ProForm: A Tool for Pre-Feasibility Analysis of Renewable Energy and Energy Efficiency Projects

1. ProForm: A Tool for Pre-Feasibility Analysis of Renewable Energy and Energy Efficiency Projects Bill Golove WHGolove@lbl.gov Lawrence Berkeley National Laboratory Yerevan, Armenia April 19 – 23, 2004

2. Agenda • Introduction to ProForm and Carbon Trading • Partnerships – Roles, Rights, Responsibilities • Analyzing projects using ProForm: Explainations and Examples • Renewable Electric – Basic and Expert User • Cogeneration – Basic User • Energy Efficiency – Basic User • Project Analysis • Evaluation

3. Major International Carbon Funds • World Bank’s Prototype Carbon Fund – 29 projects, US $180 million • World Bank’s Community Development Carbon Fund – target size US $100 million • World Bank’s BioCarbon Fund – target size US $100 million • Dutch government – 19 projects • Japanese companies – 14 projects • Swedish government – 3 projects • Canadian companies – 2 projects • Finnish government – 2 projects • UK companies – 2 projects

4. I. Introduction to Proform

5. A computational spreadsheet tool for clean energy projects that: Calculates basic energy and financial indicators Quantifies emission reductions Calculates the financial impact of the sale of carbon credits on a project Designed to evaluate a multitude of project types Generation, efficiency, co-generation, fuel switching, methane capture What is ProForm?

6. Rationale for the Development of ProForm • Need for a common framework to conduct assessment of clean energy projects (i.e., projects with greenhouse gas reduction benefits) • Lack of familiarity among small entrepreneurs in developing countries with financial analysis/pro-formas • Lack of access among local developers to expensive project analysis software • Requirement for evaluation of the impact of potential revenue from carbon credits under alternative project financing arrangements (additionality)

7. Who Should Use ProForm? • Entrepreneurs in developing countries and EITs • National climate change/energy and regulatory agencies • Individual/multi-lateral investors and financial institutions • Consultants/analysts

8. Benefits of Proform • Simple, transparent and precise methodology • Lowers project preparation costs • Reduces complexity and subjectivity in the process of estimating financial and environmental benefits. • Can be used both for preparing project proposals and for evaluating project proposals

9. Types of Projects (I) • Renewable energy projects that: • Generate and sell electricity to the grid • Generate and use electricity internally • Renewable non-electric projects that displace • Electricity • Fuel • Cogeneration projects

10. Types of Projects (II) • Energy efficiency projects that: • Reduce electricity consumption • Reduce fuel consumption • Reduce electricity and fuel consumption • Fuel switching projects • Landill methane gas capture projects

11. Pre-Feasibility Scenario Analysis • ProForm aids the user in evaluating a variety of scenarios • 3 scenario capability built-in • Values for carbon credits • Discount rates • Other financial and technical variables, such as • Loan terms • Electricity price • Capacity factor, etc.

12. Results • Financial (pre- and post-tax): • Net Present Value • Internal Rate of Return • Cash Flow • Debt Service Coverage Ratio • Emissions reductions: • C, NOx, SOx, PM

13. Additional Information • ProForm is a tool in development for a market in development • Financing ProForm • Seed money from the U.S. Department of Energy • Continuing development, distribution, and training funds from USAID • ProForm is distributed free of charge • Training in the use of ProForm will be offered if there is sufficient interest and funding; also customized versions

14. Partners Roles, Rights, and Responsibilities

15. Financing Agencies USAID USDOE Logistic Partners NGOs Consultants Orientation Endorsement Partners Development Banks Governmental Agencies Multilateral Investors Financial Institutions Training and Distribution Partners NGOs Industry Assoc’s Consultants Individual users Private Companies Researchers Consultants Types of Partnerships

16. Endorsement Partners • Accept project proposals which use ProForm in their preparation • Use ProForm to evaluate the project proposals received • Distribute ProForm from own internet site, if desired

17. Training and Distribution Partners • Distribution of ProForm to users • Train and provide technical assistance to users • Collect example project data

18. Logistics Partners • Establish contacts within the country or region • Coordinate training workshops • Collect example project information

19. Individual Users • Use ProForm for project preparation and analysis • Share project data, at their discretion

20. LBNL • Training of the trainers • Customizing software to meet specific needs of partners • Distribution of ProForm to users

