LICAN HYDROELECTRIC PLANT

Transcription

1 LICAN HYDROELECTRIC PLANT Document Prepared B Empresa Eléctrica Licán S.A. Project Title Lican Hdroelectric Plant Version 2 Date of Issue Prepared B Contact Empresa Eléctrica Licán S.A. Address: Av. Vitacura 2771 of. 501 Las Condes - Las Condes Santiago - Chile Phone: Contact s: m.perez@elisa.cl, jmcontardo@gmail.com Website: v3.0 1

2 Table of Contents 1 Project Details Summar Description of the Project Sectoral Scope and Project Tpe Project Proponent Other Entities Involved in the Project Project Start Date Project Crediting Period Project Scale and Estimated GHG Emission Reductions or Removals Description of the Project Activit Project Location Conditions Prior to Project Initiation Compliance with Laws, Statutes and Other Regulator Frameworks Ownership and Other Programs Additional Information Relevant to the Project Application of Methodolog Title and Reference of Methodolog Applicabilit of Methodolog Project Boundar Baseline Scenario Additionalit Methodolog Deviations Quantification of GHG Emission Reductions and Removals Baseline Emissions Project Emissions Leakage Summar of GHG Emission Reductions and Removals Monitoring Data and Parameters Available at Validation Data and Parameters Monitored Description of the Monitoring Plan Environmental Impact Stakeholder Comments v3.0 2

3 1 PROJECT DETAILS 1.1 Summar Description of the Project The Lican Hdroelectric Plant, or hereafter the Project, consists of the construction and operation of a Run-Of-River hdropower plant of MW of installed capacit and near GWh of average annual generation, resulting in 57.83% plant factor. The Lican Hdroelectric Plant operates with two horizontal Francis Turbines, each one connected directl to their respective snchronous generators. Both generators connect to a power transformer elevating the voltage from 13.2 KV to 66 kv in the Lican substation. The Project electric generation is supplied to the Central Interconnected Grid (Sistema Interconectado Central in Spanish, hereafter SIC) b a single-circuit 66 kv transmission line, connecting the Project to the existing Antillanca substation at km west from the Lican substation. The project has been registered under the Clean Development Mechanism (CDM) standard on 24/10/2012, but it has been operational since 15/06/2011. The CDM starting date el 01/12/2012, thus the project is seeking the VCS registration as a pre-cdm project in order to account emission reductions generated between the commissioning date and the CDM starting date. The baseline scenario for the Lican Hdroelectric Plant is the continuing operation of the existing and future power plants, without the Lican Hdroelectric Plant electricit generation, to meet the actual electricit demand. In the Project scenario the same electricit demand is met with the Lican Hdroelectric Plant generation displacing the generation from existing power plants and future power developments (see further details in section B.4). The aim of the Lican Hdroelectric Plant is to generate electricit from renewable hdrological resources that will directl reduce greenhouse gas emissions produced b fossil fuel based power plants. With its average annual generation, the Project will reduce near 56,427 tons of CO2e per ear. The Project reduces greenhouse gas emissions produced b thermal electric plants, fired with fossil fuels, which are currentl in operation in Chile. Lican Hdroelectric Plant was initiall developed b Inversiones Candelaria Ltda. Then, the Project and all its related assets were transferred to Empresa Eléctrica Lican S.A. (ELISA), who is in charge of the plant development, construction and operation. The purpose of the Lican Hdroelectric Plant is to generate electricit contributing to the sustainable development in Chile through: Use of local renewable energ resources (small hdro) to displace fossil fuel based power generation in the SIC. Reduction of GHG emissions, specificall CO2e Increased commercial activit through clean and renewable source of power. Permanent and temporar emploment generation in the XIV region where the project is located, improving economic benefits to the surrounding communities which have a high rate of unemploment and povert. Training of local people, in techniques and occupations related to the construction and operation of a hdroelectric power plant. v3.0 3

4 1.2 Sectoral Scope and Project Tpe PROJECT DESCRIPTION: VCS Version 3 Based on the AM0026 version 3 of UNFCCC methodolog, the Lican Hdroelectric Plant falls into the large-scale project categor. Sectoral Scope: Number 1, Energ industries (renewable/non-renewable sources) The Project is not a grouped project or a debundled part of a larger project. 1.3 Project Proponent The Project proponent organization is Empresa Eléctrica Lican S.A. and their details are shown in the following Table 1.1. Table 1.1: Project Proponent details Organization: Empresa Eléctrica Lican S.A. Street/P.O.Box: Av. Vitacura 2771 of. 501 Las Condes Building: Helvecia Cit: Santiago de Chile State/Region: Región Metropolitana Postfix/ZIP: Countr: Chile Telephone: FAX: m.perez@elisa.cl URL: Represented b: Title: General Manager Salutation: Mr. Last Name: Pérez Middle Name: Rodrigo First Name: Marcelo Department: Mobile: Direct FAX: Direct tel: Personal Other Entities Involved in the Project No other Entities are involved in the Project. 1.5 Project Start Date The project emission reduction starting date is 15 June of 2011 corresponding to the date when the project started generating and suppling electricit to de grid 1.6 Project Crediting Period The crediting period start date of the project is 15/06/2011. The crediting period will end on 30/11/2012, since after this date the project will be accounting emission reductions under the Clean Development Mechanism standard. v3.0 4

5 1.7 Project Scale and Estimated GHG Emission Reductions or Removals The estimates of emission reduction are provided to facilitate evaluation of emission reduction from the Project. The total estimated emission reduction to be achieved b the project is about 82,553 tons of CO2e over the crediting period. With an average annual generation of approximatel GWh, the Project will reduce emissions b 56,427 tons of CO2e per ear and hence the project activit is categorized as Projects. Table 1.2: Estimated GHG emission reductions Project Mega-project X Years Estimated GHG emission reductions or removals (tco2e) 2011 (since 15/06/2011) 30, (until 30/11/2012) 51,789 Total estimated ERs 82,553 Total number of crediting ears 2 Average annual ERs 56, Description of the Project Activit Electric power generation will be accomplished through well-proven technologies. The project considers the construction of: a water intake in the Lican River with 8 m 3 /s design flow, a pressure penstock with meter head, a dail peak hour reservoir of 102,000 m 3 volume and 30,870 m 2 area, a power house with two sets of horizontal axis Francis turbines of MW each connected to their correspondent power generators of MW each, a 13.2 to 66 KV power transformer of 18 MVA capacit and km of a single circuit 66 kv transmission line, which connects the project to the SIC grid through the existing Antillanca substation (formerl Rucatao substation project). The transmission line voltage ma be extended to 110 KV in the future, in order to increase the transmission capacit to allow third part projects interconnection to the SIC grid. Nevertheless, this will not affect the Project installed capacit, equipment, annual generation nor its laout. Average annual energ production of the Project is estimated in GWh, obtained through a 48 hdrologic statistical average from ears 1959 to 2006, resulting in 57.83% plant factor. The net electricit delivered to the grid will be monitored continuousl on b electric meters on site. The Project will help to stimulate the development of Non Conventional Renewable Energ (ERNC) industr in Chile and will contribute to transfer technolog and know-how to the countr on small renewable zero-emissions developments. v3.0 5

6 PHYSICAL INFRASTRUCTURE Table 1.3: Project Details POWER PLANT 2 horizontal Francis Turbines of MW each 2 power generator of MW each Design flow: 8 m 3 /s Peak hour reservoir of 102,000 m 3 volume and 30, 870 m 2 area m head 1 power transformer of 18/22.5 MVA (ONAN/ONAF) to 66 KV 66 KV power substation km, 66 KV transmission line 57.83% plant factor Capacit: MW Average Net Generation: GWh/ear. Located 65 km east from Osorno cit Construction time: 25 months Estimated cost: USD 44.7 million Figure 1.1: Project Site Schematic Diagram Licán River Intake Dail peakhour Reservoir of 102,000 m 3 Adduction Channel, 8.55km, And 8m3/s design flow Foreba Spillwa Mechanical Axis Powerhouse Turbine2 3 ~ Generator MW 3 ~ 13.2KV Bus bar Substation Power Transformer 13.2/66 kv 18/22.5 MVA Circuit Braker 66 KV Bus bar Electricit to the grid Turbine1 Generator MW Tailrace Licán River Project emission reductions are calculated as a Combined Margin emission factor (CM), consisting of the weighted average of an Operating Margin (OM) and a Build Margin (BM), following AM0026 (version 3) approved methodolog. The OM emission factor from the project activit will depend on the actual generation data from the SIC. The dispatch data, to be provided ex-post b the Economic Dispatch Center (CDEC-SIC), will conclusivel indicate the tpe of generation displaced b the addition of Lican Hdroelectric Plant in the generation mix in the SIC. The monitoring and verification plan for the Project utilizes the data provided b CDEC-SIC and other official data. The BM emission factor will be determined as option (i) in AM0026 (version 3), i.e., following the BM emission factor estimation process described in the: Tool to calculate the emission factor for an electricit sstem, which is calculated on an ex-post basis as the generation-weighted average emission factor (tco2/mwh) of all the power units during the most recent ear for which power generation data is available. The Project is designed based on 40 ears of economic life, suggesting that it will reduce emissions for a considerabl long period of time, even after the crediting period. v3.0 6

