Hydropower (Pembangkit Listrik Tenaga Air)

Hydropower as CDM Project Activities

International Affairs Department Hydroelectric Power Development Center New Energy Foundation (NEF)

Contents
What is CDM? Hydropower and CDM CDM Scheme and Keywords State of Hydropower CDM Projects Key Issues for Host Country of Hydropower CDM Projects

What is CDM? Hydropower and CDM CDM Scheme and Keywords State of Hydropower CDM Projects Key issues for Host Country of Hydropower CDM Projects

Kyoto Protocol

Adopted at the Third Conference of Parties (COP3), United Nations Framework Convention on Climate Change (UNFCCC) , held in Kyoto, Dec. 1997 International treaty containing legally binding constraints on greenhouse gas GHG) emissions. (CO2, CH4, N2O, HFCs, PFCs, SF6) Industrialized Countries (Annex I Parties) agreed to limit their GHG emissions, -5% from 1990 levels by 2008-2012. 3 flexible mechanism (Kyoto mechanism)

Emissions trading Joint Implementation (JI) Clean Development Mechanism (CDM)

Emission reduction targets

EU Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxemburg Netherlands Portugal Spain Sweden UK EU total

Targets of Annex I Parties

Reduction target -21% -7.5% -21% 0% 0% -21% 25% 13% -6.5% -28% -6% 27% 15% 4% -12.5% -8% Emission share 0.4% 0.8% 0.4% 0.4% 3.1% 6.7% 0.6% 0.3% 2.9% 0.1% 1.2% 0.4% 1.6% 0.4% 4.1% 23.1% Countries transiting to market economy Bulgaria Croatia Czech Estonia Hungary Latvia Lithuania Poland Romania Russia Slovakia Slovenia Ukraine Reduction target -8% -5% -8% -8% -6% -8% -8% -6% -8% 0% -8% -8% 0% Emission share 0.9% 1.1% 0.2% 0.6% 0.2% 0.3% 3.1% 1.5% 16.6% 0.4% 0.1% 5.0% Other countries Australia Canada Iceland Japan
Liechtenstein

Monaco New Zealand Norway Switzerland US

Reduction target 8% -6% 10% -6% -8% -8% 0% 1% -8% -7%

Emission share 2.3% 3.3% 0.0% 6.8% 0.0% 0.0% 0.4% 0.3% 0.3% 33.6%

Developing countries (non-Annex I) have no targets

Clean Development Mechanism (CDM)

Help Annex 1 countries comply with their emission reduction commitments Contribute to the ultimate goal of the convention i.e., stabilization of GHG concentrations in the atmosphere Assist non-Annex 1 countries in achieving sustainable development
Host country
Transfer to investing country

Investing country (Annex I)

CO2 emission

CER
Distribute to host country
Assigned amount

Before projectAfter project

Fund, technology, etc.

CER: Certified Emission Reduction

What is CDM? Hydropower and CDM CDM Scheme and Keywords State of Hydropower CDM Projects Key issues for Host Country of Hydropower CDM Projects

Hydropower is effective for CDM

Hydropower is one of few carbon-free energy sources capable of large scale & low cost generation large potential of GHG reduction If all of the technically exploitable capability is exploited, CO2 reduction will be
technically exploitable capability 11,570 TWh emission factor 0.5 t-CO2/MWh = 5.79 billion t-CO225 of worlds CO2 emission)

CDM is effective for hydropower

Construction cost: 2,500 $/kW, operation rate 50%, payout period 50 years
electricity price: 3.1 cents/kWhIRR 5% 5.8 cents/kWhIRR 10%

If CO2 reduction unit is 0.5kg-CO2/kWh and carbon credit is $5/t-CO2 , additional income will be 0.25 cent/kWh

CO2 reduction effect 4 8 % of electricity price

Carbon finance may become important for hydropower development

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Potential water power sources

5000

Power generation (TWh)

4000 3000 2000 1000 0 Africa North South America America Asia

undeveloped planed or under construction installed

Europe Middle Oceania East

Japan

Based on Survey of Energy Resources 1998 (World Energy

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Comparison of CO2 Emissions per kWh by Electric Power Sources

