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 Large scale wind farm project "Melowind" Version number of the PDD 01 Completion date of the PDD 06/06/2012 Project participant(s) Estrellada S.A. Host Party(ies) Uruguay Sectoral scope and selected methodology(ies) Sectoral Scope 1: Energy industries renewable/non renewable sources. ACM0002, version Estimated amount of annual average GHG 95,595 tco 2 /year emission reductions

2 CDM Executive Board Page 2 SECTION A. Description of project activity A.1. Purpose and general description of project activity The purpose of the project is to generate electricity from wind power and to deliver the generated output to the national grid of Uruguay. The project activity will reduce GHG emissions by displacing fossil fuel based electricity generation in the connected system. The main objectives of the project are: to bring in a new supplier/ independent power producer to the national electricity market and promote the sustainable development of the country, through the generation of electricity from 100% renewable energy to contribute to climate change mitigation and generate carbon credits that will provide necessary funding to make the project feasible; to reduce fossil fuel dependency of the host country by displacing fossil-fuel based electricity generation from the national system to improve environmental conditions in the region by increasing the share of renewable power generation; to contribute to the energy security of Uruguay by introducing a new, renewable and indigenous source of electricity. to decentralize energy production The proposed project consisting of 20 wind turbines of 2.5 MW with a total installed capacity of 50 MW will be implemented by Estrellada S.A., in the Department of Cerro Largo in Uruguay. The annual average net energy to be delivered to the grid is estimated at GWh, resulting in GHG emission reductions of approximately 95,595 tones CO 2 per year by displacing fossil fuel based electricity generation from the national grid. The project will positively contribute to the sustainable development of the host country in several ways, including the creation of a new source of employment in a region with low socio-economic development, the contribution to Uruguay s energy security, and an improvement of Uruguay s trade balance. A.2. Location of project activity A.2.1. Host Party(ies) Uruguay A.2.2. Region/State/Province etc. Department of Cerro Largo

3 CDM Executive Board Page 3 A.2.3. City/Town/Community etc. Pueblo Arbolito A.2.4. Physical/Geographical location The project activity is located in the Department of Cerro Largo. The coordinates of the project site are: Latitude: Longitude: Figure 1 Project site

4 CDM Executive Board Page 4 Table 1 WTG Coordinates MELOWIND WTG Nº Latitude Longitude A.3. Technologies and/or measures The project will use safe and sound technology regarding wind power generation. According to requirements of UTE (monopoly distributor utility) in order to buy generated energy based on wind power, the wind generator must be certified by international and recognized entities under approved norms 1. Also annual energy production must be certified. The proposed project is compliant with these requirements. The proposed project consists in 20 wind turbines of 2.5 MW with a total installed capacity of 50 MW. The relevant technical specifications of the wind turbine Nordex N100/2500 are shown in Table 2. Table 2 - Technical specifications of wind power unit Parameter Name Unit Value Rated Power kw 2,500 Wind Class -- 2a (IEC) Rotor Diameter m 100 Swept Area m 2 7,823 1 According to requirements of UTE tender K42857

5 CDM Executive Board Page 5 Rated frequency Hz Rated Voltage V 660 Cut in wind speed m/s 3 Cut out wind speed m/s 20 Number of turbines units 20 Installed Capacity MW 50 Net energy production (P75) in GWh Net plant factor (P75) in % 45.7 The wind turbines will be installed at a hub height of 80 m. The set-up of the wind park includes a stepup transformer of 0.66 kv/31.5 kv. The WTGs will be interconnected through an internal grid of 31.5 kv wires that are connected to a step-up transformer 31.5/150 kv installed in a station close to the wind farm. A 150 kv line will connect the wind farm station to the S.I.N. (Interconnected National System of the host country). Also optical fiber cables will connect all turbines together and the control center of the wind farm to transmit control signals and the Control Center will be built on the project site. Energy delivered to the grid will be measured at the output of the 31.5/150 kv transformer. Measurements will be taken according to SMEC (Commercial Measurement System) approved by the URSEA (Regulation Entity of energy and water services). The measurements required by the ADME are automatically sent to the control center of the DNCU and to the control center to the wind farm to be registered in the Scada System of the plant. The average estimated energy generated and sold to the grid results in GWh/year which implies a P75 plant power factor of 45.7%, considering energy losses. A.4. Parties and project participants Table 3 Project participants Party involved (host) indicates a host Party Private and/or public entity(ies) project participants (as applicable) Indicate if the Party involved wishes to be considered as project participant (Yes/No) Uruguay Estrellada S.A. No A.5. Public funding of project activity The project will not make use of any sources of public funding from Parties included in Annex I to the Convention.

