THE GOLD STANDARD: Project Design Document for Gold Standard Voluntary Offset projects (GS-VER-PDD)

Transcription

1 THE GOLD STANDARD: Project Design Document for Gold Standard Voluntary Offset projects (GS-VER-PDD) For more information, please contact The Gold Standard: phone fax April 2006 This document was developed by: The Gold Standard for VERs has received financial support from: Explanatory information on how to complete the PDD and how to obtain Gold Standard registration can be found in the project developer s manual available on the Gold Standard website. This template of the PDD is applicable for micro-, small- and large-scale projects. Note that the shaded boxes present information on the Gold Standard VER project development procedures. Project developers should delete these shaded boxes when preparing their PDD.

2 VOLUNTARY OFFSET PROJECTS PROJECT DESIGN DOCUMENT FORM (GS-VER-PDD) Version 01 - in effect as of: January 2006) page 2 CONTENTS A. General description of project activity B. Application of a baseline methodology C. Duration of the project activity / Crediting period D. Application of a monitoring methodology and plan E. Estimation of GHG emissions by sources F. Environmental impacts G. Stakeholders comments Annexes Annex 1: Contact information on participants in the project activity Annex 2: Baseline information Annex 3: Monitoring plan Annex 4: Cash Flow of the project Annex 5: Project Diagram Annex 6: Written Statement concerning EIA Annex 7: Written Statement concerning earlier announcement of the project Annex 8: Written Statement concerning bundling Annex 9: Report on stakeholder meeting Annex 10: Resolution from REAP meeting Annex 11: Written Statement on compliance with national law Annex 12: Google Earth Pictures of installation sites Annex 13: Written Statement concerning VER price Annex 14: Emission Factor Calculation Philippine Grid

3 page 3 SECTION A. General description of project activity A.1 Title of the project activity Title: Pico-Hydro in the Philippines Version: 1.2 Date: 21 July 2008 A.2. Description of the project activity The project aims to contribute to sustainable development in Philippine villages in rural areas by providing affordable, clean, appropriate renewable energy to households through the installation of low-head pico-hydro systems. The project activity will result in a reduction of CO 2 emissions through displacement of fossil fuel options for off-grid energy service provision. The aim is to install some 1,315 pico-hydro systems with a total capacity of approximately 1.0 MW over the 7 year crediting period of the project. Family hydro systems using low-head turbines of 200 1,000 Watt capacity will be installed in remote and un-electrified communities in the Philippine countryside where appropriate water resources such as irrigation canals and small streams are available. The low-head turbines are ideal for use in irrigation canals and small streams where conventional micro-hydro systems are not suitable. They are low-cost and easy to install using local skills and materials. It is planned that either one or a series of two or more turbines capable of delivering the power required by a community, or individual turbines for single or small clusters of households will be installed in streams or irrigation canals. The households and communities will use the picohydro systems for lighting, radio and small livelihood projects. Sustainable development benefits In the case of community systems being established, the beneficiary community will be provided the proper training from the dealers to achieve the required operating and maintenance skills. For individual users, operation and maintenance can also be disseminated through the dealers (sharing of practical experience and knowledge, plus manuals). Thus every beneficiary community will benefit from training on the maintenance and use of the pico-hydro system as part of every community-based project implemented. The energy derived from the pico-hydro system installations provides social and economic benefits to the beneficiaries, in terms of access to better quality energy supplies and at lower cost. This would not occur without the project. The impact of electricity enhances the social and economic status of the households and the community. Lighting extends the working hours in the community and the electricity can be used to provide access to information through the use of television and radios without the expense and difficulty of battery charging. The communities are expected to develop increased awareness in caring for and preserving the watershed of the local water systems and irrigation canals due to the additional direct economic benefits derived by the project.

4 page 4 In the medium term, sustainable development is enhanced as additional livelihood activities are expected to follow after a stable energy supply is established in the community. Additional micro-industries such as cottage and crafts manufacturing are expected to prosper in the newly energised communities. The local assembly and installation of the pico-hydro systems and the medium-term aim to have in-country manufacturing capability will create employment and generate added value to the local economy. In the long term, substantial savings in foreign exchange are expected because kerosene, which is the major fuel to be displaced, is produced from imported oil. The results of the sustainable development matrix underline these facts, as the overall result is 9+. Please see Table 1 for details. Table 1: Sustainable Development Matrix Component Score (-,0,+) Local/regional/global environment Water Quality and Quantity Quantity + Neither quality nor quantity of water is directly affected. However, with the additional benefits that come along with the pico-hydro schemes, communities will become more aware of conservation of the watersheds. As it was the case in an already existing project in Polocon, where community based watershed management was combined with water resource utilization of hydro power (Mirco Hydro Power and Watershed Protection, The Philippines; Air Quality (emissions other than GHG) Other pollutants (including, where relevant, toxicity, radioactivity, POPs, stratospheric ozone layer depleting gases) Soil condition (quality and quantity) Biodiversity (species and habitant conservation) sgp.undp.org/download/sgp_philippines1.pdf) + Energy derived form the pico-hydro systems is cleaner compared to the widely used kerosene lamps, which are major cause of indoor air pollution and resulting health impacts, like respiratory and eye problems. Traditional metal can lamps without chimney emit 540 mg/h of particulate emissions in average (Stuart Schare and Kirk R Smith; Particulate emission rates of simple kerosene lamps; 1995). 0 0 The soil condition is not directly affected. 0 Biodiversity is not directly affected. In the meetings and forum where the project was presented, there is overwhelming consensus that the project has positive environmental impact in addition to the direct benefits enjoyed by the community. Ms. Joy Goco, at the Department of Environment and Natural Resources (DENR), also confirmed the positive environmental impact of the project. Considering that pico-hydro requires very minimal installation where there is negligible effect in the water-runoff of streams and irrigation canals, it is not necessary to conduct Environmental Impact Assessment (EIA) for the project (see Annex 6) Sub Total 2+

