PROJECT DESIGN DOCUMENT (PDD)

Transcription

1 CDM Executive Board Page 1 PROJECT DESIGN DOCUMENT FORM FOR CDM PROJECT ACTIVITIES (F-CDM-PDD) Version 04.1 PROJECT DESIGN DOCUMENT (PDD) Title of the project activity National Bio Energy Nangong Biomass Power Plant Version number of the PDD 01.1 Completion date of the PDD 07/08/2013 Project participant(s) Swiss Carbon Value Ltd. (private entity) National Bio Energy Co., Ltd. (private entity) Host Party(ies) China Sectoral scope and selected methodology(ies) Sectoral scope 1: energy industries (renewable sources) ACM0018 Version Estimated amount of annual average GHG 143,010 tco2e emission reductions

2 CDM Executive Board Page 2 SECTION A. Description of project activity A.1. Purpose and general description of project activity >> The proposed National Bio Energy Nangong Biomass Power Plant (hereafter refers to as the Project), locates in Nangong county, Hebei province, R.P. China. Nangong County, is an important agriculture especially cotton bases of China. The proposed biomass power plant with the capacity of 30 MW, will utilize local surplus biomass residues (mainly as agricultural biomass residues and wood waste) for electricity generation. The proposed project will install one 130 t/h biomass-fired boiler with the technology from BWE Company of Denmark, which is a world leading company in biomass boilers production and biomass cogeneration. The proposed project will also install one turbine and generator, which are produced domestically. Further details on the equipments are provided in A.3. It is estimated that the Project can deliver 193 GWh of electricity to the North China Grid (NCG) utilizing about 300,000 tons biomass residues per year. The utilized biomass by the project, which is all collected from nearby area of the project, has been open burnt or left to decay before the project. The pre-project situation and the baseline scenario are identical: the electricity is produced within the North China Grid and biomass residues are open burnt or dumped to decay in an uncontrolled manner. Thus, when the proposed project is put into operation, it will produce and claim GHG emissions reductions from: - displacing electricity that would otherwise be produced to supply the high-growth, coal-dominated power generation of North China Grid, - avoiding CH4 emissions because the straw would otherwise be dumped or left to decay or burnt in an uncontrolled manner without utilizing it for energy purpose in the absence of the proposed project. The estimated annual GHG emission reductions are 143,010 tco 2 e. The important event of the project please see the table A-1. Table A-1 Important event of the project Date Event November 2008 FSR finalization 30/12/2008 EIA approval 14/1/2009 Project approval 06/03/2009 CDM decision meeting April 2009 Boiler purchase contract 08/06/2009 Generator purchase contract 17/07/2009 Turbine purchase 25/10/2009 Project construction started May/2010 GS VER ERPA negotionation 26/10/2010 Commission started 23/12/2010 Signed GS VER ERPA A.2. Location of project activity A.2.1. Host Party(ies) >> China

3 CDM Executive Board Page 3 A.2.2. Region/State/Province etc. >> Hebei Province A.2.3. City/Town/Community etc. >> Boli village, Wangdaomiao town, Nangong county, Xingtai city A.2.4. Physical/Geographical location >> The project is located 600 meters to the north of Boli village and stands at the north side of Xingde Road. The project has the geographical coordinate with east longitude of 37 21'41. 39"N, '12. 11"E. A.3. Technologies and/or measures >> The proposed project will install an 130t/h high temperature and pressure Biomass Direct Burning boiler, the technology are imported from Denmark BWE Company. This technology has been operated successfully in some European countries such as Denmark, England and Germany. The boiler is manufactured by Longji Power Unit Ltd. The key technical specifications of boiler are listed as Table A-1 below.

4 CDM Executive Board Page 4 Table A-2 Key Technical specifications of boiler Parameters Name Unit Value Model YG-139/9.2-T Type of Boiler / Grate type Boiler maximum continuous rating t/h 130 Superheated Steam pressure Mpa 9.2 Superheated Steam temperature o C 540 Boiler feed-water temperature o C 210 Boiler Efficiency % 92 Boiler Exhaust Temperature o C 190 Boiler fire fuel / Biomass Life time years 20 Other two key equipments are turbine and generator, technologies of which are all provided by domestic manufacturers (respectively Qingdao Jieneng Steam Turbine Group Co., Ltd. and Shandong Jinan Power Generation Equipment Plant). Key technical specifications of turbine and generator are listed as Table A- 2 and Table A-3 respectively. Table A-3 Key technical specifications of turbine Parameters Name Unit Data Model / N Rated Output MW 30 Rated Rotation Speed r/min 3000 Rated Flow t/h 130 Rated Pressure MPa 8.83 Rated Temperature o C 210 Life time years 20 Table A-4 Key technical specifications of Generator Parameters Name Unit Data Model / QF-30-2 Rated Output MW 30 Rated Voltage kv 10.5 Rated Electric Current A 3437 Rated Rotation Speed r/min 3000 Efficiency % 80% Life time years 20 The biomass residues used in the project are mainly consisted by 3 categories: Biomass residues category 1 2 Biomass residue type Cotton stalk Wood wastes Table A-5 Category of biomass residues Biomass residues Biomass fate in the absence residues of the project source activity Off-site from the nearby farmland Off-site from the nearby Dumped or left to decay under aerobic condition (B1) Dumped or burnt in an uncontrolled Biomass residues use in project scenario Electricity generation on-site (biomass-only boiler) Electricity generation on-site (biomass-only Biomass residues wet mass (tonnes) 216,000 24,000

