CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006 CONTENTS

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1 CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006 CONTENTS A. General description of the small scale 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 proposed small scale project activity Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring Information 1

2 Revision history of this document Version Date Description and reason of revision Number January 2003 Initial adoption 02 8 July 2005 The Board agreed to revise the CDM SSC PDD to reflect guidance and clarifications provided by the Board since version 01 of this document. As a consequence, the guidelines for completing CDM SSC PDD have been revised accordingly to version 2. The latest version can be found at < December 2006 The Board agreed to revise the CDM project design document for small-scale activities (CDM-SSC-PDD), taking into account CDM-PDD and CDM-NM. 2

3 SECTION A. General description of small-scale project activity A.1 Title of the small-scale project activity: Vardenis Cascade Small Scale Hydroelectric CDM project 08/09/2009, Version 01 A.2. Description of the small-scale project activity: The Vardenis Cascade Small-Scale Hydropower Project (hereafter referred to as the Project) developed by Firma G.A.Kh. LTD (hereafter referred to as the Project Developer) is a small-scale hydropower project in Gegharkunik Marz in the Republic of Armenia. Total installed capacity of the Project will be 14.9 MW. The project consists of two levels of power stations. The capacity of the first power station is 9.7 MW, the capacity of the second station is 5.2 MW. Vardenis-1,2 SHPPs will start generate electricity in September The electricity generated by Project will be sold to the Armenian Electricity Network (AEN). The project is expected to generate an annual average electricity of 38,100 MWh. Purpose of the project activity The main purpose of the project activity is generation of clean hydroelectric energy and contribution to climate change mitigation efforts. Contribution to sustainable development The project will generate renewable and clean electricity and thus, contributes to sustainable development which includes: 1. Social sustainability The project activity will create jobs opportunities in the area with very high unemployment level for skilled and unskilled labor during the construction and operation of the plant. The implementation of the project will benefit the Armenia through development of additional sustainable generation capacity not dependant on the imported energy sources, which will add to the independence of the energy system of the Republic as well. Implementation of the project will also contribute to development of experience and intellectual capacity among the local construction workers that will go through a set of trainings, organized by the Project Host during the project implementation, which will help them to become a skilled work force in future as well. The trainings are not contractually considered. 3

4 2. Environmental sustainability The construction of the Vardenis-1,2 SHPPs will not affect the quality of the river water, as well as the well being of the local population. Moreover, the project activity will have a positive impact on the environment as it will displace part of electricity generated by the conventional power plants in the national grid, thus avoid environmental pollution caused by the burning of fossil fuel and lead to an increased sustainability in the power generation sector. Total expected CO2 emission reduction from the proposed project is estimated to the amount of about 118,592 tco2 over the ten year crediting period. 3. Economic sustainability The implementation of the project will increase funds for municipality and state budget due to tax collection. The project implementation will also generate employment possibilities for the local population which lacks available workplaces in their region. During the project implementation locally produced equipment will be used which will benefit the renewable energy technology an intellectual capacity development in Armenia. The Project complies with the Energy Strategy of Republic of Armenia which promotes the development of new renewable energy technologies and capacities. In addition, implementation of the project will also contribute to the sustainable development of Armenia through reducing the dependence on imported energy carriers, such as natural gas, thereby reducing the outflow of capital from Armenia to other countries. A.3. Project participants: Name of Party involved (*) ((host) indicates a host Party) Private and/or public entity(ies) project participants (*) (as applicable) Kindly indicate if the Party involved wishes to be considered as project participant (Yes/No) Republic of Armenia (host) Private entity: Firma G.A.Kh. No LTD Germany Private entity: EnBW Trading GmbH 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. A.4. Technical description of the small-scale project activity: 4

5 A.4.1. Location of the small-scale project activity: A Republic of Armenia Host Party(ies): A Gegharkunik Marz A Region/State/Province etc.: City/Town/Community etc: Vardenis village A Details of physical location, including information allowing the unique identification of this small-scale project activity : The Project is located on the Vardenis river in Gegharkunik marz (i.e. region) near Vardenis village. 5

