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El Gallo Hydroelectricity Project PDD Analysis

El Gallo Hydroelectricity Project PDD Analysis. Project Description. Project Description. Social and Environmental Benefits. Social and Environmental Benefits. Finance. Baseline Methodology. Prohibitive barriers to securing financing: high interest rates of Mexican financial markets

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El Gallo Hydroelectricity Project PDD Analysis

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  1. El Gallo Hydroelectricity ProjectPDD Analysis

  2. Project Description

  3. Project Description

  4. Social and Environmental Benefits

  5. Social and Environmental Benefits

  6. Finance

  7. Baseline Methodology • Prohibitive barriers to securing financing: • high interest rates of Mexican financial markets • perceived technology risk (El Gallo is a small hydro by a private developer) • transaction and development costs of small project • Registration as a CDM project with World Bank backing would overcome those barriers (credibility and creditworthiness) • Sale of CO2 is more secured than that of electricity to customers with low creditworthiness (US$ 270,000 per year out of US $7.7 million per year)

  8. Baseline Emission Rates • Displacement of electricity that would otherwise be provided by the expansion of the grid • Emissions from a technology that represents an economically attractive course of action, taking into account investment barriers • Baseline emissions are the average of the approximate operating margin and the build margin (as in the methodology defined for small-scale projects)

  9. Baseline Emission Rates • Baseline emissions are the average of the approximate operating margin and the build margin (as in the methodology defined for small-scale projects) • operating margin is the weighted average emissions of all generating sources serving the system, excluding hydro, geothermal, wind, low-cost biomass, nuclear and solar • build margin is the weighted average emissions of recent capacity additions to the system, defined as the lower of most recent 20% of plants built or the 5 most recent plants.

  10. Project Boundary and Leakage • Geographic and system boundary of electric grid: power projects that feed into the Mexican grid can be established almost anywhere in the country. • Potential leakages mainly related to plant construction, fuel handling and land inundation are not considered by the baseline methodology.

  11. Expert Reviewers Comments • The methodology is valid as the project is a relatively minor addition to the grid. • The PDD should consider undertaking an analysis showing that the project is not a least cost option and therefore not part of the baseline scenario. • Some barriers identified in the PDD are debatable: • perceived technology risk: risk is low as the technology is widely known in Latin America. • Meth Panel Recommendation: approval with minor changes

  12. Public Comments • The PDD uses the small-scale baseline methodology, yet its capacity exceeds 15MW. • Most developing countries face similar difficulties in securing financing for their hydropower projects. Approving the PDD would make any kind of hydropower project, including large ones in China and India, eligible for CDM.

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