1. Standardized Baseline Methods COP 8 - New Delhi Duane Kexel, Vice-President, PSE Jari Vayrynen, Prototype Carbon Fund

2. 2 Background Czech Umbrella Project –Aggregate Small Projects From CEA/SEF –Target A Few Lines of Business –Transactions Costs Too High For Individual Project Analyses –Need Methods That CEA/SEF Can Apply Quickly To Screen Projects –Need Basis For Pre-Validation

3. 3 Limits On Conventional Analyses Too Costly For Small Projects Too Lengthy For Numerous Projects Require More Data Than Is Easily Available Energy Audits Are Available But Full Feasibility Studies Are Not Not Familiar Approaches For Local Staff

4. 4 Standardized Baseline (SBL) Concept Trade-off Effort and Precision Proponent May Choose Standard or Detailed Approach SBL May Yield Somewhat Smaller ERUS For Much Smaller Effort Intentional Conservative Bias In SBL Validator Must Confirm That SBL Results Are Sound Over A Set of Eligible Projects

5. 5 Czech Experience To Date Standard Baseline Methodologies Proposed: –“Small” Municipal District Heating Projects –Hospital or Campus Energy Efficiency Projects Illustrative SBL Case Studies For Each –Rozmital Coal To Gas DH Integration –Thomayer Hospital EE Full BLS and MP Prepared For Each DNV Now Validating Both SBL and BLS

6. 6 Eligibility Criteria-Standard DH Baseline Why? - Limit Exposure From Simplified Methods Total Space & Water Heat Load < 100 TJ/a Uses Existing Network-Expansion < 10% At least 90% of load residential and small comml Individual Load Data For Loads > 2,500 GJ/a Heat Only Boilers - No CHPs Fuels - Lignite, Coal, LFO, Gas, Biomass

7. 7 DH Standard Method Summary Determine Services Offered, Service Area And Heat Loads Assume End User Demands Remain Fixed If They Comply With Czech Standards - Otherwise Assume Compliance Within Ten Years Determine Time Horizon For Operation of Existing System - Default = Five Years Default Existing System Efficiencies Equal Czech Stds Unless Lower Efficiencies Are Documented Existing System Losses Default - 15% Replacement Is With Least-Cost Greenfield System

8. 8 DH Standard Method Summary 2 First Step Is Survey To Solicit Needed Data For First Five Years, Loads = Current; Efficiencies Are Based on Standards Graphic Methods Used To Identify Optimum Replacement System

9. 9 DH SBL Data Requirements Sponsor Data –Decision Criteria –Alternatives Considered –Expected First Year Heat Price Existing System Data –Age and Expected Retirement Date –Heat Production and Fuel Consumption –Fuel Costs and Calorific Values –Distribution Losses –Loads (Max MW, Min MW, MWh, HPY, SH, WH)

10. 10 DH SBL Data Requirements - 2 Future System –Expected New Loads –Expected Load Reduction Due To Efficiency –Loads vs Czech Standards –Replacement System Costs by Component –Total Efficiencies

11. 11 Replacement System Optimization Determine Least Cost Operating Hours For Gas and Coal Boilers (~1,000 Hours for Peakers) Find Mwh/a From Coal and From Gas (Areas Under Load Curve ~95% Coal) Apply Emission Factors To Fuel Consumption To Get SBL CO2 Emissions

12. 12 SBL vs Rozmital BLS Results

13. 13 SBL vs Rozmital BLS Results Replacement Immediate For Both SBL, BLS Due To Condition of Boilers SBL Uses Integrated System, BLS Uses Distributed Supply System Loads 1.0% Higher for SBL Efficiencies Lower for SBL CO2 Emissions 13% Lower for BLS

14. 14 DH SBL Additionality Continued Operation of Exisitng System Assumed To Be Least Cost for 5 Years Replacement System Is Optimized To Assure Least Cost Operation Baseline Is Least Cost, Environmentally Compliant System Proposed System Must Then Be Higher Cost Without Carbon Credits

15. 15 Eligibility Criteria Std Energy Efficiency Baseline (SEEB) Intended For “Campus-Like” Facilities Schools, Universities, Hospitals, Etc. No Firm Size Limit But Typically < 5,000 tpy CO2 Reduction Detailed Energy Audit With Investment and Savings For Each Building Financing Must Be ESCO and Host ESCO and Hospital Terms and Hurdle Rates Are Known

16. 16 SEEB Method Summary Energy Audit Provides Load Reductions at Each End User and Related Investment Total Efficiency = MWh to End User/MWh Fuel Input Default Total Efficiencies (TE) Provided For Current and Replacement Systems Load Reductions * TE = Fuel Reductions

17. 17 SEEB Method Summary 2 Fuel Reductions * Fuel Prices = Fuel Cost Savings (FCS) Non-fuel Cost Savings = k * FCS Cash Flows Yield IRRs for Each Building Investment and for Each Year of Project Investments Which Meet ESCO and Hospital Hurdle Rates Are In Baseline All Other Investments Are Out of Baseline

18. 18 Illustrative SEEB Terms Investments - 75% ESCO, 25% Hospital Savings To ESCO - 100% For As Many Years As Required to Provide ROI = 15% Savings to Hospital, 100% After ESCO Has Earned 15% Hospital Hurdle ROI - 10%

19. 19 SEEB Data Requirements Savings and Investments by Building or Supply System Component Existing Supply and Delivery System Total Efficiencies by Hot Water and Steam Networks by Boiler Fuel Retirement Date For Existing System and Total Efficiencies and Fuel For Replacement System Fuel Price Projections Non-fuel Operating Costs as Percent of Fuel Cost Defaults Provided For Missing Data

20. 20 SEEB vs Thomayer BLS ERUs

21. 21 SEEB vs Thomayer BLS Results Both Show No EE Investments in The Baseline Because of Inadequate ROIs All of The Proposed Investments Are Then Additional Minor Differences in CO2 Reductions - Variance Due to Changes in Efficiencies Expect Greater Variance In Projects With Existing System To Be Replaced

22. 22 Standard Baselines Conclusions Expect Wide Application Expect Significant Reductions in Transactions Costs Will Need Improved Databases To Support May Need Refinements Based on Experience Suggestions Welcome