CDM Potential in Renewable Energy Sector Projects

Syed Amjad HussainHead, CDM Cell

Ministry of Climate Change

Concept of CERs/ Carbon Credits

Developing Country (Host)

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Baseline Scenario

CERsSold to Developed country ($)

CDM Project

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GHG’s Eligible under Kyoto ProtocolGHG’s Eligible under Kyoto ProtocolThe KPs emissions targets cover the following main GHGs:

Name Formula GWP (CO2 eq.)

1. Carbon- dioxide (CO2) 12. Methane (CH4) 213. Nitrous oxide (N2O) 3105. Per- fluorocarbons (PFCs) 92,004. Hydro- fluorocarbons (HFCs) 11,7006. Sulphur hexafluoride (SF6) 23,9007. Nitrogen trifluoride (NF3)* 11,200

* Applies only from the beginning of the second commitment period

CDM Project Cycle

Validation

Implementation and Monitoring

Verification & Certification

Executive Board

Host Country Approval

National CDM Authority

Designated Operational Entities

Registration

Project proponents

Project Identification and Formulation of PDD

Issue CERs

Time Required for Completion of Different Component within CDM Project Cycle

Benefits from CDM (Carbon Finance)

CDM Project(e.g., alternate energy

production)

AdditionalEnergy

Production

Certified Emission

Reductions

DirectForeign

Investment &Revenue

Carbon Credits(Developed

country Buyer)

Benefits to Host country

(An Example)

Plus other Benefits(Jobs, Clean Env.Tech. Transfer)

CDM Incentive for Developed Countries

Developed countries have been subjected to legally binding emission targets…..2008/12.

Due to un-localized nature of CO2…it does not matter for environment where reduction occurs.

Costs of abatement or reduction of emissions :Developed Countries : U$ 50-100/ton (estimated)Developing Countries : U$ 1-15/ton

Reductions of GHG is much cheaper in developing countries.

CDM Incentives for Developing Countries

Capitalize an “unvalued” commodity…… CERs

“Additional” financing for local Sustainable Development priorities and as such has potential of “Catalyzing” large Foreign Direct Investment (FDI) flows

Instrument for “appropriate” Technology Transfer

Linkage with local environmental issues – (air pollution etc.)

Financial viability ~ Carbon financing can increase project Internal Rate Returns (IRRs) between 0.5 to 50% (WB)

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

– Unilateral, Bilateral and Multilateral CDM Projects are allowed in following sectors

– Energy - Renewable/alternate energy,- Energy efficiency/conservation, and- Fossil- fuel cogeneration

– Waste Management- Landfill gas capture - Recycling- Energy from solid waste etc.

– Transportation

- Alternative fuel vehicles- Mass transit systems- Cleaner engines, CNG

Types of CDM Projects

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Cont---

– Industrial processes (Steel, Fertilizer, Textile etc.)

– Land Use, Land Use Change and Forestry (watershed management, sustainable forest management, Afforestation and reforestation)

– Agricultural and livestock practices

– Any other project resulting in GHG mitigation or carbon sequestration.

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Global Sector wise CDM Projects

Global Overview of Different Sector and Sub-sector CDM Projects

Global overview of Energy Sector and Sub-Sector Distribution of CDM Projects

No Type of Projects in

Hydropower

At Validation Registered Total

1 - Runoff River 212 1432 1644

- Existing Dam 18 91 109

- Higher Efficiency Hydropower

2 2 4

- New Dam 41 479 520

Sub-Total 273 2004 2277

Cont---No Type of Projects in Energy Sub-Sector At

ValidationRegistered Total

2 Wind 255 2355 2610

3 Solar

- Solar PV

- Solar Lamp

- Solar PV Water Disinfection

- Solar Thermal Power

- Solar Thermal Heat

- Solar Water Heating

- Solar Cooking

53

-

-

5

-

-

-

315

1

2

10

2

6

18

368

1

2

15

2

6

18

Sub-Total 58 354 412

4 Geothermal Electricity

Geothermal Heating

2

-

30

3

33

3

Sub-Total 2 33 36

CDM Potential in Renewable Energy Sector of Pakistan

Summary: RE Potential in Pakistan

• Small Hydro (Off-grid Micro/Mini Hydro) (45 MW) 0.276Small Hydro (Off-grid Micro/Mini Hydro) (45 MW) 0.276

• Grid Connected Mini Hydro (1,815 MW)Grid Connected Mini Hydro (1,815 MW) 5.565.56

• Large Hydro (25,641MW)Large Hydro (25,641MW) 56.1556.15

• Bagasse Cogeneration (760 MW)Bagasse Cogeneration (760 MW) 1.661.66

• Solar Home SystemsSolar Home Systems 0.05 0.05

• DomesticDomestic Energy EfficiencyEnergy Efficiency 3.6 3.6

• Reduction in transmission & distribution lossesReduction in transmission & distribution losses 4.0 4.0

• Combined Cycle Power PlantCombined Cycle Power Plant 4.0 4.0

• CNG BusesCNG Buses 0.0240.024

• Municipal Energy EfficiencyMunicipal Energy Efficiency 0.47 0.47

• Wind EnergyWind Energy 12 12Units: Million tones/yr

Off Grid Micro/Mini Hydro

• 3 clusters of 15 MW each are expected to go up3 clusters of 15 MW each are expected to go up

