Delivering a real CDM ProjectThe BP PRODEEM Rural Solar Project

BP is playing an active role in addressing climate change

‘97

‘98

‘99

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Achieve 10% target‘01

Set 10% reduction target

Leave Global Climate Coalition

Build global GHG ETS

Develop methodology, verify baseline

Advocate precautionary action

‘96

The Future?

The CDM is important to BP

• Expands the scope of cost effective options for

mitigating climate change

• Compliance tool in Annex 1 countries

• Enable step change in technology and can

enhance projects in non-Annex 1 countries

The BP PRODEEM project is a CDM case study

• Broader BP Objectives

– Bottom up, small scale

– Provide a working business example for our Business units

– Provide practical tools to our business units to engage in the CDM

• Engage business, governments, academics and NGOs• Drive the rule making process for CDM projects• Build CDM capacity within government institutions in

Brazil, BP and the wider business community

• Primary objective – To bring a real CDM project to life

BP is working in partnership with PRODEEM in Brazil

• PRODEEM is the Programme for Energy Development of States and Municipalities

• National pilot programme

• Objective: promote supply of sustainable energy to poor communities in unelectrified rural areas

• Community based applications:

– Community buildings (schools, health & community centres)

– Water pumping (human & animal consumption & irrigation)

– Public lighting

20 million people in rural areas have no access to electricity

BRAZIL

Major population centres supplied by mainly Hydro based grid electricity

20 million people in rural areas without access to electricity

Project Implementation is underway

• 1852 schools in remote rural areas

• Standard solar package

• A total of 11,112 panels each of 120W will be installed

• Total watts installed - 1.33MW

• Benefit the lives of over

60,000 children

• Delivering electricity for:

– lighting,

– telecommunications &

– refrigeration for food

Project is contributing to Sustainable development in Brazil• Consulted with Brazilian Government and local stakeholders on

sustainability impacts of project

Environmental and Social Impacts:

• Providing access to modern energy to poor communities

• Avoiding local air pollution from alternative energy (small scale diesel)

• Enhancing education for children and adults (>60,000 kids)

Socio-Economic Impacts

• $US 10 million investment

• Local employment: utilising 13 local companies

• Capacity Building– Provided training in installation and maintenance

– Entrepreneur workshops bringing together; Micro finance institutions, Grassroots capacity building organisations and Equipment vendors

• Demonstrating application of clean technology

Project Baseline

• Grid extension too expensive

• Alternative energy source: small scale diesel generators

• Applied the proposed baseline methodology for small scale solar CDM projects

• Standardised baseline for all schools

• Project avoids 1722 tonnes CO2e per annum

Verification & Monitoring Plan

Cost of verification & monitoring is high for remote solar projects

Initial Verification

• Strict PRODEEM technical standards

• Random sample of systems tested prior to installation

• 3rd party technical validation at commissioning

Project life monitoring

• Wide dispersion of schools presents huge challenge– Approach must be simple and cost effective

• Discussing practical solutions with PRODEEM– Bi-monthly school solar report?

– Local companies act on operational problems

– CER verification every 3 – 5 years

– Install metering equipment at sample (1-5%) of schools?

Financial Impact of CERs

• Potential CER volume: 1722 tonnes per annum

• Transaction cost estimates appear high:

– Submission preparation: $ 60 – 80 K +

– Verification (if every 3 years): $ 10 - 15 K per annum

• Market Price

– Great uncertainty

– Possible range: US$ 5 – 10 per tonne

• Potential CER Revenue: $ 9 – 17 K per annum

• Revenue reinvested in project

• More extensive financial modelling underway, however,

Current market conditions unlikely to drive investments in small scale solar

Conclusions

• Business is eager to engage in the CDM

• CDM expands the scope of cost effective options for mitigating climate change

• CDM has the potential to incentivise business to introduce cleaner technologies in non-Annex 1 countries

a cautious start, but this is changing….

• Project developers, investors and market players need greater transparency on CDM rules

• Greater simplicity may reduce disproportionate transaction costs for small scale projects

• Business willing to contribute to rule making process through practical examples – learning by doing

Where to find out more….

www.bp.com