Final Draft Report

PROMOTION OF RENEWABLE ENERGY,

ENERGY EFFICIENCY AND GREENHOUSE GAS ABATEMENT
(PREGA)

Viet Nam

Demonstration of Rice Husks-fired

Power Plant in An Giang Province
A Pre-Feasibility Study Report1

May 2004

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Prepared by the PREGA National Technical Experts from Institute of Energy, Viet Nam.
 TABLE OF CONTENTS

1. Brief description of project........................................................................................5

1. Brief description of project........................................................................................5
2. Location of power station...........................................................................................5
3. General description of project area ..........................................................................5

3.1. Geographical and Socio-Economic features of An Giang province ..............5

3.2. Need for building the combinations of rice preservation- mill systems ........7
4. Rationale of building a demonstration rice husk- fired power plant ....................7

4.1. Potential of power generation from rice husk in Vietnam .............................7

4.2. Government policy on renewable energy and electrification.........................8
5. General description of project...................................................................................9

5.1. Present situation of infrastructures in the area and power station .............9
5.2. Hoa Binh Food Purchasing and Processing Unit.......................................9
5.3. Layout area and expected capacity of power station....................................11
5.4. Technological Procedures for rice husk power generation......................13
6. Project Implementation Plan...................................................................................18
7. Contribution To Sustainable Development............................................................18
8. Project Base Line and GHG Abatement Calculation............................................18

8.1. Methodology for calculation of base line of emission.............................18

8.2. Calculation of baseline.............................................................................18
8.3. GHG Abatement Calculation...................................................................20
8.4. Reduction of CO2 emission from paddy drying.......................................21
8.5. Total CO2 emission reduction..................................................................21
9. Financial Analysis.....................................................................................................21

9.1. Total investment cost evaluation .............................................................21

9.2. Financial Analysis....................................................................................24
10. Economic analysis.....................................................................................................33

10.1. Poverty alleviation effect ....................................................................33

10.2. Environmental impacts........................................................................33

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 10.3. Economic Analysis of the Project .......................................................33
11. Conclusions ...............................................................................................................39

LIST OF TABLES

Table 3.1. Current situation of power supply and consumption in AnGiang Province 7
Table 4.1: Potential of rice husk for power generation in Vietnam ..............................8
Table 5.1. List of equipment at Hoa Binh Food Purchasing and Processing Unit.......11
Table 5.2. Local fuel availability.......................................................................................12
Table 5.3. Technological characteristics ..........................................................................12
Table 5.4. Chemical composition......................................................................................12
Table 5.5. Energy and power balance ..............................................................................12
Table 5.6. Thermal energy balance ..................................................................................13
Table 5.7. Technical and economic parameters of the project ......................................17
Table 8.1: Electricity production in the period 2000 - 2010 - 2020 (base case) ............18
Table 8.2: Fuel demand for electricity production (base case)......................................19
Table 8.3. Coefficients of CO2 emissions (according to IPCC) .....................................19
Table 8.4. Heat value of fuel types....................................................................................19
Table 8.5: CO2 emissions in years of 2002 - 2020 and baseline......................................20
Table 8.6: CO2 emission reduction by AnGiang Rice Husk Power Plant in years of 2002
– 2020 (Based on the Whole Vietnam Electricity System Baselin)................................20
0.5 MW rice husk – fired cogeneration plant ..................................................................23
Table 9.2. Summary of the technical and financial results (adjusted to current price) for a
0.5 MW rice husk – fired cogeneration plant ..................................................................24
Table 9.3. Components of capital source for project......................................................26
Table 9.4. Results of financial analysis with WACC of 7.325 %...................................26
from the point of view of investor.....................................................................................26
Table 9.5. Results of financial analysis with WACC of 7.325%....................................27
from the point of view of project ......................................................................................27

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Table 9.6. Sensitivity Analysis with indicators from the point of view of project......27
Table 9.7. Sensitivity Analysis with indicators from the point of view of investor .....28
Table 9.8. Revenue of project...........................................................................................29
Table 9.9. Financial Analysis from the point of view of investor with WACC of 7.325%,
CO2 emission reduction taken into account....................................................................30
Table 9.10. Financial Analysis from the point of view of project with WACC of 7.325%,
CO2 emission reduction taken into account....................................................................31
Table 10.1. Data input of Economic analysis...................................................................34
Table 10.2. Economic Analysis results with electricity price of 5 UScent/kWh...........35
Table 10.3. Economic Analysis with CO2 emission reduction taken into account .....37
Table 10.4. Economic Analysis without CO2 emission reduction taken into account .38

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1. Brief description of project
Project "Pre-feasibility study of Demonstration Rice Husk-fired Power Plant in An Giang
province" was prepared with the following tasks:

• To identify the site appropriate for building the power station and its capacity;
• To select technologies, which are suitable to current specific conditions in rice mills
as well as socioeconomic development trends in An Giang province in particular and
in Mekong river delta provinces in general, mainly for meeting the future power and
heat requirements of rice mills;
• To evaluate the civil works and investment cost;
• To evaluate the economic and financial effectiveness; and
• To calculate CO2 emission reduction.

The results of calculation and analysis of the project can be summarized as follows:
(i) Project will be put in operation in 2005 and end in 2024
(ii) Total amount of CO2 emission reduction within project lifetime will be 20,194
tons.

The financial and economic indicators of project are:

FIRR = 19.5 % FNPV = 1 mil. US$ B/C = 1.74
EIRR = 25.72% ENPV = 0.926mil. US$ B/C = 1.96

The project is considered as one of the first models of power generation from rice husk in
Vietnam aimed at demonstrating, introducing, propagandizing and expanding the application of
technology to other rice mills or group of mills in An Giang province as well as in other
provinces/ areas in Mekong River Delta, and finally contributing to economic development, job
creation, ensuring a reliable power and heat supply, sufficiently meeting the requirement of rice
mill and providing excess electricity to the grid.

2. Location of power station

The rice husk - fired power station is expected to be built at Hoa Binh Food Purchasing and
Processing Unit in An Hoa commune, Chau Thanh district, An Giang province. The anticipated
site of TPP is situated by the Road to Cambodia, 16 km far from Long Xuyen city (see the
attached map).

3. General description of project area

3.1. Geographical and Socio-Economic features of An Giang province

An Giang is located at the southwest frontier of Vietnam, bordered on the Southeast by Can Tho
province, on the North - East by Dong Thap province, on the northwest by the common frontier
between Vietnam and Cambodia. With a natural area of 3,406.2 km2 and average population of
2,082,838 persons (density of 609 persons per km2), An Giang has one city (Long Xuyen), one
provincial Town (Chau Doc) and 9 districts (Chau Phu, Chau Thanh, Cho Moi, Phu Tan, Tinh

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Bien, Tri Ton, Tan Chau, Thoai Son and An Phu). In recent years, socio-economic development
of the province has been continuously developing (in the period 1996-2000 the average growth
rate of GDP is of 7.4% per year) of which the essential is agriculture development, followed by
sea-aquatic product processing. Within the province area, beside two main river branches Tien
Giang and Hau Giang, there are a lot of rivers and canals, evenly distributed. The grand amount
of alluvium annually provided by the rivers and canals makes land fertilized, that is an important
factor promoting the development of agriculture. With this advantage, An Giang is considered
one of the large rice cultivation areas in Vietnam. Thus, the investment in building the storage
systems in isolated communes or in the localities having large rice production area for temporary
preservation of rice and installing advanced facilities for producing and processing export rice at
lower cost are very important measures to maintain the crucial role of agriculture sector. Having
more than 200 rice mills with capacity above 100 tons of paddy per day, An Giang is one of
potential markets for disseminating cogeneration technology using rice husk as fuel.

