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Additionality in NovaGerar Gas to Energy Landfill Project

Additionality in NovaGerar Gas to Energy Landfill Project. Amr Abdel-Aziz, Ph.D. Consultant. New Policies Attractive econ. Baseline. Baseline. Emissions. Emissions. Project. Project. 2004. 2025. 2004. 2025. Year. Year. Additionality. Definition.

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Additionality in NovaGerar Gas to Energy Landfill Project

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  1. AdditionalityinNovaGerar Gas to Energy Landfill Project Amr Abdel-Aziz, Ph.D. Consultant

  2. New Policies • Attractive econ. Baseline Baseline Emissions Emissions Project Project 2004 2025 2004 2025 Year Year Additionality Definition • Emission reductions that are additional to any that would occur in the absence of the project Importance Environmental Additionality Project Additionality • Most critical issue for project acceptance • Project will be refused if additionality is not proven

  3. Additionality How to Demonstrate • Flow chart of series of questions that lead to narrowing down of potential options • Qualitative or quantitative assessment of different potential options and an indication of why the project is more likely • Qualitative or quantitative assessment of one or more barriers facing proposed project • An indication that the project type is not common practice in the proposed area of implementation

  4. Institutional Technology Economic Additionality In Easier Terms Barriers

  5. NovaGerar Landfill Project Some Used to Generate Electricity CH4 Excess Flared

  6. Project Design 12 MW 11 MW Difference Flared 9 MW 7 MW 5 MW 4 MW

  7. Not Required Additionality in AM003 Baseline and project are the only plausible options • Continue BAU (no collection) • LFG collection and flaring • High efficiency flaring and power generation Calculate a conservative IRR (excluding CERs) Project IRR  4% IRR < Conservative acceptable IRR N Not Additional Gov. Bond Rate = 22% Additional Y Additional

  8. IRR Calculations -- Elements • Capital Costs (-ve) • Electricity Generator (1 kW * 12 unit) • Flaring equipment • Gas plant • Assembling and testing • Connection to grid • Operating Costs (-ve) • Gas plant and flaring equip. O&M • Maintenance and supervision • Administrative expenses (PCF and EB) • Land rent • Others (-ve) • Income Tax • Revenue (+ve) • Carbon credits • Electricity sales

  9. IRR Calculations -- Elements

  10. IRR Calculations – Cash Flow Flaring and collection Incremental Incremental Generators IRR  4% < Benchmark IRR  Additional

  11. Benchmark IRR • Government bond rate plus suitable project risk premium • Commercial lending rate • Expert views on expected IRRs for this or comparable project types • Other hurdle rates that can be applied for the country or sector

  12. Application of Additionality Test Y Part 1: Has construction of the project already started N Y Part 2: Is Execution of Project based on direct on indirect legal obligation? N Project is more attractive IRR  4% < acceptable IRR Part 3a: Financial or Economic barrier (Benchmark Approach) Project Economically less attractive Y Part 4: Are many projects, based on same type of technology recently implemented without CDM (50/20 test) No landfill in Brazil employs this technology N Project Additional

  13. General Advice When Proving Additionality • Transparent information should be provided • Documented evidence has to be available • Conservative interpretation of documented evidence as how it is used to demonstrate additionality • Conservative assumptions to be used

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