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

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

2 page 2 SECTION A. General description of project activity A.1 Title of the project activity: Monterrey I LFG to Energy Project Version 1 January 07, 2008 A.2. Description of the project activity: >> The project activity seeks reductions in GHG emission from a landfill in the city of Monterrey. The project is located in the landfill site which was established on a greenfield site with a total landfill area of 220 hectares. The area of proposed site in the landfill is 58 ha. Since operation began in 1991, the landfill has been accepting mostly non-hazardous domestic and commercial waste as well as some non-hazardous hospital and industrial waste. The proposed CDM project activity will capture the landfill gas and use it as fuel for power generation. The proposed project activity will sustain 7 MW capacity power generators that will supply energy to the grid. The process for collection and utilization will consist of a landfill gas extraction and collection system using wells connected to vacuum pumps and a gas cleaning system, prior to use as fuel in gas engines. The project is expected to capture and utilize an estimated 1,3 million tones of CO 2 e up to The project will contribute to improved solid waste management practices through remediation program for closure of landfills. The main social and environmental benefits from improved landfill gas management practices will be a positive effect on health and local environment. The project will also create employment in the local area and will supply renewable energy to the grid. The project will contribute to host country s goals of promoting sustainable development and more specifically: Transfer clean and efficient technologies Generate clean renewable energy Create employment opportunities Improve waste management practices and prevent environmental pollution A.3. Project participants: >> Name of Party involved Private and/or ((host) indicates a host project Party) (as applicable) Mexico (host) BENLESA Denmark public entity(ies) participants International Bank for Reconstruction and Development ( IBRD ) acting as the trustee of the Danish Carbon Fund (DCF) Kindly indicate if the Party involved wishes to be considered as project participant (Yes/No) No Yes

3 page 3 A.4. Technical description of the project activity: A.4.1. Location of the project activity: >> A Host Party(ies): >>Mexico A >> State of Nuevo Leon Region/State/Province etc.: >> Monterrey A City/Town/Community etc: A Detail of physical location, including information allowing the unique identification of this project activity (maximum one page): >> The SIMEPRODE landfill is located in north side of Salinas Victoria, Nuevo Leon in the district of Salinas Victoria N, W SALINAS VICTORIA COLOMB IA AEROPUERTO DEL NORTE MONCLOVA (MINA) RELLENO SANITARIO GARCIA APA SCO F.F.C.C. A LAR EDO Simeprodeso Km ARCO VIAL BLVR. BENITO JUAREZ CARRETERA A LAREDO STA. ROSA ESCOBEDO RETER A A COLO MB IA CAR A M ONTERRE Y SENDERO NORT E SAN NICOLAS

4 page 4 Monterrey II Monterrey I A.4.2. Category(ies) of project activity: >>Sectoral Scope 13: Waste handling and disposal Sectoral Scope 1: Energy industries A.4.3. Technology to be employed by the project activity: >> Technology: The process includes the following steps: 1. The gas is extracted and collected from the landfill via gas wells, located through a modeling process and vacuum pumps. The gas goes through a cleaning process that dewaters the gas via cooling and filters the gas to guarantee a clean gas phase. There are three independent cleaning systems. The clean gas is sent either to internal combustion gas engines (Jenbacher-GE), rated at 1.06 MW or alternatively to flares rated to burn maximum estimated gas production. The gas engines are fitted with air and water coolants designed to operate at the maximum ambient summer temperature and are auto-regulated. The electricity is generated at 480 volts and 60 Hz. A triphasic transformer station takes the potential to 34,500 volts, for delivery to the transmission line. A remote station provides information on power on line, voltage delivered and frequency to CEF, according to regulations. An on line sensor delivers information of methane burned, equivalent CO 2 abated and electricity generated to the plant site.

5 page 5 A.4.4 Estimated amount of emission reductions over the chosen crediting period: >> Years Annual estimation of emission reductions (tons of CO 2 e) , , , , , , ,739 Total estimated emission reductions over the first 1,649,173 crediting period Total number of crediting years (over first crediting 7 period) Annual average of estimated emission reductions over the 235,596 first crediting period A.4.5. Public funding of the project activity: >> No public funding is involved in this project

