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Extension of simplified modalities for demonstration of additionality

to EE and RE projects

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Options for extending simplified additionality modalities

1. Apply micro scale additionality for small scale a) EE and b) RE projects in LDCs or where market penetration not

reached commercial level

2. Allow DNAs to include a) small/ micro EE and b) off grid

RE in automatic additionality list (Attachment A, Appendix B SSC

guidelines

3. Consider E- ruling in additionality determination for

all EE and RE projects located in LDCs

Options for extending the simplified additionality modalities

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General concerns regarding implementation of options 1 & 2 for EE

EE Options ChallengesEnergy efficiency

1. Consider market penetration of technologies and update regularly.

2. Consider EE service provided by the technologies (but not limited to technology only) and implementation mechanisms and environment when applying barrier analysis

3. Consider discounting over time for anticipated energy efficiency improvements or reduce crediting lifetime of EE projects.

4. Define benchmarks, which are conservative/ambitious using default values. (i.e. deemed savings based on BAT).

1. High data costs to determining market penetration of technologies

2. Lack of data/information for objective demonstration of additionality using barriers

3. There are cases where autonomous improvement rates in energy efficiency could be warranted since it could be expected that technologies will improve over time. Clarification of when this might occur is subjective.

4. Benchmarks are political and it may be difficult to reach an agreement.

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General concerns regarding implementation of options 1 & 2 for RE

RE Options ChallengesRenewable energy projects

1. Public sector RE projects could have option to apply just barrier analysis rather than full investment analysis, since installation is driven by need for service or good (i.e. rate of return less relevant).

2. Include small and micro hydro projects with clear positive SD impact located in LDCs on positive list.

3. Focus on barrier analysis on access to capital.

4. Could establish automatic additionality for off/mini grid projects where rural electrification rate < y% in a country/region/zone using nationally or internationally published data.

1. Production costs can vary between countries. This can impact additionality.

2. For most wind and hydro projects CDM does not increase the IRR very significantly.

3. New hydro projects are often built even when they are not the least cost option for political reasons.

4. Off grid renewable energy projects are likely to benefit from policies supporting improved energy access. The nature of these policies will impact additionality.

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•Market penetration (technology or EE service) is less than x% & market penetration is evaluated every 3-5 years or

•Exceeds BAT energy efficiency level of best technology in country – update technology benchmark 3-5 years.

•End users are households/communities/SMEs

Option 1a

Expand simplified rules to SSC threshold for EE

projects if:

•RE project is new project or

•New project in rural areas and rural electrification rate <y%

Option 1b. Expand simplified rules to SSC threshold for RE

projects if:

•Project is EE project that achieves energy savings < defined benchmark.

•Benchmarks must be updated regularly i.e. every 3-5 years

Option 2a

EE < 60 GWh to be included in positive list

(micro rules) if:

•It is a public sector project supporting new RE installations in an LDC facing barriers in accessing capital and CDM >x% of operational costs

Option 2b Off grid renewable < 15MW

energy to be included on positive list if:

Eligibility criteria as the way forward

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• E- policies: policies that give comparative advantage to less emissions intensive technologies or fuels adopted prior to Marrakesh Accords (11/11/2001). Impact can be ignored in determining additionality. (i.e. forms of public funding)

• EB55 – EB decided to make decisions on how to treat E- on a project by project basis.

• Recommendation – for all projects located in LDCs allow E- to apply. Thus all policies after 11/11/2001 that result in public funding supporting low carbon growth e.g. feed in tariffs, subsidies, tax benefits etc) should not need to be considered when applying investment analysis.

Option 3: E- and additionality determination

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Options for extending simplified additionality modalities

1. Apply micro scale additionality for small scale a) EE and b) RE projects in LDCs or where market penetration not

reached commercial level

2. Allow DNAs to include a) small/ micro EE and b) off grid

RE in automatic additionality list (Attachment A, Appendix B SSC

guidelines

3. Consider E- ruling in additionality determination for

all EE and RE projects located in LDCs

Options for extending the simplified additionality modalities

THE WORLD BANK CARBON FINANCE UNIT

Thanks for listening

Contact: Fspors@Worldbank.org