6 A.4.2. Type and category(ies) and technology/measure of the small-scale project activity: The project activity utilizes the hydro potential of Vardenis River for power generation and exports the generated power to the grid. According to small-scale CDM modalities the project activity falls under Type I Renewable Energy Projects and Category I-D Grid connected renewable electricity generation. The project uses run-of-river hydropower technology which converts mechanical energy available in the water flow into electrical energy using hydro turbines and generators. This kind of technology is standard for the small scale hydropower and widely used in the world for many years The equipment used in the project will be developed and manufactured locally. Technology description: The total installed capacity of the project is 14.9 MW with total expected annual net electricity generation of 38,100 MWh per annum. Vardenis-1 It is proposed to construct a cascade of two SHPPs on the Vardenis River. In order to increase the capacity of the hydropower plant, according to the new design, it is proposed to construct a two water intakes: one will be built at m altitude on the Vardenis River, from which an open water channel will start and on its 3.5 km length it merges with another 3.9 km open water channel starting from the second water intake which will be built at 2,575 m altitude on one of the largest confluents of Vardenis River. The end of this water channel will be made of aqueduct. Both channels will have a trapezoidal structure. of 2,560. After the merger point the open water channel will extend for 4 km until it will reach the altitude From that point the derivation channel of the SHPP-1 will start and extend for 1150 m using D=1420 mm pipe. The SHPP-1 will be located at m altitude. The water outflow from the SHPP-1 is taken at 2,307.6 m altitude via 1.6 km length water channel and brought to the 2308 m altitude, from where the derivation channel for SHPP-2 will extend for 2.3 km using D=1,400 mm pipe. The SHPP-2 will be located at 2,163 m altitude. The presently available access to the project area by road from the Vardenis village. Asphalt access roads to the Power station building. Serpentine curves from the edge of the plateau down to the river need improvement involving rock blasting and widening of the track to cater for the transportation 6

7 of the heavy construction material and machinery. About 2 km of access road need to be constructed to the powerhouse and, further. MAIN STRUCTURES Vardenis -1 SHPP Vardenis-1 SHPP will consist of the following structures: Head unit on the Vardenis river, which will include weir dam (2.0x2.5x9 m), descender (made of reinforced concrete 24x1.8x3.2 m), water intake (which will have two valves: main and emergency) and fish pass. Head unit on the confluent which will include weir dam, descender, water intake and fish pass. Open channels from the head unit on Vardenis river and its confluent. Open channel after the merger point of two channels. Penstock 1150 m long steel pipeline with 1400 mm diameter. Power house of the SHPP, where 5 turbines and generators will be installed. Tail race (discharge channel). Vardenis -2 SHPP Vardenis-2 SHPP will consist of the following structures: Head unit on the Vardenis river, which will include weir dam (2.0x3.0x20 m), sediment basin (made of reinforced concrete 22x1.6x3.0 m), water intake (which will have tow valves: main and emergency) and fish pass. Open channels from the head unit on Vardenis river. Penstock 2.3 m long steel pipeline with 1,400 mm diameter. Power house of the SHPP, where 5 turbines and generators with total capacity Mw will be installed. Tail race (discharge channel). A.4.3 Estimated amount of emission reductions over the chosen crediting period: Table A4. Vardenis-1,2 SHPPs Year Estimation of emission reductions (tones of CO2) 01/09/ /09/ , /09/ /09/ , /09/ /09/ , /09/ /09/ ,

8 01/09/ /09/ , /09/ /09/ , /09/ /09/ , /09/ /09/ , /09/ /09/ , /09/ /09/ , Total estimated reductions (tonnes of CO 2 ) 118,614.5 Total number of crediting years 10 Annual average over the crediting period of estimated reductions (tonnes of CO 2 ) 11,861 A.4.4. Public funding of the small-scale project activity: Total funding required for the project does not include any public funding from Annex I countries. Hence, the project proponents hereby confirm that public funding from parties included in Annex -I is not involved in the project activity. A.4.5. Confirmation that the small-scale project activity is not a debundled component of a large scale project activity: According to the Appendix C of the Simplified Methodologies and Procedures for the small-scale CDM, this Project activity is not a debundled component of a larger project activity because there is not a registered small-scale CDM project activity or an application to register another small-scale CDM project: With the same project participants In the same project category and technology/measure; Registered within the previous 2 years; Whose project boundary is within 1 km of the project boundary of the proposed small-scale activity at the closest point. Hence, the project is eligible as a small-scale CDM project and can use the simplified modalities and procedures for small-scale CDM project activities. SECTION B. Application of a baseline and monitoring methodology B.1. Title and reference of the approved baseline and monitoring methodology applied to the small-scale project activity: Type I: Renewable Energy Projects AMS-I.D. ver.14 Grid connected renewable electricity generation B.2 Justification of the choice of the project category: As per the provisions of simplified modalities and procedures for small scale CDM project activities (version 14), Type I. D comprises renewable energy generation units, such as photovoltaics, hydro, 8

9 tidal/wave, wind, geothermal, and renewable biomass, that supply electricity to and/or displace electricity from an electricity distribution system that is or would have been supplied by at least one fossil fuel fired generating unit. If the unit added has both renewable and non-renewable components (e.g. a wind/diesel unit), the eligibility limit of 15 MW for a small-scale CDM project activity applies only to the renewable component. If the unit added co-fires fossil fuel, the capacity of the entire unit shall not exceed the limit of 15 MW. Project activity meets the applicability conditions of the methodology in following manner: 1. The project activity consists of three run-of-river small-hydro power plants. Thus, the project activity does not consist of a combined heat and power (co-generation) system. the project will export the generated power to the grid with domination of fossil fuel generating units. 2. The installed capacity of the proposed project is only 14.9 MW, which is less than the qualifying capacity of 15 MW. The capacity of the project will not increase beyond 15 MW. B.3. Description of the project boundary: According to methodology AMS-ID/(ver.14), the project boundary encompasses the physical, geographical site of the renewable electricity generation source. Hence, the project boundary is the 10 hectare area where the powerhouse and transmission line is placed including the connection point with AEN Substation. B.4. Description of baseline and its development: According to Energy Sector Development Strategies in the Context of Economic Development in Armenia 1 adopted by the Government of Armenia in August 2005, modernizing and replacing the generating capacity is essential since: 38% of Armenian installed capacity has been in operation for more than 30 years; The primary equipment at TPPs has reached 200 thousand hours level and does not correspond to international standards in terms of technical, economic and ecologic criteria; 70 % of the installed equipment at HPPs has been in operation for more than 30 years, and 50% for more than 40 years

