copy the linklink copied!Annex B. Explanatory guide for using the OPTIC Model
copy the linklink copied!Purpose of the OPTIC Model
The spreadsheet-based Optimising Public Transport Investment Costs (OPTIC) Model is a simple, easy-to-use decision support tool prepared by the OECD to support the Government of Kyrgyzstan in preparing and estimating the costs and environmental benefits of the Clean Public Transport (CPT) Programme. It was used in particular for costing the replacement of the old bus fleet in urban centres with modern buses equipped with engines that run on:
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compressed natural gas (CNG)
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liquefied petroleum gas (LPG)
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diesel, ideally (imported) Euro 5 fuel
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electricity (trolleybuses and battery-powered trolleybuses)
The OPTIC Model was used to estimate programme costs, and the emission reductions of carbon dioxide (CO2) and other pollutants from urban public transport – i.e. carbon monoxide (CO), nitrogen oxides (NOx), particulate matter (PM) and sulphur dioxide (SO2) – that could potentially be achieved by implementing the proposed project pipelines.
Similar models that exist on the market estimate the greenhouse gas (GHG) emission reductions for a country or for groups of countries. These models mainly focus on GHG emissions from industry and take into account various scenarios for the country’s economic development. Such models, however, are not particularly suitable for this investment programme, which focuses on reducing emissions from urban public transport only.
copy the linklink copied!Preparations for using the OPTIC Model
The OPTIC Model consists of seven modules: 1) assumptions; 2) emission factors; 3) transport sector overview with information on current bus fleet and age; 4) determining the subsidy level; 5) cost calculation; 6) emission reductions calculation; and 7) programme costing and environmental effects.
Assumptions
The model has been prepared in Excel and uses macros. Therefore, when starting the model, the macros in Excel should be enabled. This requires setting the security settings to "medium". For earlier versions of Excel (before 2010), security settings can be changed using the following commands: Tools>Macros>Security. For Excel 2010 and 2013, the macro security settings can be set in the "Developer" tab. If the Developer tab is not visible, it can be accessed by going to: File>Options>Customize Ribbon and then selecting “Developer” from the options in the right-hand window.
The user needs to fill in the cells that are highlighted yellow in the Excel sheets. Then these steps should be followed:
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1. Complete the information on assumptions and emission factors. Assumptions can be found under the “Assumptions” tab. The following information is essential for the model:
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the average price of a new CNG bus
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the average price of a new LPG bus
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the average price of a new diesel bus equipped with a Euro VI engine
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the average price of a new trolleybus
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the average price of a new CNG minibus
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the average price of a new LPG minibus
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the average price of a new diesel minibus equipped with a Euro VI engine.
For the purpose of this model, the average bus is understood to be a 10-metre-long bus with a total capacity of about 100 passengers.
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1. Input the average level of fuel consumption for each type of bus listed above. This information should also be provided for old diesel buses that will be replaced. For the purpose of the model, old diesel buses are divided into several categories: new and more than 5, 10 and 15 years old.
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2. Input fuel costs for each type of bus. The average kilometres per vehicle per day (kpvpd) 1, which is found in the last column in Table B.1, is essential.
Emissions factors
After inputting information on the basic assumptions, next the user inputs information on emissions from buses. This can be found under the “Emission factors” tab. The emissions will be identified in kilograms or grams of the emitted pollutant per kilometre of bus operation. The information on emissions is key for calculating emission reductions (Table B.2).
There are two tables containing emission factors:
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normative emissions according to the standards
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real emissions according to actually measured emissions
The source of information and the reason for providing two different sets of emission factors are discussed at the end of this annex.
Transport sector overview
Next, the information on the existing urban public sector in Moldova needs to be provided under the “Transport” tab (Table B.3). This is done by providing information on the existing bus fleet in Moldova. The fleet will be divided by bus type. The last two columns contain information on the availability of CNG stations. This information is provided by entering “Yes” or “No” into the respective cells.
Determining the subsidy level
The module on determining the subsidy level takes into account both the investment costs and savings for public service providers by replacing old buses. New buses using alternative fuels are more efficient because of technological improvements and also due to the lower price of CNG and LPG fuels compared to diesel.
