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Economic analysis of biogas and compost projects in a palm oil mill with clean development mechanism in Malaysia

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Abstract

This article is a case study to compare the economic viabilities of biogas generation and compost projects in a palm oil mill in Malaysia with and without clean development mechanism (CDM). Biogas is captured from anaerobic ponds or digester tanks treating palm oil mill effluent (POME) and converted to green renewable electricity for grid connection, while compost is produced from the shredded empty fruit bunch and raw untreated POME. The both technologies were compared by considering the changes of the materials flow and energy balances. A palm oil mill with a capacity of 54 t fresh fruit bunch per hour has the potential to produce either 6.9 GWh of electricity from biogas or fertilizer equivalent to 488 t of nitrogen, 76 t of phosphorus and 1,065 t of potassium per year. The economic analysis for 10 years project term analysis indicated that CDM gave a significant impact and ensured economic viability for both projects with 25 % of internal rate of return (IRR), RM 12.39 million of net present value (NPV) and 3.5 years of payback period (PBP) for biogas project, whereas 31 % of IRR, RM 10.87 million of NPV and 2.9 years of PBP for compost project, respectively. In addition, sensitivity analysis indicated that the profitability of both projects will vary depending on the economic situation, such as electricity price which is based on the government policy, whereas compost price that depend on fertilizer market price with 43 % NPV change in 20 % range of fertilizer value.

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Notes

  1. Commodity market prices are cited from online page, for example World Bank (www.worldbank.org).

  2. CER credit price is cited in online page, for example ICE (https://www.theice.com/homepage.jhtml) and BlueNext (http://www.bluenext.eu/).

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Acknowledgments

This work was accomplished by obtaining technical and financial field data from Felda Serting Hilir Palm Oil Mil. We wish to gratefully acknowledge Felda Palm Industries Sdn Bhd (FPI) for this encouragement and permission to conduct research at the palm oil mill. This work was conducted under the financial support of Japan Society for the Promotion of Science (JSPS).

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Authors and Affiliations

  1. Department of Biological Functions and Engineering, Graduate School of Life Science and System Engineering, Kyushu Institute of Technology, 2-4 Hibikino, Wakamatsu-ku, Kitakyushu, Fukuoka, 808-0196, Japan

    Tatsuya Yoshizaki & Yoshihito Shirai

  2. Department of Bioprocess Technology, Faculty of Biotechnology and Biomolecular Sciences, Universiti Putra Malaysia, 43400, Serdang, Malaysia

    Mohd Ali Hassan

  3. Department of Process and Food Engineering, Faculty of Engineering, Universiti Putra Malaysia, 43400, Serdang, Malaysia

    Azhari Samsu Baharuddin

  4. Faculty of Economics and Management, Universiti Putra Malaysia, 43400, Serdang, Malaysia

    Nik Mustapha Raja Abdullah

  5. Faculty of Plantation and Agrotechnology, Universiti Teknologi MARA, Shah Alam, 40450, Serdang, Selangor, Malaysia

    Alawi Sulaiman

  6. FELDA Palm Industries Sdn Bhd, Balai Felda, Jalan Gurney Satu, 50400, Kuala Lumpur, Malaysia

    Zainuri Busu

Authors
  1. Tatsuya Yoshizaki
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  2. Yoshihito Shirai
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  3. Mohd Ali Hassan
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  4. Azhari Samsu Baharuddin
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  5. Nik Mustapha Raja Abdullah
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  6. Alawi Sulaiman
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  7. Zainuri Busu
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Correspondence to Mohd Ali Hassan.

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Yoshizaki, T., Shirai, Y., Hassan, M.A. et al. Economic analysis of biogas and compost projects in a palm oil mill with clean development mechanism in Malaysia. Environ Dev Sustain 14, 1065–1079 (2012). https://doi.org/10.1007/s10668-012-9371-7

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  • DOI: https://doi.org/10.1007/s10668-012-9371-7

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