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FRUIT PROCESSING WASTE AS A RENEWABLE ENERGY

SOURCE FOR A CLEAN DEVELOPMENT MECHANISM


PROJECT IN SOUTH AFRICA



Frederich Mostert



Research report presented in partial fulfilment of the
requirements for the degree of Master of Business
Administration at the University of Stellenbosch


Supervisor: Mr. J.Volschenk



Degree of Confidentiality: A March 2010

ii
Declaration
By submitting this research report electronically, I, Frederich Mostert, declare that the entirety of
the work contained therein is my own, original work, that I am the owner of the copyright thereof
(unless to the extent explicitly otherwise stated) and that I have not previously, either in its entirety
or in part, submitted it for obtaining any qualification.



F. Mostert 27 January 2010


Copyright 2009 Stellenbosch University
All rights reserved
iii
Acknowledgements
I wish to thank my wife, Stephanie Cilliers and my two boys, Odin and Kael, without whose
support, encouragement and distraction it would not have been possible for me to complete this
study. Also I wish to thank the Two-a-Day group for not only their financial support to make these
studies possible, but also for giving me the opportunity to study and to apply the knowledge that at
times was different to previous practices.


iv
Abstract
The objective of the study was to establish whether a small-scale biomass renewable energy
project that uses waste fruit and pomace as the predominant feedstock could be a feasible clean
development mechanism (CDM) project. The study was based on the solid waste streams of a
pome fruit processor.
Renewable energy technologies that convert biomass into a methane rich gas were evaluated.
These included the various anaerobic digestion technologies that yield biogas and gasification
technologies that yield syngas. Gasification was not found to be a feasible technology due to the
moisture content requirement of less than 20% against that of the biomass of 70-80% and due to
the low bulk density of the biomass of 250 kg/m
3
versus the required minimum of 500kg/m
3
.
The biogas could either be fired in a combined heat and power (CHP) unit or in a dual fired burner
with heavy furnace oil (HFO). Feeding the thermal energy and electricity from the CHP unit back to
the processor or supplying the electricity to the national electricity grid was considered. The plant
would supply electricity to the national electricity grid as an Independent Power Producer (IPP).
Eskom would be the renewable energy purchasing agent (REPA) that purchases the electricity at
an anticipated R0.96/kWh under a power purchase agreement (PPA) in terms if the renewable
energy feed-in tariff phase II (REFIT) guidelines.
The anticipated revenue for electricity was six fold the coal offset cost of R0.16/kWh, while there
was no demand for the heat energy after the processing season, thus firing biogas in a dual fired
burner was not feasible.
The most feasible technology was the anaerobic digestion of the biomass using a continuous
stirred tank reactor (CSTR) process followed by a CHP unit that feeds the heat to the processing
facility and the electricity into the national electricity grid. Waste fruit and wet pomace would be co-
digested with abattoir waste during the operating season. Dried pomace, abattoir waste, waste fruit
and any other non-woody material from the surrounding farms and packhouses would be digested
after the season to optimize the utilisation of the plant capacity. A capacity of 11 dry tons per day
for the case study at a cost of R13 138 889 yielded an IRR of 15.2% and a net present value
(NPV) of - R1 498 616 based on a discount rate of 18%, when excluding revenue from the sale of
carbon emission reductions (CERs). Therefore, without the sale of CERs, this project would be
rejected as a non-feasible investment.
The project is eligible for CDM registration as a small-scale renewable energy project activity. No
barriers were identified that would prevent the registration of this project activity as a CDM project
in South Africa. The sale of CERs increased the NPV of the optimum solution to R156 483 and the
v
IRR to 18.3%. Registering the project as a CDM project activity improved the feasibility of the
project to the extent that it was marginally feasible.
The fermentation and hydrolysis of the biomass into bioethanol was investigated as an alternative
to the generation of heat and electricity. Although the technology is proven, no facilities were
identified that use spoilt apples or apple pomace as the substrate. This increased the risk of the
project and a discount rate of 24% was set when calculating the project NPV. This project activity
yielded an NPV of - R1 296 057 when excluding CDM revenue. The feasibility improved to an NPV
of - R263 507 and an IRR of 23.4% when taking the additional revenue from the sale of CERs into
account. This project alternative was only marginally out of the money. With the development of
newer technology, this alternative could prove to be more attractive in the future.
vi
Table of contents
Declaration ...................................................................................................................................... ii
Acknowledgements ....................................................................................................................... iii
Abstract .......................................................................................................................................... iv
List of Tables .................................................................................................................................. ix
List of Figures ................................................................................................................................. x
CHAPTER 1 INTRODUCTION AND BACKGROUND ..................................................................... 1
1.1 INTRODUCTION ........................................................................................................................ 1
1.2 RESEARCH OBJECTIVES ......................................................................................................... 3
1.3 DELIMITATION AND SCOPE OF RESEARCH PROJECT ........................................................ 4
CHAPTER 2 BIOMASS RENEWABLE ENERGY............................................................................ 6
2.1 INTRODUCTION ................................................................................................................... 6
2.2 RENEWABLE ENERGY DRIVERS ...................................................................................... 7
2.2.1 Policy framework ............................................................................................................ 7
2.2.2 Energy security ............................................................................................................... 9
2.2.3 Environmental considerations ........................................................................................ 9
2.2.4 Corporate social responsibility ..................................................................................... 10
2.3 BIOGAS ENERGY TECHNOLOGIES ................................................................................. 10
2.3.1 Introduction ................................................................................................................... 10
2.3.2 Anaerobic digestion ...................................................................................................... 11
2.3.3 Co-digestion ................................................................................................................. 15
2.3.4 Pyrolysis & gasification ................................................................................................. 15
2.3.5 Operation of a biogas system ....................................................................................... 17
2.4 BIOETHANOL ..................................................................................................................... 19
2.4.1 Introduction ................................................................................................................... 19
2.4.2 Hydrolysis and fermentation ......................................................................................... 19
2.4.3 Raw material ................................................................................................................ 20
2.5 SUMMARY .......................................................................................................................... 20
CHAPTER 3 CARBON MARKETS ............................................................................................... 23
3.1 ECONOMIC SYSTEMS ...................................................................................................... 23
3.2 EMISSIONS REDUCTION MECHANISMS......................................................................... 23
3.3 CDM MARKET SYSTEM .................................................................................................... 23
3.4 CURRENT CDM SITUATION ............................................................................................. 26
3.5 CDM IN SOUTH AFRICA .................................................................................................... 28
3.5.1 South African situation ................................................................................................. 28
3.5.2 Resource barriers ......................................................................................................... 30
vii
3.5.3 Stakeholder barriers ..................................................................................................... 30
3.5.4 Sustainable development ............................................................................................. 31
3.5.5 Validation ...................................................................................................................... 32
3.5.6 Mitigation projects ........................................................................................................ 32
3.6 SMALL SCALE RENEWABLE ENERGY PROJECTS ........................................................ 34
3.6.1 Introduction ................................................................................................................... 34
3.6.2 Biomass renewable energy projects ............................................................................ 34
3.6.3 Advantage of small scale project registration ............................................................... 34
CHAPTER 4 PROJECT DESCRIPTION ........................................................................................ 36
4.1. INTRODUCTION ................................................................................................................. 36
4.2. BIOMASS FEEDSTOCK ..................................................................................................... 36
4.2.1. Fruit processing facility waste and by-products ............................................................ 36
4.2.2. Co-digestion of supplementary biomass ...................................................................... 37
4.3. RENEWABLE ENERGY TECHNOLOGY ........................................................................... 38
4.3.1. Introduction ................................................................................................................... 38
4.3.2. Anaerobic digestion ...................................................................................................... 38
4.3.3. Gasification ................................................................................................................... 41
4.3.4. Hydrolysis and Fermentation ........................................................................................ 43
4.4. APPLICATION OF ENERGY .............................................................................................. 43
4.4.1. Introduction ................................................................................................................... 43
4.4.2. Electricity ...................................................................................................................... 43
4.4.3. Heat energy .................................................................................................................. 45
4.4.4. Ethanol ......................................................................................................................... 46
4.5. CDM .................................................................................................................................... 46
4.5.1. Introduction ................................................................................................................... 46
4.5.2. Baseline ........................................................................................................................ 47
4.5.3. Anaerobic digestion ...................................................................................................... 50
4.5.4. Fermentation and hydrolysis ........................................................................................ 52
4.5.5. Monitoring ..................................................................................................................... 52
4.5.6. CER revenue ................................................................................................................ 52
4.6. SUMMARY .......................................................................................................................... 53
CHAPTER 5 FINANCIAL EVALUATION ....................................................................................... 56
5.1. INTRODUCTION ................................................................................................................. 56
5.1.1. Discount rate ................................................................................................................ 56
5.1.2. Project life cycle ........................................................................................................... 57
5.1.3. Capital .......................................................................................................................... 57
5.1.4. CDM revenue ............................................................................................................... 58
5.1.5. Operating parameters .................................................................................................. 58
viii
5.1.6. Digestate ...................................................................................................................... 59
5.1.7. Ethanol ......................................................................................................................... 59
5.2. FEASIBILITY EXCLUDING CDM ........................................................................................ 59
5.2.1. Anaerobic digestion of fruit waste ................................................................................ 60
5.2.2. Anaerobic digestion of fruit waste & dry pomace ......................................................... 60
5.2.3. Anaerobic digestion of fruit waste & wet pomace ......................................................... 62
5.2.4. Anaerobic digestion of wet and dry pomace and fruit waste ........................................ 63
5.2.5. BioEthanol - Fermentation & hydrolysis ....................................................................... 63
5.3. FEASIBILITY INCLUDING CDM ......................................................................................... 64
5.3.1. Anaerobic digestion ...................................................................................................... 64
5.3.2. Hydrolysis and fermentation ......................................................................................... 65
5.4. SENSITIVITY ANALYSIS .................................................................................................... 66
5.4.1. Anaerobic digestion ...................................................................................................... 66
5.4.2. Hydrolysis and fermentation ......................................................................................... 67
CHAPTER 6 SUMMARY, CONCLUSION AND RECOMMENDATIONS ....................................... 69
6.1 INTRODUCTION ................................................................................................................. 69
6.2 CONCLUSIONS .................................................................................................................. 70
6.3 FURTHER RESEARCH ...................................................................................................... 72
LIST OF SOURCES ....................................................................................................................... 73

ix
List of Tables
Table 2.1: REFIT schedule for 2009 ................................................................................................. 8
Table 2.2: REFIT Phase 2 Tariffs for 2009 ....................................................................................... 8
Table 2.3: Comparison of gasifier types ......................................................................................... 16
Table 2.4: Bio-energy conversion technologies .............................................................................. 21
Table 2.5: Most established AD technologies ................................................................................. 22
Table 3.1: Monetising carbon credits for renewable energy projects .............................................. 28
Table 3.2: CDM eligibility criteria in paragraph 6(c) of decision 17/CP7 ......................................... 34
Table 3.3: CDM project categories ................................................................................................. 35
Table 4.1: Comparison between CSTR quotations ......................................................................... 41
Table 5.1: Anaerobic digestion of waste fruit .................................................................................. 60
Table 5.2: Anaerobic digestion of waste fruit and dry pomace ....................................................... 61
Table 5.3: Anaerobic digestion of waste fruit and dry pomace ....................................................... 62
Table 5.4: Bioethanol: Fermentation and hydrolysis ....................................................................... 64
Table 5.5: Anaerobic digestion feasibility without CDM and with CDM .......................................... 65
Table 5.6: Hydrolysis and fermentation without CDM and with CDM ............................................. 66
Table 5.7: Basis of sensitivity analysis Anaerobic Digestion: 11 t
d
/day capacity ......................... 67
Table 5.8: Basis of sensitivity analysis Bioethanol ....................................................................... 69


x
List of Figures
Figure 1.1: Alternative energy solutions for fruit processing biomass ............................................... 4
Figure 2.1: Global investment in renewable energy from 2004 to 2008 ........................................... 6
Figure 2.2: USA SO
2
and NO
x
emissions by industry for 2002 ....................................................... 10
Figure 2.3: Bioenergy production technologies ............................................................................... 11
Figure 2.4: Anaerobic digestion flow diagram ................................................................................. 13
Figure 2.5: Critical financial and operational aspects in running a biogas plant ............................. 18
Figure 3.1: Participants to the Koyoto Protocol ............................................................................... 24
Figure 3.2: REFIT superimposed over the CDM structure and process ......................................... 26
Figure 3.3: UNFCC registered CDM projects by region .................................................................. 26
Figure 3.4: CERs issued by host country ........................................................................................ 27
Figure 4.1: Histogram of waste fruit sent for landfill ........................................................................ 37
Figure 4.2: Generic flow chart of the biomass conversion system .................................................. 39
Figure 4.3: Aerial photograph of Grabouw ...................................................................................... 45
Figure 4.4: Biomass feed rate: AD - fruit waste only ....................................................................... 54
Figure 4.5: Biomass feed rate: AD - fruit waste & dry pomace ....................................................... 54
Figure 4.6: Biomass feed rate: AD - fruit waste & wet pomace ...................................................... 55
Figure 4.7: GHG emissions abatement for the project alternatives ................................................ 55
Figure 5.1: Intrapolated anaerobic digester capacities ................................................................... 57
Figure 5.2: Feasibility of anaerobic digestion project activities without CDM ................................. 63
Figure 5.3: Feasibility of anaerobic digestion project activities with CDM....................................... 65
Figure 5.4: Sensitivity analysis Anaerobic Digestion: 11 t
d
/day capacity ..................................... 66
Figure 5.5: Bioethanol sensitivity analysis ...................................................................................... 68





1
CHAPTER 1
INTRODUCTION AND BACKGROUND
1.1 INTRODUCTION
Is climate change merely An Inconvenient truth as Al Gore titled his 2006 documentary that
brought this topic to public attention? For many, this may have been the first time they were
confronted with the concept of climate change and this issue has unleashed what is probably one
of the hottest debates of the 21
st
century.
In the 20
th
century, global economies expanded fourteen fold, energy consumption increased
sixteen fold and industrial output expanded by a factor of forty. The thirteen fold increase in carbon
dioxide emissions was one result of this growth (Sterling & Waterford, 2005:7). Carbon dioxide,
methane and nitrous oxide are the most significant greenhouse gasses (GHG). It is anticipated that
GHG emissions are likely to increase 4-fold by 2050 if global economies continue to grow without
constraint (Winkler, 2007:49). The concern is that the increase in GHG emissions is cited by the
Intergovernmental Panel of Climate Change (IPCC) as significantly contributing to climate change
and global warming (Sterling Waterford, 2008).
Despite the evidence tendered in support of claims of climate change, there are an equal number
of arguments against the veracity of such claims. It is not the purpose of this study to decide on the
causality between GHG emissions and climate change, but to place emphasis on the policy
framework that has been created as a result thereof. A long term mitigation scenario (LTMS) is
proposed by the Department of Environment Affairs and Tourism that requires industry to reduce
GHG emissions by 2050 to a level 30-40% below current levels (Energy Research Centre, 2007:4).
The gap between growth without constraint and LTMS creates a major challenge for the future
economy (Winkler, 2008c:83). This challenge is also exacerbated by the current economic crisis
with many economies currently entrenched in a recession which has inevitably created a shift in
focus.
Since the Kyoto Protocol of 1997 was ratified an emissions trading plan as a clean development
mechanism (CDM) was established with the purpose of reducing anthropogenic emissions
globally.
The marginal emissions abatement cost in a developing country such as South Africa is typically
much lower than in a developed country. Emissions reduction targets have been set for developed
countries, while many developing countries have been exempted from these targets to a later date
2
(at least 2012). This serves to motivate countries to identify projects with industry partnerships
between developed and developing countries where carbon emission reductions can be effected.
The result is the development of an industry purposely focused on identifying such projects and the
development of business to pursue these opportunities.
The IPCC reports that not one sector can sufficiently abate GHG emissions and subsequently
reduce the effect of climate change. Instead, the IPCC recommends short to medium term
mitigation technologies within the following industries (Metz, Davidson, Bosch, Dave & Meyer
2007:10):
Energy supply
o Efficiencies;
o Fuel switch from coal to gas, nuclear and renewable sources;
o Carbon capture and storage (CCS)
Transport
o Fuel efficiency;
o Biofuel;
o Hybrids
Buildings
o Energy and lighting efficiency through building design & construction
Industry
o Energy efficiency and recovery
Agriculture
o Improved crop yields
o Energy crops
Forestry
o Preservation to improve carbon sequestration
o Forest products for bio-energy
Waste management
o Reduction/Utilisation of biogas
o Waste minimisation
A hypothetical reference case that represents the GHGs that would have been emitted if the
project were not implemented, is the baseline for a CDM project activity (CDM Rulebook, 2009:83).
A CDM project activity is additional if the GHG emissions are reduced below the baseline (CDM
Rulebook, 2009:84). Anthropogenic emissions mitigated with reference to this baseline are all
converted to a CO
2
-equivalent (CO
2
e) to allow different mitigation projects to be evaluated through
a single metric. Carbon credits are issued as certified emission reductions (CERs) for every ton
3
CO
2
-equivalent abated. These CERs may be traded on the carbon market just like any other
commodity and investors from developed countries can buy carbon credits to achieve their GHG
mitigation targets.
Potential mitigation projects could originate from the fruit processing industry. At present spoiled
fruit that is unsuitable for processing into juice puree or any other product is discarded as landfill
waste. The fruit waste emits GHGs in the form of methane gas when decomposing. These gases
can be mitigated through an activity that generates biogas or a biofuel. The biogas can be used to
produce steam or generate electricity. Further emissions abatement results from the replacement
of fossil fuels that would be burnt to generate an equivalent amount of energy; fossil fuel that would
be used to dry some of the waste streams; and fuel burnt to dispose of the waste. This may create
an opportunity for fruit processing facilities to turn its waste streams, and those of neighbouring
facilities, into a value added product for the benefit of a sustainable environment.
1.2 RESEARCH OBJECTIVES
The research focused on the energy or biofuel potential of biomass waste streams from the fruit
processing industry. It was understood that such renewable energy project capacities would be
under 5MW and be considered small scale. Technologies required to convert this energy rich
biomass into useful energy were reviewed. The significance of the CDM for such a project in the
South African context was evaluated to establish the effect that CDM may have on the feasibility of
the study.
The above requirements lead to the research questions:
Can a small scale renewable energy project that utilises fruit waste as its primary feed stock
be a feasible CDM project activity in South Africa?
The following four sub-questions needed to be answered in order to answer the main research
question:
1. Is such a biomass renewable energy project eligible for CDM registration?
Eligibility of the project for CDM participation and the barriers that prevent the proliferation of
CDM projects in South Africa were investigated.
4
2. What is the feasibility of existing biomass energy technologies for this project when not
including CDM revenue?
The most feasible solution that converts fruit processing waste into energy had to be
established. The biomass can be converted to bioethanol and be sold as biofuel. Alternately
biogas can be produced which can be used to generate steam for the processor in a dual fired
boiler or by generating heat and electricity. This electricity in turn can be used either by the
processing facility itself or it can be fed back into the national electricity grid. Figure 1.1 below
depicts these alternatives.
BIOMASS
ANAEROBIC
DIGESTION
(waste only)
ANAEROBIC
DIGESTION
(include pomace)
GASIFICATION
FERMENTATION
DIGESTATE
BIOGAS
CHP
BOILER
HEAT
STEAM
FACTORY
FACTORY
FACTORY
ELECTRICITY
GRID REFIT
OTHER
ETHANOL

Figure 1.1: Alternative energy solutions for fruit processing biomass (Source: Author)
Feasibility was established by calculating the financial feasibility (NPV & IRR) excluding the
additional CDM revenue potential for the solutions above.

