GEOTHERMAL CDM POTENTIAL - OLKARIA II EXPANSION CASE. Presentation to UNU-KenGen Geothermal training. Pius Kollikho

Transcription

1 GEOTHERMAL CDM POTENTIAL - OLKARIA II EXPANSION CASE Presentation to UNU-KenGen Geothermal training Pius Kollikho 1

2 Outline Climate Change Important events Potential Impacts of Climate Change United Nations Framework Convention on Climate Change (UNFCCC) The Kyoto Protocol Clean Development Mechanism KenGen CDM Projects Olkaria II Geothermal Expansion Project Conclusion 2

3 Climate Change Important events 1988: 1990: 1992: 1994: Establishment of Intergovernmental Panel on Climate Change (IPCC) First International Scientific Assessment Signature of the UNFCCC UNFCCC comes into force 1997: Kyoto Protocol (CoP 3) 2001: 2001: Third International Scientific Assessment Marrakech Accords (CoP 7) rules of implementation of Kyoto Protocol adopted 16 th Oct 2004: Russia indicates Ratification 16 th Feb. 2005: Kyoto comes into force 3

4 Potential Impacts of Climate Change 4

5 United Nations Framework Convention on Climate Change (UNFCCC) Objective: stabilizing global greenhouse gas concentrations in the atmosphere Developed countries (Annex I countries) aim to restore GHG emissions to 1990 levels Support capacity building in, and facilitate technology transfer to developing countries to mitigate, and to adapt to climate change Meet as a Conference of Parties in the future, consider progress 5

6 The Kyoto Protocol Developed Countries and Economies in Transition (Annex I countries) Agreed to reduce greenhouse gases by 5.2 % below 1990 levels in the commitment period Coming into force: required ratification of 55 Parties to UNFCCC representing 55 % of CO2 emissions 6

7 The Kyoto Mechanisms The protocol establishes mechanisms to achieve objectives in cost-effective and flexible way Emissions Trading (ET) Joint Implementation (JI) Clean Development Mechanism (CDM) 7

8 The Kyoto Mechanisms: Clean Development Mechanism CDM was defined at COP3 in Kyoto 1997 Modalities and procedures to implement the CDM was agreed in 2001 in Marrakech, Morocco known as The Marrakech Accords This made the CDM official 8

9 Concept of CDM Set in Article 12 of the Kyoto Protocol i. To help mitigate climate change ii. Assist Annex I countries attain emission reduction commitments iii. Assist developing countries in achieving sustainable development 9

10 Greenhouse Gases Targeted 1. Carbon dioxide CO 2 (source: fossil fuel combustion, deforestation, agriculture) 2. Methane CH 4 (source: agriculture, land use change, biomass burning, landfills) 3. Nitrous oxide N 2 O (source: fossil fuel combustion, industrial, agriculture) 4. Hydro fluorocarbons HFCs (source: industrial/manufacturing) 5. Per fluorocarbons PFCs (source: industrial/manufacturing) 6. Sulphur hexafluoride SF 6 (source: electricity transmission/manufacturing) 10

11 Criteria for CDM Projects Sustainable development Host country criteria Environmental Impact Assessment Stakeholder consultations Emission reductions Environmental additionality Project viability Technologically proven Financially sound Host country approval Project validation and registration 12

12 CDM Benefits Attract foreign investment to countries engaged in the trading CERs Increase the profitability of cleaner more efficient technology in energy, industry, and transport sectors Clean up waste management operations Improve land-use strategies and practice Contribute to sustainable development of the host country 13

13 CDM Project Cycle 14

14 Project Design CDM Cycle Processes National Approval Project Idea Note (PIN)- Prefeasibility assessment Project Design Document (PDD) 15 Validation / Registration Monitoring Verification Issuance Normal/ Small-scale CDM project Involved parties: Project developer CDM Consultant Critical Issues Project Description Emissions Reduction Calculation Clear project boundary Crediting Period Sustainable Development

15 CDM Cycle Time based activities ACTIVITY TIME Design 1-3 (months) Validation 1 Registration 2 Verification 1 Issuance 0.5

16 KenGen CDM Projects 17

17 KenGen CDM Projects..1 Initially Belgian Government was interested with Redevelopment of Tana Japanese Carbon Fund with Olkaria II expansion They both required KenGen to meet initial requirements of documents preparation such as PDD During the Carbon Fair in Cologne in May 2006, MD requested WB to have a look at KenGen s projects portfolio for CDM In June 2006 WB team (Fernando and Noreen) visited country and assessed KenGen s projects. Nine PINs were prepared and six accepted in the WB CDM portfolio ( KenGen s week in Washington ) 18

18 KenGen CDM Projects..2 Eburru Geothermal Project - 21 GWh Olkaria II Geothermal Expansion Project GWh Redevelopment of Tana Power Station Project GWh Optimisation of Kiambere Power Project - 60 GWh Kipevu Combined Cycle Power Project GWh Sondu Miriu Power Project GWh 19

19 CDM Projects & Estimated CERs Project Annual Energy (GWh) Estimated CER Eburru 21 13,431 Olkaria II ,026 Tana Re-dev ,339 Kiambere Optimization 60 38,376 Kipevu CC ,630 Sondu Miriu ,068 Total 659,872 20

20 Olkaria II Expansion 21

21 Olkaria II Expansion ERPA signed between KenGen and World Bank. Pre-validation of PDD done and posted to the website for comments. Awaiting final registration 3 rd Unit 22

22 Emission reduction quantities Combined Emission Factor for the grid is estimated at tco2e/mwh With annual generation of 276,000 MWh per year, the project is estimated to reduce 171,026 tco 2 e annually Total of 1,197,186 tco 2 e for the duration of the initial 7-year CDM crediting period 23

23 Barriers of Geothermal development Investment barriers Role of CDM Barriers in geothermal investment due to high costs Very limited private sector investment in the sector At a price of US $ per ton of CO 2 e, the sales from CERs is about US $ 13 million in the first 7 years. 24

24 Barriers of Geothermal development Role of CDM.. Contd. Other barriers Tariff barriers Financing barriers 25

25 National Approval 26

26 Kenya s CDM project review The committee advices the Director General, NEMA to issue Letter of Approval for CDM projects The 6 CDM projects were presented to the CDM review committee in August The committee s response was favourable. National approval granted 27

27 Benefits of KenGen s CDM Projects to the Country 28

28 CDCF Community Benefits Olkaria II extension is benefiting from CDCF An extra 1 US per CER is paid for community development projects. At Olkaria the projects include: Construction and equipping of a health centre Extension of water pipeline and Construction of dormitories 29

29 Contribution to the sustainable development of Kenya Less utilisation of thermal power generation plants thereby displacing expensive heavy fuel, diesel, coal and gas-fired generation Reduction of CO2 emissions to the atmosphere by generating energy with less GHG emissions Employing local labour in construction and plant management 30

30 Contribution to the sustainable development of Kenya.. Contd. Contributing to Kenya s fiscal revenues through the payment of taxes Help the country improve the hydrocarbon trade balance through reduction of oil imports for electricity generation Assisting poor rural communities through the implementation of community programs funded by part of the carbon revenues Increasing the number of clean energy projects in the country 31

31 Conclusion There are opportunities for CDM accruing from geothermal development in the Rift Valley. Need to maximize on the facility before end of KP period (2012) Projects implementation is crucial. Benefits are to the World (less GHG), Country (less import of fuels), KenGen (revenue streams) and neighbouring communities (community projects benefits) 32

32 THANK YOU LET US JOIN TOGETHER TO DEVELOP CLEAN ENERGY FOR KENYA 33