private, cooperative, and small-medium
enterprise. The purchase price is determined base on the regional generating cost of PLN,
which is known as HPP (Harga Pokok Produksi). If the electricity is sold through medium
voltage grid (20kV), the purchase price will be 0.8 x HPP. At low voltage (380V) the purchase
price will be 0.6 x HPP.

Based on this policy, in the area having low electricity demand and rely on distributed diesel
power generator would relatively have a high HPP. Based on HPP analysis the highest HPP will
be in the region like East Nusatenggara and West Papua with the HPP around Rp 2,500/kWh
(around 25 US$-cent/kWh). Generally, the HPP is higher than the IPP price discussed earlier
and this is more attractive for the investors.

The Ministerial Decree on “PSK Tersebar” was aimed to accelerate the development of small
scales electric power plant to supply electricity in remote areas. In order to promote private,
cooperative and small-medium enterprise to invest in small scale electricity generation,
therefore, the HPP must be attractive. For Java and Sumatera where many large power plants
are built, the HPP is relatively low so that the price from a small scale power plant could not
compete with that of a larger power plant. This has made the development of a small scale
power plant unattractive. Moreover, electricity demand in Java and Sumatera is relatively high
that an upper limit of 1 MW as regulated in the Ministerial Decree relatively small. Therefore, a
new regulation for the development over 1 MW is now being prepared by the Department of
Energy and Mineral Resources.

The decree is considered as a relatively new regulation. Up till now there are only four projects
registered under the Ministerial Decree regarding the distributed power project (isolated power
project).
        • Micro-hydro Plant Seloliman, East Java, 30 kW
        • Micro-hydro Plant Dompyong, East Java, 30 kW
        • Micro-hydro Plant Subang-1, West Java, 120 kW
        • Micro-hydro Plant Subang-2, West Java, 30 kW




                                                                                              4-2
The selling price of micro-hydro power plant at Seloliman is around Rp 443 per-kWh 5
(approximately 4.4 US$-cent/kWh), close to the price of steam power plant Paiton. The reason
for this is that the Seloliman hydropower was built with mixed funding from the grant of German
Embassy, GEF fund and revolving fund from an Indonesian Energy Cooperative KOPENINDO
(non government organization), so that income from sold electricity was not included in the
asset depreciation value.

4.2. Selection of an Appropriate Power Generation Technology

In addition to utilizing direct combustion, Bagasse electric power plant could also being run by
gasification or liquefaction process. However, viewed from economic side a direct combustion
process might be the best choice.

4.2.1. Bagasse Combustion Technology

Combustion technology is mostly used for generating electricity or a combination of supplying
electricity and heat (cogeneration system) in a factory. Efficiency of a boiler utilizing bagasse as
a fuel would range 10 - 20%. High efficiency could be reached if it is operated at higher
pressure and temperature. In case of a cogeneration system its efficiency could reach more
than 50% so that it is considered better than a conventional system.

Recent technology developed and currently applied is a fluidization combustion system, such as
fluidized bed boiler. This system is applied in some factories as described in the following
paragraph. By applying this system the efficiency of electric power plant may reach over 40%.
Now, a total energy efficiency of 70% has been reached after operation of such system.
A direct bagasse combustion technology is similar to coal combustion technology which utilizes
fixed bed boiler, kiln boiler, fluidized bed boiler or spouted bed boiler. The combustion system of
stoker boiler and fixed bed system is the same, by blowing air into the boiler. In term of the cost,
the fixed bed system is cheaper than the stoker one, so that it might be a good choice for a
small scale power generation. A fixed bed boiler in a large power generation system is not
applicable due to the difficulty to arrange fuel to obtain design combustion, leading to lower
efficiency. There, a medium to a large power generation would apply stoker boiler system.
The stoker boiler is usually applied to a system fuelled by biomass sources such as city refuse,
wood waste, bagasse etc. However, it is not appropriate for combusting of biomass with high
water content.
Other type of boiler is a kiln boiler. The combustion in the kiln could be performed in such a time
allowing various materials in shapes and size to fully burn. The use of this type boiler is limited
to the area required for constructing of such kiln. Only few application of this kiln has been
identified.
A fluidized bed boiler is very suitable to be applied for combusting materials which are unable to
be burned in a stoker boiler, such as material with high moisture content like EFB (Empty Fruit
Bunch) or biomass containing watery particle. Despite of its capability to burn wet materials,
fluidization of materials in this type of boiler would need a high power. Moreover, a well
distributed combustion would be achieved only if materials have relatively the same size. In this
case a crusher would be required and this would add to its consumption of parasitic load though
it would not as high as for a spouted bed boiler.
A spouted bed furnace (boiler) is a pulverized coal combustion boiler, generally used for coal
power plant. This boiler is very appropriate for combusting biomass, particularly crushable

5
    “Pembangkit Listrik Tenaga Mini Hidro Seloliman”, Laporan Akhir, MHPP-GTZ, Jakarta 2004


                                                                                                 4-3
biomass in equal size and form. This type of boiler has a large combustion room, able to burn in
a very short time and a high temperature. Furthermore, its large combustion room has made it
possible for combusting a huge amount material. However, this kind of boiler is not suitable for a
small-scale biomass plant requiring small combustion room. Utilizing this type of boiler would
make a small-scale biomass plant economically not feasible.

4.2.2. Application of Biomass Power Plant in Foreign Country

4.2.2.1 Japan

In Japan most biomass power plants are developed as captive power, consisting of boiler
fuelled by black liquor (pulp residue). Other biomass power plant is generated from incenerating
of city refuse. There is a tendency to utilize more and more biogas resulted fermentation of food
wastes, animal wastes etc for turbine gas or diesel gas.

However, only few direct incenerations are implemented unlike those in many Indonesian sugar
factories. Table 5.2 shows steam boilers conditions mostly applied. From the table it is shown
that the steams are not always in high conditions meaning that there is no high technology
implemented. This also means that there is no significant difference to commond biomass
boilers utilized in Indonesia (yet some boilers for wood combustion have a high steam condition).
Such boiler conditions have been applied since increasing specification of steam boiler would
lead to the cost of machines to rise which is not always good viewed from economic perspective.
From past experiences and some studies reported almost all biomass boilers in Indonesia were
not equipped with economizer. Therefore, at the same steam conditions, boilers equipped with
economizer as utilized in Japan have higher thermal efficiency. This is one of superior
technology upon utilizing biomass in Japan.

The following paragraph will discuss about the economic aspect of biomass power plant
facilities in Japan. Data are collected from IEEJ (Institute Energi & Economics Japan). Tabel 5.3
shows that HPP for a wood biomass powerplant ranges from 6,2 to 18,2 US-cent/kWh while that
for a bagasse biomass power plant lies between 23,0 to 56,1 US-cents/kWh. This has showed a
large difference value between the two types power plant.

Bagasse boilers have a short operation time (in appropriate with sugar production time) so that
efficiency of its machines is very low. This will finally affect basic production price (studies in
Indonesia has been showing a relevant result). Important factor to be evaluated is not the
Electricity Unit Price but the Energy Unit Price and it should be compared to basic production
price of that from coal. For this study, bagasse electric power plant will be analyzed from its
current capability to produce electricity. The excess of electricity produced could be sold or
considered as a reduction to electricity cost. And if we ignore to replace old machines, economic
evaluation would have to be considered from the electricity cost reduction. It is not always that
simple viewed from an economic perspective. If new equipment for a steam process could be
considered feasible it would be possible to implement expected changes.




                                                                                                4-4
           Table 5.2. Example of steam boiler condition of a biomass power plant in Japan

                                                Nu                        Steam                                               Purch
N                                                                 Flow                Steam                     Out
        Buyer                  Location         mb      Type              pressu                    Fuel                      asing
o                                                                 rate                temp.                     put
                                                er                        re                                                  year
                                                                                      0
                                                                  t/h     MPa          C                        kW
        Nippon Noboban,                                 Stok
1                       Ibaraki                 1                 22      2           220           Moulding    990           1997
        Co.                                             er
                                                        Stok
2       Chiken, Co             Okayama          1                 20      2,3         270           Moulding    1950          1997
                                                        er
        Nippon Syokuhin,                                Stok                                        Jagung,
3                         Okayama               1                 42,8    7,3         460                       5700          1993
        Co.                                             er                                          Oil
                          Kagoshi                       Stok                                        Bagasse/
4       Nansei Sugar Mill                       1                 30      2,5         350                       1500          1990
                          ma                            er                                          Oil
                          Kagoshi                       Stok
5       Nanse Sugar Mill                        1                 38      2,5                       Moulding                  1988
                          ma                            er
        Juken   Sangyou,                                Stok
6                         Aichi                 1                 27      6,8         405           Bagasse                   1988
        Co.                                             er
                                                        Stok
7       Chubu Seishi. Co.      Okinawa          1                 65      2,1         280           Moulding                  1987
                                                        er
                                                                                                    Moulding/
        Utsunomiya                                      Stok
8                              Ibaragi          1                 33,3    6,8         425           sludge      3000          1986
        Seishi, Co.                                     er
                                                                                                    paper
                                                        Stok                                        Bagasse/
9       Tokai Pulp, Co.        Okayama          1                 20      4,7         400                                     1985
                                                        er                                          Oil
        Miyako Sugar Mill,                              Stok
10                         Okinawa              1                 15      24          350           Moulding    600           1985
        Co.                                             er
                                                        Stok
11      Tyuou Seishi, Co.      Shizuoka         1                 9       3,3         360           Moulding    570           1983
                                                        er
                                                        Stok
12      Tokiwa, Co.            Aichi            1                 27,4    67          425           Moulding    3150          1983
                                                        er
1       Seiwa         Sugar Kagoshi                     Stok                                        Bagasse
                                                1                 30      2,5         325                       1600          1979
3       Mill, Co.           ma                          er                                          /Oil
     Source: Takuma Co.

