Clean Development Mechanism CDM Funding for Windfarms

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Clean Development Mechanism (CDM) Funding for
Windfarms

• Dr John Green, Director, IT Power Carbon

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Presentation Outline

• The CDM Market
• CDM funding for windfarms
• Case study describing the first windfarm in the
  world to become a CDM project
• Obtaining advice

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CDM Host Countries
Green Potential CDM host countries Blue EC
countries Linking Directive connects CDM market
with EU ETS market Yellow European countries
with economies in transition   Red Countries
outside of the European Union that have ratified
the Kyoto Protocol  White Countries that have
not ratified the Kyoto Protocol  
Source Point Carbon
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How the CDM can Accelerate Wind Power Development

• Additional source of revenue
• Help secure other finance
• Offset foreign exchange risks for imported
  equipment
• Promote technology transfer

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Funding from the CDM

• Example of a 45MW wind farm in China
• Total investment approximately US50 million
• CERs of approximately 90,000/year
• Price at US6 per tCO2 would lead to income of
  approximately US5.4 million over 10 years
• Discounted, this represents approximately 8 of
  total investment costs

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Overview of the CDM Market

• Current CER price 3-8
• EU ETS price 18-28
• World Banks PCF price objectives is US3/tCO2
• 1 Certified Emission Reductions (CER) 1 tonne
  reduction of carbon dioxide equivalent saved
  compared to the project baseline

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Buyers of CERs

• In 2003-4 the major buyers (accounting for 90 of
  the transactions) were
• Japanese Companies
• World Bank Carbon Finance Business
• Netherlands Government
• Private funds and ETS participants are now
  playing a strong role in the market

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Limitations

• Bureaucratic procedures
• CDM Executive Board Methodology Panel
• National policies
• Transactions costs (up-front and on-going)
• Market price
• Too low uncertain for many projects
• Post-2012 uncertainty
• Relatively low demand
• No demand from the USA
• Russian/Ukrainian supply

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Documentation required for a CDM Project

• Baseline study - emissions that would occur in
  the absence of the proposed project
• Project Design Document (PDD) - 60 pages needed
  to demonstrate that this project is additional
• Contract for selling emissions reductions

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Issues to be Considered

• Need to demonstrate why the project activity is
  not likely occur as part of the business as usual
  (BAU) scenario
• Need to identify the additionality over the
  baseline
• Need to demonstrate how the project
  meets/supports the sustainable development
  criteria of the host country
• Evidence of CDM funding being taken into account
  before the final decision is given for the
  project to go ahead

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CDM Costs

• Costs
• Project Design Document 75k
• Verification 8k
• Registration 15k
• Annual certification 8k
• Small-scale CDM a little cheaper
• Minimum project size for it to be profitable?
• Approximately 10,000 tCO2e/year

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Worlds first windfarm CDM Project

• Case study - IT Power wrote the Project Design
  Document (PDD) for the Chinese Huitengxile
  project

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Huitengxile Windfarm

• 25.8MW windfarm in Inner Mongolia
• Twelve 900kW and ten 1,500kW turbines
• Needed to demonstrate that the windfarm would not
  have been built without CDM
• Emission reductions windfarm electricity
  production emission coefficient of grid
• US2.75 million obtained from CDM over 10 years,
  representing 8 of the project costs

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Huitengxile Windfarm

• IT Power wrote the Project Design Document (PDD),
  advised on the sale price for the CERs and
  produced a business plan for the project
• The project documentation was validated in 2005,
  becoming the first CDM project in China
• CERs from the first year of operation will become
  available in Autumn 2006

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Obtaining Advice

• UNFCCC website www.unfccc.de
• Point Carbon www.pointcarbon.com
• IT Power www.itpower.co.uk

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IT Power Carbon Capabilities

• Project Design Documents
• Advice on selling CERs
• Corporate sustainable energy GHG emission
  reduction advice

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Advantages of working with IT Power Carbon

• Most successful company at getting CDM funding
  for windfarm projects
• Experience of working on 800 sustainable energy
  projects in 100 countries
• Working for World Bank, UNDP, Shell, etc
• Offices in UK, China, India, Mongolia, Australia,
  USA, Kenya, South Africa and Uganda

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IT Powers 800 projects,in 100 countries over
25 years
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Carbon Neutral Travel

• IT Power offsets it carbon dioxide emissions from
  flights by purchasing compact florescent lights
  (CFL) for households in Yunnan and Mongolia
• 1 CFL approximately US3
• Cost US12.32 / tCO2
• Flights 0.25 kgCO2 / mile
• US12.64 / 1,000 miles

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For further information

• Dr John Green
• john.green_at_itpower.co.uk
• Tel [phone]