Climate
An Giang is a tropical zone with monsoon and two clearly different seasons, dry and rainy.
Average temperature in the year is of 27oC. The number of sunny hours is 2,521 hours per year,
and the average rainfall is 1,132 mm. During rainy season from August to November, the water
in Mekong River rises and causes flood. The water level during flood can reach 1-2.5 meters, to
as high as 3.5 m, and always negatively impacts on the socioeconomic activities in the province.

Hydrology - water resource

There are 280 rivers and canals distributed at a density of 0.72 km/km2, the highest river density
in Mekong River Delta provinces, which can sufficiently supply water for productive and
domestic activities in plain areas of the province. However, the hydrological regime in An Giang
heavily depends on the level of water in Mekong River. Every year, 70% of land area in the
province is flooded less than 1-2.5 meters of water during 2.5 - 4 months. This is a big problem
affecting socioeconomic development in An Giang province.

Power supply system

In recent years, beside the annual financial capital sources coming from the Government, An
Giang Authorities have mobilized other sources and local people to invest in developing
provincial power supply system in order to provide national grid electricity to isolated and
mountainous districts and communes.

Since the end of 2002, 100% of communes have been electrified. The amount of electricity sale
reached 395 million kilowatt-hours. Up to now, 80% of rural households are connected to the
national power grid. The use of electricity from national power grid by industries and small scale
industries, especially in rural private rice mills, is still at limited level due to some reasons like
the habit of using diesel motor and the concern about high grid investment cost or unstable and
insufficient power supply. Table 3.1 presents current situation of power supply and consumption
in An Giang in the period 2000-2002 and estimated for 2005.

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 Table 3.1. Current situation of power supply and consumption in An Giang Province

No Items Unit 2000 2001 2002 2005

1 Power generation* MWh 10,403 2,410 1,343
2 + Commercial MWh 286,006 334,401 395,371 587,300
electricity
+ Agro-forest-aquatic MWh 7,246 7,709 9,135
production
+ Industry - MWh 64,724 81,387 140,205
Construction
+ Commercial - MWh 8,172 8,809 10,864
Service
+ Administration- MWh 193,870 222,394 254,576
residential
+ Others MWh 12,594 14,102 16,591
Note: * The electricity produced by diesel sets with installed capacity is of 7.6 MW installed
capacity is of 7.6 MW, belonged to the Provincial Power Company.

3.2. Need for building the combinations of rice preservation- mill systems

An Giang is one of Mekong River delta provinces with good local conditions, favorable for
agriculture development, especially rice production. As it was mentioned in the socioeconomic
Master Plan for the period up to 2010, agriculture will remain the key sector in the economic
development of the province, of which rice production is the most important. It is planned to
produce 2.5 - 2.6 million tons of rice in 2005, and to increase white rice export from 460
thousand tons in 2001 to 650 thousand tons in 2005.

To achieve these objectives, beside the activities for improving rice species in terms of quality,
productivity and usable value, improving post-harvest conditions, especially in cases when bad
weather causes overload of old storage systems and high losses ratio, there is a need to invest in
building and installation of combined preservation systems and modern rice mills.

4. Rationale of building a demonstration rice husk- fired power plant

4.1. Potential of power generation from rice husk in Vietnam

Vietnam has abundant and diverse biomass sources such as bagasse, rice husk, coffee husk,
coconut and woody residues but only a small portion of bagasse has been used as fuel for power
generation. Apart from bagasse, rice husk and straws are important biomass sources, which could
be also used for biomass - based power generation and cogeneration in Vietnam.

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Vietnam is rice-exporting country but most of its rice mills are of small capacity. It is estimated
that 2.5 million tons of rice husk is available and can be used for energy generation. Potential of
rice husk for power generation is presented in Table 4.1.

Table 4.1. Potential of rice husk for power generation in Vietnam

Type of Potential* (1000 Use factor Available for Expected power

biomass tons) use (1000 tons) capacity (MW)
Rice husk 6,400 0.39 2,500 100-200
Note: + According to Yearbook, 2001.

The rice mills having longer hulling period and additional revenue from ash sale could attract the
investors in rice husk fired power plant with unit investment cost of 1500-1600 US$/kW, even
when electricity tariff is one component (electricity but not capacity). However, since most of
existing rice mills are of small capacity, efficient transportation would be very important in
collecting rice husk from rice mills and supplying it to a big power plant.

The results of recent survey on rice husk sources at rice mills in Vietnam showed that most of
public owned rice mills have changed their operation mode in rice production. The mills in the
north have only function for rice preservation. In the south, the same situation is observed but
less popular. Also from this survey, the areas with highest potential of power generation from
rice husk are in the Mekong River Delta provinces such as Long An, Tien Giang, An Giang,
Kien Giang, Can Tho, Soc Trang, Dong Thap and Tra Vinh. In An Giang province, the
preliminary survey identified about 200 rice mills having milling capacity of 2.5 tons of paddy
per hour, most of which are operated by diesel engine.

4.2 Government policy on renewable energy and electrification

At present, the major barrier is the absence of energy policy and institutional framework strong
enough to promote the exploitation and use of renewable energy, especially for power generation
in the areas where the rural electrification and grid connection is least-cost. Lack of financial
mechanism for establishing and operating the trading enterprises on renewable energy, for
instance, technology market, investment, policy on credit and loan has negatively affected and
restricted the renewable energy development in Vietnam for years. There still exist a lot of
crucial issues and difficulties in selecting the ownership pattern for renewable energy projects
(public or private) as well as providing necessary support when the socioenvironmental benefits
from the investment in renewable energy technologies development were identified. Financial
sources and the way to access the measures encouraging investment in energy technologies
through taxation (e.g. priority, incentive or exemption) are not clearly announced.

There exist some policies, which have positive effects on promoting the development and
application of renewable energy technologies in Vietnam. Being market oriented, the policy on
rural electrification will be a good base encouraging the investors in development of renewable
electricity in order to meet the on site energy requirements (own use) or providing to the grid
through private utilities, cooperatives or other owners. These units will invest in small power
stations. Recently, the diverse modes of investment have brought in the encouraging effects.

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Since early 2000, the Ministry of Industry has approved the policy on rural electrification and
issued the main principles for diversifying the ownership, providing the incentives to power
trading utilities and encouraging the distributed power source. Rural electrification will be
considered in two options: on-grid or off-grid, based on the least-cost criteria.

5. General description of project

Objectives: Project "Demonstration of rice husk-fired power plant in An Giang has the following
objectives:

(i) Demonstration for dissemination and expansion of technology application to other rice
mills within An Giang or other provinces in Mekong River Delta.
(ii) Focus on exploitation of rice husk available at Hoa Binh Unit and some surrounding
private rice mills for producing heat and electricity to meet sufficiently the energy need
of the mill and to supply the excess electricity to grid or neighboring consumers.

Project title: Demonstration of rice husk fired power plant in An Giang province
Project Owner: An Giang Food and Agriculture Product Import & Exporting Company
Location: Hoa Binh Food Purchasing and Processing Unit

5.1. Present situation of infrastructures in the area and power station

5.1.1. Transportation system

The place for building power station is located in the center of high quality rice cultivation area.
Additionally, it has the advantage of superficies and lies beside the National Road 91 and river
Hau, convenient for fluvial shipping by high shipload boats.

5.1.2. Power grid

A medium voltage line of 15 kV from Chau Thanh to Tri Ton district was built; it will facilitate
the grid connection of expected power station.

5.1.3. Water supply

Water from river Hau is sufficiently supplied for production process.

