Voluntary Carbon Standard VALIDATION REPORT BUNDLED WIND POWER PROJECT

Transcription

1 VALIDATION REPORT BUNDLED WIND POWER PROJECT Positive Climate Care 9.75 MW Bundled Wind Power Project Activity by Savita Oil Technologies Ltd. & its group companies in the state of Maharashtra, India. Project No/ Rev. No.: V-3-I-01-B-0058/ 01

2 Name of Validation company: Date of issue: Perry Johnson Registrars CDM Inc Report Title: VCS Validation Report for Positive Climate Care 9.75 MW Bundled Wind Power Project Activity by Savita Oil Technologies Ltd. & its group companies in the state of Maharashtra, India Client(s): 1. Savita Oil Technologies Limited (formerly Savita Chemicals Limited) 2. Naved Investment & Trading Company Private Limited 3. Khatri Investments Private Limited Coordinating agency for the project: Savita Oil Technologies Limited Summary: Approved by: S. V. Jamble Project Title: PD Positive Climate Care 9.75 MW Bundled Wind Power Project Activity by Savita Oil Technologies Ltd. & its group companies in the state of Maharashtra, India Version : 02 Date : The clients as listed above have commissioned Perry Johnson Registrars Clean Development Mechanism Inc. (PJRCDM) to perform validation of their bundled project Positive Climate Care 9.75 MW Bundled Wind Power Project Activity by Savita Oil Technologies Ltd. & its group companies in the state of Maharashtra, India under Voluntary Carbon Standard (VCS) The validation is an independent assessment to determine the conformance of the project activity to the requirements of VCS , including applicable baseline methodology, demonstration of additionality, monitoring plan and the greenhouse gas (GHG) emission reduction potential. The project activity involves installation and operation of wind turbine generators (WTGs) of 9.75MW capacity in Sangli, Nashik and Ahmednagar districts of Maharashtra state, India. The machines were commissioned between the years 2007 and 2009 and the power generated is exported to the Northern Eastern Western North Eastern (NEWNE) grid regional grid of India. The project activity has correctly applied the AMS I D methodology version 14 and relevant tools from Clean Development Mechanism (CDM) to determine baseline, establish additionality and frame the monitoring plan. PJRCDM conducted a physical verification of the WTGs, interviewed representatives of the project proponents and carried out a review of relevant documents. A number of Clarification Requests (CLs) and Corrective Action Requests (CARs) were issued which were subsequently resolved by the project proponent. Total GHG emission reduction achievable by the project activity has been estimated at be tonnes of CO 2 e per annum. Based on the documentation verified, it is PJRCDM s opinion that the emission reductions from the project activity would be real, measurable, additional and permanent. Report Number/ Version Number of pages V-3-I-01-B-0058/01 28 Work carried out by: G Subramanyam Umashankar S. Work reviewed by S V Jamble V-3-I-01-B-0058/01 2/28

3 Abbreviations CAR CDM CEA CL FAR GHG IPCC IRR kwh MW NEWNE PD PJRCDM PLF PP UNFCCC VCS VCU WTG Corrective Action Request Clean Development Mechanism Central Electricity Authority, Ministry of Power, Government of India Clarification Request Forward Action Request Greenhouse gases Intergovernmental Panel on Climate Change Internal Rate of Return kilo watt-hour Mega Watt Northern Eastern Western North Eastern (NEWNE) Grid of India Project Description (VCS) Perry Johnson Registrars Clean Development Mechanism Inc. Plant Load Factor Project Proponent United Nations Framework Convention on Climate Change Voluntary Carbon Standard Voluntary Carbon Unit Wind Turbine Generator V-3-I-01-B-0058/01 3/28

4 Table of Contents 1 Introduction Objective Scope and Criteria VCS project Description Level of assurance Methodology Review of Document Follow-up Interviews Resolution of any material discrepancy Validation Findings Project Design Baseline and demonstration of additionality Monitoring Plan Calculation of GHG Emissions Environmental Impact Comments by stakeholders Validation conclusion...16 Appendix I...17 Appendix II...19 V-3-I-01-B-0058/01 4/28

5 1 INTRODUCTION Savita Oil Technologies Limited, Naved Investment & Trading Company Private Limited and Khatri Investments Private Limited (hereinafter referred to individually or collectively as the client or project proponent ) have contracted Perry Johnson Registrars Clean Development Mechanism Inc. (PJRCDM) to perform validation of the bundled project Positive Climate Care 9.75 MW Bundled Wind Power Project Activity by Savita Oil Technologies Ltd. & its group companies in the state of Maharashtra, India, (hereinafter referred to as the project/project activity) under the Voluntary Carbon Standard (VCS) standard. This report describes the validation work undertaken. 1.1 Objective The purpose of Validation is to perform an independent, third party assessment of whether the project activity conforms to the qualification criteria set out in the VCS standard to attain real, measurable, additional and permanent emission reductions. The validation statement/opinion is a written assurance that the project complies with all the applicable VCS requirements and has the ability to generate the emission reductions stated over the project s crediting period. 1.2 Scope and Criteria The validation scope includes an independent and objective review of the project s VCS project description (PD). In particular, the specific objectives of the validation work involve: To verify that the project activity meets the requirements of VCS standard including additionality, proof of title and compliance with local laws To assess whether the baseline and monitoring plan are in conformance with the methodology applied from the VCS approved GHG program. To certify that the information presented are complete, consistent, transparent and free of omission or material error. The information in the PD is reviewed against the criteria of VCS standard, the VCS program guidelines, and the applied CDM methodology - AMS I D, version 14. PJRCDM has performed the validation based on a risk based approach focusing mainly on the significant risks to meet the qualification criteria and the ability to generate Voluntary Carbon Units (VCUs). The work carried out by PJRCDM is free from any conflict of interest. 1.3 VCS project Description The project activity involves installation and operation of wind turbine generators (WTGs or machines) totalling 9.75 MW capacity at Maharashtra state of India by the three project proponents combined. The power generated from the WTGs is exported to the Maharashtra state electricity grid, which is inter-connected with the Northern Eastern Western North Eastern (NEWNE) grid network of India. The WTGs are V-3-I-01-B-0058/01 5/28

