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VALIDATION

REPORTfor the CDM Project Activity

5 MW Solar PV Power Project in SivagangaiVillage, Sivaganga District, Tamil Nadu

inIndiaReport No. 01 997 9105057438

Version No.04, 02/05/2011

TV Rheinland Japan Ltd.


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Version No.:04 Page 2

Validation Report 01 997 9105057438

I. Project description:

Project title:5 MW Solar PV Power Project in Sivagangai Village, Sivaganga District,

Tamil NaduHost Country: India

Methodology: AMS-I.D. version 16 Large Scale SmallScale

Annual average emissionreductions (estimate):

7862 tCO2e/yr

GHG reducing measure/technology: The GHG emission reduction would happen by displacing the fossilfuel dominated grid electricity equivalent to the net renewable electricity supplied by the SPV power plant.

Party Project ParticipantsParty considered a project

participantIndia(Host) M/s Sapphire Industrial Infrastructures

Private Limited (SIIPL)No

II. Validation:

Contract party: M/s Sapphire Industrial Infrastructures Private Limited

Validation Team:

Role Full nameAppointed for

Sectoral ScopesAffiliation

Team Leader Mr. Asim Kumar Jana 1,2,3,4,5,11,12,13 TV Rheinland India Ltd.Team Member Mr. Raj Kumar Deka 1,2,3 TV Rheinland India Ltd.

Trainee

Mr. Dinesh Mane

Mr. Sanjay Kumar AgarwallaMr. Vikash Kumar Singh

N/A

N/AN/A

TV Rheinland India Ltd

TV Rheinland India LtdTV Rheinland India Ltd

TechnicalReviewer

Mr. Praveen Nagaraje Urs 1, 13 TV Rheinland India Ltd.

Validation Phases: Validation Status:Desk Review Corrective Actions / Clarifications Requested

Follow up interviews Full Approval and Submission for Registration

Resolution of outstanding issues Rejected

III. Validation Report:

Report No.: Current revision No.: Date of current revision: Date of first issue:

019979105057438 04 02/05/2011 03/02/2011Distribution:

No distribution without permission from the Client orresponsible organizational unit

Unrestricted distribution

Final a roval: Released on: Desi nated O erational Entit DOE :

Date: 2011-05-12By: Dr. Manfred Brinkmann

TV Rheinland Japan Ltd.Shin Yokohama Daini Center Bldg.,3-19-5, Shin Yokohama Kohoku-ku,

Yokohama, JAPAN 222-0033Tel.: +81 45 470 1850, Fax: +81 45 470-2361

E-mail: [email protected]


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Executive Summary Validation Opinion

The validation team assigned by the DOE (TV Rheinland Japan Ltd.) concludes that the CDMProject Activity 5 MW Solar PV Power Project in Sivagangai Village, Sivaganga District, TamilNadu in India, as described in the PDD (version-01.5, dated 22/03/2011), meets all relevantrequirements of the UNFCCC for CDM project activities including Article 12 of the Kyoto Protocol;the modalities and procedures for CDM (Marrakesh Accords); the subsequent decisions by theCOP/MOP and CDM Executive Board; and host country criteria. The selected baseline/monitoringmethodologies are applicable to the project and correctly applied. The DOE therefore requests theregistration of the project as a CDM project activity.

The validation was executed in the following steps so far:

- Receipt of PDD (version 01, 05/03/2010) for global stakeholder commenting- Global stakeholder comment process (19/03/ 2010 17/04/2010)

- On-site visit with stakeholder interviews (29/03/2010 30/03/2010 and on 20/08/2010)- Issue of checklist with corrective action requests (CARs) and clarification requests (CLs)and the draft validation report and protocol

- Desk review of revised PDD applying AMS.I.D Version 16- Review of proposed corrections and clarifications- Issue of the final validation report and protocol

The project participant is M/s Sapphire Industrial Infrastructures Private Limited from the host PartyIndia. No Annex I Party has yet been involved. India fulfils the relevant participation criteria for theCDM. Approval of voluntary participation from the Designated National Authority (DNA) of Indiaand confirmation that the project assists in achieving sustainable development has been obtainedthrough its letter of approval dated 01/02/2010 /P03/.

This validation did not reveal any information that indicates that the project can be seen as adiversion of ODA funding towards India.

The validation team has checked that the project correctly applies AMS I.D (Version 16) - Gridconnected renewable electricity generation. By generating renewable electricity which willdisplace fossil fuel based grid electricity, the project results in the reductions of CO2 emissions thatare real, measurable and give long term benefits to the mitigation of climate change. It isdemonstrated that the project is not a likely baseline scenario. Emission reductions attributable tothe project are hence additional to any that would have occurred in the absence of the projectactivity.

The project is likely to result in an average emission reduction of 7862 t CO 2e per annum over theselected first renewable crediting period of seven years. The emission reduction forecast has been

checked and is deemed likely that the stated amount is achieved given that the underlyingassumptions do not change.

The monitoring methodology has been correctly applied. The monitoring plan makes sufficientprovision for monitoring relevant project and baseline emission indicators. Detailed responsibilitiesand authorities for project management, monitoring and reporting and QA/QC procedures havealso been addressed.

In the course of the validation twenty eight (28) Corrective Action Requests (CARs) and seventeen(17) Clarification Requests (CLs) were raised and successfully closed. No Forward ActionRequests (FAR) was raised during this validation


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In summary, the validation team considers that the underlying reason of the early CDMconsideration, the investment barrier and barrier due to prevailing practice is sufficientlyevidenced. Thus it is the validation teams opinion that the 5 MW Solar PV Power Project in

Sivagangai Village, Sivaganga District, Tamil Nadu, as described in the PDD version 01.5 dated22/03/2011 meets all the relevant UNFCCC requirements for the CDM project and relevant hostcountry criteria and correctly applies the baseline and monitoring methodology AMS I.D., Version16. The validation team of TUV Rheinland Japan Ltd. thus recommends the proposed project to beregistered as a CDM project activity with the UNFCCC.


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Abbreviations

AM Air Mass

BAU Business as usualBE Baseline EmissionsBM Build MarginCA Corrective Action / Clarification ActionCAR Corrective Action RequestCDM Clean Development MechanismCEA Central Electricity AuthorityCERs Certified Emission ReductionsCERC Central Electrcity Regulataory ComissionCL Clarification Request

CM Combined MarginCO2 Carbon dioxide

CO2e Carbon dioxide equivalentCOD Commercial Operation DateCP Certification ProgramDACRE District Advisory Committee on Renewable EnergyDNA Designated National AuthorityDPR Detailed Project ReportDOE Designated Operational EntityEB CDM Executive BoardEIA Environmental Impact AssessmentER Emission ReductionsEPA Energy Purchase AgreementEPC Engineering Procurement Construction

ERM Environment Resource ManagementFAR Forward Action RequestFSR Feasibility Study ReportGBI Generation Based IncentativeGOI Government of IndiaGHG Greenhouse Gas(es)GSC Global Stakeholders CommentsIDBI Industrial Development Bank of IndiaIDC Interst During ConstructionIFC International Finance CorporationIFY Indian Finanacial YearINR Indian RupeesIRR Internal Rate of Return

kWh Kilowatt hourLoA Letter of ApprovalL LeakageMBCL Moser Baer Clean Energy LimitedMNRE Ministry of New and Renewable EnergyMoEF Ministry of Environment & ForestMOP Ministry of PowerMoV Means of VerificationMoM Minutes of MeetingMP Monitoring PlanMW Megawatt


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MWh Megawatt hourMWp Megawatt hour peakN/A Not Applicable

ODA Official Development AssistanceOM Operating MarginO & M Operation and MaintenancePDD Project Design DocumentPP Project ParticipantPLF Plant Load FactorPLR Prime Lending RatePV Photo VolaticQC/QA Quality control/Quality assuranceRBI Reserve Bank of IndiaSEIA Social and Environment Impact AssessmentSLD Single Line Diagram

SPV Solar Photo VolaticSTC Standard Test ConditionsSIIPL Sapphire Industrial Infrastructures Private LimitedRfR Request for RegistrationSD Sustainable DevelopmentSSC Small-ScaleSSC PA Small Scale Project ActivityTNEB Tamilnadu Electricity BoardUNEP United Nations Environment ProgrammeUNFCCC United Nations Framework Convention on Climate ChangeVVM Validation Verification ManualWDV Written Down Value


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TABLE OF CONTENTS

1 INTRODUCTION........................................................................................................8

1.1 Objective 8

1.2 Scope 8

2 METHODOLOGY....................................................................................................... 9

2.1 Desk Review of the Project Design Documentation 9

2.2 Follow-up Interviews with Project Stakeholders 12

2.3 Resolution of Outstanding Issues 13

2.4 Internal Quality Control 14

2.5 Validation Team 15

3 VALIDATION FINDINGS.......................................................................................... 153.1 Approval and participation 15

3.2 Project Design Document 17

3.3 Project Description 17

3.4 Baseline and Monitoring Methodology 19

3.5 Additionality 29

3.6 Monitoring 42

3.7 Sustainable Development 44

3.8 Environmental Impacts 44

3.9 Local Stakeholder Consultation 44

3.10 Comments by Parties, Stakeholders and NGOs 45

Appendix A: Validation ProtocolAppendix B: Certificates of Competence


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1 INTRODUCTION

The M/s Sapphire Industrial Infrastructures Private Limited has commissioned the DOETV Rheinland Japan Ltd. to perform a validation of the CDM Project Activity 5 MW Solar PVPower Project in Sivagangai Village, Sivaganga District, Tamil Nadu in India (hereafter called theproject activity). This report summarises the findings of the validation of the project, performed onthe basis of UNFCCC criteria for the CDM, as well as criteria given to provide for consistent projectoperations, monitoring and reporting. The term UNFCCC criteria refers to Article 12 of the KyotoProtocol, the CDM modalities and procedures and the simplified modalities and procedures forsmall scale CDM project and the subsequent decisions by the COP/MOP and CDM ExecutiveBoard. In addition to these criteria, host country criteria are also taken into account.

