Business Concept Rice Husk Electricity Production Environmental Sciences Essay

Most of us don’t think much about organic refuse once disposed off. It is important to realize the importance of waste recycling, especially for power generation because it will pave way for preservation of the fast depleting natural resources. Organic materials from farm waste can very easily be treated to produce renewable energy. Biomass technologies make use of combustion processes for power generation and therefore can be harnessed at anytime unlike solar or wind energy which is dependent on nature’s whims. Ethanol can be extracted from crops which in turn is used to fuel cars powered by bio fuel and can also be used in producing electricity.

Rice husk is generally used as solid fuel in combustion process by rice mills but around 50% still go waste. Many countries including Thailand, India, Bangladesh, Philippines use rice husk to produce electricity. These rise husks are used as fuel in small power generators that can be installed near factories and run by a small team. In Pakistan there are about 560 listed rice mills producing a large amount of waste in the form of rice husk which can be converted to producer gas by adapting simple technology of gasifiers and the equipment necessary for operations is cheap and can be easily procured locally. Hence, we are proposing the establishment of a business that will provide electricity by using rice husk that would otherwise be burned in the open air or left to decay.

Biomass gasification system is being employed in order to generate electricity. Biomass gasification power generation system adopts the draft-down fixed bed gasification furnace which saves electricity and operation is also convenient. Biomass gasification is a simple and relatively old process, in which biomass is heated to very high temperatures in an atmosphere of less than 1% oxygen. Under these conditions, it does not burn in flames, but turns into a ‘producer gas.’ Next to the gasifier are four filters for cleaning tar and dust from the gas, and a generator in which the producer gas is used to drive a turbine and create electricity. That’s it.

The plant proposed price is $1200 per KW. But the second hand plant is available at $600 per KW and $200 per KW is being charged to cover installment, structural changes etc. The total cost of building 200 KWH plant including set-up will be approximately Rs. 16 million. In 1st year the biomass gasifier plant is operated at average 70% capacity level. The projected cost of producing 1,176,000 KW/ year electricity will be approximately Rs 11 million that will yield income around Rs. 1,341,100.

This project is very important from the Pakistan perspective. Pakistan has been facing an unprecedented energy crisis since the last several years. The problem becomes severe during the summers. Large numbers of users have to be disconnected from the energy supply system to prevent overloading the generating stations (load shedding). On occasions the urban dwellers had to suffer load shedding of 8-10 hours every day. During the same time rural consumers suffered it for up to 20 hours at a stretch. Such projects not only solve electricity problems, creates employment opportunities but also pave the way towards development. Throughout the world m of energy. It is a basic requirement for economic development and for an adequate standard of living. As a country’s population grows and its economy expands its demand for electrical energy multiplies. If this demand is not met adequately a shortage in supply occurs.

2.0 Introduction

Every person is in the state of failure. Whether it is child who fails to get good marks in test or employee who has failed to achieve his target and get abominated by his boss whose business is suffering from losses. All this is happening in Pakistan because of one reason only, that is the electricity outages. Each day dozens of people are protesting on roads, outside the parliament, governor house, WAPDA, PEPCO to demand electricity round the clock.

The role of electricity cannot be undermined in uplifting the economy of a country and improving the standard of living of its people. However many developing countries like Pakistan have been facing acute deficiency in electricity. Currently Pakistan is going through the crises of power outages causing destruction to our economy and increasing frustration amongst the people. At present, there is a dire need to explore alternative energy resources that are indigenous, cost effective, environmental friendly and quick to implement rather than just relying on dams that require long term construction process and heavy investments.

The availability of heat and electricity forms an essential ingredient of a living society. The need for energy is ever increasing due to technological revolution occurring all over the globe. Hence, there is a pressing need to generate additional energy to bridge the supply demand gap. This calls for technologies, which is cost-effective and require less gestation period from conception to realization. Biomass is one such energy source that offers solutions matching the above requirements. Biomass has several aspects of utility in the society and there is substantive residue left unutilized after the societal needs are met with.