5 CDM Executive Board Page 5 3 Corn and wheat stalk area manner (B1) boiler) Off-site from the nearby farmland Dumped or burnt in an uncontrolled manner (B1&B3) Electricity generation on-site (biomass-only boiler) 60,000 A.4. Parties and project participants Party involved (host) indicates a host Party China (host) Switzerland Private and/or public entity(ies) project participants (as applicable) National Bio Energy Co., Ltd. (Private entity) Swiss Carbon Value Ltd. (Private entity) Indicate if the Party involved wishes to be considered as project participant (Yes/No) No No A.5. Public funding of project activity >> The project activity hasn t received any public funding from parties of Annex I. SECTION B. Application of selected approved baseline and monitoring methodology B.1. Reference of methodology >> ACM0018 Version Consolidated methodology for electricity generation from biomass residues in power-only plants In line with the application of the ACM0018 methodology the project refers to the following tools and methodology: Version 02 of Tool to calculate project or leakage CO 2 emissions from fossil fuel combustion. Version of Emissions from solid waste disposal sites. Version 01 of Tool to calculate baseline, project and/or leakage emissions from electricity consumption. Version of Tool to calculate the emission factor for an electricity system. Version of Assessment of the validity of the original/current baseline and update of the baseline at the renewal of the crediting period Version of Project and leakage emissions from transportation of freight. B.2. Applicability of methodology >> The approved baseline and monitoring methodology ACM0018 Consolidated methodology for electricity generation from biomass residues in power-only plants is applicable to project activities both in the project type and biomass category. The detail is listed as bellowing. Methodology The installation of new biomass residues (co-)fired power-only plants at a site where currently no power generation occurs (greenfield power projects); Table B-1 Applicability of methodology Project The proposed project is a Greenfield biomass residues fired power-only plant. No other biomass types than biomass residues, as Only agricultural and woody biomass residues

6 CDM Executive Board Page 6 defined above, are used in the project plant Fossil fuels may be co-fired in the project plant. However, the amount of fossil fuels co-fired shall not exceed 80% of the total fuel fired on an energy basis For projects that use biomass residues from a production process (e.g. production of sugar or wood panel boards), the implementation of the project shall not result in an increase of the processing capacity of raw input (e.g. sugar, rice, logs, etc.) or in other substantial changes (e.g. product change) in this process The biomass residues used by the project facility should not be stored for more than one year Projects that chemically process the biomass residues prior to combustion (e.g. by means of esterification, fermentation and gasification) are not eligible under this methodology. The biomass residues can however be processed physically such as by means of drying, pelletization, shredding and briquetting No power and heat plant operates at the project site during the crediting period If any heat is generated for purposes other than power generation (e.g. heat which is produced in boilers or extracted from the header to feed thermal loads in the process) during the crediting period or was generated prior to the implementation of the project activity, by any onsite or off-site heat generation equipment connected to the project site, the following conditions should apply: (a) The implementation of the project activity does not influence directly or indirectly the operation of the heat generation equipment, i.e. the heat generation equipment would operate in the same manner in the absence of the project activity; (b) The heat generation equipment does not influence directly or indirectly the operation of the project plant (e.g. no fuels are diverted from the heat generation equipment to the project plant); and (c) The amount of fuel used in the heat generation equipment can be collected in the nearby area, as defined above, are used in the project. No fossil fuel is co-fired in the project plant. All the biomass residues used in the project are the waste from agriculture and wood industry; the biomass residues treatment in the project won t cause any production increase in the relevant industry. Biomass in the project site won t be stored for more than one year in which case the energy of biomass would lose largely. As the direct-combustion technical adopt in the power plant, biomass don t need any chemically process. As the national regulation and the quantity of biomass source, no other power and/or heat plant would operate at the project site during the crediting period. No heat would be generated for the purposes other than power generation.

7 CDM Executive Board Page 7 monitored and clearly differentiated from any fuel used in the project activity. In the case of fuel switch project activities, the use of biomass residues or the increase in the use of biomass residues as compared to the baseline scenario is technically not possible at the project site without a capital investment in: The retrofit or replacement of existing heat generators/boilers; or The installation of new heat generators/boilers; or A new dedicated biomass residues supply chain established for the purpose of the project (e.g. collecting and cleaning contaminated new sources of biomass residues that could otherwise not be used for energy purposes); Equipment for preparation and feeding of biomass residues. It s not a fuel switch project. The project activity is a Greenfield power-only plant, which exports the power to the North China Grid. There was no any other power or heat-generation plant ever operated in the project site before the project. Only agricultural and woody biomass residues within the applicable biomass categories in the methodology, which are obtained from the nearby area, are used in the project. The storage term of the biomass residues is usually shorter than 1 year. The power project adopts biomass direct flaring technology, there was no any chemical process is needed for the biomass fuel. Part of the biomass would undergo shredding before combustion. No power and heat plant would operate at the project site during the crediting period. Therefore, the approved CDM consolidated methodology ACM0018 is applicable to the proposed project. B.3. Project boundary Table B-2 GHGs source included or excluded from the project boundary Source Gas Included? Justification/Explanation CO 2 Included Main emission source Baseline Electricity generation CH 4 N 2 O Excluded Excluded Excluded for simplification. This is conservative Excluded for simplification. This is conservative Uncontrolled burning or decay of CO 2 Excluded It is assumed that CO2 emissions from surplus biomass residues do not lead to