1.2 Fuel Facility and Operation

CO2 emissions (kg-CO2.kWh)

1 0.8 0.6

0.975 0.742 0.608

0.887

0.519

0.4 0.2 0 0.088

0.704

0.478

0.408

0.038

0.130

0.111

0.053

0.029

0.022

0.015

0.011

Photovoltaics

Geothermal

Based on a report published by the Central Research 12 Institute of the Electric Power Industry, Japan

Hydropower

Oil

LNG CC

Nuclear

Wind

LNG

Coal

Benefits from CDM projects for hydropower in South Asian Countries

Usage of abundant potential of undeveloped hydropower resources Contribute to the stability of power supply Infrastructure development Revenues from sales of CER Development aid in addition to ODA Low running cost Other benefits from multi-purpose dams

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What is CDM? Hydropower and CDM CDM Scheme and Keywords State of Hydropower CDM Projects Key Issues for Host Country of Hydropower CDM Projects

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CDM scheme
Host country participation Project developer Project Planning Host country approval Designated National Investing country Authority (DNA) approval
CDM Executive Board (CDM EB) Designated Operational Entity (DOE)

(Project develo

Designated Nati Authority (DNA)

Preparation of Project Design Document(PDD) Approval of New Methodology (by CDM EB) Validation(by DOE) and Registration(by CDM EB)

Project developer Project Implementation/ Annual Monitoring

Verification and Certification of Reductions Issuance of CER Sale in Market

(Project develo

Designated Operational Entity (DOE) CDM Executive Board (CDM EB)

Project developer Add to Adaptation Fund

15 (Project develo

CDM related organizations (1)

CDM Executive Board (CDM EB)

Supervise the CDM projects under the authority and guidance of the COP/MOP *

Make recommendations on further modalities and procedures Approve new methodologies related to, baselines, monitoring plans and project boundaries Methodology panel Review provisions with regard to simplified modalities, procedures and the definitions of small scale project activities Small Scale CDM panel Be responsible for the accreditation of DOE CDM accreditation panel Register the validated projects as CDM project activities 16 Issue CER according to the emission reduction verified by DOE
* COP: Conference of Parties, MOP: Meeting of Parties

CDM related organizations (2)

Designated Operational Entity (DOE)

A body (private or public) accredited by the CDM EB to review projects

Validate proposed CDM project activities Verify and certify reductions in anthropogenic GHG emissions Make information obtained from CDM project participants publicly available, as required by the executive board

Designated National Authority (DNA)

Parties participating in the CDM shall designate DNA Interfaces between project owner and the DOE

Malaysia: Conservation and Environmental Management Division, Ministry of Science, Technology and the Environment Bhutan: National Environment Commission Secretariat 17

Approval of New Methodology

Preparation of draft PDD (new methodology) Submission to the CDM EB through DOE Experts desk review, Public comments Recommendation by Methodology Panel Consideration by CDM EB

A-rank: ApprovedB-rank: Changes required C-rank: Not approved

As of Sep. 2003 A-rank: 2 projects B-rank: 4 projects 18 C-rank: 6 projects (2 hydropower projects included)

Validation and Registration

Host country approval

Validation by Designated Operational Entity

Validation points

detailed scrutiny of the institutional capacity of the project stakeholders evidence underlying the calculations of carbon benefits systems to be used for monitoring

Project Design Document will be made publicly available for comments

Submission to to CDM EB

Registration by CDM EB

Registration finalized after a maximum of 8 weeks from receipt 19

Verification, certification, and issuance of CERs

Project Implementation and Monitoring

Emissions must be monitored during project life time

Project developer must monitor and report as set out in the PDD Monitoring methodology must be approved by CDM EB

Monitoring of environmental and social impacts is implicit in Environmental Impact Assessment

Verification

Includes site visits, checks of monitoring data and calculation of emission reductions

Certification/Registration by CDM EB
Issuance of CERs

CERs issue within 15 days, unless the CDM EB requests a review (only if fraud, malfeasance or incompetence of DOE

