SS CDM Cogeneration in Egypt - Additionality

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SS CDM Cogeneration in Egypt - Additionality
Tunis August 27-28, 04

• Ihab Elmassry, M. Sc. CEM, CDGP
• Cummins Power Generation, UK
• Email imassry_at_link.net

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Cogeneration

• Cogeneration is the simultaneous generation of
  usable heat and power, usually electricity, in a
  single process from the same fuel.

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Plant Self Generation Concept

Base electrical kWh supplied Gas Gen-set
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Additionality test (Proposal on CDM Additionality
Tests, Lex de Jonge Sandra Grener)
Project is not additional
Has construction of the project started?
Was the project construction started before 1
Jan, 2000?
Was CDM taken into consideration since the early
stages of project development
Was the project construction starting date before
both date of registration 31 Dec. 2005?
Is there documentation to this effect?
Is execution of the project based on a direct or
indirect legal obligation?
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Check one of the options 3a or 3b for barrier
testing?
Project is not additional

• 3b do one or more of the following barriers
  exists
• Investment
• Technological
• Practice
• others

3a determine financial or economical barrier
(IRR, .. Etc)
Project is less eco attractive
Are many projects recently implemented without
CDM?
Project is additional

• Have one or more of the following barriers
  recently changed fundamentally
• Investment
• Technological
• Practice
• others

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Cogeneration

• Whey the non project is more likely?

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I. Investment/financial barrier

• A cogeneration project is relatively a capital
  intensive project. The cost of a cogeneration
  project may be varied from fraction of millions
  up to tenth of millions depends on the size and
  the type of the cogeneration unit.
• There is no clear financing mechanism for
  environmental and/or energy efficiency and/or
  demand side management projects.
• Banks and leasing companies interest rates are
  high.

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I. Investment/financial barrier (cont.)

• Subsidy that imposed on electricity and energy
  prices which resulted in low return on investment
  for cogeneration projects.
• Relatively high simple payback periods, in best
  cases it is not less than 6 years.

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Example Debt/Equity 100/0
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Example Debt/Equity 50/50
Base Case
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Example Debt/Equity 0/100
Base Case
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II. Practice

• Lack of knowledge about the conducting
  techno-economic feasibility studies and risk
  assessment for cogeneration projects.
• Lack of knowledge on energy efficiency equipment

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III. Institutional

• Absence of governmental incentives such as low
  bank interest rate and advantageous customs,
  taxes and customs duties.
• The reluctance of the utility to purchase the
  excess of electricity produced by the small
  producers. It offers a very low selling back
  price.
• The lack of awareness of cogeneration technology
  and its benefits to Egypt,

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III. Institutional (cont.)

• The lack of long-term plans supported by the
  government for cogeneration promotion.
• No cogeneration power purchase agreement
• Cogen-End user contractual issues
• Low selling back tariff
• No official written procedure for interconnection
  requirements

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IV. Technological

• Few number of small scale cogeneration projects
  are already installed, this leads to operation
  performance risk