Version 07.0 Page 1 of 52

Transcription

1 Project design document form for CDM project activities (Version 07.0) PROJECT DESIGN DOCUMENT (PDD) Title of the project activity Akbük Wind Power Plant Version number of the PDD 0.5 Completion date of the PDD 22/09/2017 Project participant(s) Host Party Applied methodology(ies) and, where applicable, applied standardized baseline(s) Suay Enerji Sanayi ve Ticaret A.Ş.. Turkey ACM0002 Version 17 Sectoral scope(s) linked to the applied methodology(ies) Estimated amount of annual average GHG emission reductions 32,433 tco 2 Sectoral Scope 1, category Energy industries (renewable - / non-renewable sources) and ACM0002: Grid-connected electricity generation from renewable sources - Version ) Version 07.0 Page 1 of 52

2 SECTION A. Description of project activity A.1. Purpose and general description of project activity Akbük Wind Farm is located in Aegean Region, Aydın Yenihisar (Didim) Province and Mugla Province in Turkey and developed by Suay Enerji Sanayi ve Ticaret A.Ş. The project has 4 wind turbines with a unit capacity of 2,400 kw. With a total installed capacity of 9.6 MW, the project is estimated to supply grid as 27,100 MWh per annum 1. Expected annual emission reductions of the project is approximately 15,425tCO 2 /year which total to reduction of 107,974 tco2-eq over the 7-year crediting period. The first turbine was commissioned on 16/10/2015, followed by the commissioning of second turbine on 27/10/2015, followed by the commissioning of third and fourth turbines on 12/11/2015. This marked the completion of the initial design of 9.6 MW, as in accordance with the related electricity production licence obtained from the Turkish National Energy Market Regulatory Authority (Turkish: Enerji Piyasası Düzenleme Kurumu, EPDK). In 2016, the Suay Enerji Sanayi ve Ticaret A.Ş. of decided to investigate into the feasibility of a capacity extension, and decided to aim for the erection of further 5 turbines (and new capacity will be 21,6 MW) on the remaining area already leased for the project activity. These five turbines are scheduled for starting operation in early But the related permission process is going on. For the new layout with a total installed capacity of 21,6 MW, a new wind yield assessment was prepared by DNV-GL Updated Garrad Hassan report, leading to an estimation of a net electricity export to the grid of 57,000 2 MWh/yr which corresponds to a capacity factor of 30,12%. (As you can see the calculation of capacity factor on Section A.3 as below) Given an expected operational life of 25 years, the Project activity will continue to reduce emissions further after the end of the crediting period as well. The Project Proponent has been granted a 49 year generation licence by the Turkish Energy Market Regulatory Authority1 for the proposed Project under the provisions of Law No governing the electricity market in the Republic of Turkey. The purpose of the project activity is to produce renewable electricity using wind as the power source and to contribute to Turkey is growing electricity demand through a sustainable and low carbon technology. The project will displace the same amount of electricity generated by the grid dominated with fossil fired power plants. The project activity will produce positive environmental and economic benefits through the following aspects: Displacing the electricity generated by fossil fuel fired power plants by utilising the renewable resources so as to avoid environmental pollution and GHG emissions, Contributing the economic development of the region by providing sustainable energy resources, Increasing the income and local standard of living by providing job opportunities for the local people. Production of pillar and other equipment in Turkey will indirectly cause the know-how transfer and empower the local industry. 1 Annual generation expectation is according to Garrad Hassan report. (page 23 N117 P75). This report has been submitted to DOE 2 Annual generation expectation is according to DNV-GL Update Garrad Hassan report. (page 24 N117 P90). This report has been submitted to GS. Version 07.0 Page 2 of 52

3 The project area belongs to the Ministry of Environment and the proposed project activity is the installation of a new grid-connected renewable power plant/unit. In the absence of the project activity, the electrical energy would have been delivered to the grid through a mix of existing power generation resources, as described in more detail in section B.4. A.2. Location of project activity Aegan Region, Aydın Province, Didim Town, Turkey A.2.1. Host Party(ies) Turkey A.2.2. Region/State/Province etc. Aegan Region, Aydın A.2.3. City/Town/Community etc. The project site is located at Didim Town of Aydın Province and Milas town of Muğla province in Turkey A.2.4. Physical/ Geographical location The coordinates of the boundaries of the proposed project activity is 37 29'42.77" N and 27 18'9.40" E. The nearest small town is Akyeniköy small town in Didim (Yenihisar) District. Table 1:Turbine Coordinates 3 T.NO E N T T T T T T T T The Generation License of the Project was amended and the permitted installed capacity was increased to 21,6 MW on 07/04/2016 (article 10-page 6 of generation license) ) Version 07.0 Page 3 of 52

4 T Please see below the maps showing the location of the project activity in Turkey and the locations of the turbines in the project area: Figure 1: The location of the project activity in Aegean Region, Turkey Version 07.0 Page 4 of 52

