dna training day 2 0930 sp patrick horka role and responsibilities of cme

The role and responsibility of the Coordinating and Managing Entity (CME)

Presented by Patrick Horka, Head of PoAs, South Pole Carbon [email protected] 21 March 2012

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Content

•  PPs/CMEs expectations in PoAs

•  CMEs roles and responsibilities

•  Possible CME operational models

•  Practical solutions to cover carbon aspects

•  South Pole’s contribution to a successful PoA

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Thanks to PoA the minimum CDM size limit can be lowered

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Goal of PoAs Making carbon revenues bankable

•  Reduced non-registration risk of CPAs •  Inclusion of new CPA within 2-5 months (if well designed PoA), possible before

financial closure •  If sound monitoring and effective verfication is ensured, very low non-delivery risk

of CERs. Risks similar to obtaining power revenues

Year -‐2 -‐1 1 2 3 4 5 Year -‐2 -‐1 1 2 3 4 5

Carbon finance

Cash inflow

Cash outflow

Cash inflow

Debt

Equity

Investment & construction expenditure

Debt servicingOperating expenditure

Operating revenues Operating revenues

Investment & construction expenditure

Debt servicing

Cash outflow Operating expenditure

CER revenues

Equity

Debt

??? CER revenues ???

Carbon revenues become bankable!

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What can be expected from PoAs?

•  Geographical and sectoral redistribution (towards LDCs and EE (low density)) •  Economy of scale/Lowered transaction costs •  Lowered registration and issuance risks •  Scalable carbon finance mechanism •  Lower time to market These evolutions shall result in : •  Translating “carbon revenues“ into “carbon finance“ •  Linking policies and ER

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Content






Typical PoA structure

UNFCCC

DOE

DNA

PoA Coordinating Entity

CPA developers

Contracts Administration

PoA design Promotion

Financial management Monitoring

CER buyer

Finacial institutions Technology provider

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CMEs layers of roles and responsibilities

1. Carbon aspects

2. Finance

3. Technology

4. Project management/product commercialization

Excellent coverage of all Carbon aspects required for all type of PoAs and, basis for an overall success!

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1. Carbon aspects

• Carbon specific due diligence of potential CPAs • Liaise with DOEs and include CPAs •  Introduce an efficient and reliable monitoring system • Monitoring data management • PoA verification • Commercialize CERs • Ability to manage all CER flows:

– Cede carbon rights – Introduction of solid incentive schemes – Track generation of emission reduction – Manage ERPAs

1. Carbon aspects

2. Finance

3. Technology


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2/3/4. Finance/Technology/Project mgt./Product commercialization

• Finance: – Provide carbon prepayments – Support equity investment

• Technology: – Knowledge of sector and user habits – Technology with USP over PoA crediting period

• Project mgt./Product commercialization: – Logistics – Distribution network down to the end-user – Marketing – Manage financial flows back to the CME

1. Carbon aspects

2. Finance

3. Technology


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Content






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Possible operational models for implementing a PoA

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Some Coordinating Entity model : the government based PoA

Government owned and operated PoA : •  Set-up and manage PoA •  PoA supports its policies Advantage/Disadvantage : •  PoA gets a monopolistic position •  PoA cannot be transboundary Challenge : •  Government needs to be familiar and

efficient with UNFCCC procedures

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Some Coordinating Entity model : the government concession

Government concession: •  PoA supports its policies •  Operation of the PoA is sub-contracted Advantage/Disadvantage : •  PoA gets a monopolistic position •  PoA cannot be transboundary •  Operator can be a carbon professional

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Some Coordinating Entity model : the private PoA

Private PoA: •  PoA supports a measure or a technology •  Coordinating entity provides at minimum

CDM and monitoring services •  Coordinating entity can provide

eventually technical and investment solutions.

Advantage/Disadvantage : •  PoA does not get a monopolistic position •  PoA can be transboundary •  Act as an „open“ PoA

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Content






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Practical solutions to cover all carbon aspects!

