Cost competitiveness of palm oil biodiesel production in Indonesia

Accepted Manuscript Cost competitiveness of palm oil biodiesel production in Indonesia

Fumi Harahap, Semida Silveira, Dilip Khatiwada PII:

S0360-5442(18)32487-3

DOI:

10.1016/j.energy.2018.12.115

Reference:

EGY 14368

To appear in:

Energy

Received Date:

07 February 2018

Accepted Date:

17 December 2018

Please cite this article as: Fumi Harahap, Semida Silveira, Dilip Khatiwada, Cost competitiveness of palm oil biodiesel production in Indonesia, Energy (2018), doi: 10.1016/j.energy.2018.12.115

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ACCEPTED MANUSCRIPT Title page: Cost competitiveness of palm oil biodiesel production in Indonesia Authors contact details: Fumi Harahap, Corresponding Author Division of Energy and Climate Studies, School of Industrial Engineering and Management, KTH Royal Institute of Technology Brinellvägen 68, 100 44 Stockholm, Sweden Email: [email protected] ; Tel: +46 8 790 7465; cell: +46 76 425 2785 Semida Silveira, Prof. Division of Energy and Climate Studies, School of Industrial Engineering and Management, KTH Royal Institute of Technology Brinellvägen 68, 100 44 Stockholm, Sweden Email: [email protected] ; Tel: +46 8 790 7469; cell: +46 70 665 9969 Dilip Khatiwada, PhD. Division of Energy and Climate Studies, School of Industrial Engineering and Management, KTH Royal Institute of Technology Brinellvägen 68, 100 44 Stockholm, Sweden Email: [email protected] ; Tel: +46 8 790 7464; cell: +46 72 366 5388

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ACCEPTED MANUSCRIPT Cost competitiveness of palm oil biodiesel production in Indonesia

Highlights The economic performance of different biodiesel production configurations are investigated Biorefineries can help reduce costs and increase revenues in the biodiesel production chain The biorefinery improves resource and cost efficiency of biodiesel production Subsidies can support implementation of biorefineries instead of covering cost gap with fossil diesel

Abstract This study investigates opportunities to improve the cost competitiveness of the palm oil biodiesel industry in Indonesia. It compares costs and revenues of standalone conventional palm oil and biodiesel production with an integrated system that includes utilisation of biomass residues. Economic metrics, viz. net income, NPV, IRR, payback period and biodiesel breakeven price are evaluated. Sensitivity analyses are carried out to verify how parameter changes affect net income. The results show that the integrated concept with upgraded CPO and biodiesel processing plant (Biorefinery), which simultaneously produces biodiesel, electricity, heat and biofertiliser, can obtain an additional income of 14 USD/t-FFB compared to the Conventional System. The biorefinery system helps to reduce dependency on government subsidy for biodiesel production, and lowers the industry vulnerability to fluctuation of fossil diesel prices. The shift to modern facilities with value chain integration provides a pathway to enhance the share of renewable energy in Indonesia through increased biodiesel production and electricity generation from palm biomass residues. It may also promote resource efficiency and climate change mitigation through reduced emissions from untreated residues and fossil energy carriers. The analysis enhances understanding about potential gains and consequences of more stringent policy implementation in the country. Keywords: biomass residues; palm oil; biodiesel; economic indicators; conventional system; biorefinery Abbreviations: biodiesel breakeven price (BBP); combined heat and power (CHP); crude palm oil (CPO); empty fruit bunch (EFB); fresh fruit bunch (FFB); heavy fuel oil (HFO); internal rate of return (IRR); kernel shell (KS); life-cycle cost (LCC); mesocarp fibre (MF); net present value (NPV); palm oil mill effluent (POME); payback period (PBP)

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ACCEPTED MANUSCRIPT 1

Introduction

Crude palm oil (CPO) is an important commodity for Indonesia both domestically and internationally. The domestic market consumed 25% of the country’s CPO production in 2016 [1]. After food, the largest use of CPO is for biodiesel production. CPO is a key feedstock for meeting the government’s 30% biodiesel blending target by 2025 [2]. In a recent study, Khatiwada et al. [3] showed that the growing demand for biodiesel in Indonesia could be met without jeopardizing the use of palm oil for food, or adding new planted area, if an agriculture policy is pursued aligned with efforts to expand the use of biofuels in the country. While larger yields can contribute to reduce costs for biodiesel, other improvements along the biodiesel supply chain may be also attractive. In this paper, we explore the potential of increasing resource and cost-efficiency in the biodiesel production. Exploring this potential is very relevant as the biodiesel program in Indonesia includes policies and financial support to improve the biodiesel cost competitiveness and sustainability of the supply chain. The production of CPO generates considerable amount of biomass residues (e.g. empty fruit bunches, fibre, shell and palm oil mill effluents). Part of this biomass is conventionally used in the oil palm plantations as soil mulch, but large portions remain unused or are burnt in the fields [4]. There is growing interest to use palm oil biomass for bio-based products. For example, palm oil bio-resources such as empty fruit bunches, fibres, shells and milling effluents can be used as feedstock to produce electricity in combined heat and power (CHP) plants. Alternatively, empty fruit bunches and effluents can be used for producing biofertilisers. Present policies require improved environmental performance of the palm oil industry (e.g. reduce GHG emissions) which provides an incentive for utilisation of the biomass available. However, the implementation of these policies has been slower than anticipated [5]–[7]. The unexplored economic values of large quantities of palm oil biomass residues, on the one hand, and the low profitability of biodiesel production, on the other hand, justify an evaluation of opportunities to integrate the value chain of CPO and biodiesel production as a way to improve the total economy and sustainability of the industry. While significant attention has been put on sustainability dimensions such as energy balance and greenhouse gas emissions from palm oil biodiesel production, the potential economic impact of production system improvements in Indonesia have not been evaluated in the same way [8]–[11]. Globally, several case studies have evaluated the economic impacts of different palm oil biodiesel supply chains, but very few have discussed system improvement or introduction of the biorefinery concept. In terms of system improvement, Quintero et al. [12] evaluated the impact of crop productivity on palm biodiesel production cost considering different feedstock growers (i.e. smallholders or largescale plantations) in Peru. The study examined improvement of upstream activities and oil palm plantations, but did not consider the upgrade of palm oil and biodiesel processing plants. Moncada et al. [13] compared the economic performance of a standalone biodiesel plant with multiproduct biorefinery system in Colombia without technology improvements. Solikhah et al. [14] discussed the economic profitability of palm biodiesel production from multi feedstocks (i.e. palm stearin, palm fatty acid distillate, CPO) and the opportunity of locating the palm oil mill and biodiesel plant in one facility without describing the upgrading biomass conversion technologies of different plant configurations in Indonesia. Khatiwada et al. [3] concluded that aligning Indonesian biodiesel mandates with an agriculture strategy will improve production efficiency and reduce pressure on land. An analysis of

