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1
Hydropower
(Pembangkit Listrik
Tenaga Air)
Hydropower
as CDM Project Activities
International Affairs DepartmentHydroelectric Power Development
CenterNew Energy Foundation (NEF)
3
Contents
What is CDM?
Hydropower and CDM
CDM Scheme and Keywords
State of Hydropower CDM Projects
Key Issues for Host Country of Hydropower
CDM Projects
4
What is CDM?
Hydropower and CDM
CDM Scheme and Keywords
State of Hydropower CDM Projects
Key issues for Host Country of Hydropower
CDM Projects
5
Kyoto Protocol
Adopted at the Third Conference of Parties (COP3),
United Nations Framework Convention on Climate Change
(UNFCCC) , held in Kyoto, Dec. 1997
International treaty containing legally binding constraints on
greenhouse gas （GHG) emissions.
(CO2, CH4, N2O, HFCs, PFCs, SF6)
Industrialized Countries (Annex I Parties) agreed to limit their
GHG emissions, -5% from 1990 levels by 2008-2012.
3 flexible mechanism (Kyoto mechanism)
Emissions trading
Joint Implementation (JI)
Clean Development Mechanism (CDM)
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Emission 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)
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 projectAfter project
Host countryInvesting country (Annex I)
Assigned amount
CO
2 e
mis
sio
n
Fund, technology, etc.
CER: Certified Emission Reduction
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What is CDM?
Hydropower and CDM
CDM Scheme and Keywords
State of Hydropower CDM Projects
Key issues for Host Country of Hydropower
CDM Projects
9
Hydropower is effective for CDM
Hydropower is one of few carbon-free energy sources
capable of large scale & low cost generation
→ large potential of GHG reduction
If all of the “technically exploitable capability” is
exploited, CO2 reduction will be …
technically exploitable capability 11,570 TWh
× emission factor 0.5 t-CO2/MWh
= 5.79 billion t-CO2（25％ of world’s CO2 emission)
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CDM 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 sources
0
1000
2000
3000
4000
5000
Africa North
America
South
America
Asia Europe Middle
East
Oceania Japan
Po
wer
gen
era
tio
n (
TW
h) 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 by Electric Power Sources
0.088 0.0380.130 0.111
0.887
0.704 0.4780.408
0.0110.0150.0220.0290.053
0
0.2
0.4
0.6
0.8
1
1.2
Coal
Oil
LN
G
LN
G C
C
Photo
voltai
cs
Win
d
Nucl
ear
Geo
ther
mal
Hydro
pow
er
CO
2 e
mis
sions
(kg-C
O2.k
Wh)
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
13
Benefits from CDM projects for hydropower
in South Asian Countries
Usage of abundant potential of undeveloped
hydropower resources
Contribute to the stability of power supply
Infrastructure development
Revenues from sales of CER
Development aid in addition to ODA
Low running cost
Other benefits from multi-purpose dams
14
What is CDM?
Hydropower and CDM
CDM Scheme and Keywords
State of Hydropower CDM Projects
Key Issues for Host Country of Hydropower
CDM Projects
15
CDM 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 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
17
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 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 requiredC-rank: Not approvedA-rank: Approved
As of Sep. 2003A-rank: 2 projectsB-rank: 4 projectsC-rank: 6 projects (2 hydropower projects included)
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Validation 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
20
Verification, certification, and issuance of
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)
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
22
Baseline
How to define “without the project” case
Taking into account national policy, local fuel availability, power
development plan, and so on.
Choice a baseline methodology
Existing actual or historical emissions, as applicable,
Emissions from a technology that represents an economically attractive
course of action,
The average emissions of similar project activities undertaken in the
previous 5 years, in similar circumstances, and whose performance is
among the top 20% of their category
23
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
25
Project boundary and leakage
How to define “Project boundary”? Under control of the project participants
Significant and reasonably attributable to the CDM
project activity
Hydropower project; Within Power station
Within connecting point to existing transmission line
Methane emission from reservoir
What is “Leakage”? Outside the project boundary; and
Measurable and attributable to the CDM project activity
Hydropower project; Decline of hydropower production downstream
26
Monitoring
What is the purpose of “monitoring”?
For determining the baseline;
For estimating or measuring anthropogenic emissions
occurring within the project boundary of a CDM
project activity and leakage, as applicable
For example; Power generation (MWh)
Quality Assurance (QA) & Quality Control (QC)
It is easy to measure relevant data
There is little factor of over/underestimation
27
Small-scale CDM projects
What is “Small-scale CDM project” Renewable energy project activities:
Up to 15 megawatts (or an appropriate equivalent)
Energy efficiency improvement project activities:
Up to the equivalent of 15 gigawatthours per year
Other project activities:
Less than 15 kilotonnes of carbon dioxide equivalent
annually
Simplified modalities and procedures Usage of simplified baseline/monitoring methodologies
Same DOE can validate and verify the project
Able to bundle similar projects
28
What is CDM?
