Proceedings of ICEE 2009 3rd International Conference on Energy and Environment,

7-8 December 2009, Malacca, Malaysia

A Techno-Economic Analysis of Biogas Plant from

Palm Oil Waste
Shahida Begum, Devaki A/P Murgayah, Siti Fazlili Bt Abdullah1
Department of Mechanical Engineering, 1Department of Electronic Communication Engineering
Universiti Tenaga Nasional
43009 Kajang, Selangor, Malaysia.
Shahida@uniten.edu.my

petroleum products (62%) and followed by electricity (19%)

with a gradual increase from natural gas (16%). Demand for
coal and coke is somewhat stabilized [2]. Though Malaysia is
a net exporter of oil and natural gas but they are the
nonrenewable and one day will be completely depleted. The
proven oil reserves have declined to 3.0 billion barrels of
January 2007, down from a peak of 4.6 billion barrel in 1996
[3]. Petronas and its various PSC partners have been very
active exploring offshore areas, especially in deepwater zone
that pose high operating costs and require substantial technical
expertise. It was forecasted that Malaysias oil production will
fall to 693000bbl/d in 2008, a 13 percent decrease from 2006
levels [4]. It is expected that Malaysia might revert to a net oil
importer by 2011. Thus the need to reserve for the future
generations and other sectors such as transportation where it is
difficult to replace oil as a fuel has played an important rule.

Abstract Renewable energy is one of the vital sources to meet

partially the global energy demand of developed as well as
developing countries. Biogas plant can be one of the major
sources of renewable energy in Malaysia as huge amount of palm
oil waste is available. Biogas plant can be of different types of
which fixed dome and floating cover are in use in many countries
for many years. The bag design is becoming popular in many
countries. The fixed dome design is used in various palm oil mills.
The generated gas can be used for cooking, lighting, power
generation and the sludge can be used as fertilizer for land. Palm
oil waste is easily available and inexpensive, the major share of
costs are incurred at the initial stage. The operating and the
maintenance costs are quite low.
In the present work an attempt has been taken to study the
technological parameters for commonly used fixed dome biogas
plant for two different sizes. The costs related to the fabrication
of plant are collected from various sources and the other items
were estimated on the basis of available information. Net present
worth, internal rate of return, benefit cost ratio and payback
period were calculated. On the basis of calculated values it was
found that the biogas plant is economically viable and viability
increased with the increase of plant size. The technological
suitability in the context of prevailing situation, economic
viability and future scope of biogas plants has been evaluated.
The findings of this study would give some directions and
guidelines for future planning and implementation of biogas
plants in Malaysia.

Whereas for natural gas, the cap on gas utilization for

power generation, with no new gas-fired power plants are
allowed. Moreover, the gradual deregulation of natural gas
prices, with price increase from RM 6.40 per MMBTU1 to RM
14.31 per MMBTU for power sector in 2008 has often brings
natural gas to the downside and it is expected that current gas
fields to be depleted by 2027 with new fields of higher carbon
dioxide content. To make things worse, there is uncertainty on
adequacy of gas supply for power generation beyond 2018 [4].

Keywords- Palm oil waste, biogas, techno-economic analysis,

sensitivity, plant size

I.

As for coal, the national dependence on imported coal is

more than 97%. Moreover, the supply constraints amongst
exporters, e.g. port facilities in Newcastle, Australia and to
cope with coal export demand due to escalating coal prices,
especially within the region making the situation difficult. The
coal deposits in Malaysia are not of very high quality mostly
composed of sub-bituminous & lignitic coals.

INTRODUCTION

The energy need in Malaysia is met by both renewable and

nonrenewable energy sources of which fossil fuels such as
gas, oil, coal are nonrenewable, while hydro power, solar
power and biomass are renewable sources. The per capita
energy consumption is widely accepted as an index of
development of a country and the energy consumption in
Malaysia is sustainable with the current rate of economic
development. Approximately 68.34 billion kWh of electricity
is generated, with 63.48 billion kWh of electricity consumed
per year [1]. By 2010, the largest energy demand is still from

978-1-4244-5145-6/09/$26.00 2009 IEEE

Hydropower is often restricted due to geographical supply

& demand mismatch for hydropower resources. Not only that,
1

71

MMBTU = million British thermal unit = 28.263682 m3 of

natural gas at defined temperature and pressure.

the high construction cost makes hydropower a less sought

option.

