KOREA ENERGY MANAGEMENT CORPORATION

Transcription

1 3.0MW KOSWATHU GANGA SMALL HYDROPOWER PROJECT <2014-FIN MW> PROGRAMME OF ACTIVITIES FOR SMALL SCALE HYDROPOWER CDM IN SRI LANKA REPORT NO. GHGCC(A) REVISION NO. 02 GHG Certification Office KOREA ENERGY MANAGEMENT CORPORATION

2 Date of first issue: Project No.: GHGCC(A) Approved by: Organisational unit: GHG Certification Office, Won-Hee HAN (Director) Korea Energy Management Corporation() Client: Client ref.: Finconsult Hydropower(Pvt) Ltd. Mr. Eranga Welikala Period for Comments - Category (Sectoral Scope) Energy Industries (renewable-/non-renewable sources) First CPA-DD (version and date) Version 1.1, 13/03/2015 CPA-DD (version and date) Version 4.0, 31/08/2015 Summary: The Korea Energy Management Corporation () Validation Team has conducted validation of the Finconsult Hydropower (Pvt.) Ltd. in Sri Lanka to ensure that the proposed project is in conformity with all applicable CDM requirements including the CDM modalities and procedures, and relevant decisions by the COP/MOP and the CDM Executive Board. The validation consisted of following three phases: 1) Desk review of the project design, baseline methodology and monitoring plan, and relevant data and information; 2) On-site assessment and follow-up interviews with relevant stakeholders in the host country, personnel with knowledge of the project design and implementation; and, 3) Resolution of outstanding issues and issuance of the final validation report and opinion. During the validation, the Team assessed, using objective evidence, the completeness and accuracy of the claimed emission reductions and conservativeness of the assumptions made in the component project activity design document (CPA-DD). In addition, based on its sectoral and regional expertise, the Team assessed whether the project activity complies with the relevant requirements set out in the CDM modalities and procedures, the applicability conditions of the selected methodology and guidance issued by the CDM Executive Board. In summary, is of the opinion that the project, as described in the component project activity(cpa) design document as of 31/08/2015, meets all applicable UNFCCC requirements for the CDM and correctly applies the approved baseline and monitoring methodology AMS- I.D (version 17). Hence, requests the registration of the Finconsult Hydropower (Pvt.) Ltd. as a CDM project activity. Report No.: GHGCC(A) Report title: Subject Group: Finconsult Hydropower (Pvt.) Ltd. Work carried out by: Jong-Wook SEO(Team Leader Under Observation) Min-Ku PARK(Team Member) Seok-Jai CHOI(Team Member) Min-Ha PARK(Team Member Under Observation) Work verified by: Seung-Ho HAN Indexing terms UNFCCC/Kyoto Protocol/CDM Validation / Verification No distribution without permission from the Client or responsible organisational unit Limited distribution Date of this revision: Rev. No.: Number of pages: 14/09/ Unrestricted distribution KEMC-CF-618(Rev.5, 09 FEB 2010)

3 Abbreviations Explain any abbreviations that have been used in the report here. AWLR Average of Weighted Lending Rate AWPLR Average weighted Prime Lending Rate BM Build Margin CAR Corrective Action Request CDM Clean Development Mechanism CEA Central Environmental Authority CEB Ceylon Electricity Board(National Grid Company) CEF Carbon Emission Factor CERs Certified Emission Reduction(s) CL Clarification request CM Combined Margin CME Coordinating/Managing Entity CO2 Carbon dioxide CO2e Carbon dioxide equivalent CPA Component Project Activity CPA-DD Component Project Activity Design Document DNA Designated National Authority DOE Designated Operational Entity EF Emission Factor EIA Environmental Impact Assessment FAR Forward Action Request FSR Feasibility Study Report GHG Greenhouse gas(es) GSC Global Stakeholder Consultation GWP Global Warming Potential IEER Initial Environmental Examination Report IPCC Intergovernmental Panel on Climate Change IRR Internal Rate of Return KECO Korea Environment Corporation Korea Energy Management Corporation KOHO Koho Trading & Consultancy (Private) Limited LDCs Least Developed Country LoA Letter of Approval LoI Letter of Intent MP Monitoring Plan NCRE Non-Conventional Renewable Energy NGO Non-governmental Organization ODA Official Development Assistance OM Operating Margin O&M Operation and Management PO Project Owner PoA Programme of Activities PoA-DD Programme of Activities Designed Document PP Project Participant PS (CDM) Project Standard PUCSL Public Utilities Commission of Sri Lanka SPPA Standardised Power Purchase Agreement SEA Sustainable Energy Authority SLCF Sri Lanka Carbon Fund SUZ Special Underdeveloped Zone UNFCCC United Nations Framework Convention on Climate Change (CDM) Validation and Verification Standard Page i

4 Table of Contents Page 1. INTRODUCTION Objective Scope GHG Project Description 4 2. METHODOLOGY Review of Documents Follow-up Interviews Resolution of Clarification and Corrective Action Requests Internal Quality Control 8 3. VALIDATION FINDINGS Project Design Document Project Description Starting Date of the CPA Creditign Period of the CPA CPA Boundary Application of the Selected Baseline and Monitoring Methodology Eligibility for Inclusion of a SSC-CPA under PoA Additionality of the CPA Special Underdeveloped Zone(SUZ) Approval Investment Analysis Emission Reduction for the CPA under PoA Monitoring Plan Local Stakeholders Consultation Environmental Impacts VALIDATION OPINION REFERENCE Appendix A: Validation Protocol Appendix B: CVs of Validation Team Members and Technical Reviewers Page ii

