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PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 CDM – Executive Board page 1

CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-PDD)

Version 03 - in effect as of: 28 July 2006

CONTENTS A. General description of project activity B. Application of a baseline and monitoring methodology C. Duration of the project activity / Crediting period D. Environmental impacts E. Stakeholders’ comments

Annexes Annex 1: Contact information on participants in the project activity Annex 2: Information regarding public funding Annex 3: Baseline information

Annex 4: Monitoring information


SECTION A. General description of project activity A.1. Title of the project activity: Waste Heat Recovery and Utilisation for Power Generation Project of Chizhou Conch Cement Company Limited Version 01 05/02/2010 Version history (ACM0004) Version 01 16/12/2006 GSP version Version 02 07/03/2007 Updated following DOE site visit Version 03 06/06/2007 Updated following receipt of DOE CAR & CR list Version 04 17/08/2007 Revised according to comments from DOE Version 05 20/11/2007 Revised according to comments from DOE Version 06 13/12/2007 Revised according to comments from DOE Due to misunderstanding to the requirements of WACC as the benchmark in the Guidance on additionality Tool, the proposed project was not accepted by the EB in the EB 42nd meeting. Considering that it still shows notable additionality of the proposed project as CDM project and similar projects of conch were accepted to register after presenting a correct application of WACC as the internal benchmark, other similar conch projects registered. In the context, the project owner decided to re-submit the project. Since the methodology ACM0004 has been expired on Mar. 5th, 2008, the project has to be re-submitted again with the methodology ACM0012. Version 01 05/02/2010 GSP version (ACM0012) A.2. Description of the project activity:

The Project Activity is a waste heat recovery and utilization for power generation project located at Chizhou Conch Cement Company Limited (CCCCL) at Niutoushan Town in Chizhou City of Anhui Province. Chizhou Conch Cement Company Limited is subordinate to Anhui Conch Cement Group Company Limited (ACCCL). The proposed project generates electricity through recovering and utilizing the waste heat from three clinker lines. The electricity generated from the proposed project is consumed by CCCCL and meets part of the electricity demand of the company clinker production. There are two 5000t/d clinker lines and one 8000t/d clinker line that have been built in CCCCL1. The scenario existing and prior to the start of the implementation of the project activity is that the waste heat from the rotating kiln of the clinker production lines of CCCCL was vented to the atmosphere and the electricity consumed by CCCCL was supplied by East China Power Grid (ECPG). The project scenario is to develop the auxiliary waste heat power generation project through the recovery and utilization of waste heat generated by two 5000t/d clinker production lines and one 8000t/d clinker production line. Two 5000t/d clinker lines started to operate in July 2002 and October 2002 respectively, and the 8000t/d clinker line started to operate in August 2003 The project proposes to install six heat recovery boilers with two sets of mixed-pressure admission condensing turbine-generator unit. The 1 Application Report of Chizhou WHR project


installed capacity is 28.6 MW. The annual design power generation of the set of turbine-generator unit above amounts to 220,000 MWh and yearly net power supply to cement production facilities is 204,600 MWh. The baseline scenario identified in section B.4 is the same as the scenario existing prior to the start of implementation of the project activity i.e the current waste heat will be continuously vented and purchase power purchased from the ECPG power grid. The Project Activity proposes to recover and utilize the waste heat from the clinker lines to generate electricity. All the electricity generated by the Project Activity is used by the cement plant itself to meet part of the electricity demand so as to replace electricity imported from the coal-dominated ECPG. Thus it can generate an annual emission reduction of 160,105 tCO2e. The Project Activity increases energy supply from clean energy sources and will meet China’s sustainable development needs. Thus, The Project Activity will reduce greenhouse gas emissions (CO2) versus the baseline scenario, which is the continued supply from the regional power grid to meet the demand for power of the cement. Additionally the Project Activity will contribute to sustainable development in the following ways:

• significantly reduce harmful emissions (including SOx, NOx and floating particles), and thus improve the local environment;

• reduce fossil fuel exploitation and consumption, thus improving energy efficiency; • lead to a reduction in the temperature of the vented hot air from about 380°C to 90°C and also

reduce the volume of water that is consumed by the humidifying pump in the cooling towers and thereby save water resources in this area.

• lead to an increase in local staff employed by about 25 persons. A.3. Project participants:

Name of Party involved (*) ((host) indicates a host Party)

Private and/or public entity(ies) project participants (*)

(as applicable)

Kindly indicate if the Party involved

wishes to be considered as

project participant (Yes/No)

Host Country: People’s Republic of China

Anhui Chizhou Conch Cement Company limited No

United Kingdom of Great Britain and Northern Ireland Cargill International SA No

United Kingdom of Great Britain and Northern Ireland Camco International Limited No

(*) In accordance with the CDM modalities and procedures, at the time of making the CDM-PDD public at the stage of validation, a Party involved may or may not have provided its approval. At the time of requesting registration, the approval by the Party(ies) involved is required. Note: When the PDD is filled in support of a proposed new methodology (form CDM-NM), at least the host Party(ies) and any known project participant (e.g. those proposing a new methodology) shall be identified.


A.4. Technical description of the project activity: A.4.1. Location of the project activity: A.4.1.1. Host Party(ies): People’s Republic of China. A.4.1.2. Region/State/Province etc.: Anhui Province. A.4.1.3. City/Town/Community etc: Niutoushan Town, Tongshan County of Chizhou City of Anhui Province. A.4.1.4. Detail of physical location, including information allowing the unique identification of this project activity (maximum one page): The Project Activity is located at the cement plant of CCCCL in Niutoushan Town, Tongshan County Chizhou City of Anhui Province. The project’s exact geographical coordinates are east longitude 117° 14’09” and north latitude is 30° 26’50”. Figure 1 and Figure 2 shows the location of the project activity.

Figure 1.Location of Anhui Province.


Figure 2. Location of the proposed project

A.4.2. Category(ies) of project activity: The project activity is relevant to sectoral scope 1 and sectoral scope 4 – Energy and Industry A.4.3. Technology to be employed by the project activity: The scenario existing and prior to the start of the implementation of the project activity is that the waste heat is vented and the equivalent electricity is supplied by the ECPG, which is dominated by coal-fired power plants. The project scenario is the implementation of the proposed project which develops the auxiliary waste heat power generation project through the recovery and utilization of waste heat generated by two 5000t/d clinker production lines and one 8000t/d clinker production line of CCCCL. The Project Activity proposes to install six heat recovery boilers with two sets of mixed-pressure admission condensing turbine-generator unit. The installed capacity is 28.6 MW. The designed annual operation time of facilities is about 7680 hours. The annual design power generation of the sets of turbine-generator unit above amounts to 220,000 MWh and yearly net power supply to cement production facilities is 204,600 MWh. The baseline scenario is the same scenario existing prior to the implementation of the proposed project. In the absence of the proposed project, waste heat would be vented and power purchased from the power grid. The technology of PH was introduced from Kawasaki Company which represents the advanced waste heat recovery technology. The theoretical power generation of clinker per ton amounts to 40/kWh2, which

2 Source: http://www.dcement.com/Article/200805/65205.html:

The proposed project


comes up to the advanced international standard with the clear superiority of high efficiency of heat recovery and good effect of energy conservation. The project will not impact on the existing production process of cement. The main process of the Project Activity can be seen in Figure 3.

Figure 3 The major process of the Project Activity

On the basis of existing clinker production lines, the project will allow the feed water to recover the heat energy of low-temperature waste heat released by cement clinker production lines through their own PH heat recovery boilers and AQC heat recovery boilers, to covert it into superheated steam, and then steam will be fed into the steam turbine through the steam pipe. The heat energy will be converted into kinetic energy in the steam turbine to enable the turbine rotor to rotate at high speed, and then will be converted into mechanical energy to drive the generator to rotate, and electricity will then be generated. The exhaust steam of the steam turbine is condensed and fed into the boiler by boosting the pressure and then re-circulated to the system. The waste gas will enter the electro static precipitator for treatment after the heat exchanger. It will then be vented into atmosphere after the dust is removed. Therefore, the harmful emission can be significantly reduced by the product activity, thus it can be considered environmental safety. The project will not impact on the existing production process of cement. The model numbers and performance characteristics of the main equipment relating to the project can be seen in the table below (Table 1).

Used for boiler feedwater circulation

Working

Dust gas

Hot water

Preheater outlet (existing)

PH boiler① (newly added)

AQC boiler② (newly added)

Steam

Grate cooler outlet (existing)

Dust gas

Steam turbine ③

Main step-down substation (existing)

Kiln-tail fan (existing)

Kiln-head electro static precipitator

water treatment plant (newly added)

Kiln-tail electro static precipitator

Low-pressure flash

Tank (newly added)

Generator ④

Condenser (newly added)

Cooling tower

(newly

Hot water

Steam

Feedwater


Table 1. Major Equipment Employed by the Project Activity

Name of major equipment (Phase I)

Model, specification and performance Quantity (set)

Point on Figure 3 Manufacturer

PH boiler Model: KAWASAKI BLW forced circulation boiler Steam pressure (super heater outlet): 7.89barA Steam temperature (super heater outlet): 305℃ Evaporation capacity: 28.29t/h Life time: more than 10y

2 1

KAWASAKI HEAVY INDUSTRIES, LTD

AQC boiler Model: KAWASAKI BLW natural circulation boiler Steam pressure (super heater outlet): 7.89barA Feed water (drum inlet): 167℃ Evaporation capacity: 18.18t/h Life time:20y

2 2 Jiang Su Nantong Wanda Boiler Co. Ltd.

Steam turbine and auxiliaries

Model: mixed-pressure admission condensing Type: NZ18-0.689/0.129 Inlet steam pressure: live steam 6.89barA/ mixed-steam 1.29 barA Inlet steam temperature: live steam 319 / mixed℃ -steam sat Life time: 30y

1 3 Nan Jing Steam Turbine Co. Ltd.

Generator Model: totally-enclosed self-cooling 3-phase AC synchronous generator Type: QFWL-18- 2, 6.3kV Rated active Capacity: 17MW Voltage: 6300V Power factor: lagging 0.85 Life time: 30y


Name of major equipment (Phase II)



PH boiler Model: KAWASAKIBLW forced circulation boiler Steam pressure (super heater outlet): 7.89barA Steam temperature (super heater outlet): 290℃ Evaporation capacity: 28.82t/h Life time: more than 10y

1 1

KAWASAKI HEAVY INDUSTRIES, LTD

AQC boiler Model: KAWASAKIBLW natural circulation boiler Steam pressure (super heater outlet): 7.89barA Feed water (drum inlet): 167℃ Evaporation capacity: 30.41t/h Life time:20y

1 2 Jiang Su Nantong Wanda Boiler Co. Ltd.


Name of major equipment (Phase II)



Steam turbine and auxiliaries

Model: mixed-pressure admission condensing Type: NZ12-0.689/0.137 Inlet steam pressure: live steam 6.89barA/ mixed-steam 1.37 barA Inlet steam temperature: live steam 313 / mixed℃ -steam sat Life time: 30y


Generator Model: totally-enclosed self-cooling 3-phase AC synchronous generator Type: QFW2-12-2, 6.3kV Rated active Capacity: 11.6MW Voltage: 6300V Power factor: lagging 0.85 Life time: 30y


The implementation of the Project Activity is not involved with technology transfer. However the implementation of the project can contribute to the commercialization of imported technology in China and facilitate the development of waste heat recovery technology.

A.4.4. Estimated amount of emission reductions over the chosen crediting period: The project uses a fixed crediting period of 10 years. The starting date of the crediting period for the project is 01/01//2011 or the date after registration which ever comes late. During the crediting period, estimation of emission reductions by the project are shown in the table 2 below.

