Introduction to CDMProject Idea Note and Project Design Document Department of Environment and Natural Resources CDM Training Workshop November 4-6,2003 Climate Change Information Center Conference Room Manila Observatory, Ateneo de Manila Campus
Sample PIN : Guatemala El Canada Hydroelectric Project Outline • Overview of the Project Idea Note and the Project Design Document • Contents of the PIN • Contents of the PDD • Summary
Overview of theProject Idea Note (PIN) and the Project Design Document (PDD)
What is a Project Idea Note ? • Developed to standardize submission requirements and review of project ideas to the various funds sources • First step in the development of a project
Provides indicative information on: • Type and size of the project • Location • the anticipated total amount of Greenhouse Gas (GHG) reduction compared to the “business-as-usual” scenario • suggested crediting life time • suggested Certified Emission Reductions (CER) price in $/ton CO2eq reduced • financial structuring • socio-economic or environmental effects/benefits
PIN Templates • PIN For CDM Projects • PIN for Small Scale Projects • PIN for LULUCF Projects
Main Differences • PIN for Small Scale Projects • Only for projects that conform to the definition of small scale projects • MUST provide a description of how the project will improve the welfare of the community(ies) involved in it • PIN for LULUCF Projects • Only for Land Use, Land Use Change and Forestry Projects • Must identify the code of the LULUCF category that the project belongs to
Categories accepted for the 1st commitment period LULUCF PIN Template: Illustrative Project Categories
What is a Project Design Document (CDM-PDD) ? • A standardized document format developed and adopted by the CDM Executive Board to be used for submitting CDM Proposals • Outlined in Appendix B to the Modalities and Procedures for CDM • First Version (CDM-PDD) launched on Aug. 29, 2002; Simplified Version for small-scale (SSC-PDD) projects launched on January 31, 2003
Project Design Document (PDD) Project Activity Summary with Annexes: • Information on • project • project context • Kyoto Protocol • CDM M&P • etc. Baseline Study (BLS) Monitoring Plan (MP) Emission Reduction Study (ERS)
Main Differences for Small Scale CDM Projects • Baseline methodology – Simplified modalities • Monitoring methodology and plan – Simplified modalities • Additionality Requirements - Simplified checklist provided • Environmental impacts –Documentation on analysis of environmental impacts of the project activity must be provided only if required by the host country
Contents of the PIN (Project Idea Note)
Contents of PIN A. Project Description, Type, Location and Schedule B. Expected Environmental and Social Benefits C. Finance
A. Project Description, Type, Location and Schedule • Objective of the Project • Project Description and Proposed activities • Technology to be employed • Project Developer/Sponsors • Type of Project • Location • Expected Schedule • Current Status of Acceptance of Host Country
B. Expected Environmental and Social Benefits • Estimate of GHG abated/CO2 Sequestered • Baseline Scenario • Specific Global and Local Environmental Benefits • Socio-Economic Aspects • Environmental Strategy/Priorities of the Host Countries
C. Finance • Total Project Cost Estimate • Sources of Finance to be Sought or already Identified • Sources of Carbon Finance • Indicative CER Price • Total ERPA Value
Project Idea Note: An Example Name of the project: • El Canada Hydroelectric Project A. Objective of the project • Construction of a 43 MW peaking run-of-river hydroelectric plant located on the Samala River, Guatemala to generate total electricity of 178Gwh/year • Output of the Project to be sold to the Grid through a commercial distributor on a 10 year Power Purchase Agreement • Will displace fossil fuel thermal power generation sources
Project Idea Note: An Example • Project Description and Proposed activities • El Canada project is a 43 MW gross peaking hydroelectric plant producing an average of 178 Gwh/year. • The Project will collect power flows from the existing Santa Maria power plant and also collects spillages from the Santa Maria dam and local inflow from the area between the Santa Maria dam and the project diversion dam. • The collected power flows will flow through a desander and are subsequently diverted through a tunnel to a regulating pond. The penstock will be approximately 2400 m long (in plan) and will convey the power flows from the regulating reservoir to the powerhouse and submitted to a substation for delivery to the grid.
Project Idea Note: An Example • Technology to be employed • The project will use hydro power as source of electricity.
Project Idea Note: An Example • A. Project Developer • Name of the project developer Generadora de Occidente, S.A. (“Project Company”) Organizational category: Private Company Other function (s) of the project developer in the project: Construct, own, operate and finance the project Address: Diagonal 6 10-65 Zona 10, Torre I, Nivel 8, Oficina 80101010 Guatemala Contact person:Juan Carlos Mendez, Project Manager 502-339-3174 ext. 137 firstname.lastname@example.org
Project Idea Note: An Example • Project Sponsor • Name of the project sponsor: • EGI Guatemala S.A. and Mesoamerica Power Development Ltd. Both companies are subsidiaries of Energía Global International Ltd. • Organizational category: Private company • Address: Energia Global International, Ltd. • c/o CHI Energy, Inc. • Andover Business Park MA 01810 • United States • Main activities: Development and operations of renewable energy electricity generation facilities in Latin America
Project Idea Note: An Example • Type of the Project • Greenhouse gases targeted : CO2 • Type of activities: Abatement • Field of the activities: • a. Energy supply: Renewable energy (hydroelectricity) • b. Energy demand N/A • c. Transport N/A • d. Waste management N/A
Project Idea Note: An Example • Location of the Project • Region: Central America • Country: Guatemala • City: Quetzaltenango • Brief description of the location of the plant: • The Project is located on the Samalá River, 12 kilometers south of the Quetzaltenango Municipality and 198 kilometers due west from Guatemala City. The Samalá River is nearly 130 kilometers in length.
