International Chiller Sector Energy Efficiency and CFC ... · PDF fileInternational Chiller...

International Chiller Sector Energy Efficiency and CFC

Phaseout

Prepared for the World Bank by

ICF Consulting

January 20, 2005

International Chiller Sector Energy Efficiency and CFC Phaseout Page i

Table of Contents

I. Introduction .................................................................................................................... 1

II. Building Chiller Sector Background ................................................................................ 2

A. Chiller Technology Background .............................................................................................. 2

B. Chiller Industry Overview........................................................................................................ 2 1. Centrifugal Chillers .......................................................................................................... 3 2. Absorption Chillers .......................................................................................................... 5 3. Positive Displacement Chillers ........................................................................................ 6

C. Global Environmental Impact .................................................................................................. 8 1. Refrigerant Emissions ODP and GWP ............................................................................ 8 2. Energy Use Warming Impact ........................................................................................... 9 3. Total Equivalent Warming Impact ................................................................................. 12

D. Local Environmental Impact .................................................................................................. 14

E. Activities to Protect the Global Environment ........................................................................ 14 1. Montreal Protocol Multilateral Fund ............................................................................. 15 2. Global Environment Facility .......................................................................................... 15

III. Chiller ODS Replacement Progress ............................................................................. 17

A. Worldwide Chiller Use .......................................................................................................... 17

B. Replacement Progress in the US ............................................................................................ 18

C. Replacement Progress in the European Union ....................................................................... 23

D. Replacement Progress in Japan .............................................................................................. 26

E. Replacement Progress in the Developing World ................................................................... 26

F. Asian Developing Country Chiller Market ............................................................................ 28

IV. Thailand Chiller Project ................................................................................................ 30

A. Project Objectives .................................................................................................................. 30 1. Primary Objectives ......................................................................................................... 30 2. Secondary Objectives ..................................................................................................... 30

B. Country Background .............................................................................................................. 31 1. National Framework for Energy Efficiency ................................................................... 31 2. Installed Chiller Base ..................................................................................................... 31 3. Impact of Economic Crisis ............................................................................................. 31 4. Current Outlook ............................................................................................................. 32

C. Institutional Framework for Project Management ................................................................. 32

D. Project Approach .................................................................................................................... 33 1. Barriers ........................................................................................................................... 33 2. Strategy for Addressing Barriers .................................................................................... 33

International Chiller Sector Energy Efficiency and CFC Phaseout Page ii

3. Key Project Design Elements ........................................................................................ 34

E. Project Status .......................................................................................................................... 36

V. Mexico Chiller Project ................................................................................................... 37

A. Project Objectives .................................................................................................................. 37 1. Primary Objectives ......................................................................................................... 37 2. Operational Objectives ................................................................................................... 37 3. Project Learning Objectives ........................................................................................... 38

B. Country Background .............................................................................................................. 38 1. National Framework for Energy Efficiency ................................................................... 38 2. Technical Context for Chiller Replacement in Mexico ................................................. 38 3. Current Outlook ............................................................................................................. 39

C. Institutional Framework for Project Management ................................................................. 39

D. Project Approach .................................................................................................................... 39 1. Sources of Project Support ............................................................................................. 39 2. Phased Approach to Project Implementation ................................................................. 40 3. Key Project Design Elements ........................................................................................ 40

E. Project Impact ........................................................................................................................ 42

F. Project Status .......................................................................................................................... 42 1. Participant Criteria and Selection .................................................................................. 42 2. Interim Results ............................................................................................................... 43 3. Project Expense Summary ............................................................................................. 44 4. CFC Recovery ................................................................................................................ 44 5. Avoided CFC Consumption ........................................................................................... 44 6. Total CFC Emissions Reductions .................................................................................. 44 7. Energy Savings .............................................................................................................. 45 8. Phase II Project Identification ........................................................................................ 45

VI. Turkey Chiller Project ................................................................................................... 46

A. Project Objectives .................................................................................................................. 46 1. Primary Objectives ......................................................................................................... 46 2. Operational Objectives ................................................................................................... 46

B. Country Background .............................................................................................................. 46 1. Chiller sector .................................................................................................................. 46

C. Project Approach .................................................................................................................... 47 1. Key Project Design Elements ........................................................................................ 47

D. Project Status .......................................................................................................................... 47

VII. India Chiller Project ...................................................................................................... 48

A. Background ............................................................................................................................ 48

B. Project Objectives .................................................................................................................. 48 1. Primary Objectives ......................................................................................................... 48

International Chiller Sector Energy Efficiency and CFC Phaseout Page iii

2. Country Background ...................................................................................................... 48

C. Proposed Project Approach .................................................................................................... 49 1. Key Project Design Elements ........................................................................................ 49

D. Challenges .............................................................................................................................. 49

VIII. Lessons Learned .......................................................................................................... 50

IX. Transforming the Market for Chillers ............................................................................. 52

A. The Market Transformation Approach .................................................................................. 52 1. The Market Transformation Concept ............................................................................. 52 2. Market Transformation for Energy-Efficient Building Technologies ........................... 52 3. Market Transformation and Chillers in Developing Countries ...................................... 55

B. Costs/Benefits ........................................................................................................................ 55 1. Quantifying Costs and Benefits ..................................................................................... 55 2. Other Costs and Benefits ............................................................................................... 57

C. Barriers to Market Transformation ........................................................................................ 59 1. General Barriers to Technology Innovation in Commercial Buildings ......................... 59 2. Barriers Specific to Developing Country Markets ......................................................... 60

D. Program Approaches .............................................................................................................. 64 1. Grant Programs .............................................................................................................. 66 2. Loan Programs ............................................................................................................... 67 3. Revolving Loan Fund .................................................................................................... 67 4. Performance Contracting ............................................................................................... 68 5. Policy Support ................................................................................................................ 68 6. New Building Codes and Design Standards .................................................................. 69 7. Training .......................................................................................................................... 69 8. Technical Assistance ...................................................................................................... 69 9. Energy-efficient Buildings Program .............................................................................. 70 10. Project Design ................................................................................................................ 71 11. Ozone Depleting Substance Emissions Reduction Impact and Cost Effectiveness ....... 72 12. Financial Model Analysis ............................................................................................... 74

X. Appendices .................................................................................................................. 77

A. Thailand Chiller Replacement Subproject Status ................................................................... 77

B. International Chiller Revolving Fund Financial Analysis ...................................................... 79

C. Program Financing Sources ................................................................................................... 87 1. Brief description of potential international financing forms and sources ...................... 87 2. Relationship between sources of financing and individual project costs ....................... 87 3. Relationship Between Financing Type and Program Structure ..................................... 89 4. The World Bank ............................................................................................................. 91 5. International Finance Corporation (IFC) ....................................................................... 92 6. Asian Development Bank (ADB) .................................................................................. 93 7. Trade Development Agency (TDA) .............................................................................. 93

International Chiller Sector Energy Efficiency and CFC Phaseout Page iv

8. U.S. Agency for International Development (USAID) Office of Energy, Environment, and Technology ...................................................................................................................... 94 9. Overseas Private Investment Corporation (OPIC) ......................................................... 95 10. Export-Import Bank (EXIMBANK) .............................................................................. 96 11. Renewable Energy and Energy Efficiency Fund (REEEF) ............................................ 97 12. Clean Development Mechanism .................................................................................... 98 13. Prototype Carbon Fund (PCF) ........................................................................................ 99 14. Community Development Carbon Fund ...................................................................... 100 15. Netherlands Clean Development Facility ..................................................................... 100 16. Other bilateral export finance programs ....................................................................... 101

XI. References ................................................................................................................. 102

List of Tables

Table 1: Chiller Types and Capacity Ranges ......................................................................................... 2 Table 2: ODP and GWP for Commonly Used Refrigerants ................................................................... 9 Table 3: Chiller Energy Use Warming Impact for Different Chiller Types ......................................... 10 Table 4: Chiller Energy Efficiency Progress (kW/ton Refrigeration Capacity

for New Large Water-Cooled Centrifugal Cillers) ................................................................ 10 Table 5: Technical Progress in Energy Efficiency of New Large Chillers—1976 to 2000 ................. 11 Table 6: Chiller Efficiencies by Country ............................................................................................. 12 Table 7: Sample TEWI Calculation for CFC-11 and CFC-12 Chillers ................................................ 13 Table 8: Sample TEWI Calculation for HCFC-123 and HFC-134a Chillers ....................................... 14 Table 9: Pre-Phaseout Worldwide Use of Chillers by Type and Refrigerant Used ............................. 17 Table 10: 2001 World Air Conditioning Market (Manufacturer’s Selling Prices,

million US$) .......................................................................................................................... 18 Table 11: US Manufacturer Shipments of Large Tonnage Liquid Chiller Packages

(Centrifugal and Screw, including US Chiller Exports) ........................................................ 19 Table 12: Large Tonnage CFC Chillers Converted or Replaced ........................................................... 20 Table 13: Chiller Refrigerant Emissions 1991-2001 (metric tons) ........................................................ 20 Table 14: Lagging Chiller Replacements ............................................................................................... 20 Table 15: Lagging Chiller Replacements ............................................................................................... 21 Table 16: Lagging Chiller Replacements ............................................................................................... 21 Table 17: Lagging Chiller Replacements ............................................................................................... 22 Table 18: Lagging Chiller Replacements ............................................................................................... 23 Table 19: United Kingdom Chiller Sales (units by type of chiller) ....................................................... 24 Table 20: Italian Chiller and Heat Rejection Equipment Production and Sales ..................................... 24 Table 21: French Chiller Equipment By Refrigerant ............................................................................. 24 Table 22: EU Chiller and Other Refrigeration Equipment Exports (thousand US$) ............................. 25 Table 23: EU Chiller and other Refrigeration Equipment Exports by Importing

Region (thousand US$) .......................................................................................................... 25 Table 24: Japanese Chiller Distribution (number of chillers) ................................................................ 26 Table 25: Japanese Chiller and other Refrigeration Equipment Exports by Importer

(thousand US$) ...................................................................................................................... 26 Table 26: Data and Estimates For Article 5 CFC Chiller Sector ........................................................... 27 Table 27: Annual Chiller Sales in China ................................................................................................ 28 Table 28: Korean Chiller Sales .............................................................................................................. 28 Table 29: Chiller Sales in Taiwan .......................................................................................................... 29

International Chiller Sector Energy Efficiency and CFC Phaseout Page v

Table 30: Project results summary ......................................................................................................... 43 Table 31: Mexico Chiller Project Lending ............................................................................................. 44 Table 32: Mexico Chiller Project CFC Recovery .................................................................................. 44 Table 33: Mexico Chiller Project Avoided CFC Consumption ............................................................. 44 Table 34: Mexico Chiller Project Second Phase Subprojects ................................................................ 45 Table 35: Energy Savings with Whole Building Energy Efficiency Chiller Replacement .................... 55 Table 36: Sample Cost-Benefit Analysis ............................................................................................... 56 Table 37: Total Prospective Environmental and Economic Benefits of Developing

Country CFC Chiller Replacement ........................................................................................ 58 Table 38: Chiller Replacement Barriers and Possible Program Approaches ......................................... 65 Table 39: Chiller Replacement Evaluation ............................................................................................ 72 Table 40: Average Chiller Age by Country ........................................................................................... 75 Table 41: Chiller Age Distribution Analysis .......................................................................................... 76 Table 42: Thailand Chiller Replacement Subproject Status ................................................................... 77 Table 43: Thailan Project Summary Data .............................................................................................. 78 Table 44: Financial Analysis of a Hypothetical Chiller Replacement Revolving Fund ........................ 79 Table 45: Summary of the Hypothetical Chiller Replacement Program ................................................ 80 Table 46: Categories of International Financing .................................................................................... 88 Table 47: Potential Alternative International Financing Sources ........................................................... 89 Table 48: Possible Impact of Financing Category on Project Structure ................................................ 90

International Chiller Sector Energy Efficiency and CFC Phaseout Page 1

I. Introduction

The purpose of this report is to (1) describe and evaluate ongoing World Bank supported chiller projects, their current status, and lessons learned from project experience to date, (2) collect and present information regarding the international chiller market and the potential market for high efficiency non-CFC chillers, particularly in developing countries, and (3) collect and present information and analysis regarding issues that affect this market and its acceptance of more energy-efficient and non/less ozone depleting technologies, including costs, benefits, barriers, and possible actions.

Chillers are an important global environmental issue because they both consume large amounts of energy and, for older chillers, contain chlorofluorocarbons (CFCs), which are ODS as well as potent greenhouse gasses (GHGs). While the report’s principle focus is chiller replacement in developing countries, the analysis includes information regarding developed country chiller markets for several reasons. First, developed countries are major suppliers to developing country chiller markets. Second, developed country chiller data is valuable for comparison purposes, both serving as an indicator of future developing country replacement and new chiller market potential, and providing a basis for estimating and evaluating developing country data. Finally, international chiller supplier interest in an individual developing country market will depend on the market’s size relative to other developed and developing country markets.

The remainder of this report is organized as follows:

Section II provides background on the building chiller sector, chiller technology, an industry overview, and information regarding the global and local environmental impacts of chillers.

Section III describes chiller Ozone Depleting Substance (ODS) replacement progress in developing and developed countries.

Section IV describes the Thailand chiller project.

Section V describes the Mexico chiller project.

Section VI describes the Turkey chiller project.

Section VII describes research on the India chiller sector and proposed India chiller project.

Section VIII describes key lessons learned from World Bank projects to date.

Section IX describes issues related to transforming the market for chillers in order to promote early retirement of old CFC, energy inefficient chillers and purchases of new, energy-efficient ones, barriers to increased replacement of inefficient CFC chillers, possible approaches to remove or reduce those barriers, and chiller industry views on barriers and programs.

Appendices include information on the status of Thailand Chiller Replacement Subproject Status, a hypothetical International Chiller Revolving Fund Financial Analysis model, and information on potential chiller Program Financing Sources.


II. Building Chiller Sector Background

A. Chiller Technology Background

Building chiller cooling systems are the predominant cooling method used in large commercial buildings in developed countries, and are increasingly common in many developing countries. Chillers use chilled water, refrigerant, pumps, fans, and a compressor to remove heat from a building. In general, chillers can be classified into two categories based on the type of refrigeration used: 1) compression refrigeration, and 2) absorption refrigeration.

Compression refrigeration chillers use mechanical energy to cool the refrigerant. Common types of compression chillers are centrifugal and positive displacement (the latter including reciprocating, screw, and scroll chillers). Most commercial buildings in the United States use water-cooled centrifugal chillers. Absorption chillers use heat energy (e.g., steam, hot water, or direct fired fuel) to cool the refrigerant. Absorption chillers are most often installed in offices and commercial buildings where steam is readily available, or where electricity is expensive or not available. Since absorption chillers do not use ODS as refrigerants, this report focuses on compression refrigeration chillers. The report also presents some statistics on absorption chillers, where available, in order to present a more complete picture of the chlorofluorocarbon (CFC) chiller replacement situation, and because absorption chillers are a replacement option for CFC chillers.

Compression refrigeration chillers are manufactured in capacities of approximately 7 kW to over 35,000 kW. The table below lists the different types of chillers available based on compressor capacities.

Table 1: Chiller Types and Capacity Ranges Chiller Type Capacity Range (kW) Scroll and Reciprocating 7.0 - 1,600 Screw 140 - 6,000 Centrifugal 350 - 35,000 Air-cooled positive displacement Up to 1,500 Water-cooled positive displacement above 1,500 Absorption chiller ~140 - 17,500

Source: UNEP 1998, JARN 11/01.

The type of chiller used in any given application is determined by the desired cooling capacity, manufacturer preference, refrigerant preference, and the viability of a chilled water system for a given application. Water chillers are approximately 20% to 50% more efficient than air-cooled systems, but they require additional space for a water cooling tower. Water and air-cooled chillers are each available with reciprocating, scroll, screw, and centrifugal compressors. In general, centrifugal chillers are the most efficient both at full and partial load, while reciprocating chillers are the least efficient. Centrifugal chillers also offer the most flexibility in terms of full and part load efficiency options, since they come in a wide variety of sizes and can be built to user specifications.

B. Chiller Industry Overview

The chiller industry centers on the production of three primary products — centrifugal, absorption, and positive displacement (screw, scroll, reciprocating) chillers — mainly used in central air conditioning systems for medium and large buildings, and in cooling systems for industrial processes. The world market for chillers is dominated by producers located principally in the United States, Europe, and Asia.


Chiller production and distribution has generally seen a steady yet slow increase over the last decade, in part due to replacement activities driven by the Montreal Protocol. However, these trends differ by region and by country. For example, while sales in the US have been strong (see Section III.B below), one major chiller manufacturer interviewed reported that developing country markets for new chillers are growing very slowly, mostly due to lack of funding. In Asia, there was significant growth in chiller sales before the Asian economic downturn began in the late nineties, but that growth then significantly slowed and is only now recovering.

Another reported trend is that chiller owners are increasingly linking a series of smaller systems in order to obtain a higher cooling capability. One manufacturer interviewed indicated that about 80% of facilities using chillers typically have at least two systems. Replacement of both units may not be seen as economical or necessary in some of these cases. Often, owners will instead opt for replacement of only one system with a higher cooling capacity non-CFC chiller, so that the remaining chiller can have fewer operating hours.

1. Centrifugal Chillers

Centrifugal chillers occupy the mainstream of the large chiller market, especially within the US and Europe, and are the norm for large central AC systems. The annual US market for chillers is estimated at approximately US$400 million (about 3000 units), or 43% of the centrifugal market. The major centrifugal chiller manufacturers are Carrier, Trane, McQuay, and York, each of which also has a significant foothold in the world market. Other centrifugal chiller manufacturers are operating in Asia, which represents the second largest market and accounts for 25-30% of the total market. Japan has experienced a reduction in its centrifugal production with decreased sales and exports. There are now three (down from seven) manufacturers in Japan engaged in centrifugal chiller production (MHI, Hitachi, and Ebara). Trane Japan has achieved strong Japanese sales by importing R-123 centrifugal chillers manufactured in the US. In other Asian countries, except for Century-Korea, manufacturers are assembling centrifugal chillers in cooperation with US manufacturers. As the Asian economies turn from the recession to recovery, production of centrifugals in China and Korea is growing.


Picture 1: 300 ton Trane centrifugal water-cooled chiller, model CVHE032, refrigerant HCFC-123, 1991 (de-installed for resale)1

Picture 2: 350 ton York centrifugal water-cooled chiller, model YTK3E3C2-CK-F, refrigerant HCFC-123, 1990

1 This and subsequent chiller pictures from www.nutemp.com (unless otherwise noted). NuTemp sells and rents used and reconditioned chillers.


Picture 3: 500 ton Carrier centrifugal water-cooled chiller, model 19XL5353364, refrigerant HFC-134a, 1993

2. Absorption Chillers

Absorption chillers dominate Asian markets, in sharp contrast to the US and European markets, where centrifugal chillers dominate. In many Asian countries, lack of indigenous fuel resources has led to government endorsement of absorption systems, which currently account for approximately 80% of annual sales of large tonnage chillers and 85% of the stock of 8,600 absorption chillers with over 100 ton capacity. There are eight absorption chiller makers in Japan, including Mitsubishi Heavy Industries, Sanyo, Kawasaki Thermal Engineering Co., Ebara, Hitachi, Yazaki, Daikan, and Takuma. Korea also has eight absorption chiller manufacturers, including Century, LG Cable, Carrier Korea, Bumyang AC, Hyundai Heavy Industry, Samsung Heavy Industry, Mando Machinery, Samwong Machinery, and Kyungdong Boiler. China also is a major regional producer of absorption chillers, both through joint ventures with Japanese and US manufacturers and with indigenous technology. Though the US market remains dominated by centrifugal chillers, all four of the major US centrifugal manufacturers either have begun manufacture of absorption chillers in North America or plan to do so in the near future.2

The primary barrier to the greater use of absorption systems has been their higher initial cost and lower energy efficiency. They can however be cost effective where waste heat or steam can be used as an energy source, or where high electricity cost, demand charge, or connection charges make gas-fired absorption chillers economical.

2 Japan Air Conditioning, Heating, and Refrigeration News Nov. 2001, World Trends of Chillers and Large Air Conditioning Equipment (JARN 11/01).


Picture 4: 1465 ton Trane absorption chiller, model ABSC14C

3. Positive Displacement Chillers

Positive Displacement chillers (reciprocating, screw, and scroll type) have been penetrating the entire global market. Reciprocating chillers are available in all size ranges; screw chillers are used in middle to large size applications; and scroll chillers are mainly used in the small-size range. Europe has the largest concentration of positive displacement manufacturers. Italy has a particularly high number of manufacturers and wide product range. Many Italian makers have established operations in the Middle East as well as Asia. Some of the larger Italian market holders in Europe are RC, Climaveneta, HCF-Lennox, Bluebox, Clivet, Rhoss, Ferroli, Ciat, HITSA, Emicon, and Aermec. Manufacturers such as Teba in Turkey and Zamil Air Conditioners in Saudi Arabia are also steadily increasing their position as global players. In addition, the top US, Japanese, and Korean companies are increasing positive displacement production. This sector of the chiller market is expected to increase due to compactness of the units, maintainability, and ease of operation. (JARN 11/01)


Picture 5: 300 ton Trane screw water-cooled chiller, model RTHA300-FC, refrigerant HCFC-22, 1993

Picture 6: 211 ton York reciprocating water-cooled chiller, model YCWJ77VUO-46PE, refrigerant HCFC-22


Picture 7: 60 ton air-cooled Trane scroll chiller and compressor3

C. Global Environmental Impact

Chillers impact the global environment in three principal ways. First, compression refrigeration chillers can harm the ozone layer through release of ODS used as refrigerant and released due to leakage, servicing, and decommissioning. Second, refrigerant emitted from chillers (including non-ODS refrigerant substitutes) can also have high Global Warming Potential (GWP), meaning that their accumulation in the atmosphere traps and reflects heat, potentially causing global climate change. Third, chillers consume significant amounts of energy, either directly for absorption chillers or indirectly as electricity generated through fossil fuel combustion, both of which produce greenhouse gases (GHG).

The ozone depletion and/or global warming impact of refrigerant emissions are direct impacts. The climate change impact of energy use is generally referred to as an indirect warming effect.4 The total climate change impact of refrigerant emissions and energy use is often referred to as the Total Equivalent Warming Impact (TEWI). Each of these effects is discussed further below.

1. Refrigerant Emissions ODP and GWP

Every ODS is ranked in a way that assesses its degree of impact on the stratospheric ozone layer. This impact is known as the ozone depleting potential (ODP). Compression refrigeration chillers traditionally used chlorofluorocarbons CFC-11 and CFC-12 refrigerant, both of which are ozone depleting substances. Current chillers use replacement refrigerant, principally hydrochlorofluorocarbons (HCFCs) or hydrofluorocarbons (HFCs). HFCs do not release chlorine or bromine upon degradation, and consequently have an ODP of zero. The ODP of substances that do release chlorine or bromine upon degradation is the ratio of its impact on the ozone layer to the impact of a similar mass of CFC-11 (the most common ODS), the ODP of which is set at 1.0 as a benchmark. Most refrigerants have ODP that range from 0.01 to 1.0 (EPA 2002).

GWP is the ratio of the global climate impact caused by a substance relative to a similar mass of CO2, the most common GHG, the GWP of which is set at 1.0 as the benchmark for other GWP values. The GWP of HCFCs and HFCs range from 93 to 12,100.

3 From PT. Tatasolusi Pratama used equipment sales, www.tsp-id.com/ac/inhalt_ac_unitary.html. 4 For electric chillers, energy use results in indirect CO2 emissions, while for absorption chillers the impact is direct.


The following table presents the ODP and GWP for commonly used refrigerants.

Table 2: ODP and GWP for Commonly Used Refrigerants Refrigerant5 ODP GWP6 Formula CFC-11 1 4,000 CCl3F CFC-113 0.8 5,000 C2F3Cl3 CFC-114 1 9,300 C2F4Cl2 CFC-115 0.6 9,300 C2F5Cl CFC-12 1 8,500 CCl2F2 HCFC-123 0.02 93 C2HF3Cl2

HCFC-22 0.055 1,700 CHF2Cl

HFC-134a 0 1,300 C2H2F4

HFC-236fa 0 6,300 C3H2F6

R-500 0.738 6,310 CCl2F2 + CH3CHF2

R-502 0.33 5,490 C2F5Cl + CHF2Cl

Source: US EPA, 2002.

Refrigerants can be knowingly or unknowingly released into the atmosphere during three general processes: servicing, leakage, and decommissioning or retirement. Knowingly releasing refrigerants from cooling equipment is known as venting, and can lead to release of substantial amounts of refrigerant into the atmosphere. For this reason, venting refrigerant is illegal in the United States and other developed countries.

2. Energy Use Warming Impact

The building chiller is often the most significant single user of energy in a large commercial building (15-20% of total building energy use for buildings with water-cooled centrifugal chillers). This energy use is either direct, on-site fossil fuel combustion (for absorption chillers), or use of electricity, which is usually generated through off-site fossil fuel combustion. In either case, significant greenhouse gases (GHGs) are emitted into the atmosphere, as shown in 0 below for several representative chiller types and efficiencies.

5 When any of these substances is used as a refrigerant, it is generally referred to as “refrigerant gas X” or “R-X.” For example, CFC-12 would be referred to as R-12 when used as a refrigerant. R-500 is a blend of CFC-12 and HFC-152a . R-502 is a blend of CFC-115 and HCFC-22 6 GWPs are commonly calculated over 20, 100, or 500 year time frames. The GWPs referred to here are for a 100-year time horizon.


Table 3: Chiller Energy Use Warming Impact for Different Chiller Types

Chiller Type kW/RT COP Tons

CO2/year

Lifetime CO2 emissions

(tons) Centrifugal water-cooled chiller 0.50 7.03 130 3,250 Centrifugal air-cooled chiller 0.95 3.70 247 6,175 Water-cooled rotary screw chiller 0.58 6.06 151 3,770 Air-cooled screw chiller 0.94 3.74 244 6,110 Direct-fired gas absorption chiller 3.41 1.03 257 6,436 Indirect-fired gas absorption chiller 2.88 1.22 217 5,434

While absorption chillers are significantly less efficient than comparably sized centrifugal chillers in terms of COP and kW per ton refrigeration capacity, their overall CO2 emissions may be lower than some electric chillers since they avoid the significant energy loss that takes place during generation and delivery of electric power. In this example, the indirect-fired absorption chiller is responsible for lower CO2emissions than the air-cooled chillers. The water-cooled centrifugal chiller remains the most efficient, both in terms of COP and CO2 emissions.7

Chiller energy efficiency has improved significantly over the last 20 years, as shown in the tables below, outlining efficiency in terms of kW/ton, and kW refrigeration / kW electric input. Table 4 shows chiller energy efficiency progress in kW/ton Refrigeration Capacity for New Large Water-Cooled Centrifugal Cillers

Table 4: Chiller Energy Efficiency Progress Year Average Best

1979 0.8 0.72 1980 0.72 0.68 1990 0.65 0.62 1991 0.64 0.6 1993 0.63 0.55 1995 0.61 0.52 1997 0.6 0.49 1999 0.59 0.48

Source: Trane. KW/ton at ARI conditions.

7 Calculations based on 2000 Operating hours, 0.65 Kg CO2 per kWh, 300 tons Refrigeration capacity, 25 year chiller lifetime, natural gas generation efficiency (including distribution losses) of 29% (EIA Natural Gas Annual 1999), and chiller efficiency data from FEMP and 1997 and 2000 ACEEE HVAC Guide.


Table 5: Technical Progress in Energy Efficiency1 of New Large Chillers—1976 to 2000

Year

Average New System Efficiency State-of-the-Art New System Efficiency

Full Load COP

Integrated Part Load Value

(IPLV)

Full Load Constant Speed

COP

IPLV (with VFD2 and/or Dual

Compressors) 1976 3.9 4.4 1979 4.4 4.9 1980 4.9 5.1 1990 5.0 5.2 5.6 5.9 1991 5.1 5.4 5.8 6.1 1992 5.4 5.6 5.8 6.4 1993 5.6 5.8 6.4 6.9 1994 5.6 5.9 6.7 7.6 1995 5.7 6.0 6.7 8.3 2000 5.9 6.3 7.3 9.5

1 Efficiency is expressed in (kW refrigeration)/(kW electric input)

2 Variable Frequency Drive

Source: UNEP, 2004.

According to the Air-Conditioning and Refrigeration Institute (ARI), this increase in energy efficiency has reduced power consumption in the US by 7 billion-kilowatt hours per year (enough to provide the annual electrical needs of approximately 740,000 households), saving $480 million in energy costs and avoiding emissions of 4 million tons of CO2 by power plants.8 It is, however, also notable that the gap between high and average efficiency levels has grown from 5-7% in the 1980s and early 1990s to 22-23% in recent years. While efficiency levels in developing countries and EITs have increased since the late 1990s, and even more since prior to that time when levels in developing countries were 0.8 kW/ton or more, the efficiency gap is even greater in developing countries, as shown in the table below for average efficiencies.

8 ARI 4/11/01 press release (www.ari.org).


Table 6: Chiller Efficiencies by Country

Country Average efficiency

(kW/ton)9 Efficiency Gap10 Above-average

efficiency gains11 Argentina 0.71 48% - Bangladesh 0.74 54% - Brazil 0.70 46% 8% Central America 0.63 30% - China 0.73 53% 7% Egypt 0.66 38% - Hong Kong 0.68 42% - India 0.71 48% 5% Indonesia 0.66 37% 6% Korea 0.76 59% - Kuwait 0.81 70% - Macao 0.78 62% - Malaysia 0.68 42% 9% Mexico 0.66 38% 9% Philippines 0.71 47% 5% Russia 0.69 43% - Saudi Arabia 0.75 57% - Singapore 0.65 36% 11% Thailand 0.71 48% 7% Trinidad 0.77 61% - Turkey 0.70 47% 14% United Arab Emirates 0.74 55% - Venezuela 0.67 40% - Vietnam 0.71 49% - Dominican Republic 0.64 34% - Average 0.71 48% 4% Worldwide average 0.60 25% 3% Best efficiency 0.48 - 7%

As the table above shows, chiller efficiency levels in Article 5 countries and EITs tend to be significantly lower than the highest efficiency chillers available, as well as lower than average levels (0.71 kW/ton versus 0.60 worldwide average and 0.48 best available). This indicates that there is significant potential to promote sales of more energy-efficient chillers in those countries.

3. Total Equivalent Warming Impact

Assessment of the global impact of building cooling systems must consider direct and indirect contributions. The direct contribution is the GWP (relative to CO2) of refrigerants emitted to the atmosphere. Indirect contribution is the total amount of GHG emitted from generating electricity to power

9 Calculated from energy efficiency, chillers sales, and market share data provided by Ozone Protection Units and chiller manufacturers for the period 1996-2001. Breakdowns by manufacturer and year are not shown in order to protect data confidentiality. 10 Calculated as the percentage difference between average efficiency and the best efficiency level. Since the highest efficiency levels may not be technically available or economically feasible for all applications, this should not be taken as an accurate indicator of absolute energy savings potential. It is however a good indicator of relative potential for increased sales of energy-efficient chillers. 11 Improvement in average efficiency 1996-2001. Calculated decreases in efficiency are not shown, since these were believed to be largely due to lack of full sales and efficiency data.


a chiller during its lifetime. The combined effect of direct and indirect impact is referred to and measured as the Total Equivalent Warming Impact (TEWI). The calculated TEWI is dependent on equipment lifetime, emission losses, and the time horizon chosen (AFEAS 2002).

0 below illustrates refrigerant emissions, energy use, and TEWI for two representative chillers using CFC-11 and CFC-12 refrigerant, respectively.

Table 7: Sample TEWI Calculation for CFC-11 and CFC-12 Chillers Refrigerant Emissions CFC-11 CFC-12

Average refrigerant charge (kg) 400 400 Annual leak rate 40% 40% Annual emissions per chiller (kg, unweighted) 160 160 Refrigerant Ozone Depleting Potential (ODP) 1.0 1.0 Annual emissions per chiller (ODP-weighted kg) 160 160 Chiller lifetime (years) 25 25 Lifetime ODS emissions (ODP tons) 4 4 Refrigerant GWP (100 year time horizon) 4,000 8,500 CO2 equivalent emissions (MT) 16,000 34,000 Global Warming Indirect Impact Refrigeration capacity (refrigeration tons) 400 400 KW per ton 0.80 0.80 Hours in use per year 2,000 2,000 KWh per chiller per year 640,000 640,000 CO2 equivalent per chiller per year (MT)12 416 416 Total CO2 energy use emissions per chiller (MT) 10,400 10,400 Total Equivalent Warming Impact (TEWI), tons CO2 equivalent 26,400 44,400

Due to restrictions on use of CFCs under the Montreal Protocol, CFC chillers are no longer manufactured (though many chillers using CFCs remain in use). New chillers use substitute refrigerants with low or no ODP, and are also significantly more energy-efficient and designed to leak much less refrigerant (1% or less of the refrigerant charge per year) over their service lives. The effect on the ozone layer and global climate of new chillers are, therefore, significantly less than their predecessors, as shown in the illustration below for two sample HCFC-123 and HFC-134a chillers.13

12 Based on 0.65 kg C02/kWh. 13 HCFC-123 chillers are a common replacement for CFC-11 chillers, while HFC-134a chillers are a common replacement for CFC-12.


