2009-06-19 2009-06-07 fvr sael rev beyer revised mpk rev b ...content.ccrasa.com/library_1/3056 - 15...

Validation Report

SUKHBIR AGRO ENERGY LIMITED

15 MW Biomass Residue Based Power Project at Ghazipur, India

Report No: 53601008 - 08/213

Date: 2009-June-08

TÜV NORD CERT GmbH

JI/CDM Certification Program

Langemarckstrasse 20

45141 Essen, Germany

Phone: +49-201-825-3335

Fax: +49-201-825-3290

www.tuev-nord.de

www.global-warming.de

Validation Report: 15 MW Biomass Residue Based Power Project at Ghazipur,

India

TÜV NORD JI/CDM Certification Program

P-No.: 53601008 - 08/213

of 111

Date of first issue: Project No.:

2009-06-08 53601008 – 08/213 Approved by: Organisational unit:

Mr. Rainer Winter TÜV NORD JI/CDM Certification Program

Client: Client ref.:

SUKHBIR AGRO ENERGY LIMITED (SAEL) Mr. M.L. Arora (General Manager)

Summary/Opinion:

The Sukhbir Agro Energy Limited (SAEL), has commissioned the TÜV NORD JI/CDM Certification Program to validate the project: “15 MW Biomass Residue Based Power Project at Ghazipur, India ”, with regard to the relevant requirements of the UNFCCC for CDM project activities, as well as criteria for consistent project operations, monitoring and reporting. UNFCCC criteria include article 12 of the Kyoto Protocol, the modalities and procedures for CDM (Marrakech Accords), and the relevant decisions by COP/MOP and CDM Executive Board.

The project activity involves installation of one 70 TPH capacity biomass residue fired boiler and one 15 MW turbine of condensing cum extraction type. The other accessories include auxiliary installations and systems, Electrostatic precipitator (ESP), cooling water system and cooling tower, ash handling system, feed water system, raw water system, DM plant and power evacuation system. The co-generation system would utilize the heat and about 2MW power for captive purposes and the surplus power is proposed to be exported to the grid. A risk-based approach has been followed to perform this validation. In the course of the draft validation 8 Corrective Action Requests (CARs) and 13 Clarification Requests (CRs) were raised and successfully closed.

The review of the project design documentation and additional documents related to baseline and monitoring methodology, the subsequent background investigation, follow-up interviews and review of comments by parties, technology supplier, local stakeholders, and employees of SAEL, consultant and NGOs have provided TÜV NORD JI/CDM CP with sufficient evidence to validate the fulfilment of the stated criteria.

In detail the conclusions can be summarised as follows: - The project is in line with all relevant host country criteria (India) and all relevant UNFCCC requirements for CDM. Project

activity approval has been obtained from National CDM Authority as DNA of India vide the Letter number F.No.4/13/2008-CCC dated 3 September 2008. The project additionality is sufficiently justified in the PDD.

- The monitoring plan is transparent and adequate. - The calculation of the GHG emission reductions is carried out in a transparent and conservative manner, so that the calculated

emission reductions of 672,590 tCO2e is most likely to be achieved for the 10 years (fixed) crediting period..

The conclusions of this report show, that the project, as it was described in the project documentation, is in line with all criteria applicable for the validation.

Report No.: Subject Group:

53800107-08/213 Environment Indexing terms

Report title:

15 MW Biomass Residue Based Power Project at Ghazipur, India

Climate change

CDM

Validation

Kyoto Protocol Work carried out by: Technical Review Ma Paa Puratchikkanal K.V. Sudarshan B.J.M. Amarnath,

Katja Beyer No distribution without permission from the

Client or responsible organisational unit

Work verified by:

Rainer Winter Limited distribution Date of this revision: Rev. No.: Number of pages:

2009-06-08 0 111 Unrestricted distribution


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Abbreviations

BAU Business as usual

CA Corrective Action / Clarification Action

CAR Corrective Action Request

CDM Clean Development Mechanism CEA Central Energy Authority

CER Certified Emission Reduction CO2 Carbon dioxide

CO2e Carbon dioxide equivalent

CP Certification Program CR Clarification Request

DNA Designated National Authority EB CDM Executive Board EIA Environmental Impact Assessment

FICCI Federation of Indian Chambers of Commerce and Industry

GHG Greenhouse gas(es)

Govt. Government IETA International Emissions Trading Association

INR Indian Rupees

IPCC Intergovernmental Panel on Climate Change

IREDA Indian Renewable Energy Development Agency

IRR Internal Rate of Return

ISO International Standards Organisation

Kg Kilogram

kW Kilowatt

kWh Kilowatt hour m Meter

MNES Ministry of Non Conventional Energy Sources, Government of India

MoEF Ministry of Environment and Forest, Government of India

MoV Means of Verification

MT Metric Tonne

MU Million Units (of electricity)

MVP Monitoring and Verification Plan

NCV Net Calorific Value of Fuel

NGO Non Government Organisation

ODA Official Development Assistance


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PDD Project Design Document QC/QA Quality control/Quality assurance SAEL Sukhbir Agro Energy Limited TPH Tonnes Per Hour UNFCCC United Nations Framework Convention on Climate Change


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Table of Contents Page

1 INTRODUCTION ............................................................................................6

1.1 Objective 6

1.2 Scope 6

1.3 GHG Project Description 7

2 VALIDATION TEAM......................................................................................11

3 METHODOLOGY..........................................................................................12

3.1 Validation Protocol 12

3.2 Review of Documents 15

3.3 Follow-up Interviews 15

3.4 Resolution of Clarification and Corrective Action Requests 16

3.5 Public Stakeholder Comments 16

3.6 Finalising the report 16

4 PRE-VALIDATION FINDINGS......................................................................17

4.1 Participation Requirements 18

4.2 Project design 18

4.3 Baseline and Additionality 19

4.4 Crediting Period 32

4.5 Monitoring Plan 32

4.6 Calculation of GHG Emissions 34

4.7 Environmental Impacts 35

4.8 Comments by Local Stakeholders 35

5 COMMENTS BY PARTIES, STAKEHOLDERS AND NGOS........................37

6 VALIDATION OPINION ................................................................................38

7 REFERENCES .............................................................................................39

ANNEX : VALIDATION PROTOCOL.........................................................................44

ANNEX : CERTIFICATES .......................................................................................110


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1 INTRODUCTION

The Sukhbir Agro Energy Limited (SAEL) has commissioned the TÜV NORD JI/CDM Certification Program (CP) to validate the project:

“15 MW Biomass Residue Based Power Project at Ghazipur, India”

with regard to the relevant requirements for CDM project activities.

1.1 Objective

The purpose of this validation is to have an independent third party assess the project design. In particular the project's baseline, the monitoring plan (MP), and the project’s compliance with

- the requirements of Article 12 of the Kyoto Protocol; the CDM modalities and procedures as agreed in the Marrakech Accords under decision 17/CP.7; the annex to the decision; subsequent decisions made by COP/MOP & CDM Executive Board,

- other relevant rules, including the host country (India) legislation and sustainability criteria

are validated in order to confirm that the project design as documented is sound and reasonable and meets the stated requirements and identified criteria. Validation is seen as necessary to provide assurance to stakeholders on the quality of the project and its intended generation of certified emission reductions (CERs).

1.2 Scope

The validation scope is given as an independent and objective review of the project design, the project’s baseline study and monitoring plan (based on ACM0006, Version 6.2), which are included in the PDD and other relevant supporting documents.

The items covered in the validation are described below:

• UNFCCC & Host Country Criteria

- UNFCCC/Kyoto Protocol requirements, in particular, the requirements of the CDM as set out in decision 17/CP.7 (Marrakech Accords), the present annex, and relevant decisions by COP/MOP & CDM Executive Board

- Host country requirements / criteria

• CDM Project Description

- Project design - Project boundaries - Predicted CDM project GHG emissions


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• Project Baseline

- Baseline methodology - Baseline GHG emissions

• Monitoring Plan

- Monitoring methodology - Indicators/data to be monitored and reported - Responsibilities

• Background investigation and follow up interviews

• Stakeholder consultation

- Publishing the PDD on TUV NORD website - Review of comments

• Draft validation reporting with CARs & CRs, if any

• Final validation reporting.

The information included in the PDD and the supporting documents were reviewed against the requirements and criteria mentioned above. The TÜV NORD JI/CDM CP has, based on the recommendations in the Validation and Verification Manual/VVM/, employed a risk-based approach in the validation, focusing on the identification of significant risks for project implementation and the generation of CERs. The validation is based on the information made available to TÜV NORD JI/CDM CP and on the contract conditions. TÜV NORD JI/CDM CP can not be held liable by any entities for making its validation opinion based on any false or misleading information supplied to it during the course of validation.

The validation is not meant to provide any consulting to the project participant. However, stated requests for clarifications and/or corrective actions may provide input for improvement of the project design.

1.3 GHG Project Description

1.3.1 Project Scope

The considered GHG project can be classified as a CDM project in the sector given in Table 1-1 (according to List of Sectoral Scopes of UNFCCC).

Table 1-1: Project Scope(s)

No. Project Scope

1 Energy Industries (renewable- /non-renewable sources)

1.3.2 Project Parties

India is the host party involved in the project activity.


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1.3.3 Project Entities

The following entities are involved in the developing of the project:

Project Proponent 1 Sukhbir Agro Energy Limited (SAEL)

Fatehullahpur, Varanasi Gorakhpur Highway

Ghazipur,

Uttar Pradesh-233302.

India

Contact person: Mr. M.L. Arora

General Manager

Telephone: +91-0548-2226409

Mobile : +919936411882 and +91 9005092111

Fax: +91-548-2226408

email: [email protected]

Project Proponent 2 Federation of Indian Chambers of Commerce and Industry (FICCI)

Tansen Marg

Federation House

New Delhi

India

Contact person: Mr. Karun Sharma

Head - CDM

Telephone: +91-11 23359735, 23739947

Mobile : +91 9818550095

Fax: +91-11 23721504, 23320714

email: [email protected]

1.3.4 Project location

The project activity is located at Village Fatehullahpur in Ghazipur District in the state of Uttar Pradesh, India. Plant is located on Varanasi-Gorakhpur highway and is 60 kms away from Varanasi. The nearest Ghazipur Railway Station is 10 km away at Ghazipur and the nearest airport is 175 km away at Babatpur and about 65 km from Varanasi.

Table 1-2: Project Location

No. Project Scope

Host Country: India


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No. Project Scope

Region: Uttar Pradesh

Project location address: Fatehullahpur, Ghazipur District, Uttar Pradesh

Latitude: 250 34’ 50.71” North

Longitude: 830 29’ 6.39” East

1.3.5 Technical project description

SAEL proposes to install a new co-generation plant to generate steam and electricity and export surplus power to the regional grid. The green field power project involves installation of a 70TPH capacity travelling grate boiler and one 15 MW extraction cum condensing turbine to generate steam and electricity. The other accessories include auxiliary installations and systems, including Electrostatic precipitator (ESP), cooling water system, ash handling system, feed water system, raw water system and DM plant and power evacuation system. The generated power of the 15 MW is proposed to be exported to the Grid after meeting the captive requirement of about 2MW. The co-generation plant is proposed to be commissioned within the premises of a 40 TPH milling capacity Rice Mill for paddy processing and a 500 TPD Solvent Extraction Plant.

The proposed CDM project activity has been planned to be fired primarily with rice husk, a by product of processed paddy. The proposed set-up would generate energy during on-season and off-season as well. During on-season the project is expected to deliver net surplus energy after meeting the captive requirements of about 2MW. In the off-season the captive requirements are estimated to be about 1MW. The net surplus energy would be delivered to the grid as per the PPA agreement with Purvanchal Vidyut Vitran Nigam Limited (PVVNL).

In the baseline, the electricity demand was met through supply from grid and 10 TPH rice husk fired boiler met the heat demand of facility.

The project activity helps in reducing the GHG emissions. The estimated amount of emission reductions over the chosen 10-year “fixed crediting period” is 67,259 tCO2e per year.

The key parameters of the 15 MW capacity extraction cum condensing type turbo generator and 70 TPH Boiler are given in tables 1-3 and 1-4.

Table 1-3: Key parameters of the Steam Turbine Generator/EPC//PO/

No. Project Scope

Supplier M/s. Qingdao Jieneng Power Station Engineering Co., Ltd (QJPS)

Type Extraction cum condensing

Rated capacity of turbine 15 MW with 10TPH extraction at 2.5 ata


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No. Project Scope

Steam conditions at turbine inlet pressure (abs)

64 kg/cm2 (g)

Temperature 485 +/- 5 deg C.

Condenser operational pressure (ata)

0.106

Recommended temperature rise in the cooling tower (deg C)

9.6

Rating at the generator terminals (MW)

15

Electrical generator One 11kV, 50Hz, 0.8 power factor

Table 1-4: Key parameters of the Boiler

No. Project Scope

Manufacturer M/s. ISGEC John Thomson (IJT)

Type Bi-drum, natural circulation, balanced draft, bottom supported, outdoor water tube type, travelling grate

Steam flow at main steam stop valve outlet (100% BMCR)

70 TPH

Steam pressure at main steam stop valve outlet

67 kg/cm2 (g)

Steam temperature at main steam stop valve outlet

490 +/- 5 deg C.

Feed water temperature at the economizer inlet

126 deg C

Design code for pressure parts IBR

The other accessories and auxiliaries include ESP, Cooling Tower, Feed water system, Ash handling system, raw water system and DM Plant and electrical system with power evacuation network.


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2 VALIDATION TEAM

The validation team is led by:

- Ma Paa Puratchikkanal. Mr Kanal from TUV NORD -Bangalore, India as a local validator of the team. He is a CDM Assessor in TUV Nord, Bangalore. He holds Master’s in Water Resources Engineering and a B.E in Civil Environmental Engineering. He is a certified GHG Auditor, CDM Validator and CDM Verifier and has validated and verified many CDM, VCS, Gold Standard and WCD based projects. He has extensive experience in water, environment and energy sector projects. He has been involved in feasibility and detailed engineering studies of technical, environmental and design solutions for various World Bank, DfID, European Commission, KfW and bilateral funding agency based projects.

For this validation he was assisted by:

- Mr. K.V.Sudarshan. The team will be assisted by Mr. Sudarshan, from TUV NORD-Bangalore, India, as the CDM Expert. Mr. Sudarshan is a Chemical Engineer and is a certified ISO 14001:2004 and GHG Auditor. He has participated in the validation and verification of several CDM, Voluntary Carbon Standard, and Gold Standard CDM projects.

- Mr. Mohinder Amarnath. Mr. Amarnath is CDM Expert of TUV NORD-Chennai. He is B. Tech. (Chemical) and engaged with TÜV India operation. He is an appointed expert for JI/CDM certification program of TÜV NORD CERT GmbH. He has participated in several CDM/ VER project validation and verification also has substantial experience in CDM Project development and Energy auditing.

The technical review was carried out by:

- Ms. Katja Beyer. Ms. Beyer is an Environmental Scientist and appointed assessor of the JI/CDM Certification Program of TÜV NORD CERT GmbH.

The validation report is verified by:

- Mr. Rainer Winter. Mr. Winter works at TÜV NORD as ISO 9001/ 14001 Auditor and environmental verifier for EMAS. He is also an approved emission verifier within the European Emission Trading Scheme. Mr. Winter is an authorized JI/CDM assessor and is in charge of the TÜV NORD JI/CDM CP.

Mr. S. Stalin and Mr. N. Premjit Singh have participated as trainees in the validation process.