5.2. Hoa Binh Food Purchasing and Processing Unit.

5.2.1. Overview

One part of land area proposed for building power station is in the area of Hoa Binh Food
Purchasing and Processing Unit, in An Hoa Commune, Chau Thanh district, An Giang province.
This unit is bordered as follows:
• On the North by private rice mill Hoang Son
• On the West by National Road 91

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 • On the East by river Hau
• On the South by canal Lang

Superficies: Total land area is 5,000 m2 of which:

• Rice storehouse No.1: 1,300 m2
• Rice storehouse No.2: 700 m2
• Hulling machine: 500 m2
• Administration hall: 70 m2
• Rice husk storehouse: 320 m2

At the moment, the mill operates only one shift per day but during crop seasons or when the rice
supply contract is signed, the mill will operate during 24 hours per day.

There are only 9 workers permanently working in the mill. Most of the workers are seasonably
hired. The product loading and transporting are done manually by porters who are poor farmers
living in the vicinity of the mill.

5.2.2. Equipment status

The rice mill was put in operation in 1999. All the initial equipment is locally manufactured. The
general technological scheme of plant is as follows:

Drying plant ⇒ Paddy hulling machine ⇒ Rice whitening machine ⇒ Rice polishing machine
⇒ Rice storehouse and rice husk storehouse.

The stevedores deliver Paddy from the boat to the rice mill. The paddy hulling chain has been
designed with an electric motor of 132 kW capacities. Another motor of 37 kW was installed for
white rice polishing chain. After the hulling chain, rice is polished in polishing machine driven
by two electric motors of 75 kW each. In addition, there exists a sorting table with one electric
motor of 11 kW and 8 others of 1 kW each.
5.2.3. Power Consumption
List of equipment at Hoa Binh Food Purchasing and Processing Unit is presented in Table 5.1.
According to the site audit, power capacity based on the installed capacity of the whole plant
when operating is of 338 kW.

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 Table 5.1. List of equipment at Hoa Binh Food Purchasing and Processing Unit

Equipment Unit Quantity Total Capacity Total Manufacture.

Design reserved real country
capacity factor capacity
(kW) (%) (kW)
I. Paddy hulling Plant
Rice hulling chain Motor 1 132 20 112 Japan
Screens Motor 6 6 15 5.1 Vietnam
Grading machine Motor 1 11 20 8.8 Vietnam
Total I
II. Rice whitening system
Rice Whitening Motor 1 37 20 29.5 Japan (old)
system
Total II
III. Polishing machine
Rotary drum dryer Motor 2 2 10 1.8 Vietnam
Polishing machine Motor 2 150 20 120 Japan (old)
Total III 4 152
Total I+II+III 13 338 270

5.2.4. Power supply

Hoa Binh Food Purchasing and Processing Unit are powered from national grid through the own
power sub-station of 320 kVA at 15/0.4kV.

5.2.5. Milling capacity

The designed milling capacity of the mill is of 5 T/h. Additionally, there is a private rice mill of
100 tons of paddy per day located just beside it, that is a good condition for supplementary rice
husk supply to the power station when needed.

5.3. Layout area and expected capacity of power station

The power station is expected to be built on the area of present husk storehouse and reserved
area of Hoa Binh Unit. This area is located next to private rice mill Hoang Son and Hau river,
convenient for transportation and collection of rice husks from neighboring rice mills by water
way. The location in the center of zone supplying raw paddy would ensure the continuous
operation of power station (see the map). Power capacity of rice husk fueled power station was
calculated based on the milling capacity of Hoa Binh Unit. This parameter will be unchanged.
Expected power capacity of power station is 500 kW. The analysis and calculations of rice husk
source, fuel characteristics and power balance are presented in following parts.
5.3.1. Technical Analysis

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 Table 5.2. Local fuel availability

Type of residues Actual Designed

Rice husk
Rice husk / paddy ratio 20% 20%
Rice husk produced 1 T/h 1 T/h
Available rice husk 1 T/h 1 T/h

Table 5.3. Technological characteristics

No Characteristics
1 Moisture content % 8.84
2 Volatile matter % 57.95
3 Ash content % 15.24
4 Fixed carbon % 18.64
5 High heating value kcal/kg 3800

Table 5.4. Chemical composition

No Characteristics
1 C (%) 31.65
2 H (%) 6.12
3 O (%) 36.08
4 N (%) 1.87

Table 5.5. Energy and power balance

Load balance
Load of rice mill (kW) Capacity supplied from rice husk power
plant (kW)
Rice milling of 5 T/h 270 Gross output 500
Parasitic load 50 Expected excess capacity (-180)
Total 320 320
Energy balance
Energy demand (MWh/year) Supplied electricity (MWh/year)
Rice milling of 5 T/h 1,300 Generation potential 2,500
Parasitic load 250 Expected excess (-950)
Total 1,550 1,550

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Heat requirement for paddy drying

According to the report of An Giang Department of Agriculture and Rural Development, the heat
demand for paddy drying in the province is very big but until now, there exist only 633 drying
machines of small capacity, 4 ton/shift on average. The total capacity of these systems can meet
only 15% of the demand. In order to meet the need for paddy drying, An Giang has planned to
build the paddy / rice preservation / drying network in the province. However, like most rice
mills in An Giang, Hoa Binh Food Purchasing and Processing Unit still has no paddy drying
system of big capacity due: (i) power supply from national grid is insufficient and not covering
the need for milling; and (ii) high price of other fossil fuels such as oil, mine coal resulted from
transportation cost in long distance.

In this project, the steam exhausted from turbine is proposed to be reused to meet the need for
paddy drying.
Table 5.6. Thermal energy balance
Unit: MWh/year
Use Generation Net export
35 (*) 8333 (**) 8298
Note: (*): -useful energy from burning 10 tons anthracite coal with efficiency of 60%
(**) - thermal energy generation from cogeneration plant with steam back-pressure turbine
and rice husk boiler

Conclusions

Installed capacity of the rice husk fired power station will be 500 kW, of which 320 kW will be
used for rice milling process in Hoa Binh Unit and surplus amount of 180 kW will be supplied to
the power grid or neighboring consumers.

5.4. Technological Procedures for rice husk power generation

5.4.1. Base for Selection of technology for cogeneration from rice husk

The selection of rice husk combustion technology for producing energy (heat and power) is
based on the following criteria:
• Production cost
• Recovery of capital and financial benefit
• Rice husk availability and fuel characteristics
• Overall efficiency of the cycle (cogeneration plant)
• Equipment manufacturing and supplying capability
• Environmental impacts and measures for mitigation.

Some worldwide proven technologies are described below for analyzing and selecting the most
appropriates to small-scale rice mills that are popular in Vietnam.

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The existing six main biomass conversion technologies are: (i) direct combustion; (ii)
gasification; (iii) anaerobic; (iv) pyrolysis; (v) briquetting and (vi) liquefaction. At present, the
most common technologies are direct combustion and gasification from rice husk to produce
electricity. An analysis of these two technologies is carried out below in order to select the more
appropriate in terms of capacity and practical application.

Before selecting the technology, an analysis of fuel characteristics is needed.

Moisture content of biomass fuel is one of its important characteristics because after collection
from the field it is not homogeneous. Thus, a careful consideration should be made in selecting
the suitable mode for fuel feeding and combustion technology. The presence of water in biomass
fuel will reduce the portion of combustible substances. Biomass having high moisture content
should be dried naturally under the sun or in a dryer before being used as fuel. On the other hand,
too high moisture content always needs more time for heating biomass up to fire setting
temperature.