6 page 6 SECTION B. Application of a baseline and monitoring methodology B.1. Title and reference of the approved baseline and monitoring methodology applied to the project activity: >> ACM0001 Consolidated baseline methodology for landfill gas project activities - Version 8; Tool for demonstration and assessment of additionality -Version 04 Tool for determining methane emissions avoided from dumping waste at a solid waste disposal site Version 2 Tool to determine project emissions from flaring gases containing methane -Version 1 Tool for calculation of emission factor for electrical systems Version 1 B.2 Justification of the choice of the methodology and why it is applicable to the project activity: >> ACM0001- Consolidated baseline methodology for landfill gas project activities---version 08 is applicable to landfill gas capture project activities, where the baseline scenarios are the partial or total atmospheric release of the gas and the project activities include situations the following: a) The captured gas is flared; or b) The captured gas is used to produce energy (e.g. electricity/thermal energy), but no emission reductions are claimed for displacing or avoiding energy from other sources; or c) The captured gas is used to produce energy (e.g. electricity/thermal energy), and emission reductions are claimed for displacing or avoiding energy from other sources. The project activity captures landfill gas and utilizes it for power generation. Therefore, the project activity corresponds to situation C. The baseline of proposed project is total release of the landfill gas to the atmosphere. Tool for determining methane emissions avoided from dumping waste at a solid waste disposal site Version 2 The tool is applicable in cases where the solid waste disposal site where the waste would be dumped can be clearly identified. The disposal site where the waste is deposited is clearly identified thus the tool is applicable to the project. Tool to determine project emissions from flaring gases containing methane -Version 1 The tool is applicable to projects where residual gas stream to be flared shall be obtained from decomposition of organic material (through landfills, bio-digesters or anaerobic lagoons, among others) or from gases vented in coal mines (coal mine methane and coal bed methane). The project flares the residual gas obtained from decomposition of municipal organic waste and thus the tool is applicable to the project. Tool for calculation of emission factor for electrical systems Version 1 This methodological tool determines the CO 2 emission factor for the displacement of electricity generated by power plants in an electricity system, by calculating the operating margin (OM) and build margin

7 page 7 (BM) as well as the combined margin (CM). The electricity produced under the project will displace electricity in the grid and thus the tool is applicable to the project. B.3. Description of the sources and gases included in the project boundary >> The project boundary includes capturing of landfill gas to generate electricity for internal use and for supply to the grid. The project boundary is the site of the project activity where the gas is captured and used. Possible CO2 emissions resulting from combustion of other fuels than the methane recovered will be accounted as project emissions. In addition, electricity required for the operation of the project activity, including transport of heat, will be accounted and monitored. The total area of the landfill site is 220 ha. The proposed project covers only 58 ha of this site which was developed through GEF grant financing. The landfill gas has been captured and destroyed in this specific cell adjacent to the proposed project activity in the past four years as a part of obligations to GEF program which funded the construction of the methane capturing system in the landfill. The objective of the GEF project was to develop a demonstration project and to capture 1mln tones of CO2 from this cell which will be fulfilled by end of Table 1: Sources and gases included in the project boundary Baseline Project activity Source Gas Included? Justification/Explanation CO 2 No CO 2 emissions from combustion or decomposition of biomass are not counted as GHG emissions LFG venting CH 4 Yes Major source of emissions N 2 O No Excluded for simplification CO 2 No Not considered because it a part of the Active LFG natural carbon cycle capture and CH 4 Yes Included as a main component of LFG flaring N 2 O No Not applicable LFG CO 2 Not considered because it a part of the combustion natural carbon cycle for power CH 4 Not applicable generation N 2 O Not applicable Table 2: Project boundary

8 page 8 Solid Waste production Solid Waste collection and transportation Solid Waste disposal at landfill Landfill gas generation Noncaptured LFG LFG capture and delivery to the power plant via wells, piping network and blowers LFG for Power plant and moisture removal treatment plant CO2 from power generation Methane not used for power generation B.4. Description of how the baseline scenario is identified and description of the identified baseline scenario: >> The baseline scenario is defined as the most likely scenario in the absence of the proposed CDM project. The proposed project involves the overhaul and expansion of the existing installations to capture and utilize the landfill gas that will be released into the atmosphere if financing is not secure to continue its operation. There are three plausible scenarios to the project activity: Alternative 1: The landfill operator would continue capturing and flaring the LFG to produce electricity without CER revenues (current situation). This is not a plausible option because operation and maintenance costs of continuing to capture landfill gas for electricity generation are very high and the revenues from sale of electricity are marginal and do not cover these costs. In addition, there are no regulations mandating LFG capture and flaring. Alternative 2: The landfill operator would discontinue capture and flaring of LFG and would sell the LFG collection equipment and generators and the landfill gas would be released to the atmosphere. This is the most likely scenario because the landfill owner does have neither any obligations nor financial interest to continue the current situation. The landfill gas was captured and flared in the past 4 years due to operator s obligation to GEF to capture and flare one million tons of CO2e. This obligation will be fulfilled by end of the In addition, the results of financial analysis clearly show that implementation of proposed project without CDM revenues is not the economically most attractive course of action. Given this, the project is not part of