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3 METHODOLOGY

The validation of the project was carried out from July ’08 to June ’09. The validation consisted of the following three phases:

• A desk review of the PDD (incl. annexes) and supporting documents with the use of a customised validation protocol according to the Validation and Verification Manual;

• Back ground investigation and follow-up interviews with personnel of the project proponent, the consultant, legal authorities and other stakeholders;

• Reporting of validation findings taking into account the public comments received on TUV NORD website.

The report includes Corrective action and Clarification Requests (CAR and CR) identified in the course of this validation.

A Corrective Action Request is established if

• mistakes have been made in assumptions or the project documentation which directly will influence the project results,

• the requirements deemed relevant for validation of the project with certain characteristics have not been met or

• there is a risk that the project would not be registered by the UNFCCC or that emission reductions cannot be verified and certified.

A Clarification Request is issued where information is insufficient, unclear or not transparent enough to establish whether a requirement is met.

After resolution of these CARs and CRs by the project proponent the validator will issue the (final) validation report and opinion.

3.1 Validation Protocol

In order to ensure consideration of all relevant assessment criteria, a validation protocol was used. The protocol shows, in a transparent manner, criteria and requirements, means of verification and the results from pre-validating the identified criteria. The validation protocol serves the following purposes:

- It organises, details and clarifies the requirements that a CDM project is expected to meet;

- It ensures a transparent validation process where the independent entity will document how a particular requirement has been validated and the result of the determination.


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The validation protocol consists of three tables: Table 1 (Mandatory Requirements); Table 2 (Requirement Checklist); and Table 3 (Resolution of Corrective Action and Clarification Request) as described in Figure 1.

The completed (till draft conclusion) validation protocol is enclosed in Annex I to this report identifying 8 Corrective Action Requests and 13 Clarification Requests.


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Validation Protocol Table 1: Mandatory Requirements

Requirement Reference Conclusion Cross reference

The requirements the project must meet.

Gives reference to the legislation or agreement where the requirement is found.

This is either acceptable based on evidence provided (OK), or a Corrective Action Request (CAR) of risk or non-compliance with stated requirements. The corrective action requests are numbered and presented to the client in the Validation report.

Used to refer to the relevant checklist questions in Table 2 to show how the specific requirement is validated. This is to ensure a transparent Validation process.

Validation Protocol Table 2: Requirement checklist

Checklist Question Reference Means of verification (MoV)

Comment Draft and/or Final Conclusion

The various requirements in Table 1 are linked to checklist questions the project should meet. The checklist is organised in seven different sections. Each section is then further sub-divided. The lowest level constitutes a checklist question.

Gives reference to documents where the answer to the checklist question or item is found.

Explains how conformance with the checklist question is investigated. Examples of means of verification are document review (DR) or interview (I). N/A means not applicable.

The section is used to elaborate and discuss the checklist question and/or the conformance to the question. It is further used to explain the conclusions reached.

This is either acceptable based on evidence provided (OK), or a Corrective Action Request (CAR) due to non-compliance with the checklist question (See below). Clarification is used when the validation team has identified a need for further clarification.

Validation Protocol Table 3: Resolution of Corrective Action and Clarification Requests

Draft report clarifications and corrective action requests

Ref. to checklist question in table 2

Summary of project owner response

Validation conclusion

If the conclusions from the draft Validation are either a Corrective Action Request or a Clarification Request, these should be listed in this section.

Reference to the checklist question number in Table 2 where the Corrective Action Request or Clarification Request is explained.

The responses given by the Client or other project participants during the communications with the validation team should be summarised in this section.

This section should summarise the validation team’s responses and final conclusions. The conclusions should also be included in Table 2, under “Final Conclusion”.

Figure 1: Validation protocol tables


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3.2 Review of Documents

The draft PDD submitted by FICCI in July 2008 and supporting background documents related to the project design and baseline were reviewed. /PDD//XCS//IRR/

Furthermore, the validation team used additional documentation by third parties like host party legislation, technical reports referring to the project design or to the basic conditions and technical data.

3.3 Follow-up Interviews

On 28th & 29th August 2008, the TÜV NORD JI/CDM CP performed the on-site interviews with the project proponent, project developer, plant operating personnel to confirm selected information and to resolve issues identified in the document review.

The key interview and main topics of the interviews are summarised in Table 3-1.

Table 3-1 Interviewed persons and interview topics

Interviewed Persons / Entities

Interview topics

Mr. Sukhbir, Managing Director - SAEL Mr. M.L. Arora General Manager - SAEL

- General aspects of the project - Project boundary - Technical details of the project activity - Approval procedures and status - Environmental Policy - Quality and Environmental Management System - Personnel deployed, competence and responsibilities - Considerations and output of Biomass assessment study - Current and future situation of electricity supply and

demand - Monitoring and measurement equipments - Baseline study assumptions - Baseline power and heat demand - Evaluation of lower efficiency plant for project scenario - Any fossil/biomass based plant in the baseline scenario - Environmental impacts - Socio economic impacts on the local population - Details of emissions reduction calculation - Operations management, controls, review mechanism and - Operational data - License, operation & maintenance authority and

responsibility - Monitoring and measurement control and QA/QC

procedure - Legal aspects of the project - Technology employed - Power Purchase Agreement


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Interviewed Persons / Entities

Interview topics

- Calibration needs during operation phase - First rice husk based power generation – details

Mr. Karun Sharma, HEAD CDM – FICCI, Mr. Charu Gupta, Sr. Consultant - FICCI

- Editorial aspects of PDD - Project boundary - Content of PDD - Baseline study assumptions - Applicability conditions of methodology, alternative

scenarios - Procedural aspects - Details of emissions reduction calculation - Additionality of the project activity - Financial Spreadsheet computations - Stakeholders meeting and outcome - Host Country Approval

3.4 Resolution of Clarification and Corrective Action Requests

In order to remedy any mistakes, problems or any other outstanding issues which needed to be clarified for positive conclusion on the project design, CARs and CRs were raised. These requests can be resolved or “closed out” by the project proponent by providing the corresponding response in the column 3 of the table three as meant in Figure 1 and submission of revised PDD and supporting documents, if required, in timely manner.

In this validation report 8 CARs and 13 CRs are raised.

The CARs / CRs are documented in Annex I and addressed in section 4.

3.5 Public Stakeholder Comments

According to the modalities for the validation of CDM projects, TÜV NORD JI/CDM CP published the draft PDD on its website www.global-warming.de on 11 July 2008 and invited comments within 30 days (until 10 August 2008) by interested parties, stakeholders and UNFCCC accredited non-governmental organisations. No comments were received.

3.6 Finalising the report

The draft validation report was submitted to the project proponents. After reviewing the revised and resubmitted project documentation; resolving the CRs & CARs raised and outstanding concerns TÜV NORD JI/CDM CP will issue the final validation report and opinion.


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4 PRE-VALIDATION FINDINGS

In the following protocol the findings from the desk review of the draft PDD, visits, interviews and supporting documents are summarised. The results are shown in table 4-1:

Table 4-1: Summary of CAR and CR issued

Validation topic 1) No. of CAR No. of CR

General description of project activity (A) - Project boundaries - Participation requirements - Technology to be employed - Contribution to sustainable development

1 2

Project baseline (B) - Baseline Methodology - Baseline scenario determination - Additionality determination - Calculation of GHG emission reductions

Project emissions Baseline emissions Leakage - Emission reductions - Monitoring Methodology - Monitoring of Project emissions Baseline emissions Leakage Sustainable development indicators / environmental impacts - Project management planning

6 6

Duration of the Project / Crediting Period (C) 1 1

Environmental impacts (D) 0 2

Stakeholder Comments (E) 0 2

SUM 8 13

1) The letters in brackets refer to the validation protocol


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For an in depth evaluation of all validation items it should be referred to the validation protocol (Annex). Annex also includes all CARs and CRs (Table 3).

4.1 Participation Requirements India as a non Annex-I party meets all relevant participation requirements. In the Letter of Approval/HGA/ dated 2 September 2008, the Indian DNA, National CDM Authority under Ministry of Environment and Forests confirmed the voluntary participation of

1. M/s. Sukhbir Agro Energy Limited (SAEL)

2. Federation of Indian Chambers of Commerce and Industry (FICCI)

as the Project Participants for the CDM project activity.

No Annex-I party was identified by the project participant; however the same will be identified in due time, as per the post registration involvement by Annex I party provisions (no. 57) made in 18th EB meeting.

4.2 Project design

SAEL proposes to install a new co-generation plant to generate electricity and export surplus power to the regional grid. The green field project involves installation of a 70TPH capacity travelling grate boiler and one 15 MW extraction cum condensing turbine to generate steam and electricity. The other accessories include auxiliary installations and systems, including Electrostatic precipitator (ESP), cooling water system, ash handling system, feed water system, raw water system and DM plant and power evacuation system. The generated power of the 15 MW is proposed to be exported to the Grid after meeting the captive requirement of about 2MW. The power plant is proposed to be commissioned within the premises of a 40 TPH milling capacity Rice Mill for paddy processing and a 500 TPD Solvent Extraction Plant.

The proposed CDM project activity has been planned to be fired primarily with rice husk, a by product of processed paddy. The proposed set-up would generate energy during on season and off-season as well. During on-season the project is expected to deliver net surplus energy after meeting the captive requirements of about 2MW. In the off-season the captive requirements are estimated to be about 1MW. The net surplus energy would be delivered to the grid as per the PPA agreement with Purvanchal Vidyut Vitran Nigam Limited (PVVNL).

In the baseline, the electricity demand was met through supply from grid and 10 TPH rice husk fired boiler met the heat demand of facility.

This type of project activity is in line with sustainable development policies of the country and national regulation / policy on Environmental Protection/HGA/. Nevertheless in the Host Government Approval/HGA/ it is stated that SAEL and FICCI have to comply with the following conditions:

• SAEL and FICCI shall not sell the CERs to any agency/ company/ organization which purchases the CERs using ODA Funds


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• SAEL and FICCI shall inform the national CDM Authority regarding all transaction details of CERs including the name and address of the party to which CERs were sold within 30 days of transfer of the CERs

• SAEL and FICCI shall furnish expeditiously any information, during the lifetime of the project as requested by the National CDM Authority.

• SAEL and FICCI shall obtain all statutory clearances and other approvals as required from the competent authorities for setting up of the project

• All transaction shall be subject to supervision of the Executive Board of the CDM, under the authority and guidance of the COP/MOP

• This approval is not transferable. The authority reserves the right to revoke this Host Country Approval if the conditions stipulated in this approval are not complied with to the satisfaction of the National CDM Authority.

Based on the financial information furnished by the project participants, it is concluded that no ODA does contribute to the financing of the project.

The location of proposed project activity is at the premises of ‘Sukhbir Agro Energy Limited’, at Village Fatehullahapur in Ghazipur District in the state of Uttar Pradesh, India. The geographical co-ordinates lie at 250 34’ 50.71” N and 830 29’ 6.39” E. The physical boundary of the project activity covers the boiler, turbine, captive power generating equipment, all equipments and accessories, and the power evacuation system connected physically to the electricity grid as per section B.3 of PDD. The calculations for the estimation of emission reduction are based on fixed 10 (ten) years crediting period, 20 (twenty) years operational lifetime) are clearly defined.

In the course of the project validation the 8 CARs and 13 CRs were raised and successfully closed out (ref Annex: Validation Protocol - Table 3).

4.3 Baseline and Additionality

The project activity is applying ACM0006 (Version 6.2) “Consolidated methodology electricity generation from biomass residues” along with Approved combined baseline and monitoring methodology ACM0002 (version 7) “Consolidated methodology for grid-connected electricity generation from renewable sources” is used to determine the baseline grid emission factor.

Baseline scenario selection and additionality determination has been proved by using “Combined tool to identify the baseline scenario and demonstrate additionality” Version 02.1.

Applicability of the baseline methodology

Validation team observations with respect to applicability of the baseline methodology are as follows:

� The project is a greenfield power project activity aiming to export surplus power to the grid utilizing rice husk and other biomass residues to generate power.


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� The project is developed at a place were currently no power generation occurs; it is a Greenfield Power Project.

� The project would utilize primarily rice husk. � Implementation of the project activity is not expected to result in an increase of

the processing capacity of paddy in the rice mill. � The project would consume rice husk generated in-house and the balance

requirement of fuel (rice husk) shall be procured from out side. In extreme conditions the purchase biomass residues listed in PDD other than rice husk is to be carried out. In all cases the storage of biomass fuel would be less than one year.

� Rice husk burnt in boilers is taken directly from the mill and does not require any specific technology for its preparation before combustion. So no energy consumption is envisaged for preparation of biomass.

� The project activity is located in Uttar Pradesh state and the same is a part of NEW NE grid in India.

� The power generation in project activity displaces power from NEW NE grid.

From the above discussions it is ascertained that the project activity meets the applicability criteria of ACM0006/ Version 6.2.

Baseline scenario and additionality

As per ACM0006/ Version 6.2, Baseline scenario needs to be arrived in following steps using “Combined tool to identify the baseline scenario and demonstrate additionality” Version 02.1 . The detailed assessment of baseline identification, barrier analysis and financial parameters is given in Table 4, Table 5 and Table 6 of this report.

The identified alternatives are listed below:


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Table 4-2: Baseline and Additionality assessment

Step Argument PP Assessment of the validation team

STEP 1

Step 1a

STEP 1: Identification of alternative scenarios:

Step 1a. Define alternative scenarios to the proposed CDM project activity

The following alternatives have been identified:

Power:

1. P1 - The proposed activity not undertaken as a CDM project activity.

2. P4- The generation of power in grid

3. P9 - The installation of new fossil fuel fired power plant of same capacity

For Biomass:

1. B1 - The biomass residues are dumped or left to decay on fields.

2. B3 - The biomass residues are burnt in an uncontrolled manner without utilizing it for energy purposes.

3. B4 - The biomass residues are used for heat generation at the project site.

4. B6 - The biomass residues are used for heat generation in other existing or new boilers at other sites.

For Heat Generation:

1. H1 - The proposed activity not undertaken as a CDM project activity

2. H4 - The generation of heat in boilers using the same type of biomass residues,

Based on the alternatives identified options are:

1. Scenario 3 of “Consolidated methodology for electricity generation from biomass residues” ACM0006 Version 6.2.

2. The proposed project activity not undertaken as a CDM project activity.

The alternative 1 could be justified as a realistic and credible alternative to the project activity. The other alternative given in the step 1a cannot be considered as alternative as several barriers exist and these are demonstrated with evidences on low return on investment. Furthermore the common practice and other barriers have been put-forth to substantiate the same. So only alternative 1 remains as a plausible and credible alternative for the project activity.

Since the project activity establishes:

• Installation of co-generation plant at a site where no power generation existed

• Power is fed to the grid

• Biomass would have been used for heat or left to decay or burnt in uncontrolled manner or a possibility is present for heat generation at other plants

• Heat generation in boiler using same type of biomass residue

� Based on the above, the

most plausible baseline scenario for power, heat and biomass has been identified as the Scenario 3 of the ACM0006 Version 6.2 methodology.

Step passed

Step not passed

Not applicable


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”The project activity involves the installation of a new biomass residue fired cogeneration plant at a site where no power was generated prior to the implementation of the project activity. The power generated by the project plant is fed into the grid or would in the absence of the project activity be purchased from the grid. The biomass residues would in the absence of the project activity (a) be used for heat generation in boilers at the project site and (b) be dumped or left to decay or burnt in an uncontrolled manner without utilizing it for energy purposes. This may apply, for example, where the quantity of biomass residues that was not needed for heat generation was dumped, left to decay or burnt in an uncontrolled manner prior to the project implementation. The heat generated by the new cogeneration plant would in the absence of the project activity”

1b

Consistency with mandatory applicable laws and regulations: The alternatives mentioned are in compliance with the applicable legal and regulatory requirements.