Nowadays, new existing technologies and techniques allow burning the fuels having high
moisture content up to 60%. Thus, we have to consider and choose the moisture content in a
range suitable to the technology.

Heating value of fuel is the amount of heat liberated from the complete combustion of 1 unit of
fuel. This is a basic feature, which will be used for calculating the parameters of combustion
chamber like heat volume, surface of grates as well as combustion and mass/heat transfer
processes in the furnace. In the technical documents on combustion of biomass in furnace / boiler
from abroad, it was proved that the heat value of biomass having moisture content at 50% should
be not less than 1,850 kcal/kg.

Homogeneity of fuel: If the homogeneity of fuel in terms of size and type is not ensured, the
combustion process in the furnace could not be stable. It needs to select an appropriate
combustion technology.

Ash content: From the above analysis, ash content has important effects on fuel properties:
reducing heating value, causing dust and corroding the material of boiler, leading to decreased
heat transfer intensity. For biomass fuel, ash content is very low and the ratio between fly ash
and slag depends a lot on the shape and size of fuel as well as selected combustion technology,
size and form of boiler / furnace. For conventional combustion on grate, this ratio is of 60/40 and
even 80/20. During combustion process, the ash is usually entrained in the smoke stream due to
suction effect of the fan. Consequently, in order to keep on the environmental allowable
parameters it needs to use the ash traps, flue gas filters (dry, wet or bag).

5.4.2.Analysis and selection of technology biomass gasification

Biomass gasification
Biomass gasification is a process of converting solid biomass into a combustible gas by
combustion with insufficient oxygen supply. There are 3 modes of biomass gasification, they
are: (i) downdraft; (ii) updraft and (iii) gross draft.

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The composition of produced gas (mainly volatile matter) depends on the factors like
temperature, pressure, heat transfer process and type of gasifier. In gaseous mixture, beside
combustible gases, there exist also other substances such as steam, and tar.

This gaseous mixture should be cleaned (for removing tar and particles) and cooled before
coming to the combusting appliance / furnace.

For internal combustion engines, the content of tar in combustible gas should not be more than
50 ppm (part per million) while for gas turbine this feature should be well lower.

(i) In the case of down -draft gasifier, producer gas has to pass a zone with higher
temperature so its temperature is rarely high, at 600-800 oC
(ii) In the case of updraft gasifier, producer gas should pass a bed of raw biomass fuel, which
has very low temperature. That's why its outlet temperature is low, ranging from 100 to
300oC.

When using this type of gasifier for internal combustion engines (also for gas turbine), the
produced gas needs to be cleaned due to higher content of tar. The up-draft gasifiers are suitable
only for fuels having high moisture content. Both types of gasifier are designed with a "throat" to
form a high temperature zone for cracking tar. However, this throat will restrict the biomass
flow, especially for the biomass having very low bulk density (kg/m3).

Direct combustion
In current development trends, fluidized bed combustion (FBC) technology is used for
combustion of solid fuels, including biomass, and particularly rice husk. FBC combustion is
chosen when fuel particle size is less than 6 mm. The bed consists of inert particles, and
commonly, sand is used.

Two types of FBC, which could be used for combustion of rice husk fuel are bubbling fluidized
bed combustion (BFBC) and circulating fluidized bed combustion (CFBC). They are described
below:

(i) Advantages of BFBC

• Reducing NOx emission
• High heat transfer effect due to the increment of contact surface when the fuel
particles are sunk in the "boiling layer".

It is important to note that biomass fuel has high volatile content (V ~ 70%); the heat liberated in
the fire box is much higher than that on the grate as the volatile matter released from biomass
fuel will burn in the space of combustion chamber. Based on this, FBC would be effected in the
furnace with two combustion chambers. In the first chamber, fuel burns at low temperature. The
generated volatile and unburned fuel particles are led to the second chamber, to which the
secondary air is supplied sufficiently for complete combustion.

(ii) Circulating Fluidized Bed Combustion

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A typical feature of FBC is the great quantity of fly ash, which contains a considerable amount of
unburned carbon (only volatile matter was burnt out). Fly ash recycle system should be used for
improving the furnace efficiency. Fly ash, after being separated from flue gas precipitators
(cyclone type), is returned back to furnace.

Combustion on grates
Combustion chamber
Based on the required capacity, the type of furnace and various fuels feeding mode van is
selected. The main factors for this selection are:
• Fuel characteristics
• Plant's capacity

For on-grate combustion furnace, there are some types of grate which might be chosen: fixed,
flat grate, inclined step grate, moving grate (shocker grate) but only the inclined moving grates
are in common use. The furnace may be divided into two separate parts: combusting and heating
(pre - furnace) or direct. Fuel feeding could be done from the bottom or from the top,
continuously or in batch. To facilitate the selection, two modes of fuel feeding are analyzed.

Selection of technology
Based on the above analysis, a conclusion is made on the possibility of using one of the
following technological schemes for power generation from rice husk:
1. Rice husk → downdraft gasifier → internal combustion engine or small scale gas
turbine → generator
2. Rice husk → Combined cycle (gas - steam) → gas and steam turbines → alternator
3. Rice husk → furnace / boiler → steam turbine → alternator

First scheme: Cleaned produced gas of biomass is preheated and led to gas turbine/I.C engine for
combustion. Low investment cost and simple operation (few of facilities required) are the
advantages of this scheme. However, it can be used for small scale power generation (up to 1000
kW) and it need tar removing process since along with operation, the dust / tar will accumulate
on heat exchange surfaces.

Second scheme: Rice husk is gasified in a gasifier. Produced gas is led to gas turbine for
combustion and power generation. The temperature of gas exhausted from gas turbine is still
high enough to produce steam. This superheated steam will be led to the steam turbine to drive
the generator producing electricity. This scheme has some advantages like high overall
efficiency and high electric capacity.

Third scheme: Biomass is burnt in a furnace (fluidized bed / grate type) for preheating water and
producing steam, which will be used in a steam turbine for driving the generator. This scheme
has higher efficiency compared to the first one and easy to apply for cogeneration. It requires,
therefore, higher investment cost and skilled operators.

16
Conclusions on selection of technology

Cogeneration plant consists of rice husk storehouse, conveying and automatic boiler feeding
systems, furnace/boiler producing 9 tons of steam per hour at 32-bar pressure. The boiler is
equipped with automatic ash removal system, heat exchangers and turbo-generator of 0.5 MW.
The turbine used here is a backpressure. Heat provided for paddy drying is of 3,000,000 kcal/h.

Rice mill will operate 5,000 hours per year. The milling period will be longer than usual thanks
to the installation of power station, which will operate for the same period of time.

Table 5.7. Technical and economic parameters of the project

Parameter Unit Data

I. Data on rice mill
Input capacity T. paddy/hour 5
Rice husk /paddy ratio % 20
Mill power requirement KW 270
Milling duration Hours/year 5,000
Ash /rice husk ratio % 20
II. Data of rice husk–fired energy plant
Biomass consumption Kg/kWh 2.0
Installed capacity kW 500
Load factor % 100
Parasitic load % 10
Operating time hours/year 5,000
Number of shift per day Shifts/day 3
Number of hours per shift Hours/shift 8
Electricity generation kWh/year 2,500,000
Investment cost
Equipment unit cost US$/KW 1570
Civil works US$ 90,000
Other costs (transmission etc.) US$ 60,000
Annual maintenance cost % of equipment cost 3
Manpower requirements
Plant supervisor person/shift 1
Skilled worker person/shift 1
Unskilled worker person/shift 2
Labor cost US$/year 28,000
Other annual operating costs US$/year 1.000

17
6. Project Implementation Plan

• Preparation of PFS report, approval: 2003

• Survey, investigation, preparation of FS report, approval: 5/2004
• Preparation Technical Design: 2004
• Construction of plant: 2005
• Starting operation: 2006
• Ending operation: 2025

7. Contribution To Sustainable Development

(i) Supply electricity and thermal energy for own use of rice mill, reduce cost price
of rice processing and preservation;
(ii) Supply more power resource, meet electricity demand of Chau Thanh district, An
Giang province;
(iii) Create new jobs for laborers; and
(iv) Introduction of new electricity generation technology.