5 CDM-PDD-FORM Figure 2: The locations of the turbines in the project area4 A.3. Technologies and/or measures Wind power is one of the most commonly used environment friendly technologies in energy sector all over the world. Within the scope of the project, all precautions have been taken for the environment during the design phase and the project will be implemented in line with the environmental law and related regulations. Nordex, a turbine manufacturer based in Germany, has been selected as equipment provider due to the quality of its products in terms of high reliability, grid friendliness and low maintenance requirements. The turbines will be delivered from Germany to the project site. The CWE (Combined Wind Farm Management and Electrical System) fulfills the tasks of wind farm management within the Nordex SCADA system. The CWE records the power data at the wind farm grid connection point and generates the set points for the turbines in order to fulfill the requirements 4 According to page 6 of DNV-GL Updated Garrad Hassan report Version 07.0 Page 5 of 52

6 The project will be involves 9 wind turbines with a unit capacity of 2,400 kw. The turbines are 3 bladed with a horizontal axis. The towers will have a hub height of 91 m. The diameter of the blades is 116.8m. The turbines will connect to Akbük TM via 31.5 kv electricity transmission line. The metering will be done at substation before electricity is fed into the grid 5. Table 2: Technical specifications of N117 units Parameter Rated Power Rotor Diameter Value 2,400 kwe m Swept area 10,715 m 2 Operating range rotational speed Rated rotatinal speed rpm 11.8 rpm Technical lifetime of turbines is considered as 25 years as it is notified for onshore wind power plants in Tool to determine the remaining lifetime of equipment. 6 PLF in case of wind energy will be calculated as follows: In case of past period: The data such as actual power generated in a year and the capacity of a particular wind mill will determine the PLF. Plant Load Factor is the ratio of the actual output of a power plant over a period of time and its output if it had operated a full capacity of that time period. Plant Load Factor = Gross Generation / (Installed Capacity * Number of Hours) For this project, plant load factor is %30.12 as below: PLF= 57,000,000/ (21,600*8760) *100=%30.12 The amount of electricity generated by the project is not influenced by factors outside the project boundary such as other power plants or demand for electricity. Rather, the governing factor is the wind speed at the project site. The Baseline Scenario discussed in more detail in B.4 below. As detailed in Section B.3, the greenhouse gas that will be reduced is carbon dioxide. In the absence of the project activity, the electrical energy would have been delivered to the grid through a mix of existing power generation resources, as described in more detail in section B.4. A.4. Parties and project participants Party involved (host) indicates a host Party Private and/or public entity(ies) project participants (as applicable) Indicate if the Party involved wishes to be considered as project participant (Yes/No) Party A (host) Suay Enerji Sanayi ve Ticaret A.Ş. Party B (host) Rüzgar Danışmanlık No No 5 The CWE of Nordex document has been submitted to DOE. 6 Version 07.0 Page 6 of 52

7 Suay Enerji Sanayi ve Ticaret A.Ş.. (private entity) is the project owner, shall be defined as the project participant. Rüzgar Danışmanlık-Çağla Balcı Eriş is the carbon consultant for this project. Contact details are given in Annex 1. A.5. Public funding of project activity The project activity does not receive any public funding. A.6. Debundling for project activity The project is not a debundled component of a large scale project activity, and no project activity is taking place within one kilometer of the project activity with the same project participants. SECTION B. Application of selected approved baseline and monitoring methodology B.1. Reference of methodology The project applies CDM-EB approved ACM0002: Grid-connected electricity generation from renewable sources - Version The methodology refers to: Combined tool to identify the baseline scenario and demonstrate additionality, Version Tool to calculate project or leakage CO2 emissions from fossil fuel combustion, Version Tool to calculate the emission factor for an electricity system, Version Tool for demonstration and assessment of additionality, Version (Investment analysis Section). Tool to determine the remaining lifetime of equipment, Version The completion date of the baseline study is 21/06/2017. B.2. Project activity eligibility The methodology ACM0002 Consolidated baseline methodology for grid-connected electricity generation from renewable sources is applicable to grid-connected renewable power generation project activities that a) install a new power plant at a site where no renewable power plant was operated prior to the implementation of the project activity (greenfield); b) involve a capacity addition c) involve a retrofit of (an) existing plant(s); or d) involve a replacement of (an) existing plant(s). Since the proposed project activit install a new power plant at a site where no renewable power plant was operated prior to the implementation of the project activity (greenfield), ACM0002 Consolidated baseline methodology for grid-connected electricity generation from renewable sources Version is applicable. The applicability criteria and conditions may be seen in more detail as below: %29_clean.pdf?t=cjN8b3JkeDY2fDDiZGwyrE4kyMkkNXP147ie Version 07.0 Page 7 of 52