3. To what extend does CDM revenue improve any of the project net present values (NPVs)?
It was determined how the financial feasibility of the most attractive renewable energy projects
a affected by including the additional CDM revenue potential.

4. How do boundary conditions affect the feasibility of the project?
Certain macro-economic aspects that drive this opportunity and the need for change were key
to this project. A sensitivity analysis on fluctuations of these drivers established under which
conditions the project became or remained feasible.
1.3 DELIMITATION AND SCOPE OF RESEARCH PROJECT
The feasibility study focused on a fruit processing facility that pulps 3
rd
grade apples and pears in
South Africa. Although data will be used from only one such facility, the approach was sufficiently
generic to be applicable to similar processing facilities within an agri-industrial environment. Focus
was placed on biomass solid waste streams.
5
The research was approached according to the structure stipulated below in order to address the
research question and sub-questions.
A literature review (Chapter 2) focused on the benefits of renewable energy and the technology
available to generate renewable energy with specific reference to the utilization of biomass as the
energy source. A summary of the status and policy framework of renewable energy in South Africa
concluded this part of the study.
This was followed by a review (Chapter 3) of the requirements for CDM with specific reference to
small scale renewable energy projects and the status of CDM with specific reference to barriers in
South Africa followed. The objective was to establish the applicability of CDM for the project activity
in this study.
The project activities were firstly evaluated on technical merit (Chapter 4). Therafter the
financial feasibility (Chapter 5) was established with and without the potential CDM revenue to
determine which project activity appeared most feasible and the extent to which CDM revenue
increased the feasibility of these renewable energy projects. A sensitivity analysis (Chapter 6)
followed that established the level at which the major variables made the most ideal project activity
feasible or not.

6
CHAPTER 2
BIOMASS RENEWABLE ENERGY
2.1 INTRODUCTION
South Africa is fortunate to have large coal reserves, affording the country the opportunity to
provide low-cost electricity from efficient, large-scale coal-based power plants (DME, 2003:vii).
Greenhouse gas emissions from these power plants are of great concern, so is the long term
sustainability of the large dependence on coal given that security of coal supply remains under a
constant threat.
Fortunately South Africa is rich in renewable energy sources. Wind resource, particularly strong
along the coast, is abundant, solar radiation is among the highest levels in the world and biomass
by-products from industry have excellent energy generation potential. Growth in renewable energy
will diversify the South African economy, spreading economic risk, while creating commercial
opportunities and possibly the export of services (NERSA, 2009a:13). To date, however, little has
been achieved in exploiting these potential resources or achieving significant market share in the
renewable energy industry (NERSA, 2009a:15).

Figure 2.1: Global investment in renewable energy from 2004 to 2008 (Ren21, 2009:14)
Naturally occurring non-depletable energy sources have the potential to be utilised as renewable
energy sources. Grid connected renewable energy is a booming sector in the global energy market
(Ren21, 2009:8). The technologies required to use these sources differ vastly and require different
capital inputs. Globally, investment into wind, solar, hydro and biomass have received the greatest
7
attention (Ren21, 2009:14). Figure 2.1 illustrates the large scale increase in global spending in
renewable energy over the past five years.
2.2 RENEWABLE ENERGY DRIVERS
A significant number of factors have contributed to the growth in renewable energy sources as
compared to the use of fossil fuels. These drivers, were reviewed in order to understand how they
may incentivise investment for the project.
2.2.1 Policy framework
A large number of countries revised their renewable energy targets such that by early 2009, policy
targets were in place for least 73 countries (Ren21, 2009:18). To meet these targets, incentives
were introduced to attract industry investment in renewable energy projects. Within the contents of
biomass renewable energy, Germany, the lead policy maker in this field, amended their renewable
energy sources act. Revenue for energy from biogas and CHP bonuses were increased. Bonuses
for the use of renewable raw materials were increased, while a wider range of vegetable co-
products was introduced (Heil, 2009:8).
To contribute towards socio-economic and environmentally sustainable growth, renewable energy
targets are set at 10,000GWh by 2013, but market mechanisms must be established to promote
and stimulate the renewable energy industry in South Africa.
The National Energy Regulator of South Africa (NERSA) approved the Renewable Energy Feed-in
Tariff (REFIT) guidelines on 26 March 2009. The guidelines were developed in response to
national policy direction. It serves as an institutional framework, tariff conditions and the role of
stakeholders.
The adoption of the REFIT creates the opportunity to increase deployment of renewable energy
sources and further contribute to sustainable growth of the sector in South Africa (NERSA,
2009a:2). The REFIT guarantees prices for electricity supplied from renewable energy sources
over the next 20 years without downwards tariff adjustment. Table 2.1 below lists the tariffs that
were determined by levelling the cost of electricity at a 12% discount rate.

8
Table 2.1: REFIT schedule for 2009
Technology REFIT (R/kWh)
Wind 1.25
Small hydro 0.94
Landfill gas 0.90
Concentrated solar plant with storage 2.10
Source: NERSA, 2009a
Noticeably, although landfill gas is covered, biomass renewable energy was excluded from the
initial guideline. The objective is to review the REFIT yearly for the first five years and every three
years thereafter. The resulting tariffs will only apply to new projects. REFIT qualifying technologies
approved for phase II are tabled below (NERSA, 2009b:1).

Table 2.2: REFIT Phase 2 Tariffs for 2009
Technology Feed-in Tariff (R/kWh)
Large-Scale photovoltaic system (>1MW) 3.94
Concentrated solar trough without storage 3.14
Concentrated solar tower with 6 hours/day storage 2.31
Biomass solids 1.18
Biogas 0.96
Source: NERSA, 2009b:1

Eskom Single Buyer Office was appointed as the only renewable energy purchasing agency
(REPA) and is obliged to purchase the power from a renewable energy generator, subject to the
fulfilment of the necessary license conditions. A renewable energy generator needs to obtain a
Generation License issued by NERSA by specifically applying for such in conjunction with applying
for a license to generate electricity. The term for the REPA is set at 20 years (NERSA, 2009a).
Monitoring and verification that the renewable energy generator is producing credible renewable
energy is the responsibility of the Eskom Single Buyer Office.
Section 12B of the Income Tax Act (58/1962) allows for renewable energy and biofuel investments
to depreciate capital (excluding buildings) at an accelerated rate of 50% in the 1
st
year, 30% in the
2
nd
year and 20% in the 3
rd
year (Nortje, 2009:17).
9
2.2.2 Energy security
Globally coal is the fastest growing energy source, with demand increasing rapidly, especially in
India and China. The global coal price is increasing while the quality of the coal is declining. These
factors, coupled with a slow growth in South African coal production, pose a significant risk for
supply of coal for electricity generation (Eskom, 2008:24).
Energy security has been under the spotlight in South Africa over the past few years due to the
countrys only electrical utilities supplier, Eskom, failing to supply sufficient electricity to meet the
countrys growing needs, with rolling blackouts becoming a household phrase and public
monitoring of supply vs demand becoming a way of life.
Renewable energy can play a meaningful role in supplementing the current power available by
providing additional base load power or serve as peak load support (NERSA, 2009a:13).
Renewable energy plants are more widely dispersed than the coal dependant power plants that
are all located closest to substantial coal resources. These renewable energy plants will bring
supply closer to demand, thereby improving grid strength and supply quality, and reducing
transmission losses.
Growing a dependence on alternative energy sources reduces the exposure to the volatility in the
commodities markets, such as the fluctuations in the oil price, over which there is little control
(NERSA, 2009a:13).
2.2.3 Environmental considerations
A shift towards renewable energy is a shift to cleaner production. Burning fossil fuels to generate
electricity pollutes the environment with hazardous NO
x
and SO
x
gases. The recording of air quality
in the USA shown in Figure 2.2 below compares the significance this sector to other activities
(EPA, 2009). The NO
x
gasses together with the CO
2
also significantly contribute to the increase of
GHG in the atmosphere, which in turn needs to be mitigated to decrease the potential impact these
gases may have on climate change (NERSA, 2009a:13).
Not only do coal fired power plants consume large amounts of coal, they also consume large
amounts of fresh water for cooling, with Eskom reporting a specific water consumption rate of 1.32
litre/kWh for 2008 (Eskom, 2008:60). This is an important criteria for making investment decisions
in renewable energy plants in a water poor country where water rights and water disposal permits
are requisites for industry.

10
USA Air Emissions - 2002
0
2 000 000
4 000 000
6 000 000
8 000 000
10 000 000
12 000 000
14 000 000
16 000 000
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Figure 2.2: USA SO
2
and NO
x
emissions by industry for 2002 (EPA, 2009)
A further aspect is the reduction in landfill space when considering using feedstock that is being
transported to landfill sites. This alleviates the need for disposal manifests and reduces disposal
costs.
2.2.4 Corporate social responsibility
The use of renewable energy is presently very fashionable. South Africa should gain support from
the international community if it were to make significant advances towards renewable energy.
Companies sponsoring renewable energy projects may also see the benefit of this type of
corporate social responsible spending, if used as an effective marketed effectively (NERSA,
2009a:13).
2.3 BIOGAS ENERGY TECHNOLOGIES
2.3.1 Introduction
This study focused on the use of biomass to generate heat, liquid fuels and gas that in turn can be
used to generate steam or electricity. Biomass refers to a fuel derived from the (Roos, 2008:4):
Forest products industry Thinnings, saw mill and wood processing industry waste
Agricultural industry Energy crops such as corn or maize silage, or waste such as stalks,
chaff or stover (dried husks or leaves)
Food and beverage industry Peels, husks, spoilt food
Municipal and urban waste sector Construction debris, green garden waste
11
Figure 2.3 classifies the bio-energy options as thermo chemical or biochemical conversion
processes. The thermo chemical process transforms biomass with low moisture content at high
temperatures into biofuels and useful heat. The biochemical conversion is carried out at high
moisture content and ambient temperatures (BNDES & CGEE, 2008:31).
Thermochemical conversion
Combustion Gasification Pyrolysis
Biochemical conversion
Digestion Fermentation
Steam Gas Gas Coal Oil
Steam
Turbine
Combined
Cycle
Engine
Synthesis
Fuel cell
Biogas
Gas
Engine
Distillation
Ethanol
Refining
Diesel
HEAT ELECTRICITY COMBUSTIBLE

Figure 2.3: Bioenergy production technologies (BNDES & CGEE, 2008: Adapted)
2.3.2 Anaerobic digestion
Anaerobic digestion is a biological process whereby high molecular organic matter is decomposed
by bacteria in an oxygen free environment. The organic material is typically slaughterhouse offal,
food processing waste, separated municipal waste and/or livestock manure that is high in moisture
content (New Energy Eco-Systems, 2006:5) Low molecular organics, including biogas rich in
methane (CH
4
), are produced that can be used as a renewable energy source to generate heat or
electricity.
Gaseous oxygen must be absent in an anaerobic system, hence digesters are sealed to be airtight.
The process is characterised by four stages, each attributed to different trophic groups and each
performed by different bacteria. The first stage is hydrolysis where complex organic molecules are
broken down into simple sugars, amino acids and fatty acids. Acetates and hydrogen can be used
by the methanogens in the last stage but other compounds such as the volatile fatty acids (VFAs)
12
must be catabolised, thus broken down further into smaller compounds. The second stage is
acidogenesis where further breakdown into VFAs, ammonia, carbon dioxide and hydrogen
sulphide is achieved by acidogenic bacteria otherwise known as fermentative bacteria. In the
acetogenic stage further digestion occurs through acetogens to produce acetic acid, carbon
dioxide and hydrogen. Methanogenesis is the final stage where the methanogens convert the
intermediate products from the previous stages into the biogas comprising methane gas, carbon
dioxide and water. The methanogens are pH sensitive, therefore the pH for this stage is controlled
within a pseudo-neutral range of pH 6.5 - 8.0. A high concentration of VFAs inhibits acidification
and methanogenesis activity due to a decrease in reactor pH (Liu, Zhang, Sun, Li & Dong, 2007:2).
Temperature, organic loading rate and reactor pH are critical control parameters to determine the
success of the process (Hong, 2005:98; Liu, 2007; Heil, 2009). The temperature must either be
controlled at a mesophilic temperature range of 30
0
C-40
0
C or a thermophilic range of 50
0
C-55
0
C,
although psychrophilic temperatures of 15
0
C-25
0
C have been studied (Hong, 2005:98; de Baere &
Mattheeuws, 2008:80). Mesophilic plants have been more common, given that these plants prove
to be more stable. Reduced reaction time at thermophilic temperatures and improvements in
process control system has increased the development of thermophilic plants in Europe from 2005
(De Baere & Mattheeuws, 2008:80).
Apart from the biogas, the non-digestable material and dead bacterial matter form a slurry residue
rich in nutrients called the digestate. The digestate makes for a high quality fertiliser (Weltec,
2008a) in countries where the soil is not saturated with nitrogen.
Anaerobic digesters can either be single or multistage systems. In a multistage system, separate
tanks are operated under conditions that are optimal for the bacteria living in each vessel (Liu, et
al., 2007:5). The process is illustrated in Figure 2.4 below.
The predominant anaerobic digester technologies developed and implemented in the industry are
(Hong, 2005:99):
- Upflow anaerobic sludge blanket digesters (UASB),
- Covered lagoons,
- Batch digesters,
- Anaerobic sequencing batch rectors (ASBR),
- Complete/continuous stirred tank reactors (CSTR),
- Plug-flow digesters.

