Central American Carbon Finance Guide
GreenStream Network Ltd. 2010 Edition
Energy and Environment Partnership with Central America Central American Carbon Finance Guide (c) copyright 2010, GreenStream Network Plc 3rd edition, November 2010
Contacts: [email protected] [email protected] and [email protected]
This Guide may be freely quoted for non-commercial purposes, provided that this Guide is acknowledged as the source and authors’ copyright is recognised
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Central American Carbon Finance Guide
FOREWORD The United Nations Framework Climate Change Convention (UNFCCC) has encouraged industrialized countries to stabilize GHG emissions and the Kyoto Protocol has committed them to do so. As another initiative to contribute to this effort and launched during the World Summit on Sustainable Development of the United Nations in Johannesburg 2002, the Energy and Environment Partnership with Central America (EEP) has been supporting the Central American countries to promote the renewable energies and energy efficiency with the purpose of not only mitigate the global climate change but also contribute to the sustainable development of the region. After seven years of successful operation the EEP continue striving after reduction of the emissions that are causing climate change and supporting the region to start a new era of global green growth. Started as a pilot initiative, the EEP has proved to be a best practice and concrete example of future climate change action financing after the Copenhagen unsuccessful Climate Summit 2009. EEP has established an outstanding number of 238 projects that are addressing the use of all the available renewable energy resources across the region, involving all kind of project developers and different size of projects. In addition, the Regional Forum on a relevant renewable energy topic that the EEP organizes twice a year is already a regional point of reference where important players of the private sector, governmental and non-governmental organizations gathers to share experiences and knowledge about state-of-the-art renewable energy technologies. The EEP’s third phase (2010 – 2012) is an initiative of the Ministry for Foreign Affairs of Finland, the Austrian Development Cooperation, the European Union, the Central American Commission for Environment and Development (CCAD) and the Secretary- General of the System for Central American Integration (SG-SICA). Also, as a good example of a successful Partnership, the Central American model is being replicated in 8 Eastern and Southern African countries, 4 Mekong river countries, 4 Andean region countries and Indonesia. Considering the renewable energy resources potential and the actual dependency of fossil fuel across the region, the EEP is proud to present the third edition of the Central American Carbon Finance Guide. This has been an important tool that have allowed to potential renewable energy project developers to know more about the Clean Development Mechanism (CDM), the current status and the future of international carbon markets, the impacts of carbon finance to project financing and to get an updated description of the energy sector in each of the Central American countries. For more detailed information about the EEP, I’m cordially inviting you to visit our web site at www.sica.int/energia
Dr. Markku Nurmi Director General. Ministry of the Environment, Finland Chairman of Steering Committee of the Energy and Environment Partnership
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ACKNOWLEDGEMENTS This Guide is a result of a participatory process involving parties from Central America, Finland and elsewhere. The authors are grateful for all the suggestions and help they have received from many individuals and organisations while writing this guide. We would like to thank especially the Energy and Environment Partnership with Central America (EEP) that made this Guide possible. Many persons within the Partnership have provided valuable comments and support during the process. We would like to express our special gratitude to Chairman of the Steering Committee of the Partnership, Dr Markku Nurmi and Mr. Peter Waldsam from the Austrian Cooperation for Development, Ms. Anu Hassinen from the Finnish Ministry of Foreign Affairs, Mr. Ismael Antonio Sánchez and Ms. María Eugenia Salaverría, as well as all the members of the Steering Committee representing all the Central American countries Carbon Finance and Clean Development Mechanism are still relatively new instruments that are constantly evolving and uncertainty of international climate politics play a key role in their development. Therefore a lot of the information is outdated already when printed. We have tried to incorporate in this guide the most recent developments in the field to the extent possible. Feedback from the users of this Guide is most welcome in this process. Principal authors of this third version of the guide are Mr. Roland Magnusson, Oliver Quireza, Juha Ruokonen and Anna-Maija Sinnemaa from GreenStream Network Ltd with strong support from the Steering Committee members. However all mistakes and errors are those of authors. External financing for this guide was provided by the Ministry for Foreign Affairs of Finland and the Austrian Cooperation for Development through the Energy and Environment Partnership with Central America. Authors appreciate the support.
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TABLE OF CONTENTS Foreword to the Third Edition ...... 3 Acknowledgements ...... 4 Table of Contents ...... 5 Abbreviations ...... 8 1 Introduction ...... 10 1.1 Background ...... 10 1.2 Purpose of the Central American Carbon Finance Guide ...... 11 1.3 Structure of the Guide ...... 11 1.4 UNFCCC and the Kyoto Protocol ...... 11 2 CDM Projects ...... 15 2.1 What is CDM? ...... 15 2.2 Definition of Small-scale CDM Projects ...... 15 2.3 Participation Requirements for CDM Projects ...... 16 2.4 CDM Project Cycle ...... 17 2.5 Project Preparation, Validation and Registration ...... 18 2.5.1 Project Preparation and Host Country Approval ...... 18 2.5.2 Project Design Document (PDD) ...... 19 2.5.3 Baseline Methodology ...... 20 2.5.4 Additionality ...... 25 2.5.5 Crediting Period and Duration of the Project ...... 26 2.5.6 Prior Consideration ...... 27 2.5.7 Monitoring Plan and Methodology ...... 27 2.5.8 Environmental Impacts ...... 28 2.5.9 Stakeholder Comments ...... 28 2.5.10 Project Validation and Registration ...... 29 2.6 Project Implementation Phase ...... 29 2.6.1 Monitoring ...... 31 2.6.2 Verification and Certification ...... 31 2.6.3 Issuance of Certified Emission Reductions ...... 31 2.6.4 Forwarding ...... 32 2.7 Sale of the Emission Reductions ...... 32 2.7.1 Prices and Risks ...... 32 2.8 Costs Related to the CDM Project Cycle ...... 34 3 Financing Small-Scale Renewable Energy Projects ...... 35 3.1 Introduction ...... 35 3.2 Impacts of Carbon Finance to Project Financing ...... 35 3.3 Project Financing ...... 36 3.4 Types of Capital ...... 37 3.4.1 Equity Capital ...... 37 3.4.2 Debt capital ...... 37 3.4.3 Mezzanine Capital ...... 38 3.5 Financial project cycle ...... 38 3.5.1 Pre-feasibility Studies ...... 39 3.5.2 Feasibility Study and Business Plan ...... 40 3.5.3 Financial plan ...... 43 3.5.4 Financial appraisal and negotiations ...... 47 3.5.5 Financial package and documents for financial closing ...... 48
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3.5.6 Financing sources for small scale renewable energy sources ...... 49 4 Central American countries information ...... 51 4.1 Regional and Country Information ...... 51 4.1.1 General Indicators ...... 51 4.1.2 Regional initiatives ...... 57 4.2 BELIZE ...... 59 4.2.1 Description of the Energy Sector ...... 59 4.2.2 National CDM Policy ...... 60 4.2.3 Relevant Organisations ...... 60 4.3 COSTA RICA ...... 62 4.3.1 Description of the Energy Sector ...... 62 4.3.2 National CDM Policy ...... 65 4.3.3 Relevant Organizations ...... 65 4.4 EL SALVADOR ...... 70 4.4.1 Description on the Energy Sector ...... 70 4.4.2 National CDM Policy ...... 73 4.4.3 Relevant organizations ...... 74 4.5 GUATEMALA ...... 77 4.5.1 Description of the Energy Sector ...... 77 4.5.2 National CDM Policy ...... 80 4.5.3 Relevant Organizations ...... 81 4.6 HONDURAS ...... 85 4.6.1 Description of the Energy Sector ...... 85 4.6.2 National CDM Policy ...... 88 4.6.3 Relevant Organizations ...... 88 4.7 NICARAGUA ...... 91 4.7.1 Description of the Energy Sector ...... 91 4.7.2 National CDM Policy ...... 96 4.7.3 Relevant Organizations ...... 102 4.8 PANAMA ...... 104 4.8.1 Description of the Energy Sector ...... 104 4.8.2 National CDM Policy ...... 108 4.8.3 Relevant organizations ...... 111 4.9 DOMINICAN REPUBLIC ...... 113 4.9.1 Description of the Energy Sector ...... 113 4.9.2 National CDM Policy ...... 115 4.9.3 Relevant Organizations ...... 119 5 The current status International Carbon Markets120 5.1 Background ...... 120 5.2 Volume of the Carbon Market ...... 121 5.3 Buyers and Sellers in the Carbon Market ...... 122 5.3.1 CERs in the EU Emissions Trading Scheme ...... 123 5.4 Technologies in the Projects ...... 124 5.5 Current situation of CDM projects ...... 126 6 The future of Carbon Markets ...... 132 6.1 Global climate negotiations and the role of mechanisms ...... 132 6.1.1 The CDM Reform ...... 133 6.1.2 New mechanisms ...... 133 6.2 Driving the demand: carbon market schemes ...... 134 6.2.1 The EU ETS ...... 134
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6.2.2 Australia ...... 136 6.2.3 Japan ...... 137 6.2.4 The USA ...... 137 6.3 Carbon financing after 2012 in the light of the current situation .... 138 6.4 Conclusions on the future of international carbon markets ...... 139 Annex I – Article 12 of the Kyoto Protocol ...... 140 Annex II – Small-scale CDM project Design Document ...... 141 Annex III – Selected Technical Assistance Funding for Project Development ...... 150 Annex IV – Equity, Grants and Loans ...... 152 Annex V – Carbon Finance ...... 155 Annex VI – regional contacts ...... 157 Annex VII – CDM PROJECT ACTIVITIES FROM CENTRAL AMERICA REGISTERED BY THE CDM EXECUTIVE BOARD ...... 161 Annex VIII – References ...... 180
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ABBREVIATIONS AA Assigned Amount AAU Assigned Amount Unit AHPPER Asociación Hondureña de Pequeños Productores de Energía Renovable AMM Administrador del Mercado Mayorista, Guatemala AMS Approved Small-Scales Methodology ANAM Autoridad Nacional del Ambiente ARESEP Autoridad Reguladora de Servicios Públicos BUN-CA Biomass Users Network – Centro América BEL Belize Electricity Limited CABEI Central American Bank for Economic Integration CAF Corporación Andina de Fomento CCAD Comisión Centroamericana de Ambiente y Desarrollo CDB Caribbean Development Bank CDCF Community Development Carbon Fund CDM Clean Development Mechanism CDM EB CDM Executive Board CEL Comisión Ejecutiva Hidroeléctrica del Río Lempa, El Salvador CER Certified Emission Reduction CHP Combined Heat and Power CMNUCC Convención Marco de las Naciones Unidas para el Cambio Climático CNDC Centro Nacional de Despacho de Carga, Nicaragua CNE Comisión Nacional de Energía, Nicaragua y Honduras CNEE Comisión Nacional de Energía Eléctrica, Guatemala COP Conference of the Parties to the UNFCCC COPE Comisión de Política Energética, Panamá CRIE Comisión Regional de Interconexión Eléctrica DEE Dirección de Energía Eléctrica, El Salvador DGE Dirección General de Energía, Honduras y Guatemala DNA Designated National Authority DOE Designated Operational Entity DSE Dirección Sectorial de Energía, Costa Rica EIB European Investment Bank ENEE Empresa Nacional de Energía Eléctrica, Honduras ENEL Empresa Nicaragüense de Electricidad ENTRESA Empresa Nicaragüense de Transmisión, S.A. EPR Empresa Propietaria de la Red ERPA Emission Reduction Purchase Agreement ERSP Ente Regulador de Servicios Públicos, Panamá ESMAP Energy Sector Management and Assistance Program ET Emissions Trading ETESA Empresa de Transmisión Eléctrica, S.A., Panamá ETESAL Empresa de Transmisión Eléctrica de El Salvador EU European Union EU15 Old EU Member Status until 1 May 2005 EUA European Emission Allowance EU ETS EU Emissions Trading Scheme FENERCA Financiamiento de Empresas de Energía Renovable en América Central FIDIC Federación Internacional de Ingenieros Consultores GESAL Geotérmica Salvadoreña (actualmente denominada La Geo)
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GHG Greenhouse Gases GSN GreenStream Network Ltd. GWh Gigawatt-hour GWP Global Warming Potencial HFC Hydrofluorocarbons ICE Instituto Costarricense de Electricidad IDB Inter.-American Development Bank IETA Internacional Emissions Trading Association IFC International Finance Corporation IIC Inter-American Investment Corporation INE Instituto Nicaragüense de Energía IRR Internal Rate of Return JI Joint Implementation kW Kilowatts kWh Kilowatt-hours LGE Ley General de Electricidad, El Salvador y Guatemala LIE Ley de la Industria Eléctrica, Nicaragua LULUCF Land-use, Land-use Change and Forestry MARENA Ministerio del Ambiente y los Recursos Naturales, Nicaragua MARN Ministerio de Ambiente y Recursos Naturales, Guatemala y El Salvador MDL Mecanismo de Desarrollo Limpio MEM Ministerio de Energía y Minas, Guatemala MER Mercado Eléctrico Regional MIF Multilateral Investment Fund MINAET Ministerio de Ambiente, Energía y Telecomunicaciones, Costa Rica MM Mercado Mayorista MW Megawatts MWh Megawatt-hours NDF Nordic Development Fund NPV Net Present Value OECD Organization for Economic Co-operation and Development PCF Prototype Carbon Fund PCN Project Concept Note PDD Project Design Document PIN Project Idea Note PPA Acuerdo de Compra-Venta de Energía RMU Removal Unit SERNA Secretaría de Recursos Naturales y Ambiente, Honduras SIEPAC Sistema de Interconexión Eléctrica para América Central SIGET Superintendencia General de Electricidad y Telecomunicaciones, El Salvador SSC-PDD Small-scale Project Design Document tCO2e metric tons of carbon dioxide equivalent UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme UNEP United Nations Environment Programme UNIDO United Nations Industrial Development Organization UNFCCC United Nations Framework Convention on Climate Change VER Verified Emission Reduction
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1 INTRODUCTION 1.1 Background The main objective of the Energy and Environment Partnership with Central America (EEP) is to promote the use of renewable energy sources and clean technologies in Central America in a sustainable manner, and to make energy services more accessible to the poor, particularly to those in rural areas and the mitigation of the global Climate Change. This effort was launched with the support of Finland's Ministry for Foreign Affairs in coordination with the Central American Integration System (SICA) and the Central American Commission on Environment and Development (CCAD) and since February 2007, the incorporation of the Austrian Development Cooperation (OCAD) has strengthened this effort. Moreover, European union is also proving financing assistance through EEP. There are several of the projects under preparation within the framework of the Partnership and in the Central America that have the potential to cut the emissions of greenhouse gas emissions. Capitalisation of this greenhouse gas reduction can in some cases significantly improve the profitability of the projects. This calls for clear guidance on how to include the climate aspect in the project preparation and implementation from the outset. The international markets for greenhouse gas emission reductions and renewable electricity certificates are fragmented. For several years, the market for Kyoto Protocol’s Certified Emission Reductions (CERs) was dominated by few players, mainly governmental carbon credit purchase programs and World Bank’s the Prototype Carbon Fund. The Cerupt programme of the Government of the Netherlands was one of the first governmental purchase programs. Since the start of the EU Emission Trading Scheme (EU ETS) in 2005, the number of players has increased significantly. New entrants include carbon funds who act on behalf of their investor, which include both governmental and private actors and private companies that participate directly in the carbon markets. The influx of new entrants makes the market more complex and increasingly competitive. One of the main drives has been the EU Linking Directive, which enables companies within the EU ETS to use CERs and ERUs for compliance, up to a certain limit. Furthermore, various non- Kyoto systems, such as renewable energy certificate schemes, voluntary initiatives (e.g. Chicago Climate Exchange) and U.S. state-level regimes, make the situation even more complicated. A great deal of knowledge and understanding is required from the project developers if they wish to maximize the carbon benefits for their projects. On the other hand, carbon finance does not convert a bad project into a good one. Carbon finance can improve the profitability of a project that is sound, sustainable and well structured in its own right. Many good ideas are not realised as projects because there is a lack of capacity to develop bankable project proposals. This is especially true when it comes to small-scale renewable energy projects. In an ideal situation, a good concept can be developed into a bankable and solid project proposal and carbon finance is used to further improve the feasibility of the project. This is the third edition of the Central American Carbon Finance Guide. The second edition was published in November 2007. Originally, in March 2003, it was the power company Pohjolan Voima Oy and other Finnish members of the Energy and Environment Partnership who expressed a need for a guide on how to ensure that greenhouse gas emission reductions generated by projects in Central America fulfill international requirements. To fulfill this need, this guide provides specific guidance on the preparation
10 Central American Carbon Finance Guide of bankable project proposals and on the use of carbon finance for small-scale renewable energy projects in Central America. 1.2 Purpose of the Central American Carbon Finance Guide This guide is intended to help project developers, financiers, technology suppliers and government officials to understand how to prepare bankable small-scale renewable energy project proposals in Central America, how to benefit from the carbon markets through CDM or other schemes, and how to manage carbon market related risks. The authors hope that the guide will be a practical reference tool for all parties involved in CDM and other climate-related projects in Central America. For this, we encourage feedback from actual users of the guide in order to improve the possible future versions of it. It is our wish that this guide will for its part contribute towards an increased number of successful small-scale renewable energy projects utilizing carbon finance in the region and further improve the competitive position of the Central American countries in the international carbon markets vis-à-vis other world regions. Moreover, we wish that the guide will highlight the key uncertainties of carbon markets in the post-2012 period. 1.3 Structure of the Guide In the first Chapter (1.4) we give background information on UNFCCC and the Kyoto Protocol. This is useful for those who want to understand better the underlying policies but not strictly necessary for a project developer. Chapter 2 explains what is meant with CDM and small-scale projects, how the project cycle looks like and what are the related costs. Chapter 3 gives a short introduction to project financing and helps developers to understand typical requirements of financial institutions to participate in projects. Chapter 4 is probably most useful for those readers who come outside of the region. It has a section for each of the seven Central American countries, as well as for the region as a whole, explaining the relevant national circumstances in each country and also giving a list of useful contacts. Chapter 5 gives a brief outlook of the carbon markets. In the Annexes, contact information for organisations providing technical assistance and financing is provided. This guide is published in two separate versions in English and Spanish. Apart from the printed version, an electronic version is available in the web at http://www.sica.int/energia/. 1.4 UNFCCC and the Kyoto Protocol To mitigate climate change, different international, national and corporate policy frameworks are being developed. In 1992, the world’s governments adopted the UN Framework Convention on Climate Change (UNFCCC).1 The ultimate objective of the Convention is to achieve stabilization of atmospheric concentrations of greenhouse gases (GHGs) at levels that would prevent dangerous anthropogenic (human-induced) interference with the climate system. UNFCCC has a permanent secretariat in Bonn (www.unfccc.int) and its supreme decision-making body is the annual Conference of Parties (COP). The Convention divides countries into two main groups. Annex I Parties include the relatively wealthy industrialized countries that were members of the Organisation for
1 UNFCCC was adopted in the United Nations Conference on Environment and Development (UNCED) celebrated in June 1992 in Rio de Janeiro, Brazil (also known as “The Earth Summit” or “The Rio Conference”). The Convention text can be found at www.unfccc.int/resource/docs/convkp/conveng.pdf.
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Economic Co-operation and Development (OECD) in 1992, as well as countries with economies in transition. All other countries that are Parties to the Convention not listed in Annex I – mostly the developing countries – are known as Non-Annex I Parties. The Annex I countries are subject to a specific commitment to adopt climate change policies and measures with the non-legally binding aim that they should have returned their greenhouse gas emissions to 1990 levels by the year 2000. This target was achieved only by a few Annex I countries.2 By August 2009, the UNFCCC had been ratified by 193 countries In 1997, governments took a further step forwards and adopted the Kyoto Protocol to the UNFCCC that broke new ground with its legally binding constraints on greenhouse gas emissions.3 Kyoto Protocol’s flexible mechanisms – Joint Implementation (JI), Clean Development Mechanism (CDM) and Emissions Trading (ET) – aim at cutting the cost of curbing emissions. The greenhouse gases covered by the Kyoto Protocol include the six gases listed in Table 1. It is important to note that traditional atmospheric pollutants, e.g. sulphur oxide, are not greenhouse gases and do not fall under the climate change agreements. Table 1. Greenhouse gases (GHG) covered by the Kyoto Protocol. The emissions of the various GHGs can be converted into carbon dioxide equivalent emissions by multiplying them with the GWP. The GWPs in the table are based on the IPCC Second Assessment Report (see Article 5 of the Kyoto Protocol) and can be revised in the future. GWPs are based on the climatic effects of the GHGs over a 100-year time horizon. Greenhouse Gas Global Warming Potential (GWP)
Carbon dioxide (CO2) 1 Methane (CH4) 21 Nitrous oxide (N2O) 310 Hydrofluorocarbons (HFCs) various gases, different GWPs Perfluorocarbons (PFCs) various gases, different GWPs
Sulphur hexafluoride (SF6) 23,900 The core of the Kyoto Protocol is a set of legally binding emissions targets for industrialized countries. These amount to a total cut among all Annex I Countries of at least 5% from 1990 levels in the period 2008-2012 (The Kyoto commitment period). The total cut is shared out so that each Annex I Country has its own individual emissions target. These individual targets, which are listed in the Protocol’s Annex B, were decided upon in Kyoto through intense negotiation. Table 2 presents the targets for Annex I countries. Table 2. Greenhouse gas reduction targets in the Annex B of the Kyoto Protocol. Country Target EU-15, Bulgaria, Czech Republic, Estonia, Latvia, Liechtenstein, -8% Lithuania, Monaco, Romania, Slovakia, Slovenia, Switzerland US -7% Canada, Hungary, Japan, Poland -6% Croatia -5% New Zealand, Russian Federation, Ukraine 0% Norway +1% Australia +8% Iceland +10% The targets in Table 2 are used to calculate the Assigned Amounts (AAs) for the Annex I countries. These are further adjusted on the basis of the changes in the carbon stocks of
2 E.g. Russia because of the economic restructuration and recession, Germany due to the impacts of the reunification, and the UK that shifted remarkably from coal to gas after 1990. 3 Kyoto Protocol to the Convention on Climate Change was adopted in the 3rd Conference of the Parties to the UNFCCC in Kyoto, Japan, in December 1997. The Protocol text can be found at www.unfccc.int/resource/docs/convkp/kpeng.pdf.
12 Central American Carbon Finance Guide each country. Specific Removal Units (RMUs) were invented in the 7th Conference of Parties in Marrakesh, Morocco in November 2001 to be used in the accounting of the so- called LULUCF activities. RMUs are issued for instance when the forests of a country act as a net carbon sink, i.e. more carbon is tied in the biomass than released during a certain period.
Figure 1. Compliance assessment under the Kyoto Protocol. According to the Kyoto Protocol, Annex I Parties shall ensure that their greenhouse gas emissions during the five-year Kyoto commitment period 2008-2012 do not exceed their Assigned Amounts (AA), with a view to reducing their overall emissions below 1990 levels in the commitment period. AA is calculated from country’s emissions in the base year 1990. Base year emissions multiplied by five (since there are five years in the commitment period) minus the Kyoto Protocol reduction target (see Table 2) is country’s Assigned Amount (orange bar). This is further adjusted by Land-use, Land-use Change and Forestry activities (LULUCF, Articles 3.3. and 3.4, green bar). Through Articles 6 (Joint Implementation), 12 (Clean Development Mechanism) and 17 (Emissions Trading) countries can acquire or sell compliance units (pink bar). The sum of the actual emissions during the five years of the commitment period 2008- 12 (right-hand side of the diagram) shall be less than or equal to the final amount of compliance units in country’s accounts (left-hand side of the diagram). Source: UNFCCC Secretariat. Articles here refer to Kyoto Protocol Articles.
The EU Member States prior to 2004 enlargement (EU15) take advantage of a scheme under the Protocol, known as the burden-sharing agreement or the “bubble”, to redistribute their -8% reduction targets among themselves. For instance Finland has a target of 0%, Sweden +4%, Spain +15% and Germany -21% under the EU agreement. To date, there is no collective target for EU-27 emissions. Ten of the twelve member states which joined the EU in 2004 and 2007 have individual commitments (between -6% and - 8%). Cyprus and Malta have no emission targets under the Kyoto Protocol. As to possible commitments for subsequent periods, the Kyoto Protocol states that these shall be established in amendments to targets in Annex B and the Parties to the Protocol shall initiate the consideration of such commitments at least seven years before the end of the first commitment period (i.e. in 2005 at latest). At the time of writing, a decision on subsequent periods is yet to be reached. The working group on extending the Protocol is due to report to the 6th Meeting of the Parties of the Kyoto Protocol (MOP 6) in late 2010 in Mexico, along with the 16th conference of the Parties to the UNFCCC (COP16). To enter into force, Kyoto Protocol needed to be ratified by 55 countries incorporating countries included in Annex I, which accounted in total for at least 55% of the total carbon dioxide emissions for 1990 of the countries included in Annex I. Years of speculation as to whether or not the Protocol would enter into force ended, when Russia announced that it would ratify the Protocol in October 2004. The protocol entered into force on 16 February 2005. By November 187 states have signed and ratified the Kyoto Protocol, including
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Australia. The United States is a signatory to the Kyoto Protocol, but has neither ratified nor withdrawn from the Protocol.
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2 CDM PROJECTS This chapter explains the principal characteristics of the CDM project cycle with special emphasis on the small-scale projects. It is intended as a simple guide to understand the CDM requirements and develop high-quality projects that fulfil the small-scale CDM criteria. 2.1 What is CDM? Linking Directive, adopted 2004, which enables companies within the EU ETS to Clean Development Mechanism (CDM) use CERs for compliance, up to a certain is defined in the Article 12 of the Kyoto limit. Protocol (see Annex I). The purpose of the CDM is to: The modalities and procedures for CDM projects were approved in 2001 in the 7th Assist non-Annex I Parties Conference of the Parties to the (developing countries) in UNFCCC in Marrakesh, Morocco.4 achieving sustainable development and in contributing to the objective of the climate Box 1. Purpose of CDM. change convention (UNFCCC); and Purpose of CDM
Assist Annex I Parties Assist developing countries in (industrialised countries) in achieving sustainable development achieving compliance with their quantified emission limitation Assist industrialised countries in and reduction commitments achieving compliance with their Kyoto under the Kyoto Protocol. commitments Renewable energy, energy efficiency and waste management projects are examples of activities that often reduce greenhouse 2.2 Definition of Small- gas (GHG) emissions and thus contribute scale CDM Projects to the global efforts to mitigate climate It is widely recognised that small-scale change. Clean Development Mechanism projects face significant transaction costs, makes it possible to certify the reduction turning them less feasible than larger- of GHG emissions from projects that scale projects. In order to overcome this fulfil certain criteria. The sale of the problem, specific streamlined modalities resulting Certified Emission Reductions and procedures for small-scale CDM (CERs) can provide additional cash flow projects were approved in 2002 in the 8th to the projects and improve their Conference of the Parties to the feasibility. CDM projects may be UNFCCC in New Delhi, India.5 implemented in developing countries that have ratified the Kyoto Protocol. According to the revised CDM rules, a small-scale project must fall into one of Industrialised countries can use the three categories with the following resulting Certified Emission Reductions criteria: (CERs) for compliance under the Kyoto Protocol. Countries may also authorise private entities to participate in CDM. 4 Decision 17/CP.7 Modalities and procedures for a clean development mechanism as defined in the Article 12 of the Companies within the EU Emissions Kyoto Protocol. Source: http://www.unfccc.int Trading Scheme (EU ETS) account for a 5 Decision 21/CP.8 – Annex II. Simplified modalities and procedures for small-scale clean development mechanism lion’s share of the private sector’s project activities. Revision: decision -/CMP.2 Further demand. The main driver of this guidance relating to the clean development mechanism. Source: http://www.unfccc.int development has been the been the EU
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1. Renewable energy generation Box 2. Small-scale CDM Projects. with a maximum output capacity Small-scale CDM Projects of 15 MW of electricity output, 45 MW thermal output, or an Small renewable energy projects appropriate equivalent, (≤ 15 MW electricity output or ≤ 45 MW thermal output) 2. Measures aimed at improving energy efficiency and thus Small energy efficiency projects (savings ≤ 60 GWh of electricity or reducing energy consumption by ≤ 180 Gwh of thermal heat per year) a maximum of 60 GWh of electricity or 180 GWh of thermal Other small projects heat per year. (emissions ≤ 60 ktCO2e per year) 3. Other measure that reduce emission by a maximum of 60 2.3 Participation kilotons of carbon dioxide Requirements for equivalents per year (ktCO2e/year). CDM Projects Maximum output capacity of Category 1 is The country hosting a CDM project must defined as installed or rated capacity, as be a Party to the Kyoto Protocol and indicated by the manufacturer of the willing to voluntarily participate in the equipment or plant, disregarding the CDM. It must also have a designated actual load factor of the plant. Category 3 national authority in place. Table 3 lists may include, for example, agricultural the ratification dates and the Designated projects, fuel switching, industrial National Authorities (DNA) of the processes and waste management. Central American Countries. The three project categories are mutually exclusive. If a small-scale project has components in different categories, each component shall meet the threshold criterion of each applicable category, e.g. for a project with both a renewable energy and an energy efficiency component, the renewable energy component shall meet the criterion for “renewable energy” and the energy efficiency component that for “energy efficiency”. Debundling Debundling means the fragmentation of a large project activity into smaller parts. A small-scale project activity that is part of a large project activity is not eligible to use the simplified rules for small-scale CDM projects. The full project activity or any component of the full project activity shall follow the regular CDM modalities and procedures.6
6 Exact rules for determining debundling can be found at the official CDM website http://cdm.unfccc.int.
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Table 3. Status of Ratification of the Kyoto Protocol in the Central American Countries. All 7 countries have ratified the Protocol (Belize has accessed the Protocol because it was not a signatory). An updated list of Designated National Authorities can be found at http://cdm.unfccc.int/DNA.
Country Signature Ratification Designated National Authority
Belize - (accession National Meteorological Service 26 September 2003)
Costa Rica 27 April 1998 9 August 2002 Ministry of Environment and Energy
Dominican 16 March 1998 12 February 2002 National Council for Climate Change and Clean Republic Development Mechanism
El Salvador 8 June 1998 30 November 1998 Ministry of Environment and Natural Resources
Guatemala 10 July 1998 5 October 1999 Ministry of Environment and Natural Resources
Honduras 25 February 19 July 2000 Secretariat of Natural Resources and 1999 Environment
Nicaragua 7 July 1998 18 November 1999 Ministry of the Environment and Natural Resources
Panama 8 June 1998 5 March 1999 National Authority for the Environment
2.4 CDM Project Cycle administrator to issue a quantity of CERs that corresponds to the verified amount All CDM projects must follow a special of emission reductions. These CERs, less project cycle. They must be validated and certain fees that are deducted (see 2.6.3), registered before they can generate are then forwarded to the registry Certified Emission Reductions (CERs). accounts of the project participants Validation is the process of independent according to their request. evaluation of a proposed CDM project by a Designated Operational Entity (DOE) In the following chapters, the CDM against the requirements set out by COP project cycle is explained step-by-step. and further elaborated by the CDM EB. The validation is based on a Project Design Document (PDD). Registration is the formal acceptance of a validated project as a CDM project activity by the CDM Executive Board (CDM EB). Once the project has been implemented, it starts to generate emission reductions. The emission reductions must be constantly monitored according to a pre- established monitoring plan. The monitored emission reductions are then verified and certified by a DOE. Based on the certification report of the DOE, the CDM EB instructs the CDM registry
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2.5 Project Preparation, Validation and Registration The first phase of the CDM project cycle consists of the project preparation, validation and registration. In preparing the project, the project participants must interact at least with local stakeholders, the host country’s DNA and a DOE. As a result of the preparation, a PDD is completed. The PDD is then validated by the DOE. The validated project is finally submitted to the CDM EB for registration. Figure 2 demonstrates the steps in this part of the project cycle.
Figure 2. Necessary steps in the early CDM project cycle (preparation, validation and registration).
Project Participants Local stakeholders Host Country
Comments Project approval Project Preparation: • Prepare the Project Design Document (PDD) Project Design Document • Invite comments from local stakeholders (PDD) • Obtain host country approval • Select the Designated Operational Entity (DOE) • Submit the PDD for validation to the DOE Designated Operational Entity (DOE)
Stakeholders, accredited Comments Project Validation: organisations, Parties • Review the PDD • Confirm that CDM requirements are fulfilled • Make the PDD publicly available for 30 days • Make a validation report (or reject the project) CDM Executive Board • Submit a registration request to CDM Executive Request for registration Board • Make the validation report publicly available Project Registration: • Registration happens automatically in four weeks unless a review is requested Validation Report
2.5.1 Project Preparation found, for example, from FENERCA’s and Host Country website; Approval http://www.bun-ca.org/fenerca.htm. Under every CDM project, there is a It is good to take into account the special project idea which may be promoted by a features of CDM from the very beginning local community, a project developer, a of the project development. Often in the government institution, an equipment early stages of the project development a vendor and so on. The early steps of a simple document called Project Idea CDM project are not different from any Note (PIN) is used. While PINs are not other project. A business plan must be officially part of the CDM project cycle, written and a feasibility study prepared, they are useful to facilitate the discussions financing must be organised etc. Chapter and negotiations between the potential 3 discusses some issues related to project project participants and most CDM financing. Information on preparing financiers use them. The PIN contains business plans and feasibility studies for the principal aspects of the project Central American energy projects can be including a preliminary calculation of the
18 Central American Carbon Finance Guide emission reduction. Among others, the Project (and any CERs which are World Bank's Carbon Finance Unit has created out of the Project); prepared a number of PIN templates for Any public funding of the different project types. These templates Project does not result in a are publicly available from diversion of official development http://www.carbonfinance.org. assistance (if public funding is Each CDM project must be approved by involved); and the host country. This is done through a DNA will cooperate with the Letter of Approval issued by the DNA of Project Participants and the the host country. According to the rules CDM EB to facilitate the CDM of the CDM, the Letter of Approval must process and give assistance, contain the following information: where necessary, for the issuance The DNA approves the and transfer of CERs to the voluntary participation of the Project Participants. Host Country in the Project as a A Letter of Approval is required from CDM project for the purpose of each party that participates in the project, Article 12 of the Kyoto Protocol; including the host country, or an Statement that the Project will organisation authorised by it. assist the host country to achieve 2.5.2 Project Design sustainable development; and Document (PDD) The DNA approves the Project as a CDM Project Activity and The basic official document describing a authorises the participation of CDM project is called Project Design the Project Participants in the Document (PDD). The latest version of Project. the PDD can be downloaded from Apart of these minimum requirements, in UNFCCC, http://cdm.unfccc.int. For practice it is useful to receive some small-scale CDM projects, there exists a additional information from the DNA. simplified PDD, which can be found at The following list contains some points the same site. that are not required by the CDM rules The parts of the simplified PDD are but are useful for the smooth listed in Box 3. implementation of the project7:
The Host Country is a Party to the Kyoto Protocol and is in compliance with its obligations under that agreement;
The Project, as proposed, is in compliance with all relevant national laws;
DNA acknowledges the Project Participants' right, title and interest in an to all of the greenhouse gas emission reductions generated by the
7 Source: Background Note - Approval of Clean Development Mechanism Projects by the Host Country. The World Bank, 2003.
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Box 3. CDM Small-scale PDD. 2.5.3 Baseline Methodology
CDM Small-Scale PDD The most important concept related to A. General description of the small-scale project CDM projects is the project baseline. The activity baseline is the scenario that reasonably represents the GHG emissions that B. Application of a baseline and monitoring methodology would occur in the absence of the proposed CDM project. The baseline is C. Duration of the project and the crediting thus an imaginary construction of what period would happen in the future if the D. Environmental impacts proposed CDM project were not implemented. G. Stakeholders’ comments Figure 3 demonstrates the concept of Annex 1: Contact information on participants in baseline. The actual realized emissions of the project activity the project are compared to the baseline, which is always set up ex-ante. The Annex 2: Information on public funding emission reduction generated by the Annex 3: Baseline information project is then the difference of the baseline emissions and realised project Annex 4: Monitoring information emissions. .
Figure 3. Concept of Baseline. Baseline is the hypothetical development of the emissions if the project is not realised. It has to take into account probable future developments, like efficiency improvements, planned investments, etc. Once the project is implemented, the realised project emissions are compared to the established baseline. The difference is the emission reduction which can be credited to the project.
Emissions, tCO2e Emission Reduction Purchase Agreement, e.g. 2004-2014 Baseline Current Emissions
Realised Emission Reduction
Estimated Project Emissions Realised Project Emissions
2002 20042010 2006 2008 2010 2012 20142020 Year
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The CDM Executive Board has approved This category includes small (<15 MWe) a number of simplified methodologies for projects that supply electricity generated determining the baseline and monitoring by renewable resources (e.g. hydro, requirements for small-scale CDM biomass, wind, geothermal, photo- projects voltaics) to a distribution system. The system must be (or would have been without the CDM project) supplied by at Table 4). New methodologies may be least one fossil fuel or non-renewable proposed by project participants. The biomass fired generating unit. proposal should include information about the activity and describe how a For a small isolated system where all fossil fuel fired generating units use fuel simplified baseline and monitoring methodology would be applied to it. The oil or diesel fuel, the baseline is the proposals for new methodologies are annual electricity generated by the evaluated by the Small-Scale Working renewable project (in kWh) times an Group. emission coefficient for a modern diesel generating unit of the relevant capacity The simplified baselines can be found in operating at optimal load. These systems the official CDM website: include for instance local mini-grids with http://cdm.unfccc.int/. As an example, diesel generators. The emission factors to the category I.D. (Grid connected be used are given in Table 5. renewable electricity generation) is explained in the following.
I.D. Simplified Baselines for Renewable Electricity Generation for a Grid
Table 4. By the end of 2009, a total of 49 methodologies for small-scale CDM projects had been approved. Source: http://cdm.unfccc.int/methodologies/index.html.
Approved small-scale methodologies (AMS)
Reference Title Version
TYPE I – RENEWABLE ENERGY PROJECTS
AMS-I.A. Electricity generation by the user 13
AMS-I.B. Mechanical energy for the user with or without electrical 10 energy
AMS-I.C. Thermal energy production with or without electricity 16
AMS-I.D. Grid connected renewable electricity generation 15
AMS-I.E. Switch from Non-Renewable Biomass for Thermal 1 Applications by the User
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TYPE II – ENERGY EFFICIENCY IMPROVEMENT PROJECTS
AMS-II.A. Supply side energy efficiency improvements – transmission 10 and distribution
AMS-II.B. Supply side energy efficiency improvements – generation 9
AMS-II.C. Demand-side energy efficiency activities for specific 13 technologies
AMS-II.D. Energy efficiency and fuel switching measures for industrial 12 facilities
AMS-II.E. Energy efficiency and fuel switching measures for buildings 10
AMS-II.F. Energy efficiency and fuel switching measures for agricultural 9 facilities and activities
AMS-II.G. Energy Efficiency Measures in Thermal Applications of Non- 2 Renewable Biomass
AMS-II.H. Energy efficiency measures through centralization of utility 1 provisions of an industrial facility
AMS-II.I. Efficient utilization of waste energy in industrial facilities 1
AMS-II.J. Demand-side activities for efficient lighting technologies 3
TYPE III – OTHER PROJECT ACTIVITIES
Urea offset by inoculants application in soybean-corn rotations 2 AMS-III.A. on acidic soils on existing cropland
AMS-III.B. Switching fossil fuels 14
AMS-III.C. Emission reductions by low-greenhouse gas emitting vehicles 11
AMS-III.D. Methane recovery in animal manure management systems 15
Avoidance of methane production from decay of biomass through controlled combustion, gasification or 16 AMS-III.E. mechanical/thermal treatment
Avoidance of methane emissions through controlled biological 8 AMS-III.F. treatment of biomass
Landfill methane recovery AMS-III.G. 6
Methane recovery in wastewater treatment AMS-III.H. 13
Avoidance of methane production in wastewater treatment 8 AMS-III.I. through replacement of anaerobic systems by aerobic systems
Avoidance of fossil fuel combustion for carbon dioxide 3 AMS-III.J. production to be used as raw material for industrial processes
Avoidance of methane release from charcoal production by shifting from traditional open-ended methods to mechanized 4 AMS-III.K. charcoaling process
Avoidance of methane production from biomass decay through 2 AMS-III.L. controlled pyrolysis
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Reduction in consumption of electricity by recovering soda 2 AMS-III.M. from paper manufacturing process
Avoidance of HFC emissions in rigid Poly Urethane Foam (PUF) 3 AMS-III.N. manufacturing
Hydrogen production using methane extracted from biogas AMS-III.O. 1
Recovery and utilization of waste gas in refinery facilities AMS-III.P. 1
Waste Energy Recovery (gas/heat/pressure) Projects AMS-III.Q. 3
Methane recovery in agricultural activities at household/small 1 AMS-III.R. farm level
Introduction of low-emission vehicles to commercial vehicle 1 AMS-III.S. fleets
Plant oil production and use for transport applications AMS-III.T. 1
Cable Cars for Mass Rapid Transit System (MRTS) AMS-III.U. 1
Decrease of coke consumption in blast furnace by installing 1 AMS-III.V. dust/sludge recycling system in steel works
Methane capture and destruction in non-hydrocarbon mining 1 AMS-III.W. activities
Energy Efficiency and HFC-134a Recovery in Residential 1 AMS-III.X. Refrigerators
Methane avoidance through separation of solids from 2 AMS-III.Y. wastewater or manure treatment systems
Fuel Switch, process improvement and energy efficiency in 2 AMS-III.Z. brick manufacture
Transportation Energy Efficiency Activities using Retrofit 1 AMS-III.AA. Technologies
Avoidance of HFC emissions in Standalone Commercial 1 AMS-III.AB. Refrigeration Cabinets
Electricity and/or heat generation using fuel cell AMS-III.AC. 1
Emission reductions in hydraulic lime production AMS-III.AD. 1
Energy efficiency and renewable energy measures in new 1 AMS-III.AE. residential buildings
Avoidance of methane emissions through excavating and 1 AMS-III.AF. composting of partially decayed municipal solid waste (MSW)
Switching from high carbon intensive grid electricity to low 1 AMS-III.AG. carbon intensive fossil fuel
Shift from high carbon intensive fuel mix ratio to low carbon 1 AMS-III.AH. intensive fuel mix ratio
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Table 5. Emission factors used in the determination of the baselines in small isolated systems. Source: Indicative simplified baseline and monitoring methodologies for selected small-scale CDM project activity categories. Source: version 15 of AMS-I.D., available from http://cdm.unfccc.int/methodologies/.