1.1 Objective

The purpose of a validation is to have an independent third party assess the project design. In

particular, the project's baseline, monitoring plan, and the projects compliance with relevantUNFCCC and host Party criteria are validated in order to confirm that the project design, asdocumented, is sound and reasonable and meets the identified criteria. Validation is a requirementfor all CDM projects and is seen as necessary to provide assurance to stakeholders of the qualityof the project and its intended generation of certified emission reductions (CERs).

1.2 Scope

The validation scope is defined as an independent and objective review of the project designdocument (PDD). The PDD is reviewed against the relevant criteria (see above) and decisions bythe CDM Executive Board, including the approved baseline and monitoring methodology. Thevalidation team has, based on the recommendations in the Validation and Verification Manual(VVM) employed a rules-based approach, focusing on the identification of significant risks for

project implementation and the generation of CERs.

The validation is not meant to provide any consulting towards the project participants. However,stated requests for clarifications and/or corrective actions may have provided input forimprovement of the project design.


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2 METHODOLOGY

The validation consists of the following three phases:

I a desk review of the project design documentsII on-site visit and follow-up interviews with project stakeholdersIII the resolution of outstanding issues and the issuance of the final validation report and

opinion.

The following sections outline each step in more detail.

2.1 Desk Review of the Project Design Documentation

The following table outlines the documentation reviewed during the validation:

Documents provided by the project participant(s):

/P01/ PDD [webhosted version], Version - 01, Date-05/03/2010

/P02/ PDD [final version], Version 01.5, Date- 22/03/2011

/P03/Letter of Approval from the Host Country from DNA India dated 01/02/2010 (No.4/22/2009-CCC).

/P04/ Modalities of Communication: dated 02/05/2011.

/P05/Spread sheets for emission reduction calculations and Grid Emission Factorcorresponds to /P01/.

/P06/ Spread sheets for emission reduction calculations and Grid Emission Factorcorresponds to /P02/.

/P07/ Spread sheets for Investment analysis and sensitivity analysis corresponds to /P01/

/P08/ Spread sheets for Investment analysis and sensitivity analysis corresponds to /P02/

/P09/Copy of the abstract of Board of Directors meeting of SIIPL dated 12/08/2008 inwhich decision for the project has been taken.

/P10/Proof of communications with CDM EB and the host DNA, as in present casestarting date is after 2nd August 2008 in accordance with EB 49, annex 22.

/P11/Grant from International Finance Corporation- Ref: copy of letter from IFC dated14/04/2009.

/P12/Copy of Service and Supply Agreement dated 29/01/2010 between the PP(SIIPL)and M/s Moser Baer Engineering & Construction Ltd.(consultant/supplier) - Proof ofstarting date of the project activity

/P13/Copy of the Detailed Project Report prepared by ITCOT Consultancy and ServicesLimited, July 2008

/P14/

Relevant proofs of local stakeholder consultation process, in particular the following:1. Copy of media used (copy of news paper advertisement in local and national

news paper) dated 17/06/20092. Copy of Minutes of Meeting of the local stakeholders consultation meeting dated

26/06/20093. Copy of Attendance sheet of the meeting of the local stakeholders consultation

dated 26/06/2009


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4. Photographs of the Local stakeholders consultation meeting dated 26/06/2009

/P15/

Operational and management structure for implementation and monitoring

(monitoring manual) of project activity (Organisation chart concerns to CDMMonitoring)

/P16/

Statutory clearances required for the implementation of the project activity.1. Copy of approval from the local Gram Panchayat dated 11/03/2009.2. Copy of No objection certificate from the District Advisory Committee on

renewable energy dated 18/06/2009, letter reference no. A5/3325/20093. Copy of Certificate for land use from the Director, town and urban planning

dated 08/06/2009 letter reference no. 773/2009/SR34. Copy of Consent to establish under water prevention and control act from

Tamilnadu Pollution Control Board dated 19/08/2009, consent order no 5048.5. Copy of Consent to establish under Air (prevention and control of pollution) act

from Tamilnadu Pollution Control Board dated 19/08/2009, consent order no4989.

/P17/ Plant Lay-out drawing as per the service agreement

/P18/Copy of revised Energy Purchase Agreement dated 09/11/2009 between TNEB andSIIPL

/P19/Copy of energy Purchase Agreement (Old) dated 20/08/2009 between TNEB andSIIPL

/P20/Undertaking letter from IFC dated 23/09/2010, that no CERs would be claimed byIFC in lieu of the grant provided.

/P21/SLD (Single Line Diagram) of the Electricity System showing from the Electricitygenerator (SPV array) point to the injection point (final metering point) to the grid.

/P22/

Undertaking letters provided by PP to demonstrate no ODA used for the projectactivity.

1. Undertaking(no ODA used) letter from SIIPL dated 03/04/2010, ref no-SIIPL/TN/03042010-22. Undertaking letter from SIIPL dated 31/05/2010, that no CERs would be

claimed by IFC in lieu of the grant provided.

/P23/Certificate of Incorporation of SIIPL issued by Assistant Registrar of Companies,National Capital Territory of Delhi and Haryana dated 10/06/2008.

/P24/ Certified output and efficiency of the SPV from an accredited agency.

/P25/Copy of Annual audited ( by accredited 3rd party financial auditors) balance sheet ofthe SIIPL for the IFY 2009-10

/P26/Declaration from the PP that the project activity, remain under the limit of smallscale project activity and the technology would not change during the entire

crediting period ref: Undertaking letter from SIIPL dated 03/04/2010./P27/ Copy of bank statement evidencing IDC paid by SIIPL until 31/12/2010.

/P28/Copy of Loan Application to IDBI Letter dated 08/10/2009, letter reference no.SIIPL/Solar/TN Project/2008-09.

/P29/Copy of Loan Sanction letter from IDBI dated 12/02/2010, letter reference no.IDBI/KBO/ICG/SIIPL/-10067.

/P30/Copy of Land sale deed between M/s Century Agrotech Limited and SIIPL dated24/11/2009.

/P31/ Copy of SEIA report prepared by ERM India Pvt. Ltd dated 20/11/2009.


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/P32/MNRE letter dated 30/10/2009 ref no 32/61/2007-08/ PVSE regarding approval ofthe project for GBI.

/P33/ Commissioning certificate of the plant dated 20/12/2010

/P34/

Declaration letter provided by the supplier (EPC contractor with whom supply andservice agreement signed / P12/) on the number and capacity of SPV modules andinverters installed at the plant site and the output capacity of the SPV power plantdated 16/03/2011, letter ref no. MBECL/CERT-SVG/2010-11/0316

Background investigation and other referred documents/websites:

/B01/ CDM Validation and Verification Manual (Version 01.2)

/B02/ Approved Baseline & Monitoring Methodology: AMS-I.D., version 16

/B03/ Tool to calculate the emission factor for an electricity system, version 02

/B04/

1. Guidance on the Assessment of Investment Analysis, EB 51, annex 58, (Version02)

2. Attachment A to appendix B of simplified modalities & procedures.3. Non-binding best practices for barrier analysis (Annex 34 of EB 35)

/B05/

UNFCCC: Guidelines for Completing the Project Design Document (CDM-SSC-PDD)and the template for the CDM-SSC-PDD.1. General Guidelines to SSC CDM methodologies, Version 162. CDM Glossary of terms3. Relevant CDM requirements (CDM M & P and decisions by the CMP and

documents released by CDM EB) published on the UNFCCC CDM website

/B06/ Carbon dioxide database version-05 published by Central Electricity Authority.http://www.cea.nic.in/planning/c%20and%20e/Government%20of%20India%20website.htm

/B07/http://envfor.nic.in/divisions/ccd/cdm_iac.html, Ministry of Environment and Forests(MoEF) interim approval guidelines for CDM projects

/B08/http://rbidocs.rbi.org.in/rdocs/Wss/PDFs/86374.pdf - Prime Lending Rate (PLR)published by RBI

/B09/ www.fastfacts.co.in/resources/DepCoAct.rtf -Companys law 1956 for SLMdepreciation on Civil works and on Plant & machinery.

/B10/

1. Tamil Nadu Electricity Regulatory Commission, Order No 6 dated 11/07/2008,http://tnerc.tn.nic.in/orders/Order%20No%206-11.07.08.pdf

2. Tamil Nadu Electricity Regulatory Commission ,Amending Order No. 6 1 dated

22/09/2009http://tnerc.tn.nic.in/regulation/Tariff/2009/Amendment%20to%20order%20No.%206%20of%202008.pdf

/B11/ http://mnre.gov.in/ - For the demonstration of barrier due to prevailing practice

/B12/http://envfor.nic.in/legis/eia/so1533.pdf- EIA notification from MoEF dated 14/09/2006.http://moef.nic.in/downloads/rules-and-regulations/3067.pdf - Amendment of EIAnotification dated 01/12/ 2009

/B13/Extract of IT act (2008-09) to support Corporate Tax, MAT, IT depreciation and ITdepreciation on civil works.