13

Figure 2.4: Anaerobic digestion flow diagram
(Source: American Great Lakes, 2009)

An Upflow sludge blanket (UASB) reactor requires a supply of waste water from a conditioning
tank where it mixes in part with the anaerobic effluent. The pH, temperature and nutrient addition
are controlled in the conditioning tank. The conditioned waste water is pumped into a manifold at
the bottom of the reactor. The water rises through the biomass bed (sludge blanket) in which the
decomposition occurs. The biogas is drawn off through a three phase separator at the top of the
reactor. This system is not well suited to handle insoluble solids, and is therefore useful in the
treatment of effluent streams rather than the decomposition of organic solid waste (Biothane
Systems International, 2006).
A covered lagoon is fitted with a membrane constructed of an impermeable industrial fabric that
rests on solid floats on the lagoon surface that covers all or part of the lagoon. This cover collects
the biogas produced from the decomposing organic substances. Anaerobic lagoons are best suited
for organic wastes with a - 3% total solids content. These lagoons are typically not heated, and
biogas production is dependent on seasonal temperature variations. The capital expenditure is
typically lower than the other technologies and their operation and maintenance is simple (Cohen,
2009). However they take up a large area, are not suitable where the water table is high and take
one to two years to reach a steady state for biogas production (Liu et. al., 2007; Hong, 2005).
14
Batch digesters are simpler systems than the continuous systems discussed below. The
feedstock is introduced at the start of the process, with or without the addition of seed material.
The reactor is sealed to allow for decomposition. Biogas is produced with a normal distribution
pattern over time, which in turn is used to indicate when the reaction is complete. Given its design
simplicity, a batch reactor tends to be less capital intensive. The greatest difficulty with this design
is keeping the solids in suspension as the biomass moves through the digester (Hong, 2005:99).
Digestion of vegetable waste results in VFA accumulation and an irreversible drop in pH, inhibiting
gas production (Liu et al., 2007:4).
Anaerobic sequence batch reactors (ASRB) are an alternative to continuous systems that use a
high rate bioconversion process to stabilise liquid waste (Hong, 2005:100). The reactor is operated
through a five-stage sequence. The first phase is the partial filling of the tank with the organic
feedstock, followed by a reaction phase. The feedstock is seeded with live bacteria during these
two stages by aerating the mixture with activated sludge pumped from the tank outlet. The desired
nitrification reaction is catalysed by the addition of oxygen, whereby ammonia is oxidised into
nitrites and nitrates. The next step is a settling stage during which the bacteria settle at the bottom
of the tank. When the oxygen is consumed, the anaerobic bacteria flourish. As bacteria grow and
die, some sludge can be removed from the bottom of the reactor. The treated liquid, which is the
clear water at the top 20-30% of the tank, can be decanted. About 5% of the tank volume is turned
over during this fill and draw cycle. The system typically consists of two identical tanks that are
operated on such a way that when the one tank is in the settle/decant phase, the other is aerating
and filling. This adds significantly to the capital and operational costs for such a system.
A complete or continuous stirred tank reactor (CSTR) decomposes organic waste to biogas in
single or multiple vertical steel tanks or concrete chests. Long axle and submersible mixers or
recirculation pump keeps the solids in suspension. This is decisive for the reliable and efficient
mixing of the fermentation substrates and is required for a constant gas yield (Weltec, 2008a).
Solids retention time is in the order of 20-40 days. Gas is collected at the top of the reactor,
typically under a membrane or in a separate balloon. A CSTR is best suited for an organic waste
with 3-10% solids content (Hong, 2005:99).
A Plug-flow digester is a system that comprises a collection system, a mixing pit or feeder and a
digester. Plug flow systems are well suited for organic solids from 11 to 13%. Water is added at the
mixing pit to achieve the optimum consistency if required. The digester is a long rectangular
construction covered with the impermeable airtight membrane to collect the biogas. Operating
temperatures are in the mesophilic range (30-40
0
C) with hydraulic retention times between 20 and
30 days. Organic matter is fed into the one end of the reactor, pushing the older material to the
15
other end like a plug. The solids becomes a viscous slurry as it decomposes, limiting solids
separation (Liu et. al., 2007).
The CSTR and plug-flow systems can be configured in one or two stages. Feedstock addition, gas
generation and digestate decanting occur all in one reactor. Two stage systems on the other hand
rely on two reactors. The first reactor serves as a pre treatment stage to optimise the acid
hydrolysis and effect phase separation. The biogas is produced in the second methane
fermentation reactor (Liu et al., 2007:5). Alternatively the first reactor serves as the primary
reaction stage, with a second reactor serving as a post-digester to maximise gas product. The
main advantage of the of the single reactor is the higher gas conversion efficiency, lower retention
time and higher methane concentration in the biogas (Liu et al., 2007:5).
2.3.3 Co-digestion
Co-digestion is the simultaneous processing of a homogeneous mixture of co-substrates. The
most typical application is the addition of a small amount of a substance to the primary feedstock,
but multiple substrates can be mixed at any predetermined ratio. This could be done to achieve
optimal nutrient ratios such as a carbon:nitrogen ratio or 16:1 (Liu et al., 2007:3). The advantage of
compounding substrates is that a central anaerobic digester can be constructed that
accommodates a variety waste streams from the immediate vicinity, thereby reducing capital costs
as compared to erecting various separate plants. Recent studies have shown improved biogas
production through synergies resulting from the supply of complementary nutrients of the co-
substrates (Wu, 2007:8; Liu, 2007:3).
2.3.4 Pyrolysis & gasification
Gasification is a thermal process that uses high temperatures (800-900
0
C) to break down low
moisture biomass (McKendry, 2002a:48). Oxygen supply is controlled to a level lower than
traditional mass-burn incineration. The fraction of the biomass that is allowed to combust is
sufficient to maintain the reactor temperature. This combustion degrades the biomass into char or
ash and synthetic gas (syngas). The syngas is a combustible mixture of carbon monoxide,
hydrogen and traces of carbon dioxide and methane (Rajvanshi, 1986:2). After the gas is cleaned,
it is combusted to generate electricity or steam. Liquids (mainly water) and char/ash are by-
products of this process. The liquid can be used to scrub the gas.
Gasifiers are classified by the way air or oxygen is introduced into the reactor. In an updraft gasifier
air passes through the biomass from the bottom and the gas passes out at the top. Smaller
gasifiers are typically fixed bed types with the air flowing downwards (Stassen & Knoef, 1994:3).
Downdraft gasifiers are also preferred for biomass gasification given that biomass residues are
16
typically rich in tar. In the alternative biomass can flow across the path of the airflow. The gasifiers
are compared in Table 2.3 below.
Table 2.3: Comparison of gasifier types
Gasifier type Advantage Disadvantage
Updraft Small pressure drop
Good thermal efficiency
Low tendency to slag formation
Sensitive to tar and moisture of
biomass
Relatively long start-up of IC
engine
Poor reaction capability with heavy
gas loads
Down draft Flexible adaptation of gas
production load
Low sensitivity to charcoal dust and
tar content of fuel
Tall design
Not feasible for very small particle
size of fuel
Cross draft Short design height
Fast response time to load
variation
Flexible gas production
Sensitive to slag formation
High pressure drop
Source: Rajvanshi, 1986:3
Four overlapping process stages occur as the biomass is gasified. Firstly the fuel is dried, after
which tar and other volatiles are driven off in a pyrolysis reaction. Combustion is the third stage
and the final stage is the reduction stage.
The difference between gasification and pyrolysis is that no oxygen is fed to the reactor with
pyrolysis. This process yields pyrolysis oil as the predominant product that can be used to fuel
engines or turbines (McKendry, 2002:49).
Gasifiers are designed for a specific fuel type and therefore switching between fuel sources for the
different seasons in the year may prove difficult. The following properties of the biomass feedstock
determine the operability of the gasifier (Rajvanshi, 1986:7&8):
Energy content
Moisture content
Bulk density
Dust content
Tar content
Ash and slagging characteristics
Combustion efficiency is improved by drying the biomass. The reduced moisture content of the
biomass results in an increase in steam production, often a reduction in net air emissions and an
17
improved gasifier operation. Although the gasifier heats the biomass and evaporates water in the
first stage, a dryer can achieve this more efficiently given that it is designed especially for this
purpose (Roos, 2008:3). The minimum bulk density for a downdraft gasifier is 400 kg/m
3
, while the
updraft gasifier requires a bulk density greater than 500 kg/m
3
(Stassen & Knoef,1994:7).
Char or ash is the solid residue produced from the pyrolysis process. The char can be burned to
produce steam or it could be converted by steam gasification to syngas. Gas cleaning may be
required, given that trace elements and contaminants concentrate in the char during pyrolysis
(Rabou et al., 2008:43).
2.3.5 Operation of a biogas system
The feasibility of a biogas plant is critically determine by the financial and operational factors
depicted in Figure 2.5 (Heil, 2009:10). Although the financial and operational aspects are illustrated
separately, they are interdependent and will be discussed together. The residual heat of the CHP
unit must be recuperated and utilised for applications such as drying to increase the energy
efficiency and maximise revenue (De Pooter, 2009:6).
Operational management & process control for best availability requires good operational
management. This includes effective preventative maintenance, the organisation of services and
professional labour or service contracts (Heil, 2009:10). Biogas plants controlled with computerised
process control systems that are specifically engineered for the biogas plant yield the following
improvements (Cook, 2009:11):
Higher biogas production due to improved digester capacity utilisation
More constant biogas production
Reduced capital and operational costs
Accelerated plant start-up
The methane potential and feeding technique are the two major criteria for feedstock evaluation
and quality management (Herbes, 2009:14). Methane potential is determined in the laboratory prior
to plant design to ensure the correct sizing of the plant.
Feeding techniques relates to the ease at which the material can be fed and prepared. The most
obvious is that it needs to be free of contaminants such as stones, plastic films and metals. The
chaff length and the length of the uncut leaves in the case of silage are two more factors that
influence the feeding of the biomass.
18
Biogas renewable energy plants hold a number of benefits over other renewable energy
technolgies (Heil, 2009:24).
OBJECTIVE
MANAGEMENT
Revenue for gas
& electricity
Investment/
debt service
FINANCIAL
ISSUES
Operating costs
Labour costs
Digestate disposal/
utilisation
Feedstock price
Cost control &
optimisation
Feedstock
Management
OPERATIONAL
ISSUES
Operational
management
Labour
management
Process control
by computer
Process control by
analysis biology
Availability
EXELLENT EFFICIENCY

Figure 2.5: Critical financial and operational aspects in running a biogas plant
(Source: Heil, 2009:10)
The biomass can easily be stored ensuring that the feedstock is in constant supply, unlike other
sources such as wind or solar which yields an erratic or cyclic energy supply. The supply of gas
can therefore be held constant with the concomitant even supply of energy. This simplifies the
utilisation of the energy (Heil, 2009:24).
Gas storage efficiently decouples the production of the gas and the utilisation of the energy (Heil,
2009:24). This allows energy production to be scheduled, i.e. greater energy output can be
adapted as required during periods of higher energy demand or the gas can be stored if
maintenance is required on down stream equipment such as the CHP unit. It is clear that this
requires careful balancing of equipment and a clear understanding of the operating requirements.
For some biomass plants the delivery of the feedstock coincided with the receipt of a load of
digestate which serves as fertiliser for the producer. The synergy from this closed loop system
improves operational efficiencies and opportunities to access the renewable resource.
19
2.4 BIOETHANOL
2.4.1 Introduction
Ethanol can be used as a fuel in spark-ignition internal combustion engines either in a gasoline
and anhydrous ethanol blend or as pure hydrated ethanol. (BNDES & CGEE, 2008:39).
2.4.2 Hydrolysis and fermentation
Low cost lignocellulosic biomass and residues can serve as feedstock for the production of bio-
ethanol as a renewable transportation fuel. Sugar cane and starch crops are traditionally used in
this process, which fuels the debate about food security vs renewable energy (Reith, J.H.;
Veenkamp & Van Ree, 2002). Also, clearing large areas of natural vegetation for fuel crops may
result in reduced carbon dioxide sequestration (Morrison, 2008:58).
Ethanol is produced by fermenting sugars with enzymes. Deriving fermentable sugars from
lignocellulosic biomass requires the suitable pre-treatment and hydrolysis steps to make the
cellulose and hemi-cellulose fractions accessible. Due to the xylose fraction, specially selected or
genetically modified micro-organisms are required for ethanol production. The ethanol is recovered
from the fermentation broth, dehydrated by distillation and final deep watering by molecular sieves
to produce an anhydrous ethanol suitable for blending in vehicle fuel (Reith et al., 2002; Omola,
2007:18).
The lignolytic fraction and other non-fermentable wastes can be used in a combustion/steam boiler
system or biomass-integrated-gasification/combined-cycle system (BIG/CC) to produce electricity,
part of which could be used in the production process (Reith et al., 2002).
Effective design, quality raw materials and good process control maximises bioethanol plant
profitability (Richards, 2009:3). The greatest operating costs for the manufacture of ethanol is raw
materials (including enzymes), energy (Mainly steam) and then labour (Madson, 2009b). This in
turn will impact on the feasibility to implement this project activity.
Hydrolysis and fermentation and technology is well established, thus it should be possible to
ensure an effective plant design. A basic ethanol stripping and distilling plant design can require
1.7 kg of steam per litre of ethanol. Improving the design to an energy cascade system reduces the
steaming requirement to 1.1 kg per litre ethanol (Madson, 2009a).
Fermentation management in established plants have good robust standard operating procedures
(SOPs) that consider process variability and dictate not only actions, but also reactions (Richards,
2009:6). Correct yeast nutrition is achieved by ensuring primary nitrogen is available, the correct
20
sugar profile is maintained and supplementary nutrition is supplied during the fermentation stage.
Furthermore yeast stress is reduced by controlling the temperature profile, controlling the organic
acid profile by minimising contamination and minimising other unwanted process shocks (Richard,
2009:7). Yeast handling, namely the science of yeast propagation is yet another process
parameter that is critical to successful fermentation (Richards, 2009:8). These requirements make
it clear that skilled and experienced operation is required to manage a well designed, computer
based, process control system.
2.4.3 Raw material
The production of ethanol from sugar cane and sugar beet does not require the hydrolysis stage,
making this process simpler than for starch based bioethanol (BNDES & CGEE, 2008:65).
With regards to starch based raw materials, corn is the most available and is rich in starch at
approximately 70%. It is low in fibre content and has low beta glucan levels. It resultantly has a low
mash viscosity and process easily. Grain sorghum properties are comparable to corn, therefore
also processing easily. Wheat has a starch content at about 68%, and has a higher mash viscosity
than corn due to a higher beta glucan content. Despite foaming during fermentation, wheat still
processes easily. Barley and rye are difficult to process. The beta glucan levels are higher, which
increases mash viscosity. The fibre content is higher than for corn and barley in particular is more
abrasive. A great amount of enzymes are required and staff needs to be well skilled to handle this
substrate, increasing operating costs. Cassava is a popular tuber grown in Asia due the high starch
content of approximately 80%. Cassava requires the addition of viscosity reducing enzymes in
order to process it (Konieczny-Janda, 2009).
2.5 SUMMARY
Table 2.4 summarises the biomass renewable energy technologies and uses of the renewable
energy sources.
It is clear that although a number of technologies are still in the development phase, a growing
number of technologies have matured to become proven technology. Incineration (combustion)
has struggled to penetrate the market due to poor public perception and development costs and
the time required to prove pyrolysis and gasification have proved too great to result in the
proliferation of these plants (De Beare & Mattheeuws, 2008:78).

21
Table 2.4: Bio-energy conversion technologies
Technology Status Possible products Industry
Anaerobic
digestion
Mature Power
Heat
Soil amendments
Other co-products
Dairies
Food processors
Confined animal feedlots
Waste water treatment
Incineration Mature Power
Heat
Soil amendments
Other co-products
Forest products
Agricultural and food
processing
Gasification Demonstration
emerging into
commercialisation
Power
Heat
Combustible syngas
Soil amendments
Chemical feedstocks
Biochar
Forest products
Agricultural and food
processing
Pyrolysis Demonstration
emerging into
commercialisation
Power
Heat
Liquid fuel bio-oil
Combustible syngas
Soil amendments
Chemical feedstocks
Biochar
Forest products
Ethanol
fermentation
Mature Ethanol Agricultural and food
processing
Lignocellulosic
conversion
R&D and
demonstration
Cellulosic ethanol
Chemical feedstocks
Hydrogen
Other co-products
Biorefineries (especially forest
products)
Source: Roos, 2008:2
Table 2.5 compares the advantages and disadvantages between the CSTR and plugflow reactors
and the benefits of temperature and reaction stages.
The South African government has kept pace with the international community with regards to the
introduction of national policies that promote and incentivise renewable energy project within the
private sector. The 96c/kWh feed-in tariffs translates to 11 c/kWh at a R/ exchange rate of 11.50.
This compares favourably with the French tariff of 9 c/kWh (Lugardon, 2009:8) and is not
dissimilar to the German tariff of 14 /kWh (Heil, 2009:12). A significant difference is the absence
of a fuel blending target such as the E10 target in the Unites States and similar targets in the EU
countries.
Carbon emission reduction is a benefit that plays a key role in the viability of such projects and will
be discussed in detail in the following section.

