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Modeling Clean Development Mechanism (CDM) Impact on Renewable Energy Economics

February 5th, 2012 Posted in Clean Development Mechanism

Modeling Clean Development Mechanism (CDM) Impact on Renewable Energy Economics

Your energy technology expert has updated its project finance models for renewable energy.

It now includes standard clean development mechanism (CDM) modeling to determine the economic impact of including carbon emission reduction (CER) credits to the overall economics of renewable energy sources (biomass cogeneration, biomass direct combustion, biomass gasification, solar PV, wind, mini-hydro, ocean thermal energy conversion).

CDM modeling consists of running a project finance model to determine pre-tax net cash flow without escalation and with full equity (project IRR). The model, however, has the option to include cheaper debt.

The steps are as follows:

1) Determine the total plant cost and all-in construction (capital) cost

 

Wind Farm -Capital Cost                    MW                MW/unit              # of units
Gross Installed capacity, MW                 40.00 2.00 20
All-in Construction Cost Breakdown 2012    
Exchange Rate, PhP/US$ 44.00    
EPC Cost             US$ 000            PhP 000            % of All-in
  Equipment Cost ex Transport & BOP (FOB)               45,481          2,001,154 49.57%
  Transportation Cost to Site (INS, OFRT, LFRT)                 4,637             204,039 5.05%
  Balance of Plant (BOP)               16,124             709,468 17.58%
Transmission Line Cost                 2,186               96,200 2.38%
Switchyard & Transformer Costs                 4,053             178,311 4.42%
Project Development & Other Costs                 1,345               59,171 1.47%
Access Roads and Infrastructure Costs                    780               34,320 0.85%
Construction Contingency                 5,643             248,293 6.15%
Interest during construction                 2,857             125,710 3.11%
Upfront Fees and commitment fees                 1,567               68,959 1.71%
Total Plant Cost               84,673          3,725,627 92.29%
Initial Working Capital (Pre-Operating Expenses)                    672               29,586 0.73%
VAT on Imported Equipment                 6,397             281,469 6.97%
All-in Construction Cost               91,743          4,036,681 100.00%
       
Total Project Cost w/out Interest               88,886          3,910,972  
Total Project Cost               91,743          4,036,681  
PhP Cost per kW               100,917  
US$ Cost per kW                 2,294    
SENSITIVITY      
Total Project Cost w/out Interest               88,886          3,910,972  
+10%               97,774          4,302,069  
-10%               79,997          3,519,874  

 

2) Determine capital structure and cost of capital (e.g. 30% equity at 15 % p.a. returns and 70% debt at 10% p.a. interest)

 

Financing:    
  Local Capital Ratio 39.66%  % 
  Foreign Capital Ratio  60.34%  % 
  Debt ratio 70.00%  % 
     
  Local & Foreign Upfront & Financing Fees 2.00%  % 
  Local & Foreign Commitment Fees 0.50%  % 
     
  Foreign All-in Interest Rate excluding tax 8.00%  % p.a. 
  Foreign Debt Payment Period (from end of GP) (Yrs) 10  Years 
  Withholding Tax on Interest (Foreign Currency) – WHT 10.00%  % p.a. 
  All-in foreign interest rate (base + tax) – with WHT 8.89%  % p.a. 
     
  Local All-in Interest Rate excluding tax 10.00%  % p.a. 
  Local Debt Payment Period (from end of GP) (Yrs) 10  Years 
  Gross Receipts Tax on Interest (Local Currency) – GRT 5.00%  % p.a. 
  All-in local interest rate  (base + tax) – with GRT 10.53%  % p.a. 
     

 

3) Determine gross generation (to estimate fuel consumption) and net generation (to estimate revenue)

 

Wind Farm – Generation and Operating Costs                    MW
Gross Installed capacity, MW                 40.00
Generation, Revenue and O&M Cost Breakdown 2012
Exchange Rate, PhP/US$ 44.00
Plant Availability Factor, % 27.13%
Guaranteed Efficiency Factor, % 95.00%
Allowance for losses & own use, % 3.00%
Annual operating hours, h/yr                 8,760
Annual gross generation, MWh/yr               90,309
Less: Losses & Own Use, MWh/yr                 2,709
Annual net generation (sales), MWh/yr               87,600
Electricity tariff (base case), PhP/kWh 8.00
Annual sales (revenue)             700,800

 

4) Estimate Fuel cost, O&M costs, G&A costs, Local & National Taxes and Carbon Emission Reduction (CER) credits (from net MWh, emission factor in tons CO2 per MWh, cost of CER in US$ per ton or EUR per ton, and exchange rate in PhP per US$ or PhP per EUR)

