Energy Efficiency – With or Without the CDM

Energy Efficiency – With or Without the CDM Dr. Anne Arquit Niederberger A+B International (Sustainable Energy Advisors) Switzerland/USA, aan@abinternational.ch Side Event UNFCCC COP12/Kyoto Protocol MOP2 16 November 2006, 11:15 – 12:45 (African Blackwood Tree) Why Energy Efficiency? Renewables Nuclear Fuel switch End-use energy efficiency Panel Topics Energy Efficiency…  for climate mitigation and sustainable development  in the post-2012 climate regime  promotion under the CDM Block 1 Energy efficiency for climate mitigation and sustainable development Panelists  Brian Dawson, Climate Change & CDM Adviser, UNDP  Karen Suassuna, Climate Change Officer, WWF Brasil  Paul Kirai, GEF KMA Energy Efficiency Project Issues  How large is the EE resource?  Which sectors/technologies have the greatest costeffective potential?  Why is EE important for (sustainable) development?  What are the main challenges to market transformation? Efficiency & Mitigation Potential Physical Mitigation Potential Technological Socio-economic Economic Possible to reduce global emissions to below 2000 levels by 2010-20 using demonstrated technologies (IPCC, 1996) Market potential Today (achieved potential) ≥Half at no net cost Future Energy Efficiency and Development Brian Dawson Climate Change and CDM Adviser UNDP, New York November 2006 Overview of Presentation  The potential of energy efficiency  Appliances/Buildings/Industry  Transport is important but not discussed  UNDP Activities  What needs to done? What is the potential of energy efficiency  Energy efficiency (EE) represents the most cost effective emissions abatement option - much at negative cost  EE accounts for more than half of the cost effective emission reduction potential to 2050 - 2006 IEA study ?  Many additional benefits (energy security, economic competitiveness, local area pollution, comfort/adaptation)  Huge potential exists but there are many barriers (cheap energy, information constraints, lack of standards, access to technology)  EE is the most neglected sector and has weak policy framework Appliance Energy Efficiency  Huge advances in appliance efficiency have been made over the past few decades - but inefficient appliances still sold in developing countries  Large savings at negative costs – India has potential to save 500Mt by 2020 while cutting costs by $4.3 billion NPV (refrigerators, motors, transformers) Refrigerator energy consumption fallen 70% since 1985  Substantial advances in washing machines, dryers, air-con, computers, TVs  Market penetration hampered by lack of standards/consumer info  10% of OECD appliance electricity used in off-mode  90% of appliances operating in 2020 have not yet been made Energy efficiency standards and labels offer the best and most cost effective  Prevent dumping in developing countries – just ban them!!   Building Energy Efficiency  Buildings account for one-third of global energy GHG emissions By 2015 half of new buildings in developing countries Half China’s office buildings constructed since 1990 60% of people live in informal structures – this will change LCA would deliver 20-30% reductions  Building stock locks in energy consumption EE during construction better than retrofits Split incentives and lack of standards Many missed opportunities!!! Energy Efficiency in Industry Process heat and motors are large consumers Huge potential exists Lack of information – many just not aware what can be saved Corporate decision making failures- low % of production costs Energy subsidies Motor programs have much to offer Standards are important UNDP Energy Efficiency Activities  Primary focus has been on S&L Completed: Tunisia, China Refrigerator program, The efficient lighting initiative Underway: Andean region, Southern Europe, Commencing: Asian Region, India, Kenya, South Africa Planning: Arab states, Algeria, Russia, Nigeria  EE- Chiller replacement program Much more needs to be done Building local institutional capacity  What do we need to do?    Transform markets Potential is very large and important contributor to economic development Establish sound policy environment building and appliance standards energy efficiency institutional capabilities legal and regulatory frameworks remove energy subsidies engage the private sector – industry associations ESCOs? ODA, GEF, CDM Must avoid perverse incentives Sequencing of funding Inefficient Products Museum Sustainable Electric Agenda 2020 - Brazil Scenario Study for an Efficient, Safe and Competive Electric Sector – Brazil 16 November 2006 - Climate COP/MOP2 Nairobi, Kenya Karen Suassuna Coordination: • WWF-Brazil Head of Researchers: • Gilberto Jannuzzi, UNICAMP and IEI Consultative Committee: • ABRAVA, ABESCO, COGEN-SP, EÓLICA, IDEC, INEE, FBOMS, UNICA Supporter: • British Embassy in Brazil Methodology • The study was conducted in three phases, with discussions submitted to an specialist Consultative