Feasibility Studies with the Aim of Developing a Bilateral Offset Credit Mechanism FY2011
Studies for Project Exploration and Planning
Feasible Study on Renovation of Exiting Hotel to Eco-hotel in Off-grid Area of Kenya
New Energy and Industrial Technology Development Organization (NEDO)NTT Data Institute of Management Consulting, Inc.
Fuji Electric Co., Ltd.Mpata International Inc.
Feasible Study on Renovation of Exiting Hotel to Eco-hotel in Off-grid Area of
Kenya
29th February, 2012
NTT Data Institute of Management Consulting, Inc.Fuji Electric Co., Ltd.
Mpata International Inc.
Feasibility Studies with the Aim of Developing a Bilateral Offset Credit Mechanism FY2011
Studies for Project Exploration and Planning
CONTENTS
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 2
1.Overview of the Survey
2.Feasibility of Introducing Energy saving Technology and Renewable Energy into MPATA SAFARI CLUB
3.Survey of Current Green Electrification at Other Hotels
4.MRV Methodology When Renewable Energy Is Introduced to Hotels
5.Feasibility of Bilateral Offset Credit Mechanism
6.Future Issues and Project Plan
Copyright © 2012 NTT DATA Institute of Management Consulting, Inc. 3
1-1. Perspective (1)
This feasibility study (F/S) tries to produce eco-friendly electricity for hotels in off-grid area of Kenya. Case study = Mpata Safari Club
Mpata Safari ClubLocated in The Masai Mara National Reserve
-Five-star luxurious hotel-It stands in off-grid area and uses diesel generators to make electricity.
NAIROBI
Copyright © 2012 NTT DATA Institute of Management Consulting, Inc. 4
1-2. Perspective (2)
This F/S is financed by NEDO of Japan.(New Energy and Industrial Technology Development Organization)
an incorporated administrative agency
And NEDO is under the jurisdiction of METI.(Ministry of Economy, Trade and Industry of Japan)
“But, why Japan is doing this?”
NEDO, METI, and Japanese industrial circles, finds current CDM* unpractical and rather problematic.
(*Clean Development Mechanism under the Kyoto Protocol)
Copyright © 2012 NTT DATA Institute of Management Consulting, Inc. 5
1-3. Problems of CDM (from Japanese Side)
– A project needs a long time: 2 years– Applicable technologies unbalanced– International partiality: 59% China (in Jan 2012*)
COP17 in Durban: Japan will not participate in the second promise (2013-) of Kyoto Protocol.
* http://cdm.unfccc.int/Statistics/Issuance/CERsIssuedByHostPartyPieChart.html
Japan don’t deny the CDM.But try to invent alternative mechanisms to mitigate the climate change by introducing technologies of Japan.
Copyright © 2012 NTT DATA Institute of Management Consulting, Inc. 6
1-4. Call for an Alternative to CDM
One of the alternatives is Bilateral Offset Credit Mechanism (BOCM).
Project Entity
Project Entity
Bilateral Treaty between Governments
JAPAN
KENYA
CO2reduction
Offset Credit(can be sold)
Offset Credit(can be sold)
Project
Buyer Companies
New International Framework
Copyright © 2012 NTT DATA Institute of Management Consulting, Inc. 7
1-5. Four Progressive Steps of Our Project
①
②
③
④
F/S of This TimeCase Study: Mpata Safari Club
Implementationfor Mpata Safari Club:“Mpata Model”
Bilateral Credit Mechanismbetween Kenya and Japan
Application to Other Hotels /Sale & Purchase of Offset Credit
Final goal for NEDO and METI(Japan)
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 8
Government of Kenya-Offer advice, data, information and so on.
NTT Data Institute of Management Consulting-Organize, Research and so on.
FUJI ELECTRIC CO., LTD.-Solution and engineering for Renewable energy.
Mpata International Inc.-Owner of the hotel.-Obtain data and information.-Arrange researches in Kenya.
Mpata Safari Club (Kenya, Masai Mara)
-Five-star luxury hotel-It stands in off-grid area and uses diesel generators to make electricity.
■Devices/Equipments to be introducedRenewable energy•Solar power
(Photovoltaic power generation, Solar water heating )•Mini-hydro power generator•Wind power generator
Energy storage•Batteries (Lead-acid battery, Lithium-ion battery)
Energy management and Saving energy•Heat pump unit, Lighting devices etc.
F/S
Advisers-Specialist on Climate Change, MRV for GHG emission reduction and so on.-Japanese companies.
Arrange products and technologies of Japanese companies.