• Baseline emissionsBaseline emissions based on 45 MW diesel based on 45 MW diesel generation: generation: 276 ktons CO276 ktons CO22 per year per year

• Abatement potentialAbatement potential: : 276 ktons CO276 ktons CO22 per year per year

• Investment barrierInvestment barrier: : total requirement of over total requirement of over US $54 million; currently no grant is available US $54 million; currently no grant is available from international donors from international donors

• Technology barrierTechnology barrier: need for m: need for more efficient ore efficient turbines and electronic load controllersturbines and electronic load controllers

Grid Connected Micro/Mini/Small Hydro

• 644 sites of less than 50 MW identified in 644 sites of less than 50 MW identified in NWFP, NA, AJK and Punjab with a total NWFP, NA, AJK and Punjab with a total potential of 1,767 MWpotential of 1,767 MW

• Total yearly generation: 11 TWhTotal yearly generation: 11 TWh• Baseline emissionsBaseline emissions (using grid baseline of 0.5 (using grid baseline of 0.5

kg COkg CO22/kwh): 5.6 Mtons of CO/kwh): 5.6 Mtons of CO22

• Abatement potentialAbatement potential: 5.6 Mtons of CO: 5.6 Mtons of CO22 per per year  year  

• Barrier AnalysisBarrier Analysis– No up front feed-in tariff announced by NEPRA for No up front feed-in tariff announced by NEPRA for

small projects so developers are not keen to carry small projects so developers are not keen to carry out any feasibility studiesout any feasibility studies

Grid Connected Large Hydro

•182 sites for a total potential of 25 GW identified in NWFP, AJK and NA by PPIB

•157 TWh capacity per year

•Baseline Emissions: 56 Mtons of CO2

•Abatement Potential: 56 Mtons of CO2/yr

•Barrier AnalysisBarrier Analysis– Policy barrier: WAPDA, the power purchaser, has not

offered commercially viable tariff

– Investment barrier: scarcity of capital and high capital cost due to high country risk

5. Bagasse Co-generation

• 76 sugar mills in the country with reportedly 760 MW (on an average 10 MW per factory) of cogeneration capacity, 6 months out of a year

• Baseline emissions (assuming grid baseline of 0.5 kg CO2/kwh): 1.66 Mtons of CO2 /yr

• Abatement potential: 1.66 Mtons of CO2 /yr

• Policy BarrierPolicy Barrier– Lack of clear policy about purchase of power by

utility companies from co-generators. – No clear feed-in tariff for power generated from

sugar cogeneration

6. Solar Home Systems & Water Pumps

• Over 7,000 unelectrified villages in Sindh and Balochistan, and 400 in FATA using kerosene oil for home lighting

• 2000 solar pumps needed• Annual Baseline Emissions

–From use of diesel water pumping = 3,125 tons of CO2

–From use of kerosene oil for home lighting = 47,302 tons of CO2

–Combined = 50,427 tons of CO2

• Abatement potential 50,427 tons of CO2 per annum• Investment barrier very high cost of solar systems

7.CNG Busses

• Government wants to introduce 8,000 CNG buses in 10 Government wants to introduce 8,000 CNG buses in 10 large urban centres in the country.large urban centres in the country.

• Baseline emission of diesel per bus = 44 tCOBaseline emission of diesel per bus = 44 tCO22 per year per year

• Project emission of CNG per bus = 41 tCOProject emission of CNG per bus = 41 tCO22 per year per year

• Abatement PotentialAbatement Potential of 8,000 buses: 24,000 tCO2 per of 8,000 buses: 24,000 tCO2 per yearyear

• Investment BarrierInvestment Barrier– Total cost: Pak Rs 40 billion required in foreign Total cost: Pak Rs 40 billion required in foreign

exchange exchange

• Fuel Availability BarrierFuel Availability Barrier: : natural gas in short supplynatural gas in short supply

8. Combined Cycle Power Generation

• Expected electricity production by CCPP Expected electricity production by CCPP technology in 2010: 23,431 GWhtechnology in 2010: 23,431 GWh

• Baseline EmissionBaseline Emission from natural gas: from natural gas:–11.7 million tCO11.7 million tCO22 2010 onwards 2010 onwards

• Projected emissions from CCPP:Projected emissions from CCPP:–7.7 million tCO7.7 million tCO22 2010 onwards 2010 onwards

• Abatement PotentialAbatement Potential–Year 2010 onwards: 4 million tCOYear 2010 onwards: 4 million tCO22/yr/yr

• Investment Barrier:Investment Barrier: l low IRR, poor financial ow IRR, poor financial health of companieshealth of companies

• Technology Barrier:Technology Barrier: severe lack of expertssevere lack of experts

Wind Energy

•Baseline Emissions: 49 million tons of CO2

•Abatement Potential: 12 million tons of CO2 per year

•Barrier Analysis:–Absence of bankable wind data sources– Absence of basic infrastructure (roads etc.)–Current upfront feed-in tariff offered by NEPRA is considered to be too low –Lack of access to project financing from local banks

Thanks