8 CDM Executive Board Page 8 surplus biomass residues CO 2 CH 4 N 2 O Excluded Included Excluded changes of carbon pools in the LULUCF sector B1 and B3 are the most likely baseline scenarios. Excluded for simplification. This is conservative Project Activity On-site fossil fuel consumption On-site and off-site transportation and processing of biomass residues Combustion of biomass residues for electricity Storage of biomass residues Waste water from the treatment of biomass residues CO 2 Included May be an important emission source CH 4 N 2 O Excluded Excluded Excluded for simplification. This emission source is assumed to be very small Excluded for simplification. This emission source is assumed to be very small CO 2 Included May be an important emission source CH 4 N 2 O CO 2 CH 4 N 2 O CO 2 CH 4 N 2 O CO 2 CH 4 N 2 O Excluded Excluded Excluded Included Excluded Excluded Excluded Excluded Excluded Excluded Excluded Excluded for simplification. This emission source is assumed to be very small Excluded for simplification. This emission source is assumed to be small It is assumed that CO 2 emissions from surplus biomass do not lead to changes of carbon pools in the LULUCF sector CH 4 emissions will be caused during the course of power. Excluded for simplification. This emission source is assumed to be small It is assumed that CO 2 emissions from surplus biomass residues do not lead to changes of carbon pools in the LULUCF sector Excluded for simplification. Since biomass residues are stored for not longer than one year, this emission source is assumed to be small Excluded for simplification. This emissions source is assumed to be very small. It is assumed that CO2 emissions from surplus biomass residues do not lead to changes of carbon pools in the LULUCF sector This emission source is not included as the wastewater is not treated under anaerobic conditions Excluded for simplification. This emission source is assumed to be small Fig B-1 Project boundary

9 CDM Executive Board Page 9 B.4. Establishment and description of baseline scenario >> According to the version of ACM0018, the following steps are used to define the baseline scenario: Step 1. Identification of alternative scenarios This step serves to identify all alternative scenarios to the proposed VER project activity that can be the baseline scenario through the following sub-steps: Step 1a. Define alternative scenarios to the proposed VER project activity. In the Identification of the baseline scenario of ACM0018, realistic and credible alternatives should be separately determined regarding: Identify all alternative scenarios that are available to the project participants and that provide outputs or services with comparable quality, properties and application areas as the proposed VER project activity. In doing so, alternative scenarios shall be separately determined regarding: How electric power would be generated in the absence of the VER project activity: and What would happen to the biomass residues in the absence of the project activity. 1. Power generation In order to determine the most plausible baseline scenario for power generation, detailed analyses are summarized in Table B-2: Table B-3 identifying the most plausible baseline scenario for power generation

10 CDM Executive Board Page 10 Series Alternative Applicable? Justification/Explanation P1 The proposed project activity not undertake as Yes a VER project activity: P2 If applicable, the continuation of power generation in the existing power-only plants fired with biomass residues, or fossil fuels, or a combination of both, at the project site. The existing power-only plants would operate at the same conditions as those observed in the most recent three years prior to the project activity No There was no existing biomass residue fired power plant at the project site. Therefore, Alternative P2 is not realistic. P3 P4 If applicable, the continuation of power generation in the existing power-only plants fired with biomass residues, or fossil fuels, or a combination of both, at the project site. The existing power-only plants would operate with different conditions from those observed in the most recent three years prior to the project activity If applicable, the retrofitting of existing poweronly plants fired with biomass residues, or fossil fuels, or a combination of both, at the project site. The retrofitting may or may not include a change in fuel mix No No There was no existing biomass residue fired power plant at the project site. Therefore, Alternative P3 is not realistic. There was no existing biomass residue fired power plant at the project site. Therefore, Alternative P4 is not realistic. P5 The generation of power in the grid Yes All the power is from grid in the project site now. It s a realistic scenario. P6 P7 The installation of new power-only plants fired with biomass residues, or fossil fuels, or a combination of both, at the project site, using the same amount or less biomass residues than under scenario P1: The installation of new power-only plants fired with biomass residues, or fossil fuels, or a combination of both, at the project site, using more biomass residues than under scenario P1: No No Fossil fuel plant with a capacity of 135MW or less is strictly prohibited according to current regulations 1 in China. Cofired with fossil fuel is forbidden for new Greenfield biomass power plant as national regulation 2. As the leading biomass power plant company, PO adopted the best technology in the world. Other biomass power plant with similar capacity using the same or less biomass residues isn t available in China beside P1. So P6 is not realistic. Fossil fuel power plant with a capacity of 135MW or less is strictly prohibited according to current regulations in China. Cofired with fossil fuel is