7 1.9 Project Location Lican Hdroelectric Plant is located in the XIV Región de los Ríos, Chile, at about 65 km east from Osorno cit and 45 km west of the Chilean-Argentinean border. The Project s intake is placed in the Lican River, and the Powerhouse facilities are placed in the Lican Farm. The water restoration takes place through a tailrace channel, delivering and restoring the waters to their previous course in the Lican River. The project coordinates are: Table 1.4: Project Coordinates (Geographic Coordinate Sstem, WGS84, Zone 19, Southern Hemisphere) Latitude Longitude Intake 40 34' 39.5" S 72 18' " W Power house 40 36' 52.7" S 72 23' 58.2" W Figure 1.2: Geographic position Osorno N Puehue Lake Lican Hdroelectric Plant Puehue Lake v3.0 7

8 Figure 1.3: Satellite view of the project Project Intake Transmission Line Project Powerhouse Reservoir Puehue Lake 1.10 Conditions Prior to Project Initiation Prior to the project initiation, the Lican river water flows were discharged to the Puehue Lake, where no electric power was obtained. Following the previous conditions, the Lican Hdroelectric Plant was conceived to use some natural slopes in the Lican River, in order to transform the potential energ of the water into a hdropower plant. Empresa Eléctrica Licán S.A. detected an opportunit obtaining the required water rights from National Water Direction (Direccion General de Aguas), which is the official authorit to grant water permits in Chile. The Project main purpose involves the generation of renewable energ. It will help Chile as a developing countr to stimulate and commercialise the use of grid connected renewable energ technologies that are required according to the article 150 bis of the Chilean General Electric Service Law Directive (DFL4/2006), published on 17/01/2006 in the Official Gazette (available at The Project is a new power unit and it did not replace an old plant Compliance with Laws, Statutes and Other Regulator Frameworks Following article 10, letter c) of the Environmental Law Nº19,300 (Le sobre Bases Generales del Medio Ambiente), and article 3, letter c) of its Regulation (Supreme Decree N 95 of 2001, Reglamento del Sistema de Evaluación de Impacto Ambiental - RSEIA), all energ generation projects having more than 3 MW of installed capacit, must meet the terms of Environmental Impact Evaluation Sstem (SEIA). Further, section II, article 8 of the Environmental Law 19,300 indicates that this kind of projects will not be able to be executed or modified if the do not have the subsequent approval of the Environmental Qualification Resolution (R.C.A. in Spanish). According this, Lican Hdroelectric Plant was submitted to the SEIA through an Environmental Impact Assessment (EIA in Spanish). The Lican project was initiall approved b the Environmental Impact Assessment process in 23/12/2004 through the Resolución Exenta N 862, COREMA X Región de los Lagos, and modified through Resolución Exenta N 0 dated in 16/01/2006, Resolución Exenta N 267 dated in 25/04/2006, Resolución Exenta N 767 dated in 17/11/2006 and Resolución Exenta N 0051 dated in 15/05/2008. According to Chilean legal dispositions, the environmental qualification process discusses a wide range of environmental impacts related to phsical, biotic, social and economic impacts during the plant s construction, operation and end of the project operation, such as: land use, air qualit, noise emissions, solid emissions, liquid emissions, native forestr effects, among other effects. It identifies the risk or v3.0 8

9 contingenc zones and the tpe of risk associated to them. It also discusses a number of corrective measures and establishes an environmental management plan to deal with the identified impacts. This plan addresses the significant and medium impacts providing measures for their mitigation, restoration or compensation. In general terms, the RCA certifies that: The project accomplishes with all the environmental requirements, and the environmental laws, including all the requirements stated in the sectorial environmental permits and authorizations. There is a minimum ecological flow to be considered for this project activit of 750 liters per second, according to Resolución D.G.A. Nº 660 dated on 20/11/2003. This flow will be granted through the intake design, where the intake will be placed with a 40 cm difference from the river bed, allowing the deliver of the ecological flow to de river before the acquisition of waters in the intake channel Ownership and Other Programs Proof of Title Empresa Eléctrica Lican S.A. compan (ELISA) constructed and owns the Lican Hdroelectric Plant. ELISA is the owner of the water rights for the hdroelectric generation. All water rights have been approved b the Dirección General de Aguas, here after DGA, ensuring the right of use of the waters. B the other hand, ELISA was granted the environmental resolution that approves the construction and the operation of the project according to the Chilean national laws Emissions Trading Programs and Other Binding Limits Participation under Other GHG Programs The Project is actuall registered under the Clean Development Mechanism Program. The registration under CDM occurred in 24/10/2012 and the project commissioning date was 15/06/2012. Thus the project is seeking the VCS registration as a pre-cdm project in order to account for those emission reductions produced between the commissioning date and the CDM registration Other Forms of Environmental Credit The Project is not seeking registration under an other GHG programs Projects Rejected b Other GHG Programs The Project has not been rejected under an GHG programs Additional Information Relevant to the Project Eligibilit Criteria Leakage Management v3.0 9

10 Commerciall Sensitive Information Further Information 2 APPLICATION OF METHODOLOGY 2.1 Title and Reference of Methodolog AM0026: Baseline Methodolog for zero-emissions grid-connected electricit generation from renewable sources in Chile or in countries with merit order based dispatch grid (version 3), together with the Tool to calculate the emission factor for an electricit sstem (version 2.2.1) and the Tool for the demonstration and assessment of additionalit (version 6.0.0). 2.2 Applicabilit of Methodolog The proposed methodolog has been specificall tailored for the Chilean Power sector. As stated b AM0026 (version 3), the applicabilit of this methodolog requires the following conditions to be met: Condition N 1) Projects that are renewable electricit generation projects of the following tpes: a) Run-of-river hdro power plants and hdro electric power projects with existing reservoirs where the volume of the reservoir is not increased; b) New hdro electric power projects with reservoirs having power densities (installed power generation capacit divided b the surface area at the full reservoir level) greater than 4 W/m 2 c) Wind sources; d) Solar sources; e) Geothermal sources; f) Wave and tidal sources. Applicabilit: The proposed Project Activit fulfills letter (b) of the previous conditions, where it is a new hdro electric power plant having a reservoir power densit of 589 W/m 2 (18,180,000 W / 30,870 m 2 ), which is greater than 4 W/m 2. Condition N 2) Projects that are connected to the interconnected grids of the Republic of Chile and Projects that fulfills all the legal obligations under the Chilean Electricit Regulation; or Proposed projects implemented in countries other than Chile provided the countr has a regulator framework for electricit generation and dispatch that meets the following conditions: (a) An identifiable independent identit is responsible for optimal operation of the sstem based on the principle of lowest marginal costs. (b) The data for merit order based on marginal costs is publicl made available b the authorit responsible for operation of the sstem. (c) The data on specific fuel consumption for each generation source in the sstem is publicl available. (d) It is possible with the information available, to ensure that power plants dispatched for other considerations (e.g. safet conditions, grid stabilit, transmission constraints, and other electrical reasons) are not identified as marginal plants v3.0 10