The module takes into account the fact that the investments should generate at least a minimum return for public transport providers; thus, the social discount rate is used to determine the net present value (NPV) of the project. The subsidy is then determined at the level at which NPV is equal to zero (see Box B.1). The economic significance of this calculation is that the subsidy will encourage potential beneficiaries to participate in the CPT Programme without encouraging the beneficiary to make a profit based on the subsidy. The various calculations required to establish the subsidy level for CNG buses are presented in Table B.4 and Table B.5.
The subsidy should be sufficient to attract potential investors/beneficiaries to apply for support from the CPT Programme, but without making the projects too profitable. This approach to calculating the subsidy will enable the government to avoid over-investing, while at the same time provide an investment incentive for potential beneficiaries without making it too profitable for them as investors. Essentially, the subsidy level should provide just the necessary leverage for individual potential beneficiaries to invest in clean transport.
In order to evaluate a given project, the net present value (NPV) is calculated by totalling the expected net cash flows (cash inflows, or receipts, minus cash outflows, or expenses) over the project operating period and discounting them using a rate that reflects the costs of a loan of equivalent risk on the capital market. An investment will yield a profit if the NPV is positive. All measures that yield a positive NPV using a discount rate that corresponds to the applied rate of return can be deemed beneficial.
The NPV is calculated as in the following formula:
where:
- NCFi is the net cash flow in the i-th year
- r is the discount rate.
Using discounting considers two factors: the investor’s expectations with respect to the measure and that the NPV can be greater than zero during the operating period.
The calculation of the subsidy level should be based on economic principles. If the project is socially significant rather than profitable for the beneficiary, the subsidy should make a small amount of profit. In simple terms, the financial NPV including the subsidy should be approximately at the level of zero KGS, which means that the project yields an acceptable rate of return for the investor/project promoter (revenues from fares combined with lower operating costs).
The “determination of the subsidy level” module uses this principle by making a simple financial analysis of the cash inflows and outflows in each year of the analysis. Cash inflows (receipts) generated by the project include fuel savings expressed in terms of the money saved by customers (public transport providers). In terms of cash outflows (expenses), the simple financial analysis totals the difference between the investment costs of a clean and a traditional bus calculated in the other modules. In the subsidy module, the subsidy is included on the cash outflow side as a negative value.
It was assumed that the investments will be made during the first year of the project and the savings averaged over the nine years of operation. The period of analysis is 10 years, a typical lifetime for this type of project. The subsidy is calculated so that the result of the NPV calculation is equal to zero KGS.
First, the savings on fuel costs were calculated, given the lower price of CNG. The parameters used to calculate fuel savings are presented in Table B.4.
The cost of a new CNG bus (EUR 255 000; MDL 5.2 million) was compared with the average cost of a used bus (MDL 1.04 million), which beneficiaries would have been likely to purchase in the absence of public support (Table B.5).
Similar calculations are made for LPG buses (Table B.6 and Table B.7) and for modern diesel buses (Table B.8 and Table B.9).
The above calculations do not take into account possible reduced maintenance costs, as old buses tend to require more maintenance over time. On the other hand, the maintenance of modern technologies can be is more expensive, especially in terms of security concerns in using CNG or LPG, so it is assumed that bus replacement will be neutral in terms of maintenance costs.
The results of the calculation are presented in the "Subsidy" tab (Table B.10).
Cost calculation
The cost calculation module under the tab "Costs" shows the estimated investment costs and the subsidy required by the CPT Programme. This information is provided in a table format that contains data on public transport in Moldova, the number of buses to be replaced, the type of new buses, total investment costs, the level of subsidy and the net costs to beneficiaries. In this module, users simply input factual information without making any decisions on the programme.
Emission reductions calculation
The emission reductions calculation module, under the tab "Emissions", shows the estimated annual emission reduction by type of pollutant. This information is provided in an Excel table (Table B.12) that contains data on transport sector in Moldova, the number of buses to be replaced, the type of new buses, the emissions from old buses, emissions from new buses, and emission reduction. In this module, users simply input the factual information without making decisions on the CPT Programme.
