ENDA TM / CDM-PDD1 Analysis of a CDM-PDD illustrated by the El Gallo project Second Regional Workshop on CD4CDM August 2004 Maputo, Mozambique Dr. Jean-Philippe Thomas ENDA TM - Dakar

ENDA TM / CDM-PDD2 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-PDD3 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-PDD4 A. General description of project activity A. 1,2,3Title, 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-PDD5 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-PDD6 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-PDD7 El Gallo project A.4.5 Public funding No public funding  no diversion of ODA

ENDA TM / CDM-PDD8 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-PDD9 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-PDD10 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 AnalysisDemand Side Analysis AND Most probable = Baseline  Baseline emissions calculation

ENDA TM / CDM-PDD11 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

ENDA TM / CDM-PDD12 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

ENDA TM / CDM-PDD13 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-PDD14 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-PDD15 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-PDD16 (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 CO 2 emissions generates a more secure revenue (hard currency) than electricity sales (local currency)

ENDA TM / CDM-PDD17 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-PDD18 Part 2. Baseline Emission Rate - BER Step 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-PDD19 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-PDD20 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-PDD21 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-PDD22 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/Scenarios is 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

ENDA TM / CDM-PDD23 B.6 Details on baseline developments B.6 -Date of completing the final draft of this baseline section 7 Septembre Name of person/entity determining the baseline ….Tellus Insitute……. …..Prototype Carbon Fund, ….

ENDA TM / CDM-PDD24 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-PDD25 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-PDD26 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-PDD27 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-PDD28 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-PDD29 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-PDD30 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-PDD31 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-PDD32 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-PDD33 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 (tCO 2 ) 120,668 MWhX 0,584 tCO 2 /MWH Net annual reductions = 70,484 tCO 2 21 year crediting period : 1, 480, 157 tCO 2

ENDA TM / CDM-PDD34 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-PDD35 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-PDD36 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-PDD37 Annexes 1. Contact information on participants in project activity 2. Information regarding public funding 3. Baseline information 4. Monitoring plan

ENDA TM / CDM-PDD38 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-PDD39 ENDA TM Environnement et Développement du Tiers Monde