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

Transcription

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

2 page 2 SECTION A. General description of project activit A.1. Title of the project activit: Title: Piedra Larga Wind Farm (the Piedra Larga Project or the Project ). Version: Document Version Number 3. Date: 29/03/2011 (29 th March 2011) A.2. Description of the project activit: The purpose of the project activit is the generation of renewable electric energ in Mexico through the construction and operation of a 90 MW wind farm in the municipalit of Unión Hidalgo, Oaxaca State. The project will be enlarged b the construction of a second phase of MW, which will make the object of a second PDD. Figure 1. General focus of the area where the wind farm will be constructed

3 page 3 The project activit will increase the percentage of renewable sourced power in Mexico grid, promoting the growth of renewable capacit and diversifing the Mexican generation mix, significantl contributing to the sustainable development of the region. This represents a quite important solution, as the Mexican electric generation mix is greatl weighted towards fossil fuels. The power plant will have an expected minimum operating life of 21 ears. Commencement of the construction of the wind farm is expected to be started on Februar The suitable tests will be done b September 2011 and the wind farm will come into operation on December The Project developer Generation Permit has been obtained from CRE (Energ Regulator Commission or Comisión Reguladora de la Electricidad), that was approved on June An Interconnection Agreement was signed with CFE (Electricit Federal Commission or Comisión Federal de Electricidad) to get access to the grid, on Ma The mexican environmental permit MIA (Manifestación de Impacto Ambiental) was obtained on Januar 2009 for the entire Project (phase I and phase II, mentioned before) from SEMARNAT (The Secretar of the Environment and Natural Resources or Secretaría de Medio Ambiente Recursos Naturales). Until now, the MIA requirements have been fulfilled rigorousl. Latel, an extra time has been asked since the resolution was onl valid for 1 ear. On March 2010 the adaptation of MIA for it exclusive application to the phase I of the project and to the definitive turbines distribution was requested, and it was approved on April 2010 b SEMARNAT. Other permits and authorisations have been asked: INAH (Instituto Nacional de Antropología e Historia) authorisation (it has been awarded but some small archaeological studies are being completed), Construction and use of soil changing Unión Hidalgo municipalit s license, and the Civil Aeronautic Direction authorisation. As mentioned before, the Project activit will contribute to sustainable development. The contributions are summarized as follows: Environmental improvement The Piedra Larga Project will reduce greenhouse gas emissions compared to a business-as-usual scenario, b displacing fossil-fuel based electricit. In addition, it will reduce other pollutants (CO, NO x, SO 2 ) resulting from the power generation industr in Mexico. Specificall, some advantages of wind energ are: Free, abundant and inexhaustible resource. Clean energ, since CO 2 emissions are inexistent in the operating phase. Provides a barrier against the volatilit of fossil fuel prices. Suppling securit Avoiding the dependence on fossil fuels. Modulate and quite fast installation.

4 page 4 Social and economic improvement The Project activit will create local emploment during the project construction and operation period and will require training workers as soon as construction begins. Likewise skills will easil be transferred to other wind power projects that are being developed in the area. Specificall, during the construction of the wind farm and later phases for its operation and maintenance, it is planned to hire the field owners and their families, and afterwards the inhabitants of Union Hidalgo municipalit. It is forecasted to hire during the construction phase an average of 375 people for civil works, 213 people for electromechanical erection and 55 people for WTG erection, in addition to 8 medium/high qualified persons. After that, 8 low qualified persons and 2 medium/high qualified ones will be needed for the operation and maintenance of the wind farm. In addition to the direct jobs that will be created, the construction works will have a positive impact in the creation of more indirect jobs in companies that provide professional services as well as auxiliar and assistance services like transport, hotel management, food suppl, textile industr, etc. A total of 80 jobs are forecasted to be created. Furthermore land lease will provide additional income to land owners, who will also continue with their regular land use practices (with the corresponding income). Moreover, the Project will contribute to Mexico s income through the pament of taxes. The Project will also contribute to the market development b providing knowledge about business to power consumers in long-term purchases. Also, a bridge will be built on the Espiritu Santo River, improving vehicular traffic for citizens, farmers and livestock farmers, as nowadas there is onl one bridge that is being repaired. Therefore the Project will contribute to improving local income levels and living standards and reducing dependence of fossil fuels as energ sources. Furthermore the Project will help to transfer acquired skills and promote administrative and rural propert regulation in Oaxaca. Technological development The project will help to stimulate the growth of the wind power industr in Mexico and will serve as a demonstration for wider application of wind power technolog and other projects for clean renewable electricit generation in local and national level. A.3. Project participants: Name of Part involved (*) ((host) indicates a host Part) Mexico (Host) Private and/or public entit(ies) project participants (*) (as applicable) Desarrollos Eólicos Mexicanos de Oaxaca 1 SA de CV (DEMEX OAXACA 1) Table 1. Project participants involved Kindl indicate if the Part involved wishes to be considered as project participant (Yes/No) No

5 page 5 Desarrollos Eólicos Mexicanos de Oaxaca 1 SA de CV, called DEMEX OAXACA 1, is the Mexican societ that will develop and operate the Project. A.4. Technical description of the project activit: A.4.1. Location of the project activit: A Host Part(ies): Mexico A Region/State/Province etc.: Juchitán district, Oaxaca State. A Cit/Town/Communit etc.: Municipalit of Unión Hidalgo A Details of phsical location, including information allowing the unique identification of this project activit (maximum one page): The Project will be located in Oaxaca State, in the southern part of Mexico. It is situated in the municipalit of Unión Hidalgo, with 12,983 habitants in 2005, according to INEGI (Instituto Nacional de Estadística, Geografía e Informática) data. The Project site has a hectares total area, but installed wind turbines, platforms and access roads will onl occup a space of hectares (3.5% of total area). The wind turbines will present the following perimeter coordinates: GEOGRAPHIC COORDINATES (º) LONGITUDE (W) LATITUDE (N)

6 page 6 A.4.2. Categor(ies) of project activit: Sectoral Scope 1: Energ industries (renewable / non-renewable sources). A.4.3. Technolog to be emploed b the project activit: The Project will have an installed capacit of 90 MW and it is expected to generate GWh per ear and be working 4, hours per ear. Wind turbines of 2 MW will be installed (Gamesa Eólica G80). The minimum expected operational lifetime is 21 ears. The 90 MW will be evacuated b a new km long 230 kv transmission line, from the Project to the La Ventosa 1 substation. It will be a double circuit aerial line, that will be separated in a stretch of 507 m to enable the crossing with the two 230 kv CFE s lines coming from the substation Juile to the Juchitán II. Figure 2. Project transmission line to the substation La Ventosa where the energ is supplied to CFE The development of the Project will help to promote application of wind turbines in Mexico, an environmentall safe technolog which will contribute to sustainable development. The technological transfer and the local hiring for the electrical and mechanical maintenance will also be an important contribution to the sustainable development in this area. Section A.2 provides detailed information. 1 CFE has recentl changed the name of La Ventosa substation for Ixtepec Potencia Substation.

