Case Study: Jepirachi Wind Power ProjectNortheastern Atlantic Coast

Colombia

Charles Cormier , PCF Team

Tel: +1.202.473.5423

ccormier@worldbank.org

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

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

Sources of Energy in the Colombian Grid 1990-2010

0

10

20

30

40

50

60

70

80

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

% C

om

posi

tion

Inst

all

ed C

apaci

ty

Range Hydro 2010: 61-63%

Range Thermal 2010: 37-39%

Wind, Solar, Biomass: 0%

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

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

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

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.

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

Social Development

Education:

• Provision of school facilities and teachers

Health

• Strengthening of health center (electricity, instruments, medical personnel)

Water Supply:

• Provision of water desalinization plant

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