Biomass is organic material, which has stored solar energy from sunlight in the form of chemical in the plants through the process called photosynthesis. Biomass fuels include agricultural wastes; crop Residues, Wood, Woody Waste & Organic wastes etc. Unlike fossil fuels Biomass does not add carbon dioxide to the atmosphere as it absorbs the same amount of carbon while growing. It is the cheapest, eco-friendly, renewable source of energy.

Here we have a business plan to use indigenous alternate energy sources to generate electricity which is cost effective and quick to implement. Pakistan is a country of diverse ecology. Northern areas have rich reserves of pine trees littering their needles and foliage the years around and covering vast land with thick biomass. The cultivable plans of Punjab and Sindh are producing crops with biomass like rice husk, cotton waste, corn empty combs, shells of peanuts, almonds, apricot and dates, even household garbage which is thrown away.

2.1. Potential Benefits of Biomass:

Reducing carbon emissions if managed (produced, transported, used) in a sustainable manner

Enhancing energy security by diversifying energy sources & utilizing local resources

Reduced problem of biomass waste management

Possible additional revenues for the agricultural and forestry sectors

Biomass (plant matter) used to generate electricity with steam turbines and gasifiers or produce heat by direct combustion is a substitute for fossil fuels and has environmental and social-cost benefits. Combustion of waste has been used for many years as a way of reducing waste volume and neutralizing many of the potentially harmful elements within it. Combustion can only be used to create an energy source when heat recovery is included. Heat recovered from the combustion process can then be used to power turbines for electricity generation. The role of biomass in electricity production is very important by using wastes.

According to Indian company the distribution and installation cost by using rice husk is around $1/W, one of the lowest in the world and replaces around 42,000 liters of kerosene and 18,000 liters of diesel per year. The company also claims that it plans to save about $50 million in two years by providing an alternative to kerosene and diesel.

2.2. Business Concept: RICE HUSK ELECTRICITY PRODUCTION

Pakistan is an agricultural country producing large amount of agricultural residues annually from bagasse, rice husk, palm oil and wood waste, which have a high electricity potential. If these unexploited residues are utilized, the total potential of biomass fuel sources and also power production capacity of the nation would be doubled. Based on this forecast we are proposing to start a business that will generate electricity by means of rice husk- biomass.

Rice is more than a staple for Pakistanis. It has a prominent place in most of rituals from the wedding to the funeral. To produce rice in milling process, rice husk is removed when passing through the process. Rice husk is the outer cover of rice that accounts for about 20% by weight of the rice. Rice husks, which are a waste product of the rice crop and found aplenty in villages, has been used as fodder for cattle and to make particle boards by a few wood-based companies. In the past, rice husk was mostly dumped as waste that caused waste disposal problem for the mills. Also, when rice husk is fermented by microorganisms, methane is emitted contributing to global warming problem. Rice husk is a fine and light particle and can cause breathing problems.

Rice husk is generally used as solid fuel in combustion process by rice mills but around 50% still go waste. Many countries including Thailand, India, Bangladesh, Philippines use rice husk to produce electricity. These rise husks are used as fuel in small power generators that can be installed near factories and run by a small team. In Pakistan there are about 560 listed rice mills producing a large amount of waste in the form of rice husk which can be converted to producer gas by adapting simple technology of gasifiers and the equipment necessary for operations is cheap and can be easily procured locally.

Hence, we are proposing the establishment of a business that will provide electricity by using rice husk that would otherwise be burned in the open air or left to decay. In order to avoid failure, the business will be started at the small scale by producing electricity for rice mill using rice husks. If we get successful we will extend our boundaries and use every biomass to generate electricity and make the country a self sufficient electricity generation country. This development will most certainly improve the living conditions of people, allowing them to experience better standards of living, and possibly giving them the chance to develop better sources of livelihood.

