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Feasibility Studies with the Aim of Developing a Bilateral Offset Credit Mechanism FY2011

Studies for Project Exploration and Planning

High-moisture (low-grade) coalwaste heat drying project

in cement factories

New Energy and Industrial Technology Development Organization (NEDO)Ube Industries, Ltd.

Ube Machinery Corporation, Ltd.

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High-moisture (low-grade) coalwaste heat drying project

in cement factories

February 2012

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Contents

1. Project Outline- Background - Circumstances and government policy of Indonesian coal- Concept of waste heat coal drying and energy recovery process

2. Baseline setting- Baseline options and Screening results- Project Scenario

3. Emission Reduction Calculation- Amount of emission and reduction- Calculation method and the results of the amount of baseline emission and project

emission

4. Estimated CO2 Reduction Potential in Indonesian cement industry

5. Business potential evaluation6. Conclusions

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1. Project Outline

Indonesian Coal Reserve

Coal Rank CV (air dry basis)[kcal/kg]

Probable Reserve[Mt]

Ratio[%]

Low Calorie <5,100 4,708 35.0%

Medium Calorie 5,100-6,100 6,609 49.1%

High Calorie 6,100-7,100 2,088 15.5%

Very High Calorie >7,100 73 0.5%

Total 13,448 100.0%

Necessity of Expansion the quantity of low-grade coal use in Indonesia (Background);Reserve and its coal rank distributionIncreasing demand of domestic use and government policy expanding use of low-grade coal Price merit depend on coal-rank (lower grade coal can get economically larger price merit)

Converts into low-grade coal from high-grade coal;

Energy utilization efficiency goes down

Increase in CO2 emission

Price merit depend on the coal grade

ICI SpecificationsICI 1: 6,500 kcal GAR ICI 2: 5,800 kcal GAR ICI 3: 5,000 kcal GARICI 4: 4,200 kcal GARICI 5: 3,500 kcal GAR

Coal Price Index (2009-2011)

“Waste Heat Recovery and Coal DryingProcess” iseffective.

Circumstances and government policy of Indonesian coal

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Waste Heat Coal Drying

Mill NSP + Kiln Cooler Grinding and FinishingLimestone

Cement Production Process

Cement

Coal AirMill

Waste Heat

“Paddle agitation” + “Gas flow” type drier

Heating gas is fed from the downward division to the upper drying division, through the slits. Coal particles in the upper drying division is in a weak fluidized state by the action of both aeration and slow speed agitation by the paddles.

SLIT

PADDLE COAL INLET

HEATING GAS INLET

SCREW CONVEYOR

COAL OUTLET

HEATING GAS OUTLET

Drying division

Component drawing

Outside view of dryer

(1) Concept of proposed technology is:- De-bottleneck technology for promoting use expansion of high-moisture fuel - Taking advantage of existing plant- Without large-scale modification, the cheaper equipment cost is achieved.

(2) Benefit of Ube's drying process: Suitable drier for low-temperature waste heat recovery system- Recover unused waste heat at low temperature even in atmosphere composition gas- Dry coal at high efficiency under the considered safety operating condition- Ordinary sized coal in bulk fed directly to the coal dryer by existing coal handling systems.

Concept of Waste Heat Recovery and Coal Drying Process

1. Project Outline

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1. Project Outline

Outline of Facility Design

Item Design Condition

Coal feed rate

Before drying (High moisture coal)

75.00 t/h

Dry coal 56.25 t/h

Raw coal moisture

Total moisture 40.0%

Dry coal moisture

Total moisture 20.0%

Waste heat condition

Waste heat gas from clinker cooler

230deg.C

Coal dryer operating condition

Heating gas temperature at coal dryer inlet

180deg.C

Incidental facilities

Coal handling facilities from/to existing facilities

1 set

Dry coal storage bin 1 set

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2. Baseline setting

High moisture coal Drier Low moisture coal

Heat Generator（BL）

Heat Generator（PJ）Waste Heat

Fossil Fuel

Project Scenario（PJ）

Baseline Scenario（BL）

Baseline options Screening results Explanation

1. Low moisture coal ×This scenario isn’t feasible, because of Indonesia’s coal policy（export control of low moisture coal), limited reserve amount, and price (low moisture coal is expensive).

2. High moisture coal(without drying)

×This scenario isn’t feasible, because it requires plant capacity upgrade which is difficult from the aspects of technology applicability, limited space, and high cost.

3. High moisture coal(with drying by using fossil fuel)

Baseline Scenario This scenario is most feasible if this project doesn’t exist.

4. High moisture coal(with drying by using waste heat)

Project Scenario

This scenario is the project(And low temperature waste heat can’t be utilized without UBE’s technology)

This project uses waste heat, instead of fossil fuel, for drying high-moisture coal.As a result, the project can reduce CO2 emission caused by fossil fuel combustion.