 

Fuel Cost (for Biomass power plant):      
  Average thermal efficiency, % of GHV 27.09%    
  Plant heat rate at 100% thermal efficiency, Btu/kWh                 3,412                 3,600 1.05506
  Average plant heat rate, Btu/kWh               12,596    
  Biomass fuel gross heating value, Btu/lb                 4,000 2.2046 lb/kg
  Biomass fuel gross heating value, Btu/MT          8,818,400                 1,000 kg/MT
  Average fuel rate, kWh/MT                    700    
  Annual gross generation, kWh/yr        90,309,278                 1,000 kWh/MWh
  Annual fuel consumption, MT/yr             128,991    
  Average fuel cost, PhP/MT                 2,172    
  Average fuel cost, PhP/kWh                 3.102    
  Annual fuel cost, PhP 000/yr             280,168 0 Switch for biomass
  Annual fuel cost for this project (wind farm)                         -  PhP 0000/yr  
       
O&M cost:      
  O&M of wind turbines 133.33  US$ 000/Unit  
  No. of wind turbine units                      20  # of Units  
  Annual O&M cost for wind turbines             117,333  PhP 0000/yr  
       
Spare parts, tools, & equipment cost:      
  Spare parts, tools, & equipment 33.33  US$ 000/MW  
  Gross installed capacity 40.00  MW  
  Annual spare parts, tools, & equipment cost               58,667  PhP 0000/yr  
       
General & Administrative (G&A) cost: (salaries & benefits)      
  G&A cost 600.00  US$ 000/yr  
  Annual G&A cost               26,400  PhP 0000/yr  
       
Property tax:      
  Property tax valuation rate, % of book value 80.0%  %  
  Property tax rate, % of value 1.5%  %  
       
Local business tax:      
  Local business tax rate, % of previous year’s revenue 1.0%  %  
       
Government share:      
  Government share of gross income (revenue – cost of goods) 0.0%  %  
    where cost of goods = fuel cost + O&M cost + spares + depreciation)      
       
ER 1-94 Contribution:      
  ER 1-94 Contribution Rate 0.01  PhP/kWh  
       
Economic life (depreciation period):      
  Years of economic operation for wind                      20  Years  
       
Wind Farm – Project revenues        
Size (MW)                            40.00 MW  
Capacity factor   25.00%       8,760  
GWh   87,600 MWh  
kWh   87,600,000 kWh  
Generation charge/ kWh PhP                            8.00 PhP/kWh  
Income/ yr PhP            700,800,000 PhP/yr  
         
Sensitivity        
+10% PhP            770,880,000    
-10% PhP            630,720,000    
+60% PhP         1,121,280,000    
         
CDM/ carbon revenues        
1 EUR=PhP PhP 56.17    
CERs                        41,698    
CER price EUR 10.00    
GEF   0.476    
CER value PhP               23,419,707    
         
CER revenues/ 21 years PhP            491,813,852    

 

5) Prepare depreciation schedule

6) Estimate gross income to estimate government share

7) Breakdown all-in capital cost into local and foreign components, equity and debt capital

8) Prepare foreign debt amortization schedule (principal repayment and loan interest)

9) Prepare local debt amortization schedule (principal repayment and loan interest)

10) Prepare net cash flow statement and compare with all-in capital cost

 

    Pre tax (no escalation) 100.00%  
Year (act) Year CapEx
PhP(10^3)
OpEx
PhP(10^3)
TPC
PhP(10^3)
Revenue
PhP(10^3)
EBITDA Net cash flow (pre-tax)
PhP(10^3)
               
