feasible study on renovation of exiting hotel to eco … study on renovation of exiting hotel to...

Feasibility Studies with the Aim of Developing a Bilateral Offset Credit Mechanism FY2011

Studies for Project Exploration and Planning

Feasible Study on Renovation of Exiting Hotel to Eco-hotel in Off-grid Area of Kenya

New Energy and Industrial Technology Development Organization (NEDO)NTT Data Institute of Management Consulting, Inc.

Fuji Electric Co., Ltd.Mpata International Inc.

Feasible Study on Renovation of Exiting Hotel to Eco-hotel in Off-grid Area of

Kenya

29th February, 2012

NTT Data Institute of Management Consulting, Inc.Fuji Electric Co., Ltd.

Mpata International Inc.

Feasibility Studies with the Aim of Developing a Bilateral Offset Credit Mechanism FY2011

Studies for Project Exploration and Planning

CONTENTS

Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 2

1.Overview of the Survey

2.Feasibility of Introducing Energy saving Technology and Renewable Energy into MPATA SAFARI CLUB

3.Survey of Current Green Electrification at Other Hotels

4.MRV Methodology When Renewable Energy Is Introduced to Hotels

5.Feasibility of Bilateral Offset Credit Mechanism

6.Future Issues and Project Plan


1-1. Perspective (1)

This feasibility study (F/S) tries to produce eco-friendly electricity for hotels in off-grid area of Kenya. Case study = Mpata Safari Club

Mpata Safari ClubLocated in The Masai Mara National Reserve

-Five-star luxurious hotel-It stands in off-grid area and uses diesel generators to make electricity.

NAIROBI


1-2. Perspective (2)

This F/S is financed by NEDO of Japan.(New Energy and Industrial Technology Development Organization)

an incorporated administrative agency

And NEDO is under the jurisdiction of METI.(Ministry of Economy, Trade and Industry of Japan)

“But, why Japan is doing this?”

NEDO, METI, and Japanese industrial circles, finds current CDM* unpractical and rather problematic.

(*Clean Development Mechanism under the Kyoto Protocol)


1-3. Problems of CDM (from Japanese Side)

– A project needs a long time: 2 years– Applicable technologies unbalanced– International partiality: 59% China (in Jan 2012*)

COP17 in Durban: Japan will not participate in the second promise (2013-) of Kyoto Protocol.

* http://cdm.unfccc.int/Statistics/Issuance/CERsIssuedByHostPartyPieChart.html

Japan don’t deny the CDM.But try to invent alternative mechanisms to mitigate the climate change by introducing technologies of Japan.


1-4. Call for an Alternative to CDM

One of the alternatives is Bilateral Offset Credit Mechanism (BOCM).

Project Entity

Project Entity

Bilateral Treaty between Governments

ＪＡＰＡＮ

ＫＥＮＹＡ

CO2reduction

Offset Credit(can be sold)

Offset Credit(can be sold)

Project

Buyer Companies

New International Framework


1-5. Four Progressive Steps of Our Project

①

②

③

④

F/S of This TimeCase Study: Mpata Safari Club

Implementationfor Mpata Safari Club:“Mpata Model”

Bilateral Credit Mechanismbetween Kenya and Japan

Application to Other Hotels /Sale & Purchase of Offset Credit

Final goal for NEDO and METI(Japan)


Government of Kenya-Offer advice, data, information and so on.

NTT Data Institute of Management Consulting-Organize, Research and so on.

FUJI ELECTRIC CO., LTD.-Solution and engineering for Renewable energy.

Mpata International Inc.-Owner of the hotel.-Obtain data and information.-Arrange researches in Kenya.

Mpata Safari Club (Kenya, Masai Mara)

-Five-star luxury hotel-It stands in off-grid area and uses diesel generators to make electricity.

■Devices/Equipments to be introducedRenewable energy•Solar power

(Photovoltaic power generation, Solar water heating )•Mini-hydro power generator•Wind power generator

Energy storage•Batteries (Lead-acid battery, Lithium-ion battery)

Energy management and Saving energy•Heat pump unit, Lighting devices etc.

F/S

Advisers-Specialist on Climate Change, MRV for GHG emission reduction and so on.-Japanese companies.