Table 2 Estimation of emission reductions of the project Years

Annual estimation of emission reductions

in tonnes of CO2e 01/01/2011 -31/12/2012 160,105 01/01/2012 -31/12/2013 160,105 01/01/2013 -31/12/2014 160,105 01/01/2014 -31/12/2015 160,105 01/01/2015 -31/12/2016 160,105 01/01/2016 -31/12/2017 160,105 01/01/2017 -31/12/2018 160,105 01/01/2018 -31/12/2019 160,105 01/01/2019 -31/12/2020 160,105 01/01/2020 -31/12/2021 160,105

Total estimated reductions (tonnes of CO2e) 1,601,049 Total number of crediting years 10

Annual average over the crediting period of estimated reductions (tonnes of CO2e) 160,105

A.4.5. Public funding of the project activity:

There is no public funding of the Project Activity.


SECTION B. Application of a baseline and monitoring methodology: B.1. Title and reference of the approved baseline and monitoring methodology applied to the project activity: The methodology applied to the Project is ACM0012 “Consolidated baseline methodology for GHG emission reductions from waste energy recovery projects (ACM0012 version 03.2)” http://cdm.unfccc.int/UserManagement/FileStorage/0M4N9567GH1J7UAJ89YNQ299K1MYSI The grid emission factor is calculated using the “Tool to calculate the emission factor for an electricity system” (Version 02) http://cdm.unfccc.int/methodologies/PAmethodologies/tools/am-tool-07-v2.pdf The “Tool for the demonstration and assessment of additionality (version 05.2)” are also applied to the Project as required by the methodology ACM0012 version 03.2). http://cdm.unfccc.int/methodologies/PAmethodologies/tools/am-tool-01-v5.2.pdf More information could be found at: http://cdm.unfccc.int/methodologies/PAmethodologies/approved.html B.2. Justification of the choice of the methodology and why it is applicable to the project activity: The consolidated methodology is applicable to two types of project activities Type-1: All the waste energy in identified WECM stream/s that will be utilized in the project activity, is, or would be flared or released to atmosphere in the absence of the project activity at the existing or new facility. The waste energy is an energy source for:

• Cogeneration; or • Generation of electricity; or • Direct use as process heat source; or • For generation of heat in element process (e.g. steam, hot water, hot oil, hot air); or • For generation of mechanical energy.

Type-2: An existing industrial facility, where the project activity is implemented, that captures and utilizes a portion of the waste gas stream(s) considered in the project activity, and meets the criteria laid out in the methodology. The project activity is a Type-1 project because:

The project will utilize all waste heat generated by the clinker lines in CCCCL for power generation, and the electricity generated will be totally supplied to CCCCL.

The waste heat utilised in the project activity was vented into the atmosphere. This can be demonstrated through the design specification of clinker lines and the existing situation on-site as below:

http://cdm.unfccc.int/methodologies/PAmethodologies/approved.html�


I. According to the designed work process of clinker production showed in the clinker lines’ FSR of CCCCL, the exhausted heat from the kiln-tail, kiln-heater, and grate-cooler of clinker production course is vented through dust-removers3

II. The quantity of waste heat from the clinker production is sufficient to be utilized in the project activity. According to the FSRs of the clinker production lines, the waste gas with high temperature from the kiln-tail, kiln-heater, and grate-cooler respectively amounts to 1678x103m3/h, and 1559x103m3/h , 361x103m3/h which represents an total amount of available waste gas of 3598x103m3/h4. The amount of waste gas utilised in the project activity is only 1716 x103m3/h5. This fully demonstrates that the project activity will not impact the process of clinker production. III. There is no equipment for waste heat recovery and utilization, which was also verified by the DOE when the on-site validation was conducted in ACM 0004 on in January 2007.

All of above facts fully show Very clear picture that the waste heat would be released to the atmosphere in the absence of the project activity. The approved consolidated baseline and monitoring methodology ACM0012 is applicable to the proposed project, because:

Methodology applicability criteria Applicable

or N/A

Justification / Explanation

If the project activity is based on the use of waste pressure to generate electricity, electricity generated using waste gas pressure should be measurable.

N/A The project activity does not involve the use of waste pressure.

Energy generated in the project activity may be used within the industrial facility or exported from the industrial facility. Applicable

Power generated in the project is used in the course of clinker production of CCCCL.

The electricity generated in the project activity maybe exported to the grid or used for captive purposes.

Applicable The electricity generated by The Project is used in the production of the clinker by project owner.

Energy in the project activity can be generated by the owner of the industrial facility producing the waste energy or by a third party (e.g. ESCO) within the industrial facility.

Applicable

Electricity in the project activity is generated by CCCCL which is the owner of the industrial facility.

Regulations do not constrain the industrial facility generating waste energy from using fossil fuels prior to the implementation of the project activity.

Applicable

There are no mandatory regulations that restrict from using the fossil fuels prior to the implementation of the specific project.

3 The FSRs of 2×5000t/d and 8000t/d clinker lines of CCCCL 4 The FSRs of 2×5000t/d and 8000t/d clinker lines of CCCCL 5 Application Report of Chizhou WHR Project


The methodology covers both new and existing facilities. For existing facilities, the methodology applies to existing capacity. If capacity expansion is planned, the added capacity must be treated as a new facility.

Applicable

The project utilizes the waste heat exhausted by existing cement clinker production lines and converts into mechanical energy to drive the generator generate electricity. There is no expansion planned on the clinker lines.

The emission reductions are claimed by the generator of energy using waste energy. Applicable

The emission reduction are claimed by CCCCL which is the power plant using waste energy

In case where the energy is exported to other facilities, an official agreement exists between the owners of the project energy generation plant (henceforth referred to as generator, unless specified otherwise) with the recipient plant(s) that the emission reductions would not be claimed by recipient plants(s) for using a zero-emission energy source.

N/A The energy is not exported to other facilities.

For those facilities and recipients, included in the project boundary, which prior to implementation of the project activity (current situation) generated energy on-site (sources of energy in the baseline), the credits can be claimed for minimum of the following time periods:

• The remaining lifetime of equipments currently being used; and

• Credit period

Applicable

Two 5000t/d clinker lines started to operate in July 2002 and October 2002 respectively, and the 8000t/d clinker line started to operate in August 2003 respectively. No energy was generated on site prior to the implementation of the project. Additionally, The remaining lifetime of the clinker lines is longer than the crediting period. The lifetime of clinker lines is 20 years according to the FSR of Clinker lines6

Waste energy that is released under abnormal operation (emergencies shut down) of the plant shall not be accounted for.

Applicable

Credit will not be claimed when the waste heat recovery boiler and steam turbine are under abnormal operation.

This methodology is not applicable to projects where the waste gas/heat recovery project is implemented in a single-cycle power plant (e.g. gas turbine or diesel generator) to generate power. However, the projects recovering waste energy from such power plants for the purpose of generation of only heat only can apply this methodology

N/A

The Project Activity recovers and utilizes waste heat from the clinker production for electricity generation Therefore it is not involved in a singe-cycle power plant.

It may therefore be concluded that the project meets all applicability criteria of the methodology ACM0012. Therefore, the methodology ACM0012 is applicable to the specific project.

6 FSR of Chizhou Clinker lines


B.3. Description of how the sources and gases included in the project boundary:

The project boundary includes the Project Activity boundary and baseline boundary.

As per ACM0012, the geographical extent project boundary shall include the following (see also figure 4 below):

1. The industrial facility where waste heat is generated

2. The facility where process heat in element process/steam/electricity is generated (generator of process heat/stream/electricity). Equipment providing auxiliary heat to the waste heat recovery process shall be included within the project boundary; and

3. The facility/s where the process heat in element process/steam/electricity is used (the recipient plant(s)) and /or grid where electricity is exported, if applicable.

For the project activity, the boundary of the project activity includes WHR system which covers the rotating kiln, the waste heat recovery boilers (PH boiler and AQC boiler), steam turbine, generator unit and its auxiliary facilities. The baseline boundary includes all gird-connected power plants in ECPG which provides the electricity to Project Entity, and all the industrial facilities in cement plant except for the WHR power system. For the Project Activity, the facility where electricity used is connected to the ECPG. Based on the “Tool to calculate the emission factor for an electricity system (Version 02)”, the spatial extent of the baseline boundary is the power plants that are physically connected through transmission and distribution lines to Project Activity. According to the “2006 Baseline Emission Factors for Regional Power Grids in China” issued by the National Development and Reform Commission 7 , the ECPG is used as the project electricity system, which covers Shanghai City, Jiangsu Province, Anhui Province, Zhejiang Province, and Fujian Province. Table 3 illustrates which emissions sources are included and which are excluded from the project boundary for determination of baseline scenario and project emissions .And figure 4 shows the project boundary.

Table 3 Overview on emissions sources included in or excluded from the project boundary Source of Emission Gas Included? Justification / Explanation

CO2 Included Main emission source

CH4 Excluded Excluded for simplification. This is conservative

Electricity generation, grid or captive source N2O Excluded Excluded for simplification. This is

conservative

CO2 Excluded There is no fossil fuel direct utilization

in boiler

Baseline

Fossil fuel consumption in boiler for thermal energy CH4

Excluded There is no fossil fuel direct utilization in boiler

7 Source: 2006 Baseline Emission Factors for Regional Power Grids in China issued by the NDRC on 15th December, 2006, http://cdm.ccchina.gov.cn/web/index.asp


N2O Excluded There is no fossil fuel direct utilization in boiler

CO2 Excluded The project is not involved in

cogeneration plant

CH4 Excluded The project is not involved in

cogeneration plant

Fossil fuel consumption in o cogeneration plant

N2O Excluded The project is not involved in cogeneration plant

CO2 Excluded This process does not exist in the

project

CH4 Excluded This process does not exist in the

project

Baseline emissions from generation of steam used in the flaring process, if any N2O Excluded This process does not exist in the

project

CO2 Excluded No auxiliary fuels will be used in the project

CH4 Excluded No auxiliary fuels will be used in the project

Supplemental fossil fuel consumption at the project plant

N2O excluded No auxiliary fuels will be used in the project

CO2 included Main emission source CH4 Excluded Excluded for simplification.

Supplemental electricity consumption N2O Excluded Excluded for simplification.

CO2 Excluded It is not involved in the proposed

project

CH4 Excluded It is not involved in the proposed

project

Electricity import to replace captive electricity, which was generated using waste gas in absence of project activity N2O Excluded It is not involved in the proposed

project

CO2 Excluded There is no gas cleaning process in the

project

CH4 Excluded There is no gas cleaning process in the

project

Project Activities

Project emission from cleaning of gas

N2O Excluded There is no gas cleaning process in the project

The project boundary is showed as the graph below:


Cement clinkerProduction line

Waste Heat Boiler Turbine Generator

subs

tatio

n



Power Plant

Power Plant

QOE,y

QOE,y

EGPJ,import, y

EGj, y

EGPJ,import, y

EGj, y

Grid



subs

tatio

n



Power Plant

Power Plant

QOE,y

QOE,y

EGPJ,import, y

EGj, y

EGPJ,import, y

EGj, y

Grid

Figure 4. Project boundary

B.4. Description of how the baseline scenario is identified and description of the identified baseline scenario: Realistic and credible alternatives should be determined for:

• Waste energy use in the absence of the project activity; and • Power generation in the absence of the project activity; and • Steam/heat generation in the absence of the project activity; and • Mechanical energy generation in the absence of the project activity

Step 1: Define the most plausible baseline scenario for the generation of electricity using the following baseline options and combinations According to the methodology, the baseline candidates should be considered for the following facilities:

• For the industrial facility where the waste energy is generated; and • For the facility where the energy is produced; and • For the facility where the energy is consumed

For the proposed project, the baseline candidates involve the cement clinker lines (where the waste energy is produced and the power will be consumed) and the power plant (where the power is produced). For the use of waste heat, the realistic and credible alternative(s) may include,

Alternatives Applicable or N/A Justification / Explanation

W1

WECM is directly vented to atmosphere without incineration or waste heat is released to the atmosphere or waste pressure energy is not utilized

Applicable

Waste heat released to the atmosphere is applicable. The waste heat to be utilized in the proposed project activity would not be used in the absence of the project activity, and would be released into the atmosphere

W2 WECM is released to the atmosphere Applicable This alternative is identical to W1,


(for example after incineration) or waste heat is released to the atmosphere or waste pressure energy is not utilized

therefore see justification for W1.