7 page 7 A.4.4. Estimated amount of emission reductions over the chosen crediting period: The crediting period starts in December 2011 with a total emissions reduction of 1,468,327 tonnes of CO 2 e. Year Annual estimation of emission reductions in tonnes of CO 2 e , , , , , , , ,281 Total estimated reductions (tonnes of CO 2 e) 1,468,327 Total number of crediting ears 7 ears Annual average over the crediting period of estimated reductions 209,761 (tonnes of CO 2 e) Table 2. Emission reductions A.4.5. Public funding of the project activit: No public funding is used for this project activit. SECTION B. Application of a baseline and monitoring methodolog B.1. Title and reference of the approved baseline and monitoring methodolog applied to the project activit: The aproved consolidated baseline methodolog applied in the Project activit is ACM0002 Version 12.1, valid from September 17 th 2010: Consolidated baseline methodolog for grid-connected electricit generation from renewable sources in conjunction with Tool for the demonstration and assessment of additionalit Version and Tool to calculate the emission factor for an electricit sstem version 2. B.2. Justification of the choice of the methodolog and wh it is applicable to the project activit: The project can meet the applicabilit criteria of the baseline and monitoring methodolog (ACM0002). Therefore the consolidated baseline methodolog for grid-connected electricit generation from renewable sources is applicable to the project: The Piedra Larga Project consists of a wind farm that supplies electricit capacit addition (90 MW) using wind energ resources providing power to the grid;

8 page 8 B.3. The Piedra Larga Project is not an activit that involves switching from fossil fuels to renewable energ at the site of the project activit; and The power grid can be clearl identified as shown in SENER s Prospectiva del sector eléctrico document, which provides information and data about the geographic area and infrastructure in Mexico, energ exports and imports from/to the Mexican sstem, detailed characteristics of the Mexican sstem, etc. Information is publicl available and can be found in the CFE ( and SENER ( websites. Description of the sources and gases included in the project boundar: Baseline Source Gas Included? Justification / Explanation Electricit delivered CO 2 Yes According to ACM0002 methodolog, for the to the grid b the CH 4 No baseline determination: CO 2 emissions from operation of gridconnected electricit generation in fossil fuel fired power power N 2 O No plants that are displaced due to the project plants activit. Table 3. Sources and gases included in the project boundar B.4. Description of how the baseline scenario is identified and description of the identified baseline scenario: According to ACM0002 version 12.1 methodolog, if the project activit is the installation of a new gridconnected renewable power plant/unit, the baseline scenario is the following: Electricit delivered to the grid b the project activit would have otherwise been generated b the operation of grid-connected power plants and b the addition of new generation sources, as reflected in the combined margin (CM) calculations described in the Tool to calculate the emission factor for an electricit sstem. The Project is the installation of a new grid-connected renewable power plant that connects with and delivers electricit to SIN Mexican grid. According to Tool to Calculate the Emission Factor for an Electricit Sstem, the delineation of grid boundaries of the Project is SIN grid. According to the methodolog ACM0002, the baseline scenario of the Project is the provision of an equivalent amount of annual power output b SIN grid which the Project is connected to. B.5. Description of how the anthropogenic emissions of GHG b sources are reduced below those that would have occurred in the absence of the registered CDM project activit (assessment and demonstration of additionalit): The Piedra Larga Project phase I will reduce anthropogenic GHG emissions b suppling zero GHG emission power, which will displace fossil fuel-fired electricit generation. Operation of the wind farm, which uses a non-ghg emitting technolog, will displace marginal electricit generated on the Mexican Grid primaril generated through the combustion of fossil fuels. Consequentl anthropogenic GHG emissions will be avoided, specificall, 1,468,327 tco 2 e during the first crediting period. As mentioned before some regions in Mexico such as Oaxaca State offer ver good wind conditions to develop wind farms for power generation. However, the development of wind farms has encountered

9 page 9 economic and financial challenges (for example, there are no premiums or incentives for sales of energ from renewable sources like in other countries), institutional barriers and legal and regulator framework with an incipient maturit level, and lack of information and organizational structure and therefore at present the Project is not a ver attractive alternative in the business-as-usual ( BAU ) scenario. In other words, the Piedra Larga Project would onl be developed and built if it is registered as a CDM project. According to Prospectiva del sector eléctrico , an official document issued b the Mexican government, wind power installations will onl comprise 2.31% of the total power installed within the Mexican energ sstem in 2024 according to long-term planning estimates. The Mexican energ sstem will be until 2020 mainl based on combined ccle, based on fossil fuels and natural gas, with the 52% of the generated energ in It also has to be noted that the contribution of wind power to the power generation sstem is ver unlikel to happen if these plants does not receive some sort of direct or indirect financial support, e.g. in the form of CERs from CDM projects. Analsis of the additionalit of the project To demonstrate the project s additionalit, Tool for the demonstration and assessment of additionalit (version 05.2) has been applied following the steps defined: Step 1. Identification of alternatives to the project activit consistent with current laws and regulations Sub-step 1a: Define alternatives to the project activit Definition of alternative scenarios to the project activit that otherwise could be implemented in case that the project activit does not reach its operative status. Under the current circumstances of the Mexican power sector, the following alternatives available to the project developer have been identified: 1. No project activit undertaken (continuation of current practice). Based on data provided b SENER, the continuation of current situation will be natural gas-fired CCGT construction. The latest planning document issued b SENER 1 shows 53.2% of the 5.11 GW of fixed planned capacit will be based on combined ccle power plants, while the other 46.8% is distributed between other technologies (gas, geothermal, internal combustion diesel tpe, etc.). Therefore, the BAU alternative would most likel be gas-fired power generation sponsored b CFE. 2. Implementation of power generation plants for renewable sources (minihdro power plants, biomass plants) to obtain equivalent electricit output. Minihdro power plants would not produce the same GWh than the project and would be necessar conventional hdro, which has a large environmental impact. 3. Implementation of the Project without CDM assistance. The 90 MW wind power project is developed without obtaining the incremental revenues that result from CDM registration. 1 Secretaría de Energía, México Prospectiva del Sector Eléctrico (table 32, page 129). DT/pub/Prospectiva_electricidad%20_ pdf

10 page 10 Without CDM incomes, the Project could not be developed due to the regulator, economical and technical obstacles for its development. Therefore, considering the environmental impacts of large hdro, the baseline scenario for the proposed project is the continuation of the current practice, which means that the Piedra Larga Project would not be implemented. Sub-step 1b: Consistenc with mandator laws and regulations CFE is Mexico's state-owned utilit. The countr's Public Electricit Service Act (Le del Servicio Público de la Energía Eléctrica) was amended in December 1992, allowing private participation in such generation activities as described in article 36 from Le del Servicio Público de Energía Eléctrica. Independent Production (Producción Independiente): The are large generation projects sponsored b CFE in which the developer builds and operates the power plant. All energ is sold to CFE at a fixed price under a long term PPA (tpicall 25 ears) and new plants must be included in CFE expansion plans. Self-consumption (Autoabastecimiento): The producer generates power for its own consumption. The power generator ma share the ownership of the production compan, joining with a number of consumers. Likewise, energ not used b the consumer has to be sold to CFE at a fixed price. It is worth mentioning that most of non-independent production private generation in Mexico has been developed under this scheme. Cogeneration (Cogeneración): It is the power generation combined with steam or other thermal energ production for Self-consumption. In order to develop a project under this scheme, it is a requirement that the efficienc of the whole sstem (i.e., electricit and thermal energ) is higher than that each part independentl. The ownership structure of cogeneration facilities is similar to that of Self-consumption projects. Small energ producers (Pequeña producción): These are power plants smaller than 30 MW, located in specific areas determined b SENER, and which production must be sold to CFE. At present renewable projects promoted b private investors can onl be developed under Independent production or Self-consumption schemes. Since Piedra Larga Project is not included in the CFE expansion plan, it can onl be developed under the Self-consumption scheme. Step 2. Investment analsis We will next demonstrate that the project activit is economicall less attractive than other alternatives without additional revenues from the sale of Certified Emission Reductions (CER). Accordingl, a benchmark analsis was performed to demonstrate the project additionalit.

