Coahuila SCAP Phase 2 Report - Draft
App. B- Micro Methodology February 2016
Appendix B Methodology for Micro-economic Analysis This technical memorandum provides an overview of the methods, data sources, planning metrics, and key assumptions that were used in conducting the microeconomic impacts analysis of CO SCAP policies.
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Memo To:
Panel of Experts, Coahuila Climate Action Plan
From: Stephen M. Roe, Thomas D. Peterson, and Scott T. Williamson, The Center for Climate Strategies (CCS) CC:
Technical Team, CCS
Re:
Principles and Guidelines for Quantification of Policy Options
Date: June 25, 2015
The purpose of this “Quantification Memo” is to propose and explain the principles, guidelines and general methods needed for quantifying the socio-economic impacts for the recommended Coahuila Climate Action Plan (CO CAP) mitigation policies. Through facilitative and technical support of CCS, the Panel of Expert (PE) and TWGs will identify, design and guide analysis of the direct socio-economic impacts of each policy and an aggregate scenario of all policies combined. Co-benefits will be described and or analyzed where possible and applicable. The direct impacts analysis of CO CAP policies is the focus of this memorandum; however, the project will also include an indirect or macroeconomic analysis of CO CAP policies. This memo will touch upon that aspect of the project, but the details will be laid out in separate communications to the PE members. This memorandum does address microeconomic to macroeconomic data bridging. 1
I. Selected Policies and General Quantification Guidelines A. Selection of Policy Options and Their Design The policies to be designed and analyzed for the CO CAP were selected during the first phase of the CAP project. These policies are listed in Table I-1 below. The technical workgroups (TWGs) that will design and analyze each mitigation policy are divided into the following economic sectors: Energy Supply (ES); Residential/ Commercial/ Institutional/ Industrial (RCII); Transportation & Land Use (TLU); Agriculture, Forestry 1
For additional reference see the economic analysis guidelines developed by the Science Advisory Board of the US EPA available at: http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/Guidelines.html. 1800 K Street, NW, Suite 714, Washington, DC 20006 (202) 540-9121 office, (202) 540-9122 fax www.climatestrategies.us IMPROVING OUR ECONOMY, ENVIRONMENT AND ENERGY SYSTEMS
CO CAP Quantification Memo CCS, June 25, 2015
& Other Land Use (AFOLU); and Waste Management (WM) sectors. Depending on need, another TWG could be formed to develop any required Cross-Cutting Issues (CCI) policies (commonly, these CC policies are not analyzed for mitigation impacts and costs as in the sector-based TWGs). Table I-1. Mitigation Policies for the CO CAP Sectors:
AFOLU
WM
ES
RCII
TLU
CCI
Policy Title/Brief Description AFOLU-1. Dairy Cattle Manure Management. Develop and implement a program for anaerobic digestion of manure from dairy livestock for reduction of methane emissions and production of renewable electricity. AFOLU-2. Increased Coverage of Urban Vegetation for Roadways, Public Spaces, Rights of Way, Parks and Gardens. Increase urban vegetative cover to increase carbon sequestration, reduce storm water run-off, and provide shading to buildings. WM-1. Landfill Gas Utilization. Establish a program to install technology to capture methane gas from landfills statewide for use in renewable electricity generation. WM-2. Increased Wastewater Sanitation and Reuse. Increase the levels of industrial and municipal wastewater treatment to reduce direct GHG emissions and increase the amount of wastewater reuse for urban and agricultural irrigation purposes. ES-1. Marketable Electricity Production with Low Carbon Content Technologies. Develop new in-State electricity capacity using a combination of renewable energy and natural gas/methane technologies. ES-2. Photo-Voltaic (PV) Power Generation – Residential Sector. Incentivize higher than BAU levels of PV capacity additions in the residential sector. ES-3. Photo-Voltaic (PV) Power Generation – Institutional Sector Incentivize higher than BAU levels of PV capacity additions in public buildings. ES-4. Photo-Voltaic (PV) Power Generation – Commercial and Industrial Sectors Incentivize higher than BAU levels of PV capacity additions in the commercial and industrial sectors. ES-5. Increased Use of Cogeneration in Industry – Promote higher levels of cogeneration of electrical power in the industrial sector. RCII-1. Energy Efficiency: New Residential/Commercial/Institutional & Industrial Buildings. New codes and standards focused on the residential and institutional sectors. Large (>5,000 m2) buildings in the commercial and industrial sectors are also addressed. RCII-2. Increasing Energy Efficiency in New Construction - Equipment. Promote the use of more energy efficient equipment in RCII buildings.
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Sectors:
AFOLU
WM
ES
RCII
TLU
CCI
Policy Title/Brief Description RCII-3. Increasing Energy Efficiency in Existing Buildings - Equipment. Retrofit buildings with more energy efficient equipment. This policy excludes the Industrial sector. RCII-4. Stimulating Energy Efficiency in the Industrial Sector - Equipment and Process Improvements. Apply fiscal incentives to implement process improvements and incorporate energy efficient equipment. TLU-1. Increase Density of Urban Design. To reduce the distance in urbanized travel. TLU-2. Promote Sustainable Urban Transport Systems. Increased use of public transit, cycling and pedestrian movement. TLU-3. Onroad Fleet Efficiency. Promote a more fuel-efficient vehicle fleet through greater use of hybrid and electric vehicles. CCI-1. None have been specified for the CO CAP.
For each policy, a series of design parameters must be defined to support detailed quantification of impacts. These include: •
Timing (start and stop dates for the proposed policy options, as well, as any phase in or ramp up/down schedules)
•
Level of effort (or quantitative goals for the proposed action)
•
Coverage of implementing or affected parties (including geographic boundaries and the specific types of entities or groups that will be required to implement the policy)
•
Other definitional issues or eligibility provisions (such as renewable fuel definitions, small business definitions, hydro power size classes, etc.)
In addition, the instruments or mechanisms used to implement each policy option must be defined, at least in general terms, to capture potential variations in effectiveness. This is particularly true for differences in price and non-price incentives and mandatory versus voluntary approaches). A variety of instruments or mechanisms exist, including: •
Voluntary agreements
•
Technical assistance
•
Targeted financial assistance
•
Taxes or fees
•
Cap and trade
•
Codes and standards
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•
Disclosure and reporting
•
Information and education
•
Others
The impacts of each are policy specific and will vary by circumstance. For instance, price instruments, such as taxes and cap and trade, may perform better for policy options that are price responsive in comparison to those that are relatively unresponsive to price. Similarly, non-price instruments, such as codes and standards, may perform better where significant market barriers exist and require barrier removal. Mandatory actions may have higher compliance or market penetration rates. B. Planning Period for the CO CAP, Coverage of Impacts, and Associated Metrics The planning period will begin with implementation in 2016 and run through 2035. Quantitative estimates will be developed for the following types of impacts where applicable based on priorities set by the Secretary of the Environment of the State of Coahuila [Secretaría de Medio Ambiente del Estado de Coahuila (SEMA)] and the Coahuila Climate Change Advisory Group (COCAG), and within the analytical capacity of the contract and process: •
Net GHG reduction potential, expressed as teragrams (Tg; million metric tons) carbon dioxide equivalent (CO2e) removed, including net effects of carbon sequestration or sinks, measured as an incremental change against a forecasted baseline; where very small denominations of GHGs are involved use of metric tons (tCO2e) may be used with notation.
•
Non GHG physical impacts (such as on air quality or energy use), as appropriate and possible based on the availability of data, applied on a case-by-case basis.
•
Individual or “stand alone” impacts of policies, as well as aggregate or interactive effects of policy sets and scenarios (“system-wide” impacts); these will be measured as an incremental change against a forecasted baseline.
•
Direct economic impacts, also known as microeconomic analysis; two key analytical endpoints will be: cost effectiveness (expressed as $/tCO2e removed) 2; and net societal costs/savings, presented as the net present value (NPV) of the stream of costs/savings incurred to implement the policy over the planning period; these analyses will include avoided costs of policy implementation, such as the avoided cost of investment in infrastructure or services from efficiency measures.
•
Indirect or secondary economic impacts on jobs, income, economic growth, and prices, also known as macroeconomic impacts, that arise from or in association with direct costs and savings. Also distributional impacts, including differential impacts related to size, location, and socio-economic character of affected households, entities, and communities; often framed as fairness and equity. For instance, this
2
Note that throughout this document, the $ sign refers to Mexican pesos.
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would include disparate effects on small versus big business or wealthy versus low income households. •
Full energy-cycle impacts, including net energy effects that include all inputs and outputs of projects, as possible based on the availability of data and relevance.
•
Discounting or time value of assets, typically using standard rates of 5 percent/yr real and 7 percent/yr nominal, applied to net flows of costs or savings over the CO CAP planning horizon (2016 – 2030). CCS requests input from PE and TWG members on the selection of a real discount rate (real rate of interest) pertinent to planning work in Mexico. 3
•
Annualized impacts, typically real net costs are estimated for each year of the planning period and are also shown on an NPV basis in order to provide both cumulative and year-specific snapshots.
•
Impacts beyond the end of the planning period; where important additional GHG reductions or costs occur beyond the project period as a direct result of actions taken during the project period, these will be shown for illustration.
C. Transparency of Analysis All key elements of policy development and analysis will be explicitly provided for review and consideration by SEMA and the COCAG. The PE and TWGs will work directly with CCS technical leads to develop each of the individual policy designs. All proceedings and decisions of the process will be available for public review. This includes policy design and implementation mechanism choices (above) as well as the technical specification of analysis for options and scenarios. These technical specifications for analysis include: •
Data sources, based on best available data and PE and TWG determinations
•
Methods and models, determined with input from PE and TWG members following review of proposed methods/models by CCS
•
Key assumptions, based on PE and TWG determinations
•
Key uncertainties, to be identified and discussed either qualitatively, or addressed through sensitivity analysis or other analytical approaches, as appropriate and possible.
Decisions on each of these variables will be made through open facilitated decisions of the PE and TWGs. Analysis by CCS, PE and TWG members will follow these guidelines and specifications. For the micro-economic analysis of policies, each TWG will work from an MS Excel workbook for their sector(s) (“micro-analysis workbook”). Each of these will have a common structure to produce analyses that allow for a reviewer to follow through the construction of each stream of energy, GHG reduction, and cost elements to produce estimates of cost effectiveness and net societal costs (on an NPV3
Based on the World Bank, the real interest in Mexico has oscillated between -1.5% and 4.9% during the period 2004 and 2012 (http://data.worldbank.org/indicator/FR.INR.RINR/countries?page=1). This might indicate a real discount rate closer to 2% might be more appropriate for use in this project.
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basis). Standard outputs from these sector micro-analysis workbooks will be used for integration analysis across sectors (“inter-sector integration”) and for input to macroeconomic modeling. D. Documentation of Policy-Specific Results Documentation of the work completed for each policy will be provided in a standard Policy Option Template format that addresses the following topics (among others) to ensure consistency for comparison of information and also assist with identifying data gaps that will be addressed. • • • • • • • •
• • • •
Policy Area (Sector) Name of Policy Option Plain English/Spanish Policy Description Causal Chain for GHG Effects Technical Policy Design Specifications (described above) Policy Implementation Mechanisms: described in general terms above but will be defined more specifically for each policy option and program through which it is implemented Related Policies and Programs in Place or Anticipated: for baseline definition (including existing and planned actions) Quantification Results, including: o Estimated Net GHG Savings in target years, o Cumulative net GHG reduction potential and net costs/savings (NPV), o Net Cost/savings per cumulative tCO2e saved, o Energy impacts (net production/consumption or shift in supply/demand mix and timing), o Specified data sources, quantification methods, and key assumptions Key Uncertainties and Sensitivity analyses (where applicable) Co-Benefits Assessments or Characterization, as appropriate Specific Technical or Other Barriers to Consensus, if any Final Levels of SEMA and COCAG Support: in terms of percentage support (often in categories such as unanimous approval, super majority, or simple majority)
The completed Policy Option Templates will be assembled into a separate appendix of the final report. Additional printouts of worksheets and reference materials may be provided where needed.
II. Direct vs. Indirect Effects and Linkages Socio-economic impacts of policy options and scenarios will include direct, indirect, and distributional effects. Direct effects are those borne or created by the specific entities, households or populations subject to the policy or implementing the new policies. Indirect effects are other than those specifically involved in implementing the policy recommendation. For instance, new vehicle standards may directly affect manufacturers and consumers of cars (e.g. due to initial higher vehicle costs). Indirectly, their sales may increase or decrease local taxes and spending on goods and services that benefit from or
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are hurt by increased disposable income of the manufacturing workforce and consumers. These direct and indirect economic analyses are sequentially linked, with overlap. Direct effects must be calculated first in order for indirect effects and distributional impacts to be calculated. Direct physical effects (net energy and GHG impacts) will be estimated to support costeffectiveness and GHG reduction target evaluations. Indirect GHG effects will be conducted only as needed to address energy-cycle and boundary issues, based on availability of data, acceptability of methods, and priority. Examples of direct and indirect net costs and benefits metrics are included in Attachment I of this memo by sector for purposes of illustration: •
Energy Supply (ES)
•
Residential, Commercial, Institutional & Industrial (RCII)
•
Transportation and Land Use (TLU)
•
Agriculture, Forestry and Other Land Use (AFOLU)
•
Waste Management (WM)
III. Accounting for Policy Interactions & Overlaps During Microeconomic Analysis The initial micro-economic analysis of each policy will be done on a “stand-alone” basis. This assumes that the policy is being implemented all by itself, and the results are calculated against business as usual (BAU) conditions as addressed in the GHG inventory and forecast (or “baseline”). The “stand-alone” GHG reductions and net societal costs will be calculated first within each sector micro-workbook. Policies will often have overlapping or interacting effects with others that are being implemented at the same time. These interactions/overlaps can occur between policies within the same sector (intra-sector) or between policies in separate sectors (inter-sector). An example of an intra-sector overlap would be a policy that reduces waste emplacement in landfills and another that addresses landfill gas capture. By implementing the first policy, there will be less waste being emplaced in landfills (as compared to BAU), which will reduce the amount of methane generated in the future and the possible GHG reductions. As well, with implementation of the second policy, there will be less methane being emitted (as compared to BAU). This will reduce the potential reductions that could be achieved by reducing landfill waste emplacement (assuming no landfill gas collection and control under BAU conditions). A common example of inter-sector interactions/overlaps occurs between electricity energy efficiency policies in the RCII sector and clean electricity generation policies in the ES sector. This occurs due to the difference in electrical grid carbon intensity between the BAU forecast and the intensity that results from the implementation of all ES supplyside policies.
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Important Electricity Supply/Demand Interactions Issues for the CO CAP CO CAP Team members indicated a desire to revise the electricity supply GHG I&F based on the characteristics of the national grid, rather than State-specific supply sources (as represented in the original CO GHG baseline). So, policies that result in a reduction in electricity consumption will use a set of carbon intensities and avoided electricity costs that are representative of the national grid. This approach is a change to common practice of consumption-based accounting, whereby the carbon intensities and avoided costs are determined for a State-specific electricity system. A consumption-based accounting approach was used to construct the initial CO GHG baseline. Conceptually, a CO CAP energy efficiency policy would reduce demand that could lead to actual reductions outside of the State. It is important to understand that the same concept would apply to electricity supply-side policies. As measured against this national grid, new sources of supply could offset supplysources located outside of Coahuila. In theory then, the actual emissions from the State’s power plants could decrease, remain the same, or even increase as a result of the CO CAP policies.
Another common area for inter-sector interaction/overlap is biofuels supply and demand policies, although, for the CO CAP, no biofuel production policies have been included in the initial set of priorities summarized above. In the event that such policies are added later in the planning process, CCS’ preferred approach to addressing interactions and overlaps is to work with the PE and TWG members to focus the AFOLU/WM supplyside policy analyses on the biofuel production volumes and costs that can be produced inState and the expected carbon intensities of those fuels. Those results would then serve as inputs to the demand-side policies in the TLU and RCII sectors, so that the full GHG reductions achieved and costs incurred for consuming those biofuels can be determined (e.g. full costs that include blending, distribution and other costs). The full set of results is then presented as a “biofuels policy package” that includes both supply- and demand-side policies. The next step after “stand-alone” policy analysis will be an assessment of intra-sector interactions and overlaps. In each sector micro-workbook, adjustments will be made to the “stand-alone” GHG reduction and cost estimates to account for the overlapping policy effects. The methods to be used to quantify these interactions/overlaps will vary depending on the suite of policies within each sector, as well as the details of their design. For complex situations involving multiple policies, a separate technical memo might be needed to document the methods developed within the micro-workbook to quantify the level of interaction/overlap. In other simpler cases, the documentation and methods will be provided directly within the sector micro-workbook. For inter-sector overlaps, a separate section of the CO CAP final report will be prepared by CCS to document where these occur and the methods used to quantify them. Therefore, the final CO CAP results will represent the best estimates of GHG reductions and societal costs/savings that are net of all interactions/overlaps. The design of each The Center for Climate Strategies
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sector micro-workbook will include data export features that capture the information needed from each policy analysis in order to assess inter-sector overlaps. The fullyintegrated CO CAP results will be developed within a separate MS Excel workbook referred to as the “Synthesis Module”.
IV. Additional Background A. Pollutant Coverage and Global Warming Potentials The CO CAP analysis will cover the following six GHGs: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). Emissions of these gases will be presented using a common metric, CO2e, which indicates the relative contribution of each gas to global average radiative forcing on a Global Warming Potential- (GWP-) weighted basis. Table IV-1 shows the 100-year GWPs published by the Intergovernmental Panel on Climate Change (IPCC) in its Second (SAR), Third (TAR), Fourth (AR4), and Fifth (AR5) Assessment Reports. For this project, the 100-year GWP’s published in the IPCC’s Second Assessment Report (SAR) will be used to convert mass emissions to a 100-year GWP basis. Use of the SAR 100-year GWP’s is consistent with the values used in the CO baseline and is also consistent with IPCC guidance for national GHG emissions inventories. Black carbon is another pollutant with positive climate-forcing properties. Black carbon is an aerosol (particulate) species (component of particulate matter) that has not yet had a GWP assigned to it by the IPCC. The initial set of CO CAP policies does not include any that target black carbon emissions specifically; however, some policies may reduce these emissions as a co-benefit. For policies that produce these co-benefits, they will be reported within the policy documentation qualitatively.
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Table IV-1. IPCC Assessment Reports: Global Warming Potential Comparisons 4
4
U.S. EPA, National GHG Inventory Report, Annex 6, Table A-277: http://www.epa.gov/climatechange/pdfs/usinventoryreport/US-GHG-Inventory-2015-Annex-6-AdditionalInformation.pdf.
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B. Emission Reductions Emission reductions for individual policies will be estimated incremental to baseline conditions based on the change (reduction) in emissions activity (e.g., physical energy or activity units), or as a percentage reduction in emissions activity (e.g., physical energy or activity units or emissions) depending on the availability of data. This information will be needed to support the cost effectiveness calculation for each policy option. Fuel- and pollutant-specific emission factors will be used to convert physical units of emissions activity to emissions. Activity-based emissions factors may also be used where applicable. The emission factors will be based, preferentially, on those used within the baseline GHG inventory and forecast for CO, or on other established and accepted factors, as a back-up (such as those of the EPA or IPCC). Emission reductions will be reported as the net of all quantified GHG impacts (i.e. as identified within the GHG causal chain for the policy option). Separate streams of net GHG impacts will be reported for: those that are expected to occur within the State’s boundaries; and those which may or may not occur within the State’s boundaries (e.g. upstream GHG emissions associated with fuel supplies). Regarding the calculation of upstream GHG reductions for fuel supplies, these emissions are not addressed specifically by the CO GHG baseline. These reductions would be associated with any reduced demand for fuel supplies, including transportation fuels, power generation fuels, etc. CCS will provide a default set of upstream GHG emission factors for different fuel types based on a default data set for the US from Argonne National Labs GREET Model. 5 These emission factors can be updated with Mexicospecific data, as available, and will reside within each sector micro-workbook. C. Net Costs and Savings Net financial (initial investment) outlays and receipts and other fixed costs/savings, and variable financial costs/savings, such as operation and maintenance (O&M) costs or savings, energy/fuel costs or savings, and other direct financial costs and savings, will be estimated for each of the policies that are determined to be quantifiable. Costs and savings will be discounted as a multi-year stream of net costs/savings to arrive at the NPV cost associated with implementing the new technologies and best practices called for in each policy design. CCS suggests that costs be discounted in constant 2014 pesos using a 5 percent annual real discount rate (7 percent nominal) based on standard rates used for regulatory impact analysis in the United States at the federal and state levels; however, if PE members identify a value more specific to conditions in Mexico, these discount rates can be adjusted accordingly.
5
https://greet.es.anl.gov/.
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Financial (initial) investments will be represented in terms of both actual annual and annualized (amortized) costs over the planning period. Total financial costs or savings represent the combined fixed and variable costs/savings associated with the implementation of a policy relative to the baseline or business as usual (BAU) technology or practice. The overall sum of annual costs each year includes: financing (equals the cost of debt plus the cost of equity); net operations and maintenance (O&M) costs, net energy costs, other net materials costs, and other cost components that are specific to policies in individual sectors (e.g. opportunity costs for land-owners in the AFOLU sectors). The cost elements above can also be used to calculate a "levelized” costs/savings for large, long term investments. Attachment B to this memorandum provides an example calculation of levelized costs for the power supply sector. For power supply, the levelized costs are in the form of $/MWh of power generated. Levelized costs are commonly used in power supply and energy efficiency analyses and could be used as the basis for estimating net societal costs. Often these values are available in the literature, if data are not available to calculate them for the specific application addressed by a policy. For the purposes of the CO CAP project, since a follow-on macroeconomic analysis will be performed, then the use of levelized costs does not provide the cost details needed (as discussed elsewhere in this memo). So, in cases where levelized costs are used to develop estimates of net societal costs, there will be a need to break out the individual cost components, so that these can be used in a subsequent macroeconomic analysis (e.g. capital investments by year, annualized investment costs, fuel costs, etc.). O&M costs or savings refer to labor, equipment, and fuel costs related to annual operation and maintenance of facilities and equipment, and can be categorized as either variable O&M costs or fixed O&M costs. Variable O&M cost estimates are provided as a function of activity units (e.g. $/MWh of power generated). Fixed O&M costs don’t vary based on the output of a facility and are estimated on the basis of plant capacity. In the micro-economic cost analyses conducted for this project, net energy costs will be kept separate from the other variable O&M costs. It is important to note that “net costs” can actually result in overall savings to society (sometimes referred to as “negative costs”). For instance, location efficiency measures may reduce the required infrastructure or services associated with new communities, depending on design and other circumstances. Similarly, electricity end use efficiency may reduce the need for new power generation facilities, and fuel efficiency measures may reduce the need for new fuel production and distribution facilities. Whenever an element of the overall societal cost analysis cannot be estimated, it will be referenced qualitatively and documented within the policy option template (including the anticipated size of the cost impacts for its exclusion). In addition to annual cost savings, annual revenues and financial outlays from implementation of the policy are included in the total annual costs. After all net annual costs have been prepared; the discount rate is applied to represent base year pesos ($2014). The sum of discounted costs for the planning period (2016 – 2035) represents the net present value (NPV) of policy implementation.
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D. Cost Effectiveness Because the monetized peso value of the impacts of GHG emissions reduction is not available (i.e. the total social cost of carbon), physical avoided emissions benefits are used instead as an input to cost effectiveness calculations, measured as pesos per tCO2e (cost or savings per ton), and referred to as “cost effectiveness.” Both positive costs and cost savings (negative costs) are estimated as a part of the calculation of emissions mitigation costs. When combined with GHG impact assessments, the results of these cost estimates will be aggregated into a stepwise marginal cost curve that can be broken down by sector or subsector, as needed (see Figure IV-1 below). Cost effectiveness calculations may also be made for other benefits, such as energy savings, health gains, etc. The cost effectiveness of a proposed policy is calculated by dividing the NPV (cumulative future streams of incremental costs or savings over the appropriate policy option time period, discounted back to the present time), by the cumulative undiscounted net CO2e reductions achieved by the technological or best practice change brought about by implementation of the policy. Mathematically, the equation to be used is as follows (note that discounting of GHG reductions may also be done but is not a standard practice for multiple reasons):
CE =
Where: CE LCm LCr At Dr CO2er CO2em t
= Cost effectiveness of a technology or best practice, $/tCO2e avoided = Levelized cost of a technology or best practice, $/activity unit = Levelized cost of the baseline or reference technology or best practice, $/activity unit = Amount of activity affected by the technology or best practice in year t, activity unit = Real discount rate, dimensionless = CO2e emissions associated with the baseline or reference technology in year t, metric tons CO2e = CO2e emissions associated with a mitigation technology or best practice in year t, metric tons CO2e = year in the evaluation period (0 ≤ t ≤ 19)
Activity units refer to a unit indicator of GHG emissions activity for a policy. The activity units will vary depending on the sector and within each sector by the individual policy design. The activity units are used to normalize data for comparison of the policy option to the baseline. For example, for the Power Supply sector, megawatt-hours (MWh) of gross electricity generation could be used as the activity unit such that dollars per megawatt-hour ($/MWh) would be used as the
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activity unit for the “LCm” and “LCr” terms, and MWh would be used as the activity unit for the cost terms in the equation. Figure IV-1. Example GHG Marginal Abatement Cost Curve
The results of the analyses will be used to develop a GHG abatement cost curve, which will rank each technology or best practice in the order of its cost effectiveness for reducing one tCO2e of emissions. This ranking will be represented in the form of a curve. Each point on this curve represents the cost-effectiveness of a given policy option relative to its contribution to reductions from the baseline, expressed as a percentage of baseline emissions. The points on the curve appear sequentially, from most cost-effective in the lower left area of the curve, to the least cost-effective options located higher in the cost curve in the upper right area. Figure IV-1 provides an example from the Kentucky (KY) Climate Action Plan. E. Levelized Costs, Common Forecast Data and NPV Calculations As noted earlier, the cost of technologies with large long-term investment requirements are often levelized and converted into pesos per activity unit. The cost components to be considered include relevant fixed and variable costs and savings. Sector-specific direct costs and savings (e.g., savings from avoided losses in transmission of electricity) will be included as applicable to each sector or policy option.
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An example calculation of levelized costs for power generation technology is included as Attachment B to this memo. Specific to the CO CAP, these types of calculations will be used to derive the avoided electricity system costs ($/MWh) that will be used to determine the savings achieved through energy efficiency or that are offset via new generation resources. Similar data inputs are often required for conducting GHG reduction and net societal cost analyses across all sectors (future energy prices, population, economic forecasts). Examples of these inputs are provided in Attachment C to this memo. These data will be housed within the Common Forecast Data workbook developed jointly by CCS and the PE members. Once finalized, copies of the summary worksheet will be incorporated into each sector micro-analysis workbook. An example calculation of the net present value of a policy micro-economic analysis is provided in Attachment D to this memo. F. Time Period of Analysis For each policy, incremental emission reductions and incremental costs and savings will be calculated relative to the characteristics of the baseline that would otherwise prevail in the Coahuila up through the end of the 2016-2035 planning period. The NPV of the cumulative net costs of each option, and the cumulative emission reductions of each option, will be reported for the entire CO CAP planning period of 2016 – 2035. Annual GHG reductions will also be reported for an interim year of 2025. CCS will extend the CO GHG baseline out to 2035 using simple trending in order to support the analysis of policies. CCS will also be updating the electricity supply sector baseline to represent electricity consumption emissions based on the carbon intensity of the national grid. G. Geographic Inclusion GHG impacts of activities that occur within Coahuila will be estimated, regardless of the actual location of emission reductions. For instance, when electrical energy efficiency measures are implemented in Coahuila buildings, GHG reductions occur as a result of lowering the demand for electricity from power plants both within and outside of the State (i.e. due to power imports). As indicated earlier in this memo, the resulting GHG reductions will be calculated to correspond to impacts on the national grid (i.e. using the carbon intensity of the national grid). There will be other policies where the GHG effects occur both within and outside the State. For example, if renewable fuels are planned for use in the transportation sector (e.g. ethanol or biodiesel), and these fuels are being sourced from outside of the State, then an accounting of full energy-cycle GHG emissions benefits is needed. This accounting would capture the full net benefits of offsetting gasoline (including petroleum extraction, transport, refining, distribution, and combustion) with ethanol (including
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feedstock production, transport, processing, distribution, and combustion). The issue of energy-cycle coverage is further explored in the next section of this memo. In situations where it is unclear whether the emission impacts are occurring within the geographic boundaries of CO, this will be clearly indicated. The standard micro-analysis workbooks will include separate columns for reductions known to occur within the State versus those that cannot be attributed to the State. Based on final input from SEMA and the COCAG, the emission reductions that occur outside of the State will not be counted towards the achievement of any CO GHG reduction goal. The exception here is for the electricity supply sector, where all net emissions impacts will be reported (this is because the baseline for the power sector accounts for emissions on the basis of consumption, rather than production). 6 While not to be measured against any State target, out of State reductions for other sectors will be reported as additional reductions and included in the cost effectiveness estimates. H. Energy-Cycle Coverage GHG reductions for each policy will be based on an energy-cycle and net energy impact analysis wherever possible, based on best available data and priority need. Tracking the full range of fuel use inputs is preferred, and in some cases essential, for accurately tracking full energy-cycle carbon emissions for technology options and best practices displaying very different performance characteristics from the standard practices they are replacing. The approach involves identifying all the possible stages of the energy-cycle, for instance, and quantifying the fuel input per unit of energy produced (electricity or fossil fuel). The focus, however, will be on those energy-cycle elements where there are significant differences in GHG emissions between the BAU case (standard practice) and the policy case. Energy-cycle impacts will be reported for each source for which information is available to support an energy-cycle analysis. Where net energy-cycle emission reductions are captured, there can often be two sets of emission reductions estimated: the total energy-cycle reductions; and those estimated on just a direct basis (e.g., tailpipe emissions). In many cases, it is difficult to determine how much of the upstream component of the energy-cycle emissions actually occur within the State (e.g. how much of the gasoline consumed in CO is produced from petroleum extracted, transported, refined, and distributed in CO). Therefore, by default, the inregion reductions will often be those just associated with fuel combustion; the remaining upstream component will be identified separately to make it clear that these could be reductions that occur out of State. 6
In order to count emission reductions that occur outside of the State as a result of policies implemented within the State, each sector-level baseline would need to be developed on a consumption basis (capturing the full energy-cycle emissions for some activity). For example, the baseline emissions for gasoline powered vehicles would account for all vehicle activity originating or ending in the State. Also, the full energy-cycle emissions would be included, rather than just the direct emissions from gasoline combustion. Only the power supply sector baseline was developed on a consumption basis for Coahuila, and this will be revised to represent consumption-based emissions for the national grid.
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Similar to the treatment of fuel combustion emission reductions above, GHG reductions from in-State non-combustion sources will be reported separately for those processes that are known to occur within CO (e.g., landfill emission reductions); and, the upstream GHG emissions (e.g. emissions embedded in each waste component). For example, a policy directed at reducing municipal solid waste generation will reduce future in-State landfill emissions and also emissions occurring either inside or outside of the State, including those associated with the extraction/processing/packaging of virgin materials into usable products that were avoided as a result of the policy. Because it is often not possible to determine the amount of upstream GHG emissions that occur in-State, any reduction of these will be reported separately from those known to occur within CO. I. Co-benefits/Costs Assessments To the extent needed, the principles and guidelines and key decisions on methods, data sources and assumptions for co-benefits/costs analysis will be provided in a separate and linked advisory memo by CCS.
V. Microeconomic to Macroeconomic Data Bridging A. Introduction This section contains the approach for preparing the results from the microeconomic analysis of all CAP policies for export and linkage with the REMI-PI+ macroeconomic model. The REMI-PI+ model will be used to assess the indirect impacts of specific CAP policies or policy bundles as well as the CO CAP as a whole on the State’s economy. The export of the results from the microeconomic analysis should be completed after the intra-sector and inter-sector overlap/integration analyses are completed, as described in previous sections. The results from the microeconomic analysis of each policy are the direct net activity, energy, GHG, and cost/savings effects of the policies on the parties responsible for or affected by their implementation (utility companies, industrial enterprises, building developers/owners/operators/residents, car owners, farmers, government agencies, etc.). Macroeconomic modeling analysis estimates the indirect effects of these changes in energy expenditures, investment costs/savings, and operation and administrative costs on the State’s economy as a whole, as well as for different economic sectors, demographic/income groups, and occupancy types, with results for changes in employment, gross regional product (GRP), personal income, personal consumption expenditures- (PCE)-price index, and population, as well as implications for the State’s competitiveness from each individual policy and for the CO CAP as a whole. Two categories of information are necessary for the microeconomic analysis sector leads to prepare and provide for the linkage/export to REMI-PI+: 1) detailed cost/savings information from the microeconomic analysis of each policy option; The Center for Climate Strategies
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some of the assumptions of how they were calculated; and how the initial investments required for policy implementation will be financed; and 2) the sectors from the REMI-PI+ model that will bear the costs, receive the savings, and be stimulated by the investment. This memo outlines these two categories of information and how they are calculated/determined within in the sector microworkbook, and then prepared for export for use by the macroeconomic modelers in REMI-PI+. B. Workbook Macro Export Features, Sector Categorization, Cost Classification In each sector micro-workbook, CCS has developed a light blue table (an example of which is shown in Figure V-1 below) below the microeconomic analysis results in the “Net Societal Costs” summary section of each policy analysis sheet. In this table, the appropriate cost/savings data, data label, and sector source/recipient should be displayed for ease of identification by external reviewers, including the macroeconomic modeling team. Initial construction of each micro-workbook has used eight columns for exporting costs/savings data for macro-modeling; however, there may be cases where more complex policies require additional columns to be added. For all columns, macro export data should be provided in real (nondiscounted) million pesos (MM$). Below each table is a section where the micro sector lead should provide additional notes on important assumptions that were made in the micro analysis, or some supplemental information that will be of use for the macroeconomic modelers. This information is described in more detail below. The information in the light blue macro export summary tables for each policy option is then linked into the “Macro Export” sheet towards the end of each sector micro-analysis workbook for export to the macro modeling team. Alternatively, the Micro Team Lead could assemble the data from this sheet for all completed sector workbooks and provide a single file to the Macro Team. The first row of the table is the “Macroeconomic Industry Category” where the appropriate sector from the REMI-PI+ model should be selected from the pull-down menu to represent the sector that will bear the cost or receive the savings that are displayed in the column below. Table V-1 provides the list of sectors in REMI-PI+ and also includes several additional non-industry sectors. For the most part, the selection of the REMI sector should be intuitive based on the policy option in question. For instance, there are several industrial sectors in the REMI sector categorization, so policies that we categorized as being in the Iron & Steel Subsector in the Industrial Sector for microeconomic analysis should be Basic Metals and Fabricated Metals in REMI-PI+. CCS can help provide additional guidance on this mapping, as needed. In some cases, especially with some RCI and TLU options, the micro analysis covers a broad set of sectors in REMI-PI+ (such as building codes and energy efficiency policies that affect many commercial sectors and institutions). In such cases, CCS
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usually distributes direct costs and savings that are computed for the aggregate commercial sector or industrial sector among all the relevant sectors in REMI using the sectoral baseline energy consumption or economic output as weights (when no better information provided by the micro-analysts). Ideally, in this case, the microanalysts would conduct an assessment of how the costs should best be disaggregated among industrial and commercial subsectors (e.g. through available data on energy consumption by subsector, building area and energy intensity, etc.).
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Municipal Government
Figure VI-1. Example Macro Export Table from Micro Workbook Analysis Sheet
Municipal Government Municipal Government
Other Community, Social and Personal Services Municipal Government
Municipal Government
Other Community, Social and Personal Services
Other Community, Social and Macroeconomic Personal Industry Category Services
Other Community, Social and Personal Services
Other Community, Social and Personal Services
Municipal Government
CO CAP Quantification Memo CCS, June 25, 2015
Municipal Government
Net Electricity Costs
MM$ $0.00 $0 $0 ($14) ($20) ($20) ($21) ($22) ($23) ($23) ($24) ($24) ($25) ($26) ($26)
Value of Power Production
Net Electricity Costs
MM$
$0.00 ($23) ($48) ($57) ($79) ($83) ($86) ($89) ($92) ($94) ($97) ($99) ($102) ($104) ($106)
Value of Power Production
Operations & Maintenance (non-energy) Annual O&M Costs
Operations & Annualized Maintenance Investment Costs (non-energy) Annual O&M Costs MM$ $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $8.9 $13 $13 $13
Annualized Annualized Overhaul Costs Overhaul Costs
Annualized Annualized Initial Investment Investment Initial Investment Costs Investment Costs Costs Costs Major System Overhaul Costs MM$ $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $34 $0.00
MM$ $0.00 $0.00 $0.00 $0.00 $7.5 $8.0 $8.6 $9.2 $9.8 $10 $11 $12 $12 $13 $13
Annualized Investment Costs
MM$ $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $34 $34 $0.00 $0.00
Annualized LFGTE Major System System Cost Overhaul Costs MM$ $0.00 $0.00 $0.00 $8.9 $8.9 $8.9 $8.9 $8.9 $8.9 $8.9 $8.9 $8.9 $8.9 $0.0 $0.0
MM$ $0.00 $5.8 $13 $21 $22 $24 $26 $28 $29 $31 $33 $35 $36 $38 $40
Initial Investment Costs Annualized LFGTE System Cost MM$ $8.9 $18 $27 $27 $27 $27 $27 $27 $27 $27 $18 $8.9 $0.0 $0.0 $0.0
MM$ $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $4.5 $4.5
Initial Macroeconomic Investment Cost Category Costs
Descriptor LFGTE Systems LFGTE Systems Macroeconomic Export Units MM$ MM$ 2016 $69 $0.00 2017 $69 $0.00 2018 $69 $0.00 2019 $0.0 $69 2020 $0.0 $0.00 2021 $0.0 $0.00 2022 $0.0 $0.00 2023 $0.0 $0.00 2024 $0.0 $0.00 2025 $0.0 $0.00 2026 $0.0 $0.00 2027 $0.0 $0.00 2028 $0.0 $0.00 2029 $0.0 $0.00 2030 $0.0 $0.00
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Macro-Export Notes: WM-1 Assumes 100% financing of CapEx and major equipment overhauls. Three landfills to be addressed are all privately operated. The fourth is owned/operated by a municipal government. All sites and LFGTE systems are of similar size. Non-Energy O&M costs are expected to be nearly 100% labor. 33% of initial investment costs will be for procurement of LFGTE design and installation services from in-State sources. The remaining 67% will be for purchasing equipment from out-of-State sources. 100% of major overhaul costs will be procured from in-State service companies ("Other Community, Social and Personal Services" sector). All O&M services costs and materials will be procured from in-State sources ("Construction" sector).
