Detailed Business Plan around an innovative approach to create a company around Carbon Credits and MicroAlgae. I had worked on this as a part of small competition that I participated during School. We could't follow it up completely because nobody in the team had the real expertise on MicroAlgae.

1. Credal
Indian Institute of Technology
Gandhinagar
Making Power Greener
Team: Kai
Date: 16 September 2012
Indian Institute Of Technology, Gandhinagar
VGEC Campus, Off- Visat Gandhianagr Highway
Chandkheda
Ahmedabad
India
Tel: +918460714907
+919998383694
Email: saurya@iitgn.ac.in
ravi@iitgn.ac.in
Skype username: sauryaprakash
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2. Credal
Table of Contents
1. Company Description
1.1. Mission Statement
1.2. Goal and Objective
2. Product And Services
2.1. Incubator Design CAD Model
2.2. Suppliers
3. SWOT Analysis
4. Marketing Plan
4.1. Market Size and Statistics
4.1.1. Carbon Credit market
4.1.2. Algae (Biomass) Market
4.2. Target Customers
4.3. Prospective Partners
4.4. Existing Market Players
4.5. Pricing Strategy
4.6. Initial marketing Strategy
5. Opportunity Estimation
6. Operational Plan
7. Management And Organisation Structure
8. Start-Up Expenses
9. Financial Projections
9.1. Financial Results
9.2. Internal Rate of Return
9.3. Payback period
9.4. Funding Requirements
10.
Sustainability Impact
11.
Financial Plan
11.1
Income Statement
11.2
Costs
11.3
Cash Flows
11.4
Cost estimation for plant
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3. Credal
Executive Summary
The use of fossil fuels for generation of energy is fraught with several serious
challenges. Among these, the release of very large amounts of CO 2 poses a
significant environmental concern. The limited efficiencies of alternative sources of
energy as well as their higher cost complicate the scenario especially in a country
like India, which has only recently begun consuming energy at a higher per capita
rate than ever before. The countries large population and dependence on traditional
fuel sources for powering its infrastructure necessitate a nuanced approach to the
problem of CO2 emissions.
Credal is a medium sized carbon consulting and algae producing firm located in
Ahmedabad, India. It specializes in providing carbon sink solutions by leveraging on
algae for carbon sequestration. The algae sink absorbs emissions from the power
plants. This absorbed CO2 is quantified in terms of captured carbon and converted
into carbon credits. The credits are rationed or sold to the partners as per the
agreements. The company also provides algae which could serve as the raw
material for biomass and other algae based firms.
The company will begin its operation by partnering with the Torrent thermal power
plant in Ahmadabad. The carbon sequestration algae incubators will be set up near
the power plant. The initial batch of required algae for sequestering CO2 would be
bought from the local vendors. The carbon sequestration process will produce large
amount of algae which will be sold to the partners and algae based companies. In
the first phase, city municipal corporations and algae based food and cottage
industries would be targeted as potential customers for algae. Steel and fertilizer
plants like IFFCO, GSFC have been identified as potential second phase partners.
An initial capital of $ 12,21,000 would be invested for acquiring the land. $ 5,85,000
would be used for purchasing the initial stack of algae. A total fixed cost of $
81,40,600 will be needed for complete construction of the incubator. Details of the
cost have been provided in the Financial plan section of this plan. $ 15,84,900 is
required for running daily operations for the first 6 months. By the end of first year
revenue expected is $ 71,64,300. The projected revenue for the 2nd year is $
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4. Credal
1,43,28,700. The internal rate of return (IRR) is 19% and the payback period is 2.8
years.
The team constituting Credal comprises of Ravi Agarwal, Saurya Prakash Sinha,
Tarkeshwar Singh and Dipesh Dayama. Ravi and Dipesh are final year Mechanical
Engineering undergraduates while Saurya and Tarkeshwar are final year students
from the Electrical Engineering department. Their previous roles in firms and
organisations like Ricoh, UL, ISRO, IIM-A and several others have sharpen their
technical and marketing acumen. The team’s complimentary skill set and insight
gained in previous roles makes them apt for executing Credal.
Credal represents a paradigm shift in the operation of coal-based thermal power
plants, and forges a unique syncretic relationship between entities that normally do
not have overlapping objectives. Its model of operation is expected to revolutionize
the energy sector in the country and will usher in real emissions reduction without
comprising on installed power requirements.
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5. Credal
1. Company Description
We are a start up firm that essentially specializes in generating Carbon Credits by
setting up
Sequestration plant employing algae as
trappers. Our motivation
lies in making the carbon emitting plants cleaner by reducing their
the atmosphere. The idea of providing incentive for less
emission in
emission has high a
potential of bringing down the reductions. This trading scheme has been
implemented in EU in two phases and there has been a decline of 11% in
emission which proves its effectiveness.
The dumping of
emission coming out from the power, steel plants has been one
of the major challenges which India faces. Our approach here has been to reduce
carbon di oxide by channelizing the emissions into an algae incubator, which uses
algae for trapping carbon di oxide. The quantization of
trapped by the algae will
have two benefits: one, it will help the plants to get rid of their emissions and
simultaneously it is going to generate credits in terms of
trapped. The plant can
trade the credits depending upon the model agreement and generate revenue.
The end product of this whole process are two: carbon credits and algae. It is
expected that the revenue will be 60%-40% from the two products respectively. The
expectations have been justified in the monetary details provided in the Financial
Plan. The by product algae, generated from the plant will be traded as a raw material
for various businesses which rely on algae as the starting or intermediary
component. We are also considering the possibility of mixing algae with the waste
and using it as a landfill material in urban areas. We believe in openness and
collaboration and yes, we do know that we cannot do it alone. We have taken the
role of algae facilitators and kept he platform open for anyone to come and build on
our shoulders.
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6. Credal
1.1. Mission Statement
We believe in the fact “make an effort where it hits the most”. Our company aims to
reduce the Green House Gases emissions from the globe leaving a cleaner and
greener environment for our generations. We work collaboratively to reduce
emissions and make it clean. Our focus on technology makes carbon market and
environment more integrated.
1.2. Goals and Objectives
Sustainability is our ultimate goal. The main revenue source is Dead Algae. We aim
to capture the market on a region wise basis starting with a relatively small region
and moving onto the bigger consumer regions. The company aims to increase its
revenue by developing sustainable and long term business partnerships. The initial
break-even point comes in the third year and from there the company has a constant
growth driven model.
The company aims to work on a constant growth driven model. Increasing the
efficiency of the incubator and new designs of incubator are our primary goals.
Further after the initial break-even, the company will invest in developing new forms
of genetically modified Algae for better efficiencies and customer specific products.
The target customer base will be focused upon and accordingly new forms of algae
will be developed.
The company plans to be an institutional seller of carbon credits in the later growth
stages. It aims to participate in Carbon exchanges rather than a retail selling. The
ultimate decision relies on Post-Kyoto treaty after 2012.
2. Products and Services
The plant consists of various chambers containing algae. The emissions are
following the paths provided by the conduits and reach the Incubator. The algae
present inside the incubator absorbs the
passage of time as it adapts to high
present and gradually with the
environment, its capacity to absorb
rapidly increases. This makes the process more efficient with time as if previously
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7. Credal
30% of the carbon was getting absorbed then now it is absorbing 80%. Researchers
at MIT have confirmed the figures .There is some variation in the amount of
with the available sunlight and atmospheric conditions but the efficiency remains
more than 50%.
2.1 Incubator Design CAD Model
Figure 1: Plant Schematic with major units
Figure 2: Algae Incubator- flue gas intake from exhaust chimney
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8. Credal
Figure 3: Inner Sectional View of the Incubator with arrays of Algae beds
Figure 4: Inner Sectional View of the Incubator with arrays of Algae beds
2.2 Suppliers
The initial supply of Algae will depend on initial business partnership. The company
aimsto implement its first incubator at an Indian state Gujarat. The thermal power
plant near the city Ahmadabad has high carbon emissions and has sufficient space
to develop and implement the incubator there. As a result, initial algae will be
purchased from a firm located near the city. The supply chain logistics will be quite
simple as the Algae supplier delivers its product outside the state too. It has a high
algae supplying capacity and has the potential for supplying for a long period if more
algae is required.
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9. Credal
3. SWOT Analysis
Strength