/B14/http://www.mnre.gov.in/pdf/guidelines_spg.pdf - Guidelines for generation basedincentive for grid interactive solar power generation projects, Government of India


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Ministry of New and Renewable Energy

/B15/http://www.cea.nic.in/e&c/regulations/notified_regulations/Metering_Regulations.pdf -

Extract of CERC 2006 for testing of Monitoring requirement./B16/

Host DNA approved project list:http://cdmindia.in/reports_list_details.php?id=21&reporttype=1

/B17/

1. http://www.cercind.gov.in/Regulations/Final_SOR_RE_Tariff_Regulations_to_upload_7_oct_09.pdf - CERC (Terms and Conditions for Tariff determination fromRenewable Energy Sources) Regulations, 2009

2. http://mnre.gov.in/press-releases/press-release-13072009-2.pdf

/B18/Solar Radiation Hand Book (2008)- http://www.indiaenvironmentportal.org.in/files/srd-sec.pdf

/B19/PV Syst. (version 4.35) simulation result to derive net electricity generation from theproject.

2.2 Follow-up Interviews with Project Stakeholders

In order to reach to a Validation Opinion an interview was planned for 29/03/2010 to 30/03/2010and on 20/08/2010. Prior to the interview salient points to be discussed were planned. Date ofinterview, interviewee and points discussed are given in the following table.

Sr. No Date Name Organization Topic/I-01/

29/03/2010 to30/03/2010

Mr. DineshNarang

Vice President, M/sSapphire IndustrialInfrastructuresPrivate Limited

Project Design, ProjectImplementation schedule,Seriousness of CDMconsideration, Additionality,Stakeholder Consultation,

/I-02/ 29/03/2010 to

30/03/2010

Ms. Sneha

Daheria

Senior Manager,

M/s SapphireIndustrialInfrastructuresPrivate Limited

Project Design, Project

Implementation schedule,Seriousness of CDMconsideration, Stakeholderconsultation process.

/I-03/ 05/05/2010 Mr. JayeshJakhete

M/s SapphireIndustrialInfrastructuresPrivate Limited

Capacity of modules andpower plant, evacuationsystem, Module degradation,PLF.

/I-03/ 29/03/2010 to30/03/2010

Mr. BhaskarJyoti Nath

Senior Consultant,Emergent VenturesIndia

Baseline and Additionality

/I-04/ 29/03/2010 to30/03/2010

Mr. ChilamburajA

Consultant,Emergent Ventures

India

Baseline and Additionality

/I-05/ 20/08/2010 Mr. S. Sridhar General Manager,Technical services,Moser Baer

Project Implementationschedule, Project design,Capacity of modules andpower plant, evacuationsystem, Module degradation,PLF.

/I-06/ 20/08/2010 Mr. D. P.Kumarasen

Vice President,Century ConsultingGroup

Stakeholder consultationprocess.


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Validation Team considered the views obtained in these interviews while arriving at ValidationOpinion.

2.3 Resolution of Outstanding Issues

The objective of this phase of the validation is to resolve any outstanding issues which need beclarified prior to TV Rheinlands positive conclusion on the project design. In order to ensuretransparency a validation protocol is customised for the project. The protocol shows in transparentmanner criteria (requirements), means of verification and the results from validating the identifiedcriteria. The validation protocol serves the following purposes:

It organises, details and clarifies the requirements a CDM project is expected to meet; It ensures a transparent validation process where the validator will document how a particular

requirement has been validated and the result of the validation.The validation protocol consists of three tables. The different columns in these tables aredescribed in the figure (Figure 1) given below. The completed validation protocol for this project isenclosed as Appendix A to this report.

Findings established during the validation can either be seen as a non-fulfilment of CDM criteria orwhere a risk to the fulfilment of project objectives is identified. Corrective action requests (CAR)are issued, where:

i) mistakes have been made with a direct influence on project results;ii) CDM and/or methodology specific requirements have not been met; oriii) there is a risk that the project would not be accepted as a CDM project or that emission

reductions will not be certified.

A request for clarification (CL) may be used where additional information is needed to fully clarifyan issue.

A forward action request (FAR) may be raised to highlight issues related to project implementationthat require review during the first verification of the project activity.


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Figure 1. Validation protocol tables

2.4 Internal Quality Control

The draft validation report including the initial validation findings underwent a technical reviewbefore being submitted to the project participants.

Validation Protocol Table 1: Validation Requirements

Checklist Question Reference Means ofverification(MoV)

Findings,comments,references,data sources

Draft and/or Final Conclusion

The variousrequirements in Table 1

are linked to checklistquestions (incl.mandatoryrequirements for CDM

project activities) theproject should meet.The checklist isorganised in differentsections, following thelogic of the CDM VVMmanual Ver 1. Eachsection is then furthersub-divided withnumeric numberingsystem.

Givesreference

todocumentswhere theanswer tothechecklistquestion oritem isfound.

Explains howconformance

with thechecklistquestion isinvestigated.Examples ofmeans ofverification aredocumentreview (DR) orinterview (I).N/A means notapplicable.

The section isused to

elaborate anddiscuss thechecklistquestionand/or theconformanceto thequestion. It isfurther used toexplain theconclusionsreached.

This is either acceptable basedon evidence provided (OK), or a

corrective action request(CAR) due to non-compliancewith the checklist question (Seebelow). A request forclarification (CL) is used whenthe validation team hasidentified a need for furtherclarification. A forward actionrequest (FAR) is raised duringvalidation to highlight issuesrelated to projectimplementation that requirereview during the firstverification of the projectactivity.

Validation Protocol Table 2: Resolution of Corrective Action and Clarification Requests

CL/CAR No

Observations Reference Summary ofproject ownerresponse

Revisedsection(s)/

Annexe(s)of the PDD

Validation teamconclusion

CL/CAR- XX

If theconclusionsfrom the draftValidation areeither a CAR ora CL, these

should be listedin this section.

Reference tothe checklistquestionnumber inTable 1where the

CAR or CL isexplained.

The responses givenby the project

participants duringthe communicationswith the validationteam should be

summarised in thissection.

This section shouldsummarise the validationteams responses andfinal conclusions. Theconclusions should alsobe included in Table 1,

under FinalConclusion.

Validation Protocol Table 3: List of forward action requests (FARs)

FARNumber

Observations Reference Summary of projectowner response

Validation team conclusion

FAR-XX

If theconclusionsfrom the draftValidation areFARs, theseshould be

listed in thissection.

Referenceto thechecklistquestionnumber inTable 1

where theFAR isexplained.

The responses givenby the project

participants during thecommunications withthe validation teamshould be summarised

in this section.

This section should summarise thevalidation teams responses and finalconclusions. The conclusions shouldalso be included in Table 1, under FinalConclusion.


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The final validation report underwent another technical review before requesting registration of theproject activity. The technical review was performed by a technical reviewer qualified inaccordance with TV Rheinlands qualification scheme for CDM validation and verification.

2.5 Validation Team

Role Full nameAppointed for

Sectoral ScopesAffiliation

Team LeaderMr. Asim Kumar Jana 1, 2, 3, 4, 5, 11,

12, 13TV Rheinland India Ltd.

Team Member Mr. Raj Kumar Deka 1, 2, 3 TV Rheinland India Ltd.

TraineeMr. Dinesh ManeMr. Sanjay kumar Agarwalla

Mr. Vikash Kumar Singh

N/AN/A

N/A

TV Rheinland India Ltd.TV Rheinland India Ltd.

TV Rheinland India Ltd.TechnicalReviewer

Mr. Praveen Nagaraje Urs 1, 13 TV Rheinland India Ltd.

3 VALIDATION FINDINGS

The findings of the validation are stated in the following sections. The validation criteria(requirements), the means of validation (document review, follow up interview) and the results fromvalidating the identified criteria are documented in more detail in the validation protocol inAppendix A.

The final validation findings relate to the project design as documented and described in the

revised and resubmitted project design documentation and the key changes in comparison withthe PDD originally (hosted for 30 days during GSC process).

3.1 Approval and participation

The table given below summarizes the project participant(s) and party (ies) involved.

The letter(s) of approval /P03/ was found to be unconditional with respect to 45 (a) to (d) VVM,ver 01.2/B01/. The authenticity check of the submitted LoA /P03/ has been done through referringto the host DNA official website /B16/. This web-research reveals that the project has beenapproved by the host DNA and the same project title and name of PP is appearing on the website.Thus, validation team considers that the given one is authentic and thus confirms to therequirement of 47 VVM, ver 01.2/B01/. In line with the requirements of 49 and 50 of VVM, ver

01.2/B01/, the following table summarizes the details of the LoA:

Project participant M/s Sapphire Industrial Infrastructures PrivateLimited

Parties involved India (host)

Project title5 MW Solar PV Power Project in SivagangaiVillage, Sivaganga District, Tamil Nadu

APPROVALLoA received YesDate of LoA 01/02/2010Reference to document 4/22/2009-CCCLoA received from PP


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Validation of authenticity Validation of authenticity of the LoA has beendone through web-research1 by referring to theofficial web-site of the host DNA /B16/.

Validity of LoA Yes, validation team considers the LoA inaccordance with 45 to 48 VVM, ver 01.2 /B01/

Additional information No, LoA does not contain any additionalspecification of the project activity like PDDversion number etc.

