QUEZON BIOGAS POWER PROJECT

(Electricity from Chicken Manure and Silage in Quezon Province)

October 2013

Prepared by Carbon Footprint Solutions Inc. For First Quezon Biogas Corporation

   

1. THE PROPONENT First Quezon Biogas Corporation (FQBC) is a duly recognized corporation under the Securities and Exchange Commission with Registration No. Cs201221629. The corporation was founded by individual poultry-owner members of the Southern Tagalog Agro-producers Cooperative (STAC) who bonded together to address their common issue of poultry waste disposal in 2012. The Cooperative commands at least 4.6 million chicken heads out of the 9.2 million total in the whole of Quezon Province. FQBC sought the help of Carbon Footprint Solutions Inc. (CFSI) to commence the pre-development stage of the Project. CFSI is a renewable energy project developer with 150MW on its project portfolio. 2. PROJECT DESCRIPTIONS AND STATUS First Quezon Biogas Corporation envisions itself to be a leading renewable energy developer and investor--harnessing agricultural residues (chicken manure, rice straw and corn stover) and transforming waste into usable energy. This biogas technology can function as baseload for power generation and can be available on a 24/7 basis. Through the development of indigenous and sustainable energy, FQBC aims to provide optimal returns on investment and to contribute to supplying the continuously growing electricity demand within the power grid. FQBC also aims to uplift the social condition of and economically empower the local communities in the project areas. Taking the different risk profiles into consideration, FQBC has decided to develop a Biogas Power Project that takes this characteristic into account. It will develop the 2.8 MW Quezon Biogas Project using agricultural waste (chicken manure, rice straw and corn stover) from the province of Quezon. 3. CONCEPT OF QUEZON BIOGAS PLANT

a. Plant input

Table 1: Feedstock Mix Input of the Biogas Power Plant In Quezon

page 4 of 34 offer number: 12-135602 date: 27 March 2013

2. Concept for your biogas plant

2.1. Plant input

Substrate Quantity Mg/a DM %

Rice and corn waste 30.000 86 Dry chicken dung 21.000 55 Water 80.000 0.0 Total 131.000 28,5

The addition of approx. 80.000 m³ of water is required in order to regulate the dry matter content in the mixing pit. Estimations have been made regarding the aforementioned input substances pertaining to consistency, content and gas yields. It has been assumed that the input substances are hygienically harmless in terms of type, origin and composition. It is important to make sure that no contaminants (e.g. wood, stones, etc) enter the process. In order to ensure an optimum fermentation and a high gas yield, it is necessary for the input substances to be fed to the system in liquid form, chopped or shredded (sieve size approx. 10mm).

2.2. Energy prognosis

• With the use of a two combined heat and power plant with each capacity of 1.412 kWel, the result is an electrical energy yield of approx. 22.161.300 kWh/a.

• The estimated annual utilization of the combined heat and power plant is approximately 90% and should use the volumes of input material as specified above. A Higher utilization is possible by increasing the amounts of input quantities and an appropriate plant operation.

• Approx. 21.811.000 kWh of thermal energy will be produced per annum, less the intrinsic consumption for the fermentation process. The heat is available all year round for further use in the form of hot water from the heat exchanger of the block heat and power plant.

• The energy prognosis is dependent on the input and may fluctuate. The provided performance data is dependent on the plant location being a max. 0 metres sea level and on a max. external air temperature of 30 °C.

The addition of approximately 15.700 m³ of water is required to regulate the ammonium content in the fermenter. Estimations on consistency, content and gas yields have been made with regard to the aforementioned input substances. The input substances have been assumed to be hygienically harmless in terms of type, origin and composition. It is important to make sure that no contaminant (e.g. wood, stones, etc.) enters the process. In order to ensure optimum fermentation and high gas yield, it is necessary for the input substances to be fed into the system either in liquid form, chopped or shredded (sieve size approximately 10mm).

b. Energy prognosis

• With the use of a combined heat and power plant with a capacity of 2.8 MW, electricity. The estimated annual utilization of the combined heat and power plant is approximately 90% and should use the volume of input materials as specified above. Higher utilization is possible by increasing the amounts of input quantities and through appropriate plant operation.

• In addition to electricity, the plant will produce heat which may be used in the production of bio-fertilizers from the digestate. The estimated total of bio-fertilizer produced annually will be 12,000 ton.

• The energy prognosis is dependent on the input and may fluctuate. The provided performance data is dependent on the plant location (max. 0 metres sea level and max. external air temperature of 40°C).

c. Process description

Dry chicken dung collected from the chicken farms will be taken from the store or silo on-site and mixed with the shredded cellusoe from rice straw or corn stovers, silage for a period of 3-6 months. This will provide a buffer for irregularities in feedstock supply and guarantee a 24/7 performance.