W3 Waste energy is sold as an energy source N/A

There are no users of heat near to the project area this is because: Other uses could be derived from potential local civil or industrial uses surrounding the project site Potential civil uses: In the surroundings of the project site, there are no other potential civil demands for the waste heat. The proposed project is located far from downtown of Chizhou city. Also the cement plant at which the project activity is located is in southern China where there are no civil heat demands. In addition, according to the Chinese heating classification, the provinces at the south of Yangtze River have no central heating for civic building 8 . Therefore, there is normally no residential heating demand for Anhui Province, in which the project located. Potential Industrial uses other than cement plant: Firstly, in the clinker production course, There is no additional demand for the waste heat. The rest of the waste heat utilised in the project activity would directly emitted into air. Secondly, there are no industrial facilities around the project location and hence no industrial demand for the waste heat. Therefore there are no local demand centres around the proposed project site, and this scenario can not be

8 Design Standard of Thermal Technique in Civil Building (GB50176-93)


regarded as a plausible baseline scenario.

W4 Waste energy is used for meeting energy demand Applicable

This scenario implies the use of waste heat for power generation. This is also in compliance with national laws and regulations, but is not compulsory under national or local governmental laws. Therefore, this scenario is a plausible baseline alternative and it will be further discussed in step 3 and section B.5.

W5

A portion of the waste gas produced at the facility is captured and used for captive electricity generation, while the rest of the waste gas produced at the facility is vented/flared

N/A The proposed project does not utilize waste gas

W6 All the waste gas produced at the industrial facility is captured and used for export electricity generation

N/A The proposed project does not utilize waste gas

Conclusion: from the above discussion the alternative W2, waste heat is released to the atmosphere, and alternative W4, waste energy is used for meeting energy demand, are the possible baseline alternatives for the use of waste heat. Note: as W1 and W2 are identical for this project, only W2 is referred to in the discussion that follows. For power generation, the realistic and credible alternative(s) may include,

Alternatives Applicable or N/A Justification / Explanation

P1 Proposed project activity not undertaken as a CDM project activity

Applicable This scenario conforms with Chinese law.

P2 On-site or off-site existing/new fossil fuel fired cogeneration plant

N/A Irrelevant, because the project activity does not have a heat supply component. Additionally, as there is no demand for heat or other forms of energy besides electricity, it is not realistic that the project activity would produce anything other than electricity

P3 On-site or off-site existing/new renewable energy based cogeneration plant

N/A As for P2

P4 On-site or off-site existing/new fossil fuel based existing captive or identified plant

N/A On-site or off-site existing fossil fuel based captive plants: There is no on-site or off-site fossil fuel based existing captive or


identified plant. All electricity consumed by the clinker production lines are supplied by the Power Grid On-site or off-site New fossil fuel based existing captive or identified plant: In terms of applicable rules and regulations, the “Notice from the General Office of the PRC State Council on Strictly Prohibiting Constructing Thermal Power Units with the Capacity under 135MW” (state council public notice [2002] No.6) prohibits the construction of fossil fuel power plants with a capacity under 135MW. Also, the “Temporary Regulation on Construction and Management of small thermal plants” strictly controls fossil fuel power plants with the unit capacity under 100MW. So constructing a new fossil fuel based plant which has the same capacity as the project (28.6MW) does not comply with legal and regulatory requirements. Hence this option cannot be considered a realistic and credible baseline alternative.

P5 On-site or off-site existing/new renewable energy or other waste energy based existing captive of identified plant

N/A On-site or off-site existing renewable energy based captive power plants: There is no on-site or off-site existing renewable energy based captive power plants. All electricity consumed by the clinker lines is supplied by the power grid. On-site or off-site New renewable energy based existing captive power plant: The project owner is not intent to build a captive power plant on-site or off-site by using renewable energy sources, because the project


location does have limited wind and hydro and tide resources to establish a power plant using these resources:

i. There is scarcity of wind

resources in Anhui Province 9 , and no existing wind farm project is available yet close to the project area. According to the Wind Farm Site Selecting of Anhui province10, no wind farm projects can be constructed in Chizhou City.

ii. Furthermore, it should also be

noted that the project site is in Chizhou City which is in a plane area 11 where it would be impossible to build a hydro power plant in or near the project site. Additionally the project site is not close to the sea, there is not tide resource to be built a tide power plant.

iii. Due to the high cost of grid

connected solar PV 12 , geothermal 13 and biomass 14 technologies on a scale that would achieve a similar output to the proposed project, these renewable power technologies are not considered plausible alternatives to the proposed project.

Therefore, not only it will not be feasible to build a captive power plant by using renewable resources onsite and offsite, but

9 China wind energy distribution: 10 http://www.86wind.com/info/detail/4-2239.html 11 http://www.ah.gov.cn/zjah/maindisp.asp?kind=zrzy&secname=dlzy 12 Consideration on development of Chinese Solar technology An Analysis to current situation and problem of Chinese Solar Power generation 13 A analysis to Chinese Geothermal development 14 Necessary Support to Biomass power plants


also it is not the preference of project owner to build a captive power plant using renewable resources as there is a deviation from its core business, and management. Waste Energy based on existing captive of identified plant:

There is no on-site or off-site waste energy based existing captive of identified plant. All electricity consumed by the clinker lines are supplied by the power grid. Hence this option cannot be considered a realistic and credible baseline alternative.

P6 Sourced Grid-connected power plants

Applicable This is the current situation and the power demand is met by the electricity delivered from the local grid which is part of the ECPG

P7 Captive Electricity generation using waste energy (if project activity is captive generation using waste energy, this scenario represents captive generation with lower efficiency than the project activity)

N/A A potential captive power plant where technologies with lower efficiency that could be deployed for the utilisation of waste heat for power generation. However, Conch has never considered the use of technology with a lower efficiency. The reasons are as follows: 1. The technology with lower efficiency brings lower efficiency of heat exchange of the boiler, less power generation, higher investment cost, a high levelised cost and lower financial return under similar condition. Further explanation is given below. 2. Conch did not have experience in other lower efficient technology other than advanced Kawasaki technology. This is demonstrated in the Ningguo phase I WHR project which was supported by the Japanese government in 1998, Ningguo phase II WHR project and other five conch 2 WHR projects


which have registered as CDM. All WHR projects developed by the Conch applied Kawasaki technology which is the same technology as the project activity. The Kawasaki technology represents advanced technology of waste heat recovery to power generation and has high efficiency as the project activity. This scenario cannot therefore be regarded as a plausible baseline alternative.

P8 Cogeneration using waste energy (if project activity is cogeneration with waste energy, this scenario represents cogeneration with lower efficiency than the project activity)

N/A As for P2

P9 Existing power generating equipment is either decommissioned to build new more efficient and larger capacity plant or modified or expanded, and resulting in higher efficiency, to produce and only export electricity generated from waste gas. The electricity generated by existing equipment for captive consumption is now imported from the grid

N/A The project activity does not utilise waste gas to power generation. Therefore, this alternative is excluded

P10 Existing power generating equipment is either decommissioned to build new more efficient and larger capacity plant or modified or expanded, and resulting in higher efficiency, to produce electricity from waste gas for own consumption and for export

N/A As for P9

P11 Existing power generating equipment is maintained and additional electricity generated by grid connected power plants

N/A As for P9 and P10

Further analysis to P7: There are two sources of waste heat used for WHR power generation in which one is from pr-heater of kiln-tail, another is hot air from grate cooler of kiln-head. The waste heat from kiln-tail is relative stable without the big change in the output of clinker and also the heat amount counts for major percentage in the power generation system. The waste heat from kiln-head fluctuates along with the different amount of cooled clinker and change in work process. Therefore the source of waste heat from kiln-head is not


stable. Thus recovering the waste heat from kiln-tail as much as possible is very important in the WHR to power generation system 15. Accordingly efficiency of heat exchange of boiler for kiln-tail is a key element in WHR power generation system. The efficiency of the boilers directly affects the amount of waste heat could be recovered from the clinker line. Higher efficiency of the boiler, more waste heat amount recovered from the clinker line. The project activity adopted the Kawasaki technology to recover low temperature WHR for power generation. The key strength of Kawasaki technology represented by high efficiency of the PH boiler and flash technology in thermal system of power generation. The Kawasaki technology applies the PH boiler to recover waste heat from kiln-tail, while other domestic technologies applying SP boiler16. Compared to SP boiler, PH boiler is of much strength such as higher efficiency of heat exchange, less maintenance etc. A comparison of PH boiler with SP boiler was presented as below:

The key parameters’ comparison of PH boiler and SP boiler17

PH boiler SP boiler Working Substance Recycle Design Forced circulation Natural circulation

Bulk Small, convenient for site layout Big, not convenient for site layout Weight Light Heavy

Dust Stratification

The flowing direction of waste gas and the exchange tubes meet at right angles. It is unlikely to stratify dust, and the ash removal implements well.

The flowing direction of waste gas parallels the exchange tubes. It is likely to stratify dust, and the ash removal implements difficultly.

Maintenance Little Huge Heat-exchange Approaches Little Big Evaporation 15%~30% Higher than vertical type 15%~30% lower than horizontal typeThe efficiency of Heat exchange 8%~10% Higher than vertical type 8%~10% lower than horizontal type

The Heat-exchange Approaches in above table presents the temperature difference between the waste gas from boiler inlet and the steam from super heater outlet. The smaller of the value is, the higher of heat exchange efficiency, steam enthalpy and thermal utilization are, which means the exchange of super heater sufficiently. The value of PH boiler approaches is about 10℃, and that of SP boiler approaches reaches to 30℃18

In addition, the Kawasaki technology adopts flash technology in thermal system for power generation19. The power plant with flash technology can generate 10% more electricity than other technology20.