Arrange products and technologies of Japanese companies.

Project members

1-6. Flow of the 1st and 2nd step:Making a “Mpata model” in Kenya

http://ja.wikipedia.org/wiki/%E3%83%95%E3%82%A1%E3%82%A4%E3%83%AB:Flag_of_Kenya.svg

9

Mpata Safari Club

Masai Mara N.R.(200 hotels / lodges)

National park A

National park B

・・・2500 off-grid hotels

(5000 licensed hotels in Kenya)

CO2Credits

CO2Credits

CO2Credits

CO2Credits

CO2Credits

CO2CreditsCO2

CreditsCO2Credits

CO2CreditsCO2

CreditsCO2Credits

Organizer in Kenya(to bundle small credits and sell)

“Mpata Model” ⇒ Other hotels in the Masai Mara National Reserve. Then to other national parks (There are 2,500 hotels in off-grid area in Kenya).We need to establish a suitable methodology of MRV and how to bundle small credits from various types of hotels.

1-7. Develop “Mpata model” in off-grid area

Copyright © 2012 NTT DATA Institute of Management Consulting, Inc.

1-8. Project Entities

10

Three companies take part in this project at this stage.

Copyright © 2012 NTT DATA Institute of Management Consulting, Inc.

Project OrganizerMethodology of MRV

To Research Market Trends in Kenya

Technical SupportStrong in renewable energies, energy saving,

and energy management system

The owner of Mpata Safari ClubTo Arrange Interview and Field Survey

CONTENTS









2-1. Conclusions

The appropriate plan is to replace portion of the present electricity supply with a PV generation system at Club.

This survey found no items to improve for energy saving in Club. However, there could be still room for improvement in equipment operation.


2-2. Ideal plan: 200 kW-size PV generation

After calculating the power consumption in the Club, we found that a 200 kW-size PV generation system was an ideal plan.This plan can supply almost all of the electric power needed for the Club during off seasons. It can supply 80% of the total power consumption.


2-3. Ideal plan: CO2 reduction and the cost

The 200 kW PV generation system could reduce;63,700 litter of Diesel consumptionand170 ton/year of CO2 emission

But, an an initial investment required to install 200 kW plan would beOver 200 million KSh

KSh 1 = ¥1 = $1.25

Practical plan would be introducing a PV generation system of 5kW to 10 kW .5kW to 10 kW model could be applicable to other hotels/lodges in off-grid are of Kenya (also see next chapter).After depreciation, the system can be expanded and optimized when necessary to achieve ideal amount of PV generation system.

CONTENTS









3-1. Conclusions

In Kenya, some tented-camps have already introduced PV generation systems (3.5 to 10 kW) that recoup the initial investment within three to five years.

The model plan would be the 5kW to 10 kW PV generation systems.

The obstacle to introducing these models lies in finance. Offering financial support for low interest rates is essential to the introduction of models.


3-2. Cases of introducing renewable energy

The size of the hotels in the lists is are largest in number in the National Reserves and National Parks of Kenya PV generating systems are around 10kW and the pay back period are around 3 to 5 years.

Facility name Room type

PV generation systemHours of power generation by diesel generat

OtherOutputInitial

installation cost (KES)

Payback period

KAREN BLIXEN CAMP

Tent lodge(22 guest rooms) 9 kW 10MM 3 years 2 hours/day Installed 5 years

ago

SANCTUARY OLONANA

Tent lodge(14 guest rooms) 8kW 9 hours/day

ELEPHANT PEPPER CAMP

Tent lodge(9 guest rooms) 3.5 kW 2.4MM 5 years

(planned)6 to 8 hours/month (equivalent to 15 minutes/day)

Small power consumption

Campi ya Kanzi Tent lodge(8 guest rooms)

13.6kW (Substitute 12kVA Diesel generator)

no use ofgenerator

Information fromwebsite

Olarro Lodge(8 guest rooms) 10kW 10MM 2.5 years

(planned)Information from

a constructor


3-3. Barriers of installing PV systems; Finance

In general, these hotels have accepted foreign investment and/or finance when installing their PV generation systems.According to one contracting company in Nairobi, the interest on a loan is

about 20% in Kenya, indicating that raising funds is very difficult in the country.