Project members
1-6. Flow of the 1st and 2nd step:Making a “Mpata model” in Kenya
9
Mpata Safari Club
Masai Mara N.R.(200 hotels / lodges)
National park A
National park B
・・・2500 off-grid hotels
(5000 licensed hotels in Kenya)
CO2Credits
CO2Credits
CO2Credits
CO2Credits
CO2Credits
CO2CreditsCO2
CreditsCO2Credits
CO2CreditsCO2
CreditsCO2Credits
Organizer in Kenya(to bundle small credits and sell)
“Mpata Model” ⇒ Other hotels in the Masai Mara National Reserve. Then to other national parks (There are 2,500 hotels in off-grid area in Kenya).We need to establish a suitable methodology of MRV and how to bundle small credits from various types of hotels.
1-7. Develop “Mpata model” in off-grid area
Copyright © 2012 NTT DATA Institute of Management Consulting, Inc.
1-8. Project Entities
10
Three companies take part in this project at this stage.
Copyright © 2012 NTT DATA Institute of Management Consulting, Inc.
Project OrganizerMethodology of MRV
To Research Market Trends in Kenya
Technical SupportStrong in renewable energies, energy saving,
and energy management system
The owner of Mpata Safari ClubTo Arrange Interview and Field Survey
CONTENTS
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 11
1.Overview of the Survey
2.Feasibility of Introducing Energy saving Technology and Renewable Energy into MPATA SAFARI CLUB
3.Survey of Current Green Electrification at Other Hotels
4.MRV Methodology When Renewable Energy Is Introduced to Hotels
5.Feasibility of Bilateral Offset Credit Mechanism
6.Future Issues and Project Plan
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 12
2-1. Conclusions
The appropriate plan is to replace portion of the present electricity supply with a PV generation system at Club.
This survey found no items to improve for energy saving in Club. However, there could be still room for improvement in equipment operation.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 13
2-2. Ideal plan: 200 kW-size PV generation
After calculating the power consumption in the Club, we found that a 200 kW-size PV generation system was an ideal plan.This plan can supply almost all of the electric power needed for the Club during off seasons. It can supply 80% of the total power consumption.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 14
2-3. Ideal plan: CO2 reduction and the cost
The 200 kW PV generation system could reduce;63,700 litter of Diesel consumptionand170 ton/year of CO2 emission
But, an an initial investment required to install 200 kW plan would beOver 200 million KSh
KSh 1 = ¥1 = $1.25
Practical plan would be introducing a PV generation system of 5kW to 10 kW .5kW to 10 kW model could be applicable to other hotels/lodges in off-grid are of Kenya (also see next chapter).After depreciation, the system can be expanded and optimized when necessary to achieve ideal amount of PV generation system.
CONTENTS
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 15
1.Overview of the Survey
2.Feasibility of Introducing Energy saving Technology and Renewable Energy into MPATA SAFARI CLUB
3.Survey of Current Green Electrification at Other Hotels
4.MRV Methodology When Renewable Energy Is Introduced to Hotels
5.Feasibility of Bilateral Offset Credit Mechanism
6.Future Issues and Project Plan
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 16
3-1. Conclusions
In Kenya, some tented-camps have already introduced PV generation systems (3.5 to 10 kW) that recoup the initial investment within three to five years.
The model plan would be the 5kW to 10 kW PV generation systems.
The obstacle to introducing these models lies in finance. Offering financial support for low interest rates is essential to the introduction of models.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 17
3-2. Cases of introducing renewable energy
The size of the hotels in the lists is are largest in number in the National Reserves and National Parks of Kenya PV generating systems are around 10kW and the pay back period are around 3 to 5 years.
Facility name Room type
PV generation systemHours of power generation by diesel generat
OtherOutputInitial
installation cost (KES)
Payback period
KAREN BLIXEN CAMP
Tent lodge(22 guest rooms) 9 kW 10MM 3 years 2 hours/day Installed 5 years
ago
SANCTUARY OLONANA
Tent lodge(14 guest rooms) 8kW 9 hours/day
ELEPHANT PEPPER CAMP
Tent lodge(9 guest rooms) 3.5 kW 2.4MM 5 years
(planned)6 to 8 hours/month (equivalent to 15 minutes/day)
Small power consumption
Campi ya Kanzi Tent lodge(8 guest rooms)
13.6kW (Substitute 12kVA Diesel generator)
no use ofgenerator
Information fromwebsite
Olarro Lodge(8 guest rooms) 10kW 10MM 2.5 years
(planned)Information from
a constructor
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 18
3-3. Barriers of installing PV systems; Finance
In general, these hotels have accepted foreign investment and/or finance when installing their PV generation systems.According to one contracting company in Nairobi, the interest on a loan is
about 20% in Kenya, indicating that raising funds is very difficult in the country.
PV Panels in KAREN BLIXEN CAMP, 9kW
It is essential not only promoting Japanese PV generating system, but also offering financial support.