% of total
energy demand

A1

New projections show that by the year 2025 with adequate

support, renewable could contribute nearly 30 percent of direct
fuel use and 60 percent of global electricity supplies [8].
Further projections for 2050 show that much of the world
growing energy needs could be met by renewable at prices
lower than those forecast for conventional energy [9].

Biog-Gas: A Promising Alternative

Renewable energy is the latest fuel incorporated into the

Diversification Policy. The Ministry of Energy, Water and
Communications has been promoting energy efficiency and
renewable energy. Referring to the Fig. 1, it is observed that
the need for renewable energy in 1971 was about 6,000 kTon.
But this value has increased up to 60,000 kTon in 2005 [5].

It is one of the alternate sources and it offers the

developing countries the prospect of increasing their energy
supply in a self reliant way at national and local levels along
with the attended economic, social and security benefits [6].
Long term sustainable development in all countries, and
particularly developing world, requires the gradual shift
towards renewable sources of energy that are more
equivalently distributed and less environmentally destructive
than the fossil fuel sources [7].

Biomass energy includes energy from all plant matter and

animal dung in the form of gas called biogas. Biogas fuels
currently account for about 16% of the energy consumption in
the country, of which about 51% is palm oil industry biogas
waste [10]. The country is the world leader in the production
and supply of crude palm oil. The Malaysian palm oil industry
is projected to steadily grow. This means more oil palm trees
being planted and more oil palm fresh fruit bunches (FFB)
being processed thus more palm oil waste, mesocarp fibres,
and palm kernel shells will be produced. Typically the
quantities of waste products generated in the manufacture of
crude palm oil per ton FFB are shown in Table 2 and Table 3
depicts solid biomass wastes.

TABLE 1. World Energy Council projections of minimum/

maximum contribution from new renewable energy

Modern
biomass
Solar
Wind
Geothermal
Small hydro
Oceanic
Total

109
85
40
48
14
539

20
16
7
9
3
100

In maximum with
major policy support
MTOE
% of
total
561
42
355
215
91
69
54
1345

8-12

The recent world energy council report makes a

conservative projection (Table 1) for renewable and,
according to the minimum possible scenario for 2020, new
renewable would meet 3-4 percent of total energy, amounting
to 539 MTOE (million ton oil equivalent) compared to 1990
level of 164 MTOE. Under the maximum possible scenario
with major policy initiatives, renewable could provide 8-12
percent of total energy 2020 (1345 MTOE). These renewable
energy sources include biomass, solar, wind, geothermal,
small hydro and oceanic energy. According to WEC, under the
minimum case or low scenario, biomass is the most important
of the renewable and is projected to account for 45 percent of
the new contribution by renewable to world energy by 2020.
In the maximum scenario projection, modern biomass will
account for 42 percent of the total renewable energy
contribution by 2020. Unlike solar, wind or microhydroelectric systems, modern biomass energy systems could
be set up in virtually any location where plants can be grown
or domestic animals are reared.

Figure 1: Evolution of Total Primary Energy from 1971-2005.

In 2020
minimum
MTOE % of
total
243
45

3-4

TABLE 2. Typical Quantities and uses of waste products from

the palm oil Industry

26
16
7
5
4
100

72

Waste
Product

Form

Quantity
(ton per
FFB)

Empty
fruit
bunches
(EFB)

Solid

0.23

Current Uses in Palm Oil

Industry
Mill with
Mill
Plantation
without
Plantation
Soil
None
mulching

Mesocarp
fibers
Shells
Palm oil
mill
effluent
(POME)
POMEbiogas

Solid

0.12

Boiler fuel

Boiler fuel

Solid
Liquid

0.07
0.67

Boiler fuel
Soil
fertilizer

Boiler fuel
None

None

None

Gas

come free, therefore, the price of palm oil waste is considered.

The price is estimated to be RM40 per ton.
Maintenance cost: Different items need to be replaced.
Among the items the gas valves need to be replaced every year
due to leakage whereas, the gas pipe can last for ten years and
replacement in every ten years is needed.
Set up cost: For initial start up of the plant, certain amount of
palm oil waste has to be charged which increases with the
sizes of the plant. The amount of palm oil waste required for
100cft and 300cft is 2000kg and 6000kg respectively.

