World Bank Workshop on CDM Methodologies and Technical Issues Associated with Power Generation and Power Saving Project Activities December 3, 2005 Montreal.

World Bank Workshop on CDM Methodologies and

Technical Issues Associated with Power Generation and Power

Saving Project Activities

December 3, 2005

Montreal

World Resources Institute

Additionality – Issues and Options for Grid-Connected

Electricity Projects

Derik Broekhoff,World Resources

InstituteUSA

Additionality

• Additionality and Baselines Are Closely RelatedAdditionality and Baselines Are Closely Related

• ““A CDM project activity is A CDM project activity is additional additional if anthropogenic if anthropogenic emissions . . . are reduced below thoseemissions . . . are reduced below those that would have that would have occurred in the absence of the registered CDM project activityoccurred in the absence of the registered CDM project activity” ” (Decision 17/CP.7, Para. 43)(Decision 17/CP.7, Para. 43)

• ““The The baseline baseline for a CDM project activity is the scenario that for a CDM project activity is the scenario that reasonably represents the anthropogenic emissions . . . reasonably represents the anthropogenic emissions . . . that that would occur in the absence of the proposed project activitywould occur in the absence of the proposed project activity” ” (Decision 17/CP.7, Para. 44)(Decision 17/CP.7, Para. 44)

Additionality & Electricity Project Baselines

• Consolidated baseline methodology for Consolidated baseline methodology for renewables (ACM 0002):renewables (ACM 0002):

• ““The additionality of the project activity shall be The additionality of the project activity shall be demonstrated and assessed using the latest version of demonstrated and assessed using the latest version of the ‘Tool for the demonstration and assessment of the ‘Tool for the demonstration and assessment of additionality…’.additionality…’.””

• How well do ACM 0002 and the ‘Additionality Tool’ How well do ACM 0002 and the ‘Additionality Tool’ work together?work together?

The CDM ‘Additionality Tool’Step 0: Preliminary screening based on the starting date of the project activity

Step 1: Identification of alternatives to the project activity consistent with current laws and regulations

Step 2:Investment analysis

Step 3: Barrier analysis

Step 4: Common practice

Step 5: Impact of CDM registration

PROJECT ACTIVITY IS ADDITIONAL

Legal Requirements & Renewables

• Additionality Tool Step 1b:Additionality Tool Step 1b:

• If the project activity is the only way to comply with If the project activity is the only way to comply with regulations where there is widespread compliance, then regulations where there is widespread compliance, then project activity is not additional.project activity is not additional.

• Question: How should this be interpreted in the context Question: How should this be interpreted in the context of a (hypothetical) renewable portfolio standard? of a (hypothetical) renewable portfolio standard?

Additionality, Alternatives, and Investment / Barriers Analysis

• Additionality Tool Step 1a: Additionality Tool Step 1a: Define Alternatives to The Project ActivityDefine Alternatives to The Project Activity

• Project activity (not CDM)Project activity (not CDM)

• Plausible alternatives that deliver Plausible alternatives that deliver comparable outputs and servicescomparable outputs and services

• Continuation of current situationContinuation of current situation

Build Margin

Operating

Margin

Additionality, Alternatives, and Investment / Barriers Analysis

• Questions:Questions:• Should we define alternatives as a “blend” of most Should we define alternatives as a “blend” of most

recent plants (per baseline methodology)?recent plants (per baseline methodology)?

• If so, how to apply investment or barriers If so, how to apply investment or barriers analysis?analysis?

• If additionality analysis identifies a specific plant as most If additionality analysis identifies a specific plant as most attractive or having fewest barriers, should that plant be used attractive or having fewest barriers, should that plant be used for BM?for BM?

• (And if continuation of current situation is (And if continuation of current situation is identified, is there only OM displacement?)identified, is there only OM displacement?)

Additionality and Common Practice

• Additionality Tool Step 4:Additionality Tool Step 4:

• ““[Analyze] other activities implemented previously or [Analyze] other activities implemented previously or currently underway similar to the proposed project currently underway similar to the proposed project activity. Projects are considered similar if they are in activity. Projects are considered similar if they are in the same [region] and rely on a broadly similar the same [region] and rely on a broadly similar technology, are of similar scale, [etc.]….”technology, are of similar scale, [etc.]….”

• Questions: Questions:

• Can we link “common practice” with the BM determination for baselines? Can we link “common practice” with the BM determination for baselines?

