CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006 CONTENTS.

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1 CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006 CONTENTS A. General description of the small scale project activit B. Application of a baseline and monitoring methodolog C. Duration of the project activit / crediting period D. Environmental impacts E. Stakeholders comments Annexes Annex 1: Contact information on participants in the proposed small scale project activit Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring Information 1

2 Revision histor of this document Version Date Description and reason of revision Number Januar 2003 Initial adoption 02 8 Jul 2005 The Board agreed to revise the CDM SSC PDD to reflect guidance and clarifications provided b the Board since version 01 of this document. As a consequence, the guidelines for completing CDM SSC PDD have been revised accordingl to version 2. The latest version can be found at < December The Board agreed to revise the CDM project design 2006 document for small-scale activities (CDM-SSC-PDD), taking into account CDM-PDD and CDM-NM. 2

3 SECTION A. General description of small-scale project activit A.1 Title of the small-scale project activit: >> Title: Ensenada Hdroelectric Project. Version: 01. Date: 16/12/2011 A.2. Description of the small-scale project activit: The purpose of the Ensenada Hdroelectric Project is to generate electricit from a renewable source b building a power plant that will satisf part of the national electrical demand. The project is developed b Hidroeléctrica Ensenada S.A. and it is located in Ensenada, Puerto Varas Municipalit, in the south of Chile. The project consists in the installation of three Pelton turbines in the Blanco River using the natural flow of water and its subsequent transformation from hdraulic energ to electricit. The water will be taken from the upper limits of the Blanco River b a steel pipe which will conduct the captured water from the water intake located 394 meters above the sea level to the water restitution point which is 176 meters above the sea level, in the same river, covering an average distance of 4,150 meters downstream 1. Figure 1 shows where powerhouse and water intake will be placed. Powerhouse Water Intake Figure 1 Sattelite picture of the project. 2 1 Hidroeléctrica Ensenada Report for the water intake construction, page Environmental Impact Statement hdroelectric project Ensenada-Río Blanco, page 25. 3

4 The Ensenada power plant to be placed in Blanco River is located at the northeastern Calbuco mountainside, therefore having an acceptable elevation gradient available for a generation capacit of 6.8 MW. Blanco River has it source at the top of Calbuco Volcano (as in Figure 1) and flows into the Hueñu-Hueñu River. Blanco River s basin is a high rainfall zone (reaching 5,000 mm of rain earl at the water intake area), therefore, besides the inevitable risks associated to the volcano, the place is perfect for the implementation of the project. It is expected that the Ensenada run-off river power plant will produce an average of 28,850 MWh/ear 3 approximatel of net electricit to be supplied to the Central Interconnected Sstem (SIC, from its Spanish acronm) in Puerto Montt Cit, through a transmission line of a 66 KV that also will be built as part of the project activit. The implementation of the project will displace the dispatch of fossil fuel based power plants currentl operating in the electricit sstem contributing to an average annual reduction of 18,794 tco 2e. Hidroeléctrica Ensenada S.A, b developing this project activit will contribute to sustainable development in Chile b satisfing part of the countr growing electricit demand using a clean electricit generation technolog with no emissions involved and b reducing dependence of imported fossil fuels. A.3. >> Project participants: Name of Part involved (*) ((host) indicate a host Part) Private and/or public entit(ies) project participants (*) (as applicable) Kindl indicate if the Part involved wishes to be considered as project participant (Yes/No) Chile Hidroeléctrica Ensenada S.A. No (*) In accordance with the CDM modalities and procedures, at the time of making the CDM-PDD public at the stage of validation, a Part involved ma or ma not have provided its approval. At the time of requesting registration, the approval b the Part(ies) involved is required Please look for contact information in Annex 1. A.4. Technical description of the small-scale project activit: A.4.1. Location of the small-scale project activit: >> A Host Part(ies): >> Chile. A Region/State/Province etc.: >> Los Lagos Region. A >> Puerto Varas Municipalit. Cit/Town/Communit etc: A Details of phsical location, including information allowing the unique identification of this small-scale project activit : 3 Civil Works description and production stud, Enertrón Ltda., page 50. 4

5 >> The project activit is located in Los Lagos Region from Chile, Puerto Varas Municipalit in the La Ensenada precinct. The coordinates of the project are: 41º S 72º W. Following figures show the phsical location of the project. Figure 2 Geographical location of Ensenada Hdroelectric Project. Source: Picture from Google Earth 5

6 Project section Figure 3 Panoramic view of the project activit area. A.4.2. Tpe and categor(ies) and technolog/measure of the small-scale project activit: >> According to the categorization of Appendix B to the simplified modalities and procedures for smallscale CDM projects activities published b UNFCCC, the project activit is Tpe I-D. Tpe I: Renewable Energ Projects Categor D: Electricit Generation for a Sstem. This categor is applicable since the installed capacit of the project is less than 15 MW and the renewable electricit produced will be connected to a grid (SIC). As described in section A.2, the project consists in the construction of a hdroelectric power plant that captures and restores water in the same Blanco River. The building works for the installation of 6.8 MW of capacit generation involves the following main components: High mountain water intake Head Canal Gravel Chamber and Foreba Penstock Powerhouse (three Pelton turbines of horizontal axis) 66 kv Transmission Line (50 km distance). The hdroelectric power plant utilizes three Pelton turbines with a rated capacit of 2,315.8 kw each and three generator units of 2,200 kw each. The total installed capacit of the project activit is 6.8 MW, with an estimated annual average generation of 28,850 MWh 4 with a plant load factor is Technolog emploed is perfectl safe for the environment since no emissions of GHG s are involved and the amount of turbined water is totall restored without affecting its qualit into the same river natural flow at an average distance of 3.5 Km downstream from the intake. The design of Ensenada hdroelectric power 4 Civil Works description and production stud, Enertrón Ltda., page 50. 6