                  Table 5.3. Example of Economic Facility Biomass Power Plant in Japan

                                       Exampl        Exampl      Exampl        Exampl       Exampl      Example    Exampl        Exampl
    No     Item         Unit
                                       e1            e2          e3            e4           e5          6          e7            e8
                                       Biomas        Biomas      Biomas        Biomas       bagass      Bagasse    bagass        bagasse
    1      Type
                                       s wood        s wood      s wood        s wood       e                      e
           Start                       Apr.          Feb.        Nov.          Dec.         Dc.         Dec. 1998 Dec.           Jan
    2
           operation                   1988          1990        1993          1993         1998                   1989          1994
           Energy                      Direct        Direct      Direct        Direct       Direct      Direct     Direct        Direct
    3      recovery                    burning       burning     burning       burning      burning     burning in burning       burning
           type                        in boiler     in boiler   in boiler     in boiler    in boiler   boiler     in boiler     in boiler
           Energy                      Cogene        Cogene      Cogene        Cogene       Cogene      Cogenera Cogene          Cogener
    4      utiliation                  ration        ration      ration        ration       ration      tion       ration        ation
           type
    5      Capacity     KW             4500          1170        3150          550          1500        1500          1400       2300
           Heat         Kcal/kg        47            3530        15734                      24          24            17670      11400
    6
           capacity
    7      Main fuel                   Mouldi       mouldi       mouldi      mouldi        bagass    Bagasse      Bagasse,      Bagasse,


                                                                                                                                4-5
                                  n,         ng         ng          ng         e                          BBM         BBM
                                  waste
                                  wood
       Calorie       Mcal/h       3800       2400       2990        3500       1870        1870           1850        1920
8      value of
       biomass
9      CF            %            58         66,5       72,6        29         25,9        19,3           23,3        12,4
       Initial
       cost
                                  1.160.9    500.00     1.000.0     100.00     612.03      701.850        1.5000.00   183.000
10     Total cost    ¥103/th
                                  85         0          00          0          1
       Power                      700.00     200.00     700.00      100.00     612.03      701.850        1.100.000   183.000
11               ¥103/th
       plant                      0          0          0           0          1
       Running
       cost
       Operation                  142.26     20.000     85.608      3.069      73.660      73.073         15.000      39.089
12               ¥103/th
       cost                       0
                                  9.800                 225.78      2.473      1.294       1.731          2.000       4.748
13     Fuel cost     ¥103/th
                                                        9
       Energy        ¥/Mcal       10,84      6,41       2,63        7,49       3,88        4,21           1,97        28,06
14
       unit price
       Electricity   ¥/kWh        9,29       6,49       19,21       9,97       41,10       58,86          51,59       24,17
15
       unit price
Development cost for a lifetime of 15 years, bank-interest 14% (expenditure rate of that year 8,99%)
Unit energy price: combination price of energy (Mcal) of heat and electricity (1kWh=0.86 Mcal)
Unit electricity price: all cost is for electricity generation. There is no heat conversion calculation
Fuel cost, consists of additional cost of fossil fuel and biomass fuel
Biomass fuel purchased excludes waste treatment cost.
CF, running cost dan unit electricity price were at the condition year 1998
Source: IEEJ

 Systems used in Table 5.2 and Table 5.3 consisted of stoker boiler and steam turbine. There is
 no fluidized bed boiler system found used for a refuse incineration given in the tables. The
 reasons for not using this type of boiler is that the scale of biomass power plant in Japan is
 small resulting a higher equipment cost facilities rather than a profit obtained from improving
 efficiency.

 4.2.2.2 Example of Biomass Power Plant in Europa

 Biomass utilization in the developing countries like in Europe has been developed in large
 number of plants reaching a large-scale production. Table 5.4 shows outline system of
 Pietarsaari power plant in Finland, which is the biggest in the world of biomass power plant with
 direct combustion (mixed with 10% coal).

 Pietarsaari Power Plant generates electricity of 265 MW and produces steam 700 tonnes/h.
 Additional cost for extra equipment could be covered from the profit obtained from improvement
 of efficiency. This condition could not be achieved by a small scale factory having a little waste,
 such as in sugar factory. Factory which could produce large waste in Indonesia is a plywood
 factory. The largest plywood factory in this country has a processing capacity of 480.000 tons
 raw material/year. The total wood processed by Oy Alholments Kraft owner of Pietsaari biomass
 power plant is estimated to reach 1,400,000 tons/year from which it is estimated that maximum
 45% of the total energy is supplied for boiler.



                                                                                                                      4-6
                   Table 5.4. Outline System of Pietarsaari Power Plant

          Item                     Specification
          Location                 Helsinki, Finlandia
          Owner                    Oy Alholments Kraft paper factory)
          Manufacturer             Kverner from Finlandia
          Type of boiler           Circulating Fluidized Bed
          Fuel                     Biomass from wood (wood chip, bulk) peat and
                                   coal ash (except black liquor and pulp
          Combustion ratio         Biomass wood 45%, peat 45%, coal 10%
          Total steam              700 t/h
          production
          Condition of steam       16.5 MPa, 545o C
          boiler
          Output                   265 MW
          Heat Supply              Supply of heat to factory 100 MWth
                                   Supply of heat to surrounding 60 MWth
          Power plant Efficiency   41% LHV
          Total efficiency         68%
          Start operation          November 2001


4.2.3. Applicable Power Plant Technology for Indonesia

The capacity of boiler and turbines of surveyed sugar factories in this study is presented in
Table 5.7 and Table 5.8. The capacities are larger than that of the Japan power plant but
smaller compared to Pietarsaari power plant. The following are review of technology applicable
for bagasse power plant in Indonesia.
•     As boiler will only be used for producing steam and the excess of of electricity generated
      from its system is to be sold, a stoker boiler will meet requirement for this purpose. A
      fluidized bed boiler would not be required. From economic point of view, increasing
      temperature and pressure will improve efficiency.
•     At the moment there is no bagasse power plant, which usually installs a steam turbine,
      connecting to PLN grid. An implementation of a condensing turbine is now under
      consideration to increase efficiency. If an implementation of such turbine is unapplicable
      then a back pressure turbine may be another option.

For the proposal of utilization of bagasse in sugar factory, a survey was conducted to 10 sugar
factories in Java (see Chapter 4).

4.3. Case Study of Applicable Electricity Generation Technology

4.3.1. Study on Sugar Factory

Study was conducted at the factories suitable for generating electricity utilizing bagasse. The
factories selected under this study falls to 6 factories under the management of PTPN 10
namely, PG Watoetoelis, PG Gempolkrep, PG Lestari, PG Pesantren Baru, PG Ngadirejo, PG
Mojopanggung and 4 factories under the management of PT Rajawali II namely, PG Tersana



                                                                                             4-7
Baru, PG Sindang Laut, PG Jatitujuh dan PG Subang. The reasons for selecting these factories
are :
       • The factories selected comprise of private and government factories
       • Though among the 6 factories are under PTPN 10, there are 2 factories located
          close to each other so that it would be beneficial for collecting bagasse from these
          two factories
       • PG Gempolkrep is the largest sugar factory among 11 sugar factories under PTPN
          10 management.
       • PG Lestari has an average size of most Indonesian sugar factory

Based on the studies from 10 sugar factories, there was no excess baggasse identified except
in Jatitujuh sugar factory. There is no opportunity to buy bagasse from other sugar factories
except frm sorounding Jatitujuh area. And there is no other biomass product to substitute for
lack of bagasse in some factories. In sugar factories, lack of bagasse can actually be
substituted by IDO, wood moulding, and sugar leaves. If a factory utilizes bagasse only, it is
recommended to build a new facility in larger scale. It would be more profitable. Base on the
analysis two sugar industries PG Gempolkrep and PG Jatitujuh are chosen as pilot projects
both are representing state owned and private enterprise, respectively.

With respect to a disemination effect, the studies should represent medium scale sugar factories,
however most of them are not qualified in term of economical aspect. Therefore as pilot project,
larger scale factories such as Gempolkrep and Jatitujuh have been chosen.

4.3.1.1 Profile of PG Gempolkrep

A. Outline

 Factory name      :   PT Perkebunan Nusantara X (Persero) Pabrik Gula Gempolkrep
 Contact Person    :   Mr. Eka Budhi Djuniato
 Address           :   PG Gempolkrep, Mojokerto 61302, Jawa Timur, Indonesia
 Phone             :   +62-321-36211; 362114
 FAX               :   +62-321-362414


 B. History

 1889    This sugar factory was established on 5 January 1889, under the name
        “SUIKER FABRIEK GEMPOLKREP”, with installed capacity at that time, 1,500
        TCD.
 1943    After Japan intervention to Gempolkrep and Mojokerto sugar factory, their
        names had been changed to “NITTI KABUSHIKI KHAISA”, with its head office in
        Tokyo.
 1945    All factories under Japan intervention were overtaken by the Indonesian
        Government on 17 August 1945.
 1947    In 1947, the Dutch entered to Mojokerto and did an intervention to Gempolkrep
        sugar factory.
 1958   Based on Law no. 8 year 1958 regarding the establishment of nasionalization of
        the Dutch companies, Gempolkrep was returned to the Government of
        Indonesia, under military management
 1973   On December 31st 1973, PT PERKEBUNAN XXI (Persero) was established
        based on an Agriculture Department decree and Gempolkrep sugar factory had

                                                                                             4-8
        becoming part of PTPN XXI.
 1975    Installed capacity of Gempolkrep sugar factory has been gradually increased, in
        the first stage it was increased from 1500 TCD to 3600 TCD.
 1986   In the second stage it was increased to 4000 TCD and in the third stage in 1988
        to 5000 TCD.
 1994   According to the Ministerial Decree of Ministry of Financial No.168/1994 a group
        of PTP Jawa Tengah had been established consisting of PTP XV-XVI, PTP
        XVIII, PTP XIX, PTP XXI-XXII dan PTP XXVII
 1996   According to PP No.15/1996 PT Perkebunan Nusantara X (Persero) had been
        formed comprising of PTP XIX, PTP XXI-XII and PTP XXVII


C. Current Condition

According to the Government Regulation No.15, dated 11 March 1996, PT. PERKEBUNAN XXI
(Persero) and PT. PERKEBUNAN XXVII (Persero) was merged into PT. PERKEBUNAN X.
Gempolkrep sugar factory located in Gempolkrep village, Gedeg Subdistrict, Mojokerto
Regency has been a strategic business part of PTPN 10. In 2003 the total employees of the
factory was reported as in Table 5.5.