15 http://www.ccement.com/news/2006/5-19/C176954294.htm 16 http://baike.baidu.com/view/2903327.html?fromTaglist 17 http://baike.baidu.com/view/2903327.html?fromTaglist 18 http://baike.baidu.com/view/2903327.html?fromTaglist 19 http://baike.baidu.com/view/2903327.html?fromTaglist 20 http://www.ccement.com/news/2006/5-19/C176958863.htm


Given that the many of advantage of Kawasaki technology is of, the WHR project with Kawasaki technology benefit from lower investment cost and more power generation. In general, under Kawasaki technology the power generation of clinker per ton amounts to 40 kWh 21. Actual output for power generation of clinker per ton even higher. E.g this amount in Tongling conch WHR project peaks up to 43 kWh, higher than the level of 30-40 kWh clinker per ton for other domestic technologies 22 . Investment cost for Kawasaki technology is lower than other domestic technology. Unit capital cost of Kawasaki technology is 7900RMB/KW, while 11000RMB/KW for foreign technology and other domestic technology23

Furthermore, by using the outcome of Kawasaki technology, the levelised cost is also lower than other domestic technology. This can be demonstrated by the analysis as below: The Kawasaki technology which is applied by the proposed project is more efficient than other technology. The WHR project with Kawasaki technology has annual operation hours of 7680 hours. This is compared to 5971 and 6650 hours for the other technology where 5971 hours is taken from the FSR of projects excluding CDM and 6650 is from the statistics of registered CDM project in UNFCCC website24. From above data, we can define the other technology as lower efficient technology relative to Kawasaki technology. If the lower efficient technology was applied, either the higher installed capacity would be required for procurement of equivalent electricity or less power would be generated for the same installed capacity as the proposed project. As a result, this would lead to higher cost and lower financial return. This is elaborated by levelized cost comparison of Kawasaki technology and other technology as below. The calculation of levelized cost of the projects excluding CDM is based on average parameters from the FSRs of four WHR projects that use other technology which is lower efficient technology compared to proposed project25. The parameters used are as follows26:

• Average operation hours under full load per year (5971 hours/year), • Unit capital cost per MW (6.651 million RMB/MW), • Unit operation cost (0.1893 RMB/KWh), • Self-consumption rate (7.6%)

These four projects are the full set of feasibility studies undertaken by the Sinoma Design Institute, which is the same Institute that has undertaken the feasibility reports for Conch27. The data from these projects has been used for the comparison (see attached spreadsheet).This shows that the data used in this analysis is also consistent with the parameters used by other CDM projects28.

21 http://www.dcement.com/Article/200805/65205.html 22 http://ah.people.com.cn/GB/channel1321/1324/200906/13/171644.html 23 http://ah.people.com.cn/GB/channel1321/1324/200906/13/171644.html 24Spreadsheet of Comparison of other technology and Kawasaki technology 25 Attached relevant pages of FSR for these four projects 26 Attached Key Financial data of projects with other technology 27 These are not related to the projects in the common practice list as information on the projects is not publically available and the feasibility study reports were developed in the past year, so are likely to be at an early stage 28 Spreadsheet of Comparison of other technology and Kawasaki technology


When calculating the levelized cost, different tax situations have been considered. This is due to Income tax is due on net income and this will be different in each case as there is a tax benefit in having higher annual costs i.e. less tax will be paid. In other words net annual income will be less when there are higher annual costs and therefore income tax will also be less. Conversely, when net annual income is higher then so are the taxes. From the table 4 below, it can be seen that Kawasaki has lowest levelized cost of 261 RMB/MWh which is compared to other technology of 339 RMB/MWh for projects excluding CDM projects and 337 RMB/MWh for registered project29. Table 4 The comparison of levelised cost for Kawasaki technology and other technology

The type of project technology annual operational hours(hrs)

levelised cost(RMB/MWh)

conch project Kawassaki technology 7680 261

registered project Other technology 6650 339

project excluding CDM Other technology 5971 337

Applying lower efficient technology would bring about higher cost hence lower financial return. However for the same installed capacity of 28.6MW as the proposed project, applying lower efficient technology would bring about lower initial investment costs, but due to the lower efficiency would bring about lower financial returns. As a result, Conch did not select lower efficiency technology, unlike many other companies in China who opt for the lower up-front cost option. Furthermore, in 1998 Conch was awarded grant financing by the Japanese Government’s Green Fund at their Ningguo plant (Ningguo Phase I). Subsequent to this demonstration project, Conch did not invest in any additional waste heat recovery plants since they were not core business and did not meet their financial objectives. Given that Conch already had some experience of the Kawasaki technology at one of their sites they only looked at roll out of this technology and not other less efficient technology options. Using other technology was therefore never an option that was considered seriously by Conch. As such any decision to extend the use of this waste heat recovery technology has only ever been in the context of utilising the Kawasaki technology. Also other technology is less efficient and is even much less financial attractiveness than the Kawasaki technology. And at the same time not significantly less expensive. There is no therefore any quantifiable economic benefit to using the other technology. The scenario 7 was not considered as an option. Conclusion: alternative P1, the proposed project activity not undertaken as a CDM project activity and alternative P6, sourced grid connected power plants, are the possible baseline alternatives for power generation.

29 Attached spreadsheet


For heat generation, as there is no heat supply in the project activity, therefore the alternatives from H1 to H9 listed in the methodology are not credible and realistic, shall be excluded Outcome of Step 1 There are two realistic and credible scenarios, which are summarized in the following matrix:

From the table above, it can be seen that two scenarios could be realistic and credible baseline scenario in terms of outcome of step1: Scenario 1: a combination of W2 and P6 Scenario 2: a combination of W4 and P1 These two scenarios will be further discussed in the following steps. Step 2: Identify the fuel for the baseline choice of energy source taking into account the national and/or sectoral policies as applicable In scenario 1: energy from the waste heat is vented to the atmosphere and electricity is supplied by the grid rather than generated on-site. Considered in these terms, the energy would be grid electricity and this is available in abundance. Also the power grid is dominated by coal-fired plants. There is not coal supply constraint. In scenario 2: the project activity not undertaken as a CDM project activity. The project activity adopts the technology of lower temperature WHR to power generation. The project activity utilizes waste heat to generate power. No any fuel is required by the project activity during power generation. Step 3: Step 2 and/ or Step 3 of the latest approved version of the “Tool for the demonstration and assessment of additionality” shall be used to identify the most plausible baseline scenario by eliminating non-feasible options Section B.5 will demonstrate that Scenario 2 (W4/P1) identified above is clearly not economically attractive to the project owner without the CDM. Please refer to Section B.5 Step 2. Therefore Scenario 1 (W2/P6), power imports from the grid combined with the non-utilization of waste heat, is the only scenario that can be selected as the baseline scenario of the project.

Waste Heat Power

W2 Waste heat vent to atmosphere

W4 The waste heat is recovered for power generation, but project is not in CDM mode

P1 To implement the proposed Project Activity, but not Undertaken as a CDM project

This combination is not possible, because there is no power generation if the waste heat is vented to atmosphere

Option 1 This scenario corresponds to the project activity not undertaken as a CDM project activity

P6 Electricity supplied by the ECPG

Optin 2: This scenario corresponds to the current practice i.e. waste heat released to the atmosphere and power supplied by the grid.

This combination is not Possible. The proposed Project Activity is aimed to replace the electricity from the local grid, not address on the combination with the grid


Step 4: If more than one credible and plausible scenario remain, the alternative with the lowest baseline emissions shall be considered as the most likely baseline scenario. This step can be skipped as only one baseline scenario remains. Conclusion: the baseline scenario of the proposed project is Scenario 1 (W2/P6) waste heat released to the atmosphere and power supplied by the grid. B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered CDM project activity (assessment and demonstration of additionality): The CDM consideration and decision making process is presented as follows: ACCCL implemented a similar WHR project which applied the same Kawasaki technology in 1998. This is Ningguo Phase I WHR project. However This WHR project was implemented in a non-commercial finance. In 1996 ACCCL was awarded a grant from the NEDO programme to supply Japanese technology for the Ningguo Phase 1 demonstration project30, 31. The FSR of this waste heat recovery project was undertaken by the Design and Research Institute of Tianjian Cement Industry32. This FSR was based on the use of Kawasaki technology and is also based upon non-commercial finance from the Japanese Government. The full construction investment was RMB 81.8664m, where the 52m was funded by the NEDO grant33. That means the actual capital cost required by ACCCL was only RMB29.86. Thus including this free grant, the project IRR was therefore higher than the benchmark of 18%34 In other words; the project was financially viable under free finance. However, the anticipated IRR would not reach the benchmark 18% and the project would not be financially attractive if full capital cost was required by conch under real commercial finance and the project would not have been implemented by ACCCL. This is the investment barriers that ACCCL has not implemented another WHR project for 8 years since Ningguo phase I WHR project until 2005, the CDM was rolling out Ningguo phase II WHR project in the project site of Ningguo Phase I. Given than there were the same investment barriers to the similar projects Ningguo Phase I and Phase II WHR projects, the proposed project will not achieve the financial return required by the Board.The board agreed to develop the proposed project through CDM finance on 10th January 200535 .ACCCL signed a Carbon Asset Development Agreement with Camco International Limited in 8th March 2006. The PDD of the proposed project was originally developed using ACM0004 and uploaded for GSP in 21st 30 http://www.osti.gov/bridge/servlets/purl/926167-oYrbRc/926167.PDF 31 Relevant pages of Ningguo phase I FSR 32P102,103 The FSR for WHR to Power generation of Ningguo Cement Plant Phase I 33 P99 FSR for WHR to Power generation of Ningguo Cement Plant Phase I 34 The FSR for WHR to Power generation of Ningguo Cement Plant Phase I 35 Board meeting minutes


December 2006, and validation on-site was conducted in 19th January 2007. The project was submitted for registration by TUV SUD on 5th March 2008, however the Project Activity was rejected in the EB42nd meeting due to PPs’ misunderstanding of the applicability of internal Benchmark required by the Additionality Tool. Soon later, another 5 similar projects (waste heat recovery and power generation projects owned by Conch Cement Group) successfully registered after an appropriate evidences were presented. Considering that the proposed Project showed that the same investment barriers as Ningguo phase I and phase II WHR projects other conch WHR project under commercial finance, ,the PPs decided to resubmit the project again, and then signed the re-validation contract with TUV SUD in May 2009. Besides, due to the expiration of the methodology ACM0004 the PDD was rewritten by applying ACM0012.The key timelines are presented in the table 5 below:

Table 5 Timelines in Project Implementation and CDM application activities Time Project Implementation Activities CDM Application Activities

10 January 2005 Board Decision to try to develop the project as a CDM project

July 2005 FSR July to December 2005 Seeking for CDM Developer36 15 August 2005 FSR approval February 2006 Started to construct phase I March 2006 CADA was signed June 2006 Started to construct phase II 14 November 2006 Signed Termsheet November 2006 Phase 1 Commissioning

21 December 2006 The PDD using ACM0004 was uploaded for GSP

19 January 2007 Validation on-site in ACM0004 19 January 2007 Signed purchase equipment agreement May 2007 Obtained Chinese LoA October 2007 Phase 2 Commissioning 12 December 2007 Signed ERPA

5 March 2008

PP sent a letter to UNFCCC Secretariat for requesting the secretariat to consider PP’s requests for registration of the project

September 2008

The Project Activity failed the CDM registration due to misunderstanding of the Benchmark Guidance and relevant inadequate response to the review questions.

February 2009

Another 5 similar projects (waste heat recovery and power generation projects owned by Conch Cement Group) got registered in the EB

36 Meeting minutes and correspondence with developers


successfully. 17th May 2009 Signed revalidation contract with TUV

SUD again January 2010 to February 2010

Revise the PDD by applying methodology ACM0012

The additionality of the project is further demonstrated and assessed using the latest version of the “Tool for the demonstration and assessment of additionality”: Step 1. Identification of alternatives to the project activity consistent with current laws and regulations Sub-step 1a. Define alternatives to the project activity Based on section B.4, we conclude that the following two alternative combinations are realistic and credible baseline scenarios: Scenario 1 (W2/P6) waste heat release in the atmosphere and power supply by the grid Scenario 2 (W4/P1) the proposed project activity not undertaken as a CDM project activity Sub-step 1b Consistency with mandatory laws and regulations Both of the alternative combinations W4/P1 and W2/P6 are consistent with current mandatory laws and regulations.

