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鱒 CDM■SSC・PDD（verslon　O2》騨ド

CDM－Executive　Board　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　page　l

　　　　　　　　PROJECTDESIGNDOCUMENT

　　　　　　　　　　　　　　　　　　of

　　　　　Luertai12．2MWHy“mpowerStationPrqiect

　　　　　　　　　　　　　　　　Version2．0

　　　　　　　　　　　　　　　27February2006

~~ CDM-SSC-PDD (version 02)

CDM - Executive Board page 2 -' - /

CLEAN DEVELOPMENT MECHANISM SIMPLIFIED PROJECT DESIG~T DOCUMENT

FOR SMALL-SCALE PROJECT AcuvITIES ' (SSC･CDM･PDD) Versioh Q2

CONTENTS

A. General descnption of the small scale pro_l~ect actrvrty

B. Baseline methodology

C. Duration of the proJect actrvity / Creditm~~12:enod

D. Momtormg methodology and plan

E. Calculation of GHG emrssron reductions by sources

F. Envrronmental nnpacts

G. Stakeholders comments

Annexes

Annex I : Information on participants in the proj ect activity

Annex 2: Information regarding public funding

Annex 3 : Statement by the Industrial and Commercial Bank of China regarding lending policy

towards small hydropower stations

Annex 4: List of stakeholders who attended the stakeholder consultation meeting

~"~}'~ CDM-SSC-PDD (version 02) t ¥ M:ill

CDM - Executive Board page 3

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Revision history of this document

~~ CDM-SSC-PDD (version 02) l ¥ Fl:1:fl

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SECTION A. General description of the S1_n_a_Il_-~La_1_e p_r_ojec_t_a_c_ti_v_ilYt

A.1. Tit]e of the ~_m_~]_1-_s_c~1_q project activity:

Luertai 12.2 MW Hydropower Station Project, Lintan County, Gannan Autonomous Tibetan Prefecture,

Gansu province, China

PDD Version 2.0

February 2006

A.2. Description of the ~_m_a_]1_-~c_a_l~ p_lLoiec_t_a_c_ti_v_it_,*v:.

Descri tion and ur ose of the ro'ect activit

The Luertai 12.2 Hydropower Station Project will involve the construction of a run-of-river hydropower

station at the main stream of the Tao River in Lintan County, Gannan Autonomous Tibetan Prefecture in

Gansu Province. China.

The main objective of the project is to generate power from a hydropower station in Gansu Province and

contribute to the sustainability of power generation of the Gansu Grid. The hydropower station will have

a capacity of 12.2 MW. The project has a design head of 11 m. The project is multifunctional and aims

besides its main function of electric power generation, at promotion of tourism and the cultivation of

kelp .

The project will be connected to the local grid via an on-site switching station that connects to Shubu 35

kV transformer station. This transformer station is linked to the local grid and connects the project via

Shuangcheng transformer station to the Gansu Provincial Grid.

Average water flow at the project location is 76.6 m3/s. The project has a design water flow capacity of

133.9 m3/s which results in expected effective operating hours of 4,670 hrs/year. The expected annual

power supply to the grid is 56.98 million kWh. The project will lead to estimated annual emission

reductions of approximately 42,327 tons C02equivalent annually.

The generated power is from renewable sources, and hence improves the sustainability of power

generation in Northwestern China, specifically through:

- Reducing reliance on exhaustible fossil fuel based power sources,

- Reducing local air pollution, and

- Reducing global emissions of greenhouse gases.

The project is located in Lintan County of Gannan Autonomous Tibetan Prefecture which has a large

Tibetan population accounting for about 50% of the total population. The local population of Lintan

County lives in extreme poverty and the county is designated as a national poverty county. Armual

income per capita for the rural population in Lintan County is on average RMB 10781.

1 The Tibetan population of Gannan Tibetan Autonomous Prefecture accounts for about 50% of the total population.

Average income per capita for the rural population in the prefecture is RMB 1341 / year. Lintan County is the

poorest county of the prefecture and the average per capita income for the rural population is 1078 RMB / year

(source: Gansu Yearbook 2004, China Statistics Press, data for 2003).

CDM-SSC-PDD (version O2) l ¥1~'ti! ~

- .l CDM - Executive Board page 5

Fuel-wood and vegetation from grasslands is used by the local population for heating and cooking.

Deforestation is a problem in this area, among others resulting in flooding downstream. The project is

part of a government effort to reduce deforestation, and at the same time improve quality of life in the

project area.

This project fits with the Chinese government objective to make the energy sector in general and the

power sector in particular more sustainable through the stimulation of small hydropower, especially

where it can replace fuel-wood in areas suffering from deforestation.

Contribution to sustainable develo ment

The project activity's contributions to sustainable development are:

' Reducing the dependence on exhaustible fossil fuels for power generation;

' Reducing air pollution by replacing coal-fired power plants with clean, renewable power;

' Reducing the adverse health impacts from air pollution;

' Reducing deforestation through providing stable power supply to the local grid;

' Reducing the emissions of greenhouse gases, to combat global climate change;

A.3. _P_r_oje_c_tJla_lLti_c_ip2Qt_~:

The parties involved in the project are shown in Table A.1:

Table A.1 Involved arties

Name of Party involved

Private (*) and /or public (**) entity

China (host)

Ja an

Lintan Luertai Hydroelectric Power Co., Ltd.

Kansai Electric Power Co., Inc. *

Party's willing or not to be

re arded as tici ants

No No

The project has not yet applied for approval by the National CDM Authorities of the parties involved, but

will start the application for approval after the validation. The project will not seek formal registration by

the UNFCCC Executive Board before the approvals have been obtained.

Below we provide more information on each of the entities involved in the project activity:

Pro'ect Owner: Lintan Luertai Hydroelectric Power Co., Ltd.

Lintan Luertai Hydroelectric Power Co,, Ltd. is a limited liability company under Chinese law dedicated

to the development and construction of hydropower and the operation and management of power stations,

The company was established 20th of September 2002 and is the sole owner of Luertai 12.2 MW

Hydropower Station Project.

Pro'ect S onsor: Kansai Electric Power Co., Inc.

Kansai Electric Power Co., Inc. is a private electric power company established in 1951 under Japanese

law. The company is a vertically integrated utility company in Japan which annual electric power sales

amount to approximately 140 TWh. It has about 13 millions customers in its franchised area, Kansai. The

annual turnover is approximately 20 billion US$.

CDM-SSC-PDD (version 02)


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The project owner is assisted in the CDM application by the following CDM project advisors:

1. Caspervandertak Consulting

Cvdt Consulting is a private consulting company established under Dutch law. Its main activity is the

identification and development of CDM projects. Within the scope of this application, Cvdt

Consulting is responsible for preparation of all carbon documentation and is the main advisor on

CDM regulations and procedures (website: www.cdmasia.or ).

2. Gansu Tonghe Investment ProJect Consultmg Co., Ltd.

Gansu Tonghe is a private company established under Chinese law. The company is dedicated to the

development of CDM projects in Gansu and North-west China. Within the scope of this application,

Gansu Tonghe is responsible for communication with the project owner, relevant data collection and

local management of the CDM application.

3. The Development and Promotion Centre of Science and Technology of Gansu

The Centre is a serni-government organization and part of the Gansu Branch of the Department of

Science and Technology, The Center's activities include the promotion of technology projects

through the preparation of feasibility studies and the organization of technology fairs and

demonstrations.

For more detailed contact information on participants in the project activities, please refer to Annex 1.

A.4. Technical description of the ~_m_,a_Il_-~c_a_IeLP_lLoje_c_t_a_c_ti_v_i!xt :

The project design consists of a run-of-river type hydro-electric facility with low head of 11 meters. The

technology employed in the project is conventional hydropower design using the natural water flow of

the river and low head.

The structure consists of a low gravity dam with a maximum height of 15 meters, an overflow dam

constructed from pebble rock and concrete, an auxiliary dam and flood gate. The powerhouse of the

station is located at the base of the dam and will house three turbine/generator units.

The project will create a small reservoir that takes the shape of the riverbed and will flood about 227,040

m of land which consists mainly of bare rock and poor vegetation. The hydropower station will not

affect the natural flow of the river as the water is directly discharged back into the river.

The turbines that will be installed are axial-flow fixed-blade propeller turbines that are suitable for

hydropower schemes with low head. The project will install two 4500KW turbine/generator sets and one

3200 kW turbine/generator. The specific technical data of the turbines / generators are listed in Table

A.2.

~"~ CDM-SSC-PDD (version 02) l ¥ M1'11 ;


Table A.2 Technical data of the turbine / enerator units

Turbine Unit Typ e Rated flow rate Capacity Type number

Unit 1

Unit 2

Unit 3

Fixed-blade propeller

Fixed-blade propeller

Fixed-blade ro eller

48.06 m3/s

48,06 m3/s

34.87 m3/s

4787 kW

4787 kW 3441 kW

ZD JP502-LH-283

ZD JP502-LH-283

ZD JP502-LH-245

Generator Unit Rated volla e Rated current Ca acit T e number Unit l

Unit 2

Unit 3

10500 V

10500 V

10500 V

309.3 A

309.3 A

219.9 A

4500 kW 450O kW

3･_OO kW

SF4500-40 / 3900

SF4500-40 / 3900

SF3200-36 / 3250

The project will also involve the construction of a switching station that will connect Luertai hydropower

station through a 35 kV connection line to Shubu 35 kV transformer station. This transformer station is

linked to the local grid and connects via Shuangcheng transformer station to the Gansu Provincial Grid.

