Case Study: Jepirachi Wind Power Project Northeastern Atlantic Coast Colombia

1. Case Study: Jepirachi Wind Power ProjectNortheastern Atlantic Coast Colombia Charles Cormier , PCF Team Tel: +1.202.473.5423 ccormier@worldbank.org

2. Project Characteristics • Description: Aeolic facility owned and operated by Empresas Publicas de Medellin (EPM), with 19.5 MW, supplied by a total of 15 generators (capacity of 1.3 MW each) • Location: Wayuu Indian Territory in the Northeastern region of the Atlantic Coast of Colombia • Financing: EPM’s balance sheet; USD $21 million

3. Benefits for Project Sponsor • Carbon finance provides an additional source of revenue • Revenues from sales of electricity: 90% • Revenues from carbon emission credits: 10% • With carbon finance, IRR increases by +1.0 • Plant will be first in country (renewable, new technology) • Wind potential in area is significant (5 GW/y ) and could represent important contribution to power system for the country (contrary trend to period of rains) • Linked to social development program

4. Sources of Energy in the Colombian Grid 1990-2010

5. The project is additional ... Demand is expected to increase between 3.7 to 5.8% in the next five years. Due to economic situation: • Withdrawal of public sector investors • Reluctance of private sector to invest in hydroelectric power Most likely course of action without CDM as determined through least cost analysis: • The most probable expansion plan consists of future investments in thermal energy • This is confirmed by comparing generation costs of Jepirachi wind power project (USD 38.35 / MWh) with other alternatives in the baseline study • Coal USD /MWh 35.30 • CCGT USD/ MWh 31.50 – 32.82 • OCGT USD/ MWh 36.50

6. What type of energy will be displaced ? • Will displace the most expensive energy that is dispatched at the margin • From 2003 to 2009 will displace a mixture of gas and coal • From 2010 to 2024 will displace energy from gas • The Monitoring Plan will confirm these assumptions and measure actual emission reductions

7. Issues during Validation • Whether local indigenous community were supportive of project • Extent of public consultation • Environmental Impact Assessment (migratory birds, etc.) • Sustainable development indicators/ economic development indicators

8. Characteristics of the Wayuu Nation • Semi-nomadic people; territory spans Northern east corner of Colombia and adjacent Venezuela • Matriarchal society without centralized structure • 30,000 individuals, 300 in the project area.

9. Social Development A formal agreement between the Project Sponsor and the Wayuu Community was signed following extensive negotiations, to outline a community driven compensation and development plan

10. Education: Provision of school facilities and teachers

11. Health Strengthening of health center (electricity, instruments, medical personnel)

12. Water Supply: Provision of water desalinization plant

13. Conclusions • PIN submitted in march 2001 • Initial validation opinion (favorable) was issued in June 2002 • Agreement reached on terms of emission reduction purchase agreement in June 2002 • Project will generate: 1.168 mtCO2 over 21 years • PCF will buy first 800,000 tons at $3.5/tCO2e, with additional premium of $0.50 t/CO2e for social benefits • Finalisation of Emission Reduction Purchase Agreement expected in December 2002 • Completion of construction expected in October 2003