Hydropower as CDM Project Activities October, 2003 International Affairs Department Hydroelectric Power Development Center New Energy Foundation (NEF)

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  • Hydropower as CDM Project ActivitiesOctober, 2003

    International Affairs DepartmentHydroelectric Power Development CenterNew Energy Foundation (NEF)

  • *ContentsWhat is CDM?Hydropower and CDMCDM Scheme and KeywordsState of Hydropower CDM ProjectsKey Issues for Host Country of Hydropower CDM Projects

  • *What is CDM?Hydropower and CDMCDM Scheme and KeywordsState of Hydropower CDM ProjectsKey issues for Host Country of Hydropower CDM Projects

  • *Kyoto ProtocolAdopted at the Third Conference of Parties (COP3), United Nations Framework Convention on Climate Change (UNFCCC) , held in Kyoto, Dec. 1997International 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 tradingJoint Implementation (JI)Clean Development Mechanism (CDM)

  • *Emission reduction targetsDeveloping countries (non-Annex I) have no targetsTargets of Annex I Parties

    EUReduction targetEmissionshareCountries transitingto market economyReduction targetEmissionshareOther countriesReduction targetEmissionshareAustria-21%0.4%Bulgaria -8%0.9%Australia8%2.3%Belgium-7.5%0.8%Croatia-5%Canada-6%3.3%Denmark-21%0.4%Czech-8%1.1%Iceland10%0.0%Finland0%0.4%Estonia-8%0.2%Japan-6%6.8%France0%3.1%Hungary-6%0.6%Liechtenstein-8%0.0%Germany-21%6.7%Latvia-8%0.2%Monaco-8%0.0%Greece25%0.6%Lithuania-8%0.3%New Zealand0%0.4%Ireland13%0.3%Poland-6%3.1%Norway1%0.3%Italy-6.5%2.9%Romania-8%1.5%Switzerland-8%0.3%Luxemburg-28%0.1%Russia0%16.6%US-7%33.6%Netherlands-6%1.2%Slovakia-8%0.4%Portugal27%0.4%Slovenia-8%0.1%Spain15%1.6%Ukraine0%5.0%Sweden4%0.4%UK-12.5%4.1%EU total-8%23.1%

  • *Clean Development Mechanism (CDM)Help Annex 1 countries comply with their emission reduction commitmentsContribute to the ultimate goal of the convention i.e., stabilization of GHG concentrations in the atmosphereAssist non-Annex 1 countries in achieving sustainable developmentCERDistribute tohost countryTransfer toinvesting countryBefore projectAfter projectHost countryInvesting country (Annex I)Assigned amountCO2 emissionFund, technology, etc.CER: Certified Emission Reduction

  • *What is CDM?Hydropower and CDMCDM Scheme and KeywordsState of Hydropower CDM ProjectsKey issues for Host Country of Hydropower CDM Projects

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

  • *CDM is effective for hydropowerConstruction cost: 2,500 $/kW, operation rate 50%, payout period 50 years electricity price:3.1 cents/kWhIRR 5% 5.8 cents/kWhIRR 10%If CO2 reduction unit is 0.5kg-CO2/kWh and carbon credit is $5/t-CO2 , additional income will be 0.25 cent/kWhCO2 reduction effect 4 8 % of electricity priceCarbon finance may become important for hydro-power development

  • *Potential water power sourcesBased on Survey of Energy Resources 1998 (World Energy Council)

  • *Comparison of CO2 Emissions per kWh by Electric Power SourcesBased on a report published by the Central ResearchInstitute of the Electric Power Industry, Japan0.9750.7420.6080.519

  • *Benefits from CDM projects for hydropower in South Asian CountriesUsage of abundant potential of undeveloped hydropower resourcesContribute to the stability of power supplyInfrastructure developmentRevenues from sales of CERDevelopment aid in addition to ODALow running costOther benefits from multi-purpose dams

  • *What is CDM?Hydropower and CDMCDM Scheme and KeywordsState of Hydropower CDM ProjectsKey Issues for Host Country of Hydropower CDM Projects