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ACCEPTED MANUSCRIPT industrial integration as proposed here will contribute further insights on potential efficiency improvements along the supply chain of the biodiesel industry. The main objective of this paper is to compare the cost competitiveness of palm oil based biodiesel produced in a conventional plant in Indonesia (Conventional System) with an upgraded system (Biorefinery) that includes the utilisation of palm biomass residues as required by the current national policy. Many authors have carried out comparisons of the economic and/or cost competitiveness of different production system configurations in an effort to explore the attractiveness of biofuels and enhance efficiency. For example, Bansal et al., Crago et al., and Millinger et al [15]–[17] used economic indicators (e.g. total cost, breakeven price) to compare the economic feasibility of biofuels from different feedstock production. Barua et al. and Blum et al. [18], [19] scrutinized the cost competitiveness of energy based on renewable sources compared with fossil fuels using economic parameters such as levelised cost of electricity. Our study enhances understanding about the context of Indonesia, the largest producer of palm oil in the world. The scope of our study is limited to the system improvement at the plant level i.e. basically integrating the palm oil mill and the biodiesel plant. We consider an average size of palm oil mill (i.e. 150 kt-FFB/y) which supplies all produced CPO (i.e. 30 kt-CPO/y) to a medium size biodiesel plant for producing biodiesel only. In other words, the production chain is dedicated to biodiesel using palm oil as feedstock. Dedicated biodiesel production will allow the palm oil mill to source feedstock from palm fruits with higher CPO yields such as palm pisifera (i.e. with thicker mesocarp) compared to other varieties (e.g. palm dura) with higher palm kernel yields and thus more favourable for edible oil production [20]. The analysis is applicable to palm oil mills across Indonesia, but can also be applied to palm oil biodiesel production elsewhere. Based on previous studies, we can assume that Indonesia has the potential to produce sufficient palm oil to meet the domestic demand for biodiesel, food and industrial uses, as well as the export demand [3]. In a context of enhanced biodiesel production in the country, as opposed to large exports of CPO, dedicated plants for biodiesel production are justified as a way to guarantee competitiveness. Dedicated processing plants for biofuel production have been implemented in other biofuel producing countries such as Brazil, the largest producer of sugar in the world. Thirty five percent of the sugarcane-based mills in Brazil produce ethanol only, and the remaining mills produce either only sugar or both sugar and fuel [21]. Ultimately, this study explores ways to improve the economic competitiveness of palm oil biodiesel production in Indonesia. We evaluate the potential profits from the use of palm biomass residue (i.e. empty fruit bunches, fibre, shell and palm oil mill effluents) and explore different allocations of the residues to produce value added products (i.e. electricity, heat, and biofertiliser) in the context of integrated palm oil and biodiesel production. We examine the biorefinery concept in three different cases, considering utilisation of biomass residue, plant conversion options, and production of value added in the form of energy products (biodiesel, bioelectricity, heat) and non-energy products (biofertilisers). This study performs life-cycle cost analysis and cost effectiveness analysis to assess the net income, net present value (NPV), internal rate of return (IRR) payback period (PBP) and biodiesel breakeven price (BBP). The life-cycle cost quantifies the cost starting from the construction phase to the end of the economic life of the plant.

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ACCEPTED MANUSCRIPT Figure 1 shows simplified diagrams representing the Conventional System and the Biorefinery as per applied in the analysis.

Figure 1 Simplified diagrams of Conventional System and Biorefinery configurations in this study Abbreviations: EFB (empty fruit bunch); MF (mesocarp fibre), KS (kernel shell); POME (palm oil mill effluent) Notes: - Remaining biomass in the Conventional System are untreated. 98% of KS is sold to the market, 24% of EFB is left to decay. - a % is to the quantity of EFB to be treated proportionately in cogeneration plant and composting. - b % is the quantity of POME to be treated proportionately in biogas plant and composting. - Details of biomass conversion technologies, quantity of biomass residues, bio-products, energy supply and distance between palm oil mill and biodiesel plant are given in Section 2.1 for the Conventional system and Section 2.2 & 3.1 for Biorefinery.

The coming sections are structured as follows. Section 2 describes the system boundaries and data sources for the palm oil and biodiesel production system. Section 3 presents the methodology for developing the biorefinery cases, and methods to carry out the economic analysis. Section 4 provides results and discussions. Finally, conclusions are given in Section 5. 2

Palm oil and biodiesel production system: system boundaries and data sources

Fresh fruit bunch (FFB) is the main feedstock for producing CPO. The production of CPO from FFB includes sterilization, stripping, digesting and pressing the fruits, and oil extraction [9]. Besides the main products, CPO and palm kernel, palm oil mills produce solid and liquid biomass residues i.e. empty fruit bunches, mesocarp fibre, kernel shell, and palm oil mill effluent. In the biodiesel plant, biodiesel is produced through the transesterification process using short chain of alcohol e.g. ethanol or methanol 5

ACCEPTED MANUSCRIPT [22]. The process can profit from the help of an alkaline catalyst such as potassium hydroxide to accelerate the reaction. It converts ester that separates the triglycerides, takes the glycerol of the triglyceride and replaces it with alkyl radical of the alcohol used [23]. Apart from biodiesel, the process generates glycerol as co-product. We evaluate palm oil and biodiesel production systems based on biomass conversion technologies, the quantity of biomass residues treated, the bioenergy (i.e. electricity and heat) and bio-product (i.e. biofertiliser) produced from the residues, the fuel (i.e. fossil or renewable) used in the facility, and the integration of the palm oil mill with the biodiesel refining plant. The system boundary of a Conventional System and a Biorefinery are described in Section 2.1 and Section 2.2. The information about palm oil conversion and mill operation was obtained from a palm oil mill in North Sumatra, and literature gathered during a field visit in Indonesia in 2015 and 2016. The material and energy flows were estimated based on the existing palm oil mill. Information for the biodiesel plant and biodiesel conversion was obtained from literature primarily describing conditions for Indonesia. Data sources for upgraded systems were obtained from international references when local data was not available. 2.1