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Table V-1. Macroeconomic Modeling Sectors (REMI PI+ Industries plus residential, commercial and government sectors) Agriculture, Hunting, Forestry and Fishing Mining and Quarrying Food, Beverages and Tobacco Textiles and Textile Products Leather, Leather Products and Footwear Wood and Products of Wood and Cork Pulp, Paper, Paper Products, Printing, and Publishing Coke, Refined Petroleum and Nuclear Fuel Chemicals and Chemical Products Rubber and Plastics Other Non-Metallic Mineral Basic Metals and Fabricated Metals Machinery, nec Electrical and Optical Equipment Transport Equipment Manufacturing, nec; Recycling Electricity, Gas and Water Supply Construction Wholesale and Retail Hotels and Restaurants Inland Transport Water Transport Air Transport Other Supporting and Auxiliary Transport Activities Post and Telecommunications Financial Intermediation Real Estate Activities Renting of Machinery and Equipment and Other Business Activities Public Admin and Defense; Compulsory Social Security Education Health and Social Work Other Community, Social and Personal Services Residential Commercial Municipal Government State Government National Government
Not like the producing sectors, which are included in the industrial by industrial transaction section of the REMI I-O table, household (residential) and government sectors are institutions included in the final demand section of the I-O table. That is why there is no “government” included in the REMI-PI+ sector list. However, there are policy levers in the model that the user can use to simulate cost/saving changes The Center for Climate Strategies
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to the government sector. Therefore, the drop-down list for attribution of costs in the micro-workbooks allows for the selection of residential and government sectors. Also, while there are a number of commercial subsectors listed in the “REMI-PI+ Industries” list, another generic “Commercial” sector is provided, since in many cases, a policy does not target a specific commercial sector. The next step is to map each cost component to the appropriate cost category. These are listed in Table V-2 below. Most of these can be brought over directly from the microeconomic analysis of direct costs (e.g. investment expenditures by year, annualized investment costs, non-energy O&M costs). Table V-2. Macro Cost Categories Cost Category
Annualized Capital Cost Operations & Maintenance (nonenergy)
Meaning Change in capital costs brought about by implementing a policy Change in annualized capital costs brought about by implementing a policy Change in O&M costs due to the policy; excludes net energy costs which are specified by cost type separately
Net Electricity Costs
Change in consumer electricity costs (i.e. retail costs)
Neat Steam/Heat Costs
Change in consumer steam/heat costs (i.e. retail costs)
Net Natural Gas Costs
Change in consumer natural gas costs (i.e. retail costs)
Net Gasoline Costs
Change in consumer gasoline costs (i.e. retail costs)
Net Diesel Costs
Change in consumer diesel costs (i.e. retail costs)
Net Fuel Oil Costs
Change in consumer fuel oil costs (i.e. retail costs)
Net Coal Costs
Change in consumer coal costs (i.e. retail costs)
Net LPG Costs
Change in consumer LPG costs (i.e. retail costs)
Net Biomass Costs
Change in consumer biomass costs (i.e. retail costs)
Net Other Fuel Costs
Program Administrative Cost
Change in consumer other fuel costs (i.e. retail costs) Change in consumer costs for materials (e.g. retail costs of process inputs) Change in consumer costs for services (e.g. avoided water consumption or waste disposal fees) Change in revenue stream to the landowner associated with a change in land use (e.g. crop cultivation to forest) Change in the value of a natural resource (e.g. value of forest land due to enhanced timber value) Change in program implementation, administrative, and any other relevant costs
National Tax Credit/Subsidy
Value of national government tax credit or subsidy
Provincial Tax Credit/Subsidy
Value of provincial government tax credit or subsidy
Municipal Tax Credit/Subsidy
Value of local government tax credit or subsidy Any other cost category not listed above; specify in macroexport notes
Initial Capital Cost
Materials Costs Services Costs Landowner Opportunity Costs Natural Resource Value Change
Other Costs/Savings
In other cases, some additional work might be needed to disaggregate cost streams from the microeconomic analysis. For example, if there is some government cost
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share involved in implementing the policy (e.g. grant program covering a percentage of capital costs), then these need to be broken out separately and assigned to their own column with attribution of the costs to municipal, state, or federal government). For energy and materials costs, the microeconomic analysis will have developed these estimates based on the energy or other supply system costs (for fuels/materials, often wholesale prices are used as a proxy for supply system costs). However, for macroeconomic analysis, retail prices are used, so a conversion is needed in the macroeconomic exports. For O&M costs, these should represent only the non-energy component of O&M (net changes in costs for energy are specified separately, as mentioned above). If possible, the micro-economic analysts should also attempt to specify a break-out of labor from other O&M costs. This wasn’t done for the example shown in Figure V-1 and might not be possible in all cases. CCS will develop appropriate defaults to split these costs during macroeconomic analysis as needed. In the third row of Figure V-1, a “Descriptor” field is provided for an additional brief description for the cost stream. For all cost streams, the values should be in nominal (non-discounted) million pesos (MM$). Each cost stream should include the full set of values for the planning period. In the example above, that corresponded to 2016 through 2030. C. Example Micro to Macro Data Bridging As an example policy, consider an example addressing landfill gas utilization which involves four landfills. Three of these are owned and operated by private entities, while the fourth is owned and operated by a municipality. Initial investment costs are required by the private entities and the municipal government to install landfill gas collection and electricity generation systems (second and third columns of Figure V-1). Private entities are assigned to the “Other Community, Social and Personal Services” macro sector which addresses solid waste management. There are no government subsidies included in this policy. All of the initial investment costs are annualized using a capital recovery factor that is consistent with the expected interest rate and system life (length of the loan period). The annualized costs are shown in the fourth and fifth columns of the table. For these cost streams, all were taken directly from the microeconomic analysis. The only difference was the need to split each micro cost stream into individual cost streams for private industry versus municipal government. Landfill gas to energy systems typically require major overhauls after about 10 years of service (mainly to the engine-generator set). As taken from the microanalysis, these are large enough to be treated as another set of investment costs and are expected to be financed as well (columns 6 through 9). As with the initial capital
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expenditures, these investment costs just needed to be divided between the private industry and government entities that will implement the policy. Annual non-energy O&M costs (mostly labor) were also calculated in the microanalysis for each year of the planning period based on the amount of electricity produced (columns 10 and 11; these exclude the major overhaul costs above). Finally, the value of the power produced by each entity is shown in the final two columns. Finally, in the last two columns, the value of the electricity produced from these projects is provided. The electricity value from the microeconomic analysis will tend to be based on the avoided electricity system costs ($/MWh) that was determined as part of the micro-analysis phase of work (the avoided electricity system cost is determined based on the marginal resource mix of generation system, which in this case was an average of all natural gas combined-cycle plants in the jurisdiction). For macro-analysis, we need to assign a value corresponding to the cost impact to the end user. For landfill gas to energy, this could be the value paid by the local utility for introduction into the electrical grid. Or, as in this case, the value could be based on the avoided retail cost of electricity experienced by each sector (assuming the power would be used to offset grid purchases). In this case, different retail rates were applied to the private versus government entities. D. Other Micro to Macro Data Bridging Considerations In macro analysis, there is not only a need to simulate investment cost changes for the sectors that make the initial investments, but also a need to simulate the stimulus impacts to those sectors that produce and provide the capital goods (such as the construction sector that builds new facilities or relevant manufacturing sectors that produce the advanced farming equipment, energy generation systems, etc.). Therefore, the Macro-Team will always be interested in additional insights that can be provided by the Micro-Team on where the investment money gets spent. A key aspect of this spending is whether it procures goods/services from in-State versus out-of-State sources. In our example from the previous section, the investment costs are a combination of materials and equipment (piping, blowers, engine-generator sets, flares) and the services needed to install the overall collection and utilization system (system designers, landfill gas well drillers, well installers, equipment installers). The costing model used to estimate the overall costs (from US EPA) can also provide an overall break-out of these costs (e.g. fraction of total installed costs). Typically, one or more TWG members will have the knowledge of the local suppliers to know whether or not the installation services costs could be performed by in-State suppliers. The TWG might also have knowledge of equipment suppliers and whether or not these could be sourced from inside the State. Surveys of other local experts could also be performed to gather insights on allocating the investment costs between in-State and out-of-State sources.
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In addition to the location of procurement of goods/services, the macro-modeling will also involve assigning these procurements to the applicable industry category. For this project, CCS recommends that members of the micro-modeling team provide the additional details in the Micro-Export Notes for each policy. See Figure V-1 for an example. Another area of key input to macro-modeling is an indication of where money is spent that is saved through reduced energy use, materials consumption, or other policy impacts. In the REMI-PI+ model, this re-spending would be allocated into the following categories for any consumer savings: • • • • • • • • • • • • •
Food and non-alcoholic beverages Alcoholic beverages, tobacco and narcotics Clothing and footwear Electricity, gas and other fuels Housing, water supply and misc. services Furnishings, household equipment and routine maintenance of the house Health Transport Communications Recreation and culture Education Restaurants and hotels Miscellaneous goods and services
CCS does not expect that micro-modelers and their respective TWG members will have information as to the anticipated re-spending patterns, so defaults will be used as available via REMI and the literature. However, Micro-Team members should certainly provide any relevant information to the Macro-Team. As indicated above, government subsidies should be specified within their own cost stream and assigned to the national, State, or municipal government, as appropriate. The “government spending” variable in REMI can be used to simulate the spending change for the State and local governments. Since the REMI-PI+ model is constructed at the State level, there are no separate variables for State government vs. local government. Also, in the State REMI-PI+ model, there is no variable for the national government. When we simulate the impact of national government subsidies on the state economy, we only need to simulate the stimulus impacts of the subsidies to the receiving sectors in the State. We do not need to worry about the national government spending changes to raise the funding provided to the State. However, if it is State/local government subsidies, except for the stimulus impacts of the subsidies to the receiving sectors, we also need to address in the REMI-PI+ model, the source of the government funding, such as raising sales or income taxes, or reducing general government spending, etc. (this information should be included in the Macro-Export notes for each policy).
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Acronyms and Glossary Acronyms & Abbreviations AFOLU
Agriculture, Forestry & Other Land Use
BAU
Business as usual
CAP
Climate Action Plan
CCI
Cross-Cutting Issues
CCS
The Center for Climate Strategies
CD
Central Desktop
CE
Cost effectiveness
CH4
Methane
CO
Coahuila
CO2
Carbon dioxide
CO2e
Carbon dioxide equivalent
COCAG
Coahuila Climate Advisory Group
CRF
Capital recovery factor
ES
Energy Supply
FCR
Fixed charge rate (factor)
GHG
Greenhouse gas
GDP
Gross domestic product
GRP
Gross regional product
GSP
Gross State product
GWP
Global warming potential
HFC
Hydrofluorocarbon
I-O
Input-output
IPCC
Intergovernmental Panel on Climate Change
KY
Kentucky
MM$
Million pesos
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Megawatt-hours
nec
Not elsewhere classified
N2O
Nitrous oxide
NPV
Net present value
O&M
Operations and maintenance
PCE
Personal consumption expenditures
PE
Panel of Experts
PFC
Perfluorocarbon
REMI-PI+
Regional Economic Models Inc. Policy Insights Plus Model
RCII
Residential, Commercial, Institutional & Industrial
SAR
Second Assessment Report (of the IPCC)
SF6
Sulfur hexafluoride
SEMA
Secretary of the Environment of the State of Coahuila (Secretaría de Medio Ambiente de Coahuila)
t
Metric ton
Tg
Teragram
TLU
Transportation & Land Use
TWG
Technical workgroup
US EPA
United States Environmental Protection Agency
WM
Waste Management
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Glossary Term Business as usual (BAU):
Consumption-based accounting:
Direct emissions:
Energy-cycle emissions:
Fixed operations and maintenance (O&M) costs: Levelization: Life-cycle emissions:
Macro-economic assessment:
Meaning in action planning, refers to the normal operation of society over time in terms of economic growth, energy use, GHG emissions, and other related factors in the absence of any intervention. considers all the emissions that result from energy consumed, waste generated, and transportation trips generated in an area, even if the emissions occur outside of the boundaries of the geographic area considered. In many cases, consumption-based accounting is useful to policy makers wishing to assess the emissions impacts of actions that address activities that they have control over (e.g. energy and materials consumption; trip generation). emissions occurring at the emission source, for example exhaust from the vehicle tailpipe or power plant stack. these emissions include those from fuel combustion as well as the upstream emissions associated with the extraction, processing, transport, refining, and distribution of the fuel. Unlike life-cycle emissions, the emissions associated with constructing facilities or equipment associated with upstream activities (e.g. steel in a pipeline; equipment at a refinery) are not included; just the emissions associated with operating the upstream activity itself (e.g. process gas used at a refinery). consist primarily of labor costs, but could also include taxes and other fixed costs. Fixed O&M costs are incurred regardless of the energy produced by a process, and are usually assessed per unit of capacity. the process of developing a lump sum that has been divided into equal amounts over a specified period of time. involves a cradle-to-grave view of GHG emissions associated with an activity (e.g., driving) or use of product (e.g., plastic bottle). Such an assessment includes the extraction and transport of raw materials, manufacture, packaging, freight, usage and final disposal. It also generally includes the emissions from construction of all facilities within the value chain. addresses the indirect or secondary economic impacts on jobs, income, economic growth, productivity, and prices that arise from or in association with the microeconomic direct costs and savings. Such an analysis is also useful to address distributional impacts, including differential impacts related to size, location, and socio-economic character of affected households, entities, and communities (often framed as fairness and equity).
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CO CAP Quantification Memo CCS, June 25, 2015 Net present value (NPV):
Nominal discount rate: Real discount rate:
Renewable energy:
under the net present value method, the present value of a project's cash inflows is compared to the present value of the project's cash outflows. The difference between the present value of these cash flows is called "the net present value". This net present value determines whether or not the project is an acceptable investment. The same concept can be applied to the analysis of policy alternatives. based on rates of interest observed by financial institutions.
removes the rate of inflation from the nominal discount rate. For example, when the nominal discount rate is 6% and there is a 2% rate of inflation, then the real discount rate is 1.06/1.02 = 1.0392 or 3.92%. energy from sources that are perpetual or that are replenished as quickly as they are used up. Renewable energy includes solar, wind, wave, tidal, geothermal, landfill gas, anaerobic digestion of biomass, and other forms of sustainablysourced biomass, and hydro power.
Renewable Portfolio a policy that requires electricity providers to obtain a minimum percentage of Standard (RPS): their power from renewable energy resources by a certain date. As an example, the State of New Jersey’s RPS goal is 22.5 percent power from renewable resources by 2021. Upstream emissions:
Variable O&M costs:
emissions that occur before a product is used for its intended purpose; for example drilling, refining, and transportation of oil to be used as vehicle fuel; emissions during manufacturing of a product (metal can, glass bottle, steel beam, etc), as well as extraction, processing and transportation of the raw materials. include periodic inspection, replacement and repair of system components and consumables, such as water and pollution control materials. Variable O&M costs vary depending on the amount of power (or other product) generated.
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Attachment A. Examples of Direct/Indirect Net Cost and Benefit Metrics Note: These examples are meant to be illustrative and are not necessarily comprehensive or the focus of the CO CAP Process. 1.
Transportation and Land Use (TLU) Sector a. Direct Costs and/or Savings i.
Incremental financial and operating cost of more efficient vehicles, net of fuel savings.
ii. Incremental costs of implementing Smart Growth programs, net of saved infrastructure and service costs. iii. Incremental cost of mass transit investment and operating expenses, net of any saved infrastructure and service costs (e.g., roads, road maintenance, vehicles) iv. Incremental cost of alternative fuel, net of any change in maintenance costs v. Net effects of carbon sequestration from land use measures b. Indirect Costs and/or Savings i.
Net value of employment and income impacts, including differential impacts by socio economic category
ii. Re-spending effects on the economy from financial savings iii. Net changes in the prices of goods and services in the region iv. Health benefits of reduced air and water pollution v. Ecosystem benefits of reduced air and water pollution vi. Value of quality-of-life improvements vii. Value of improved road and community safety viii.
Energy security
2. Residential, Commercial, Institutional and Industrial (RCII) Sectors a. Direct Costs and/or Savings i. Net capital costs or savings (or incremental costs or savings relative to standard practice) of improved buildings, appliances, equipment (for example, cost of higher-efficiency refrigerator versus refrigerator of similar size and with similar features that meets standards) ii. Net operation and maintenance (O&M) costs or savings (relative to standard practice) of improved buildings, appliances, equipment, including avoided/extra labor costs for maintenance (for example, The Center for Climate Strategies
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maintenance cost savings from less changing of longer-lived compact fluorescent light (CFL) or light-emitting diode (LED) bulbs in lamps relative to incandescent bulbs) iii. Net fuel (gas, electricity, biomass, etc.) costs (typically expressed as avoided costs from a societal perspective, that is, based on the net cost to society of producing an additional unit of fuel, as opposed to the retail cost of fuel) iv. Cost/value of net water use/savings v. Cost/value of net materials use/savings (for example, raw materials savings via recycling, or lower/higher cost of low-global warming potential (GWP) refrigerants) vi. Direct improved productivity as a result of industrial measures (measured as change in cost per unit output, for example, for an energy/GHG-saving improvement that also speeds up a production line or results in higher product yield) b. Indirect Costs and/or Savings i. Net value of employment and income impacts, including differential impacts by socio economic category ii. Re-spending effect on economy iii. Net value of health benefits/impacts iv. Value of net environmental benefits/impacts (value of damage by air pollutants on structures, crops, etc.) v. Net embodied energy of materials used in buildings, appliances, equipment, relative to standard practice vi. Improved productivity as a result of an improved working environment, such as improved office productivity through improved lighting (though the inclusion of this as indirect might be argued in some cases) 3. Energy Supply (ES) Sector a. Direct Costs and/or Savings i. Net financial costs or savings (or incremental costs or savings relative to reference case technologies) of renewables or other advanced technologies implemented as a result of policies ii. Net O&M costs or savings (relative to reference case technologies) of renewables or other advanced technologies implemented as a result of policies iii. Avoided or net fuel savings (gas, coal, biomass, etc.) of renewables or other advanced technologies implemented as a result of policies relative to reference case technologies The Center for Climate Strategies
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iv. Total system costs (net capital + net O&M + avoided/net fuel savings + net imports/exports + net transmission and distribution (T&D) costs) relative to reference case total system costs b. Indirect Costs and/or Savings i. Net value of employment and income impacts, including differential impacts by socio economic category ii. Re-spending effect on economy iii. Higher cost of electricity in the region iv. Energy security v. Net value of health benefits/impacts vi. Value of net environmental benefits/impacts (value of damage by air pollutants on structures, crops, etc.) 4. Agriculture, Forestry, and Other Land Use (AFOLU) Sectors a. Direct Costs and/or Savings i. Net financial costs or savings (or incremental costs relative to standard practice) of facilities or equipment (e.g., manure digesters, biogas-fired generators, and associated infrastructure; ethanol production facilities) ii. Net O&M costs or savings (relative to standard practice) of equipment or facilities iii. Net fuel (gas, electricity, biomass, etc.) costs or avoided costs iv. Cost/value of net water use/savings v. Cost/value of carbon sequestration from land use measures vi. Reduced vehicle miles traveled (VMT) and fuel consumption associated with land use conversions (e.g., as a result of forest/rangeland/cropland protection policies) b. Indirect Costs and/or Savings i. Net value of employment and income impacts, including differential impacts by socio-economic category ii. Net value of human health benefits/impacts iii. Net value of ecosystem health benefits/impacts (wildlife habitat; reduction in wildfire potential; etc.) iv. Value of net environmental benefits/impacts (value of damage by air or water pollutants on structures, crops, etc.) 5. Waste Management (WM) Sector a. Direct Costs and/or Savings
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i. Net financial costs or savings (or incremental costs relative to standard practice) of facilities or equipment (e.g., composting facilities; landfill gas collection and utilization equipment; anaerobic digesters and methane utilization equipment; associated electricity transmission/distribution infrastructure; other waste to energy facilities; waste collection and processing equipment; material recovery facilities; recycling facilities; upgrades to wastewater treatment plants) ii. Net O&M costs or savings (relative to standard practice) of equipment or facilities iii. Net fuel (gas, electricity, biomass, etc.) costs or avoided costs iv. Cost/value of net change in waste management practice (e.g. avoided cost of landfilling) v. Cost/value of recycled commodities; reclaimed water b. Indirect Costs and/or Savings i. Net value of employment and income impacts, including differential impacts by socio-economic category ii. Net value of human health benefits/impacts iii. Net value of ecosystem health benefits/impacts (reduction in surface and groundwater contamination) iv. Net embodied energy of water use in equipment or facilities relative to standard practice
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Attachment B. Example Calculation of Levelized Costs This attachment provides a brief conceptual overview as well as an annotated example regarding the calculation of levelized costs associated with power generation technology. Levelized costs are useful in evaluating financial feasibility and for directly comparing the cost of one technology against another. Conceptual Overview of Levelized Costs for Power Generation Technology Levelized cost can be defined as a constant annual cost that is equivalent on a present value basis to the actual annual costs. That is, if one calculates the present value of levelized costs over a certain period, its value would be equal to the present value of the actual costs of the same period. Using levelized costs, often reported in $/MWh, allows for a ready comparison of technologies in any year, something that would be more difficult to do with differing annual costs. This can be illustrated in the Figure below. The present value of the levelized cost as shown is exactly equal to the present value of the annual costs. Figure B-1. Illustrative Comparison of Levelized and Actual Annual Costs
Components of Levelized Costs For power generation technologies, there are several components that typically make up the levelized cost, as briefly described in the bullets below. ▪
Initial investment (financial) costs (IIC): Typically reported in units of $/kW, these costs include the total costs of construction, including land purchase, land development, permitting, interconnections, equipment, materials and all other components. Construction financing costs are also included
▪
Fixed operations & maintenance (O&M): Typically reported in units of $/kW-yr, these costs are for those that occur on an annual basis regardless of how much the
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plant operates. They typically include staffing, overhead, regulatory filings, and miscellaneous direct costs. ▪
Variable O&M: Typically reported in units of $/MWh, these costs are for those that occur on an annual basis based on how much the plant operates. They typically include costs associated with maintenance and overhauls, including repairs for forced outages, consumables such as chemicals for pollution control equipment or boiler maintenance, water use, and other environmental compliance costs.
▪
Fuel: Typically reported in units of dollars per million British Thermal Units of fuel heat content ($/mmbtu), these costs are for start-up fuel use as well as on-line fuel use.
Information Needed to Calculate Levelized Costs for Power Generation Technologies There are several other bits of information that is needed in order to calculate levelized costs, as briefly described in the bullets below. ▪
Plant size: This refers to the size of the plant, expressed in units of MW.
▪
Capacity factor: This refers to the share of the year that the plant is in operation, expressed as a percentage.
▪
Fixed charge factor: This factor is calculated based on assumptions regarding the plant lifetime, the effective interest rate or discount rate used to amortize capital costs, and various other factors specific to the power industry. Expressed as a decimal, typical fixed charge factors are typically between 0.10 and 0.20, meaning that the annual cost of ownership of a power generation technology is typically between 10 and 20 percent of the capital cost. Fixed charge factors decrease with longer plant lifetimes, and increase with higher discount or interest rates.
▪
Fuel price projection: This refers to the projected price of the fuel used to produce electricity over the lifetime of the plant, expressed in units of $/MMBtu in each year of the fuel price forecast. Price projections from the U.S. Department of Energy’s Energy Information Administration are often used. In some cases, fuel price projections are expressed as levelized values for use in calculating the overall levelized costs of generation.
▪
Heat rate: This refers to the efficiency by which fuel is consumed for the production of electricity, expressed in units of Btu/kWh.
Formulas Used to Calculate Levelized Costs There are several formulas needed to convert the various units into the $/MWh units used to express levelized costs. These are briefly described below. ▪
Initial Investment Costs (IIC): These costs are converted to $/MWh units as per the formula below: Levelized IIC = IIC * FCF * conversion factor / (HPY * CF) Where:
IIC = initial investment costs ($/kW) CF = capacity factor (%)
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▪
Fixed O&M (FOM): These costs are converted to $/MWh units as per the formula below: Levelized fixed O&M cost = FOM * conversion factor / (HPY * CF) Where:
FOM = fixed O&M ($/kW-yr) CF = capacity factor (%) HPY = hours per year = 8,760 conversion factor = 1,000 (convert from $/kW to $/MW)
▪
Variable O&M (VOM): These costs are already provided in units of $/MWh so no conversion is needed.
▪
Fuel costs (FC): Each year’s fuel price is converted to units of $/MWh as follows: Fuel price = FPt * HR / conversion factor Where:
FPt = fuel price in year t ($/MMBtu) HR = heat rate (Btu/kWh) Conversion factor = 1,000 (convert from kWh to MWh) t = year in the plant lifetime
These annual fuel costs are then levelized as follows: Levelized fuel cost = [PV * DR * (1+DR)t] / [(1 + DR)t – 1] Where:
PV = present value of discounted fuel cost stream DR = discount rate
Example Calculation of Levelized Costs for Power Generation Technologies The above information can be combined to develop the levelized cost for any technology. As an example, the case of a conventional natural gas-fired combined cycle plant is considered. Table B-1 summarizes the starting assumptions. Levelized cost calculations are offered in the bullets that follow the table. Note that cost parameters are specified on a per-unit basis, the calculation is independent of the size of the generator. Table B-1. Power Generation Cost and Performance Assumptions Parameter
Value
Size (MW)
540
Year
Price
Year
Price
Year
Price
Online year
2012
1
7.57
11
6.09
21
6.57
Natural gas
2
7.12
12
6.14
22
6.61
Heat rate (btu/kWh)
7,064
3
7.54
13
6.20
23
6.83
Capacity factor (%)
65%
4
7.77
14
6.25
24
6.96
Discount rate (%)
5.0%
5
7.30
15
6.16
25
7.09
30
6
7.01
16
6.06
26
7.20
Fuel type
Operating life (years)
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▪
Parameter
Value
Annual Fuel Price (constant $/MMBtu)
Size (MW)
540
Year
Price
Year
Price
Year
Price
Fixed charge factor (%)
12%
7
6.77
17
6.18
27
7.25
Capital cost ($/kW)
703
8
6.47
18
6.25
28
7.30
Fixed O&M cost ($/kW-yr)
12.14
9
6.26
19
6.36
29
7.35
Variable O&M cost ($/MWh)
2.01
10
6.14
20
6.46
30
7.4
Initial investment costs: the levelized initial investment cost is equal to: Levelized (IIC) = 703 * 0.12 * 1,000 / (8,760 *0.65) = $14.82/MWh
▪
Fixed O&M: The levelized fixed O&M cost is equal to: Levelized fixed O&M cost = 12.14 * 1,000 / (8,760 * 0.65) = $2.13/MWh
▪
Variable O&M: The levelized variable O&M cost is equal to $2.01/MWh
▪
Fuel costs: The present value of the discounted fuel cost stream is equal to $104.35/MMBtu. The levelized fuel cost is equal to: [104.35 * 0.05 * (1+0.05)30] / [(1 + 0.05)30 – 1] = $6.79/MMBtu This levelized value is then converted to units of $/MWh as follows: Levelized FC = 6.79 * 7,064 / 1,000 = $47.97/MWh
▪
Total levelized cost: The total levelized cost is equal to the sum of the above components, as follows: Total levelized cost = levelized IIC + levelized FOM + VOM + levelized FC = 14.82 + 2.13 + 2.01 + 47.97 = $66.93/MWh
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Attachment C. List of Common Data Requirements for Impacts Quantification These are examples of data needed across sectors. Each sector has its own sectorspecific data needs. CCS will work with the PE and TWG members to identify recommended data sources. These will be entered into a common MS Excel file called “Common Baseline Forecast and Microeconomic Analysis Data.xls”. This file will be located in the following Central Desktop (CD) folder along with this Quantification Memo: 03 Microeconomic Analysis. For those with CD access to the project workspace (https://ccs.centraldesktop.com/coahuilacapphaseii/folder/0/#folder:4049774): 1. Energy price forecasts: covering electricity, as well as each fuel type; 2. Forecasts for electricity and gas sales in CO during the planning period; 3. Information on current (most recent year) utility sales of gas and electricity in CO, preferably by utility, especially if different goals are to apply to different utilities; 4. Carbon intensity of grid electricity: should be taken from CO’s GHG I&F or derived from data supporting these baseline estimates (i.e. net generation and the associated CO2e emissions in each year; also net annual imports and estimates of their carbon intensity). This value may change over the modeling period, and will be needed for many ES options and demand-side policies in the other sectors; 5. Estimates of the average current and projected gas and electricity avoided costs (in $/MMBtu and $/MWh) in CO. If these data are not readily-available, they can probably be estimated from the results of statewide cost modeling exercises; 6. Energy-cycle emission factors: for electricity, as well as each fuel type; sources could be the ANL GREET model (http://greet.es.anl.gov/) or specific studies done for Mexico; 7. State-wide population forecast; 8. Forecasts for the number of new residential buildings to be constructed over the planning period (by year), and of the commercial floor space to be constructed annually (or, for example, forecasts for these parameters in fiveyear increments); 9. Estimates of current total water use, preferably by sector, for the most current year available (and, preferably, for recent years) in CO. If water use data are unavailable, water production (volume of water treated for domestic, commercial, and industrial uses) in CO would be a good proxy; also, the embedded energy/carbon content of water deliveries to different regions (cities) in CO. 10. Estimates of future water use in CO. These may be available from water treatment/distribution authorities, or may need to be created by The Center for Climate Strategies
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extrapolating trends in use per person and applying them to demographic projections; 11. Estimates of current and future volumes of wastewater treated by municipality or plant; 12. Regional economic forecast (employment, gross state product (GSP); and 13. Biomass supply and demand assessment: a common need for energy and GHG planning where strategies target in-State fuel supplies; however, the initial set of CO CAG policies does not include any biofuels production priorities.
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Attachment D. Example Calculation of Net Present Value in MicroEconomic Policy Analysis This attachment provides an example calculation of the net present value (NPV) of costs for implementation of a policy addressing the application of straw mulching technology in the agricultural sector. This policy has a goal of reducing crop residue (straw) burning as a management method by assisting farmers to transition to mulching crop straw for re-application to crop fields. Benefits include reduced GHG emissions from crop straw burning, an increase in crop yields, lower irrigation requirements, and reduced nutrient requirements. Results here are shown in Chinese currency (RMB or ¥). The cost elements for the policy include the following: • • • • • • • •
Initial investment costs: capital costs for crop residue harvesting and application equipment; Annualized investment costs: this example assumes 100% financing of initial investments over the lifetime of the equipment (15 years at 5.0% interest produces a capital recovery factor of 0.096); Transport costs: for application to local area crop land (¥/t biomass); Operations costs: additional labor for mulch harvest and application (¥/hectare); Fuel costs: for harvest and application equipment (¥/hectare); Irrigation savings: electricity savings for reduced irrigation pumping. Calculated as a function of reduced water needs, reduced power requirements, and value of electricity savings (¥/MWh avoided); Fertilizer savings: calculated as a function of reduced nitrogen requirements and value of avoided commercial fertilizer use (¥/t avoided); Yield increase value: value of higher yields produced through mulch application (¥/hectare).
The costs of applying this new management practice (straw mulching) need to be netted against those for baseline management. In this example, baseline management is crop residue burning with costs that are low enough to be considered zero. Table IV-1 summarizes the stream of costs associated with each of these cost elements during the planning period (2010-2035). Costs for each element in each year are shown in nominal (real) million (MM) RMB (¥). For each of these cost elements, the details of how each one is escalated through the planning period will be spelled out in the Quantification Results section of the Policy Option Template introduced earlier in this memorandum. For example, future increases in energy costs will be determined from the energy price forecasts assembled for use by all sector analysts in this project. Other escalation procedures will be specific to the sector and policy being analyzed. For example, the future expected costs of
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commercial nitrogen fertilizers or future value of crop commodities will need to be determined for an agricultural sector policy that requires those inputs. The column in Table IV-1 showing net costs shows the sum of all costs and savings (net costs) for each year of the planning period. The final column shows the net discounted costs, which have been discounted to a base year of 2010. The overall calculation of the net present value (NPV) of costs is shown in the following equation.
NPV = Where: LCm LCr At Dr
= Levelized cost of a technology or best practice, ₱/activity unit = Levelized cost of the baseline or reference technology or best practice, ₱/activity unit = Amount of activity affected by the technology or best practice in year t, activity unit = Real discount rate, dimensionless
For this example policy, the net societal costs are ¥MM 1,296 (1.30 billion RMB) in real currency which is equal to ¥MM 913 (0.91 billion RMB) when discounted to 2010 dollars using a 5.0% discount rate.
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Table IV-1. Example NPV Calculation: Agricultural Crop Residue Mulching
Year
Harvest & Application Capital Costs (MM¥)
Annualized Capital Costs (MM¥)
Transport Costs (MM¥)
Operations Costs (MM¥)
Yield Increase (MM¥)
Irrigation Savings (MM¥)
Fertilizer Savings (MM¥)
Diesel Costs (MM¥)
Net Costs (MM¥)
Discounted Net Costs (2010MM¥)
2010
¥67
¥6.4
¥9
¥22
¥-7
¥-22
¥-1
¥20
¥27
¥27
2011
¥67
¥12.8
¥17
¥45
¥-14
¥-44
¥-3
¥40
¥54
¥51
2012
¥67
¥19.2
¥26
¥67
¥-21
¥-66
¥-8
¥59
¥77
¥70
2013
¥67
¥25.6
¥35
¥90
¥-28
¥-88
¥-15
¥79
¥98
¥84
2014
¥67
¥32.0
¥43
¥112
¥-35
¥-109
¥-25
¥99
¥116
¥95
2015
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-32
¥99
¥109
¥86
2016
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-38
¥99
¥103
¥77
2017
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-45
¥99
¥97
¥69
2018
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-51
¥99
¥90
¥61
2019
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-57
¥99
¥84
¥54
2020
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-64
¥99
¥77
¥48
2021
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-70
¥99
¥71
¥42
2022
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-76
¥99
¥65
¥36
2023
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-83
¥99
¥58
¥31
2024
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-89
¥99
¥52
¥26
2025
¥0
¥25.6
¥43
¥112
¥-35
¥-109
¥-96
¥99
¥39
¥19
2026
¥67
¥25.6
¥43
¥112
¥-35
¥-109
¥-102
¥99
¥33
¥15
2027
¥67
¥25.6
¥43
¥112
¥-35
¥-109
¥-108
¥99
¥26
¥12
2028
¥67
¥25.6
¥43
¥112
¥-35
¥-109
¥-115
¥99
¥20
¥8.3
2029
¥67
¥25.6
¥43
¥112
¥-35
¥-109
¥-121
¥99
¥14
¥5.4
2030
¥67
¥32.0
¥43
¥112
¥-35
¥-109
¥-127
¥99
¥14
¥5.2
2031
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-134
¥99
¥7
¥2.6
2032
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-140
¥99
¥1
¥0.3
2033
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-147
¥99
¥-5
¥-1.8
2034
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-153
¥99
¥-12
¥-3.7
2035
¥0
¥32.0
¥43
¥112
¥-35
¥-109
¥-159
¥99
¥-18
¥-5.4
¥1,296
¥913
Totals=
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App. C- ES Policy Recommendations February 2016
Appendix C Energy Supply Policy Recommendations
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Totals
Electricity production through renewable energy technologies (photovoltaic panels, wind generators) in Central Station Power Supply Photovoltaic energy in residential buildings Photovoltaic energy in public buildings Photovoltaic energy in commercial and industrial buildings Cogeneration in the industrial sector
Policy ID Policy Title
ES-1. ES-2. ES-3. ES-4. ES-5.
Policy ID Policy Name
Base Year 2014$
Energy Supply Sector - Summary of Benefits and Costs (2016 - 2035)
Total GHG Impacts
"Stand-Alone" Analysis In-State GHG Impacts
App. C- ES Policy Recommendations February 2016
(0.054)
(1.3)
(0.36)
(0.64)
(19)
(0.46)
(0.82)
(25)
($1,614)
($1,008)
($166)
($304)
($2,179)
($173)
($670)
($459)
($359)
($369)
($89)
Cost Effectiveness $/tCO2e Notes
(0.92)
(0.029)
(2.2)
($5,270)
NPV 2016-2035 $Million
(0.034)
(1.7)
(30)
(2.4)
2035 Cumulative TgCO2e
(0.020) (0.16)
(24)
(2.4)
2035 Cumulative TgCO2e
(0.079)
(1.8)
(0.22)
Annual CO2e Impacts 2025 Tg 2035 Tg
(1.2)
(0.12)
Intra-Sector Interactions & Overlaps Adjustments Intra-Sector Overlap Adjusted Results Total GHG Impacts Base Year 2014$ In-State GHG Impacts
($304)
($2,179)
($359)
($369)
($89)
Cost Effectiveness $/tCO2e Description of Interaction or Overlap No Overlaps
(25)
($166)
($459) ($670) No Overlaps
NPV 2015-2035 $Million
(19)
(0.82)
($1,008)
($173)
2035 Cumulative TgCO2e
(1.3)
(0.64)
(0.46)
($1,614)
2035 Cumulative TgCO2e
(0.92)
(0.054)
(0.36)
(2.2)
($5,270)
Annual CO2e Impacts 2025 Tg 2035 Tg
(0.034)
(0.029)
(1.7)
(30)
(2.4)
No Overlaps
No Overlaps
No Overlaps
(0.020)
(0.16)
(24)
(2.4)
ES-1.
(0.079)
(1.8)
(0.22)
Electricity production through renewable energy technologies (photovoltaic panels, wind generators) in Central Station Power Supply Photovoltaic energy in residential buildings
ES-2.
(1.2)
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(0.12)
C-0
ES-3. Photovoltaic energy in public buildings Photovoltaic energy in commercial and ES-4. industrial buildings ES-5. Cogeneration in the industrial sector Total After Intra-Sector Interactions /Overlap
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App. C- ES Policy Recommendations February 2016
Energy Supply (ES) Sector Overview The tables above provide a summary of the microeconomic analysis of policies in the Energy Supply sector. The first table provides a summary of results on a “stand-alone” basis, meaning that each policy was analyzed separately against baseline (business as usual or BAU) conditions. Details on the analysis of each policy are provided in each of the Policy Option Documents (PODs) prepared by SCAP PE members that follow within this appendix. The “Stand-Alone” results provide the annual GHG reductions for 2025 and 2035 in teragrams (Tg) of carbon dioxide equivalent reductions (CO2e), as well as the cumulative reductions through 2035 (1 Tg is equal to 1 million metric tons). The In-State reductions shown are just those that have been estimated to occur within the State. Additional GHG reductions, typically those associated with upstream emissions in the supply of fuels or materials, have also been estimated. Also reported in the stand-alone results is the net present value (NPV) of societal costs/savings for each policy. These are the net costs of implementing each policy reported in 2014 dollars. The cost effectiveness (CE) estimated for each policy is also provided. Cost effectiveness is a common metric that denotes the cost/savings for reducing each metric ton (t) of emissions. Note that the CE estimates use the total emission reductions for the policy (i.e. those occurring both within and outside of the State). As indicated in the summary table, analysis of ES policies found that all produce a net cost savings to society (indicated by negative NPV implementation costs and cost effectiveness values). Intra-Sector Interactions & Overlaps Adjustments The second summary table provides the same values described above after an assessment was made of any policy interactions or overlaps. There were no interactions or overlaps identified between the ES policies; therefore, the values in the second table are the same as those in the first table.
