Case Study 5: Gemina rice husk project, Nicaragua Sandra Greiner Carbon Finance Unit The World Bank World Bank methodology event Dehli, 22 October 2002

Contents Introduction to the Gemina Rice Husk Project, Nicaragua Elements of the baseline Consistency with the Small Scale Panel’s recommendations for simplified methodologies and procedures

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 Main sources of emission reductions –Displacement of electricity from fossil fuel –Methane reduction from avoided rice husk decomposition –CO2 reduction from substitution of cement Yearly reductions (low/optimal) CO2 energy7,418 / 11,144 t CO2e Methane from husks2,338 / 2,338 t CO2e CO2 cement0 / 2,712 t CO2e Projected reduction 21 years: 212,395 t CO2e (low)

Elements of the Baseline I Gemina project is small scale –Renewable energy component less than 15MW –Rice husk power plant directly emits less than 15,000 t CO2e If biomass is counted as renewable energy direct emissions from the project are zero

Elements of the Baseline II Baseline approach 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

Consistency with SSC Panel Draft for simplified modalities and procedures I Gemina project falls under category D. “Electricity Generation for a System” Suggested methodology: –For environmental additionality: indicate why technology would not be implemented using barriers of Appendix A Alternatively: cost comparison –For calculation of emission reductions: Operating margin, dispatch analysis or average of operating and build margin

Consistency with SSC Panel Draft for simplified modalities and procedures II GeminaSSC PanelDifferences AdditionalityBarrier Analysis a)Barrier Analysis b)Cost compa- rison Gemina uses indicator to demonstrate the effect of barriers Emission coefficients Emission intensity of a proxy plant Operating/ build margin or dispatch analysis Different approach