Preparing a CDM Project Design Document (PDD) Michael Gerbis, P.Eng. President The Delphi Group.

Preparing a CDM Project Design Document (PDD)

Michael Gerbis, P.Eng.

President

The Delphi Group

The Delphi Group

In Business since 1987 Complexity, Creativity, Change Business Units:

Health and the Environment Business and the Environment Clean Energy Markets and Technologies Climate Change

Strategic Analysis Policy assessment & development GHG Mng Services

Overview

PDD 101 What is a Project Design Document? Key Components

Baselines

Monitoring Plans

Lessons Learned

Sources of Information

What is a PDD?

A PDD: presents information on the essential

technical and organizational aspects of the project activity

is a key input into the project validation, registration, and verification processes required for CDM projects under Kyoto

Key Components of a PDD

A. General description of project activity

B. Application of a baseline methodology

C. Duration of the project activity / Crediting period

D. Application of a monitoring methodology and plan

E. Estimation of GHG emissions by sources

F. Environmental impacts

G. Stakeholders’ comments

Lessons Learned*

Project participants not identified clearly Insufficient description of the

technology Lack of logic and consistency in PDD Small-scale selected for a large-scale

project Compliance with local legal

requirements not covered sufficiently Insufficient information on the

stakeholder consultation process

* Source: CDM PDD Guidebook: Navigating the Pitfalls, DNV & UNEP

Baselines

Lesson LearnedIt is important to have a clearly defined baseline as early as possible; it is especially important to recognize how conditions may change a project's

estimated emission reduction volume and to integrate these scenarios with a realistic project

performance. - TransAlta

What is a Baseline?

A baseline is a hypothetical scenario that represents what would have happened in the absence of the project (i.e. business as usual).

A baseline methodology is used to estimate baseline GHG emissions that will be compared to project emissions to determine overall emission reductions

Application of a Baseline Methodology

CDM project proponents have two options: Use an existing approved methodology

Simpler approach Only if a relevant methodology exists

Develop a new methodology Additional effort required A new monitoring methodology and plan

(Section D) will also be required

Application of a Baseline Methodology

In either case, in the PDD: Identify the methodology to be used (either an

existing or new methodology) Justify why the methodology is relevant for the

specific project Describe how the methodology will be applied in

the project context Describe how project GHG emissions will be

reduced below baseline emissions Describe how the baseline boundary in the

methodology is applied to the project activity

What is a Baseline Study?

Is a systematic and methodological analysis to determine the most likely development scenario and its evolution in time in absence of the Kyoto Protocol mechanisms

Is the basis for the projection of emission reductions

Credibly demonstrates environmental additionality

Provides all arguments, facts and evidence in support of the determined project baseline, so that the baseline can be validated

Required for the Project Design Document

Examples of Baseline Variables

Accessibility & reliability of relevant data Location, type and size of project Existing and planned policies Available resources

Lesson Learned

Generally accepted data is vital, particularly when it comes to baselines. This will guard against future questioning of validity, and requests for a more objective baseline (i.e., one not established by the company looking to validate the project). Transparency is key. - Mikro-Tek

Complexities of Baselines

Baselines are complex & difficult to determine

Inherently speculative – it attempts to predict what will not happen

Forecasting uncertainty Business-cycle forecasting is extremely

difficult Baseline level of emissions tend to be

overstated

What is Additionality?

“Additionality” is the key eligibility criterion for CDM projects

Interpreted as “environmental additionality” Assessed against a baseline

Emission Reductions=

hypothetical baseline emissions – actual (CDM project) emissions

Project Boundary

Sets the physical area Identifies sources and sinks

Anthropogenic;

Includes all GHG that are significant and attributable On-site Off-site

The project boundary defines the area within which emissions reductions occur

Project Boundary

Off-site Transportation of fuel or Fugitive Gas Emissions - Pipelines

Takes into consideration “significant” and “reasonably attributable” including both:

Boiler Emissions or Flaring Emissions

On-site emissions reductions that

arise immediately from the project activity itself

Off-site emissions reductions occur

upstream or downstream of the project

Leakage

GHG reductions or increases that result from the project outside the project boundary

Identification and quantification of leakage remains one of the most challenging technical issues related to the development of GHG mitigation projects.

