MRT Energy Efficiencies Model for ERP

Proposed Structure of this Public Private Partnership (PPP) Model

The project will be leveraging an Existing-Refurbish- User-Tariffs model. This will involve the state- owned entity with the existing mandate to operate the mass transit system to improve the energy efficiency of its current assets through refurbishment. The private company engaged to install the technology will be provided financing by the state-owned entity to undertake the refurbishment activities.

Table 1: Model Attributes

Proposed risk allocation of the Public Private Partnership Model

Key features of PPP structure

• Private sector entity supports with the design and build of retrofitting public transport system with lower emissions technology via a contractual agreement with the ministry/ government entity
• The government or state-owned entity acts as the implementation partner, and is responsible for all activities related to the implementation, management, monitoring and reporting of the project over the project’s lifetime
• The government or state-owned entity earns fees from public transport use by end users as well as any additional revenue upside from the emission reduction credit (ERC) generation
• Potential to include financiers in this PPP structure in exchange for a portion of the ERC revenues earned in this project

Key considerations/risks for proposed project

• Extensive stakeholder engagement required to ensure buy-in from operators of public transport as well as any other relevant stakeholders
• Close coordination needed between the government or state-owned entity operating the mass transit line and the private sector entity installing the new technology to ensure benefit sharing is aligned and that the project is financially viable for both
• Partnering with a service provider for the project’s marketing, sales and pricing is needed to identify potential offset buyers, negotiate contracts, and secure good target price per tonne to enable the financial viability of ERC generation
• Contracting a monitoring, verification and reporting (MRV) service provider with experience in conducting MRV and preparing the necessary documents for generating ERCs in a voluntary carbon market standard will reduce risk of registration and issuance delays or bottlenecks, and strengthen credibility of project’s carbon integrity quality

Figure 1: Financing and Activity Flows for the Model

Case Study: Installation of Low Greenhouse Gases (GHG) Emitting Rolling Stock Cars in Metro System, India

Project description

The Delhi Metro Rail project uses low GHG emitting rolling stocks with regenerative braking technology to conserve electrical energy and reduce GHG emissions. Conventional electro- dynamic rheostatic braking technology is replaced with regenerative braking technology in the rolling stocks. This system uses 3 phase AC traction motors and consists of two units each with a Driving Trailer car and a Motor Car. The regenerative braking system generates electrical energy by converting the kinetic energy of decelerating rolling stock, reducing the consumption of grid electrical energy and subsequent GHG emissions.

The project involves installing these low GHG emitting rolling stocks in 3 service lines which are Shahdara-Rithala; Vishva Vidyalaya-Central Sectt.; and Indraprastha-Dwarka-Sub City. These lines are expected to serve an estimated 2,182,000 passengers on a daily basis.

Targeted results

Expected annual ERCs generated from the program will be 41,160 tonnes.

Figure 2: Structure of Case Study PPP

The project is partly financed by the Government of Japan through Japan Carbon Finance Ltd. Mitsubishi Electric fulfilled orders for energy-efficient electric subway equipment from the Delhi Metro Corporation, which included locomotive products equipped with electric power generating brake systems. Overall project management and execution was by the Delhi Metro Corporation.

Summary of the Model Financials

Assuming a similar project scale, context and arrangements as in the case study of installing rolling stocks in a metro system that serves an estimated 2 million (M) passengers, the project’s Net Present Value (NPV) without ERC in- and outflows – only considering non-ERC inflows through other revenue streams or cost savings enabled by the project – is positive at $15.5M¹. With ERC cashflows, the total project will have a greater positive NPV of $16M, which makes these types of mass rail transit systems projects more financially attractive. The revenues generated from ERCs helped to provide additional justification to pursue the project despite its high upfront capital expenditure.

Table 2: Summary of sources of inflows and outflows and key assumptions

Table 3: Net cashflows summary (in USD)

Footnote 1: All prices are expressed in United States Dollars (USD)