Table 8: Sample TEWI Calculation for HCFC-123 and HFC-134a Chillers Refrigerant Emissions HCFC-123 HFC-134a

Average charge (kg) 400 400 Annual leak rate 1% 1% Annual emissions per chiller (kg) 4 4 Lifetime (years) 25 25 Lifetime emissions per chiller (kg) 100 100 Refrigerant Ozone Depleting Potential (ODP) 0.02 - Lifetime emissions per chiller (ODP-weighted kg) 2 - Refrigerant GWP (100 year time horizon) 93 1,300 CO2 equivalent emissions (MT) 9.3 130 Global Warming Indirect Impact Average capacity (tons) 400 400 KW per ton 0.50 0.60 Hours in use per year 2,000 2,000 KWh per chiller per year 400,000 480,000 CO2 emissions per chiller per year (kg CO2/kWh, MT) 260 312 Chiller lifetime (years) 25 25 Total CO2 energy use emissions per chiller (MT) 6,500 7,800 Total Equivalent Warming Impact (TEWI), tons CO2 equivalent 6,509 7,930

D. Local Environmental Impact

The use of chillers also impacts the local environment. The energy required to run a chiller during its lifetime leads to creation of pollutants such as particulate matter, nitrogen oxides (NOx), sulfur dioxide (SO2), carbon monoxide (CO), lead (Pb), airborne toxic chemicals, and ground level ozone. Health risks from these pollutants include lung cancer, chronic pulmonary disease, pulmonary heart disease, and bronchitis, which are leading causes of death and sickness in developing countries. These pollutants also cause economic damage to buildings and environmental and economic damage to vegetation, animals, and natural resources.

E. Activities to Protect the Global Environment

Developing country environmental protection efforts and international assistance to developing countries in protecting their environments has traditionally focused on local environmental issues such as air and water quality. Global environmental issues, on the other hand, have traditionally received less attention and action. This situation has been due to a variety of factors, most importantly (1) a lack of awareness of global environmental issues and (2) a lack of financing for the incremental cost of measures that affect the global environment. The first of these issues – awareness – has been addressed (though not yet entirely resolved) by the negotiation of key global treaties to address global environmental issues, in particular the Montreal Protocol and Framework Convention on Climate Change. The second – financing – has been addressed by the creation of multilateral funds to support these conventions: the Montreal Protocol Multilateral Fund (MPMF) to support phase-out of ozone depleting substances in developing countries, and the Global Environment Facility (GEF), which addresses climate change, ozone depletion, and other global environmental issues. Concurrent with the development of these multilateral financing sources, individual country governments and non-governmental organizations (NGOs) have also increasingly focused their attention and resources on global environmental issues.


1. Montreal Protocol Multilateral Fund

The Multilateral Fund was established by a decision of the Second Meeting of the Parties to the Montreal Protocol in London in June 1990, and began operation in 1991. Its objective is to provide technical and financial assistance to developing country parties to the Montreal Protocol whose annual per capita ODS consumption is less than 0.3 kg in order to help them comply with the Protocol’s requirements. Referred to as Article 5 countries, 130 of the 175 signatories of the Montreal Protocol meet the eligibility criteria and are therefore eligible to receive financing from the Fund. An Executive Committee manages the Fund, with day-to-day operations undertaken by the Fund Secretariat. The Secretariat reviews project proposals, which are then reviewed and approved by the Executive Committee. Projects are developed and implemented by Article 5 grantee countries with the assistance of four implementing agencies, the United Nations Development Programme (UNDP), the United Nations Environment Programme (UNEP), the United Nations Industrial Development Organization (UNIDO), and the World Bank.

Contributions to the Multilateral Fund are from non-Article 5 signatory countries according to the United Nations scale of assessment. These are made in cash to the Fund, with the exception that up to 20% of a country’s contribution may be made in the form of bilateral projects executed by a contributor in an Article 5 country based upon an approved project proposal. As of mid 2001, contributions to the Multilateral Fund totaled US$1.3 billion.

2. Global Environment Facility

The Global Environment Facility (GEF) was established in 1991 to protect the global environment in developing countries. To date, the GEF has provided over US$3 billion in financing to developing countries in its four focal areas: biodiversity, climate change, international waters, and ozone layer depletion. 166 countries participate in the GEF, either as donors or grant recipients. The GEF is led by the GEF Assembly (all member countries), which meets every three years. Management of the GEF is by the GEF Council, which meets twice yearly and develops GEF programs and policies and approves workplans. Day-to-day management is by the GEF Chief Executive Officer (CEO), who is authorized to approve projects based on Implementing Agency and Secretariat recommendations, and the GEF Secretariat, which organizes meetings and other GEF activities, manages project tracking systems and the GEF workplan, and provides advice on policy issues and project approval. GEF projects are developed and implemented in grantee countries through three Implementing Agencies: the World Bank, the United Nations Development Programme (UNDP), and the United Nations Environment Programme (UNEP). Through the GEF’s new Expanded Opportunities Program, Regional Development Banks (such as the Asian Development Bank, African Development Bank, and European Bank of Reconstruction and Development) and other UN agencies (such as FAO and UNIDO) can participate in project implementation in conjunction with an official Implementing Agency.

In the Climate Change focal area, the GEF is the designated financial mechanism for the Framework Convention on Climate Change. In the Biodiversity focal area, the GEF is the designated financial mechanism for the Convention on Biological Diversity. In the Ozone Layer Depletion focal area, GEF financing is available only for countries not eligible for financing from the Montreal Protocol Multilateral Fund, principally the Economies in Transition (EITs) of Eastern Europe. In these countries, the GEF adheres to the guidelines and policies of the Montreal Protocol Multilateral Fund. Biodiversity and climate change have received the bulk of GEF financing to date (40% and 35%, respectively), with the remainder going to international waters (14%), ozone layer depletion (6%), and multi-focal projects (5%).

GEF financing is advantageous in that it is grant financing and does not need to be repaid. However, GEF projects have long lead times (a minimum of 1-2 years) and potentially substantial preparation costs. The Project Preparation and Development Facility (PDF) is a precursor to full GEF project financing that can


be used to finance project development costs. PDF financing is currently available in PDF-A (up to US$25,000, awarded at the discretion of the Implementing Agency), PDF-B (up to US$350,000, awarded by the GEF Operating Committee) and PDF-C (up to US$750,000, generally only approved for large investment projects with significant design and engineering costs), with progressively increasing documentation requirements. A PDF-B grant proposal itself takes approximately one-quarter to one person-year to develop.

GEF and PDF grants can also be combined with World Bank/IFC loan packages, and/or with financing from other multilateral, bilateral, or commercial lenders. Leveraging GEF and PDF resources (i.e., by combining them with multilateral loan packages, other grants, and host country funds) is a strongly positive factor in GEF project review. The GEF ozone protection and GHG mitigation focal areas directly apply to chiller conversion programs.


III. Chiller ODS Replacement Progress

A. Worldwide Chiller Use

The table below provides estimates of the number of water-cooled chillers in service worldwide in the early-mid 1990s. It also includes estimates of the total refrigerant charge in these chillers.

Table 9: Pre-Phaseout Worldwide Use of Chillers by Type and Refrigerant Used Type of

Refrigerant Used in Chiller

Number of Chillers

In Service14

Total Refrigerant Used (tons)

Average Refrigerant

Charge15 (kg/kW)

Annual Shipments

of New Chillers16

Refrigerant Used in New Chillers

(tons) Centrifugal and Large Tonnage Screw Chillers

CFC-11 110,000 37,500 0.25 N/A N/A CFC-12 20,000 6,10017 0.35 N/A N/A HCFC-22 35,000 13,800 0.35 3,450 2,100 R-500 7,400 2,000 0.35 N/A N/A HCFC-123 8,100 2,500 0.22 3,725 1,410 HFC-134a 2,600 1,100 0.35 1,550 650

Positive Displacement Chillers (Air and Water Cooled) HCFC-22 455,000 22,500 0.34 33,500 1,630 TOTAL 638,100 85,500 0.32 42,225 5,790

As shown in this table, approximately 130,000 CFC-11 and CFC-12 chillers are believed to have been in service in 1993. Since developed country manufacturers dominate large tonnage centrifugal and screw chiller manufacturing and effectively ceased production of CFC chillers in 1993, no significant numbers of new CFC chillers should have been produced after that date. The current CFC chiller stock will, therefore, largely be determined by the speed with which CFC chillers are being converted or replaced in chiller-using countries. The US, which had about 80,000 large CFC-11 and CFC-12 chillers prior to 1993, has already phased out approximately 40,000 of those chillers (see further discussion in Section III.B below). The stock of CFC chillers in Europe has also been reduced, but an unknown number of additional CFC chillers were produced in developing countries after 1993.18 One industry source interviewed estimates that there are about 60,000 CFC chillers remaining in service, but other estimates place the current total as high as 100,000.19

The table below provides current data on key world markets for chillers. The data show that positive displacement chillers (i.e., reciprocating, screw, and scroll type chillers) still dominate the market, due to the higher numbers of positive displacement chillers sold. By value, centrifugals count for $911 million or

14 1993 data from UNEP, Report of the Refrigeration, Air-Conditioning and Heat Pumps Technical Options Committee, 1995 Assessment. 15 UNEP. Refrigerant charge per unit of cooling capacity for US and Japanese brand chillers manufactured between 1990-1995. Rest of world assumed to be similar to these weighted averages for US and Japanese brand chillers in terms of refrigerant charge. 16 Does not include CFC chillers produced in Article 5 countries. 17 Data are cumulative and include CFC-12 in R-500 chillers. 18 In some developing countries with significant production of chillers locally, e.g., India, CFC chillers were produced up until 1997, though not in the quantities as had been produced in developed and developing countries prior to 1993. 19 Industry sources are not specifically identified for confidentiality reasons.


25% of the total chiller market, but almost double that (49%) in the United States, which is the strongest market for centrifugal chillers (see further discussion in Section III.Bbelow). At an average $75,000 per chiller, this equates to annual sales of approximately 12,000 centrifugal chillers worldwide.

Table 10: 2001 World Air Conditioning Market (Manufacturer’s Selling Prices, million US$)20

Country

Reciprocating, Screw, and

Scroll Chillers % Share by

country Centrifugal

Chillers % Share by

country Absorption

Chillers >350 kW % Share by

country China $270 13% $85 9% $290 51% France $108 5% N/A N/A N/A N/A Germany $129 6% N/A N/A N/A N/A Italy $164 8% N/A N/A N/A N/A Japan $137 6% $49 5% $127 22% Korea N/A N/A $32 4% $45 8% Spain $63 3% N/A N/A N/A N/A Taiwan $123 6% $54 6% N/A N/A UK $83 4% N/A N/A N/A N/A USA $416 19% $443 49% $45 8% Others $642 30% $248 27% $61 11% Total $2,135 100% $911 100% $568 100%

B. Replacement Progress in the US

As shown in the table below, US chiller manufacturer shipments (including exports, which account for approximately 25% of total shipments) of new large tonnage chillers were strong throughout the late 1980s and early 1990s, in large part due to replacement of old chillers as a result of Montreal Protocol restrictions. Approximately 60% of chiller sales within the US were for replacement of old CFC chillers. One major manufacturer reported that 70% of their sales to Europe are replacement chillers for existing buildings, so a similar trend appears to exist there (see further discussion in Section III.C below).

20 Source: BSRIA/JARN 2001. Entries shown as “N/A” are either not significant, or are included in “Other” in the original data source.


Table 11: US Manufacturer Shipments of Large Tonnage Liquid Chiller Packages (Centrifugal and Screw, including US Chiller Exports)

Year Units Shipped Percent Change 1986 3,726 6.8% 1987 3,744 0.5% 1988 4,407 17.7% 1989 4,988 13.2% 1990 4,994 0.1% 1991 4,482 -10.3% 1992 4,822 7.6% 1993 5,955 23.5% 1994 7,133 19.8% 1995 9,444 32.4% 1996 9,197 -2.6% 1997 8,627 -6.2% 1998 7,558 -12.4% 1999 6,529 -13.6% 2000 7,731 18.4% 2001 7,171 -7.2% 2002 5,793 -19.2% 2003 5,742 -0.9%

Source: Air-Conditioning and Refrigeration Institute, Statistical Profile (July 16, 2001), p. 30.

By the end of 2002, an estimated 41,189, or 51%, of the approximately 80,000 large CFC chillers in service in the US in the early 1990s had been replaced or converted.21 Since US chiller manufacturers stopped production of CFC chillers in 1993, this represents a retirement of half of the CFC chiller fleet over a nine-year period. An expected lifetime of 20-25 years and even distribution of chillers suggests that average replacement would be 4-5% per year, which indicates an expected 10-13 years to retire half of the CFC chiller fleet and based on which expected conversions and replacements to date would average only 41% of the existing stock. This indicates that CFC chiller replacement in the US is proceeding at a quicker pace, relative to expected equipment lifetimes and not taking into consideration other factors, since 26% more of the existing chiller stock has been converted than would have been the case given average equipment lifetimes. It is, however, notable that this trend seems to have decelerated since the late 1990s. While the share of the chiller stock converted or replaced through 2000 exceeded 5% per year, retirement of CFC chillers since 2000 has fluctuated around (or below) 4% year, suggesting that after an initial spurt, annual retirement levels have returned to average expected levels. The table below shows the breakdown of CFC chiller conversions and replacements per year and projected replacements and conversions through 2005 based on industry survey results.

21 American Refrigeration Institute survey results.


Table 12: Large Tonnage CFC Chillers Converted or Replaced Year Conversions Replacements Cum. Total % of 80,000 % per year

Through 1997 #N/A #N/A 23,054 29% 7.2% 1998 #N/A #N/A 27,285 34% 5.3% 1999 491 3,085 31,516 39% 4.5% 2000 913 3,235 35,664 45% 5.2% 2001 381 2,550 41,526 52% 3.7% 2002 379 2,215 41,189 51% 3.2% 2003 187 2,398 43,774 55% 3.2% 2004 165 2,883 46,822 59% 3.8% 2005 145 3,084 50,051 63% 4.0% 2006 125 3,064 53,240 67% 4.0%

Source: ARI press releases (www.ari.org).

The table below demonstrates the effect that increasing shipments of new non-CFC chillers and the replacement of CFC chillers with non-CFC ones has had in the US on CFC, HCFC, and HFC chiller refrigerant emissions.

Table 13: Chiller Refrigerant Emissions 1991-2001 (metric tons)22 Year CFC-11 CFC-114 CFC-12 HCFC-123 HCFC-124 HCFC-22 HFC-134a HFC-236fa R-500 Total 1991 6,643 648 806 - - 2,840 - - 550 11,488 1992 6,303 683 836 138 146 2,515 1 - 574 11,196 1993 5,669 700 752 277 345 2,185 2 - 568 10,498 1994 4,912 718 654 407 531 2,303 5 - 550 10,079 1995 4,137 719 552 515 688 2,373 7 - 521 9,514 1996 3,446 720 462 621 825 2,440 37 - 439 8,990 1997 2,828 697 380 713 945 2,503 64 14 363 8,507 1998 2,273 522 306 793 1,049 2,562 88 118 294 8,006 1999 1,777 366 240 860 1,138 2,620 109 211 231 7,552 2000 1,333 228 181 917 1,214 2,656 132 292 174 7,127 2001 936 107 128 964 1,278 2,673 155 365 122 6,728

Tables 14 through 18, and accompanying charts, show lagging chiller chiller replacements over the period 1998-2006.

Table 14: Lagging Chiller Replacements Sum of % of 80,000 Year of Estimate

Year 2000 2001 2002 2003 2004 1998 34% 1999 39% 2000 44% 45% 2001 49% 49% 52% 2002 54% 54% 56% 51% 2003 59% 60% 55% 55% 2004 64% 59% 59% 2005 63% 63% 2006 57%

22 Emissions from ICF Consulting Vintaging Model, which estimates refrigerant emissions based on number of chillers in fleet and estimated leakage rates.


Table 15: Lagging Chiller Replacements

Sum of Cum Total Year of Estimate Year 2000 2001 2002 2003 2004 1998 27,285 1999 31,516 2000 35,304 35,664 2001 39,170 39,440 41,526 2002 43,423 43,245 44,650 41,189 2003 47,115 48,018 44,072 43,774 2004 51,486 47,313 46,822 2005 50,633 50,051 2006 53,240

Table 16: Lagging Chiller Replacements

Sum of Total Year of Estimate Year 2000 2001 2002 2003 2004 1998 4,231 1999 3,576 2000 3,788 4,148 2001 3,866 3,776 2,931 2002 4,253 3,805 3,124 2,594 2003 3,870 3,368 2,883 2,585 2004 3,468 3,241 3,048 2005 3,320 3,229 2006 3,189


Table 17: Lagging Chiller Replacements Sum of Replacements Year of Estimate

Year 2000 2001 2002 2003 2004 1998 #N/A 1999 3,085 2000 3,271 3,235 2001 3,359 3,324 2,550 2002 3,765 3,433 2,764 2,125 2003 3,558 3,058 2,549 2,398 2004 3,203 2,947 2,883 2005 3,056 3,084 2006 3,064


Table 18: Lagging Chiller Replacements Sum of Conversions Year of Estimate

Year 2000 2001 2002 2003 2004 1998 #N/A 1999 491 2000 517 913 2001 507 452 381 2002 488 372 360 379 2003 312 310 334 187 2004 265 294 165 2005 264 145 2006 125

C. Replacement Progress in the European Union

Total sales of central air station AC equipment in the five major EU countries—Italy, Spain, Germany, France, and the UK—were nearly US$1.7billion in 2001. Chillers represent an average of 40% of this total in each country (BSRIA/JARN 2001).

As the table below indicates, chiller sales in the United Kingdom have increased steadily since 1999, and are projected to continue to increase through 2004. This increase suggests that in the UK, as in the US, growing chiller demand is at least in part due to increased retirements of old CFC chillers, since (all else being equal) sales levels would have tended to remain unchanged (or at least not enjoy a consistent upward trend) in an established market like the UK in the absence of increased retirements due to the CFC phaseout. This presumption is further supported by the above average sales growth for non-CFC centrifugal and absorption chillers (6% versus 4% for other chiller types), both of which are potential substitutes for CFC-using centrifugal chillers.


Table 19: United Kingdom Chiller Sales (units by type of chiller)

Chiller Type Year Annual % Change

1999-2004 1999 2000 2001 2002 2003 2004 Reciprocating, screw, scroll 2,420 2,541 2,664 2,769 2,852 2,938 4.00% Centrifugal 50 53 56 60 63 67 6.00% Absorption>140kW 22 23 25 26 28 29 6.00% Air Cooled 2,250 2,363 2,481 2,580 2,657 2,737 4.00% Water Cooled 242 254 264 275 286 297 4.20% <100 kW 1,321 1,387 1,455 1,513 1,560 1,608 4.00% >100kW 1,171 1,230 1,290 1,342 1,383 1,426 4.00% Total Chiller Sales 2,492 2,617 2,745 2,855 2,943 3,034 4.00%

Source: BSRIA/JARN

Sales of chillers in Italy represent over 50% of total central station equipment sales and the industry expects continuing growth there. The table below shows the total sales and manufacturing data for chillers in Italy for 1999 and 2000.

Table 20: Italian Chiller and Heat Rejection Equipment Production and Sales

Year Sales in Italy Manufacturing in Italy

Units EURO (million) Units EURO (million) 1999 30,745 217.53 48,034 370.38 2000 40,185 226.60 57,914 379.57

The table below shows national chiller numbers for France, and associated refrigerant use.

Table 21: French Chiller Equipment By Refrigerant Refrigerant Type Number of Chillers

R-11 100 R-12 650

R-134a 200 R-22 50 Total 1000

Source: 1999 Earth Technologies Forum (1998 data).

European CFC production stopped in January 1995. Industry experts estimate that Europe probably had less than 10,000 CFC-using chillers when the Montreal Protocol became effective, and the number of R-11 and R-12 chillers in use has decreased through either replacement or retrofit, which in turn has further stimulated the European replacement chiller market. European Union regulations call for systems using R-11 to be replaced by new equipment, whereas R-12 systems may be retrofitted with R-134a. In the light and heavy commercial segment (predominantly semi-hermetic air and water chillers), HFCs currently dominate as the refrigerant of choice. Since 2000, no HCFC use has been permitted in new systems with input power higher than 150kW. HCFC production is scheduled to end within the EU in 2015. HFC-134a and R-407C are now widely used in Europe as long-term substitutes for chiller applications, and R-410a may emerge in the near future. The European Union is also an exporter of chillers. Trade data collected by the European Union indicate that France, Italy, and Germany were the largest exporters of chillers in the EU. The table below shows EU exports of refrigeration equipment, including chillers.


Table 22: EU Chiller and Other Refrigeration Equipment Exports (thousand US$) Exporter 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Austria - - - - 16,974 12,815 13,296 11,176 10,542 7,423 10,908 Belg.-Lux 1,103 2,846 9,134 12,806 6,663 4,232 3,376 4,658 14,567 5,987 9,931 Denmark 708 353 577 1,103 1,626 953 960 503 1,049 1,006 1,898 Finland - - - - 1,484 1,389 1,272 1,220 1,040 1,380 2,035 Germany 55,773 51,428 64,429 66,956 84,418 64,865 51,375 61,173 59,861 57,687 75,070 France 48,016 58,351 51,752 73,966 104,289 64,486 63,358 58,543 80,799 59,226 65,887 Greece 606 577 1,210 1,024 3,329 3,961 2,700 2,495 1,397 2,969 619 Ireland 102 122 278 301 2,041 3,242 25 83 6 16 - Italy 19,684 31,753 38,396 42,575 44,973 53,383 49,422 51,893 50,553 75,492 77,080 Neth 2,482 2,756 4,821 4,314 3,919 2,529 2,463 3,622 3,138 3,987 1,677 Portugal 3,012 1,547 2,561 1,671 1,330 1,116 674 1,117 1,631 1,894 3,149 Spain 5,774 5,006 7,436 8,549 8,176 9,935 13,371 14,551 13,254 12,266 10,665 Sweden - - - - 4,219 4,471 3,091 1,983 2,219 1,612 1,973 UK 4,799 5,902 12,417 13,049 13,074 20,897 33,229 12,841 16,695 14,840 14,009 Total 142,060 160,638 193,013 226,314 296,515 248,273 238,612 225,856 256,751 245,784 274,901

Source: Eurostat. 23

As the table above demonstrates, EU chiller exports and other refrigeration equipment totaled approximately US$275 million for the period 1991-2001. As shown in the table below, the bulk of these exports were to the Middle East, Asia, and other European countries. The top three importing countries (in order) were Switzerland, China, and Poland. The table below shows EU chiller and other refrigeration equipment exports by importing region.

Table 23: EU Chiller and other Refrigeration Equipment Exports by Importing Region (thousand US$) Region 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Africa 24,994 30,953 30,226 29,017 29,699 23,500 22,712 23,538 24,303 24,379 29,929 Asia 6,331 15,850 24,258 22,514 40,780 34,506 28,471 26,383 20,675 30,849 37,199 Balkan 5 66 74 258 156 1,050 406 449 403 1,274 519 Balkans 3,101 4,055 3,996 7,636 14,654 11,118 9,924 8,889 12,361 11,013 11,933 Central America 1,133 957 3,449 2,443 1,973 1,599 792 305 306 1,187 842 Central Asia 1,391 4,917 8,246 10,626 3,387 4,758 7,450 4,430 3,013 4,324 3,341 Eastern Europe 28,070 21,741 31,334 48,604 69,347 60,019 48,859 64,184 76,838 56,726 63,588 Middle East 22,735 32,813 33,142 41,304 44,389 32,917 40,070 28,369 35,016 31,243 34,109 North America 2,533 1,896 2,863 6,626 11,173 6,523 6,613 9,963 15,628 17,056 24,762 Northern Europe 20,091 23,051 19,620 23,746 27,107 22,849 22,258 21,486 24,383 25,218 27,697 Oceania 2,113 1,794 3,562 2,938 3,188 3,457 2,835 2,627 4,804 4,533 3,013 South America 9,287 6,121 5,870 5,110 6,983 12,400 12,777 11,566 10,878 12,279 11,038 South Asia 7,583 1,505 2,272 3,617 6,905 4,951 4,427 2,169 1,959 3,448 4,802 Southeast Asia 5,949 7,406 14,735 14,270 22,119 14,033 15,815 8,336 8,446 8,421 10,599 S. Europe 5,955 6,434 8,977 6,491 13,416 13,021 15,121 13,048 17,541 13,766 11,447 Other 789 1,078 389 1,113 1,239 1,570 83 115 194 69 84 Total 142,060 160,638 193,013 226,314 296,515 248,273 238,612 225,856 256,751 245,784 274,901

23 Eurostat, Air conditioning machines incorporating a refrigerating unit but without a valve for reversal of the cooling/heat cycle (excluding self-contained window or wall air conditioning machines).


D. Replacement Progress in Japan

In Japan, until 11 years ago, seven manufacturers had been engaged in centrifugal chiller production. Since then, the manufacture of this type of chiller has dropped and exports have decreased. There are only three remaining Japanese manufacturers engaged in production. However, with the still incomplete recovery of the Japanese economy from the continuing recession, the commercial air conditioning market has enjoyed steady growth in demand. Japan dominates the market in absorption chiller production, and as a result of system efficiency advances and technical assistance, the Japanese chiller market for absorption chillers continues to grow. As illustrated by the table below, chiller sales are on the rise, with increasing demand seen for both imported and domestically produced chillers (with the exception of local shipments of absorption chillers, which have fallen slightly).

Table 24: Japanese Chiller Distribution (number of chillers) Chiller Type 2000 2001

Centrifugal 327 401 Absorption 3,456 3,263 Positive Displacement 9,315 10,061

The table below shows total Japanese chiller exports by importing country.

Table 25: Japanese Chiller and other Refrigeration Equipment Exports by Importer (thousand US$) Country 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Netherlands 7,594 18,318 20,954 31,556 36,905 36,651 60,303 2,283 639 1072 989 2,013 Indonesia 18,511 26,103 27,092 21,347 28,470 29,127 7,213 109 30 2,712 970 1,455 Hong Kong 5,374 8,450 12,045 13,314 15,590 18,027 18,739 2,627 1,735 31,585 17,739 11,379 U. S. A. 28,146 10,432 8,332 10,060 7,396 8,376 8,294 2,838 293 13,065 14,924 17,867 China 586 1,219 2,234 7,338 34,249 57,251 11,844 21 76 3,195 2,654 4,993 Singapore 8,775 10,263 12,802 11,811 14,412 12,246 12969 2,627 1,690 5,517 5,968 4,720 Belgium 1,159 2,068 2,283 10,642 9,390 11,813 19,041 1,102 27 7,626 4,276 7,104 Australia 3,516 6,000 8,225 6,769 12,215 11,647 12,527 837 121 1,671 1,263 1,127 UK 3,101 3,635 3,464 2,559 4,952 7,432 8,399 1,806 1,435 1,032 203 742 Germany 1,410 3,484 4,218 4,948 4,474 1,044 585 340 133 1,553 3,647 7,175 Philippines 774 565 1,972 788 1,126 7,808 8,291 13 26 4,231 2,195 3,017 Italy 29 37 634 520 447 477 111 6 17 2,304 15,138 10,479 Israel 1,785 1,852 119 618 255 1,985 6,681 9,852 4,714 137 278 Taiwan 8,536 5,624 786 1,357 233 1,410 826 162 615 2,775 3,644 1,718 Greece 248 104 473 187 331 776 263 138 341 2,890 9,229 10,998 South Africa 3,083 531 938 6,038 57 203 1,591 90 5 1,337 966 609 Malaysia 585 1,333 1,078 2,066 4,060 1,796 560 635 160 779 152 435 Turkey 2,035 3,909 1,255 1,040 1,907 809 649 16 613 210 1,043 UAE 42 76 27 97 93 16 444 10 13 4,116 4,049 4,018 Thailand 170 280 1,164 1,685 3,127 2,270 2,179 239 160 338 662 388 France 674 2,330 1,278 1,983 1,593 200 90 23 885 717 2,196 Other 6,966 8,284 7,668 8,919 10,516 13,974 7,805 1,236 410 18,999 20,136 17,491 Grand Total 103,098 114,898 119,041 145,643 191,798 225,338 189,403 26,996 12,653 108,432 110,010 110,970

Source: Japanese Ministry of Finance

E. Replacement Progress in the Developing World

In the early 1990s, approximately 8,000 CFC-11 and 2,000 CFC-12 chillers were reported to be in service in Article 5 countries, with approximately 700 chillers being installed in those countries annually. A 1994


UNEP study estimated that chillers in service in Article 5 countries contained approximately 4,000 tons of CFC in 1993, or 400 kg on average per chiller.24 The total annual consumption of CFC-11 and CFC-12 in Article 5 countries in the chiller sector was estimated at 1,500 tons, which represents approximately one percent of total CFC-11 and CFC-12 consumption in Article 5 countries and suggests an average leak rate of 37.5%. In an attempt to obtain more detailed data, Ozone Protection Units (OPUs) were surveyed for this report for information on their current CFC chiller stock and estimated chiller CFC use. Based on responses received, estimated leak rates, and information collected from project proposals and other sources, CFC chillers in Article 5 countries may be almost 15,000 units containing almost 6,000 tons of CFCs and emitting over 2,000 tons per year, as shown in the table below.

Table 26: Data and Estimates For Article 5 CFC Chiller Sector

Country Total CFC

Chiller Stock Total CFC Use

(tons) Total Charge

(tons) Annual Losses

(percent) Argentina 300 60 120 50% Botswana 80 12 32 12% Chile 170 25 68 36.76% China 1,750 460 1,225 37.55% Columbia 450 68 180 37.78% Croatia 54 3 14 21.43% Egypt 670 100 268 37.31% Fiji 5 3 2 150.0% Guatemala 100 15 40 37.50% India 1,100 171 596 28.69% Indonesia 1,300 195 520 37.50% Malaysia 1,500 225 600 37.50% Mexico 1,500 225 600 37.50% Philippines 800 120 320 37.50% South Africa 250 14 38 36.84% Syria 32 13 13 100.0% Thailand 1,500 225 600 37.50% Turkey 2,500 188 500 37.60% Venezuela 500 100 200 50.0% Total 14,561 2,222 5,935 37.38%

Source 1: Based on data from UNEP, Montreal Protocol project proposals and country plans, information received from Ozone Protection Units, and industry sources.

Source 2. UNEP, 2004.

It should, however, be noted that the table above represents incomplete and potentially inaccurate data. However, it does provide an order-of-magnitude estimate for the number of CFC chillers in service in Article 5 countries. In many cases, NOUs’ most recent data was at least several years old, and would therefore not include the impact of CFC chiller retirement. Based on anecdotal information received from industry sources, chiller installations in developing countries still seems principally to be driven by new construction, rather than by replacement of older CFC chillers as is the case in the US and Europe. Also, the installed base of chillers prior to the CFC phaseout was not nearly as large in developed countries as in the developed world.

In order to be conservative in estimating the CFC chiller stock in developing countries, one should allow for chiller replacements that have already taken place (although the net effect of these replacements and new CFC chillers is unknown) and take into consideration the earlier UNEP estimate. Taking the 24 UNEP, Report on Strategic Options for Retrofitting of Mobile Air-Conditioners and Chillers, March 1994.


midpoint between the above figures and the UNEP 1994 estimate of 10,000 CFC chillers in service in Article 5 countries with approximately 4,000 tons of CFC, yields 12,500 chillers containing approximately 5,000 tons of CFCs.

F. Asian Developing Country Chiller Market

The relatively smaller stock of chillers in developing countries notwithstanding, developing nations in Asia have significantly increased their position as a major player in the global chiller market, due to warm climates in much of Asia and strong economic growth. Economic growth in Asian developing countries was interrupted by the Asian economic crisis in the late 1990s, which impacted new chiller installations and chiller replacements, but sales have increased as economies have recovered. The second largest centrifugal market is currently in Asia, representing 25-30% of global sales. About 85% of large absorption chillers are concentrated in the Far East. 25

China’s announcement in 1995 that it would phase out the use of CFC by 2006 boosted sales and distribution of new chillers, particularly absorption chillers, throughout the region. Absorption chillers are the only type of central-plant air conditioning products that have been developed in China independent of foreign technology, and China stands second only to Japan in manufacture of absorption chillers. However, as electricity availability has expanded within China, screw and scroll technologies have gained popularity due to their efficiency and high performance. Chiller sales reached US$634 million in 2001. China expects to see a changing position in the chiller industry as it moves from an import-oriented region to an export-oriented one. The table below shows chiller distribution throughout China in the year 2000.

Table 27: Annual Chiller Sales in China Chiller Type Units

Centrifugal 850 Absorption 2,600 Positive Displacement 20,000

China has acted rapidly in its switching of refrigerant used in chillers. The switch from CFC (R-12) to HCFC (R-22) for central plant air conditioners has been substantially accomplished. The vast majority of Chinese screw and scroll chillers currently use HCFC-22, while 70% of centrifugal chillers now use R134a.

Next to Japan and China, Korea has become a major Asian producer and large market for chillers, particularly absorption types. Rapid growth in Korean industry sparked increased usage of air conditioning in new plants and large buildings, resulting in 1,700 units being shipped in the peak year of 1997. By 2001, Korea was doing US$32 million per year in centrifugal sales and close to US$45 million in absorption chiller sales.