6 Baseline scenario UNFCCC/CCNUCC CDM Executive Board Page 6 SECTION B. Application of selected approved baseline and monitoring methodology B.1. Reference of methodology The applicable methodology is ACM0002, Consolidated baseline methodology for grid-connected electricity generation from renewable sources, Version , EB 67. The tools used are the following: Tool to calculate the emission factor for an electricity system version Tool for the demonstration and assessment of additionality version Combined tool to identify the baseline scenario and demonstrate of additionality version (only for steps required in footnote 2 of the methodology) B.2. Applicability of methodology The approved methodology ACM0002 is applicable to grid-connected renewable power generation that installs a new power plant at a site where no renewable power plant was operated prior implementation of the project activity (Greenfield plant), as it is the case with the proposed project. The proposed project activity is a Greenfield wind farm. Grid boundaries can be clearly identified and information on the grid is available. The project activity is applicable to ACM0002. B.3. Project boundary The methodology used states that the spatial extent of the project boundary includes the project site and all power plants connected physically to the project electricity system that the CDM project power plant will be connected to. The national grid is the defined electricity system for the project activity. Emission sources included in the project activity are detailed in the following table. As the project is the installation and operation of a wind farm and there is no fossil fuel or electricity consumption, project emissions are zero. Table 4 - Emission sources Source GHGs Included? Justification/Explanation CO 2 emissions from electricity generation in fossil fuel fired power plants that are displaced due to the project activity CO 2 Main emission source. Fossil fuels Yes are combusted in power units for electricity generation. CH 4 No Minor emission source. N 2 O No Minor emission source. B.4. Establishment and description of baseline scenario Identification of the baseline scenario

7 CDM Executive Board Page 7 The project activity is the installation of a new grid-connected renewable power plant/unit. According to ACM0002, the baseline scenario is the: electricity delivered to the grid by the project activity that would have otherwise been generated by the operation of grid-connected power plants and by 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 electricity system. B.5. Demonstration of additionality I. Timeline for the implementation of the project Table 5 - Timeline Date (Estimated) Description Q PPA with UTE Q1/Q Purchase of equipment and buildings contracts Q1/2013 Start of civil works Q2/2013 Start mounting equipment and electric connections Q1/2014 First electricity to grid of the project II. Prior consideration of the CDM - Prior consideration form sent to CDM Secretariat and DNA of Uruguay on 18 May 2011 Evidence that continuing and real actions were taken to secure CDM status is given by the following: - Purchase order of Estrellada S.A. for CDM services by Carbosur (January ) - Conduction of two public audiences in Melo and Montevideo on 11/4/2012 and 12/4/2012, respectively, as part of the procedures mandated by the DNA of Uruguay for the issuance of the Letter of Approval of the host country. - Contracting of TÜV Süd as validator in May, 2012 III. Additionality According to the applied methodology ACM0002, the additionality shall be demonstrated and assessed using the latest version of the Tool for demonstration and assessment of additionality approved by the Executive Board. The latest version is EB65, Annex 21. According to paragraph 4 of the mentioned tool: Project activities that apply this tool in context of approved methodology ACM0002, only need to identify that there is at least one credible and feasible alternative that would be more attractive than the proposed project activity. Pursuant to paragraph 5 of the tool, the applicable geographical area covers the entire host country as a default. Although the technology is not country specific, the geographical area is not extended to the neighboring countries Argentina and Brazil because of differences with respect to the regulatory frameworks, investment climate, access to technology, access to financing and country size.

8 CDM Executive Board Page 8 The measure for emission reduction corresponding to the project activity, as per paragraph 6 of the tool corresponds to Fuel and feedstock switch. The output: of the project activity (paragraph 7 of the tool) is electrical energy that must have quality and properties required in the host country. Following is the step-wise approach according to paragraph 10 of the tool. Step 1: Identify realistic and credible alternative baseline scenarios for power generation Sub-step 1a: Define alternatives to the project activity The Melowind project activity will provide renewable electricity to the national grid based on wind power. The background data for the following analysis are detailed in Annex 3 to this PDD. The Uruguayan matrix of electricity power supply was composed until recent years (2005) of fossil fuel fired power plants totaling a nominal capacity of 604 MW and renewable traditional hydroelectric plants with a nominal capacity of 1,538 MW. The maximum capacity for hydroelectric generation of the country has been practically reached, particularly for medium and large scale plants. The last installed plant, Palmar, with 330 MW, started operating in Until 2007, additional capacity was introduced with new fossil fuel based plants. La Tablada (CTR) plant with two 104 MW gas turbines (gas oil) and Punta del Tigre I Plant with four 50 MW gas turbines were installed in 1992 and 2006, respectively. In 2005 a small landfill biogas based plant of 1.2 MW was connected to the grid. The National Government began to promote in 2006, through specific policies, renewable energy generation from basically wind power and biomass. As a result, several wind power plants with a total nominal capacity of MW and several biomass plants with a nominal capacity of 82.2 MW are currently in operation. In parallel to those investments, Punta del Tigre plant increased its capacity by 100 MW (2008) with two new fossil-fuel based gas turbines, and Central Batlle Plant installed ten units (reciprocating engines) of 8 MW each, totaling 80 MW. Non-traditional, renewable power plants represented 4.3% of the energy produced to meet the energy demand in All fossil fuel based power plants have been developed by UTE, a state utility which has the monopoly of the transmission and distribution grids. Uruguay has no fossil fuel resources of its own, and must import and process fuels to supply the internal demand. Imports and refinery processes are also monopolies of the public utility ANCAP. Natural gas is not under this monopoly but this fossil fuel is not available in Uruguay in sufficient amounts to support the production of a 50 MW power plant. Regarding biomass-based plants currently connected to the grid, except for the 1.2 MW Las Rosas landfill gas plant and Fenirol 10 MW biomass power plant, both of them having shown serious operating difficulties than impaired their ability to reach their production targets, all are cogeneration plants (steam and electricity) associated to industrial processes of nearby plants. The largest of these, with an installed capacity of 140 MW, corresponds to a cellulose pulp plant (UPM) that delivers an average 30 MW to the grid. All remaining power plants use biomass residues from industrial processes (black liquor, barks, chips, rice husks) or thinning wood from forest plantations. According to the government Decree 367/010, UTE has called for bids (Tender K2158) to buy electric energy generated from biomass power plants of up to 20 MW under a feed-in tariff modality, up to a