6 expected to generate power with a plant load factor (PLF) of 20%. The commissioning dates and unique identification details of the machines are as under: Project owner Savita Oil Technologies Limited (formerly Savita Chemicals Limited) Naved Investment & Trading Company Private Limited WTG No. GP-18 (Survey No. 367) GP-19 (Survey No. 367) GP-21 (Survey No. 372) 87 Registration No. E/NS/292(i)) 78 (Registration No. E/NS/292(ii)) 3 Registration Make Capacity (MW) Village/ Town District/ State Commissioning date Vestas th February 2007 Gudhepanchgani/ Sangli/ Vestas th April 2007 Shirala, Maharashtra Vestas th March 2007 Enercon th March 2008 Aundhewadi/ Nashik/ Sinnar Maharashtra Enercon st March 2008 No. E/AN/132(ii)) Enercon th March (Registration No. E/AN/132(i)) Enercon 0.8 1st April (Registration No. E/AN/126(i)) Ahmednagar/ Enercon 0.8 Manhere/ Akole 24 th July 2008 Maharashtra Khatri Investments Private Limited Ltd 2 (Registration No. E/AN/125(i)) Enercon 0.8 Total th July 2008 The geographical coordinates of location of the WTGs are as mentioned in the PD. The lifetime of the machines stated is 20 years. 1.4 Level of assurance In line with VCS requirements and as per ISO :2006 para A.2.3.2, a reasonable level of assurance is defined for the validation of the project. This implies that, based on the process and procedures conducted, PJRCDM should state whether the information in the PD - is materially correct and is a fair representation of the actual project details, and - is prepared in accordance with VCS requirements and the applied CDM methodology for information pertaining to additionality, GHG quantification, monitoring and reporting. The validation work is carried out as per this requirement and details are presented in the Validation statement in section 4 below. 2 METHODOLOGY The project activity applies approved small scale CDM methodology AMS I D version 14 categorised under sectoral scope 1 Energy Industries (renewable/non renewable sources). For validation, PJRCDM s approach involves broadly three steps: V-3-I-01-B-0058/01 6/28

7 1. Completeness check and desktop review of the project description (PD) 2. Onsite inspection, interview with project representatives and issuance of findings 3. Resolution of the findings followed by preparation of the validation report The following team members from PJRCDM were involved in these steps: Name Role Areas covered G Subramanyam Validator Completeness check, desk top review, site visit, issuance and closure of findings, report preparation Umashankar S. S. V. Jamble Validator Technical Reviewer Desk top review, issuance and closure of findings, report preparation Technical review 2.1 Review of Document On receipt of the project description from the client, the completeness of information made available as per VCS standard requirements is reviewed. A desktop review is further carried out to assess the following: the project details as per VCS PD template appropriateness of methodology applied compliance with relevant laws and regulations correctness of application of baseline and monitoring methodology demonstration of additionality monitoring plan stakeholder comments proof of title other external documents like grid emission factor, IPCC emission factor, etc. where applicable A complete list of all documents reviewed is attached in Appendix-I of this report. The first version of the PD was received on 4 th June Follow-up Interviews After reviewing the project documents, site visits were conducted on the 10 th and 11 th August 2009 at Sangli and Nashik/Ahmednagar sites respectively, where physical inspection was made to verify the project details. During the visit and the follow-up meeting, interviews were conducted with the following project representatives: Name / Designation / Company Mr. Narendra Singh Bhatia, site in-charge, Enercon at Nashik and Ahmednagar Mr. Arun Jadhav, site in-charge, Vestas Sangli Interviewed on Project technical details, monitoring system, calibration practice and frequency Project technical details, monitoring system, calibration practice and frequency V-3-I-01-B-0058/01 7/28