It involves the construction and operation of a new rice husk power plant with approximately 200 KWh. The process allows rice husks to be substituted for fossil fuel. This novel way of producing electricity will provide a reliable supply and is cheaper than alternatives, translating to a savings of million liters of fuel oil per year and precious foreign exchange. Taking advantage of biomass also decreases air pollution and greenhouse gas emissions by reducing the quantity of fossil fuel burned

3.0 Description of venture

We are proposing the establishment of a firm that will provide electricity at affordable price to industries and nearby residential areas. We are providing cheap electricity from rice husk at low rate. Rice husk is wasted in Pakistan but we can utilize it in producing electricity and its further waste (rice husk ash) can also be used in

In rubber industry as reinforcing agent

In cement industries

Cosmetics

In tooth pastes as anti-caking agents

In water purifier as purifier

The nature of our business will be partnership. Three principals would be involved each with their own share and contribution. The principals of this venture are fresh graduates of Management Sciences Department of Lahore College for Women University, Lahore.

3.1. Size of business

The firm aims to start up its business at small scale catering only one region i.e. Gujranwala, Pakistan with a startup capital of 20 million. The small physical plant would be able to accommodate a small setup and the initial finance would be able to facilitate a small venture like this. After gaining success we can further try to provide electricity to different regions at low rates.

3.2. Plant equipment and personnel

Our equipment divided into three parts

Biomass gasifier

Biomass purification system

Generator

3.3. Availability of rice husk

About 600 million tonnes of rice paddy was produced all over the world out of which an estimated 5.5 million tonnes was grown in Pakistan in 2005-06. Rice husk is the outer covering of the rice grain that is removed as a result of milling process on rice kernel. On average 20% of rice paddy is husk places the global estimate of the rice husk at 120 million tonnes. This means that in Pakistan alone, about 1.1 million tonnes of rice husk was generated in year 2005-06 [Bronzeoak Ltd, 2002 and Statistics Division, Government of Pakistan].

The amount of rice husk available depends on season and rice production capacity of the rice mill. If sometimes there are not enough rice husks from the Rice mill to meet the requirement, the power plant will buy from others rice mills within the province

3.4. Vision

To lighten the ordinary people’s life

3.5. Mission

Want to brighten peoples’ lives by providing affordable, local and sustainable energy solutions and promoting productive uses of agricultural wastes with the help of inimitable workforce

3.5. Objectives

To provide cheap and environmental friendly energy solutions to the homes and industries of Pakistan

To upgrade simple energy technology of rice husk in order to improve productivity of industries

To reduce energy costs by substituting agricultural waste rice husk as bio fuel instead of costly fossil fuel

3.6. Keys to success

Following keys to success have been identified, that if they are followed, the likelihood of sustainable business and success will significantly increase:

To offer products that are demanded by consumers

To provide electricity at affordable prices

To ensure 100% customer satisfaction by working 24/7/365.

4.0 Product Description

Generating electricity from rice husk that is a outer cover of rice. The electricity we provide will be at lower rates than WAPDA.

4.1. Competitive Analysis

The rice processing industry, through the implementation of plant can operate 24 hours a day, 346 days a year.

The use of rice husks for fuel does not create competition with food crops since the rice husks would otherwise be agricultural waste

4.2. Environmental Friendly

Biomass can be used for reduce greenhouse effect because trees absorb CO2 as they grow and this carbon is released when the biomass is combusted. Thus, the net amount of CO2 added to the atmosphere during energy production through the use of biomass over the entire life cycle is nearly zero.

Also its combustion temperature is lower than fossil fuel combustion, it is anticipated that there will be lower NOx emissions. Since biomass contains little sulphur compared to coal, it is also expected that there will be lower SOx emissions.