22
Table 2.5: Characteristics of most significant parameters for AD technologies
TEMPERATURE Mesophilic Thermophilic
Easily controlled (near
ambient temperature)
More instrumentation and controls
Bacteria more resistant to
process variation
Bacteria are more sensitive to
variations in temperature, pH and
feedstock
Lower demand for
additional heating
More heat and improved digester
insulation required
Lower gas production rate Higher production rate
Possibly larger footprint Potentially smaller footprint
Potentially higher residence
times
Potentially higher throughput
DESIGN CSTR Plug flow
Well established Less established
All reactions take place in
equilibrium
Reaction zones are more distinctly
separated
Wet AD Dry AD
Mixers Augers & recirculation pumps
REACTOR STAGES Only digester Digester & post-digester
Lower gas yield Higher gas yield
Less gas storage capacity -
Gas holding tank required
Additional gas storage capacity
Lower capital costs Higher capital costs
Source: Author
23
CHAPTER 3
CARBON MARKETS
3.1 ECONOMIC SYSTEMS
A market is an institution through which buyers and sellers interact and engage in exchange. In a
free market economy, the system operates on its own without interference from government. Price
is the coordinating mechanism (Case & Fair, 2002:37). Markets do not always produce what the
buyer wants at the lowest cost, as a result of which there are inefficiencies. Rewards are not
evenly distributed, leaving out some groups, but government plays a role in bringing about a more
equitable distribution of income and wealth in such cases (Roux, 2008:7).
3.2 EMISSIONS REDUCTION MECHANISMS
The 1997 Kyoto Protocol marked the first time that governments accepted legally binding GHG
emissions constraints starting February 2005 (Sterling Waterford, 2008:4). Companies and other
groups from annex 1 countries (developed countries, typically countries from the European Union)
are issued emissions permits and an equivalent number of allowances set by a central authority
such as a government or international body. Such allowances may be traded between companies
that need to increase their emissions allowance and those that pollute less than their emissions
cap. Such Emissions Trading Schemes is one of three flexible mechanisms aimed at reducing
GHG emissions by achieving reductions where they cost the least (Winkler, 2008a:89). Non-Annex
1 countries, which are mostly developing countries, do not have emission reduction targets, but
must ratify the Protocol in order to host emission reduction projects. Figure 3.1 (Pointcarbon, 2009)
graphically shows the categories in which countries participate in the Kyoto Protocol.
Clean development mechanism (CDM) is the carbon emissions mitigation mechanism that creates
the best opportunity for developing countries to gain access to the growing carbon market (Winkler,
2008c).
3.3 CDM MARKET SYSTEM
The CDM uses market mechanisms to achieve environmental targets of GHG emissions reduction
on a project-by-project basis. It is an economic instrument that assists developing countries in
achieving sustainable development by allowing industrialized countries to finance projects for
reducing greenhouse gas emissions in developing countries and receive credit for doing so.
24

Figure 3.1: Participants to the Koyoto Protocol (Pointcarbon, 2009)
Annex I countries (EU members), that have taken on a common commitment in the first
Kyoto commitment period (2008-2012) to reduce average greenhouse gas emissions by 8%
compared to 1990.
Annex I countries (only the USA) that have signed the Kyoto Protocol, but have not ratified it.
Countries making the transition to a market economy. They have emission caps and are
typically net sellers in the carbon market.
Annex II non-EU countries that ratified the Kyoto Protocol and have compliance targets.
Non-Annex countries do not have emission caps and are potential hosts for Clean
Development Mechanism (CDM) projects.
Carbon credits are issued as certified emission reductions (CERs) for every ton of CO
2
-equivalent
abated. These CERs may then be traded on the carbon market just like any other commodity, with
investors from developed countries buying carbon credits to achieve their GHG mitigation targets.
Hence the most cost effective emissions reduction projects are promoted. The CERs are sold by
way of an Emissions Reduction Purchase Agreement (ERPA). The price could be fixed for a
volume of CO
2
-equivalents to be delivered at an index price, with the remainder linked to the
European Allowance Price index or a market spot price. CERs can be considered incorporeal
assets and can therefore be transferred and security can be taken over them (Tucker & Gore,
2008). The absorption potential of the atmosphere can be considered the scarce resource in this
25
input (factor) market. This artificially created scarcity has given carbon a value as a new
commodity and an asset class in its own rights (Tucker & Gore, 2008). The LTMSs could be seen
as the output (product) markets that must meet the demand that has been created artificially
through the cap and trade system.
Additionality is a principal element for a project to qualify as a CDM project activity and is defined
as follows:
A CDM project activity is additional if anthropogenic emissions of greenhouse gasses by
sources are reduced below those that would have occurred in the absence of the registered
project activity (CDM Rulebook, 2009:84).
This requires, after the implementation of the project activity, that GHG emissions are lower than
the business-as-usual scenario or any other scenario whereby GHG emissions would gradually be
lower (CDM Rulebook, 2009:84). A project that is strategically, financially or otherwise feasible and
that reduces GHG emissions would be considered a business-as-usual scenario and would not be
eligible for registration as a CDM project. Eligibility for CDM registration only holds if the emission
reductions are real, measureable and have long term benefits towards mitigating climate change
(CDM Rulebook, 2009:84).
The hypothetical reference case that represents the volume of GHGs that would have been
emitted if the project activity were not implemented is termed the baseline (CDM Rulebook,
2009:83). The net change in GHG emissions by sources outside the project boundary, but which
are attributable to the CDM project activity, is termed leakage and must be accounted for when
determining the reduction in anthropogenic emissions (CDMRulebook, 2009:330).
A project meets the requirements for additionality if the emission reductions resulting from
implementing the project are certified by a designated operational entity (DOE) (CDM Rulebook,
2009:84). The process of creating carbon currency must be audited annually by the DOE to
validate and verify the GHG emission reductions (Furter, 2008).
The CDM project cycle includes the following stages:
1. Carbon assessment
2. Project Design Document (PDD)
3. Validation (by DOE) & Registration (by UNFCC)
4. Issuing of Carbon credits
5. Delivery of payment
The overview of the REFIT structure and process superimposed over the CDM in Figure 3.2 below
illustrates how onerous and complicated the structures would be for the project host.
26
PURCHASING PARTIES
DOE
Annex I /
Annex II
Country
NERSA
UNFCCC
REPA
ERPA
CDM
REFIT PPA
Electricity
Money
REGISTERING
PARTY
CERs
Money
Validation
Registration
Reporting
License
Reporting
Customer
Renewabl e
Energy
Proj ect
Host

Figure 3.2: REFIT superimposed over the CDM structure and process (Source: Author)

3.4 CURRENT CDM SITUATION
CDM accounts for the majority of project-based transactions, despite the significant increase in
joint initiative (JI) projects over the past few years. China remains the biggest seller of CERs
expanding its market share to 73% of all CDM transactions (World Bank, 2008). Figure 3.3
illustrates the share of projects approved by the UNFCCC. Figure 3.4 compares the expected
annual CERs from registered projects per host country.

Figure 3.3: UNFCCC registered CDM projects by region (Source: UNFCCC, 2009)
27
Although Africa only has 30 registered projects (1.8% of the global projects), of which South Africa
holds 15, the number of projects in Africa are growing, and the expected annual CERs are
increasing steadily (UNFCCC, 2009).
Average Annual Reductions
2 900 689
0
5 000 000
10 000 000
15 000 000
20 000 000
25 000 000
30 000 000
35 000 000
40 000 000
C
h
i
n
a
I
n
d
i
a
B
r
a
z
i
l
R
e
p
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b
l
i
c

o
f

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o
r
e
a
M
e
x
i
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o
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i
l
e
A
r
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e
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i
n
a
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i
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e
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i
a
I
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o
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i
a
M
a
l
a
y
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i
a
S
o
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h

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f
r
i
c
a
Q
a
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a
r
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o
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o
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i
a
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e
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E
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e
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i
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e
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T
h
a
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a
n
d
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a
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a
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z
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e
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a
d
o
r
N
i
c
a
r
a
g
u
a
O
t
h
e
r
180 121 490

Figure 3.4: CERs issued by host country (Source: UNFCCC, 2009 - Adapted)
Primary CERs (pCERs) transactions declined by nearly 30% from a high of 552 millions CERs in
2007 to about 389 million in 2008. The value of primary CDM transactions for 2007 grew to 5.4
billion (US$7.43 billion) (World Bank, 2008:19). Private sector entities and governments in the EU
and Japan accounted for the greatest demand. Voluntary markets supporting activities to reduce
carbon emissions not mandated by policy makers are also growing strongly, tripling in value in
2007 to US$265 million (World Bank, 2008). Primary CDM transactions fell to 4.5 billion (US$6.52
billion) in 2008 due to the slowing of the economy and amid uncertainty concerning the rules that
would be applicable post 2012 (World Bank, 2009:31). This reduction occurred despite calls from
the scientific community for a heightened urgency in taking action on climate change (World Bank,
2009:7).
CER prices averaged 11.46 (US$16.78) for primary forward contracts in 2008, an increase of
16% from the previous year. Prices prior to the start of the financial crisis in October 2008 ranged
between 8-16, depending on the projects progress from a regulatory and operational perspective
(World Bank, 2009:44). Projects further down the pipeline or projects developed by experienced
and established sponsors and projects with high expected issuance yields command the highest
prices. Spot contracts of issued CERs declined from 19.90 in August to 13.30 in December
2008.
28
Secondary markets emerged as the biggest market development in 2007 and early 2008 (World
Bank, 2008) due to the growing range of risks of CER registration and issuances in 2007. The
carbon market innovated and provided portfolio based guarantees that are guaranteed CER
contracts (gCER) sold by a secondary seller such as a market aggregator. These guarantees are
usually credit-enhanced through the balance sheets of a highly rated bank engaged by the seller.
One example of the use of this secondary market is the carbon credit note (CBN) issued by
SterlingWaterford in 2005. The CBN was 1
st
issued in January 2005 at US$9.90 (R56.41). It was
listed on the JSE in April 2005 at a price of US$14 (R84). It matured in June 2008 paying investors
US$24.17 (R185), which equates to a growth in Rand value of 250% in just more than 3 years,
outperforming the all share and bond indices (SterlingWaterford, 2008).
Table 3.1 highlights the improvement that the sale of CERs has on the financial feasibility of
renewable energy projects in developing countries. It is apparent from the data that CDM has a
significant improvement on biomass and methane to energy projects, suggesting that CDM may be
very relevant to this study.
Table 3.1: Monetising carbon credits for renewable energy projects
Country Project Type
% IRR
excl. CERs
% IRR
incl. CERs
IRR Increase
[% points]
% IRR
Increase
Romania District heating 10.5 11.4 0.9 9
Costa Rica Wind 9.7 10.6 0.9 9
Jamaica Wind 17.0 18.0 1.0 6
Morocco Wind 12.7 14.0 1.3 10
Chile Hydro 9.2 10.4 1.2 13
Costa Rica Hydro 7.1 9.7 2.6 37
Guyana Bagasse 7.2 7.7 0.5 7
Nicaragua Bagasse 14.6 18.2 3.6 25
Brazil Biomass 8.3 13.5 5.2 63
Latvia Methane 11.4 18.8 7.4 65
India Methane 13.8 18.7 4.9 36

Source: King, 2005:16
3.5 CDM IN SOUTH AFRICA
3.5.1 South African situation
South Africa signed the United Nations Framework Convention on Climate Change (UNFCCC) in
1993, ratified it in August 1997 and acceded to the Kyoto protocol in June 2001 (Kim, 2003:3).
29
South Africa is not an annex 1 country and has therefore not been allocated an emissions cap. As
a result thereof South African companies cannot participate in international emissions trading
schemes nor may they gain benefit from funding emissions reduction programs in other countries.
Instead South Africas negotiating position is aligned with that of the G77 countries and it is
therefore eligible to host CDM projects (Kim, 2003:3).
While emissions from Africa are low and are expected to remain so for the near future, South
Africa is the greatest polluter on the continent. The CDM potential is high, given the coal based
economy and extensive industrial sector (Ehlers & Wiekert, 2006). Based on a study between 1999
and 2001, the following seven sectors were identified where mitigation opportunities are the
greatest (World Bank, 2002):
Electricity (greatest potential at 1,32 million tons CO
2
between 2001-2025)
Liquid fuels
Natural & synthetic gas
Commercial & residential sector
Transport
Mining
Industry
Agriculture

An active and growing carbon market and carbon prices should encourage industry to implement
CDM projects (Little, 2006:61). South Africa has a well developed infrastructure, which leads to
foreign investor confidence (Little, 2006:63). This should stimulates foreign direct investment (FDI)
and may access to funds from financial institusions more readily available.
The Department of Environmental Affairs and Tourism is the leading agency in promoting climate
change related activities in South Africa. It has issued a climate change policy that stresses the
inclusion of the climate change policy in national policies and calls for collective action from all
ministries (Kim, 2003). It has identified the Department of Mineral and Energy (DME) as its main
partner in addressing South Africas emissions profile, given that the countrys energy policy will be
most significantly determine this profile. The DME is the designated national authority (DNA) that
gives final approval to CDM projects. (Ehler & Wiekert, 2006; Little, 2006:68). Specialists on CDM
have also entered the industry, which strengthens South Africas capacity effectively to pursue
CDM project activities (Little, 2006:66).
30
In order to incentivise companies to register CDM projects, the South African government initiated
a tax incentive in 2009 where the sale of CERs will be wholly exempt from normal tax and capital
gains tax. This applies to the amount received or accrued from the disposal or anticipated disposal
of these CERs (National Treasury, 2009:29).
But if the market potential is so great, why are there only 11 CDM projects registered in South
Africa? A number of barriers to the carbon market exist in respect of Africa as a whole, including
South Africa. The lack of consistency in the application of the CDM with no precedents, together
with complicated rules, leads to a complex, long and uncertain process. The projects that have
been registered are typically big projects where the degree of uncertainty is significantly reduced.
Additional uncertainty leads to an unpredictable process.
3.5.2 Resource barriers
Successful implementation requires an effective institutional framework and an environment
conducive thereto. South Africa has limitations for the implementation of CDM projects. Lack of
resources, for example human resources such as either the lack of skills or the unavailability of
skilled manpower, together with limitations on capital expenditure and of technology, restricts the
development of the CDM. Governmental shortfalls, including the lack of leadership and decision
making procedures at the ministerial level and inefficient governance, create further strain on an
already complex process (Ehler & Wiekert, 2006). Government appears to lack an understanding
of the CDM guidelines and rules and a lack of project management experience (Little, 2006:67).
3.5.3 Stakeholder barriers
Concerns exist that developed countries will use the CDM to exploit the easy, cheap mitigating
projects and, when it is the turn of developing countries to show emissions abatement that only the
more expensive projects will remain (Kim, 2003:5).
Stakeholders operate in silos, limiting the capacity to facilitate more projects in South Africa (Little,
2006:67).
Scepticism prevails among stakeholders, in government circles and in the private and public
sectors, given that the CDM is a politically sensitive issue. Key private sector players fear its
impact on the coal market and locally developed technology. The Chamber of Mines strives to
ensure that climate change related initiatives have the least amount of impact on coal exports,
given the mining industrys vested interest in the coal market. CDM projects such as Sasols gas
pipeline and other renewable energy projects may pose a threat to this industry. Eskom also
31
appear to be cautious of certain technology transfers that may threaten the market for its own
technology (Kim, 2003:6).
3.5.4 Sustainable development
Stakeholders expect the CDM to achieve the fundamental sustainable development additionality,
while some investors are primarily interested in the financial benefits. No fixed set of goals for
sustainable development have been set by government, but the view is that the social benefits
should be aligned with South Africas integrated development policies. These policies include the
following four areas (Kim, 2003:7):
1. Principal indicators
o Employment equity
o Job creation
o Poverty eradication
2. Environmental benefits
o Environmental improvement
o Enforcement of environmental regulation
3. Local economic development
o Rural development
Affordable energy
o Human development
Adult based education
Skills development
o Sustainability of projects
Technology training
Provision of basic infrastructure
4. Public participation
o Empowerment of disadvantaged people
o Participatory environmental governance
o Sustainability of projects sense of ownership

The emphasis on sustainability is lobbied as being essential for the success of the CDM. This is
somewhat contrary to classic economic reasoning. The greatest benefit for CDM projects comes
from the energy sector, which in turn is a highly capital intensive industry. The behaviour of profit
maximizing firms that use capital intensive technology do not rely on human labour (Case & Fair,
2002:140). This poses the conundrum that the projects with the greatest emissions offset are those
that do not necessarily lead to sustainable development. As an example, hydroflurocarbon (HFC)
32
and nitrous oxide have very high global warming potential. Destroying this gas in an industrial
facility with no social benefit makes such projects viable for the CDM revenues alone (Winkler,
2008b:65).
3.5.5 Validation
The need to validate and verify the GHG reductions creates the opportunity for a local auditing
authority to accredit itself as a designated operational entity (DOE). In June 2008,
PricewaterhouseCoopers (PwC) was the 1
st
to become an accredited DOE with the UNFCCC.
However, PWC have subsequently dismantled this division, given the limited number of registered
and potential projects in South Africa (Terblanche, 2008).
3.5.6 Mitigation projects
South Africa has fallen prey to poor energy forecasting. The result is that a number of oil or gas
power generation facilities are being built that are motivated not by a need for lower emissions, but
because these are quicker to erect than coal fired plants. Additionality does not exist and no
carbon credits can be claimed. In contrast, the closed cycle gas turbine (CCGT) power plant in
Mozambique is in the CDM pipeline. All the efforts and money injected into the demand side
management could have been registered as a CDM project, if it had not been done for reasons of
necessity but if it had served as part of the governments LTMS instead, as a viable alternative to
increasing the capacity of coal fired power plants. This concept is emphasized by the Kuyasa
project, where 2300 low cost houses were retrofitted to give residents hot water at reduced energy
consumption. This project was designed and developed before the electricity shortages and was
successfully registered as a CDM project. Now similar initiatives are underway, but not under the
auspice of CDM.
Large projects such as Sasol and Omnias nitrous oxide abatement projects were the first to be
implemented given the great financial benefits from such projects. Sasol has banked about R100M
in CERs while Omnia will generate about R60M in annual revenue from their project (Van der
Merwe, 2008:27).
High transaction costs and uncertainty of the CDM process means that CDM projects are more
likely to be undertaken as VER projects (Kinkead, 2007). Programmatic CDM opens the
opportunities for future mitigation projects. It is an attempt to address the shortfalls of the lack of
precedents, by grouping similar CDM projects into one program. This reduces the number and
subsequently the cost of CDM registrations. It also allows for the implementation of smaller
mitigating projects by their inclusion within a program.
33
Another barrier that retards the process is the environmental impact assessments (EIAs) that are
prerequisites for most of these types of projects. The EIA process is often delayed through the lack
of government resources (Kim, 2003).
Capacity building of financial institutions continues to be important, to understand the value of an
ERPA (Kinkead, 2007:7). Project characteristics that private sector buyers require (Kinkead,
2007:8):
Sound business plan
Creditworthy counter party
Relatively stable investment environment
Transparent DNA approval process
Responsive and engaged clients
Large projects and/ or excellent sustainable development benefits
Renewable energy

Until recently, the low price for electricity has made renewable energy and energy efficiency
measures unattractive, leading to widespread energy wastage with little consideration for
alternative supply options (Ehler & Wiekert, 2006). This situation has changed quickly in the recent
past given the 34% increase in the electricity tariff and further tariff increases proposed for next
year. A further 2c/kWh environmental tax for burning fossil fuels to generate electricity was passed
directly on to customers as an environmental levy with effect from April 2009 (Eskom, 2009).
A white paper published by the DME in 2003 sets a target of generating 10TWh of electricity from
renewable energy sources by 2013, but the DME has done very little to develop renewable energy
projects through any form of legislation (Ehler & Wiekert, 2006). The provision of revenues in the
Minster of Finances budget for 2009 exempts the sale of primary CERs from tax, although capital
gains tax may be levied instead.
Notwithstanding the progress made in the global economy to reduce its dependency on dirty
energy, South Africa has still found it justifiable to expand its export coal yard in Richards Bay
terminal which still remains a bottleneck to move coal into this economy. This may suggest that
emission reductions cannot be achieved through the artificial economy created by the three
flexible mechanisms that have given rise to a vibrant carbon market.
34
3.6 SMALL SCALE RENEWABLE ENERGY PROJECTS
3.6.1 Introduction
The present ratio of small scale to large scale project activities is 43:57 (UNFCCC, 2009).This
would suggest that the simplified modalities sufficiently incentivises small scale projects by
sufficiently reducing the cost and time for CDM registration. In order for a project to use the
simplified modalities and procedures, the UNFCCC set requirements proposed small-scale CDM
projects must meet.
The eligibility criteria for small-scale CDM projects as listed in Table 3.2. The project types are
mutually exclusive; therefore, any project activities that fall within more than one of these types
must meet the criteria of each relevant component. Project participants may submit a request for
approval for a proposed project that does not contain one of these components. The project must
not be a debundled component of a larger project and it must conform to one of the project
categories stipulated in Table 3.3.