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Project Design Document (PDD)

General description of project activity Baseline methodology

Applied methodology, additionality, project boundary

Duration of the project activity/ Crediting period Monitoring methodology and plan Calculation of GHG emissions by sources Environmental impacts Stakeholders comments

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Baseline

How to define without the project case

Taking into account national policy, local fuel availability, power development plan, and so on. Choice a baseline methodology

Existing actual or historical emissions, as applicable, Emissions from a technology that represents an economically attractive course of action, The average emissions of similar project activities undertaken in the previous 5 years, in similar circumstances, and whose performance is among the top 20% of their category
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Additionality

What is additionality?
Reductions in emissions that are additional to any that would occur in the absence of the certified project activity. Kyoto protocol Article12-5c Environment must reduce GHG emission Investment profitability of the project must increase dramatically by CER Financediversion of ODA is prohibited Technologymust use the state-of-art technology
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Project boundary and leakage

How to define Project boundary?

Under control of the project participants Significant and reasonably attributable to the CDM project activity Hydropower project;

Within Power station Within connecting point to existing transmission line Methane emission from reservoir

What is Leakage?

Outside the project boundary; and Measurable and attributable to the CDM project activity Hydropower project;

Decline of hydropower production downstream

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Monitoring

What is the purpose of monitoring?

For determining the baseline; For estimating or measuring anthropogenic emissions occurring within the project boundary of a CDM project activity and leakage, as applicable For example; Power generation (MWh)

Quality Assurance (QA) & Quality Control (QC)

It is easy to measure relevant data There is little factor of over/underestimation

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Small-scale CDM projects

What is Small-scale CDM project

Renewable energy project activities: Up to 15 megawatts (or an appropriate equivalent) Energy efficiency improvement project activities: Up to the equivalent of 15 gigawatthours per year Other project activities: Less than 15 kilotonnes of carbon dioxide equivalent annually Usage of simplified baseline/monitoring methodologies Same DOE can validate and verify the project 27 Able to bundle similar projects

Simplified modalities and procedures

What is CDM? Hydropower and CDM CDM Scheme and Keywords State of Hydropower CDM projects Key Issues for Host Country of Hydropower CDM Projects

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Hydropower CDM projects submitted to World Bank PCF and ERU-PT/ CERU-PT
PCF: 4 projects, ERU-PT/CERU-PT: 9 projects As of 3 June, 2003 Generation type: 2 run of river, 4 run of river with reservoir, 7 dams 4 utilizes existing dams Capacity distribution Country distribution

Costa Rica, Panama: 3 Uganda, Romania: 2 Guatemala, Chile, Peru:1

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Baseline methodology of hydropower CDM projects submitted to the Methodology Panel

35 projects have been submitted to the Methodology Panel under the CDM Executive Board as New Methodology (As of 19 Sep. 2003) 4 are hydropower projects:

El Canada Hydroelectric Project (Guatemala) Peas Blancas Hydroelectric Project (Costa Rica) La Vuelta and La Herradura Hydroelectric Project (Colombia) El Gallo Hydroelectric Project (Mexico)
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Environmental issues

Antipathy against large hydropower projects (especially in Europe): renewable but not sustainable Example of criticism by NPOs such as CDM Watch

Significant GHG emissions during construction Inflated baselines Methane emissions from reservoirs Cost overrun, corruption Criticism of anyway project

Most issues are not unique to hydropower projects, and dam, not hydropower itself, is the main target of criticism Need to appeal that hydropowers negative impact is small

The state of the art technology, social development,

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What is CDM? Hydropower and CDM CDM Scheme and Keywords State of Hydropower CDM projects Key Issues for Host Country of Hydropower CDM Projects

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Identification of CDM projects

Key factors on Identification of a Host Country

Participation in Kyoto Protocol

Ratification on Kyoto Protocol Organization on CDM

Investment conditions for Hydropower development as a IPP project.