Weakness
Highly cost effective method for major

carbon dioxide emitting sectors
Improper moderation may lead to
algae growth inhibition

Low cost raw material

High upfront costs

No problem of carbon dioxide

High incubator maintenance
transportation

Incubator limitations, if power plant

No exploitation of underground
operates at full throttle
resources unlike existing carbon
sequestration techniques

Self- sustaining system

Low infrastructure costs in India

Dead algae, low-cost and eco-friendly
method of biomass production

Tested, reliable and simple
technology

No change in existing power plant
design
Opportunities

Threats
Kyoto protocol is ending in 2012. The

expected cap is between 10-15%

Regions like Australia, New-Zealand,


attractive

investments.
for
foreign
emitter) might not
Presence
of
international
market
players
India, being a fast growing nation, is
quite
(biggest
comply with any post-Kyoto treaty
Mexico, California are starting their
pilot trading scheme
USA
Volatile carbon markets and present
low carbon prices

Environmental
and
human
risks
associated with toxic and infectious
agents involved in algal processes.
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10. Credal
4. Marketing Plan
4.1 Market Size and Statistics
The two products that shall come out of the entire process are the Dead Algae in the
form of biomass and the Carbon Credits and hence it is necessary to evaluate the
market opportunities for both of them individually. This shall help in making an
informed judgement about the growth opportunities for the firm.
4.1.1 Carbon Credits Market:
Under the Kyoto Protocol, the 'caps' or quotas for Greenhouse gases for the
developed Annex 1 countries are known as Assigned Amounts and are listed
in Annex B.[9] The quantity of the initial assigned amount is denominated in
individual units, called Assigned amount units (AAUs), each of which
represents an allowance to emit one metric tonne of carbon dioxide
equivalent, and these are entered into the country's national registry. In turn,
these countries set quotas on the emissions of installations run by local
business and other organizations, generically termed 'operators'. Each
operator has an allowance of credits, where each unit gives the owner the
right to emit one metric tonne of carbon dioxide or other equivalent
greenhouse gas. Operators that have not used up their quotas can sell their
unused allowances as carbon credits, while businesses that are about to
exceed their quotas can buy the extra allowances as credits, privately or on
the open market. This opened up a completely new market which has grown
exponentially in the last decade.
Some of the interesting statistics and observations about the
Carbon trading Market:

The Carbon markets worldwide grew by 11% in 2011 to reach a net size of
$176 billion1.