Table 3.2: CDM eligibility criteria in paragraph 6(c) of decision 17/CP7
Project types
Type I: Renewable energy projects Maximum generation capacity smaller than 15 MWe
Type II: Energy efficiency improvement
projects
A maximum of 60 GWh per annum supply and/or
demand-side energy efficiency saving
Type III: Other project activities Anthropogenic emissions reduction and direct
emissions that do not exceed 60 kilotons CO
2
e per year
Source: cdm Rulebook, 2008:152

3.6.2 Biomass renewable energy projects
The small-scale biomass renewable energy project will be evaluated against the criteria for a type I
project given that heat and electricity will be cogenerated from most of the project alternatives.
Type I and III methodologies will be evaluated and used where applicable, given that the
suggested project activities fall within the agricultural sector, which results in the switching from
fossil fuels to biomass and avoids methane gas emissions.
3.6.3 Advantage of small scale project registration
Small scale project participants are entitled to use the simplified modalities to reduce costs,
meaning the use of simplified project design documentation. Simplified baseline methodologies
and simplified monitoring plans that have reduced monitoring requirements may be used. A
separate baseline study and monitoring plan is not required while the requirements for leakage
35
calculations are simplified. A predefined list of barriers may be used to demonstrate additionality.
Project boundaries are limited to the physical project activity. The same designated operational
entity (DOE) may be contracted for the validation, verification and certification. (World Bank, 2003)
Table 3.3: CDM project categories (cdmrulebook,2008:152)
Project types Project categories
Type I: Renewable
energy projects
A Electricity generation by the user/household
B Mechanical energy for the user/enterprise
C Thermal energy for the user
D Electricity generation for a system
Type II: Energy
efficiency
improvement
projects
E Supply-side energy efficiency improvements transmission and
distribution activities
F Supply-side energy efficiency improvements generation
G Demand-side energy efficiency programmes for specific technologies
H Energy efficiency and fuel switching measures for industrial facilities
I Energy efficiency and fuel switching measures for buildings
Type III: Other
project activities
J Agriculture
K Switching fossil fuels
L Emission reductions in the transport sector
M Methane recovery

Small scale projects may be bundled, as long as the sum of the project activities remain within the
limitations stipulated in paragraph 6(c) of decision 17/CP7. This may be undertaken at any stage of
the project cycle, from as early as the project design documentation stage and right up to the
certification stage. A monitoring plan for the bundled project activities may be based on the
performance of activities on a sample basis.
Preliminary quantification of cost savings showed, by applying the small-scale modalities and
procedures, that carbon finance costs would be reduced to less than half of regular CDM project
activities.
Mechanisms are in place to make funding available for projects that reduce anthropogenic gas
emissions. It is anticipated that CDM project should proliferate in South Africa, but it lags behind
other developing countries such China and India. These factors are not considered prohibitive and
with the policy changes such as tax incentives and GHG emissions reduction targets, the number
of CDM projects may increase over the foreseeable future.
36
CHAPTER 4
PROJECT DESCRIPTION
4.1. INTRODUCTION
The fruit processor in this study manufactures about eight million litres annually of apple and pear
juice concentrate from 3
rd
grade deciduous fruit. The production season begins in January and
continues until June. After the fruit is macerated and pressed, the juice is concentrated by
evaporating off water using steam. The process is energy intensive with a steaming requirement of
up to 30 tons dry steam per day and a peak energy demand of 1200kVA during peak season and
an annual energy requirement of 3.5 to 4 GWh.
4.2. BIOMASS FEEDSTOCK
4.2.1. Fruit processing facility waste and by-products
The juice grade fruit arrives at a rate higher than the factory throughput. Fruit must therefore be
stored before being processed. The industry practice is to store the fruit outside with only a limited
amount of fruit stored in cold storage due to the high costs associated with cold storage. Fruit is
stored outside for up to three weeks before being processed. The fruit is sorted prior to being
processed, with spoiled fruit being discarded and removed from site for landfill where it is
composted. Figure 4.1 illustrates the average amount of waste fruit during the season for the past
five years. A maximum rate of 140 tons/week or 20 tons per day will be considered. This rate
varies annually due the great variability in crop harvested, but an average of 2400 tonnes fruit is
discarded per year. Fruit waste is removed for landfill, which leads to GHG emissions from the
transportation of spoiled fruit to the landfill site and the partial anaerobic decay of the fruit at the
landfill site.
The apple waste has a 20% solids content. Based on total mass, 17% are sugars, i.e. soluble
solids. The other 3% is the insoluble peel, core and pips of the fruit, which are predominantly
organic and are considered to be a volatile fraction. The ash content is taken as 2.5% of the total
solids (TS), hence the volatile solids (VS), are calculated to be:
VS
Waste_Fruit
= (1-2.5%)*TS = 19.5% of the total mass
Thus, volatile solids, based on a waste rate of 20 tons per day are:
VS
Waste_Fruit
= 3.9 tons per day.
37
0
20
40
60
80
100
120
140
160
180
200
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Pr ocessing week
T
o
n
s

w
a
s
t
e

f
r
u
i
t

Figure 4.1: Histogram of waste fruit sent for landfill
The insoluble fraction of apples and pears, called pomace, consists of the peel, pips and core of
the fruit. The pomace is currently dried in a rotary drum dryer to reduce moisture content from 70%
to 10% and is then sold as animal feed. The production rate of pomace is constant at about 60
tons per day throughout the processing season. The hot air that evaporates the water from the
pomace is heated in a brick kiln by incinerating coal. The spent flue gas from the drier is vented
into the atmosphere. Again GHG emissions are emitted from the burning of fossil fuels and the
transport of the pomace to the point of delivery. At a 70% moisture content the pomace consists of
15% soluble solids (sugars) and 15% insoluble solids. As with the fruit waste and because these
are organic solids, the volatile solids are the sum of these two fractions, namely 30% of the 60 tons
per day, i.e. 18 dry tons per day.
4.2.2. Co-digestion of supplementary biomass
Due to the seasonality of the business, alternative feedstock would be required to serve as
feedstock for the period July to December. A small amount of waste fruit may be sourced from the
fruit packing operations in close proximity.
The processing facility is located within the Grabouw industrial region. Other industries with
feedstock of value would be the adjacent abattoirs, with meat waste and blood, and chicken farms,
with their litter, less than 10 km away. These supplies of feedstock are anticipated to be small
volumes but would be well suited for anaerobic digestion due the high nitrogen content and high
protein content.
In the alternative, sawmill waste such as sawdust, bark and off-cuts from sawmills within a 30 km
radius may supplement the feedstock if gasification were to be applied as renewable energy
38
technology. Wood chips from the forestry and clearing activities may also serve well, but would
need to be purchased, as wood chips have possible alternative uses such as mulching.
In addition, an estimated 2% of the total fruit harvest is rejected at the farms and is left in the
orchard to decay as it is too costly for farmers to collect and landfill this fruit (Walton, 2008). Based
on the 80,000 tons fruit received for juicing and the 100,000 tons fruit received for packing, this
fraction is conservatively estimated at 3,600 tons, which would be available from June to August.
The orchards must be maintained in the latter part of the year. During such time thinnings and
cuttings may serve as an alternative raw material, depending on the moisture content and the
renewable energy technology employed.
A maximum biomass feed of 24 dry tons will be used to determine capacity. Alternative sources of
feedstock would be required in the latter part of the year to supplement the capacity required
during peak season.
4.3. RENEWABLE ENERGY TECHNOLOGY
4.3.1. Introduction
The energy potential of the various biomass feedstocks must be analysed to determine which will
be most profitable. The flow chart for the generic system choice of the conversion process of
biomass to electricity and heat is illustrated in Figure 4.2 below. This will be used to determine and
quantify the system inputs such as the biomass and energy requirements and outputs such as gas,
energy, co-products and emissions.
4.3.2. Anaerobic digestion
Given the high moisture content of the primary feedstock, anaerobic digestion is well suited, as
dilution water from factory effluent is readily available to reduce the solids content in the bioreactor
to 3 to 10%. Technologies that are well established and available are anaerobic CSTR and
covered lagoon.
Some plug flow anaerobic digesters have been built, but the conditions in these digesters are not
homogenous, so the four reactions, namely hydrolyses, acidification, acetification and methanation
occur in distinct zones in the reactor. The methane gas yield would not be optimised, given that
these reactions act in isolation instead of being in equilibrium. Settling or flotation of solids could
also be a risk resulting in incomplete reaction and poor utilisation of reactor volume. ASBR is still in
a developmental stage and was not considered. The footprint of a covered lagoon is larger than
that which is available at the processing facility. The other difficulty is that such lagoons are not
well insulated due to the nature of their design. They work well in tropical climates where heating is
39
not required, but this installation would require continuous heating, especially at night and during
winter. It also restricts operations to mesophic temperatures.
Biomass
Storage
Biomass
Biomass
Pretreatment
eg. acidif ication,
hydrolysis,
drying
CO
2
, CH
4
, N
2
O
Conversion
eg. digestion,
f ermentation,
gasif ication
By-product
eg. Digestate,
biochar
Transport
Biogas/Syngas
Energy
production by
combustion
at CHP
CO
2
, CH
4
, N
2
O
Electricity
Electricity
Grid
Heat
Processing
Facility
Storage
Transport
CO
2
, CH
4
, N
2
O
Application
eg. f ertiliser

Figure 4.2: Generic flow chart of the biomass conversion system
CSTR could be operated at either temperature range. Although plant throughput is improved at the
elevated temperature and the bacteria adapts to this temperature, their survival rate is reduced and
they are also more sensitive to temperature fluctuations (Beckedorf, 2009). Therefore CSTR
operated at a mesophilic temperature of 30-40
o
C at 10% solids was considered optimal.
The biogas yield from fruit solid waste can range from 0.3 m
3
/kg VS to 0.5 m
3
/kg with 50-60%
methane gas, depending on the feed rate (Wang, 2008:262). The technology suppliers GWE and
Weltec confirmed a methane gas yield of 0.27-0.30 m
3
/kg solids with a calorific value at STP of
35.5 MJ/Nm
3
. The electric conversion rate of the gas engine in the combined heat and power
40
(CHP) plant is 38% and waste heat from the gas engine is 40% of calorific value of the feed gas
(Thorpe, 2008; Weltec, 2008b).
Two capacity alternatives were considered, 6 dry tonnes versus 24 dry tonnes. The 6 dry-ton
capacity is sufficient to digest all the waste fruit for each day and then supplement the feedstock
with biomass from the surrounding area, such as post-harvest waste, abattoir waste and, if
required, wet pomace, to utilise the digester capacity fully throughout the year. For the 24 dry
tonne capacity, all the waste fruit and pomace will be digested. Again, provision was made for
capacity to digest supplementary stock such as abattoir waste is included, given the advantage of
such biomass for the supply of nitrogen. It was assumed that the alternative feedstock will only be
sufficient to operate the larger digester at 20% capacity after the season, while the smaller digester
should operate at 90% capacity at all times. Under both circumstances, it will be assumed that the
digester is stopped for 20 days every year for maintenance. Therefore a production year is
calculated as 346 days.
Only easily digestable waste biomass would be usable as a supplementary feedstock. This would
include the post-harvest waste fruit from the farms, animal waste from the neighbouring abattoirs
and sorted municipal waste such as grass trimmings and other non-woody material. The abattoir
biomass will also serve to enrich the feedstock with nitrogen. The capacity for each alternative was
marginally higher than required specifically to provide for this readily available biomass.
Budget quotations from three technology suppliers of anaerobic CSTR digesters were obtained.
These quotations were compared to determine the expected capital requirements for the two
capacity options.
The quotation received from Project Assignment (Biothane) stated a greater methane gas
production. The Weltec quotation assumed the primary feedstock could be more evenly spread
over the year (Weltec Biopower, 2008b). Although this is not the case, the option to digest only
waste fruit and exclude the pomace was also considered, given that the pomace is currently sold
as animal feed.
Cape Advanced Engineering (CAE) initially proposed an anaerobic plug flow reactor but concerns
of sludge settling rates redirected their proposal towards CSTR. A quotation for both 6 tonnes/day
and 24 tonnes/day was received. Again, this afforded the opportunity to include the scenario
whereby the waste fruit and pomace was digested vs only the digestion of waste fruit. The reactors
were designed with the high cost of capital in African vs European countries in mind, yet they are
claimed to be equally functional. These quotations were used when evaluating the anaerobic
digestion.
41

Table 4.1: Comparison between CSTR quotations
Supplier Weltec Cape Advanced
Engineering
GWE -
Talbot &
Talbot
Biothane -
Projects
Assignment
Feed Rate (dry tonnes/day) 6
1
6
1
24 40

40

Capital cost CSTR [R]
9,450,000
2
10,500,000

19,000,000
43,000,000 38,100,000
Capital cost CHP [R] 18,000,000 Not quoted
Methane gas [m
3
/day] 1,570 11,700 16,560
Electrical output [MW] 0.270 0.300 1.1 1.8 2.6
3
Heat power output [kW] 275 274 1010 1900 Not stated
Capital cost [R/MW
e
] 35,000,000 35,000,000 17,272,272 33,888,889 21,576,923
4
1. Assumed biomass supply could be stored for later supply or only waste fruit from factory & orchard digested during
season time
2. Quotation in . Exchange rate of R11.50/ assumed. Grid connection or sludge dewatering not included
3. Electrical output not stated, but total output stated as 6900 MW equivalent. At 38% electrical conversion this equated
to 2.6MW
4. Capital cost for CHP plant of R18,000,000 according to Talbot and Talbot assumed