• What would “common practice” be in context of 5 most recent plants?What would “common practice” be in context of 5 most recent plants?

• What does a 50/50 “combined margin” really mean?What does a 50/50 “combined margin” really mean?

2006

2008

2010

2012

2014

2016

Baseline

Emissions RateProjectEmissions Rate

Operating Margin Emissions Rate Build Margin

Emissions Rate

Additionality, Combined Margins, and Time

• Questions:Questions:

• What if project activity is “common practice” (or is most What if project activity is “common practice” (or is most attractive / has fewest barriers) but otherwise a new plant would attractive / has fewest barriers) but otherwise a new plant would not have been built for five more years?not have been built for five more years?

• Can a project still be additional if it emits more Can a project still be additional if it emits more than the OM but less than BM?than the OM but less than BM?

Additionality, Combined Margins, and Time

• Under ACM 0002, baseline for retrofits assumed to Under ACM 0002, baseline for retrofits assumed to correspond to project activity after a certain datecorrespond to project activity after a certain date

Additionality and Retrofit Projects

2006

2008

2010

2012

2014

2016

Baseline

Emissions RateProjectEmissions Rate

Historical Emissions Rate

RetrofitEmissions Rate

• Under ACM 0002, baseline for retrofits assumed to Under ACM 0002, baseline for retrofits assumed to correspond to project activity after a certain datecorrespond to project activity after a certain date

Additionality and Retrofit Projects

• Date based on “typical average technical lifetime” Date based on “typical average technical lifetime” or “common practices of the company”or “common practices of the company”

• (Same) Questions: (Same) Questions:

• How can the timing of implementation be incorporated in additionality analysis?How can the timing of implementation be incorporated in additionality analysis?

• Should “common practice” in additionality analysis involve a timing component for retrofits (and other electricity Should “common practice” in additionality analysis involve a timing component for retrofits (and other electricity projects)?projects)?

• Ensure additionality tool and grid-connected electricity Ensure additionality tool and grid-connected electricity project baseline methodologies are compatibleproject baseline methodologies are compatible

Recommendations

• Clarify how elements of the additionality tool can be adapted Clarify how elements of the additionality tool can be adapted and implemented in the context of electricity sector projectsand implemented in the context of electricity sector projects

• Definition of additionality tool “alternatives”Definition of additionality tool “alternatives”

• Clarify link between “continuation of current situation” and OM.Clarify link between “continuation of current situation” and OM.

• Clarify link between other “alternatives” and BM.Clarify link between other “alternatives” and BM.

• Clarify if necessary how these alternatives should be evaluated using investment and barriers analysis.Clarify if necessary how these alternatives should be evaluated using investment and barriers analysis.

Recommendations

• Definition of additionality tool “common practice”Definition of additionality tool “common practice”

• Link “common practice” to BM methodology.Link “common practice” to BM methodology.

• Incorporate timing component for retrofit projects and possibly others.Incorporate timing component for retrofit projects and possibly others.

Recommendations

• Possible:Possible:

• For additionality determinations, provide explicit guidance for situations where the project activity or an alternative might For additionality determinations, provide explicit guidance for situations where the project activity or an alternative might have been implemented at a later date in the baseline scenario.have been implemented at a later date in the baseline scenario.

• Ensure guidance is compatible with BM definition and any forthcoming guidance on choosing different OM/BM weightings.Ensure guidance is compatible with BM definition and any forthcoming guidance on choosing different OM/BM weightings.

GHG Protocol Electricity Workgroup

• GHG Protocol Part 2: Project ProtocolGHG Protocol Part 2: Project Protocol

• CDM-Compatible Methodologies & Guidance for Offset ProjectsCDM-Compatible Methodologies & Guidance for Offset Projects

• Launch Side Event Tuesday, December 6, Launch Side Event Tuesday, December 6, 6:00pm - 7:30pm in Mackenzie River Room6:00pm - 7:30pm in Mackenzie River Room

• Multi-Stakeholder Group Working on Sector-Specific Guidance for Grid-Connected Power ProjectsMulti-Stakeholder Group Working on Sector-Specific Guidance for Grid-Connected Power Projects

• Guidance Document Available Mid-2006Guidance Document Available Mid-2006

• www.ghgprotocol.orgwww.ghgprotocol.org

World Resources Institute