CDM POTENTIAL FOR SMALL HYDRO

By
Rohit Verma
Asst. Director
MBA [Power Management]
Heads under which presentation is being made

Background of Kyoto Protocol

What is Kyoto Protocol ?
Discussion of the Concept of CDM and key terminology
used in CDM.
Projects and their respective categories eligible for CDM
benefits.
Understanding CDM Project Cycle.
Preparation of a Project Design Document for a Small
Hydro Plant in Himachal Pradesh [Majhi Khad {4.5 MW}]
Kyoto Protocol and It’s background.
• IPCC was established in 1988 jointly by UNEP (United Nations
Environment Programme) and WMO (World Meteorological
Organization)
• IPCC - TAR concluded that continued emissions of Green House
Gases (GHGs) in the Earth’s atmosphere by human activities will
lead to unprecedented warming of Earth in the 21st century, unless
measures were adopted to limit these emissions.
• On the basis of the Authoritative Assessment of the Climate
Change by IPCC, United Nations Framework Convention on
Climate Change (UN-FCCC) was set up in May 1992 to protect the
Earth from global climate change due to “dangerous anthropogenic
interference by human activities”
Kyoto Protocol and It’s background.
• In 1992, at the UN Conference on Environment and Development, the
so-called “Earth Summit,” in Rio de Janeiro, the United Nations
Framework Convention on Climate Change (UN-FCCC) was adopted
by the a number of countries.
• Aim was to reduce the emission of Greenhouse gases.
• 186 countries are party to this convention.
• They meet annually in conference of parties {called COP}
• In the third COP in 1997, Kyoto protocol was adopted.
• It is mandatory and it will become effective as soon as the countries
ratifying it are accounting for at least 55% of the global GHG.
• India signed UN-FCCC on 10th June 1992 and ratified it in 1993
• Protocol divides the world into basically two parts.
• Annex 1 countries :41 industrialized countries which account for
more than 75% of the world emissions.
• Non annex 1 countries: Which are basically developing countries.
• Under the protocol it is mandatory for a Annex 1 countries to reduce
their GHG by an average of around 5.8%,taking 1991 as base year.
This is to be achieved by 2012 or 5.2% below their 1990 emission
levels in 2008-12 (Phase-I)
• This can be done by reducing consumption of fossil fuels, investing
in energy efficient technologies and development of renewables.
• Reduction of consumption of energy is ruled out as development will
be adversly effected.
• Only option left is development of energy efficient technologies,
renewable projects.
 Kyoto Protocol to• UN-FCCC
The Framework Convention
on Climate Change
established the Conference of
Parties (COP) as its supreme
body
• Quantified emission reduction
targets for each Annex-I
Country were Individually
fixed

• India, a signatory to
UNFCCC since June
1992, has no binding
commitment to reduce
GHG emissions
• Although INDIA is
ranked 5th in total
GHG emissions, its
emission / capita
remains low
Climate Change Science – How it has progressed?

The threats to humanity

from climate change is
now a reality.

Climate Scientists are in nearly

unanimous agreement that
atmospheric levels of CO2 must be
limited to no more than 450 PPM in
order to catastrophic chaos.
UK is now advocating global cuts in
CO2 of 30% by 2020 and of 60% by
2050.
 Green House Gases
The UN-FCCC basket includes six
keygreenhouse gases produced byhuman
activities, namely
• Carbon Dioxide (CO2)
• Methane (CH4)
• Nitrous Oxide (N2O)
• Hydro fluorocarbons (HFC)
• Per fluorocarbons (PFC)
• Sulphur Hexafluoride (SF6)
 Concept of CDM
• If the annex 1{developed} nations ,commission a green
project in their own country than it can prove incredibly
expensive.
• So a way out has been found in CDM.
• Under CDM,an annex 1 country can get carbon credits, if it
invests in a green project in a non annex 1 countries.
• The Clean Development Mechanism (CDM) is a project-
based mechanism that allows public or private entities to
invest in greenhouse gas (GHG) mitigating activities in
developing countries and earn abatement credits, which
can then be applied against their own GHG emissions or
sold in the open market.
• The CDM has the dual objective of reducing greenhouse
gas emissions and contributing to sustainable
development in the host country.
• So annex 1 country can achieve their targets by

 Reducing fossil fuel consumption.