A lower quality heat generated from the CHP plant was not stated above, because such heat
cannot be used at the processing facility, but is sufficient to heat the biomass to mesophilic or
thermophilic temperatures. The excess lower quality heat will would either be vented or exchanged
against the factory effluent.
Firing the biogas into a dual fired burner would require the conversion of a heavy furnace oil (HFO)
boiler by the direct replacement of the burner. This would result in the boiler firing biogas or HFO or
both if required. The price of a burner that fires an 11 t/h boiler that generates 10 bar steam is
quoted at R760 000 (Technoburn, 2008).
4.3.3. Gasification
Roos (2008:3) reports a maximum boiler efficiency of 74% for wood chips fed at 45% moisture
content, while the boiler efficiency increases to 80% if the wood chips are dried to a 10-15%
moisture content, which leads to an increase of 50-60% in steam production. The moisture content
of the biomass needs to be less than 20% for downdraft gasification and smaller than 50% for
updraft gasifiers (Stassen & Knoef, 1994:7; Roos, 2008:5). The moisture content of the waste fruit
and pomace is 80% and 70% respectively, while the most appropriate gasifier is the downdraft
42
design. Hence, the moisture content of both the spoiled fruit and the pomace is too high to be fed
directly into a gasifier.
The existing dryer is used to dry the pomace and is designed to be balanced with the processing
plant capacity. The waste fruit would need to be macerated into a pulp, dewatered in a belt press
to a moisture content of about 70% and then be fed with the pomace to be dried in the existing
dryer.
From the available plant data, the dryer uses 0.124 tons of coal at a calorific value of 25.8 MJ/kg
per ton of water evaporated from the pomace. Therefore 192 GJ/day or 2.2 MW of thermal energy
must be used to dry the biomass to the required moisture content. The net calorific value (NCV) of
23.2 MJ/kg for the dry mass (Energy research centre of the Netherlands, 2009) was used for the
apple pomace and waste apple. Given a moisture content of 10% after drying, this relates to a
NCV of 20.88 MJ/kg (wet).
A small-scale gasification plant with a 5 MWe capacity typically generates heat and electricity at an
overall efficiency of 77%, in the ratio 2.6 kW
thermal
:1kWe. The CHP plant would deliver 260 GJ/day
heat energy and 1.0 MWe electricity at a feed rate of 28 tons/day and a utilisation factor of 90% to
achieve an average feed rate of 24.5 t/day. (Van der Drift, 2008; Rabou, 2008; Schman, 2008).
Assuming 10% system losses, 213 GJ/day was used to dry the biomass while the remaining 47
GJ/day would be used in the processing facility.
The bulk density of packed dry apple pomace is about 240 kg/m
3
(Bulk Handling Global). This is
well below the minimum requirement of 500 kg/m
3
(Stassen & Knoef,1994:7). For this reason
operability difficulties with regards combustibility and efficiency are expected.
The primary advantage using gasification technology is that dry biomass would be more readily
available in the latter part of the year due to orchard thinning and pruning, and the ready supply of
wood waste from neighbouring sawmills within 30 km of the facility.
The additional capital requirements for the handling of such material coupled with the additional
energy required for evaporation and the low bulk density that increases the risk of an inefficient
operation, made this technology unattractive. It was therefore not included in the financial
evaluation.
43
4.3.4. Hydrolysis and Fermentation
The high water and sugar content of the rejected fruit and, to a lesser extent, the pomace, before
drying makes such fruit suitable for the conversion to ethanol (EtOH). The potential ethanol yield is
approximately 65 litres per ton if only a fermentation step were used, while the yield would increase
to 84 litres per ton when the hydrolysis process is utilised to break down the starch and fibre of the
waste fruit. The yield for the pomace was expected to be 50% of the yield of the spoilt fruit (Cowen,
2007:3; Chatanta, Chandri, Gopal, Devi, Gupta, Bhalla, 2008; Taurus Distillation, 2006). The plant
would convert the waste fruit into 120 000 litres EtOH and the pomace to 216 000 litres EtOH
yielding 336,000 litres ethanol during the 120day operating season.
The only supplementary biomass that may be readily available is the fruit clearing from the
orchards, which may be available after the harvesting period. The timing of this fruit supply may be
problematic. Other sources would need to be actively pursued. A feed rate of at least 6 tons per
day after the processing season, from waste fruit sourced from packing operations in the off-
season, would yield 67,800 litres ethanol over these 226 days. Therefore a total of 403 800 litres
ethanol could be produced annually.
The capital cost for a small-scale plant suitable for the stated throughput is quoted at R15 million
for the full turnkey project (van Breda, 2009). The thermal energy produced will be fully reused,
while 75% of the electricity will be used by the bioethanol plant. The section will hence be deemed
to be self-sufficient. The plant will be considered a carbon neutral operation.
4.4. APPLICATION OF ENERGY
4.4.1. Introduction
From the energy recovery options, a variety of renewable energy applications are possible. These
include electricity, heat energy and ethanol. The potential application for each was established in
order to determine the cost savings and potential revenue that may be generated.
4.4.2. Electricity
The energy consumption and peak energy demand is highly seasonal with a peak demand of
1200kVA during the processing season and falling down to 400 kVA out of season. The average
cost of electricity is R0.35/kWh. Therefore the processing facility has a sufficient demand for the
smaller design, but the excess electricity would have to be fed back into the grid. Although the
REFIT phase 1 guidelines are not applicable in this regard, the biomass and biogas levelled
electricity costs of R1.18/kWh and R0.96/kWh respectively of REFIT phase 2 was deemed
suitable. This is presently financially therefore the plant will feed all electricity back into the grid as
44
an Independent Power Provider (IPP). It will be accepted that Eskom will be the REPA that
purchases the electricity under a power purchase agreement (PPA) in terms if the REFIT
guidelines.
The renewable energy could serve as an alternative supplement to the packhouses electricity
needs. The holding company is an apple and pear packing operation with its main facility 2 km
from the processing facility. The packhouse and associated cold storage rooms have a peak
energy demand of 6 MVA, due to the large amounts of energy that refrigeration requires. This high
rate of electricity consumption places the company amongst the top 150 electricity consumers in
the country. The packhouse is under pressure to make a 10% energy saving, based on their
energy demand of two years ago. In the light of recent expansions and strong growth, the
management team has decided that such a target is unachievable. The result is that management
is negotiating with the authorities to adjust their baseline. Should these negotiations fail, the
packhouse would purchase diesel generator sets to supplement its energy consumption. Even
though this may appear counter intuitive, it would be a more feasible solution than to pay the heavy
fines proposed by the utilities provider.
As seen in Figure 4.3 below, it is not feasible to connect the electricity supply directly to the
packing operations, given that the distance between the facilities and the difficulties relating to
power servitudes through the town would make such a connection prohibitively expensive or even
impossible. The solution would be to use Eskoms electricity grid as a carrier by stepping the power
up through a transformer so that the power can be fed into the grid and then to discount a like
amount of electricity drawn off at the packhouse as though it were supplied from the renewable
energy plant. This concept known as wheeling would typically require an agreement with Eskom
and would incur a rental charge. Similar agreements do not yet exist, but Eskom has indicated a
willingness to accommodate such an arrangement. Eskom would firstly ensure that the metering
and accounting of IPPs be accommodated (Van Zyl, 2009). An anticipated cost similar to that set
by the Cape Town municipality of 5 c/kWh was assumed for wheeling contracts. Given that the
cost of electricity at the packhouse is the same as at the processor, it was more feasible to sell
under a PPA in accordance to REFIT phase 2. Thus for purpose of the study, the REFIT phase 2
tariff of 96 c/kWh was used.
45

Figure 4.3: Aerial photograph of Grabouw
Source: GoogleEarth, 2009
4.4.3. Heat energy
3900 tons of coal are burned annually in a 16-ton coal fired boiler at the processing facility at a rate
of about 27-30 tons per day during the processing season, to generate 11-13 tons of steam per
hour at 900kPa. Assuming a calorific value of 25.8 MJ/kg of coal, this equates to an energy
requirement of 750 - 850 GJ per day or average demand of 8.5 to 9.5 MW. For this reason the
maximum of 2 MW heat from the CHP plant would substitute the heat energy requirements during
the season of about 135 days. This is not the case out of season, given that waste wood collected
onsite from wooden bin repairs is incinerated in the boiler to generate steam during this time.
The current coal price of R1150/tonne delivered to site was used to calculate cost savings from
coal displacement during the operating season only. This resulted in a coal offset saving of
R44.6/GJ or R0.16/kWh given a calorific value for coal of 25.8 GJ/ton. The electricity revenue is six
times the coal offset savings, based on an electricity tariff of R0.96/kWh. Hence the option to fire
the biogas into a dual fired burner to generated steam was a less feasible solution and was not
given further consideration in this study.
Processing
Facility
Packhouse
46
4.4.4. Ethanol
The ethanol could be converted into gel fuel and sold as an illuminating paraffin substitute. This
would require marketing the product as a green substitute to attain a minimum price of R8.00/litre
(Gets, Cohen, Notten, Austin, 2007:6).
In the alternative, ethanol could be sold for liquid transport fuel for B2, E5 or E10 blends. Wyne
(2008:23) reports the processing cost for the manufacture of ethanol from sugar cane at R1.48/litre
versus a bulk selling price of R4.94/litre EtOH. An ethanol price marginally below 2 US$ per US
gallon is forecast over the next 5 years (BFAP, 2008:10). This equates to a price of R4.23/litre,
based on a R/US$ exchange rate of 8.00. A price rounded down to R4/litre was used in this study.
4.5. CDM
4.5.1. Introduction
The primary interest of the energy recovery project is the reduction of the facilitys carbon footprint.
The technologies selected for the study fell within the pre-approved methodologies as specified by
the CDM Executive Board. This ensures a reduction in overall CDM transaction costs and makes
the registration process less cumbersome and less time consuming (Schman, 2008:36). The
project is a biomass co-generating system that supplies electricity either to the electricity
distribution grid, onsite consumption or at another facility, while generating thermal energy for
onsite use. Both forms of energy would otherwise be supplied from fossil fuel fired generating units
and are not generated by co-firing biomass with fossil fuels. The application methodology was
therefore classified as Renewable Energy Projects: Thermal energy production with or without
electricity (Type 1C). To qualify as this type of small scale methodology the total thermal output
from the co-generation system must not exceed 45 MW, while electricity output must remain below
15 MWe (refer to 3.5) (UNFCCC:1). In the proposed project this requirement was met because
none of the project alternatives exceed 5 MW total power output for the CHP or so-called
cogeneration system and will deliver under 2 MW electrical power.
Should electricity be supplied to the grid and thereafter supplied through the utility suppliers grid to
the packhouse, or be sold to the utility supplier or another electricity broker, an agreement must be
signed specifying that only the generating facility can claim the emissions abatement from the
electricity so displaced. (UNFCCC:2). The REFIT guideline specifies that the carbon abatement
resides with the IPP (NERSA, 2009), so this would be in place under a PPA.
Carbon gas offset varies depending on the proposed technology, each being evaluated separately.
The emissions for the baseline and each project alternative were based on the generic model
detailed in Figure 4.2. Each was compared to one single baseline as described hereunder.
47
Emissions for each alternative was calculated, where possible, in accordance with the UNFCCC
approved methodology, otherwise emission factors from registered CDM projects in South Africa
employing similar technology was referenced.
4.5.2. Baseline
The baseline was taken as the current practice for the last five years and taken over a 20 year
period so that direct comparisons with the REFIT guidelines could be made if and where
appropriate.
Electricity is imported from the electricity grid, while thermal energy is produced onsite using fossil
fuels. The waste fruit is sent to landfill while pomace is dried using fossil fuels for heat energy and
transported offsite as animal feed. The measurements were based on an average sized crop and
over a year from January to December. The average was calculated by using the data for the past
5 seasons.
The annual electricity demand for the facility was taken as 3 500 000 kWh. This consumption was
multiplied by an emission factor, expressed in tCO
2e
/MWh. The conservative default value of 0.4
tCO
2e
/MWh is suggested in the UNFCCC methodological tool for calculating baseline emissions
from electricity consumption for electricity grids where hydro power plants constitute less than 50%
of the total grid generation (UNFCCC, 2009c). The electricity grid in South Africa is predominantly
supplied by electricity produced from fossil fuels, and therefore this value was not considered
sufficiently representative. In the alternative this factor may be calculated (UNFCC, 2009b). This
required the weighted average emissions of the current electricity grid to be calculated. Schman
(2008:37) proposed this value to be 0.88 kgCO
2e
/kWh, based on work done by Winkler et al.,
which is significantly higher than the conservative default value of 0.4 tCO
2e
/MWh. Based on the
utility figures for 2008, Eskom generated 239 108 GWh of electricity, while releasing 224 Mt CO
2

into the atmosphere (Eskom:2008:iii). This equates to an emission factor of 0.935 kgCO
2e
/kWh.
The value of 0.88 kgCO
2e
/kWh was used for this study, because of the Department of Mineral and
Energy target of 10,000GWh per annum (circa 4% of projected demand) renewable energy
supplied to the electricity grid by 2013 (DME, 2003). This results in carbon emissions of 3 058
tCO
2e
.
Anthropogenic emissions for steam/heat generated using coal in the baseline were calculated as
heat displaced by the project activity and was calculated as follows:
48

BE
thermal CO
2
,y
= (
EG
thermal,y
/

BLthermal
)*EF
coal,CO
2

with:
BE
thermal CO
2
,y
Baseline emissions from heat displaced by the project activity during the year y; kgCO2e
EG
thermal,y,
Net quantity of steam/heat generated by the project activity during the year y; GJ
EF
coal,CO
2
CO2 emission factor of the coal currently used in the baseline plant
= 94.6 kgCO
2
/GJ (IPCC, 2003:23)

BL,thermal
Baseline efficiency of the boiler burning coal, in the absence of these project activities
=85% from plant data

Pomace is dried in a rotary drum drier that is heated by hot air from a brick furnace. Coal is
combusted in the brick furnace at a rate of 125 kg coal per ton of wet pomace. Therefore 810 tons
coal is burned to dry the 6480 tons pomace. This resulted in GHG emissions of 1 977 tCO
2e
per
annum, assuming a calorific value of 25.8 GJ/t and a default emission factor of 94.6 kgCO
2
/GJ for
bituminous coal (IPCCC, 2006:23).
Steam is generated on site using a 16 ton/hour coal fired boiler that delivers steam at 900 kPa,
175
0
C. The plant combusts 3900 tons of coal per year, which equated to 9 519 tCO
2e
per year.
Coal transport was based on a road freight distance of 1600 km. Trains are not being used due to
unavailability, and in any event the cost of using rail transport, if available, costs are equal to that of
road transport. The coal is therefore transported by truck from the mine pits to a depot, about 60
km from the processing facility and then delivered to site as required. For the road freight, the
emission factor of 0.77 kgCO
2e
/km (as used for the transportation of fruit waste) will be used. Coal
road transport GHG emissions were based on 3900 tons for the steam boiler and 930 tons for the
dryer and 24 tonnes coal per load. Emissions from coal transport were calculated as 248 tCO
2e
per
year which equated to 51.35 kgCO
2e
/t coal consumed.

Landfilling of the 2400 tons waste fruit results in methane gas released into the atmosphere. The
landfill site was considered a semi-aerobic managed solid waste disposal site due to the
composting and waste management that takes place. The multiphase model based on first order
decay was used to calculate the annual methane emissions (UNFCC, 2006e).
BE
CH4,20
=

(1-f)

GWP
CH4

(1-OX)

16
/
12

DOC

MCF

20

x=1
W
x

e
-k(y-x)

(1-e
-k
)
With,
BE
CH4,20
Calculated methane gas (tCO
2
e) released over the project period of 20 years
49
Model correction factor for uncertainty = 0.9
f Methane captured and otherwise utilised or flared = 0.5 given the partial composting
at the disposal site
GWP
CH4
Global warming potential of methane = 21
OX Oxidation factor = 0.1
F Methane fraction in emitted gas = 60%
DOC Degradable organic carbon fraction that can decompose = 17%
MCF Methane correction factor
Disposal site is considered a semi-aerobic managed solid waste disposal site = 0.5
20

x=1
W
x
Amount of waste [tonnes] disposed over the 20 years, assuming no project activity
k Decay rate = 0.185
Biomass is taken as fast decaying;
Region mean annual temperature (MAT) < 20
0
C;
Region mean annual precipitation (MAP) < Potential evapotranspiration (PET)
According to this model, the methane emissions averaged 879 tCO
2e
per year over the 20-year life
of the project (UNFCC, 2006e). No emissions for post-harvest fruit in the orchards were included
because this fruit rots under aerobic conditions. It was considered that other waste streams, such
as abattoir waste, are disposed of in an environmentally responsible manner.
The transportation of waste fruit to the landfill site is another anthropogenic activity where GHGs
are emitted and was based on the following:
100 km round trip per 16 tonne load
Fuel consumption of 0.24 kg
diesel
/km (Spalding-Fetcher, 2002)
Net calorific value (NCV) for diesel (NCV
diesel
) is 43.0 GJ/t (IPCC, 2006:18);
Emission factor (EF
diesel
) of 74 .1 kgCO
2e
/GJ (, IPCC, 2006:23)
The result was an emission factor of 0.77 kgCO
2e
/km per 16 tonne round trip. For the 2400 tonnes
and the 100km round trip, the GHG emission from the transport of waste fruit to landfill was
calculated at 11.5 tCO
2
per annum.
50
The annual emissions for the baseline were calculated as follows:
Activity tCO
2e
Electricity 3,058
Fruit waste landfill 879
Fruit waste transport 11.5
Coal (4830 tonnes) 11,744
Pomace drying 1,977
Steam boiler 9,519
Transport 248
Total 15,693

4.5.3. Anaerobic digestion
Two options for anaerobic digestion were considered. The first of the two capacity alternatives was
the case for digesting the biomass of 20 tonnes/day (6 tonnes dry per day) throughout the 135
day season and then 2 tonnes after the processing season. Plant utilisation of 80% was assumed,
in addition to a plant shut down of 20 days per annum for planned maintenance. It was assumed
that the electricity generated would be fed back into the electricity grid, while the thermal energy
would be fully utilised at the facility during the production season to supplement the steam currently
generated from the coal fired boiler.
In the first process step, waste fruit would be stored for a maximum of one or two days prior to
being digested. Hence no leakage for this decaying fruit was considered. The annual emissions
from the CHP plant was 534 tCO
2e
for the 346 day year, based on the emission factor of 54.6
kgCO
2e
/GJ for methane gas, with an anticipated methane gas yield of 1413 m
3
/day during the
season and 471 m
3
/day after the season and a calorific value for methane of 35.4 MJ/m
3
.
From Table 4.1 (section 4.3.2), the thermal energy output for this capacity was 275 kW (or 23.8
GJ/day). This reduced to 198 kW, assuming 90% plant utilisation and system losses of 10% to the
point of application. The low quality heat would be used to heat the biomass feed from an ambient
temperature to the mesophilic temperatures between 35
0
C to 40
0
C. This equated to 10.03 GJ/day,
based on the maximum flow rate of 120 m
3
/day feedstock diluted with factory effluent to 5% solids.
The high quality heat is available to supplement the factorys steaming requirement over the
season of approximately 120 days. No steam energy was substituted for the remainder of the year
given that the boiler is operated on wood biomass due to the low steam demand outside the
processing period. This offset 243 tCO
2e
per year due to a reduced requirement of 99.5 tonnes of
coal. The emission reduction resulting from coal transporting was negligible.
51
Operating the renewable energy plant for 120 days at a rate of 300 kW and a utilisation factor of
90%, displaced 778 MWh of grid supplied electricity during the season and a further 488 MWh
electricity after the season. Thereby 1114 tCO
2e
was mitigated per annum, when basing the
calculation on an emission factor of 0.88 tCO
2e
/MWh for grid supplied electricity.
All the waste fruit sent to the landfill site will be processed, which meant that an average of 879
tCO
2e
per year was mitigated from landfill gas emissions and a further 11.5 tCO
2e
per year in
respect of transportation emissions. No emission abatement was considered for transportation of
additional waste biomass from the post-harvest supply of spoiled fruit or other possible sources. It
was assumed that the anthropogenic gases emitted from transporting the postharvest waste fruit to
the digesters would be offset against the emissions mitigation because waste fruit would not be
transported to the landfill site.
The biomass was assumed to digest easily, hence no residual emissions were considered for the
agricultural application as fertiliser or composting of the digestate. However the transport of this
digestate could not be ignored. It was assumed that the digestate would not be transported more
than 30 km to the point of application, with most of it being applied at orchards within a 20 km
radius. Therefore an average transport distance of 15 km was assumed. The digestate will be
transported as sludge after being dewatered, typically as 8 ton loads. Based on a mass balance
over the system, the digestate would be produced at a rate of 11 tonnes/day and 23% solids
content after dewatering. This resulted in 3 tCO
2e
emissions per year, given an emissions factor of
0.77 kgCO
2e
/km for road transport.
The components were summed to determine the mitigating effect of the project activity.
Process step Emission decrease / (increase) [tCO
2e
]
CHP plant (534)
Grid supplied electricity displaced 1114
Coal displacement (112 tonnes coal) 243 (coal combustion)
Fruit waste landfill gas 879 (decay) + 11.5 (waste fruit transport)
Digestate transport (3) ,(sludge transport)
Total emission mitigation per annum 1711 tCO
2e
/year

