Solar Carbon Credits
Incept has contracted the rights to sell the carbon credits from the Green Innovation, Exploration and Resources Inc-owned solar power plant in Negros, Philippines.
The financing is complete on the 80 MW Solar plant with 25 + 25 years permit from Department of Energy, Republic of Philippines under Approval Number SESC 2014-02-064 with production in 2018. The solar plant produces around 39 million (subject to approval Gold standard) carbon credits over 25 years (calculation 80MW= 5153900720 running KWH at the rate of .007560 MTCO2e= 38,953,489 carbon credits over 25 years). Over the 25+25 years contract the Incept subsidiary will receive a net consideration in real terms based on daily trading price per carbon credit sold on daily basis and the ability to sell these credits forward. The net consideration (in real terms) prior to expenses per annum is estimated to be over US$11 million per annum based to certified gold standard credits.
This contract is expected to be increased on the same basis by another 200 MW of solar plant production in the Philippines with the same producer.
This contract is expected to grow in size as Green Innovation Exploration and Resources Inc expands its operations in Phillipines and Mali. Renewable energy is helping many countries to complete its economic transformation and achieve energy security. Solar energy is one of the most abundantly available forms of energy that is be a solution to our ever increasing energy demand. The Earth receives 174 petawatts (PW) of incoming solar radiation in the upper atmosphere. Out of that, approximately 30% is reflected back to space while the rest is absorbed by clouds, oceans and land masses. There are very few technologies available to harness solar energy and convert it into usable form. One of the well known technologies is the solar photovoltaic cell. It is a device that converts solar radiations into electric current using the photoelectric effect. A number of solar photovoltaic cells when electrically connected to each other and mounted in a support structure or frame is called a photovoltaic module.
Solar PV projects are growing worldwide due to its nature of converting solar energy directly into electricity. It is also a good option where grid electricity is economically univiable. Although the cost associated with solar PV projects are high but project developers are still interested in solar PV technologies by considering the future expansion in the industry. Many governments are providing subsidies e.g. feed in tariff, generation based incentives and other benefits for solar projects. Recently India proposed National Solar Mission under its National Action Plan on Climate Change to promote solar energy in the country.
Solar PV projects are environment friendly and help in reducing GHG emissions that would have otherwise occurred due to the fossil fuel based power generation. If the Solar PV plant starts injecting electricity in the grid, it can help to displace equal amount of electricity that would have otherwise been generated from the GHG intensive grid (Most of the power grid have electricity from coal based power plants). Hence such projects are also eligible to earn carbon credits under the Clean Development Mechanism (CDM). CDM is an arrangement under the Kyoto Protocol allowing industrialized countries with a GHG emission reduction targets to invest in projects that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries. Such projects can earn Carbon Credits in the form of GHG emission reductions (One carbon credit is equivalent to one ton of carbon dioxide.
There are a number of pricing methodologies (http://www.goldstandard.org/blog-item/carbon-pricing-what-carbon-credit-worth)
Pricing based on value delivered:
While all Gold Standard projects play a critical role in our transition to a low-carbon economy, some projects go far beyond carbon mitigation. Using a value-driven model to set a price for carbon credits can truly account for the holistic environmental, social and economic impacts of a specific project—that is, both in emissions reductions plus the additional development benefits that can transform lives. The United States Environmental Protection Agency (EPA) released an updated report in 2015 to estimate the total cost of carbon to society. The Figure below summarizes these costs over time according to different risks and assumptions of climate science. This means that for every tonne of carbon dioxide we emit into the atmosphere, we sacrifice an average of USD $36 in environmental degradation and negative social impacts. In theory, these should be accounted for in the price of a carbon credit.
Figure Social Cost of CO2 2015-2050* (in 2007 dollars per metric ton)
Source: Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (May 2013, Revised July 2015)
Discount Rate and Statistic
|Year||5% Avg.||3% Avg.||2.5% Avg.||3% 95th Percentile|
To take this a step further and shine a light on the value above and beyond carbon mitigation, Gold Standard commissioned a group of economists to conduct a comprehensive valuation of the socio-economic benefits delivered by our projects. The conclusion was that projects that follow our principles of inclusive design, transparent governance and outcomes that are long-term, consistent and comparable, deliver additional outcomes worth billions of (US equivalent) dollars. The economic value of Gold Standard project impacts per tonne of CO2 can be seen below.
Prices in the voluntary carbon market do reflect some of these “economic value” principles. For example, prices for clean cookstoves projects, which often deliver life-saving health benefits to women and children, are generally higher than projects that focus more on the emissions reduction. But they ultimately yield to the forces of supply and demand, without safeguards such as a minimum price. This is why there is a tremendous gap between the average historical prices for carbon credits from Figure 1 compared to the economic value of impacts they deliver as noted below.
Gold Standard’s new holistic standard “Gold Standard 3.0,” currently in development, aims to address this discrepancy by more rigorously quantifying the beyond-carbon benefits and allowing for these to be either sold on top of the carbon emission reduction or at least more accurately accounted for within the price of a Gold Stander carbon credit. But in the meantime, we advocate for buyers of carbon credits to more fully recognize these values in their negotiations with sellers.
Figure Monetary value of Gold Standard project impacts
Per ton of reduced CO2 emissions