Average water flow at the project location is 76.6 m3/s. The project has a design water flow capacity of

133.9 m3/s which results in expected effective operating hours of 4,670 hrs/year. The expected annual

power supply to the grid is 56,98 million kWh.

Construction of the project commenced in May of 2003. The project is expected to become operational in

stages with the Ist turbine (3.2 MW) at the end of May 2006, the 2nd turbine (4,5 MW) at the end of

June 2006 and the 3rd turbine (4.5 MW) at the end of July 2006.

A.4.1. Location of the ~_m_a_ll_-_sL~l_e, 12:r_oj~c_t_ac_t_iv_i_tY:

A.4.1.1. _H_o_s_t _P_a_I~yCi~~ ): J

The People's Republic of China

A.4.1.2. Region/State/Province etc. :

Gansu Province

A.4.1.3. City/Town/Community etc :

Lintan County of Gannan Autonomous Tibetan Prefecture

A.4.1.4. Detail of physica] Iocation, iuc]uding information allowing the unique identification of this ~l_n_a_1 I_-Sc_a_l~ p_r_oj~c_t_a_c_ti_v_it!~Ge_s) :

The Luertai Hydropower Station is located at the main stream of the Tao River near Lishitan Village of

Shubu Township in Lintan County, Gannan Autonomous Tibetan Prefecture in the south of Gansu

Province ,

The site location's approximate coordinates are east longitude of 103918'33" and north latitude of

34~37'26". The nearest city is Lintan City, the County Seat, at 24 km north of the project location. The

nearest larger city is Hezuo City, the prefectural capital at 79 km.

CDM-SSC-PDD (version 02) i ¥ M'I:fl

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Gannan Autonomous Tibetan Prefecture is an underdeveloped region of China characterized by a large

Tibetan population accounting for about 50% of the total population. Lintan County is the poorest county

of the prefecture. The project site is located in the North Tibetan Plateau which has an elevation of

between 2800 and 3400 m, above sea-level, The Tao River follows a curved path through the terrain

which is characterized by steep mountains and abrupt elevation differences.

Figure A1: Map of Lintan County and the project location

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A.4.2. T_ype _a_u_d_c_a_tsgQI~~Ge_sJ and technology of the S_m_a_ll_-Sc_'a_lS P_r_ojec_t_a_c_ti_v_i!~t :

Type I Renewable energy projects

I.D Grid connected renewable electricity generation

The project activity utilises the hydro potential for power generation. Thus the project type is renewable

energy. Since the capacity of the proposed project is only 12.2 MW, below the threshold qualifying

capacity of 15 MW, the project activity can be regarded as a small scale CDM project activity.

The power generated is exported to the grid. Thus, according to small-scale CDM modalities, the project

activity falls under Type - I - Renewable Energy Proj ects and category I-D - Renewable Electricity

Generation for a grid.

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The project will not expand beyond 15 MW. Proof of this is that the approval of the Chinese authorities

is based on the current technical design of the project; in other words, expansion beyond the current

capacity would not be possible without further government approvals.

A.4.3. Brief explanation of how the anthropogenic emissions of anthropogenic greenhouse gas

(GHGS) by sources are to be reduced by the proposed ~_m_~l_1-_s_c~1_~ Eroiest~Lt_iYi_ty, including why

the emission reductions wou]d not occur in the absence of the proposed ~_m_~l_1-_s_c~1_e_Eroiest~~t_iYi_ty,

taking into account nationa] and/or sectoral policies and circumstances:

a Reduction of emissions

The proposed project activity will displace predominantly coal based power generation combined with

large-scale hydropower, with zero GHG emission small-scale hydropower. The displaced power results

in significant greenhouse emissions. Thus the proposed project activity will result in significant GHG

emission reductions.

b National and sectoral olicies

The main sectoral policy relevant to this project activity is the promotion of renewable energy in China,

as evident in the currently promulgated renewable energy law (the Renewable Energy Law of the

People's Republic of China), which will take effect on I Jan. 2006, and in the long-term target that in

2020, 15% of power generation should be from renewable resources. The Chinese government prioritizes

the development of renewable energy in the energy development strategy and encourages grid-connected

power generation from renewable sources. However, there are no direct incentives such as financial

grants or subsidized loans.

The law is described in more detail in Section B.3. Its precise practical implementation is not yet decided,

but will involve various measures to increase the attractiveness of renewable power vis-~-vis

conventional power. Thus, the instruments used under the Renewable Energy Law will be of type "E-",

and can according to the guidelines of EB16 be ignored when developing the baseline scenario.

The only potential exception is the expected development of a renewable energy portfolio system (see

"Market Safeguard"), which may be in the form of a mandatory market share system for renewable

power (one of the main options under consideration). This would be an example of an "L-" policy for

which the EB does not yet give any guidance. However, we note that the details of the "market

safeguard" are not yet known, that its impact has not been considered in the decision-making on the

investment decision, and that at plausible levels of a possible MMS, small-scale hydro-power options

would remain uncompetitive with coal-fired power plants.

c Grid descri tion

Gansu's grid is mostly supplied from coal-fired power plants and hydropower plants, plus one gas-fired

power plant. Gansu also imports power from other parts of the North West China Power Grid, accounting

for 12.5% of power supplied to Gansu's grid. Exports account for 13.6% of Gansu's total grid power

supply.

~,:,~ CDM-SSC-PDD (version 02)

'* 7 CDM - Executive Board page 10

Hydropower has made significant contributions to the expansion of power supply in Gansu Province over

the last few decades. However, new hydropower additions to the grid, in particular small hydropower

stations, experience increasingly unattractive economic returns on investment. The reasons for this are

that the most suitable locations for hydropower projects have already been used, and new projects are

located in remote areas driving up the costs of hydropower per kWh. In addition, the engineering costs in

China are rapidly rising.

The proposed project activity experiences significant barriers in its implementation, which consist of the

unattractive economic returns on investment and the difficulties in arranging financing. The barriers to

implementation are further illustrated and elaborated in Section B3. Registration of the project as a CDM

activity would result in additional income flows, which would increase the attractiveness of the project

and would allow it to overcome the above-mentioned barriers.

A.4.3.1 Estimated amount of elnission reductions over the chosen ~_lLe_dit_ingJ2_e_ri_o_~:

The estimation of the emission reductions in the first crediting period is presented in Table A.3.

Table A.3 The estimation of the emission reductions in first creditin eriod

Year The estimation of annual

emission reductions (tC02e)

Year I (1 June 2006 - 31 May 2007)

Year 2 (1 June 2007 - 31 May 2008)

Year 3 (1 June 2008 - 31 May 2009)

Year 4 (1 June 2009 - 31 May 2010)

Year 5 (1 June 2010 - 31 May 2011)

Year 6 (1 June 2011 - 31 May 2012)

Year 7 (1 June 2012 - 31 May 2013) The estimation of total emission reductions in Ist crediting period (tC02e)

Total number of crediting years in first crediting period

The estimation of annual avera e emission reduction in 1~t creditin eriod (tC02e

36613

42327

42327 42327

42327

42327 42327 290574'

7

41511

A.4.4. Public funding of the ~1_n_a_]1_-Sc_a_l~ p_lLoje_c_t_a_c_tiv_it!X:

The project receives several grants from the respective national, provincial and prefectural government.

The grants are in no way connected to public funding from an Armex I country and may be ignored in

determining the baseline scenario in accordance with the executive board decision of EB16 (see also

section B.3.

A.4.5. Confirmation that the s_m_~l_1_-s_c_a_l~ prgie_c_t_a_cli_v_it!y is not a ~~~u~~l_e_d_component of a larger

project activity:

The project is a small-scale project activity of category I.D, because the capacity of the hydropower

station is under 15 MW. The project has a total designed capacity of 12.2 MW and will not expand

beyond the current capacity. Proof is that the approval of the Chinese authorities is for the current design

' Figures do not add up to the total due to rounding.

~_*,~;"~i~;~


- / CDM - Executive Board page 1 1

of 12.2 MW; in other words, expansion beyond the current capacity would not be possible without

further government approvals,

The project is not a debundled component of a larger project activity as the project owner is not

operating, developing or planning to develop another project in the direct vicinity of the project boundary,

CDM-SSC-PDD (version 02) l ¥ I't'l:ll ~

--･ / CDM - Executive Board page 1 2

SECTION B. Application of a ~~~e_llin_e_~l_e_tl_19glQl_o~y:

B.1. Tit]e and reference of the ~pprQYe_d_~~Se_liin_~_m_e_t~pgl91_Qgy applied to the ~_In_a_ll_-_s~al_eJ~:r_oj~~t

~Lt_iYi_tyi

Indicative simplified baseline and monitoring methodologies for selected small-scale CDM project

activity categories: I.D 'Grid connected renewable electricity generation'

B.2 _P_r_oie_c_t_c_a_t~gQr~y applicable to the_s_m_~l_1-_s_c_ale prole_c~ ~~t_iYi_ty::

Alicabilit

The applicability conditions for simplified baseline methodology category I.D are:

- Capacity of up to 15 MW - The project should concern renewable energy generation units, such as photovoltaics, hydro,

tidal/wave, wind, geothermal, and renewable biomass, that supply electricity to and/or displace

electricity from an electricity distribution system that is or would have been supplied by at least one

fossil fuel or non-renewable biomass fired generating unit.