10 The same document indicates that the capacity additions planned for will include a mix of thermal power plants (capacity additions to the two existing Yerevan and Hrazdan plants) and new hydro and wind plants. The following additions to the grid are currently planned: gas fired addition to the Yerevan power plant 208 MW gas fired addition to the Hrazdan power plant 440 MW small hydro plants 70 MW Meghri hydro plant 140 MW wind plants 100 MW For the period the planned capacity additions are: Loriberd hydro plant 60 MW small hydro plants 65 MW wind plants 200 MW In total the plan expects the addition of 1,256 MW of thermal power plants and 635 MW of renewable energy, of which the planned addition of 300 MW wind power plants by 2016 appears to be quite optimistic, given the fact that currently no private wind farms are installed in Armenia. If the plans are implemented and the Armenian nuclear power planned is phased out as envisaged, then the Armenian energy mix would look as follows in 2016: thermal power plants would contribute to 65.05% of total capacity while carbon- free generation would contribute to 34.95%. The construction of Hrazdan-5 TPP and New Unit in Yerevan TPP has been started in and it is expected that these power plants will be operational in Identification of Baseline scenario There are only a few baseline scenarios in addition to the proposed project activity that realistic and credible in the context of the Armenian Grid. Scenario 1. The continuation of current activities This scenario represents the continuation of current practices, which includes generation of electric energy with significant domination of fossil fuel natural gas, which currently accounts to around 30% of the total energy generation mix (detailed information about generation and installed capacity in Armenian grid is presented in the table below B1). Besides, there are significant generation capacity additions

11 through one unit of Hrazdan TPP and also on additional unit of Yerevan TPP. This scenario option is in compliance with Armenian relevant laws and regulations 3, and without financial and other barriers. Table B1. 4 Name Fuel Capacity, MW Generation (2007),GWh Delivery (2007), GWh ANPP Hydro 880 2, Hrazdan TPP Gas , Yerevan TPP Gas International Hydro Energy Corporation Vorotan Cascade Hydro Dzora SHPP Hydro Small SHPPs Hydro Lori-1 Wind Power Plant Wind Imports Future capacity additions for are presented in the table B2. Table B2. 5 Name Fuel Capacity, MW Projected generation Commission date 36 Small hydro power plants Hydro Hrazdan-5 TPP Gas New Unit in Yerevan TPP Gas Energy Law of Armenia, (I-III quarters), (IV quarter) 5 Source PSRC, Ministry of Energy of RA, 11

12 Scenario 2. The proposed project activity undertaken without being registered as a CDM project activity This scenario is realistic and credible and is available for project participant. This scenario is in compliance with all applicable legal and regulatory requirements and may be a part of the baseline scenario. However the barriers discussed below in the section B.5 would restrict the implementation of the scenario. Scenario 3. Other renewable energy power plant with equivalent annual power generation. There is neither potential for wave or tidal energy in Armenia. No biomass, solar or geothermal power plants with a similar scale to the project has previously been built in Armenia. There is only one stateowned wind power plant Lori-1 with the capacity 2.64 Mw. The wind farm was built with support from a 3.5 mln US$ grant from the government of the Islamic Republic of Iran. It is state owned and operated under supervision of "High Voltage Network" CJSC, Thus there are no favorable conditions for the construction of power plants based on other renewable sources. Therefore, this scenario is not a feasible scenario. Conclusion: From the above analysis we can conclude that the first scenario is the most feasible and realistic scenario. As a result, the baseline scenario of the project is: Scenario 1 The continuation of current activities. Determination of Baseline emission factor: The baseline to be used in calculating the emission reductions from this project is outlined in the relevant paragraphs of AMS I.D version 14. According to AMS I.D version 14, the baseline of this project is the kwh produced by the small hydroelectric power plant multiplied by an emission coefficient (measured in kg CO2e/kwh) calculated in a transparent and conservative manner. Emission factor is calculated as a combined margin (CM), consisting of the combination of operating margin (OM) and build margin (BM) according to the procedures prescribed in the Tool to calculate the emission factor for an electricity system Version The emission factor is calculated ex-ante for estimative purposes. Nevertheless, the emission factor will be monitored ex-post. The Operating margin is calculated based on the Simple Adjusted OM method, since low-cost/must-run resources (hydro and nuclear) constitute more than 50% of total grid generation (in 2007 about 75). The Build margin emission factor is calculated based on the power generation data of most recently built power plants which comprise 20%of the system generation data. The details of baseline will be explained at Annex 3. 12