Government Policy Legal condition

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Key factors on Project Design Document

Baseline methodology

High average CO2 emissions units of power generation (High effect of hydropower project) High CO2 emissions power generation development plan (substitute for high CO2 emissions power generation) Project activity would not have occurred anyway due to a barrier Less hydropower development Plan Hydropower is more expensive than thermal power ( investment barrier)

Additionality

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CDM project Approval by Host country

Project Approval by DNA of Host country

Prior to the submission of the validation report to the executive board,

Submission to both of Host country and own party Written approval of voluntary participation from the DNA (Designated National Authority) of each party

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Validation of project activities

How to validate a project activity?

Independent evaluation of a project activity by a DOE (Designated operational entity) against the requirements of the CDM on the basis of the PDD. New baseline or monitoring methodology

Review by the executive board

Receipt of public comments Knowledge for CDM scheme and validation Sympathy with hydropower developments Charge for service
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Key factors on selection of DOE

Verification & Certification of project activities

What is Verification?

Periodic independent review and ex post determination by DOE of monitored reductions No prescribed length of the verification period Written assurance by the DOE A project activity achieved the reductions as verified

What is Certification?

For implementing verification and certification smoothly;

Clearly defining monitoring methodology and Quality assurance in the PDD

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Agreement of CERs trade

What is Agreement of CERs trade?

Agreement between a CDM participant and a Purchase of CERs (Certified Emission Reductions), Carbon fund, Investor, and so on Share of risk concerning the amount of emission reductions by a CDM project activity

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Correlation between hydropower development process and CDM procedure

Hydropower development process
Master Plan - Power Development Plan - Transmission Line Plan

CDM procedure

Pre Feasibility Study - Preliminary survey (Discharge, Geological condition) - Reconnaissance survey (Topographic & Geological condition, General EIA) Schematic design Financial evaluation

Need and items of EIA (Environmental Impact Assessment) EIA - Natural Environment - Social Environment - Negotiation with authorities and local communities - Endorsement - License PPA (Power Purchase Agreement) Financing / Scheme EPC Contract

Approach to host country as a CDM project

Submission to both of own party and host party (DNA) - Project participants - General description (Title, Location, GHG, Schedule) - Project support - Environmental Impacts - Finance scheme - Baseline Methodology - Calculation of Emission Reductions - PDD draft

Feasibility Study - Full-scale investigation (Boring, In-situ test, Hydrological & Climate survey) - Basic design - Construction method - Construction cost estimation -Financial evaluation

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Feasibility Study Full-scale investigation (Boring, In-situ test, Hydrological & Climate survey) Basic design Construction method

Preparation of PDD - Project description - Baseline methodology - Duration of the project activity / Crediting period - Additionality - Environment Impacts - Public funding of the project activity - Stakeholders comments - Calculation of Emission Reductions

Approval by both of own party and host party (DNA) Written Approval (Attach to PDD) Selection and Contract with DOE Submission of PDD to DOE

Construction cost estimation

Financial evaluation

Validation - Review of PDD by DOE - Receipt of public comments - Approval by both of own party and host party
Validation Report Design for execution Detail design, Construction method (DOE submits to the executive board) Registration as a CDM project - Review by the executive board

Within 8 weeks after the date of receipt of the request for registration (unless a Party involved in the project activity or at least three members of the EB request 41 a review of the proposed issuance of CERs)

Commencement of the work

Construction management

(If needed) Implementation of Monitoring

(If needed) Implementation of Monitoring - Submission to report

Operation Start (Construction Completion)

Implementation of Monitoring - Submission to report

Operation & Maintenance

Verification By DOE, - Periodic independent review - On-site inspections - Determination of Emission Reductions - Receipt of public comments (Notice to Project participants, Each party, the Executive board)

Certification Report (DOE submits to the executive board)

Certification of Emission Reductions By DOE, - Certification in writing - Receipt of public comments (Notice to Project participants, Each party, the Executive board)

Issuance of CERs (Certified Emission Reductions) - Review by the Executive board

Within 15 days after the date of receipt of the request for issuance (unless a Party involved in the project activity or at least three members of the 42 EB request a review of the proposed issuance of CERs)