Bundling small scale projects

1. Bundling small scale projects Principles of bundling Bundling Documentation Examples and their applications in Carbon Finance projects Bundling (& “de-bundling”) Questions/discussion

2. What is a bundle? “A group of things fastened together for convenient handling.”

3. What is a CDM bundle? • Bringing together of several small-scale CDM projects, • Without the loss of distinctive characteristics of each activity. • Can be arranged as one or more “sub-bundles” with each activity retaining its distinctive characteristics, • technology/measure, • location, • application of simplified baseline methodology. • Project activities within a sub-bundle are of the same type. • Sum of output capacity of activities in a sub-bundle must not exceed the maximum output capacity of its type i: renewable energy ii: energy efficiency iii: other

4. General bundling principles • Should be indicated when requesting registration. • Once project activity is part of a bundle for a particular project cycle stage, it cannot be “de-bundled” for that stage. • Bundle composition cannot change over time. • Activities bundle cannot be taken out or added after registration.

5. General bundling principles • Same crediting period for all activities. • Should be demonstrated that bundle will remain under the limit for that type, every year during the crediting period. • If bundle goes beyond its limits, maximum claimable ERs is capped at level for that type • That is, excess ERs generated will not be eligible.

6. Principles - homogenous bundles Same type, same category, same technology/measure • Same baseline may be used under some conditions • One DOE can validate. • Common monitoring plan for the bundle, one monitoring report • Conditions for sampling • Same length and starting date of crediting period • One verification report. • One issuance – same time, for same period, 1 serial number for all projects (the bundle). • Sum of all activities should be as per SSC limits. • Must use SSC methodologies.

7. Principles - heterogeneous bundles (a) Same type, same category but different technology (b) Same type, different category, different technology (c) Different types • Same baseline may be used under some conditions • One DOE can validate. • Different monitoring plans, separate monitoring reports. • Same crediting period for all activities. • One verification report, one issuance, one serial number. • Sum of all activities??? • Must use SSC methodologies.

8. SSC bundles, SSC limits • Type I: Maximum output capacity of 15 MW (or an appropriate equivalent); • Type II: Maximum output of 60 GWh per year (or an appropriate equivalent); • Type III: emission reductions of less than or equal to 60 kt CO2 equivalent annually.

9. Bundling Documentation • Small-scale PDD • CDM-SSC-PDD • Version 03, in effect as of 22 December 2006. • Form for submission of bundles • At registration stage (sometimes DOEs request at validation) • F-CDM-SSC-BUNDLE For additional reference, see CDM Glossary of Terms

10. Advantages and Limitations in Practice

11. Advantages • Can save costs, depending on case. • 1 DOE for validation and verification • Sampling allowed in monitoring plan. • 1 PDD collects all small project activities. • Single entity can act on everyone’s behalf. • Good way for small, rural, scattered projects to access carbon finance. Example: Nepal Micro Hydro Program: Installation of MH stations range 3 – 100kW Up to 15MW ~ 750 plants covered in 1 PDD Govt. of Nepal on behalf of all MH operators

12. Limitations • Can also raise costs. • What if # of project activities amount to greater than SSC limits? • Make large-scale bundle, with regular methodologies, if available 2. Parse into different PDDs - how many PDDs will this produce? • Ex-ante identification of project activities • Sites? Villages? Municipalities? Districts? Example: Nepal Biogas Program: Installation of 162,000 – 200,000 biogas plants. 1 PDD covers ~9000 average sized plants PDD writing + validation + verification yr1= $30K Plus $10K per year verification x # of years Not withstanding modality repetition per PDD!

13. Example: Vertical Shaft Brick Kiln India • Improve thermal performance of brick manufacturing through VSBK implementation • Intention is to set up 127 VSBK plants, in 2-3 years; • SSC threshold is 60 GWh per year; • Bundles 14, 28, 21 VSBK plants which is 22.87 GWhth per year (contracted for equivalent of 6 bundles, based on 45 GWhth) • Methodology “Energy efficiency and fuel switching measures for industrial facilities” AMS II.d

14. VSBK India (contd.) • PDD ready when enough VSBKs implemented • Crediting period limitations, since all must have same length & start date • Critical mass/ # of kilns needed to justify CDM costs. • OK if: • Kilns are identified. • Reasonably short time span between first and last. • Otherwise, first kiln loses the most ERs.

15. VSBK India (contd.) • Each project activity = different company • Focal point (bundling agency) with CFU? • Legal agreements needed • Between each VSBK and bundling agency (ER sharing, admin costs, technology fees etc). • Sometimes between each entrepreneur and technical service agency (monitoring, community benefits plan implementation etc). (Bangladesh HHK in preparation) • Capacity issues of bundling agency? • Are they legally entitled to the ERs? (LoI, ERPA evidence) • Do they have capacity to act “on behalf of”?

16. Large Scale Bundles • Bundling together regular CDM projects, • Uses same bundling principles, • No size limitations. Example: Tunisia bundle of nice landfills 317,909 metric tones CO2 equivalent per annum Different landfill owners Validated and Registered

17. Example – implementation arrangement with bundling agency + bundled project World Bank ERPA Implementing agency Reporting/ community benefits etc 1 bundle Sub-project (legal) agreements Company A

18. “De-bundling” • No particular link to the concept of bundling • Instead, checks the use of SSC methodologies. • Fragmentation of large project into smaller bits • Each CANNOT use SSC methodologies • De-bundled occurs when: • With the same project participants; • In the same project category and technology/measure; and • Registered within the previous 2 years; and • Whose project boundary is within 1 km of the project boundary of the proposed small-scale activity at the closest point.

19. Questions to keep in mind • Who is the bundling agency? • Financier/technology provider/private company/1 of the companies/entrepreneurs/NGO/other? • Are risks and benefits understood? • Title and authorization to ERs, LoI signing? • Are legal arrangements secure, adequate? • Capacity as counterpart? • Appraisal issues? • …

20. Thank you!