Emission factors for small diesel generator systems, kgCO2e/kWh
Case: Mini-grid with Mini-grid with Mini-grid with storage 24 hour temporary service (4-6 service hours/day) Productive applications Water pumps
Load factor: 25% 50% 100%
< 15kW 2.4 1.4 1.2 ≥ 15kW and <35 kW 1.9 1.3 1.1 ≥35 kW and <135 kW 1.3 1.0 1.0 ≥135 kW and < 200 kW 0.9 0.8 0.8 > 200 kW 0.8 0.8 0.8
For all other systems, including system, excluding hydro, geothermal, renewable energy projects that supply wind, low-cost biomass, nuclear and solar electricity to the national grid, the generation. baseline is calculated as follows. The The build margin is the emission factor of baseline is the electricity generated by the prospective power plants whose renewable generating unit (in MWh) construction and future operation would multiplied by an emission factor (in be affected by the proposed CDM tCO2e/MWh). The emission factor is project. It is calculated as the generation- calculated either as: weighted weighted average emissions the combined margin which is the (tCO2/MWh) of recent capacity weighted average of the operating additions to the system, defined as the margin and the build margin, 8 or lower of most recent 20% of plants built or the 5 most recent plants. the weighted average emissions of the current generation mix. The following examples illustrate the The operating margin is the emission factor calculation. of the existing power plants whose Example 1: A small 0.5 MW hydropower electricity generation would be affected plant will be constructed in a village. The by the proposed project. There is some electricity in the village is currently flexibility in how the operating margin may provided by a 1 kW diesel generator, be calculated.9 The simple operating margin is which runs 24 hours a day. From calculated as the generation-weighted average CO2 emissions per unit net electricity generation (tCO2/MWh) of all generating power plants serving the
8 The weights depend on the type of technology and the choice of CDM methodology. Typically, the weights vary between 0.25 and 0.75. 9 CDM Executive Board: Methodological Tool to Calculate the Emission Factor for an Electricity System – Version 2. . EB 50.
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Table 5 we see that the load factor 2.5.4 Additionality corresponding to 24-hour mini-grid is estimated at 25%. The emission factor CDM projects must be additional. This for the generator is therefore 0.8 means that the GHG emissions must be kgCO2e/kWh or 0.8 tCO2e/MWh reduced below those that would have (>200kW). Our hydropower plant has an occurred in the absence of the registered estimated load factor of 50% (4380 hours CDM project. In other words, projects per year at peak load). The annual that would have been implemented renewable energy production is therefore anyway, even in the absence of the 0.5 MW * 4380 h = 2,190 MWh. CDM, may not earn emission Consequently, since the electricity reductions. produced by the hydropower replaces Figure 4 gives a general idea about the electricity produced by the diesel additionality requirement. For instance, generator, the emission reduction a project that is required by the amounts to 2,190 MWh x 0.8 national legislation is generally not tCO2e/MWh = 1,752 tCO2e per year. considered additional. As an example, a Example 2: The same 0.5 MW typical CDM project would be methane hydropower plant will be constructed but capture from a landfill site. However, if this time connected to the national grid. the capture is required by the host The electricity in the national grid is country national legislation, this project currently produced as follows: would generally not be considered additional, unless the project’s - 40% hydropower (0 tCO2e/MWh) performance clearly exceeds the - 50% diesel power (0.7 tCO2e/MWh) minimum requirements of the legislation. - 10% natural gas CC (0.4 tCO2e/MWh) On the other hand, a renewable energy The weighted average emissions are therefore project that is less profitable for the 40% * 0 + 50% * 0.7 + 10% * 0.4 = 0.39 investors than a fossil-fuel-based tCO2e/MWh. alternative (when income from the sale of The simple operating margin is 83% x 0.7 + the CERs is not taken into account), would potentially pass the additionality 17% x 0.4 = 0.65 tCO2e/MWh, when 10 hydropower is excluded. test. If the latest plants constructed in the country were all natural gas combined cycle plants (CC), the build margin would 10 The CDM EB has developed a tool for the demonstration and assessment of additionality. The current version of this be 0.4 CO2e/MWh. In hydro power tool is 5.2. The newest version of this tool is available from projects, the operating margin and the build http://cdm.unfccc.int/methodologies/. margin have equal weight in the calculation of the combined margin for the first crediting period of a CDM project. Thus, the combined margin is (0.65+0.4)/2 = 0.53 tCO2e/MWh. If the plant had a load factor of 50% (4380 hours per year at peak load) as in our earlier example, the emission reductions would be 2,190 MWh x 0.53 tCO2e/MWh = 1,161 tCO2e per year.
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Figure 4. Schematic presentation of the emissions would have been additionality requirements. higher without the CDM project. 2.5.5 Crediting Period and Duration of the Project
The Kyoto Protocol states that Certified Emission Reductions obtained from the year 2000 onwards can be used for compliance (see Annex I, point 10). The problem resulting from the fact that Kyoto Protocol was not in force before February 2005 was resolved in Marrakech Accords through the so-called early action provisions.11
For small-scale CDM projects, the The crediting period is the period during additionality requirements are somewhat which the CDM project generates CERs. simplified. Small-scale CDM projects are In general, the CDM Executive Board considered additional if the project will only issue CERs for a crediting participants are able to demonstrate that period which commences after the date the project activity would have not be of registration. Historically, there have implemented in the absence of the CDM been some exceptions to this rule. due to the existence of one or more of However, now they have expired. the following barriers: The starting date of a CDM project is the date at which the implementation or Investment barrier: a financially more viable alternative to the construction or real action of a project CDM project would have led to activity begins. Project activities started higher emissions; between 1 January 2000 and the first registration of a CDM project by the Access to finance barrier: the CDM Executive Board had to provide project activity could not access documentation at the time of registration appropriate capital without showing that the starting date fell within consideration of the CDM this period. revenues; CDM project participants may choose Technological barrier: a less either a 10-year crediting period with no technologically advanced option of renewal, or a seven-year alternative to the project involves baseline, which may be renewed at most lower risks and would have led two times (3x7 years = 21 years). On to higher emissions; each renewal, a DOE must determine Barrier due to prevailing that the original baseline is still valid or practice: prevailing practice or has been updated taking into account of existing regulatory requirements new date where applicable. would have led to an alternative In other words, a 10-year baseline is risk- with higher emissions; free as it is unchangeable once it has been Other barriers: institutional validated. On the other hand, renewable barriers, limited information or seven-year baseline can produce CERs organizational capacity, restricted for a longer period (14 or 21 years), financial resources or other 11 The text on the early crediting in the Marrakech accords reasons identified by the project was modified in Milan in CoP9 for clarity. The first CDM participants show that the was registered in November 2004
26 Central American Carbon Finance Guide provided that the original baseline The monitoring plan tells how data is remains valid or only changes slightly. collected and archived in order to: There is a risk, however, that after Estimate the emissions from the seven years the project has become project; business-as-usual and the revalidation determines that it is no longer Determine the baseline of the additional. project; and In our Example 2 in Chapter 2.5.3, the Calculate the emission reductions project participants could choose to use and possible leakage of the the calculated baseline 0.53 tCO2e/MWh project. for a 10-year period. Alternatively, they Monitoring plan must reflect good could opt for a 3 x 7 year baseline using monitoring practice and be appropriate to 0.53 tCO2e/MWh for 7 years, after the circumstances of the project. Project which the baseline has to be recalculated participants are responsible for based on the actual situation of the grid implementing the monitoring plan at that time. contained in the PDD. They must archive 2.5.6 Prior Consideration the relevant monitored data and report it to a DOE. The projects participants must inform the Leakage refers to the net change in Host party DNA and/or the UNFCCC emissions outside the project boundary, Secretariat in writing of the which is measurable and attributable to commencement of the project activity the CDM project activity. For example, if and of their intention to seek CDM second-hand equipment transferred from status. The notification must be made another place were used in a CDM within six months of the start date of the project, the emissions could increase in project activity. A one page form for the original site of the equipment and the notifying the Host Party DNA and/or impact of this leakage must be taken into the UNFCCC is available from account. In biomass projects, leakage http://cdm.unfccc.int/Reference/PDDs could mean increased deforestation and _Forms/Registration/index.html. this has to be also addressed in the PDD. Notification of the prior consideration of Simplified modalities and procedures for the CDM is recommendable, because the small-scale CDM project activities also DOEs and the CDM EB uses it as an include simplified monitoring indicator of whether a project is methodologies, including leakage additional or not. considerations. As an example, in case of 2.5.7 Monitoring Plan and renewable energy generation for a grid, Methodology monitoring shall consist of metering the electricity generated by the project. In the When a CDM project is implemented, it case of co-firing biomass with fossil fuels, must be systematically monitored over the amount of biomass and its energy the whole crediting period, so that the content must also be monitored. actual emission reductions can be The table below specifies the minimum calculated. Project participants must information that must be provided for include a monitoring plan in the PDD. monitored data and it has to be included in the PDD.
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Table 6. Monitoring information to be provided in the Project Design Document. Two examples of different data types are given.
ID No. 1 2
Data type Quantitative Qualitative
Data variable Electricity to the grid Origin of Biomass
Data unit GWh Fuel provider name and location
Measured, calculated or M E estimated (M,C,E)
Recording frequency Monthly Weekly
Proportion of data to be 100% 100% monitored
Archive (electronic/ Electronic Electronic paper)
How long data is kept? Minimum 2 years after Minimum 2 years after last CER last CER issuance issuance
Comment Data measured by grid The manager fills in the origin of the operator fuel from the fuel bookkeeping.
2.5.8 Environmental summary of the comments received and Impacts an explanation of how the comments were taken into account. One of the two principal objectives of Public participation in industrial projects the CDM is to contribute towards the is increasingly incorporated in national sustainable development of the host and local legislation and regulations; country. Therefore the analysis of the stakeholders’ opinions are often asked environmental impacts of the CDM before granting e.g. construction or projects is important. The host country environmental permits for a project. In has the right and the responsibility to many cases the CDM requirements for define its sustainable development goals. stakeholder comments can be integrated The project participants must submit to in this process. It is important to note, the DOE documentation on the analysis however, that the CDM modalities of the environmental impacts of the require comments from local project, if this is required by the host stakeholders independently of any country e.g. by the national national requisites. environmental legislation or as part of the CDM endorsement procedure. 2.5.9 Stakeholder Comments
Public participation may be considered essential for the social sustainability of a project and it is an important part of the CDM project cycle. Project participants must invite comments by local stakeholders and include in the PDD a
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2.5.10 Project Validation and to avoid its publication. According to the Registration CDM rules, the information used to determine additionality, to describe the Validation is the process of independent baseline methodology and to support evaluation of a project by a Designated environmental impact assessment may Operational Entity (DOE) against the not be considered as confidential. requirements of the CDM. Project Registration is the formal acceptance of a participants should select and contract an validated project by the CDM EB. operational entity to validate their Registration is a prerequisite for the proposed CDM project. By the end of verification, certification and issuance of 2009, 26 operational entities have been CERs related to the project (see designated. Different DOEs may have http://cdm.unfccc.int/Projects for the different sectoral scopes. 42 entities have list of registered projects). Once a request applied for accreditation (so-called for registration has been made, the Board applicant entities or AEs). The CDM EB must decide within eight weeks whether maintains a list of all designated to accept the project or not. At the operational entities and applicant entities conclusion of the eight week period, the in its website. It is good practise to check registration is deemed final, unless a Party the actual situation from involved in the project activity or at least http://cdm.unfccc.int/DOE/. three members of the Executive Board request a review. The registration fee is The DOE selected to do the validation an upfront payment, equivalent to the (the validator) shall review the PDD and amount due for the Administration Share any supporting documentation (e.g. of Proceeds in respect of the expected analysis of the environmental impacts, average annual certified emission comments from local stakeholders, reductions for the proposed project technical project documentation) and activity over its crediting period as confirm that the CDM requirements have identified in the project design document been met. The validator must also receive and as validated by the designated a written approval of voluntary operational entity. The amount paid as a participation (Letter of Approval, see registration fee is deducted from the 2.5.1) from the DNA of the host country. Administration Share of Proceeds that is The approval must include confirmation due at the time of the issuance of the first that the project assists the host country in year's CERs (see Chapter 2.6.3) achieving sustainable development.12 The procedures for validation and The validator then makes the PDD registration are subject to change. The publicly available for a period of 30 days. latest procedures can be found on the During that period Parties to the Kyoto internet from Protocol, stakeholders and organizations http://cdm.unfccc.int/Reference/Proced that are accredited observers of the ures. UNFCCC can make comments on the PDD. PDDs open for comments are 2.6 Project published on the UNFCCC website, Implementation http://cdm.unfccc.int/Projects/Validatio Phase n. Once a CDM project has been registered, The project participants shall clearly mark constructed and commissioned, the any confidential information as such in order project implementation phase begins. The emission reductions generated by the 12 Written approval is also required from any other country that is Party to the Kyoto Protocol and participates in the project must be monitored. The monitored project, e.g. an Annex I country that will buy the emission emission reductions have to be verified and reductions.
29 Central American Carbon Finance Guide certified by a DOE. Based on the according to their instructions. Figure 5 certification report, the CDM EB will describes the CDM project issue the corresponding CERs, which are implementation phase. In the following, then forwarded to the project participants each step is shortly explained.
Figure 5. Implementation phase of a CDM project.
Project Participants
Monitoring: • Implement the monitoring plan which is part of Monitoring Report the Project Design Document (PDD) • Archive the relevant monitored data Designated Operational Entity • Prepare a Monitoring Report (DOE) • Submit the monitoring report to the Designated Operational Entity (DOE) Verification and Certification: • Make the Monitoring Report publicly available Certification Report • Check the documentation provided Request for issuance of CERs • Conduct on- site inspections as appropriate • Review monitoring results and methodologies CDM Executive Board • Determine the emission reductions occurred • Prepare a verification report Issuance of CERs: • Make the Verification Report publicly available • Issuance is considered final 15 days after the receipt of a request for issuance, unless a • Certify the emission reductions review is requested • Prepare a certification report
CDM Registry Administrator
CERs for the Project CERs for administrative costs Participants CERs for adaptation
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2.6.1 Monitoring length of the verification period is not defined in the CDM rules; quite often the Monitoring is the systematic surveillance verification is performed annually.13 In and measurement of the project small-scale CDM projects it is possible to performance, which makes it possible to use the same DOE for validation (see measure or calculate the amount of Chapter 2.5.10) and verification; in larger emission reductions that the project projects different entities must be used. generates. Monitoring is the responsibility The DOE performing the verification of the project participants and it must be must: conducted according to the monitoring plan in the registered PDD (see Chapter Make the monitoring report 2.5.7). publicly available14; The most typical monitoring activity in a Determine whether the provided renewable energy project is the documentation is in accordance measurement of its energy output. with the PDD; Normally, the baseline in a renewable Conduct on-site inspections as energy project is defined in terms of appropriate; tonnes of CO2 reduced per energy produced. For example, each megawatt- Review monitoring results and hour (MWh) of electricity generated by a the application of the wind turbine could replace other methodologies; generation capacity in the grid and reduce Determine the amount of CO2 emissions by a certain amount. The emission reductions; and actual amount of emission reductions generated is thus directly proportional to Provide a verification report to the amount of electricity produced by the the project participants, the generator (if the wind does not blow, Parties involved and the CDM emissions are not reduced). Therefore it Executive Board. is essential to know the exact amount of Certification is a written assurance by the electricity produced each year to estimate DOE that during a specified time period the emission reductions generated during the CDM project achieved the emission the same year. reductions as verified. The DOE The monitored data must be archived prepares the Certification Report based either in paper or electronic format, as on the Verification Report. The described in the monitoring plan. The Certification Report is also made publicly monitoring report is prepared on the available. The Certification Report is basis of this data and submitted to the submitted to the CDM EB and it is a DOE. The monitoring report is the formal request to issue CERs. fundamental document, in which the 2.6.3 Issuance of Certified following steps of the project cycle are Emission Reductions based. 2.6.2 Verification and The CERs are issued 15 days after the Certification CDM EB has received the Certification Report, unless a review is requested. A Verification is the periodic independent Party involved in the project activity or at review and determination of the least three members of the Executive monitored emission reductions that have 13 A less-frequent verification is one way of reducing occurred as a result of a CDM project transaction costs. Often the necessary verification frequency during the verification period. The is defined in the ERPA. 14 For confidential information, see Chapter 2.5.10. verification is done by the DOE. The
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Board request a review of the proposed providing additional revenues. The issuance. proceeds from the sale of the emission The CDM Registry Administrator works reductions can be seen as internalizing under the authority of the Executive the global environmental benefits that the Board. If no review is requested, the project is generating. The project reduces Registry Administrator will issue the greenhouse gas emissions either directly or indirectly and this benefit has a price quantity of CERs specified in the 16 Certification Report into an account of on the international carbon markets. the Executive Board in the CDM The project may benefit from the sale of Registry. From that account: the CERs in several ways. Typically, the cash flow of the project is improved A share of 2% will be forwarded to a special account to assist through the sale of the CERs by means developing countries particularly of a long-term Emission Reduction Purchase vulnerable to climate change Agreement (ERPA). ERPAs are often impacts in meeting the costs of based on a payment-on-delivery principle, adaptation; which means that the buyer pays for the CERs at the time of delivery, i.e. no An issuance fee of USD 0.10 per delivery no payment. In addition, the CER is charged for the first seller and buyer may agree on an upfront 15,000 tonnes of CO2 equivalent payment, which is not dependent on for which issuance is requested when the CERs are delivered. However, in a given calendar year. For any all thing being, equal this typically affects amount in excess of this, the fee the unit price. In addition to the is USD 0.20 for all units in propriety ERPAs used by carbon funds excess of this amount. The there are many ERPA templates proceeds from the fees are used developed by Non-governmental to cover administrative organization such as the International expenses.15 Emissions Trading Association 2.6.4 Forwarding (http://www.ieta.org). Signing an ERPA in hard currency terms Forwarding is the process by which the with a creditworthy international investor CDM registry administrator transfers can also facilitate the negotiations with CERs from the CDM EB’s pending the lenders and thus make the financial account into the accounts of Parties closing of the project easier. Sometimes involved and project participants, as well the buyer of the CERs is willing to as to the accounts in the CDM registry provide an upfront payment, as well. relating to the Share of Proceeds. The Naturally a discount rate is applied when UNFCCC Secretariat has confirmed that upfront money is made available; often a CERs may only be forwarded to accounts guarantee is also required for upfront held by project participants in the payments, which may result costly. national registry of the Annex I country that authorised their participation in the 2.7.1 Prices and Risks CDM project. Projects may sell emission reductions that 2.7 Sale of the Emission are certified or not. Reductions that are Reductions expected to be Kyoto-compliant are more expensive than those that are not. From the project developer’s point of Non-Kyoto emission reductions can be view, the purpose of the CDM is to used e.g. to voluntary offset emissions or improve the feasibility of the project by
16 For more information on international carbon markets, see 15 See Chapter 0 for more information. Chapter 5.
32 Central American Carbon Finance Guide in non-Kyoto compliance systems (see The project risk refers to the Chapter 5 for description of non-Kyoto possibility that the project is carbon markets). delayed or discontinued, or that The price of yet-to-be-issued CERs, i.e. the project, once commissioned, primary CERs, depends on a number of generates fewer CERs than factors, among others, the division of expected. Thus, the closer the risks between the seller and buyer. The project is towards completing higher risks the seller assumes, the higher construction and starting price the seller can expect, as Table 7 operations, the higher the price. shows. Other key determinants of the The CDM risk refers to the market price are: possibility that the project generates less CERs than The counterparty risk, i.e. the risk that project owner will expected because of delays or default and not deliver the issued failures in the CDM cycle. Thus, CERs as agreed. the further along the CDM cycle, the higher the price. Track record of the project sponsor CERs from large-scale projects may fetch a premium over small- Volume risk, i.e. the risk that the scale project due to the smaller project generates fewer CERs per unit CDM cycle cost than expected. The volume risk can be split into the project risk However, CER from less- and the CDM risk. Thus, the conventional small-scale projects stage at which the project is in may appear very attractive to CDM cycle and the project investors who which to balance construction cycle has a direct their portfolios, especially if impact on the volume risk. these projects are from countries that are that are underrepresented in the CDM.
Table 7. Primary CER prices in early Febraury 2010. Based on IDEACarbon’s recurrent market sounding amongst buyers and sellers of yet-to-be-issued CERs. Reproduced with permission from IDEACarbon.
Id Scenario description Price in EUR
Ai The validation, registration, volume and regulatory risks 6.87 are taken by the buyer. The CERs are delivered post- 2012.
Aii The validation, registration and volume risks are taken 7.88 by the buyer. The CERs are delivered pre-2013.
B As Scenario Aii, but the seller takes the validation risk 8.68
C As Scenario B, but the seller takes the registration risk 9.47
D As C, but the seller takes the volume risk 10.47
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2.8 Costs Related to the €30,000-60,000, depending on the CDM Project Cycle complexity of the project, host country, and on whether local or international Getting a project through the CDM cycle consultants are used. implies additional costs. The costs vary greatly depending on the complexity of The cost of the validation is based on the project, use of external consultants, commercial negotiations between the etc. Figure 5 illustrates typical cost in project participants and the DOE chosen each stage in of the CDM cycle. to validate the project. Currently, the validation cost is around €30,000. The costs of preparing a PDD, obtaining the host country approval and managing the validation process vary in the range of
Figure 6. Estimates of costs related to the CDM. Source: GreenStream.
Project Preparation, Validation and Registration Implementation Phase
Project PDD, validation Registration Moni- Veri- CER issuance Idea Note and host $0-350,000 toring fication and transfer €2,000-7,000 country (depends on the €5,000/a €10,000- $0.10 for first approval expected CER 15,000/a 15,000 CERs, €30,000- volume, will be $0.20 for the 60,000 deducted from rest; plus a 2% issuance fees) adaptation fee
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3 FINANCING SMALL-SCALE RENEWABLE ENERGY PROJECTS This section provides a general overview on how to develop a bankable project proposal and what are the main concerns that the financing institutions have when considering the financing of an energy project. 3.1 Introduction reduction projects, carbon finance may play a significantly larger role. Few other project developers than larger Furthermore, most of the carbon companies have the necessary resources contracts are payment on delivery, so to finance their project ideas from out of even if significant cash flow resulted the pocket. In most cases, external debt from the sale of the emission reductions, or equity is needed. This chapter outlines it would not solve the problem of initially the overall procedure for financial financing the project. structuring of renewable energy projects. It is impossible to provide here a Figure 7 shows World Bank’s estimates complete handbook of project financing; on carbon finance’s impact on project we rather try to give a basic idea for the financing. It can be seen that with developer. Many banks and other biomass projects and methane capture financing institutions have plenty of the impact is most significant due to the material on this issue. One source of high Global Warming Potential of information specific to Central America methane. is Fenerca (Financiamiento de Empresas Carbon finance does not turn a bad de Energía Renovable en América project into a good-one. On the other Central, www.fenerca.org), which has hand, it may significantly improve the manuals on preparation of business probability for good project ideas to be plans, etc. The steps described here seek realised as projects. Some of the impacts to meet in general terms most financing that carbon finance may have on the institutions’ information requirements. project’s viability are: However, each financing institution has its own guidelines for approval of Carbon finance improves the finance. The project developer should IRR on equity and may thus get establish and maintain a good dialogue new investors on board, who with the relevant representative at each otherwise would not be financing institution and always follow interested in the investment; each financing institutions specific The ERPA with a creditworthy guidelines when submitting an counterpart gives the project a application. cash flow in hard currency, 3.2 Impacts of Carbon which may facilitate the Finance to Project negotiations with the lenders; Financing and It is important to bear in mind that Parties interested in purchasing carbon finance is only a small part of the the emission reductions may total financing of the project. According bring additional resources, to some estimates, carbon finance can technical expertise and know- generally improve the financial rate of how to the project. return of a project by 1-5 percentage points, depending on the type of the project and other conditions. However for some technologies, such as methane
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In order to be able to benefit from The following chapters aim at giving carbon finance through CDM or other some insight into the traditional project mechanisms, the underlying financial financing. structure of the project must be solid.
Figure 7. Impact of Carbon Finance on the IRR of selected projects. (DH=District Heating). Source: World Bank.
Impact of Carbon Finance on Sample Renewable Energy and Energy Efficiency Projects
20 18 16 14 12 10 IRR w ith carbon finance 8 IRR w ithout carbon finance
6 Financial IRR (%)IRR Financial 4 2 0 DH Wind Hydro Bagasse Biomass Methane
equity contribution and nothing more. 3.3 Project Financing Lenders to the project (e.g. Traditionally, commercial banks lend commercial or development money against fixed assets and the total banks) assume part of the project amount of the loan must be guaranteed risks, since they are lending by the borrower. In project financing, the without full recourse and creditors provide financing to a project primarily on the basis of project solely based on the merits of the project assets. itself, with limited or no recourse to the companies sponsoring the project. (i.e. On the other hand, establishing a special non-recourse or limited recourse project company incurs transaction costs financing). Typically a separate project which may be significant in a small company (sometimes called special project. Also, non-recourse financing is purpose company or special purpose more expensive than traditional lending vehicle) is established by the project against guarantees because of the higher sponsors to implement the project. The risks for the lender. Many banks are also benefits of such arrangement for the unfamiliar with project financing and sponsors include: unwilling to lend based on the merits of the project without full guarantees. If the It allows the sponsors to borrow project sponsor has sufficient financial funds to finance a project capacity to implement the project without without increasing their liabilities a special purpose company, this may be beyond their investment in the an option in a small project. project. On the sponsor’s balance sheet, their exposure to Independently of whether the project will the project is the amount of their be financed using conventional full-
36 Central American Carbon Finance Guide recourse financing or project financing, understand the characteristics of each of the CDM investors or buyers of emission them. The challenge of financial reductions are most interested in the structuring is to set up a combination of financial soundness of the project. debt, equity and mezzanine financing that Therefore, a properly made business plan optimizes the use of various financial and a feasibility study are always required. sources. A typical project may involve e.g. 20-40% of equity provided by the 3.4 Types of Capital project sponsors and 60-80% of debt To implement a project, capital (or provided by commercial banks, financing) is needed. There are basically international financial institutions and/or three types of capital available for all bilateral government lenders. projects:
Equity; Figure 8 shows a typical financial Debt; and structure of a project. Mezzanine capital. Every type of capital plays a special role in project financing and it is important to
Figure 8. Financial Structure of a project.
Project Owners
Equity Dividends
Premium Project Company
Debt Service Loan
Insurers Lenders Payments if triggered
3.4.1 Equity Capital 3.4.2 Debt capital
Equity represents the funds injected by In contrast to equity capital, debt has the the owners of the project and it is the highest ranking of all capital. Senior debt lowest ranking capital of all in terms of its has first claim over all the assets of a claims on the assets of the project. project and must be repaid first, normally Normally all the other obligations must according to a predetermined schedule. be satisfied before any dividends to the Therefore the debt bears the lowest risk project owners can be paid. Equity of all capital and correspondingly the investors therefore bear the highest risk returns on debt are usually limited to the in the project. If the project fails, the interest payments, irrespective of how equity investors will most probably lose a successful the project may be. significant part of their equity investment. Lenders would usually prefer a low debt- On the other hand, if the project is equity ratio passing majority of the risks successful, the equity investors can also to the equity investors. A high debt- make the biggest gains. After all the other equity ratio reduces equity investors’ obligations are met, everything that exposure to the project risks and increase remains belongs to the equity investors. their potential returns when the project is
37 Central American Carbon Finance Guide successful. On the other hand, high debt in that regular payments of interest leverage increases the risk of default are involved. However, payments are which would result in equity investors subordinated to senior debt and need losing all their investment. Normally the only be made when project funds are higher the project risks, the lower the available. For bearing greater risks than debt-equity ratio. Projects exposed to senior loans, mezzanine capital requires market risks tend to have 60-65% debt higher returns. This is achieved either leverage, whereas an energy project with through higher interest rates or partial firm take-or-pay power purchase participation in the project’s profits.17 agreement could reach 70-80% leverage. 3.5 Financial project As lenders become more familiar with carbon finance, a long-term ERPA with a cycle creditworthy counterparty can also help Although there are several ways of raise project’s leverage. moving forward, most projects follow to some extent the steps presented in Figure 3.4.3 Mezzanine Capital 9. Generally there is first a pre-feasibility Mezzanine capital has characteristics phase followed by the preparation of a from both equity and debt and it is more detailed feasibility study and therefore a more flexible instrument than business plan. When external finance is either pure equity or debt capital. needed (either loans or equity capital or Structurally it is subordinated in priority both), a package of documentation has to of payment to senior debt, but it is senior be prepared for the potential financiers. to common stock or equity. In the following chapters the steps needed until the financial closing of the Examples of mezzanine financing are project are briefly explained. subordinated loans, preferred shares and convertible bonds. For instance, 17 subordinated loans have characteristics of UNIDO. BOT Guidelines. Vienna 1996.
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Figure 9. CDM project cycle and parallel project financing steps. Source: World Bank.
1. Pre - feasibility Study • Project outline • Draft business plan • Sponsors 2. Feasibility Study Project completion Up to 21 years • Financial sources • Detailed project plan Preparation and review of the Project • Business plan Up to 21 years • Sponsors 6. Reporting to financial 3 months • Financial sources institutions Simplified Project Design Document • Annual and quarterly reports Cost 2 months Periodic verification & Reduction 3. Financial Appraisal & negotiations certification - with Stream • Final business plan 2 months 1- Lined 3 years • FinncingFinancing plan plan Procedures • Risk assessment and mitigation strategies Validation process 3 months
Construction and start up Project Appraisal and Negotiation 5. Construction 4. Financial package and documents for financial closing • Recognised international standards • Negotiations with each financial institution for contracts (e.g. FIDIC) • Bidding procedure • Loan agreement & legal documents • Project agreements (e.g. PPA, ERPA, fuel supply) • Contracts with suppliers and constructors • All public approvals • Legal opinions of the total package
3.5.1 Pre-feasibility Studies is implemented by an existing company, does it have the sufficient resources to do The purpose of the pre-feasibility stage is it on its own or are other equity investors to investigate the project outline and or lenders needed? Does the project screen the opportunities without merit the formation of a special project spending major resources on extensive company (see Chapter 0)? Most financial studies of the entire project. It is also an institutions emphasize the sponsor’s important stage in order to gain interest financial strengths and proven capabilities from co-investors and potential financing to implement the project. Thus, any institutions and authorities, and achieve project development should be started by non-binding Letters of Interest for the identification of key owners and receiving project development. During the pre- letters of interest from these before feasibility stage, it is also important to contacting financial institutions. receive early input from financial Besides organisation, the first questions institutions for optimal project design. are also related to money. Who is going The pre-feasibility phase of the financial to give the seed money for the project cycle corresponds time-wise to development of the project? There are the preparation of the Project Idea Note in different sources that provide grants for the CDM project cycle. pre-feasibility studies or business Often the first questions relate to the development (see Annex III) but organisation of the project. Is there a generally the project developers have to group of people, companies or other be prepared to invest some of their own organisations who are willing to invest in, resources (time, work and money), as or to be part of the project? If the project well.
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The principal objective of the pre- from each potential source of finance feasibility study is to determine whether: before submitting an initial written 18 application for finance. The representatives from financial institutions All possible project alternatives have been examined; could contribute by valuable advice and input to the project. Often the initial The project concept justifies a approval from the financing institutions detailed analysis by a feasibility is a precondition for the later approval of study; the full finance of the project. Any aspects of the project are The host country authorities for approval critical to its feasibility and need of the potential CDM project should also in-depth investigation; and be contacted already at this stage, and the The project idea, on the basis of pre-feasibility study should be the available information, should accompanied, if possible, by a Letter of be considered either non-viable Interest from the authorities in the host or attractive enough for a country. particular investor. 3.5.2 Feasibility Study and The pre-feasibility study should look at Business Plan the project from economic, market- related, technical, financial and Feasibility study and business plan differ managerial point of view. Normally, the both in scope and in detail. The feasibility PIN (as discussed in Chapter 2.5.1) study gives an overview of different would also cover much of the basic possibilities comparing various project information requirements for pre- alternatives, technology options etc., feasibility-studies. However, the PIN while business plan gives the details of a concentrates on emission reductions, specific selected activity. Whereas whereas the emphasis in the pre- feasibility study concentrates on such feasibility study is on the financial issues as electricity tariffs, competition, viability of the project. taxation and fuel availability, the business plan focuses on business structure, Different project alternatives should be management plans, specific business assessed in the pre-feasibility phase, so targets, staffing and so on. The feasibility that in later stages the most viable study and business plan together should alternative can be selected as the basis for provide potential lenders or equity the project. The project developers may investors with sufficient information to have fixed ideas or be blind to some undertake a decision on investments or flaws of the project concept; therefore it lending. This phase of the financial is important to involve impartial project cycle corresponds to the outsiders in the preparation and/or PIN/PDD phase of the carbon finance revision of the feasibility study. cycle. Most financing institutions have a two- When the potential investors or lenders step approval procedure with an initial are assessing the feasibility study and review and final approval. The pre- business plan, they normally focus on feasibility study should be used in the such key factors as:19 initial phase to open the dialogue with the financing institutions. It is recommended The company/sponsor can to have meetings, in person or by demonstrate that it operates its telephone conference, with key contacts 19 http://carbonfinance.org. Document Library. PCF Implementation Note #7: Financial Risk Assessment and 18 UNIDO. Manual for the Preparation of Industrial Mitigation: Risk-based Structuring and Pricing, Annex 6. Feasibility Studies. Vienna 1991.
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current businesses profitably, can Depending on the size and other service its debt, and has the characteristics of the project, the know-how and capacity to feasibility study would typically include: operate the proposed project; Executive Summary; A business plan indicates that the Project background and history, project can be developed and including presentation of project operated in a manner that will sponsors’ financial strength and enable it to provide a reasonable past experiences in project return to investors while implementation; servicing debt; Market analysis and marketing Summary of the projects concept; technical outline demonstrates documented efficient and proven Description of the project technology. A detailed technical location, site and environment; project plan should be made Description of the project available upon request or be technology and engineering enclosed as appendix; issues, including examples where The project has a credible the technology has been customer base – or in the case of successfully utilised in other independent power or heat similar projects; producers, an offtaker – with the Project organisation and financial capacity to purchase the overhead costs; project’s output during the debt repayment period; and Required human resources and their availability; The sponsors and the project company have sufficient Project implementation schedule; financial strength so that neither Total investment costs and the sponsors nor the project project financing (proposed have liabilities that would capital structure indicating which undermine the ability of the parties are expected to provide project to achieve and maintain the project’s financing); profitability. Financial evaluation (payback Feasibility Study period, IRR and NPV The feasibility study includes basically the calculations, sensitivity analyses same information as the pre-feasibility and presentation of main study but in a much more detailed level. assumptions); and It addresses supply and demand Description of project’s characteristics in the specific market of environmental and social impacts the project. Prices and pricing trends for or other special requirements of project inputs (e.g. fuels) and outputs the financiers. (e.g. electricity) and their sensitivities are discussed. The feasibility study should In small projects, a properly done pre- answer such questions as: Can you get feasibility study together with the into the market? Can you secure all business plan can be sufficient without a necessary contracts? Are your financial full-scale feasibility study, if it essentially projections realistic? What are the worst- answers the questions above. case and the best-case scenario?
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Business Plan The business plan should be a well- The business plan offers a different point structured document of maximum 25 of view from the global perspective of pages plus appendices. The business plan the feasibility study. It provides details should be fact-based and focus on the about the operation, the market, project presentation of facts and numbers. management and the project An example of an outline for a business organisation’s financials. It also addresses plan is presented in Table 8. how to create a profitable income stream for the project’s investors.
Table 8. Business Plan outline for projects. Source: World Bank 2002.
Proposed Business Plan Outline
1. Executive Summary 1.1. Description of project and business history, current status, customer, beneficiaries, size of program, expectations for future project 1.2. Target markets, expected sales and expected emission reductions (ER) volumes 1.3. Project marketing and outreach Strategy 1.4. Budget and financial projections; expected contributions 2. Mission 2.1. Sponsor: Current scope of activities and responsibilities (utilize existing information e.g. from annual reports) 2.2. Project: Brief explanation of project’s fit with sponsor’s mission 3. Project Strategy 3.1. Business concept 3.2. Marketing strategy – sales estimates and prices by product/customer class 3.3. Cost structure and supplier analysis 3.4. Competition -- capability of other companies to provide similar services 4. Management Structure and Capabilities 4.1. Sponsor(s) 4.1.1. Directors and managers 4.1.2. Budget, including sources of financing 4.1.3. Structure, capabilities and experience: similar projects that sponsor has closed (number, financing provided, current status) 4.2. Project management plan 4.2.1. Legal authority (i.e. permits) 4.2.2. Structure 4.2.3. Roles and responsibilities of each position 4.2.4. Names and backgrounds of critical personnel (sponsor staff, technical assistance, consultants, advisory board, if applicable) 5. Technology & procurement 5.1. Proposed technology concept 5.2. Potential suppliers 5.3. Reference projects or documentation for mature technology 5.4. Proposed purchase procedures 5.5. Proposed contract structures 6. Project Risk Management 6.1. Risk identification 6.2. Proposed strategies for mitigating risks (including long term offtake contracts) 7. Project Budget and Financial Projections 7.1. Estimated requirements for construction period 7.2. Estimated requirements for first 3 years of` operation 7.3. Budget for full operation 7.4. Financing Plan 7.5. Sensitivity analysis of key assumptions: power sales, ERPA, main costs etc.
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3.5.3 Financial plan necessary permits, site preparation, engineering, procurement and An important part of the business plan is construction, interests during the the financial plan of the project. There construction period, trial runs, start-up are four key elements where the financial and commissioning costs etc. Operating plan should focus at: project costs, costs may consist of such items as fuel, financial structure (equity, debt), return salaries and social benefits, rent, water, on investment and risks. The financial power, gas, taxes, office supplies, plan should be based on a continued maintenance, marketing, administration, dialogue with the financing institutions depreciation and financial costs. since the pre-feasibility stage. It should Operating costs are supposed to be result in a structure of the capital that financed from the revenues generated by would be sufficient for providing the the project. However, there may be project with liquid funds for the project significant operating expenses before the implementation and start up. At the same project starts to generate sufficient time, the financial structure should be income. An important part of the adapted to the risk profile of the project investment costs, which is often and make sure that the project manages neglected, is the initial working capital. In to repay the capital expenditures even in the analysis of the investment costs it the worst-case scenario. should therefore be carefully checked Project Costs whether the initial working capital Since reliable cost estimates are requirements are properly considered in fundamental to the appraisal of a project, the cost estimates. This helps to avoid in it necessary to check carefully all cost unexpected shortage of finance during items that could have a significant impact start-up of project operations. on the financial feasibility of the project. Table 9 shows the project development The costs can generally be divided in and implementation cost table from the three phases: development (pre- World Bank’s Project Cover Note. It investment) costs, project divides the costs into development costs, implementation (investment) costs and installed costs (sum of capital costs and operating costs. Pre-investment costs installation costs) and other costs (e.g. include for instance the preparation of legal costs, start-up costs, initial working the pre-feasibility and feasibility studies capital). These are the total project costs and business plan, related travelling etc. that must be financed through a The project implementation costs include combination of debt and equity. The costs related to insurances, land table also includes a brief description of acquisition, taxes, legal expenses, the commercial strategy of the project.
Table 9. Project costs and commercial strategy.
Estimate of Total Project Costs (pre-investment and investment phase) Development costs US$ / € and a brief clarification Installed costs US$ / € and a brief clarification Other costs US$ / € and a brief clarification Total project costs US$ / € and a brief clarification Commercial strategy A brief description of the commercial strategy of the project
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Financial Structure financing plan. Table 10 presents a model The financial plan should suggest the to describe the financial structure of a financial structure to cover all the costs project. For typical division between presented in Table 9. It should include equity and debt, see Chapter 3.4. Annex IV list some potential sources of debt and names of sources of debt and equity to 20 be sought or already identified, equity for projects in Central America. contribution of each, and status of commitment. Any letters of intent or any 20 More information can be found in “Financing Business Opportunities in Latin America and the Caribbean” other evidence of interest from financiers published by the Finnish Ministry for Foreign Affairs. It can should be attached as enclosures to the be found in Finpro’s website at www.finpro.fi.
Table 10. Proposed financial structure – sources of finance identified.
Source US$ % Status of Terms for finance(interest rate, (€) Commitment repayment time, tenor, insurance requirements) EQUITY Sponsor 1 Sponsor 2 Other Shareholders Other Shareholders Total Equity DEBT Foreign bank loan Export credit Local bank (local currency) loan Total Debt TOTAL FINANCING Financing Gap (Project cost minus total financing)
On a regular basis, OECD undertakes a Table 11. OECD country risk classification of Central American countries as of October 2009. global country-risk classification, Source: OECS. classifying all countries in the world into Country OECD risk 7 risk classes (see Table 11). category Belize 6 Financing institutions consider the Costa Rica 3 foreign investment risk in country risk Dominican Republic 5 category 1 as low, and most commercial El Salvador 4 Guatemala 5 OECD based financing institutions are Honduras 6 closed for investments in OECD country Nicaragua 7 category 6 and 7 without guarantees in Panama 3 terms of sovereign counter guarantees, export credit guarantee or other The OECD risk classifications of the guarantee. various Central American countries imply However, if the proposed project is that different financing strategies should financially strong and profitable, the be developed for projects in e.g. project developer may search for risk Honduras and Nicaragua, than for Costa mitigation strategies and counter Rica and Panama. The latter may attract guarantees, such as export guarantees, to more commercially oriented financing at attract foreign credits even though the the current stage. country risk is rated as high (see Chapter The international credit rating agencies 3.5.6 for more information on export (S&P, Moody’s, Fitch) also give ratings guarantees). for countries, as well as for companies.