All alternatives mentioned in step 1a are in line with the national regulations and able to meet compliances of environmental regulations. Identified realistic and credible alternative 1 to the project activity that are in compliance with mandatory legislation and regulations taking into account the enforcement in the region / country and EB decisions on national and/or sectoral policies and regulations.

Step passed

Step not passed

Not applicable


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STEP 2

Step 2a

STEP 2: Barrier Analysis

Step 2a: Identify barriers that would prevent the implementation of alternative scenarios:

Sub-step 2a: Technological barriers and Institutional barriers have been put-forth in this barrier analysis. • It is argued that as the region is a

low industrial potential region, the availability of skilled labour is a threat to the project. Besides this it is mentioned that there are not many academic institutions in the region that have the competence and infra structure to produce skilled technical persons suitable for operating such plants. Majority of the populations living in the region have low per capita income and are dependent mostly on agriculture directly or indirectly. Since SAEL’s core business has not been power generation the risk associated is also considered high. And as SAEL’s core business has not been power generation the risk associated is also considered high.

• The silica present in risk husk ash is also foreseen to cause more abrasion than coal ash which would cause long time effects to the equipments.

Institutional barrier:

It has been argued that the U.P state witnesses one of the lowest power tariff for biomass based power generation projects. And also the Power Purchase Agreement has been evolved until 2009-10. So, post 2009-10 the uncertainty of tariff rate for sale of power is still at risk. As per the PPA the proponents have also pay rebate by 1.25% on the payment made within one month, which also reduces the revenue from sale of power. All these have been said to be the Institutional barrier for the project.

Argument not justified

Argument not convincing

Argument justified but not decisive

Argument justified / significant

A visit to the site and nearby areas and interaction with stakeholders such as workmen, local persons etc revealed that observation about the backwardness of the region of project activity is valid and genuine.

A document indicating the data downloaded from the website of new energy was made available. This was further supplemented by Tariff orders of State Electricity Regulatory bodies for biomass based power generation. Validators confirm the existence of these documented in PPA.

Step passed

Step not passed

Not applicable


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2b

Eliminate alternative scenarios which are prevented by the identified barriers:

The only alternative scenario is “The proposed project activity not undertaken as a CDM project activity”. The same has been argued on the barriers faced by the project activity.





Step passed

Step not passed

Not applicable

3

Step 3. Investment Analysis: The project internal rate of return (IRR), with and without CDM benefit has been calculated for the project activity. The IRR calculations of project activity exhibit that the IRR of the project without CDM revenue is 6.78%. Which is below the benchmark PLR of 11%. This analysis indicates that any project should yield returns of more than 11 %, to consider it for implementation. By the support of CDM revenue availed against CERs, the project IRR just crosses the benchmark PLR of 11%.

Sensitivity analysis:

In order to arrive at the conclusion that the financial analysis is robust, and reasonable, the analysis is carried out with variations in the critical assumptions. Such an exercise would generate a report on sensitivity analysis. The critical parameters chosen for sensitivity analysis for the project are Electricity Tariff and Fuel price. And also variations in parameters like O&M Cost and Tariff rate are considered. The Tariff rate and Fuel price in the IRR calculations are taken as base (100 per cent) and the variation in the IRR with 10% increasing and 10% decreasing of the same are calculated.

Hence, even with the sensitivity analysis based on realistic deviations in assumptions, the project IRR of project activity is unlikely to be the most financially attractive as compared to the benchmark returns.

In accordance of “combined tool to identify the baseline scenario and demonstrate additionality” while validating the application of additionality tool, Validation team has made systematic use of information to identify source and estimate the associated risk. It is also ensured by the validation team that evaluation is done on the basis of tool “Guidance on assessment of investment analysis” Version 2 provided in EB-41.

Various elements have been checked during the additionality assessment. Validation team has checked the identified financial indicator (IRR), which is most suitable for the project type and decision context. In order to verify the relevant benchmark value of PLR, validation team has referred all necessary supportive data and found to be OK.

Step passed

Step not passed

Not applicable


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The prime lending rate (PLR) is the benchmark interest rate at which banks in India lend for the implementation of large project activities. Therefore, for any project to be financially attractive, the IRR of the project must be higher than the rate of borrowing of the PLR. If the project IRR doesn’t exceed the PLR, then it would not be financially feasible project activity. The PLR have been established by RBI for borrowers are based on various parameters like actual cost of funds, operating expenses and non-performing assets. This ensures a borrower to get a more realistic rate of interest on its loans. Thus the choice of PLR as the bench mark for the project activity is appropriate and the PP has demonstrated the project returns is less than this bench mark PLR.

The detail financial analysis/IRR/ shows that for the benchmark analysis the indicator opted is the Prime Lending Rate (PLR) at 11% based on the bank lending rates as stated by Reserve Bank of India (RBI) for 5 major banks. (http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/81678.pdf). The PP have chosen an average PLR at 11%.This bench mark has been verified and found to be appropriate. Since the project IRR is 6.78% and is well below the bench mark PLR of 11% the project is deemed additional.


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A sensitivity analysis has also been performed with ±5% to ±10% change in Fuel Price and Tariff and have shown that the IRR in most case is less than the bench mark PLR of 11% and is not economically attractive. The parameters chosen for Sensitivity analysis were best access the robustness of the project activity.





STEP 4

Step 4a

Step 4. Common practice analysis:

Step 4a: Analyze other activities similar to the proposed project activity

SAEL has been argued that SAEL is the first unit in the state to implement a 15 MW rice husk based grid connected power project and this is authenticated by the letter dated 18-Nov-2008 from UPPCL that say “It is to confirm that the Power Purchase Agreement with M/s Sukhbir Agro Energy Limited is the only agreement on biomass based Co-generation Plant in the state of U.P. at present in which the fuel to be used is rice husk.

The Validation team was able to verify the document provided by UPPCL stating that SAEL is the only rice husk based power generating unit to have a PPA in the state of Uttar Pradesh where fuel fired is rice husk.

Step passed

Step not passed

Not applicable


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It was assessed through the letter from UPPCL, the power purchase signing authority for the state of U.P, which has indicated that the SAEL is the first project with rice husk co-generation that would be supplying power to the grid. There is no other project in the region with rice husk as fuel and which sells power to the grid, the same has been confirmed from the letter provided by UPPCL. Thus it can be concluded that the rice husk based co-generation projects is not common practice in the region.





Step 4b

It is argued the project is the biggest rice husk based power generating unit in the region. Even the other co-generation units based on bagasse too have approached for CDM.

It is evident from the letter from UPPCL that the project is the first rice husk based power generation project, that supplies energy to grid.





Step passed

Step not passed

Not applicable

Assessment of the validation team Project is additional

Project is not additional

1) “Combined tool to identify the baseline scenario and demonstrate additionality” version 02.1.


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The additionality of the project has been demonstrated as per the algorithm given in the combined tool. The additionality of project activity is demonstrated as below:

The rice husk based power generating unit with sale to grid is not a common practice hence barriers due to prevailing practice has been accepted by validation team from verifying the letter provided by UPPCL stating that SAEL is the only power generating unit using rice husk having a PPA with UPPCL.

During the discussion with technical team of SAEL, validation team was convinced on the technological associated with project activity like abrasion due to silica as the ash generated through biomass combustion contains more Silica than the ash generated from Coal combustion) and availability of skilled labor. And the institutional barriers pointing that there exists an uncertainty on the tariff post 2009- 2010. Further more the additionality of the project has been demonstrated by the “Benchmark Analysis” route. Benchmark analysis/IRR/ along with confirming sensitivity analysis are elaborated with arguments based on reality. As per the requirements of the Combined tool to identify the baseline scenario and demonstrate additionality, Validation team has made systematic use of information to identify source and to estimate the risk. The chosen benchmark PLR based on the bank lending rates have been verified and found to be appropriate. Further more as per the bench mark PLR has been taken from the RBI released information for five major banks which range between 10.75 to 11.25%. The SAEL have chosen a PLR of 11%. Hence the approach by the project proponent in choosing the bench mark value is deemed to be conservative. Even as per sensitivity analysis +/- 10% variation Tariff rate and Fuel price have been considered and the project IRR is proven to be below the bench mark of 11%. As per Step 3, during the assessment validation team found the benchmark is reliable. During site visit and consequent discussion with SAEL, validation team has ascertained that the decision of project activity implementation was a long term strategic decision only with CDM revenue, it was appropriately concluded by validation team that the project is not viable without CDM revenue. The project was also assessed for the barrier analysis and the common practice and is concluded that the project faces the barriers has claimed in the PDD and also is not a common practice in the region. However, as explained above the step 3 (investment analysis) was considered as the significant supportive claim to additionality.

According to the PDD, the impact of CDM registration of the SAEL project helps in overcoming the financial barriers demonstrated in the PDD. CDM funds for the project activity will help to improve the project competitiveness and financial sustainability and help in the reduction of anthropogenic greenhouse gas.

Thus, the validation team arrived at the opinion that the project activity can be assessed to be additional and is not a BAU case. Taking this into account, it is TUV’s opinion that the PDD sufficiently demonstrates that the project activity faces barriers and the barriers do not prevent the baseline scenario.

Nevertheless some CARs and CRs have been raised and were successfully closed (ref Annex: Validation Protocol - Table 3).


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Baseline Emissions

The baseline emissions calculation explained under section B.6.1 of PDD has adopted the equations suggested in methodology ACM0006/Version 6.2. Baseline determination is performed on the basis of a combined margin of operating margin and build margin. Simple operating margin method is selected to determine the operating margin by the project proponents. A pre-condition for using this method is that the low cost/ must run resources constitute less than 50 per cent of total grid generation in last 5 years. SAEL has checked this condition with the help of data of electricity generated in NEW NE Grid/CEA/ from year 2005-2006 to the year 2007-2008. The choice of these years is acceptable since these data were the latest available at the time of preparation of the final PDD. The grid emission factor has been taken from the Central Electricity Authority, India “CO2 baseline database, version 4, October 2008. (Source: http://www.cea.nic.in). SAEL has considered baseline of NEW NE Grid. Even if version 3 of the CEA database was the valid version during the validation start and could be used as per the “Tool for the calculation of grid emission factor”, version 4 has been accepted because of the more conservative value of 0.80 tCO2/MWh (instead of 0.81 tCO2/MWh).

The calculation of the emission factor is clear and transparently given in section B.6.1 and in annex 3 of PDD. As a result of the check the validation team is convinced of the result of the grid emission factor calculation.

The resultant figure of grid emission factor are as below is deemed to be adequate, transparent as well as conservative.

Operating Margin/CEA/

Year tCO2/MWh

2005-06 1.00

2006-07 1.01

2007-08 1.00

Average 1.00

Build Margin/CEA/

Year tCO2/MWh

2007-08 0.6

Combined Margin = (0.5 x OM) + (0.5 x BM)

Year tCO2/MWh

2007-08 0.80


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Relevant national and sectoral policies have been considered such as decisions of the Ministry of Environment and forest, Uttar Pradesh Pollution Control Board and the energy policy of the Government of India.

In the course of the project validation the CARs and CRs was raised and successfully closed out (ref Annex: Validation Protocol - Table 3).

Prior consideration of the CDM

The below detailed chronology of events have been verified for assessing the serious consideration of CDM:

Document Date

Initial Communication to SAEL board regarding project approval

25.07.2006

Board meeting for approval of project 18.09.2006

Appointment of EPC contractor (Project Start Date) 22.12.2006

Discussion of offer received from Vitol Carbon Solutions Pvt. Ltd. And E&Y P Ltd. for CDM consultancy at Board meeting

18.01.2007

Civil work start at site 15.03.2007

Discussion of offer received from The Louis Berger Group for CDM consultancy at Board meeting

28.04.2007

Turbine contract finalization 28.05.2007

Discussion of offer received from Emergent Ventures India Pvt. Ltd. for CDM consultancy at Board meeting

18.06.2007

Discussion of offer received from FICCI Quality Forum for CDM consultancy at Board meeting

20.11.2007

Appointment of CDM Consultant – FICCI Quality Forum 26.11.2007

First communication with KfW regarding sale of CERs 19.03.2008

First communication with Non-Conventional Energy Development Agency (NEDA), Uttar Pradesh for status and details of biomass based cogeneration plant in UP

27.05.2008

Submission of project to Host Country DNA 04.06.2008

Appointment of Validator (DOE), advance payment done 18.06.2008


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Offer received from GTZ regarding sale of CERs 20.06.2008

Indicative term sheet received from KfW regarding sale of CERs

25.06.2008

Communication with Global Vantage Llc regarding sale of CERs

12.07.2008

Submission of two CD-ROMs containing Project PDD & PCN to DNA

16.07.2008

Meeting with DNA 21.07.2008

Submission of relevant documents to DNA 21.07.2008

Communication with Ecolutions Carbon India Pvt Ltd regarding sale of CERs

22.07.2008

Revised offer received from KfW regarding sale of CERs 01.08.2008

Submission of biomass assessment report to DNA 13.08.2008

Validation site visit 30.08.2008

Project Approval from Host Country DNA 03.09.2008

Second communication with Non-Conventional Energy Development Agency (NEDA), Uttar Pradesh for status and details of biomass based cogeneration plant in UP

12.09.2008

Communication with Green Initiative Carbon Assets S.A. regarding sale of CERs

17.09.2008

Communication with Gujarat Fluorochemicals Limited regarding sale of CERs

24.09.2008

Third communication with Non-Conventional Energy Development Agency (NEDA), Uttar Pradesh for status and details of biomass based cogeneration plant in UP

22.10.2008

First communication with Uttar Pradesh Power Corporation Ltd. (UPPCL) for status and details of biomass based cogeneration plant in UP

24.10.2008

Second communication with Uttar Pradesh Power Corporation Ltd. (UPPCL) for status and details of biomass based cogeneration plant in UP

14.11.2008

Communication received from UPPCL for status and details of biomass based cogeneration plant in UP

14.11.2008


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Communication with Kommunalkredit Public Consulting Gmbh regarding sale of CERs

17.11.2008

Communication received from UPPCL for status and details of biomass based cogeneration plant in UP confirming the project activity to be 1st rice husk based cogeneration plant with electricity export to grid in the state

18.11.2008

Communication with X-change Carbon Pvt. Ltd. Regarding sale of CERs

15.12.2008

The above documentation and communications by the PP indicates the project has been taken seriously as a CDM project and demonstrates that the PP in parallel with implementation has been serious actions to secure CDM revenue.

4.4 Crediting Period

The intended crediting period of the project is fixed 10 years (2009 to 2019). The starting date of the crediting period was expected to be on 1 September 2009 or the date of registration, whichever occurs later.

In the context of starting date and crediting period CAR C1 and C2 was raised and successfully closed (ref Annex: Validation Protocol - Table 3).

4.5 Monitoring Plan

The project activity is applying Approved Monitoring Methodology ACM0006/Version 6.2: “Consolidated methodology electricity generation from biomass residues”. Applicability criteria for monitoring methodology ACM0006/Version 6.2 are same as applicability criteria of the baseline methodology ACM0006/Version 6.2.

An understanding of the monitoring plan with respect to the project activity is as follows:

a. Estimate or measure emissions occurring within the project boundary b. Determine the baseline emission c. Estimate changes in emission outside the project boundary.

The monitoring plan takes into account the baseline emissions, leakages as well as project emissions. The monitoring plan is in line with requirements of ACM0006/Version 6.2. PDD has made provisions for monitoring the GHG emission reduction due to the project activity. All the data necessary for the estimation or measuring the GHG emissions within the project boundary in the project scenario as well as baseline scenario have been included in the monitoring plan of PDD.