5 page 5 Social Sustainability and Development *Employment (including job Job Quality quality, fulfilment of labour + statements) The project will generate a number of good quality jobs, especially in the rural areas. People, especially woman will be trained in the operation and maintenance of the units. These types of technical jobs will result in an increase of job quality as jobs in rural areas are mostly in the agricultural sector. People who are trained in the operation and maintenance of the units are able to earn an extra income. For example, a farmer that used to work in the farm and earn fifty Pesos a day can be trained to maintain and repair the pico-hydro units probably for the same amount of money earned in a day. The households who will benefit from the pico-hydro need to translate the benefits into increase in productivity in order to pay for the pico-hydro service and for other things that they need. More opportunities will be available to these rural communities with the availability of power from the pico-hydro units. One classic example is the use of cellular phones in the delivery of products from the farm to the market. People can only use cellular phones if there is power available for charging. With the cellular phone, people can directly communicate with the buyer in the market for orders and payment arrangements. Handicraft makers will know what type of products and what quantities are needed by the market, so they will only produce what is needed and reduce wastage. Proper communication equipment will reduce the time and cost needed in travelling just to have a meeting between a farmer and buyer 1. *Livelihood of the poor (including poverty alleviation, distributional equity and access to essentials services) Furthermore the project will generate a high quality job, as it is planned to employ a project officer who will be responsible for the management of the project. Poverty Alleviation + Lightning will extend the productive time of the beneficiaries by enabling them to work extra hours in the evening, which could augment family income and contribute to poverty alleviation. 1 Interview with Silver Navarro, Senior Project Engineer, Solar Electric Company Inc.

6 page 6 Distributional Equity + The systems installed will be the property of the local agents 2. They will be able to payback system costs through the collected end user fee. Thus the ownership of a 200 W system will go over to the agent after 4 years, of a 500 W system after 3 years and a 1000 W system after 2 years. In addition the beneficiaries will save money and therefore increase their income, as the unit cost of energy provided by pico-hydro systems is lower than kerosene. A study on the Ifugao micro hydro project concluded that Home lighting systems for 200 families at USD and maintenance fee of USD/month displaced the cost of kerosene in the household budget of about 2-8 USD/month (Charlene Hazel C. Tan, Larisse Gale D. Garcia, Maria Antonia Tanchuling, Ph.D; Renewable Energy Technology in the Philippines; University of the Philippines). Access to essential services + Due to reliable energy supply people will have increased access to information technologies such as radios. In addition lightning offers the opportunity for education in the evening hours. According to a study on an already implemented micro hydro project in the Philippines The local elementary school, which used to get dark, now has lights. Students can study in the evenings using lights at home (Micro Hydro Power and Watershed Protection, The Philippines; sgp.undp.org/download/sgp_philippines1.pdf) *Access to energy services + Installation of the system will provide increasing amounts of electricity from 66 MWh to 1,089 MWh per year to rural households in the beneficiary communities. *Human and institutional capacity (including empowerment, education, involvement, gender) Empowerment + This community based project will involve the beneficiaries in project development, implementation and maintenance of the plants. It is planned to conduct 3 project development activities each year in the 5 regions of the Philippines, which will involve the communities in the planning phase in each region. In addition the pico-hydro systems will be the property of the rural people and local agents. Education/skills + Every beneficiary community will benefit from training on maintenance and use of pico-hydro systems. Furthermore all systems installed will have a customer operation and maintenance contract that will be fulfilled by local technicians. From among the existing users of the picohydro system, there had been sufficient anecdotal evidence that schoolchildren had increased their learning hours in the evening due to the availability of more effective lighting in the homes. 2 Agents could be NGO s, church based organisations, community groups and small business, with a special focus on women.

