Improvement of Benchmark Analysis

Masuda

Description

Barriers & Challenges to Financing for Energy Efficiency CDM ProjectsCDM/JISustainable InvestmentM４UDevelopmentFinanceAdvisory Service on Clean Development Mechanism and Financing for SustainabilityMASUDA, Masato President of M4U Limited,Chief Counselor to the president of Japan Carbon Finance, Ltd.on February 25, 2005 at CTI Industrial Joint Seminar on 1Technology diffusion of Energy Efficiency in Asian Countries, Beijing, China1. Outlook for Primary Energy 1. Consumption in Asia by Country by FuelMtoeMtoe5,0005,000Other AsiaRenewable4,500 4,5004,000 4,000IndonesiaNuclear 3,5003,500India3,0003,000Natural2,500 2,500GasP.R.China2,000 2,000Oil1,5001,500SouthKorea1,0001,000CoalJapan500 5000 01990 2000 2010 2020 1990 2000 2010 2020Year Yearfrom The Institute of Energy Economic, Japan, March 200422. Heavy Reliance on Fossil Fuels might cause:• Uncertainty of Economic Growth due to due to bottleneck of energy supply• Tension among Countries due to strengthening energy security• Domestic Environmental Problems caused by emissions of SO2, NOX, etc.X• International / Global Environmental Problems such as transborder pollution, climate change, etc.33. CDM is expected to improve Energy 3. Efficiency in Developing Countries• CDM shall assist Non-Annex I countries in -Annex I countries in achieving Sustainable Development, and assist Annex I countries in achieving compliance with their Kyoto commitments ...

Informations

• Publié par: Nizeng
• Nombre de lectures: 16
• Langue: English

Extrait

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Sustainable Development

Finance

MASUDA, Masato President of M4U Limited, Chief Counselor to the president of Japan Carbon Finance, Ltd.

Advisory Service on Clean Development Mechanism and Financing for Sustainability

CDM/JI

４

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2000 2010 Year

Mtoe 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1990

Other Asia Indonesia India P.R.China South Korea Japan

2020

by Fuel

by Country

Renewable Nuclear Natural Gas Oil Coal

2020

400

2010

2000 Year

Mtoe 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1990

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Problems such as transborder pollution, climate change, etc.

c

emissions of SO 2 , NO X , etc.

E

3

 

   

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strengthening energy security

c

bottleneck of energy supply

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shall asCDM   noN-tsis in ies nurt Iocen xnA ries

achieving Sustainable Development , and assist Annex I countries in achieving compliance with their Kyoto commitments Non-Annex I country as Host C ountry Annex I country

GHG emissions

Before Implementation of CDM Project

DOE & EB

Limitation of GHG Emissions

Support (finance &/or technology)

CERs

After Implementation GHG emissions ERs

3 . Developing CountfEificneyci  n rove imprgy  Enee px Msi dotceetCD

4. Difficulties for Energy Efficiency CDM

5



(a) Methodological Difficulties

(b) None of Energy Efficiency CDM project has been registered 

(b) Financial Difficulties

(a) Only 2 methodologies for Energy Efficiency CDM have been approved (as of Feb.18, 2005)

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7

(FCCC/CP/2004/L.2, Para.15.)  Encourages project participants to make proposals for new baseline and monitoring methodologies for types of projects activities ･･･ , such as   transportation, energy efficiency and district heating, and the Executive Board to consider such proposals with priority and to continue its work on elaborating consolidated methodologies for new sectors 

No consensus for Top -down Approach COP  s Guidance relating to the CDM

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Years

Credit Period Project Lifetime

Capex Cash Out-flow Construction z Energy Efficiency CDM is more difficult because of: (a) Big Capital Expenditure (Capex), and (b) Low Global Warming Potential (GWP)

8

Original Cash In-flow to Project

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Capex: US$33 M including 10 % VAT/Import Duty Net Electricity Generation: 150,000 MWh/y  T a r i f f : U S $ 0 . 0 5 / k W h O&M Cost: US$2.0 M  Income T ax: 30 % Construction : 2 yrs  Operational Lifeti me: 2 0 yrs from Completion Depreciation: by 10 -yr straight -line installments up to 5 % scrap value Carbon Emission Factor of Grid: 0.9 t -CO2/MWh

9

Grid



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US$, Million

7.5 2.0 0.0

0.0  5.5  1.6  3.9  0.0  0.0  0 0  . 3.9 

13  7.5  2.0  0.0 

10

5.5

0.0 0.0 0.0 3.9

0.0

3.1

2.0 3.1

7.5 2.0

1.7 3.1

0.7 1.7

2.4 0.7

0.0 2.4

4.8

0.0 4.8

0.0 0.0

3.1 0.0

12 7.5 2.0 3.1

0.0 2.4 0.7 1.7 3.1 0.0 0.0 4.8

0.0  2 4  . 0 7  . 1.7  3.1   0 0  . 0.0  4.8  

5  7.5  2.0  3.1 

16.5 0.0

0.0 16.5

0.0 6.5

16.5 0.0

0.0 0.0

0.0 6.5

0.0 0.0

0.0 0.0

0.0 0.0

0.0 0.0

0.0 0.0

0.0 0.0

0.0

0.0

0.0

0.0 0.0

4 7.5

4.8

0.0 4.8

0.0 0.0

3.1 0.0

1.7 3.1

0.7 1.7

2.4 0.7

0.0 2.4

0.0

3.1

2.0 3.1

7.5 2.0

3 7.5

-16.5 -16.5

0.0 6.5

0.0 0.0

1 0.0

0.0

0.0 0.0

2 0.0

1

0.0 0.0

0.0 0.0

2

Year

 Equity IRR = 11.6%  (Project IRR = 11.6%)  Cash Flow Projection

Year

Cash Flow =

9 ． IRR of Model Project

11

10 ． Impact of Incentive Policies on Energy Efficiency Project

 budgetary amount （ US$3.0M ） is assumed: (a) Exemption of VAT/ Import Duty （ US$ 3.0M ）    Equity IRR = 11.6%  12.9% (+1.3%) (b) Reduction of Income Tax (U S$0. 6 M  first 5 yrs ）    Equity IRR = 11.6%  12.6% (+1.0%)   (c) Subsidy for On -grid Tariff （ US$0.1 5 M  20 yrs)    Equity IRR = 11.6%  11.9% (+0.3%)  Upfront Incentive seems most attractive for Investors

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