This presentation is about Clean Development Mechanism and focus is on power sector. key aspects covered are CDM world statistics, Indian scenario, CER prices, CDM project management, etc.

1. CLEAN DEVELOPMENT MECHANISM

5. What is Clean Development Mechanism (CDM)?

6. Certified Emissions Reductions ( CERs ) A CER is given by the CDM Executive Board to projects in developing countries to certify they have reduced green house gas emissions by one tonne of carbon dioxide per year

7. One CER is equivalent to one tonne of carbon dioxide reduced

8. ONE CER = $ 10 (CONSERVATIVE ESTIMATE)

9. Six green house gases Source: IPCC Third assessment report,2001 Gas Global Warming potential Carbon dioxide (CO2) 1 Methane (CH4) 21 Nitrous Oxide (N2O) 310 Hydrofluorocarbons (HFCs) 140-11700 Perfluorocarbons (PFCs) 7000-9200 Sulphur hexafluoride (SF6) 23900

10. What makes a project eligible for CDM? A project is eligible for CDM benefits if the project will result in a net decrease in green house gas emissions – this is called additionality

11. CDM Projects Renewable Energy Hydro/Wind/Biomass/Solar/Biogas based Cogeneration Clean Energy Energy Efficiency Waste Heat Recovery and Utilization Natural Gas Green Building Energy Efficient Lighting/Cooling/Heating HFC/PFC Abatement Aforestation /Reforestation Methane/Landfill gas recovery & Utilization Others Types of CDM Projects

13. Baseline If a project gets 20,000 CER’s it means that it’s emissions are 20,000 tonnes of carbon dioxide less than a reference point called a baseline. A baseline for a CDM project gives the greenhouse gases emissions that would have occurred in the absence of the proposed CDM project activity

14. Baseline Methodology Step-1: Identify Baseline Scenario Step-2: Define Data sources and Assumptions Step-3: Estimating the Baseline Step-4: Evaluating Baseline Methodology Step-6: Monitoring of Baseline Methodology Step-5: Assessment of uncertainties

15. Step 1: Identifying Baseline Scenario D E F I N E R E F I N E SELECT BASELINE SCENARIO Survey of activities providing similar services as the Project Define Spatial Scope – local/regional/national Map technology/practices for Project Activity in Spatial Boundary Identify policies/regulations that influence choice of Technology/practices Identify programs for promoting resource conservation Technology/practices in the sector Drop/Add alternatives to Baseline Scenarios

16. Step 2: Defining Data sources and Assumptions Describe Parameters and Assumptions List the Data used and its Sources Define the Vintage of Data Determine the Spatial level of Data

18. Step 4: Evaluating Baseline Methodology Two parameters for Evaluation Relevance Robustness Applicability of Baseline Methodology Strength and Weakness Transparency Conservative- ness

20. 1 2 3 4 5 6 7 Preparation of Project Design Document (PDD) Approval of Host Country Validation of Project by DOEs Registration of Project by UNFCCC Monitoring of Project Activity Verification & Certification of CERs by DOEs Issuance of CERs by UNFCCC One Time Activity Annually For full Crediting period Buyers pay to Project owners Signing Contract With Buyers CDM Project Cycle

21. Feasibility Study Decision Making Project Planning Project Implementation Project Operation & Maintenance CDM CDM CDM CDM Realization of CDM Revenue Without CDM With CDM Include CDM revenue in project financials & IRR calculation If possible secure Bank loan only on virtue of CDM revenue Include discussion of CDM in all board meeting Include all risk & barrier in project DPR report Involve CDM consultant and develop PDD & PCN Submit PDD to validation agencies at least 4 month prior to signing first purchase order or EPC contract for the project Facilitate in CDM registration PDD: Project Design Document ,PCN: Project Concept Note, EPC: Engineering Procurement and Construction, DPR: Detailed Project Report Project Management

22. Impact of CDM Revenue on the Renewable Energy Project Cost Source: Prototype Carbon Fund, World Bank 2005 Technology IRR Energy efficiency (heating by solar panels) <1.0 Wind 0.9-1.3 Hydro 1.2-2.6 Bagasse 0.5-3.5 Biomass <5.2 Solid Waste Management (Methane Recovery) >5.0

24. Project Additionality Test

25. STEP 0: CLAIMING CREDITS FOR PROJECT WITH START DATE PRIOR to date of registration – if not applicable go to step 1 directly STEP 1 : IDENTIFICATION OF ALTERNATIVES to the project activity consistent with mandatory laws and regulations STEP 3 : BARRIER ANALYSIS Is there at least one barrier preventing the implementation of the proposed project activity without the CDM; and (2) Is at least one alternative Scenario, other than proposed CDM project activity not Prevented by any of the Identified barriers? STEP 2 : INVESTMENT ANALYSIS Does sensitivity analysis conclude that the proposed CDM project activity is unlikely to be the most financially attractive or is unlikely to be financially attractive? STEP 4 :COMMON PRACTICE ANALYSIS (1) No similar activities can be observed? (2) If similar activities are observed, are they essential distinctions between the proposed CDM project activity and similar activities that can reasonably be explained? Project is additional Project is Not Additional Claim CDM Benefits N N N Y Y Y

26. STEP 2: Investment Analysis Any financial returns from project Other than the CER benefits? Use simple cost analysis Demonstrate costs and prove no benefits accrue No Investment comparison Analysis Choose: IRR 1 , NPV, CB ratio Or unit cost of service ($/kWh) Benchmark Analysis Choose: IRR 2 , NPV, CB ratio Or unit cost of service ($/kWh) 1: Project or Equity IRR; 2: Project IRR. Choose Benchmark: GBR + Risk Premium, or Cost of Cap or Req. return Rate, or Company internal Benchmark Yes Indicator of at least One Alternative > CDM Project Indicator of CDM Project < Benchmark Sensitivity Analysis

29. Estimation of GHG emissions reduction Estimation of GHG emissions (1) ADD: Estimation of Leakage (2) TOTAL Estimation of GHG emissions (1+2= 3) LESS Baseline emissions (4) NET Emissions reduction (4-3)

32. CER Prices as on 15/07/2009 Europe

33. CER Prices as on 15/07/2009 U.S

34. CER Prices as on 15/07/2009 India Rs.

42. CDM WORLD

43. CDM Statistics Source: India holds 2 nd position with 442 registered projects

44. CDM Statistics (Contd…) Source: India expects 35,774,921 CERs from registered projects i.e. 80940 CERs per projects

45. CDM Statistics (Contd…) Source: 1256 registered projects

46. CDM Statistics (Contd…)