Clean Development Mechanism CDM Eng.

Rafik Georgy
120


UNFCCC
1992
UNFCCC
United Nations Framework Convention On Climate Change

386 1994

1995 3 5



Conference of Parties COP

COP3 1997 Kyoto Protocol

1999 3 15

Annex 1 Countries Non Annex 1 Countries


% 6 5 , 1990 2012 -2008 ( ) %55 %55 , ( )16 :


)*(GWPCO2
CH4 N2O

*
* * * *

20 HFCs

- PFCs
SF6

* 100
)Global Worming Potential (GWP



Emissions Trade ET Joint Implementation JI

Clean Development Mechanism CDM ( ) ( ) :

o o

) (Additional Business As Usual Baseline Scenario

() ()



2002

Designated National Authority DNA

- CDM DNA
: o o

( ) Certified Emission Reductions CERs

CDM - KYOTO CRITERIA

Contributes to the sustainable development of the

host country. Results in emission reductions that would not have happened otherwise. Generates real, measurable and long-term climate change mitigation benefits. Approved by parties involved. Credits potentially earned from 2000 onward (through 2008-2012).

Zafarana Wind Power Plant as a CDM Project

Zafrana project is an 120 MW wind power plant. More than 440 GWh of electricity per year.(based on capacity factor 42 %) Around 90,000 TOE Saved yearly. About 230,000 t of Certified Emission Reductions annually (CERs) if designated as CDM. Expected life time 20 25 years A cooperation project between NREA of Egypt and JBIC of Japan who Supports project financing.

CDM Procedures
PDD Production Pubic & Expert Opinions. Host country confirmation. Methodology Panel Approval. Validation. CDM Executive Board Approval. Registration. Monitoring. Verification. Certification. CER issuance and registration.

PROJECT DESIGN DOCUMENT (PDD)

General description of project activity. Baseline methodology. Duration of the project activity / Crediting period. Monitoring methodology and plan. Calculation of GHG emissions by sources. Environmental Impacts. Stakeholders comments.

What is a BASELINE

It is The Business as usual that is what would otherwise happen if CDM project will not be implemented.
It is the reference value to estimate the reduction of CO2 ( or GHG ) emissions.

Baselines and Additionality

A baseline is the emissions that would have occurred In the absence of the project or without project scenario Covers gas emissions from all sectors and sources within the project boundary.
It is the key to the GHG reduction project used to determine the emission reductions (ERs) from the

project activity.
Additionality must demonstrate that without the project, the GHG emissions would not have been

reduced.

Approaches to Baselines
COP7 held in Marrakech in 2001 formulated CDM Modalities & procedures The Marrakech Accords lay out three approaches from which proponents should select as the basis for their baseline methodology : A) actual current or historical emissions, or B) emissions from a cost-effective technology taking into account barriers to investment, or C) the averaged emissions of similar projects in the past 5 years in similar socio-economic, environmental and technical conditions and whose performance is in the top 20 percent.

General Baseline Requirements

Baseline Must be project-specific. In describing the chosen methodology, an explanation must be given as to : Why the method was chosen How it will be applied How it was established in a transparent and conservative manner How it takes into account any relevant national sectoral polices.

or

Additionality

Probably, the most important issue for CDM-project baseline methodology approval is whether the project satisfies the additionality criterion. Two interpretations turning the condition into fulfillment of two criteria :

Additionality ( cont. )

o o

Soft interpretation ; Environmental Additionality : the project must show, through the baseline scenario, that CDM project, compared to alternative production methods, reduces CO2 emissions during its life time production process. i.e the project will accomplish both: Measurable and certified GHG emission reductions Long term climate change mitigation benefits

Or

Additionality ( cont. )

Hard interpretation; insists on proving that the project, being more expensive without counting CER revenues compared to the alternative base line, would not be implemented if the CDM project did not exist
Zafarana Project Satisfies BOTH !!

BaseIine Methodology for the Wind Project

Presently, no approved CDM methodology to be applied for Grid Connected Wind Power Generation.

New methodology is proposed in accordance with CDM modalities and Procedures.

Baseline Methodology Steps

The project is additional because:

There is no incentive program to promote wind power projects currently in Egypt. The cost for a wind power plant is higher than for conventional thermal power plants, in terms of levelised cost of KWh produced. The economic growth in Egypt has led to stricter terms and conditions for foreign financial assistance. Naturally, the project will result in CERs.

Investment Barriers for wind Plants

No incentives for wind power generation. Wind is more capital intensive. Low price for natural gas. Result: Currently wind generated KWh cost cannot compete with thermal generated KWh cost. Wind cannot be viewed as BAU leading to : WIND NEED for CDM SUPPORT TO BE IMPLEMENTED.

