GUYSUCO LogoSkeldon Sugar Modernization Project ssmp Logo
 
   
Carbon Finance

The Skeldon Sugar Modernisation Project (SSMP) will provide Guyana with a modern VHP raw sugar factory capable of producing 115,000 tonnes of sugar per year and exporting over 100 GWh per year of electrical power to the national grid. Since the SSMP inception in 1999, the World Bank Group has been closely linked with the project and has given its support to the inclusion of cogeneration. This was confirmed in February 2004, after discussions with the World Bank Carbon Finance Business (CFB), when the World Bank identified the SSMP cogeneration component as excellent economic value and having the potential for an Emission Reduction Purchase Agreement (ERPA). This was based on the ability of the SSMP to displace the use of fossil fuel in power generation in Guyana and make a genuine contribution to global climate control. The CFB has identified the Community Development Carbon Fund (CDCF) as the appropriate World Bank carbon finance product to handle the proposed ERPA. The CDCF provides carbon finance to small-scale projects in the developing world and has its web site at http://carbonfinance.org .

The initial step was for Guyana to submit a Letter of Endorsement (this was done in 2000) in which the Host Country specifically covenants that it will continue to maintain itself in compliance with its obligations under the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol. Guyana has already signed and acceded to the Kyoto Protocol.

More recently, Guysuco has submitted a Project Idea Note (PIN) to the CFB (prepared by the SSMP Project Manager, Booker Tate Ltd of UK), that enabled a quick evaluation to determine if the project meets the eligibility criteria. This was successful and the CFB then requested a Project Concept Note (PCN) that permitted further evaluation of particular aspects of the project. This was followed by a Letter of Intent (LOI) in which the CFB formally signals its intention to purchase emission reductions generated by the SSMP under terms agreed in return for the exclusive right to contract for the purchase of emission reductions. This CFB has now approved the project for further development.

Factory configuration

The SSMP will include the following generating plant (in addition to the sugar factory equipment) :

One 15 MW back pressure turbo alternator set

One 15 MW condensing/extraction turbo alternator set

One    5 MW diesel alternator set

Two 2.5 MW diesel alternator sets

Two 125 t/h steam boilers

This will enable the supply of 10 MW of firm power to the national grid during the two crops and while the bagasse fuel stocks are available during the off crop. At other times, firm power will be supplied to the national grid from the diesel alternators.

Current status

A Memorandum of Understanding between Guysuco and the national power utility has been signed which sets out the framework for the negotiation of a Power Purchase Agreement prior to the start of power supply operations in 2006.

In addition to the revenue earned from the sale of Emission Reductions (ERs) and a positive contribution to global climate control, there will be a significant reduction in Guyana's foreign exchange requirement for the purchase of fossil fuels. Guyana can be proud to have reached this level of implementation with its ambitious cogeneration project and to have reached an advanced stage in the preparation for an ERPA.

Next steps

The following process is required by the CFB :

Letter of Approval (LOA) - for the Host Country to formally approve the project for the purposes of Article 6 or 12 of the Kyoto Protocol, and confirm that the project assists the Host Country in achieving sustainable development.

Baseline Study (BLS) and Monitoring Plan (MP) - to investigate the project-based creation of ERs; explain the 'additionality of the project; define how project operation will be monitored, how achieved ERs are calculated, and how the ERs will be independently verified on a periodic basis throughout the project operational phase.

Project Design Document (PDD) - to enable the Operational Entity (OE) to determine whether the project (i) has been approved by the parties involved in the project, (ii) would result in reductions of greenhouse gas emissions that are additional, (iii) has an appropriate Baseline and Monitoring Plan.

Validation - an Independent Validator will agree that the ERs are additional to the baseline, the MP is sufficient, and that the ERs have a high chance of being certified under the Kyoto Protocol.

Pre-Negotiations Workshop / Consultations - if necessary, to ensure fairness in the process of negotiating and concluding.

Negotiations / Host Country Agreement / ERPA - to agree the final terms of the ERPA between the CFB, the project sponsor, and the Host Country. The project sponsor signs the ERPA and the Host Country signs the parallel Host Country Agreement.

Post-Negotiations Workshop - if necessary to discuss lessons learned.

Initial Verification / project commissioning - after the project's construction and before its commissioning to produce ERs, the CFB contracts an Independent Third Party (a Verifier) for the project (different from the Validator to undertake an Initial Verification, which should confirm that the project is ready to generate verifiable and certifiable ERs. This will trigger the CFB acceptance of ERs from the project.

Monitoring - to measure and calculate the emission reductions generated by the project. Once the project starts to generate emission reductions, the project entity monitors the project in accordance with the MP.

Verification and Certification - to verify and certify the emission reductions periodically and in accordance with the MP and other applicable guidelines by an Independent Third Party (the Verifier.

Transfer of Emission Reductions - once the ERs are certified, the CFB will pay for the amount of ERs as agreed in the ERPA and the ERs are transferred to Participants in accordance with the ERPA and/or Host Country Agreement and applicable UNFCCC or other rules.