7 plant considers securit standards recommended b hdroelectric projects specialized institutions 5 therefore energ generated b this project activit is produced from environmentall safe and sound technolog of hdro electricit generation equipment provided b Reflex Asia (HK) Limited, a sourcing and engineering services compan, who is in charge of providing all 3 turbines and generators, ancillar equipment, and related services like training for the equipment operation to the compan (project developer) staff. Reflex Asia (HK) Limited is then, using its know-how and transferring technolog to the Host Part and the project participant through the implementation of this project activit. The following tables show general specifications 6 equipments. of the project activit electricit generation Table 1 Turbine technical specifications. Specifications Value Model CJ325-W-112/2x12 Design Flow 4.0 m 3 /s Generation units 3 Turbine tpe Pelton Axis configuration Horizontal Capacit MW Net head 195 m Table 2 Generator technical specifications. Specifications Value Tpe Snchronous Units 3 Axis configuration Horizontal Nominal capacit 2,200 kw/2,750 kva Nominal voltage KV Speed r.p.m Runnawa speed 880 r.p.m Power factor (Cosφ) 0.8 (lag) >> A.4.3 Estimated amount of emission reductions over the chosen crediting period: 5 Hidroeléctrica Ensenada Report for the water intake construction, pages 13 and Equipment contract between the project developer and Reflex Asia (HK) Limited. Civil Works description and production stud, Enertrón Ltda., page 50. 7

8 Table 3 Emission reductions over the chosen crediting period. Years Annual estimation of emission reductions in tonnes of CO 2 e , , , , , , ,794 Total estimated reductions (tonnes of CO 2 e) 131,558 Total number of crediting ears 7 Annual average over the crediting period of estimated reductions (tonnes of CO 2 e) 18,794 A.4.4. Public funding of the small-scale project activit: >> No public funding from an Annex I countr is involved in this project, meaning no Official Development Assistance ( ODA ) funding is involved in this project. A.4.5. Confirmation that the small-scale project activit is not a debundled component of a large scale project activit: According to appendix C to the simplified modalities and procedures for the small-scale CDM project activities, Ensenada Hdroelectric project is not a debundled component of a large project activit because there is not a registered small-scale CDM project activit or an application to register another small-scale CDM project activit: With the same project participants; In the same project categor and technolog/measure; and Registered within the previous 2 ears; and Whose project boundar is within 1 km of the project boundar of the proposed small-scale activit at the closest point. SECTION B. Application of a baseline and monitoring methodolog. B.1. Title and reference of the approved baseline and monitoring methodolog applied to the small-scale project activit: >>Version 17 of AMS-I.D. Grid connected renewable electricit Generation. This methodolog also refers to: The Tool to calculate the emission factor of an electricit sstem version 2.2.1, in effect as of EB

9 The Tool to calculate project or leakage CO 2 emissions from fossil fuel combustion, version 2 in effect as of EB B.2 Justification of the choice of the project categor: >> Ensenada Hdroelectric Project qualifies as a small scale project because its operation is based on three Pelton turbines with a rated power of MW each. With this installed capacit the project activit will never exceed small scale limits of 15 MW. The project activit falls into categor I.D and it is applicable to AMS-I.D methodolog because it satisfies the applicabilit criteria conditions specified in AMS-I.D: Project activit involves a hdroelectric power plant that supplies electricit to a national grid (SIC). Project activit is the installation of a new power plant in a site where there was no renewable energ power plant operating prior to the implementation of the project activit. B.3. Description of the project boundar: >> According to methodolog AMS-I.D, the spatial extent of the project boundar includes the project power plant and all power plants connected phsicall to the electricit sstem that the CDM project power plant is. The electricit sstem of the project activit is the Central Interconnected Sstem of Chile (SIC, b its Spanish acronm). Table 4 Emissions sources included in or excluded from the project boundar. Source Gas Included? Justification / Explanation Baseline CO 2 emissions from electricit generation in fossil fuel fired power plants that are displaced due to the project activit. CO 2 Yes Main emission source. CH 4 No Minor emission source. N 2 O No Minor emission source. Project activit The project will suppl zero-emissions renewable energ to the grid. CO 2 CH 4 N 2 O No No No Not considered as an emission source. Not considered as an emission source. Not considered as an emission source. The GHG emissions within the project activit boundaries are associated to the baseline, produced from electricit generation in fossil fuel-fired power plants connected to the SIC electric grid. The project activit will suppl zero-emissions electricit to the grid, thus avoiding GHG emission b displacing the dispatch of thermoelectric power plants. B.4. Description of baseline and its development: 9

10 >> The baseline scenario is that the electricit delivered to the grid b the project activit would have otherwise been generated b the operation of grid-connected power plants and b the addition of new generation sources into the grid. The baseline of the project activit is all GHG emissions that would occur in the Central Electricit Sstem (SIC) of Chile in the absence of the CDM project. Figure 4 shows the extension of this grid in the countr. According to AMS-I.D the baseline emissions are the product of electrical energ baseline produced b the renewable generating unit multiplied b the grid emission factor. Data used to determine baseline emissions are described in the following table: Table 5 Baseline Emissions Data. Data Unit Value Data Source Operating Margin CO 2 Emission Factor of the Grid Build Margin CO 2 Emission Factor of the Grid Combined Margin CO 2 Emission Factor of the Grid Quantit of net electricit supplied to the grid as a result of the implementation of the CDM project activit t CO 2 e/mwh t CO 2 e/mwh t CO 2 e/mwh MWh/ear 28,850 Calculated with CDEC-SIC available data (refer to section B.6.3) Calculated with CDEC-SIC available data (refer to section B.6.3) Calculated with CDEC-SIC available data (refer to section B.6.3) Project specifications in production stud. 7 Baseline emissions tco 2 e/ear 18,794 Calculated Operating (OM), Build (BM) and Combined Margin (CM) CO 2 emission factor of the grid were calculated according to Tool to calculate the emission factor for an electricit sstem (version ). The operating margin was calculated using the Simple Adjusted Operating Margin Method, since more than 50% of the electricit generated in the grid is low cost must run. The BM and OM were calculated ex-ante and BM comprises the 20% of the sstem generation (in MWh) that have been built most recentl (ear 2010). 7 Civil Works description and production stud, Enertrón Ltda., page

