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

Analysis of a CDM-PDD illustrated by the El Gallo project. Second Regional Workshop on CD4CDM 16-18 August 2004 Maputo, Mozambique Dr. Jean-Philippe Thomas ENDA TM - Dakar. Objective of the presentation. To present the contents of a CDM-PDD To understand its connections

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

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  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) In bold : specific to « CDM » PDD 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 CDM New 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 period • D. Monitoring methodology and plan • E. Calculations of GHG emissions by sources • F. Environmental impacts • G. Stakeholders comments • Annex In bold : specific to « CDM » PDD 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. AND Supply Side Analysis Demand Side Analysis CDM Project Proponent Potential Options for the Society Intention to do the CDM project activity (wind farm, bagasse fueled cogeneration, …) Comparative analysis of different options/scenarios in absence of CDM (IRR, barriers, etc.), including the proposed 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 The proposed CDM activity is not rated first, other option(s)/scenario will credibly be preferred / be most probable Most probable = Baseline Baseline emissions calculation Effective implementation and viable operation of the CDM activity 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 ENDA TM / CDM-PDD Additionality of proposed CDM project clearly established

  11. 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: • Additionality • Baseline scenario/baseline emission rate ENDA TM / CDM-PDD

  12. Methodology application : various steps 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 ENDA TM / CDM-PDD

  13. 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 ENDA TM / CDM-PDD

  14. 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 ENDA TM / CDM-PDD

  15. 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 ENDA TM / CDM-PDD

  16. (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) ENDA TM / CDM-PDD

  17. 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$) ENDA TM / CDM-PDD

  18. 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 ENDA TM / CDM-PDD

  19. 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) ENDA TM / CDM-PDD

  20. 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. ENDA TM / CDM-PDD

  21. 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 ENDA TM / CDM-PDD

  22. Alternative options/scenariosex: new grid connected thermal plants Project Boundary: Emissions under control of project developer 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 Spatial Scope for the Analysis of Alternative Options/Scenarios is equal to Project Boundary Project Boundary: Emissions under control of project developer ENDA TM / CDM-PDD

  23. 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, …. ENDA TM / CDM-PDD

  24. Reminder : 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 • Annex In bold : specific « CDM » PDD ENDA TM / CDM-PDD

  25. 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.) ENDA TM / CDM-PDD

  26. Reminder : 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 • Annex In bold : specific to « CDM » PDD ENDA TM / CDM-PDD

  27. 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… » ENDA TM / CDM-PDD

  28. 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 ENDA TM / CDM-PDD

  29. 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 ENDA TM / CDM-PDD

  30. 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 verification Data type / uncertainty / QA/QC procedures ? / Why plan or not • D.7 Name person/entity ENDA TM / CDM-PDD

  31. Reminder : 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 • Annex In bold : specific « CDM » PDD ENDA TM / CDM-PDD

  32. 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 ENDA TM / CDM-PDD

  33. 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/MWH Net annual reductions = 70,484 tCO2 21 year crediting period : 1, 480, 157 tCO2 ENDA TM / CDM-PDD

  34. Reminder : 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 • Annex In bold : specific to « CDM » PDD ENDA TM / CDM-PDD

  35. 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 ENDA TM / CDM-PDD

  36. 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 ENDA TM / CDM-PDD

  37. Annexes • 1. Contact information on participants in project activity • 2. Information regarding public funding • 3. Baseline information • 4. Monitoring plan ENDA TM / CDM-PDD

  38. 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

  39. ENDA TM Environnement et Développement du Tiers Monde energy2@enda.sn http://www.enda.sn ENDA TM / CDM-PDD

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