                 Table 5.5. Total Employees of Gempolkrep Sugar Factory

                                                     Position
              Department
                                   Fixed employees          Seasonal worker
              Finance                     117                     8
              Plantation                  207                    318
              Equipment                   281                    216
              Reparation                   12                    214
              Total                       617                    756

In 2001, Gempolkrep obtained ISO 9000 certificate form an International Institution in Geneva,
Swiss. Gempolkrep is the only one factory of PTPN 10 which is ISO certified.

About half (50%) of cane plantation supplying the cane to Gempolkrep sugar factory belongs to
farmers, the rest is owned by Gempolkrep. The capacity of Gempolkrep sugar factory is 5,200
TCD and it is run in a semi-automatic process. The target in the long term is a sugar factory with
Fully Automatic Process. All equipment was imported; boiler from Japan and China, the mill was
imported from Australia and Texas-USA.

Gempolkrep sugar factory is not only processing sugar from cane, but also performing
cristalization and purification of sugar. The process is by defication-sulfitation. The main
product is white sugar.




                                                                                               4-9
                                               In a sugar purification process, liquid and
                                               solid wastes will be produced. The liquid
                                               waste is around 900 m3/day. A lagoon
                                               system (yard lagoon) was implemented
                                               since 1985 to process the liquid waste. It is
                                               equipped with deoiling pond and aerobic
                                               pond.




    Figure 5.1. Yard lagoon system


                                               Solid waste (except bagasse) consists of
                                               ash, charcoal, metal, etc. Boiler will
                                               produce exhaust gas containing ash
                                               particles, etc). in 2003 a wet scrubber type
                                               of dust collector was installed to avoid
                                               these particles to contaminate the
                                               environment.




        Figure 5.2. Wet Scrubber



Eventhough the factory have received ISO9001, the total steam from boiler still unrecorded.
Electricity production is recorded every hour but the record is not filling properly therefore it is
imposible to get a figure of a total energy consumption.

4.3.1.2 Profile of PG Jatitujuh

   A. Outline

 Factory name       :   PT Pabrik Gula Rajawali II Unit PG Jatitujuh
 Contact Person     :   Ir Djoentoro
 Address            :   PO Box No 7 Jatitujuh, Cirebon, Indonesia
 Phone              :   +62-233-881350
 FAX                :   +62-233-881410




                                                                                                4-10
     B. History

In conjunction with a program of self sufficient of sugar, the Indonesian government and World
Bank had formed an Indonesian Sugar Study (ISS) in 1971 aiming at finding non irrigating lands
suitable for cane plantation. The survey had been conducted from 1972 -1975. The survey
identified that area BKPH Jatitujuh, Kerticala, Cibenda and Katimanunggal were suitable
location for cane plantation. A ministerial decree dated on 9 August 1976 was issued to release
those areas for being developed by PNP XIV (Jatitujuh Sugar Project). In the year 1977-1978
the factory was handled by French contractor Fives Cail Babcock (FCB and since 1977 the
project was managed by PNP XIV). Trial for milling carried out on 10 October 1978 and it has
started its commercial milling since June 1980. In 1980 the management had been taken over
by PT. Rajawali Nusantara in order to improve its production performance and management.

     C. Current Condition

Based on the Ministerial Decree of Agriculture No 481/KPTS/UM/8/1976 dated 8 August 1976
the total area allocated for cane plantation was 12,022.5 Ha.

General condition of Jatitujuh Sugar factory


 1      Factory       -   Build                         Year          1977-1978
                      -   Contractor                                  FCB-French
                      -   Operated                      Year          1980
                      -   Installed crushing capacity   TCD           4000
                      -   Processing                                  Sulfitation
                      -   Processing day                              SHS I A

 2      Areal        - Area                             Ha            13,114.4
                     - Distance from city               Km            77
                     - Distance from regency            Km            32

 3      Facility     -    Main road                     Km            32
                     -    Secondary road                Km            63
                     -    Tertier road                  Km            123
                     -    Water reservoir               Ha            579

 4      Supporting   -    Housing Perumahan             Unit          182
        facilities   -    Mosque                        Unit          2
                     -    Hall                          Unit          1
                     -    Sport area                    Unit          5
                     -    Policlinic                    Unit          1
                     -    Mess                          Unit          1




                                                                                           4-11
                Table 5.6. Number of Employees in Jatitujuh Sugar Factory

       Status                         Majalengka      Indramayu              Total
                                       Regency         Regency
       Fixed employees                   296             325                  621
       Seasonal worker                   265             290                  555
       Contract worker
          Plantation                     3,420           2,750               6,170
          Cutting                        1,750           2,450               4,200
          Factory                         172             215                 387
       Cane transport driver                                                  450
       Sugar transport driver                                                2,107
       Mollasses transport driver                                            2,235
       Fossil fuel transport driver                                            92
       Bagasse transport driver                                              4,710
       Partner/Contractor                                                     282
       Animal feed transport                                                  120
       Trader                                                                  35
       Total                                                                21,964


4.3.2. Review Proposal Pilot Project

4.3.2.1 Common Need

As one of pilot project objectives is to apply energy technology substituting fossil fuel and
performing an energy conservation measures at sugar factory in Indonesia. The success of
these measures is expected to be disseminated for all sugar factory in Indonesia. In order that
the pilot project achieves its target, the following requirements are to be met:

       a. Proven technology
          Utilizing combustion system, cogeneration system, proven combustion system and
          similar proven system operated in other country
       b. High Efficiency
          For electricity generation proposal, a boiler with high combustion efficiency is
          adopted to give a high efficiency co-generation system.
       c. Local content analysis, maintenance and operation
          For a user friemdly operation and maintenance, current manufacture technology,
          operation and maintenance (O&M) in Indonesia should be considered
       d. Environment friendly
          Apart from consistenly keeping the regulations concerning air pollution, water quality,
          odour spreading, gas warming and work regulation, it would also need to pay
          attention to local- and world environment.
       e. A long term operation stability
          It is stable system in the long term, giving no reduction in operational ratio and large
          thermal efficiency ratio.




                                                                                              4-12
4.3.2.2 Basic Planning

Sugar factories generate bagasse as a biomass waste and mollases as a by product of sugar
cane processing. Most bagasse is being utilized as fuel for boiler for producing steam and for
producing electricity supplying half of electricity consumption. All molasses is sold as raw
material for producing seasoning and alcohol.

Among its 6 sugar factories owned by PTPN 10 under this study, PG Gempolkrep is selected for
pilot project. While those sugar factories operated under PT Rajawali II PG Jatitujuh is also
selected as pilot option for comparison to former pilot project.

Pilot Project Proposal of Gempolkrep and Jatitujuh Sugar Factories :

The project is to apply cogeneration system that consists of back pressure turbine and high
efficiency boiler utilizing bagasse as fuel generated from the sugar factory. The system pressure
and temperature of steam are 7.16 MPa and 5150C, respectively.

By installing a new turbine and a new boiler, one out of total two existing boiler and turbine units
will not be operated for electricity generation. The other one of existing boiler supplies steam for
mechanical turbine and thermal energy needs in the sugar cane processing. The entire
electricity demand in the factory will be supplied from the new turbine generator. Excess of
electricity will be sold to PLN.

4.3.2.3 Pre design of Pilot Project

Table 5.7. and table 5.8. show the proportion of current condition and design conditions of pilot
project, fuel consumption and energy consumption, etc.

4.3.2.4 Specification Proposal of Pilot Project

Sugar Factory

1.   Boiler Specification
     Boiler type                                              natural circulation
     Design pressure                                         7.8 MPa
     SH outlet steam pressure                                7.16 MPa
     SH outlet steam temperature                             515±5 0 C
     Steam flow                                              65,100 kg/h
     Feeding water temperature (inlet economizer)            142 0 C
     Air temperature                                         30 0 C
     Air blowing type                                        balanced draft
     Heat efficiency design                                  89 % (LHV base)
     Fuel Ratio of Consumption                               28,500 kg/h

     Main boiler Components and furnace
     - Burner equipment (Feeding fuel equipment, stoker)
     - Superheater
     - Economizer
     - Air preheater


                                                                                                4-13
      Boiler casing, frame and acessories
      - Ladder
      - Fireproof Material and thermal insulating material
      - Chemical dosing equipment, blow device and flash tank
      - Ventilation equipments (FDF, IDF, air duct, gas duct, stack)
      - Deaerator and Trestle
      - Pumps (BFP, deaerator pump, feeding-water treatment pump, etc.)
      - Ash Discharge Equipment
      - Water Purifier equipment
      - Feeding water tank, pipes and valves
                  -    Measurement-and control equipment
                  -
              Table 5.7. Pre Design of Pilot Project Gempolkrep Sugar Factory

