Small Scale Methodologies in Power Sector

Transcription

1 Small Scale Methodologies in Power Sector Carbon Finance Assist The World Bank December

2 Future Electricity Outlook TWh Source: IEA, 2004 Coal Oil Gas Nuclear Hydro Other renewables Coal will remain the dominant fuel worldwide 2

3 Power Sector CO 2 Emissions Coal Gas 2002 Oil Coal Gas 2030 Oil Mt of CO2 OECD Developing countries Transition economies Source: IEA,

4 Impact of Carbon Finance SUMMARY SENSITIVITY ANALYSIS INCREMENTAL IRR RESULTS - CONTRIBUTION OF CARBON FINANCE Sector Impact price = $6.5/ton CO2e CF impact Purchase 7y Purchase 10y Purchase 14y Purchase 21y (% range) Landfill % % % % CH4 from coal 7.6% 9.7% 10.8% 11.5% 7-12 Biomass % % % % 2-8 Forestry % % % % Renewable energy % % % % District Heating 0.5% 0.6% 0.6% 0.7% Source: A. Kossoy, CFU (Feb. 2006) 4

5 Small-scale Renewable Energy Projects Applicability Solar PV, hydro, wind, geothermal, renewable biomass Unit supplying electricity to and/or displaces electricity from electricity system otherwise supplied by at least one fossil fuel generating unit If both renewable and non-renewable components (e.g. wind/diesel), eligibility limit of 15MW applies to renewable component. If unit co-fires with fossil fuel: Total unit capacity 15MW Co-generation systems: sum of all forms of energy output 45 MW th If adding capacity: Total capacity 15MW For retrofits: Total output of modified/retrofitted unit 15MW 5

6 Baseline: A Key Challenge Power sector projects and CERs depend upon an unknown counterfactual baseline: there is no right answer baseline emissions Certified emission reductions Project emissions The difference between the actual project emissions and the emission baseline constitute the volume of CERs time 6

7 Emission Factors for Different Technologies Fuel Technology Emission Factor (tco 2 /GWh) Natural Gas Combined Cycle Gas Turbines Natural Gas Simple Cycle Turbines 525 Diesel Internal Combustion Engines Fuel Oil Simple Cycle Turbines 815 Coal Steam Turbines

8 Baseline Calculation One general baseline calculation: Project output (MWh/yr) X emission factor (tco 2 /MWh) Different possible methodologies to calculate emission factor (tco 2 e/mwh) using a Build Margin and an Operating Margin 8

9 Baseline Methodology The choice and/or timing of new power plants (or life extension of existing ones), i.e. the build margin, and/or The operation of existing power plants, i.e. the operating margin, Depending on Context: excess capacity, suppressed demand, fixed investments Project characteristics: peak vs. base load, load-following vs. resource-driven (firm vs. non-firm) Market behavior: plans, intuition, and time-scale of interest (short-term vs. long-term) Project size: Cumulative effects of small projects, delay vs. displace new capacity additions 9

10 Combined Margin Methodology combines the operating and build margins appropriate where counterfactual scenario assumed to be the ongoing expansion and operation of the grid (as opposed to one specific investment) 10

11 Operating Margin ACM002 currently contains 4 options: Simple OM: Weighted-average emission rate excluding low-operating cost and must-run power plants Simple Adjusted OM: Including some mustrun/low-cost resources (e.g. hydro) where they dominate a grid Dispatch data analysis OM Average OM 11

12 Operating Margin Option 1 Simple Operating Margin EF = Σ EFi x GENi Σ GENi Where EFi is the EF (ton CO2/GWh generated) of source i, GENi (GWh) is the electricity generation of source i, and i is the set of power plants not including low-operating cost (renewables) and must-run power plants (nuclear) Simple and can be calculated ex-ante (3 previous years) or ex-post for each year of operation. Only for those grids that low-operating cost and must-run represent less than 50% of generation 12

13 Operating Margin Option 2 Simple Adjusted Operating Margin EF = (1-λy) Σ EFi x GENi + λy x Σ EFj x GENj Σ GENi Σ GENj Where EFi and GENi are analogous to the Simple OM and EFj and GENj refer to low-operating cost and must-run power plants. λ is the number of hours in which low-cost and mustrun are at the margin. Less Simple and has to be calculated ex-post for each year of operation. For those grids that low-operating cost and mustrun represent more than 50% of generation 13

14 Operating Margin Option 3 Dispatch Data Analysis EFh = Σ EFh x GENh Σ GENh Where EFh and GENh are analogous to the Simple OM, but calculated for each hour of the year and include the top 10% of the system dispatch. Very complex and requires a lot of data. Is the preferred option if data is available 14

15 Operating Margin Option 4 Average OM EF = Σ EFi x GENi Σ GENi Where EFi and GENi are analogous to the Simple OM, but include all the power plants in the grid, regardless if they are must-run or lowcost. Much simplier, but lead to a lower EF 15

16 Build Margin the generation-weighted average emission factor of a sample of power plants m, as follows, EF_BMy = FUEL USE * EMISSION COEFF/GENERATION where the sample group m consists of either the 5 most recent or the most recent 20% of power plants built or under construction, whichever group s average annual generation is greater (in MWh); Option of ex ante or ex post analysis for either OM or BM 16

17 SSC Grid-connected Renewable Electricity Generation For systems where all generators use exclusively fuel oil and/or diesel fuel: Baseline emissions = annual generation (kwh/yr) X emission factor for modern diesel generating unit (e.g. 0.8kgCO2e/kWh) For other systems: Average of approximate operating margin and build margin ; or Weighted average emissions (kgco 2e /kwh) of current generation mix. 17

18 Approved Methodologies for Power SSC Projects AMS-I.A. AMS-I.B. AMS-I.C. AMS-I.D. AMS-II.A. AMS-II.B. AMS-II.C. AMS-II.D. AMS-II.E. AMS-II.F. Electricity generation by user Mechanical energy for the user Thermal energy for the user Grid-connected renewable energy generation Supply side EE improvements T&D Supply side EE improvements Generation Demand side EE programs for specific technologies EE and fuel switching measures for industrial facilities EE and fuel switching measures for buildings EE and fuel switching measures for agricultural facilities and activities 18

19 Additionality Tool Financial Analysis => is the project the least cost option for the expansion of the grid? Barrier Analysis: technology, construction risks, regulatory barriers for long term investments, access to financing (DSCR requirements), etc. Common practice is key to sustain additionality argument (last 5 years). Not all the renewable are similar. Given context of high oil & gas prices, many renewable alternatives becoming competitive to CCGT-Natural Gas 19

20 Additionality - Examples Chile - Chacabuquito Guatemala El Canada Guatemala Las Vacas Costa Rica Cote SSC Colombia Jepirachi Mexico La Venta II Investment Barrier: not least cost option Investment Barrier: not least cost option Barrier: Construction Risks and water quality Investment Barrier: construction cost Investment Barrier: not least cost option Investment Barrier: not least cost option 20

21 Small Scale Power Projects Use an approved baseline methodology to reduce uncertainty and transaction cost Barrier analysis is the most important tool for additionality 21