CDM Type Micro-hydro Projects: A Case Study National Workshop on Capacity Development for the Clean Development Mechanism (CDM) Eugenio Lopez Conference Center December 9, 2002 Grace S. Yeneza Preferred Energy Inc.

Clean Development Mechanism Will be driven by the availability of developing country projects operating below the “baselines” Will be a “competitive” process Offers an excellent opportunity for Philippines to fund projects for sustainable development

Technical Requirements for CDM Baseline Study Mitigation Analysis Company to commission and pay for a baseline study, in accordance with Kyoto Protocol requirements Company to prepare Project Concept Note showing “with Project scenario” and estimated emissions reduction benefits Review of proposals by an investment banker for the buyers (fee range-10 to 15% of CER value).

Technical Requirements for CDM Validation/verification Preparation of Monitoring Plan by qualified consultants, Operational Entity ("OE") to validate the Emission Reduction component of the Project Buyer commissions an appraisal and due diligence at a level determined by the CDM.

Technical Requirements for CDM Certification Prepare and submit a Project Design Document ("PDD") (with "Letter of Approval" from GOP Project Company requests the GOP to submit to the CDM Executive Board a request for registration of the Project

Micro-hydro Projects Basically Small (up to 100kW) Villa Escudero – 98 kW Tulgao, Kalinga - 30 kW Balbalasang MHP – 25 kW Lon-Oy MHP – 20 kW Caguyen, Licuan Baay, Abra - 7kW Buneg, Nabuanagan, Apayao- 5 kW A 100-kW micro-hydro = tCO2 e/yr Most are community-owned and operated, for community use Dispersed & implemented in remote areas

Examples of CDM Projects Undergoing Evaluation Caribbean wind farm project: -20 MW electricity output -50,000 t CO 2 emission reductions per year (for 10 years) -Project costs: US$20m (+) -Carbon value US/tonne CO 2 e = $1.72m US US/tonne CO 2 e = $2.87m US SE Asia waste to energy project: -2 MW electricity output -50,000 t CO 2 e (+) emissions reductions per year(for 10 years) -Project costs: US$3.5m -Carbon value US/tonne CO 2 e = $1.72m US US/tonne CO 2 e = $2.87m US It will take about units 100-kW microhydros to attain significant CER to attract CDM

Challenges/Hurdles to Overcome GOP approval process Current Technical Requirements Capacity building What CDM is all about How to do baselines How to capture value of benefits How to prepare required documentation Financing Project Aggregation; identify organizations to do aggregation

Recommendations Pro-active government that is project development-oriented Systems and approval procedures must be clear & easy to comply with Lobby for “ Fast-track” mechanism for approval/certification of small scale projects Small scale projects must be viewed from the developmental perspective and not only from its carbon mitigation potential

Recommendations Establish an entity to develop top down baselines for small scale projects Even now, start a quasi-CDM program within DENR Provide access to financing by small projects Focus capacity building and support on developing real project developers