Environment & Poverty Times


06 2009


Energy for a sustainable future


Energy for a sustainable future means fulfilling demand efficiently, drawing on renewable sources. It involves providing sustainable energy services and solutions, sometimes requiring off-grid solutions or the development of more effective technologies and infrastructures to optimize energy production and consumption.


Favela Cool against Global Warming By Christina Gradl and Aline Krämer


German appliance manufacturer BSH Bosch und Siemens Hausgeräte GmbH (BSH) has established a refrigerator replacement programme which provides fridges to the Brazilian poor for free – and makes a profit from it. How is this possible? The source of this unusual business model is legislation passed by the Brazilian government which requires that all energy providers in the country invest half a percent of their total turnover in energy-saving measures, and half of that in poor districts. To comply with this regulation, energy suppliers started to implement awareness-raising programmes about saving energy in shantytowns, or fave- las, exchanged light bulbs, and finally turned to the refrigerator as one of the household appliances consuming most energy.


Currently, about 38 million refrigerators in Brazilian homes are more than 10 years old, six million are even older than 20 years. “Some fridges don’t even have a door, because if you are stealing electricity anyway, you are not bothered about electricity consumption,” explains Dirk Hoffmann, BSH Senior Vice President for Growth Markets Sales. The old fridges use an average of 880 kilowatt hours per year, whereas the newest BSH fridges use no more than 180 kilowatt hours.


Through the fridge exchange programme, everybody benefits: poor households get a brand new appliance and, in addition, the household reduces energy consumption tremendously, and it becomes eligible for government programmes that subsidize the energy consumption of poor families up to 100kWh. Not only does the family get a free, legal connection, it also gets an energy bill that serves as proof of residence, opening the door to other social programmes. The utilities, in turn, increase their revenues by gaining new customers and by avoiding the huge transmission losses of around 30% caused by illegal tapping. And BSH sells more fridges.


There is another beneficiary: global society, threatened by climate change. Every fridge that is replaced saves on average 210 kilo- grams of CO2 emissions per year. Over the past year, BSH has already replaced over 80,000 refrigerators in the slums of Brazil- ian cities, cutting overall annual CO2 emis- sions by 12,800 tonnes. Recently, BSH has managed to capitalize on that by getting a methodology approved for generating carbon credits with the Clean Development Mecha- nism (CDM). And, although BSH recently sold its operations in Brazil, the methodology and model are viable and can be replicated anywhere in the world where conditions are appropriate. We interviewed Samuel Shiroff, who led this initiative for BSH.


Glossary


CDM: the Clean Development Mechanism is an arrangement under the Kyoto Protocol allowing industrialized countries with a greenhouse gas reduction commitment to invest in projects that reduce emissions in developing countries as an alternative to reductions in their own countries. CERs: Certified Emission Reductions are carbon credits issued by the CDM Executive Board for emission reductions achieved by CDM projects. VERs: Voluntary Emission Reductions are carbon credits produced outside a legal framework. CFC: Chloro Fluoro Carbons are chemicals composed of carbon, chlorine, and fluorine. They are used in the manufacture of aerosol sprays, blowing agents for foams and packing materials, as solvents, and as refrigerants. They cause depletion of the earth’s ozone layer and contribute heavily to global warming. HFC: Hydro Fluoro Carbons are chemicals composed of carbon, hydrogen and fluorine (no chlorine). They have no known effects on the ozone layer, but do contribute significantly to climate change, being up to 12,500 times as potent as carbon dioxide in global warming. They are targets of the Kyoto Protocol and a significant share of CERs are from HFCs


Interview with Samuel Neal Shiroff, Project Leader, BSH Bosch und Siemens Hausgeräte GmbH


Samuel Neal Shiroff is a director in the Growth Markets department at Bosch and Siemens Home Appliances Group located in Munich, Germany. Sam is responsible for developing and implementing the business models based on the Clean Development Mechanism (CDM) of the Kyoto Protocol. BSH is currently active in this area with its new technology “Protos” plant oil cooking stove, as well as with the replacement of very old refrigerators in the developing world.


