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Consultative Meeting on Reports of Joint CreditingMechanism Feasibility Studies 2012 in Indonesia
Small-scale Hydropower Projects
February 21, 2013
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Small Hydro Power Project
Project Site Location
Toba
Lake
PJ site
Site Location North Sumatra
Average Water Flow 21 m3/sec
Capacity Factor 62%
Generation Capacity 5MW * 2
Electricity Generation 57GWh/year
Project Information
Waterway
Headpond
Penstock
Powerhouse
Small Hydro Power Project Structure
Source: NEDO. Micro Hydro Power Installation Guide Book
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Project Outline (2)- IDIs Support Proposal Util izing Joint Crediting Mechanism
IDI proposes to utilize J apanese financial and technology support as well as application of simplemechanism for realizing better development of small Hydro & value of emission reductions.
IDIs Support Proposal
Creditworthiness ofthe developer
Few FinancialInstitution takingconstruction risk
Developer's lack ofexperience in smallhydro /underestimation ofengineering aspect
Severe cash flowwhen the repaymentof loan is huge
Issue #1 Issue #2 Issue #3 Issue #4
Financial SupportJ apanese Financial ProvidersIncluding Energy Fund SharingConstruction Risk withDevelopers
Joint Crediting Mechanism
Simple MRV
Positive Approach (eligibility)
Japanese TechnologyWell Experienced J apanese
Consulting Company Providing
Reliable Technology & Knowhow
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Project Outline (3)- Financial Support & Technology Support from Japan
Asset
SeniorLoan
Equity
Funding Gap
Asset
SeniorLoan
Equity
Equity orMezzanine
Financial Support
Possibility of J apanesefinancial support
Technology Support
Permit
Permit
Permit
PPA
Financing
Construction
Operation
Pre-F/S
F/S
Review of
Designs, etc
Equipment
Trouble
Possible application ofJ apanese technology &knowhow
Construction
Trouble
Senior lender can only provide about 70% of totalproject cost as senior loan in general
Developers need finance provider to fill the gap as
they may have project pipeline
Limit 70%
Need toredo surveys
/ designs
Some developers underestimate importance ofengineering, and end up redoing studies/designs
Experienced J apanese company involvement from
early stage will help successful development
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JCM draft MRV Methodology Proposed by IDI- Reference Scenario
Eligibility
Greenfield small hydro power project of 20,000 kW and under that is replacing gridand/or use of diesel power plant and equipped with meters for power generation= Positive Approach
Reference
Scenario(1)
Reference
Scenario
(2)
Reference Scenario can be (1), (2), or combination of (1) & (2)
GRID
Small Hydro
Power Plant
Operation ofExisting Power Plant
New Power Plant
OperationofExisting DieselPowerPlant
FactorySmall HydroPower Plant
Substitute for Grid
Substitute for Diesel
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JCM draft MRV Methodology Proposed by IDI- Reference Scenario Calculation
Reference
Scenario
(1)
Calculation
ElectricityGeneration(kWh/year)
EmissionFactor (Grid)(tCO2/kWh)
EmissionReduction
(tCO2/year)
Reference
Scenario(2)
Calculation
Electricity
Generation(kWh/year)
Efficiency
Diesel Power(GJ /kWh)
Emission
Reduction(tCO2/year)
Emission
Factor (Diesel)(tCO2/GJ )
Reference
Calculation
for F/S PJ
(1)5,000 kW * 2
GenerationCapacity
8,760h
Hours/year
62%
CapacityFactor
0.000748tCO2/kWh
EmissionFactor (Grid)
40,625 tCO2/y
EmissionReduction
Electricity Generation (kWh/year)
Substitute for Grid
Substitute for Diesel
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JCM draft MRV Methodology Proposed by IDI- Important Feature / Early Verification
Issuesto be
Addressed
Early Verification
Electricity Generated
for First Three Months(kWh/3months)
Electricity Generation
for the Year(kWh/year)
Emission
Reduction(tCO2/year)
ImportantFeature
Credit TransferMechanism
Up to G to GDiscussion on the
Design of mechanism
Risk of OverVerification
Early verification may estimatemore/less emission reductionthan actual amount for the year
Instead of having to wait one or two years for verification,
this methodology enables to have early verification and possibly early revenue
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Early Verification / Approach to Solve Issues Identif ied- In case of substitute for Grid
Start of
CommercialOperation Electricity generated:
(kWh/3months)
M1 M2 M3Water flow
monitored (m3/s)
Historical averageWater flow
MHA1 MHA2 MHA3
Emission(tCO2/year)
Possible Revenue Timing
within the same year
Coefficient k takes the minimumnumber of each month rate and 1
By monitoring 3 months of electricity generation and water flow,this methodology can estimate amount of emission for the year for verification
Emission per year
(tCO2/year)Electricity per year
(kWh/year)Conservative
coefficient (k)
Emission Factor(tCO2/kWh)
Using conservative coefficient reduces the risk of estimatingemission reduction more than the actual reduction amount
Year 1
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Why Early Verification & Possible Early Revenue for Developers Matter?
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Regular Repayment Schedule by the local banks
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Balloon Type Repayment Schedule
Interest
Principle
Interest
Principle
9 Regular repayment schedule by the local banks start with huge amount of repayment (Year 1)
making it difficult for developers to repay.9 There are some cases where Indonesian financial institution allows balloon type schedule.
9 However, it still creates refinance risk at the end year (Year 6).
9 Our proposed methodology helps developers by providing option to conduct verification within
the Year 1 and possibly receive revenue within the same year9 Therefore, credit revenue would help developers to finance their project, and the earlier the
revenue comes in, the more projects can be financed and developed.
Revenue line Revenue line
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Summary
Four issues regarding small hydro power developmentare identified based on thelocal stakeholders opinion and IDI assessment
IDIs support proposal addresses each issue by bringing J apanese finance support,
J apanese technology and J oint Crediting Mechanism.
IDI has met with more than 15 respectable developers, and their total capacityexceeds 100MW, which have potential to reduce emission of roughly 400,000tCO2/year
There are many more small hydro developers and projects in Indonesia, andIndonesia has abundant hydro resources that can be utilized for development
J CM scheme has the potential to push great number of small hydro power project
developments
Thank you