11 Figure 4 SIC Coverage Map Source: Centre for the Economic Load Dispatch of the SIC (CDEC-SIC) B.5. Description of how the anthropogenic emissions of GHG b sources are reduced below those that would have occurred in the absence of the registered small-scale CDM project activit: Prior consideration According to the Guidance on the demonstration and assessment of prior consideration of the CDM the CDM prior consideration is a major element in assessing that CDM benefits were considered necessar in the decision to undertake the project as CDM project activit. The project developer sent the Prior Consideration of the CDM form fulfilled with the required project activit information on 16/02/2010 to the UNFCCC and to the DNA in Chile (Ministr of Environment). The intention of obtaining the CDM status for the project also is stated in Declaration of Environmental Impact which is part of the Environmental Impact Assessment National Sstem sent b Hdroeléctrica 11

12 Ensenada S.A (project developer) to the Environmental Ministr 8. In that document, appling for registering the project as a CDM project activit is presented as one of the main objectives of the implementation of the Hdroelectric power plant. The following timeline shows the main events of the project implementation and CDM issues. 12/03/ /09/ /02/ /02/ /04/2011 Year 2012 Building Works Contract signed Prior consideration CDM form Project approval b environmental authorit Turbines Purchase Contract CDM Stakeholders Meeting Hdroelectricit generation connected to the Grid Aditionalit Demonstration of project additionalit is based on the options listed in Attachment A to Appendix B of the Simplified Modalities and Procedures for Small-Scale CDM Project Activities which indicates that Project participants shall provide an explanation to show that the project activit would not have occurred anwa due to at least one of the following barriers: (a) Investment barrier (b) Technological barrier (c) Barrier due to prevailing practice (d) Other barriers Ensenada Hdroelectric project reduces anthropogenic GHG emissions b suppling zero GHG emission power, which will displace fossil fuel-fired electricit generation. Operation of the small scale run off river plant, which uses a non-ghg emitting technolog, will displace the equivalent amount of electricit that would have been generated with fossil fuel in the grid (SIC). The Project developer needs to overcome an investment barrier: 8 Environmental Impact Statement hdroelectric project Ensenada-Río Blanco, page

13 A. Investment barrier A financiall more viable alternative to the project activit would have led to higher emissions. The investment barrier is demonstrated through an investment analsis. According to the Guidelines on the assessment of investment analsis, the purpose of the investment analsis in the context of the CDM is to determine whether the project is less financiall attractive than at least one alternative in which the project participants could have invested. In cases where the alternative requires investment anhow and baseline emissions are based on that alternative, the onl means of determining that the project activit is less financiall attractive than at least one alternative is to conduct an investment comparison analsis. The benchmark approach is therefore suited to circumstances where the baseline does not require investment or is outside the direct control of the project developer, i.e. cases where the choice of the developer is to invest or not to invest. The project considers suppling electricit for an existing grid, and no investment is required for the baseline and the application of a benchmark analsis based on the project IRR is full justified and recommended for the Ensenada project. The benchmark for the IRR comparison was obtained from the guidelines for assessment of the investment analsis, as per the default value provided for the approximate expected return on equit for electricit generation industr sector in Chile. Then according to the appendix of the referenced guidelines, the benchmark to be applied is 10.3%, which is in real terms and considers taxes expenses. Since this value is expressed in percentages in real terms, and the IRR calculation of the project activit was carried out in real terms as well. The project evaluation considers the pure project, without financing or CER s incomes. The IRR of the project activit was calculated with an economical assessment. The investment involves a total investment of USD 18,204,416 with a 33% considered for the project execution in ear 2009 and with the 67% for the ear The average energ production considered in the economical evaluation of the project activit is 28,850 MWh with a power plant capacit of 6.8 MW and a firm power of 2,000 kw/month. For calculating energ selling incomes, it was considered a firm power price of 8,426 USD/MW/month and an electricit price and an electricit price of USD/MWh, which is the price stated for the ear 2011 in the National Energ Commission node prices report published in April Both prices were published b the National Energ Comission. For calculating operation costs, a value of 0.01USD/kWh was considered whichis a tpical value for small scale hdro power plants. The following table shows the project activit cash flows (in USD). For further details see the Economical Analsis spreadsheet of the project: 13

14 Table 6 Economical evaluation of Ensenada Hdroelectric project. Year Investment -6,007,457-12,196,959 Energ Incomes 2,063,933 2,063,933 2,063,933 2,063,933 Firm Power Incomes 202, , , ,234 Operating Costs -288, , , ,500 EBITDA -6,007,457-12,196,959 1,977,667 1,977,667 1,977,667 1,977,667 Depreciation expenses -1,820,442-1,820, Taxes over earnings 26,728 26, , ,203 Cash flow -6,007,457-12,196,959 1,950,938 1,950,938 1,641,463 1,641,463 According to the Chilean Tax Law a 17% tax was applied. Tax expenses were applied over the depreciated benefits, b appling a depreciation rate of 10% of the total investment amount which is fixed for this kind of projects b the internal taxes service. 9 Finall, the result of the financial parameter IRR is: Table 7: Project IRR. Project IRR Benchmark Financial Parameter 7.64% 10.3% As it can be seen in Table 7 above, the project IRR does not reach the benchmark. Sensitivit analsis According to the Guidance on the Assessment of Investment Analsis, the objective of the sensitivit analsis is to determine in which scenarios the project activit would pass the benchmark. According to the economic evaluation the following parameters are included in the sensitivit analsis: a) Investment Costs b) Electricit generation c) Operating Costs The project IRR is analzed for a fluctuation of ± 10% of each of these two parameters independentl, the results are shown in the following table: 9 As per "Electric companies (Empresas Electricas)" for "Generation equipments" 14