Committee • Base Year Scenario 2004 • Two scearios for 2020: • BAU Scenario based on official documents • Sustainable Electric Scenario (SES) Instaled Electricity Capacity - 2020 BAU and SEC CET:BAU and CES:SES 250 7% 200 10% 150 GW 78 GW 7% 20% 204 GW 2% 18% 75% 5% 24% 100 92 GW 50 126 GW 60% 13% 60% Outros Renovaveis Fossil HE 2004 2 4 17 69 BAU CET 15 19 48 122 PSW CES 9 26 16 75 The social-environmental bennefits • The Sustainable Electric Scenario alouds: • Generate 8 millions of new jobs, with 3,5 millions more then the BAU • Reduction on the floaded areas • Stablized the CO2 emissions on 20 million tons 80.000.000,00 70.000.000,00 60.000.000,00 50.000.000,00 72.230.022 tCO2 tCO2 40.000.000,00 30.000.000,00 20.000.000,00 10.000.000,00 23.655.916 tCO2 21.665.119 tCO2 CES BAU CET PSW 20 04 20 06 20 08 20 10 20 12 20 14 20 16 20 18 20 20 Quanto vai custar? • 12% plus economy with energy efficiency mesures. Billions BRL(2004) 290 280 270 260 250 240 230 220 BAU CET PSW CES • USD 14 Billions up to 2020 Public Policy Recomendations for Energy Efficiency • Energy Efficiency withing the planing policy phase: • Auction of Energy Efficiency • Standards of Energy Efficiency for equipments and process/ services • Targets for compulsuary investments of energy facilities • Tecnological Public Aquisitions What WWF is doing? • WWF have a Climate Change Programe in Key Countries • In Brazil: Working with partners to construct a brifing papper on Auction for Energy Efficiency • 7-8 Dec 2006 Workshop on Gold Standards for Renewable and Energy Efficiency Projects • Thank you!!! • www.wwf.org.br • karen@wwf.org.br • http://assets.wwf.org.br/downloads/wwf_energia_ebook.pdf ENERGY EFFICIENCY With or Without CDM Paul Kirai National Project Manager GEF-KAM Industrial Energy Efficiency Project COP12/MOP2 Side event Nairobi 16th November 2006 Kenya Energy Scenario •High dependence on imported petroleum products. Represents close to 30 % of Kenya’s total import bill. Meets 90% of commercial energy demand •Shortfall in hydro electricity generation resulting in increased thermal generation Large Commercial and industrial consume 60% of electricity generated. Industrial Energy Efficiency Project - Kenya 25 Kenya Energy scenario •Wastage of energy ranges between 10% and 40% of primary energy input saving measures. •Little uptake of energy • Savings of up to 40% energy bills have been registered Industrial Energy Efficiency Project - Kenya 26 Energy saving potential in industry 108,200 14% toe per annum of industrial energy consumption p.a 325,000 tons p.a. CO2 Savings  Grid “emissions factor" for Kenya is, 0.718 Kg CO2-equivalent /KWh generated Industrial Energy Efficiency Project - Kenya 27 Energy saving potential Estimated annual savings for different types of industry 500 450 400 350 300 250 200 150 100 50 0 Food Textile Paper Industry type Industrial Energy Efficiency Project - Kenya Kshs million Electricity Fuel Oil Wood Tea Hotel 28 Energy Saving Options Capacity Utilization Three Approaches Fine Tuning Technology Upgrade Industrial Energy Efficiency Project - Kenya 29 Fine tuning – Before adjustment Boiler excess air control Steam Pr: 7 bar. G Air Temp: 30 Deg C Feed Water Temp: 85 Deg C Furnace oil Temp: Above 120 degC Flue Gases Temp: 247 Deg C %O2; 11.8 %CO2: 6.7 CO: 1100 ppm Boiler no.1 3000 lbs/hr Boiler efficiency: 75.4% Excess air: 120% Dry Flue gas losses: 17.8% Moisture losses: 5.2% Radiation losses: 2% Blowdown losses: 0 Issues: Very high Excess air (90-100%) Very high flue gas temperature Very high CO percentage High FO temp Industrial Energy Efficiency Project - Kenya 30 Capacity Utilization- Drying Ovens Flue gas @ 310 DegC Excess air: 15-20% Exhaust gas @ 140 DegC Damper The primer drier can accommodate 2 trolleys If size is reduced, it can accommodate 3 Filters Air Hot air 3500 Size of the drier 11000 mm For the present operation, only one oven Out of 3 ovens will be sufficient Savings in IDO: 22% Industrial Energy Efficiency Project - Kenya 31 Technology Upgrade - Waste heat recovery Steam to process Boiler-1 3 TPH F.O Recover Waste heat from the flue gases • FG temp can be at 170 Deg C Steam to process • Hot water may be generated •For use in process Boiler-2 Flue gas at 230 to 270 Deg C Savings potential: 3 TPH 1.2 million KSh per year (6%) Investment: 0.6 million KSh Steam to process Pay back: 6 months Flue gas at 230 to 270 Deg C Boiler-2 3 TPH Flue gas at 280 to 300 Deg C Industrial Energy Efficiency Project - Kenya 32 Fine Tuning - Fuel Savings OIL CONSUMPTION ANALYSIS EnergyAudit Conducted in April 03 0.23 LTS/KGS PROD. 0.20 0.20 0.19 0.18 0.18 0.16 0.15 0.14 0.15 0.14 0.13 J a n 0 3 F e b 0 3 M a r 0 3 A p r 0 3 M a y 0 3 J u n 0 3 J u l 0 3 A u g 0 3 S e p 0 3 MONTH Lowering of energy intensities in a textile plant in Kenya Industrial Energy Efficiency Project - Kenya 33 Benefits of Energy Efficiency in Kenya Business Level     Lower Energy Costs Improve Productivity and