 Investing as a sponsor in a host country and earning
carbon credits .
 Buying carbon credit from open market.
 Clean Development Mechanism
Article 12 of the Kyoto Protocol defines the clean development mechanism as -
“The purpose of the clean development mechanism shall be to assist Parties not
included in Annex I in achieving sustainable development and in contributing to the
ultimate objective of the Convention, and to assist Parties included in Annex I in
achieving compliance with their quantified emission limitation and reduction
commitments under Article 3”.

Under the Kyoto Protocol of the UNFCCC, industrialized countries (Annex-I) have
committed to reducing their emissions of greenhouse gases, including carbon dioxide
and methane.

Under Clean Development Mechanism (CDM), Annex-I countries can reduce

emissions by purchasing emission credits from other countries that invest in projects
and programs that avoid GHG emissions and produce a net global reduction in
emissions.

The mechanism depends, therefore, on the capacity to accurately assess the

emissions avoided such that a net reduction can be verified and valued.
•
Clean Development
Clean Development Mechanism was
Mechanism
instituted in 2001 under Kyoto Protocol.

• Came into force on 16th February 2005

after European Community and many
other Annex-I Countries along with
Russia ratified the Kyoto Treaty.

• Major Non-Participating Annex-I

Countries to Kyoto Treaty currently are
USA and Australia.

CDM is one part of a set of

incentives and financial
options for bringing about
mitigation, adaptation and
sustainable development to
arrest climate change.
Key CDM Terms and Concepts.
Additionality:
The CDM projects must be additional. This means that we should prove
that project is facing a number of barriers and will materialize only when
it gets CDM benefits after it gets registered as a bonafide CDM project.
We have to prove that it is not a business as Usual activity

Baseline
The baseline describes what will happen, and how many greenhouse gas
emissions will be there in the absence of project activity or if same
goods /services are produced by conventional means. These emissions
are then compared with the project emissions to get the net emission
reductions and hence the amount of carbon credits.

Certified Emission Reduction (CER)

The name given to a carbon credit from a CDM project. Credits from JI
projects are called Emission Reduction Units (ERU). CERs are equal to
one ton of carbon dioxide equivalents (tCO2e).
Crediting Period
The crediting period is the length of time during which the project will
generate carbon credits. Under the Marrakech Accords, projects
can choose between a 7-year period, which can be renewed twice
to make a total of 21 years, or a one-off 10-year period.

Designated National Authority (DNA) for the CDM

The DNA is the focal point for CDM matters in your country. It is
frequently a unit in a government ministry that is responsible for
administering CDM implementation and overseeing approval of
projects.
Designated Operational Entity
DOEs are accredited by the Executive Board and perform two
functions: validating CDM projects, and verifying and certifying
emissions reductions from projects. The same DOE cannot perform
both functions for one project unless it is a small-scale project.
CDM Executive Board
The CDM Executive Board supervises the CDM and makes the final decision
about project registration and the issuing of carbon credits. The Board also
makes the final decision whether to approve new baseline and monitoring
methodologies and must approve new DOEs.

Project Design Document (PDD)

The document that describes the prospective CDM project and how it meets
the validation requirements spelt out in the Marrakech Accords. The PDD is
the main document assessed by the validator and is made available during
the 30-day public comment period. 30 day public comment period is the
period during which stakeholders, the public and NGOs can make
submissions to the validator about whether or not the project meets the
validation requirements and thus whether it should be approved or not
Monitoring and Verification
The reduction in emissions achieved by a CDM project must be
monitored by the project operator consistently with the monitoring
plan outlined in the Project Design Document (PDD). This data is
then verified by a designated operational entity, which then certifies
that the reductions have taken place and recommends that the
Executive Board issues carbon credit.
 Projects and their categories eligible for CDM
benefits
ENERGY SECTOR

• Fuel subsitution:Subsitution of high carbon fuels [coal and oil] with

low carbon fuels [natural gas ,renewables].
• Cogeneration projects
• Capture and recovery of methane leakage from transport or flaring
in the oil or gas industry.
• Energy generation by Renewable means

WASTE MANAGEMENT SECTOR:

• Capture of biogases produced by municipal waste stored in
controlled landfill sites
• Capture and recycling of biogas from sewage treatment plant.
INDUSTRIAL SECTOR
• Any change in industrial processes resulting in a reduction in GHG emission
s, e.g. use of energy efficient ovens for glass production
• Capture and use of methane produced by industrial wastewater treatment
equipment.
• Improved energy efficiency in industrial projects

HOUSING AND TERTIARY SECTORS

• Improved energy efficiencies in residential or tertiary buildings (office,
shopping malls etc.).