9 CDM Executive Board Page 9 maximum of 200 MW. This process is based on feasibility studies developed by the Ministry of Industry, Energy and Mining (MIEM), assuming what many experts considered as an overestimation of the biomass availability in the country. At present, the government has received expressions of interest (which did not imply any expenditures or commitments from their side) for a total MW. However, most of these potential investors that expressed their interest have no biomass resources of their own, and after several months there has been absolutely no progress toward implementation of any of those projects. Moreover, the owners of biomass resources that would be the most interested in developing power plants have expressed that the tariff defined by the government is too low considering the high cost of logistics for collection, loading, transportation and processing of biomass, making any investment untenable. Later, in an attempt to attract biomass owners to develop projects, the government issued another tender (K42433), also referred to Decree 367/010, extending the installed capacity of the proposed power plants from 20 MW to a maximum of 60 MW. However, this strategy seems to have failed as well, given that after several months there were no expressions of interests, except for the case of one small sawmill that would process its own residues. In the case of wind power generation, UTE installed 20 MW at Sierra de Caracoles. Private owners have installed three wind farms with a total capacity of MW. Two more winds farms of 10 and 18.7 MW are also being developed also by private investors. All these private wind farms were developed under previous different UTE tenders. In July 2010 under Tender K39607, UTE selected three additional wind power projects of 50 MW each. More recently, the public tender of UTE K41398 awarded three offers for a total installed capacity of 192 MW. The 6 th of December 2011 UTE published the Decree 424/011 to enable participants who were not awarded in the last tender K41398 to present offers for the price resulting from the weighted average of the three awarded projects. The tender under the Decree 424/011 K43037 pre awarded projects the 28 February 2012 under which the present project Melowind was also pre awarded. The award and PPA signature are subject to comptroller s office approval. Outcome of Step 1a (a) The proposed project activity undertaken without being registered as a CDM project activity remains as a feasible option. However, as shown by the investment analysis in Step 2, the proposed project not undertaken as a CDM project activity (i.e., without income from CERs) is not financially attractive for a potential investor. (b) Renewable sources other than wind power cannot be considered as realistic and credible alternatives, particularly considering an installed capacity of over 30 MW. Only mini-power hydroelectric locations have been identified. No studies have been planned the use of wave, tidal and geothermal energy. Photovoltaic solar power is also not more attractive in terms of costs than wind power for the proponent. In the context of this methodology and activities that can provide renewable electric energy over 30 MW, only the use of biomass and wind energy can be considered as potentially feasible alternatives for the use of renewable energy for the project proponent. Of these, biomass-based power is not an option because Estrellada does not have biomass resources of their own and could also not outsource the supply due to the scarcity of the resource available in the region within reach of the project site and the high competition for the resource triggered by the existing and projected biomass power plants and for the high logistics costs associated with the handling of biomass. It would not be possible for Estrellada to establish the necessary long-term agreements for procurement of biomass. In addition, the policy implemented by the government for the development of biomass power based on a feed-in tariff scheme has failed due to lack of interest from the owners of biomass resources, mainly due to the low power price. Installing a biomass based power plant is not an option for Estrellada S.A.

