CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-PDD) Version 03 - in effect as of: 28 July 2006 CONTENTS

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1 page 1 CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-PDD) Version 03 - in effect as of: 28 July 2006 CONTENTS A. General description of project activity B. Application of a baseline and monitoring methodology C. Duration of the project activity / crediting period D. Environmental impacts E. Stakeholders comments Annexes Annex 1: Contact information on participants in the project activity Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring plan

2 page 2 SECTION A. General description of project activity A.1 Title of the project activity: Malinghe Hydropower Project. A.2. Description of the project activity: Malinghe Hydropower project is developed by XingYi Malinghe Power Generation Company Ltd., part of the Guangzhou Jilong Group Ltd. Guangzhou Jilong Group Ltd have interests in hydro power generation, hotel building and real estate. The hydropower station will be located at Maling River in Guizhou Province. The project will produce electricity from water as a renewable source. Malinghe Hydropower project consists of two parts. Malinghe I and Malinghe II. Malinghe I has a dam with the height of 67m and a capacity of 37 MW. The flooded area caused by the dam are 17 ha, which results in a power density of 217 W/m2. Malinghe II the second hydropower dam has a height of 32m and a capacity of 15 MW. The flooded area caused by Malinghe II is 3 ha, which results in a power density of 500 W/m2. This new design differs from the older and previously approved design for the construction of a single 90 m dam with a capacity of 45 MW, which would have flooded an area of more than 130 ha, at the same section of the river. The main reason for the change in design has been the avoidance of resettlement/ relocation of more than 1200 people. Malinghe will generate MWh renewable electricity per year. The proposed project activity will reduce CO2 emissions by replacing more carbon intensive grid electricity, which otherwise would have been produced by thermal power stations. The measures undertaken to achieve this are the planning, construction and the operation of the hydropower stations. The project meets all the host countries requirements specified by the National Development and Reconstruction Committee. Furthermore the project contributes to Sustainable Development in a variety of ways. The proposed project activity will reduce CO2 emissions by replacing more carbon intensive grid electricity, which otherwise would have been produced by thermal power stations. The measures undertaken to achieve this are the planning, construction and the operation of the hydropower stations and the CDM project activity is to ensure that adequate equity is available to finance the projects. Economic impacts: Guizhou is the second poorest province after Tibet. During the construction phase there will be an employment opportunity for the local people, which will significantly add to their income. The project is located in a very remote area. The project will also bring infrastructure improvements, such as the construction of the road. Development of employment and industry in the region is a goal of past and current five year plans, and provision of power is a key component of this.

3 page 3 Environmental impacts: By increasing renewable energy capacity, the project will deliver improved air quality, both locally and globally, by reducing NOx, SOx and CO2 emissions. Geli Bridge project will cause flooding of some land which may give rise to some methane emissions, but the power density is well above the threshold in ACM0002. To help minimise this problem and to minimise the amount of debris entering the hydro power system, vegetation will be cleared before inundation. Inevitably, biodiversity will also suffer, however, the project is part of a planned and approved development scheme and all host country environmental regulations have been fulfilled. Social impacts: The construction, operation and maintenance will provide much needed employment opportunities for the region. For example, see 1, which highlights China s 11th 5-year plan to help reduce poverty in Guizhou Province. Sustainable development impacts: The hydropower will provide important seasonal power supplies to China s growing industrial, agricultural and domestic sectors without utilizing non-renewable resources. A.3. Project participants: Name of 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) People s Republic of China (host) Xingyi Malinghe Power Generation Company Ltd. No United Kingdom of Great Britain and Northern Ireland Sindicatum Carbon Capital Ltd No (*) In accordance with the CDM modalities and procedures, at the time of making the CDM-PDD public at the stage of validation, a Party involved may or may not have provided its approval. At the time of requesting registration, the approval by the Party(ies) involved is required. 1 See internet reference 7, provided to DOE

4 page 4 A.4. Technical description of the project activity: A.4.1. Location of the project activity: A People s Republic of China A Guizhou Province Host Party(ies): Region/State/Province etc.: A City/Town/Community etc: Malinghe I and II: Maling Town at Maling River A Detail of physical location, including information allowing the unique identification of this project activity (maximum one page): Malinghe

5 page 5 Malinghe I Malinghe II Xingyi See for an overview of Guizhou Province. A.4.2. Category(ies) of project activity: The project falls into: Category 1, energy industries (renewable sources), the project activity is gridconnected renewable power generation. A.4.3. Technology to be employed by the project activity: No technology and know- how will be transferred as part of the project activity. As will be shown below, the CDM finance will strengthen the internal rate of return of the project, lifting it above the IRR threshold for infrastructure developments. A.4.4 Estimated amount of emission reductions over the chosen crediting period:

6 page 6 Years Annual estimation of emission reductions in tones of CO2 e , , , , , , ,636 Total estimated reductions (tonnes of CO2e) 1,117,449 Total number of crediting years 7 Annual average over the crediting period of estimated reductions (tonnes of CO2e) 159,636 Malinghe will produce MWh per year A.4.5. Public funding of the project activity: No public funding is involved in this project activity.