TABLE 3. Solid Biomass Wastes

Biomass
Residue
Empty Fruit
Bunches
Mesocarp
Fibers
Palm Kernel
Shells
Palm Tree
Trunks
Fronds
Total

Annual
Quantity,
million MT
9.65

Approx.
Moisture
Content, %
55

Energy
Content,
MJ/kg
6.33

5.92

40

10.64

2.41

10

15.26

6.36

Dry basis

18.50

30.48
54.82

Dry basis

19.81

3.

The techno-economic analysis is based on the estimation of

cost and cash inflow for a proposed project. The cost includes
the capital cost, set up cost and annual operating cost and the
inflow is selling price of the product from the proposed
project. In case of biogas plant the inflow is comprised of the
selling price of the biogas and the sludge (fertilizer) produced.
In this analysis two different plant sizes has been considered.
The capacity of the plant will vary depending on the
availability of the palm oil waste in the location where the
plant is installed. For this, the cost estimation has been made
for different capacity factor. The prices of the construction
material will increase over the period of time. As such the
sensitivity analysis is also performed by considering an
average of 10% increase in price of the raw materials.

The availability of large quantity of palm oil wastes has

encouraged in taking an attempt to make a detailed economic
analysis for two different sizes of biogas plants. It was found
from the analysis that biogas plant from palm oil waste is
viable and viability increased as the plant size increased.
2.

Methodology adopted in calculation

A3

Estimation of Cost and Cash Inflow

Cost calculation (cash outflow) for 100cft plant

Reference cost for the plant

The main use of biogas is considered for cooking and selling

of the biogas for gas cylinder. Many biogas plants are already
in operation in certain palm oil mills. Therefore the data on
cost of different components of biogas plant (for different)
plant size were considered as reference cost. Cost of different
components of the biogas plant (plant size 100cft and 300cft)
are given in Table A1 and A2 of Appendix A.

Capital cost

Annual cost comprises of annual operation and

maintenance cost. The operation cost consists of labor cost
and price of palm oil waste, whereas the expenses relating to
the change of gas-valves, gas pipes etc. are considered as
maintenance. The maintenance cost for two different sizes of
plants is presented in Tables A3-A4 in Appendix A.

Annual operating cost

Labor cost (RM1400/month)

RM7,050.00
Set up cost
Cost of palm oil waste to start the
x2000kg
RM80.00
plant:

Labor cost: To keep the plant operative palm oil waste has to
be charged every day. Considering the full time job of the
labor per month labor cost has been assumed to be RM1400
for plant size 100cft and RM2800 for plant size 300cft.

RM16,800.00
Price of palm oil waste
x
x30x12

RM1,008.00
Total annual operating cost
RM17, 808.00

Cost of palm oil waste: The amount of palm oil waste

required to be charged everyday for 100cft and 300cft are
70kg and 210kg respectively. Since palm oil waste doesnt

Output calculation (cash inflow) for 100cft plant

73

Fertilizer
Cost of equivalent urea
X179.2kgX4X12

A linear interpolation formula can be used to determine the IRR:

RM34, 406.40
Gas

ir = i1

Selling price per cylinder RM5

(1*XRM5X30X12) RM1, 800.00

+ PV (i2 - i1)
PV + NV

Where ir is the IRR, PV is the NPV (positive) at low discount

rate of ii and NV is the NPV (negative) at high discount rate of

Total cash inflow (A+B)

RM36, 206.40
B3

Cash flow analyzer online financial

calculator

i2. The

value of PV and NV used in the above formula are

positive. However, i1 and i2 should not differ by more than

one or two percent. Otherwise, the results will not be realistic
because the discount rate and the NPV are not related linearly.

Net Present Value (NPV)

The following relationship has been used to calculate the net

present value, NPV.

