Village Empowered:
Rural Bio-Energy Production as a Bundled CDM Project

By M. P. Singh and Geetika Kalha
May 2006

Mr. Sing is the CEO of Earthizenz in Chandigarh, India. Mr. Kalha is the Secretary General of the Village Life Improvement Foundation. The views expressed here are those of the authors and not of the organizations they come from. This Paper was presented at the 3rd International Biofuels Conference, January 18-19, 2006

1 Introduction

1.1 Background

Conventional sources of energy are not only depleting but also generating GHGs. These gases are causing irrevocable damage to the climate on this planet.
The Kyoto protocol has been set up to reduce the emission of these harmful gases and to encourage renewable energy usage. This Protocol offers, through CDM, tradable Carbon Credits to developing countries. The value of these Carbon Credits is market driven and is sharply rising, thus making an effort to reduce emission becomes increasingly economically attractive.

Switching from fossil fuels to fuels based on renewable sources (e.g. biofuels), is the effort of all countries. Production of bio-fuels has shifted the focus to the village. The massive scope of producing bio-diesel and its socio-economic implications has been very widely discussed. These will not be reported here. A detailed analysis of impact of the Clean Development Mechanism under the Kyoto Protocol, however, needs to be worked out. This is important as activities throughout the cycle of biodiesel manufacture, i.e. from afforestation to the ultimate usage, are eligible for the credits. There is also the need to study the contribution of byproducts, as they can also produce bio-fuel.

This paper argues that merely planting of Jatropha for producing biodiesel, by itself is not a sound strategy, as it does not take the advantage of the full potential of CDM and, consequently the potential returns to the farmer and the village. If the strategy to switch to biodiesel is to succeed, it has to form part of the total CDM package that can be made available to the village.
Only by the means suggested in this paper, does the plantation and processing of Jatropha prevent leakage, become economically viable and at the same time provide for energy and sanitation to the village.
Biofuel has to be seen, not in isolation but as part of a total environment/energy management system at the micro level.

1.2 Bio Energy Programme in India

Renewable energy programmes in India have been in vogue since 1970's, however, the biomass energy programme has gained emphasis since the inception of the CDM under the Kyoto Protocol. Bioenergy plantations are now being considered as viable options to meet the rural energy demands and simultaneously reduce the emissions of GHGs.

1.3 Biomass based renewable energy

The biomass based renewable source of energy, when produced in an efficient and sustainable manner has various environmental and social benefits. The ultimate use of bioenergy plantations can be for:

  1. Direct utilisation of biomass as fuel
  2. Conversion of woody biomass to energy through controlled combustion.
  3. Biofuels to produce convenient and less polluting fuels such as biodiesel whilst continuing to provide use of biomass for carbon mitigation.
  4. Methane gas reclamation from leafy, crop waste and vegetable waste biomass through Biomethanation.

Point no. 1 is not in the scope of this article.

Point no. 2 is touched only from the CDM (as applied to afforestation and reforestation) point of view

Point no. 3 is the most widely talked of aspect in recent years and much work has been done in this direction. This paper attempts to touch upon hitherto untouched aspects, which render the whole activity more economically feasible. The advantage, thus gained, is shown to have absorbed an additional Rs.3 per Kg. of oilseed suggested for the farmer.

Point no. 4 is central to all wastes generated in the process of agriculture, forestry and agro-forestry. In the present context, and in the context of Carbon Credits, the biomass wastes within the project boundary and because of the project are negativities. These wastes can be treated to prevent methane gas escape or to harness methane gas. This, when seen together with sanitation projects being taken up in rural areas, becomes a major source of energy. Further benefits of Carbon Credits as a result of methane capture and later power generation have been suggested and the advantage has been translated to numbers. The suggested integrated process provides energy, to the, sanitation, health and an overall better quality of life to the village.

1.4 The Biodiesel Path

Since detailed calculations on bio-diesel are available, based on various trials at all levels, this has been taken as the central path of this paper. The value of byproducts in the bio-diesel process has been explored and the hidden contributions have been suggested in the main costing which proves that the fixation of Rs. 25/- per litre of bio-diesel by the Ministry of Petroleum is a critical beginning.
The calculations of cost/benefit to farmers are based on use of wasteland. Yields have been taken from a project appraisal by NABARD.