7 page 7 SECTION B. Application of a baseline and monitoring methodology B.1. Title and reference of the approved baseline and monitoring methodology applied to the project activity: Consolidated baseline methodology for grid-connected electricity generation from renewable sources, ACM0002 Version 06 and the Tool for the demonstration and assessment of additionality Version 2. B.2 Justification of the choice of the methodology and why it is applicable to the project activity: The Malinghe hydropower project meets all the applicability requirements of ACM0002, as shown below: - It is connected to the South China Power Grid (SCPG) through the Guizhou Grid. Malinghe is a hydropower project with a power density for Maling I of 217 W/m2 and for Maling II of 500 W/m2. This is more than 10W/m2. - It does not involve switching from fossil fuels to renewable energy at the proposed site. - The SCPG is clearly identified and information on the characteristics of this grid is publicly available. B.3. Project Activity Baseline Description of the sources and gases included in the project boundary Source Existing power fleet Gas Included? Justification/Explanatio n CO2 Yes Predominantly coal fired power plants CH4 No Not required by methodology N2O No Not required by methodology Project site CO2 No Not required by methodology CH4 No Not required by methodology N2O No Not required by methodology B.4. Description of how the baseline scenario is identified and description of the identified baseline scenario: The baseline scenario is identified by reviewing the current and future additions to the electricity generating fleet in the Province, based on data from the local office of the China Southern Grid Company and public statements of the energy policy for the Province reported in press releases on the internet.

8 page 8 These documents show that coal fired power generation has been dominant in the past and will continue to be the main source of new additions to the grid. Whilst there is a significant amount of hydro power capacity being added, as will be shown below, the economic and financial barriers facing these types of projects are becoming increasingly difficult, such that many new hydro power projects are being financed through the CDM, as few surpass the 8% IRR benchmark. For example: Press release highlighting coal reserves and increase in power generation 15/15-3-b/15-3-b-88.htm 2 which states Guizhou has 52.6 billion tons of proven coal reserves. Departments concerned have set about to organize quality coal development projects in support of the west-east power transmission program. Currently, Guizhou has built China largest electrolytic aluminium plant, the largest phosphate fertilizer base, and largest abrasive 3 confirms that 88% of new additions are thermal and only 12% are hydro, which includes the massive Three Gorges Dam which started producing electricity this year (see 4 ) 5, which lists forthcoming (in year plan) power developments, which include some hydro but are weighted towards coal. 6 which highlights the supplies of coal available for exploitation for the realization of the west-east electricity transmission goal: Guizhou will seize the historical opportunity of west-east electricity transmission to construct pit power plants for the coal bases of Liupanshui, Zhijin and Qianbei with an installed capacity of 1 million kw so as to build Guizhou into a giant power producer and an important energy base in south China. In addition to these points, interviews with the hydro power project developers and the local grid management confirmed that coal fired power stations are more desirable to construct, as they receive higher revenue per kwh electricity produced (23.4 cents / kwh) as opposed to only 22.8 RMB cents / kwh from hydropower stations. The following points were also made: Thermal power stations provide a more stable and reliable electricity supply than hydropower stations. As the power generation profile is weighted towards the summer monsoon season, 50% of power generation takes place within the 3 month peak demand period. Consequently, the hydro projects cannot be relied upon for year round production and therefore, whilst SCPG will see some further development in hydropower capacity, the bulk of the future capacity increase will come from coal fired thermal power stations. Coal has dominated the energy structure of electricity generation in China for a long time, and as there are plentiful supplies of coal, including in Guizhou Province, coal is not likely to be replaced as the dominant fuel in the medium to long term (i.e. in the next few decades). 2 See Internet reference 1, provided to DOE 3 See Internet reference 4, provided to DOE 4 See Internet reference 5, provided to DOE 5 See Internet reference 8, provided to DOE 6 See Internet reference 9, provided to DOE

9 page 9 Based on the information presented above, it is concluded that the baseline scenario is the continued development of coal fired thermal power plants with some development of hydro-powered projects. The detailed calculations for the determination of the carbon emission factor for the baseline is detailed in Annex 3, using a combination of the simple operating margin and build margin. B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered CDM project activity (assessment and demonstration of additionality): The following steps are used to demonstrate the additionality of the project according to latest version of the tool for the demonstration of additionality agreed by the Executive Board. Step 0. Preliminary screening based on the starting date of the project activity. This step is not applicable because the crediting period of the project will start from the date of registration. Step 1. Identification of the alternative to the project activity consistent with current laws and regulations. Sub-step 1a. Define alternatives to the project activity. Xing Yi Hydropower Development Ltd has been specifically set up to develop, construct and operate hydropower stations. The company is not involved in thermal power generation. Therefore, the alternatives to implementing this project as a CDM project activity, for these project participants, are to implement the proposed project activity as a CDM project, to implement it not as a CDM project activity or to not implement the project at all in which case the electricity will continue to be generated by coal fired power plants. Sub-step 1b. Enforcement of applicable laws and regulations: The applicable legal and regulatory requirements for the proposed project include laws, central government regulations, local regulations, department rules and disciplines related to electricity and environment protection, are available on the website of State Electricity Regulatory Commission (SERC), Ministry of Water Resources and National Development and Reform Commission (NDRC): and There is no legal obligation for the project owner to develop this project activity or not, and therefore both of the two alternatives are in compliance with all applicable laws and regulations. Step 2. Investment analysis Sub-step 2b. Option III: Apply benchmark analysis.