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3. Emission Reduction CalculationBLy (Baseline Emissions) PJy (Project Emissions)

Fossil fuel-derived

BE fuel,y = HGPJ／ηBL,fuel× EF CO2,fuel PE fuel,y = 0

BE fuel,y Baseline Emissions (fossil fuel） t-CO2/y PE fuel,y Project Emissions (fossil fuel） t-CO2/y

HGPJHeat Generated and supplied to drier in the Project cal/y

ηBL,fuelEfficiency of baseline heat generator -

EF CO2,fuel

Emission Factor of fossil fuel used in the baseline heat generator

t-CO2/cal

Electricity-derived

BE elec,y= EC BL,y × EF CO2,elec,y= P BL,y ×T PJ,y× EF CO2,elec,y

PE elec,y = EC PJ,y × EF CO2,elec,y

BE elec,y Baseline Emissions (electricity） t-CO2/y PE elec,yProject Emissions (electricity） t-CO2/y

EC BL,yElectricity Consumption of baseline heat generation plant kWh/y EC PJ,y

Electricity Consumption of project heat generation plant kWh/y

P BL,yElectricity Consumption of baseline heat generation plant kW EF CO2,elec,y

CO2 emission rate of electricity t-CO2/kWh

T PJ,y Project operating time h/y

EF CO2,elec,y CO2 emission rate of electricity t-CO2/kWh

ERy (Emission Reduction) = BLy - PJy= ( BE fuel,y ＋ BE elec,y ) － ( PE fuel,y ＋ PE elec,y )

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Symbol Explanation Determination way

Parameters set before

start of this project

ηBL,fuelEfficiency of baseline heat generator

• Designed value of assumed heat generator that would be used in the baseline scenario

EF CO2,fuelEmission Factor of fossil fuel used in the baseline heat generator

• IPCC Guideline values

P BL,yElectricity Consumption of baseline heat generation plant

• Designed value of assumed heat generator that would be used in the baseline scenario

EF CO2,elec,y CO2 emission rate of electricity• Grid emission factor calculated by the government or those of power

plant to be replaced. • To be upgraded as necessary.

Monitoring

parameter

HGPJHeat Generated and supplied to drier in the Project

• Continuous and automatic measuring and recording, by using temperature and flow rate data

T PJ,y Project operating time • Continuous and automatic measuring and recording

EC PJ,yElectricity Consumption of project heat generation plant

• Continuous and automatic measuring and recording, by using electricity meter

Monitoring Point: HGPJ

Project boundaryEmission Reduction: ERy

= BLy － PJy= (BE fuel,y ＋ BE elec,y) － (PE fuel,y＋ PE

elec,y )

= 28,832 t-CO2/y

3. Emission Reduction Calculation

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4. Estimated Potential of CO2 Reduction

Clinker Production rate 7,500 t/dAnnual Operating Time 8,000 h/yClinker Capacity 2.5 Mt/yCoal Consumption (before/after drying) 75.0/56.1 t/h, TM=40%/20%Annual Coal Requirement (before/after drying) 0.60/0.45 Mt/yCO2 Reduction 28,832 t-CO2/yCO2 Reduction Potential Factor on Coal consumption 0.064 t-CO2/t-coal after drying

Calculation results of the Indonesian potential cement factory

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5. Business potential evaluation

Factor -50% -25% Base +25% +50%

Coal Price (ICI-1) U$60/t U$90/t U$120/t U$150/t U$180/t

Annual Uptrend Percentage of Coal Price

+2.50% +3.75% +5.00% +6.25% +7.50%

Facility Cost U$13.9M U$20.9M U$27.9M U$34.9M U$41.8M

Carbon Credit Price U$7.5/t U$11.25/t U$15/t U$18.75/t U$22.5/t

Annual Change percentage of Carbon Credit Price

-5.0% -2.5% 0% +2.50% +5.00%

Factor -50% -25% Base +25% +50%

Coal Price (ICI-1) 12.7% 28.5%

42.4%

55.4% 68.0%

Annual Uptrend Percentage of Coal Price

39.5% 41.0% 43.7% 45.1%

Facility Cost 87.2% 57.7% 32.7% 25.8%

Carbon Credit Price 41.7% 42.0% 42.7% 43.0%

Annual Change percentage of Carbon Credit Price

42.2% 42.3% 42.4% 42.5%

Variation in major factors from the base case

Changes in IRR based on variations in major factors

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6. Conclusions

Methodology for “The Project of Low-temperature waste heat recoverysystem for Low-rank coal drying“ has developed;

– This project adopts waste heat for drying high-moisture coal,– Instead of the drying heat source obtained by combustion of a fossil fuel,– CO2 amount resulting from use of a fossil fuel is reduced.– Simplified and easy monitoring methodology was suggested– Application in “Waste heat drying process of low grade coal” is widely expected in many

industrial sectors.Potential of CO2 Reduction was calculated;

– Estimated CO2 reduction effect using the methodology in the project case of coal feed rate of75 t-low-rank coal/h is approx. 28,800t-CO2/y

– Reduction potential of the CO2 in Indonesian Cement sector is set to 0.55Mt-CO2/y currentlyin maximum, and 1.13Mt-CO2/y around 2020.

Merit of waste heat drying of low grade coal;– Reduction of fuel cost can be achieved– Utilization of the low grade coal in Indonesia is promoted.– Large-scale facility modification is unnecessary, and initial investment cost can be saved.– Calculated internal rate of return (IRR) on the condition of project duration of 10 years is

estimated +42.4%

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Thank you