Guatemala: El Canada Hydroelectric Project

1
Guatemala El Canada Hydroelectric Project

• Meth Panel decision on its proposed baseline
  methodologies
• May 2003

2
Contents

• Recommendations by the Meth Panel on Baseline
  Methodology
• Evaluation of the Proposed New Baseline
  Methodology by the Meth Panel

3
Recommendations on Baseline Methodology

• C Methodology Not Approved
• May be resubmitted in accordance with the
  procedures for submission and consideration of
  proposed new methodologies of the Executive Board

4
Recommendations on Baseline Methodology

• Reasons for Non Approval
• The methodology shall explicitly demonstrate that
  the project activity is not the baseline
• Cost calculations do not follow a specified
  methodology and are not applied conservatively
• Ex post calculation of baseline emission rates is
  not justified

5
Recommendations on Baseline Methodology

• Reasons for Non Approval
• The elaboration of the baseline scenario must be
  specified by the baseline methodology and not
  left to the monitoring methodology
• Discrepancy between the load characteristics of
  of the proxy plant used to demonstrate
  additionality and the marginal dispatch plants
  used to determine ex post baseline emission
  factors

6
Details of the Evaluation

• The methodology shall explicitly demonstrate that
  the project activity is not the baseline
• No reference should be made to environmental
  additionality and the methodology must
  explicitly demonstrate that the project activity
  is not the baseline
• CDM MP does not use this term. Additionality
  has been defined in the CDM MP and clarified in
  the CDM-PDD glossary. What is required is a
  demonstration of how the proposed new methodology
  implements this decision.
• If the costing formula were clearly specified,
  the methodology might be capable of a
  demonstration that the project activity is not
  the baseline. However, there are two
  methodological problems
• 1) Costing formula is not specified
• 2) The comparison should be between the expansion
  of the grid with the project activity registered
  under the CDM and without such registration

7
Details of the Evaluation

• 2. Cost calculations do not follow a specified
  methodology and are not applied conservatively
• The project participants should select a specific
  costing approach in their methodology and
  document it fully. The EPRI TAG Method is only
  cited as an example.
• The methodology should specify that conservative
  assumptions are used for cost calculation (long
  lifetime of the project activity, short lifetime
  of alternatives, low discount rates, realistic
  assessment of value of hydro generation)
• The methodology should require to rigorously
  document the method and parameters used to
  generate the costs of the different options
  evaluated for the least cost analysis.

8
Details of the Evaluation

• 3. Ex post calculation of baseline emission
  rates is not justified
• In order to ensure that a) the methodology
  yields a conservative result b) is not rendered
  invalid should current dispatch data become
  invalid in the future c) the precise algorithms
  are clear ex ante, the methodology should include
  a calculation of an ex ante baseline emission
  factor, consistent with the elements of a
  methodology identified by the EB. The baseline
  emission factors must be reported explicitly in
  the draft CDM-PDD.

9
Details of the Evaluation

• 3. Ex post calculation of baseline emission
  rates is not justified (Continuation)
• Specifically, the ex post calculation of baseline
  emission rates methodology has the following
  problems
• The methodology seems to introduce unnecessary
  uncertainty the emission factors for the
  baseline are known, as they must be estimated for
  the purpose of reporting the emissions
  reductions. The principle of transparency demands
  that such estimates be stated
• Emission factors MUST be reported explicitly in
  the draft PDD as the proposed new methodology
  relies heavily on the argument that there will be
  emission reductions that will take place
• The project developer MUST justify why the ex
  post monitoring of the grid in the with the
  project situation is a fair representation of
  what would have occurred in the absence of the
  project activity

10
Details of the Evaluation

• 4. The elaboration of the baseline scenario must
  be specified by the baseline methodology and not
  left to the monitoring methodology
• The reasonableness of the baseline scenario is
  open to methodological question Taking only the
  highest cost/ last plants fired may be a workable
  estimation method, but is likely to err on the
  high (non-conservative) side where peaking units
  have a higher emission factor that other plants.
• The baseline methodology should show how the
  least-cost methodology can be implemented in a
  consistent and a transparent manner. A thorough
  explanation is needed to explain why coal is
  considered as the most attractive scenario given
  the national expansion plans of Guatemala which
  does not mention coal as a significant player.

11
Details of the Evaluation

• 4. Discrepancy between the load characteristics
  of of the proxy plant used to demonstrate
  additionality and the marginal dispatch plants
  used to determine ex post baseline emission
  factors
• There is lack of clarity in distinguishing peak
  and base-load. This lack of clarity has
  implications on the cost. (Example The coal
  plant used as proxy to demonstrate addtionality
  will most likely run at night and in lower demand
  season when avoided costs are low) If El Canada
  Project can store and release more during peak
  periods, then it can provide higher valued
  output.