Practically, the loan at low interest rates would meet local needs.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 19
3-4. CO2 Recuction of Model plan
From the survey, we come to the conclusion that the model plan would be the 5kW to 10 kW PV generation systems.
PV Panels in ELEPHANT PEPPER CAMP,3.5kW
The amount of CO2 reduction are;– 4.25 tons/year (5kW)
to 8.5 tons/year (10 kW)
If these models were introduced into 2,500 hotels in off-grid areas in Kenya, CO2 reduction would reach;
– 10,625 tons/year to 21,250 tons/year.
CONTENTS
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 20
1.Overview of the Survey
2.Feasibility of Introducing Energy saving Technology and Renewable Energy into MPATA SAFARI CLUB
3.Survey of Current Green Electrification at Other Hotels
4.MRV Methodology When Renewable Energy Is Introduced to Hotels
5.Feasibility of Bilateral Offset Credit Mechanism
6.Future Issues and Project Plan
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 21
4-1. Conclusions
A methodology for BOCM can be referred to for small-scale CDM and/or PoA and methodologies being deliberated at the UNFCCC.
Concerning monitoring methodologies, since hotels in off-grid areas have no electricity meters, their exact power consumption "before introduction" cannot be measured.
The appropriate methodology is measuring the "after introduction“ or exact power supplied by renewable energy.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 22
4-2. Baseline
When setting a baseline per hotel, Paragraph 8 (b) Option 2 is applied, among the baseline calculation formulas for renewable energy conversion in 1-A of CDM small-scale methodologies.
E BL,Ren,y = Σi EGi,y/(1-l)Where:E BL,Ren,y : Annual energy baseline of renewable energy consumption (kWh)Σi : The sum over the group of i renewable energy technologiesEGi,y : The estimated annual output of the renewable energy technologies of the group of i
renewable energy technologies installed (kWh) l : Average technical distribution losses (20%)
Based on the above formula, the baseline emissions per Club are calculated. Paragraph 9 of the baseline CO2 emissions calculation formula in 1-A of the methodologies is applied.
BECO2,y = EBL,Ren,y × EF CO2
Where:BECO2,y : CO2 emissions (kg-co2) in the baseline in year y EF : CO2 emissions factor of diesel fuel (0.8 kg CO2-e/kWh)
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 23
4-3. Additionality
NM073 under deliberation proposes new additionality tests for rural electrification projects. According to the proposal, since Kenya is classified as a Low Income Country (LIC) and its rural electrification rate is below 12%, the country has additionality.
In addition, in case of introducing a 10 kW system into other Hotels within the range of 500 hotels, 10 kW systems will amount to less than 5 MW. Then, the project is eligible for the exemption of additionality tests of micro scale CDM. If a project of this size were first installed, it would be able to win international understanding without demonstrating additionality in detail.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 24
4-3. Monitoring
Monitoring methodologies will be examined in terms of measurement, reporting, verification, and methodology validation measurement.
CONTENTS
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 25
1.Overview of the Survey
2.Feasibility of Introducing Energy saving Technology and Renewable Energy into MPATA SAFARI CLUB
3.Survey of Current Green Electrification at Other Hotels
4.MRV Methodology When Renewable Energy Is Introduced to Hotels
5.Feasibility of Bilateral Offset Credit Mechanism
6.Future Issues and Project Plan
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 26
5-1. Conclusions
Kenya has been promoting NAMA to make up CDM.
Thus, BOCM should be built up along the Kenyan NAMA policy.
Although Kenya is not an LDC, its rural electrification rate is similar to that of an LDC.
Present CDM is unable to grasp the needs of such countries.
Partners of BOCM should be countries which are non-LDC but LIC or LMIC.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 27
5-2. Recognition of the present CDM
The 3 problems of CDM are recognized not only by Kenya but also by the international community.
1. it takes too long to obtain approval2. paper work is complicated, including data collection; 3. application is expensive.
One of the problems specific to Kenya is;– targets of EU-ETS offset are, in principle, limited to LDC from 2013.
Since Kenya is not an LDC, the momentum to generate CDM projects in Kenya is expected to decline.
In addition, infrastructure problems are common to African countries.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 28
5-3. NAMA; the climate change policy of Kenya
Kenya is determined to promote NAMA as a mitigation policy for climate change in the future.
In the chart (right), shows 9 elements of Kenya National Climate Change Action Plan.
