Quantification of the CDM effect: PT.NOEI Integrated Solid Waste Management Project in Bali Mitsubishi Securities Clean Energy Finance Committee Workshop on Landfill Gas Development and the CDM Denpasar, Indonesia September 5 -7, 2005

Integrated Solid Waste Management Project in Bali, Indonesia The project: PT.NOEI Integrated Solid Waste Management (GALFAD) Project in Bali, Indonesia Quantification of emission reductions (CERs). Effect of CDM on the project.

Recap of the project Current practice: disposal of approximately 800 tonnes per day of municipal solid waste in a landfill / dumpsite Proposed project: Introduction of the GALFAD system, in which: –Landfill gas (methane) will be recovered from the exisiting landfill and used for power generation –Biogas will be extracted through anaerobic digestion of the new (wet) waste and used for power generation –Other (dry) waste will be gasified and used for power generation –Power generation capacity to increase in phases to 9.6MW.

Sources of emission reduction 1) Avoidance of methane that would be emitted from landfill (waste already existing in the landfill), through methane capture and destruction. 2) Avoidance of methane that would be emitted from new waste, through anaerobic digestion and gasification. 3) Displacement of fossil fuel-based grid power generation with the project’s carbon-neutral power.

Baseline Emission Reduction = Baseline Emission – Project Emission The baseline is the continuation of current practice, i.e. disposal of waste in a landfill / dumpsite, with no methane emission control in place. The waste undergoes mainly anaerobic decomposition, resulting in methane being emitted into the atmosphere. In the project, the methane is either directly recovered or forcibly extracted and destructed, leading to an emission reduction.

New methodology submitted recently (NM0127, 2&OpenNM=NM0127&cases=B ) 2&OpenNM=NM0127&cases=B The baseline emission is based on the following. i) For the methane destructed through simple LFG recovery, the baseline emission calculation is based on the actual, monitored amount of methane captured, multiplied by the GWP of methane (21). Methane = Captured Methane x GWP of CH4 Emission (tCH4) (21tCO2/tCH4) (Same method as for ACM0001) Emission Reduction Estimation: Baseline Emission

ii) For the methane avoided through forced extraction (anaerobic digestion) and gasification, the baseline emission is calculated using the IPCC First-Order-Decay model. The calculation is based on the actual, monitored characteristics of the waste fed into the system. Methane emission =

where: k= methane generation rate constant (1/yr) A= (1 – e-k), normalisation factor which corrects the summation W(x)= amount of municipal solid waste generated in year x (Gg/yr) MCF(x)= methane correction factor in year x DOC(x)= degradable organic carbon (DOC) in year x (Gg C/Gg waste) DOCF= fraction of DOC dissimilated F= fraction by volume of CH4 in landfill gas 16/12= conversion of C to CH4 R(t)= recovered CH4 in inventory year t (Gg/yr) OX= oxidation factor Source: IPCC

iii) For the grid electricity displacement component, the project’s capacity of 9.6MW qualifies under the small- scale category. The small-scale methodology I.D: Renewable electricity generation for a grid was therefore used, where: Grid emission = electricity produced x carbon intensity by project of the grid (kWh) (tCO2/kWh) The carbon intensity is calculated as the weighted average emission of the current generation mix for Indonesia (Java- Bali grid).

Project emission includes on-site fossil fuel use and stack gas emissions. Leakage is the net change in emissions caused by the project outside of the project boundary. For projects of this type, leakage may include the increase in transportation when the project site is located far from the existing landfill site. Emission Reduction Estimation: Project Emission and Leakage

YearWaste disposal (tCO2e) Grid electricity (tCO2) Annual total (tCO2e) 125,84725,56551, ,86051,130137, ,00851,130157, ,48951,130173, ,67451,130187, ,88351,130200, ,39251,130210,522 TOTAL786,153332,3451,118,498 Project emissions not estimated ex ante.

Monitoring Requirements Comprehensive monitoring required due project being regular scale. In addition, the higher uncertainty associated with methane emission modeling also means a tighter monitoring regime is necessitated. Monitoring required for project emission calculation: –Onsite fossil fuel use and emission factor –Stack gas volume and methane emission factor –(Physical leakage)

Monitoring required for baseline emission calculation: –Volume of waste fed into digester and gasifier –Waste composition and organic content of each stream –Volume and methane content of landfill gas captured and fed to flare/boiler/generator –Gas pressure and flare temperature –Electricity supplied to grid and grid emission factor Although more comprehensive monitoring is required as compared to simple landfill gas collection projects, it is less onerous than it first seems.

What the CDM can do The project is unlikely to be implemented without the CDM –The project may have some revenue from recyclables –The main source of revenue is from the sale of electricity –The projected IRR too low to attract investors

CER Revenue Crediting Period / CER Price Annual7 years10 years21 years EUR50.25 ~ EUR100.5 ~ (EUR million) Investment amount = EUR15million These figures represent an increase in revenue to be added to the basic income from the sale of electricity. In the context of the Bali project, sale at EUR5 will increase the IRR by 6%, at EUR10 by 11%.

Summary In terms of the CDM, projects such as these may not be as attractive in comparison to simple landfill gas projects, which are lower cost. However, there are significant long-term benefits in terms of waste reduction, sanitation, etc. Also, if the new methodology NM0127 is accepted, these projects can enjoy more certainty in terms of expected CERs. Trade off. May also consider doing in phases.