case studies energy efficiency landfill gas

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Accessing Carbon FinanceCase Study: CDM and Energy

Efficiency

Hakim Zahar, P.Eng.Vice-President

ECONOLER INTERNATIONAL

February-March, 2007



1 st Case study: Taishan Cement WorksWHR and Utilisation for Power

Generation ProjectProject DescriptionStatus of t he project for its registrationCDM deal structure: tenders or sole sourceFinancing of t he CDM costs

MethodologyAdditionality



1 st Case study: Taishan Cement Works

Project Description ± Project Activity : waste heat recovery and utilization for power

generation project ± Location: Taishan Cement Works in Ninyang County of S handong

Province of t he People¶s Republic of C hina. ± Host Party: C hina ± Other Parties Involved: United Kingdom of Great Britain and

Nort hern Ireland ± Authorized Participants: Natsource Europe Limited ± Description: The Taishan Cement Works produces highquality

cement using t he new dry process tec hnique and has been beingimplemented in two p hases ± t he 2500 tons per day clinker production line commenced operation in June 2003 and t he 5000tons per day clinker production began production November 2004.



1 st Case study: Taishan Cement WorksProject Description ± Problematic: Energy demand has increased in tandem wit h cement

production and t he captive power plant has insufficient capacity to provide for t his increase.

± Baseline: Taishan would have to take electricity eit her from t he grid,

or construct a new waste coal fueled captive power plant, t he mosteconomically attractive option. ± Project Activity: recovery and use of waste heat from t he rotating

kilns of t he two cement clinker production lines. The waste heat iscurrently mainly vented to atmosp here, wit h a portion re-circulatedwithin the clinker process. However t he Project Activity will nowcapture t he waste heat for use in a power generation plant, t heexhaust heat of w hich can also still be recirculated to t he clinker process. Th is power generation plant will be rated at 13.2MW andwill produce annually 89.5 million kW h of electricity wit h nosignificant associated emissions of CO2.




Project Description ± Large Scale Project

± Categories: 1 and 4The project activity falls under sectoral scope 4 ± ManufacturingIndustries, specifically t he cement sector.The project activity is also relevant to sectoral scope 1 ± Energy± Mining/mineral production.

± Amount of Reductions: 105,894 metric tonnes CO2equivalent per annum




Status of t he project for its registration ± The start date of t he Project Activity was 1st

July 2004, w hen equipment ordered. ± Validation report: Marc h 2006 ± Registration Date: June 24, 2006 ± Crediting Period: 01 Jan 06 - 31 Dec 12

(Renewable)




CDM deal structure: tenders or sole source ± Xinwen Mining Group Company is permitted by t he

National Development and Reform Commission of t hePeople¶s Republic of C hina to transfer to t he NatsourceEurope Limited no more t han 800,000 tCO 2e in totalCERs for a period of 7 years from t he starting date of t he

project.

Financing of t he CDM costs ± Fee level: USD 19923.2




Methodology ± Th is Project Activity uses t he approved met hodology

AM0024 titled ³Met hodology for green house gasreductions t

hroug

hwaste

heat recovery and utilization

for power generation at cement plants´ w hich wasdeveloped for t his Project Activity and w hich wasrecommended for approval by t he met hodologies panelat their 17t h meeting and accepted by t he ExecutiveBoard at t heir 21st meeting.

± The met hodology is applicable to t he Project as t heProject clearly utilises waste heat recovery for utilisationin a power generation unit at a cement plant.




Methodology : The met hodology lists five applicabilitycriteria and all of t hese applicability criteria clearly applyto this Project Activity because:A. The electricity produced by t he Project Activity is used wit hin

the cement works w here the Project Activity is located andthere is no electricity export to t he grid in t he baseline scenario.

B. The Project Activity displaces electricity from an identifiedspecific generation source w hich is a 15MW extension to t he37MW captive coal fired plant at t he site (baseline). Th is

15MW extension, i.e. t he baseline scenario, is a moreeconomically attractive course of action t han the proposedCDM Project Activity.



1 st Case study: Taishan Cement WorksMethodology : The met hodology lists five applicabilitycriteria and all of t hese applicability criteria clearlyapply to t his Project Activity because:C. There is sufficient publicly available information to identify

the specific generation source (baseline) w hich is a 15MWextension to t he existing 37MW captive coal fired plant at t hesite.

D. The PDD demonstrates t hat in t he baseline, waste heat use isonly possible wit hin the boundary of t he clinker making

process.

E. Waste heat is only planned to be used in t he Project Activityand for recycling waste heat wit hin the boundary of t he clinker making process.