10 page 10 According to the Economical Assessment and Parameters for Construction Project, 2nd edition 7, which was issued by Ministry of Construction and former State Development and Planning Commission (current NDRC) and is the most important reference for project assessment in China, a project will be financially acceptable when the FIRR is better than the sectoral benchmark FIRR. The sectoral benchmark FIRR on total investment for power industry is 8%. The application of the benchmark analysis is appropriate because the only alternatives (as identified above) are to implement the project or not. Sub-step 2c. Calculation and comparison of financial indicators. The IRR (without CDM) as detailed in the feasibility study submitted to NDRC for approval is 7.5%. On repeating the IRR calculation, it was found to be 6.98% and including conservative CER financing, the project IRR exceeds 8% (see table below. Full details available to DOE). With the income from CERs, the FIRR is increased to above the benchmark rate and is thus financially acceptable. Item Unit IRR without the income of CERs Benshmark rate IRR with the income of CERs IRR of the Total Investment % 6.98% 8% 8.13% Sub-step 2d. Sensitivity analysis. Three factors are considered in the following sensitivity analysis: 1) Total investment. 2) Operation and maintenance cost. 3) Output. The feed-in tariff is not considered because it is strictly regulated by relevant authorities. Assuming the above three factors vary in the range of -10%-+10%, the IRR of the project (without the income from CERs sales) varies to different extents, as shown in Figure 1. In the case that the total investment decreases by approximately 10%, the IRR of the project equals to the benchmark rate, but it is not possible for the total investment to change, especially to decrease so greatly. In the case that the annual output increases by approximately 8%, the FIRR of the proposed project equals to the benchmark rate. Considering that the annual output is based on the annual generating hours which are estimated from the long time series of hydrology information, the probability that average annual output is 8% higher than the estimated value is very small. The financial analysis is very insensitive to operation and maintenance costs. 7 State Power Corporation of China. Interim Rules on Economic Assessment of Electrical Engineering Retrofit Projects. Beijing: China Electric Power Press, 2003.

11 page 11 IR R S e n s itiv ity A n a ly s is 8.5% 8.0% 7.5% IR R 7.0% 6.5% 6.0% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% C apex Pow er O utput O pex To conclude, without the income from CERs sales, the project is not financially viable, even when the possible variations of the main parameters are considered. Step 4. Comment practice analysis Sub-step 4a. Analyze other activities similar to the proposed project activity. Sub-step 4a. Analyze other activities similar to the proposed project activity. Analysis of other hydro power developments in Guizhou since 2000 Project Installe d capacity Constructio n start date Commission ing date Project Development Company Dahua 200 MW Jan 2004 March 2007 Guizhou Wujiang Qinggshuihe Hydropower Dev Corp. Ltd Major shareholders (State / Provincial / County Government %; Private %) Guizhou Wujing Hydropower River Development Co (Govt) (30%) Qianneng Tianhe Phosphorus Co. Ltd. (Govt) (25%) Guizhou Tengyuan Electricity Power Generation Co Ltd (Private) (21%) Guizhou Guodian Technology Co. Ltd (Private) (19%) and Kaiyang County Assets CDM? Yes (this proje ct)

12 page 12 Investment & Operation Co. Ltd. (Local Govt) (5%) Geli Bridge 150 MW Not yet started Guizhou Wujiang Qinggshuihe Hydropower Dev Corp. Ltd Guizhou Wujing Hydropower River Development Co (Govt) (?%) Qianneng Tianhe Phosphorus Co. Ltd. (Govt) (?%) Guizhou Tengyuan Electricity Power Generation Co Ltd (Private) (?%) Guizhou Guodian Technology Co. Ltd (Private) (?%) and Kaiyang County Assets Investment & Operation Co. Ltd. (Local Govt) (?%) Yes Yong Kang 12 MW XingYi Yong Kang Power Generation Company Ltd Nahuihe 19.5 MW Maling 51 MW Not yet started Dongqing hydropower station four 220MW Francis turbines Lubuge 3.2 million kwh Wujiang Siling 4 x 250MW March 2005 June 2007 XingYi Nahuihe Power Generation Company Ltd Not yet started Nov 8, 2006 end of 2008 XingYi Maling Power Generation Company Ltd Guizhou Qianyuan Power Development Corporation Guizhou Qianyuan Power Development Corporation Wujiang Hydro Power Group Puding 75 MW?? Wujiang Hydro Power Group Jilong 90% Teng Yuan Hong Yuan Private 10% Jilong 51% Teng Yuan 39% Hong Yuan 10% Private Jilong 60% Teng Yuan 16% Hong Yuan 14% Private 10% Guizhou Qianyuan is a major affiliate of China Huadian, a 100% state owned corporation Guizhou Qianyuan is a major affiliate of China Huadian, a 100% state owned corporation Yes Yes Yes No No 100% State Owned No 100% State Owned No Sub-step 4b Discuss any similar options that accruing