PARTICIPATIONParty is party to Kyoto Protocol Yes. India ratified the Kyoto protocol in August

2002

Voluntary participation Yes in statement 2 of LoA.Diversion of officialdevelopment aid towards hostcountry

No. There is no Annex I country involved.

Project contribution to SD Yes in statement 3 of LoA.

The validation of approval and participation has been done on the basis of 45-48 and 52-53 ofVVM ver 01.2 and validation team confirms that the proposed project activity by SIIPL meets therequirement of 44 and 51 of VVM cer 01.2.

Validation of ODA

The validation team did not reveal any evidence that this Project activity can be seen as adiversion of ODA. It is also confirmed by the interview with Mr. Dinesh Narang Vice President Finance, SIIPL /I-01/ during site visit interview. The project proponent arranged its funding frominternal accrual, the loan from Bank /P29/ and a grant from IFC /P11/. The means of finance forthe project activity against the total project cost is tabularised below:

S. No. Means INR (in Millions)1. Internal accruals(= Total Project Cost- Loan- Grant

from IFC)285.9

2. Loan from IDBI Bank /P29/ 490.00

3. Grant for IFC /P11/ 192.00

4. Total Project Cost (Consists of cost of supply andservices of plant & machinery and civil services/P12/, Cost of land /P30/, loan financing fee /P29/and IDC /P13/).

967.89

Nevertheless CL-01 has been raised to get the affirmation from the PP and IFC that grant from theIFC does not result in a diversion of official development assistance and is separate from and isnot counted towards the financial obligations of those Parties. In the response PP has provided anundertaking /P22/ that no diversion of ODA fund from the Annex I party has been used for theproject activity and no CERs would be claimed by IFC in lieu of the grant given /P11/. A similarundertaking from IFC/P20/ has also been furnished to the validation team affirming that no CERswould be claimed by IFC in lieu of the grant. Hence the validation concludes that there is no ODAfunding or diversion of ODA is involved in the project activity. Based on submitted document fromthe PP, CL-01 has been closed (ref Annex: Validation Protocol - Table 2).

1http://cdmindia.in/reports_list_details.php?id=21&reporttype=1


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Confirmation of MoC

The Modalities of Communication (MoC) /P04/, signed on 02/05/2011, was received from the PP.

As required in Procedures for Modalities of Communication between Project Participants and theExecutive Board, the Validation Team has verified that the name of Mr. Dinesh Narang VicePresident Finance as sole authorised signatories for future communication related to thecorresponding scope of authority with UNFCCC . The MOC has been checked as per therequirement of EB 45 annex 59 and found correct. The Validation Team confirms that the signatoryand contact details on the MoC /P04/ are authorized and credible.

3.2 Project Design Document

The validation team validated that the Project Design Document is based on the currently validCDM-SSC-PDD template, version 03 /B05/ and is correctly applied in accordance with theapplicable guidance document /B05/.

3.3 Project Description

The project activity involves the construction of grid connected SPV power project of 5 MWpcapacity in Sivaganga District in the State of Tamil Nadu India. The project site location in terms ofLatitude (0904758.5 to 9048249 N) and Longitude (7802643.5 to 7802702.6 (E)) was checkedfrom SEIA report prepared by ERM India Pvt. Ltd /P31/. Moreover, the location of the projectactivity site, as mentioned in the PDD was cross-checked during on site visit by the validation team.

The project activity employs combination of different capacity SPV modules viz MBTF 76Wp,MBTF 78Wp, MBTF 80 Wp, MBTF 82 Wp , MBTF 84 Wp and MBTF 86 Wp. The modules whichare installed under the project activity falls under same type 1/4size MBTF 100 modules. This

MBTF 100 modules (a-Si Thin-film Module) and are tested and certified under IEC 61646 and IEC61730) /P24/. The output capacity of this 1/4size MBTF 100 module has been defined by themanufacturer and are tested /P24/ at standard test conditions (STC) 25 degree C, AM -1.5 andirradiance 1000 W/m2, which is in line with the requirement of General Guidelines to SSC CDMmethodologies/B05/, Version 16, foot note number 7. Total 2934 pieces of 76 Wp modules, 3618pieces of 78 Wp modules, 11070 pieces of 80 Wp modules, 14238 pieces of 82 Wp modules ,28224 pieces of 84 Wp modules and 936 pieces of 86 Wp modules have been installed at theplant site and the total installed capacity of the modules comes to 5.009616 MWp and the samehas been verified by the documentation of the SPV modules installed at the plant site provided bythe supplier /P34/. Thus the total installed capacity of the SPV modules is 5.009616 MWp (DCpower), which is specified by the manufacturer at testing conditions. Validation team furtherverified the output capacity of the power plant as 5 MW, as specified by the supplier (on the basisof manufacturer specification /P12/) /P34/ based on the total inverter capacity of 5000 kW (10 nos.

of 500 kW each) installed at the plant site. This is inline with the requirements of 4(a) of generalguidance version 16.

The capacity of the SPV power plant is also cross verified from the Detailed Project Report /P13/,commissioning certificate /P33/, supply and service agreement /P12/ and SLD of the power plant/P21/, statutory clearances /P16/ and from Energy Purchase Agreement /P18/, /P19/ andconfirmed to be 5 MW.

The employed technology, i.e. a-Si Thin Module- SPV technology and the installed capacity of thepower plant i.e. 5 MW are not expected to undergo any change within the crediting period. PP hassubmitted an undertaking /P26/, /P27/ in this regard that the technology and capacity would notchange during the entire crediting period /P26/. The other equipments would be installed in the


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project activity like Transformers & Junction have also been verified through document review/P12/, SLD /P21/ and through onsite visit.

The project plant will be predominantly south oriented and layout with flat panel of thin film typemodules of PV array will be prepared. Photovoltaic module consists of several photovoltaic cellsconnected by circuits and sealed in an environmentally protective laminate, which forms thefundamental building blocks of the complete PV generating unit. Several PV panels mounted on aframe are termed as PV Array. No sun tracking device is installed for the PV Arrays. Thetechnology being used in the project activity is indigenously available and is deemed to representcurrent good practice and state-of-the-art technology.

The electricity generated by the project activity will be supplied to the TNEB grid. An EPA /P18/has already been signed between SIIPL and TNEB for on grid export of electricity. The TNEB gridis a part of the southern regional grid of India as per CEA guidelines version 05 /B06/. The planthas commissioned on 20/12/2010 /P33/ and started the commercial operation. The estimated netelectricity supplied figure works out as 8322 MWh per operational year. The project will resultemission reductions of 7862 tCO2e per annum.

The key technical features including the physical locations as mentioned in the PDD has beenverified during on site visit and document review. The operation and maintenance of the projectwould be done by PP itself2.

Nevertheless CAR-27 has been raised on the capacity of SPV modules used in the project activityand closed after sufficient justification and documentation provided by the PP and subsequentchanges in the PDD. CAR-13 has been raised to provide the number of SPV modules installed atthe project site. CL-02 has been raised by the validation team to clarify the provision of switch yardfor 10 MW as mentioned in the service agreement and closed after convincing justification (refAnnex: Validation Protocol - Table 2).

The project activity contributes to the sustainable development criteria of the host country /B07/ interms of social, economical, technological and environmental benefits achieved due to the projectactivity.

Emission reduction calculation has been done as per the applied methodology AMS I.D. ver 16/B02/.

The estimated net electricity supplied by the project activity to the grid is based on the DetailedProject Report /P13/ prepared by a third party, contracted by the SIIPL. The PLF of the projectactivity meets the requirement of 3 (b) of annex 11 of EB 48 and is deemed to be realistic. Thenet electricity supplied to the grid will be calculated ex-post by the difference of measured exportand measured import of electricity as described in the monitoring plan of the PDD /P02/.

Based on the information furnished by the project participants, no ODA contributes to the financingof the project. Temporal boundaries of the project are clearly defined.

The starting date of project, project duration (life time) and crediting time are presented in the tablebelow.

Starting date of project /P12/ Expected projectoperational lifetime/P12/, /P13/

Crediting period

2 However the PP may enter into separate O & M contract with a third party.


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29/01/2010 (Date of signing ofSupply and service agreement/P12/). This can be treated as the

earliest date on which the PP hascommitted expenditures related toproject specific implementation andconstruction as per the Glossary ofCDM Terms and 67 of EB 41meeting report.

25 years Renewable 7 years creditingperiod starting from01/05/2011 or the date of

registration, whichever is later.

The validation team verified the starting date from the date of signing of Supply and serviceagreement /P12/ dated 29/01/2010 between the PP and M/s Moser Baer Engineering &Construction Ltd. and expected project operational lifetime from the technical specification from theequipment manufacturer /P12/ and also from the Detailed Project Report /P13/. This was alsocross checked with Annex 15 of EB 50 by the validation team and found comparable (=25 years).

This grid connected solar photovoltaic power plant has obtained all local and sectoral statutoryclearances as specified under Indian Electricity Act 2003 and project has got all statutoryclearances /P16/ required to install the project including consent to establish /P16-(5)/.

In summary, according to clause 64 of VVM, ver 01.2 /B01/, by means of document review and on-site interviews with stakeholders, the validation team considers the project description in PDD/P02/ Version 01.5 dated 22/03/2011 accurate and complete.

3.4 Baseline and Monitoring Methodology

3.4.1 Applicability of the selected methodology to the project activity

The project applies the approved simplified baseline methodology for selected small-scale CDMproject activity categories, category I.D- Grid connected renewable electricity generation(AMS.I.D.) version 16 /B02/, which also uses the Tool to calculate the emission factor forelectricity an electricity system version 02 /B03/.

