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e7 Private CDM Investor CDM Program + Experience

e7 Private CDM Investor CDM Program + Experience. presented by Klaus Baumann e7 Senior Program Manager/Project Director RWE Environmental Affairs. UNEP RISOE Jerba CDM Investor Forum 22-24 September, 2004 Jerba, Tunisia. What is e7 ?.

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e7 Private CDM Investor CDM Program + Experience

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  1. e7 Private CDM Investor CDM Program + Experience presented by Klaus Baumann e7 Senior Program Manager/Project Director RWE Environmental Affairs UNEP RISOE Jerba CDM Investor Forum 22-24 September, 2004 Jerba, Tunisia

  2. What is e7 ? • Non-profit group of 9 leading electricity companies from G7 nations (AEP, EdF, ENEL, HQ, Kansai, OPG, RWE, SP, TEPCO) • Created in 1992 (after Rio Summit) • Mission to be proactive on global electricity and climate change issues and promote sustainable development • Actions: investment in CDM/JI projects, capacity building, joint positions, policy debate, stakeholder partnerships

  3. e7’s AIJ, CDM and JI projects • Renewable energy development in Indonesia (AIJ) • Thermal power plant efficiency measures in Jordan (AIJ) • Wind park on Galapagos Islands in Ecuador (CDM) • Micro-hydropower development in Bhutan (CDM) • Energy efficiency measures in Bulgaria (JI) • Hydropower development in Bolivia, Zimbabwe, and Nicaragua (CDM) • Wind power in Chile (CDM)

  4. Selected e7 project case studies

  5. Renewables in Indonesia (AIJ) • e7 financed and developed 4 MHPs, 200 SHS, and 1 wind-solar-diesel hybrid system • Decentralised, rural electrification, demonstration project • AIJ acknowledgement: Indonesia and Germany • Monitoring phase until 2003 • Macro barriers - non-transparent national CDM policy / SD indicators, capacity building problems • Micro barriers - high transactions costs (US$ 245,000 vs. 40,000), less CERs than forecasted)

  6. Hydropower in Bolivia (CDM) • CDM pilot project: 25 MW hydro, isolated grid, financially sustainable, innovative investment scheme • Feasibility study 90% complete. Now on hold due to change in government policy • Macro barriers: • Legal and administrative framework not ready for this kind of CDM project • Change of government in 2002 with change in policy (gas priority) • Micro barriers: • Joint venture agreement with local distribution company • Fixed tariffs

  7. Wind power in Galapagos (CDM) • CDM pilot project: wind park in Galapagos Islands (2000 kW) to replace diesel and to mitigate risk of fuel spills • Project in feasibility phase; delayed 1.5 years. • Macro barriers: • Disconnection between ministries • DNA not enough authority • Legal and administrative framework not ready for this kind of CDM project • Micro barriers: • Environmental risks (bird issue) • Fixed tariff vs. Financially/technically sustainable tariff • Intervention of ministry into investment issues • legal precedent-setting

  8. Investment Considerations

  9. CDM strategies: e7 – e7 member companies • e7 position (non-profit, pilot projects): • Sustainable development • Financial sustainability • Parallel development goals • Strong local partnership • Small-scale projects • RWE position (commercial, requirements): • Need for CERs/ERUs based on NAP/ plant allocation • Participation in international funds such as PCF is attractive because of high level of experience and low risks • Otherwise, projects undertaken directly must satisfy company criteria (IRR, acceptable risk, etc.)

  10. Impact of Carbon Finance on Project Financing at $3-4/t CO2e(estimates from PCF’s experience)

  11. Conclusions & Recommendations

  12. Host country factors attracting CDM investors • Investment climate • Government responsiveness to needs of investors, Investment promotion (office), Power sector legal framework, adeq. tariffs, • Host country CDM policy • Established, clear, consistent CDM policy • Strong DNAs (clear, effective approval procedures) • Clear requirements (host country approval (responsibility), Sustainable Development, etc.) • Techno-economic potentials • Preliminary studies for project types/sizes with highest potential • Data availability • Easy baseline estimation • Prepared for generation types • Data availability

  13. Global factors affecting CDM investors • Kyoto mechanisms and regulations for CDM projects have to be in force • Ratification (Russia?) + CDM EB rules/methodologies • Fungibility with other legal frameworks • e.g. EU linking directive - CDM/JI within EU emissions trading scheme • Project type restrictions and additional requirements should be minimised • Restrictions on hydropower • Financial additionality? • Transaction costs • Clarify post 2012 situation • Energy investment requires substantial capital for investment over long periods • Infrastructure has technical life beyond crediting periods • Price of CO2

  14. Questions / Discussion For more information, please visit www.e7.org or contact: Klaus Baumann Email: klaus.baumann@rwe.com

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