5 1. INTRODUCTION The Finconsult Hydropower (Pvt.) Ltd. and Korea Environment Corporation(KECO) have commissioned the Korea Energy Management Corporation () to perform a validation of the 3.0MW Koswathu Ganga Hydro Power Project in Sri Lanka (hereafter called the project ). This report summarises the validation findings for the project, as well as means of validation to assess the correctness of the information provided by the project participants. The validation team consisted of the following personnel: Role Name Organization Technical areas Desk review Participation Site visit Team Leader (Under Observation) Jong-Wook SEO GHG Certification Office 1-1, 3-1 P P Team Member / Technical Expert Min-Ku PARK GHG Certification Office 1-2, 13-1 P P Team Member Seok-Jai CHOI GHG Certification Office 1-1, 1-2 P P Team Member (Under Observation) Min-Ha PARK GHG Certification Office 4-1, 5-1, 9-2 P P Technical Reviewer Seung-Ho HAN GHG Certification Office 1-1, 1-2, 3-1, 13-1, 14-1, 15-1 P 1.1. Objective The purpose of validation is to ensure a thorough, independent assessment of the proposed small scale Component Project Activity (CPA) submitted for inclusion under Programme of Activities (PoA) against the applicable CDM requirements and determination of the CPA s fulfilment of all stated criteria in the registered PoA. The validation has been performed to confirm general description, baseline selection, application criteria of methodology, additionality, eligibility criteria, calculation of emission reductions, monitoring plan, crediting period, environmental impact and stakeholder s comments on a basis of the Kyoto Protocol, CDM rules, modalities, related decisions by the CMP, CDM Executive Board and host country criteria. This report includes a result of its assessment Scope The validation scope is defined as an independent and objective review of: - Technical description of the project; - GHG sources and types to be included within the project boundaries; - Baseline scenario; Page 3

6 - Application of the selected baseline and monitoring methodology; - Project additionality; - Monitoring plan; - Environmental impacts by the proposed project; and, - Comments by local stakeholders. The validation scope can be extended depending on project-specific situations or required by relevant decisions by the COP/MOP and the CDM Executive Board. has 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 not meant to provide any consulting towards the clients. However, stated requests for clarifications and/or corrective actions may provide input for improvement of the project design GHG Project Description This CPA is being proposed under the programme of activities(poa), Programme of Activities for Small Scale Hydropower CDM in Sri Lanka. The purpose of this PoA is to develop programmatic CDM for small hydropower generation projects which are not viable as CDM projects due to their small size even though they have significant emission reduction potential. The purpose of this CPA is to set up a small hydropower project to avoid GHG emissions from fossil fuel based power generation. The CPA will be implemented as per the same implementation framework as described in the PoA-DD of Small Scale Hydropower Programme in Sri Lanka. This proposed CPA is planning to install a run-of-river hydropower plant with a capacity of 3.0MW using water flow of Koswathu Ganga at Panahetagala village, Ratnapura district about 15km away from Kalawana town in Sri Lanka. The estimated annual power generation of the hydropower plant is 12.3GWh. The entire power generation will be exported to the national grid of Ceylon Electricitiy Board(CEB). The project implementation will contribute to GHG emission reductions equivalent to 8,940 tco 2 per year in Sri Lanka. The CPA will also contribute to local employment and provide the additional livelihood opportunites to local people. Page 4

7 2. METHODOLOGY The validation may consist of the following three phases: 1) Desk review of the project design, baseline methodology and monitoring plan, and relevant data and information; 2) On-site assessment and follow-up interviews with relevant stakeholders in the host country, personnel with knowledge of the project design and implementation; and, 3) Resolution of outstanding issues and issuance of the final validation report and opinion. In order to ensure transparency, a validation protocol was customized for the project according to the Validation and Verification Standard. The protocol shows, in a transparent manner, criteria (requirements), means of validation and the results from validating the identified criteria. The validation protocol serves the following purposes. l It organizes details and clarifies the requirements which a CDM project is expected to meet; l It ensures a transparent validation process where the validator will document how a particular requirement has been validated and the result of the validation. The validation protocol consists of three tables. The different columns in these tables are described in Figure 1. The completed validation protocol is enclosed in Appendix A to this report. Findings established during the validation can either be seen as non-fulfilment of validation protocol criteria or risk to the fulfilment of project objectives. Corrective Action Requests (CARs) are issued, where: i) Mistakes have been made with a direct influence on project results; ii) Validation protocol requirements have not been met; or iii) There is a risk that the project will not be accepted as a CDM project or that emission reductions will not be certified. The validation team may use the term Clarification Request (CL), which will be where: i) Additional information is needed to fully clarify an issue. Forward Action Request (FAR) may also be issued, where: i) Certain issues related to project implementation should be reviewed during the first verification. Page 5

