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The Flexible Mechanisms of the Kyoto Protocol as Business Opportunity

Aqua Vital International Dr. Howard Barmil

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Table of Contents Background on Kyoto Protocol

Background to Project Development

Project Development vs. Equipment Sales

Contact points of the two different sectors (Equipm.Sales&Pro.Dev.)

Feasibility Study with and without Carbon Credits

Potentials Equipment Sales/ Potentials Project Development

Organisation structure to exploit the potentials the Best way

Financial and Personel needs

Profit Analysis

Recapitulation

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Background (1): The Kyoto-Protocol

ANNEX-ICountries

Germany

- 21%

- 5,2 %

EUROPEANUNION

- 8 %

A: -13%

B: -7,5%

DK: -21%

SF: 0%

F: 0%

GR: +25%

IRL: +13%

I: -6,5%

L: -28%

NL: - 6%

P: + 27%

E: + 15%

S: +4%GB: -12,5%

Russia:0%

USA:-7%

Reference year: 1990 1 st Budget period:2008 - 2012

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Background (2): Flexible Mechanisms

Joint Implementation: >> project related(JI) >> Reduction in Guest country will be credited

to Investor country and deducted in the Guest country

>> Clearing in the Budget period(Specialty: Early JI)

Business partners are both in an Industrialized Country, or in an Industrialized and in an ex socialist country.

Clean Development Mech.: >> project related(CDM) >> Reduction in Guest country raises

Budget of the Investor country>> „immediately“ creditable

Business partners are in an Industrialized country and in a Developing Country.

Intern. Emission Trading: >> financial Transaction(IET) >> bilateral Transfer of Carbon Credits

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Scheme: Project Mechanisms

Investor

Certification

Greenhousegas-Reduction

Rehabilitation

Carbon CreditsERU‘s or CER‘s

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Business Profile

Can Greenhouse gases be reduced?

Is it possible to save primary energy?

Will renewable energy sources be promoted?

With Business activities and projects

⇒ Project fits in this business field

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• An intensive and complex Procedurehas to be worked off in order to fulfil the needs to be

called a Climate Change Project

• The whole procedure includes among other subjects international contracts, Certifications and authorisations.

Execution of a CDM - ProjectProcedure

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Project Cycle

PIN/PCN Letter of Endorsement/of Approval of the Host Government PDD Validation by independant Entity Emission Reduction Purchase Agreement Registration and following steps

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PIN Letter of Endorsement/of Approval of the Host Government PDD Validation by independant Entity Emission Reduction Purchase Agreement Registration and following steps

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Example of Specific CO2 Production

Total 0,963 kg COTotal 0,963 kg CO22/kWh*/kWh*100 % Primary Energy100 % Primary Energy

~ 52 %52 %

~ 48 %48 %

~ 19 %19 %

~ 41 %41 %

LossesLosses ~ 40 %40 %

Condenser PlantCondenser Plant

BoilerBoiler

Thermal OutputThermal Output

Electrical OutputElectrical Output0,669 kg CO0,669 kg CO22/kWh*/kWh*

0,294 kg CO0,294 kg CO22/kWh*/kWh*

*Source:„Ganzheitliche Bilanzierung der Energiebereitstellung“ FfE-Study;

Energy Mix Germany 1996: 0.669 kg CO2/kWhel

Total 0,5 kg Total 0,5 kg COCO22/kWh/kWh

100 % Primary Energy100 % Primary Energy

~ 41,9 %41,9 %

~ 44,8 %44,8 %

LossesLosses~ 13,3 %13,3 %

DEUTZ CHPDEUTZ CHP

Thermal OutputThermal Output

Electrical OutputElectrical Output

48 % (0,463 kg CO48 % (0,463 kg CO22/kWh)/kWh)COCO2 2 - Saving with CHP- Saving with CHP

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0,280,26

0,2

0,33

0,4

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

0,4

0,45

lignite Hard Coal Heavy FuelOil

Diesel Oil Natural Gas

CO2 Production of fossil primary Energy at combustion

[kg CO2/kWh Energy input]

Quelle: Third Report of the Parliamentary Comission on „Preventive Measures to Protect the Earth`s Atmosphere“ published in October 1990

Natural Gas - the cleanest Fossil Fuel

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Project Examples

>>> Gathering and Utilization of Waste gases from - Landfill sites - Sewage Plants- Coal Mines - Biogas devices

>>> Change of the Fuel (for example Natural Gas instead of Coal)

>>> Cogeneration1 ton of CH4 equals 21 tons of CO2 also in the payment!