Can occur at a local and international levels Activity shifting Outsourcing Market shifts in supply and demand Inaccurate or incomplete baseline (although

should be seen as baseline fault not really leakage)

Set Crediting Period

Two Options An initial period of 7 years (may be

renewed a maximum of two times, for a total of 21 years) Renewals are contingent on re-validation

of the original baseline. Baseline may need to be updated with

newly available data

A maximum of 10 years with no option of renewal

Calculate Emissions Reductions

Determine project boundary

Project & Baseline Emissions

Estimate Net Emissions Reductions

Adjust Results for uncertainties and deduct any possible “leakage”

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

1 2 3 4 5 6 7 8 9 10

Project Year

Co

2 T

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Emission Reductions

Baseline emissions

Project emissions

Lessons LearnedHost country expertise, particularly in sequestration projects, is vital. These experts possess information with respect to best practices and the establishment of baselines that can save both time and considerable expense. – Mikro-Tek

Lessons Learned*

Insufficient explanation of baseline scenarios

Insufficient explanation of project additionality

Baseline information not sufficiently supported by evidence and/or not referenced sufficiently

Major risks to the baseline not identified/ described

The project boundaries not defined clearly

Project and/or crediting start date unclear


Monitoring Plans

Lessons LearnedContracting is one of, if not the most, essential steps in the CDM process. Specifically, it is of paramount importance that all contracts (e.g. between buyer and seller of CERs) are legally

binding and have an adequate process for arbitration - TransAlta

“Continuous or periodic data collection to check the accuracy of the baseline and

project emissions”

Required for Validation and Project Design Document (attachment)

Builds on Baseline Study

Revisions need to be validated

Monitoring Basics

Application of a Monitoring Methodology and Plan

Provides information on how to collect/ archive data needed to: Estimate/measure emissions within the

project boundary; Determine the baseline; and Identify increased emissions outside of

the project boundary (i.e. leakage) The Monitoring methodology describes

how to prepare a project-specific monitoring plan

Application of a Monitoring Methodology and Plan

As with baseline methodologies, project proponents have two options: Use an existing approved methodology

Simpler approach Only if a relevant methodology exists

Develop a new methodology Additional effort required Necessary if a new baseline methodology is

being used

Monitoring Plan

A description of the project activities Key parameters involved

Emission sources to be monitored Specific monitoring process

√ The data sources used to calculate baselines√ All sources of GHG’s√ Processes & procedures for data collection, measuring, reporting√ Technical equations√ Roles and responsibilities of participants √ Quality assurance and control procedures√ Record keeping systems√ ER model and calculation procedures

Simple Examples of Data Monitoring

Project Type Data to be monitored

Retrofit of existing fossil fuel power generation

Quantity of fuel being used Electricity being generated Test fuel samples to derive emissions

factor

Recovery of exhaust gas in oilfield

Metering quantity of methane captured and used as fuel

Sampling gas composition for CH4 levels

Tail Gas Quantity of fuel being loaded Number of manual loads (maintenance)

Flare Gas recovery Metering of flare gas composition Quantity being captured, flare & reused Amount of flare gas being exhausted to

atmosphere

Preparing a New Monitoring Methodology

A template is available from UNFCCC website Key areas:

Method description Monitoring of leakage Formulae used to estimate project emissions (as

per baseline methodology) Key assumptions (e.g. emission factors) QA & QC procedures Descriptions of past successful application of the

method

Lessons Learned*

Deviations from monitoring methodology not justified sufficiently

Monitoring and project management procedures not defined


Lessons Learned: World Bank’s Prototype Carbon Fund (PCF)

The WB has developed, applied and tested a number of baseline and monitoring methodologies for a broad range of different project types and locations. Some of their lessons are highlighted in their Annual Reports and on their website www.prototypecarbonfund.org.

Key References

UNFCCC CDM website: http://cdm.unfccc.int/Reference/Documents

Official PDD guideline document Templates for PDDs; new baseline methodologies; and

new monitoring methodologies.