TRANSPORT SECTOR
• Improved energy efficiencies of vehicles.
• Vehicle fuel substitution , e.g. substitution of gasoline or diesel with LPG or
natural gas
• Substitution of high-energy consumption means of transport with low GHG
emission means of transport e.g. replacement of individual means of
transport (cars) by buses or trains.

AGRICULTURE SECTOR
• Improved energy efficiency or use of low GHG emission energy sources to
drive irrigation pumps.
• Reduced animal waste or capture and use of methane generated by animal
waste.

FORESTRY SECTOR
• Afforestation: It consists of planning tress in areas that have not forests in
the last 50 years.
 CDM PROJECT CYCLE
Prepare Project Design Document :
The first step in the process of formulization a CDM Project requires Project
Participants to complete a Project Design Document, which describes in
detail the project activity.
• The Project Design Document must include descriptions of the technical
aspects of the project, the project purpose, its contribution to sustainable
development, the Project Boundaries
• The proposed baseline methodology, a statement of the estimated
operational life of the project, stakeholder comments, an analysis of
environmental impacts for the project.
• An explanation of how the project activity meets CDM Additionality
requirements, and a proposed formula for the calculation of the Greenhouse
Gas emissions to be reduced and project leakage.
Designated National Authority Issues Letter Of Approval:
• The host must confirm that it approves a CDM project for the purpose of the
Kyoto protocol and that the project assists it to achieve its sustainable
development goals.

Validation by Designated Operational Entities :

Validation is the process of independent evaluation of a project activity by a
DOE against the requirements of the CDM .
DOE will review the Project Design Document to confirm

• Participation in the CDM Project activity is voluntary

• Project participants are signatories to the Kyoto Protocol.
• Comments of the stakeholders have been considered.
• Project activity will result in overall reduction of GHG
• The baseline methodology and monitoring plan comply with CDM Executive
Board requirements
Registration by the CDM Executive Board
Registration is the formal acceptance by the CDM Executive Board of a validated
project as a CDM Project activity.
Monitoring by Project Participants
Once the project activity has been Validated and Registered, the Project Participants
will be required to implement the validated monitoring plan included as part of the
Project Design Document .
Verification and Certification by Designated Operational Entities :
Verification is the periodic independent review and determination by an accredited
DOE of the monitored enhanced reductions in Greenhouse Gas emissions that
have occurred during the Verification period because of a CDM Project.
Issuance of CERs by the CDM Executive Board :
A Certification Report will contain a request to the CDM Executive Board for the
issuance of CERs equal to the enhanced reductions of Greenhouse Gas
emissions as verified by the DOE
Diagrammatic Representation of CDM
Project Cycle.
 Selection of a baseline methodology

• Use of existing /past data to calculate GHG emissions.

• This approach requires an Investment analysis approach
regarding possible project alternatives utilizing
alternative technologies.
Emissions from a “technology which is economically
most attractive{ taking into account barriers to
investment} is taken as a baseline.
• The average emissions of similar project activities
undertaken in the previous five years, in similar
circumstances, and whose performance is in the top
20% of their category”.
 Baseline for electricity projects.

• We use the concept of Build margin and Operating margin.

• The key concept is that of “avoided generation” i.e. what would have
happened without the GHG mitigation project.
• Build margin means avoided generation means we are replacing a
facility that would otherwise have been built.
• Operating margin means effecting the operation of current plants.
• Generally we take an average of two to get a combined margin
approach.
• The weighted average emissions rate of the most recent 20% of
plants built .
• The weighted average of all resources except zero fuel-cost/must-
run facilities gives us the operating margin
 Work done by CEA
•Unit-specific fuel consumption is now available
•Operating Margin (OM)
•Build Margin (BM)
•Combined Margin (CM)
•Average Emission (AV)
• Accurate & conservative data is now available based on the location of the
plant.
•Possible to adopt baseline methodology such as ACM 002 or AMS I.D etc
for CDM projects and development of PIN & PDD.
• Data for power production from captive power plants availabe for the last
4 years and annual updation is being done.
• Coal analysis on region based availability has been made.
Courtesy: Mr Urs Brodmann, CDM-India, Praveen Gupta & Sanjay
Sharma , CEA.
Emission Factors
Outcome of CEA Study
 Tools to determine Addionality
• Means reduction in GHG emissions should be additional to what would have
happened in normal course [i.e. in the absence of the CDM activity]
• We have to prove that the project is additional and is not a ‘business as
usual activity’.
• For this we have to identify alternative projects which will produce
equivalent goods and services and they have to be examined in the light of
the entire legal and regulatory framework in force in the host country.
• You have to show that the proposed project is financially not the most viable
option.
• Investment barrier – it is not easy to secure investment /raise loans for the
project.
• We have to show that the project faces other bariers like technology or lack
of skilled manpower.
• Finally we have to show and prove conclusively that the project will become
financially viable if it gets registered as a CDM project.
Default Carbon dioxide Emissions from fuel
CO2 Emissions from Fuel Usage
Summary of Global Warming Potentials
(GWP)
Process related Green House gas emission
 RECOMMENDATION

