CDM Considerations and Opportunities in Cambodia: Energy Efficiency, Transport & Renewable Energy Andrew Williamson Advisor to Department of Energy Technique (Ministry of Industry, Mines and Energy National Workshop on Capacity Development for the Clean Development Mechanism March 2003

Structure of Presentation Key questions… 1.How can CDM help projects in Cambodia? 2.How do CDM projects ‘work’? 3.What opportunities exist in Cambodia? Energy Efficiency Transport Renewable Energy 1.CDM considerations 2.International Case Study 3.Opportunities in Cambodia

CDM Project Requirements A CDM project must be… REAL (it will actually reduce emissions) Measurable (the emission savings can be quantified) Additional (the savings would not have happened without the project) Sustainable (defined by host country to include environmental + community benefits, technology transfer etc)

Energy Efficiency – CDM Considerations (1) The main types of EE projects are: Demand Side Example: Retrofit new efficient lighting, reduce energy losses in process, introduce new efficient appliances Supply Side Example: Improve efficiency of generator, upgrade transmission line and transformers to reduce losses, upgrade steam boiler for greater efficiency Fuel Switching Example: Replace coal boilers with gas-fired units, use biofuels instead of diesel. (* NOT nuclear!)

Energy Efficiency (EE) projects usually reduce the energy demand per unit of output and thus offer other benefits of cost saving and production efficiency EE projects for CDM can involve either upgraded or new equipment CDM Transaction costs are high so often need to group many projects under one CDM project to make viable EE projects are difficult to baseline, monitor + verify, and special guidelines have been produced to assist calculation Must first establish Emissions Baseline – the greenhouse emissions which would have occurred in ‘business as usual’, ie: if the CDM project was not done. Small projects (up to 15MW generation capacity or 15GWh/yr of equivalent energy savings) have special simplified rules and calculations Energy Efficiency – CDM Considerations (2)

Monitoring and Verification – need to prove that savings are real throughout the project This can be difficult and costly, especially when many emission sources are involved (easier on single large projects where performance can be measured directly) THUS vital for effective training and management of operators (includes ensuring that operation manuals for new equipment are provided in Khmer language) Emissions Leakage – refers to situation where old replaced equipment is sold to someone who uses it elsewhere resulting increased emissions elsewhere (so it reduces the overall effectiveness of project). Energy Efficiency – CDM Considerations (3)

Energy Efficiency - International Case Study Bangladeshi Brick Kilns Project 20 new Brick Kilns Higher efficiency than standard kilns (new “Hoffman” design) Uses natural gas rather than coal Project Partners Baseline assumes most likely scenario for brick production over next 10 yrs in Bangladesh Monitoring will involve metering of actual gas consumption + calculation of brick production Kiln Owners 20 various companies CDM Investor …Could be: Owners’ Association NGO Private Business (in Developed Country) CDM Operator (organise CDM financing + deliver CERs to Investor) $ $ CERs

Energy Efficiency - International Case Study Brick Kilns in Bangladesh Baseline CaseCDM Project Project Size170 million bricks per year Capital InvestmentUS$4.89 milUS$13.69 mil Fuel CostsUS$2.25 milUS$1.91 mil Operations + Maintenance20% of project cost per year36.4% of proj cost per year Sale price per brickUS$ US$ Financing Interest Rate15% Total emissions of CO286,496 tonnes per year41,438 tonnes per year Emissions Reduction45,059 tonnes per year Financial Internal Rates of Return IRR (assuming CER value of US$10 per tonne of CO2) Without CDM Financing IRR on Equity18.9% IRR on Total Costs17.3% With up-front CDM Financing IRR on Equity27.4% IRR on Total Costs20.6% With Sale of CERs IRR on Equity24.8% IRR on Total Costs20.2%

Energy Efficiency - Cambodian Opportunities (1) Breweries and Bottling Distillery (cassava?) Water Purification Laundries Brick Kiln Garment Factories Rice Mills Sugar Refinery Food Processing Industrial Sector – types of operators Animal Feed Factory Plywood Manufacturing Cement Works (?) Paper Mill Sewerage Pumping Cigarette Factories Plastics manufacturer Galvanized Iron Roofing Paint Factory

Opportunities – Industrial Sector Lighting – improve design (new fittings + reflectors), new technology (tri-phosphor fluorescents, high pressure sodium), control (timers, sensors), skylights + light wells/shelves Boilers – improved design, insulate ducting, steam traps, heat recovery to pre-heat feed water Refrigeration – new refrigerants + lubricants, optimise settings, controls (timers, sensors), duct layout + zoning, new technology Compressed Air – leak stop program (must be ongoing), efficient nozzles, unit sizing, optimise control (staging, timers, variable speeds etc), position intake for cool air Electric Motors – replace with high efficiency motors, variable speed drives, optimise control (timers, sensors, idle shut-off) Energy Efficiency - Cambodian Opportunities (2)