13 page 13 The analysis of other hydro projects implemented in Guizhou Province shows that the projects that have been constructed prior 2002 are the best and most profitable sites. These hydropower stations are owned by Government owned companies. The projects constructed post 2002 with state level finance have been successfully financed and completed whilst those relying on private equity are now struggling to raise the required amounts of equity. The predicted IRR of the Malinghe hydropower project is 7.5%, which is well below the 8% threshold commonly applied to such infrastructure project and goes some way to explaining why they are now having difficulty attracting new equity investors. Step 5 Impact of CDM registration. The project is currently trying to raise equity to start the construction process, but on the basis of the low FIRR, investors are not keen. Considering the wide range of alternatives that exist in China as it develops rapidly, including thermal power options in Guizhou, investors could easily find alternatives with higher returns and faster paybacks. Including the CDM in the financial model improves the FIRR, lifting it above the threshold rate of 8% and also provides some added security in the form of hard currency income. B.6. Emission reductions: B.6.1. Explanation of methodological choices: The proposed project will adopt the baseline methodology ACM0002 to choose and confirm the baseline gird, and then calculate the emission factor of the baseline grid and finally the GHG emission reductions due to the operation of the proposed project. Firstly, the substituted baseline grid needs to be chosen.without the proposed project, the electricity which the proposed project will supply will be provided by other grid-connected power plants or other newly added electricity sources. According to the new definition of project boundary in baseline methodology ACM0002, (a) use the delineation of grid boundaries as provided by the DNA of the host country if available; or (b) use, where DNA guidance is not available, in large countries with layered dispatch systems, the regional grid definition should be used. As for China which is a large country with layered dispatch, the regional grid should be chosen as the baseline grid. Therefore, China Southern Power Grid was chosen as the project boundary, namely baseline grid. According to China s actual grid structure, China Southern Power Grid covers Guangdong Province, Guangxi Zhuang Autonomous Region, Guizhou Province, Yunnan Province and Hainan Province. The baseline emission factor (EFy) is calculated as the simple average of the operating margin emission factor (EFOM, y) and the build margin emission factor (EFBM, y). In accordance with ACM0002, the baseline emission factor can be calculated with the following steps described below. Step 1 Calculate the Operating Margin emission factor (EFOM,y) Baseline methodology ACM0002 gives the four following methods to calculate the operating margin emission factor (EFOM,y): (a) Simple OM or (b) Simple adjusted OM, or (c) Dispatch data analysis OM, or (d) Average OM. If the dispatch data of the gird can be available, method(c) the dispatch data analysis should be the first methodological choice. But this method needs the grid system dispatch order of operation for each power plant of the system and the amount of power that is dispatched from all plants in

14 page 14 the system during each hour that the project activity is operating. However, at present the grid dispatch data of China is secret data which can t be publicly acquired. So the proposed project can t adopt the method (c) to calculate the operating margin emission factor(efom,y ).With the same reason, the load curve of the grid can t publicly be acquired; the method (b) can t be adopted. The Simple OM method (a) can only be used where low-cost/must run resources constitute less than 50% of total grid generation, and low operating cost and must run resources typically include hydro, geothermal, wind, low-cost biomass, nuclear and solar generation. In the five most recent years from 2000 to 2004, the low-cost/must run resources constituted less than 50% of total power generation of the China Southern Power Grid and the relevant ratios are respectively 34.27%, 32.33%, 31.62%, 31.06% and 28.01% 2for 2000, 2001, 2002, 2003 and As a result, the simple OM method can be used to calculate the operating margin emission factor(efom,y ) of the proposed project. The Simple OM emission factor (EFOM,simple,y) is calculated as the generation-weighted average emissions per electricity unit (tco2e/mwh) of all generating sources serving the system, not including low operating cost and must-run power plants. According to this method, the formula of EFOM, y calculation is: Where: Fi,j,y is the amount of fuel i (in a mass or volume unit) consumed by relevant power sources j in year(s) y; j refers to the power sources delivering electricity to the grid, not including low-operating cost and must run power plants, and including imports to the grid; COEFi,j is the CO2 emission coefficient of fuel i (tco2e / mass or volume unit of the fuel), taking into account the carbon content of the fuels used by relevant power sources j and the percent oxidation of the fuel in year(s) y; GENj,y is the electricity (MWh) delivered to the grid by source j. The CO2 emission coefficient COEFi is obtained as Where: NCVi is the net calorific value (energy content) per mass or volume unit of a fuel i; OXIDi is the oxidation factor of the fuel (see page 1.29 in the 1996 Revised IPCC Guidelines for default Values); EFCO2,i is the CO2 emission factor per unit of energy of the fuel i. At the same time, according to ACM0002, the Simple OM can be calculated using either of the two following data vintages for years(s) y: - (ex-ante) the full generation-weighted average for the most recent 3 years for which data are available at the time of PDD submission, or, - The year in which project generation occurs, if EFOM,y is updated based on ex-post monitoring.

