Power

EWEA Conference, Athens, 2EWEA Conference, Athens, 2ndnd March 2006 March 2006

Clean Development Clean Development Mechanism (CDM) Mechanism (CDM)

Funding for WindfarmsFunding for Windfarms

Dr John Green, Director, IT Power CarbonDr John Green, Director, IT Power Carbon

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

Presentation OutlinePresentation Outline The CDM MarketThe CDM Market CDM funding for windfarmsCDM funding for windfarms Case study describing the first Case study describing the first

windfarm in the world to become a windfarm in the world to become a CDM projectCDM project

Obtaining adviceObtaining advice

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

CDM Host CountriesCDM Host CountriesGreen: Potential CDM host countries

Blue Blue : EC countries: Linking Directive connects CDM market with EU ETS market

Yellow: European countries with economies in transition  

Red: Countries outside of the European Union that have ratified the Kyoto Protocol 

White: Countries that have not ratified the Kyoto Protocol  

Source: Point Carbon

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

How the CDM can Accelerate How the CDM can Accelerate Wind Power DevelopmentWind Power Development

Additional source of revenueAdditional source of revenue Help secure other financeHelp secure other finance Offset foreign exchange risks for Offset foreign exchange risks for

imported equipment imported equipment Promote technology transferPromote technology transfer

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

Funding from the CDMFunding from the CDM Example of a 45MW wind farm in China:Example of a 45MW wind farm in China:

– Total investment approximately US$50 Total investment approximately US$50 millionmillion

– CERs of approximately 90,000/yearCERs of approximately 90,000/year

– Price at US$6 per tCOPrice at US$6 per tCO22 would lead to would lead to income of approximately US$5.4 million income of approximately US$5.4 million over 10 yearsover 10 years

– Discounted, this represents approximately Discounted, this represents approximately 8% of total investment costs8% of total investment costs

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

Current CER price: €3-€8Current CER price: €3-€8 EU ETS price: €18-€28EU ETS price: €18-€28 World Bank’s PCF price objectives is World Bank’s PCF price objectives is

US$3/tCOUS$3/tCO22

• 1 Certified Emission Reductions (CER) = 1 tonne reduction of carbon dioxide equivalent 1 Certified Emission Reductions (CER) = 1 tonne reduction of carbon dioxide equivalent

saved compared to the project baseline saved compared to the project baseline

Overview of the CDM MarketOverview of the CDM Market

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

In 2003-4 the major buyers (accounting In 2003-4 the major buyers (accounting for 90% of the transactions) were:for 90% of the transactions) were:– Japanese CompaniesJapanese Companies– World Bank Carbon Finance BusinessWorld Bank Carbon Finance Business– Netherlands GovernmentNetherlands Government

Private funds and ETS participants are Private funds and ETS participants are now playing a strong role in the marketnow playing a strong role in the market

Buyers of CERsBuyers of CERs

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

LimitationsLimitations Bureaucratic proceduresBureaucratic procedures

– CDM Executive Board & Methodology CDM Executive Board & Methodology PanelPanel

– National policiesNational policies– Transactions costs (up-front and on-going) Transactions costs (up-front and on-going)

Market priceMarket price– Too low & uncertain for many projectsToo low & uncertain for many projects

Post-2012 uncertaintyPost-2012 uncertainty Relatively low demandRelatively low demand

– No demand from the USANo demand from the USA– Russian/Ukrainian supplyRussian/Ukrainian supply

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

Documentation required Documentation required for a CDM Projectfor a CDM Project

Baseline study - emissions that Baseline study - emissions that would occur in the absence of the would occur in the absence of the proposed projectproposed project

Project Design Document (PDD) - Project Design Document (PDD) - 60+ pages needed to demonstrate 60+ pages needed to demonstrate that this project is “additional”that this project is “additional”

Contract for selling emissions Contract for selling emissions reductionsreductions

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

Issues to be Issues to be ConsideredConsidered

Need to demonstrate why the project activity is Need to demonstrate why the project activity is not likely occur as part of the business as usual not likely occur as part of the business as usual (BAU) scenario(BAU) scenario

Need to identify the additionality over the Need to identify the additionality over the baselinebaseline

Need to demonstrate how the project Need to demonstrate how the project meets/supports the sustainable development meets/supports the sustainable development criteria of the host countrycriteria of the host country