NO COST OPTIONS: SAVING POTENTIAL

SL. HEAD SAVING UNIT INVESTMENT EMISSION T/CO2 CER
NO. POTENTIAL ,RS LAKH FACTOR

1. POWER 24.55 LAKH NIL 0.00089 3542 3542

KWh/
YEAR

CALCULATION OF CER FOR ELECTRICITY

KWH X CO2 EF = TOTAL CO2 FROM

ELECTRICITY

GWP OF CO2=1

CER= GWP X TONS OF CO2

 RECOMMENDATION

LOW COST OPTIONS: SAVING POTENTIAL

SL. HEAD SAVING UNIT INVESTMENT EMISSION T/CO2 CER

NO. POTENTIAL ,RS LAKH FACTOR

1. COAL 24026 TONS/Y 25 1.53 36760 36760

EAR

2. POWER 34.4 LAKH 11 0.00089 3061 3061

KWh/YE
AR
 RECOMMENDATION

HIGH/VERY HIGH COST OPTIONS: SAVING POTENTIAL

SL. HEAD SAVING UNIT INVESTMENT EMISSION T/CO2 CER
NO. POTENTIAL ,RS LAKH FACTOR

1. COAL 21316 TONS/Y 213.0 1.53 32613 32613

EAR

2. POWER 51.2 LAKH 112.3 0.00089 4557 4557

KWh/YE
AR
 RECOMMENDATION

SAVING POTENTIAL IN CDM PROJECTS

SL. HEAD SAVING UNIT EMMISSION T/CO2 CER
NO. POTENTIAL FACTOR

1. COAL 45342 TONS/YEAR 1.53 69373 69373

2. POWER 110.15 LAKH 0.00089 9804 9804

KWh/YEAR

TOTAL 79177 79177

VALUE OF 3.56 CRORES

CER
VALUE OF CER= CER*VALUE/CER*CONVER RATE*NO OF YEAR
 RECOMMENDATION

CDM OPTIONS, WHY?????

SL. SAVING HEAD UNIT SAVING INVESTMENT PAY OUT
NO. POTENTIAL IN RS. IN RS. PERIOD
( MONTHS)

1. 45342 COAL TONS/YEAR 452.25 2025 53.73

2. 110.15 POWER LAKH 275.7 248 10.79

KWh/YEAR

TOTAL 727.95 2273 37.47

 RECOMMENDATION

CDM OPTIONS, WHY?????

SL. HEAD SAVINGS INVESTMENT IN PAY OUT ADDIONAL
NO. IN RS. RS.LAKHS PERIOD EARNING DUE
( MONTHS) TO CDM

1. PAYOUTWITHOUT 727.95 2273 37.47 NIL

CDM

2. PAYOUTWITH CDM 1084 2293 25.38 356LAKHS

TOTAL
 Basic data on CDM

• 43 projects issued 15.5 million CERs

• 334 registered projects forecast 600 million
CERs by 2012
• >900 submitted projects forecast 750 million
CERs by 2012
• Governments and companies in industrialized
countries have budgeted more than 4.5 billion €
for CER acquisition
 CDM in power sector-Scenarios

R&M /Retrofitting:
Renovation and modernization
Expansion
New plants
Fuel switch
Barriers to CDM in Power Sector

• No approved methodology in power sector.