                           Current Condition                  Pilot project              Remarks
Total utilization                                                                   1 Unit turbine and
of fuel               259,616ton/year/2/4,056h/year =    28.5 t/h                   turbine generator
 Bagassse             32.0 ton/h                                                    would be shut down
 Fossil fuel                                                                        by implementation of
 Moulding etc         2,910/2=1,455 kLtr/year                                       pilot project.
                      887/2=443.5 ton/year                                          Current fuel
                                                                                    consumption indicates
                                                                                    that installed boiler
                                                                                    fuel consumption is
                                                                                    half of total fuel
                                                                                    consumption.
Total energy used
 Steam process        60 t/h×4,056=243,400 ton/year      60 t/h×4,056=243,400       2,723.8MJ/steam1ton;
                      (662,973,000 MJ/year)              ton/year                   0.2Mpa(G); at 133oC
 Energy fro           3,470 ×4,056                       (662,973,000 MJ/ year)
factory               =14,074,000 kWh/year
                      =50,668,000 MJ/year                (3,470+700)×4,056
                                                         =16,914,000 kWh/year
 Sold electricity                                        =60,889,000 MJ/year

                                                         (9,100-3,470-
                                                         700)×4,056
                                                         =19,996,000 kWh/year
                                                         =71,986,000 MJ/year
Design
Condition             Gempolkrep Sugar Factory
Factory               Total cane milled: 865,385 ton/year (year 2004 realisation)
 Waste                Bagasse= total cane milled×30%=259,616 ton/year
production            (assumption)
                      Bagasse= 7.33 MJ/kg (1,750 kcal/kg)
 LHV                  factory operation hour= 169d/y×24hr/d=4,056 hr/y (year
  Operation hour      2004 realisation)
  Total electricity   electricity production= 9,100 kW
production            current condition= 3,470kW (year 2004 realisation)
  Electricity for     addition from pilot project= 700 kW
factory




                                                                                                      4-14
                    Table 5.8. Pre Design of Pilot Project Jatitujuh Sugar Factory

                        Current Condition                Pilot project            Remarks
Total utilization of                                                              1 Unit turbine and
fuel                    191,698 ton/year/2/3,408h/year   28.5 t/day               turbine generator
 Bagassse               = 28.1 ton/day                                            would be shut down
 Fossil fuel                                                                      by implementation of
 Moulding etc           1666,4/2=833 kLtr/year                                    pilot project.
                                                                                  Current fuel
                                                                                  consumption
                                                                                  indicates that boiler
                                                                                  fuel consumption is
                                                                                  half of total fuel
                                                                                  consumption.
Total energy used
 Steam process          60 t/d×3,408=204,480 ton/year    60 t/day×3,408           2,723.8
                        (556,962,000 MJ/year)            =204,480 ton/year        MJ/steam1ton;
 Energy fro factory     3,500×3408=11,928,000            (556,962,000 MJ/ year)   0.2MPa(G) at 133 oC
                        kWh/year (on season)
                        = 42,940,800 MJ/year             (3,500+700)×3,408
 Sold electricity                                        =14,313,600 kWh/year
                        4300 kWh/d x 223d                =51,528,960 MJ/year
                        = 958,900 kWh/year
                        = 3,452,040 MJ/year (off         (9,100-3,500-
                        season)                          700)×3,408
                                                         =16,699,200 kWh/year
                                                         =60,117,120 MJ/year
Design Condition
 Factory                Jatitujuh Sugar Factory
 Waste Production       Total cane milled = 519,648 ton/year (year 2004
                        realisation)
 LHV                    Bagasse= total cane milled × 36.89%=191,698 ton/year
Operation hour          (realisation)
Total electricity       Bagasse= 7.33 MJ/kg (1,750 kcal/kg)
production              factory operation hour= 142 d/y × 24 hr/d = 3,408 hr/y
Electricity for         (year 2004 realisation)
factory                 electricity production: 9,100 kW
                        current condition= 3,500 kW (year 2004 realisation)
                        addition from pilot project= 700 kW




2.    Exhaust gas collection dust equipment
      - Electric collection dust machine    type                         dry type
                                            Capacity                     131.000 m3N/h
      - Amount of corbicula dust (dust collection machine)               0,235 g/m3N




                                                                                                     4-15
3.   Steam turbine generator and auxiliaries
     Steam Turbine
     - type                               horizontal, multistage backpressure turbine
     - output - on the dynamo edge                          9.100 kW
     - steam condition                    inlet             6.,86 MPa 510 0C
                                          outlet            0,29 MPa
     - steam consumption ratio                              7,15 kg/kW

     Generator
     - type                  Horizontal axis rotation field magnetic cylindricality,
                             Three-phase alternating current alternator
     -   output                                     10,706 kVA
     -   pole number                                4P
     -   frequency                                  50 HZ
     -   voltage                                    6 kV
     -   power ratio                                0,85

     Component
     - Steam turbine and reducer
     - Generator and exciter, air cooling
     - Oil lubricant equipment
     - Local operation box
     - electricity generator control panel, Synchronous board
     - Piping, insulation temperature


4.   Steam transformer
     - Type                                     lateral type
     - Heating side inlet steam                 64,67 t/h    0,28 MPa       210 0 C
     - outlet condensing water                  142 0 C
     - Heated side inlet feeding water          80 0 C
     - outlet steam                             60,0 t/h     0,2 MPa        133 0 C

5.   Distribution Equipment
     - PLN grid       voltage 20 kV frequency 50 HZ 3 phase
     - Control panel (circuit breaker, relays, meters, transformation devices, etc)
     - transformator equipment: 6 kV -20 kV, 6kV - 380V.
     - local switchboard

4.3.2.5 Heat Balance and System Diagram

The proposal for heat balance refers to a system diagram and heat balance presented in
Annexes.




                                                                                        4-16
5.      OPTIMIZATION OF BAGASSE UTILIZATION IN SUGAR FACTORIES

Based on the evaluation of data and information gathered from the visited sugar factories has
lead to a site selection for a pilot project. This chapter presents the results of data analysis and
evaluation for the pilot project.

5.1. Biomass Power Plant Equipment

This chapter presents the study on global pre-design and selection of technology used for
electricity generation that will possibly fit to be applied to Indonesian sugar factories. Table 6.1
presents an analysis result of PG Gempolkrep with 2 distinct conditions.

As already described in Chapter 5, four candidates for the biomass power station pilot project
are proposed:

         1.   Power station in PG Gempolkrep (proposal 1)
         2.   Power station in PG Gempolkrep (proposal 2)
         3.   Power station in PG Jatitujuh (proposal 1)
         4.   Power station in PG Jatitujuh (proposal 2)

The proposed system will use existing system (current installed system), consisting of boiler-
and backpressure turbine systems. Steam is supplied from backpressure turbines. Condensate
water from condensers and boiler feed pump is pumped to the existing boiler. The temperature
and pressure of the existing boiler are approximately 2 MPa and 325 oC respectively. Rising of
temperature and inlet turbine pressure are out of questions. Rising of inlet turbine pressure
would cause steam to saturate

Both proposal 1 and 2 will be applied for PG Jatitujuh and PG Gempolkrep. Table 6.2 shows the
difference of the systems used in Proposal 1 and Proposal 2 for both sugar factories.

In these two cases the utilized bagasse in the proposed system is only half of the generated
bagasse. The rest will be utilized in the existing boiler for steam production required for driving
the mechanical turbines and thermal needs in sugar cane processing. If the required steam (not
as designed value) for driving the turbines of the processing equipments could be determined
then the analysis of the amount of excess bagasse utilized could be performed. However, such
analysis is not yet available. Therefore, it is assumed that only half of excess bagasse is utilized
in the analysis. The Proposal 1 adopts higher steam temperature and pressure relative to
Proposal 2 (Table 6.1). The proposed system in Proposal 1 and 2 will generate electricity about
9,100 kW and 6,200 kW, respectively.

                           Table 6.1. Bagasse Power Plant Facilities

                                         Sugar factory                   Sugar factory
 Item
                                  Proposal 1 Proposal 2           Proposal 1 Proposal 2
 Name of factory                           Gempolkrep                      Jatitujuh
 Biomass used                     Bagasse        Bagasse           Bagasse       Bagasse
 Total biomass used               28.5 t/h      31.0 t/h          28.5 t/h        31.0 t/h
 Penggunaan               biomass 259,616 t/y   259,616 t/y       191,698 t/y     191,698 t/y
 pertahun
 Total production of        steam 65.1 t/h         66.9 t/h       65.1 t/h        66.9 t/h


                                                                                                 5-1
 boiler
 Output GT                             9,100 kW       6,200 kW      9,100 kW      6,200 kW
 Possibility        (expected     sold 4,930 kW       2,265 kW      4,900 kW     2,235 kW
 electricity)
 Possibility        of   annual   sold 19,996         9,187 MWh     14,553        6,637 MWh
 electricity                           MWh                          MWh


                                     Table 6.2. Comparison of system

                                                               Proposal 1    Proposal 2
                              Item                  Unit       Jatitujuh &   Jatitujuh &
                                                               Gempolkrep    Gempolkrep
                         Type                       Natural circulation
                         Steam pressure             MPA        7.16          2.5
          BOILER




                                                    O
                         Steam temperature           C         515           350
                         Steam production           Kg/hour 65,100           66,900
                                                    O
                         Feed water temperature      C         142           110
                         Bagasse consumption        Kg/hour 28,500           31,000
                         Bagasse calorie value      KJ/kg      7,330         7,330
                         Type                       Back pressure turbine
                         Power plant out put        kW         9,100         6,200
                         Inlet steam pressure       MPa        6.86          2.38
                                                    O
                         Inlet steam temperature     C         510           345
          TURBINE
          STEAM




                         Steam flow rate            Kg/hour 65,100           60,000
                         Outlet steam pressure      MPa        0.28          0.25
                         Outlet steam temperature   O
                                                     C         210           131


Bagasse consumed in the proposal 1 is 28.5 tons per hour and in the proposal 2 is 31 tons per
hour. The amount of inlet steam into boiler and turbines is equal in the proposal 1 yet there is a
difference in steam consumption in the proposal 2 owing to its 7 tons/hour steam supply into
deaerator.