               
2011 0            
2012 0        (3,910,971.53)            (3,910,971.53)           (3,910,971.53)               (3,910,971.53)
2013 1               (250,207.66)             (250,207.66)             700,800.00             450,592.34                    450,592.34
2014 2               (254,869.08)             (254,869.08)             700,800.00             445,930.92                    445,930.92
2015 3               (252,522.49)             (252,522.49)             700,800.00             448,277.51                    448,277.51
2016 4               (250,175.91)             (250,175.91)             700,800.00             450,624.09                    450,624.09
2017 5               (247,829.33)             (247,829.33)             700,800.00             452,970.67                    452,970.67
2018 6               (245,482.74)             (245,482.74)             700,800.00             455,317.26                    455,317.26
2019 7               (243,136.16)             (243,136.16)             700,800.00             457,663.84                    457,663.84
2020 8               (240,789.58)             (240,789.58)             700,800.00             460,010.42                    460,010.42
2021 9               (238,443.00)             (238,443.00)             700,800.00             462,357.00                    462,357.00
2022 10               (236,096.41)             (236,096.41)             700,800.00             464,703.59                    464,703.59
2023 11               (233,749.83)             (233,749.83)             700,800.00             467,050.17                    467,050.17
2024 12               (231,403.25)             (231,403.25)             700,800.00             469,396.75                    469,396.75
2025 13               (229,056.66)             (229,056.66)             700,800.00             471,743.34                    471,743.34
2026 14               (226,710.08)             (226,710.08)             700,800.00             474,089.92                    474,089.92
2027 15               (224,363.50)             (224,363.50)             700,800.00             476,436.50                    476,436.50
2028 16               (222,016.91)             (222,016.91)             700,800.00             478,783.09                    478,783.09
2029 17               (219,670.33)             (219,670.33)             700,800.00             481,129.67                    481,129.67
2030 18               (217,323.75)             (217,323.75)             700,800.00             483,476.25                    483,476.25
2031 19               (214,977.17)             (214,977.17)             700,800.00             485,822.83                    485,822.83
2032 20               (212,630.58)             (212,630.58)             700,800.00             488,169.42                    488,169.42
Totals          (3,910,971.53)          (4,691,454.41)          (8,602,425.94)        14,016,000.00          5,413,574.06                 5,413,574.06

 

11) Calculate project IRR (the discount rate that will make the NPV of the project equal to zero)

 

Pre tax NPV@ different discounting factors (30 years)
disc. factor NPV/ PhP  
5.0%       1,766,528.91  
10.0%              1,727.14  
12.0%         (433,808.95)  
15.0%         (912,637.25)  
16.0%      (1,037,162.47)  
20.0%      (1,411,707.24)  
25.0%      (1,693,229.09)  
30.0%      (1,853,564.33)  
35.0%      (1,942,781.36)  
40.0%      (1,988,444.29)  
           10.01%                    (0.00)  
     

 

12) Conduct sensitivity analysis (base case, sensitivity cases – vary TARIFF, vary CAPEX, vary OPEX)

 

      Pre tax (no escalation) 100.00% Equity
Year Year (CPA) Base case
PhP(10^3)
With CDM
PhP(10^3)
Tariff +10% Tariff runs +60% Tariff -10% CapEx
TPC -10%
CapEx
TPC +10%
O&M +10% O&M -10%
                     
                     
2010 0                                  -                         -                             -                              -                            -                          -                            -                             -                          -
2011 0               (3,910,971.53)      (3,910,971.53)          (3,910,971.53)          (3,910,971.53)         (3,910,971.53)       (3,519,874.38)         (4,302,068.68)          (3,910,971.53)       (3,910,971.53)
2012 1                    450,592.34          450,592.34              520,672.34               871,072.34              380,512.34           450,592.34              450,592.34              425,571.58            475,613.11
2013 2                    445,930.92          469,350.63              516,010.92               889,830.63              399,270.63           445,930.92              445,930.92              420,444.02            471,417.83
2014 3                    448,277.51          471,697.21              518,357.51               892,177.21              401,617.21           448,277.51              448,277.51              423,025.26            473,529.76
2015 4                    450,624.09          474,043.80              520,704.09               894,523.80              403,963.80           450,624.09              450,624.09              425,606.50            475,641.68
2016 5                    452,970.67          476,390.38              523,050.67               896,870.38              406,310.38           452,970.67              452,970.67              428,187.74            477,753.61
2017 6                    455,317.26          478,736.96              525,397.26               899,216.96              408,656.96           455,317.26              455,317.26              430,768.98            479,865.53
2018 7                    457,663.84          481,083.55              527,743.84               901,563.55              411,003.55           457,663.84              457,663.84              433,350.22            481,977.46
2019 8                    460,010.42          483,430.13              530,090.42               903,910.13              413,350.13           460,010.42              460,010.42              435,931.46            484,089.38
2020 9                    462,357.00          485,776.71              532,437.00               906,256.71              415,696.71           462,357.00              462,357.00              438,512.71            486,201.30
2021 10                    464,703.59          488,123.30              534,783.59               908,603.30              418,043.30           464,703.59              464,703.59              441,093.95            488,313.23
2022 11                    467,050.17          490,469.88              537,130.17               910,949.88              420,389.88           467,050.17              467,050.17              443,675.19            490,425.15
2023 12                    469,396.75          492,816.46              539,476.75               913,296.46              422,736.46           469,396.75              469,396.75              446,256.43            492,537.08
2024 13                    471,743.34          495,163.04              541,823.34               915,643.04              425,083.04           471,743.34              471,743.34              448,837.67            494,649.00
2025 14                    474,089.92          497,509.63              544,169.92               917,989.63              427,429.63           474,089.92              474,089.92              451,418.91            496,760.93
2026 15                    476,436.50          499,856.21              546,516.50               920,336.21              429,776.21           476,436.50              476,436.50              454,000.15            498,872.85
2027 16                    478,783.09          502,202.79              548,863.09               922,682.79              432,122.79           478,783.09              478,783.09              456,581.39            500,984.78
2028 17                    481,129.67          504,549.38              551,209.67               925,029.38              434,469.38           481,129.67              481,129.67              459,162.64            503,096.70
2029 18                    483,476.25          506,895.96              553,556.25               927,375.96              436,815.96           483,476.25              483,476.25              461,743.88            505,208.63
2030 19                    485,822.83          509,242.54              555,902.83               929,722.54              439,162.54           485,822.83              485,822.83              464,325.12            507,320.55
2031 20                    488,169.42          511,589.12              558,249.42               932,069.12              441,509.12           488,169.42              488,169.42              466,906.36            509,432.48
Totals                   5,413,574.06       5,858,548.49           6,815,174.06          14,268,148.49           4,456,948.49        5,804,671.21           5,022,476.90           4,944,428.62         5,882,719.50
IRRs   10.01% 10.65% 12.15% 22.46% 8.44% 11.58% 8.67% 9.25% 10.76%