The selected version of the methodology at the time of hosting of PDD /P01/ is AMS I.D., version15.

Since it was not possible to request for registration before 10 Feb 2011 23:59:59 GMT (deadlinefor submission of request for registration), the validation team raised a CAR-28 in-order to adoptthe latest methodology version. The PP has revised the PDD in accordance with the methodologyAMS I.D., version 16. The validation team noted that the revision of this methodology in the PDD

does not require re-web hosting in accordance with EB 50, Annex 48, 6. The revised PDD(version 01.5, dated 22/03/2011) /P02/ and ver 16 of AMS I.D /B02/ forms the basis of thisvalidation report.

Applicability criteria for the baseline methodology /B02/ are assessed by the validation team bymeans of document review and interview. It is agreed in the validation teams opinion that theproject activity fully met the criteria as described below:

Applicability criteria asper methodology /B02/

Means of Validation

1 of methodology. The project activity is a SPV based power plant of rated output capacity


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5 MW and has been checked from the document review mainly /P12/,/P13/. Furthermore, the electricity generated by the project activity willbe supplied to the TNEB which is part of electricity generation system

and comes under southern region grid of India as per the delineation ofCEA /B06/ and this has been checked from the Energy PurchaseAgreement /P18/ signed between the PP and TNEB which explicitlymention that the generated electricity from the project activity will besold to the TNEB.

It has also been noted by the validation team that since the projectactivity does not displace electricity from an electricity distributionsystem that is or would have been supplied by at least one fossil fuelfired generating unit hence methodology AMS-I.F. is not applicablefor the present case.

2 of methodology. Bullet no. (a) of the paragraph 2 of the applied methodology isapplicable for the present case as project activity install a new powerplant at a site where there was no renewable energy power plantoperating prior to the implementation of the project activity i.e. aGreenfield plant, the same has been checked from the documentreview /P01/, /P12/, /P13/, /P17/, /P18/, /P21/, /P30/ and from the onsitevisit.

3 of methodology. The present CDM project activity is not a hydro project; hence thisparagraph is not applicable for the subject project case.

4 of methodology. The present CDM project activity is not a biomass power plant; hencethis paragraph is not applicable for the subject project case.

5 of methodology. The project activity is a 5 MW solar PV power plant and it does notinvolve any non-renewable component and verified from the documents/P01/, /P12/, /P13/, /P17/, /P18/, /P21/.

6 of methodology. The project activity is a 5 MW solar PV power project and is not a co-generation project; hence paragraph is not applicable for the project. 7 of methodology. The project activity is a Greenfield project being implemented at a site

where no SPV power plant exists and this is not a capacity additionproject and verified from documents /P01/, /P12/, /P13/, /P17/, /P18/,/P21/, /P30/. Hence this paragraph is not applicable to the project.

Furthermore, the capacity of the Greenfield project is below 15 MW andfalls under small scale project activity.

8 of methodology. As stated above the project is a green field project and hence thisparagraph is not applicable. The capacity of the Greenfield project isbelow 15 MW and falls under small scale project activity.

Thus the validation team confirms that the project participant correctly applied the approvedmethodology /B02/ for the project activity.

There is no registered small-scale project activity under the CDM or an application to registeranother small-scale CDM project activity by the project participant within the previous two yearswith the same project category and technology within 1 km of the project boundary of the proposedproject. This is confirmed by the validation team during the on-site interview with the representativeof PP. In addition, the validation team has checked up with the UNFCCC website/CDM Pipelinepublished by UNEP RISO Centre3 and not identified other small-scale project being developed bythe project participant. Therefore, the proposed project is not deemed to be a de-bundled

3 http://cdmpipeline.org/


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No

component of a large project activity. In accordance with Annex 13 of EB 54 the assessment of thede-bundling is presented in the adopted flowchart as below:

Being a Solar PV based power project and according to the applied baseline and monitoringmethodology AMS I. D. version16 /B02/, the validation team did not observe any fossil fuel firedequipment for on-grid connection or power supply to the project site. Apart from this, the validation

NA

The proposed SSC PA isdeemed to be a debundledcomponent of a large projectactivity and is not eligible touse the simplified modalitiesand procedures for

Is there a registered SSC PA M/sSapphire Industrial InfrastructuresPrivate Limited with as the proposedSSC PA?

Are the registered SSC PA andproposed SSC PA, type Iactivities providing energy to thesame user? (as per EB30,paragraph 37)

Is there a registered SSC PA in thesame project category andtechnology/measure as theproposed SSC PA?

Is the boundary of the registered SSC PAwithin 1 km of the boundary of theproposed SSC PA at the closest point?

Is the registered SSC PA registeredwithin the previous 2 years?

Does the total size of the proposed SSCPA combined with the registered SSCPA exceed the limits for SSC PAs?

Are the registered SSC PA andthe proposed SSC PA intransport sector involvingboundaries/sources that aremobile? (as per EB 35,paragraph 58 & 59 )

The proposed SSC PA isdeemed to be a debundledcomponent of a large projectactivity but can qualify to usesimplified modalities andprocedures for SSC PAs.

NA

NA

NA

NA

Not A licable NA

NA

NANA

NA

NA

The proposed SSC PA is notdeemed to be a debundledcomponent of a large projectactivity, therefore is eligible touse the simplified modalitiesand procedures for SSC PAs.

NA

NA

Do SSC PAs comprise of independentsubsystems/measures =


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team confirms that there would be no sources of project emission which are not addressed by theAMS.I.D/Version16 /B02/.

However, the validation team while reviewing the information contained in the PDD /P01/ in sectionB.2, noted that justification is needed to be provided for each of the applicability conditions definedin the methodology including the foot notes. In this context CAR-26 was raised. The PP hasaddressed the requested changes in the revised PDD /P02/ and the validation team reviewed thesame and found to be appropriate. Hence this CAR was closed (ref Annex: Validation Protocol -Table 2).

Thus the validation team considers that the project participant has correctly applied the approvedmethodology for the project activity.

3.4.2 Project Boundary

Project activity boundary is delineated as physical and geographical boundary of the Solar PVpower plant and is adequately described in the PDD /P02/ in Section B.3. The projects systemboundary includes solar PV arrays, inverters and transformers.

The validation team was able to confirm that all the identified emission sources which are impactedby the project activity are addressed by the approved methodology /B02/ and can be seen in theTable below. Hence a clarification of revision to or deviation from the approved methodology /B02/is not requested.

GHGs involved DescriptionBaselineemissions

CO2 Major emission source, which is emittedfrom the electricity generation by fossilfuel-fired power plants connected to the

Southern grid.Project emissions N/A Project emission is regarded as zero asthe project is a renewable energy (solarPV power plant) project.

Leakage N/A As per the applied methodology /B02/,leakage is to be considered in case oftransfer of energy generating equipmentfrom another activity. As this projectactivity is a green field project (asdescribed in section 3.4.1 above) andthere is no transfer of equipment fromanother activity (as the equipments used

in the project activity is newly purchased/P13/) , leakage is not considered for thisproject activity as per the methodology.

In the web hosted PDD /P01/, all the physical units has not been elaborated in the projectboundary diagram. Hence CAR 02 was raised and successfully closed (ref Annex: ValidationProtocol - Table 2).


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3.4.3 Baseline Identification

The identified baseline scenario, in line with the methodology AMS.I.D version 16 /B02/, is the

equivalent electricity that would in absence of the project activity, have been generated by theoperation of the grid-connected power plants belonging to the Southern regional grid.

Determination of Baseline Emission

The electricity baseline under the adopted methodology AMS I.D. version 16 /B02/ is calculated asthe product of electrical energy baseline EGBL,y (Quantity of net electricity supplied to TNEB whichis the part of southern grid) expressed in MWh of electricity produced by the renewablegenerating unit multiplied by the grid emission factor in accordance with 11, 12 of AMS I.Dversion 16 /B02/.

According to AMS I.D. version 16 /B02/ 12, the Emission Factor can be calculated in atransparent and conservative manner as follows:

a) A combined margin (CM), consisting of the combination of operating margin (OM) and buildmargin (BM) according to the procedures prescribed in the Tool to calculate the Emission Factorfor an electricity system.

ORb) The weighted average emissions (in kg CO2e/kWh) of the current generation mix. The data ofthe year in which project generation occurs must be used.

PP has opted option a) and adopts the ex-ante calculation of emission factor of the grid. Thecombined margin emission factor for Southern grid of India has been calculated to be 0.944793tCO2e / MWh. This has been calculated using the source from the Central Electricity Authority CO 2

Baseline Database /B06/. Central electricity Authority (CEA) (under Ministry of Power, Governmentof India) have worked out baseline emission factor for various grids in India and made thempublicly available. The data from CO2 Baseline Database for the Indian Power Sector User Guide -Version 5.0 /B06/ is the most recent data at the time of submission of CDM-PDD for validation (Cpp5 of tool to calculate emission factor of an electricity system, version 02 /B03/). Validation teamhas checked the calculation of the combined margin grid emission factor and confirmed that theapplied value of the emission factor follows the tool /B03/. And the values of OM and BMincorporated in the PDD /P02/ is taken from publically available database i.e. by CEA (Govt ofIndia) /B06/.

Nevertheless, following steps (step numbers correspond to tool to calculate emission factor of anelectricity system, version 02) demonstrate the calculation of combine margin emission factor inaccordance with tool to calculate emission factor of an electricity system, version 02.

