Developing portfolios of smallscale projects experience from Asia

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Developing portfolios of small-scale projects -
experience from Asia

• Jay Mariyappan
• Climate Change Strategy Unit, IT Power Ltd.

Gold CDM - HWWA, Hamburg, Germany
7-8th June 2004
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IT Power

• A leading consultancy in renewable sustainable
  energy, climate change international
  development with over 20 years experience.
• 60 employees with offices in UK, India, Morocco,
  South Africa, China, Mongolia, Australia and USA.
• Rural development and energy provision in
  developing countries to carbon finance climate
  change strategies
• Technical expertise covers PV, SWH, Hydro, Marine
  Currents, Wind, Biomass, CHP etc..

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Overview

• Developing portfolios - what is bundling?
• What is required to bundle?
• Recent capacity building projects - 2 examples in
  Philippines India
• Family hydro portfolio in Philippines
• Selection of 3 portfolios in India - hydro, solar
  energy efficiency

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Developing portfolios - - what is bundling?
Bundling Projects
GHG offsets (tCO2)
CER buyers
CERs
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Recent capacity building projects

• DFID (UK) - Capacity for developing family hydro
  power using carbon finance in Vietnam
  Philippines
• 1 pico-hydro CDM bundle
• EU Synergy - Enabling institutional capacity for
  small-scale CDM Projects in India
• 3 project portfolios (small hydro, solar energy
  efficiency)

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Pico hydro project design issues

• Vietnamese market delivery not suitable for CDM
• Most suitable for 5 different islands in
  Philippines but (Market potential 120,000 over 10
  yrs)
• Baseline options - energy use data (kerosene,
  diesel, batteries) or standardised baselines
  (diesel EF)
• No local manufacture (after 2-3 yrs?)
• Only limited experience with pico-hydro
  technology 150 installed units (training
  maintenance)
• Difficult to estimate uptake accurately (limit to
  7 years v. conservative market uptake) Risk
• Risk share?

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Family hydro portfolio in Philippines

• Technology 4,700 pico-hydro (3.14 MW) units to
  be installed over 7yrs
• Initially 150-200 sites
• Emission reductions 15,000 tCO2,
• Carbon asset US100,000
• High SD benefits (low cost energy services, jobs,
  productive uses, reduced indoor air pollution)
• Project owner - REAP
• Project sponsors Solar Electric Co. MATEC

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Results experience

• Carbon finance reduces unit price by US20
  (80-100 to US60-80)
• Risk factors resulted in low CERs (conservative
  market development, 7yrs) Possible
  upgrade/replication?
• Require at least US10/tCO2
• Minimum upfront project dev costs but CDM
  transaction costs still high
• MV incorporated into maintenance contracts
• In-kind resources risk share from project
  owner/sponsors
• May only work for larger volumes (1MW/yr minimum
  at current prices)
• Market SD benefits Gold standard?

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• Project section criteria (Aug 03)
• Socially relevant
• Technology
• Project promoter
• Gestation period
• Financial
• 11 PCNs received
• Refinements/modifications (March 04)
• 3 selected

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Project 1 Off-grid Solar bundle

• 20,000 SHS, 22 PVPS
• Baseline diesel mini-grid (SSC MP annex B)
• 500-4000 tCO2 10th yr 20,000 over 10 yr period
• Market Dynamics, Enertech Tata BP Solar
• Price expectations US10/CO2

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Project 2 Grid-connected RE

• 9.6 MW 7.5MW hydro, 2.1 MW wind
• Baseline (Check??)
• 35,000 CERs/yr
• Boruka Power

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Project 3 Fuel Switch

• Gas LP water heaters (200,000) Gas LP room
  heaters (62,000)
• Baseline average grid mix (conservative
  projection)
• 1.087 mtCO2 0.633 mtCO2
• Shri Shakti Alternative Energy Ltd.

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Results Experience to date

• Transaction cost reduction v. significant
  (standardised baselines, verification etc.)
• V. large SSC potential market in India
• Bundling by technology or baseline
• Capacity building for bundling organisations
  (CDM, contract/portfolio risk mgmt, etc.)
• PDD development (now-Aug 04)
• Business plan for bundling org (Mar 05)
• Interest from buyers/finance orgs

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Overall experience from bundling

• Can potentially lead to the development of high
  SD projects that would otherwise not be viable
  through CDM (other ODA?)
• Evidence of CDM transaction cost reduction but
  project development costs increase?
• Project design for reducing costs risks
  extremely important for success
• For micro projects, bundle volume has to be high
  for viability but this can increase risk
  (non-realisation of CERs) Trade off?
• Limits (15MW etc.) on bundling are prohibitive
• Prices still too low for many ADDITIONAL micro
  projects high value CERs?
• Potentially bundling can be carried out by a
  range of orgs e.g. financial orgs, trade
  associations, etc

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Further Info

• Project website for reports, project updates, SSC
  info,
• www.cdmpool.com
• or contact jason.mariyappan_at_itpower.co.uk