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Cost – Income Analysis: virtual Example

Income and Costs for a Climate Change Project

Cost Revenues

Transactioncosts of a Climate Change project 60.000 € Value of a CER Certificate 40.000 t/a x 12 € = annual payment

equals about 10 MW Natural Gas projetct or 1,3 MW Non Natural Gas project if Methanemissions are avoided

480.000 € Yearly costs of Verification (starting year 2) 10.000 € Profit 1st. year 420.000 € Profit in the following years* 470.000 €

* Projekt running times 1 x 10 Jahre oder 3 x 7 Jahre

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1. Background Project Development Example: Biogas system

a.) Phases of Project development (major steps)

1. Offer of a raw material or gas (here Biogas, but also Coal Mine Gas, Landfill Gas, etc.)

2. Evaluation of the amount, Quality and time of use

3. Issuing an Investment Plan and Cash Flow Plan

4. Discussion with Investor about the total situation and Investment frame green Light

5. Contracts about securing the raw material, Permits, Procurement (Tender procedure for equipment Service and operation)

6. Contracts for the Sales of Energy, Certificates and Fertilizer

7. Operation

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2. Project Development Biogas device Overview

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Equipment Sales vs. Project Development

1.Equipment Sales

a.) Tender procedure

b.) Contact with specialized technical personell in that specific technical field

c.) not complex (only supply against money)

d.) specific customer segment

e.) specific profit for specific supply

2. Project Development

a.) complex various specialists in different fields required

b.) many segments, many fields possible

c.) companies like more selling, me with project development like more buying

d.) with „good contracts“ „good profit“ possible

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2. What is needed?a.) Personel

1.Specialists in the use of Biogas, Coal Mine Gas etc. (Experts who understands the technical issues of Biogas devices, Coal Mine use, Landfills etc., somebody who knows the technical criteria of equipment and use of the gas)

2.Specialists in Financing (somebody who knows how to model the financing of such systems, including the financing with Carbon Credits, somebody who knows about international subsidies and help of international banks

3.Specialists in CDM and JI (somebody who knows about the whole project cycle, to achieve the most credits possile but also where to sell or how to use the Credits the best way)

4.Specialists in Marketing and Distribution (somebody who knows international trade, establishes contacts in many countries, establishes subsidiaries, finds the distribution channels to many raw materials and gases, contractual expert (a tough fighter)

5. Operation supervisors (somebody who is responsible to supervise and has an overview over the projects) This person has to manage the projects the others have aquired. Installation and operation is subcontracted, but sales contracts have to be made up, then there has to be a responsible in the company, who knows about execution of the project.

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b.) Value Chain and where are the values(where can you earn money)

-Raw material -Service and Engineering of the whole project-Equipment (Foreign- and own systems)-Service of devices-Energy Sales-Generation of Certificates-Trade of Certificates a. Sales of the generated Certificates of own projects

b. Brokerage

-Trading of Coproducts (for example Water, Fertilizer, CO2)

-Sale of the whole project

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3.) Connection Equipment Sales and Project Development

a.) Equipment Sales (when company just sells equipment)

CompanyClient

b.) Project Development

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Feasibility Study with and without Cabon Credits (Example study to show what IRRs can be achieved, to be discussed in person)

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Registered Climate Change projects

584

0

14

66

16

0

1

6

1

86

16

0

228

182

(01) Energy industries (renewable - / non-renewable sources)

(02) Energy distribution

(03) Energy demand

(04) Manufacturing industries

(05) Chemical industries

(06) Construction

(07) Transport

(08) Mining/mineral production

(09) Metal production

(10) Fugitive emissions from fuels (solid, oil and gas)

(11) Fugitive emissions from production and consumption of halocarbons andsulphur hexafluoride

(12) Solvent use

(13) Waste handling and disposal

(14) Afforestation and reforestation

(15) Agriculture

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Potential

Out of that potential we can do most of the segments shown before

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Outlook in the future

New possibilities: Establishment of Programatic CDM in Indonesia (Fixed preliminary agreements )

Involved Experts:

-Dr. Günther Herdin (International Gas engine Expert)

-Dr. Tamer Turna (International Engineering Expert)

-Dr. Howard Barmil (International Business Development Expert)

-Knowledge of Government officials worldwide for example

-Mr. Franzjosef Schafhausen, Germany Dr. Dr. Dürr Vienna etc. due to the fact of participation in working groups in Austrian and German Governments and the COPs/MOPs