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App. C- ES Policy Recommendations February 2016
ES-1. Electricity production through renewable energy technologies (photovoltaic panels, wind generators) in Central Station Power Supply. Policy Description The purpose of this policy is to take advantage of low carbon energy resources in Coahuila to contribute to the national GHG reduction target (3) 7 through the strategy of diversification of the energy matrix production in the country (3.2.1) 8. This includes reducing dependence on fossil fuels with high carbon content in electricity generation 9, by promoting installation of power plants that use renewable energy sources, specifically wind and sun, thereby helping to reduce GHG emissions per Mega Watt (MW) generated. This strategy is consistent with the state’s resources, as Coahuila receives a high level of solar radiation (2.9 to 6.7 kWh/m2) with high potential for energy conversion. The State can support diversification of electricity supply options by providing siting and construction of new facilities and generation operations with primary renewable energy. Policy Design State Goals: • •
2025: 790 MW of new installed capacity for electricity production using low carbon technologies. Currently it has a capacity of 2900 MW, of which approximately 66 MW come from plants that use renewable energy (Hydroelectric Plant Amistad). 2035: 1140 MW of new installed capacity for state electricity production using technologies with low carbon content.
Timing: •
2016-2025-2035. • Progress of this policy is followed and assessed annually.
Parties Involved: For this policy’s implementation, participation and support of the following agencies and organizations will be necessary: Private Sector: • Independent energy producers 7
Objective 3: Reduce emissions of greenhouse gases to move to a competitive economy and low emissions development (Special Climate Change Program Promotion Version 2014-2018, 2014-2018 PECC Government of the Republic.) 8 Strategy 3.2.1 Promote the diversification of the energy matrix with public and private investment in generation through clean energy (Special Climate Change Program Promotion Version 2014-2018, 2014-2018 PECC. Government of the Republic). 9 95% of the total electricity generating capacity comes from two coal plants located near the town of Nava: Carbon II with a capacity of 1,400 MW and Rio Escondido (Jose Lopez Portillo) with a generating capacity of 1,200 MW. 5% of the remaining capacity corresponds to a combined cycle plant located in Ramos Arizpe, a hydroelectric plant located in the riverbed of the Rio Grande (within the limits of Coahuila and Texas) and one turbogas plant located in Monclova.
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• Investors • Banks and other financial institutions • Owners of large land properties (wind and solar farms) National Public Sector: • Ministry of Energy (SENER) 10 • Mexican Oil Company (PEMEX) 11 • National Science and Technology Council (CONACYT) 12 • Energy Safety and Environment Agency (ASEA) 13 • National Financial S.N.C. (NAFIN) 14 • Federal Electricity Commission (CFE) 15 • Energy Regulatory Commission (CRE) 16 • National Commission for Energy Efficiency (CONUEE) 17 • Trust for Energy Savings (FIDE) 18 • National Institute of Statistics and Geography (INEGI) 19 State Public Sector: • State Ministry of Environment 20
10
Ministry of the Government of Mexico whose mission is to lead the country's energy policy, within the constitutional framework, to ensure competitive, economically viable, sufficient, high quality, and environmentally sustainable energy supply required for the development of national life. (http://www.energia.gob.mx/). 11 Productive Company in the Energy Sector of the State. (http://www.pemex.com) 12 Public agency of the Mexican federal government dedicated to promote and stimulate the development of science and technology in that country (http://www.conacyt.gob.mx/) 13 The Agency aims to regulate and supervise in industrial, operational safety and environmental protection, facilities and activities in the hydrocarbon sector, including dismantling activities and abandonment of facilities and waste control. 14 Development bank whose mission is to "contribute to economic development through facilitating the access of micro, small and medium enterprises (MSMEs), entrepreneurs and priority investment projects, through financing and other business development services and contribute to the formation of financial markets and act as trustee and financial agent of the Federal Government, allowing drive innovation, improve productivity, competitiveness, job creation and regional growth ".http://nafin.com 15 Mexican government’s company, whose mission is to provide the public service of electric power with criteria of sufficiency, competitiveness and sustainability, committed to customer satisfaction, with the country's development and the preservation of the environment. http://www.cfe.gob.mx/. 16 The mission of the Commission is to regulate in a transparent, impartial and efficient manner the activities of the energy industry within its competence, in order to generate certainty to encourage productive investment, encourage healthy competition, fostering adequate coverage and attention to the reliability, quality and security of supply and provision of services at competitive prices to the benefit of society. http://www.cre.gob.mx/. 17 Administrative agency of the Ministry of Energy, which was created through the Law for Sustainable Use of Energy published in the Official Gazette on November 28, 2008, and has as its main objective to promote energy efficiency and serve as a technical body on sustainable use of energy. http://www.conuee.gob.mx/wb/ 18 Private trust, non-profit, incorporated in Energy Savings support programs. Its aim is to contribute to actions of saving and efficient use of electricity. http://www.fide.org.mx/ 19 Institute responsible for the collection, processing and dissemination of information about the land, people and economy of Mexico.http://www.inegi.org.mx/default.aspx 20 Ministry that promotes sustainable use of natural resources through regulation of activities that impact the environment and promoting an orderly, comprehensive and harmonious growth of the urban environment with the natural environment through the implementation of public policies to improve quality of life of Coahuila. http://www.sema.gob.mx/.
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App. C- ES Policy Recommendations February 2016
State Ministry of Economic Development, Competitiveness and Tourism. 21 Energy, Minerals and Hydrocarbons Commission 22
GHG Causal Chain Direct GHG Reduction Indirect GHG Reduction Direct GHG Increase Indirect GHG Increase Quantification of GHG effects
Implementation Mechanisms Implementation mechanisms considered to support this policy are: Regulation • Include regulations regarding siting and supervision of projects considered in this policy. • Link NMX regulations concerning extraction and electricity generation with the state law. • Include regulations concerning installations according to minimum requirements: o Construction requirements for photovoltaic modules: 21
Ministry whose mission is to strengthen the economy of the State of Coahuila through the incorporation of higher value-added activities, the integration of productive chains, incorporation of new technologies and increased exports of goods and services. http://www.sedecoahuila.gob.mx/. 22 Commission contracts and working conditions in the mines, power generation in the state, contracts awarded to individuals and exploitation of shale gas, among others.
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NMX-J-618/1-ANCE-2010: General requirements for the construction of photovoltaic modules. NMX-J-618/3-ANCE-2011: Requirements for thin film PV modules, design qualification. NMX-J-618/4-ANCE-2011: Requirements for crystalline silicon photovoltaic modules, design qualification. NMX-J-618/5-ANCE-2011: Test method for salt spray corrosion in photovoltaic modules. NMX-J-618/6-ANCE-2011: Method of UV (ultraviolet) test for photovoltaic modules. o Rules relating to the wind sector: NOM-081-SEMARNAT-1994 establishes the maximum permissible limits for noise emission of stationary sources and their method of measurement. o Include the operations mechanism and regulation of Clean Energy Certificates (CEL by its acronym in Spanish), which by 2018 stablishes a 5% mandatory clean power generation. Incentives • Facilitate access to the generating companies in the carbon markets. • Promote economic and tax incentives for companies that use, develop or generate renewable energy. Financing • Establish financing schemes, sales contracts, PPA (Power Purchase Agreement 23 ), loan guarantees, public funds and authorization legislation for state purchases. • Development of a "state trust for energy sustainability" to support investment in energy generation with low carbon sources. • Promotion and training regarding the use of diverse programs and funds offered by the Energy Ministry and other institutions. Others • Development of the national and regionalized detailed renewable energies inventories. • Encourage the participation of research centers/universities in the development of technology for power generation with primary renewable sources. • Promote the creation of new clusters associated with renewable energy technologies (Economic Development State Program, course of action 1.3). • Promote the integration of an economic sector that takes advantage from the emerging market for renewable energy sources and promote industrial development for the production of machinery and equipment for alternative energy generators (Economic Development State Program, course of action 3.13). • Design, implement and promote a confinement program for equipment ready to be discarded. Related Policies/Programs in Place and Recent Actions
23
Contract in which the seller agrees to input the generated electricity into the network, and the buyer to consume it under contractual terms that may or may not restrict the release of this energy in a liberalized market. Having a PPA in the electricity sector accounts cover the risk of long-term market at a reasonable price for both parties. It is also a suitable alternative to ensure a certain level of supply and encourage investment in generation.
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State Level: • Adaptation and Mitigation to Climate Change Impacts in the state of Coahuila de Zaragoza Law (P.O. E. 25/Jan/ 2013). • Promotion of Rational Use of Energy for the State of Coahuila de Zaragoza Law (P.O. E. 13/July/ 2007). Programs and Recent Actions: • Coahuila State Energy Plan 24. National Level: • National Energy Strategy 2013-2017. • National Strategy for Energy Transition and Sustainable Use of Energy. 2014. • Use of Renewable Energy Exploitation and Energy Transition Financing Law. • Sustainable Exploitation of Energy Law (LASE). Programs and Recent Actions: • Special Program for Exploitation of Renewable Energies 25. • Photovoltaic System Promotion Program for Mexico (PROSOLAR). • Sectorial Fund CONACYT-Ministry of Energy- Energy Sustainability. Trust that aims to promote scientific and technological applied research, and the adoption, innovation, assimilation and technological development in the fields of: renewable energy, energy efficiency, clean technologies, and primary energy sources diversification. • Energy Transition and Sustainable Energy Exploitation Fund o PoA´s y NAMAS´ (Programmatic Studies, Kyoto Protocol) 26. o BioEconomy2010 27. • Supporting instruments for promoting the use of renewable energy sources 28 : • No tariff for equipment oriented to prevent pollution and for research and technological development. • Accelerated depreciation for infrastructure projects using renewable energy sources. • Interconnection agreements for renewable power sources, available at CRE website. • Clean Development Mechanism to obtain Emission Reduction Certificates. • Law of use of Renewable Energies and Financing of Energy Transition Law. Estimated Net GHG Reductions and Net Costs or Savings 24
This program aims to promote savings, efficiency and sustainability of energy in commercial, residential and industrial services. Through defining strategies and lines of action that can be executed through projects and subprograms for economic development and society, energy culture, and research, technological development and innovation. Among the research topics alternative sources of energy is included, which contributes to the mitigation of climate change. 25 Program available at: http://www.energia.gob.mx/portal/Default.aspx?id=2686. 26 This project seeks to promote the development of National Action Programs or appropriate mitigation actions, referred to in the Kyoto Protocol and the Bali Action Plan, to facilitate access to project carbon markets (Subministry of planning and energy transition. Renewable energy, http://www.sener.gob.mx/webSener/portal/Default.aspx?id=1665). 27 The project aims to contribute to the conservation, sustainable use and management of natural resources used in primary production by providing support to allow a new production structure through the production of biofuels and the use of renewable energies (Subministry of planning and energy transition. Renewable energies, http://www.sener.gob.mx/webSener/portal/Default.aspx?id=1665). 28 For further detail on the existing incentives please visit: http://www.renovable.gob.mx/in the Electric Generation/ Promotion and Financing Section.
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ES-1.1 Table. Estimation of net GHG reductions and costs or savings. 2025 In-State GHG Reductions
2035 In-State GHG Reductions
2016-2035 Cumulative InState GHG Reductions
2016 – 2035 Cumulative Total Reductions
(TgCO2e)
(TgCO2e)
(TgCO2e)
(TgCO2e)
(0.92)
(1.31)
(18.53)
(24.53)
Net present value of societal costs, 2016 – 2035 ($Million, 2014)
Cost effectiveness ($2014/ tCO2e)
$(2,179)
$(89)
The estimated impacts of the implementation of this policy are presented in Table ES-1.1. Electricity production through renewable energy technologies will reduce emissions of greenhouse gases. The annual in-state reduction in carbon dioxide equivalent emissions of would achieve 1.31 tons in 2035. The in-state cumulative decrease between 2016 and 2035 would total 18.53 tons. The application of this policy with respect to the trend scenario would yield cumulative savings of 2,179 million pesos and savings per each ton reduced in emissions of greenhouse gases would be approximately 89 pesos. Data Sources: Coahuila State Government, 2015. Energy Program of the state of Coahuila [Online]. Available: http://energiacoahuila.com/contents/view/programa_energetico_coahuila. Coahuila State Government, 2011. Rational use of energy for the state of Coahuila promotion Law. Official Gazette of the state of Coahuila. Published on July 13, 2007. Reform: June 25, 2011. [Online]. Coahuila State Government. 2014. State Economical Development Program 2011-2017. [On line]. Available at: http://coahuila.gob.mx/micrositios/index/programas-sectoriales. Energy Environmental Economics, E3, 2012. Technical Potential for Local Distributed Photovoltaics in California. March. pp 47-49. http://www.cpuc.ca.gov/NR/rdonlyres/8A822C08-A56C-4674-A5D2099E48B41160/0/LDPVPotentialReportMarch2012.pdf Energy Regulatory Comission. Resolution RES/005/2015. Energy Regulatory Comission. Resolution RES/201/2015. Energy Secretary, 2012. Prospectiva de Energías Renovables 2012-2026. México. Environment Secretary. “Coahuila Energy Projects” [electronic mail]. December, 4, 2015. Federal Electricity Commission, 2013. Costs and reference parameters for formulating investment projects in the electric sector; Generation. Programming Branch, Federal Electricity Commission, Mexico City. Klein, Joel. 2009. Comparative Costs of California Central Station Electricity Generation Technologies, California Energy Commission, CEC-200-2009-017-SD. Available in: http://www.energy.ca.gov/2009publications/CEC-200-2009-017/CEC-200-2009-017SF.PDF Ministry of Energy, Energy Information System. Mexico: SENER. Available in: http://sie.energia.gob.mx/. National Government, 2014. Promotion Edition of the Special Climate Change Program 20142018, PECC 2014-2018. [On line]. National Institute of Statistics, Geography and Informatics, 2015. Statistical Yearbook 2014. Division Coahuila. Divisional management; Department of Research and Statistics. Mexico: INEGI.
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National Institute of Statistics and Geography, 2015. Economic Census 2014. Definitive results. Automated census information. Mexico: INEGI. U.S. Energy Information Administration, EIA, 2011. Electricity Market Module. http://www.eia.gov/forecasts/aeo/assumptions/pdf/electricity.pdf p. 97. Quantification methods: The analysis is divided into two sections, emissions and costs. In the emissions section, the usual situation of GHG emissions of total electricity production in Coahuila is calculated first. The total cost includes the cost of capital, the annualized capital costs of operation and maintenance, the avoided costs, benefits or net costs and net present value resulting from the application of the policy. a) Emission Section GHG emissions in the usual (baseline) situation Emissions in the usual situation for the production of electricity for residential use are calculated in the way set out in this section. Avoided GHG emissions with the implementation of the policy Avoided GHG emissions with the policy are calculated as follows: • Reduction targets of the policy are distributed proportionately to get the same reduction percentage for each year. • Using the reduction percentages and the total gross electricity production we obtain the electricity production with non-renewable fuels avoided. b) Costs Section Cost of capital • To calculate the cost of capital, the price of the investment per MW of Photovoltaic Panel ($ / MW) and wind power plant was obtained. • By multiplying the price of the investment per MW required for the implementation of the policy, the cost of capital in millions of pesos is obtained. Annualized capital cost The annualized capital cost is calculated as follows: • The Capital Recovery Factor is calculated using the interest rate and the life of the equipment in years. •Recovery Factor is multiplied by Capital Costs each year. • Annualized costs of the previous year must be added each year. Operation and maintenance costs The operation and maintenance costs are calculated as follows: • The (new) fixed incremental operation and maintenance cost calculates the (new) incremental fixed cost by multiplying the annual clean energy policy target (MW) by the assumed costs of operation and maintenance ($ / kW) to reach $M pesos. • The leveled fixed O&M investment for ES-1 is calculated by multiplying the incremental (new) fixed O&M investment by the assumed capital recovery factor (9.57% for solar & 9.09% for wind). (Where the capital recovery factor is the ratio of a constant annuity to the present value of receiving that annuity over the given time period.) Avoided Costs The Center for Climate Strategies
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Avoided costs are calculated as follows: • Avoided costs are estimated by multiplying the cost per MWh ($ / MWh) in the usual scenario by the production of electricity (MWh) generated from renewable sources. Key Assumptions: Policy targets by type of renewable technology are represented in Table ES-1.2 Table ES-1.2. Policy targets by type of renewable technology. End Year Policy Target (units MW) % of ES-1 goal from Solar % of ES-1 goal from Wind
2025 790 6% 94%
2035 1140 13% 87%
In the Policy targets by type of renewable technology there are included the projects that are being developed in Coahuila, which are represented in Table ES-1.3. Table ES-1.3. Policy targets by type of renewable technology. Location Hipólito Parras Acuña 1 Acuña 2 Matamo ros Total Total
Renewable technology
Beginning of Operations
CAPACITY (MW)
Wind
End 2016
190
Wind
Not available
200
Wind
oct-16
150
Wind
abr-17
200
Solar photovoltaic
Not available
20
Wind Solar TOTAL
DATA SOURCE Coahuila State Government. 2015. Environment Secretary. Coahuila State Government. 2015. Environment Secretary. CRE (Energy Regulatory Comission). RES/201/2015 Coahuila State Government. 2015. Environment Secretary. CRE (Energy Regulatory Comission). RES/005/2015
740 20 760
The 2025 assumption includes an additional 30 MW of solar photovoltaic to reach the 790 MW target. Table ES-1.4 shows the 2016 cost assumptions for ES-1: Table ES-1.4. Cost assumptions for ES-1 policy. Solar 25 8% 10% 100% $ 2,090
Book life (yrs.) Weighted average cost of capital Capital recovery factor Regional construction multiplier Overnight facility capital cost Overnight T&D capital cost Fixed O&M Variable O&M Capacity factor (CF) Heat rate
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38.14 21% 13500
Wind 30 8% 9% 100% $ 1,990 $ 176.75 $ 17.30 $ 7.42 30% 10320
Units Year Percent Percent Percent 2014 $US/kW 2014 $US/kW 2014 $US/kW 2014 $US mills/kW Percent Btu/kWh
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Capacity credit Integration costs Transmission and Distribution Assumptions Overnight T&D cap. cost (2014 $pesos/kW yr.)
• • • • •
• •
Solar 100% $
Solar 0
Wind 25% $ 8.94 Wind 2733
Units Percent 2014 $US/MWh
Financials: 1 US$ = $15.46 pesos. Capital costs for solar PV decline by ~1.3% per year over the planning period. T&D losses are 10.7%. The assumed technology is for central station solar PV with a peak capacity of 2.5-100 MW. Ratio of Integration Cost/Avg Wholesale Power Price is 5.6%. This ratio is multiplied by the MWh from wind; in effect reducing the MWh and GHG emissions reductions from the resource due to "firming up" or integrating the wind generation into the grid using NG turbines. Avoided GHGs and system costs ($/MWh) were based on the Coahuila system marginal resource mix. The assumed avoided electricity and retail fuel prices are shown in Table ES-1.5.
Table ES-1.5. Cost assumptions for policy ES policies.
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Electricity MX$ / MWh $2,468 $2,455 $1,792 $1,882 $1,926 $2,007 $2,123 $2,205 $2,291 $2,371 $2,455 $2,542 $2,655 $2,775 $2,778 $2,782 $2,786 $2,790 $2,794 $2,798 $2,802 $2,807
Nat. Gas: Indust. (MX$/GJ) 80.92 85.77 84.40 91.27 100.21 110.80 125.12 135.06 145.69 155.34 165.60 176.50 190.22 205.30 205.30 205.30 205.30 205.30 205.30 205.30 205.30 205.30
Key Uncertainties •
There is uncertainty regarding the relative cost of production respecting renewable-source/ fossil energies based technologies.
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•
App. C- ES Policy Recommendations February 2016
There is uncertainty regarding the evolution of the tax over sale and imports of fossil fuels according to their carbon content. Currently, tax payers are the manufacturers, producers and importers from the sale and imports of fossil fuel. The share assessment is based on the type of fuel. The March 31, 2015 is issued in the Official Gazette the requirement for Clean Energy Certificates (CEL by its Spanish acronym) 29 by 2018, where an enforceable requirement of Clean energy certificates for the period 2018 will be 5%. This instrument will help achieve the target set in this policy, however, the micro effect is not quantified due to uncertainty regarding fines and market prices of the certificates, and also depend on the obligations, operating mechanisms and criteria associated with CEL established by the Secretary of Energy.
Additional Benefits and Costs • •
The transition in the energy matrix impacts directly and indirectly on levels of employment and production. The net effect is evaluated in the macroeconomic analysis. Economic benefits for companies generating electricity from renewable sources.
Feasibility Issues Feasibility issues identified are the following: • • • • • • • • • •
Economic barrier due to high costs of renewable technologies. The costs of energy production do not consider environmental externalities or impacts on the health of the population, so that investments in clean energy lose priority for being more "expensive". The National Electric System Network should be in optimal condition for the massive inclusion of energy generated from renewable sources. Fossil fuel-based industries’ limited interest. Coordination of environmental and energy policies. Coordination amongst parties involved is required in order to remove obstacles for financing. There is some level of difficulty in obtaining licenses and permits that the renewable source project developers have to do in order to have the required permits. A lot of time spent in processing permits and authorizations for projects in renewable energy. Will to replace high carbon technologies. Lack of trained personnel available for installation and operation of renewable technologies.
29
This instrument seeks to achieve greater market power generation from clean energy sources, so as to allow individual obligations converted into national goals of clean electricity generation. The mechanism used is that the state sets a minimum percentage of generation of energy from clean sources each year, which must be covered by generators and distributors. Thus, if the generators or distributors do not cover this percentage, they must buy the number of certificates that allow them to fulfill that obligation. Otherwise, the producer or distributor (as specified in the market) must pay the fine imposed by the authority, which represent the maximum price of the certificates. According to the Electricity Industry Law, CELs will be securities issued by the Energy Regulatory Commission attesting to the production of a certain amount of electricity from clean energy and will meet the requirements associated with consumption centers load.
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Resistance of the population to allow the installation of infrastructure for the use of renewable energies in their lands.
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ES-2. In-situ electricity generation in residential buildings with photovoltaic panels. Policy Description Towards 2020, the residential sector will be the eighth greenhouse gas emitter and the second in carbon black 30 (PECC, 2014). These emissions are associated with electricity consumption of households. The costs of small-scale generation with photovoltaic panels are lower than domestic rates, once the government subsidy is incorporated. Also, the territory of Coahuila receives high levels of solar radiation. Therefore, the implementation of economic and financial incentives will boost the self-generation of solar photovoltaic electricity in the residential sector. The implementation of this policy contributes to the reduction of GHG emissions related to the consumption of electricity produced from fossil fuels. Similarly, it supports the national strategy for distributed power generation in the domestic, commercial and industrial sector (3.4.3). Policy Design State Goals: • •
2025: The residential sector of Coahuila produces 35 MW of electricity distributed by means of photovoltaic panels. 2035: The residential sector of Coahuila produces 55 MW of electricity distributed by means of photovoltaic panels.
Timing: •
Planning of the Project begins in 2016. The first goal is achieved by 2025, and the second one, ten years later (2035). • Progress of this policy is followed and assessed annually.
Parties Involved: Private Sector: • Household owners • Photovoltaic panels producers and distributors • Photovoltaic solar energy contractors • Banks and other Financial Institutions National Public Sector: • Ministry of Energy (SENER) • National Housing Fund Institute for Workers (INFONAVIT) • Housing Fund of the Institute of Social Security and Social Services for State Employees (FOVISSSTE) • Energy Regulatory Commission (CRE) • Federal Electricity Commission (CFE) • National Housing Commission (CONAVI) • National Commission for Energy Efficiency (CONUEE) 30
Considering a global warming potential (GWP) of 20 years.
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• Trust for Energy Savings (FIDE) State Public Sector: • State Ministry of Environment • State Ministry of Economic Development • Intersecretarial Climate Change Commission • Energy, Minerals and Hydrocarbons Commission GHG Causal Chain Direct GHG Reduction Indirect GHG Reduction Direct GHG Increase Indirect GHG Increase Quantification of GHG effects
Implementation Mechanisms Implementation Mechanisms considered for supporting this policy are: Regulation • Include regulations concerning installation of photovoltaic systems according to minimum requirements:
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o NMX-J-618/1-ANCE-2010: General requirements for the construction of photovoltaic modules. o NMX-J-618/3-ANCE-2011: Requirements for thin film PV modules, design qualification. o NMX-J-618/4-ANCE-2011: Requirements for crystalline silicon photovoltaic modules, design qualification. o NMX-J-618/5-ANCE-2011: Test method for salt spray corrosion in photovoltaic modules. o NMX-J-618/6-ANCE-2011: Method of UV (ultraviolet) test for photovoltaic modules. Incentives • Economic and/or tax incentives that promote the installation of photovoltaic panels in households. • Issue certificates for building with sustainable equipment, when 70% of the average annual energy consumption is covered by the in situ generation using photovoltaic panels. Financing • Design and implement feasible and attractive financing schemes to enable the use of photovoltaic systems in households. • Align credits for installations of photovoltaic generation with mortgages. • Promotion and training regarding the use of diverse programs and funds offered by the Energy Ministry and other institutions. Environmental Awareness • Establish a policy to encourage the use of low environmental impact technologies. Promotion and Dissemination • Promote the creation of new clusters associated with renewable energy technologies, particularly photovoltaic panels (Economic Development State Program, course of action 1.3). • Promote the integration of an economic sector that takes advantage from the emerging market for renewable energy sources and promote industrial development for the production of machinery and equipment for alternative energy generators (Economic Development State Program, course of action 3.13). • Design, implement and promote a confinement program for equipment ready to be discarded. Related Policies/Programs in Place and Recent Actions State Level: • Adaptation and Mitigation to Climate Change Impacts in the state of Coahuila de Zaragoza Law (P.O. E. 25/Jan/ 2013). • Promotion of Rational Use of Energy for the State of Coahuila de Zaragoza Law (P.O. E. 13/July/ 2007). Programs and Recent Actions: • Coahuila State Energy Plan 31.
31
This program aims to promote savings, efficiency and sustainability of energy in commercial, residential, industrial and service activities. Through defining strategies and lines of action that can be executed through projects and subprograms for economic development and society, energy culture, and research, technological development
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National Level: • National Energy Strategy 2013-2017. • National Strategy for Energy Transition and Sustainable Use of Energy. 2014. • Use of Renewable Energy Exploitation and Energy Transition Financing Law. • Sustainable Exploitation of Energy Law (LASE). • National Strategy for Sustainable Household Programs and Recent Actions: • Photovoltaic System Promotion Program for Mexico (PROSOLAR). • Special Program for Exploitation of Renewable Energies. 32 • Green Mortgage Program, INFONAVIT. 33 • Energy Transition and Sustainable Energy Exploitation Fund o Interconnection contracts for renewable sources of energy provided by the CRE that provide administrative facilities so as to enable the network to interconnect generation sources planned to be installed. • Housing with Solar Roofs Program (25,000 solar roofs project). Part of the project consists of identifying niche markets for a financially viable use of photovoltaic systems in the residential, industrial and service sectors in Mexico, analyzing whether the use of photovoltaic systems in these sectors permits savings form investors’ perspective, compared with the purchase of all electricity to the national power grid. 34 • NAMA 35 Mexican Sustainable Housing (new households), CONAVI, SEMARNAT and GIZ. 36 Promotion program for cost-effective, energy-efficient building models throughout the whole housing sector, particularly focusing on social housing, within the national mortgage market. 37 Estimated Net GHG Reductions and Net Costs or Savings Table ES-2.1. Estimation of net GHG reductions and costs or savings. 2025 InState GHG Reductions
2035 InState GHG Reductions
2016 – 2035 Cumulative In-State Reductions
2016 – 2035 Cumulative Total Reductions
(TgCO2e)
(TgCO2e)
(TgCO2e)
(TgCO2e)
(0.03)
(0.05)
(0.64)
(0.82)
Net present value of societal costs, 2016 – 2035 ($2014)
Cost effectiveness ($2014/ tCO2e)
$(304)
$(369)
The estimated impacts of the implementation of this policy are presented in Table ES-2.1. Distributed electricity generation in residential buildings with photovoltaic panels will reduce electricity consumption generated by fossil sources, hence this will reduce emissions of and innovation. Among the research topics alternative sources of energy is included, which contributes to the mitigation of climate change. 32 Program available at: http://www.energia.gob.mx/portal/Default.aspx?id=2686. 33 Available at: http://portal.infonavit.org.mx/. 34 Program available at: http://www.gtz.de/en/dokumente/en-market-niches-for-gride-connected-photovoltaic-systems-mexico.pdf. 35 Nationally Appropriate Mitigation Actions 36 German Development Cooperation 37 Program available at: http://www.conavi.gob.mx/viviendasustentable.
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App. C- ES Policy Recommendations February 2016
greenhouse gases. The average annual in-state reductions in carbon dioxide equivalent emissions of would be 0.05 tons between 2015 and 2035. The cumulative decrease in 2035 would total 0.82 tons. The application of this policy with respect to the trend scenario would yield cumulative savings of 304 million pesos and savings per ton reduced in emissions of greenhouse gases would be of 369 pesos. Data Sources: Coahuila State Government, 2015. Energy Program of the state of Coahuila [Online]. Available: http://energiacoahuila.com/contents/view/programa_energetico_coahuila. Coahuila State Government, 2011. Rational use of energy for the state of Coahuila promotion Law. Official Gazette of the state of Coahuila. Published on July 13, 2007. Reform: June 25, 2011. [Online]. Coahuila State Government. 2014. State Economical Development Program 2011-2017. [On line]. Available at: http://coahuila.gob.mx/micrositios/index/programas-sectoriales. Energy Environmental Economics, E3, 2012. Technical Potential for Local Distributed Photovoltaics in California. March. pp 47-49. http://www.cpuc.ca.gov/NR/rdonlyres/8A822C08-A56C-4674-A5D2099E48B41160/0/LDPVPotentialReportMarch2012.pdf Energy Secretary, 2012. Prospectiva de Energías Renovables 2012-2026. México. Federal Electricity Commission, 2013. Costs and reference parameters for formulating investment projects in the electric sector; Generation. Programming Branch, Federal Electricity Commission, Mexico City. Klein, Joel. 2009. Comparative Costs of California Central Station Electricity Generation Technologies, California Energy Commission, CEC-200-2009-017-SD. Available in: http://www.energy.ca.gov/2009publications/CEC-200-2009-017/CEC-200-2009-017SF.PDF Ministry of Energy, Energy Information System. Mexico: SENER. Available in: http://sie.energia.gob.mx/. National Government, 2014. Promotion Edition of the Special Climate Change Program 20142018, PECC 2014-2018. [On line]. National Institute of Statistics, Geography and Informatics, 2015. Statistical Yearbook 2014. Division Coahuila. Divisional management; Department of Research and Statistics. Mexico: INEGI. National Institute of Statistics and Geography, 2015. Economic Census 2014. Definitive results. Automated census information. Mexico: INEGI. U.S. Energy Information Administration, EIA, 2011. Electricity Market Module. http://www.eia.gov/forecasts/aeo/assumptions/pdf/electricity.pdf p. 97. Quantification methods: The analysis is divided into two sections, emissions and costs. In the emissions section, the usual situation of GHG emissions of total electricity production in Coahuila is calculated first. Then emission reduction derived from power consumption from the grid was calculated. Calculated costs of implementing photovoltaic panels took into account reductions in power consumption from the grid. Total cost includes the cost of capital, the annualized capital costs of The Center for Climate Strategies
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operation and maintenance, the avoided costs, benefits or net costs and net present value resulting from the application of the policy. a) Emission Section GHG emissions in the usual (baseline) situation Emissions in the usual situation for the production of electricity are calculated in the following way: Avoided GHG emissions with the implementation of the policy Avoided GHG emissions with the policy are calculated as follows: b) Costs Section Cost of capital • To calculate the cost of capital, the price of the investment per MW of Photovoltaic Panel ($ / MW) was obtained. • By multiplying the price of the investment per MW required for the implementation of the policy, the cost of capital in millions of pesos is obtained. Annualized capital cost The annualized capital cost is calculated as follows: • The Capital Recovery Factor is calculated using the interest rate and the life of the equipment in years. Recovery Factor is then multiplied by Capital Costs each year. • Annualized costs of the previous year must be added each year. Operation and maintenance costs The operation and maintenance costs are calculated as follows: The annualized capital is multiplied by the proportion that Operation and Maintenance costs represent. Avoided Costs Avoided costs are calculated as follows: • Avoided costs are the amount of power generated with photovoltaic panels multiplied by the forecasted price ($/MWh) in the residential sector; expressed in millions of pesos (MM$). Key Assumptions: The 2016 cost assumptions for ES-2 are shown in Table ES-2.2. Table ES-2.2. Key inputs to the ES-2 analysis. Book life (yrs.) Weighted average cost of capital Capital recovery factor Regional construction multiplier Overnight facility capital cost Overnight T&D capital cost Fixed O&M Variable O&M Capacity factor (CF) Heat rate Capacity credit Integration costs Transmission and Distribution Assumptions Overnight T&D cap. cost (2014 $pesos/kW yr.)
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Solar 25 8.25% 9.57% 100% $2,875 $0 $38 $0 21% 10,320 100% 0 Solar 0
Units Year Percent Percent Percent 2014 $US/kW 2014 $US/kW 2014 $US/kW 2014 $US mills/kW Percent Btu/kWh Percent 2014 $US/MWh
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• • • •
Financials: 1 US$ = $15.46 pesos. Capital costs for solar PV decline by ~1.3% per year over the planning period. The assumed technology for solar PV is Roof installation with a peak capacity of 3-5 KW. Avoided GHGs and system costs ($/MWh) were based on the COA system marginal resource.
•
The assumed avoided electricity prices are shown table ES-1.4.
Key Uncertainties •
There is uncertainty regarding the relative cost of generation distributed with photovoltaic panels respecting CFE’s rate, due to the foresight of the current subsidy for electric energy.
Additional Benefits and Costs • •
Opportunity to increase production levels and create employment if integration of the productive sector is achieved, in which the associated photovoltaic panel market is leveraged upon. Economic savings in the residential sector resulting from lower power consumption from the grid specifically for users who do not have access to electricity subsidy.
Feasibility Issues Feasibility issues identified are: • • • • • • • •
Economic barrier due to the upfront costs for the purchase of photovoltaic technology, plus the lack of national low cost equipment. Coordination is required among parties involved to ensure that barriers to access funding are removed. Energy production costs do not consider environmental or health issues, thus, investments in clean energy lose their priority because they are more “costly”. The National System Grid should be in optimal conditions to incorporate massive energy production from renewable sources. Part of the population has no knowledge and is unaware of the real magnitude of environmental problems and its consequences. The electricity subsidy acts as a barrier in developing the implementation of photovoltaic panels for consumers who do not have a high consumption. Lack of knowledge about the economic benefits that photovoltaic panels can provide to the high-consumption residential sector. Lack of trained personnel available for installation and operation of renewable technologies.
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ES-3 In-situ electricity generation in public buildings with photovoltaic panels. Policy Description Electrical energy used in public buildings comes largely from fossil fuels with high global warming potential. Therefore, the objective of this policy is to increase energy efficiency in the institutional sector, taking advantage of the high incidence of solar radiation of the entity, promoting the installation of photovoltaic panels in public buildings in Coahuila to meet their electric energy requirements electric. With this measure, besides reducing operating costs in the public sector, GHG emission is mitigated using cleaner and more efficient technologies to replace fossil fuels for power generation. Policy Design State Goals: • •
2025: 40% of electric power consumed in public buildings is self-generated with photovoltaic panels. 2035: 60% of electric power consumed in public buildings is self-generated with photovoltaic panels.
Timing: •
Planning of the Project begins in 2016. The first goal is achieved by 2025, and the second one, ten years later (2035). Progress of this policy is followed and assessed annually. Parties Involved: Private Sector: • Photovoltaic panels producers and distributors • Photovoltaic solar energy contractors • Investors • Banks and other Financial Institutions National Public Sector: • Ministry of Energy (SENER) • Energy Regulatory Commission (CRE) • Federal Electricity Commission (CFE) • National Commission for Energy Efficiency (CONUEE) • Trust for Energy Savings (FIDE) State Public Sector: • State Ministry of Environment • State Ministry of Economic Development • Intersecretarial Climate Change Commission • Energy, Minerals and Hydrocarbons Commission
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GHG Causal Chain Direct GHG Reduction Indirect GHG Reduction Direct GHG Increase Indirect GHG Increase Quantification of GHG effects
Implementation Mechanisms Implementation Mechanisms considered for supporting this policy are: Regulation • Design and implementation of rule that demands public buildings’ generation of 40% electric energy by the means of photovoltaic panels. • Include regulations concerning installation of photovoltaic systems according to minimum requirements: o NMX-J-618/1-ANCE-2010: General requirements for the construction of photovoltaic modules. o NMX-J-618/3-ANCE-2011: Requirements for thin film PV modules, design qualification. o NMX-J-618/4-ANCE-2011: Requirements for crystalline silicon photovoltaic modules, design qualification. o NMX-J-618/5-ANCE-2011: Test method for salt spray corrosion in photovoltaic modules. The Center for Climate Strategies
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o NMX-J-618/6-ANCE-2011: Method of UV (ultraviolet) test for photovoltaic modules. Incentives • Issue certificates for building with sustainable equipment, when 80% of the average annual energy consumption is covered by in situ generation using photovoltaic panels. Financing • Design and implement financing schemes to enable the use of photovoltaic systems in public buildings. Others • Design, implement and promote a confinement program for equipment ready to be discarded. Related Policies/Programs in Place and Recent Actions State Level: • Adaptation and Mitigation to Climate Change Impacts in the state of Coahuila de Zaragoza Law (P.O. E. 25/Jan/ 2013). • Promotion of Rational Use of Energy for the State of Coahuila de Zaragoza Law (P.O. E. 13/July/ 2007). Programs and Recent Actions: • Coahuila State Energy Plan 38. • Installation of a Public Security solar farm in Torreon (168 solar panels) with a generating capacity of 76.6 MW annually. • Solar farm in the community of San José de Carranza, Sierra Mojada with daily capacity of 358.15 KWH. • Solar farm in Boquillas del Carmen, Ocampo for 65 families. National Level: • National Energy Strategy 2013-2017. • National Strategy for Energy Transition and Sustainable Use of Energy. 2014. • Use of Renewable Energy Exploitation and Energy Transition Financing Law. • Sustainable Exploitation of Energy Law (LASE). • Electric Industry Law Programs and Recent Actions: • Special Program for Exploitation of Renewable Energies 39. • Energy Transition and Sustainable Energy Exploitation Fund o Interconnection contracts for renewable sources of energy provided by the CRE that provide administrative facilities so as to enable the network to interconnect generation sources planned to be installed.
38 This program aims to promote savings, efficiency and sustainability of energy in commercial, residential, industrial and service activities. Through defining strategies and lines of action that can be executed through projects and subprograms for economic development and society, energy culture, and research, technological development and innovation. Among the research topics alternative sources of energy is included, which contributes to the mitigation of climate change. 39 Program available at: http://www.energia.gob.mx/portal/Default.aspx?id=2686.