The Conventional System

The Conventional System depicts a typical production of palm oil biodiesel in Indonesia. The palm oil mill and the biodiesel plant in Indonesia are typically geographically separated, whereby the palm oil mill is closer to the plantation, and the biodiesel plant is located near a seaport to more easily serve the export market. The handling capacity of a palm oil mill in Indonesia is between 10 and 60 t-FFB/h [4]. In this study, we describe the production unit of a palm oil mill in North Sumatra, which has a representative size for a typical mill in Indonesia: 30 t-FFB/h and operating time 5,000 h/y. The steam, and electrical requirements, as well as yields of empty fruit bunch, fibre, shell and mill effluent were obtained from the field visit, shown in Table 1. The Conventional System considered in this study has a cogeneration plant, or CHP plant, which has long been used in some palm oil mills in Indonesia. Other mills still use a diesel generator to meet the internal energy consumption [24]. In the conventional palm oil mills, the CHP plant has 20 bar (2.0 MPa) and 350 0C of steam, low efficient boilers (70% efficiency) and steam turbine with electrical efficiency (16%) for producing steam (500 kg/t-FFB) and electricity (22 kWh/t-FFB) required for palm oil milling operation. The low-efficient cogeneration plant only burns a small portion of the shells (2%) and fibres for energy generation. It consists of steam boilers, back pressure turbine, and electrical networks which have been integrated in one system. It generates sufficient energy (electricity and heat) to run the mill. Most palm oil mills in Indonesia are not connected to the external electricity grid. The installed capacity of the cogeneration plant is 0.6 MW, which is calculated based on shells and fibres treated (see calculation in Appendix A). In the Conventional System, the mill effluent is treated in aerobic and facultative open lagoons with no biogas recovery. The system also considers co-composting of empty fruit bunches and effluents treated for producing biofertilisers, which has been the common practice in palm oil mills in Indonesia [25]. The amount of biofertiliser produced in the Conventional System is 96.23 kg/t-FFB (see calculation in Appendix B). The value is close to the estimation presented by Stichnothe et al. [26]. In the Conventional System, the biodiesel plant receives CPO from the palm oil mill. As described above, our assessment considers a dedicated mill supplying all produced CPO to a biodiesel plant. The use of 6

ACCEPTED MANUSCRIPT CPO for purposes other than biodiesel production is not considered in this study. The biodiesel plant has capacity to process 30 kt-CPO/y. Biodiesel is the main product of the plant and glycerol is the coproduct. Table 2 shows material input and output for palm biodiesel production. The biodiesel plant was assumed to be located 50 km from the palm oil mill. The transport cost was 0.14 USD/t-CPO/km [27]. Diesel fuel and heavy fuel oil supply energy to the biodiesel plant. The quantity of the fuels were estimated as described in Appendix C. Table 1 Material and energy flow for palm oil production, per t-FFB, in the Conventional System Item Input material FFB Electricity Steam Diesel for pumping effluent(*) [26] Output material Crude palm oil, CPO By-product Palm kernel, PK Biomass residue Empty fruit bunch, EFB Kernel shell, KS Mesocarp fibre, MF Waste water Palm oil mill effluent, POME

Value

Unit

1 22 500 0.064

kWh kg l

200

kg

47

kg

230 60 140

kg kg kg

0.6

m3

Note: All values were obtained from field visit, except diesel for pumping effluent (*)

Table 2 Material and energy flow for palm biodiesel production, per kg-biodiesel, in the Conventional System Item

Value

Unit

Input material Crude palm oil, CPO(a)

1.19

kg

Methanol(b)

0.14

kg

Catalyst, NaOH(c)

0.02

kg

Diesel (d)

0.092

l

0.039

l

Heavy fuel oil

(e)

Output material Biodiesel

1

By-product Glycerol (f)

0.167

kg

Notes: (a) Calculated based on 950 l-biodiesel/t-CPO [28] and biodiesel density 0.88 kg-biodiesel/l-biodiesel [29] (b) Quantity of methanol is the average values from Ref. [10], [28], [30] (c) Quantity of catalyst NaOH is the average values from Ref. [10], [30], [31] (d) Calculated based on electricity consumption in biodiesel plant, 0.27 kWh/kg-biodiesel, which is the average values from Ref. [10] [31], [32] (e) Calculated based on steam consumption in biodiesel plant, 1,360 MJ/t-biodiesel [32], [33] (f) Data from Ref. [10]

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The schematic representation of the Conventional System is shown in Figure 2.

Figure 2 Schematic representation of the Conventional System, a 30 t-FFB/h palm oil mill with a low efficiency biomass cogeneration, an adjacent aerobic co-composting plant and a biodiesel plant at 50 km distance (numbers are per t-FFB) Abbreviations: CPO (crude palm oil); EFB (empty fruit bunch); FFB (fresh fruit bunch); MF (mesocarp fibre), KS (kernel shell); PK (palm kernel); POME (palm oil mill effluent); HFO (heavy fuel oil) Data sources and assumptions: (a) Values obtained from field visit (b) Data from Ref. [26] (c) Quantity of methanol is the average values from Ref. [10], [28], [30] (d) Quantity of catalyst NaOH is the average values from Ref. [10], [30], [31] (e) Calculated see Appendix C (f) Calculated, assuming total distance: 2*50 km; transport cost was 0.14 USD/t-CPO/km [27] (g) Estimated based on substrate ratio for co-composting of POME and EFB [34], [35] (h) Calculated see Appendix B (i) Calculated based on conversion from Ref. [28] (j) Calculated based on conversion from Ref. [10]

2.2

The Biorefinery

The Biorefinery is a conceptual plant which comprises a palm oil mill, a biodiesel plant, a high efficiency biomass cogeneration plant, a biogas unit or a co-composting plant, all in one facility. It is an upgraded system in comparison with what is typically installed in Indonesia. Petterson et al. and Solikhah et al. [14], [36] indicated that the cost for transporting feedstock is significant in relation to the total cost of feedstock, capital and biodiesel production and distribution. Hence, an integration of the feedstock production and the biofuel production plant can reduce transport costs and related emissions. For Indonesia, such integration can also contemplate the location of the refinery closer to domestic markets unlike the present location of biodiesel plants, which is often close to the seaport mainly to serve the export market. Energy for the Biorefinery is derived from palm biomass sources helping to eliminate the deposition of residue. The proposed biorefinery is a simple one that uses one feedstock to produce 8

ACCEPTED MANUSCRIPT two or three products with current available technologies [37]. The Biorefinery is connected to the external electricity grid and, therefore, excess electricity can be sold beyond the refinery borders. For the purpose of comparison, the Biorefinery has similar feedstock input (i.e. FFB) as the Conventional System, thus 30 t-FFB/h or 150 kt-FFB/y; and operating time of 5,000 h/y. Notice that FFB is considered as feedstock in this study instead of CPO because CPO is an intermediate product to be processed into biodiesel. As mentioned before, this study does not discuss other uses for the CPO. The treatment of palm oil mill effluent in the Conventional System with a series of ponds can reduce pollutants (i.e. BOD and COD), but does not capture methane. To meet the sustainability requirement as defined by the national policy, the proposed Biorefinery treats the effluent in a biogas plant to capture the methane for producing biogas for electricity. The biogas plant consists of biodigester, scrubber, gas engine, boiler, flare [7]. There are several anaerobic digestion technologies (biodigester) for biogas recovery. The covered lagoon (covered ponds with mixing mechanisms) was chosen in this study due to lower installation costs compared to the continuous stirred tank reactors, although the gas production efficiency is lower [38]. The installed capacity of the biogas plant (in MW) was calculated based on the quantity of effluents (see calculation and assumptions in Appendix D). The potential for biofertiliser from POME bio-digestate from the biogas plant is not considered in this study. The cogeneration plant in the biorefinery is described as a high efficient CHP plant (a 4.0 MPa and 360 0C of steam with 90% boiler efficiency), coupled with steam turbine (30% electrical efficiency) to generate steam and electricity for CPO and biodiesel production. It is equipped with pre-treatment system for pressing, cutting and drying the empty fruit bunches. The pre-treatment system is used to convert the empty fruit bunches into a better fuel for the boiler [39]. The installed capacity of the cogeneration plant was calculated based on the quantity of residues (i.e. empty fruit bunches, shell and fibre) (see calculation and assumptions used in Appendix E). As mentioned in the Introduction, we explore three different cases of Biorefinery (i.e. Case 1 to Case 3) to assess the impact of different conversion options of palm biomass residues to produce value added products (i.e. electricity, heat, and biofertiliser). Description of the biorefinery cases and methods for economic evaluation are presented next. 3 3.1

