Green Green:  Financing News for the U.S. Geothermal Industry


Volume 2, Number 5
31 October 2001

HOT NEWS

Green Green Expands Focus

Greenhouse Gas Emissions Trading

REGULAR FEATURES

In Short

Upcoming Events

Other Geothermal and Related Calendars

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Green Green Expands Focus

Green Green is expanding its focus. In addition to reporting on international project financing and opportunities, the newsletter will begin reporting on news relevant to financing small- and medium-size power generation and direct use geothermal projects in the United States. Issues which may be covered include the effects of Electric Utility Restructuring, Renewable Portfolio Standards, Environmental or Carbon Credits and their trading benefits, and Public Benefits Funds.

Renewable Portfolio Standards can provide an incentive to small generation projects due to the need for utilities to find and buy renewable energy. This needs to be defined on an ongoing basis and presented to the smaller entities in the geothermal industry. The trading of carbon or environmental credits is likely to become a brokers market, as this incentive area grows. This, too, needs definition and promulgation to the industry. Finally, Public Benefits Funds exist in 23 states and are used in various ways, many of which may well be of use and benefit to the geothermal industry. These, too, need better definition and their status reported to the industry on an ongoing basis.

This issue of Green Green addresses greenhouse gas and carbon dioxide emissions trading – what is being done around the world and in the United States.


Greenhouse Gas Emissions Trading

The potential market for greenhouse gas (GHG) and carbon dioxide emissions is enormous. In the U.S. alone, estimates range from $100 billion to $500 billion. Worldwide trade in GHG emissions have resulted in more than 160 million metric tons of CO2 equivalent reductions, and are expected to grow to $90.4 billion per year by 2010 (Source: Resource and Economics, Vol. 21, 1999; http://www.CO2e.com). The implementation of GHG emissions trading and development of national markets are in various stages throughout the world.

The United Kingdom will have the world's first nationwide greenhouse gas trading system. The $313-million UK Emissions Trading Scheme could cut up to 2 million tons of carbon per year from the atmosphere by 2010. In April, the UK Government introduced the Climate Change Levy (CCL). The CCL is an energy tax which is applied to most non-domestic users on energy unless it comes from renewable energy sources or combined heat and power generation. Non-domestic users are charged 0.00625 cents/kWh on electricity. The UK has set itself a goal that goes beyond the Kyoto target – to reduce emissions of CO2 by 20% below 1990 levels by 2010.

Additionally, through the Renewables Obligation, the UK is committed to increasing the amount of the country's electricity generated by renewables to 10% by 2010. Under the plan, participants sign up to deliver emission reduction targets through either cuts in-house or by buying and selling emission allowances on the market. If firms can reduce emissions cheaply and beat their targets, they can sell the surplus allowances or bank them for future use.

In Norway, at the request of the Parliament, the Ministry of Petroleum and Energy is evaluating how a compulsory tradeable green certificate program could support increased use of renewable energy. Since most homes across Norway are heated with electricity, the proposed program should include heat from solar energy, biomass, and geothermal heat pumps, as well as power.

In Europe, the European Commission is supporting an international project called RECerT (Renewable Electricity Certificate Trading) to help achieve the European Union's target for renewables penetration of 12% of primary energy by 2010, thereby contributing to achieving the EU's Kyoto objective targets for CO2 emissions reduction. There is also a private initiative called RECS (Renewable Energy Certificate System).

Down under, as part of Australia's new Renewable Energy (Electricity) Act 2001, the Mandatory Renewable Energy Target (MRET) requires that an extra 2% of energy must be generated from renewable energy sources, including geothermal-aquifer and hot dry rock, by 2010. The Act is expected to add an additional 9,500 GWh of renewable energy sources. Renewable Energy Certificates (RECs), one created for every MWh of renewable energy produced, would be traded and used to demonstrate compliance with the MRET. For more information, refer to the Office of the Renewable Energy Regulator (ORER) web site.

In the United States, Native Americans in Montana made the first carbon offset trade in April. Sustainable Forestry Management (SFM), a London-based company which invests in forestry projects with environmental and social benefits, will buy GHG emission reductions equivalent to almost 48,000 tons of carbon dioxide from native Americans in Montana. SFM is paying the Confederated Salish and Kootenai tribes on the Flathead Indian Reservation $50,000 to reforest 100 hectares of their reservation that was destroyed by forest fires in 1994. In return, the tribes will preserve the forest for 100 years and pass on the associated GHG offsets or "carbon credits" to SFM for 80 years. The trade was facilitated by the Montana Carbon Offset Coalition and arranged by Chicago-based Environmental Financial Products LLC, headed by Richard L. Sandor.