Step 1 - In line with the requirements specified in the tool /B03/, the PP has used a regional griddefinition as applicable for large countries like India having layered electricity dispatch systems.The Indian power system is divided in two grids, the Northern, Eastern, Western and North-Eastern (NEWNE) Grid and Southern Grid. The project activity is connected to Southern Grid andhence for the purpose of estimation of baseline emission factor the consideration of Southern Gridis appropriate and correct.

Step 2 - of the tool gives an option to include off-grid power plants in the project electricity system.CEA in its database for the Indian Power Sector User Guide - Version 5.0 /B06/ has consideredonly grid power plants for the analysis.


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Step 3 - Simple OM method, out of the four methods provided in the tool /B03/ for calculating theoperating margin (EFgrid,OM,y) is selected. The tool /B03/ specifies that the simple OM method canonly be used if the low-cost/must-run resources constitute less than 50% of total grid generation in

:1) average of the five most recent years, or 2) based on long-term averages for hydroelectricityproduction. The Simple OM method selected is justified and appropriate as the average proportionof low-cost/must run resources is less than 50%. The ex-ante option for determining the simpleOM is opted by the PP.

Step 4 - The PP has considered the national published data (CEA database, ver 05 /B06/) forsimple OM (This is in conformation with the 2, section B.6.1 of Specific guidelines for completingCDM-SSC-PDD, version 5 /B05/). The simple OM emission factor calculated by the CEA is thegeneration weighted average CO2 emissions per unit net electricity generation (tCO2/MWh) of allgenerating power plants serving the system, not including low-cost/must power plants (Cp page 6,User Guide CO2 Baseline Database, ver-5 for the Indian power sector /B06/).

The value of simple operating margin for each year and the data for the calculation of EF grid,

simple OM,y is published by the CEA /B06/ and is publically available. However, validation teamhas carried checked the published value of simple OM from the data available in CEA, version 5/B06/ and found that PP has rightly calculated the generation weighted average value and this isin line with the tool /B03/ and arrived at the following summary:

Year OM emission factor(tCO2/MWh)

NetGenerationincludingimports(MWh)

2008-09 0.9729248 121471250.52007-08 0.9906235 114701739.32006-07 0.9991209 109116377.5

EFgridOM=(0.9729248*121471250.5+0.9906235*114701739.3+0.9991209*109116377.5)/(121471250.5+114701739.3+109116377.5) = 0.987082 tCO2/MWh

Hence validation team confirms that the PP has rightly followed the CEA database version 05/B06/ and the EFgridOM for the southern grid is based on three year generation weighted average isinconformity with the tool to calculate emission factor, version 02 /B03/.

Step 5 - Option (b) the set of power capacity additions in the electricity system that comprise 20%of the system generation (in MWh) and that have been built most recently has been considered byCEA and the same has been selected in the PDD.

Validation team checked independently and confirm that the selection of the options is correct.

This conclusion has been made based on the analyzing both the options, and it was found that theset of power as per option (b) comprises of larger annual generation and hence confirm therequirement of the tool /B03/. In validating this step, validation team further confirms that:

(i) the identified power capacity additions comprise 20% of the system generation for the yearunder consideration.(ii) none of the considered power capacity additions considered under (i) above have been builtmore than ten years earlier.

PP has fixed the Build Margin emission factor as ex-ante for the whole crediting period.


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Step 6 - The PP has considered the national published data (CEA database, ver 05 /B06/) for BM(This is in conformation with the 2, section B.6.1 of Specific guidelines for completing CDM-SSC-PDD, version 5 /B05/).

The CEA database /B06/ provides a BM value for the Sothern grid as 0.817923. As part ofvalidation of Step 6 of the tool /B03/, Validation team has checked the BM for the year 2008-09and found the same correct and in line with the tool.

Step 7 of the tool /B03/ requires calculation of the combined margin emission factor as per thefollowing equation:

EFgrid,CM,y = EFgrid,OM,y x wOM + EFgrid,BM,y x wBM

According to the tool /B03/ on selecting alternative weights, the default weights applicable for solarprojects are wOM = 0.75 and wBM = 0.25 for the first and subsequent crediting period have beenapplied. The combined margin emission factor has been calculated as; EFy = 0.944793 tCO2/MWh

(The official published data for simple OM and BM is considered for calculation of CM). The CM forthe first crediting period is fixed ex-ante. Hence the validation team confirms that the PP hascorrectly calculated the combined margin grid emission factor and is in line with the tool tocalculate emission factor, version 02 /B03/. Nevertheless CAR-03 has been raised and closedduring the course of validation (ref Annex: Validation Protocol - Table 2).

Table A-3: Assessment of assumptions used in Baseline Emissions

Parameter ValueApplied

Unit Source ofInformation

DOE Conclusion

BASELINE EMISSIONS

RatedoutputCapacity ofthe plant

5 MW TechnicalSpecificationas mentionedin Supply andserviceagreement/P12/ anddetailedproject report/P13/.

Cross checked with technicalspecification provided by themanufacturer as mentioned in Supplyand service agreement /P12/ anddetailed project report /P13/ and foundcorrect.

Plant LoadFactor

19 % DetailedProject Report/P13/

As per the DPR prepared by third partycontracted by the PP, same PLF hasbeen submitted to the Bank, in line with

EB 48 annex 11 requirement. Crosschecked with the CERC (Terms andConditions for Tariff determination fromRenewable Energy Sources)Regulations, 2009 (p46 of 77) /B17/,which refers to the same PLF for SPVpower project.


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Combinedmargin forthe

Southerngrid

0.944793 tCO2/MWh BaselineCarbonDioxide

EmissionDatabaseVersion 5.0,from CEA database / B06/

Crosschecked with the Baseline CarbonDioxide Emission Database Version 5.0,from CEA data base /B06/ and found

OK.

Accounting of E + and E- policies to be (or not to be) considered in development of baselinescenario

PP has included national and sectoral policies relevant to the baseline scenario as per EB 22annex 3 in section B.4 of the PDD. Section B.4 reveals following national and sectoral policies indevelopment of baseline scenario:1. Electricity Act-2003 published in 26th May 200342. National Electricity Policy 200553. Tariff Policy 200664. National Rural Electrification Policies, 20067

At the conclusion, PP has concluded that all the above policies & circumstances mentioned aboveare E- policies (which gives comparative advantage to less emission intensive technology) andimplemented since the adoption by the COP of the CDM M & P (decision 17/CP.7, 11 November2001; hence need not to be considered in the development of baseline. Furthermore, allassumption like feed in tariff has been based on the EPA /P18/ and MNRE guidelines for gridconnected solar PV project /B14/, which the project activity is entailed to avail.

Validation team concludes that the assumptions taken for the demonstration of additionality is themost applicable, appropriate and realistic assumptions and hence the compliance of 2 of EB 53annex 32 is not required and Instead the baseline scenario is based on hypothetical situationwithout the provincial and sectoral polices being in place. Hence the selection of baseline scenarioconfirms to Annex 3 of EB 22.

Validation team further noted the following text of 27 of EB 55 meeting report:

The Board considered draft "Guidelines on the treatment of national and sectoral policies in thedemonstration and assessment of additionality and agreed not to continue the consideration ofthe treatment of national and sectoral policies in the demonstration and assessment ofadditionality. The Board also agreed that possible impact of national and sectoral policies in thedemonstration and assessment of additionality shall be assessed on a case by case basis.Taking

this in to account validation team confirms that national and sectoral policy need not be taken intoaccount for the demonstration of additionality for the given project case.

Nevertheless CAR-04 has been raised and closed during the course of validation (ref Annex:Validation Protocol - Table 2).

Validation team has checked the following according to the latest version of Approved CDMValidation and Verification Manual version 01.2 /B01/, and the results are tabulated as follows:

4http://www.powermin.nic.in/acts_notification/electricity_act2003/pdf/The%20Electricity%20Act_2003.pdf5http://pib.nic.in/archieve/others/2005/nep20050209.pdf6http://www.karmayog.org/redirect/strred.asp?docId=21767http://www.indg.in/rural-energy/policy-support/national-rural-electrification-policies-2006


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ygridCOyBLy EFEGBE ,,, 2*= (Cp Section B.6.3 of PDD /P02/)

Where:

BEy Baseline Emissions in yeary; t CO2eEG BL,y Quantity of net electricity supplied to the grid as a result of the

implementation of the CDM project activity in year y (MWh)EF CO2,grid,y CO2 Emission Factor in year y; t CO2/ MWh

EF CO2,grid,y in this case is taken as Combined margin CO2 emissions factor for grid connectedpower generation in year y.

EG BL,y is estimated as 8322 MWh.

There would not be any project emission due to the project activity. Leakage is also not applicableas the transfer of equipment does not apply to this green-field project activity utilizing newpurchased equipment (Cp 20 of AMS I.D, version 16 /B02/ and 50 of EB 44). So emissionreduction is direct multiplication of quantity of net electricity supplied to the grid as a result of theimplementation of the CDM project activity in year y (MWh) (export-import figure) and the gridemission factor.