10 CDM Executive Board Page 10 (c) In this case the increasing energy demand in the Uruguayan system will be supplied by increasing the capacity of the currently existing plants and introducing new power plants, what has been achieved historically with a mix of different primary energy sources, mostly based on fossil fuels. This is the baseline scenario according to B.4. Sub-step 1b: Consistency with mandatory laws and regulations Alternatives (a) and (c) are in compliance with all mandatory applicable legal and regulatory requirements. Outcome of Step 1b Alternatives (a) and (c) are realistic and credible alternative scenarios to the project activity that are in compliance with all mandatory applicable legal and regulatory requirements taking account of enforcements in the country and EB decisions on national and/or sectoral policies and regulations. According to paragraph 4 of the additionality tool: Project activities that apply this tool in context of approved methodology ACM0002, only need to identify that there is at least one credible and feasible alternative that would be more attractive than the proposed project activity. The methodology addresses the first step with the guidance of the Combined tool to identify the baseline scenario and demonstrate additionality, version Here steps 1 and 2 are not applied to Greenfield projects, as stated in the scope and applicability of this tool. However, the tool is, for example, not applicable in the following situation: The CDM project activity is the installation of a Greenfield facility that provides a product to a market (i.e. electricity, cement, etc.) where the output could be provided by other existing facilities or new facilities that could be implemented in parallel with the CDM project activity. Step 2: Investment analysis The methodology indicates the following: Apply a benchmark analysis, as per step 2b of the Tool for the demonstration and assessment of additionality, if more than one alternative is remaining after Step 2 and if the remaining alternatives include scenarios P1 and P2. This step requires determining whether the proposed project activity is not: (a) The most economically or financially attractive; or (b) Economical or financially feasible, without the revenue from the sale of Certified Emission Reductions (CERs). Sub-step 2a: Determine appropriate analysis method There are three possible options for this analysis. Simple cost analysis (option I) is not applicable to Melowind project activity because CERs are not the only source of revenues. Investment comparison analysis (option II) is also not applicable because the alternative scenarios are not comparable, and one of them is not available for project participants. Therefore, benchmark analysis (option III) is applied. Sub-step 2b: Apply benchmark analysis

11 CDM Executive Board Page 11 Of the two most commonly used investment indicators, internal rate of return (IRR) of the project and net present value of the cash flow (NPV), the former was chosen, based on the following reasons: a. It is a more practical indicator for comparing the project activity with a benchmark, and it can easier be interpreted. b. The documents available in the country for deriving a benchmark have used IRR. c. For the assessment of the contribution of proposed CDM projects to the sustainable development of the country the DNA of Uruguay uses IRR and not NPV as the indicator of economic feasibility and also of the contribution to Uruguay s economy. The Capital Asset Pricing Model (CAPM) is used to estimate the expected internal rate of return on unleveraged project activity that compensates the investor on risk and time value of money (k e ) For a developing country, ke is determined according to the following equation: k e = r f + [E(R m ) r f ] + prs Where: k e = project cost of capital (benchmark project IRR, %) r f = risk free rate (%) [E(R m ) r f ] = premium for market risk (%) systematic risk of the project activity (dimensionless) prs = premium for sovereign risk (%) Sub-step 2c. Calculation and comparison of financial indicators The project s lifetime was set to 20 years and the investment will be made during the years 2012 to 2014, starting commercial operation is estimated for August 2014, which is a period consistent with the experience in this type of wind farms. This timeframe responds to the established rules and regulations in bidding for power generation. The plant factor for the project is calculated in accordance with the wind yield assessment conducted for the project. For base calculation purposes the scenario of the expected generation with the probability of 75% (P75) is chosen, which is a more reasonable assumption for the investor. The net plant factor is 45.7%. The project is expected to generate GWh annually. The sale price of electricity has already been set through the tender process at US$/MWh, and will be the basic value to be included in the power purchase agreement to be signed between Estrellada S.A. and UTE. The agreement includes an annual adjustment of the price based on a parametric equation defined by UTE. For the purpose of the investment analysis, Estrellada S.A. has assumed that the sale price of electricity will increase by 1.92 per cent annually during the project s lifetime. In accordance with the assumptions, all the operational costs have been escalated at a rate of 3.85 per cent annually for the calculation of the cashflow.

12 CDM Executive Board Page 12 It is assumed that the equipment purchased has a life expectancy of 20 years, with linear project amortization. A rescue value equivalent to 5 per cent of the investment, adjusted by inflation of 3.85 per cent per year was included in the 20 th year of operation. The corporate income tax in Uruguay accounts for 25%. It is assumed that this project will benefit from the investment promotion regime which grants income tax exemptions to projects declared as of national interest. For the Estrellada S.A. project it was assumed that such exemptions would apply for the first ten years of operation at different percentages. Based on these assumptions, the project cash flow (without CDM registration) results in an internal rate of return (IRR) of 8.58 per cent. This value is lower than the benchmark of 11.14% IRR. Sub-step 2d. Sensitivity analysis Pursuant the additionality tool, a sensitivity analysis of the selected investment indicator (IRR) to possible variations in the assumed values of the main underlying parameters was performed. Three parameters selected for the sensitivity analysis were: Net plant factor: favorable and unfavorable scenarios were assumed by decreasing and increasing the amount with respect to the base scenario by 10%, respectively. Amount of investment: favorable and unfavorable scenarios were assumed by decreasing and increasing the amount with respect to the base scenario by 10%, respectively. Land leasing: Favorable and unfavorable scenarios were assumed by increasing and decreasing the factor by 10% with respect to the base scenario. Wind Turbine Generators (WTG) Engineering and substation maintenance cost: Favorable and unfavorable scenarios were assumed by increasing and decreasing the factor by 10% with respect to the base scenario. The impacts of these alternative scenarios on the IRR are shown in Table 6. Table 6 - Sensitivity analysis Sensitivity Analyis -10% Base 10% Net plant factor IRR-Value 7.20% 8.58% 9.92% Investment Costs IRR-Value 9.99% 8.58% 7.39% Operational costs IRR-Value 8.65% 8.58% 8.52% WTG maintenance costs IRR-Value 8.73% 8.58% 8.44% The modification of the assumed variables in the simple sensitivity analysis turned to vary the Internal Rate of Return according to the following graph.