13 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 small-scale CDM project activity: Justification for application of simplified methodologies to the project activity. The installed capacity of the project is 14.9 MW, which is less than the limiting capacity of 15 MW and is thus eligible to use small-scale simplified methodologies. The project activity is generation of electricity for a grid system using hydro potential. Hence, the type and category of the project activity matches with I.D. Version 14 as specified in Appendix B of the indicative simplified baseline and monitoring methodologies for small-scale CDM project activities. Justification for additionality of the project under the UNFCCC simplified modalities is to establish the additionality of the project activity according to the Attachment A of Appendix B, which lists various barriers, out of which, at least one barrier shall be identified due to which the project can not occurred any way. The barriers identified can be grouped in two categories: 1. Investment barrier, including: a) Lack of affordable financing for small scale hydro power plants b) Uncertainties with the tariffs for electricity generated by the SHPPs 2. Other barriers, including a) Hydrological risks The analysis of existing barriers is presented below. Investment barriers: The project faces the following perceived investment risks and barriers. a. Lack of affordable financing for small scale hydro power plants The main barrier identified by the project owner at the date of decision making was the investment barrier and the project owner hence made the decision to implement the project as a CDM project activity. The lack of affordable capital is seen as the main barrier for the development of the project, as the following problems exist for small hydro projects that want to raise funds 6 : 6 The information is obtained from the websites of 6 biggest banks in Armenia (

14 - The interest rates applied to loans in drams by Armenian twenty commercial banks to corporate clients are too high averaging at about 16-18% (the reference rate of the banking interest is 15% to which a commercial bank margin of 1-3% needs to be added) - The loan terms are too short for a long term investment such as a power plant - The loan amounts are too small for international capital markets - Due to the history of payment and credit problems, it will take a long time to cover the sector image for investors - Lack of collateral acceptable for the local bank>local banks require to provide at least 120% of collateral before funds disbursement, which is difficult for the project developers. It must be noted that Firma G.A.Kh. LTD has in fact faced large problems in attracting capital. The company had to extend or renew their construction permits 7, because construction works were delayed due to the absence of the affordable financing, in terms of the high interest rates and short maturity. Moreover, the absence of the project financing schemes from the local banks and requirement to provide guarantees or acceptable collateral also prevented implementation of the project. That s why the project owner has made a decision to implement the project as a CDM project activity and sell future CERs on up-front payment basis. This decision was made in February 2007, after which the project owner has signed the contract with the consultant for the PDD development. The Project was presented to the potential buyers and only the from EnBW s was considered acceptable, because only EnBW proposed to buy CERs on up-front payment basis. Therefore, CDM is vital for the implementation of the project, since only up-front payment for the CERs in combination with the equity and loan from the local bank will make possible the construction of the project. b. Risks due to level of tariffs 1) According to the PSRC 8 methodology 9 the tariffs are due for review annually, prior to 1st of December of that year. The reviewed tariffs are put into force starting from January 1 of next year. For the power plants that have been in operation with current tariff for less than 6 months, the new tariff should be put into force after the expiration of the first 6 months period of operation with the preceding tariff. According to the PSRC, starting from 2007 the tariff for electricity generated from hydropower plants need to be reviewed according to the following equation: 7 The first license for Vardenis SHPP was granted by PSRC on 12/06/2002. This license was cancelled in 12/06/2004, since the project owner couldn t start and finish construction. 8 PSRC Public Services Regulatory Commission of the Republic of Armenia, 9 PSRC decision No207N, dated , 14

15 PI ER 1 T T1 K1 K 2 (1 K1 K 2 ) 100 ER2 where: T - The new tariff, AMD; T1 - Existing tariff, AMD; k1 - Constituent coefficient of existing tariff which is taken equal to 0.25; PI - The ratio of consumer price index in September of current year to the one in the same month of previous year; k2 - Constituent coefficient of existing tariff which is taken equal to 0.35; ER1 - The arithmetic average of AMD/USD exchange rate during the period of January- September of current year; ER2 - The arithmetic average of AMD/USD exchange rate during the period of January- September of previous year. This way it is obvious that 40% of the tariff is the fixed constituent, 25% - constituent tied to inflation rate, and 35% - constituent tied to the AMD/USD exchange rate. This kind of floating tariff creates a bottleneck for possible investors during the financial analysis of this kind of projects as well as adds uncertainty about future cash flows, since the future AMD/USD exchange rate and consumer price index are unknown. 10 From the conducted analysis it is evident that the project can not succeed without the extra cash flow from Certified Emission Reductions (CERs) in hard currency as well as without additional funds that can be provided as an up-front payment for the CERs by the EnBW, increase the attractiveness of the project to investors, local banks and international development banks. B.6. Emission reductions: B.6.1. Explanation of methodological choices: The project category is renewable electricity generation for a grid system, which is also fed by both fossil fuel fired generating plants and non-fossil fuel based generating plants. Hence, the applicable baseline, indicative simplified baseline and monitoring methodologies is the kwh produced by Vardenis-1,2 SHPPs multiplied by an emission coefficient (measured in kg CO2e/kWh). 10 Source,- PSRC R2E2, Development of renewable energy in Armenia: lessons learned, existing barriers, and measures for overcoming those barriers, GEF-CS-20/