As the project activity is not the only alternative amongst the ones considered above then the proposed CDM project activity passes this Step. Step 2. Investment Analysis Sub-step 2a. Determine appropriate analysis method

The Tool for the Demonstration and Assessment of Additionality recommends three analysis methods including simple cost analysis (Option I), investment comparison analysis (Option II) and benchmark analysis (Option III) under sub-step 2b. Option I is not applicable to this project since there will be additional economic benefits associated with the cost savings for power procurement. Option II is not applicable to the project as the alternative scenario is electricity supplied by power grid which is not a specific project. Option III (apply benchmark analysis) has therefore been applied as the principal mechanism to demonstrate the additionality of this project. Sub-step 2b – Option III. Apply benchmark analysis 1. Selection of Appropriate Benchmark According to the “Tool for the demonstration and assessment of additionality”, discount rates and benchmarks shall be derived from: (a) Government bond rates, increased by a suitable risk premium to reflect private investment and/or the project type, as substantiated by an independent (financial) expert or documented by official publicly available financial data;


(b) Estimates of the cost of financing and required return on capital (e.g. commercial lending rates and guarantees required for the country and the type of project activity concerned), based on bankers views and private equity investors/funds’ required return on comparable projects; (c) A company internal benchmark (weighted average capital cost of the company), only in the particular case referred to above in paragraph 5. The project developers shall demonstrate that this benchmark has been consistently used in the past i.e. that project activities under similar conditions developed by the same company used the same benchmark; (d) Government/official approved benchmark where such benchmarks are used for investment decisions; (e) Any other indicators, if the project participants can demonstrate that the above Options are not applicable and their indicator is appropriately justified. In accordance with the approaches provided by The Tool, Approach (c) internal benchmark is selected to decide the benchmark of the project activity. The benchmark used in the proposed project is derived from the ACCCL internal benchmark which is based on the weighted average capital cost of ACCCL. According to the Board resolution and Five-year Development plan of Conch Group the WACC of 18% should be applied as the hurdle rate for all the new investments of ACCCL37,38.Both documents clearly state that the WACC of 18% should be used for the evaluation of all new investments. In the Five-year Development Plan (2002 to 2006) for the Conch Group, this benchmark is established as the cut-off rate of investment for all investments during the five-year period, so as to sustain the continuous expansion of investments39. The Board Resolution clearly states that ‘in order that the equity cost and debt cost can be recovered (minimum required return rate on equity and average interest of loans) the internal rate of return on investment after tax for all the new investment projects, expanded and retrofit projects must be above 18%. Changes in the national economic condition, the industrial development policies as well as the capital market can influence the capital cost of the company. Therefore the company internal benchmark may be adjusted in terms of the capital cost of ACCCL in different periods. The financial department should pay attention to the variation of company capital cost. When there is a large difference with the capital cost, the financial department should submit a proposal for amendment of the company internal benchmark to the Board for approval. Otherwise the existing benchmark is valid until the Board approves a new internal benchmark’.40

37 China International Engineering Consulting Corporation: Five-year Development Plan of Conch Group, ,September 19th ,2001 38 The Resolution of the ACCCL Board on the Development Strategy of ACCCL during the Tenth Five-year Plan of China Social & Economic Development and the Company Internal Benchmark for the Investments 39 P138, chapter 6, expected planning projects and analysis of investment potentiality, Five-year Development Plan of Conch,, drew up China International Engineering Consulting Corporation, ,September 19th ,2001 40 The Resolution of the ACCCL Board on the Development Strategy of ACCCL during the Tenth Five-year Plan of China Social & Economic Development and the Company Internal Benchmark for the Investments


To date a new company internal benchmark has not been approved by the board and as such the WACC of 18% (precise value was 17.9 % in 2003) is a valid hurdle rate to evaluate all new investments of ACCCL including the proposed project. 2. Suitability of the selected benchmark The suitability of the selected benchmark of WACC of 18% (precise value is17.9%) has been assessed based upon compliance with national policies and regulations and compliance with the requirements of the EB Tool and the Guidance I. Compliance with National policies regarding the selection of benchmark in China In China, minimum investment benchmarks for certain sectors are published in “Methods and Parameters for Financial Evaluation of Construction Projects (3rd Edition)”. The sector benchmarks are based on required returns for projects undertaken with Government funding or are in the Government’s area of focus (sectors where products are priced by the Government) e.g electricity, water supply, heat and gas supply, rail and airport. These benchmarks are not suitable for private investors41. These are the so-called sector benchmarks applied by other CDM projects in China. However, they are not a fair representation of what investors thresholds are in reality and they are just a guidance of minimum returns expected by the Government. The guidance in this book emphasizes that the published “benchmarks are not necessarily suitable for private investors. This Government reference sets out that private investors, other than the Government, should determine their own benchmark for their investments according to capital cost and risk premium otherwise they may apply the accepted minimum IRR as the benchmark of project.” 42 The guidance specifically states that the “other investors should focus on not only consider the sector’s risk, but also specific risks associated to project, opportunity cost as well as investors’ expectation to return on investment” (p197, Methods and Parameters)43. It also states that “the minimum acceptable IRR is determined by investors themselves” and that the “investors can identify their own minimum acceptable IRR as the benchmark of projects according to their own development strategy, business model, expectation to achieved target of projects, expected return on investment, opportunity cost etc. Under this case which the investors determine their own benchmark; the benchmark may be or may not be the same as the sector benchmark applied in the government funding projects. It may be higher or may be lower than the sector benchmark”44 In summary, non-state owned investors developing a company internal benchmark are permitted and

41 p196, “Methods d Parameters for Economical Appraisal for Construction Project”, China Planning

Publishing House (version 3) 42 p197“Methodology and Parameters for Economical Appraisal of Construction Project”, China Planning Publishing House (version 3) 43 p197“Methodology and Parameters for Economical Appraisal of Construction Project”, China Planning Publishing House (version 3) 44 P199, Methods and Parameters for Economical Appraisal for Construction Project”, China Planning

Publishing House (version 3)


encouraged by the relevant national policies. As such ACCCL is not required to use the benchmarks set out in this reference for their investment decisions. The two primary reasons are that ACCCL is not state owned and does not use Government funding. ACCCL is a listed company established on September 1, 1997. The company was established based on the restructuring of the previous Anhui Conch Group Company (ACGC). ACGC was established September 3rd, 1996 based on the restructuring of Ningguo Cement Plant 45. ACCCL was listed on the Hong Kong Stock Exchange on 21 October 1997 46 and ACCCL was listed on the Shanghai Stock Exchange in 2002.

As such, ACCCL (previously ACGC) and ACGC (previously Ningguo Cement Plant) is owned by multiple shareholders and its financing is from different capital channels, each reflecting various costs of capital. Therefore since the establishment of the company ACGC (previously Ningguo Cement Plant) and later ACCCL the company has a higher cost of equity than fully State Owned Enterprises or enterprises or projects which are supported by Government funding in China. This is due to the fact that ACCCL must satisfy the minimum returns required by shareholders with a higher cost of capital. As stated above the proposed project is invested by ACCCL and it is not funded by the government47. The power generation by the proposed project is for internal use not for sale to the grid. For these reasons, the internal benchmark can be applied in the proposed project and the sector benchmark is not required. II. Compliance with EB Tools and Guidance “Tool for the demonstrations and assessment of additionality”: “A company internal benchmark (weighted average capital cost of the company), only in the particular case where the project activity can be implemented by the project participant, the specific financial/economic situation of the company undertaking the project activity can be considered48. The project developers shall demonstrate that this benchmark has been consistently used in the past, i.e. that project activities under similar conditions developed by the same company used the same benchmark.” Guidance on the Assessment of Investment Analysis (version3.1) The requirements of selection of appropriate benchmarks set up in the Guidance: “In cases where a benchmark approach is used the applied benchmark shall be appropriate to the type of IRR calculated. Local commercial lending rates or weighted average costs of capital (WACC) are

45 http://www.pinsou.com/news/2006/11/29/20061129530397674.htm 46 1998 Annual Report of ACCCL& http://www.pinsou.com/news/2006/11/29/20061129530397674.htm 47 Application Report Approval of Chizhou WHR Project 48 For example when the project activity upgrades an existing process or uses a resource (i.e. some waste) available on the project site and that is not traded.


appropriate benchmarks for a project IRR. Required/expected returns on equity are appropriate benchmarks for equity IRR.” “In the cases of projects which could be developed by an entity other than the project participant the benchmark should be based on publicly available data sources” ‘Internal company benchmarks/expected returns (including those used as the expected return on equity in the calculation of a weighted average cost of capital - WACC), should only be applied in cases where there is only one possible project developer and should be demonstrated to have been used for similar projects with similar risks, developed by the same company or, if the company is brand new, would have been used for similar projects in the same sector in the country/region. This shall require as a minimum clear evidence of the resolution by the company’s Board and/or shareholders and will require the validating DOE to undertake a thorough assessment of the financial statements of the project developer - including the proposed WACC - to assess the past financial behavior of the entity during at least the last 3 years in relation to similar projects’. According to the above and in summary the requirements from the EB for the application of an internal benchmark (WACC) of 18% and suitability of applied IRR analysis are as follows: (a) There is only one potential project owner (b) The benchmark has been used in similar projects over past three years. (c) The benchmark is required by the company’s Board and/or shareholders (d) The suitability of the 18% value applied The benchmark of 18% has been selected and applied in accordance with both the additionality tool and the further guidance at the time of project’s submission. This is demonstrated below where each of the four points above is addressed. (a) There is only one potential project owner The proposed project has only one potential developer, the CCCCL, which is subordinated to ACCCL.

This can be explained as follows.

i. The proposed project falls into the nature of upgrade and retrofit, modification. This is because the project activity has the characteristics of upgrade and retrofit and modification according to the definition of modified/upgraded /retrofitted and expanded projects stated in the Method and Parameters49.

a) It is built on the site of an existing cement plant and shares auxiliary facilities with the existing plant.

b) The project relies on the existing cement production process. The fuel used in the project activity is waste heat from two 5000 t/d and one 8000 t/d clinker production lines of the existing cement plant. The project activity represents the reutilization of the waste resource from existing production process which can be deemed as extension or improvement of the existing production process. The nature of the project activity is demonstrated by the approval of FSR from Anhui DRC50.

49 P172 to 174, The Methods d Parameters for Economical Appraisal for Construction Project”, China Planning Publishing House (version 3) 50 Application Report Approval of Chizhou WHR Project


ii. The proposed project has to be developed by the project owner who is the owner of existing cement plant. Cement production is core business for the CCCCL and the power generation from the proposed project will be supplied to the cement production. Therefore, the power generation will is tightly associated with the clinker production and could also impact the clinker production. In order to guarantee the operation of clinker lines, CCCCL must control the operation of the project activity. In this context CCCCL must be the unique developer of the proposed the project.

The power generation by the proposed project is totally for internal use not for sale. As shown in the FSR of clinker lines, the waste heat would be released to the atmosphere rather than utilized for other purpose in the absence of the project activity. According to the designed work process of clinker production, shown in the clinker lines’ feasibility study report (FSR), the exhaust heat from the kiln-tail, kiln-heater, and grate-cooler of clinker production course will be vented through dust-removers51 . Also there is not any estimated revenue from the sale of waste heat was shown in the FSR of the clinker lines. (b) The benchmark has been used in similar projects over past three years. All projects undertaken in the past have applied the same benchmark of 18% that was derived from the WACC and therefore the same financial behavior has been demonstrated for the past three years. This benchmark has been applied to core investments and non core investments, new investments and retrofits/expansion of investments. Accordingly, this benchmark has also been applied to waste heat recovery projects. 1. The benchmark has been used in the similar projects before the decision making of the Project

Activity In the past, ACCCL has implemented two waste heats to power projects within its operations on a non-commercial basis which are technically the same as the proposed project. They are part of the project owners operations.