8 Figure 1 Validation protocol tables 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. Validation Protocol Table 2: Requirement Checklist This is either acceptable based on evidence provided (), or a Corrective Action Request (CAR) of risk or noncompliance 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. Checklist Question Reference Means of Verification (MoV) 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). means not applicable. Comment 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. and/or Conclusion This is either acceptable based on evidence provided (), or a Corrective Action Request (CAR) due to noncompliance 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 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 Conclusion. Page 6

9 2.1. Review of Documents The Component Project Activity Design Document (CPA-DD) version 1.1 dated 13/03/2015 submitted initially and final version dated 31/08/2015 along with additional background document /3/ - /37/ related to the project design and baseline were assessed as a part of validation. The desk review mainly focused on the following aspects: l Participation Requirement l Component Project Activity Design Document l Application of the Selected Baseline and Monitoring Methodology l Project Additionality l Sustainable Development and Local Stakeholder Comments l Baseline Methodology and Project Baseline l Monitoring Methodology and Plan Coverage of Emission Sources l Monitoring Practices and GHG Data Management 2.2. Follow-up Interviews On 25/03/2015 the validation team performed interviews with project stakeholders to confirm major information on the project activity and to resolve issues identified during the desk review.the responsible persons of Finconsult Hydro Power(Pvt.) Ltd., Koho Trading & Consultancy(Pvt.) Ltd. and Greenpolaris Ltd. were interviewed. The main topics of the interviews are summarized in Table 1. Table 1 Interview topics Interviewed organisation Finconsult Hydropower (Pvt.) Ltd. (CPA implementer) Koho Trading & Consultancy (Pvt.) Ltd. (Supporter) Greenpolaris Ltd.(Consultant) Interview topics Ø Project background information Ø Project technology, operation, maintenance and monitoring capability Ø Project additionality Ø Project monitoring and management plan Ø Project approval status (incl. CME approval, CDM project status) Ø Stakeholder consultation process Ø Application of selected baseline and monitoring methodology Ø Baseline determination Ø Emission reduction calculation Ø Emission reduction monitoring plan Ø Environmental impacts Ø Local stakeholder comments and process 2.3. Resolution of Clarification and Corrective Action Requests The objective of this phase of the validation was to resolve the requests for corrective actions, clarifications and any other outstanding issues needed to be clarified for s positive conclusion on the project design. The Corrective Action Requests raised by and presented to the CPA implementer in s Non-Conformity report as of 07/04/2015 were resolved during communications between the CPA implementer and. To guarantee the Page 7

10 transparency of the validation process, the concerns raised and given responses are documented in the validation protocol in Appendix A. Since modifications to the CPA-DD were necessary to resolve s concerns, the CPA implementer decided to revise the CPA-DD and resubmitted the updated CPA-DD. After reviewing and assessing the revised PDD, issued this final validation report and opinion Internal Quality Control The final draft validation opinion and report have been assessed through technical review before requesting registration of the project activity. The technical review has been conducted by a technical reviewer qualified in accordance with s Review of Validation/V&C Procedure mainly in terms of validation procedures and results, and approved by the Director of s GHG Certification Office. 3. VALIDATION FINDINGS In the following sections the findings of the validation are stated. The validation findings for each validation subject are presented as follows: 1) The findings from the desk review of the original CPA-DD, and the findings from physical site inspection and interviews during the follow-up visit are summarised. These findings are in detail described in the Validation Protocol in Appendix A. 2) Where the validation team had identified issues that needed clarification or that represented a risk to the fulfilment of the project objectives, a Clarification and a Corrective Action Request, respectively, have been issued. The Clarification and Corrective Action Request are stated in the following sections and are further documented in the Validation Protocol in Appendix A. 3) Where a Clarification and a Corrective Action Request have been issued, the communications between the Client and to resolve them are summarised. 4) In conclusion, the validation opinion of the validation team has been presented. The final validation findings are based on the revised project design document (Version 4.0, 31/08/2015) and re-submitted supporting documentation CPA Design Document The CPA-DD is prepared in accordance with the latest template (CDM-SS-CPA-DD-FORM, Component project design document form for small-scale component project activities, Version 04.0) and guidance published by the CDM EB. Page 8

