Analysis of a CDM-PDD illustrated by the El Gallo project

ENDA TM / CDM-PDD 1

Analysis of a CDM-PDDillustrated by the El Gallo project

Second Regional Workshop on CD4CDM

16-18 August 2004

Maputo, Mozambique

Dr. Jean-Philippe Thomas

ENDA TM - Dakar

ENDA TM / CDM-PDD 2

Objective of the presentation

• To present the contents of a CDM-PDD

• To understand its connections

• To show a CDM-PDD demonstrative approach

• To develop its various steps with the

illustration of the El Gallo hydroelectric project

ENDA TM / CDM-PDD 3

CDM-PDD CONTENTS

• A. General description of project activity• B. Baseline methodology• C. Duration of the project activity/crediting

period• D. Monitoring methodology and plan• E. Calculations of GHG emissions by

sources• F. Environmental impacts• G. Stakeholders comments• Annexes

In bold : specific to « CDM » PDD

ENDA TM / CDM-PDD 4

A. General description of project activity

• A. 1,2,3 Title, description, participants,Technical Description, location

…• A.4.2 Category (ies) of project activity

UNFCCC CDM list• A.4.4 Brief explanation on how GHGs

by sources will be reduced by CDM

• A.4.5 Public funding

(no diversion of ODA)


ENDA TM / CDM-PDD 5

El Gallo Project

A 2. To generate renewable electricity using hydroelectric resources and to sell it the to Mexican consumer partners (industrial users and municipalities) on the basis of power purchase agreements (PPAs) using ‘Comision federal de Electricidad transmission system’ to wheel the energy.

30 MW power plant at the existing dam of El Gallo

ENDA TM / CDM-PDD 6

El Gallo project

A.4.2 Category (ies) of project activity :

No listed under UNFCCC CDMNew category : « Renewable electric generation in grid connected applications

A.4.4 Brief explanation of how GHGs by sources are to be reduced by this CDM activity

Summary of of methodology in section B.2

ENDA TM / CDM-PDD 7

El Gallo project

• A.4.5 Public funding

No public funding no diversion of ODA

ENDA TM / CDM-PDD 8

Reminder : Contents of PDD

• A. General description of project activity B. Baseline methodology• C. Duration of the project activity/crediting


sources• F. Environmental impacts• G. Stakeholders comments• Annex


ENDA TM / CDM-PDD 9

B. CDM-PPD BASELINE METHODOLOGY

• B.1 Title and reference of the methodology applied

- UNFCCC reference list

- New baseline methodology Annex Variety of approaches to determine whether

« the project activity is additional and therefore not the baseline scenario»

ENDA TM / CDM-PDD 10

CDM Project Proponent

Potential Options for the Society

Intention to do the CDM project activity

(wind farm, bagasse fueled cogeneration, …)

Effective implementation and viable operation of the

CDM activity

Demonstration that the project will not be implemented spontaneously by the proponent (barriers, IRR not attractive, cannot be competitive,…)and needs CDM to happen

Comparative analysis of different options/scenarios in absence of

CDM (IRR, barriers, etc.),

including the proposed CDM activity

The proposed CDM activity is not rated first, other option(s)/scenario

will credibly be preferred / be most

probable

Nobody is likely to undertake a project similar to the proposed CDM activity in the absence of CDM, and proposed activity emits less than Baseline

Additionality of proposed CDM project clearly established

Supply Side Analysis Demand Side AnalysisAND

Most probable = Baseline Baseline emissions calculation


El Gallo :a new baseline methodology

• B.1 Baseline methodology: ‘’Barriers analysis, baseline scenario development and baseline emission rate, using combined margin- for small grid-connected zero emission renewable electricity’’

• Two elements:1. Additionality 2. Baseline scenario/baseline emission rate


M1. El Gallo (a) argument (b)overcome barrier

P1 Additionality (financing)

(barrier analysis)

M2. General context : argument / overcome barrier

M3 (a) definite and calculate : BER ex ante

P2 Baseline scenario

/ Baseline Emis. Rate

M3 (b) justify conservatism : ex post monitoring to update BER

Methodology application : various steps


B.2 Justification of the baseline methodology & its application to the p.a.

• B.2 Renewable is disadvantged

• Prohibitive barrier to secure financing

Applicable method:- Sufficient informations to demonstrate

prohibitive barriers; not a common practice!- El Gallo will displace electricity


B.3 Description of how the methodology is applied in the context of p.a.

• Part 1. Additionality is based on a barrier analysis, relevant arguments :- M1. In the specific El Gallo context- M2. In the general context of the Mexican

Electricity Sector

• Part 2. A justification of the baseline scenario with a transparent and conservative emission rate is carried out


Part. 1 M1 Relevant barriers in the context of El Gallo

(a) Difficulty in procuring financing :- Access to financing : high interest rates, short

loan terms, difficulty to access to international financial markets

- Perceived technological risks : large amount of large scale hydro and conventional fossil techno. Increase risks for sma\ll-scale/RE

- Transaction costs : are high for low capacity renewables opportunities


(b) How a CDM activity would enable to overcome the identified barriers ?