The input substances, which are transported by screw conveyors and substrate pumps, will be homogenised in the central mixing tank by the centrally positioned

agitator. The mixing tank is designed as a sealed non-pressurised tank with an inspection opening. The agitation time, feeding intervals, and respective daily volumes of the input substances can be entered into the PC and amended as required. Once the agitation process is complete, the substrate pump (which is upstream of the solids shredder) will pump the substrate into the fermenter. The pumping process is controlled by a weighing system which is located beneath the mixing tank. The two fermenters each have a useable volume of approximately 6.000 m³. A daily supply of approx. 139.5 m³ of substrate results in a substrate residence time of approx. 86 days. The fermenter is equipped with Flexo-roof with integrated gas membrane, specially developed by EnviTec. The biogas is stored in the fermenter. A recirculation shaft is attached to the fermenter. The recirculating matter will be transferred from the fermenter to the shaft by an overflow pipe. From here, a dry installed substrate pump pushes it into the mixing tank for dry substance control, and converts it into solid bio-fertilizer.

The biogas produced in the fermenter is fed from the gas storage to the combined heat and power plant (CHP), which is installed in a plant building with noise protection in compliance with noise regulations. Prior to entering the CHP, the biogas is dehydrated. The condensate produced here runs off into the condensate shaft. The CHP will have an upstream frequency-regulated gas compressor. Excess gas in the fermenter gas membrane will be flared off via a stationary gas flare. Biogas is burned in the CHP, converted into power with the aid of the generator and fed into the public electricity network. Heat, which is produced during the combustion process, will be used to warm the fermenter and to dry the used digestate to produce bio-fertilizer. For more information, please visit the ENVITEC website (http://www.envitec-­‐biogas.com). Available on the website is an animated film of the digester system which will be delivered to FQBC. 4. BENEFITS FROM THE PROJECT Biogas offers many advantages to people living in rural areas. A biogas plant, for example, digest agricultural (animal and crop) waste into clean high-grade fuel gas and high-quality fertilizer.

a. AVERT DESTRUCTION OF AGRICULTURAL LAND

The increased demand for poultry products have led to rapid and concentrated growth of the industry, which in turn has led to an excess in manure supplies. Although poultry litter is one of the best organic fertilizers available, excessive land application rates may lead to nitrate leaching into groundwater, phosphorus (P) runoff into adjacent water bodies, and elevated bacterial or viral pathogen levels in lakes and rivers. Based on European studies, a square meter of land can only absorb up to 2 kgs of manure per year. Currently, the Southern Tagalog Agro-producers Cooperative (STAC) has 4.6M birds per cycle which produces 22,000MT of manure per year.

4.6M birds X 0.8kg manure X 6 cycle = 22,000MT manure/year If this manure is not properly disposed, a common practice now in Quezon Province as well as in the rest of the country, it will have tremendous effect to our climate and environment. 22,000MT of manure need 11,000 hectares of land for proper waste disposal.

The common practice is to dump it anywhere as long as nobody complains. Most of the time, manure is dumped in the member’s own land. By dumping large volumes of manure continuously in the same area every 50 days will render that land useless. For example, a poultry operator who has 10,000 birds which produce about 8,000 kg of manure every 50 days. This amount of manure is usually dumped in an area of 2.5 hectares.

4.6M birds /10,000 X 2.5 hectares = 1,150 hectares Around 1,150 hectares of arable land in Quezon which may be used for food production is being destroyed because of improper disposal of chicken manure. This is equivalent to 6.9M kg of rice every year or PhP82.8M left out from the pocket of the farmers. If the farmer's (ka’sama) share from the landowner is 30% of the total income, which is the common practice, this is PhP24.8M or PhP54,000 each farmer every year. 1,150 hectares X 3,000kgs rice X 2cycle X PhP12.00/kg = PhP82.8M

b. AVERT CONTAMINATION OF GROUND WATER Poultry manure may contaminate water by (1) leaching through the soil, (2) runoff, where manure has been stored or applied to the land and (3) direct discharge into the water. Excessive dumping of poultry manure can lead to water quality concerns as well as odor and insect problems. Reduced crop yields also result from thisn over-application of manure. The major potential water contaminants are nitrogen, phosphorus and bacteria. Nitrogen contamination may come from stockpiled manure or from manure applied to the land. An increase of nitrogen in water is serious because of human health concerns The overdose of nutrients from surface runoff is a major source of water pollution. After nitrogen flows into the soil, it is then dissolved when it reaches water. Nitrogen and phosphorous are washed off or blown off from the fields which then contaminate the groundwater. Pollution ends up in the creeks, lakes, rivers, streams, and eventually Laguna de Bay. According to the Department of Environment and Natural Resources, more than 50 historic rivers, led by the big ones in Bulacan and Pampanga, are now “biologically dead”. A major contributor to this death is the improper disposal of manure.