9 page 9 the baseline scenario and thus the project is additional. Detailed description of additionality is provided in Section B.5. B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered CDM project activity (assessment and demonstration of additionality): >> The determination of additionality is done using the Tool for demonstration and assessment of additionality -Version 4. Step 1. Identification of alternatives to the project activity consistent with current laws and regulations Sub-step 1a. Define alternatives to project activity: Alternative 1: The landfill operator would continue capture and flaring of LFG to produce electricity without CER revenues (current situation and unlikely scenario due to high operation and maintenance costs). Alternative 2: The landfill operator would discontinue capture and flaring of LFG after it fulfils its obligations with GEF and would sell the LFG collection equipment and generators and the landfill gas would be released to the atmosphere (most plausible scenario). The Monterrey I LFG to energy project has been in operation since The LFG plant was financed with 47% GEF equity financing (grant) and 53% financing from the private investor. The total upfront cost of the project was USD 11 million for the design and construction of a LFG collection system and 7.42 MW power plant. The GEF grant financing played a key role in implementation of the project helping to remove the major technical, financial and institutional barriers that the project was facing. Under the terms of GEF grant, the landfill gas operator had an obligation to capture and flare 1 million tones of CO2e which it will fulfil by However, the long term sustainability of the project is in danger as the sales of electricity do not cover the costs of operation and maintenance. Moreover, there is a need for reinvestment as the generators are due for a major overhaul which would cost around USD 250,000 per generator and new engines are estimated to cost USD 640,000. There are no other sources of grant financing available neither from the government nor from multinational organizations to absorb some of the reinvestment and operational costs of the project. Therefore the most likely scenario in the absence of proposed CDM project would be scenario 2 where the project sponsor would sell the landfill gas equipment and the generators and the landfill gas would be vented to the atmosphere. The details of financial analysis are provided in Step 2. Sub-step1b. Enforcement of applicable laws and regulations: All the alternatives provided above comply with the laws and regulatory requirements of the country. Regulation NOM-083-SEMARNAT-2003 defines the specifications for environmental protection from the selection, design, construction and operation, monitoring and closure of final disposal sites for urban and special solid waste. This comprehensive regulation defines guidelines for the construction and operation of landfills, and also provides guidance regarding LFG, including recommendations for the collection, utilization and/or flaring of the LFG. However, the regulation does not specify minimum requirements regarding the amount of gas to be collected and utilized or flared. The tool for the

10 page 10 demonstration and assessment of additionality clearly states that only laws that are enforced need to be considered in the determination of the baseline scenario. NOM-083-SEMARNAT is clearly not enforced in Mexico, as outlined below: Norma 083 is a federal law that, given the sovereignty of local authorities in this area (landfills are within the responsibility of the municipalities), only becomes legally binding if it is adopted by the local authorities. So far, no local authorities have adopted NOM-083-SEMARNAT NOM-083-SEMARNAT-2003 has never been enforced since its adoption about x years ago. Even the earlier norm, which NOM-083-SEMARNAT-2003 replaced, and which only required the active venting of LFG for safety reasons, was not enforced. Given the above, NOM-083-SEMARNAT-2003 has become more of a document outlining policy guidance rather than a regulation to be widely adopted. In short, NOM-083-SEMARNAT-2003 shall not be taken into account in the establishment of a baseline Scenario for LFG projects in Mexico. Step 2. Investment analysis Sub-step 2a. Determine appropriate analysis method As per the Tool for the demonstration and assessment of additionality, one of three options must be applied for this step: (1) simple cost analysis (where no benefits other than CDM income exist for the project), (2) investment comparison analysis (where comparable alternatives to the project exist) or (3) benchmark analysis. Sub-step 2b. Option II. Investment Comparison Analysis Proposed CDM project activity includes revenues (from sale of power to the grid) other than CERs. Therefore, Option II. Investment comparison analysis will be used. The likelihood of development of this project without CER revenues as opposed to proposed CDM project will be determined by comparing the NPV of both alternative scenarios. Electricity price assumed is US$ per KWh, Operating and Maintenance Costs of US$ per KWh 1. NPV uses 15% discount, and upfront investment of US$1,000,000 for the overhaul of the equipment (engines mainly), and a sale value of US$2,000,000 of the existing equipment, which represents 20% of the upfront investment, depreciation over 20 years and corporate tax rate of 30%. Sub-step 2c. Calculation and comparison of financial indicators The financial analysis was carried out for the two alternative scenarios and the proposed CDM project: alternative one consisting of the continuation of the current operation without carbon revenues, alternative two is the sale of the equipment, and the CDM project scenario which is continuation of the project with carbon revenues. For alternative one the NPV calculated is US$ 1,162,675, which includes US$1,000,000 in upfront investment for overhaul; for the alternative 2 the income from the sale of the equipment is estimated to be no less than US$2,000,000 and does not require the upfront investment for the overhaul; for the CDM project scenario the NPV calculated is US$ 9,168,000, which includes the overhaul of 1 Based on actual prices and costs

11 page 11 US$1,000,000 but not the alternative cost of selling the equipment. Therefore, without carbon revenues, the operator would simply discontinue the operations and sell the equipment to partly recover its investment costs. Another way of looking at these alternatives is to include in both alternative 1 and CDM project the alternative cost of selling the equipment as part of the upfront investment. In that case, the NPV for the alternative 1 is US$ 838,000, and for the CDM project US$7,168,000. This method reinforces the above conclusion that without CDM revenues the project proponent would sell the equipment and close the landfill gas capture system and will let the methane to be vented to the atmosphere. Financial Indicators (NPV): The table below shows the NPV rate for all alternatives including the CDM project scenario. Alternative 1 Alternative 2 CDM Project Investment US$1,000,000 none US$1,000,000 Net present value (US$) US$1,162,675 >US$2,000,000 US$9,168,000 Sub-step 2d. Sensitivity analysis A sensitivity analysis was conducted by altering the following parameters: Increase in project revenue (price of electricity sold to the grid) Reduction in projects running costs (operational and maintenance costs) These parameters were selected as being the most likely to fluctuate over time. Financial analysis was performed altering each parameter by 15% and assessing what impact on the project NPV would be. As provided below, the project NPV remains lower than the NPV of the project under the CDM and considering all other risks involved with non-performance of technology the project cannot be considered as financially attractive without CDM revenues. Variables NPV without variation Increase in project revenues Reduction in project costs NPV US$1,162,675-15% -US$752,194 15% US$3,077,543-15% US$2,753,141 15% -US$427,792 Step 3 Barrier analysis is skipped. Step 4. Common practice analysis Sub-step 4a: Analyze other activities similar to the proposed project activity

