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This presentation informs on work carried out for the Chilean government regarding a proposal for a NAMA (Nationally Appropriate Mitigation Action) in “self-supply energy systems based on non-conventional renewable energy” in Chile. The proposal was developed in cooperation with Fundación Chile and financed by the International Climate Initiative of the German government through the Mitigation Momentum project (www.mitigationmomentum.org). The development of the proposal was undertaken in a consultative process involving key governmental, private sector and civil society stakeholders. Frauke Röser, Managing Consultant International Climate Policies at Ecofys, gave the presentation during a webinar in February 2014.
Citation preview
Supporting NAMA development in Chile
Ecofys webinar
Frauke Roeser
20/02/2014
© ECOFYS | |
Outline
20/02/2014 Frauke Roeser
Introduction to NAMAs
Case Study – Chile Self-supply Renewable Energy
Q&A
2
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Backdrop
Frauke Roeser 20/02/2014 3
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The evolution of NAMAs in the climate negotiations
> Paragraph 1 (b) (ii) of the Bali Action Plan of 2007:
> “ […] Nationally appropriate mitigation actions by developing country Parties
in the context of sustainable development, supported and enabled by
technology, financing and capacity building, in a measurable,
reportable and verifiable manner.”
20/02/2014 Frauke Roeser 4
COP 13 Bali
•Bali Action Plan first mentions NAMAs
COP 15 Copenhagen
•NAMA submissions by countries
•„NAMAs to be subject to MRV“
COP 16 Cancun
•NAMA Registry agreed
•„NAMAs aim at achieving deviation from business as usual“
COP 17 Durban
•Guidelines for Biennial Update Reporting (including NAMAs)
COP 19 Warsaw
•NAMA Registry operational
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Key aspects of a NAMA
A NAMA is a voluntary intervention by a developing country
government:
> Which is in line with national and/or local development
priorities
> Which receives support from domestic and/or international
sources
> Which has effect on reducing GHG emissions either directly
or indirectly
> Which is measurable, reportable and verifiable ("MRVable")
to ensure transparency of the NAMA outcomes
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NAMA Types
> NAMAs can be:
– Strategies (e.g. renewable strategy – wind,
solar, tidal)
– Policies and Programmes (e.g. energy
efficiency standard, Feed-in tariff, energy efficient
lighting programme)
– Projects (e.g. Bus Rapid Transit lane)
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Differences of NAMAs to CDM
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Element NAMA CDM*
Type of activity - National Strategy - Policy - Programme - Project
- Individual Project - Aggregation of projects
Funds flow To government To project developer
Carbon credits No Yes
Sustainable development benefits
Very important (‘nationally appropriate’)
Prerogative of host country
*Clean Development Mechanism
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Global NAMA action
> 87 NAMAs and 37 feasibility studies in 35 countries in the NAMA database
> Tracking of global NAMA activity
20/02/2014 Frauke Roeser 8
Source: www.nama-database.org
© ECOFYS | | 20/02/2014 Frauke Roeser
State of play of NAMAs
> 40 submissions to the UNFCCC Registry: 36 supported; 4 unilateral
> NAMA Database contains 87 NAMAs and 37 studies from 35 countries
Source: www.nama-database.org
9
Number of NAMAs
34 68
10
3
6
0 10 20 30 40 50 60 70 80
Concept
Proposal/ Planning
Implementation
Not knownSubmitted to registry
Not submitted to registry
© ECOFYS | | 20/02/2014 Frauke Roeser
Regional distribution of NAMAs
> Latin America most active region
– Followed by Africa
– Europe: Serbia submitted 12
NAMAs
> Broader regional spread than CDM
– Africa and Least Developed
countries notably larger share
> Possible reasons
– NAMA emphasize sustainable
development
– Flexibility in design
CDM
NAMA
Source: http://cdm.unfccc.int/Statistics/Public/CDMinsights/index.html, accessed 15/01/2014
Middle East and Africa,
26%
Asia, 13% Latin
America,
50%
Europe, 11%
Africa
2%
Asia
Pacific
84%
Econo-
mies in tran-sition 1%
Latin
America
13%
10
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Sectoral distribution of NAMAs
CDM
NAMA
Source: http://cdm.unfccc.int/Statistics/Public/CDMinsights/index.html, accessed 15/01/2014
Source: Ecofys et al 2013
> Energy supply largest share (36%)
– Followed by transport and
buildings
> Broader sectoral coverage than in
CDM
– Esp. transport and buildings
notably more relevant
> Possible reasons
– Less stringent MRV
requirements
– Accounting for medium to long
term emission reduction and
transformational change
possible
Waste
14%
Industry
11%
Forestry
4%
Energy
supply
36%
Transport
19%
Agriculture
2%
Buildings
14%
Energy
Supply
75%
Agricult
ure
2.4%
Building
s
1.3%
Waste
11%
Industry
10%
Forestry
0.6% Transpo
rt
0.35%
11
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NAMA Finance
> New and additional funds agreed:
> US$30 bn as fast start finance for 2010 – 2012
> „Mobilize“ US$100bn per annum by 2020
> Establishment of Green Climate Fund (GCF)
> Few NAMAs in implementation
> Finance still mainly focussing on readiness activities
> Only one dedicated NAMA implementation fund: NAMA Facility of
UK and Germany
> Need to provide finance to build confidence
> Public finance likley to be limited
> Important role of the private sector
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Outline
20/02/2014 Frauke Roeser
Introduction to NAMAs
Case Study – Chile Self-supply Renewable Energy
Q&A
13
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Mitigation Momentum
> Support to the Chilean
government through the
Mitigation Momentum project
– Funded by the German
International Climate
Initiative
– Partnership with Energy
Reserach Centre of the
Netherlands (ECN)
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www.mitigationmomentum.org
> Counterpart in Chile
– Ministry of Environment
– Ministry of Energy
– Centre for Renewable Energy (CER)
> Local partner Fundacion Chile
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Energy context Chile
> Between 2012 and 2020, electricity
consumption is projected to
increase at a rate around 5.9%
> By 2020 ca. 8000 MW of new
generation capacity will be needed
to satisfy demand
> Chile relies heavily on hydropower
and has almost no indigenous fossil
energy resources.