No recommendations have been made for agro-forestry with Jatropha on existing land under cultivation. The yields on such lands would be higher. This paper is an attempt to show that the situation is not as optimistic as it was made out to be in 2003. Neither is it as bad as some cynics would project it to be. It is a national necessity to develop alternates to fossil fuels and with the additional factors, suggested in this paper it provides food for thought for people interested in diversifying into alternative crops.

2 The Bio-Diesel Production

The following are the stages of bio-diesel production:

  1. Afforestation & Reforestation with Jatropha C.
  2. Oil extraction from seed.
  3. Trans-esterification

2.1 Afforestation & Reforestation

As per COP 7 (2001) through COP 10 (Feb. 2005), afforestation and reforestation are the only eligible land use activities in the CDM. The definitions of forest for this purpose is:

Special provisions are provided for small scale afforestation & reforestation projects. Many small scale projects can also be bundled (UNFCCC), so that the fixed costs of registration can be spread out.

2.1.1 The CDM Impact On Afforestation & Reforestation

The first phase of CDM until the year 2012 is open to reforestation and afforestation projects in developing countries as defined in the CDM guidelines and modalities and procedures finalized at COP 9 & COP 10 for such projects. The main criteria to be met by projects include meeting benchmarks of additionality (ie on top of business as usual scenario), permanence of emission reductions achieved and no leakage (ie ensuring that emissions achieved at one location are not emitted elsewhere).

"Small-scale afforestation and reforestation project activities under the CDM" are those that are expected to result in net anthropogenic greenhouse gas removals by sinks of less than 8 kilotonnes of C0² per year and are developed or implemented by low-income communities and individuals as determined by the host party. If a small-scale afforestation or reforestation project activity under the CDM results in net anthropogenic greenhouse gas removals by sinks greater than 8 kilotonnes of C0² per year, the excess removals will not be eligible for the issuance of tCERs or ICERs. (UNFCCC).

The key features as per the definition are:

Assuming an average productivity of 5 tons/ha, the area required for bundled small scale CDM projects would range between 250 to 400 ha, varying with species and plant density. The energy plantations of Jatropha would be principally eligible under this category of CDM projects. (Hooda & Rawat, 2004). At the current rate of exchange of CERs (As per Business Standard Sept. 8, 2005, the rate is $10/tCO²e) this translates into $ 80,000 per annum, which means $ 800,000 (Rs. 360 lacs) over a 10 year period. Taking the worst case scenario, that is size of project as 400 Ha, we have CDM credit amounting to $ 2000/ha or Rs.90,000/ha. This is nearly 3.5 times the total cost of cultivation on one Ha of wasteland.

The above is a broad example, however, each project would be calculated as per its „Net anthropogenic GHG removals by sinks, which would be „Actual net GHG removals by sinks“ minus „Baseline net GHG removals by sinks“, minus „Leakage.

This means that the Government needs to:

2.1.2 Cost of Jatropha Curcas Cultivation in One Hectare Waste Land

Placed below (Table 1a) is the traditional costing of a jatropha plantation, giving the farmer inadequate and unattractive returns. It provides, to the farmer, a sale price of only Rs. 5 per Kg. of seed. This shows that the farmer has to spend nearly Rs.25, 000 in the first three years, without any accruals. Though the table contains a cost of Rs. 1000/- for intercropping, the later tables on accrual and cost benefit analysis do not take into account any intercropping.

Table 1(b) gives the projected annual yield of one hectare. And table 1(c) gives the cost benefit analysis.
The argument of the authors is that the system can afford to pay a higher price to the farmer.

