Experience of SEC “Biomass” in development of JI projects in Ukraine

Dr. Georgiy GeletukhaSEC Biomass, Ukraine

UNFCCC Workshop on Joint Implementation

9-10 March 2006, Bonn, Germany

Content

• SEC “Biomass” introduction

• Case studies of developed JI projects

• Potential JI projects in Ukraine

• Final words

SEC “Biomass” Ltd.

• Scientific Engineering Centre “Biomass” is a private consulting and engineering company, established in 1998. Staff – 20 employees, 5 possess PhD

• Proposes high-quality consulting in the field of energy production (including from biomass)

• Provides following services: Preparation of pre-feasibility/feasibility studiesSelection of commercial equipment for energy

generationR&D, engineering and design worksJI project identification, consulting including preparation

of tender documents for JI projects (PIN, PDD, Business Plan, etc.)

SEC “Biomass” Ltd. (cont)

Experienced in preparation of: 8 PINs for Austrian JI Programme 3 PDDs for Austrian JI Programme 3 PINs for ERUPT-5 tender 2 PDDs for ERUPT-4 and ERUPT-5 tenders 6 Feasibility studies (FS) for Japan JI Programme 5 PINs for Japan JI Programme 2 FSs for German JI Programme 5 PINs for Japan JI Programme 1 PIN for private buyerTotally: 22 PINs; 5 PDDs; 8 FSs

Ukraine’s JI procedure (approved by Ukrainian Government, decree N206 of 22.02.2006)

1. JI projects should be designed according to the requirements approved at the Conferences of Parties. Obtaining a Letter of Endorsement (LoE) at first stage and a Letter of Approval (LoA) after submitting a full project proposal

2. Owner of an object, where project is expected to be implemented (project owner), will submit printed and electronic version of justification materials on potential JI project prepared according to specific requirements to the Ministry of Environmental Protection (MEP)

3. MEP during a month will check the justification materials on conformity with Ukrainian and international legislation and in case of a positive consideration will prepare LoE.

4. Project owner on the basis of LoE will develop a JI project according to the specific requirements, which shall include the following chapters: Baseline study Estimation of the emission reduction units Monitoring plan of project implementation Environmental impact assessment Financing plan

Ukraine’s JI procedure (continue)

5. Project owner in order to obtain LoA will submit project materials together with expert conclusion of independent certified organization to the MEP for consideration regarding conformity to JI criteria.

6. MEP could organize if necessary an expertise of the project.7. MEP during a month will consider the project and make a decision.

In case of approval MEP will prepare a LoA8. JI project should be registered in MEP in order to keep an

accounting record on ERUs or absorption of GHGs. 9. The monitoring of GHG reduction is done by independent expert

organization. 10.The report on the test results and monitoring of GHG should be

submitted by owner to MEP for registration. Transfer of ERUs from the National Register to the register of corresponding partner country is doing after registration of above mentioned report and achieved ERUs in MEP.

11.The information on the project implementation should be distributed in mass media.

Case Study 1: Utilization of sunflower husks for steam and power production at OJSC

Kirovogradoliya (Austrian JI/CDM Program) Project Idea: Installation of a new husk fired CHP plant: - 2 operational husk fired boilers (16 t steam/hr each)- Steam turbine (2.5 MW)- 1 reserve husk fired boiler (16 t steam/hr)

Expected GHG Emission Reductions: 1. Replacement of natural gas by biomass - 22,000 t of CO2e/y2. Avoiding brining biomass to the landfill - 13,000 t of CO2e/y3. Avoiding of electricity purchase - 15,000 t of CO2e/y

Total ERUs for the commitment period (2008-2012): 250,000 t of CO2e Total investment: 6,1 million EUR

Payment for ERUs makes up 25 % of total project cost under 6.5 EUR/t CO2e

Status: Positively validated PDD is under evaluation at Austrian JI Program

Case Study 1 (continue): additionality test

1. JI project is not economically attractive without ERUs sale

2. Baseline scenario has better financial showings (it is much cheaper and technically easier: 760,000 EUR against 6 mill EUR of JI project)

3. First CHP plant in Ukraine on solid biomass

Financial showings JIP without ERUs sale

JIP with ERUs sale

Baseline scenario

NPV, Euro -298060 501101 117175

IRR 8.9% 11.9% 13.4%

Simple payback period 7.1 yr 5.9 yr 5.7 yr

Discount rate for all cases is 10%

Case Study 2: Rehabilitation of the District Heating System of Crimea –

(Austrian JI/CDM Programme)Project Idea: Reconstruction and modernization of existing DH system:1) Rehabilitation of 188 boiler houses;2) Fuel switch (from fuel oil to natural gas) for a number of boiler houses;3) Replacement of 43 km of heat networks by pre-insulated pipes;4) Installation of 6 CHP units (total installed capacity 3 MWe)5) Landfill gas recovery and utilization for energy purposes

Expected GHG emission reductions: 120,000 tons of CO2e/yTotal expected ERUs for (2008-2012): 600,000 tons of CO2e Total investment: 13.6 million EURCarbon credits may cover over 25% of the total investments at price 6

EUR/t CO2e

Status: Positively validated PDD is under evaluation at Austrian JI Program

Case Study 3: Electric power production on stripped casing-head

gas in Boryslav city – (Austrian JI/CDM Programme)

Project Idea: utilization of non-conventional gas by construction of a power plant with total capacity of 12 MWe.