15 page 15 The proposed project adopts takes the Simple Operating Margin, which is calculated ex ante. The OM emissions factor is Annex 3 shows the detailed calculation of the OM. Step 2 Calculate the Build Margin emission factor (EFBM,y) According to ACM0002, the BM is calculated as the generation-weighted average emission factor of a sample of power plants m, as follows: Where: Fi,m,y is the amount of fuel i (in a mass or volume unit) consumed by plant m in year y; COEFi,m is the CO2 emission coefficient (tco2e / a mass or volume unit) of fuel i, taking into account the carbon content of the fuels used by plant m and the percent oxidation of the fuel in year y; GENm,y is the electricity (MWh) delivered to the grid by plant m in year y. The methodology provides two options for the BM calculation :1) Ex-ante calculation based on the available data in the recent three years when the PDD submission; 2) Ex-post update BM according to the actual generated electricity and emission reductions in the first crediting period, and in other crediting period the ex-ante calculation like the first choice can be adopted. The result of BM emission factor in this project is based on the first choice: ex-ante calculation and the update for the emission factor are not needed. Because some data is not available, the BM calculation in this PDD adopts the modifications methods agreed by the CDM EB. First, calculate the newly added installed capacity and the various component technologies, then calculation of the weight of newly added installed capacity of each power generation technology. Finally the commercial and efficient level of each power generation technology is adopted to calculate BM emission factor. Because the generating capacity of the coal-fired, oil-fired and gas-fired technology can not be separated from the existing statistical data, the BM calculation in this PDD adopts the following method: First, use the available data in the energy balance tables on the most recent year, then calculate the proportion of CO2 emissions from solid, liquid and gaseous fuels corresponding to the total emissions of CO2 emissions; Second, the proportion used as the weight, based on the emission factors of the optimal efficient and commercial technologies, calculate the emission factor of the thermal power in each grid. Finally, this thermal emission factor is multiplied by the proportion of thermal power added capacity in the additional 20% capacity. The result is BM emission factor. Concrete steps and the formula for BM are as follows: Sub-step1: Calculation of the proportion of CO2 emissions from solid, liquid and gaseous fuels corresponding to the total emissions of CO2 emissions.

16 page 16 Where: Fi,m,y is the amount of fuel i (in a mass or volume unit) consumed by plant m in year y; COEFi,m is the CO2 emission coefficient (tco2e / a mass or volume unit) of fuel i, taking into account the carbon content of the fuels used by plant m and the percent oxidation of the fuel in year y; Coal, Oil and Gas is the feet for solid fuels, liquid fuels and gas fuels. Sub-step2: Cacluation the emission factor of thermal power. EFCoal,Adv EFOil,Adv EFGas,Adv represent the emission factors of the optimal efficient and commercial coal-fired, oil-fueled and gas-fueled technologies. Sub-step 3: Calculation of BM in the grid. Where: CAPTotal is the total added installed capacity; CAPThermalis the total added installed capacity for thermal power. The key parameters used to calculate BM emission factor include: the low calorific value of each fuel, the oxidation rate, the potential emission factors and the efficiency of various power generation technologies. Please refer to the selection of these values in annex 3 and DNA report for China Southern Power Grid. According to the statistic investigation for the new thermal power projects which were newly built during

17 page 17 10th Five-Year Plan period by China's State Electricity Regulatory Commission, among the newly built thermal power projects during , the installed capacity per turbine of 600 MW and above accounts for 21%, the capacity per turbine of 300MW accounting for 60%, and the single capacity for the remaining turbines is less than 300 MW. In 2004 the capacity of all the newly built large and medium sized thermal power projects comes to 34 GW, of which there are 11 series of 600MW sets, accounted for 20% weak among newly added generating capacity in the large and medium-sized thermal power projects. Summarizing the above analysis, the optimal efficiency of the commercialization of the coal fuelled technology is determined as 600 MW domestic sub critical units. The weighted average for power supply coal consumption of 11 sets newly built 600 MW is chosen as the commercial and optimal technical efficiency. The supply coal consumption of domestic sub critical 600 MW power plants is estimated to be gce/kWh, equivalent to the efficiency of power supply with 36.53%. The commercial technology of gas turbine power plants (including oil-fueled and gas-fueled) with the optimal efficiency is 200 MW combined cycle (equivalent to the level of GE 9E unit).according to the relevant statistics for gas turbine power plants in 2004, the maximum practical efficiency of the gas turbine power plants is chosen as a approximate estimation for the commercial optimal efficiency. The coal consumption of the gas turbine power plants (converted by heat value) is estimated to be gce/kwh, equivalent to the efficiency of power supply 45.87%. The emission factor of the most efficient commercial coal-fueled, oil-fueled and gas-fueled power plant is shown in the following table. Based on the above calculation principle for BM, basic data and parameter, China DNA NDRC established the Report on Determination of Baseline Grid Emission Factor at The calculation result of BM for China Southern Power Grid is tco2e/mwh. The concrete calculation process please sees annex 3 and the Report on Determination of Baseline Grid Emission Factor at Step 3 Calculate the baseline emission factor EFy The baseline emission factor is the weighted average of the Operating Margin emission factor (EFOM,y) and the Build Margin emission factor (EFBM,y):