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Estimated Net GHG Reductions and Net Costs or Savings Table ES-3.1. Estimation of net GHG reductions and costs or savings. 2025 InState GHG Reductions
2035 InState GHG Reductions
2016 – 2035 Cumulative In-State Reductions
2016 – 2035 Cumulative Total Reductions
(TgCO2e)
(TgCO2e)
(TgCO2e)
(TgCO2e)
(0.02)
(0.03)
(0.36)
(0.46)
Net present value of societal costs, 2016 – 2035 ($2014)
Cost effectiveness ($2014/ tCO2e)
$(166)
$(359)
The estimated impacts of the implementation of this policy are presented in Table ES-3.1. In-situ electricity generation in public buildings with photovoltaic panels will reduce electricity consumption generated by fossil sources, hence this will reduce emissions of greenhouse gases. The average annual in-state reductions in carbon dioxide equivalent emissions of would be 0.03 tons between 2015 and 2035. The cumulative decrease in 2035 would total 0.46 tons. The application of this policy with respect to the trend scenario would yield cumulative savings of 166 million pesos and savings per ton reduced in emissions of greenhouse gases would be of 359 pesos. Data Sources: Coahuila State Government, 2015. Energy Program of the state of Coahuila [Online]. Available: http://energiacoahuila.com/contents/view/programa_energetico_coahuila. Coahuila State Government, 2011. Rational use of energy for the state of Coahuila promotion Law. Official Gazette of the state of Coahuila. Published on July 13, 2007. Reform: June 25, 2011. [Online]. Coahuila State Government. 2014. State Economical Development Program 2011-2017. [On line]. Available at: http://coahuila.gob.mx/micrositios/index/programas-sectoriales. Energy Environmental Economics, E3, 2012. Technical Potential for Local Distributed Photovoltaics in California. March. pp 47-49. http://www.cpuc.ca.gov/NR/rdonlyres/8A822C08-A56C-4674-A5D2099E48B41160/0/LDPVPotentialReportMarch2012.pdf Federal Electricity Commission, 2013. Costs and reference parameters for formulating investment projects in the electric sector; Generation. Programming Branch, Federal Electricity Commission, Mexico City. Klein, Joel. 2009. Comparative Costs of California Central Station Electricity Generation Technologies, California Energy Commission, CEC-200-2009-017-SD. Available in: http://www.energy.ca.gov/2009publications/CEC-200-2009-017/CEC-200-2009-017SF.PDF Ministry of Energy, Energy Information System. Mexico: SENER. Available in: http://sie.energia.gob.mx/. National Government, 2014. Promotion Edition of the Special Climate Change Program 20142018, PECC 2014-2018. [On line]. National Institute of Statistics, Geography and Informatics, 2015. Statistical Yearbook 2014. Division Coahuila. Divisional management; Department of Research and Statistics. Mexico: INEGI.
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National Institute of Statistics and Geography, 2015. Economic Census 2014. Definitive results. Automated census information. Mexico: INEGI. U.S. Energy Information Administration, EIA, 2011. Electricity Market Module. http://www.eia.gov/forecasts/aeo/assumptions/pdf/electricity.pdf p. 97. Quantification methods: The analysis is divided into two sections, emissions and costs. In the emissions section, the usual situation of GHG emissions of total electricity production in Coahuila is calculated first. Then emission reduction derived from power consumption from the grid was calculated. Calculated costs of implementing photovoltaic panels took into account reductions in power consumption from the grid. Total cost includes the cost of capital, the annualized capital costs of operation and maintenance, the avoided costs, benefits or net costs and net present value resulting from the application of the policy. a) Emission Section GHG emissions in the usual (baseline) situation Emissions in the usual situation for the production of electricity are calculated in the following way: Avoided GHG emissions with the implementation of the policy Avoided GHG emissions with the policy are calculated as follows: b) Costs Section Cost of capital • To calculate the cost of capital, the price of the investment per MW of Photovoltaic Panel ($ / MW) was obtained. • By multiplying the price of the investment per MW required for the implementation of the policy, the cost of capital in millions of pesos is obtained. Annualized capital cost The annualized capital cost is calculated as follows: • The Capital Recovery Factor is calculated using the interest rate and the life of the equipment in years. Recovery Factor is then multiplied by Capital Costs each year. • Annualized costs of the previous year must be added each year. Operation and maintenance costs The operation and maintenance costs are calculated as follows: The annualized capital is multiplied by the proportion that Operation and Maintenance costs represent. Avoided Costs Avoided costs are calculated as follows: • Avoided costs are the amount of power generated with photovoltaic panels multiplied by the forecasted price ($/MWh) in the residential sector; expressed in millions of pesos (MM$). Key Assumptions: The 2016 cost assumptions for ES-3 are shown in Table ES-3.2. The Center for Climate Strategies
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Table ES-3.2. Estimation of net GHG reductions and costs or savings derived from the application of ES-3 to direct emission factors. Book life (yrs.) Weighted average cost of capital Capital recovery factor Regional construction multiplier Overnight facility capital cost Overnight T&D capital cost Fixed O&M Variable O&M Capacity factor (CF) Heat rate Capacity credit Integration costs Transmission and Distribution Assumptions Overnight T&D cap. cost (2014 $pesos/kW yr.)
Solar 25 8.25% 9.57% 100% $2,875 $0 $38 $0 21% 13,500 65% 0 Solar 0
Units Year Percent Percent Percent 2014 $US/kW 2014 $US/kW 2014 $US/kW 2014 $US mills/kW Percent Btu/kWh Percent 2014 $US/MWh
• • • •
Financial: 1 US$ = $15.46 pesos. Capital costs for solar PV decline by ~1.3% per year over the planning period. The assumed technology for solar PV is Roof installation with a peak capacity of 3-5 KW. Avoided GHGs and system costs ($/MWh) were based on the Coahuila system marginal resource. • The assumed avoided electricity prices are shown in table ES-1.4. Key Uncertainties •
There is uncertainty regarding the relative cost of generation distributed with photovoltaic panels respecting CFE’s rate, due to the foresight of the current subsidy for electric energy.
Additional Benefits and Costs • •
Opportunity to increase production levels and create employment if integration of the productive sector is achieved, in which the associated photovoltaic panel market is leveraged upon. Economic savings in the institutional sector resulting from lower power consumption from the grid specifically for users who do not have access to electricity subsidy.
Feasibility Issues Feasibility issues identified are: • • • •
Economic barrier due to the upfront costs for the purchase of photovoltaic technology, plus the lack of national low cost equipment. Coordination is required among parties involved to ensure that barriers to access funding are removed. Lack of trained personnel available for installation and operation of renewable technologies. Partial ignorance about the economic benefits that photovoltaic panels can provide and their risks.
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ES-4. In-situ electricity generation in commercial and industrial buildings with photovoltaic panels. Policy Description The commercial and industrial sectors have increasingly contributed to the increase of GHG emissions that alter the energy balance of the climate system. Therefore, it is appropriate to move towards an energy model that considers the consumption of electricity in commercial and industrial buildings by harnessing solar energy. The auto-consumption of electricity produced by photovoltaic technologies will contribute to savings in operating costs in commercial and industrial buildings, and contribute to mitigation of GHG emissions, both by reducing dependence on non-renewable fuels, and avoiding energy losses during transport and distribution of electrical energy required in the commercial and industrial buildings of Coahuila. Policy Design State Goals: • •
2025: 10% of electric power consumed in commercial and industrial buildings is selfgenerated with photovoltaic panels. 2035: 20% of electric power consumed in commercial and industrial buildings is selfgenerated with photovoltaic panels.
Timing: •
Planning of the Project begins in 2016. The first goal is achieved by 2025, and the second one, ten years later (2035). o Progress of this policy is followed and assessed annually.
Parties Involved: For this policy’s implementation, participation and support of the following agencies and organizations will be necessary: Private Sector: • Commercial/ industrial buildings owners • Photovoltaic panels producers and distributors • Photovoltaic solar energy contractors • Investors • Banks and other Financial Institutions National Public Sector: • Ministry of Energy (SENER) o Planning and Energy Transition Subministry o Electricity Subministry • Federal Electricity Commission (CFE) • Energy Regulatory Commission (CRE) • National Commission for Energy Efficiency (CONUEE) The Center for Climate Strategies
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State Public Sector: • State Ministry of Environment • State Ministry of Economic Development • Intersecretarial Climate Change Commission • Energy, Minerals and Hydrocarbons Commission GHG Causal Chain Reductions in GHG include CO2, N2O, CH4, and potentially carbon black. Direct GHG Reduction Indirect GHG Reduction Direct GHG Increase Indirect GHG Increase Quantification of GHG effects
Implementation Mechanisms Implementation Mechanisms considered for supporting this policy are: Regulation • Include regulations concerning installation of photovoltaic systems according to minimum requirements: o NMX-J-618/1-ANCE-2010: General requirements for the construction of photovoltaic modules.
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o NMX-J-618/3-ANCE-2011: Requirements for thin film PV modules, design qualification. o NMX-J-618/4-ANCE-2011: Requirements for crystalline silicon photovoltaic modules, design qualification. o NMX-J-618/5-ANCE-2011: Test method for salt spray corrosion in photovoltaic modules. o NMX-J-618/6-ANCE-2011: Method of UV (ultraviolet) test for photovoltaic modules. Incentives • Economic and/or tax incentives that promote the installation of photovoltaic panels in industries. • Issue certificates for building with sustainable equipment, when 70% of the average annual energy consumption is covered by the in situ generation using photovoltaic panels. • Issue Clean Energy Certificates. • Facilitate company access to carbon credit markets. Financing • Design and implement feasible and attractive financing schemes to enable the use of photovoltaic systems in commercial and industrial buildings. • Promotion and training regarding the use of diverse programs and funds offered by the Energy Ministry and other institutions. Environmental Awareness • Establish a policy to encourage the use of low environmental impact technologies. Promotion and Dissemination • Promote the creation of new clusters associated with renewable energy technologies. • Promote the integration of an economic sector that takes advantage from the emerging market for renewable energy sources and promote industrial development for the production of machinery and equipment for alternative energy generators. • Design, implement and promote a confinement program for equipment ready to be discarded. Related Policies/Programs in Place and Recent Actions State Level: • Adaptation and Mitigation to Climate Change Impacts in the state of Coahuila de Zaragoza Law (P.O. E. 25/Jan/ 2013). • Promotion of Rational Use of Energy for the State of Coahuila de Zaragoza Law (P.O. E. 13/July/ 2007). Programs and Recent Actions: • Coahuila State Energy Plan 40. • Installation of a Public Security solar farm in Torreon (168 solar panels) with a generating capacity of 76.6 MW annually. National Level: 40 This program aims to promote savings, efficiency and sustainability of energy in commercial, residential, industrial and service activities. Through defining strategies and lines of action that can be executed through projects and subprograms for economic development and society, energy culture, and research, technological development and innovation. Among the research topics alternative sources of energy is included, which contributes to the mitigation of climate change.
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• • •
National Energy Strategy 2013-2017. National Strategy for Energy Transition and Sustainable Use of Energy. 2014. Use of Renewable Energy Exploitation and Energy Transition Financing Law. (LAERFTE). • Sustainable Exploitation of Energy Law (LASE). • Electric Industry Law Programs and Recent Actions: • National Electric Prospective o Wind: 300 MW for 2025 • Special Program for Exploitation of Renewable Energies 41. • Photovoltaic System Promotion Program for Mexico (PROSOLAR). • Niche Markets for Photovoltaic Systems with Connection to the Electrical Network in Mexico. Part of the project consists of identifying niche markets for a financially viable use of photovoltaic systems in the residential, industrial and service sectors in Mexico, analyzing whether the use of photovoltaic systems in these sectors permits savings from investors’ perspective, compared with the purchase of all electricity to the national power grid 42. • Energy Transition and Sustainable Energy Exploitation Fund o Interconnection contracts for renewable sources of energy provided by the CRE that provide administrative facilities so as to enable the network to interconnect generation sources planned to be installed. Estimated Net GHG Reductions and Net Costs or Savings Table ES-4.1. Estimation of net GHG reductions and costs or savings. 2025 InState GHG Reductions
2035 InState GHG Reductions
2016 – 2035 Cumulative In-State Reductions
2016 – 2035 Cumulative Total Reductions
(TgCO2e)
(TgCO2e)
(TgCO2e)
(TgCO2e)
(0.08)
(0.16)
(1.66)
(2.20)
Net present value of societal costs, 2016 – 2035 ($2014)
Cost effectiveness ($2014/ tCO2e)
$(1,008)
$(459)
The estimated impacts of the implementation of this policy are presented in Table ES-4.1. In-situ electricity generation in commercial / industrial buildings with photovoltaic panels will electricity consumption generated by fossil sources, hence this will reduce emissions of greenhouse gases. The average annual in-state reductions in carbon dioxide equivalent emissions of would be 0.16 tons between 2015 and 2035. The cumulative decrease in 2035 would total 2.20 tons. The application of this policy with respect to the trend scenario would yield cumulative savings of 1,008 million pesos and costs per ton reduced in emissions of greenhouse gases would be of 459 pesos.
41
Program available at: http://www.energia.gob.mx/portal/Default.aspx?id=2686. Program available at: http://www.gtz.de/en/dokumente/en-market-niches-for-gride-connected-photovoltaic-systems-mexico.pdf. 42
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Data Sources: Coahuila State Government, 2015. Energy Program of the state of Coahuila [Online]. Available: http://energiacoahuila.com/contents/view/programa_energetico_coahuila. Coahuila State Government, 2011. Rational use of energy for the state of Coahuila promotion Law. Official Gazette of the state of Coahuila. Published on July 13, 2007. Reform: June 25, 2011. [Online]. Coahuila State Government. 2014. State Economical Development Program 2011-2017. [On line]. Available at: http://coahuila.gob.mx/micrositios/index/programas-sectoriales. Energy Environmental Economics, E3, 2012. Technical Potential for Local Distributed Photovoltaics in California. March. pp 47-49. http://www.cpuc.ca.gov/NR/rdonlyres/8A822C08-A56C-4674-A5D2099E48B41160/0/LDPVPotentialReportMarch2012.pdf Federal Electricity Commission, 2013. Costs and reference parameters for formulating investment projects in the electric sector; Generation. Programming Branch, Federal Electricity Commission, Mexico City. Klein, Joel. 2009. Comparative Costs of California Central Station Electricity Generation Technologies, California Energy Commission, CEC-200-2009-017-SD. Available in: http://www.energy.ca.gov/2009publications/CEC-200-2009-017/CEC-200-2009-017SF.PDF Ministry of Energy, Energy Information System. Mexico: SENER. Available in: http://sie.energia.gob.mx/. National Government, 2014. Promotion Edition of the Special Climate Change Program 20142018, PECC 2014-2018. [On line]. National Institute of Statistics, Geography and Informatics, 2015. Statistical Yearbook 2014. Division Coahuila. Divisional management; Department of Research and Statistics. Mexico: INEGI. National Institute of Statistics and Geography, 2014. Economic Census 2015. Definitive results. Automated census information. Mexico: INEGI. U.S. Energy Information Administration, EIA, 2011. Electricity Market Module. http://www.eia.gov/forecasts/aeo/assumptions/pdf/electricity.pdf p. 97. Quantification methods: The analysis is divided into two sections, emissions and costs. In the emissions section, the usual situation of GHG emissions of total electricity production in Coahuila is calculated first. Then emission reduction derived from power consumption from the grid was calculated. Calculated costs of implementing photovoltaic panels took into account reductions in power consumption from the grid. Total cost includes the cost of capital, the annualized capital costs of operation and maintenance, the avoided costs, benefits or net costs and net present value resulting from the application of the policy. a) Emission Section GHG emissions in the usual (baseline) situation Emissions in the usual situation for the production of electricity are calculated in the following way: The Center for Climate Strategies
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Avoided GHG emissions with the implementation of the policy Avoided GHG emissions with the policy are calculated as follows: b) Costs Section Cost of capital • To calculate the cost of capital, the price of the investment per MW of Photovoltaic Panel ($ / MW) was obtained. • By multiplying the price of the investment per MW required for the implementation of the policy, the cost of capital in millions of pesos is obtained. Annualized capital cost The annualized capital cost is calculated as follows: • The Capital Recovery Factor is calculated using the interest rate and the life of the equipment in years. Recovery Factor is then multiplied by Capital Costs each year. • Annualized costs of the previous year must be added each year. Operation and maintenance costs The operation and maintenance costs are calculated as follows: The annualized capital is multiplied by the proportion that Operation and Maintenance costs represent. Avoided Costs Avoided costs are calculated as follows: • Avoided costs are the amount of power generated with photovoltaic panels multiplied by the forecasted price ($/MWh) in the residential sector; expressed in millions of pesos (MM$). Key Assumptions: The 2016 cost assumptions for ES-4 are shown in Table ES-4.2. Table ES-4.2. Estimation of net GHG reductions and costs or savings derived from the application of ES-4 to direct emission factors. Book life (yrs.) Weighted average cost of capital Capital recovery factor Regional construction multiplier Overnight facility capital cost Overnight T&D capital cost Fixed O&M Variable O&M Capacity factor (CF) Heat rate Capacity credit Integration costs Transmission and Distribution Assumptions Overnight T&D cap. cost (2014 $pesos/kW yr.)
• • •
Solar 25 8.25% 9.57% 100% $2,875 $0 $38 $0 21% 13,500 65% 0 Solar 0
Units Year Percent Percent Percent 2014 $US/kW 2014 $US/kW 2014 $US/kW 2014 $US mills/kW Percent Btu/kWh Percent 2014 $US/MWh
Financials: 1 US$ = $15.46 pesos. Capital costs for solar PV decline by ~1.3% per year over the planning period. The assumed technology solar PV is Roof installation with a peak capacity of 3-5 KW.
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•
Avoided GHGs and system costs ($/MWh) were based on the COA system marginal resource.
•
The assumed avoided electricity prices are shown in table ES-1.4.
Key Uncertainties There is uncertainty regarding the relative cost of generation distributed with photovoltaic panels respecting CFE’s rate, due to the foresight of the current subsidy for electric energy. Additional Benefits and Costs • •
Opportunity to increase production levels and create employment if integration of the productive sector is achieved, in which the associated photovoltaic panel market is leveraged upon. Economic savings for the commercial / industrial sector resulting from lower power consumption from the grid.
Feasibility Issues Feasibility issues identified are: • • • •
Economic barrier due to the upfront costs for the purchase of photovoltaic technology, plus the lack of national low cost equipment. Coordination is required among parties involved to ensure that barriers to access funding are removed. Lack of knowledge about the economic benefits that photovoltaic panels can provide to the commercial and industrial sectors. Lack of trained personnel available for installation and operation of renewable technologies.
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ES-5. Encouragement of efficient cogeneration of electricity in industry. Policy Description Electricity cogeneration systems 43 reach a much higher efficiency than conventional systems by leveraging untapped waste heat and reducing unnecessary energy losses, enabling considerable medium and long term savings (CONUEE and CRE, 2013). In Mexico, regulation has been developed considering energy efficient cogeneration projects. In most companies in the industrial sector, heat and electricity are essential inputs. When these two forms of energy are required together in a production process, it is an opportunity to implement cogeneration systems, which leads, simultaneously, to achieve greater efficiency in the use of fossil fuels and produce less pollutant emissions per unit of useful energy. This policy considers the promotion of efficient cogeneration systems 44 according to the productive structure of the state, where the impulse for cogeneration is concentrated in the following sectors: Cement industry, steel industry and mining sector. Cogeneration mode represents a viable option to contribute to energy sustainability by increasing energy and economic efficiency of the company. Policy Design State Goals: Based on the potential of sectors and Coahuila’s economic structure, the following scenario is proposed in Table ES-5.1: Sector Steel Cement Mining Total
• •
2025 30 25 13 68
2035 55 45 25 125
2025: 68 MW of cogeneration capacity installed in industry. 2035: 125 MW of cogeneration capacity installed in industry.
43
According to the Law of Electric Energy Public Service, Article 36, Section II, Cogeneration is defined as the production of electrical energy produced in conjunction with steam or other high thermal energy or both; when the thermal energy that is not utilized in the process is used for the direct or indirect production of electric power or when fuels produced during processes are used for direct or indirect power generation. 44 Efficient Cogeneration is defined as the generation of electricity under the provisions of Section II of Article 36 of the LSPEE, provided that the process has a higher minimum efficiency established by the CRE: Capacity of the system Minimal efficiency (%) Capacity >0.03-<0.5MW 5 Capacity >=0.05-<30MW 10 Capacity >=30-<100MW 15 Capacity >=100 20 Considering the net electricity generated in a system for a year (E), net useful thermal energy or heat generated in a system and used in a production process for one year (H), the fossil fuel used in a system for one year (F), where the electrical performance RE = E / F and the thermal efficiency RT = H / F. For more information check: 5 CRE (Feb. 22, 2011): http://www.sener.gob.mx/res/Acerca_de/REScalculoEficienciaCogeneracionEficienteCRE_220211.pdf.
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Timing: •
2016-2025-2035. • Progress of this policy is followed and assessed annually. Parties Involved: For this policy’s implementation, participation and support of the following agencies and organizations will be necessary: Private Sector: • Cogeneration related establishments/ Generating companies • Manufacturers and distributors of cogeneration technology • Banks and other financial institutions National Public Sector: • Ministry of Energy (SENER) • National Commission for Energy Efficiency (CONUEE) • Energy Regulatory Commission (CRE) • Federal Electricity Commission (CFE) State Public Sector: • State Ministry of Environment • State Ministry of Economic Development • Inter-secretarial Climate Change Commission • Energy, Minerals and Hydrocarbons Commission GHG Causal Chain Reductions in GHG include CO2, N2O, CH4, and potentially carbon black. Direct GHG Reduction Indirect GHG Reduction Direct GHG Increase Indirect GHG Increase Quantification of GHG effects
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Implementation Mechanisms Implementation Mechanisms considered for supporting this policy are: Incentives • Creation and dissemination of federal and regional tax incentives for Distributed Generation with Cogeneration Systems. • Emission and promotion of clean energy certificates (CEL by its Spanish acronym), which will be mandatory by 2018. • Facilitate access for companies to carbon credit markets. Financing • Preferential prices of energetics for co-generators. • Establish proportional rates for permits according to the size of the project. • Development of a "state trust for energy sustainability" to support cogeneration actions. • Promotion and training regarding the use of diverse programs and funds offered by the Energy Ministry and other institutions. Training/ Advice /Dissemination • Establish training schemes to ease paperwork for cogeneration investments. • Dissemination of a state program to encourage cogeneration. • Training and advice for companies with cogeneration potential. Related Policies/Programs in Place and Recent Actions State Level: • Adaptation and Mitigation to Climate Change Impacts in the state of Coahuila de Zaragoza Law (P.O. E. 25/Jan/ 2013). • Promotion of Rational Use of Energy for the State of Coahuila de Zaragoza Law (P.O. E. 13/July/ 2007). Programs and Recent Actions: The Center for Climate Strategies
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• Coahuila State Energy Plan 45. National Level: • National Energy Strategy 2013-2017. • National Strategy for Energy Transition and Sustainable Use of Energy. 2014. • Use of Renewable Energy Exploitation and Energy Transition Financing Law (LAERFTE). o While cogeneration is not considered renewable energy, LAERFTE states that the powers granted to the CRE on renewable energies will apply to electricity cogeneration systems even if they are not using renewable energies, as long as those systems meet the efficiency criteria established by the CRE itself (LAERFTE, Article 20). • Electric Industry Law. • Sustainable Exploitation of Energy Law (LASE). Recent programs and actions: • LAERFTE offers the following benefits for efficient cogeneration systems: o Methodology for determining charges for transmission services rendered by the supplier to the Licensees with electricity generating plants with renewable energy or efficient cogeneration 46 o Interconnection contract for electricity generation facilities with renewable energy or efficient cogeneration 47 o Arrangement for transmission service of electricity for energy source 48 o Annex F-RC interconnection contract for electricity generation facilities with renewable energy or efficient cogeneration 49 Estimated Net GHG Reductions and Net Costs or Savings Table ES-5.1. Estimation of net GHG reductions and costs or savings. 2025 InState GHG Reductions
2035 InState GHG Reductions
2016 – 2035 Cumulative In-State Reductions
2016 – 2035 Cumulative Total Reductions
(TgCO2e)
(TgCO2e)
(TgCO2e)
(TgCO2e)
(0.12)
(0.22)
(2.41)
(2.41)
Net present value of societal costs, 2016 – 2035 ($2014)
Cost effectiveness ($2014/ tCO2e)
$(1,614)
$(670)
The estimated impacts of the implementation of this policy are presented in Table ES-5.2. Encouragement of efficient cogeneration of electricity in industry will reduce energy consumption, 45
This program aims to promote savings, efficiency and sustainability of energy in commercial, residential, industrial and service activities. Through defining strategies and lines of action that can be executed through projects and subprograms for economic development and society, energy culture, and research, technological development and innovation. Among the research topics alternative sources of energy is included, which contributes to the mitigation of climate change. 46 http://www.cre.gob.mx/documento/1327.pdf 47 http://www.cre.gob.mx/documento/1328.pdf. 48 http://www.cre.gob.mx/documento/1329.pdf. 49 http://www.cre.gob.mx/documento/1331.pdf.
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hence, will reduce emissions of greenhouse gases. The average annual in-state reductions in carbon dioxide equivalent emissions of would be 0.22 tons between 2015 and 2035. The cumulative decrease in 2035 would total 2.41 tons. The application of this policy with respect to the trend scenario would yield cumulative savings of 1,614 million pesos and savings per ton reduced in emissions of greenhouse gases would be of 670 pesos. Data Sources: Coahuila State Government, 2015. Energy Program of the state of Coahuila [Online]. Available: http://energiacoahuila.com/contents/view/programa_energetico_coahuila. Coahuila State Government, 2011. Rational use of energy for the state of Coahuila promotion Law. Official Gazette of the state of Coahuila. Published on July 13, 2007. Reform: June 25, 2011. [Online]. Coahuila State Government. 2014. State Economical Development Program 2011-2017. [On line]. Available at: http://coahuila.gob.mx/micrositios/index/programas-sectoriales. Energy Secretary, 2012. Prospectiva de Energías Renovables 2012-2026. México. Federal Electricity Commission, 2013. Costs and reference parameters for formulating investment projects in the electric sector; Generation. Programming Branch, Federal Electricity Commission, Mexico City. Hedman, Bruce, Ken Darrow, Eric Wong, Anne Hampson. ICF International, Inc.2012. Combined Heat and Power: 2011-2030 Market Assessment. California Energy Commission. CEChttp://www.energy.ca.gov/2012publications/CEC-200-2012-002/CEC200-2012-002. 200-2012-002.pdf Ministry of Energy, Energy Information System. Mexico: SENER. Available in: http://sie.energia.gob.mx/. National Government, 2014. Promotion Edition of the Special Climate Change Program 20142018, PECC 2014-2018. [On line]. National Institute of Statistics, Geography and Informatics, 2015. Statistical Yearbook 2014. Division Coahuila. Divisional management; Department of Research and Statistics. Mexico: INEGI. National Institute of Statistics and Geography, 2015. Economic Census 2014. Definitive results. Automated census information. Mexico: INEGI. Quantification Methods: Key Assumptions: The theory of Combined Heat and Power, CHP, is to maximize the energy use from fuel consumed and to avoid additional GHG’s by the use of reclaimed thermal energy. The reclaimed thermal energy can be used by other nearby entities (e.g., within an industrial park or district steam loop) for productive purposes. Generating stations in urban areas may have existing opportunities or may require the co-location of new industry. Table ES-5.3. Assumptions for CHP (Combined Heat and Power) CHP Characteristics CHP Technology
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CHP Characteristics CHP Unit Size MW Heat Rate BTU/kWh Capacity Factor Heat Recovered from CHP (Power to heat ratio) Installed Capital Costs $/kW O&M Costs $MX/MWh
40.00 8,759 80% 95% $ 21,764 $ 92
Hedman et al. (2012) Tables 38-40. Hedman et al. (2012) Table A-2. Hedman et al. (2012) Table A-2. Hedman et al. (2012) Tables 38-40. Hedman et al. (2012) Tables 38-40.
Feed in Tariff Export Pricing Region #1 Feed in Tariff Export Pricing Region #2 Feed in Tariff Export Pricing Region #3
$ $ $
1,115 1,913 1,165
$MX/MWh $MX/MWh $MX/MWh
$
1,397
$MX/MWh
Average of Export Prices Economic Life/years Natural Gas Fuel Percent Levelized Cost of Electricity $/MWh Avoided Thermal Charges $/MWh Avoided Capacity Charges $/MWh Net Generation Cost $/MWh Avoided Price of Power $/MWh MW Capacity Avoided Boiler Characteristics Displaced boiler efficiency Fixed O&M $/MMBTU Variable O&M $/MMBTU
• • •
20 100% $ 2,006 $ 813 $ 17 $ 1,268 $ 1,579 68
$ $
75% 1.29 1.29
Hedman et al. (2012) Tables 38-40. Assumption Calculated Calculated Calculated Calculated Assumption ES-2 Policy Targets Assumption Assumption Assumption
We assume that the heat rate for new turbines installed under ES-5 declines from 9.220 BTU/kWH in 2016 to 8,759 by 2024 and is constant after that. We assume all new Combined Heat and Power (CHP) is fueled by natural gas as that all existing boiler fuel is natural gas as well. Assumed avoided electricity and natural gas prices are shown in Table ES-1.4.
Key Uncertainties •
If an appropriate promotion of the economic benefits and technical requirements does not take place, there could be a lack of interest of the producers with cogeneration potential because cogeneration is not their main business.
Additional Benefits and Costs •
Efficient cogeneration will bring economic benefits to companies with potential.
Feasibility Issues • •
Uniformity and ease in interconnection permits and costs are required, along with a review of the technical requirements so that they are accessible and aligned to the real needs of the projects. Economic barrier due to the upfront costs for the purchase of technologies, plus the lack of national low cost equipment.
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Coordination is required among parties involved to ensure that barriers to access funding are removed. Lack of knowledge about the economic benefits that cogeneration can bring to the commercial and industrial sectors. Lack of trained personnel available for installation and operation of renewable technologies.
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Appendix D- Residential, Commercial, Institutional and Industrial Sector Policies
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Total GHG Impacts
"Stand-Alone" Analysis In-State GHG Impacts
($1,590)
(0.049)
(0.29)
(0.51)
(18)
(0.38)
(0.65)
2035 Cumulative TgCO2e
($29,918)
($7,200)
($21,262)
($601)
($855)
NPV 2015-2035 $Million
($1,307)
($1,206)
($1,590)
($1,311) None
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($1,206)
($1,311)
($601)
($1,307)
Cost Effectiveness $/tCO2e Notes
($21,262)
($1,238)
($855)
(0.38)
($7,200)
NPV 2016-2035 $Million
(0.049)
(0.29)
(18)
($29,918)
(0.65)
(0.025)
(0.029)
(14)
(24)
(5.5)
2035 Cumulative TgCO2e
(0.014)
(1.2)
(19)
(4.3)
(0.51)
(0.72)
(1.8)
(0.54)
2035 Cumulative TgCO2e
(0.18)
(0.025)
(0.029)
(14)
(24)
(5.5)
In-State GHG Impacts
(0.014)
(1.2)
(19)
(4.3)
2035 Cumulative TgCO2e
(0.72)
(1.8)
(0.54)
Annual CO2e Impacts 2025 Tg 2035 Tg
(0.18)
($1,238) None
None
None
None
(0.94)
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Cost Effectiveness $/tCO2e Description of Interaction or Overlap
Intra-Sector Overlap Adjusted Results Total GHG Impacts Base Year 2014$
Intra-Sector Interactions & Overlaps Adjustments
(0.94)
Annual CO2e Impacts 2025 Tg 2035 Tg
Base Year 2014$
Residential, Commercial, Industrial and Institutional - Summary of Benefits and Costs (2016 - 2035)
Coahuila SCAP Phase 2 Report
RCII-1.
Totals
Building Codes and Standards Increasing energy efficiency in new constructions- Equipment (Appliances, solar water heaters, flow water heaters). Increasing energy efficiency in existing constructions, excluding industrial sector Equipment (Appliances, lighting, solar water heaters, flow water heaters). Energy Efficient Equipment and Processes in the Industrial Sector
Policy ID Policy Title
RCII-2.
RCII-3. RCII-4.
Policy ID Policy Name
RCII-1. Building Codes and Standards Increasing energy efficiency in new constructions- Equipment (Appliances, solar RCII-2. water heaters, flow water heaters). Increasing energy efficiency in existing constructions, excluding industrial sector Equipment (Appliances, lighting, solar water RCII-3. heaters, flow water heaters). Energy Efficient Equipment and Processes in the Industrial Sector Total After Intra-Sector Interactions /Overlap RCII-4.
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Residential, Commercial, Institutional and Industrial (RCII) Sector Overview The tables above provide a summary of the microeconomic analysis of policies in the Residential, Commercial, Institutional and Industrial sector. The first table provides a summary of results on a “stand-alone” basis, meaning that each policy was analyzed separately against baseline (business as usual or BAU) conditions. Details on the analysis of each policy are provided in each of the Policy Option Documents (PODs) prepared by SCAP PE members that follow within this appendix. The “Stand-Alone” results provide the annual GHG reductions for 2025 and 2035 in teragrams (Tg) of carbon dioxide equivalent reductions (CO2e), as well as the cumulative reductions through 2035 (1 Tg is equal to 1 million metric tons). The In-State reductions shown are just those that have been estimated to occur within the State. Additional GHG reductions, typically those associated with upstream emissions in the supply of fuels or materials, have also been estimated. Also reported in the stand-alone results is the net present value (NPV) of societal costs/savings for each policy. These are the net costs of implementing each policy reported in 2014 dollars. The cost effectiveness (CE) estimated for each policy is also provided. Cost effectiveness is a common metric that denotes the cost/savings for reducing each metric ton (t) of emissions. Note that the CE estimates use the total emission reductions for the policy (i.e. those occurring both within and outside of the State). As indicated in the summary table, analysis of the RCII sector policies found that implementation of all of them is expected to return a net cost savings to society (as indicated by the negative values for policy implementation costs (NPV) and cost effectiveness is defined in part by the amount of GHGs reduced, a value for CE could not be calculated for this policy. Intra-Sector Interactions & Overlaps Adjustments The second summary table provides the same values described above after an assessment was made of any policy interactions or overlaps. No overlaps were identified within RCII policies. The RCII policies were designed to cover separate end-uses and measures. For new construction, RCII-1 includes the energy consuming end-uses associated with building energy codes such as building envelope and heating, ventilating and air conditioning (HVAC), while RCII-2 includes only the energy consumption associated with appliances in new buildings. RCII-3 excludes industrial sector building energy-use (HVAC and lighting) as these are included in RCII-4. Therefore, each of the stand-alone policy results are what can reasonably be expected for GHG reductions for the individual policies, given their implementation schedule and assumptions in the analysis.
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RCII-1. Increasing energy efficiency in new and existing construction buildings- Building codes and standards. Policy Description Construction and design modifications of a building can contribute to increase energy efficiency, reducing energy demand to satisfy thermal conditioning and lighting needs, improving inhabitants’ comfort, thus contributing to mitigate deterioration of the environment. Within the framework of energetic sustainability, this policy covers regulation of design, construction and major remodeling of buildings, with the objective of building low carbon footprint “green buildings”. All of this through enhancement, improvement, and adoption of regulations and standards that promote thermal isolation technologies, installation of low-power consuming lighting systems: halogen, compact-fluorescent (LFC) and light-emitting diode (LED) lamps, and carbon sequestration activities (such as green roofs, vertical gardens, and urban gardens) in new buildings. Policy Design Implementation of bioclimatic design for new buildings in Coahuila is considered according to the four climatic regions: dry, dry temperate 50, extreme warm dry 51, and warm dry 52. Regulation will be made at a state level considering the type of building (residential, institutional, industrial or commercial) as well as the bioclimatic region of municipalities, to later Focused on the whole household sector, public and commercial/industrial/services buildings. State goals: • •
2025: Energy intensity reduction by 30% (electricity, LPG, NG) (GJ/building), in relation to 2015. 2035: Energy intensity reduction by 50% (electricity, LPG, NG) (GJ/building), in relation to 2015.
Timing: •
Planning of the Project begins in 2016, thus expecting the first goal to be achieved by 2025, and the second one ten years later, in 2035. • Lineal reductions are assumed in the time frame: annual reduction of 3% through 2025, and 2.5% annually in the 2025-2035 period.
Parties Involved: Private sector: • Household owners • Construction companies/ Real estate developers • Architects • Technology and construction material suppliers 50
Arteaga, Parras, Saltillo and Sierra Mojada. Acuña, Monclova and Viesca. 52 Rest of municipalities. 51
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• Banks and financial institutions National Public Sector: • Ministry of Energy (SENER) 53 • Energy Regulatory Commission (CRE) 54 • Federal Electricity Commission (CFE) 55 • National Housing Commission(CONAVI) 56 • National Commission for Energy Efficiency (CONUEE) 57 • National Housing Fund Institute for Workers (INFONAVIT) 58 • Housing Fund of the Institute of Social Security and Social Services for State Employees (FOVISSSTE) 59 • National Bank for Public Works and Services (BANOBRAS) 60 • Trust for Energy Savings (FIDE) 61 State Public Sector: • State Ministry of Environment 62
53
Ministry of the Government of Mexico whose mission is to lead the country's energy policy, within the constitutional framework, to ensure competitive, economically viable, sufficient, high quality, and environmentally sustainable energy supply required for the development of national life. /http://www.cre.gob.mx/ 54 The mission of the Commission is to regulate in a transparent, impartial and efficient manner the activities of the energy industry within its competence, in order to generate certainty to encourage productive investment, encourage healthy competition, fostering adequate coverage and attention to the reliability, quality and security of supply and provision of services at competitive prices to the benefit of society. http://www.cre.gob.mx/. 55 Mexican government’s company, whose mission is to provide the public service of electric power with criteria of sufficiency, competitiveness and sustainability, committed to customer satisfaction, with the country's development and the preservation of the environment. http://www.cfe.gob.mx/. 56 Federal body responsible for coordinating the function of housing promotion, and to apply and make sure that the objectives and goals of the federal government in housing are met. Its mission is to design, coordinate and promote housing policies and programs in the country, aimed at developing the conditions to enable Mexican families have access to housing solutions according to their needs and possibilities. http://www.conavi.gob.mx/. 57 Administrative agency of the Ministry of Energy, which was created through the Law for Sustainable Use of Energy published in the Official Gazette on November 28, 2008, and has as its main objective to promote energy efficiency and serve as a technical body on sustainable use of energy. http://www.conuee.gob.mx/wb/. 58 Mexican Institute which aims to create value for employees, their families and communities, through solutions that allow them to increase their heritage and quality of life in a sustainable manner, throughout their working lives and in retirement, based on a three part scheme (government, business, employee) and autonomy. http://www.infonavit.org.mx/ 59
Institute responsible for granting housing loans to workers employed by the State. Today it is a financial institution of global competitiveness, with a clear social vocation and a strong sense of responsibility as a public body. http://www.fovissste.gob.mx 60 Development banking institution, public company with majority of state ownership, its purpose is to finance or refinance public or private projects in infrastructure and utilities investment and contribute to the institutional strengthening of Federal, state and municipal governments. http://www.banobras.gob.mx. 61 Private trust, non-profit, incorporated in Energy Savings support programs. Its aim is to contribute to actions of saving and efficient use of electricity. http://www.fide.org.mx/ 62 Ministry that promotes sustainable use of natural resources through regulation of activities that impact the environment and promoting an orderly, comprehensive and harmonious growth of the urban environment with the natural environment through the implementation of public policies to improve quality of life of Coahuila. http://www.sema.gob.mx/.