The transaction volume in terms of CO2 emissions reached 10.3 billion
tons.2
1
2
Source: State and Trends of the Carbon market, 2012, World Bank Report
Source:State and Trends of the Carbon market, 2012, World bank Report
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11. Credal

The European Union Allowance volumes increased to a valuation of $148
billion.

The imminent end of the first commitment period of the Kyoto Protocol has
brought in a lot of uncertainty in the prices of the Carbon certificates being
traded through the exchanges.

Under business as usual projections, the Carbon emission of the world
shall reach 56 Gig tons by 2020. Even if all the countries adhere to the
Copenhagen Accord the projections stand at 49 Gigatons of CO2
emissions annually.

The projected emission reduction demands for the period 2013-2020
worldwide is between 2156-2706 billion tons of CO2 emission reductions.

The minimum projected demand till 2030 for CER certificates is projected
at 8.9 Gigatons of CO2e.3
4.1.2 Algae (Biomass) Market:
The biomass market has seen a recent rise because of its increased
applications ranging from Biodiesel, organic foods and fertilizer based usages.
Some of the interesting statistics about the biomass market are:

The Global biomass market is expected to increase to $693 billion in 2015
from $573 billion in 2011. This corresponds to a CAGR of 3.9%.4

Primary solid biomass use for EU power and heat sector will increase to
146-158 Mtoe5 in 20206.

Bio-energy use will increase by 2.5 times till 2020.

The import requirement for Biomass for the European Union shall stand
somewhere between 26-38 Mtoe by 20207.
4.1.3 Algae Market:
Algae are grown commercially mainly for being processed into bio-fuels such
as ethanol and biodiesel and as neutraceuticals. While the utility of algae in
providing a variety of useful compounds has been known for a long time,
3
Source: A Cost Curve for Greenhouse Gas Reduction, Report by McKinsey
Source: http://www.environmentalleader.com/2010/09/20/biomass-market-to-hit-693-billion-by-2015/
5
Mtoe stands for Million tons of oil equivalent
6
Source: Biomass 2020: Opportunities, Challenges and Solutions, Report by Eurelectric.
7
Source: Biomass 2020: Opportunities, Challenges and Solutions, Report by Eurelectric
4
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12. Credal
appreciation for algae as a major fuel source is a recent phenomenon. In
particular, variations in the environmental culture conditions such as nutrient
supply, length of growth period and speed of operation can influence the biomolecular diversity of algal biomass. Notably, while the lipid and carbohydrate
content of algae vary widely across different species, they can both be
converted into forms that can be used as fuels. Nevertheless, nutrition and
health products continue to dominate the algae market and there are no
commercial algae plants operating with the consistent purpose of producing
bio-fuel. For prominent market players, see section 6.4.
The market for algae as a source material is extraordinary considering the
targeted annual processing of million tonnes or more of algae for most of the
companies listed in section 6.4. The market is still in its nascent stages
considering rapid technological developments pertaining to bio-fuel and
biodiesel refining from algal species. A conservative estimate of the relevant
algae market based on algal strain used, in terms of compatibility with existing
industries, is pegged at 1 -5 million tonnes annually. The vast majority of
current enterprises focus on the ability to process algae into fuels that can
compete with traditional petroleum and other fossil fuels. Thus, to an extent a
steep growth in the algae market especially in the context of bio-fuels has
been restricted by the price of petroleum. This is likely to change in the recent
future due to expansion of operations of the major players as well as
increased use of algal strains as feedstock and neutraceuticals.
4.2 Target Customers
The product being presented is a B2B product and hence the customers are more
like partners who shall have a longer time horizon of partnership. These customers
in principle can be anyone who wants to buy carbon credits or algae. However the
following sectors shall be primary targets for the products:

Cement Industry:
Cement
manufacturing
releases
CO2
in
the
atmosphere both directly when calcium carbonate is heated, producing lime
and carbon dioxide, and also indirectly through the use of energy if its
production involves the emission of CO2. The cement industry produces
about 5% of global man-made CO2 emissions, of which 50% is from the
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13. Credal
chemical process, and 40% from burning fuel. The amount of CO2 emitted by
the cement industry is nearly 900 kg of CO2 for every 1000 kg of cement
produced. With the increasing stringent impositions on pollution control, the
cement industry can be targeted as a major customer for the sale of Carbon
Credits.

Steel Industry: Today, the world steel industry accounts for between4 %
and 5 % of total man-made greenhouse gases. The average CO2 intensity for
the steel industry is 1,9 tons ofCO2 per ton of steel produced. Taking into
consideration the global steel production of more than 1,3 billion tons, the
steel industry produces over two billion tons of CO2.Over 90 % of emissions
from the steel industry come from iron production in nine countries or regions:
Brazil, China, EU-27, India, Japan, Korea, Russia, Ukraine, and the USA.

Thermal Power Plants: Thermal power plants are a primary contributor
to the total greenhouse gas emissions worldwide. Among the thermal power
plants, coal combustion results in greater amounts of carbon dioxide
emissions per unit of electricity generated (2249 lbs/MWh) while oil produces
less (1672 lb/(MW·h)) and natural gas produces the least 1135 lb/(MW·h).
According to a report published in 2008, out of the total 28 Gigatons of CO 2
generated worldwide, 8 Gigatons was contributed by Coal based thermal
power plants. Cost of reducing CO2 emissions by a ton is estimated to be $25
to $30 and hence Carbon Credit shall be a favourable option for the industry
to undertake.