15 Table 8: Sensibilit analsis results without sale of CERs. Sensibilit scenario Variation IRR Investment Costs % 8.92% Electricit generation % 8.84% Operation Costs % 7.81% The results presented above show that the project IRR does not exceed the benchmark minimum confirming the fact that the project activit doesn t reach the benchmark which is 10.3%. Therefore the project activit is additional. B.6. Emission reductions >> B.6.1. Explanation of methodological choices: >> According to the AMS-I.D methodolog applicable to the project activit, the baseline scenario is the electricit delivered to the grid b the project activit that would have otherwise been generated b the operation of grid-connected power plants and b the addition of new generation sources, as reflected in the combined margin (CM) calculations described in the Tool to calculate the emission factor for an electricit sstem v The emission reductions are calculated as the difference between the emission of the baseline scenario and the emissions due to the project activit and the associated leakage. Baseline emissions Baseline emissions include onl CO 2 emissions from electricit generation in fossil fuel fired power plants that are displaced due to the project activit. The methodolog assumes that all project electricit generation above baseline levels would have been generated b existing grid-connected power plants and the addition of new grid-connected power plants. The baseline emissions are to be calculated as follows: Equation 1: Baseline emissions Where: BE : EG BLJ, : EF CO2, grid, : BE = EG BL, EF CO2,grid, Baseline emissions in ear (tco2/r) Quantit of net electricit generation that is produced and fed into the grid as a result of the implementation of the CDM project activit in ear (MWh/r) CO 2 emission factor of the grid in ear ((tco 2 /MWh) Calculation of EF grid CM,, The emission factor is calculated in a transparent and conservative manner as a Combined Margin (CM). CM consists in the combination of operating margin and build margin in accordance with the Tool to calculate the emission factor of an electricit sstem, 2.2.1, which includes six steps to be applied: 15

16 Step 1. Identif the relevant electricit sstems. Step 2. Choose whether to include off-grid power plants in the project electricit sstem (optional) Step 3. Select a method to determine the operating margin (OM). Step 4. Calculate the operating margin emission factor according to the selected method. Step 5. Calculate the build margin (BM) emission factor. Step 6. Calculate the combined margin (CM) emissions factor. The steps and formulae used to estimate baseline emissions and project emissions of the proposed project activit are described below: Step 1. Identif the relevant electric sstems There are four connected electricit sstems in Chile; SING, SIC, Asen and Magallanes sstems which cover different geographical locations along the countr. All of them operate independentl and do not transfer electricit to each other, so neither imports nor exports are observed in an of the mentioned sstems. Due to the location of the project activit, it is connected to the SIC electricit sstem so it has been identified as the project electricit sstem and all the necessar information of the power plants within the SIC, will be considered to calculate the build margin and the operating margin emission factor. Step 2. Choose whether to include off-grid power plants in the project electricit sstem To calculate the operating margin and build margin emission factors, the chosen method is Option I: Onl grid power plants are included in the calculation. Step 3. Select a method to determine the operating margin (OM). The selected OM emission factor method from the Tool to calculate the emission factor of an electricit sstem is Option (b) Simple Adjusted OM. In this method power plants/units are separated in lowcost/must-run power sources and other power sources. The data vintage chosen for the calculation of the OM emission factor is the ex-ante option, where calculations are based on a 3-ear generation-weighted average and the most recent data (2010, 2009 and 2008) available at the time of submission of the PDD to the DOE for validation, without requirement to monitor and recalculate the emission factor during the crediting period. Step 4. Calculate the operating margin emission factor according to the selected method. The calculation of the Simple Adjusted OM emission factor is calculated as a generation-weighted average CO 2 emission per unit net electricit generation (tco 2 /MWh) of all generating power plants serving the sstem, where the power plants/units are separated in low-cost/must-run power sources (k) and other power sources (m). As described in Option A of the Simple OM method, it is calculated based on the net electricit generation of each power unit and an emission factor for each power unit, as follows: Equation 2: Operating Margin emission factor 16

17 Where: EF grid,om-adj,, : λ : EF grid EGm, EFEL, m, EGk, EF i, m i, k, OM adj, = ( 1 λ ) + λ EG EG m m, k k, EL, k, Simple adjusted operating margin CO 2 emission factor in ear (tco 2 /MWh) Factor expressing the percentage of time when low-cost/must-run power units are on the margin in ear EG m, : Net quantit of electricit generated and delivered to the grid b power plant / unit m in ear (MWh) EG k, : Net quantit of electricit generated and delivered to the grid b power plant / unit k in ear (MWh) EF EL,m, : CO 2 emission factor of power unit m in ear (tco 2 /MWh) EF EL,k, : CO 2 emission factor of power unit k in ear (tco 2 /MWh) m: All grid power units serving the grid in ear, except low-cost/must-run power units k: All low-cost/must-run grid power units serving the grid in ear : The three most recent ears for which data is available at the time of submission of the CDM PDD to the DOE for validation (ex-ante option). The CO 2 emission factor of each power unit is determined using options A1, A2 or A3, as indicated in the Tool to calculate the emission factor of an electricit sstem using the most recent historical ear (2010, 2009 and 2008) for which power generation data is available. Option A1. If for a power unit m data on fuel consumption and electricit generation is available, the emission factor should be determined as follows: Where: Equation 3: CO 2 emission factor based on fuel consumption EF EL, m, = i FC i, m, NCV EG i, m, EF CO2, i, EF EL,m, : CO 2 emission factor of power unit m in ear (tco 2 /GWh) FC i,m, : Amount of fossil fuel tpe i consumed b power unit m in ear (mass or volume unit) NCV i, : Net calorific value (energ content) of fossil fuel tpe i in ear (GJ / mass or volume unit) EF CO2,i, : CO emission factor of fossil fuel tpe i in ear (tco 2 2/GJ) EG m, : Net quantit of electricit generated and delivered to the grid b power unit m in ear (MWh) m: All grid power units serving the grid in ear, except low-cost/must-run power units i: All fossil fuel tpes combusted in power unit m in ear : The three most recent ears for which data is available at the time of submission of the CDM-PDD to the DOE for validation (ex-ante option). 17