Evaluating the cost competitiveness of palm oil biodiesel production systems Biorefinery cases

In order to investigate the most cost-effective biorefinery configuration for palm biodiesel production in Indonesia, we explore three different Biorefinery cases (Case 1 to Case 3) utilising the available biomass residues. The quantity of palm oil mill effluents and empty fruit bunches vary because both types of residue can be treated in more than one biomass conversion technology available at the site. Table 6 presents the quantity of biomass utilised in each biomass conversion technology. The effluents are either used for biogas generation in the anaerobic digestion plant (using covered lagoon to capture methane) for later producing electricity, or can be used to produce biofertiliser together with empty fruit bunches. The empty fruit bunches can be processed in the cogeneration plant as described above, and in a co-composting plant with the effluents. The aerobic co-composting plant applies similar technology as the Conventional System. The schematic representation of the Biorefinery is shown in Figure 3.

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Figure 3 Schematic representation of the Biorefinery, a 30 t-FFB/hour palm oil mill with a high efficient biomass cogeneration, a biogas plant, or with a co-composting plant and a biodiesel plant (numbers are presented per t-FFB) Abbreviations: CPO (crude palm oil); EFB (empty fruit bunch); FFB (fresh fruit bunch); MF (mesocarp fibre), KS (kernel shell); PK (palm kernel); POME (palm oil mill effluent) Data sources and assumptions: (a) Values obtained from field visit (b) Data from Ref. [26] (c) Quantity of methanol is the average values from Ref. [10], [28], [30] (d) Quantity of catalyst NaOH is the average values from Ref. [10], [30], [31] (e) Calculated see Appendix D (f) Estimated based on electricity required for treating POME in biogas plant [38] (g) Estimated based on substrate ratio for co-composting of POME and EFB from Ref. [34], [35] (h) Calculated see Appendix E (i) Estimated based on electrical consumption for EFB pre-treatment plant [38] (j) Quantity of electricity use in biodiesel plant is the average values from Ref. [10], [31], [32] (k) Calculated based on conversion from Ref. [28] (l) Calculated based on conversion from Ref. [10] (m) Excess electricity to the grid is electricity production from biogas and cogeneration plant subtracted by the electricity for on-site use (n) Quantity of biofertiliser was quantified using similar approach as in the Conventional System, as shown in Appendix B

3.2

Metrics for performing economic analysis in different configurations

As mentioned previously, the study investigates the economic metrics for measuring the competitiveness of the conventional and upgraded palm oil biodiesel production in Indonesia. NPV (net present value), IRR (internal rate of return), payback period, and biodiesel breakeven price were evaluated. Details about the metrics and data sources are provided below.

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Life-cycle system costs We apply life-cycle cost (LCC) which quantifies the cost, starting from the construction phase of a facility to the end of its economic life [40]. LCC includes annualised capital costs and annual recurrent costs (materials, fuel, and maintenance), Eq.1. Input for LCC assessment is shown in Table 3. The capital costs comprise cost for palm oil mill, conversion technologies for biomass residues and biodiesel plant. The capital cost of technology or plant was annualised considering 25 years lifetime and 6.8% interest rate [41], using Eq.2. The cost of land was excluded. Capital cost reduction of 25% was considered when the palm oil mill and biodiesel plant are located in one single facility [42]. In our analysis, we considered scaling effect, with a scaling factor (R) of 0.7, to adjust the capital costs in relation to the size of the equipment, based on a reference cost [43], which is expressed in Eq.3. The reference values of the capital cost are shown in Appendix F. The maintenance cost is estimated at 4% of the annual capital cost [44]. Table 3 Input for life-cycle cost Item

Value

Reference

0.12 USD/kg

[45]

Diesel

0.38 USD/l

[46]

Heavy fuel oil

0.43 USD/l

[46]

Methanol

0.35 USD/kg

[47]

Catalyst, NaOH

0.635 USD/kg

[47]

Transport cost

0.14 USD/t-CPO/km

[27]

Plant lifetime

25 years

CPO mill and biodiesel plant FFB

Other assumptions

Interest rate

6.8 %

𝐶 = ∑(𝑉𝑖 ∗ 𝑃 ) + 𝐴𝐸𝐶 + 𝑀 𝑖

[41] (Eq. 1)

where,

C is annual cost 𝑉𝑖 is annual quantity of input (feedstock, materials, energy) 𝑃𝑖 is unit cost 𝐴𝐸𝐶 is annualised capital cost 𝑀 is annual maintenance cost

𝐴𝐸𝐶 =

𝑖

.𝐶𝐶

𝑡

1 ‒ 1/(1 + 𝑟)

(Eq. 2)

where,

𝐴𝐸𝐶 is annualised capital cost r is interest rate CC is total capital cost t is the economic lifetime 𝐶𝐶𝑎 𝐶𝐶𝑏𝑎𝑠𝑒

𝑆𝑖𝑧𝑒𝑎

= (𝑆𝑖𝑧𝑒

𝑏𝑎𝑠𝑒

𝑅

)

(Eq. 3) 11

ACCEPTED MANUSCRIPT where, 𝐶𝐶𝑎 and 𝑆𝑖𝑧𝑒𝑎 represent the costs and installed capacity of the equipment or technology evaluated in this study 𝐶𝐶𝑏𝑎𝑠𝑒 and 𝑆𝑖𝑧𝑒𝑏𝑎𝑠𝑒 are the costs and installed capacity of the reference equipment from the scientific works

Potential revenues Total revenues (Eq. 4) presents annual quantity of outputs multiplied by unit prices (in Table 4). The unit prices are fixed. (Eq. 4)

𝑅 = ∑(𝑉𝑜 ∗ 𝑃 ) 𝑜

where,

𝑅 is annual revenues 𝑉𝑜 is annual quantity of output (biodiesel, palm kernel, CPO, excess electricity, biofertiliser, glycerol) 𝑃𝑜 is unit price

Table 4 Unit prices of materials, fuel, products Items

Amount

Reference

0.41 USD/kg

[48]

0.085 USD/kWh

Regulation 12/2017

Biodiesel

0.66 USD/l

[46]

Glycerol

0.16 USD/kg

[49]

Biofertiliser

0.09 USD/kg

(*)

Palm kernel Electricity from bioenergy sources

Note: (*) Based on inorganic fertiliser price (NPK) [50] and considering nutrients value substitution of a tonne inorganic fertiliser equals to 7.9 dry tons of produced biofertiliser [51].