For the larger 24 tonnes dry capacity alternative, the same principles hold true for both the thermal
and electrical emissions offsets. Because this project activity does not require the pomace to be
dried, the baseline emissions for drying the pomace with coal and the emissions from transporting
this coal to site are abated. The emissions offset of 5138 tCO
2e
per annum was calculated as
shown below.
52

Process step Emission decrease / (increase) [tCO
2e
]
Season After season
CHP plant (1311) (206)
Grid supplied electricity displaced 2509 394
Boiler coal offset (365 tonnes) 892
Dryer coal offset (810 tonnes) 1977
Fruit waste landfill gas 891
Digestate transport (6)
Total emission mitigation per annum 5138 tCO
2e
/year

4.5.4. Fermentation and hydrolysis
This process will use the self generated energy, while emission mitigation will realise from the coal
offset from not drying the pomace and from methane abatement from fruit decay. The bioethanol
will replace diesel as a source of fuel. The emissions by the end consumer is not expected to
improve given the emissions factor for biodiesel of 70,800 to 79,000 kg-CO
2
/TJ vs the 74,100 kg-
CO
2
/TJ for diesel (IPCC, 2006:1.24). Therefore the emissions abatement schedule resulted in an
offset of 2 862 tCO
2e
per annum.
Process step Emission decrease / (increase) [tCO
2e
]
Dryer coal offset (810 tonnes) 1977
Fruit waste landfill gas 891
Digestate transport (6)
Total emission mitigation per annum 2 862 tCO
2e
/year

4.5.5. Monitoring
When substituting the burning of fossil fuels with thermal energy, the GHGs that are emitted at the
coal fired boiler and coal fired dryer may be partially abated. For every ton of coal that is not burnt,
a carbon dioxide equivalent (CO
2
e) of 2.44 tons is mitigated. For every MWh of electricity that is
substituted with renewable energy, a reduction in GHGs of 0.88 tCO
2e
was assumed.
4.5.6. CER revenue
Certified Emissions Reductions (CERs) are the carbon offset credits generated under the UN CDM
for emission reduction investment in developing countries.
53
The source of project funding plays an important role in determining the price that the project
activities CERs can achieve in the market. In forward contracts, the purchasing party commits
project funding in advance. In exchange for an increased risk arising from having to wait for the
carbon credits to realise, the purchaser typically enters into a forward contract agreement whereby
a CER price is determined in advance. Under the current economic climate, recent reports put this
forward price for CERs in emission reduction purchase agreements between 6.50 and 8.50
(Carbonpositive, 2009, PointCarbon, 2009). In 2007, China supplied 73% of the primary CERs into
the world market. In the alternative, a project activity can be self funded, with credits sold at spot
rates when they are realised. Despite the spot CER price falling to well below 10 earlier this year,
prices have improved, with future contracts for December 2009 delivery closing above 13 on the
European Climate Exchange in June 2009 (Pointcarbon, 2009).
For purposes of this study, a CER price of 10 was used and an exchange rate of R11.50/. The
CER potential for the anaerobic digestion, compared as follows:
Anaerobic Digestion (Excluding pomace) R 196 724 p.a.
Anaerobic Digestion (Including pomace) R 591 005 p.a.
Hydrolysis & Fermentation (Including pomace) R 329 067 p.a.

4.6. SUMMARY

The projects that hold potential were identified as CSTR anaerobic digestion and the production of
bioethanol. Feed rates and feedstock may vary with the options described below.

1. Anaerobic digestion of fruit waste from the processing facility. The biomass will be
supplemented with abattoir effluent when available. Biomass from the surrounding area will be
sourced to sustain a portion of the capacity after the processing season. The biomass feed rate
graphically shown in Figure 4.4 below illustrates the change in capacity of 6 dry tons per day of
waste fruit from the processing facility to the 2 dry tons per day after the processing season
when only spoilt fruit from the packhouse would be sourced.
54

0
6
12
18
24
J
a
n
F
e
b
M
a
r
A
p
r
M
a
y
J
u
n
J
u
l
A
u
g
S
e
p
O
c
t
N
o
v
D
e
c
F
e
e
d

R
a
t
e

(
d
r
y
-
t
o
n
/
d
a
y
)
Waste Fruit
Processing
Season
Off
Season

Figure 4.4. Biomass feed rate: AD - fruit waste only
2. Anaerobic digestion of fruit waste from the processing facility. The biomass will be
supplemented by abattoir effluent when available. Biomass from the surrounding region will be
sourced after the processing season and pomace that is dried during the processing season
will supplement this feedstock to maintain maximum plant capacity. Biomass feed rate is
graphically shown in Figure 4.5. shows how the spare capacity after the season is
supplemented with dry pomace at a rate of 4 dry tons per day.
0
6
12
18
24
J
a
n
F
e
b
M
a
r
A
p
r
M
a
y
J
u
n
J
u
l
A
u
g
S
e
p
O
c
t
N
o
v
D
e
c
F
e
e
d

R
a
t
e

(
d
r
y
-
t
o
n
/
d
a
y
)
Waste Fruit
Dry Pommace
Processing
Season
Off
Season

Figure 4.5. Biomass feed rate: AD - fruit waste & dry pomace
3. Anaerobic digestion of fruit waste and wet pomace from the processing facility. The biomass
will be supplemented by abattoir effluent when available. Biomass from the surrounding area
will be sourced to sustain a portion of the capacity after the processing season. Figure 4.5
highlights how the required capacity increases to 24 dry tons per day, resulting in merely
16.7% post-season capacity utilisation.
55
0
6
12
18
24
J
a
n
F
e
b
M
a
r
A
p
r
M
a
y
J
u
n
J
u
l
A
u
g
S
e
p
O
c
t
N
o
v
D
e
c
F
e
e
d

R
a
t
e

(
d
r
y
-
t
o
n
/
d
a
y
)
Waste Fruit
Wet Pomace
Processing
Season
Off
Season

Figure 4.6: Biomass feed rate: AD - fruit waste & wet pomace
4. Fermentation of fruit waste and wet pomace from the processing facility for the manufacture of
ethanol. The plant will be adequately sized to process the biomass during the processing
season as with the third option above.
Figure 4.7 compares the GHG emission reduction expressed as tons CO
2
per annum for each of
the options above as a reduction off the baseline of 15 693 t-CO
2e
.
CO
2
abated as compared
to the basline of 15 693 t-CO
2
2158 5138 2862 1711
0
5000
10000
15000
20000
1
.

A
D
_
F
r
u
i
t
o
n
l
y
2
.

A
D
_
F
r
u
i
t

&
W
e
t
_
P
o
m
a
c
e
3
.

A
D
_
F
r
u
i
t
&
D
r
y
_
P
o
m
a
c
e
4
.

B
i
o
E
t
O
H
t
o
n
s

C
O
2

p
.
a
.
Abatement
Residual

Figure 4.7: GHG emissions abatement for the project alternatives
The shaded bars represent the GHG abatement and the clear bar the residual GHG emissions.
The greatest reduction in GHG emissions of 5 138 tons (32.7%) was realised from the anaerobic
digestion of fruit waste and wet pomace during the season. GHGs were reduction for the other two
digestion capacities and federate was 2 158 tons (13.8%) for the digestion of waste fruit and dry
pomace fed post-season only and 2 158 tons (10.9%) for the digestion of waste fruit only. The
bioethanol option yields an 18.2% GHG reduction.
56
CHAPTER 5
FINANCIAL EVALUATION
5.1. INTRODUCTION
It was established that biomass can be converted to heat and electricity and this process will offset
carbon emissions directly at the processing facility through the displacement of coal and the
avoidance of methane emissions and also indirectly through supplementing electricity supplies to
the national electricity grid and in so doing displacing the need for dirtier coal generated electricity.
In the previous sections the projects that appeared to hold potential were identified as:
1. Anaerobic digestion of fruit waste from the processing facility only.
2. Anaerobic digestion of fruit waste and pomace from the processing facility.
3. Fermentation of fruit waste and wet pomace from the processing facility to yield bioethanol.
The financial feasibility of such opportunities were determined and thereafter a determination was
made to assess the additional financial benefit from CDM revenues. The financial assumptions
must firstly be well defined.
5.1.1. Discount rate
A project will be feasible if the net present value (NPV) of the investment is positive. Therefore
future expenses and revenues need to be discounted back to present values at a predetermined
rate. This discount rate will be set at a premium above the risk-free-rate for an investment. The
risk-free rate will be based on the yield of a 10 year bond, which is currently 8.6% (Reservebank,
2009). The risk of the project will determine the premium above the risk-free rate. Potential
investors appetite for risk will affect this premium.
The REFIT guidelines set out by NERSA set the discount rate at 12% to determine the levelised
REFIT tariffs (NERSA, 2009:27). Schman (2008:45) suggests a rate of 18% for a renewable
energy project using biomass from wine cellar waste, which is in line with the current policy at the
processor when investing in a proven technology. The processor increases this rate by at least 6%
for unproven technology. A discount rate of 18% was therefore be used to determine the NPV
(termed NPV
18
hereafter) for projects using proven technology. The NPV (termed NPV
24
hereafter)
for projects that have only been proven on laboratory scale was discounted at 24%.
57
5.1.2. Project life cycle
The unpredictable future of a project beyond 10 years usually implies that forecasting is not done
past a 10 year horizon, unless specific conditions justify an extension of the forecast period.
NERSA takes a renewable energy project life to be 20 years and this period was used to determine
the REFIT, which is fixed for the full period. The renewable energy project was therefore also
calculated over the full 20 year period, given this increased predictability of the future and to
simplify comparisons between projects.
5.1.3. Capital
The cost for the small and large scale facilities were used to fix the boundary costs for the smallest
and largest facilities that were evaluated. A linear regression was applied to interpolate the capital
requirements for plant capacities between these boundaries. Figure 5.1 illustrates the Intrapolated
results of using the capital costs given in Table 4.1. As an example, a plant capacity of 12 dry tons
per day, costs R13 333 333 with an electrical output of 567 kW
e
and thermal output of 1.87 GJ/h
(519.4 MW).
13333333
567
1870
10 000 000
12 500 000
15 000 000
17 500 000
20 000 000
6 8 10 12 14 16 18 20 22 24
Capacity [dry tons per day]
C
a
p
i
t
a
l

c
o
s
t

[
R
]
0
500
1000
1500
2000
2500
3000
3500
4000
k
W
e
Capital Electrical Thermal
M
J
/
h

Figure 5.1: Intrapolated anaerobic digester capacities
Equipment was depreciated against the project so that the benefit of the tax shield was taken into
account. The 2009 tax rate for business in South Africa of 29% was used.
Tax incentives for renewable energy allows for an accelerated depreciation over three years at a
rate of 50%, 30% and 20% (refer section 2.2.1).

58
5.1.4. CDM revenue
The market price for CERs and the transaction costs to register a CDM project needed to be
established. The forward price for carbon credits has decreased significantly after the onset of the
world recession in late 2008. This price of 10/CER in the second part of 2009 was used in the
study. It is debatable whether this price would decrease further, but given the uncertainty of carbon
mitigation targets after 2012 it would be unwise to assume a price greater than the 1 year futures
price. The cross rate between the Rand and the Euro was taken as R11.50/. As this rate
preceded a bullish performance by the Rand, it was assumed that the Rand was unlikely to
appreciate further in the long term. This lead to the estimated carbon emissions revenue of
R115/CER. Tax was not deducted from CDM revenue, given that the sale of CERs qualifies for a
tax exemption (refer to section 3.5.1).
The transaction costs were assumed to be R320 000, based on Schmans study of a renewable
energy CDM project which anticipated generating 200kWe from winery biomass (Schman,
2008:49).
5.1.5. Operating parameters
The smallest plant capacity was modelled on a capacity of 6 dry tons per day and the largest at a
capacity of 20 dry tons per day. The processing season was taken as 135 days while the full year
was considered to be 346 days. This gave 20 days per year for maintenance. The plant capacity
utilisation was determined by the feed rate of the biomass. Plant availability was assumed to be
90%, as it is a reasonably simple operation.
The coal price increased sharply over the past 18 months. Although the price has stabilised, there
have been no significant reductions that suggest that this price is unrealistically high. It was
anticipated that the demand for coal will increase as the world economy recovers, which in turn
would result in a concomitant increase in the price of the coal. This price is of significance for the
savings that should be realised by generating steam and, where pomace is used, if coal is not
used to dry the pomace. The 2009 price of R1150/ton delivered to site was used and provision was
made for an annual increase of 10%.
Pomace is a by-product and its price is determined by the coal price, given that coal contributes
80% of the input costs. The price for pomace was set at R560 per air dried ton for the 2010
processing season. It was assumed that the market will be able to absorb the price increases
determined by the processor. The annual increase was set at a rate of 10%, although it is
understood that pomace serves as a substitute for yellow maize as animal feed. The average
South African futures exchange (SAFEX) prices suggests that the maize price will remain
59
reasonably constant over the next four years and only show an upward trend thereafter (BFAP,
2008:12). Increasing the price at a lower rate will increase the project attractiveness, given that the
price of pomace is an opportunity cost that is forfeited when digesting the pomace instead of
selling it as animal feed.
It was assumed that 80% of the heat from the CHP plant will be utilised for preheating the air to the
coal fired boiler at the fruit processing facility.
Currently the waste fruit is transported to a landfill site where it serves as a feedstock for
composting. The all-inclusive cost for this removal was R101.50/ton for the 2009 season. This cost
is strongly dependent on the fuel price and was be increased at a rate of 10% annually.
Operating costs for maintenance and a process controller were assumed to be R220 000 p.a. for
the smaller 6 dry tonnes per day plant and R440 000 p.a. for the larger 24 dry tonnes per day
plant.
Finally, it was assumed that some inventory for spares will be kept. Using a rule of thumb of about
1% of capital spend, this was valued at R100 000 and was be included as net working capital in
year 0.
5.1.6. Digestate
The digestate is well suited as an organic fertiliser. The selling price of the fertiliser should easily
cover the cost of transport. No profit or cost was therefore included for this by-product.
5.1.7. Ethanol
The ethanol price was expected to follow the oil price, given that ethanol serves as substitute for oil
and that there is currently no policy that mandates blending rates in biofuels in South Africa. The
100% fuel levy exemption is applicable, hence it is anticipated that the ethanol price should trade
slightly lower than the petrol price. The ethanol price was forecast to increase by 8% p.a. (BFAP,
2008:28).
5.2. FEASIBILITY EXCLUDING CDM
The nominal internal rate of return (IRR) was calculated to measure the profitability of the project.
The net present value (NPV) was also determined to afford further comparison between the project
alternatives. The alternatives were firstly considered as if the project were not registered as a CDM
project activity.
60
5.2.1. Anaerobic digestion of fruit waste
The feed rate to the anaerobic digester was kept at a capacity of 6 dry tons biomass during the
operating season and reduced to 2 dry tons per day after the season. The results from the analysis
are tabled below in Table 5.1.
Table 5.1: Anaerobic digestion of waste fruit
In-season After season Year 1 [R]
Capital for capacity Waste fruit: 6t
dry
/day Waste fruit: 2t
dry
/day (10 500 000)
Revenue
Electricity revenue 778 MWh 488 MWh 1 215 130
CERs - - 0
Cost Reductions
Boiler coal offset 99.5 ton - 114 380
Dryer coal offset 0
Biomass disposal 2400 ton - 365 400
Costs
Pomace revenue - - 0
Operating costs (220 000)
Depreciation (5 250 000)
Profit before interest & tax (3 775 091)

The early losses were due to the inflated tax shield afforded by the accelerated depreciation.
Despite these losses, the operating cash flow was positive. The early losses also quickly turned
into profits in the fourth year, but not sufficiently to compensate for the R10 500 000 capital outlay.
Based on a discount rate of 18%, the project was out of the money with an NPV
18
of -R1 925 668.
The internal rate of return (IRR) was 13.9% was above the risk-free rate and NERSAs rate of 12%.

5.2.2. Anaerobic digestion of fruit waste & dry pomace
The design rate of the anaerobic digester was kept at 6 dry tons biomass. However pomace dried
during the processing season is digested after the season to optimise the capacity of the
renewable energy plant. The results from the analysis are tabled below:

61
Table 5.2: Anaerobic digestion of waste fruit & dry pomace
In-season After season Year 1 [R]
Capital for capacity Waste fruit: 6t
dry
/day Waste fruit: 2t
dry
/day
Dry pomace: 4t
dry
/day
(10 500 000)
Revenue
Electricity revenue 778 MWh 1 464 MWh 2 152 397
CERs - - 0
Cost Reductions
Boiler coal offset 99.5 ton - 114 380
Dryer coal offset - - 0
Biomass disposal 2400 ton - 365 400
Costs
Pomace revenue - 1 004 ton
dry
(562 489)
Operating costs (220 000)
Depreciation (5 250 000)
Profit before interest & tax (3 400 313)

The project was even further out of the money with an NPV
18
of -R2 129 704. At first this may
appear counterintuitive, but as it was assumed that the price of pomace increases annually, while
the electricity revenue does not, a point was reached where the opportunity cost of not selling the
pomace as animal feed exceeded the profits from generating electricity. The 1116 air dry tons
(1004 tons O.D.) pomace generated 976 MWh
e
after the processing season, hence 1 ton air dry
pomace that could be sold at R560/ton in the first year generated a revenue of R1036.80 from the
electricity sold per air dry ton of pomace. The price of pomace was anticipated to increase at a rate
of 10% p.a so it would no longer be feasible to use dried pomace when 560(1+10%)
n
>1036.80
held, with n being the number of years after the project is commissioned. This was calculated to be
6.46 years, and therefore pomace should only be used for the first six years. Thereafter it needed
be removed from the model, on the basis that it should be more profitable to sell the pomace as
animal feed at that time.