Table 28: Korean Chiller Sales Chiller Type 1997 1998 1999 2000 2001 Centrifugal 430 100 50-100 Absorption 1,700 1,400-1,600 1,300-1500 1,200 1,000 Positive Displacement 500-1000 500-1000 500-1000 1,800

25 This section draws principally on data and information from JARN 11/01.


Taiwan has many local small chiller producers, however production has been decreasing gradually as Packaged Air Conditioners (PACs) increase in popularity. Currently, most small chillers are produced in Taiwan, but imports are expected to increase if and when Taiwan enters the World Trade Organization. In addition, imports of centrifugal chillers have steadily increased as Taiwan has developed its industrial infrastructure. The table below shows Taiwan chiller sales for the year 2000.

Table 29: Chiller Sales in Taiwan Chiller Type Units

Centrifugal 400-600 Absorption 15-20


IV. Thailand Chiller Project

A. Project Objectives

There are both primary and secondary objectives for the Thailand Chiller Project, targeted to allow the project to appeal to a variety of stakeholders.

1. Primary Objectives

The project’s primary objectives are to assist Thailand to (1) improve energy efficiency and reduce greenhouse gas emissions in the building chiller sector, and (2) reduce consumption of ODS as required under the Montreal Protocol. The project is meeting these objectives by establishing favorable conditions for transforming the market for chillers in Thailand. This is being accomplished through the demonstration of energy and financial savings gained from the early replacement of low-energy efficiency chillers using CFC as the refrigerant with high-energy efficiency non-CFC chillers.

Specifically, the project supports the replacement of approximately 24 CFC chillers on a pilot basis to demonstrate the economics and feasibility of the technology. By replacing the CFC chillers with systems that are 30% more efficient and CFC-free, it is envisioned that future GHG emissions associated with air-conditioning can be reduced by a commensurate 30%, and future CFC emissions at participating chiller sites will be eliminated. Following a successful demonstration of actual energy savings resulting from the replacement of older CFC chillers, a larger-scale program would lead to the replacement of 30% of the remaining CFC chillers in Thailand. Of the 1,500 CFC chillers that are estimated to be in use in Thailand, 1,400 were identified in 1999. It is estimated that the larger-scale program could lead to the replacement of 420 additional existing CFC chillers.

It is expected that the demonstration effect of the project and the experience gained will lead to more widespread use of energy-efficient chillers in the chiller market as a whole. In addition to these key market transformation benefits, the project will result in a significant reduction in both GHG and ODS emissions. In addition, replacing the targeted 444 CFC chillers will allow for the recovery of existing CFC from that equipment, which should be sufficient to provide ongoing service-related refrigerant to the remaining CFC chillers until the end of their useful lifetimes.

2. Secondary Objectives

While the primary objectives of the project are intended to encompass fundamental market transformation in the Thailand chiller sector, and are largely targeted to changing behavior among key stakeholders in the market, the secondary objectives of the project are intended to target more discreet accomplishments. These objectives are at both the programmatic and technical levels.

At the programmatic level, secondary objectives include developing Thailand’s ability to promote energy efficiency through innovative financing, and learning lessons to assist in replicating the project in other countries. The lessons learned for innovative financing should contribute to additional successful energy efficiency promotion in both Thailand and other countries where this experience might be replicated.

At the technical level, secondary objectives include (1) reducing the stress on the electrical system in Thailand, releasing peak capacity for other uses, and (2) lessening the need for construction of new generation capacity in Thailand. Reducing peak capacity stress on power generation will benefit both customers and the government, since demand can be stabilized, and new generation requirements will be reduced.


B. Country Background

1. National Framework for Energy Efficiency

In 1992, the Government approved legislation establishing the Energy Conservation Promotion Act, which increased the commitment and resources necessary to implement a comprehensive energy efficiency program. The Act (1) formalized the responsibilities of the Department of Energy Development and Promotion (DEDP) as the lead implementation agency for energy conservation, (2) gave DEDP the authority to issue voluntary building energy codes and appliance efficiency standards, (3) identified a class of large energy users as “controlled facilities” and required that they hire energy managers, conduct energy studies and develop energy conservation plans, or face large financial penalties, and (4) established the Energy Conservation Promotion Fund (ECF), financed through taxes on refinery products. The ECF will fund energy conservation, and renewable energy and co-generation projects as well as support training, technical assistance, promotion, monitoring and evaluation, research and demonstration, technology transfer, and related activities that improve environmental conditions.

To implement the Energy Conservation Promotion Act, the Ministry of Science, Technology and Environment issued a Ministerial Order in 1995 establishing energy consumption standards for building air-conditioning systems (centrifugal chillers) for both existing systems and new installations. Depending on the cooling capacity, energy consumption shall not exceed 0.8 - 0.9 kW per refrigerated ton for all existing centrifugal chillers, and 0.67 - 0.75 kW per refrigerated ton for new installations.

2. Installed Chiller Base

The chiller sector in Thailand has grown dramatically in the past decade due to the large amount of construction that has taken place as the Thai economy has grown. Commercial building chillers of a wide variety exist in Thailand, but most are centrifugal and utilize CFC-11 as a refrigerant. However, it is estimated that 3-5% of all chillers in Thailand use CFC-12. Chillers in Thailand are supplied by seven manufacturers, though five (Carrier, Daikin, McQuay, Trane, and York) account for the majority of production.

It is estimated that there are currently slightly fewer than 1,500 CFC (95 percent using CFC-12) chillers operating in Thailand. More than 80% of existing CFC chillers are estimated to be located in Bangkok. All of these chillers were installed prior to 1994, since CFC-based chillers have not been available in Thailand since 1993. The majority of CFC-based chillers currently in operation are now approximately at least 10 years old, and the average cooling capacity of those CFC chillers is between 400 and 500 tons. However, to achieve the highest energy savings possible, the chiller project is also intended to address the replacement of CFC chillers that are older than 9 years. While newer centrifugal chillers consume less energy, those installed before 1993 were found to consume significantly more: approximately 0.8 - 1.0 kW per refrigerated ton.

3. Impact of Economic Crisis

A macro-economic crisis plunged the Thailand economy into severe recession in mid-1997, which threatened the gains achieved from high economic growth over the preceding decade. The objectives of the chiller project were consistent with measures outlined within the World Bank’s Country Assistance Strategy (CAS), agreed upon in June 1998. That strategy visualized a number of short-term stabilization measures for the economy primarily through prudent monetary policy. Over the medium term, the CAS also sought to consolidate nascent economic stability and generate sustainable recovery through a number of medium term measures. Renewing competitiveness of the Thai economy was the cornerstone of this medium-term strategy. Removing infrastructure bottlenecks was one of the four interventions proposed


by the CAS for renewing competitiveness. The CAS emphasized that energy is in short supply and that the economic crisis threatened the financial viability of the Electricity Generating Authority of Thailand (EGAT), which faced serious difficulty in meeting its investment requirements. The CAS considered balancing environmental concerns with the valid need to provide electricity inexpensively and reliably as pivotal to recovery of the electricity sector. The chiller project was designed to release peak capacity, save energy, and generate long-term financial savings, and therefore has contributed to the fulfillment of all the concerns highlighted in the CAS for the electricity sector. The project is also supportive of the CAS goal of ensuring quality of life through protecting the environment.

4. Current Outlook

Thailand's economy, including the energy sector, has resumed its strong growth in the wake of the disruption caused by the Asian economic crisis of the late 1990s. After a period of decline, demand has begun to rise again. Peak power demand for fiscal year 1998 was recorded at 14.5 gigawatts (gW), a 9% increase from 1998. At the end of fiscal year 1998, total electricity generating capacity of the EGAT was 14.7 GW. Peak demand hit 14.9 gW in 2000, almost 9% over the 1999 peak. Based on these continuing peak demand trends, reducing energy consumption in areas such as the chiller sector remains an important strategy in Thailand.

Thailand's energy sector is now undergoing a period of restructuring and privatization. The Thai electric utility and petroleum industries, which have historically been state-controlled monopolies, are currently being restructured.

In 1999 total energy consumption in Thailand was reported at 2.5 quadrillion British Thermal Units (BTU), or 0.6% of world total energy consumption. Energy-related carbon emissions were 44.6 million metric tons of carbon, approximately 0.7% of world total carbon emissions. Thailand had 17.5 gW of electric generation capacity as of 1999, and generated approximately 89 million megawatt-hours (MWh) of electricity.

C. Institutional Framework for Project Management

The financial intermediary tasked with coordinating project activities with DIW and OEPP is the Industrial Finance Corporation of Thailand (IFCT). Prior to the chiller project, IFCT supported implementation of the first tranche of MLF-financed projects, and has acquired extensive experience with procurement, disbursement and other requirements of the World Bank, as well as policies and guidelines of the MLF. IFCT’s capacity to evaluate and appraise proposals for chiller replacements under this project has been strengthened by the technical support provided under the project, and through the assignment of a special Project Management Unit (PMU). This unit is comprised of three full-time staff members (one senior manager, one engineer, and one financial specialist), and is able to draw on other IFCT staff and a group of technical consultants as appropriate to ensure adequate technical and financial management capacity for the unit. IFCT charges an administrative fee of 4.5% per annum on the outstanding sub-loans to cover the costs of the PMU.

The Department of Industrial Works (DIW) within the Ministry of Industry is the focal point for MLF-financed activities, while the Office of Environmental Policy and Planning (OEPP) of the Ministry of Science, Technology, and Environment is the focal point for GEF-funded activities. Both DIW and OEPP are providing advisory support to the IFCT to ensure that the project is implemented in line with the national strategies for ODS phaseout and GHG reduction, as well as policies and guidelines of the GEF and MLF.


D. Project Approach

The approach to the design and implementation of the Thailand chiller project was based on identification of the key barriers facing the introduction of newer chiller technology. The project was formulated to address these specific barriers. Below is a description of the key barriers identified at the outset of the project, the project’s strategy for addressing those barriers, and a description of key project elements designed to facilitate implementation.

1. Barriers

The project identified three key market barriers to the early retirement of older CFC-based chillers in Thailand.

Cost and Credit. A key barrier in preventing the retirement of older CFC chillers in Thailand is the combination of high up-front investment needed to cover the cost of new chillers, and limited access to commercial credit. Awareness of the potential market for energy efficiency investments is lacking among domestic lenders.

Unfamiliar Technology. A low level of familiarity with new chiller technology is another potent barrier to the replacement of chillers in Thailand. Although this high-efficiency non-CFC technology has received greater degrees of acceptances in developed countries, it is not widely recognized or understood in developing countries. There is also a perceived technology risk that energy savings realized in other developed countries cannot be achieved in developing countries with a tropical climate.

Limited Technical Capacity. Thailand suffers from limited technical capacity for chiller system design and maintenance. Many chillers are over-sized by builders and developers, and building owners are unwilling to invest in proper operation and maintenance of chiller systems. Technical expertise and practical experience for the design and servicing of large building chillers is still limited to the large chiller suppliers and manufacturers. These suppliers and manufacturers do not have the proper incentives to size chiller systems for maximum efficiency. Given these constraints, further training in chiller design, operation, and maintenance is needed.

2. Strategy for Addressing Barriers

The project employs a two-pronged strategy to address the three key barriers described above. The first part of the strategy is designed to target cost and financing barriers. This includes the provision of financing in the form of interest-free loans to establish a revolving fund for implementation of an initial series of 24 chiller replacements. This initial set of chiller replacements is intended to demonstrate the financial, technical, and institutional feasibility of chiller replacement. For administrative and logistical purposes, the replacement of the first 24 units is being undertaken in Bangkok. Ninety percent of the financial savings to be achieved through reduced energy consumption will flow back into a revolving fund administered by IFCT. If this ongoing demonstration phase confirms the win-win nature of investments in highly efficient non-CFC chillers, initial resources plus an additional US$25 million (which IFCT would be committed to borrow from either the IBRD or other sources such as local commercial banks) will be used to replace an additional 420 chillers in Thailand.

The second part of the strategy is to seek agreements with chiller suppliers to provide service and maintenance as well as sufficient training and technical assistance, as needed. This is intended to both improve the efficiency of initial chiller system design upon installation, and improve capacity among building managers and technical staff to service and manage the chillers in the most efficient manner possible.


These two interlocking strategies work together to address the third barrier identified above – unfamiliarity with new chiller technology. By demonstrating both the technical and financial feasibility of chiller replacement, it is envisioned that the project can lead to a transformation within the Thai chiller market in such a way that key stakeholders, including building owners, developers, technology suppliers, and service technicians, will work together to promote the introduction and long-term use of more energy-efficient CFC-free chiller technology.

3. Key Project Design Elements

The functional framework for implementing the project is based on the following key project design elements:

Organizational Arrangements. The Industrial Finance Corporation of Thailand (IFCT) is both the borrower and implementing agency for the proposed project, with the Kingdom of Thailand as the guarantor of the loan. DIW and OEPP are the Government agencies responsible for overseeing the implementation of the project.

Responsibilities of IFCT and DIW. IFCT, via the PMU, is responsible for: (1) sub-project identification, technical and financial appraisal of subprojects and Sub-borrowers, (2) signing of sub-loan agreements, (3) disbursement of loan funds to Sub-borrowers and collection of repayments, (4) supervision of subproject implementation, collection of data on energy efficiency of new chillers, and periodic reporting to DIW, OEPP and the Bank, (5) repayment of the loan to the Bank, (6) preparation of the project completion report, and (7) assistance in raising additional funds if the Government decides to proceed with the follow-on chiller replacement program. DIW is responsible for supervising project implementation, arranging for and conducting an independent evaluation of the project, and development of the follow-on project.

Project Financing and Repayment to the Bank. The project is not a conventional IBRD lending instrument or technical assistance grant from the GEF and MLF. As an implementing agency and a trustee for the funds from GEF and MLF, the World Bank is providing a loan to IFCT under the same terms and conditions as approved by GEF/MLF. IFCT will repay the Bank in Thai Baht, adjusted for losses due to technology shortfall and/or foreign exchange risk, if any.

On-lending Terms. IFCT on-lends in local currency (Baht) to Sub-borrowers selected to participate in the project. All sub-loans are used for covering costs of new chillers, installation, and maintenance services. For each sub-project, the amount specified for monthly repayment is determined up-front at 90-100% of expected energy savings over a pre-agreed repayment period. The repayments begin following the commissioning of the new chiller. If savings are lower than expected because of technical shortfalls beyond the control of Sub-borrowers, chiller suppliers, and/or their service contractors, the repayment amount is adjusted for shortfalls according to pre-agreed procedures and conditions. As approved by GEF/MLF, shortfalls are discounted from the amount repaid by IFCT to the World Bank. Chiller suppliers are required to provide limited performance guarantees, while Sub-borrowers are required to maintain operational conditions (e.g., cooling load and water temperature) at the time of measurement, as stated in the sub-loan agreements and/or agreements between chiller suppliers and Sub-borrowers. Sub-loan agreements between IFCT and the Sub-borrowers reflect all of these conditions. Based on cash flow analysis completed for the project, it is estimated that repayments for all subprojects can be made within four years after the commissioning of chillers.

Follow-on Program Development Activities. IFCT will provide assistance to DIW and its consultants to develop the follow-on program and transfer experiences gained from the implementation of this project.


Management and Monitoring. IFCT is responsible for overall project management, supervision, and monitoring. IFCT and the PMU under IFCT’s management are responsible for: (1) preparing semi-annual progress reports for the Bank, (2) submitting an annual project audit report prepared by an independent auditor mutually acceptable to the Bank and IFCT, (3) monitoring implementation of all individual subprojects to ensure full compliance with environmental and safety standards, and equipment disposal agreements, (4) preparing a completion report for the project, and (5) notifying the Bank of any significant delays and problems with project implementation.

Overall Project Evaluation. DIW, in close cooperation with IFCT, Government agencies (OEPP, MOF), and the Bank, will carry out an overall evaluation of the project. DIW will hire an independent consultant to verify findings of this evaluation and assist the Government and IFCT in planning and securing additional funds for the follow-on project. Success of the project will be evaluated against the following indicators:

Have all non-CFC chillers installed under the pilot project achieved energy savings of at least 0.27 KW/Ton?

Are energy savings enough to generate an internal rate of return of at least 15%?

Does the government agree to proceed with the follow-on project at the time of undertaking the evaluation?

World Bank Supervision. The World Bank’s supervision of the project includes: field visits to current and prospective sub-borrowers, discussions with project participants on project implementation, and the review of progress/audit and subproject appraisal reports. The World Bank also reviews with DIW and OEPP the overall progress of implementation of national CFC phase-out and GHG emission reduction strategies. Supervision mission visits also monitor sub-project implementation, compliance with environmental and safety standards and training, and evaluation of project performance according to the GEF and MP project monitoring criteria.

Subproject Selection and Technical Protocol. The selection process and technical criteria for the 24 subprojects were developed in consultation with IFCT, DIW, MOF, the Energy Policy and Planning Office (EPPO), EGAT, the Air Conditioning Association of Thailand, Sub-borrowers, and chiller suppliers. Agreements on the selection process and criteria were secured from Sub-borrowers and chiller suppliers. Terms and conditions for performance verification and guarantees, dispute settlement, and definition of technical shortfalls were agreed to by Sub-borrowers, chiller suppliers, and IFCT. Agreements on other key elements, including pro-forma of key documents (subproject proposals, appraisal report, and sub-loan agreement) were also secured. IFCT appointed a consultant team to assist in the identification, short-listing, and verification of the energy consumption of existing CFC chillers.

Subproject Appraisal and Replacement of Chillers. IFCT, assisted by its consultants, ensured the timely appraisal of subprojects, and has signed sub-loan agreements with Sub-borrowers so that commissioning of all chillers can be completed within 12 months after the effective date of the project (December 4, 2001). It is planned to have approximately 24 chillers replaced in four consecutive groups of six units each with an elapsed time from the signing of sub-loans to commissioning of 9 months or sooner. Prior to signing of the sub-loans, Sub-borrowers will submit their final implementation plans, including disbursement schedules, refrigerant management plans, and plans for disposal of the CFC chillers. IFCT and its technical consultants will ensure timely commissioning of the chillers, verify test runs, and provide training to the chiller owners. Sub-borrowers will be required to monitor performance of the new chillers.


Procurement issues. Procurement of goods and works follow World Bank Guidelines.26 Because the loan is to a financial intermediary (IFCT), the procurement of new chillers, including installation and performance guarantees (where applicable) are undertaken by the Sub-borrowers according to commercial practices. Each Sub-borrower selects a chiller supplier to develop a sub-project with the owner that optimizes the owner’s benefits, and who can submit a proposal in line with project requirements. ICF and Sub-borrowers use a standard sub-loan agreement.

Financial management issues. IFCT’s accounting system was reviewed and found to be satisfactory to the World Bank. Financial transactions go through the normal processes associated with IFCT’s operations and accounting system. The PMU is responsible for maintaining project accounts in accordance with sound accounting practices and for preparing the project financial reports as required by the Bank. The project accountant is responsible for developing the project financial management system and project financial management manual as well as maintaining accounts for the project. The system consists of accounting, reporting, and disbursement procedures. IFCT’s external auditor is required to provide a separate audit opinion on the Special Account, Statement of Expenditures (SOE), and Source and Use of Funds statement, in addition to an opinion on the IFCT’s financial statements. The audit reports and IFCT’s annual report are furnished to the World Bank not later than six months after the end of each fiscal year. For all the expenditures with respect to the project sub-loan, IFCT maintains credit files with all necessary supporting documents for project identification, appraisal, supervision, and disbursements to chiller owners.

Disbursement Arrangements. Loan proceeds are used by Sub-borrowers to pay for replacement of CFC chillers. IFCT maintains a Special Account in US dollars, and loan proceeds are disbursed to this account in line with World Bank guidelines. The investment for new chillers is withdrawn from this account. IFCT has also opened a project account in Thai Baht, and repayments from Sub-borrowers are kept in this account. IFCT’s administrative fees and the reduction in repayments (where applicable) for technology failure are tracked in this account. The interest income earned from the outstanding balance is used to further strengthen technical and financial management capacities, including the audit fee for the project accounts. If IFCT and the Government decide to implement the follow-on chiller replacement program and secure an additional US$30 million, the project account and outstanding sub-loans may become a long-term revolving fund for chiller replacement.

E. Project Status

Active implementation of the project began during the fourth quarter of 2001. As of late April 2003, key indicators for the overall status of the project include the following:

6 Chillers have been installed, with 1 more in the processed of being installed.

10 Chillers are awaiting delivery in Thailand to be subsequently installed.

42 chillers identified by this project will be replaced with the need for concessional lending.

The appendix on page 77 provides a list of all of potential participants identified by IFCT for chiller conversions with support from the project.

26 Procurement Under IBRD Loans and IDA Credits, January 1995, revised January and August 1996, September 1997, and January 1999.


V. Mexico Chiller Project



The primary objectives of the Mexico Chiller Concessional Lending Pilot Project include the following:

Test various loan conditions to finance the replacement of 20 CFC chillers (phases I and II) with energy-efficient CFC-free systems;

Assess the sustainability of a revolving fund created by the project;

Reduce technology risks and uncertainty associated with degree of possible electricity savings; and

Encourage borrowing for early chiller replacement.

The project will help Mexico sustain its 1999 freeze on ODS consumption and explore financing instruments to begin reducing the current and long-term demand for CFC from the stock of chillers installed in the country. Together with other refrigeration applications, Mexico’s remaining CFC consumption is largely dependent on the significant stock of CFC-using equipment. Assuming a successful implementation of 20 chiller replacements and complete loan recovery (3.5 years loan-term and 0% real interest rate, i.e., nominal rate at inflation rate), the US$2.3 million project would support 113 chiller replacements in 11 years. Such replacements would make available 52 MT of CFC for servicing the CFC chillers that remain.

Technology risks associated with the project have been reduced by soliciting performance-based bids from chiller suppliers and installation firms. To measure electricity savings, the project undertook an independent energy audit of the chillers/buildings employing a measurement and verification protocol to establish a baseline.

2. Operational Objectives

Based on the primary objectives of the project, the following operational objectives are central to project implementation activities:

Characterize the criteria used by chiller owners in the country in deciding whether to replace a chiller before the end of its useful life (e.g., perceptions of regulatory pressure, financing constraints, perceptions of electricity savings, performance and reliability, and environmental effects);

Based on these criteria, develop a menu of financing options to test acceptability by various types of chiller owners;

Develop an incentive framework for chiller suppliers and installation firms to provide integrated services and increase reliability and performance in achieving and maintaining electricity savings;

Develop a monitoring and evaluation protocol to learn from Phase I and adjust Phase II accordingly; and

Disseminate the project’s experience within Mexico and elsewhere.


3. Project Learning Objectives

Through implementation of this pilot project, several key questions will be addressed that will assist the Government in promoting further replacements of chiller technology in Mexico. These include the following:

If new CFC-free chillers are more energy-efficient and offer electricity savings, why is replacement not taking place already?

How can the uncertainty of electricity savings be minimized?

How can a concessional lending instrument be sustainable while serving its purpose of encouraging borrowing for early chiller replacement?


1. National Framework for Energy Efficiency

The Energy Efficiency Trust (Fideicomiso para el Ahorro de Energía Eléctrica-FIDE) was created in 1990 as a partnership between the public and private sectors. Its founders were Mexico’s two main public utilities (Comisión Federal Electricidad and Compañía de Luz y Fuerza), the top five private manufacturing and consulting business associations, and the Electrical Workers Union. FIDE’s mission is to promote energy efficiency investments and support the development of credit and related services markets. FIDE receives contributions from its founders, but also generates its own revenues from projects and services.

FIDE’s programs include energy efficiency demonstration projects in the commercial and services sectors, energy efficiency technical assistance, training, dissemination, and promotion, and technical support for demonstration projects in large industrial processes. For demonstration projects, FIDE offers interest-free loans of up to 60% of total project costs and interest-bearing loans for 100% of project costs. The loans are repayable in three years at variable interest rates. FIDE completed 155 and 210 demonstration projects in 1997 and 1998, respectively.

Furthermore, with the support of a US$23.4 million loan from the Inter-American Development Bank that became operational in 1998, FIDE programs were expanded to introduce market credit mechanisms with financing from national and international organizations, equipment suppliers and distributors, and insurance and leasing companies. FIDE also promotes the development of ESCOs (Energy Services Companies) in Mexico to expand the supply of integrated energy efficiency services, including performance contracting. In addition, FIDE has established a program of rebates for efficient motors, compressors, and lighting (including labeling for efficient models).

2. Technical Context for Chiller Replacement in Mexico

This project proposal was developed on the basis of a sample of 20 chillers from the 114 total systems found in the city of Monterrey, in the northern state of Nuevo Leon. While detailed data about chiller characteristics in the rest of Mexico are still under study, Monterrey’s data are deemed illustrative of the profile likely to be found in the rest of the country and were, therefore, used to extrapolate to national data.

The project replaces CFC-11 and CFC-12 with high-efficiency HFC-134a chillers. The uses of HCFC chillers are restricted to cases where there is no other alternative technology viable. Such cases are identified from technical analyses that consider the particular conditions of each building and will require


the agreement of the World Bank. Both HCFC-123 and HFC-134a chillers are widely available around the world, and since 1993 have been installed in most new construction in buildings in Mexico. Both are effective replacements in terms of refrigerant properties, but both have environmental considerations associated with their use. Their effectiveness is well proven in developed and developing countries around the world, and equipment and service is readily available in Mexico.

3. Current Outlook

Mexico possesses abundant reserves of petroleum and natural gas, yet strong economic growth, augmented by unprecedented political stability in 2000 and early 2001, is causing energy demand to outpace the country's ability to generate additional supply. Mexico's electricity sector is at a crossroads. Electricity consumption has rapidly increased, up by about 60% in just the past decade, and fossil fuel generation has been increased by nearly 60% to keep up with the demand. However, despite this rapid increase in generation over the past decade, budgetary constraints on major infrastructure projects like natural gas pipelines, transmission lines, and power plants may prevent supply from meeting demand growth over the next two decades. Given current grid capacity constraints, shortages could result.

In 1999, Mexico’s total energy consumption was 6.1 quadrillion BTU, production was 9.03 quadrillion BTU, and energy-related carbon emissions were 100.6 million metric tons of carbon, each about 1.6% of the world total. Mexico has installed electric power generating capacity of 38.5 million kilowatts and in 1999 generated 182.5 billion kilowatt-hours (bkWh).

Mexico's industrial energy policy calls for conversion of many oil-fired power plants to natural gas by 2005. Deregulation of the electricity sector is also a major issue in Mexico.

C. Institutional Framework for Project Management

The World Bank, on behalf of the UK Government, presented a preliminary proposal for the chiller project to FIDE in March 1999. Since FIDE’s objectives and experiences in administering credit programs closely match the project’s objectives and needs, the Bank received a strong expression of interest from FIDE, and a commitment from FIDE to providing co-financing for the project. Since FIDE’s contribution comes from its own funds, there has been no need to request funds from Mexico’s government budget. Mexico’s Ozone Unit within the Ministry of Environment (INE) has also endorsed the project.

FIDE also acts as the executing agency for the project. FIDE’s involvement in implementation is expected to yield substantial benefits beyond its financial role, since FIDE has close to a decade of experience promoting energy-efficient investments and supporting the development of energy efficiency credit and service markets. In addition, based on demand from building owners, FIDE may be able to supply additional funds for efficiency improvements beyond the chiller systems.27

D. Project Approach

1. Sources of Project Support

The Mexico project combines grant financing from the Montreal Protocol Multilateral Fund (through a bilateral grant from the UK) of US$1 million (Phases I and II financing) with government co-financing of

27 See discussion of benefits of combining other energy efficiency improvements with chiller replacement (the whole building energy efficiency approach) in 0 on page 55 and accompanying text


a similar amount to establish the project’s revolving fund. Loans administered through the revolving fund are repaid over a three-year period through a standard schedule of principal and interest payments.28 Loans are denominated in dollars and are interest free for chillers less than 20 years old, and bear interest at the rate of 2% for chillers 20 or more years old.

2. Phased Approach to Project Implementation

The project is being implemented in two phases, with an original target of at least ten chillers being replaced in the first phase (which was exceeded). A second phase will follow if the first conversions are deemed successful. A monitoring and evaluation system is being utilized to track progress and assess success. Implementation has included the following financing arrangements and initial results:

Funding includes $2.3 million, including $1 million UK bilateral MLF grant; $1 million from local counterpart FIDE (Fideicomiso para el Ahorro de Energía Eléctrica or Energy Efficiency Trust, a public-private partnership); and $300,000 from chiller owners for phases 1 and 2.

Grant to Mexico lent to chiller owners to finance chiller replacement.

Converted 12 chillers (increase over the 10 originally planned) in now-completed first phase. Plan to convert ~100 additional chillers in second phase.

Planned contributions to date exceeded by 40% for FIDE, 350% by chiller owners, ODS eliminated and energy savings 56% and 36% over plan respectively. Disbursements and repayments have all been made on schedule.


Participant Selection. Phase I of the project was initiated upon receipt of financing from the Multilateral Fund, at which time FIDE publicized the project and finalized the selection of the chillers to be replaced. At the same time, FIDE started the selection of the chiller suppliers. In order to maximize competition among beneficiaries, the criteria used in developing the list of recipients took two parameters into consideration. First, FIDE considered the technical characteristics of the chiller itself (age, efficiency, leakage rate, operating load, baseline energy consumption, etc.). As part of the replacement strategy, newer chillers, no older than 20 years, with a higher leakage rate and poorer efficiency will be prioritized. Second, FIDE considered the owner’s credit-worthiness and financial capacity to repay the loan. Nevertheless, since the Mexican partner in this project (FIDE) is interested in demonstrating the energy savings of new technology that become more apparent when replacing chillers older than 20 years, FIDE has retained some flexibility in choosing the equipment in 50% of the systems (i.e., the share of the project they are financing). In summary, the equipment age selection criteria were the following: 50% of the systems (those financed by the Fund) were to be no older than 20 years; and for the other 50% FIDE retained the flexibility to chose older chillers if deemed necessary.

An agreement was signed with each building owner prior to development of specifications and procurement of the appropriate replacement chillers. Since the project aims at testing the design options of a concessional lending instrument, the Project provides flexibility to the executing agency in the final selection of chillers regionally within a fixed budget for chiller replacements.

28 An initial six month grace period for principal and interest repayment is included in the three year repayment period.


For Phase II of the project, selection criteria will be simplified in order to speed the approval process. Any proposed chiller meeting these criteria can be replaced through the revolving fund until available funds are exhausted. The new criteria are:

minimum efficiency of 0.67 kW/RT for screw chillers and 0.64 kW/RT for centrifugal chillers;

maximum chiller price of US$341 per RT for chillers with capacity up to 350 RT and US$290 for capacity greater than 350 RT; and

maximum subproject execution in 24 weeks from contract signing until chiller commissioning.

Loan Repayment. Loans to building owners carry a standard principal and interest repayment schedule. The payment is independent from actual electricity savings to avoid the perverse incentive of influencing electricity measurement or claiming lower than expected savings.

FIDE has assessed a menu of financing options to offer building owners. The rates and conditions being considered include:

dollar-denominated loans with a higher percent of project financing;

peso loans at fixed interest rates (above the expected inflation rate);

peso loans at variable interest rates adjusted by inflation (e.g., the CPP-Costo de Captación a Plazo, average bank borrowing rate published monthly by Banco de México);

loans denominated in UDIs (Units of Investments, a Mexican inflation-adjusted monetary unit updated daily based on the consumer price index); and

loan collateral, accepted by FIDE as the value of the new equipment plus a decommissioning charge.

Energy Savings Audits. Since a chiller accounts for only part of an electric energy consumption bill and since the chiller’s efficiency is directly related to other operating characteristics of the building, chiller replacement is complemented with an electricity audit. This preliminary audit assesses the efficiency of lighting services, the variable and constant thermal load of the building, and the efficiency of the chiller-plant (ventilation system, chilled water pipes, insulation, etc.). As a result of this audit, two important aspects of overall energy efficiency are addressed. First, inefficiencies in other building facilities are identified, providing the owner with technical options to achieve energy savings. Second, the audit’s results help the chiller supplier determine design conditions. The electricity audit is conducted by FIDE based on its extensive and successful experience in building energy savings programs.

This performance auditing approach aims at selecting “project suppliers” rather than just “chiller suppliers.” With this in mind, FIDE works in close collaboration with selected chiller suppliers in determining the baseline condition of the target buildings. This information enables suppliers to guarantee a range of operating efficiencies at the time of bidding. Independent agents selected by FIDE and the World Bank then verify these efficiencies during implementation.

Chiller Replacement Procurement. Once loan agreements between FIDE and the chiller recipients were signed, FIDE procured the first ten chillers from local distributors in Mexico. The actual type of chiller purchased was determined on a case-by-case basis with the building owners. The contract between FIDE and the chiller supplier includes equipment, installation, and maintenance for the loan payment period. Maintenance costs are not included in the project because they are not considered incremental costs for the building owner.


Project Evaluation Criteria. FIDE and the World Bank are now conducting an in-depth evaluation of Phase I. The evaluation will use several criteria, including:

Expediency of loan processing;

Loan recovery performance/revolving fund balances;

Cost-savings in contract packaging;

Chiller plant efficiency performance;

Owners acceptance of financing options;

Recovery and recycling of CFC from old chillers; and

Decommissioning and destruction of old chillers.

Phase II Initiation. If Phase I of the program is deemed successful by the MLF Executive Committee, FIDE, and the World Bank after the first year, FIDE will move forward to implement Phase II of the project, which will be implemented during the next 3.5 years. Phase II of the project will be contingent upon ExCom approval. New project participants will be identified in order to invest the balance of the one-year revolving fund and the additional complementary financing. This additional financing of US$1,153,000 may be structured as in Phase I, or FIDE may choose to raise more funds to increase the program’s coverage.