21. III. Analyzing Projects: Explanations and Examples

22. Minimum Data Requirements • Minimum requirements workbook is available to help in preparing data for input into ProForm • ProForm denotes minimum required cells with an asteric *

23. Opening Dialogue Box – Project Types (I) • Renewable Electric • Projects that generate and sell electricity to the grid • Renewable Non-Electric • Co-Generation • Natural gas - single cycle

24. Opening Dialogue Box – Project Types (II) • Efficiency • Reduce the use of energy • Generate electricity for internal use • Fuel Switching • Landfill Methane Gas Capture Projects

25. Opening Dialogue Box - Options • Biomass fuel • Baseline Energy types • Electricity • Fuel • Both • Source of Cogeneration • Steam • Project Developer – • Utility • Energy Services Company (ESCO) • End User

26. Opening Dialogue Box - User Mode • Basic • Rapid and easy analysis • Expert • Allows user to change input values over time, for example: • Capacity • Efficiency • Financial elements

27. Opening Dialogue Box - Financial Analysis • Basic • All revenues and costs are aggregated in to a single flow • Advanced • Allows for two different project sponsors and financial flows

28. Project Identification Financial Energy Environmental Environment Technical Information Financial Financial ProForm Structure Project Specific Data Results Calculations Baseline Data Technical Data

29. Worksheets • Input Data: “I” • Calculations: “_Calc” • “Base” Baseline • “RenE, RenN, Eff, CoGen, FuelSwitch, Landfill” Project technology • “Fin” Finances • “GHG” Greenhouse gas emissions • “Results” • Appendix • Approximate global values • Conversion Factors

30. Cells and Protection • Yellow cells – Data entry • Grey Cells – Calculations • Can only be changed in expert user mode • Purple Cells – Results

31. Three Scenarios of CER Price

32. Example Projects • Renewable Electric • Small Hydroelectric– Expert User • Cogeneration • District Heating – Basic User • Efficiency • Cement Production – Basic User

33. Hydroelectric Dam • 4 MW • 68% Capacity Factor or 24000 MWh / year • 25 year • $6.75 million

34. Hydroelectric Dam Expert User – “Fin_Calcs” • Change in price received for electricity • years 1 to 10: 26 Drams/kWh • years 11 to 25: 29 Drams/kWh • Increasing operation and mantainance costs • 5% each year

35. Hydroelectric Dam Expert User – “FinAnal” • Instead of equal installment loan payments: *Thousands of dollars, 9% interest

36. Hydroelectric Dam Expert User – “FinAnal” • Only depreciate a portion of total costs • $6,015,656 • Sale of potential • $280,000 /year 10 • $336,000 /year thereafter

37. District Heating Cogeneration • 90 MW Yerevan District Heating Boiler to be replaced with Combined Heat and Power Plant. • Electricity generated displaces grid natural gas. • Capacity factor =5000 hours/8760 hours per year = 57%

38. Existing Equipment 950 tons clinker/day 3.4 GJ fuel oil / ton clinker 133 kWh/ton clinker 80% capacity New Equipment 2200 tons clinker/day 2.8 GJ fuel oil / ton clinker 96 kWh/tons clinker 80% capacity Cement Efficiency Project

39. Cement Efficiency Project Calculating the Base Line • Existing Kiln: 3.4 GJ/ton * 950 ton/day * 365 days/year * 0.8 = 943160 GJ/year • New Kiln: 2.8 GJ/ton * 2200 ton/day * 365 day/ year * 0.8 = 1798720 GJ/year The new kiln uses more energy than the existing one. But it is much bigger!

40. Cement Efficiency Project Calculating the Baseline • Base Line Kiln: 3.4 GJ/ton * 950 ton/day * 365 days/year * 0.8 * 2200/950 = 2184160GJ/year 1798720 < 2184160 • To produce the same quantity of cement, the new kiln is more efficient!

41. Cement Efficiency Project Displaced Investment • Comparing units with the same level of service New Equipment: 2200 tons/day Existing Equipment: - 950 tons/day Displaced Investment: 1250 tons/day • Displaced Investment = Cost of baseline equipment that would be needed to produce 1250 more tons of cement each day – distinguish between cost to equalize service levels and cost to achieve improved energy efficiency

42. IV. Evaluation

43. ProForm Web Site • ProForm version 4.0 is distributed free of charge at • http://poet.lbl.gov/Proform • Other tools and related publications are available at • http://eetd.lbl.gov/ea/EA_C_I.html