The project activity concerns a 12.2 MW Hydropower Station delivering power to the Gansu grid. Thus,

it satisfies the requirement that the capacity of the project should be at most 15 MW. It is a hydropower

station providing power, hence the project activity satisfies the requirement that the project should

concern renewable power generation. Finally, the power is supplied to the Gansu grid, which is

predominantly coal-fired. Therefore, all applicability conditions for the use of simplified baseline

methodology category I.D have been satisfied.

Actual a lication of the baseline methodolo

The baseline scenario of the 'Luertai 12.2 MW Hydropower Station Project' is the continued operation

of the existing power plants in the system and the addition of new generation sources to meet electricity

demand. The project activity involves a construction of a zero-emission power source. Thus, the emission

reductions are equal to the baseline emissions.

In accordance with the small scale methodology I.D, baseline emissions are equal to power generated by

the project activity and delivered to the grid, multiplied by the baseline emission factor. According to the

small scale methodology I.D the baseline emission factor is calculated as either the "average of the

approximate operating margin and the build margin", or the "weighted average emissions (in kg

C02/kWh of the current generation mix)". The second option results in lower baseline emissions and

lower emission reductions. The project entity and the buyer have mutually agreed to opt for the more

conservative average emission factor approach so as to fully safeguard the environmental integrity of the

Clean Development Mechanism. Thus, baseline emissions are based on the weighted average emissions

in accordance with the small-scale methodology I.D.

The key methodological steps involved are:

1. Calculation of the Emission Coefficient (EC)

2. Calculation of the Baseline emissions


CDM - Executive Board page 1 3

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The methodology is applied to the Gansu Power grid. Section B.4 describes how the project boundary is

decided, The details of the calculations are described in section E.1.2.4

B.3. Description of how the anthropogenic emissions of GHG by sources are reduced below those

that would have occurred in the absence of the registered ~_m_al_1-_ss~1_~ CDM 12:liojELtagt_iYi_tY:

Additionalit

Hydropower has made significant contributions to the expansion of power supply in Gansu Province over

the last few decades. However, new hydropower additions to the grid, in particular small hydropower

stations, experience increasingly unattractive economic returns on investment. The reasons for this are

that the most suitable locations for hydropower projects have already been used, and new projects are

located in remote areas driving up the costs of hydropower per kWh. In addition, the engineering costs in

China are rapidly rising. In the absence of the project activity, the Gansu Grid is expected to expand

through the least-cost expansion, which in the case of Gansu is predominantly through coal-fired thermal

power generation, excluding the proposed project activity.

The additionality argument is based on the proposition that the project faces an investment barrier that

prevents the implementation of this type of project activity. The investment barrier is argued on the basis

of two separate strands of argument: the project faces a barrier due to 1) poor economic return on

investment, and 2) Iimited access to financial resources.

Return on investment

The project faces a barrier to implementation due to the poor returns on investment. The returns on

investment for power generated by coal-fired thermal power plants are higher than for the proposed

project activity. To illustrate this, we performed an investment analysis in which we compare the

proposed project activity with a representative coal-fired thermal power generation project. The

parameters used in the calculation are presented in Table B.1.

The parameters for the coal-fired power plant are taken from Meier, with the exception of the grid

power prices, coal prices and the lifetime of the project, 30 years. The parameters for the hydropower

station reflect the actual Luertai 12.2 MW Hydropower station.

Table B.1 Parameters used in the investment ana] sis.

H dro (12.2MW) Coal (Fi ures er kW) Capital outlay

Annual power generation

Annual Operation and

Maintenance costs

Cost of capital

Government grant

119.30 million RMB

56.98 million kWh

2.24 million RMB

5%; 7.5%; 10% 40,00 million RMB

Grid rice for small h dro 0,18 RMB / kWh

Capital outlay 5392 RMB Annual power generation

Annual Operation and

Maintenance costs

Cost of capital

Coal consumption per kWh Coal price

Coal handling losses

Grid rice thermal

6132 kWh 3% of investment

5%; 7.5%; 10% 466 g4

170 / 220 / 250 RMB/ton

7% 0.269 RMB / kWh

~ Meier, Peter (2002): Economic and Financial Analysis of the China Renewable Energy Scale-up Progl'amme

(CRESP), Draft Report. Peter Meier. " Assumed calorific content of typical coal in China: 5080 kcal/kg



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The underlying assumptions are presented below and can be considered conservative:

, Project duration: We assume a long project duration of 30 years. This favors the economic

returns of the hydropower station because the share of annualized capital costs in the annual

costs is much higher for hydropower stations than for coal-fired power plants.

, Governmellt grants: The Luertai project has received and is expected to receive several

government grants which were extended to overcome the economic and financial barriers that the

project faces, These grants amount to about 40 million RMB. The UNFCCC Executive Board

(EB) meeting 16, annex 3: "Clarifications on the treatment of national and/or sectoral policies

and regulations (paragraph 45 (e) of the CDM Modalities and Procedures) in determining a

baseline scenario" provides a clarification on whether these grants should be taken into

consideration in determining the baseline scenario. The grants constitute a so-called Type E-

policy which is defined as "National and/or sectoral policies or regulations that give positive

comparative advantages to less emissions-intensive technologies over more emissions-intensive

technologies (e,g, public subsidies to promote the diffusion of renewable energy or to finance

energy efficiency programs)".

AJ:ticle 3 of the above mentioned executive board decision states that "Type E-" national and/or

sectoral policies or regulations that have been implemented since the adoption by the COP of the

CDM M&P (decision 17/CP.7, 11 November 2001) may not be taken into account in developing

a baseline scenario (i.e. the baseline scenario should refer to a hypothetical situation without the

national and/or sectoral policies or regulations being in place). As all grants have been extended

after 11 November 2001, the grants may in accordance with the above mentioned EB decision

not be taken into account in developing the baseline scenario.

For the sake of transparency we present both the results of the investment analysis with and

without taking these grants into consideration.

e Coal price: We performed the analysis for three different coal prices reflecting differences in

transportation costs faced by coal-fired thermal power plants due to the relative distance from a

coal mine. The coal prices have been set at 170 RMB/ton (price at mine-mouth), 220 RMB/ton (medium transportation cost) and 250 RMB/ton (high transportation cost).5

e Grid price: The grid price for power suppliers serving the Gansu grid is set under the guidance

of the National Development and Reform Commission and is executed and enforced by the Price

Authority of Gansu Province. The current grid price for small hydropower stations in Gannan

Autonomous Tibetan Prefecture is 0.18 RMB / kWh. The grid price for thermal power plants

takes into consideration the cost structure of individual power plants. In table B.2 we present the

grid prices for several thermal power plants in Gansu Province and obtain the weighted average

grid price for thermal power plants.

5 The coal prices have been obtained through personal communications with Jingyuan Coal Mine Co,, Ltd (one of

the main coal mines of Gansu Province) and Gansu Datang Electric Power GeneTation Co., Ltd. (one of the

main thermal power generation companies in Gansu Province), and are considered realistic for Gansu Province.

R_ CDM-SSC-PDD (version 02) i ¥ F1'1'1} J

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Table B.2 Calculation of the wei hted avera e rid rice for thermal ower in the Gansu rid.6

Power lant Ca acitv (MW) Grid Price (RMB/kWh) Guodian Lanzhou Thermal Power Plant

Datang Gansu Lanxi Thermal Power Co. Itd.

Datang Lanzhou Xigu Thermal Power Co., Itd.

Diantou Yongchang Electricity Generation Co. Datang Liancheng Electricity Plant7

Datang 803 Power plant

Datang Gangu Power Plant

Total

J~~LgWei hted average~ rid rice thermal ower

Ltd.

lants:

220 310 200 200 200 50 24

1204

0.230

0.278

0.280

0.277

0.196

0,484

0.535

0.269

The investment analysis compares the two investments on the basis of internal rate of return (IRR) and

the payback period of the investment. We obtain the results of the analysis for the Luertai hydropower

station vis-~-vis coal-fired power generation in Table B.3.