Profitability Increase Ability to Compete in regional and Global Markets Corporate responsibility Country Level      Reduce Foreign Exchange Expenditures Strengthen the Industrial Sector Keep and Create Jobs Contribute to Poverty reduction Lower environmental impacts Industrial Energy Efficiency Project - Kenya 34 Project Benefits Energy Savings 1,198 GWh in 5yrs – worth US$22m CO2 Savings estimates 5 years 15 years tonne - 580,000 tonnes @ $5.50 per tonne, - 5.27 million tonnes @US$ 0.6 per Industrial Energy Efficiency Project - Kenya 35 Challenges for CDM Size of projects too small – low CER Very Specific projects Few approved methodologies – Industrial Energy Efficiency Project - Kenya 36 Block 2 Energy efficiency in the post-2012 climate regime Panelists  Rick Bradley, Head of Division, Energy Efficiency & Environment, International Energy Agency Issues  Have UNFCCC/KP been effective in promoting EE?  How much can EE contribute to post-2012 climate mitigation (5-yr, 15-yr horizon)?  What types of policies, frameworks and partnerships are needed? Do we need a "Protocol on Energy Efficiency for Development"?  What are Annex I Parties and the private sector actually doing? The Contribution of Energy Efficiency Beyond 2012 Richard A. Bradley, PhD Head, Energy Efficiency and Environment Division International Energy Agency © OECD/IEA - 2006 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Have the UNFCCC and Kyoto Protocol stimulated market transformation and investment in energy efficiency or have policies and measures to promote energy efficiency taken a back seat? INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Recent Action 2005 IEA Ministerial 2005 G8 Gleneagles Plan of Action 2006 EU Energy Efficiency Plan of Action World Bank Investment Framework INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Energy Efficiency Policies – 2006 Sectoral Examples • Appliances: Japan Top Runner Program for Efficient Appliances Expanded to 21 Products • Buildings: EU Energy Performance of Buildings Directive (EPBD) • Industry: France White Certificates Trading • Transport: New Zealand Fuel Consumption Information Project - Online Consumer Guide • Multi-sectoral Framework Policy: UK Energy Review For further detail: http://efficiency.iea.org © OECD/IEA 2006 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Many countries have stated that energy efficiency is crucial and therefore a high priority. How large will the contribution of energy efficiency to post-2012 climate mitigation be (next 5 years, next 15 years)? What specifically are Annex I nations considering to promote the uptake of energy efficient technologies going forward? INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Alternative Policy Scenario: Global Savings in Energy-Related CO2 Emissions 42 Increased nuclear (10%) Increased renewables (12%) Power sector efficiency & fuel (13%) Electricity end-use efficiency (29%) Fossil-fuel end-use efficiency (36%) 38 Reference Scenario Gt of CO2 34 30 Alternative Policy Scenario 26 2004 2010 2015 2020 2025 2030 Improved end-use efficiency of electricity & fossil fuels accounts for twothirds of avoided emissions in 2030 © OECD/IEA - 2006 Light’s Labour’s Lost Policies for Energy-efficient Lighting Claude Mandil, Executive Director © OECD/IEA - 2006 Paul Waide, Senior Policy Analyst AGENCE INTERNATIONALE DE L’ENERGIE INTERNATIONAL ENERGY AGENCY International Energy Agency What can be saved costeffectively? 6000 No Policies Lighting electricity consumption (TWh) 5000 Current Policies LLCC from 2008 745 TWh = 15% 4000 1635 TWh = 38% 3000 2000 1000 0 1995 2000 2005 2010 2015 2020 2025 2030 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Projected additional potential savings TWh/year by end-use for IEA-Europe 400 350 300 250 200 150 100 50 0 PCs Standby Television Other uses Circulation pumps Dishwashing Clothes-drying Clothes-washing Refrigeration Lighting Cooking Water heating Space cooling Space heating 1990 1995 2000 2005 2010 2015 2020 2025 2030 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE What types of policies, frameworks and partnerships are needed to overcome barriers and capitalize on opportunities to promote energy efficiency? Do we need a dedicated "Protocol on Energy Efficiency for Development" for the post-2012 regime? INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Policy Instruments in the OECD  Planning and zoning laws  Building codes  New, retrofits, existing There are great  Rating, accreditation schemes examples of  Labeling, disclosure each from around the  Equipment standards OECD, but no  Lighting, motors, standby, etc one country „has  R&D, demonstration it all‟  Market transformation initiatives  Voluntary initiatives INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE What mechanisms are needed to enable non-Annex I countries to lower their energy intensity? INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Block 3 Energy efficiency promotion under the CDM Panelists  Klaus Oppermann, World Bank Carbon Finance Issues  Status of EE promotion under the CDM  What are the major barriers to EE promotion under the CDM?  