8 Table 3: Applicability of ACM0002 v Ref. Applicability Criteria Justification A) This methodology is applicable to gridconnected renewable energy power generation project activities that: (a) Install a Greenfield power plant; (b) Involve a capacity addition to (an) existing plant(s); (c) Involve a retrofit of (an) existing operating plants/units; (d) Involve a rehabilitation of (an) existing plant(s)/unit(s); or (e) Involve a replacement of (an) existing plant(s)/unit(s) B) The project activity may include renewable energy power plant/unit of one of the following types: hydro power plant/unit with or without reservoir, wind power plant/unit, geothermal power plant/unit, solar power plant/unit, wave power plant/unit or tidal power plant/unit; C) In the case of capacity additions, retrofits, rehabilitations or replacements (except for wind, solar, wave or tidal power capacity addition projects the existing plant/unit started commercial operation prior to the start of a minimum historical reference period of five years, used for the calculation of baseline emissions and defined in the baseline emission section, and no capacity expansion, retrofit, or rehabilitation of the plant/unit has been undertaken between the start of this minimum historical reference period and the implementation of the project activity The project activity is a Greenfield, grid connected wind power plant project. The project activity is a Greenfield, grid connected wind power plant project. 13 Since the proposed project is the installation of a new power plant at a site where no renewable power plant was operated prior to the implementation of the project activity (greenfield), this condition is not applicable to the proposed project activity The Energy Generation License for 49 years obtained from Electricity Market Regulation Authority (EMRA). 14 The Energy Generation License for 49 years obtained from Electricity Market Regulation Authority (EMRA). Version 07.0 Page 8 of 52

9 D) In case of hydro power plants, one of the following conditions shall apply: The project activity is implemented in an existing single or multiple reservoirs, where the volume of any of reservoirs is increased and the power density calculated using equation (3), is greater than 4 W/m2; The project activity results in new single or multiple reservoirs and the power density calculated using equation (3), is greater than 4 W/m2; The project activity is an integrated hydro power project involving multiple reservoirs, where the power density for any of the reservoirs, calculated using equation (3), is lower than or equal to 4 W/m2, all of the following conditions shall apply: (i) The power density calculated using the total installed capacity of the integrated project, as per equation (4), is greater than 4 W/m2; (ii) Water flow between reservoirs is not used by any other hydropower unit which is not a part of the project activity; (iii) Installed capacity of the power plant(s) with power density lower than or equal to 4 W/m2 shall be: a. Lower than or equal to 15 MW; and b. Less than 10 per cent of the total installed capacity of integrated hydro power project. This condition is not applicable to the project activity as it does not involve the installation of a hydro power plant The Energy Generation License for 49 years obtained from Electricity Market Regulation Authority (EMRA). Version 07.0 Page 9 of 52

10 E) In the case of integrated hydro power projects, project proponent shall: (a) Demonstrate that water flow from upstream power plants/units spill directly to the downstream reservoir and that collectively constitute to the generation capacity of the integrated hydro power project; or (b) Provide an analysis of the water balance covering the water fed to power units, with all possible combinations of reservoirs and without the construction of reservoirs. The purpose of water balance is to demonstrate the requirement of specific combination of reservoirs constructed under CDM project activity for the optimization of power output. This demonstration has to be carried out in the specific scenario of water availability in different seasons to optimize the water flow at the inlet of power units. Therefore this water balance will take into account seasonal flows from river, tributaries (if any), and rainfall for minimum five years prior to implementation of CDM project activity. F) The methodology is not applicable to the following: Project activities that involve switching from fossil fuels to renewable energy sources at the site of the project activity, since in this case the baseline may be the continued use of fossil fuels at the site; Biomass fired power plants; G) In the case of retrofits, replacements, or capacity additions, this methodology is only applicable if the most plausible baseline scenario, as a result of the identification of baseline scenario, is the continuation of the current situation, that is to use the power generation equipment that was already in use prior to the implementation of the project activity and undertaking business as usual maintenance. This condition is not applicable to the project activity as it does not involve the installation of a hydro power plant. This condition is not applicable to the project activity as it does not involve switching from fossil fuels to renewable energy sources and does not involve the installation of a biomass fired power plant. The project activity is a Greenfield, grid connected wind power plant project. B.3. Project boundary The spatial extent of the project boundary includes the project power plant and all power plants connected physically to the electricity system. The project boundary for the project activity is as demonstrated in the figure below: Version 07.0 Page 10 of 52

11 Figure 3: Project Boundary The greenhouse gases and emission sources included in or excluded from the project boundary are shown in the table 4 below: Table 4: The greenhouse gases and emission sources Source Gas Included Justicication/Explanation CO 2 emissions CO 2 Yes Main emission source. The resulting from dominant emissions from electricity generation power plants are in the form of in fossil fuel fired CO 2, therefore CO 2 emissions power plants that are from fossil fuel fired power Baseline replaced due to the plants connected to the grid project activity will be considered in baseline calculations. CH 4 No Minor emission sources Project Activity Construction and operation of the project activity N 2 O No CO 2 No Minor emission sources as CH 4 No stated in ACM0002, version N 2 O No The following figure represents the line diagram of the project activity, including metering points: Version 07.0 Page 11 of 52