E. Project Impact

During the 4.5 years of the proposed project, FIDE will purchase as many new chillers as possible using the money available from the revolving fund. The US$2.3 million project (US$1,000,000 MLF grant for Phases I & II and $1,306,932 in local financing) will support an estimated 113 chiller replacements, phasing out 52 MT of CFCs. This assumes that (1) lending at a real interest rate of 0% to 4%, (2) the inflation rate will quickly adjust to exchange rate changes, and (3) the life of the revolving fund is 11 years (through the year 2010).

F. Project Status

1. Participant Criteria and Selection

FIDE launched the program in October 2000 with the issuance of a detailed Project Manual to inform bidders of program characteristics and the procedures to be followed. The time allowed for the bid preparation and submission was six weeks. The five main chiller suppliers operating in Mexico (York International, Ideal Standard, Trane Division, Equipos McQuay, and Carrier Mexico) were invited to participate in the bidding process, which opened on December 5, 2000. Bid evaluation and qualification criteria were developed to prioritize the most cost-effective and efficient proposals and to share the technological/economic risks with the supplier and the chiller owner. In total, FIDE received 20 bids. The process of evaluation, requests for clarifications, and bid qualification took one month. Of the 20 bids, FIDE pre-awarded a total of US$1,120,403 in loans (US$460, 201 from the UK and US$660,201 from FIDE) for the ten best projects. Two other projects have been selected and are currently undergoing the approval process. As a result, with the same grant funds originally requested for replacement of ten chillers the program will fund 12 chiller replacements. Following the pre-awarding of these loans, the projects were further assessed based on verification of potential energy savings and financial evaluation of the building owner.


2. Interim Results

The interim results achieved to date by the project are summarized in the following table.

Table 30: Project results summary Concept Project Design Actual Result

Timeframe of bidding process and pre-award of contract. 10 weeks 10 weeks Chillers to be replaced 10 12 Participating firms 4 4 Awarded firms 4 ODP eliminated in the first year 5 tons 7.8 tons ODP to be eliminated in 11 years 52 tons 81 tons Projects in Pipeline N/A 8 Average Age of chiller replaced 20 years 12 years Owner counterpart for installation, freight and insurance as a percentage of total project cost 13% 31%

Owner counterpart for chillers, system optimization, and building energy consumption optimization as a percentage of total project cost.

0 3.80%

Price per ton of refrigeration $125 $100 Guaranteed electric energy savings (kWh/year) 5.4 million 8.0 million

Initial results from Phase I of the project indicate that the project has succeeded in some key areas, including:

Counterpart Financing Levels. The Mexican counterpart (FIDE) financing exceeded by 40% the expected amount (US$700,000 instead of the US$500,000 requested).

Grant Financing. FIDE contributed an additional US$200,000 grant for energy efficiency improvements in the chiller system.

Building Owner Contributions. Building owner contributions exceeded by 350% the expected amount (US$692,300 instead of the US$153,466 expected).

Project Scope. Twelve (12) chillers were financed instead of the ten (10) expected, with the same grant amount expected replace ten chillers due to the increased building owner contributions.

ODP Reductions. The ODP to be eliminated in the first year was 56% greater then expected (7.8 tons instead of 5 tons)

Disbursement Schedule. Disbursements have been made on schedule with 100% disbursement achieved in August 2002 upon payment to suppliers of 15% of the contract sum originally withheld.

Energy Savings. Energy savings were 36% higher than proposed (7,387,902kWh/yr instead of 5,423,539kWh/yr proposed) base on in-situ evaluation of 9 chillers..

Feasibility of Credit Programs. Loan conditions were evaluated as having been attractive to building owners, which suggests that a credit program in this sector is feasible. The included loans in both UDIs and US$ with a 2% interest rate that permit the sustainability of the revolving fund.

Repayment. 100% of building owners that participated in the program have made their monthly repayment on time.


3. Project Expense Summary

The table below outlines project expenses as of February 2002.

Table 31: Mexico Chiller Project Lending

Project Loan Amount

US$ Percentage of

Committed Resources Paid Resouces

US$ Percentage of Paid

Resources La Campiña I y II 136,222.00 13.62 115,788.70 11.57 Condominio Acero Monterrey 120,000.00 12.00 102,000.00 10.20 Palace Resorts (Beach Palace, Cancún Palace and Sun Palace I and II)

288,347.00 28.83 245,094.95 24.50

Cetys Universidad 120,000.00 12.00 60,000.00 6.0 ÍTEMS campus Monterrey 120,000.00 12.00 60,000.00 6.0 Industria Química del Istmo 100,000.00 10.00 50,000.00 5.0 Chiller Purchases 884,569.00 88.45 632,883.65 63.27 Administrative Costs 35,834.00 3.58 33,822.00 3.38 GRAND TOTAL 920,403.00 92.0 666,705.65 66.6

4. CFC Recovery

The table below outlines CFC recovered under each project.

Table 32: Mexico Chiller Project CFC Recovery Project Recovered Refrigerant (kg)

Condominio Acero Monterrey 40 Administradora La Campiña 357 ITESM campus Monterrey 149 Palace Resorts 1,257 TOTAL 1,803

Note: In the Cetys Universidad Project , the old chiller was decommissioned without recovering the refrigerant gas and oil.

5. Avoided CFC Consumption

In several sub-project cases, old chiller equipment leaked, requiring regular refrigerant recharge. Replacing the old chillers avoided new refrigerant use as shown in the table below.

Table 33: Mexico Chiller Project Avoided CFC Consumption Project Refrigerant Emissions Avoided (kg) Condominio Acero Monterrey 1,600 Administradora La Campiña 360 Palace Resorts 1,800 Total 3,760

6. Total CFC Emissions Reductions

Taking into account recovered gas and avoided emissions from equipment leakage, chiller replacements to date have avoided the use of 6,212 kg of refrigerant.


7. Energy Savings

Chiller replacements in 2001 allowed for demand savings of 1,073 mW and reduced energy use of 780,885 kWh. These results were determined by considering the real efficiencies of the obsolete equipment through on site measurements.

8. Phase II Project Identification

The following table lists projects identified for the second phase.

Table 34: Mexico Chiller Project Second Phase Subprojects No. Supplier Project Location Sector

1 York Hotel El Presidente Acapulco Acapulco, Guerrero Hotel 2 York IQUISA Coatzacoalcos, Veracruz. Industrial 3 McQuay Hotel Krystal Vallarta Puerto Vallarta, Jalisco Hotel 4 Trane Marriott Casa Magna Cancún Cancún, Quintana Roo. Hotel

Phase II projects will include other non-program financing.


VI. Turkey Chiller Project

The refrigeration project for ODS phase-out in Turkey was approved December 2001. Initial preparatory work was started in 2002. The current plan for 2003 is the second annual plan and is trying to be flexible to meet aggressive targets.



The objective is to replace 65 chillers in 2 phases, 25 in the first phase and 40 in the second phase.

The original 65 chillers should recover approximately 11 MT of CFC.

2. Operational Objectives

The first chillers should be replaced in early 2003 before the cooling season begins. These chillers will be studied through the 2003 cooling season to provide case studies to inform and motivate future participation.

Elements of the 2003 plan include:

review and strengthening of existing phase-out policies and regulations.

issue of 2003 CFC import quotas.

moving forward with refrigeration contacts signed with SME commercial refrigeration companies.

Continued re-training of refrigeration companies.

Continuation of the RRR program (Recovery/Recycling/Reclamation).

Initiate training of customs officials.

Sign contracts with chiller companies identified in 2002.

Start end-user retrofit program.


1. Chiller sector

The stock of chillers in Turkey comprises 10,000 units, of which 25% use CFC-11 or CFC-12. The average charge is 150kg of refrigerant. 80% of the chillers are 195 tons or less. Turkey does not have any domestic chiller production.

There is a relatively low cost opportunity to retrofit, but this produces no improvement in chiller efficiency, missing out on the benefits of potential energy savings.


C. Project Approach


Two phase project with 25 chillers in Phase I and 40 in Phase II. The activity will establish a revolving fund that provides interest free loans (up to 80% of the replacement costs) with a payback period of 4 years. After Phase I, the cash flow for the revolving fund will be analyzed and payback terms adjusted as needed.

The first chillers will be replaced in winter 2002/2003 and then studies the following summer to provide learning to support projects done in Winter 2003/2004.

D. Project Status

At this writing, there was no available status update on the project.

The original 65 chillers should recover approximately 11 MT of CFC.


VII. India Chiller Project

A. Background

At the time of this writing, there is no active India Chiller replacement project. However, joint research conducted by the World Bank and the Government of India has shown that India has a large chiller sector, and that the slow replacement rate of CFC chillers barring specific action is likely to render India unable to complete its Montreal Protocol phaseout requirements. A project proposal is therefore currently being developed for India. With this in mind, this section includes information about the potential and operational recommendations for India.29

India has made significant progress in its ODS phase-out plan, reducing the use of CFC in industrial processes. This has been achieved through a combination of financing for replacement of equipment and tax relief for materials and equipment necessary for ODS phaseout.

Still, it is unlikely that India will meet its goals given current conditions and needs to examine ways of accelerating the process. Refrigeration and air-condition account for almost 20% of India ODS consumption, the second most significant sector after solvents.

Given the experience in Mexico and Thailand with chiller replacement, and the large stock of CFC chillers in India, some chiller replacement or retrofit approach is logical and currently under consideration. Still, with the estimate for replacing CFC chillers at US$572 million, an approach needs to leverage funds, financing some portion of the cost through anticipated energy savings

India does not yet have a chiller replacement project, but as it is not on track to reach its ODS phase-out goals, some sort of project to accelerate CFC-phaseout will be needed. Studies have indicated that a chiller replacement project will be feasible in India due to:

There is a high level of uncertainty in estimates of the size of the market for small chillers (<100RT). The estimate ranges from 40,000 to 100,000 units. The estimate is better for large chillers. There are between 1000 and 1200 large chillers (>100RT) in India.

B. Project Objectives


The primary objective will be to read CFC phaseout targets at a reasonable cost.

2. Country Background

In the case of the large-chiller category, the estimate for the size of the market is good. There are approximately 1,100 chillers with an average capacity of 600 tons. Almost all are centrifugal type, using CFC-11. A few screw and reciprocal chillers are found in the largest sizes.

Most Chillers are between 5 and 10 years old, with a significant number between 10 and 15 years old. A survey of owners revealed older chillers unknown to manufacturers.

29 From the big huge PDF.


Electricity cost on average about 3.5 Rupee/kWh or about US$.075, though it varies up and down by about 30%. This is a fair rates to see paybacks, but obviously more interesting in the areas where electricity approaches US$0.10/kWh.

C. Proposed Project Approach


The findings of a study commissioned by the WB are:

India is unlikely to reach its phaseout targets until 2034 without an program to accelerate phaseout.

A CFC recycling program is likely to be insufficient.

A incentive program of US$58.1 million would be necessary to achieve phaseout by 2010.

Uncertainty in the population of chillers might require as much as US$7 million more

The estimated total equipment cost would be US$572 million (US$179 million for large chillers >100RT, US$394 for small chillers <100RT)

There are local organizations willing and able to provide funds for onlending and to administer the grant element from the MF.

The study makes the following recommendations/observations:

the MF should support India with incentive/compensation to accelerate ODS phaseout .

The project should be staged to continue learning and reduce uncertainty as the project advances.

Reduced tariffs on non-CFC chillers would improve the attractiveness of early chiller replacement for CFC phaseout.

Increase electricity tariffs would improve the attractiveness of early chiller replacement for CFC phaseout.

it would help the phase-out program if Government would announce and implement a gradually increasing excise duty on substances subject to phase-out under the Montreal Protocol; and

A campaign to raise awareness of non-CFC alternatives and reduce confusion about the technology would help encourage chiller replacement.

D. Challenges

1. Subsidized electricity rates, encourage continued use of energy-inefficient chillers and blunts the impact potential savings from improvements in energy efficiency.

2. There is a high level of uncertainty in the market for small chillers (<100RT). The estimate ranges from 40,000 to 100,000 units

3. There are between 1000 and 1200 large chillers (>100RT) in India


VIII. Lessons Learned

Clear Technical Opportunity to reduce CFC and energy use.

Need for Tailored Implementation. Participant and supplier motivation is different in markets with varying costs of capital and financing, requiring flexibility when selecting recruitment, funding, and other implementation mechanisms based on local conditions. For example, in Thailand, falling interest rates (which fell from 18% before the economic crisis to 7%, the lowest ever) led the project to reduce its interest rate from 4.5% to 3.5% to be competitive. In Mexico, interest rates were much higher, and the revolving fund was particularly attractive to chiller owners.

Disposal of ODS-using Equipment. In markets where competing replacement programs exist, the issue of equipment disposal must be considered. Programs supported by the MLF, which requires disposal, will not be as attractive as alternative programs which do not. Project designers and local implementation partners must find a way to deal with this.

Communicating Benefits to Chiller Owners. Project experience suggests that initial skepticism among chiller owners requires effective communication of the benefits of chiller replacement early in the recruitment process. Once these benefits are understood, chiller owners have been very motivated to participate, particularly in combination with improved access to financing, and technical assistance.

Support for Existing Policies. In countries where existing or new regulations promote replacement of inefficient chillers (e.g., ODS phase-outs, building energy use codes), a chiller replacement program can facilitate and/or speed their implementation. A chiller replacement program gives owners a powerful incentive to replace chillers before mandatory compliance.

Supplier Motivation. Suppliers have been very motivated to collaborate with chiller programs. However, project experience shows that service contracts with local service providers may need to be strengthened to ensure that projects succeed during the critical first two years of a replacement project. Poor service during this period can jeopardize the commissioning of replacement chillers. Clear requirements and guidelines may need to be incorporated into sales agreements for suppliers wishing to participate in programs that access concessional financing.

Chiller Owner Recruitment. Program designers should streamline the participation process to the maximum extent possible to capture and retain participants.

Premium Properties. Project experience indicates that premium properties with high interest in customer comfort (e.g., hotels, shopping malls, etc.) have the highest initial interest in chiller replacement programs. These owners may be effective first targets for future programs.

Technical Assistance. Technical Assistance is a critical part of successful chiller programs. It can include both organizational effort required to select participants and evaluate program performance, as well as technical assistance of the type normally provided by a supplier. Since intensive technical assistance may not be in line with existing business practices of suppliers, it is important to design programs carefully to either provide certain types of technical assistance outside of the supplier-owner relationship, or require additional support from the supplier as part of program participation guidelines.

Variability in Energy Savings. Energy savings does not depend only on cooling capacity size, but on power consumption and operating hours as well. Energy saving also depends on the chiller being appropriately size to operate at its maximum efficiency. These considerations should be taken into account when analyzing potential project impacts.


Operation and Management. During the preparation stage, the concept of preventative maintenance has been successfully promoted among chiller owners. Providing technical assistance in this area can help increase the benefits of a program, by improving practices among chiller owners who would not otherwise participate in the program of replacement.

Selection Criteria. Proper selection criteria should be evaluated for each program. Since criteria can either shrink or expand the potential pool of participants, criteria need to be calibrated with program goals. Early or initial phases may need to be more stringent with the use of criteria, while later phases may require the easing of criteria in order to reach additional participants.

Over Capacity of Existing Chillers. Many building owners have more installed chiller capacity than they need, providing additional savings opportunity.


IX. Transforming the Market for Chillers

A. The Market Transformation Approach

1. The Market Transformation Concept

The concept of transforming markets in favor of beneficial technologies is more fundamental than simply replacing existing equipment with more environmentally sound or energy-efficient alternatives. Market transformation involves influencing existing markets to promote change in their underlying structure or to make lasting changes in the behavior of market participants. Market transformation presupposes that there is currently a “market failure” or that there are externalities or barriers that inhibit innovation in the market. Barriers can be any of a wide range of factors such as industry conservatism, pricing problems, financing problems, lack of information on the part of the consumer, inability of suppliers to sell new ideas, or other relevant factors. Normally, markets are transformed by the market players themselves, e.g., a new market entrant might offer new features or a large consumer may demand innovation from suppliers.

In other cases, none of the critical barriers preventing market transformation are addressed from within by the market’s own key players. In such cases, there is the opportunity for outside players to act in addressing those barriers. Based on recent experience, this role has typically been played by government, frequently in partnership with other key stakeholders in the market. From the public welfare perspective, such market transformation programs are justified if the cost of the intervention is exceeded by the value of public good it creates.

A significant function of market transformation programs is often to address the “first mover” risk. For example, financial assistance for industry demonstration projects helps to overcome personal risk for industry champions of more efficient technologies, as well as dispels doubts about a technology’s local viability. Such programs must be designed to offer the opportunity for long-term replication across the entire market. In such cases where an intervention such as special financial assistance is provided to spur innovation, it must be carefully designed so that the results it produces for participants effectively demonstrate the desirability of making the innovation outside of this special support framework.

2. Market Transformation for Energy-Efficient Building Technologies

(i) US ENERGY STAR® Case Study

In considering market transformation strategies for promoting energy-efficient technologies, it may be useful to review existing efforts. Since the early 1990s, interventions by government agencies have attempted to influence market transformation for energy consuming products in homes and business with some notable successes. One of the first and best examples is the ENERGY STAR program in the US. Since the early 1990s, the US Environmental Protection Agency (EPA) and the US Department of Energy (DOE) have undertaken a series of ENERGY STAR initiatives with the ultimate goal of transforming the US market for building equipment, office equipment, and appliances towards greater energy efficiency. This activity is built on the premise that there is a market failure, whereby economically logical investments are prevented by some combination of barriers. In the most general scenario, market failure assumes that manufacturers are capable of making more efficient products, but do not because of perceived insufficient demand, while consumer demand remains undeveloped because the more efficient choices are either not available or too expensive. ENERGY STAR uses a dual approach for market transformation, recruiting building owners to make commitments to greater energy efficiency, while simultaneously working with manufacturers to provide higher efficiency building equipment products.


The experience of the ENERGY STAR work in commercial buildings has shown that upgrades to buildings are more likely to occur when there is less confusion about the nature of the upgrade opportunities. ENERGY STAR uses several strategies to better align building operations and corporate financial decision-making. While it can be difficult for a facility manager to sell energy efficiency upgrades to a financial officer, the facility manager can readily provide ideas for energy efficiency when the company management recognizes these opportunities and treats energy consumption as a controllable cost. Many ENERGY STAR tools, such as the Financial Value Calculator, are designed to take the financial messages high in an organization or, at least, give a facility manager independent sources of information to make the case for investments. Much of this is technology neutral, promoting the concept of investing in energy efficiency and leaving the determination of the specific strategy as a separate step.

Equipment manufacturers and contractors appreciate the ENERGY STAR program because a large part of their sales job has traditionally been to convince skeptical managers that opportunities for energy savings are real. If a client believes in energy efficiency investments, the salesman can concentrate on differentiating his product and finding a suitable pricing/financing arrangement.

ENERGY STAR does not offer grants or financing of any sort for energy-efficiency projects. It is a true market transformation program in that it aims only to facilitate investments that stand on their own financial merits. The original ENERGY STAR technology upgrade program was called “Green Lights” and focused on the opportunities for upgrading commercial lighting to more efficient options. The program provided training and assisted in project feasibility analyses to help determine if a lighting project met a specific “hurdle rate” for worthwhile investments. While an organization could set its own hurdle rate, Green Lights suggested that only projects with a 10-year IRR of 20% or better should be funded. Over 800 million square meters of space where upgraded through Green Lights, yielding an average 10-year IRR of about 35%.

Currently, ENERGY STAR for Business encourages organizations to benchmark their properties using the ENERGY STAR Benchmarking Tool. This approaches identifies if a building, viewed as a whole, is energy-efficient. The Benchmarking Tool scores buildings on a 1-to-100 point scale, with 1 being the least efficient and 50 being average. The tool adjusts the score according to the effects of weather, climate, and basic building operating parameters. Generally, any building that scores less than a 75 (representing an “energy performance” better than 75% of US buildings) is assumed to have opportunities to improve. Equipped with information about how a building compares, managers can prioritize which properties offer the most savings opportunity and can better convey expectations to energy consultants and equipment suppliers. Still, all upgrades are expected to be subject to a cost/benefit analysis. For many buildings, there is an extra benefit of being recognized by ENERGY STAR and receiving a label for their building, if a benchmarking score of 75 or better can be achieved and validated. As of January 2002, the ENERGY STAR Benchmarking Tool is also available for localities outside of the US.

(ii) ENERGY STAR and Chillers

The ENERGY STAR program for buildings is based on an approach that encourages overall evaluation of building energy efficiency, along with an array of potential energy saving measures. In this way, ENERGY

STAR has not been involved in a stand-alone program to promote energy-efficient chillers. Chiller replacements on their own tend to fall at the top end of potential upgrade costs, and therefore looking at a chiller upgrade as a first step on its own merits has not been considered to be the most effective approach. However, when combined with other upgrade projects that allow the building to be better managed, and result in reductions in the overall cooling load, replacing the chiller can be attractive.

As part of this approach, the ENERGY STAR Buildings Manual suggests an integrated system analysis that involves examining the relationship between the range of possible upgrades and improvements and


culminates in replacing the existing chiller or chillers with smaller, more efficient staged chillers, providing more flexibility and reliability along with energy savings.

The stages of the ENERGY STAR approach are:

Re-commissioning. Periodically examine building equipment, systems, and maintenance procedures as compared to design intent and current operational needs.

Lighting. Install energy-efficient lighting systems and controls that improve light quality and reduce heat gain.

Supplemental Load Reductions. Purchase ENERGY STAR labeled office equipment, install window films and add insulation or reflective roof coating to reduce energy consumption of supplemental load sources.

Fan Systems Upgrades. Properly size fan systems, adding variable speed drives, and converting to a variable-air-volume system.

Heating And Cooling System Upgrades. Replace CFC chillers -- retrofit or install energy-efficient models to meet the building’s reduced cooling loads, upgrade boilers and other central plant systems to energy-efficient standards.

The following case study is included in the ENERGY STAR manual to illustrate how different technology projects can impact the needed chiller capacity:

Existing Cooling Capacity 1,760 tons Pre-Upgrade Calculated Peak Cooling Load 1,805 tons Upgrades Implemented Reductions

Lighting retrofit 45 tons Peak airflow to labs reduced 10 percent 115 tons Energy Star computers, monitor shutoff, window films 38 tons Variable-speed drives 14 tons

Post-Upgrade Projected Peak Cooling Load 1,593 tons

ENERGY STAR suggests evaluation of the initial operating and maintenance costs, size, and weight of the new chiller, and to aim for a 15-50% reduction in chiller energy use. The importance of having good chiller efficiency at partial load is also emphasized.

To assist chiller owners in evaluating the potential for energy savings and technical upgrades to more energy-efficient chiller equipment, ENERGY STAR offers a software tool called QuikChill that has been used to assess centrifugal chillers upgrades. QuikChill performs full economic and energy analyses of potential upgrade scenarios involving complex chiller plants without complex building data. It handles consolidation of existing chillers, integration of new chillers, and retrofits to existing chillers.

Taking the whole building approach to a chiller replacement project can lead to impressive overall savings, as shown in the table below.


Table 35: Energy Savings with Whole Building Energy Efficiency Chiller Replacement

Measure

Old Building Energy Savings Annual Electricity

Use (mWh) Share of Building

Energy Use Chiller Replaced HVAC System

Upgrade Total Building

Upgradea Chiller 2,000 20% 50% 50% 60% Pumps 600 6% 0% 20% 30% Cooling Tower 400 4% 0% 50% 60% Ventilation 1,500 15% 0% 20% 30% Total HVAC 4,500 45% 22% 36% 46% Lighting 3,000 30% 0% 0% 20% Plug loads 1,500 15% 0% 0% 20% Other 1,000 10% 0% 0% 20% Total 10,000 100% 10% 16% 32%

a Includes lighting upgrades and other measures that reduce cooling load. Investment cost drops because new equipment can be downsized.

Source: E-Source Manual, calculations.

3. Market Transformation and Chillers in Developing Countries

The principles of market transformation can and have been used in a developing country context. While market transformation activities such that as under the ENERGY STAR program have focused on addressing key information barriers to spur innovation, pilot programs in countries such as Thailand and Mexico (see sections IVand Error! Reference source not found.respectively) have used financial incentives to spur similar innovation. While these programs are dependent on access to financing to promote potential chiller upgrades, incentives are key to overcoming barriers and transforming key elements of the market. For example, if demonstration programs such as the Thailand and Mexico projects are able to successfully demonstrate, document, and communicate the energy and financial savings possible through chiller upgrades, it may be possible to move the market in the direction of more efficient overall use of chillers in the long term. When combined with access to concessional financing and other sources of financial support, such programs represent a viable opportunity to both capture long-term energy efficiency gains and contribute to establishing a base for full market transformation.

B. Costs/Benefits

Central to any market transformation approach involving chiller replacement are the costs and benefits associated with replacing older technology with newer energy-efficient and CFC-free technology. Examining these costs and benefits is useful to establishing a clear theoretical basis for the promotion of replacement chillers as either a business investment decision, or as a decision that can bring other types of benefits. In examining chiller replacement projects, some costs and benefits can be easily (though not necessarily accurately) quantified, while others are either difficult to quantify, are qualitative in nature, or involve a public good.

1. Quantifying Costs and Benefits

While chiller replacement programs are often motivated and funded in order to reduce the demand for CFC refrigerants, it is the potential for energy savings that drives financial returns. The return of a project is determined by the cooling load, the hours of operation, the cost of electricity, the interest rate on borrowed funds (or the opportunity cost), and the difference in operation efficiency (kW/ton) between the old and new chillers.


The financial return to improved chiller efficiency can be estimated using the net cost per ton of refrigeration, the hours of operation, the change in operating efficiency, and the cost of electricity. The following is an example using sample values.

Table 36: Sample Cost-Benefit Analysis Cost per installed ton $500/ton Change in efficiency 0.99kw/ton - 0.55 kW/ton = 0.44 kW/ton Hours of operation 2700 Average cost of electricity $.10/kWh Yields Energy savings/year/ton 1188 kWh Cost savings/year/ton $118.80 10-year IRR 20%

The following analysis from the Mexico Chiller project considered the remaining chiller life in calculating a return for two scenarios (A and B) based on no programmatic financial assistance. While the electricity price shown in the example is very low, it is well illustrated that the point that returns can vary according to the operating profile. Scenario A is based on 6,480 hours per year, while Scenario B is based on 4,680 hours per year.

Scenario A ( without project): expected remaining life of 6 years. (Chiller load: 450 Ton)

Electricity bill $321,849 Bill with new chiller* $290,000 Efficiency of baseline chiller: 0.9 kW/Ton

Efficiency of new chiller: 0.59 kW/Ton Operating Hours per Year: 6480 Average Operating Chiller Load: 374 ton Average kWh price: 0.042 US$ Building annual baseline consumption with old chiller: 7,721,000 kWh (information provided by building owners) Building annual consumption with new chiller: 6,968,938 kWh

Savings $31,849 New equipment cost (w/o tax) $125,800 Installation (20% of equip. cost) $25,160 Transport (3%) $3,774 Taxes (15%) $18,870 Total cost $173,604 Commercial loan $173,604 Monthly loan payment $8,829 Loan real interest rate 20% Loan Payment period (years) 2.0 * calculation on monthly prices basis.

Period 1 2 3 4 5 6 7 8 9

Baseline (450 Ton) Electricity Bill 321,849 321,849 321,849 321,849 321,849 321,849 290,000 290,000 290,000

Loan payment (20%) 105,947 105,947 Sub-total 321,849 321,849 321,849 321,849 321,849 321,849 395,947 395,947 290,000

New chiller (450 Ton) Electricity bill 290,000 290,000 290,000 290,000 290,000 290,000 290,000 290,000 290,000


Total -74,098 -74,098 31,849 31,849 31,849 31,849 105,947 105,947 0 IRR 20%


Scenario B (Without project): expected remaining life of 6 years. (Chiller Load 450 Ton)

Electricity bill $321,849 Bill with new chiller* $306,070 Efficiency of baseline chiller: 0.9 kW/Ton

Efficiency of new chiller: 0.67 kW/Ton Operating Hours per Year: 4680 Average Operating Chiller Load: 347 Ton Average kWh price: 0.042 US$ Building annual baseline consumption with old chiller: 7,721,000 kWh (information provided by building owners) Building annual consumption with new chiller: 7,346,896 kWh

Savings $15,779 New equipment cost (w/o tax) $125,800 Installation (20% of equip. cost) $25,160 Transport (3%) $3,774 Taxes (15%) $18,870 Total cost $173,604 Commercial loan $173,604 Monthly loan payment $8,829 Loan real interest rate 20% Loan Payment period (years) 2.0 * Calculated not with annual average electricity price but on monthly prices basis.

Period 1 2 3 4 5 6 7 8 9

Baseline (450 Ton) Electricity Bill 321,849 321,849 321,849 321,849 321,849 321,849 306,070 306,070 306,070


New chiller (450 Ton) Electricity bill 306,070 306,070 306,070 306,070 306,070 306,070 306,070 306,070 306,070


Total -90,168 -90,168 15,779 15,779 15,779 15,779 105,947 105,947 0 IRR 8%

In many chiller replacement projects, other measures, such as lighting retrofits, are performed to reduce the overall cooling load, reducing the size and cost of the new chiller or chillers. An integrated project usually has a much higher overall return.

2. Other Costs and Benefits

If a facility has back-up power generation or negotiates for deregulated electricity, the reduced load from the chiller replacement creates additional savings opportunities. Replacement of a 500-ton chiller with an efficiency of 0.85 kW/ton with a 0.55-kW/ton non-CFC chiller would reduce the building’s peak load by 150 kW.

Other costs and benefits are much more difficult to generalize. Replacing a chiller is likely to save on maintenance cost, unless the old chiller was neglected while the new chiller is properly maintained. If the old chiller was leaking refrigerant, there may be a benefit from avoided costs for replacement refrigerant.

A chiller replacement will create a public good benefit that may be enjoyed by the chiller owner, but is also available to the broader public. These benefits include protection of the ozone layer, fewer emission from the generation of electricity, and better electricity service thanks to reduced peak demand.

Some organizations may publicize the public good aspects of a chiller replacement and received a public relations benefits or improved employee morale. The value of improved public perception varies considerably among organizations.


The table below shows what the total global environmental, local environmental, and economic benefits would be if an estimated 12,500 CFC chillers currently in service were converted to energy-efficient, non-CFC chillers (here, for illustrative purposes, an equal number of HCFC-123 and HFC-134a chillers).

Table 37: Total Prospective Environmental and Economic Benefits of Developing Country CFC Chiller Replacement Number of chillers = 12,500

Per Chiller Total Annual impact ODS emissions reductions (ODP kg) 160 1,999,500 Refrigerant cost savings $1,001 $12,512,500 Energy use savings (kWh) 200,000 2,500,000,000 Energy use cost savings $12,000 $150,000,000 Total cost savings $26,431 $330,387,500 TEWI reduction (MTCE) 4,611 57,641,625 Local pollution reduction (metric tons): NOx 0.8 10,185 N20 0.002 25 SOx 10.6 132,696 PM 5.0 61,959 Lifetime impact ODS emissions reductions (ODP kg) 2,399 29,992,500 Refrigerant cost savings $15,015 $187,687,500 Energy use savings (kWh) 3,000,000 37,500,000,000 Energy use cost savings 180,000 2,250,000,000 Total cost savings 396,465 4,955,812,500 TEWI reduction (MTCE) 69,170 864,624,375 TEWI reduction ( tons CO2 equivalent) 253,623 3,170,289,375 Local pollution reduction (metric tons): NOx .03 368 N20 159 1,990,446 SOx 74 929,392 PM 0.21 2,611 Economic impact Total investment cost for new chillers $184,920 $2,311,500,000 Power plant capacity avoided (kW) 100 1,250,000 Power plant investment savings ($1250/kW) $125,000 $1,562,500,000 "Net" investment needed30 $59,920 $749,000,000 Net present value of savings over chiller life (6% discount rate) $126,269 $1,578,361,864 Net present value of investment $66,349 $829,361,864 Simple payback (years) 2.3 2.3

As the above calculations show, if 12,500 inefficient CFC chillers could be replaced with efficient non-CFC chillers:

Approximately 2,000 tons per year and 30,000 tons total of ODS use would be eliminated;

30 Up front investment for new chillers less estimated scrap value for old chiller and avoided investment for new power plant capacity.


Peak electric power demand would be reduced by 1.25 gW avoiding US$1.6 billion in new generation investment;

Approximately $1.6 billion (Net Present Value) in operating costs would be saved;

Over 2.9 million tons of local air pollution would be avoided; and

3.2 billion metric tons of carbon dioxide emissions would be avoided.

It should also be noted that the avoided investment in new power supply and transmission capacity is equal to two-thirds of the total projected investment cost for the new non-CFC, energy-efficient chillers. 31

C. Barriers to Market Transformation

There are many barriers to transforming the market for chillers. Barriers to energy-efficient and ODS-free chiller adoption in developed countries are well documented, and many of these are also relevant in developing country. There are also other barriers that appear to be more specific to developing country market environments. These different types of barriers are discussed below.