11 Applicabilit: The proposed Project Activit is connected to the Central Interconnected Grid of the Republic of Chile, fulfilling all legal obligations under the Chilean Electricit Regulations. Condition N 3) The methodolog is not applicable to: The proposed CDM project activities that involve switching from fossil fuels to renewable energ at the site of the project activit, and if the baseline is the continued use of fossil fuels at the site. Applicabilit: The proposed Project Activit does not involve switching from fossil fuels to renewable energ at the site of the project activit and the baseline is not the continued use of fossil fuels at the site. 2.3 Project Boundar The methodolog onl claims emissions reductions from the substitution of power generation due to the implementation of a CDM activit in one of the grids. Onl CO2 derived from the combustion of the thermal plants is accounted. The sources and tpes of GHG included are listed in the following table. Table 2.1: Project Boundar Source Gas Included? Justification/Explanation Baseline Project CO2 emissions that are displaced due to the Project Activit from electricit generation in fossil fuel fired power plants connected to the grid. Emissions as a result of the Project Activit CO 2 Yes Main emission source. Emission due to thermal power plant dispatch CH 4 No Not Applicable N 2 O No Not Applicable Other No Not Applicable CO 2 CH 4 N 2 O Other No No No No Project emission can be considered as 0 Chile has four different grids and there are no interconnections between them. Therefore, each grid defines the geographical and sstem boundaries for proposed projects located within it (see map in Error! No se encuentra el origen de la referencia. below). According to the National Energ Commission (Comisión Nacional de Energía or CNE ( the Northern Interconnected Grid (SING) compromises the regions I to II and accounts 23%t of the total capacit. The SIC, where the Lican Hdroelectric Plant is immersed, compromises the regions III to X and accounts 76% of the total capacit. The Asen and Magallanes grids are located in the XI and XII regions, respectivel, and account about 1% of the nation total capacit. The generation mix capacit of the SIC comprises of 45% hdroelectric generation, 17% diesel, 11% coal, and the remainder from natural gas, wind and cogeneration. v3.0 11

12 Chile Electric Grids Figure 2.1: Project Boundar Sistema Interconectado Central SIC Sistema Interconectado del Norte Grande SING I II III Sistema Interconectado Central SIC IV V VI VII VIII IX X Santiago Sistema de Asén XI Sistema de Magallanes XII The electricit generated b the proposed Project will be transmitted to Central Interconnected Sstem grid (Sistema Interconectado Central or SIC). The spatial scope of the project boundar also covers all power plants phsicall connected to this grid. At present there are no electricit imports or exports of the SIC grid to other national or international grids. However, future sstem expansion ma include interconnection to the SING grid or Argentina grid (SADI). 2.4 Baseline Scenario Identification of the Baseline Scenario In a centrall planned sstem the baseline scenario can be determined on the basis of the least cost expansion and operation of the electric grid as defined b the planning authorit. In Chile there is no central planning for expansion of power facilities. However, the CNE prepares an indicative expansion plan, which is used to calculating sstem energ and power node prices. This calculation is based on the most plausible scenario for least cost capacit additions on the grid. However, sector investments come from private investors who are free to choose the projects the want to develop and base their decisions regarding investments and operation of plants on their own perception of the market, where the CNE node price determination is a ke factor. Consequentl, the baseline for the purpose of estimating emission reductions prior to their actual generation, should be determined as the most likel scenario of capacit additions and generation private investors and plant operators would choose on the basis of demand projections, node and spot prices, investment costs, available technolog for capacit expansions and expected price of fuels. Thus, the baseline scenario consists of the current power plants in the relevant sstem grid for the Lican Hdroelectric Plant boundar (which is the SIC grid) plus the projected capacit expansion and including the generation pattern in the SIC as it occurs in the absence of the generation of this CDM Project. Description of the identified Baseline Scenario The baseline scenario for the Lican Hdroelectric Plant is the continuing operation of the existing and future power plants, without the Lican Hdroelectric Plant electricit generation, to meet the actual electricit demand. In the Project scenario the same electricit demand is met with the Lican Hdroelectric Plant generation dispatched in the base load displacing the generation from existing power plants and future power developments. Because the Project uses renewable sources to produce electricit, there are v3.0 12

13 no additional emissions from the Project Activit and the emissions reductions is a result of the displaced generation from the SIC grid. 2.5 Additionalit The following steps are used to demonstrate Lican Hdroelectric Plant additionalit. These steps are based on the latest Tool for the demonstration and assessment of additionalit (version 6.0.0). Step 1) Identification of alternatives to the project activit, based on the Chilean national authorit indicative expansion plan; this step shows that Lican Hdroelectric Plant is not the onl alternative for the expansion of the sstem and nor the least cost alternative, which are combined ccle natural gas or diesel fired power plants, coal and hdro dams (non run-of-river). Step 2) Investment Analsis is developed. This analsis is done through a Benchmark Analsis (Option III), showing that the Project is not financiall attractive. Step 3) Barrier Analsis has been omitted from the analsis. Finall, Step 4) With a common practice analsis, other projects similar to Lican Hdroelectric Plant were searched for, showing that there are no similar activities observed in the SIC, with the exception of those projects that have been submitted under, or are seeking, carbon finance under a GHG Program. Step 1. Identification of alternatives to the project activit consistent with current laws and regulation. The CNE establishes for ever node price report the optimal expansion plan of the SIC, and uses it to calculate the regulated prices (Node Prices). The expansion plan consists of successive iterations of comparing different options of the sstem expansion that minimizes the net present cost of the energ suppl, which includes the sum of the net present value of investments, operation and maintenance, and shortage cost for a period of ten ears (see the Formula below). Therefore, the model picks the technologies and projects that minimize the objective formula, assuring the minimum economic cost for the expansion and operation of the sstem. The investor uses the expansion plan as reference to take the investment decision, so the construction plan is a clear view of the investment conditions of the sstem. Min Investment Op & MantCosts VariablesCosts ResidualValue Following the previous rationale, the alternatives to the proposed Project activit are: a. The proposed Project Activit implemented, not undertaken as an Emission Reductions (ER) project As it is supported later in this section, this alternative is not realistic for the project developer, since it is not economicall attractive without ER revenues. b. Continuation of the current baseline for Chile, being this the implementation of fossil fuel power plants The projected tendenc in Chile is generall towards the continuation of large scale nonrenewable sources, as described in the step 4) common practice analsis. Step 2. Investment analsis (Sub-step 2b Option III. Benchmark analsis) The Investment Analsis shall demonstrate that the Project Activit is economicall or financiall less attractive than other alternatives without additional revenues from the sale of emission reductions. Sub-step 2a) Determine the appropriate analsis method v3.0 13

14 Since the proposed project will earn revenues from not onl ER sales but also electricit sales, the simple cost analsis method is not appropriate. Instead, Benchmark analsis (Option III) will be applied. Sub-step 2b) Option III. Appl Benchmark Analsis The financial indicator for this analsis is the IRR, which is the most commonl used parameter to determine the investment decisions. According to the Chilean electric law (DFL 4/2006), the official rate of return for electric projects is 10%, used to determine Node Prices, transmission line and distribution investments. Based on this benchmark, calculation and comparison of financial indicator are carried out in sub-step 2c. It should be noted that the IRR Benchmark is a conservative rate, applicable to the Chilean power sector where most of the projects investments come from large companies that benefit from scale economies. Sub-step 2c) Calculation and comparison of financial indicator. Calculation and comparison of the financial indicator of the Project is implemented according to the Guidance on Assessment of Investment Analsis (version 5). According to the feasibilit stud of the Project, the parameters needed for calculation of ke indicators are the following: Table 2.1: Lican Hdroelectric Plant Valuation Parameters Firm capacit 7.19 MW Energ production (1) GWh / ear Contract and Spot sales 50% at Node Price and 50% at Spot Total Investment USD 44.7 million Operation Life 30 ears Income Tax 17% Debt rate 5.24% Avg. Node Energ Price (2) USD/MWh Avg. Spot Energ Price (2) USD/MWh Capacit Price USD/KW-ear Emission Factor 650 tco2e/gwh CERs Price 18 USD/CER O&M costs USD million / ear Transmission toll USD million / ear Administrative costs USD million / ear Source: Eléctrica Lican S.A. according to the Lican Hdroelectric Plant Feasibilit Stud (1) Based on 48 ears statistical average (1959 to 2006), resulting in 57.83% plant factor (2) Average over 30 ears of plant operation. As shown in the feasibilit stud and confirmed in the CNE Node Price Report, sstem prices tend to decrease in the mid and long term, because of the construction of new coal, natural gas and hdro power plants, thus reducing the more expensive operation of oil power in the SIC. In accordance with the Benchmark Analsis, if the financial indicators of the Project, such as the Project IRR, are lower than the benchmark, the Project is not considered to be financiall attractive. v3.0 14