Tab]e B.3 Com ilrison of economic indicators

Luertai h d ro ower station

Calculation without governmenl grant taken into consideration

Internal rate of return (IRR)

over a 30 year period

Pa)'back pcriod (in years')

, Wi[houl CDM revenues

,With CDM revenues Cost of capital

Without CDM revenues'

With CDM revenues

5% 27.94

17.46

5.29% 7.52010

7.5alo

2t),73

10%

i~ternal rate of ;eturn tlkk~


Payback period (in years)

~al9u_lati9n vyit~_g_oy~Tn_~~~n.~_ g. _rant deducted fiom investment

, ;Without CDM revenues

With CDM revenues ! Cost of capital

iWithout CDM revenues

i With CDM revenues

5% 13.99

9.84

9.43% 12.580/0

7.5% 18.74

11.73

10%

15.07

Coal-fired thermal _power

Internal rate of return (IRR),


Payback period (in years)

;doal_price = I~b ~ivlB / ton

;Coal price = 220 RMB / ton ~d~~jJ2irice ~ 25d R~iB_ / ton

i Cost of capital

:Coal__ p_ri~e_ _--__170__~MB_/_lp~

Coal pnce_ il~2U_SMB/,_ to_n_

Coal rice = 250 RMB / ton

5010

6.7O

8 , 25

9,59

17.81010

14.860/0

1 3.050/0

7.5010

7.49

9.5 l

11.37

lOclc

8.56

l 1.41

l 4,43

The results clearly indicate that the return on investment of the Luertai hydropower station is less

attractive than the investment in coal-fired thermal power generation. The results also show that without

the government grants the project has difficulty yielding a positive return.

When we compare the two investments taking the most favorable assumptions for the hydropower station,

i,e. including government grants and CDM revenues, and the most unfavorable assumptions for coal-

,]

7

Source: Supplementary notice on the adjustment of the grid price of the Northwest Power Grid, issued by NDRC

on 2nd of June, 2005.

Two power plants with the name Datang Liancheng Electricity Plant exist at the same location, i.e, an older plant

and a more recent plant. The grid price and capacity listed here refer to the older power plant,

CDM-SSC-PDD (version 02) I ¥ I'l:ll: ,l

,J


fired thermal power generation, i.e, a coal price of 250 RMB / ton, the return on investment for the coal-

fired thermal power plant is still slightly more attractive. Therefore, the proposed project activity clearly

faces an investment barrier due to its cornmercial unattractiveness.

Access to financial resources:

The Luertai hydropower station project also faces an investment barrier due to the limited access to

financial resources. The financial services sector of Gansu Province is not well developed and lacks the

instruments to deal with financing of high risk projects. In addition to the poor economic return on

investment as argued above, the project also faces several other obstacles that make it difficult to attract

financial resources, which we discuss below:

o Project location: The project is located in Lintan County, a very poor and remote area of China,

and designated as a national poverty county. There are very few companies based in Lintan

County with sufficient financial resources to develop a hydropower station and few companies

outside of Lintan County willing to invest in hydropower projects in Lintan. Evidence of the

adverse financing environment in Lintan County is the fact that the Luertai project is the first

project in Lintan County that is being developed by a private company. All previous hydropower

projects in Lintan County have been developed by either the water conservancy bureau or other

government related agencies.

o Lack of hydropower experience: The project developer, Lintan Luertai Hydroelectric Power

Co., Ltd. was established with the single purpose to develop the Luertai hydropower station. The

company is a subsidiary of Gansu Hualing Milk Products Group, a company dedicated to the

production of casein products. Both companies have no previous experience in the development

of hydropower stations.

, Adverse lending policies by banks: The banking sector is reluctant to extend loans to small

hydropower stations unless special circumstances apply. The high risks and poor returns

associated with small hydropower projects, make it difficult for project developers to receive

loans without putting up a high share of equity capital.

The risk-adverse attitude of the banking sector was formalized in the summer of 2004, when

under the guidance of the National Development and Reform Commission many banks adopted

policies under which hydropower stations with a capacity under a certain threshold will not

receive any loans or extensions of loans. Annex 3 contains a statement by the Industrial and

Commercial Bank of China confirming its policy not to extend loans to projects under 25 MW.

Most other banks in China have adopted similar policies, although the exact threshold will differ

for each bank.

These new lending policies will not significantly affect the Luertai hydropower station directly

as most financing for the project had already been arranged before these policies were adopted,

but it. demonstrates the general reluctant attitude of banks to extend loans to small hydropower

stations.

The above mentioned obstacles present a prohibitive barrier to attract financing. Further evidence of the

adverse financial environment of the project is given by the fact that the project has received a

considerable amount of government grants totaling about 40 million RMB. The grants were extended by

the government of Gannan Prefecture, the Provincial Water Resource Bureau, the Provincial Finance

CDM-SSC-PDD (version 02) ~

7


Bureau and the National Government Bond. Without these contributions the project would not have been

feasible. The government grants do not have to be taken into account in establishing the baseline scenario

(see previous section).

To conclude, the project faces an investment barrier due to the unattractive return on investment and

problematic access to financial resources. The additional revenues from registration of the proposed

project activity as a CDM activity help to overcome this barrier.

National olicies affectin the ro'ect

Power generation in China was 621.2 billion kWh in 1990 and 1480.8 billion kWh in 2001 implying an

annual growth rate of 8.2 %. At the same time, real GDP's annual growth rate was 9.7%. In more recent

years annual growth of power generation has accelerated and power generation in 2003 reached 1,891

billion kWh (15.4% higher than 2002)

Installed power generation capacity in China was 319 GW in 2000. Most of the power generation is from

coal, followed by nuclear and hydropower (in which large scale hydropower dominates). This is also

clear from figures on power generation in China: The World Energy Outlook 2002 gives the following

breakdown of power generation in 2000: Coal: 77.9%, Hydro: 16.0%, Nuclear: 1.2%, Oil 3.3%. Gas

1.4%, other renewable 0.1%.

The efficiency of coal-fired power plants in China is low. ERI mentions an average conversion efficiency

of energy into power of 32%, whereas the World Energy Outlook 2002 mentions 25-27%. However, this

estim~te is biased downward by the inclusion of old, inefficient plants. Recently added and planned

plants have conversion efficiencies of up to 40% and above.

China has a number of large grids that span several provinces. The macro-structure of the grid system in

China is one South China grid (comprising the four provincial grids of Guangdong, Guangxi, Guizhou,

and Yunnan) and one national grid. The national grid is composed of a number of smaller regional grids:

North China (comprising Beijing. Tianjin, Hebei, Shanxi, and West Inner Mongolia), Middle China

(comprising Henan, Hubei, Hunan and Jiangxi), Northeast China (comprising East Inner Mongolia,

Liaoning, Jilin and Heilongiiang), Northwest China (comprising Shaanxi, Gansu, Qinghai, and Ningxia),

and East China (comprising Shanghai, Jiangsu, Zhejiang, and Anhui). In addition, China has a number of

provincial grids, including for example the provincial grids of Sichuan and Fujian.

The power sector has been open to foreign investment since the early 1990s. Until 2000, about 2.2 billion

US$ in foreign investment flowed in the power sector. Retail power prices are set by distributors, but

need to be approved by the government. Wholesale power transactions are based on power purchase

agreements, which do not take seasonal and time-of-day load variations into account. Key recent

developments in the power sector are the separation of transmission and production businesses in the

power sector.

Power Sector China's Tenth Five-Year Plan presents the main strategic outline for the energy sector: shifting away

from coal, developing oil and gas infrastructure, promoting energy efficiency, and increasing the use of

renewable, with the objective to diversify the energy mix, to increase security of energy supply, to

improve energy efficiency, and to protect the environment.

~i_ CDM-SSC-PDD (version 02) lil h~tC

/*~~ CDM - Executive Board page 1 8

~ ~

In the power sector, the focus of the Chinese government policy are on encouraging competition and

lower costs by the introduction of competitive bidding for generators that seek to sell power, and a

modern regulatory framework is to be established as well.

Coal sector

Another irnportant sector to consider is the coal sector. Coal is abundant in China, with proven reserves

of 114 billion tons (consumption peaked in 1996 at 1.4 billion tons). Traditionally coal was often mined

by small village level enterprises, a lot of which were very inefficient. A significant number of these

mines (47,000) were closed down during and after 1998, partly also in response to oversupply of coal to

the market, partly also over safety and environmental concerns.

However, currently China is experiencing a coal shortage, due to soaring demand for coking coal in the

surging steel sector and demand of the power sector. This supply shortage is likely to be short-lived,

since China has ample opportunities to expand the production of coal, with a number of large-scale coal

mines due to be opened and perhaps the possibility to reopen some of the mines closed in the 1990s. The

World Energy Outlook 2002 furthermore mentions that the coal sector will be opened for foreign investment, which will further help to reduce the current supply shortage.

Coal prices were deregulated in 2002, and the price of coal is now determined by direct negotiations.

Renewable Energy Sector

A Renewable Energy Law has been approved by China's National People's Congress in early 2005.

Details are provided below under legal framework.

Legal Framework China has taken the lead in signing the Framework Convention on Climate Change in 1992. Later, China

developed series of Great Countermeasures for China's Environment.

In 1995, Electricity Act of the People's Republic of China is the first to deal exclusively with the issue of

energy resources, in which clean and renewable energy resources for electricity generation is encouraged

and supported.

In the Outline for Development of New and Renewable Energy in China, the government established its

basic strategy for the development of energy resources. Renewable energy is greatly encouraged in the

outline.

The Energy Saving Law of China was issued in 1998, in which renewable energy is affirmed and emphasized for energy saving, emission reduction and environment improving.