c. ADDITIONAL INCOME FOR FARMERS

In general, feedstock consolidation involves five major operational/control points namely: (a) Feedstock Collection, (b) Feedstock Transport, (c) Feedstock Processing, (d) Feedstock Storage, and (e) Feedstock Loading. The total allotted budget for feedstock consolidation is PhP29M every year. If the daily wage in Quezon is PhP250 per day or PhP7,000 per month, around 1,500 farmers will benefit from a 20% increase in their monthly income or 345 new workers may be employed. Chicken manure will be purchased by FQBC from farmers which are not investors on a per ton-basis based on the number of birds per harvest per farm. Below is the formula for determining the total cost of material at collection point: (Total number of birds harvested x 0.8 kg)/ 1000 x Php200.00 = Total Cost Rice straw and corn stovers will be purchased by FQBC in a per ton-basis based on the number of tons consolidated by the Farmers Organization at the collection point. The total weight of the material will be determined through a weigh-bridge measurement installed at the central processing yard. Below is the formula for determining the total cost of material at collection point: (Total weight of material in tons) x Php 200 = Total Cost of Material Each type of feedstock is a by-product of a specific production system which requires a specific handling system. Chicken manure, for example, is available in the stockyards of poultry farmers while rice straw and corn stovers are available in small individual farmer plots. The same thing is true for other agricultural waste. In contrast, chicken manure will be primarily sourced from large commercial poultry operators of the Southern Tagalog Agro-producers’ Cooperative (STAC).

d. INCREASED CROP YIELD AND LOWER PRODUCTION COST As mentioned above, one of the by-products of a biogas plant is high-quality fertilizer. In exchange for the agricultural waste, particularly rice straw and corn strover, the biogas plant will give the farmers a liquid foliar fertilizer which will contribute to lowering the farmers cost of production by 20% and increase the crop yield. The 30,000MT of agricultural waste (rice straw) is equivalent to 10,000 hectares of rice field. 1,500 liters of liquid foliar fertilizer at PhP5 per liter is PhP7,500 per hectare.

Currently, a farmer spends PhP40,000 per hectare to produce 3MT of rice. Changing the equivalent chemical fertilizer to liquid foliar fertilizer will help bring down the cost of production. 5. FOSSIL FUEL VERSUS RENEWABLE ENERGY

Figure 1: Cost of Renewables compared with Fossil Fuel

Rising fossil fuel prices and fuel price volatility as well as a modestly growing economy, and with energy demand growing more than 7% a year, makes renewable energy an attractive investment.   Renewable energy resources include biomass, wind, geothermal, hydro, solar, and ocean energy. Electricity from fossil fuel and electricity generated from renewables might have the same electrons, but the financing characteristic of those electrons is significantly different. While the cost of fossil fuel installations is relatively cheap compared to renewables, the cost of operation is extremely high, as electricity is only generated when the costly fuel is transformed into electricity. With renewables, the capital cost is high, but the wind, water or steam, used to produce electricity has very minimal costs. As a result, while the cost of fossil-fuel-based electricity is mainly determined by the price of fuel, the cost for renewables is mainly determined by the cost of financing required for the initial investment. CONCLUSION One of the strategic points of the biogas development is the production and utilization of biogas, which impacts on many environmental, economic and social areas and which may benefits the involved farmers and society (local communities) in terms of the following:

1. Waste reduction. Biogas technology can help reduce the amount of waste and the costs of their removal.

2. Reduction of soil and groundwater pollution. Wastewater from digesters (liqiud foliar fertilizer) has much more constant composition than the wastewater from manure dumps. Proper use of wastewater from digesters can reduce the risks of polluting soil and groundwater.

3. Additional income for farmers. Production of raw materials, combined with the management of biogas plants, makes production of biogas economically attractive to farmers and helps to increase their income (less mineral fertilizers, increasing the quality of lands, higher and better quality of crops). In addition, farmers get a new social function as energy producers or waste managers.

4. New jobs creation. Compared to the use of imported fossil fuels, biogas

production requires much more staff to collect and transport raw materials, for equipment manufacturing, for construction, operation and maintenance of biogas plants, etc.

5. Reduction of GHG emissions and diminishing of global warming. The

use of biogas may reduce emissions of carbon dioxide (CO2), methane (CH4) and nitrous oxide (NO) from the storage and thus lessening impact to global warming.

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