PROJECT DESIGN DOCUMENT

Transcription

1 PROJECT DESIGN DOCUMENT 4.0 MW INDUSTRIAL WASTE BASED POWER GENERATION PROJECT VENSA BIOTEK LIMITED SamalKot, Andhra Pradesh Prepared by: 1, Navjeevan Vihar, Tel: New Delhi Fax: website:

2 CONTENTS A. General Description of the small-scale Project Activity B. Baseline Methodology C. Duration of the Project Activity / Crediting Period D. Monitoring Methodology and Plan E. Calculation of GHG Emission Reductions by Sources F. Environmental Impacts G. Stakeholders Comments Annexes Annex 1: Information on participants in the project activity Annex 2: Information regarding public funding Annex 3: Base Line Data Appendix A: References Appendix: Abbreviations CDM VENSA PDD (Version 02 8 July 2005) Page 2 of 56

3 A. General Description of the small-scale Project Activity A.1 Title of the small-scale project activity: 4.0 MW biomass based power generation project at Vensa Biotek Limited. A.2 Description of the small-scale project activity: Purpose of the Project: The purpose of the Vensa Biotek Limited (VBL) power generation project is to utilise industrial waste (biomass based) and other agricultural residue for generation of electricity for in-house consumption and export surplus to the electricity grid. The project activity indirectly helps in reducing the power deficit in the state of Andhra Pradesh, reduces the grid system s dependency on fossil fuel resources (primarily coal and gas) and reduces the emission of greenhouse gases (GHG). The project activity also contributes to an economically, environmentally and socially sustainable development in the region through the commercial operation of the power plant and thereby creating sustainable stakeholder value. Features of the Project: The project involves the implementation of a biomass-based power generation plant using direct combustion of fuels in a boiler for steam generation and expansion of the same in an extraction cum condensing turbine. The installed capacity of the plant is 4.0 MW. The fuel used is primarily starch industry solid waste viz. tapioca tippi and agrobiomass viz. rice husk, groundnut husk, saw dust and tapioca stem and biogas (generated from bio-methanation plant for treating liquid effluents generated during starch manufacturing). The generated electricity meets VBL s captive electricity requirement and the surplus being sold to the state grid. The generated electricity replaces a mixture of coal and gas-based power generation. The total amount of certified emission reductions (CERs) to be delivered is expected to be 175,079 tco 2 equivalent. The implementation of the project also leads to additional income and employment in the region (approximately 80,000 man days of work per year 1 ). Past Scenario: The total power requirement of the starch and liquid glucose plant was being met by APTRANSCo (Andhra Pradesh Power Transmission Corporation Limited) grid and total process steam requirement of around 10 TPH at 10 kg/cm 2 was being met by two 1 Based on an estimate of at least 100,000 man-days per year for a 5 MW biomass based plant from the Indian Ministry of Non-Conventional Energy (1999) CDM VENSA PDD (Version 02 8 July 2005) Page 3 of 56

4 numbers of low pressure Thermax design Water Tube boilers, which were fed with rice husk. Diesel generator sets were being used as a standby provision for power. Project Scenario: The project activity, which is a carbon neutral fuel based cogeneration plant, generates electricity in addition to steam to meet VBL s captive electricity requirements thereby displacing an equivalent amount of electricity the plant would have drawn from the APTRANSCo grid. Additionally, the surplus electricity is being exported to the grid and in absence of the project same electricity would have been supplied through the power generation mix of APTRANSCo. By feeding additional power to the grid, the project will add to the reliability of power supply and stabilization of the voltage, which will create business opportunities and help economic development in rural areas where the plant is situated. The CDM project is limited to the captive electricity consumption and the electricity export to the electricity distribution grid, where the CO 2 -neutral electricity generation will replace conventional electricity generation highly dependent on fossil fuel in the grid system and thereby reducing GHG emission in the electricity grid system. The CDM project also produces steam for the plant processes, but this part will not be part of the CDM project as the steam generated by the new plant replaces the renewable steam production that was taking place on an old rice husk (biomass) fired boiler. Key data for the project: Power generation capacity In house power demand Annual minimum in house demand Scheduled export to the grid Annual minimum export to the grid system Annual consumption of biomass Annual consumption of biogas 4.00 MW 1.55 MW 9,112 MWh 2.45 MW 19,400 MWh Tapioca Tippi (in-house / by supplier) Rice Husk (by supplier) Tapioca stems / Groundnut Husk / Saw dust (by supplier) Total Biogas (in-house) 19,800 MT 13,200 MT 10,500 MT 43,500 MT 2.9 million NM 3 CDM VENSA PDD (Version 02 8 July 2005) Page 4 of 56