18 page 18 Where the weight wom and wbm by default, are 50%. The proposed project adopts the default weight. Based on the emission factors calculated in the previous 2 steps, the baseline emission factor is EFy=EFOM,y/2+ EFBM,y/2= tCO2e/MWh. Step 4 Calculate the baseline emissions (BEy) and emission reductions (ERy) The amount of electricity to be delivered to the grid from the project is EGy=205,504 MWh, so the annual baseline emissions (BEy), as the product of the baseline emissions factor (EFy) calculated in Step 3 and the electricity to be supplied by the project activity to the grid, are: BEy=EGy EFy= 159,636 tco2e. There is no project emission, then PEy=0. There is no leakage due to the project activity, then Ly=0. The emission reductions ERy by the project activity during a given year y are the difference between baseline emissions (BEy), project emissions (PEy) and emissions due to leakage (Ly), as follows: ERy=BEy-PEy-Ly=EGy EFy= 159,636 tco2e. B.6.2. Data and parameters that are available at validation: (Copy this table for each data and parameter) Data / Parameter: EFy Data unit: tco2 / MWh Description: Emission factor of the gird Source of data used: China electricity power year book Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: Calculated as a ex ante weighted sum of the OM and BM emission factors See Annex 3 Recalculated at the start of each new crediting period, using the parameters described below Operating Margin Data / Parameter: NCVi Data unit: MJ/t or MJ/Km3 Description: Net calorific value of a fuel i, per unit mass or volume Source of data used: China Energy Statistical Yearbook Value applied: See Report on Determination of Baseline Grid Factor by Chinese DNA at Justification of the National values are applied, as per ACM0002 choice of data or description of

19 page 19 measurement methods and procedures actually applied : Any comment: No comment Data / Parameter: OXIDi Data unit: % Description: Oxidation factor of fuel i Source of data used: Revised 1996 IPCC Guidelines for National Greenhouse Gas Inventories Value applied: See Report on Determination of Baseline Grid Factor by Chinese DNA at Justification of the As per ACM0002 choice of data or description of measurement methods and procedures actually applied : Any comment: No comment Data / Parameter: EFco2,i Data unit: tc/tj, converted to tco2e/tj by multiplying by 44/12 Description: CO2 emission factor per unit of energy for fuel i Source of data used: Revised 1996 IPCC Guidelines for National Greenhouse Gas Inventories Value applied: See Report on Determination of Baseline Grid Factor by Chinese DNA at Justification of the As per ACM0002 choice of data or description of measurement methods and procedures actually applied : Any comment: No comment Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: Fi,j,y Mass or volume of fuel i Amount of fuel I consumed by source j in year y China Energy Statistical Yearbook See Report on Determination of Baseline Grid Factor by Chinese DNA at As per ACM0002 No comment

20 page 20 Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: Build Margin Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: GENj,y MWh Electricity generation by source j in year y China Energy Statistical Yearbook See Report on Determination of Baseline Grid Factor by Chinese DNA at As per ACM0002 No comment Installed capacity of each type of electricity generation of Southern China Power Grid in recent years MW Installed capacity of each type of electricity generation of Southern China Power Grid in recent years China Electric Power Yearbook See Report on Determination of Baseline Grid Factor by Chinese DNA at As per ACM0002 and clarifications on the use of AM0005 and AMS-1D No comment Data / Parameter: Maximum efficiency of electricity from coal, gas and oil fired power stations Data unit: % Description: Maximum efficiency of electricity from coal, gas and oil fired power stations Source of data used: National official data sources Value applied: See Report on Determination of Baseline Grid Factor by Chinese DNA at Justification of the As per ACM0002 and clarifications on the use of AM0005 and AMS-1D choice of data or description of measurement methods and procedures actually applied : Any comment: No comment Data / Parameter: Data unit: EFf,adv tco2e/mwh

21 page 21 Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: Minimum CO2 emission factor for fuel f Calculated from maximum efficiency figures above See Report on Determination of Baseline Grid Factor by Chinese DNA at As per ACM0002 and clarifications on the use of AM0005 and AMS-1D No comment Data / Parameter: Λf Data unit: % Description: Calculation of CO2 emissions from fuel f as a proportion of the total emissions of CO2 Source of data used: China Energy Statistical Yearbook Value applied: See Report on Determination of Baseline Grid Factor by Chinese DNA at Justification of the As per ACM0002 and clarifications on the use of AM0005 and AMS-1D choice of data or description of measurement methods and procedures actually applied : Any comment: No comment Data / Parameter: EFom Data unit: tco2/mwh Description: Operating Margin Emission Factor Source of data used: Weighted average emission factor of the 20% most recent power plants built according to the Report on Determination of Baseline Grid Factor by Chinese DNA at Value applied: Justification of the Calculated using the method described by the Chinese DNA according to choice of data or ACM0002 and EB guidance, using publicly available data. description of measurement methods and procedures actually applied : Any comment: No comment Data / Parameter: Data unit: Description: Source of data used: EFbm tco2/mwh Build Margin Emission Factor Weighted average emission factor of the 20% most recent power plants built according to the Report on Determination of Baseline Grid Factor by Chinese