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Their ratings for the host country and the Therefore, ratings should be collected project sponsors are important indicators whenever possible and presented as part for investors and financing institutions. of the financing plan (see Table 12).
Table 12. Credit ratings of host country and company. See www.moodys.com, www.standardandpoors.com, www.fitchibca.com and www.oecd.org for ratings. Sites may require registration.
Rating Agency* Country Company
S&P
Moody’s
Fitch
OECD
Financial Analysis Most financing institutions prefer to An important part of the financial plan is receive cash flow projections for the the financial analysis. It should be able to project along with the financial analysis demonstrate that the project is profitable, both in paper copies and in electronic able to generate sufficient return for the form (Excel files or similar). An Excel investors and service its debt. Financial template for making a simple analysis is forecasts provide insight into the risks, available from the World Banks’ Carbon important issues and burden sharing Finance Unit’s Document Library (http://carbonfinance.org/). Some of the within the project; they are not an objective in themselves. Forecasts should key results of the financial analysis are not be “Too Good To Be True”. listed in Table 13.
Table 13. Key results of financial analysis.
2004 05 06 07 08 09 10 11 12 13
Cash flow (before CERs)
Cash flow (after CERs)
Net Present Value NPV (before CERs)
Net Present Value NPV (after CERs)
Estimated financial internal rate of return FIRR (before CERs)
Estimated financial internal rate of return FIRR (after CERs)
Debt Service Coverage Ratio (before CERs)
Debt Service Coverage Ratio (after CERs)
The critical assumptions should be the financial plan. Sensitivity tests should highlighted and their values explained in be carried out for critical factors such as:
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Power or heat sales Financial risk
Emission reduction sales Financial risks could be mitigated by an appropriate financial structure; Resources, e.g. wind resources, availability and price of biomass the higher the risk, the higher the share or hydrological data of equity in the project that is required to raise finance. The level of foreign debt Interest rate levels should to certain extent match the level Exchange rate levels of hard currency income, e.g. from the ERPA, combined with the cash-flow of Production costs the project in relation to the recent years The sensitivity test should result in a base inflation and development of the case financial projection, a worst case exchange rate of the local currency. The scenario and a break-even scenario to debt-repayment structure should be illustrate the security margins in the adapted to the cash-flow generation of project. the project. The project risks could be split into the following factors and a The financial plan should also include a mitigation plan should be developed for proposal for key financial covenants. A each: covenant is a promise in the debt agreement that certain activities will or Construction risk and performance risk will not be carried out. The purpose of a These risks can be mitigated by sufficient covenant is to give the lender more pre-investigations, planning and use of security. Covenants can cover everything well-known engineering and construction from minimum dividend payments to companies. This should be combined levels that must be maintained in working with an appropriate contract structure, capital. Typical covenants could relate e.g. FIDIC (Federación Internacional de for instance to: Ingenieros Consultores). The FIDIC Equity ratio (recommended level contract model regulates the exact of 35 – 50% in developing responsibilities of each contracting party countries). and defines financial punishment for delays and non-fulfilment of contracts. Ratio of Net Debt to EBITDA (Earnings before Interests, Counterparty risks Taxation, Depreciation and Counterparties here could refer to fuel Amortisation) to illustrate the suppliers, power or heat offtakers or any debt service capabilities of the other parties outside the project, whose project cash flow. fulfilment of contractual obligations is Financial risk assessment and important for the success of the project. mitigations The counterparty risks should be mitigated by evaluation of the financial The key financial risks should be strength and performance records of the highlighted: counterparty coupled with appropriate Market/price risk – power or other sales contract structure. Financing institutions prefer long term Contract risk contracts with financially sound power Contract risk should be mitigated by company. Otherwise, the tariff structure appropriate legal advisors and legal and expected tariff development should opinions. be evaluated in detail. Sensitivity analysis should be carried out to investigate the Environmental and social risk break-even level of power tariff (or price of other products sold) for the project.
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These risks should be evaluated in the Is there a reliable legal pre-feasibility study, and the projects framework and efficient court should be appropriately designed to system? handle these issues, e.g. through an As previously mentioned, the host environmental and social management country’s OECD rating coupled with the plan prepared as part of the foreign investors’ evaluation of the environmental and social assessment.. investment climate may exclude some Country risk commercial bank financing options and Foreign investors and foreign financing other financing strategies should be institutions may search to cover the risk identified. associated with investments in the host 3.5.4 Financial appraisal and country either through export guarantee negotiations agencies or private political risk insurance companies. As an alternative, the political Financial appraisal is a method used to risks could be split in main items and evaluate the viability of a proposed evaluated individually. Naturally, foreign project by assessing the value of net cash investments would be attracted to host flows that result from its implementation. countries with positive valuation of the Due diligence is part of the appraisal following factors: process and it serves to confirm all material facts in regards to the lenders or Is the investment climate stable for foreign investors? investors participation in the project. During the financial due diligence Is there low risk for depreciation process, most financing institutions of the local currency? would examine to some extent the items presented in Table 14. . Table 14. Financial due diligence.
Objective Evidence Sound Audited financials for at least 3 years [and auditor’s management letter] sponsor/company demonstrating sound financial performance and management. Ratio analysis including: margin analysis, debt service coverage ratio, operating ratios, debt/equity ratio, self-financing ratio Sound Project A business plan that shows a clear strategy, an understanding of the market, Business socio-political, financial, and technical challenges the project faces, and financial projections (covering at least five years of operations after project completion) demonstrating the financial viability of the project (including project capital cost estimates, project financing plans, income statements, balance sheets and cash- flow statements). Ratio analysis as above. Sound offtaker / Business plan should also include market analysis – especially analysis of credible market demand – indicating historical and projected trends in sales volumes both in for output physical and monetary terms, customers, tariffs. (a) In the case of an independent power and/or heat producer: an affidavit indicating a sound purchase agreement (for contracted sales) or viable market (for merchant sales). Ideally: take-or-pay PPA with viable offtaker and automatic indexation of tariffs. (b) In the case of an integrated utility or other company with numerous customers: a market assessment describing the customer base and growth trends, and potential threats from substitutes or competitors; indicating sufficient demand for the product at projected prices to enable the project to operate profitably. Limited debt and A statement summarizing potentially large debts and liabilities, required only to liability exposure the extent that they are not revealed in the audited financial statements Technology, 1. Approved technical concept procurement 2. Solid project management during implementation procedures and 3. Adequate contract structure to protect the project developers towards delays construction in delivery and costs overruns 4. Plan for appointing recognized construction companies only
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Experience statement, including all the projects the firm has Before the appraisal, the project closed, their current status, and developer should have had a detailed additional details on projects examination of the project with the similar to the CDM project at contact person at the financing institution hand in order to make sure the project is adapted to the financing institutions Any ratings and reports from requirements and guidelines to the extent D&B, S&P, Fitch, OECD possible. (country only). The appraisal and commitment of one Public filings, if any. financing institution may often be Audited financial statements for conditional upon approvals from other most recent three years. financing institutions in order to ensure the banks commitment to only fully Company By-Laws/Articles of financed projects. After appraisal, the Association. financing institutions often present List of Directors and Managers additional assumptions in order to reduce of the Company. the risk profile in the project. This often strengthens the project and reasonable Shareholders Agreement. requirements should be met. However, List of Company Subsidiaries, if most financing institutions would also not included in financial accept reasonable arguments and a statements. constructive negotiations process would result in a satisfying result for all parties. List of Company Debts (maturities, interest rates, 3.5.5 Financial package and security) if not included in documents for financial statements. financial closing Paper and electronic copies of company financial projections Preparation of the loan agreements including assumptions, balance normally build on the standard loan sheet, income statement, cash agreements from the financing flow; include proposed projects institutions, unless several financing and other planned investments. institutions would share the same loan agreement either through syndicated loan Before appraisal, the following agreements (for the largest projects) or documents should be ready to submit to club-deals with 2 – 4 banks. the financing institutions upon requests: In addition to the loan agreements with Major project contracts (e.g. lending institutions, the following engineering, procurement and documentation should be ready before construction). financial closing. Purchase contracts (e.g. power). Financial documentation checklist:21 Concessions, licenses and For each sponsor and the project permits. company the following documents Financing agreements, letters of should be available (where applicable): intent or similar from banks, equity providers, carbon finance 21 http://carbonfinance.org. Document Library. PCF sources, etc. Implementation Note #7: Financial Risk Assessment and Mitigation: Risk-based Structuring and Pricing, Annex 1 Technical assistance agreements, if applicable.
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Laws governing project Export Finance of Equipment for operations (e.g. build, operate, Projects transfer laws, and government Export credit and guarantee agencies may decrees). have a possible role in risk mitigation for Sources of major procurements. small-scale energy projects for the imported part of the equipment. In some Paper and electronic copies of project financial projections countries, such as the USA, the US-Exim including assumptions, per unit Bank is responsible for both the export (e.g. USD/MWh, USD/ton) credits and the export guarantee. In other product costs and prices (tariffs), countries, such as in Finland, Finnvera will issue the export-guarantees, while income statement, and cash flow. commercial banks and the exportbank, 3.5.6 Financing sources for FIDE – The Finnish Export Finance small scale renewable Development, will be responsible for the energy sources export credit. The export guarantee institutes and export credit banks can A brief presentation of potential sources normally advice on contact persons in of finance for small-scale energy projects their sister organisation (see Table 15). in Central America is given in the Export credits may be applied to finance annexes. The annexes list institutions’ part of a CDM project, for instance: types of financial contribution and their main criteria for finance/support and supply of equipment for e.g. links to make it easier for the reader to wind turbines, biomass boilers, screen the possibilities and be able to photovoltaics or hydropower contact the respective sources for more plants or turn-key projects detailed information about their supply of specific consulting conditions for contributing to the project. services, e.g. wind-mapping or Often, the contact persons from these hydrology and power design organisations and financial institutions studies can also advise on interested sponsors and local sources for finance of project The main terms and conditions for development and financing of the export credits are regulated by OECD, projects. and the maximum credit time for power stations is 12 years. The Annexes are: It is normally the supplier of the Sources for general support for equipment that would facilitate the project preparation and technical contact to the export credit agency and assistance (Annex III) the export guarantee agency until Sources for equity, grants and approval of the finance, where after these loans (Annex IV) agencies will contact the CDM project developer and if applicable, the counter Carbon finance sources (Annex guarantee institute, for preparing the V) documentation for the project. More complete information can also be Export guarantees may come in various found in the book “Financing Business forms22: Opportunities in Latin America and the Caribbean”, which is available from the Credit Risk Guarantees Finnish Ministry for Foreign Affairs and from the Finpro website www.finpro.fi. 22 Ministry of Foreign Affairs of Finland: Financing Business Opportunities in Latin America and the Caribbean
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Buyer Credit Guarantees by the local partner/project company and up to 85% of the contract could be Letter of Credit Guarantees financed by an export credit. Of the Investment Guarantees export credit, the OECD export Bond Guarantees guarantee institutes may cover up to 90% of the commercial risk and 100% of the Finance Guarantees political risk. The remaining risk must be Raw Material Guarantees carried by the supplier of the equipment or the supplier’s bank. A traditional export credit arrangement consist of a contracted amount, whereof minimum 15% should be paid up-front
Table 15. Examples of national and commercial export credit and guarantee institutions.
Examples of export credits & guarantee institutes23 Links to guidelines
CESCE (Spain) www.cesce.es Compagnie Francaise d'Assurance (COFACE) www.coface.com Eksportkreditfonden i Danmark (EKF) (Denmark) www.ekf.dk Eksportkreditnemden i Sverige (EKN) (Sweden) www.ekn.se ERG (Switzerland) www.swiss-erg.com Export Credit Guarantee Department (ECGD) (UK) www.ecgd.gov.uk/ Finnvera (Finland) www.finnvera.fi HERMES (Germany) www.hermes-kredit.com MIGA (World Bank Group) www.miga.org Atradius (Switzerland, Germany, Spain) www.atradius.com US EXIMBANK (United States) www.exim.gov
23 Source: www.giek.no
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4 CENTRAL AMERICAN COUNTRIES INFORMATION
4.1 Regional and Country Information This section introduces a general overview of the Central American and Dominican Republic electric industry, as well as the vision of the electric market in each one of the 8 countries of the region. 4.1.1 General Indicators Table 15 shows the main social and economic The Central American countries and indicators of Central America. Dominican Republic together had a population of approximately 52 million inhabitants as of 2008, and a GDP estimated around US$182 billion, after the institutional consolidation of the transformation of the electric industry in almost all of the countries. This transformation process started in the early 90s, and was characterized by the separation of the generation, transmission and distribution activities. This new management mode promotes competitiveness within the generation and commercialization markets, while transmission and distribution activities remain as regulated activities.
Table 15. SICA Countries - Social and Economic Indicators, 2008.
Population Population GDP 2008 GDP per capita Country Area (km2) Density (inhab) (US$)a (US$) (inhab/km2)
Belize 22,800 287,730 12,619737 1,778.0 6,179.4b Costa Rica 50,700 4,533,200 0,093353 29,663.2 6,543.55 El Salvador 21,041 7,218,000 0,343045 22,114.6 3,063.81 Guatemala 108,889 13,677,800 0,132952 39,038.5 2,854.15 Honduras 111,900 7,706,900 0,076908 14,219.6 1,845.05 Nicaragua 130,000 5,668,900 0,050523 6,365.3 1,122.85 Panama 75,517 3,395,300 0,048929 23,087.9 6,799.96 Dominican Republic 48,442 9,528,800 0,213203 45,647.0 4,790.42 TOTAL 569,289 52,016,630 2220,911 Source: ECLAC, based on official figures. Preliminary figures for the year 2006. Central American electric statistics. LC/MEX/L.904/Rev.1, 13 November 2009. a. million of current Dollars b: 2004 statistics
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According with the ECLAC study corresponding source. Generation reached LC/MEX/L.953 ( December 22th 2009), the 39,242 GWh in the entire region. Table 16 show the evolution of installed Hydroelectricity had the highest contribution capacity installed in Central America between with a total of 19,579 GWh (71.3%), followed 1990 and 2008. According to these figures, the by geothermal with 3,131 GWh (11.4%) and total capacity of the sub-region grew from fossil fuel with 2,892 GWh (10.5%); other 4,129 MW to 10,270 MW, ie, were added sources such as bagasse contributed with 6,141 MW of new capacity. Of this, 43% 1,662 GWh (6.1%) and finally the only wind (2,640 MW) correspond to technologies using contribution was made by Costa Rica with 198 renewable energies sources, and the remaining GWh (0.7%)48. 57% (3,501 MW) of power plants working with fossil fuels. 48 The figure 11 shows electric generation in the CEPAL, according to the official reports year 2008, in accordance with the
Table 16 Evolution of the installed capacity for electricity generation in Central America as of 1990 to 2008.
MW Renewables Thermal Geother Fuel Gasturbi Year Total Hydro Wind Bagasse Diesel Coal mal oil ne 1990 4,129.3 2,708.6 0 165 0 59.5 218.5 517.7 0 1995 5,218.4 2,797.0 0 235.3 72.5 473.8 577.0 1,062.8 142.0 2000 7,526.5 3,312.9 42.5 405.2 205.3 507.6 1,744.8 896.3 142.0 2005 9,132.8 2,879.8 68.6 437.4 529.8 648.6 2,597.2 829.4 142.0 2006 9,715.3 4,243.3 69.9 501.6 634.1 631.1 2,682.1 814.1 139.0 2008 10,270.5 4,257.0 69.9 501.6 684.7 634.1 3,148.6 814.1 160.4
Table 17 Evolution of the electricity generation Central America as of 1990 to 2008.
GWh Renewables Thermal Geother Fuel Gasturbi Year Total Hydro Wind Bagasse Diesel Coal mal oil ne 1990 14,175,2 12,165.9 0.0 747.6 0.0 1,013.8 16.5 231.4 0.0 1995 19,454.4 11,468.5 0.0 1,159.0 127.4 1,870.4 2,168.3 2,660.9 0.0 2000 26,955.4 15,417.8 182.7 1,999.3 721.6 1,133.8 6,351.1 590.6 558.4 2005 34,504.0 17,050,3 203.6 2,461.5 1,251.3 1,611.2 10,601.0 346.5 978.5 2006 36,380.2 17,790.5 273.5 2,635.6 1,355.6 1,967.5 10,789.3 557.7 1,010.5 2008 39,241.5 19,759.3 198.2 3,130.9 1,661.8 1,867.8 10,948.9 627.1 1,047.6
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Table 18 Installed capacity by country in year 2008, organized by source of energy (renewable and not renewable)
MW Renewables Thermal Geother Fuel Gasturbi Year Total Hydro Wind Bagasse Diesel Coal mal oil ne Costa Rica 2,446.6 1,524.3 69.9 165.7 20.0 0.0 319.0 347.7 0.0 El Salvador 1,439.8 485.7 0.0 204.4 107.5 0.0 626.0 16.2 0.0 Guatemala 2,227.1 752.6 0.0 44.0 350.8 4.5 706.9 215.9 152.4 Honduras 1,579.7 520.3 0.0 0.0 79.6 0.0 899.3 72.5 8.0 Nicaragua 879.7 105.3 0.0 87.5 126.8 229.8 251.3 79.0 0.0 Panama 1,697.5 868.8 0.0 0.0 0.0 399.8 346.0 82.8 0.0 Total 10,270.5 4,257.0 69.9 501.6 648.7 634.1 3148.6 814.1 160.7
Figure 10. Electric Generation in Central America by source (in GWh), 2008
Table 19 Electricity production in 2008 (GWh) by source of energy.
GWh Renewables Thermal Geother Fuel Gasturbi Year Total Hydro Wind Bagasse Diesel Coal mal oil ne Costa Rica 9,413 7,384 198 1,131 22 168 312 366 0 El Salvador 5,716 2,095 0 1,421 189 0 154 58 0 Guatemala 7,917 3,581 0 289 870 0 284 25 1048 Honduras 6,815 2,305 0 0 243 20 470 57 0 Nicaragua 3,176 529 0 290 338 0 177 14 0 Panama 6,204 3,865 0 0 0 825 111 107 0 Total 39,242 19,579 198 3,131 1,662 1,020 1,049 627 1048
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sources of approximately 50%, additional to In view of the estimated economic and population growth for Central America, it is the installed capacity. estimated that the demand for electricity The historical participation of renewable throughout the region will increase energy for the electric generation in Central approximately 5% per year. These projections America has been reduced. As shown in imply that the demand for additional installed Table 17, up to 2006, dependency on capacity will also increase in the order of 550 imported fossil fuels has increased in the MW per year. This scenario includes a region – with the exception of Costa Rica-. probable participation of renewable energy
Table 17. Share of renewable energy in electric generation (%)
Region C.R. El Salv. Guat. Hond. Nic. Pan. Bel. 1980 71.1 98.8 98.7 20.0 91.6 53.7 55.0 0.0 1990 91.1 98.7 93.6 92.3 100.2 61.2 84.0 0.0 1998 60.4 92.4 53.0 55.4 54.3 21.8 51.3 34.1 2000 67.0 99.1 57.6 54.2 60.5 16.9 70.5 35.8 2002 59.1 98.4 50.6 40.6 38.7 23.4 64.7 28.0 2006 51.1 80.0 54.1 47.5 38.1 42.8 52.8 42.6 Ref.: (1980-2002) CNE/ESMAP, [email protected], Strategy for the Promotion of Investments in Renewable Energy, Managua, February 01, 2005 Ref.: (2006) ECLAC, based on official figures. Preliminary figures for the year 2006. Central American Isthmus. Statistics for the electric sub/sector. LC/MEX/L.772, 09 April 2007
According to data compiled by BUN-CA, technical potential estimates in the order of there is an interesting potential in the Central 31,000 MW in year 2006; hydroelectric American region to continue expanding an potential is the highest including small to large investment portfolio for renewable energy hydroelectric generation plants. sources. Table 18 presents a preliminary
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Table 20 Estimated technical potential from renewable energy sources (in MW)
Co-generation Country Hydro Geothermal Wind Total with residues Belizea 27 0 20 27 74 Guatemalab 5,000 1,000 7,800 250 14,050 Hondurasc 3,200 126 60 52 3,438 El Salvadord 839 450 50 1,339 Nicaraguae 1,740 1,000 250 100 3,090 Costa Ricaf 5,802 235 600 24 6,661 Panamag 2,341 40 400 20 2,801 Total 18,949 2,851 9,155 498 31,453 Source: a: Estimated compilation by BUN-CA from several sources as of year 2006 b: Energy statistics. Electric sub-sector, 2001-2006, Ministry of Energy and Mines (the wind potential is still a preliminary theoretical estimate under study) c: Action Plan for the Implementation of a National Sustainable Energy Policy, SERNA, June 2005 d: Energy Policy of the Government of El Salvador, May 2007 (the hydro potential includes the technical potential for the binational projects of El Tigre and La Paz) e: Strategy for the promotion of Renewable Energy Sources in Central America, ECLAC, May 28, 2004 f: Ibid e g: Ibid e
For the partial use of this potential it is were 216 participants in Central America necessary to know the institutional structure comprised by 159 generators (38 public of the electric market in each country. As institutions and 121 private), eight (8) shown in Table 19, by the end of 2006 there transmission companies, 22 distributors and 27 in commercialization of electricity.
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Table 19: Institutional structure of the Central American electric market (2009)
Country Guatemala Honduras El Salvador Nicaragua Panama Costa Rica
Electric Market Wholesale Monopoly Wholesale Wholesale Wholesale Monopoly Direction Direction National Council Ministry of Commission on Direction on General of General of on Energy Energy and Energy Policy Energy Sector Energy (Ministry Energy (Ministry of Mines (MEM) (Ministry of (Ministry of of Energy and (Secretary of Energy) Econmy and Environment Electric Sector Mines-MEM) State of Finances -MEF) ,Energy and Authority Naturals Telecomunicatio Resources and n – (MINAET) Environment- SERNA) Administrator of National Transactions Unit Center of Center of Center of Market the Wholesale Company on (UT) National Charge National National Operator and Market (AMM) Electric Energy Dispatch Dispatch (CND) Dispatch Manager (ENEE) (CNDC) National National General Regulator Nicaraguan Regulator Regulator Electric Sector Commission on Commission on of Electricity and Institute on Institution for Authority for Regulator Electric Energy Energy (CNE) Telecomunications Energy (INE) Public Utilities Public Utilities (CNEE) (SIGET) (ERSP) (ARESEP) Public 1 13 3 4 3a 5 Generators
Private 19 27 12 10 21 32 Generators 3 (ETCEE, Transmission TRELECand 1 (ENEE) 1 (ETESAL) 1 (ENTRESA) 1 (ETESA) 1 (ICE) other)
Distributors 3 1 5 2 3 8
Commercializat 13 1 13 0 0 0 ion
Total agents by 39 43 34 17 28 46 country a. The state company is the Panama Canal Authority (Autoridad del Canal de Panamá) that uses energy for auto consumption Original source: BUN-CA, 2005. FENERCA: Promotion of Renewable Energy in Central America: Opportunities for Policy statements –update as of March 2005-. Updated information by BUN-CA as of 2006.
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for insuring that the principles set forth 4.1.2 Regional initiatives in the Framework Treaty and its Regulations are respected by all Regional Electric Markets participants. The CRIE as the regulator is As a result of the changes generated by the highest authority of MER and shall the privatization processes in the 90’s and exercise its activities in close coordination the later institutional transformation, with the national regulators, who are its many private investors have positioned natural counterparts in each of the themselves in the Central American Central American countries. energy industry. Regional institutions The Framework Treaty also establishes governments, with the exception of the creation of the Regional Operating Belize and Dominican Republic, are Entity (Entidad Operadora Regional currently working on the unification of a (EOR)), as part of the regional regional energy market. A Treaty Signed integration process. EOR is in charge of in 1996 by all countries is an expression the technical operation and dispatch of of the willingness to create a unified the interconnected system, and the competitive market in the region. operation of the regional market. In order to build the Regional Energy SIEPAC Market (MER), the Central American Since 2006, the ongoing negotiations for countries have approved and ratified the the construction of the Electric Framework Treaty for the Central Interconnection System for Central American Energy Market25 (Tratado America (Sistema de Interconexión Marco del Mercado Eléctrico de América Eléctrica para América Central – Central), which entered into effect in SIEPAC-), are geared to develop the first January 1999, providing the necessary regional interconnected transmission legal framework for the region to operate system with a length of 1,785 Km; a regional electric market through the SIEPAC will start the wholesale of Network Owner Company (Empresa 26 electric market of Central America. . Propietaria de la Red (EPR for its acronym in Spanish), incorporated in In its first phase the project will 1998; EPRs is a company governed by interconnect Panama with Guatemala and private law and responsible for building, in a second phase with Mexico and managing, and maintaining the regional Colombia. interconnected system. Based on the The SIEPAC project is the first regional guidelines of the Treaty, the governments system of electric transmission which will approved the general design of the MER support the electric net of Central in the year 2002, consisting of a seventh America (Guatemala, El Salvador, market, parallel with the six national Honduras, Nicaragua, Costa Rica and electric systems, with independent rules Panamá). The project consists of a 230 from the others, and contacted through kV line of a circuit with provided towers the Regional Transmission Network (Red for a future second circuit. The lengths in de Transmisión Regional (RTR)). km are: Guatemala 281, El Salvador 286, The Framework Treaty also created the Honduras 270, Nicaragua 310, Costa Rica Regional Commission for Electric 493 and Panama 150. Furthermore it is Interconnection (Comisión Regional de included 298 MVAR of compensation Interconexión Eléctrica (CRIE)) as the equipments. One of the guard cables of entity regulating the MER, responsible the line will be type OPGW with 12 single mode strings and 24 of displaced
25 The Framework Treat of the Electric Market was 26 undersigned by 6 countries on December 30, 1996 Ref.: http://www.eprsiepac.com
57 Central American Carbon Finance Guide dispersion, plus the addition of cable sector authorities supports the Regional OPGW from the tower T to the Plant Energy Plan. Cajon in Honduras. The SIEPAC line For order of the Presidents of the SICA will connect the national nets of every countries the CCAD is doing country through a total of 28 access harmonisation actions in the climate points in the following sub-stations: change issue in the region countries with Guatemala Norte, Panaluya y Guatemala the goal to develop a regional regime for Este in Guatemala; Ahuachapán, Nejapa cooperation and environmental y 15 de Septiembre in El Salvador; Río integration to contribute to the life Lindo (including additional works in this quality of the Central American people. substation and Agua Caliente in The CCAD issues include the following Honduras; Planta Nicaragua y Ticuantepe programmatic areas: a) vulnerability and in Nicaragua; Cañas, Parrita, Río Claro y adaptation; b) Mitigation; c) Institutional Palmar Norte in Costa Rica; and and Capacities Development; d) Veladero in Panamá. En el tramo Education and public awareness and e) Ahuachapán – Nejapa-15 de Septiembre International management. en El Salvador, the second circuit will be at once installed. 27 The CCAD which is integrated by the national environment authorities of the region is meeting periodically to follow- Central American Integration System up the accorded issues. (SICA) The Central American electric system has The Declaration of the III Meeting of the been high in the agenda of the Secretary Council of Ministers of Environment and General of SICA(SG/SICA)), who is Energy of the Central American charge of the execution and coordination Integration System (SICA), held in of the mandate given by the Central October 10, 2006 in Panama City, it was American Presidential Summits and the decided to create the Energy decisions reached by the Foreign Affairs Coordination Unit of the Region. under Ministerial Councils. the supervision of the SG/SICA. Some SICA, has made a request to the various of the most important tasks include the regional organizations within the coordination of actions regarding framework of the Meso American Energy sustainable energy, with emphasis on Integration Program (Programa de renewable energy sources. Integración Energética Mesoamericana – PIEM) to develop a regional strategy for this sector in light of the regional energy vulnerability, caused by the high dependency of the countries on imported fossil fuels. In this context, in February 2005, the Ministers of the Environment met in San Pedro Sula to issue the San Pedro Sula Declaration on Renewable Energy and the Environment, which set up the Central American commission on Environment and Development (CCAD) that in coordination with the energy
27 http://www.eprsiepac.com/descripcion_siepac_transm ision_costa_rica.htm
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4.2 BELIZE capacity to support a peak demand of about 67 MW in 2006, starting with a 18- MW hydro development at Vaca on the Macal River that will be online by 2009, and a bagasse power cogeneration facility with a capacity of 13.5 MW expected to be online by the end 2007. Generation: Power generation in Belize for 2006 was composed of a total of 360,879 MWh of which 88,243 MWh corresponded to public generation by BEL with hydroelectric plants and 46,491 MWh with thermal plants. A total of 18,831 MWh where generated using renewable energy sources, such as solar and biomass. In addition about, 51% of
the generation (180,510 MWh) Figure 11 Political Map of Belize corresponded to imports from Mexico.
Transmission: The transmission system is 4.2.1 Description of the also operated by BEL. There is an Energy Sector interconnection to the electricity systems of Mexico, which is extremely important General Information for Belize since it imported about 30% of Belize maintains its electric structure its energy by 2006. based on the Electricity Law Nº13 of Distribution: Due to the nature of the 1992. This law has as its objective to monopolistic vertical integration of the regulate every aspect related to the Belizean electric system, BEL is in charge electrical service in Belize. of the electric distribution, which in 2006 The Energy Sector in Belize is a private served about 65,000 customers. vertical monopoly; the only enterprise Legal framework focused on with license to transmit and distribute renewable energy electricity is the Belize Electricity Limited –BEL-. The law now allows independent The main legislation related to the power producers to sell power to BEL Belizean energy sector is the following: for distribution. BEL now only generates Law of 1950: Creation of the Belize a minority of the power it transmits Electricity Board (BEB). In 1950 the law primarily to meet peak demands. There is of the electricity act was revised to a regulating entity of the power sector at provide for the establishing of the Belize the state level, the Public Utilities Electricity Board. This government Commission –PUC-. institution was charged with the Installed capacity: In 2006 the installed responsibility to generate electric energy, capacity in Belize was approximately 82 transmit, and distribute to the general MW, including 32 MW hydroelectric public. (Mollejon and the Chalillo projects), 25 Law Nº13 of 1992: Establishment of the MW diesel generation; and 25 MW Belize Electricity Limited (BEL). In 1992 purchased from Mexico. the electricity act was amended to The demand for energy in Belize grows at provide for the privatization of the an average rate of 9% annually. BEL electricity sector and BEB became Belize estimates that it will require an additional Electricity Limited, a private company
59 Central American Carbon Finance Guide owned by it shareholders with the Belize plans to satisfy future demand government retaining 51% of the voting through 2 activities: (1) a group of stock. In 1999 the Government of Belize hydroelectric plants that are in their initial further divested itself of its holding in phase, being of relevance the Vaca and BEL and so Fortis Inc. became BEL’s Hydro Maya developments and (2) majority shareholder. improvements to existing diesel plants. Law of 1999: Creation of the Public The National Meteorological Service is Utilities Commission (PUC). The Public the Designated National Authority Utilities Act was created in August of (DNA) for CDM projects in Belize. 1999 to provide for the establishment of a Public Utilities Commission whose main functions would be to regulate the 4.2.3 Relevant public utilities and protect the interests of Organisations the customers at large. Ministry of Natural Resources The electricity market More information with: The electricity market in Belize is guided under an opportunity market where Ms. Beverly Castillo Chief prices play an important role. Currently, Executive Officer, Tel: +501 BEL sells and distributes 100% of the 822-2630 electricity; however, there are several Fax: +501 822-2333 private small entities that generate E-mail: [email protected] electricity for its own consumption. Public Utilities Commission – PUC- The Public Utilities Commission is an autonomous body, created in 1999, and is In Belize the purchase tariffs are the government agency in charge of proposed by BEL since it is the only regulating with the responsibility to distributing entity with license to sell to regulate all public utilities in Belize. They the public. This proposed tariff has to be issue licenses and set the retail price for known and approved by the PUC before the sale of electricity to the general entering into force. public. The objective of the PUC is to regulate everything related with the supply of the public utilities in Belize, 4.2.2 National CDM Policy such as electricity, water, and telecommunications. Ratification of the UNFCCC More information with: Date signed: June 13, 1992 Ratification Date: October 31, 1994 Mr. John Avery
Kyoto Protocol Tel: +501 223-4938 Adhesion date: September 26, 2003 E-mail: [email protected]
Belize Electricity Limited -BEL- This utility is the sole commercial, transmitter, and power distributor current in Belize. Belize recently discovered some low BEL is a public limited liability company, production oil reserves which are incorporated in 1992. Under the commercially exploited, but it doesn’t Electricity Law Nº13, the Ministry of have proven gas or carbon reserves. Up Energy and Communications gave an to now, the petroleum utilized to exclusive license to BEL (initiating in generate electricity is imported. 1993) to generate, transmit and provide electricity in Belize. It is majority owned
60 Central American Carbon Finance Guide by Fortis Inc. of Canada since 1999 and holds a license issued by the Public Utilities Commission to operate in Belize. It has offices in all the districts of Belize along with a 115kv national grid that is interconnected to the Mexican national grid. More information with:
Michael Polonio Tel: +501 227-0954 E-mail: [email protected]
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4.3 COSTA RICA process will be transferred to ICE. There is also an electric sector regulating body that participates in the determination of rates and tariffs and that also looks for the compliance of quality, quantity, reliability, continuity, opportunity and optimum performance of the public utilities, such as electricity, water, telecommunications, and fuel, among others, called the Public Utilities Regulating Authority. (ARESEP for its acronym in Spanish). Installed capacity: In the year 2009 the installed capacity of Costa Rica was 2,415.7 MW, which included 1,523.8 MW from hydroelectric plants, 191,7 MW from geothermal, 95,1 MW from wind and 598,4 MW from thermal plants owned by ICE. Private participation, other electric companies and the rural electrification Figure 12 Political Map of the Republic of Costa Rica. cooperatives had 379.07 MW hydroelectric, 29,5 MW geothermal, 23,7 biomass generation 4.3.1 Description of the Energy and 429,5 MW from wind parks. 52 Sector Demand grows at an average of 5% a year. In accordance with the National Plan for Electric General Information Generation Expansion for the period 2010- Costa Rica has an electric market characterized 2021, it’s required to add about 2,400 MW by the presence of one state owned company generation capacity, of which 93% must come that dominates the market (ICE), and which is from renewable sources and 7% consist on the vertically integrated, generating, transmitting installation of complementary fossil fuel plants. and distributing electric energy. Generation: There are several companies that Notwithstanding, there are a total of 27 private participate in generation53 that as of the year generating companies under operation that sell 2009 generated 9,235.9 GWh. A total of 7.111,7 to ICE the energy produced, together with the GWh corresponded to generation from CNFL, two city hall companies, 2 of the 4 rural hydroelectric plants, 1,200.7 GWh from electrification cooperatives and one cooperative geothermal plants, 92,4 GWh from biomass, consortium. The distribution system is 369,4 GWh from wind generation and 461,8 comprised of 8 companies, besides the ICE, 2 GWh from fossil fuel plants. city hall companies, 4 rural electrification cooperatives and a corporation whose shares Transmission: The transmission system is are mainly owned by ICE – National Company operated by the ICE. Currently it has 1,810.2 of Force and Light (CNFL)-. Likewise, in 52 accordance with the legislation in force, Sistema de Información Energética Nacional, Dirección Sectorial de Energía; Sistema de Información del Sistema generation by private investors to be sold to Eléctrico Nacional, Instituto Costarricense de Electricidad y ICE, cannot be higher than 15% of the total ICE, CENPE, Plan de Expansión de la Generación Eléctrica, installed capacity of the country, and an período 2008-2021, Septiembre de 2007.. 53 These are the ICE, “Compañía Nacional de Fuerza y Luz- additional 15% from private generation plants, CNFL”, the “Junta Administrativa del Servicio Eléctrico de that will sell electricity to ICE, through a public Cartago-JASEC,” the “Empresa de Servicios Públicos de bid process under the sales price competition Heredia-ESPH, COOPELESCA, the BOT Miravalles and 27 regime, that at the end of the contracting additional private companies with ongoing projects.
62 Central American Carbon Finance Guide km of connection lines (727 km at 138 KV and installed capacity in Costa Rica, 1,083.1 km at 230 KV), through them a total of grouped in a total of 32 plants. 1,415,074 customers were served as of Law 7200 was amended by the Law December 2009. Costa Rica is interconnected No. 7508 on May 31, 1995. It modifies with Panama and Nicaragua. the percentage of the Costa Rican Distribution: Energy distribution in Costa Rica capital and the concession terms. It is under the responsibility of 8 companies of adds a second chapter on the which 4 public companies are in charge of the competition regime for projects with a distribution in the Large Metropolitan Area, maximum capacity of 50 MW; it also where the majority of the customers live. In includes a section on transitional addition, there are 4 rural electrification disposition referring to the cooperatives that distribute electricity in that undersigning of treats for electrical area. To this date, 98.98%54 of the population interconnection with other national of Costa Rica has access to electricity. companies on energy in Central America. This Law also authorizes to Legal Framework targeted at renewable energy install an additional 15% to the one stipulated in the Law 7200. The main laws in force in Costa Rica, related to renewable energy are: Under the protection of this Law a total of 29.55 MW of the Geothermal Law Nº449 dated April 8, 1949, Law Plant Miravalles III was installed, for the creation of the Electricity representing 1.4% of the country’s Institute of Costa Rica (ICE for its installed capacity, as well as the acronym in Spanish). hydroelectric Project of La Joya with a Law Nº7200 dated October 18, 1990: capacity of 51 MW. participation in the private electric system started with the passing of the 7200 Law of 1990. This Law authorizes Law No 8642. General law of the Autonomous or parallel Electric telecommunications and the Law No Generation and declares the public 8660 on Strengthening and interest of the ICE to purchase from Modernisation of Public Entities of the non conventional energy sources and Telecommunications sector, modify cooperatives and private companies, in the regulation in the which at least 35% of the capital stock telecommunications area, which was a is owned by Costa Rican citizens who monopoly on favour of the ICE. The establish electric plants with limited new market rules affect also the electric capacity. This law authorizes to install area of which shall be also attended. up to 15% of the total capacity of the National Interconnected System (SNI Law No. 8723. According to this law for its acronym is Spanish). With the the MINAET can grant the utilization support of this law a total of 189.85 of hydraulic resources for the MW is generated for the SNI, hydroelectricity generation up to 50 representing a 10.2% of the total MW of capacity.