What changes are needed to make the CDM more supportive of EE? Is a dedicated "Energy Efficiency Working Group" needed? Energy Efficiency and the CDM Klaus Oppermann Carbon Finance Unit, The World Bank November 2006 COP/MOP2 Nairobi Energy Efficiency and the CDM: current status • UNFCCC project pipeline: less than 10% of total CERs out of energy efficiency. • Most CERs out of energy efficiency CDM projects: use of waste heat in power generation (ACM0004). • Demand side energy efficiency projects: only a few projects in industrial energy efficiency (2 approved methodologies on process steam optimization) • Households, service sector, small enterprises, transportation: marginal - despite approved AMS for small-scale activities (thresholds too Regulatory barriers to energy efficiency under the CDM 1 • Sustainable development aspect of the CDM in context of EE not really understood: – In developing countries EE means in most cases more output with given input (instead of less input to produce the same output): current CDM rules don‟t allow to deal with the growth effect/development effect of EE projects. – “Rebound effect” (income effect on energy demand resulting from savings on energy bills): not part of the CDM concepts but more and more requirement burdened on EE CDM methodologies. – Very restrictive on leakage: crowding in/out of equipment. Regulatory barriers 2 • Bundling too restrictive for micro EE activities (e.g.: lighting, appliances, cooking stoves, vehicles) Bundle • Rather limited number of activities starting at the same point in time • All individual activities know at the time of registration, composition of activities is not changing over time • One investor representing all individual activities  Example: A company replaces inefficient boilers at 3 Solutions 1 • Allow for growing baseline emissions, general approach (analog to power generation projects): ER = Δ energy efficiency * project output (service) • Rebound effects should not be part of CDM methodologies (as income effects are in general not part of the CDM rules). • Realism on leakage: realities of markets for used equipment in development countries (supply of used equipment can be completely elastic imports). Solutions 2: CDM program • Incentive schemes and measures like: – Loan programs for building rehabilitation – Grant programs for energy efficient equipment or for the use of renewable energies – Labeling of energy efficient appliances ..... that use the CDM to finance the program. • In CDM programs: – The program is the project – The program implementing entity (Government, NGO, financial intermediary, industrial federation) is project participant Program versus Bundle Program • Emission reductions are achieved by large number of multiple actions executed over time: different starting points • Type, size and timing of the induced actions may not be known at the time of registration • Program implementing entity is project participant, entities acting under the program not  Example: National program to replace inefficient light bulbs. Bundle • Rather limited number of activities starting at the same point in time • All individual activities know at the time of registration, composition of activities is not changing over time • One investor representing all individual activities • Eligibility: all types of incentive schemes, implementation programs for policies and standards (by themselves they cannot be CDM projects). • All rules on CDM methodologies apply, approved methodologies can be used for programs. • Program can be put in place by any private or public entity that makes sure that the actors under the program won‟t claim carbon credits by their own Emerging Rules for CDM Programs [expected for EB28] General interest of CDM Programs • Reach private households, small business, transport in bringing together a large number of small activities. • Support and enable Governments, public sector entities, NGOs, ESCOs, financial intermediaries to implement incentive schemes or policies financed (in part) out of the CDM. • Potentially generating revenues out of programs that can be reinvested (in particular for energy efficiency). • Provide a missing link: cost centers for program implementation different from beneficiaries: with CDM revenues no more need of redistribution mechanisms • Make energy efficiency bankable for commercial Thank You Klaus Oppermann Koppermann@worldbank.org Latest WB paper available: Achieving GHG Emission Reductions in Developing Countries through End-User Energy Efficient Projects in the CDM - The Lighting Sector www.carbonfinance.org Open Discussion Energy Efficiency…  for climate mitigation and sustainable development  in the post-2012 climate regime  promotion under the CDM