15 Table 2.2: Financial Indicator Comparison IRR NPV in USD x 1000 Over Assets (10% discount rate) Project with ER Income 10.15% 508 Project without ER Income 8.16% -6,171 Table 2.2 shows the Project IRR of the Project with and without the sales of emission reductions (ERs). Without the sales of ERs the Project IRR is 8.16 percent, which is lower than the financial benchmark. Thus the Project is not considered to be financiall attractive. However, taking into account the additional revenues from ERs sales, the project IRR is increased to percent, which is slightl higher than the financial benchmark. Therefore the CDM revenues enable the project to overcome the investment barrier and the additionalit of the Project is demonstrated. Sub-step 2d) Sensitivit analsis The sensitivit analsis shall show whether the conclusion regarding the financial attractiveness is robust to reasonable variations in the critical assumptions. For the Project, four parameters where selected as sensitive factors to check out the financial attractiveness, plus a fifth parameter to see the ER sales impact on the Lican Hdroelectric Plant: 1) Total investment cost. 2) Hdrological impact during the first two ears of operation. 3) Energ Node Prices. 4) Operating costs and 5) ER Sales The results of sensitive analsis are shown in Table 2.3 and Figure 2.2 below. Table 2.3: Sensitivit Analsis Sensitive variable LOW HIGH To Benchmark Investment costs +10% 10% 14.9% IRR over assets 7.14% 9.38% 10.0% Hdrolog variations Humid Dr (see comment) IRR over assets 7.17% 8.12% - Energ Node price 10% +10% +26.4% IRR over assets 7.45% 8.86% 10.0% Operating Costs +10% 10% 32.5% IRR over assets 7.58% 8.74% 10.0% v3.0 15

16 Figure 2.2: IRR Over Assets Sensitivit Analsis IRR Over Assets Sensitivit ER sales (up to 3x7 ears) 8,16% 10,15% Operating Costs +10% / -10% Node price -10% / +10% 7,58% 7,45% 8,74% 8,86% Hdrolog Humid/Dr 7,17% 8,12% Investment costs +10% / -10% 7,14% 9,38% 6% 7% 8% 9% 10% 11% 12% The IRR of the Project varies in different degrees in accordance with the fluctuation of the selected 4 parameters within the range of +7.14% to +9.38% if ER sales are not considered. Analsis over Node Price Variations: Energ Node Prices sensitivit shows that an increase b 10 percent results in an increase of the Project IRR b 8.86%, still positioning the Project IRR under the financial Benchmark. To sta over the Benchmark it would be required an increase over the energ node prices of 26.4%. Below this level, the Project IRR would remain under the benchmark. It should be noted that Node Prices reflect a long term average of the sstem operation, considering most plausible capacit additions, available technologies and fuel prices. Taking into account that diesel fuel plants are graduall been replaced b lower cost plants such as coal, liquefied natural gas plants and hdroelectric plants, it is unlikel to expect an increase on long term sstem prices. Analsis over Hdrolog Variations: Hdrolog variations do have impact in the IRR, however the effects are mostl negative and keeps the IRR below the Benchmark. Since it is unlikel that a hdropower project would face an extreme hdrological scenario for man ears, the sensitivit analsis for hdrolog variations onl considers the first three ears of operation facing a Dr or Humid condition. These first three ears have the largest impact in the project Net Present Value and IRR, and show a realistic scenario over hdrolog variations impacts. For the remaining ears of this analsis, the project is expected to produce an average generation output ( GWh/ear). The Humid condition produces GWh of energ generation and a Dr condition produces 69.9 GWh of energ generation (See Figure 2.3 below). It is important to note that hdrological scenarios not onl affect the project generation output but it is also inversel correlated with sstem spot prices, where low spot prices appear in Humid conditions (near 31 USD/MWh, based on sstem variable costs where low-cost coal technolog results in the relevant dispatching unit) and high spot prices appear in Dr conditions (near 132 USD/MWh, based on sstem variable costs, where closed ccle diesel power units are dispatched to cover the sstem demand). As it is shown in the Table 2.3 above, the Humid condition presents a more negative result compared to the average case. The Dr scenario, does not present a significant variation, where the lower generation is compensated b higher spot prices revenues. Still, both conditions, Dr and Humid, remain under the Benchmark of 10% IRR. v3.0 16

17 Figure 2.3 : Lican Hdroelectric Plant Monthl Projected Generation GWh Average (92.1 GWh) Dr (69.9 GWh) Humid (108.7 GWh) Jan Feb Mar Apr Ma Jun Jul Aug Sep Oct Nov Dec Source: ELISA. estimate based on hdrological data for 48 ears (1959 to 2006). Since the Benchmark cannot be reached on an of the extreme conditions, a simplified example can show the unlikelihood of reaching the Benchmark: For the Dr scenario, it would be required a price increase of 231% of the sstem spot prices (235.9 USD/MWh as average for the first three ears of operation in dr conditions). In the Humid scenario, it would be required an increase of near 132% in the average sstem spot prices to reach the 10% IRR Benchmark (135.5 USD/MWh as average price for the first three ears of operation in humid conditions). In each case, such increase in the sstem prices are not likel to occur considering the CNE Node Price report April-2007, which estimates a relativel stable result for the projected spot prices for the next 10 ears of the sstem operation, with an average of near USD/MWh. Analsis over Operating Costs Variations: Annual Operating Costs sensitivit, which considers transmission tolls, administrative costs and O&M costs, show that an increase of 10 percent results in a decrease of the project IRR to 7.59%. B other hand, a decrease in annual Operating Costs in 10 percent results an increase of the project IRR to 8.74%, still under the Benchmark. In order to reach the Benchmark, operating costs should decrease to 32.5%. However it is unlikel to expect a 32.5% decrease of total operating costs since maor operating costs come from the transmission tolls. Transmission tolls have been estimated following same CDEC-SIC procedures which are based on the financing of the required investments. Considering that the distance of the project to the SIC grid is alread determined b the site location, and labor and construction materials are ver unlikel to decrease in the future, it is unlikel to expect such a decrease in the tolls. Other operating costs considered in the project valuation are administration costs and maintenance that are estimated based on the number of emploees and real power plants operating costs. Analsis over Investment Costs Variations: The investment costs have a relevant impact in the IRR. If the investment costs are increased b 10%, this results in a decrease of the project IRR b 7.14%. In the opposite scenario, if the investment costs are decreased b 10%, results in an increase of the project IRR b 9.38%, but in both cases, the IRR remains under the Benchmark of 10% IRR. It s highl unlikel that the investment costs can decrease more than 10%. The development of the engineering of Lican Hdroelectric Plant is in the final stage, where all the basic engineering, electromechanical equipment is alread defined and the contracts are alread closed, thus the budget v3.0 17

18 could not suffer great variations, except for possible contingencies as problems with soil mechanics or other unexpected difficulties that would onl increase the investment costs instead of decreasing them. } Through the previous sensitivit analsis, it is clearl shown the relevance of the ER sales in the success of the Project. The additional revenues change substantiall the IRR of the project, positioning the Project IRR over the Benchmark, thus evidencing the impact of these revenues on the investment decision, as shown in Table 2.3 and Figure 2.2. Step 3. Barrier Analsis This section has been omitted as per the latest Tool for the demonstration and assessment of additionalit version , step 1. Step 4. Common practice analsis. o Sub-step 4a Analze other activities similar to the proposed activit: Even with the actual Node Price scenario, where monomic price levels are over 80 USD/MWh, thermal generation alternatives are still the minimum cost option for capacit additions, as indicated b CNE in its node Price and construction plan published in April 2007 (see Table 2.5). Following the Guidelines for Common Practice (version 01.0) a stepwise approach is presented:» Step 1: Calculate applicable output range as +/-50% of the design output or capacit of the proposed project activit. Lican Hdroelectric Plant has MW of installed capacit, then the applicable output range is 9.1 MW to 27.3 MW.» Step 2: In the applicable geographical area, identif all plants that deliver the same output or capacit, within the applicable output range calculated in Step 1, as the proposed project activit and have started commercial operation before the start date of the project. Note their number N all. Registered CDM project activities shall not be included in this step; The applicable geographical area is limited to the SIC grid of Chile. This is because in Chile there a 4 independent grids, as explained Error! No se encuentra el origen de la referencia., with no interconnections between them. Then the applicable output range calculated as per step 1 (in the SIC grid spatial extent) results in the following table: Plant Name Table 2.4: Common Practice Applicable Output Range Commissioning Date [Year] Tpe Net Capacit [MW] Different Technol. (see note) Volcán 1944 Run-Of-River 14.0 (iv) Chiburgo 2007 Run-Of-River 19.2 (v) Capullo 1995 Run-Of-River 10.9 Puntilla Run-Of-River 22.1 (v) Los Molles 1952 Run-Of-River 19.8 (iv) Sauzalito 1959 Run-Of-River 11.9 (iv) Coa Run-Of-River 12.5 (v) Florida Run-Of-River 27.2 (v) v3.0 18