8 Follow-up meeting: Ms. Meenakshi Jain/ Chief Managing Director/ Positive Climate Care (VCS consultant for project proponents) Baseline, additionality and emission reduction calculations During the site visit, PJRCDM verified the actual operation of the project as described in the PD. The system of metering used for monitoring the export to grid and the calibration practice adopted were examined. The monthly records system of energy meter readings was also reviewed. 2.3 Resolution of any material discrepancy Based on the site inspection and review of documents including the monitoring plan, issues that need to be further elaborated upon, researched or added in order that the project activity meets the VCS requirements and can achieve credible emission reductions is identified, clarified and to be resolved by the project proponent. A Corrective Action Request (CAR) is raised if one of the following occurs: a. The project participants have made mistakes that will influence the ability of the project activity to achieve real, measurable additional emission reductions; b. The VCS standard requirements, including the specific requirements of the methodology applied, have not been met; c. There is a risk that emission reductions cannot be monitored or calculated If information made available is insufficient or not clear/ transparent enough to determine whether the applicable VCS requirements have been met, a Clarification request (CL) is raised and communicated to the project proponent. Observations may also be raised which are for the benefit of future verification period- called as Forward Action Requests (FARs). These, however, have no impact upon the completion of the current validation activity. On receipt of response and revised PD from the project proponent, the adequacy of compliance with VCS and the methodology requirements is checked. Closure of comments raised occurs only if the response provided and corrections made fully comply with the stated requirements of the VCS standard and the methodology applied. The list of CARs/ CLs/ FARs raised and the response provided, the means of validation, reasons for their closure, and references to correction in the PD are provided Appendix-II to this report. Summary of major findings: Among the major findings during validation, it was found that the project is currently under CDM validation. To ensure that the VCS credits generated by the project are not double counted, CAR#3 was raised to transparently declare the application with other GHG programs. The revised PD states that the project has applied for CDM and the VCS crediting period will last till the date of CDM registration. Further, declaration letters have been sought under CAR#3 from V-3-I-01-B-0058/01 8/28

9 project proponents stating there would be no double counting with other GHG programs and subsequently CAR#3 was resolved. The small scale PD had applied investment barrier with investment analysis to demonstrate that the additionality of the project as per small scale CDM additionality tool Attachment A to Appendix B of simplified modalities and procedures for small scale projects. Since the investment was done by the proponents at different periods, CAR#6 was raised to provide IRR analysis as per the time of investment and later resolved. The benchmark applied is commercial lending rates and clarity of the same was sought under CAR#5. This was evidenced as per the prime lending rate for the different years of investment. Further, justification was sought under CAR#5 on the assumptions used for the IRR computations. The revised PD states that capital costs have been based on purchase orders and plant load factor (PLF), Operating costs and tariff are considered as per the Maharashtra Electricity Regulatory Commission (MERC) 2003 tariff order for wind energy projects. Project IRR has been compared with the prevailing prime lending rates at the time of investment as benchmarks. Detailed assumptions and elaboration have now been discussed in the revised version#2 of the PD along with the sensitivity analysis. The revised PD and IRR spreadsheets with changes incorporated as per the issues raised were rechecked with the documentary evidences and found to be in order. 3 VALIDATION FINDINGS 3.1 Project Design The VCS project activity involves installation and operation of wind turbine generators with total capacity of 9.75 MW at Sangli, Nashik and Ahmednagar districts of Maharashtra state, India. Details of unique identification and commissioning dates are as provided in section 1.3 of this report. An estimated Million kwh/ year is expected to be sold to the Maharashtra state grid which is a part of the integrated Northern Eastern Western North Eastern (NEWNE) grid of India. Plant Load Factor stated was 20% and CL#5 was raised to justify the assumption. The PLF is based on the 2003 tariff order by Maharashtra State Electricity Regulatory Commission (MERC) and hence subsequently resolved. In version 1 of the PD VCS start date was not clear as it stated the date as commissioning of the different WTGs. CAR#1 was raised to clearly specify this as per VCS standard. The VCS start date was revised as 13 th February 2007, which is the commissioning date of the first WTG. The VCS crediting period for the project is now stated as 10 years from 13 th February 2007 to 12 th February Operational lifetime of the machines under the project has been defined as 20 years. There has been a change of company name of the proponent Savita Oil technologies Limited from the earlier Savita Chemicals Limited effective from 1 st August Authorization of name change by Registrar of Companies, Maharashtra has been furnished for the proponent and found in order. Further, the evidence of Naved Investment & Trading Company Private Limited and Khatri Investments Private Limited being group companies of Savita Oil Technologies Limited was sought and found OK. V-3-I-01-B-0058/01 9/28

10 The proof of title of the proponents in the bundle was sought (CAR#9) to ensure compliance with VCS proof of title requirements. These were evidenced through ownership documents like purchase orders, commissioning certificates and power purchase agreements with the state electricity grid operator (see Appendix-I for document references) and hence resolved. During validation, it was found that the project is currently under CDM validation. To ensure that the environmental credits generated by the project are not double counted, CAR#3 was raised to transparently declare this status. The revised PD states that the project is under CDM validation and the crediting period under VCS will last until the CDM registration date. A declaration letter has also been separately furnished by the project proponents stating avoidance of double counting with other GHG programs. The project states that it is a grouped project. The coordinating agency for the bundle was not clear and hence CAR#4 was raised. Letters of authorization stating Savita Oil Technologies Limited as the coordinating agency for the bundled project have been furnished by each of the proponents and hence the CAR#4 was closed. The project complies with national and local laws and environmental regulations. Lastly, as per the VCS section criteria, the schedule of meeting the contracting deadline for validation was sought under CAR#10 for the proponents in the bundle and found to meet the requirement. 3.2 Baseline and demonstration of additionality The project proponent had applied approved baseline methodology AMS I.D., version 13 which has been approved by the CDM Executive Board. CAR#2 was raised to apply the latest applicable methodology version and resolved subsequently. The revised PD adopts the AMS ID version 14. The total installed capacity of the bundle is 9.75 MW which is less than the 15 MW limit for type I small scale project activities. The application of baseline methodology is justified as follows: The project generates electricity using the renewable source i.e. wind energy. The total installed capacity of the project is less than 15 MW. The installed capacity has been verified from the commissioning certificates and power purchase agreements of the proponents. The grid boundary selected for the project activity is the NEWNE regional grid of India to which the project exports generated power. The selection is appropriate for a large country like India and is in line with CDM guidelines and the Tool to calculate the emission factor for an electricity system (Version 1.1). The project proponents have committed not to replace the technology during the crediting period. Baseline for the project has been identified in line with the small scale methodology AMS I D version 14, where the baseline emissions are renewable energy generated times the emission factor of the grid. The grid emission factor has been determined as Option a, the combined margin grid emission factor of the NEWNE grid as tco 2 / MWh in line with the Tool to calculate the emission factor for an electricity system (Version 1.1). Additionality: The additionality of the project is established with the Attachment A to Appendix B of the simplified modalities and procedures for small-scale CDM project V-3-I-01-B-0058/01 10/28