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State Ministry of Economic Development, Competitiveness and Tourism. 63 State Ministry of Urban Management, Water and Territorial Ordinance 64
GHG Causal Chain Direct GHG Reduction Indirect GHG Reduction Direct GHG Increase Indirect GHG Increase Quantification of GHG effects
Implementation Mechanisms Implementation mechanisms considered for supporting this policy are: Regulation • Establish the mandatory legal framework and standard regulations oriented to the construction sector of Coahuila and the bioclimatic region. • Link NMX regulations to the state law
63
Secretariat whose mission is to strengthen the economy of the State of Coahuila through the incorporation of higher value-added activities, the integration of productive chains, incorporation of new technologies and increased exports of goods and services. http://www.sedecoahuila.gob.mx/. 64 Office of the State Public Authority for assisting the Head of the Executive Power in the formulation, conduct, implementation and evaluation of programs and government policies in the areas of urban development, metropolitan areas, water, transport, airport services, housing and land use which is expressly entrusted the Organic Law of Public Administration of the State of Coahuila, and other laws, regulations, decrees and orders of the Governor. http://www.segucoahuila.gob.mx.
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o NMX-AA-164-SCFI-2013 Sustainable building- Environmental criteria and minimum requirements. • Incorporate insolation standards for residential building permits. Incentives • Establish financial and/ or economic incentives for builders or independent builders for the design and construction of sustainable buildings. • Issue sustainable building certificates, when the construction complies to the design and construction requirements considered in this policy. Financing • Establish new legal-financial schemes to support the construction of buildings that comply to the regulatory framework for efficient use of energy. • Support the use of “green credits” for builders and “green mortgages”. • Development of a “State Trust for Energetic Sustainability” to support specific actions such as “bioclimatic design”, “use of insulating materials in buildings”, “solar panels”, etc. • Promotion and training regarding the use of diverse existing programs and funds. • Establish mechanism to acquire existent national funds. Environmental Awareness • Promote the efficient use of materials in commercial, industrial and residential buildings. Training/ Advice • Link construction permits to specialized advisory services for builders and/or independent builders regarding building with rational use of energy. • Design and development of training for institutions that offer financial schemes for the acquisition of energy efficient materials and technologies. Others: • Encourage the development of green supply chains. • Encourage participation of research centers and universities regarding design and building oriented to energy efficiency Related Policies/Programs in Place and Recent Actions State Level: • Adaptation and Mitigation to Climate Change Impacts in the state of Coahuila de Zaragoza Law (P.O. E. 25/Jan/ 2013). • Promotion of Rational Use of Energy for the State of Coahuila de Zaragoza Law (P.O. E. 13/July/ 2007). • General Urban Settlements Law National Level: • National Energy Strategy 2013-2017. • National Strategy for Energy Transition and Sustainable Use of Energy. 2014. • Use of Renewable Energy Exploitation and Energy Transition Financing Law. • Sustainable Exploitation of Energy Law (LASE). • National Strategy for Sustainable Households Programs and recent actions:
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Green Mortgage Program, INFONAVIT. 65 NAMA 66 Mexican Sustainable Housing, CONAVI, SEMARNAT and GIZ 67. Promotion program for cost-effective, energy-efficient building models throughout the whole housing sector, with a particularly focusing on social housing, within the national mortgage market. 68 Thermal Insulation Program Trust (FIPATERM) – Full Systematic Savings Program
Estimated Net GHG Reductions and Net Costs or Savings Table RCII-1.1. Estimation of net GHG reductions and costs or savings. 2025 In-State GHG Reductions
2035 InState GHG Reductions
2016 - 2035 InState Cumulative Reductions
2016 – 2035 Cumulative Total Reductions
(TgCO2e)
(TgCO2e)
(TgCO2e)
(TgCO2e)
Net present value of societal costs, 2016 – 2035 ($2014, Millions)
(0.025)
(0.049)
(0.507)
(0.652)
($855)
Cost effectiveness ($2014/ tCO2e)
($1,311)
The estimated impacts of the implementation of this policy are presented in Table RCII-1.1. Promoting and regulating design, construction and implementation of major renovations of buildings with standards and low carbon footprint technologies, will reduce fuel consumption and hence reduce emissions of greenhouse gases. The in-state reductions in carbon dioxide equivalent emissions in 2035 would be 0.05 while the in-state cumulative decrease would achieve 0.507 tons between 2015 and 2035. Considering the Upstream Out-of-State GHG Impacts, the cumulative reductions would be of 0.652 tons between 2015 and 2035. The application of this policy with respect to the trend scenario would yield cumulative savings of 855 million pesos and savings per ton reduced in emissions of greenhouse gases would be of 1,311 pesos. Data Sources: American Council for an Energy-Efficient Economy, 2011. Advanced Energy Efficiency in Arkansas: Opportunities for a Clean Energy Economy. http://aceee.org/researchreport/e104. Coahuila state government, 2015. Energy Program of the state of Coahuila [Online]. Available: http://energiacoahuila.com/contents/view/programa_energetico_coahuila. Coahuila State Government, 2011. Rational use of energy for the state of Coahuila promotion Law. Official Gazette of the state of Coahuila. Published on July 13, 2007. Reform: June 25, 2011. [Online]. Federal Electricity Commission, 2013. Costs and reference parameters for formulating investment projects in the electric sector; Generation. Programming Branch, Federal Electricity Commission, Mexico City. Mario Molina Center (CMM) 2010. Regional and sectorial strategies to achieve sustainable development and low carbon in Mexico, First Stage.
65
Program available at: http://portal.infonavit.org.mx Nationally Accepted Mitigation Actions 67 German Development Cooperation 68 Program available at: http://www.conavi.gob.mx/viviendasustentable. 66
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Ministry of Energy, Energy Information System. Mexico: SENER. Available in: http://sie.energia.gob.mx/. National Institute of Ecology and Climate Change. 2012. Study of the impact of measures and energy efficiency policies in the areas of consumption, energy balance and emission scenarios of greenhouse gases in the short and medium term. Mexico. National Institute of Statistics and Geography, 2015. Economic Census 2014. Definitive results. Automated census information. Mexico: INEGI. National Institute of Statistics, Geography and Informatics, 2015. Statistical Yearbook 2014. Division Coahuila. Divisional management; Department of Research and Statistics. Mexico: INEGI. Quantification Methods: The analysis is divided into two sections, emissions and costs. In the first section, the usual situation of GHG emissions for the whole Residential, Commercial, Institutional and Industrial (RCII) sector are calculated considering fuel consumption emissions (NG- Natural Gas and Liquefied Petroleum Gas - LPG) and electricity. Then, emission reductions resulting from the implementation of the policy is calculated. Taking into account the reduction of emissions, costs were calculated, mainly the ones that improve energy efficiency (fuel and electricity). The total cost includes the cost of capital, the administrative cost, the total cost, the avoided costs, and the net costs or benefits of implementing the policy. a) Emission Section GHG emissions in the usual (baseline) situation Emissions in the usual situation for RCII Sector are calculated considering: • The total consumption of electricity and fuel sector and in MWh and TJ, respectively. This information is obtained from the GHG inventories and secondary sources. • CO2e emissions are calculated using emission factors for electricity and gas type. GHG emissions avoided with the implementation of the policy GHG emissions avoided with the policy are calculated as follows: • Reduction targets of the policy are distributed proportionately to get the same percentage of reduction for each year. • Using reduction values and respective emission factors, total GHG reductions resulting from the application of the policy are calculated. • This policy applies only to the construction of residential, commercial, institutional and industrial new properties and major renovations over existing buildings. b) Cost Section Capital Costs • Efficiency leveled costs in electricity and fuel consumption were calculated first. They are expressed in $ / MWh and $ / GJ. • The cost of capital in each year was obtained by multiplying the leveled cost for electricity saved in MWh and fuel (LPG or NG) saved in TJ. The value of these costs are expressed in millions of pesos ($ M). The Center for Climate Strategies
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Administrative costs Administrative costs are also included in the costs of energy efficiency of RCII-1 policy. It refers to the evaluation, marketing and dissemination of the policy, and are calculated as a percentage of capital costs. For this policy, the assumption of value is 15%. That percentage is multiplied by the leveled costs of capital for each year. Avoided costs The avoided costs are calculated as follows: • The price of electricity per forecasted sector ($/MWh) and forecasted fuel price ($/GJ) for each year suggested as a policy objective. • The predicted amount of electricity (MWh) and fuel saved annually in new construction. • The avoided costs are the amount of electricity saved each year, multiplied by the forecasted price of electricity in each sector, expressed in millions of pesos ($MM). The method for calculating the costs avoided in the case of fuel is performed in the same way, using the corresponding values for use and prices for each type of fuel. Total costs The total cost is calculated by adding administrative costs and capital costs per year until 2035. Net costs or benefits Net costs or benefits are calculated by subtracting the avoided costs from total costs for each year until 2035, to obtain the net cash flow for each period. Negative values represent savings for the consumer. Net present value Net present value is calculated using a real discount rate of 5% to estimate the overall discounted cost (benefit). Key Assumptions: • • •
• •
New buildings shall comply with the regulations. Investment may come from federal programs (in part) and bank financing or own resources of the construction industry or the independent builder. The average factor of direct emissions intensity of CO2 emissions avoided by electricity is 0.53 metric tons per megawatt-hour (tCO2e/MWh), and is derived from a forecast of consumption based on the carbon dioxide equivalent (CO2e) for each year, divided by predicted sales in MWh. This approach includes losses by transmission and distribution (T & D) in emission intensity. Electricity Transmission and distribution and loss rate (Electricity Transmission & Distribution and loss rate) = 10.7% RCI-1 includes only the frame construction and lighting. These uses are considered for the proportion of energy consumption by fuel type, which is shown in table RCII-1.2.
Table RCII-1.2. Proportion of fuel use per sector. Electricity Fuels
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Residential
Commercial
Industrial
54% 47%
27% 44%
18% 13%
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•
For the residential sector, end-use energy consumption in Coahuila’s climate zones 69, hot climate and the rest of Coahuila 70, is determined in the way shown in table RCII1.3. Table RCII-1.3. Proportion of fuel use per sector. Measures 18 SEER Central AC Heating 71 Lighting
• •
Hot Climate End use % of total 49% 47% 13%
Rest of Coahuila End use % of total 9% 47% 27%
For commercial, the end-use energy consumption is the same: lighting and HVAC and building shell at 26% each for both climate zones. Useful life estimates convert the leveled costs $/MWh and $/GJ back to initial capital costs. The estimates for RCII-1 are shown in table RCII-1.4:
Table RCII-1.4. Proportion of fuel use per sector. Estimated Useful Life-Summary
Electricity Residential Commercial 15.69 14.84 Weight Years 0.255 20 0.043 5.3 0.064 25 0.021 25 0.085 15 0.277 15 0.255 11 1.000 15.69 Weight Years 0.54 18 0.46 12 14.84 Weight Years 0.5 20 0.5 15 17.50 Weight Years 1 10 10.00 Weight Years 1 17 17.36 Weight Years 1 17.5 17.50
Years per Installed Measure Residential Electricity Insulated ductwork Infiltration reduction Roof insulation Efficient windows 18 SEER Central AC Efficient heat pump Lighting (CFL) Weighted Average Total Commercial Electricity HVAC & shell Lighting Weighted Average Total Industrial Electricity Duct/Pipe insulation Lighting Weighted Avg Total Residential Fuel Efficient gas furnace Weighted Avg Total Commercial Fuel HVAC Weighted Avg Total Industrial Fuel HVAC Weighted Avg Total
69
To locate the municipalities in the corresponding climatic zone, recorded temperatures (normal for 1981-2010 season) were used in the National Weather Service of the National Water Commission. 70 Municipalities included in “Rest of Coahuila” are: Castaños, Francisco I Madero, General Cepeda, Ocampo, Parras, Ramos Arizpe, Saltillo, Arteaga, San Buenaventura, Sierra Mojada and Viesca. The rest of municipalities are included in “Hot climate”. 71 There were no gas consumption statistics per municipality, thus there was no differentiation made.
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The weighted average levelized costs of energy efficiency are as follows ($MX): o Residential electricity hot climate $/MWh: $142.89 o Residential electricity rest of Coahuila $/MWh: $45.60 o Residential fuel $/GJ: $55.19 o Commercial electricity $/MWh: $1057 o Commercial fuel $/GJ: $289.66 o Industrial electricity $/MWh: $568.87 o Industrial fuel $/GJ: $44.90 • The assumed avoided electricity prices are as shown in table RCII-1.5: Table RCII-1.5. Avoided electricity prices. MX$/MWh 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
•
MX$/MWh
Electricity 2468 2455 1792 1882 1926 2007 2123 2205 2291 2371 2455
2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Electricity 2542 2655 2775 2778 2782 786 2790 2794 2798 2802 2807
The assumed avoided fuel prices are as shown in table RCII-1.6:
Table RCII-1.5. Avoided Fuel prices.
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Nat. Gas: Resident. 156.39 159.22 162.10 165.03 168.01 171.05 174.15 177.30 180.50 183.77 187.09
($/GJ) Nat. Gas: Indust. 80.92 85.77 84.40 91.27 100.21 110.80 125.12 135.06 145.69 155.34 165.60
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Nat. Gas: Comm/Inst. 79.67 81.11 82.57 84.07 85.59 87.14 88.71 90.32 91.95 93.61 95.31
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2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Nat. Gas: Resident. 190.48 193.92 197.43 201.00 204.64 208.34 212.11 215.94 219.85 223.83 227.87
($/GJ) Nat. Gas: Nat. Gas: Indust. Comm/Inst. 176.50 97.03 190.22 98.79 205.30 100.57 205.30 102.39 205.30 104.24 205.30 106.13 205.30 108.05 205.30 110.00 205.30 111.99 205.30 114.02 205.30 116.08
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Key Uncertainties • •
There is uncertainty regarding the willingness of the parties involved to cooperate in this policy’s implementation, specifically in the mechanisms that involve sanctions or use of economic resources. The implementation of building codes requires enforcement at 2 stages: the review of the architectural plans, as well as inspection of the building upon completion to ensure compliance. Both of these stages require a dedicated funding stream, typically financed by fees on building permits. Without these two components, the energy savings from building energy codes is likely to be smaller.
Additional Benefits and Costs • • •
Opportunity to increase regional production levels and create employment if integration of the energy efficient equipment and technology productive sector is achieved. Energy consumption cost savings for users. Positive impact on population health related to the mitigation of greenhouse gases causing lower rate of local pollutants.
Feasibility Issues Feasibility issues identified are the following: • • • • • • • • • • •
Economic barrier due to high upfront costs of energy efficient technology. Effectiveness of training to contractors or builders about building codes. Coordination amongst parties involved is required in order to remove obstacles for financing due to difficulty in obtaining credit in the private financial sector for developing energy efficient projects. Non-compliance with the energy efficiency rules if there are no sanctions. Resistance of the population to the sanctions for breach of the standards for energy efficiency in buildings. The population has no knowledge and is unaware of environmental problems. The electricity subsidy acts as a barrier in developing the implementation of energy efficiency strategies for consumers who do not have a high consumption. Lack of knowledge about the economic benefits that efficient equipment can provide in the consumption of energy, therefore in costs, especially in the high-consumption sector. Resistance to cultural changes in the population in favor of adopting practices that enhance energy efficiency due to lack of information and bad habits regarding energy waste. Tendency to prefer a conventional commercial approach by the perception of costs, risks and uncertainties regarding sustainable building. The absence of a globally accepted certification system for sustainable building practices.
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RCII-2. Increasing energy efficiency in new constructions- Equipment (Appliances, solar water heaters, flow water heaters). Policy Description Part of the emissions of GHG in the residential, commercial, institutional and industrial sectors (RCII) comes from the consumption of electricity to satisfy the needs of lighting, water heating, thermal conditioning and appliance operation. The goal of this policy is to increase energy efficiency in the RCII sectors by reducing the energetic demand, supporting a decrease in GHG emissions from generation, distribution and consumption of energy. This policy promotes the following measures specifically: • • • •
Use of solar energy through installation of solar water heaters in households, thus reducing consumption of liquefied petroleum gas (LPG), natural gas (NG) or electricity for water-heating purposes. Encourage the use of flow water heaters, with the purpose of reducing the use of LPG and NG. Acquisition of energy efficient appliances. Use of more energy efficient thermal conditioning equipment (e.g. minisplit inverter).
This policy is complementary to policies 2, 3 and 4 of the Energy Sector, which consider the installation of photovoltaic panels for in situ generation in residential, commercial, industrial and institutional buildings. Policy Design State Goals: • •
2025: Energy intensity reduction by 30% (electricity, LPG, NG) (GJ/building), in relation to 2015. 2035: Energy intensity reduction by 50% (electricity, LPG, NG) (GJ/building), in relation to 2015. o Convenience of establishing different goals per sector will be evaluated.
Timing: •
Planning of the Project begins in 2016. The first goal is achieved by 2025, and the second one in 2035. • Lineal reductions are assumed in the time frame: annual reduction of 3% through 2025, and 2.5% annually in the 2025-2035 period.
Parties Involved: Private sector: • Household owners • Builders/ Real estate developers • Architects • Technology suppliers • Banks and financial institutions The Center for Climate Strategies
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National Public Sector: • Ministry of Energy (SENER) o Planning and Energy Transition Subministry o Electricity Subministry • National Housing Fund Institute for Workers (INFONAVIT) • Housing Fund of the Institute of Social Security and Social Services for State Employees (FOVISSSTE) • Energy Regulatory Commission (CRE) • Federal Electricity Commission (CFE) • National Housing Commission(CONAVI) • National Commission for Energy Efficiency (CONUEE) • Trust Fund for Shared Risk (FIRCO) State Public Sector: • State Ministry of Environment • State Ministry of Economic Development, Competitiveness and Tourism. • Household State Commission GHG Causal Chain Direct GHG Reduction Indirect GHG Reduction Direct GHG Increase Indirect GHG Increase Quantification of GHG effects
Implementation Mechanisms Implementation mechanisms considered to support this policy are: Regulation The Center for Climate Strategies
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Link NMX regulations to the state law o NMX-AA-164-SCFI-2013 Sustainable building- Environmental criteria and minimum requirements. o NMX-ES-003-NORMEX-2008: This rule establishes minimum requirements for installation of thermal solar systems for water heating. Incentives • Establish economic and/or tax incentives for installation of energy efficiency systems. • Issue “building with sustainable equipment” certificates, when the construction complies to the equipment requirements mentioned in the policy design (lighting, solar power water heating, efficient appliances, etc.). Financing • Establish new legal-financial schemes regarding energy efficient equipment in order to facilitate access to higher efficiency alternatives. • Include a mandatory amount in mortgages for the acquisition of energy efficient equipment. • Support the use of “green credits” and “green mortgages”. • Promotion and training regarding the use of diverse existing programs and funds. • Establish mechanism to acquire existent national funds. Environmental Awareness • Establish a promotion policy to encourage the use of low environmental impact technologies, as well as the rational use of these, emphasizing on its benefits. Training/ Advice • Link construction permits to specialized advisory services for builders and/or independent builders regarding building with rational use of energy. • Design and development of training for institutions that offer financial schemes for the acquisition of energy efficient materials and technologies. Others: • Encourage the development of green supply chains. • Encourage participation of research centers and universities regarding design and building oriented to energy efficiency Related Policies/Programs in Place and Recent Actions State Level: • Adaptation and Mitigation to Climate Change Impacts in the state of Coahuila de Zaragoza Law (P.O. E. 25/Jan/ 2013). • Promotion of Rational Use of Energy for the State of Coahuila de Zaragoza Law (P.O. E. 13/July/ 2007). National Level: • National Energy Strategy 2013-2017. • National Strategy for Energy Transition and Sustainable Use of Energy. 2014. • Use of Renewable Energy Exploitation and Energy Transition Financing Law. • Sustainable Exploitation of Energy Law (LASE). • National Strategy for Sustainable Household
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Programs and recent actions: • Special Program for Exploitation of Renewable Energies. 72 • Green Mortgage Program, INFONAVIT. 73 • Solar Roof Household Program. 74 Part of the program covers the cost of solar heaters included in INFONAVIT’s green mortgages. 75 • NAMA 76 Mexican Sustainable Housing, CONAVI, SEMARNAT and GIZ 77. Promotion program for cost-effective, energy-efficient building models throughout the whole housing sector, particularly focusing on social housing, within the national mortgage market. 78 • Program for the Promotion of Solar Heaters in Mexico (Procalsol), initiative of the National Commission for Energy Efficiency (CONUEE) 79 Estimated Net GHG Reductions and Net Costs or Savings Table RCII-2.1. Estimation of net GHG reductions and costs or savings. 2025 In-State GHG Reductions
2035 InState GHG Reductions
2016 - 2035 InState Cumulative Reductions
2016 – 2035 Cumulative Total Reductions
(TgCO2e)
(TgCO2e)
(TgCO2e)
(0.014)
(0.029)
(0.294)
Cost effectiveness ($2014/ tCO2e)
(TgCO2e)
Net present value of societal costs, 2016 – 2035 ($2014, Millions)
(0.378)
($601)
($1,590)
The estimated impacts of the implementation of this policy are presented in Table RCII-2.1. Increasing energy efficiency in new constructions by installing efficient equipment, will reduce energy consumption and hence emissions of greenhouse gases. The In-State reduction in carbon dioxide equivalent emissions in 2035 would be 0.03 while the In-State cumulative decrease would achieve 0.29 tons between 2015 and 2035. Considering the Upstream Out-of-State GHG Impacts, the cumulative reductions would be of 0.38 tons between 2015 and 2035. The application of this policy with respect to the trend scenario would yield cumulative savings of 601 million pesos and savings per ton reduced in emissions of greenhouse gases would be of 1,590 pesos. Data Sources: American Council for an Energy-Efficient Economy, 2011. Advanced Energy Efficiency in Arkansas: Opportunities for a Clean Energy Economy. http://aceee.org/researchreport/e104. Coahuila state government, 2015. Energy Program of the state of Coahuila [Online]. Available: http://energiacoahuila.com/contents/view/programa_energetico_coahuila.
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Program available at http://www.energia.gob.mx/portal/Default.aspx?id=2686. Available at: http://portal.infonavit.org.mx 74 Support given by the German Technical Cooperation (GIZ) y el INFONAVIT, with financial support of the German Federal Environmental Ministry. 75 Available at: http://www.conuee.gob.mx/wb/CONAE/financiamiento_solar 76 Nationally Accepted Mitigation Actions 77 German Development Cooperation 78 Program available at: http://www.conavi.gob.mx/viviendasustentable. 79 Program available at: http://www.gtz.de/en/dokumente/sp-procasol-avances-y-plan-operativo.pdf. 73
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Coahuila state government, 2011. Rational use of energy for the state of Coahuila promotion Law. Official Gazette of the state of Coahuila. Published on July 13, 2007. Reform: June 25, 2011. [Online]. Federal Electricity Commission, 2013. Costs and reference parameters for formulating investment projects in the electric sector; Generation. Programming Branch, Federal Electricity Commission, Mexico City. Ministry of Energy, Energy Information System. Mexico: SENER. Available in: http://sie.energia.gob.mx/. National Institute of Ecology and Climate Change. 2012. Study of the impact of measures and energy efficiency policies in the areas of consumption, energy balance and emission scenarios of greenhouse gases in the short and medium term. Mexico. National Institute of Statistics, Geography and Informatics, 2015. Statistical Yearbook 2014. Division Coahuila. Divisional management; Department of Research and Statistics. Mexico: INEGI. National Institute of Statistics and Geography, 2015. Economic Census 2014. Definitive results. Automated census information. Mexico: INEGI. Quantification Methods: The analysis is divided into two sections, emissions and costs. In the first section, the usual situation of GHG emissions for the whole Residential, Commercial, Institutional and Industrial (RCII) sector are calculated considering fuel consumption emissions (NG- Natural Gas and Liquefied Petroleum Gas - LPG) and electricity. Then, emission reductions resulting from the implementation of the policy is calculated. Taking into account the reduction of emissions, costs were calculated, mainly the ones that improve energy efficiency (fuel and electricity). The total cost includes the cost of capital, the administrative cost, the total cost, the avoided costs, and the net costs or benefits of implementing the policy. a) Emission Section GHG emissions in the usual (baseline) situation Emissions in the usual situation for RCII Sector are calculated considering: • The total consumption of electricity and gas in MWh and TJ, respectively for each sector (Residential, Commercial, Industrial and Institutional). This information is obtained from the GHG inventories and secondary sources. • CO2e emissions are calculated using emission factors for electricity and gas. Total emissions expressed in CO2e tons are obtained multiplying each emission factor by energy consumption. GHG emissions avoided with the implementation of the policy GHG emissions avoided with the policy are calculated as follows: • Reduction targets of the policy are distributed proportionately to get the same percentage of reduction for each year. • Using reduction values and respective emission factors (NG, LPG, and Electricity), total GHG reductions resulting from the application of the policy are calculated. b) Cost Section The Center for Climate Strategies
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Capital Costs • Efficiency in electricity and fuel consumption leveled costs were calculated first. They are expressed in $ / MWh and $ / GJ. • The cost of capital in each year was obtained by multiplying the leveled cost for electricity saved in MWh by fuel (LPG or NG) saved in TJ. The value of these costs are expressed in millions of pesos ($ MM). Administrative costs Administrative costs are also included in the costs of energy efficiency of RCII-2 policy. It refers to the evaluation, marketing and dissemination of the policy, and are calculated as a percentage of capital costs. For this policy, the assumption of this value is 15%. That percentage is multiplied by the leveled costs of capital for each year. Avoided costs The avoided costs are calculated as follows: • The price of electricity per forecasted sector ($/MWh) and forecasted fuel price ($/GJ) for each year suggested as a policy objective. • The predicted amount of electricity (MWh) and fuel saved annually in new construction. • The avoided costs are the amount of electricity saved each year, multiplied by the forecasted price of electricity in each sector, expressed in millions of pesos ($MM). The method for calculating the costs avoided in the case of fuel is performed in the same way, using the corresponding values for use and prices for each type of fuel. Total costs The total cost is calculated by adding administrative costs and capital costs per year until 2035. Net costs or benefits Net costs or benefits are calculated by subtracting the avoided costs from total costs for each year until 2035, to obtain the net cash flow for each period. Negative values represent savings for the consumer. Net present value Net present value is calculated using a real discount rate of 5% to estimate the overall discounted cost (benefit). Key Assumptions: • •
Investment in the policy will come from consumers, federal programs, financial loans and the construction sector. The average factor of direct emissions intensity of CO2 emissions avoided by electricity is 0.53 metric tons per megawatt-hour (tCO2e/MWh), and is derived from a forecast of consumption based on the carbon dioxide equivalent (CO2e) for each year, divided by predicted sales in MWh. This approach includes losses by transmission and distribution (T & D) in emission intensity.
Key Uncertainties
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There is uncertainty regarding the willingness of the parties involved to cooperate in this policy’s implementation, specifically in the mechanisms that involve sanctions or use of economic resources. There is uncertainty about the willingness of local government funding to match the federal government grants. These funds are required to subsidize efficient appliances. The assumed avoided electricity and fuel prices are shown table ES-1.4 and table ES-1.5, respectively.
Additional Benefits and Costs • • •
Opportunity to increase regional production levels and create employment if integration of the energy efficient equipment and technology productive sector is achieved. Energy consumption cost savings for users associated with decrease in consumption. Positive impact on population health related to the mitigation of greenhouse gases causing lower rate of local pollutants.
Feasibility Issues Feasibility issues identified are the following: • • • • • • • • • • • •
Economic barrier due to high upfront costs of energy efficient technology. Getting efficient appliances to builders and contractors requires “market transformation” programs where utilities or governments work with retailers to increase the energy efficiency of the appliances that are available for purchase in the state. Coordination amongst parties involved is required in order to remove obstacles for financing due to difficulty in obtaining credit in the private financial sector for developing energy efficient projects. Non-compliance with the energy efficiency rules in buildings if there are no sanctions. Resistance of the population to the sanctions for breach of the standards for energy efficiency in buildings. Part of the population has no knowledge and is unaware of environmental problems and their consequences. The electricity subsidy acts as a barrier in developing the implementation of energy efficiency strategies for consumers who do not have a high consumption. Lack of knowledge about the economic benefits that efficient equipment can provide in the consumption of energy, therefore in costs, especially in the high-consumption sector. Resistance to cultural changes in the population in favor of adopting practices that enhance energy efficiency due to lack of information and bad habits regarding energy waste. Tendency to prefer a conventional commercial approach by the perception of costs, risks and uncertainties regarding acquisition of efficient equipment and technology. The absence of a globally accepted certification system for energy efficient practices in appliance uses. Lack of data regarding energy consumption in buildings.
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RCII-3. Increasing energy efficiency in existing constructions, excluding industrial sector - Equipment (Appliances, lighting, solar water heaters, flow water heaters). Policy Description In this policy, GHG mitigation strategy is oriented to satisfy energetic needs of existing buildings of RCII (Residential, Commercial, Institutional and Industrial) sector by replacing high-energydemanding technologies (electricity and gas) with more efficient ones. This policy specifically promotes the following measures: • Use of solar energy through installation of solar water heaters in households, thus reducing consumption of liquefied petroleum gas (LPG), natural gas (NG) or electricity for water heating purposes. • Use of flow water heaters, with the purpose of reducing the use of LPG and NG. • Acquisition of energy efficient appliances. • Replacement of incandescent bulbs for efficient lighting systems: halogen, compactfluorescent (LFC) and light-emitting diode lamps (LED). • Replacement of standard air-conditioning equipment for more energy efficient thermal conditioning equipment (e.g. minisplit inverter). Policy Design State Goals: • •
2025: Energy intensity reduction by 30% (electricity, LPG, NG) (GJ/building), in residential, commercial and institutional buildings in relation to 2015. 2035: Energy intensity reduction by 50% (electricity, LPG, NG) (GJ/building), in residential, commercial and institutional buildings in relation to 2015.
Timing: •
Planning of the Project begins in 2016. The first goal is achieved by 2025, and the second one in 2035. • Lineal reductions are assumed in the time frame: annual reduction of 3% through 2025, and 2.5% annually in the 2025-2035 period.
Parties Involved: Private sector: • Household owners • Banks and financial institutions National Public Sector: • Ministry of Energy (SENER) o Planning and Energy Transition Sub-ministry o Electricity Sub-ministry • National Housing Fund Institute for Workers (INFONAVIT) The Center for Climate Strategies
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Housing Fund of the Institute of Social Security and Social Services for State Employees (FOVISSSTE) Energy Regulatory Commission (CRE) Federal Electricity Commission (CFE) National Housing Commission(CONAVI) National Commission for Energy Efficiency (CONUEE) Trust Fund for Shared Risk (FIRCO) Trust for Energy Savings (FIDE)
State Public Sector: • State Ministry of Environment • State Ministry of Economic Development, Competitiveness and Tourism. • Household State Commission GHG Causal Chain Direct GHG Reduction Indirect GHG Reduction Direct GHG Increase Indirect GHG Increase Quantification of GHG effects
Implementation Mechanisms Implementation mechanisms considered to support this policy are: Regulation • Link NMX regulations to the state law o NMX-ES-003-NORMEX-2008: This rule establishes minimum requirements for installation of thermal solar systems for water heating. The Center for Climate Strategies
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Implement an energy use control program in the institutional sector that considers schedules, sustainable practices, presence sensors, etc.
Incentives • Establish economic and/or tax incentives for replacement of energy efficiency systems in order to facilitate access to high efficiency alternatives. • Issue “building with sustainable equipment” certificates, when the construction complies to the equipment requirements mentioned in the policy design (lighting, solar power water heating, efficient appliances, etc.). • Issue sustainable building certificates, when renovations comply to the design and construction requirements considered in this policy. Financing • Establish new legal-financial schemes regarding energy efficient equipment. • Include a mandatory amount in mortgages for the acquisition of energy efficient equipment. • Support the use of “green mortgages”. • Promotion and training regarding the use of diverse existing programs and funds. Environmental Awareness • Establish a promotion policy to encourage the use of low environmental impact technologies, as well as the rational use of those, emphasizing the benefits obtained. • Promotion and dissemination programs that benefit environmental sustainability. Training/ Advice/ Promotion • Design and development of training for institutions that offer financial schemes for the acquisition of energy efficient equipment and systems. • Implement exchange and recycling programs linking private sector (industrial and commercial) to create the market for this kind of products and the program is economically self-sustaining. • Encourage participation of research centers and universities regarding design and building of energy efficiency- oriented technologies. Recent Actions Related Policies/Programs in Place and Recent Actions State Level: • Adaptation and Mitigation to Climate Change Impacts in the state of Coahuila de Zaragoza Law (P.O. E. 25/Jan/ 2013). • Promotion of Rational Use of Energy for the State of Coahuila de Zaragoza Law (P.O. E. 13/July/ 2007). Programs and Recent Actions: • Coahuila State Energy Program 80. 80
This program aims to promote savings, efficiency and sustainability of energy in commercial, residential and industrial services, through defining strategies and lines of action that can be executed through projects and
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Green Office Program, Ministry of Environment. Beginning in 2013 sodium vapor luminaries have been replaced by energy-saving luminaries (Metro White) in Parras, Sabinas, San Pedro and Torreon. Up to February 2015 a total of 7264 luminaries had been replaced, generating a 3,050MW annual saving. Also 312 public sodium vapor luminaries were replaced for LED in Torreon, generating a 289.5MW annual saving.
National Level: • National Energy Strategy 2013-2017. • National Strategy for Energy Transition and Sustainable Use of Energy. 2014. • Use of Renewable Energy Exploitation and Energy Transition Financing Law. • Sustainable Exploitation of Energy Law (LASE). Programs and recent actions: • Special Program for Exploitation of Renewable Energies. 81 • Green Mortgage Program, INFONAVIT. 82 • Solar Roof Household Program. 83 Part of the program covers the cost of solar heaters included in INFONAVIT’s green mortgages. 84 • Program for the Promotion of Solar Heaters in Mexico (Procalsol), initiative of the National Commission for Energy Efficiency (CONUEE) 85 • Energy Transition and Sustainable Energy Exploitation Fund o Appliance Replacement Program for Energy Savings o Light Bulb Replacement Pilot Project for Energy Savings • Sustainable Light Program: Program oriented for domestic users of electric energy with basic domestic rate, excluding the high-consumption rate. It consisted in gradually replacing 45.8 million incandescent bulbs for fluorescent lamps (LFCA) nationwide. 86 • NAMA 87 Mexican Sustainable Housing (existing households), CONAVI, SEMARNAT and GIZ 88. Program for sustainable household renovation with a particular focus on low and medium income households. 89 Estimated Net GHG Reductions and Net Costs or Savings Table RCII-3.1. Estimation of net GHG reductions and costs or savings.
subprograms for economic development, society, energy culture, and research, technological development and innovation. Among research topics alternative sources of energy are included, which contribute to the mitigation of climate change. 81 Program available at: http://www.energia.gob.mx/portal/Default.aspx?id=2686. 82 Program available at: http://portal.infonavit.org.mx. 83 Support given by the German Technical Cooperation (GIZ) y el INFONAVIT, with financial support of the German Federal Environmental Ministry. 84 Available at: http://www.conuee.gob.mx/wb/CONAE/financiamiento_solar. 85 Program available at: http://www.gtz.de/en/dokumente/sp-procasol-avances-y-plan-operativo.pdf. 86 Program available at: http://www.fide.org.mx. 87 Nationally Accepted Mitigation Actions 88 German Development Cooperation 89 Program available at: http://www.conavi.gob.mx/viviendasustentable.
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2025 In-State GHG Reductions
2035 InState GHG Reductions
2016 - 2035 InState Cumulative Reductions
2016 – 2035 Cumulative Total Reductions
(TgCO2e)
(TgCO2e)
(TgCO2e)
(0.720)
(1.200)
(13.800)
Cost effectiveness ($2014/ tCO2e)
(TgCO2e)
Net present value of societal costs, 2016 – 2035 ($2014, Millions)
(17.624)
($21,262)
($1,206)
The estimated impacts of the implementation of this policy are presented in Table RCII-3.1. Increasing energy efficiency in existing constructions by installing efficient equipment, will reduce energy consumption and hence emissions of greenhouse gases. The In-State reduction in carbon dioxide equivalent emissions in 2035 would be 1.20 while the In-State cumulative decrease would achieve 13.80 tons between 2015 and 2035. Considering the Upstream Out-of-State GHG Impacts, the cumulative reductions would be of 17.62 tons between 2015 and 2035. The application of this policy with respect to the trend scenario would yield cumulative savings of 21,262 million pesos and savings per ton reduced in emissions of greenhouse gases would be of 1,206 pesos. Data Sources: American Council for an Energy-Efficient Economy, 2011. Advanced Energy Efficiency in Arkansas: Opportunities for a Clean Energy Economy. http://aceee.org/researchreport/e104. Coahuila state government, 2015. Energy Program of the state of Coahuila [Online]. Available: http://energiacoahuila.com/contents/view/programa_energetico_coahuila. Coahuila state government, 2011. Rational use of energy for the state of Coahuila promotion Law. Official Gazette of the state of Coahuila. Published on July 13, 2007. Reform: June 25, 2011. [Online]. Federal Electricity Commission, 2013. Costs and reference parameters for formulating investment projects in the electric sector; Generation. Programming Branch, Federal Electricity Commission, Mexico City. Ministry of Energy, Energy Information System. Mexico: SENER. Available in: http://sie.energia.gob.mx/. National Institute of Ecology and Climate Change. 2012. Study of the impact of measures and energy efficiency policies in the areas of consumption, energy balance and emission scenarios of greenhouse gases in the short and medium term. Mexico. National Institute of Statistics, Geography and Informatics, 2015. Statistical Yearbook 2014. Division Coahuila. Divisional management; Department of Research and Statistics. Mexico: INEGI. National Institute of Statistics and Geography, 2015. Economic Census 2014. Definitive results. Automated census information. Mexico: INEGI. Quantification Methods: The analysis is divided into two sections, emissions and costs. In the first section, the usual situation of GHG emissions for the Residential, Commercial, and Institutional (RCII) sectors is calculated considering fuel consumption emissions (NG- Natural Gas and Liquefied Petroleum Gas - LPG) and electricity. Then, emission reductions resulting from the implementation of the policy is calculated. Taking into account the reduction of emissions, costs were calculated, The Center for Climate Strategies
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mainly the ones that improve energy efficiency (fuel and electricity). The total cost includes the cost of capital, the administrative cost, the total cost, the avoided costs, and the net costs or benefits of implementing the policy. a) Emission Section GHG emissions in the usual (baseline) situation Emissions in the usual situation for Residential, Commercial, and Institutional Sectors are calculated considering: • The total consumption of electricity and gas in MWh and TJ, respectively for each sector. This information is obtained from the GHG inventories and secondary sources. • CO2e emissions are calculated using emission factors for electricity and fuel use. Total emissions expressed in CO2e tons are obtained multiplying each emission factor by energy and/or fuel consumption. GHG emissions avoided with the implementation of the policy GHG emissions avoided with the policy are calculated as follows: • Reduction targets of the policy are distributed proportionately to get the same percentage of reduction for each year. • Using reduction values and respective emission factors (NG, LPG, and Electricity), total GHG reductions resulting from the application of the policy are calculated. b) Cost Section Capital Costs • To calculate capital cost, efficiency in electricity and fuel consumption leveled costs were calculated first. They are expressed in $ / MWh and $ / GJ, respectively. • The cost of capital in each year was obtained by multiplying the leveled cost for electricity saved in MWh by fuel (LPG or NG) saved in TJ. The value of these costs are expressed in millions of pesos ($ MM). Administrative costs Administrative costs are also included in the costs of energy efficiency of RCII-3 policy. It refers to the evaluation, marketing and dissemination of the policy, and are calculated as follows: • Administrative costs are a percentage of capital costs. For this policy, the assumption of this value is 15%. That percentage is multiplied by the leveled costs of capital for each year. Avoided costs The avoided costs are calculated as follows: • The forecasted price of electricity ($/MWh) and forecasted fuel price ($/GJ) for each year suggested as a policy objective. • The predicted amount of electricity (MWh) and fuel saved annually. • The avoided costs are estimated multiplying the amount of electricity saved each year, by the forecasted price of electricity and fuel, expressed in millions of pesos ($MM). Total costs Total costs are calculated in the following way: • Administrative costs and capital costs are added each year until 2035. The Center for Climate Strategies
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Net costs or benefits Net costs or benefits are calculated by subtracting the avoided costs from total costs for each year until 2035, to obtain the net cash flow for each period. Negative values represent savings for the consumer. Net present value Net present value is calculated using a real discount rate of 5% to estimate the overall discounted cost (benefit). Key Assumptions: • • •
The highest percentage of investment in the policy will come from consumers. The rest of investment in the policy will come from federal programs, specifically for lighting. The average factor of direct emissions intensity of CO2 emissions avoided by electricity is 0.53 metric tons per megawatt-hour (tCO2e/MWh), and is derived from a forecast of consumption based on the carbon dioxide equivalent (CO2e) for each year, divided by predicted sales in MWh. This approach includes losses by transmission and distribution (T & D) in emission intensity.