The Renewable Energy Law has been drafted and revised twice and approved.

1. The main objective of the law is to promote the utilization of renewable energy, improve the energy

structure, protect the environment and facilitate the sustainable development of economy and society.

2. Different types of investors are allowed to participate in the development of renewable energy.

3. State council is responsible for working out the national renewable development program, and

making incorporation with National Economic and Social Development Program,

4. [Market Safeguard] The Government of China will implement the Renewable Energy Portfolio

System and stipulate the total quantity objective of energy production or renewable energy

consumption.

5. [Grid Connection] The Government of China encourages and supports all kinds of renewable energy

connected to the power grid.

CDM-SSC-PDD (version 02) l~~r'ttC

/*= CDM - Executive Board page 1 9

~ I

6. [Power Purchase] Grid Companies must purchase the total quantity of qualified power from

renewable energy.

7. [Decentralized Power] The Government of China supports the development of decentralized renewable energy system in rural area to supply the solution of power access to local production and

life.

8. [Power Price] A Classified Power Price System is applicable to the power from renewable energy to

the grid. For decentralized renewable system managed by the grid company, the power price is

stipulated as the local end-selling price.

9. [Power Price Apportionment] The cost of grid company purchasing renewable energy power will be

co-borne by national grid company,

10. [Financial Support] The Ministry of Finance will set up special development fund for renewable

energy .

11. [Favorable Tax Policy] Renewable energy projects listed in the industry directive will enjoy a

favorable tax policy, be exempted of VAT for procurement of renewable energy equipment and the

product using power, heat, gas and liquid fuel from renewable energy,

12. [Legal Responsibility] The grid company and other relevant organization that disobey the law will be

punished by penalty in different level.

B.4. Description of how the definition of the project boundary related to the ~as_e_Ii_n_e__m_ei~Q~Ql_ogy

selected is applied to the S_m_a_ll_-~c_a_le p_lLoie_c_t_.1_c_ti_v_it!X:

The project boundary encompasses the physical, geographical site of the renewable generation

source, in accordance with the baseline methodology used.

The boundaries of the project include the area occupied by the components of the hydropower station

which includes:

,

,

e

e

e

o

o

Reservoir at the dam site

overflow dam

auxiliary dam

flood gates

power house onsite switching / transformer station

transmission lines to the grid

The boundary of the project is marked by the point where the project connects to the grid. The grid

company will install metering equipment at this location to meter the net supply of power from the

Luertai hydropower station to the grid.

The boundaries for the baseline emissions are defined as the Gansu grid and direct emissions from all

generation sources serving the grid, including imports from the Northwest China grid,

B.5. Detai]s of the _b_a_s~l_iu~ and its development:

The baseline is the continued operation of the existing power plants in the system and the addition of

new generation sources to meet electricity demand. The associated baseline emissions are given by the

amount of power production in kWh, multiplied by the emission factor 0,742836 tC02/MWh Applying

the emission factor to the expected annual power supply by the hydropower station (56.98 million kWh)

results in the baseline emissions of 42,327 tC02 each year. For details, we refer to Section E.

~l~}:~ CDM-SSC-PDD (version 02)

~- / CDM - Executive Board page 20

Date of completion of the baseline: 15/01/2006

Name of persons determining the baseline:

Casper van der Tak, General Director, Caspervandertak Consulting

Tel: +86-10-84505756

Fax: +86-10-84505758 Email: info cas ervandertakconsultin .com; cas er cdmasia.or

Joost van Acht, Consultant, Caspervandertak Consulting

Tel: +86-931-4663436

Fax: +86-931-4541296 Email: 'oost cas ervandertakconsultin ,com; 'oost cdmasia.or

Jin Yuebing, General Director, Gansu Tonghe Investment Proj ect Consulting Co., Ltd.

Tel: +86-931-4663436

Fax: +86-931-4541296

E-mail: ' bin s 126.com; ' bin s 163.com

Caspervandertak Consulting and Gansu Tonghe Investment Project Consulting Co., Ltd, are not project

participants ,

Intellectual Property :

The baseline study as presented in this PDD has been developed by Caspervandertak Consulting and

Gansu Tonghe Investment Project Consulting for the purpose of the CDM application of the proposed

project activity only. The baseline study remains the intellectual property of Caspervandertak Consulting

and Gansu Tonghe Investment Project Consulting Co., Ltd. The text, or parts of the text, of the baseline

study presented in this PDD may not be used in the application of other CDM projects without the prior

written consent of Caspervandertak Consulting and Gansu Tonghe Investment Project Consulting Co.,

Ltd.

CDM-SSC-PDD (version 02) )


SECTION C. Duration of the project activitv. / _C_lle_d_it_ipgJ2_e_r_io_d_:

C.1. Duration of the. S_m_a_ll_-Sc_,a_le p_r_oje_c_t_a_c_ti_v_it!X:

C.1.1. Starting date of the ~_n_lal_1-_s_c_ale prole_ci _ast_iyi_ty,:

May 2003

C.1.2. Expected pln_c_r_aii_o_n_a_1 1 i_fe_t_i_m_e_Qt t_h_e_s_,pal_1:s_c_a_1 e p_rgie_c_t _a_cli_v_it~:.:

30 years O months

C.2. Choice of srS(_li_ti_n~~ peti_o_d. and related information:

C.2.1. Renewable L[ie_d_iLi_ngJle_ljQ~ s

A renewable crediting period will be used.

C.2.1.1. Starting date of the first ~r_e_d_it_i_n~ne_ljQc_1:

1 June 2006

C.2.1.2. Length of the first ~re_d_i_ti_n!&P~r_ipgl:

7 years O months

C.2.2. ,~i_x_e_d, ~_tLe~it_ing J2_e_ri_o_~:

Not applicable

C.2.2.1. ~~･a_lit_iug date

Not applicable

C.2.2.2. I.ength:

Not applicable

~f_ CDM-SSC-PDD (version 02)


I:~r~CC ~

SECTION D. Application of a _m_o_n_i~QliipgL:m_~t_h_o_d_o_lpgy and plan:

D.1. Name and reference of approved _m_o_n_i_tQr_i!rg_m_~t_h_o_d_o_lpgy applied to the s_m_~]_1:s_c_a_le p_rei!e_c_t

_aLt_iYi_ty:

Indicative simplified baseline and monitoring methodologies for selected small-scale CDM project

activity categories: I.D 'Grid connected renewable electricity generation'

D.2. Justification of the choice of the methodology and why it is app]icable to the ~_m_~l_1-_s_c~l_~

p_rQi!e_c_t _a_cii_vitJ_:

Alicabilit

The applicability conditions for simplified baseline methodology category I.D are:

- Capacity of up to 15 MW - The project should concern renewable energy generation units, such as photovoltaics, hydro,

tidal/wave, wind, geothermal, and renewable biomass, that supply electricity to and/or displace

electricity from an electricity distribution system that is or would have been supplied by at least one

fossil fuel or non-renewable biomass fired generating unit.

The project activity concerns a 12.2 MW Hydropower Station delivering power to the Gansu grid. Thus,

it satisfies the requirement that the capacity of the project should be at most 15 MW. It is a hydropower

station providing power, hence the project activity satisfies the requirement that the project should

concern renewable power generation. Finally, the power is supplied to the Gansu grid, which is

predominantly coal-fired. Therefore, all applicability conditions for the use of simplified baseline

methodology category I.D have been satisfied.

D 3 Data to be monitored:

The only data that will be monitored is the amount of power supplied to the grid by the hydropower

station (EGy). The supply to the grid will be metered, and verified with the help of sales records.

D.4. Qualitative explanation of how quality control (QC) and quality assurance (QA) procedures

are undertaken:

Supply to the grid will be metered. The record of sales to the grid will be used to assure the quality of the

data on power supply by the hydropower station to the grid.

D.5. Please describe briefly the operational and management structure that the p_r_oie_c_t

p~rt_igiy2_a_n_trsJ will imp]ement in order to monitor emission reductions and any !~a_k_a~ge effects

generated by the project activity:

The monitoring of the emissions reductions will be carried out according to the scheme shown below.

The General Manager will hold the overall responsibility for the monitoring process, but as indicated

below parts of the process are delegated. The first step is the measurement of the electrical energy

produced and reporting of daily operations, which will be carried out by the plant manager. The project

CDM-SSC-PDD (version 02) [:~rccc


~ p

owner will appoint a monitoring officer who will be responsible for verification of the measurement and

the calculation of the emissions reductions. The monitoring officer will prepare operational reports of the

project activity, recording the daily operation of the hydropower station, including operating periods,

power generation, power delivered to the grid, equipment defects, etc. Finally, the monitoring reports

will be reviewed by the General Manager.

Fi ure D.1 Mana ement structure in order to monitor emission reductions

Su ort b Gansu Ton he and

Cas ~rvanderiak

Consultin

Electric power supply to the grid by Luertai hydropower station is metered at two locations. The project

entity meters the power supply at the switching/transformer station that will be constructed at the project

site and the grid company will meter the power supply at the connection point to the grid. The regulations

of the grid company require annual calibrations of the metering instruments at both locations. If there are

any substantial discrepancies between the readings of the metering instruments throughout the year, both

instruments will be recalibrated.