Assumptions
Espacement:3 M x 2 MAvg. Wage Rate:Rs.50/MD
No. of Trees/HA:1666Casualty Replacement:10%
Survival/HA:1500 Nos.
Table 1(a)   Traditional Cost of Jatropha Curcus Cultivation Per Hectare Waste Land (Seeding)
S. No. Particulars of Works Unit Cost (Rs. Per Year) Total (Rs.)
  1 2 3  
1. Site preparation 10MD 500 - - 500
2. Initial ploughing for 6 Hrs 100/Hr 600 - - 600
3. Intercropping Rs. 1000 1000 - - 1000
4. Alighment & staking 5 MD 250 - - 250
5. Digging of pits (45 cm³) & refilling @50 pits/MD & 150 pits/MD 33/11 MD 1650 550 - 2200
6. Cost of FYM @2 Kg/pit Rs. 150/ton 500 - - 500
7. Cost of fertilizer @ 250gm/plant Rs. 2000 2000 2000 2000 6000
8. Cost of plants including transport (1666, 166 nos.) Rs. 3 per plant 4998 498 - 5496
9. Cost of planting &replanting @ 100 plants Per MD 16 & 5 MD 250 - - 1050
10. Weeding, soil working, application of Fertilizer etc. (3,2,1) 10 MD per working 1500 1000 500 3000
11. Plant protection measures LS 100 100 100 300
12. Pruning 20 MD 1000 1000 1000 3000
13. Sub Total Rs. 14898 5398 3600 23896
14. Contingencies 5% 744 270 180 1145
15. Grand Total - 15642 5668 3780 25090

Source: Karmakar & Haque (2004)

This shows that the farmer has to spend nearly Rs.25, 000 in the first three years.

Table 1(b)   Yield and Income per Hectare of Jatropha Cultivation of Wasteland
Year Seed per Tree (kg) No. of Trees Seed (kg) Price per kg Income (Rs.)
3 0.50 1500 750 5 3750
4 0.50 1500 750 5 3750
5 1.00 1500 1500 5 7500
6 1.50 1500 2250 5 11250
7 2.00 1500 3000 5 15000
8 2.50 1500 3750 5 18750

Source: Karmakar & Haque (2004)

Table 1(c)   Economics of Jatropha Cultivation in one Hectare of Wasteland
Year 1 2 3 4 5 6 7 8
Cost 15643 5668 3780          
Benefits     3750 3750 7500 11250 15000 18750
Net Benefit -15643 -5668 -30 3750 7500 11250 15000 18750

Source: Karmakar & Haque (2004)

The above tables, drawn up in 2004, show that the farmer gets an income of Rs.18750 in the 8th year, without taking into account any income from intercropping. We also notice that the net benefit to him is negative in the first three years.

2.2 Giving More To The Farmer

If however,

2.2.1 Interpolation of Enhanced Price and CDM Effect of Afforestation

It is suggested here that the sale price of seed for the farmer be taken as Rs.8 per Kg. The additional Rs.3/- can be made up in the next two stages of the Bio-diesel manufacturing process by taking into account the positive impact of additionalities and further CDM credits. The suggested total Income & net benefit charts are presented below:

Table 2   Yield & Income/Hectare of Jatropha Cultivation of Waste Land with Enhanced Sale Price of Seed
Year Seed per Tree (kg) No. of Trees Qty of Seed (kg) Price per kg Income (Rs.)
3 0.50 1500 750 8 6000
4 0.50 1500 750 8 6000
5 1.00 1500 1500 8 12000
6 1.50 1500 2250 8 18000
7 2.00 1500 3000 8 24000
8 2.50 1500 3750 8 30000
Table 3   Cost Benefit Analasys after Interpolation with Enhanced Seed price & CDM Benefit from Afforestation
Year 1 2 3 4 5 6 7 8
Cost 15643 5668 3780 0 0 0 0 0
Benefits 0   6000 6000 12000 18000 24000 30000
Net Benefit -15643 -5668 2220 6000 12000 18000 24000 30000
CDM Benefit 18000 18000 9000 9000 9000 9000 9000 9000
Total Benefit 2357 12332 11220 15000 21000 27000 33000 39000
Total CDM Benefit of Rs. 90,000, proposed as advance to the farmer @ 2yrs “Credits in the 1st yr. 2yrs“ Credits in the 2nd and one yrs CDM each in the next 6 yrs. This ensures returns from the year one.

If the government advances the AR benefits as suggested, the farmer does not have to wait three years to get financial returns from the afforestation. The CDM credits can be given in advance and the farmer earns steadily each year. The government would, of course, have to identify afforestation and reforestation projects and deal with them accordingly. Small scale projects will have to be so bundled so that the collective net anthropogenic GHG removal by the sink is just about 8 Kilo tons.