5.2. Profitability Analysis

Selection for proposal 1 or proposal 2 requires a profitability analysis based on both businesses
as usual and its economic potential for diversification.

5.2.1. Cost Calculation

a). Basic Assumption
Calculations of expenses for each candidate of pilot project are based on the actual data
collected during the course of the study. The detailed cost calculation for project includes all
costs that may incur during the implementation of the project, including among others
engineering, manufacturing, transport/shipment, construction and commissioning. The basic
cost calculation is considering local components utilization as much as possible.




                                                                                               5-2
b) Economic Analysis
An economic comparison is applied to proposal system 1 with proposal system 2. (Note: in
proposal 1 as well as in proposal 2 equipments such as an electricity precipitator (the installed
system is using a wet scrubber).

IRR is used as an index value for economic analysis. Another index value is the selling income
of excess power to PLN, after assuming certain prices for steam supply and electricity supply to
factory. Yet diesel oil- and wood fuel consumption reductions are other additional incomes.
Expenses to be considered are corporate tax, operational cost, loan repayment and its interest.

5.2.2. Pre Conditions

Pre conditions in the economic analysis are presented in Table 6.3.

5.3. Cost of Equipment

Table 6.4 lists the equipment considered in this study. A steam transformer is not included in the
proposal 2 leading to the reduction of a remarkable cost. The preconditions of both proposal 1
and proposal 2 have made use personal information obtained from Mr. Yoshitada Sakai from the
Institute Economic Energy Japan (IEEJ), without further confirmation to manufacturer. Neither
proposal 1 nor 2 includes taxes such as an import tax.

In case that local components or -content could be maximized and a detailed analysis would be
done, a cost reduction could be achieved. For this reason an exact number of energy
consumption should be identified and a highly accurate system must be planned.

        Table 6.3. Preconditions in the economic analysis of Gempolkrep and Jatitujuh

    No      Item                                   Unit     Proposal 1               Proposal 2
    1          Equipment costs                     US$                 15,428,000                9,410,000
    2          Installation costs                  US$                   4,000,000               2,950,000
    3          Operational costs                   US$                     476,000                 285,715
    4          Depreciation                                 Life time 15 years, depreciation value 10%
    5          Equity ratio                        %        30
    6          Repayment                                    Interest 6%, repayment in 10 years
    7          Corporate tax                       %        30
    8          Unit price of electricity sale to   Cent/kWh 5
               PLN
    9          Unit price of electricity sale to   Rp/kWh     481
               PLN
    10         Unit price of electricity           Rp/kWh     493
               purchase
    11         Steam price                         $/ton      1,5
    12         Steam price                         Rp/ton     14.437
    13         Diesel fuel price                   Rp/ltr     5480
    14         Unit price of moulding              Rp/kg      250
    15         Exchange rate                                  1 US$ = Rp 9625




                                                                                                        5-3
                               Table 6.4. Cost of Equipment (unit US$)

                            Item                         Proposal 1          Proposal 2
          Boiler and auxiliaries                              6,135,000           5,257,000
          Turbine, generator and auxiliaries                  3,410,000          1,772,000
          Steam transformer                                   2,315,000                   -
          Electricity equipment/controller                    2,330,000           1,429,000
          Design and technology                               1,238,000             952,000
         TOTAL                                               15,428,000           9,410,000


5.3.1. Unit Price of Electricity Sale

The following table 6.5 lists the electricity tariff for companies from January through December
2004 at Rp. 493/kWh. Electricity generated from new equipments would be utilized for the
process in the factory. The income could be calculated by multiplying the unit price of electricity
purchased times the electricity consumed.

          Table 6.5. Unit Price of Electricity Sale of the Gempolkrep Sugar Factory

Item                                   Calculation            Unit        Data            Remarks
Electricity consumption per      A1                                              14.074
                                                           MWh/year
year
Electricity consumption per      A2    A1/12                                      1.173   used for 6
                                                          MWh/month
month                                                                                     months
Load factor                      A3                            %                     90
                                 A4    A2/30/24/A3x100                            1.810
Average power consumption                                     KW
                                       x1000
Power factor                     A5                            %                  85
Average power consumption        A6    A4/A5x100              KVA             2.129
Tariff category                  A7                                          1-3/TM
                                 A8                       Rp/kVA/mont        29.500
Basic unit price
                                                               h
Basic monthly price              A9    A6xA8               Rp/month       62.815.148
Unit price                       A10                        Rp/kWh               439
                                 A11   A2x1000xA10                        514.873.83
Unit price per month                                        Rp/month
                                                                                   3
Total electricity price per      A12   A9+A11                             577.688.98
                                                            Rp/month
month                                                                              1
Electricity purchasing price     A13   A12/A2/1000          Rp/kWh               493


5.3.2. Steam Unit Price

Like the steam for the electrical power, the steam being utilized for processing is considered as
a profit. Steam unit price is shown in Table 6.6. The price of steam boiler is US$ 105,000 per
ton steam produced from steam auxiliaries and the price includes instalment cost. The boiler will
have a lifetime of 30 years and an operation time of 5000 hours per year. At this boiler price, per
ton steam will give an income of 1.5 US$ (as an imaginer income).




                                                                                                       5-4
                            Table 6.6. Calculation of Steam Price

Item                            Calculation       Unit         Data    Remarks
A1   Boiler price                                 US$ /ton     100,000 Including piping and
                                                                       installation
A2    Life time                                   Hour         150,000 30 thn x 5000 hours
A3    Total cumulative          1 x A2            Ton/30       150,000 Total steam within 30
      steam production                            tahun                years
A4    Total cumulative          A1 x 0,03 x 30    US$/ton       90,000 3%/year x 30 year
      operational cost
A5    Total cumulative          A1 x 0,3          US$/ton       30,000 30%
      repayment
A6    Steam price               (A1+A4+A5)/E2 US$/ton               1.5

5.3.3. Fuel Cost Saving

As alternative fuels used in the Gempolkrep sugar factory are moulding and fossil fuel (diesel
fuel). If the pilot project would be realized, all alternative fuels would no longer be used.
Therefore, the cost of fuels purchased is considered as an imaginer income. The price of the
fuel applied in the calculation is the latest fuel price in August 2005.

5.3.4. Calculation of Annual Income (real income and imaginer income)

As in the pre condition described in the previous paragraph, the real and imaginer annual
incomes for implementing the pilot project are shown in Table 6.7 and 6.8.

As previously explained, the power plant invesment of the pilot project in this study is assumed
as a business as usual from which its profit is calculated if the project is being operated.

In both factories, currently, there have been installed BTG (boiler, turbine, generator) fuelled by
bagasse supplying steam for processing and electricity required for the factories. The steam
and the electricity supplied to the factories are same in both quality and amount for current
condition and the pilot projects (as business as usual). The excess of the electricity produced is
sold to PLN. This implies that the investment is related to the equipments, operation and
maintenance, which directly support the sale of electricity to PLN, the supply of steam for
processing and the electricity required by the factories.

The income on cash flow basis is only the income obtained from electricity sale. Initially, its
equipments of the power station are compared to that fuelled by fossil fuel. The price of the
equipment is more expensive than that fuelled by fossil fuel but overcome by the reduction of
fossil fuel required.

5.4. Economic Evaluation

The index evaluation applied in this study is the IRR. An economical evaluation is performed
after applying the pre conditions set in the previous paragraph.




                                                                                                5-5
5.4.1. IRR and Criteria

5.4.1.1 IRR

This section considers the profitability of the business in the power generation in Gempolkrep
and Jatitujuh Sugar Mill. There are two types of IRR: that relative to the total investment in the
project (i.e., internal rate of return on investment; IRROI) and that relative to the capital invested
in the project (i.e., internal rate of return on equity; IRROE). The IRROI indicates the profitability
of the entire project, and is used mainly when the entire amount of funding is to be raised by
corporate finance or in order to gauge the possibilities of obtaining loans from banks. It may be
regarded as an indicator for viewing the level of profit generated by the cash flow assuming that
there is no borrowing from banks and all funds are raised through shareholders' equity (capital
stock).
                     Table 6.7. Annual Income of Gempolkrep Sugar Factory

                             Item                       Calculation         Unit   Proposal 1   Proposal 2
 Income from electricity production
 A1     Electricity production                                        kW                9,100        6,200
 A2     Parasitic power                                               kW                3,470        3,470
 A3     Other load of the factory                                     kW                 700           465
 A4     Available electricity for sale                  A1-A2-A3      kW                4,930        2,265
 A5     Operational days                                              day                169           169
 A6     Operational hours (2004)                        A5x24         h                 4,056        4,056
 A7     Total electricity sale                          A4xA6/1000    MWh              19,996        9,187
 A8     Unit price of electricity                                     US$/kWh            0.05         0.05
 A9     Unit price of electricity                       A8x9625       Rp/kWh             481           481
 A10    Income from electricity sale                    A7xA8         US$             999,804      459,342
 A11    Total electricity consumption for the factory   A2xA6/1000    MWh              14,074       14,074
 A12    Electricity purchasing price                                  Rp/kWh             493           493
 A13    Electricity purchasing price                    A 12/9625     US$/kWh           0.051        0.051
 A14    Saving from electricity purchase                A11xA13       US$             720,898      720,898
        Electricity Income sale + electricity saving
 A15    Price                                           A10+A14       US$           1,720,702    1,180,240
        Income from steam sale
   a1   Total steam processed                           A6            t/h                 60            60
   a2   Total annual steam supply (hours)                             h                 4,056        4,056
   a3   Total annual steam supply                       a1xa2         t/y             243,360      243,360
   a4   Steam price                                                   $/t                 1.5          1.5
   a5   Total sale                                      a3xa4         US$/y           365,040      365,040
        Saving on additional fuel consumption
  B1    Total purchased diesel oil                      2,910,166/2   liter         1,455,083    1,455,083
  B2    Unit price                                                    Rp/l              5,480        5,480
  B3    Unit price                                      B2/9625       US$/l              0.57         0.57
  B4    Price of purchased diesel oil fuel              B1xB3/1000    US$             828,452      828,452
  B5    Total purchased moulding                        886,910/2     kg              443,455      443,455
  B6    Unit price                                                    Rp/kg              250           250
  B7    Unit price                                      B6/9625       US$/kg             0.03         0.03
  B8    Price of purchased moulding                     B5xB7/1000    US$              11,518       11,518