If any minor deviations between the two readings exist, the value metered by the grid company will be

taken as the actual supply to the grid and is used in the calculation of the project's emission reductions.

This approach is conservative as the readings at the grid connection point are under normal conditions

lower due to transmission losses.

D.6. Name of person/entitv_ determining the _m_o_n_it_o_l~Qgjl_lqt_h_o_d_o_lQgy:

Date of completion of the monitoring methodology: 15/01/2006

Name of person determining the monitoring methodology:

Casper van der Tak, General Director, Caspervandertak Consulting

Tel: +86-10-84505756

Fax: +86-10-84505758

Email: info cas ervandertakconsu in ,com; cas er cdmasia,or

CDM-SSC-PDD (version 02) I ¥ I,'1'1'(: ,J

!


Joost van Acht, Consultant, Caspervandertak Consulting

Tel: +86-10-84505756

Fax: +86-10-84505758 Email: 'oost cas ervandertakconsultin ,com; 'oost cdmasia,or

Jin Yuebing, General Director, Gansu Tonghe Investment Project Consulting Co., Ltd.

Tel: +86-931-4663436

Fax: +86-931-4541296

E-mail: ' bin s 126,com; ' bin s 163.com

Caspervandertak Consulting and Gansu Tonghe Investment Project Consulting Co., Ltd. are not project

partici pants.

Intellectual Property :

The baseline study as presented in this PDD has been developed by Caspervandertak Consulting and

Gansu Tonghe Investment Project Consulting for the purpose of the CDM application of the proposed

project activity only. The baseline study remains the intellectual property of Caspervandertak Consulting

and Gansu Tonghe Investment Project Consulting Co., Ltd. The text, or parts of the text, of the baseline

study presented in this PDD may not be used in the application of other CDM projects without the prior

written consent of Caspervandertak Consulting and Gansu Tonghe Investment Project Consulting Co., Ltd . .

':~:~~ CDM-SSC-PDD (version 02)


II~ F~Lle ,,~

SECTION E.: Estimation of GHG emissions by sources:

E.1. Formulae used:

E.1.1 Selected formulae as provided in 2pp~ut_]i_x_~:

Not applicable. The methodology does not include a description of formula.

E.1.2 Description of formulae when not provided in ~y~y2_e_n_d_i~_B_:

E.1.2.1 Describe the formulae used to estimate anthropogenic emissions by sources of GHGS due to

the prQi!e_c_t_a_c~i_v_itJ. within the project boundary:

Not applicable. Anthropogenic ernissions by sources due to the project activity are zero, as the project

activity is a zero emissions renewable power project,

E.1.2.2 Describe the forlnulae used to estimate l_e_a_k_ag~ due to the Er_ojSLt~9t_iYi_tY, where required,

for the applicable 1~r_oj~~tLat_eg~0rY in _ag~g~_e_n_d_i~ _B_ of the simp]ified modalities and procedures for

~_m_a_ll_-Sc_a_l~ _C_DM J2_r_oie_c_t_a_c_ti_v_it_i~s

Not applicable. Leakage only needs to be considered if energy generating equipment is transferred from

another site, which is not the case.

E.1.2.3 The sum of E.1.2.1 and E.1.2.2 represents the s_n_1_all_-s_c_a_le p_r_oie_c_t_a_c_ti_v_it*,.Y emissions:

The small-scale project activity emissions are in this particular case zero,

E.1.2.4 Describe the formulae used to estimate the anthropogenic emissions by sources of GHGS in the ~~~e_lill~ using the ~as_e_li_n_e__m_e~~Q~Ql_o~y for the app]icable p_r_oie_c_t_c_a_te~g!o_rJ, in aEEe_n_~i_x_B__of

the simplified modalities and procedures fou' S~l_a_ll_-Sc_a_I~_C_pM J2_lLoje_c_t_a_c_ti_v_it_i9S:

Baseline emissions are based on the weighted average emissions in accordance with the small-scale

methodology I.D. The emission coefficient is calculated by using the following formula:

~ ,-F* J COEF i j EC = ~JJ'J

~J J GEN

With:

' Fj,j the amount of fuel i consumed by relevan

sources including imports, as indicated above

(E.1)

power sources j, The index j runs over all power

~':=~}~: CDM-SSC-PDD (version 02) )

.l


e

,

COEFj,j the C02 emission coefficient of fuel i, taking into account the carbon content of fuels used

by relevant power sources j and the percentage oxidation of the fuel;

GENj the electricity delivered to the grid by source j.

The C02 emission coefficient is equal to the net calorific value of fuel i, multiplied by the oxidation

factor of the fuel and the C02 emission factor per unit of energy of the fuel i.

COEF, NCV EFc02,i 'OXIDi (E.2)

For coal in China, coal use is usually measured in standard coal equivalent, with an energy content of

29.28 GJ/tce (7000 kcal/kg). According to IPCC default, the oxidation factor is 0.98. The C02 emission

factor is 25.8t C/TJ, which is equal to 94.6t C02/TJ. Hence the emission coefficient of coal is 94.6/1000

* 29.28 * 0.98 = 2.71 tC02 /tce of standard coal equivalent.

Natural gas use is also measured in standard coal equivalent, Natural gas has an energy content of 38.931

GJ/m3 (China Energy Statistics Yearbook 2000-2002). The conversion factor from cubic meters to coal

equivalent is 1.3300 Kgce/m3. According to IPCC default, the oxidation factor is 0.995, The C02

emission factor is 15.3 tC/TJ, which is equal to 56.1 tC02/TJ. Hence the emission coefficient of natural

gas is 56.1/1000 * 38.931 * 0.995 / 1.3300 = 1.6 tC02 / ton of standard coal equivalent natural gas.

Emissions from imports have been taken into account by taking the average emissions of the exporting

grids. Table E.1 provides the data used for calculation of the average emission factor.

Table E.1Emissions of rovincia] rids com osin the North West Power Grid (excludin Gansu) 2003

Name of the grid rover ge_n~rated (GWh)

Thermal Hydro Total C02 emissions

(tC02)

Shaanxi

Ningxia

Qinghai

Tota]

(North West)

38,144

19,175

6,446

63,765

4,560

822 7,136

12,518

42,704

19,998

13,582

76,284

36,179,584

18,187,488

6,114,031

60,481,103

Source.' China Electric Power Yearbook 2004

The total emissions of the exporting provincial grids have been calculated by multiplying thermal power

generation with a conservative fuel consumption value (0.35 Tce/MWh)8 and the emission coefficient of

coal (2.71 tC02/ Tce) which results in the total emissions as indicated in table E-2. Dividing the total

emissions of the exporting grids, 60,481,103 tC02 by the total generated power of the grids, 76,284

GWh, results in an average emission factor for the Northwest Power Grid of 0.7928413 kg C02 / kWh.

The total emissions that will be included in the calculation of the Baseline Emission Coefficient of the

Gansu grid are calculated as the total imports from the Northwest Power Grid multiplied by the average

emission factor which results in total emissions of 4,425,735 tC02,

8 The fuel consumption value of 0.35 Tce/MWh is the average fuel consumption for thermal power generation of the

Gansu Grid in 2003 (source: Gansu Grid Statistics 2003, issued by Gansu Power). The fuel consumption is the

lowest value in all available Gansu Grid Statistics editions, i.e. 2000 to 2004.

~l~ CDM-SSC-PDD (version 02) I I l~'f:1:l] ~

.l


The Baseline Emissions are calculated by multiplying the Baseline Emission Coefficient by annual

power supply.

With: BEy the baseline emission in year y, EGy the amount of power generated by the project that is supplied to

the grid, and EC the emission coefficient, calculated according to formulas (E.1)-(E.2).

See also the discussion in Section B.2

The formulas are applied to the baseline data presented in Tables E.1, E.2 and E 3 Data used m the

calculations have been highlighted.

Tab]e E 2 Com ositron of ower su I to the Gansu Power Grid in 2004

Power Source Power supplied

(GWh) Unit of

fue] input

Unit fuel Total fue] C02 emission consumption in consumption factor in ton Unit er MWh9 C02 / unit

C02 emissions

tC02

Coal Natural gas

Hydro Wind Im ports

Total supply

Total for

calculation of

EC

28,306.23

247.88

10,548.38

57.15

5,582.12

44,741.76

44,741.76

Tce Tce

0.374

0.304

o

o

10,586,530.02

75,355.52

O

O

2,71

1.60

O

O

28,689,496,35

120,568.83

O

O

4,425,735.04

33,235,800.23

Source: Gansu Grid Statistics 2004 , issued by Gansu Power Co

Table E.3 ExDected annua] Dower generation

,, Ltd.