11 CDM Executive Board Page 11 As analyzed above, Alternative P1and P5 are considered as plausible baseline scenarios. 2. Use of biomass forbidden for new Greenfield biomass power plant as national regulation In the case new biomass power plant using more biomass residues, it isn t a financially attractive plan than P1 due to higher cost within the available technology. And as analyzed in B5 of PDD, the NPV of P1 is much lower than 0, so P7 can t a realistic baseline scenario. The fuel of the proposed project is composed by agricultural waste and woody residue. Without the proposed project activity, a huge amount of biomass residues are open burnt or left unused in the project area. According to the methodology ACM0018, the category of the utilized biomass is described below: Biomass residues category (k) Biomass residue type 1 Cotton stalk 2 Wood wastes 3 Corn and wheat stalk Table B-4 category of biomass residues Biomass Biomass residues fate in residues source the absence of the project activity Off-site from the nearby farmland Off-site from the nearby area Off-site from the nearby farmland Dumped or left to decay under aerobic condition (B1) Dumped or burnt in an uncontrolled manner (B1) Dumped or burnt in an uncontrolled manner (B1&B3) Biomass residues use in project scenario Electricity generation onsite (biomassonly boiler) Electricity generation onsite (biomassonly boiler) Electricity generation onsite (biomassonly boiler) Biomass residues wet mass (tonnes) 216,000 24,000 60,000 When defining plausible and credible alternative scenarios for the use of biomass residues, the guidance below should be strictly followed: If the biomass residues involve any type of processing prior to combustion such as drying, pelletization, shredding, briquetting, etc., two options can be considered. The biomass residues processing plant is included in the project boundary and the primary source of the biomass residues is assessed according to the procedures described in this section. Therefore, if pellets are used in the project activity and the pelletization plant is included in the project boundary, the biomass residues used as raw material for the production of pellets have to be assessed

12 CDM Executive Board Page 12 using the procedures described herein. Otherwise, if the biomass residues processing plant is not included in the project boundary then the processed biomass obtained from that plant should be considered as B8 above; The baseline scenario for the use of biomass residues should be separately identified for different categories of biomass residues, covering the whole amount of biomass residues supposed to be used in the project activity along the crediting period, and consistent with the alternative scenarios selected for power generation (Scenarios P above); A category of biomass residues is defined by three attributes: (1) its type (i.e. bagasse, rice husks, empty fruit bunches, etc.); (2) its source (e.g. produced on-site, obtained from an identified biomass residues producer, obtained from a biomass residues market, etc.); and (3) its fate in the absence of the project activity (Scenarios B above); The scenarios B1 or B3: can only be regarded as a plausible baseline scenario for a certain category of biomass residues, if the project participants can demonstrate that at least one of the two approaches (a) or (b) are fulfilled. Otherwise, the baseline scenario for this particular biomass residues category should be considered as B8:, and a leakage penalty will be applied when calculating leakage emissions. If during the crediting period, new categories of biomass residues of the type B1:, B2: or B3: are used in the project activity which were not listed at the validation stage, e.g. due to new sources of biomass residues, the baseline scenario for those types of biomass residues should be assessed using the procedures outlined in this guidance for each category of biomass residues. Identify realistic combinations of scenarios for electric power generation and use of biomass residues. The identified realistic combinations should be considered in the following steps. Detailed analyses on each alternative are summarized in Table B-5. Table B-5 identifying the most plausible baseline scenario for biomass use Series Alternative Applicable? Justification/Explanation B1 The biomass residues are dumped or left to decay mainly under aerobic conditions. This applies: for example, to dumping and decay of biomass residues on fields Yes It s common that biomass residues be dumped or left to decay around the site of the proposed project. Alternative B1 is a realistic baseline alternative for unused biomass. B2 B3 The biomass residues are dumped or left to decay under clearly anaerobic conditions. This applies, for example, to landfills, which are deeper than 5 meters. This does not apply to biomass residues that are stock-piled or left to decay on field The biomass residues are burnt in an uncontrolled manner without utilizing for energy purposes No Yes The concerned biomass residues in the project area are widely burnt or left to decay on field rather than anaerobic treatment. Local people have no habit to bury stalks or woody wastes because there is no enough land and labor to do so. It s common that biomass residues be burnt in an uncontrolled manner without utilizing it for energy purposes. Therefore, Alternative B3 is one realistic baseline alternative for unused biomass.