11 activities. The additionality was demonstrated through the investment barrier route. Since the IRRs furnished were not as per individual proponent and not based on the time of investment, the same was raised in CAR#5 and CAR#6. It was responded that since proponents Naved Investment Trading and Khatri Investments are the group companies, hence their IRR computation was grouped. The evidences for the same were checked and subsequently the issue was resolved. However, the revised PD submits individual IRRs for proponent based on the project establishment period. The project compares the project IRR with the commercial lending rates as per the guidelines of the CDM Additionality Tool and the EB Guidance on the assessment of Investment Analysis. Since the basis of lending rates assumed were not clear, CAR #6 was raised. The PD states that there was a delay in commissioning of the project and the investment was not made during signing of purchase order but was rather made prior to commissioning due to delays at the start of the project. It was verified that the benchmark and IRR computation have been done based on the time of commitment to go ahead with the project and hence the issue was resolved. Accordingly, the project has categorised the IRR analysis of the WTGs for three financial years (3x 1.65 MW), (2x0.8MW) and (4x0.8MW) and found appropriate. The benchmarks are for the years are prime lending rates (PLRs) at 12.25%, 12.25% and 11.50% for the three years respectively. The lending rates were verified as per Reserve Bank of India data for these years and subsequently CAR#6 was closed. It was verified that the debt:equity ratio has been assumed at 70:30 based on the Maharashtra State Electricity Regulatory Commission (MERC) 2003 tariff order applicable for wind energy projects. Since the details of assumptions related to capital costs, plant load factor, operation and maintenance (O&M) costs and tariff were not clear, CAR#5 was raised to transparently state the source of data assumed. The capital cost was verified as per the purchase orders for the machines. Plant load factor, O&M costs and tariff have been taken as per the MERC 2003 tariff order for wind energy projects. The tariff of MERC has been prescribed till the 13 th year of operation only. The tariff after 14 th year at Rs. 3.50/ kwh has been considered reasonable based on cost plus approach stated by MERC 2003 tariff order. The salvage value was not considered and hence the same was raised in CAR#5. The salvage value has now been taken at 10% of the project cost as per the depreciation rate considered and hence CAR#5 was closed. The following assumptions have been verified and found reasonable for the IRR computation: Input Parameter Value Applied Source of information verified from Book depreciation 4.50% Straight Line Method, Schedule XIV of Companies Act, 1956, item II (b) with 90% depreciation Accelerated Depreciation Written Down Value (WDV) basis - 80% under Income Tax Act Under Income Tax Act 1961 Minimum Alternate Tax (MAT) 8.45% for , 11.22% for and 11.33% for Under provisions of Income Tax Act 1961 for the year V-3-I-01-B-0058/01 11/28

12 Plant Load Factor 20% Based on MERC tariff order Derating after 10 th year 5% fixed Based on MERC tariff order Income Tax (with surcharge) Lifetime of machine and IRR computed for Sale of power for first 13 years Sale of power from 14 th year Capital Cost of WTGs Operation and Maintenance Cost 33.66% Under Income Tax Act years Rs per kwh with escalation of Rs. 0.15/ kwh for the first 13 years of operation Rs from 14 th year onwards As per actuals 1.5% for first three years, 2% from fourth year and escalation of 5% per year thereafter Based on MERC tariff order 2003 Assumed based on cost plus approach of MERC tariff order Cross-checked with purchase orders (see Appendix-1 for details) Cost/ MW works out at Rs to 50 Million/ MW, and is based on prevailing rates for the technology suppliers Enercon and Vestas respectively Based on MERC tariff order The results of the project IRR computation and applicable benchmark were found as follows: Project Proponent WTG No. Make Wind Capacity (MW) Time of investment prior to commissioning Applicable benchmark (PLR) % Savita Oil GP-18 Vestas Technologies GP-19 Vestas Limited GP-21 Vestas Savita Oil Technologies 87 Enercon 0.8 Limited 78 Enercon 0.8 Savita Oil Technologies Limited, Naved Investment & Trading Company Private Limited and Khatri Investments Private Limited (all group companies) 3 Enercon Enercon Enercon Enercon 0.8 Project IRR% (Without VCS) V-3-I-01-B-0058/01 12/28