NPV was first calculated with discount factor up to 50% but

yet a negative value (NV) wasnt obtained. Further calculation
NPV= (NCF1.a1) + (NCF2.a2) + (NCF3.a3) + + of NPV was not possible as 50% was the highest discount
(NCFr.ar) + + (NCFn.an)
factor provided in the discount factor for discrete
compounding booklet. Hence, the excel method was employed
Where NCFr = The net cash flow of a project in years r,
and the method is also used when the financial life, N is large.
ar = The discount factor in years r
The value of IRR for 100cft and 300cft at different capacity
r = 1, 2, 3, ..i n appropriate to the discount rate
factors were calculated and summarized in Table 5 below:
applied.
TABLE 5: IRR of different plant sizes at different capacity
For example, an = 1/(1+I)n is the discount factor for n years with
factors
discount rate of i. NPV for 100cft and 300cft plant with
Capacity factor
IRR for different plant size
different discount factor and capacity factor is calculated and
100cft
300cft
presented in Table 4.
100
225%
432%
90
179%
365%
TABLE 4: NPV calculation at different capacity factor for
80
133%
299%
different sizes of plant
NPV at 10% D.F
100 capacity factor
90 capacity factor
80 capacity factor
NPV at 16% D.F
100 capacity factor
90 capacity factor
80 capacity factor
NPV at 18% D.F
100 capacity factor
90 capacity factor
80 capacity factor

100cft
149,091.302
11,8267.341
94,573.390

300cft
597,549.62
505,077.767
412,605.861

101,689.512
87,353.463
65,887.41

411,675.832
347,277.667
282,879.496

D3

Benefit-Cost Ratio (BCR)

This is the ratio of benefits to costs. It should be calculated

using the present values of each of them, discounted at an
appropriate rate of interest. The ratio should be at least 1.0 for a
project to be acceptable. The result of calculation is given in
Table 6.

TABLE 6: BCR for different plant size at different capacity

factor with 10% discount rate
Capacity
BCR for different plant size
factor
100cft
300cft
100
1.937
2.8264
C3
Internal Rate of Return (IRR)
90
1.743
2.5438
80
1.549
2.2611
There are four major computational methods to calculate IRR.
Among of which are:

91,123.249
78,873.055
59,492.854

370,244.181
312,103.588
253,962.98

Using excels financial command(used for

data involving large discount factor)
Direct solution
Trial and error method(using interpolation,
works only for simple investment)

E3

PayBack Period (PBP)

The time period needed to recover the original investment is a

very important element to appraise a project and payback period
is used to estimate that. It represents the number of years in

74

which the investment is expected to pay for itself. Thus when sensitivity analysis has also been performed by considering an
average of 10% increase in the price of raw materials. Then
net cash flow occurs at even rate:
the effects of both the capacity factors i.e. plant output and
Payback period = Cash of the investment/net cash flow per year 10% escalation in prices of different raw materials is evaluated
together.
The calculated value is presented in Table 7
4.0
Conclusions
The conclusions are based on the analysis of results of cost
economics of biogas plant of two different sizes, sensitivity
study covering a number of ranges of capacity factors and
escalation of prices of building and maintenance materials of
the plants. The inflow for the project was considered from the
selling price of gas for gas cylinder and the sludge as fertilizer
on land. Through the net present value calculation, it is found
that the project is viable at all the three discount factor
selected (10%, 16% and 18%) for both 100cft and 300cft plant
sizes. It was also found that the project was profitable even
when evaluated at a capacity factor of 80. The project is even
viable when running at a capacity factor of 80 with a ten
percent escalation of price. Another important feature
considered in this project was the sensitivity analysis. From
the calculations, it can be summarized that the initial
investment could be recovered in 0.3389 years (4 months) and
0.2063 year (2.5 months) for 100cft and 300cft plant
respectively when the capacity factor is 100. While 0.4843
year (5.8 months) and 0.2430 year (2.9 months) is required for
90 capacity factor. Whereas, 0.6423 year (7.7 months) and
0.2956 year (3.5 months) for 80 capacity factor. The bigger
the plant size, the shorter the payback period, and the higher
the capacity factor the shorter the payback period.