22 page 22 DNA at Value applied: Justification of the Calculated using the method described by the Chinese DNA according to choice of data or ACM0002 and EB guidance, using publicly available data. description of measurement methods and procedures actually applied : Any comment: No comment B.6.3 Ex-ante calculation of emission reductions: Emission reductions are calculated according to the formula ERy = BEy PEy Ly (1) Where ERy = emission reductions in year y BEy = baseline emissions in year y PEy = project emissions in year y Ly = Leakage emissions in year y. PEy and Ly = zero. BEy = (EGy-EGbaseline) * EFy Where EGy = net electricity generated in year y EGbaseline = Electricity that would have been generated in the baseline (=0) EF.y = Grid emission factor in year y.[ B.6.4 Summary of the ex-ante estimation of emission reductions: Maling Year Estimation of project activity emissions (tonnes CO2e) Estimation of baseline emissions (tonnes CO2) Estimation of leakage (tonnes CO2e) Estimation of overall emission reductions (tonnes CO2e) , , , , , , , , , , , , , ,636

23 page 23 Sub-Total 0 1,117, ,117,449 B.7 Application of the monitoring methodology and description of the monitoring plan: B.7.1 Data and parameters monitored: (Copy this table for each data and parameter) Data / Parameter: Data unit: Description: Source of data to be used: Value of data applied for the purpose of calculating expected emission reductions in section B.5 Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: Any comment: EGy MWh Electricity quantity Electricity supplied to the grid by the project Directly measured by generation company 205,504 MWh per annum Electricity meters will record the amount of power exported to the gird. These can be corroborated against payments from the Local grid, probably based on meters at the sub-station. The data will be archived electronically and stored for two years after the end of the crediting period. The project owner will be responsible for ensuring the meters meet the National Guidelines for accuracy and reliability. As these are the basis of fiscal transactions, it is in the project owner s interests to ensure the meters remain accurate. No comment B.7.2 Description of the monitoring plan: The following key tasks will be carried out: 1. Continuous measurement (electronic data from hydro power plant) Electricity supplied to the grid by the project (EGy) 2. Monthly reporting (electronic and hard copies) Monthly summary of continuous measurement data for electricity supplied to the grid by the project All documentation regarding sales to the grid will be collated in hard copy for inspection 3. At the start of each new crediting period: GHG emission factor of the South China Grid (EFy), based on the simple average of the operating and build margins, determined as per the current version of AMC0002 Tasks 1 and 2 will be performed by the Chief Engineer and Task 3 will be performed by Sindicatum Carbon Capital Ltd. Management and implementation structure for monitoring plan This monitoring plan will be implemented by trained staff and subject to periodic audit.

24 page 24 Parameter to be monitored Quality Control The electricity delivered to the grid will be monitored by electricity sales receipts and double checked by meter data in the plant. The project owner will be responsible for ensuring the meter meets the China s national guidelines for accuracy and reliability. B.8 Date of completion of the application of the baseline study and monitoring methodology and the name of the responsible person(s)/entity(ies) The baseline study was prepared by Gareth Phillips and Daniel Bussin of Sindicatum Carbon Capital Ltd., 18 Hanover Square, London W1S 1HX gareth.phillips@carbon-capital.com SECTION C. Duration of the project activity / crediting period C.1 Duration of the project activity: C.1.1. Starting date of the project activity: Planned to start construction April 2008, assuming capital has been raised. C.1.2. Expected operational lifetime of the project activity: 30 years

25 page 25 C.2 Choice of the crediting period and related information: C.2.1. Renewable crediting period March years C C Starting date of the first crediting period: Length of the first crediting period: C.2.2. Fixed crediting period: N/A N/A C C Starting date: Length: SECTION D. Environmental impacts D.1. Documentation on the analysis of the environmental impacts, including transboundary impacts: Environmental impacts have been assessed in the feasibility study which has been approved. An English summary of the relevant section has been submitted with the PDD and the full Chinese document is available to the DOE. D.2. If environmental impacts are considered significant by the project participants or the host Party, please provide conclusions and all references to support documentation of an environmental impact assessment undertaken in accordance with the procedures as required by the host Party: Environmental impacts are not considered significant by the project participants or the host party. SECTION E. Stakeholders comments E.1. Brief description how comments by local stakeholders have been invited and compiled:

26 page 26 A list of stakeholders was compiled to include the local regulatory bodies including the local Development and Reform Committee, Municipal Council, Immigration Bureau, Water Bureau; investors in the projects and local villagers. They were invited to attend the stakeholder consultation. The meeting was held at the offices of the China Southern Grid Company in Xingyi, about 2 hours drive from the location of the dam and power stations, in conjunction with stakeholder consultation meeting for Nahuihe and Yongkang. E.2. Summary of the comments received: Like the villagers at Nahuihe and Yongkang projects, all of the participants at the meeting were very supportive of the project. The comments received related to the range of benefits that the local villagers would experience (roads for better access; employment; potable water; water for irrigation; cheaper power) and the benefits to the local economy (sustainable supply of power, development of tourist attractions, environmental benefits). There were no specific questions on the Malinghe project from the participants that required a response. E.3. Report on how due account was taken of any comments received: No specific actions required. Photographs of stakeholder consultation Malinghe: Stakeholder consultation. Introduction to the Kyoto Protocol and CDM 23/11/06 Malinghe: Stakeholder consultation 23/11/06