Project Idea Note: An Example • Expected Schedule • Earliest project start date: • The project is expected to begin Commercial Operations in the 4th quarter of 2003. • Estimate of time required before becoming operational after approval of the PIN: N/A • Expected first year of CER-delivery: End of 2003 • Project lifetime: • The useful life of a hydroelectric plant typically exceeds 50 years
Project Idea Note: An Example • Expected Schedule • Current status or phase of the project: • The Project Developer has recently completed EPC contract negotiations and is in the preliminary states of construction start- up. Detailed project design and engineering has commenced, with site construction expected to begin late in the 1st quarter or early in the 2nd quarter of 2002. Construction is expected to take 22 months. The Project Company has entered into a mandate letter with a multilateral lending institution and is in negotiations to secure and structure debt financing. • A.Current status of the acceptance of the Host Country • A preliminary contact with Guatemalan Government for Letter of Endorsement is under way.
Project Idea Note: An Example • The position of the Host Country with regard to the Kyoto Protocol • Guatemala has signed and ratified the Kyoto Protocol
Project Idea Note: An Example • Estimate of GHG Abated • Annual: • Up to and including 2012: 1.5 million tCO2-equivalents • Up to a period of 10 years: 1.67 million tCO2-equivalents • Up to a period of 14 years: 2.34 million tCO2-equivalents • Up to a period of 21 years: 3.5 million tCO2-equivalents
Project Idea Note: An Example • B. Baseline Scenario • Displace electricity that would otherwise have been generated by thermal plants. • Guatemala is experiencing accelerated growth in demand for electricity while, at the same time, finding itself unable to meet the demand with projected hydro and other sources of electricity due to delays in construction. The demand gap has been filled with low-cost, quickly developed bunker fuel generated electricity to avoid power shortages in the near term. The El Canada Project will displace these emergency measures by producing electricity to meet part of the demand using hydro resources and will help avoid the installation of new fossil plants upon retirement of older ones. • The El Canada Project would offset approximately 167,000 metric tons of CO2 equivalent for each full year of operations
Project Idea Note: An Example • B. Specific Global and Local Environmental Benefits • Which guidelines will be applied to? The Project will be subject to local regulations from the Guatemalan Ministry of Environment and is being constructed to comply with applicable World Bank environmental guidelines. • Local benefits Protection of water sources found locally in the area near the Project’s water intake The project has committed to reforesting certain INDE (the Guatemalan national utility) properties on which the Project is being constructed. • Global benefits The Project utilizes natural resources for the generation of electric energy rather than contaminating technologies/fuels. This achieves the objective of benefiting both the local and global populations by reducing greenhouse gas emissions.
Project Idea Note: An Example • B. Socio Economic Aspects • What social and economic effects can be attributed to the project and which would not have occurred in a comparable situation without that project? The Project will have the ability to open the river to future projects since an additional 30 to 50 MW can be developed down river after the Project is operating. The Project will provide relatively clean and filtered water to these other potential projects down river and will avoid the need to construct regulating reservoirs. The geographic location of the Project also has an important impact of the stability and reduction of electric losses in the electricity distribution system due to the increased levels and quality of service in the area. This will also benefit the local communities.
Project Idea Note: An Example B. Socio Economic Aspects Which guidelines will be applied to? Project will be subject to local regulations from the Guatemalan Ministry of Environment and is being constructed to comply with World Bank environmental guidelines. What are the possible direct effects (e.g. employment creation, capital required, foreign exchange effects)? Approximately 200 to 250 direct local jobs will be created directly. It is estimated that at least US $30 million will be invested in the Guatemalan economy. What are the possible other effects? None
Project Idea Note: An Example • Environmental strategy/ priorities of the Host Country The Guatemalan Ministry of Energy and Mines urged discussion about and approval of a law which would provide incentives for the development and construction of renewable energy projects. Amongst renewable energy, projects using hydro technology have received the most interest, given that in Guatemala there is a large identified (but largely under-utilized) hydro potential.
Project Idea Note: An Example C. Total Project Cost Estimate Development costs: 3.27 EURO million (US$ 2,841,000) Installed costs: 50.6 EURO million (US$ 44,034,000) Other costs: 11.1 EURO million (US$ 9,625,000) Total project costs: 65 EURO million (US$ 56,500,000)
Project Idea Note: An Example C. Sources of Finance to be Sought or Already Identified Equity: Shareholders equity contributions are expected to be approximately 22.7 EURO million (US$ 19,775,000). Final equity contributions level will be determined once project financing has been completed. Debt - Long-term: To be determined Debt - Short term: N/A Not identified: N/A CDM contribution sought:5-7 EURO million depending on time frame (US$4.5-6.2 million) CDM contribution in advance payments: Not yet determined.