Case Studies Energy Efficiency Landfill Gas

Accessing Carbon Finance
Case Study: CDM and Energy

Efficiency
Hakim Zahar, P.Eng.
Vice-President
ECONOLER INTERNATIONAL
February-March, 2007
Three Case Studies
1. Standard Energy efficiency project: Taishan

Cement Works Waste Heat Recovery (WHR)
and Utilisation for Power Generation Project
2. Project bundling: Landfill Gas Recovery and
Flaring for 9 bundled landfills in Tunisia
3. Programmatic approach: Moldova Energy
conservation and greenhouse gases emissions
reduction
1st Case study: Taishan Cement Works
WHR and Utilisation for Power
Generation Project
• Project Description
• Status of the project for its registration
• CDM deal structure: tenders or sole source
• Financing of the CDM costs
• Methodology
• Additionality
– Project Activity : waste heat recovery and utilization for power
generation project
– Location: Taishan Cement Works in Ninyang County of Shandong
Province of the People’s Republic of China.
– Host Party: China
– Other Parties Involved: United Kingdom of Great Britain and
Northern Ireland
– Authorized Participants: Natsource Europe Limited
– Description: The Taishan Cement Works produces highquality
cement using the new dry process technique and has been being
implemented in two phases – the 2500 tons per day clinker
production line commenced operation in June 2003 and the 5000
tons per day clinker production began production November 2004.
– Problematic: Energy demand has increased in tandem with cement
production and the captive power plant has insufficient capacity to
provide for this increase.
– Baseline: Taishan would have to take electricity either from the grid,
or construct a new waste coal fueled captive power plant, the most
economically attractive option.
– Project Activity: recovery and use of waste heat from the rotating
kilns of the two cement clinker production lines. The waste heat is
currently mainly vented to atmosphere, with a portion re-circulated
within the clinker process. However the Project Activity will now
capture the waste heat for use in a power generation plant, the
exhaust heat of which can also still be recirculated to the clinker
process. This power generation plant will be rated at 13.2MW and
will produce annually 89.5 million kWh of electricity with no
significant associated emissions of CO2.
– Large Scale Project
– Categories: 1 and 4
• The project activity falls under sectoral scope 4 –
Manufacturing Industries, specifically the cement sector.
• The project activity is also relevant to sectoral scope 1 –
Energy– Mining/mineral production.
– Amount of Reductions: 105,894 metric tonnes CO2
equivalent per annum

– The start date of the Project Activity was 1st
July 2004, when equipment ordered.
– Validation report: March 2006
– Registration Date: June 24, 2006
– Crediting Period: 01 Jan 06 - 31 Dec 12
(Renewable)