12 Figure 4: Monitoring line diagram The scheme shows the connection points of Akbük Wind Farm Project with the national grid. The Akbük wind farm has to be connected to the national grid via 31.5 kv Medium Voltage overhead transmission line. Two electricity meters will be installed at Akbük Wind Farm Project. These meters will be working in parallel. 4 wind turbines will be connected to the meters through a step-up transformer 154/31.5 kv In accordance with ACM0002 version 17.0 no project emissions are relevant for the project activity, since these emissions are occurred as a result of the operation of geothermal power plants and water reservoirs of hydropower plants. B.4. Establishment and description of baseline scenario According to the Baseline Methodology Procedure in Tool to calculate the emission factor for an electricity system, Version baseline emissions are calculated under Section B.6.3. The electricity generation is predominantly composed by fossil fuel fired power plants in Turkey. The share of resources in the electricity generation in Turkey may be seen in Figure 4 The contribution to annual electricity generation from wind energy was only 2.1 % in Version 07.0 Page 12 of 52

13 Figure 5: Projected Electricity Generation Mix 16 As per the 10-year projection of TEIAS (Turkish Electricity Transmission Company), it is obvious that fossil fuels would continue being the main sources for electricity generation (70.9% in 2021). High growth rate of energy demand is forecasted to continue over coming decade. Fossil fuels will be dominant in the electricity generation mix, with an expected share of 71% in Renewables including wind energy would have a limited share of then 28 %. For this reason, main part of the new capacity will be fossil fuel based. B.5. Demonstration of additionality The local stakeholder consultation meeting was organized on in Akyeniköy before as it is before the construction of the plant. In addition to this, during the financial analysis done for the investment decision, the VER revenue has been taken into account. Time schedule of the project activity may be seen in in table 5 as followed: Table 5: Time schedule of the project activity Event Actual / Expected Date Board Decision on VER Project Development Actual Obtaining Generation License Actual Local Stakeholders Meeting Actual Turbine Contract 17 Actual Start of Construction Actual Commisioning Date of Turbines#2 Actual Commisioning Date of Turbines# 1 Actual Commisioning Date of Turbines#,3 Actual Commisioning Date of Turbines# 4 Actual First day of full operation Actual Validation of project activity Actual The Generation License of the Project was Actual amended and the permitted installed capacity was increased to 21,6 MW Start of first crediting period and first monitoring period Actual End of first monitoring period Actual The turbine contract has been submitted to DOE for investment analysis. Version 07.0 Page 13 of 52

14 First day of full operation with 21.6 MW capacity Expected As seen in Table 5, the project proponent has considered VER revenue and the investment decision was based on VER revenue. Approved consolidated baseline methodology ACM0002 Consolidated baseline methodology for grid-connected electricity generation from renewable sources version 17.0 requires the use of the latest Tool for demonstration and assessment of additionality (v07.0.0) agreed by the CDM Executive Board to demonstrate and assess the additionality of the proposed project. The steps completed from the tool may be seen below: (a) Step 0 Demonstration whether the proposed project activity is the first-of-its-kind; (b) Step 1 Identification of alternatives to the project activity; (c) Step 2 Investment analysis; (d) Step 3 Barriers analysis; and (e) Step 4 Common practice analysis Step 0: Demonstration whether the proposed project activity is the first-of-its-kind N/A Step 1: Identification of alternatives to the project activity Sub-step 1a: Define alternatives to the project activity In the absence of the proposed project activity, plausible and credible project activities to the proposed project activity are as below: The proposed project activity not undertaken as a VER project activity Construction of some other renewable energy plant with the same annual power output Continuation of the current situation (no project activity or other alternatives undertaken). The alternative, The proposed project activity not undertaken as a VER project activity is not realistic, since the equity IRR of the proposed project activity is far below the benchmark IRR. (Please see Investment Analysis Section) The Electricity Market Regulatory Authority (EMRA) gives priority to local resources with low environmental impact to generate electricity and therefore other renewable resources may be considered as alternatives to the proposed project. Utilizing solar power or biomass for electricity generation is still at the early stage in Turkey. The biomass sector in Turkey lacks adequate regulatory framework. Especially for landfill gas, investors are dependent on municipal administrations since they hold the authority to control landfills. As for solar, the EPDK has awarded only one license for solar. The reason why solar capacity has not been utilised is that the regulatory framework has been absent. This delay is largely due to the commercial infeasibility of solar projects. 18 In addition to this, the Project Participant s knowledge is focused in wind energy and Akbük WPP has licence only for wind power investment in the proposed project area. Therefore, other project activities delivering same electricity in the same project area is not realistic for Project Participant Version 07.0 Page 14 of 52