12 page 12 There are no similar projects happening apart from CDM projects. Sub-step 4b: Discuss any similar options that are occurring No similar projects are being developed in the country. B.6. Emission reductions: B.6.1. Explanation of methodological choices: >> The following methodology and tools are applied to the proposed project activity. Details are provided below. ACM0001 Consolidated baseline methodology for landfill gas project activities - Version 8; Tool for determining methane emissions avoided from dumping waste at a solid waste disposal site Version 2 Tool to determine project emissions from flaring gases containing methane -Version 1 Tool for calculation of emission factor for electrical systems Version 1 According to the methodology baseline emissions are: Where: BE y : Baseline emissions in year y (tco2e) MD project,y : The amount of methane that would have been destroyed/combusted during the year, n tonnes of methane (tch4) in project scenario MD reg,y : The amount of methane that would have been destroyed/combusted during the year in the absence of the project due to regulatory and/or contractual requirement, in tonnes of methane (tch4) GWP CH4 : Global Warming Potential value for methane for the first commitment period is 21 tco2e/tch4 EL LFG,y : Net quantity of electricity produced using LFG, which in the absence of the project activity would have been produced by power plants connected to the grid or by an on-site/off-site fossil fuel based captive power generation, during year y, in megawatt hours (MWh). CEF elecy,bl,y : CO2 emissions intensity of the baseline source of electricity displaced, in tco2e/mwh. The MD reg,y is assumed to be zero since there are no regulations or contractual agreements requiring capture and flaring of methane. MD project,y will be determined ex post by metering the actual quantity of methane captured and destroyed once the project activity is operational. The methane destroyed by the project activity (MD project,y ) during a year is determined by monitoring the quantity of methane actually flared and gas used to generate electricity and the total quantity of methane captured. MD project, y = MD flared, y + MD electricity, y (2)

13 page 13 Where: MD flared,y = Quantity of methane destroyed by flaring (tch4) MD electricity,y = Quantity of methane destroyed by generation of electricity (tch4) Where: LFG flare,y is the quantity of landfill gas fed to the flare(s) during the year measured in cubic meters (m3), w CH4,y Is the average methane fraction of the landfill gas as measured during the year and expressed as a fraction (in m³ CH4 / m³ LFG), D CH4 Is the methane density expressed in tonnes of methane per cubic meter of methane (tch4/m3ch4) and PE flare,y Are the project emissions from flaring of the residual gas stream in year y (tco2e) determined following the procedure described in the Tool to determine project emissions from flaring gases Containing Methane. If methane is flared through more than one flare, the PE flare,y shall be determined for each flare using the tool. Where: MD electricity, y is the quantity of methane destroyed by generation of electricity and LFG electricity, y is the quantity of landfill gas fed into electricity generator. Ex-ante estimation of the amount of methane that would have been destroyed/combusted during the year, in tonnes of methane (MDproject,y) The ex-ante estimation of the the amount of methane that would have been destroyed/combusted during the year, in tonnes of methane (MDproject,y) will be done with the latest version of the approved Tool to determine methane emissions avoided from dumping waste at a solid waste disposal site, considering the following additional equation: (5) Where: MD project, y = BE CH4,SWDS,y /GWP CH4 (6) BECH4,SWDS,y = Methane emissions avoided during the year y from preventing waste disposal at the solid waste disposal site (SWDS) during the period from the start of the project activity to the end of the year y (tco2e) φ = Model correction factor to account for model uncertainties (0.9) f = Fraction of methane captured at the SWDS and flared, combusted or used in another manner