11 3.2. CPA Description The proposed CPA is developed under the small-scale PoA titled Programme of Activities for Small Scale Hydropower CDM in Sri Lanka(Ref. 9705). The purpose of this CPA is to set up a small hydropower project to avoid GHG emissions from fossil fuel based power generation. This CPA plans to install a hydropower plant with a capacity of 3.0MW using water flow of Koswathu Ganga. It drops down about 60m in a series of rapids in the village of Waturawa, close to Kalawana in South-western Sri Lanka. Its total capacity is described as 3.0MW in the SPPA(Standardised Power Purchase Agreement) dated on 21 October The estimated annual power generation of the hydropower plant is 12.3GWh. The entire power generation will be exported to the national grid of Ceylon Electricitiy Board(CEB). The electricity generated by the project will be delivered to the Sri Lanka national grid system via 33 kv transmission line, as stated in the SPPA signed by CEB and in the Feasibility Study Report of the proposed project activity. The validation team has checked the description of the proposed project by reviewing the CPA- DD and the Feasibility Study Report in detail. Technical descriptions on installed capacity of turbines and generators were sufficient. The project will proceed in a small existing run-of-river and be operated in an environmentally safe manner, which does not involve significant land clearance, development or resettlement unlike accumulation reservoir type of projects. No project emissions will be produced by the project and it is confirmed through review of the feasibility study and interview of the CPA implementor and project supporter that no fossil fuel based generators will be installed at the project site during its operational period. The project implementation will contribute to the annual reduction 8,940 tco 2 of greenhouse gas emissions in Sri Lanka. In conclusion, the validation team concluded that the CPA-DD has adequate accuracy and completeness in the description of the proposed project Starting Date of CPA The starting date of CPA will be 01/10/2015(the date of purchase contract for turbines and generators) and it is not prior to the commencement of validation of the PoA(05/02/2013) according to the requirement of the PoA. The expected starting date of the CPA is based on the action plan(expected implementation schedule) by the CPA implementer. The CME and the CPA implementer signed CDM contract on 29/12/2014 and the CPA implementer was scheduled to make a purchase contract for turbines and generators subsequently. During the follow-up interview, the validation team found that the CPA implementer and Finconsult Hydropower (Pvt.) Ltd. were in the purchasing process Crediting Period of CPA The expected lifetime of the proposed project is about 20 years. The 7 years are chosen as a renewable crediting period and it starts on 01/09/2016(the date of commercial operation of this CPA). The emission reductions are estimated to be 8,940 tco 2 e/yr and 62,874 tco 2 e over the 7 years of the first crediting period. It is calculated considering the amount of electricity Page 9

12 displacement that would otherwise be generated from fossil fuel-based power plants. And this project is to last for 20 years because it would be renewed up to twice by the CPA implementer like other projects under the same PoA. The crediting period of the CPA shall be limited until the end of the PoA CPA Boundary The spatial extent of the project boundary includes the physical, geographical location of the project where a weir, a channel, a surge chamber, a penstock, hydro-turbines, generators and metering system will be installed by the CPA implementer. The CPA boundary was checked by interviewing the staffs of the CPA implementer during site visit and reviewing evidences received from the CPA implementer. Source Gas Included Justification/Explanation Baseline scenario Project scenario CO 2 Y Main Emission Source CH 4 N Excluded for simplification N 2 O N Excluded for simplification Other Not Applicable CO 2 The project activity is the hydro power project without CH reservoir. It does not consume fossil fuels that there is no 4 project-related emissions. N 2 O The sources and GHGs included in the CPA boundary have been considered in a clear manner and these were described in the section D.3 of CPA-DD. The validation team checked location, the component of the plant and battery system for emergency back-up power by reviewing the project diagram and interviewing the staffs during the site visit. The validation team confirmed that the identified boundary, the selected sources and GHGs as documented in the CPA-DD are justified for the project activity and fully in line with the requirements set by the applied methodology AMS-I.D. (ver. 17) and registered PoA-DD Application of the Selected Baseline and Monitoring Methodology This CPA is a small-scale CDM programme of activity. According to the Appendix B of the simplified modalities and procedures for small-scale CDM project activities of UNFCCC, type and category of the project can be confirmed in accordance with the methodology, AMS-I.D.: Grid connected renewable electricity generation (Version 17), and the tool, Tool to calculate the emissions factor for an electricity system (Version ). The applicability of the selected methodology, AMS I.D.: Grid connected renewable electricity generation (Version 17) was confirmed as follows: Page 10

13 Condition This methodology comprises renewable energy generation units, such as photovoltaic, hydro, tidal/wave, wind, geothermal and renewable biomass: (a) Supplying electricity to a national or a regional grid; or (b) Supplying electricity to an identified consumer facility via national/regional grid through a contractual arrangement such as wheeling Illustration of respective situations under which each of the methodology (i.e. AMS-I.D, AMS-I.F and AMS-I.A) is given below. Applicability of AMS-I.D, AMS-I.F and AMS-I.A based on project types This methodology is applicable to project activities that: (a) Install a new power plant at a site where there was no renewable energy power plant operating prior to the implementation of the project activity (Greenfield plant); (b) Involve a capacity addition; (c) Involve a retrofit of (an) existing plant(s); or (d) Involve a replacement of (an) existing plant(s). Hydro power plants with reservoirs that satisfy at least one of the following conditions are eligible to apply this methodology: - The project activity is implemented in an existing reservoir with no change in the volume of reservoir; - The project activity is implemented in an existing reservoir, where the volume of reservoir is increased and the power density of the project activity, as per definitions given in the project emissions section, is greater than 4 W/m 2 ; - The project activity results in new reservoirs and the power density of the power plant, as per definitions given in the project emissions section, is greater than 4 W/m 2 If the new unit has both renewable and non-renewable components (e.g. a wind/diesel unit), the eligibility limit of 15 MW for a small-scale CDM project activity applies only to the renewable component. If the new unit co-fires fossil fuel, the capacity of the entire unit shall not exceed the limit of 15 MW, No., Remark The CPA comprises renewable energy generation units based on hydropower generation units that supply electricity to a national grid, CEB. Refer AMS-I.D. Version. 17 Table 2 at Page 16. Project supplies electricity to a national/regional grid, CEB. There has not been any renewable energy power plant at the site operating prior to the CPA. The CPA is the installation of a new greenfield power plant. The CPA is a run-of-river type hydropower plant and newly built that it will not result in new reservoirs. The capacity of CPA is 3.0MW which is less than 15MW. 6 Combined heat and power (co-generation) systems are not eligible under this category. The CPA does not include cogeneration. 7 In the case of project activities that involve the addition of renewable energy generation units at an existing renewable power generation facility, the added capacity of the units added by the project should be lower than 15 MW and should be physically distinct from the existing units. The CPA is a newly built hydropower station of which capacity is less than 15MW. 8 In the case of retrofit or replacement, to qualify as a small-scale project, the total output of the retrofitted or replacement unit shall not exceed the limit of 15 MW. The CPA is a newly built hydropower station of which capacity is less than 15MW. Page 11

