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Standard Bank Group launches scoping study on regional grid emissions for southern Africa power pool
5 December 2011

Africa accounts for less than 2% of the 3 395 projects registered under the Clean Development Mechanism (CDM), compared with 46% in China. 

Out of the 77 registered CDM projects in Africa, 20 are in South Africa. 

But Standard Bank Group estimates that there is substantial potential for the CDM in renewables in southern Africa: by 2020, between 8.4 and 15.6 million tonnes from Least Developed Countries (LDCs) and between 8.7 and 11.5 million tonnes from Middle Income Countries. 

This was discussed at the launch today of a Standard Bank Group scoping study prepared by Camco - a global developer of emission reductions and clean energy projects, with the aim of assessing the options for the inclusion of cross-border (country-to-country) emissions for grid-connected power sector CDM projects in southern Africa. 

To date, in most countries surrounding South Africa, CDM project development in the power sector has been constrained by Grid Emission Factors (GEF), which are defined as the amount of carbon dioxide (equivalent) emissions associated with each unit of electricity put on to an electricity grid. 

Says Geoff Sinclair, Standard Bank Group's head of carbon sales and trading: "Given the endowment of energy resources throughout southern Africa, in particular renewable such as hydropower and biomass, and the rapid growth in regional electricity demand over the past decade, one would have expected to see a large number of renewable energy or natural gas switching projects developed in the region. 

"Unfortunately, this has not happened. Although for many years project developers in the region have sought to utilise the CDM as a component of financing for clean energy electricity projects, no grid-connected CDM projects have been developed outside South Africa." 

He said that this may be partly attributable to small project size, financing challenges and regulatory frameworks to support Independent Power Producers (IPP) and renewable. However, until recently, the limits also posed by existing CDM rules have restricted developers from taking into account the overall regional emissions impact on the integrated power network as their baseline. 

"Put simply, even with South Africa contributing 80% of the power on the Southern Africa Power Pool (SAPP) and having one of the highest GEFs in the world, project developers in the neighbouring countries have not been able to claim carbon credits for clean electricity projects on the high greenhouse emissions-intensive interconnected grid," said Mr Sinclair. 

Discussions with many of the Designated National Authorities (DNAs) in the region indicate that the historical means for calculating cross-border emissions is an area of common concern and a major barrier to CDM project development in southern Africa. "They see the lack of opportunity to earn credits from cross-border electricity sales as impeding the development of clean energy projects in the region and many are keen to see initiatives in place to remove these barriers under CDM," said Mr Sinclair. 

The Standard Bank Group study provides a high level overview of the key issues associated with CDM projects involving cross-border emissions and provides recommendations on the steps that would need to be taken to remove these barriers and ensure that the CDM is relevant to the countries that need it most. 

"Standard Bank commissioned this study because we view regional grid emissions issues as critical barriers to be resolved in facilitating the development of both the CDM and energy infrastructure in sub-Saharan Africa," said Mr Sinclair. 

The initial focus of the study was on the viability and practicality of establishing a regional methodology and, therefore a regional GEF within the SAPP for countries that are part of this interconnected grid. 

However, recent developments indicate that a regional methodology may not be appropriate for all SAPP member states and, therefore, not the only solution to this challenge, at least in the short to medium turn. 

The study therefore looks at existing approaches internationally to cross-border emissions and the methodologies for the calculation of GEFs, as well as how these can be applied and enhanced. 

"The development of cross-border solutions has the potential to unlock a significant number of CDM projects in the region and there is now a clear need for all key stakeholders and partners to work together to achieve this goal," said Mr Sinclair. 

You can view the full report here. - See more at: http://standardbank.com/Article.aspx?id=-142&src=m2011_34385466#sthash.Z2DyIaah.dpuf

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