Methodology and Additionality: key concepts by Tqurg9

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									 Baseline methodologies for grid-
connected electricity – Context and
  Introduction to the Combined
   Margin Baseline Calculation
        Martina Bosi, World Bank
         Holiday Inn, Montreal
           December 3, 2005
Some Context
  Outlook for Future World Electricity Generation
                14 000

                12 000

                10 000

                 8 000
          TWh




                 6 000

                 4 000

                 2 000

                     0
                                          2002                2030

                       Coal Oil Gas Nuclear Hydro Other renewables
            Gas-based electricity production will triple, but coal will remain the
                                 dominant fuel worldwide
•Source: IEA, World Energy Outlook 2004
         Context: Power Sector CO2 Emissions
               Coal
                                                                      2002
               Gas

                 Oil



               Coal

               Gas                                                    2030

                 Oil

                       0      2 000       4 000     6 000     8 000   10 000    12 000
                                                  Mt of CO2
                           OECD       Developing countries     Transition economies
  Power generation will contribute half the increase in global CO2 emissions;
  In 2030, coal plants in developing countries will produce more CO2 than the
                        entire power sector in the OECD;
•Source: IEA, World Energy Outlook 2004
             Generating Capacity Requirements
                                          2003-2030
                                  China
                  OECD North America
                          OECD Europe
                             Other Asia
                  Transition economies
                          OECD Pacific
                                  Africa
                                   India
                   Other Latin America
                            Middle East
                                  Brazil
                              Indonesia

                                           0   100 200 300 400 500 600 700 800 900
                                                            GW

                       Under construction        Planned    Additions needed by 2030

          4,800 GW of new capacity will be needed to meet new demand and
                                   retirements’
•Source: IEA, World Energy Outlook 2004
CDM and Power Generation
                                        Technology

                                         $   Finance




     Industrialized                        Developing
     Governments                          Countries and
         and                               Companies
      Companies



                      CO Equivalent
                       2

                  Emission Reductions
 CDM Portfolio (projects at PDD stage)
                                     CDM projects by sector (total:477)
         CH4
      reduction    HFC &N20
     and cem ent      2%
         24%

  fuel sw itch                        pow er
       4%                           generation
                                       57%
       energy
      efficiency                                            renewables
         13%                                                   19%
                                                                 energy
                                                                efficiency
Annual CERs from CDM projects                                       4%
by sector (total:83.4 million)                                   fuel switch
                                                                      1%
                                                 HFC &N20
                                                   52%           CH4
                                                              reduction
                                                             and cement
                                                                 24%
Source: UNEP Risoe database (28 Nov. 2005):
Technological Distribution of World Bank’s
Carbon Finance Portfolio (total $629 million)



                                            renewable
                                              energy
                            Energy                        Nitrious Oxide
                                               21%
                           Efficiency                        Removal
             Waste            10%                               2%
           management                                   Transportation
              18%                                            1%
                                                          Coal Mine
                                                          Methane
                                                            10%
                      HFC23                         LULUCF
                       31%                            7%

Source: Carbon Finance Annual Report 2005
Source: Carbon Finance Annual Report 2005
            Key CDM Methodological Challenge:
                     the Baseline
                baseline
emissions




              Certified          The difference between the
              emission           actual project emissions and
              reductions         the emission baseline
                                 constitute the volume of
             Project emissions
                                 CERs

                   time
         Baseline Calculation

• one general baseline calculation:
Output (kWh/yr) X emission factor (kgCO2/kWh)


• Different possible methodologies to calculate
  emission factor (kg CO2e/kWh)


              Methodological challenge
  Impact of Different Baselines for Power
   Generation Projects: Example of India


              1000
                                                            Fossil fuel only
                      960
               900
                                                               Peaking
               800    789
   tCO2/GWh




               700
                                                               All sources
               600
                      565
               500
                      418                                     Natural gas only
               400
                      382                                   Natural gas (BAT)
               300
               200
               100
                 0
                               Wind           Natural gas
                                              (BAT)
               Possible emission credits under different baselines

Source: Bosi (2000)
     Desirable Features of Baseline
            Methodologies

For example:
• Accuracy
• Transparency
• Conservative
• Cost-effective
• Consistency
• Practical (e.g. based on available data)
 Baseline Methodology for Grid-Connected Power
 Generation Projects: Combined Margin Approach
 Most grid-connected electricity projects likely to
  affect both:
      – Operation of current or future plants, i.e. the operating
        margin; as well as
      – The building of new facilities, the build margin
 Combined margin (CM) baseline methodology
  combines the operating and build margins
      appropriate where counterfactual scenario assumed to be
       the ongoing expansion and operation of the grid (as
       opposed than 1 specific investment)
•Source: Kartha et al. 2002
 Calculating the Combined Margin

          Combined Margin EF (kg CO2e/kWh) =
        (Operating Margin EF + Build Margin EF)/2


Baseline = Project Output (kWh/yr) X Combined Margin
emission factor (kgCO2/kWh)




Michael Lazarus’ presentation will provide the details!
                     Conclusions
• World electricity demand expected to double (now - 2030)
   – Most of growth to come from developing countries
   – Electricity-related CO2 emissions in developing countries projected
     to more than double
    Opportunity for CDM to create incentive to reduce CO2 intensity
 Power generation project: important part of CDM portfolio
 Determining Emission Factor of Baseline: key
  methodological challenge
 Combined Margin is attractive/promising baseline
  methodology
    But devil is in the details
              Thank You!

Martina Bosi (mbosi@worldbank.org)

www.carbonfinance.org

								
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