In 1996 ACCCL (previously ACGC) was awarded a grant from the NEDO programme to supply Kawasaki technology for the Ningguo Phase 1 demonstration project 52 , 53 . The project was implemented in 1998. The FSR of this waste heat recovery project was undertaken by the Design and Research Institute of Tianjian Cement Industry 54 . This FSR was based on the use of Kawasaki technology and is also based upon non-commercial finance from the Japanese Government. The full construction investment was RMB 81.8664m, where the 52m was funded by the NEDO grant55. That means the actual capital cost required by ACCCL was only RMB29.86. Thus, including this non-commercial grant financing the project IRR and equity IRR of the project were anticipated to be 19.65%

51 FSRs of two 5000 t/d and one 8000 t/d clinker lines of CCCCL 52 Relevant pages of Ningguo phase I FSR 53 http://www.osti.gov/bridge/servlets/purl/926167-oYrbRc/926167.PDF 54 P102,103 The Application Report for WHR to Power generation of Ningguo Cement Plant Phase I 55 P99 Application Report for WHR to Power generation of Ningguo Cement Plant Phase I


and 22.97% respectively. Both IRR were therefore higher than the current benchmark of 18%56 and as such the project went ahead on this non-commercial basis. Although this project was implemented in non-commercial funding, it clearly showed that ACCCL consistently applied the same benchmark 18% to assess this WHR projects based on commercial investment evaluation. Given that if the full capital cost of 81.8664m required by conch, the anticipated IRR would not reach the benchmark 18% and the project would not have been implemented by ACCCL. This demonstrates that ACCCL (previously ACGC) has always applied benchmarks higher than the Government benchmark to their projects; it also shows that they have been consistent in their investment behaviours for over 10 years. The second project, Ningguo Phase 2 was registered by the CDM EB in May 2007, Ref. 898. The FSR of the project was undertaken by SINOMA in July 2005 57. The FSR was assessed by an Engineering Consultancy Company of Anhui Province which is an independent company authorized by the Government. In the assessment Report 58 , it stated that the parameters applied in FSR were over optimistic. The real IRR was expected to be lower than that projected in the FSR and specifically it should better take account of the capital cost and maintenance costs for imported equipment59. According to this assessment Report, the project IRR was adjusted to 15.06%, and equity IRR was 15.15%, which was below the benchmark of 18% as stated in adjusted FSR of Ningguo phase II60.As such this project was rejected by the Board of ACCCL as a commercial investment proposition in the absence of the CDM as it did not meet the company’s internal risk/reward thresholds. Following its registration as a CDM project, the project was able to proceed and the Board of ACCCL was able to consider further similar waste heat to power projects, such as the present proposed CDM project, on the basis that they could generate additional revenues from CERs.

2. Together with the Project Activity, the benchmark was applied by other five similar projects Subsequently, 18% also was applied as the benchmark to evaluate the financial position of five other similar Conch WHR projects, which with the Project Activity together, are the so-called Conch 2 WHR projects. Similarly, the investment evaluation shows that other five Conch 2 WHR projects could not achieve the required minimum return by the Board and it concluded that WHR projects are not commercial investments. Following Ningguo phase II registration as a CDM project, the Conch 2 WHR projects were able to proceed and the Board of ACCCL was able to consider further similar waste heat to power projects, as such the Conch 2 proposed CDM projects, on the basis that they could generate additional revenues from the sale of CERs. Finally, these five Conch 2 projects were registered by the CDM Executive Board in 2009 (Ref.1672,1673,1674,1675, 1676). 3. Moreover, the benchmark has being applied by the following similar projects after the decision

making of the Project Activity

56 The Application Report for WHR to Power generation of Ningguo Cement Plant Phase I 57 Application Report of 9100kw WHR to Power Generation of Ningguo Cement Plant. 58 Assessment Report on 9100kw WHR to Power Generation of Ningguo Cement Plant. 59 Assessment Report on 9100kw WHR to Power Generation of Ningguo Cement Plant. 60 Application Report of 9100kw WHR to Power Generation of Ningguo Cement Plant (Adjustment).


Similarly, other 17 similar WHR projects, which are so-called Conch 3 WHR projects, are proved not commercial investments. Following the successful registration of Ningguo phase II and other 5 Conch 2 WHR projects, the Conch 3 WHR projects were able to proceed by considering that they could generate additional revenues from the sale of CERs. At present, these 17 Conch 3 projects are in the process of CDM registration. Not only ACCCL has applied the same hurdle rate 18% to assess WHR project but also has ACCCL consistently applied the same benchmark of 18% to evaluate all its investments undertaken. The full list of investments that have been undertaken by ACCCL since 2002 and prior to the investment in the proposed project are shown below (The FSR for all projects are attached for check).

Table 6 the list of investments undertaken by ACCCL from 2002 to 2006

Year Project title

2002 5000t/d Clinker Line (Phase II) of Anhui Digang Conch Cement Company Limited

2002 4000t/d Clinker Line(Phase II) of Huaining Conch Cement Company Limited

2002 5000t/d Clinker Cement Production Retrofit Engineering of Zongyang Conch Company Limited

2002 20000t/a PVC mixing material producing line and 20000t/a high quality alloy profile production line of Wuhu Conch Alloy Profile Company Limited

2003 4000 t/d Clinker Cement Production Retrofit Engineering of Baimashan Conch Cement Company Limited

2003 10000 t/d Clinker Cement Production line Retrofit Engineering of Tongling Conch Cement Company Limited

2004 Phase III 2x4500t/d Clinker Line of Digang Conch Cement Company Limited 2004 1.65 million tone/a cement grinding line of Taizhou Conch Cement Company

Limited 2004 Phase I 2×5000t/d Clinker Line of Wuhu Conch Cement Company Limited 2004 Phase I 2×5000t/d cement Clinker Line of Xuancheng Conch Cement Company

Limited 2005 Phase I 4000t/d cement Clinker Line of Beiliu Conch Cement Company Limited 2005 4x4500 t/d Cement Clinker Production Retrofit Project of Chizhou Conch Cement

Company Limited 2005 Phase II 2×4500t/d Cement Clinker Production Retrofit project Wuhu Conch

Cement Company Limited Although Ningguo phase I was implemented before the Board resolution, these two projects show that the technology was not a commercial investment option for ACCCL without the free finance and this is why ACCCL did not look again at waste heat recovery for 8 years after the initial demonstration at Ningguo Phase 1. They also clearly demonstrate that the Board of ACCCL has been consistent since Ningguo phase 1 on their evaluation of waste heat recovery projects as a non-commercial investment proposition. It also shows that the CDM was instrumental for ACCCL in commercializing these opportunities through the significant additional revenues that would be available to them.


Considering all the examples above, it can be demonstrated from ACCCL’s investment behaviour that their investment thresholds have always been consistently applied to “similar projects with similar risks”. The same financial behaviour has been observed more than three years. Indeed, all new investments including those in core business and non-core business are required to meet the minimum financial return in ACCCL. The technologies that are not core business in ACCCL such as power generation from waste heat have much higher technology risk than those that are core business (clinker lines). As such the same minimum return required from those projects that are not core business will be viewed with more conservatism scepticism. (c) The benchmark is required by the company’s Board and/or shareholders ACCCL has been required to apply their own internal benchmark to assess all its new investments by the Board including the projects for its core business and other projects of non core business projects since the establishment of the company including its parent company ACGC (previously Ningguo Cement Plant). The benchmark of 18% was stated in the Five-year Development Plan of Conch Group (2002 to 2006) which was undertaken by China International Engineering Consulting Corporation which is under the NDRC. In this Five-year Plan, it is pointed out that based on estimated financing cost (capital cost) for all the new investments, the IRRs for all new investments undertaken by Conch Group during the five-year period should be above 18% in order to sustain the continuous sources of finances for the expansion of the core business61. This is confirmed by the Resolution of the Board62 in 2003. As described above at no time has ACCCL invested in projects below this threshold and all investments undertaken by ACCCL have had equity returns above the benchmark of 18%. As such it is demonstrated to be both suitable and appropriate to use this benchmark for all investments within ACCCL. According to new 5 years plan63, so far the Board of ACCCL has not issued any new benchmark, so the benchmark of 18% is applicable since the decision making, as well as now. (d) The suitability of the 18% value applied To assess if the WACC of 18% is an appropriate benchmark, the determination of the WACC and the suitability of the WACC in the year of the investment decision have been assessed.

i. Determination of the WACC The WACC of ACCCL includes the cost of debt and cost of equity. It can be quantified as: E D WAAC=Ke ×——— + Kd × ———

61 P138, chapter 6, expected planning projects and analysis of investment potentiality, Five-year Development Plan of Conch, drew up China International Engineering Consulting Corporation, ,September 19th ,2001 62 The Resolution of the ACCCL Board on the Development Strategy of ACCCL during the Tenth Five-year Plan of China Social & Economic Development and the Company Internal Benchmark for the Investments 63 Page 143~145, 11th- 5 years Development Plan of ACCCL, 2006. China International Engineering Consulting Co.


E+D E+D Where: Ke—— Cost of equity

Kd—— Cost of long-term debt E—— Equity D—— Long-term Debt

The cost of debt is simply decided by average interest charges of loan. The cost of equity is related to the dividend paid out to shareholders. The dividend growth model (DGM) is applied to determine the cost of equity of ACCCL. The cost of equity is related to the dividend paid out to shareholders and market value of a company. The formula of calculating cost of equity is as follow: Ke: --- Dividend model d1 Ke= ————+g P0

Where: d1——dividend to be paid in one year g—— Average growth rate of dividend in past years

P0——current ex div market price of the share As seen from above, the cost of equity is dependent on how much the dividend will be paid out to shareholders and the performance of a company which related to market value of the company. g:

Based on the principles of calculation for the WACC addressed above, the WACC for each year, and cumulative average WACC over past years are presented as follows: Table 7 WACC from 2003 to 200764

2003 2004 2005 2006 2007WACC 17.90 % 28.57% 27.45% 15.95% 26.05%Cumulative average WACC 17.90% 23.24% 24.64% 22.47% 23.18%

ii. The suitability of the WACC in the year of the investment decision

From the above calculation of the WACC from 2003 to 2005 (the decision making year), the WACC in 2003 was 17.90% (18%), which is the lowest value of cumulative average WACC over three years since the promulgation of the relevant Board decision. The decision making of the proposed project was in early 2005, and the FSR was conducted in middle 2005, and as such the cumulative average available

64 Attached calculation of the ACCCL WACC for each year


WACC in the time of decision-making of the proposed project should be the value in 2004 which is 23.24%. Besides, after the decision making, the cumulative average WACC from 2005 to 2007 are 24.64%, 22.47%, and 23.18% respectively. Therefore, the benchmark applied in the proposed project is the most conservative. In theory, the WACC could be changed every year. However, in the longer term, the WACC of company stands within a relatively stable range. In practice, ACCCL reassesses its WACC on the consideration of multiple factors such as theoretical changes in the value of the cost of equity and debt, changes in macro-economic conditions in a long-term period and the IRRs achieved in past investments etc. Therefore, ACCCL may not change its benchmark in terms of theoretical WACC each year. The board resolution clearly states65 that when there is no large deviation in the theoretical WACC compared to the previous year, then the benchmark should remain unchanged.

The WACC in 2003 was 17.9 % (18%) The board resolution also confirms 18% as an internal benchmark. The 10th five-year plan suggests that 18% should be the hurdle rate for all the new investments from 2002 to 2006 based on an estimation of capital cost over the period. Also, in the 11th 5-year plan 66, all investment evaluations and estimations are based on a hurdle rate of 18%.

From the calculation of the WACC, WACC 18% can be seen to be a most conservative benchmark for the proposed project. Also the Five-year Development Plan for Conch Group and the Board solution stated that WACC of 18% as the benchmark for all the investments undertaken by ACCCL is required and clarified when the internal benchmark should be adjusted in terms of the changes in WACC. Thus WACC of 18% is applied as the benchmark of the proposed project is a suitable and conservative when the WACC of other companies in the cement sector are demonstrated to be at this level67.