7 page 7 Gender Equality + As the project implies the training of beneficiaries on operation and maintenance of the systems, it is expected that women will mostly be the beneficiaries. In addition it is expected that women can establish small income generating activities like sewing and handicrafts. Altogether this will enhance their role in decision-making processes. Sub Total 4+ Economic and technological development *Employment (numbers) + Short term employment opportunities will result from the local assembly and installation of the pico-hydro systems. The fabrication of the accessories for and installation of the different units will create employment for approximately 3 person days per unit. Furthermore it will employ one person on permanent basis for operation and maintenance for every 10 systems installed 3. In the medium term permanent employment will result from having in country manufacturing. In addition the development of a pico-hydro market could result in direct employment gains for technicians and installers. Balance of payments (sustainability) *Technological self reliance (including project replicability, hard currency liabilities, skills development, institutional capacity, technology transfer) Sub Total 3+ Total 9+ + Savings in foreign exchange are expected as less oil for kerosene production, which is the major fuel to be displaced, will need to be imported. According to a market assessment, which was carried out in the context of the feasibility study for this project (J Mariyappan, S. Taylor, J Church, J.Green; A guide to CDM and Family Hydro Power, IT Power, 2004), immediate potential family hydro market in selected provinces of the Philippines was estimated as more than 24,000 units. The 2004 household energy consumption survey of the National Statistic Office of the Philippines concluded that an equivalent to an average of 4.2 litres of kerosene per household per month was consumed. This equals an energy use from kerosene of 39,46 kwh/ month per household. As shown in Appendix 2 of the PDD the plants installed will displace 8,266 MWh of kerosene use over the crediting period of seven years, which equals an displacement of 879,000 l of kerosene. + Implementation, operation and maintenance will be carried out by local technicians. Accessories, namely channel intake and draft tube, will be manufactured by local craftsmen using local materials. In addition it is planned that the project will be accompanied by a model pilot installation for experimentation and research including measuring equipment in partnership with the academe, project implementers, equipment suppliers and government agencies 4. At the beginning pico-hydro system will be imported from Vietnam. However, in the medium term it is expected that a manufacturing base will be build during the course of the project. 3 Interview with Silver Navarro, Senior Project Engineer, Solar Electric Company Inc. 4 Interview with Olegario Serafica, President, Renewable Energy Accossiation of the Philippines

8 page 8 The purpose of the VERs: The generated VERs from this project are used for offsetting emissions of the Nordelbisches Missionszentrum (NMZ), which has established a fund for the offsetting of flight emissions of institutions and individuals. Please include in the description: - the purpose of the project activity - the view of the project participants of the contribution of the project activity to sustainable development (max. one page). -the results from the sustainable development matrix Section 3.4 of the Gold Standard VER Project Developer s Manual provides guidance on the methodology for assessing the project activity against the indicators of the sustainable development matrix. A.3. Project participants: Name of Party involved (*) ((host) indicates a host Party) Philippines (host) Germany Private and/or public entity(ies) project participants (*) (as applicable) Renewable Energy Assocciation of the Philippines (host) REAP Secretariat Infostelle Klimagerechtigkeit Nordelbisches Missionszentrum Kindly indicate if the Party involved wishes to be considered as project participant (Yes/No) Yes Yes The Initial feasibility study was carried out by IT Power Ltd. Carbon Resource Management provided CDM consulting services. Please list project participants and provide contact information in Annex 1. A.4. Technical description of the project activity: A.4.1. Location of the project activity: As specified in section the Gold Standard VER Project Developer s Manual, the project can be located in any country that does not have a quantitative reduction target under the Kyoto Protocol. A Host Party(ies): Philippines A Region/State/Province etc.: The pico-hydro plants will be installed in several regions of the Philippines. A map is shown under

9 page 9 A City/Town/Community etc: The aim of the project is to install 1,315 pico-hydro power plants in several regions of the Philippines. Please refer to for details. A Detail of physical location, including information allowing the unique identification of this project activity (maximum one page): The following map shows the locations for the plants. All locations have been identified based on their feasibility for implementation of pico-hydro plants. The monitoring plan will incorporate the listing of all units installed (please see section D, Table D3 for details). Sites for installation of first units in year 1 and 2 of project implementation, identified by REAP, are: 1. Municipality of Asipulo, Ifugao (Luzon) Units will be installed in the Barangays Kamandag, Kawayan, Palis and Liwon. Total potential add up to 20 to 30 units depending on the demand. The aforementioned barangays are about km away (1-day hike) from the town proper and in average the distance to the grid is 25 km. 2. Municipalities Baler and Casiguran, Aurora Units will be installed in remote barangays in these two provinces. In average these barangays are 20 km away from the national grid. Staff of REAP, who visited these sites some time ago, reported that the town Mayor himself could not believe that REAP s staff had been to the site because he himself had never been there. These sites are that remote, that REAP s staff had to sleep overnight along the route before reaching the target community. These communities have potential for the installation of at least 10 to 20 units. 3. Municipality of Calanasan, Apayao (Luzon) Units will be installed in 5 remote barangays in this municipality. Several pico-hydro units have already been installed in various barangays but there are still some villages desiring to get additional units. All barangays have a very slim chance of getting connected to the grid. Overall potential is about units. 4. Municipality of Tanodan, Kalinga (Luzon) The mayor signified intention to buy 7-10 units. The municipality has a very good water resource sufficient even for a micro-hydro power plant, which was considered. However, the mayor wants to give individual pico-hydro units to the remote barangays (10-20 km away from town center,) which cannot be reached by transmission lines due to distance. These villages have a potential of units. 5. Municipality of Dolores, Samar (Visayas) The 5 remote barangays are 5-10 km away from the town center with no established roads to reach the sites. Distance to the grid averages 10 to 15 km. Total potential amounts to units