TABLE 7: Payback period for different plant size at different

capacity factor
Capacity factor Payback period (year) for different plant
size
100cft
300cft
100
0.3389
0.2063
90
0.4843
0.2430
80
0.6423
0.2956
F3

Sensitivity Analysis

Sensitivity analysis has been carried out to determine the

net present value (NPV), internal rate of return (IRR), benefit
cost ratio (BCR) and payback period (PBP) of biogas plants of
different sizes and which are delineated in Tables 4-7. The
output of the biogas plant mainly depends upon the
availability of its input i.e. palm oil waste. Therefore, the
capacity of the plant will vary depending upon the amount of
palm oil waste available in the locality where the plant is
installed. For this, cost estimation has been made for different
capacity factor of the biogas plants of different sizes. Cost
estimation is made up to 80% of the plant ideal capacity over
the whole life of the plant. The prices of different construction
materials may increase over the period of time. As such
Discount
Factor
10%
12%
15%

TABLE 8: Sensitivity analysis with 10% escalation of price of raw materials

NPV
IRR Discount
NPV
IRR Discount
NPV
Factor
Factor
100CF
90 CF
80CF
133,176.468
2%
203,724.632
183
160
115,894.917
8%
12,7071.234
4%
118,806.956
95,863.513
6%
99,060.559
REFERENCES

IRR

111

[7]. Goldenberg et. al. (1998), Energy for a sustainable world, Wiley
Eastern Limited, New Delhi.
[8]. N. H. Ravindranath, D. O. Hall (1995), Biomass, energy and
Environment- A developing countries perspective from India, Oxford
University Press Inc., New York.
[9]. Johansson et.al (1993), Renewable Energy, Island Press, Washington.
[10]. A. Ascherio (2002), Diet fat and risk of CHD: New developments in
Enhancing oil palm industry development through environmentally
technology, Indonesian Oil palm research institute, pp. 60-65.

[1].http://allmalaysia.info/msiacommerce/infrastricture/utilities.asp
[2]. A. Zain-Ahmed, Contemporary issues in energy and buildings in
Malaysia: Focus on R & D and policies, SENVAR+IAESEE 2008:
Humanity +Technology, pp15-23
[3]. Malaysia Energy Data, Statistics and Analysis-oil, Gas, Electricity, Coal,
www.eia.doe.gov
[4]. C. Stefan Christoper, PhD thesis (2003), Survey on alternate energy in
Malaysia
[5]. M.B. Wahid, Oil Palm-Achievements and Potential, Department of
agricultural Technology, Faculty of agriculture, UPM.
[6]. WR (1994-95), World Resources 1994-95, Oxford University Press,
New York.

75

APPENDIX-A
TABLE A1: Capital Cost for 100cft plant
Raw Material
Digging mud (cft)
Brick
Cement
Sand (cft)
Khoa (cft)
RCC Pipe
Rod (per tube)
Wax (kg)
Mason
Labor
Valve (1 in.)
Gas Pipe (ft)

Quantity
700
1300
14
70
35
7. 5
32
2
10
12
1
100

Unit Price (RM)

1.00
0.33
15.00
2.97
5.00
38.00
25.00
17.00
200.00
150.00
38.00
3. 50

Total Cost (RM)

700
429
210
207.9
175
285
800
34
2000
1800
38
350
7028.90
7050.00

TABLE A2: Capital Cost for 300cft plant

Raw Material
Digging mud (cft)
Brick
Cement
Sand (cft)
Khoa (cft)
RCC Pipe
Rod (per tube)
Wax (kg)

Quantity
1600
2850
27
130
70
10
85
3

Unit Price (RM)

1.00
0.33
15.00
2.97
5.00
38.00
25.00
17.00

Mason
Labor
Valve (1 in.)
Gas Pipe (ft)

20
24
1
200

200.00
150.00
38.00
3. 50

76

Total Cost (RM)

1600
940. 50
405
386.10
350
380
2125
51
4000
3600
38
700
14575.60
14600.00

TABLE A3: Maintenance cost for 100cft

Year

Valve replacement cost

Gas pipe replacement cost

Total maintenance cost

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

0
0
38
38
38
38
38
38
38
38
38
38
38
38
38
38
38
38
38
38
38

0
0
0
0
0
0
0
0
0
0
0
350
0
0
0
0
0
0
0
0
0

0
0
38
38
38
38
38
38
38
38
38
388
38
38
38
38
38
38
38
38
38

TABLE A4: Maintenance cost for 300cft

Year

Valve replacement cost

Gas pipe replacement cost

Total maintenance cost

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

0
0
38
38
38
38
38
38
38
38
38
38
38
38
38
38
38
38
38
38
38

0
0
0
0
0
0
0
0
0
0
0
700
0
0
0
0
0
0
0
0
0

0
0
38
38
38
38
38
38
38
38
38
738
38
38
38
38
38
38
38
38
38

77