5 Turbine Details Type 1 No. X 4.00 MW Multi stage, Extraction cum condensing turbine Gross Steam Steam Power Pressure Temperature Generation 65 kg/cm C 4000 kw Boiler Details Type Pressure Temperature Steam (TPH) 1 No. high Bi-drum, Multi fuel fired, 65 kg/cm C 28 TPH efficiency boiler Travel grate, Water tube Chronological Description of the Project s Background: In January 2001, VBL a leading manufacturer of starch and liquid glucose from maize and tapioca tuber, decided to set up a 4.0 MW biomass based power plant (industrial waste and agro-biomass). Subsequently, VBL management obtained permission from Non-conventional Energy Development Corporation of Andhra Pradesh (NEDCAP) for setting up of the 4.0 MW Power Plant. The core justification for this investment by VBL management was the potential monetization of CERs to deliver a sustainable and appropriate return. Subsequently, as VBL was unable to obtain proper guidance and technical evaluation facilities, in August 2002 the issue of CERs marketing was temporarily postponed. In June 2004, VBL decided to revive the issue of CERs marketing and develop the biomass based cogeneration project as a CDM project under the Cleaner Technology Promotion In India (CTPI) supported by SECO/UNIDO. Power purchase agreement (PPA) with the transmission authority APTRANSCo was signed in February Despite several technical and financial risks associated with the project, VBL decided to start construction of power plant in October The reasonable assurance that the project would be able to avail carbon credits benefits was one of the key factors in the decision making, as is stated in VBL s Board Meetings 2. Decisions weighing IRR against securing CDM credits are presented in Section B.3. Since its commissioning and start-up in November 2003, VBL cogeneration plant has been confronted with several ongoing operational problems related to the behavior of mixed biomass feedstock. Availability of Bio-mass: The VBL cogeneration plant is being fuelled with starch industry solid waste viz. tapioca tippi and agro-biomass viz. rice husk, groundnut husk, saw dust and tapioca stem etc. Apart from these two types of fuels, the cogeneration plant is also being fuelled with biogas generated from bio-methanation plant (from treating liquid effluents generated in 2 Documentary evidence on VBL s Board Meetings decisions would be shared with the Designated Operational Entity CDM VENSA PDD (Version 02 8 July 2005) Page 5 of 56

6 the starch plant). Apart from these fuels, the company has also identified agro wastes such as tapioca stem. These are being sourced from the same farmers who are supplying the raw material (maize and tapioca) for the starch and glucose production. Thus, for VBL the biomass waste is supplied from the own plant and from the contracted farmers. VBL has entered into agreement with biomass suppliers for long term supply of biomass. Additionally, as per the survey conducted by NEDCAP on availability of biomass in the region (East Godavari district), it highlights that the district has surplus biomass availability for the next years. Contribution to Sustainable Development: The project activity has excellent contribution towards sustainable development and addresses the key issues: Environmental Sustainability: Substituting the electricity requirement from grid by cogeneration scheme thereby eliminating the generation of equivalent quantum of electricity using conventional fuel feeding the state grid Reducing disposal and indiscriminate incineration (in low efficiency boilers) of biomass waste generated during starch manufacturing process Conserving coal and other non-renewable natural resource Mitigating the emission of GHG (CO 2 ) as biomass is a carbon neutral fuel Socio-economic Sustainability: Andhra Pradesh had a peak power deficit of 2.3% at the end of the year 2003, according to Ministry of Power (MoP, 2003). The biomass based power plants will contribute, though in a small measure, to bridging the gap between the supply and demand of power in the state. The unit is located at dispersed rural location, which reduces the transmission and distribution (T&D) losses to some extent. The T&D losses in Andhra Pradesh were about 26% in year 2003 (MoP 2003). The project is in line with the policies of MNES. It contributes to achievement of the 11 th Plan target of 10,000 MW renewable energy by 2012 set by MNES. Contrary to certain fossil fuel fired plants, the proposed project will not lead to an outflow of foreign exchange capital, since most capital equipment is locally produced and the biomass waste does not have to be imported. This is in accordance with India s policy of self-reliance. The plant is situated far from an urban center, creating rural employment. It is estimated that the project has potential to create approximately 80,000 man-days of work per year. Creation of employment opportunities in rural areas has long been recognized as a major element of sustainable development and to stem the CDM VENSA PDD (Version 02 8 July 2005) Page 6 of 56

7 large-scale migration from rural to urban areas. To this extent, the project directly addresses a core national concern. A.3 Project Participants: The project participants are: Vensa Biotek Limited (VBL): project owner Government of India: host country; the Government of India ratified the Kyoto Protocol in Vensa Biotek Limited India Role in the Project: Developer and investor in the biomass based power generation project and supplier of the carbon credits. Brief Company Description: Vensa Biotek Limited (VBL) is one of the leading manufacturers of starch and liquid glucose from maize and tapioca tuber. The company started its commercial production of starch and liquid glucose in 1989 by using tapioca tuber as raw material. Subsequently the company has added maize plant and this is only one of its kinds in India, which can process both tapioca and maize simultaneously. The company processes around 30,000 MT of tapioca and 63,000 MT of maize annually. The company currently operates commercial plants aggregating a total installed capacity of 80 MT for the production of starch, and 40 MT for liquid glucose per day. VBL is a public limited company with equity participation from IDBI and IFCI banks. The net fixed assets of the company are INR Million (US$ 4.84 million) and net sales of approx. INR Million (US$ 4.88 million) in The main promoters hold 51% of the equity. It has an impeccable track record with its bankers and a track record of profits and dividends for its shareholders. Contact information on party(ies) and private/public entities involved in the project activity are listed in Annex 1. CDM VENSA PDD (Version 02 8 July 2005) Page 7 of 56