According to the Additionality Tool, discount rates and benchmarks shall be derived from:” Estimates of the cost of financing and required return on capital (e.g. commercial lending rates and guarantees required for the country and the type of project activity concerned), based on bankers views and private equity investors/funds’ required return on comparable projects.” In order to demonstrate the appropriateness of the WACC applied as the benchmark, the analysis to the cost of financing and required return on capital is assessed by Essence Securities (Investment fund). The report commissioned in 2008 “The Analysis to the benchmark of ACCCL investment projects”68 issued by Essence Securities pointed out that average WACC of ACCCL from 2003 to 2007 is between 18% and 24%, which is consistent with the average WACC ranged from18% to 22% for listed cement companies in China in the same period. The report from Essence Securities also states that all IRRs of investment projects in the cement sector were above 16% in that period and while all investment projects undertaken by ACCCL were higher than 18%69. 65 The Five-year Development Plan of Conch, China International Engineering Consulting Corporation, and The Resolution of the ACCCL Board on the Development Strategy of ACCCL during the Tenth Five-year Plan of China Social & Economic Development and the Company Internal Benchmark for the Investments 66 Page 143~145, 11th- 5 years Development Plan of ACCCL, 2006. China International Engineering Consulting Co. 67. The Analysis to the benchmark of ACCCL investment projects, Essence Securities, 18th December 2008 68 The Analysis to the benchmark of ACCCL investment projects, Essence Securities, 18th December 2008 69 P9, The Analysis to the benchmark of ACCCL investment projects, Essence Securities, 18th December 2008


The report also states that for WHR projects, the IRR should be expected higher than or at least the same as investments for its core business due to three main reasons. Firstly, WHR projects are fully reliant on the clinker line production. Secondly, the WHR project can influence on the clinker line production if the WHR does not perform well. Thus it will lead a big risk to its core business. Finally, there is high operation risk in WHR project due to the project owner lacks of experience70. ACCCL’s investment behaviour has also been noted by independent observers in the market. A report issued by Noble, a UK-based investor and equity analyst, states that “Having met China’s largest cement company [ACCCL] in the past, while covering the cement industry, we would note that the group not only expects a high return on projects but is also very focused on cement. Even a high return non-core project would likely be rejected in favour of the core business.” 71 This confirms that not only does ACCCL consistently require a higher benchmark than might be expected from a state owned enterprise, but they also require higher returns on projects that are not core business such as waste heat recovery for power generation. The 18% benchmark can therefore be demonstrated to be appropriate and applicable. In conclusion, not only applying internal benchmark of WACC as the benchmark of the proposed project complies with national policies and meet all requirements of Tool as well the Guidance; but also the similar projects undertaken by ACCCL over past years clearly showed that ACCCL has been applying the same value of WACC as internal benchmark to evaluate all its projects in the past and now. Furthermore, the recalculation of WACC and external evidences as well as ACCCL internal documents fully demonstrated that 18% WACC applied as benchmark in the proposed project is completely appropriate and very conservative. Sub-step 2c. Calculation and comparison of the financial indicator 1. Major parameters and assumptions The major parameters and assumptions are listed in the following table to calculate the financial indicators of the Project Activity.

Table 8 Parameters and Assumptions for Financial Assessment

Parameter Value Unit Source Power generation Installed capacity 28.6 MW FSR Net power generation 204,600 MWh FSR Auxiliary electricity consumption rate 7% FSR Revenue Construction period 1 year FSR Operation period 20 year 15years in the FSR, and

apply 20 years here for

70 P10-11,The Analysis to the benchmark of ACCCL investment projects, Essence Securities, 18th December 2008 71 Clear Capital, Noble, Carbon Credit Developers Insight, October 3 2008


conservation Electricity tariff(exclusive) 376 RMB/MWh FSR,72 Capital cost Construction investment 216,528,100 RMB FSR Unit capital cost 7,571 RMB/KW Calculated Working capital 5,500,000 RMB FSR O & M 24,969,428 RMB FSR Depreciation and Amortization Residual rate 5% FSR Depreciation period 12 year FSR Amortization period 10 year FSR Tax and Additional surcharge Income tax 33% FSR VAT 17% FSR Construction surcharge 5% FSR Education surcharge 3% FSR CER price 100 RMB PDD Crediting period 10 year PDD

Suitability of the assumptions applied: The input values applied in the investment analysis are derived from the FSR of the project. The FSR was undertaken by Sinoma International Engineering Co., Ltd which is an independent design authority73,74. The FSR was approved by the government authority which is Anhui Province Development and Reform Commission75. In this context, the FSR should be deemed as credible source to be applied to make investment decision. The key input values in IRR calculation taken from the FSR and was consistent with relevant criteria for similar projects required by government regulations. Only the project lifetime in the investment analysis is not from the FSR. This is explained in the PDD later. The input value is detailed and evidenced by relevant documentation and statistical data for the cross-check as follows: Total Investment76 The total investment cost is taken from the FSR which was estimated by the Design Institute according to the national criteria for similar projects77:

72 Certification letter of the electricity consumption and tariff of CCCCL from 2006 to 2008 73 Qualification rank: A. No. Gongzijia 2031312004, issued by National Development and Reform Commission of P.R China 74 Application Report of Chizhou WHR project 75 Approval of the “Application Report of Chizhou Conch WHR project” by Anhui Province Development and Reform Commission 76 Summary of key technical and investment parameters,P6, Application Report of Chizhou WHR project 77 P46 Application Report of Chizhou WHR project


The Installation and construction costs are in accordance with the guidance for Anhui province. The construction cost is estimated based on the guidelines for similar size WHR projects and the installation cost is estimated based on the guidelines for installation charges of similar size projects. All purchase costs for domestic equipment refer to the factory price or quoted prices. The imported equipment cost is estimated based on the foreign manufacturer quoted price (C.I.F). The calculation of the duty, VAT, financing and exchange rates has been done in accordance with the list of levied duty on import of equipments. Other costs of construction engineering are estimated in accordance with the Budgetary Norm for Engineering Construction of Building Material sector (1992), issued by the State Building Material Bureau that gives reference to the specific situation of the proposed project. The basic preparation cost is calculated as 4% of construction engineering cost (construction engineering includes construction cost, installation cost and other construction engineering costs)

1.1. Construction investment Value in FSR (10000 RMB)

Construction Cost 1328.53 Key Equipment Cost 13876.19

Installation Cost 2893.23 Other Construction Engineering Costs

(including land and other construction costs) 3554.86

TOTAL 21652.81 Unit capital cost of the project activity is 7,571 RMB/KW. This is a reasonable by comparing to the average unit capital cost of 7610 RMB/KW for 14 registered CDM project in UNFCCC78.

1.2. Working Capital Working capital is calculated as 0.025RMB/kWh, which equates to about 5.5 million RMB. The actual working capital required was 0.04-0.05RMB/kWh 79 . And also according to estimating approach for working capital, the working capital usually accounts for 5%-12% of fixed assets investment80. The working capital applied in the IRR calculation is only 2.5% of fixed assets investment. Therefore, the working capital applied in the IRR calculation is conservative. 2. Power Tariff The power tariff rate applied in the investment analysis of the Project Activity is 376 RMB/kWh (excluding tax and other additional rate), which equals the value in the FSR. Furthermore, it was also proved by the actual electricity bill of the CCCCL81.

78 Statistical data in Chizhou IRR spreadsheet 79 The clarification of demanded working capital over operation period 80 The Estimation of Engineering. China Electric Publisher, 2008. http://jc.cepp.com.cn 81 Certification letter of the electricity consumption and tariff of CCCCL from 2006 to 2008


3. Power Generation The average of operation hours of the clinker line is 7680 hours. The power generation of the project is estimated in a basis of 7680 hours each year, full operation hours of the clinker lines. This is conservative as normally, the operation hours of a WHR project are 5% less than the clinker line due to repairs and redundancy of equipments82 . Therefore, 7680 operation hours is unlikely to happen in reality; however it is very conservative against the average operation hours of 6650 for 14 registered projects83. 4. Operation Period From the following evidences, we can see that the project lifetime was designed as 15 years in the FSR, but 20 years is applied in the investment analysis which is appropriate and conservative:

The AQC and PH boilers are the key equipment of the proposed project. The capital cost of boilers accounts for 44.1% while 14.5% for turbine-generator 84 . Therefore, the lifetime of the boilers determines the lifetime of the project. The lifetime of the both boilers are 20 years85, accordingly, the operation period of the project activity is applied in the investment analysis.

Considering that the waste heat and smoke from the kiln that contains large amounts of dust, this is

expected to lower the lifetime of the boiler and turbine generator. This is because the AQC boiler utilizes the waste heat and smoke gas from the front of the kiln and the PH boiler takes the waste heat and gas from the back of the kiln. When the parameters of waste heat and gas fluctuate, the two boilers influence each other. The adjustment in operation is very difficult. Furthermore, if the AQC boiler has a fault then either the whole power plant will stop operating or the cool water feed into the PH boiler will be stopped. These effects cause wear of the PH boiler that impacts it’s lifetime as well as causing safety problems86.

The lifetime of 14 registered similar projects is from 15 years to 21 years, with an average value of

about 17 years. Therefore, 20 years operation period is reasonable and relatively conservative87. Therefore, applying 20years operation period in the PDD is conservative and this also is compliant with the EB Guidance on investment analysis which requires the operation period for the investment analysis to be from 10 years to 20 years. 5. O & M cost The total O & M cost of 24.97 million RMB is broken down as follows:

82 http://www.chinacements.com/news/2007/4-11/C134253705.htm 83 Statistical data in Chizhou IRR spreadsheet 84 Application Report (FSR) of Chizhou WHR project 85 Technical specification of PH and AQC boilers 86 http://www.ccement.com/news/2005/11-11/C1764869363.htm 87 Statistical data in Chizhou IRR spreadsheet


5.1. Major material and Power Utility Costs

Operation Cost Value in IRR calculation(Million RMB)

Material and water, power (utility cost) 12.23 88 Chemical cost 1.71

Water Cost 4.39 Power Utility Cost (Charge by the grid for

connection to the grid) 6.13

Annual Net power generation 204,600MWh NB: 1. The connection charge was considered in the IRR calculation as this is the cost that has to be paid to the power grid company by the project owner according to the government’s policy regarding the administration of captive power plants. Therefore it can not be seen as cost-saving. Indeed, the WHR project is a captive power plant. The electricity generated by the WHR captive power plant is used in the production of clinker line rather than sold to power grid. However the captive power plants have to be connected to the power grid according Chinese government’s policy for power plant administration89. Thus the connected captive plant has to pay the reasonable fee for consumption of power grid’s resources. In general, the connection charge on the captive power plants includes the charge for back-up capacity and charge for the consumption of resources and service of the power grid90 91. The cost for the consumption of grid resources and service was calculated into the O&M cost according to governments’ policy:

The connection charge of 0.03RMB/KWh in the IRR calculation of the project is from the FSR. This value is slightly lower than that in the Connection Agreement of Chizhou Conch (0.05RMB/KWh) which is agreed by both powers Grid Company and captive power plant, therefore it is conservative92 . The captive power plants are connected to the power grid is formulated by the national supervisory body of electricity. According to the Policy of Management for operation of power plants connected to the power grid, issued by supervisory body of Chinese power，all power plants should be connected to the power grid including the captive power plants in order to well integrate all power generation resources and guarantee stable operation of both power grid and power plants/generation unit, as well as provides with high quality of power supply93. The policy defines that scope of management covers

88 P58, Application Report of Chizhou WHR project; connection agreement 89 The Policy of Management for operation of power plants connected to the power grid, issued by supervisory body of Chinese power 90 Discussion on the connection charge to the power grid and purchase price for the big users who are directly supplied with power by power plants, http://www.gdlk.com.cn/output_html/20042281717.htm; 91 Research of the Paid Service for Connection with Power Grid of Power Plants Owned by Industrial Users for Their Own Use, No.141 Shandong Dianli 92 Connection Agreement of Chizhou Conch 93 The Policy of Management for operation of power plants connected to the power grid, issued by supervisory body of Chinese power


that all power plants and power generation unit including captive power plants and public power plants which are connect to provincial power grid and regional power grid. In terms of content of management, the power grid is responsible to manage the security management, operation management, repairs and maintenance, technical management, and technical supervision to the connected power plants94. That means the power grid has to input the resources in order to provide with such resources and services to the connected power plants. As such, the power grid charges on the connected power plants for their consumption of the resources and services95,96. 2. Not only the government requires all captive power plants must be connected to the power grid, but also captive power plants demands to connect to the power grid even it does not sell the power to the power grid during operation period. This is to guarantee a procurement of sufficient power supply for the core business when the captive suffers redundancy. Given that the captive power plants would not be connected to the power grid, there would not be substitute supply of power to the core production when the captive power plants are redundancy. In the context stated above, the CCCCL signed the connection agreement with the power grid company to ensure to obtain enough guarantee of power supply as needed.