18 When using option A1, data on fuel consumption of a particular power plant/unit (FC i,m, ) can be obtained from two different sources that present the information in different was: 1) Total amount of fuel in mass units (kg or m3), from CDEC-SIC; or 2) Specific Fuel Consumption in mass units over energ units (kg/mwh or m3/mwh), from CNE. In this case fuel consumption is calculated multipling the presented value and the total electricit generated b the power plant/unit. When for a power plant/unit data from both sources is available, the first one is preferred over the second one. Option A2. If for a power unit m onl data on electricit generation and the fuel tpes used is available, the emission factor should be determined based on the CO 2 emission factor of the fuel tpe used and the efficienc of the power unit, as follows: where: Equation 4: CO 2 emission factor based on efficienc EFCO2, m, i, 3.6 EF = EL, m, EF EL,m, : CO 2 emission factor of power unit m in ear (tco 2 /MWh) EF CO2,m,i, : Average CO 2 emission factor of fuel tpe i used in power unit m in ear (tco 2 /GJ) η m, : Average net energ conversion efficienc of power unit m in ear (ratio) m: All grid power units serving the grid in ear except low-cost/must-run power units i: All fossil fuel tpes combusted in power unit m in ear : The three most recent ears for which data is available at the time of submission of the CDM-PDD to the DOE for validation (ex-ante option). Option A3. If for a power unit m onl data on electricit generation is available, an emission factor of 0 tco 2 /MWh can be assumed as a simple and conservative approach. Since information is available for all power plants/units, onl options A1 and A2 are used. η m, The parameter λ is defined as follows: Equation 5: λ determination Number of hours low cost / must run sources are on the margin in λ( %) = 8,760 hours per ear ear Lambda ( λ ) is calculated as per the following procedure: Step i) Plot a load duration curve. Collect chronological load data (tpicall in MW) for each hour of the ear, and sort the load data from the highest to the lowest MW level. Plot MW against 8,760 hours in the ear, in descending order. 18

19 Step ii) Collect power generation data from each power plant / unit. Calculate the total annual generation (in MWh) from low-cost/must-run power plants / units (i.e. EG k, ). k Step iii) Fill the load duration curve. Plot a horizontal line across the load duration curve such that the area under the curve (MW times hours) equals the total generation (in MWh) from low-cost/must-run power plants / units (i.e. EG k, ). k Step iv) Determine the Number of hours for which low-cost/must-run sources are on the margin in ear. First, locate the intersection of the horizontal line plotted in step (iii) and the load duration curve plotted in step (i). The number of hours (out of the total of 8,760 hours) to the right of the intersection is the number of hours for which low-cost/must-run sources are on the margin. If the lines do not intersect, then one ma conclude that low-cost/must-run sources do not appear on the margin and λ is equal to zero. Step 5. Calculate the build margin (BM) emission factor. The BM emission factor is determined in accordance to Option 1 of the Tool to calculate the emission factor of an electricit sstem, where for the first crediting period the build margin emission factor is calculated ex-ante based on the most recent information available (2010) on units alread built for sample group m at the time of CDM-PDD submission to the DOE for validation. For the second crediting period, the BM emission factor should be updated based on the most recent information available on units alread built at the time of submission of the request for renewal of the crediting period to the DOE. For the third crediting period, the BM emission factor calculated for the second crediting period should be used. This option does not require monitoring the emission factor during the crediting period. The sample group of power units m used to calculate the build margin is determined as per the following procedure provided in the Tool to calculate the emission factor for an electricit sstem v : (a) Identif the set of five power units, excluding units registered as CDM project activities, that started to suppl electricit to the grid most recentl (SET 5-units ) and determine their annual electricit generation (AEG SET5-units in MWh); (b) Determine the annual electricit generation of the project activit sstem, excluding power units registered as CDM project activities (AEG total, in MWh). Identif the set of power units, excluding power units registered as CDM project activities, that started to suppl electricit to the grid most recentl and that comprise 20% of AEG total (if 20% falls on part of the generation of a unit, the generation of that unit is full included in the calculation) (SET 20%) and determine their annual electricit generation, AEG SET 20% in MWh) (c) From SET AEG SET5-units and SET 20% select the set of power units that comprises the larger annual electricit generation (SET sample ); Identif the date when the power units in SET sample started to suppl electricit to the grid. If none of the power units in SET sample started to suppl electricit to the grid more than 10 ears ago, then use SET sample to calculate the build margin. Ignore steps (d), (e) and (f). The SET 20% was selected as the SET sample because it is the set of power units that comprises the larger annual generation (compared to SET 5-units ). 19