13 CDM Executive Board Page 13 B4 The biomass residues are used for electricity generation in power-only plant configuration at the project site in new and/or existing power plants No As the Hebei province regulation 3, the second biomass power/heat plant won t be approved within 100km distance to the existing ones in order to avoid biomass resource competition. There is no any other power plant to take use of the biomass residues in the baseline scenario. B4 is excluded. B5 The biomass residues are used for power and/or heat generation in other existing or new power plants at other sites No There is no generation and/or heat project using biomass residues as fuel close to proposed project. Considering the cost of biomass transportation, other existing or new grid-connected power plants in distance will not use the biomass residues in the project area. B5 is excluded. B6 The biomass residues are used for other energy purposes, such as the generation of bio-fuels No There is no biomass residues based energy facility around the proposed project site. So alternative B6 is not a realistic baseline alternative for unused biomass B7 B8 The biomass residues are used for non-energy purposes, e.g. as fertilizer or as feedstock in processes (e.g. in the pulp and paper industry) The primary source of the biomass residues and/or their fate in the absence of the project activity cannot be strictly identified No No The biomass residues in the project mainly cotton, corn stalk and woody residues have not been used as paper or other non-energy industry in local area. Therefore, B7 is excluded. The biomass fates have been studied and stated clearly in the Biomass Survey Report according to the on site research from local government. As analyzed above, the most realistic and credible alternative for biomass use is B1and B3. Outcome of step 1a: list of plausible alternative scenarios to the project activity Therefore, the most realistic and credible alternative is as follows: Table B-6 List of plausible alternative Scenarios Project Type Alternative Scenarios Power Generation Use of biomass Scenario 1 The proposed project activity not undertake as a CDM or VER project activity P1 B1 or B3 Scenario 2 No any biomass utilized power plant project P5 B1 or B3 Sub-step 1b. Consistency with mandatory laws and regulations For power generation, P1 (The proposed project activity not undertaken as a CDM or VER project activity) is encouraged by government in order to make usage of the surplus biomass. P5 (Supply of equivalent power generation by the North China Grid) which is just a common behavior, consistent with related laws and regulations in China. 3

14 CDM Executive Board Page 14 As for biomass use, related policies and regulations have been issued, such as Renewable Energy Promotion Law and Renewable Energy. But currently there are no related regulations that compel to use biomass. Biomass has been dumped or left to decay or burned in an uncontrolled manner are ubiquitous both in China and near the project site. Therefore, B1 or B3 is a common scenario in the real world. Sub-step 1b. Consistency with mandatory laws and regulations As for power generation, P1 (The proposed project activity not undertaken as a CDM or VER project activity) and P5 (Supply of equivalent power generation by the North China Grid) are consistent with related laws and regulations in China. As for biomass use, related policies and regulations have been issued, such as Renewable Energy Promotion Law and Renewable Energy. But currently there are no related regulations that compel to use biomass. Biomass has been dumped or left to decay or burned in an uncontrolled manner are ubiquitous both in China and near the project site. Therefore, B1 or B3 is a common scenario in the real world. Outcome of Step 1b: Based on the analysis above, the 2 alternative scenarios listed in the outcome of Step 1a are in line with the existing Chinese laws and regulations. Step 2. Barrier analysis This step serves to identify barriers and to assess to which alternatives are prevented by these barriers. Sub-step 2a. Identify barriers that would prevent the implementation of alternative scenarios Establish a complete list of realistic and credible barriers that may prevent alternative scenarios to occur. Such realistic and credible barriers may include: Investment barriers, other than insufficient financial returns as analyzed in Step 3, inter alia: o For alternatives undertaken and operated by private entities: Similar activities have only been implemented with grants or other non-commercial finance terms. Similar activities are defined as activities that rely on a broadly similar technology or practices, are of a similar scale, take place in a comparable environment with respect to regulatory framework and are undertaken in the relevant geographical area, as defined in Sub-step 1a above; o No private capital is available from domestic or international capital markets due to real or perceived risks associated with investments in the country where the project activity is to be implemented, as demonstrated by the credit rating of the country or other country investment reports of reputed origin. Technological barriers, inter alia: o Skilled and/or properly trained labor to operate and maintain the technology is not available in the relevant geographical area, which leads to an unacceptably high risk of equipment disrepair, malfunctioning or other underperformance; o Lack of infrastructure for implementation and logistics for maintenance of the technology (e.g. natural gas can not be used because of the lack of a gas transmission and distribution network); o Risk of technological failure: the process/technology failure risk in the local circumstances is significantly greater than for other technologies that provide services or outputs comparable to those of the proposed CDM project activity, as demonstrated by relevant scientific literature or technology manufacturer information;

15 CDM Executive Board Page 15 o The particular technology used in the proposed project activity is not available in the relevant geographical area. Lack of prevailing practice: o The alternative is the first of its kind. Other barriers, preferably specified in the underlying methodology as examples. There is no barrier above could prevent the implementation of the alternative scenario 1 and 2. Outcome of Step 2a: No barrier that may prevent alternative scenario 1 and 2 above to occur Sub-step 2b: Eliminate alternative scenarios which are prevented by the identified barriers Identify which alternative scenarios are prevented by at least one of the barriers listed in Sub-step 2a, and eliminate those alternative scenarios from further consideration. All alternative scenarios shall be compared to the same set of barriers. The assessment of the significance of barriers should take into account the level of access to and availability of information, technologies and skilled labour in the specific context of the industry where the project type is located. For example, projects located in sectors with small and medium sized enterprises may not have the same means to overcome technological barriers as projects in a sector where typically large or international companies operate. Outcome of step 2b: No barrier that may prevent alternative scenario 1 and 2 above to occur Outcome of Step 2: Alternative scenarios 1 and 2 are not prevented by any barrier. Table B-7 List of remaining alternative Scenarios after barrier analysis Project Type Alternative Scenarios Power Generation Use of biomass Baseline 1 The proposed project activity not undertake as a CDM or VER project activity P1 B1 or B3 Baseline 2 No any biomass utilized power plant project P5 B1 or B3 Since there are still 2 alternative scenarios remaining, including the proposed project activity undertaken without being registered as a CDM or VER project activity (Baseline 1), proceed to Step 3 (investment analysis). B.5. Demonstration of additionality >> Step 3: Investment analysis For an alternatives which does not involve any investment by the project participants, use the following values for the financial indicator: If the financial indicator is the NPV: assume a value of NPV equal to zero; If the financial indicator is the IRR: use as the IRR the financial benchmark, as determined through the options (a) to (e) below. The proposed project adopts the financial indicator of NPV according to the methodology. As indicated in the ACM0018, for an alternative which does not involve any investment by the project participants, use