19 Plant Name PROJECT DESCRIPTION: VCS Version 3 Commissioning Date [Year] Tpe Net Capacit [MW] Different Technol. (see note) Laguna Verde TG 2004 Diesel oil 18.7 (i) Horcones TG 2004 Diesel oil 24.3 (i) Nueva Aldea II 2006 Diesel oil 10.0 (i) Diego de Almagro 1981 Diesel oil 23.7 (i) S. Fco. de (i) 2002 Diesel oil 23.9 Mostazal Constitución Biomass 10.2 (i) Laja Biomass 11.8 (i) Esperanza 2007 Diesel oil 21.5 (i) Cholguán 2003 Biomass 13.0 (i) Nueva Aldea I 2005 Biomass 14.0 (i) Quellón II 2008 Diesel oil 9.8 (i) Canela 2007 Wind 18.0 (i) N all = 20 N diff = 19 Source: Energ Statistics / Generation Installed Capacit (2011) Note: According to Paragraph 4 of the Guidelines for Common Practice (version 01.0)» Step 3: Within plants identified in Step 2, identif those that appl technologies different that the technolog applied in the proposed project activit. Note their number N diff. According to the identified plants in step 2), N diff results in 19. Some power plants from Table 2.4 are run-of-river projects. However these plants have been considered to be different technologies following Paragraph 4 of the Guidelines for Common Practice (version 01.0) and the detailed arguments presented on Sub-Step 4b bellow.» Step 4: Calculate factor F=1-N diff /N all representing the share of plants using technolog similar to the technolog used in the proposed project activit in all plants that deliver the same output or capacit as the proposed project activit. The F factor results in: F = 1 N diff /N all = 1-19/20 = 0.05 Where N all N diff = 1 Following the previous stepwise process stated in the Guidelines for Common Practice (version 01.0), since F factor is smaller than 0.2 and N all N diff is smaller than 3, then Lican Hdroelectric Plant project shall not be considered a common practice project. o Sub-step 4b. Discuss similar options that are occurring: Similar activities have been identified in Table 2.4. However these activities have been as different technologies from the previous step due to the following analsis: Puntilla 22.1 MW plant corresponds to a previousl existing project developed between 1926 (unit N MW) and 1942 (unit N MW), originall owned b Compañía Manufacturera de Papeles Cartones S.A. (CMPC), an important paper manufacturing compan in Chile. In 1997, after a bidding process, CMPC transfers its generating assets to Eléctrica Puntilla S.A. In 2006 Electric Puntilla S.A. implements Unit N 3 (7 MW) after an energ efficienc improvement. This plant v3.0 19

20 has been considered under a different technolog, since it corresponds to an existing plant upgrade, not a full project development. ( Coa 10.8 MW project corresponds to the implementation of unit N 5 of the previousl existing Coa project, that was commissioned in Unit N 5 was commissioned in 2008 after an efficienc improvement of the plant. This plant has been considered under a different technolog, since it corresponds to an existing plant upgrade, not a full project development. ( ) Florida power plant has been in operation since The latest capacit results from the installation of 2.2 MW in 1999 and 1.8 MW in This plant has been considered under a different technolog, since it corresponds to an existing plant upgrade, not a full project development. ( Chiburgo 19 MW project utilizes the existing discharge sstem of Colbun 478 MW reservoir power plant that originall delivered irrigation waters to Canal Maule Sur through a dissipation valve. Colbun is the second largest electric plaer in the Chilean market, with near 2,400 MW of installed capacit. Chiburgo project replaced the existing dissipation valve with hdroelectric turbines, requiring limited additional civil works and benefiting from the existing Colbun s substation and power line for grid interconnection. Thus Chiburgo faces ver different conditions and could not be considered as common practice in the sstem due to its particular laout. ( ) Volcan, Los Molles and Sauzalito have been considered different technologies since the were developed more than 50 ears ago, with ver different market conditions were the legal framework of the Chilean electric sector consisted in onl one public compan operator (Endesa). Chilean legal framework changed after 1980 with the enacting of law DFL1 in 1982 Le General de Servicios Eléctricos (actuall DFL4/2006), allowing the private sector to participate in this market. ( ) Further analsis. At the time when the Lican Hdroelectric Plant project was considered as an investment option, the effective CNE Node Price Report was April 2007 report, and thus, the one that affected the investment decision. The following Table 2.5 shows the Construction plan from that report ( Table 2.5: CNE Construction Plan for the SIC Month Year Project Name Capacit in MW October 2007 San Isidro II Open Ccle Diesel 240 April 2007 Quilleco Hdroelectric Plant 70 June 2007 Chiburgo Hdroelectric Plant 19.4 September 2007 Canela Wind Farm August 2007 Hornitos Hdroelectric Plant 55 October 2007 Palmucho Hdroelectric Plant 32 March 2008 San Isidro II Combined Ccle Diesel 358 v3.0 20

21 Month Year Project Name Capacit in MW April 2008 Ojos de Agua Hdroelectric Plant 9 October 2008 La Higuera Hdroelectric Plant 155 March 2009 San Isidro II Combined Ccle LNG 358 April 2009 San Isidro II Combined Ccle LNG additional fire 377 October 2009 Guacolda III coal power plant 135 Januar 2010 Nueva Ventanas coal power plant 242 Source: Node Price Report April As shown above, the least cost alternative for the construction plan of the SIC are thermal power plants (Coal, Diesel and Natural Gas). The rest of the projects in the construction plan are renewable energ CDM projects, with the exception of Chiburgo and Palmucho power plants. The CDM status of these projects is shown in Table 2.6 below: Table 2.6: Projects Considered Additional Undergoing CDM Registration Process Project Name Hornitos Hdroelectric Plant Quilleco Hdroelectric Plant Chiburgo Hdroelectric Plant Palmucho Hdroelectric Plant Capacit (MW) as in CNE Node Price Report Technolog 55 Run-Of-River 70 Run-Of-River 19.4 Run-Of-River Canela Wind Farm Wind La Higuera Hdroelectric Plant Ojos de Agua Hdroelectric Plant CDM status CDM Project id 1374, Registration date: 09/07/2008 CDM Project id 1265, Registration date: 09/07/2008 Not CDM (withdrawn b PP) 32 Run-Of-River Not CDM 155 Run-Of-River 9 Run-Of-River Source: CDM Project id 1958, Registration date: 03/04/2009 CDM Project id 0248, Registration date: 20/03/2006 CDM Project id 0937, Registration date: 19/04/2007 Following the above evidence, there are no similar activities observed in the SIC being carried at the Project start date, with the exception of Palmucho and Chiburgo Hdroelectric Project. Similar to Chiburgo, Palmucho project faces particular characteristics since it has been conceived to utilize the ecological water flow discharge from the existing Ralco 570 MW reservoir power plant, requiring limited additional civil works and benefiting from the existing Ralco s substation and power line for grid interconnection. Also, Palmucho was developed b the largest electric plaer in the Chilean market ENDESA - who owns and operates near 4,300 MW of hdrothermal installed capacit in the Central Interconnected Sstem. Thus Palmucho faces ver different conditions and could not be considered as common practice in the sstem due to its particular characteristics. ( 284 ) v3.0 21

22 Following all above arguments the additionalit of the proposed CDM Project Activit is fulfilled, according to the Tool for the demonstration and assessment of additionalit (version 6.0.0). 2.6 Methodolog Deviations No methodolog deviations are considered in the project. 3 QUANTIFICATION OF GHG EMISSION REDUCTIONS AND REMOVALS 3.1 Baseline Emissions AM0026 (version 3) calculates ex-post the emission factor for the Operating Margin b observing actual dispatch data, the generation from the power plants and the merit order. The OM emission factor is determined b the generation that would be dispatched in the absence of this Project. Step 1) The Emission Factor of the Operating Margin OM EF OM, Where, H h1 EF H h1 j, h xgeneration Generation j, h j, h :AM0026 (version 3) formula (8) EF j,h... Operating margin Emission factor for proposed CDM project j for hour h, expressed in tco 2 /MWh Generation j,h... Generation of proposed CDM project j during hour h, expressed in MWh h... Total number of hours of the ear Sample calculation (ear 2010) EF OM,=2010 = 55,182.5 tco 2 e / 92,101 MWh = tco 2 e/gwh The emission factor for the proposed CDM project j, in a sstem with N CDM projects, for a hour h is based on identification of the marginal plant(s) that would be operated to meet the electricit supplied b the proposed CDM project j. The identification of marginal plant(s) displaced b proposed CDM project j is based on the first-built first served principle. Date of built is defined as the date when the plant begins the dispatch of energ to the grid. The emission factor for an hour h for a CDM project j in sstem is estimated as the weighted average of emission factor of the identified marginal plant(s) that would have supplied electricit to the grid in absence of the j th CDM plant. The emission factor is estimated as follows: EF M j, h D( j, i) * d / D( j, i i1 Where, ) i : AM0026 (version 3) formula (9) D(j,i)... Energ displacement of the marginal plant i due to the proposed CDM project j, expressed in MWh d i... Emission factor of the marginal plant i, expressed in tco 2 /MWh. v3.0 22