8. Project Base Line and GHG Abatement Calculation

8.1. Methodology for calculation of base line of emission

(i) Since capacity of anticipated rice husk thermal power plant will substitute
capacity of one coal-fired power plant, the baseline emission (without this project)
will be calculated for the whole Vietnam power system.
(ii) Based on long-term power system development plan, electricity production in
years of the planned period will be calculated.
(iii) The structure of produced electricity and fuel demands for electricity production
will be calculated.
(iv) Based on the emission coefficients, annual CO2 emission from each fuel type will
be calculated.
(v) Baseline is calculated: amount of CO2 per kWh

8.2. Calculation of baseline

1. In Electric Power Development Master Plan for Vietnam for the period 2001 - 2010
with outlook to 2020, calculated annual electricity production are as follows:

Table 8.1: Electricity production in the period 2000 - 2010 - 2020 (base case)

Year 2000 2005 2010 2020

Total electricity 26594 53438 96125 201367
production, GWh

18
 2. Total capacity of power plants in Vietnam in 2020 is estimated to about 41400 MW,
of which hydro - 15000 MW (36.1%), gas thermal - about 14000 MW (33.0%), coal
thermal - 6700 MW (16.2%), and imported fuel - 4000 MW (9.6 %).

In the structure of electricity production in 2020, hydro accounts for 28% (about 56 billion
kWh), gas thermal, 39.1% (about 79 billion kWh), coal thermal, 17.9% (36 billion kWh),
imported, 8.2% (about 16 billion kWh). With this structure of electricity production, demand of
primary fuels for electricity generation in the period 2002 - 2020 is as follows:

Table 8.2: Fuel demand for electricity production (base case)

Unit: thousand tons, mil. m3

Fuel 2002 2003 2004 2005 2006 2007 2008 2009 2010 2020
structure

Coal 3101 3542 3415 4254 4129 5494 6947 8302 9959 15859

Gas 1966 3262 4963 5644 6418 6666 7935 8173 9278 16897

Oil, FO, 1048 473 187 319 568 826 81 73 73 -

DO

3. Calculation of emissions and baseline

Table 8.3. Coefficients of CO2 emissions (according to IPCC)

Fuel type Emission coefficient (K), kg CO2/ GJ

Anthracite coal 98.3
Oil 74.1
Gas 56.1

Table 8.4. Heat value of fuel types

Fuel type Heat value (CV)

Coal, GJ/1000 tons 21000
Oil, GJ/1000ton 42300
Gas, GJ/tr.m3 38000
Emission amount is calculated by the following formula:

19
 En = Σ (Bi x CVi x Ki)
Where:
- En: Total CO2 emission in year n
- Bi: Fuel amount consumed in year n by type (i = coal, oil, gas taken from table 2).
- Ki: Emission coefficients (table 8.3)
- CVi: Heat value (table 8.4)

The results of calculation are showed in table 8.5

Table 8.5: CO2 emissions in years of 2002 - 2020 and baseline

Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2020
Coal 6401394 7311751 7049585 8781532 8523495 11341264 14340692 17137819 20558364 32737734

Gas 4191119 6953932 10580123 12031879 13681892 14210579 16915833 17423201 19778840 36021025

Oil 3284883 1482585 586138.4 999883.2 1780356 2589039 253888.8 228813.4 228813.4 0

CO2 (ton) 13877396 15748268 18215846 21813295 23985743 28140882 31510414 34789833 40566017 68758758

Generation 34275 53438 96125 201367

(GWh)
Kg of 0.40488 0.39049 0.39248 0.40820 0.40019 0.41805 0.41623 0.42297 0.42201 0.34146
CO2/kWh

8.3. GHG Abatement Calculation

Based on the results presented in Table 8.5, the GHG emission reduction if the Rice Husk Power
Project of 500 KW (2500 MWh annually) is implemented, compared to Whole Vietnam
Electricity System Baseline can be calculated and showed in following table:

Table 8.6: CO2 emission reduction by An Giang Rice Husk Power Plant in years of 2002
– 2020 (Based on the Whole Vietnam Electricity System Baseline)

Years 2002 2003 2004 2005 2006 2007 2008 2009 2010 2020

Baseline 0.404 0.390 0.392 0.408 0.400 0.418 0.416 0.422 0.422 0.341
Emission
Coefficient (Kg
of CO2/kWh

Reduction of 1000 1045 1040 1057 1055 852

non-biogenic
CO2 (Ton of
CO2)

20
From Table 8.6 with assumption that baseline emission coefficient will be unchanged from 2020
to 2025, the total CO2 emission reduction, which will be reduced during project lifetime (2006 -
2025) can be calculated. The calculation result is 19 800 tons of CO2.

8.4. Reduction of CO2 emission from paddy drying

As mentioned above, the annual anthracite coal consumption for paddy drying of the rice mill is
10 tons. This energy process emits CO2 and other pollutants. The use of steam at low pressure
generated by the project for paddy drying instead of using coal will result in reduction of non-
biogenic CO2 emission, equaled to 19.72 ton of CO2/year. During project lifetime, the total
reduction amount will be of 394 tons of CO2.

8.5. Total CO2 emission reduction

From the above calculation, total CO2 emission reduction during project lifetime is 20194 tons.

9. Financial Analysis
9.1. Total investment cost evaluation

9.1.1. Legal backgrounds

• Works to be done and some unit costs based on results of survey at An Giang
province.
• Project management costs according to the Circular No. 08/TT-BXD dated
16/11/1999 by Ministry of Construction.
• Unit costs of evaluation and construction consultancy according to the Decision No.
15/2001/QD-BXD dated 20/7/2000 by Minister of Construction.
• Project design costs according to the Decision No. 12/2001/QD-BXD dated
20/7/2001 issued by Minister of Construction.
• Circular No. 137/1999/TTLT-BTC dated 19/11/1999 by Ministry of Finance on
guideline for construction project insurance.
• Unit costs of equipment and electric materials of foreign and domestic manufacturers.
• Guideline on preparation of cost estimates, total cost estimate for basic construction
power projects No. 2281/EVN-KTDT dated 25/05/2001 by Electricity of Vietnam.
• Government Decree No. 22/1998 /ND-CP dated 24/4/1998 on compensation when
the government uses land for purposes of defense, security, national and public
benefits.
• Costs of preparation of procedures for getting land, construction license and land
compensation according to paper No. 1307/BXD-VKT dated 29/08/1998.
• Format of Pre-Feasibility Study report prepared by PREGA team of ADB.
• Related papers in force.
• Exchange rate: US$ 1 = VND 15200

21
9.1.2. Breakdown components of investment cost

General techno-economic assumptions

Rice milling capacity is 120 ton of paddy per day, major part of which is for domestic usage or
export. Cogeneration plant consists of a rice husk storehouse, conveying and automatic boiler
feeding system, a furnace/boiler producing 9 tons of steam per hour at 32-bar pressure. The
boiler is equipped with automatic ash removal system, heat exchangers and turbo-generator of
0.5 MW. The turbine used here is a backpressure.

Rice mill will operate 5000 hours annually. The milling period will be longer than usual due to
the installation of power station, which will operate for the same period of time.