8 A.4 Technical Description of the small-scale Project Activity: A.4.1 Location of the small-scale project activity: A Host Party(ies) : India A Region/State/Province etc. : Andhra Pradesh A City/Town/Community etc : G. Ragampet village, Peddapuram Mandal, East Godavari District A Detail of physical location, including information allowing the unique identification of this small-scale project activity(ies): See following pages CDM VENSA PDD (Version 02 8 July 2005) Page 8 of 56

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11 A.4.2 Type and Category(Ies) and Technology of small-scale Project Activity: Project Category : Renewable energy power project (Type I) Sub Category : Thermal energy for the user (I.C) Renewable electricity generation for supply to a grid (I.D) As defined under Appendix B of the simplified modalities and procedures for small-scale CDM project activities, these categories include biomass based co-generating systems that produce heat and electricity for use on-site and biomass combined heat and power (co-generation) systems that supply electricity to a grid. For cogeneration systems to qualify under these categories, the sum of all forms of energy output shall not exceed 45 MW thermal (rating for the primary boiler shall not exceed 45 MW thermal ). This project activity clearly qualifies in the above categories since the net thermal energy output from the project activity is approximately 22.7 MMKcal/hr MW thermal (< 45 MW thermal ). The captive power requirement for operating VBL is about 1.55 MW (0.44 MW auxiliary consumption for cogeneration plant and 1.11 MW for process). Before setting up the cogeneration plant, power requirement was being met by supplies from APTRANSCo. By setting up the biomass based cogeneration plant, VBL meets its steam and power requirement from captive sources and is thus applicable for project category I.C. Additionally, the surplus electricity is supplied to the grid that is now supplied primarily by coal power plants with future plans overwhelmingly in favour of fossil fuel based generating facilities and is thus applicable for project category I.D. Technology of Project Activity: The system adopted for power generation is direct combustion of fuels in a highpressure boiler for steam generation and expansion of the same in an extraction cum condensing turbine for generation of power. The boiler (28 TPH, 65 kg/cm 2, C) used for steam generation is specifically designed to fire a combination of various biomass fuels. The boiler is provided with a large furnace and the super heaters are specially designed and provided with a protective coating to prevent corrosion from the chemically contaminated flue gases that are generated while burning tapioca fibre, rice husk and tapioca stems. The flue gas velocity and spacing of the super heater coils are so designed to allow minimum fouling with chemical depositions, to extend the life of the Super heater. CDM VENSA PDD (Version 02 8 July 2005) Page 11 of 56

12 The steam turbine for the power plant is an extraction cum condensing turbine with one controlled extraction for process steam requirements. The turbine is designed to drive the generator directly through a gearbox to generate power at 50 HZ. The speed of the generator is 1,500 RPM and the generator is designed to generate 4.0 MW Electrical Power at 50 HZ, 11 KV Voltage level and 0.9 Plant Load Factor. The generating voltage at the generator terminals is 11 KV which is stepped up to 33 KV for exporting power to APTRANSCo grid in a 5 MVA Transformer and bring down the voltage from 11 KV to 415 V in a 2 MVA Transformer for captive use of power. Accordingly all other electrical equipment like grid transformer, switchyard etc. are sized. No transfer of technology is involved to host country as the technology of biomass based high steam pressure power generation is known and in use in India. However, the use of tapioca and maize crop residue as fuel for power generation is a pioneering effort by VBL; this project represents the use of tapioca and maize crop residue, for the first time, for the generation of electricity on a commercial scale. A.4.3 Brief explanation of how the anthropogenic emissions of anthropogenic greenhouse gases (GHGs) by sources are to be reduced by the proposed smallscale project activity, including why the emission reductions would not occur in the absence of the proposed small-scale project activity, taking into account national and or/sectoral policies and circumstances: The project results in a clear reduction of CO 2 emissions: the CO 2 neutral biomass based power generation for captive consumption and supply to the electricity grid replaces CO 2 - emitting fossil fuel based power that might have been generated in absence of the CDM project. The emission reductions would not occur in the absence of the proposed small-scale project activity as the alternatives to the project include business-as-usual i.e. import of equivalent amount of electricity through the power generation mix of APTRANSCo grid. Almost all starch-manufacturing plants in India have their own boilers to generate steam and electricity supply is from the grid. The boilers dedicated to the starch manufacturing process are mainly fuelled with coal or lignite. The proposed project uses starch industry solid waste and agricultural wastes (biomass) to generate power for self-consumption and export of surplus power to the APTRANSCo grid. In absence of the project, same power might have been supplied through the power generation mix of APTRANSCo grid, resulting in CO 2 (carbon dioxide) emissions. CDM VENSA PDD (Version 02 8 July 2005) Page 12 of 56