Energy Efficiency - Cambodian Opportunities (3) Hospitals Hotels Banks Office Buildings Government Offices Warehouses Restaurants Markets and Shops Schools Opportunities Building Design – orientation + exterior awnings + facades + landscaping to reduce solar gain, insulation, natural lighting, natural ventilation, building materials to reduce air- con load, interior colours to reduce lighting load, double- glazed windows, air-locks + air curtains + revolving doors to minimise air leaks Lighting – improve design, new technology (fittings + reflectors, low-energy ballasts, dimmable fluorescents), automate control (timers, sensors), zoning Water Heating – centralised units, solar and gas rather than electric, heat pumps, insulate ducting, heat recovery from air-con, reduce water use (efficient nozzles, taps, showers), optimise settings (reduce temp) Air Conditioning – new refrigerants + lubricants, optimise settings, controls (timers, sensors), duct layout + zoning, new technology, avoid individual control-setting, ceiling fans where possible Commercial Buildings

Energy Efficiency - Cambodian Opportunities (4) Cogeneration (or “Combined Heat and Power”(CHP) Anywhere with both electrical and heating or cooling needs Especially: industrial plants and commercial buildings Service can be offered by existing IPP (delivers electricity AND steam / cool air!) Scenario 1: Garment Factory Electricity generated by on-site diesel generators Modified so hot water recovered directly from ‘’water jacket” or heat exchangers to pre-heat the factory boilers Big saving in energy costs and emissions from coal-fired boilers Scenario 2: Commercial Building Electricity generated by on-site diesel generator Air conditioning compressors driven directly by second shaft on diesel engine OR: absorption chillers use the recovered heat from engines (as above) to generate cool air

Energy Efficiency - Cambodian Opportunities (5) Houses Apartment Blocks Rural cottages Opportunities Building Design – orientation + exterior awnings + facades + landscaping to reduce solar gain, natural lighting, natural ventilation (flow-through, heat exhausts), building materials to reduce cooling load Cooking – gas cooking if possible, efficient wood + coal stove designs, area with good ventilation + separate from living areas (to avoid heating them) Lighting – use compact fluorescents, interior colours to reduce lighting load, task lighting rather than whole space (eg: over cooking bench, kitchen table etc) Space Cooling – ceiling fans, sealable bedrooms for aircon Appliances – awareness programs: energy efficiency labeling + stand-by loads, refrigerator settings + maintenance Street Lighting – design + placement, high efficiency bulbs + fittings, optimise timers or sensors Residential

Transport - CDM Considerations Transport Efficiency Projects can be difficult to measure + verify as emission sources are generally privately owned + mobile! CDM validity should be checked. Vehicle Efficiency Improve existing vehicles (better maintenance, testing, regulations) New technology (introduce + encourage its use through incentives + regulation) Transport System Efficiency Public transport systems (which are effective) Trains for bulk cargo to/from sea/air ports Encourage and simplify non-motorised transport Plan towns, buildings and events to improve traffic flow + reduce need for motorised transport Fuel Substitution Biofuels (biodiesel, ethanol etc) to reduce use of diesel and petrol Encourage natural gas + CNG use Electric + hybrid vehicles (…and soon: fuel cells)

Project Improve the energy efficiency of public bus system Replace engines on 200 of the fleet of 500 busses Switch from diesel to either clean diesel, natural gas or other (still in design) Transport - International Case Study Urban Busses in Yogyakarta, Indonesia Emissions Reductions 2,106 tonnes CO2 per year 25% reduction per bus 10-15% reduction for fleet Project Crediting Period 10 years Project Participants Yogyokarta Urban Bus Co-op Gadja Mada University Road, Traffic + Transport Office

Transport Opportunities for Cambodia (1) Biofuels Sustainable, renewable fuel source (for transport + generator sets) Biodiesel, Ethanol, raw vegetable oils (eg: palm oil in Marine diesel engines) Local production from energy crops Increase energy independence Project Options Establish local manufacturing plants plus energy crops (technology transfer + training) Demonstration project with free/cheap samples to promote + gain credibility Public transport trial running on biofuels Incentives (subsidies, tax concessions) to transport companies to use (eg: trucks, taxis, ferries, trains) Promote + raise awareness of benefits for environment + Cambodia

Transport Opportunities for Cambodia (2) Private Vehicles Establish emissions regulations + registration requirements Periodic vehicle inspections + phase-in fines OR free tune-ups? Tune-up program: establish training program for service centres, and mobile testing stations Efficiency labeling on vehicles sold Public Transport Efficient bus system around the major towns with services devoted to schools, universities + factories As major highways are improved, establish cheap, reliable and safe bus system between major towns + tourist destinations Upgrade train services (passenger + cargo) from sea port to Phnom Penh (plus Pursat, Battambang + Siam Reap?)

