GHG Accounting for Electricity Transmission and Distribution Projects

GHG Accounting for Electricity Transmission and Distribution Projects Marcelino Madrigal Sr. Energy Specialist, ETWEN The World Bank Randal Spalding-Fecher Pöyry Energy Management Consulting June 2010 1

Outline Study objective Background and rationale Basic GHG accounting principles Key GHG impacts and existing methodologies WB s T&D project types categorization Recommended approach for assessing GHG impacts Case studies Conclusions 2 GHG impacts of T&D projects

Objective: GHG impacts of T&D projects Contribute to the SFDCC goal of improving GHG accounting in the energy sector by reviewing, assessing and recommending GHG accounting methodologies for electricity T&D projects Examine and build on existing methodologies to find out whether they can feasibly and reliably provide estimates of net project emissions Identify and conceptually design a methodological approach for T&D projects in the context of World Bank lending operations 4 GHG impacts of T&D projects

Contribution of power sector to global emissions 6 GHG impacts of T&D projects

US$ Millions Rationale for GHG accounting for T&D 9,000 8,000 7,000 World Bank Group Energy Financing, FY03-FY09, by Project Type Less knowledge of the implications of T&D on GHG emissions 6,000 5,000 4,000 3,000 Considerable importance to WB portfolio 2,000 1,000 - FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 Regulation & Reform Transmission and Distribution Oil, Gas and Coal Thermal Generation Energy Efficiency Hydro > 10MW New Renewable Energy Better understand the implications of possible new accounting approaches 7 GHG impacts of T&D projects

Why T&D is important from the emissions point of view? The case of technical electricity losses China Power Sector Emissions 3070 MtCo2, 2007 %50 loss reduction 8% Total losses 18.1 % Share of SF6 0% %50 loss reduction 13% India Power Sector Emissions 749 MtCo2, 2007 Total losses 29.4% Share of SF6 0% With data from IEA, USA EPA, and own calculations 8 GHG impacts of T&D projects

GHG Accounting principles Gross emissions inventory versus project level net impact Inventory approach used for corporate or national carbon footprints in a defined geographical area: companies, organisations, or countries (e.g. IPCC inventories) Net emissions approach used to evaluate project impact on the entire emissions system, by comparing with project to without project scenarios Defining project boundary Generic principles Credibility/accuracy, Transparency Feasibility/ease of harmonization 10 GHG impacts of T&D projects

Project boundary: Life cycle and value chain for power sector Value chain Life cycle phase Fuel Supply Generation T&D Consumption Materials production Manufactuer of metal, etc Manufacture of metal, etc Manufacture of metal, etc Manufature of materials Construction Construction of coal mine and mining equipment Construction of power stations Construction of power lines/ substations Construction of factory, home, etc Operation Mining of fossil fuel Combustion in power plant Transmitting power Use of power in cement factory, home, school, Decommission Disposal of substations/ lines 11 GHG impacts of T&D projects

Example: Inventory Accounting by New Zealand Transmission Company Total emissions: 10,600 tons CO 2 e (73% is SF 6 ) SF 6 used in circuit breakers in substations and other sealed electrical equipment Transmission electricity losses not considered as part of the footprint 12 GHG impacts of T&D projects

Example of net emissions approach: transmission interconnection between two countries 220 kv onterconnection between Cambodia and Vietnam 156 km line (220 kv/200 MW) to export from Vietnam to Cambodia, along with local grid strengthening in Phnom Penh Vietnamese grid is 40% hydropower while Cambodia is 95% fuel oil Estimated emissions reductions from cleaner energy exports: 536,000 tco 2 over 10 years Combined margin emissions: Vietnam 0.678 tco 2 /MWh and Cambodia 0.741 tco 2 /MWh 13 GHG impacts of T&D projects

The different impacts of T&D on emissions: example Hypothetical project: 1000 km with 2 x 500 kv lines, clearing natural tropical forest, aluminium and steel lines, in grid with emissions factor of 700 kg CO 2 /MWh Direct emissions from transmission line Embodied emissions: 0.3 kg CO 2 /MWh Land clearing : 19 kg CO 2 /MWh Corona effect: ~1-3 kg CO 2 /MWh SF 6 : 2 kg CO 2 /MWh Impacts on generation emissions for different project alternatives Reduce technical losses from 15% to 10%: -35 kg CO 2 /MWh Expansion to serve suppressed demand: +700 kg CO 2 /MWh Expansion displacing diesel generators: -100 kg CO 2 /MWh Importing hydro power (EF100 kg CO 2 /MWh): -600 kg CO 2 /MWh 15 GHG impacts of T&D projects

