Richard Hosier Global Environment Coordination Unit World Bank.
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Transcript of Richard Hosier Global Environment Coordination Unit World Bank.
Richard HosierGlobal Environment Coordination Unit
World Bank
Accelerated Phase-out of CFCs in use in India
India is estimated to operate 12,500 chillers in 2005
Most chillers are old and many use CFC’sCFC’s demonstrate high Ozone Depleting
Potential (ODP) and high GWPCFC-11 has ODP of 1 but a GWP of 4000By phasing out CFC’s, there is also a decrease in
GHG concentrations and reduced radiative forcingMultilateral Fund of the Montreal Protocol
allocated $1m to the above taskChillers average about $170,000 MLF allocation will not go far--$80/chillerSynergy between goals/objectives and leverage are
key to the puzzle
What are the benefits arising from early chiller replacement?Global Environmental Benefits:
Reduction in ODP under MP/MLF (159 kg/chiller)Reduction in GWP from refrigerant (640 t CO2e)
instantaneously from phase-outPrivate Financial/Economic Benefits to Chiller
Owners:30% energy efficiency gain in moving from national
average to world averagePer chiller, savings of 214,000 kWh/yr or ~$12,000/yr
(also CO2e benefits—0.82 kg CO2e/kWh)Still, 30% FIRR is insufficient to convince chiller
owners to replace chillers before end of useful lifetimeBenefit to Electricity Sector:
Reduction of load capacity of ~130 kW/chiller
India Chillers: How to phase-out 1200 chillers with $1m?
MLF provides $1m grant—30 chillers Total market has 189 ODP t Given GWP, equals 378,000 t CO2 eq
GEF provides $6m—185 chillers Interested in energy savings, 4.8 TWh over 20 years Equal to 3.9 m tonnes CO2 eq plus replication
CDM-Spanish Carbon Fund (SCF) or KfW as carbon buyer
Purchase CERs from project—revenues to revolving fund Flows of CER’s, 488,905 valued at $5.85 m (until 2013)
Private investors---$80m to make investment complete
Can Market Transformation Convert the remainder?
Year
Cash Flow
(-)
(+)
GEF/MLFCF
ObjectivesStimulate accelerated replacement of CFC-
based chillers to new and more energy efficient technology by overcoming well-documented techno-economic and market barriers for energy efficiency products
Actors: Industrial Development Bank of India (IDBI) to serve
as Financial Intermediary and CDM coordinatorWorld Bank: provide know-how & advice; GEF and
MLF Implementing Agency; facilitate SCF(KfW)-IDBI agreement; plus some advance funding for CDM methodology development (Note: No WB loan)
Private sector Chiller Owners
Options facing Chiller OwnersOption 1: grant subsidy of 20% of cost of
new centrifugal chiller based on normative price of $400/TR multiplied by rated cooler capacity, paid once the old chiller has been properly disposed of and CFCs reclaimed
Option 2: carbon credits based on certified emission reductions (CERs) generated from actual energy savings achieved by the new chillers per year from the first year of installation of new centrifugal chillers until 2013 (SCF) sold at a fixed price through WB as agent
ML FundGEFCarbon Finance
Financial
Framework
Area
Operational/
Project Management
Framework
Area
Technical/
Implementation
Framework
Area
World Bank
IDBI Bank
MoEFERPA
Chiller Manufacturers / Energy Service
Companies
Grant
AgreementProject
Agreement
GEF Council
Approval
ExCom
Approval
Work Program
DOE
Chiller Owners
Contract
MOU
Registration
MM&V Agency
ContractSGA /
ERTA
MLF GEFCarbon FinanceFinancial
FrameworkArea
Operational/Project
ManagementFramework
Area
Technical/Implementati
onFramework
Area
World Bank
IDBI Bank
MoEFERPA
Chiller Manufacturers / Energy Service
Companies
GrantAgreement
ProjectAgreement
GEF CouncilApproval
ExCom Approval
Work Program
DOE
Chiller Owners
Contract
MOU
Registration
MM&V Agency
ContractSGA /ERTA
Financial Incentive SchemeChiller owners that choose option 1
receive grant funds from the Project, but have to surrender their carbon credits to the Project, and these credits will be used to finance replacement of new chillers;
No chiller owners will receive both grant funds and CDM for replacing the same chiller
This scheme is similar to a revolving fund model. Repayment is made with carbon credits, instead of cash.
Financial Options in DiagramOption 1: Up-front
subsidyOption 2: CER
SubsidyWB(MLF, GEF)
Chiller Owner
Carbon
Market
IDBI IDBI IDBICarbon Project
CapitalOther Banks
CER
20% grant
<80% loan
(option)
<80% loan
(option)
CER
$ value
WB(MLF, GEF)
IDBI IDBICarbon Capital Other
Banks
Carbon
Market
Chiller Owner
Loan (option
)
Loan (option)
CER
CER
$ value
$ value
Eligibility Centrifugal chillers to be replaced must be
currently in use in India;Replacement of existing CFC centrifugal chillers
with cooling capacity of 100 TR and aboveThey must have a residual technical life of more
than 5 years (must have been installed after 1993*) New chiller must have an energy consumption
capacity rated at not more than 0.63 kW/TR, and be non-CFC or non-HCFC chillers
For the replacing units, they must be installed on the first-come-first serve basis between January 1, 2008 and December 31, 2011; Rated capacity of new chillers must be within 5% of the baseline capacity.
Revision of Original Financing PackageProject Implementation delayed due to Bank
processingSpanish Carbon Fund is limited beyond 2012
Only ¼ of CERs could be issued post 2012Resulted in may loss of CER revenue—no longer $6m in
CDM revenue but $2-3mWB, representing client’s interest approached KfW
KfW has a longer buying term than SCFIssued ERPA up to 2018 with Contract (pre) and Option
(post) CER’sContributing $13m to stimulate replication—982,000
CERsCDM revenues can account for larger share of
refrigerator market phase out
Capturing synergies can lead to Greater Impact Global Environmental Impact
GEF-directGEF-direct4.6 m tCO4.6 m tCO22ee
CDM CDM 982,000 tCO982,000 tCO22ee
MLF MLF 95,00095,000tCO2etCO2e
GEF-GEF-indirectindirect
8 m tCO8 m tCO22ee
CDMCDM$13 million$13 million
GEF GEF $6 million$6 million
MLF MLF $1 $1 millionmillion
Private SectorPrivate Sector$80 million$80 million
Leveraging enables MLF
Funds to achieve greater impact and investment
ConclusionCreatively took advantage of synergies between
MLF, GEF, and Carbon FinanceSuccessfully leveraging market transformation
from $1m of MLF funding to meet multiple goalsCDM remains challenging
What happens after 2012?How can we turn CF cash flows into actual
financing?How can we build projects using GEF and other
funds to leverage in greater impact?
Looking toward the future……Potential Urban Demand for Air Conditioning
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