20 The SET 20% consist in the power units (excluding CDM project activities) that started to suppl electricit to the sstem most recentl and that comprises the 20 % of the annual total electricit generation in the sstem excluding electricit generated b CDM project activities. None of the power units in SET sample started to suppl electricit to the grid more than 10 ears ago therefore steps (d), (e) and (f) are ignored. The build margin emission factor is the generation-weighted average emission factor (tco 2 /MWh) of all power units m during the most recent ear (2010) for which power generation data is available, calculated as follows: Where: EF grid,bm, : EG m, : EF EL,m, : m : : Equation 6: Build Margin emission factor EF grid, BM, EGm, EF m = EG m m, EL, m, Build margin CO 2 emission factor in ear (tco 2 /MWh) Net quantit of electricit generated and delivered to the grid b power unit m in ear (MWh) CO 2 emission factor of power unit m in ear (tco 2 /MWh) Power units included in the build margin Most recent historical ear for which power generation data is available The CO 2 emission factor of each power unit m (EF EL,m, ) is determined using options A1 or A2 (represented b Equation 3 and Equation 4), using for the most recent historical ear (2010) for which power generation data is available, and using for m the power units included in the build margin. Step 6. Calculate the combined margin (CM) emissions factor. The calculation of the combined margin (CM) emission factor (EF grid,cm, ) is based on method (a) Weighted average CM as follows: Equation 7: Combined Margin emission factor EF w grid, CM, = EFgrid, OM, wom + EFgrid, BM, Where: EF grid,cm, : Combined margin CO 2 emission factor in ear (tco 2 /MWh) EF grid,bm, : Build margin CO 2 emission factor in ear (tco 2 /MWh) EF grid,om, : Operating margin CO 2 emission factor in ear (tco 2 /MWh) w OM : Weighting of operating margin emissions factor (%) w BM : Weighting of build margin emissions factor (%) The default values established in the Tool to calculate the emission factor for an electricit sstem for the weighting of the OM (w OM = 50%) and for the weighting of the BM (w BM = 50%), are used in the BM 20

21 calculation of the baseline emission factor, as stated in the Tool to calculate the emission factor of an electricit sstem. Project emissions For most renewable power generation project activities, there are no emission sources and GHG involved, except for geothermal, and some hdro power projects that consider reservoirs involved in the operation of the project. Since Ensenada Hdroelectric Project considers run-of-river hdroelectric power plants with no reservoirs associated to its operation, the project activit s GHG emissions are equal to zero. (PE = 0). Leakage There is no energ generating equipment being transferred from another activit, therefore leakage is not considered in this project activit. Emission reductions Emission reductions are calculated as follows: Where: ER : BE : PE : LE : Equation 8: Emission Reductions ER = BE PE Emission reductions for the ear (tco 2 /). Baseline emissions for the ear (tco 2 /). Project emissions for the ear (tco 2 /). Leakage emissions for the ear (tco 2 /). LE B.6.2. Data and parameters that are available at validation: Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actuall applied: An comment: EG m, MWh Net quantit of electricit generated and delivered to the grid b power unit m in ear. CDEC-SIC Please refer to values in Error! No se encuentra el origen de la referencia.- Error! No se encuentra el origen de la referencia.- Error! No se encuentra el origen de la referencia. of Annex 3. Data from CDEC-SIC represents the most recent and reliable information available. 21

22 Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actuall applied: An comment: FC i,m, For Diesel and Coal: kg/ear, for Natural Gas: m3/ear. Amount of fossil fuel tpe i consumed b power plant / unit m in ear CDEC-SIC Annual Report and CNE Definitive Technical Report (Half-Yearl). Please refer to values in Error! No se encuentra el origen de la referencia.- Error! No se encuentra el origen de la referencia.- Error! No se encuentra el origen de la referencia. of Annex 3. Data from CDEC-SIC and CNE represents the most recent and reliable information available. If information on annual fuel consumption for a specific power plant is not available from CDEC-SIC, specific fuel consumption data reported b CNE is used. Data / Parameter: NCV i, Data unit: For Diesel and Coal: [GJ/kg] and For Natural Gas: [GJ/m 3 ] Description: Net calorific value (energ content) of fossil fuel tpe i in ear Source of data used: CNE Annual Energ Balance Report 2009 and IPCC revised guidelines (2006). Value applied: Values in Error! No se encuentra el origen de la referencia.of Annex 3. Justification of the Data from CNE represent the most reliable information available for national choice of data or fuels, and IPCC represent the most reliable information available for default description of values and methodological requirements. measurement methods and procedures actuall applied : An comment: CNE Energ Balance Report includes Gross Calorific Values (GCV) for different tpes of fuel. These values were corrected to Net Calorific Values (NCV) based on IPCC assumption stating that for liquid and solid fuels NCV is 5% lower than GCV, and for gas fuels NCV is 10% lower than GCV. Data / Parameter: EF CO2,i, Data unit: tco 2 /GJ. Description: CO 2 emission factor of fossil fuel tpe i in ear. Source of data used: IPCC revised guidelines (2006). Value applied: Values in Error! No se encuentra el origen de la referencia.of Annex 3. Justification of the No other data is publicl available. For estimating emission factor for different choice of data or fossil fuel-based generation technologies, IPCC guidelines have been used in a description of conservative manner. measurement methods and procedures actuall applied : An comment: 22