Programme costing and environmental effects
The CPT Programme costing and environmental effects module is under the tab “Decision”. This is the main module for supporting decision making. It can be used for the automatic calculation of the programme costs as well as for manual adjustments.
The upper part of the screen contains the information on the programme target. Users may define one of the following programme targets:
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investment costs
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subsidy budget (amount of funding available for subsidies)
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CO2 emission reduction
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CO emission reduction
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NOx emission reduction
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PM2.5 emission reduction
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SO2 emission reduction.
By clicking on the “Go” button to the right of the respective target (Table B.13), the model calculates the programme financial envelope necessary to achieve the target, for that target only, excluding the other targets.
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Table B.12. Adjusting programme costs and environmental effects
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Source: OECD, OPTIC Model. |
The algorithm for the programme cost calculation is as follows:
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The model reviews the information on public transport for each city, in the order provided in the table in the “Transport” tab. The review is done in three iterations, starting from the urban centres and then respectively for suburban and inter-city connections.
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First, the model determines whether the city has any potential for CNG buses; if so, the model proposes the replacement of an old bus by a CNG bus.
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Then, the previous step is repeated until the target is reached or all old buses in a given iteration are replaced.
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If the city does not have the potential for CNG buses, the model completes the same steps with Euro VI diesel buses.
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If the city lacks the potential for either CNG or Euro VI diesel buses, the model proceeds through the same steps with LPG buses.
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The costs of CNG stations are also taken into account. If the number of buses replaced is higher than 100, it is assumed that a CNG station is a commercial project and a subsidy is not required. Existing CNG stations in Bishkek and Osh are taken into account.
The results are presented in an Excel table (Table B.14) that contains basic information on the number of new buses, investment costs, subsidies and emission reductions per year. If users want to see details, the “Emissions” or “Costs” tabs should be used (described earlier).
Users may change the project pipelines by providing their own information on the number of new buses. Then the calculations are updated accordingly.
copy the linklink copied!Programme costing for Phase 1 (pilot phase) and Phase 2 (scaling-up phase)
In the spreadsheet titled “Programme targets”, (Table B.15) users may define whether the calculation is being done for the pilot phase (Phase 1), which covers only two cities, or for Phase 1 and 2. The user may also define whether normative or real emission factors are used in the calculation. The third parameter defined by the user is the scenario for Phase 2, which may be as follows:
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Scenario 1: Replacement of oldest buses (those remaining after Phase 1) operating in urban/suburban areas of the pilot cities.
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Scenario 2: Replacement of the buses as in Scenario 1, as well as those operating inter-city connections (which covers urban/suburban transport in other cities).
By clicking on the “Go” button to the right of the defined scenario, the model calculates the programme costs and emission reductions. The targets are thus ignored.1
copy the linklink copied!Sources of information used in the assumptions
The current version of the model uses information from different sources, both Moldovan and international. This section describes the sources of information for each assumption used:
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Data on urban public transport (number of buses, fuel type and age) were provided by the cities of Chisinau and Balti, the National Agency of Road Transport (ANTA), the Ministry of Transport and Roads Infrastructure (since September 2017, within the Ministry of Economy and Infrastructure), and the Ministry of Environment (since September 2017, part of the Ministry of Agriculture, Regional Development and Environment), as well as by private minibus operators in Chisinau and Balti.
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The average prices of buses were obtained from estimates from European Bank for Reconstruction and Development (EBRD) tenders, municipal tenders, statements of bus and minibus operators in questionnaires, and market research on the internet.
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The fuel prices were obtained from market research on the main distribution companies on the internet and in particular the national regulator ANRE.