For purposes of CDM, AR activity should be de-linked from the rest of the bio-diesel production cycle. However, the observations & recommendations of the Meth Panel, in the case of the first biodiesel project, submitted to UNFCCC, should be kept in mind. Emissions of N²O from fertilizer need to be preferably avoided or accounted for. FYM used should not have been the result of piling up of biomass but should be after subjecting the biomass to controlled digestion and methane capture.

2.3 Oil Extraction & Transesterification

The following sections (2.3.1 & 2.3.2) deal with the next two stages of the biodiesel cycle. Table 4 gives a combined costing of oil extraction and trans-esterification of an existing unit. In table 5 & 6, the two processes are separated. Table 5 deals with oil extraction with the following additions:

Table 6 deals with the trans-esterification process with the following changes to table 6.

2.3.1 Existing Costing of Oil Extatraction and Transesterification

To start with, a costing presented by M/s Gujrat Oleo Chem Limited, a company manufacturing biodiesel is placed below. This costing takes Rs. 4/- per Kg. as the purchase price of seed.

Table 4   Costing of Oil Extraction and Trans-esterification: by M/s Gujrat Oleo Chem. Ltd
  Oil recoverable per Ton of Seed
(based on reported 33-50% oil contents)
0.333
  Cost of Seeds Rs. per Ton
(based on discussions at NABARD)
4000
  Crushing and refining Rs. per Ton
(Industrial average cost of crushing)
600
A. Cost Oil Rs. per Ton 13814
B. Processing Charges to Biodiesel
(at our plant in operation)
10000
  Total Cost per ton of Biodiesel A+B 23814 (Say 24/L)

Source: Chaturvedi (2004)

As mentioned above, if the by-products are re-evaluated, it is possible to give the farmer a higher price for the seeds. This has been shown below:

2.3.2 Tables with Enhanced Purchase Price of & Revaluation of Byproducts

Table 5   Jatropha Oil Expelling Cost after Methane Recovery
Item Qty (kg) Rate (Rs) Cost (Rs) Sale (Rs)
Seed 100 8 800.00  
Cost of Expelling 100 1 100.00  
Total per 100kg cost of seed     900.00  
 
By-Products
De-oiled Cake 70      
Bio-Gas from Cake 35      
Plant Nutrient Cocentrate 35      
Cost of Methanation @ Re1/Kg 70 1 70.00  
Sale of By-Products
Biogas(Kg) (60kg/100kg cake) 35      
Methane @80% of bio-gas 28 15   420.00
Leftover matter (70-35) 35      
Total cost of Oil/ Income     970.00 476.00
 
Net Cost of 30 kg Oil     494.00  
Net Cost of 33 litres Oil     494.00  
Cost per Litre of Oil     14.97 Say 15
Profit per Litre Oil @ 10%     1.50  
Sale Price of Oil     16.50  
Table 6   Cost of Transestrification
Item Qty (Litre) Rate (Rs/Litre) Cost (Rs) Sale (Rs)
Cost of Oil 100 16.50 1650.00  
Transportation 100 0.50 50.00  
Trans-estrification charges 100 10.00 1000.00  
 
By product Glycerol 20      
Sale of Glycerol 20 10.00   200.00
Total Cost and Total Sale     2700.00 200.00
 
Net Cost of Biodiesel/Litre     25.00  

The advantage of methanation of the de-oiled cake has more than offset the additional cost of seeds paid to the farmer. Therefore, with the farmer getting Rs.8/- per Kg., the oil extraction unit getting its due profit, the Bio-diesel can still be manufactured at a cost of Rs. 25/-.The calculation of methane capture is done on the basis of information given by M/s Mojj Engineering Systems Ltd. Through Jayant Pavgi (2004).

The Ministry of Petroleum has fixed the purchase price of bio-diesel at Rs.25/-. Keeping in view the overall impact on the economy as well as the other social benefits as also the uncertainty of the price of fossil fuels, this price needs to be revised upwards.

2.3.3 CDM Application to Energy Generated using Methane Captured during Oil Extration

In table 5 above Methane has been shown to have been captured. Normally, Methane capture is an activity that merits Carbon Credits. However, in the present case it is assumed that even if this capture was not done, no methane would have been emitted. Therefore, no net reduction in emission is achieved. Therefore, Methane credits have not been taken into account as it is assumed to be a Bussiness As Usual (BAU) Scenario.
However, we propose that the methane so generated be harnessed, within the project cycle, to generate electricity, either for the grid or for captive consumption.
CDM credits can be obtained under a bundled small scale project by generating electricity and replacing the usual source of power.