1.  A project management tool (PMT): –  Track CPAs and keep PoA overview –  Define responsibilities –  Allow communication flow between team members –  Overview CPA milestone targets –  QC/QA system –  Manage CERs, allocate to buyers, transfer to CPA implementer –  Portfolio management

2.  Automated Monitoring and Verification Systems (MOVERs) –  Automatic collection and tamper proof transmission of data. –  Interface for DOEs, credit buyers and POs to access the data in real

time to conduct consistency checks –  Data aggregation and archival across a potentially large number of

CPAs

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South Pole’s “PMT”: PoA overview

High level PoA management for CME management!

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South Pole’s “PMT”: PoA vintages overview

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South Pole’s “PMT”: CPA milestones overview

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South Pole’s “PMT”: CPA QC/QA

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Sout Pole’s PMT: Monitoring mgt. example

Collects data from the

project site

Prepares monthlyreports forthe CME

Collectsmonthly

reports and relevant

information

Stores datainto PMT and develops PoA MonitoringReport

QA/QC of the PoA MonitoringReport

Provides / recievesCDM-‐relatedfeedbak to the

CPA Implementeras needed

CPA Implementer

CME

SouthPole

Technical staff

Operational staff

Management

RR

A I

C

C

CPA Manager R R

R RProject Manager

Supervisor A

APoA Manager (CPA Supervisor)

I

R

Quality Manager C

I

Local Responsible forData Management I I

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South Pole’s “MOVERs”: Example China micro hydro

MOVERs developed in China: •  GSM based technology using common industrial standard (RS485) •  Hardware set-up is very simple cheap (ca. 100 EUR per meter)

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South Pole’s “MOVERs”: Example China micro hydro (continued)

Electricity meter at Suzhou also configured to send data to PMT

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South Pole’s “MOVERs”: PMT interface

MOVERs PMT interface developed for first pilot project (CYY)

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South Pole’s “MOVERs”: Application opportunities

• Fixed installed meters (e.g micro hydro): – Direct transfer of data via GSM – Real time data control – Direct actions on CPAs with data “out of bound”

• No meters, manual data collection (e.g. water purification): – Technical local staff to collect data on hard copy (e.g. water

device user information) – Local responsible for data mgt. to archive hard copy and

electronically submit data on regular basis – Almost real time data control – Centralized data verification and intervention option – Tracking of distribution and/or monitoring progress – To do: Direct data feeding via text messaging and

transmission via mobile phones

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Take away message

Each CMEs faces their very specific challenges BUT all CMEs need a deep carbon management expertise, internally or via a partner, to achieve the continuous issuance of CERs!

1. Carbon aspects

2. Finance

3. Technology


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Content




•  Practical solutions for to cover carbon aspects


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South Pole provides the whole range of carbon asset management solutions

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PoA relevant today

PoA relevant today

PoA relevant today

PoA relevant

tomorrow

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South Pole is proactively shaping the PoA market and conciously takes the risk of an early mover

• Two PoAs under implementation as a Public Private Partnership (together with GTZ) PPPs

Own development

• Own development of 8 private sector PoAs, 1 registered, 7 in final validation stage

• First successfully validate VCU grouped project

• South Pole is developing first fully integrated, web based management system to manage PoAs

• More than 20 finalized and ongoing consulting mandates in the space of PoAs

• First mandate to take over carbon mgt. tasks on behalf of al CME

Consulting

World wide presence, allowing best support for own but also external PoAs

Johannesburg

Zurich

Jakarta

Bangkok

Taipei

Beijing

Mexico City

•  2006: Incorporation in Zurich / Switzerland

•  2011: ten offices worldwide

•  2011: Best Project Developer*

•  Swiss Social Entrepreneur of the Year 2011**

•  Over 80 carbon pros from 22 countries

•  Projects in over twenty countries

•  Specialized in high-quality “Gold Standard”

California

Local presence

as of January 2012

Hanoi New Delhi

Medellin

Satellite office Head office

* Environmental Finance: Voluntary Carbon Market Survey 2011; ** Schwab Foundation/WEF

Kampala

dna training day 2 0930 sp patrick horka role and responsibilities of cme

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