14 page 14 GWPCH4 = Global Warming Potential (GWP) of methane, valid for the relevant commitment period OX = Oxidation factor (reflecting the amount of methane from SWDS that is oxidised in the soil or other material covering the waste) F = Fraction of methane in the SWDS gas (volume fraction) (0.5) DOCf = Fraction of degradable organic carbon (DOC) that can decompose MCF = Methane correction factor Wj,x = Amount of organic waste type j prevented from disposal in the SWDS in the year x (tons) DOCj = Fraction of degradable organic carbon (by weight) in the waste type j kj = Decay rate for the waste type j j = Waste type category (index) x = Year during the crediting period: x runs from the first year of the first crediting period (x = 1) to the year y for which avoided emissions are calculated (x = y) y = Year for which methane emissions are calculated Emission Reduction Emission reductions are calculated as follows: Where: ERy = Emission reductions in year y (tco2e/yr) BEy = Baseline emissions in year y (tco2e/yr) PEy = Project emissions in year y (tco2/yr) ER y = BE y PE y (6) Calculation of emission reductions grid electricity displacement To calculate the Carbon Emission Factor CEFelectricity,y for the grid electricity displaced the project will follow the Tool to calculate the emission factor for an electricity system This methodological tool determines the CO 2 emission factor for the displacement of electricity generated by power plants in an electricity system, by calculating the operating margin (OM) and build margin (BM) as well as the combined margin (CM). The build margin was based on the latest 20% built of power plant in generation because such sample was grater than the latest 5 power plants built in the system. The OM selected is the Simple Operating Margin Emission Factor because data for the Dispatch Data Analysis OM is not publicly available and the IMNG has less than 50% of low-cost/must-run plants since decades ago. The weights of 50% and 50% for the OM and the BM respectively were taken given that they are the default weight values. B.6.2. Data and parameters that are available at validation: (Copy this table for each data and parameter) Data / Parameter: Carbon Emission Factor (CEFelectricity,y) Data unit: tco 2 /MWh Description: CO 2 emissions intensity of the electricity displaced Source of data used: CENACE, CEF (Generation, Programming Unit). Measurement Data used for the generation was provided by CENACE; data for the net procedures if any: efficiency conversions was taken from information system software (Generation Unit) and official internal reports (Programming Unit) weighted average NECs

15 page 15 Any comment: per fuel type were provided for the baseline calculation and DOE checked individual NECs per power unit and agreed with conservatism of the baseline calculation. CM will be fixed ex-ante and will not need to be monitored/verified after the time of validation. Data / Parameter: Data unit: Description: Source of data used: Measurement procedures if any : Any comment: Data / Parameter: Data unit: Description: Source of data used: Measurement procedures if any: Any comment: Data / Parameter: Data unit: Description: Source of data used: Measurement procedures if any: Any comment: GWPCH4 tco2/tch4 Global warming potential of CH4 IPCC 21 for the first commitment period. Shall be updated accordingly to any future COP/MOP decisions N/A DCH4 tch4/m3ch4 Methane density IPCC At standard T and P (0 degrees C and 1,013 bar) the density of methane is tch4/m3ch4 N/A BECH4, SWDS,y tco2e Methane generation from the landfill in the absence of the project activity at year y Calculated as per the Tool for determining methane emissions avoided from dumping waste at a solid waste disposal site Version 2 As per the Tool for determining methane emissions avoided from dumping waste at a solid waste disposal site Version 2 Used for ex-ante estimation of the amount of methane that would have been destroyed/combusted during the year B.6.3 Ex-ante calculation of emission reductions: Ex ante estimate of emission reductions was done using the Tool for determining methane emissions avoided from dumping waste at a solid waste disposal site Version 2. The actual emission reductions will be monitored ex-post. The CEF electricity,y, for the relevant grid is calculated according to Tool to calculate the emission factor for an electricity system. Summary of calculations is provided below. Calculation of the ex-ante OM

16 page 16 The Simple OM is the generation-weighted average emission per electricity unit (tco 2 /MWh) of all generation sources serving the system, not including low-operating cost and must run power plants, and was calculated as follow: EF_OMy = Sumproduct [Fi,j,y*COEF]/Sum Generationj,y where j refers to power sources, i refers to the fuel used, and y to the year in which actual ERs occur, and j does not take into consideration low-cost/must-run resources. Following the methodology, for the project, the COEF of imports should be zero and exports should not be discounted from the generation data. As the margin is fixed ex-ante, the calculation takes into account latest 3 years of data publicly available. Calculation of the ex-ante BM The BM is defined as the generation-weighted average emission factor (tco 2 /MWh) of a sample of power plants. Such sample should be composed by either the 5 most recently built plants or the plants whose aggregated generation comprises the most recent 20% of the IMNG generation in the year of project generation occurrence, whichever group s generation is greater 2 both lists should exclude CDM-Status plants. The methodology, gives 2 options for the calculation of the BM. The first option was selected this option required the BM to be calculated ex-ante based on the most recent information at the time of PDD submission 3. Imports are considered a build margin source with COEF equal to zero, since these imports come from other countries 4. The BM was calculated ex-ante by applying to the selected sample the following formula: EF_BMy (tco 2 /MWh) = [ i,m(fi,m,y) x (COEFi,m)] / [ mgenm,y]; m = plants of the selected sample, F = their annual generation in MWh, COEF = their tco 2 /MWh factor, GEN= total sample s annual generation, i=technology. Calculation of the ex-ante CM Following the methodology, the baseline emission factor is the CM calculated as the weighted average of the OM and the BM as follows: CM= w OM x OM+ w BM x BM OM and the BM ex-ante calculation were based on most recent data available at the time of PDD submission. The w OM and w BM by default for wind-power plants according to the methodology, are 0.75 and 0.25, respectively; because of their intermittent and non-dispatchable nature. Calculation of the project s ERs prior to validation. ERs per year for the project are to be calculated ex-post annually from the following multiplication: Baseline emissions (tco 2 e) = ex-ante CM x (annual project generation in MWh) = ERs per year (tco 2 e). 2 The latest 20% added in generation to the IMNG was taken for the project s BM estimation, as this sample was larger in generation than the 5 most recent added power plants to the IMNG generation data. Only 2005 generation data was taken because the latest 20% added to the IMNG comprises power plants that did not operate in 2004 or 2003, so a 3-year average of their generation would be biased. 4 There is no connection between any isolated system within Mexico and the IMNG. As of today Mexico exchanges electricity with Belize and USA only. In the future, Mexico will exchange electricity with other Central American countries. The interconnection of the IMNG with the Central American Interconnection System ( SIEPAC) is programmed to occur in January This will enable the exchange of electricity between Mexico and the rest of Central America through Guatemala. The transmission line Tapachula-Los Brillantes (400 KV) is the only transmission line that will use Mexico to connect with SIEPAC.