11 page 11 Sub-step 2a. Determine appropriate analsis method Since the proposed project will earn revenues from not onl CDM but also electricit sales, related the simple cost analsis method is not appropriate. Instead, investment comparison analsis benchmark analsis (Option III) will be applied. It is worth mentioning that the data used for the financial parameters analsis corresponds to the time when investment decision took place, which was on December 3 rd 2009, time when the buing of the turbines was awarded to Gamesa. Sub-step 2b.- Option III. Appl benchmark analsis The additionalit of the Piedra Larga Project will be demonstrated b benchmark analsis with Project IRR as financial parameter. According to the Tool for the demonstration and assessment of additionalit (version 05.2), a relevant benchmark for a project IRR can be derived from government bond rates increased b a suitable risk premium to reflect private investment and/or project tpe. Accordingl, a benchmark value of 11.41% has been determined. This value takes into consideration of the rates for Treasur Bonds in Mexico and a risk premium to reflect private investment countr risk factors, as follows: The Bank of Mexico indicates that the rate for 20-ear Fix Rate Bond ( Bono a tasa fija a 20 años ) is 8.44%. This value corresponds to the the Bond rate of December 2009, month in which the investment decision took place. ( &idcuadro=cf114&sector=7&locale=es). The risk premium was determined considering both the mature market investment premium and the technolog risk premium: o o Investment premium: According to the Bloomberg database, an acknowledged specialist in providing financial data and investment information, the risk premium for Mexico is 2.972%. Although this figure reflects the countr risk of the date of December 2009, it is not likel that this rate would change during the investment phase of the project given the relativel stable state of Mexico s econom with respect to the risk. 2 Technolog risk: a reliable risk premium related to wind energ projects could not be identified due to a lack of public information in this sector. However, this risk has not been considered in the benchmark value, as a conservative approach, since wind energ is the onl business of Desarrollos Eólicos Mexicanos de Oaxaca 1 SA de CV (DEMEX OAXACA 1). In line with a conservative approach, a benchmark of 11.41% has been selected. 2 Here, the most conservative risk premium between the value available at Damodaran Online ( and at Bloomberg database has been used.

12 page 12 Sub-step 2c. Calculation and comparison of financial indicators According to the methodological tool for additionalit demonstration, the previousl indicated financial indicator have been calculated for the Piedra Larga Project and compared with the context situation. Benchmark analsis comparison (Option III): Estimations on basic parameters for calculation of Piedra Larga Project financial indicators are the following: Installed capacit (MW) 90 Estimated output (MWh/ear) 365,931 Inicial Price ($USD/MWh) 68 Annual average income (Million $USD/Year) 35 Total Investment (Million $USD) 187 Operating cost (Million $USD/Year) 6 Project Lifetime 21 Income Tax 28% Inflation Rate 3.73% Depreciation Period (ears) 20 Residual Value (Million $USD) 0 Expected CERs price (USD/tCO 2 ) 14 Table 4. Financial parameters Financial parameter Project IRR (%) Without CERs sales 9.48% With CERs sales 10.54% Table 5. Financial parameters As shown, revenue from the CER sales would greatl improve the financial feasibilit of the Project, providing an incentive to overcome existing barriers. A benchmark analsis for project IRR has been performed b comparing the project s IRR with the benchmark rates of return available to investors in Mexico. The parameters are shown in the following table: IRR Benchmark Project IRR without CER revenue Rate of return - Benchmark Base Case values 9.48% 11.41% Table 6. IRR benchmark rates The project IRR is calculated at 9.48% without CER revenue and is substantiall below the benchmark rate. Since the CDM project activit has a less favorable indicator (lower project IRR) than the benchmark, the CDM project activit cannot be considered as financiall attractive. The IRR also demonstrates that the Project is not economicall attractive without support of CER income.

13 page 13 Sub-step 2d. Sensitivit Analsis A sensitivit analsis is a frequentl used method for assessing the perceived uncertainties b identifing the potential changing ranges of some ke elements and potential impacts of such changes on the economic model of the Project. A sensitivit analsis has been carried out for some financial indicators when fluctuating within the range of -10% to +10%: Financial indicators Project IIR sensibilit analsis 10% 5% Base Case -5% -10% Project Cost 8.52% 8.98% 9.48% 10.02% 10.60% Electricit Price 10.66% 10.08% 9.48% 8.86% 8.22% O&M Cost 9.65% 9.72% 9.48% 9.87% 9.95% Electricit Generation 10.66% 10.08% 9.48% 8.86% 8.22% Table 7. Financial parameters sensivit analsis. As shows the sensibilit analsis of the main variable financial parameters, the revenue obtained from the CER will greatl improve the financial feasibilit of the Project and will provide an incentive to overcome existing barriers. Step 3. Barrier analsis N/A Step 4. Common practice analsis Sub-step 4a. Analze other activities similar to the proposed project activit. This wind energ source is not similar to an other technolog or power plant due to its technical characteristics. As this kind of technolog still has to face a wide number of barriers in Mexico to be developed, almost all Wind Farms projects in Mexico have been implemented with CDM support. CDM wind farms developed in Mexico are the following: Project Activit Status Date Bii Nee Stipa Registered December 2005 Eurus Wind Farm Registered Januar 2007 Bii Nee Stipa III Registered Februar 2007 La Venta II Registered June 2007 La Ventosa Wind Energ Project Registered December 2007 Santo Domingo Wind Energ Project Registered November 2008 Bii Stinu Wind Energ Project Registered Januar 2009 Fuerza Eólica del Istmo Wind Farm Registered August 2009