A 1 TPD oil extraction plant can produce 2100 kg of deoiled cake in a day. (@700Kg./ton of seed), which means 840 Kgs of Methane will be captured as per calculations given in table above.
This is capable of generating 80 KW (0.08MW) in a day running 24 hours.
At 80% efficiency, this tanslates into (0.08MW*365days*24h*0.80) = 560MWh per annum
Carbon emission of replaced electricity = mixed cycle (CEF=0.4kgCO²e/KWh)
= 0.4tCO²/MWh
Carbon Credit 560MWh/annum*0.4tCO²/MWh = 224 tCO²
At current rate ($10 per tCO²) this comes to $2240 that is Rs.100, 800 per annum
At a production of 300 kilo litres per annum this credit works out to (100800/300) Rs.336 per Kilo litre. That is about Rs. 0.34 per Litre of oil extracted or Rs. 0.36/litre bio-diesel.

2.3.4 Post Production CDM application to Biodiesel

This credit should be available to the agency that actually replaces the fossil fuel with Bio-Diesel, such as IOC, Railways, road transport Cos., Power generation etc.Subject to the valuation/ prevention of leakage at all stages of the project from afforestation to actual usage, the credits are calculated as under.

Emission factor for Diesel is 3.2 Kg. CO²@/ L (IPCC)

Bio Diesel gives a reduction of 78%
Hence, reduction in emission is 2.50 Kg.CO²/L or 250 Kg/KL or 0.250 t/KL biodiesel
1 t CO2 is reduced by 0.4 KL of biodiesel
In other words, 0.4 KL of biodiesel earns 1CER
At current exchange rates, 0.4 KL of BD earns $10 or Rs. 450
1 Litre of BD will earn Rs.1.13

Calculations of CDM done on the basis of „Effect of CDM on Bio-diesel: Rana (2004)“ and also from paper by Panigrahi (2004).

Since the manufacturer has no control over its ultimate utilization a methodology needs to be evolved to enable the organizations/ parties actually controlling the use of biodiesel, and who are able to quantify the reduction in emissions. The question of accounting for the use of biodiesel outside the country has also been brought up by the Meth Panel, CDM, UNFCCC, while dealing with NM0108.

3 Leakage & Avoidable Emissions in the Manufacturing Chain

If emission reduction achieved at one place results in increased emission in another, outside the project boundary, it is termed as leakage. Here we have termed losses within the project boundary as negativities.

The AR activity itself can cause unwanted and avoidable emissions. Examples:

We, thus, see that Methane (GWP 21) recovery can have a huge socio-economic impact on village. Discussed below is,

  1. Avoidance of methane generation through controlled combustion.
  2. Avoidance of methane and Nitrous Oxide emission by altering the cultivation methods currently adopted for paddy.
  3. Integrated Recovery of Methane in the rural scenario through biomethanation along with other biowastes, including wet garbage, dung. & even wastewater.

4 Avoidance of Methane Production from Biomass Decay through Controlled Combustion

This category (controlled combustion) does not capture methane, it avoids its release. This would come under small scale project category IIIe for purposes of CDM.
The baseline calculation for a given mix of Biomass mix, which is to be combusted, is done as per formulas and factors laid down by IPCC.
If a mixed biomass from a rural area is assumed to be 20 Ton/day, the base line emission of 4.02 t CO2e per day. The Carbon Credits entitlement would depend on how much less Carbon Dioxide is emitted during controlled combustion of the 20 ton mixed biomass.

Combustion is not the best method to adopt, unless the waste is not very easily biodegradable. It may be desirable to go in for biomethanation wherever possible. The simple reason is that methane recovered has more options of use and the residue in the process is a very valuable soil conditioner.

5 Integrated Methane Recovery from Total Waste Biomass (Agroforestry, Kitchen and Cow Dung) and Village Wastewater:

As discussed, ecological advantages of agro-forestry are negated if the biomass waste is allowed to decay and release methane gas into the atmosphere. Decay and burning of biomass can result in unwanted emissions within the project boundaries. The following calculations will clearly show that waste can be effectively treated in a biomethanation reactor more gainfully than the controlled combustion above. The only limiting factor is the ease or otherwise of fermentation of certain types of bio-wastes.