54 ICE, Proceso de Demanda “COSTA RICA: PORCENTAJE DE COBERTURA ELECTRICA”,(estimado a mayo 2009) Law Nº8345: Participation of the Rural Electrification, Cooperatives and the
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Municipal Public Utilities for National a 5.4% increase for low demand and 5.7% for Development: This Law authorizes high demand. This plan summarizes the electric MINAET to grant water concessions generation development strategies to satisfy for the production of hydroelectricity future demand, considering the various to cooperatives, allowing a more active technological options available. Of the participation of these companies in the hydroelectric projects to be developed by ICE electric market. The grant assignment for the Expansion Plan, there are 3 has to be according to the national hydroelectric, plus 2 at the feasibility stage, that plans of energy expansion. could contribute with approximately, 1,330 MW in the next ten years. The expansion plan
The executive government has presented law also considers the contribution of the other proposals to the legislative assembly to the end public generation companies to generate 252.9 of 2009, which plan to modify the electric MW through hydroelectric projects by the sector, creating an electric market and National Company of Power and Light, the establishing new actors and rules, however the Cartago Electric Service Board of Directors, current government is at the end of its period Coneléctricas R.L., CoopeGuanacaste R.L. and which makes difficult the approval, also the COOPELESCA, R.L. elections and new government entrance will take place on February and May 2010. Regarding geothermal energy, the development of Las Pailas Project is being studied. It has an estimated capacity of 35 MW. A total of 120- Electric Market 180 MW fossil fuel energy plant would be generated by the Project Garabito, which is The electric Market in Costa Rica is dominated expecting to star operation by the year 2010. by the ICE, mainly because it enjoys full right The alternatives regarding fossil fuel energy to use water concessions to generate include gas turbines with diesel fuel, mid speed hydroelectricity in accordance with Law Nº449. engine bunker and combined cycle steam Electricity prices for generation and costumers turbines. are established by the ARESEP. See Figure 14. The National Plan for the Electric Generation Expansion in Costa Rica (2001-2016), forecasts
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Central Transmission Generation Energy Distribution Consumers (ICE) buyer Large Consumers
Consumers
Export
4.3.2 National CDM Policy that was established in 1995, today called the Costa Rican Association for Joint Implementation (ASOCIC)), is the Ratification of the UNFCCC national authority that facilitates the Date of signing: June 13, 1992 attraction of investments, provides Date of Ratification: June 13, 1994 general guidelines, assesses projects and
Kyoto Protocol sees to the follow up of projects, and Date of signing: April 27, 1998 reports to the CMNUCC Secretary Date of Ratification: August 9, 2002 representing the Government of Costa Rica in the negotiations at the
Convention, and other multilateral and Costa Rica has recognized, based on bilateral organizations on Climate equity and in accordance with their Change. shared but differentiated responsibilities, Costa Rica has carried out 9 projects the need to voluntarily contribute to the approved by the UNFCCC Secretariat, 4 climate change mitigation. renewable energy projects (1 Costa Rica has a National Climate hydroelectric and 3 wind), 4 forestry Change Program, through which they projects and one waste water treatment in perform researches on inventories, coffee processing plants. All generation vulnerability studies, ozone layer and the projects are operating and produce national communications are carried out, approximately 6.4% of the energy financed by national resources and the consumed in the country. contributions of external entities. The OCIC (for its acronym in Spanish) is To this date, Costa Rica does not have a the National Designated Authority of specific legislation on carbon Costa Rica. transactions. There is a Forestry Law, More information at: which incorporates the concept of Environmental Paid Services (PSA for its William Alpizar acronym in Spanish) for private forest Tel: +506 222-5616 Ext. 108 owners and forest plantations, in E-mail: [email protected] compensation for the preservation and handling of forests or reforestation, financed by a tax on hydrocarbons. 4.3.3 Relevant Organizations The Costa Rican Office for Joint Implementation (Oficina Costarricense Ministerio de Ambiente, Energía y de Implementación Conjunta (OCIC)) Telecomunicaciones - MINAET This
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Ministry is in charge of drafting energy fix prices and rates; in addition, it will policies, as well as of protecting the take care of the compliance with quality, country’s natural resources. quantity, reliability, continuity, timeliness More information at: and best service. Among the defined public services we can mention the supply of electric energy in generation, Teofilo de la Torre Argüello Minister transmission, distribution, and Tel: +506 257-1417 / 223-2124 commercialization. Fax: +506 257-0697 www.minaet.go.cr More information at:
Vacancy position Energy Sector Directorate –DSE (for General Regulator its acronym in Spanish) - is a Technical Alvaro Barrantes Chaves Secretariat for the Energy Sector Direction Service of Energy Planning, comprised of the entities part Tel: +506 220-0102 of this secretariat. The DSE was +506 2543 0604 established with the purpose to make Fax: +506 2296 1449 efforts aimed at: a) developing, [email protected] implementing and consolidating the www.aresep.go.cr drafting, execution and control of a permanent energy planning system; b) obtaining the necessary elements for an accurate decision making at the Costa Rican Institute for Electricity (Instituto Costarricense de qualitative level regarding specific energy options; c) developing a holistic energy Electricidad –ICE)- The ICE, was created by the Special Law Nº449 dated model plan; and d) investigating sources 55 that can replace non renewable energy. It April 8, 1949 as an autonomous was created by an agreement entered into institution in charge of the development force on February 15, 1984 between the of energy resources in the country. One MINAET, ICE, the Costa Rican Oil of the duties of ICE is to develop in Refinery (RECOPE) and ARESEP. Costa Rica the energy producing sources, particularly water resources, and in More information at: stimulating the use of electricity for Gloria Villa industrial and population development. Director Since 1963, ICE has undertaken the E-mail: [email protected] responsibility for establishing and Giovanni Castillo operating the country’s Subdirector telecommunication services. The ICE E-mail: [email protected] group is currently comprised of the Tel: +506 2257-3662 “Compañía Nacional de Fuerza y Luz, Fax: +506 2257-2434 S.A. (CNFL)”, Radiográfica www.dse.go.cr Costarricense, S.A. (RACSA), the ICE- Electricidad and ICE- Public Services Regulating Authority - Telecommunications. The ICE ARESEP- The Law that created the participates in all the chain stages. ARESEP, transformed the former
National Electricity Service (Servicio 55 Nacional de Electricidad (SNE)), on its The Law To create ICE was amended by the laws: Nº2749 of May 24, 1961; Nº3003 of July functions and duties of the ARESEP, it 11, 1962; Nº3154 of July 31, 1963 and Nº5507 states that the Regulating Authority will of April 19, 1974.
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More information at: services for the population: potable water supply, public lighting, and sewage. Eduardo Doryan Executive President More information at: Tel: +506 2220 5643 Allan Benavides Vílchez, Fax: +506 2220 1555 General Manager www.grupoice.go.cr Tel: +506 2562-3787 o 2562-3788 National Company for Power and Fax: +506 2237-6566 Light (Compañía Nacional de Fuerza E-mail: y Luz, S.A.-CNFL)- It was founded on [email protected] April 8, 1941, as a corporation where the www.esph-sa.com ICE has the majority of shares. Its mission is to contribute to the economic Electric Service Management Board and social development of the country by of Cartago (Junta Administrativa del supplying to the market a competitive Servicio Eléctrico de Cartago - electric service. The CNFL has become JASEC)- Created through the Law the dominant energy distribution and Nº3300 dated July 23, 1964. In the Law commercialization company in the Costa Nº 7799 dated April 30, 1998 they Rican market, although it only serves 2% transformed the company to adapt it to of the national territory, it covers a total the new times. The JASEC is a public area of 903 km2 of the Large service company which supplies Metropolitan Area, including the capital electricity to five towns in the Province city of San José. Besides buying from of Cartago. Its main function is to ICE, the CNFL has an installed capacity exclusively supply the electric company for power generation of 55.5 MW of the municipality of Cartago with through the operation of seven electricity. hydroelectric plants. More information at: More information at:
Oscar Meneses, General Manager Pablo Cob Saborío Tel: +506 2550 6814 General Manager Fax: +506 2551-4529 Tel: +506 2295-5020, 257-8647 E-mail: [email protected] ó E-mail: [email protected] [email protected] www.jasec.co.cr www.cnfl.go.cr
Heredia Public Utility Service -ESPH- Costa Rican Association of Energy The Law Nº767 dated October 25, 1949, Producers (Asociación Costarricense was enacted under the name of Municipal de Productores de Energía –ACOPE)- Electric Service of Heredia. In the Law ACOPE was created in 1989, and Nº5889 dated April 1, 1976, it was currently represents more than 40 created the Company for Public Utility hydroelectric, wind and biomass private Services of Heredia (ESPH). Law Nº producers who generate in the country 7789 dated April 30, 1998 transformed with a production capacity of 135 MW in this company so it could adapt itself to total. It is important to point out that the changes of the time. The ESPH has, private generation has had an important besides electric energy distribution in the boom in Costa Rica, despite the fact that Province of Heredia, other three basic the majority of the companies only
67 Central American Carbon Finance Guide generate energy to sell to ICE or the is building the hydroelectric Canalete National Power and Light Company project that will have a capacity of 17.5 (Compañía Nacional de Fuerza y Luz MW. (CNFL)). Private generation in Costa Rica is supported by Laws N° 7200 and More information at: 7508 that authorize the Autonomous or Miguel Gómez Corea, General parallel Electric Generation. Manager More information at: Tel: +506 2680 9292 ext.103 Fax: +506 2680 0606 Mario Alvarado Mora E-mail: [email protected] Director Executive www.coopeguanacaste.com Tel: +506 2258-4141 Fax: +506 2258-4136 COOPEALFARORUIZ R.L. was E-mail: [email protected] created in November 1972 to provide electric service to society. The Cooperative covers a territory of 250 km COOPESANTOS R.L. This with distribution lines, serving the Alfaro Cooperative was created in January 1965, Ruíz, Naranjo, Valverde Vega and San with the purpose of supplying electric Ramón towns, directly benefitting around energy to the area of Santos and 5,000 persons. Caraigres, covering the towns of Dota, Tarrazú, León Cortés, Acosta and part of More information at: the South and West of the El Guarco, Cartago, Desamparados, Aserrí and Mora towns. This cooperative covers a territory Rolamán Navarro Rojas, of 1,500 km2, with 1,200 km in General Manager distribution lines, serving a total of 125 Tel: +506 : 2463 3401 communities with a population of Fax: 2463 3273 ext.115 100,000 inhabitants who are directly E-mail: [email protected] benefited. www.coopealfaroruiz.com
More information at: COOPELESCA R.L. Was created in January 1965 with the purpose of Elías Calderón Monge providing electric service to the town of General Manager San Carlos and the north zone. This Tel: +506 2546-2525 cooperative covers 4,956 km2, with about Fax: +506 2546 2527 2,200 km of distribution lines, serving E-mail: some of the communities located in the [email protected] Sarapiquí, San Carlos, San Ramón, www.coopesantos.com Alajuela, los Chiles and Grecia towns, directly benefiting a total of 32,500 direct COOPEGUANACASTE R. L. It was members. Coopelesca R.L. operates created in January 1965, aimed at around 47,000 meters. It is participating providing its target population with in the generation stage with the electricity. This cooperative covers a Chocosuela hydroelectric Project with 4 territory of 1,500-2,000 km2, with machines in cascade form that generate approximately 2,000 km of distribution 25.5 MW. lines, serving some of the towns located at the North Zone and North Pacific of the country, directly benefiting around 33,200 members associated. Currently it
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More information at: R.L., known as Coneléctricas R.L. One of the main purposes of this union is to develop hydroelectric generation projects. Omar Miranda Murillo General Manager The four cooperatives together provide electric service to a population of 500.000 Tel: +506 2461-1550 :2401 2924 2 Fax: +506-2461 1550 persons covering an area of 11,500 km , E-mail: which represents around 22% of the [email protected] national territory. www.coopelesca.co.cr More information at:
CONELÉCTRICAS R.L. On June 26, 1989 the four previously mentioned rural Erick Andrés Rojas Salazar electrification cooperatives in Costa Rica, General Manager merged into one new cooperative called Tel: +506 2460-0044 the National Consortium of Fax: +506-2460-6363 Electrification Companies of Costa Rica E-mail: [email protected]
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4.4 EL SALVADOR discriminatory basis. The government also created several generation
companies, and separated the generation coordination, maintenance and expansion of the transmission system. Besides, 4 electric distribution companies were created, which currently operate in specific regions of the country.
In 2007, as a consequence of the energetic crisis, the National Energy Council was created in accordance with established on legislative decree No. 404. Figure 13 Political Map of the Republic of El Such Council is considered the maximum Salvador authority, governing and normative regarding energetic policy, with the objective of establishing the politics and 4.4.1 Description on the strategy which promote the efficient Energy Sector development of the energetic sector. It was until August of 2009 when this General Information Council initiated operations. The El Salvador approved the General objectives established are: Electricity Law in 1996, which promotes a) To elaborate a plan in short, free competition in power generation, middle and long term in the transmission and distribution, as well as matter of energy; as well as setting the restructure of the previous vertically the national energy policy; integrated national power company - b) To favor regulatory frames Executive Hydroelectric Commission of which promote investment and the Lempa River (Comisión Ejecutiva competitive development in Hidroeléctrica del Río Lempa- CEL). energy sector; in addition to allow This Law led to the privatization of the surveillance of good practices in distribution system in 1998, to the sale of energy markets from the 276 MW generation plants in 1999 and to concerning institutions; the privatization of the transmission c) To promote rational use of system in the year 2000. Besides, this Act energy and all the necessary also established a regulating entity, the actions to improve development General Regulator of Electricity and and growth of renewable energy Telecommunications (Superintendencia resources; considering General de Electricidad y environmental protection policies Telecomunicaciones (SIGET)), and a launched by the competent Wholesale Market operator, the Board. Transactions Unit (UT). d) To motivate the regional energy
markets integration, based on free The Government of El Salvador decided competence and fair trade, to restructure the electric sector by equitable and non discriminatory establishing an attenuated vertical from the different actors or disintegration model (separated agents in this market. accounting per activity and neutrality of the transmission system), free access to It is expected by June of 2010, to launch the transmission and distribution network and to put in force the new energy policy by third parties, insuring freedom of of El Salvador, the one which was entrance on objective and non
70 Central American Carbon Finance Guide proposed by the new Government signed up on September 26th of 2008. On initiated in June of 2009. September 30th the symbolic act of the first drilling of the project´s works was Generation: As of 2009, El Salvador had performed, and in November the same an installed capacity of 1,471.2 MW. The year, the Environment and Natural distribution corresponds on 472 MW to Resources Ministry granted the hydroelectric generation (32%), 204.4 corresponding environmental MW to geothermal plants (14%), and permissions. The start order for works is 794.7 MW to fossil fuel plants (54%)56. effective from January 5th of 2009.
The generation operators which The Hydroelectric project El Chaparral, participated in the wholesale electric under building since 2009, will have an market in 2008, are CEL, LaGeo, Duke installed power of 65 MW, equivalent to Energy International, Nejapa Power more than 200,000 families’ Company, Cements of El Salvador, Sugar consumption. The water outflows of El Company of El Salvador - CASSA, Chaparral hydroelectric plant, will be Textufil, Energetic Investments - INE, used as well for the generation of electric Borealis Energy, Central Electric power in the “15 de septiembre” Generator -GECSA, HILCASA Energy, hydroelectric power plant located sugar mill El Angel and sugar mill La downstream over the Lempa river, as the Cabaña. same time this will extend its lifetime The project will produce electric power Although it is true that El Salvador has thorough renewable sources while used the import mechanism due to its avoiding 116,000 tons of CO2 annually. It commercial advantages, the country has is expected to be available by 2014. had the necessary installed capacity (with its reserve) to cover the domestic Transmission: The most important demand. Besides, a national policy for transmission system is the SIEPAC capacity increment was implemented. which is described in the section 4.1. The Proof of this has been the re-powering of local transmission system in El Salvador the hydroelectric plants (84 MW), owned is operated under the responsibility of the by CEL. In 2009, INE increase in 50 Electric Transmission Company of El MW the Thermal Plant of Talnique and Salvador (Empresa de Transmisión the sugar mill El Angel and La Cabaña Eléctrica de El Salvador (ETESAL)). started operations with 22.5 MW and 21.0 MW respectively, The 44 MW Unit 3 Distribution: It is a totally private sector. of the Geothermal Plant in Berlin was This activity is performed by the AES built by LaGeo between 2005 and 2006 Group, integrated by CAESS, AES- and started operations in April 2007. In CLESA, EEO and DEUSEM, DELSUR, mid 2007, the production of the EDESAL and B&D Technical Services, Geothermal Field of Berlin was increased who provides to 1.429.141 clients. The in 10 MW with a Binary Cycle project. AES Group delivers energy to approximately 78% of the market; the other distribution company DELSUR is Regarding the Hydroelectric project El responsible of the resting 22% of the Chaparral (65 MW) the land acquisition is clients. up to 71%, under the scheme which was promoted as the Public Tender No. In 2009, the peak demand reached 906 CEL-2471 “Hydroelectric Central construction MW57. Plant generation injections El Chaparral”, and which contract was 57 Statistics Bulletin. Transactions Unit S.A., 56 Ibid 30 January-December 2009
71 Central American Carbon Finance Guide amounted to 5,653 GWh in 2009, of Decree No. 404, dated September which 26% corresponded to hydroelectric 18th of 2007, Law for National plants, 25% to geothermal, 45% to fossil Energy Council creation. 58 fuel and 4% to import . th Decree No. 11, dated January 22 of 2008, Rebuilding on the Legal Framework targeted at regulations of the Electricity Renewable Energy General Law which ask for The main renewable energy legislation of minimum fixed percentages of El Salvador includes: obligatory contracting by distributors between 2009 and Decree Nº 843, dated October 10, 2012 with the propose to reach 1996, the general Electricity Act at least 50% of the obligatory and its Regulation (Ley General contracting, and ought to be put de Electricidad y su Reglamento) in force at the latest December Agreement Nº70, dated July 25, 2012. 1997). Agreement No. 32-E-2008, Decree Nº354 dated July 10, 1998, approval for the adjusted Power- National Electricity and Base price which will rule the Telecommunications Investment long term contracts and the on- Fund Act (Ley del Fondo de costs based sales. Inversión Nacional de Electricidad y Telefonía). SIGET Agreement NºE-13-99, Electricity Market dated July 19, 1999, Regulation for the Operation of the The wholesale Market of El Salvador is Transmission System and the comprised of the Contracts Market (MC) Wholesale Market (Reglamento and the Market for System Regulation de Operación del Sistema de (MRS), which is managed and operated Transmisión y del Mercado by the UT. The UT operates the Market Mayorista). for System Regulation and the Contract Market for the scheduled dispatch. SIGET Agreement N° 59-E-2001 dated August 14, 2001, Norm Generators, distributors and traders, in applicable to the bidding process addition to the large consumers of more for the granting of geothermal than 5 MW capacity can participate in the and hydraulic resource UT. The generation scheme is dependent concession for electric form the rainy season and the oil imports generation purposes. because the hydroelectric plants produce approximately 26% of the total Decree Nº1216, dated April, 2003, generation of the country and the fossil Reforms to the General fuel power plants produce 45% of the Electricity Act. total. Decree No. 462, dated December 11th of 2007, The Fiscal Intensive The operation norms of the law for the renewable energies Transmission System and the Wholesale promotion in electricity Market (WM) are set forth in the generation. Operations Regulation issued by the UT for this effect.
58 Ibid 30 Although the WM Operations Regulation does not allow the direct participation of
72 Central American Carbon Finance Guide producers with a capacity below 5 MW, and institutional framework, is through the Commercialization Regulation the creation of market mechanism approved in November, 2000 capable of managing the risks inherent to incorporates other mechanisms that this activity. enable their participation in the WM as a “market indirect agent”, which operates Figure 17 shows the type of electric through the distribution networks in their market that operates in El Salvador respective zones.
One way to insure the participation of small producers, within the current legal
Wholesale Generation Transmission market (UT) Distribution Consumers
Large Consumers
Consumers
Export
Figure 17.Chart of the Electric Market in El Salvador
worldwide efforts to mitigate the climate 4.4.2 National CDM Policy change.
The Ministry of the Environment and Ratification of the UNFCCC Natural Resources (MARN for its Spanish Acronym), with the support of Date of signing: June 13, 1992 the World Bank Carbon Finance, Date of Ratification: December 4, 1995 developed the Electric Sector Baseline Study of El Salvador in 2003, which Kyoto Protocol determined that for small scale projects (with a capacity equal to or lower than 15 Date of signing: June 8, 1998 MW), and new energy efficiency projects Date of Ratification: November 30, 1998 (lower than or equal to 15 GWh savings per year), the emission factor was calculated based on the “Combined El Salvador, upon subscribing and Margin” methodology, recommended by ratifying the United Nations Framework the Executive Board of the CDM. For Convention on Climate Change the year 2008, the emission factor for El (UNFCCC) and the Kyoto Protocol, has recognized that the human activities affect the emission of greenhouse gases (GHG), and therefore commits to follow
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Salvador was 0.690 tons of CO2 per The Management of Physical Resources MWh59. and Energy was created within the organizational chart of the Ministry of the Environment and Natural Resources National Structure of the Clean (MARN) in which the Clean Development Mechanism in El Development Unit operates. This Unit Salvador has been entrusted with the implementation of the activities related to The MARN was appointed by the CDM in El Salvador, and works in Secretariat of the Convention on Climate coordination with the Focal Point of the Change as the Designated National United Nations Framework Convention Authority for the Clean Development on Climate Change. Mechanism in El Salvador, with the purpose of supporting and developing As a result of the effort, El Salvador has activities aimed at implementing CDM in currently a portfolio of 6 projects the country. registered under CDM, which together reduce 620,000 tons of carbon dioxide per year 1 project under validation which 59 MARN, Carbon Fund. Baseline Study for the totals 6,900 tons of carbon dioxide per Electric Sector of El Salvador. Page. 1. San year. Salvador, 2003. Updated 2006.
4.4.3 Relevant organizations as the maximum authority, which rules in matter of energy policy with the final propose of the policy establishment and Ministry of the Environment and the strategy which promotes de efficient Natural Resources – (MARN for its development from the energy sector. Spanish acronym) - The MARN is the Designated National Authority for More information: Climate Change and CDM in El Salvador. This Ministry acknowledges the necessity Ing. Luis Roberto Reyes Fabián to coordinate efforts, aimed at executing Tel: +503 22 31 58 43 actions to protect the environment and E-mail: [email protected] the sustainable management of the country’s natural resources, reason why it links its work with all the society sectors. General Superintendence for Electricity and Telecommunications - More information at: SIGET- The SIGET was established in 1996 by the Law to Create the SIGET. This is an autonomous institution whose José Francisco Rodríguez García highest authority is the General Tel: +503 2267 9576 Superintendent appointed by the [email protected] President of the Republic. This institution www.marn.gob.sv is responsible for insuring the compliance with all the laws and regulations The National Energy Council created applicable to electricity and on 2007, began activities in August 2009, telecommunications in El Salvador. The and the official act in January 2010, and duties of SIGET include: seeking for the in accordance with established on the quality of the services, approve the tariffs Legislative decree No. 404, is considered established by the distribution companies
74 Central American Carbon Finance Guide within their geographical areas of Fax: +503 2521-7301 distribution, enforce the electricity sector E-mail: [email protected] regulatory requirements, sanction the incompliance to its regulation, resolve conflicts between operators and Hydroelectric Executive Commission coordinate with the environmental of the Lempa River -CEL- This entity authorities. was created through the Executive Decree for the Creation of CEL dated More information at: October 3, 1945, Published in the Official Gazette Nº139 dated October 8 Ing. Giovanni Hernández of that same year. Since its creation CEL Electricity Manager was the single company in charge of all Tel: +503 2257 4438 y 79 the electric sector activities. In 1996, E-mail: with the approval of the General [email protected] Electricity Law, CEL split its main v activities in order to organize independent companies within the electric market, and promote the higher Lic. José Calixto Arias possible competitiveness within the conomic Adviser to the sector. In 1998 the electricity distribution Management of Electricity was privatized, thus separating activities Tel: +503 2257 4479 y 72 and creating GESAL (Salvadoran Fax. +503 2257 4496 Geothermal, 1999 – currently LaGeo) E-mail: and ETESAL (Salvadoran Transmission [email protected] Company, 1999). In 1999, the company Duke Energy bought the fossil fuel Transactions Unit- (UT for its generation facilities. In accordance with Spanish Acronym)- The General the provisions of the Law, CEL has Electricity Law assigns to the become an electric energy generation Transactions Unit (UT) the responsibility company that uses and takes care of the as Market Administrator and water resources of the country, and Independent Operator of the competes in the market together with Transmission System, in which all other energy generators. operators and final users participate. The UT manages the power system of El In 2004, CEL signed a Cooperation Salvador, and oversees the quality and Agreement on Wind Energy with the reliability of the electric service supply, UCA and MARN, reason why, since June and of the commercial operation of the 2006 the country has measures of the markets established by the General wind energy speed at 50 meters of height Electricity Law; for instance the in San Isidro (Sonsonate), Metapán (Santa Contracts Market and the System Ana), La Hachadura, (Ahuachapán) and Regulator Market (MRS for its Spanish Monteca (Morazan). acronym). Based on the results of the More information at: measurements, CEL decided to concentrate its efforts on a second stage in the area of Metapán. This second stage Ing. Luis González, General consisted in the installation of 50 meters Manager measuring towers in that area. In April Tel: +503 2521-7300 2009, CEL signed a contract with the Spanish company IBERINSA for the
75 Central American Carbon Finance Guide feasibility study of the Metapán and San transformation of CEL’s Transmission Isidro wind farms, which includes the Division during the modernization installation of a 60 meters measuring process of the system, initiated in 1996, tower at each site. This project is with the main responsibility to operate financed through a grant from the the national electric transmission system. Spanish Government. ETESAL expansion plans respond to the demand growth analysis, and to the CEL is also working in the photovoltaic identified need to expand the technology, launching in June 2009 a transmission system and the domestic pilot generation project of 24.57 kWp at electric development policies60. the roof of the main office at the “Centro de Gobierno” in San Salvador, using More information at: monocrystalline, polycrystalline and amorphous technology. With this Ing. José Ernesto Gálvez generator CEL studies the operation of Orellana, these three technologies, under El General Manager Salvador climate conditions. In addition Tel: +503 2211-6600 CEL is contributing to the development Fax. +503 2211-6663 of a policy for the non conventional E-mail: [email protected] renewal energies.
CEL is currently running a study, with a Geotérmica Salvadoreña, S.A.-LaGeo- grant from KfW of Germany, for the (Salvadoran Geothermal) Started as an installation of a 5 MWp photovoltaic independent generator as of November 1, generating plant on the grounds of the 1999 with the start up of operations of “Guajoyo” and “15 de Septiembre” the geothermal plants in Ahuachapán hydroelectric power plants. with 95 MW and in Berlín with 56.2 MW, as a product of the transformation More information at: process of CEL’s Geothermal Division.
Regarding the renawable energies, LaGeo Ing. Alvaro Ibarra is researching on solar, ocean tide energy, Director of the Wind Project biofuels, and hydrogen projects, among Tel. + 503 2211 6284 others. In addition, it is working jointly E mail: [email protected] with the CCAD and HSBC in the www.cel.gob.sv drafting of a Practical Guide for Renewable Energy Project Developers.
Ing. Luis Carlos Henríquez Jefe de Gestión y Financiamiento More information at: de Proyectos Ing. Carlos Rodolfo Herrera. Tel. + 503 2211 6138 General Manager Cel. + 7870-6865 Tel. + 503 2211 6703 E mail: [email protected] E-mail [email protected] www.cel.gob.sv
Ing. Salvador Handal Renewable Energy Project Transmission Company of El Coordinator Salvador (Compañía de Transmisión de El Salvador, S.A.) -ETESAL- 60 Review the reforms to the General Electricity Initiated operations on October 1, 1999. Act issued in 2003 at ww.siget.gob.sv This company resulted from the
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E mail: [email protected] Tel. + 503 2211 6793 4.5 GUATEMALA bagasse and 1,591.2 MW to those that use oil derivates and coal. In the year 2008, generation amounted to 8,717.39 GWh 2,442.24 GWh by the public sector and 6,275.15 GWh by the private sector- of which 93.10% corresponded to the generation for the National Interconnected System, 5.67% to self producers, while the remaining 1.23% was generated to cover the demand in remote areas. As far as generation by type of resource used, 55.41% corresponded to the use of renewable energy sources (hydro energy, geo energy and sugar cane bagasse), while 44.58% was generated from coal and oil derivatives. Figure 14 Political Map of the Republic of Transportation: The transportation Guatemala. system is divided into the main and the secondary systems. The main system, shared 4.5.1 Description of the by all generators, is currently owned by Energy Sector the INDE and operated by the Electric Energy Transportation and Control General Information Company (Empresa de Transporte y Guatemala started the process of reform Control de Energía Eléctrica (ETCEE)); of the electric sub sector with the the system also includes the Guatemala - enactment of the 1996 General Electricity El Salvador – Honduras interconnection. Law (Ley General de Electricidad The secondary system is comprised of (LGE)). This law standardized the joint the electric infrastructure other than the development of generation, main system and the distribution transportation, distribution and networks by exclusion. It is operated by commercialization activities, in the Central American Electric accordance with the principles and Transportation Company (Transportista statements applicable to all natural or Eléctrica Centro Americana S.A. legal persons, with a private, private- (TRELEC)) RECSA and DUKE public, or state share, regardless of their ENERGY. The SIEPAC which is level of autonomy, or incorporation described in the section 4.2 plays also an regime. important role in the transmission system. Graph 1 shows the transition of the electric market of Guatemala. Generation: As of December 2008, Distribution: In 1998 the “Unión Guatemala had a capacity of 2,365.3 MW. FENOSA” and “Iberdrola” companies Of this capacity 774.1 MW corresponded acquired distribution in Guatemala. to generation with hydroelectric plants, Iberdrola supplies the Central Zone of 49.2 MW to geothermal plants, 371.5 Guatemala with electric energy (Empresa MW to generators that use sugar cane Eléctrica de Guatemala Sociedad Anónima, EEGSA); while the
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Distribuidora de Electricidad de part of the country, both owned by Occidente, Sociedad Anónima “Unión Fenosa”. (DEOCSA), supplies the western part of the country and the Distribuidora de Electricidad de Oriente, Sociedad Anónima (DEORSA) covers the eastern
Before
EEGSA INDE
Generation Generation Transmission Transmission Distribtution Distribution Marketing Marketing
Now
Generators Transmitters Distributers Marketers 28 5 (3 + 14) 17
Large users : 930
Figure 19. Change in the structure of the electric sector in Guatemala
There are other companies besides the below than the ones EEGSA has to pay ones mentioned that distribute energy, due to the purchase contracts it entered like for example the 13 municipal electric into before 1998, which were re companies (EEM) and some other negotiated to adapt them to the General private distribution companies in isolated Electricity Law. As a result of this it has systems, adding up to a total of 17 attracted many of the large consumers distribution companies in the country. that were previously supplied by EEGSA. The maximum demand reached 1,450 Guatemala exchanges energy with El MW in 2009. Salvador, where the Guatemalan market serves the electric system of El Salvador, Commercialization: There are 7 electric provided there is no deficit risk, which is commercialization companies of which estimated as the mean demand of 25 MW COMEGSA (Comercializadora Eléctrica during the year. de Guatemala S. A.), is one. This company was created by “Empresa Legal Framework targeted on Eléctrica de Guatemala EEGSA”. Renewable Energy COMEGSA and is not committed by the The MEM policy is aimed at fostering the Energy Purchase Sales Contracts and can development of renewable sources, buy at the Wholesale Market at prices allowing in the mid and long term to
78 Central American Carbon Finance Guide attract investors interested in the without a reservoir have problems since renewable energy sector, consequently they cannot guarantee energy during peak improving the environmental quality of hours, (4 hours a day), therefore this type the energy sector. of contract does not have any minimum Among the most important renewable or maximum time restrictions. energy legislation in Guatemala, it is This market seeks the identification and worthwhile mentioning: transparency among fixed costs (FC) and variable costs (VC) and there are market Political Constitution of the Republic of Guatemala mechanisms, like the economic signals to compensate both types of costs. Energy Decree Nº93-96, dated November and power products are identified, as well 13, 1996, General Electricity as quality and reliability services, such as Law the toll service. These products and Government Agreement Nº256-97, services are bought and sold among dated March 21, 1997, agents and through specific markets. Regulation of the General The Energy Market seeks to guarantee Electricity Law the energy demand and exchange among Government Agreement Nº299-98, participants. The costs per “machine” are dated May 25, 1998, Regulation determined in 4 manners in this market: of the Wholesale Market Generation variable costs for Manager thermal companies (fuel and not Trade and Operational Coordination fuels) Standards of the Wholesale The price of water for hydro Market Manager companies: water prices are Decree Nº52-2003, dated October supplied by the generator in 28, 2003. Law of Incentives for accordance with its own the development of renewable methodology which is reviewed energy projects every quarter. Government Agreement No. 63- Energy contract prices are agreed 2007, Policy for the Preservation, upon freely among the parties. Protection, and Improvement of the Energy import supply. Environment and Natural Resources. March, 2007 On the other hand, within the legal and institutional framework of the Electric Electric Market sub sector of Guatemala it is important The wholesale electric market of to highlight the modalities of the electric Guatemala has a twofold structure: Power market and types of contracts, defined as: and Energy markets. The opportunity or spot market: The Power Market seeks to promote for price based on the short term private investments in Guatemala. This marginal price. market obliges large consumers to Bilateral Transactions: term contract the maximum net projected contracts (firm contracts freely power for at least one year, plus a reserve agreed upon among the parties) charge of (3%), plus total losses of the Power deviation market: Not transmission system. (+ 4.5%). firm contracts with interruptible The offer is based on one year history of demand and a price established the generator, since they are not available by the AMM on a monthly bases. in 100% all year round. Generators
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On the consumer’s side: Distributors should have more than 15,000 users. Free market (large users with a power demand over 100Kw) and Transporters should have a firm a regulated market (regulated connected power over 10 MW. users with a power demand Commercializers (including below 100 kW). importers and exporters) should buy or sell in blocks over 2 MW. Some of the main guidelines that define Large users should have a demand the participation in the wholesale market, equal or over 100 kW. as established by the Regulation for the The following figure shows the electric Wholesale Market Manager (article 5), market share in Guatemala. include:
Generators should have a maximum power over 5 MW.
Transmission Wholesale Generation Distribution Consumers ETCE/ETRELE market (AMM) C Large Consumers
Consumers
Export
Figure 15 Chart of the electric market of Guatemala
4.5.2 National CDM Policy Institutional framework on climate Ratification of the UNFCCC change
Date of signing: June 13, 1992 Ratification Date: March 28, 1995 through During 2008-2009 the environmental Legislative Decree No. 15-95, the ratification instrument was deposited at the United Ministry and Natural Resources modified Nations Secretariat on December 15, 1995. the institutional framework to improve the adaptation and mitigation of the
country to the climate change. Kyoto Protocol Date of signing: July 10, 1998 Ratification Date: July 7, 1999, On September 21th 2009 through the Through Legislative Decree No.-23-99 governmental agreement 253-2009 the Inter-institutional Commission on climate Change (CICC) which is led by the Vice President of the Republic and is confirmed by 16 Secretaries and Ministries.
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On the other hand on December 9 2009 4.5.3 Relevant the national politic on climate change was Organizations approved with the specific goals to: (1) Developing national capacities on climate Ministry of the Environment and change, (2) reduce the vulnerability and Natural Resources (MARN for its the adaptation improvement and (3) acronym in Spanish) contribution to reduce green house gases. Is the State body in charge of formulating The last goal includes the utilization of and executing the policies regarding the renewable energies, energy efficiency and enforcement of the regime for the participation on the carbon markets. preservation, protection, sustainability and improvement of the environment The national activities within the CDM and natural resources and the human represent opportunities to attract direct right to a healthy and ecologically foreign investment to significantly balanced environment, preventing support electric generation projects with pollution, reducing the depletion of the renewable sources, among other, that environment, and the loss of our natural reduce or avoid the emission of heritage. With regards to the greenhouse gasses into the atmosphere development of renewable energy, the and thus contribute to the sustainable MARN is empowered to: “Control development of the country. environmental quality, approve environmental impact assessments –EIA-, practice them in the In Guatemala the National Office for event of environmental hazards and see to their Clean Development –ONDL- assists the compliance as well as sanctioning compliance”38 Ministry of the Environment and natural Resources, in the analysis of the projects More information at: and its appropriate contribution to the Carlos Abel Noriega sustainable development of the country.. Dirección de Gestión Ambiental The Ministry of the Environment and y Recursos Naturales Natural Resources by means of Ministerio de Ambiente y Governmental Agreement No. 388-2005 Recursos Naturales was legally designated as the Designated E-mail: [email protected] National Authority (DNA) in charge of Tel:(502)242-30500 the Clean Development Mechanism www.marn.gob.gt (CDM)37. More Information at: National Program for Climatic Change –Ministry of the Environment Raúl Castañeda Illescas Oficina Nacional de Desarrollo and Natural Resources. Limpio Upon ratifying the CMNUCC, Ministerio de Ambiente y Guatemala carried out activities to Recursos Naturales comply with the commitments E-mail: [email protected] undertaken as part of the Convention. Tel: (502) 242-30500 The first step was to sign and ratify the www.marn.gob.gt Kyoto Protocol in July 1998 and July 1999 respectively. It submitted the First National Communication on Climatic Change in 2001 and at the end of 2003, it created
37 Ref. MI434-2007/JMDF/ma, June 28th, 2007, 38 Law for the Creation of the Ministry of the MARN, Guatemala Environment and natural Resources, Art. 3
81 Central American Carbon Finance Guide the National Climatic Change Program public and private property; prepare the by means of Agreement No. 134-2003 of social and economic assessment reports, the Ministry of the Environment and grant the resources to fully or partially Natural Resources. pay electrification investment projects The National and Sectoral Inventory on and rural electrification for social and Greenhouse Emissions was built through public good. the National Program on Climatic Change, using the year 1990 as the More information at: baseline year. To this date, they have also worked on the preliminary assessment on Fabio Gudiel Sandoval greenhouse emissions, based on the year Ministerio de Energía y Minas 2000. E-mail: [email protected] Other activities of the National Program Tel: (502) 2419633 for Climatic Change include studies and www.mem.gob.gt the preparation of climatic, social and economic scenarios as part of the research on the vulnerability and General Energy Directorate -DGE- Is adaptation to climatic change and other the dependency of the Ministry of Energy Program activities. and Mines aimed at drafting and coordinating State policies and plans as Besides, regional and local strategies have well as indicatives plans, to promote the been promoted to identify, quantify and employment of renewable energy and the reduce the negative impact of global efficient use of energy resources to warming and climatic change and enhance the quality of life of the variance. These activities are mainly Guatemalan population. The Electricity aimed at the energy sector, agriculture, Department is in charge of granting the and the change in the use of land and authorizations for project developers to forestry. use the goods of public domain. More information at: More information at: Carlos Enrique Mansilla M. Coordinador del Programa Nacional de Cambio Climático Carlos Echeverría E-mail: Director de Energía [email protected] Ministerio de Energía y Minas [email protected] E-mail: [email protected] TEL: (502) 242-30500, ext. 2306 Tel: (502) 24196363 www.marn.gob.gt www.mem.gob.gt/energia/index. Ministry of Energy and Mines -MEM- htm Is the State body in charge of drafting and coordinating state policies, plans and National Commission for Electric programs of the electric sub sector, and Energy (Comision Nacional de the enforcement of the General Energía Eléctrica –CNEE) - Is the Electricity Law and its regulation.39 It is technical body of the Ministry of Energy also responsible for granting the and Mines, with functional independency authorizations to install the electric to exercise its powers, in charge of the generating plants, transportation services, following, among other:40 and final distribution, and the constitution of indefinite easements in
39 Ley General de Electricidad, Art. 3 40 General Electricity Law, Art. 4
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Comply with, and enforce the not correspond to freely agreed upon General Electricity Law and its long term contracts, and c) guarantee the Regulation and impose sanctions security and supply of electric energy. to wrongdoers. More information at: See to the compliance with the Yury Urbina obligations of awarders and Tel: (502) 233-27901 concessionaires, and project the E-mail: [email protected] rights of users and prevent www.amm.org.gt behaviors that attempt against free competition as well as abusive or discriminatory National Electrification Institute practices. (Nacional de Electrificación-INDE-) Define the transmission and was established in 1959, in accordance distribution rates, subject to with Decree Nº1287, as a semi regulations in accordance with autonomous and decentralized entity of the General Electricity law, as the State. The INDE had the monopoly well as with the methodology to of the electric service rendering and calculate these. operated as the sub sector ruler. To this date it participates in the electric market More information at: as the transportation agent through the Sergio O. Velásquez M. “Empresa de Transporte y Control de Comisión Nacional de Energía Energía Eléctrica -ETCEE-” providing Eléctrica, CNEE service to all agents of the National E-mail: [email protected] Interconnected System (Sistema Nacional Tel: (502) 2366-4202 Interconectado –SNI-), and to the www.cnee.gob.gt exporters and importers. The “Empresa Wholesale Market Manager -AMM- de Generación de Energía Eléctrica – The wholesale market was installed in EGEE-”, is also part of the “Grupo 1998, as the body in charge of the set of INDE”. In 1994 the sub sector started purchase sales operations and power and its reforms with the elimination of the energy block sales carried out at the short monopoly and the ruling role of the and long term among market agents. Its INDE and in 1997 with the change in the operation is regulated by the General regulating framework of the sub sector, Electricity Law, its Regulation and the the INDE decided to re/structure the Regulation of the Wholesale Market company carrying out processes to Manager (Governmental Agreement segregate operations. Nº299-98). The management of the More information at: wholesale market is in charge of a private Julio Roberto Alvarez non for profit entity, called the Wholesale Instituto Nacional de Market Manager (Administrador del Electrificación INDE Mercado Mayorista –AMM-). Among Tel: (502) 242-21920 the main duties of the AMM are a) E-mail: [email protected] coordinate the operation of generating www.inde.gob.gt plants, international interconnections and minimum cost transportation lines for the Private Generators: As of 1992 the set of operations of the wholesale market, Government allowed private participation b) establish the short term market prices in electric generation; to this end, several for power and energy transfers among generating plants were built through generators, commercializes, distributors, exclusive supply contracts entered into importers and exporters, when they do with EEGSA and INDE. The
83 Central American Carbon Finance Guide liberalization of the electric market in 1996, opened the participation of the private sector in the generation sector, represented by the National Generation Association (Asociación Nacional de Generaciones (ANG)), and also created the Association of Renewable Energy Generators (Asociación de Generadores con Energía Renovable (AGER)). As of 2006, the private generation of electric energy Represented around 70% of the total energy produced in the country41. More information at:
Karla Sobalvarro Asociación Nacional de Generadores (ANG) Tel: (502) 2333-4955 E-mail: [email protected]
Cristhian Escobar Asociación Nacional de Generadores con Energia Renovable, (AGER) Tel: (502) 2334-4848 E-mail: [email protected] www.ager.org.gt
41 Energy Statistics. Electric Sub sector, 2008, Ministry of Energy and Mines.
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4.6 HONDURAS the Framework Law of the Energy Sub sector, approved in 1994; by which it maintained the segmentation of the ENEE in generation, transmission, and distribution and the promotion of the electric generation with renewable sources, for which the National Congress approved on June 1, 2007 the Law for the Promotion of Energy from Renewable Sources, aimed at, among other, fostering the investment and development of energy projects, using natural resources thus allowing to reduce the dependency on imported fuels.
Generation: The electric generation installed
capacity of Honduras as of 2008 was 1,580 Figure 16 Political Map of the Republic of Honduras. MW. From this total, 33.8%(520MW) are the ENEE hydroelectric plants, (899MW) ENEE fossil fuel plants; from Diesel (73 4.6.1 Description of the MW) Gas, (8 MW) Coal, Representing Energy Sector 61.8%, steam with a 0.8% and co-generation with 3.6%. General Information In 2008 the installed capacity represents The development of the electric sub sector 68.3% belonging to the privet sector which in Honduras is integrated by three sales the energy to the ENEE. institutions, the National Energy Company (Empresa Nacional de Energía Eléctrica The current electric system of Honduras in (ENEE)) responsible of the generation, 2008, has seven hydroelectric plants and transmission and distribution of the seven fossil fuel plants owned by the electricicty in the country., the National ENEE. It is worthwhile highlight that the Energy Commission (la Comisión Nacional Hydroelectric Plant in Francisco Morazán de Energía (CNE)) which regulates and (El Cajón), with an installed capacity of 300 monitors the supplying of the public service MW represents around 20% of the total of electricity and the Secretariat of State for generation capacity of the country. Natural Resources and the Environment (Secretaría de Estado de Recursos Naturales In addition to the ENEE plants, as of 2008 y Ambiente (SERNA)), which coordinates there were twelve private hydraulic power and evaluates the policies related to the plants in Honduras with a capacity between renewable and no renewable natural 0.5 KW and 12.8 MW, with a total of 4.4% resources. of the energy from the System, the ENEE is responsible from the resting 29,4% of the Currently, there is a State Commission for generation. There are three main companies Modernization, attached to the Presidency in generation sector, two large privet of the Republic, that is currently analyzing (LUFUSSA and ENERSA) who provided the new Regulatory Framework for the respectively 30.4% and 22.1% of the energy Electric Sub Sector in Honduras, as a in 2008, and the resting by the ENEE with continuation of the provisions set forth in a corresponding 29.5%.
