Case Study: Gemina rice husk project, Nicaragua (Scenario Analysis and Small-Scale Simplified Methodologies) Carbon Finance Unit The World Bank 22 October (Revised by CCIC, 17 July 2003)

Contents Introduction to the Gemina Rice Husk Project, Nicaragua Elements of the baseline Applicability of the Meth Panel’s recommendations for simplified methodologies for Small-Scale CDM projects

Introduction to the Gemina project I Current practice –Gemina Rice and Flour Mill Rice produces 18,000 tons of rice husk yearly, increasing to 25,000 tons after expansion in 2003 –Rice husks are dumped in open piles –Periodic burning of piles to reduce volume Rice husk to electricity project –Construction of ~1.6 MW power plant –Plant consumes 2.75 t rice husk per hour –Ash used to substitute for cement

Introduction to the Gemina project II Technology: Conventional boiler/steam turbine –Rice husks are fed to the combustor and burned to produced to produce heat –Steam generated is passed to steam turbine which drives an electrical generator Rice Husk Power Plant –To cover electricity demand for rice and flourmill complex –And sell the excess electricity to third parties

Introduction to the Gemina project III Main sources of emission reductions –Displacement of electricity from fossil fuel –Methane reduction from avoided rice husk decomposition –CO 2 reduction from substitution of cement Yearly reductions (low/optimal) CO 2 energy7,418 / 11,144 t CO 2 e Methane from husks2,338 / 2,338 t CO 2 e CO 2 cement0 / 2,712 t CO 2 e Projected reduction 21 years: 212,395 t CO 2 e (low)

Elements of the Baseline I Baseline –Electricity would otherwise be produced using fossil fuels –Dumping of waste husks from Gemina rice mill in open piles Gemina project is small-scale –Renewable energy component less than 15MW –Rice husk power plant directly emits less than 15,000 t CO 2 e If biomass is counted as renewable energy direct emissions from the project are zero

Elements of the Baseline II Approach for calculating baseline emissions selected by Gemina –Marrakech Accord 48 a): Existing or historical emissions, as applicable Justification of selected approach –48 a) defines Business-as-usual as baseline scenario –PCF interpretation: BAU can be justified by (a) using historic or current information (control group) or (b) showing that barriers impede other options. especially relevant for small scale investments

Elements of the Baseline III Barriers to investment identified for Gemina a)Regulatory barriers to access the market for electricity -Smallest block of electricity that can be offered on the Nicaragua wholesale market is 5 MW (Gemina 1.6 MW) b)Competitive disadvantage of non-traditional projects -Lack of precedents regarding integration of small generators of renewable energy created problems with concessionaire c)Limited access to credit -Gemina could not attract financing due to inter alia absence of long-term PPA, high country risk for Nicaragua

Elements of the Baseline IV Indicator for restrictive nature of identified barriers: –Gemina rice husk generator is first-of-a-kind technology in all Central America PCF assistance to overcome the barriers –Carbon purchase agreement is secure revenue stream –World Bank involvement may trigger the interest of other financial institutions

Applicability of Meth Panel’s recommendation for simplified methodologies I Gemina project (1.6 MW power plant) falls under category I. D. “Renewable Electricity Generation for a Grid” Recommended simplified methodology: –Technology/Measure: 25. Biomass combined heat and power (co- generation) systems that supply electricity to a grid –Boundary: 26. Physical, geographical site of the renewable generation source

Applicability of Meth Panel’s recommendation for simplified methodologies II Recommended simplified methodology: –Baseline: 28. For a system where all fossil fuel fired generating units use fuel oil or diesel oil, the baseline is the annual kWh generated by the renewable unit times an emission coefficient for a modern diesel generating unit of the relevant capacity operating at optimal load –Leakage: 30. If the renewable energy technology is new equipment being installed for the first time, no leakage calculation is required.

Applicability of Meth Panel’s recommendation for simplified methodologies III Recommended simplified methodology: –Monitoring: 31. Shall consist of metering the electricity generated by the renewable technology. In the case of co-fired plants, the amount of biomass input and its energy content shall be monitored.