Must be sustainable Measuring + Verification usually just involves measuring actual generation output, then calculating baseline fossil fuel emissions as savings Need to be close to suitable transmission lines or consumers Need someone to buy energy Need licences from EAC as generator Need to secure long-term supply of fuel if biomass (+possibly hydro) Renewable Energy - CDM Considerations

International Case Study - Renewable Energy Waste Palm Oil Electricity Generation, Indonesia (1) Project 10.3MW capacity from special high-pressure boiler with steam-turbo generator Combustion of 220kT/yr of empty fruit bunches from processing plant Palm Oil mill is 1.5km from 20kV substation + close to river Host Country Partner Joint venture of 3 Indonesian companies (Catra Nusantara Bersama, Bronzeoak Limited, and PT Indonesian Power) 2 of the companies will also purchase the power from the JV CDM Investor Partner now looking - from an Annex 1 country probably use a local Indonesian company to co-ordinate CDM investment

International Case Study - Renewable Energy (2) Waste Palm Oil Electricity Generation, Indonesia Project Details Project CostUS$16.5 mil Operating CostUS$1.6 mil FinancingDebt 60%, Equity 40% Interest Rate on Term Loan12% pa Plant Load Factor82% Annual Electricity Generation million kWh per year CERs generated per year56,500 tonnes CO2 Calorific Value of Fuel1052 kcal / kg Fuel CostUS$0.027 / kg Power Sale PriceUS$ / kWh Project IRR without CDM funds19.5% IRR at CER price of US$ % IRR at CER price of US$ % IRR at CER price of US$ %

Hydropower Excellent potential, proven ability in-country Pico/micro suitable in many small villages on rivers Mini – projects identified and investigated in Meritech study CDM: gather small projects into one proposal Wind Large utility scale (>500kw): 8 areas identified by modelling as good potential, now need monitoring and investigation Small domestic scale (<500kW): demonstration projects by NEDO in Takeo, but one turbine damaged and monitoring unsuitable Further investigation needed Solar PV Excellent potential Extensive demonstrations by NEDO and others Opportunities for Grid-Interactive inverters in towns and small grids Renewable Energy Opportunities for Cambodia (1)

Biomass Various fuels available (rice husks, straw, bagasse, palm oil, forestry residue, plantation timber/crops (eg: rubber)) Many technologies now mature and in use elsewhere Need thorough resource assessment + feasibility studies current fuel uses must be investigated Biofuels Biodiesel, ethanol and direct vegetable oils (Discussed in Transport section) Requires resource and feasibility assessments Landfill and Urban Waste Many technologies mature and available Cheap and widely used elsewhere Can be retrofitted, but better if designed at start of landfill life Geothermal Small, low-quality resource in Kompong Spue Worth basic investigation 50MW plant planned for central Vietnam Renewable Energy Opportunities for Cambodia (2)

Next Steps Raise Stakeholder Awareness of Benefits Government, Project Developers, Private Industry, Investors, International Developers and CDM Investors Project Identification + Pipeline Resource assessments + industry studies/surveys + energy audits Project Design Feasibility Studies Consultation with communities, authorities Project Promotion + Financing Seek partners for finance + investment + co-ordination “Will CDM help this project?” Yes: Start CDM Cycle No: Find alternative funding

CDM Projects in Cambodia - information and assistance - CDM Operation, Cambodia Status etc Climate Change Unit MoE: Mr Tin Ponlok or Mr Sum Thy Renewable Energy and Energy Efficiency Department of Energy Technique: Dr Sat Samy, Director Hydropower Department: Dr Bun Narith, Director Fossil Fuel Generation, Transmission and Distribution Energy du Cambodge: Dr Praing Chulasa, Deputy Director, Corporate Planning and Projects Electricity Authority of Cambodia: Dr Ty Norin, Chairman Department of Energy Development (MIME): Mr Tun Lean, Director

References “A User’s guide to the CDM”, Pembina Institute, June “CDM Opportunities in Asia”, TERI New Delhi et. al., October 2002 “Cambodia’s Initial Communication under the UNFCCC”, Ministry of Environment Cambodia, August 2002 “Introduction to the CDM”, UNEP Collaborating Centre on Energy and Environment, RISO National Lab, (not dated) “Simplified modalities and procedures for CDM small-scale project activities”, UNFCCC ( “DRAFT Renewable Energy Action Plan”, World Bank and MIME (DET), November 2002 Useful Websites International Energy Agency (baseline calculations) Monitoring and Verification guidelines Asian CDM Opportunities Renewable Energy Feasibility Software + Examples (FREE download) Prototype Carbon Fund – World Bank or