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Fuel consumption was calculated by reviewing technical information of bus producers and several bus utilities introducing new buses (Der Betrieb mit Flüssiggas als Alternative zum Dieselantrieb/(Operating with LPG as an alternative to diesel propulsion);2 Cost and Benefits of Clean Technologies for Bus Rapid Transit (BRT): Summary of Results for Kampala (ICCT, 2012[6]); Comparison of Modern CNG, Diesel and Diesel Hybrid-Electric Transit Buses: Efficiency and Environmental Performance (MJB&A, 2013[7]); CNG vs. Diesel Bus Comparison; Infrastructure for Alternative Fuels (European Expert Group on Future Transport Fuels, 2011[8]) 3 and A Realistic View of CNG Vehicles in the US (Nath R. et al, 2014[9]).
Emission factors
The emission factors were taken from:
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The section on “Exhaust Emissions of European Monitoring and Evaluation Programme” in the European Environment Agency (EEA) Air Pollution Emission Inventory Guidebook 2013; Technical Guidance to Prepare National Emission Inventories (EEA, 2016[10]).
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Euro II-VI emission standards.
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Euro II-V fuel standards (for SO2).
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The revised 1996 Intergovernmental Panel on Climate Change (IPCC) Guidelines for National Greenhouse Gas Inventories, Vol. 3: The Reference Manual (IPCC, 1996[11]).
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The Emissions Factors Toolkit (EFT) published by Defra and the Devolved Administrations (Defra and the Devolved Administrations, 2017[12]).
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For electricity, the CO2 Emission factor & transmission and distribution loss factor provided in the U4E Country report: http://united4efficiency.org/wp-content/uploads/2017/05/MDA_U4E-Country-Assessment-Report.pdf.
The various emission standards used in the calculations are provided in Table B.16. They are practically entirely based on the European emission regulations for new heavy-duty diesel engines, commonly referred to as Euro I-VI.
Similarly, the EU fuel standards for sulphur content for Euro 2-5, used in the calculations, are provided in Table B.16.
On the other hand, the estimated CO2 emission factors for a number of pollutants emitted by European heavy-duty diesel vehicles come from the Revised 1996 IPCC Guidelines for National Greenhouse Gas Inventories and its Reference Manual (IPCC, 1996[11]) (Table B.18).
The current norms for air pollution and CO2 emissions can be taken from the EMEP/EEA Air Pollution Emission Inventory Guidebook 2016 (EEA, 2016[10]). Table B.19 presents the Tier 1 approach to measuring exhaust emissions (explained in the source document for the table).
The EME/EEA Air Pollution Emission Inventory Guidebook 2016 is also used as a source for estimating the CO2 emission factors for different fuels used in operating heavy-duty vehicles (Table B.20).
A couple of sources were used for fuel consumption values used in the model, combined with the authors’ own assumptions, particularly for LPG consumption volumes (Table B.21).
It was assumed that the emission factors for old engines are the same as for a new one. However, in new engines energy efficiency is higher and fuel consumption 10% lower than in buses more than 5 years old, 15% lower than buses of more than 10 years old, and 25% lower than buses of more than 15 years old.
The specific emission factors used in the model are provided in Table B.2 above. The emission factors presented in Table B.2, however, are based on maximum levels, according to specific norms. The real emissions may vary, mainly because normative emissions are tested in laboratory conditions and not in actual traffic. This is a concern primarily in the case of diesel engines, where emission reduction depends on the installed emission reduction equipment. In the case of CNG and LPG, emissions are less problematic, because lower emissions are mainly the result of using cleaner fuels.
In 2014, the ICCT issued a report on real-world exhaust emissions from modern diesel cars presenting measurements of real emissions. The analysis showed that real-world emissions of CO2 and NOx are higher than the limits (respective Euro norms) – by an average of 40% and 70%, respectively (Franco et al., 2014[15]).
Note: The “window” represents a sample.
Source: (Franco et al., 2014[15]).
Thus, the model also offers an alternative set of emission factors taking into account the fact that real emissions may exceed normative ones. Table B.21. presents the real emission factors used in the model.
The user can change both normative and real emission factors according to modelling needs.
Notes
← 1. The model assumes that an average bus operates 330 days per year.
← 2. For information on CNG vehicles, see www.erdgasautos.at (in German).
← 3. See www.bus.man.eu/cng_optimizer/index.html (accessed 25 February 2017).
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