CDM for Sustainable Development: Modelling of CDM Impacts on the Thai Power System r' Mr' Philipp We

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CDM for Sustainable DevelopmentModelling of CDM
Impacts on the Thai Power Systemr. Mr. Philipp
Weiss and Prof. Thierry Lefevre
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Background The PRET Project

• Promotion of Renewable Energy Technologies (PRET)
• Cooperation between
• Department of Alternative Energy
• Development and Efficiency (DEDE)
• Ministry of Energy, Thailand
• Danish International Development
• Agency (DANIDA)

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Background The PRET Project

• Objective Develop cost-effective strategies with
  action plans to promote and develop renewable
  energy technologies in Thailand.
• First step Analysis of renewable energy
  technologies in the Renewable Energy Technology
  Economic Assessment Spreadsheet (RETEAS)
• Overview on Feasibility, Financial Investment
  Rate of Return (FIRR) and Financial Net Present
  Value (FNPV) of RET's in Thailand.
• Estimation of energy generation costs (Bath/kWh)
  for the different technologies.

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Background The RED Model

• Further development The Renewable Energy
  Development (RED) Model
• Excel-based model to analyse the impact of
  different incentives on the development and
  utilisation of renewable energy in Thailand.
• Incentives Feed-in tariffs on electricity
• Investment based tax exemption
• Investment subsidies
• Low-Interest loans
• Analysis of Capacity development, Power and
  Heat Generation, Fuel Consumption, Economic
  Power Costs, Financial Generation Costs,
  IRR, Impact of Incentives on consumer bill

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Extension of the RED Model

• Modelling of Impacts of CDM and
  Sectoral/Programmatic CDM
• Methodology
• Project based CDM Implemented at individual
  technology/ project level
• Calculation of generated emission reductions
• Baseline Standard Thai Generation Mix (EGAT)
• CDM Costs and Revenues Included in Cash Flow of
  a project.
• Effect Influences the financial characteristics
  of a specific technology.

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Extension of the RED Model

• Methodology
• Sectoral/Programmatic CDM Implemented at
  national/sectoral/program level, Combination with
  other incentives.
• Example Feed-in tariff given to technologies
  (sectors) could be financed by generated emission
  reductions (CERs).
• Costs and revenues of S-CDM are calculated on
  the basis of a specific technology or sectoral
  program and are related to the total emission
  reductions resulting from the program.
• Result Allows calculation of the impact on
  consumer bill particularly reduction of
  incentives transferred costs on consumer.

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The Extended RED Model Input 1
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The Extended RED Model Input 2
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Economic Power Generation Costs
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Technical RE Power Supply Curve
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The Approved Thai Feed-In System (in THB/kWh)

• Taken as an input for the model, there is no
  impact compared to a no-incentive scheme, if the
  2011 Strategic Energy Target is to !!be reached
  on time
• The projects IRR increase impact with this scheme
  is of less than 1 , which is too small to have
  any significative impact on the investment
  climate towards RETs with regards to the 2011
  strategic targets

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Possibilities of the Extended Model

• How does individual project based CDM influence
  the viability of RE technologies?
• Does CDM - when taken as the only incentive -
  have a significant impact on the decision making
  process towards a cleaner energy system?
• What combination of incentives has the most
  promising impact in promoting a cleaner energy
  system?
• To which extend can governmental incentives (e.g.
  feed-in tariffs) be covered by sectoral CDM ?
• How does a higher CER price influence the various
  scenarios?

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Project-based CDM Impact on
Generation Costs
CER-price 15 EUR
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Project-based CDM Impact on IRR
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Project-based CDM

• Big impact on generation costs in biomass
  combined cooling and power Generation costs are
  cut down to 1/10 of the original costs
• Negative Generation Costs in Cogeneration
  Technologies Due to the possibility of selling
  the produced steam, electricity is rendered as a
  by-product that is viable in any case, even if
  the producer has to pay the consumer for
  receiving the electricity. But steam demand
  limitations restrict that need to be considered
• Concerning the IRR CDM acts like a cherry on top
  of the cake for the Investor, and in some cases
  with lots of whipped cream.
• Strong Incentive !