4.3. Production Plan

Biomass gasification plant is being employed in order to generate electricity. The production process starts with the continuous conveying of rice husks in a sequential order as follows: from the storage yard to the indoor storage, to the grinder, to the service silo and finally to the furnace chamber of a boiler. The process of gasification involves controlled burning of the biomass to produce a particular cocktail of gases, called the producer gas. This gas is a mixture of carbon monoxide, nitrogen, hydrogen, carbon dioxide and a little bit of methane. Producer gas is a combustible gas. It is fed into a gas engine, which drives an alternator to produce electricity. Next to the gasifier are four filters for cleaning tar and dust from the gas, and a generator in which the producer gas is used to drive a turbine and create electricity. “The design of the plant involved a lot of research and development, especially regarding the fuel feeding, combustion regulation and ash removal. Raw and hot producer gas could be used for meeting thermal needs or could be cooled and cleaned, and used in reciprocating engines or gas turbines for power generation. Biomass gasification power generation system adopt the draft-down fixed bed gasification furnace which saves electricity and convenient. The engines and generator, electrical equipment should be arranged indoor, but other equipment can be arranged outdoor. The area of building for each 200KW generator unit is approximately 40-50m2. Through the above process, biomass gasification & power generation converts various kinds of wastes into electricity, reducing pollution due to waste disposal and making better use of energy.

4.4. Feasibility Study

According to analysis done by Southern Brazilian Rice Processing Cooperative Agriculture return on investment through Payback, or return on invested capital (one of the simplest indicators of investment that considers the time at which the project will pay the initial investment) is 3.86 years if they install micro power system.

Rice husk electricity generation project is really successful in India. According to Indian website rice husk is burnt to produce enough energy for powering a turbine and producing electricity. As of now, there are 60 mini-rice husk powered electricity plants that light 25,000 households in different parts of the country. According to them production cost will be Rs. 2/K Wh. Any industry persons would be ready to have power at Rs. 2/KWh. India who has built its first plant in Bihar has extended his netwok in various villages.

Moreover, Golden Rice Cambodia has invested $2 million in a rice-husk electricity plant in order to power local rice mills.

In Thailand a pilot plant project of capacity 9.8 MW is installed and is successful. The project has been established since July 2000. In Thailand, a large portion of the electricity production is from fossil fuels causing concern for energy security as well as environmental emissions of CO2, SO2 and NOX. Biomass has been proposed as one of the alternative (renewable) energy sources of energy which can, to extent, offset the use of fossil fuels.

Experts said that Pakistan has great potential to produce electricity from rice husk because it holds important place in rice producing countries (The nation, 8th June 2009). The use of husk power allows cheap electricity to reach homes without relying on expensive and polluting electricity imported from China. He also advised the rice mills to build up biomass power plants, which can be fuelled by rice husk and get output ranging from 100kw to 1.2MW for each unit of equipment. By utilizing of waste heat, the millers can get much steam that is useful for a rice mill, he maintained. The secret lies not in the biomass gasification system, which is “so simple that even a person who cannot read and write can operate it with a little bit of training,” (Indian website source)

5.0 Market Analysis

5.1. Industry Analysis

WAPDA is the sole producer of electricity in Pakistan. It is providing electricity to the commercial as well as the residential areas. But unfortunately WAPDA performance is not good in the last two decades. According to Pepco, nationwide demand went beyond 16,337MW but the company could not manage more than 10,261MW — leaving a shortfall of 6,070MW.Earlier, PEPCO had claimed that load shedding will be carrying out according to schedule. However, no schedule has been released so far and load shedding is carried out for 7 to 10 hours in the cities and for up to 15 hours in rural areas. Because of which industries are suffering loss and our economy is also going down and our exports are becoming less which further decreases balance of payments. Moreover, after frequent intervals the per unit price also increases that increases the cost of production and ultimately producer increase their prices and shifts their burden to consumers.

5.2. Market Segmentation

The market segmentation for biomass gasifier electricity plant will provide electricity to the:

Commercial areas

Industrial zones

The areas where are initially targeting is Gujranwala. The rationale of choosing this region is that Gujranwala possesses many rice mills that make availability of rice husk around the clock. Moreover, if in any year rice production decreases we can easily import rice husk from Narowal and Kasur where there are availability of rice mills.

5.3. Target market

Nowadays in Pakistan the electricity consumption has been surpassed and supply of electricity is insufficient to meet the demand. Many industries have been shut down causing unemployment due to this critical situation. These industries use more amount of electricity due to which provision of electricity to households also affects badly. Industries should have their own separate setup for electricity generation instead of depending on government to provide them electricity. So the major targeted areas where we can provide electricity through rice husk are:

Industries

Households

Commercial areas

Industries: Industries especially the rice mills can get electricity at a very affordable price through biomass power production without relying on fossil fuel combustion. The small scale power plant will help to meet the needs of power of the specific factory. It will assist Pakistan sustainable growth to keep up with the industrialized world.