– Xinwen Mining Group Company is permitted by the
National Development and Reform Commission of the
People’s Republic of China to transfer to the Natsource
Europe Limited no more than 800,000 tCO2e in total
CERs for a period of 7 years from the starting date of the
project.
– Fee level: USD 19923.2
• Methodology
– This Project Activity uses the approved methodology
AM0024 titled “Methodology for greenhouse gas
reductions through waste heat recovery and utilization
for power generation at cement plants” which was
developed for this Project Activity and which was
recommended for approval by the methodologies panel
at their 17th meeting and accepted by the Executive
Board at their 21st meeting.
– The methodology is applicable to the Project as the
Project clearly utilises waste heat recovery for utilisation
in a power generation unit at a cement plant.
• Methodology : The methodology lists five applicability
criteria and all of these applicability criteria clearly apply
to this Project Activity because:
A. The electricity produced by the Project Activity is used within
the cement works where the Project Activity is located and
there is no electricity export to the grid in the baseline scenario.
B. The Project Activity displaces electricity from an identified
specific generation source which is a 15MW extension to the
37MW captive coal fired plant at the site (baseline). This
15MW extension, i.e. the baseline scenario, is a more
economically attractive course of action than the proposed
CDM Project Activity.
• Methodology : The methodology lists five applicability
criteria and all of these applicability criteria clearly
apply to this Project Activity because:
C. There is sufficient publicly available information to identify
the specific generation source (baseline) which is a 15MW
extension to the existing 37MW captive coal fired plant at the
site.
D. The PDD demonstrates that in the baseline, waste heat use is
only possible within the boundary of the clinker making
process.
E. Waste heat is only planned to be used in the Project Activity
and for recycling waste heat within the boundary of the clinker
making process.
• CDM project additionality demonstration:
1. Prior to the project starting date the Project Sponsor had entered
into a CDM development agreement with a CDM consulting
company and started the preparation of a submission of a new
methodology applicable to the project activity (NM0079).
2. The Project Activity is not the only option which is available to the
Project Owners.
3. There is clear evidence that the Project Activity is less financially
attractive than the baseline scenario for a wide range of scenarios
(the Project IRR of the baseline scenario is 67% higher than the
Project Activity)
4. There are technological barriers and barriers to prevailing practice
• CDM project additionality demonstration:
5. No similar projects were found in Shandong Province and only
four similar projects have been identified as implemented in China
at similar sized cement plants to date – two using imported
equipment and two using domestic equipment. None of those
projects located at a mine mouth cement plant where the incentives
for carrying out the Project Activity are considerably different to
cement works where there are no captive power plant options.
6. Clearly the CDM revenue represents a significant stream of
revenue for the Project, counting for 19.2% of the annual revenue
of the project during the crediting period assuming a conservative
CER value of USD6 per ton and comparing it against avoided
electricity purchases. This potential benefit directly increases the
investment return of the Project Activity and compensates for its
increased cost and increased risks.
2nd Case Study: Project bundling:
Landfill Gas Recovery and Flaring for
9 bundled landfills in Tunisia
• Definition of bundling
• Methodology
• Additionality
Definition of bundling
• A bundle of CDM projects is defined as a collection or
aggregation of several CDM projects.
• In a bundle, each activity could be undertaken individually
as a CDM project activity (e.g. three wind farms) and the
various project activities are only bundled together in order
to reduce CDM-related transaction costs.
• A proposed CDM project shall be deemed to be a bundle of
CDM projects :
– The bundled technologies/measures should be independently owned
and operated;
– The bundle should be implemented at different locations;
– New CDM projects can be added to a bundle within the crediting
period;
2nd Case Study: 9 bundled landfills in
Tunisia
– Project Activity : Landfill Gas Recovery and Flaring for 9 bundled
landfills in Tunisia
– Location: The nine landfills are disseminated over the Tunisian
Territory and close to the following cities: Bizerte, Sfax, Kairouan,
Djerba, Gabes, Monastir, Sousse, Nabeul and Medenine.
– Host Party: Tunisia
– Other Parties Involved: Italy
– Authorized Participants: International Bank for Reconstruction and
Development (IBRD) as the Trustee of Italian Carbon Fund (ICF)
– Large Scale Project
– Categories: Waste handling and disposal
Tunisia
– Description: The project activity will install a gas recovery and
flaring system in each of the nine landfills, in order to reduce CH4
emissions, and thus generate CERs, while ensuring safety at the
Landfill sites, serving sustainable development purposes, and
providing additional resources to environment protection in Tunisia.
The nine landfills have an aggregated nominal capacity of 3,300
tons of waste per day; i.e. 1.2 million tons of waste/year.
– Baseline: Originally, none of the nine landfills was designed to be
equipped with LFG management system.
– Amount of Reductions: 317,909 metric tonnes CO2 equivalent per
annum
Tunisia
– The starting date of the project activity is
expected to be 1st January 2007.
– Validation report: February 2006
– Registration Date: November 23, 2006
– Crediting Period: 01 Jan 07 - 31 Dec 12 (Fixed)
Tunisia
