European Wind Energy Conference February - 2 March 2006, Athens, Greece PROMOTING WIND ENERGY THROUGH THE FLEXIBLE MECHANISMS OF THE KYOTO PROTOCOL D. Diakoulaki, G. Dimitropoulos, P. Georgiou, C. Tourkolias National Technical University of Athens, Lab. of Industrial & Energy Economics Ε. Georgopoulou, S. Mirasgedis, Y. Sarafidis, D. Lalas National Observatory of Athens, Inst. for Environmental Research & Sustainable Development

EWEC 2006 National Technical University of Athens2 Contents The Clean Development Mechanism  The scope of the presentation Pre-selection of host countries Financial analysis of wind energy projects  Results without CDM  Results with CDM Sensitivity Analysis Conclusions

EWEC 2006 National Technical University of Athens3 Flexible Mechanisms A co-operative framework within the Kyoto Protocol  Annex-I countries: to meet their commitments in the most cost-effective way  non-Annex-I countries: to support sustainable development ►Emissions Trading ►Joint Implementation ►Clean Development Mechanism

EWEC 2006 National Technical University of Athens4 Clean Development Mechanism Article 12 of KP: “any Annex I country or any licensee legal entity of Annex I country is allowed to be credited for emissions reductions achieved by investing in projects located in non-Annex I countries” that would not have been implemented without the incentive of CDM Lack of knowledge and/or financial resources in non-Annex-I countries Lack of satisfactory profit for Annex-I countries

EWEC 2006 National Technical University of Athens5 Questions Is wind energy  an appropriate type of CDM project? Is CDM  an appropriate tool for the development of wind energy exploitation in developing countries ???

EWEC 2006 National Technical University of Athens6 The scope of the presentation To demonstrate the effect of CDM on typical Wind Energy projects To identify attractive investment opportunities on wind energy in smaller CDM markets  (of particular interest for Greek investors) To investigate the impact of key-parameters on the project’s profitability

EWEC 2006 National Technical University of Athens7 Existing CDM projects (1) 513 projects registered or under validation 22/12/2005

EWEC 2006 National Technical University of Athens8 Existing CDM projects (2) 107 Mt CO2/yr from projects registered or under validation 22/12/2005

EWEC 2006 National Technical University of Athens9 Geographical distribution of Wind projects 55 Wind energy Projects Total Capacity: 2140 MW Total Emissions Reduction: 3100 kt CO 2 eq/yr

EWEC 2006 National Technical University of Athens10 Moldova Georgia Armenia Bosnia & Herzegovina Serbia & Montenegro Albania F.Y.R.O.M. Lebanon Jordan Egypt Libya Tunisia Algeria Non-Annex I Countries Pre-selection of host countries

EWEC 2006 National Technical University of Athens11 Project specification Capacity: 51 MW (60 x 850 kW) Hub height: 60 m Rotor diameter: 52 m Investment cost: 1000 €/kW Operational and Maintenance cost: 15 €/kW,year  Assumed to be the same in all host countries

EWEC 2006 National Technical University of Athens12 Data Requirements Without CDM  Load factors  Electricity tariffs With CDM  Load factors  Electricity tariffs +  Baseline emission factor  Value of CERs

EWEC 2006 National Technical University of Athens13 Load factors Calculated on the basis of data on average wind speed

EWEC 2006 National Technical University of Athens14 Electricity prices Determined on the basis of local data

EWEC 2006 National Technical University of Athens15 Results of Financial Analysis

EWEC 2006 National Technical University of Athens16 Baseline Emission Factors Calculated on the basis of local data as the average of:  Operating margin: existing electricity system  Build margin: recent additions to the system

EWEC 2006 National Technical University of Athens17 Value of CERs Values fluctuations in the carbon market  Basic scenario 15 €/t CO 2  Pessimistic scenario 10 €/t CO 2  Optimistic scenario 25 €/t CO 2

EWEC 2006 National Technical University of Athens18 Results Registration in CDM is expected to increase IRR by 1.5% – 2% CERs: 15 €/t CO2

EWEC 2006 National Technical University of Athens19 Sensitivity Analysis ParameterPessimisticOptimistic Load factor-20%+20% El. tariff-+20% Investment cost+20%-20% Emission factor-20%+20% Value of CERs10 €/t CO 2 25 €/t CO 2

EWEC 2006 National Technical University of Athens20 A marginal case: Egypt Sensitivity Analysis

EWEC 2006 National Technical University of Athens21 A promising case: Jordan Sensitivity Analysis

EWEC 2006 National Technical University of Athens22 Average impact IRR increase

EWEC 2006 National Technical University of Athens23 Conclusions Interesting investment opportunities on wind energy exist in some developing countries The CDM has a relatively small impact on the project’s profitability The influence of CDM relevant parameters is very low  Emission factor (country specific)  CERs value The most critical factors influencing IRR are:  Investment cost: to be reduced through subsidies  Load factor: to carefully select the site  Electricity tariffs: to be provided in host countries

EWEC 2006 National Technical University of Athens24 Thank you for your attention !