Base Line Methodology Margins Considered

Operating Margin : Average of all generation types excluding low cost / must run plants. Those excluded were hydro facilities while existing wind plant is a debatable issue. Build margin : Average of the most recent 5 plants built, or most recent 20% ; under implementation projects should be considered.

Steps to determine Baseline

Yes Is the project additional? No Project cannot qualify as CDM

Yes

Will the project affect the operating margin?

No

Yes

No Will the project also affect the build margin?

Build margin approach

Methodology not applicable

Combined margin approach

Operating margin approach Determine: Operating margin Build margin Combined margin

Determining Operating Margin.

Less than 20% generation comes from hydro. More than 80% from thermal Power Plants. Wind will replace thermal generation mix of Combined Cycle, Steam Turbines and Gas Turbines.

A conservative approach.

Determining Build Margin

Emission rate of : Most recent 20% plants built, or Most recent (5) plants built gives same result. ( two approaches give same result for Zafarana ) Cairo North (2),750MW, CC, 5.3%. Cairo North (1),750MW, CC, 5.256%. Zafarana, 77MW, wind, 0.3%. Suez Gulf (1,2) BOOT,682MW, ST 4.8%. Port Said East (1,2), 682MW, ST 4.6%. Conservative Approach to Consider Wind Plant.

Power Generators Selection For Baseline Calculation

Electric load curve
1900 1800 1700 1600 1500 Wind Energy farm contribution

MW

1400 1300 1200 1100 1000 900 800 Day period (12 hours)

Marginal generators

Base Pick period generators (2 hours)

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

To determine Operating Margin

Notes: For the Egypts grid excluding Low-cost / must-run (around 33 power plants) Total Capacity (MW) = 12,933 Net Power (GWh) = 62,353 Fuel Consumption (103 toe) = 14,378

e: Egypt's grid excluding low-cost/must-run Power Plant Type of Capacity Generation (MW) ShoubraEl Khima ST Cairo West ST Cairo West ext. ST Cairo South I CC(hybrid) Cairo South II CC Wadi Hof GT Tebbin GT Tebbin ST Damietta CC Talkha(CC) CC Talkha(ST) ST Talkha 210 ST Ataka ST Abu Sultan ST Shabab GT Port Said GT 1260 350 660 570 165 100 46 45 1125 283.6 90 420 900 600 100 64

Net Power (GWh) 7141 1563 3521 3236 1018 20 103 7 6736 1410 1 1912 4634 2879 73 24

Fuel Consumption (103 toe) 1686 426 791 711 186 8 43 3 1294 346 0.2 487 1053 824 25 9

Arish Oyoun Mousa Kafr El Dawar Mahmoudia (G) Mahmoudia (CC) Damanhour 300 Damanhour Ext Damanhour (CC) Seiuf (G) Seiuf (ST) Karmouz Abu Kir Sidi Krir 1.2 Matrouh Walidid Kuriemat Assiut ToTal

ST ST ST GT CC ST ST CC GT ST GT ST ST ST ST ST ST

66 640 440 180 308 300 195 152.8 200 113 25 900 640 60 600 1245 90 12.933

356 3655 1411 51 1898 945 742 923 38 355 1 3896 3662 149 2819 6713 461 62.353

108 823 376 19 386 211 195 177 14 131 0.1 925 765 41 674 1489 152 14.378

Source: Annual Report 2001 2002 , Egyptian Electricity Holding Company

To determine build Margin

To obtain the CO2 emission factor for the build margin, we have to calculate the emission factor for the resent 5 plants. o Total Net Power (GWh) = 19,754 o Fuel consumption ( 103 toe ) = 3,994

The 5 Recent Plants

Plant Plant Type Net Power(GWh) (% of total3 ) 5256 (5.3%) Fuel Consumptions (103 toe) 988 )based onNREA estimate of fuel consumption) 988 (as above) 0 1009 (based on Oyoun Msousa) Commissioni ng Date 05/06 06/07 Cairo North ( 2 ) CC 750 MW

Cairo North (1 ) Zafarana Suez Gulf 1.2 BOOT

CC 750 MW Wind 77 MW ST 682 MW

5256 (5.3%) 280 (0.3%) 4481 (4.6%)

03/04 04/05 03/04 02/03

Port Said East 1.2 BOOT

TOTAL

ST 682 MW

4481 (4.6%)
19754

1009 (as above)

3994

02/03

Baseline Methodology steps (continued)

The project will affect Operating margin and build margin. Combined margin = {Operating margin + [Build margin x n]}/n+1 n has been chosen to be 1 instead of 0.6 which would have been in favor of wind. Again complying with the conservative approach CDM criterion

Monitoring Methodology
Presently there is no monitoring methodology applicable to the project. Base Line source of emission is grid electricity which can be reasonably monitored as an indication for Potential fuel consumption (to be saved) hence avoided emissions of CO2 mainly. Duration of the project is yet to be chosen with preference to 7 years at least for the timebeing.