1. General Barriers to Technology Innovation in Commercial Buildings

First cost versus life-cycle cost. While the conceptual difference between the initial cost of equipment and the life-cycle cost, also known as total cost of ownership, is well understood, it is often not thoroughly investigated or intentionally ignored. Determining life-cycle cost is not easy. Estimating costs for activities such as maintenance, that are subject to their own cost-benefit analysis, makes direct comparisons more difficult. Even if the life-cycle cost is believed to be better for more energy-efficient products, it is not always possible to make the best long-term choice. Pressure to stay within budgets or limited borrowing capacity may outweigh long-term benefits.

Split Incentives. If the owner or manager of a building passes energy costs to tenants, there is little incentive to invest in more efficient equipment. In markets where rent cannot be raised to finance energy efficiency improvements, there would be a penalty to the building owner.

Lack of information. Building owners and building management staff may lack information on their chiller energy use and refrigerant emissions and their associated costs, and/or they may not be aware of technology options to reduce chiller energy use and refrigerant emissions.

31 Per chiller values shown are averaged between sample HCFC-123 and HFC-134 chillers. Economic benefits do not include the health benefits of pollution reduction, which can be significant. Savings include energy cost (at $0.06/kWh) and refrigerant savings. Labor costs are not included, but are assumed to be substantially unchanged. Equipment installation cost is net of scrap value of old chiller. Chiller scrap value and refrigerant prices are estimates based on data collected in 2001 in India. Refrigerant prices do not include tariffs and taxes since these vary significantly by country and should in any case not be included in an analysis of economic benefits, since they represent transfer payments and not true economic costs. Net present value figures are discounted at a real rate of 6% per year. Voided power cost is based on data collected in Thailand (US$1.25 investment per watt capacity), but is believed to be representative for other developing countries as well. Lifetime calculations are based on a 15 year remaining lifetime for the CFC equipment replaced. For further detailed calculations, please see 0, Table 39: Chiller Replacement Evaluation, on page 72. The benefits shown in this table do not include the energy and investment cost savings achievable through overall building energy efficiency gains that allow reduced building cooling loads and a smaller chiller that uses less energy (see 0, Table 35: Energy Savings with Whole Building Energy Efficiency Chiller Replacement , on page 55). Including the savings from the whole building approach would allow for additional energy and energy cost savings of up to 20% or more.


Lack of decision-making ability. Even where facility managers understand options for improved energy efficiency, financial decision makers may not be aware of or interested in options for investing in it. In commercial building facilities, building management staff may not be accorded decision-making authority within a firm, or may not recognize having the ability to make a contribution to the firm’s bottom line through energy efficiency investments and efficient management practices. Management staff often come from a financial and/or sales background, and therefore tend to focus on what are perceived as more important business issues. Internal accounting procedures may increase the difficulty of obtaining management approval for purchases of new, energy-efficient chillers, since investment in building equipment is viewed as a controllable cost that should be minimized, while energy use is an uncontrollable cost that must be accepted.

Perceived Risk. Many organizations sacrifice energy savings to avoid the perceived risks of changing technology, disrupting occupants, incurring debt, or entering into complicated agreements outside of core business areas. Problems with energy efficiency that interfere with occupant productivity or distract management can be more costly that the equipment. Staying with existing equipment that may have a significant remaining useful life is viewed as more prudent.

Uncertainty about the future. Many organizations hesitate to invest in energy efficiency because of anticipated changes in conditions. This includes, but is not limited to: hopes that electricity prices may fall with deregulation, lack of a long-term commitment to a property, expectations of further advancements or cost-reductions of technology, or expected changes in macroeconomic or business conditions.

2. Barriers Specific to Developing Country Markets

The barriers associated with transforming the market for energy-efficient building technologies are frequently even more complex in developing countries. This is because in addition to facing many of the same technical and financial barriers observed in developed countries, developing countries face a variety of additional circumstances specific to their technology environment.

Chiller manufacturers provide a critical vantage point for assessing some of the key barriers preventing higher rates of chiller replacement in developing countries. In support of this analysis, representatives of several major chiller manufacturers were contacted in a series of unstructured interviews in order to obtain their views on barriers to increased sales of new, energy-efficient CFC-free chillers in developing countries. Their views are incorporated into the discussion below.

Some of the key barriers faced by developing countries for transforming the chiller market include:

Awareness. Lack of awareness can be a bigger issue in developing countries than in developed countries. According to industry observers, many owners do not even think about their chiller until it breaks down. Many developing country customers are not even aware of how much energy they use or how they use it. The key issue from the manufacturer perspective is to make the customer understand the impact of chiller purchase decisions to the bottom line. Financial managers make the decisions on purchase, but often don’t realize the effect that energy efficiency makes on their electricity bill. Customers are however receptive to arrangements that can defray the incremental cost of higher efficiency through energy savings, if awareness and other barriers can be overcome.

Trust. According to manufacturers, part of the awareness problem comes from the fact that manufacturers are in a position to profit from chiller replacement, especially with higher-end, more efficient equipment that endusers may be less familiar with. When chiller efficiency or ODS are discussed, many customers assume that the motivation is selling more expensive equipment to generate a higher commission. Customers are often reluctant to share too much information with vendors for fear of being at a


disadvantage in negotiations. Often times, customers are justified in their suspicions. More informed customers are likely to have better communication with vendors, thereby increasing the level of trust.

It should however be noted that a number of manufacturing staff interviewed were originally from developing countries and now hold high levels of responsibility within their firms. Therefore, in most cases, lack of awareness of local conditions and cultural barriers inhibiting communication and trust should not be barriers.

Unfavorable macroeconomic conditions. Many developing countries have experienced serious financial instability that has necessitated more conservative business behavior. Investments that can be delayed are put off until business conditions or financial stability improve. For investments that must be paid in US dollars, hope for a weaker dollar encourages postponement of capital-intensive projects. The financial crises of the 1990s served to increase uncertainty about the future.

First cost and tight credit markets. Even in cases where organizations believe that they are ready for energy efficiency projects, it may not be possible for them to internally finance or borrow the needed funds, or interest rates may be prohibitive. This lack of ability to finance chiller conversions is particularly pronounced in lower-income developing countries. Without some sort of rebate or concessionary lending, chiller replacement projects may not be economically viable. Due to lack of financing and/or higher discount rates, the focus on first cost tends to be even higher in developing than in developed countries.

This barrier was consistently identified by chiller manufacturers as a, if not the, major barrier to increased energy-efficient CFC-free chiller sales in developing countries. End users often do want the best, most efficient equipment that is available in the market, but can't always afford it. Top-of-the-line, high efficiency products don't sell as well in the developing world as in industrialized nations. In the US, new chillers typically have efficiencies around 0.5 kW/ton. In developing countries, many simply cannot afford this equipment, and cheaper, less efficient new machines with efficiencies of 0.67 to 0.75 kW/ton sell better. The price difference between having an efficiency of 0.5kW/ton and 0.75 kW/ton is US$25-30K for a typical chiller. Despite manufacturer efforts to explain that the more efficient chillers cost less in the long run, customers cannot afford the additional cost up front. Customers understand life-cycle costing, but cannot or will not pay the higher first cost.

Developing and selling the most energy-efficient chillers possible is a goal of high-end manufacturers, as they are constantly improving their own products. However, if there's no specific efficiency requirement put forth by the purchaser, manufacturers generally do not bid the most expensive and efficient machine, but rather the machine that is most likely to win the bid. This is often the cheapest machine that meets the specifications. Most developing country customers do not specify efficiency levels, but only tonnage, without including temperature conditions. Developing country customers often want to discuss price before specifications, especially when a customer does not hire a professional engineer (due to unavailability or to save money).

Many chillers in developing countries are also used well beyond their useful lives. Resorts and hotels were developed more than 20 years ago with international assistance. Replacing the chillers is a significant financial burden. Emphasizing the absolute need to keep the facilities running is the best way to sell a chiller replacement, but building owners are unlikely to choose more efficient models without program assistance, said one industry representative.

While supplier financing can be a partial solution to this problem, it is by no means a universal one. According to manufacturer representatives interviewed, major manufacturers find it too costly and difficult to do small deals on credit in developing countries unless it is backed by established


multinational customers. Otherwise the risk of default and the cost of collection are too great. More common is for suppliers to work with confirmed letters of credit from international banks.

Developing country customers are however starting to move from first-cost to life-cycle costing, but still there is an emphasis on first cost. Efficiency improvements are easier to sell to industrial customers and first cost is relatively less important. Since many chillers used in developing countries are for industrial processes rather than to cool buildings, this helps build the market for energy-efficient chillers.

Split incentives. The focus on first cost can be further exacerbated by split incentives for new buildings, since developing country building practices and economic incentives to developers may lead to minimization of development costs. Low development costs are frequently sought in order to: (1) offer a building for sale or rent at the lowest possible price in order to attract buyers or tenants who are highly price sensitive, (2) maximize the developer’s short term profits, and/or (3) minimize up front development costs due to difficulties with obtaining financing. For any or all of these reasons, developing country developers may also choose to construct a building with no central cooling system at all. This reduces the developer’s cost but increases ultimate costs to tenants, who will then have to purchase, install, and operate window units or small split systems for space cooling. These consume more power, cost more to operate, and are more likely than modern chillers to use refrigerants that are more damaging to the ozone layer and to leak those refrigerants during everyday use and servicing. Even in cases where the building owner or manager is interested in maximizing the value and comfort of the property, they only have incentives to invest in more energy-efficient systems if the local market values energy efficiency. Without demand for energy efficiency from the tenant market or local enforced building codes that require greater efficiency, developers typically do not invest in energy efficiency.

Underdeveloped markets. Even where split incentives do not exist, lack of direct linkages among real estate developers, management companies, and purchasers may lead to the design and construction of buildings that do not fully meet tenant needs (e.g., omission of a central plant such that tenants are forced to spend more money to purchase and operate window air conditioners).

Doubt about appropriateness of technology. Central air conditioning plants in general and non-CFC, energy-efficient chillers in particular are more prevalent in developed countries than in many developing countries. Case studies about projects in the US, Europe, or even other developing countries are greeted with skepticism. There is a need in some developed countries for case studies on energy-efficient, non-CFC chillers in facilities that represent typical local conditions in order to demonstrate their appropriateness. There are many stories in developing countries about projects that did not work as well as they should have. Decision makers in developing countries may also justifiably doubt whether a technology is appropriate for them, based on power quality, availability of technical expertise, or other local conditions. Few organizations want to risk discovering that a building technology really is inappropriate for their conditions, particularly with technology that is significantly more advanced than that in common use in the country. Building owners may be particularly reluctant to acquire new technologies, due to lack of familiarity and the fear that replacement parts or servicing will be difficult to obtain, expensive, or altogether unavailable.

Perceived or actual lack of skilled technical staff. In markets where there is a real or perceived lack of adequately skilled and trained maintenance staff, there will be resistance to new technologies that require or are perceived to require a higher level of maintenance, as may be the case with central air conditioning plants in general and new, advanced chiller technologies in particular. In many developing country markets, there is not an adequate supply of skilled and trained technicians for maintenance of existing chillers. The justifiable assumption is that the problem will be worse with new, non-CFC chillers, threatening the gains in energy savings and reliability. Furthermore, building owners may not have the technical expertise to evaluate their need for a new chiller. There is often a lack of technical information


on the part of architectural and engineering designers, contractors, and manufacturers regarding energy-efficient building systems and central plant specification, and a lack of building energy use analytical and evaluation tools, especially for cooling. If owners do decide they need a new chiller (or are forced to purchase one due to failure of their existing chiller), some developing countries may lack engineering staff to appropriately specify the replacement system (especially its size, which can lead to over-sizing of the new chiller resulting in higher energy use). Or, the building owner may simply be unwilling to pay the cost of hiring a professional consulting engineer to assist in specifying the new system. According to manufacturer representatives interviewed, while it is hard to generalize about the level of technical ability of technicians given the disparities among and within countries, it is widely agreed that preventive maintenance is worse in developing countries. Developing countries have the oldest equipment, do not maintain equipment at optimal levels, and have the least money to replace it. As mentioned in the discussion of first cost, there is a perception that the skill to properly size chillers is either not present or under used.

National Energy Policy. Energy subsidies, or energy use policies that lead to inefficient allocation of resources (e.g., an excessively high demand charge for electric power that leads owners to purchase a less efficient absorption system instead of an efficient electrical chiller) can represent a significant barrier to purchase of energy-efficient equipment.32 According to manufacturers, electricity prices are still subsidized for commercial users in many countries. These subsidies are often complex and produce perverse results. In one Middle Eastern country and major chiller importer, for example, energy has been very cheap, with peak load limited by regulations. As long as a building is under its allotted peak demand, there is no incentive to save. The effect of subsidies is to minimize the difference between life-cycle costs of efficient and inefficient equipment. Subsidies are often politically difficult to remove. Other pricing policies also distort the market. Charging for installed transformer capacity or building size or fixing demand charges for long periods diminishes the incentive for efficiency.

There is some improvement, however. One example is occurring in a Middle Eastern country which is a significant importer of chillers. The purchase price of electricity was originally $0.005/kwh, which removed any incentive for energy efficiency. The true cost of electricity was four times higher than that, with the difference subsidized by the government. Now, the government has started to eliminate that subsidy. In China, the pricing system encourages efficiency in new construction, but not after the connection capacity is negotiated. When a system bases charges on real demand and consumption costs and changes are realized immediately, efficiency is encouraged.

Consequences of failure. It is easy to blame a failure of old chiller equipment on the many barriers to upgrades. There is greater personal risk if a new chiller has problems, especially if the project was perceived as risky to the organization. The assumption is that the manager made an inappropriate choice or was fooled by unscrupulous salesmen.

Bad experience with Building Automation Systems (BAS). In the 1980s and 1990s, many buildings in developing countries were equipped with BAS that either failed to live up to their promises or eventually failed because they were not routinely upgraded. Many buildings have given up on BAS, returning to manual operation. Since a good BAS is essential to optimized chiller operation, the negative perception increases the perceived risks for chiller replacement.

Lack of or unenforced building codes. In developed countries, building codes require that building systems components and/or the building as a whole meet minimum performance requirements. This can

32 Note that industrialized countries are often equally guilty of economically and environmentally perverse energy policy and subsidies.


have a significant impact on chiller selection (e.g., ASHRAE 90.1). Developing countries may not have building codes, or may have lax or voluntary codes that do not address chiller efficiency and refrigerant choice, or that do not require high levels of building energy efficiency in general. In some developing countries that do require more efficient or non-CFC chillers in new construction or prohibit the resale of obsolete chiller technology, the regulations are not enforced sufficiently to effect change. Some manufacturers have developing country sales of models that cannot be offered in the US or Europe because of refrigerant choice and efficiency standards.

Manufacturers confirm the importance of building codes, since they require building owners to have a more efficient building (lighting, insulation, chiller efficiency requirements, etc.). However, manufacturers confirmed that in their experience developing countries do not have adequate codes, or do not enforce them consistently. While proper codes would make sure buildings start out with efficient equipment, some developing countries have deeper problems with responsibility for buildings. New buildings are built without central systems, leaving it up to the tenants to build out their space with less efficient window units or small split systems. The problem extends beyond just cooling systems. Some buildings are “falling apart” within a few years of completion. Local tenants rights may also keep rents from being raised, eliminating owner incentives to offer better services and proper maintenance.

Incentives to over-size chiller capacity. Lack of designers trained in energy-efficient building design generally leads to a lower of level of energy efficiency in overall building systems. This can lead to an increase in building cooling loads, and ultimately to the specification of a chiller that is larger in capacity than required. The result is an excess use of energy to run the over-sized systems. The problem of over-sizing can also stem from intentional over-specification by engineers, since they are rarely if ever criticized or legally sanctioned if a chiller is too large, but do face such outcomes if a chiller is under-sized.

According to manufacturers, developing country customers also often do not hire a skilled engineer to “right-size” their equipment. In the opinion of one industry representative interviewed for this report, it can be expensive to hire a professional engineer to do a building load calculation. While there is much less over-sizing now in the US, it is still a problem in developing countries. Over-sizing wastes money both in terms of first-cost and life-cycle cost as too much capacity is purchased and the machine is likely to be run less efficiently. Without the technical skills to right size the chiller, end-users may often err on the safe side and buy a larger chiller.

Data Issues. The data needed to analyze the return on a chiller replacement are either unavailable or not collected. Older chillers do not have internal logging functions. This means that an accurate financial analysis of a chiller replacement is not possible until after a customer has started thinking about a new chiller. If the old chiller is failing, the customer must make a decision with the limited information that he already has, or hire a consulting engineer.

D. Program Approaches

An international program to support replacement of CFC chillers with energy-efficient, non-CFC chillers and promote sales of new energy-efficient ozone-friendly chillers could adopt a variety of approaches. Possible approaches are described below, along with input regarding each approach from industry representatives surveyed in conjunction with preparation of this report. These approaches include:

Grant programs

Loans

Revolving loan fund


Performance contracting

Energy-efficient buildings program

Policy support

New building codes and design standards

Training

Technical assistance

With core financing from both the Montreal Protocol Multilateral Fund (MLF) and Global Environment Facility (GEF), potentially supplemented by concessional loan funds, an energy-efficient ozone friendly chiller program could adopt approaches the scope and nature of which would be difficult or impossible with financing from a single source only. These approaches would be designed to reduce or eliminate the barriers discussed in detail above. The way in which these barriers relate to the programs is described in the table below.

Table 38: Chiller Replacement Barriers and Possible Program Approaches Barriers Program Options to Address

General barriers to greater energy efficiency in buildings First cost versus life-cycle cost Grant programs, Loans, Revolving loan fund

Split Incentives Policy support, New building codes and design standards, Energy-efficient buildings program

Lack of information Energy-efficient buildings program, Technical assistance

Lack of decision-making ability Energy-efficient buildings program, Grant programs, Loans, Revolving loan fund

Perceived Risk Energy-efficient buildings program, Grant programs, Loans, Revolving loan fund, Performance contracting

Uncertainty about future Energy-efficient buildings program, Grant programs, Loans, Revolving loan fund, Performance contracting

Additional barriers that apply particularly in developing countries

Awareness Training, Technical Assistance, Energy-efficient buildings program

Trust Training, Technical Assistance, Energy-efficient buildings program

Unfavorable macroeconomic conditions Grant programs, Loans, Revolving loan fund

First cost/tight credit markets Grant programs, Loans, Revolving loan fund, Performance contracting

Split-Incentives Policy support, New building codes and design standards, Energy-efficient buildings program

Underdeveloped markets Energy-efficient buildings program, Policy support, Training, Performance contracting

Doubt about appropriateness of technology Energy-efficient buildings program, Policy support, Training, New building codes and design standards, Technical assistance, Performance contracting

Perceived or actual lack of skilled technical staff Energy-efficient buildings program, Policy support, Training, Technical assistance, Performance contracting

National Energy Policy Policy support, New building codes and design standards

Consequences of failure Grant programs, Loans, Revolving loan fund, Technical assistance, Performance contracting

Bad experience with Building Automation Systems (BAS) Energy-efficient buildings program, Policy support, Training Lack of or unenforced building codes New building codes and design standards


Barriers Program Options to Address

Incentives to over-size chiller capacity Energy-efficient buildings program, Training, New building codes and design standards, Technical assistance

Data issues Energy-efficient buildings program, Training, Technical assistance

1. Grant Programs

A grant program would offer a specific cash subsidy or rebate to building owners who replace their inefficient CFC chillers with a non-CFC energy-efficient one, purchasers of energy, and potentially also to purchasers of new energy-efficient, ozone friendly chillers for new buildings.33

As shown in the 0 “Chiller Replacement Evaluation” on page 72, grants could be awarded on the basis of the projected combined Ozone Depleting Substance (ODS) and Greenhouse Gas (GHG) emissions reductions offered.

Given the magnitude of the number of CFC chillers remaining in service and limitations on financing levels for both the MLF and GEF, it is unlikely that a solely grant-based program could be of adequate magnitude to significantly reduce the developing country stock of inefficient CFC chillers. As illustrated in 0, if the amounts are based on cost effectiveness criteria, total MLF and GEF financing per chiller replaced would be in the range of approximately $5,000-$7,000 out of an estimated per chiller installed cost of approximately $250,000 ($150,000 equipment cost and $100,000 installation cost).34 Given the distinct possibility that this small subsidy relative to the total installed cost (approximately 2%) would not have an adequate impact, it is necessary to consider other approaches, either instead of or addition to grant financing.

In the US, utility rebate programs help sales of new chillers and are financed through assignment of part of the electric power rate to maintaining capacity. In many cases in the US, where rebates to promote energy efficiency have been most common, it has been cheaper for regulated utilities required to provide service at approved prices to give funds to end-users to curtail their energy needs than to build new generation capacity. Manufacturers like rebate programs because they offer financing to incentivize purchase of high-end equipment, and were very supportive of the idea of an international rebate program. In the US, manufacturers are closely involved with utility rebate programs, perhaps even as a preferred vendor. Where customers understand life-cycle costing but cannot or will not pay the higher first cost, rebate programs have proven effective, and enable the customer to buy the more efficient machine.

If grants are adopted by an international chiller replacement program (either on their own or in conjunction with loan programs), then they could adopt several approaches to determine grant recipients and amounts. One approach would be to allocate grants based on evaluation of incremental costs to endusers at the sub-project level, and then award financing based on the determined incremental cost. Since both the GEF and MLF require that only incremental costs be funded, this is the approach adopted for most GEF and MLF projects. However, for large-scale programs with a significant number of sub- 33 The environmental impact of the rebate is lower than the impact of replacement of inefficient CFC chillers with efficient non-CFC ones. If a subsidy were adopted to promote purchase of efficient, ozone friendly chillers for new buildings (i.e., not as replacement chillers), it is therefore likely that that subsidy would be smaller than the subsidy for chiller replacement. A more likely approach is however that grants, if provided at all, would be targeted at chiller replacements only. 34 A guideline for chiller costs the United States is $700 per installed ton, but these costs can range from $500-1200 per ton. The Mexico project used $300/installed ton as a guideline, assuming that installation costs add an additional 20% to equipment costs, whereas the range in the US is 50-100%.


projects and participants, this approach soon becomes unwieldy and costly. The Program could therefore adopt a Grant Auction Mechanism to determine and award grant financing, as was developed and implemented for financing of Chile’s ODS phaseout program through the MLF. Auction mechanisms use a competitive allocation of resources to achieve lower administrative costs for preparing and supervising projects and to reduce overall costs to financing agencies because firms are competing for limited resources and thus have an incentive to reduce their funded costs. Auction mechanisms also allow for a revealed preferences market-based approach to be used to determine true incremental costs, since bidders for participation in an auction program have an incentive to bid their actual incremental cost in order to receive financing. For Chile’s program, companies were invited to bid on cost-effective conversion projects in order to receive co-financing from a limited amount of resources. Companies submitted bids based on a cost-effectiveness (CE) thresholds announced before each auction. The auction process took about two months, after which individual project proposals were evaluated for funding eligibility to ensure that they meet MLF requirements, technical feasibility and the financial solvency of the companies involved.35

A global chiller program also adopted an auction approach to allocate grant financing to enterprises. However, this auction approach would differ from traditional auctions in that grant amounts would be fixed instead of being based on amounts bid by participants. Instead, participant would bid to see which participants can deliver the maximum energy efficiency and ODS emissions reductions for fixed grants amount, so that unit CO2 and ODS emissions reduction cost is minimized and emissions reductions are maximized for the fixed grant amount.

2. Loan Programs

One principal alternative or supplemental approach would be to provide financing for chiller replacements (and potentially also for placement of new energy-efficient ozone friendly chillers in new buildings) in the form of loans. These loans could cover either the full installed cost of the new chiller, or a portion thereof. Given that lack of financing for new or replacement chiller purchase has been identified as a (if not the) major obstacle to a greater numbers of chiller replacements and sales of new energy-efficient ozone friendly chillers, a loan program would directly address this barrier. Such a program would be even more compelling and have greater impact if funds were offered at concessional interest rates, but the program could have an impact (though a lesser one) even at commercial rates.

However, the administrative costs of administering a direct program given the large number of transactions that could be expected to take place would probably be prohibitive. A preferable option would therefore be a revolving loan fund, discussed below.

3. Revolving Loan Fund

A revolving loan fund would make loans to chiller owners and purchasers as described above. What separates a revolving loan fund from direct loan programs is that the loan fund is generally dedicated to a specific programmatic purpose, and repayments from borrowers are then recycled to allow issuance of new loans. In this manner, the number of loans that can be supported is increased. Due to the fund’s specialization and programmatic focus, administrative costs can also be reduced. Both the Thai and Mexico chiller projects made use of revolving loan funds. Chiller manufacturers were highly supportive of the idea of a revolving fund, and felt that it could significantly reduce the first cost and financing barriers. But as one manufacturer representative emphasized, the program should remain as simple as possible:

35 Financing Matters: Innovative Financing for Effective ODS Phaseout.


“I just received my Ozone update from Paris and read about these projects and know some of the people who work on them. These projects are far too complex and bureaucratic. To have a real effect, we really have to reach out to developing countries and create programs that are easier for them to access.”

A revolving fund could potentially be organized on a country-by-country basis, a regional basis, as a single global fund operating simultaneously in multiple countries, or as a combination of interlocking global/regional and country funds.

For further information and analysis regarding a possible international revolving loan fund, please see discussions in Sections IX.D.11 and IX.D.12, and a detailed financial model in Appendix X.B.

4. Performance Contracting

Chiller manufacturers sometimes offer performance contracting or financing to promote sales, but less often to local developing country customers. While manufacturers assume much of the risk in performance contracting, they still often require third-party financing. Any revolving funds, loans, or grants that facilitate financing of chillers are helpful. Control systems companies also do performance contracting that would include chiller replacement as part of a broader package.

The key aspect of performance contracting is that it combines financing with a guarantee of a pre-determined level of energy savings and/or an allocation of those savings between the enduser and the performance contractor.36 Performance contracting addresses risk or perceived risk by transferring that risk from the building owner to the performance contractor. Since it generally also includes a management and service contract aspect, performance contracting also helps address lack of technically skilled staff.

Performance contracting is generally a manufacturer or ESCO based program. It could, however, be encouraged through a international chiller replacement program, and the program could actively work with providers of performance contracting services.

5. Policy Support

This program activity area would support research of policy options and promotion of those options to developing country decision makers and regulatory bodies so as to support the program's overall goals and enhance market penetration of adoption of energy-efficient technologies, in particular energy-efficient ozone friendly chillers. Possible policy approaches that would be identified, evaluated, and promoted through this activity include:

high level support for modification of building codes (discussed separately below);

tax preferences for owners and managers of energy-efficient buildings and purchasers of energy-efficient ozone friendly chillers;

administrative preferences for developers of energy-efficient buildings (e.g., a fast track program approval process);

policy support for review and elimination/reduction of energy subsidies and other damaging energy policies;

36 It is also possible that a performance contractor would provide the guarantee in conjunction with third party funding in return for a fee or management contract.


development in conjunction with local authorities of policies to allow CFC prices to reach levels that reflect their actual or prospective scarcity and to reflect the damage they do to the ozone layer, such that use of CFCs as a refrigerant is further discouraged; and

possible customs duty preferences for importers of energy-efficient, ozone friendly chillers.37

6. New Building Codes and Design Standards

Development of building codes that incorporate energy use issues, promote more energy-efficient buildings, and require a minimum level of chiller efficiency would be an important component of an overall program. Work in this area could include support for research and development of new codes and a legislative/administrative approach to implement them, training of local and national regulators in proposed new codes and their importance, and training for the regulated community (i.e., builders, design firms, and owners). Work should also be coordinated with other developing country and international groups that are or become involved in this area.

In the area of design standards, developing country design firms are often required to submit blueprints for approval by regulatory authorities prior to beginning construction. These authorities should also be targeted in training programs so as to familiarize them with energy efficiency design principles.

7. Training

Training should be provided for groups of engineers in target countries to assist and encourage them in specifying energy-efficient ozone-friendly chillers and familiarize them with the benefits and incentives that the program offers to promote those chillers. This training could potentially include international study tours, development of materials for required incorporation of energy efficiency design principles into existing academic programs, and program-sponsored training workshops in developing countries. In all cases, training should be coordinated with other program activities.

8. Technical Assistance

Developing countries often have a shortage of consulting engineers. Many local engineers do not have enough expertise in large, water-cooled chillers and have no experience with non-CFC chillers. Skilled engineers from developing countries can frequently find work in more developed countries or serve only the high-end of the local market.

Professional engineering analysis could be offered by the program in order to fill the gaps in those countries that do not have adequate technical expertise available. Professional engineering analysis could also potentially be required for replacement projects above 50 tons in order to ensure that appropriate design standards were met. Technical assistance provided directly by the program to building owners would also address the “trust” barrier by providing expert third party advice on chiller specification. If professional engineering services were paid for by the program, this would also reduce the first-cost barrier to use of those services by building owners.

Manufacturer representatives confirmed the importance of technical assistance. While chiller manufacturers are sometimes suspect, they remain a primary source of information for customers. However, any credible, independent source of information and technical assistance provided would help 37 Customs preferences would favor imports of energy-efficient chillers over import of non-efficient ones. Such preferences could be combined with domestic tax preferences so that both domestic and international suppliers of energy-efficient chillers are treated equally.


the market and enhance delivery of the message. While manufacturers know that their chillers are frequently over-sized, they would prefer to have their products sized correctly, avoiding problems and complaints.38 Hiring a professional engineer to do proper load calculation can pay for itself if over-sizing is avoided.

Energy-efficient lighting and other improvements that reduce building cooling loads and allows for a smaller chiller are economical, but chiller manufacturers are usually not in a position to take on the broader projects. Educating end-users about the connections between other building loads and chillers would help chiller replacement. Large decreases in energy use get management attention and build support for further increases in efficiency.

9. Energy-efficient Buildings Program

The purpose of a program activity to promote overall energy efficiency in new and existing buildings would be four-fold. First, given that an energy-efficient chiller is a crucial part of overall building energy efficiency, activities that encourage owners to make their buildings more energy-efficient also encourage them to purchase more energy-efficient chillers. Second, a more comprehensive approach to overall building efficiency would allow chiller efficiency options to be placed in the context of and compared with other building energy efficiency measures. Third, since many of the barriers that impede greater use of energy-efficient ozone friendly chillers are the same barriers that inhibit adoption of other building energy efficiency technologies, addressing those barriers in the context of the chiller program would also simultaneously reduce barriers to adoption of other energy efficiency technologies. Fourth, and most importantly, selection of a new chiller is best accomplished in the context of an energy-efficient building. Since other energy-using building systems and equipment (computers, lighting, fans, etc.) give off heat in direct proportion to their energy use, inefficient systems and equipment cause increased building cooling loads. Greater cooling loads due to inefficient building systems means that a large chiller is needed and that the chiller will have to provide more cooling that would otherwise be the case, resulting in higher chiller energy use. Furthermore, adoption of general efficiency practices for the building as a whole means that a smaller capacity chiller can be purchased, which results in a lower up front chiller purchase price to the building owner. Based on studies and experience in the US, the resulting savings are often equal to and in some cases greater than the costs of the general building efficiency measures adopted, which means that the overall cost of building energy efficiency are much lower or even zero (some of the savings can even be used to upgrade to a more energy-efficient chiller).

Given the long term growth trajectory in developing country populations, economies, and as a result, in the building sector, activities that influence the selection of building systems in new buildings are highly desirable. An overall building energy efficiency program could include the following:

1. a program that recruits developers and builders, provides training and technical support, and seeks a commitment or provides direct incentives so that cost effective energy efficiency approaches are used in their new buildings;

2. a program that certifies and promotes energy-efficient buildings in a way designed to create a superior branded image for such buildings (see also "public education" below);

3. an incentive program or design/build contest that provided cash awards and/or recognition to builders and/or designers that achieve the highest energy efficiency levels; or

38 One manufacturer representative reported that his company refuses to bid on projects where there is inadequate documentation about loads.


4. a combination of the above.

For new buildings, this program activity would focus on building design, equipment specification, and effective building management (including chiller maintenance to reduce energy use and ODS emissions) after building commissioning. For existing buildings, the activity would focus on specifications for equipment upgrades and building management. In addition to training and provision of concessional loans and possibly grants for purchase of ozone friendly energy-efficient chillers, technical support and incentives (financial and/or promotional) could be used to enhance adoption of those measures. For example, the program could sponsor regional and/or national contests with cash prizes and professional recognition for building managers/owners who achieve the greatest energy efficiency gains.

Finally, a comprehensive energy-efficient buildings program allows for all of the potential measures described above to be combined into a single, unified program, which allows for efficiencies in managing and promoting the program.

10. Project Design

Apart from the key financial, informational, and technical barriers described above, there are a variety of risks associated with implementing chiller replacement projects in developing countries which program design would have to address. These include the following:

1. Small- and medium-sized enterprises, which are the most likely to benefit from the project, may be unaware of the opportunity to replace chillers with more efficient alternatives, or perceive additional risk involved with such a replacement.

2. Interested potential participants may not be judged to be financially eligible to participate in the project, depending on guidelines for participation.

3. Improper operation and maintenance of new CFC-free high efficiency chillers may lead to a failure to realize savings necessary to sustain the revolving fund. Currently, most technicians in developing countries are not trained to operate and maintain non-CFC equipment.

4. Actual electricity savings could be lower than expected, resulting in reduced repayments to revolving funds.

5. Participants may achieve energy efficiency savings, but may fail to make the required payments to the revolving fund.

6. CFCs may not be adequately recaptured during decommissioning of old equipment to supply remaining CFC needs.

7. The decommissioning of old chillers to guarantee that they are not redeployed may be challenging. If not fully decommissioned, such chillers could continue to use CFCs and increase overall electricity consumption. The equipment may also have additional salvage value that will be realized unless key components are rendered useless or destroyed.

