Development and Utilization of Alternative and Sustainable Sources of Energy

1. Development and
Utilization of Alternative
and Sustainable Sources
of Energy
Africa Carbon Exchange (ACX) Carbon
Workshop
Wednesday 14th November 2012
Presented by James Mwangi

2. Outline
 Alternative and Sustainable Sources of Energy
 Recent Trends in Renewable Energy Investment
 Carbon Markets and Sustainable Sources of
Energy
 Renewable Energy Carbon Project Development
 Guiding Questions in the Development Process
 Utilization of Renewable Energy
 Conclusion

3. Alternative and Sustainable
Sources of Energy
 These refer to energy derived from
renewable or “green” sources such as
hydro, wind, solar, geothermal and biogas
 These energy sources eliminate
dependence on fossil fuel based sources
of energy and are sustainable in the near,
mid and long term

4. Recent Trends in Renewable
Energy Investment
 For some renewable energy technologies,
technological developments have led to a
significant decline in costs and increased
reliability of the technology, which have
made investments more attractive
 High (and erratic) oil prices have
contributed to interest in renewable energy
investments

5. Recent Trends in Renewable
Energy Investment cont.
 Regulatory support for renewable energy
technologies has increased over the past ten
years.
 For example, between 2004 and 2011, the
number of countries that put in place supportive
renewable energy policies rose from 40 to
almost 120
 Kenya has in place the Least Cost Power
Development Plan (LCPDP)

6. Carbon Markets and Sustainable
Sources of Energy
 Carbon markets are an instrument for
reducing carbon emissions and targeting
greenhouse gas (GHG) externalities from
fossil fuel use
 The carbon market involves the trading of
Certified Emissions Reductions (CERs)
generated by Clean Development
Mechanism (CDM) projects and Verified
Emissions Reductions (VERs) generated
by Voluntary Market projects

7. Renewable Energy Carbon Project
Development
 Development of renewable energy carbon
projects is subject to certain criteria
stipulated by article 12 of the Kyoto
Protocol:
 i) Projects must receive approval from
the host country Designated National
Authority (DNA) and benefit the host
country (DNA in Kenya is NEMA)

8. Renewable Energy Carbon Project
Development cont.
 ii) Projects must assist host countries in
achieving sustainable development
 iii) Projects must result in measurable
long-term benefits towards climate
change mitigation
 iv) Projects must result in reductions in
emissions that are additional to any that
would have occurred in the absence of
the certified project activity

9. Guiding Questions in the
Development Process
 Decision 1: Is there a project here?
 The initial step in any project involves identifying
a potential carbon trading opportunity
 As awareness of the market grows, so too does
the ability to identify the type of potential that is
likely to lead to a project
 Feasibility studies can determine this

10. Guiding Questions cont.
 Decision 2: Is the project “additional”
 The issue of additionality simply seeks to
prove that the project would not have been
possible without the additional inflows of
carbon finance
 As such, does the activity reduce
greenhouse gas emissions in a way that
departs from „business as usual‟?

11. Guiding Questions cont.
 Decision 3: Which methodology will be
used?
 A project methodology refers to a precedent or
guiding framework approved by the CDM
Executive Board
 Where the proposed project is similar enough to
an existing precedent, it has the advantage of
being able to draw on the existing approaches

12. Guiding Questions cont.
 Decision 4: What scale will the project be?
 This involves determining how many tons
of carbon dioxide equivalent the project will
reduce:
 Below 5,000 tCO2e per annum-small scale
 5,000-30,000 tCO2e per annum-mid-size
 Over 30,000 tCO2e per annum-large scale
 The scale of the project will determine the
actual project development costs

13. Guiding Questions cont.
 Decision 5: Will this be a Clean Development
Mechanism project or a voluntary market
project?
 CDM projects attract better market prices but are
more complex to develop
 Voluntary market projects are less complex to
develop but attract lower market prices than the
CDM projects
 However, with Kenya being a non-LDC, we will
not be able to trade on the CDM Market of the
EU-ETS unless bilateral ties are put in place with
sovereign EU states from January 2013.

14. Guiding Questions cont.
 Decision 6: How will the project be financed?
 This refers to financial viability and typically
there are 2 workstreams that require funding:
 i) Actual project development – e.g. the
purchase and installation of solar water heaters
or the building of a methane capture plant

15. Guiding Questions cont.
 ii) Costs of developing a carbon trading
project – this includes the research costs,
monitoring costs and costs of registration
with a certifying body (UNFCCC, Gold
Standard, Voluntary Carbon Standard, etc)
 To be financially viable, the benefits
arising from the project should exceed the
costs

16. Guiding Questions cont.
 Possible sources of finance are:
 The European Commission‟s Center for
Development of Enterprise which has developed
a programme that facilitates grants of upto 50%
of the CDM development costs
 The World Bank‟s “Prototype Carbon Fund” and
the “Community Development Carbon Fund”
 Financial consulting firms, operating in
environmental commodities are also willing to
finance project development costs and in some
cases actual components
 Investors can also finance projects “at risk” and
recover their investment from the sale of CERs
once the project is up and running

17. Utilization of Renewable Energy
 Potential projects that fall under the realm of
renewable energy are:
 Biomass- solid biomass (bagasse -Mumias, sisal
waste, cut flower waste etc) and biogas
 Wind – on-shore-Lake Turkana
 Hydro – large scale –KENGEN, small scale-KTDA
 Solar – photovoltaic (mini-grids – REA, solar
home systems and solar water heating) and
concentrating solar power –KENGEN plans
 Geothermal –large scale- GDC (Menengai)

18. Conclusion
 Based on the above-mentioned, renewable
energy project development is based on
the determination of the guiding questions
alluded to earlier
 Identifying costs and the respective
contributions of different project
participants and stakeholders early on in
the project is crucial in ensuring project
viability, prevention of disputes and conflict
and in identifying who will end up owing
what credits

19. THANK YOU…!!!!