Households: As the major source of electricity in Pakistan is WAPDA. Citizens can’t do anything when the light has gone so all the routine and lifestyle of citizens get disturbed by this situation. That’s why by using biomass production plant we produced electricity so households also enlightened their houses and do their work freely.

Commercial areas: Biomass production plant is able enough to provide electricity to majority of people. Commercial areas such as main bazaars, small outlets are also affected by the deficiency of electricity as their business stuck by the deficiency of electricity. So by producing electricity through rice husk we can make this situation better.

Hence our target market is meeting the criteria of effective targeting which includes the following characteristics:

The characteristics of the segments targeted are identifiable.

The target market is sizeable enough to generate reasonable profits.

Our target market is stable in terms of life styles and consumption patterns.

Our market is accessible in an economical way.

5.4. Marketing Mix

PRODUCT

The company aim to produce electricity by using rice husk biomass gasifier plant. The conversion of plant material into energy takes place inside a biomass gasifier. So through this process more electricity will be produced.

PRICING STRATEGY

Cost pricing strategy will be used that is after determining the cost, profit will be added to decide at which price per unit electricity will be sold. We will charge different prices to residential and commercial areas. Rs. 9.90 per unit will be charged to residents and Rs. 13.90 per unit to industries.

PLACE

The power plant will be besides the rice mill so that transportation cost will be minimal. The areas where are initially targeting is Gujranwala. The rationale of choosing this region is that Gujranwala possesses many rice mills like Adil company, Agroman Crystal rice mill, Ahsan rice mill, Al Fajar rice mill, Al haidi rice mill, Al hameed rice mill, Al Riaz rice mill, Al Shauq Rice and processing mill etc. that make availability of rice husk around the clock. Moreover, if in any year rice production decreases we can easily take rice husk from Narowal and Kasur where there are availability of rice mills. So, availability of rice husk will not be a problem in this region.

PROMOTION

The basic marketing challenge is to come up with a cohesive campaign to attract rice millers to take electricity from our company. This can be achieved by a giving them a solid value proposition, that they can get reliable energy for substantially lower rates. We will make them see the comparison of prices between rice husk electricity and the alternatives that they have.

5.5. Analysis of competitors

In Pakistan, WAPDA enjoys the monopoly in producing electricity at such a big scale. The main problem with WAPDA is that it has a high demand for electricity but its supply to its users is low. Because of its failure in providing electricity around the clock and continual increase in per unit electricity prices at frequent intervals many industries has built up their own power set-ups like Bahria town. But they aren’t our direct competitors. The primary reason is that our target market is different. We are targeting those areas that are getting electricity from WAPDA at high rates. We will provide them electricity at not only at cheaper rates but also the availability of electricity will be ensured around the clock.

5.6. Assessment of risk

Main risk will be continuous supply of biomass and Climatic conditions. This can be mitigated by carrying out an in depth survey of the biomass availability in the area and ensuring that the plant can use a variety of biomass.

5.7. Internal Analysis

Strengths

The resources used for rice husk energy technology are mainly by-products that result minimal cost for the raw materials in electricity production.

Rice husk technology is more reliable than the alternative energy sources.

Unlike wind turbines and dams, it is not dependent on geographic areas

Rice husk is also more strategic than other forms of biofuel because it does not take away materials that are still edible, unlike in corn or wheat fuel.

A source of revenue is the sale of ash, a waste- product that emerges by using rice husk technology.

Having this secure source of raw materials supports Pakistan to become more energy-independent

Weaknesses:

Shortage of raw material

Low production of rice due to floods

Latest technology not being used in Pakistan

No government support.

7.0 Management Summary

The organization will be led by three principals.

7.1. Authority of principals

There will be equal authority among the principals. The signatures of at least 3 members would be required to take any decision financial or otherwise.