14 page 14 Onl one not CMD wind farm similar project, La Venta III with 101 MW, is actuall under construction in México. La Venta III project is being developed under a national large scale renewable energ program ( Proecto de Energías Renovables a Gran Escala PERGE) consisting on helping Mexico to develop the initial experience required for implementing renewable energ applications connected to the grid with a commercial base. Therefore, a grant was stated b FMAM of about millions US$ for helping to the construction of this 101 wind farm. Sub-step 4b. Discuss an similar options that are occurring. The Piedra Larga Project is not included in PERGE program and consequentl is not being given an economic support as was La Venta III project. Besides, no other similar activities are observed. Similar projects that have been recentl announced rel on additional income from registration as a CDM project in order to overcome the existing barriers, as La Venta II Wind Farm project (83.3 MW), La Ventosa Wind Farm project (102 MW, but onl 79.9 MW constructed at the moment) and Fuerza Eólica del Istmo Wind Farm project (50 MW), among others. As a result of appling the Tool for the demonstration and assessment of additionalit ver. 5.2 it is concluded that based on conservative approaches and assumptions the proposed project activit Piedra Larga Wind Farm fulfils all the additionalit requirements demonstrating that the CDM registration is required and fundamental for it s implemented. Prior CDM consideration: The project participant had undertaken the proposed project activit b considering the CDM benefits to overcome the financial barriers associated with it. The project participant, during their decision to invest in the project, had seriousl considered CDM benefits. Besides, there are several other initiatives that have been taken b the project participant for successfull and timel implement this project as a CDM project activit. According to EB 49 Annex 22, project participant of project activities with a starting date on or after 02 August 2008 must inform a Host Part DNA and the UNFCCC secretariat of the commencement of the project activit and of their intention to seek CDM status. According to the requirements, in Piedra Larga s Proect such notification has been made within six months of the project activit start date, 23/12/2009, when contract for wind turbines suppl was signed. In order to demonstrate the prior consideration of CDM, next is included a timetable indicating all the relevant information regarding the development of the project and the main events related to the CDM development (shown in bold font):

15 page 15 Milestone Date Start of stakeholders consultation process June 2008 Initial PPA signed 2 December 2008 Environmental Impact Manifest (MIA) issued 9 Januar 2009 Wind stud 22 januar 2009 Contract with Garrigues Medio Ambiente consultant compan for carring out Piedra Larga s PDD 13 Februar 2009 CRE (Energ Regulator Commission or Comisión Reguladora de la Electricidad) permit 4 June 2009 Final PPA signed Jul 2009 Approval of the turbines suppliers proposal with the final price. (Time of investment decision) 3 December 2009 Contract with the selected DOE 18 December 2009 EPC contract signed including the technolog suppl (Starting date) 23 December 2009 PDD public information in UNFCCC web 29 December 2009 Contacts with potential CER buers 25 Januar 2010/ 5 Jul 2010 Prior Consideration notification sent to DNA 5 Ma 2010 Interconnection Agreement with CFE (Electricit Federal Commission or Comisión Federal de Electricidad) to get access to the grid 28 Ma 2010 Reception in UNFCCC of the Prior Consideration 14 June 2010 Obtention of the LoA from the DNA 22 June 2010 Start of the construction of Piedra Larga Wind farm Februar 2011 Wind farm starts operations December 2011 Start of the crediting period December 2011 The chronolog of event as set out in the table clearl shows that real and continuing action to secure CDM status for the project activit was taken right at the time of project start.

16 page 16 B.6. Emission reductions: B.6.1. Explanation of methodological choices: The baseline scenario represents the electricit that would have otherwise been generated b the operation of the grid-connected power plants and b the addition of new generation sources. Step 1.Identif the relevant electricit sstems The Mexican electricit sstem (Sistema Electrico Nacional, SEN) is formed b the Interconnected National Sstem (Sistema Interconectado Nacional, SIN) and two isolated grids (Baja California and Baja California Sur) 3. For being situated in Oaxaca state, located in the Oriental operation area (See Figure 3), Piedra Larga Phase I wind farm project will deliver the generated electricit to the main grid Sistema Interconectado Nacional (SIN). Figure 3. National Electric Sstem (SEN) operation areas. Source: Prospectiva del Sector Eléctrico , page 172. Nevertheless, data for the SIN grid are not alwas available b their own, so data from the global sstem SEN have been used at some points. There are no imports to the grid within the boundaries of Mexico, but there are electricit imports and exports with electricit sstems in other countries b means of nine electric interconnections with the Unites States of America, Belize and Gautemala. Specificall imports come from the US and exports go to EUA, Belize and Guatemala, being most of it received or exported throught the Baja California isolated grid. Therefore, SIN imports and exports data are given in table below: 3 Source: SENER Prospectiva Sector Eléctrico ) p 123, among others.

17 page % of total generation 2008 Exports (GWh) % Imports (GWh) % Net Exchange (GWh) % Table 8. Electricit imports and exports. Source: SENER, Prospectiva del sector eléctrico (table 17, page 94) According to ACM0002, the emission factor for imports from connected electricit sstems located in other countries is 0 tco 2 /MWh. Furthermore, electricit exports should not be subtracted from electricit generation data used for calculating and monitoring the baseline emission factors. Step 2. Choose whether to include off-grid power plants in the project electricit sstem The option I is chosen, so onl grid power plants are included in the calculation. Step 3. Select a method to determine the operating margin (OM) The ACM0002 consolidated methodolog provides four methods to calculate the operating margin. For the Piedra Larga Project, option (a) Simple OM has been chosen because: i) sufficient data is not available for using the Dispatch Data Analsis option, and ii) low-cost/must-run resources in Mexico have represented less than 50% of total grid generation over the most recent ears (see table below). It is worth pointing out that the most recent data available are related to period. The Operating Margin calculation is based on earl statistics provided b the Mexican Energ Ministr SENER Average Fuel-oil 31.8% 29.7% 23.1% 21.3% 18.37% Combined Ccle 34.6% 33.5% 40.5% 44.2% 45.72% Renewable + Hdro 15.2% 15.9% 16.5% 14.9% 19.59% Coal 8.6% 8.4% 8.0% 7.8% 7.54% Dual (coal + fuel oil) 3.8% 6.5% 6.2% 5.8% 2.92% Turbogas 1.3% 0.6% 0.7% 1.1% 1.19% Nuclear 4.4% 4.9% 4.8% 4.5% 4.16% Diesel 0.3% 0.4% 0.4% 0.5% 0.52% Low-cost/must-run 19.6% 20.9% 21.3% 19.4% 23.7% 21.0% Net generation (GWh) 190, , , , ,276 Table 9. Percentage of electricit generation b energ source. Source: SENER Prospectiva del sector eléctrico (table 21, page 110) As shown in the table above, the average share of low-cost/must run generation (e.g.; hdro, geo/wind and nuclear plants) for the last five ears has been 21%, significantl below 50%.