14 3.3. Eligibility for Inclusion of a SSC-CPA under PoA All the eligibility criteria required for the inclusion of the CPA under the PoA have been described in the section D.5 of CPA-DD. Each of them has been checked and found acceptable as below; No. Eligibility Applicability Check 1 The CPA is a voluntary activity, which is not enforced by any mandatory national/local regulation in Sri Lanka. 2 The CPA is performed within the geographical boundary of Sri Lanka. 3 The CPA signs an agreement with CME to involve the CPA into PoA to ensure that CPA implementer is aware of and agreed to subscribe the CPA into PoA. (In case that CPA implementer is same as the CME, the agreement is not required.) 4 The CPA is not a de-bundled component of a large project activity. 5 The CPA is not involved in another registered or under validation as a CDM project activity or as a CPA under another PoA or as other GHG reduction projects related to small hydropower generation. 6 The CPA applies Run-of-River power generation technology and if reservoir, power density of the project is greater than 4 W/m 2. (The CPA should submit the specification of hydro power generation facility/equipment installed) (Satisfied) The validation team confirmed that there is no mandatory requirement for the private sector or a government agency to invest in small hydropower project by reviewing the registered PoA-DD and interviewing the staffs of the CPA implementer. (Satisfied) The validation team confirmed by reviewing the google map and GPS coordination that the CPA is within the geographical boundary of Sri Lanka. (Weir : 80 26' 35"E / 6 29' 51"N, Power house : 80 25' 16"E / 6 30' 40"N). (Satisfied) The contract between CME and the CPA implementer was reviewed and staffs of the CPA implementer were interviewed. The CPA implementer agreed to include CPA into the registered PoA and be responsible for the CDM related activities by signing the contract on 29th Dec Furthermore the validation team checked that the CPA implementer sent Letter of Intent for Project Participation in Programme of Activities for Small Scale Hydropower CDM in Sri Lanka to CME on 15th Dec (Satisfied) The validation team confirmed by reviewing the certificate of not de-bundled component of large project activity which CME provided and interviewing the CPA implementer. Also, it is confirmed that fulfilled de-bundling check list is described in section A.12 of CPA-DD in line with registered PoA-DD. (Satisfied) The validation team checked that this proposed CPA was not involved in another project by reviewing the certificate of double counting check and interviewing with the CPA implementer. (Satisfied) The validation team checked all project components which will be installed: a weir, a sedimentation tank, a headrace channel, a forebay, a penstock, turbines and generators. Run-of-River power generation technology will be applied to the project as described in CPA-DD. Further, the validation team crosschecked by reviewing the diagram of the project and Page 12

15 7 The CPA satisfies the applicability conditions for simplified baseline and monitoring methodologies as specified in the AMS I.D. (version 17) 8 The CPA provides an affirmation that funding from Annex I party, if any, does not result in a diversion of official development assistance. 9 The CPA meets the requirements pertaining to demonstration of additionality. To determine the additionality, CPA should follow the process in B.5 of PoA-DD, Part II. 10 The CPA does not commence prior to the start date of validation of PoA (05/Feb/2013), in accordance with EB 55th, Annex 38 and has the documentary evidence to check its start date. 11 The CPA performs local stakeholder consultation before the inclusion into PoA and construction. the follow-up interview. (Satisfied) The validation team checked that this proposed CPA was not a de-bundled component of a large project activity by reviewing the de-bundled confirmation document and the follow-up interview. Also, it is confirmed that fulfilled de-bundling check list is described in section A.12 of CPA-DD in line with registered PoA-DD. (Satisfied) The validation team confirmed by reviewing the affirmation letter from the CPA implementer that the proposed CPA did not receive the ODA from Annex I party. Therefore, this CPA was implemented in line with CDM standards and registered PoA-DD. (Satisfied) By reviewing the investment analysis (Excel sheet) with supporting document, particularly FSR (namely business plan) and budget plan, the validation team found that the proposed CPA was sufficiently satisfied in terms of the additionality. (Satisfied) The CPA will be started after 01/10/2015, later than the start date of PoA-DD. Therefore the CPA does not commence prior to the start date of validation of PoA. (Satisfied) The validation team checked that there was no negative opinion during the local stakeholder consultation which was held on 23th Feb in Panahetagala village. It was confirmed by reviewing the minute of the consultation and attendance list. The validation team is of the opinion that local stakeholder consultation was adequately implemented. 12 The CPA performs the environmental impacts analysis according to National Environmental Regulation of Sri Lanka. (Satisfied) 13 The capacity of the CPA does not exceed 15MW. (Satisfied) The Initial Environmental Examination Report(IEER) for this proposed CPA was approved from CEA. The validation team confirmed by reviewing the approval document of 9th May 2008 from CEA. The CPA implementer requested the extension of Environmental approval for this project on 4th Dec On 03 August 2015, the extension was approved and it will be effective until 28 th Dec The validation team confirmed by reviewing the IEER that the proposed CPA causes no negative impacts to the environment. It was confirmed by reviewing the CME-CPA Page 13