Financial Banks: The growth in Carbon trading as a commodity has
promoted the financial banks across the world to take significant positions in
the market. These banks deal with the Future trading of Carbon Credits where
they are made to deliver credits at the end of the fixed time period. The high
fluctuations and short time horizon provide opportunities of earning more for
each carbon credit sold to investment firms or brokerages.

Public Transportation Systems: Public transportation Systems form a
major component of voluntary Carbon offsets. These are generally
government owned and shall act as potential buyers of Carbon Credits.

Organic Food Industry: The organic food industry has seen a dramatic
rise in the last few years primarily because of the growing concern among
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14. Credal
people on the harmful effect of the use of fertilisers and pesticides in crop
production. Algae biomass shall have huge applications in this industry.

Organic Fertilizers: Organic fertilizers have seen wide adoption because
of the growing understanding among farmers about the long term problems
created by Chemical Fertilizers.

Bio-diesel plants: Algae has seen industry wide adoption in Biodiesel
production which is increasingly being tried and tested for the power
generation and transportation purposes. This makes biodiesel plants a
potential customer for the firm.
4.4 Prospective Partners
The partners for the firm shall have the major role of providing the Carbon emission
that shall be used by the microalgae to multiply itself. In principle any carbon emitting
industry shall be potential partner for Credal. However, based on the carbon
emissions of different industries, the following can be highlighted as the priority for
partnering:

Thermal Power plants

Cement Industry

Steel Industry
4.5 Existing Market Players
About 70 companies worldwide manufacture specific algal species for the
neutraceutical industry. Prominent among these are the Taiwan Chlorella
Manufacturing Company which produces nearly 400 tonnes of dry algal biomass per
year. In India, the algae Spirulina is widely produced in total amounts of close to 300
tonnes annually. Spirulina production and use has been widely promoted especially
in southern states as a sustainable for of rural agro-economic development. Dabur
and EID Parry are major producers of the algae in India. The global demand of
Spirulina alone is estimated at 5000 tonnes annually only half of which is met
currently.
In addition to the growing market of food and health products from algal sources,
several companies worldwide have begun start-up or pilot scale projects towards
using algae for biofuel production. Prominent among these is Algenol Biofuels, that
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15. Credal
uses cyanobacteria (species of blue-green algae) to prepare ethanol which can be
easily separated from the culture medium. Algenol Biofuels is currently at the pilotscale and is working in collaboration with the Dow Chemical Company, National
Renewable Energy Company and Georgia Institute of Technology. Sapphire Energy
is a start-up venture based in New Mexico and is engaged in the production of biodiesel from algae. Hawaii-based Cellana was previously prominent in feedstocks and
personal care products and has diversified into algae-bio-fuel production utilizing
industrial emissions of CO2. Solazyme specializes in algae-based jet-fuel production.
The US Navy purchased 150,000 gallons of the jet fuel at a total cost of $10 million.
Arizona based Heliae Development, LLC is involved in development of multiple algal
strains and products that are ultimately refined into jet fuel.
There are a lot of existing carbon brokers and wholesalers in USA and a few in India.
The potential market competitors to our firm are:
AtmosClear Climate Club:- It is a USA based for-profit organization
providing carbon offsets to individuals and institutions. Consumers become an
AtmosClear Climate Club member by purchasing credits in blocks of 1, 3, 6,
12 and 25 tons. Buyers of these credits are provided with special deals from
sponsors of the program such as ski resorts. Offset projects include methane
trapping and renewable energy projects. They have invested at the Des
Plaines Landfill based northwest of Chicago, Illinois and have third party
verification by Environmental Resources trust. They charge a carbon price
varying from US $3-$25 per ton of CO2.

Atmosfair:- It is a Germany based for profit organization which provides
offsets for GHG created by air travel. Passengers can determine their travel
emission online through Atmosfair’s online calculator and then purchase
credits from them. The company invests in Gold standard CDM certified
climate protection projects. They have invested in electricity generation from
waste, projects in University of Rio (Brazil), solar heaters for kitchen at
schools, hospitals and temples in India and electricity projects in South Africa.
Under the CDM mechanism these projects are carried out according to Kyoto
rules and are monitored by UN accredited technical organization.
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16. Credal

The Climate Trust:- The Climate Trust is a US based not-for-profit
organization investing in emission reduction projects on behalf of businesses,
individuals and organizations. It is one of the largest offset buyers in USA.
The
company
invests
in
renewable
energy,
carbon
sequestration,
cogeneration, material substitution and transport efficiency projects. It
manages the projects for over lifetime and retires credits on behalf of emitters.
Generated credits are exclusively owned by the company. It has invested in
Oregon Paper plant, wind farms in Oregon and Washington etc.. It has offset
4.5 million tCO2 till date. The average price range of the credit is US $6-$10
per ton of CO2 .

