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

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. Copyright Springer Science+Business Media B.V. 2012