10 6. Misamis Oriental/Lanao Provinces (Mindanao) PROJECT DESIGN DOCUMENT FORM (GS-VER-PDD) page 10 REAP is already working on an agreement with a potential distributor for these provinces. While the main towns and villages are now electrified because they are near a hydro power plant, there are remote communities and barangays that will not be connected to the grid and therefore are potential clients/users of pico-hydro units. The aforementioned barangays are 5-10 km away from the grid and have a potential of units. The following map shows the areas in which the first units will be installed. In addition the Google Earth pictures in Annex 12 show the different sites and their topography.. According to information from Mr. Milo Milang from the Department of Energy, the Municipalities of Asipulo, Ifugao and Camarines Norte are all reported energized. Whereas the municipalities of Apayo, Eastern Samar and Kalinga are not fully energized to date ( of Mr. Milang dated June13th,2008). Furthermore according to his information a Barangay can be claimed as energized, if: a) At least 30 households have PV Solar Home systems; b) A communal battery charging station (either PV or Microhydro) is serving at least 30% of households; c) Privately owned mini-grid is operating in the area (even informal); or if: a) Electric distribution lines already reach the populated center of the barangay, that is, electricity services are accessible to potential consumers; b) At least 10 households are connected and electricity is already flowing in the distribution lines. This definition shows that even if some Barangays are already claimed as energized there is still enough potential for off-grid electrification, especially in the areas outlined above. In the municipalities, which are energized the units will be installed for households which are far away from the town proper. A detailed description of all sites of the 1,315 units can not be given at this point of time, as it is hard to predict the demand in certain regions within the next years. According to the feasibility study A guide to CDM and family Hydro Power (2004), immediate potential family-hydro market in selected provinces was estimated as more than 24,000 units. The assessment was based on the following indicators: Electrification level, Topography and water resources, Affordability This shows that demand and conditions for pico-hydro units will be even higher than the projected amount of units for this project. However, within the project boundary units should be installed where actual demand is present. A detailed list about the actual pico-hydro sites and its distances to the grid will be part of the monitoring plan. An overview about the implementation program is shown in Annex 2.

11 Map 1 Sites for implementation of the units PROJECT DESIGN DOCUMENT FORM (GS-VER-PDD) page

12 page 12 A.4.2. Size of the project: According to the thresholds described in the introduction of the Gold Standard VER Project Developer s Manual, this project falls under the threshold of micro scale Gold Standard VER Project, as the annual emission reduction will be lower than 5,000 t CO2e per year (please see section E for details). Please specify the size of the project (micro-, small- or large-scale project) according to the thresholds described in the Introduction of the Gold Standard VER Project Developer s Manual. A.4.3. Category(ies) of project activity: This project falls into the category I.A Renewable Energy projects Electricity Generation by the User. As the maximum capacity of the project will not exceed 1.0 MW, this hydroelectricity project is eligible under the Gold Standard, according to Appendix A paragraph A.1.2 of the Gold Standard VER Project Developer s Manual. Please use the list of categories of project activities listed in Appendix A of the Gold Standard VER Project Developer s Manual. A.4.4. Brief explanation of how the anthropogenic emissions of anthropogenic greenhouse gas (GHGs) by sources are to be reduced by the proposed project activity, including why the emission reductions would not occur in the absence of the proposed project activity, taking into account national and/or sectoral policies and circumstances: The project activity will result in a reduction of CO 2 emissions through displacement of fossil fuel-based options for off-grid energy service provision through the installation of pico-hydro plants. The aim is to install 1,315 systems with a total capacity of approximately 1.0 MW over 7 years, which will result in total emission reductions of 2,140 tonnes over the 7-year crediting period (see Annex 2 for details). Without the project activity energy provision in the villages will be achieved through low cost fossil fuel alternatives like diesel gensets, car batteries and kerosene lamps or candles. A detailed analysis of the addtionality of the project was carried out using the UNFCCC s Tool for the demonstration and assessment of additionality and is presented in section B.3. Please explain briefly how anthropogenic greenhouse gas (GHG) emission reductions are to be achieved (detail to be provided in section B) and provide the estimate of anticipated total reductions in tonnes of CO2 equivalent as determined in section E. Max. length one page. Project participants should assess additionality in a conservative manner so as to avoid the crediting of business-as-usual activities. Please refer to the UNFCCC s Tool for the demonstration and assessment of additionality (see as explained in section of the Gold Standard VER Project Developer s Manual.