                                                                                                        5-6
  B9   Total saving on purchased additional fuel            B4+B8           US$         839,971        839,971
  C1   Total                                                A15+a5+B9       US$       2,925,712      2,385,250



                         Table 6.8. Annual Income of Jatitujuh Sugar Factory

                        Item                           Calculation         Unit   Proposal 1      Proposal 2
Income from electricity production

  A1   Electricity production                                        kW                9,100           6,200
  A2   Factory load                                                  kW                3,500           3,500
  A3   Other load of the factory                                     kW                  700             465
  A4   Electricity power for sale                      A1-A2-A3      kW                4,900           2,235
  A5   Total operational days                                        day                 135             135
  A6   Operational hours (2004)                        A5x24         h                 3,240           3,240
  A7   Total sold electricity                          A4xA6/1000    MWh              15,876           7,241
  A8   Unit price of electricity                                     US$/kWh            0.05            0.05
  A9   Unit price of electricity                       A8x9625       Rp/kWh              481             481
 A10   Income from selling electricity                 A7xA8         US$             793,800         362,070
 A11   Total electricity consumption for the factory   A2xA6/1000    MWh              11,340          11,340
 A12   Electricity purchase price                                    Rp/kWh              493             493
 A13   Electricity purchase price                      A 12/9625     US$/kWh           0.051           0.051
 A14   Saving from purchase electricity                A11xA13       US$             580,844         580,844
       Income from selling electricity + saving of
 A15   electricity                                     A10+A14       US$           1,374,644         942,914
       Income from selling steam
  a1   Total steam processed                           A6            t/h                  60              60
  a2   Total annual supply hours                                     h                 3,240           3,240
  a3   Total annual steam supply                       a1xa2         t/y             194,400         194,400
  a4   Steam price                                                   $/t                 1.5             1.5
  a5   Total sale                                      a3xa4         US$/y           291,600         291,600
       Saving on additional fuel consumption
  B1   Total purchased diesel oil                      1,666,400/2   l               833,200         833,200
  B2   Price                                                         Rp/l              5,480           5,480
  B3   Price                                           B2/9625       US$/l              0.57            0.57
  B4   Cost of purchased diesel oil                    B1xB3/1000    US$             474,383         474,383
  B5   Total purchased moulding                                0     kg                    0               0
  B6   Price of moulding                                             Rp/kg               250             250
  B7   Price of moulding                               B6/9625       US$/kg             0.03            0.03
  B8   Price per unit of purchased moulding            B5xB7/1000    US$                   0               0
  B9   Total saving on additional fuel purchased       B4+B8         US$             474,383         474,383
  C1   Total                                           A15+a5+B9     US$           2,140,627       1,708,897



The IRROE is used for assessing profitability of the business, viewed from the standpoint of
capital subscribers, by gauging the rate of profit generated by the cash flow on the funds

                                                                                                               5-7
(shareholders' equity) invested in the business as capital after payment of taxes and repayment
of the principal and interest on long-term loans.

5.4.1.2 Criteria

Economic criteria could be achieved (or the project is viable), after considering interest from
bank as high as 6% and the risk of the business carried with, if IRR and IRROE are assumed to
be 10% and IRROE 15% respectively. The index is calculated for a period of 20 years.

5.4.2. Effect of GHG emissions reduction

At the current stage, there is no electricity generated from biomass sold to PLN. It would rather
be difficult to implement such a project in Indonesia. It is advisable to seek foreign partnership,
particularly countries under Annex 1 in UNFCCC for implementing the project under a CDM
scheme. By developing a CDM project, CER credit would be an additional income. The incomes
would come not only from the sale of electricity to PLN but also from the CER credit.

Table 6.9 and 6.10 show the calculation of CO2 emission reduction as the result of implementing
the pilot project (installing power generation). For the calculation, it was assumed a loan
obtained from ADB with an interest value of 6% resulting from a joint venture of an Indonesian
company with that of the Annex I countries. Other assumption made in this calculation was the
price of electricity at a maximum of 5 cent US$/kWh for biomass power generation in Java
Island.

      Table 6.9. CO2 Reduction Due to Implementation of Power Generation Plant in
                               Gempolkrep Sugar factory

                       Item                  Calculation         Unit   Proposal 1 Proposal 2
A1   Total electricity sale                                MWh             19,996      9,187
A2   CO2 emission per MWh electricity sale                 t-CO2/MWh         0.67       0.67
A3   Sub Total CO2 emission reduction        A1xA2         t-CO2           13,397      6,155
A4   Total fossil fuel purchased             2910166/2     liter         1,455,083 1,455,083
A5   Calorific value of fossil fuel                        kJ/liter         41,709    41,709
A6   Fossil fuel energy                      A4xA5/10^9    TJ                60.69     60.69
A7   Emission parameter of fossil fuel                     t-C/TJ             21.1      21.1
A8   Oxidation parameter                                                      0.99      0.99
A9   Sub Total CO2 emission reduction        A6xA7xA8x44 t-CO2               4,648     4,648
                                             /12
A10 Total methane gas per year                           m3                     0           0
A11 Density of methane gas                               m3-CO2/t-CO2     0.00071     0.00071
A12 Methane gas emission per year            A10xA11     t-CH4                  0           0
A13 Sub Total CO2 emission reduction         A12x21      t-CO2                  0           0
A14 TotalCO2 emission reduction              A3+A9+A13 t-CO2               18,046      10,804




                                                                                                5-8
      Table 6.10. CO2 reduction due to implementation of power generation plant in
                                 Jatitujuh Sugar Factory

                       Item                      Calculation         Unit   Proposal 1 Proposal 2
A1   Total electricity sale                                    MWh              15,876     7,241
A2   CO2 emission per MWh electricity sale                     t-CO2/MWh          0.67      0.67
A3   Sub Total CO2 emission reduction           A1xA2          t-CO2            10,637     4,851
A4   Total fossil fuel purchased                1666400/2      liter            833,200      833,200
A5   Calorific value of fossil fuel                            kJ/liter          41,709       41,709
A6   Fossil fuel energy                         A4xA5/10^9     TJ                 34.75        34.75
A7   Emission parameter of fossil fuel                         t-C/TJ              21.1         21.1
A8   Oxidation parameter                                                           0.99         0.99
A9   Sub Total CO2 emission reduction           A6xA7xA8x4     t-CO2              2,662        2,662
                                                4/12
A10 Total methane gas per year                                 m3                     0            0
A11 Density of methane gas                                     m3-CO2/t-        0.00071      0.00071
                                                               CO2
A12 Methane gas emission per year               A10xA11        t-CH4                  0            0
A13 Sub Total CO2 emission reduction            A12x21         t-CO2                  0            0
A14 Total CO2 emission reduction                A3+A9+A13      t-CO2             13,299        7,513


5.4.3. Calculation of IRR

Based on the precondition set above for Proposal 1 and Proposal 2, the result of the calculation
of IRROI and of IRROE is shown in Table 6.11 for Gempolkrep and Jatitujuh sugar factories.

           Table 6.11. IRR at GHG emissions trading price of 0, 5 & 10 US$/t-CO2

                                                                GHG emission trading price (US$/t-CO2)
                    Electricity selling price
                       Cent US$/kWh                                           (Unit;%)
                                                                 0                5               10
                              4.5               IRROI               8.36             8.81             9.26
Gempolkrep                                      IRROE              11.60            12.46            13.32
Sugar factory                  5                IRROI               8.86             9.31             9.75
Proposal 1                                      IRROE              12.55            13.42            14.28
                              5.5               IRROI               9.36             9.80            10.23
                                                IRROE              13.51            14.37            15.24
                               6                IRROI               9.84            10.28            10.71
                                                IRROE              14.47            15.34            16.21
                              6.5               IRROI              10.32            10.75            11.18
                                                IRROE              15.43            16.31            17.19
                               7                IRROI              10.80            11.22            11.64
                                                IRROE              16.40            17.28            18.17




                                                                                                        5-9
       Table 6.11. IRR at GHG emissions trading price of 0, 5 & 10 US$/t-CO2 (cont.)