13 CDM Executive Board Page 13 Figure 2 Sensitivity analysis Step 4: Common practice analysis Sub-step 4a: Analyze other activities similar to the proposed project activity The project activity is not the first-of-its-kind and therefore the common practice in the host country is analyzed. Sub-step 4a: Analyze other activities similar to the proposed project activity Sub-step 4b: Discuss any similar Options that are occurring The last version of the tool introduces the concept that different technologies in the context of common practice are technologies that deliver the same output and differ by at least one of the following, as appropriate in the context of the measure applied in the proposed CDM project and applicable geographical area. The analysis is carried out considering the host country as the region where environment, regulatory framework, investment conditions, access to technology, access to financing and the interconnected electricity system characteristics are similar to the proposed project activity. Wind power delivers the same output (electric energy) as other power plants/units and differ from them in terms of: (a) Energy source/fuel, and (i) units costs. Similar activities in the host country are: Four wind farms are operational at the moment in the host country. None of them are similar to the proposed project activity because of differences in scale and/or technology.

14 CDM Executive Board Page 14 In addition: UTE s Los Caracoles wind farm is a 20 MW plant, composed by ten wind generators of 2 MW each. Its scale is less than 50% of that of the proposed activity. In addition to the difference in scale, the business framework is very different, since the owner is the public utility and the first five wind generators were installed based on a specific tender called by UTE, directed to Spanish companies only. The first stage of 10 MW is under CDM validation, whereas a PDD is currently in preparation corresponding to the second stage. Agroland wind farm is composed by three wind generators with a total installed capacity of 0.45 MW and Nuevo Manantial wind farm is composed by several wind generators of 0.5 MW to 1 MW that complete 13 MW. These two wind farms were bundled as a CDM project activity, registered with reference number The fourth wind farm identified is Kentilux, with a total installed power of 10 MW, which began operation in the first quarter of This project is also intended to be registered in the CDM as it has been published for Global Stakeholder Consultations Process at UNFCCC site and is currently under validation. Luz de Mar-Pintado Wind Farm (40 MW) has been under CDM validation since 05/07/2011 (date of starting period for comments). Minas I wind farm (42 MW) is under CDM validation since 20/08/2011 (date of starting period for comments). Several future wind farms that participated at UTE tenders had submitted the Prior consideration form to start the CDM process, demonstrating their intention to register their projects under the CDM. It can be concluded that no similar activities exist without being registered, or in the process of becoming registered under the CDM. Therefore the proposed project activity is additional. The common practice relative to the project activity is analyzed following the paragraph 47 of the last version of the tool. Step 1: The applicable range considering plus-minus 50% of 50 MW of the designed capacity is between 25 MW and 75 MW. Step 2: In the applicable geographical area, all plants that deliver the same output or capacity, within the applicable output range calculated in Step 1, as the proposed project activity and have started commercial operation before the start date of the project, are identified. Registered CDM project activities are not included in this step. Table 7 Plants with similar installed capacity N all = 3 Plant Power Output MW Energy source/fuel Number Central Batlle, Sala B 50 Fuel Oil 1 TGAA (Maldonado) 25 Gas Oil 2 UPM 30 Biomass 3

15 CDM Executive Board Page 15 Step 3: Within plants identified in step 2, those that apply technologies different than the technology applied in the proposed project activity are identified. These apply different technologies regarding energy source/fuel. N diff = 3 Step 4: The factor F is calculated, representing the share of plants using technology similar to the technology used in the proposed project activity in all plants that deliver the same output or capacity as the proposed project activity. Factor F = 1 - N diff / N all = 0 As the factor F is lower than 0.2 and the difference between N all and N diff is lower than 3, then the project activity is not common practice. B.6. Emission reductions B.6.1. Explanation of methodological choices Total emission reduction for the project activity is estimated by the baseline emissions from electricity generation minus project and leakage emissions: ER BE - PE - LE (1) y y y y Where: ER y BE y PE y LE y Emission reduction in year y (tco 2 /yr) Baseline emissions in year y (tco 2 /yr) Project emissions in year y (t CO 2 e/y) Leakage emissions in year y (t CO 2 e/y) No potential emission sources of leakage and project emissions were identified for this project. Therefore project and leakage emissions are zero and emission reductions will be calculated as: ER y BE y (2) Baseline emissions As per ACM0002, baseline emissions are to be calculated as follows: BE EG EF (3) y PJ,y grid,cm,y Where: BE y EG PJ,y EF grid,cm,y Baseline emissions in year y (tco 2 /yr) Quantity of net electricity generation that is produced and fed into the grid as a result of the implementation of the CDM project activity in year y (MWh/yr) Combined margin CO 2 emission factor for grid connected power generation in year y calculated using the latest version of the Tool to calculate the emission factor for an electricity system (tco 2 /MWh)