(4) Mitigation planning and actions includes NAMA and REDD+.
http://www.environment.go.ke/wp-content/uploads/2011/12/KENYA-CLIMATE-CHANGE-AP-NATIONAL-ADAPTATION.pdf
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 29
5-4. NAMA; the mitigation policy of Kenya
The Government of Kenya puts special emphasis on the following considerations in the identification of NAMAs:
• Priority mitigation actions in key economic sectors with demonstrated deviation from business as usual emission levels
• Policy measures and tools aimed at implementing NAMAs and in meeting the objectives of the country’s sustainable development strategy
• The co-benefits of implementing mitigation actions• Support needed for the implementation of NAMAs (costed NAMAs)• Putting in place a national system for measurement, reporting and
verification. http://www.environment.go.ke/wp-content/uploads/2011/12/KENYA-CLIMATE-CHANGE-AP-NAMAS-and-REDD+.pdf
We should propose the BOCM as it complements NAMA policy of Kenya.Efforts are needed to develop additional climate change measures for the
tourism business, the major industry in Kenya, to NAMA in order for Hotels to seek generation of bilateral offset credit.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 30
5-5. Sugestion; how we develop BOCM
Complement NamaWe should propose the BOCM as it complements NAMA policy of Kenya.Efforts are needed to develop additional climate change measures for the
tourism business, the major industry in Kenya, to NAMA in order for Hotels to seek generation of bilateral offset credit.
Non-LDC, but LIC or LMIC as a partner of BOCMNon-LDC, but still considered as Low Income Countries (LIC) or Lower Middle Income Countries (LMIC) in Africa and other parts of the world have the problem. Finding purchasers of credits after 2013 will not be easy. Thus, non-LDC but LIC or LMIC are considered ideal partners to promote negotiations over BOCM. In Africa, the list below shows the 12 non-LDC but LIC or LMIC
Cameroon, Cape Verde, Congo, Rep., Cote d'Ivoire, Egypt, Arab Rep., Ghana, Kenya, Morocco, Nigeria, Swaziland, Zimbabwe
CONTENTS
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 31
1.Overview of the Survey
2.Feasibility of Introducing Energy saving Technology and Renewable Energy into MPATA SAFARI CLUB
3.Survey of Current Green Electrification at Other Hotels
4.MRV Methodology When Renewable Energy Is Introduced to Hotels
5.Feasibility of Bilateral Offset Credit Mechanism
6.Future Issues and Project Plan
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 32
6-1. Future Issues
These are future issues of this project;1. Continuous survey at the Club2. Further Study of other Hotels3. Setting up an organizing body 4. Approach to the Government
Concerning surveying the possibilities for energy saving, electricity meters will be installed on the generators, major electric equipment and guest rooms of the Club.
Concerning wind power generation, we will survey patterns of wind throughout the year while bearing in mind the installation of small wind generators in future.
We would like to introduce a PV generation model system to the Club on an experimental basis and conduct additional surveys at the facilities.
– a 5 to 10 kW-size PV generation model system primarily made in Japan will be installed.
– This model system will collect data covering actual costs (initial investment cost, running cost), electricity generated, amount of solar radiation and meteorological data.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 33
6-2. Future IssuesContinuous survey at the Club
We would like to survey the present conditions of hotels and lodges that are located in other national reserves and parks and conduct a feasibility study in anticipation of introducing renewable energy into those hotels and lodges.
A local survey of hotels that may introduce renewable energy, etc. in the future shall be continued. First, a feasibility study for introducing renewable energy into hotels and other accommodations located in the Masai Mara National Reserve will be promoted.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 34
6-3. Future IssuesFurther Study of other Hotels
We also would like to formulate a model plan targeting tent lodges, the largest segment of the market.
Concerning wind power generation, we will survey patterns of wind throughout the year while bearing in mind the installation of small wind generators in future.
As discussed earlier, if a 5- to 10-KW renewable energy system is introduced into 2,500 Hotels, the amount of credits generated will reach from 10,625 to 21,250 tons.
Under the current market price, if the credits per ton can be sold at 10 euros(=1,200 yen), the total credits obtained would be from 12,900,000 yen to 25,800,000 yen (1 yen = 1 KSh).
Thus, an agreement with each of the Hotels shall be concluded prior to payment of a portion of the amount to each of the Hotels.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 35
6-4. Future IssuesSetting up an organizing body
A body shall be set up (or entrusted) that promotes some other method (offering low-interest finance or appropriating such portion to premiums on the insurance for quality assurance of panels).
We would like to share information on NAMA with the Kenyan Government to utilize BOCM as early as possible.
Copyright © 2011 NTT DATA Institute of Management Consulting, Inc. 36
6-5. Future IssuesApproach to the Government
We would like to approach the Ministry of Tourism and the Kenya Tourist Board (KTB) in the coming survey and continue to survey the actual situations of other hotels in Kenya.We also seek the possibility to develop climate change measures in the tourism. If such measures would be added in the list of NAMA, this project could create credits under the BOCM.