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Figure 22 Installed capacity in Honduras by Source (MW)66
Biomass; 91
Hydropower; 522 Thermal; 993
66 www.enee.hn
Legal Framework Targeted on Transmission: The transmission system is Renewable Energy also operated by the ENEE. This system is interconnected to the electric systems in Among the legislation to promote Guatemala and El Salvador, comprised of renewable energy it is worthwhile the so called “Triángulo del Norte” (Northern highlighting the 1994 Framework Law of Triangle). Honduras is also interconnected the Energy Sub Sector (Decree Nº158-94, with Nicaragua, Costa Rica and Panama by Published in the Official Gazette dated three different transmission lines of 230, November 26, 1994, Framework Law of the 138 and 69 kV. Energy Sub Sector and its Regulation, Agreement Nº934-97, published in the The National Interconnected System Official Gazette dated April 4, 1998), which coordinates its operation through the regulates electric energy generation, National Dispatch Center, attached to the transmission, distribution and ENEE. commercialization activities in Honduras. This Law is deemed as a very important step Distribution: the electric distribution is forward in the promotion of private under the responsibility of the ENEE due investment, since it allows the participation to the vertical integration of the electric of the private sector in both energy sector in Honduras. As of today it covers generation and transmission. 70.72% of the total Honduran population (ENEE, May 2007). Despite of the In order to continue with the promotion of legislation that allows different options of renewable energy in 2007 the National participation, there is no independent Congress approved the Law of promotion participation. to the generation of electricity through renewable resources (Ley para la Promoción de la Generación de Energía Eléctrica con Recursos Renovables), .Decree No. 70- 2007, which came to replace the Incentives
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Law published in 1998. This new Law remains unchanged as a reference for the contains fiscal incentives for energy projects contract throughout the effective term of construction, production, and sales; in the contract which can be up to 15 years, addition the incentives are linked to the with a 1.5% annual increase for a maximum kilowatt-hour prices, custom, reduction of term of 11 years. the terms for the environmental license, no need for operation contracts for projects According to the Framework Law the smaller than 3 MW. production of energy through the construction or leasing of generating plants or units or through any other means is Electric market allowed. Likewise, the electric energy generating companies private or mixed, that Honduras has been very proactive in the use renewable and sustainable resources to promotion of its energy renewable sources sell their production shall have the following and offers one of the most attractive options: incentive packages in all Central America, with “standardized” long term power Sell directly to a consumer or purchase agreements, including tax distributing company in which case exemptions, an additional payment for the it should build the lines needed to energy generated by renewable energy and a connect to the national network dispatch guarantee, thus expanding the owned by ENEE, or pay the scope of incentives with this new transmission toll costs. Promotion Law.
According to the statistics of the Honduras If the sale is at the initiative of a electric sector, there are 14 plants of private or public-private company, renewable energy smaller as 10 MW; 10 the ENEE shall pay a maximum hydroelectric and 4 biomass, with a total price equal to the short term capacity of 59.4 MW. marginal cost, calculated by the ENEE and approved by the The Honduran electric market is vertically National Energy Commission integrated. Every project interconnected to (CNE for its acronym is Spanish), the electric network must negotiate the sales plus a ten percent incentive (10%). of energy with the ENEE, since it is the The dispatch of this energy is a only entity authorized by Law to buy energy priority over the fossil fuel or oil from private developers. derivatives plants.
The baseline price paid by the power purchase agreements could be a maximum The following figure shows the current price equal to the Short Term Marginal Cost electric market of Honduras. (CMCP for its acronym in Spanish), which
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Central Transmission Generation Energy Distribution Consumers ENEE buyer Large Consumers
Consumers
Export
Figure 17 Scheme of the electric market in Honduras
agriculture, changes in the use of land and 4.6.2 National CDM Policy waste management.
Until March of 2009, Honduras presented 25 Ratification of the UNFCCC projects; 5 of Biogas, 9 of Bio-energy, and 11
Date of signing: June 13, 1992 Hydroelectric, from which more than 50% are Ratification Date: October 19, 1995. already registered and all together summarizing more than 280 MW and 134 Kyoto Protocol ktCO2e. Date of signing: February 25, 1999
Ratification Date: July 19, 2000 So far Honduras has 15 projects registered as CDM, of which 9 are hydroelectric, 3 are The CDM actions related with energy are in methane capture and 3 are co-generation. charge of the Energy General Directorate (DGE), which is part of the Secretariat of For 2010 there is a project of biomass to State for Natural Resources and the energy in process of registration with an Environment (SERNA) in Honduras. The estimated amount of CER’s of 18,856 DGE should identify the energy projects that tCO2e/a. could be eligible for the Clean Development Mechanism of the Kyoto Protocol. The forest The first CPA under a PoA of 4 hydroelectric sector is managed by the SERNA through the projects with capacity from 0.7 to 2.3 MW has National Program on Climate Change obtained the local approval from the DNA (Programa Nacional de Cambio Climático) which works to support projects under the framework of the program REDD+ (UN 4.6.3 Relevant Organizations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries). Secretariat of State for Natural Resources
and the Environment -SERNA- Was The country has 2 GHG and sinks inventories created by means of the Decree Nº 218-96 (1995, 2000). The sectors included in the dated December 17, 1996, published at the inventory are energy, industrial processes,
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Official Gazette Nº 28148 of December 30, one in the fields of transmission and 1996, with the following duties: distribution.
Formulation, coordination, execution and assessment of the polices related More information at: to the protection and use of the hydro resources, the new and renewable Glenda Castillo, Planning and sources of energy; Development Department Tel: +504 220-0470 / 220-0471 All activities related to the hydroelectric and geothermal energy Fax: +504 220-0470 generation and transmission, as well as the mining activity and fossil fuel National Energy Commission-CNE- exploration and exploitation; Created by means of Decree Nº 131-98 of the Law to Motivate Production, Competitiveness Coordination and assessment of the policies related to the environment, and Support to Human Development, in ecosystems, the national system of replacement of the National Energy natural protected areas, and national Commission (CNEE), and the National Public parks and the protection of the plants Service Oversight Commission (CNSSP). Its and animal life; as well as the research objective is to regulate electric energy and control services for every form of generation, transmission, distribution and contamination. commercialization throughout the national territory.
More information at: More information at:
Engineer Dr. Valerio Gutierrez Lopez Salomon Lopez, President Secretary of State Office Tel: +504 232-6057 Tel: +504 235-7833 Fax: +504 232-4459 Fax: +504 232-6250 E-mail: [email protected] E-mail: [email protected]
Honduran Association of Small Producers Dr. Rigoberto Cuellar of Renewable Energy -AHPPER- Which is a private, non for profit association, Tel: + (504) 235 78 33 / 239 36 91 incorporated in the year 2001, with the sole E-mail: purpose of promoting economic development [email protected] in the country by seeking social, economic and environmentally effective solutions to the various problems faced by the energy sector in National Electric Energy Company the country. (Empresa Nacional de Energía Eléctrica- ENEE-) Created by the Decree N°48 dated February 20, 1957. It is a public autonomous organization responsible for the electric energy production, transmission, and distribution in Honduras. At present the ENEE manages the National Interconnected System and is its main Generator, and the only
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More information at:
Elssia Paz Presidente AHPPER Evelyn Nuñez Executive Director Tel/fax: +504 235-8533 www.ahpper.hn
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4.7 NICARAGUA charge of supervising and regulating electric energy industry.
Structure of the Nicaraguan Electric Sector
The Law of the Electric Industry No. 272 (LIE, for its acronym is Spanish) contains the General Legal Framework for the Electric Industry. This law divides the electric sector into three sectors: generation, transmission and distribution.
Generation. At the end of 2009 the effective generation capacity of the interconnected national system was 725.8 MW from which 100 MW come from hydro sources, 492.1MW from fossil fuel, 37,7 MW from geothermal, Figure 18 Political Map of Nicaragua. 57 MW from biomass and 39 MW from wind sources. Summarising 32.2% is generate based on renewable sources and the rest from oil 4.7.1 Description of the Energy sources. Sector The higher capacity demand was on December 3th 524.5MW, and the annual General Information electricity generation was 3,099GWh, from which 882.5GWh (29%) were generated The new authorities of Nicaragua enacted in through renewable sources and the rest by oil 2007 the Law No. 612 “Reform Law and products. The generation from private Addition to Law No. 290”, “Law for the companies was 2,429 GWh (78,4%) and the Organization, Competitiveness and rest 670 GWh (21,6%) was generated by the Procedures for the Executive Branch” State company ENEL. The fuel oil and diesel (29/01/07) of the Ministry for Energy and for electricity generation was used at most by Mines (MEM for its acronym in Spanish). the private companies with 88.05% and the rest 11.95% was used by the State company.67 The MEM, among other functions formulates, proposes, coordinates and executes the The generation capacity based on biomass Strategic Plan and Public Policies of the pertains to private companies, 30 MW are Energy Sector and Geological Resources; and from the mill Monte Rosa and 27 MW from also approves standards, licenses, and the mill San Antonio. concessions. Its functions and attributions are established in Law No. 612. Approximately 30% of the oil imports and by- products are earmarked to electric generation. The National Electric Transmission Company Generators can sell electricity among (ENATREL), the Nicaraguan Electricity Company (ENEL) and the Nicaraguan Oil 67 Logros 2009, Ministry of Energy and Mines, Company (PETRONIC) are attached to the Nicaragua Ministry of Energy and Mines. The Nicaraguan Energy Institute (INE) is in
91 Central American Carbon Finance Guide themselves, to distributors, and directly to large consumers68. Currently there are 11 generators which supply the Interconnected National system. 68 Guía inversionista 2008, Ministy of Energy and Mines, Nicaragua
Table 21 Concessionary Electricity Generators for the interconnected system
Duration Name Date of Licence Type of generation Power (MW) (years) Nicaragua Sugar Estates, Ltd. (NSEL) 21/8/1998 15 Biomass 30
Empresa Energética Corinto, Ltd (EEC) 11/12/98 20 Bunker 70.5
Tipitapa Power Company, Ltd 21/8/1998 20 Bunker 50.9
Corporaciòn Elèctrica Nicaraguense, S.A. (CENSA) 08/02/2000 20 Bunker 63
Generadora Elèctrica Central, S.A.(GECSA) 07/06/2000 30 Bunker 237.7
Generadora Eléctrica Occidental, S.A. (GEOSA) 07/6/2000 30 Bunker 100
Generadora Hidroelèctrica S.A. (HIDROGESA) 22/2/2001 30 Hydroelectric 100
Empresa Monte Rosa, S.A. 16/10/2001 15 Biomass 30
ORMAT Momotombo Power Co. 29/3/01 30 Geothermal 32
Polaris Energy, S.A. 9/10/03 20 Geothermal 10
Consorcio Eòlico Amayo 16/08/2007 30 Wind 39.9
Transmission is state owned, although the The Nicaraguan transmission network is secondary transmission is not. Secondary connected to the one of Honduras and Costa transmission is the one built by a market agent Rica through a 230 KV line. In 2009 the new to connect to the National Interconnected 230 KV high voltage line, the SIEPAC Project System (SIN for its acronym in Spanish). The (Electric Interconnected System for Central National Electric Transmission Company America) which is described in the section 4.2 (ENATREL, for its acronym in Spanish) is the will start operations. State Company in charge of the energy transportation through its high voltage lines of The operation of the transmission network is 69 KV and more, according to the regulator under the responsibility of the National Load (INE) and its substations. The transmission Dispatch Center (CNDC, for its acronym is net consists of 2,414 km of lines of 230kV, Spanish), as ENATREL’s organizational 138kV and 69kV, these lines interconnected entity. 71 substations with an installed capacity of 1,816.15 MVA.
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Table 21: Licenses for Generation to Supply the Isolated Systems
Name Date of Licence Duration (years) Type of generation Power (MW) EMEEA-Wiwili 17/10/97 30 Hydroelectric 1.3
ENEL (Corn Island) 4/11/98 30 Diesel 1.2 ASOLPIC 27/3/01 30 Hydroelectric 0.03
APRODELBO (Bocay) 27/3/01 30 Hydroelectric 0.23
ATDER 27/3/01 30 Hydroelectric 0.9
Puerto Cabezas Power 16/10/01 20 Bunkerúnker 4.5
Egomsa (Ometepe) 3/11/03 15 Diesel 2.5
Distribution: is totally private, incorporating from 0,1736 USD/kWh in January to 0,1922 all the lines and transformers under 69 KV USD/kWh in December, which represents an within the SIN. In the year 2000, it was increment of 10,7%. granted through a privatization process to The Atlantic Coast is not part of the National only one Spanish company controlled by Interconnected Network, where private Union Fenosa, in association with minority companies can operate as electric energy Nicaraguan shareholders. generators, transmitters and distributors. ENEL, the state owned company, provides The distribution company handles the most of the electric energy service in this area. distribution system of the Pacific coast and The energy losses in the distribution level at the centre of the country through two the end of 2009 were 22.05%, which subsidiaries Disnorte and Dissur69, which compared with the 28.92% in 2007 means a together served around 720,000 users, with reduction of 6.87%. Such reduction is sales of 2,214 GWh70. The average sales price attributed to the implementation of the law of electricity to the distributors’ clients varied for the “Distribution and Responsible use of the electricity service” approved in 2008. 69 www.ine.gob.ni 70 Logros 2009, Ministry of Energy and Mines, Nicaragua
Table 22 Distribution licenses.
Date of Number of Name Area assignment license Distribuidora de Electricidad del Regiòn del Pacífico Occidental, Norte del 7/6/2000 08-2000 Norte, S.A. (DISNORTE). Paìs y Oeste de la Capital. Distribuidora de Electricidad del Sur, Regiòn del Pacífico Oriental, Centro del 7/6/2000 10-2000 S.A.(DISSUR). Paìs y Este de la Capital. Cooperativa de electrificación Rural Masaya rural, el Pochote, Tierra Blanca, El del departamento de Masaya 4/5/2000 Mojòn, etc. (Coderma R.L.) Fuente de energía : DISSUR Empresa Nicaraguense de Bluefields, RAAS Electricidad (ENEL) INE-288-12- Municipio de Nueva Guinea, RAAS. Zelaya Luz S.A. 2006 Fuente de energía : DISSUR
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Legal framework targeted to renewable to all the economic agents participating in the energy electric energy activities (Generation, Transmission and Distribution), it is regulated The electric sector of Nicaragua is governed by the INE. This institution approves the by a series of broad and itemized Laws, rates, including the distribution requests. Decrees and Regulations. Their texts can be found in the Web sites of the Ministry of The CNDC functions as the intermediary Energy and Mines (www.mem.gob.ni), the among the distributors and generators that Nicaraguan Energy Institute (www.ine.gob.ni), dispatches at the lowest marginal cost. and at the National Assembly (www.asamblea.gob.ni). Each distributor has the obligation to contract the purchase of electric energy with the The Laws key to investing in the renewable generators located within the national territory energy sector are the following: Law 217 or abroad, in order to cover a percentage of General Environmental and Natural their forecasted demand; the remaining can be Resources Law (1996), Law 261 Municipal bought, or the excess can be sold at the spot Law (1997), Law 272 Electric Industry Law market or international markets. The (1998), Law 443 Law for the Exploration and distribution companies can purchase or sell Exploitation of Geothermal Resources (2002), electric energy through agreements or at the Law 467 Law for the Promotion of the spot market, and also can import it from Hydroelectric sub sector (2003), Law 532 Law abroad. The current Law 554 for Energy for the Promotion of Electric Energy from Stability, grants the INE the power to Renewable Sources (2005), and the temporarily regulate prices, also in the spot amendments to the LIE (Law 494), to the Law market. for the Exploration and Exploitation of Geothermal Resources (Law 594). There are a total of 11 concessionaries of According to the Law 532 the projects that electric generators, which supply the system utilize hydraulic, wind, biomass, solar, and interconnected with Nicaragua (See Table 21). geothermal resources have the following fiscal Additionally, there are seven generation benefits: licenses to supply isolated systems (See Table 22). Custom tariff exemption and value added tax for the importation of equipment. Main Actions regarding rural electrification Income tax exemption for seven years The distributors have to give priority The MEM is responsible for the electrification to the renewable energies and enable development in rural areas, particularly in the INE to impose minimum small population communities where the amounts. The occasional market has economic agents of the electric industry are established a price between not interested in participate. Therefore, to US$55/MWh to U$65/MWh develop rural electrification, it is necessary to subjected to modification by the allocate available resources through the MEM for the renewable energies. organisms with jurisdiction. Recent MEM data indicate that in Nicaragua, approximately 60% Electric market of the population has access to electric services. In rural areas it is estimated that only The LIE establishes the creation of a around 35 to 40% of the population have this Wholesale Electric Market with specific access. standards which accomplishment corresponds 94 Central American Carbon Finance Guide
The plans for rural electrification consider to In Summary during the period 2007-2009 the increase the electric coverage for the year 2014 MEM has electrified 31,836 households which with 82.5%, considering different financing represent 190,005 benefited habitants71. sources, such as: the national reserves, During 2007, with the program of rural donations and loans from the Kingdom of the electrification, which includes projects of Netherlands, Suisse cooperation for the network expansion, small hydroelectric plants, development, COSUDE, PNUD, BCIE, micro-turbines and individual photovoltaic World Bank, BID, ACDI, Fond contra-valor systems, 9,102 households were electrified in Canada-Nicaragua and others. 224 rural communities, benefiting 54,198 habitants. The project included the installation Currently, the MEM is executing the National of 463 km of electric net and the installation Plan for Rural Electrification in Concessional of 2,500 household solar panels with an Areas (PLANERAC), through the Nicaraguan investment of C$ 122.5 millions. Fund for the Electric Industry Development (FODIEN), which has a short term In 2008 192 rural communities with 11,423 electrification program, with defined projects households and 68,430 habitants were in the area of concession for the private benefited. 378 km of electric net and 2,842 distributing companies. individual solar panels were installed with an investment of C$169.5 millions. Likewise, the strategy for the electrification of During 2009 524 km of distribution nets were rural areas that do not have concessions, installed in 245 communities, electrifying PLANER-ANC, was developed with the 11,311 households and benefitting 67,377 support of the Inter American Development habitants from a national goal of 12,525 Bank (IADB), aimed at developing households and 74,661 habitants. In 11,311 electrification in isolated areas outside the households have been installed 4,290 Disnorte-Dissur area of concession. This electricity meters. strategy includes, among other, the implementation of at least two rural COMMUNITARY PHOTOVOLTAIC electrification projects using renewable energy SYSTEMS IN THE RAAN – EURO-SOLAR resources. This strategy includes the following PROGRAM. This program consists of the programs, among other: “Rural Electrification installation of photovoltaic systems in 42 Program in Isolated Areas” (PERZA) – World communities of seven municipalities of the Bank, “Hydroelectricity Development at Small RAAN. The systems will be installed in Scale for Productive Uses in Areas Outside schools and will be used to provide electricity the Network” (PCH) - UNDP. for education, health and communication. During 2009 the granted company started the The development of the electrification construction works where the panels, batteries projects has been achieved with support of the and satellite towers were installed. The citizen cabinets, who have participated in the furniture for the computers and printers also coordination teams developed by the MEM was supplied. The training for the managers of together with the Mayoralties and the systems was also done. Municipalities. During the year 2009, 128 During 2010 the refrigerators, water purifiers, Mayoralties and 154 Municipalities were computers, printers and projectors will be visited. installed.
71 Logros 2009, Ministerio de Energia Y Minas, Nicaragua
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PILOT PROJECT BASED ON of projects which generate emission PHOTOVOLTAIC ENERGY IN MEM reductions to be commercialised in the INSTALLATIONS. With the donation of the international market. South Korean government through the Korean Energy Management Corporation The ONDL also attend the vulnerability issues (KEMCO) the pilot project for electricity and the process of adaptation to the climate generation by photovoltaic systems in the change, the elaboration of GHG national MEM offices was installed, with 90kW of inventories and the national communications capacity connected to the net. This is the which reposts the results and activities which biggest installation from its type in Central at country level has been done to combat the America. The investment was US$1,5 millions. climate problem.
WAPÍ, SMALL HYDROELECTRIC Currently the ONDL implement the project PLANT. In 2009 was started the construction “Capacity development for the CDM – CD4 works for the 630kW plant, located in the CDM”, financed by the PNUMA/ UNEP municipality of El Rama in the RAAS. In 2010 RISØ CENTRE which started on April 2007. the plant will be commissioned. This project has the goal to support the DNAs in the process CDM projects approval 4.7.2 National CDM Policy according to the priorities of the sustainable development priorities of the country, to improve the institutional preparation and the UNFCCC Ratification construction of national capacities, Signing date: June 13, 1992 furthermore to the contribution to the Ratification Date: October 31, 1995 mitigation of GHG.
Kyoto Protocol Signing date: July 7, 1998 Ratification date: November 18, 1999 On the other hand the project “Enabling activities for the preparation of the second national communication to the UNFCCC” which started on March 2005 which looks to develop two main programs, to face the GHG The government of Nicaragua as part of the mitigation and the identification of adaptation UNFCCC, after ratifying the Kyoto Protocol measures to the climate change to the level of can participate in the international carbon prioritized departments as well as strengthen market through the CDM. As part of the of the institutional legal instruments to include international commitments it is necessary that the climate change into the national and local the country has a National Designated development plans. Authority (DNA). That is way the ONDL was created as a decentralized climate change The ONDL takes integrally the directions that management unit which depends of the the UNFCCC promote to combat the climate MARENA created through the executive change, they are the mitigation according to decree No 21-2002 with support of the the Kyoto protocol and the adaptation, where PNUD thought the project PNUD- the last one is governed by the vulnerability NIC/01/008. The ONDL is under the studies. These studies are the base for the coordination of the executive council where construction and implementation of the participation of both, the State and the adaptation actions. society is involved. Its mission is to contribute to the mitigation of climate change through The ONDL also offer technical support to the the foster of sustainable environmental people interested in the climate change and investments by means of the implementation CDM issues. 96 Central American Carbon Finance Guide
As of 1990, the Government of Nicaragua energy, geothermal, wind, solar and biomass started an energy reform process to insure the energy72 73. reliable and efficient energy supply, and promote economic efficiency in the energy Table 23. Renewable energy potential and utilization. sector to attract the necessary resources for Type Potential Installed Utilizatio the expansion of the electric energy capacity n infrastructure. This process ended in April (MW) (MW) (%) 1998, with the approval of the Law Nº272 Hydro- 2,000 100 5 Electric Industry Law (Ley de Industria electric Geother- 1,500 88 6 Eléctrica” (LIE)). mal Wind 800 0 0 Nicaragua, upon the ratification of the Kyoto Biomass 700 60 9 Protocol and the United Nations Framework TOTAL 5000 248 35 Convention on Climate Change, agreed to prepare a national inventory of Greenhouse The hydroelectric potential of projects over Effect Gases (GHE), to fulfil the following 10MW is estimated at 2,000 MW in 60 purposes: identify the processes that release identified sites. and extract Greenhouse Effect Gases; identify the actors that produce these emissions and The Ministry of Energy and Mines, with the the amounts produced; prepare and submit financial support of the Global Environment the basic reports demanded by the agreement Fund (GEF) through the UNDP, has and learn and obtain complementary launched a national project called: “Small Scale information on climate change, economy, Hydroelectric Development for Productive metering methods, etc. Uses in Areas outside the Network”. The purpose of the project was to reduce the Nicaragua completed its first National GHG emission of the Greenhouse Effect Gases Inventory with the support of the World (GHE) caused by the use of fossil fuels in Environmental Fund (FMAM-GEF), through electric generation for productive uses in the the United Nations Development Program rural areas not integrated into the National (UNDP), using the established guidelines. Interconnection System (SIN for its acronym This instrument reflects the status of in Spanish). emissions, as well as the capacity of GHE absorption by the country, using 1994 as the A total of 30 sites with sufficient potential base line year. The outcome of the study (9MW) to develop projects associated with shows that the forestry sector and the change productive uses were pre selected out of the in the use of land represent the greatest source potential sites identified within the country. of carbon dioxide emissions and at the same time the maximum GHE absorption of the The exploitable geothermal potential is country; therefore it establishes that Nicaragua estimated at 1,500 MW, concentrated in the is a “carbon pool country” mainly due to the fields along the volcanic area of the Pacific natural regeneration of the vegetation. Coastline.
Clean and Renewable Energy Potential With regard to wind resources, it is estimated
that around 800 MW, are located mainly in Nicaragua has a high potential for renewable and clean energy resources. Among these 72 Guia inversionista 2008, Ministerio de Energía y resources we can find the following: Hydro Minas, Nicaragua 73 Atlas temático Nicaragua, Recursos energéticos nacionales
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Rivas and Chontales. Nevertheless, the new financial instrument on climate change Atlantic Coast has great wind potential and mitigation projects. the IADB is supporting an assessment to Nicaragua has undersigned Memorandums of define this potential in Bluefields, Monkey Understanding (MOU) to facilitate the Point, Puerto Cabezas and Laguna de Perlas. transaction of carbon certificates with the Netherlands, Finland, Canada and Denmark. The biomass resource has been estimated at In addition, it carried out a national firewood 700 MW, but limited to the Nicaraguan Pacific survey aimed at characterizing firewood area. A higher potential is found in the production, commercialization and supply, to Atlantic area, where the land can be used to assess its impact on the environment and the plant African Palms. forests. The Office has developed a simple and quick Nicaragua is a tropical country located 12 process to give the governmental degrees to the north of the Ecuador. The authorizations required by the CDM projects. project SWERA of the UNEP has completed The process is detailed in the ONDL Web a solar resources map which indicated that the site: http://www.ondl.gob.ni/ zone with the mayor potential is located in the north of the country in the departments of The project cycle in Nicaragua León and Chinandega with a 6 kW/d/m2 potential although the Pacific coast shows an The Project cycle starts with the submission of outstanding potential with 5 kW/d/m2 too74. Project Idea Note (PIN) to NCDL, which provides an idea about the project concept and structure. This document is drafted with National Office for Clean Development the information from the pre-feasibility study. and Climate Change A sketch of the project cycle is shown in Annex 3. Thanks to the support of the UNDP/Nicaragua, the National Office for The procedures for projects to meet the Climate Change and Clean Development national cycle and obtain government (ONDL for its acronym in Spanish) was endorsement are the following: created in 2002, as an entity attached to the Ministry of the Environment and Natural Non-objection Resources (MARENA). This entity is governed by a Board of Directors with the 1. In order to obtain the Non-Objection participation of the public sector and civil Letter, Project proponents must submit to society. The office was accredited as the the President of the Executive Board, National Designated Authority for the Clean presided by the Ministry of Environment Development Mechanism in charge of the and Natural Resources, a written request, governmental authorizations for CDM expressing their intention to join in the projects. carbon market, through the Clean Development Mechanism. One of the main priorities of this office is to facilitate the entry of Nicaragua into the 2. When receiving the request, the National carbon market. It currently offers technical Office for Clean Development will check assistance to project developers and promotes that all documentation is complete and, if the creation of national capabilities to use this so, will proceed to register the Project. In case documentation is incomplete, it will 74 Atlas temático Nicaragua, Recursos energéticos not be received until the solicitant nacionales completes the documentation and missing 98 Central American Carbon Finance Guide
information. No documents will be 6. Once all documentation is submitted and received until all documentation is accepted, a Cooperation Agreement will complete. be signed between the Project proponent and the Minister of Environment and Following is a list of the required Natural Resources. documentation that must be submitted to the National Office for Clean Letter of Approval Development for the Non-objection letter: 1. The Project proponent must comply with the following requisites in order to obtain a) Project Idea Note (PIN). Annex the Letter of Approval: 4 shows the PIN format b) Endorsement from the a) Submission of a digital and a printed Municipal Council where the Project Design Document (PDD). project is to be developed. b) Carry out a public consultation about c) Copy of the statutes the project. (*) Memorandum of Association c) Due environmental permission or duly registered. permission to operate in case the d) Copy of the Power of Attorney Project requires it. e) Certified Minute of the d) Full digital and printed Project Design Incorporated Company’s Document (PDD) incorporating all Executive Board approving comments and observations gathered Project execution during the public consultation.
3. In the case of energy efficiency projects of Procedures for Public Consultation. (*) well established companies or industries, there is no need to obtain the Municipal i. Consultation will take place at Council endorsement for the project to Project site. apply to the CDM, in view that all projects ii. The Project proponent must, in a of this nature bring economic and simple manner, explain the Project environmental benefits to the country. and its impacts and benefits, not just to the environment, but to 4. The Ministry of Environment and Natural sustainable development as a Resources, through the corresponding whole. entity responsible for Climate change iii. The Project proponent will send Global Management (ONDL), has a all Project documentation to the maximum period of eight working days to main related agents. revise the submitted documentation and, if iv. If local authorities or National it is according to established requirements, Office for Clean Development will notify so to the proponent. thinks it is relevant, the Project proponent must broaden the 5. In case some of the documents do not invitation to other actors for meet the established requirements, the public consultation. proponent will be so notified, for him to v. PDD, as well as Environmental complete or correct the missing Impact Assessments (EIA), are to requirements in a period of thirty working be submitted to public days, at the most. consultation, physically presenting the Project report to MARENA’s documentary center in its 99 Central American Carbon Finance Guide
headquarters in Managua, and in xii. When a project is to be executed in its corresponding various municipalities or there are departmental/municipal different projects in different delegation, when the Project is municipalities, oral presentation related to power generation or will take place in the municipality replacement energy. that is more equidistant to the vi. If the Project is about energy areas where those projects will be efficiency al national level, besides developed. MARENA’s headquarters in xiii. When project coverage in at Managua, it should be sent to all national level, oral presentation departmental/municipal should take place in a municipality delegations at national level. It that can be covered by the media. should also be published in the xiv. When applicable, comments websites of MARENA and all should be incorporated, if relevant, related institutions, Ministry of in the PDD. There will be an Energy and Mines (MEM), ONDL representative at the oral municipalities, Nicaragua’s presentation. Municipalities Association xv. In cases where a project requires (AMUNIC). an Environmental Impact vii. All interested parties may consult Assessment (EIA) it is the PDD during a period of five recommended that, whenever working days and submit any possible, the EIA process should comments by writing during that be utilized to also carry out the same period. Five days after this PDD public consultation. period has expired, the proponent must do a public oral Project 2. The ONDL will create a data base of presentation where comments on independent consultants, according to the Project submitted during those their experience in different issues. This five consultation days should be will facilitate Project proponents their answered. search for experienced consultants, and viii. The ONDL shall publish once in a guarantee good quality results. The local newspaper, the date when the ONDL will, under no circumstance, be public consultation will take place, subject to grant a Letter of Approval just and announcing that project PDD because the Project proponent hires a is available for public consultation. consultant from that data base. ix. Oral presentation of consultation and comments before the public Once the whole process concludes, the must take place in the municipality ONDL will request the higher authorities of where the Project will be MARENA to grant the corresponding Letter implemented. of Approval, which should come into effect x. Costs for official publication and within the next 30 days after the consultation. any other that is to be done will be on behalf of the project proponent Besides, the “National Climate Change itself. Council” was set up as a multi-sector xi. Municipalities will also announce organization with the participation of the the consultation process, by means public sector, civil society and academic they considered best-suited and institutions and organizations. The Council is more effective. a consultation organism in this matter.
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Examples of Renewable Energy Projects Table 24. Projects registered as CDM.
Table 24 lists registered CDM projects and Project Sector Capacity Estimated lists the projects which are in the process to be MW tCO2 Tratamiento Energía 2.5 1,569,700 registered as CDM. anaeróbico de Biodigestor- vinazas metano
San Jacinto Energía- 60 1,533,242 Tizate geotermia Cogeneración Energía – 60 1,964,972 con Bagazo Bagazo de caña Eólico Amayo Energía 40 3,639,972 Total 162.5 8,707,886
Table 25.Projects in process to be registered as CDM (includes all the stages). Project Sector Capacity Total Emision Reduction CO2 Totals Proyecto Central Hidroeléctrica Larreynaga Energía- Hidroeléctrica 17 Mw 1,126,818
Proyecto Pequeña Central Hidroeléctrica Energía- Hidroeléctrica 0.93 Mw 46676 El Bote Proyecto Central Hidroeléctrica El Salto YY Energía- Hidroeléctrica 25 Mw N/P Proyecto Sistema de interconexión eléctrica Energía- Línea de transmisión N/P para los países de Centro América Proyecto Riscos de oro de Rosita Minas El área de N/P influencia se extiende a 45,000 Ha
Proyecto Eólico La Fe Energía- Eólica 19.8 Mw N/P Proyecto Eólico Las Sierras Energía- Eólica 20 Mw 1,615,040 en un periodo de 14 años Proyecto Hidroeléctrica La Mora Energía- Hidroeléctrica 1.9 Mw 85,288 en un periodo de 14 años
Sistema Regional de Pago por Servicios Forestal 8,054.16 ha 2,841,234.65 Ambientales en Carbono a campesinos bajo el área de en un el POSAF en Nicaragua influencia del periodo de Proyecto. 20 años
Proyecto Hidroeléctrico El Sardinal Energía- Hidroeléctrica 1.2 Mw 30, 506 en un periodo de 7 años Proyecto Eòlico Amayo II Energía- Eólica 23.1 Mw 186,320 hasta el 2012 Proyecto Mini Centrales Hidroeléctricas en Energía- Hidroeléctrica 0.9 Mw 33.071,183 Bonanza y Rosita Generación de Energía a Base de Arroz, en Energía- Biomasa 3.5 Mw 489,000 en Chinandega un periodo de 15 años Procesamiento de sangre de ganado Bovino Energía- Metano N/P 26,112 para la obtención Proteínas incluyendo el 2012 Proyecto Hidroeléctrico El Barro Energía- Hidroeléctrica 34 Mw 571,410
Programa de Reforestación Futuro Forestal Forestal 4,054.04 Ha N/P
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Tel: +505 2222-4580 / 505 22809500 4.7.3 Relevant Organizations Fax: + 505 2222-4629 www.mem.gob.ni
Ministerio del Ambiente y Recursos Naturales (MARENA) MSc. Iván Cortes Director General de Electricidad y Recursos Renovables Tel: +505 22809500 Lic. Martha Ruiz Sevilla Ministra [email protected] Tel: +505 22632862 / 505 22631273/ Dr. Fernando Sánchez Fax: +505 2263-2596 Director de Políticas y Planificación www.marena.gob.ni Energética Tel : +505 22680861 / + 50522680714 Ing. Roberto Araquistain Vice Ministro [email protected] Tel + 505 22631343 [email protected] Dr. Luis Molina Barahona Responsable Unidad de Gestión Oficina ONDL Ambiental Tel: +505 2222-5576 o 505 22809500 Bernardo Torres Directora General Cambio Climático Fax: +505 2222-4629 MARENA E-mail: [email protected] Tel :+505 22334455 [email protected] Empresa Nacional de Transmisión Eléctrica S.A. ( ENATREL)
Lic. Manuel Madriz Ing. Salvador Mansell, Gerente Coordinador Oficina Nacional de General Cambio Climático Tel: +505 2277-4159/ 505 22674402, MARENA 505 22674374 Tel : 505 22334455 www.enatrel.gob.ni [email protected]
Empresa Nicaragüense de Electricidad Ministerio de Energía y Minas ( MEM) (ENEL)
Ing. Ernesto Martínez Tiffer, Ing. Emilio Rappaccioli, Presidente Ejecutivo Ministro – MEM Tel: +505 2278-5830, 505 2270-1044, Tel: +505 2222-5576 o 505 22809500 505 2270-1066 Fax: +505 2222-4629 Fax: +505 2267-4377 www.mem.gob.ni www.enel.gob.ni
Ing. Lorena Lanza, Vice Ministra 102 Central American Carbon Finance Guide
Instituto Nicaragüense de Energía (INE)
Ing. David Castillo Presidente del Consejo de Dirección Tel: +505 22221325 / 505 2228- 2058/ 505 22221326 Fax: +505 222-7052 www.ine.gob.ni
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4.8 PANAMA
Figure 19 Political Map of Panama.
4.8.1 Description of the For year 2008 by means of the law No 52 Energy Sector of July 30th 2008, the National Secretariat of Energy is created. The National Secretariat of Energy is responsible for General Information planning, investigating, setting direction, The Privatization of the Electrical Sector of supervision, and control. The Secretariat Panama, initiated with the approval of Law will have access to global policies in the No.6 of 3 February 1997, which dictates energy sector, and will formulate strategies the Institutional Regulatory Framework for and policies for the Republic of Panama. the electrical services provided by the state Among those are: or Government of Panama. Promote energy security for the This Law was subsequently reformed in benefit of the population and 1998, and contemplates a power market country’s development. impelled by commercial actors, who can generate, sell and buy energy by means of To propose to the Executive contracts and in the occasional or spot agency laws and regulations that market. promotes the obtaining of The Panamanian State sold in 1998, during electrical energy, hydrocarbons and the privatization process, 51% of the alternative energies in the best actions of the companies of thermal conditions for the country. generation, 49% of the actions of the To impel measures destined to companies of hydraulic generation and efficient use of the power 51% of the companies of distribution of resource, in coordination with electricity. institutions and commissions of In this new structure of the electrical State that bear relation to this sector, the Panama State maintained 100% matter. of the equity of the electrical transmission company (ETESA). ETESA is the To organize meetings between responsible entity for the National Center pertinent institutions, to discuss of Energy Dispatch (CND). energy subjects, so that they are taken care of in an opportune and expeditious way.
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Figure 20 Map of the Republic of Panama and amount of clients by Zone of Concession (2009).
As a result of the privatization of the In the electrical generation sector electrical sector, the old state electrical participate conventional generators; auto company (IRHE), was divided in three generating plants and cogenerating plants. great blocks, Generation, Transmission and These electricity producers may sell their Distribution. All of this is operated by The excessive productions. There are also National Dispatch Center, and regulated by companies that commercialize their The National Authority of Public Services generation from another country in the (ASEP), which follows the directions of the Wholesale Electric Trade Market of National Secretariat of Energy. Panama through international Generation: In Panama currently there are interconnections. two types of electric generation From 2000 to 2009, the growth in energy hydroelectric and thermoelectric. The main consumption was of 10.37%. The actual hydroelectric plants are: Fortuna, Estí, La Capacity installed is 1,816.7 MW of which Estrella, and Los Valles, Algarrobo, Hidro 87.1% (1,582.5 MW) corresponds to the Candela located in the Province of Chiriquí Interconnected Network, 11.7% (213.4 and Bayano located in the province of MW) to the auto generating plant Panama. The Thermoelectrial generators connected to the Interconnected Network, are Bahía las Minas, Termocolón, Cativá, and 1.1% (20.8 MW) belongs to power located in the Province of Colon and generating Systems in isolated places. Pedregal Power, Pan Am and COPESA, located in the Province of Panama.
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Structure of Electric Sector
Electric Power Generation Companies: Color Meanings: Hydro Thermic Hydro-Thermo State Participation 49% AES Panama BLM Corp EGESA ENEL Fortuna (Except EGESA, State owned – 100%) COPESA GENA Hidro Candela Hidro Panama
Private owned Co. I&D Balboa Istmus Hidro Power Melo Mendre
PanAm Generating Pedregal Power Térmica del Caribe
Auto Generator (State owned – 100%) ACP
Distributor/Generator (State ESEPSA participation)
National Secretariat Government of Energy Institutions. .Electric Sector . Fossil Fuel Sector National Authority of Public Electric Transmission Company Services (ASEP)
National Dispatch Center
Large Electricity Distribution Companies (49 % state-owned) Consumers OER Elektra Noreste EDEMET EDECHI >100kW) Rural Electrification
Electricity Market
Figure 21 Structure of the electric sector in Panama.
Of this total, 47.8% (869.0 MW), The average price of electricity in Panama corresponds to hydroelectric power for 2009 was $ 0.167/kWh and according stations, whereas 52.2% (947.6 MW) to the records of the National corresponds to thermoelectric plants. Interconnected System, maximum demand was recorded on the 4th of December 2009. Transmission: Panama is interconnected With demand reaching 1.153,9MW. with Costa Rica and Central America. The Distribution: The distribution of electrical interconnected Transmission system is energy in Panama is operated and owned property of Empresa de Transmisión by three private companies, which are: Eléctrica, S.A. (ETESA) which is a state EDEMET, EDECHI, and Elektra. (for owned company. better reference refer to figure N°1 ). Preliminary numbers show that Net electric power generation in Panama for year 2009 was 6,701 GWh
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Legal Framework Targeted on Renewable generation systems and for new and future Energy. clean technologies.