13 The capital cost assumed is based on actual purchase orders and the tariff is fixed for the first 13 years as per power purchase agreements. Therefore, the only major variables influencing IRR are identified as the plant load factor and tariff after 13years for the project. Sensitivity analysis for 10% higher PLF or 10% higher tariff after 13 th year shows that the projects IRRs do not cross the benchmark for the machines. Based on the above discussion, it is concluded that the investment in the project is not financially attractive as per the step 2 of CDM Tool for the demonstration and assessment of additionality Version 5.2 and the CDM EB 41 Guidance on the Assessment of Investment Analysis. It is thus concluded that the additionality of the project is adequately demonstrated and project is not the baseline scenario as per Attachment A to Appendix B of simplified small scale modalities and procedures. 3.3 Monitoring Plan In line with the AMS ID methodology applied, the monitoring plan of the project involves monitoring of the net electricity sold to the grid by the wind machines. During the site visit to Maharashtra, it was observed that the WTGs under the project activity are connected to a feeder with other machines which do not belong to the project activity. Therefore, CAR# 7 was raised to transparently present the monitoring plan on how the accounting is done accurately for power exported from the machines in the project activity. This was elaborated in version 2 of the PD. It was verified that the power export is based on the monthly joint meter reading made by the Maharashtra state electricity board personnel along with the Operations and Maintenance (O&M) contractors of Vestas and Enercon as applicable. The monitoring system consists of measuring energy generation at the individual wind turbine generator - by controller energy meters; and a joint meter at the substation end of the feeder where the power is exported to the grid. The responsibility of quality assurance of the meter recording rests with the project proponents through its O&M contractors for individual WTG controllers. For the joint meters the Maharashtra state electricity grid operator is responsible for calibration. Frequency of monitoring is continuous, and the data is aggregated for a month. The data is archived on paper (monthly electricity energy receipts from state electricity grid operator) and electronically and the retention time for keeping of records is defined in the PD as two years beyond the crediting period. The joint meter has the configuration of main and check meters with 0.2% accuracy class. The calibration is done annually by the state electricity grid operator. The controller meters are digital meters with electronic self calibration to ensure continuous system diagnostics. CAR#7 was raised to elaborate with evidence on the calibration practices and was subsequently closed after checking the adequacy. Given that the net power exported are based on the third party energy receipts in the form of joint meter readings, PJRCDM is of the opinion that it is reasonable to assume that the same will be reliable. The grid emission factor has been determined ex-ante and is not monitored. It will be applied ex-ante throughout the VCS crediting period. V-3-I-01-B-0058/01 13/28

14 3.4 Calculation of GHG Emissions The GHG source for baseline of the project has been chosen as CO 2 and no other sinks and/or reservoirs for either the baseline or project activity have been identified. This is justified as per the applicable methodology. The baseline of the project activity is kwh produced by the renewable generating unit multiplied by an emission coefficient (kg CO 2 /kwh). The emission coefficient is the combined margin of the grid, calculated as a weighted average of operating margin (OM) and build margin (BM) according to the procedures prescribed in the Tool to calculate the emission factor for an electricity system Version 1.1. The OM and BM emission factors have been sourced from the Central Electricity Authority (CEA) database version 04, dated September While OM has been calculated as average of the years , and , the BM has been selected for the latest year For wind projects, weights of 0.75 and 0.25 have been applied as per the tool. The CEA data is an official source of Ministry of Power, Government of India and calculated in accordance with the ACM0002 methodology and the "Tool to Calculate the Emission Factor for an Electricity System", Version 1.1. PJRCDM confirms that grid emission factor tco 2 /MWh is in line with the latest CDM tool and guidelines. In line with the methodology, the baseline emissions is determined as BE y = EG y * EF CO2 where: BE y Baseline Emissions in year y; tco 2 EG y Net Energy supplied to the grid in year y; kwh Emission Factor of the grid in year y; kgco 2 e/kwh EF CO2 Further, emission reductions for the project have been calculated as: Emission reductions (ERy) = BE y PE y LE y where: ER y BE y PE y LE y Emission reductions in year y (tco 2 e/y) Baseline Emissions in year y (tco 2 e/y) Project emissions in year y (tco 2 /y) Leakage emissions in year y (tco 2 /y) Since the bundled project is based on wind energy alone, no project emissions and leakage have been considered in accordance with the baseline methodology AMS ID, version 14. Hence, the final emission reductions resulting from the project is equivalent to the baseline emissions. Thus, Emission reductions (ER y ) = BE y The bundled project is expected to sell net electricity of Million kwh/ year. The GHG emission reduction accruable from the project activity has therefore been estimated as tco 2 equivalent per year. V-3-I-01-B-0058/01 14/28