15 In case no project activity is taken, the same amount of electricity would be generated by the existing grid to supply the increasing demand of the country. This alternative is that electricity delivered to the grid by the project activity would have otherwise been generated by the operation of grid-connected power plants and by the addition of new generation sources. Outcome of Sub-Step 1a Considering these circumstances, the alternative Continuation of the current situation seems realistic. It is seen that this scenario is consistent with the baseline definition of ACM0002., version 17 where the baseline scenario is defined that the amount of electricity which would be delivered to the grid by the project activity, generated by the operation of existing grid-connected power plants and by the addition new generation sources. Sub-step 1b: Consistency with mandatory laws and regulations The Project is in compliance with all required relevant regulations and there is no breach of any legislation. The Project is subject to the following laws; Table 6: Applicable Mandatory Laws and Regulations Applicable Mandatory Laws and Regulations Number/Legislation Date Electricity Market Law Nr / Law on Utilization of Renewable Energy Resources for Nr / the Purpose of Generating Electrical Energy Environmental Law Nr / Outcome of Sub-Step 1b The alternatives discussed above are in compliance with applicable legal and regulatory requirements. Step 2: Investment Analysis According to Tool for the demonstration and assessment of additionality version , the economical or financial attractiveness of the proposed project should be determined without taking into consideration the VER revenues. It should be noted that the guidance provided by the Executive Board on investment analysis has been taken into account. The following sub-steps are conducted in order to do the investment analysis. Sub-step 2a: Determine appropriate analysis method: With respect to Tool for the demonstration and assessment of additionality version , simple cost analysis can only be applied to projects that do not generate any other financial benefits than the VER related incomes. Electricity produced by the proposed project will be sold to the national grid and is expected to create revenues, the simple cost analysis is eliminated. As the appropriate analysis method, benchmark analysis (option III) has been selected. Sub-step 2b: Option III. Apply benchmark analysis As implied in Annex 5: Guidance on the Assessment of Investment Analysis (version 05), required/expected returns on equity is appropriate benchmark for an equity IRR Version 07.0 Page 15 of 52

16 The expected return on capital should be higher than expected return on equity for an investment to be feasible. The expected return on equity consists of a risk free rate of return; an equity risk premium; a risk premium for the host country and an adjustment factor to reflect the risk of projects in different sectoral scopes. As per the requirements of Tool for the demonstration and assessment of additionality (Version ) expected return on equity is determined as Calculation of expected return on equity: The following formula is used for expected return on equity: Expected Cost of Equity = US Treasury Bond Rate+ Beta*(Equity Risk Premium + Country Risk Premium) 1. Choice of Risk Free Rate The risk free rate has been used as the US treasury bond rate. Taking into account Annex 5: Guidance on the Assessment of Investment Analysis (version 05), the risk free rate of return is based on the long-term average returns of US treasury bonds and is used as 3.00%. 2. Choice of Beta Beta is chosen as 1 in accordance with Annex 5: Guidance on the Assessment of Investment Analysis (version 05). 3. Choice of Country Risk One of the simplest and most easily accessible measure of the country risk is the rating assigned to a country s debt by a rating agency. These rating measure default risk but they are affected by many of the factors that drive equity risk. Country Default Spreads and Risk Premiums, by Aswath Damodaran 22 which was lastly updated in 2016 is taken as a reference for country risk premium. Aswath Damodaran is a Professor of Finance at the Stern School of Business at New York University and well known as author of several widely used academic and practitioner texts on Valuation, Corporate Finance and Investment Management. The country risk premium for Turkey is taken as 3.60%. 4. Equity Risk Premium As per Annex 5: Guidance on the Assessment of Investment Analysis (version 05), the value of 6.5% is used for equity risk premium. The equity risk premium is derived from the long-term historical returns on equity in the US market relative to the return of bonds. The key parameters are presented in Table 7: Table 7: Key parameters applied in the calculation of expected return on equity 22 Version 07.0 Page 16 of 52

17 Parameter Value Source Risk Free Rate (US Treasury Bond Rate) 3.00% BETA 1 Country Risk Premium 3.60% Equity Risk Premium for USA 6.50% CDM-PDD-FORM Annex 5: Guidance on the Assessment of Investment Analysis (version 05) 23 Guidelines on assessment of investment analysis v5 Country Default Spreads and Risk Premiums, 2016, Aswath Damodaran 24 Annex 5: Guidance on the Assessment of Investment Analysis (version 05) Expected return on equity 13.10% Calculated As a conservative approach, the as % is accepted as the benchmark for the proposed project. Sub-step 2c: Calculation and comparison of financial indicators The main financial indicators may be seen in Table 8: Table 8: Main Financial Indicators Parameter Unit Value Reference Total investment $ 30,982,841 IRR spreadsheet 25 Loan % 75 Signed term sheet 26 Equity % 25 Signed term sheet Production expenses $/ year 1,041,238 IRR spreadsheet average Installed capacity MW 21.6 Production License Yearly electricity MWh/year 57,000 Garrad Hassan Generation Electricity feed in tariff report. $/cent/kwh 7.3 Law on Utilization of Renewable Energy Resources for the Purpose of Generating Electrical Energy Yearly revenue $/ 3,038,185 IRR spreadsheet Corporate tax % 20 - The key assumptions for the calculation of the equity IRR are as follows: All relevant costs and revenues are included in the calculation of the equity IRR of the project activity. The investment period has been chosen as 25 years as per EB62 Annex 5(paragraph 3 and Tool to determine the remaining lifetime of equipment 27, version 1.. The lifetime of the project activity has been supposed as 25 years. The revenue from yearly electricity generation is based on domestic component usage incentives, state guaranteed fixed tariff for renewable energy and market prices. Domestic component usage incentives are valid for first five years, state guaranteed fixed tariff is valid for first ten years and market prices are valid after ten years and until the rest of project life. According to the Law on Utilization of Renewable Energy Resources, the guaranteed feed in tariff for electricity generated from wind energy is 7.3 $cent/kwh. However for the Documents releted to investment costs are available to the DOE. 26 Signed term sheet 27 Version 07.0 Page 17 of 52