The project NPV
18
then increased to -R1 314 224, and yielded an IRR of 15.1%, which means this
option would still be rejected.

From this analysis, it appeared that there may be merit in increasing the renewable energy plant
capacity to digest all the pomace. This could be approached in one of two ways either by digesting
the wet pomace during the season before drying, or by digesting a fraction of the pomace wet,
while drying the remainder, to be digested after the processing season.
62

5.2.3. Anaerobic digestion of fruit waste & wet pomace
The capacity of the renewable energy plant was increased to be able to digest all the pomace
during the operating season. This eliminated the need to dry the pomace, but necessitated the
larger renewable energy plant design with a capital cost of R20 000 000. This approach is tabled
below:
Table 5.3: Anaerobic digestion of waste fruit and wet pomace
In-season After season Year 1 [R]
Capital for capacity Waste fruit: 6 t
dry
/day
Wet pomace: 18 t
dry
/day
Waste fruit: 2 t
dry
/day

(20 000 000)
Revenue
Electricity revenue 2851 MWh 447 MWh 3 166 733
CERs - - 0
Cost Reductions
Boiler coal offset 365 ton - 420 085
Dryer coal offset 810 ton - 931 500
Biomass disposal 2400 ton - 365 400
Lost revenue/
Opportunity cost

Pomace revenue 2000 ton
dry
- (1 120 000)
Operating costs (440 000)
Depreciation (10 000 000)
Profit before interest & tax (6 900 282)

The opportunity cost of not selling the pomace was again offset against the revenue received from
the sale of electricity, but also from the savings realised by not burning coal in the dryer. The
pomace and coal prices were assumed to increase at the same rate of 10% and given that the
price of pomace is 44.33% greater than the coal price, it was not feasible to feed pomace from the
20
th
year of the project. Discounting this marginal difference back to the present made very little
difference to the result, but to remain consistent for purposes of comparison, it was assumed that
pomace would be sold as animal feed in year 20.

The NPV
18
of the project of -R4 099 183 and IRR of 12.8% show that the additional capital spend
did not offset the additional electricity revenue and the savings made by not burning coal to dry the
pomace.

63
5.2.4. Anaerobic digestion of wet and dry pomace and fruit waste
The question arose whether there is an optimum plant capacity that is designed to digest the waste
fruit and a part of the wet pomace during the season, while digesting dried pomace after the
processing season. Interpolating plant capacities and digesting pomace when more feasible,
yielded NPV and IRR values are plotted in Figure 5.2 below.
Project feasibility with intrapolated capacities
-4 500
-4 000
-3 500
-3 000
-2 500
-2 000
-1 500
-1 000
-500
0
6 8 10 12 14 16 18 20 22 24
Capacity [t
dry
/day]
N
P
V

[
R
'
0
0
0
]
12%
13%
14%
15%
16%
17%
18%
I
R
R
NPV
IRR

Figure 5.2: Feasibility of anaerobic digestion project activities without CDM
The initial increase in plant capacity to 11 dry tons per day marginally improved the project IRR to
15.2% based on a capital cost of R13 138 889, but it had a negative effect on the NPV
18
, which
decreased further to -R1 498 616. At this capacity, some wet pomace is digested during the
processing season and dry pomace post-season for the first 5 years. Thereafter the opportunity
cost from pomace revenue and the increased cost to dry the pomace outweighed the revenue from
the electricity and hence only wet pomace is used during the processing season. Plant capacities
above 11 dry tons per day became increasingly unattractive as the cost of capital increased,
without the benefit of increased revenue after the processing season.
5.2.5. Bioethanol - Fermentation & hydrolysis
The schedule of the revenue, savings and costs is set out below. Like anaerobic digestion, the
project was not feasible with an NPV
24
of -R1 296 057 (discount rate of 24%) and an IRR of 20.8%
which was 3.2 % below the discount rate
64
Table 5.4: Bioethanol: Fermentation and hydrolysis
In-season Year 1 [R]
Capital for capacity Waste fruit: 6 t
dry
/day
Wet pomace: 18 t
dry
/day
(9 000 000)
Revenue
Ethanol revenue 403 800 litres (318.598 tons) 1 615 200
CERs - 0
Cost Reductions
Dryer coal offset 810 ton 931 500
Biomass disposal 2400 ton 365 400
Lost revenue/
Opportunity cost

Pomace revenue 2000 ton
dry
(1 120 000)
Operating costs (497 280)
Depreciation (4 500 000)
Profit before interest & tax (2 876 113)

5.3. FEASIBILITY INCLUDING CDM
The fermentation of waste fruit and pomace to ethanol, would have had a positive NPV at a
discount rate of 18%, but no plant was identified that converts apple pomace into bioethanol,. This
raised the discount rate to 24%, which took the project out of the money. None of the projects were
in the money, thus all the projects evaluated would qualify as CDM project activities, and CDM
revenue could be generated from these projects.

5.3.1. Anaerobic digestion
the additional cost of R320 000 and the revenue from the sale of the CERs were included for this
case where the anaerobic digestion project is registered as a CDM project activity. The results for
supplementing the waste fruit with wet & dry pomace are graphed in Figure 5.3 below and the
various options are compared in Table 5.5 for the various capacities and against the scenario
where the project was not registered as a CDM project activity.
65
Project feasibility with intrapolated capacities
-1 500
-1 000
-500
0
500
6 8 10 12 14 16 18 20 22 24
Capacity [t
dry
/day]
N
P
V

[
R
'
0
0
0
]
15%
16%
17%
18%
19%
NPV
IRR

Figure 5.3: Feasibility of anaerobic digestion project activities with CDM
The CER revenue improved the feasibility of the project, such that the NPV
18
was positive for the
anaerobic digester designed at 10-12 dry tons per day, with an optimum NPV
18
for a capacity of 11
dry tons per day.
Table 5.5: Anaerobic digestion feasibility without CDM and with CDM
Project Activity No CDM As CDM project
NPV
18
IRR NPV
18
IRR
Anaerobic digestion of fruit waste only - R1 925 668 13.9% - R1 192 653 15.5%
Anaerobic digestion of fruit waste
& dry pomace
- R1 314 224 15.1% - R398 181 17.1%
Anaerobic digestion of waste fruit &
Wet pomace (24 ton/day capacity)
- R4 099 183 12.8% - R1 255 054 16.5%
Anaerobic digestion of wet & dry pomace &
waste fruit capacity 11 dry tons/day
-R1 498 616 15.2% R156 483 18.3%

5.3.2. Hydrolysis and fermentation
The cost of registering the higher risk bioethanol project was anticipated to be the same as for
anaerobic digestion of R320 000. The CER revenue due from the coal offset by not drying the
pomace and methane emissions from waste fruit decay was duly added. Table 5.6 compares the
results against the unregistered project.
66
Table 5.6: Hydrolysis and fermentation without CDM and with CDM
No CDM As CDM project
NPV
24
IRR NPV
24
IRR
Hydrolysis & fermentation of waste fruit & wet
pomace
- R1 296 057 20.8% - R263 507 23.4%

The additional CER revenue improved the feasibility of the project, but only to the point where it
was still marginally out of the money, given the high threshold level required.
5.4. SENSITIVITY ANALYSIS
The input parameters were based on assumptions, hence it as important to understand the effect
these parameters have on the feasibility of the projects.
5.4.1. Anaerobic digestion
The anaerobic digester project was not deep in the money, with small adjustments to the input
parameters having a meaningful change in the project NPV. The results are illustrated below in
Figure 5.4 and summarised in Table 5.7.

Anaerobic digestion sensitivity analysis
-6000.000
-4000.000
-2000.000
0.000
2000.000
4000.000
6000.000
50% 75% 100% 125% 150% 175% 200%
Percentage of base
N
P
V

[
R
'
0
0
0
]
CER Price
Capital
Inflation
REFIT

Figure 5.4: Sensitivity analysis Anaerobic Digestion: 11 t
d
/day capacity

67
Table 5.7: Basis of sensitivity analysis Anaerobic Digestion: 11 t
d
/day capacity
Parameter Base scenario
Levelised electricity tariff R0.96 /kWh
CER R115
Capital expenditure R13,138,889
Inflation of coal, pomace, maintenance 10%

As would be expected, the REFIT for the electricity played the most significant role in determining
the feasibility of the project. The feasibility of the project therefore suddenly change if amendments
were to be made to the REFIT tariff during NERSAs annual review of these guidelines.
The slope of the CER line was relatively flat in comparison with the REFIT, suggesting that it may
have a limited effect. Ironically the revenue received from the carbon credits was required to make
the case study feasible, taking the NPV from a negative to a positive.
It may be difficult to reduce the capital costs further and in such a way make the project attractive.
The strong effect of the capital cost on the NPV emphasises the downside risk if the project were
to be overspent due to increases in material costs or otherwise.
The inflation of coal prices specifically is of particular significance. Increases in coal price greater
than 10% per year have occurred recently. Such increases would increase the attractiveness of the
project.
The sensitivity of the discount rate was not tested because the IRR for each project was
determined. It was clear that with the project IRR = 18.3% for the base scenario, the project was
marginally feasible. The slightest variation of any of the assumed inputs can cause the project to
be out of the money.
5.4.2. Hydrolysis and fermentation
Although the production of bioethanol yielded a negative NPV, it had a higher rate of return than
the anaerobic digestion. It was therefore sensible to establish under which conditions this project
would be feasible. Figure 5.5 illustrated the results.
68
Bioethanol sensitivity analysis
-6000.000
-4000.000
-2000.000
0.000
2000.000
4000.000
6000.000
50% 75% 100% 125% 150% 175% 200%
Percentage of base
N
P
V

[
R
'
0
0
0
]
BioEtOH Price
Capital
Inflation
Yield

Figure 5.5: Bioethanol sensitivity analysis
The project was most sensitive to the price of the bioethanol and the cost of capital, but was nearly
as sensitive to the effect of inflation and the ethanol yield. The greater sensitivity to inflation versus
the anaerobic digestion project was due to revenue from bioethanol increasing with inflation, while
the price of the electricity revenue was fixed for the project duration. Taking the inflation closer to
the South African government target of 4-6% had a negative impact on the feasibility of the project.
What was unclear is whether all of these input parameters would increase at the same rate. Table
5.8 compares the base values with the conditions required for the project to be feasible.
Table 5.8: Basis of sensitivity analysis Bioethanol
Parameter Base scenario NPV > 0
Bioethanol price R4.00/l R4.14/l
Ethanol yield: Fruit & Pomace 50 l/t & 30 l/t 52.56 l/t & 31.53 l/t
Capital expenditure R9,000,000 R8,668,987
Inflation 10% 10.8%

69
CHAPTER 6
SUMMARY, CONCLUSION AND RECOMMENDATIONS
6.1 INTRODUCTION
The research report set out to establish whether a small-scale renewable energy project that uses
waste fruit and pomace as the predominant feedstock could be a feasible CDM project in South
Africa.
The most feasible technology was the anaerobic digestion of the biomass in a continuous stirred
tank reactor (CSTR) that generates biogas. The methane rich biogas is fed into a CHP unit that
delivers heat to the processing facility and the electricity into the national electricity grid. Waste fruit
and wet pomace would be co-digested with abattoir waste during the operating season. Dried
pomace, abattoir waste, waste fruit and any other non-woody biomass would be digested after the
season to optimize the utilisation of the plant capacity. A capacity of 11 dry tons per day for the
case study at a cost of R13 138 889 yielded a net present value (NPV) of -R1 ,498 616 and an IRR
of 15.2% when excluding revenue from the sale of carbon emission reduction equivalents (CERs).
If the project were registered as a CDM project activity, the revenue from the sale of CERs would
increase the NPV to R156 483 and the IRR to 18.3%. This 20.4% increase in IRR compared poorly
against the increase of 36-65% as reported by King (refer section 3.4). Given that the waste fruit is
used for composting and the pomace is consumed as animal feed, the anthropogenic gas emission
reduction for this study is lower than that cited by King resulting in a reduction of revenue from the
sale of CERs.
The hydrolysis and fermentation of waste fruit and wet pomace to produce ethanol was not
feasible, even when registering the project as a CDM project due to the higher threshold rate of
return of 24%. At this rate, the project yielded an NPV of -R263 507 and an IRR of 23.4%, while
mitigating 2861 tons of CO
2e
per annum.
70
6.2 CONCLUSIONS
1. Is the biomass renewable energy project suitable for CDM registration?
All the alternatives are eligible for CDM registration as a small scale renewable energy project
activity, because none of the projects exceeded the power cap of 15MW. Additionality held true,
given that the projects yielded an NPV < 0 without the CER revenue.
CDM participation is feasible in South Africa, despite the low number of registered projects. No
barriers were identified that would prevent the registration of this project activity as a CDM project.
The process may be onerous and this may possibly delay the registration of the project.
2. What is the feasibility of existing biomass energy technologies for this project when not
including CDM revenue?
Not all the technologies considered were technically feasible. Gasification of the biomass was
technically not feasible due to the moisture content requirement of less than 20% against that of
the biomass of 70-80% and due to the low bulk density of the biomass of 250 kg/m
3
versus the
required minimum of 500kg/m
3
.
Firing the biogas in a dual fired boiler to offset the use of coal in the processing facility was not a
feasible alternative because the revenue for electricity of R096/kWh is six fold the coal offset cost
of R0.16/kWh and the heat is only required during the processing season.
The fermentation and hydrolysis of the biomass into bioethanol yielded a rate of return of 23.4%
and an NPV of -R263 507 at a discount rate of 24%.
The digestion of waste fruit and pomace co-digested with abattoir waste in an 11 dry tonnes per
day anaerobic CSTR followed by a CHP unit that delivers heat to the processing facility and
electricity into the national electricity grid, yielded a NPV of R156 616 based on a discount rate of
18%, when excluding CER revenue.
The seasonality of the industry lead to the high capital cost in relation to total energy generated, as
the renewable energy plant must be designed to accommodate the bulk of the biomass over 5
months of the year. This leads to poor utilization of capacity. It was for this reason that the optimum
solution for the anaerobic digestion coincided with a capacity that was optimised to the extent that
waste fruit and part of the pomace is co-digested during the operating season, while the remainder
71
of the pomace was dried and digested after the season. The disadvantage of this option was the
high energy costs of drying the pomace for the later digesting.
3. Does CDM revenue improve any of the projects net present values (NVPs)?
Based on the assumptions made in the study, none of the technologies were feasible without the
additional revenue from the sale of CERs. The optimum solution which co-digests waste fruit and
pomace with abattoir waste in an anaerobic CSTR was feasible when including CDM revenue, with
the IRR increasing from 15.2% to 18.3%, i.e. a 20.4% improvement and the NPV improving from
-R1 498 616 to R156 483. This compared less favourably with King (2005:16) whom reports a 36-
65%improvement in IRR. The main reason for this difference was that the current practice of
composting the waste fruit and using the pomace as animal feed already mitigates carbon
emissions from biomass decay.
4. What boundary conditions make this project feasible?
The sensitivity analysis showed that although the optimum solution was feasible, the marginal
changes in any of the input variables made the project unattractive. A conservative approach was
taken and it is anticipated, should some of the assumptions not hold true, that it should be to the
benefit of the projects and may result in the bioethanol project being feasible. For example,
inflation of the pomace price was set equal to that of coal. Pomace is however a substitute for
maize, hence it may be more realistic to assume that the rise in the coal price would be greater
than that of maize and subsequently pomace. This would imply that a point would be reached
within the near future where it would no longer be profitable to sell dry pomace and new markets
would have to be found for the pomace. In terms of the project this implies that the opportunity cost
for not selling the pomace may be overstated.
The levelised electricity tariff of R0.96/kWh was attractive when compared to the average of
R0.35/kWh currently paid for grid supplied electricity. But it could be assumed that the price paid
for electricity may continue to rise sharply at the current rate of 34% per annum for the next three
years, after which the rate increases at 6% per annum, which is currently the upper inflation target
level of the South African Reserve Bank. This yielded a present value (PV) of R0.360/kWh,
assuming the annual kWh generated remained constant and one applies the discount rate of 12%,
as used by NERSA to determine the REFIT tariff. This was not substantially different from the PV
of R0.359/kWh for the levelised tariff.
72
6.3 FURTHER RESEARCH
Sourcing biomass to optimise the post-season capacity should be further pursued. In this study, an
underutilised farm of 50 ha, currently being used for irrigating effluent over the grasslands, could
be better utilised to grow an energy crop such as sugar beet or sugar cane. Currently no crop is
grown on the farm, given that irrigating the crop with treated effluent creates a health risk if the
crop were to be harvested for human consumption. A crop such as sugar beet would provide a
yield within its first year and, given the warmer South African climate, could be sown in Spring and
be harvested in Autumn. This makes the harvest available after the processing season, thereby
increasing plant utilization.
Alternative methods to preserve the pomace (other than drying) should be investigated so that it
becomes more feasible to store this feedstock for processing when more convenient.
The application of fruit waste and pomace to produce bioethanol or gel fuel should be studied to
establish whether the assumptions made in this study are true. Once this technology is
established, it may become the most feasible solution, even to a point where the additional
revenue from CERs are not required.
73
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