The emissions reductions due to the project activity were estimated ex-ante to be 7862 tCO2e peryear in the PDD /P02/ and calculated as follows:

ERy = BEy = EGBL,y * EF CO2,grid,y = 8322 MWh * 0.944793 tCO2e/MWh = 7862 tCO2e (roundeddown)

The summary of GHG emission reduction is as follows:

All assumptions made for estimatingGHG are listed in the PDD

YesNo

As per PDD /P02/ Section B.6

All data used by project participants arelisted in the PDD

YesNo

As per PDD /P02/ Annex 3 BaselineInformation & Section B.6

Their references and sources are alsolisted in the PDD

YesNo


Formulas, parameters, values arecomplete, accurate, transparent andconservative

YesNo


All the references and documents used

are correctly quoted and conservativelyinterpreted in the PDD

Yes

No

As per PDD /P02/ Annex 3 Baseline

Information & Section B.6

Methodology has been applied correctlyto calculate project emissions, baselineemissions, leakage emissions andemission reductions

YesNo

As per AMS I.D, Version 16 /B02/ andmethodological tool, Tool to calculate theemission factor for an electricitysystem/Version 02/B03/.

All the emissions of baseline emissionscan be replicated using informationprovided in the PDD

YesNo

As per AMS I.D, Version 16 /B02/ andmethodological tool, Tool to calculate theemission factor for an electricitysystem/Version 02/B03/.


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Nevertheless, CAR 05, were raised and successfully closed (ref Annex: Validation Protocol - Table3).

3.5 Additionality

The project is small scale in size i.e. below 15 MW in line with the requirement of GeneralGuidelines to SSC CDM methodologies/B05/, Version 16, foot note number 7. Therefore, inaccordance with 28 of the simplified modalities and procedures for small-scale CDM projectactivities, the additionality of the project activity has been demonstrated using Attachment A toAppendix B, read with Annex 34, EB 35/B02/and Guidance given vide Annex 58 of EB 51 /B02/.As all requirements specified vide 28 of the simplified modalities and procedures are compliedwith by the project activity, this approach has been assessed to be appropriate for the additionalityassessment for this project activity.

3.5.1. CDM consideration

Project developer had stated the start date of the project activity is 29/01/2010 and has submitteda copy Service and Supply Agreement /P12/ dated 29/01/2010 between the PP and M/s MoserBaer Engineering & Construction Ltd. as evidence. The project developer has not undertaken anyconstruction or any real action on the implementation of the project activity prior to this date. Sincethe real action of the activity had begun on 29/01/2010, as per Glossary of CDM terms (Version05) /B05/ and 67 of EB 41, this date has been treated as the start date of the project activity.

Since the start date of the project activity is after 02 August 2008, the project activity falls under thecategory ofnew project activityas per paragraph 100 of VVM (01.2) /B01/.

The PDD /P01/ was web-hosted for public comments on 19/03//2010, i.e., after the start date ofthe project activity. Since the start date of the project activity was after 02 August 2008 and the

PDD /P01/ was web-hosted after the start date, as per paragraph 2 of Annex 22, EB 49 /B05/[paragraph 101 of VVM (01.20 /B01/], project participant is required to inform the Host Party DNAand the UNFCCC secretariat in writing of the commencement of the project activity and of theirintention to seek CDM status and such notification must be made within six months of the projectactivity start date. Project developer had informed both UNFCCC and DNA /P10/ on 20/02/2009about their intention to seek CDM status. Copies of correspondence /P10/ with UNFCCC and DNAhave been submitted to validation team. Besides, validation team also checked the UNFCCCwebsite8 and satisfied itself that the project developer had informed UNFCCC on the said date.

The project fulfills the condition stipulated vide paragraphs (2) of Annex 22 of EB 49 /B05/, [andparagraph 100 and 101 of VVM (01.2) /B01/]. Validation Team concludes that there was a priorconsideration of CDM and CDM was seriously considered in the decision to implement the projectactivity.

Nevertheless CAR-18 has been raised and closed during the course of validation (ref Annex:Validation Protocol - Table 2).

3.5.2. Alternatives

This is a solar PV power project and is based on the Methodology AMS I-D Ver. 16 /B02/. Themethodology /B02/ states, If the project activity is the installation of a new grid-connectedrenewable power plant/unit, the baseline scenario is the electricity delivered to the grid by the

8 http://cdm.unfccc.int/Projects/PriorCDM/notifications/index_html (5 MW Solar PV Power Project in SivagangaiVillage, Sivaganga District, Tamil Nadu Reg 20 /02/ 2009)


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project activity that otherwise would have been generated by the operation of grid-connectedpower plants and by the addition of new generation sources.

Paragraph 105 of VVM, ver 01.2 /B01/ states that PDD is required to identify credible alternativesto the project activity in order to determine the most realistic baseline scenario, unless theapproved methodology that is selected by the proposed CDM project activity prescribes thebaseline scenario and no further analysis is required. Since the approved methodology AMS I-D,version 16 /B02/ used by the project activity prescribes the baseline scenario, no further analysisof alternatives is required for the project activity.

Validation Team, therefore, concludes that the PDD /P02/ and the validation report conforms to theguidance given by EB vide paragraph 105 of VVM (Ver.01.2) /B01/.

3.5.3. Investment Analysis

PDD /P02/ demonstrates that the project would not be financially feasible, without the revenuefrom the sale of certified emission reductions (CERs). In order to assess the claim of the projectdeveloper that the project scenario is not economically feasible without benefits from CER sales,Validation Team adopted a six-pronged strategy, viz.,

a) determining the suitability of the investment analysis, benchmark applied and the suitabilitythereof to the type of financial indicator presented;

b) conducting an assessment of parameters and assumptions used in calculating the financialindicator and determining the accuracy and suitability of parameters;

c) cross-checking the parameters against third-party or publicly available sources;d) reviewing annual financial reports related to the project participant;e) assessing the correctness of computations carried out and documented; andf) subjecting the critical assumptions of the project activity to reasonable variations to determine

under what conditions variations in the result would occur, and the likelihood of theseconditions.

a) Suitability of investment analysis, financial indicator and benchmark: Project developerhad demonstrated that the financial returns of the proposed CDM project activity would beinsufficient to justify the required investment [Paragraph 109 (c) of VVM (01.2) /B01/]. Fordemonstrating the financial unattractiveness of the project activity, project developer had choseninvestment barrier and to demonstrate the investment barrier had selected benchmark analysisSince in this instant case, as subsequent section would reveal, baseline is outside the directcontrol of the project developer (grid connected power) and hence, the choice of the projectdeveloper is restricted to invest or not to invest, the benchmark approach is most suited as per

the latest version of Guidance 16 of Annex 58 of EB 51 /B04/.In the above background, as subsequent paragraphs would reveal, Validation Team concludesthat the additionality justification given by the project developer is in accordance with therequirements derived from the approved CDM methodology and the methodological tools referredtherein as well as the guidance given by EB vide paragraphs 108-110 of VVM (01.2/B01/).

The project developer has chosen Project IRR to demonstrate the additionality of the project.Considering the fact that the project is financed by a mix of debt and equity and that guidance 12of Annex 58, EB 51 /B04/ permit the use of project IRR as one of the financial indicators todemonstrate additionality, project IRR has been considered as appropriate financial indicator forthe project type and decision making context.


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As per guidance 12 of Annex 58, EB 51 /B04/, Local commercial lending rates or weighted

average costs of capital (WACC) are appropriate benchmarks for a project IRR. The projectdeveloper has chosen the Prime Lending Rate (PLR), which is the commercial lending rate, as thebenchmark. Since the PP has chosen project IRR as financial indicator, selection of PLR asbenchmark conforms to Guidance 12 of Annex 58, EB 51. At the time of decision making (internalmanagement decision dated 12/08/2008) /P09/ the PLR (evidenced by publications by theReserve Bank of India) ranged between 12.75% and 13.25% 9 /B08/. PLR represents thecommercial lending rate of banks. Therefore, the PLR as benchmark conforms to guidance 12 ofAnnex 58, EB 51/B04/. Moreover, since the PLR is publicly available and can be validated byDOE, it also conforms to guidance 13 of Annex 58, EB 51/B04/. PP has chosen the lower end ofthe range, viz., 12.75% as benchmark, which is conservative.

Therefore, the Validation Team concludes that the benchmark selected by the project developer issuitable for the financial indicator selected and is conservative. Since the financial indicator equals

the benchmark with CDM benefits, Validation Team considers that it is reasonable to assume thatthe investment would not have taken place and the CDM benefits were decisive factor in taking theinvestment decision. Therefore, the selected benchmark is appropriate and conforms to paragraph112 (a) and (c)10of VVM (01.2) /B01/.

b) Parameters and assumptions used:

The three important parameters, which determine the project IRR of the project, are project cost,financing pattern and profitability estimates.

The source for various input parameters used in the financial indicator calculations and theirassessment by referring to 110(a),(b) and (c) of VVM version 01.2 are discussed below insubsequent paragraphs, which also reveals that the input parameters considered in the financialindicator calculations conform to guidance 6 of Annex 58, EB 51 /B04/ or conservative.

1. Project Cost: The project cost includes land, civil works, plant and machinery, installation andcommissioning, interest during construction and upfront fee payable to bank. Land cost is basedon land sale deed dated 24/11/2009 between PP and M/s Century Agrotech Limited /P30/, civilworks and plant and machinery costs are based on Supply Agreement /P12/ dated 29/01/2010between the PP and M/s Moser Baer Engineering & Construction Ltd. , installation andcommissioning costs are based on Service Agreement /P12/ dated 29/01/2010 between the PPand M/s Moser Baer Engineering & Construction Ltd., interest during construction (IDC) 11 isbased on DPR prepared by ITCOT consultancy and services Limited, July 2008 /P13/ and loanprocessing charges (upfront fee) is based on loan sanction letter of IDBI dated 12/02/2010 /P29/.