Dr. Sandor, widely known as the father of market-based emissions trading instruments, and research professor at the Kellogg Graduate School of Management at Northwestern University, designed and created the Chicago Climate Exchange (CCX). CCX, the first U.S. voluntary pilot program for trading of GHG, and covers Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio, and Wisconsin. It has received grants from the Joyce Foundation.

Midwest-based utility companies involved in the design phase of the CCX represent almost 20% greenhouse gas emissions in the region. They include energy providers, e.g., multinational oil, gas, and solar giant BP; Calpine of San Jose, CA; and Alliant Energy of Madison, WI. Combined market capitalization of the 33 participants amounts to $425 billion.

"Those of us who can see that it will be necessary in the future to reduce carbon dioxide want to be involved in creating the mechanism that will do that," said Kristine Krause, vice president of the environment division of the Milwaukee-based Wisconsin Energy Corp., a CCX participant.

The CCX would enable participants to get credit for voluntary emissions reductions and to buy and sell credits to find the most cost effective way to reduce their emissions. The CCX's stated goal is to reduce participants' greenhouse gas emissions by 5% below 1999 levels over five years. By comparison, the countries that ratified the Kyoto Protocol must reduce emissions of carbon dioxide to an average of 5.2% below 1990 levels during the five-year period 2008-2012.

The CCX will be the first test of carbon trading on a regional scale with global potential. The Midwest is a promising location for starting the market because of its nearly one-fifth share of the U.S. economy and GHG emissions; its mix of manufacturing, transport, energy, agriculture, and forestry sectors; and its extensive international linkages.

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In Short

  • The European Parliament voted on 3 July to approve the Directive on renewable energy. The Directive aims to double the proportion of green energy from 6% to 12% of primary energy supply by increasing the share of renewably generated electricity from 14% to 22% by 2010. The Directive will lead to simplified planning procedures for renewable projects, guarantees grid access for green power, and create more transparent terms for grid access and use. The Directive also provides important guarantees for investors in renewables, and removes uncertainty. Each EU member state will be free to use its chosen means of encouraging the use of renewables to meet its targets, e.g., through a quota system, feed-in tariffs, green certificates, etc.
  • The Kenyan government plans to invest $2.27 billion from 2002 to 2019 to build new power plants, including six 4-MWe geothermal plants, a 161-MWe hydropower plant and, diesel plants with a combined generation of 540 MWe.
  • Shell El Salvador and Geotermica Salvadorena SA de CV (GESAL) have formed a joint venture to produce electricity from one of GESAL's geothermal fields in El Salvador. The project, Shell's first in geothermal, will generate 5 MWe.
  • FondElec Group, Inc. has launched the Latin American Clean Energy Services Fund to invest in countries in the region that have shown advances in energy efficiency and renewable energy technology projects. The main targets of the fund are Brazil and Mexico. Headquartered in Quito, Ecuador, the fund will make equity or quasi-equity investments in small innovative companies that use energy-efficient measures or renewable energy for generating power. The fund will be capitalized at $25-50 million; the Multilateral Investment Fund (MIF) of the Inter-American Development Bank, will commit up to $10 million. FondElec Group Inc. is a private equity investment firm with more than $220 million of investment capital.
  • The Philippine National Oil Company (PNOC) is confident that the 40-MWe geothermal project in Sitio Pata-an, Barangay Mailum, Bago City, will begin operations by 2004. PNOC said that it will not conduct geothermal exploration in a 169 hectares buffer zone within the Mt. Kanlaon National Park.
  • According to The Philippine Star, CalEnergy is optimistic about investment in the Philippine power sector, and may acquire assets of Philippine state-owned National Power Corp. (Napocor), which will be up for sale next year as part of the government's privatization plan.
  • South Crofty Holdings Inc. (SFH) will form North Pacific GeoPower (NPGP), Canada's first geothermal energy company for the commercial production of electricity. This publicly listed renewable energy company will be created by way of a reverse take-over of SFH and a vend-in of 100% of the significant Meager Creek geothermal project from Crew Development Corp. (CRU) to SFH. A meeting of SFH shareholders is scheduled for 22 November to vote on the proposal. Upon completion of the transactions, CRU will own approximately 87% of SFH, which will be re-named NPGP and dedicated solely to the development of the Meager Creek geothermal energy project located north of Vancouver.
  • The construction of the first power unit of the Mutnovsky geothermal power plant in Kamchatka, the Russian Far East, is scheduled for completion in December.

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Upcoming Events

2001
November
December

2002
January May September
February June October
March July November
April August December

2001
1-2 November
Web site: 5th Annual Mexican Energy 2001
Houston, TX
Mexico's power demand growth is expected to be 10% per year. To meet that demand, generation capacity will have to grow approximately 71% through 2008.