The roles, responsibilities and authority for the project activity management, reporting and monitoring procedure and quality control /quality assurance procedure are explained in PDD. Implementation of the monitoring plan can be verified during the next stage of verification and certification.


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Data monitoring: Validation team has checked monitoring methods of key parameters these include energy meter, biomass procured, weight measurement, at SAEL site. The system is proposed to compile data, generate reports and provide flexibility for data usage. Furthermore, monitoring instruments used in the field level monitoring consist of weigh bridge and meters with a local display/output at the measuring point. Data are proposed to be recorded manually in logbooks by technicians.

Equipments used: PDD section B.7 states that the CDM team is responsible for the correctness and completeness for the different proposed monitoring data with procedure for monitoring the instrument, traceability of instrument calibration, make of instrument, location of instrument, calibration method, range of instrument, uncertainty, linkage with system management. Monitoring instruments are proposed to be used in the project activity for monitoring, display, control, collection and storage of data related to key parameters of monitoring plan and for generating reports.

Frequency of monitoring: The frequency of all the monitoring data is according to the Approved monitoring methodology ACM0006; the same is addressed in section B.7.2

Energy parameters: All energy related parameters like electricity generation and captive consumption at SAEL will be monitored by digital energy meters and also proposes to record in relevant logbook.

Fuel parameters: Quantity and moisture content of the fuel (biomass) are proposed to be monitored on a batch basis.

Biomass Transport: The trucks utilized for procurement of biomass is also proposed to be monitored along with the quantity of biomass.

Data recording:

Methods of recording project activity data: All the energy details and captive consumptions are proposed to be recorded separately and the net energy surplus delivered to the grid would be utilized for emission reduction computations.

Data archiving: Details of data archiving are described in Section B of PDD. Monitored data are collected as per the recording frequency for generating reports. As per PDD, history of monitored data can be viewed as per MIS and stored for two years after the end of crediting period.

Review procedures and frequency: Validation team has discussed with SAEL official during site visit regarding the review procedures and frequency. Mr. M.L. Arora, General Manager of SAEL has proposed to review the progress of the implementation of documented procedures, records of monitoring plan on a daily basis.

Calibration methods: Validation team has referred the PDD, to understand the calibration method of different key monitoring parameters. Calibration procedures are adopted to maintain accuracy of equipments/instruments of the plant. Calibration of


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Monitoring Equipment for CDM is systematically linked with the system management. Scheduled training will be given for personnel on calibration of equipments and instruments.

Calibration frequency: During discussion with project proponent, it is concluded that, periodic calibration will be carried out as per the industrial standards for all electrical and electronic instruments and recorded in calibration reports.

Uncertainties related to GHG emissions: As per PDD, the CDM team is responsible for review of the data, uncertainties for monitoring parameters and related equipment details.

Nevertheless some CARs have been raised and were successfully closed (ref Annex: Validation Protocol - Table 3).

4.6 Calculation of GHG Emissions

Methodologies for calculating emission reductions are documented. The project intends to reduce GHG emissions to the extent of the difference of baseline emission and sum of project emission and leakage.

In accordance with ACM0006/Version 6.2 the emission reduction calculation covering leakage, project emission and baseline is demonstrated in section B.6.1 of the PDD. Project emission is also rightly calculated in the PDD/PDD2/. The data used is transparent based on the independent check by the validation team the overall calculation of emission reduction/XCS/ is correct and conservative.

As per ACM0006/Version 6.2, the spatial extent of the project boundary comprises the boiler, turbine, captive power generating equipment, any equipment used to provide auxiliary heat to the system, and the power plants connected physically to the electricity grid that the proposed project activity would displace the energy from the grid.

Consideration of all GHG (s)

- CO2 emission due to transportation of biomass have been included. - CH4 (Methane) emission due to biomass utilization have been excluded and

considered to be zero. - CFCs (Chlorofluorocarbons) or PFCs (Per fluorocarbons) are not used in the

project activity and hence, they are neglected. - Other GHGs have been excluded.

Calculation of baseline emission

The baseline emission has been arrived at based on the electricity generation, heat generation and biomass utilized. The calculation of the same is presented transparently in the section B.6 of PDD


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Project emission

The project activity emission due to transportation of biomass has been included and the same is proposed to be monitored.

Leakage

The SAEL has proposed to do the biomass assessment study every year and would consider the leakage in case required as per the provisions of the methodology.

Nevertheless, some CARs and CRs have been raised and were successfully closed (ref Annex: Validation Protocol - Table 3).

4.7 Environmental Impacts

PDD has given a summary of the environmental impact of the project activity. SAEL has also obtained relevant air and water consents and all necessary statutory clearances from the respective bodies/SC/.

Section D.1 of PDD has described the transboundary impact analysis for the project activity and no significant impact is estimated on the environment due to the project activity. Consent to establish is obtained from Uttar Pradesh State Pollution Control Board.

4.8 Comments by Local Stakeholders

PDD has considered two broad categories of stakeholders Government and Non-Government. Identified Government/local body stakeholders to the project activity and their response to the project activity are as follows:

• A flyer pamphlet notice inviting public to participate on the stakeholder meeting to be held on 26 November 2006. The same has been verified and found to be appropriate. The local villagers have been invited by issuing pamphlets and personal invitation by the PP in the nearby villages. This is deemed sufficient as this the first project to come up in the project village and the villagers have expressed happiness as it will lead to employment opportunities.

• Minutes of meeting on 26 November 2006 held with people living in the nearby area which was organized by the project proponent.

The invitation of local villagers through distribution of flyers is considered adequate as this the first project of such nature in the village and the coverage of newspapers would not conveyed the information, as most of the local populace is refined to the villages only. This was also confirmed during interview with the local villagers.

The approvals and consents granted to the project activity are considered as positive comments for the project activity. Consultants and equipment suppliers are the other stakeholders identified for the project activity. Clearances or permissions for operation of the plant are considered as positive responses to the project activity.

A summary of the comments received and a note on how these concerns are addressed are included in the PDD as evidence in the form of MOM/LSC/.


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Nevertheless, CAR E1 was raised and was successfully closed (ref Annex: Validation Protocol - Table 3).


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5 COMMENTS BY PARTIES, STAKEHOLDERS AND NGOS

According to the modalities for the validation of CDM projects, TÜV NORD JI/CDM CP published the draft PDD on its website www.global-warming.de on 11 July 2008 and invited comments within 30 days (until 10 August 2008) by interested parties, stakeholders and UNFCCC accredited non-governmental organisations. No comments were received.


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6 VALIDATION OPINION

The conclusions of this report show, that the project, as it was described in the project documentation, is in line with all criteria applicable for the validation.

Bangalore, 2009-06-08 Essen, 2009-06-08

Ma Paa Puratchikkanal Rainer Winter Team Leader Final Approval TN JI/CDM CP TN JI/CDM CP

The Sukhbir Agro Energy Limited (SAEL) , has commissioned the TÜV NORD JI/CDM Certification Program to validate the project: “15 MW Biomass Residue Based Power Project at Ghazipur, India”, with regard to the relevant requirements of the UNFCCC for CDM project activities, as well as criteria for consistent project operations, monitoring and reporting. UNFCCC criteria include article 12 of the Kyoto Protocol, the modalities and procedures for CDM (Marrakech Accords), and the relevant decisions by COP/MOP and CDM Executive Board.

The project activity involves installation of one 70 TPH capacity biomass residue fired boiler and one 15 MW turbine of condensing cum extraction type. The other accessories include auxiliary installations and systems, including Electrostatic precipitator (ESP), cooling water system and cooling tower, ash handling system, feed water system, raw water system and DM plant and power evacuation system. The generated power of the 15 MW is proposed to be exported to the grid after meeting the captive requirement of about 2 MW. A risk-based approach has been followed to perform this validation. In the course of the draft validation 8 Corrective Action Requests (CARs) and 13 Clarification Requests (CRs) and were raised and successfully closed.

The review of the project design documentation and additional documents related to baseline and monitoring methodology; the subsequent background investigation, follow-up interviews and review of comments by parties, technology supplier, local stakeholders, employees of SAEL, consultant and NGOs have provided TÜV NORD JI/CDM CP with sufficient evidence to validate the fulfilment of the stated criteria.

In detail the conclusions can be summarised as follows: - The project is in line with all relevant host country criteria (India) and all relevant

UNFCCC requirements for CDM. Project activity approval has been obtained from National CDM Authority as DNA of India vide the Letter number F.No.4/13/2008-CCC dated 3 September 2008.

- The project additionality is sufficiently justified in the PDD. - The monitoring plan is transparent and adequate. - The calculation of the GHG emission reductions is carried out in a transparent and

conservative manner, so that the calculated emission reductions of 672,590 tCO2e is most likely to be achieved within the 10 years (fixed) crediting period.


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7 REFERENCES

Table 7-1: Documents provided by the project proponent

Reference Document

/BAR/ • Biomass Assessment Study report by U Bandyopadhyay Project and Management Consultant dated July 2008.

/CAP/ • EPC Contract with M/s. The Indure Private Limited dated 16 July 2007 for provision of Design, engineering, Procurement, Manufacture, Inspection & Testing, Supply, Erection and commissioning of the proposed power plant on a Turnkey basis..

• Contract Agreement dated 28 May 2007 for supply of Steam Turbine, Generator and Auxiliaries with M/s. Qingdao Jieneng Power Station Engineering Co., Ltd.

/EIA/ EIA notification dated 14 September 2006 – Providing exemption of this category of projects from EIA Approval.

/EQL/ List of equipments at the project site.

/HGA/ Host Government Approval from Ministry of Environment & Forests, Govt of India, F.No.4/13/2008-CCC dated 3 September 2008.

/INS/ Insurance offer from Oriental Insurance Corporation Limited, an Insurance cover agency.

/IRR/ Financial Analysis

/LOAN/ Loan Sanction Letter dated SBI dated 28 August 2007 and PNB dated 27 December 2006.

/LSC/ Proof of local stakeholder consultation process (dated 26 November 2006) and relevant communication.

• A flyer pamphlet notice inviting public to participate on the stakeholder meeting to be held on 26 November 2006.

• Minutes of meeting on 26 November 2006 held with people living in the nearby area which was organized by the project proponent

/MD/ Minutes of meeting of the board of directors of the Company on 18 September 2006 for the decision by the Company’s Management for the CDM Project owing to the benefits of CDM. Copy of the minutes of meeting is provided by the Company.

/MOC/ Modalities of Communication to the Executive Board by the Project


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Reference Document

Participants SAEL and FICCI.

/PC/ Prior consideration documents including board meeting, communication with consultants, communication buyers, approach to DNA of India and appointment of DOE.

/PDD/ 1. Draft PDD “15 MW Biomass Residue Based Power Project at Ghazipur, India,” (hosted for public comments during (11 July 2008 to 10 August 2008).

2. Final PDD incorporating corrections out of Draft Validation Report dated 25 November 2008

/Photos/ Photos taken at rice husk storage, uncontrolled burning and site conditions,

/PO/ EPC Contract with M/s. The Indure Private Limited dated 16 July 2007 for provision of Design, engineering, Procurement, Manufacture, Inspection & Testing, Supply, Erection and commissioning of the proposed power plant on a Turnkey basis. Contract Agreement dated 28 May 2007 for supply of Steam Turbine, Generator and Auxiliaries with M/s. Qingdao Jieneng Power Station Engineering Co., Ltd.

/PPA/ Purvanchal Vidyut Vitaran Nigam Limited power purchase agreement dated 29 July 2006.

/PPL/ Letter from PP stating that rice hsuk would not dumped and left for aerobic decay.

/PQ/ Price quotation for rice husk dated 10 July 2006

/SC/ UPPCB: Pollution Board Consent to Establish dated 8 September 2006.

/SD/ Letter of intent to EPC contractor dated 22 December 2006

/UPPCL/ Letter from UPCL stating that this is the first rice husk power generating project to have signed for PPA dated 18 November 2008.

/XLS/ Baseline and Emission Reduction Calculations (Excel Sheets)


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Table 7-2: Background investigation and assessment documents

Reference Document

/ACM0006/ “Consolidated methodology for electricity generation from biomass residues” – Version 6.2

/CPM/ TÜV NORD JI / CDM CP Manual (incl. CP procedures and forms)

/CEA/ CO2 Baseline Database for the Indian Power Sector, Version 4.0, Central Electricity Authority

/GCP/ UNFCCC: Guidelines for completing CDM-PDD and CDM-NM (Version 6.2.2)

/IPCC-GP/ IPCC Good Practice Guidance & Uncertainty Management in National Greenhouse Gas Inventories, 2000

/IPCC-LULUCF/ 2000 IPCC Good Practice Guidance for LULUCF.

/IPCC-RM/ Revised 2006 IPCC Guidelines for National Greenhouse Gas Inventories: Reference Manual.

/KP/ Kyoto Protocol (1997)

/MA/ Decision 17/CP. 7 (Marrakesh – Accords & Annex to decision 17/CP.7)

/AR/ Annual report of Ministry of Power

/TA/ Combined tool to identify the baseline scenario and demonstrate additionality” version 02.1.

/VVM/ IETA, PCF Validation and Verification Manual 2006 (Dec.)

Table 7-3: Websites used

Reference Link Organisation

/dna/ www.cdmindia.nic.in DNA of India


India


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Reference Link Organisation

/cma/ www.cmaindia.org Website for cement manufactures association

/ipcc/ www.ipcc-nggip.iges.or.jp IPCC publications

/appcb/ www.uppcb.com Uttar Pradesh State Pollution Control Board

/unfccc/ http://cdm.unfccc.int UNFCCC

Table 7-4: List of interviewed persons

Reference MoI1 Name Organisation / Function

/IM01/ V Mr.

Ms

M.L. Arora General Manager. Sukhbir Agro Energy Limited

/IM02/ V Mr.

Ms

Karun Sharma Head – CDM, FICCI

/IM03/ V Mr.

Ms

Charu Gupta Sr. Consultant – CDM, FICCI.

1) Means of Interview: (Telephone, E-Mail, Visit)


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ANNEX

Validation Protocol

Validation Report: 15 MW Biomass Residue Based Power Project at Ghazipur, India


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* MoV = Means of Verification, DR= Document Review, I= Interview Page A-44

ANNEX : VALIDATION PROTOCOL

Table 1: Mandatory Requirements for (CDM) Project Activities

Requirement Reference Conclusion

Parties

The project shall assist Parties included in Annex I in achieving compliance with part of their emission reduction commitment under Art. 3.

Kyoto Protocol Art.12.2

OK. The project activity helps in reducing net global green house gas emissions at significantly lower international costs.

The project shall assist non-Annex I Parties in contributing to the ultimate objective of the UNFCCC.

Kyoto Protocol Art.12.2.

OK

The project shall have the written approval of voluntary participation from the designated national authority of each Party involved.

Kyoto Protocol Art. 12.5a, CDM Modalities and Procedures §40a

CAR A1: The Letter of Approval from the Indian DNA is to be submitted.

CAR A1 is closed.

The project shall assist non-Annex I Parties in achieving sustainable development and shall have obtained confirmation by the host country thereof.

Kyoto Protocol Art. 12.2, CDM Modalities and Procedures §40a

CAR A1: See above

CAR A1 is closed.

In case public funding from Parties included in Annex I is used for the project activity, these Parties shall provide an affirmation that such funding does not result in a diversion of official development assistance and is separate from and is not counted towards the financial obligations of these Parties.

Decision 17/CP.7, CDM Modalities and Procedures Appendix B, § 2

Neither is an Annex 1 Party involved nor is there any public funding.

Parties participating in the CDM shall designate a national authority for the CDM. CDM Modalities and Yes, the National Clean



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Procedures §29 Development Mechanism Authority under the Ministry of Environment & Forests is the Designated National Authority in India, the Host party.