23 M... M is the total number of marginal plants that would be dispatched if the sstem is operated without the N CDM projects. Sample calculation (ear 2010): EF j=1,h=8754 = 6.98 MWh * tco 2 e/gwh / 6.98 MWh = tco 2 e/gwh Energ displacement of the marginal plant i due to the proposed CDM project j, is calculated as follows: D j, i) MINC j i1 l1 D( j, l); A B i i N k j D( k, i) 1 ( : AM0026 (version 3) formula (11) Where, Ai... Maximum energ generation of the marginal plant i expressed in MWh/h (equivalent to plant capacit in MW) Bi... Actual Energ generation of the CDM marginal plant i expressed in MWh/h Cj... Energ generation of the CDM project j expressed in MWh/h N... Total number of CDM projects in the sstem M... Total number of additional marginal plants that should be dispatched if the sstem is operated without the N CDM projects Where: D(j,0) = 0 and D( N+1, i) = 0 D(j,i) = 0 for all i<m, s.t. Ai Bi m i1 m* A B N C k k j1 D(j,i) = 0 for all i>m, s.t. i i k j N C i1 k j1 C Sample calculation (ear 2010, h=8754, applicable for the displacement of energ over Quellon 2 diesel power plant) (values in MWh): D(j=1,i=1) = Min { ; (10 0.7) 0) } = Min { 6.98 ; 9.30 } = 6.98 MWh d i, the emission factor for displaced marginal plant, is estimated as follows: d i : AM0026 (version 3) formula (12) Where, SFC i *CEF OM,i *Oxid i SFC i... Is the specific fuel consumption of i th marginal power plant, expressed as (ton of fuel or TJ/MWh. CEF OM,i,... is the CO 2 emission factor of fuel used in i th marginal power plant, expressed as tco 2 / (ton of fuel or TJ) Oxid i... is fraction of carbon in fuel, used in i th marginal plant, oxidized during combustion. Sample calculation (ear 2010, h=8754, applicable for Quellon 2 diesel power plant): d i=1 = Kg-fuel/MWh x (10,900 Kcal/Kg-fuel x 7,400 KgCO 2 e/tj x 4,1868 x 10-9 TJ/Kcal) x 1 d i=1 = Kg-fuel/MWh x tco 2 e/kg-fuel x 1 d i=1 = tco 2 e/gwh v3.0 23

24 The marginal plant(s) are those power plants listed in the top of the grid sstem dispatch order during hour h needed to meet the electricit demand at the hour h without the generation of CDM project(s). If no thermal power plants are needed to meet the demand without the CDM projects, then the emission factor of the marginal plant is zero. The generation of Lican Hdroelectric Plant is obtained from the metering sstem which follows a national standard NCh 2542, which states 0.2% error allowance on a KWh base. Hourl energ data obtained from the metering sstem is submitted to CDEC-SIC ever two hours as for all other generating units of the sstem. Periodic calibration (ever two ears) will be conducted through independent certified entities. The Semi-annual Node Price Report, CDEC-SIC databases and the IPCC Good Practice Guidance provide all the information to calculate the emission factors for all the power plants within the Chilean grids, including future plants projected in the expansion plan. Node Price Reports inform about the specific fuel consumption for ever thermal power plant, which are used together with the carbon content of the different fuels as reported b the IPCC. Step 2. Calculation of the Build Margin BM As described in AM0026 (version 3), Option i), the emission factor for the Build Margin for the first crediting period can be calculated annuall ex-post, following Option 2 for Build Margin Calculation as indicated in the Tool to calculate the emission factor for an electricit sstem (version 2.2.1). According the chosen option above, the build margin emission factor for the first crediting period can be calculated annuall, based on the set of power units that comprises the larger annual generation of the following two options: the most recent 20% of capacit added to the grid in, ex-post; or The set of five power units that have been built most recentl Taking in consideration the options above, the build margin is calculated as follows: EF grid BM, Where, m1 EG m, m i1 EF EG m, EL, m,, : actuall am-tool-07 (version 2.2.1) formula (12) EF grid,bm,... Build margin CO 2 emission factor in ear (tco 2 /MWh) m... Power units included in the build margin EF EL, m,... CO 2 emission factor of power unit m in ear (tco 2 /MWh) EG m,... Net quantit of electricit generated and delivered to the grid b power for the m in ear (MWh.)... Most recent historical ear for which power generation data is available Sample calculation (ear 2010): EF grid,bm,=2010 = 5,433,966 tco 2 e / 9,480.3MWh = tco 2 e/gwh EF FC * NCV * EF i, m, i, CO2, i, i EL, m, : actuall am-tool-07 (version 2.2.1) formula (2) EGm, v3.0 24

25 Where, EF EL,m,,... CO 2 emission factor of power unit m in ear (tco2/mwh) FC i,m,... Amount of fossil fuel tpe i consumed b power unit m in ear (Mass or volume unit). NCV i,... Net calorific value (energ content) of fossil fuel tpe i in ear (GJ/mass or volume unit). EF CO2,i,... CO 2 emission factor of fossil fuel tpe i in ear (tco2/gj) EG m,... Net quantit of electricit generated and delivered to the grid b power unit m in ear (MWh) m... Power units included in the build margin i... All fossil fuel tpes combusted in power unit m in ear... Most recent historical ear for which power generation data is available Note: Since FC i,m, is not directl available through CDEC-SIC data and onl one fuel tpe is used per power plant in the sstem, then the above formula can be computed with following equivalent formula: EF FC * NCV * EF i, m, i, CO2, i, i EL, m, SFCm, * NCVm, * EGm, Where, EF CO2, m, :replacement of am-tool-07 formula (2) SFCm,.. Is the specific fuel consumption of the power unit m in the ear expressed as ton of fuel or TJ/MWh. NCVm,. Net calorific value (energ content) of fossil fuel used b power plant m in ear (GJ/mass or volume unit). EFCO2,m,.. CO 2 emission factor of fossil fuel used b power plant m in ear (tco 2 /GJ) Sample calculation (ear 2010, applicable for Candelaria 1 GNL power plant): EF EL,m=1,=2010 = dam 3 -fuel/mwh x (9,341 Kcal/m 3 -fuel x TJ/Kcal) x 54,300 KgCO 2 /TJ EF EL,m=1,=2010 = tco 2 e/gwh When no data is available for calculating EF EL,m, a conservative value shall be applied considering either a null EF EL,m, or Option A2 of the Tool to calculate the emission factor for an electricit sstem, which establishes the following formula to estimate the plant emission factor: EF EL, m, Where, EF CO2, m, i, m, *3.6 EF CO2, m, m, *3.6 : actuall am-tool-07 (version 2.2.1) formula (3) EFCO2,m,.. Average CO 2 emission factor of used in power unit m in ear (tco 2 /GJ) m. Power units included in the build margin m, Average net energ conversion efficienc of power unit m in ear (ratio) i.. All fossil fuel tpes combusted in power unit m in ear. Most recent historical ear for which power generation data is available Sample calculation (ear 2010, applicable for Curauma 2 MW diesel power plant): EF EL,m=124,=2010 = 72,600 x 3.6 / 39.5% = tco2e/gwh v3.0 25

26 For the second crediting period, the Build Margin emission factor (EF grid, BM, ) shall be updated based on the most recent information available on units alread built at the time of submission of the request for renewal of the crediting period. For the third crediting period to be submitted, the Build Margin emission factor calculated for the second crediting period shall be used. Step 3. Project Emission Reductions According to AM0026 (version 3), the combined emission factor for the proposed Project Activit, is calculated with the weighted average for both the Operating Margin (OM) and the Build Margin (BM) as follows: EF : AM0026 (version 3) formula (7) w OM *EF OM, w BM *EF grid,bm, Where, EF OM,... Emission factor for operating margin power generation sources, in tco 2 /MWh w OM = Weight for operating margin emission factor. EF grid,bm,... Emission factor for build margin power generation sources, in tco 2 /MWh w BM = Weight for build margin emission factor. Sample calculation (ear 2010): EF =2010 = tco2e/gwh x tco2e/gwh x 0.5 = tco2e/gwh The baseline emissions for the Project are calculated as follows: BE Where, EF * Generation : AM0026 (version 3) formula (6) EF... Baseline emission factor, in tco 2 /MWh Generation... Electricit generated b the proposed CDM Project in ear (in MWh). Sample calculation (ear 2010): BE =2010 = 92,101 MWh x tco 2 e/gwh = 53,995 tco 2 e Finall, the Project mainl reduces CO 2 emissions through substitution of power generation supplied b the existing generation sources connected to the grid and likel future additions to the grid. The emission reduction (ER ) b the project activit during ear is equal to the Baseline Emissions. Since the Lican Hdroelectric Plant consists of a hdro power plant, there are no Project Emissions (PE ). Additionall, as per AM0026 (version 3), no leakage has been identified for this project activit. The emission reduction can be expressed as follows: ER BE PE L BE : AM0026 (version 3) formula (2) Sample calculation (ear 2010): ER =2010 = 53,995 tco 2 e 0 0 = 53,995 tco 2 e The Baseline emission calculation requires an overwhelming amount of data, considering all hourl dispatch and weekl merit order data. All detailed sstem data can be freel obtained from CDEC-SIC s v3.0 26