Economic metrics Net income, NPV, IRR, and PBP are common indicators for economic analysis, used to investigate the feasibility and desirability of a system [20], [52]. Net income (Eq. 5) is calculated as the difference between total income and total cost. NPV indicates overall financial performance of a project. NPV (Eq. 6) is derived from the total discounted income and costs at lending rate of 6.8% (average lending rate in Indonesia January – June 2016 from [41]) and project lifetime of 25 years. IRR (Eq. 7) is calculated at NPV equal to zero. PBP (Eq. 8) presents the time it takes before an investment is recovered. It is expressed by capital cost divided by annual revenues. (Eq. 5)

𝐼=𝐶‒𝑅 where,

𝐼 is annual net income 𝐶 is annual cost 𝑅 is annual revenue

( 𝑁𝑃𝑉 = (∑

𝑅 ‒ (𝐶𝐶 + 𝑇)

𝑛 𝑁𝑃𝑉 = ∑1

(1 + 𝑟)𝑛

𝑛𝑅 ‒ (𝐶𝐶 + 𝑇) 1 (1 + 𝐼𝑅𝑅)𝑛

) )=0

(Eq. 6) (Eq. 7)

where,

12

ACCEPTED MANUSCRIPT 𝑁𝑃𝑉 is net present value 𝑅 is annual revenue T is annual O&M cost includes annual cost of feedstock, materials, energy and maintenance cost 𝐶𝐶 is total capital cost r is interest rate n is project lifetime 𝐼𝑅𝑅 is internal rate of return

𝑃𝐵𝑃 =

𝐶𝐶 𝑅‒𝑇

(Eq. 8)

where,

PBP is payback period CC is total capital cost 𝑅 is annual income T is annual O&M cost includes annual cost of feedstock, materials, energy and maintenance cost

We also estimated biodiesel breakeven price (BBP), (Eq. 9), known as sale price of product at zero plant profit. It is defined as net income excluding profit from the sale of biodiesel. Branca et al. [53] and Miranowski et al. [54] applied that concept to estimate the maximum purchase feedstock price for biofuel processing. Johari et al. [55] estimated the CPO price for palm biodiesel to determine the level of subsidy needed for biodiesel to compete with fossil diesel. Keske et al. [56] quantified the profitability of biofuel feedstock for the farmer at certain diesel price using breakeven point analysis. We used BBP to draw breakeven line to understand the biodiesel profitability of the evaluated cases, and compare it with fossil diesel. The breakeven line draws BBP at various costs of feedstock (i.e. FFB) and against the historical FFB cost and fossil diesel price from January 2010 until April 2016. BBP was expressed in energy equivalent of diesel (energy content of diesel: 35.8 MJ/l and biodiesel 33 MJ/l [29]). The FFB cost from 80 – 240 USD/t was proportionally linked to CPO market price in the past 10 years [57]. Fossil diesel prices were obtained from official policy documents1 and expressed in 2016 price. Notice that the method used to derive the breakeven line in this study is appropriate for analysis of short term potential and economic viability of biodiesel [54], [58].

𝐵𝐵𝑃 =

𝐶 ‒ 𝑅 ‒ (𝑉𝑜𝑏 ∗ 𝑃𝑜𝑏) 𝑉𝑜𝑏

(Eq. 9)

where,

𝐵𝐵𝑃 is biodiesel breakeven price C is annual costs 𝑅 is annual revenues 𝑉𝑜𝑏 is annual biodiesel production 𝑃𝑜𝑏 is biodiesel price

Sensitivity analysis Sensitivity analysis is used to address uncertainties related to investment and market fluctuations that can alter economic outcomes in significant ways. The sensitivity test investigates the variation of economic performance with changes in key assumptions. In studies related to palm oil, common 1

Policy documents of Indonesia for obtaining diesel prices data: Regulation 9/2006, 16/2008, 38/2008, 15/2012, 34/2014, 191/2014, 39/2014, 4/2015, 39/2015, 2/2016, 4738/20

13

ACCEPTED MANUSCRIPT variables for sensitivity analysis include raw material prices, interest rate, capital cost, O&M cost [28], [59], [60]. We run the test to measure the impact of parameters on net income. Table 5 shows the key parameter changes and variations for sensitivity analysis. Table 5 Parameters for sensitivity analysis Economic indicator for sensitivity test Net income (Million USD/y)

Parameter

Base value

FFB cost Electricity price from biomass Biofertiliser price

0.12 USD/kg

Biodiesel price Total annualised capital cost

0.663 USD/kg (based on configuration)*

0.085 USD/kWh 0.088 USD/kg

Variations to the base value

-50%, -25%, +25%, +50%

Note: * Total capital cost is shown in Table 6. The annualised cost was calculated using 8.45% annuity factor. 4 4.1

Results and discussions The shift towards an integrated Biorefinery

Table 6 presents the capital costs of the analysed plant configurations (Conventional System and Biorefinery Case 1 to Case 3), showing the investments needed to move towards an integrated system. The capital costs of all biorefinery configurations are higher than the Conventional System, primarily due to the investment for upgrading the treatment of palm biomass residue. Meanwhile other recurrent costs in the Biorefinery are 10% lower than in the Conventional System. The study shows that no potential economic benefits can be gained moving from Biorefinery Case 1 to Case 3, due to the high investment required for the biogas technology. However, the technology is more efficient to capture methane from POME compared to the aerobic co-composting [61] and thus has higher environmental benefits. The annual costs and revenues are shown in Table 7. The cost of feedstock (i.e. FFB) is the item affecting the total cost the most, with an average share of 80%. This is in line with other studies showing that the feedstock affects production costs in a range of 50-80% [28], [62], [63]. Cost reduction opportunities in the Biorefinery include reduction of fossil energy costs for industrial operation (by utilising on-site generated energy), reduction of transport cost of feedstock to the biodiesel plant, reduction of material losses through implementation of high efficient biomass conversion technologies, and increase value added for the biomass residues (i.e. selling excess electricity and biofertiliser). Selling biofertiliser and excess electricity to the grid results to annual revenues which are highest in the Biorefinery-Case 1. This unit supplies excess electricity of 10.6 GWh/y which, for instance, can be used to electrify about 6,000 households in Indonesia, assuming an average electricity consumption of 1.7 MWh/household/y [64]. The system can obtain additional income of 14 USD/t-FFB compared to the Conventional System.