16 CDM Executive Board Page 16 the following values for the financial indicator: If the financial indicator is the NPV: assume a value of NPV equal to zero. So NPV of the relevant baseline scenario (Scenario 2) is assumed to be 0. Based on what mentioned above, the calculation and comparative analysis of financial indicators for the proposed project are carried out. (1) Basic parameters for calculation of financial indicators Table B-8 Key parameters for the calculation of financial indicators Parameter Value Unit Data source Installed capacity 30 MW FSR Total static investment 29,520 ( 10 4 ) RMB FSR Annual power output 193,815 MWh FSR Tariff (Including VAT) RMB/KWh FSR Tariff (Excluding VAT) RMB/KWh FSR Biomass residue price 260 RMB/t FSR Biomass residue consumption 300,000 Ton FSR Depreciation year 15 Year FSR Depreciation rate 6.33 % FSR Residue rate 5 % FSR VAT for Electricity 17 % FSR O&M Cost (average value) 7,938 ( 10 4 ) RMB FSR Project lifetime 21 (including 1 year of Year FSR construction period) Discount rate 8 % FSR (2) Comparison of Project NPV for the proposed projects Compare the indicators of the proposed VER project and all the alternative scenarios. The results of NPV calculation with the input values available at the moment investment decision made with and without VER revenue are listed in Table B.2. Table B-9 NPV comparison of the proposed project Scenarios Without VER Baseline 2 With VER (Baseline 1) (VER Project) NPV (million RMB) As seen above, the Project NPV without VER revenue is much lower than benchmark which means the project without VER revenue (also Baseline 1) is not attractive compared with the scenario that do no investment at all (Baseline 2). So Baseline 1 could be considered as financial unattractive compared with other alternative scenarios. At the same time, the VER revenue could largely improve the financial situation and make the proposed VER project more financial applicable. Sensitivity analysis. The objective of sensitivity analysis is to show whether the conclusion regarding the financial attractiveness is robust to reasonable variations in the critical assumptions. For the proposed project, the following financial parameters were taken as uncertain factors for sensitive analysis of financial attractiveness:

17 CDM Executive Board Page Total static investment 2. Annual O&M cost 3. Tariff (excluding VAT) 4. Annual power supply Table B-10 Sensitivity analysis NPV(million RMB) -10% -7.50% -5% -2.50% % 5% 7.50% 10% Total static investment O&M cost Electricity Tariff Annual power supply Fig B-2 Sensitivity analysis (a) Total static investment The NPV would not exceed benchmark even until the total static investment decreased by %. According to the statistics released by National Statistics Bureau of China in 2009, the national total price index of investment in fixed assets are 101.5, 103.9and during year 2006, 2007 and 2008 respectively 4. The trend showed clear the investment price has been going up during the project planning and construction stage and impossible to decrease. 4 China Statistic Year Book

18 CDM Executive Board Page 18 (b) Annual O&M cost Only where the annual O&M cost decrease by % would the Project NPV rise to 0. According to the FSR, the annual O&M costs include biomass expense, material expenses, water expenses, salary and welfare, heavy repair expenses and the miscellaneous expenses. Considering these expenses are ever- growing year by year over the recent years, the annual O&M costs will be impossible to decrease. Therefore, as what are stated above, the annual O&M cost is not likely to decrease. (c) Tariff With other influence factors remaining unchanged, only when the tariff increases by at least %, the NPV could exceed 0. According to the Interim Regulation for Tariff of Renewable Energy Power Generation and Appointment of Expenses 5, which came into effect on 1 January 2006, when the biomass power industry has just started in China. The tariff is driven by the tariff for coal fired power plants in the year 2005 in the province and the compensation tariff of 0.25 RMB/kWh. According to the Notification of National Development and Reform Commission (NDRC) on Electricity Price Increase for North China Power Grid 6, which came into effect on 1 July 2008, the tariff for coal fired power plants in southern Hebei Province increases to be RMB/kWh (including VAT). Based on these two regulations, the tariff of RMB/kWh (including VAT) has been used in FSR for financial analysis, which was already the conservative value at the investment decision time. (d) Annual power supply Only where the annual power supply increases by % does the Project NPV go above 0. The power generation is decided by annual utilization hours, but at the same time, when the annual utilization hours increase, the operation cost will correspondingly increase due to increase of biomass consumption. The proposed project has a utilization hour of 7,300 h according to the FSR. Compared to the average 6,869 h annually actual operating hours during operation of the project, it s already quite conservative for the operating hours of 7,300 h used at the investment decision time considering the equipment regular examined and repaired and the operation cost increase. In addition, as the seasonal supplying of the biomass and the biomass power plant is still in the start stage, the stable of the boiler and other equipment need improve as well. So far it s impossible for the operating hours to exceed the threshold. Based on the above sensitivity analysis, there is clear evidence that the implementation of the project without VER revenues is not above the typical rate of the economically attractive course of action in China. Therefore, if the project is not undertaken as a registered VER project, it is not financially viable, even when possible variations in the main parameters are considered. As analyzed above, Baseline scenario 1 (P1 to power generation, B1 or B3 to unused biomass) lacks financial attractiveness. Baseline scenario 2 (P5 to power generation, B1 or B3 to unused biomass) is not a specific project to be invested. The import power from the NCG will not only meet the requirements of national laws and regulations, but also be financially feasible. Moreover, the biomass residues to be utilized in the proposed project is currently dumped or left to decay under mainly aerobic conditions or burnt in an uncontrolled manner without utilizing it for energy purposes, which doesn t need any facility and is in full compliance with all the applicable laws and mandatory regulations. Outcome of Step 3. As analyzed above and will be dominated in the Section B.5, the most applicable baseline scenario of the project is determined as scenario 2 of the alternative scenarios