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Sectoral/Programmatic CDM (S/P-CDM)

• The energy policy or the programme is the
  project.
• The initiating agency (governmental or
  non-governmental) would register this
  policy/programme as a CDM project.
• The carbon offset proceeds of the participating
  projects would be attributed to the implementing
  agency, the owner of the CDM project.
• The offsets will help financing the incentives
  given to the individual project owners.
• A baseline would be defined at sectoral or
  programmatic level, and all projects
  integrated/approved to be part of the policy or
  the programme would be eligible.
• Monitoring would also take place at sectoral wide
  level to determine the effect of the policy or
  the programme.

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Example of S/P-CDM Scenarios to model the
achievement of Thailands Energy Strategy

• Incentives for the Participants
• Feed-in Tariff 8 year Tax exemption
• Target 12.300 MW of installed RE Power
  Generation Capacity
• Scenario 1 to 3 are modelled with 3, 4 and 5
  THB/kWh fixed-feed-in tariff respectively in
  order to analyze the cost difference of achieving
  the target in 2011 or postponed to later years.
• Scenarios 4 and 5 are not explicitly based on a
  fixed feed-in tariff Scenario 4 is based on a
  specific IRR,
• Scenario 5 is based on the resource potential

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Scenarios 1 to 3

• Scenario 1 All RE technologies can access the
  policy
• Scenario 2 Only biomass condensing (20 MW),
  hydro, combined cooling power and biogas
  electricity generation technologies
• Scenario 3 is a combination of classical CDM and
  sectoral CDM The S-CDM scheme for all biomass
  based power generation and cogeneration
  technologies all other technologies are open for
  the project-based CDM approach

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Scenarios 4 and 5

• Scenario 4 is based on the IRR of the investor.
  The feed-in tariff has been adjusted to reach an
  IRR of 25 for all technologies. The supported
  IRR of solar technologies is 15.
• Scenario 5 is based on the resource potential of
  the RE fuels.
• It is explicitly modelled to reach the RE
  implementation target of the energy strategy, at
  a defined time target, by adjusting the level of
  the feed-in tariff.
• The feed-in tariff is the same for all
  technologies, but capped at a level when the
  needed fuel resource is fully employed.
• The tax exemption of eight years is granted in
  these scenarios as well.

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Sectoral/Programatic CDM
The Table shows the resulting price impact of the
Feed-in Tariff Incentive scheme () and the cost
cutting impact of a Sectoral/ Programmatic CDM
(CDM) in THB/kWh on the end consumer power bill
for reaching the RE fuelled power production
target in the years 2011 to 2014. A CER price of
15 Euro is assumed.
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Some Initial Results of the S/P-CDM Scenarios

• Achieving the policy target in 2011 causes
  extremely high costs on the end consumers bill
  with a resulting electricity price increase of
  17,3 compared to the actual consumers power
  price of 3,11 THB/kWh.
• The resulting costs will go down considerably,
  when postponing the achievement of the target.
• The S-CDM revenues reduce the impact of
  incentives like the feed-in tariff on the
  consumer bill in the considered scenarios in a
  range of 5 to 20, with an average value of 15.
  
• This is far away from the dream of completely
  financing the promotion of RETs in the energy
  system with CDM, but it still has a large impact.
  With an increasing CER price, the impact will be
  even higher.
• In the considered scenarios, a CER price of
  about 80 Euro would completely finance the
  incentives scheme (feed-in).

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Final Remarks

• Sectoral and Programmatic CDM are not yet allowed
  in the presented form, so the inclusion in the
  incentive catalogue of the RED model is still
  theoretical and allows only to show future
  potentials.
• S-CDM is based on voluntary programs or policies,
  so it has to be combined with conventional
  incentives like feed-in tariffs to attract
  investors.
• That allows a developing country to effectively
  control the development of its energy sector,
  with a better adequation of the development of
  RETs to domestic resources, contributing to
  sustainable development goals and getting
  financial support by industrialized countries.

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CDM Contribution to Sustainable Development
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CDM Contribution to Sustainable Development
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Thank You