1. 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. 2 Johannes Laubach e-mail: Johannes.Laubach@web.de Content Mil Hydropower Station CDM Project 2 Gilanchay Cascade Hydropower CDM Project 3 CDM Power Sector Baseline Azerbaijan 1

3. 3 Johannes Laubach e-mail: Johannes.Laubach@web.de CDM Power Sector Baseline Azerbaijan 1

4. 4 Johannes Laubach e-mail: Johannes.Laubach@web.de Power Sector Azerbaijan (2006) Name of stationCommissioningFuelDesign capacityActual capacity Year[MW][MW] 1. Azerbaijan TPS1981 - 1990Gas/oil2,4001,900 1) 2. Ali-Bayramly TPS1962 - 1968Gas/oil1,050840 3. Severnaya TPS1960Gas/oil15080 4. Severnaya TPS (CC) 2003Gas400350 5. Sumgait CHP No. 1 1959 - 1962Gas/oil200- 6. Sumgait CHP No. 2 1966 - 1972Gas/oil220- 7. Sumgait CHP No. 3 (CC) 2004Gas/oil3232 8. Baku No. 1 (GT) 2000Gas/oil106106 9. Baku CHP No. 2 (CHP) 1954Gas/oil24- 10. Gandja1962Gas/oil7525 11. Nakhichevan GT1994Gas64- Total on thermal power stations-4,7213,333 (81%) 12. Shamkir HPS1982 - 1983Hydro380340 13. Yenikend HPS2000 - 2003Hydro150120 14. Mingechavir HPS1953 - 1954Hydro401.6300 15. Yarvara HPS1957Hydro16.511 16. Araz HPS1971Hydro2220 17. Tarta HPS1975Hydro50- 18. Small sized HPSvariousHydro19.4- Total on hydropower stations (HPS)Hydro1,040791 (19%) Total on energy system--5,7614,124

5. 5 Johannes Laubach e-mail: Johannes.Laubach@web.de 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 2003 - 2005: 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. 6 Johannes Laubach e-mail: Johannes.Laubach@web.de 6 Ex-ante Build Margin 5 most recently commissioned power plants: Commissioned200320042005 Average Weight [t CO 2 /MWh e ][%] AZERKHIMIYA CC CHP2003-0.460.460.461 *) YENIKEND 1 - 4 2000/0300003 SHIMAL (SEVERNAYA) CC 120030.430.430.460.4416 BAKU-1 GT-1, GT-220000.750.700.770.745 AZERBAIJAN DRES 1 - 8 1981-900.820.810.810.8176 Weighted average0.750.720.720.73 => 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 0.4 - 0.5 t CO 2 /MWh e very soon!!!

7. 7 Johannes Laubach e-mail: Johannes.Laubach@web.de 7 Ex-ante Combined Margin 200320042005AverageWeight t CO 2 /MWh e % Operating Margin0.730.700.700.7250 Build Margin0.750.720.720.7350 Combined Margin0.740.710.120.7250 => 0.72 t CO 2 /MWh e was applicable for validation in 2006!

8. 8 Johannes Laubach e-mail: Johannes.Laubach@web.de Mil Hydropower Station CDM Project 2

9. 9 Johannes Laubach e-mail: Johannes.Laubach@web.de 9 Technical Data Dam & reservoir Dam height: 26 m Water reservoir: 55,000 m³ => “run-of-river” Reservoir surface (estimated):5,000 - 10,000 m² ??? Hydropower station Design flow: 100.5 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. 10 Johannes Laubach e-mail: Johannes.Laubach@web.de 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. 11 Johannes Laubach e-mail: Johannes.Laubach@web.de 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 CDM @ 7 €/CER8.8%33.3 Project activity with CDM @ 10 €/CER9.4%31.6 Project activity with CDM @ 20 €/CER11.3%26.1

12. 12 Johannes Laubach e-mail: Johannes.Laubach@web.de Gilanchay Cascade Hydropower CDM Project 3

13. 13 Johannes Laubach e-mail: Johannes.Laubach@web.de 13 Technical Data Cascade of 18 “small” Hydropower plants Design capacity: 43.4- 52.2 MW Average annual generation:194- 231 mln kWh/yr Construction time:6 years, but 1.5 years per plant (commissioning ~ 2010 - 2015)

14. 14 Johannes Laubach e-mail: Johannes.Laubach@web.de 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. 15 Johannes Laubach e-mail: Johannes.Laubach@web.de 15 Economics and Impact of Carbon Finance ParameterUnitValue Capital expenditures (CAPEX)mln €101.1 CAPEX disbursementyears 1 - 520%/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 CDM @ 7 €/CER4.3%78.9 Project activity with CDM @ 10 €/CER4.6%77.1 Project activity with CDM @ 20 €/CER5.7%71.0

16. 16 Johannes Laubach e-mail: Johannes.Laubach@web.de Average OM method yields low baseline emissions and consequently low credits ! Thank You!