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Future of CDM after 2012... what’s next? 15th June 2012 Boonrod Yaowapruek [email protected]
June 2012
Disclaimer
The release, publication or distribution of the materials to which this gatepost gives access in certain jurisdictions may be restricted by law and therefore persons in any such jurisdictions into which this announcement is released, published or distributed should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the laws of any such jurisdiction.
These presentation reflects the IPR GDF SUEZ Asia CDM team’s beliefs and expectations and involve risk and uncertainty from the carbon markets because they relate to events and depend on circumstances that will occur in the future. No representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements speak only as at the date of the relevant materials and IPR GDF SUEZ Asia CDM team and its advisers expressly disclaim any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in the materials. No statement in the materials is intended to be a profit forecast. As a result, you are cautioned not to place any undue reliance on such forward-looking statements.
These materials do not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares nor shall it or any part of it, nor the fact of its distribution form the basis of, or be relied on in connection with, any contract commitment or investment decision.
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GDF SUEZ is a leading group in three key businesses
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International Power is the Energy International Business Line of GDF SUEZ responsible for the Group’s energy activities in six geographical regions (Business Areas).
ENERGY EUROPE
ENERGY INTERNATIONAL
GLOBAL GAS & LNG
INFRA- STRUCTURES
ENERGY SERVICES
SUEZ ENVIRONNEMENT
NORTH AMERICA
UK-EUROPE LATIN AMERICA
META AUSTRALIA ASIA
INTERNATIONAL POWER PLC
International Power – part of the GDF SUEZ Group
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We are developing our presence in Asia Pacific
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Future of CDM after 2012
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Future of CDM after 2012
CER price ???
Supply • regulated by UNFCCC • updated EB66 • Large Scale CDM • Small Scale CDM • Programmatic CDM
Demand • Europe • Japan • North America • Australia • North America • South Korea?
1 2
3
Total expected demand ?
Total expected supply ?
Supply: how to generate CERs?
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Monitoring report
Verification report
Raw Data Issuance process
Consultant/Project owner
Auditor (DOE)
CDM EB / RIT
Project owner
Applying for CDM
registration
Carbon credit (CER) Factory In order to comply with the standard, a project must be registered
as a CDM project activity (similar to getting a business license) before it can generate carbon credits
CERs
$$$
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EB 66 outcome
As a part of the CDM’s regulatory overhaul, new project cycle procedures (Clean development mechanism Project Cycle Procedure, PCP) were adopted at EB’s meeting no.66.
• From 1 May 2012, submissions for registration (after the validation process finished) can be made under the new CDM regulatory. Project assessments can be made using either the new and old procedures until 1 October 2012.
• From 1 October 2012, all CDM related submissions must be made under the new procedures.
Therefore, Project developers need to adapt to the new Validation and Verification Standard (VVS), DOEs will also have to validate with the VVS.
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Durban outcome •Further CDM improvements to increase efficiency, scale, and outreach confirmed, using standardized baselines, PoAs, and simplified addtionality approaches.
•Carbon capture and storage (CCS) projects are now eligible.
•The materiality standard was completed.
- What does it mean? - What would be an impact?
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Source: UNFCCC
Forecast: CERs supply
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Source: World Bank
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• Europe: Oversupplied (because of Over-allocation, Economic reasons, Overlap of policies). The EU climate and Energy Package remains the main driver for post-2012 demand. If the EU moves from 20% to 30% target (below 1990 by 2020), the demand will be increased.
• Australia: Carbon Pricing Mechanism (CPM) is expected to import international credits after 2015.
• North America: potential demand currently comes from California. Quebec and the some WCI partners may adopt similar provisions.
• Japan: Japan is preparing a Bilateral Offsetting Credit Mechanism (BOCM) that is intended to use Kyoto Mechanisms.
• South Korea: On 2 May 2012 the National Assembly adopted an emission trading scheme, starts in 2015. CERs/ERUs would qualify for use in the scheme; while other credits, potentially from new market mechanisms and voluntary projects, would also be eligible.
2 Demand for CERs
Forecast: CERs demand
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Source: World Bank
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Future of CDM after 2012
Current CER price (spot) ~3.5 EUR/tCO2
1 2
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Demand by 2020 (tCO2)*
CDM EU ETS Eligible 3,729 CDM other 814 ERU 318 Total 4,861
Supply by 2020 (tCO2) EU ETS 1,635 Australia 348 New Zealand 77 Japan 539 North America 94 Switzerland 13 Total 2,706
*Not include South Korea’s
CDM Market Update
• Most compliance buyers have fulfilled their target (2020 target) already by contracting forward CERs.