15 3.5 Environmental Impact The project activity is a renewable energy project with a cumulative capacity of 9.75MW of WTGs being implemented in Sangli, Nashik and Ahmednagar districts of Maharashtra state, India. The project being a wind energy project does not warrant any environmental impact assessment as per then prevailing notification S.O. 60 (E) dated 27 th January 1994 and later S.O dated 14 th September 2006 in India. Further, no environmental permit is required for wind projects. However, the project proponent needs to obtain clearance from the state electricity renewable energy development agency prior to setting up of the machines and signing of the power purchase agreement. PJRCDM was able to verify the projects compliance with local laws and regulation with these documents (see Appendix-I for details). Environmental impact of the project is found insignificant. 3.6 Comments by stakeholders VCS requires discussion on relevant outcomes from stakeholder consultations and mechanisms for on-going communication for the project activity. CAR#9 was raised for providing complete details with evidences of the stakeholder meeting and ongoing communication. The revised PD states that stakeholders meeting was organized by the project proponents at Sangli Nashik and Ahmednagar in Maharashtra, India in July 2008 as part of the CDM process. The identified stakeholders were the local villagers and the employees of O&M contractors. A survey was conducted from 22 nd July to 28 th July 2008 where the feedback was obtained from local stakeholders on the setting-up and operating of wind energy generators. The details of the stakeholder communication process have been included in version 2 PD. The information provided was cross checked with the evidences (see Appendix-I for details) and found in order. No negative comments have been received for the project activity. V-3-I-01-B-0058/01 15/28

16 4 VALIDATION CONCLUSION PJRCDM Inc. has performed the validation of the project Positive Climate Care 9.75 MW Bundled Wind Power Project Activity by Savita Oil Technologies Ltd. & its group companies in the state of Maharashtra, India. The validation was carried out to independently assess whether the project conforms to the qualification criteria and requirements of Voluntary Carbon Standard (VCS) , including the baseline and monitoring methodology applied. The VCS Program provides the standards and framework for independent validation based on ISO :2006 and ISO :2006 standards. PJRCDM s approach is risk-based, drawing on an understanding of the risks associated with the meeting of VCS standard requirements. The assessment was based on the review of project description (PD), supporting evidences, site interview, including other explanations where necessary to enable PJRCDM to provide reasonable assurance that the information reported in the PD is complete and materially correct. Our scope and conclusion is thus limited to the above evaluation. The project involves sale of electricity from wind turbine generators with total capacity of 9.75MW to the grid, thereby displacing grid power. The VCS approved CDM baseline and monitoring methodology AMS I D, version 14 has been correctly applied to determine the baseline and the emission reductions. In our opinion, it is sufficiently demonstrated that the project is not the baseline scenario and emission reductions resulting from the project activity are real, permanent and are additional to what would have occurred in the absence of VCS project activity. Further, the monitoring plan makes adequate provision for ensuring transparency and accuracy during project monitoring. The total GHG emission reduction achievable from the project is estimated at tonnes of CO 2 equivalent per year over the 10 year crediting period starting from 13 th February This estimate is fair given that the underlying assumptions do not change. To summarize, it is PJRCDM s opinion that the project as described in the version 02 of the VCS PD Positive Climate Care 9.75 MW Bundled Wind Power Project Activity by Savita Oil Technologies Ltd. & its group companies in the state of Maharashtra, India dated 12 th November 2009 meets the VCS requirements and correctly applies the baseline and monitoring methodology AMS-I.D, version 14. Project Manager PJRCDM Site Program Manager PJRCDM V-3-I-01-B-0058/01 16/28

17 APPENDIX I: DOCUMENTS REVIEWED A. Key documents 1. VCS Project Description (PD) Version 1 dated 4 th June PD Version 2 dated 12 th November VCS Standard, Program Guidelines and the Registration and Issuance Guidance Document 4. CDM approved small scale methodology, AMS I D Version CEA grid emission factor database, version 04, September Individual Internal rate of return calculation sheet of the project proponents 7. Emission Reduction calculation of the project B. Project related supporting documents 1. Purchase order of WTG between Khatri Investment Pvt. Ltd. and Enercon (India) Ltd. on 31 st March Naved Investment & Trading Co. Pvt. Ltd. and Enercon (India) Ltd. on 31 st March Savita Chemicals Ltd. and Enercon (India) Ltd. on 19 th May Savita Chemicals Ltd. and Enercon (India) Ltd. on 31 st March Savita Chemicals Ltd. and Vestas Wind Technology India Pvt. Ltd. on 29 th December Work order for Erection & Commissioning between Khatri Investment Pvt. Ltd. and Enercon (India) Ltd. on 31st March Naved Investment & Trading Co. Pvt. Ltd. and Enercon (India) Ltd. on 31st March Savita Chemicals Ltd. and Enercon (India) Ltd. on 19th May Savita Chemicals Ltd. and Enercon (India) Ltd. on 31st March Savita Chemicals Ltd. and Vestas Wind Technology India Pvt. Ltd. on 30th December Power Purchase Agreement between Khatri Investment Pvt. Ltd. and Maharashtra State Electricity Distribution Company Ltd. on 11th September Naved Investment & Trading Co. Pvt. Ltd. and Maharashtra State Electricity Distribution Company Ltd. on 11th September Savita Chemicals Ltd. and Maharashtra State Electricity Distribution Company Ltd. on 5th June 2007, 3rd July 2008 and 20th April Commissioning Certificate for WTG of Khatri Investment Pvt. Ltd. issued by MSEDCL, letter dated 28th July Naved Investment & Trading Co. Pvt. Ltd. issued by MSEDCL, letter dated 28th July Savita Chemicals Ltd. issued by MSEDCL, letter dated 17th Feb 2007, 29th March 2007, 25th April 2007, 1st April 2008, 31st March 2008, 21st March 2009 and 2 nd April Clearance certificate of Khatri Investment Pvt. Ltd. from Maharashtra Energy Development Agency, dated 17th August 2006 and 23rd July V-3-I-01-B-0058/01 17/28