Expected GHG emission reductions: 60,000 tons of CO2e/y

Total expected ERUs for (2008-2012): 300,000 tons of CO2e

Total investment: 9,000,000 EUR

Carbon credits may cover over 20% of total investments at price 6 EUR/t CO2e

Status: Positively validated PDD is under evaluation at Austrian JI Program

Case Study 4: Methane Capture at Odessa MSW Landfill (for ERUPT-5)

Project Idea: Installation of LFG extraction system at Odessa MSW landfill and replacement of natural gas in Cement factory kilns (500 m from the landfill)Expected GHG Emission Reductions: 1. Natural gas replacement at Cement factory - 7,000 t of CO2e/year2. Capture of methane emissions at the landfill - 60,000 t of CO2e/year Total expected ERUs for (2008-2012): 320,000 t of CO2eTotal investment: 1.1 million EUR

Carbon credits may cover over 170% of total investments at price 6 EUR/t CO2eStatus: Positively validated PDD is rejected by the Netherlands JI Program.

Possible types of JI projects from Ukraine

• Substitution of traditional fuels by less carbon intensive fuels or biomass

• CHP (~30% of fuel economy, and ~30% of GHG emission reduction)• Energy efficiency in DH sector and electricity generation• Capture of coal mine/coal bed methane, biogas from municipal solid

waste landfills, agricultural farms, waste water treatment plants (flaring or utilization)

• Heat or CHP production from solid biomass, MSW etc.• Methane emission reduction under gas and oil production and

transportation. • Other energy saving projects in metallurgy, cement production, mineral

fertilizer production, chemistry etc.

Potential JI projects in coal industry

• About 95% of coal mines in Ukraine are underground mines• Ukraine’s coal industry responsible for the biggest share of

methane emissions in the country• Coal industry of Ukraine emits 1,5 billion m3 of CH4 annually• 42 coal mines in Ukraine have installed degasification systems and

only a few mines use CMM in boiler houses• Methane concentration range in degasification pipeline is 25-60 %• There is good experience in CMM utilization in Ukraine. The

biggest in the history of GE Jenbacher project on CMM utilization is in Ukraine at Zasyad’ko coal mine (65 MWe + 65 MWth).

Problems of JI projects development in Ukraine Barrier Possible way of decision

Delay in Governmental approval of JI procedure

Fortunately, it has been finally approved on 22 February of 2006. Lobby of interested parties were quite useful: project owners, developers, NGOs, some Ministries, professional associations.

Lack of information on JI possibilities among project owners.

• Capacity building projects supported by donor countries: Climate Change Initiative (1998-2002, USAID); TACIS project (2004-2006); GEF project (2005).

• PointCarbon web site with a Russian translation (translation was supported by Danish Environmental Protection Agency)

•JI conference in Ukraine, Kiev, 3-5 October 2005 (SEC Biomass, PointCarbon and others), 2nd JI conference in Ukraine, Kiev, 23-25 October 2006.

•Russian/Ukrainian brochure on JI is needed very much.

Problems of JI projects development in Ukraine (cont). Barrier Possible way of decision

Not readiness of project owners at the moment to pay for development of JI projects documentation (PIN, PDD, validation report, etc.)

Fortunately, the most of project buyers (both Governmental programs and private companies) are ready to support development of JI projects documentation (sometimes after long explanations and negotiations).

Request of buyer on strong bank quarantines in case of advance payment for ERUs.

Many companies in Ukraine has no credit history and strong bank quarantines are quite expensive for them. Two alternatives are: availability of bank quarantines and advance payment or absence of bank quarantines and advance payment. The compromise between buyer and project owner may be found.

Final words• The procedure for JI project development and approval

has been approved by Ukrainian Government on 22 February 2006.

• The big increase of natural gas prices in Ukraine from 2006 (more than twice) is stimulating implementation of energy saving projects in Ukraine.

• These two factors do Ukraine by country with a great potential for JI projects right now.

• There is a considerable experience in SEC Biomass in development of JI projects in different sectors of economy.

• SEC Biomass intends to “push forward” more JI projects from Ukraine to the international emissions market.

Welcome to Cooperation

If you are interested in JI consulting services:

- JI project identification

- Feasibility studies

- PIN development

- PDD development

- JI project portfolio development

Welcome to contact SEC “Biomass”:

www.biomass.kiev.ua

First announcement(will be distributed in ~2 weeks)

2-nd International Conference on JI Projects in Ukraine “Climate Change and Business”

October 23-25, 2006, Kyiv, Ukraine

Organized by:• Ministry for Environmental Protection of Ukraine• Institute of Engineering Ecology• SEC “BIOMASS” • PointCarbon

Conference web site: www.biomass.kiev.ua

Thank YOU for Your Attention!

Contact information:

Georgiy Geletukha

geletukha@biomass.kiev.ua,

http://www.biomass.kiev.ua