Total investment cost of the project: 935 000 US$

Main costs of investment are:
Equipment: 785 000 US$
Installation, construction: 90 000 US$
Other costs: 60 000 US$
The following economic parameters will be taken into account in the analysis.

Revenue:
Rice husk disposal cost saving: consist of savings from not having to dispose rice husk, as it will
be used for power generation for the whole year. Since the power plant and rice mill will run
simultaneously, rice husk does not need to be stored, except for very short periods of time. This
will lead to lessening rice husk storage and handling costs.

Electricity cost savings: gained due to: (a) not use mined coal for paddy drying and (b) not have
to purchase grid electricity during the milling season.

Surplus power sale: revenue from the auto produced electricity in excess of the mill requirement
and the excess amount is sold to the power grid or neighboring consumers.

Surplus thermal sale: revenue from the auto produced thermal energy in excess of the
requirement for paddy drying and the excess amount is used to dry for other mills around the
area of Hoa Binh Food Purchasing and Processing Unit.

Ash sale: ash is a by-product from rice husk combustion in the boiler. At present, European
boiler manufacturers are able to develop incineration systems to produce rice husk ash of
consistent quality. Rice husk of such quality can be considered as a valuable additional material
in some industries such as glass and brick manufacturing, in the steel industry, and more
recently, in semi-conductor industry. Thus, investment in equipment, which could produce good
quality ash, will increase the additional revenue for end-users through the sale of ash. Whenever
the equipment can produce ash of good quality, the additional income from ash sale is possible.
This attractiveness, therefore, should be taken into account in the evaluation. A modest estimate
of the profit from ash sale is about 50 US$ per ton.

22
It is assumed that the above revenues will be generated only from the second year and the first
year is the construction period. The depreciation cost of the equipment is calculated for 15 years.
Possible income from sale of old equipment is not taken into account.

Costs
Capital investment cost: Based on current data, an equipment unit cost of 1570 US$/KW is used
for the rice husk -fired power plant. This cost consists of investment cost of a boiler, a turbo-
generator and other costs. Civil works and equipment import duties are also considered when
analyzing.

Annual operating costs of the cogeneration plant consist of maintenance costs and labor costs.
Annual maintenance costs are assumed at 3% of the total equipment cost.

In this study, the production should not only cover the need of rice mill itself (paddy drying and
cooling cells for rice storage) but it also should meet the other electricity requirement of the mill
and administrative buildings. The technical and financial assumptions used in the analysis are
summarized in Table 9.1

Table 9.1: Summary of technical and financial parameters of the

0.5 MW rice husk – fired cogeneration plant

Parameter Unit Indicator

I. Data on rice mill
Mill Input capacity T. paddy/hour 5
Rice husk /paddy ratio % 20
Mill power requirement kW 270
Milling duration Hours/year 5,000
shift 3
Ash /rice husk ratio % 20
Consumption of anthracite coal Kg/year 10,000
Financial assumptions
Exchange rate* VND/US$ 15,200
Electricity purchase price out -of -pick load hours US$/kWh 0.0589
Electricity buy-back rate US$/kWh 0.0566
Market Price of anthracite coal US$/kg 0.022
Ash selling price US$/ton 50
CO2 Credit US$/ton 5
Labor rate
- Plant supervisor US$/month/shift 300
- Skilled worker US$/month/shift 200
- Unskilled worker US$/month/shift 150
II. Data of rice husk–fired energy plant
Biomass consumption Kg/kWh 2.0
Installed capacity kW 500
Load factor % 100

23
 Parameter Unit Indicator
Parasitic load % 10
Operating time hours/year 5,000
Number of shift per day Shift/day 3
Number of hours per shift hours/ship 8
Power generation MWh/year 2,500
Power Sales MWh/year 950
Thermal Generation MWh/year 8333
Thermal Sales MWh/year 9298
Investment cost
Equipment unit cost US$/KW 1570
Civil works US$ 90,000
Other costs (transmission etc.) US$ 60,000
% of equipment
Annual maintenance cost 3
cost
Manpower requirements
Plant supervisor person/shift 1
Skilled worker person/shift 1
Unskilled worker person/shift 2
Labor cost US$/year 28,000
Other annual operating costs US$/year 1,000

Table 9.2. Summary of the technical and financial results (adjusted to current price) for a
0.5 MW rice husk – fired cogeneration plant

Parameters Unit Value

Installed capacity kW 500
Capital investment US$ 785,000
Annual operating costs of rice husk – fired power plant
Labor costs US$/year 28,800
Maintenance costs US$/year 23,550
Other costs US$/year 1,000
Annual total costs US$/year 53,350

9.2. Financial Analysis

9.2.1. Objectives

Financial analysis is to evaluate the feasibility of the project at the point of view of the investor
(project manager), from that to offer forms of capital mobilization, financial mechanisms in
order to ensure balance in financial revenue - cost and efficiency of project.

24
9.2.2. Financial analysis consists of the following:

Project financial analysis, from the view of investor, is to define ability of capital mobilization,
loan conditions (interest, payback time, grace period…), to reach the financial efficiency.

9.2.3. Financial Analysis includes following reports:

1. Report of Revenue: represents annual revenue, costs and net income of project during the
lifetime.
2. Table of Cash Flow: represents revenue flow, cost flow and net present value for the
project during lifetime with discount rate taken into account

Table of cash flow evaluates financial effect, defines financial indicators of project and investor,
includes:
• Financial Internal Rate of Return: FIRR
• Financial Net Present Value: FNPV
• Ratio of Benefit and Cost: B/C

Borrowing capital: An Giang Food and Agriculture Product Import & Exporting Company is the
investor.

According to commercial loan conditions, project manager must contribute at least 30% of total
investment capital (including interest during construction period), maybe stock or own fund,
70% capital remaining will be credit loan.

It is anticipated to borrow loan with the terms and conditions as follows:

• Payback time: 3 years
• Grace period: 1 year
• Lifetime of project: 20 years

GHG credit of rice husk power plant: 5 US$/ ton CO2. It is taken into account during first ten
years.

Average electricity price is set up so that financial rate of return is at least equal or higher than
WACC to ensure the feasibility of the project.

The results of financial indicators of project investor (An Giang Food and Agriculture Product
Import & Exporting Company) are as follows:

Average interest rate of 7% and equity participation with expected interest rate of 10%, it is
anticipated to have capital resources of project as in the table below:

25
 Table 9.3. Components of capital source for project

Sources Weighted Nominal Income tax Tax-adjusted

of Fund cost rate nominal cost

Loan 70%
of which
ADB 30% 6.7% 32% 5.556%
Loan
Other 10% 7.5% 32% 5.1%
foreign loan
Domestic 30% 12% 32% 8.16%
loan
Equity 30% 10% 10%
participation

From the above sources of fund and interest rates with income tax rate of 32%

WACC =0.3*5.556%+0.1*5.1%+0.3*8.16%+0.3*10%= 7.325%

The results of financial indicators are in the tables below:

Table 9.4. Results of financial analysis with WACC of 7.325 %

from the point of view of investor

Indicators With CO2 emission reduction Without CO2 emission

taken into account reduction taken into account

NPV (mil. US$) 0.805 0.586

FIRR 28.56% 22.5%

B/C 1.45 1.35

26
 Table 9.5. Results of financial analysis with WACC of 7.325%
from the point of view of project

Indicators With CO2 emission Without CO2 emission

reduction taken into reduction taken into
account account

NPV (mil. US$) 1 0.79

FIRR 19.5% 17.07%

B/C 1.74 1.53

The analysis results show that FIRR of project would be higher than WACC. In case of GHG
emission reduction taken into account the benefits of the projects will be higher. Project is
financially feasible.
9.2.3. Sensitivity Analysis
This Study carried out sensitivity analysis based on the most likely changes.

