Handing the beautiful earth down to future generations

1. Addressing emissions reductions Electricity sector based approach December 10, 2004 KANSAI Electric Power Handing the beautiful earth down to future generations

2. Outline • About Kansai Electric Power • Why a benchmark of grid connected electricity project necessary? • What does the benchmark convey ? • Additionality issues on the benchmark • Selecting baseline candidates • Selecting stringent benchmark

3. Overview of Kansai Electric Power Company 159.7 TWh Other utilities (15%) IPP (15%) Tokyo Nagoya Hydro (10%) Other Fossil Fuel (2%) Osaka LNG (15%) 1951 1990 Nuclear (48%) 2002 emission factor 140.2 TWh Sold electricity 0.261 kg-CO2/kWh CO2 emissions 36.6 Mt-CO2 1990 2010 2003 Japan

4. Setting a "proxy" Barriers test What is a "benchmark" ? Grid connected electricity project Baseline candidate Baseline candidate Baseline candidate Baseline candidate Baseline candidate Baseline candidate Project specific baseline Standard benchmark

5. Why a benchmark necessary ? It is very difficult or impossible to define the specific baseline scenario of a grid connected electricity project. • By the CDM project, • Which power sources will be replaced? • How much kWh of those power sources • will be affected? Need to understand a characteristic of a grid electricity

6. CO2 FOSSIL FOSSIL kWh = 0 kWh = 100 CO2 CO2 FOSSIL FOSSIL kWh = 100 kWh = 100 Grid electricity is supplied according to changes of total demand, not specifically to on-off trend of each demand. Characteristic of a grid electricity

7. Grid connected electricity project Energy Efficiency Renewable energy Project type Fuel switch Re-powering Grid side Supply side Demand side Grid Firm Load control Non-firm Non-firm Possibility to identify replaced power sources by a project Possible (difficult) Impossible Impossible Project specific baseline or Standard benchmark Standard benchmark

8. Characteristic of a grid electricity Characteristic of a grid electricity CO2 OFFICE NUCLEAR FACTORY FOSSIL MIX MIX HYDRO HOME CO2 HYDRO It is impossible to identify particular power sources to particular project FOSSIL

9. Daily supply & demand control (Kansai) ［GW］ 35 ［Sep.3, 2003］ Pumped storage hydro 30 25 Fossil fuels 20 Pumping Other utilities 15 IPP Hydro 10 5 Nuclear 0 ［Time］ 24 12 18 1 6 The optimum generation mix with fossil fuel and hydro power ensures stable supply to TOTAL energy demand in a short term. Nuclear power operation stays constant. (S&D is controlled by TOTAL demand fluctuation)

10. Annual supply & demand control (Kansai) 35 ［2003］ ［GW］ Pumped storage hydro Fossil fuels 30 Other utilities 25 20 15 IPP Hydro 10 5 Nuclear 0 ［Month］ 4 6 7 8 5 9 10 11 12 1 3 2 Saw-like fluctuation indicates weekly S&D control.The optimum generation mix with all power sources ensure stable supply to TOTAL energy demand in a long term. Nuclear power stations control their operation by coordinating the timing of periodical inspections. (S&D is controlled by TOTAL demand fluctuation)

11. Review of power expansion plan (Japan) (Reviewing capacity installed plan) ［GW］ Large base load plant such like nuclear is also affected by a trend of TOTAL energy demand and those future power expansion plan is reviewed yearly. Pumped storage hydro Review Hydro Coal LNG Oil Nuclear 45.74 57.00 49.58 2002 2008 planned in 1999 2008 planned in 2004

12. Lead time for Nuclear Power station (Kansai) Lead time of Ohi No.4 nuclear power station Aug.1979 July.1985 Feb.1993 more than 10 years... Start construction Start operation Start "Environmental Assessment" Depend on the situation, it takes more than 10 years for constructing power pant. long-term effect should also be taken into account for developing baseline scenario.

13. Why a benchmark necessary ? All grid power sources are affected by total demand varying from second to second. It is very difficult or impossible to define the specific baseline scenario. We need a "benchmark" as a proxy!! • Particularly, in case where they... • CANNOT obtain sufficient information from Grid System Operator • CANNOT obtain available data of • electricity supply system

14. What does the benchmark convey? Benchmark is a proxy. It should be stringent and conservative compared with project specific baseline. On the other hand, a proxy makes it possible to reduce transaction costs and accelerate CDM project. Invigorate the Kyoto mechanisms !!

15. Conceptual features of a benchmark ≠ ≠ ACM0002 Consolidated baseline methodology Project specific baseline scenario “Benchmark” Baseline candidate Baseline candidate Baseline candidate .............. NO baseline scenario Equation only Crucial point of difference “Benchmark” is the proxy for a baseline that represents baseline candidates. Consolidated baseline methodology is the equation that consolidates the equations of baseline scenarios for analogous projects.

16. What is the baseline under CDM The baseline for a CDM project activity is the scenario that reasonably represents the anthropogenic emissions by sources of greenhouse gases that would occur in the absence of the proposed project activity. ( Marrakesh Accord) A baseline is counterfactual. Defining the baseline scenario means to develop persuasive story apart from the ultimate baseline that only exists as a concept. A number of baselines can be proposed according to a way of demonstration. Need a benchmark as a proxy!!

17. Additionality issues on the benchmark GHG Emissions ≠Benchmark !! Baseline Scenario Additional !! Project Scenario Start of project activity Time Additionality can be originally demonstrated by defining project specific baseline scenario. However, in theory, a proxy is not a defined baseline scenario, thus it cannot demonstrate additionality. To secure the level of additionality, a proxy should be selected stringently among the baseline candidates. Need a Stringency Level Test ?

18. Selecting baseline candidates Firstly..... Strict baseline candidates are nominated by addressing the following characteristic conditions National energy policies and regulations Grid capacity Constitution of the grid power sources Liberalization of the power market Power expansion plan Energy demand trend Technological level Fuel availability more strict Baseline candidates

19. 25% Level Benchmark Selecting stringent benchmark Stringency Level Test (kg-CO2/kWh) Baseline candidates Average of all candidates Stringent Conservative A proxy should be stringent and conservative compared with project specific baseline. Therefore, the benchmark should be more stringent than the average of all candidates. Unless there is specific GHG program in host country, it is desirable to set stringency level below at least 25% level.

20. Conclusion • It is very difficult or impossible to define the specific baseline scenario of a grid connected electricity project. • In case where sufficient grid information is not available, identifying standard benchmark will be useful procedure as a substitute of defining baseline scenario. • In principle, benchmark should be stringent and conservative compared with project specific baseline. • Benchmark cannot demonstrate Additionality. Therefore, Benchmark should be selected stringently among the baseline candidates. • It is possible to nominate strict baseline candidates by • addressing the characteristic of electricity sector in • selected geographic area and temporal range of the project. • Benchmark can be identified by implementing stringency level test.

21. Thank you !! http://www.kepco.co.jp/english/index.html Handing the beautiful earth down to future generations