Legal Scope of the Energy sector Law 52, July 30 2008. Creates The National Since February 1997, the Republic of Panama, Secretariat of Energy and incorporates to the initiated the deregulation and Secretariat the functions and attributions of privatization process for its national energy the Energy political Commission, previously sector. For the process, the nation developed under the Ministry of Finance, as well as the the following laws and executive Decrees. functions and direction of the Petroleum and Law 6, of February 6 1997, Dictates the Oil Derivatives National Department, Regulatory and institutional Framework for previously under the Ministry of Commerce providing Electrical Public Services in and Industry. Panama. This law is executed under the norms established in the executive Decree 22, The Electricity Market| signed on the 19th of June 1998. Decree Law 10, February 26 1998, by which The wholesale market of electricity, that some Articles of Law 6, of February 6th 1997 includes the Contract market and the are modified. Occasional market, constitutes the buying and Law 15, February 7 2001, establishes the norms selling mechanism of energy and/or power and other dispositions for subsidies and grants between the producing agents and the given to low energy demand customers with consuming agents (distributing, great clients basic energy needs to support their and export) households. By means of article 6 of the Resolution of Decree Law 10, February 22nd 2006 Reorganizes Cabinet No 101, August 23 2009, the State the structure and attributions of the Public asks the National Authority of Public Services Services Regulating Agency (ASEP), and (ASEP) to comply Electrical distribution dictates other dispositions. Companies to purchase or hire their full demand. It also establishes that if a company Executive decree 279 November 2006, by which does not comply, then the company could Law 26 of January 1996 is regulated, reformed only transfer to the final client the current by the Decree Law 10, of February 22 2006, average tariff from existing contracts. which reorganizes the structure and attributions of the Public services Regulating Electric Distribution Companies will not be agency. allowed to sell energy purchases at spot market prices. Cabinet Resolution 101, August 23 2009, Instructs entities, organizations, and The spot or occasional market will work solely authorities with attributions and functions for transactions between generating related to providing electric public services, to companies to comply with increasing adopt measures directed towards strict customer demand. compliance with the social and economic obligations of such market players. The adopted basic model promotes competition in the wholesale production of Law 45, August 4 2004, establishes fiscal electrical energy. The distributors and great incentives for the promotion of foreign consumers can make their direct purchases to investments in conventional renewable the producing agents, whereas the distributors generation systems such as hydroelectric, as maintain a captive market of end users in their well as for other types of renewable energy zone of concession. This structure is in use since July 1998. 107 Central American Carbon Finance Guide
The National Dispatch Center CND operates 4.8.2 National CDM Policy the Wholesale Electricity Trade Market based on the Commercial Rules approved by the UNFCCC Ratification National Authority of Public Services Signing date: March 18, 1993 (ASEP) RRatification Date: May 23, 1995
The Contract market establishes medium and Kyoto Protocol long term contracts between the participants SSigning date: June 8, 1998 of the Wholesale Market of Electricity. Two Ratification date: March 5, 1999 types of contracts are considered for this market: Contracts for the buying or selling of energy, as well as contracts of energy power In Article 79 of Law N°41, “General between generating facilities and the Environment Law”, Panama acknowledges that distribution companies. These contracts may carbon sequestration is an environment service be: provided by forests. Therefore, the country establishes the mechanisms to obtain the Exclusively of Power economic and financial gains promoted by the Exclusively of Energy flexible energy mechanisms contained in the Of Power and Energy Kyoto Protocol.
Figure No. 27 presents the map of CDM projects in the Republic of Panama75
75 National Environmental Authority. www.anam.gob.pa
Figure 22 Map of the CDM Projects in the Republic of Panama.
The National Environment Authority is the Designated National Authority (DNA) of Climate Change Focal Point, and the Panama at the CDM Executive Board, whose 108 Central American Carbon Finance Guide responsibility falls on the figure of the Deputy Spanish) within the Operational Structure of Manager: the ANAM.
One of the duties of the UCCD is to continue Lic. Melani Castillo Him, Manager ANAM with the implementation of the National E-mail: [email protected] Climate Change Program of Panama, which Tel: (507) 500-0823 encompasses the National Inventories and Fax: 500-0820 Mitigation of the Greenhouse Gasses effect. http://www.anam.gob.pa This component has the national inventory of Greenhouse Effect Gasses, and is also in charge of keeping a record of the national The National Environmental Authority activities of mitigation projects, endorsed and (ANAM, for its Acronym in Spanish), is not periodically certified; these have to be only responsible for drafting, coordinating, and submitted by the ANAM to the International overseeing the execution of the climate change Institutional Regime by the ANAM, through national policy, but also has created the National Communications. National Climate Change Program of the ANAM, in accordance with Resolution N°AG- This sub program was the beginning and 00402001, dated February 14, 2001, with the design of and implementation of the country’s functions to assist in the execution of the CDM strategy, by including a promotion activities and commitments undertaken by the component for projects that are qualified to Republic of Panama through the ratification of participate in the international carbon market. the United Nations Framework Convention on In the Table 23, shows the total of 107 CDM Climate Change and the Kyoto Protocol. As of projects: 2006 the ANAM has the Climate Change and Desertification Unit (UCCD for its acronym in
Table 26 Registered CDM projects.
Title Host Other Parties Methodolo Reductions ** Registered Parties gy * LOS ALGARROBOS Spain AMS-I.D. 37213 01 Oct 05 HYDROELECTRIC PROJECT Panama ver. 5 (PANAMA) PROJECT FOR THE Spain AMS-I.D. 12167 REFURBISHMENT AND ver. 6 24 Dec 05 UPGRADING OF DOLEGA Panama HYDROPOWER PLANT (PANAMA). PROJECT FOR THE Spain AMS-I.D. 10963 REFURBISHMENT AND ver. 6 24 Dec 05 UPGRADING OF MACHO DE Panama MONTE HYDROPOWER PLANT (PANAMA). Concepción Hydroelectric AMS-I.D. 36126 21 Oct 06 Panama Project ver. 8 Paso Ancho Hydroelectric United Kingdom of AMS-I.D. 22233 10 Mar 07 Project Panama Great Britain and ver. 8 Northern Ireland Santa Fe, Energy Wind farm United Kingdom of ACM0002 172877 23 Feb 09 Panama Great Britain and ver. 6 Northern Ireland
Table 27. CDM projects types.
Type of CDM projects in Panama
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Type Capacity MW CERs/year Hydroelectric 86 6986632.00 Solid Wastes 5 1585579.00 Management Transportation 1 30000000.00 Biomass 3 55248.00 Wind 14 5143630.00 Energy Efficiency 3 26528.00 Reforestation 6 673900.00 Total 118 44471517.00 Source: ANAM 2010
Table 28 Projects in the pipeline to be registered as CDM.
Projects to be registered at the CDM Project Capacity, CERs/year MW Estí Hydroelectric Plant 111.5 326,496
Bayano Hydroelectric Plant 86.0 31,635
Small scale project of the Hydroelectric Power Plant of 5.94 17,289 Cañazas El Sindigo hydroelectric project 5.0 38,615
Ojo de Agua hydroelectric project 5.8 20,633 Los Estrechos hydroelectric project 10.0 29,933 Changuinola I hydroelectric project in Panama 223.0 669,000 Cerro Patacón Landfill Gas Utilization Project 5.0 291,368 Barro Blanco Hydroelectric Power Plant Project 29.0 46, 071 CEMEX Panama Bayano cement plant Alternative fuels project 33,919 Alcoholes Del Istmo – Biomass Energy Plant 1.0 21,239 Barro Blanco Hydroelectric Power Plant Project 28.8 66,681 Dos Mares Hydroelectric Project 115.0 295,578
Mendre Hydroelectric Power Plant Project 19.75 50,273 Total 645.79 1,939,030 Source: ANAM 2010
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It is important to mention that the because once included the citizen promoters of the projects that have qualified participation component, the near as CDM, have voluntarily committed communities have a greater opportunity to themselves to carry out development receive more expedite contributions that will projects for the communities in their improve their sustainable development and projects for amounts around 20% and 30% their quality of life. of the income earned from the CER’s annual sales. Consequently, CDM projects represent Local Registry Process: a great contribution for the sustainable Panama has a local CDM Project registry development of the country. It is process, with the following steps (see Table 26): worthwhile highlighting that this has become a key factor for society to accept these projects,
Table 29. Process to register CDM Projects in Panama.
Activity Responsible 1. Project Initial Idea. Promoter 2. Proceedings with the corresponding authorities to fulfill legal requirements to Promoter operate program activities (E.g.: licenses, permits, concessions, etc.) 3. Submit the following requirements before the ANAM. (Forms available at the Promoter ANAM Web page: www.anam.gob.pa) 3.1 PIN-Project Idea Note (World Bank version) 3.2 Community Benefits Questionnaire (Community Development Carbon Fund version) 3.3 Registry of Project Impact Assessment or the Environmental Audit. and its PAMA. 4. Issuance of the Letter of Non Objection once it enters the EIA or the ANAM – AND respective PAMA (15 days) 5. Issuance of the Letter of Complacency once the Environmental Impact ANAM – AND Assesment or the respective PAMA is approved (5 days)
6. Submission of the Project Design Document (PDD) together with the approved Promoter EIA or PAMA resolution and the Report of Validation. DOE 7. Issuance of the Letter of Approval (15 days), ANAM - AND
Source: ANAM 2010
establish the policies of the sector. It must as 4.8.3 Relevant organizations well promote the efficient use of energy in the country and the development of renewable sources, which are environmentally National Secretariat of Energy (SNE) sustainable. The Secretariat will also increase (Ley 52 del 30 de julio de 2008) its electrical reach area and will protect foreign and national investment in the sector. The above legislation states that The National Secretariat of Energy will function as part of The legislation creates a consultative the Executive Body of Government assigned committee that will be constituted by five to the Ministry of the Presidency. Between its members: Company managers of: The functions, the law attributes to the Secretariat Electrical Transmission company, the of Energy: to formulate, plan strategically and Electrical Generation Company, the National
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Authority of the Environment, a As an independent entity of the State, the representative of the National Council of the ASEP, regulates and controls the market for: private sector and the administrator of the Public service of the potable sanitary sewage National Authority of Public service. system, public water supply, electricity, telecommunications, radio and television as National Authority for the Environment well as the transmission and distribution of (ANAM). natural gas.
Created by means of Law No 41, of July 1998, ASEP establishes the criteria, fees, is responsible for the administration of the methodologies and formulas and approves the environment and establishes the principles, sale tariffs that will be charged to end users. and basic norms and regulations for the ASEP is also responsible for approving and protection, conservation and recovery of the supervising practical standards and environment, promoting the sustainable use of commercial common practices. ASEP grants our natural resources. It gives order to our concessions and licenses, and establishes the environmental management and incorporates criteria and procedures for sales contracts of it to Panama’s social and economic objectives energy and power. In addition ASEP plays an of sustainable human development. important role in arbitration of conflicts in the market and executes the application of Direction of our Policy: sanctions.
Stimulate, and to promote sustainable Office of Rural Electrification (OER). environmental behaviours. It is an entity of the State that works with the Integrate Environmental Policies in Social Investment Fund assigned to the the Public Policies of the State. Ministry of the Presidency. The OERs Prioritize in mechanisms of mission is to promote the electrification of environmental restoration in the non profitable rural areas, not served and public and private management of the without concessions. environment.
Promote instruments and For this purpose the OER will look at mechanisms to stimulate the different options to determine and develop transition process towards a the most feasible projects to electrify these sustainable society. rural regions.
National Authority of Public Services (ASEP). Law 6, February 3rd, 1997.
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4.9 DOMINICAN REPUBLIC diagnose of the energy sector and the environmental assessment strategy for the electric sector.
Structure of the Dominican Electric Sector
Dominican Republic as many Latin American countries started a the end of the 90’s the process of reform of the electricity sector to solve the chronic problems related with the high generation costs, rationing of energy, politicized tariffs and inefficient management of the State monopoly which is integrated vertically. The reform brought in a market model with private participation and independent regulation, maintaining the hydraulic generation and the transmission in Figure 23 Political Map of Dominican Republic. hands of the State. The reform was completed at the beginning of 2001 con the capitalisation of private investors in the three new 4.9.1 Description of the Energy companies, one for distribution and two Sector companies for thermal generation, which created the restructuration of the Dominican General Information Corporation of Electricity (CDE) and the State monopoly. The Superintendence of National Commission of Energy (CNA) Electricity and the National Commission of Energy are independent organisations in The CNA was created through the General charge of the regulation and the creation of Law of Electricity (Ley General de policies. The creation of a competitive market Electricidad) 125-01, included in the article 7, th of energy was managed by a Coordinator published on July 26 2001. This law establish Organisation supported by the regulatory the new legal and institutional framework that framework. rules the activities of the sub-sectors: electric, hydrocarbons, alternatives sources and Generation76 rational use of energy, which means the entire The total energy consumption in the Republic energetic sector. in 2005 was 5.265 KTep (1 KTep= 4,14MWh) Although the CNA emerges under the (Figure 24), which is equivalent to the 71% of General Law of Electricity, its mission and the total energy offer. In the perspective of functions surpass widely the electric energy the long term the energy consumption scope, where the real scope includes all the increase 6% from 2006 to 2005. This types of energy, such as: oil, renewable consumption had a strong decrement because energies and bio-fuels but also the different of the economic problems occurred as of final uses. 2002. The generation capacity in 2005 was 39.102 Coordination of the National Energetic Plan MW.
During the last years the CNA has been coordination the woks to do the National Plan 76 http://www.cne.gov.do/sien2/estadisticas.aspx of energy. Such plan includes the global
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Figure 24. Evolución del consumo de energía de la República Dominicana (2001-2005).
Hydropower Coal Renewable energy. Bagasse 2 % 0 % 4 % Wood The consumption of renewable energies in 10 % Dominican Republic in 2005 represented 16% of the sources, where the wood is the most Fossil fuels important renewable resource with 10% of (hydrocarbo ns) share. In the following Figure 25 is shown the 84 % detail77.
Figure 25 Renewable Energy production in 2005. 77 Diagnóstico y definición de líneas estratégicas sobre el uso racional de energía (ure) en república dominicana Legal framework targeted to renewable energy The renewable energies are governed by the Law 57-07 (Ley No. 57-07 de Incentivo a las Energías Renovables y Regimenes Especiales), which was promulgated in May 7th 2007. According to this law, the CNA has awarded many grants for the exploitation of renewable energies, with an estimated capacity of 1.252,4 MW. The details are presented in the following Table 30.
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Table 30. Renewable energy grants.
Requested Request Concessions Energy type Concessions Effectiveness concession granted
MW % MW % %
Wind 2,100 83.4 1,200 95.8 57.1 Photovoltaics 300.5 11.9 50 4.0 16.6 Small hydro 1.4 0.1 1.4 0.1 100.0 Biomass 116 4.6 1 0.1 0.9 Solarthermal 50 2.0 0 0.0 0.0 Total 2,517.9 100 1,252.4 100
Main Actions regarding rural electrification 4.9.2 National CDM Policy
Project of photovoltaic electrification in the island Saona UNFCCC Ratification In coordination with the Environment Signing date: June 12, 1992 Ratification Date: October 7, 1998 Ministry and Natural Resources the planning of a photovoltaic project to supply electricity Kyoto Protocol to the 85 families located in the island Saona. Signing date: March 16, 1998 Ratification date: February 12, 2002 This project will be financed in cooperation with the Korea International Cooperation Agency (KOICA) with an estimated investment of US$3,000,00078 One of the climate change commitments of the country is the elaboration of a national Project of drinking water and electric energy inventory of GHG emissions and sinks, which Field studies were done together with the has been done as part of the national institutions: Foundation Sur Futuro and the communication. General Direction for Development of the Community to supply such services through renewable sources. The done works were: the National Office for Clean Development identification and evaluation of the rural and Climate Change electrification projects, which is already approved, the evaluation for the system of The National Office of CDM (ONMDL) of geographic information and the design of the ‘National Council for Climate Change and rural electrification policies Clean Development Mechanism’, established by Decree 601-08 in September 2008, has a role of DNA in the Dominican Republic. The Council, headed by the president of the
Dominican Republic, is composed of members from relevant authorities and organizations in the fight against climate change and has three branches, 78 CNE Memoria Anual 2009 Administration, Office of Climate Change,
115 Central American Carbon Finance Guide and the Office of Clean Development Mechanism – DNA79. nismforCDM/tabid/56/Default.aspx#DNA_Structure
79 http://www.cambioclimatico.gob.do/eng/en/NationalMecha
Figure 26 Structure of the climate change authorities in Dominican Republic.
CDM local procedure approval Approval procedures for CDM projects is shown in the following chart80.
80 http://www.cambioclimatico.gob.do/eng/en/NationalMecha nismforCDM/tabid/56/Default.aspx#DNA_Structure
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Figure 27 CDM approval process.
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Table 31 CDM Project pipeline in the Dominican Republic (October 2009) 81
Project Title Types of Projects Current Status
El Guanillo wind farm project Wind power Registered but not implemented yet Juancho – Los Cocos wind farm Wind power Under validation project (108MW)
Cabo Engaño Wind Project Wind Power Relocated to Juancho – Los Cocos GED Eolic Windfarm Wind Farm (2 × 50 PDD under preparation MW) TOS-2Ríos Biomass Cogeneration Biomass Cogeneration PIN approved (NOL obtained) Project Forbes Energy Dominicana Biomass Cogeneration Approval letter obtained Bagasse Cogeneration Project
CTD Bagasse Cogeneration Biomass Cogeneration PIN under preparation Project CONACADO Biomass Project Biomass Power PIN under preparation KOAR Dominicana Biomass Biogas Power PIN approved (NOL obtained) Electricity Generation Project
Duquesa Landfill Project Methane Capture Undergoing check list for registration City Hall of Santiago SWM Composting PIN under preparation MercaSID Project Composting/wastewater PIN under preparation Treatment
Pig Farmers Association Wastewater Treatment PIN under preparation IDDI Fuel Switch PIN under preparation Dominican AES Fuel Switch PIN under preparation BASIC ENERGY Fuel Switch PIN under preparation CEMEX Dominicana Blended Cement Under validation Production EGEHID Hydropower Small and Medium PIN under preparation Scale Hydropower
Estefany y Asociados S.A. Solar Power PIN under preparation
81 http://www.cambioclimatico.gob.do/eng/en/NationalMechanismforCDM/tabid/56/Default.aspx#DNA_Structure
Examples of Renewable Energy Projects During 2009 the profile of many Projects was iii. Measurement of wind potential in the worked to be evaluated by the Environment province Montecristi. and Energy Partnership (AEA). 8 projects iv. Feasibility to increase the anemometry were approved which will be implemented. and engineering for a wind park in The projects are: Guzmancitos Puerto Plata. i. Water supply though renewable energies in communities located in the v. Construction of 20 bio-digesters border zones. throughout the county and the installation of 20 power generators of ii. Bio-fuels development in the 10 kW. Republic. 118 Central American Carbon Finance Guide
vi. Study for the strategy for the tidal energy in the short term. 4.9.3 Relevant Organizations
vii. Introduction of technologies for distributed generation of tidal energy in Secretaría de Medio Ambiente y Recursos small coastal communities. Naturales
viii. Supplying of electricity from photovoltaic sources to the community Palomino, Luis Geraldo Matos province Azua. [email protected] 472 1144 Wind pilot project in Vergnet Comisión Nacional de Energía A French wind generator with capacity of 274kW will be delivered. Santo Domingo, Rep. Dom. Japanese cooperation Tel.:809-732-2000 With support of the JICA, three projects will Fax: 809-547-2073 be donated in 2010: i. Photovoltaic illumination for the Climate Change National Office public lighting and main highways and bridges. Director: Mr. Victor García
ii. Photovoltaic illumination in the Clean development Mechanism National governmental buildings complex. Office
iii. Photovoltaic system in the new Director: Mr. Moises Alvarez building of the environment Ministry.
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5 THE CURRENT STATUS INTERNATIONAL CARBON MARKETS This Chapter explains briefly the current state. Emphasis is given to the project-based transactions, especially to Certified Emission Reductions (CERs). 5.1 Background allocation plan. In a cap-and-trade system a participant, whose emissions are below its Because of existing or expected regulations or allocated amount, can sell the excess allowances for voluntary reasons, many governments and to a participant whose emissions exceed its companies have started to implement measures allocated amount. In the end of a trading to reduce greenhouse gas emissions. period At the end of a predefined follow-up Greenhouse gases are not local pollutants; they period the participant must surrender mix up high in the atmosphere affecting the allowances corresponding to its actual thermal balance of the earth. Therefore for the emissions. global climate change the impact of one tonne of CO2 emitted in Finland is equal to one tonne Emission reductions are tradable commodities emitted in Central America. This phenomenon that are based on a hypothetical baseline, i.e. is the basis for the development of the so- what would have happened in the absence of called international carbon market, where either an emissions reduction project that was emission allowances or emission reductions implemented. Joint Implementation (JI) and (such as Certified Emission Reductions) are Clean Development Mechanism (CDM) in the traded. Kyoto Protocol are examples of project-based emission reduction mechanisms. The carbon market can be divided at least in two ways. As to the tradable commodities, they Another way to divide the carbon market is can be either: based on the regime where the carbon commodities are used. In this way, the tradable Emission allowances under a cap-and- commodities can be divided for example in trade scheme; or Kyoto-compliant and non-Kyoto-compliant Emission reductions based on specific instruments. Non-Kyoto-compliant tradable projects. instruments include for instance verified Assigned Amount Units (AAUs) allocated to emission reductions (VERs) used voluntarily by Annex I countries under the Kyoto Protocol some companies to demonstrate good and the European Emission Allowances corporate citizenship, or by private consumers (EUAs) allocated to European companies for voluntary offsetting e.g. travel related under the European Union Emissions Trading carboin dioxide emissions. Also state level Scheme (EU ETS) are examples of emission regulation and voluntary actions in the United allowances. In both cases, a cap is given for States has created markets for non-Kyoto- emissions and an amount of allowances compliant carbon commodities. corresponding to that cap is allocated. In the Another environmental commodity which has case of the Kyoto Protocol, the Annex I a lot in common with emission allowances and countries have a defined Assigned Amount, emission reductions is the green electricity which is the cap of the greenhouse gas certificate or guarantee of origin. This market is emissions for a country; in the case of the EU based on certificates or guarantees which are ETS, the companies included in the scheme given to electricity producers using renewable have an established cap based on the national sources for power generation. Often one
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certificate is given for each megawatt-hour of Scheme (EU ETS) increased especially the electricity generated from renewable source. financial value of the global carbon market on These certificates are then traded both in completely new level. During the year, the EU voluntary and in regulatory markets. More ETS market volume exceeded USD 100 billion. information on renewable certificates can be The EU ETS market has continued to grow found at www.recs.org. and its value in 2009 was some USD 118 In the following, the carbon market is analysed billion. Main reason for the financial value of with a special emphasis on the market for EU ETS being so high, is the share size of the Certified Emission Reductions (CERs) and number of transactions. In 2009, 6300 generated by CDM projects. MtCO2 were traded in the EU ETS. Establishment of the EU ETS also increased 5.2 Volume of the Carbon demand for project based emission reductions. Market The future development of the global carbon After the first known carbon transactions in market depends naturally on the supply and the 1995 global, the growth has been exponential. demand in the market. In 2009, the euro value of traded units was some 144 billion USD and 8700 MtCO2e. Years of speculation as to whether or not the Figure 28 illustrates the development of global Kyoto Protocol would enter into force ended, carbon market in terms of volume of CO2e when Russia announced that it would ratify the traded in 2008-2009. Protocol in October 2004. When the Protocol entered into force on 16 February 2005, the Figure 28. Development of the carbon market. Annex I countries was set legally binding Traded volume in million of tonnes. Contracted volumes 2008-2009,. Source: World Bank. State and emission targets for Annex I countries for the Trends of the Carbon Market 2010. period 2008-2012.
Carbon markets 2008-2009 It has been estimated that Annex I countries will purchase emission reductions (or 9000 allowances) about 1400-2000 MtCO2e in the 8000 period 2008-2012 to meet their Kyoto
7000 obligations. From this demand of CERs and ERUSs about 1200 MtCO2e is estimated to 6000 come from EU 15 countries and the rest from
MtCO2e 5000 the other Annex I countries. 4000 It has been estimated that the potential supply
3000 of CERs and ERUs is 1400-2000 MtCO2e in period 2008-2012. The estimated supply 2000 contain emissions reductions potentially 1000 supplied trough clean development mechanism (1300-1700 MtCO2e), joint implementation 0 2008 2009 (100-250 MtCO2e). The largest CDM countries
EU ETS CDM JI AAU Spot and Secondary Kyoto credits are China, India, Brasilia, Mexico and South Korea. In 2008, financial value of the market was EUR Nevertheless, estimates on the global supply some 96 billion and by 2009 it reached 146 and demand are uncertain and there are several billion. In 2009, the share of the primary CDM factors affecting the supply and the demand. projects was about 10 % of the traded volume with value of 0,4 billion USD. In 2005, launching of the European Emissions Trading
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respectively, on the list of sellers in terms of transacted volumes. On a cumulative basis, 5.3 Buyers and Sellers in Brazil accounts for about 8% of primary CERs the Carbon Market contracted between 2002 and 2008. As said earlier, the shift in the projects has been Figure 30 shows that the European buyers towards Kyoto compliance projects, which dominate the CDM and JI markets for means that the majority of the projects is today compliance, with a combined market share of implemented either in the developing or the over 80%. Private sector companies are the transition countries. Figure 29 shows that most active, with slightly less than 90% of China accounts for a lion’s share of the primary contracted volumes. CDM market. According to the World Bank, between 2002 and 2008, China accounted for 66% of all contracted CDM supply in the market. With 4% and 3% market share each, India and Brazil rank second and third,
Figure 29. Location of CDM projects. Source: State and Trends of the Carbon Market 2010. The World Bank.
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Figure 30. Primary CDM and JI buyers as shares of volumes purchased, vintages up to 2012. Source: State and Trends of the Carbon Market 2010, The World Bank.
5.3.1 CERs in the EU Emissions EUAs started well before 2005. During 2003- Trading Scheme 2004 the price was under 10 € most of the time. In February 2005, few weeks after the scheme EU ETS is the world’s largest carbon market. was launched, the price started rising. After few The Scheme drives the European private firm’s months of trading the price achieved € 20. At demand for emissions reductions, because the highest emission allowances were traded at € EU Linking Directive, which enables 31. The publication of the verified emission in companies within the EU ETS to use CERs May 2006 showed that there is significant and JIs for compliance, up to a certain limit surplus of allowances in the phase 1 (2005– 2007) lead to collapse of the carbon prices. The The EU ETS was launched in the beginning of decline has continued and in the end of the 2005. It covers about 11,500 installations in phase one the price was below 1 €. As the energy, cement, metal, pulp and paper and trading periods have their own demand and other industries. Within the scheme some 2.2- supply the price of Phase 2 (2008-2012) 1.8 billion EU emission allowances (EUAs) are allowances has remain moderately hight level. allocated annually during the second trading period 2008-2012 (the yearly allocation declines stepwise towards the year 2012). Figure 31 shows the price development of EUAs. Trading with forward contracts of
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35,00
30,00
25,00
20,00
15,00 EUR/tCO2 10,00 Allowance price Phase 1 (2005-2007) 5,00 Allowances price Phase 2 (2008-2012)
0,00
3.7.2005 3.9.2005 3.1.2006 3.3.2007 3.5.2007 3.7.2007 3.9.2007 3.1.2008 3.3.2009 3.5.2009 3.7.2009 3.9.2009 3.1.2010 3.1.2005 3.3.2005 3.5.2005 3.3.2006 3.5.2006 3.7.2006 3.9.2006 3.1.2007 3.3.2008 3.5.2008 3.7.2008 3.9.2008 3.1.2009 3.3.2010 3.5.2010
3.11.2005 3.11.2007 3.11.2009 3.11.2006 3.11.2008
Figure 31. Price development for the EU Allowances (EUAs). Source: GreenStream Network Plc.
At highest Phase 2 allowances have been traded CERs from nuclear projects are at EUR 31 level in 2008 but due to global excluded, as well as tCERs and lCERs recession the industrial activity in Europe has from sinks projects for the time being; declined and lead to lower emissions. This Hydroprojects exceeding 20 MW must reduction in demand of allowances has lead to fulfil the guidelines of the World lower price levels. Commission on Dams; The ETS directive recognizes the need to link Each member state must establish a project-based emission reductions, such as maximum amount of CERs and ERUs CDM and JI, into the EU ETS. The exact rules which may be used as a percentage of are set out in the so-called linking directive, the initial allocation for each which amends the EU ETS directive. The installation during the period 2008- linking directive was formally approved on 13 2012. September 2004 and official published on 13 November 2004 by the Council of European 5.4 Technologies in the Union. By and large, European companies Projects within the EU ETS can use for compliance Figure 32 shows that the largest CDM project CERs and ERUs on average 11 % of their categories in 2008 was renewable energy, fuel emission allowances allocations. switching and energy efficiency. These three The principal features of the Linking Directive broad project categories totaled 323 MtCO2e, are: accounting for 82% of the total volume contracted in 2008. EU member states may allow companies to use CERs for Figure 33 shows forecast of the distribution compliance starting from 2005 and until 2012. It can be seen that HFC ERUs starting from 2008. CERs and (Hydrofluorocarbons) projects had the largest ERUs are converted into EUAs in the share followed by animal waste, hydropower national registry and the resulting and biomass related projects. EUAs are immediately redeemed for compliance purposes;
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Animal waste related projects have increased The large share of HFC projects is mainly due most of their share from the previous period. to the enormous Global Warming Potential The renewables based projects are estimated (GWP) of these greenhouse gases. For example play more and more significant role. The share HFC23 (has a GWP of 11,700 (each tonne of of HFC-23 related projects is not estimated to HFC23 corresponds to 11,700 tCO2e,most of grow beyond 2007, because there is limited the HFC-projects base on decomposition of number of targets for those projects. HFC23). Figure 32. CDM project types as share of volumes supplied. Source: State and Trends of the Carbon Market 2009. The World Bank. Abbreviations CMM = Coal Mine Methane, LFG = Landfill Gas, EE = Energy Efficiency, N2O = N2O Abatement Projects, HFC = Hydrofluorocarbons.
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Figure 33. Total forecasted volume of issued credit by 2012 from different CDM project types, in Mt CO2e Source: http://www.cdmpipeline.org/ (February 2010)
5.5 Current situation of not all of the potential supply of emission CDM projects reductions from the CDM will materialise by 2012. In addition, it can be expected that a In every week new projects enter the CDM larger share of projects will be rejected in future pipeline. According to a market analyst Point because of the increased scrutiny of the CDM Carbon, at the end of January 2010, there was Executive Board (CDM EB). Figure 34 approximately 10,000 active CDM/JI projects. illustrates the number of projects rejected by These projects are estimated to produce 1,000- the CDM EB. In addition to rejections, a large 1,400 MtCO2e of emissions reductions by the number of projects underwent review for end of the 2012. Nevertheless, statistics show registration, which also prolongs the CDM that not all projects will be registered, and that cycle. of those projects that are registered very few will deliver 100% of the anticipated volume of Those projects include 12 projects located in the emission reductions in the Project Design Central America. Currently there are also 68 Document (PDD). projects are requesting for registration. Those include six projects from Central America: By the end of January 2010, some 2,000 CDM three from Honduras, one from each, El /JI projects have been registered. However, for Salvador, Nicaragua, and Costa Rica. these 2,000 projects, only for one-third have been issued emission reduction credits. Due to bottlenecks in the CDM cycle, it is likely that
Figure 34. Number of projects rejected by the CDM Executive Board. Source: State and Trends of the Carbon Market 2009. The World Bank.
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Table 32. Registered CDM projects in Central America by the end of May 2010. Project-specific details are available from http://cdm.unfccc.int/Projects/registered.html. Source: NEP Risoe CDM/JI Pipeline Analysis and Database. Project title Host Province, Type Sub- Date of Expected country state or type registration number of region CERs Rio Azul landfill gas to Costa San José Landfill Landfill 2005-10-13 3,009,443 energy project Rica gas power
Cote small-scale Costa Guanacaste Hydro Existing 2006-03-03 176,945 hydropower plant Rica & Alajuela dam
La Joya Hydroelectric Costa Cartago Hydro Existing 2007-03-09 785,619 Project Rica dam
Tejona Wind Power Project Costa Guanacaste Wind Wind 2007-03-23 252,000 Rica
Switching of fuel from coal Costa Puntarenas Biomass Palm oil 2007-11-30 694,652 to palm oil mill biomass Rica energy solid waste residues at waste Industrial de Oleaginosas Americanas S.A.
Use of biomass residues in Costa Guanacaste Biomass Agricult 2008-06-05 596,968 Colorado cement plant Rica energy ural residues : other kinds
El Guanillo wind farm in Dominic Monte Wind Wind 2006-10-20 1,537,836 Dominican republic an Cristi Republic
Bionersis project on La Dominic Santo Landfill Landfill 2010-04-09 4,580,021 Duquesa landfill an Domingo gas flaring Republic City
Abanico Hydroelectric Ecuador Morona Hydro Run of 2006-02-04 3,091,809 Project river
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Project title Host Province, Type Sub- Date of Expected country state or type registration number of region CERs Sibimbe Hydroelectric Ecuador Los Ríos Hydro Run of 2006-02-04 1,253,010 Project river
San Carlos Bagasse Ecuador Guayas Biomass Bagasse 2006-03-06 1,006,154 Cogeneration Project energy power
Afortunados Swine Waste Ecuador Pichincha Methane Manure 2006-09-25 152,866 Management avoidan ce
Tropicales-Plata Swine Ecuador Pichincha Methane Manure 2006-09-25 233,627 Waste Management avoidan ce
Valentinos-San Javier Ecuador Pichincha Methane Manure 2006-09-25 306,940 Swine Waste Management avoidan ce
Calope Hydroelectric Ecuador Cotopaxi Hydro Run of 2006-11-12 1,335,359 Project river
Perlabi Hydroelectric Ecuador Pichincha Hydro Run of 2006-10-22 139,200 Project river
Zámbiza Landfill Gas Ecuador Pichincha Landfill Landfill 2007-03-08 1,219,956 Project gas flaring
San Jose de Minas Ecuador Pichincha Hydro New 2008-08-17 374,051 Hydroelectric Project dam
Codana Biogas Project Ecuador Guayas Methane Waste 2010-01-18 423,445 avoidan water ce
Galapagos / San Cristobal Ecuador Galápagos Wind Wind 2008-05-13 49,248 Wind Power Project
San José del Tambo Ecuador Bolívar Hydro Run of 2008-02-01 541,685 Hydroelectric Project river
Apaqui run-of-river Ecuador Carchi Hydro Run of 2008-11-06 2,413,580 hydroelectric project river
Las Vacas hydrolectric Guatem Guatemala Hydro Existing 2005-12-17 2,350,431 project ala dam
Matanzas Hydroelectric Guatem Baja Hydro Run of 2006-01-21 926,133 Plant ala Verapaz river
San Isidro Hydroelectric Guatem Baja Hydro Run of 2006-01-23 388,556 Plant ala Verapaz river
El Canadá Hydroelectric Guatem San Marcos Hydro Run of 2006-12-02 3,117,470 Project ala river
Candelaria hydroelectric Guatem Alta Hydro Run of 2006-11-09 378,596 project ala Verapaz river
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Project title Host Province, Type Sub- Date of Expected country state or type registration number of region CERs Biogas energy plant from Guatem Izabal Methane Waste 2008-04-06 530,075 palm oil mill effluent ala avoidan water ce
Xacbal Hydroelectric Guatem Quiché Hydro Run of 2008-12-23 4,518,197 Project ala river
Amatitlan Geothermal Guatem Escuintla & Geother Geother 2008-12-12 1,419,942 Project ala Guatemala mal mal electricit y
Bioenergia Anaerobic Guatem Escuintla Methane Waste 2009-04-01 1,550,890 Digestion and Biogas ala avoidan water Generation Project ce
Co-composting of EFB and Guatem Izabal Methane Compos 2009-07-18 342,219 POME project ala avoidan ting ce
Biogas project, Olmeca Guatem San Marcos Methane Waste 2009-11-23 531,364 III, Tecún Uman ala avoidan water ce
Rio Blanco Small Scale Hondura Cortés Hydro Run of 2005-01-11 327,810 Hydroelectric Project s river
Cuyamapa Hydroelectric Hondura Yoro Hydro Run of 2005-04-23 579,475 project s river
Cortecito (5.3MW) and Hondura Cortés Hydro Run of 2005-06-03 640,032 San Carlos (4.0 MW) s river small-scale hydro project
CUYAMEL Hydroelectric Hondura Cortés Hydro Run of 2005-11-26 524,109 Project s river
LA GLORIA Hydroelectric Hondura Colón Hydro Run of 2006-01-09 424,165 Project s river
Cececapa run of river Hondura Santa Hydro Run of 2006-03-02 32,069 Hydroelectric Project s Bárbara river
Yojoa Small run of river Hondura Cortés Hydro Run of 2006-03-02 18,526 Hydropower Project s river
Zacapa run of river Mini Hondura Santa Hydro Run of 2006-03-02 16,314 Hydro Station Project s Bárbara river
Eecopalsa – biogas Hondura Yoro Methane Waste 2006-09-02 460,493 recovery and electricity s avoidan water generation from Palm Oil ce Mill Effluent ponds
Tres Valles Cogeneration Hondura Francisco Biomass Bagasse 2007-06-28 435,436 Project s Morazán energy power
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Project title Host Province, Type Sub- Date of Expected country state or type registration number of region CERs Cervecería Hondureña Hondura Cortés Methane Waste 2007-08-28 200,910 Methane Capture Project s avoidan water ce
Inversiones Hondurenas Hondura Yoro Biomass Bagasse 2007-12-12 518,580 Cogeneration Project s energy power
Energeticos Jaremar – Hondura Atlántida Methane Waste 2008-03-08 540,462 Biogas recovery from Palm s avoidan water Oil Mill Effluent ponds, and ce heat & electricity generation
Energía Ecológica de Hondura Yoro Biomass Palm oil 2009-03-25 219,041 Palcasa S.A. EECOPALSA s energy solid Biomass Project waste
La Esperanza Hondura Intibucá Hydro Run of 2005-08-19 1,006,530 Hydroelectric 12.7 MW s river small scale project
Energia Limpia Jaremar Hondura Cortés Biomass Agricult 2010-02-20 258,864 renewable thermal s energy ural generation from biomass residues : other kinds
San Jacinto Tizate Nicarag León Geother Geother 2006-04-08 6,342,350 geothermal project ua mal mal electricit y
Monte Rosa Bagasse Nicarag Chinandeg Biomass Bagasse 2006-06-22 1,448,079 Cogeneration Project ua a energy power
Vinasse Anaerobic Nicarag Chinandeg Methane Waste 2007-03-09 2,336,277 Treatment Project ua a avoidan water ce
Amayo 40 MW Wind Power Nicarag Rivas Wind Wind 2009-04-12 1,866,502 Project ua
"Los Algarrobos" Small- Panama Chiriquí Hydro Run of 2005-10-01 670,140 Scale Hydroelectric Project river
Project for refurbishment Panama Chiriquí Hydro Existing 2005-12-24 330,851 and upgrading of Macho dam de Monte hydropower plant (from 0,7 MW to 2,4 MW)
Project for refurbishment Panama Chiriquí Hydro Existing 2005-12-24 403,201 and upgrading of dolega dam hydropower plant (to 3,12MW)
Concepción Hydroelectric Panama Chiriquí Hydro Run of 2006-10-21 722,876 Project river
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Project title Host Province, Type Sub- Date of Expected country state or type registration number of region CERs Paso Ancho hydroelectric Panama Chiriquí Hydro Run of 2007-03-10 400,377 project river
Santa Fe Energy Wind Panama Veraguas Wind Wind 2009-02-23 2,623,422 Farm
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6 THE FUTURE OF CARBON MARKETS This Chapter explains likely future trends of the international carbon market. The clean development mechanism is year negotiation process would have led to the established under the Kyoto Protocol which is unification of the two tracks and one; a legally binding protocol to the United comprehensive long term framework for GHG Nations Framework Convention on Climate mitigation would have been reached in COP15, Change (UNFCCC). The Kyoto Protocol as Copenhagen in 2009. However, expectations such does not have a specific term but the towards the Copenhagen were reduced already Article 3 defining the length of the months before the meeting as both tracks were commitment period recognizes only the facing delays and obstacles in agreeing on ongoing 2008-2012 period. The need to agree important negotiation items. on post 2012 commitments and equally Despite the lowered expectations the outcome important, incorporate the USA under a legally 58 of Copenhagen was a disappointment to many binding, global agreement has led to a quarters. The COP15 ‘took note’ of a 12- negotiation process that was developed in Bali paragraph political agreement known as the 2007 and is still ongoing. Copenhagen Accord. The Accord, signed by 30 This chapter heads to outline the structure and governments, establishes a commitment to status of these global negotiations and identify limit global temperature increase to 2 degrees the status of CDM in the ongoing process. A provides initial three year funding of $30 more detailed analysis is conducted on the million adaptation and mitigation actions in possible outcomes for existing and possible developing countries, establishes a REDD+ new mechanisms currently under discussion. mechanism and sets emission reduction Furthermore, based on regional and national monitoring and reporting requirements for all policies the section heads to analyze what is the countries. The Accord annexes I and II include expected demand and supply for CERs and list of 2020 emission reduction targets for what are the main uncertainties/opportunities industrialised countries and planned national from the private sector perspective. mitigation actions for developing countries. The Copenhagen Accord has no legal status but it is a document providing information on 6.1 Global climate the planned actions undertaken by the negotiations and the signatories. The Copenhagen outcome also role of mechanisms failed to combine the two negotiation tracks and instead, extended the mandates of both The basis of the global negotiations has been tracks by one year to continue to resolve the the two separate negotiation tracks that were open issues. established in COP13 two years ago in Bali: a track to carry a global dialogue on future long- The role and form of mechanisms is discussed term climate co-operation with the under both tracks. Practicalities related to participation of all countries and another track improving the CDM are negotiated under the to deal with the future commitments under the Kyoto-track and possible new and additional Kyoto Protocol. The initial goal was that a two mechanisms are on both tracks agenda. The following summarises the current status, open 58 The USA participated on Kyoto-negotiations and it issues and implications for each option has a emission reduction target listed in the Kyoto currently under negotiation. Protocol Annex B. However, it never ratified the Protocol thus the target never entered into force.