YeaT Period Annual Power Generation (MWh)

2

3

4

5

6

7

1 June 2006 - 31 May 2007

1 June 2007 - 31 May 2008

1 June 2008 - 31 May 2009

1 June 2009 - 31 May 2010

1 June 2010 - 31 May 2011

1 June 2011 - 31 May 2012

1 June 2012 - 31 MaV 2013

49,288

56,980

56,980

56,980

56,980

56,980

56,980

Applying the formulae to these data yields:

EC = 33235800.23 / (1000000 * 44741.76) = 0.0007428 tC02/kWh = 0.7428 t C02/MWh

(See Table E.1 and E.2 for underlying data used in the calculation)

BEy = 0.7428 * 49288 = 36,613 tC02 (Year 1)

BEy = 0.7428 * 56980 = 42,327 tC02 (subsequent years)

9 Fuel consumption data where not available in the 2004 edition of the Gansu Grid Statistics. The source of the

values used to calculate the baseline emission factor is the 2003 edition of the Gansu Grid Statistics.

~l=~}~!'~ CDM-SSC-PDD (version 02) J /


E.1.2.5 Difference between E.1.2.4 and E.1.2.3 represents the emission reductions due to the

p_rgi!e_c_t_a_c~i_v_itJ. during a given period:

The emission reduction ERy by the project activity during a given year y is the difference

baseline emissions (BEy), Project emissions (PEy) and emissions due to leakage (Ly), as follows:

between

ER y = BEy ~ PEy ~Ly (E.4)

Since PEy = O and Ly = O, the Emission Reductions due to the project are equal to the baseline emissions:

ERy = BEy

Thus we get:

(E.5)

ERy = BEy = 0,7428 * 49288 = 36,613 tC02 (Year 1)

ERy = BEy = 0,7428 * 56980 = 42,327 tC02 (subsequent years)

E.2 Table providing values obtained when applying forlnulae above:

Table E.4a and E,4b (next page) present the value when applying the formulae to the data.

Table E.4a Ex ante estimate of emission reductions due to the ro'ect

Year Period Project Emissions

tC02 Baseline emissions

tC02 Leakage

tC02 Emission Reductions

tC02 1

2

3

4

5

6

7

1 June 2006 - 31 May 2007

1 June 2007 - 31 May 2008

1 June 2008 - 31 May 2009

1 June 2009 - 31 May 2010

1 June 2010 - 31 May 2011

1 June 2011 - 31 May 2012

1 June 2012 - 31 Mav 2013

o

O

o

O

o

O

o

36613 42327 42327 42327 42327 42327 42327

o

o

o

o

O

o

O

36613 42327 42327 42327 42327 42327 42327

The estimation of total emission reductions in 1'[ crediting period (tCp2e) 290574i '

Total numbeT of crediting y_e~rs in ~'[ crediting period 7 The estimation of annual avera e emission reduction in 1'[ creditin eriod ~~Q2e 41511

10 Figures do not add up to the total due to rounding.

CDM-SSC-PDD (verslon 02) J.


Table E.4b Summar ex ante estimate of emission reductions due to the ro'ect in the Ist creditin eriod

Year The estimation of annual

emission reductions (tC02e)

Year I (~ June 2006 - 31 May 2007)

Year 2 (1 June 2007 - 31 May 2008)

Year ~ (1 June 2008 - 31 May 2009)

Year 4 (1 June 2009 - 31 May_20101

Year 5. (1 June_ ~010 - 31 May__~011)

Year 6_(_1 June 2011 - 31 May_ ~01~)

Year 7 (1 June 2012 - 31 May 2013) The estimation of total emission reductions in 1*1 crediting period (tC02e)

Total number of crediting years in first crediting period

The estimation of annual avera e emission reduction in Ist creditin eriod (tC02e

36613

42327

42327

42327

42327

42327

42327 290574**

7

41511

11 Figures do not add up to the total due to rounding.

~~"~~' CDM-SSC-PDD (version 02) l:A r~CC

~ CDM - Executive Board page 30

~ ~

SECTION F.: Environmental impacts:

F.1. If required by the ~Qs_t_P_~r_ty,, documentation on the analysis of the environmental impacts of

the pr9ie_c_t _a_c~i_v_itJ. :

An Environmental Impact Assessment (EIA) was carried out and was accepted by the Gansu

Environmental Protection Administration in April of 2002. The EIA was followed up by several

additional responses by the project owner that are further elaborated in section G.3. A summary of the

main findings of the EIA is given below:

SUMMARY OF ENVIRONMENTAL IMPACT ASSESSMENT

Location description

The Luertai Hydropower station is located at the upper or middle reaches of the Tao River in Lintan

County. Vegetation in the area is generally in good condition and the local ecology is well preserved.

upper reaches of the Tao River do not suffer from any serious pollution and the water quality at the

project site is fine. The water flow is sufficient to meet the needs for the construction of the project.

The

Environmenta] impact during construction The construction of Luertai project will have a certain negative impact on the environment at the project

site and the immediate vicinity due to construction activities such as excavation activities, transportation

of construction materials, processing of sand and gravel, concrete mixing, etc. These construction

activities will lead to some deterioration of local plant life, erosion of soil and water, creation of dust and

noise and disturbances due to increased traffic.

Impact of project design

In the original plans for the project, two competing technical designs were considered:

Design 1: a diversion type design with a short tunnel leading to a powerhouse

Design 2: an integrated dam / powerhouse design without tunnel or open channel

Both designs will lead to the displacement of local residents, although design I will displace a larger

number of people. In addition, the structures of design I will occupy lead to the flooding of more land

than design 2. The construction of the tunnel of design I will lead to increased discharge of sand and

stone into the river. A practical disadvantage of design I is that the tunnel will freeze up during the

winter season which negatively affects annual power generation. The EIA recommends the

implementation of design 2.

Displacement of residents

Displaced residents are planned to be relocated to Qidaogou area in Anxi County. This area is a

resettlement area for migrants and displaced people. The environment in Qidaogou area can

accommodate the requirements for resettlement, and will allow displaced people to improve their living

standards. The successful implementation of the Luertai hydropower station project will depend on

whether the issue of relocation of displaced residents can be settled satisfactory.

CDM-SSC-PDD (version 02) l ¥ Fl,1,1! ~

/


Environluental impact during operation

1. The operation of the hydro power station will not have a significant impact on the river's

hydrological regime. Water availability in the upper and middle reaches of the river will not

be affected.

2. The power station will have a small impact on the water temperature close to the dam which

will affect ice formation to some degree. The operation of the hydropower station will not

lead to stratification (temperature layering).

3. The flow of sand to the lower reaches of the Tao River will be abated.

4. The project will not lead to pollution of the river water. Waste water due to the operation of

the power station will not be discharged into the river and shall be disposed according to

regulations.

5. The project will not have a significant negative impact on the local geology,

6. The creation of the reservoir will not negatively impact the regional ecology, but will have a

certain negative impact on migratory fish.

7. The probability of a dam breach is very low.

Opinions of the stakeholders

The local population has been consulted about their opinions regarding the project. The majority of the

local residents (including the majority of the residents that will be displaced) expressed their support to

the project, Few individuals (residents that will be displaced) expressed dissenting opinions. Further

mediation between the project developer and dissatisfied residents is necessary to address their concerns.

Conclusion The project will have a certain negative environmental impact during the construction period which is

acceptable as long as the suggested environmental protection measures are strictly followed. During

operation, the project will have a srnall negative impact on the environment. However, it makes a

significant contribution to the economic development of Lintan County and will contribute to the

improvement of living standards of local population and alleviation of poverty. The project will also

contribute to overcoming the overall backwardness of the county, improve the investment environment

and improve the utilization of local water resources. The project is acceptable in terms of its

environmental impact.

Recommendations 1. Attention needs to be paid to a fair settlement for displacement and compensation of local

residents, including approval by residents and relevant government departments. In addition,

the coordination with Anxi County (the original destination area for displaced residents)

needs to be strengthened.

2. In relation to the flooding of the road near the project, consultation with the public should

take place.

3. A detailed assessment of the impact on local residents is required if the diversion type design

with short tunnel (Design 1) is applied.

4. Environmental restoration activities should be carried out after construction of the project.


/


SECTION G. S_t_a_k_e_h_o_]d_~r_~' comments:

Brief description of how comments by local ~_t~~~tQl_d_e_r~ have been invited and colnpiled:

During the preparations for Luertai hydropower station, several consultations with relevant stakeholders

have taken place. The project owner has made particular efforts to include the local villagers in the

decision making process which led to an adjustment of the compensation and relocation plan which is

more generous than required by law. The participation and outcome of these consultations are described

in section G.2.

In relation to the CDM application, a separate stakeholder consultation was organized to confirm the

impacts of the project on the relevant stakeholders. The consultation lasted for one month, from the 3'd of

January to the 4th of February of 2006, and consisted of the following elements:

, Establishment of a website:

The website contained information on the project, CDM, the stakeholder consultation process and

provided an opportunity to post comments by e-mail or by telephone.

, Organization of a stakeholder consultation meeting near project site:

Date / time: 19 January 2006, from 14:OO to 17:OO.

Location: Lintan Hotel in Lintan County Seat (about 20kn from the project site).