16 This project baseline emissions are calculated like the below. BE y = EG y * EF grid EGy = the amount of electricity generation by the Vardenis-1,2 SHPPs. EF y = the project baseline emission factor The project baseline emission factor is calculated in a transparent and conservative manner as a) A combined margin (CM), consisting of the combination of operating margin (OM) and build margin (BM) according to the procedures prescribed in the Tool to calculate the emission factor for an electricity system ; or b) The weighted average emissions (kg CO2e/kWh) of current generation mix. The project proponent has chosen the option (a) i.e. the weighted average of the OM and the BM for the purpose of calculation of baseline according the Tool to calculate the emission factor for an electricity system ver following six steps: Step 1. Identify the relevant electric power system. Step 2. Select an operating margin (OM) method. Step 3. Calculate the operating margin emission factor according to the selected method. Step 4. Identify the cohort of power units to be included in the build margin (BM). Step 5. Calculate the build margin emission factor. Step 6. Calculate the combined margin (CM) emissions factor. Step 1. Identify the relevant electric power system. The hydropower power plants will be connected to the national electricity grid of Armenia, which is operated and monopolized by the Electric Networks of Armenia CJSC (ENA). This national electricity grid is the unique transmission and distribution line, to which all power plants in Armenia are physically connected. Hence the national electricity grid is the project electricity system. There are electricity imports to the national electricity grid from Iran - another host country, thus the Iranian Power Grid is the connected electricity system and the emission factor for the imported electricity is zero tons CO 2 per MWh by default. Step 2. Select an operating margin (OM) method. The Operating Margin is calculated on the basis of the option (b) Simple Adjusted OM, because as it is evident from the table 3 below, generation by low-cost/must-run power sources exceeds 50%, requiring the calculation of a lambda factor to modify the results of the Simple OM Method. Table 3 16

17 Year Percentage of low-cost/must run resources in 74.71% 75.16% 70.75% 72.91% 72% total electricity generation Average of five years % Source: PSRC For the simple adjusted OM the emissions factor can be calculated using either of the two following data vintages: Ex ante option: 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, without requirement to monitor and recalculate the emissions factor during the crediting period, or Ex post option: The year in which the project activity displaces grid electricity, requiring the emissions factor to be updated annually during monitoring. For the calculation of the Operating Margin (OM) Option 2 is chosen, by which the OM emission factor will be updated annually ex-post for the year in which actual project generation and associated emissions reductions occur. Justification of the ex-post calculation. According to the EB09 Annex 3 par. 8 the ex-post calculation of baseline emission rates may only be used if proper justification is provided. The project proponents have decided to choose ex-post calculations, because: 1) Two new thermal power (new units in Yerevan and Hrazdan TPPs) plants will be operational in ) About 40 small HPPs has obtained the license for the construction and will be operational in ) Starting from 2009 Armenia will start export electricity to Turkey (around mln kwh/pa.). According to the Law of Energy of Armenia, this electricity will be generated in Hrazdan TPP and therefore the percentage of thermal power plants in total generation mix will increase. However, the ax-ante approach was used for the calculation of indicative operating margin. Step 3: Calculate the Operating Margin emission factor (EFOM,y) according to the selected method For the calculation of the OM official data on energy generation per power plant and energy consumption was used. The OM was calculated using the method described in the applied methodological tool, using the following equation: 17

18 Where: λy = the number of hours for which low-cost/must-run sources are on the margin in year y 8760 hours per year year According to the Tool to calculate the emission factor for an electricity system v.01.1, the number of hours during low-cost/must-run sources is on the margin are obtained through the following procedure (see Figure B1 below): Step i) Plot a Load Duration Curve Collect chronological load data (typically in MW) for each hour of a year, and sort load data from highest to lowest MW level. Plot MW against 8,760 hours in the year, in descending order. Step ii) Organize Data by Generating Sources Collect data for, and calculate total annual generation (in MWh) from low-cost/must-run resources. Step iii) Fill Load Duration Curve Plot a horizontal line across load duration curve such that the area under the curve (MW times hours) equals the total generation (in MWh) from low-cost/must-run resources. Step iv) Determine the Number of hours per year for which low-cost/must-run sources are on the margin First, locate the intersection of the horizontal line plotted in step (iii) and the load duration curve plotted in step (i). The number of hours (out of the total of 8,760 hours) to the right of the intersection is the number of hours for which low-cost/must-run sources are on the margin. If the lines do not intersect, then one may conclude that low-cost/must-run sources do not appear on the margin and lambda is equal to zero. Lambda is the calculated number of hours divided by 8,760. Figure B1 Illustration of lambda calculation for simple adjusted operating margin emission factor 18