•An approved baseline methodology requires
specific data
•Non availability of fuel data on a power plant-
specific basis
• Data may not be available or quality of data
cannot be ensured, without which Projects cannot
be registered
as of Oct, 2006
 Aims of methodologies

• CDM shall lead to “measurable and long term

emission reductions that are additional”
• Determination of reductions requires definition
of baseline methodology and monitoring of key
parameters throughout the lifetime of the
project
• Determination of Key performance indicators
for data for large, medium and small plants.
 Purpose of CDM

•CDM is an incentive to achieve additional

emission reduction.
•It is not a reward for BAU scenario
•Goal is to make project happen because of
CDM for non-viable projects
 PDD For a SHP

• The project in question is Majhi Khad small hydro power plant in

Kangra district,H.P.Majhi Khad is a small tributary of Beas
• Its installed capacity is 4.5 MW <15 MW.So it qualifies to be a small
scale CDM activity [CDM-SSC].
• PDD for a SSC contains the following:
A: General Description of a Project Activity
B: Baseline Methodology
C: Duration of Project Activity
D: Monitoring Methodology
E: Calculation of GHG emissions reductions
F: Environmental Impacts
G: Stakeholders Comments
• So simplified modalities and procedures arrived at arrived at in
COP.7 {decision 17} referred to as Simplified M and P for SSC are
applicable.
• This has an Appendix B which contains Simplified Baseline and
Monitoring Methodologies.
• Two methods are discussed under clause 29 for determining the
baseline
• 29{a}-Average of approximate build and operating margin
• 29{b}-Baseline emission reduction = [Energy produced by the
renewable project] GWH . [Emission coefficient] t CO2/GWH
• Key Note: Emission coefficient is calculated by the weighted
average emissions of the current generation mix.
Emission coefficient must be calculated in a transparent and
conservative manner.
• Choice of a grid.
• We will choose the weighted average emission
coefficient of the current generation mix.
• So we find the generation mix.
• Find out the Northern regional grid carbon
intensity.
• Calculate weighted average emission coefficient
of the current generation mix.
• Calculate the baseline/Avoided emissions
 How the Project brings about Wholesome Sustainable
development{Social, Economic, Environmental and
Technological wellbeing}

• Following benefits would not have accrued to people in the absence

of the project activity.
• Elimination of poverty by employment generation.200 people will be
employed during the construction phase. About 6000 mandays of
employment is generated during this phase and Rs 45 lakh is
distributed as salaries/wages.
• Direct permanent employment to 30 persons during operation of the
plant.
• Additional investment of Rs 26 crores in creation of infrastructure in
an underdeveloped area.
• Setting up of rural industries in this difficult hilly terrain. This will lead
to creation of jobs.
• Utilization of environment friendly and safe technologies. No GHG
emissions.
• Project feeds power to regional grid which is facing shortage. So
improvement in quality of power takes place.
• Project Purpose:
• To generate electricity by renewable means.
• Prevent environment damage.
• Add capacity in generation.
• To bring about sustainable development

• Technical Parametres:It intercepts water flow of around 56.91

Mcum over a net head of 167 m.A weir is constructed across river in
Thatri village and a power house to the left flank of Mauji Khad in
Khanyar village.
• Two Pelton turbines comprising two synchronous generators of
capacity 2250KW each are used. Generating voltage will be 6.6KV
which is stepped up to 33 KV.
 Determining Additionality

• It is SSC activity .So additionality will be establish by simplified

means. The project developers should identify at least one barrier
listed in Attachment A of Appendix B.

Following barriers have been identified:

• Investment barrier: Total Investment required is Rs 265 million,
which comes around 59 million/MW.This is quite high. Nearest
substation is 6 Km away. Transmission lines of about 6 Km have to
be laid down for evacuating power. It proves costly for a very small
plant. Substation voltage is 33KV which is quit high.So voltage is to
be stepped up. Costly equipment has to be procured for this
purpose. Digging up for installation of hydroturbines and generators,
laying transmission lines in a hilly area, prone to landslides is also
quite risky and costly proposition.
• Geological Risks: High Earthquake zone.Site falls in Seismic zone
5.
• Hydrological Regime: High uncertainty with regard to availability of
water in the stream.
• Prevailing practices: Due to above risks associated with SHP,the
general practice amongst the planners is to go in for Fossil Fuel
Fired mega power projects.
• 13168 CERs will be generated per year, assuming a rate of 6
dollars/CER, additional revenue of Rs 36 Lakh will accrue every
year during crediting period. This will have the following beneficial
impact:
– IRR will increase from 12% to 14%.
– Project will become financially viable.
• So the project is an additional project and is not business
as usual activity. It would not have happened, if it was not registers
as a CDM activity.
• Calculation of GHG Emissions: Formulae
used is given in Appendix B of Simplified
Methodologies and Procedures for SSC
{Clause 29[b]}
• Project leads to no emissions as it is a
renewable source. No leakage calculation is
required.
• We use the current generation mix for northern
grid.CEA publishes annual energy generation for
each of the regional grid every year.
Thank You
for a Patient Hearing