18 Naved Investment & Trading Co. Pvt. Ltd. from Maharashtra Energy Development Agency, dated 16th July 2008 and 23rd July Savita Chemicals Ltd. from Maharashtra Energy Development Agency, dated 12th February 2007, 26th March 2007, 21st March 2008, 29th March 2008, 17th August 2006, 16th March 2009, 25th March 2009 and 30th March Reserve Bank of India Prime Lending Rates data 7. The Companies Act, 1956 India SCHEDULE XIV (section205) - Rates of depreciation 8. Maharashtra Electricity Regulatory Commission (MERC) tariff policy order for wind energy dated 24 November Documents related to stakeholder survey reports, conducted on July 2008 V-3-I-01-B-0058/01 18/28

19 Draft report clarification requests and corrective action requests by validation team APPENDIX- II: Resolution of Corrective Action and Clarification Requests Ref. To the section of the PD Summary of project owner response Validation team conclusion CAR 1 In line with Section of the VCS the project start date and crediting period can only be a single date. Further, the crediting period is not clearly stated in 1.6. The exact calendar dates should be provided in table 1.3 and 4.4. CAR 2 The VCS PD date and version number is missing in the contents page. Title of the project to include the country. Further, the latest version of approved methodology and tools to be used. The pages numbers in the contents page are not corrected. CL 1 Details of other project proponents and 1.3, 1.6, 4.4 Cover page, 1.2, As per VCS , the project start date shall not be before 1 st January, The first WTG of the project activity was commissioned on 13 th February 2007 which is also the start date of the present project activity. The Crediting Period will last for ten years starting from 13 th February 2007 to 12 th February However, since the WTGs under the project are currently under CDM validation, the VCS crediting period will last till the date of CDM registration to avoid double counting of GHG credits. The necessary changes related to date, version number, title and numbering have been carried out in revised version of PD. The latest version of methodology AMS ID available for small-scale CDM project at UNFCCC website under Appendix B of the simplified modalities and procedures: AMS ID/ version 14, valid from 31 st July 2009 and Methodological Tool: Tool to calculate the emission factor for an electricity system version 01.1 has been used in revised version of PD which is in accordance with VCS standard. Details of all project proponents, designations of their representatives and roles have been mentioned in revised VCS start date is stated as 13 th February VCS Crediting period start date is from 13 February CAR closed. OK. CAR closed. Details of project proponents furnished. V-3-I-01-B-0058/01 19/28

20 Draft report clarification requests and corrective action requests by validation team Ref. To the section of the PD Summary of project owner response Validation team conclusion their role is missing. Designation of representative of the project proponent not clear. version. CL closed. CL 2 A consolidated sheet of unique identification numbers project location, size, make and commissioning date to be provided 1.4, 1.5 and 1.6 A consolidated Sheet containing details of project proponents, project size, make, commissioning date, location, unique identification number and latitude and longitude details has been incorporated in revised version of PD. OK. CL closed. CL 3 Further details are sought on permissions such as forest and environmental clearance, power purchase agreements, permissions from government agencies, etc. 1.10, 8.1 According to Indian regulation, the implementation of the wind park does not require any environmental clearance. Necessary consent taken from state power utility to commission and execute wind power project, copies of power purchase agreements have been provided to validator. OK. CL closed. CAR 3 Clear statement is required as to whether the project participants have applied for other GHG programs with evidence of crediting period sought. It is also be clearly demonstrated that 1.13, 1.3 and 4.4 PPs have applied for registration under the CDM process of UNFCCC and the project activity has received Host Country Approval. And the same has been stated in relevant sections. A letter of undertaking from the Project Proponents have been provided to validator for the same, in which PP has declared that GHG reduction credit would be claim under only one GHG program for a particular period of time The project is currently under CDM validation. The VCS crediting period will last till the date of CDM registration to avoid double counting. Letter V-3-I-01-B-0058/01 20/28

21 Draft report clarification requests and corrective action requests by validation team Ref. To the section of the PD Summary of project owner response Validation team conclusion there will not be double counting of emission reductions for the past as well as future credits. The crediting period applied for the project activity will have to clearly reflect the status of application to other GHG programs. CAR 4 Letter of Authorization for coordinating agency Savita Oil Technologies on behalf of other project participants has not been provided. Further, substantiation is sought on the relationship between the project participants, if any. CL 4 Identification of risks that may substantially affect the project s GHG emission reductions or removal (Monitoring period) to avoid double counting of GHG credits, in line with the VCS standard and Further Guidance for projects that are Registered in two GHG Programs dated 19 March 2008 issued by VCS Association Savita Oil technology will act as coordinating agency for the present project activity. Letter of authorization from other PPs M/s Naved and M/s Khatri has been provided to validator. M/s Naved and M/s Khatri are group companies of M/s Savita oil technology Ltd. A letter from Savita oil stating the relationship between PPs has also been provided to Validator As wind power generation is dependent on many factors like machine availability, grid availability, wind availability, climatic factors etc., the capacity utilization factor, which is not under the control of supplier or owner of the WEGs, is less than best case scenario. Depending upon the pattern, the CUF is estimated. Hence, there is stating avoidance of double counting furnished by project proponents. CAR closed. Savita Oil Technologies will be the coordinating agency for the bundle. CAR closed. OK. CL closed. V-3-I-01-B-0058/01 21/28