14

Table 6 Capital cost of Conventional System and Biorefinery Case 1 to Case 3*, based on quantity of biomass residues treated Unit

Biomass conversion options

Conventional System

Palm oil mill Biodiesel plant Low efficiency biomass cogeneration Aerobic co-composting plant Total Palm oil mill Biodiesel plant Aerobic co-composting plant High efficiency of biomass cogeneration plant Total Palm oil mill Biodiesel plant Aerobic co-composting plant Biogas plant – anaerobic covered lagoon High efficiency of biomass cogeneration plant Total Palm oil mill Biodiesel plant Biogas plant – anaerobic covered lagoon High efficiency of biomass cogeneration plant Total

Biorefinery-Case 1

Biorefinery-Case 2

Biorefinery-Case 3

% of biomass residues utilised

Production per year

KS: 2%** MF: 100%

30 kt-CPO 25 kt-biodiesel 3 GWh 14.4 kt-biofertiliser

POME: 100%, EFB: 82% KS: 100%, MF: 100%, EFB: 18%

30 kt-CPO 25 kt-biodiesel 14.4 kt-biofertiliser 21 GWh

POME: 50%, EFB: 41% POME: 50% KS: 100%, MF: 100%, EFB: 59%

30 kt-CPO 25 kt-biodiesel 7.2 kt-biofertiliser 1.5 GWh 22 GWh

POME: 100% KS: 100%, MF: 100%, EFB:100%

30 kt-CPO 25 kt-biodiesel 3 GWh 24 GWh

Total capital cost (Million USD) 6.02 1.48 1.04 0.80 9.34 6.02 1.11 0.80 16.20 24.13 6.02 1.11 0.49 0.99 16.99 25.61 6.02 1.11 1.61 17.77 26.51

Notes: *see Figure 2 and Figure 3 for the schematic representation of the configurations. **the remaining shells is sold to the market

15

ACCEPTED MANUSCRIPT Table 7 Costs and revenues of the Conventional System and Biorefinery (Case 1 to Case 3), in thousand-USD/y Items

Conventional System

Biorefinery Case 1

Case 2

Case 3

Costs Feedstock (i.e. FFB)

18,000

18,000

18,000

18,000

Diesel

1,426

12

12

6

Heavy fuel oil

426

-

-

-

Transport cost

432

-

-

-

Methanol

1,241

1,241

1,241

1,241

Catalyst

261

261

261

261

Maintenance cost

52

4

4

4

Annualised capital cost

1,290

2,414

2,539

2,616

(a) Annual cost

23,126

21,933

22,058

22,128

Palm kernel

2,898

2,898

2,898

2,898

Biodiesel

18,896

18,896

18,896

18,896

Glycerol

670

670

670

670

-

902

1,135

1,369

Biofertiliser

1,265

1,265

632

-

(b) Annual income

23,729

24,631

24,232

23,832

602

2,699

2,174

1,704

Revenues

Electricity to grid

Annual net income (b) – (a)

4.2

Results of the economic analysis

The NPV, PBP, and BBP of the Conventional System and Biorefinery Case 1 to Case 3 are shown in Figure 4. Our analysis demonstrates that Biorefinery-Case 1 provides the highest net income (i.e. 25 Million USD/y) and NPV (i.e. 31 Million USD/y), lowest BBP (0.57 USD/l-biodiesel) and 17% IRR. The production of biodiesel from palm oil mill in that unit is economically viable as the payback period 5.7 years is less than one-third of the plant’s life time (i.e. 25 years) [28]. Therefore, we identify Biorefinery-Case 1 as the most cost-effective configuration among the considered alternatives, or the one that can enhance the economic competitiveness of palm oil biodiesel production in Indonesia the most.

16

ACCEPTED MANUSCRIPT

Figure 4 Net income, NPV, payback period and biodiesel breakeven price of the Conventional System and the Biorefinery Case 1 to Case 3 The breakeven line in Figure 5, which was configured based on BBP at different unit cost of FFB, represents the minimum selling price for biodiesel at plant zero profit, that is, when costs are equal to revenues. The X-axis is biodiesel and diesel price and Y-axis is FFB cost from January 2010 to April 2016. Palm oil based biodiesel is profitable at FFB cost and diesel price below the line, whereas values above the line represent unprofitable production. The graph shows that none of the historical prices of diesel and costs of FFB falls below the breakeven lines. There are five points that nearly intersect with the breakeven line of Biorefinery-Case 1 which were from August 2015 to December 2015 when the diesel price was around 0.48 – 0.5 USD/l (76 – 79 USD/barrel) and the FFB cost was around 111 – 120 USD/t-FFB (or equal to 557 – 604 USD/t-CPO). Market price of palm oil has rarely been low enough or diesel prices high enough to make biodiesel profitable. The most cost-effective plant configuration (Biorefinery-Case 1) can help to reduce the level of fiscal support by 0.07 USD/l-biodiesel. It can generate savings of 0.7 billion USD/y for meeting the consumption target of 30% biodiesel blending rate with fossil diesel by 2020 (or 10.11 billion litre of biodiesel2). In order to bring the breakeven line further up, either plant revenues or the level of fiscal support need to be increased. The effect of adding fiscal support to the price of biodiesel is shown in Figure 5. Fiscal support in the range of 0.1 to 0.2 USD/l-biodiesel was provided from 2015 to 2016. When similar incentives were added, (represented by the green and the blue lines in Figure 5), the breakeven lines go up above a few historical values, implying profitable biodiesel production at FFB costs and diesel prices combination below the line.

2

Authors calculation based on diesel fuel projection in 2025 of 43 billion litres for transport and industry sectors [75] and biodiesel blending rate of 30% (Regulation 12/2015). Energy content of diesel 35.8 MJ/l and for biodiesel 33 MJ/l [29]

17

ACCEPTED MANUSCRIPT

Figure 5 Historical FFB cost and diesel price, and biodiesel breakeven lines of Conventional System and Biorefinery-Case 1 Notes: X-axis is diesel and biodiesel prices and Y-axis is FFB cost from January 2010 to April 2016. Cost of FFB is proportionally linked to CPO market price [57]. Price of diesel was obtained from various official policy documents. All prices data were converted to 2016 price.