Existing methodologies and case studies have narrower scopes Transmission and Distribution Guidelines IPCC 2006 Guidelines for National Greenhouse Gas Inventories, Vol 3, Ch 8.2 Emissions of SF6 and PFCs from electrical equipment (2006c) Tools applied within World Bank Group IFC Carbon Emissions Estimation Tool (CEET) (IFC 2009) Tools applied to generation, transmission and distribution case studies Transpower (New Zealand) carbon footprint (2008) Life cycle assessment of aluminium smelter in Greenland (Schmidt & Thrane 2009) (uses EcoInvent as the source for T&D) Eco-balance of a Solar Electricity Transmission from North Africa to Europe (May 2005) Life cycle inventories of energy systems: results for current systems in Switzerland and other UTCE countries ( EcoInvent ) (Dones et al. 2007) Emissions of GHGs from the use of transportation fuels and electricity, Argonne National Laboratory (DeLuchi 1991) Power Sector Guidelines GHG Protocol Project Accounting Standard (2005) GHG Protocol Guidelines for Quantifying GHG Reductions from Grid-Connected Electricity Projects (2007) Greenhouse Gas Assessment Handbook (1998), Ch 3.6.2 Guidelines for Energy Conversion and Distribution Projects GEF. Manual for calculating GHG benefits of GEF projects: energy efficiency and renewable energy projects.(2008) CDM baseline and monitoring methodologies AMS II.A Supply-side energy efficiency improvements transmission and distribution (ver10) AM0035 SF6 Emission Reductions in Electrical Grids (ver01) AM0045 Grid connection of isolated electricity systems (ver02) AM0067 Methodology for installation of energy efficient transformers in a power distribution grid (ver02) AM0079 Recovery of SF6 from Gas insulated electrical equipment in testing facilities (ver01) NM0272 International interconnection for electric energy exchange NM0269 Reduction of emissions through one way export of power from lower to higher emission factor electricity system 16 GHG impacts of T&D projects

What do World Bank T&D projects look like? WB T&D interventions (loans) are not like most CDM or private sector transactions, which are single projects with clear boundaries (e.g. a wind farm, cement plant, or energy efficient boiler) Traditionally consist of several projects at different voltage levels pursuing varied objectives May impact different areas of the client country electricity network (more or less related) Components of an investment plan supported by country and multiple donors Different levels of technical detail at time of approval (e.g. a large interconnection project may have more technical specs than a distribution investment program) 18 GHG impacts of T&D projects

WB T&D projects categorization by objective Technical loss reduction: Reduce technical losses in the transmission or distribution system Increased reliability: Increase reliability so that consumers have fewer and/or shorter supply interruptions Distribution capacity expansion: Increase the overall capacity to distribute electricity Electrification: Connecting new consumers to the grid Transmission capacity expansion: Increase the overall capacity to transmit electricity over significant distances Cross-border trade: Increase electricity trade between countries by constructing inter-connectors between their national grids 19 GHG impacts of T&D projects

Three different GHG impact categories Category of emissions impact Direct nongeneration Direct generation Description Similar to standard corporate or national inventory. Emissions that happen within the physical boundary of T&D project, and possibly through the life cycle of that equipment. Effect on short-run and/or long-run generation emissions that does not require any other actions outside the physical boundary of the T&D project. This would be the case for technical loss reduction projects. Indirect generation Effect on short-run and/or long-run generation emissions that requires actions outside the physical boundary of the T&D project. This would be the case for increased reliability, capacity expansion, electrification and cross-border trade. 21 GHG impacts of T&D projects

Proposed approach: link project objectives to GHG impacts Project objectives drive current technical design, economic, and environmental assessment All projects potentially have direct nongeneration impacts Link project objectives to direct and indirect emissions impacts on generation Use decision trees to set baseline and project scenarios for each project type 22 GHG impacts of T&D projects