4-6 November
Web site: Joint International Conference & Business Meet: Non-Fossil Fuel Generation
New Delhi, India
Jointly organized by the Ministry of Power, Government of India, and Confederation of Indian Industry, the conference will discuss and deliberate issues related to development of hydro, nuclear and renewable-based generation in India.

4-8 November
Web site: 2nd World Conference on Technology Advances for Sustainable Development
Cairo, Egypt
The conference combines the 2nd International Conference on Renewable Energy and Environment Protection Technologies, and the 5th International Conference on Solar Electricity: Photovoltaics, Wind, and Solar Thermal Technologies.

5-6 November
Web site: Eyeforenergy Green Convention
Brussels, Belgium
What are the structural and economic forces driving investment in the alternative energy market? How are the energy majors already benefiting from green energy opportunities and how can your company develop a successful sustainable energy strategy? Get answers to these critical questions and listen to case studies from industry experts such as the European Commission, Enel, BG Group, and Edison.

7-9 November
Web site: 23rd New Zealand Geothermal Workshop
Auckland, New Zealand

7-10 November
Renewable Energy Indonesia 2001
Jakarta, Indonesia
Email: Stephen Luff, Overseas Exhibition Services

11-14 November
Web site: Distribution 2001
Brisbane, Australia
Email: Noela Cain, Commercial Specialist-Energy, U.S. Commercial Service, Melbourne, American Consulate General

15-16 November
Web site: 3rd Annual Financing U.S. Power Projects
New York, NY
Hear first-hand experiences and case studies from Calpine, Consolidated Edison Development, Dynegy, El Paso, Enron, and Mirant. Plus, get an update from FERC on the changed political and regulatory landscape, find out about the cost of capital, and identify hidden risks in complex financing structures. Two pre-conference workshops focus on IPOs and Financing Merchant Plants.

21-23 November
Web site: Geothermal Energy in Underground Mines
Ustron, Poland
Email: Zbigniew Malolepszy, Faculty of Earth Sciences, University of Silesia

22-27 November
Web site: Shanghai International Industry Fair
Shanghai, China

26-29 November
Web site: 2001 World Sustainable Energy Expo
Adelaide, Australia

28-29 November
Web site: Energy Venture Fair II
Houston, TX
Approximately 75 up-and-coming growth companies in areas including distributed generation, emissions control, energy e-commerce, energy information management, power quality and reliability, renewables, virtual utilities and infrastructure will meet with venture capitalists and strategic investors to explore the significant business opportunities in today's electric power sector, one of the most rapidly growing destinations for private equity investment dollars.

29 November
Renewable Energy Summit
Los Angeles County Fairplex
Pomona, CA
Email: Mark Pfeifle, Press Secretary
Tel: (202) 208-6416
Hosted by Interior Secretary Gale Norton and Energy Secretary Spencer Abraham, the national summit will bring renewable energy experts together to discuss the future development of renewable energy resources on public lands.

3-4 December
Web site: Trade Finance in Asia: Maximizing trade opportunities / Minimizing the risks
Hong Kong

4-5 December
Web site: The Commercialization of Distributed Power for Small-Scale Stationary Applications
Central London, UK

6-9 December
Enexpo Turkiye
Ankara, Turkey
Email: Farshid Bagherian, General Manager, S.S.D professional Group
Fax: [90] (312) 213-8532

12-13 December
Web site: Renewable Energy Initiative Plans: Bringing the Alternative into the Mainstream
Phoenix, AZ

13 December
Web site: North American Development Bank (NADB) Public Meeting
San Antonio, TX
Tel: (210) 231-8000
The purpose of this meeting is to provide an opportunity for a direct exchange of information about the Bank's institutional and project development with the NADB Board of Directors. With that in mind, please note that each person interested in addressing the Board will be asked to limit his/her remarks to three minutes, in order to allow as many people as possible to participate.

2002
6-11 January
Web site: Rio 02 - World Climate and Energy Event
Rio de Janeiro, Brazil

19-21 January
International Conference on Renewable Energy for Rural Development
Dhaka, Bangladesh
Organized by Mechanical Engineering Department, BUET and the Centre for Renewable Energy Systems Technology (CREST)
Email: A.K.M. Sadrul Islam

21-23 January
Web site: Third International Symposium on Non-CO2 Greenhouse Gases (NCGG-3)
Maastricht, Netherlands
Organized by VVM-sectie (Section for Clean Air in The Netherlands)

22-23 January
Web site: 5th Electric Utilities Environmental Conference on Air Quality, Global Climate Change, Renewable Energy, and Emergency Response
Tucson, AZ

28-30 January
Web site: 27th Stanford Workshop on Geothermal Reservoir Engineering
Palo Alto, CA