CDM project additionality demonstration:1. Prior to t he project starting date t he Project Sponsor had entered

into a CDM development agreement wit h a CDM consultingcompany and started t he preparation of a submission of a new

methodology applicable to t he project activity (NM0079).2. The Project Activity is not t he only option w hich is available to t he

Project Owners.3. There is clear evidence t hat the Project Activity is less financially

attractive t han the baseline scenario for a wide range of scenarios(the Project IRR of t he baseline scenario is 67% higher than theProject Activity)

4. There are tec hnological barriers and barriers to prevailing practice




CDM project additionality demonstration:5. No similar projects were found in S handong Province and only four

similar projects have been identified as implemented in C hina atsimilar sized cement plants to date ± two using imported e quipmentand two using domestic e quipment. None of t hose projects locatedat a mine mout h cement plant w here the incentives for carrying outthe Project Activity are considerably different to cement workswhere there are no captive power plant options.

6. Clearly t he CDM revenue represents a significant stream of revenue for t he Project, counting for 19.2% of t he annual revenueof the project during t he crediting period assuming a conservative

CER value of USD6 per ton and comparing it against avoidedelectricity purc hases. Th is potential benefit directly increases t heinvestment return of t he Project Activity and compensates for itsincreased cost and increased risks.



2nd Case Study: Project bundling:Landfill Gas Recovery and Flaring for

9 bundled landfills in Tunisia

Definition of bundlingProject DescriptionStatus of t he project for its registrationCDM deal structure: tenders or sole sourceFinancing of t he CDM costs




Definition of bundling

A bundle of CDM projects is defined as a collection or aggregation of several CDM projects.In a bundle, eac h activity could be undertaken individuallyas a CDM project activity (e.g. t hree wind farms) and t hevarious project activities are only bundled toget her in order to reduce CDM-related transaction costs.A proposed CDM project s hall be deemed to be a bundle of CDM projects : ± The bundled tec hnologies/measures s hould be independently owned

and operated; ± The bundle s hould be implemented at different locations; ± New CDM projects can be added to a bundle wit hin the crediting

period;



2nd Case Study: 9 bundled landfills in

TunisiaProject Description ± Project Activity : Landfill Gas Recovery and Flaring for 9 bundled

landfills in Tunisia ± Location: The nine landfills are disseminated over t he Tunisian

Territory and close to t he following cities: Bizerte, Sfax, Kairouan,Djerba, Gabes, Monastir, Sousse, Nabeul and Medenine.

± Host Party: Tunisia ± Other Parties Involved: Italy ± Authorized Participants: International Bank for Reconstruction and

Development (IBRD) as t he Trustee of Italian Carbon Fund (ICF) ± Large Scale Project ± Categories: Waste handling and disposal




TunisiaProject Description ± Description: The project activity will install a gas recovery and

flaring system in eac h of the nine landfills, in order to reduce CH4emissions, and t hus generate CERs, w hile ensuring safety at t heLandfill sites, serving sustainable development purposes, and

providing additional resources to environment protection in Tunisia.The nine landfills have an aggregated nominal capacity of 3,300tons of waste per day; i.e. 1.2 million tons of waste/year.

± Baseline: Originally, none of t he nine landfills was designed to beequipped wit h LFG management system.

± Amount of Reductions: 317,909 metric tonnes CO2 e quivalent per annum




TunisiaStatus of t he project for its registration ± The starting date of t he project activity is

expected to be 1st January 2007. ± Validation report: February 2006 ± Registration Date: November 23, 2006 ± Crediting Period: 01 Jan 07 - 31 Dec 12 (Fixed)




TunisiaCDM deal structure: tenders or sole source ± The LFG recovery and flaring systems will be financed by t he

National Waste Management Agency (ANGED), and operated by private contractors.

± Total investment of t he LFG collection and flaring system in t henine landfills is estimated at 6.7 MUS$, w hich will be mobilizedthrough a World Bank Loan.

± The World Bank will provide to t he government of Tunisia wit h aloan to partially finance a Solid Waste Management Project tosupport t he implementation of t his programme

Financing of t he CDM costsFee level: USD 62081.8




TunisiaMethodology ± Consolidated baseline met hodology for landfill gas

project activities ± ACM0001/Version3, dated 19 May

2006 ± Project activity meets applicability criteria of t he chosen

methodology. Th is met hodology is adopted in relationwith the selected approac h for Baseline taken from

paragrap h 48 of t he CDM modalities and procedures:³(b) Emissions from a tec hnology t hat represents aneconomically attractive course of action, taking intoaccount barriers to investment´.