Environmental Impacts
Noise Pollution Negligible, Being an arid area. Visual Pollution Same, no community nearby. Land Use Same, however, during construction fences will be erected around.

Environmental Impacts (CONT.)

Potential Impact on Migrating Birds. Relatively of more concern. Zafarana is close but not in a major Pathway of birds. No green areas, fresh water nor food scraps of human activity exist as it is a remote arid area. Result: Danger is minimum and almost negligible.

CDM Procedures
PDD Production Pubic & Expert Opinions. Host country confirmation. Meth Panel Approval. Validation. CDM Executive Board Approval. Registration. Monitoring. Verification. Certification. CER issuance and registration.

Project Cycle for the CDM

1- Project Design & Formulation 2- National Approval
Project Design Document (PDD)

DNA

Operational Entity A

MP & EB

3- ValidationRegistration
4- Project Financing 5- Monitoring

DOE (A)

Investor

Project Participants

Project Cycle for the CDM

Monitoring Report

6- Verification Certification

Operational Entity B
DOE (B) Verification Report Certification Report Request for CERs

7- Issuance of CERs Legends Activity Report

EB - Registry

Institution

The first 36 proposed new methodologies sent to the EB

Meth. No. 1 2+29 3 4 5 6 7 8 9+14+15+19 10 11 12 13 16 17 18 20 21 22 23 24 25 26 27 28+35 30 31 32 33 34 36 Type Bagasse power Fuel switch from coke to charcoal in steel works CO2 from NH3 production used in methanol prod. Landfill gas flaring Landfill gas electricity Hydro Power Burning HFC23 from HCFC22 production Hydro Power Rice husk power plant (el + steam + cement) Landfill gas electricity Bagasse Power Wind farm Biogas from palm oil waste water Fuel switch from coal to natural gas Efficiency improvement of steam use at refinery New cogeneration plant using natural gas Hydro Power Landfill gas power for on site usage Biogas power from swine manure Hydro power Wind farm Biomass residues power plant Recovering associated gas in stead of flaring Bagasse power expansion Switch from coal/lignite to agro-biomass power Bagasse power and steam Power from waste heat in iron kiln Biogas power from municipal waste Energy efficient expansion of cement factory CH4 & N2O reductions from manure management 120 MW wind farm in Zafarana 1.Mark B C C AM2 B C AM1 C C B C B B Meth9 Deskr. Meth9 A A 2.Mark GHG reduction/yr A 143 ktCO2 EB14 ca. 1000 ktCO2 229 ktCO2 ca. 800 ktCO2 AM3 ca. 300 ktCO2 144 ktCO2 1400 ktCO2 100 ktCO2 AM4 400 ktCO2 A 400 ktCO2 100 ktCO2 53 ktCO2 27 ktCO2 A 18 ktCO2 100 ktCO2 115 ktCO2 70 ktCO2 70 ktCO2 90 ktCO2 70 ktCO2 45 ktCO2 85 ktCO2 670 ktCO2 23 ktCO2 600 ktCO2 95 ktCO2 37 ktCO2 100 ktCO2 80 ktCO2 20 ktCO2 227 ktCO2 Country Brazil Brazil Trinidada & Tobago Brazil Brazil Guatamala South Korea Costa Rica Thailand South Africa India Jamaica Malaysia Chile China Chile Colombia Brazil Chile Mexico Colombia India Vietnam Brazil India India India India Costa Rica Brazil Egypt Investor Unilateral IFC-Netherlands & Japan Germany Unilateral WB NCDF PCF Japan CERUPT Rolls-Royce Power + PCF Unilateral CERUPT Japan Nestle Chile Unilateral Japan (J-Power) Japan (J-Power) CERUPT Canada PCF PCF Swedish Energy Agency Japan CERUPT PCF Local Unilateral PCF CERUPT Canada Japan (JBIC) yr. 7 7 10 7 7 7 7 10 7 7 7 10 10 7 10 10 7 10 7 7 7 10 10 10 10 10 10 10 7 7 7

Meth9

Conclusion:

At 5 US$ per ton CO2 & around 0.56kg CO2 avoided emissions per KWh produced from thermal power stations -Wind produced KWh will have a bonus of around 2 piaster which cannot close the gap between wind and thermal generation. CDM cannot solely make uncompetitive projects economically attractive. Rather, CDM can make near economic projects feasible or more attractive.