16 CDM Executive Board Page 16 The project activity is the installation of a new grid-connected renewable power plant at a site where no renewable power plant was operated prior to the implementation of the project activity. EG EG (4) PJ, y facility,y Where: EG PJ,y EG facility,y Quantity of net electricity generation that is produced and fed into the grid as a result of the implementation of the CDM project activity in year y (MWh/yr) Quantity of net electricity generation supplied by the project plant/unit to the grid in year y (MWh/yr) The Tool to calculate the emission factor for an electricity system (version ) is used for the estimation of the baseline emission factor. Following are the choices made in application of the steps of this tool. Step 1. Identify the relevant electric power system The DNA in Uruguay has not published a delineation of the project electricity system and the connected systems. a) Project electricity system The project electricity system is defined as the national interconnected system (S.I.N.) of Uruguay as it is described in the following figure 2 : 2

17 CDM Executive Board Page 17 Figure 3 National grid The S.I.N. includes all power plants that are physically connected trough transmission and distribution lines to the project activity and can be dispatched without significant transmission constraints. In fact there are no constraints for any configuration of power generation in the different plants. The Salto Grande bi-national hydroelectric power plant and transmission system belongs to Argentina and Uruguay in equal parts. From the produced energy, 50% corresponds to the host country. This definition is also in line with the default definition that should be used according to the tool. b) Connected electricity systems There is only one electricity system in the host country, to which the project activity is connected. Two international systems are connected to the project electricity system of Uruguay: the systems of Argentina and Brazil. In both cases, transmission to the project electricity has significant transmission constraints. In the case of Argentina, the capacity of the transmission system is greater than peak power demand of Uruguay and is normally operated under its rated capacity, but spot prices in the electricity market have big differences with spot prices of the Uruguayan market. Spot prices in Uruguay can be found in the web site of ADME (Electric Market Administration and spot prices in Argentina can be found in the web site of CAMMESA (Administration Company of Wholesale Electricity Market S.A. - Since in Uruguay variable costs of electric energy depend on international costs of fossil fuel, in Argentina political decisions result in internal costs not referenced with

18 CDM Executive Board Page 18 international costs, thus making spot prices to have a difference of more than 50% with respect to those of Uruguay, most of the time. Power and energy transactions between markets in Uruguay and Argentina are implemented by means of special or dedicated modalities or contracts. In the case of Brazil, transmission capacity at the moment is limited to 70 MW (trough a frequency transformer plant 50 Hz/60 Hz that connects 150 kv/132 kv grids in Uruguay and South System of Brazil respectively). Transactions occurred during special and emergency situations or in case of opportunities when export/imports are considered convenient for both countries. The modalities normally used are the compensation of the registered energy. The balance is controlled on a monthly basis. Modalities are explained in detail on the website of the National Operator of the Electric System of Brazil ( ) 3. Step 2. Choose whether to include off-grid plants in the project electricity system (optional) Option I is chosen. The S.I.N. covers more than 99% of the electricity demand in Uruguay. Step 3. Select an operating margin (OM) method Option (c) (dispatch data analysis OM) is chosen, given that hourly dispatch data are available in Uruguay for all sources connected to the grid. This choice is justified by the fact that dispatch data analysis OM is the option with the highest accuracy in the estimation of the baseline emission factor. Step 4. Calculate the operating margin emission factor according to the selected method The operating margin will be estimated annually ex post, by monitoring the relevant parameters. EF EG EF PJ, h EL, DD, h h grid. OM DD, y (5) EG PJ, y Where: EF grid,om_dd,,y EG PJ,,h EF EL,DD, h EG PJ,,y h y Dispatch data analysis operating margin CO 2 emission factor in year y (tco 2 /MWh) Electricity displaced by the project activity in hour h in year y (MWh) CO 2 emission factor of power units in the top of the dispatch order in hour h in year y Total electricity displaced by the project activity in year y (MWh) Hour in year y in which the project activity is displacing grid electricity Year in which the project activity is displacing grid electricity EF EL, DD, h n EG n n, h. EF EG n, h EL, n, y (6) 3 See in detail:

19 CDM Executive Board Page 19 Where: EF EL,DD,h EG n,h EF EL,m,y n h CO 2 emission factor of power unit n in hour h in year y (tco 2 /MWh) Net quantity of electricity generated and delivered to the grid by power unit n in hour h (MWh) CO 2 emission factor of power unit n in year y (tco 2 /MWh) Power units in the top of the dispatch Hour in year y in which the project activity is displacing grid electricity The emission factor of the unit or plant will be calculated using the equation (11) of the Tool and using the option A1, equation (2) of the tool. Amount of fossil fuel consumed in the year y or specific consumptions of units is officially available. The set of power units at the top of the dispatch will be determined based on the merit order based in the variable cost of each unit or plant. According to the national regulation 4 wind power is prioritized in the dispatch order regarding energy sources. Step 5: Calculate the build margin emission factor Regarding vintage of data, Option 1 is selected. Option 1: For the first crediting period, calculate the build margin emission ex ante based on the most recent information available on units already built for sample group m at the time of the CDM-PDD submission to the DOE for validation. For the second crediting period, the build margin emissions factor shall should updated based on the most recent information available on units already built at the time of the submission of the request for renewal of the crediting period to the DOE above. For the third crediting period, the build margin emission factor calculated for the second crediting period should be used. This option does not require monitoring the emission factor during de crediting period The sample group of power unit m used to calculate the build margin should be determined as per the procedures of the tool applying steps (a) to (f). The build margin emission factor is calculated by the generation-weighted average emission factor of all power units identified in Step 5, during the most recent year for which power generation data is available, calculated as: EF grid BM, y Where: m EG m, y m EF m, y EL, m, y. (7) EG EF grid,bm,y Build margin CO 2 emission factor in year y (t CO 2 /MWh) 4 See Decree

20 CDM Executive Board Page 20 EG m,y EF EL,m,y m y Net quantity of electricity generated and delivered to the grid by power unit m in year y (MWh) CO 2 emission factor of power unit m in year y (t CO 2 /MWh) Power units included in the build margin Most recent historical year for which power generation data is available Step 6 Calculate the combined margin emissions factor To calculate the combined margin (CM) emission factor (EF grid,cm,y ) the method (a) is chosen. The combined margin emissions factor is calculated as follows EF EF EF ) (8) grid, CM, y ( OM grud, OM, y BM grid, BM, y Where: EF grid,bm,y Build margin CO 2 emission factor in year y (tco 2 /MWh) EF grid,om,y Operating margin CO 2 emission factor in year y (tco 2 /MWh) w OM Weighting of operating margin emissions factor (%) w BM Weighting of build margin emissions factor (%) The default values for wind generation project activities weights of w OM = 0.75 and w BM = 0.25 are used for the first crediting period and for subsequent crediting periods. Table 8 - Calculated grid emission factor for the first crediting period Year OM Emission Factor (tco 2 /MWh) BM Emission Factor (tco 2 /MWh) CM Emission Factor (tco 2 /MWh) All data presented in this table was calculated by using the electronic worksheet that is attached to the documentation presented to the DOE for validation.

21 CDM Executive Board Page 21 B.6.2. Data and parameters fixed ex ante Data / Parameter Unit Description EF CO2,FO tco 2 /GJ CO 2 emission factor of fuel oil Source of data 2006 IPCC Guidelines for National GHG Inventories, Volume 2, Chapter 1, Table 1.4, page 1.23 Value(s) applied Choice of data or Measurement methods and procedures Purpose of data Additional comment The emission factor unit is used in calculations corresponding to the Tool to calculate the emission factor for an electricity system. Default values shall be updated according to IPCC guidelines if changes Data / Parameter Unit Description EF CO2,GO tco 2 /GJ CO 2 emission factor of gas oil Source of data 2006 IPCC Guidelines for National GHG Inventories, Volume 2, Chapter 1, Table 1.4, page 1.23 Value(s) applied Choice of data or Measurement methods and procedures Purpose of data Additional comment The emission factor unit is used in calculations corresponding to the Tool to calculate the emission factor for an electricity system. Default values shall be updated according to IPCC guidelines if changes Data / Parameter Unit Description EF CO2,NG tco 2 /GJ CO 2 emission factor of natural gas Source of data 2006 IPCC Guidelines for National GHG Inventories, Volume 2, Chapter 1, Table 1.4, page 1.24 Value(s) applied Choice of data or Measurement methods and procedures Purpose of data Additional comment The emission factor unit is used in calculations corresponding to the Tool to calculate the emission factor for an electricity system. Default values shall be updated according to IPCC guidelines if changes

22 CDM Executive Board Page 22 B.6.3. Ex ante calculation of emission reductions The emission reductions were estimated by applying the methodology equations, using the methodological choices detailed in Section B.6.1 above. Detailed calculations are included in Annex 3 and worksheet attached to this PDD. The baseline scenario was developed taking into consideration the current status of the electrical system of Uruguay, the historical and projected growth in electricity demand, the availability of resources (e.g., hydro, fossil fuels) and relevant national and sectoral policies, including the consideration of the document Energy Policy 2005/ prepared by the Ministry of Industry, Energy and Mines and the document of UTE Plan de Inversiones (Investment Plan) The description of how these elements were considered in the development of the baseline is provided in Annex 3. Baseline emissions for electricity supplied to the grid in the year y shall be calculated as the amount of electricity produced with the renewable technology (MWh in the year) multiplied by the CO 2 emission factor of that grid (in tco 2 /MWh). The emission factors for the following years (2014 to 2020) are estimated using the combined margin (CM), consisting of the combination of operating margin (OM) and build margin (BM) according to the procedures prescribed in the Tool to calculate the emission factor for an electricity system Version All data presented below and in Annex 3 are taken from an electronic worksheet provided to the DOE as part of validation documents. It is noted that the emission factors as well as the emissions reductions are average values considering the average value of expected hydroelectric production. The emission factors, and therefore the emissions reductions, may experience large inter annual variations due to the characteristic high variability in the production of hydro power in the country, which depends on precipitation regime (please, see more details in Annex 3). B.6.4. Summary of ex ante estimates of emission reductions Table 9 Emissions summary Year Baseline emissions (t CO 2 e) Project emissions (t CO 2 e) Leakage (t CO 2 e) Emission reductions (t CO 2 e) , , , , , , , , , , , , , ,842 Total 669, ,168 Total number of 7 years, renewable to 21 crediting years Annual average over the crediting period 95, ,