                             4.5             IRROI                 12.39          12.78         13.17
 Gempolkrep                                  IRROE                 19.80          20.66         21.52
 Sugar factory                5              IRROI                 12.72          13.11         13.49
 Proposal 2                                  IRROE                 20.53          21.39         22.26
                             5.5             IRROI                 13.05          13.43         13.81
                                             IRROE                 21.26          22.13         23.01
                              6              IRROI                 13.38          13.76         14.14
                                             IRROE                 22.00          22.88         23.76
                             6.5             IRROI                 13.70          14.08         14.46
                                             IRROE                 22.75          23.63         24.51
                              7              IRROI                 14.02          14.40         14.77
                                             IRROE                 23.49          24.38         25.27
                             4.5             IRROI                  4.28           4.68          5.06
 Jatitujuh                                   IRROE                  4.45           5.11          5.75
 Sugar factory                5              IRROI                  4.75           5.14          5.52
 Proposal 1                                  IRROE                  5.23           5.88          6.52
                             5.5             IRROI                  5.21           5.59          5.96
                                             IRROE                  6.00           6.64          7.28
                              6              IRROI                  5.66           6.03          6.39
                                             IRROE                  6.76           7.40          8.03
                             6.5             IRROI                  6.10           6.46          6.82
                                             IRROE                  7.52           8.16          8.79
                              7              IRROI                  6.53           6.89          7.24
                                             IRROE                  8.28           8.91          9.54
                             4.5             IRROI                 10.10          10.38         10.67
 Jatitujuh                                   IRROE                 14.97          15.55         16.13
 Sugar factory                5              IRROI                  10.45         10.73         11.01
 Proposal 2                                  IRROE                  15.68         16.26         16.84
                             5.5             IRROI                  10.79         11.07         11.35
                                             IRROE                  16.39         16.97         17.55
                              6              IRROI                  11.13         11.41         11.69
                                             IRROE                  17.10         17.68         18.27
                             6.5             IRROI                  11.47         11.75         12.02
                                             IRROE                  17.81         18.40         18.99
                              7              IRROI                  11.81         12.08         12.36
                                             IRROE                  18.53         19.12         19.72



5.5. Analysis

As presented in table 6.11 after comparing all the options, it is shown that the most profitable
result is obtained for PG Gempolkrep with Proposal 2 followed by Jatitujuh with Proposal 2 and
Gempolkrep with Proposal 1. Generally Proposal 2 (both for Gempolkrep and Jatitujuh) gives a
better profit than Proposal 1. Although the electricity produced by Proposal 1 is higher than Proposal 2,
but its relatively high investment cost of equipment makes Proposal 1 (for both Gempolkrep and Jatitujuh)
less attractive.



                                                                                                    5-10
In this case proposal 1 for Gempolkrep would meet criteria if the price of electricity sale to PLN
US is cent US$ 5.5 / kWh after putting the project in the CDM scheme (at CER credit equals to
US$ 10 / t-CO2). The short operation time of less than half year has limited the profit to be
obtained.

The calculation indicated that the revenue from the sale of credit on GHG emission reduction
would improve the profit of the project.

As shown in Table 6.11, the IRROI and IRROE indicate that project Proposal 2 is feasible to be
funded by investors or banks even if the CDM scheme is not implemented (CER credit is zero).
Jatitujuh Proposal 2 is viable to accept financing from banks or investors though no CDM
scheme is applied to the project (CER credit equals to zero) but at its electricity selling price
equals to US cent US$ 5/ kWh or more.

The unit price of electricity sale (unit price of electricity purchased by PLN) is determined after
negotiation of price with PLN Wilayah under which the project is covered. The unit price of
electricity sale resulted from negotiation is not published. However, from all information obtained
the unit price of electricity sale for sugar factories in Java island has a maximum value of 4.5 - 5
US$ cent/kWh. The highest unit price of electricity purchase in Java according to PLN is sold
from PLTU Paiton 4,9 US$ cent / kwh. As previously mentioned in Chaper 5, according to
MHPP-GTZ report, the selling price of PLTMH Seloliman is around 4.4 US$ cent/kwh, slightly
less than that of PLTU Paiton. Such a price policy needs to be reviewed.

The calculations above were of rough estimations. In case that the project is going to be
implemented, it would need a confirmed purchase price from PLN. For this purpose the
following should be considered; an accurate energy consumption must be identified, instalment
of steam flow meter at each equipment receiving steam from boiler, total bagasse production
and heat being generated.

The data obtained in this study was not resulted from measurements. Accordingly, even
assuming only half of excess bagasse is utilized in the system the sale to the PLN would
increase. Furthermore, it would be still economical upon inclusion of a corporate tax. The
system adopted in this study, utilizing half of excess bagasse, is possible to be applied for a
small-scale factory.

Considering the cost of the equipment facility mentioned before, if the local content is increased
Its cost would decrease. For example, if the steam condition of the boiler in proposal 2 is
fabricated in Indonesia and the plant design and order is done by local consultant or involving
local expert from relevant institution (e.g. BPPT).

As the oil subsidy will be removed, the unit price of electricity will also increase soon. Thus, it is
estimated that the profitability of the pilot project will be better.

5.6. Analysis of Sensitivity

In this part, sensitivity analysis is done by assuming some parameters at fluctuated values,
which depend not only on the negotiation between sugar factory and bank but also economic
condition in Indonesia.

It is assumed that the project is implemented on the GHG emission reduction price of US$ 5/t-
CO2. For this parameter, the values of the investment cost and the electricity sales price

                                                                                                  5-11
determined at basic condition are varied around plus or minus 50%. Figure 6.1 trough Figure
6.4 show the change of IRROI relatively to the basic condition because of its parameter change.
Based on the calculation and figure 4.1 through Figure 6.4, it is clear that the investment cost
has a significant influence to the feasibility of the project in term of profit (IRROI).

The basic condition mentioned in some sub chapter before showed that not all proposals have
met the criteria of a profitable business therefore increasing profit analysis should be done. To
increase a profit, some actions should be done, i.e. increase sales, reduce expenses and initial
investment.

For the first point (point a), there is an upper boundary for CER credit and the selling price of
electrics to PLN.



                               IRROI of Gempolkrep Sugar Mill Proposal 1
                                          20

                                          15
                        13.94
          IRROI (%)




                                          10                            10.52
                                                    9.31
                        8.06
                                                                        6.21
                                            5

                                            0
                      -25                       0                  25
                                                                        Investment Cost
                                      Change Rate (%)
                                                                        Power Sales Rate


           Figure 6.1. Sensitivity of IRROI of Gempolkrep Sugar Mill Proposal 1




                                                                                             5-12
                              IRROI of Gempolkrep Sugar Mill Proposal 2
                                           20
                         18.51
                                           15
                                                                          13.92
IRROI (%)
                         12.29                       13.11
                                           10                             9.58

                                             5

                                             0
                  -25                            0                   25
                                                                       Investment Cost
                                      Change Rate (% )                 Power Sales Rate


 Figure 6.2. Sensitivity of IRROI of Gempolkrep Sugar Mill Proposal 2




                                 IRROI of Jatitujuh Sugar Mill Proposal 1
                                             10
                          9.04
                                                 8
            IRROI (%)




                                                 6                          6.25
                                                         5.14
                          3.97                   4
                                                                            2.44
                                                 2

                                                 0
                        -25                          0                 25
                                         Change Rate (%)
                                                                       Investment Cost
                                                                       Power Sales Rate


        Figure 6.3. Sensitivity of IRROI of Jatitujuh Sugar Mill Proposal 1




                                                                                          5-13
                                  IRROI of Jatitujuh Sugar Mill Proposal 2
                                              20

           IRROI (%)      15.6                15

                                                                               11.58
                                                       10.73
                          9.86                10
                                                                               7.5
                                               5


                                               0
                       -25                         0                      25
                                                                               Investment Cost
                                          Change Rate (%)
                                                                               Power Sales Rate


                       Figure 6.4. Sensitivity of IRROI of Jatitujuh Sugar Mill Proposal 2

For the second point (point b) one aspect relates to the reduction of the management- operation
cost and the periodic maintenance. All of these is closely related to the fixed cost of the
equipment performance.

Therefore it is necessary to get incentives i.e. tax cutting or grant for a fixed instalment. Grant
for fixed instalment for example can be obtained through a business joint venture between
developed countries (low interest loan from ADB) and Indonesia. However, it is very hard to
realize that because of long and complicated administration process. If a JVC is formed
between a company from countries of Annex I (Kyoto Protocol) and Indonesia wherein a CDM
Scheme can be implemented, then an evaluation to obtain an economical value of CER credit
would be made.

Finally, for the third (point c), it can be considered to reduce the initial investment by subsidy or
by decreasing facility cost through a specification reduction. One possibility to reduce initial
investment is obtaining a grant from ADB. ADB gives a grant as much as ¼ of the total
investment for power plant development. As a result, the profit could be increased from the
reduction of interest cost. Calculation result of IRROI and IRROE with an investment reduction
of 25% is shown in Table 6.12.

Expected specification reduction is no direct effect to power plant performance. One possible
way to cut the cost from this side is by increasing local content since the investment cost
mentioned above is based on an EPC from Japan. If we could use more local content it would
be expected to reduce the initial investment.




                                                                                                  5-14
          Table 6.12. IRR at GHG emissions trading price of 0, 5 & 10 US$/t-CO2

Investment lowered at 25%
                                                                   GHG emission trading price
                 Electricity selling price                               (US$/t-CO2)
                 Cent US$/kWh                                              (Unit;%)
                                                                    0         5           10
Gempolkrep                                     4,5     IRROI       12,81      13,35        13,88
Sugar Factory                                          IRROE       20,71      21,93        23,16
Proposal 1                                      5      IRROI       13,40      13,94        14,46
                                                       IRROE       22,06      23,29        24,53
                                               5,5     IRROI       13,99      14,52        15,04
                                                       IRROE       23,42      24,67        25,93
                                                6      IRROI       14,58      15,10        15,62
                                                       IRROE       24,80      26,06        27,33
                                               6,5     IRROI       15,15      15,67        16,18
                                                       IRROE       26,20      27,47        28,76
                                                7      IRROI       15,73      16,24        16,75
                                                       IRROE       27,61      28,90        30,19

                Table 6.12. IRR at GHG emissions trading price of 0, 5 & 10 US$/t-CO2 (cont.)