A lot of work has been done at Indian Institute of Science (CST) towards designing biomethanation reactors that can tackle mixed feedstock of waste material for methanation (Chanakya).
Now that the application of the fermenter has widened, there is no need to mix fresh water with cow dung for bio-gas. A village has a lot of bio mass waste, apart from cow dung. The UASB reactor has been suitably modified and can produce a higher percentage of bio-gas, using mixed feed stock. Tailor made solutions need to be designed for different areas.
A case study using biomethanation of mixed wastes as discussed above is given below:

5.1 Case Study from proposed facility in Kishengarh village at Chandigarh (IN)

5.1.1 The CDM impact of Methane recovery

The authors have, on behalf of the Village Life Improvement Foundation, upon request from the Government, had given a proposal for treatment of biomass waste along with wastewater at village Kishengarh, Chandigarh. The mixed waste consists of:

Expected Biogas Recovery from the biomass mix per day = 1000 cum = 0.6 tons
Methane component in this biogas @60% 0.36tons
Baseline: 100% discharge of methane to atmosphere.
Methane available for credit @ 100% = 0.36 tons (A)
However, 2 mld wastewater is going for aerobic treatment.
Biogas recovery expected from wastewater = 450 cum = 0.25 tons
Methane Content @ 60% = 0.15 tons
Baseline: Due to aerobic treatment now 60%
Methane available for credit @60% = 0.09 tons (B)
Total methane credit per day {(A)+(B)} = 0.45 tons
Total Methane credit per annum = 164.5 tons
GWP of Methane = 21
GWP of methane combustion = 3
CER = 164.5*(21-3)
= 2961 tCO²/annum

At the current exchange rate this comes to USD 29610 or Rs.13,32, 000/annum

5.1.2 CDM Impact of power generation from methane captured:

As per UNFCCC guidelines, if the methane captured in a project is further used to generate electricity used in place of electricity generated by fossil fuels, Carbon Credits can be claimed under the same project.
The methane calculated above is capable of generating 100 KW (0.1MW) in a day running 24 hours.
At 80% efficiency, this tanslates into (0.1MW*365days*24h*0.80) = 700 MWh per annum
Carbon emission of replaced electricity = mixed cycle (CEF=0.4kgCO²e/KWh)
= 0.4tCO2/MWh
Carbon Credit 700MWh/annum*0.4tCO²/MWh =280 tCO²

At current rate ($10per tCO2) this comes to $2800 that is Rs. 1, 26,000 per annum.
The baseline scenario in the case of Methane capture is that in the absence of this project all the methane would be sent to the atmosphere due to decay, as there is no municipal rule set in Rural areas.
The above calculation does not include the cost of dung and the sale accruals of:

The paragraphs above clearly indicate that once biodiesel production takes off, the treatment of wastes caused and byproducts produced as a result would become mandatory. Biomethanation of bio-wastes would become mandatory. Combining this with rural sanitation processes will render sanitation a gainful proposition monetarily. Figure 1 below depicts the central role biomethanation can play in the rural scenario.

Biomethanation

Conclusion

The Clean Development Mechanism forms a very important part of the total cycle of producing biodiesel. It is applicable, in some form or the other, to all stages of the production as well as post production utilization. The benefits, via tradable Carbon Credits, can be given to all the contributors to the effort of production as well as the users of biodiesel.

The value of these credits is market driven. The seriousness of the developed world is evident from the steep rise in the value of CERs in the International market. The calculations in this paper have been done taking $ 10/- CER, which is rising and is estimated to touch $45 by 2007.

Bundling of small scale projects needs to be facilitated by the government. Separate bundles will have to be made of individual steps in the production cycle. We can have:

There is an involvement of several departments in the handling of the various facets of the biodiesel production cycle. The way things stand today, all this cannot be achieved as there is a total lack of co-ordination between the responsible arms of the Govt. A truly integrated approach will have to be followed to achieve all this.
Perhaps a Special Purpose Vehicle may have to be designed to oversee the coordination between the various departments.
Once this is achieved, it would ensure that the farmer gets a good deal, the village gets a better environment and the process of making biodieseld becomes more cost effective.

References

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