  • *CDM schemeProject PlanningProject Implementation/ Annual MonitoringVerification and Certification of ReductionsIssuance of CERAdd 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 developerProject developerSale in MarketProject developer(Project developer)(Project developer)Host countryparticipationInvesting country approvalHost country approvalDesignated NationalAuthority (DNA)

  • *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 proceduresApprove new methodologies related to, baselines, monitoring plans and project boundaries Methodology panelReview provisions with regard to simplified modalities, procedures and the definitions of small scale project activities Small Scale CDM panelBe responsible for the accreditation of DOE CDM accreditation panelRegister the validated projects as CDM project activitiesIssue CER according to the emission reduction verified by DOE * COP: Conference of Parties, MOP: Meeting of Parties

  • *CDM related organizations (2)Designated Operational Entity (DOE)A body (private or public) accredited by the CDM EB to review projectsValidate proposed CDM project activitiesVerify and certify reductions in anthropogenic GHG emissions Make information obtained from CDM project participants publicly available, as required by the executive boardDesignated National Authority (DNA)Parties participating in the CDM shall designate DNAInterfaces between project owner and the DOEMalaysia: Conservation and Environmental Management Division, Ministry of Science, Technology and the EnvironmentBhutan: National Environment Commission Secretariat

  • *Approval of New MethodologyPreparation of draft PDD (new methodology)Submission to the CDM EB through DOEExperts desk review, Public commentsRecommendation by Methodology PanelConsideration by CDM EB B-rank: Changes requiredC-rank: Not approvedA-rank: ApprovedAs of Sep. 2003 A-rank: 2 projects B-rank: 4 projects C-rank: 6 projects (2 hydropower projects included)

  • *Validation and RegistrationHost country approvalValidation by Designated Operational EntitySubmission to to CDM EBRegistration by CDM EB Validation pointsdetailed scrutiny of the institutional capacity of the project stakeholdersevidence underlying the calculations of carbon benefitssystems to be used for monitoringProject Design Document will be made publicly available for commentsRegistration finalized after a maximum of 8 weeks from receipt

  • *Verification, certification, and issuance of CERsProject Implementation and MonitoringVerificationCertification/Registration by CDM EB Issuance of CERsEmissions must be monitored during project life timeProject developer must monitor and report as set out in the PDDMonitoring methodology must be approved by CDM EBMonitoring of environmental and social impacts is implicit in Environmental Impact AssessmentIncludes site visits, checks of monitoring data and calculation of emission reductionsCERs issue within 15 days, unless the CDM EB requests a review (only if fraud, malfeasance or incompetence of DOE is suspected)

  • *Project Design Document (PDD)General description of project activityBaseline methodologyApplied methodology, additionality, project boundaryDuration of the project activity/ Crediting periodMonitoring methodology and planCalculation of GHG emissions by sourcesEnvironmental impactsStakeholders comments

  • *BaselineHow to define without the project caseTaking into account national policy, local fuel availability, power development plan, and so on.Choice a baseline methodologyExisting 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

  • *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 Article12-5cEnvironment must reduce GHG emissionInvestment profitability of the project must increase dramatically by CERFinancediversion of ODA is prohibitedTechnologymust use the state-of-art technology

  • *Additionality (2)Emissions beforeproject implementationBaseline emissionsEmissions for p(CER)=0Project emissionsEmissions for p(CER)=P0Emissions in the boundaryIncentives(e.g. expected CER price)Emissions reduced anywayP0Baseline scenarioProject scenarioEmissions reduced by CDM project

  • *Project boundary and leakageHow to define Project boundary?Under control of the project participantsSignificant and reasonably attributable to the CDM project activityHydropower project;Within Power station Within connecting point to existing transmission lineMethane emission from reservoirWhat is Leakage?Outside the project boundary; andMeasurable and attributable to the CDM project activityHydropower project; Decline of hydropower production downstream

  • *MonitoringWhat 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 applicableFor example; Power generation (MWh)

    Quality Assurance (QA) & Quality Control (QC)It is easy to meas

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