18 page 18 The Simple OM emission factor can be calculated using either of the two following data vintages for ear (s): Ex-ante option: A 3-ear generation weighted average, based on the most recent data available at the time of submission of the CDM-PDD to the DOE for validation, without requirement to monitor and recalculate the emissions factor during the crediting period, or Ex-post option: The ear in which the project activit displaces grid electricit, requiring the emissions factor to be updated annuall during monitoring. Ex-ante option has been chosen because the earl statistics provided b SENER needed to calculate the OM ex-post are normall published more than one ear after the end of the reporting ear, leading to large delas between emission reduction and monitoring, verification and issuance of CERs. It has been also chosen due to the simplicit of the project development and also for the emission reduction verification. Step 4: Calculate the operating margin emission factor according to the selected method. The Simple OM Emission Factor (EFOM,simple,) is calculated as the generation-weighted average emissions per electricit unit (tco2/mwh) of all generating sources serving the sstem, not including low-operating cost and must-run power plants. It has been calculated following the Option B mentioned in the Step 4 of the Tool to calculate the emission factor for an electricit sstem (version 2). Option B is used because: (a) total net electricit generation of all power plants serving the sstem as well as the fuel tpes and total fuel consumption of the project electricit sstem are available; conversel, data for option A are not; and (b) onl nuclear and renewable power generation are considered as low-cost/ must-run power sources and the quantit of electricit supplied to the grid b these sources is known; and (c) off-grid power plants have not been included in the calculation (see Option I chosen in Step 2). Option B addresses the calculation based on data on fuel consumption and net electricit generation of each power plant / unit, resulting in the equation below. Where: EF FCi, NCVi, EFCO2, i,, i = EG (tco 2 e/mwh) grid OMsimple, EF grid,omsimple, FC i, NCV i, EF CO2,i, EG is the simple operating margin CO 2 emission factor in ear (tco 2 /MWh); refers to the amount of fossil fuel tpe i consumed in the project electricit sstem in ear (mass or volume unit); refers to the net calorific value (energ content) of fossil fuel tpe i in ear (TJ/Gg); refers to the CO 2 emission factor of fossil fuel tpe i in ear (tco 2 /GJ); refers to the net electricit generated and delivered to the grid b all power sources serving the sstem, not including low cost/ must run power plants/units, in ear (MWh);

19 page 19 i refers to all fossil fuel tpes combusted in power sources in the project electricit sstem in ear. refers to the relevant ear as per the data vintage chosen in step 3. The parameters that are used for calculating the Operating Margin are obtained as follows: The FC i, factor can be found in SENER s official documents Prospectiva del sector eléctrico , Prospectiva del sector eléctrico , which are available at and private communication with SENER for 2008 data. The EG factor has been obtained from the Prospectiva del sector eléctrico SENER s official publication. The NCV i, and EF CO2,i, factors can be found in the 2006 IPCC Guidelines for National Greenhouse Gas Inventories, Volume 2 (Energ), Chapter 1 (Introduction). The calculation of the operating margin includes electricit imports to the grid. Step 5: Identif the group of power units to be included in the build margin (BM). The sample of power plants must be chosen between two options proposed in the Tool to calculate the emission factor for an electricit sstem version 2: (a) The set of five power units that have been built most recentl, or (b) The set of power capacit additions in the electricit sstem that comprise 20% of the sstem generation (in MWh) and that have been built most recentl. Option (b) has been chosen to calculate the BM as this is the alternative that ields a sample group which comprises the larger annual generation. In terms of vintage data, one of the following two options must be chosen: Option 1. Calculate, for the first crediting period, the BM emission factor ex-ante based on the most recent information available on units alread built; and for the second crediting period, update the BM emission factor based on the most recent information available on units alread built at the time of submission of the request for renewal of the crediting period to the DOE. For the third crediting period, the BM emission factor calculated for the second crediting period should be used. This option does not require monitoring the emission factor during the crediting period. Option 2. Update the build margin emission factor annuall, ex-post, for the first crediting period, including those units built up to the ear of registration of the project activit or, if information up to the ear of registration is no et available, including those units built up to the latest ear for which information is available. For the second crediting period, the BM emission factor shall be calculated ex-ante, as described in option 1 above. For the third crediting period, the build margin emission factor calculated for the second crediting period should be used.

20 page 20 Option 1 has been chosen. So the calculation of the Build Margin emission factor EF grid,bm, ex-ante based on the most recent information available on plants alread built for sample group m at the time of PDD submission has been carried out. Step 6: Calculate the build margin (BM) emissions factor. The BM emission factor has been addressed following the equation below, as indicated b the Tool to calculate the emission factor for an electricit sstem. Where: EF grid, BM, = m EG m m, EF EG m, EL, m, (2) EF grid, BM, EG m, EF EL, m, m refers to the Build Margin CO 2 emission factor in ear (tco 2 /MWh) refers to the net quantit of electricit generated and delivered to the grid b power unit m in ear (MWh) refers to the CO 2 emission factor of power unit m in ear (tco 2 /MWh) refers to the power units included in the build margin refers to the most recent historical ear for which power generation data is available. EF EL, m, has been determined following option A2, as onl data on electricit generation and the fuel tpes used is available. This emission factor has been calculated using the CO 2 emission factor of the fuel tpe used and the efficienc of the power unit, as follows: Where: EF EL, m, = EF CO2, m, i, η m, 3.6 EF EL, m, EF CO2, m, i, refers to the CO 2 emission factor of power unit m in ear (tco 2 /MWh) refers to the average CO 2 emission factor of fuel tpe i used in power unit m in ear (tco 2 /GJ) η m, average net energ conversion efficienc of power unit m in ear (%) refers to the most recent historical ear for which power generation data is available. Step 7: Calculate the combined margin (CM) emissions factor. The combined margin emissions factor is calculated as follows: EF w grid, CM, = EFgrid, OM, wom + EFgrid, BM, BM Where: ω OM refers to the weighting of operating margin emissions factor (%) ω BM refers to the weighting of build margin emissions factor (%)

21 page 21 For wind and solar projects, the default weights are as follows: ω OM = 0.75 and ω BM = 0.25 (due to their intermittent and non-dispatchable nature). For the calculation of these two terms (BM and OM), official data published b SENER in the Prospectiva del sector eléctrico documents have been used. These documents can be accessed at B.6.2. Data and parameters that are available at validation: Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actuall applied : An comment: Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures FC i, TJ/da Amount of fossil fuel tpe i consumed in the project electricit sstem in ear Private communications with SENER for 2008 data. Prospectiva del sector eléctrico , page 148, graph 39, for 2007 data. Prospectiva del sector eléctrico , page 116, graph 40, for 2006 data. Year Consumed fossil fuel (TJ/da) , , ,407 Specific data obtained from an official source has been chosen for the fuel consumption. EF CO2,i, and EF CO2,m,i, tco 2 /TJ CO 2 emission factor of fossil fuel tpe i used in power unit m in ear IPCC default values at the lower limit of the uncertaint at a 95% confidence interval as provided in Table 1.4 of Chapter 1 Vol. 2 of the 2006 IPCC Guidelines on National GHG Inventories. Fuel tpe CO 2 emission factor (tco 2 /TJ) Fuel oil 75.5 Natural Gas 54.3 Natural Gas Liquids 58.3 Diesel 72.6 Coal 87.3 As there are not available local or countr specific values of carbon content per fuel tpe in Mexico, IPCC world-wide default values have been used.