8. Currency fluctuations may negatively impact the pricing of new chillers and well as the payback of loans.


9. It may prove difficult to agree on baseline energy consumption among chiller owners. This is a challenge in all ESCO-type arrangements. Periods of growth, extreme weather patterns, or new demands on equipment can distort baseline energy use and is a substantial source of dispute.

10. The costs associated with managing the revolving fund may burden the financial viability of the project; e.g., logistics, administration, collection of payments, and monitoring.

Several industry representatives surveyed also offered broad thoughts on program design:

“If you have a quick, focused chiller replacement program, you can go, define your obstacles, and address them quickly. You need to have someone in-country who has expertise and is committed to the program, and who can work with the equipment owners. When most of the equipment was originally installed, there was a supplier who knew how to select and install the system. But these people are gone now.”

11. Ozone Depleting Substance Emissions Reduction Impact and Cost Effectiveness

As the following table for sample chiller conversion projects shows, approximately equal emissions reductions are achievable by replacing CFC with HFC or HCFC and reducing leakage.39 However, calculation of cost effectiveness shows that these emissions reductions, at over US$1,500 per kilogram, are not cost effective if the Montreal Protocol Fund is assumed to pay the full cost of the conversion (see Evaluation below).40 Therefore, it is important to consider other financing options for a potential chiller replacement program.

Table 39: Chiller Replacement Evaluation CFC-11 HCFC-123 CFC-12 HFC-134a Average

Ozone Depleting Substance Emissions Reductions Average charge (kg) 400 400 400 400 400 Annual leak rate 40% 1% 40% 1% 1% Annual emissions per chiller (kg, unweighted) 160 4 160 4 4 Refrigerant Ozone Depleting Potential (ODP) 1.0 0.02 1.0 - 0 Annual emissions per chiller (ODP-weighted kg) 160 0.08 160 - 0.04 Lifetime ODS emissions (ODP tons) 2 0 2 - 0 Annual emissions reductions per chiller (ODP kg) 160 160 160 CE based on estimated per chiller replacement cost ($/kg ODP) 41

$1,156 $1,156 $1,156

Allowable financing based on CE threshold ($15.21/kg per year, total) $2,432 $2,434 $2,433

Global Warming Indirect Impact Average capacity (tons) 400 400 400 400 400 KW per ton 0.80 0.50 0.80 0.60 0.55 KW per chiller at full load 320 200 320 240 220 Peak load reduction (kW) 120 80 100

39 This analysis considers refrigerant conservation only in conjunction with chiller replacement and not as an independent option. 40 It is in any case unlikely that the Montreal Protocol would consider the entire conversion cost to be incremental, even if this amount were cost effective. 41 Total per chiller installed cost of US$190,000, including US$115,000 equipment cost and US$75,000 installation cost, less estimated scrap value of 5,080 per chiller (based on data collected in 2001 in India).


CFC-11 HCFC-123 CFC-12 HFC-134a Average Hours in use per year 2,000 2,000 2,000 2,000 2,000 KWh per chiller per year 640,000 400,000 640,000 480,000 440,000 KWh per chiller per year energy savings 240,000 160,000 200,000 CO2 emissions per chiller per year (0.65 kg CO2/kWh, MT) 416 260 416 312 286 Chiller lifetime (years) 15 15 15 15 15 Total CO2 emissions per chiller (MT) 6,240 3,900 6,240 4,680 4,290 Indirect emissions reductions (MT/chiller) 2,340 1,560 1,950 Global Warming Direct Impact Refrigerant emissions per chiller per year 160 4 160 4 4 Lifetime (years) 15 15 15 15 15 Lifetime emissions per chiller 2,400 60 2,400 60 60 Refrigerant GWP (100 year time horizon) 4,000 93 8,500 1,300 697 CO2 equivalent emissions (MT) 9,600 5.58 20,400 78 41.79 Direct emissions reductions (MT/chiller) 9,594 20,322 14,958 Total Equivalent Warming Impact (TEWI), CO2 equivalent 15,840 3,906 26,640 4,758 4,332 TEWI, metric tons carbon equivalent 4,320 1,065 7,265 1,298 1,181 TEWI emissions reductions per chiller (MTCE) 3,255 5,968 4,611 TEWI emissions reductions per chiller (%) 75% 82% 79% Allowable financing based on CE threshold of $1/MTCE $3,255 $5,968 $4,611 Total multilateral financing per chiller $5,687 $8,401 $7,044


CFC-11 HCFC-123 CFC-12 HFC-134a Average Economic Analysis New chiller purchase and installation cost $184,920 $184,920 $184,920 Energy cost/year ($0.06/kWh) $38,400 $24,000 $38,400 $28,800 $26,400 Annual energy savings $14,400 $9,600 $12,000 Refrigerant price ($/kg) (developing country cost estimate)42 $6.50 $10.00 $6.40 $5.50 $7.75 Refrigerant cost/year $1,040 $40 $1,024 $22 $31 Refrigerant savings $1,000 $1,002 $1,001 Total annual operating costs (not including labor) $39,440 $24,040 $39,424 $28,822 $26,431 Total annual operating savings (not including labor savings) $15,400 $10,602 $13,001 Net present value savings over chiller life (discounted at 6%) $149,569 $102,969 $126,269

However, as this table shows, it might be feasible to seek partial Montreal Protocol and GEF financing for a portion of chiller costs. For example, on a per-chiller basis, allocating a fixed amount of US$15.21 (based on the cost-effectiveness threshold for commercial refrigeration projects) per ODP-weighted kilogram for CFC reductions and US$1 (a conservative figure) per ton of CO2 for greenhouse gas emissions reductions yields per chiller financing ranging from approximately US$5,000-US$7,000.

The above table also demonstrates that example chiller replacements are cost effective to the end user, providing net present value benefits (at a 6% discount rate) of over US$215,000 over the remaining 10-year life of the chiller being replaced. This benefit covers most of the cost of the new chiller equipment and installation, which would then have an additional 15-20 years of useful life in service for the end user.

12. Financial Model Analysis

The financial model analysis attached as X.Bshows how a chiller replacement revolving fund program could operate. For illustrative purposes, the revolving fund is capitalized with a conditional grant (to be repaid upon successful completion of the project) of US$50 million and a low-interest loan of $250 million. At the assumed financial intermediation fees, cost-of-funds, and program interest rates shown, this revolving fund would finance 3262 chiller replacements over a ten year procurement period (and more if the procurement period were extended). After exhaustion of the initial capital (which would take place during an intensive initial period), subsequent replacements would be financed with repayments from loans made in earlier periods. Upon receipt of all repayments (and after allowing for a default rate of 10%) and repayment of the low-interest loans made to the program, the fund would have enough left over to repay the initial conditional grant, and finance continued activities (or potentially other ozone and climate protection activities).

As demonstrated by earlier analysis (ICF 1994), conversion will tend to be a preferred option for newer chillers, which have longer remaining lifetimes, much lower refrigerant leakage rates, and generally higher efficiency levels than older machines. Replacements should therefore target neither the newest chillers nor the oldest ones (which have much higher refrigerant leakage rates and lower efficiency levels, but short remaining lifetimes and are, therefore, more likely to be retired on their own), but the middle cohort. As the table below indicates, this approach does in fact maximize ODS emissions reductions (and similarly, energy efficiency gains). Based on equal distribution of a total of 12,500 chillers (595 chillers per age group) and a per chiller charge of 500 kg, the middle 3,500 chillers (aged 17-22)43 are those which are most effectively targeted in order to maximize ODS phaseout per chiller. Since

42 Based on data collected in India, net of taxes and customs tariffs. (See also footnote 31on page 59 ). 43 If additional chillers can be targeted for replacement through expansion or extension of the revolving fund, the selection of chillers will expand outward from the middle age cohort in order to maximize ODS phaseout.


major chiller exporters ceased production of CFC-using chillers in 1993, most remaining CFC-11 or 12 chillers are at least ten years old, as shown on the table. Leak rates shown for those chillers here are 1%, increasing evenly at 2% per age group up to a maximum of 40% for the oldest chillers.

In 0 below, estimated average chiller age in 2003 is shown for select countries. The average ages shown are for equipment purchased during the period 1991-2001, represents only partial and estimated sales data, and includes sales of non-CFC chillers. If CFC chillers sold prior to 1991 were included, the average age would be significantly higher. Nonetheless, the table does provide insight regarding differing average equipment ages between countries.

Table 40: Average Chiller Age by Country Country Average. Age in 2003

Argentina 7.5 Bangladesh 2.5

Brazil 5.8

Central America 5.9

China 6.8

Dominican Republic 3.5

Egypt 4.2

Guam 3.4

Hungary 2.0

India 6.8

Indonesia 6.9

Jamaica 2.0

Korea 6.3

Kuwait 2.4

Lebanon 2.0

Malaysia 8.1

Mexico 5.5

Pakistan 2.0

Philippines 7.0

Portugal 2.0

Puerto Rico 7.1

Qatar 2.0

Russia 4.5

Saudi Arabia 4.0

South Africa 2.0

Syria 2.0

Trinidad 2.0

Turkey 5.5

Uruguay 4.5

Venezuela 6.4

Vietnam 4.0

Thailand 7.4

Global average (including developed countries) 6.3


The following table describes the impacts of phase-out based on chiller age.

Table 41: Chiller Age Distribution Analysis

Chiller age Cum.

number

Average Leak Rate

Average annual

emissions per chiller (kg ODP)

Annual emissions

(ODP tons)

Remaining life

(chiller-years)

Emissions over

remaining life (ODP

tons)

Cum. emissions

over remaining life (ODP

tons)

Total ODS

impact (ODP tons)

Cum. ODS

impact (ODP tons)

Phase-out per chiller

(kg ODP)CE-based subsidy

10 595 1% 5 3 11,905 60 60 357 357 100 $152 11 1,190 3% 15 9 11,310 167 226 464 822 280 $426 12 1,786 5% 25 15 10,714 263 489 560 1,382 441 $671 13 2,381 7% 34 20 10,119 347 835 644 2,026 582 $886 14 2,976 9% 44 26 9,524 419 1,254 717 2,743 704 $1,071 15 3,571 11% 54 32 8,929 480 1,734 778 3,520 806 $1,226 16 4,167 13% 64 38 8,333 529 2,264 827 4,347 889 $1,352 17 4,762 15% 73 44 7,738 567 2,830 864 5,211 952 $1,448 18 5,357 17% 83 49 7,143 593 3,423 890 6,102 996 $1,515 19 5,952 19% 93 55 6,548 607 4,031 905 7,007 1,020 $1,552 20 6,548 21% 103 61 5,952 610 4,641 908 7,914 1,025 $1,559 21 7,143 22% 112 67 5,357 601 5,242 899 8,813 1,010 $1,537 22 7,738 24% 122 73 4,762 581 5,823 879 9,692 976 $1,484 23 8,333 26% 132 78 4,167 549 6,372 847 10,539 922 $1,403 24 8,929 28% 142 84 3,571 505 6,877 803 11,342 849 $1,291 25 9,524 30% 151 90 2,976 450 7,327 748 12,089 756 $1,150 26 10,119 32% 161 96 2,381 383 7,711 681 12,770 644 $980 27 10,714 34% 171 102 1,786 305 8,016 603 13,373 512 $779 28 11,310 36% 181 107 1,190 215 8,231 513 13,885 361 $549 29 11,905 38% 190 113 595 113 8,344 411 14,296 190 $289 30 12,500 40% 200 119 - - 8,344 298 14,594 - $-

Total 12,500 20.5% 0 1,281 125,000 8,344 8,344 14,594 14,594 668 $10,153 Years 17-22

3,571 23.4% 0 349 37,500 3,559 3,559 5,345 5,345 997 $15,159

Other years 8,929 19.6% 0 933 87,500 4,784 4,784 9,249 9,249 536 $8,150


X. Appendices

A. Thailand Chiller Replacement Subproject Status

(Status as of December 2001)

Table 42: Summary Status Table

Item Name Chiller RT Estimated

cost($) Status 1 Thai CRT#1 1 950 $230,894 Subloan agreement signed on March 1, 2002 2 Bangkok InterCon 2 2x400 $216,213 Subloan agreement ready to be signed 3 Rama Garden Hotel 2 2x400 $261,021 Subloan agreement signed on Feb 8, 2002 4 Venus Thread 1 400 $136,227 Tech & fin approved 5 Union Thread (Ladpraow) 1 700 $163,934 Tech & fin approved 7 $1,008,289 Technical Approved

Item Name Chiller RT Status 1 Thai Durable Textile 1 600 $214,614 Pending 1 $214,614 Power Consumption Measured

Item Name Chiller RT Status 1 Thai Spinning 1 300 $121,258 Waiting for proposal 2 Bangkok Textile Factory 1 1 600 $204,341 Waiting for proposal 3 The Empress Hotel 2 2x300 $- Waiting for proposal 4 Imperial Mae Ping 2 2x200 $- Waiting for proposal 5 Chiangmai Orchid 2 2x250 $- Waiting for proposal 6 Westin Riverside 1 350 $- Waiting for proposal 7 Chiangmai Plaza 1 175 $- Waiting for proposal 8 Chemical Enterprise 2 $- Waiting for proposal

9 Chaophayapark Hotel 1 500 $126,345 Not planning to submit proposal

10 Central Department Store 1 250 $92,894 Not planning to submit proposal

11 Seagate Technology Thailand 1 700 $152,805 Not planning to submit proposal

12 Royal River Hotel 1 400 $112,325 Not planning to submit proposal 13 Amari Airport Hotel 1 300 $100,630 Not planning to submit proposal 14 Regent Rajdamri Hotel 1 500 $126,507 Not planning to submit proposal

15 Royal Orchid Sheraton Hotel 1 500 $127,269 Not planning to submit proposal

16 Royal City Hotel 1 350 $106,637 Not planning to submit proposal 17 Kangwal Textile 1 420 $117,332 Not planning to submit proposal 18 Sony Semiconductor 1 450 $121,894 Not planning to submit proposal 19 Asia Fiber 1 650 $156,615 Not planning to submit proposal 20 Ambassador Hotel 1 1000 $230,917 Submited Proposal but financially rejected 21 Dusit Resort Pattaya 1 500 $126,368 Not planning to submit proposal 22 Novotel Bangkok 1 450 $121,894 Submited Proposal But payback > 48 months 23 IFCT 1 400 $112,094 Not planning to submit proposal 24 Siam City Hotel 1 300 $92,544 Not planning to submit proposal

25 The Dusit Thani 1 500 $126,483 Not planning to submit proposal


Item Name Chiller RT Estimated

cost($) Status 26 Vichien Textile 1 400 $109,508 Not planning to submit proposal 27 Siam Tire Cord 1 360 $107,119 Submited Proposal But financially rejected 28 Read-Rite Thailand 1 600 $145,047 Not planning to submit proposal

29 Marriott Royal Garden 1 425 $118,641 Not planning to submit proposal

30 Central Grand Plaza Hotel 1 500 $126,345 Not planning to submit proposal 31 Mandarin Spinning 1 1500 $281,976 Submited proposal but canceled

32 Indra Regent Hotel 2 400+500 $309,964 Submited proposal but canceled (joined EGAT)

33 Thai Textile Industry 1 650 $152,020 Not planning to submit proposal 34 Alpha Spining 1 250 $111,609 Submited Proposal But payback > 48 months 35 Union Technology 1 500 $122,882 Not planning to submit proposal

36 Thai Trafeta Textile 1 445 $120,633 Not planning to submit proposal

37 Jong Stit Co., Ltd 2 2x500 $- Power Consumption Measured by Trane Oct24,2001

38 Union Thread (Bangpu) 1 700 $238,398 Submited proposal but canceled

39 Union Thread (Bangpakong)

1 700 $238,398 Submited proposal but canceled

40 Thai Polymer Textile 2 2x580 $365,088 Canceled because they invested in Co-Gen 41 Marine Northum 2 2x250 $- Waiting for proposal 42 Thai Toshiba 2 2x400 $- Waiting for proposal

43 Imperial Queen's Park 2 2X800 $- Waiting for proposal

53 $5,024,782

1 Dusit Group Hotel 7 3500 $1,114,533 Canceled without power consumption measured

2 Thai Fermentation Industry

6 6x500 $910,986 Canceled because they invested in Co-Gen

13 $2,025,519

*Cost figures are converted from Thai Baht to US$ at B/US$43.31 (Source: Washington Post 3-15-02).

Table 43: Thailand Project Summary No. No. of Chillers

Participants 147 169 Financially Approved 5 7 Technically approved 1 1 Technically disqualify 2 2 Financially rejected 2 2 Canceled 29 42


B. International Chiller Revolving Fund Financial Analysis

The table below descirbes an anlysis of a hypothetical chiller replacement revolving fund.

Table 44: Financial Analysis of a Hypothetical Chiller Replacement Revolving Fund Program Assumptions/Data Inputs:

Exchange rate (Alternate Currency, Alternate Currency/$) USD 1.00 Installed cost per chiller $195,000 Equipment $115,000 Installation $75,000 Procurement cost $5,000 Deposit/owner cost-sharing (average per unit) $- Average amount financed ($, Alternate Currency) $195,000 195,000 Total grant funds ($, Alternate Currency) $50,000,000 50,000,000 Total loan funds ($, Alternate Currency) $250,000,000 250,000,000 Total initial program financing ($, Alternate Currency) $300,000,000 300,000,000 Cost of funds (unsubsidized) (p.a.) (nominal and effective) 10.0% 10.47% Cost of funds (subsidized) (p.a.) (nominal and effective) 4.0% 4.07% Interests rate on funds available (nominal and effective) 6.0% 6.17% Program interest rate charged to borrowers (nominal and effective) 10.0% 10.47% Administrative cost/fee for borrowed funds (p.a.) (nominal and effective) 0.0% 0.00% Administrative cost/fee for outstanding funds (p.a.) (nominal and effective) 4.5% 4.59% Administrative cost/fee on funds available (p.a.) (nominal and effective) 0.0% 0.00% Administrative cost per account 100 100 Administrative cost per unit placed ($, Alternate Currency) 100 100 Fixed program cost ($/year, Alternate Currency/month) $- - Payment term (years, months) 15 180 Average payment (Alternate Currency/year, Alternate Currency/month) 25,146 2,095 Initial number of units placed (month) 150 Maximum number of units placed per month 150 Procurement period (years, months) 10 120 Payment default rate 10% Total program duration (years, months) 25 300 Grace period (year, months) 10 120 Total loan balance at begin repayment ($, Alternate Currency) $372,708,171 372,708,171 Program loan repayment terms (term in years, monthly payment in Alternate Currency) 15 2,756,877

Fund value at end of program ($, Alternate Currency) $140,420,539 140,420,539 Summary calculations: Total units placed (months, number) 480 3,262 Chiller lifetime (years) 30 Baseline power use (kW/ton capacity) 0.75 Replacement unit average power use (kW/ton capacity) 0.50 Operating hours per day, year 12 4,380 Average system size (tons capacity) 500 Baseline average power use (kWh/day, kWh/yr) 4,500 1,642,500 Energy savings (%, kWh/yr) 33% 547,500 Power cost (Alternate Currency/kWh) 0.05 Power cost savings (Alternate Currency/year, Alternate Currency/month) 27,375 2,281.25 Payment relative to energy cost savings 92%


The following table includes detailed data to support the hypothetical chiller replacement program analysis outlined above.

Table 45: Summary of the Hypothetical Chiller Replacement Program

Month Balance Owed

Program Repay-ments

Program Admin Costs

Funds Available

New Units

(#)

Cum. Units

(#)

Cum. Units

Repaid (#)

Total Units In

Repayment (#)

Monthly Payments

Due

Monthly Payments Received

Out-standing Capital

Average Out-

standing Capital Per Unit Net Assets

0 250,000,000 300,000,000 - - - - - - 50,000,000 1 250,833,333 - - 301,500,000 150 150 - - - - 29,250,000 #DIV/0! 52,049,479 2 251,669,444 - 124,688 273,632,812 150 300 - 150 314,322 282,890 58,429,428 389,530 52,558,489 3 252,508,343 - 235,360 245,798,506 150 450 - 300 628,644 565,780 87,537,696 291,792 53,026,865 4 253,350,037 - 345,766 217,997,512 150 600 - 450 942,966 848,669 116,574,211 259,054 53,454,440 5 254,194,537 - 455,903 190,230,266 150 750 - 600 1,257,288 1,131,559 145,538,374 242,564 53,841,045 6 255,041,852 - 565,769 162,497,207 150 900 - 750 1,571,610 1,414,449 174,429,584 232,573 54,186,513 7 255,891,992 - 675,361 134,798,781 150 1,050 - 900 1,885,932 1,697,339 203,247,232 225,830 54,490,678 8 256,744,965 - 784,677 107,135,437 150 1,200 - 1,050 2,200,254 1,980,229 231,990,705 220,944 54,753,368 9 257,600,782 - 893,715 79,507,628 150 1,350 - 1,200 2,514,576 2,263,118 260,659,385 217,216 54,974,415 10 258,459,451 - 1,002,473 51,915,811 150 1,500 - 1,350 2,828,898 2,546,008 289,252,649 214,261 55,153,649 11 259,320,982 - 1,110,947 24,360,452 124 1,624 - 1,500 3,143,220 2,828,898 312,699,867 208,467 55,312,512 12 260,185,386 - 1,197,525 1,933,627 9 1,633 - 1,624 3,403,059 3,062,754 313,657,640 193,139 55,532,654 13 261,052,670 - 1,190,649 2,060,400 10 1,643 - 1,633 3,421,919 3,079,727 314,799,535 192,774 55,752,186 14 261,922,846 - 1,195,107 2,005,322 10 1,653 - 1,643 3,442,874 3,098,586 315,929,991 192,288 55,971,650 15 262,795,922 - 1,199,429 1,964,505 10 1,663 - 1,653 3,463,828 3,117,446 317,048,912 191,802 56,191,056 16 263,671,908 - 1,203,708 1,938,065 9 1,672 - 1,663 3,484,783 3,136,305 317,961,203 191,197 56,411,243 17 264,550,815 - 1,207,113 2,121,948 10 1,682 - 1,672 3,503,643 3,153,278 319,057,238 190,824 56,630,860 18 265,432,651 - 1,211,398 2,124,438 10 1,692 - 1,682 3,524,597 3,172,138 320,141,451 190,334 56,850,450 19 266,317,426 - 1,215,547 2,141,650 10 1,702 - 1,692 3,545,552 3,190,997 321,213,744 189,843 57,070,021 20 267,205,151 - 1,219,652 2,173,704 11 1,713 - 1,702 3,566,507 3,209,856 322,469,018 189,465 57,288,753 21 268,095,835 - 1,224,542 2,024,886 10 1,723 - 1,713 3,589,557 3,230,601 323,516,703 188,860 57,508,017 22 268,989,488 - 1,228,463 2,087,149 10 1,733 - 1,723 3,610,512 3,249,461 324,552,163 188,365 57,727,292 23 269,886,119 - 1,232,429 2,164,617 11 1,744 - 1,733 3,631,467 3,268,320 325,770,298 187,981 57,945,758 24 270,785,740 - 1,237,180 2,061,580 10 1,754 - 1,744 3,654,517 3,289,065 326,780,533 187,374 58,164,787 25 271,688,359 - 1,240,960 2,169,993 11 1,765 - 1,754 3,675,472 3,307,925 327,973,232 186,986 58,383,026 26 272,593,987 - 1,245,616 2,098,152 10 1,775 - 1,765 3,698,522 3,328,670 328,957,821 186,378 58,601,846 27 273,502,633 - 1,249,300 2,238,013 11 1,786 - 1,775 3,719,477 3,347,529 330,124,659 185,986 58,819,898 28 274,414,309 - 1,253,859 2,197,873 11 1,797 - 1,786 3,742,527 3,368,275 331,278,170 185,486 59,037,722 29 275,329,023 - 1,258,276 2,173,861 11 1,808 - 1,797 3,765,578 3,389,020 332,418,244 184,985 59,255,328 30 276,246,787 - 1,262,643 2,166,107 11 1,819 - 1,808 3,788,628 3,409,765 333,544,768 184,483 59,472,724 31 277,167,609 - 1,266,960 2,174,743 11 1,830 - 1,819 3,811,678 3,430,510 334,657,630 183,979 59,689,923 32 278,091,501 - 1,271,224 2,199,903 11 1,841 - 1,830 3,834,728 3,451,256 335,756,715 183,474 59,906,934 33 279,018,473 - 1,275,438 2,241,720 11 1,852 - 1,841 3,857,779 3,472,001 336,841,909 182,967 60,123,766 34 279,948,535 - 1,279,599 2,300,330 11 1,863 - 1,852 3,880,829 3,492,746 337,913,096 182,458 60,340,432 35 280,881,696 - 1,283,707 2,375,871 12 1,875 - 1,863 3,903,879 3,513,491 339,165,160 182,053 60,556,111 36 281,817,969 - 1,288,594 2,272,647 11 1,886 - 1,875 3,929,025 3,536,122 340,207,511 181,444 60,772,172 37 282,757,362 - 1,292,503 2,382,630 12 1,898 - 1,886 3,952,075 3,556,868 341,430,498 181,034 60,987,266 38 283,699,886 - 1,297,281 2,314,130 11 1,909 - 1,898 3,977,221 3,579,499 342,443,531 180,423 61,202,764 39 284,645,553 - 1,301,080 2,459,119 12 1,921 - 1,909 4,000,271 3,600,244 343,636,956 180,009 61,417,316 40 285,594,371 - 1,305,747 2,425,912 12 1,933 - 1,921 4,025,417 3,622,875 344,815,181 179,498 61,631,461 41 286,546,352 - 1,310,265 2,410,652 12 1,945 - 1,933 4,050,563 3,645,507 345,978,078 178,985 61,845,211


Month Balance Owed

Program Repay-ments

Program Admin Costs

Funds Available

New Units

(#)

Cum. Units

(#)

Cum. Units

Repaid (#)

Total Units In

Repayment (#)

Monthly Payments

Due



Average Out-


42 287,501,507 - 1,314,726 2,413,486 12 1,957 - 1,945 4,075,709 3,668,138 347,125,520 178,471 62,058,575 43 288,459,845 - 1,319,129 2,434,562 12 1,969 - 1,957 4,100,854 3,690,769 348,257,378 177,955 62,271,562 44 289,421,378 - 1,323,474 2,474,030 12 1,981 - 1,969 4,126,000 3,713,400 349,373,523 177,437 62,484,185 45 290,386,116 - 1,327,759 2,532,041 12 1,993 - 1,981 4,151,146 3,736,031 350,473,823 176,918 62,696,454 46 291,354,070 - 1,331,985 2,608,747 13 2,006 - 1,993 4,176,292 3,758,662 351,753,147 176,494 62,907,547 47 292,325,250 - 1,336,983 2,508,470 12 2,018 - 2,006 4,203,533 3,783,180 352,820,890 175,883 63,118,837 48 293,299,667 - 1,340,995 2,623,197 13 2,031 - 2,018 4,228,679 3,805,811 354,067,385 175,455 63,328,973 49 294,277,333 - 1,345,869 2,561,255 13 2,044 - 2,031 4,255,920 3,830,328 355,297,027 174,937 63,538,494 50 295,258,257 - 1,350,589 2,518,800 12 2,056 - 2,044 4,283,161 3,854,845 356,314,675 174,322 63,748,243 51 296,242,452 - 1,354,413 2,691,826 13 2,069 - 2,056 4,308,307 3,877,476 357,510,657 173,887 63,956,869 52 297,229,927 - 1,359,098 2,688,664 13 2,082 - 2,069 4,335,548 3,901,993 358,689,364 173,364 64,164,911 53 298,220,693 - 1,363,627 2,705,473 13 2,095 - 2,082 4,362,789 3,926,510 359,850,653 172,839 64,372,381 54 299,214,762 - 1,368,090 2,742,421 14 2,109 - 2,095 4,390,031 3,951,028 361,189,378 172,405 64,578,458 55 300,212,144 - 1,373,318 2,603,842 13 2,122 - 2,109 4,419,367 3,977,431 362,314,922 171,795 64,784,514 56 301,212,852 - 1,377,556 2,681,736 13 2,135 - 2,122 4,446,609 4,001,948 363,422,604 171,264 64,990,027 57 302,216,894 - 1,381,818 2,780,275 14 2,149 - 2,135 4,473,850 4,026,465 364,707,276 170,823 65,194,179 58 303,224,284 - 1,386,844 2,703,797 13 2,162 - 2,149 4,503,186 4,052,868 365,778,317 170,209 65,398,340 59 304,235,032 - 1,390,877 2,844,307 14 2,176 - 2,162 4,530,428 4,077,385 367,026,042 169,762 65,601,159 60 305,249,148 - 1,395,764 2,810,149 14 2,190 - 2,176 4,559,764 4,103,788 368,254,828 169,235 65,803,178 61 306,266,646 - 1,400,489 2,797,499 14 2,204 - 2,190 4,589,101 4,130,191 369,464,517 168,705 66,004,407 62 307,287,534 - 1,405,142 2,806,535 14 2,218 - 2,204 4,618,438 4,156,594 370,654,950 168,174 66,204,855 63 308,311,826 - 1,409,723 2,837,439 14 2,232 - 2,218 4,647,775 4,182,997 371,825,967 167,640 66,404,533 64 309,339,532 - 1,414,231 2,890,392 14 2,246 - 2,232 4,677,111 4,209,400 372,977,405 167,105 66,603,452 65 310,370,664 - 1,418,665 2,965,580 15 2,261 - 2,246 4,706,448 4,235,803 374,304,102 166,654 66,800,792 66 311,405,233 - 1,423,857 2,867,354 14 2,275 - 2,261 4,737,880 4,264,092 375,415,423 166,040 66,997,923 67 312,443,250 - 1,428,050 2,987,733 15 2,290 - 2,275 4,767,217 4,290,495 376,701,668 165,583 67,193,494 68 313,484,728 - 1,433,090 2,935,077 15 2,305 - 2,290 4,798,649 4,318,784 377,967,199 165,051 67,388,047 69 314,529,677 - 1,437,960 2,905,576 14 2,319 - 2,305 4,830,081 4,347,073 379,016,844 164,432 67,582,423 70 315,578,109 - 1,441,922 3,095,255 15 2,334 - 2,319 4,859,418 4,373,476 380,240,900 163,968 67,775,271 71 316,630,036 - 1,446,728 3,112,480 15 2,349 - 2,334 4,890,850 4,401,765 381,443,724 163,429 67,967,131 72 317,685,470 - 1,451,364 3,153,443 16 2,365 - 2,349 4,922,282 4,430,054 382,820,139 162,972 68,157,183 73 318,744,421 - 1,456,751 3,022,514 15 2,380 - 2,365 4,955,810 4,460,229 383,979,497 162,359 68,346,800 74 319,806,903 - 1,461,131 3,111,725 15 2,395 - 2,380 4,987,242 4,488,518 385,117,084 161,814 68,535,460 75 320,872,926 - 1,465,522 3,225,279 16 2,411 - 2,395 5,018,675 4,516,807 386,427,718 161,348 68,722,343 76 321,942,502 - 1,470,662 3,167,551 16 2,427 - 2,411 5,052,202 4,546,982 387,715,747 160,811 68,907,989 77 323,015,644 - 1,475,626 3,134,745 16 2,443 - 2,427 5,085,730 4,577,157 388,980,982 160,272 69,092,409 78 324,092,363 - 1,480,504 3,127,071 16 2,459 - 2,443 5,119,258 4,607,332 390,223,232 159,731 69,275,613 79 325,172,671 - 1,485,295 3,144,743 16 2,475 - 2,459 5,152,785 4,637,507 391,442,307 159,188 69,457,611 80 326,256,579 - 1,490,000 3,187,974 16 2,491 - 2,475 5,186,313 4,667,682 392,638,013 158,642 69,638,411 81 327,344,101 - 1,494,618 3,256,977 16 2,507 - 2,491 5,219,841 4,697,857 393,810,156 158,093 69,818,028 82 328,435,248 - 1,499,146 3,351,973 17 2,524 - 2,507 5,253,368 4,728,031 395,153,539 157,620 69,995,638 83 329,530,033 - 1,504,417 3,277,347 16 2,540 - 2,524 5,288,991 4,760,092 396,277,494 157,004 70,172,614 84 330,628,466 - 1,508,674 3,425,152 17 2,557 - 2,540 5,322,519 4,790,267 397,572,287 156,525 70,347,604 85 331,730,561 - 1,513,763 3,403,782 17 2,574 - 2,557 5,358,142 4,822,328 398,842,247 155,981 70,521,149 86 332,836,329 - 1,518,667 3,409,462 17 2,591 - 2,574 5,393,765 4,854,389 400,087,167 155,434 70,693,259 87 333,945,784 - 1,523,477 3,442,421 17 2,608 - 2,591 5,429,389 4,886,450 401,306,838 154,885 70,863,946


Month Balance Owed

Program Repay-ments

Program Admin Costs

Funds Available

New Units

(#)

Cum. Units

(#)

Cum. Units

Repaid (#)

Total Units In

Repayment (#)