Gempolkrep                                           4,5   IRROI       17,63      18,11         18,58
Sugar Factory                                              IRROE       32,49      33,76         35,03
Proposal 2                                            5    IRROI       18,04      18,51         18,98
                                                           IRROE       33,57      34,84         36,13
                                                     5,5   IRROI       18,44      18,91         19,38
                                                           IRROE       34,65      35,93         37,22
                                                      6    IRROI       18,84      19,31         19,78
                                                           IRROE       35,74      37,03         38,33
                                                     6,5   IRROI       19,24      19,71         20,17
                                                           IRROE       36,84      38,13         39,44
                                                      7    IRROI       19,64      20,10         20,57
                                                           IRROE       37,94      39,24         40,55
Jatitujuh                                            4,5   IRROI        8,06       8,51          8,95
Sugar Factory                                              IRROE       11,03      11,88         12,72
Proposal 1                                            5    IRROI        8,59       9,04          9,47
                                                           IRROE       12,04      12,89         13,73
                                                     5,5   IRROI        9,12       9,56          9,99
                                                           IRROE       13,05      13,90         14,75
                                                      6    IRROI        9,64      10,07         10,49
                                                           IRROE       14,06      14,91         15,77
                                                     6,5   IRROI       10,15      10,57         10,99
                                                           IRROE       15,08      15,94         16,80
                                                      7    IRROI       10,65      11,07         11,48
                                                           IRROE       16,10      16,97         17,84
Jatitujuh                                            4,5   IRROI       14,84      15,19         15,53
Sugar Factory                                              IRROE       25,44      26,28         27,12
Proposal 2                                            5    IRROI       15,26      15,60         15,94
                                                           IRROE       26,46      27,31         28,15

                                                                                                        5-15
                                              5,5   IRROI        15,68     16,02      16,36
                                                    IRROE        27,49     28,34      29,20
                                               6    IRROI        16,10     16,43      16,77
                                                    IRROE        28,53     29,39      30,25
                                              6,5   IRROI        16,51     16,84      17,18
                                                    IRROE        29,58     30,44      31,31
                                               7    IRROI        16,92     17,25      17,59
                                                    IRROE        30,63     31,50      32,37



5.7.    Proposal Pilot Project

Based on the analysis resulted above the study recommends proposal 2 for both Gempolkrep
sugar factory and Jatitujuh sugar factory as the pilot project candidates for generating electricity
utilizing bagasse.

There are 15 sugar factories in Indonesia having a capacity similar to Jatitujuh (a capacity of
more than 4000 tons/day). A dissemination effect could be expected.

Even though there are many smaller sugar factories than Jatitujuh They are not recommended
as the candidates for the pilot project as it would be difficult to them to gain a profit.

Gempolkrep sugar factory and other sugar factories are very interested in utilizing bagasse for
producing electricity. It would be for sure if the pilot project were implemented in any sugar
factory, it would get very good respond and cooperation.


6.      CONCLUSIONS

The main findings concerning the project for utilization of bagasse are summarized in Table 7.1
up to Table 7.4.

The internal rate of return on investment (IRROI), which shows the internal rate of return of the
project as a whole taking into account revenues from emission credits trading through GHG
reduction at US$ 5 per t-CO2 and electricity tariff of 0.05 US$/kWh was found to be 9.31%
(Table 7.1), 21.39% (Table 7.2), 5.14% (Table 7.3), and 10.73% (Table 7.4). It is concluded,
therefore, that the project of Gempolkrep and Jatitujuh proposal 2 are sufficiently profitable for
private sector investment.




     Table 7.1. Results of Study of Bagasse-based Power Generation and Cogeneration
                            in Gempolkrep Sugar Plant Proposal 1



                                                                                                6-16
Bagasse processing capacity                28.5 ton/h
Bagasse processing capacity                259,616 t/y
Electricity sell to grid                   4,930 kW
Additional fuel                            No
Bagasse-based Power output                 9.1 MW
power                 Potential            19,996 MWh /year
system                electricity for
                      sale
                      Electricity tariff   0.045-0.055 US$/kWh
Environment           Baseline             thermal power plant
                      GHG reduction        18,046 t- CO2 per year
Cost                  Initial              US$ 15,428,000
performance           investment
GHG                   Evaluation point     Electricity tariff     Electricity tariff   Electricity tariff
reduction (in                              0.045 US$/kWh          0.05 US$/kWh         0.055 US$/kWh
terms of IRROI) No GHG trading
                                                           8.36                 8.86                      9.36
                     $5/t-CO2                              8.81                 9.31                      9.80
                     $10/t-CO2                             9.26                 9.75                   10.23
GHG                  Evaluation point      Electricity tariff     Electricity tariff   Electricity tariff
reduction (in                              0.045 US$/kWh          0.05 US$/kWh         0.055 US$/kWh
terms of             No GHG trading
EIRROI)                                                  11.60                 12.55                   13.51
                     $5/t-CO2                            12.46                 13.42                   14.37
                     $10/t-CO2                           13.32                 14.28                   15.24


This also demonstrates that the effect on revenues of the reduction of GHG emissions is
considerable. A key point is thus whether the project can be undertaken in such a way as to
obtain stable revenues using the CDM framework, based on a variety of forms of cooperation
between Annex I Country (Kyoto Protocol) and bodies in the host country of Indonesia, such as
the Indonesian Government and the sugar plant industries.

    Table 7.2. Results of Study of Bagasse-based Power Generation and Cogeneration
                           in Gempolkrep Sugar Plant Proposal 2

Bagasse processing capacity                31.0 ton/h
Bagasse processing capacity                259,616 t/y
Electricity sell to grid                   2,265 kW
Additional fuel                            No
Bagasse-based Power output                 6.2 MW
power
system                Potential            9,187 MWh /year
                      electricity for
                      sale
                      Electricity tariff   0.045-0.055 US$/kWh
Environment           Baseline             thermal power plant
                      GHG reduction        10,804 t- CO2 per year
Cost                  Initial              US$ 9,410,000
performance           investment
GHG                   Evaluation point     Electricity tarif      Electricity tariff   Electricity tariff
reduction (in                              0.045 US$/kWh          0.05 US$/kWh         0.055 US$/kWh



                                                                                                                 6-17
terms of IRROI)      No GHG trading
                                                         12.39                 12.72                   13.05
                     $5/t-CO2                            12.78                 13.11                   13.43
                     $10/t-CO2                           13.17                 13.49                   13.81
GHG                  Evaluation point      Electricity tariff     Electricity tariff   Electricity tariff
reduction (in                              0.045 US$/kWh          0.05 US$/kWh         0.055 US$/kWh
terms of             No GHG trading
EIRROI)                                                 19.80                  20.53                  21.26
                     $5/t-CO2                           20.66                  21.39                  22.13
                     $10/t-CO2                          21.52                  22.26                  23.01


    Table 7.3. Results of Study of Bagasse-based Power Generation and Cogeneration
                            in Jatitujuh Sugar Plant Proposal 1

Bagasse processing capacity                28.5 ton/h
Bagasse processing capacity                191,698 t/y
Electricity sell to grid                   4,900 kW
Additional fuel                            No
Bagasse-based Power output                 9.1 MW
power                 Potential            14,553 MWh /year
system                electricity for
                      sale
                      Electricity tariff   0.045-0.055 US$/kWh
Environment           Baseline             thermal power plant
                      GHG reduction        13,299 t- CO2 per year
Cost                  Initial              US$ 15,428,000
performance           investment
GHG                   Evaluation point     Electricity tarif      Electricity tariff   Electricity tariff
reduction (in                              0.045 US$/kWh          0.05 US$/kWh         0.055 US$/kWh
terms of IRROI) No GHG trading
                                                           4.28                 4.75                   5.21
                     $5/t-CO2                              4.68                 5.14                   5.59
                     $10/t-CO2                             5.06                 5.52                   5.96
GHG                  Evaluation point      Electricity tariff     Electricity tariff   Electricity tariff
reduction (in                              0.045 US$/kWh          0.05 US$/kWh         0.055 US$/kWh
terms of             No GHG trading
EIRROI)                                                   4.45                  5.23                   6.00
                     $5/t-CO2                             5.11                  5.88                   6.64
                     $10/t-CO2                            5.75                  6.52                   7.28




                                                                                                               6-18
    Table 7.4. Results of Study of Bagasse-based Power Generation and Cogeneration
                            in Jatitujuh Sugar Plant Proposal 2

Bagasse processing capacity               31.0 ton/h
Bagasse processing capacity               191,698 t/y
Electricity sell to grid                  2,235 kW
Additional fuel                           No
Bagasse-based Power output                6.2 MW
power                 Potential           6,637 MWh /year
system                electricity for
                      sale
                      Electricity tarif   0.045-0.055 US$/kWh
Environment           Baseline            thermal power plant
                      GHG reduction       7,513 t- CO2 per year
Cost                  Initial             US$ 9,410,000
performance           investment
GHG                   Evaluation point    Electricity tarif     Electricity tarif    Electricity tarif
reduction (in                             0.045 US$/kWh         0.05 US$/kWh         0.055 US$/kWh
terms of IRROI) No GHG trading
                                                        10.10                10.45                   10.79
                     $5/t-CO2                           10.38                10.73                   11.07
                     $10/t-CO2                          10.67                11.01                   11.35
GHG                  Evaluation point     Electricity tarif     Electricity tarif    Electricity tarif
reduction (in                             0.045 US$/kWh         0.05 US$/kWh         0.055 US$/kWh
terms of             No GHG trading
EIRROI)                                                14.97                15.68                  16.39
                     $5/t-CO2                          15.55                16.26                  16.97
                     $10/t-CO2                         16.13                16.84                  17.55




                                                                                                             6-19
Annexes


Annex 1. Heat Balance of Sugar Factory




                                         Annex - 1
Annex 2. Flow Sheet




                      Annex - 2

				
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