Standardized Baseline Methodologies for Energy Efficiency Projects in the Czech Republic

1. Standardized Baseline Methods COP 8 - New Delhi Duane Kexel, Vice-President, PSE Jari Vayrynen, Prototype Carbon Fund

2. Background • Czech Umbrella Project • Aggregate Small Projects From CEA/SEF • Target A Few Lines of Business • Transactions Costs Too High For Individual Project Analyses • Need Methods That CEA/SEF Can Apply Quickly To Screen Projects • Need Basis For Pre-Validation

3. Limits On Conventional Analyses • Too Costly For Small Projects • Too Lengthy For Numerous Projects • Require More Data Than Is Easily Available • Energy Audits Are Available But Full Feasibility Studies Are Not • Not Familiar Approaches For Local Staff

4. Standardized Baseline (SBL) Concept • Trade-off Effort and Precision • Proponent May Choose Standard or Detailed Approach • SBL May Yield Somewhat Smaller ERUS For Much Smaller Effort • Intentional Conservative Bias In SBL • Validator Must Confirm That SBL Results Are Sound Over A Set of Eligible Projects

5. Czech Experience To Date • Standard Baseline Methodologies Proposed: • “Small” Municipal District Heating Projects • Hospital or Campus Energy Efficiency Projects • Illustrative SBL Case Studies For Each • Rozmital Coal To Gas DH Integration • Thomayer Hospital EE • Full BLS and MP Prepared For Each • DNV Now Validating Both SBL and BLS

6. Eligibility Criteria-StandardDH Baseline • Why? - Limit Exposure From Simplified Methods • Total Space & Water Heat Load < 100 TJ/a • Uses Existing Network-Expansion < 10% • At least 90% of load residential and small comml • Individual Load Data For Loads > 2,500 GJ/a • Heat Only Boilers - No CHPs • Fuels - Lignite, Coal, LFO, Gas, Biomass

7. DH Standard Method Summary • Determine Services Offered, Service Area And Heat Loads • Assume End User Demands Remain Fixed If They Comply With Czech Standards - Otherwise Assume Compliance Within Ten Years • Determine Time Horizon For Operation of Existing System - Default = Five Years • Default Existing System Efficiencies Equal Czech Stds Unless Lower Efficiencies Are Documented • Existing System Losses Default - 15% • Replacement Is With Least-Cost Greenfield System

8. DH Standard Method Summary 2 • First Step Is Survey To Solicit Needed Data • For First Five Years, Loads = Current; Efficiencies Are Based on Standards • Graphic Methods Used To Identify Optimum Replacement System

9. DH SBL Data Requirements • Sponsor Data • Decision Criteria • Alternatives Considered • Expected First Year Heat Price • Existing System Data • Age and Expected Retirement Date • Heat Production and Fuel Consumption • Fuel Costs and Calorific Values • Distribution Losses • Loads (Max MW, Min MW, MWh, HPY, SH, WH)

10. DH SBL Data Requirements - 2 • Future System • Expected New Loads • Expected Load Reduction Due To Efficiency • Loads vs Czech Standards • Replacement System Costs by Component • Total Efficiencies

11. Replacement System Optimization • Determine Least Cost Operating Hours For Gas and Coal Boilers (~1,000 Hours for Peakers) • Find Mwh/a From Coal and From Gas (Areas Under Load Curve ~95% Coal) • Apply Emission Factors To Fuel Consumption To Get SBL CO2 Emissions

12. SBL vs Rozmital BLS Results

13. SBL vs Rozmital BLS Results • Replacement Immediate For Both SBL, BLS Due To Condition of Boilers • SBL Uses Integrated System, BLS Uses Distributed Supply System • Loads 1.0% Higher for SBL • Efficiencies Lower for SBL • CO2 Emissions 13% Lower for BLS

14. DH SBL Additionality • Continued Operation of Exisitng System Assumed To Be Least Cost for 5 Years • Replacement System Is Optimized To Assure Least Cost Operation • Baseline Is Least Cost, Environmentally Compliant System • Proposed System Must Then Be Higher Cost Without Carbon Credits

15. Eligibility Criteria Std Energy Efficiency Baseline (SEEB) • Intended For “Campus-Like” Facilities • Schools, Universities, Hospitals, Etc. • No Firm Size Limit But Typically < 5,000 tpy CO2 Reduction • Detailed Energy Audit With Investment and Savings For Each Building • Financing Must Be ESCO and Host • ESCO and Hospital Terms and Hurdle Rates Are Known

16. SEEB Method Summary • Energy Audit Provides Load Reductions at Each End User and Related Investment • Total Efficiency = MWh to End User/MWh Fuel Input • Default Total Efficiencies (TE) Provided For Current and Replacement Systems • Load Reductions * TE = Fuel Reductions

17. SEEB Method Summary 2 • Fuel Reductions * Fuel Prices = Fuel Cost Savings (FCS) • Non-fuel Cost Savings = k * FCS • Cash Flows Yield IRRs for Each Building Investment and for Each Year of Project • Investments Which Meet ESCO and Hospital Hurdle Rates Are In Baseline • All Other Investments Are Out of Baseline

18. Illustrative SEEB Terms • Investments - 75% ESCO, 25% Hospital • Savings To ESCO - 100% For As Many Years As Required to Provide ROI = 15% • Savings to Hospital, 100% After ESCO Has Earned 15% • Hospital Hurdle ROI - 10%

19. SEEB Data Requirements • Savings and Investments by Building or Supply System Component • Existing Supply and Delivery System Total Efficiencies by Hot Water and Steam Networks by Boiler Fuel • Retirement Date For Existing System and Total Efficiencies and Fuel For Replacement System • Fuel Price Projections • Non-fuel Operating Costs as Percent of Fuel Cost • Defaults Provided For Missing Data

20. SEEB vs Thomayer BLS ERUs

21. SEEB vs Thomayer BLS Results • Both Show No EE Investments in The Baseline Because of Inadequate ROIs • All of The Proposed Investments Are Then Additional • Minor Differences in CO2 Reductions - Variance Due to Changes in Efficiencies • Expect Greater Variance In Projects With Existing System To Be Replaced

22. Standard Baselines Conclusions • Expect Wide Application • Expect Significant Reductions in Transactions Costs • Will Need Improved Databases To Support • May Need Refinements Based on Experience • Suggestions Welcome