27 web page at Also, node price reports, used to calculate thermal plant emission factors, can be obtained from national s authorit energ commission CNE at The calculation of the baseline emissions will be provided ex-post with real data according the approved methodolog; hence, the data used in this PDD for the calculation of the current baseline for registration is onl for estimation purposes based on historical data that will not necessar reflect actual sstem conditions. The detailed data required to calculate the EF OM, and EF grid,bm, will be provided ex-post (refer to section B.6.1 for further details). For estimation purposes within this PDD, the information of CDEC-SIC real dispatch data from 2007 to 2010 has been used together with a simulated dispatch of the Lican Hdroelectric Plant. The following tables show the estimation results of emission factor of each ear and the average emission factor of the period: YEAR Table 3.1: Ex-ante Combined Emission Factors Estimation EF OM, tco 2 e/gwh EF Grid,BM, tco 2 e/gwh EF tco 2 e/gwh Average Source: Preliminar estimations based on CDEC-SIC data and IPCC Guidelines. The following table provides information and data used to determine baseline emissions Table 3.2: Summarized Data to Calculate the Baseline Emissions Variable Value Data source EF grid, BM, (tco 2 e/gwh) Estimated using an average of CDEC- SIC real dispatch data from 2007 to 2010 and latest IPCC Guidelines following the latest Tool to calculate the emission factor for an electricit sstem, actuall (version 2.2.1) formula (12) EF OM, (tco 2 e/gwh) Estimated using an average of ex-post data of SIC dispatch (2007 to 2010) and latest IPCC Guidelines following AM0026 (version 3) formula (8) EF (tco 2 e/gwh) Combined Margin result following AM0026 (version 3) formula (7) EG (GWh/ear) Average net project generation BE = ER (tco 2 e/ear) 56,427 Calculated following AM0026 (version 3) formula (6) and (2) v3.0 27

28 3.2 Project Emissions The Project has no Project Emissions because the project activit onl involves generation of electricit from renewable sources. Therefore, since the Project consists of a hdro power plant (Run of river), as for AM0026 (version 3), there are no Project Emissions. 3.3 Leakage No leakage was identified for the project activit. 3.4 Summar of GHG Emission Reductions and Removals Project emission reductions are calculated as a Combined Margin emission factor (CM), consisting of the weighted average of an Operating Margin (OM) and a Build Margin (BM), following AM0026 (version 3) approved methodolog. The OM emission factor from the project activit will depend on the actual generation data from the SIC. The dispatch data, to be provided ex-post b the Economic Dispatch Center (CDEC-SIC), will conclusivel indicate the tpe of generation displaced b the addition of Lican Hdroelectric Plant in the generation mix in the SIC. The monitoring and verification plan for the Project utilizes the data provided b CDEC-SIC. The BM emission factor will be determined as option (i) in AM0026 (version 3), i.e., following the BM emission factor estimation process described in the: Tool to calculate the emission factor for an electricit sstem (version 2.2.1), which is calculated on an ex-post basis as the generation-weighted average emission factor (tco2/mwh) of all the power units during the most recent ear for which power generation data is available. Table 3.1: Emissions Reductions and Removals Years Estimated baseline emissions or removals (tco2e) Estimated project emissions or removals (tco2e) Estimated leakage emissions (tco2e) Estimated net GHG emission reductions or removals (tco2e) 2011 (from 15/06/2011) 2012 (until 30/11/2012) 30, ,764 51, ,789 Total 82, ,553 v3.0 28

29 4 MONITORING 4.1 Data and Parameters Available at Validation Data / Parameter: w BM Data unit: % Description: Weight for Build Margin emission factor Source of data used: Proposed value Value applied: 50% Justification of the Default parameter choice of data or description of measurement methods and procedures actuall applied : An comment: Data / Parameter: w OM Data unit: % Description: Weight for Operating Margin emission factor Source of data used: Proposed value Value applied: 50% Justification of the Default parameter choice of data or description of measurement methods and procedures actuall applied : An comment: Data / Parameter: Surface area of reservoir Data unit: m 2 Description: Surface area of reservoir Source of data used: Lican detail engineering files Value applied: 30,870 Justification of the Measured at project start date choice of data or description of measurement methods and procedures actuall applied : An comment: Used for determining power densit of the project reservoir (installed power generation capacit divided b the surface area at the full reservoir level). v3.0 29

30 4.2 Data and Parameters Monitored PROJECT DESCRIPTION: VCS Version 3 Data Unit / Parameter: Generation (or Generation j,h ) Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Energ in MWh Energ Generation of the Project for each hour h On-site metering sstem (same data submitted to CDEC-SIC) Electronic measurement sstem each 15 minutes and integrated hourl for recording and submitting to CDEC-SIC Verification procedures shall be applied based on redundant energ meters. Hourl 92,101 MWh Monitoring equipment: Schneider Electric ION 8650 QA/QC procedures to be applied: Calculation method: An comment: Accurac class 0.2 Meter shall have a maximum error of 0.2% according to NCh 2542 official standard, and will be calibrated ever two ears through independent certified entities. Metering data is sent regularl to CDEC-SIC where a balance is made for energ transactions between power generators. This data results in receipts of sales that represent a double check for the generation of the Project Activit. The total energ of the period Generation, equivalent to the sum of all Generation j,h shall be crosschecked with actual energ invoices Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: EF tco2e/mwh CO2e Emission factor of the displaced energ from the grid IPCC Guidelines, CDEC-SIC databases and CNE official reports Calculated based on AM0026 (version 3) formula (7) Calculation based on official data and AM0026 procedures. Estimation shall be calculated annuall tco2e/mwh Automatic calculation procedure through a revised worksheet v3.0 30

31 Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: EF OM, tco2e/mwh Operating Margin Emission Factor Latest IPCC Guidelines, CDEC-SIC databases and CNE official reports. Calculated based on AM0026 (version 3) formula (8) using CDEC-SIC data Calculated using CDEC-SIC databases and AM0026 procedures. Estimation shall be calculated annuall tco2e/mwh Automatic calculation procedure through a revised worksheet. Calculation should be done after CDEC- SIC energ balance to ensure data validit Data Unit / Parameter: EF j,h Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: tco2e/mwh Operating margin Emission factor for proposed CDM project j for hour h IPCC Guidelines, CDEC-SIC databases and CNE official reports Calculated based on AM0026 (version 3) formula (9) Calculated hourl from CDEC-SIC dispatch data and AM0026 procedures. Value applied: Average estimation is tco2e/mwh (EF OM, ) Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: Automatic calculation procedure through a revised worksheet. Calculation should be done after CDEC- SIC energ balance to ensure data validit v3.0 31

32 Data Unit / Parameter: D(j,i) Data unit: Description: Energ in MWh Energ displacement of the marginal plant i due to the proposed CDM project j Source of data: Calculated based on AM0026 (version 3) formula (11) using CDEC-SIC dispatch data Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: Calculated hourl from CDEC-SIC dispatch data and AM0026 procedures. Hourl Displaced energ is calculated for each sstem unit. Total energ displacement for the proposed Project Activit is equivalent to project generation (92,101 GWh per ear) Automatic calculation procedure through a revised worksheet. Calculation should be done after CDEC- SIC energ balance to ensure data validit Data Unit / Parameter: d i Data unit: tco 2 e/mwh Description: Emission factor of the marginal plant i, Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: IPCC manual and CNE node price report Calculated based on AM0026 (version 3) formula (12) based on official data whenever available Hourl calculation based on official data and the latest IPCC manual and official data from CNE s Node Price Report. Verification procedure shall be applied based on historical data per fuel tpe. Average for Coal powered units = 1.29 tco2e per MWh Average for diesel powered units = 0.81 tco2 per MWh Average for natural gas powered units = 0.55 tco2 per MWh Calculation based on official data. v3.0 32