18 first five years the tariff is 8.7 $cent/kwh with added incentives for domestic component usage. 28 Only the portion of investment costs which is financed by equity have been considered as the net cash outflow and the portion of the investment cost which is financed by debt have not been considered as a cash outflow. The Internal Rate of Return (IRR) is calculated as 6.95 %. This is obviously below the financial benchmark of % and the project activity cannot be considered to be a financially attractive alternative. Sub-step 2d: Sensitivity Analysis The objective of the sensitivity analysis is to assess if the conclusion regarding the financial attractiveness is steady to reasonable variations in the critical assumptions. According to the Annex 5 of EB 62 Guidelines on the assessment of Investment analysis version 5, only variables including the initial investment cost, that constitute more than 20% of either total project costs or total project revenues should be subjected to reasonable variation. In accordance with the guidelines, important parameters for the feasibility of the proposed project activity are defined as investment cost, production expenses and revenues. The mentioned parameters have been tested with a range of ±10% for the sensitivity analysis. The following table demonstrates the results for a ±10% deviation of selected parameters which increase the equity IRR. Table 9: Sensitivity Analysis of the equity IRR with changes in investment cost, production expenses and revenues Parameter Value Applied Equity Value Applied Equity IRR IRR Investment cost 29,410,491 $ (-10%) 8.84% 32,555,191 $ (+10%) 5.34% Production 937,114 $ (-10%) 8.42% 1,145,362 $ (+10%) 5.48% expenses (yearly) Revenue (yearly) 2,734,367 $ (-10 %) 2.32% 3,342,004 $ (+10%) 12.47% Outcome of Step 2 The sensitivity analysis shows that the equity IRR of the proposed project does not overcome the financial benchmark despite favourable conditions. The sensitivity analysis further substantiates that the project activity is not a feasible alternative and so additional. Step 3: Barrier Analysis The analysis not applied. Step 4: Common Practice Analysis According to Tool for the demonstration and assessment of additionality version , the proposed project activity apply the measures listed in the definitions section of the tool. So, Sub-step 4a is applied. 28 IRR calculation spreadsheet is available to the DOE. Version 07.0 Page 18 of 52

19 Sub-step 4a: The proposed VER project activity(ies) applies measure(s) that are listed in the definitions section CDM-PDD-FORM EB 69 Report Annex 8, The Guidelines on Common Practice version 02.0 is applied for the proposed project activity. Step 1: Calculate applicable capacity or output range as +/-50% of the total design capacity or output of the proposed project activity. The installed capacity of the proposed project activity is 21.6 MW. Therefore, the lower limit of the applicable output range is 10.8 MW and upper limit is 32.4 MW. Step 2: Identify similar projects (both CDM and non-cdm) which fulfill all of the following conditions: (a) The projects are located in the applicable geographical area; (b) The projects apply the same measure as the proposed project activity; (c) The projects use the same energy source/fuel and feedstock as the proposed project activity, if a technology switch measure is implemented by the proposed project activity; (d) The plants in which the projects are implemented produce goods or services with comparable quality, properties and applications areas (e.g. clinker) as the proposed project plant; (e) The capacity or output of the projects is within the applicable capacity or output range calculated in Step 1; (f) The projects started commercial operation before the project design document (CDM-PDD) is published for global stakeholder consultation or before the start date of proposed project activity, whichever is earlier for the proposed project activity. The power plant projects connected to Turkey s national electricity grid as of end of 2012 may be seen in Annex 1 of TEIAS Capacity Projection Report ( ). 29 Step 3: Within the projects identified in Step 2, identify those that are neither registered CDM project activities, project activities submitted for registration, nor project activities undergoing validation. Note their number Nall. From the list obtained from TEIAS Capacity projection Report ( ), it has been understood that there are initially 632 projects. When projects registered as VER projects and projects under validation are excluded, the new list entails 548 projects. Satisfying the steps 2 and 3, Nall is 0. Step 4: Within similar projects identified in Step 3, identify those that apply technologies that are different to the technology applied in the proposed project activity. Note their number Ndiff. According to the guidance on common practice, classification of different technologies has been realised taking into account the main criteria energy source/fuel, size of installation (power capacity) and Investment climate in the date of investment decision (subsidies or other financial flows, promotional policies and legal regulations). The power plants which have different fuel types such as hydro, lignite, natural gas, fuel oil, coal etc., are accepted as different technologies. In addition, the company types of the power plants are considered while defining the different power plants because different company types have different promotional policies, legal regulations, 29 Version 07.0 Page 19 of 52