(i) An increase in investment cost by 10 percent

Decreases in benefits:
• No benefit from ash sale
• No benefit from thermal energy sale

(ii) An increase in costs of operation and maintenance by 10%

(iii) A delay in the period of construction, causing a delay in revenue generation by one year.

(iv) Combinations of variables: the effects on FNPV and FIRR of a simultaneous decline in
benefits and an increase in investment cost and O&M costs can be computed.

The effects of above changes are summarized in the following table.

Table 9.6. Sensitivity Analysis with indicators from the point of view of project

FNPV (mil.
Item Base case Change FIRR (%) SI (FNPV) SV (FNPV)
US$)
Base case 1 19.5
Investment 0.935 mil. US$ 10% 0.91 17.52 0.900 -111%
No benefit from ash sale 50 US$/ton ash 0 US$/ton ash 0.42 12.74 0.580 172%
No benefit from thermal
4.6 US$/MW h 0 US$/MW h 0.76 16.77 0.240 417%
energy sale
O&M costs 0.0534 mil. US$ 10% 1.02 19.7 -0.200 500%

Construction delays One year 0.934 19.38 6.60% NPV 6.6% lower

Combination of variables 0.093 8.28

27
 SI: Sensitivity Indicator
SV: Switching Value

Table 9.7. Sensitivity Analysis with indicators from the point of view of investor

FNPV (mil.
Item Base case Change FIRR (%) SI (FNPV) SV (FNPV)
US$)
Base case 0.805 28.56
Investment 0.935 m il. US$ 10% 0.747 25.09 0.720 -139%

No benefit from ash sale 50 US$/ton ash 0 US$/ton ash 0.179 11.83 0.778 129%

No benefit from thermal

4.6 US$/MW h 0 US$/MWh 0.557 21.75 0.308 325%
energy sale
O&M costs 0.0534 m il. US$ 10% 0.768 27.53 0.460 -218%

Construction delays One year 0.75 28.49 6.83% NPV 6.83% lower

Combination of variables -0.189 2.09

Above results of sensitivity analysis show that, project still gets financial feasibility with
independent changes. In case of combination of variables changed, from the point of view of
investor, project is not feasible due to negative FNPV and FIRR lower than WACC.

9.2.4. Conclusions of project’s financial feasibility

• The project will be feasible and financial indicators will be higher if invested by
borrowing capital.
• Financial indicators of the project will be higher if GHG emission reduction is taken
into account.
• If project can get loan from WB, ADB with incentive interest, the feasibility will be
better.

28
 Table 9.8. Revenue of project
Unit: mil. US$

Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 Total
I. Electricity effect
Electricity Sales (MWh) 931 931 931 931 931 931 931 931 931 931 931 931 18620
Electricity Sales Revenue (mil. US$) 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.0053 0.1054
Electricity saving (MWh) 1300 1300 1300 1300 1300 1300 1300 1300 1300 1300 1300 1300 26000
Electricity saving revenue (mil. US$) 0.008 0.008 0.008 0.008 0.008 0.008 0.008 0.008 0.008 0.008 0.008 0.008 0.1508
II. Thermal Energy Effect
Sales (MWh) 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 157662
Net Revenue(mil. US$) 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.7252
III Other Benefits 0.0052 0.0054 0.0054 0.0055 0.0055 0.0054 0.0053 0.0052 0.0051 0.0050 0.0045 0.0002 0.0946
Benefit from not purchase coal for
paddy drying (mil. US$) 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0044
CO2 credit (mil. US$) 0.0050 0.0052 0.0052 0.0053 0.0053 0.0052 0.0051 0.0050 0.0049 0.0048 0.0043 0.0000 0.0902
Total Revenue 0.047 0.047 0.047 0.047 0.047 0.047 0.047 0.047 0.047 0.047 0.046 0.042 0.9253
II. Costs (mil. US$)
1. Total direct cost 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.053 2.0020
1.1. O&M cost 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.0670
1.2. Depreciation 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.9350
2. Interest payment 0.037 0.025 0.012 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.0746
3. Total cost 0.153 0.141 0.128 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.116 0.053 2.0766
4. Income before tax -0.106 -0.094 -0.081 -0.069 -0.069 -0.069 -0.069 -0.069 -0.069 -0.069 -0.070 -0.012 -1.1514
5. Income tax 0 0 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.0000
6. Income after tax -0.106 -0.094 0.000 -0.069 -0.069 -0.069 -0.069 -0.069 -0.069 -0.069 -0.070 -0.012 -1.0702
29
 Table 9.9. Financial Analysis from the point of view of investor with WACC of 7.325%, CO2 emission reduction taken into
account
Unit: mil. US$

Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 Total
1. Net Revenue (excluded VAT) 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.250 0.246 5.008
1.1.Surplus power sales 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 1.192
1.2.Surplus thermal sales 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.725
1.3.Ash sales 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 1.752
1.4. CO2 emsission reduction profit 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.004 0.000 0.090
1.5.Benefit from not purchase electricity 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 1.508
1.6.Benefit from not purchase coal for heating p 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.004
2. Total income 0.00 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.250 0.246 5.012
3. Investment 0.2805 0.281
4. Total costs before tax 0 0.095 0.234 0.220 0.206 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.608
4.1. O&M cost 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.067
4.2. Interest payment 0.042 0.028 0.014 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0 0 0.083
4.3. Loan payment 0 0.15272 0.1527 0.1527 0 0 0 0 0 0 0 0 0.458
5. Income tax 0.00 0.050 0 0 0 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.062 1.088
6. Total cost 0.28 0.14 0.24 0.23 0.22 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 2.977
7. Net income -0.28 0.11 0.01 0 0 0 0.13 0.13 0.13 0.13 0.13 0.13 0.13 2.036
NPV 0.805
IRR 28.56%
B/C 1.45

30
Table 9.10. Financial Analysis from the point of view of project with WACC of 7.325%, CO2 emission reduction taken into
account
Unit: mil. US$

31
Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 Total
1. Net Revenue (excluded VAT) 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.251 0.250 0.246 5.008
1.1.Surplus power sales 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 1.192
1.2.Surplus thermal sales 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.725
1.3.Ash sales 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 1.752
1.4. CO2 emsission reduction profit 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.004 0.000 0.090
1.5.Benefit from not purchase electricity 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075 1.508
1.6.Benefit from not purchase coal for heating p 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 0.004
2. Investment cost 0.935 0 0.935
3. O&M cost 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.067
Total cost 0.935 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 2.002
4. Income tax 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.063 0.062 1.261
5. Net Income -0.935 0.188 0.188 0.188 0.188 0.188 0.188 0.188 0.188 0.188 0.188 0.187 0.184 2.812

NPV 1.00
IRR 19.50%
B/C 1.74

32
10. Economic Analysis
10.1. Poverty alleviation effect

The economic features bringing in the social profit like labor involvement, job opportunity
creation and other benefits gained by the various sectors from the project will contribute in
increasing the economy and create good conditions for agricultural and rural development
towards direction of modernization and industrialization. Realization of this project will promote
the development of rice industry with a competitive advantage through reducing the post-harvest
losses and improving quality of goods, mainly rice for export.

10.2. Environmental impacts

The expected impacts of the power plant are as follows:

• Bran dusts emitted during operation of rice mill. In this case, the mill will be located in a
convenient place, far from the center of inhabitants.
• Additionally, surrounding the mill, the trees have been planted for collecting dust. Inside
the mill, vacuum cleaners and draft fans are also installed to improve the air in working
area.
• The mill and polishing machine are located far from the road and inhabitant center so that
the noise does not disturb the people living in surrounding.
• Impact on land use is not considerable
• The issue of resettlement is not impacted.