Monthly Payments

Due



Average Out-


88 335,058,936 - 1,528,192 3,502,891 17 2,625 - 2,608 5,465,012 4,918,511 402,501,050 154,333 71,033,218 89 336,175,800 - 1,532,812 3,591,104 18 2,643 - 2,625 5,500,635 4,950,571 403,864,591 153,853 71,200,256 90 337,296,386 - 1,538,167 3,511,464 18 2,661 - 2,643 5,538,354 4,984,518 405,201,775 153,311 71,365,598 91 338,420,707 - 1,543,332 3,460,208 17 2,678 - 2,661 5,576,072 5,018,465 406,317,385 152,693 71,530,087 92 339,548,776 - 1,547,565 3,633,409 18 2,696 - 2,678 5,611,695 5,050,526 407,601,667 152,204 71,692,370 93 340,680,605 - 1,552,623 3,639,479 18 2,714 - 2,696 5,649,414 5,084,473 408,858,934 151,654 71,852,990 94 341,816,207 - 1,557,488 3,674,661 18 2,732 - 2,714 5,687,133 5,118,419 410,088,959 151,101 72,011,956 95 342,955,594 - 1,562,250 3,739,204 19 2,751 - 2,732 5,724,851 5,152,366 411,486,516 150,617 72,168,446 96 344,098,780 - 1,567,741 3,637,525 18 2,769 - 2,751 5,764,665 5,188,199 412,660,905 150,004 72,323,833 97 345,245,776 - 1,572,203 3,761,708 19 2,788 - 2,769 5,802,384 5,222,146 414,002,361 149,513 72,476,764 98 346,396,595 - 1,577,484 3,720,178 19 2,807 - 2,788 5,842,198 5,257,978 415,315,183 148,965 72,627,781 99 347,551,250 - 1,582,565 3,709,193 19 2,826 - 2,807 5,882,012 5,293,811 416,599,131 148,414 72,776,892 100 348,709,754 - 1,587,538 3,729,012 19 2,845 - 2,826 5,921,826 5,329,644 417,853,964 147,861 72,924,108 101 349,872,120 - 1,592,402 3,779,899 19 2,864 - 2,845 5,961,641 5,365,476 419,079,439 147,304 73,069,438 102 351,038,361 - 1,597,156 3,862,119 19 2,883 - 2,864 6,001,455 5,401,309 420,275,313 146,744 73,212,892 103 352,208,489 - 1,601,799 3,975,939 20 2,903 - 2,883 6,041,269 5,437,142 421,636,339 146,249 73,353,650 104 353,382,517 - 1,607,161 3,925,800 20 2,923 - 2,903 6,083,178 5,474,861 422,966,797 145,700 73,492,252 105 354,560,459 - 1,612,317 3,907,973 20 2,943 - 2,923 6,125,088 5,512,579 424,266,432 145,148 73,628,708 106 355,742,327 - 1,617,357 3,922,735 20 2,963 - 2,943 6,166,998 5,550,298 425,534,988 144,592 73,763,026 107 356,928,135 - 1,622,281 3,970,365 20 2,983 - 2,963 6,208,907 5,588,016 426,772,206 144,034 73,895,217 108 358,117,895 - 1,627,087 4,051,146 20 3,003 - 2,983 6,250,817 5,625,735 427,977,824 143,472 74,025,291 109 359,311,621 - 1,631,775 4,165,362 21 3,024 - 3,003 6,292,726 5,663,454 429,346,579 142,973 74,152,426 110 360,509,327 - 1,637,175 4,117,468 21 3,045 - 3,024 6,336,731 5,703,058 430,682,736 142,422 74,277,163 111 361,711,024 - 1,642,360 4,103,753 21 3,066 - 3,045 6,380,737 5,742,663 431,986,022 141,867 74,399,510 112 362,916,728 - 1,647,423 4,124,512 21 3,087 - 3,066 6,424,742 5,782,267 433,256,164 141,310 74,519,477 113 364,126,450 - 1,652,361 4,180,041 21 3,108 - 3,087 6,468,747 5,821,872 434,492,886 140,749 74,637,076 114 365,340,205 - 1,657,173 4,270,640 21 3,129 - 3,108 6,512,752 5,861,477 435,695,908 140,185 74,752,313 115 366,558,006 - 1,661,860 4,396,610 22 3,151 - 3,129 6,556,757 5,901,081 437,059,950 139,680 74,864,369 116 367,779,866 - 1,667,250 4,362,424 22 3,173 - 3,151 6,602,857 5,942,572 438,389,259 139,127 74,973,783 117 369,005,799 - 1,672,418 4,364,390 22 3,195 - 3,173 6,648,958 5,984,062 439,683,545 138,570 75,080,565 118 370,235,818 - 1,677,455 4,402,819 22 3,217 - 3,195 6,695,059 6,025,553 440,942,516 138,010 75,184,725 119 371,469,937 - 1,682,359 4,478,027 22 3,239 - 3,217 6,741,159 6,067,043 442,165,878 137,447 75,286,271 120 372,708,171 - 1,687,130 4,590,330 23 3,262 - 3,239 6,787,260 6,108,534 443,548,334 136,940 72,627,504 121 371,193,654 2,756,877 1,692,598 1,787,340 - 3,262 - 3,262 6,835,456 6,151,910 440,409,114 135,012 72,728,052 122 369,674,089 2,756,877 1,678,718 3,512,592 - 3,262 - 3,262 6,835,456 6,151,910 437,243,735 134,042 72,827,986 123 368,149,458 2,756,877 1,666,847 5,258,341 - 3,262 - 3,262 6,835,456 6,151,910 434,051,977 133,063 72,927,305 124 366,619,746 2,756,877 1,654,878 7,024,787 - 3,262 - 3,262 6,835,456 6,151,910 430,833,621 132,077 73,026,010 125 365,084,934 2,756,877 1,642,809 8,812,135 - 3,262 - 3,262 6,835,456 6,151,910 427,588,445 131,082 73,124,099 126 363,545,007 2,756,877 1,630,640 10,620,588 - 3,262 - 3,262 6,835,456 6,151,910 424,316,227 130,079 73,221,575 127 361,999,946 2,756,877 1,618,369 12,450,355 - 3,262 - 3,262 6,835,456 6,151,910 421,016,739 129,067 73,318,437 128 360,449,735 2,756,877 1,605,996 14,301,644 - 3,262 - 3,262 6,835,456 6,151,910 417,689,757 128,047 73,414,686 129 358,894,357 2,756,877 1,593,520 16,174,665 - 3,262 - 3,262 6,835,456 6,151,910 414,335,049 127,019 73,510,322 130 357,333,794 2,756,877 1,580,940 18,069,631 - 3,262 - 3,262 6,835,456 6,151,910 410,952,385 125,982 73,605,348 131 355,768,030 2,756,877 1,568,255 19,986,757 - 3,262 - 3,262 6,835,456 6,151,910 407,541,533 124,936 73,699,762 132 354,197,046 2,756,877 1,555,464 21,926,259 - 3,262 - 3,262 6,835,456 6,151,910 404,102,256 123,882 73,793,567 133 352,620,825 2,756,877 1,542,567 23,888,356 - 3,262 - 3,262 6,835,456 6,151,910 400,634,320 122,819 73,886,763


Month Balance Owed

Program Repay-ments

Program Admin Costs

Funds Available

New Units

(#)

Cum. Units

(#)

Cum. Units

Repaid (#)

Total Units In

Repayment (#)

Monthly Payments

Due



Average Out-


134 351,039,351 2,756,877 1,529,562 25,873,269 - 3,262 - 3,262 6,835,456 6,151,910 397,137,483 121,747 73,979,352 135 349,452,604 2,756,877 1,516,449 27,881,219 - 3,262 - 3,262 6,835,456 6,151,910 393,611,507 120,666 74,071,334 136 347,860,569 2,756,877 1,503,226 29,912,432 - 3,262 - 3,262 6,835,456 6,151,910 390,056,147 119,576 74,162,710 137 346,263,227 2,756,877 1,489,894 31,967,133 - 3,262 - 3,262 6,835,456 6,151,910 386,471,159 118,477 74,253,483 138 344,660,560 2,756,877 1,476,450 34,045,551 - 3,262 - 3,262 6,835,456 6,151,910 382,856,296 117,369 74,343,654 139 343,052,552 2,756,877 1,462,894 36,147,918 - 3,262 - 3,262 6,835,456 6,151,910 379,211,310 116,251 74,433,222 140 341,439,183 2,756,877 1,449,226 38,274,464 - 3,262 - 3,262 6,835,456 6,151,910 375,535,948 115,124 74,522,192 141 339,820,436 2,756,877 1,435,443 40,425,426 - 3,262 - 3,262 6,835,456 6,151,910 371,829,959 113,988 74,610,563 142 338,196,293 2,756,877 1,421,546 42,601,040 - 3,262 - 3,262 6,835,456 6,151,910 368,093,086 112,843 74,698,339 143 336,566,737 2,756,877 1,407,532 44,801,546 - 3,262 - 3,262 6,835,456 6,151,910 364,325,073 111,688 74,785,520 144 334,931,749 2,756,877 1,393,402 47,027,185 - 3,262 - 3,262 6,835,456 6,151,910 360,525,659 110,523 74,872,109 145 333,291,311 2,756,877 1,379,155 49,278,198 - 3,262 - 3,262 6,835,456 6,151,910 356,694,584 109,348 74,958,108 146 331,645,404 2,756,877 1,364,788 51,554,834 - 3,262 - 3,262 6,835,456 6,151,910 352,831,583 108,164 75,043,518 147 329,994,012 2,756,877 1,350,302 53,857,339 - 3,262 - 3,262 6,835,456 6,151,910 348,936,391 106,970 75,128,343 148 328,337,114 2,756,877 1,335,695 56,185,964 - 3,262 - 3,262 6,835,456 6,151,910 345,008,738 105,766 75,212,584 149 326,674,694 2,756,877 1,320,966 58,540,960 - 3,262 - 3,262 6,835,456 6,151,910 341,048,356 104,552 75,296,244 150 325,006,732 2,756,877 1,306,115 60,922,583 - 3,262 - 3,262 6,835,456 6,151,910 337,054,969 103,328 75,379,326 151 323,333,211 2,756,877 1,291,139 63,331,090 - 3,262 - 3,262 6,835,456 6,151,910 333,028,305 102,093 75,461,833 152 321,654,111 2,756,877 1,276,039 65,766,739 - 3,262 - 3,262 6,835,456 6,151,910 328,968,085 100,849 75,543,766 153 319,969,414 2,756,877 1,260,814 68,229,791 - 3,262 - 3,262 6,835,456 6,151,910 324,874,030 99,594 75,625,128 154 318,279,101 2,756,877 1,245,461 70,720,512 - 3,262 - 3,262 6,835,456 6,151,910 320,745,858 98,328 75,705,924 155 316,583,154 2,756,877 1,229,980 73,239,167 - 3,262 - 3,262 6,835,456 6,151,910 316,583,285 97,052 75,786,155 156 314,881,554 2,756,877 1,214,371 75,786,025 - 3,262 - 3,262 6,835,456 6,151,910 312,386,023 95,765 75,865,826 157 313,174,282 2,756,877 1,198,631 78,361,357 - 3,262 - 3,262 6,835,456 6,151,910 308,153,784 94,468 75,944,939 158 311,461,319 2,756,877 1,182,760 80,965,436 - 3,262 - 3,262 6,835,456 6,151,910 303,886,277 93,159 76,023,497 159 309,742,646 2,756,877 1,166,757 83,598,539 - 3,262 - 3,262 6,835,456 6,151,910 299,583,207 91,840 76,101,506 160 308,018,244 2,756,877 1,150,620 86,260,945 - 3,262 - 3,262 6,835,456 6,151,910 295,244,278 90,510 76,178,967 161 306,288,094 2,756,877 1,134,349 88,952,933 - 3,262 - 3,262 6,835,456 6,151,910 290,869,191 89,169 76,255,885 162 304,552,177 2,756,877 1,117,943 91,674,788 - 3,262 - 3,262 6,835,456 6,151,910 286,457,645 87,817 76,332,263 163 302,810,474 2,756,877 1,101,400 94,426,795 - 3,262 - 3,262 6,835,456 6,151,910 282,009,337 86,453 76,408,106 164 301,062,965 2,756,877 1,084,718 97,209,243 - 3,262 - 3,262 6,835,456 6,151,910 277,523,959 85,078 76,483,418 165 299,309,631 2,756,877 1,067,898 100,022,424 - 3,262 - 3,262 6,835,456 6,151,910 273,001,203 83,691 76,558,203 166 297,550,452 2,756,877 1,050,938 102,866,631 - 3,262 - 3,262 6,835,456 6,151,910 268,440,757 82,293 76,632,466 167 295,785,410 2,756,877 1,033,836 105,742,161 - 3,262 - 3,262 6,835,456 6,151,910 263,842,308 80,884 76,706,211 168 294,014,484 2,756,877 1,016,592 108,649,313 - 3,262 - 3,262 6,835,456 6,151,910 259,205,538 79,462 76,779,442 169 292,237,655 2,756,877 999,204 111,588,388 - 3,262 - 3,262 6,835,456 6,151,910 254,530,128 78,029 76,852,166 170 290,454,903 2,756,877 981,671 114,559,692 - 3,262 - 3,262 6,835,456 6,151,910 249,815,757 76,584 76,924,385 171 288,666,208 2,756,877 963,992 117,563,531 - 3,262 - 3,262 6,835,456 6,151,910 245,062,099 75,126 76,996,106 172 286,871,552 2,756,877 946,166 120,600,216 - 3,262 - 3,262 6,835,456 6,151,910 240,268,828 73,657 77,067,334 173 285,070,913 2,756,877 928,191 123,670,058 - 3,262 - 3,262 6,835,456 6,151,910 235,435,612 72,175 77,138,074 174 283,264,272 2,756,877 910,067 126,773,375 - 3,262 - 3,262 6,835,456 6,151,910 230,562,120 70,681 77,208,331 175 281,451,609 2,756,877 891,791 129,910,483 - 3,262 - 3,262 6,835,456 6,151,910 225,648,015 69,175 77,278,112 176 279,632,904 2,756,877 873,363 133,081,705 - 3,262 - 3,262 6,835,456 6,151,910 220,692,960 67,656 77,347,421 177 277,808,136 2,756,877 854,782 136,287,365 - 3,262 - 3,262 6,835,456 6,151,910 215,696,612 66,124 77,416,264 178 275,977,286 2,756,877 836,046 139,527,788 - 3,262 - 3,262 6,835,456 6,151,910 210,658,628 64,580 77,484,649 179 274,140,333 2,756,877 817,153 142,803,307 - 3,262 - 3,262 6,835,456 6,151,910 205,578,661 63,022 77,552,582


Month Balance Owed

Program Repay-ments

Program Admin Costs

Funds Available

New Units

(#)

Cum. Units

(#)

Cum. Units

Repaid (#)

Total Units In

Repayment (#)

Monthly Payments

Due



Average Out-


180 272,297,257 2,756,877 798,103 146,114,253 - 3,262 - 3,262 6,835,456 6,151,910 200,456,361 61,452 77,620,067 181 270,448,037 2,756,877 778,895 149,460,962 - 3,262 150 3,262 6,835,456 6,151,910 195,291,375 59,869 77,687,112 182 268,592,653 2,756,877 759,526 152,843,774 - 3,262 300 3,112 6,521,134 5,869,020 190,397,669 61,182 77,785,227 183 266,731,084 2,756,877 739,925 155,980,211 - 3,262 450 2,962 6,206,812 5,586,131 185,777,505 62,720 77,914,437 184 264,863,311 2,756,877 721,349 158,868,016 - 3,262 600 2,812 5,892,490 5,303,241 181,433,161 64,521 78,074,762 185 262,989,311 2,756,877 703,808 161,504,912 - 3,262 750 2,662 5,578,168 5,020,351 177,366,936 66,629 78,266,226 186 261,109,065 2,756,877 687,309 163,888,601 - 3,262 900 2,512 5,263,846 4,737,461 173,581,148 69,101 78,488,848 187 259,222,551 2,756,877 671,863 166,016,765 - 3,262 1,050 2,362 4,949,524 4,454,571 170,078,134 72,006 78,742,650 188 257,329,749 2,756,877 657,476 167,887,066 - 3,262 1,200 2,212 4,635,202 4,171,682 166,860,250 75,434 79,027,649 189 255,430,637 2,756,877 644,159 169,497,147 - 3,262 1,350 2,062 4,320,880 3,888,792 163,929,873 79,500 79,343,863 190 253,525,195 2,756,877 631,920 170,844,627 - 3,262 1,500 1,912 4,006,558 3,605,902 161,289,397 84,356 79,691,308 191 251,613,402 2,756,877 620,769 171,927,106 - 3,262 1,624 1,762 3,692,236 3,323,012 158,941,240 90,205 80,070,001 192 249,695,236 2,756,877 610,713 172,742,163 - 3,262 1,633 1,638 3,432,396 3,089,157 156,833,354 95,747 80,474,496 193 247,770,676 2,756,877 601,775 173,336,378 - 3,262 1,643 1,629 3,413,537 3,072,183 154,726,762 94,983 80,880,652 194 245,839,701 2,756,877 593,800 173,924,566 - 3,262 1,653 1,619 3,392,582 3,053,324 152,623,569 94,270 81,288,674 195 243,902,289 2,756,877 585,830 174,504,805 - 3,262 1,663 1,609 3,371,627 3,034,465 150,523,805 93,551 81,698,559 196 241,958,420 2,756,877 577,873 175,077,044 - 3,262 1,672 1,599 3,350,672 3,015,605 148,427,498 92,825 82,110,307 197 240,008,070 2,756,877 569,928 175,641,229 - 3,262 1,682 1,590 3,331,813 2,998,632 146,332,580 92,033 82,523,702 198 238,051,220 2,756,877 561,997 176,199,192 - 3,262 1,692 1,580 3,310,858 2,979,773 144,241,160 91,292 82,938,953 199 236,087,847 2,756,877 554,071 176,749,013 - 3,262 1,702 1,570 3,289,904 2,960,913 142,153,266 90,543 83,356,055 200 234,117,929 2,756,877 546,158 177,290,636 - 3,262 1,713 1,560 3,268,949 2,942,054 140,068,928 89,788 83,775,006 201 232,141,445 2,756,877 538,258 177,824,007 - 3,262 1,723 1,549 3,245,898 2,921,309 137,990,270 89,083 84,196,012 202 230,158,372 2,756,877 530,372 178,347,187 - 3,262 1,733 1,539 3,224,944 2,902,449 135,915,246 88,314 84,618,861 203 228,168,689 2,756,877 522,507 178,861,987 - 3,262 1,744 1,529 3,203,989 2,883,590 133,843,884 87,537 85,043,549 204 226,172,374 2,756,877 514,656 179,368,354 - 3,262 1,754 1,518 3,180,939 2,862,845 131,778,311 86,810 85,470,281 205 224,169,405 2,756,877 506,819 179,864,344 - 3,262 1,765 1,508 3,159,984 2,843,985 129,716,480 86,019 85,898,846 206 222,159,759 2,756,877 499,003 180,351,771 - 3,262 1,775 1,497 3,136,934 2,823,240 127,660,517 85,278 86,329,449 207 220,143,414 2,756,877 491,202 180,828,691 - 3,262 1,786 1,487 3,115,979 2,804,381 125,608,376 84,471 86,761,876 208 218,120,348 2,756,877 483,423 181,296,915 - 3,262 1,797 1,476 3,092,928 2,783,636 123,562,184 83,714 87,196,335 209 216,090,539 2,756,877 475,658 181,754,500 - 3,262 1,808 1,465 3,069,878 2,762,890 121,521,991 82,950 87,632,821 210 214,053,963 2,756,877 467,916 182,201,369 - 3,262 1,819 1,454 3,046,828 2,742,145 119,487,846 82,179 88,071,331 211 212,010,599 2,756,877 460,196 182,637,448 - 3,262 1,830 1,443 3,023,778 2,721,400 117,459,800 81,400 88,511,860 212 209,960,424 2,756,877 452,499 183,062,658 - 3,262 1,841 1,432 3,000,727 2,700,655 115,437,905 80,613 88,954,405 213 207,903,414 2,756,877 444,825 183,476,924 - 3,262 1,852 1,421 2,977,677 2,679,909 113,422,210 79,819 89,398,961 214 205,839,548 2,756,877 437,175 183,880,166 - 3,262 1,863 1,410 2,954,627 2,659,164 111,412,768 79,016 89,845,525 215 203,768,803 2,756,877 429,548 184,272,305 - 3,262 1,875 1,399 2,931,576 2,638,419 109,409,632 78,206 90,294,093 216 201,691,155 2,756,877 421,944 184,653,264 - 3,262 1,886 1,387 2,906,431 2,615,788 107,414,948 77,444 90,744,870 217 199,606,581 2,756,877 414,364 185,021,077 - 3,262 1,898 1,376 2,883,380 2,595,042 105,426,692 76,618 91,197,641 218 197,515,059 2,756,877 406,817 185,377,530 - 3,262 1,909 1,364 2,858,235 2,572,411 103,447,013 75,841 91,652,613 219 195,416,566 2,756,877 399,293 185,720,659 - 3,262 1,921 1,353 2,835,184 2,551,666 101,473,887 74,999 92,109,570 220 193,311,077 2,756,877 391,802 186,052,249 - 3,262 1,933 1,341 2,810,039 2,529,035 99,509,464 74,205 92,568,720 221 191,198,570 2,756,877 384,335 186,370,333 - 3,262 1,945 1,329 2,784,893 2,506,404 97,553,817 73,404 93,030,056 222 189,079,021 2,756,877 376,902 186,674,808 - 3,262 1,957 1,317 2,759,747 2,483,772 95,607,018 72,595 93,493,574 223 186,952,407 2,756,877 369,501 186,965,577 - 3,262 1,969 1,305 2,734,601 2,461,141 93,669,142 71,777 93,959,269 224 184,818,704 2,756,877 362,134 187,242,534 - 3,262 1,981 1,293 2,709,456 2,438,510 91,740,263 70,951 94,427,137 225 182,677,889 2,756,877 354,801 187,505,579 - 3,262 1,993 1,281 2,684,310 2,415,879 89,820,455 70,117 94,897,172


Month Balance Owed

Program Repay-ments

Program Admin Costs

Funds Available

New Units

(#)

Cum. Units

(#)

Cum. Units

Repaid (#)

Total Units In

Repayment (#)

Monthly Payments

Due



Average Out-


226 180,529,938 2,756,877 347,502 187,754,606 - 3,262 2,006 1,269 2,659,164 2,393,248 87,909,795 69,275 95,369,369 227 178,374,827 2,756,877 340,237 187,989,513 - 3,262 2,018 1,256 2,631,923 2,368,731 86,010,453 68,480 95,843,933 228 176,212,533 2,756,877 333,006 188,208,307 - 3,262 2,031 1,244 2,606,777 2,346,099 84,120,430 67,621 96,320,650 229 174,043,031 2,756,877 325,818 188,412,753 - 3,262 2,044 1,231 2,579,536 2,321,582 82,241,898 66,809 96,799,724 230 171,866,297 2,756,877 318,665 188,600,857 - 3,262 2,056 1,218 2,552,295 2,297,065 80,374,952 65,989 97,281,148 231 169,682,307 2,756,877 311,556 188,772,493 - 3,262 2,069 1,206 2,527,149 2,274,434 78,517,595 65,106 97,764,709 232 167,491,037 2,756,877 304,491 188,929,421 - 3,262 2,082 1,193 2,499,908 2,249,917 76,672,000 64,268 98,250,608 233 165,292,463 2,756,877 297,462 189,069,645 - 3,262 2,095 1,180 2,472,666 2,225,400 74,838,267 63,422 98,738,843 234 163,086,561 2,756,877 290,477 189,193,039 - 3,262 2,109 1,167 2,445,425 2,200,883 73,016,494 62,568 99,229,406 235 160,873,306 2,756,877 283,537 189,299,473 - 3,262 2,122 1,153 2,416,088 2,174,480 71,208,877 61,760 99,722,501 236 158,652,673 2,756,877 276,642 189,386,930 - 3,262 2,135 1,140 2,388,847 2,149,962 69,413,437 60,889 100,217,914 237 156,424,637 2,756,877 269,800 189,457,150 - 3,262 2,149 1,127 2,361,606 2,125,445 67,630,276 60,009 100,715,638 238 154,189,176 2,756,877 263,005 189,509,999 - 3,262 2,162 1,113 2,332,269 2,099,042 65,861,593 59,175 101,215,875 239 151,946,262 2,756,877 256,256 189,543,458 - 3,262 2,176 1,100 2,305,028 2,074,525 64,105,411 58,278 101,718,410 240 149,695,872 2,756,877 249,562 189,559,261 - 3,262 2,190 1,086 2,275,691 2,048,122 62,363,932 57,425 102,223,446 241 147,437,981 2,756,877 242,915 189,555,387 - 3,262 2,204 1,072 2,246,355 2,021,719 60,637,277 56,565 102,730,978 242 145,172,564 2,756,877 236,323 189,531,683 - 3,262 2,218 1,058 2,217,018 1,995,316 58,925,570 55,695 103,240,997 243 142,899,595 2,756,877 229,788 189,487,992 - 3,262 2,232 1,044 2,187,681 1,968,913 57,228,935 54,817 103,753,498 244 140,619,050 2,756,877 223,309 189,424,158 - 3,262 2,246 1,030 2,158,344 1,942,510 55,547,498 53,930 104,268,474 245 138,330,903 2,756,877 216,886 189,340,026 - 3,262 2,261 1,016 2,129,008 1,916,107 53,881,386 53,033 104,785,917 246 136,035,128 2,756,877 210,522 189,235,433 - 3,262 2,275 1,001 2,097,575 1,887,818 52,232,823 52,181 105,306,030 247 133,731,701 2,756,877 204,215 189,108,336 - 3,262 2,290 987 2,068,239 1,861,415 50,599,857 51,266 105,828,597 248 131,420,596 2,756,877 197,974 188,960,441 - 3,262 2,305 972 2,036,807 1,833,126 48,984,716 50,396 106,353,819 249 129,101,788 2,756,877 191,793 188,789,699 - 3,262 2,319 957 2,005,374 1,804,837 47,387,548 49,517 106,881,689 250 126,775,250 2,756,877 185,678 188,595,929 - 3,262 2,334 943 1,976,038 1,778,434 45,806,406 48,575 107,411,990 251 124,440,956 2,756,877 179,632 188,380,833 - 3,262 2,349 928 1,944,605 1,750,145 44,243,521 47,676 107,944,923 252 122,098,882 2,756,877 173,647 188,142,358 - 3,262 2,365 913 1,913,173 1,721,856 42,699,044 46,768 108,480,480 253 119,749,001 2,756,877 167,730 187,880,318 - 3,262 2,380 897 1,879,646 1,691,681 41,175,224 45,903 109,018,864 254 117,391,287 2,756,877 161,882 187,592,642 - 3,262 2,395 882 1,848,213 1,663,392 39,670,137 44,977 109,559,857 255 115,025,714 2,756,877 156,113 187,281,007 - 3,262 2,411 867 1,816,781 1,635,103 38,183,941 44,041 110,103,449 256 112,652,256 2,756,877 150,415 186,945,222 - 3,262 2,427 851 1,783,253 1,604,928 36,718,887 43,148 110,649,843 257 110,270,886 2,756,877 144,787 186,583,212 - 3,262 2,443 835 1,749,726 1,574,753 35,275,152 42,246 111,199,030 258 107,881,578 2,756,877 139,240 186,194,764 - 3,262 2,459 819 1,716,198 1,544,578 33,852,913 41,334 111,751,001 259 105,484,306 2,756,877 133,773 185,779,666 - 3,262 2,475 803 1,682,670 1,514,403 32,452,350 40,414 112,305,746 260 103,079,043 2,756,877 128,388 185,337,702 - 3,262 2,491 787 1,649,143 1,484,228 31,073,644 39,484 112,863,258 261 100,665,763 2,756,877 123,084 184,868,658 - 3,262 2,507 771 1,615,615 1,454,054 29,716,976 38,543 113,423,526 262 98,244,438 2,756,877 117,864 184,372,313 - 3,262 2,524 755 1,582,087 1,423,879 28,382,530 37,593 113,986,542 263 95,815,042 2,756,877 112,726 183,848,450 - 3,262 2,540 738 1,546,464 1,391,818 27,072,587 36,684 114,552,505 264 93,377,548 2,756,877 107,672 183,294,961 - 3,262 2,557 722 1,512,937 1,361,643 25,785,255 35,714 115,121,197 265 90,931,929 2,756,877 102,711 182,713,490 - 3,262 2,574 705 1,477,313 1,329,582 24,522,819 34,784 115,692,816 266 88,478,159 2,756,877 97,836 182,101,927 - 3,262 2,591 688 1,441,690 1,297,521 23,285,485 33,845 116,267,353 267 86,016,208 2,756,877 93,054 181,460,026 - 3,262 2,608 671 1,406,067 1,265,460 22,073,464 32,896 116,844,798 268 83,546,052 2,756,877 88,367 180,787,542 - 3,262 2,625 654 1,370,444 1,233,400 20,886,966 31,937 117,425,140 269 81,067,661 2,756,877 83,776 180,084,226 - 3,262 2,643 637 1,334,821 1,201,339 19,726,203 30,967 118,008,368 270 78,581,009 2,756,877 79,282 179,349,827 - 3,262 2,661 619 1,297,102 1,167,392 18,593,486 30,038 118,594,683 271 76,086,069 2,756,877 74,884 178,582,206 - 3,262 2,678 601 1,259,383 1,133,445 17,489,048 29,100 119,184,072


Month Balance Owed

Program Repay-ments

Program Admin Costs

Funds Available

New Units

(#)

Cum. Units

(#)

Cum. Units

Repaid (#)

Total Units In

Repayment (#)

Monthly Payments

Due



Average Out-


272 73,582,812 2,756,877 70,592 177,781,093 - 3,262 2,696 584 1,223,760 1,101,384 16,411,030 28,101 119,776,316 273 71,071,210 2,756,877 66,408 176,948,097 - 3,262 2,714 566 1,186,042 1,067,438 15,361,747 27,141 120,371,611 274 68,551,237 2,756,877 62,323 176,081,075 - 3,262 2,732 548 1,148,323 1,033,491 14,341,438 26,171 120,969,948 275 66,022,864 2,756,877 58,347 175,179,747 - 3,262 2,751 530 1,110,604 999,544 13,350,346 25,189 121,571,314 276 63,486,063 2,756,877 54,480 174,243,832 - 3,262 2,769 511 1,070,790 963,711 12,390,808 24,248 122,175,907 277 60,940,806 2,756,877 50,724 173,271,161 - 3,262 2,788 493 1,033,072 929,764 11,460,994 23,247 122,783,505 278 58,387,064 2,756,877 47,087 172,263,317 - 3,262 2,807 474 993,258 893,932 10,563,244 22,285 123,394,306 279 55,824,811 2,756,877 43,562 171,218,126 - 3,262 2,826 455 953,443 858,099 9,697,828 21,314 124,008,297 280 53,254,016 2,756,877 40,159 170,135,280 - 3,262 2,845 436 913,629 822,266 8,865,014 20,333 124,625,466 281 50,674,652 2,756,877 36,877 169,014,468 - 3,262 2,864 417 873,815 786,434 8,065,074 19,341 125,245,800 282 48,086,690 2,756,877 33,719 167,855,378 - 3,262 2,883 398 834,001 750,601 7,298,282 18,337 125,869,285 283 45,490,102 2,756,877 30,685 166,657,693 - 3,262 2,903 379 794,187 714,768 6,564,914 17,322 126,495,908 284 42,884,858 2,756,877 27,777 165,421,095 - 3,262 2,923 359 752,277 677,050 5,867,344 16,344 127,125,865 285 40,270,930 2,756,877 24,994 164,143,379 - 3,262 2,943 339 710,368 639,331 5,205,871 15,357 127,759,143 286 37,648,289 2,756,877 22,347 162,824,203 - 3,262 2,963 319 668,458 601,612 4,580,795 14,360 128,395,728 287 35,016,906 2,756,877 19,836 161,463,223 - 3,262 2,983 299 626,549 563,894 3,992,420 13,353 129,035,606 288 32,376,752 2,756,877 17,463 160,060,092 - 3,262 3,003 279 584,639 526,175 3,441,051 12,334 129,678,760 289 29,727,797 2,756,877 15,229 158,614,461 - 3,262 3,024 259 542,729 488,456 2,926,997 11,301 130,325,178 290 27,070,013 2,756,877 13,135 157,125,978 - 3,262 3,045 238 498,724 448,852 2,452,665 10,305 130,975,053 291 24,403,369 2,756,877 11,181 155,592,401 - 3,262 3,066 217 454,719 409,247 2,018,384 9,301 131,628,372 292 21,727,836 2,756,877 9,377 154,013,356 - 3,262 3,087 196 410,714 369,643 1,624,490 8,288 132,285,117 293 19,043,385 2,756,877 7,725 152,388,463 - 3,262 3,108 175 366,709 330,038 1,271,319 7,265 132,945,274 294 16,349,985 2,756,877 6,226 150,717,340 - 3,262 3,129 154 322,704 290,434 959,209 6,229 133,608,827 295 13,647,608 2,756,877 4,880 148,999,603 - 3,262 3,151 133 278,699 250,829 688,504 5,177 134,275,758 296 10,936,223 2,756,877 3,690 147,234,863 - 3,262 3,173 111 232,598 209,338 461,643 4,159 134,946,262 297 8,215,799 2,756,877 2,656 145,420,842 - 3,262 3,195 89 186,498 167,848 278,992 3,135 135,620,322 298 5,486,308 2,756,877 1,788 143,557,129 - 3,262 3,217 67 140,397 126,357 140,920 2,103 136,297,920 299 2,747,718 2,756,877 1,087 141,643,308 - 3,262 3,239 45 94,297 84,867 47,798 1,062 136,979,039 300 0 2,756,877 554 139,678,960 - 3,262 3,262 23 48,196 43,376 0 0 140,420,539


C. Program Financing Sources

1. Brief description of potential international financing forms and sources

This section briefly describes potential international financing forms (i.e., instruments) and sources that could be utilized to support a global chiller program. The specific instruments considered are as follows, in order of general desirability:

Grants, which do not require repayment;

Concessional debt, which is debt provided by multilateral or regional lending agencies at below-market interest rates;

Commercial debt, which is debt provided by banks or other lending institutions at market interest rates, by either an individual organization or a consortium of organizations;44 and

Equity, a direct investment (for the purposes of this memorandum, by an international investor) in the project owner or project participant.