Key Uncertainties • • • •
There is uncertainty regarding the willingness of the parties involved to cooperate in this policy’s implementation, specifically in the mechanisms that involve sanctions or use of economic resources. There is uncertainty about the willingness of local government funding to match the federal government grants. These funds are required to subsidize efficient appliances. The landlord-tenant market failure can make building retrofits more difficult as landlords typically pay for efficient equipment, but renters pay the utility bills. The assumed avoided electricity and fuel prices are shown table ES-1.4. and table ES-1.5, respectively.
Additional Benefits and Costs • • •
Opportunity to increase regional production levels and create employment if integration of the energy efficient equipment and technology productive sector is achieved. Energy consumption cost savings associated to lower power consumption. Positive impact on population health related to the mitigation of greenhouse gases causing lower rate of local pollutants.
Feasibility Issues Feasibility issues identified are the following: • •
Economic barrier due to high upfront costs of energy efficient technology. Getting access to rental properties to retrofit them is problematic because the of coordination issues between landlords and tenants.
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Coordination amongst parties involved is required in order to remove obstacles for financing due to difficulty in obtaining credit in the private financial sector for developing energy efficient projects. Non-compliance with the energy efficiency rules in buildings if there are no sanctions. Resistance of the population to the sanctions for breach of the standards for energy efficiency in buildings. Part of the population has no knowledge and is unaware of environmental problems and their consequences. The electricity subsidy acts as a barrier in developing the implementation of energy efficiency strategies for consumers who do not have a high consumption. Lack of knowledge about the economic benefits that efficient equipment can provide in the consumption of energy, therefore in costs, especially in the high-consumption sector. Resistance to cultural changes in the population in favor of adopting practices that enhance energy efficiency due to lack of information and bad habits regarding energy waste. Tendency to prefer a conventional commercial approach by the perception of costs, risks and uncertainties regarding acquisition of efficient equipment and technology. The absence of a globally accepted certification system for energy efficient practices. Lack of data regarding energy consumption in buildings.
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RCII-4. Stimulating energy efficiency in the industrial sector with energy efficient equipment and industrial processes’ improvement: industrial sector. Policy Description The Special Climate Change Program (PECC, 2014) anticipates that for 2020, the industrial sector will be the third GHG emission generator at a national level. The main polluting sources of this sector come from the consumption of fossil fuels during manufacturing processes, especially in the iron, steel and cement industries. Due to the sectorial structure of economy in Coahuila, where the machinery and equipment production manufacturing sector stands out, in the iron and steel industries, as well as the metalmechanic, industry in the state generates 29% of the total emissions of GHG. The purpose of this policy is to implement regulations and incentives to decrease potential global warming through greater energy efficiency of the industrial sector, through improvements in operation processes, replacement and acquisition of low-energy consuming machinery and equipment, as well as replacement of high-energy demanding technologies for industrial operation (electricity and gas) for more efficient technologies (e.g. replacement of incandescent luminaries for efficient lighting systems: halogen, fluorescent-compact (LFC), and (LED) lamps; solar water heaters, etc. Policy Design State Goals:
• •
2025: Energy intensity reduction by 15% (kJ/$GDP) (fuels and electricity), in relation to 2015. 2035: Energy intensity reduction by 25% (kJ/$GDP) (fuels and electricity), in relation to 2015.
Timing: •
Planning of the Project begins in 2016. The first goal is achieved by 2025, and the second one in 2035, considering a linear reduction in time. • Lineal reductions are assumed in the time frame: annual reduction of 1.5% through 2025, and 1% annually in the 2025-2035 period.
Parties Involved: Private Sector: • Entrepreneurs and Plant Directors • Banks and other Financial Institutions • Machinery and technology suppliers National Public Sector: • Ministry of Energy (SENER) o Planning and Energy Transition Sub-ministry The Center for Climate Strategies
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• • • • • • •
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o Electricity Subministry Ministry of Environment and Natural Resources (SEMARNAT) Federal Attorney's Office of Environmental Protection (PROFEPA) Energy Regulatory Commission (CRE) Federal Electricity Commission (CFE) National Commission for Energy Efficiency (CONUEE) Trust Fund for Shared Risk (FIRCO) Trust for Energy Savings (FIDE)
State Public Sector: • State Ministry of Environment • State Ministry of Economic Development, Competitiveness and Tourism. • Intersecretarial Climate Change Commission • State Attorney's Office of Environmental Protection GHG Causal Chain Direct GHG Reduction Indirect GHG Reduction Direct GHG Increase Indirect GHG Increase Quantification of GHG effects
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Implementation Mechanisms Implementation mechanisms considered for supporting this policy are: Regulation • Establish regulations relating to energy efficiency requirements for industrial motors. • Make waste management plan compulsory for every Company. Incentives • Establish economic and/or tax incentives for replacement of energetically inefficient equipment and machinery for higher efficiency systems. Financing • Preferential financing: A Business Eco-Credit provided by the state’s trust to invest in energy savings. • Take the best advantages of financing options of existing trusts (e.g. FIDE) • Promotion and training on the use of diverse existing programs and funds. Environmental Awareness • Implement a program that promotes control of energy use in the industrial sector that considers schedules, sustainable practices, presence sensors, etc. Training/ Advice • Design and development of training for institutions that offer financial schemes for the acquisition of energy efficiency equipment and systems. • Implement national programs that are oriented to sustainable production systems, amongst which is SEMARNAT’s Special Sustainable Production and Consumption Program (PEPyCS). • Link operation permits to specialized advisory services regarding benefits and financial options for energetically inefficient machinery/ equipment replacement, and also better practices for better energy efficiency in processes. Others • Encourage participation of research centers and universities regarding design and building of energy efficiency- oriented technologies, as well as design and implementation in process improvements. Related Policies/Programs in Place and Recent Actions State Level: • Adaptation and Mitigation to Climate Change Impacts in the state of Coahuila de Zaragoza Law (P.O. E. 25/Jan/ 2013). • Promotion of Rational Use of Energy for the State of Coahuila de Zaragoza Law (P.O. E. 13/July/ 2007). National Level: • National Energy Strategy 2013-2017. • National Strategy for Energy Transition and Sustainable Use of Energy. 2014. • Use of Renewable Energy Exploitation and Energy Transition Financing Law. • Sustainable Exploitation of Energy Law (LASE). Programs and recent actions: The Center for Climate Strategies
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Special Program for Exploitation of Renewable Energies. 90 Program for the Promotion of Solar Heaters in Mexico (Procalsol), initiative of the National Commission for Energy Efficiency (CONUEE) 91 Energy Transition and Sustainable Energy Exploitation Fund Special Sustainable Production and Consumption Program (PEPyCS) 2014-2018 92. Environment and Natural Resources Sectorial Program 2013-2018 (PROMARNAT) 93.
Estimated Net GHG Reductions and Net Costs or Savings Table RCII-4.1. Estimation of net GHG reductions and costs or savings. 2025 In-State GHG Reductions
2035 InState GHG Reductions
2016 - 2035 InState Cumulative Reductions
2016 – 2035 Cumulative Total Reductions
(TgCO2e)
(TgCO2e)
(TgCO2e)
(0.18)
(0.54)
(4.3)
Cost effectiveness ($2014/ tCO2e)
(TgCO2e)
Net present value of societal costs, 2016 – 2035 ($2014, Millions)
(5.5)
($7,200)
($1,307)
The estimated impacts of the implementation of this policy are presented in Table RCII-4.1. Stimulating energy efficiency in the industrial sector with energy efficient equipment and industrial processes’ improvement, will reduce energy consumption and hence emissions of greenhouse gases. The In-State reduction in carbon dioxide equivalent emissions in 2035 would be 0.54, while the In-State cumulative decrease would achieve 4.3 tons between 2015 and 2035. Considering the Upstream Out-of-State GHG Impacts, the cumulative reductions would be of 5.5 tons between 2015 and 2035. The application of this policy with respect to the trend scenario would yield cumulative savings of 7,200 million pesos and savings per ton reduced in emissions of greenhouse gases would be of 1,307 pesos. Data Sources: American Council for an Energy-Efficient Economy, 2011. Advanced Energy Efficiency in Arkansas: Opportunities for a Clean Energy Economy. http://aceee.org/researchreport/e104. Coahuila state government, 2011. Rational use of energy for the state of Coahuila promotion Law. Official Gazette of the state of Coahuila. Published on July 13, 2007. Reform: June 25, 2011. [Online]. Federal Electricity Commission, 2013. Costs and reference parameters for formulating investment projects in the electric sector; Generation. Programming Branch, Federal Electricity Commission, Mexico City. Ministry of Energy, Energy Information System. Mexico: SENER. Available in: http://sie.energia.gob.mx/. National Institute of Ecology and Climate Change. 2012. Study of the impact of measures and energy efficiency policies in the areas of consumption, energy balance and emission scenarios of greenhouse gases in the short and medium term. Mexico. 90
Program available at: http://www.energia.gob.mx/portal/Default.aspx?id=2686. Program available at: http://www.gtz.de/en/dokumente/sp-procasol-avances-y-plan-operativo.pdf. 92 Program available at: http://www.dof.gob.mx/nota_detalle.php?codigo=5342495&fecha=28/04/2014. 93 Program available at: http://www.dof.gob.mx/nota_detalle.php?codigo=5326214&fecha=12/12/2013. 91
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National Institute of Statistics, Geography and Informatics, 2015. Statistical Yearbook 2014. Division Coahuila. Divisional management; Department of Research and Statistics. Mexico: INEGI. National Institute of Statistics and Geography, 2014 Economic Census 2015. Definitive results. Automated census information. Mexico: INEGI. Quantification Methods: The analysis is divided into two sections, emissions and costs. In the first section, the usual situation of GHG emissions for the industrial sector is calculated considering fuel consumption emissions (NG- Natural Gas and Liquefied Petroleum Gas - LPG) and electricity. Then, emission reductions resulting from the implementation of the policy is calculated. Taking into account the reduction of emissions, costs were calculated, mainly the ones that improve energy efficiency (fuel and electricity). The total cost includes the cost of capital, the administrative cost, the total cost, the avoided costs, and the net costs or benefits of implementing the policy. a) Emission Section GHG emissions in the usual (baseline) situation Emissions in the usual situation for the Industrial Sector are calculated considering: • The total consumption of electricity in MWh and fuels (TJ), respectively for each sector. This information is obtained from the GHG inventories and secondary sources. • CO2e emissions are calculated using emission factors for electricity and fuel use. Total emissions expressed in CO2e tons are obtained multiplying each emission factor by energy and/or fuel consumption. GHG emissions avoided with the implementation of the policy GHG emissions avoided with the policy are calculated as follows: • Reduction targets of the policy are distributed proportionately to get the same percentage of reduction for each year. • Using reduction values and respective emission factors (NG, LPG, and Electricity), total GHG reductions resulting from the application of the policy are calculated. b) Cost Section Capital Costs • To calculate capital cost, efficiency in electricity and fuel consumption levelized costs were calculated first. They are expressed in $ / MWh and $ / GJ, respectively. • The cost of capital in each year was obtained by multiplying the levelized cost for electricity saved in MWh by fuel (LPG or NG) saved in TJ. The value of these costs are expressed in millions of pesos ($ MM). Administrative costs Administrative costs are also included in the costs of energy efficiency of RCII-4 policy. It refers to the evaluation, marketing and dissemination of the policy, and are calculated as follows: • Administrative costs are a percentage of capital costs. For this policy, the assumption of this value is 15%. That percentage is multiplied by the levelized costs of capital for each year. The Center for Climate Strategies
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Avoided costs The avoided costs are calculated as follows: • The forecasted price of electricity ($/MWh) and forecasted fuel price ($/GJ) for each year suggested as a policy objective. • The predicted amount of electricity (MWh) and fuel saved annually. • The avoided costs are estimated multiplying the amount of electricity saved each year, by the forecasted price of electricity and fuel, expressed in millions of pesos ($MM). Total costs Total costs are calculated in the following way: • Administrative costs and capital costs are added each year until 2035. Net costs or benefits Net costs or benefits are calculated by subtracting the avoided costs from total costs for each year until 2035, to obtain the net cash flow for each period. Negative values represent savings for the consumer. Net present value Net present value is calculated using a real discount rate of 5% to estimate the overall discounted cost (benefit). Key Assumptions: • • •
•
The highest percentage of investment in the policy will come from industry. The rest of investment in the policy will come from federal programs. The average factor of direct emissions intensity of CO2 emissions avoided by electricity is 0.53 metric tons per megawatt-hour (tCO2e/MWh), and is derived from a forecast of consumption based on the carbon dioxide equivalent (CO2e) for each year, divided by predicted sales in MWh. This approach includes losses by transmission and distribution (T & D) in emission intensity. We assume that the 15% (2025) and 25% (2035) targeted reduction in energy use is discounted by the growth in industrial sector output. The following table (RCII.4.2) provides the growth rate in the industrial sector. Table RCII-4.2. Annual growth rate in industrial sector. Industrial Sector Year
Millions of pesos
2013
223,166
2.66%
2014
229,104
0.0%
2015
235,200
2.7%
2017
241,457
2.7%
2018
247,882
2.7%
2019
254,477
2.7%
2020
261,248
2.7%
2021
268,198
2.7%
2022
275,334
2.7%
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• • • •
Year
Millions of pesos
Annual growth rate
2023
282,660
2.7%
2024
290,180
2.7%
2025
297,901
2.7%
2026
305,827
2.7%
2027
313,964
2.7%
2028
322,317
2.7%
2029
330,893
2.7%
2030
339,697
2.7%
2031
348,735
2.7%
2032
358,013
2.7%
2033
367,539
2.7%
2034
377,317
2.7%
2035
387,356
2.7%
Since RCII-1 covered HVAC and building structure, RCII-4 only applies to energy used in industrial processes and equipment. Estimated energy consumption for industrial processes is 83% for electricity and 87% for fuels. Rate of loss for the transmission and distribution of electricity = 10.7% The percentages of end use of electricity are estimated as: o Efficient motors: 72% o Sensors, controls and other electrical components: 28% Percentages end use of fuels are estimated as: o Water heaters: 67% o Process heat: 33%
Weighted average leveled capital costs and operations and manufacturing costs (O&M) for RCII4 are estimated as shown in table RCII-4.3: Table RCII-4.3. Weighted Average Capital & O&M Cost. Weighted Average Capital & O&M Cost of Efficiency Measures All Years
Industrial Electric $/MWh Hot Climate $ 349.00
Rest of Coahuila $ 349.00
Industrial Fuel $/GJ Hot Climate $ 45.20
Rest of Coahuila $ 45.20
Useful life estimates convert the leveled costs $/MWh and $/GJ back to initial capital costs. The estimates for RCII-4 are:
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Table RCII-4.4. Estimated useful life. Industrial
Estimated Useful LifeSummary
Electricity
Years per Installed Measure (weighted average) =
13.88
Industrial Electricity
Weight
Fuel 13.06 Years
Motors
0.721
13
Other electrical
0.279
15
Weighted Average Total
13.88
Industrial Fuel
Weight
Years
Process Heat
0.516
14
Boiler Use
0.258
11.75
Other fuel
0.226
12
Weighted Average Total
13.06
Key Uncertainties • • •
There is uncertainty regarding the willingness of the parties involved to cooperate in this policy’s implementation, specifically in the mechanisms that involve sanctions or use of economic resources. There is uncertainty about the actual energy consumption in the industrial sector as a result of the operation as well as their existing energy efficiency levels. The assumed avoided electricity and fuel prices are shown table ES-1.4. and table ES-1.5, respectively.
Additional Benefits and Costs • • • • •
Opportunity to increase regional production levels and create employment if integration of the energy efficient equipment and technology productive sector is achieved. Cost savings in production or sales for the commercial/ industrial sector. Greater competitiveness by reducing production costs or sales in the commercial and industrial sectors. Greater productive efficiency by improving processes in industrial/ commercial sectors. Positive impact on population health related to the mitigation of greenhouse gases causing lower rate of local pollutants.
Feasibility Issues Feasibility issues identified are the following: • • •
Economic barrier due to high upfront costs of energy efficient technology. Industrial energy efficiency programs require coordination between gas, electric, and water utilities, so that the audits costs can be split amongst the different resource uses. Industrial customers are also sensitive to the payback period of the energy efficiency investment, so incentives that reduce initial capital costs are critical.
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Having strong engineers and technical staff involved in the industrial efficiency program will help increase industry participation. Coordination amongst parties involved is required in order to remove obstacles for financing due to difficulty in obtaining credit in the private financial sector for developing energy efficient projects. Non-compliance with the energy efficiency rules in buildings if there are no sanctions. Resistance of the entrepreneurial sector to the sanctions for breach of the standards for energy efficiency in buildings. Resistance to cultural changes in the population in favor of adopting practices that enhance energy efficiency due to lack of information and bad habits regarding energy waste. Lack of knowledge about the economic benefits that efficient equipment can provide in the consumption of energy, therefore in energy consumption costs. Tendency to prefer a conventional production approach by the perception of costs, risks and uncertainties regarding acquisition of efficient equipment and technology. The absence of a globally accepted certification system for energy efficient practices.
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Appendix E Transportation and Land Use Policy Recommendations
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2035 Tg (0.12) (0.35)
(1.7) (5.6)
February 2016
App. E - TLU Policy Recommendations
$3,004 ($4,549)
$/tCO2e Notes ($1,776) ($5,390)
Cost Effectiveness
Base Year 2014$
"Stand-Alone" Analysis Total GHG Impacts
$Million ($3,025) ($30,338)
NPV 2015-2035
TgCO2e (1.7) (5.6)
$3.7 ($33,359)
2035 Cumulative
TgCO2e (1.3) (4.4)
(0.0012) (7.3)
2035 Cumulative
(0.00095) (5.7)
(1.3) (4.3)
(0.0012) (7.3)
2035 Cumulative TgCO2e
(0.00095) (5.6)
2035 Cumulative TgCO2e
In-State GHG Impacts
(0.12) (0.35)
Annual CO2e Impacts 2025 Tg 2035 Tg (0.068) (0.19)
(0.000051) (0.000088) (0.26) (0.47)
E-2
$3.7 ($33,222)
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NPV Cost 2015-2035 Effectiveness $Million $/tCO2e Description of Interaction or Overlap ($3,025) ($1,776) Some overlap between land use improvements in ($30,201) ($5,428) TLU-1 and gasoline fuel consumption in TLU-2. This overlap reduces the emissions savings from gasoline $3,004 from TLU-2. ($4,571)
Intra-Sector Overlap Adjusted Results Total GHG Impacts Base Year 2014$
Intra-Sector Interactions & Overlaps Adjustments
(0.000051) (0.000088) (0.26) (0.48)
2025 Tg (0.068) (0.19)
Annual CO2e Impacts
In-State GHG Impacts
Transportation and Land Use Sector - Summary of Benefits and Costs (2016 - 2035)
Coahuila SCAP Phase 2 Report
Policy ID Policy Title Urban Density Index TLU-1. Sustainable Urban Mobility TLU-2. Energy Efficient Government Fleet Totals TLU-3.
Total After Intra-Sector
Policy ID Policy Name TLU-1. Urban Density Index TLU-2. Sustainable Urban Mobility Energy Efficient Government Fleet TLU-3.
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Transport and Land Use Sector Overview The tables above provide a summary of the microeconomic analysis of CO CAP policies in the Transportation and Land Use (TLU) sector. The first table provides a summary of results on a “stand-alone” basis, meaning that each policy was analyzed separately against baseline (business as usual or BAU) conditions (i.e. without consideration of influences from other CAP policies). Details on the analysis of each policy are provided in each of the Policy Option Documents (PODs) prepared by the SCAP PE members that follow within this appendix. The “Stand-Alone” results provide the annual GHG reductions for 2025 and 2035 in teragrams (Tg) of carbon dioxide equivalent reductions (CO2e), as well as the cumulative reductions through 2035 (1 Tg is equal to 1 million metric tons). The reductions shown are just those that have been estimated to occur within the State. Additional GHG reductions, typically those associated with upstream emissions in the supply of fuels or materials, have also been estimated and are reported under the column for total GHG impacts. Also reported in the stand-alone results is the net present value (NPV) of societal costs/savings for each policy. These are the net direct costs of implementing each policy reported in 2014 pesos. The cost effectiveness (CE) estimated for each policy is also provided. Cost effectiveness is a common metric that denotes the cost/savings for reducing each metric ton (t) of emissions. Note that the CE estimates use the total emission reductions for the policy (i.e. those occurring both within and outside of the State). Implementation of all proposed policy options could result in a reduction of 7.3 million tons of CO2 equivalent, and generate cumulative cost savings of $33,222 million pesos. The combined cost-effectiveness of the sector was estimates at -$4,571 pesos per CO2 ton avoided. Intra-sector overlaps and other adjustments It is not expected that TLU-3 will interact with other policies in the sector given that the policy has an effect on a very narrow segment of the vehicle fleet in the state of Coahuila, namely, the government vehicle fleet, which is not directly addressed by TLU-2 or TLU1. Some overlap is expected between TLU-1 and TLU-2 because greater urban densification in TLU-1 is likely to induce less passenger vehicle travel, which will affect the mode shift from passenger vehicle travel to public bus transit. For that reason, the cost and emission savings from avoided gasoline consumption in TLU-2 are adjusted downward to account for less overall vehicle travel. This overlap increases over the policy period; by 2030, TLU-2 gasoline reductions are adjusted downward by a factor of 1.9%, which is equivalent to the reduction in vehicle-kilometers traveled achieved by TLU-1.
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TLU-1. Increase urban density indexes to reduce average distances in urban transfers. Policy Description. The critical variable of efficient urban mobility is not the speed of transfers, but the average distance traveled. During the last fifty years, as in the major metropolitan areas of the country, in the state’s major cities, urban density has been drastically declining (in terms of inhabitants per hectare). This policy would seek to contain first and then reverse the trend, allowing the creation of more compact cities in which the average distance of daily trips is reduced. It is important to note that greater urban density does not require a substantial increase in the height of buildings, as there are important land reserves in urbanized areas of many cities (e.g., in the state capital, vacant lots account for nearly a quarter of the surface area of Saltillo). Raising property tax in undeveloped areas would raise the cost of land speculation and thus encourage the practice of urban infill to meet the needs of a growing population. Additionally, local zoning should allow mix use developments, conducive to reducing urban trip distances. Policy Design State Goals: 1. Increase the urban density index (inhabitants/ hectare) of the major metropolitan zones in the state (variations regarding 2015 levels): a) Saltillo-Arteaga-Ramos Arizpe. 2025: +23.7 % 2035: +36 % b) La Laguna. 2025: +20.3 % 2035: +30.6 % c) Monclova-Frontera. 2025: +16.8 % 2035: +25.4 % d) Piedras Negras-Nava. 2025: +17 % 2035: +27.3 % Timing: 2016-2035. Parties Involved: Federal Government. State Government. Local Governments of the state’s major metropolitan areas. The Center for Climate Strategies
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Real Estate Developers. GHG Causal Chain
Direct GHG Reduction Indirect GHG Reduction Direct GHG Increase Indirect GHG Increase Quantification of GHG effects
Implementation Mechanisms Establish two quantifiable goals in the Master Plans for Urban Development of the major
metropolitan areas of the state: a) total urbanized area (hectares), and b) urban density (number of inhabitants per hectare). Align the granting of water services with these goals. Limit issuance of building permits to the available urban area. Simplify, respect and enforce the legal framework related to urban development and land use. Raise the property tax rate on vacant lots within city limits, except for existing reserves in the properly authorized industrial parks. Compile an inventory of available urban areas for mixed development projects. The Center for Climate Strategies
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Integrate land reserves in urbanized areas for mixed development projects. Remit from property taxes the cost of property improvements having a public benefit, such as erecting fences, building sidewalks and conducting street cleaning. Generate tax incentives that favor mixed development projects in urban areas. Add or expand zoning regulations that favor mixed-use development in order to shorten the distance of the daily vehicle movements between home and work, educational, commercial and entertainment places. Launch dissemination campaigns for public education of Urban Development Regulations. Establish a transparent mechanism for citizen complaints and the corresponding attention from the Authorities. Related Policies/Programs in Place and Recent Actions State Level: Law of sustainable mobility. Law of human settlements and urban development. LEGEEPA (General Law on ecological balance and environmental protection) Federal and State. State urban development program 2011-2017. Urban development program of the major metropolitan areas of the state of Coahuila. National Level: National Urban Development Program 2014-2018. Special Climate Change Program 2014-2018. General Law on Climate Change Estimated Net GHG Reductions and Net Costs or Savings Table TLU-1.1 Estimated net GHG reductions and costs or savings. In-State GHG Impacts Annual CO2e Impacts Policy ID Policy Title TLU-1. Urban Density Index
2025 Tg (0.068)
2035 Tg (0.12)
2035 Cumulative TgCO2e (1.3)
Total GHG Impacts 2035 Cumulative TgCO2e (1.7)
Base Year 2014$ NPV 2015-2035 $Million ($3,025)
Cost Effectiveness $/tCO2e ($1,776)
The estimated effects from implementation of this policy are presented in Table TLU-1. Higher urban density induces a gradual reduction of average distances traveled in daily trips, thus fuel consumption is reduced and so GHG emissions. The average annual reduction in emissions of carbon dioxide equivalent is estimated at 0.07 tons between 2015 and 2025. Reductions are expected to increase to 0.12 during the period from 2025 to 2035. The cumulative total by 2035 is 1.7 tons. The implementation of this policy with respect to the projected scenario yields The Center for Climate Strategies
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cumulative savings of $3,025 million pesos; overall cost-effectiveness was assessed at -$1,776 pesos per ton of carbon dioxide equivalent. Data Sources National Institute of Statistics and Geography (INEGI). Digital map, version 6.1: http://www.inegi.org.mx/geo/contenidos/mapadigital/ National Population Council (CONAPO): Population projections for municipalities and localities: http://www.conapo.gob.mx/es/CONAPO/Proyecciones_Datos Emissions Inventory of Mexico’s Northern Border, 1999 (p. 57) WDOT. Anne Vernez Moudon, Orion Stewart. "Tools for Estimating VMT Reductions from Built Environment Changes". WA-RD 806.3. June 2013 (pp. 11-12). The Climate Registry, General Reporting Protocol, version 2, 2014 Emission Factors. Gasoline 8.78 kg CO2/gal Moving Cooler, Prepared by Cambridge Systematics. July 2009. Quantification Methods The method quantifies reductions in total vehicle-kilometers traveled and associated GHG emission reduction in function of an increase in urban density in the most populated metropolitan areas of the state of Coahuila. Key Assumptions For the four most populous metropolitan zones of Coahuila, demand for housing and city services due to population growth in the period 2016-2035 is projected to occur in areas with vacant lots available within city limits. Key Uncertainties The change in policy direction calls for new behaviors on the part of the main economic and social agents: real estate developers, public officials and citizens. The ability to adapt to change will be an important element in the success of this policy. Quantification of the average distances can be approximated in two ways: 1) using the information generated from the origin-destination surveys performed as a component of the sustainable urban mobility projects held in the four largest metropolitan areas of Coahuila; 2) applying parameters based on research studies that relate distances with urban density indexes (inhabitants/ hectare). In the first case, it is required to have the mentioned databases and conduct origin-destination surveys in 2025 and 2035 to evaluate progress towards the established goals. In the second case, there are no specific studies that have been conducted of Mexican cities, so the estimates will be made using the estimated parameters for cities in the U.S.A. The Center for Climate Strategies
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Additional Benefits and Costs The unit costs of providing basic services to urban residents are reduced. Reduced costs and time in urban transfers. It improves quality of life and economic competitiveness. Feasibility Issues As with any policy of metropolitan character, proper coordination amongst municipal administrations involved in the metropolitan area is required, as well as among municipal, state and federal governments.
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TLU-2. Promote sustainable urban mobility systems. Policy Description. During the last fifty years, the national population not only tripled, but there has been a continuous migration from rural to urban settlements. By 2010, cities of more than 15 000 inhabitants accounted for 71.6% of the total national population (National Urban Development Program, 2014-2018, p. 3). The accelerated rate of population growth in cities was followed by an expansion of urban areas and a decrease in urban density. At the same time, there has been a drastic growth in the number of vehicles in the state’s vehicle fleet. These trends reveal the disorderly growth of Mexican cities, where urban mobility systems are increasingly dependent on the private vehicle. Despite large investments in road infrastructure, traffic congestion problems have continued to become more acute, while the average distances traveled have increased exponentially. More cars are in roads increasing total vehicle-kilometers traveled, at decreasing average speeds, producing significant externalities in time, travel costs and GHG emissions. Sustainable urban mobility systems seek to stop and reverse these trends, through qualitative and quantitative diversification of mobility options. It seeks to ration car use by encouraging the use of mass transit and non-motorized modes of transportation. For this, it is required to modernize mass transit systems, develop infrastructure for pedestrians and cyclists, and implement beautification projects and expansion of green areas in roads, parks, gardens and other urban spaces. The purpose of these measures is to modify the structure of daily transfers for clean or with lower GHG emissions, while simultaneously reducing costs and travel times, improving the aesthetics of public spaces, quality of life and economic competitiveness of cities. The expansion of green areas would also enhance their ability to capture carbon. As part of these actions, Coahuila will join the national strategies that seek to design and implement a policy of sustainable mobility for cities of 500,000 or more inhabitants (Strategy 3.5.1 PECC), which aims to promote key transportation projects that exhibit transit travel time reduction, socio-economic profitability and improved environmental impact. (Strategy 3.5.7, PECC). Policy Design State Goals: La Laguna: Goals for 2025 and 2035. 1. Restructure the demand for the various modes of transportation, that is, reduce the percentage of private passenger car use and increase the relative participation in the use of mass public transportation, bicycling and walking.
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Public Transport* Other motorized Cars By foot
2014 49.0% 11.0% 25.0% 15.0% 100.0%
2024 49.0% 10.0% 24.0% 17.0% 100.0%
2034 49.0% 9.0% 23.0% 19.0% 100.0%
2. Increase energy efficiency of the mass transit system. Saltillo-Arteaga-Ramos Arizpe: Goals for 2025 and 2035. 1. Restructure the demand for the various modes of transportation; that is, reduce the percentage of private passenger car use and increase the relative participation in the use of mass transit, bicycling and walking. 2. Increase energy efficiency of the mass transit system. 2014
Alternative Scenario
2024
2034
Public Transport* Other motorized+
687,684 246,538
35.76% 12.82%
1,045,190 381,897
35.09% 12.82%
1,496,928 559,673
34.29% 12.82%
Cars+
657,307
34.18%
978,574
32.85%
1,217,573
27.89%
By foot or Bicycle+
331,538
17.24%
573,143
19.24%
1,091,406
25.00%
1,923,066
100.00%
2,978,804
100.00%
4,365,580
100.00%
Monclova-Frontera-Castaños: Goals for 2025 and 2035. 1. Restructure the demand for the various modes of transportation; that is, reduce the percentage of private passenger car use and increase the relative participation in the use of mass transit, bicycling and walking. 2014
Alternative Scenario
2024
2034
Public Transport* Other motorized+
304,591 288,309
31.57% 29.88%
335,528 317,861
31.54% 29.88%
369,604 351,019
31.47% 29.88%
Cars+
258,246 113,648
26.77%
25.00% 13.57%
270,158 183,825
23.00%
11.78%
265,912 144,337
15.65%
964,756
100.00%
1,063,647
100.00%
1,174,601
100.00%
By foot or Bicycle+
2. Increase energy efficiency of the mass transit system. The Center for Climate Strategies
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Coverage: Most populated metropolitan areas of the state: La Laguna and Saltillo-Arteaga-Ramos Arizpe; and Monclova, Castaños and Frontera. Timing: 2016-2035. Parties Involved: Federal Government. State Government. Local Governments of the state’s major metropolitan areas. Urban public transport licensees. GHG Causal Chain
Direct GHG Reduction Indirect GHG Reduction Direct GHG Increase Indirect GHG Increase Quantification of GHG effects
Implementation Mechanisms The Center for Climate Strategies
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Modernize mass transit systems in major metropolitan areas of the state by introducing systems for prepayment and restructuring routes to reduce the number of vehicles in the fleet, shorten raveled distances, and increase occupancy levels of the units (passenger / km). These operational improvements will increase energy efficiency, and bring down the average costs of operation. Additional gains in energy efficiency could be obtained through the modernization of the vehicle fleet (see TLU-3). Improve pedestrian infrastructure in major metropolitan areas of the state by using a concentric strategy starting with the urban core, improving crossings: delimiting the crossing areas, installing pedestrian stoplights and setting specific times for crossing the roads, incorporating road signs that warn drivers when turning into a street to give pedestrians the right-of-way. Also starting from the center towards the periphery, remove obstacles on sidewalks (parked cars on sidewalks and garages, cables, commercials, pits, open drainages, etc.), improve their conditions with regard to cleanliness and lighting. Distribute road infrastructure budget consistently with the goals set for covering the needs of urban mobility. Further develop the infrastructure that will enable the safe use of bicycles as means of transportation. Provide adequate maintenance of existing infrastructure and develop networks of bicycle traffic. Encourage bicycle-sharing programs and parking. Study and propose new areas and public roads for leisure, particularly, seek recovery of streams for establishing linear parks and routes for non-motorized transport. Regularly conduct origin-destination surveys to monitor the evolution of commuting habits and modes of transportation. Develop specific plans for the various components of the urban mobility system of metropolitan areas (pedestrian, bicycle, urban public transport, taxis, specialized transportation, school buses, private cars). Implement the official Mexican standards for road signs. Adopt transport-oriented development principles to urban development. Financial incentives to developers in areas close to public transport. Improve the quality of public transport. Facilitate interconnection between different modes of transport, especially between the pedestrian and bicycle transportation to mass transit. Extend the areas served by mass transit systems. Develop plans for transporting personnel. Implement speed reduction strategies to discourage the use of cars. Apply restrictions on the circulation of cars in downtown areas of cities and parking facilities in certain areas. Increase quantity and quality of infrastructure for safe bicycling in cities. Related Policies/Programs in Place and Recent Actions State Level: The Center for Climate Strategies
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App. E - TLU Policy Recommendations February 2016
Law of sustainable mobility. State urban development program 2011-2017. Urban development program of the major metropolitan areas of the state of Coahuila. Study: integrated transport system in the metropolitan region of southeastern Coahuila. Study: Integral Sustainable Urban Mobility Plan of La Laguna National Level: National Urban Development Program 2014-2018. Special Climate Change Program 2014-2018. General Law on Climate Change. Estimated Net GHG Reductions and Net Costs or Savings Table TLU-2.1. Estimated net GHG reductions and costs or savings. In-State GHG Impacts Annual CO2e Impacts Policy ID Policy Title TLU-2. Sustainable Urban Mobility
2025 Tg (0.19)
2035 Tg (0.35)
2035 Cumulative TgCO2e (4.4)
Total GHG Impacts 2035 Cumulative TgCO2e (5.6)
Base Year 2014$ NPV 2015-2035 $Million ($30,338)
Cost Effectiveness $/tCO2e ($5,390)
The estimated effects of implementing this policy are presented in Table TLU 2. Modernization of urban mass transit systems in the metropolitan zones of Saltillo, Monclova and La Laguna, would allow a reduction in operation costs, especially fuel consumption because of the reduction in vehicle-kilometers traveled. Moreover, mass transit modernization would change the current transportation mode distribution where cars make up a smaller portion of daily commute trips and mass and non-motorized modes make up a greater portion. This results in a reduction in vehiclekilometers traveled, gasoline consumption and associated GHG emissions. Implementation of this policy would allow an average annual decrease in carbon dioxide emissions equivalent to 0.25 tons between 2015 and 2025. They would increase to 0.46 during the period from 2025 to 2035. The cumulative total decrease to 2035 would be 5.6 tons. This policy would generate economies compared to the trend scenario that would amount to $30,338 million pesos for the entire period, and savings per ton of GHG emissions reduction would be $5,390 pesos. Data Sources Consultants in Municipalities and Sustainability Authorities S. C. (2014). Integrated Transport System in the Southeast Metropolitan Region of Coahuila (SITSEC), Document 3: Mobility Forecast and Alternative Solutions. Saltillo, Coahuila, March 2014. URBIS INTERNACIONAL, S. A. de C. V. (2014). Integrated Plan for Sustainable Urban Mobility of Monclova and its conurbation (PIMUS), Stage III: Development of the Sustainable Mobility Integrated Plan PIMUS, Monclova, Coahuila, May 13.
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TRANSCONSULT (2014). Integrated Plan for Sustainable Urban Mobility of La Laguna. (PIMUS). Quantification Methods The method quantifies the reduction in vehicles kilometers traveled and associated GHG emissions due to the modernization of the mass transit system as well as the GHG emission reductions to do a shift in the modes of transportation away from private passenger cars to mass transit, biking and walking. Key Uncertainties To modernize mass transit, good cooperation amongst all strategic actors is critical among fleet operators and concessionaires, municipal, state and federal authorities. Policies that promote non-motorized modes of transportation and rationing of the private passenger car in urban space require cultural changes among city inhabitants. The analytical framework for this policy builds on recent studies of mobility that provide operational and financial information of a reconfiguration of the routes of public transport. However, these studies do not specify a forecast of mobility modes. Consequently, the distribution of means of transport is based on an inference of mobility scenarios for the public transport sector for 2014 and 2034. Additional Benefits and Costs Less time and costs in everyday transfers. More active and healthy lifestyles, improving the general conditions for public health and safety. Feasibility Issues The modernization of mass transit requires substantial changes in the organization of the service, which, in turn, require the participation of public transport operators and concessionaries. Municipal and state authorities should also adopt the significance of these changes to governance.
