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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
• 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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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
4. Project management/product commercialization
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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
4. Project management/product commercialization
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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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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
• 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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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
4. Project management/product commercialization
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Content
• PPs/CMEs expectations in PoAs
• CMEs roles and responsibilities
• Possible CME operational models
• Practical solutions for to cover carbon aspects
• South Pole’s contribution to a successful PoA
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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
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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