• Last year, pre-2013 Volumes traded drop, however the market for post-2012 grew significantly.
• The market has become “Buyers’ market”.
• Lack of demand gives the remaining Buyers power to determine the contract dynamics.
– No fixed price - pre-2013 project registration – No CDM cost sharing - No EU ETS eligibility
• Buyers aim to negotiate to get less binding post-2012 ERPAs.
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Source: World Bank
Historical & Transaction prices
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EUR/tCO2
Natural Floor = CO2 abatement cost Or breakeven point
Natural Cap = secondary CER price
Contracted CER price
€ -
€ 5.00
€ 10.00
€ 15.00
€ 20.00
€ 25.00
12/0
8/20
08
05/1
1/20
08
02/0
2/20
09
29/0
4/20
09
23/0
7/20
09
15/1
0/20
09
12/0
1/20
10
08/0
4/20
10
01/0
7/20
10
23/0
9/20
10
16/1
2/20
10
28/0
3/20
11
22/0
6/20
11
14/0
9/20
11
16/1
2/20
11
13/0
3/20
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BlueNext Spot CER Daily Closing Price (EUR/tCO2)
Source: BlueNext
Prices & Volumes : EUAs, CERs, ERUs
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Source: World Bank
Forecast: CER price (EUR/tCO2)
Date of
forecast
2013 2014 2015 2016 2017 2018 2019 2020
BarCap Jun 2012
7.0 7.0
7.0
7.0
7.0
7.0
7.0
7.0
Bloomberg-NEF
May 2012
3.17 2.99 2.83 2.50 2.17 2.27 2.39 2.51
Reuter- Point carbon
Apr 2012
5.6 7.0 7.0 7.5 8.2 9.4 9.9 10.4
Orbeo (medium-term)
Jan 2012
8.5 10.0 10.0 9.0 7.0 3.0 3.0 3.0
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Source: Bloomberg, Reuter, Barcap, Orbeo
What’s next for Thai developers
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The Renewable and Alternative Energy Development Plan (AEDP 2012-2021)
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Source: dede
Characters of Thai CDM projects
Project Type No. of project
(including validation
phase)
Potential CERs generation per technology
Project IRR without CDM
revenue* (only registered
projects)
Project IRR with CDM revenue*
(only registered projects)
Methane Avoidance 97 - 5.5% 19.3%
Biomass Energy 38 35,000 CERs-yr per 10 MW (PLF ~ 70%-80%)
9.5% 13.0%
Solar power 18 8,000 CERs-yr per 10 MW (PLF ~ 15%-18%)
7.5% 8.3%
Landfill gas 8 40,000 CERs-yr per 1 MW (PLF ~ 70%-80%)
- -
Waste Heat Recovery
8 30,000 CERs-yr per 10 MW (PLF ~ 60%-70%)
9.6% 12.5%
Hydro power 7 26,000 CERs-yr per 10 MW (PLF ~ 55%-65%)
- -
Wind power 5 11,000 CERs-yr per 10 MW (PLF ~ 23%-25%)
- -
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Source: UNEP Risoe, IGES, IPR-GDF SUEZ
Q&A: Questions & Actions
1. I don’t know whether my project can be a CDM project or not?
2. What should I do if I’ve not started the CDM process?
3. How should I take the CDM revenue in my financial model?
4. What would happen if my project can’t get registered by this year (2012)?
5. Where can I find a buyer if I still don’t have one?
6. I don’t want to sell any CERs now, can I wait until I get issued CERs and then sell?
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Resourceful links • http://www.tgo.or.th/
• http://www.efe.or.th/index.php
• http://cdm.unfccc.int/index.html
• http://www.cdmrulebook.org/home
• http://www.cdm-meth.org/
• http://www.cdmpolicydialogue.org/panel
• http://www.climate-connect.co.uk/Home/
• http://www.cdmbazaar.net/
• https://www.theice.com
• http://www.bluenext.eu/index.php
Annex
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Australia’s CPM
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Source: World Bank
South Korea
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BlueNext Spot Price
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Source: BlueNext
Spot Market Suspended. Reopening on 21/06
Boonrod Yaowapruek Senior Originator [email protected] + 662 684 6064
For more info, please contact us…
