hydropower as cdm project activities october, 2003 international affairs department hydroelectric...
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Hydropower Hydropower as CDM Project Activitiesas CDM Project Activities
October, 2003
International Affairs DepartmentHydroelectric Power Development Center
New Energy Foundation (NEF)
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ContentsContents
What is CDM?Hydropower and CDMCDM Scheme and KeywordsState of Hydropower CDM ProjectsKey Issues for Host Country of
Hydropower CDM Projects
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What is CDM?Hydropower and CDMCDM Scheme and KeywordsState of Hydropower CDM ProjectsKey issues for Host Country of
Hydropower CDM Projects
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Kyoto ProtocolKyoto Protocol
Adopted at the Third Conference of Parties (COP3), United Nations Framework Convention on Climate Change (UNFCCC) , held in Kyoto, Dec. 1997
International treaty containing legally binding constraints on greenhouse gas ( GHG) emissions. (CO2, CH4, N2O, HFCs, PFCs, SF6)
Industrialized Countries (Annex I Parties) agreed to limit their GHG emissions, -5% from 1990 levels by 2008-2012.
3 flexible mechanism (Kyoto mechanism)– Emissions trading– Joint Implementation (JI)– Clean Development Mechanism (CDM)
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Emission reduction targetsEmission reduction targets
EU Reductiontarget
Emissionshare
Countries transitingto market economy
Reductiontarget
Emissionshare
Othercountries
Reductiontarget
Emissionshare
Austria -21% 0.4% Bulgaria -8% 0.9% Australia 8% 2.3%
Belgium -7.5% 0.8% Croatia -5% Canada -6% 3.3%
Denmark -21% 0.4% Czech -8% 1.1% Iceland 10% 0.0%
Finland 0% 0.4% Estonia -8% 0.2% Japan -6% 6.8%
France 0% 3.1% Hungary -6% 0.6% Liechtenstein -8% 0.0%
Germany -21% 6.7% Latvia -8% 0.2% Monaco -8% 0.0%
Greece 25% 0.6% Lithuania -8% 0.3% New Zealand 0% 0.4%
Ireland 13% 0.3% Poland -6% 3.1% Norway 1% 0.3%
Italy -6.5% 2.9% Romania -8% 1.5% Switzerland -8% 0.3%
Luxemburg -28% 0.1% Russia 0% 16.6% US -7% 33.6%
Netherlands -6% 1.2% Slovakia -8% 0.4%
Portugal 27% 0.4% Slovenia -8% 0.1%
Spain 15% 1.6% Ukraine 0% 5.0%
Sweden 4% 0.4%
UK -12.5% 4.1%
EU total -8% 23.1% Developing countries (non-Annex I) have no targets
Targets of Annex I Parties
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Clean Development Mechanism (CDM)Clean Development Mechanism (CDM)
Help Annex 1 countries comply with their emission reduction commitments
Contribute to the ultimate goal of the convention i.e., stabilization of GHG concentrations in the atmosphere
Assist non-Annex 1 countries in achieving sustainable development
CER
Distribute tohost country
Transfer toinvesting country
Before project After project
Host countryInvesting country (Annex I)
Assigned amount
CO
2 em
issi
on
Fund, technology, etc.
CER: Certified Emission Reduction
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What is CDM?Hydropower and CDMCDM Scheme and KeywordsState of Hydropower CDM ProjectsKey issues for Host Country of
Hydropower CDM Projects
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Hydropower is effective for CDMHydropower is effective for CDM
Hydropower is one of few carbon-free energy sources capable of large scale & low cost generation → large potential of GHG reduction
If all of the “technically exploitable capability” is exploited, CO2 reduction will be …
technically exploitable capability 11,570 TWh
× emission factor 0.5 t-CO2/MWh
= 5.79 billion t-CO2 ( 25 % of world’s CO2 emission)
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CDM is effective for hydropowerCDM is effective for hydropower
Construction cost: 2,500 $/kW, operation rate 50%, payout period 50 years
electricity price:⇒ 3.1 cents/kWh ( IRR 5% )5.8 cents/kWh ( IRR 10% )
If CO2 reduction unit is 0.5kg-CO2/kWh and carbon credit is $5/t-CO2 , additional income will be 0.25 cent/kWh– CO2 reduction effect : 4 ~ 8 % of electricity price
Carbon finance may become important for hydro-power development
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Potential water power sourcesPotential water power sources
0
1000
2000
3000
4000
5000
Africa NorthAmerica
SouthAmerica
Asia Europe MiddleEast
Oceania Japan
Pow
er g
ener
atio
n (T
Wh) undeveloped
planed or under construction
installed
Based on “Survey of Energy Resources 1998 (World Energy Council)”
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Comparison of CO2 Emissions per kWh Comparison of CO2 Emissions per kWh by Electric Power Sourcesby Electric Power Sources
0.088 0.0380.130 0.111
0.887
0.704 0.4780.408
0.0110.0150.0220.0290.0530
0.2
0.4
0.6
0.8
1
1.2
Coa
l
Oil
LN
G
LN
G C
C
Pho
tovo
ltaic
s
Win
d
Nuc
lear
Geo
ther
mal
Hyd
ropo
wer
CO
2 em
issi
ons
(kg-
CO
2.kW
h)
Fuel
Facility and Operation
Based on a report published by the Central ResearchInstitute of the Electric Power Industry, Japan
0.975
0.742
0.6080.519
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Benefits from CDM projects for Benefits from CDM projects for hydropower in South Asian Countrieshydropower in South Asian Countries
Usage of abundant potential of undeveloped hydropower resources
Contribute to the stability of power supply Infrastructure development Revenues from sales of CER Development aid in addition to ODA Low running cost Other benefits from multi-purpose dams