PV Panels in KAREN BLIXEN CAMP, 9kW

It is essential not only promoting Japanese PV generating system, but also offering financial support.

Practically, the loan at low interest rates would meet local needs.


3-4. CO2 Recuction of Model plan

From the survey, we come to the conclusion that the model plan would be the 5kW to 10 kW PV generation systems.

PV Panels in ELEPHANT PEPPER CAMP,3.5kW

The amount of CO2 reduction are;– 4.25 tons/year (5kW)

to 8.5 tons/year (10 kW)

If these models were introduced into 2,500 hotels in off-grid areas in Kenya, CO2 reduction would reach;

– 10,625 tons/year to 21,250 tons/year.

CONTENTS









4-1. Conclusions

A methodology for BOCM can be referred to for small-scale CDM and/or PoA and methodologies being deliberated at the UNFCCC.

Concerning monitoring methodologies, since hotels in off-grid areas have no electricity meters, their exact power consumption "before introduction" cannot be measured.

The appropriate methodology is measuring the "after introduction“ or exact power supplied by renewable energy.


4-2. Baseline

When setting a baseline per hotel, Paragraph 8 (b) Option 2 is applied, among the baseline calculation formulas for renewable energy conversion in 1-A of CDM small-scale methodologies.

E BL,Ren,y = Σi EGi,y/(1-l)Where:E BL,Ren,y : Annual energy baseline of renewable energy consumption (kWh)Σi : The sum over the group of i renewable energy technologiesEGi,y : The estimated annual output of the renewable energy technologies of the group of i

renewable energy technologies installed (kWh) l : Average technical distribution losses (20%)

Based on the above formula, the baseline emissions per Club are calculated. Paragraph 9 of the baseline CO2 emissions calculation formula in 1-A of the methodologies is applied.

BECO2,y = EBL,Ren,y × EF CO2

Where:BECO2,y : CO2 emissions (kg-co2) in the baseline in year y EF : CO2 emissions factor of diesel fuel (0.8 kg CO2-e/kWh)


4-3. Additionality

NM073 under deliberation proposes new additionality tests for rural electrification projects. According to the proposal, since Kenya is classified as a Low Income Country (LIC) and its rural electrification rate is below 12%, the country has additionality.

In addition, in case of introducing a 10 kW system into other Hotels within the range of 500 hotels, 10 kW systems will amount to less than 5 MW. Then, the project is eligible for the exemption of additionality tests of micro scale CDM. If a project of this size were first installed, it would be able to win international understanding without demonstrating additionality in detail.


4-3. Monitoring

Monitoring methodologies will be examined in terms of measurement, reporting, verification, and methodology validation measurement.

CONTENTS









5-1. Conclusions

Kenya has been promoting NAMA to make up CDM.

Thus, BOCM should be built up along the Kenyan NAMA policy.

Although Kenya is not an LDC, its rural electrification rate is similar to that of an LDC.

Present CDM is unable to grasp the needs of such countries.

Partners of BOCM should be countries which are non-LDC but LIC or LMIC.


5-2. Recognition of the present CDM

The 3 problems of CDM are recognized not only by Kenya but also by the international community.

1. it takes too long to obtain approval2. paper work is complicated, including data collection; 3. application is expensive.

One of the problems specific to Kenya is;– targets of EU-ETS offset are, in principle, limited to LDC from 2013.

Since Kenya is not an LDC, the momentum to generate CDM projects in Kenya is expected to decline.

In addition, infrastructure problems are common to African countries.


5-3. NAMA; the climate change policy of Kenya

Kenya is determined to promote NAMA as a mitigation policy for climate change in the future.

In the chart (right), shows 9 elements of Kenya National Climate Change Action Plan.