Copies of all these documents have been submitted to validation team. The cost of the project as9 The PLR is sourced from the RBI Weekly Statistical Supplement issued by the Reserve Bank of India, which was

available to the PP at the time of decision making (internal management decision) /P09/ (i.e., 12/08/2008). This ratepertains to 25/07/2008 See http://rbidocs.rbi.org.in/rdocs/Wss/PDFs/86214.pdf /B08/. The PLR as of 12/08/2008 canbe sourced from 29/08/2008 issue (which was not available to the PP at the time of decision making). The PLR for theweek ended 15/08/2008 was 13.25%- 14%. see http://rbidocs.rbi.org.in/rdocs/Wss/PDFs/86674.pdf.

10 Paragraph 112 (b) of VVM version 01.2 /B01/ does not apply to the project as no risk premium has been applied indetermining the benchmark

11As on 31/12/2010, SIIPL has paid INR 22.943 .mn. as IDC- has been verified from the bank statements /P27/. Henceconsidered IDC i.e. INR 10.034 mn. as per DPR /P13/ is a conservative assumption, which would lead to comparativehigher IRR.


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per these documents works out to INR 967.89 mn and same has been considered in the financialanalysis calculation /P08/.

There is a difference in the project cost between the DPR prepared by ITCOT consultancy andservices Limited, July 2008 /P13/ 12(based on which the internal management decision was takenin 12/08/2008)/P09/and the cost considered for financial analysis /P08/. As per DPR prepared byITCOT consultancy and services Limited, /P13/, which was prepared in July 2008, the cost ofproject at works out to INR 998.98 mn., while the cost considered for financial analysis /P08/works out to be INR 967.89 mn only. Since the cost considered for financial analysis /P08/ is lowerthan that of the DPR /P13/, validation team deemed it appropriate to consider the cost consideredin the financial analysis /P08/. Had the validation team gone by guidance 6 of Annex 58, EB 51/B04/ the cost should be based on the DPR /P13/, which is higher than the cost considered forfinancial analysis /P08/. Consequently, the financial indicator would have been lower and projectIRR would be 10.23%, if the cost had been based on the DPR /P13/ as against 10.84% based oncost considered for financial analysis /P08/. Hence, the cost considered in the computation offinancial indicator is more conservative13.

The cost of the project works out to INR 193.58 mn./MW (=967.89/5). Ministry of New andRenewable Energy /B17-2/ has estimated the project cost at INR170 INR200 mn14; where asCERC in their order CERC (Terms and Conditions for Tariff determination from RenewableEnergy Sources) Regulations, 2009 /B17-1/has recommended a cost of INR180 mn.15. Validationteam checked the cost assumed by other projects (available on UNFCCC homepage) andobserved that so far only 3 projects (other than the candidate project) have web hosted the PDD.The cost of project projected by the other three projects are as follows:

Project Activity INRMn./MW

Reference web-link

Solar Power Generation Project Reliance Ind. Ltd.

231 http://cdm.unfccc.int/Projects/Validation/DB/CW4U2U1WAD3WDPXSUC01XC4A4U4GA0/view.html

Grid connected 3MWp Solar PVpower plant in Belgum District ofKarnataka State, India

207http://cdm.unfccc.int/Projects/Validation/DB/K6JDWJCC907P6A186V6QW2VDRIW2AA/view.html

3MWp Grid Connected SolarPower Project at YalesandraVillage, Kolar District, Karnataka,India

197

http://cdm.unfccc.int/Projects/Validation/DB/19WUKG07V1SC0DZZR3OA88M2KV1YMU/view.html

Project activity 193.58

12DPR /P13/ was prepared by ITCOT Consultancy Services Ltd., a reputed consultancy organization. The DPR /P13/was completed in July 2008. The Board took investment decision (internal management decision) /P09/ on 12/08/2008i.e., within one month. Hence, all the values were valid at the time of decision making. The DPR /P13/ has beensubmitted to the Ministry of New and Renewably Energy, Government of India, based on which the generation basedsubsidy has been granted.

13 Validation team also noted that the project cost actual (incurred) as on 31/12/2010 is higher than the project costconsidered in IRR spread sheet. This is due to non consideration of certain assumption like miscellaneous expenses,contingencies and per-operative expenses and also due to increase in the IDC during period of construction. Hencethe considered project in the IRR sheet is most conservative estimate and leads to a higher IRR.

14 Please see http://mnre.gov.in/press-releases/press-release-13072009-2.pdf /B17-2/15 Please see http://www.cercind.gov.in/Regulations/Final_SOR_RE_Tariff_Regulations_to_upload_7_oct_09.pdf /B17-1/ (p.44/77).


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All the three projects are under validation. As evident, the cost of candidate project activity is thelowest amongst the projects which have web hosted their PDDs. Since the project cost representsthe cost based on executed agreements /P12/, /P29/, /P30/ and conservative (as it is lower than

the cost as per DPR /P13/) and compares well with other projects, validation team accepted thecost.

2. Financing Pattern: The equity involved in this project activity is INR 285.9 mn, interestfree loan/grant from IFC, Washington of INR192 mn.16 /P11/ and term loan of INR490 mn. fromIDBI Bank /P29/17. Bank had sanctioned the loan at 12% interest. Hence PP has considered theactual loan amount i.e. INR490 mn. and interest rate @ 12%, as verified from the loan sanctionletter of IDBI dated 12/02/2010 /P29/. The actual interest payable by the project activity is takeninto consideration, which is also in conformity with the guidance 11 of Annex 58, EB 5118/B04/.The same financing pattern (i.e. loan amount of INR 490 mn. and interest rate @ 12%) was alsoavailable with the PP at the time of decision making /P09/ and the detailed Project report /P13/prepared by ITCOT consultancy in July 2008 considers the same. All other terms and conditionsof loan sanction i.e. number of monthly equal installments, monthly repayment and moratorium

period (in months) are same as mentioned in the loan sanction letter of IDBI dated 12/02/2010/P29/ and the detailed Project report /P13/ prepared by ITCOT consultancy in July 2008. Henceconforms to guidance 6 of Annex 58, EB 51 /B04/.

The project financing pattern yields a gearing of 70:30 (considering the interest free loan/grantfrom IFC, Washington as loan /P13/), which is based on actual loan sanctioned to the projectactivity by the IDBI bank dated 12/02/2010 /P29/. In India, infrastructure projects are generallyentitled to a debt equity ratio of 70:30, though depending on the case the ratio can be marginallyhigher or lower. CERC /B17/ and all the State Electricity Regulatory Commissions recommend adebt equity ratio of 70:30 for solar energy projects. As the debt equity ratio is in conformity with theratio recommended by CERC /B17/ and is also evidenced by the sanction letter IDBI bank dated12/02/2010 /P29/, the validation team has accepted the financing pattern as correct andappropriate. The detailed Project report /P13/ prepared by ITCOT consultancy in July 2008considers the same i.e. 70:30 debt-equity ratio, hence available with the PP at time of decisionmaking i.e. internal management decision dated 12/08/2008) /P09/ and thus conforms to guidance6 of Annex 58, EB 51 /B04/. The interest free loan/grant from IFC, Washington of INR192 mn asverified from the letter from the IFC dated 14/04/2009 /P11/ has been deducted by the total projectcost while calculating the project IRR considering this as a grant, hence appropriate andacceptable. The detailed project report dated July 2008 /P13/ also mentions the IFC grant in thesame tune i.e. INR 192 mn. and hence this was also known to the project developer at the time ofdecision making.

3. Profitability estimates: The profitability estimates of the project, which forms the basis forproject IRR calculation is based on installed capacity, PLF, power tariff, O&M cost, interest,depreciation, taxation. Each of these assumptions used in the profitability estimates are discussed

below:i. Installed capacity: The installed capacity of the project activity is based on the output

capacity of Solar PV power plant, which is evidenced by the Supply and ServiceAgreement /P12/ dated 29/01/2010 and is the same as available with the PP at the time ofdecision making i.e. internal management decision dated 12/08/2008) /P09/, since the

16 IFC had sanctioned a loan/grant /P11/ of USD 4 mn. out of Global Environment Facility Trust Fund, for which theletter from the IFC was issued /P11/ on 14/04/2009. The loan will be converted into non-repayable grant uponcommissioning of the project. In case the COD is not achieved by December 2010, the loan should be repaid in fourequal annual installments without interest.

18 Guidance 11 of annex 58, EB 51 /B04/ states, In cases where a post-tax benchmark is applied the DOE shall ensurethat actual interest payable is taken into account in the calculation of income tax


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detailed Project report /P13/ prepared by ITCOT consultancy in July 2008 considered thesame capacity. The project rated output capacity i.e. 5 MW was further cross checkedthrough document review namely all statutory clearances /P16/ and from Energy Purchase

Agreement /P18/, /P19/ and found to be 5 MW, hence correct and acceptable.

ii. PLF: As per Annex 11, EB 48 /B05/, the plant load factor (PLF) should be defined ex-anteaccording to one of the following three options:

a. The plant load factor provided to banks and/or equity financiers while applying theproject activity for project financing, or to the government while applying the projectactivity for implementation approval;

b. The plant load factor determined by a third party contracted by the projectparticipants (e.g. an engineering company).

Project developer has submitted a copy of the DPR /P13/ dated July 2008, prepared by a

reputed techno-economic consultant ITCOT consultancy and service