13 A Estimated amount of emission reductions over the chosen crediting period A conventional electrical energy equivalent of Million kwh for a period of 10 years in Andhra Pradesh would be replaced by the electricity from the existing 4.0 MW nonconventional renewable resource (biomass) based cogeneration plant with CO 2 emission reduction of 175,079 tonnes CO 2 e in a period of 10 years. A.4.4 Public funding of the small-scale Project Activity: No public funding as part of project financing from parties included in Annex I is involved in the project activity. Equity for the project is supplied by VBL and debt is supplied by an Indian Bank. A.4.5 Confirmation that the small-scale project activity is not a de-bundled component of a larger project activity: According to Appendix C of Simplified Modalities and Procedures for small scale CDM project activities, Debundling is defined as the fragmentation of a large project activity into smaller parts. A small-scale project activity that is part of a large project activity is not eligible to use the simplified modalities and procedures for small-scale CDM project activities. As highlighted in Appendix C of Simplified Modalities and Procedures for small scale CDM project activities, a proposed small-scale project shall be deemed to be a debundled component of a large project activity if there is a registered small-scale CDM project activity or an application to register another small-scale CDM project activity: With the same project participants; In the same project category and technology / measure; Registered within the previous 2 years; and Whose project boundary is within 1 km of the project boundary of the proposed small-scale activity at the closest point. On the basis of the above, the proposed cogeneration project cannot be considered as de-bundled component of a large project activity as: The proposed project is VBL s first and so far only biomass power plant and VBL do not propose another biomass power plant; VBL have not registered any other small-scale project activity within the previous two years; and Project boundary is not within 1 km radius of any other proposed small-scale activity. CDM VENSA PDD (Version 02 8 July 2005) Page 13 of 56

14 B: Application of a Baseline Methodology B.1 Title and Reference of the approved baseline methodology applied to the small-scale Project Activity: Main Category: Type I Renewable energy power project Sub Category: C Thermal energy for the user D Renewable electricity generation for a grid The reference has been taken from the recent list of the small-scale CDM project activity categories contained in Appendix B of the simplified M&P for small-scale CDM project activities. B.2 Project Category Applicable to the small-scale Project Activity: Appendix B of the simplified modalities and procedures for small-scale CDM project activities, provides indicative simplified baseline and monitoring methodologies for selected small-scale CDM project activity category. As per this document, the proposed CDM project falls under Type I.C Thermal Energy for the User and Type I.D - Renewable electricity generation for a grid. Baseline methodology for projects under Type I.C has been detailed in paragraphs 5-7 (Type I.C) of the above mentioned document. Paragraph 7 (Type I.C) which applies to this sub category of project activity states that for renewable energy technologies that displace electricity the simplified baseline is the electricity consumption times the relevant emission factor calculated as described under Category I.D, paragraph 7 (Type I.D). Similarly, baseline methodology for projects under Type I.D has been detailed in paragraphs 5-7 (Type I.D) of the above mentioned document. Paragraph 7 (Type I.D) also applies to this sub category of project activity. Paragraph 7 (Type I.D) states that the baseline is the kwh produced by the renewable generating unit multiplied by an emission co-efficient (measured in kg CO 2 equ/kwh) calculated in a transparent and conservative manner as: a) The average of the approximate operating margin and the build margin, where: I. The approximate operating margin is the weighted average emissions (in kg CO 2 equ/kwh) of all generating sources serving the system, excluding hydro, geothermal, wind, low-cost biomass, nuclear and solar generation; CDM VENSA PDD (Version 02 8 July 2005) Page 14 of 56

15 II. The build margin is the weighted average emissions (in kg CO 2 equ/kwh) of recent capacity additions to the system, which capacity additions are defined as the greater (in MWh) of most recent 20% of existing plants or the 5 most recent plants OR b) The weighted average emissions (in kg CO 2 equ/kwh) of the current generation mix. Considering the available guidelines and the present project scenario, Andhra Pradesh state grid has been chosen for baseline analysis by selecting the weighted average emissions of current generation mix for baseline calculations. Further details of the baseline are given in Annex 3. 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 small-scale CDM project activity (i.e. explanation of how and why this project is additional and therefore not identical with the baseline scenario) Emission Reductions: a) On-site Emissions: Construction of Cogeneration Plant: The first direct on-site emissions occur during the construction of the cogeneration plant. However, as there is a shortage of electricity in India, it can be assumed that in the baseline situation, fossil fuel power plants would have been constructed instead which would at least result in similar emission levels. We can therefore safely assume that the construction of cogeneration plant does not result in additional emissions compared to the baseline scenario. Combustion of Biomass: The fuel used for the cogeneration plant is primarily starch industry solid waste viz. tapioca fibre and maize husk, agro-biomass viz. rice husk and tapioca stem and biogas. Direct on-site GHG emissions after implementation of the project arise from the burning of biomass and biogas in the boiler. These emissions mainly include CO 2. However, the CO 2 released equals the amount of CO 2 taken up by the biomass during growing, representing a cyclic process of carbon sequestration and therefore no net emissions occur. Since the above biomass contains only negligible quantities of other elements like Nitrogen, Sulphur etc. release of other GHGs are considered as negligible. Additionally, the biogas which is generated from bio-methanation plant for treating liquid effluents generated during starch manufacturing is assumed to be produced on a sustainable CDM VENSA PDD (Version 02 8 July 2005) Page 15 of 56