 

Please refer to the list below of the CDM project finance models and my other project finance models:

 

TECHNOLOGY
Cost of Power Generation Technologies.xls
Levelized cost of electricity.xls
Latest Feed-in-Tariff Rates for Renewable Energy Technologies.doc
Wind Turbine Price List.xls
Power Plant Emission Data and Model:
Power Plant Emission Calculation Model by mass.xls
Power Plant Emission Calculation Model by concentration.xls
CDM Feed-in-Tariff Models for Renewable Energy
CDM Biomass Cogeneration Model.xls
CDM Biomass Direct Combustion Model.xls
CDM Biomass Gasification Model.xls
CDM Mini-Hydro Model.xls
CDM Ocean Thermal Model_10 MW.xls
CDM Ocean Thermal Model_50 MW.xls
CDM Solar PV Model.xls
CDM Solar PV Model.xls
ADVANCED Feed-in-Tariff Models for Renewable Energy
ADV Biomass Cogeneration Model.xls
ADV Biomass Direct Combustion Model.xls
ADV Biomass Gasification Model.xls
ADV Mini-Hydro Model.xls
ADV Ocean Thermal Model_10 MW.xls
ADV Ocean Thermal Model_50 MW.xls
ADV Solar PV Model.xls
ADV Wind Model.xls
MTO Feed-in-Tariff Models for Renewable Energy
MTO Fit_biomass cogeneration.xls
MTO Fit_biomass direct combustion.xls
MTO Fit_biomass gasification.xls
MTO Fit_Mini Hydro.xls
MTO Fit_ocean thermal_10 MW.xls
MTO Fit_ocean thermal_50 MW.xls
MTO Fit_solar PV.xls
MTO Fit_wind.xls
Simplified Feed-in-Tariff Models for Renewable Energy (Student Edition)
Simplified Fit_biomass anaerobic digestion.xls
Simplified Fit_biomass cogeneration.xls
Simplified Fit_biomass gasification.xls
Simplified Fit_biomass direct combustion.xls
Simplified Fit_Mini Hydro.xls
Simplified Fit_ocean thermal_10 MW.xls
Simplified Fit_ocean thermal_50 MW.xls
Simplified Fit_solar PV.xls
Simplified Fit_wind.xls
Renewable Energy Resource Assessment Model
Wind Energy Resource Assessment Tool_Anemometer Measurement
Wind Energy Resource Assessment Tool_3TIER Prediction
MTO Project Finance Models:
proj_diesel genset power plant model.xls
proj_hybrid power plant model (diesel, biomass, mini-hydro, solar, wind).xls
proj_oil thermal power plant model.xls
proj_coal thermal power plant model (pulverized, CFB, IGCC).xls
proj_geothermal power plant model.xls
proj_simple cycle GT plant model.xls
proj_combined cycle GT plant model.xls
proj_nuclear power plant model.xls
LP Models for Optimal Load Dispatch
Optimal Load Dispatch_Luzon_1.xls
Optimal Load Dispatch_Mindanao_1.xls
Optimal Load Dispatch_Visayas_1.xls
LP Model for Trigeneration.xls

 

To order, simply email me to confirm your order so I can email you the price list.

energydataexpert@gmail.com

I will then email you my local bank details where you could remit the payment. Once my bank confirms receipt of payment, I will email you the CDM project finance model.

 

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