Before joining BSH, Sam was the executive director of the Bellagio Forum for Sustain- able Development and represented Deutsche Bank’s investment in the Prototype Carbon Fund of the World Bank.


– How did the idea to access the carbon market with the fridge exchange programme originate?


– We first started working on this idea in the context of another project, the plant oil cooking stove Protos. This is a technology we are working on for developing countries. The customers there are often very poor. One of the ways that we were attempting to provide the product at a cost that can be affordable is through carbon credits. Through Protos we had established a good working relation- ship with the German Development Agency, GTZ; and in our conversations we started talking about other appliances – specifically refrigerators and potential carbon credits from electricity savings and from recycling refrigerators that contain HFCs.


– What role did GTZ play in the development of the carbon credit programme?


– GTZ is an equal partner in this public- private partnership which is really taking advantage of good synergies: we provide information, input and expertise as a refrig- erator manufacturer that is a global leader in energy efficiency and the GTZ provides expertise on CDM as well as other develop- ment-related issues. I think there is a lot of strength in this partnership.


– How are the carbon savings calculated?


– There are the two ways to generate CERs. First, carbon saved from increasing energy efficiency is calculated as follows: Old fridge energy usage minus new electricity usage times the emissions factor times the number of years. The difference in trans- mission losses is also included. Second, recycling refrigerators that contain HFCs generates credits for the amount of HFCs captured.


– What is the status quo regarding the safe disposal of old refrigerators in Brazil?


– At best, the gas from the compressor is removed during the recycling. The foam is simply left to emit whatever it contains. At worst, everything is just released to the atmosphere because people take the copper off the compressors to sell it. We are mov- ing forward to change that and establish processes through which all of the envi- ronmentally harmful gases are captured and destroyed.


– How much revenue could be generated from CFC capture?


– CFCs are not eligible for CERs because they are covered by the Montreal Protocol on substances that deplete the ozone layer, and thus not applicable for the Kyoto Protocol. Montreal currently provides no funding for the destruction of CFCs contained in old fridges. Thus these gases, which are extremely harmful for the ozone layer and the climate, are left to be released into the atmosphere because there is no incentive to capture them.


A typical Brazilian Favela. BSH.


We are hoping to change this incentive by generating voluntary credits for them. But prices on the voluntary market vary - credits are simply worth what a buyer is willing to pay for them. A refrigerator may contain CFCs worth the equivalent of 3 to 5 tonnes of CO2. To pay for the cost of recycling, the minimum price per tonne would need to be


A family in front of their new highly efficient fridge. BSH.


around €3 to €5. Clearly, the higher the price, the stronger will be the incentive to get these fridges disposed of in an environmentally responsible manner.


However, several additional issues compli- cate this area of carbon trading:


First, voluntary credits from CFC capture could really flood the market. A million fridges would suddenly generate 5 million voluntary credits, and that just from one part of Brazil. A large supply would lower the value of those credits and thus create a negative dynamic.


Second, unless a closed system comprising the entire life cycle exists, it will be unclear what gas is in the new fridge that inevitably replaced the old one. If it is an HFC, one gas with high global warming potential simply replaces another – which is far less desirable than using a climate-friendly coolant.


Third, if it becomes profitable to recycle CFC refrigerators in developing countries, this may be an incentive to ship fridges from the industrialized countries to developing countries to claim credits. This is obviously not a good idea.


– Who receives the revenues from the car- bon credit sales? BSH or the utilities that purchase the fridges, or both?


– From an efficiency viewpoint it makes more sense for BSH to be the entity that manages all relevant activities. If each indi- vidual energy company sets up its own CDM department and is managing its own refrig- erator exchange programme, the costs mul- tiply many times. If BSH does it throughout a country, it is simply more efficient.


However, we are an appliance manufacturer, not a carbon credit company, and therefore, we are very flexible. If the utility wants all the credits we have no problem with that. Obviously the costs and the risks need to be shared. It is simply a matter of negotiating the best way to share all of the benefits of the project.


– How predictable are savings from fridge replacements?


– With fridge replacements, there is very little if any real behaviour change. The only potential change is that customers may no longer unplug the fridge, because with much lower energy consumption, they can now afford continuous cooling. This makes exchanging refrigerators one of the most


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