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TLU-3. Stimulate the purchase and use of electrical, pluggable hybrids, and hybrid vehicles. Policy Description. To encourage the purchase of electric, plug-in hybrid and hybrid cars, this policy seeks to: incorporate this type of vehicles in the state and local governments’ fleets; provide individuals who acquire them, tax incentives upon purchase (VAT exemption and ISAN) and possession (exemption for this concept) as well as special privileges for parking; support, together with manufacturers of electric and hybrid cars with plants in the state, the development of a network of charging stations. Policy Design State Goals: 1. Increase participation of hybrid, pluggable hybrid and electric vehicles in the state’s fleet: 2025: 10% of total. 2035: 20% of total Coverage: State Government fleet. Local Government fleet. Private owners. Timing: 2016-2035 Parties Involved: Federal Government. State Government. Local Governments of the state’s major metropolitan areas. Urban public transport licensees. Transport companies. Automobile assemblers. Private owners. GHG Causal Chain
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Direct GHG Reduction Indirect GHG Reduction Direct GHG Increase Indirect GHG Increase Quantification of GHG effects
Implementation Mechanisms Ration car use in the urban space of major metropolitan areas of the state. Promote, with the participation of local chambers of commerce, an employee-commuting program. Upon certification, owners of electric, hybrid and pluggable hybrid cars can enjoy free parking in parking lots where there are parking meters. Increase the number of parking meters in the urban space, as well as fees and allocate the funds raised to strengthen the infrastructure of non-motorized transport. Provide tax incentives for owners of such cars (e.g., car sale tax remissions, vehicle registration tax break). Incorporate electric, hybrid and hybrid cars to the vehicle fleet of public state and local agencies. One of the automobile assembly companies established in the metropolitan area-Arteaga SaltilloRamos Arizpe announced the launch of an electric car in 2015. The state Government and the municipalities of its major metropolitan areas can promote, with that company, a strategy to promote sales in Coahuila (e.g. incorporating these vehicles in its fleet and encouraging the development of a network of charging stations powered by renewable energy). Related Policies/Programs in Place and Recent Actions The Center for Climate Strategies
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State Level: Law of sustainable mobility. State urban development program 2011-2017. Urban development program of the major metropolitan areas of the state of Coahuila. Studies of urban mobility of the major metropolitan areas of the state. National Level: National Urban Development Program 2014-2018. Special Climate Change Program 2014-2018. General Law on Climate Change. Estimated Net GHG Reductions and Net Costs or Savings Table TLU-3.1. Estimated net GHG reductions and costs or savings, Scenario A. In-State GHG Impacts Annual CO2e Impacts Policy ID Policy Title Energy Efficient TLU-3. Government Fleet
2025 Tg
2035 Tg
(0.000061) (0.000110)
Total GHG Impacts
Base Year 2014$
2035 Cumulative
2035 Cumulative
NPV 2015-2035
Cost Effectiveness
TgCO2e
TgCO2e
$Million
$/tCO2e
(0.00116)
(0.0015)
$4
$2,889
The calculations related to the implementation of this policy are presented in Table TLU-3.1. In this scenario A, electricity consumption of plug-in vehicles is considered using the national grid’s metrics with regard to the carbon content and average price of energy supply. Improved energy efficiency achieved from the gradual replacement of conventional technologies with electrical, hybrid and plug-in hybrid vehicles, would reduce greenhouse gases emissions in the amount of 1500 CO2 equivalent tons during the whole period. The net costs would be $4 million pesos during those twenty years, with which the reduction of each CO2 ton would generate expenditures of $2,889 pesos. Table TLU-3.2. Estimated net GHG reductions and costs or savings, Scenario B. In-State GHG Impacts Annual CO2e Impacts Policy ID Policy Title Energy Efficient TLU-3. Government Fleet
2025 Tg
Total GHG Impacts
Base Year 2014$
2035 Cumulative
2035 Cumulative
NPV 2015-2035
Cost Effectiveness
TgCO2e
TgCO2e
$Million
$/tCO2e
2035 Tg
(0.000051) (0.000088)
(0.00095)
(0.0012)
$4
$3,004
In this scenario B, electricity consumption of plug-in vehicles is considered using Coahuila’s grid’s metrics with regard to the carbon content and average price of energy supply. Improved energy efficiency achieved from the gradual replacement of conventional technologies with electrical, hybrid and plug-in hybrid vehicles, would reduce greenhouse gases emissions in the amount of 1,200 CO2 equivalent tons during the whole period. The net costs would be $4 million pesos during The Center for Climate Strategies
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those twenty years, with which the reduction of each CO2 ton would generate expenditures of $3,004 pesos. Data Sources Coahuila State Government (2011). Special Transport Program 2011-2017. Quantification Methods The method estimate GHG emission reductions in proportion to the incorporation of electrical, plug-in and non-plug hybrid vehicles in the state’s and municipalities’ fleets. Similarly, fuel cost savings due to greater fleet average fuel economy are quantified. Key Uncertainties The volatility of fossil fuel prices, which hinders the financial feasibility analysis of incorporating lower net GHG emissions vehicles into the fleet. Additional Benefits and Costs Improved fleet’s average fuel economy. Feasibility Issues Impacts on state and local finances due to additional costs for purchasing lower GHG emission vehicles, as well as the fiscal sacrifice related to the elimination of income from property taxes of low GHG emission vehicles.
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App. F- AFOLU Policy Recommendations February 2016
Appendix F Agriculture, Forestry, and Other Land Uses Policy Recommendations
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Cost Effectiveness
(0.74)
(0.089)
(1.8)
$404
$115
$4.2
$285
$147
Full benefits for tree planting policies are not realized unless the full life of the trees are $131 considered. 2075 CE = MX$27
Full benefits for tree planting policies are not realized unless the full life of the trees are $47 considered. 2075 CE = -MX$87
Notes
Agriculture, Forestry and Other Land Use Sector - Summary of Benefits and Costs (2016 - 2035)
Total GHG Impacts
NPV 2016-2035
$/tCO2e
"Stand-Alone" Analysis In-State GHG Impacts 2035 Cumulative
$Million
(0.055)
(0.085)
(2.8)
(0.88)
Base Year 2014$
2035 Annual CO2e Impacts Cumulative TgCO2e
(0.026)
(0.0093)
(1.7)
(0.88)
TgCO2e
Policy Title
(0.0037)
(0.15)
(0.084)
2035 Tg
Policy ID
Dairy Cattle Manure Management
(0.042)
2025 Tg
AFOLU-1.
Urban Forestry
(0.072)
Policy Name
(0.055)
(0.88)
(0.085)
(0.74)
2035 Annual CO2e Impacts Cumulative 2025 Tg 2035 Tg TgCO2e
(0.88)
(0.089)
(1.8)
2035 Cumulative TgCO2e
$115
$4.2
$285
NPV 2015-2035 $Million
$47
$159
$404
$147
$131
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(2.8)
Cost Effectiveness $/tCO2e Description of Interaction or Overlap No interactions or overlaps identified. (0.026)
(0.084)
(1.7)
(0.0093)
F-2
(0.15)
(0.042)
(0.072)
(0.0037)
In-State GHG Impacts
Intra-Sector Overlap Adjusted Results Total GHG Impacts Base Year 2014$
Intra-Sector Interactions & Overlaps Adjustments
$159
AFOLU-2.
Rural Forestry
Policy ID
Dairy Cattle Manure Management Urban Forestry Rural Forestry
Totals
AFOLU-3.
AFOLU-1. AFOLU-2. AFOLU-3.
Total After Intra-Sector Interactions /Overlap
The Center for Climate Strategies
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App. F- AFOLU Policy Recommendations February 2016
Agriculture, Forestry & Other Land Use (FOLU) Sector Overview The tables above provide a summary of the microeconomic analysis of CO CAP policies in the Agriculture, Forestry and Other Land Use (AFOLU) sector. The first table provides a summary of results on a “stand-alone” basis, meaning that each policy was analyzed separately against baseline (business as usual or BAU) conditions (i.e. without consideration of influences from other CAP policies). Details on the analysis of each policy are provided in each of the Policy Option Documents (PODs) that follow within this appendix. The “Stand-Alone” results provide the annual GHG reductions for 2020 and 2030 in teragrams (Tg) of carbon dioxide equivalent reductions (CO2e), as well as the cumulative reductions through 2030 (1 Tg is equal to 1 million metric tons). The reductions shown are just those that have been estimated to occur within the State. Additional GHG reductions, typically those associated with upstream emissions in the supply of fuels or materials, have also been estimated and are reported under the column for total GHG impacts. Also reported in the stand-alone results is the net present value (NPV) of societal costs/savings for each policy. These are the net direct costs of implementing each policy reported in 2014 pesos. The cost effectiveness (CE) estimated for each policy is also provided. Cost effectiveness is a common metric that denotes the cost/savings for reducing each metric ton (t) of emissions. Note that the CE estimates use the total emission reductions for the policy (i.e. those occurring both within and outside of the State). As indicated in the first summary table, the full benefits of many AFOLU policies are only realized when considering the full life-span of the new technology or management practice brought about through policy implementation (in this case, the planting of new trees under AFOLU-2 and -3). For this reason, the costs and benefits of some AFOLU policies were estimated out to the year 2075. Key findings are summarized in the Notes column and in the documentation for each policy. Intra-Sector Interactions & Overlaps Adjustments The second summary table provides the same values described above after an assessment was made of any policy interactions or overlaps. There were no interactions of overlaps identified between the AFOLU policies; therefore, the values in the second table equal those in the first table.
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AFOLU-1. Dairy cattle manure management.
Policy Description This policy proposes using manure generated in the milking farms of the state of Coahuila as a natural fertilizer, and also for the production of biofertilizer and electricity, thus supporting the reduction in the use of fossil fuels in energy generation. In the case of direct fertilizer and biofertilizer generation it is important to mention that manure contains high quantities of organic compounds, therefore, adding it to the soil results in an increase in the soil’s nutrients, having proven its efficiency in tomato and pepper crops in the Laguna region. Furthermore, it supports the reclamation of saline soils used in fodder production. On the other hand, for usage in electricity production, it is recommended to revise recent experiences involving installation of anaerobic digesters and moto-generators used to process manure through anaerobic digestion, with the purpose of choosing the most suitable technology for the process. Policy Design Goals: Exploit 40% of manure generated by dairy cattle to produce electricity and biofertilizers. An exploitation of 7% is currently estimated, which is equivalent to 167 tons, we would be looking at an exploitation of around 1,000 tons. Temporality: 2016-2025. Coverage: Laguna Region Stakeholders: National Agencies: 1. Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food (SAGARPA): Trust Fund for Shared Risk (FIRCO) 2. Federal Electricity Commission (CFE) 3. Ministry of Energy (SENER) State Agencies: 1. State Ministry of Agricultural Development 2. State Ministry of Environment The Center for Climate Strategies
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3. State Ministry of Economic Development, Competitiveness and Tourism. Private Bodies: 1. Regional Cattle Union GHG Causal Chain
The causality chain identifies the main effects of the policy and the subsequent impact on GHG. The star symbol identifies the significant effects on GHG which will be quantified. Red and green colors indicate the net impact on GHG emissions, which could be positive or negative. Implementation Mechanisms 1. Take advantage of the Trust Fund for Shared Risk (FIRCO) and SAGARPA’s (Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food) “Support Project for Shared Risk Added-Value Agribusiness” which funds 50% of the installation costs for anaerobic digesters and moto-generators.
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2. Create a State Program for management and exploitation of manure, under the responsibility of State Ministry of Agricultural Development. The following strategies should be considered: a. Create a State Program for management and exploitation of manure. b. Economic and tax incentives for producers who invest in manure management for this kind of production. c. Training for producers that generate biogas, electricity and biofertilizers. d. Carry out information and awareness activities for agricultural producers such as forums, conferences, or workshops. Current Similar Policies and Programs, and Recent Actions Trust Fund for Shared Risk (FIRCO) and SAGARPA’s (Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food) “Support Project for Shared Risk Added-Value Agribusiness” (PROVAR). Estimated Net GHG Reductions and Net Costs or Savings 2025 In-State GHG Impacts (TgCO2e) (0.026)
2035 In-State GHG Impacts (TgCO2e) (0.055)
2016 – 2035 Cumulative In-State Impacts (TgCO2e) (0.74)
2016 – 2035 Cumulative Total Impacts (TgCO2e) (1.8)
Net present value of societal costs, 2016 – 2035 ($2014) $285
Cost Effectiveness ($2014/ tCO2e) $159
Quantification Methods: Net Energy & GHG Impacts. Business as Usual and Policy GHG impacts were estimated, including avoided methane emissions, direct and upstream offset emissions from electricity generation, and upstream emissions from fertilizer production. BAU manure utilization was assumed to occur at large farms (>1500 head) and increase linearly from 0% in 2016 to 7% in 2025. Under the policy, it was assumed that the policy would be implemented at large farms (>1500 head) first between 2016 and 2025, and then at medium farms (500-1000 head) after 2025 until the 40% goal is reached. Avoided methane emissions from utilized manure was estimated based on the emission factor from the Baseline I&F (0.041 tCO2e/head-year) and a control efficiency of 81.5% based on data on anaerobic digesters in the U.S. The number of cows affected and the methane collected is shown in Table AFOLU-1-1. The avoided grid electricity, shown in Table AFOLU-1-2, was estimated using a factors of 1.25 kWh/tonne of manure, from a British Columbia study of anaerobic digestion (Werner and Strehler), and 10.9 tonnes of manure/head-year, based on 80% recovery of 37.2 kg/head-day. The offset of upstream emissions from fertilizer production, also shown in Table AFOLU-1-2, was estimated based on the assumption that the manure has a The Center for Climate Strategies
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nitrogen content of 1.42% and that the upstream GHG content of commercial N fertilizers is 2.32 tCO2e/tN (Salazar et. al, 2003). Table AFOLU-1.1. Policy Cattle Populations and Methane Emissions. Dairy Cows Covered Large Farms % of total head
Year
Dairy Cows Covered Medium Farms % of total head
Dairy Cows Covered Large Farms head
Dairy Cows Covered Medium Farms
CH4 Emissions - Large & Medium
Collected CH4
Tg CO2e
Tg CO2e
head
2016
0%
-
0%
-
-
0.000
2017
3%
10,984
0%
-
0.000
(0.000)
2018
6%
22,775
0%
-
0.001
(0.001)
2019
8%
35,417
0%
-
0.001
(0.001)
2020
11%
48,958
0%
-
0.002
(0.002)
2021
14%
63,446
0%
-
0.003
(0.002)
2022
17%
78,932
0%
-
0.003
(0.003)
2023
19%
95,471
0%
-
0.004
(0.003)
2024
22%
113,118
0%
-
0.005
(0.004)
2025
25%
131,933
0%
-
0.005
(0.004)
2026
25%
135,092
2%
8,106
0.006
(0.005)
2027
25%
139,152
3%
16,698
0.006
(0.005)
2028
25%
143,212
5%
25,778
0.007
(0.006)
2029
25%
147,271
6%
35,345
0.007
(0.006)
2030
25%
151,331
8%
45,399
0.008
(0.007)
2031
25%
155,390
9%
55,941
0.009
(0.007)
2032
25%
159,450
11%
66,969
0.009
(0.008)
2033
25%
163,510
12%
78,485
0.010
(0.008)
2034
25%
167,569
14%
90,488
0.011
(0.009)
2035
25%
171,629
15%
102,977
0.011
(0.009)
526,186
0.109
(0.089)
Sum
2,134,640
Table AFOLU-1.2. Offset Electricity and Fertilizer Emissions.
Year
Electricity Production: Medium Farms
Electricity Production: Large Farms
MWh
MWh
Grid Offset Benefit
Upstream Fuels for Power Supply
GHG Emissions from Upstream Fertilizer
GHG Emissions from Upstream Fertilizer
Tg CO2e
Tg CO2e
Tg CO2e
Tg CO2e
2016
-
-
0.000
0.000
0.000
0.000
2017
-
3,430
(0.002)
(0.001)
0.000
(0.004)
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Electricity Production: Medium Farms Year
MWh
Electricity Production: Large Farms MWh
App. F- AFOLU Policy Recommendations February 2016
Grid Offset Benefit
Upstream Fuels for Power Supply
GHG Emissions from Upstream Fertilizer
GHG Emissions from Upstream Fertilizer
Tg CO2e
Tg CO2e
Tg CO2e
Tg CO2e
2018
-
7,112
(0.004)
(0.001)
0.000
(0.008)
2019
-
11,061
(0.006)
(0.002)
0.000
(0.013)
2020
-
15,289
(0.008)
(0.002)
0.000
(0.018)
2021
-
19,814
(0.011)
(0.003)
0.000
(0.023)
2022
-
24,650
(0.013)
(0.004)
0.000
(0.028)
2023
-
29,815
(0.016)
(0.005)
0.000
(0.034)
2024
-
35,326
(0.019)
(0.005)
0.000
(0.040)
2025
-
41,202
(0.022)
(0.006)
0.000
(0.047)
2026
2,531
42,188
(0.024)
(0.006)
(0.003)
(0.048)
2027
5,215
43,456
(0.026)
(0.007)
(0.006)
(0.050)
2028
8,050
44,724
(0.028)
(0.007)
(0.009)
(0.051)
2029
11,038
45,992
(0.030)
(0.007)
(0.013)
(0.053)
2030
14,178
47,260
(0.033)
(0.007)
(0.016)
(0.054)
2031
17,470
48,528
(0.241)
(0.007)
(0.020)
(0.056)
2032
20,914
49,795
(0.038)
(0.007)
(0.024)
(0.057)
2033
24,510
51,063
(0.040)
(0.008)
(0.028)
(0.059)
2034
28,259
52,331
(0.043)
(0.008)
(0.032)
(0.060)
2035
32,159
53,599
(0.046)
(0.008)
(0.037)
(0.061)
Sum
164,324.58
666,635.38
(0.65)
(0.10)
(0.19)
(0.76)
Table AFOLU-1.3. Net Policy Emissions.
Year
Net In-State GHG Impacts
Out-of-State GHG Impacts
Total GHG Impacts
Tg CO2e
Tg CO2e
Tg CO2e
2016
0.000
0.000
0.00
2017
(0.002)
(0.004)
(0.01)
2018
(0.005)
(0.009)
(0.01)
2019
(0.007)
(0.014)
(0.02)
2020
(0.010)
(0.020)
(0.03)
2021
(0.013)
(0.026)
(0.04)
2022
(0.016)
(0.032)
(0.05)
2023
(0.019)
(0.039)
(0.06)
2024
(0.023)
(0.046)
(0.07)
2025
(0.026)
(0.053)
(0.08)
2026
(0.029)
(0.058)
(0.09)
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Year
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Net In-State GHG Impacts
Out-of-State GHG Impacts
Total GHG Impacts
Tg CO2e
Tg CO2e
Tg CO2e
2027
(0.031)
(0.062)
(0.09)
2028
(0.034)
(0.067)
(0.10)
2029
(0.036)
(0.072)
(0.11)
2030
(0.039)
(0.077)
(0.12)
2031
(0.248)
(0.083)
(0.33)
2032
(0.045)
(0.088)
(0.13)
2033
(0.048)
(0.094)
(0.14)
2034
(0.052)
(0.100)
(0.15)
2035
(0.055)
(0.106)
(0.16)
Sum
(0.74)
(1.05)
(1.79)
Net Cost Impacts. Estimated Costs include capital costs (assumed 50% Federal Government costs share and annualized at 3.5% over 15 years), Operation & Maintenance (O&M), fertilizer productions costs, and avoided electricity costs (savings). Cost values are shown in the table below. The estimated costs are shown in Table AFOLU-1-4. Cost Parameter Medium Dairy Initial Anaerobic Digester Cost Large Dairy Initial Anaerobic Digester Cost O & M: Medium Farm O & M: Large Farm Biofertilizer production cost Federal Government Cost Share
Value 2,570 1,656 107 53 3,000
Units MX$/head MX$/head MX$/head MX$/head MX$/tonne
0.5
$/$Capital Cost
Table AFOLU-1.4. Policy Costs.
Year
Annualized Capital Costs
O&M
Biofertilizer Production Costs
Avoided Electricity Costs
Total Policy Costs
Total Discounted Policy Costs
Cost Effectiveness
MM$
MM$
MM$
MM$
MM$
MM$2014
$2014/tCO2e
2016
$0.00
$0.00
$0.00
$0
$0
$0
2017
$2.37
$0.81
$7.0
($6)
$4
($5)
2018
$4.82
$1.73
$15
($14)
$8
($1)
2019
$7.37
$2.77
$24
($22)
$12
$2
2020
$10.01
$3.92
$34
($32)
$16
$4
2021
$12.75
$5.21
$45
($44)
$20
$6
2022
$15.58
$6.65
$58
($56)
$23
$9
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Annualized Capital Costs
O&M
Biofertilizer Production Costs
Avoided Electricity Costs
Total Policy Costs
Total Discounted Policy Costs
Cost Effectiveness
MM$
MM$
MM$
MM$
MM$
MM$2014
$2014/tCO2e
Year 2023
$18.53
$8.24
$72
($71)
$28
$11
2024
$21.58
$10.00
$87
($87)
$32
$12
2025
$24.74
$11.93
$104
($105)
$35
$14
2026
$26.49
$13.25
$115
($119)
$36
$16
2027
$28.29
$14.74
$128
($135)
$36
$15
2028
$30.14
$16.33
$142
($147)
$42
$17
2029
$32.05
$18.02
$156
($159)
$48
$19
2030
$34.00
$19.82
$172
($171)
$55
$22
2031
$36.01
$21.73
$189
($184)
$62
$24
2032
$38.87
$23.75
$206
($198)
$71
$26
2033
$41.80
$25.88
$225
($211)
$81
$29
2034
$44.82
$28.13
$244
($226)
$91
$31
2035
$47.92
$30.50
$265
($241)
$102
$34
Sum
$478
$263
$2,285
($2,227)
$800
$285
$159
Data sources: •
Anaerobic digester cost data: Sagarpa-FIRCO, 2007, "Aprovechamiento de biogás para la generación de energía eléctrica en el sector agropecuario”.
•
Fertilizer costs: Vicencio de la Rosa, et al., 2011, "Producción de composta y vermicomposta a partir de los lodos de la planta de tratamiento de aguas residuales de un rastro", Rev. Int. Contam. Ambie. 27 (3) 263-27.
•
Fertilizer production: Salazar E. et al., 2003, "Abonos orgánicos y plasticultura", Sociedad Mexicana de la Ciencia de Suelo A.C./Facultad de Agricultura y Zootecnica de la UJED, 222 P. http://www.smcs.org.mx/pdf/libros/abonos_org.pdf
•
Electricity generated: Werner and Strehler, n/d, "British Columbia On-Farm anaerobic digestion Benchmark Study", B.C. Agricultural Research and Development Corporation, en https://www.bcac.bc.ca/sites/bcac.localhost/files/AD%20Benchmarking%20Study_0.pdf
•
Manure Biogas yield: Méndez, et al., 2000, "Evaluación productiva, de efecto ambiental y de problemas relevantes es explotaciones lecheras de pequeña escala", Livestock Research for Rural Development 12 (1) , en: http://www.fao.org/ag/aga/agap/frg/lrrd/lrrd12/1/manu121.htm
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•
Importance of Milk Production Systems Small Scale in Mexico, 2013. http://www.canacintra.org.mx/alimentos/eventos/acapulco/congreso_nacional/premer_dia/Im portancia_de_los_SPLPE_en_Mexico_Cong_FIL_CANACINTRA_UAM_jun2013.pdf
•
Report on the situation of livestock genetic resources (RGP) of Mexico, 2012. http://www.sagarpa.gob.mx/ganaderia/Publicaciones/Lists/Informe%20sobre%20la%20situa cin%20de%20los%20Recursos%20Genticos/Attachments/1/infofao.pdf
•
Sagarpa-FIRCO, 2010, "General biodigestion systems" Shared Risk Trust (FIRCO). http://sigan.org/2010/pdf/generalidades.pdf
•
Use and manure as a nutritional alternative gases, 2011. http://www.uaaan.mx/postgrado/images/files/hort/simposio5/02-uso_estiercol.pdf
Key Assumptions: In addition to the assumptions described above, these assumptions listed below were used to quantify this policy: • 25% of dairy cattle are assumed to be at Medium Farms (500-1000 head). • 25% of dairy cattle are assumed to be at Large Farms (>1000 head). • The federal and state governments and the Livestock Association provide subsidies, incentives and / or training for farmers. Key Uncertainties •
The performance of biogas production varies within each system. This requires continuous review to choose the most suitable technology for the process, based on recent experience and continuous technological changes.
•
For the implementation of this policy support of the federal and state governments is being considered, as well as the Regional Livestock Union to finance the biodigesters and / or giving incentives to farmers, therefore, good cooperation among these strategic actors is required.
Additional Benefits and Costs •
Economic benefits:
Job creation, consumption of electricity and bio-fertilizer sales. • Costs: Facility costs for the anaerobic digester and the moto-generator (these are included in the direct impacts analysis), and process costs for production of biofertilizer should be further researched. The Center for Climate Strategies
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Feasibility Issues • Acceptance by farmers. • The financial situation affecting this sector.
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AFOLU-2. Increase and maintenance of urban vegetation.
Policy Description This policy is designed to benefit from the urban vegetation in roads, public spaces, easements (streams, train tracks, high-voltage line pathways, etc.) and parks and gardens, in Coahuila’s cities. With the corresponding reforestation and conservation, increase and improvement of the vegetation surface of the state will be enhanced, with the creation of green corridors, contributing with carbon dioxide absorption. Reforestation, complete restoration and maintenance of green areas with emphasis in rescuing and preserving native species permits conservation and protection of the wide genetic biodiversity in the state. Also, urban trees strategically planted to provide shadow for buildings can generate benefits in energy savings. Additionally, urban trees capture rain water, contributing to reduce the amount of water that ends up in residual water treatment in areas with combined sewerage systems. Policy Design Goals: The goal has two parts, on the side of reforestation additional planting of 5,000 trees per year, equivalent to 12 has. reforested. While on the side of conservation of natural resources, the goal is to increase the vegetation on 93 ha. by year. Temporality: 2016-2035, assuming a lineal behavior, in 2035 carbon sequestration through vegetation will increase in 37,619 tCO2e. Coverage: State Stakeholders: Participation of the following bodies is required for this policy’s implementation: National Agencies: 1.
National Forest Commission
2.
National Water Commission
3.
Ministry of Environment and Natural Resources
State Agencies: 1.
State Ministry of Environment
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Local Agencies: 1.
Local Urban Development Department
2.
Local Ecology Department
GHG Causal Chain
The causal chain identifies the main effects of the policy and the subsequent impact on GHG. The star symbol identifies the significant effects on GHG which will be quantified. Red color indicates the net impact on GHG, which could be positive or negative. Implementation Mechanisms • Enhance reforestation programs, implementing new techniques and extending the volunteer programs. •
Identify native species with adequate development possibilities according to the climatic characteristics of the region. The Center for Climate Strategies
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•
Enable tree nurseries for the production of species for reforestation.
•
Training in reforestation, irrigation, fertilization and pruning, based on citizen awareness.
Current Similar Policies and Programs, and Recent Actions • Strategic Program: State Park and Urban Forests Network, in order to diagnose the green areas in the state, promote the improvement of existing areas and the establishment of new green urban areas. •
Sustainable Urban Mobility Plan of Laguna Region. PIMUS.
Estimated Net GHG Reductions and Net Costs or Savings 2025 In-State GHG Impacts (TgCO2e) (0.0037)
2035 In-State GHG Impacts (TgCO2e) (0.0093)
2016 – 2035 Cumulative In-State Impacts (TgCO2e) (0.085)
2016 – 2035 Cumulative Total Impacts (TgCO2e) (0.089)
Net present value of societal costs, 2016 – 2035 ($2014) $4.2
Cost Effectiveness ($2014/ tCO2e) $47
Quantification Methods:
Net Energy & GHG Impacts. The number of trees planted in each year was divided among the urban core, strategic suburban (located to provide shading for buildings), and other suburban. All trees provide carbon sequestration, only strategic suburban trees provide energy benefits from shading of buildings. New trees only provide a fraction of the carbon sequestration and heating/cooling benefits of a mature tree. The fractions for full shading benefits for tree age ranges were developed based on the asumption that full size would be reached at 35 years. In addition to these plantings, 93 hectares at the suburban/rural border will be reforested. Table AFOLU-2.1. Policy Plantings and Carbon Sequestration.
Year 2016 2017
Cumulative Policy Urban Core Plantings
Incremental Cumulative Suburban Plantings
Cumulative Other Suburban Plantings
Suburban/ Rural Periphery Reforested
Carbon Sequestered - Urban
Carbon Sequestered - Suburban Strategic
Carbon Sequestered - Suburban Other
Trees
Trees
Trees
Ha
Tg CO2
Tg CO2
Tg CO2
500 1,000
4,500 9,000
Carbon Sequestered – Rural/Suburban Periphery
1,250
93
0.0000
0.00000
0.00000
Tg CO2 (0.0001)
2,500
93
(0.0000)
(0.00003)
(0.00001)
(0.0002)
(0.0000)
(0.00007)
(0.00003)
(0.0004)
2018
1,500
13,500
3,750
93
2019
2,000
18,000
5,000
93
(0.0000)
(0.00011)
(0.00004)
(0.0005)
2020
2,500
22,500
6,250
93
(0.0000)
(0.00016)
(0.00006)
(0.0006)
2021
3,000
27,000
7,500
93
(0.0000)
(0.00022)
(0.00008)
(0.0007)
8,750
93
(0.0000)
(0.00028)
(0.00011)
(0.0009)
2022
3,500
31,500
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Cumulative Policy Urban Core Plantings
Incremental Cumulative Suburban Plantings
Cumulative Other Suburban Plantings
Suburban/ Rural Periphery Reforested
Carbon Sequestered - Urban
Carbon Sequestered - Suburban Strategic
Carbon Sequestered - Suburban Other
Trees
Trees
Trees
Ha
Tg CO2
Tg CO2
Tg CO2
4,000
36,000
Carbon Sequestered – Rural/Suburban Periphery
10,000
93
(0.0001)
(0.00035)
(0.00014)
Tg CO2 (0.0010)
(0.0001)
(0.00044)
(0.00017)
(0.0011)
2024
4,500
40,500
11,250
93
2025
5,000
45,000
12,500
93
(0.0001)
(0.00052)
(0.00020)
(0.0012)
(0.0001)
(0.00062)
(0.00024)
(0.0013)
2026
5,500
49,500
13,750
93
2027
6,000
54,000
15,000
93
(0.0001)
(0.00072)
(0.00028)
(0.0015)
2028
6,500
58,500
16,250
93
(0.0001)
(0.00083)
(0.00032)
(0.0016)
2029
7,000
63,000
17,500
93
(0.0001)
(0.00095)
(0.00036)
(0.0017)
(0.0002)
(0.00107)
(0.00041)
(0.0018)
2030
7,500
67,500
18,750
93
2031
8,000
72,000
20,000
93
(0.0002)
(0.00120)
(0.00046)
(0.0019)
2032
8,500
76,500
21,250
93
(0.0002)
(0.00133)
(0.00051)
(0.0021)
2033
9,000
81,000
22,500
93
(0.0002)
(0.00147)
(0.00057)
(0.0022)
(0.0002)
(0.00161)
(0.00062)
(0.0023)
2034
9,500
85,500
23,750
93
2035
10,000
90,000
25,000
93
(0.0003)
(0.00176)
(0.00068)
(0.0024)
Sum
105,000
945,000
262,500
1,860
(0.0021)
(0.0137)
(0.0053)
(0.026)
Table AFOLU-2.2. Policy Plantings Energy and Emissions Offsets.
Year
Energy Offset
Natural Gas Offset
Electricity GHG Offset
Natural Gas GHG Offset
Upstream Natural Gas GHG Offset
Upstream Electricity GHG Offset
MWh
TJ
Tg CO2
Tg CO2
Tg CO2
Tg CO2
2016
0
0.00
0.0000
0.000000
0.000000
0.0000
2017
(13)
0.01
(0.0000)
0.000000
0.000000
(0.0000)
2018
(40)
0.02
(0.0000)
0.000001
0.000000
(0.0000)
2019
(85)
0.04
(0.0000)
0.000002
0.000001
(0.0000)
2020
(148)
0.07
(0.0001)
0.000004
0.000001
(0.0000)
2021
(233)
0.10
(0.0001)
0.000006
0.000002
(0.0000)
2022
(341)
0.14
(0.0002)
0.000008
0.000002
(0.0001)
2023
(474)
0.19
(0.0003)
0.000011
0.000003
(0.0001)
2024
(634)
0.24
(0.0003)
0.000014
0.000004
(0.0001)
2025
(823)
0.30
(0.0004)
0.000017
0.000005
(0.0001)
2026
(1,044)
0.37
(0.0006)
0.000021
0.000006
(0.0002)
2027
(1,298)
0.44
(0.0007)
0.000025
0.000007
(0.0002)
2028
(1,568)
0.52
(0.0008)
0.000029
0.000008
(0.0002)
2029
(1,853)
0.59
(0.0010)
0.000033
0.000009
(0.0003)
2030
(2,153)
0.66
(0.0011)
0.000037
0.000010
(0.0003)
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Energy Offset
Natural Gas Offset
Electricity GHG Offset
Natural Gas GHG Offset
Upstream Natural Gas GHG Offset
Upstream Electricity GHG Offset
MWh
TJ
Tg CO2
Tg CO2
Tg CO2
Tg CO2
2031
(2,392)
0.74
(0.0013)
0.000041
0.000012
(0.0004)
2032
(2,631)
0.81
(0.0014)
0.000046
0.000013
(0.0004)
2033
(2,870)
0.88
(0.0015)
0.000050
0.000014
(0.0004)
2034
(3,109)
1.0
(0.0017)
0.000054
0.000015
(0.0005)
2035
(3,349)
1.0
(0.0018)
0.000058
0.000016
(0.0005)
Sum
(25,057)
8.1
(0.013)
0.00046
0.00013
(0.004)
Table AFOLU-2.3. Net Policy Emissions.
Year
In-State Emissions
Out-of-State Emissions
Total Emissions
Tg CO2
Units
Tg CO2e
2016
(0.0001)
0.0000
(0.0001)
2017
(0.0003)
(0.0000)
(0.0003)
2018
(0.0005)
(0.0000)
(0.0005)
2019
(0.0007)
(0.0000)
(0.0007)
2020
(0.0009)
(0.0000)
(0.0009)
2021
(0.0012)
(0.0000)
(0.0012)
2022
(0.0015)
(0.0000)
(0.0015)
2023
(0.0018)
(0.0001)
(0.002)
2024
(0.0021)
(0.0001)
(0.002)
2025
(0.0024)
(0.0001)
(0.003)
2026
(0.0028)
(0.0002)
(0.003)
2027
(0.0032)
(0.0002)
(0.003)
2028
(0.0037)
(0.0002)
(0.004)
2029
(0.0041)
(0.0003)
(0.004)
2030
(0.0046)
(0.0003)
(0.005)
2031
(0.0050)
(0.0003)
(0.005)
2032
(0.0055)
(0.0004)
(0.006)
2033
(0.0059)
(0.0004)
(0.006)
2034
(0.0064)
(0.0004)
(0.007)
2035
(0.0068)
(0.0005)
(0.007)
Sum
(0.059)
(0.0036)
(0.063)
Net Cost Impacts. Costs associated with associated planting and maintaining were estimated based on the number of trees planted each year and the costs indicated under Data Sources.
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Savings from reduced usage of electricity and natural gas and savings from reduced stormwater runoff were estimated for each year based on the age range fractions described above. Table AFOLU-2.4. Policy Costs.
Year
Capital Costs
Annualized Capital
O&M
Irrigation Costs
Strategic Suburban Electricity Savings
MM$
MM$
MM$
MM$
MM$
Strategic Suburban Natural Gas Savings
Stormwater Runoff Savings
Suburban/ Rural Periphery Reforestati on Costs
Total Policy Costs
Total Discounted Policy Costs
Cost Effectiveness
MM$
MM$
MM$
MM$
MM$2014
$2014/tCO2e
2016
$0.35
$0.03
$0.015
$0.188
$0.00
$0.0000
($0.00)
$0.28
$0.5
$0.5
2017
$0.36
$0.05
$0.031
$0.386
($0.02)
$0.0003
($0.00)
$0.28
$0.7
$0.6
2018
$0.37
$0.08
$0.048
$0.596
($0.08)
$0.0009
($0.00)
$0.28
$0.9
$0.8
2019
$0.38
$0.11
$0.066
$0.816
($0.17)
$0.0018
($0.00)
$0.28
$1.1
$0.9
2020
$0.39
$0.14
$0.084
$1.047
($0.32)
$0.0030
($0.00)
$0.28
$1.2
$0.9
2021
$0.40
$0.17
$0.104
$1.288
($0.51)
$0.0046
($0.00)
$0.28
$1.3
$0.9
2022
$0.41
$0.20
$0.124
$1.541
($0.78)
$0.0065
($0.00)
$0.28
$1.4
$0.9
2023
$0.42
$0.23
$0.145
$1.804
($1.12)
$0.0088
($0.00)
$0.28
$1.3
$0.9
2024
$0.43
$0.26
$0.167
$2.078
($1.56)
$0.01
($0.00)
$0.28
$1.2
$0.8
2025
$0.44
$0.29
$0.190
$2.363
($2.09)
$0.01
($0.01)
$0.28
$1.0
$0.6
2026
$0.45
$0.32
$0.214
$2.658
($2.77)
$0.02
($0.01)
$0.28
$0.7
$0.4
2027
$0.46
$0.36
$0.238
$2.965
($3.60)
$0.02
($0.01)
$0.28
$0.3
$0.1
2028
$0.47
$0.39
$0.264
$3.282
($4.36)
$0.03
($0.01)
$0.28
($0.1)
($0.1)
2029
$0.48
$0.43
$0.290
$3.609
($5.15)
$0.03
($0.01)
$0.28
($0.5)
($0.3)
2030
$0.49
$0.46
$0.317
$3.948
($6.00)
$0.04
($0.01)
$0.28
($1.0)
($0.4)
2031
$0.50
$0.50
$0.346
$4.298
($6.67)
$0.04
($0.01)
$0.28
($1.2)
($0.5)
2032
$0.51
$0.54
$0.374
$4.658
($7.35)
$0.04
($0.01)
$0.28
($1.5)
($0.6)
2033
$0.52
$0.58
$0.404
$5.029
($8.03)
$0.05
($0.01)
$0.28
($1.7)
($0.7)
2034
$0.53
$0.62
$0.435
$5.410
($8.71)
$0.05
($0.02)
$0.28
($1.9)
($0.7)
2035
$0.54
$0.66
$0.467
$5.803
($9.40)
$0.06
($0.02)
$0.28
($2.1)
($0.8)
Totals
$8.91
$6.40
$4.32
$53.77
($68.70)
$0.43
($0.14)
$5.61
$1.7
$4.2
Data Sources:
The following data sources were used to quantify costs and benefits for planting and maintaining urban trees:
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•
Carbon sequestration by urban trees, 0.262 kg C/ m2-yr, was taken from Nowak's 2013 urban tree study, value for Arlington, Texas. 94
•
Carbon sequestration for reforested suburban/rural periphery, 1.31 Mg CO2/ha, taken from the Coahuila Baseline Inventory & Forecast.
