Development and Utilization of Alternative and Sustainable Sources of Energy

Africa Carbon Exchange (ACX) Carbon

Workshop

Wednesday 14th November 2012

Presented by James Mwangi

Outline

Alternative and Sustainable Sources of Energy

Recent Trends in Renewable Energy Investment

Carbon Markets and Sustainable Sources of Energy

Renewable Energy Carbon Project Development

Guiding Questions in the Development Process

Utilization of Renewable Energy

Conclusion

Alternative and Sustainable

Sources of Energy

These refer to energy derived from

renewable or “green” sources such as

hydro, wind, solar, geothermal and biogas

These energy sources eliminate

dependence on fossil fuel based sources

of energy and are sustainable in the near,

mid and long term

Recent Trends in Renewable

Energy Investment

For some renewable energy technologies,

technological developments have led to a

significant decline in costs and increased

reliability of the technology, which have

made investments more attractive

High (and erratic) oil prices have

contributed to interest in renewable energy

investments

Recent Trends in Renewable

Energy Investment cont.

Regulatory support for renewable energy technologies has increased over the past ten years.

For example, between 2004 and 2011, the number of countries that put in place supportive renewable energy policies rose from 40 to almost 120

Kenya has in place the Least Cost Power Development Plan (LCPDP)

Carbon Markets and Sustainable

Sources of Energy Carbon markets are an instrument for

reducing carbon emissions and targeting greenhouse gas (GHG) externalities from fossil fuel use

The carbon market involves the trading of Certified Emissions Reductions (CERs) generated by Clean Development Mechanism (CDM) projects and Verified Emissions Reductions (VERs) generated by Voluntary Market projects

Renewable Energy Carbon Project

Development

Development of renewable energy carbon projects is subject to certain criteria stipulated by article 12 of the Kyoto Protocol:

i) Projects must receive approval from the host country Designated National Authority (DNA) and benefit the host country (DNA in Kenya is NEMA)

Renewable Energy Carbon Project

Development cont. ii) Projects must assist host countries in

achieving sustainable development

iii) Projects must result in measurable

long-term benefits towards climate

change mitigation

iv) Projects must result in reductions in

emissions that are additional to any that

would have occurred in the absence of

the certified project activity

Guiding Questions in the

Development Process

Decision 1: Is there a project here?

The initial step in any project involves identifying

a potential carbon trading opportunity

As awareness of the market grows, so too does

the ability to identify the type of potential that is

likely to lead to a project

Feasibility studies can determine this

Guiding Questions cont.

Decision 2: Is the project “additional”

The issue of additionality simply seeks to prove that the project would not have been possible without the additional inflows of carbon finance

As such, does the activity reduce greenhouse gas emissions in a way that departs from „business as usual‟?

Guiding Questions cont.

Decision 3: Which methodology will be

used?

A project methodology refers to a precedent or

guiding framework approved by the CDM

Executive Board

Where the proposed project is similar enough to

an existing precedent, it has the advantage of

being able to draw on the existing approaches

Guiding Questions cont. Decision 4: What scale will the project be?

This involves determining how many tons of carbon dioxide equivalent the project will reduce:

Below 5,000 tCO2e per annum-small scale

5,000-30,000 tCO2e per annum-mid-size

Over 30,000 tCO2e per annum-large scale

The scale of the project will determine the actual project development costs

Guiding Questions cont.

Decision 5: Will this be a Clean Development Mechanism project or a voluntary market project?

CDM projects attract better market prices but are more complex to develop

Voluntary market projects are less complex to develop but attract lower market prices than the CDM projects

However, with Kenya being a non-LDC, we will not be able to trade on the CDM Market of the EU-ETS unless bilateral ties are put in place with sovereign EU states from January 2013.

Guiding Questions cont.

Decision 6: How will the project be financed?

This refers to financial viability and typically

there are 2 workstreams that require funding:

i) Actual project development – e.g. the

purchase and installation of solar water heaters

or the building of a methane capture plant

Guiding Questions cont.

ii) Costs of developing a carbon trading project – this includes the research costs, monitoring costs and costs of registration with a certifying body (UNFCCC, Gold Standard, Voluntary Carbon Standard, etc)

To be financially viable, the benefits arising from the project should exceed the costs

Guiding Questions cont.

Possible sources of finance are:

The European Commission‟s Center for Development of Enterprise which has developed a programme that facilitates grants of upto 50% of the CDM development costs

The World Bank‟s “Prototype Carbon Fund” and the “Community Development Carbon Fund”

Financial consulting firms, operating in environmental commodities are also willing to finance project development costs and in some cases actual components

Investors can also finance projects “at risk” and recover their investment from the sale of CERs once the project is up and running

Utilization of Renewable Energy Potential projects that fall under the realm of

renewable energy are:

Biomass- solid biomass (bagasse -Mumias, sisal

waste, cut flower waste etc) and biogas

Wind – on-shore-Lake Turkana

Hydro – large scale –KENGEN, small scale-KTDA

Solar – photovoltaic (mini-grids – REA, solar

home systems and solar water heating) and

concentrating solar power –KENGEN plans

Geothermal –large scale- GDC (Menengai)

Conclusion

Based on the above-mentioned, renewable energy project development is based on the determination of the guiding questions alluded to earlier

Identifying costs and the respective contributions of different project participants and stakeholders early on in the project is crucial in ensuring project viability, prevention of disputes and conflict and in identifying who will end up owing what credits

THANK YOU…!!!!