17 page 17 Ex-ante OM = tco 2 /MWh. Ex-ante BM = tco 2 /MWh. Ex-ante CM = tco 2 /MWh B.6.4 >> Summary of the ex-ante estimation of emission reductions: Table 1 Estimated ex-ante Project Emissions Emission reductions from methane capture component Year Estimation of project activity emissions (tonnes of CO 2 e) Estimation of baseline emissions (tonnes of CO 2 e) Estimation of leakage (tonnes of CO 2 e) Estimation of emission reductions (tonnes of CO 2 e) , , , , , , , , , , , , , ,739 Annual emission reductions from energy displacement in tons CO 2 e. Year Tons CO2e 29,754 29,754 29,754 29,754 29,754 29,754 29,754 B.7 Application of the monitoring methodology and description of the monitoring plan: B.7.1 Data and parameters monitored: Data / Parameter: LFGtotal,y Data unit: m 3 Description: Total amount of landfill gas captured at normal T and P Source of data: From project developer Measurement Measured by flow meter continuously, data to be aggregated monthly and yearly. procedures if any: Monitoring frequency: Continuous QA/QC procedures: Flow meters shall be subject to a regular maintenance and testing regime to ensure accuracy.

18 page 18 Any comment: Data / Parameter: LFGflared,y Data unit: m 3 Description: Flow of LFG to the flare. Amount of landfill gas flared at normal T and P Source of data: Flow meter Measurement procedures if any: Monitoring frequency: QA/QC procedures: Any comment: Measured continuously, data to be aggregated monthly and yearly for each flare. Continuous Flow meters shall be subject to a regular maintenance and testing regime to ensure accuracy. Data / Parameter: LFG electricity, y Data unit: m 3 Description: The amount of landfill gas combusted in power plant at normal T and P Source of data: Flow meter Measurement Measured by a flow meter. Data to be aggregated monthly and yearly. procedures if any: Monitoring frequency: Continuous QA/QC procedures: Flow meters shall be subject to a regular maintenance and testing regime to ensure accuracy. Any comment: Data / Parameter: Data unit: Description: Source of data to be used: Measurement procedures if any: Monitoring frequency: QA/QC procedures: Any comment: Data / Parameter: Data unit: Description: Source of data: Measurement procedures if any: Monitoring frequency: QA/QC procedures: PEflare,y Tonne CO 2 e Project emissions from flaring of the residual gas stream in year y Calculated as per the Tool to determine project emissions from flaring gases containing Methane. Measured continuously, data to be aggregated monthly and yearly. Continuous Instruments are periodically tested in order to secure accuracy. w CH4,y m³ CH 4 / m³ LFG Methane fraction in the landfill gas Measured by continuous gas quality analyzer. Methane fraction of the landfill gas to be measured on wet basis. Measured continuously, data to be aggregated monthly and yearly. Continuous The gas analyser shall be subject to regular maintenance and calibration to ensure

19 page 19 Any comment: Data / Parameter: Data unit: Description: Source of data: Measurement procedures if any: Monitoring frequency: QA/QC procedures: Any comment: Data / Parameter: Data unit: Description: Source of data: Measurement procedures if any: Monitoring frequency: QA/QC procedures: Any comment: Data / Parameter: Data unit: Description: Source of data: Measurement procedures if any: Monitoring frequency: QA/QC procedures: Any comment: Data / Parameter: Data unit: Description: Source of data: Measurement procedures if any: Monitoring frequency: QA/QC procedures: accuracy. T C Temperature of the landfill gas Project participants Measured to determine the density of methane DCH4. NO separate monitoring is necessary when using flow meters that automatically measure the temperature and pressure, expressing LFG volumes in normalised cubic meters Continuous Measuring instruments shall be subject to regular maintenance and testing regime in accordance to appropriate national/international standards. P Pa Pressure of the landfill gas Project participants Measured to determine the density of methane DCH4. No separate monitoring is necessary when using flow meters that automatically measure the temperature and pressure, expressing LFG volumes in normalised cubic meters Continuous Measuring instruments shall be subject to regular maintenance and testing regime in accordance to appropriate national/international standards. EL LFG MWh Net amount of electricity generated using LFG Project developer Electricity meter Continuous The electricity meter will be subject to regular (in accordance with stipulation of the meter supplier) maintenance and calibration to ensure accuracy. Required to estimate the emission reductions from electricity generation from LFG Operation of the energy plant hours Operation hours of the energy plant Project developer Annually The electricity meter will be subject to regular (in accordance with stipulation of