• Involvement of WB (PCF) as purchaser of e.r. to overcome the financing barrier

• Sale of CO2 emissions generates a more secure revenue (hard currency) than electricity sales (local currency)


M.2 Additionality : arguments in the context of the Mexican Electric Sector

• Since 10 years, independant production is streamlined

• 200 permits were granted

• 15 permits small hydro financing barrier

• 7 are in operation industrial firms (for internal consumption)

• El Gallo = 7 projects (45millions$)


Part 2. Baseline Emission Rate - BERStep M3 (a) Define and calculate

• Operating margin : affecting the operation of power plants on the grid (0,764)

• Build margin : avoiding the construction of future power plants (0,404)

• BER (tCO2/MWh) = average (oper. margin and build margin) = 0,584

• See table


Part 2. Step M3 (b) : Justification of the conservatism of the baseline methodology

It provides a transparent and conservative estimate for the base emission rate =>

Ex ante value for the emissions baseline

Ex post monitoring to update BER (yearly)


B.4 How and why this project is additional, not the baseline scenario

• B.4 :

- Part 1. Project would not occur without CDM funding

- Part 2. Shows emission rate of the displaced electricity is higher than emissions of the p.a.


B.5 Description of how the definition of the project boundary related to the baseline is

applied to project activity

• EL GALLO : PROJECT BOUNDARY

Geographic and sytem boundary of electric grid : Mexico’s national borders


Project Boundary:

Emissions under control of project developer

Alternative options/scenarios

ex: new grid connected thermal plants

Frequently :Spatial Scope for the Analysis of alternative Options/Scenariosis wider than Project Boundary:

Ex: National Grid, …

Sometimes :Alternative options are purely internal to the project: Ex: low pressure OR high pressure boilers, flaring OR not flaring landfill gas,…

Project Boundary: Emissions under control of

project developer

Spatial Scope for the Analysis of Alternative Options/Scenarios is equal to Project Boundary

Project


B.6 Details on baseline developments

• B.6- Date of completing the final draft of this

baseline section

7 Septembre 2003- Name of person/entity determining the

baseline

….Tellus Insitute…….

…..Prototype Carbon Fund, ….


Reminder : PDD contents

• A. General description of project activity• B. Baseline methodology C. Duration of the project activity/crediting



In bold : specific « CDM » PDD


C. Duration of the project activity /Crediting period

• C.1 Duration of project activity :

- starting date, (01/05/05)

- operational lifetime, (25 y.)

• C.2 crediting period :

- starting date of the first crediting period,

(01/05/05)

- lenght (7 y.)




period D. Monitoring methodology and plan• E. Calculations of GHG emissions by




D. Monitoring Methodology and Plan

• CDM-PPD: Detailed information related to the collection and archiving all relevant data with:

• D1 Name and reference of approved methodology applied to the project activity

D.1 « Methodology for ex post monitoring of

electricity generation and its impacts on

emissions… »


D.2 Justification of the methodology and why it is applicable to the p.a.

• D.2 : Appropriate because it is used in conjunction with the baseline scenario


D. CDM-PPD : Monitoring• D.3 data to be collected and archived• D.4 Potential sources of emissions attributed to

the p.a., collected and archived• D.5 relevant data necessary for determining the

baseline• D.6 Quality control and quality assurance for

data monitored• D.7 Name…determining the monitoring

methodology


D. El Gallo

• D.3 No emissions

• D.4 No sources of emissions were identified

• D.5 Data type / unit / measured / frequency/How archived / for how long

• D.6 For auditing and verificationData type / uncertainty / QA/QC procedures ? / Why plan

or not

• D.7 Name person/entity




period• D. Monitoring methodology and plan E. Calculations of GHG emissions by


In bold : specific « CDM » PDD


E. Calculation of GHG emissions by sources

• E.1 Description of formulae used to estimate emissions (project activity)

• E.2 Description of formulae used to estimate leakage

• E.3 : E1 + E2 = p.a. emissions• E.4 Description of formulae used to

estimate emissions of baseline• E.5: E4 – E3 = emission reductions p.a.• E.6 : table


E. El Gallo project• E.1 No formulae for calculations of direct emissions• E.2 No formulae for estimating leakage• E.3 Sum is zero• E.4 Baseline emissions :

• E.5 Idem E4• E.6 See table

Monitoring generation output (MWh) X baseline emission rate (tCO2)120,668 MWh X 0,584 tCO2/MWHNet annual reductions = 70,484 tCO2 21 year crediting period : 1, 480, 157 tCO2




period• D. Monitoring methodology and plan• E. Calculations of GHG emissions by sources F. Environmental impacts G. Stakeholders comments• Annex



F. EL Gallo Environmental impacts

,

Exhibit A of CDM-PPD- Areas of potential impacts : Flora and fauna, hydrology

- Impacts : water quality and quantity, biodiversity, construction, cultural heritage

- Environmental management plan proposed


El Gallo: Stakeholders comments

• G.1 Brief description of the process on how stakeholders have been invited and comments compiled

• G.2 Summary of the commennts

• G.3 Report on how due account was taken of all comments received


Annexes

• 1. Contact information on participants in project activity

• 2. Information regarding public funding

• 3. Baseline information

• 4. Monitoring plan


PDD contents


period• D. Monitoring methodology and plan• E. Calculations of GHG emissions by sources• F. Environmental impacts• G. Stakeholders comments• Annexes



ENDA TM Environnement et Développement du Tiers Monde

[email protected]://www.enda.sn

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Analysis of a CDM-PDD illustrated by the El Gallo project

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