19 FCi,j,y = Amount of fossil fuel type i consumed in power units j in the project electricity system in year y (tonne) FCi,k,y = Amount of fossil fuel type i consumed in power units k in the project electricity system in year y (tonne) k = Refers to units which are either low-cost or are must-run. j = Refers to the units that are not either low-cost or are must-run. NCVi,y = Net calorific value (energy content) of fossil fuel type i in year y (GJ /tonne) EF CO2,i,y = CO2 emission factor of fossil fuel type i in year y (tonne CO2/GJ) EGk,y = Net electricity generated and delivered to the grid by power units k serving the system in year y (MWh) EGj,y = Net electricity generated and delivered to the grid by power units j serving the system, in year y (MWh) i = All fossil fuel types combusted in power sources in the project electricity system in year y λy is defined as stated in the Tool to calculate the emission factor for an electricity system v.01.1 STEP 4 - Identify the cohort of power units to be included in the build margin The sample group of power units m used to calculate the build margin consists of power units that comprises the larger annual generation, between the next options: (a) The set of five power units that have been built most recently, or 19

20 (b) The set of power capacity additions in the electricity system that comprise 20% of the system generation (in MWh) and that have been built most recently. Following the guidance of the tool, alternative chosen was (b) considering that it comprises larger annual generation. STEP 5 Calculate the build margin emission factor The build margin emissions factor is the generation-weighted average emission factor (tonne CO2/MWh) of all power units m during the most recent year y for which power generation data is available. This emission factor will be calculated in an ex ante basis. The formula used is: Where: EF grid,bm,y = Build margin CO 2 emission factor in year y (tco 2 /MWh) EG m,y = Net quantity of electricity generated and delivered to the grid by power unit m in year y (MWh) EF EL,m,y = CO 2 emission factor of power unit m in year y (tco 2 /MWh) m = Power units included in the build margin y = Most recent historical year for which power generation data is available STEP 6 Calculate the Combined Margin (CM) emission factor The CM emission factor is calculated using the following equation: Where: EF grid,bm,y = Build margin CO 2 emission factor in year y (tco 2 /MWh) EF grid,om,y = Operating margin CO 2 emission factor in year y (tco 2 /MWh) w OM = Weighting of operating margin emissions factor (%) w BM = Weighting of build margin emissions factor ( %) Following the Version 01.1 of Tool to calculate the emission factor for an electricity system, the values for the weighting factors are 0.5 each, considering the proposed project activity is a hydro project. w OM =0.5 w BM =

21 B.6.2. Data and parameters that are available at validation: 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: FCi,m,y 1000 m 3/ year Amount of fossil fuel type i consumed by power plant / unit m in year y ArmRosGazprom All data are available to the DOE for validation (See Annex3) Dispatch data is not available in Armenia. PSRC provides the most actually updated data relevant to the power generation in Armenia that could be accessed by public. Data / Parameter: NCVi,y Data unit: GJ /1000 m 3 Description: Net calorific value (energy content) of fossil fuel type i in year y Source of data used: Default value of the IPCC 2006 Guidelines Value applied: All data are available to the DOE for validation (See Annex 3) Justification of the With reference to Version 01.1 of Tool to calculate the emission factor for an choice of data or electricity system description of measurement methods and procedures actually applied : Any comment: Data / Parameter: EF CO2,i,y and EF CO2,m,i,y Data unit: tco 2 /GJ Description: CO 2 emission factor of fossil fuel type i in year y Source of data used: Default value of the IPCC 2006 Guidelines Value applied: All data are available to the DOE for validation (See Annex 3) Justification of the With reference to Version 01.1 of Tool to calculate the emission factor for an choice of data or electricity system description of measurement methods and procedures actually applied : Any comment: Data / Parameter: Data unit: Description: Source of data used: EGm,y MWh Net electricity generated and delivered to the grid by power plant/unit m in year y Public Service Regulatory Commission of Armenia 21

22 Value applied: All data are available to the DOE for validation (See Annex 3) Justification of the Dispatch data is not available in Armenia. PSRC provides the most actually updated choice of data or data relevant to the power generation in Armenia that could be accessed by public. description of measurement methods and procedures actually applied : Any comment: Data / Parameter: Data unit: Description: Source of data used: EF grid,cm,y tco 2 /MWh Combined Margin (CM) emission factor Public Service Regulatory Commission of Armenia, Armrosgazprom Value applied: All data are available to the DOE for validation (See Annex 3) Justification of the With reference to the approved methodology AMS I.D ver.14. and Version 01.1 of choice of data or Tool to calculate the emission factor for an description of electricity system measurement methods and procedures actually applied : Any comment: Data / Parameter: Data unit: Description: Source of data used: Identification of power source plants for the OM Name of plant The operating margin includes all generating power plants serving the system, not including low-cost / must-run power plants / units and imports PSRC Value applied: All data are available to the DOE for validation (See Annex 3) Justification of the With reference to the approved methodology AMS I.D ver.14. and Version 01.1 of choice of data or Tool to calculate the emission factor for an description of electricity system measurement methods and procedures actually applied : Any comment: Data / Parameter: Data unit: Description: Source of data used: Identification of power source plants for the BM Name of plant The build margin includes either the newest five power plants or newest power plants that have been built more recently and contributed to 20% of electricity generation of a certain year, whichever definition includes the largest generation. PSRC Value applied: All data are available to the DOE for validation (See Annex 3) Justification of the With reference to the approved methodology AMS I.D ver.14. and Version 01.1 of 22