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> Recent droughts and environmental challenges have limited the
development of hydro projects. There is continued concern over access
to competitively priced gas supplies.
> As a result, around half of new capacity under construction is coal
Source: Minsiterio de Energia Chile/ CER:
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> Strong emphasis on non-
conventional renewable energy
(NRCE) in Chile’s National Energy
Strategy
> Law 20.257 sets a target of 10%
NRCE by 2024
> New institutions to boost NCRE – the
Renewable Energy Centre (CER)
Energy Strategy Chile
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Source: Gobierno de Chile, Ministerio de Energia, 2012:
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Promote the incorporation of renewable energy systems for self-
supply. All non-conventional renewable energy projects qualify as
long as 50% of the generated energy is consumed onsite.
Objective of the NAMA
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Barriers – Renewable energy
18
• Payback periods of RE vs. core business investments in the sector
• Banking institutions not accustomed to small-scale RE project finance
• Unwillingness to invest in pre-feasibility studies when outcomes are uncertain
Financial
• Access to qualified installers and consulting companies to deliver projects
• Access to qualilfied technicians to operate and maintain equipment
Capacity
• Lack of understanding of technologies and benefits
• Lack of trust Awareness
• Long and difficult process to gain approval for injecting electricity to the grid Regulatory
20/02/2014 Frauke Roeser
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NAMA Components
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Levelized cost of energy
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> Aim is to lower the Levelized Cost of Energy below or near the retail
energy rate while maximizing the leverage of programme funds.
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Financial Component
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Example guarantee fund
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Portfolio loss allocation 80%
Total contribution: $10 million
Non recoverable funds (losses): -$6.40 million
Years to depletion: 23 years
Leverage on non-recoverable funds: 15.63
10.00
Portfolio loss allocation 0%
Total contribution: $50 million
Leverage 2.00
Portfolio loss allocation 20%
Total contribution: $30 million
Share financing
Equity 20%
Loans 80%
Terms
Int. rate 3.75% Defaults
Tenor 15 years Exp.rate 10%
$80 million
$100 million
Funds from the
commercial
financial institution
and development
bank are used for
the actual loans
The guarantee
funds are granted
and set aside to
cover loan defaults.
Guarantee funds
are invested in a
low risk investment
like govt. treasuries
Leverage including recoverable funds
(worst case scenario):
CORFO+Int. development bank
Commercial Financial Insitution
Projected volume of loans
Total projected investments
NAMA Guarantee Fund
Project loans
Frauke Roeser
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Impacts of the NAMA
> GHG emissions – Impacts depend on size of fund and leverage of financial instruments.
Theoretical potential as much as 1.7 million tonnes CO2/e per year
> Job creation – Distributed renewable energy projects will create jobs from installation,
ongoing operations and maintenance.
> Market creation – NAMA will enable more suppliers to establish in Chile, lowering costs
from cumulative learning effects, reduced regulatory costs and increased competition of
suppliers.
> Mitigation capacity – The mitigation capacity of Chile will increase as the RE market
expands, financing institutions gain experience with RE project finance and high-skilled
workers develop critical skills.
20/02/2014 Frauke Roeser 23
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Outlook
> Chile NAMA is one of five successful NAMAs under the NAMA
Facility call in 2013
– Chile: Self-supply Renewable Energy
– Costa Rica: Low Carbon Coffee NAMA
– Mexico: NAMA for Sustainable New Housing
– Colombia: Transit-oriented Development
– Indonesia: Sustainable Urban Transport Program Indonesia
> British German NAMA Facility is first dedicated fund for NAMA
implementation
> Implementation expected to begin in 2014
20/02/2014 Frauke Roeser 24
Source: nama-facility.org
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What made the NAMA a success?
> Strong government owernship and support
> In line with national strategy and priorities
> Stakeholder based approach to NAMA design
> In depth review of key barriers to mitigation – investment in
renewable energy applications
– Mix of interventions to address barriers
> Early engagement with finance sector
– Detailed design of finance mechanism
> Concrete, realistic, implementable
20/02/2014 Frauke Roeser 25
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Outline
20/02/2014 Frauke Roeser
Background on NAMAs
Case Study - Chile
Q&A
26
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Thank you!
Ecofys Germany GmbH International Climate Policies Am Karlsbad 11 10785 Berlin Germany Frauke Röser T: +49 (0)30 29773579-32 E: [email protected]
20/02/2014 Frauke Roeser 27
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Financing of NAMAs
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MRV of Self-supply renewable energy NAMA in Chile
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