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What is CDM?Hydropower and CDMCDM Scheme and KeywordsState of Hydropower CDM ProjectsKey Issues for Host Country of
Hydropower CDM Projects
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CDM schemeCDM scheme
Project Planning
Project Implementation/ Annual Monitoring
Verification and Certification of Reductions
Issuance of CER
Add to Adaptation Fund
Preparation of Project Design Document(PDD)
Approval of New Methodology (by CDM EB)
Validation(by DOE) and Registration(by CDM EB)
CDM Executive Board (CDM EB)
Designated Operational Entity (DOE)
Designated Operational Entity (DOE)
CDM Executive Board (CDM EB)
(Project developer)
Designated NationalAuthority (DNA)
Project developer
Project developer Sale in Market
Project developer
(Project developer)
(Project developer)
Host countryparticipation
Investing country approval Host country approvalDesignated NationalAuthority (DNA)
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CDM related organizations (1)CDM related organizations (1)
CDM Executive Board (CDM EB)– Supervise the CDM projects under the authority and
guidance of the COP/MOP * • Make recommendations on further modalities and procedures• Approve new methodologies related to, baselines, monitoring plans
and project boundaries Methodology panel
• Review provisions with regard to simplified modalities, procedures and the definitions of small scale project activities Small Scale CDM panel
• Be responsible for the accreditation of DOE CDM accreditation panel
• Register the validated projects as CDM project activities• Issue CER according to the emission reduction verified by DOE * COP: Conference of Parties, MOP: Meeting of Parties
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CDM related organizations (2)CDM related organizations (2)
Designated Operational Entity (DOE)– A body (private or public) accredited by the CDM EB to
review projects• Validate proposed CDM project activities• Verify and certify reductions in anthropogenic GHG emissions
Make information obtained from CDM project participants publicly available, as required by the executive board
Designated National Authority (DNA)– Parties participating in the CDM shall designate DNA– Interfaces between project owner and the DOE
• Malaysia: Conservation and Environmental Management Division, Ministry of Science, Technology and the Environment
• Bhutan: National Environment Commission Secretariat
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Approval of New MethodologyApproval of New Methodology
Preparation of draft PDD (new methodology)
Submission to the CDM EB through DOE
Experts’ desk review, Public comments
Recommendation by Methodology Panel
Consideration by CDM EB
B-rank: Changes required C-rank: Not approvedA-rank: Approved
As of Sep. 2003 A-rank: 2 projects B-rank: 4 projects C-rank: 6 projects (2 hydropower projects included)
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Validation and RegistrationValidation and Registration
Host country approval
Validation by Designated Operational Entity
Submission to to CDM EB
Registration by CDM EB
Validation points– detailed scrutiny of the institutional capacity of the project stakeholders– evidence underlying the calculations of carbon benefits– systems to be used for monitoring
Project Design Document will be made publicly available for comments
Registration finalized after a maximum of 8 weeks from receipt
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Verification, certification, and issuance Verification, certification, and issuance of CERsof CERs
Project Implementation and Monitoring
Verification
Certification/Registration by CDM EB
Issuance of CERs
Emissions must be monitored during project life time– Project developer must monitor and report as set out in the PDD– Monitoring methodology must be approved by CDM EB
Monitoring of environmental and social impacts is implicit in
Environmental Impact Assessment
Includes site visits, checks of monitoring data and calculation of emission reductions
CERs issue within 15 days, unless the CDM EB requests a review(only if fraud, malfeasance or incompetence of DOE is suspected)
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Project Design Document (PDD)Project Design Document (PDD)
General description of project activity Baseline methodology
– Applied methodology, additionality, project boundary Duration of the project activity/ Crediting period Monitoring methodology and plan Calculation of GHG emissions by sources Environmental impacts Stakeholders comments
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BaselineBaseline
How to define “without the project” case– Taking into account national policy, local fuel availability,
power development plan, and so on.– Choice a baseline methodology
• Existing actual or historical emissions, as applicable,
• Emissions from a technology that represents an economically attractive course of action,
• The average emissions of similar project activities undertaken in the previous 5 years, in similar circumstances, and whose performance is among the top 20% of their category
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Additionality Additionality
What is “additionality”?( Reductions in emissions that are additional to any that would occur in the absence of the certified project activity. Kyoto protocol Article12-5c )