23 choice of data or description of measurement methods and procedures actually applied : Any comment: Tool to calculate the emission factor for an electricity system Data / Parameter: Data unit: Description: Source of data used: EF grid,om,y tco 2 /MWh Operating Margin (CM) emission factor Public Service Regulatory Commission of Armenia, Armrosgazprom Value applied: All data are available to the DOE for validation (See Annex 3) Justification of the With reference to Version 01.1 of Tool to calculate the emission factor for an choice of data or electricity system description of measurement methods and procedures actually applied : Any comment: Data / Parameter: Data unit: Description: Source of data used: EF grid,bm,y tco 2 /MWh Build Margin (CM) emission factor Public Service Regulatory Commission of Armenia, Armrosgazprom Value applied: All data are available to the DOE for validation (See Annex 3) Justification of the With reference to the approved methodology AMS I.D ver.14. and Version 01.1 choice of data or of Tool to calculate the emission factor for an description of electricity system measurement methods and procedures actually applied : Any comment: Data unit: Description: Source of data used: Electricity imports MWh Electricity transfers from connected electricity systems Public Service Regulatory Commission of Armenia Value applied: All data are available to the DOE for validation (See Annex 3) Justification of the With reference to the approved methodology AMS I.D ver.14. and Version 01.1 of choice of data or Tool to calculate the emission factor for an electricity system description of measurement methods 23

24 and procedures actually applied : Any comment: Data / Parameter: Lambda factor of the grid Data unit: Description: Fraction of time during which low-cost / must run sources are on the Margin. Source of data to be PSRC, Electric Networks of Armenia used: Value of data All data are available to the DOE for validation (See Annex 3) Description of With reference to the Version 01.1 of Tool to calculate the emission factor for measurement methods an and procedures to be electricity system applied: Any comment: B.6.3 Ex-ante calculation of emission reductions: This project is generating electricity by small hydroelectric power plant and connecting to grid instead of using fossil fuel for abating greenhouse gas (GHG) emissions. The amount of GHG emissions are calculated according to the methodology AMS I.D ver.14. Baseline emissions Baseline emissions of this project are calculated by multiplying the amount of this project electricity generation by the electricity Carbon Emission Factor which is calculated through the methodology BE electricity,y =EG y x EF electrcity,y BE electricity,y the amount of baseline emissions in in year y (tco 2 ) EG y - the amount of Total net electricity generation in year y (MWh) EF electrcity,y - the Baseline Electricity CO2 Emissions Factor in year y (tco2/mwh) The Electricity Emissions Factor will be updated annually. In the current version of the PDD the emission factor is calculated ex-ante for 2007 for estimative purposes. The detail about Baseline Electricity CO 2 Emissions Factor will be described in Annex 3 The amount of total net electricity generation by small hydroelectric power project. Vardenis-1 SHPP MWh Vardenis-2 SHPP MWh Baseline emissions Vardenis-1 SHPP Annual electricity generation * Emission Factor = MWh * tco2/mwh = tco2 Vardenis-2 SHPP Annual electricity generation * Emission Factor = MWh * tco2/mwh = 4265 tco2 Total baseline emissions ,7 tco2. Project emissions Because of there is no emission through small hydroelectric power project activity, amount of the emission is 0. 24

25 Leakage This is not applicable as the renewable energy technology used is not equipment transferred from another activity. Therefore, as per the Simplified Procedures for SSC Project Activities no leakage calculation is required. The amount of Leakage is 0. Emission Reductions Baseline emissions Project emissions Leakage = , = ,7 tco2 B.6.4 Summary of the ex-ante estimation of emission reductions: Vardenis-1 SHPP Year Estimation of baseline emissions (tonnes of CO 2 e) Estimation of project activity emission reductions (tonnes of CO 2 e) Estimation of Leakage (tonnes of CO 2 e) Estimation of emission reductions (tonnes of CO 2 e) 01/09/2009-7, /09/2010 7, /09/2010-7, , /09/ /09/2011-7, , /09/ /09/2012-7, , /09/ /09/2013-7, , /09/ /09/2014-7, , /09/ /09/2015-7, , /09/ /09/2016-7, , /09/ /09/2017-7, , /09/ /09/2017-7, , /09/2019 Total (tonnes 75, ,964.5 of CO2) 25