Terrapass:-It is a US based offering motorists a way to offer their car
emissions through the purchase of emission offsets. It works with wholesalers
and CCX to purchase credits and invests in GHG abatement projects.
Uniquely it publishes its transaction history online. It is certified by the
organization Green-e. It has offset 12000-15000 tCO2 till date. The average
price band of carbon credits is US $9-$12.
Although none of the above market players are involved in algae production but they
are solely into carbon management business. The above mentioned organizations
are some of the biggest carbon credits producers and sellers.
4.6 Pricing Strategy
The pricing strategy of a product is critical to its success. The product being
mentioned here is a B2B product which implies that pricing shall be a major
component of the marketing strategy. The Dead Mass produced from the processes
shall have a fixed pricing structure which shall be in sync with the market price for
each ton of biomass. However, the Carbon Credit pricing can have two possible
structures because of the possibility of Customer and raw material (carbon emission)
provider being the same. The following are the two possible partnering structures:
I.
The first type of partnership will involve our company and the firm providing
carbon dioxide, as raw material, are the only stakeholders. Here the firm
providing emissions will be the same who will be using the credits generated
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17. Credal
and hence we will charge a carbon credit price of approximately $11 for the
service we are offering.
II.
The second type of partnership will involve our company, the emission
provider and the credit purchaser. Here we will charge a carbon credit price of
$ 15-20 (approx.) to the third party and the emission provider will be given $5
(approx.) per ton of emission supply.
Note:- The carbon credit prices mentioned above are highly subjected to the
prevailing market prices of credits at the concerned time and volumes of purchase
and hence will be modified accordingly.
4.7 Initial Marketing Strategy
4.7.1. Web advertising (Google Ad sense)
The initial web presence will be communicated using the Google
advertising platform. It will help us target the potential partners and
consumers.
4.7.2. Approaching power plant through presentations and seminars
Approaching
thermal
power
plants
locally
and
offering
joint
partnerships. This would be in terms of presentations and meetings.
4.7.3. Initiating partnerships with major players in this field
Approaching the existing players and persuading partnerships on
regional basis. Here we will approach different state governments for
developing initial partnerships with various state government ruled
bodies.
4.7.4. Inviting Universities Environmental and energy department to partner
with us.
Making our presence among the Universities and reaching out to the
academia. Company will provide internships for students and long term
relationships will be developed for promoting research in this field
helpful to the company. In the later stages we could sponsor some of
the PHD positions in the universities. These positions would be
focussed on the financial aspects of the environmental engineering.
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18. Credal
4.7.5. Presence in environmental conference
Conferences will provide us a platform to reach the interested group of
people and land for partners.
4.7.6. Floating a few ads in Business media (If budget permits)
A short commercial making our case could be floated in media.
5. Opportunity Estimation8
The opportunity size for the firm shall vary significantly with the growth of CO2
abatement ways that come up for the major Carbon emitting industries. Hence, it
becomes necessary to estimate the market left for the product after taking in
consideration these factors. An interesting insight about this was made in a report
published by McKinsey in 2007.The report discusses the cost curve for the
Greenhouse Gases reduction for various industries. It makes projects trends till 2030
and predicts the Global CO2 emissions to be 26.7 Gigatons in 2030. The report
further goes onto prove that 70% of these reductions shall be met by cost effective
ways where each ton of CO2 emission reduction shall have a marginal cost of less
than 40 Euro. The rest 30% shall act as the worst case market opportunity for the
firm which comes out to around 8.9 Gigatons per year in emissions.
6. Plant Operational Plan
The incubator is fed with the emissions coming out of the power plants. Suction
pumps placed at the bottom of the incubator are used for sucking the emission inside
the incubator. These pumps create a vacuum at the bottom which helps in circulating
the emission through the central conduit.
The incubator has algae plant beds which are placed at vertical positions. The
emitted gases are captured by the algae when passed through them. The efficiency
of capture depends upon the algae being used and the duration of the daytime. The
incubator has been designed while keeping in mind the sunlight requirements of
algae. A transparent borosilicate glass has been used of making the top of the
chimney for facilitating the sunlight to come in. Inside the incubators, reflectors have
been used to for spreading the sunlight across the algae beds. Each algae beds or
8
Source: A Cost Curve for Greenhouse Gas Reduction, Report by McKinsey
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19. Credal
pond has a capacity of 5000 litres and has 250 kg of algae (Taking 50g of algae per
litre of water). The overall estimated size of the incubator is 3,200,000 litres and
contains 13.5 tonnes of algae at one go. The expected cost of the setup comes
somewhere around 3 Crores.
The incubator will be placed somewhere near the chimney and exhaust pipes from
the chimney would be connecting the plant to the incubator. The algae is getting
doubled in a time duration of 7-8 hrs. Meanwhile a sufficient amount of algae is
maintained inside the incubator so that the incubator could effectively reduce the
emissions. The doubled algae will be carefully taken out from the incubator after 48
hrs on a regular basis. Part of the algae would be kept in ponds for their renewable
after 48 hrs. The batch of algae taken out will be used for selling to other industries
which primarily uses the algae as the raw material.