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6.1.1 The CDM Reform which again has no agreed future yet complicates the array. Discussions on CDM focused highly on 6.1.2 New mechanisms practicalities how the mechanism should be revised and improved in the future. The issues Although COP15 did not make any legally whether carbon capture and storage (CCS) and binding agreements on new mechanisms the forests in exhaustion should be included to the discussions and country proposals on mechanism continued to polarise parties and additional crediting mechanisms were lively and no decision was reached on. The governance expected to continue in the near future. The and approval processes of the CDM have been proposals discussed were mechanisms for lately under the loop as projects have been 60 REDD+, NAMAs and sectors. From these facing delays due the approval process that is the last involves private sector the clearest thus also considered to lack of transparency. Thus it is viewed more detailed than the other improvements related to these issues were high mechanisms in following. on agenda. The parties negotiating on Kyoto Protocol managed to following decisions to the Sectoral crediting mechanism means that the CMP resolution59: crediting mechanism would include one sector that would follow either national or • the establishment of an appeal process international sectoral emission regulation. In for project developers against the EB; the climate negotiations among others the EU • reduced role for the EB in reviewing lifted sectoral mechanism high on agenda and projects; proposed it as a transition mechanism for • the communication between the EB economically more advanced developing and project developers and auditors countries and highly competitive sectors must be improved and made more towards the development of cap and trade transparent; based systems. The principle of sectoral mechanism compared to CDM has two • the establishment of a simplified fundamental differences. First, sectoral additionality rules for small projects mechanism would cover an entire industrial (renewable < 5MW and energy sector (e.g. power, steel) whereas CDM applies efficiency < 20GWh/year) to a single project type which again is usually The agreed issues are highly important to related to a single installation. Secondly, while increase the functionality and transparency of CDM credits are additional to the emissions the mechanism. Still, many reform proposals that would have occurred in the absence of the and important issues relating to CDM project (business as usual), sectoral credits opportunities post 2012 were shunted into would be earned against a baseline that is a future discussions. At the moment, the nature threshold set below the sectoral business as of the negotiation process is that “nothing is usual emission trend. This would effectively agreed until everything is agreed”. This bias mean that the mechanism does not credit all impacts also the future of existing and possible reductions from the sector, but only those new mechanisms by increasing uncertainty. between the thresholds. Although the parties have a consensus that Sectoral mechanism can be expected to require CDM should be part of the post-Kyoto period, a higher host country involvement as the fact that CDM is a part of Kyoto Protocol governments have a role in gathering emission
59 Draft Decision -/CMP.5 Further guidance relating to 60 NAMA means the nationally appropriate mitigation the clean development mechanism. actions taken by developing countries as their contribution to reduce GHGs.
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and baseline data for the sector. Also the sector side by side. In the future, carbon markets are applying the mechanism must have rather likely to see more market areas and different standardised monitoring and reporting types of credits. The wideness of the markets requirements to ensure equal treatment for and quality and amount of different credit types installations. Hence, sectoral mechanism is is, at the moment, dependent on the level of likely to be applied in more advanced engagement developing countries are willing to developing countries. From private sector point take in the future and emphasis developed of view sectoral mechanism can offer an countries are placing on national and/or alternative to CDM. However, the success is regional actions. Both issues and finally the highly dependent on whether the mechanism opportunities offered to private sector are manages to be transparent and fair with revealed once the negotiations are more close minimum administrative burden. to a concrete new agreement. The paragraph 6 of the Copenhagen Accord calls for the immediate establishment of a 6.2 Driving the demand: REDD+ mechanism. Forest destruction is recognized to have a significant impact on carbon market schemes climate change thus the principle behind REDD+ is that (developing) countries that are willing to reduce emissions from deforestation 6.2.1 The EU ETS should be compensated for doing so. The The EU Member States have formally discussed crediting mechanisms include an approved emission reduction targets within the option where REDD+ would create tradable EU ETS up to 2020. The new ETS Directive credits thus would link to carbon markets and (2009/29/EC) approved in Spring 2009 brings include private sector more substantially. Again, some fundamental changes to the scheme. some proposals would apply it in state level, These changes take place from 2013 onwards thus at the time of writing the opportunities as Phase 3 of the EU ETS starts. The biggest REDD+ offers to private sector remain to be change is a step towards a more centralised seen. guidance and a concrete implication from this The underlining principle behind a possible is a one single allocation cap instead of national NAMA mechanism is to support developing allocation plans. This means also more uniform countries in fulfilling their national GHG rules for credit imports. During the ongoing mitigation actions by using the leverage of Phase 2 the Member States set the credit limits global carbon markets. Under NAMA which led to inconsistent practices among the mechanism, developing countries would earn companies included in the EU ETS. Other big tradable emission reductions or removals changes are the gradual change of allocation against their national actions, more specifically, method from free allocation to auctioning, the against defined thresholds. The proposals for extension of commitment period from five to the mechanism have similarities to sectoral eight year and a lower emission cap that is mechanism as it is proposed to apply to one or tightened every year towards 2020. The EU more NAMA eligible sectors. However, the ETS sectors are required to reduce their NAMA mechanism is also likely to include emissions by 21% from the 2005 level by 2020. capacity building assistance to developing This complies with the EU’s overall GHG countries and would serve as a form, or emission reduction target61. complement the financial support directed to developing countries.
Overall, none of the possible new mechanisms 61 The EU Member States have made a joint would not as such replace CDM but can work commitment to reduce the Community GHG emissions
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20% below the 1990 by 2020. Once an international post-Kyoto agreement is reached and other countries have committed to equally ambitious targets according to -30%. The overall target is further divided between to their capability, the EU will increase the 2020 target the ETS and non-ETS sectors.
Table 33. Scenarios for international offset rules under the EU ETS.
International Moderate global Ambitious global No global agreement regime agreement agreement EU 2020 20% from 1990 level 30% from 1990 level 20% from 1990 level Emission reduction target EU ETS credit Companies already under As in the 20% scenario. As in the 20% import limit ETS: Indicatively 50% of the scenario where an Extended rule for 2008- additional emission international 2020, companies are reductions required from agreement is reached. allowed to use the same the ETS sector can be amount than during 2008- covered with international 2012 or a % that that is credits. not below 11% of their Phase 2 allocation. The rule that leads to larger credit amount is followed. New companies and companies who were not allowed to use credits in Phase 2: Minimum 4.5% of the verified emissions is 2013-2020. For aviation, the minimum share is 1.5%. Banking credits Credits from countries Credits from countries CERs and ERUs that from Phase 2 that have ratified the that have ratified the were issued prior international agreement. international agreement. 2013.
Qualitative Project specific qualitative Project specific qualitative CERs and ERUs from restrictions restrictions are subjects to restrictions are subjects to projects that were international rules. international rules. registered prior 2013. CERs from projects in least developed countries. Credits from countries with who the EU has made a bilateral agreement. Covering project types that were eligible in Phase 2.
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The ETS Directive defines the rules to the careful to which projects they commit, and how amount of credits that can be used 2013 they commit. One way used by some buyers to onwards but also to the rules for credit banking hedge post-2012 risk was to include specific and some qualitative restrictions to credits. contract provisions that would allow them to However, as the form and rules of global post- cancel the ERPA should the project not be Kyoto mechanisms are still under negotiation, eligible for compliance under EU ETS Phase the EU-rules are also subject to possible III. changes. Table 34 summarizes the currently The demand for additional credits within the known credit rules under each possible post- EU ETS has also created a notable secondary Kyoto scenario. market for CERs. They are traded, alongside with EUAs in several exchanges and OTC. In In addition to EU ETS, the Member States are 2009, the two most liquid carbon exchanges in allowed to use limited amount of credits first to the EU were the Climate Exchange (ECX) and meet their Kyoto and later the 2020 targets. For Bluenext. ECX is concentrated in forward State level compliance use, the qualitative products (for CERs all remaining Kyoto period restrictions are acquired from the ETS vintages) whereas Bluenext is the largest Directive and thus also subjects to future platform for spot trades. international rules. Use of credits should be 6.2.2 Australia complementary to national actions. Australia has delivered a 5% GHG emission In volume wise, the EU continued to be the reduction target by 2020 from 1990 level to the leading market for CERs. In 2008, million 389 Copenhagen Accord. In case a comprehensive CERs were contracted on the primary market. climate agreement is reached it might increase 70-80% of this total volume was contracted by the target to 15 or 25%. Australia is planning to private buyers in the EU, mainly for launch a cap and trade based emission trading compliance within the EU Emission trading scheme called Carbon Pollution Reduction Scheme (EU ETS)62. The future demand for Scheme (CPRS) from 2010 onwards. The CERs from the EU ETS, and anticipated legislation is, at the moment, under political carbon trading schemes, depends very much on approval process. The approval process has the outcome of negotiations of a post-2012 been delayed due to political disagreements and climate agreement. To get an idea of the future at the same time, the initially proposed scheme demand from the EU ETS in the absence of an has been modified. According to government international climate agreement, it may be White Paper63 the scheme will cover some 1000 useful to compare this number with the volume domestic companies and 75% of GHG already contracted by European private buyers emissions. The companies will hold tradable of CERs and ERUs. According to the World carbon units AEUs (Australian Emission Units) Bank, by mid-2009 European private buyers that are issued by the government. In addition had already contracted 1,370 MtCO2e. to AEUs, companies are allowed additional Despite the uncertainty regarding the eligibility flexibility through international credits and rules, the World Bank has reported increasing domestic offsets. The later covers emission interest in post-2012 CER vintages. Given the reductions created in forestry projects. regulatory risk that governs the post-2012 For international credits (CERs, ERUs and market across all anticipated carbon trading RMUs) there will be no quantitative restrictions regimes, including the EU ETS, buyers were
63 Carbon Pollution Reduction Scheme, Australia’s 62 The World Bank (2009): State and Trends of the Low Pollution Future. White Paper. Volume 1, Carbon Market 2009. December 2008.
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how much they can be used for compliance. According to World Bank (2009) Japan’s However, the ultimate demand for credits is private sector is likely to need international dependent on the stringency and on the final credits to comply with their voluntary form of rules of the cap and trade scheme and commitments. The estimated demand, taking until they are agreed, the demand for CERs is into account the economic downturn in 2009, challenging to estimate. The size of the CPRS is about 300 MtCO2e. Japanese companies market will be smaller and again the emission have contracted about 300 Mt (nominal) from reduction target is looser than the one in the CDM and JI, including recent purchases of EU ETS thus the demand is likely the stay about 190 Mt by the electric power industry notably below the EU ETS demand. and 60 Mt from the steel industry. These numbers underscore the challenges for 6.2.3 Japan compliance that Japanese companies and the Japan submitted a 25% GHG emission Government of Japan would have faced absent reduction target to the Copenhagen Accord at a downturn. Is state-wise the massive the end of January 2010. The target was contraction in the fourth quarter of 2008, the preceded by Government proposal to national GHG emissions are likely to decrease over climate law called the basic anti-global warming 2008-12, reducing Japan’s projected overall bill. The package includes a proposal for a Kyoto shortfall to just over 500 MtCO2e. The mandatory cap-and-trade based emission Government of Japan has announced that it trading scheme. The proposal will go to plans to purchase 100 Mt international offsets parliament hearing during spring 2010. The (CERs, ERUS and AAUs), of which 95 Mt is government is seeking to have the trading already secured. scheme in place by in 2011 but the time table Japan is likely to continue to rely on may prove to be challenging thus the scheme international credits once the mandatory would be postponed by a year. trading scheme is in place. In case of less The country has had a voluntary trading stringent caps for offsets the demand for CERs scheme in place since 2005. The fourth phase and ERUs may be considerable. However the of the JVETS (Japan’s Voluntary Emissions volume of demand is dependent on the scope Trading Scheme) was launched in 2008. The and ambitiousness of the scheme and is likely scheme aims to support voluntary CO2 to stay way below the EU ETS demand. reduction activities by business operators and 6.2.4 The USA to ensure their target achievement in a cost- effective way by using a subsidy to facilities As a non-Kyoto country the USA is not which contribute CO2 emissions reductions creating any demand for CERs during 2008- and participants’ commitments to reduce CO2 2012. AT the moment, USA is not applying any Merits for scheme participants’ emissions national GHG legislation but instead, state- below their base year emissions and emissions level ambitiousness and measures vary across trading. Potential participants voluntarily apply the country. Under RGGI (Regional to participate, submitting their own emission Greenhouse Gas Initiative) 10 Northeast and reductions targets (either absolute or intensity- Mid-Atlantic states head to reduce power based) for review. In addition to their own sector CO2 emissions by 10 % by 2019 internal abatement efforts, participants can compared to 2009 level, which was also the meet their compliance objectives using starting year of the scheme. The RGGI is a domestic allowances, offsets from domestic cap-and trade based emission trading scheme projects or Kyoto Mechanisms. By March under which companies can trade with RGGAs 2009, 455 had taken an emission reduction (RGGI Allowances). Early 2010, RGGAs are target under the scheme. traded around $2.10.
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Since the change in presidential administration compliance under the cap-and-trade scheme the USA has returned to the international and hence create real competition for CDM climate negotiation. Under the Copenhagen and/or to its successor. Accord it pledged to take a target “in the range If in place, the US emissions trading scheme of 17%, in conformity with anticipated U.S. has the potential to create notably higher energy and climate legislation, recognizing that demand for international credits. The the final target will be reported to the magnitude would require the current pace of Secretariat in light of enacted legislation”. yearly created emission reductions to speed up The USA national climate legislation is at the notably and that the approval process would be time of writing in Senate hearing. The package, scaled up. Once and if approved, the national including i.e. state level emission reduction legislation is likely to give guidance to markets targets, targets for renewable energy, energy on the possible demand but also to efficiency and a cap-and trade scheme, passed international negotiations on the quality and the House hearing in 2009 but at the moment, type of international credits the USA would be Senate approval is not yet clear64. Once and if willing accept. Then again, until the package passed the legislation is likely to differ from the has its final form, all the above mentioned initially proposed package called the Waxman- issues remain uncertain. Markey Draft Bill. Thus the final form of the 6.3 Carbon financing after cap-and trade scheme and the possible role of international offsets are not yet confirmed. 2012 in the light of the current situation The initial Waxman-Markey proposal would allow a rather significant amount of additional The demand of CERs, and any other project offsets to be used for compliance: based carbon credits, depends on the outcome approximately two billion tons annually. This of negotiations of a post-2012 climate amount is split equally between international agreement. At the time of writing, these and domestic offsets. Demand for one billion negotiations were not yet completed. As a international offsets annually is significantly result, some buyers in the EU ETS, which more than the demand the EU ETS is expected represents a lion’s share of the current demand to create (1.7 billion tons for 2008-2020). The for CERs, have opted for provisions that allow climate package proposes that credits created them to cancel the ERPA should the project under an international agreement can be not be eligible for compliance under Phase III accepted into the national scheme only if equal of the EU ETS. In financing terms, this or better quality credits are available than those presents a major challenge for the project certified by the EPA65. The World Bank (2009) sponsor. Due to the provision, the future recognizes that other credible and independent income from CERs depends on a factor (the certification processes that meet the EPA’s outcome of the climate negotiations) that the criteria will also likely be deemed acceptable for project sponsor has no control over. This uncertainty is likely to make carbon 64 The package needs to get 60 supporting votes in the revenue based project financing very Senate. The ruling party Democrats lost their 60 seat challenging in the short term as the financiers – majority to Republicans in January 2010 as Republican Scott Brown replaced Edward Kennedy. A small especially lenders – are not willing to take risks working group constituted from a representative from they cannot control. Therefore large amounts both parties and one independent senator is currently of fresh carbon revenue based project finance working on a joint proposal that could pass the Senate will be mobilized only when enough long term voting. The time table of the proposal and voting were certainty is created on the carbon market. It is not known at the time of writing. 65 also noteworthy that only few carbon funds are EPA (Environmental Protection Agency) is the national environmental authority in the USA.
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currently willing to take this risk although they possess special expertise in these markets. 6.4 Conclusions on the future of international carbon markets In the beginning of March 2010 the international carbon markets are still longing for certainty on the future and shape of international carbon markets from 2013 onwards. The political commitments taken under the Copenhagen Accor are behind the required levels to mitigate climate change66 abut still there is an optimistic signal that the ambitiousness and scale of the markets is increasing in the future. Still, the protracted negotiations on a legally binding agreement and on the rules for international carbon markets are slowing down and even threatening to halt the markets. From mechanism perspective, one could conclude that the future of mechanisms is certain but the shape, rules and even names are not. This applies also to CDM. Under negotiations on the future of Kyoto Protocol the existence of CDM has not been questioned but the rules, applicable host countries and project types may change even radically. This again is subject to the overall composition of possible future agreement, the role of other mechanisms in it, emission reduction actions taken by developing countries and what kind of mechanisms the USA is willing to accept. From project developer and CDM-market perspective this uncertainty increases risks related to the revenues of existing projects after 2012 and is likely to slow down the implementation of new projects for the ongoing period and for the future periods.
66 According to the IPCC Fourth Assessment Report the Annex I countries should reduce their GHG emissions 25-40% from 1990 by 2020 in order to reach a scenario where the atmospheric CO2 concentration would be stabilized into 450 ppm.
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ANNEX I – ARTICLE 12 OF THE KYOTO PROTOCOL 1. A clean development mechanism is hereby defined. 2. The purpose of the clean development mechanism shall be to assist Parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the Convention, and to assist Parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments under Article 3. 3. Under the clean development mechanism: a. Parties not included in Annex I will benefit from project activities resulting in certified emission reductions; and b. Parties included in Annex I may use the certified emission reductions accruing from such project activities to contribute to compliance with part of their quantified emission limitation and reduction commitments under Article 3, as determined by the Conference of the Parties serving as the meeting of the Parties to this Protocol. 4. The clean development mechanism shall be subject to the authority and guidance of the Conference of the Parties serving as the meeting of the Parties to this Protocol and be supervised by an executive board of the clean development mechanism. 5. Emission reductions resulting from each project activity shall be certified by operational entities to be designated by the Conference of the Parties serving as the meeting of the Parties to this Protocol, on the basis of: a. Voluntary participation approved by each Party involved; b. Real, measurable, and long-term benefits related to the mitigation of climate change; and c. Reductions in emissions that are additional to any that would occur in the absence of the certified project activity. 6. The clean development mechanism shall assist in arranging funding of certified project activities as necessary. 7. The Conference of the Parties serving as the meeting of the Parties to this Protocol shall, at its first session, elaborate modalities and procedures with the objective of ensuring transparency, efficiency and accountability through independent auditing and verification of project activities. 8. The Conference of the Parties serving as the meeting of the Parties to this Protocol shall ensure that a share of the proceeds from certified project activities is used to cover administrative expenses as well as to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation. 9. Participation under the clean development mechanism, including in activities mentioned in paragraph 3(a) above and in the acquisition of certified emission reductions, may involve private and/or public entities, and is to be subject to whatever guidance may be provided by the executive board of the clean development mechanism. 10. Certified emission reductions obtained during the period from the year 2000 up to the beginning of the first commitment period can be used to assist in achieving compliance in the first commitment period.
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ANNEX II – SMALL-SCALE CDM PROJECT DESIGN DOCUMENT
CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006
Contents
A. General description of the small scale project activity
B. Application of a baseline and monitoring methodology
C. Duration of the project activity / crediting period
D. Environmental impacts
E. Stakeholders’ comments
Annexes
Annex 1: Contact information on participants in the proposed small scale project activity
Annex 2: Information regarding public funding
Annex 3: Baseline information
Annex 4: Monitoring Information
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Revision history of this document
Version Date Description and reason of revision Number 01 21 January Initial adoption 2003 02 8 July 2005 The Board agreed to revise the CDM SSC PDD to reflect guidance and clarifications provided by the Board since version 01 of this document. As a consequence, the guidelines for completing CDM SSC PDD have been revised accordingly to version 2. The latest version can be found at
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SECTION A. General description of small-scale project activity
A.1 Title of the small-scale project activity: >>
A.2. Description of the small-scale project activity: >>
A.3. Project participants: >>
A.4. Technical description of the small-scale project activity:
A.4.1. Location of the small-scale project activity: >>
A.4.1.1. Host Party(ies): >>
A.4.1.2. Region/State/Province etc.: >>
A.4.1.3. City/Town/Community etc: >>
A.4.1.4. Details of physical location, including information allowing the unique identification of this small-scale project activity : >>
A.4.2. Type and category(ies) and technology/measure of the small-scale project activity: >>
A.4.3 Estimated amount of emission reductions over the chosen crediting period: >>
A.4.4. Public funding of the small-scale project activity: >> A.4.5. Confirmation that the small-scale project activity is not a debundled component of a large scale project activity:
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SECTION B. Application of a baseline and monitoring methodology
B.1. Title and reference of the approved baseline and monitoring methodology applied to the small-scale project activity: >>
B.2 Justification of the choice of the project category: >>
B.3. Description of the project boundary: >>
B.4. Description of baseline and its development:
>>
B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered small-scale CDM project activity:
B.6. Emission reductions:
B.6.1. Explanation of methodological choices: >>
B.6.2. Data and parameters that are available at validation: (Copy this table for each data and parameter) Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment:
B.6.3 Ex-ante calculation of emission reductions: >>
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B.6.4 Summary of the ex-ante estimation of emission reductions: >>
B.7 Application of a monitoring methodology and description of the monitoring plan:
B.7.1 Data and parameters monitored: (Copy this table for each data and parameter)
Data / Parameter: Data unit: Description: Source of data to be used: Value of data Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: Any comment:
B.7.2 Description of the monitoring plan: >>
B.8 Date of completion of the application of the baseline and monitoring methodology and the name of the responsible person(s)/entity(ies) >>
SECTION C. Duration of the project activity / crediting period
C.1 Duration of the project activity:
C.1.1. Starting date of the project activity: >>
C.1.2. Expected operational lifetime of the project activity: >>
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C.2 Choice of the crediting period and related information:
C.2.1. Renewable crediting period
C.2.1.1. Starting date of the first crediting period: >>
C.2.1.2. Length of the first crediting period: >>
C.2.2. Fixed crediting period:
C.2.2.1. Starting date: >>
C.2.2.2. Length: >>
SECTION D. Environmental impacts >>
D.1. If required by the host Party, documentation on the analysis of the environmental impacts of the project activity: >>
D.2. If environmental impacts are considered significant by the project participants or the host Party, please provide conclusions and all references to support documentation of an environmental impact assessment undertaken in accordance with the procedures as required by the host Party: >>
SECTION E. Stakeholders’ comments >>
E.1. Brief description how comments by local stakeholders have been invited and compiled: >>
E.2. Summary of the comments received: >>
E.3. Report on how due account was taken of any comments received: >>
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Annex 1
CONTACT INFORMATION ON PARTICIPANTS IN THE PROJECT ACTIVITY
Organization: Street/P.O.Box: Building: City: State/Region: Postfix/ZIP: Country: Telephone: FAX: E-Mail: URL: Represented by: Title: Salutation: Last Name: Middle Name: First Name: Department: Mobile: Direct FAX: Direct tel: Personal E-Mail:
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Annex 2
INFORMATION REGARDING PUBLIC FUNDING
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Annex 3
BASELINE INFORMATION
Annex 4
MONITORING INFORMATION
- - - - -
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ANNEX III – SELECTED TECHNICAL ASSISTANCE FUNDING FOR PROJECT DEVELOPMENT
Institution Technical Main criteria for achieving finance Link to guidelines / assistance contact details Central Project Eligible countries: Costa Rica, El Salvador, http://www.bcie.org/ American Preparation Guatemala, Honduras, Nicaragua Bank for Facility of USD 5 Economic million The facility is tied to the global lines of credits Integration for each country. CABEI has offices in Costa (CABEI) Rica, El Salvador, Guatemala, Honduras and Nicaragua. Caribbean Pre-investment Eligible country: Belize http://www.caribank.o Development and pre-feasibility rg/ Bank (CDB) studies can be Community Groups, Non-Government Caribbean financed by the Organisations, Government Organisations and Development Bank Basic Needs Trust Agencies and Community-Based Organisations P.O. Box 408 Fund (BNTF) may apply by using the BNTF Request Form Wildey, St. Michael available at the website. Barbados, W.I. Tel. +246-431 1600 Fax +246-426 7269 [email protected]
Belize office: BNTF Office c/o Social Investment Fund Constitution Drive P.O. Box 459 Belmopan Cayo District, Belize Tel: 501-822- 0239/0508 Fax: 501-822-0279 World Bank Various types of Several funds with different specific targets and http://www.worldban Trust Funds technical criteria which may be obtained by contacting k.org assistance in the each fund. pre-investment stage Energy Sector Technical ESMAP is a trust fund under the World Bank. http://www.esmap.org Management assistance, specific It is a global technical assistance program which / and Assistant studies provides policy advice on sustainable energy Program development to governments of developing (ESMAP) countries. ESMAP also contributes to the transfer of technology and knowledge in energy sector management and the delivery of modern energy services to the poor. Inter- Technical Co- Special priority for project development within http://www.iadb.org/ American operation environment and small scale finance. Development Program Bank (IDB) IDB also manages funds under the Sustainable Energy and Climate Change Initiative (SECCI). Strategic pillars are: Renewable Energy and Energy Efficiency; Sustainable Biofuel development; Access to Carbon Markets and;
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Adaptation to Climate Change Multilateral Technical MIF is part of the IDB Group. Support for http://www.iadb.org/ Investment assistance grants small-scale interventions and pilot projects mif Fund (MIF)
Nordic Interest free loans For projects outside Europe. Requires strong http://www.nopef.co Project Fund and grants for Nordic interest, applicants must be companies m/ (NOPEF) project that operate in the Nordic region. development Loans may cover up to 40% of approved development expenses Covers: feasibility studies, evaluation of potential business partners, financial analysis and documentation preparation, legal assistance, contract negotiations Ministry for Technical Eligible applicants: Finnish companies, research http://www.finnparth Foreign assistance for and training institutions and associations for ership.fi/ Affairs of feasibility studies, economic, industrial and technological projects Finnpartnership – Finland: training, in developing countries. Finnish Business Finnpartnersh acquisition of May cover up to 70% of the project Partnership ip expert services development, and the applicant must normally Programme, and planning cover the remaining costs. Uudenmaankatu 16 B, costs 4th floor, FIN-00120 Helsinki, Finland Tel. +358934843314 Mobile +358408279753 Fax +358934843346
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ANNEX IV – EQUITY, GRANTS AND LOANS
Financial Main terms and criteria for Link to guidelines / Institution instruments achieving finance contact details Direct loans Eligible countries: Costa Rica, El http://www.bcie.org/ Co-financing Salvador, Guatemala, Honduras, CABEI has offices in Central Guarantees Nicaragua. Guatemala, El Salvador, American Bank Micro-finance through Honduras and Nicaragua. for Economic intermediaries Integrations Special facility for (CABEI) sustainable development Direct loans Eligible country: Belize http://www.caribank.org/ Co-finance Caribbean Development Bank P.O. Box 408 Wildey, St. Michael Barbados, W.I. Tel. +246-431 1600 Fax +246-426 7269 Caribbean [email protected] Development Bank (CDB) Belize office: BNTF Office c/o Social Investment Fund Constitution Drive P.O. Box 459 Belmopan Cayo District, Belize Tel: 501-822-0239/0508 Fax: 501-822-0279 Loans Eligible country: Panama http://www.caf.com/ Project structuring and Corporación financing Andina de Co-financing Fomento (CAF) Guarantees Equity investments Loans IDB supports economic and social http://www.iadb.org/ Guarantees development and regional integration IDB has headquarters in Grants in Latin America and the Caribbean. It Washington D.C. It has an Inter-American does so mainly through lending to office in each of the Central Development public institutions, but it also funds American Countries. Bank (IDB) some private projects, typically in infrastructure and capital markets development. Direct loans ICC is part of the IDB Group. IIC’s http://www.iic.int/ Direct equity or quasi- mission is to promote and support the Central American Regional equity investments development of the private sector and Office Credit to local the capital markets in its Latin Mr. Gustavo Romero Inter-American financial American and Caribbean member Edificio Centro Colón, Piso Investment intermediaries countries as the institution charged 12, Paseo Colón, entre calles Corporation Guarantees for and with fostering the development of 38 y 40 (IIC) investments in capital small and medium-size enterprises to Apartado postal 1142-1007 markets offerings further sustainable economic San José, Costa Rica development. All Central American Tel: (506) 233-2543 countries are IIC’s members. Fax: (506) 257-0083
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Financial Main terms and criteria for Link to guidelines / Institution instruments achieving finance contact details
Grants MIF is also part of the IDB Group. http://www.iadb.org/mif Loans Its mandate is to support innovative MIF has offices in each of Equity private sector development and the Central American Quasi-equity improve economic prospects for those Countries. less equipped to benefit from market reforms. MIF can provide resources to Multilateral both public and private sector Investment organizations. Private sector agencies Fund (MIF) can include non-governmental organizations, industry associations, chambers of commerce, etc. but must be non-profit. Organisations from all the Central American countries are eligible. Loans, equity finance, The International Finance http://www.ifc.org syndicated loans, risk Corporation (IFC) is a member of the management World Bank Group. It promotes products, sustainable private sector investment intermediary finance in developing countries as a way to reduce poverty and improve peoples’ lives. IFC’s Project Criteria includes: The project must be located in a developing country that is a International member of IFC (all Central Finance American countries); Corporation It must be in the private sector; (IFC) It must be technically sound; It must have good prospects of being profitable; It must benefit the local economy; and It must be environmentally and socially sound, satisfying IFC environmental and social standards as well as those of the host country.
Grants, co-financing, NDF provides grant financing for http://www.ndf.fi/ guarantees. climate change projects preferably in NORDIC cooperation with multilateral and DEVELOPMENT FUND bilateral development institutions. P.O. Box 185, NDF supports adaptation and FIN-00171 Helsinki Nordic mitigation interventions through Finland Development grants related to infrastructure, natural Fund (NDF) resources, and capacity building. Nordic Climate Facility (NCF) and one of NDF’s financing instruments. Partner countries Honduras and Nicaragua. Regional activities can be considered Finnish Fund for Equity financing Finnfund is a Finnish development http://www.finnfund.fi/ Industrial Investment loans finance company that provides long- P.O. Box 391 Cooperation Mezzanine financing term risk capital for private projects in FIN-00121 Helsinki (Finnfund) Guarantees (in developing countries. Apart from co- Finland
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Financial Main terms and criteria for Link to guidelines / Institution instruments achieving finance contact details exceptional cases) investing with Finnish companies tel. +358 9 348 434 Co-financing Finnfund finances ventures that use fax +358 9 3484 3346 Finnish technology, cooperate with Finnish partners on a long-term basis or generate major environmental or social benefits. Debt E+Co makes debt and equity clean http://www.energyhouse.co Equity energy investments in developing m/ countries. The investments range from E+Co Latin America approximately USD 25,000 – and Caribbean (LAC) 1,000,000. Regional Office Wilhelm Baumgartner, LAC Regional Manager E+Co. E+Co Costa Rica Office P.O. Box 13443-1000 San José, Costa Rica Tel: 506 296 3532 Fax: 506 296 4810 Email: [email protected]
Clean Technology Clean Technology Fund: to finance http://www.climateinvestme Fund: Concessional demonstration, deployment and ntfunds.org financing instruments, transfer of low carbon technologies Financing is channeled such as grants and with significant potential for GHG through the African concessional loans, emissions savings Development Bank, Asian and other risk Development Bank, mitigation European Bank for Climate instruments. Reconstruction and Investment Development, Inter- Funds Strategic Climate Strategic Climate Fund: to support American Development
Fund: Concessional progress toward the future climate Bank, and World Bank financing instruments, change regime by providing Group. such as grants and experience and lessons through concessional loans, learning by doing in targeted sectors and risk mitigation or challenges instruments, such as guarantees and equity.
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ANNEX V – CARBON FINANCE Technical assistance related to carbon finance, examples
Institution Description Website UNCTAD UNCTAD/Earth Council Institute Carbon http://www.unctad.org/ghg Market Programme contains useful information on carbon markets and CDM, including a self- learning course on CDM. UNDP UNDP’s Energy for Sustainable Development http://www.undp.org/energy/clima website has many resources, including the UNDP te.htm CDM User’s Guide UNEP Capacity Development for the CDM (CD4CDM) http://cd4cdm.org/unepcdm.htm is UNEP’s CDM capacity building programme. UNIDO UNIDO’s Sustainable Energy and Climate Change http://www.unido.org/doc/18258 Programme has various CDM-related capacity building activities World Bank World Bank’s Carbon Finance Unit has several http://www.carbonfinance.org/ facilities that provide technical assistance related to carbon finance: - BioCFPlus - PCFPlus - CDCFPlus Selected carbon funds, source: Safety in growing numbers? A review of carbon funds, Point Carbon, 2006
Name Investors Geographic focus Project type focus GG-CAP (Natsource) Private Global, preference in Asia and All, approved methodologies Latin America ICECAP Carbon Portfolio (ICP) Private Global; focus on CDM Any projects that qualify under the EU Linking Directive Baltic Sea Region Testing Public- Estonia, Latvia, Lithuania, Renewables, fuel switching, and Ground Facility Private Poland, Russia, Ukraine energy efficiency; waste Bio Carbon Fund (World Bank) Public- Global Forestry and agro-related Private Community Develop-ment Public- Non-Annex-I countries which Small scale Carbon Fund (WB) Private have ratified the Kyoto Protocol Dexia-FondElec Energy Public- Non EU countries and 10 newly Energy efficiency Efficiency and Emission private inducted countries Reductions Fund L.P Fondo de Carbono para la Public- Global; preference Latin All projects Empresa Espanola Private America/North Africa. Japan GHG Reduction Fund Public- Developing countries and All projects Private Eastern Europe KfW Carbon Fund Public- Global No forestry sinks projects and Private restrictions on large hydro Multilateral Carbon Fund Public- East/central Europe, Russia Only buys credits from projects Private financed either by the EIB or EBRD Prototype Carbon Fund (World Public- Global All projects Bank) Private Umbrella Carbon Fund (World Public- China Large-scale projects with emission Bank) Private reductions of more than 10 Mt CO2e
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Name Investors Geographic focus Project type focus Danish Carbon Fund (World Public- All countries that ratified Kyoto Wind, combined heat and power, Bank) Private Protocol or be about to ratify it hydro, biomass, landfill projects Italian Carbon Fund (World Public- China, Mediterranean, Latin Renewables (focus on biomass), Bank) Private America, Balkans, Middle East methane, gas flaring, sequestration Spanish Carbon Fund (World Public- Focus on Latin America, North renewables, biomass, urban waste Bank) Private Africa and Europe management, industrial processes Climate Change Capital Carbon Private Global; prefenrece is in Asia, All projects; focus on industrial Funds 1+2 especially China gas, coal mine, landfill, waste treatment European Carbon Fund Private Global All types Merzbach Carbon Fund Pool Private 40% Latin America, 40% Africa All types and 15% Asia Merzbach Mezzanine Fund 1 Private 40% Latin America, 40% Africa All types and 15% Asia Trading Emissions PLC (TEP) Private Global All, other than forestry / sink
FE Global/Asia Clean Energy Public- Developing Asia: China, India Clean energy and efficiency Services Fund Private and Southeast Asia
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ANNEX VI – REGIONAL CONTACTS Contacts in Belize
Telephone Name Institution E-mail (501) Martin Alegria Ministerio de Recursos Naturales y 822-2542 / 2630 [email protected] Ambiente Robert Tillett Public Utilities Commission 223-4938 [email protected] Michael Polonio Belize Electricity Limited 227-0954 [email protected] Ademek Klaus Tropicales Limited 882-0078 [email protected] Ambrose Tillett Consultor de Energía Renovable 274-555 [email protected] Dylan Vernon PNUD 822 2688 [email protected] José García TUNICH NAH Consultants 225 2036 [email protected] Kevin Denny Kelosha Corporation Belize Ltd 422 3666 [email protected] Luis Aké Consultor Energía Renovable 225-2084 [email protected] [email protected] Lennox L. Neal Belize Sugar Industry 322 2150 [email protected] Joseph Sukhnandan Belize Electricity Limited (BEL) 222 7054 [email protected] Henry Anderson University of Belize 822 3680 [email protected]
Contacts in Costa Rica
Name Institution Telephone E-mail (506) Gloria Villa MINAE 2257-3662 [email protected] Giovanni Castillo MINAE 2257-3662 [email protected] Francine Solera MINAE 2257-3662 [email protected] Misael Mora ICE 2220-6955 [email protected] www.ice.go.cr Henry Solís Compañía Nacional de Fuerza y Luz 2295-1261 [email protected] Dennis Mora Compañía Nacional de Fuerza y Luz, S.A. 2296 4608 [email protected] www.cnfl.go.cr Lucio Pedroni CATIE 2558 2334 [email protected] Oscar Coto Consultor 2271-3210 [email protected] Leyda Mercado PNUD 2296-1544 [email protected] Ana María Majano INCAE 2433-9908 [email protected] Enrique Morales Grupo SARET 2443-0001 [email protected] Leonel Umaña Mesoamerica Energy 2209-7956 [email protected]
Contacts in El Salvador
Name Institution Telephone E-mail (503) Carlos Cañas Ministerio del Ambiente y Recursos Naturales 2267 9447 [email protected] Mario Rodríguez Comisión Nacional de Energía 2233-7924 [email protected] Miguel Domínguez CEL 2211-6138 [email protected] Luis Boigues SABES 2275 9864 [email protected] Arturo Solano Tecnosolar 2260 2448 [email protected] Rodolfo Herrera LaGeo 2211-6700 [email protected] Mauricio Arévalo Central Hidroeléctrica Sensunapán 2453 0168 [email protected] Ernesto Cano Generadora Mirazalcos 2264 0562 [email protected] Hermes Landaverde INGENDEHSA, S.A. de C.V. 2273 6243 [email protected] Axel Söderberg Dematheu & Cia 2210-6995 [email protected] José María Vides Generadora Cucumacayán 2451 7140 [email protected] Levy Portillo Planta Piloto de Biodiesel 2631-1723 César Villalta UCA 2210-6662 [email protected] Carolina Dreikorn PNUD 2263-0066 [email protected] Yolanda Salazar Centro de Producción más Limpia 2264-4622 [email protected] Ana Graciela Cortez DIMMA S.A de C.V 2274-9050 [email protected] Roberto Bonilla SEESA de C.V. 2270-9518 [email protected]
Contacts in Guatemala
Name Institution Telephone E-mail (502) Carlos Mansilla Ministerio de Medio Ambiente 2423 0500 [email protected] Raúl Castañeda Ministerio de Medio Ambiente 2423 0500 [email protected] Juan Fernando Pérez Ministerio de Energía y Minas 2476-1892 [email protected]
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Name Institution Telephone E-mail (502) Jorge Alberto Asturias OLADE 2476-0681 [email protected] Yuri Urbina Administrador del Mercado Mayorista – AMM 2332-7901 [email protected] Julio Roberto Alvarez Instituto Nacional de Electrificación - INDE 2422-1920 [email protected] Sergio Veliz Consejo Nacional de Areas Protegidas 2422-6700 [email protected] Lorena Córdova Instituto Nacional de Bosques - INAB 2473-5215 [email protected] Rodolfo Cardona PNUD 2384-3100 [email protected] Roberto Arimany DINTERSA 2332-3807 [email protected] Lou Ingram LUEX 2220-3133 [email protected] Juan Pablo Dary Solar Pública 2333-7346 [email protected] German Juárez COMEGSA 2420-4200 [email protected] Ricardo Asturias OCTAGON 2367-6324 [email protected] Cristhian Escobar AGER 2334-4848 [email protected] Hugo Arriaza Morales NRECA International Ltd 2368-1169 [email protected] Luis Arturo Mérida Agroindrustrias La Laguna 2331-7999 [email protected] Alaide González Energía y Ambiente 2473-3409 [email protected] María Amalia Porta Centro Guatemalteco de P+L 2334-4848 [email protected] Guillermo García Pilones de Antigua 9783-1050 [email protected] Carlos Raúl Montes Alimentos Campestres S.A. 2258-5609 [email protected]
Contacts in Honduras
Name Institution Telephone E-mail (504) Manuel Manzanares Secretaría de Recursos Naturales y Ambiente 232-6227 [email protected] Jorge Rivera AHPPER 235-7395 [email protected] Elsia Paz Proyecto Hidroeléctrico La Esperanza 985-4037 [email protected] Loyda Alonso SOLUZ 557-5127 [email protected] Manuel Ma-Tay Proyecto Hidroeléctrico Hidro Yojoa 224-0703 [email protected] Sonia de Rivera CENIT S.A. de C.V. 227-0982 [email protected] Mauro del Oro Proyecto Hidroeléctrico La Nieve 566-0430 [email protected] Jorge Mejía EcoAldeas de Honduras 226-5484 [email protected] Roberto Núñez EMCE 236-8788 [email protected] Oscar Aguilar Servicios y Mantenimientos Tecnológicos 239-2157 [email protected] Glenda Castillo ENEE 220-0470 www.enee.hn Juan R. Medrano ADESOL 239-5691 [email protected] Julio Cárcamo PNUD 220-1100 [email protected] Jorge Bueso CENOSA 669-1403 [email protected] Ignacio Osorto AHDESA 246-1610 [email protected]
Contacts in Nicaragua
Teldphone Name Institution E-mail (505) Denis Fuentes Ministerio de Ambiente 2263 1343 [email protected] Luis Molina Ministerio de Energía y Minas 2222-5576 [email protected] David Castillo Instituto Nicaragüense de Energía 2228-2057 [email protected] www.ine.gob.ni Ernesto Martínez Tiffer Empresa Nicaragüense de Electricidad 2278-5830 [email protected] Rodolfo López Centro Nacional de Despacho 2276-0533 [email protected] Sergio Narváez Instituto de Desarrollo Rural 2270-3412 [email protected] Roberto Vargas Industria GEMINA, S.A 2249-1129 [email protected] Rebeca Leaf ATDER-BL 2612-2030 [email protected] Víctor Salazar Pereira Funproteca 2311-2090 [email protected] María Engracia Trinidad Proleña 2278-7252 [email protected] Leoni Argüello PNUD 2266-1701 [email protected] Susan Kinne Grupo FÉNIX, UNI 2278-3133 [email protected] Fernandolino Narváez ANPPER 2244-4288 [email protected] Pedro Silva Ingenio San Antonio 2343-2546 [email protected] Francisco Zamora Atlantic, S.A. 2278-1477 [email protected] Mathias Craig BlueEnergy 2572-2468 [email protected] Rodrigo Mantica Grupo KLM 2252-6346 [email protected]
Contacts in Panama
Name Institution Telephone E-mail (507) Cynthia Deville Autoridad Nacional del Ambiente 500-0802 [email protected] Lilian Suárez CATHALAC 998-4271 [email protected] 158
Name Institution Telephone E-mail (507) Michael Mihalitsianos Autoridad Nacional de los Servicios Públicos 508-4501 [email protected] Wolfram González Ministerio de Comercio e Industria 560-0600 /700 [email protected] Rafael De Gracia Autoridad Nacional de los Servicios Públicos 508-4602 [email protected] Heine Aven Luz Buena 232-7690 [email protected] Eusebio Girau Unión Europea 265- 3235 [email protected] Víctor Pérez PROLACSA 987-8249 [email protected] Manuel González Proyecto SOLEDUSA 998-6046 [email protected] Elías Dawson Hidroeléctrica ENEL La Fortuna 206-1855 [email protected]
Contacts in Dominican Republic
Name Institution Telephone E-mail (1 809) José Rafael Almonte Secretaría de Medio Ambiente y Recursos 567-4300 ext. 366 [email protected] Naturales
Pasi Kapanen Vice Consul de Finlandia, República 563 5625 [email protected] Dominicana Rosendo Alvarez Cámara Escandinava Báltica de Comercio de 333-3330 [email protected] la República Dominicana Cirilo Marte COAPI 858 4433 [email protected]
Contacts in Finland
Name Institution Telephone E-mail (358) Maria Söderlund Ministerio de Relaciones Exteriores 91605 5522 [email protected] Anu Hassinen Ministerio de Relaciones Exteriores 91605 56109 [email protected] Mikael Udd ABB Oy 5033 41951 [email protected] www.abb.com Hannu Eerola Nordic Development Fund 1061 80457 [email protected] Bengt Tammelin Finnish Meteorological Institute (FMI) 91929 4160 [email protected] www.fmi.fi Aleksi Lumijarvi GreenStream Network 40529 1315 [email protected] Jyrki Leppänen NAPS Systems Oy 207545 653 [email protected] Helena Korhonen FINNFUND 9348 434 [email protected] Juha Huotari Wärtsilä Biopower 10709 5454 [email protected] Arjo Heinsola Universidad de Jyväskylä 14260 2212 [email protected] Veli-Pekka Heiskanen VTT Processes 14672 533 [email protected] Markku Patajoki Neste Oil 104584225 [email protected] Tuomo Utriainen Pöyry Energy 50 578 0746 [email protected]
Contacts in Austria
Name Institution Telephone E-mail Robert Zeiner Agencia Austríaca para el Desarrollo 431 9039 9500 [email protected] Martin Lugmayr Agencia Austríaca para el Desarrollo 431 9039 9544 [email protected] Christina Todeschini Agencia Austríaca para el Desarrollo 431 9039 9544 [email protected] Rudolf Huepfl Asesor en Energía para el Desarrollo 431 7263 391 [email protected]
Regional Contacts
Telephone Name Institution E-mail
Juan Daniel Alemán SG-SICA (503) 2248-8800 [email protected] Edgar Chamorro SG-SICA (503) 2248-8800 [email protected] Enriqueta de Rodríguez SG-SICA (503) 2248-8800 [email protected] Jorge Vásquez SG-SICA (503) 2248-8800 [email protected] Roberto Rodríguez CCAD (503) 2248-8800 [email protected] Leyla Zelaya CCAD (503) 2248-8849 [email protected] Ricardo Aguilar CCAD (503) 2248-8902 [email protected] Salvador Enrique Rivas AEA (503) 2248-8854 [email protected] María Eugenia Salaverría AEA (503) 2248-8855 [email protected] Mauricio Ayala AEA (503) 2248-8954 [email protected] Yanira Pascasio de Ayala AEA (503) 2248-8920 [email protected] Ismael Sánchez AEA (503) 2210-6662 [email protected]
159
Otto García Hidralia Energía (502) 2362 8076 [email protected] Waldo Moncada BCIE (504) 240-2243 www.bcie.org Héctor Rodríguez BCIE /ARECA (504) 240-2243 [email protected] Eija Rotinen Embajada de Finlandia CA (505) 2278 1216 [email protected] Leena Haapaniemi Embajada de Finlandia CA (505) 2278 1218 [email protected] Hubert Neuwirth Cooperación Austríaca para el (505) 2266 3316 [email protected] Desarrollo Yader Baldizón Cooperación Austríaca para el (505) 2266 3316 [email protected] Desarrollo Peter Waldsam Cooperación Austríaca para el (505) 2266 3316 [email protected] Desarrollo Helga Schmoigl Embajada de Austria en México (55) 5254 4418 [email protected] Armando Guzmán Banco Mundial, Washington (202) 522 0338 [email protected] Catalina Santamaría UNFF, Nueva York (212) 963-4703 [email protected] Sylvia Szankay CII / BID, Washington (202) 623 3878 [email protected] www.iic.int José María Blanco BUN-CA (506) 2283-8835 [email protected] www.bun-ca.org Wilhelm Baumgartner E+Co LAC 506 2296-3532 [email protected]
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ANNEX VII – CDM PROJECT ACTIVITIES FROM CENTRAL AMERICA REGISTERED BY THE CDM EXECUTIVE BOARD
This section is intended to present general information of each Central American and Dominican Republic activities on CDM more representative projects, registered by the CDM Executive Board up to February 28, 2010. A brief summary of the Project Design Document (PDD) for each selected project is presented. Emphasis has been put on the methodology applied, the project description, how the project contributes to sustainable development of the country and the estimate of CO2 Emission Reduction. The complete information for each project can be downloaded from the web site: http://cdm.unfccc.int/Projects/registered.html
The following Table indicates for each project the host country, other parties, registration date, methodology, CO2 emission reductions and the reference number used to be registered by the CDM Executive Board.