Agenda of the meeting:

- Opening of the meeting - Introduction of the project

- Introduction of the Clean Development Mechanism

- Explanation of the stakeholder consultation process

- Round of comments by each participant

- Further questions and answers

- Closing of the meeting

To ensure wide participation of stakeholders, announcements of the stakeholder consultation meeting and

website were made through the following channels:

Newspaper announcement on January 4, 2006 in the Gansu Daily (Gansu's leading daily newspaper)

Online announcement on the Gansu Economic News Site: w¥~v, sei.com.cn

Online announcement on the website of the Office of National Coordination Committee on Climate

Change (the Designated National Authority of China)

In addition to the above announcements, important stakeholders received personal invitations to attend

the meeting. See for attendance of the meeting Annex 4.



liArll:C ~

~* ,

G.2. Summarv of the comments received:

During the preparations for Luertai Hydropower Station, the following meetings were held:

Meetin 1 Date: 4th of June 2003 Location: Azitan township government building Participants: Representatives of relevant governmental organizations

Representative of Lintan Luertai Hydroelectric Power Cofnpany

Delegation of local residents

Outcome of the meeting:

Agreement was reached on the land area that would be expropriated, compensation standards and several

other issues related to the construction of the hydropower station.

Meetin 2 Date: 13*h of April 2004 Location: Lintan County government building Participants: Lintan County officer of the leading group in charge of relocation of displaced residents

Delegation of residents that will be displaced.

Representative of Lintan Luertai Hydroelectric Power Company


In the meeting the concerns of the displaced residents were discussed and a new agreement on relocation

and compensation was worked out. This agreement was later settled in the "Agreement on relocation

arrangements of affected residents at Lisitan village in the reservoir area of Luertai hydro power station

in Lintan county and other corresponding affairs" which was signed on the 23rd of April, 2004.

Meetin 3 Date: 20'h of April, 2004 Location: Lisitan village Participants: Representatives of all families in Lisitan village

Representative of Lintan Luertai Hydroelectric Power Company


The agreements on compensation for plowland, grass land, and forest area were concluded and signed by

the villagers and the representative of the project owner.

In addition, a separate stakeholder consultation meeting was organized to confirm the impacts of the

project on local stakeholders, A summary is provided below:

Comments received at stakeholder consultation meeting:

All stakeholders present at the meeting expressed their support for the Luertai Hydropower Station

Project. The main comments are listed below:

' Mr. Wu Yu, Vice-governor of Lintan County, explained the process through which the

compensation for displaced residents was decided. The initial agreement, which was drafted in

accordance with national standards regarding compensation, was received by the local villagers

as unsatisfactory. It was decided that more consultation was necessary between the project owner,

local residents and relevant government organizations. On the basis of these consultations it was

CDM-SSC-PDD (version 02) l ¥ I:1*1'1!

j


decided to apply the compensation standards of Jiudianxia hydropower station (a large

hydropower station in Gansu Province) and the budget for compensation was increased from 4

million RMB to 5.35 million RMB. In addition, the status of displaced residents was changed

from village resident to urban resident which allows them to live and work in a city of their

choice.

' Mr. Li Zhashi, secretary of the village committee of Yaguan village (close to the project site),

stated that the project will benefit the village through the creation of employment chances for

10cal villagers. In addition, Mr Li expressed his expectation that the village may benefit from the

development of local tourism which could stimulate their economic development.

･ The displaced residents were asked about their views on how the project has affected their lives. They all stated that their current living standard is higher than before the project and they

expressed their satisfaction with the compensation agreement.

' During the meeting many questions were asked about the Clean Development Mechanism which

were answered by the project owner and the project's consultants.

The attendants of the stakeholder consultation meeting are listed in Armex 4 (names withheld).

Comments received through website:

No comments were received by e-mail through the stakeholder consultation website or by telephone.

G.3. Report on how due account was taken of anv. comments received:

Responses by the project owner in reaction to the findings of the Environmental Impact

Assessment (EIA):

The project owner has taken the findings and recommendations of the EIA into account in the planning

and implernentation of the Luertai project. The main responses are given below:

' Project Design The EIA recommended the integrated dam / powerhouse design without tunnel or open channel

(design 2) based on its limited environmental impact. The project owner has followed the

recommendation and has adopted design 2 as the final design.

' Disp]acement of residents The project will lead to the displacement of 137 people. In the original planning the displaced

population was to be relocated to the Qidaogou area in Anxi County. Compensation was settled

according to regulations and amounted to about 30,000 RMB/person on average. The local

population expressed some dissatisfaction about the above arrangements. These concerns were

taken serious by the project owner and led to a revised resettlement plan which included an

increase of the compensation amount to about 39,000 RMB/person on average. In addition, Iocal

residents were free to choose their new area of residence. The revised resettlement plan received

general approval by the residents. The agreement has been documented in the [Compensation

agreement and related issues concerning the relocation of displaced residents of Luertai

CDM-SSC-PDD (version 02) ;


hydropower station reservoir (Lisitan village) in Lintan County],

The displaced residents have all been relocated to other towns and cities within Gannan

Autonomous Tibetan Prefecture,

･ Waste water and domestic sewage Two filtration wells will be constructed to deal with waste water and domestic sewage, The

waste water will not be discharged into the river,

･ Road flooding After consultation with the transportation bureau of Zhuoni County additional measures were

agreed between the project owner and the bureau, which will prevent flooding of the road near

the project.

･ Environlnenta] restoration activities The environment at the project site will be restored as much as possible through the planting of

trees and bushes. Regulations will be strictly followed.

Responses to the colnments received during the stakeholder consultation:

No negative comments were received.

<.~~::") CDM-SSC-PDD (version 02) I ¥ rl'l'l:

./a

CDM - Executive Board page 36 Annex 1

CONTACT INFORMATION ON PARTICIPANTS IN THE _P_R__OJ_E_~_T__A_C_T~_V_1_T_Y_

The Pro ' ect Owner:


CDM - Executive Board

The Purchasin Part :

page 37

liAh~tC ~

~~'i:~J:' CDM-SSC-PDD (version 02) I ¥M:(:1: ~

/


Annex 2

The project receives several grants from the respective national, provincial and prefectural government.

The grants are in no way connected to public funding from an Annex I country and may be ignored in

determining the baseline scenario in accordance with the executive board decision of EB16 (see also

section B.3 .

~___",:,~;:~ CDM-SSC-PDD (version 02)

I ¥ I,'1'1'(1 J

/


Annex 3

STATEMENT BY THE INDUSTRIAL AND COMMERCIAL BANK OF CHINA REGARDlNG THEIR LENDlNG POLICY TOWARDS SMALL HYDROPOWER STATIONS

Statement

The following statcment expresses the loan policies of the Industrial and Commercial

Bank of china. This statement is inLended to clarify the financial environment for the

development of srnall-scale hydro-electric power stations in China.

The Industrial and Commercial Bank ofchina (hereafter referred to as ICBC), herewith

confrms that:

The loal] policies of ICBC fully take into account the regulations, guidelines and advice

of the National Development and Reform Commission,

To 8ct in accQrdarce with these re8ulations, guidelines aTld advice, ICBC, revised her

leading policy tow8rds small hydn~electric power station projects as of July 26;004.

Thc ncw lending policy states that hydro~lectric power station projects with a design

capacity ofno less thaJ1 2S MW will be etigible for receiving loaus by ICBC

(stated in ICBC Document Tqo. [2004] 130: "About thc loan policy towards 10 industries~

such as the telecom sector in 2004").

Bound by this policy. ICBC aJ]d all hcr national, regional and local brauches will, unless

special circumstances apply, not issue any new loans or extensions of loans to any hy~ro-

electric power station project under 25 MW.

This statement is provided as testimony of the loan policies of ICBC and shall be used for

CDM deve]opment purposes only.

: ~~~~-Sigred Date: 24 March, 200S

Mr. ZHANO Jianqing (~{~~~~ ) Client M81lager

Industrial and Comme･cia] Bank ofChina, Commerce Dep8rtnent of Cansu Branch


CDM - Executive Board page 40 ',~7

Annex 4

LIST OF STAlCEHOLDERS WHO ATTENDED THE STAKEHOLDER CONSULTATION MEETlNG

Stakehol der Or anization Position I occu ･,rtion

A B C D E

F ~ ~ i Vill~gj~~ie;; C~mmilt~e ofYa~l_!an~Villa_ge; G

H j Disp_laced resident I L Displaced resident J _ ___ _ __ j Dis:placed resident

K Displaced resident L Displaccd re,sident M Displaced rcs'idcnt N Displaced resident O Displaccd res ident P : Displ~ce.d fesident Q f Displ_aced resident

R j Dis laced resident

Lintan County Government

Development & Reform Commission of Lintan County

Land Resource Bureau of Lintan County

Government of Shubu Town Administration Office of Resident Displacement Affairs of

Lintan County

Wa_ter_Re~o_Yr~~ anc_Hy_dr9povy~T_ Bur~au of ~i_nt~P _Cou_p_ty

Vice-governor

Vice general director

General director

Vice head of town

Vice general director

Vice ~;~neral director

Committee secretary

Taxi driver

Taxi driver

- ~1--Taxi driver

Taxi driver

Entre pleneur (c9nstru9tion)

Disabled due to illness

Worker / farmer

Worker / rarmer

Worker / farmer

Worker / farmer

Worker / farmer

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