The breakeven line can also be used to assess the maximum price that the biodiesel producer can pay for the feedstock (i.e. FFB), given the price of fossil diesel, which is the biodiesel substitute. At 50 USD/barrel (0.31 USD/l) of fossil diesel, the biodiesel producer can afford to purchase feedstock for up to 76 USD/t-FFB in the Biorefinery-Case 1 compared to 59 USD/t-FFB in the Conventional System. When incentive of 0.2 USD/l-biodiesel is added, the biodiesel producer can afford 114 USD/t-FFB while still keeping the biodiesel production profitable. The incentive given for biodiesel produced in the Biorefinery provides support both for the industry as well as oil palm farmers, but it is not a sustainable solution. 4.3

Effects of parameter changes: sensitivity analysis

We analysed the sensitivity of our comparative cost estimates to external prices and technology capital cost, shown in Figure 6. The description of key parameter changes and the variations is outlined in Table 5. For the purpose of sensitivity analysis, the comparison was performed for Conventional System and Biorefinery-Case 1 (the most cost-effective system). Figure 6 reveals that the feedstock (i.e. FFB) cost and sale price of biodiesel are the two parameters affect the net income the most. The uncertainties of both parameters become the main driver of the economic sustainability of the industry. The Conventional System is more affected with the changes compared to the biorefinery configurations.

18

ACCEPTED MANUSCRIPT

Figure 6 Sensitivity analyses on net income (Million USD/y) of Conventional System (CS) and Biorefinery-Case 1 (BC1) with parameter change of -50%,-25%, +25%, +50% from the base value on i) FFB cost; ii) biofertiliser; iii) bioelectricity price; iv) biodiesel price; v) annualised capital cost. 5

Conclusions

Our analysis identified Biorefinery-Case 1 to be the most cost-effective plant configuration, offering new economic opportunities for the palm oil biodiesel industry in Indonesia. The Biorefinery-Case 1 is an improved system that simultaneously produces biodiesel, electricity, heat and biofertiliser. It converts 100% of mill effluents and 82% of empty fruit bunches into biofertiliser. It also processes 18% empty fruit bunches, 100% shells and 100% fibres to produce energy, meeting on-site energy demand and generating excess electricity to the grid. The most cost-effective configuration (i.e Biorefinery-Case 1) provides the highest net income and NPV and lowest BBP. It delivers net income and NPV four times higher than the Conventional System. Producing and selling biofertilisers create a new revenue flow compared to, for example, the Biorefinery-Case 3 that does not have the biofertiliser production. The additional revenues improve the mill’s resilience to feedstock prices, increasing the economic robustness in the sector. The analysis reveals that the configuration with biogas plant for methane capture (i.e. Biorefinery Case 2 and 3) is less cost-effective due to the high capital cost of the technology. However, the system can bring more environmental benefits due to higher emissions reduction compared to the aerobic cocomposting system, and can contribute to increase electricity generation from biogas sources. If carbon markets evolve, emissions reductions can add to the attractiveness of biogas. For the time being, the 19

ACCEPTED MANUSCRIPT analysis suggests that a strategy may be needed if increased penetration of biogas technologies is aimed at for the mills. The Biorefinery offers clear opportunities to reduce costs and increase revenues in the biodiesel industry. The analysis of biodiesel breakeven price demonstrates that biodiesel dependency on government subsidies for competing with fossil diesel can be reduced if production is organised in biorefineries. Thus part of the subsidy budget could be directed to promote industrial integration in the models discussed here. This would reduce the industry’s vulnerability to diesel price fluctuations and make it more competitive. In the short term, biodiesel market expansion will be limited in the absence of government incentives unless high diesel prices or low feedstock costs prevail. In the meantime, infrastructure support such as connection to the electricity grid, which most conventional palm oil mills currently do not have, needs to be established to support the shift towards biorefineries as well as the possibility to market excess electricity. This study focused on present system performance and improved biomass conversion technologies. The upgrade of existing systems is in line with the current regulatory frameworks, and is a starting point towards more complex biorefinery systems. Yet, there is need to do more in order to reduce the barriers for industrial transformation, and accelerate policy implementation. Eventually, the shift to a modern facility with value chain integration as explored in this study can contribute to secure feedstock supply, reducing transport, enhancing penetration of renewable energy in Indonesia, and making the whole integrated system more energy and carbon efficient. All together, these benefits contribute to various policy objectives, and to the country’s climate commitments. Future studies should explore ways not only to improve the biodiesel cost-competitiveness in Indonesia but also to accelerate policy compliance. That can include exploring second-generation bioethanol, production of pellets and methanol, together with market creation for these products. It may also review pricing policies for feedstock, biodiesel and fossil diesel, or evaluate electricity tariffs from bioenergy sources, which can serve to promote both electricity and biodiesel production in the country. Finally, while this study discusses improvement opportunities in a typical palm oil mill, future work could incorporate geospatial location of the existing mills in Indonesia to identify mills and areas that are most attractive to be upgraded as Biorefineries for biodiesel production, also considering the possibility to receive feedstock from other mills in the same area.

20

ACCEPTED MANUSCRIPT Appendix A Installed capacity of low efficiency biomass cogeneration in the Conventional System Cogeneration plant capacity factor = 80% Cogeneration plant operating hours = 7008 Electrical efficiency = 16% Electricity demand of palm oil mill = 22 kWh-e /t-FFB (Ref. field visit) Annual net electricity demand = Gross electricity demand = Installed capacity =

22 kWh electricity /t ‒ FFB ∗ 150,000 t ‒ FFB/year 1000

3,300 MWh/y 80%

4,125 MWh/y 7008

= 3,300 MWh/y

= 4,125 MWh/y

= 0.6 MW

21

ACCEPTED MANUSCRIPT Appendix B Production of biofertiliser from EFB and POME in the Conventional System POME to FFB ratio = 0.6 m3-POME /t-FFB (Ref. field visit) Quantity of waste water = 90,000 m3 POME/y POME to EFB ratio = 3.2 m3-POME/t-EFB (Ref. [34], [35]) 90,000 m3 POME/y

EFB = 3.2 m3 ‒ POME/t ‒ EFB = 28,125 t-EFB/y COD POME= 55,000 mg/L (Ref. field visit) POME solids content = 40,000 mg/L (Ref. [65]) POME moisture = 96% (Ref. [51]) EFB moisture= 57.2% (Ref. [66]) Compost moisture= 35% (Ref. [51]) Dry matter loss during composting= 60% (Ref. [51]) Dry matter POME =

90,000 m3 POME/y ∗ 40,000 mg/L 9

10

= 3,600 t-dry POME/y

Dry matter EFB = 28,125 t-EFB/y * (1-57.2%) = 12,038 t-dry EFB/y Total dry matter POME + EFB, considering losses during composting= (3,600 t-dry POME/y + 12,038 t-dryEFB/y) * 60% = 9,382 t/y Total biofertiliser produced = 9,382 t/y * (1-35%) = 14,435 t-biofertiliser/y = 96.23 kg-biofertiliser/tFFB