23 CDM Executive Board Page 23 B.7. Monitoring plan B.7.1. Data and parameters to be monitored Data / Parameter EG PJ,h,y Unit MWh Description Quantity of net electricity generation supplied by the project activity to the grid in hour h of year y Source of data Hourly data is registered in the Scada system of National Load Dispatch Center. These data is officially published by ADME on a monthly basis. Value(s) applied 22.9 Measurement methods Measurements are collected with meters and procedures according to the and procedures Measurements Commercial System (SMC) approved by URSEA (Regulation Unit for Energy and Water Services). All data will be recorded by the project proponent as described in the monitoring plan. Monitoring frequency The SMC system ensures QA/QC procedures for commercial measures. The measurements results will be cross-checked with records for electricity sold. QA/QC procedures Purpose of data Additional comment Data are available for market agents. Data / Parameter Unit Description Source of data Value(s) applied Measurement methods and procedures Monitoring frequency QA/QC procedures Purpose of data Additional comment EG n,h,y MWh Net quantity of electricity generated and delivered to the grid by power unit n in hour h These data is officially published by ADME monthly. Hourly data is registered in the Scada system of National Load Dispatch Center. Various, specified in the worksheet Melowind Electric Scenario v1. Measurements are collected with meters and procedures according to the Measurements Commercial System (SMC) approved by URSEA (Regulation Unit for Energy and Water Services). All data will be recorded by the project proponent as described in the monitoring plant. The SMC systems assure QA/QC control and procedures for commercial measures. Data are available for market agents.

24 CDM Executive Board Page 24 Data / Parameter NCV FO Unit GJ/t Description Net calorific value (energy content) of fossil fuel type i in year y Source of data Official data provided yearly by DNE Value(s) applied Measurement methods Official statistics; publicly accessible and reliable data source. and procedures Monitoring frequency Annually QA/QC procedures Data will be checked for consistency with default factors of IPCC Guidelines. If inconsistencies are found, the likely reasons will be investigated. Purpose of data Additional comment Data / Parameter NCV GO Unit GJ/t Description Net calorific value (energy content) of fossil fuel type i in year y Source of data Official data yearly provided by DNE Value(s) applied Measurement methods Official statistics; publicly accessible and reliable data source. and procedures Monitoring frequency Annually QA/QC procedures Data will be checked for consistency with default factors of IPCC Guidelines. If inconsistencies are found, the likely reasons will be investigated. Purpose of data Additional comment Data / Parameter NCV NG Unit GJ/m 3 Description Net calorific value (energy content) of fossil fuel type i in year y Source of data Yearly data provided by DNE Value(s) applied Measurement methods Official statistics; publicly accessible and reliable data source. and procedures Monitoring frequency Annually QA/QC procedures Data will be checked for consistency with default factors of IPCC Guidelines. If inconsistencies are found, the likely reasons will be investigated.. Purpose of data Additional comment N/A

25 CDM Executive Board Page 25 Data / Parameter Unit Description Source of data Value(s) applied Measurement methods and procedures Monitoring frequency QA/QC procedures Purpose of data Additional comment FC i,n,h mass or volume unit Amount of fossil fuel type i consumed by grid power unit n in hour h Data sources are ADME and/or UTE and owners of plant units. Various, specified in the worksheet Melowind Electric Scenario v1. Official statistics; publicly accessible and reliable data source. Mass or volume consumed for unit i in the hour h is obtained multiplying specific consumption of the unit in mass or volume/mwh by energy generation in MWh of the hour h. EG Arg,h,y Data / Parameter Unit MWh Description Electricity imported during hour h in year y from the connected system of Argentina. Source of data Hourly data provided by ADME. Value(s) applied 0 Measurement methods Official statistics; publicly accessible and reliable data source. Data is and procedures published diary by ADME. Monitoring frequency approved by URSEA (URSEA Decision No of 27/11/2002) QA/QC procedures Purpose of data Additional comment Data is available for market agents. Data / Parameter Unit Description EG Bra,h,y MWh Electricity imported during hour h in year y from the connected system of Brazil. Source of data Hourly data provided by ADME. Value(s) applied 0 Measurement methods and procedures Official statistics; publicly accessible and reliable data source. Data is published diary by ADME. Monitoring frequency QA/QC procedures Purpose of data Additional comment Measurements are made according to Commercial Measurement System approved by URSEA (URSEA Decision No of 27/11/2002) Data is available for market agents