The host Party and the participating Annex I Party shall be a Party to the Kyoto Protocol.

CDM Modalities §30/31a

India, the Host party, ratified the Kyoto Protocol on 26 Aug 2002.

The participating Annex I Party’s assigned amount shall have been calculated and recorded.

CDM Modalities and Procedures §31b

No participation from any Annex I party

The participating Annex I Party shall have in place a national system for estimating GHG emissions and a national registry in accordance with Kyoto Protocol Article 5 and 7.


Not Applicable

Additionality

Reduction in GHG emissions shall be additional to any that would occur in the absence of the project activity, i.e. a CDM project activity is additional if anthropogenic emissions of greenhouse gases by sources are reduced below those that would have occurred in the absence of the registered CDM project activity.

Kyoto Protocol Art. 12.5c, CDM Modalities and Procedures §43

In the absence of the project activity, an equivalent quantity of power would be generated through conventional means adding to the GHG intensity of the grid. An investment analysis has been presented together with a sensitivity analysis to establish that a financial barrier exists for implementation of the project which is mitigated by CER revenues.



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Forecast emission reductions and environmental impacts

The emission reductions shall be real, measurable and give long-term benefits related to the mitigation of climate change.

Kyoto Protocol Art. 12.5b

Electric power is generated from renewable biomass based energy, in the absence of which carbon intensive fuel/s would have been used. Hence, emission reductions achieved are real, measurable and provide long term benefits by reducing GHG emissions.

Environmental impacts (only for large scale projects)

Documentation on the analysis of the environmental impacts of the project activity, including transboundary impacts, shall be submitted, and, if those impacts are considered significant by the project participants or the Host Party, an environmental impact assessment in accordance with procedures as required by the Host Party shall be carried out.

CDM Modalities and Procedures §37c

CR D1: Environmental Impact Assessment needs to be submitted.

CR D1 is closed

Stakeholder involvement

Comments by local stakeholders shall be invited, a summary of these provided, and how due account was taken of any comments received.


OK

Parties, stakeholders and UNFCCC accredited NGOs shall have been invited to comment on the validation requirements for minimum 30 days, and the project design document and comments shall have been made publicly available.

CDM Modalities and Procedures §40

The project was hosted on the TUV’s website http://www.global-warming.de/e/1865/and was available for global stakeholder



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comments from 11 July 2008 to 10 August 2008.

No comments were received.

Other

The baseline and monitoring methodology shall be previously approved by the CDM Executive Board.

CDM Modalities and Procedures §37e

Yes, the project uses approved consolidated methodology ACM0006 (Version 6.2) “Consolidated methodology for electricity generation from biomass residues”.

A baseline shall be established on a project-specific basis, in a transparent manner and taking into account relevant national and/or sectoral policies and circumstances.

CDM Modalities and Procedures §45c,d

A project specific baseline has been established in a transparent manner.

The baseline methodology shall exclude to earn CERs for decreases in activity levels outside the project activity or due to force majeure.

CDM Modalities and Procedures §47

CERs due to decreases in activity levels outside the project activity are also included.

The project design document shall be in conformance with the UNFCCC CDM-PDD format.

CDM Modalities and Procedures Appendix B, EB Decision

Yes, the PDD is submitted in the approved CDM-PDD format, Version 3, in effect as of 28 Jul 2006.

Provisions for monitoring, verification and reporting shall be in accordance with the modalities described in the Marrakech Accords and relevant decisions of the COP/MOP.

CDM Modalities and Procedures §37f

OK.



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Requirements for small-scale projects only

The proposed project activity shall meet the eligibility criteria for small scale CDM project activities set out in § 6 I of the Marrakech Accords and shall not be a debundled component of a larger project activity.

Simplified Modalities and Procedures for Small Scale CDM Project Activities §12a,c

The project activity consists of installing a 15 MW capacity biomass based power project and thus it comes under consolidated methodology project activity. It is not a debundled component of a larger project activity.

The proposed project activity shall conform to one of the project categories defined for small scale CDM project activities and use the simplified baseline and monitoring methodology for that project category.

Simplified Modalities and Procedures for Small Scale CDM Project Activities §22e

NA.

If required by the host country, an analysis of the environmental impacts of the project activity is carried out and documented.

Simplified Modalities and Procedures for Small Scale CDM Project Activities §22c

CR D1: Environmental Impact Assessment report needs to be submitted.

CR D1 is closed.



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Table 2: Requirements Checklist

CHECKLIST QUESTION Ref. MoV* COMMENTS Draft Concl. Final

Concl.

A. General Description of Project Activity

The project design is assessed.

A.1. Project Boundaries

Project Boundaries are the limits and borders defining the GHG emission reduction project.

A.1.1. Are the project’s spatial boundaries (geographical) clearly defined?

/PDD/

(A.4.1)

DR The project activity is proposed to be located in the premises of a rice mill and solvent extraction plant of Sukhbir Agro Energy Limited at Village Fatehullapur, in Ghazipur district, Uttar Pradesh, India. The project is located on Varanasi-Gorakhpur highway and is about 60 Km away from Varanasi.

Rice husk transfer system, high pressure boilers, and turbine generator, step-up transformers, transmission lines and the connected NEW NE grid define the project boundary.

OK

A.1.2. Are the project’s system boundaries (components and facilities used to mitigate

/PDD/ (B.3.)

DR The green field power project activity consists of installation of one 70 TPH capacity biomass residue fired boiler and one

OK



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Concl.

GHGs) clearly defined? 15 MW turbines of condensing cum extraction type. The other accessories include auxiliary installations and systems, including Electrostatic precipitator (ESP), cooling water system and cooling tower, ash handling system, feed water system, raw water system and DM plant and power evacuation system. The generated power of the 15 MW is proposed to be exported to the Grid after meeting the captive requirement of about 2MW.

A.2. Participation Requirements

Referring to Part A, Annex 1 and 2 of the PDD as well as the CDM glossary with respect to the terms Party, Letter of Approval, Authorization and Project Participant.

A.2.1. Which Parties and project participants are participating in the project?

/PDD/ (A.3.)

DR/I India is the Host Party; private entity Sukhbir Agro Energy Limited (SAEL), the project owner, and Federation of Indian Chambers of Commerce and Industry (FICCI), are the project participants.

Letter of approval from the MoEF needs to be submitted.

CAR A1 OK

A.2.2. Have all involved Parties provided a valid and complete

/PDD/ DR Letter of approval from the Designated CAR A1 OK



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Concl.

letter of approval and have all private/public project participants been authorized by an involved Party?

(A.3.)

National Authority, MoEF, Government of India, is to be submitted for verification.

A.2.3. Do all participating Parties fulfil the participation requirements as follows: − Ratification of the Kyoto

Protocol

− Voluntary participation

− Designated a National Authority

/PDD/

/UNFCCC/

DR Yes, India has ratified the Kyoto Protocol on 26 August 2002 and has appointed the Ministry of Environment and Forests (MoEF) as the Designated National Authority.

OK

A.2.4. Potential public funding for the project from Parties in Annex I shall not be a diversion of official development assistance.

/PDD/ (A.4.5,

Annex 2)

/IM01/

DR/I No public funding has been availed for this project activity.

OK



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Concl.

A.3. Technology to be employed

Validation of project technology focuses on the project engineering, choice of technology and competence/ maintenance needs. The validator should ensure that environmentally safe and sound technology and know-how is used.

A.3.1. Does the project design engineering reflect current good practices?

/PDD/ (A.4.2.)

DR The project plans to install one 70 TPH capacity biomass residue fired boiler and a 15 MW capacity extraction cum condensing type turbo generator. Apart from these, a system is proposed in place for control of the emission of particulate matter from the boiler exhaust and a water treatment plant; these are to minimise the pollution and adverse environmental impacts. Thus, the project design engineering reflects good practices.

OK

A.3.2. Does the project use state of the art technology or would the technology result in a significantly better performance than any commonly used technologies in the host country?

/PDD/ (A.4.2.)

DR Equipments used for biomass power production like boiler, piping, pressure parts, turbine and generator follows standards like IBR, ANSI, AMSE, IEC etc., This reflects the latest updated technology employed and thus would reflect in significant better performance.

OK



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Concl.

A.3.3. Does the project make provisions for meeting training and maintenance needs?

/PDD/ O&M_1,2,& 3

DR/ Provision for training needs have been addressed; however, training needs in terms of CDM needs to be provided.

CR A1 OK

A.4. Contribution to Sustainable Development

The project’s contribution to sustainable development is assessed.

A.4.1. Has the host country confirmed that the project assists it in achieving sustainable development?

DR The approval from the DNA of India confirming that the project assists in achieving sustainable development is to be submitted for verification.

CAR A1 OK

A.4.2. Will the project create other environmental or social benefits than GHG emission reductions?

PDD

(A-2)

DR/I In addition to aiding the lowering of the carbon intensity of the connected power grid, the project activity has created employment opportunities for the local population. Employment opportunities like transportation of biomass residues from near by areas, operation and maintenance, local business improvement etc. Thus the project creates positive environmental, economic and social benefits.

OK

Small scale project activity



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Concl.

Is it assessed whether the project qualifies as small-scale CDM project activity

A.4.3. Does the project qualify as a small scale CDM project activity as defined in paragraph 6 I of decision 17/CP.7 on the modalities and procedures for the CDM?

PDD

(A-2)

DR NA NA

A.4.4. Is the small scale project activity not a debundled component of a larger project activity?

PDD

(A..4.5)

DR NA NA

A.5. General Topics

A.5.1. Has the PDD been duly filled? PDD DR The PDD has been prepared in the CDM-PDD format, Version 03 in effect as of 28 July 2006.

OK

A.5.2. Has all necessary information been made available to the validator?

.

PDD

DR All necessary information has been provided in the PDD, the following documents are to be provided:

1. Pollution control board consent to Establish

2. Biomass assessment report 3. Rice Husk Balance study

CR A2 OK



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Concl.

4. All statutory clearances 5. Purchase order copies

B. Project Baseline

The validation of the project baseline establishes whether the selected baseline methodology is appropriate and whether the selected baseline represents a likely baseline scenario.

B.1. Baseline Methodology

It is assessed whether the project applies an appropriate baseline methodology.

B.1.1. Does the project apply an approved methodology and the correct version thereof?

/PDD/

(B.1)

/UNFCCC/

DR The project falls under: Approved combined baseline and monitoring methodology ACM0006 (Version 6.2) “Consolidated methodology for electricity generation from biomass residues” is applied to the project activity

Approved combined baseline and monitoring methodology ACM0002 (version 7) “Consolidated methodology for grid-connected electricity generation from renewable sources” is used to determine the baseline grid emission factor.

Baseline scenario selection and additionality

OK



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Concl.

determination is done by using “Combined tool to identify the baseline scenario and demonstrate additionality” version 02.1.

B.1.2. Are the applicability criteria in the baseline methodology all fulfilled?

/PDD/

(B.2.)

/ACM0006/

DR The project activity consists of generating electricity by utilizing rice husk and fulfills all the applicability criteria of ACM0006.

1. The project is rice husk based power generation project.

2. The project is a green field power project where currently no energy is being generated.

3. The project utilizes rice husk, a biomass residue

4. Implementation of the project doesn’t result in increase in the production capacity.

5. The biomass are not stored for more than one year.

No special preparation is needed for the rice husk before combustion.

Thus, all the applicability criteria are fulfilled.

OK



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Concl.

B.2. Baseline Scenario Determination

The choice of the baseline scenario will be validated with focus on whether the baseline is a likely scenario, and whether the methodology to define the baseline scenario has been followed in a complete and transparent manner.

B.2.1. What is the baseline scenario? /PDD/

(B.3)

DR The identified baseline scenario identified as per ACM0006 are:

Power – P4 - The generation of power in grid,

Biomass – (B1 or B2 or B3) & B4 - The biomass residues are used for heat generation at the project site,

Heat – H4 - The generation of heat in boilers using the same type of biomass residues,

OK

B.2.2. What other alternative scenarios have been considered and why is the selected scenario the most likely one?

/PDD/

(B.4.)

DR In the absence of the project activity some of alternative scenarios taken into account are :

Power:

1. The proposed activity not undertaken as a CDM project activity.

2. The generation of power in grid

CAR B5

OK



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Concl.

3. The installation of new fossil fuel fired power plant of same capacity

For Biomass:

1. The biomass residues are used for heat generation at the project site.

2. The biomass residues are dumped or left to decay on fields.

3. The biomass residues are burnt in an uncontrolled manner without utilizing it for energy purposes.


1. The proposed activity not undertaken as a CDM project activity

2. The generation of heat in boilers using the same type of biomass residues.

All the alternatives of Power, Biomass and Heat needs to be explained and the elimination justified in the PDD.

B.2.3. Has the baseline scenario been determined according to the methodology?

/PDD/

(B.4.)

DR All plausible scenarios have been analysed and the most realistic and credible baseline have been considered as per the ACM0006

OK



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Concl.

methodology.

B.2.4. Has the baseline scenario been determined using conservative assumptions where possible?

/PDD/

(B.4.)

DR Yes, the baseline as been determined using conservative assumptions.

OK

B.2.5. Does the baseline scenario sufficiently take into account relevant national and/or sectoral policies, macro-economic trends and political aspirations?

/PDD/

(B.4.)

DR Yes, power generation specific sectoral policies propose to encourage renewable energy generation, which have been taken into account. Economics dictate fossil fuel based power generation, which has also been considered.

OK

B.2.6. Is the baseline scenario determination compatible with the available data and are all literature and sources clearly referenced?

/PDD/

(B.4.)

DR Yes. The baseline scenario is compatible with available data.

OK

B.2.7. Have the major risks to the baseline been identified?

/PDD/

(B.4.)

DR Errors of omission and commission are minimised because CEA is the collating authority for all data related to power and also has been mandated with the task of calculating the Grid Emission Factors.

No major risks to the baseline are foreseen.

OK



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Concl.

B.3. Additionality Determination

The assessment of additionality will be validated with focus on whether the project itself is not a likely baseline scenario.

B.3.1. Is the project additionality assessed according to the methodology?

/PDD/

(B.5)

DR Yes. The additionality has been assessed in line with the stipulations of the ACM0006 methodology.

OK

B.3.2. Are all assumptions stated in a transparent and conservative manner?

/PDD/

(B.5.)

DR All the given data have been well referenced in a transparent and conservative manner.

OK

B.3.3. Is sufficient evidence provided to support the relevance of the arguments made?

/PDD/

(B.5.)

/IRR/

/BAR/

/XCS/

DR/I Yes, it has been demonstrated through the use of the latest additionality tool “Combined tool to identify the baseline scenario and demonstrate additionality” version 02.1, that the project itself is not a likely baseline scenario. . STEP 1: Identification of alternative scenarios: The alternative scenarios identified for the baseline are:

Power:

1. The proposed activity not undertaken as a

OK



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Concl.

CDM project activity.

2. The generation of power in grid

3. The installation of new fossil fuel fired power plant of same capacity

For Biomass:

1. The biomass residues are used for heat generation at the project site.

2. The biomass residues are dumped or left to decay on fields.

3. The biomass residues are burnt in an uncontrolled manner without utilizing it for energy purposes.


1. The proposed activity not undertaken as a CDM project activity

2. The generation of heat in boilers using the same type of biomass residues,

STEP 1b: All the above listed alternatives comply with all existing statutory rules and regulations.



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Concl.

Based on the identified alternatives the most plausible baseline scenario for power, heat and biomass has been identified as the Scenario 3 of the ACM0006 methdology.

STEP 2: Barrier analysis: • Sub-step 2a: Technological barriers

and Institutional barriers have been put-forth in this barrier analysis.