The plant has conduits which are connected to each of the algae beds for supplying
water. The algae which have been exposed to the
emissions are automatically
taken out from the incubator and loaded on the connected train trolleys. The whole
process of loading is automatic and does not involve any human intervention.
We will be using Programming Logic Controllers for making the system work
automatically. After every 48 hrs the existing batch of algae present in algae beds is
lowered and the algae present in it gets transferred to the trolleys. In a similar
fashion, the new batch of algae is spread onto it which is followed by immersing it in
water and then moving it to their respective places. The number of algae beds filled
will be depending upon the emission coming in, which would directly be depending
upon the capacity at which the plant is operating.
The excess algae are taken out and 10% of it is converted in to dry biomass by
keeping it isolated from the sunlight. The rest if the algae which is fairly rich in fat
content could be possibly employed for making algae oil, biodiesel and could also be
consumed (verify).
For scaling the incubator capacity, a number of similar incubators could be
connected in parallel and these together would be performing the same function as a
standalone incubator.
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20. Credal
7. Management and Organization Structure
The company’s management shall be divided into three different sections viz: the
Operations Division, the R&D cell and the Financial Section. Each of these shall be
headed by one individual and the three of them shall report to the Chief Executive
Officer of the company. The heads of the three divisions shall be called Chief
Operations Officer, Chief Technology Officer and the Chief Financial Officer. The
function and role of each of the divisions and their leads is mentioned below:
CEO: Ravi Agarwal, Mechanical Engineering, IIT Gandhinagar
He is passionate about working in Carbon markets and his intern at IIM Ahmedabad
introduced and gave him a broader perspective about carbon finance. He believes,
Economics to be a major market driving force which could generate momentum in
pushing reforms for climate change. He has held several managerial positions in the
college which has made him familiar with the intricacies of the job and made him
suitable for the role of CEO.
Ravi plans to take up an MBA after completion of his undergraduate studies. The
experience gained through this venture would facilitate him in understanding the
challenges associated with the job.
Operations
Division
(COO):
Saurya
Prakash
Sinha,
Electrical
Engineering, IIT Gandhinagar
He has been a connection between the management and the technical division. He
has been a part of student team that implemented a nationwide database for fire
incident data reporting. He has persuaded and convinced several national and
international organisations for collaborations on the same. He is also an adept
programmer and electronics enthusiast. In his most recent role he designed high
efficiency converters for ISRO Chandrayaan II mission. His previous roles have
facilitated him to have a sound understanding of technical and managerial aspects.
This helps him in communicating the ideas effectively. Along with it, he brings with
him expertise in project planning and project implementation.
Saurya, wants to go for Masters’ in the field of Energy management. He believes his
role in the organisation would give him a better understanding of the climate change
and potential solutions.
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21. Credal
Research & Development (CTO) :
Dipesh Dayama, Mechanical
Engineering, IIT Gandhinagar
During his bachelor’s degree program in mechanical engineering, he has been
involved in projects which have had various elements of design – be it space
applications, agricultural /farm equipment to designing a controller for finger
dynamics. During his recent intern he has designed Optical Fractals for the ISRO
Mars mission. He feels this has enabled him to have an appetite for design and
optimization linked work, which is always increasing. The relevant experience and
practise he looks forward to employ in this start-up wherein he majorly handling the
incubator designs.
Dipesh, wants to go for Masters in the field of Computer Design Modelling and he
believes that his current role would facilitate him get a better understanding of design
aspects and practical challenges.
Financial Division (CFO) : Tarkeshwar Singh, Electrical Engineering, IIT
Gandhinagar
He is passionate about finance. Credal has the potential to become the biggest
carbon credit and biomass company in India because of scalability and the simplicity
of the technology being used. He expects Credal to integrate itself with at least 3040% of the Coal based power plants in India in five years. It’s a challenging goal but
he believes the challenge to help grow ourselves and optimize our resources
well. He has a significant interest in creation of new businesses. He has worked on
product launches in the web space, but he believes that the general learning from
these can be applied to any industry. He has been involved in the alpha launch of
two such products: BookSnap and RVS Open APIs. He was the part of the launch
team of both the projects while working with Ricoh Innovations and currently both the
products are being modified for a nationwide beta launch.
Tarkeshwar, would be taking up Finances and will go for an MBA in future. His role
in the firm would be instrumental in making him better with numbers.
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22. Credal
Advisors:
Prof. Bhaskar Dutta
Ph.D.: Carnegie Mellon University, Pittsburgh, 2004
Email: bdatta @iitgn.ac.in
Phone: +91-2397 2324
Fax: +91-79-2397 2622
http://www.iitgn.ac.in/faculty/chemistry/bhaskar.htm
Prof. Vimal Mishra
Ph. D.: Purdue University, West Lafayette, USA, 2010
Email: vmishra@iitgn.ac.in
http://www.iitgn.ac.in/faculty/civil/vimal.htm
8. Start-up Expenses
Having a detailed list of start-up expenses is essential to the launch of any new
venture. The major costs involved with the firm apart from the registration costs for
the firm, shall be the fixed capital costs involved with the first project. The fixed
capital requirements assuming a plant size of 50 Mw based on the designs proposed
in the plan approximately sums to around $12 million.
9. Financial Projections
Assumptions:

Coal based power plant size: 50 MW

CO2 per MWh = 900 kg

Algae Reproduction time: 8-12 hrs.(10 hrs taken as average)

Time taken for development of a fully developed culture: 48 hrs

CO2 conversion rate: 50%

CO2 Algae Conversion Rate: 1.5-2 Kg CO2 converts to 1 kg of Algae

Dead Mass Ratio for Algae: 10%

Extra Algae is removed from plant every 48hrs

Algae Cost Price in the market: $2.66

Biomass Sales price: $150

Carbon Credit Price= $10.8

Product generated at the end of the day:

Carbon Credits(ton CO2e): 450

Biomass produced: 225 ton
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23. Credal
9.1
Financial Results:
The detailed financial results are provided in the Financial Plan.
9.2
Internal Rate of Return:
The internal rate of return assuming a four year life for the project is
19%.
9.3
Payback period:
The discount rate adjusted payback period turns out to be
approximately 2.8 years.
9.4
Funding Requirements: The initial funding required to get the plant
started and set up shall be acquired through a bank loan and the
funding in the form of capital investment. The distribution of the two
shall approximately be in the ratio of 3:1.
10. Sustainability impact
Sustainability: Short term and long term impacts
The global thirst for energy is an ever-increasing reminder of the need to achieve
sustainable solutions in energy production and consumption. Factors that complicate
efforts in this realm arise from the need to balance the genuine requirements of
higher gross domestic product for emerging economies with the use of methods that
are efficient but not cost-prohibitive for such economies. In particular, the total
energy consumption of all emerging economies combined (including India and
China) is expected to surpass that of the mature market economies (US, Canada
and Western Europe) within the next 3-5 years. Notably, the per capita energy
consumption in India is still one of the lowest among all the major world economies.
In this context, a greater use of fossil fuels especially coal in thermal power plant
operation, will find great political and economic support from relevant quarters in the
short term. However, given the associated problem of greenhouse gas (GHG)
emissions, a spurt in coal-based power generation is sure to create long-term issues,
unless those are tackled at the outset. Significant improvements have already been
made towards using cleaner coal thereby reducing the release of harmful pollutants
into the atmosphere. Nevertheless, more efficient coal-usage does not alter the
course of significant amounts of CO2 emissions from taking place. Imposition of fines
or caps on excess emitting units may only increase the burden on the consumer
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24. Credal
without bringing down the gross emissions. It is in this unique context, that the
proposed strategy is expected to benefit coal-powered power generation without
being detrimental to the environment or being cost-prohibitive.
The major short term impact of the use of algal-mediated CO2 fixation, is to expose
the marketplace to a newer model of conventional power generation. The most
attractive aspect of the proposed strategy is that it does not require significant
alterations in coal-based power generations. On the contrary, the proposed strategy
offers a syncretic platform where the power companies can reap benefits from
lowering their GHG emissions and from carbon credits trading. The short term
impact will also be significant in the algal-mediated method being used effectively as
a breeder-reactor to produce more raw materials for other such ventures. While the
use of algae for CO2 fixation is a relatively recent development, it has been largely
uncoupled from using CO2 directly from emission sources. Both the short-term and
long-term impacts of the proposed strategy highlight the multiple beneficiaries
involved in the operation and therefore indicate the overall sustainability of the
venture. By providing an incentive of benefit from operation, the proposed strategy
draws in multiple stakeholders on a fundamental level and is therefore a more
holistic approach towards sustainable energy production.
Benefits:
The specific benefits of the proposed strategy can be demarcated as those
applicable to power generating units, consumers, downstream processes and
industries, the environment, and to partners and investors.
The principle benefit to coal-based power plants forming an integral part of the
proposed strategy, is to be able to reduce their emissions without either altering their
own infrastructure significantly. The reduced emissions of CO 2 from such
participating plants easily lends them a tag of Green or at least ”Greener” energy
compared to those that do not. With the suggested mechanism of claiming and
trading credits for the lowered emissions, the power companies are provided with a
method of increasing revenue sources. The monetary benefits received by the power
company could be further shared with energy consumers ultimately increasing the
profitability of the entire operation. An attractive feature of the proposed strategy is
that it is not reliant on an all-or-none approach. It is recognized that the efficiency of
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25. Credal
CO2 fixation will need to be optimized on a relatively smaller scale, before a full
blown conversion is tried out. Also, changes in the efficiency of operation over time
could influence the multiple critical partnerships being forged through this venture. It
is thus safe to believe that the power companies will be able to grow to the extent
desirable and appropriate within a certain efficiency that is achieved. Finally, one
very important benefit that is tied in with the lowering of emissions, has to do with the
possibly changing the perception of thermal power plants being generally detrimental
to human health. Coal-based power plants that operate as part of the proposed
strategy could therefore find increased acceptance in political circles, which could
ultimately lead to larger energy production.
The environment is most-benefited by the proposed strategy by reducing the active
GHG emissions in the form of CO2 released from thermal power plants. Previous
approaches towards actively reducing CO2 in the atmosphere have explored the idea
of sequestering ambient CO2 inside the earth’s surface. However, apart from the