22 Draft report clarification requests and corrective action requests by validation team Ref. To the section of the PD Summary of project owner response Validation team conclusion enhancements given the PD are not substantiated clearly. CL 5 Further detail is sought on the power evacuation system implemented. Source of data for Plant Load factor (PLF) is not clearly evidenced. CL 6 The baseline scenario needs to be substantiated with adequate statistical data of the grid mix at the time of project implementation. always a chance for fluctuation in CUF which would affect the production of electricity and in turn the associated returns from the wind farm. 1.9 Details about Power evacuation system implemented as part of the project activity have been incorporated in revised PD. The expected Plant Load Factor (PLF) is assumed to be 20% in Maharashtra as per the tariff order of Maharashtra Electricity Regulatory Commission dated 24/11/2003. The installed capacity of Western Region at the end of financial year as per Central Electricity Authority (CEA General review 2006, Table No. 2.4) was MW.as mentioned in Table 3.4 of CEA General Review 2006, the gross electricity generation for the year comprised of hydro MU, Natural Gas MU, Coal MU, Nuclear 5100 MU and wind was only MU. The share of wind was only 0.5% of total gross electricity generation for the western region. The same has been discussed with reference in section 2.4 of revised version of PD. PLF sourced from Maharashtra Electricity Regulatory Commission Tariff order CL closed. OK. CL closed. V-3-I-01-B-0058/01 22/28

23 Draft report clarification requests and corrective action requests by validation team Ref. To the section of the PD Summary of project owner response Validation team conclusion CAR 5 Justify the following with evidences: The lifetime of project activity needs to be provided. The basis for PLF provided for individual wind turbines in the IRR analysis is not transparent. Justification is sought on the methodology of PLF s used. Justify the reactive energy withdrawal charges considered. The depreciation as per Companies Act is considered at 90% of cost. However depreciation as per Income tax Rules is considered at 100% of cost. Substantiate 2.5 The life time of the project activity is 20 years as per MERC tariff order dated PPs have assumed 20% PLF as per MERC tariff order dated On a conservative basis, reactive energy withdrawal charges have been avoided in IRR calculations. The Income Tax (Twenty Forth Amendment) Rules, 2002 allow accelerated depreciation for wind mills up to a maximum of 80% of the asset value in a year. However, for the purpose of tariff determination, it may be prudent to take depreciation on a Straight Line Method (SLM) wherein the asset life is to be depreciated to a residual value of 10% of its initial value over the entire asset life of 20 years. Hence book depreciation has been considered as 90% of asset value. The PLF, O&M costs, debt:equity ratio and tariff have been assumed as per applicable Maharastra Electricity Regulatory Commission Tariff order 2003 for wind energy projects. Benchmark has been considered as prime lending rate and data was verified for the years from Reserve Bank of India statistics for the relevant years. Reactive energy charges not accounted for conservativeness. Salvage value considered as 10% of project cost and takes V-3-I-01-B-0058/01 23/28

24 Draft report clarification requests and corrective action requests by validation team Ref. To the section of the PD Summary of project owner response Validation team conclusion The project uses Prime Lending rate as the benchmark. Clarity is sought on the basis of the data used. The Benchmark which has been applied is the Reserve Bank of India Prime lending rate. The Reserve Bank of India has a role to regulate and supervise the financial system of the country. It has the main function to prescribe the broad parameters of banking operations within which the country's banking and financial system function. Every year the Reserve Bank in its Annual Statement on Monitory policy, prescribes the Prime Lending rates which is a standard benchmark referred by the other financial institutions in India. In order to keep this benchmark conservative, no risk premium associated with the project type or the project developer was added to it. Further, RBI s PLR is in itself a conservative benchmark as it does not take into account the commercial lending rates of private sector banks which are typically higher than that of nationalized banks. The use of the PLR is also consistent with the Tool for demonstration and assessment of additionality (Version 05.2), Clause 6(b) of Sub-step 2b - Option III which states that- benchmarks shall be derived from estimates of the cost of financing and required return on capital (e.g. commercial lending rates and guarantees required for the country and the type of project activity concerned), based on bankers views and private equity investors/funds required return on into account the land cost. CAR closed V-3-I-01-B-0058/01 24/28

25 Draft report clarification requests and corrective action requests by validation team Ref. To the section of the PD Summary of project owner response Validation team conclusion comparable projects; Justify the following input parameters : 1. O & M cost 2. Debt and equity component (Debt-equity ratio) 3. Rate of interest for loan 4. Moratorium period and repayment tenure Substantiate with evidence that the PP have availed loan from banks. Benchmark PLR has been taken as per investments made by PPs for different phases of the project activity in respective years. Following RBI PLR has been considered for the investment analysis: Year ( ): 12.25% Year ( ): 12.25% Year ( ): 11.50% (source: Reserve bank of India, Handbook of Statistics , Table 74) At the time of decision making to invest in wind mill projects, the PPs have followed the guidelines laid out in the official Government MERC tariff policy 2003 for revenue estimation. The assumption sheet estimates 10% of total cost as salvage. However the same is not considered for IRR calculations sheet. Deduction under section 80IA is allowed for 10 consecutive years out of 15 years from the The relevant loan documents have been provided to Validator. 10% of the capital cost has been considered as salvage value (includes land cost) and the same is incorporated in the revised IRR spreadsheet. V-3-I-01-B-0058/01 25/28