20 page 20 Any comment: the meter supplier) maintenance and calibration to ensure accuracy. This is monitored to ensure methane destruction is claimed for methane used in electricity plant when it is operational Data to be monitored as per Tool to determine project emissions from flaring gases containing methane Data / Parameter: fv i,h Data unit: -- Description: Volumetric fraction of component i in the residual gas in the hour h where i = CH4, CO, CO2, O2, H2, N2 Source of data: Measurements by project participants using a continuous gas analyzer Measurement Ensure that the same basis (dry or wet) is considered for this measurement procedures if any: and the measurement of the volumetric flow rate of the residual gas (FVRG,h) when the residual gas temperature exceeds 60 ºC Monitoring frequency: QA/QC procedures to be applied: Any comment: Continuously. Values to be averaged hourly or at a shorter time interval Analyzers will be periodically calibrated according to the manufacturer s recommendation. A zero check and a typical value check should be performed by comparison with a standard certified gas. As a simplified approach, project participants may only measure the methane content of the residual gas and consider the remaining part as N2. Data / Parameter: FVRG,h Data unit: m 3 /h Description: Volumetric flow rate of the residual gas in dry basis at normal conditions in the hour h Source of data: Measurements by project participants using a flow meter Measurement procedures if any: Ensure that the same basis (dry or wet) is considered for this measurement and the measurement of volumetric fraction of all components in the residual gas (fvi,h) when the residual gas temperature exceeds 60 ºC Monitoring frequency: QA/QC procedures to be applied: Any comment: Measured continuously. Values to be averaged hourly or at a shorter time interval Flow meters are to be periodically calibrated according to the manufacturer s recommendation. Data / Parameter: to2,h Data unit: -- Description: Volumetric fraction of O2 in the exhaust gas of the flare in the hour h Source of data: Measurements by project participants using a continuous gas analyzer Measurement Extractive sampling analyzers with water and particulates removal devices or in procedures if any: situ analyzers for wet basis determination. The point of measurement (sampling point) shall be in the upper section of the flare (80% of total flare height). Sampling shall be conducted with appropriate sampling probes adequate to high temperatures level (e.g. inconel probes). An excessively high temperature at the sampling point (above 700 ºC) may be an indication that the flare is not being adequately operated or that its capacity is not adequate to the actual flow. Monitoring frequency: Measured continuously. Values to be averaged hourly or at a shorter time interval QA/QC procedures: Analyzers must be periodically calibrated according to the manufacturer s

21 page 21 Any comment: recommendation. A zero check and a typical value check should be performed by comparison with a standard gas. Monitoring of this parameter is only applicable in case of enclosed flares and continuous monitoring of the flare efficiency. Data / Parameter: fvch4,fg,h Data unit: mg/m 3 Description: Concentration of methane in the exhaust gas of the flare in dry basis at normal conditions in the hour h Source of data: Measurements by project participants using a continuous gas analyzer Measurement Extractive sampling analyzers with water and particulates removal devices or in procedures if any: situ analyzers for wet basis determination. The point of measurement (sampling point) shall be in the upper section of the flare (80% of total flare height). Sampling shall be conducted with appropriate sampling probes adequate to high temperatures level (e.g. inconel probes). An excessively high temperature at the sampling point (above 700 ºC) may be an indication that the flare is not being adequately operated or that its capacity is not adequate to the actual flow. Monitoring frequency: QA/QC procedures: Any comment: Measured continuously. Values to be averaged hourly or at a shorter time interval Analyzers must be periodically calibrated according to the manufacturer s recommendation. A zero check and a typical value check should be performed by comparison with a standard gas. Monitoring of this parameter is only applicable in case of enclosed flares and continuous monitoring of the flare efficiency. Measurement instruments may read ppmv or % values. To convert from ppmv to mg/m 3 simply multiply by % equals ppmv. Data / Parameter: Data unit: Description: Source of data: Measurement procedures if any: Monitoring frequency: QA/QC procedures: Any comment: T flare o C Temperature in the exhaust gas of the flare Measurements by project participants Measure the temperature of the exhaust gas stream in the flare by a Type N thermocouple. A temperature above 500 C indicates that a significant amount of gases are still being burnt and that the flare is operating. Continuously. Thermocouples should be replaced or calibrated every year. An excessively high temperature at the sampling point (above 700 ºC) may be an indication that the flare is not being adequately operated or that its capacity is not adequate to the actual flow. B.7.2 Description of the monitoring plan: >>The monitoring methodology is based on direct measurement of the amount of landfill gas captured and destroyed at the flare platform(s), the natural gas pipelines and the electricity generating/thermal energy unit(s) to determine the quantities as shown in Figure 1. The monitoring plan provides for continuous measurement of the quantity and quality of LFG flared. The main variables that need to be determined are the quantity of methane actually captured MDproject,y, quantity of methane flared (MDflared,y), the quantity of methane used to generate electricity (MDelectricity,y), the quantity of