3-6 February
Middle East Electricity - The international exhibition and conference for the power and electricity industries
Dubai, U.A.E
Organized by IIR Exhibitions
Email: Sarah Woodbridge

4-8 February
Web site: 5th Annual Asia Power Conference
Singapore

19-21 February
Web site: Eyeforenergy Emissions Trading 2002
Okura Hotel, Amsterdam

27-28 February
2nd Annual African Insiders Strategic Briefing 2002
Johannesburg, South Africa
Email: Babette van Gessel

6-8 March
Web site: World Sustainable Energy Day 2002
Wels, Austria
The conference will showcase outstanding projects and initiatives in the fields of energy efficiency and renewable energy sources from all over the world and inform about the latest development in energy politics. A special program element is the presentation of the winners of the Energy Globe Award 2002 – the prize for sustainable energy projects.

19-21 March
Web site: Electric Power 2002 Exhibition and Conference
St. Louis, MO
The Electric Power 2002 Exhibition and Conference has been selected by the U.S. Department of Commerce to participate in its International Buyer Program, one of only 28 events chosen and the only one serving the power sector. With this designation, U.S. Embassies and commercial offices throughout the world will actively encourage buying delegations to attend the conference.

25-28 March
MinTek 2002: 6th Russian International Mining, Exploration and Mining Equipment Exhibition
Moscow, Russia
Email: Oleg Netchaev

22-23 April
Mexican Energy 2002
Houston, TX
Email: Babette van Gessel

22-24 April
Web site: 3rd Latin American and Caribbean Gas and Electricity Congress
Santa Cruz, Bolivia
Organized by Camara Boliviana de Hidrocarburos, CIER, and SPE Internacional

24-26 April
Web site: XV Argentine Geological Congress
El Calafate, Santa Cruz Province, Argentina

19-24 May
Web site: Energex 2002 Conference
Cracow, Poland
Organized by the Mineral and Energy Economy Research Institute

2-7 June
Web site: Sustainable Development of Energy, Water, and Environment Systems
Dubrovnik, Croatia
Organized by the University of Zagreb and the Instituto Superior Tecnico

9-11 June
Web site: WEC Regional Energy Forum: Energy and European Integration
Neptun, Romania
Organized by the World Energy Council

11-13 June
Web site: Generating Ideas for Power - PowerGen Europe 2002
Fiera Milano, Milan, Italy

24-25 June
Web site: Annual Conference "Worldwide Energy Liberalization – Building on Lessons Learned"
Leipzig, Germany

29 June-5 July
Web site: World Renewable Energy Congress VII & Exhibition
Cologne, Germany

1-3 July
Web site: Renewable Energy Expo 2002
Koln Messe, Cologne, Germany

10-11 September
Web site: Renewable Energy in Maritime Island Climates (REMIC)
Belfast, Northern Ireland
Email: Mrs. C. Buckle, The Solar Energy Society

22-25 September
Web site: Geothermal Resources Council 2002 Annual Meeting
Reno, NV

1-4 October
6th International Conference on Greenhouse Gas Control Technologies
Kyoto, Japan
Organized by the GHGT-6 Secretariat
Email: Norifumi Matsumiya
Paper Deadline: 28 February 2002

9-11 October
9th Annual Africa Upstream 2002
Cape Town, South Africa
Email: Babette van Gessel

18-20 October
Web site: Pre-congress short course on "Geothermal Energy Resources for Developing Countries"
Mal del Plata, Argentina

21-25 October
Web site: XXXII International Association for Hydrogeologists Congress on Groundwater and Human Development
Mal del Plata, Argentina

6-9 November
II International Renewable Energy Source Symposium
Santiago, Chile
Email: Ruben Ramos Heredia, Centro de Investigaciones de Energia Solar

2004
16-26 August
Web site: 32nd International Geological Congress
Florence, Italy
Email: Matteo Moscatelli, Newtours SpA
2005
To be determined
World Geothermal Congress 2005
Antalya, Turkey
WGC2005 First Announcement

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THE FINE PRINT

Green Green is produced for the Idaho National Engineering & Environmental Laboratory (INEEL) under Purchase Order No. K99-181018 and the U.S. Department of Energy, Assistant Secretary for Energy Efficiency and Renewable Energy, Office of Wind and Geothermal Technologies.

This information was prepared as an account of work sponsored by an agency of the U.S. Government. Neither the U.S. Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply its endorsement, recommendation, or favoring by the U.S. Government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the U.S. Government or any agency thereof.


Green Green is produced by
Bob Lawrence & Associates, Inc.
Liz Battocletti, Editor

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Phone: 703 836 3654 / Fax: 703 836 6086
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