16 implementer contract, SPPA between the CPA implementer and CEB and FSR. In addition, the validation team cross-checked the specification data of installed hydro-turbines and generators which will be purchased in the near future. l CL 1: The validation team investigated whether the proposed project is de-bundled or not. During the on-site assessment, the evidence for de-bundling check in the confirmation of eligibility criteria checked by CME was not submitted. Therefore, it is requested to be clarified. n Corrective Actions: Sri Lanka Sustainable Energy Authority confirmed that there is no other project being developed or developed within 1km of the boundary of the project. n Conclusions: It was confirmed that there is no other project being developed or developed within 1km of the boundary of the project by reviewing the confirmation letter from Sri Lanka Sustainable Energy Authority and interviewing the CPA implementer. Therefore, the CL is closed. Thus the validation team confirmed that the proposed CPA is fully in line with the requirements set by the registered PoA-DD Additionality of CPA The additionality of the proposed project has been presented on a CPA level as indicated in Section B.5 of PoA-DD. As the proposed CPA applies the small scale methodology, the additionality of the proposed CPA was demonstrated in accordance with Attachment A to Appendix B of the simplified modalities and procedures for small-scale CDM project activities, based on the valid version of the Guidelines on the Demonstration and Additionality of Small- Scale Project Activities (Version 09.0), Tool for the demonstration and assessment of additionality (Version 07), and the Guidelines on the Assessment of Investment Analysis (Version 05) Special Underdeveloped Zone(SUZ) Approval The capacity of hydroplant is less than 5MW, and it is a micro scale project. According to the Guideline: demonstrating additionality of microscale project activities(version 05.0), project activities up to 5 MW that employ hydro power technology in this PoA are additional if the geographic location of the project activity is in a special underdeveloped zone (SUZ) of Sri Lanka. validation team checked that there have not been any SUZ approvals in Sri Lanka from the CDM wesite( except onshore wind and Biomass Investment Analysis To prove additionality, the CPA implementer fulfilled investment analysis of step 2 in Tool for the demonstration and assessment of additionality (Version 07) to prove that this project would Page 14

17 not have started due to investment barriers as described in the registered PoA-DD. The CPA implementer selected the benchmark analysis and calculated Project IRR for the project activity. ly, it was shown that the proposed CDM project activity is not economically and financially feasible, without the revenue from the sale of certified emission reductions (CERs). Formulae and calculation processes of the IRR were validated by reviewing the calculation spreadsheets submitted by the CPA implementer. The validation team checked a feasibility study report, the EPC contract and public tariff announcements for non-conventional renewable energy related to the proposed CPA. It was validated that key parameters and assumptions used in the financial calculations are accurate and suitable in light of relevant accounting practices as follows: Ÿ Investment Cost: The investment cost of the project is composed of land value, civil and electromechanical works, etc. The total estimated investment cost for this project is 1,038,470,000 LKR according to the final version of FSR which was revised in January It is slightly increased comparing with the initial FSR dated November 2011 due to increase of project acquisition & land cost and interest during construction. Actually the total estimated investment cost for this project was 852,700,000 LKR in the initial FSR. The project acquisition & land cost was reviewed with the real receipts submitted by the CPA implementer. As described in the Guidelines on the Assessment of Investment Analysis (version 05.0), input values should be applicable at the time of the investment decision taken by the project participants. The total investment cost from the FSR dated January 2014 was applied to the investment analysis. Therefore the validation team confirmed that the investment cost for the proposed project activity was appropriately determined in the investment analysis and much more conservative compared to the investment cost from the initial FSR. Ÿ O&M Costs: The O&M cost for the proposed CPA is 9,000,000 LKR/yr with 5.16% escalation every year as describes in Non conventional renewable energy tariff which was announced in January This value, 9,000,000 LKR/yr is the 0.87% of total investment cost including interest during construction. In addition it has been crosschecked with the initial CPA (2013-PPB MW) under the same PoA that the O&M cost for the proposed CPA is less than the O&M cost for initial CPA as below; CPA O&M costs(lkr/yr) Total Investment cost(lrk) Ratio Initial CPA 13,040, ,530, % Proposed CPA 9,000,000 1,038,470, % Therefore the validation team confirmed the appropriateness of the O&M cost for the proposed CPA in terms of conservativeness. Ÿ Electricity Tariff: In Sri Lanka, there are two types of NCRE tariff price according to Non-Conventional Renewable Energy Tariff Announcement which was applied to SPPA between CEB and project developers(i.e. CPA implementer). They were Three- Page 15