20 subsidies and other financial flows. As a result, when both the fuel types of the power plants and the company types are taken into account, the number of companies that apply technologies different that the technology applied in the proposed project activity, Ndiff, is 0. Step 5: Calculate factor F=1-Ndiff/Nall representing the share of similar projects (penetration rate of the measure/technology) using a measure/technology similar to the measure/technology used in the proposed project activity that deliver the same output or capacity as the proposed project activity. The factor F defined in the guideline is calculated with the formula below: F = 1 Ndiff/Nall F = 1 0/0 = 1 - Undefined Nall-Ndiffer is Undefined and the factor F is Undefined, the proposed project activity is not a Common Practice. 30 Outcome of Step4 The project activity is not regarded as common practice, then the proposed project activity is additional. B.6. Emission reductions B.6.1. Explanation of methodological choices As developing the baseline and calculation of the emission reductions for the proposed project activity are calculated according to Tool to calculate the emission factor of an electricity system version Emission Reductions The emission reductions are calculated based on the below formula: ER y = BE PE - LE y Y Y Where: ER y = Emission reductions in year y (tco 2 e/yr) BE y = Baseline emissions in year y (tco 2 /yr) PE y = Project emissions in year y (tco 2 e/yr) LE y = Leakage emissions in year y (t CO2/y) Project Emissions As the proposed project activity is a new grid-connected wind power plant. For this reason, PE y is considered as 0 in line with ACM0002 Version PE y =0 Leakage 30 Common Practice Analysis is available to the DOE. Version 07.0 Page 20 of 52

21 Leakage emission (LEy) is considered as 0 as suggested in ACM0002/Version Baseline Emissions The baseline emissions are calculated as follows: BE y= EGBL,y * EF CO2,grid,y Where: BE y EG BLy EF CO2grid y = Baseline emissions in year y (tco 2 /yr) = Quantity of net electricity supplied to the grid as a result of the implementation of the CDM project activity in year y (MWh) = CO2 emission factor of the grid in year y (t CO2/MWh) Calculation of EG PJ,y The calculation of EG PJ,y is different for (a) greenfield plants; (b) retrofits and replacements and; (c) capacity additions. Since the proposed project activity falls under the description greenfield plants, the following method has been adopted: Greenfield renewable energy power plants EG PJ,y = EG facility,y Where: EG PJ,y = Quantity of net electricity generation that is produced and fed into the grid as a result of the implementation of the CDM project activity in year y (MWh/yr) EG facility,y = Quantity of net electricity generation supplied by the project plant/unit to the grid in year y (MWh/yr) Calculation of EF grid,cm EF grid,cm is calculated according to the Tool to calculate the emission factor for an electricity system version This tool provides the following steps to calculate combined margin (CM) emission factor: Step 1. Identify the relevant electric systems; Step 2. Choose whether to include off-grid power plants in the project electricity system (optional); Step 3. Select a method to determine the operating margin (OM); Step 4. Calculate the operating margin emission factor according to the selected method; Step 5. Calculate the build margin (BM) emission factor; Step 6. Calculate the combined margin (CM) emissions factor Step 1. Identify the relevant electric systems According to the Tool to calculate the emission factor for an electricity system (version ), a project electricity system has to be defined by the spatial extent of the power plants that are physically connected through transmission and distribution lines to the project activity and that can be dispatched without significant transmission constraints. Version 07.0 Page 21 of 52

22 Similarly, a connected electricity system, e.g. national or international, is defined as an electricity system that is connected by transmission lines to the project electricity system. Power plants within the connected electricity system can be dispatched without significant transmission constraints but transmission to the project electricity system has significant transmission constraint. The transmission lines in Turkey are operated by TEİAŞ (Turkish Electricity Transmission Co), which is owned by the government. The grid is km long and constitutes of 606 transformer stations with a total transformer capacity of 98,852 MVA and 10 interconnections to neighbour countries. 31 The interconnected grid system is operated continuously and no electricity price differences exist throughout the regions. 32 Therefore, the relevant electric power system is defined as the national grid system of Turkey. Step 2. Choose whether to include off-grid power plants in the project electricity system (optional) According to the applicable tool, Project Participants may choose between the following two options to calculate the operating margin and build margin emission factor: Option I : Only grid power plants are included in the calculation. Option II: Both grid power plants and off-grid power plants are included in the calculation. Option I has been chosen for the project activity and therefore only grid power plants are considered in the calculation. Step 3. Selection of an operating margin (OM) method According to Tool to calculate the emission factor for an electricity system (version ), the calculation of the operating margin emission factor (EF grid,om,y ) is based on one of the following methods: (a) Simple OM; or (b) Simple adjusted OM; or (c) Dispatch data analysis OM; or (d) Average OM. Option (a) Simple OM method has been chosen to calculate the operating margin emission factor. This choice is applicable since low-cost/must-run resources constitute less than 50% of total grid generation. The low-cost/must-run resources include hydro, geothermal, wind, low-cost biomass, nuclear and solar power generation. There is no indication that coal is used as a must-run and no nuclear energy plants are located in Turkey. This makes hydro power as the only relevant low-cost must run source for electricity. The electricity generation from wind power is 2.1% of the total electricity generation. Therefore the requirements for the use of the Simple OM calculations are satisfied. Table 10: Breakdown by sources of the electricity generation from the Turkish grid, Power Plants by Fuel Type Generation (MWh/yr) Coal Total , , , , ,0 31 The emission factor from neighbouring countries is taken as 0 tco 2 eq/mwh for determining the OM official webpage of TEIAŞ (Turkish Electricity Transmission Co.) 33 official webpage of TEIAŞ (Turkish Electricity Transmission Co.) Version 07.0 Page 22 of 52