CDM PDD Guidebook: Navigating the Pitfalls, DNV & UNEP http://cd4cdm.org/Publications/UNEP-DNV_PDD%20Pitfalls%20Guidebook.pdf

World Resource Institute GHG Protocol Guide http://www.ghgprotocol.org/templates/GHG5/layout.asp?MenuID=849

Small Scale CDM Projects

Small-Scale CDM (SSC) Overview

Simplified to reduce cost

14 small-scale CDM project activity classifications

Opportunities for bundling projects

A simplified project design document

Simplified methodologies for baseline determination and monitoring plans

Small-Scale CDM (SSC) Overview

Furthermore

Simplified provisions for environmental impact analysis

Lowered project registration fee

Shorter review period for registration of project activities

The same DOE can validate as well as verify and certify emissions reductions

SSC Eligible Project Types

Type (i) – renewable energy <= 15 MW output capacity (disregarding actual load factor)

Type (ii) – energy efficiency improvement (supply and/or demand side) <= 15 GWh per year

Type (iii) – other activities that reduce emissions and have direct CO2e emissions <= 15 kT

Eligible Small Scale Project Types

Type I: Renewable Energy ProjectsA. Electricity generation by userB. Mechanical Energy for the userC. Thermal energy for the userD. Renewable Electricity generation for a

grid


Type II: Energy Efficiency Improvement Projects

A. Supply side energy efficiency improvements – transmission and distribution

B. Supply side energy efficiency improvements – generation

C. Demand-side energy efficiency programs for specific technologies

D. Energy efficiency and fuel switching measures for industrial facilities

E. Energy efficiency and fuel switching measures for buildings


Type III: Other Project ActivitiesA. AgricultureB. Switching fossil fuelsC. Emission reductions by low-greenhouse

emission vehiclesD. Methane recovery and avoidance

Types I - IIIA. Other small-scale project

PDD for SSC Projects

Same general approach, project cycle and PDD sections as for regular CDM projects

A. General Description of Project Activity Essentially the same, except that

confirmation must be given that the SSC project is not simply a ‘debundled’ large-scale project


B. Application of a Baseline Methodology Streamlined additionality explanation Project boundary description linked to

project type guidance Detailed baseline info not required –

simply reference relevant approved methodology


C. Duration of the Project Activity / Crediting Period Identical

D. Application of a Monitoring Methodology and Plan Streamlined requirements For monitoring plan, complete relevant

table from approved methodology Information on formula used moved to

the next section of the document


E. Estimation of GHG emissions by sources Essentially the same, except formulae used

are to be described in this section for the SSC project document

F. Environmental Impacts Streamlined – only a short summary with

relevant attached documentation required, if applicable

G. Stakeholders Comments Identical

SSC Baseline and Monitoring Methodologies

A key area of difference between regular and small-scale project approaches

SSC methodologies are very simple, on the order of a few pages for both baseline and monitoring information combined

All approved methodologies contained in one document – “Appendix B”

Proposed new methodologies are simply submitted in writing to CDM executive board for consideration

SSC Baseline and Monitoring Methodologies – Key Sections

Technology/measure

Boundary

Baseline

Leakage

Monitoring

Example Cat. 1D: Renewable Electricity generation for a grid

E.G.: PVs, hydro, tidal/wave, wind, geothermal and biomass making electricity for a grid.

For small networks emission coefficients below is used.

For other systems an average of ”approximate operating margin” and ”build margin” is used, or a weighted average emissions of current generation mix if data not available.

Mini grid 24 h 4-6 h withKgCO2/kWh service service storageLoad factors 25% 50% 100%<15 kW 2.4 1.4 1.215-35 kW 1.9 1.3 1.135-135 kW 1.3 1 1135-200 kW 0.9 0.8 0.8>200 kW 0.8 0.8 0.8

Cat. 2C: Demand-side energy efficiency programs for specific technologies

This category comprises programmes that encourage the use of energy-efficient equipments, lamps, ballasts, refrigerators, motors, fans, air conditioners, appliances etc . At many sites

Baseline: number of devices times power of device times average annual operating hours/ grid loss times emission coefficient as in 1.D.

Monitoring: the number and power and operating hours of replaced devices. Annual check of a sample to show that they are still operating.

Further Questions?

Please contact:

Mike GerbisThe Delphi Group428 Gilmour StreetOttawa, OntarioCanada

Tel: 613-532-2005

Fax: 613-562-2008

E-mail: [email protected]

Web site: www.delphi.ca

Preparing a CDM Project Design Document (PDD) Michael Gerbis, P.Eng. President The Delphi Group.

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