Project boundary for net emissions assessment Life cycle phase Generation T&D Materials production Manufacture of metal, etc Manufacture of metal, etc Construction Operation Construction of power plants Combustion in power plant Energy use in construction Land clearing SF 6 fugitive emissions Corona discharge Decommissioning SF 6 disposal emissions 23 GHG impacts of T&D projects

Reduce marginal generation Increase marginal generation Displace alternative powerr Displace other energy Change power build plan Generation emissions impacts of T&D projects Possible impacts on generation Project category Direct generation effects Technical Loss Reduction Y N N N N Indirect generation effects Increased reliability N Y Y N N Distribution capacity expansion N Y Y N N Electrification N Y Y Y N Trans capacity expansion new lines within a grid N Y Y N Y? Trans capacity expansion connect grids Y Y N N Y Cross-border trade Y Y N N Y 24 GHG impacts of T&D projects

Recommended approach Steps Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Description Determine which direct nongeneration emissions will be included Calculate direct nongeneration emissions: use calculation modules Determine how baseline and project emissions should be calculated for generation impacts: use provided flow-charts Calculate baseline generation emissions: use calculation modules Calculate project generation emissions: use calculation modules Summarize GHG emissions impacts 25 GHG impacts of T&D projects

Baseline and project scenarios Project category Project Scenario Baseline Scenario Direct generation effects Technical Loss Reduction Generated electricity lost through technical losses after project implementation Generated electricity lost through technical losses prior to project Increased reliability Dist. Capacity expansion Electrification Trans capacity expansion new lines within grid Trans capacity expansion connect grids Cross-border trade Indirect generation effects Additional generation during longer supply hours Additional grid generation delivered to consumers, or generation from new plant Additional grid generation delivered to consumers, or generation from new plant Additional grid generation delivered to consumers, or generation from new plant Marginal/surplus generation in exporting grid, or generation from new plants built for export Marginal/surplus generation in exporting country, or generation from new plants built for export Power source used during power outages or no emissions if alternative is not available Alternative power source displaced by additional grid power or no emissions if alternative not available Alternative power sources displaced by additional grid power or no emissions if alternative not available Alternative power sources displaced by additional grid power or no emissions if alternative not available Marginal generation in importing grid Marginal generation in importing country 26 GHG impacts of T&D projects

Module example Step 2: Land Clearing Module Similar equations to CDM methodologies: PE LC = A,def X BD Where: PE LC = Direct nongeneration emissions from land clearing (tco 2 ) A def = Area of land deforested (ha) BD = Biomass density per unit area (above ground, below ground, soil carbon, litter and dead biomass) (tco 2 /ha) Parameter Source A def Project feasibility documents, or the product of default right of way and line length BD IFC CEET table (which is taken from IPCC 2006 Guidelines), shown in Annex A.1 27 GHG impacts of T&D projects

Flowchart example T&D Capacity Expansion Project Y BE1 = modeled w/out project PE1=modeled with project Is a system model available? N Identified source of incremental supply? Y N Identified alternative to addt'l electricity? Identified alternative to addt'l electricity? Y N Y N BE3=EF AE x IE PE3=EF AS x IE BE4=zero PE3=EF AS x IE BE3=EF AE x IE PE4=EF CM x IE BE4=zero PE4=EF CM x IE 28 GHG impacts of T&D projects

Summary Example Step 6. Summary of GHG impacts Direct Nongeneration impacts Example of summary table (tco 2 ) Embodied emissions 5,000 Energy in construction 12,000 Land clearing 33,000 SF 6 1,500 Direct Generation impacts Baseline Project Net Technical Loss Reduction 30,000 10,000-20,000 Indirect Generation impacts Baseline Project Net Increased reliability N/A N/A N/A Capacity Expansion 25,000 30,000 5,000 Electrification N/A N/A N/A Cross-border trade N/A N/A N/A 29 GHG impacts of T&D projects