16 basis and therefore the CO 2 associated with biogas consumption is re-absorbed in the growth of fodder and foodstuffs. Storage of Biomass: The harvesting of the maize crop takes place throughout the year, tapioca crop in the period of January to March and rice crop in the period of July to November and December to March. Since tapioca being a seasonal crop is only available for three to six months a year, adequate storage facilities are required. In principle N 2 O and CH 4 emissions could arise from storage. However, this is not expected to generate significant GHG emissions: In principle nitrous oxide emissions could arise from storage. However, it seems fair to assume the amount of nitrous oxide emissions formed during biomass storage to be comparable to the amount of N 2 O emissions arising from agricultural residues when left on the field. As a consequence the N 2 O emissions will not be influenced by the project and will therefore not be taken into account. Substantial methane emissions from storage are not anticipated. There are three arguments for this: 1. The materials are stored in such a way that anaerobic digestion is very unlikely (dry and with excess oxygen) 2. Methane production from anaerobic digestion only starts after a couple of months and reaches its peak after 2 years (storage time for the proposed project is on an average one month 3 ) 3. The biomass materials used in this project have very little organic components that are biodegradable under anaerobic conditions. b) Off-site Emissions: Transport of Biomass: Direct off-site emissions in the proposed project arise from transporting the biomass. The biomass is being transported by tractors and trolleys. However, in the baseline situation, the transport of coal and gas has to be taken into account. On average, the distance over which fuels have to be transported will be substantially larger for fossil fuel-fired power stations because of the larger distance to mines and ports than for the proposed project. For example, Andhra Pradesh fossil fuel-fired power stations procure coal from facilities located over kilometres away either from in-house mines (Singareni and Godavarikhani) or from neighbouring states such as Chattisgarh, Orissa and Madhya Pradesh 4. Therefore, transport emissions in the baseline will be larger than the 3 Documentary evidence regarding the VBL agreement with biomass suppliers stating that the supplier agrees to supply the biomass in monthly consignments to VBL would be shared with the Designated Operational Entity 4 Andhra Pradesh has huge reserves of key minerals such as coal, limestone, granite, bauxite and barytes. In fact, the State is estimated to have a third of India s total mineral wealth. Andhra Pradesh is the only southern state with coal deposits; however, annual coal production is an almost negligible proportion of reserves (0.3 per cent) CDM VENSA PDD (Version 02 8 July 2005) Page 16 of 56

17 transport emissions related to the proposed project. Because of a lack of data on the average transport distances for coal to power stations in Andhra Pradesh and the Southern grid, we have not included fuel transport emissions in the system boundary of both the current situation and the project 5. This also provides a conservative estimate of emission reductions. Biomass Left or Burnt on the Field: The project will result in reduced direct off-site emissions compared to the current situation, in which part of the biomass waste stays on the field. This may lead to methane emissions from decaying biomass. In cases where the biomass is burnt on the field, N 2 O may be emitted. N 2 O and methane have a stronger global warming potential than CO 2. These emissions however, are not taken into account, providing a more conservative estimate of the baseline emissions. Since the proposed project uses biomass waste only, no additional biomass is grown on account of the project. Therefore the project does not result in an additional uptake of CO 2 by sinks. Justification of Simplified Methodologies: The net thermal energy output from the project activity is approximately 22.7 MW thermal. The proposed project therefore qualifies for a small-scale project as the sum of all forms of energy output is not exceeding 45 MW thermal (as defined in Appendix B of the M&P of small-scale CDM project activities). Additionality: In order to determine if the project activity is additional, the additionally tool approved by the CDM Executive Board is applied 6. Each of the steps is explained below: Step 0: Preliminary screening based on the starting date of the project activity ( Since Andhra Pradesh is located adjacent to the ports, imported coal is also easily available. Regarding gas and other major sources of energy, the discovery of gas in the Krishna-Godavari Basin offshore coastal Andhra Pradesh by the consortium led by Gujarat State Petrochemicals Limited will form a major determinant of the future energy generation pattern for Andhra Pradesh ( ). 5 The fuel efficiency of tractors and trolleys is 6-7 km/liter. We take 6 km/liter in order to be conservative. Biomass will be transported over an average distance of 30 km with a minimum load per trip of 8000 kg. Thus, transporting up to 33,600 MT (Tapioca Tippi (9,900 MT), Rice Husk (13,200 MT) and Tapioca stems / Groundnut Husk / Saw dust (10,500 MT) requires 4,200 trips of 60 km (including the return trip). In total, a maximum of 42,000 liters of diesel oil will be consumed for the 4.0 MW plant per year, with total emissions amounting to 111 ton CO2/year (assuming an emission factor for diesel oil of 20.2 t C/TJ, a caloric value of TJ/k ton and a density is kg/l). 6 CDM VENSA PDD (Version 02 8 July 2005) Page 17 of 56