• It is argued that as the region is a low industrial potential region, the availability of skilled labour is a threat to the project. And as SAEL’s core business has not been power generation the risk associated is also considered high.

• The silica present in risk husk ash is also foreseen to cause more abrasion than coal ash which would cause long time effects to the equipments.

Institutional barrier: • It has been argued that the U.P state

witnesses the lowest power tariff for biomass based power generation projects. And also the Power Purchase Agreement has been



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Concl.

evolved until 2009-10. So, post 2009-10 the uncertainty of tariff rate for sale of power is still at risk. As per the PPA the proponents have also pay rebate by 1.25% on the payment made within one month, which also reduces the revenue from sale of power. All these have been said to be the Institutional barrier for the project.

STEP 3: Investment Analysis:

To demonstrate the additionality of the project, SAEL have chosen – Bench mark analysis.

The bench mark chosen is Prime Lending Rate published by Reserve Bank of India at the time of conceptualisation. The PLR of 11% as been taken from the RBI published data (http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/81678.pdf)

It has been demonstrated that the project IRR of the project activity without CDM revenues is 6.78% which is lower than the



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Concl.

benchmark PLR of 11%. The IRR improves to 14.64 % with CDM revenues. A sensitivity analysis has also been performed with ±5% to ±10% change in PLF, Fuel Price and energy Selling Price. and have shown that the IRR in most case is less than the bench mark PLR of 11%. The financial spread sheet calculations need to be provided for verification. STEP 4: Common practice analysis: It is stated that the SAEL is the biggest power plant from rice husk based power generation and it is also put-forth that the renewable energy penetration was only 1.7% of the total power generation in the state of U.P. and this is not a common practice in the region. Even in the co-generation sector it is the bagasse based power projects that are dominant and the SAEL is the first rice husk based power project of the capacity of 15 MW.

Thus, the project is demonstrated to be additional.



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Concl.

The following clarifications and documents need to be provided:

1. It needs be demonstrated how availability of skilled labour is termed under technological barrier.

2. Proof needs to be provided on how silica is said to be more abrasive

3. Proof needs to be presented for the statement that in U.P. the lowest tariff rates are prevailing for biomass based power generation.

4. A copy of PPA needs to be provided for verification

5. Biomass assessment study report needs to be provided

6. Financial spreadsheet calculations need to be provided for verification.

7. Suitable third party documentary evidence should be submitted to substantiate the following expenses assumed in the calculation of IRR as they are not recommended by UPERC Order:

Miscellaneous expenses at 2% of O&M Cost

Administration cost at 2% of sales revenue

Insurance at 0.2% of project cost

CRB1

CAR B2

CAR B3



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Concl.

Metering errors at 0.5% of sales revenue.

8. The interest on working capital does not appear to be correct for the following reasons:

Entire working capital requirement is deemed to have been financed by banks, while normally, bank finance is restricted to only 75% of current assets less current liabilities

Since a rebate of 1.25% rebate has been provided for to get the payment within a month, sundry debtors for one month is not acceptable.

Assumption given in cell I30 of ‘Assumption’ worksheet is at variance with actual computation of interest on working capital in the ‘IRR’ worksheet

One month stock of O&M expenditure is deducted from one month stock of fuel and receivables for reasons not known

Tax computation is not correct as it has been made without accounting for depreciation.

The tax rates assumed in the calculation do not appear to be correct. The tax rate should correspond to the period in which the investment decision was taken.

Sensitivity analysis should be in conformity with Annex 45 of EB 41. Sensitivity analysis should be presented in a manner which

CAR B4

CR B6



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Concl.

enables independent verification

The sensitivity analysis reveals that the project could become non additional if the tariff goes up by 10% or the fuel cost comes down by 10%. Examine the probability of occurrence of such variations.

The statement “all the bagasse based projects in the region……” (p.18) is vague. Substantiate the statement with statistics on projects which have been implemented/under implementation and projects, which have been registered/under registration with UNFCCC

Submit documentary evidence in support of the power tariff for self consumption (Rs.3.59/kWh) paid by the PP. The Power tariff is reported to be Rs.3.90/kWh,which has been increased.

Submit the documentary evidence for the rebate of 1.25% provided on sale revenue or the expenditure should be removed.

The basis for providing 0.2% of sales revenue as collection charges when 1.25% rebate has been taken into account needs to be explained.

B.3.4. If the starting date of the /PDD/ DR A copy of the Letter of intent from EPC CR B2



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Concl.

project activity is before the date of validation, has sufficient evidence been provided that the incentive from the CDM was seriously considered in the decision to proceed with the project activity?

(C.1.1.)

contractor dated 22 December 2006 has been submitted as evidence for start date of the project activity.

Proof of CDM consideration needs to be provided for verification.

EPC contract needs to be provided for verification.

B.4. Calculation of GHG Emission Reductions – Project emissions

It is assessed whether the project emissions are stated according to the methodology and whether the argumentation for the choice of default factors and values – where applicable – is justified.

B.4.1. Are the calculations documented according to the approved methodology and in a complete and transparent manner?

/PDD/

(B.6.)

DR CO2 emissions from off-site transportation biomass residues are included in the project boundary and will be measured and accounted as project emissions. This is deducted from the gross emission reductions to arrive at net emission reductions for credit to the project activity. This bas been calculated in a transparent manner.

OK

B.4.2. Have conservative /PDD/ DR The grid emission factor is sourced from OK



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Concl.

assumptions been used when calculating the project emissions

(B.6.) publicly available data published by CEA, which has used conservative assumptions. Project emissions are calculated as The biomass residues procured from outside are transported to the project site by trucks and the CO2 emissions resulting from transportation of the biomass residues to the project plant are calculated as per option-1 on the basis of distance and the number of trips.

B.4.3. Are uncertainties in the project emission estimates properly addressed?

/PDD/

(B.6.)

(B.7.)

DR The quantum of electricity import is measured by a manual meter and DCS system of acceptable level of accuracy (Class 0.5). Installation of a check and main meter eliminates errors to a large extent. The project emissions are calculated on the basis of distance and the number of trips the trucks used for transportation of biomass residue to the project plant. The meters are subject to periodic calibration for every one year. All these measures minimize any possible uncertainty in the estimate of project emissions.

OK



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Concl.

B.5. Calculation of GHG Emission Reductions – Baseline emissions

It is assessed whether the baseline emissions are stated according to the methodology and whether the argumentation for the choice of default factors and values – where applicable – is justified.

B.5.1. Are the calculations documented according to the approved methodology and in a complete and transparent manner?

/PDD/

(B.6.)

/CEA/

/XCS/

DR Baseline emission calculations have been carried out in accordance with the requirements of the methodology. The grid emission factor is multiplied with the power exported to the grid to arrive at gross emission reductions from which project emissions are deducted to arrive at net emission reductions. The values for Combined Margin have been sourced from the CEA published data.

OK

B.5.2. Have conservative assumptions been used when calculating the baseline emissions

/PDD/

(B.6.)

DR The grid emission factor is sourced from publicly available data published by CEA, of India.

OK

B.5.3. Are uncertainties in the baseline emission estimates

/PDD/ DR No uncertainties are foreseen for the baseline emissions.

OK



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Concl.

properly addressed? B.6.)

B.6. Calculation of GHG Emission Reductions – Leakage

It is assessed whether leakage emissions are stated according to the methodology and whether the argumentation for the choice of default factors and values – where applicable – is justified.

B.6.1. Are the leakage calculations documented according to the approved methodology and in a complete and transparent manner?

/PDD/

(B.6.)

DR/I Leakage is not applicable as no transfer of equipment is envisaged either from or to the project. However, biomass procurement pattern and emissions arising in the course of the same needs to be addressed in the PDD.

CAR B6 OK

B.6.2. Have conservative assumptions been used when calculating the leakage emissions?

/PDD/

(B.6.)

DR/I Refer to B.6.1 OK

B.6.3. Are uncertainties in the leakage emission estimates properly addressed?

/PDD/

(B.6.)

DR/I Refer to B.6.1 OK



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B.7. Emission Reductions

The emission reductions shall be real, measurable and give long-term benefits related to the mitigation of climate change.

B.7.1. Are the emission reductions real, measurable and give long-term benefits related to the mitigation of climate change.

/PDD/

(B.6.)

DR Power is generated by converting the available biomass energy, which is fed to a regional distribution grid that is predominantly fed by GHG intensive power plants, thus effectively lowering the carbon intensity of the grid. Thus, the emission reductions are real, measurable and provide long-term benefits.

OK

B.8. Monitoring Methodology

It is assessed whether the project applies an appropriate baseline methodology.

B.8.1. Is the monitoring plan documented according to the approved methodology and in a complete and transparent manner?

/PDD/

(B.7.)

DR Monitoring plan is documented according to approved consolidated baseline and monitoring methodology ACM0006/ Version 6.2, is chosen for the proposed project activity. Thus, it deals with power generation, heat generation and biomass residue scenarios in conjunction. The methodology is in complete and transparent manner. For

OK



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Concl.

calculation of CERs the electricity generated is multiplied by emission factor and is deducted for the project emissions to get the net emission reduction accrued from the project.

B.8.2. Will all monitored data required for verification and issuance be kept for two years after the end of the crediting period or the last issuance of CERs, for this project activity, whichever occurs later?

/PDD/

(B.7)

DR, The monitored data will be archived and preserved for at least for two years after the crediting period as per the requirements.

OK

B.9. Monitoring of Project Emissions

It is established whether the monitoring plan provides for reliable and complete project emission data over time.

B.9.1. Does the monitoring plan provide for the collection and archiving of all relevant data necessary for estimation or measuring the greenhouse gas emissions within the project boundary during the crediting period?

/PDD/

(B.7.)

DR All data related to auxiliary consumption and gross production are calibrated electronically and project emissions are recorded in a separate log book and the details recorded are the distance and the number of trips the trucks used for transportation of biomass fuel. Thus the monitoring plan provide for the collection and archiving of all relevant data necessary

OK



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Concl.

for estimation or measuring the greenhouse gas emissions within the project boundary during the crediting period.

B.9.2. Are the choices of project GHG indicators reasonable and conservative?

/PDD/

(B.7.)

DR Project emissions like transportation of biomass residue also included in the project emission calculation. So this indicates conservative assumption.

OK

B.9.3. Is the measurement method clearly stated for each GHG value to be monitored and deemed appropriate?

/PDD/

(B.7.)

DR The grid emission factor is fixed ex ante and power import is measured by an accurate, tamper proof, calibrated meter.

OK

B.9.4. Is the measurement equipment described and deemed appropriate?

/PDD/

(B.7.)

DR The manual and DCS meters are standard equipment in use in this power sector. Thus these equipments are deemed appropriate.

OK

B.9.5. Is the measurement accuracy addressed and deemed appropriate? Are procedures in place on how to deal with erroneous measurements?

/PDD/

(B.7.)

DR The meters used are of 0.5 class. In annex 4 under the title “Monitoring Information“, is the procedure to be followed in the event of faulty recording.

OK

B.9.6. Is the measurement interval identified and deemed appropriate?

/PDD/

(B.7.)

DR Measurement is done continuously and is compared on a daily basis by the shift in charge. However, recording of data relevant to CER calculations occurs once in a month.

OK

B.9.7. Is the registration, monitoring, /PDD/ DR Yes, annex 4 gives complete details of OK



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measurement and reporting procedure defined?

registration, monitoring, measurement and reporting procedures.

B.9.8. Are procedures identified for maintenance of monitoring equipment and installations? Are the calibration intervals being observed?

/PDD/

DR/I The meters are under the custody of the Project participants and Purchaser of power. A faulty meter is normally replaced with a tested meter by project participants carries out accuracy check of the meters at the time of installation and there after every one year meter is proposed to be calibrated with help of third party inspection.

OK

B.9.9. Are procedures identified for day-to-day records handling (including what records to keep, storage area of records and how to process performance documentation)

/PDD/

DR/I

The Director and the CDM team is responsible for maintaining all the data and periodically sends the data to the client for archival safekeeping. Performance documentation is monitored by the same team who has also provided a minimum performance guarantee.

OK

B.10. Monitoring of Baseline Emissions

It is established whether the monitoring plan provides for reliable and complete baseline emission data over time.

B.10.1. Does the monitoring plan provide for the collection and archiving of all relevant data necessary for determining

/PDD/

(B.7.)

DR Facilities for collection and recording of all relevant data have been provided. Quantum of electricity generated is recorded in

CR B3 OK



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Concl.

baseline emissions during the crediting period?

electronic form and archived as per methodology. However, medium of recording of other data and archiving of the records in conformity with the methodology needs to be put in place.

B.10.2. Are the choices of baseline GHG indicators reasonable and conservative?

/PDD/

(B.7.)

DR Yes. OK

B.10.3. Is the measurement method clearly stated for each baseline indicator to be monitored and also deemed appropriate?

/PDD/

(B.7.)

DR Refer to B.10.1 OK

B.10.4. Is the measurement equipment described and deemed appropriate?

/PDD/

(B.7.)

DR Yes. OK

B.10.5. Is the measurement accuracy addressed and deemed appropriate? Are procedures in place on how to deal with erroneous measurements?

/PDD/

(B.7.)

DR Yes. OK

B.10.6. Is the measurement interval for baseline data identified and deemed appropriate?

/PDD/

(B.7.)

DR Refer to B.9.6 OK

B.10.7. Is the registration, monitoring, measurement and reporting

/PDD/ DR Yes, the PDD defines the outline of a procedure to register, monitor and measure

OK



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Concl.

procedure defined? (B.7.) and report data.

B.10.8. Are procedures identified for maintenance of monitoring equipment and installations? Are the calibration intervals being observed?

/PDD/

(B.7.)

DR Yes. The meter is proposed to be calibrated annually.

OK

B.10.9. Are procedures identified for day-to-day records handling (including what records to keep, storage area of records and how to process performance documentation)

/PDD/

(B.7.)

DR Yes. OK

B.11. Monitoring of Leakage

It is assessed whether the monitoring plan provides for reliable and complete leakage data over time.

B.11.1. Does the monitoring plan provide for the collection and archiving of all relevant data necessary for determining leakage?

/PDD/

(B.7.)

DR Please refer B.6.1 CAR B6 OK

B.11.2. Are the choices of project leakage indicators reasonable and conservative?

/PDD/

(B.7.)

DR The baseline scenario corresponds to scenario 3 mentioned in the PDD and the PP has chosen option L2 to demonstrate that the biomass residues used did not adversely affect fossil fuel consumption

CAR B6 OK



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Concl.

elsewhere.

B.11.3. Is the measurement method clearly stated for each leakage value to be monitored and deemed appropriate?

/PDD/

(B.7.)

DR Pending clarification B.11.2. CAR B6 OK

B.12. Monitoring of Sustainable Development Indicators/ Environmental Impacts

It is assessed whether choices of indicators are reasonable and complete to monitor sustainable performance over time.

B.12.1. Is the monitoring of sustainable development indicators/ environmental impacts warranted by legislation in the host country?

/PDD/

(A.2. E.1)

- Legislation in the Host Country, India, does not mandate monitoring of sustainable indicators.

OK

B.12.2. Does the monitoring plan provide for the collection and archiving of relevant data concerning environmental, social and economic impacts?

/PDD/

(B.7.)

- Refer to B.12.1 OK

B.12.3. Are the sustainable development indicators in line with stated national priorities in the Host Country?

/PDD/

(B.7.)

- Refer to B.12.1 OK



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B.13. Project Management Planning

It is checked that project implementation is properly prepared for and that critical arrangements are addressed.

B.13.1. Is the authority and responsibility of overall project management clearly described?

/PDD/

DR, I

Yes, the authority and responsibility of overall project management is described.