22 page 22 methane generated (MDtotal,y). The methodology also measures the energy generated by use of LFG (ELLFG,y) F FE Flare CH4 T P F F Landfill Power Plant Landfill Gas (LFG) Measurements: CH4: Fraction of CH4 T= Temperature P=Pressure F= Flow of LFG (m3) FE=Flare of efficiency To determine these variables, the following parameters will be monitored: The amount of landfill gas generated (in m³, using a continuous flow meter), where the total quantity (LFGtotal,y) as well as the quantities fed to the flare(s) (LFGflare,y), to the power plant(s) (LFGelectricity,y) are measured continuously. In the case where LFG is just flared, one flow meter for each flare can be used provided that these meters used are calibrated periodically by an officially accredited entity. The fraction of methane in the landfill gas (wch4,y) should be measured with a continuous analyzer or, alternatively, with periodical measurements, at a 95% confidence level, using calibrated portable gas meters and taking a statistically valid number of samples and accordingly the amount of land fill gas from LFGtotal,y, LFGflare,y, LFGelectricity,y shall be monitored in the same frequency. The continuous methane analyser should be the preferred option because the methane content of landfill gas captured can vary by more than 20% during a single day due to gas capture network conditions (dilution with air at wellheads, leakage on pipes, etc.). Methane fraction of the landfill gas to be measured on wet basis. The parameters used for determining the project emissions from flaring of the residual gas stream in year y (PEflare,y) should be monitored as per the Tool to determine project emissions from flaring gases containing methane. Temperature (T) and pressure (p) of the landfill gas are required to determine the density of methane in the landfill gas. The quantities of fossil fuels required to operate the landfill gas project, including the pumping equipment for the collection system and energy required to transport heat, should be monitored. In projects where LFG gas is captured in the baseline to either meet the regulation or for safety reason, fossil fuel used in the baseline too should be recorded. The quantity of electricity imported, in the baseline and the project situation, to meet the

23 page 23 requirements of the project activity, if any. The quantity of electricity exported out of the project boundary, generated from landfill gas, if any. Relevant regulations for LFG project activities shall be monitored and updated at renewal of each credit period. Changes to regulation should be converted to the amount of methane that would have been destroyed/combusted during the year in the absence of the project activity (MDreg,y). Project participants should explain how regulations are translated into that amount of gas. The operating hours of the energy plant(s) and the boiler(s). The measurement equipment for gas quality (humidity, particulate, etc.) is sensitive, so a strong QA/QC procedure for the calibration of this equipment is needed. The Monitoring Plan will by implemented by the following parties: The project sponsor (SEISA) will oversee the development of the project and will periodically carry out internal audits to assure that project activities are in compliance with operational and monitoring requirements. The project operator (SEISA and SPOC 5 ) will adopt the instructions given in the MP and accomplish all activities related to the implementation of the procedures given in the Operational Manual. The main responsibilities of the operator are related to: Data handling: maintaining an adequate system for collecting, recording and storing data according to the protocols determined in the MP, checking data quality, collection and record keeping procedures regularly. Reporting: preparing periodic reports that include emission reductions generated, observations regarding MP procedures. Training: assuring personnel training regarding the performance of the project activities and the MP. Quality control and quality assurance: complying with quality control and quality assurance procedures to facilitate periodical audits and verification. An Operational Manual produced by the developer of the project will include procedures for training, capacity building, proper handling and maintenance of equipment, emergency plans and work safety, detailed monitoring plan is provided in Annex 4. B.8 Date of completion of the application of the baseline study and monitoring methodology and the name of the responsible person(s)/entity(ies) >> Zarina Azizova: zazizova@worldbank.org Fernando Cubillos: fcubillos@worldbank.org World Bank Carbon Finance Unit 5 (*) SPOC means Sub-project Operator Company owned by SEISA, and is the entity that owns and operate the sites.

24 page 24 SECTION C. Duration of the project activity / crediting period C.1 Duration of the project activity: C.1.1. Starting date of the project activity: >> 1 March 2008 C.1.2. Expected operational lifetime of the project activity: >> 21 years C.2 Choice of the crediting period and related information: C.2.1. Renewable crediting period 3x 7 years renewable C >> 1 May 2008 C >> 7 (seven) years Starting date of the first crediting period: Length of the first crediting period: C.2.2. Fixed crediting period: >>N/A >>N/A C C Starting date: Length: SECTION D. Environmental impacts >> D.1. Documentation on the analysis of the environmental impacts, including transboundary impacts: >> The net environmental impacts are expected to be positive since the landfill gas will be captured and utilized as a renewable energy source and proper closure of the landfill site will eliminate some of the local environmental issues. The installation and operation of a LFG collection and control systems (flare or engine generators) at the landfill will significantly improve the environment compared to the baseline condition, including a reduction of air emissions. However, during the construction and installation of the projects, potential environmental impacts could arise. Examples of potential impacts include: Noise during construction, Emissions from construction vehicles and equipment,