costs involved, limitations abound in terms of efficiently liquefying large amounts of
CO2 followed by injection into the earth. In addition, the geophysical consequences
of such sequestration are not fully understood. The environment is also benefited by
the use of algae that are produced in larger amounts upon growth in the incubation
wells. The algae can be used as effective adsorption agents in landfills and for other
types of waste management. Finally, the high organic content of the algae can be
made use of as fertilizers for growing regular crops and plants. In addition to
completing the chain of symbiotic associations inherent in the proposed strategy, this
use benefits from being a completely non-synthetic form of soil and crop
nourishment.
Energy consumers can expect to benefit by way of reduced prices for a cleaner form
of energy. Apart from the monetary incentives, consumers will appreciate cleaner air
and environment in the vicinity of power plants. A change in perception of the form of
energy being produced by the coal-based power plants participating in the proposed
strategy could open up possibilities of land development and use surrounding the
plants in a manner that cannot be justified at the present time.
The proposed strategy offers substantial benefits to partners and investors, in the
form of a huge untapped market that is bound to increase with obvious rise in energy
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26. Credal
demand. In particular, partners may earn more than just monetarily, as the proposed
platform is suitable for multiple other innovations that can be introduced. For
example, a partnering unit may use the algae purchased from this venture for
landfilling operations at a particular site and subsequently setup of cement plant that
uses very similar algal-CO2 trapping infrastructure. The large untapped market at the
early part of this venture is bound to benefit partners who are interested in using the
algae as a raw material and would be able to purchase it at a cheaper price.
Finally, investors will be benefited by clear financial incentives inherent in the large
untapped credits market. In addition, the proposed strategy attempts to optimize the
infrastructure and component assets in a fashion that limits their cost to within a
reasonable liability range. Also, the ability to invest in a venture that promotes green
energy would be a strong incentive and could provide the investors with a unique
and underexplored investment niche.
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27. Credal
11. Financial Plan
11.1 Income Statement
Revenue from Dead Mass sales
Revenue from Partner Firm
Net Revenue
$ 1,02,65,625
$ 18,13,135
$ 1,20,78,760
Expenditures
Plant Operation Costs
$ 42,27,566
$ 14,40,000
Net Expenses
$ 72,52,542
50
0.5
$ 15,84,976
Admininstrative and Operating
Costs(35% of revenue)
Interest on Loan
25% Assumptions:
Power plant Size(MW)
CO2 Conversion Rate
CO2 emission rate(Kg per
Mwh)
Profits:
$ 48,26,219
900
Initital Algae
Requirement(in Kgs)
Algae Reproduction time(in
hrs)
Algae Purcahsing Cost(per
Kg)
Dead Material Selling
price(per ton)
Cabon Credit Price
225000
10
$ 2.6
$ 125.0
$ 11.0
Per day dead Mass
production in tons
Carbon Credit Credit
Genrated per day
225
450
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28. Credal
11.2 Costs
Capital Costs
Percentage
of Fixed
Costs
15%
Per Module
Cost
Number of
modules
needed
Land Cost
Algae Supply
Incubator Costs
$
$
12,21,091
5,85,000
Chimney Construction Cost
Algae Containers
$
$
40,16,454
56,000
$
$
2,86,890
4,000
14
14
Pipes, including connectors,
valves, etc
Intake mechanism for CO2
$
$
28,000
2,80,000
$
$
2,000
20,000
14
14
$
8,40,000
$
60,000
14
$
$
$
3,00,000
8,14,061
81,40,605
$
$
$
$
$
$
$
$
89,547
1,05,828
4,07,030
5,04,718
1,70,953
1,62,812
1,44,089
15,84,976
Water tank(including pupms
etc)
Carbon Destruction Projects
Application Cost
Administrative overhead
Total Fixed Cost
10%
Operational Costs
Nutrient Supply
Flocculants
Maintenance
Labor and Overheads
Waste Disposal
Water Costs
Overhead(@ 10%)
Total Operatopnal Costs
1.10%
1.30%
5.00%
6.20%
2.10%
2.00%
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29. Credal
11.3 Cash-flows
Assumptions:
6 months payment Cycle for Biomass and Carbon Credit Sales
3 months payment
cycle for the costs
Loan taken for 3 years and the payment is made in two equal
installments in the later two years
Cash Flow
projections for First
year
Sources of Cash
Revenue
$ 60,39,380
Uses of Cash
Operating Costs
Initial Costs
$ 54,39,406
$ 81,40,605
Total Cash Balance
Minimum Cash
Balance needed
$ -80,40,631
Surplus(Deficit) Cash
$ -85,40,631
Initial Capital
Loan Amount
$ 36,00,000
$ 96,00,000
$ 5,00,000
Internal Rate
of Return
Payback
Period
NPV:
Net Profit
Margin:
19%
2.8 yrs
$
4,09,449
40%
Discounted
Cash
Flows(@
15%)
Cashflows for
IRR Calculation:
1st
$
Year 80,40,631 $ -80,40,631
2nd $
$
year 51,85,587 45,09,206
3rd
$
$
Year 52,11,806 39,40,874
NPV=
$ 4,09,449
Cash Flow
projections for
Second Year
Sources of Cash
Revenue
Cash Balance C/F
Uses of Cash
Operating Costs
Loan Amount
Payment
Total Cash Balance
Minimum Cash
Balance needed
$ 1,20,78,760
$ 51,59,369
$ 72,52,542
$ 48,00,000
$ 51,85,587
$ 5,00,000
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30. Credal
Surplus(Deficit) Cash
$ 46,85,587
Cash Flow
projections for Third
Year
Sources of Cash
Revenue
Cash Balance C/F
Uses of Cash
Operating Costs
Loan Amount
Payment
Total Cash Balance
Minimum Cash
Balance needed
Surplus(Deficit) Cash
$ 1,20,78,760
$ 51,85,587
$ 72,52,542
$ 48,00,000
$ 52,11,806
$ 5,00,000
$ 47,11,806
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31. Credal
11.4 Cost Estimation for Plant
Cost Estimation for STEEL Stack
Steel Stack Dimensions
in feet
Stack Height
90
Stack Diameter
40
Stack Thickness (AverageAssumed)
Note: Average thickness of steel stack assumed as
15 mm
Sr.
No.
Particulars
1
Steel Plate Volume
Steel Plate Density
7.865
tonne/cubic
meter
3
Steel Plate Material
including
its Fabrication
4
Foundation
5
Design Consultancy
& supervision charges
6
Contingency
7
0.0150
15.761
cubic meter
2
in meters
27.439
12.195
Sub-total (1 to 6)
Quantity
123.958
Tonnes
Rate
Amount($
)
$2,000
(Material plus
Fabrication
cost)
$2,47,916
@7% of (3)
$17,354
@5% of (3+4)
$13,264
@3% of
(3+4+5)
$8,356
$2,86,890
Estimated cost of the stack will be about $300
thousand + 20%.
Page 31