27 page 27 Malinghe: A Villager expresses her view on the proposed Malinghe hydropower project 23/11/06 Malinghe: The Mayor of Xingyi addresses the meeting including stakeholders from Nahui, Yongkang and Maling 23/11/06 Annex 1 CONTACT INFORMATION ON PARTICIPANTS IN THE PROJECT ACTIVITY Organization: Sindicatum Carbon Capital Ltd. Street/P.O.Box: 18 Hanover Square Building: City: London State/Region: Postfix/ZIP: W1S 1HX Country: UK Telephone: +44 (0) FAX: +44 (0) URL: Represented by: Title: Chief Climate Change Officer Salutation: Mr Last Name: Phillips Middle Name: First Name: Gareth Department: Mobile: Direct FAX: Direct tel: +44 (0) Personal Gareth.Phillips@carbon-capital.com

28 page 28 Organization: XingYi Malinghe Power Generation Company Ltd. Street/P.O. Box Shajing Street Building: 5 th Floor, No. 10 City: Xingyi City State/Region: Guizhou Postfix/ZIP: Country: PR China Telephone: FAX: URL: Represented by: Mr Sheng Title: Chief Engineer Salutation: Mr Last Name: Sheng Middle Name: First Name: Department: Mobile: Direct FAX: Direct tel: Personal

29 page 29 Annex 2 INFORMATION REGARDING PUBLIC FUNDING No public funding is involved in this project activity.

30 CDM Executive Board page 29 Annex 3 BASELINE INFORMATION The baseline information for calculation of OM, BM and CM emission factor of China Southern Power Grid is shown in the Report on Determination of Baseline Grid Emission Factor by China DNA NDRC at The concrete process is shown in the following tables. Table A1 The fuel fired electricity generation of China Southern Power Grid in 2002 Province The fuel fired electricity generation (MWh) The rate of electricity sefconsumptio n (%) The fuel fired electricity connected to the grid (MWh) Guangdong 123,081, Guangxi 13,069, Guizhou 33,231, Yunnan 15,787, Total Data source: China Electric Power Yearbook ,213,080 11,982,966 30,605,751 14,490, ,292,685 TableA2 Calculation of simple OM emission factor of the China Southern Power Grid in 2002 Fuels Units Guangdong Guangxi Guizhou Yunnan Total Emission factor (tc/tj) OXID (%) NCV (MJ/t, or MJ/km3 ) Emission (tco2)

31 CDM Executive Board page 30 A B C D E=A+B+C+ D F G H I=E*F*G*H*44/12/ (quanlity unit) or I=E*F*G*H*44/12/1000 (volume unit) Raw coal ten thousand tones , , , ,582,063.7 Washed coal ten thousand tones ,344 - Other washed coal ten thousand tones , ,664.8 Coke ten thousand tones , ,114.8 Coke oven a hundred million gas m ,726 - Other gas a hundred million m ,227 15,618.2 Crude oil ten thousand tones , ,078.8 Gasoline ten thousand tones , Diesel ten thousand tones ,652 2,321,856.4 Fuel oil ten thousand tones ,816 22,471,255.5 LPG ten thousand tones ,179 2,833.9 Refinery gas ten thousand tones ,055 43,424.1 Natural gas a hundred million m ,931 - Other petroleum products ten thousand tones , ,340.1 Other coking products ten thousand tones ,435 - Other energy ten thousand tce Total ,406,545.9 The fuel fired electricity connected to the grid (MWh) 173,292,685

32 CDM Executive Board page 31 EF simple,om, 2002 (tco2e/mwh ) Data source: China Energy Statistical Yearbook Table A3 The fuel fired electricity generation of China Southern Power Grid in 2003 Province The fuel fired electricity generation (MWh) Guangdong 143,351,000 Guangxi 17,079,000 Guizhou 43,295,000 Yunnan 19,055,000 The rate of electricity sefconsumptio n (%) The fuel fired electricity connected to the grid (MWh) 136,197,785 16,380,469 40,450,519 18,336, Total 211,365,399 Note: When calculation of simple OM emission factor of the China Southern Power Grid in 2003, the electricity imports from China Middle Power Grid is 11100MWh, so the total fuel fired electricity generation of China Southern Power Grid in 2003 is ,365,399=211,376,499MWh. Data source: China Electric Power Yearbook 2004 Table A4 Calculation of simple OM emission factor of the China Southern Power Grid in 2003 Fuels Units Guangdong Guangxi Guizhou Yunnan Total Emission factor (tc/tj) OXID (%) NCV (MJ/t, or MJ/km3 ) Emission (tco2)