– The LFG recovery and flaring systems will be financed by the
National Waste Management Agency (ANGED), and operated by
private contractors.
– Total investment of the LFG collection and flaring system in the
nine landfills is estimated at 6.7 MUS$, which will be mobilized
through a World Bank Loan.
– The World Bank will provide to the government of Tunisia with a
loan to partially finance a Solid Waste Management Project to
support the implementation of this programme
• Fee level: USD 62081.8
Tunisia
• Methodology
– Consolidated baseline methodology for landfill gas
project activities – ACM0001/Version3, dated 19 May
2006
– Project activity meets applicability criteria of the chosen
methodology. This methodology is adopted in relation
with the selected approach for Baseline taken from
paragraph 48 of the CDM modalities and procedures:
“(b) Emissions from a technology that represents an
economically attractive course of action, taking into
account barriers to investment”.
Tunisia
• Additionality
1. The project will start by July 2006, so the registration will occur before
the start of the first crediting period.
2. There is no mandatory law or regulation, or any contractual
arrangement that force Landfill operators to collect and flare methane or
to use it for electricity generation.
3. Considering the LFG project without CDM, the project would not have
been adopted by Tunisia as it wouldn't generate any revenue, and its
NPV would be negative (MUS$ -9.1), with an IRR also negative.
4. Common Practice for Controlled landfills in Tunisia will not consider
CH4 extraction and flaring, and it is unlikely that LFG systems would
be prevalent in the future without the CDM contribution.
5. The project activity will generate significant economic benefits through
the sale of ERs that will justify contracting a loan to cover the
investment expenses and to make project implementation possible.
3rd Case Study: Programmatic approach:
Moldova Energy conservation and
greenhouse gases emissions reduction
• Definition of programmatic approach
• Methodology
• Additionality
Definition of programmatic approach
• The program is the project, the program enacting
• agent is project participant
• The Program can be a private sector initiative or a
Government measure: voluntary or mandatory
• Emission reductions are achieved by multiple
actions executed over time
• Type, size and timing of the induced actions may
not be known at the time of registration
3rd Case Study: Moldova Energy
conservation and GHG reduction
– Project Activity: The project refers to energy conservation measures
in public buildings and consequently to GHG emission reduction.
– Location: 32 public buildings in 9 municipalities of the Republic of
Moldova: Cantemir, Edinet, Falesti, Floresti, Hincesti, Ialoveni,
Nisporeni, Straseni, Ungheni
– Host Party: Republic of Moldova
– Bilateral and Multilateral Funds : Community Development Carbon
Fund (CDCF)
Managing company: International Bank for Reconstruction and
Development (IBRD)
Netherlands
– Authorized Participants: Carbon Finance Unit Moldova
– Small Scale Project
– Description: This Moldovan project aims at GHG emission
reduction as result of efficiency improvements and fuel switching
measures for a series of public buildings (kindergartens, schools,
vocational schools, hospitals, policlinics etc.) implemented via the
WB Moldova Energy II Project.
– Baseline: the most conservative scenario selection, has been chosen
the scenario corresponding to five (5) percent annual heat
consumption growth rate.
– Categories: Sectoral scope 1: Energy industries (renewable - / non-
renewable sources); Sectoral scope 3: Energy demand
– Amount of Reductions: 11,567 metric tonnes CO2 equivalent per
annum
– Fee level: USD 5000
– The start date of the Project Activity was
January 15, 2006
– Validation report: November 7, 2005
– Registration Date: January 29, 2006
– Crediting Period: 20 Jan 06 - 19 Jan 16 (Fixed)
– The total Energy II project financing will be US$ 39.93 million, of
which US$35 million would be financed from an IDA credit,
US$4.33 million from internal cash generation and municipal
contributions and US$0.6 million from the Swedish International
Development Agency (SIDA).
– The WB Energy II Project investment decisions refer to least cost
technical solutions, which have to satisfy the required heating
standards at minimum costs.
– The Community Development Carbon Fund (CDCF) will have the
CER rights.
• Financing of the CDM costs :
• Methodologies
– II.E Energy efficiency and fuel switching
measures for buildings
– III.B Switching fossil fuels
• Additionality
a) Investment barrier: a financially more viable alternative to the project
activity would have led to higher emissions;
b) Technological barrier: a less technologically advanced alternative to
the project activity involves lower risks due to the performance
uncertainty or low market share of the new technology adopted for the
project activity and so would have led to higher emissions;
c) Barrier due to prevailing practice: prevailing practice or existing
regulatory or policy requirements would have led to implementation of
a technology with higher emissions;
d) Other barriers: without the project activity, for another specific reason
identified by the project participant, such as institutional barriers or
limited information, managerial resources, organizational capacity,
financial resources, or capacity to absorb new technologies, emissions
would have been higher’.
Thank you for your attention!
Hakim Zahar, P.Eng

hzahar@econolerint.com
+1 418 692-2592
www.econolerint.com

Case Studies Energy Efficiency Landfill Gas

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Accessing Carbon Finance

Case Study: CDM and Energy

1. Standard Energy efficiency project: Taishan

• Status of the project for its registration

• CDM deal structure: tenders or sole source

Hakim Zahar, P.Eng

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