13 page 13 A Estimated amount of emission reductions over the crediting period: Please indicate the chosen crediting period and provide the total estimation of emission reductions as well as annual estimates for the chosen crediting period in the following table. Table 2: Estimated amount of emission reductions over the crediting period Year Annual estimation of emission reductions (in tonnes of CO 2 e) Total emission reductions 2,140 (tonnes of CO 2 e) Total number of crediting years 7 Annual average over the 306 crediting period of estimated reductions (tonnes of CO 2 e) SECTION B. Application of a baseline methodology Baselines must be constructed in a conservative manner in order to reduce the risk of artificially inflating the number of VERs received by a project activity. Section of the Gold Standard Project Developer Manual provides further explanation on the interpretation of a conservative approach required for Gold Standard compliance. Where project participants wish to propose a new baseline methodology (other than MethPanel, SSC WG or the UNDP MDG Carbon Facility approved methodologies), please direct it to the Gold Standard TAC to be approved and validated. B.1. Title and reference of the approved baseline methodology applied to the project activity: Title: Electricity generation by the user Reference: AMS-I.A (version 11) This methodology is available from Please refer to the UNFCCC CDM web site ( appendix C to the simplified M&P for the small-scale CDM project activities or UNDP web site ( for the title and reference list as well as the details of approved baseline methodologies or use the Gold Standard references when a new validated methodology has been used.

14 Please note that the table Baseline Information contained in Annex 2 is to be prepared in parallel to completing the remainder of this section. B.1.1. Justification of the choice of the methodology and why it is applicable to the project activity: The approved methodology AMS-I.A is applicable to the proposed project activity, because: the proposed project involves pico-hydro units that supply individual households or users with a small amount of electricity; the beneficiaries are not grid-connected; the total capacity does not exceed 15 MW. page 14 Please justify the choice of methodology by showing that the proposed project activity meet the applicability conditions under which the methodology is applicable or the choice of submitting a new methodology to the Gold Standard TAC. B.2. Description of how the methodology is applied in the context of the project activity: Please explain the basic assumptions of the baseline methodology in the context of the project activity and show that the key methodological steps are followed in determining the baseline scenario. Provide the key information and data used to determine the baseline scenario (variables, parameters, data sources etc.) in table form. The approach for the baseline follows AMS-I.A Electricity generation by the user. This methodology consists of three main steps: First, the determination of the energy baseline, i.e. the amount of energy actually offset by the project activity. Secondly, the determination of the appropriate emissions factor. Thirdly, the baseline emissions are calculated as the product of the two above. The energy baseline: The energy baseline is the fuel consumption of the technology in use or that would have been used in the absence of the project activity. Option 1 of AMS-I.A is used to calculate the baseline emissions because: For this project the amount of households supplied by each unit can be calculated exactly as outlined below. The calculation of a trend adjusted projection of historic fuel consumption would be calculated with imprecise data based on assumptions about future household kerosene consumption. Recent data about current household kerosene consumption could be derived from the 2004 household energy consumption survey conducted by the Department of Energy of the Philippines. Achieved Emission reductions can be verified easily as the monitoring plan implies the monitoring of the amount of households connected to each household and the monitoring of the type and amount of energy used before (Please see section D for details). Using household kerosene consumption as the baseline energy follows the requirement for a conservative approach. Out of the three types of fuel which will be displaced,

15 through the pico-hydro units, kerosene is the type of energy with the lowest emission factor. Please see following calculations for details. Thus the formula used to calculate the energy baseline is as follows: EB = Σi(ni * ci)/(1 - l) page 15 where: EB annual energy baseline in kwh per year. Σi the sum over the group of i renewable energy technologies (e.g. residential, rural health centre, rural school, mills, water pump for irrigation, etc.) implemented as part of the project. ni number of consumers supplied by installations of the renewable energy technology belonging to the group of i renewable energy technologies during the year. ci estimate of average annual individual consumption (in kwh per year) observed among rural kerosene consumers belonging to the same group of i renewable energy technologies. If energy consumption is metered, ci is the average energy consumed by consumers belonging to the group of i renewable energy technologies. l average technical distribution losses that would have been observed in diesel powered minigrids installed by public programmes or distribution companies in isolated areas, expressed as a fraction Following this formula the annual energy baseline was calculated by finding the estimated number of households connected to each unit as well as the annual energy consumption of each household. Three different sizes of units are planned to be installed, as shown in Table 3. The estimated number of households which will be supplied is based on reasonable assumptions regarding the load of each household (2 CFL and 1 output for a small transistor radio). The actual annual energy consumption was derived from data of the 2004, Philippine household energy consumption survey 5, a market assessment study on PV Systems 6 and an interview with Silver Navarro, Senior Project Engineer of Solar Electric Company Inc. The outcomes are shown in table 4. The energy baseline is then the product of households connected and the amount of energy used by each household as shown in table 5. Table 3 Units to be installed and estimated number of households supplied Unit Capacity 200 W 500 W 1000 W Amount of hh supplied Table 4 Household Energy Consumption in rural areas of the Philippines Type of Energy Energy Consumption (kwh/y) % of HH using type of Energy Kerosene Car Batteries Diesel Project Edison, Market Assessment Study on PV Sytems. Triodos Renewable Energy for Development Fund and World Bank, prepared by Philippine Survey &Research Centre (PSRC), 2002