26 Vardenis-2 SHPP Year Estimation of baseline emissions (tonnes of CO 2 e) Estimation of project activity emission reductions (tonnes of CO 2 e) Estimation of Leakage (tonnes of CO 2 e) Estimation of emission reductions (tonnes of CO 2 e) 01/09/2009-4, ,265 30/09/ /09/2010-4, ,265 30/09/ /09/2011-4, ,265 30/09/ /09/2012-4, ,265 30/09/ /09/2013-4, ,265 30/09/ /09/2014-4, ,265 30/09/ /09/2015-4, ,265 30/09/ /09/2016-4, ,265 30/09/ /09/2017-4, ,265 30/09/ /09/2017-4, ,265 30/09/2019 Total (tonnes 0 0 of CO2) 42,650 42,650 B.7 Application of a monitoring methodology and description of the monitoring plan: B.7.1 Data and parameters monitored: Data / Parameter: Data unit: Description: Source of data to be used: Value of data Description of measurement methods and procedures to be applied: QA/QC procedures to EG y MWh Net electricity supplied to the grid by the Vardenis-1,2 SHPPs The electric meter installed in Vardenis-1, Vardenis-2 SHPP will measure the electricity supplied to the grid. The projected electricity generation by Vardenis-1 and Vardenis-2 SHPP is presented in the section A.4 For the monitoring of electricity generation inspected and certified (according to national regulations) monitoring equipment (electric meter) will be installed in place. The data will be monitored and recorded by qualified engineers according to the monitoring plan. Electric meter readings will be double-checked with the records of the AEN. The Firma G.A.Kh. LTD will appoint a designated engineer on site who will be 26

27 be applied: Any comment: responsible for collecting and compiling the necessary data for the monitoring plan. The data will be collected in a transparent way and provided to the third party audit entity for the DOE validation and certification. Data / Parameter: FCi,m,y Data unit: 1000 m 3/ year Description: Amount of fossil fuel type i consumed by power plant / unit m in year y Source of data to be ArmRosGazprom used: Value of data All data are available to the DOE for validation (See Annex 3) Description of The data on fossil fuel consumption is available in Armenia and can be provided measurement methods by Armrosgazprom upon request. and procedures to be applied: QA/QC procedures to be applied: Any comment: The Firma G.A.Kh. LTD will appoint a designated engineer on site who will be responsible for collecting and compiling the necessary data for the monitoring plan. The data will be collected in a transparent way and provided to the third party audit entity for the DOE validation and certification. Data / Parameter: NCVi,y Data unit: GJ /1000 m 3 Description: Net calorific value (energy content) of fossil fuel type i in year y Source of data to be Default value of the IPCC 2006 Guidelines used: Value of data All data are available to the DOE for validation (See Annex 3) Description of IPCC default values at the lower limit of the uncertainty at a 95% confidence measurement methods interval as provided in Table 1.2 of Chapter 1 of Vol. 2 (Energy) of the 2006 and procedures to be IPCC Guidelines on National GHG Inventories will be used as it is prescribed applied: in the Tool to calculate the emission factor for an electricity system Version QA/QC procedures to be applied: Any comment: See Annex 4, Data / Parameter: EF CO2,i,y Data unit: tco 2 /GJ Description: CO 2 emission factor of fossil fuel type i in year y Source of data to be Default value of the IPCC 2006 Guidelines used: Value of data All data are available to the DOE for validation (See Annex 3) Description of measurement methods IPCC default values at the lower limit of the uncertainty at a 95% confidence interval as provided in Table 1.2 of Chapter 1 of Vol. 2 (Energy) of the

28 and procedures to be applied: QA/QC procedures to be applied: Any comment: IPCC Guidelines on National GHG Inventories will be used as it is prescribed in the Tool to calculate the emission factor for an electricity system Version See Annex 4, Data / Parameter: Identification of power source plants for the OM Data unit: Name Description: The operating margin includes all generating power plants serving the system, not including low-cost / must-run power plants / units and imports Source of data to be PSRC used: Value of data See Annex 3 Description of For the identification of power plants for the OM official publications of PSRC measurement methods on energy sector in the relevant year will be used. and procedures to be applied: QA/QC procedures to See Annex 4. be applied: Any comment: Data / Parameter: EGm,y Data unit: MWh Description: Net electricity generated and delivered to the grid by power plant/unit m in year y Source of data to be PSRC used: Value of data See Annex 3 Description of For the identification of power plants for the OM official publications of PSRC measurement methods on energy sector in the relevant year will be used. and procedures to be applied: QA/QC procedures to See Annex 4. be applied: Any comment: Data / Parameter: Data unit: Description: Source of data to be used: Value of data Description of measurement methods and procedures to be applied: Lambda factor of the grid Fraction of time during which low-cost / must run sources are on the Margin. PSRC, Electric Networks of Armenia For the calculation of the lambda factor of the gridt Firma G.A.Kh. LTD will use the data from PSRC on electricity generation and delivery and will request chronological load data for each hour of the year from the Electric Networks of Armenia. 28