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CASE STUDY: 

CASE STUDY Dalkia Joint Implementation project in Lithuania

Key Figures for Dalkia 2004: 

Key Figures for Dalkia 2004 5.6 billion € revenue 43 300 employees Active in 40 countries on all continents 630 District and cooling system managed 80 000 energy sites operated 76 200 managed heating capacities and 5100 power generation capacities 5 millions housing units and 2800 industrial sites

Vision of Dalkia on ETS and Kyoto Projects : 

Vision of Dalkia on ETS and Kyoto Projects Dalkia in European Trading Scheme = a leading position 240 sites within 11 EU countries (2% of EU sites) 19 Millions EAUs (1% of the EAU market) A centralised strategy and organisation to value EAU and develop « carbon projects » As an energy operator focused on efficiency and environmental protection, ETS and Kyoto projects represent a real opportunity to enhance Dalkia level of services By introducing new legal obligations on industries, ETS also represents a risk (compliance, energy price increase, carbon price, investment burden…), especially during the second period of ETS (2008/12) during which that burden is likely to increase Hence CDM/JI projects are part of our global carbon strategy and represent : A means to facilitate long-term project realisation with hosting CDM partners linked with emission reductions and transfer of advanced technology&management A means to decrease our compliance cost within the ETS in the mid-term (2008, post 2012 ?) A means to demonstrate our leadership in using innovative tools and supporting the sustainable development of our partners and reinforce our long-term partnership with our customers

JI in Lithuania : polical & economic context: 

JI in Lithuania : polical & economic context POLITICAL CONTEXT Ratification of Kyoto Protocol in 2003 Desire to promote energy efficiency, renewable energy and CHP, especially because CO2 emissions are likely to rise International Climate change policy : Participation AIJ/ BASREC/Strategy JI elaboration/ MoU under discussion (France, Finland…) Participation in ETS, as all EU Member States Lack of institutional framework to analysis and approve projects ENERGETIC CONTEXT Energy dependency (90% fossil fuel imported from Russia) Overcapacity of electricity installation and production (80% nuclear), but decommissioning process by 2009 High energy intensity Low efficiency in DH (despite 70% connexion rate) Only one local energy resource : biomass

Dalkia in Lithuania and wood fuel implantations : 

Dalkia in Lithuania and wood fuel implantations Druskininkai Marijampole Vilkaviskis Palanga Telsai Kybartaï Kelme Vilnius Kalzu Ruda Dalkia in Lithuania : Litesko : 30M€ (10 DH) Vilniaus Energija : 100 M€ 1500 staff 60% of District heating market Concession scheme up to 30 years Partnership with EBRD N°1 private electricity producer (Vilnius CHP = 284 MWe) Woodfuel portfolio in Litesko 9 woodfuel boilers ( + 50 MW) including 7 in JI Switch from heavy fuel/gas to biomass 20 % combustibles in 2004 Competitive advantages Local resource Stable price, lower than fossil fuel Social and environmental positive externalities Birzai

Partnership with European Carbon Fund : 

Partnership with European Carbon Fund Cooperation agreement in 2003 between Litesko, Dalkia International and the CDC (Caisse des Dépôts et de Consignation) to build a first pilot project and create a framework contract Pioneer position in carbon finance for two leaders in utilities and finance : Dalkia : to gain some technical and management skills in order to develop later others and biggers JI/CDM projects in Eastern Europe, Latin America and Asia CDC : creation of the European Carbon Fund (2004), managed today by “Ixis Environment & Infrastructure”

Project management: 

Project management PHASE 1 : FEASIBILITY STUDY Target : Compliance test with KP criteria and calculation of ERU PHASE 2 : ELABORATION OF JI Target : Elaboration of PDD (with BTG/Vertis)& Host Country endorsement letter PHASE 3 : DETERMINATION Verification of PDD by un DNV (DOE) Finalisation of term sheet with EU Carbon Fund and signature of contract Approval of Parties (on going) Determination and Registry PHASE 4 : IMPLEMENTATION Implementation and monitoring Yearly Verification Conversion (AAU= ERU), transfer and payment on delivery

Slide8: 

Additionnality test Environmental YES, renewable energy project (fuel switch) Structural barriers Yes, lack of local knowledge in the DH and forestry sector Financial and technical considerations High investment, new technology, operational risks, no State support for green heat Policy and legal considerations Weak public incentives to develop renewable energy and energy efficiency Energy dependency on fossil fuel

RESULTS: 

RESULTS 250 000 ERU between 2008 and 2012 Innovative contract built in partnership with European Carbon Funds Technology and management knowledge transfer Stabilisation of heat price for municipalities and clients Creation of a sustainable woodfuel sector : In addition to this JI project, Dalkia and the FFEM (French Fund for Environment) launched in 2004 a long-term program to support wood fuel sector More than 40 new local jobs in rural area Reinforcement of our partnership with institutions and local communities

Contact : 

Contact Sophie Ducoloner, Direction of Energy Markets sducoloner@dalkia.com