16 Table 5 Energy Baseline Kerosene Year EB 200 W (kwh) EB 500 W (kwh) PROJECT DESIGN DOCUMENT FORM (GS-VER-PDD) EB 1000 W (kwh) , , , , , , , , , , ,376 1, , ,376 1,183, , , , , , ,338 page 16 The emission factor: To follow a conservative approach the emission factor of all three types of energy which will be displaced through pico-hydro units was calculated and the lowest was chosen to calculate the baseline emissions. According to these calculations which are outlined in Annex 2 in detail the following emission factors were calculated: 1. Kerosene The emission factor for kerosene was calculated based on IPCC default values and resulted in KgCO 2 /kwh. 2. Car batteries charged via grid electricity The emission factor for the Philippine grid was calculated at 0.50 KgCO 2 /kwh based on data and outcomes of the study "CDM Baseline Construction for the Electricity Grids in the Philippines". 3. Diesel According to AMS, 1A paragraph 10 a default value of 0.8 KgCO 2 /kwh which is derived from diesel generation units, may be used for option 7(a) and 7(b). Thus kerosene consumption was used to calculate the energy baseline and the respective emission baseline. Baseline emissions Baseline emissions can be calculated as the product of the energy baseline above and the respective emissions factor for this type of energy as shown below and indicated in table 7. Baseline Emissions (tco2) = ((Energy Baseline (kwh) * Emission Factor for Kerosene (kg CO2/ kwh))/ 1000.

17 Table 6 Baseline Emissions Kerosene Year 200 W (tco2) 500 W (tco2) 1000 W (tco2) Total (tco2) Total 2,140 PROJECT DESIGN DOCUMENT FORM (GS-VER-PDD) Total emission reductions accumulate to 2,140 tco 2 over the crediting period of 7 years. page 17 Key information and data used to determine the baseline scenario (variables, parameters, data sources etc.) is shown in table form in Annex 2. B.3. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered VER project activity: Explanation of how and why this project is additional and therefore not the baseline scenario in accordance with the selected baseline methodology. Include 1) a description of the baseline scenario determined by applying the methodology, 2) a description of the project scenario including national policies relevant to the baseline, and 3) an analysis showing why the emissions in the baseline scenario would likely exceed emissions in the project scenario. The project activity will result in a reduction of CO 2 emissions through displacement of fossil fuel-based options for off-grid energy service provision. The aim of the proposed project activity is to install a total capacity of approximately 1.0 MW over 7 years, which will result in total emission reductions of 2,140 tonnes of CO 2 over the project lifetime. Since the first proposal of the project, the sale of emission reductions has always played an important part in making the project more economically attractive. Without the proposed project activity, electrification of the villages will be achieved mainly through low-cost fossil fuel-based alternatives like diesel gensets, batteries and kerosene lamps. A detailed analysis of the additionality of the project is carried out using the UNFCCC s Tool for the demonstration and assessment of additionality (version 3). The Tool consists of 4 steps as described below. Step 1: Identification of alternatives to the project activity consistent with current laws and regulations Realistic and credible alternatives to the project activity that can be part of the baseline scenario are defined through the following sub-steps:

18 Sub-step1a. Define alternatives to the project activity: PROJECT DESIGN DOCUMENT FORM (GS-VER-PDD) page 18 The demonstration about the alternative that provides outputs or services comparable with the proposed project activity is as follows: a) The proposed project activity undertaken without being registered as an emission reduction project activity. The proposed project will face many barriers, as demonstrated below, and the proposed project activity undertaken without being registered as an official emission reduction project activity is not a realistic alternative. b) A fossil fuel-fired power plant with the comparable capacity or electricity power generation. The pico-scale capacities installed in each location, and the fact that these units are not grid connected, mean that fossil fuel power plants are not a feasible alternative. c) Other sources of renewable energy with the comparable capacity or electricity generation, such as PV, biomass and wind. While other such renewable energy technologies like solar PV, geothermal, biomass and wind could be applied in the Philippines, the employment of such technologies is very limited. In addition, these technologies are still relatively new and expensive. Total penetration of these renewable energy sources in the Philippines is minimal and therefore not a realistic alternative. According to the 2004 Household Energy Consumption Survey only 0.2% of households used Biogas, 0.3 % of households used Coconut Oil, 0.1 % of households used PV and 0.6 % of households used other fuel technologies 7. d) Grid extension/electrification and electricity generation provided by the grid. Electrification of rural areas in the Philippines is taking place. However, large areas are still not connected to the grid, and it will take decades before the majority of the rural areas are electrified through grid connections. In addition, electrification through grid extension is very costly and is not a realistic alternative to the proposed project activity s many locations. Furthermore many households remain without a connection to the grid, even if villages have been connected, as the Department of Energy (DoE) can claim barangay electrification if 8 : a) At least 30 households have PV Solar Home systems; b) A communal battery charging station (either PV or Microhydro) is serving at least 30% of households; c) Privately owned mini-grid is operating in the area (even informal); or if: a) Electric distribution lines already reach the populated center of the barangay, that is, electricity services are accessible to potential consumers; b) At least 10 households are connected and electricity already flowing in the distribution lines. e) Business as usual: energy provision through low-cost fossil fuel alternatives like diesel gensets, car batteries and kerosene lamps Household Energy Consumption Survey, National Statistics Office, Department of Energy ( 8 Written information of Mr. Milo Milang from the Philippine Department of Energy.June 13 th, 2008