10.3. Economic Analysis of the Project

Economic Analysis is aimed to evaluate feasibility of the project to national economy, to
calculate and compare economic indicators for selecting solution and the best way of
implementation.

Economic analysis is to analyze social efficiency of the project to national economy. Economic
indicators bring social benefits such as creating new jobs, making the development of other
economic sectors, contributing to development of country. Therefore, it is necessary to consider
social- economic benefits when defining economic electricity selling price and reduce labor cost
and taxes in initial investment cost.

Economic analysis also considers costs of damages by project impacts to other sectors, to
environment and to national economy. Contents in economic analysis include cash flow table
and economic indicators with each of technology and construction plans.

Expenditure flow:
 • Investment costs in economic analysis: This is investment cost without labor costs and
taxes (benefits for society, brought jobs for society). This eliminated potion is estimated
of about 10% of total investment cost of the project.
• Operation and maintenance cost (O&M cost) and other costs as in financial analysis.

Income flow:
• Turnover from electricity sales
• Turnover from thermal energy sales (using for drying rice for other customers around
plant area)
• Turnover from selling ash
• Other benefits gained from the project: reduction of negative impacts on economy,
environmental protection, benefit from not purchase coal for drying rice.

Table 10.1. Data input of Economic analysis

Export price of anthracite coal 30 US$/ton

Electricity price at LRMC at 6.4 US$/MWh
medium voltage
Thermal Energy Price 4.6 US$/MWh
Amount of coal saving 10 000 ton/year
Amount of electricity saving 1300 MWh/ years
Amount of surplus electricity 950 MWh/year
Amount of surplus heat 8298 MWh

Output of economic analysis is a statement of economic cash flow and economic indicators got
from technology and construction option set out for selection of best alternative. Economic
effectiveness is determined through following economic indicators:
• EIRR
• ENPV
• B/C
• Discount rate of 10%

The standard model developed by EC-ASIAN COGEN Program is used here for economic
analysis of utilizing biomass residues to produce energy.

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 Table 10.2. Economic Analysis results with electricity price of 5 UScent/kWh

Indicators With CO2 emission reduction Without CO2 emission

taken into account reduction taken into account
EIRR 25.72% 25.09%

NPV (mil. US$) 0.926 0.888

B/C 1.96 1.93

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 Table 10.3. Economic Analysis with CO2 emission reduction taken into account
Unit: mil. US$

Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 Total
Cost 0.842 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.909
Investment cost 0.842 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.842
O&M cost 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.067
Revenue 0.272 0.272 0.272 0.272 0.272 0.272 0.272 0.272 0.272 0.272 0.271 0.267 5.429
Surplus power sale 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 1.192
Surplus thermal energy sale 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.725

Benefit from not purchase electricity 1.664

0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083
Revenue from selling ash 0.0876 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 1.752
Environmental benefit 0.005 0.0052 0.0052 0.0053 0.005 0.005 0.005 0.005 0.005 0.005 0.004 0.000 0.090
Benefit from not purchase coal for
0.006
heating rice 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003
Net Income -0.842 0.219 0.219 0.219 0.219 0.219 0.219 0.219 0.219 0.218 0.218 0.218 0.214 3.521

NPV (mil. US$) 0.926

IRR 25.72%
B/C 1.96
 Table 10.4. Economic Analysis without CO2 emission reduction taken into account
Unit: mil. US$

Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 Total
Cost 0.842 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.909
Investment cost 0.842 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.842
O&M cost 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 0.053 1.067
Revenue 0.267 0.267 0.267 0.267 0.267 0.267 0.267 0.267 0.267 0.267 0.267 0.267 5.339
Surplus power sale 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 0.060 1.192
Surplus thermal energy sale 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.725
Benefit from not purchase electricity 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 0.083 1.664
Revenue from selling ash 0.0876 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 0.088 1.752
Benefit from not purchase coal for
0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.006
heating rice
Net Income -0.842 0.214 0.214 0.214 0.214 0.214 0.214 0.214 0.214 0.214 0.214 0.214 0.214 3.430

NPV (mil. US$) 0.888

IRR 25.09%
B/C 1.93

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11. Conclusions
There are two general trends characterizing the rice processing industry in the ASEAN countries:
Firstly, rice production has been stabilized at certain levels, except Vietnam, whose paddy
production still tends to increase. Secondly, agricultural lands for paddy growing have been
decreasing, converting to other purposes for more profitable land use. This is expected to be
stabilized in the coming years because the Government has started developing the wastelands for
paddy production. With the use of high-yielding rice species, these wastelands are expected to
significantly contribute to the total paddy production in the future.

Paddy production increases and at the end of rice milling process there will be a greater volume
of rice husk produced, which in most cases is simply considered as wastes to be disposed off,
commonly by dumping, open-burning or incineration. Use of rice husk for generating power and
heat will be very meaningful for the biomass energy markets.

However, the first important thing is to recognize the following factors that would make rice
husk – fired plant more viable: (i) firstly, at the special level, the geographic concentration of
paddy production and the geographic location of rice mills, the distance to the power plant; (ii)
secondly, on the technical level, the milling capacity and milling duration of rice mill and the
best available technology; and (iii) thirdly, the economic viability of investing in the power
plant; and finally, the institutional policies.

The important thing for the power plant is that it should be built close to the rice husk sources in
order to minimize transport cost of rice husk from the rice mill and it needs also to consider the
size of the rice mill as well. Milling capacity will determine the rice husk output from the paddy
milling process.

In actual conditions, the existence of old backward milling technologies, the abundance of rice
husk residue and the problems of its disposal lead to the necessity to apply the paddy drying and
milling process at the mills. In some cases the mills meet their heat need for own process by
using rice husk as fuel burnt in very inefficient manner, while the electricity was purchased from
the power grid or self-generated using diesel gensets.

It is attractive for the rice mill operators or the potential investors when considering the
economic effect from making the existing systems into the more efficient ones.

However, despite the big potential of power generation from rice husk in Vietnam, the major
barrier to the uptake of cogeneration technologies has been the insufficient information on the
projects carried out in the region or the bad experience from the rice husk energy projects set up
in the past. The uncertainties on the use of technologies for the site and specific energy systems
make appear a bad impression on the potential investors in the rice industry. The interested
equipment and technology suppliers should pay attention on this issue in order to convince the
potential investor of the benefit of cogeneration utilizing rice husk as fuel.

The experience of COGEN in the field of energy from biomass showed that for a 2.5 MW rice
husk – fired power plant installation, the plant owner gains energy savings and other economic
benefits, such as added income from the sale of excess electricity to the power grid and pay-back
time of less than four years.

The well-proven technologies for biomass energy are currently available in the ASEAN market.

COGEN promotes the European technologies, which are proven, energy efficient and
environment friendly. The rice mill owners who are uptake of the technology and interested in
the application can take advantages of the available technical services.

Last but not least, the current national programs for energy security in most ASEAN countries
actively promote the use of indigenous renewable energy sources, particularly biomass, and the
governments encourage the private sector to participate in power generation. On the other hand,
environment measures are being taken for all sectors, especially in the industries and energy
sectors through environmental regulations and economic incentives. These policies, therefore,
encourage the rice mill owners to venture into cogeneration technology using their rice husks as
fuel. Moreover, they are able to solve the following issues: waste disposal management;
compliance with environmental regulations; giving more value to their wastes by turning them
into profit; and energy self- sufficiency in their mills.

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