Hydropower and CDM
CDM Scheme and Keywords
State of Hydropower CDM projects
Key Issues for Host Country of Hydropower
CDM Projects
29
Hydropower CDM projects submitted to World
Bank PCF and ERU-PT/ CERU-PT
PCF: 4 projects, ERU-PT/CERU-PT: 9 projects
（As of 3 June, 2003）
Generation type: 2 run of river, 4 run of river with
reservoir, 7 dams （4 utilizes existing dams）
Capacity distribution
Country distribution：
Costa Rica, Panama: 3
Uganda, Romania: 2
Guatemala, Chile, Peru:1
30
Baseline methodology of hydropower CDM
projects submitted to the Methodology Panel
35 projects have been submitted to the Methodology
Panel under the CDM Executive Board as “New
Methodology” (As of 19 Sep. 2003)
4 are hydropower projects:
El Canada Hydroelectric Project (Guatemala)
Peñas Blancas Hydroelectric Project (Costa Rica)
La Vuelta and La Herradura Hydroelectric Project
(Colombia)
El Gallo Hydroelectric Project (Mexico)
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Environmental issues
Antipathy against large hydropower projects (especially
in Europe): renewable but not sustainable
Example of criticism by NPOs such as “CDM Watch” Significant GHG emissions during construction
Inflated baselines
Methane emissions from reservoirs
Cost overrun, corruption
Criticism of “anyway project”
Most issues are not unique to hydropower projects, and
dam, not hydropower itself, is the main target of criticism
Need to appeal that hydropower’s negative impact is
small The state of the art technology, social development, …
33
What is CDM?
Hydropower and CDM
CDM Scheme and Keywords
State of Hydropower CDM projects
Key Issues for Host Country of
Hydropower CDM Projects
34
Identification of CDM projects
Key factors on Identification of a Host Country
Participation in Kyoto Protocol
Ratification on Kyoto Protocol
Organization on CDM
Investment conditions for Hydropower development as
a IPP project.
Government Policy
Legal condition
35
Key factors on Project Design Document
Baseline methodology High average CO2 emissions units of power generation (High effect
of hydropower project)
High CO2 emissions power generation development plan (substitute
for high CO2 emissions power generation)
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)
36
CDM project Approval by Host country
Project Approval by DNA of Host country
Prior to the submission of the validation report to the
executive board,
Submission to both of Host country and own party
Written approval of voluntary participation from the DNA
(Designated National Authority) of each party
37
Validation of project activities
How to “validate” a project activity?
Independent evaluation of a project activity by a DOE
(Designated operational entity) against the requirements of
the CDM on the basis of the PDD.
New baseline or monitoring methodology
Review by the executive board
Receipt of public comments
Key factors on selection of DOE
Knowledge for CDM scheme and validation
Sympathy with hydropower developments
Charge for service
38
Verification & Certification of project
activities
What is “Verification”?
Periodic independent review and ex post determination by
DOE of monitored reductions
No prescribed length of the verification period
What is “Certification”?
Written assurance by the DOE
A project activity achieved the reductions as verified
For implementing verification and certification smoothly;
Clearly defining “monitoring methodology”and “Quality assurance” in the PDD
39
Agreement of CERs trade
What is “Agreement of CERs trade”?
Agreement between a CDM participant and a Purchase of
CERs (Certified Emission Reductions), Carbon fund,
Investor, and so on
Share of risk concerning the amount of emission reductions
by a CDM project activity
40
Correlation between hydropower development
process and CDM procedure
Hydropower development process CDM procedure
Master Plan- Power Development Plan- Transmission Line Plan
Pre Feasibility Study- Preliminary survey
(Discharge, Geological condition)- Reconnaissance survey
(Topographic & Geological condition, General EIA)
↓Schematic design
Financial evaluation
Feasibility Study
- Full-scale investigation
(Boring, In-situ test,
Hydrological & Climate survey)
↓
- Basic design
- Construction method
- Construction cost estimation
-Financial evaluation
EIA- Natural Environment- Social Environment
- Negotiation with authorities and
local communities- Endorsement
- License
PPA(Power Purchase
Agreement)Financing / Scheme
EPC Contract
Approach to host countryas a CDM project
Need and items of EIA
(Environmental Impact Assessment)
Submission to both of own party and host party (DNA)
- Project participants- General description
(Title, Location, GHG, Schedule)- Project support
- Environmental Impacts- Finance scheme
- Baseline Methodology- Calculation of Emission
Reductions- PDD draft
41
Approval by both of ownparty and host party (DNA)
Design for execution
Detail design, Construction method
Submission of PDD to DOE
Selection andContract with DOE
Preparation of PDD- Project description
- Baseline methodology
- Duration of the project activity / Crediting period
- Additionality
- Environment Impacts
- Public funding of the project activity
- Stakeholders comments
- Calculation of Emission Reductions
Written Approval
(Attach to PDD)
Feasibility Study
Full-scale investigation
(Boring, In-situ test,
Hydrological & Climate survey)
↓
Basic design
Construction method
Construction cost estimation
Financial evaluation
Validation
- Review of PDD by DOE
- Receipt of public comments
- Approval by both of ownparty and host party
Validation Report
(DOE submits to the executive board)
Registration as a CDM project
- Review by the executive board
Within 8 weeks after the date of receipt of the request for registration (unless a Party involved in the project activity or at least three members of the EB request a review of the proposed issuance of CERs)
42
Commencement of the work
Construction management(If needed)
Implementation of Monitoring- Submission to report
(If needed) Implementation
of Monitoring
Operation Start(Construction Completion)
Operation & Maintenance
Implementation of Monitoring- Submission to report
Verification
By DOE,- Periodic independent review
- On-site inspections- Determination of Emission Reductions
- Receipt of public comments (Notice to Project participants,
Each party, the Executive board)
Certification ofEmission Reductions
By DOE,- Certification in writing
- Receipt of public comments(Notice to Project participants,
Each party, the Executive board) Certification Report(DOE submits to
the executive board)
Issuance of CERs(Certified Emission Reductions)- Review by the Executive board
Within 15 days after the date of receipt of the request for issuance(unless a Party involved in the project activity or at least three members of the EB request a review of the proposed issuance of CERs)