19 page 19 Electrification of the villages will most likely be achieved through low-cost fossil fuel alternatives like diesel gensets, batteries and kerosene lamps. The 2004 Household Energy Consumption Survey concluded that approximately 80% of the households whose average family monthly income was less than P 5,000 used kerosene and/or fuelwood. In addition it said that The proportion of households using gasoline and diesel went up in proportion with family income. Furthermore the report ESMAP- Rural electrification and Development in the Philippines (Report 255/02) concluded that the unelectrified rural population in the Philippines is using more fuel for their power needs. (ESMAP, 2002; p16) Sub-step 1b: Consistency with mandatory laws and regulations: The 5 alternatives described in sub-step 1a are all in compliance with applicable legal and regulatory requirements (please see Annex 11 for justification). However, only the business as usual energy provision (alternative e) is a realistic alternative. Proceed to Step 2 (Investment analysis) or Step 3 (Barrier analysis). (Project participants may also select to complete both steps 2 and 3). The project participants chose to complete step 3. Step 3: Barrier analysis This analysis shows that the project activity faces barriers that (a) prevent the implementation of this type of proposed project activity; and (b) do not prevent the implementation of the alternatives. Sub-step 3a: Identify barriers that would prevent the implementation of the proposed CDM project activity: Barriers are identified and assessed below. Investment barriers The cost of the alternatives a, b, c, and d is prohibitive to their implementation. The rural areas in the Philippines are economically under-developed and the investment required for these alternatives is not available. For the proposed project, the additional carbon financing has increased the economic attractiveness and the emission reductions have committed project partners to the implementation of the pico-hydro units (see Annex 10). The income from emission reductions is equal to a share of 1.6% of the required investment costs (see Annex 4 for details). Furthermore the project can only be implemented due to the commitment of the NMZ to purchase 1,166 VER s upfront in project year 1 and invest USD of donations earmarked for the Gold Standard VER project in the Philippines. This will assure the financing of the first project year, the most crucial year for project implementation 9.In addition the NMZ will purchase another 834 VER s in project year 2 upfront if the emission reductions in year 1 are generated as outlined in Annex 2. 9 Please also see Annex 13 and Annex 4 for details.

20 page 20 Technological barriers Technological barriers prevent the application of other modern renewable energy sources (alternative c). This is reflected in the very small penetration of these technologies in the Philippines. In addition, technological barriers also prevent the widespread employment of the proposed project activity without emission reductions (alternative a), as the renewable energy sector has limited capacity and skills to implement programmes like this. As outlined above only the implementation of the proposed project activity as an emission reduction project has made additional resources available for implementation. Sub-step 3b: Show that the identified barriers would not prevent the implementation of at least one of the alternatives (except the proposed project activity): The barriers above would prevent the proposed project activity to be implemented without carbon financing, as well as the other alternatives b, c and d. Alternative e, business as usual, is not prevented by either technological barriers or financial barriers. Firstly, the alternatives in scenario e are well-known and low-tec technologies which are readily available in the rural areas in the Philippines. Indeed, they are the energy provision of choice for the majority of the rural population Please see the Houshold Energy Consumption Survey mentioned above and table 4 for justification Secondly, in most circumstances these alternatives do not require any investment as the technologies (diesel gensets, batteries, kerosene lamps) are already there. While running costs are higher than for the pico-hydro alternative, they are still low. It is the upfront investment costs that are deterring the population from implementing pico-hydro. The projected carbon revenue will reduce these barriers, as: the carbon finance will be used to buy down the cost of good quality pico-hydro units. Table 7: Share of carbon finance to unit costs Capacity (W) Price per unit (USD) (Incl. accessories and tax) Estimated number of households connected VER per unit (tco2e/y) Share of carbon finance to unit costs over lifetime (%) 200 $ ,07 9,50% 500 $ ,36 14,88% 1000 $ ,34 20,74% VER cost = USD 15; Unit lifetime (conservative approach) = 5 years due to bulk importation of pico-hydro equipment within this project, end-users will see a reduction in their cost over systems currently in the market, making hydro energy more competitive with kerosene and diesel-based lighting. This costs advantage is expected to increase once systems are manufactured in-country later on in the project. In addition this will lead to a real market uptake of pico-hydro technology. the project is not financially viable without NMZ finance for the purpose of implementing a GS VER project and acquiring credits, as the NMZ will give start-up financing in form