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CDM PROJECT ACTIVITIES FROM CENTRAL AMERICA REGISTERED BY THE CDM EXECUTIVE BOARD Registered Title Host Parties Other Parties Methodology Reductions Ref. La Joya Hydroelectric Project (Costa 9-Mar-07 Rica) Costa Rica Spain ACM0002 ver. 6 38273 541
23-Mar-07 Tejona Wind Power Project (TWPP) Costa Rica Netherlands ACM0002 ver. 6 12600 824 Switching of fuel from coal to palm oil mill biomass waste residues at Industrial de Oleaginosas Americanas S.A. 30-Nov-07 (INOLASA) Costa Rica Germany AMS-I.C. ver. 10 38212 1314 United Kingdom of Great CEMEX Costa Rica: Use of biomass Britain and Northern 5-Jun-08 residues in Colorado cement plant Costa Rica Ireland ACM0003 ver. 4 42040 1405 Canada Landfill Gas to Energy Facility at the Netherlands 12-Mar-06 Nejapa Landfill Site, El Salvador El Salvador Luxembourg ACM0001 ver. 2 183725 167 LaGeo, S. A. de C. V., Berlin Geothermal 25-May-06 Project, Phase Two El Salvador Netherlands ACM0002 ver. 4 176543 297 ACM0006 ver. 4
29-Jun-07 El Angel Cogeneration Project El Salvador ACM0002 ver. 6 25285 1061 30-Nov-07 Berlin Binary Cycle power plant El Salvador Belgium ACM0002 ver. 6 44141 1218 ACM0006 ver. 4 30-Nov-07 Central Izalco Cogeneration Project El Salvador Japan ACM0002 ver. 6 45750 1033 17-Dec-05 "Las Vacas" Hydroelectric project Guatemala Spain AM0005 90363 73 21-Jan-06 Matanzas Hydroelectric Plant Guatemala Switzerland AMS-I.D. ver. 6 38493 172 23-Jan-06 San Isidro Hydroelectric Plant Guatemala Switzerland AMS-I.D. ver. 6 13389 174 9-Nov-06 Candelaria Hydroelectric Project Guatemala Switzerland AMS-I.D. ver. 8 18922 604
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CDM PROJECT ACTIVITIES FROM CENTRAL AMERICA REGISTERED BY THE CDM EXECUTIVE BOARD Registered Title Host Parties Other Parties Methodology Reductions Ref.
Canada, Netherlands, Finland, France, Sweden, 2-Dec-06 El Canadá Hydroelectric Project Guatemala Germany, Japan, Norway ACM0002 ver. 6 118527 606 AMS-I.A. ver. 9 , Biogas energy plant from palm oil mill AMS-I.D. ver. 10 , 6-Apr-08 effluent Guatemala AMS-III.H. ver. 4 30333 1509 United Kingdom of Great Britain and Northern 12-Dec-08 Amatitlan Geothermal Project Guatemala Ireland ACM0002 ver. 6 82978 2022 23-Dec-08 Xacbal Hydroelectric project Guatemala Netherlands ACM0002 ver. 6 311438 1834 United Kingdom of Great Bioenergia Anaerobic Digestion and Britain and Northern 1-Apr-09 Biogas Generation Project Guatemala Ireland AM0022 ver. 4 100000 2180 18-Jul-09 Co-composting of EFB and POME project Guatemala AMS-III.F. ver. 5 22940 2527 AMS-III.H. ver. 9 23-Nov-09 Biogas Project, Olmeca III, Tecún Uman Guatemala AMS-I.A. ver. 12 37377 2667 11-Jan-05 RIO BLANCO Small Hydroelectric Project Honduras Finland AMS-I.D. ver. 4 17800 28
Austria, United Kingdom of Great Britain and 23-Apr-05 Cuyamapa Hydroelectric Project Honduras Northern Ireland AMS-I.D. ver. 5 35660 45 Cortecito and San Carlos Hydroelectric 3-Jun-05 Project Honduras AMS-I.D. ver. 5 37466 51
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CDM PROJECT ACTIVITIES FROM CENTRAL AMERICA REGISTERED BY THE CDM EXECUTIVE BOARD Registered Title Host Parties Other Parties Methodology Reductions Ref.
Canada Netherlands Italy, Denmark , Finland , Austria , Sweden, Switzerland Germany Luxembourg Belgium , 19-Aug-05 La Esperanza Hydroelectric Project Honduras Japan , Norway , Spain AMS-I.D. ver. 4 37032 9 Switzerland , United Kingdom of Great Britain 26-Nov-05 Cuyamel Hydroelectric Project Honduras and Northern Ireland AMS-I.D. ver. 6 25353 83 United Kingdom of Great Britain and Northern 9-Jan-06 LA GLORIA Hydroelectric Project Honduras Ireland AMS-I.D. ver. 6 20464 154 2-Mar-06 Zacapa Mini Hydro Station Project Honduras Finland AMS-I.D. ver. 7 915 235 2-Mar-06 CECECAPA Small Hydroelectric Project Honduras Finland AMS-I.D. ver. 6 1877 156 2-Mar-06 Yojoa Small Hydropower Project Honduras Finland AMS-I.D. ver. 6 1069 157
Eecopalsa – biogas recovery and electricity generation from Palm Oil Mill AMS-I.D. ver. 8 2-Sep-06 Effluent ponds, Honduras Honduras Switzerland AMS-III.H. ver. 2 27615 492 ACM0002 ver. 6 28-Jun-07 Tres Valles Cogeneration Project Honduras Japan ACM0006 ver. 4 16479 1066 Cervecería Hondureña Methane Capture AMS-I.C. ver. 9 28-Aug-07 Project Honduras AMS-III.H. ver. 4 7302 896 Inversiones Hondurenas Cogeneration ACM0002 ver. 6 12-Dec-07 Project Honduras ACM0006 ver. 4 19937 1034
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CDM PROJECT ACTIVITIES FROM CENTRAL AMERICA REGISTERED BY THE CDM EXECUTIVE BOARD Registered Title Host Parties Other Parties Methodology Reductions Ref.
Energeticos Jaremar – Biogas recovery from Palm Oil Mill Effluent (POME) ponds, and heat & electricity Switzerland AMS-I.C. ver. 11 8-Mar-08 generation, Honduras Honduras Sweden AMS-III.H. ver. 5 30646 1483 Energía Ecológica de Palcasa S.A. 25-Mar-09 EECOPALSA Biomass Project Honduras AMS-I.C. ver. 13 14088 1877 Energia Limpia Jaremar renewable thermal generation from biomass (EFB) 20-Feb-10 Honduras Honduras AMS-I.C. ver. 13 18856 2826
Switzerland, United Kingdom of Great Britain 8-Apr-06 San Jacinto Tizate geothermal project Nicaragua and Northern Ireland ACM0002 ver. 4 280703 198
Amayo 40 MW Wind Power Project - 12-Apr-09 Nicaragua Nicaragua ACM0002 ver. 7 120811 2315 Brazil, Japan, Swizerkand, United Kingdom of Great Monte Rosa Bagasse Cogeneration Britain and Northern 22-Jun-06 Project (MRBCP) Nicaragua Ireland AM0015 56020 191 Vinasse Anaerobic Treatment Project - Compañía Licorera de Nicaragua, S. A. 9-Mar-07 (CLNSA) Nicaragua Netherlands AM0013 ver. 3 119847 675 1-Oct-05 LOS ALGARROBOS HYDROELECTRIC Panama Spain AMS-I.D. ver. 5 37213 81
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CDM PROJECT ACTIVITIES FROM CENTRAL AMERICA REGISTERED BY THE CDM EXECUTIVE BOARD Registered Title Host Parties Other Parties Methodology Reductions Ref. PROJECT (PANAMA) PROJECT FOR THE REFURBISHMENT AND UPGRADING OF DOLEGA 24-Dec-05 HYDROPOWER PLANT (PANAMA). Panama Spain AMS-I.D. ver. 6 12167 135 PROJECT FOR THE REFURBISHMENT AND UPGRADING OF MACHO DE MONTE HYDROPOWER PLANT 24-Dec-05 (PANAMA). Panama Spain AMS-I.D. ver. 6 10963 133 21-Oct-06 Concepción Hydroelectric Project Panama AMS-I.D. ver. 8 36126 597 United Kingdom of Great Britain and Northern 10-Mar-07 Paso Ancho Hydroelectric Project Panama Ireland AMS-I.D. ver. 8 22233 669 United Kingdom of Great Britain and Northern 23-Feb-09 Santa Fe, Energy Wind farm Panama Ireland ACM0002 ver. 6 172877 2174 El Guanillo wind farm in Dominican Dominican 20-Oct-06 republic Republic Spain ACM0002 ver. 6 123916 175 * AM - Large scale, ACM - Consolidated Methodologies, AMS - Small scale ** Estimated emission reductions in metric tonnes of CO2 equivalent per annum (as stated by the project participants)
Background: In accordance with the modalities and procedures for a CDM (Annex decision 17/CP.7) : "41. The registration by the Executive Board shall be deemed final eight weeks after the date of receipt by the Executive Board of the request for registration, unless a Party involved in the project activity or at least three members of the Executive Board request a review of the proposed CDM project activity. The review by the Executive Board shall be made in accordance with the following provisions
(a) It shall be related to issues associated with the validation requirements;
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CDM PROJECT ACTIVITIES FROM CENTRAL AMERICA REGISTERED BY THE CDM EXECUTIVE BOARD Registered Title Host Parties Other Parties Methodology Reductions Ref. (b) It shall be finalized no later than at the second meeting following the request for review, with the decision and the reasons for it being communicated to the project participants and the public."
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1) Costa Rica The construction of the project started on November 2003 and commercial The republic of Costa Rica has a operation started on August 2004. population of 4,321,717 people, the
Spanish is the official language and the Sustainable development currency is the Colon. Official website of contributions the country is: www.casapres.go.cr From Costa Rica perspective, the project
will contribute to: a. Rio Azul landfill gas and utilization project in Costa Rica Meet the growing demand for electricity based on alternative Methodology Applied and locally available sources, AM: 0011: Landfill Gas recovery with instead of relying on imported Electricity Generation and no Capture or fuel oil. Destruction of Methane in the Baseline Scenario Demonstrate that global and local environmental benefits can Reference be generated through an 0037 integrated and mainstreamed approach to support national Project Description sustainable development The project activity consists in priorities. constructing and operating a landfill gas Prove that landfill gas technology recovery system, flaring equipment and a for energy conversion is 3.7 MW electricity generation plant. The environmentally, institutionally internal combustion engines will burn the and technically feasible despite collected methane at the site to generate the related barriers and electricity to the national interconnected associated risks grid Improve the deteriorated sanitary
conditions of the local The project will use the landfill gas communities by reducing toxic generated from the Rio Azul municipal and odorous gases emissions landfill site in the city of San José, Costa Rica. The site is owned by the Ministry of Decrease the risk of landslides by Health and has been in operation since accelerating the settlement the early 70’s, but it was not until the process of the deposited solid 1990’s that it became a landfill. In 1995, a waste concession was given to the National Power and Light Company (CNFL), a CO2 Emission Reduction local utility to use the landfill gas to Using the projected emissions given by generate electricity. On January 2001, the the First Order Decay (FOD) model and public bid No. 13-2000 promoted by the quantity of methane used to generate CNFL, awarded the project to the electricity since August 18, 2004, it is Corporate Group SARET. estimated that 1,560,836 ton of CO2 equivalent will be avoided during the 10- Since this is the first landfill gas energy year crediting period. project to be developed in the Central American and Caribbean region, SARET According with the operation schedule will use the expertise of the British firm there is not intention to flare any Combined Landfill Projects (CLP). methane; however, this situation will
168 Central American Carbon Finance Guide happen when the power plant equipment is on maintenance.
2) El Salvador The Republic of El Salvador has a The project will increase the exiting 6,874,926 population, the capital city is power generation capacity through the San Salvador and the official language is drilling of up to ten producers and three Spanish. The official website of the re-injection geothermal wells and the government is www.casapres.gob.sv installation of a new condensation power unit with maximum gross output to the a. LaGeo, S. A. de C. V, Berlin generator of 44 MW (maximum net Geothermal Project, Phase output to the grid of 42 MW). The Berlin Two, El Salvador Geothermal Field is characterized by a depth between 1,000 and 1,500 m in the range of 280-300 °C, 115 bar pressure, Methodology Applied and good rock permeability. Reservoir Consolidated baseline methodology for dimensions and characteristics are grid-connected electricity generation enough to sustain a 44 MW power plant from renewable sources (ACM0002, for the entire life of the project, with an 2004). expected field depletion of about 1% per year Reference The expected plant lifetime is of at least 0297 30 years
Project Description e main contributions to El Salvador’s Commercial use of the Berlin sustainable development for this project Geothermal field started in 1992 with 10 are: MW installed power and backpressure turbines. At present the Berlin a) The efficient use geothermal Geothermal Power Plant has installed 2 resources, while minimizing impact on condensing units (flash power plants) of the environment. 31.5 MW each; these units started b) The use of an indigenous and operation in late 1999. The power plant is cleaner source will reduce the fed by 8 producer geothermal wells already high dependency on supplying a two-phase fluid (steam + imported fossil fuel for electricity liquid) at around 100 kg of steam per generation second, 10 bar (absolute) pressure and c) Reduction of greenhouse gases 180 °C Extracted fluid is a 3-1 ratio (GHG) emissions - which would water-steam mixture. After being fed into be generated in the absence of the the turbine to generate electricity the project. steam is partly evaporated (80%), and d) The Berlin Geothermal Power partly re-injected (20%), along with the Plant has a community separated fluid. engagement program aimed to The geothermal fluid transportation create a balanced and constructive system includes a two-phase flow environment with neighboring pipeline, which will connect production municipalities of Berlin City. The wells to steam separators, steam pipelines fundamental elements of the from separators to the plant area and program, used to maximize geothermal water pipelines to the re- benefits to the community, are injection wells the generation of local employment opportunities, social
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investment activities, development of sustainable small businesses, and protection of the local environment. e) Construction and maintenance of road infrastructure that ensures communication and commercial activities in the surroundings of the project site. f) LaGeo Project includes a biodiversity inventory research project to be done by Universidad de El Salvador and a conservation and reforestation program in areas around the geothermal power plant.
CO2 Emission Reduction The Berlin Geothermal Power Plant is interconnected to the El Salvadoran grid and is expected to avoid emissions of 176 543 tCO2 yearly, i.e. total emission reductions of 1 235 798 tCO2 over the first 7-year crediting period.
.
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3) Guatemala project improves voltage levels and reduces transmission losses by an estimated 0.86 MW. The Republic of Guatemala has a population The hydroelectric plant is designed as a of 12,951,547 people; the capital is the City of Peaking Plant in which water is stored in a Guatemala, the Quetzal is their currency and reservoir in order to produce electricity during Spanish is the official language. The official the peak demand hours. website is: www.guatemala.gob.gt
Sustainable development contributions a. Project GT1 Las Vacas Las Vacas project contributes to the Hydroelectric Project. sustainable development of the region in Methodology Applied different ways: AM0005: Baseline methodology (barrier analysis, baseline scenario development and by creating new jobs in the region and baseline emission rate, using combined thus improving local income levels margin) for small grid-connected zero- and living standards; emissions renewable electricity generation. Monitoring methodology for small grid- injecting new investment in the region connected zero-emissions renewable electricity that helps improve local generation. infrastructure, assists local businesses, and creates indirect jobs to support Reference the project;. 0073 reducing dependence on imported fossil fuel; Project Description The project activity consists of a hydroelectric reducing local air contaminants plant using wastewater as a main source with a generated burning fossil fuels, eg. CO, installed capacity of 45 MW located at an NOx, SO2, particulates; reservoir on the Las Vacas river 18 kilometers • improving availability, reliability and northeast of Guatemala City. Construction of voltage levels of electricity in the the first phase was finished on May 2002 with region and reducing transmission 20 MW, second and third phase of the Project losses; to total 45 MW were available on May 2003. improving water quality in the Las
Vacas river by oxygenating the water, Las Vacas hydroelectric plant (Hidroeléctrica collecting and recycling plastics that Río Las Vacas – HRLV) generates an average gather at the dam, and by dredging of 120 GWh of electricity per year that is sold and sorting sediments in the river for to COMEGSA, Guatemala’s largest power use in the construction industry; purchaser, under a Power Purchase Agreement (PPA). The project is connected to improving tree cover and reducing Guatemala’s national electric system, thus soil degradation in the area by displacing electricity on the national grid that initiating a number of reforestation is primarily generated by fossil fuel. Electricity programs; produced by Las Vacas plant is transmitted to increasing local awareness of the national grid via a 18 km transmission line environmental issues by initiating an that connects the plant to the Ciudad Quetzal environmental program in the local substation. Because of the plant’s proximity to schools. Guatemala City, the major demand centre, the
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Three important local environmental 0028 initiatives are being carried out as part of Las Vacas project that contribute to the Project Description: sustainable development of the region. The The project activity contemplates the objectives of these initiatives are to improve production of clean hydroelectric power that water quality in the Las Vacas river basin, will contribute ti reduce the Honduran recycle waste products that collect in the river, imported petroleum bill and reduce CO2 reduce soil degradation and increase forest emissions, which would had occurred cover in the local area. otherwise, in the absence of this project. The The main initiatives are: Main Objective is to generate clean energy while operating and maintaining the facility, a plastics recycling plant; selling the power to ENEE (National Power a sludge storage area; and Utility) through a PPA with duration of 15 reforestation program years, that can be extended to the convenience of both parties to sell power to a big consumer, or the regional energy market while CO2 Emission Reduction contributing to the sustainable development Using the combined margin method and an of its area of influence and the country. import and export adjustment, an Emission Factor of 0.753 tCO2/MWh has been The project is a run-off-river renewable estimated. Based on this factor and an average hydroelectric generating plant which is annual generation of 120 GWh an annual composed by Tyrol type dimension dam, a emission reduction of 90,363 tCO is 2 233m tunnel, a forebay that will be used to calculated. For a chosen crediting period of 3 remove any sediment carried by the incoming crediting periods of 7 years, it is estimated that flow of water, a 1,500.00 m penstock, and a the project will reduce emissions by 1,897,623 powerhouse with its discharge channel and tCO . access road. 2
The hydrology in the area is satisfactory, the nominal capacity of generation is of 5,000.00 kW, the transmission line has approximately a 4) Honduras length of 1.5 kilometers. The production of The Republic of Honduras has a 7,346,532 firm annual energy will be 22,000.00 people population, the capital city is kWh/year, and 17,800.00 tonnes/year of Tegucigalpa, official language is Spanish and CO2e will be avoided. The net head is of the currency is Lempira. The governmental 125.50 meters. No population displacement is website is: www.casapresidencial.hn required.
a. Rio Blanco Small Hydroelectric Honduras is at present at crossroads: Project extremely vulnerable to worl oil prices and victim of climate changes phenomena such as Methodology Applied: El Niño and La Niña. Having its own water Type 1: Renewable Energy Projects reserves for hydroelectricity production Category I.D.: Renewable Electricity affected and habing come down to low levels Generation for a Grid of the simplified M&P for two years in the road, it has prevented the for small-scale CDM project activities largest hydroelectric central Francisco
Morazán (commomly known as El Cajón, Reference: 300WM), to operate al full capacity, forcing
172 Central American Carbon Finance Guide the country to increase its dependency on 5. Serve as a small demonstrative project for fossil fuels by generating more than 50% of clean renewable energy generation in the the countries needs of electric energy and to country; import energy from countries such Costa Rica 6. Preservation of the RIO BLANCO River to cover energy deficits. basin; 7. Reforestation of project's area of Sustainable development contributions: influence; 8. Permanent and temporary Job generation Lacking a clear National energy Policy that at the Central through the project's would foster expansion of the generation implementation; system through renewable energy sources, the 9. Production of indirect employment in the country has compromised its sustainable area; development paying a heavy burden on badly 10. Improvement of hand quality labor in the needed hard currency to pay for its fossil fuels. area by training in different technical areas This situation hampers the well being of the and vast poor majority that lives in rural areas and 11. Contribution to local community by marginal ruban areas, specially the most payment of taxes. vulnerable groups such as women, children and elders. On the other hand, 40% of final CO2 Emission Reduction: use of energy for cooking purposes is still The firm energy derived from this project is done by non sustainable extraction of assumed to be constant during each year of firewood that in conjunction with peasant’s the crediting period and will replace an pressure over the fragile forest vocation soils equivalent amount of capacity from thermal (more than 70% of the country) are depleting plants. The plant is scheduled to start our forest thus affecting river basins. Situation operating on mid year 2004. that has to be reverted, and this is the subject of this project’s small contributions to sustainable development at local, municipal and at national level.
The Río Blanco Hydroelectric Project will contribute to sustainable development though the following ways:
1. Generation of improved quality electricity for the San Francisco de Yojoa Municipality, which will foster the produclive use of electricity in communities that still don't have it, as well than in the rest of the country; 2. Help the country to reduce the imported oil bill, which will strengthen our energy autarchy; 3. Reduction of Green House Gases
emissions, specifically CO2; 4. Strengthening of the country 's rural electrification coverage;
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RIO BLANCO HYDROELECTRIC PROJECT
CO eq Cumulative Year 2 tonnes abated (tonnes)
2004 7,416.67 7,416.67
2005 17,800 25,216.67
2006 17,800 43,016.67
2007 17,800 60,816.67
2008 17,800 78,616.67
2009 17,800 96,416.67
2010 17,800 114,216.67
2011 17,800 132,016.67
2012 17,800 149,816.67
2013 17,800 167,616.67
2014 10,383.33 178,000
Total 178,000
Project Description:
5) Nicaragua Monte Rosa Bagasse Cogeneration Project (MRBCP) activity aims to increase its energy efficiency and cogeneration capacity in order The Republic of Nicaragua has a population to supply electricity to the grid, therefore of 5,773,456 people, the capital city is adding value to the bagasse produced by the Managua and the currency is the Cordoba. company. Spanish is the official language, and the governmental website is: Currently, the total installed electric power www.presidencia.gob.ni capacity is 26 MW, but only 18 MW are a. Monte Monte Rosa Bagasse actually used, leaving 8 MW as standby. Cogeneration Project (MRBCP) Through phased installation of substantially more capacity, improved energy efficiency in
its processes, and generation of sufficient Methodology Applied: bagasse around the harvest season, Monte AM0015: Bagasse-based cogeneration Rosa has generated surplus electricity of about connected to an electricity grid. 94.000 MWh during the 2001 – 2003 period,
and will generate surplus electricity of Reference: approximately 93.000 MWh in 2004, 0191 increasing to 120.000 MWh in 2008. These
sales of electricity to the grid allow it to
participate in the emissions reduction market.
Monte Rosa does not have a power purchase
agreement. Instead, it opted to commercialize
174 Central American Carbon Finance Guide its surplus electricity in the spot market, competitive advantage for the agricultural known in Nicaragua as “mercado de ocasión”. production in the sugarcane industry in Nicaragua. Monte Rosa also believes that There are 2 phases for this project. The first bagasse cogeneration is very important for the st expansion (1 phase) was in cane season 2001- energy strategy of the country in that 2002 with the installation of an extraction cogeneration is an alternative to postpone the turbogenerator of 15 MW. At that time, installation and/or dispatch of thermal energy Monte Rosa started to sell energy to the grid. generation utilities. It is expected that the sale nd of the CER generated by the project will boost The second expansion (2 phase) consists of the attractiveness of bagasse cogeneration the phased addition of steam turbogenerators projects, helping to increase the production of and a 900 psi (62 bar) high-pressure boiler this energy and decrease dependency on fossil which will burn the sugar cane residue fuel produced in the mill to generate steam. The The project participant also considers the steam will be directed to the turbogenerators, following as benefits of the project: generating electricity at a voltage of 13.800 volts. The steam leaving the turbines is 1. The creation of 35 direct jobs at the condensed in a cooling tower, and the industrial area, and also indirect jobs. condensate is recycled and redirected to the boilers (a simple steam cycle). The electricity 2. Increasing biomass use will diminish the voltage is increased to 69.000 volts at an on- need to import fossil fuel and thus site substation. It is then transmitted to improve Nicaragua’s balance of payments. another sub-station 15 km away, located in the In other words, the 98.200 MWh annually city of El Viejo, Nicaragua. that the Monte Rosa expansion project will provide to the grid (average over 14 The main investments of this 2nd phase years) will reduce Nicaraguan imports of project will be: approximately 119.800 barrels/yr of fuel Installation of a new 900-psi (62 bar) oil #6 (bunker), thus saving about US$3,5 high-pressure boiler, million per year in imported fuel costs.
Installation of three new 3. Technological development due to use of turbogenerators. (1 condensing type bagasse cogeneration as a source of of 15 MW, and 2 extraction type of renewable energy. Monte Rosa could also 20 MW each) serve as an example for encouraging other Installation of a new cooling tower. bagasse cogeneration projects, by starting to consider CERs revenue to reach their Installation of 2 new transformers and other equipment at the sub- financial feasibility. station. Environmental Contribution These new investments will be staged over a Besides reducing the GHG emissions by five-year period. As the new turbogenerators implementing its expansion projects, Monte are installed, old turbogenerators will be Rosa has implemented, in August of 2004, an retired. Environmental Management System. Its name The Monte Rosa is concerned that bagasse is Plan de Gestión Ambiental (Environmental cogeneration is a sustainable source of energy Management Plan). The system controls the that brings not only advantages for mitigating following environmental aspects of the plant: global warming, but also creates a sustainable
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Residual water million per year in imported fuel costs. Because of the high cost of fossil fuel, Gas emissions Nicaragua has planned for some time to Solid Waste increase its base load capacity from Noise renewables. The Nicaraguan government, through the National Energy Commission Dust (CNE), is formulating a new energy policy that Air quality has as main objectives: increase the confidence of foreign and domestic investors; increase rural electrification (Nicaragua has the lowest Sustainable development contributions: electrification index in Latin America, 50%); and finally permanently promote the use of Increasing biomass use at MRBCP will renewable and clean sources. diminish the need to import fossil fuel and also improve Nicaragua’s balance of payments. In other words, the 98.200 MWh annually that the Monte Rosa expansion project will provide to the grid (average over 14 years) will reduce Nicaraguan imports of CO2 Emission Reduction: approximately 119.800 barrels/yr of fuel oil #6 (bunker) and also save about US$3,5
Annual Estimation of Years Emission Reductions in Tonnes Of CO2e 2002 15.876 2003 26.006 2004 30.673 2005 69.955 2006 76.549 2007 83.775 2008* 89.305 Total Estimated Reductions (Tonnes Of Co e) 392.139 2 Total Number of Crediting Years 7
Annual Average Over The Crediting Period of Estimated Reductions 56.020 (Tonnes Of Co e) 2 st st *It’s admitted that the Project’s 1 Crediting Period will be considered from March 1 , 2002 to March st 1 , 2009. However, the table above doesn’t consider the year 2009 due to uncertainties about the beginning of its harvest season, when the electricity generated by the cogeneration system become operational.
6) Panama
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The Republic of Panama has 3,228,186 people population; the capital is Panama City and the Spanish is the official language. Governmental website: www.presidencia.gob.pa
a. Concepción Hydroelectric result in an effective displacement of Project electricity produced by the expensive, marginal thermal power stations.
Methodology Applied: The objectives of the Project in the medium- and long-term are: Project TYPE I – Renewable Energy Projects Category 1.D. – Grid connected renewable electricity generation (version 8). Inject additional clean, safe and reliable capacity to the Panamanian Reference: Electric System. 597 Contribute to the decrease of emissions of Greenhouse Gases Project Description: (GHG) in Panama, resulting is a cleaner environment This PDD presents the Concepción Hydroelectric Project, a proposed small-scale, Reduce the dependence of imported run-of-river development in Western Panama. fuels. The electric energy-generating Concepción Project is designed for an installed capacity of 10.0 MW and is expected to generate in The results of Project implementation average 67 GWh/yr. Concepción will be will be: connected to EDECHI’s distribution line in Electricity Generation of 67 GWh/yr the “El Porvenir” substation (EDECCHI Generation of short- and long-term stands for “the Electric Distribution Company employment in the project area (about of the Province of Chiriquí”). Via EDECHI, 200 jobs will be created for local the Project will sell the energy production to people in Boqueron during the various energy-based generators connected to construction phase) the grid based on an economic dispatch. By so doing, the generation at Concepción will Direct physical and financial displace parts of certain expensive, polluting contributions to community generation sources currently connected to infrastructure projects adjacent to the National Interconnected System (SIN, a project site (roads, river crossings, system that integrates all generating plants in etc.) the country, as well as all transmission and Generation of Business to major distribution networks). During year 2004, Panamanian Contractors about 30% of the country generation was based on fuel oil or diesel and, despite the Contribution in the reduction of the high cost associated with this type of price of energy to the end consumers generation, Panama has plans in place to expand the thermal generation within the next The run-of-river development is located on few years. Small-Scale developments like the Piedra River, downstream the Macho de Concepción are not factored into the Monte Hydroelectric Plant, about 26 Km far electricity supply-demand planning and from the City of David, Province of Chiriquí. consequently, operation of this Project will The project uses the flows of the Macho de
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Monte, Bregue y Piedra Rivers. The project usual scenario would result in low cost consists of a daily regulation dam, a Hydroelectric units coming on line first and conveyance system and one surface then, residual fuel oil and then, diesel powerhouse. Concepción is a run-of-river generators. During its operation, the development with the intake on the Piedra Concepción Project will offset these more River, discharging in the same. In detail, the expensive residual fuel oil and diesel units and works include a low-height combined concrete this will happen because the dispatch system and rockfill diversion dam, an intake structure will seek keeping the electricity price low and incorporated in the concrete part of the dam, therefore, will prioritise low cost production a desander, a fibreglass-reinforced polyester over more expensive units (in the case of resin pipe conveyance, a surge tank, a steel thermal units, the major component of the bifurcation, a surface powerhouse with two production costs are the variable costs, mainly horizontal-axis Francis turbine-generators, a determined by fuel costs). tailrace canal and an electric substation. The power works are located on the left bank of At present, there are limited resources and/or the river. The gross head of this plant is 65.0 possibilities in the country to upgrade older m and with losses at design discharge of some existing power plants, alternative that might 6 m, the net head amounts to 59.0 m. The sometimes be cheaper than new Hydroelectric design discharge of the powerhouse is 20.0 plants. Further, since the sector has been m3/s, resulting in a 10-MW plant installed deregulated, there is no legislation in place or capacity. planning whatsoever to upgrade such facilities, if any. Consequently, it is likely that any non- Sustainable development contributions: hydro new capacity will use the lowest-cost technology available such as combustion The entering in operation of the Concepción turbines, internal combustion engines, or Project will increase the amount of renewable combined-cycle technology. energy connected to the grid. Currently (2004), the Panamanian National Electric Generation CO2 Emission Reduction: System is formed both by hydro and thermal generating sources (34.4% thermal and 65.6% Calculations based on the simplified hydro, on the year 2004- generation basis). methodology allowed for small-scale projects The regulatory framework establishes the indicate that Concepción will result in an operation of generation plants and units on a annual emissions avoidance of 36,153 tons of merit-order dispatch basis, according to the CO2 equivalent per year (tCO2e/year). generation cost. The fact that hydroelectric Calculation was based on evaluating the plants have a low cost for energy production “approximate operating” and the “build” and can be managed to optimise the use of margins based on the electrical system water confers them a higher dispatch priority operating as of December 2004 according to than thermal generators (Concepción is data published by the Energy Policy basically a run-of-river development with zero Committee (COPE), the Economy and production costs) Finance Ministry (MEF) of the Republic of Panama. Thus, the increase of low-cost hydro energy available - such as Concepción becoming available – will reduce the use of higher-cost energy produced by fossil fuel fired power plants. Without the Concepción Project, an increase in demand under the business as
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Annual estimation of Years emission reductions in Tonnes of CO2 e Year 1 (2007) 35,590 Year 2 (2008) 36,153 Year 3 (2009) 36,153 Year 4 (2010) 36,153 Year 5 (2011) 36,153 Year 6 (2012) 36,153 Year 7 (2013) 36,153 Year 8 (2014) 36,153 Year 9 (2015) 36,153 Year 10 (2016) 36,153 Year 11 (2017) 36,153 Year 12 (2018) 36,153 Year 13 (2019) 36,153 Year 14 (2020) 36,153 Year 15 (2021) 36,153 Year 16 (2022) 36,153 Year 17 (2023) 36,153 Year 18 (2024) 36,153 Year 19 (2025) 36,153 Year 20 (2026) 36,153 Year 21 (2027) 36,153
Total estimated reductions 758,650 (tonnes of CO2 e)
Total number of 21 crediting years Annual average over the crediting period of estimated reductions 36,126 (tonnes of CO2 e)
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ANNEX VIII – REFERENCES BUN-CA. Manuales sobre energía renovable. San José, Costa Rica, 2002. www.bun-ca.org BUN-CA. Compendio de estudios de caso de proyectos demostrativos de energía renovable a pequeña escala en América Central. San José, Costa Rica, 2002. www.bun- ca.org BUN-CA. Guías para Desarrolladores de Proyectos de Generación de Energía Eléctrica utilizando Recursos Renovables. San José, Costa Rica, 2002. www.bun-ca.org BUN-CA. Manuales sobre energía renovable. San José, Costa Rica, 2002. www.bun-ca.org FENERCA. Modelos empresariales para servicios energéticos aislados (Manuales de Energía Renovable). San José, Costa Rica 2001. www.fenerca.org FENERCA. Reducción de Emisiones de Carbono (Manuales de Energía Renovable). San José, Costa Rica 2001. www.fenerca.org FENERCA. Promoción de Energía Renovable en Centroamérica: Oportunidades para el Planteamiento de Políticas. San José, Costa Rica 2001. www.fenerca.org IETA. CDM Emission Reductions Purchase Agreement v.2.0. 2004. www.ieta.org Ministry for Foreign Affairs in Finland. Financing Business Opportunities in Latin America and the Caribbean. Helsinki, Finland 2003. http://www.finpro.fi/ Ministry for Foreign Affairs, Finland. Clean Development Mechanism (CDM) and Joint Implementation (JI) Pilot Programme – Operational Guidelines. Helsinki, Finland 2003. http://global.finland.fi/english/projects/cdm/ Point Carbon. The Carbon Market Analyst: Outlook for 2004: An update. Oslo, Norway 2004. www.pointcarbon.com Rodríguez, Jorge 2004. Guía Metodológica: Cómo desarrollar proyectos exitosos dentro de la iniciativa de cambio climático. La Habana, Cuba, 2004. UNDP. The Clean Development Mechanism: A User’s Guide. New York, USA, 2003. http://www.undp.org/energy/climate.htm#cdm UNFCCC. Simplified modalities and procedures for small-scale CDM project activities. New Delhi, India, 2002. http://cdm.unfccc.int/Reference/Documents UNFCCC. Simplified project design document for small-scale CDM project activities. Bonn, Germany, 2003. http://cdm.unfccc.int/Reference/Documents UNIDO. Guidelines for Infrastructure Development through Build-Operate-Transfer (BOT) Projects. Vienna, Austria, 1996. www.unido.org UNIDO. Manual for the Preparation of Industrial Feasibility Studies. Newly revised and expanded edition. Vienna, Austria, 1991. www.unido.org World Bank. State and Trends of the Carbon Market 2004. Washington, D.C. 2004. www.carbonfinance.org World Bank. Small Scale CDM Projects: An Overview. Washington, D.C. 2003. www.carbonfinance.org/cdcf/
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GreenStream Nework Plc www.greenstream.net
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