Case study 1. Ethiopia-Kenya transmission interconnection project Status Objective Description Early stage of identification Save generation investment and operation cost by exporting new hydropower 1200 km, 500 kv, AC and DC Two phases 1000 MW and 2000 MW (all tco 2 over project life) Direct Nongeneration impacts Embodied emissions N/A Energy in construction N/A Land clearing 554,400 SF6 250,359 Baseline Project Net Direct Generation impacts Technical Loss Reduction N/A N/A Indirect Generation impacts Increased reliability N/A N/A Capacity Expansion N/A N/A Electrification N/A N/A Cross-border trade 69,817,071 0-69,817,071 31 GHG impacts of T&D projects

Case study 2: Kenya, electricity expansion project Status Objective Description: Approved Increase capacity, efficiency, reliability, access Kisii-Awendo Line. Increase transmission capacity (all tco 2 over project life) Direct Nongeneration impacts Embodied emissions N/A Energy in construction N/A Land clearing 2,244 SF 6 N/A Baseline Project Net Direct generation impacts Technical Loss Reduction 83,541 0-83,541 Indirect generation impacts Increased reliability 0 42,032 42,032 Capacity Expansion 0 66,255 66,255 Electrification N/A N/A Cross-border trade N/A N/A 32 GHG impacts of T&D projects

Case study 2: Kenya, electricity expansion project Status Objective Description: 33 GHG impacts of T&D projects Approved Increase capacity, efficiency, reliability, access Eldoret-Kitale Line. increase transmission capacity (all tco 2 over project life) Direct Nongeneration impacts Embodied emissions N/A Energy in construction N/A Land clearing 13,860 SF6 7,490 Baseline Project Net Direct Generation impacts Technical Loss Reduction 37,961 0-37,961 Indirect Generation impacts Increased reliability 0 26,115 26,115 Capacity Expansion 0 470,029 470,029 Electrification 574,520 470,029-104,491 Cross-border trade N/A N/A

Case study 3: Brazil, Electrobras distribution rehabilitation Status Objective Description (all tco 2 over project life) Direct nongeneration impacts Embodied emissions Energy in construction Land clearing SF6 Approved Service quality improvement and loss reduction Replacement of transformers, resizing conductors, meters, improved CMS/RMS N/A N/A N/A N/A Baseline Project Net Direct generation impacts Technical Loss Reduction 570,988 0-570,988 Indirect generation impacts Increased reliability 208,736 63,411-145,325 Capacity Expansion N/A N/A N/A Electrification N/A N/A N/A Cross-border trade N/A N/A N/A 34 GHG impacts of T&D projects

Findings from pilot projects Methodology is easy to use Level of effort is small (e.g. 4 days for one component) Calculations implemented during technical and economic assessment Impacts on generation likely to be much larger than direct impacts Transmission projects that improve reliability, efficiency, and trade between different emission factor systems can have positive impacts on emissions Transmission and distribution projects to meet increased demand can have negative impacts on emissions if no other sources are available 35 GHG impacts of T&D projects

Outline Study objective Background Importance of T&D for Bank and GHG emissions Rationale for GHG accounting GHG accounting principles T&D project type categorization Key GHG impacts and existing methodologies Recommended approach for assessing GHG impacts Case studies Conclusions 36 GHG impacts of T&D projects

Conclusions We have developed an approach to determine the most important impacts of T&D projects that can be easily implemented in the context of WB operations There were no available methodologies in the climate financing arena that could comprehensively address all project types The methodology contributes to SFDCC s commitment to study, develop, and test methodologies on projects Applying the methodology for other purposes (business decisions) may require further analysis. Consistency across sectors and multilaterals 37 GHG impacts of T&D projects

38 Thanks!

Step 5. Calculate project generation emissions for the T&D projects Step 5 Similar equations to baseline emissions 39 GHG impacts of T&D projects

Results of case studies Case 1 Case 2 Case 3 Project I Project II Direct, Nongeneration impacts Embodied emissions N/A N/A N/A N/A Energy in construction N/A N/A N/A N/A Land clearing 554,400 2,244 13,860 N/A SF 6 249,971 N/A N/A N/A Direct Generation impacts Technical Loss Reduction N/A -83,541-37,961-570,988 Indirect Generation impacts Increased reliability N/A 42,032 26,115-145,325 Capacity Expansion N/A 66,255 470,029 N/A Electrification N/A N/A -104,491 N/A Cross-border trade -69,817,071 N/A N/A N/A 40 GHG impacts of T&D projects