7.2. Roles and responsibilities of members of organization

Mubeena Farasat will deal in accounting and finance

Ayesha Aleem will deal in marketing

Abeera Pervaiz will deal in technical and production

8.0 Financial Analysis

8.1. Statement of financing needed

The amount of Rs. 20 million is used as a start up finance. This amount will cover the initial financial requirement for setting up a small production plant. The costs relating to the purchase of machinery and the setup; the physical place for operation; the contract with the firms for the regular supply of rice husk, fuel to burn the rice husk will be the major cost; also the hiring of human resource for operating the machinery is the cost that would be borne at the end of the month.

Composition of Capital

Plant and Machinery

Purchase of machinery is the major decision as it requires heavy financing. Because of capital shortage manual feeding of rice husk is done instead of purchasing belt conveyor that can convey the material to the gasifier furnace. Our equipment is majorly divided into three parts, biomass gasifier, biomass purification system and generator. Major machinery may includes feeding machine, gas tank, gasifier furnace, purifier, filters, pipeline network etc

The major supplier is Mr. Muhammad Duja, owner of Ducon Energy Management System having office at DHA Karachi. His proposed price is $1200 per KW. But the second hand plant is available at $600 per KW and $200 per KW is being charged to cover installment, structural changes etc. The total cost of building 200 KWH plant including set-up will be approximately Rs. 16 million (800Ã-100Ã-200).

Capacity of plant

The installed production capacity of the proposed unit would be 200 KWH eggs. However, the capacity utilization of 70% and 80% is envisaged during the first two years.

Capacity utilization

Per day Capacity

100%

70%

80%

Electricity production

200 KWH

140 KWH

160 KWH

Rice Husk

1680 tons

1176 tons

1344 tons

Land

A plot of around 3 kanal will be sufficient as the built-up area requirement is not more than 16 mrlas. Building would be taken on rent at Rs. 60,000 per month that will be around 720,000 lacs per annum or 0.72 million.

Accessories

Necessary furniture like tables, chairs, desks, storage cupboards; a small amount of stationary; water coolers, split a/cs in the office are required that will take approximately Rs. 5 lakhs for its arrangements.

Vehicles

Carriage Vans will be needed to bring rice husk to the desired location. Second hand vehicles will be purchased that will approximately cost Rs. 6 lakhs.

8.3. Manpower Requirement

In order to execute the work, employees, labors are required.

Particulars

Quantity

Rs

Operation Manager

1

60,000

Machine Operators

2

40,000

Skilled workers

2

30,000

Unskilled workers

10

60,000

Guard

3

26,000

Clerks

4

26,000

 

 

 

Cost of Goods Sold

RICE HUSK ELECTRICITY PRODUCTION

Projected C0st of Services sold

As of year ended 31 Dec, 2012

 

2012

2013

2014

Merchandise inventory opening

26,000

66,700

99,000

Add: Purchases

7,644,000

 8,064,000

10,080,000

 

7,056,000

 8,130,700

10,179,000

Add: Wages (116,000*12)

1,392,000

1,670,400

1,770,400

Rent expense (50,000*12)

720,000

720,000

720,000

Fuel charges

1,200,000

 1,600,000

1,700,000

Miscellaneous

300,000

255,000

275,000

Cost of goods available for sale

10,668,000

 12,376,100

14,644,400

Less: Merchandise inventory closing

66,700

 99,000

127,000

Cost of goods sold

10,601,300

 12,277,100

14,517,400

 

 

 

 

 

 

 

EXPLANATION

In 1st year the biomass gasifier plant is operated at average 70% capacity level. So total rice husk needed in the first operating day will be 4 tons that will be purchased at a price of 26,000.The total rice husk purchased in the year will be around 7,644,000 (1176 tons Ã- Rs 6,500 per ton) needed in the year. Direct expenses may include the wages given to the labors that are breaking eggs and operating machines, rent that will be available at Rs. 60,000 p.m., fuel charges that will be outsource. Miscellaneous includes the transportation charges, cl