Carboncredits.nl Baseline Methodologies Dispatch Analysis Gerhard Mulder Project Officer

Senter Internationaal  Agency of the Dutch Ministry of Economic Affairs  Programme implementation, for example: – CO2-reductionplan (domestic) – Emerging markets – Export Finance  Staff of approximately 760  Annual budget: EUR million

Senter Internationaal: Carboncredits.nl  Carboncredits.nl is the team within Senter that executes the JI/CDM mechanism for the Dutch government – 6 project officers, one programme manager – Supported by a group of technical and financial experts  3 ERUPT tenders: (total 70 projects - JI)  1 CERUPT tender: (total of 80 projects - CDM)  Look at

Senter Internationaal: Procurement rules  Carboncredits.nl implements the programme conform EU procurement rules. Public tender with two phases: – selection phase: focus on the supplier – contract awarding phase: focus on the proposal  There is no negotiation, and there is no preference for companies  Procurement rules are published in the Terms of Reference (ToR)  Advantage: one rules are published, they stand firm  Disadvantage: limited flexibility, bureaucratic

Introduction: History of JI/CDM  Dutch Government started with first AIJ projects in 1997  First ERU-Procurement Tender (ERUPT) for Joint Implementation in 2000 – Describe baseline methodology in ToR – Input from national and international experts  Today: ERUPT- 2 and 3, plus CERUPT-1 have resulted in over 150 PINs, and approximately 50 Baseline studies

Introduction: Goals Baseline study  What is the goal of a baseline study? – Article 44: the baseline for a CDM project activity is the scenario that reasonably represents the anthropogenic emissions by sources of GHG that would occur in the absence of the proposed project activity  Baseline emissions -/- project emissions +/- leakage = emissions reductions

Introduction: Elements of the Baseline  Principle of Control – Project boundary – Account for Leakage  Fixed period – For 7-year renewable or 10-year non-renewable – Provides confidence to investors  Marrakech Accords criteria: Conservative, Transparent, Reasonable  Not one-size-fits-all – Reality is very complex – Scenario Analysis

The Dutch Baseline Methodology  Strong emphasis on using conservative assumptions  The ToR allows for more than one baseline methodology: – Scenario Analysis – Investment Analysis – Simplified Baselines for Small Scale CDM

Scenario Analysis  Definition: “A future emissions scenario (baseline) is constructed by identifying barriers and risks in a key- factor analysis, using currently delivery system as a starting point”  Which MA approach is umbrella for scenario analysis methodology (art. 48)? – A. Existing or historical emissions – B. Barriers-to-investment approach – C. Build Margin/Benchmarking

Scenario Analysis: Steps  Step 1: Describe current delivery system to develop baseline emissions – E.g. how many MWs of what type is installed, fuel use, etc  Step 2: Establish which emissions can be controlled or influenced by the project participants – One step upstream, one step downstream  Step3: Develop Key Factor Analysis – Sectoral reform initiatives, local fuel availability, power sector expansion plans, and the economic situation in the project sector  Step 4: Determine CEF – Various techniques to calculate displacement

Scenario Analysis: Take your pick  While Scenario Analysis is guiding principle, it can be implemented in more than one way – Depending on the sector/project – Depending on the preference of the project participant  Of the approximately 25 PDDs we received for CERUPT, we identified several different ways to implement our baseline guidelines: – Dispatch Analysis – Alternative Investment Analysis – Ex-ante calculation of CEF of existing plants  All methodologies are conform MA: reasonable, conservative, and transparent

Dispatch Analysis: An Overview  Dispatch Analysis simulates the electricity sector for a period of time  It calculates generating costs per plant in each hour, and then optimises the dispatch for the system  The model calculates the electricity generated for each power plant for the whole crediting period  Knowing the carbon content of the fuels, you can calculate the emissions generated  You run the model with and without the proposed CDM project, and you can calculate how much electricity and emissions your project has displaced

Dispatch Analysis: Advantages  Approximates reality closest – Uses reality as starting point – Combines short term and long term effects  Works best if National Expansion Plans exist – But has element of Alternative Investment Analysis  Data input can be evaluated easily and objectively – DOE must evaluate input  Focus is on displacing electricity rather than capacity – CEF is based on how much electricity the proposed CDM project is expected to generate

Dispatch Analysis: Disadvantages  Dispatch Model may not always be available – Models are often used by National Grid Operator  Data may not always be available – Some data may be proprietary

Peñas Blancas Case Study  Operational details of the PB hydroelectric facility in Costa Rica: – 35.4 MW – 169 GWh/year – Construction starting date: August 2000  Costa Rica is committed to developing renewable resources: 75 percent of installed capacity is hydro  ICE is the vertically integrated state-owned utility  Official national expansion plan foresees in development of more hydro, as well as fossil fired units

Peñas Blancas Case Study Average CEF 0.46 tCO2/MWh)

Peñas Blancas Case Study  How was Costa Rica conservative in establishing the baseline? – Assumes no imports – Did not include scenario of regional integration – Average fuel prices – Heat rates of existing fossil plants – Demand projections – Used National Expansion Plan  Furthermore, all assumptions meet the criteria that the baseline must be ‘transparent and reasonable’

Next Steps  Meth Panel rejected 14 of 15 New Methodologies – Could not reach consensus on Dispatch Analysis  Investment additionality appears to be back as the most important criteria for project eligibility  Executive Board must provide guidance on how to move the CDM ahead