23 Data / Parameter: Power plants Date of Build Data unit: Dimensionless Description: Date of build/operation start of each power plant Source of data used: CDEC-SIC Statistics earbook Value applied Values in Error! No se encuentra el origen de la referencia. of Annex 3. Justification of the Data from CDEC-SIC represents the most recent and reliable information choice of data or available. description of measurement methods and procedures actuall applied: An comment: η m Data / Parameter: Data unit: % Description: Efficienc of power plant m Source of data used: Defaults values from "Tool to calculate the emission factor for an electricit sstem" page 25 Value applied Please refer to values in Error! No se encuentra el origen de la referencia.- Error! No se encuentra el origen de la referencia.- Error! No se encuentra el origen de la referencia. of Annex 3. Justification of the This data is used to calculate the emission factor of a plant m (as per option A2 choice of data or of the tool to calculate the emission factor of an electricit sstem) if there is no description of fuel consumption data available from public national sources like CDEC-SIC measurement methods (fossil fuel consumption) and CNE (specific fossil fuel consumption). and procedures actuall applied: An comment: This parameter is onl used if no fuel consumption data is available. B.6.3 Ex-ante calculation of emission reductions: >> The CO 2 emission factor of the grid (EF CO2grid, =0.651 tco 2 /MWh) was calculated in a transparent and conservative manner as a combined margin consisting in a combination of operating margin (OM) and a build margin (BM) according procedures prescribed in the Tool to calculate the Emission Factor for an electricit sstem as follows: Operating Margin Emission Factor A transparent ex-ante calculation of the OM emission factor is presented below, appling all relevant equations presented in section B.6.1 above, provided in the Tool to calculate the emission factor for an electricit sstem and using the data presented in Annex 3. The values used for estimating the emission factor for each power unit included in the OM (except those considered as low-cost/must-run power sources since the represent an emission factor of 0 tco2/mwh) are exposed in the tables presented in Annex 3 and depending on annual fuel consumption or specific fuel 23

24 consumption data availabilit options A1 and A2 are applied, using Equation 3 and Equation 4, respectivel. The OM emission factor is calculated using Equation 2. An example of the calculation considering Option A1 is provided using 2008 data for Ancud Diesel based power unit: 1,350,000( kg) ( GJ kg) ( tco2 GJ) EFEL, m, = = ( tco2 MWh) 6, MWh ( ) An example of the calculation considering Option A2 is provided using 2010 data for Curanilahue which is a Natural Gas based power unit: An example of the load duration curve is shown below for the ear The resulting hours of lowcost/must run power sources operating not on the margin is 8759 hours, thus the value of lambda is: λ 1 8,760 (%) = =

25 Figure 5: Example Load Duration Curve for ear Source: Calculated based on CDEC-SIC hourl basis electricit generation data. Values of Lambda for each ear are shown in the following table: Table 9: Lambda Values. Year Lambda λ Finall, as an example of the OM emission factor estimation, the calculations for ear 2009 is presented below in accordance to the data provided in Annex 3: According to the data vintage chosen in Step 3 (ex-ante option), the Operating Margin emission factor is calculated as a 3-ear generation-weighted average of the values for ears 2008, 2009 and Table 10: Operational Margin Emission Factors. Operational Margin Emission Factor Energ Generated Year EF grid,om-adj, EG m, [tco2/mwh] [MWh] ,819, ,738, ,193,039 25

26 Table 11: Operating Margin Emission Factor. Operating Margin Emission Factor EF grid,om [tco2/mwh] Build Margin Emission Factor A transparent ex-ante calculation of the BM emission factor is presented below, appling all relevant equations presented in section B.6.1 above, provided in the Tool to calculate the emission factor for an electricit sstem and using the data presented in Annex 3. The values used for estimating the emission factor for each power unit included in the BM are exposed in the tables presented in Annex 3 and depending on annual fuel consumption or specific fuel consumption data availabilit options A1 and A2 were applied, using Equation 3 and Equation 4, respectivel. The BM emission factor is calculated for ear 2010 using Equation 6. An example of the calculation considering Option A1 is provided for El Peñón diesel based power unit: EF ( kg) ( GJ kg) ( tco2 GJ) 57,734( MWh) 12,250,000, = = EL m, 2 ( tco MWh) An example of the calculation with Option A2 is provided using data for Colmito diesel based power unit: ( tco2 GJ) 3.6 EFEL, m, = = ( tco2 MWh) Using the values presented in Annex 3 the following value for the BM emission factor is calculated: Table 12: Build Margin Emission Factor. Build Margin Emission Factor EF grid,bm [tco2/mwh] The detailed list of power units selected in the Build Margin and their data is presented in 26

27 Table 18 of Annex 3. Combined Margin Emission Factor Using the EF grid,om value, the EF grid,bm value and the weighting values of the OM (w OM = 50%) and the BM (w BM = 50%), the CM estimation is calculated as follows: Project Activit Emissions For this hdroelectric project, PE = 0. Table 13: Combined Margin Emission Factor. Combined Margin Emission Factor EF grid,2009 [tco2/mwh] Leakage There is no energ generating equipment being transferred from another activit, therefore leakage is not considered in this project activit (LE =0). Table 14 summarizes the results for OM emission factor of tco 2 e/mwh and BM emission factor of tco 2 e/mwh. These values are used to obtain an estimation of the CM emission factor of tco 2 /MWh and considering that Ensenada Hdroelectric project expects to displace 28,850 MWh of electricit per ear, the emission reductions come up to 18,794 tco2e per ear. Table 14: Emissions Reduction Estimation Data. Variable Unit Value Source OM Emissions Factor (EF grid,om-adj, ) tonnes CO2e/MWh Calculated BM Emissions Factor (EF grid,bm, ) tonnes CO2e/MWh Calculated CM Emissions Factor (EF grid,cm, ) tonnes CO2e/MWh Calculated Electricit Generated b the project MWh/ear 28,850 Project Participant Emissions Reduction (ER ) tonnes CO2e/ear 18,794 Calculated B.6.4 Summar of the ex-ante estimation of emission reductions: >> The following table summarizes the expected emissions reductions of the project activit over the first crediting period: Table 15: Summar of ex-ante Emission Reductions. 27