22

ACCEPTED MANUSCRIPT Appendix C Quantity of diesel and Heavy Fuel Oil (HFO) for electricity and steam requirements in the biodiesel plant of the Conventional System Biodiesel plant capacity = 28,500 kL-biodiesel/y = 25,080 t-biodiesel/y Density of biodiesel = 0.88 kg/L (Ref. [29]) LHV of diesel oil= 42.8 MJ/kg (Ref. [29]) Density of diesel oil = 0.837 kg/litre (Ref. [29]) Electricity demand Electricity demand of biodiesel plant = 0.27 kWh/kg-biodiesel (Ref. derived from average value [10], [31], [32]) Annual electricity demand = 0.27 kWh/kg-biodiesel * 25,080 t-biodiesel/y * 1000 = 6,855 MWh/y Efficiency of diesel generator = 30% Generator operating hours = 7008 h/y Gross electricity demand =

6,855 MWh/y 30%

= 22,851 MWh/y = 82 TJ/y

22,85 MWh/y 7008

Capacity of diesel generator =

TJ

= 3.26 MW

6

82 y ∗ 10

Diesel consumption = 42.8 MJ/kg ∗ 0.837 kg/litre = 2,296,383 l-diesel/y Steam demand Steam demand of biodiesel plant = 1360 MJ/t-biodiesel (Ref. [32], [33]) LHV of HFO = 41 MJ/kg Density of HFO = 0.988 kg/l-HFO Boiler capacity = 2 t/h Boiler efficiency = 90% Operating hours = 7008 h/y Enthalpy of water at 100degC, 3100kPA = 42 MJ/t (Ref. enthalpy table) t

Annual enthalpy of feedwater =

MJ

h

2h ∗ 42 t ∗ 7008y

= 6 TJ/y

10^6

Enthalpy of water at 300degC, 3000 kPA (31bar) = 2991 MJ/t (Ref. enthalpy table) t

Annual enthalpy of feedwater= TJ

Annual energy demand =

42 y ‒

TJ

HFO consumption =

MJ

10^6

6TJ y

90%

= 42 TJ/y

= 40 TJ/y

6

40 y ∗ 10 MJ

h

2h ∗ 2991 t ∗ 7008y

kg

41 kg ∗ 0.988litre

= 988,039 L-HFO/y

23

ACCEPTED MANUSCRIPT Appendix D Calculation of electricity production and installed capacity of biogas plant in Biorefinery-Case 3 POME to FFB ratio = 0.6 m3-POME /t-FFB (Ref. field visit) Quantity of waste water = 90,000 m3 POME/y COD POME = 55,000 mg/L = 0.055 t-COD/m3 (Ref. field visit) Methane density = 0.716 kg-CH4/m3-CH4 (Ref. [67]) Methane yield = 0.252 t-CH4/t-COD (Ref. [68]) Methane conversion factor = 0.8 (Ref. [67]) Uncertainty factor = 0.9 (Ref. [68]) Methane energy content = 35.9 MJ/Nm3 (Ref. [67]) Conversion from MJ to kWh = 3.6 MJ/kWh (Ref. [29]) Lagoon COD efficiency = 98% (Ref. [69]) Electrical efficiency= 30% Plant operating hours = 7008 h/y Annual methane production = 90,000 m3 POME/y * 0.055 t-COD/m3 * 0.252 t-CH4/t-COD * 0.8 * 0.9 * 98% = 880 t-methane/y Gross electricity generation =

880 t ‒

Installed capacity of biogas plant =

methane MJ ∗ 30% ∗ 35.9Nm3 y kgCH4

MJ

0.716m3CH4 ∗ 3.6kWh 2,942 MWh/y 7008 h/y

= 2,942 MWh/y

= 0.52 MW

24

ACCEPTED MANUSCRIPT Appendix E Calculation of electricity production and installed capacity of high efficiency biomass cogeneration in Biorefinery-Case 3 EFB to FFB ratio = 230 kg EFB /t-FFB (Ref. field visit) Quantity of EFB = 34,500 t-EFB/y Moisture removal of raw EFB = 30.40% (Ref. [70]) Quantity of EFB after moisture removal = 30.40% * 34,500 t-EFB/y = 10,488 t-EFB/y KS to FFB ratio = 60 kg KS /t-FFB (Ref. field visit) Quantity of KS = 9000 t-KS/y MF to FFB ratio = 140 kg-MF /t-FFB (Ref. field visit) Quantity of MF = 21,000 t-MF/y LHV of EFB = 12,144 MJ/t (Ref. average value from [66], [70]) Moisture content of EFB = 57.2% (Ref. [66]) LHV of KS = 17,013 MJ/t (Ref. average value from [66], [70]) Moisture content of KS = 21.4% (Ref. [66]) LHV of MF = 13,874 MJ/t (Ref. average value from [66], [70]) Moisture content of MF = 37.2 % (Ref. [66]) Electrical efficiency = 30% Energy from EFB = Energy from KS = Energy from MF =

tEFB y ∗

10,488

12,144

MJ t ∗ (1 ‒ 57.2%)

10^6 tKS y ∗

9000

17,013

MJ t ∗ (1 ‒ 21.4%)

10^6 tMF y ∗

21,000

13,874

120 TJ/y

MJ t ∗ (1 ‒ 37.2%)

10^6

= 55 TJ/y

= 183 TJ/y

Total energy generated by cogeneration plant = 358 TJ/y Conversion factor TJ-MWh = 278 MWh/TJ (Ref. [29]) Gross electricity = 358 TJ/y * 278 MWh/TJ * 30% = 29,818 MWh/y Installed capacity of biomass cogeneration plant =

29,818 MWh/y 7008 h/y

= 4.25 MW

25

ACCEPTED MANUSCRIPT Appendix F Capital cost and installed capacity of the reference equipment Table F.1 Capital cost and installed capacity of the reference equipment Technology Palm oil mill Biodiesel plant Low efficiency biomass cogeneration(a) Aerobic co-composting plant(b) Biogas plant - anaerobic covered lagoon(c) High efficiency biomass cogeneration(d)

Capital cost of the reference equipment (Million USD) 6.02

Installed capacity of the reference equipment 30 t-FFB/h

Reference [71], [72]

12

50,000 t-biodiesel/y

[73]

10.69

7.68 MW

[74]

0.6

9,563 t-wet-compost

[51]

2.87

1.2 MW

[7]

30.5

9.2 MW

[70]

Notes: (a) Capital cost consists of cogeneration plant with low pressure boiler (b) Capital cost includes equipment cost (c) Capital cost includes digester (covered lagoon), scrubber, dehumidifier biogas, gas engine, boiler, biogas flare (f) Capital cost includes cogeneration plant with high pressure boiler, including EFB pre-treatment plant Data from literatures are adjusted for inflation to 2016 price, using Indonesia GDP deflator (Bank of Indonesia) Exchange rate 1 USD = 13,000 Indonesian Rupiah (local currency)

26

ACCEPTED MANUSCRIPT Acknowledgements This study is developed as part of the INSISTS cooperation (Indonesian Swedish Initiative for Sustainable Energy Solutions). The authors would like to thank you Indonesian Oil Palm Research Institute (IOPRI) for facilitating the field work. This work was supported by the Swedish Energy Agency [T6473]. The analysis was carried out independently.

27

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