18 a) Project start date: In January 2001, VBL proposed to set up a 4.0 MW Power Plant based on Starch waste. Subsequently VBL management obtained permission from NEDCAP for setting up of the 4.0 MW Power Plant. Financing of the project was secured in October 2001 and project was commissioned in November Step 0: Eligibility of projects already started Yes No Has construction started? Y Was construction begun before 01/01/2000? N Was construction before (i) registration date, and (ii) registration Y of a CDM activity? Was CDM considered from early stages of development? Y Is there documentation to this effect? Y b) Evidence demonstration that CDM incentives were seriously considered in the development of project: Despite several technical and financial risks associated with the project, VBL decided to start construction of cogeneration plant in October The reasonable assurance that the project would be able to avail carbon credits benefits was one of the key factors in the decision making. During the planning phase itself (January 2001), VBL proposed to explore the possibility for marketing the CERs for better viability of the project. Subsequently, as the company was unable to obtain proper guidance and technical evaluation facilities, in August 2002 the issue of CERs marketing was temporarily postponed. In June 2004, VBL decided to revive the issue of CERs marketing and develop the biomass based cogeneration project as a CDM project under the Cleaner Technology Promotion In India (CTPI) supported by SECO/UNIDO. Step 1: Identification of Alternatives to the Project Activity Consistent with Current Laws and Regulations Sub-step 1a: Define Alternatives to the Project Activity: The alternatives to the project include business-as-usual i.e. import of equivalent amount of electricity through the power generation mix of APTRANSCo grid. Almost all starchmanufacturing plants in India have their own boilers to generate steam and electricity supply is from the grid. The boilers dedicated to the starch manufacturing process are mainly fuelled with coal or lignite. The proposed CDM project uses starch industry solid waste and agricultural wastes (biomass) to generate power for self consumption and export of surplus power to the CDM VENSA PDD (Version 02 8 July 2005) Page 18 of 56

19 APTRANSCo grid. In absence of the project, same power might have been supplied through the power generation mix of APTRANSCo grid, resulting in CO 2 (carbon dioxide) emissions. The data from APTRANSCo reveals that thermal generation (coal and gas based) accounts for as high as 80% of total generation in Andhra Pradesh 7 as on 31/03/2005. This includes the share of Central Sector thermal power projects based on coal and gas. Sub-step 1b: Enforcement of Applicable Laws and Regulations: Both the project activity (cogeneration plant) and the alternative scenario (old boiler) at project site are in compliance with all regulations. Thus, the refurbishment of the project activity at project is not mandated by law and clearly exceeds the legal requirements. Step 2: Investment Analysis: The project is a pioneer in utilization of waste from starch manufacturing process for electricity generation for self consumption and export of surplus power to the grid. However, there are currently no special incentives for these small power producers to offset the generally higher costs of non-conventional energy production as compared to conventional power production based on fossil fuel. Implementation of the project faces investment barriers. The outlook for the starch market has changed over time. Compared to earlier years when starch production was considered as a major revenue-earner, the situation today is quite grim with depressed Indian and global starch markets. In the depressed starch price scenario, which affects capacity for internal accrual to generate funds for investment, making investments in cogeneration facility, which costs approximately INR 36 million / MW (US$ 0.8 million), is an issue. Though a number of financial institutes offer funds to implement cogeneration projects, the stringent equity considerations affect the possibility of accessing them. Some of the investment barriers are: The cost of biomass fuel (rice husk) is low at the moment compared to conventional fuel, as the renewable energy market is limited. If the market for renewable energy increases in India or other uses of the waste emerge, the costs of production increases as a result of the sacrifice of alternative revenues for the project owner. There are no special tariffs or grants schemes available in India for renewable energy projects and the project got finance on behalf of the financial strength of the project owner. IRR Analysis: The most appropriate analytical option is the presentation of financial indicators (IRR 7 ( CDM VENSA PDD (Version 02 8 July 2005) Page 19 of 56

20 calculation) for the project compared to benchmark IRR for biomass based power plants. The typical IRR benchmark in case of biomass based power plants is around 13% depending on the type of fuel that is used. IRR at present operating conditions with reduced power tariff i.e. INR / kwh are coming to 10.76% 8 making the project an unviable one without CER sale revenue stream. With CER sale revenue stream the IRR is coming to 13.80% (see footnote 8) making it a viable option. A likely alternate investment decision would have been for the implementation of a coal based power plant. The typical IRR in case of coal based power plants is around 20% (see footnote 8) depending on the type of coal that is used While calculating the IRR in project scenario, the maximum fuel price is considered. The unit is located in the heart of biomass belt. Various biomass fuels are available throughout the year. Apart from this, VBL is using Tapioca Fibre and Rice Husk in their boiler for steam generation. Escalation in wages, O&M etc. were considered as 5%. Least Cost Analysis: The project s costs of generating electricity are higher than that for the least cost option of coal. The cost of electricity production from the project is estimated at INR 2.02/kWh (see footnote 8), whereas the annualised cost of power generation from a 100 MW coal based power plant are estimated in this study at INR 1.90/kWh (see footnote 8). Additionally IRR of a typical coal based (100 MW) power project is 20% (approx.) as against 11% (approx.) for biomass based power project (see footnote 8). VBL went for biomass based power generation option because of the following reasons: 1. The quality of grid power for VBL was bad as the voltage variation was high and the frequent interruptions in power supply results in heavy loss of production. Hence good quality of power was the immediate requirement for VBL and un-interrupted supply of power became necessary for smooth running and profitable operation of the plant. To get good quality of power, option with VBL was to generate power through coal based power plant or utilise the waste generated in-house for power generation. 2. Biomass based power generation (through in-house waste from plant and from market) is slightly costly as compared to coal based (explained above). The selection of biomass based power option is because the plant has full control on fuel availability and is beneficial with CDM revenues. At the same time, it is environmentally friendly as well. On the basis of above analysis it is clear that VBL could have considered a coal based 8 Details of the calculation will be provided to the Designation Operational Entity CDM VENSA PDD (Version 02 8 July 2005) Page 20 of 56