21 page 21 of upfront payment for VER certificates and donations for the implementation of the first units 10. In addition the project reduces a number of other barriers currently faced by pico-hydro in the Philippines, including: Increasing awareness without the project, end-users would only have information from the limited number of pico-hydro dealers currently in the country. There are only two pico-hydro dealers in the Philippines at present. Although there are a few specialists who serve as independent agents, these are mostly on part-time basis only and there is no formal business plan to promote/sell pico-hydro on sustainable basis 11. With awareness generated through the implementation of a number of new units, the end-users will be easier encouraged to install pico-hydro for their energy needs. The lack of success stories on renewable energy applications is a barrier widely faced by renewable energy technologies in the Philippines 12. Under the proposed project, there shall be complete monitoring of installed units on regular and systematic manner, thus, sufficient documentation will be generated to serve as success stories. Furthermore a number of demo units will be installed in various communities. Availability of technology pico-hydro has not been as widely disseminated in the Philippines as in Vietnam. Whereas Vietnam has the highest use of family hydro in the world (120,000 units having been installed), in early 2003 only 100 to 150 pico-hydro systems have been installed in the Philippines 13. The project will aim to bring this technology forward to the rural areas. If both Sub-steps 3a 3b are satisfied, proceed to Step 4 (Common practice analysis) The identified barriers prevent the implementation of the project activity without GS VER registration, but they do not prevent the occurrence of the alternatives. Step 4: Common practice analysis Sub-step 4a.: Analyze other activities similar to the proposed project activity: Although the Philippines have recently seen significant activity in the development of good quality pico-hydro and micro-hydro schemes for communities, pico-hydro is still not widely disseminated. As of 2001 there are thought to be a minimum of 17 schemes installed, compared to early 2003, where approximately 100 to 150 family hydro systems have been installed country wide 14. However, according to market assessment which was taken out in the context of the feasibility study A guide to CDM and Family Hydro Power, immediate potential 10 Please see Annex Interview with Vicente Roaring, Executive Director, Renewable Energy Association of the Philippines 12 Transitioning to Renewable Energy - An Analytical Framework for Creating an Enabling Environment; Heinrich Böll Foundation, International Institute for Energy Conservation; J Mariyappan, S. Taylor, J Church, J.Green; A guide to CDM and Family Hydro Power, IT Power, J Mariyappan, S. Taylor, J Church, J.Green; A guide to CDM and Family Hydro Power, IT Power, 2004

22 page 22 family hydro market in selected provinces of the Philippines was estimated as more than 24,000 units 15. Sub-step 4b: Discuss any similar options that are occurring: Recent pico-hydro projects have only been implemented with grants or other non-commercial finance terms, like local and national government funding 16 In addition studies show that in spite of the several large and small renewable energy projects implemented in the country over the last two decades by both the government and the private sectors, true commercialization of RE in the Philippines has yet to be attained. This is largely due to the current strategy of implementing projects and programs that are demo type, donor driven, and insufficient financial or technical resources for sustained operation and maintenance. Granting of subsidies for equipment demonstration type projects has only distorted the market as well as consumer expectations and interests. The result has been a great deal of effort with very little transition 17. This shows that pico-hydro technology still faces barriers which hinder the wide implementation of units and therefore can not be seen as a technology of common practice. If Sub-steps 4a and 4b are satisfied, i.e. similar activities cannot be observed or similar activities are observed, but essential distinctions between the project activity and similar activities can reasonably be explained, then the proposed project activity is additional. In conclusion, all the steps above are satisfied, the proposed project activity is additional and not the baseline scenario. B.4. Description of how the definition of the project boundary related to the baseline methodology selected is applied to the project activity: The physical, geographical site of the pico-hydro plant and the users delineate the project boundary. For the baseline determination only CO 2 emissions from the displaced kerosene use are taken into account. B.5. Details of baseline information, including the date of completion of the baseline study and the name of person (s)/entity (ies) determining the baseline: Date of completion of the baseline study: 23/06/ J Mariyappan, S. Taylor, J Church, J.Green; A guide to CDM and Family Hydro Power, IT Power, 2004; p.15 and Appendix A, p Navarro S.T, Jr.- Igputoy Pico-hydro Project, Solar Electric Co. Ltd. 17 Transitioning to Renewable Energy - An Analytical Framework for Creating an Enabling Environment; Heinrich Böll Foundation, International Institute for Energy Conservation; 2004