19 CDM Executive Board Page 19 Project Type Baseline Scenario Power Generation Use of biomass Scenario 2 Power Greenfield Project P5 B1 or B3 STEP 4. Common practice analysis Provide an analysis of any other activities that are operational and that are similar to the proposed project activity. Projects are considered similar if they are in the same country/region and/or rely on a broadly similar technology, are of a similar scale, and take place in a comparable environment with respect to regulatory framework, investment climate, access to technology, access to financing, etc. The projects with broadly similar technology including biomass power-only power plant and biomass cogeneration plant are considered as similar project. The projects located in the region with same twoseason dry farmland agricultural area are seen as the similar considering the boiler technical, biomass type and price. The scale of the similar project is defined as the project capacity within (±50%) of the proposed project, which is 15MW-45MW. By the June of 2012, there are 8 similar biomass power generation projects put into operation in Hebei province 7 and nearby province. They have all applied as CDM to overcome the identified barriers 8. Table B Similar project in or nearby Hebei province No. Project in Hebei province 1 Pingquan Biomass-based Power Generation Project 2 Hengshui TEDA Gucheng Biomass-based Power Generation Project 3 Hebei Wu an Ruikang 48MW Biomass Power Generation Project 4 Hebei Zunhua Straw Power Generation Project 5 Hebei ChengAn Biomass Cogeneration Project 6 Straw generation project in Wei county Hebei province, P.R. China 7 Hebei Jinzhou 24MW Straw-Fired Power Project 8 Hebei Wuqiao Biomass Generation Project Project in nearby provinces 9 Shandong Shanxian 1*25MW Biomass Power Plant Project 10 Biomass Generation Project in Xun county, Henan province, P.R. China Extent to the nearby province of similar area including Shandong, Shanxi, Henan and northern Anhui province, there are more than 20 biomass power projects, which are all applying for CDM project. It s common that the similar biomass projects are all applying for CDM or other carbon revenue to improve their weak financial condition. To summarize, it can be proved that the proposed project meets the additionality criteria in the aspects of environment, investment and technology. Outcome of Step 4: No similar option without applying for CDM can be reserved. Therefore, the proposed project is additional

20 CDM Executive Board Page 20 According to the analysis in Section B.5, the baseline scenario applying to the proposed project is shown below: Table B-12 Combination of the baseline scenario for the proposed project Baseline scenario Scenario Project type Power generation Biomass use 2 No investment P5 B1 or B3 B.6. Emission reductions B.6.1. Explanation of methodological choices >> Emission reductions are calculated as follows: Where: ER y = Emissions reductions during year y (tco 2 ) BE y = Baseline emissions during year y (tco 2 ) PE y = Project emissions during year y (tco 2 ) LE y = Leakage emissions during year y (tco 2 ) Baseline Emissions Baseline emissions may, where applicable, include the following emission sources: CO 2 emissions from fossil fuel power plants at the project site; CO 2 emissions from grid-connected fossil fuel power plants in the electricity system; CH 4 emissions from anaerobic decay of biomass residues and/or CH 4 emissions from uncontrolled burning of biomass residues without utilizing them for energy purposes. Baseline emissions are calculated as follows: Where: BE y = Baseline emissions in year y (tco 2 e) BE EL,y = Baseline emissions due to generation of electricity in year y (tco 2 ) BE BR,y = Baseline emissions due to uncontrolled burning or decay of biomass residues in year y (tco 2 e) According to the ACM0018 version , the calculation of baseline emissions due to uncontrolled burning or decay of biomass residues is optional. The project participants do not include these emission sources in baseline calculation. Thus, BE y =BE EL,y Baseline emissions are determined through the following steps: (1) (2) Step 1: Determination of BE EL,y Baseline emissions from electricity generation are calculated based on the net quantity of electricity generated at the project site under the project scenario (EG PJ,y ) and a baseline emission factor (EF BL,EL,y ) which expresses the weighted average CO 2 intensity of electricity generation in the baseline, as follows:

21 CDM Executive Board Page 21 Where: BE EL,y = Baseline emissions due to generation of electricity in year y (tco 2 ) EG PJ,y = Net quantity of electricity generated in all power plants which are located at the project site and included in the project boundary in year y (MWh) = Emission factor for electricity generation in the baseline in year y (tco 2 /MWh) EF BL,EL,y For this methodology, it is assumed that transmission and distribution losses in the electricity grid are not influenced significantly by the project activity and are therefore not accounted for. (3) Step 1.1: Determination of EG PJ,y The net quantity of electricity generated in all power plants which are located at the project site and included in the project boundary (EG PJ,y ) is determined as the difference between the gross electricity generation at the project site (EG PJ,gross,y ) and the auxiliary electricity consumption required for the operation of the power plants at the project site (EG PJ,aux,y ), as follows: (4) Where: EG PJ,y EG PJ,gross,y EG PJ,aux,y = Net quantity of electricity generated in all power plants which are located at the project site and included in the project boundary in year y (MWh) = Gross quantity of electricity generated in all power plants which are located at the project site and included in the project boundary in year y (MWh) = Total auxiliary electricity consumption required for the operation of the power plants at the project site (MWh) EG PJ,aux,y shall include all electricity required on-site for the operation of equipment related to the preparation, processing, storage and transport of biomass residues (e.g. for mechanical treatment of the biomass, conveyor belts, driers, pelletization, shredding, briquetting processes, etc.) and electricity required for the operation of all power plants which are located at the project site and included in the project boundary (e.g. for pumps, fans, cooling towers, instrumentation and control, etc.). Step 1.2: Determination of EF BL,EL,y The electricity generated under the project activity could be generated in the baseline in three different ways, depending on the baseline scenario and the particular situation of the project activity. Use of biomass residues at the project site. Electricity could be generated with biomass residues in power plants at the project site. This applies, for example, if AND/OR (a) The project activity is a replacement of an existing biomass residues fired power plant; (b) The project activity is a capacity expansion of an existing biomass residues fired power plant by installing a new biomass residues fired power plant that is operated next to the existing plant; (c) The project activity is a fuel switch project activity where some biomass residues have already been used prior to the implementation of the project activity. Use of fossil fuels at the project site. Electricity could be generated with fossil fuels in power plants at the project site. This applies, for example, if (a) The project activity is a fuel switch from fossil fuels to biomass residues;

22 CDM Executive Board Page 22 (b) In the baseline, a fossil fuel power plant would continue to operate at the project site in parallel with a new biomass residues power plant; AND/OR Power generation in the electricity grid. Electricity could be generated by power plants in the electricity grid. This applies, for example, if (a) The project activity exports all electricity to the grid and no electricity would be produced at the project site in the baseline; (b) The project activity results in an increase of the quantity of electricity produced by power plants included in the project boundary and this increased electricity is exported to the grid or would in the baseline be purchased from the grid. In the baseline scenario, the project activity exports all electricity to the grid (P5). Therefore, the baseline scenario of electricity generated under the project activity could be Power generation in the electricity grid. Based on this approach, EF BL,EL,y is calculated as follows: (5) Where: EF BL,EL,y EG BL,BR,y EG BL,FF,y EG BL,grid,y EG BL,FF/grid,y EF grid,cm,y EF BL,FF,y = Emission factor for electricity generation in the baseline in year y (tco 2 /MWh) = Amount of electricity that would be generated with biomass residues in poweronly plants operated at the project site in the baseline in year y (MWh) = Minimum amount of electricity that would be generated with fossil fuels at the project site in the baseline in year y (MWh) = Minimum amount of electricity that would be generated by power plants in the electricity grid in the baseline in year y (MWh) = Amount of electricity that could be generated in the baseline either by power plants in the electricity grid or by power plants at the project site using fossil fuels in year y (MWh) = Combined margin CO 2 emission factor for grid-connected electricity generation in year y (tco 2 /MWh) = CO 2 emission factor for electricity generation with fossil fuels in power plant(s) at the project site in the baseline in year y (tco 2 /MWh) In the following, first the amounts of electricity generated from the various sources in the baseline (EG BL,BR,y, EG BL,grid,y, EG BL,FF,y and EG BL,FF/grid,y ) are determined, taking into account the project configuration and the baseline scenario. Therefore, different cases have to be considered. Then the emission factors (EF grid,cm,y and EF BL,FF,y ) are determined. Step 1.3: Determination of EG BL,BR,y The amount of electricity that would be generated with biomass residues in power-only plants operated at the project site in the baseline (EG BL,BR,y ) should, in accordance with the baseline scenario and the historical situation before project implementation, be determined as follows: Case 1: No power generation with biomass residues in the baseline. If Scenario B4 does not apply to any biomass residue category (i.e. if no biomass residues would be used for electricity generation in power-only plants in the baseline), then: EG BL,BR,y = 0.