DURBAN’SGAS-TO-ELECTRICITY PROJECT

UEMPUEMPREFERENCE GROUP MEETING ON

CLIMATE CHANGE NELSON MANDELA BAY

8 APRIL 2010

John ParkinDeputy Head: Plant & Engineering

eThekwini Municipality

AFRICA’S FIRSTLANDFILL GASCDM PROJECT

UNSUSPECTING & NAIVE

“I learnt that courage was not the“I learnt that courage was not theabsence of fear,

but the triumph over it”

(Nelson Mandela)(Nelson Mandela)

CHAMPION

ETHEKWINI MUNICIPAL AREA

“Component One”

(the Mariannhill and La Mercy Landfills)

700 000 CER700 000 CER

MARIANNHILL LANDFILL

1 MW ENGINE

LA MERCY LANDFILL

0,5 MW ENGINE

“Component Two”

(the Bisasar Road Landfill)

3 100 000 CER

BISASAR ROAD LANDFILL

INITIAL GENERATION 4 MW

NEW ENGINE PLACEMENT MAY 2009

COMMISSIONED 6,5 MW JULY 2009

• PIN• PCN

The CDM Project Process

• PCN• Conditional Approval from DNA (DME)• Base-Line Study• Validation Report• MP (Monitoring Plan)• PDD (Project Design Document)• Comment from Public and Stakeholders• EIA Process and obtain ROD for Project• EIA Process and obtain ROD for Project• Verification of Project• Final DNA Approval• Project Registration with CDM Exec Board

First contact with PCF/World Bank

MOU between eThekwini and PCF –

November 2001

February 2003

LFG-to-Elec CDM Project Time Frames

Commence EIA’s –

Adhoc Approval for funds –

ROD’s for Mariannhill and La Mercy (“Component One”) –

Appeal against “Component One”

July 2003

October 2003

July 2004

August 2004

Appeal response to Minister of DAEA for “Component One” –

ROD Bisasar (“Component Two”) –

Started construction …. “Component One” -

September 2004

October 2004

January 2006

Final Revised ROD for “Component Two” (Bisasar) –

CDM Registration of Component 1 (Mariannhill & La Mercy) –

Commissioning of Mariannhill & La Mercy Flares & Gens –

August 2006

November 2006

Nov~Dec 2006

LFG-to-Elec CDM Project Time Frame Cont

Commissioning of Mariannhill & La Mercy Flares & Gens –

Initial Verification of Component 1 –

“Component Two” (Bisasar) Start Construction –

Verification of “Component 1” Year 1

Nov~Dec 2006

January 2007

March 2007

January 2008

Commissioning of Bisasar Rd Flare & Engines

Registration of Component 2 (Bisasar Rd)-

Commissioning of 6 MW Component 2 ( Bisasar Rd)

March 2008

March 2009

July 2009

Site Methane Destruction

Electricity Generation

TOTALS

Calculated Emission Reductions(in tons)

Bisasar Road 5,295,296 800,704 6,096,000

Mariannhill 1,112,568 112,344 1,224,912

La Mercy 488,972 24,511 513,483

TOTALS 6,896,836 937,559 7,834,395

THE TEAM

• In House Project Management

• Legal Imbemu Environmental Legal Services• Legal Imbemu Environmental Legal Services

• Gas Specialist SLR Ltd ( UK )

• Civil Consultants Wilson & Pass Inc.

• PCF World Bank

• DTI & DME

• French Development Bank• French Development Bank

• EIA Felehetsa / WSP Environmental

• External Verifiers (was SGS now DNV)

• CER Purchaser (Trading Emissions Plc)

WHEN THINGS GO WRONG

ADMINISTRATIVE CHALLENGES• MFMA & SCM don’t deal with out of ordinary

processes

• EIA Process problematic

• Registration by UNFCCC Ex Board long, • Registration by UNFCCC Ex Board long, tedious & pedantic

• Inconsistent decisions by Ex Board

• No direct access to Ex Board

• Monitoring Onerous, expensive

• Language is often a barrier

• Drawn out process

• Whole process is costly

• DOE accreditation

TECHNICAL CHALLENGES

• Lack of Expertise & Resources

• Extreme weather conditions• Extreme weather conditions

• Excess leachate; poorly run site

• Manufacturers supplying incorrect equipment

• Lack of sharing information

• Lack of Experience / Technical Ability

110mm Rain

In one & half

hours

TOO MUCH LIQUID

LA MERCY LANDFILL

OPERATING CHALLENGES

• Service Suppliers lack of Expertise

• Cost of Spares & oil• Cost of Spares & oil

• Cost of Services

• Availability of Spares

• Need good Quality Assurance

• Monitoring: correct procedures• Monitoring: correct procedures

• Logging of raw data & interpretation

LEASONS LEARNED

• Be weary of “Experts”

• Easier to deal with Technical challenges than • Easier to deal with Technical challenges than Political & Administrative issues

• Running of Landfill is as important as the Extraction Process

• Carry out a pre Verification Inspection, saves a lot of stress at verificationa lot of stress at verification

• Add six months to any time frame given

• Cash flow is a major problem

WE’RE STILL LEARNING

JOB CREATION

• 157 Temporary unskilled

• 23 Temporary skilled

• 11 Permanent skilled ( Artisan & Higher )

• 4 Bursaries BScEng ( civil )

FRUSTRATED NO CONTROL

OUTWEIGHED AH ST- - F IT

SHOW ME THE MONEY

• The capital and operating expenditures of the project are supported by two revenue

Project Review

the project are supported by two revenue streams:

– Sale of Carbon Credits – Sale of Electricity

• Without the sale of carbon credits, the project would not be financially viable.

ELECTRICITY SALESUNITS HIGH

RATEAMOUNT LOW

RATEAMOUNT REFIT

RATEAMOUNT

PEAK 441583 108,86 480707,25 30,45 134462,02 90,00 397424,70

STAND-ARD

1068681 28,36 303077,93 18,68 199629,61 90,00 961812,90

OFF PEAK

1469577 15,18 223081,79 13,07 192073,71 90,00 1322619,30

SUR-CHARGE

105306,73 56900,07 273978,21

MAX DEMAND

38880,06 38880,06 38880,06

1151053,76 621945,47 2994715,17

CASH FLOW

INCOME EXPENDITURE

• ELECTRICITY SALES R720 000 / month

• CARBON CREDITS R2 200 000 / month

• CAPITAL EXPENDITURE TO DATE R65 000 000

• ANNUAL OPERATING R8 000 000

• TOTAL R 35 040 000 / annum

Concluding Comments-Landfill gas offers a viable renewable energy source only when linked to Carbon Finance or CDM (R0.57/kWh)

-VER’s may be more viable than CER’s due to over the top requirements of UNFCCC Ex. Boardrequirements of UNFCCC Ex. Board

-The EIA process has over-ripened this fruit – lost two years

- Lack of Technical Skills is restricting expansion in Africa

-Implementation of proven technologies is a must-Implementation of proven technologies is a must

-Distance from Europe is detrimental to fast reaction

-Exchange rate has a dramatic influence on cash flow

EXCEEDED EXPECTATION

THANKS FOR YOUR ATTENTION