TunisiaAdditionality1. The project will start by July 2006, so t he registration will occur

before t he start of t he first crediting period.2. There is no mandatory law or regulation, or any contractual

arrangement t hat force Landfill operators to collect and flare met haneor to use it for electricity generation.

3. Considering t he LFG project wit hout CDM, t he project would nothave been adopted by Tunisia as it wouldn't generate any revenue, andits NPV would be negative (MUS$ -9.1), wit h an IRR also negative.

4. Common Practice for Controlled landfills in Tunisia will not consider CH4 extraction and flaring, and it is unlikely t hat LFG systems would

be prevalent in t he future wit hout the CDM contribution.5. The project activity will generate significant economic benefitsthrough the sale of ERs t hat will justify contracting a loan to cover t heinvestment expenses and to make project implementation possible.

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3 rd Case Study: Programmatic approach:Moldova Energy conservation and

greenhouse gases emissions reduction

Definition of programmatic approac hProject DescriptionStatus of t he project for its registrationCDM deal structure: tenders or sole sourceFinancing of t he CDM costs




Definition of programmatic approach

The program is t he project, t he program enactingagent is project participant

The Program can be a private sector initiative or aGovernment measure: voluntary or mandatoryEmission reductions are ac hieved by multipleactions executed over time

Type, size and timing of t he induced actions maynot be known at t he time of registration



3 rd Case Study: Moldova Energy

conservation and GHG reductionProject Description ± Project Activity: The project refers to energy conservation measures

in public buildings and conse quently to GHG emission reduction. ± Location: 32 public buildings in 9 municipalities of t he Republic of

Moldova: Cantemir, Edinet, Falesti, Floresti, Hincesti, Ialoveni, Nisporeni, Straseni, Ung heni ± Host Party: Republic of Moldova ± Bilateral and Multilateral Funds : Community Development Carbon

Fund (CDCF)Managing company: International Bank for Reconstruction andDevelopment (IBRD)

Netherlands ± Authorized Participants: Carbon Finance Unit Moldova ± Small Scale Project




conservation and GHG reductionProject Description ± Description: Th is Moldovan project aims at GHG emission

reduction as result of efficiency improvements and fuel switc hingmeasures for a series of public buildings (kindergartens, sc hools,

vocational sc hools, hospitals, policlinics etc.) implemented via t heWB Moldova Energy II Project. ± Baseline: t he most conservative scenario selection, has been c hosen

the scenario corresponding to five (5) percent annual heatconsumption growt h rate.

± Categories: Sectoral scope 1: Energy industries (renewable - / non-renewable sources); Sectoral scope 3: Energy demand

± Amount of Reductions: 11,567 metric tonnes CO2 e quivalent per annum

± Fee level: USD 5000




conservation and GHG reductionStatus of t he project for its registration ± The start date of t he Project Activity was

January 15, 2006 ± Validation report: November 7, 2005 ± Registration Date: January 29, 2006 ± Crediting Period: 20 Jan 06 - 19 Jan 16 (Fixed)




conservation and GHG reductionCDM deal structure: tenders or sole source ± The total Energy II project financing will be US$ 39.93 million, of

which US$35 million would be financed from an IDA credit,US$4.33 million from internal cas h generation and municipalcontributions and US$0.6 million from t he Swedis h InternationalDevelopment Agency (SIDA).

± The WB Energy II Project investment decisions refer to least costtechnical solutions, w hich have to satisfy t he required heatingstandards at minimum costs.

± The Community Development Carbon Fund (CDCF) will have theCER rig hts.

Financing of t he CDM costs :




conservation and GHG reductionMethodologies ± II.E Energy efficiency and fuel switc hing

measures for buildings ± III.B Switc hing fossil fuels




conservation and GHG reductionAdditionalitya) Investment barrier: a financially more viable alternative to t he project

activity would have led to higher emissions; b) Technological barrier: a less tec hnologically advanced alternative to

the project activity involves lower risks due to t he performanceuncertainty or low market s hare of t he new tec hnology adopted for t he

project activity and so would have led to higher emissions;c) Barrier due to prevailing practice: prevailing practice or existing

regulatory or policy re quirements would have led to implementation of a tec hnology wit h higher emissions;

d) Other barriers: wit hout the project activity, for anot her specific reasonidentified by t he project participant, suc h as institutional barriers or limited information, managerial resources, organizational capacity,financial resources, or capacity to absorb new tec hnologies, emissionswould have been higher¶.



Thank you for your attention!

Hakim Za har, [email protected]

+1 418 692-2592

www.econolerint.com

case studies energy efficiency landfill gas

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