The principal sources and features of these forms are described in 0 below0 below. II0 lists such sources and describes the type of financing which these organizations provide. Individual sources are further described in the Appendix.

2. Relationship between sources of financing and individual project costs

The purpose of this section is to evaluate the applicability of individual financing sources to the types of project costs that need to be covered for a global chiller program. Since financing sources are generally restricted in terms of the type of costs eligible for coverage, each project cost must be paired with an appropriate source.

All else being equal, financing from sources with fewer restrictions should be maximized. In particular, alternative sources of financing are needed for those project costs which cannot be funded under the MLF or GEF. Some of these costs are predictable, since MLF and GEF eligibility requirements specifically rule out certain cost items (e.g., the MLF will not cover any cost related to increased production capacity). However, it is not always possible to predict which cost components will not be considered eligible, given the uncertainty built into the approval process.

This uncertainty is particularly apparent with the GEF, which is at an earlier stage of development and has fewer guiding principles than the MLF. For example, though MLF guidelines in principle allow for project owners to apply for incremental operating costs for up to six months of post-project operation45 (or alternatively, to apply for an additional 10 percent to the project’s capital budget to cover increased operating costs), in practice most projects do not apply for any funds for incremental operating costs, as

44 Commercial debt may also include loan guarantees, provided by either a loan consortium member, an outside private lending organization, a government or government agency (e.g., OPIC), or a multilateral funding agency (e.g., IFC). Such guarantees are issued for a fee (a set percentage of the loan amount), and effectively transfer loan risk to the guaranteeing agency, thus allowing for a reduced interest rate. See the Appendix for additional information on loan guarantees provided by individual funding sources. 45 Originally, four years of incremental operating costs were eligible for MLF funding, but this was subsequently reduced to two years, one year, and one half year in order to conserve limited MLF resources.


this reduces the project’s cost effectiveness46 and hence its chance of approval. Similarly, with the GEF, informal rules and preference make certain types of expenditures (e.g., direct grants to profit making companies) less likely to receive financing than others (e.g., institutional strengthening or international technical assistance). Consideration of alternative financing sources must therefore take both formal and informal financing requirements into consideration.

Table 46: Categories of International Financing

Financing Type Principal Sources Possible Recipients Repayment

Terms/Interest Rate Application Process Grants Multilateral funds and

development institutions; host and foreign government agencies; non-profit institutions

Host government agency; project implementer or service provider; project owner (e.g., factory); other project participants

None For large grants, long (e.g., one year or more) lead time and time-consuming approval process. For small grants, potentially shorter approval process, but limited financing availability.

Concessional debt Multilateral banks (e.g., World Bank, ADB)

Host country government agency

Long term, low interest Very long lead time; time-consuming approval process.

Commercial debt Local and international banks; multilateral lending institutions (e.g., IFC)

Project owner Short-medium term, market interest rate

High degree of selectivity; relatively fast approval.

Equity International technology transfer partners; venture capitalists

Project owner Variable term, very high rate of return to investor required; recipient must generally relinquish at least partial control of venture to outside investor

High degree of selectivity; fast approval.

46 MLF cost effectiveness is defined as cost to the Fund to eliminate one kilogram of ozone depleting substance (ODS) production or emission per year, on an ozone-depletion potential (ODP) weighted basis.


Table 47: Potential Alternative International Financing Sources Organization Organization Type Financing Type(s) Features

World Bank Multilateral lending agency low interest loans below market interest rate loans and project development support

International Finance Corporation (IFC)

Multilateral lending agency commercial loans and loan guarantees; minority equity interests

lends at market rates with maturities from 3-13 years; occasionally makes equity investments

Asian Development Bank (ADB) Multilateral lending agency low interest loans

similar to World Bank, but specifically for Asia region; covers 50 percent of project costs ($5-50 million loan size)

Trade Development Agency (TDA)

U.S. Government agency feasibility study financing

provides partial support (generally 50 percent or $300,000 -400,000) for feasibility studies of projects likely to result in U.S. exports

United States Agency For International Development (USAID) Office of Energy, Environment, and Technology

U.S. Government agency grants and loans provides small grants and loans to promote sustainable development

Overseas Private Investment Corporation (OPIC)

U.S. Government agency commercial loans and loan guarantees for U.S. investment projects

provides direct loans of $2-10 million at market (or slightly below market) rates and loan guarantees for larger ($10-75 million) projects involving U.S. investment in developing countries

Export-Import Bank (EXIMBANK) U.S. Government agency

below-market loans and loan guarantees for U.S. exports

provides loans and loan guarantees for up to 85 percent of the export value

Renewable Energy and Energy Efficiency Fund (REEEF)

Non-profit energy efficiency fund

equity investment; commercial loans

fund established to finance renewable energy and energy efficiency projects (mostly through equity contributions) up to $50-100 million; 15-20 percent required IRR

Prototype Carbon Fund and other CDM facilities Multilateral fund

Payment for verified emissions reductions

Potentially high transaction and other project overhead costs (some of which might be able to be structured so as to be met by other multilateral financing source requirements, e.g., GEF)

3. Relationship Between Financing Type and Program Structure

This section discusses and gives examples of the relationship between type of financing and program structure. Different financing forms and sources may be either explicitly or implicitly limited to certain recipients, or to certain specified uses. Additionally, some financing types may require a specific project structure. For example, as noted in 0 above, equity investment by an international technology transferor or other equity investor requires that the local project owner be willing to cede at least partial ownership and control of the company to the international investor. This form of investment also reduces project organizer ability to control the joint activities of the technology provider and project owner.


Such factors as whether financing is channeled directly to the project owner/enduser or through a host country intermediary also have a determinative impact on project organization. The presence of intermediaries potentially increases the difficulty of organizing and implementing the project. This level of complexity increases substantially if more than one different intermediary is involved. Conversely, total absence of an active intermediary may also make project goals more difficult to achieve, since a single intermediary may exercise important oversight responsibilities.47

0 below shows the possible impact of financing form on project structure, based on the forms, sources, and recipients introduced in 0 above.

Table 48: Possible Impact of Financing Category on Project Structure Financing type Principal sources Possible recipients Possible structural impact Grants Multilateral funds and

development institutions; host and foreign government agencies; non-profit institutions

Host government agency; project implementer or service provider; project owner (e.g., factory); other project participants

Generally requires that funds be either directly expended by international financing agency48 or channeled through a host country government or non-profit agency, which may then distribute funds to other project participants

Concessional debt Multilateral banks (e.g., World Bank, ADB)

Host country government agency

Requires that loans be guaranteed by and channeled through host country government agency49

Commercial debt Local and international banks; multilateral lending institutions (e.g., IFC)

Project owner May require that loans be channeled through an intermediary so as to create a consolidated loan package large enough to justify transaction costs; requires independent legal agreements with loan recipients

47 Reduced intervention by outside parties and intermediaries may also have a positive effect on the project by reducing the project owner’s implementation and administration costs. This benefit may offset any reduction in the project’s ability to achieve its stated goals, especially if the project owner’s goals coincide with the stated goals of the project. An additional possible benefit of intermediary involvement may be reduced risk to the provider of funds, which should result in lower cost of funds. 48 E.g., United Nations Office of Procurement Services (UNOPS) or other U.N. executing agency for UNDP implemented GEF and MLF projects. Expenditure of funds is generally through competitive procurement. 49 E.g., Chinese Ministry of Finance (MOF) for World Bank loans.


Financing type Principal sources Possible recipients Possible structural impact Equity International technology

transfer partners; venture capitalists

Project owner Requires independent legal agreements with investment recipients; generally requires at least partial surrender of control to international investor; likely to make financial, legal, and other issues supersede project goals in importance for investor and project owner50

4. The World Bank

Overview: The World Bank, established in 1945, is comprised of the International Bank for Reconstruction and Development (IBRD) and its affiliates: the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). A total of 155 member countries have subscribed capital to the Bank enabling it to finance its lending operations primarily from its own borrowing in capital markets. However, a substantial portion of the Bank’s resources also come from the retained earnings and the flow of repayment.

The World Bank finances capital infrastructure, such as roads and railways, telecommunications, and port and power facilities. However, the Bank’s development strategy emphasizes investments that can directly affect the well-being of poor people in developing countries by making them more productive and integrating them as active partners in the development process. The Bank’s efforts to reduce poverty include investments to improve education, ensure environmental sustainability, expand economic opportunities, strengthen population-planning, improve health and nutrition services, and develop the private sector.

Criteria: The IBRD’s charter requires that it: (1) lend for productive purposes to stimulate economic growth in developing countries; (2) pay due regard to the prospects of repayments; (3) make loans to governments or with guarantees from the government; (4) not restrict procurement to purchases from any particular member country; and (5) make lending decisions based on economic considerations alone. IBRD loans are at market interest rates.

The IDA provides assistance to poorer developing countries (i.e., those with an annual per capita gross domestic product of $580 or less, expressed in 1989 U.S. dollars). Terms of the IDA loans are less stringent than those of “regular” IBRD loans. IDA makes long term loans at zero interest.

The IFC is legally and financially a separate entity. Its purpose is to promote growth in the private sector of less developed country economies, largely by taking equity positions in projects (see separate profile).

MIGA encourages equity investment and other direct investment by attempting to remove non-commercial investment barriers. MIGA’s activities include: (1) investors guarantees against non-commercial risks; (2) advising developing member countries on policies, programs, and procedures related to foreign investment; and (3) acting as a bridge between the international business community and host governments on investment issues.

50 See further discussion of equity investment issues under Conclusion below.


Contact Information:

The World Bank 1818 Street, NW Washington DC 20433 Tel: 202/477-1234

5. International Finance Corporation (IFC)

Overview: The International Finance Corporation (IFC) was established in 1956 to help strengthen the private sector in developing countries. IFC lends directly to individual private sector entities and provides long-term loans, equity investments (approximately 20 percent of total IFC investment), guarantees and "stand-by financing", risk management, and "quasi-equity instruments" such as subordinated loans, preferred stock, and income notes. Total IFC financing can equal up to 25 percent of the total project budget, though this amount can be exceeded through loan syndication. IFC also provides advisory services and technical assistance to project owners. Other relevant information on IFC is as follows:

Source of funds: About 80 percent is borrowed in the international financial markets through public bond issue private placements and 20 percent is borrowed from IBRD.

Lending: Each year, IFC approves about $4 billion in financing, including syndications and underwriting for private-sector projects in developing countries. The minimum IFC investment is generally $5 million per project, though this amount can be lower under some circumstances. From project identification through disbursement of funds generally takes six to nine months.

Loan Conditions: Interest rate on IFC loans and financing are based on market rates, which vary between countries and projects; maturity on loans ranges from 3 to 13 years.

Criteria: Project proposals will be assessed on the basis of the following:

Project Description: brief description of the project and current status;

Sponsorship and Management: history and business of sponsors, management arrangements, and technical arrangements;

Markets and Sales: market orientation (export/domestic), production volumes and sales objectives, potential users and distribution channels, and relevant tariffs and protective measures;

Technical Feasibility: equipment availability, labor and infrastructure facilities, resource accessibility, and potential environmental issues;

Financing Requirements: breakdown of project costs, proposed financial plan, type of assistance sought, and expected profitability;

Government Regulations: government controls, exchange controls, tax regulations, export/import licenses, and price controls applicable to the project.


International Finance Corporation 1850 I Street, N.W. , Building I, Room 6045 Washington, DC 20433


6. Asian Development Bank (ADB)

Overview: Established in 1966, the Asian Development Bank (ADB) is a multilateral development bank whose primary objective is poverty alleviation through sustainable economic growth in Asia. The Bank has 35 developing member countries, of which China, India, and Indonesia are the largest loan recipients. ADB assistance is channeled into the following sectors: agriculture and agro-industry; energy; industry and non-fuel minerals; financial services; transport and telecommunications; social infrastructure (e.g., education, health); and urban development.

Typical borrowers of ADB funds include governments, ministries, or an agency or utility under a ministry. The borrower makes the key decisions on awarding contracts for engineering, design, project management, works construction, and purchase of capital goods. While governments and related agencies are the primary recipients of ADB funds, private sector enterprises too are eligible for some forms of assistance. For private sector support, a project must play a catalytic role in the development of the country. For such projects, ADB assistance is limited to 50 percent of project costs or $50 million, whichever is less. The minimum loan is $5 million.

The financial resources of ADB consist of ordinary capital resources comprising subscribed capital from member countries, reserves and funds raised through borrowings and Special Funds. Special Funds include the Asian Development Fund, which is made up of contributions from member countries and other accumulated income, and the ALGAS fund, which is designed to support GHG mitigation activities in developing member countries. ADB has also recently created a $50-60 million China energy efficiency loan fund, and makes limited grant funds available for project development.

Criteria: Projects or programs are analyzed in terms of:

The borrower’s capacity to finance and administer the project;

Its economic, technical, and environmental feasibility; and

Its social and economic benefits to the recipient country.


Asian Development Bank Office of the Environment and Social Development 6 ADB Avenue, 1501 Mandaluyong City 0401 Metro Manila, Philippines

7. Trade Development Agency (TDA)

Overview: Established in 1980, the U.S. Trade Development Agency (TDA) is a government organization that promotes U.S. exports by providing grants for feasibility studies for large development projects in developing and middle income countries. The purpose of these grants is to provide U.S. firms with the opportunity to undertake feasibility studies for large overseas projects, thereby increasing the chance that they will be involved in project implementation. TDA grants the funds on the condition that U.S. firms are utilized to conduct the study. TDA is currently involved in studies in the following areas: energy, environment, mining and minerals development, health care, manufacturing, telecommunications, transportation, water resources, agriculture, and aviation.

There are two types of studies which TDA may fund: (1) feasibility studies for projects in which U.S. companies intend to make equity investments, and (2) feasibility studies for public sector projects.


Before TDA funds a feasibility study, experts are hired to develop reports regarding the feasibility study and the project to be implemented at the conclusion of the study. If the TDA decides to fund the feasibility study, it asks interested firms to submit proposals. The host government decides which of the competing companies will undertake the study.

The agency may provide up to one million dollars per study, although the average grant amount ranges between $300,000 and $400,000. While up to 20 percent of TDA financing may be used to pay subcontractors in the host country, the remainder must be used for services sourced in the U.S.

Criteria: All feasibility study proposals must include a project description, U.S. export potential, information on host country partners, evidence of the host nation's commitment to the project, justification for why TDA financing is needed, a financial analysis of the project, assessment of foreign competition for project implementation, and the impact of the project on U.S. labor. A few of the most important criteria include:

The project must be a development priority for the host country.

The export potential of the project must be significantly greater than the cost of TDA assistance.

The procurement process must be open to U.S. firms.


Mr. Richard Abizaid Asia Region Trade Development Agency Room 309, SA-16 Washington, D.C. 20523-1602 Tel.: 703/875-4357 Fax: 703/875-4009

8. U.S. Agency for International Development (USAID) Office of Energy, Environment, and Technology

Overview: USAID’s Office of Energy, Environment, and Technology goal is to help developing countries and emerging economies find market-oriented solutions to their energy and environmental problems. The Office’s programs address three main issues: 1) high rates of energy demand and economic growth accompanied with lack of energy, especially in rural areas; 2) financial problems, including lack of investment capital; and 3) growing environmental threats, especially global climate change, acid rain, and urban air pollution. The Office focuses its efforts in the following areas:

Energy Efficiency

Renewable Energy Project Development

Private Sector Energy Development

Energy Technology Innovation

Training/Technical Assistance

The Office has two main strategies for achieving its objectives:


Tapping U.S. Know-How: The Office arranges cooperative relationships between developing countries and U.S. energy and environment industries, multilateral development banks, and non-governmental organizations; and

Promoting Private Sector Initiatives: The Office assists countries put in place market-oriented policies and institutions to support private environment and energy initiatives.

The types of assistance offered include: financing (loans, investment funds); policy, legislative, and regulatory development assistance; reports and workshops on market conditions and opportunities; and engineering and other technical assistance.

Criteria: The criteria for USAID financing vary on a case-by-case basis. However, the following points are generally considered in the project evaluation process:

Potential of the project to meet its goals

Contribution to human welfare and sustainable development;

Scientific and technical basis of project; and

Host nation political, legal, economic, and administrative conditions.


Mr. Sid Chernenkoff, Director U.S. Assistance for East Asia and South Asia U.S. AID Office of Energy, Environment, and Technology Room 508, SA -18 Washington D.C. 20523-1810 Tel.: 202/647-7037 Fax: 202/647-1805

9. Overseas Private Investment Corporation (OPIC)

Overview: OPIC is a U.S. government agency that provides loans, loan guarantees, and political risk insurance to American business ventures in the developing world. These services are provided to those projects that are economically and technically sound but are unable to receive sufficient financing or insurance from the commercial sector. Projects supported by OPIC must have a positive effect on the U.S. economy, be financially sound, and provide significant benefits to the social and economic development of the host nation. While OPIC does not require the foreign enterprises to be owned entirely by U.S. interests, generally the U.S. investor is expected to own at least 25 percent of the equity in the project. Neither financing nor insurance are available for investments in business that are majority owned by a foreign government. Furthermore, only the portion of the investment made by a U.S. investor may be financed or insured by OPIC.

OPIC's finance division offers loans and loan guarantees. Loans are generally granted to small U.S. businesses and range from $2 million to $10 million. For larger projects, in the $10 million to $75 million range, loan guarantees are provided. OPIC's insurance division offers coverage against the following three risks: currency inconvertibility, expropriation, and political unrest. Other investor services provided by OPIC include investment missions and outreach activities.

Criteria: Eligible projects must meet the following criteria:


Positive effect on the U.S. economy: projects must demonstrate positive balance of payments and employment effects on the U.S. economy;

Development contribution: projects must benefit the economic and social development of the host nation;

Performance requirements: OPIC will not become involved in any project subject to re-export requirements that will reduce the potential for U.S. trade and employment benefits.

Environmental impact: the project should not have an unreasonable or major adverse impact on the host nation's environment; and

Worker's rights: all projects supported by OPIC must meet internationally recognized standards of worker's rights.


Ms. Luanne Grey, Information Specialist Overseas Private Investment Corporation 1100 New York Avenue, N.W. Washington, D.C. 20527 Tel.: 202/336-8663 (main number: 202/336-8799) Fax: 202/408-5155

10. Export-Import Bank (EXIMBANK)

Overview: The Export-Import Bank (EXIMBANK) of the United States is a U.S. Government agency that facilitates the export financing of U.S. goods and services to foreign buyers. EXIMBANK supports export sales by providing direct loans to foreign buyers, guarantees to U.S. and foreign commercial lenders for credit risk protection, export credit insurance to U.S. exporters against failure of foreign buyers to meet payment obligations, and pre-export financing for small business through its Working Capital Guarantee Program.

Relevant information about EXIMBANK loans includes:

Types of Loans: EXIMBANK provides both direct and intermediary loans. Direct loans are provided to foreign buyers of U.S. exports; intermediary loans fund parties that extend loans to foreign buyers;

Interest Rates: EXIMBANK loans carry the lowest interest rate permitted under the OECD Arrangement -- the OECD Commercial Interest Reference Rate (CIRR) -- which changes monthly. For relatively poor countries, lower interest rate loans are available; and

Extent of Assistance: Loan and guarantee programs cover up to 85 percent of the U.S. export value.

Criteria: Transactions are evaluated in terms of the creditworthiness of the buyer, the buyers country, and the exporter’s ability to perform. In general the following information is assessed:

Financial Data: Balance sheets and income statements for the past 3 years for the buyer and any guarantor(s);

Credit Data: at least two credit references are checked;

Technical Feasibility: technical characteristics of the project, breakdown of costs, project scheduling, participant profiles, and environmental impact; and


Applicant and Exporter Data: Evidence of the applicant’s ability to implement the requested loan or guarantee.


Mr. Leon White Export-Import Bank of the United States Credit Information Section 811 Vermont Avenue, N.W. Washington D.C. 20571 Tel: 202/565-3923 (main number: 202/565-3946) Fax: 202/565-3931 (main number: 202/565-3380)

11. Renewable Energy and Energy Efficiency Fund (REEEF)

Overview: REEEF is an independent fund developed by IFC and other supporting institutions. It will be capitalized with $100 million in equity and at least $50-100 million in debt, and is expected to open for business in mid-1997. Providers of funds to REEEF are expected to include private banks, insurance companies, and public and commercial investors. The Fund is expected to be managed by a consortium of four entities:

Energy Investors Fund of Boston and San Francisco (affiliated with John Hancock)

ABN Amro bank

Environmental Enterprise Assistance Fund

E & Co.

The Fund will make equity investments and loans to private sector firms, which will be defined liberally in the case of China and other transitional economies but probably would exclude purely state-owned enterprises. Sponsored projects will include on-grid renewables, off-grid renewables, and energy efficiency projects, including manufacturing of energy efficient products. REEEF may also serve as a financial intermediary, providing a line of credit through a third party.

Project size is expected to range from a low of several hundred thousand dollars to a maximum of $50-100 million. There are also expected to be restrictions by project (e.g., no more than 25 percent of the Fund invested in any one project), country, and region (e.g., no more than 60 percent in Asia). Required rate of return on projects is 15-20 percent.

Criteria: Since REEEF has not yet been officially established, no guidelines currently exist regarding criteria. However, based on discussions with REEEF organizers, it is expected that future criteria will include:

Private sector project (definitions and criteria are expected to be comparable to IFC criteria, which allow financing of projects in China with partially state-owned or state-affiliated enterprises);

One of Fund’s target areas (include on-grid renewables, off-grid renewables, and energy efficiency);

15-20 percent IRR.



Mr. Barry Neal Executive Director Energy Investors Fund 591 Redwood Highway San Rafael, CA Tel: 415/380-0532, Fax: 415/380-0527

12. Clean Development Mechanism

Overview: Under the Kyoto Protocol to the Unites Nations Framework Convention on Climate Change (UNFCCC), industrialized (“Annex I”) countries must reduce carbon emissions by an average of 5.2 percent below their 1990 levels during the period 2008–2012. Under Article 12 of the Protocol, to cost-effectively meet these commitments, Annex I countries may finance and receive credit for emissions-avoiding projects in developing countries.

The Clean Development Mechanism (CDM) allows industrialized countries to reduce their overall compliance costs by “purchasing” emissions reductions from developing countries in which those emissions reductions can be obtained more cost-effectively than in the purchaser’s home country. This approach is based on successful “emissions trading” approaches that have been implemented within countries (e.g., SO2 emissions allowance trading in the U.S.) and on the international allowance trading implemented under the Montreal Protocol for Ozone Depleting Substance (ODS) production and consumption allowances.

To succeed in meeting its goals, the CDM must create verifiable, measurable emissions reductions that are both sustainable and additional to reductions that would otherwise have taken place in the absence of the project. Additionality of emissions reductions is relative to a without-project baseline, or calculation of what emissions would have been had the project not taken place.

The specifics and modalities of how CDM will be implemented in the context of multiple investors and host countries are still in development in conjunction with a variety of bilaterally and multilaterally funded programs, including the World Bank’s Prototype Carbon Fund (see 13 below), the Bank’s National Strategy Studies program (see contact information below), the Community Development Carbon Fund (Section 14), and the Netherlands Clean Development Facility (Section 15).

Two percent of CDM proceeds will be invested in the Kyoto Protocol Adaptation Fund, which will be used to assist countries in adapting to the effects of climate change.



Peter J. Kalas, NSS Program Manager National Jointly Implementation/Clean Development Mechanism Strategy Studies Program Environment Department Climate Change Unit The World Bank 1818 H Street NW Washington, DC 20433, USA Tel: +1 202 458 5647 Fax: +1 202 522 2130 Email: [email protected].

13. Prototype Carbon Fund (PCF)

Overview: On July 20th, 1999 the Executive Directors of the World Bank approved the establishment of the Prototype Carbon Fund (PCF). The PCF’s goals are to combat climate change, promote sustainable development, demonstrate the possibilities of public/private partnerships, and offer a learn-by-doing opportunity to stakeholders.

Under the Kyoto Protocol to the Unites Nations Framework Convention on Climate Change (UNFCCC), industrialized (“Annex I”) countries must reduce carbon emissions by an average of 5.2 percent below their 1990 levels during the period 2008–2012. To cost-effectively meet these commitments, Annex I countries may fund projects to generate emission reductions (ERs) in other countries, as follows:

Article 6 allows for the Joint Implementation (JI), through which an Annex I country may acquire emission reduction units when it helps to finance projects that reduce net emissions in another industrialized country or country with economy in transition (EIT).

Article 12 establishes the Clean Development Mechanism (CDM), through which Annex I countries can finance and receive credit for emissions-avoiding projects in developing countries.

The PCF was created to operate under these articles and help create a market in project-based JI and CDM emission reductions, demonstrate how project-based greenhouse gas Emission Reduction transactions can promote and contribute to sustainable development, and lower the cost of compliance with Kyoto Protocol.

The PCF is structured as a closed-end Mutual Fund structure with diverse portfolio to minimize project risks, reduce transactions costs, and enhance stakeholders’ learning experience. Shareholders include governments (6 at $10 million each by the end of 2002) and companies (17 at $5 million each), for total subscribed capital or US$180 million to be invested in approximately 30 projects. Carbon emissions reductions achieved are to be high quality competitively priced, (target deal price $2.50-3.50/tCO2). Shareholders receive a pro rata share of the verified emission reductions which the Fund achieves. The PCF negotiated 20 carbon purchase agreements by the end of 2002 which will result in total carbon emission reductions of more than 25 million tons CO2 equivalent.

The PCF is endeavoring to achieve a geographically and technologically balanced portfolio both. Approximately half of the investments will be made in Economies-in-Transition demonstrating JI, and half will be made in developing countries facilitating the CDM. The technical focus will be on renewable energy and energy efficiency projects, which have a great potential for replication and for reducing


climate change at a reasonable cost. As a pilot activity, the PCF does not endeavor to compete in the Emission Reductions market. It’s total capital is restricted to US$180 million, and the Fund is scheduled to terminate in 2012.


Ken Newcombe Fund Manager Prototype Carbon Fund The World Bank 1818 H Street, N.W. Washington, DC 20433 U.S.A. Mail Stop: (MC4-414) tel. 202/473-6010 http://www.PrototypeCarbonFund.org

14. Community Development Carbon Fund

Overview: In September 2002 at the World Summit on Sustainable Development in Johannesburg, the World Bank launched the Community Development Carbon Fund (CDCF), in collaboration with the International Emissions Trading Association (IETA). (World Bank 9/03/02 press release). The Facility has a target size of $100 million and will operate under Article 12 of the Kyoto Protocol establishing the Clean Development Mechanism (CDM).

The CDCF will provide carbon finance to small-scale projects in small developing countries and rural areas of all developing countries. The CDCF’s emphasis will be on renewable energy, energy efficiency, methane emissions reductions, and agro-forestry projects with significant and measurable community development and poverty reduction benefits.

Small-scale projects that reduce greenhouse gas emissions include such projects as mini- and micro-hydro, wind energy, small municipal and agricultural waste projects, energy efficient appliances, clean transport, and agro-forestry projects. However, higher business costs and risks in small and less developed countries put small-scale projects at a disadvantage when competing for carbon finance, causing them to bypassed by CDM investors. The CDCF’s goal is to reduce costs and risks by aggregating these projects, working through local intermediaries, and using streamlined project procedures.


Community Development Carbon Fund The World Bank, 1818 H Street, NW, Washington, DC 20433, USA Email: [email protected] http://www.communitycarbonfund.org

15. Netherlands Clean Development Facility

Overview: The World Bank announced an agreement with The Netherlands in May 2002 to establish a facility to purchase greenhouse gas emission reduction credits. The Facility will support projects in developing countries that generate potential credits under the Clean Development Mechanism (CDM), established by the Article 12 of the Kyoto Protocol to the UN Framework Convention on Climate Change (see Section 12 above for further information).


The Facility’s goal is to invest €35 million (approximately. US$33 million) per year in carbon emissions reductions projects (not including sequestration) for 2002-05, with planned emissions reductions of 32 million tons of CO2 equivalent.


Netherlands Clean Development Facility Carbon Finance Business Unit, ENV The World Bank, 1818 H Street, NW, Washington, DC 20433, USA [email protected] http://www.carbonfinance.org/NetherlandsClean.htm

16. Other bilateral export finance programs

Various.


XI. References

AFEAS 2002, Alternative Fluorocarbons Environmental Acceptability Study, Total Global Warming Impact, January.

ARI, International Statistical Profile of the Air-Conditioning and Refrigeration Industry, Publication Date: March 1996.

ARI, International Statistical Profile of the Air-Conditioning and Refrigeration Industry, Publication Date: July 2001.

BSRIA/JARN, World Market for Air Conditioning, 2001.

Clodic, Dennis et al, 1999, Refrigerant Emissions Calculation Method, In, The Earth Technologies Forum

Conference Proceedings, Washington, D,C, September 27-29, Pg, 170.

Crawford, James, 1999, Limiting HFC Emissions from Chillers, In, The Earth Technologies Forum

Conference Proceedings, Washington, D,C, September 27-29, Pg 185.

EPA 2002, Environmental Protection Agency, Ozone Depletion Web site (http://www,epa,gov/Ozone/).

European Union - Statistics Division, External Trade Statistics of the European Union and its members, 1989-1993.

Eurostat - European Union, External Trade Statistics of the European Union and its members, 1988-2000.

Federal Energy Management Program (FEMP), How to Buy Energy-efficient Commercial Equipment (www.eren.doe.gov/femp/procurement).

Fideicomiso Para el Ahorro de Energia Electrica (FIDE, or Energy Efficiency Trust of Mexico), Programa De Financiamiento Para La Sustitución De Sistemas De Enfriamiento De Aire (Chillers), Reporte De Actividades, Febrero 2002 (Mexico Chiller Project Feb, 2002 Progress Report).

ICF Consulting, Cost-Effectiveness of Options to Reduce Ozone Depleting Substances: Chillers and Motor Vehicle Air Conditioners (report prepared for the World Bank), 1994.

Japan Air Conditioning, Heating, and Refrigeration News (JARN) 2001, World Trends of Chillers and Large Air Conditioning Equipment, November 25, 2001, Serial No, 394-S.

Japan Refrigeration and Air-Conditioning Industry Association, Estimates of World Demand for Air Conditioners (http://www.jraial.or.jp/index.html).

Japanese Ministry of Finance - Commodity by Country Trade Statistics, 1989-2000, Available online at: http://www,mof,go,jp/trade-st/tr-indexe,html.

Molina, Felipe David Angeles, Fideicomiso para el ahorro de Energía Eléctrica (FIDE) [Energy Efficiency Trust of Mexico], Mexico City, Mexico, Presentation on Mexico chiller replacement project at Earth Technologies Forum Executive Summit on Building Air Conditioning Investment, Washington, DC, 27 March 2002.


Prapawawad, Anat, Industrial Finance Corporation of Thailand (IFCT), Presentation on Thailand chiller replacement project at Earth Technologies Forum Executive Summit on Building Air Conditioning Investment, Washington, DC, 27 March 2002.

Project Brief—Thailand Building Chiller Replacement Program – pcd4,doc, 9/8/98 STAP Review Annex 3, 9/98.

Suozzo, Margaret, Jim Benya, Mark Hydeman, Paul DuPont, Steven Nadel, and R, Neal Elliott, 1997, Guide to Energy-efficient Commercial Equipment, ACEEE, Washington, D,C (ISBN 0-918249-30-9).

Suozzo, Margaret, Jim Benya, Mark Hydeman, Paul DuPont, Steven Nadel, and R, Neal Elliott, 2000, Guide to Energy-efficient Commercial Equipment, ACEEE, Washington, D,C, (ISBN 0-918249-41-4).

U,S, Department of Commerce, Import Export Data for the Air-Conditioning and Refrigeration Market, 1993.

UNEP, Report of the Refrigeration, Air-Conditioning and Heat Pumps Technical Options Committee, 1995 Assessment.

UNEP, Report on Strategic Options for Retrofitting of Mobile Air-Conditioners and Chillers, March 1994.

UNEP, 2004. UNEP Report of the TEAP Chiller Task Force. May 2004.

World Bank, Financing Matters: Innovative Financing for Effective ODS Phaseout, November 2001 (http://www-esd.worldbank.org/mp/whatsnew/exhibition/innovativefin.html).

World Bank, Thailand Chiller Project Appraisal Document March 15, 2001.

International Chiller Sector Energy Efficiency and CFC ... · PDF fileInternational Chiller...

Documents

Transcript of International Chiller Sector Energy Efficiency and CFC ... · PDF fileInternational Chiller...