28 Year Estimation of project activit emissions (tonnes of CO2 e) Estimation of baseline emissions (tonnes of CO2 e) Estimation of leakage (tonnes of CO2 e) Estimation of overall emission reductions (tonnes of CO2 e) , , , , , , , , , , , , , ,794 Total(tonnes of 131, ,558 CO2 e) , ,794 B.7 Application of a monitoring methodolog and description of the monitoring plan: B.7.1 Data and parameters monitored: Data / Parameter: Data unit: Description: Source of data to be used: Value of data applied for the purpose of calculating expected emission reductions in section B.5 Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: An comment: EG MWh/ear Electricit supplied b project activit to the grid (SIC). On-site metering sstem. Meter located at the project site. 28,850 Continuous hourl measurement and at least monthl recording. Measurements are undertaken using energ meters certified and calibrated according national standards. Data will be kept for two ears after the end of the crediting period or the last issuance of CER s, whichever occurs later. Electricit meter should have a maximum error of 0.2% and be calibrated ever three ears according to local standards for electricit transactions in CDEC-SIC. Metering data will be sent regularl to CDEC-SIC, where a balance is made for energ transactions between power generators. B.7.2 Description of the monitoring plan: >> The monitoring plan to be applied is based on the parameters detailed in section B

29 1. Monitoring organization The project activit contemplates the proper staff to perform the monitoring of the parameters associated to the CDM project. Previous to the project start the Operation and Maintenance Managers will receive the adequate training to gather and record the corresponding data in order to comprehend and know about the adequate sites and sstems incorporated for data and record keeping, the correct steps to collect the data and to check it before its storage, the internal audits schedule, how to proceed in cases of equipment failure, etc. The proper procedures will be elaborated, previous to the starting date of the project. 2. Monitored parameter The measurement of the amount of electricit produced from the project activit will be performed with equipment provided b certified entities and calibrated according national standards at least ever 3 ears. The amount of electricit produced will be cross checked with invoice or redundant electricit meters. The recorded data will be kept for at least two ears after the end of the crediting period or the last issuance of CER s, whichever occurs later. B.8 Date of completion of the application of the baseline and monitoring methodolog and the name of the responsible person(s)/entit(ies) >> 30/07/2010 POCH AMBIENTAL S.A. María Luz Farah; Mariela Ramos. Renato Sánchez 3838, Santiago, Chile Telephone Number: (56 2) marialuz.farah@poch.cl; mariela.ramos@poch.cl The entit is not a project participant. SECTION C. Duration of the project activit / crediting period C.1 Duration of the project activit: C.1.1. Starting date of the project activit: >> The small-scale project started on 30/09/2009. This date correspond to the date on which contracts for civil works have been signed. C.1.2. Expected operational lifetime of the project activit: >> The expected operational lifetime of the project activit will be 40 ears and 0 months Annex Nº 1 of the equipment purchase contract: Technical specifications of the equipments, Scopes and Guarantees, page 6. 29

30 C.2 Choice of the crediting period and related information: The project activit will use a renewable 7 ears and 0 months crediting period. C.2.1. Renewable crediting period C Starting date of the first crediting period: >> The first carbon crediting period will begin on 1/07/2012 or the da after registration (if the project is in operation). C >> 7 ears and 0 months. Length of the first crediting period: C.2.2. Fixed crediting period: >>N/A >>N/A C C Starting date: Length: SECTION D. Environmental impacts >> D.1. If required b the host Part, documentation on the analsis of the environmental impacts of the project activit: >>The applicable Chilean law is the which stipulates in its article number 10, letter (c) that the generator centrals with capacit over 3 MW must be submitted to an environmental impact evaluation. According to the law Hidroeléctrica Ensenada presented a Declaration of Environmental Impact (DIA for its Spanish acronm) to the environmental authorit (CONAMA) on 26/11/2008. The project activit had a positive Resolution of Environmental Qualifications (RCA for its Spanish acronm) on 12/03/2009. D.2. If environmental impacts are considered significant b the project participants or the host Part, please provide conclusions and all references to support documentation of an environmental impact assessment undertaken in accordance with the procedures as required b the host Part: >>Environmental impacts of the project activit are not considered significant b the host Part therefore the national environmental authorit (CONAMA) approved the implementation b the submission of a favourable RCA. Environmental Impact Declaration (DIA), project commitments and Resolution of Environmental Qualifications (RCA) can be downloaded from the web page of the National Environmental Impact 11 General Environmental Law N Le Sobre bases generales del medio ambiente, 30

31 Assessment Sstem (SEIA for its Spanish acronm) at a SECTION E. Stakeholders comments >> E.1. Brief description how comments b local stakeholders have been invited and compiled: >>Hidroeléctrica Ensenada S.A has invited to the local stakeholders meeting trough a public announcement on posters in different spots like Ensenada town headquarters of the neighbourhood and also b sending and delivering letters to representatives from several institutions like Ministerial Regional Secretariat of Environment, National Forestr Commission, Ensenada Police, Ensenada Municipalit, between others. The meeting was held at an assembl hall of a neighbourhood of Ensenada, on 26 April 2011 at 6:30 p.m. The meeting was attended b 27 participants, including representatives from different institutions: Ministerial Regional Secretariat of Environment, Ensenada Police, Ensenada Fire Brigade, the principal of Epson School, and different stakeholders from neighborhoods and residents of the project area. On behalf of Hidroeléctrica Ensenada S.A. the meeting was attended b Ivonne Bell (legal representative of the compan), Juan de Andrés Alonso, and Carlos Pugin, Alex Ziller (partner of the compan). Before starting the meeting ever assistant signed a list. Figure 6. Assistance registration at the entrance of the meeting place Then, the meeting was developed and considered the following topics: Opening Compan introduction Technical characteristics of the project Environmental considerations of the project Climate change, Koto protocol, CDM project, emission reductions and contribution to the sustainable development 31

32 Questions session Some of the pictures from the stakeholders meeting are presented in the following figure. Figure 7 Pictures of the Stakeholders meeting 32