•
Tree Installation & Maintenance Costs and Energy Impacts were developed from USFS's Desert Southwest Community Tree Guide 95: o Net electricity savings from shading, 234 kWh/tree-yr at full maturity in strategic suburban areas; o Net energy dis-benefits from shading during winter, -68 MMBtu/tree-yr at full maturity in strategic suburban areas. o Stormwater Runoff Savings, US$6.61/tree
•
Planting and maintenance costs: o Urban trees: MX$70 per tree for planting, MX$3.20 per tree-year for maintenance, MX$37.56 per tree-year for irrigation. o Suburban trees: MX$70 per tree for planting, MX$3.00 per tree-year for maintenance, MX$37.56 per tree-year for irrigation.
•
Sustainable Use of Natural Resources costs (suburban/rural periphery), 3,018 $/Ha.
•
Programa Integral de Desarrollo Rural, 2015 (Componente: Conservación y Uso de Suelo y Agua (COUSSA). Secretaría de Agricultura, Ganadería, Desarrollo Rural, Pesca y Alimentación.
Key Assumptions:
•
Allocations of new plantings (fraction of total tree requirement): o “Municipal Core”: high-rise areas, where street trees offer little energy savings benefits, set at 10%; o “Suburban Strategic”: outside of the urban core (e.g. suburban areas), low to midrise buildings offer energy savings benefits for strategically-planted trees, set at 65%; o “Suburban Other”: outside of the urban core; open areas that do not offer potential for energy savings (parks, other open areas, streets, etc.), set at 25%.
•
Proportion of Urban Core Trees providing stormwater benefits: 10%
94 Nowak, David, and Daniel Crane. “Carbon Storage and Sequestration by Urban Trees in the USA.” Environmental Pollution 116 (2002): p. 385 Accessed on web June 2, 2014. 95 Desert Southwest Community Tree Guide: Benefits, Costs, and Strategic Planting. United State Department of Agriculture, Forest Service. http://www.fs.fed.us/psw/programs/uesd/uep/products/001_cufr542_72dpiDsrtSWCommTreeGd04.pdf
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App. F- AFOLU Policy Recommendations February 2016
Tree sizes planted: o Small deciduous tree – 20% o Medium deciduous trees – 30% o Large deciduous trees – 30% o Conifer trees – 20%
Key Uncertainties •
The amount of electricity savings from reduced air conditioning is based on U.S. data and may not accurately reflect the level of AC usage in Coahuila.
•
Urban reforestation policy will require cultural change and promotion of participation of citizens.
•
It should achieve good cooperation between the strategic partners such as the population and the authorities at all levels of government.
Additional Benefits and Costs • Economic benefits: Temporary job creation. • Costs: They can generate rupture sidewalks. Feasibility Issues • Sufficient funding to improve the corridors. • Lack of training on the issues of urban forestry and green corridors.
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AFOLU-3. Increase and conservation of vegetation in rural areas.
Policy Description This policy is designed to take advantage of the vegetation in rural areas in the state. Reforestation and conservation permits increasing and improving the vegetation surface in the state, helping with the absorption of carbon dioxide. Reforestation, integral restoration and maintenance of green areas with emphasis in native species’ rescue and conservation permits protection of the wide genetic biodiversity present in the state. Likewise, this policy will support the conservation of the existent aquifers and will allow a larger supply of water for human consumption. Similarly, a more efficient management of vegetation permits mitigation of deterioration, shortage or over-exploitation of the primary productive resources: land and water. Policy Design Goals: On the side of conservation of natural resources, the goal is to increase the floor area intended for sustainable use in 3,180 has. per year. While on the side of reforestation, the goal is additional planting of 5,000 trees per year. Temporality: 2016-2035, assuming a linear behavior, in 2035 carbon sequestration through vegetation will increase 2 times. Coverage: State Stakeholders: Participation of the following bodies is required for this policy’s implementation: National Agencies: 1.
National Forest Commission
2.
National Water Commission
3.
Ministry of Environment and Natural Resources
State Agencies: 2.
State Ministry of Environment
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Local Agencies: 1.
Local Urban Development Department
2.
Local Ecology Department
GHG Causal Chain
The causal chain identifies the main effects of the policy and the subsequent impact on GHG. The star symbol identifies the significant effects on GHG which will be quantified. Red color indicates the net impact on GHG, which could be positive or negative. Implementation Mechanisms •
Enhance reforestation programs, implementing new techniques and extending the volunteer programs. The Center for Climate Strategies
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•
Identify native species with adequate development possibilities according to the climatic characteristics of the region.
•
Enable tree nurseries for the production of species for reforestation.
•
Training in reforestation, irrigation, fertilization and pruning, based on citizen awareness.
•
Take advantage of the new programs related to water conservation and use.
Current Similar Policies and Programs, and Recent Actions • National Forestry Program: Its goal is to promote the usage of forestry resources, according to sustainable forestry management principles, to maintain and increase environmental goods and services’ availability. • National Reforestation Program: Its goal is to reforest with a wide and effective participation of society, using appropriate techniques and species for the environmental conditions of each region, for restoration and conservation of ecosystems and forest coverage in the country. • Strategic Program: State Park and Urban Forests Network, in order to diagnose the green areas in the state, promote the improvement of existing areas and the establishment of new green urban areas. • Integral Rural Development Program (Component: Land and Water Use and Conservation (COUSSA)). Estimated Net GHG Reductions and Net Costs or Savings 2025 In-State GHG Impacts (TgCO2e) (0.042)
2035 In-State GHG Impacts (TgCO2e) (0.084)
2016 – 2035 Cumulative In-State Impacts (TgCO2e) (0.88)
2016 – 2035 Cumulative Total Impacts (TgCO2e) (0.88)
Net present value of societal costs, 2016 – 2035 ($2014) $115
Cost Effectiveness ($2014/ tCO2e) $131
Quantification Methods:
For rural trees, carbon sequestration was estimated based on the area reforested and the sequestration rate of 1.31 MgCO2/ha, taken from the Baseline I&F, as shown in Table AFOLU3.1. Table AFOLU-3.1. Policy Reforested Area and Carbon Sequestration.
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Annual Area Reforested
Cumulative Area Reforested
Carbon Sequestered
Annual Rural Periphery Reforested
Cumulative Rural Periphery Area Reforested
Rural Periphery Area Carbon Sequestered
Ha
Ha
Tg CO2e
Ha
Ha
Tg CO2e
Year 2016
12
12
(0.0000)
3,180
3,180
(0.0042)
2017
12
24
(0.0000)
3,180
6,360
(0.0083)
2018
12
36
(0.0000)
3,180
9,540
(0.0125)
2019
12
48
(0.0001)
3,180
12,720
(0.0167)
2020
12
60
(0.0001)
3,180
15,900
(0.0208)
2021
12
72
(0.0001)
3,180
19,080
(0.0250)
2022
12
84
(0.0001)
3,180
22,260
(0.0292)
2023
12
96
(0.0001)
3,180
25,440
(0.0333)
2024
12
108
(0.0001)
3,180
28,620
(0.0375)
2025
12
120
(0.0002)
3,180
31,800
(0.0417)
2026
12
132
(0.0002)
3,180
34,980
(0.0458)
2027
12
144
(0.0002)
3,180
38,160
(0.0500)
2028
12
156
(0.0002)
3,180
41,340
(0.0542)
2029
12
168
(0.0002)
3,180
44,520
(0.0583)
2030
12
180
(0.0002)
3,180
47,700
(0.0625)
2031
12
192
(0.0003)
3,180
50,880
(0.0667)
2032
12
204
(0.0003)
3,180
54,060
(0.0708)
2033
12
216
(0.0003)
3,180
57,240
(0.0750)
2034 2035
12 12
228 240
(0.0003) (0.0003)
60,420 63,600
Totals
240
3,180 3,180 63,600
(0.0792) (0.0833) (0.87)
(0.003)
Costs for rural reforestation were estimated using an assumption that 400 trees/ha would be planted and a planting cost of MX$23 per tree. Reforested land will include both public and private lands. It was assumed that private land reforestation will not require rental or acquisition costs. Costs for the suburban/rural periphery reforested through a program for sustainable use of natural resources program are expected to be MX$3,018/Ha. Table AFOLU-3.2. Policy Reforestation Costs.
Year
Total Policy Costs
Total Discounted Policy Costs
Cost Effectiveness
MM$
MM$2014
$2014/tCO2e
2016
$9.71
$8.81
2017
$9.71
$8.39
2018
$9.71
$7.99
2019
$9.71
$7.61
2020
$9.71
$7.24
2021
$9.71
$6.90
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Total Policy Costs
Total Discounted Policy Costs
Cost Effectiveness
MM$
MM$2014
$2014/tCO2e
$9.71
$6.57
2023
$9.71
$6.26
2024
$9.71
$5.96
2025
$9.71
$5.68
2026
$9.71
$5.41
2027
$9.71
$5.15
2028
$9.71
$4.90
2029
$9.71
$4.67
2030
$9.71
$4.45
2031
$9.71
$4.24
2032
$9.71
$4.03
2033
$9.71
$3.84
2034
$9.71
$3.66
2035
$9.71
$3.48
Total
$194
$115
$131
Key Uncertainties • Rural reforestation policy will require enhancement of environmental care habits and promotion of participation of rural inhabitants. • It should achieve good cooperation between the strategic partners such as the population and the authorities at all levels of government. Additional Benefits and Costs • Economic benefits: Temporary job creation. Feasibility Issues • Sufficient funding to improve vegetation in rural areas. • Lack of training on the issues of rural forestry.
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Appendix G Waste Management Policy Recommendations
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App. G- WM Policy Recommendations February 2016
Waste Management (WM) Sector Overview The tables above provide a summary of the microeconomic analysis of policies in the Waste Management sector. The first table provides a summary of results on a “stand-alone” basis, meaning that each policy was analyzed separately against baseline (business as usual or BAU) conditions. Details on the analysis of each policy are provided in each of the Policy Option Documents (PODs) that follow within this appendix. The “Stand-Alone” results provide the annual GHG reductions for 2025 and 2035 in teragrams (Tg) of carbon dioxide equivalent reductions (CO2e), as well as the cumulative reductions through 2035 (1 Tg is equal to 1 million metric tons). The In-State reductions shown are just those that have been estimated to occur within the State. Additional GHG reductions, typically those associated with upstream emissions in the supply of fuels or materials, have also been estimated. Also reported in the stand-alone results is the net present value (NPV) of societal costs/savings for each policy. These are the net costs of implementing each policy reported in 2014 dollars. The cost effectiveness (CE) estimated for each policy is also provided. Cost effectiveness is a common metric that denotes the cost/savings for reducing each metric ton (t) of emissions. Note that the CE estimates use the total emission reductions for the policy (i.e. those occurring both within and outside of the State). As indicated in the summary table, analysis of both WM policies indicated that they could be implemented with net cost savings to society. Intra-Sector Interactions & Overlaps Adjustments The second summary table provides the same values described above after an assessment was made of any policy interactions or overlaps. There were no interactions or overlaps identified between the WM policies; therefore, the values in the second table are the same as those in the first table.
3
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WM-1. Electricity production with landfill methane. Policy Description With this policy methane gas (CH4) is captured in Coahuila’s landfills and is used to generate electricity, connected to the Federal Electricity Commission’s (CFE) public network. Methane capture on one hand helps reduce landfill gas emissions, and on the other, has a natural growing source, as it comes from the population increase and the urban solid waste generation resultant from the increase in consumption and personal waste generation. Furthermore, methane capture counteracts the usage of non-renewable resources such as oil, carbon and natural gas; it also generates income for landfills and savings for users that benefit from this type of gas. Policy Design Goals: In the first stage, exploitation of methane gas from Saltillo’s and Torreon’s landfills to produce 2 MW of electricity per year. In a second stage, in 2035, the goal is to produce 3 MW per year, resultant from both landfills’ capacity enlargement. Temporality: 2016-2035. In the first stage, producing 2MW by 2020, and full implementation by 2035. Coverage: Saltillo and Torreon. Stakeholders: National Agencies: 1. Federal Electricity Commission (CFE) 2. Ministry of Energy (SENER) State Agencies: 1. State Ministry of Environment Local Agencies: 1. Local Government of Saltillo. 2. Local Government of Torreon. 4
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GHG Causal Chain
The causal chain identifies the main effects of the policy and the subsequent impact on GHG. The star symbol identifies the significant effects on GHG which will be quantified. Red color indicates the net impact on GHG, which could be positive or negative. Implementation Mechanisms 1. Installation of gas collection systems in landfills. 2. Distribution and commercialization of electric energy generated through methane in landfills. 3. Benefit from new regulations that impulse clean energy, permitting energy-generating companies to sell electricity to the Federal Electricity Commission, with benefits for the company and the city. Current Similar Policies and Programs, and Recent Actions • Phase 1 Project for electricity generation from biogas in Saltillo’s landfill. In part, this CAP policy addresses a second phase to expand landfill gas capture and utilization at this site. 5
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Estimated Net GHG Reductions and Net Costs or Savings 2025 In-State GHG Impacts (TgCO2e) (0.13)
2035 In-State GHG Impacts (TgCO2e) (0.13)
2016 – 2035 Cumulative In-State Impacts (TgCO2e) (2.1)
2016 – 2035 Cumulative Total Impacts (TgCO2e) (2.2)
Net present value of societal costs, 2016 – 2035 ($2014) ($153)
Cost Effectiveness ($2014/ tCO2e) ($71)
Quantification Methods: Net Energy & GHG Impacts. GHG emissions impacts were estimated for the direct landfill methane collection and destruction, grid electricity offset, and upstream emissions from grid electricity offset. The following factors were used to estimate these emissions sources: Parameter
Value
Units
LFG Collection Efficiency
64
Conversion Efficiency for LFGTE System LFGTE Capacity Factor
327 0.85
m3 CH4/MWh unitless
Conversion Factor: mass to volume
0.00068
tCH4/m3 CH4
Notes/Citations https://www.globalmethane.org/Data/LF_MX_Saltillo_fly er_2010.pdf Derived from information provided in EPA LFG Handbook, Section 1.3 (http://www.epa.gov/lmop/documents/pdfs/pdh_chapte r1.pdf) assumed based on EPA case studies Standard conversion: http://encyclopedia.airliquide.com/Encyclopedia.asp?Gas ID=41
%
The US EPA’s LandGEM model was used to estimate methane emissions from the Saltillo and Torreon landfills based on waste acceptance rates. This first order decay (FOD) model is consistent with the IPCC model used to estimate landfill CH4 emissions in the GHG baseline. Expansion of the Saltillo landfill gas collection and utilization system from 1 to 2 MW was set to occur in 2020; while the 1 MW system for Torreon was set for installation and operation in 2025. Table WM-1.1 provides a summary of the net impacts estimated for policy implementation. The second column provides emission reductions for landfill CH4 collection and combustion in teragrams of carbon dioxide equivalents (TgCO2e). The third column provides estimates of the indirect emission reductions produced by offsetting grid-based electricity with the power generated by projects implemented from the policy. The fourth column provides another set of indirect emission reductions from reduced fossil fuel demand for the power plants supplying power to the grid. “In-State GHG Impacts” refers to the sum of direct landfill CH4 reductions plus the indirect grid electricity offsets. “Out-of-State GHG Impacts” represents just the upstream GHGs from grid power fuel supply. These are considered to occur outside of the geographic boundaries of Coahuila, since the location of all emission sources in the fuel supply chain are not known to occur within the State (e.g. natural gas extraction, processing, transmission). Total impacts include both in-State and out-of-State impacts. As shown in the table, by 2025, the policy is expected to result 6
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in total GHG reductions of 0.14 TgCO2e. Total cumulative reductions for the policy period are 2.2 TgCO2e.
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Table WM-1.1. Net Emissions Impacts.
Year
Landfill CH4 Collection & Destruction
Indirect Grid Electricity Offset Benefit
Upstream GHGs for Grid Power Fuel Supply
TgCO2e
TgCO2e
TgCO2e
In-State GHG Impacts TgCO2e
Out-of-State GHG Impacts TgCO2e
Total GHG Impacts TgCO2e
2016
(0.041)
(0.0040)
(0.0013)
(0.045)
(0.0013)
(0.046)
2017
(0.041)
(0.0040)
(0.0013)
(0.045)
(0.0013)
(0.046)
2018
(0.041)
(0.0040)
(0.0012)
(0.045)
(0.0012)
(0.046)
2019
(0.041)
(0.0040)
(0.0012)
(0.045)
(0.0012)
(0.046)
2020
(0.082)
(0.0079)
(0.0023)
(0.090)
(0.0023)
(0.092)
2021
(0.082)
(0.0079)
(0.0023)
(0.090)
(0.0023)
(0.092)
2022
(0.082)
(0.0079)
(0.0023)
(0.090)
(0.0023)
(0.092)
2023
(0.082)
(0.0079)
(0.0023)
(0.090)
(0.0023)
(0.092)
2024
(0.082)
(0.0079)
(0.0023)
(0.090)
(0.0023)
(0.092)
2025
(0.12)
(0.012)
(0.0034)
(0.13)
(0.0034)
(0.14)
2026
(0.12)
(0.012)
(0.0034)
(0.13)
(0.0034)
(0.14)
2027
(0.12)
(0.012)
(0.0034)
(0.13)
(0.0034)
(0.14)
2028
(0.12)
(0.012)
(0.0034)
(0.13)
(0.0034)
(0.14)
2029
(0.12)
(0.012)
(0.0034)
(0.13)
(0.0034)
(0.14)
2030
(0.12)
(0.012)
(0.0034)
(0.13)
(0.0034)
(0.14)
2031
(0.12)
(0.012)
(0.0034)
(0.13)
(0.0034)
(0.14)
2032
(0.12)
(0.012)
(0.0034)
(0.13)
(0.0034)
(0.14)
2033
(0.12)
(0.012)
(0.0033)
(0.13)
(0.0033)
(0.14)
2034
(0.12)
(0.012)
(0.0033)
(0.13)
(0.0033)
(0.14)
2035
(0.12)
(0.012)
(0.0033)
(0.13)
(0.0033)
(0.14)
Totals
(1.9)
(0.19)
(0.054)
(2.1)
(0.054)
(2.2)
Net Cost Impacts. The estimated costs for this policy include initial capital costs, major overhaul costs after 6 years, operations and maintenance (O&M), and the value of electricity generated. Capital costs were annualized over 10 years at 3.5%. Costs were estimated based on the following factors. Table WM-1.2. Key Cost Inputs. Parameter
Capital Costs
Value
MX$33.8
Units
$MM/MW
Notes/Citations EPA LFG Energy Handbook; Case Study "Electricity 2"; 3 MW system that requires a LFG collection and flaring system; http://www.epa.gov/lmop/documents/pdfs/pdh_appa.pdf. Total Capital cost = $USMM7.63
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Parameter
O&M Costs: Conversion Equipment Major Overhaul Time until Major Overhaul
App. G- WM Policy Recommendations February 2016
Value
Units
MX$526
$/MWh
MX $10.9
$MM/MW
6.0
yrs
Notes/Citations Same EPA Case Study as above; $US884,764/yr. Project generates 22,407 MWh/yr; escalated using the annual inflation rate. Assumed to be equal to half of the initial capital costs for engine/gen set; gas compression/clean up eqpt. = $USMM2.45 or $US0.82/MW. Based on 50,000 hours
Table WM-1.3 provides a summary of the net societal cost impacts for the policy. Total policy costs are the sum of the annualized capital costs for project installation, operations and maintenance costs, annualized major overhaul costs, and the societal value of electricity produced by both projects. Discounted policy costs are then presented based on a 5% discount rate selected for the project. The total ($153 million through 2035) is the net present value (NPV) of policy implementation costs. The cost effectiveness result is derived by dividing the policy’s NPV by the total GHG reductions from Table WM-1.1. The result is an expected $71 saved for every ton of CO2e GHG reductions. Table WM-1.3. Net Societal Costs Summary. Total Policy Costs
Total Discounted Policy Costs
Cost Effectiveness
MM$
MM$2014
$2014/tCO2e
Year
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Totals
$0.00 $0.00 $0.00 $0.00 ($7.83) ($8.44) ($9.08) ($9.68) ($10.3) ($20.9) ($21.1) ($22.8) ($22.8) ($22.7) ($26.7) ($25.4) ($25.3) ($25.2) ($25.2) ($29.2) ($313)
$0.00 $0.00 $0.00 $0.00 ($5.84) ($6.00) ($6.14) ($6.24) ($6.32) ($12.2) ($11.8) ($12.1) ($11.5) ($10.9) ($12.2) ($11.1) ($10.5) ($9.99) ($9.50) ($10.5) ($153)
($71)
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It is important to note here that the societal value of electricity production is equal to the cost of electricity production from the marginal resource mix for Coahuila (the avoided cost of electricity production). The avoided cost ranges from about 1.8 to 2.8 pesos per kilowatt-hr ($/kWh) during the policy period. The resultant savings achieved by producing renewable electricity for the grid offset the project construction and operation costs which provide the overall net savings attributed to the policy. The avoided electricity generation costs are different (likely much higher) than the value of electricity sold back to the grid by each project operator (which may be on the order of 0.65 $/kWh). The value of power sold back to the grid is an appropriate value for use in macroeconomic analysis, but not for direct net societal cost analysis. Additional data sources: •
Waste acceptance inputs for Saltillo: https://www.globalmethane.org/Data/LF_MX_Saltillo_flyer_2010.pdf
•
Waste acceptance inputs for Torreon: Intermunicipal Matmoros-Torreón Landfill Gas Project, https://cdm.unfccc.int/Projects/DB/AENOR1343038915.78/view
•
Geographic and Statistical Yearbook 2014 by State. http://www.inegi.org.mx/prod_serv/contenidos/espanol/bvinegi/productos/integracion/pais/ae pef/2014/702825063986.pdf
•
Waste Management, 2011. http://www.sema.gob.mx/descargas/legal/NORMAS/NORMA%20161.pdf
•
Guide for the use of methane gas in sanitary, 2011 fillings. http://biogasiclei.pacmun.org.mx/wp-content/uploads/2013/04/g-Guia-Aprovechamiento-Gas-MetanoEPA-COCEF-ICMA-Julio-2011.pdf
•
State Program for the Prevention and Management of urban solid waste and special management for the state of Coahuila, 2013. http://www.semarnat.gob.mx/sites/default/files/documentos/gestionresiduos/pepgir_coahuila.pdf
•
Regulations for the use of the health, filling 1998. http://ordenjuridicodemo.segob.gob.mx/Estatal/COAHUILA/Municipios/Saltillo/SALReg20.pdf
•
Sagarpa-FIRCO, 2010, "General biodigestion systems". Shared Risk Trust (FIRCO). http://sigan.org/2010/pdf/generalidades.pdf
Important assumptions: 10
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• 1 MW of generation will be added at Saltillo in 2020, 1 MW of generation will be added at Torreón in 2025. • The BAU case was assumed to not include any costs that would be avoided under the policy (e.g. landfill gas venting or flaring systems). Also, BAU and the Policy Scenario were assumed to have the same landfill capping requirements. • Landfills of the three most populated areas of the state were considered metropolitans. (Saltillo, Torreon and Monclova). • Lifetime of landfills: 20 years. • The energy generated by each project will be used to meet local needs in situ or not covered by the network. • Acceptance by municipal governments, especially Saltillo and Monclova, which belong to a different political party to state government. Key Uncertainties • The production performance depends on the type of system installed. • For the implementation of this policy, the private sector is being considered primarily along with the support of federal, state and municipal governments. • This energy could also help achieve the goals of the Renewable Energy Portfolio (CER) in ES sector. Additional Benefits and Costs • Economic benefits: local employment creation. • Costs: reduced cost of power generating plant facilities. Feasibility Issues • Acceptance by municipal governments. • Cost of production plant.
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WM-2. Increase sanitation coverage and water reclamation. Policy Description This policy permits increasing percentages of sanitation and reuse of water for industrial processes and irrigation of green urban areas and agricultural crops, which reduces the amount of pollutants resulting from not sanitizing water. Also, reuse in the industrial sector allows a wider availability of water for productive processes. Usage for watering green urban areas allows savings in consumption of water from aquifers, at the same time that green areas in cities are preserved, as well as the drinking water supply for the population. Policy Design Goals: • Increase the flow of treated water in 40%. Photovoltaic solar will be installed at wastewater treatment plants sufficient to cover the increased energy demand for water treatment. •
Increase the use of reclaimed water used for industrial activities to 900 l/s and the amount used for irrigation of green areas to 300 l/s, for a total of 1,200 l/s by 2035.
Temporality: 2016-2035. Assuming a linear behavior, in 2035 the amount of treated water will increase to 5,400 l/s; and the amount of reused water will pass 3,619 l/s. Coverage: State Stakeholders: National Agencies: 1.
Ministry of Environment and Natural Resources
2.
National Water Comission
State Agencies: 3.
State Water and Treatment Comisssion
4.
State Ministry of Urban Management, Water and Territorial Ordinance
5.
State Ministry of Infrastructure 12
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State Ministry of Environment
Local Agencies: 1.
Local Governments
GHG Causal Chain
The causal chain identifies the main effects of the policy and the subsequent impact on GHG. The star symbol identifies the significant effects on GHG which will be quantified. Colored boxes indicate the net impact on GHG, which could be positive or negative. Implementation Mechanisms • Build infrastructure to transfer water from treatment plants to the supply sources for the industry, construction of the purple line. 13
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• Equip the current supply sources of water in green areas for reuse of treated water.
Current Similar Policies and Programs, and Recent Actions • Local Wastewater Treatment Plants Projects, operating 18 plants in the state, distributed in 13 municipalities. Estimated Net GHG Reductions and Net Costs or Savings 2025 In-State GHG Impacts (TgCO2e)
2035 In-State GHG Impacts (TgCO2e)
2016 – 2035 Cumulative In-State Impacts (TgCO2e)
2016 – 2035 Cumulative Total Impacts (TgCO2e)
Net present value of societal costs, 2016 – 2035 ($2014)
Cost Effectiveness ($2014/ tCO2e)
(0.037)
(0.051)
(0.76)
(0.98)
$2,081
($2,132)
Quantification Methods: Net Energy & GHG Impacts. The GHG impacts of this policy were estimated based on emission estimates for increased water treatment energy for increased water treatment flows and reduced pumping and potabilization for water replaced by reclaimed water. Parameter Water Treatment Energy
Pumping Energy Potabilization Energy
Value
Units
0.29
kWh/m3
1.02 0.33
kWh/m3 kWh/m3
Notes/Citations Values from Baja California, http://www.cea.gob.mx/indicadores.html Based on value for Matamoros, Coahuila, https://ccwiwra.files.wordpress.com/2011/07/pedraz a_ase-watergy-mexico.pdf http://www.cea.gob.mx/indicadores.html
BAU wastewater treatment flows were forecasted based on historical data for 2007-2013, as shown in the Table WM-2.1. Table WM-2.1 also shows the BAU energy and emissions estimated based on these wastewater flows and the energy intensity for treatment and the estimated wastewater flows, energy, and emissions under the policy. Since the increased energy required for treating additional wastewater will be provided by newly installed solar, there is no increase in emissions for the increase wastewater treatment.
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Table WM-2.1. Business as Usual Wastewater Treatment.
BAU Treated Wastewater in Coahuila Year liters/second m3/yr 2007 2,966 93,535,776 2008 3,866 121,918,176 2009 4,026 126,963,936 2010 4,026 126,963,936 2011 3,858 121,665,888 2012 3,858 121,665,888 2013 3,878 122,296,608 2016 4,329 136,532,859 2017 4,192 132,195,118 2018 4,233 133,499,952 2019 4,311 135,957,726 2020 4,408 139,009,560 2021 4,483 141,361,720 2022 4,544 143,302,395 2023 4,557 143,715,821 2024 4,660 146,944,754 2025 4,729 149,133,623 2026 4,789 151,025,397 2027 4,846 152,818,135 2028 4,908 154,790,700 2029 4,976 156,925,859 2030 5,048 159,194,401 2031 5,105 160,990,226 2032 5,168 162,984,840 2033 5,234 165,050,824 2034 5,300 167,129,386 2035 5,364 169,160,380 2016-2035 Totals 3,001,723,678
BAU Energy for Treatment GWh
39.59 38.34 38.71 39.43 40.31 40.99 41.56 41.68 42.61 43.25 43.80 44.32 44.89 45.51 46.17 46.69 47.27 47.86 48.47 49.06 870
Policy Treated Wastewater liters/second m3/yr
4,445 4,415 4,572 4,771 4,996 5,200 5,392 5,529 5,778 5,990 6,194 6,396 6,610 6,834 7,067 7,147 7,236 7,327 7,419 7,510
Policy Energy for Treatment GWh
140,173,736
40.65
139,245,524
40.38
144,179,949
41.81
150,459,884
43.63
157,544,168
45.69
163,979,595
47.55
170,052,176
49.32
174,375,196
50.57
182,211,495
52.84
188,902,589
54.78
195,326,180
56.64
201,719,939
58.50
208,451,476
60.45
215,511,513
62.50
222,872,161
64.63
225,386,316
65.36
228,178,776
66.17
231,071,154
67.01
233,981,140
67.85
236,824,533
68.68
3,810,447,499
1,105
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Increased water reclamation was assumed to be implemented linearly to achieve 900 l/s for industrial usage and 300 l/s in 2035. Table WM-2.2 shows the incremental Policy Scenario water reclamation flow rates and the energy and emissions from the pumping and potabilization of the offset water. Table WM-2.2. Policy Reclaimed Water. Water Reclaimed Under Policy for Green Space Irrigation
Water Reclaimed Under Policy for Industrial Use
Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
liters/ second 200 237 274 311 347 384 421 458 495 532 568 605 642 679 716 753 789 826 863 900 Totals
3
m /yr
liters/ second
6,307,200 7,469,053 8,630,905 9,792,758 10,954,611 12,116,463 13,278,316 14,440,168 15,602,021 16,763,874 17,925,726 19,087,579 20,249,432 21,411,284 22,573,137 23,734,989 24,896,842 26,058,695 27,220,547 28,382,400 346,896,000
200 237 274 311 347 384 421 458 495 532 568 605 642 679 716 753 789 826 863 900
m3/yr 315,360 630,720 946,080 1,261,440 1,576,800 1,892,160 2,207,520 2,522,880 2,838,240 3,153,600 3,468,960 3,784,320 4,099,680 4,415,040 4,730,400 5,045,760 5,361,120 5,676,480 5,991,840 6,307,200 66,225,600
BAU Potabilizatio n/ Pumping Energy GWh 8.94 10.93 12.93 14.92 16.92 18.91 20.91 22.90 24.89 26.89 28.88 30.88 32.87 34.87 36.86 38.85 40.85 42.84 44.84 46.83 558
BAU Potabilization/ Pumping Emissions Tg CO2e 0.0048 0.0059 0.0069 0.0079 0.0090 0.010 0.011 0.012 0.013 0.014 0.015 0.016 0.017 0.019 0.020 0.021 0.022 0.023 0.024 0.025 0.30
BAU Potabilization/ Pumping Upstream Emissions Tg CO2e 0.0014 0.0017 0.0020 0.0023 0.0026 0.0029 0.0032 0.0035 0.0038 0.0041 0.0044 0.0047 0.0050 0.0052 0.0055 0.0058 0.0061 0.0064 0.0066 0.0069 0.084
Net Cost Impacts. Costs include O&M costs for additional wastewater treatment, capital costs for new sewer connections, “purple line” capital costs for reclaimed water, and saved pumping and potabilization costs for water replaced by reclaimed water. The factors shown in the table below were used to calculate these emissions and costs. Table WM-2.3. Key Cost Inputs. 17
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Parameter
App. G- WM Policy Recommendations February 2016
Value
Water Treatment O&M Costs Cost for installing sewer connection Per capita wastewater generation Water Reclamation Capital Costs Potabilization O&M Pumping O&M
Units
Notes/Citations
Based on current budget for water treatment and 2016 flow Based on US$160 per capita (2000), http://www.who.int/water_sanitation_health/wsh04 $3,888 2014MX$/capita 04.pdf. 2.91
MX$/m3
292
Liter/day/capita
7.9 0.37 5.02
MX$/m3 MX$/m3 MX$/m3
Anda and Shear, 2008, http://pwm.sagepub.com/content/12/4/590.abstract Based on MX$100 million for 400 l/s http://www.cea.gob.mx/indicadores.html http://www.cea.gob.mx/indicadores.html
Table WM-2.4 shows the costs avoided by replacing potable water by reclaimed water, which includes O&M and electricity costs. Table WM-2.4. BAU Avoided Costs.
Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
BAU O&M for Potable Water Affected by Policy
BAU Electricity Costs for Potable Water Affected by Policy
BAU Total for Avoided Potable Water
MM$
MM$
MM$
$179 $219 $259 $298 $338 $378 $418 $458 $498 $538 $578 $618 $657 $697 $737 $777 $817 $857 $897
$16 $21 $25 $30 $36 $42 $48 $54 $61 $68 $77 $86 $91 $97 $103 $108 $114 $120 $126
$179 $219 $259 $298 $338 $378 $418 $458 $498 $538 $578 $618 $657 $697 $737 $777 $817 $857 $897
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BAU O&M for Potable Water Affected by Policy
BAU Electricity Costs for Potable Water Affected by Policy
BAU Total for Avoided Potable Water
MM$
MM$
MM$
Year 2035 Totals
$937 $11,154
$131 $1,454
$937 $11,154
The Policy costs for increased wastewater treatment are shown in Table WM-2.5, and the costs associated with reclaimed water are shown in Table WM-2.6. The net policy costs, estimated as total policy costs minus total BAU costs, are shown in Table WM-2.7. Table WM-2.5. Policy Costs for Wastewater Treatment.
Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Totals
PV Solar Capital Costs
Annualized PV Capital Costs
PV Solar O&M
Capital Costs for New Sewer Connections
Incremental Wastewater Treatment O&M
MM$
MM$
MM$
MM$
MM$
$1.43 $1.34 $1.43 $1.51 $1.59 $1.61 $1.63 $1.54 $1.82 $1.77 $1.79 $1.81 $1.88 $1.94 $2.01 $0.28 $0.31 $0.33 $0.33 $0.32
$0.14 $0.27 $0.40 $0.55 $0.70 $0.85 $1.01 $1.16 $1.33 $1.50 $1.67 $1.84 $2.02 $2.21 $2.40 $2.43 $2.46 $2.49 $2.52 $2.55
$0.02 $0.04 $0.05 $0.07 $0.09 $0.11 $0.13 $0.15 $0.18 $0.20 $0.22 $0.25 $0.27 $0.30 $0.32 $0.32 $0.33 $0.33 $0.34 $0.34
$132.83 $124.39 $132.42 $139.44 $147.12 $148.97 $150.74 $142.63 $168.09 $164.25 $165.33 $167.86 $173.62 $179.67 $185.78 $26.21 $29.11 $30.15 $30.33 $29.64
$11 $21 $31 $42 $54 $66 $78 $89 $103 $116 $129 $142 $156 $170 $185 $187 $190 $192 $195 $197
$27
$30
$4.0
$2,469
$2,353
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Coahuila SCAP Phase 2 Report
App. G- WM Policy Recommendations February 2016
Table WM-2.6. Policy Costs.
Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Totals
Avoided Costs for Potable Water Affected by Policy
BAU Electricity Costs for Potable Water Affected by Policy
Water Reclamation Capital Costs
Annualized Capital Costs
MM$
MM$
MM$
MM$
$179 $219 $259 $298 $338 $378 $418 $458 $498 $538 $578 $618 $657 $697 $737 $777 $817 $857 $897 $937 $11,154
$16 $21 $25 $30 $36 $42 $48 $54 $61 $68 $77 $86 $91 $97 $103 $108 $114 $120 $126 $131 $1,454
$53 $64 $76 $88 $99 $111 $123 $134 $146 $158 $170 $181 $193 $205 $216 $228 $240 $252 $263 $275 $3,275
$4.6 $10 $17 $24 $33 $43 $53 $65 $78 $91 $106 $122 $139 $156 $175 $190 $201 $206 $205 $196 $2,114
Table WM-2.7. Net Policy Costs.
Year 2016 2017 2018 2019 2020 2021 2022 2023 2024
BAU Total for Avoided Potable Water
Total Policy Costs
Total Net Policy Costs
Total Discounted Policy Costs
MM$
MM$
MM$
MM$2014
$179 $219 $259 $298 $338 $378 $418 $458 $498
$148 $155 $181 $207 $235 $258 $283 $298 $350
($31) ($63) ($78) ($92) ($104) ($120) ($135) ($160) ($148)
($28) ($55) ($64) ($72) ($77) ($85) ($91) ($103) ($91)
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Coahuila SCAP Phase 2 Report
Year 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Totals
App. G- WM Policy Recommendations February 2016
BAU Total for Avoided Potable Water
Total Policy Costs
Total Net Policy Costs
Total Discounted Policy Costs
MM$
MM$
MM$
MM$2014
$538 $578 $618 $657 $697 $737 $777 $817 $857 $897 $937 $11,154
$373 $402 $434 $471 $509 $549 $407 $423 $431 $432 $425 $6,971
($165) ($175) ($183) ($187) ($188) ($188) ($370) ($394) ($426) ($464) ($512) ($4,183)
($96) ($98) ($97) ($94) ($91) ($86) ($162) ($164) ($168) ($175) ($184) ($2,081)
Additional data sources: • Geographic and Statistical Yearbook 2014. Available by State: http://www.inegi.org.mx/prod_serv/contenidos/espanol/bvinegi/productos/integracion/pais/aepef /2014/702825063986.pdf • Water Atlas in Mexico 2012. Available at: http://www.conagua.gob.mx/CONAGUA07/Noticias/SGP-36-12.pdf • Statistics on Water in Mexico, 2013. Available at: http://www.conagua.gob.mx/CONAGUA07/Noticias/SGP-2-14Web.pdf • National Inventory of Municipal Water treatment plants and wastewater treatment operation. 2011 Available at: http://www.conagua.gob.mx/CONAGUA07/Publicaciones/Publicaciones/SGAPDSINVENTRIO%202011%20FINAL.pdf • Mexican Official Standard NOM-003-ECOL-1997. http://www.profepa.gob.mx/innovaportal/file/3297/1/nom-003-semarnat-1997.pdf Important assumptions: • To implement the policy must follow NOM-003. • This policy is aimed at the three most populated areas of the State: Saltillo, Torreon and Monclova. 21
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Coahuila SCAP Phase 2 Report
App. G- WM Policy Recommendations February 2016
Key Uncertainties • It is necessary to continue with the policy despite the changes of government, mainly because of the duration of the municipal governments. • Good cooperation between the municipal and state levels of government should be achieved. • The net policy emission impacts do not include an estimate for methane emitted for wastewater that is not treated before release due to insufficient data. However, these emissions are believed to be small compared to emissions associated with treatment energy consumption. Additional Benefits and Costs • Economic benefits: Creation of specialized jobs. • Costs: Increased energy demand resulting from the operation of water treatment plants. Reduction from any used for initial sourcing of water (e.g. pumping of ground or surface water) Feasibility Issues • Funding. • Commitment of the authorities to continue implementing this policy. • Increasing prices of equipment and materials. • Changes in government administration, which hinders the full development of the policy.
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