Evidence of CDM funding being taken into account Evidence of CDM funding being taken into account before the final decision is given for the project to before the final decision is given for the project to go aheadgo ahead

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

CostsCosts– Project Design Document ~€75kProject Design Document ~€75k– Verification ~€8kVerification ~€8k– Registration ~€15kRegistration ~€15k– Annual certification ~€8kAnnual certification ~€8k

Small-scale CDM a little cheaperSmall-scale CDM a little cheaper Minimum project size for it to be Minimum project size for it to be

profitable?profitable?– Approximately 10,000 tCOApproximately 10,000 tCO2e2e/year/year

CDM CostsCDM Costs

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

World’s first windfarm CDM World’s first windfarm CDM Project Project

Case study - Case study - IT Power IT Power wrote the wrote the Project Project Design Design Document Document (PDD) for (PDD) for the Chinese the Chinese Huitengxile Huitengxile project project

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

Huitengxile WindfarmHuitengxile Windfarm 25.8MW windfarm in Inner Mongolia25.8MW windfarm in Inner Mongolia Twelve 900kW and ten 1,500kW turbines Twelve 900kW and ten 1,500kW turbines Needed to demonstrate that the windfarm Needed to demonstrate that the windfarm

would not have been built without CDMwould not have been built without CDM Emission reductions: windfarm electricity Emission reductions: windfarm electricity

production * emission coefficient of gridproduction * emission coefficient of grid US$2.75 million obtained from CDM over US$2.75 million obtained from CDM over

10 years, representing 8% of the project 10 years, representing 8% of the project costscosts

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

Huitengxile WindfarmHuitengxile Windfarm IT Power wrote the Project Design IT Power wrote the Project Design

Document (PDD), advised on the sale Document (PDD), advised on the sale price for the CERs and produced a price for the CERs and produced a business plan for the projectbusiness plan for the project

The project documentation was The project documentation was validated in 2005, becoming the first validated in 2005, becoming the first CDM project in China CDM project in China

CERs from the first year of operation CERs from the first year of operation will become available in Autumn 2006 will become available in Autumn 2006

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

Obtaining AdviceObtaining Advice UNFCCC website: UNFCCC website: www.unfccc.dewww.unfccc.de Point Carbon: Point Carbon: www.pointcarbon.comwww.pointcarbon.com IT Power: IT Power: www.itpower.co.ukwww.itpower.co.uk

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

IT Power Carbon CapabilitiesIT Power Carbon Capabilities Project Design DocumentsProject Design Documents Advice on selling CERsAdvice on selling CERs Corporate sustainable energy & Corporate sustainable energy &

GHG emission reduction adviceGHG emission reduction advice

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

Advantages of working Advantages of working with IT Power Carbonwith IT Power Carbon

Most successful company at getting CDM Most successful company at getting CDM funding for windfarm projectsfunding for windfarm projects

Experience of working on 800+ Experience of working on 800+ sustainable energy projects in 100 sustainable energy projects in 100 countriescountries

Working for World Bank, UNDP, Shell, etc Working for World Bank, UNDP, Shell, etc Offices in UK, China, India, Mongolia, Offices in UK, China, India, Mongolia,

Australia, USA, Kenya, South Africa and Australia, USA, Kenya, South Africa and UgandaUganda

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

IT Power’s 800+ projects,IT Power’s 800+ projects,in 100 countries over 25 in 100 countries over 25

yearsyears

EWEA Conference, Athens, 2nd March 2006EWEA Conference, Athens, 2nd March 2006Power

Carbon Neutral TravelCarbon Neutral Travel IT Power offsets it carbon IT Power offsets it carbon

dioxide emissions from dioxide emissions from flights by purchasing flights by purchasing compact florescent lights compact florescent lights (CFL) for households in (CFL) for households in Yunnan and Mongolia Yunnan and Mongolia

1 CFL: approximately US$31 CFL: approximately US$3 Cost: US$12.32 / tCO2Cost: US$12.32 / tCO2 Flights: 0.25 kgCOFlights: 0.25 kgCO22 / mile / mile US$12.64 / 1,000 milesUS$12.64 / 1,000 miles

Power

EWEA Conference, Athens, 2EWEA Conference, Athens, 2ndnd March 2006 March 2006

For further information:For further information:

Dr John GreenDr John Green

john.green@itpower.co.ukjohn.green@itpower.co.uk

Tel: +44 117 980 9441Tel: +44 117 980 9441