OK

B.13.2. Are procedures identified for training of monitoring personnel?

/PDD/ I

DR The training of monitoring of CDM personnel needs to be provided.

CR B4 OK

B.13.3. Are procedures identified for emergency preparedness for cases where emergencies can cause unintended emissions?

/PDD/ DR/I Emergency procedure is in place. OK

B.13.4. Are procedures identified for review of reported results/data?

/PDD/ DR Yes, the Director, General Manager and the shift in charge review the reported data.

OK

B.13.5. Are procedures identified for corrective actions in order to provide for more accurate future monitoring and reporting?

/PDD/ DR The procedure for corrective action needs to be in place.

CR B5 OK



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Concl.

C. Duration of the Project/ Crediting Period

It is assessed whether the temporary boundaries of the project are clearly defined.

C.1. Are the project’s starting date and operational lifetime clearly defined and evidenced?

/PDD/ (C.1.)

/SD/

DR Project start date is reckoned as 22 December 2006 and operational life time is 20 years.

Date of letter of intent to EPC contractor needs to be submitted.

CR C1 OK

C.2. Is the start of the crediting period clearly defined and reasonable?

/PDD/ (C.2.)

DR A fixed crediting period of ten years starting from 11 November 2008 or project registration date which ever is later has been chosen.

The crediting period start date needs to be revised.

CAR C1 OK

D. Environmental Impacts

Documentation on the analysis of the environmental impacts will be assessed, and if deemed significant, an EIA should be provided to the validator.



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Concl.

D.1. Has an analysis of the environmental impacts of the project activity been sufficiently described?

/PDD/ (D.1.)

DR A brief write up is provided about the likely environmental impacts of the project activity.

OK

D.2. Are there any Host Party requirements for an Environmental Impact Assessment (EIA), and if yes, is an EIA approved?

/PDD/ (D.1.)

/EIA/

DR

Clarification is required for EIA study not being required for the project activity.

CR D1 OK

D.3. Will the project create any adverse environmental effects?

/PDD/ (D.1.)

DR/I The project activity is not expected to cause any adverse environmental effects.

OK

D.4. Are transboundary environmental impacts considered in the analysis?

/PDD/ (D.1.)

DR Pending clarification D.2 CR D1 OK

D.5. Have identified environmental impacts been addressed in the project design?

/PDD/ (D.2.)

DR Pending Clarificaiton D.2 CR D1 OK

D.6. Does the project comply with environmental legislation in the host country?

/PDD/ (D.1.)

DR/I Provide the consent to Establish from the Uttar Pradesh Pollution Control Board for Verification.

CR D2 OK



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Concl.

For Small-scale projects

D.7. Does host country legislation require an analysis of the environmental impacts of the project activity?

Not Applicable

D.8. Does the project comply with environmental legislation in the host country?

Not Applicable

D.9. Will the project create any adverse environmental effects?

Not Applicable

D.10. Have environmental impacts been identified and addressed in the PDD?

Not Applicable

E. Stakeholder Comments

The validator should ensure that stakeholder comments have been invited with appropriate media and that due account has been taken of any comments received.



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Concl.

E.1. Have relevant stakeholders been consulted?

/PDD/

(E.1.)

/LSC/

DR, I

A local stakeholders meeting was conducted on 26 November 2006 in the campus of SAEL at Fatehullahpur, Tehsil & Ghazipur.

Information about the proposed project had been provided to the participants and their comments have been recorded.

No adverse comment is reported.

Minutes of the proceedings of the meeting needs to be submitted.

CR E1 OK

E.2. Have appropriate media been used to invite comments by local stakeholders?

/PDD/

(E.1.)

DR/I

Copy of notice informing the local stakeholders about the proposed meeting needs to be submitted for verification.

CR E2 OK

E.3. If a stakeholder consultation process is required by regulations/laws in the host country, has the stakeholder consultation process been carried out in accordance with such regulations/laws?

Local laws No such requirement exists. OK

E.4. Is a summary of the stakeholder comments received provided?

/PDD/

(E.2.)

DR Pending clarification E.1 CR E1 OK



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Concl.

E.5. Has due account been taken of any stakeholder comments received?

/PDD/

(E.3.)

DR/I Pending Clarification E.1 CR E1 OK



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Table 3: Resolution of Corrective Action and Clarification Requests

Draft report clarification requests and corrective action requests by validation team

Ref. To checklist question in table 2


Validation team conclusion

CAR A1

Letter of approval from the Designated National Authority, MoEF, Government of India, is to be submitted for validation.

A.2.1, A.2.2, A.3.3, A.4.1

Approval from the DNA, MoEF, Government of India was received in October 2008. The same has been submitted to the DOE.

OK.

The LoA from the host country dated 3 September 2008 has been verified and accepted.

CAR A1 is closed.

CAR B1

Suitable third party documentary evidence should be submitted to substantiate the following expenses assumed in the calculation of IRR as they are not recommended by UPERC Order:

a) Miscellaneous expenses at 2% of O&M Cost b) Administration cost at 2% of sales revenue c) Insurance at 0.2% of project cost d) Metering errors at 0.5% of sales revenue

B.3.3

Following changes are made in IRR working:

Miscellaneous expenses : Nil

Metering errors : Nil

This is the general practice adopted in calculation. In the event of absence of any evidence, the same has been removed

OK.

The revised financials have been accepted with the changes.

CAR B.1 is closed.

CAR B2

The interest on working capital does not appear to be

B.3.3 OK



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correct for the following reasons:

• Entire working capital requirement is deemed to have been financed by banks, while normally, bank finance is restricted to only 75% of current assets less current liabilities

• Since a rebate of 1.25% rebate has been provided for to get the payment within a month, sundry debtors for one month is not acceptable.

• Assumption given in cell I30 of ‘Assumption’ worksheet is at variance with actual computation of interest on working capital in the ‘IRR’ worksheet

• One month stock of O&M expenditure is deducted from one month stock of fuel and receivables for reasons not known

a)Interest on working capital has been worked out considering 75% as loan

b) Sales realisation will not happen on day to day basis. Hence assumed at 30 days. The billings cycle will be at least 45 -60 days. Hence debtors will be at least 30 days.

c) The same is a printing error and has been removed

d) O&M expenditure is not on account of stock . But it is a creditor for expenses and hence reduced from current assets to arrive at net working capital

The revised financial spreadsheet has addressed all the issues.

CAR B.2. is closed.

CAR B3

• Tax computation is not correct as it has been made without accounting for depreciation.

• The tax rates assumed in the calculation do not appear to be correct. The tax rate should correspond to the period in which the investment decision was taken.

B.3.3 Tax working changed considering depreciation

Tax rate changed to rates prevailing in June 2006

OK.

Accepted.

CAR B.3 is closed.



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CAR B4

Sensitivity analysis should be in conformity with Annex 45 of EB 41. Sensitivity analysis should be presented in a manner which enables independent verification

B.3.3 The sensitivity analysis is now in confirmity with Annex 45 of EB 41. Only Electricity sale price and fuel cost have been taken for doing sensitivity analysis

OK.

The same has been verified and accepted.

CAR B.4 is closed.

CAR B5

All the alternatives of Power, Biomass and Heat needs to be explained and the elimination justified in the PDD.

B.2.2 All the alternatives have been addressed and the elimination of the same justified in the revised PDD.

All the alternatives have been verified and assessed. It is found to be satisfactory.

CAR B5 is closed.

CAR B6

Biomass procurement pattern and emissions arising in the course of the same needs to be addressed in the PDD.

B.6.1 Since the biomass is procured within a 200 kms range and is adhering to the methodology requirement, the emissions arising out of it is not considered. The same is addressed in the revised PDD section B.6.1, pages 28 and 29.

The biomass assessment study report has been verified and the biomass availability within range is deemed satisfactory.

CAR B6 is closed.

CAR C1

C.1 The crediting period start date has been revised to 15/02/2009. The same has been updated in the

OK.



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The crediting period start date needs to be revised. PDD. CAR C1 is closed.

CR A1

Training needs in terms of CDM needs to be provided.

A.2.2 The project proponent has appointed a CDM consultant to guide them throughout the CDM project life. The consultant has experienced personnel in the field of CDM. The consultant will take care of the entire CDM project and will train the Project Proponent’s staff to do the monitoring as per the requirement of CDM.

The project proponent has also built an internal CDM project team. The details of this team have been put in section B.7.2 of the PDD.

OK.

The requisite training provisions made by the Project Proponent is in line with the CDM requirements.

CR A1 is closed.

CR A2

The following documents are to be provided:

Pollution control board consent to Establish

Biomass assessment report

Rice Husk Balance study

A.5.2 The following documents:

1. Pollution control board Consent to Establish

2. Biomass assessment report

3. Rice husk balance study (Included in the investment analysis/CER estimation sheet)

OK.

All the documents have been verified.

CR A.2 is closed.



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All statutory clearances

Purchase order copies

4. All statutory clearances and,

5. Purchase order copies of equipments related to project activity have been submitted to the DOE.

CR B1

The following clarifications and documents needs to be provided:

• It needs be demonstrated how availability of skilled labour is termed under technological barrier.

• Proof needs to be provided on how silica is said to be more abrasive

• Proof needs to be presented for the statement that in U.P. the lowest tariff rates are prevailing for biomass based power generation.

• A copy of PPA needs to be provided for verification • Biomass assessment study report needs to be

provided • Financial spreadsheet calculations need to be

provided for verification.

B. 3.3 • Availability of skilled labour has been now indicated in the other barriers. In this part of country because of poverty and low infrastructure, the progress has been very slow. Here per capita income is very low and this part of eastern India is still living with old habits and technology.

• Silica being has very high compression strength and is brittle and non porous. Besides this there is minimum oil content and this makes it hard and abrasive. Some physical characteristics of these two products have been produced to justify our opinion.

• The PDD states that the power sale tariff in the UP

OK.

The clarifications and supporting documentary proofs have been verified.

The financial spread sheet has been analyzed and CAR’s B2. B3, B4 and CR B6 have been raised and closed.

CR B1 is closed.



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state is amongst the lowest. This is now again substantiated with the latest tariffs. Please refer to file attached “Tariff Comparison.zip”.

• Copy of PPA has been provided.

• Biomass assessment study report has been provided.

• Final spreadsheet calculations have been provided.

CR B2

Proof of CDM consideration needs to be provided for verification.

EPC contract needs to be provided for verification.

B.3.4 Proof of CDM consideration in the form of Minutes of Board of Directors has been provided for closing the CR B 2.

EPC contract with INDURE has been provided.

OK.

The minutes of the Board meeting dated 18 September 2006 has been verified.

The EPC contract dated 16 July 2007 has been verified and accepted.

CR B2 is closed.

CR B3 B.10.1 Medium of recording of other data OK.



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Medium of recording of other data and archiving of the records in conformity with the methodology needs to be put in place.

has been indicated and the archiving of the records will be done two years after the crediting period is as per methodology.

CR B3 is closed.

CR B4

The training of monitoring of CDM personnel needs to be provided.

B.13.2 Training of monitoring personnel has been provided by the In charge of Power plant. Training to all other heads of departments have also conducted by the CDM consultants. It has been indicated that regular brushing of GHG emission reduction project and specific training need requirements shall be met with internal as well as external sources.

OK.

CR B4 is closed.

CR B5

The procedure for corrective action needs to be in place.

B.13.5 Procedure for corrective action indicating need for root cause identification has been made and the same is attached as evidence. All executives have been informed of this requirement for closing non-conformities.

OK.

CR B5 is closed.

CR B6

The sensitivity analysis reveals that the project could become non additional if the tariff goes up by 10% or the

B.3.3

The revised sensitivity analysis shows that the project does not

OK.

The clarifications and supporting



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fuel cost comes down by 10%. Examine the probability of occurrence of such variations.

The statement “all the bagasse based projects in the region……” (p.18) is vague. Substantiate the statement

become non additional if fuel cost comes down by 10%. Also this situation will not happen, since the price of ricehusk has already increased in the region. The evidence for the same has been given to the DOE during site visit.

The chances of tariff increasing by a level of 10% is very bleak. This is very much evident from the tariff represented in the PPA. The year on year increment of electricity sale price for a project is approximately Rs 0.04 amounting to 1.3% only and the tariff increase for projects commencing in different financial years is to the tune of 4%.

The same is substantiated by letter received from UPPCL and also the list of projects available from their website. The document is attached (UPPCL ppa.pdf)

documentary proofs have been verified.

CR B6 is closed.



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with statistics on projects which have been implemented/under implementation and projects, which have been registered/under registration with UNFCCC

Submit documentary evidence in support of the power tariff for self consumption (Rs.3.59/kWh) paid by the PP. The Power tariff is reported to be Rs.3.90/kWh,which has been increased.

Submit the documentary evidence for the rebate of 1.25% provided on sale revenue or the expenditure should be removed.

The basis for providing 0.2% of sales revenue as collection charges when 1.25% rebate has been taken into account needs to be explained.

This is evident in the PPA. The same has been submitted to the DOE.

This is the general practice adopted in calculation. In the event of absence of any evidence, the same has been removed.

CR C1

Date of letter of intent to EPC contractor needs to be submitted.

C.1 Date of letter of intent to EPC contractor dated issued to has been submitted to DOE.

The EPC contract dated 16 July 2007 has been verified.

CR C1 is closed.



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CR D1

Clarification is required for EIA study not being required for the project activity.

D.1, D.2, D.4, D.5

A copy of clarification on exemption from EIA has been submitted to DOE.

OK.

The same has been verified from the Ministry of Environment and forest circular dated 21 November 2006.

CR D1 is closed.

CR D2

Provide the consent to Establish from the Uttar Pradesh Pollution Control Board for Verification.

D.6 Consent to establish from UPPCB bearing has been submitted to DOE.

OK.

The consent to establish dated 8 September 2006 has been verified.

CR D2 is closed.

CR E1

Minutes of the proceedings of the meeting needs to be submitted.

E.1 Minutes of proceedings of stakeholders meeting has been submitted to DOE.

OK.

The stakeholder’s consultation mnutes



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dated 26 November 2006 has been verified.

CR E1 is closed.

CR E2

Invitation notice for stakeholder’s consultation needs to be provided.

E.2, E.4, E.5 A copy of invitation notice issued inviting stakeholders for consultation has been submitted to DOE.

OK.

The invitation notice for the stakeholder’s meeting to be held on 26 November 2006 has been verified.

CR E2 is closed.

GENERAL ISSUES:

1. Spread sheet for baseline calculations is required. 2. Financial spread calculations needs to be provided.



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Table 4: Assessment of Baseline Identification

Assessment of validation team

Baseline Alternatives

identified

Elimi-nated

Reason for elimination Evidence

used

Appropriateness of

information source

Explanation of final result

P1 No Not Applicable /PDD/

/IRR/

In the baseline scenario when the proposed project activity is not undertaken as CDM project, it abides by the legal and regulatory requirements of the host country. But, the various barriers as discussed in the section B.5 of the PDD, have demonstrated that the project would not be viable without CDM revenues.

P2 Yes

No biomass based power generation existed before the proposed project activity at site.

PPA and also by Physical

verification by DOE

during site visit

No power generation existed prior to the project activity. The project proponent has entered into an agreement for supply of power to the grid through a PPA.

P3 Yes No power generation existed before the project activity at site.

PPA and also by Physical

verification by DOE

during site visit

No power generation existed prior to the project activity. The PP has signed an agreement by PPA to sell power to grid by the project activity.

P4 No Not Applicable /PPA/ This pertains to the grid scenario for generation of power by the grid connected power plants, hence not applicable to the project. The project was proposed by the project proponent for supply of power to grid.