21 power plant instead of the biomass plant, which in terms of financial feasibility would be clearly more attractive than a biomass plant. It can thus be concluded that a biomass plant is not an attractive course of action and therefore its implementation is not the most likely scenario. Step 3: Barrier Analysis: Technological Barriers: The project uses an advanced cogeneration technology in the form of high-pressure boiler (65 kg/cm 2, C) with steam turbine coupled to an alternator for the generation of power. Currently, the starch manufacturing industry in India predominantly uses low efficiency, low-pressure boilers for their own steam generation (14 to 17 kg/cm 2 ). The high-pressure boiler installed at VBL not only belongs to the first installations in the starch sector but is also among the most efficient installations in India. Being aware of the difficult combustion characteristics of rice and tapioca residues VBL contracted with Thermax Ltd. Thermax took specific precautions with respect to the design (larger furnace, convective heat transfer surfaces, efficient soot blowers and conservative furnace outlet temperature) of the boiler. As such, VBL was aware of the serious technological risk associated with the combustion of rice husk and tapioca residues. Additional revenues through carbon credits were considered essential to counterbalance the risks. Institutional Barriers: The lack of familiarity with handling high-pressure boilers coupled with the complex operation of condensing and extraction multistage turbines is a major barrier to adoption of the proposed new technology in the starch manufacturing sector. Furthermore, the project used new technologies that had not been implemented in starch manufacturing sector before. The technological risk was higher than conventional projects as the knowhow and support facilities in manufacturers will be established together with the project. The above barriers lead to an increased risk for the project owner compared to establishing a conventional power plant for their starch-manufacturing unit. Step 4: Common Practice Analysis: Sub-step 4a: Analyze Other Activities Similar to the Proposed Project Activity: Almost all starch-manufacturing plants in India have their own boilers to generate steam and electricity supply is from the grid. The boilers dedicated to the starch manufacturing process are mainly fuelled with coal or lignite. The project activity is the first project in CDM VENSA PDD (Version 02 8 July 2005) Page 21 of 56

22 India to utilize all the biomass waste products from the starch manufacturing process for generation of power and steam and supply excess electricity to the electricity grid system. Sub-step 4b: Discuss Any Similar Options that are Occurring: There is no other case in India in starch manufacturing sector of a project of this type. Step 5: Impact of CDM Registration: The CDM has made it possible to set up a cogeneration plant and export electricity to the grid. CDM revenues improve the project s rate of return, without CERs, the project shows lower IRR, but breaks even with CER revenues in 10 years crediting period, which is necessary to initiate such pioneering projects. Thus the prospect of CDM credits for the project proved helpful in securing a go-ahead decision for this project, since they diversified the financial returns on investment. In the absence of CER revenue stream, the project might not have been taken at all. The registration of the proposed project activity will have a strong impact in paving the way for similar biomass projects to be implemented in the starch manufacturing sector. From the above assessment, it is clear that the proposed project does not fall within the baseline scenario and that it would not occur without the assistance of the CDM benefits. CDM VENSA PDD (Version 02 8 July 2005) Page 22 of 56

23 B.4 Description of how definition of the Project Boundary related to the baseline methodology selected is applied to the small-scale Project Activity: According to Appendix B of the simplified modalities and procedures for small-scale CDM project activities, the project boundary encompasses the physical and geographical site of the renewable generation source. For the proposed project activity the project boundary is from the point of fuel storage to the point of electricity supply to the starch manufacturing unit where the project proponent has a full control. The steam generation from the cogeneration activity has been excluded from the project boundary, as it is not included under the CDM project activity. Thus, project boundary covers fuel storage, boiler, steam turbine generator and all other accessory equipments. The transport of biomass and the state electricity grid are not included in the project boundary. CDM VENSA PDD (Version 02 8 July 2005) Page 23 of 56

24 Flow chart and project boundary is illustrated in the following diagram: Biomass Source Project Boundaries Biomass Storage Biomass Fired Boiler Emission Generated Power Generation Unit Emission Sequestered Electricity to Starch Manufacturing Unit Auxiliary Consumption Electricity Export to State Grid and Consumption Steam for process requirement at site Figure B.1: Flow Chart and Project Boundary CDM VENSA PDD (Version 02 8 July 2005) Page 24 of 56

25 B.5 Details of the Baseline and its Development: B.5.1 Specify the baseline for the proposed project activity using a methodology specified in the applicable project category for small-scale CDM project activities contained in appendix B of the simplified M&P for small-scale CDM project activities: The general approach for the baseline is based on the baseline formula as included in Appendix B, IC category: Thermal energy for the user and ID category: Renewable electricity generation for a grid (UNFCCC, 2003b). The baseline proposed here is Option (b): The weighted average emissions of the current generation mix. In the proposed baseline, Andhra Pradesh electricity grid is used as the reference region for estimating the current generation mix. Using the methodology available for smallscale project activities, the weighted average emissions (in KgCO 2 equ/kwh) of current generation mix of Andhra Pradesh is used for the calculation of baseline. Actual CO 2 emission factor are used for the purpose. B.5.2 Date of completing the final draft of this baseline section: 29/07/2005 B.5.3 Name of person/entity determining the baseline: The baseline has been prepared by Winrock International India in consultation with VBL. Company name : Winrock International India Address : 1 Navjeevan Vihar, New Delhi India Telephone number : Fax number : wii@winrockindia.org Website : Winrock International India is not a project participant as meant in Annex 1. CDM VENSA PDD (Version 02 8 July 2005) Page 25 of 56