– Environment : must reduce GHG emission– Investment : profitability of the project must
increase dramatically by CER– Finance : diversion of ODA is prohibited– Technology : must use the state-of-art
technology
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Project boundary and leakageProject boundary and leakage
How to define “Project boundary”?– Under control of the project participants– Significant and reasonably attributable to the CDM
project activity– Hydropower project;
• Within Power station • Within connecting point to existing transmission line• Methane emission from reservoir
What is “Leakage”?– Outside the project boundary; and– Measurable and attributable to the CDM project activity– Hydropower project;
• Decline of hydropower production downstream
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MonitoringMonitoring
What is the purpose of “monitoring”?– For determining the baseline;
– For estimating or measuring anthropogenic emissions occurring within the project boundary of a CDM project activity and leakage, as applicable
– For example; Power generation (MWh)
Quality Assurance (QA) & Quality Control (QC)– It is easy to measure relevant data
– There is little factor of over/underestimation
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Small-scale CDM projectsSmall-scale CDM projects
What is “Small-scale CDM project” – Renewable energy project activities:
Up to 15 megawatts (or an appropriate equivalent)– Energy efficiency improvement project activities:
Up to the equivalent of 15 gigawatthours per year– Other project activities:
Less than 15 kilotonnes of carbon dioxide equivalent annually
Simplified modalities and procedures– Usage of simplified baseline/monitoring methodologies– Same DOE can validate and verify the project– Able to bundle similar projects
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What is CDM?Hydropower and CDMCDM Scheme and KeywordsState of Hydropower CDM projectsKey Issues for Host Country of
Hydropower CDM Projects
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Hydropower CDM projects submitted to Hydropower CDM projects submitted to World Bank PCF and ERU-PT/ CERU-PTWorld Bank PCF and ERU-PT/ CERU-PT
PCF: 4 projects, ERU-PT/CERU-PT: 9 projects( As of 3 June, 2003 )
Generation type: 2 run of river, 4 run of river with reservoir, 7 dams ( 4 utilizes existing dams )
Capacity distribution Country distribution :
– Costa Rica, Panama: 3
– Uganda, Romania: 2
– Guatemala, Chile, Peru:10
1
2
3
4
5
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Baseline methodology of hydropower CDM Baseline methodology of hydropower CDM projects submitted to the Methodology Panelprojects submitted to the Methodology Panel
35 projects have been submitted to the Methodology Panel under the CDM Executive Board as “New Methodology” (As of 19 Sep. 2003)
4 are hydropower projects:– El Canada Hydroelectric Project (Guatemala)
– Peñas Blancas Hydroelectric Project (Costa Rica)
– La Vuelta and La Herradura Hydroelectric Project (Colombia)
– El Gallo Hydroelectric Project (Mexico)
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Environmental issuesEnvironmental issues
Antipathy against large hydropower projects (especially in Europe): renewable but not sustainable
Example of criticism by NPOs such as “CDM Watch”– Significant GHG emissions during construction– Inflated baselines– Methane emissions from reservoirs– Cost overrun, corruption – Criticism of “anyway project”
Most issues are not unique to hydropower projects, and dam, not hydropower itself, is the main target of criticism
Need to appeal that hydropower’s negative impact is small– The state of the art technology, social development, …
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What is CDM?Hydropower and CDMCDM Scheme and KeywordsState of Hydropower CDM projectsKey Issues for Host Country of
Hydropower CDM Projects
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Identification of CDM projectsIdentification of CDM projects
Key factors on Identification of a Host Country– Participation in Kyoto Protocol
• Ratification on Kyoto Protocol
• Organization on CDM
– Investment conditions for Hydropower development as a IPP project.
• Government Policy• Legal condition
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Key factors on Project Design DocumentKey factors on Project Design Document
Baseline methodology• High average CO2 emissions units of power generation
(High effect of hydropower project)
• High CO2 emissions power generation development plan (substitute for high CO2 emissions power generation)
– Additionality• Project activity would not have occurred anyway due to a
barrier
• Less hydropower development Plan
• Hydropower is more expensive than thermal power ( investment barrier)
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CDM project Approval by Host countryCDM project Approval by Host country
Project Approval by DNA of Host country– Prior to the submission of the validation report
to the executive board, • Submission to both of Host country and own party
• Written approval of voluntary participation from the DNA (Designated National Authority) of each party
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Thank you for your kind attention !Thank you for your kind attention !
For more information and question
http://cdm.unfccc.int/ (UNFCC CDM)[email protected] (NEF)