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P5 Yes

This option would not optimally utilize the fuel because of lower electricity generation efficiency leading to lower power output. Hence it was dropped by the project proponent at the time of decision making. The project returns would also affect the loan repayment.

/IRR/

/UPPCL/

A lower inefficient plant will produce less power affecting the income from the project severely. The IRR of the project activity when operating under the proposed project efficiency itself is unattractive; so, a further lower efficiency project would only affect IRR adversely. It can also be noted that no loans can be obtained if the project returns are very low. As seen from the IRR computation, the project IRR at the assumed efficiency of 80% reaches the bench mark only with the CDM revenue.

So, with lower efficiency proposal the project IRR reduces drastically. This was tested by lowering the installed capacity to 12 MW, PLF to 70% and reducing the project cost by INR 142.5 M and calculating the project IRR. The project IRR works out to <0 (-10.12%) without CDM revenues. In our opinion it is practically not possible to get financing for such conditions. Therefore, the dropping of the alternative as a possible scenario by the PP is justified..

Apart form the above and as per the UPPCL letter, this is the first rice husk based grid connected Project. Activity that would deliver power to the Grid. When evaluated from the projects available in the UNFCCC, it is seen that most of the rice husk based power generation units are small. So, the PPs choice of investing with better efficiency plant instead of lower efficiency plant with lower output is acceptable.

P6 Yes

This option would not optimally utilize the fuel because of lower electricity generation efficiency for generating the same power output. Option was also dropped by the project proponent considering the loan repayment would not be an easy task.

/IRR/

/UPPCL/

Lower boiler efficiency occurs in majority of cases due to insufficient combustion of the fuel, and radiation losses. Radiation losses make the working conditions in the boiler room unbearable. Also, the saving of project cost is only in insulation and is negligible. Thus, inefficient burning of the fuel alone is considered for the foregoing analysis:

1. The particulate matter content in the stack emissions become higher requiring higher investments on establishing and operation of pollution control abatement measures.

2. It also involves extra investment as the storage space for the biomass required under the changed efficiency requires a larger



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storage space.

3. These, by and large, nullify any cost advantage the PP may have in opting for a less efficient system.

As under scenario P5, the IRR under such circumstances works out to –be very low even with CDM consideration.

Thus the option can be ruled out..

P7 Yes

No biomass based power generation existed before the project activity at site hence question of retrofitting does not arise.

/EQL/

Physical verification

by DOE during site

visit

/PPA/

No evidence of biomass based power generation found during site inspection. The equipment list at the project site also has been verified and found that no biomass based power supply existed.

P8 Yes

No biomass based power generation existed before the project activity at site; hence no retrofitting of existing biomass residue fired biomass is envisaged.

/EQL/


by DOE during site

visit

/PPA/

No evidence of biomass based power generation found during site inspection and also from the equipment list.

P9 No It is a possible alternative. /PPA/

This alternative is also in compliance with all laws and regulation. Hence, retaining coal based power generation as a possible alternative is deemed acceptable. However, the PPA has been executed for power supply to grid using biomass only and no captive consumption scenario has been arrived at.

H1 No Not Applicable /IRR/ In the baseline scenario when the proposed project activity not undertaken as CDM project, it abides by the legal and regulatory



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requirements of the host country. But, the various barriers as discussed in the section B.5 of the PDD, have demonstrated that the project would not be viable without CDM revenues.

H2 Yes

This option would not optimally utilize the fuel because of lower efficiency. Hence would adversely affect the project returns.

Interview

/EQL/

/IRR/

Lower efficiency leads to lower project out-put and thereby affecting the returns drastically from the project activity, which can be seen from the IRR computations. Thus this option can be ruled out.

H3 Yes

No fossil fuel based co-generation leading to generation of heat existed before the project activity at site


by DOE during site

visit

/EQL/

No evidence of fossil based co-generation was found during the site visit.

H4 No Not Applicable /PDD/ A possible alternative.

H5 Yes

No biomass residue based cogeneration plant existed before the project activity at site.

/EQL/

Physical Verification

by DOE during site

visit

No evidence of biomass based co-generation has been found.

H6 Yes

With rice husk available as an internal source of fuel, generation of heat using fossil fuels will not be a plausible alternative. Also with the small 10 TPH boiler in place, further

/EQL/

Site Visit

The PP alteady has a facility with availability of rice husk and is obvious that they cannot venture to establish a fossil fuel sourced heat generation..



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investment will have to be done to install a similar capacity fossil fuel fired boiler would involve.

H7 Yes

Use of heat from external sources such as district heat is neither available nor such practices are prevalent in the region. The region has very few industries.

/Site Visit/ The region does not have any such facility and this was confirmed during site-visit.

H8 Yes

There is both captive heat and power demand and also the option of surplus electricity export to grid. As such the option of using other heat generation technologies (e.g. heat pumps or solar energy) compared to cogeneration system is not a possible alternative. Also under the pre-project scenario the heat generation is based on rice husk as fuel. Switching from such internally available fuel source to a highly capital intensive proposition of Solar energy is not a possible alternative.

/XLS/

/Site Visit/

Interview

The in-house availability of rice husk proves that the PP would not think of investing in high cost solar energy sources. The same can be derived from the baseline computations. Thus, this option is not a feasible option to the PP, has availability of rice husk eliminates, the possible implementation of alternate technologies.



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B1 No Not Applicable /Photos/

/Interview/ This is a possible alternative as the biomass could have been left to

decay.

B2 Yes

The alternative of anaerobic decay for example using deep landfills is not into practice in the region of the project activity.

/PPL/

/Interview/

This is not a possible alternative as this would involve the local pollution control authorities to have such landfills. No landfills are found in the region. And also the letter from PP has also been evidenced that the biomass would not be dumped under aerobic conditions.

B3 No Not Applicable

/Photos/

/Interview/

/Site Visit/

This is a possible alternative.

B4 No Not Applicable /Site Visit/


B5 Yes

This is the first grid-connected project activity based on rice husk in the state of Uttar Pradesh, in India. This is demonstrated from the letter received from UPPCL.

UPPCL letter

indicating that the project

activity is with rice

husk is first of its kind.

As this is the first rice-husk based co-generation grid connected plant in the region, this option is not a possible alternative with the existing scenario. The letter of UPPCL indicates the same. UPPCL is the authority for executing PPA and hence this evidence is deemed acceptable.

B6 No Not Applicable

/Interview/

/Site Visit /




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B7 Yes

There is no other commercial and established use of rice husk for energy purpose such as generation of bio fuels currently except for combustion to generate energy, in the region. This is also indicated from the biomass assessment study.

/BAR/

Biomass assessment

report

The region does not have such application facilities.

B8 Yes

Biomass residue (Rice husk) is not used as fertiliser or as feedstock currently except for combustion to generate energy, in the region. This is also established from the biomass assessment study done.

/BAR/

Biomass assessment

report

Such facilities are not evident in the region.



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Table 5: Assessment of Barrier Analysis

Assessment of validation team Kind of Barrier (invest,

tech, other)

Description of Barrier Evidence used Appropriateness of

information source

Explanation of final result

Investment Barrier

The proposed project activity is not financially attractive and it is the CDM revenue that makes it viable. The financial indicator chosen is the internal rate of return for the project (IRR) and is most suitable for the project type and decision context. This is compared with the cost of financing which has been taken from the Prime Lending Rate (PLR) in India prevailing at the time of taking decision. PLR is conservatively estimated at 11%.

The calculation of the IRR is based on the project cash inflows from sale of electricity to grid and project cash outflows related to cost of operation and maintenance of the plant, fuel cost, etc. All these costs considered are in line with industry standards.

On the basis of above assumptions, the IRR of the project computed without the inclusion of CER revenues was found to be 6.78% and increases to 14.64% after the inclusion of CER revenue.

/PDD/

/IRR/

The investment barrier spread sheet has been verified, the PP has established this barrier with the low return envisaged from the project. The same has been compared to a bench mark PLR at 11%. The project IRR is 6.78%, which is well below the PLR bench mark chosen, hence this analysis is acceptable.



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Institutional Barrier

PPA tariff and poor implementation of policies related to biomass based power sector:

1. Uttar Pradesh Electricity Regulatory Commission has announced the tariff for sale of power from renewable sources of energy for the term 2005-06 to 2009-10. The short term PPA and indicated tariff rate applicable after 2009-10 are yet not defined.

2. Besides this the tariff rate in the state of Uttar Pradesh is among the lowest provided by various state regulatory bodies for biomass based power

3. PPA details a rebate of 1.25% on the billed amount for payment made within one month

4. Lack of implementation capacity in the renewable energy sector

/PPA/

Tariff orders of state electricity regulatory

bodies

/PPA/

New Energy India web site

1. The PPA does not indicate the tariff rate post 2010 and there exists uncertainty in tariff rate. Hence the argument is acceptable.

2. The tariff rate provided is found to be low in Uttar Pradesh (U.P.) and Orissa compared to the neighboring state tariff orders. Since the project is in the state of U.P. This argument is deemed acceptable.

3. Though this is not a decisive argument, such clause does exist in the PPA. However this is not a decisive factor.

4. Not a decisive factor and hence of not major importance.



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Table 6: Assessment of Financial Parameters

No financial parameters are used for additionality justification

Assessment of all financial parameters see below

DOE ASSESSMENT

Parameter Value

applied Unit

Source of Information

(please indicate document and page)

Reference Correctness of value applied

Appropriateness of information

source Comment

Capital Expenditure

634500000.00

INR /XLS/

Summary – H8

Costing provided by EPC

Contractor

As per the cost provided in the EPC contract and is taken by PP for financial computations from the EPC contract record. The value applied is correct.

Installed Capacity 15 MW /PDD/ - Page 2

/XLS/ - Summary D4

Generator name

plate and purchase

order

The purchase order depicts the capacity as 15 MW and the name plate of generator specifies the same. The value applied is correct.

Operating days

Season – 180

Off season - 150

Days /XLS/ - Summary D5, D6

Plant operation

details

The rice husk processing is seasonal, that is these are based on the rice mill operational days, and based on the processing days the same has been accounted for, thus, the seasonal days mentioned is deemed acceptable. The PPA also mentions tariff difference during on season and off-season days

Plant load factor 80% % /XLS/ - Summary D9

/PDD/ - Page 30

UPERC Guidelines

The plant is estimated to run at 80% PLF. Considering the husk processed, the plant operational details, and all other aspects on break down, maintenance etc. The UPERC guidelines



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http://www.uperc.org/Copy%20of%20Order%20-UPERC%20NCE%20Policy%20FINAL%20DT.18-7-2005.pdf (page 15 point 5.5) have provided assumption of PLF of 60% for bagasse based co-generation plants. This PLF has been reduced from 80% to 60% for bagasse based co-generation plants based on the 6 to 8 months sugar mill operation. Since, this is a rice husk based project and considering the longer period of operation of rice mills, the 80% PLF is deemed acceptable.

And also verifying at the following neighboring state regulatory orders:

1. The Andhra Pradesh APERC order No. 84 dated 20th March 2004 has considered a PLF of 80%.

2. Haryana State has mentioned 80% PLF as per HERC Commission order on Renewable Energy Tariff & Other issues for FY 2007-08 to FY 2012-13 in Annexure B at page number 11.

Thus, considering the above Electricity Regulatory Commission orders a PLF of 80% considered is appropriate for the project activity.

Auxiliary Consumption

11 % /XLS/ - Summary D10

/PDD/ - Page 30

Assumption in PDD

SAEL have identified the number of electrical equipments that fall under auxiliary equipments category and the total auxiliary power consumption has been computed as 11.18%. This has been taken by the PP in consultation with the equipment suppliers. The computation of equipment wise energy consumption has been verified and found to be ok. Moreover, the UPERC guidelines mention



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auxiliary consumption ranging between 8.5 to 11% for bagasse based co-generation projects. Since, the rice husk based co-generation projects have requirements of additional equipments such as condensate extraction pump, cooling water pumps and cooling tower fans, hence, the auxiliary consumption of 11% considered is appropriate.

Rice husk requirement for project activity

118272 TPA /XLS/ – Summary D23

Estimated on the

basis of 80% boiler efficiency

as detailed in the

purchase order

This has been computed based on the efficiency of boiler and hence considered ok.

In house rice husk supply

34569 TPA /XLS/ – Summary D21

Based on rice paddy processed in the mill

This is computed by the PP based on the capability to process rice husk in-house and hence the value applied is ok.

Rice husk cost 1200 INR /XLS/ – Summary C29

/PQ/

Rate quotation

from contractor

The rate from the rice husk supplier contract has been verified and the value applied is correct.

O&M Cost 2.5

% of total

project cost

/XLS/ – Summary D21 UPERC Policy

The same as been verified from UPERC policy Page no 18 point 5.10 dated 18 July 2005.

//www.uperc.org/Copy%20of%20Order%20-UPERC%20NCE%20Policy%20FINAL%20DT.18-7-2005.pdf



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Administration Cost

2.5 % of sale

revenue /XLS/ – Summary G31

Assumption in XLS

The administrative cost has been considered as per the staff level, administrative requirements,traveling, conveyance, communication, stationery, staff welfare etc., and hence, it is ok.

Insurance 0.2% of

project cost % /XLS/ – Summary G33

Assumption in XLS

/INS/

SAEL has taken offer from ‘The Oriental Insurance Company Limited’ and the value is 0.202 %. Hence the insurance rate considered at 0.2% is appropriate.

Depreciation rate 95% in 20

years % /XLS/ – Summary G32

Depreciation on SLM basis has

been considered as per

the companies

act

The same has been verified from schedule 14 of companies act (II (a) prescribes the rate of depreciation to be charged to the assets accordingly to the rate applicable for plant and machinery @4.75 SLM (Straight Line Method)..

http://www.fastfacts.co.in/resources/DepCoAct.rtf

Interest on working capital

10.25% % /XLS/ – Summary G30

Assumption in XLS

/LOAN/

The same has been verified from Loan

sanction letter

MAT 7.5% % /XLS/ – Summary C32 Prevailing rates in

June 2006

Rates of MAT were applicable at the time of decision making. Confirmed by data available on http://www.banknetindia.com/banking/budget63a.htm which gives details of budget proposals

Corporate Tax 35% % /XLS/ – Summary C33 Prevailing rates in

June 2006

Rates confirmed by visiting http://www.kpmg.com.hk/en/virtual_library/Tax/competitiveness_series/CorporateTaxRates.pdf



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Power selling rate

2008-09

3.25 & 3.28

2009-10

3.29 & 3.32

Rs/kWh /XLS/ – Summary C52, C53 & D52, D53

PPA

The same has been verified from the PPA and the value applied is correct. The tariff rate post 2010 is not yet determined and defined. The IRR was subject to an increase of 3 paise per kWh of energy sold every year and the IRR was found to be still below the bench mark.

Power purchase rate

3.320625 Rs/kWh /XLS/ – Summary C56

As per current UPERC policy

UPERC directive

The same has been verified from the PPA and the value applied is correct.

Grid emission factor

0.80 tCO2/M

Wh /XLS/ – Summary H51

CEA guidelines

The data has been sourced from the published data of the Central Electricity Authority (version 4). http://www.cea.nic.in/planning/c%20and%20e/Government%20of%20India%20website.htm

CER selling price 10 EURO /XLS/ – Summary H52

Assumption

This rate has been taken by PP as to arrive at the CER revenue that would be gained by the project activity.

EURO conversion rate

55 INR/EU

RO

/XLS/ – Summary H53 Prevalent exchange

rate in June 2006

This is taken from the prevailing conversion rates in 2006.

Net CER to SAEL (after adaptation fee & consultancy fee)

94% %

/XLS/ – Summary H58 Assumption in XLS This has been arrived by PP has computed from

various payable charges towards consultancy.



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ANNEX : CERTIFICATES



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