GRM 2010 GRM 2011

Abstract Details

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Title of Paper:
Waste Heat Recovery as a Potential CDM Project: Case Study of a Refinery in Bahrain
Paper Proposal Text :
Waste heat recovery is an effective measure to improve energy efficiency and reduce greenhouse gas emissions. This is eligible under the clean development mechanism (CDM), one of the three flexibility mechanisms of the Kyoto Protocol. This research use a case study of a waste heat recovery system to be installed to recover waste heat from three gas turbines to produce 110 PSIG steam at 350oF to 380oF. This will lead to shut down three existing gas fired low-pressure (LP) boilers that are working on natural gas. This study aims to assess the viability of waste heat recovery systems in reducing CO2 emissions in a refinery within the CDM of the Kyoto protocol. The study aims also to assess the impacts of removing energy price subsidies, and adding carbon revenues on economic feasibility of energy efficiency projects.

The research used the methodology of "Case Study" to investigate quantitatively the different variables affecting the environmental and economical viability of WHR in a refinery. Using the CDM approved methodology ACM0012 "consolidated baseline methodology for GHG emission reductions from waste energy recovery projects".

The research concluded that installing three waste heat recovery boilers would save 13,830 MMSCF of natural gas over 10 years. This is equivalent to US$ 20,993,940 at current gas prices in Bahrain. Consequently, 822,406 ton CO2 would be reduced at a cost of US$ 3.82/ton CO2. At a discount rate of 10 %, the Net Present Value (NPV) of installing the waste heat recovery system was proved to be negative. This means that this energy efficiency investment is not economically viable, and thus meets the additionality criteria of the CDM. The analysis indicated that the current subsidised gas prices, nearly less than 25 % of the international market price, pose a major barrier to improving energy efficiency. If this waste heat recovery project were to register under the CDM, and at a carbon market price of US$ 8/ ton CO2, the project would still be not economically attractive. This means that carbon revenues would not be sufficient to overcome the barrier of severely subsidised gas prices. However, changing the market price of CERs would impact this project’s feasibility. Adding carbon revenues at CER price more than US$ 10/ ton CO2 would improve the economic feasibility and make waste heat recovery investment pay back. The cost of carbon saving due to waste heat recovery would increase from – 3.82 US$ / ton CO2 at CER price of US$ 8/CER to US$ 1,8/ ton CO2 at CER price of US$ 12/CER. Assessing the effect of removing energy subsidies indicated that the waste heat recovery project would be economically attractive. This validates the assumption that reforming energy prices would promote energy efficiency. The analysis showed that at a natural gas price between US$ 6-8 /MMSCF, the project proved to be economically viable under all scenarios of changing discount rate and changing operation and maintenance costs. This means that by removing energy subsidies, the case study would not meet the additionality criteria and could not be registered under the CDM.

This research suggests a number of recommendations and future work including reforming fuel subsidy in order to promote energy efficiency, building national capacity in the field of energy efficiency and emission reductions, establishing and improving the legal and institutional frameworks to tap into the CDM, assessing the potential of waste heat recovery in other industries in Bahrain, assessing the potential of other energy efficiency improvement projects in Bahrain, and assessing the potential CDM projects in different economic activities in Bahrain.

Key words: WHR, CDM, Bahrain, Energy Subsidies, Carbon Market.