(4) Mitigation planning and actions includes NAMA and REDD+.

http://www.environment.go.ke/wp-content/uploads/2011/12/KENYA-CLIMATE-CHANGE-AP-NATIONAL-ADAPTATION.pdf


5-4. NAMA; the mitigation policy of Kenya

The Government of Kenya puts special emphasis on the following considerations in the identification of NAMAs:

• Priority mitigation actions in key economic sectors with demonstrated deviation from business as usual emission levels

• Policy measures and tools aimed at implementing NAMAs and in meeting the objectives of the country’s sustainable development strategy

• The co-benefits of implementing mitigation actions• Support needed for the implementation of NAMAs (costed NAMAs)• Putting in place a national system for measurement, reporting and

verification. http://www.environment.go.ke/wp-content/uploads/2011/12/KENYA-CLIMATE-CHANGE-AP-NAMAS-and-REDD+.pdf

We should propose the BOCM as it complements NAMA policy of Kenya.Efforts are needed to develop additional climate change measures for the

tourism business, the major industry in Kenya, to NAMA in order for Hotels to seek generation of bilateral offset credit.


5-5. Sugestion; how we develop BOCM

Complement NamaWe should propose the BOCM as it complements NAMA policy of Kenya.Efforts are needed to develop additional climate change measures for the

tourism business, the major industry in Kenya, to NAMA in order for Hotels to seek generation of bilateral offset credit.

Non-LDC, but LIC or LMIC as a partner of BOCMNon-LDC, but still considered as Low Income Countries (LIC) or Lower Middle Income Countries (LMIC) in Africa and other parts of the world have the problem. Finding purchasers of credits after 2013 will not be easy. Thus, non-LDC but LIC or LMIC are considered ideal partners to promote negotiations over BOCM. In Africa, the list below shows the 12 non-LDC but LIC or LMIC

Cameroon, Cape Verde, Congo, Rep., Cote d'Ivoire, Egypt, Arab Rep., Ghana, Kenya, Morocco, Nigeria, Swaziland, Zimbabwe

CONTENTS









6-1. Future Issues

These are future issues of this project;1. Continuous survey at the Club2. Further Study of other Hotels3. Setting up an organizing body 4. Approach to the Government

Concerning surveying the possibilities for energy saving, electricity meters will be installed on the generators, major electric equipment and guest rooms of the Club.

Concerning wind power generation, we will survey patterns of wind throughout the year while bearing in mind the installation of small wind generators in future.

We would like to introduce a PV generation model system to the Club on an experimental basis and conduct additional surveys at the facilities.

– a 5 to 10 kW-size PV generation model system primarily made in Japan will be installed.

– This model system will collect data covering actual costs (initial investment cost, running cost), electricity generated, amount of solar radiation and meteorological data.


6-2. Future IssuesContinuous survey at the Club

We would like to survey the present conditions of hotels and lodges that are located in other national reserves and parks and conduct a feasibility study in anticipation of introducing renewable energy into those hotels and lodges.

A local survey of hotels that may introduce renewable energy, etc. in the future shall be continued. First, a feasibility study for introducing renewable energy into hotels and other accommodations located in the Masai Mara National Reserve will be promoted.


6-3. Future IssuesFurther Study of other Hotels

We also would like to formulate a model plan targeting tent lodges, the largest segment of the market.

Concerning wind power generation, we will survey patterns of wind throughout the year while bearing in mind the installation of small wind generators in future.

As discussed earlier, if a 5- to 10-KW renewable energy system is introduced into 2,500 Hotels, the amount of credits generated will reach from 10,625 to 21,250 tons.

Under the current market price, if the credits per ton can be sold at 10 euros(=1,200 yen), the total credits obtained would be from 12,900,000 yen to 25,800,000 yen (1 yen = 1 KSh).

Thus, an agreement with each of the Hotels shall be concluded prior to payment of a portion of the amount to each of the Hotels.


6-4. Future IssuesSetting up an organizing body

A body shall be set up (or entrusted) that promotes some other method (offering low-interest finance or appropriating such portion to premiums on the insurance for quality assurance of panels).

We would like to share information on NAMA with the Kenyan Government to utilize BOCM as early as possible.


6-5. Future IssuesApproach to the Government

We would like to approach the Ministry of Tourism and the Kenya Tourist Board (KTB) in the coming survey and continue to survey the actual situations of other hotels in Kenya.We also seek the possibility to develop climate change measures in the tourism. If such measures would be added in the list of NAMA, this project could create credits under the BOCM.

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