33 Data Unit / Parameter: SFC i Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: Fuel intensit in Ton/MWh or TJ/MWh Specific fuel consumption of i th marginal power plant CNE official reports and CDEC-SIC databases Calculation based on official data. Verification procedure shall be applied based on historical data per fuel tpe. Estimation shall be calculated annuall or twice a ear Average for Coal powered units = tons per MWh Average for diesel powered units = m 3 per MWh Average for natural gas powered units = m 3 per MWh QA/QC procedures to be applied: Data is obtained from official reports. Historic comparison of each unit can provide data validation for existing and new units in the sstem. Calculation method: An comment: Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: M Number Number of marginal plants that would be dispatched if the sstem is operated without the N CDM projects. CDEC-SIC data Calculated hourl from CDEC-SIC databases and AM0026 procedures. Several results per hour base Electronic worksheet shall be implemented to deliver automatic calculations through revised worksheet v3.0 33

34 Data Unit / Parameter: N Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Number List of CDM plants in the sstem CDEC-SIC and UNFCCC registered projects for the SIC grid Determined from CDEC-SIC databases Value applied: N=1 For estimation purposes, onl one CDM unit was considered. According to AM026 methodolog, the identification of marginal plant(s) displaced b CDM projects is based on the first-built first served principle. Assuming onl one CDM unit in the sstem is equivalent to assume that the proposed project is the last CDM project of the sstem. Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: Actual number of CDM units will be determined according to the official information from UNFCCC project registr and CDEC-SIC actual dispatch Data is obtained from official reports. Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: C j MWh Energ generation of CDM project j CDEC-SIC dispatch data Calculated hourl from CDEC-SIC dispatch data and AM0026 procedures. Hourl Since N = 1, as describes in the previous table, all CDM energ considered for estimation purposes is equivalent to 92,101 GWh per ear. Automatic calculation procedure through a revised worksheet. Calculation should be done after CDEC- SIC energ balance to ensure data validit v3.0 34

35 Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: A i MW Maximum energ generation of the marginal plant i at hour h CDEC-SIC Determined from CDEC-SIC official data Hourl Several sstem units are considered in the estimation. Official CDEC-SIC dispatch data was used Data is obtained from CDEC-SIC official data Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: B i MWh Energ generation of the marginal plant i during hour h CDEC-SIC Determined hourl from CDEC-SIC databases. Hourl Several sstem units are considered in the estimation. Data is obtained from official CDEC-SIC databases. v3.0 35

36 Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: EF grid,bm, tco2e/mwh Build Margin CO 2 Emission Factor of the grid for the ear Calculated based on the latest Tool to calculate the emission factor for an electricit sstem, actuall (version 2.2.1) formula (13). based on official data, CNE node price report, the latest IPCC Guidelines and CDEC-SIC databases Calculated annuall using CDEC-SIC databases and the latest Tool to calculate the emission factor for an electricit sstem procedures Annuall tco2e/mwh Automatic calculation through a revised worksheet using CDEC-SIC and official databases and CNE Node Price report values. Data Unit / Parameter: EF EL,m, Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: tco2e/mwh CO2 Emission Factor of power unit m in ear Calculated based on the latest Tool to calculate the emission factor for an electricit sstem. Based on the latest IPCC Guidelines, CNE official reports and CDEC-SIC databases Calculated annuall from CDEC-SIC databases and the latest Tool to calculate the emission factor for an electricit sstem procedures. Annuall Value applied: Average estimation is tco2e/mwh (EF grid,bm, ) Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: Official data and latest IPCC Guidelines are used v3.0 36

37 Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: EG m, MWh Net quantit of electricit generated and delivered to the grid b power unit m in ear CDEC-SIC dispatch databases Determined annuall from CDEC-SIC dispatch databases Annuall Several sstem units are considered in the estimation. Automatic calculation through a revised worksheet using CDEC-SIC data Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: Plant name Text Identification of power sources CDEC-SIC databases Determined from CDEC-SIC databases, as new power plants are available in the sstem Annuall Several sstem units are considered in the estimation. Based on CDEC-SIC identification names. A revised worksheet is used to properl identif each plant name on the sstem. v3.0 37

38 Data Unit / Parameter: CEF OM, i Data unit: tco 2 per ton of fuel or TJ Description: CO 2 emission factor of fuel used in the i th marginal power plant of the Operating Margin cohort Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: IPCC Guidelines Determined from IPCC guidelines following AM0026 procedures Coal powered units = 95.6 tco2e per TJ Diesel powered units = 74.1 tco2 per TJ Natural gas powered units = 56.1 tco2 per TJ IPCC recommended data is used Data Unit / Parameter: Oxid i Data unit: % Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Fraction of fuel oxidized on combustion Latest IPCC default values Determined from IPCC guidelines following AM0026 procedures Value applied: Average for Coal powered units = 100% Average for diesel powered units = 100% Average for natural gas powered units = 100% Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: IPCC recommended data is used v3.0 38

39 Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: SFCm, Mass or volume per MWh (Ton/MWh or TJ/MWh) Specific fuel consumption of the power unit m in the ear of the Build Margin CNE node price report, CDEC-SIC databases and/or other official sources Determined from CNE node price reports and CDEC- SIC databases. Estimated earl or twice a ear Annuall Several sstem units are considered in the estimation. Automatic calculation through a revised worksheet In replacement of FC i,m, following explanation in section 3.1 step 2) (replacement-am-07 formula 2) Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: NCVm, Energ per mass or volume unit Net calorific value (energ content) of fossil fuel of power plant m in ear Latest CNE official data for national energ inventor Determined from CNE official data for national energ inventor Annuall Average for Coal powered units = 7,000 Kcal per Kg Average for diesel powered units = 10,900 Kcal per Kg Average for gas powered units = 9,341 Kcal per m 3 Official data is used In replacement of NCV i, following explanation in section 3.1 step 2) (replacement-am-07 formula 2) v3.0 39

40 Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: EF CO2,m, tco2 per GJ CO2 emission factor of fossil fuel used b power plant m in ear IPCC Guidelines (2006) values at the lower limit of the uncertaint at a 95% confidence interval following the Tool to calculate the emission factor for an electricit sstem Determined from IPCC guidelines Annuall Several units are considered in the estimation. IPCC recommended data is used In replacement of EF CO2,i, and EF CO2,m,i, following explanation in section 3.1 step 2) (replacement-am-07 formula 2 and am-07 formula 3) Data Unit / Parameter: Data unit: Description: Source of data: Description of measurement methods and procedures to be applied: Frequenc of monitoring/recording: Value applied: Monitoring equipment: QA/QC procedures to be applied: Calculation method: An comment: m, Ratio Average net energ conversion efficienc of power unit m in ear Tool to calculate the emission factor for an electricit sstem, Annex 1. Determined according to AM0026 procedures Annuall Not Applicable Official data is used 4.3 Description of the Monitoring Plan The monitoring methodolog determines the baseline emissions b observing the actual power dispatch data from CDEC-SIC and the official expansion plan provided b CNE. Please refer to section 3.1 for formulae reference. The monitoring methodolog involves the monitoring of the following: Electricit generated and fed into the grid b the proposed CDM project, and other CDM registered projects (data available at CDEC-SIC). v3.0 40

41 Public data on dispatch of electricit and other relevant information from the CDEC-SIC. This data is used to calculate the emission factor for the operating margin based on a dispatch increment analsis. Public data on official expansion planning for the sstem. This data will be used to calculate the emission factor for the build margin. Emission Factors for ever thermal power plant that operates or is included in the expansion plan. Data needed to calculate the build margin emission factor consistent with the Consolidated Baseline methodolog for grid-connected electricit generation from renewable sources. All data monitored and required for verification and issuance are to be kept for two ears after the end of the crediting period or the last issuance of CERs for this project activit, whichever occurs later. The marginal plant(s) are identified using the merit order and the official marginal price for that hour. Figure 4.1: Project Generation metering sstem diagram Power Unit 1 3 ~ Mid Voltage Line Energ Measurement Power Transformer High Voltage Line Energ Measurement Energ to The grid Power Unit 2 3 ~ Control Room Meetering Sstem Ethernet Mid Voltage Meetering Devices Operator Screen Meetering Server High Voltage Meetering Device Class 0.2 This device measures the Project net energ and is used for sending data to CDEC-SIC. This device is the relevant measurement equipment for EF calculations v3.0 41