22 page 22 actuall applied : An comment: Data / Parameter: (η m,) Efficienc power plants Data unit: % Description: Average net energ conversion efficienc of power unit m in ear Source of data used: SENER, Prospectiva del sector eléctrico (table 47, page 159). Value applied: Technolog Efficienc (%) Thermal 37.6% Gas Turbine 39.4% Combined Ccle 51.7% Internal Combustion 45.1% Justification of the choice of data or description of measurement methods and procedures actuall applied : An comment: Efficienc for each plant has been considered following the values provided b SENER instead of default values, as the most accurate approximation, for being specific National Electric Sstem data. Nevertheless, as data given b SENER corresponds to the main tpical proects considered for the expansion of the National Electric Sstem of Mexico, the more conservative data for each technolog have been chosen. Data / Parameter: NCV i, Data unit: MJ/kg Description: Net calorific value (energ content) of fossil fuel tpe i in ear. It is the quantit of heat released b the full combustion of a unit of fuel when the water produced is assumed to remain as vapor and the heat is not recovered. Source of data used: IPCC default values at the lower limit of the uncertaint at a 95% confidence interval as provided in Table 1.2 of Chapter 1 Vol. 2 of the 2006 IPCC Guidelines on National GHG Inventories. Value applied: Fuel tpe NCV i [MJ/kg] Natural gas 46.5 Natural Gas Liquids 40.9 Fuel oil 39.8 Diesel 41.4 Coal 24.0 Justification of the choice of data or description of measurement methods and procedures actuall applied : An comment: Since local net calorific values per fuel tpe are not available, IPCC world-wide default values would be used. As fuel consumption official published data are given in TJ, those values of NCV are not used in calculations, for being alread included in the fuel consumption values used.

23 page 23 Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actuall applied : An comment: EG m, and EG GWh In OM calculation (EG ): net electricit generated and delivered to the grid b all power sources serving the sstem, not including low cost/must run power plants/units, in ear. In BM calculation (EG m, ): net quantit of electricit generated and delivered to the grid b power unit m in ear For electricit generated in OM: SENER, Prospectiva del Sector Eléctrico (table 21, page 110). For electricit generated b power units in BM, SENER, Prospectiva del Sector Eléctrico (table 47, page 159), private communication with CFE and CFE 2003 annual report, available at EG (GWh) 162, , ,170 EG m, - - See Table 10 Data are calculated in accordance with the tool to calculate the emission factor for an electricit sstem version 02, and are provided b official national sources. Data / Parameter: GWP CH4 Data unit: tco 2 e/tch 4 Description: Global warming potential of methane valid for the relevant commitment period Source of data used: IPCC Value applied: 21 tco 2 e/tch 4 Justification of the Given b the ACM0002 Methodolog version 12.1 choice of data or description of measurement methods and procedures actuall applied : An comment: Data / Parameter: W OM Data unit: Fraction Description: Weight of Operating Margin Emission Factor in the emission factor used for the proposed CDM project activit Source of data used: Tool to calculate the emission factor for an electricit sstem, version 2 Value applied: 0.75 Justification of the This is in accordance with the methodolog ACM0002 version choice of data or description of

24 page 24 measurement methods and procedures actuall applied : An comment: Data / Parameter: W BM Data unit: Fraction Description: Weight of Built Margin Emission Factor in the emission factor used for the proposed CDM project activit Source of data used: Tool to calculate the emission factor for an electricit sstem, version 2 Value applied: 0.25 Justification of the This is in accordance with the methodolog ACM0002 version choice of data or description of measurement methods and procedures actuall applied : An comment: Data / Parameter: EF OM, Data unit: tco 2 /GWh Description: Operating Margin Emission Factor for Mexican grid in ear Source of data used: SENER, Prospectiva del sector eléctrico (table 21, page 110; table 17, page 94), Prospectiva del sector eléctrico (graph 39, page 148) Prospectiva del sector eléctrico (graph 40, page 116), 2006 IPCC default values and private communication with SENER. Value applied: tco 2 /GWh Justification of the The Simple OM Emission Factor (EFOM,simple,) is calculated as the generationweighted average emissions per electricit unit of all generating sources serving choice of data or description of the sstem, not including low-operating cost and must-run power plants. It has measurement been calculated following the Option B mentioned in the Step 4 of the Tool methods and to calculate the emission factor for an electricit sstem (version 2). procedures actuall applied : An comment: Data / Parameter: EF BM, Data unit: tco 2 /GWh Description: Build Margin Emission Factor for Mexican grid in ear Source of data used: SENER, Prospectiva del sector eléctrico (Table 18, page 96; table 47, page 159), Prospectiva del sector eléctrico (Table 19, page 101), Prospectiva del sector eléctrico (table 19, page 77), Prospectiva del sector eléctrico (table 13, page 57), Prospectiva del sector eléctrico (table 14, page 51), Prospectiva del sector eléctrico (table 9, page 44), Private communications with CFE and CFE 2003 Annual Report available at

25 page 25 Value applied: Justification of the choice of data or description of measurement methods and procedures actuall applied : An comment: tco 2 /GWh According to the Tool to calculate the emission factor for an electricit sstem version 2, the sample of power plants have been calculated as Option b (the set of power capacit additions in the electricit sstem that comprise 20% of the sstem generation and that have been built most recentl). In terms of vintage data Option 1 has been chosen. So the calculation of the Build Margin emission factor EF grid,bm, ex-ante based on the most recent information available on plants alread built for sample group m at the time of PDD submission has been carried out. Data / Parameter: EF grid CM, Data unit: tco 2 /GWh Description: Combined margin CO 2 emission factor for the proposed CDM project activit. Source of data used: Formula given b the Tool to calculate the emission factor for an electricit sstem version 2 Value applied: tco 2 /GWh Justification of the ex-ante baseline emission factor choice of data or description of measurement methods and procedures actuall applied : An comment: B.6.3. Ex-ante calculation of emission reductions: Calculate the operating margin emission factor (EF OM ): Using the Tool to calculate the emission factor for an electricit sstem, data on the specific energ consumption b fuel tpe is directl taken from SENER s documents Prospectiva del sector eléctrico , Prospectiva del sector eléctrico and private communications with SENER for 2008 data. Data on electricit generation, imports and exports, were taken from Prospectiva del sector eléctrico (table 17, page 94). As fuel consumption data, provided b the Mexican Government official publications, are given in TJ units, NCV factor is alread included in the official published used value. The emission coefficient factor b fuel tpe is determined in tco 2 /TJ, taken from the 2006 IPCC Guidelines for National Greenhouse Gas Inventories, Volume 2 (Energ), Chapter 1 (Introduction), Table 1.4 (Default CO 2 emission factors for combustion), Effective CO 2 emission factor, 95% confidence interval, lower limit value. Them, appling the mentioned values, the next annual Operating Margin Emission Factors are obtained: 4 Available at

26 page 26 FCi,2006 NCVi,2006 EFCO2, i,2006 i EFgrid, OMsimple,2006 = EG = 676.0tCO2 / GWh 2006 FCi,2007 NCVi,2007 EFCO2, i,2007 i EFgrid, OMsimple,2007 = EG = 647.4tCO2 / GWh 2007 FCi,2008 NCVi,2008 EFCO2, i,2008 i EFgrid, OMsimple,2008 = EG = 628.1tCO2 / GWh The 3-ear weighted average Operating Margin is calculated below: EF EFgrid, OMsimple, average = = 650.3tCO2 / GWh EG 2008 grid, OMsimple, EG Calculate the build margin emission factor (EF BM ): According to the definition and the formulae to calculate the Build Margin, the newer power plants installed in Mexico that comprise the earl last 20% sstem generation are those indicated in the following table:

