Bishkek, 7th of December 2009 Training Workshop: Baseline Study of the Kyrgyz Power Sector for Clean Development Mechanism Presentation III: Case Study for Carbon Finance of Hydropower Johannes Laubach

2 Johannes Laubach Content Mil Hydropower Station CDM Project 2 Gilanchay Cascade Hydropower CDM Project 3 CDM Power Sector Baseline Azerbaijan 1

3 Johannes Laubach CDM Power Sector Baseline Azerbaijan 1

4 Johannes Laubach Power Sector Azerbaijan (2006) Name of stationCommissioningFuelDesign capacityActual capacity Year[MW][MW] 1. Azerbaijan TPS Gas/oil2,4001,900 1) 2. Ali-Bayramly TPS Gas/oil1, Severnaya TPS1960Gas/oil Severnaya TPS (CC) 2003Gas Sumgait CHP No Gas/oil Sumgait CHP No Gas/oil Sumgait CHP No. 3 (CC) 2004Gas/oil Baku No. 1 (GT) 2000Gas/oil Baku CHP No. 2 (CHP) 1954Gas/oil Gandja1962Gas/oil Nakhichevan GT1994Gas64- Total on thermal power stations-4,7213,333 (81%) 12. Shamkir HPS Hydro Yenikend HPS Hydro Mingechavir HPS Hydro Yarvara HPS1957Hydro Araz HPS1971Hydro Tarta HPS1975Hydro Small sized HPSvariousHydro19.4- Total on hydropower stations (HPS)Hydro1, (19%) Total on energy system--5,7614,124

5 Johannes Laubach 5 Ex-ante Simple Operating Margin Simple OM: Weighted-average emission rate excluding low-operating cost and must-run power plants: –2002: 0.76 t CO 2 /MWh e –2003: 0.73 t CO 2 /MWh e –2004:0.70 t CO 2 /MWh e –2005: 0.70 t CO 2 /MWh e –Average : 0.72 t CO 2 /MWh e => Azerenerji gradually improves efficiency of thermal power generation => OM will rapidly decrease in close future => “ex-ante” OM clearly preferable to “ex-post” OM

6 Johannes Laubach 6 Ex-ante Build Margin 5 most recently commissioned power plants: Commissioned Average Weight [t CO 2 /MWh e ][%] AZERKHIMIYA CC CHP *) YENIKEND / SHIMAL (SEVERNAYA) CC BAKU-1 GT-1, GT AZERBAIJAN DRES Weighted average => Next power station to be commissioned ( Sumgait CCPP, 517 MW, 2007?!) will kick Azerbaijan DRES out of the Build Margin => Build Margin will decrease to t CO 2 /MWh e very soon!!!

7 Johannes Laubach 7 Ex-ante Combined Margin AverageWeight t CO 2 /MWh e % Operating Margin Build Margin Combined Margin => 0.72 t CO 2 /MWh e was applicable for validation in 2006!

8 Johannes Laubach Mil Hydropower Station CDM Project 2

9 Johannes Laubach 9 Technical Data Dam & reservoir Dam height: 26 m Water reservoir: 55,000 m³ => “run-of-river” Reservoir surface (estimated):5, ,000 m² ??? Hydropower station Design flow: m³/s Design water head35 m Design capacity:3 x 9.4 = 28.2 MW Average annual generation:143 mln kWh/yr Construction time:3 years

10 Johannes Laubach 10 Emission Reductions Baseline emissions 1st crediting period 143,000 MWh/yr x 0.72 t CO 2 /MWh e = 103,000 t CO 2 /yr Project emissions Power density: 28.2 MW : 10,000 m² = 2,800 W/m²> 10 W/m² => 143,000 MWh/yr x 0 t CO 2 /MWh e = 0 t CO 2 /yr Emission reduction 1st crediting period (ex-ante) 103,000 t CO 2 /yr - 0 t CO 2 /yr = 103,000 t CO 2 /yr = 103,000 CERs/yr Emission reduction 2nd/3rd crediting periods (estimated) 143,000 MWh/yr x ~0.4 t CO 2 /MWh e = ~57,000 CERs/yr

11 Johannes Laubach 11 Economics and Impact of Carbon Finance ParameterUnitValue Capital expenditures (CAPEX)mln €35 CAPEX disbursementYears 1 to 333%/year Operational expenditures (OPEX)mln € / yr1.2 Project lifetime (technology)years40 Varied parameterInternal Rate of Return (IRR) Levelized electricity generation cost %€/MWhe Project activity without CDM7.4%37.2 Project activity with 7 €/CER8.8%33.3 Project activity with 10 €/CER9.4%31.6 Project activity with 20 €/CER11.3%26.1

12 Johannes Laubach Gilanchay Cascade Hydropower CDM Project 3

13 Johannes Laubach 13 Technical Data Cascade of 18 “small” Hydropower plants Design capacity: MW Average annual generation: mln kWh/yr Construction time:6 years, but 1.5 years per plant (commissioning ~ )

14 Johannes Laubach 14 Emission Reductions Baseline emissions 1st crediting period ~200,000 MWh/yr : 0.89 x 0.72 t CO 2 /MWh e = ~161,000 t CO 2 /yr No project emissions Emission reduction 1st crediting period (ex-ante) ~161,000 t CO 2 /yr = ~161,000 CERs/yr Emission reduction 2nd/3rd crediting periods (estimated) ~200,000 MWh/yr : 0.89 x ~0.4 t CO 2 /MWh e = ~90,000 CERs/yr

15 Johannes Laubach 15 Economics and Impact of Carbon Finance ParameterUnitValue Capital expenditures (CAPEX)mln €101.1 CAPEX disbursementyears %/yr Operational expenditures (OPEX)mln € / yr2.6 Project lifetimeyears40 Varied parameterInternal Rate of Return (IRR) Levelized electricity generation cost %€/MWhe Project activity without CDM3.5%83.2 Project activity with 7 €/CER4.3%78.9 Project activity with 10 €/CER4.6%77.1 Project activity with 20 €/CER5.7%71.0

16 Johannes Laubach Average OM method yields low baseline emissions and consequently low credits ! Thank You!