26 C. Duration of the project activity / Crediting period C.1 Duration of the small-scale Project Activity: C.1.1 Starting date of the small-scale Project Activity: 16 th October 2002 The project started construction after January Referring to the Glossary of terms provided in version-2 (03 December, 2004) of Guidelines for completing the project design document (CDM-PDD), the proposed new methodology: baseline (CDM-NMB) and the proposed new methodology: monitoring (CDM-NMM) the project starting date is considered as October 16, 2002 the date of laying of foundation stone to start the actual implementation of the project activity, considering the future benefits through CDM for sustainable operation of the project. The project started the commercial operation from November 20, C.1.2 Expected operational lifetime of the small-scale project activity: Life time of the project : 20 years C.2 Choice of the crediting period and related information: C.2.1 Renewable crediting period (at most seven (7) years per crediting period) C C Starting date of the first crediting period (DD/MM/YYYY): Length of the first crediting period: C.2.2 Fixed crediting period (at most ten (10) years): C Starting date (DD/MM/YYYY): 20/11/2003 C Length (max 10 years): 10 years CDM VENSA PDD (Version 02 8 July 2005) Page 26 of 56

27 D. Application of a monitoring methodology and plan D.1 Name and Reference of Approved Methodology Applied to the small-scale Project Activity: The monitoring methodology / guideline mentioned in the Appendix B of the simplified modalities and procedures for small scale CDM project activities in the project category Type I.C and Type I.D is considered as basis for monitoring methodology for the project activity. This methodology involves metering of the electricity generated by the renewable technology. Although the proposed project does not involve co-fired plants, the monitoring of the amount of biomass input and its energy content is included as well in the methodology. D.2 Justification of the Choice of The Methodology and Why It is Applicable to The small-scale Project Activity: The proposed project is eligible as a small-scale project (see section B.2), category Thermal Energy for the User (I.C) and Renewable electricity generation for a grid (1.D.). The monitoring methodology is consistent with the methodology as required in Appendix B (UNFCCC, 2003b). The proposed methodology thus provides measured data on the amount of electricity generated, the biomass input and the fossil fuel input. With this information, a reliable estimate of the amount of emission reductions can be made. In order to monitor the mitigation of GHG due to the project activity at VBL, the total electricity produced and auxiliary consumption, and captive power consumption for process plant, needs to be measured. The net electricity supplied to manufacturing facility of VBL and state grid by the project activity multiplied by emission factor for the grid will form the baseline for the project activity. Description of Monitoring Plan: Explanation of Data Collection: The data will be collected as follows: The quantity of biomass purchased will be based on invoices/receipts from farmers and the fuel contractor as well as with the weighbridge log. This will be audited in regular, annual tax and shareholder audits. If required the DOE will be given access to the audit and monitoring reports. Biogas and biomass produced in plant. CDM VENSA PDD (Version 02 8 July 2005) Page 27 of 56

28 Electricity production and distribution will be measured and monitored through: o In-house electricity meters installed within the plant premises to record the gross power produced, auxiliary power consumed, and captive power consumption for processes o Two Electricity meters installed (one check meter and one main meter) at the inter connection point of the substation at Peddapuram for the electricity export The purchase and use of fossil fuels (coal) would of course cancel a measure of emission reductions. The purchase of fossil fuels, if made, will be tracked through the audit report and reflected in final emission reduction calculations. To date, the need to use fossil fuels has not occurred for the project. The energy content of the biomass is measured on an annual basis from a recognised testing laboratory Missing Data: Missing data is only relevant on the level of electricity meters being temporarily out of order. At the sub-stations of APTRANSCo there are two meters: the main metering system and a back-up meter. If the main meter is out of order or under repair, the backup meter will provide redundancy. Besides the two meters there will be meters from VBL within the plants themselves. However, these meters are for internal use (gross power produced, auxiliary power consumed and electricity supplied to manufacturing facility of VBL) only and APTRANSCo may not accept these readings for billing purposes. Electricity fed into the grid and unable to be metered will not be registered and invoiced. This will result in less registered emission reductions than actually generated. Operational Parameters of the power generating Unit: Total Electricity Generated: The total electricity generated by the power project will be measured in the plant premises to the best accuracy and will be monitored and recorded, on a continuous basis through installed electricity meters. Auxiliary Consumption: The electricity consumed by plant auxiliaries will be recorded in the plant premises to the best accuracy. This will be monitored and recorded on a continuous basis through installed electricity meters. The total quantum of electricity consumed by the auxiliaries would affect the total electricity supplied to the manufacturing unit and state grid and therefore the amount of GHG reductions. CDM VENSA PDD (Version 02 8 July 2005) Page 28 of 56