18 tiered Tariff and Flat Tariff. Both tariffs are for 20 years, but Three-tiered Tariff has three fixed rates based on operation time. In case of three-tiered tariff for mini-hydro project, LKR/kWh is applied for 1 st to 8 th year, 5.16 LKR/kWh for 9 th to 15 th and 1.62 LKR/kWh for16 th to 20 th. The escalation of O&M rate shall be considered. The flat tariff has only one rate for 20 years, LKR/kWh for mini-hydro project. The CPA implementer applied a flat tariff for the entire 20 year. confirmed it by reviewing the Standardised Power Purchase Agreement between CEB and the CPA implementer and interviewing the implementer. The flat tariff will not be escalated for any reason over 20 years. Also the available highest electricity tariff, LKR/kWh, is much conservative compared to other tariff price. Ÿ Plant Load Factor (PLF): Annual electricity generation was calculated to be 14GWh according to the initial FSR which was estimated by an engineering company, VS Hydro(Pvt) Ltd., considering natural conditions including water flow and net head. It was particularly noted that the estimated annual power generation and plant load factor for the project activity were based on a 27-year hydraulic study ( period). Afterward the CPA implementer decided to decrease the installed capacity and change the annual electricity generation. In the revised FSR, annual electricity generation is 12.3GWh, thereby amounting to a plant load factor of 49.3%. It is also confirmed that the plant load factor determined by a third party(i.e. an engineering company) is applicable in line with para 3(b) of the Guideline for the reporting and validation of plant load factors. The validation team therefore concludes that the value of 49.3% is reasonable to use. Ÿ Emission Factor: The emission factor has been calculated in accordance with tool to calculate the emission factor for an electricity system (version ). Simple OM method and ex-ante option with fixed EFs for both the OM and BM calculation have been selected. The value of will be used as a Combined Margin emission factor and this value will be applied during the crediting period without update as described in B.6.2. of the registered PoA-DD. Ÿ Benchmark Value: According to the Guidelines on the Assessment of Investment Analysis (version 05), local commercial lending rates or weighted average costs of capital (WACC) are appropriate benchmarks for a project IRR. In this view, the CPA implementer has selected the Average Weighted Lending Rate as a local commercial lending rate ( %) from January 2013 to December 2013 offered by the Central Bank of Sri Lanka at the approval date of the final version of budget plan. The validation team concluded by reviewing the publication of the Central Bank of Sri Lanka and IRR calculation sheet that the benchmark value selected was appropriate to the proposed project. Page 16

19 Ÿ IRR Sensitivity Analysis: According to the Guidelines on the Assessment of Investment Analysis (version 05), local commercial lending rates or weighted average costs of capital (WACC) are appropriate for a project IRR. Sensitivity analysis was applied to examine whether the conclusion regarding the financial attractiveness is robust to reasonable variations of the critical assumptions. For the proposed project, 1) total project cost, 2) electricity generation and 3) electricity tariff were selected as variable parameters, and fluctuated with a range of +10% to -10%. This range in fluctuation meets the requirement of EB62 Annex 5. As described in detail at the table below, it is unlikely that the total project cost, the annual net electricity generation and the electricity tariff will change significantly. The DOE has, therefore, concluded that the range in fluctuation is reasonable. The result of the analysis revealed that IRR does not exceed the benchmark value of %. The Guidance on the Assessment of Investment Analysis requires the robustness of the investment analysis to be proved through a sensitivity analysis by varying the critical assumptions to reasonable variation and it is also required by the registered PoA. As per the registered PoA, sensitivity analysis shall be properly carried out considering both negative and positive variations (from -10% to +10%) in major variables such as total project cost, electricity generation and tariff price. The sensitivity analysis revealed that even under more favorable conditions, the IRR would not cross the benchmark as given in the following table: Variations Major Variables -10% 0 10% Total project cost 15.26% 13.58% 12.14% Electricity Generation 11.88% 13.58% 15.20% Tariff 11.88% 13.58% 15.20% Benchmark % In conclusion, it is confirmed that all assumptions and financial calculations used in investment analysis are appropriate, correct, and consistent with CPA-DD and calculation spreadsheets, and that the Project IRRs are properly calculated. The investment analysis has been properly performed and complies with the registered PoA-DD and relevant guidelines. The assessment of all used parameters and the financial calculation show their accuracy and suitability. Hence the validation team confirms that the financial returns of the proposed component project activity would be insufficient to justify the required investment if CDM is not considered. The proposed project is therefore deemed additional. Page 17