23 Liquid Total , , , , ,0 Natural Gas , , , , ,0 Wastes , , , , ,0 Hydro+Jeothermal+Wind Total , , , , ,0 Total , , , , ,0 Share 19% 17% 19% 26% 25% For the simple OM, the emissions factor can be calculated using either of the two following data vintages: Ex ante option: If the ex ante option is chosen, the emission factor is determined once at the validation stage, thus no monitoring and recalculation of the emissions factor during the crediting period is required. For grid power plants, use a 3-year generation-weighted average, based on the most recent data available at the time of submission of the CDM PDD to the DOE for validation. Ex post option: If the ex post option is chosen, the emission factor is determined for the year in which the project activity displaces grid electricity, requiring the emissions factor to be updated annually during monitoring. The ex ante option has been selected for the proposed project activity. Data from the period has been obtained for calculating the three-year average. This period is standing for the most recent data available at the time of submission of the PDD to DOE. Step 4: Calculate the operating margin emission factor according to the selected method The simple OM emission factor is calculated as the generation-weighted average CO 2 emissions per unit net electricity generation (tco 2 e/mwh) of all generating power plants serving the system, not including low-cost / must-run power plants / units. The simple OM emission factor might be calculated as follows: Option A: Based on the net electricity generation and a CO 2 emission factor of each power unit; Option B: Based on the total net electricity generation of all power plants serving the system and the fuel types and total fuel consumption of the project electricity system. Since the fuel consumption and the average efficiency data for each power plant/unit are not available Option B is used for simple OM calculation. The simple OM emission factor is calculated based on the net electricity supplied to the grid by all power plants serving the system, not including low-cost/must run power plants/units, and based on the fuel type(s) and total fuel consumption of the project electricity system as follows: EF grid, OMsimple, y Where: i FC NCV EF iy, iy, CO, iy, EG y 2 EF grid,omsimple,y FC i,y NCV i,y EF CO2,i,y = Simple operating margin CO2 emission factor in year y (t CO 2 /MWh) = Amount of fuel type i consumed in the project electricity system in year y (mass or volume unit) = Net calorific value (energy content) of fuel type i in year y (GJ/mass or volume unit) = CO 2 emission factor of fuel type i in year y (t CO 2 /GJ) Version 07.0 Page 23 of 52

24 EG y i y the = Net electricity generated and delivered to the grid by all power sources serving the system, not including low-cost/must-run power plants/units, in year y (MWh) = All fuel types combusted in power sources in the project electricity system in year y = The three most recent years for which data is available at the time of submission of PDD to the DOE for validation (ex-ante option) Step 5: Calculate the build margin (BM) emission factor In terms of vintage of data, project participants can choose between one of the following two options: Option 1: For the first crediting period, calculate the build margin emission factor ex ante based on the most recent information available on units already built for sample group m at the time of CDM- PDD submission to the DOE for validation. For the second crediting period, the build margin emission factor should be updated based on the most recent information available on units already built at the time of submission of the request for renewal of the crediting period to the DOE. For the third crediting period, the build margin emission factor calculated for the second crediting period should be used. This option does not require monitoring the emission factor during the crediting period. Option 2: For the first crediting period, the build margin emission factor shall be updated annually, ex post, including those units built up to the year of registration of the project activity or, if information up to the year of registration is not yet available, including those units built up to the latest year for which information is available. For the second crediting period, the build margin emissions factor shall be calculated ex ante, as described in Option 1 above. For the third crediting period, the build margin emission factor calculated for the second crediting period should be used. Project participant selects Option 1 in terms of vintage of data for the proposed project activity: The sample group of power units m used to calculate the build margin should be determined in accordance with the below procedure, in line with the data vintage selected above: (a) Identify the set of five power units, excluding power units registered as VER project activities, that started to supply electricity to the grid most recently (SET 5-units ) and determine their annual electricity generation (AEG SET-5-units, in MWh); (b) Determine the annual electricity generation of the project electricity system, excluding power units registered as VER project activities (AEG total, in MWh). Identify the set of power units, excluding power units registered as VER project activities, that started to supply electricity to the grid most recently and that comprise 20 per cent of AEG total (if 20 per cent falls on part of the generation of a unit, the generation of that unit is fully included in the calculation) (SET >20% per cent) and determine their annual electricity generation (AEG SET->20% per cent, in MWh); (c) From SET 5-units and SET >20% per cent select the set of power units that comprises the larger annual electricity generation (SET sample ); Identify the date when the power units in SET sample started to supply electricity to the grid. If none of the power units in SET sample started to supply electricity to the grid more than 10 years ago, then use SET sample to calculate the build margin. The most recent information available belongs to 2011 and based on TEIAŞ statistics which is the official information source for the grid. 34 Since the data of 2011 does not provide any information about the commissioning dates of the plants, the set of five power units that started to supply electricity to the grid most recently cannot be determined. Therefore, SET 20% is selected as the set of power units that comprises the larger annual electricity generation (SET sample ) Version 07.0 Page 24 of 52