27 page 27 Additions 2008 Additions 2007 Additions 2006 Additions 2005 Additions 2004 Additions 2003 Name of the power plant Power plants characteristics Start of operation Technolog * Fuel Installed capacit (MW) Gross generation (GWh) Self-use rate (%) Net generation (GWh) Accumulated net generation (%) Humeros 07/04/2008 GEO % % Ciudad del Carmen 01/05/2008 GT Diesel % % Ciudad del Carmen 01/05/2008 GT Diesel % % Vallejo (LFC) 09/08/2007 GT Natural Gas % % Holbox 01/07/2007 IC Diesel % % Holbox 01/07/2007 IC Diesel % % Tamazunchale (PIE) 21/06/2007 CC Natural Gas 1, , % 6, % El Cajón (Leonardo 01/06/2007 HY % % Rodríguez Alcaine) El Cajón (Leonardo Rodríguez Alcaine) 01/03/2007 HY % % Cootepec (LFC) 30/01/2007 GT Natural Gas % % Cootepec (LFC) 30/01/2007 GT Natural Gas % % Cuautitlán (LFC) 30/01/2007 GT Natural Gas % % Villa de las Flores (LFC) 04/01/2007 GT Natural Gas % % Victoria (LFC) 04/01/2007 GT Natural Gas % % Remedios (LFC) 04/01/2007 GT Natural Gas % % Ecatepec (LFC) 04/01/2007 GT Natural Gas % % Atenco (LFC) 2006 GT Natural Gas % % Chihuahua II (El Encino) 2006 CC Natural Gas % % Altamira V (PIE) 2006 CC Natural Gas 1, , % 8, % Tuxpan V (PIE) 2006 CC Natural Gas , % 3, % Valladolid III (PIE) 2006 CC Natural Gas , % 3, % Hermosillo 2005 CC Natural Gas % % Ixtaczoquitlan 2005 HY % % Yecora 2005 IC Diesel % % Botello 2005 HY % % Rio Bravo IV PIE 2005 CC Natural Gas , % 3, % La Laguna II PIE 2005 CC Natural Gas , % 3, % Holbox 2005 IC Diesel % % El Sauz 2004 CC Natural Gas % % Tuxpan (Pdte. Adolfo López 2004 GT Natural Gas % % Mateos) San Lorenzo Potencia 2004 GT Natural Gas % % Rio Bravo III PIE 2004 CC Natural Gas , % 1, % Chicoasén (Manuel Moreno 2004 HY , % 2, % Torres) Transalta Campeche 2003 CC Natural Gas , % 1, % Naco Nogales 2003 CC Natural Gas , % 2, % 43, NOTE: *Technolog (CC:Combined Ccle; HY:Hdro; GT: Gas Turbine; IC: Internal Combustion; TH; Thermal, Simple Ccle) Table 10. Latest generation of the newest power plants covering 20% of the sstem generation from 2008 backwards. Source: SENER, Prospectiva del sector eléctrico , Prospectiva del sector eléctrico , Prospectiva del sector eléctrico , Prospectiva del sector eléctrico , Prospectiva del sector eléctrico , Prospectiva del sector eléctrico , Private communications with CFE and CFE 2003 Annual Report. Data of Name of the power plant, Start of operation, Technolog and Installed capacit have been obtained from SENER Prospectiva del sector eléctrico (table 18, page 96), Prospectiva del sector eléctrico (table 19, page 101), Prospectiva del sector eléctrico (table 19, page 77), Prospectiva del sector eléctrico (table 13, page 57), Prospectiva del sector eléctrico (table 14, page 51) and Prospectiva del sector eléctrico (table 9, page 44). Plants included in Baja California and Baja California Sur isolated grids have been excluded as well as CDM registered projects. Data for Fuel and Gross generation have been obtained from private communications with CFE. For the selection of the tpe of fuel for each plant, the most conservative option has been chosen when

28 page 28 different fuels were being used. This is the case of Internal Combustion plants that use fuel oil and diesel, where disel with a more conservative emission factor has been chosen. Aslo, for 2003 additions, CFE 2003 Annual Report (available at have been used. Data for Self-use rate have been obtained from SENER Prospectiva del sector eléctrico (table 47, page 159). There, most conservative data given b technolog have been chosen. The Build Margin emission factor for the ear 2008 is determined as follows: EGm, EFEL, m, m EFgrid, BM,2008 = EG = tco2 / GWh m m, Calculate the combined margin emission factor (EF CM ): The baseline emission factor is calculated as the weighted average of the Operating Margin and the Building Margin emission factors. In the case of wind projects, the default weight for ω OM is 0.75 and for ω BM, 0.25 (owing to their intermittent and non-dispatchable nature). Thus, the obtained ex-ante baseline emission factor which applies for the first crediting period is: EF grid, CM, = EFgrid, OM, wom + EFgrid, BM, wbm = 650.3* * 0.25 = 573.2tCO2 / GWh Calculate the baseline emissions: Baseline emissions include onl CO 2 emissions from electricit generation in fossil fuel fired power plants that are displaced due to the project activit, and are calculated as follows: BE = EGPJ, EFgrid, CM, Where: BE = Baseline emissions in ear (tco 2 /r) EG PJ, = Quantit of net electricit generation that is produced and fed into the grid as a result of the implementation of the CDM project activit in ear (MWh/r) EF grid,cm, = Combined margin CO 2 emission factor for grid connected power generation in ear calculated using the latest version of the Tool to calculate the emission factor for an electricit sstem (tco 2 /MWh) According to the ACM0002 version 12.1 methodolog, the Piedra Larga Project is considered as a Greenfield renewable energ power plant, then: EG PJ, = EG facilit, Where:

29 page 29 EG facilit, = Quantit of net electricit generation supplied b the project plant/unit to the grid in ear (MWh/r) Then, BE = EG facilit, EFgrid, CM, = 365.9GWh 573.2tCO2 / GWh = 209, 761tCO2 Calculate the emissions reductions The emission avoided b the project activit should be calculated as the difference between the baseline emissions (BE ), and project emissions (PE ). Since it is not required to consider project emissions in the case of wind to electricit and no emissions due to leakage are caused b the project activit, the emission reductions are, directl, the baseline emissions. Estimated earl emission reductions calculated as of the first crediting period credits income are the baseline emission factor multiplied b the energ generation. Estimated _ Emission _ Re ductions = BE PE = 209,761tCO 2 e B.6.4 Summar of the ex-ante estimation of emission reductions: Total emission reductions during the crediting period are 1,468,327 tco2 (See Annex 3). Estimation of emission reductions: Years Estimation of baseline emissions (tonnes of CO 2 e) Estimation of project activit emissions (tonnes of CO2e) Estimation of leakage (tonnes of CO2e) Estimation of overall emission reductions (tonnes of CO2e) , , , , , , , , , , , , , , , ,281 Total (tco 2 ) 1,468, ,468,327 Table 11. Ex-ante estimation emission reductions

30 page 30 B.7. Application of the monitoring methodolog and description of the monitoring plan: B.7.1 Data and parameters monitored: Data / Parameter: Data unit: Description: Source of data to be used: Value of data applied for the purpose of calculating expected emission reductions in section B.5 Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: An comment: EG facilit, MWh/ear Quantit of net electricit generation supplied b the project plant/unit to the grid in ear Project activit site. Estimation b Windtest of the annual energ production for the P02 case project GWh/ear Electricit meters Cross check measurements results with record for sold electricit. Measurements will be done each 5 minutes b the power meters installed. Electricit supplied b the Piedra Larga Project to the national grid to be checked b sales receipts. Archived data kept during the crediting period and two ears after b means of electronic and paper backup.