20 3.5. Emission Reduction for CPA under PoA The algorithms and formulae in the PoA-DD are from the approved methodology of AMS-I.D Grid connected renewable electricity generation (version 17). As per the applied methodology, the emission reduction (ER y ) by the project activity during the crediting period is calculated as follows: ER y = BE y (PE y + LE y ) (1) Baseline Emission (BE y ) As per the guidance provided in AMS-I.D (Ver.17) for this project the baseline emissions are the product of electrical energy baseline EG BL,y expressed in MWh of electricity produced by the renewable generating unit and the grid emission factor as; BE y = EG BL,y * EF CO2,grid,y where; BE y Baseline Emission in a year y (tco 2 ) EG BL,y Quantity of net electricity supplied to the grid as a result of the implementation of the CDM project activity in a year y (MWh) CO2 emission factor of the grid in a year y (tco 2 /MWh) EF CO2,grid,y (2) Project Emission (PE y ) The project is the Run-of-River type hydro-power generation project which results in no new reservoir or no increase of existing reservoir in the project activities. And there is no CO2 emission from on-site consumption of fossil fuels due to the project activity. The batteries will be used as an emergency power source instead of fossil fuel generators. validation team checked the type of power plant and the possibility of fossil fuel consumption during the site-visit and confirmed that the project emission is zero (PE y = 0 tco2/y). (3) Leakage Emission (LE y ) As per category AMS-I.D (Version 17), leakage is to be considered only if the energy generating equipment is transferred from other activities or if the existing equipment is transferred to other activities. validation team checked that the power plant is a newly built and any of machineries will not be transferred from other activities by interviewing staffs. validation team confirmed there will be no leakage associated with the project activity and therefore, leakage emission is zero. LE y = 0 tco 2 /y In conclusion, the emission reduction (ER y ) by the project activity during the crediting period is as follows: Page 18

21 ER y = BE y - PE y - LE y = (12,300 Í ) = 8,940 tco2e Hence the validation team checked that the steps taken and equations (including the parameters) applied to calculate baseline emissions, project emissions, leakage and emission reductions are correct and fully comply with the requirements of the selected baseline and monitoring methodology. It was also verified that the GHG calculations are accurate, complete and transparent. Thus it can be stated that: Ÿ All assumptions and data used by the project participants are listed in the CPA-DD, including their references and sources; Ÿ All documentation used by CPA implementer as the basis for assumptions and source of data is correctly quoted and interpreted in the CPA-DD; Ÿ All values used in the CPA-DD are considered reasonable in the context of the proposed project activity; Ÿ The baseline methodology has been correctly applied to calculate project emissions, baseline emissions, leakage and emission reductions. All estimates of the baseline emissions can be replicated using the data and parameter values provided in the CPA-DD Monitoring Plan The monitoring plan for the project activity is established pursuant to the approved baseline and monitoring methodology, AMS-I.D (Ver. 17). To calculate the baseline emissions, the net electricity supplied to the national grid (EG BL,y ) which is generated by the plant will be measured. The emission factor defined in CPA-DD will be used to calculate the baseline emission. The net electricity will be calculated as the difference between export and import readings from the electricity meter. The electricity meter will be calibrated before use and sealed and locked by CEB. The electricity meter will be tested at least annually. If the electricity meter is found to be more inaccurate than 2 percent, CEB will make the electricity meter accurate or replaced. CEB will read the electricity meter with CPA implementer. CPA implementer will witness CEB s data reading and record and keep the reading value as evidence for CEB s electricity purchase. The CPA implementer will manually document or electronically save the data. Collected data will be saved as a form of computer file at least once a month by trained personnel. These data will be kept for at least two years after the crediting period. CPA implementer will report the monitoring data periodically to SLCF(CME) as described in CPA-DD and CDM Operation Manual. The monitoring and QA/QC procedures including responsibilities and authorities for project management, calibration of metering equipment and training for staffs are provided in the CPA- DD and CDM operation manual. Through interview with the managing director and review of Page 19

22 the training plan, it could be checked that the CPA implementer are able to implement the monitoring plan. confirmed by reviewing the SPPA between CME and CPA implementer and CDM operation manual that the monitoring procedure will be applied to this project. It can also be checked that the monitoring arrangements described in the monitoring plan are feasible within the project design. The validation team is of the opinion that the implementation of the monitoring plan (including data management, quality assurance and quality control procedures) is sufficient to ensure the reporting and the verification of the emission reductions resulted from the proposed component project activity. Project emission and leakage emission will not be calculated and other parameters will not be measured. The plant is a newly built one with no reservoir and there will be no equipment transferred from other activities. Also validation team checked that there is no fossil fuel consumption for emergency generation and other purposes. But, with regards to the monitoring plan, one CAR was raised and closed out as below: l CAR 1: According to the PoA, each CPA implementer shall be determined and the monitoring plan shall be prepared. However, the validation team found that the CPA- DD(ver1.1) does not clearly describe the frequency of calibration and the level of accuracy for metering equipment. This is therefore requested to be corrected. n Corrective Actions: The final version of CPA-DD contains the monitoring plan and calibration of metering equipment. And monitoring plan, testing and calibration, reading of metering equipment, etc. are consistent with section 7 of CDM operation manual by CME and SPPA. n Conclusions: validation team checked the information related to the metering equipment and confirmed that the information is consistent with SPPA and CDM operation manual by reviewing the documents and the final version of CPA-DD. Therefore, the CAR is closed Local Stakeholders Consultation It was confirmed that the stakeholder meeting was held in Kalawana office close to the project site on 23/02/2015. Stakeholders were invited to comment on the proposed project activity through public announcement. In the consultation meeting, presentations were made by the CPA implementer who outlined the planned project activity in a non-technical manner (including environmental, social and technological considerations), climate change, the role of the Clean Development Mechanism and annual emission reductions potential. The validation team checked evidences including the attendance list, questionnaire sheets and pictures. The validation team concluded that the process to collect stakeholder s comments was appropriately implemented. Hence the validation team is of the opinion that local stakeholder consultation was adequately implemented. Page 20