1. Ihab Elmassry, Egypt 1 RW4 -Tunis, Aug 27-29, 04 SS CDM Cogeneration in Egypt - Additionality Ihab Elmassry, M. Sc. CEM, CDGP Cummins Power Generation, UK Email imassry@link.net Tunis – August 27-28, 04

2. Ihab Elmassry, Egypt 2 RW4 -Tunis, Aug 27-29, 04 Cogeneration Cogeneration is the simultaneous generation of usable heat and power, usually electricity, in a single process from the same fuel.

3. Ihab Elmassry, Egypt 3 RW4 -Tunis, Aug 27-29, 04 Plant Self Generation Concept Base electrical kWh supplied Gas Gen-set kWh from utility No kWh exported

4. Ihab Elmassry, Egypt 4 RW4 -Tunis, Aug 27-29, 04 Additionality test (Proposal on CDM Additionality Tests, Lex de Jonge & Sandra Grener) Has construction of the project started? Was the project construction started before 1 Jan, 2000? Was the project construction starting date before both date of registration & 31 Dec. 2005? Is execution of the project based on a direct or indirect legal obligation? Proj ect is not addi tiona l Was CDM taken into consideration since the early stages of project development Is there documentation to this effect?

5. Ihab Elmassry, Egypt 5 RW4 -Tunis, Aug 27-29, 04 Check one of the options 3a or 3b for barrier testing? Proj ect is not addi tiona l 3a: determine financial or economical barrier (IRR,.. Etc) 3b: do one or more of the following barriers exists: Investment Technological Practice others Are many projects recently implemented without CDM? Project is additional Have one or more of the following barriers recently changed fundamentally Investment Technological Practice others Project is less eco attractive

6. Ihab Elmassry, Egypt 6 RW4 -Tunis, Aug 27-29, 04 Cogeneration Whey the non project is more likely?

7. Ihab Elmassry, Egypt 7 RW4 -Tunis, Aug 27-29, 04 I. Investment/financial barrier A cogeneration project is relatively a capital intensive project. The cost of a cogeneration project may be varied from fraction of millions up to tenth of millions depends on the size and the type of the cogeneration unit. There is no clear financing mechanism for environmental and/or energy efficiency and/or demand side management projects. Banks and leasing companies’ interest rates are high.

8. Ihab Elmassry, Egypt 8 RW4 -Tunis, Aug 27-29, 04 I. Investment/financial barrier (cont.) Subsidy that imposed on electricity and energy prices which resulted in low return on investment for cogeneration projects. Relatively high simple payback periods, in best cases it is not less than 6 years.

9. Ihab Elmassry, Egypt 9 RW4 -Tunis, Aug 27-29, 04 Example: Debt/Equity 100%/0% +20%Base Case

10. Ihab Elmassry, Egypt 10 RW4 -Tunis, Aug 27-29, 04 Example: Debt/Equity 50%/50% Base Case +20%

11. Ihab Elmassry, Egypt 11 RW4 -Tunis, Aug 27-29, 04 Example: Debt/Equity 0%/100% +20%Base Case

12. Ihab Elmassry, Egypt 12 RW4 -Tunis, Aug 27-29, 04 II.Practice  Lack of knowledge about the conducting techno-economic feasibility studies and risk assessment for cogeneration projects.  Lack of knowledge on energy efficiency equipment

13. Ihab Elmassry, Egypt 13 RW4 -Tunis, Aug 27-29, 04 III.Institutional Absence of governmental incentives such as low bank interest rate and advantageous customs, taxes and customs duties. The reluctance of the utility to purchase the excess of electricity produced by the small producers. It offers a very low selling back price. The lack of awareness of cogeneration technology and its benefits to Egypt,

14. Ihab Elmassry, Egypt 14 RW4 -Tunis, Aug 27-29, 04 III.Institutional (cont.) The lack of long-term plans supported by the government for cogeneration promotion. No cogeneration power purchase agreement Cogen-End user contractual issues Low selling back tariff No official written procedure for interconnection requirements

15. Ihab Elmassry, Egypt 15 RW4 -Tunis, Aug 27-29, 04 IV.Technological:  Few number of small scale cogeneration projects are already installed, this leads to operation & performance risk