31 page 31 B.7.2. Description of the monitoring plan: The project meets the applicabilit criteria under the monitoring methodolog, ACM0002 Version 12.1 Consolidated baseline methodolog for grid-connected electricit generation from renewable sources. This methodolog is designed, among other things, for Power plants using wind resources. For this purpose and in accordance with monitoring methodolog, the information that needs to be monitored shall include the electricit generation from the proposed project activit, measured from the control house on site. Data will be obtained from two CFE (Comisión Federal de Electricidad) power meters, one as the main meter and a back up one, located at the substation of La Ventosa belonging to CFE. The CFE will deliver to DEMEX OAXACA 1 detailed information about the hourl generated energ. Those aspects are regulated in the Interconnection for Renewable energ sources official model contract. To check the generation output, the electricit measured will be compared with the electricit bill to avoid possible discrepancies. Further details are discussed in Annex 4. For the emission reductions calculation, it will be used the following formula: Annual emission reduction = (project activit s annual electricit dispatched to the grid) * (CO 2 emission factor (ex-ante) of the estimated baseline) The project activit s annual electricit dispatched to the grid (EG facilit, ) will be monitored in accordance to the monitoring requirements of the ACM0002 methodolog, b continuous measurements b electricit meters and at least monthl recording. The DEMEX OAXACA 1 operation and maintenance department will be responsible for the check, authorize and forward monitoring data submitted b CFE, and for calculations and elaborate monitoring reports as well. B.8. Date of completion of the application of the baseline stud and monitoring methodolog and the name of the responsible person(s)/entit(ies): Date of completion: 30/11/2010 (November 30 th 2010) The entit responsible for the application of the baseline and monitoring methodolog: Garrigues Medio Ambiente Consultoría Técnica de Gestión Integrada del Medio Ambiente Hermosilla Madrid, SPAIN Tel: / Fax: ernesto.lluch@garrigues.com; rosario.manas@garrigues.com This entit is not a project participant.

32 page 32 SECTION C. Duration of the project activit / crediting period C.1. Duration of the project activit: C.1.1. Starting date of the project activit: 23/12/2009 (December 23 rd 2009), date for the signature of the EPC contract which includes the turbines suppl. C.1.2. Expected operational lifetime of the project activit: The project activit is expected to have a minimum lifetime of 21 ears from its commissioning date. C.2. Choice of the crediting period and related information: C.2.1. Renewable crediting period: C Starting date of the first crediting period: 01/12/2011 (December 1 st 2011) or the da after the project has been registered, whichever the latest. C Length of the first crediting period: The crediting period will be 7 ears, renewable. C.2.2. Fixed crediting period: C Starting date: Not applicable. C Length: Not applicable.

33 page 33 SECTION D. Environmental impacts D.1. Documentation on the analsis of the environmental impacts, including transboundar impacts: In this zone of the state of Oaxaca it doesn t exist an Environmental Management Units (Unidades de Gestión Ambiental- UGA) or an State or Regional Territorial Ecological Regulation. Also, in accordance to the Protected Natural Areas National Commission (Comisión Nacional de Áreas Naturales Protegidas) and to the Biodiversit Use and Knowledge National Commission (Comisión Nacional para el Uso Conocimiento de la Biodiversidad (CONABIO)), the project site is not included within a Protected Natural Area with federal decree, nor within the High-priorit Terrestrial Regions, High-priorit Marine Regions, High-priorit Hdrologic Regions or Bird Conservation Areas. The project site is not situated within a Federal Protected Natural Area. The nearer protected natural area is La Sepultura, at 80 km in a west direction. Other close to natural protected areas is the national park Bahías de Huatulco (at 70 km) and jungle reserve El Ocote (at 115 km). Figure 4. Protected natural areas in Routh Mexico. Source: CONABIO, 2007 In order to optimize financial, institutional and human resources about biodiversit knowledge in Mexico, the Biodiversit Use and Knowledge National Commission (CONABIO) have defined priorit regions for biodiversit considering terrestrial (priorit terrestrial regions), sea (priorit sea regions) and aquatic continental (priorit hdrologic regions) fields. Also, it has been defined some Bird Conservation Areas with different importance levels. At this time, there are no regulation instruments that restrict the activities in the priorit regions. For that reason, there are no legal impediments to carr out projects as the one explain in this document. Though, it is necessar to consider the application of interaction reduction measures between birds and wind turbines. The stud site is not situated within a Priorit Terrestrial Region. The closest ones are Selva Zoque-La Sepultura, at 17 km, and Sierras del norte de Oaxaca-Mixe, at 21 km approximatel.

34 page 34 Figure 5. Priorit Terrestrial Regions in south Mexico. Source: CONABIO, 2007 The Project site is not situated within a Priorit Sea Region. The closest one is the Laguna Superior e Inferior, located at 7 and 9 km in south direction from the Project site. Figure 6. Priorit Sea Regions in South Mexico. Source: CONABIO, 2007 The Project site is not situated within a Bird Conservation Area. The closest ones are Chimalapas, at 30 km, Uxpanapa, at 53 km and Sierra Norte, at 72 km, approximatel.

35 page 35 Figure 7. Bird Conservation Area in Mexico. Source: CONABIO, 2007 A stud about the monitoring of birds and bats for the whole project territor (including phase I and phase II areas) was delivered in March 2010 and approved b the responsible organization in Agust D.2. If environmental impacts are considered significant b the project participants or the host Part, please provide conclusions and all references to support documentation of an environmental impact assessment undertaken in accordance with the procedures as required b the host Part: DEMEX OAXACA 1 will elaborate an Environmental Management Plan which will incorporate all the proposed prevention, protection, control, mitigation, restoration and compensation measures, and the determining statements in the decision issued b SEMARNAT. The Plan will specif procedures and activities that will be applied, and the expected time that their implementation would require. A noise level evaluation will be carried out in accordance to the MIA requirements, and the possible negative effects will be analsed. The environmental protection actions to carr out are listed next, b phase: Preparation and construction stage Compensate for vegetation lost and its environmental services like the soil retention, flora and fauna habitats, or its participation in the carbon capture through compensation actions in the affected areas (reforestation, erosion caused b the path control measures, etc.) Presentation of the technical report related to the conditions of the area where the wind farm will be built. Presentation of an existing vertebrates stud or sampling. Measures for rescue and conservation of the local species. Local and regional annual bird stud to identif possible nests, food suppl or rest locations for birds. If necessar, establish new prevention and protection measures.