5.2. Labour Cost97

The number of employees is 25 and the average salary and benefit per employee is 32,000RMB/year and therefore the total annual labour cost is 800,000 RMB. The labour rate is estimated in accordance with the average rate of the cement plant in Anhui Province in 2006. The actual average salary and benefit per employee in the Conch Group is 4,9000RMB/year in 2005, 54,600RMB in 2006 and 58,800RMB in 2007 98 . On this basis, the value used in the IRR calculation is conservative.

5.3. Repairs and Maintenance cost The repairs and maintenance cost is estimated to be as 3.98% of fixed assets investment and is given as 8.74 million RMB.

5.4. Other O& M costs Other O&M costs/overhead covers all management costs. This includes management salary and benefit; benefit expenditure: company pays medical, health, housing fund, pension, training cost, insurance, unemployment cost for employees, labor union cost, including expendable supplies, office cost, training

94 The Policy of Management for operation of power plants connected to the power grid, issued by supervisory body of Chinese power 95Research of the Paid Service for Connection with Power Grid of Power Plants Owned by Industrial Users for Their Own Use; No.141 Shandong Dianli 96 Discussion on the Rational Form of connection charge to the power grid and purchase price for the large consumer who are directly supplied with power by power plant 97 P56, Application Report of Chizhou WHR project 98 The statistics of employee’s salary and benefit in ACCCL


costs, business cost, distribution costs, travel costs, entertainment; property tax, land tax, the shares of board cost, cost of vehicle licenses, sewage treatment charge, green-built cost, insurance of assets, cost for legal advice, labour insurance, auditing charge, labour unit charge etc. It is calculated as 0.016 RMB/KWh. The unit O&M is 0.1135 RMB/KWh which is in a reasonable range compared to average unit O&M of 0.1737 for 14 registered WHR projects. 6. Income tax calculations The EB51 Annex 58 –Guidance on the assessment of investment analysis (Version 03) indicates that” In cases where a post-tax benchmark is applied the DOE shall ensure that actual interest payable is taken into account in the calculation of income tax. In such situations interest should be calculated according to the prevailing commercial interest rates in the region, preferably by assessing the cost of other debt recently acquired by the project developer and by applying a debt-equity ratio used by the project developer for investments taken in the previous three years.” The WACC used as benchmark for the proposed project is a post-tax benchmark. Therefore, according to the guidance mentioned above, the income tax after interest is used for IRR calculation for the proposed project (please see the IRR spreadsheet for details). The FSR Scenario is chosen for the investment analysis because it’s in line with the situation during the decision making, and the IRR is calculated by using the income tax after interest. 2. The main result of financial indicator calculation The financial indicators are presented below ( i )using these fixed input values and (ii) using variable input values according to reasonable assumptions. (i).Fixed Input Values Fixed input values were used by the project owner for the electricity tariff and O&M costs for the whole operation period. This is required by the national criteria. According to “Methods and Parameters” which is the national guidance for evaluation of new investments and is also the guidance for Design Institute to conduct FSRs99, the tariff rates for both output and input values should be predicted at the beginning of the operation period and that these predictable tariff rates will be fixed and applied throughout the operation period. This is due to the fact that the operation period is long and it is difficult to predict the inflation rate and the outcome of that rate100. Furthermore, the rates at the beginning of the project for both electricity and O&M costs also represent the rates which project owner can obtain and ensure to use for the investment analysis at the time of making the decision whether to proceed with the project. Accordingly, the decision to go ahead with the project is based on the assumptions of fixed O&M costs and electricity tariff rates.

99 P84 Method and Parameters (Version 3), published by the NDRC and the Ministry of Construction of China, 2006 100 P84 Method and Parameters (Version 3)


Also in China, the electricity tariff is controlled by the Chinese government and it is hard for project owner to forecast the future electricity tariff rate and the inflation rate for the O&M cost. The electricity tariff is related tightly to the national economy. The Government will only raise tariffs when it is absolutely necessary and therefore when the costs of power production have increased sufficiently to justify an increase. The power tariff is increased only due to the rise in operation costs (such as coal price, labour, transportation and interest rates) of the power generators. This is because of fears that it could further drive up inflation and as a developing country it is important to keep prices down to ensure affordability across society101. Moreover, the benchmark is based an assumption that the fixed input values were used; as such a comparable assumption should be applied in investment analysis. As such fixed input values were applied by the project owner for the electricity tariff and O&M costs. These were applied in the calculation of the IRR over the whole operation period in the FSR by the Design Institute. Accordingly, these fixed input values from FSR were also applied in IRR calculation of the PDD. Any change in the electricity tariff is uncertain and this is dealt with by analysis of the IRR in the sensitivity analysis, where the robustness and the likelihood of the project exceeding the benchmark is dealt with. The financial indicators obtained based on the above parameters in fixed input value are presented in the following Table, including project IRR without CERs revenues. Without CERs revenues, the project IRR of the Project is 15.92% lower than the benchmark and it could be concluded that the proposed Project is not financially feasible. With CER revenue, the project IRR is 20.90%, above the benchmark.

Table 9. Comparison of project IRR without CERS revenues and with CERs

Item Without CERs revenue With CERs revenue Benchmark Project IRR 15.92% 20.90% 18% NPV -19,300,809 RMB 27,818,627 RMB 0

What’s more, the IRR in actual scenario is calculated, which is 15.98%, also below the Benchmark. (ii). Variable Input Values In order to demonstrate that the use of fixed input values is conservative, the IRR has also been calculated by using variable input values. Specifically the power tariff and O&M costs have been adjusted in accordance with the historical trends for price increases of raw materials, labour costs and power tariffs given below (Also for details, please see attached spreadsheet) over the last five years

According to Anhui provincial statistics, the power tariff from 2003 to 2008 is 452, 468, 510, 532.5, 532.5, and 572.0 RMB/MWh respectively 102.. This represents an annual average growth rate from 2004 to 2008 of 4.87%.

101 http://www.ndrc.gov.cn/xwfb/t20050628_27624.htm 102 http://www.ahpi.gov.cn/jgzc/%CD%EE%BC%DB%B7%FE%5B2003%5D146%BA%C5.htm, http://www.czzwgk.gov.cn/XxgkNewsHtml/MA602/200802/MA602050601200802004.html, http://www.whwjj.gov.cn/news/content.asp?id=69&typeid=6#, http://www.whx.gov.cn/DocHtml/old/1054.html http://www.huizhouqu.gov.cn/bjss1.asp?id=114105102101&mc=%D3%C3%B5%E7%BD%C9%B7%D1


Meanwhile, the annual growth rate of purchase prices for raw materials, fuels and power in Anhui province was 6.7%, 15%, 7.1%, 3.9%, and 4.53% in 2003, 2004, 2005, 2006 and 2008, and the data in 2007 was missing. Thus, the average annual growth rate is 7.45% from 2003 to 2008103. Additionally the average wage in the manufacturing industry from 2003 to 2008 is 9701, 11595, 13651, 15816, 19067 and 22644 RMB/year104, which presents an average annual growth rate of 18.49%. The statistics show a clear trend of increasing costs for material, coal, water, transportation and labour. Taking an average of the labour growth rate and the material growth rate we see an annual increase of 12.97% which compares to an average annual increase of 4.87% for the power tariff, thus demonstrating that the use of fixed values is conservative. From the statistics, there is clearly a trend of increasing costs in the material, coal, water, transportation and labour. We assumed a conservative annual increase of 12.97% in O&M cost and an increase of 4.87% in power tariff rate were applied to the O&M costs in the calculations using variable values. When an average growth rate of 4.87% for power and an annual increase of 12.97% for O&M costs were applied in calculation of the IRR, the project IRR is then 11.83%, which is still lower than the benchmark and demonstrates that the project is still additional by the use of fixed input values.

Table 10 Comparison of Project IRR and NPV in using variable values

Item Without CERs revenue Benchmark With CERs Project IRR 11.83% 18% 18.74% NPV -41,362,902 RMB 0 5,756,534 RMB

Sub-step 2d. Sensitivity analysis: The sensitivity analysis is to show that if the financial attractiveness of the proposed project is robust to reasonable variations in the critical assumptions, in other words, if investment analysis could consistently supports the conclusion that the Project Activity is unlikely to be financially attractive. In that case, the sensitivity of the IRR to CERs price is not included in the following analysis. Also sensitivity analysis is only conducted using fixed input value The following three parameters are considered in the sensitivity analysis:

1. Construction investment 2. Annual generation 3. Annual O&M cost 4. Tariff rate

The results are shown in the following Table and Figure.

Table 11 Sensitivity analysis on key investment parameters

http://zwgk.hsq.gov.cn/read.aspx?id=2687 103http://www.stats.gov.cn/ 104 http://www.stats.gov.cn/


-20% -15% -10% -5% 0% 5% 10% 15% 20% Construction investment

19.64% 18.57% 17.61%

16.73% 15.92%

15.18%

14.49%

13.86% 13.26%

Annual net power generation

10.90% 12.22% 13.49%

14.72% 15.92%

17.09%

18.24%

19.37% 20.48%

Annual O&M cost

17.53% 17.13% 16.73%

16.33% 15.92%

15.51%

15.10%

14.69% 14.27%

Tariff rate 10.90% 12.22% 13.49

% 14.72% 15.92

% 17.09

% 18.24

% 19.37% 20.48%

Sensitivity Analysis

8.00%

13.00%

18.00%

-20% -15% -10% -5% 0% 5% 10% 15% 20%

Variation

IRR

Construction investment Annual generation Annual O&M cost Tariff rate

Figure 5. Sensitivity analysis graph in key investment parameters

Justification of the project IRR will not be above the benchmark: Although the project IRR might be higher than the benchmark when the key parameters change beyond the scope of -20% to 20%, these situations are extremely unlikely as the investment analysis is already conservative. This is explained below for each situation specifically. The IRR could touch benchmark when any one of the following parameters varies beyond the variable range.

Variable Range Power tariff +8.8%

Power generation +8.8% O&M cost -25.8%

Construction investment -12.2% . 1. Increase in tariff rate The project IRR would exceed the benchmark when tariff rate increased by 8.8% as analyzed above, over


last seven years from 2003 to 2008, the power tariff rate only increase by 4.87% which is far below 8.8%. Therefore it is extremely unlikely that the project IRR might be beyond the benchmark. 2. Increase in power generation The project IRR might be higher than the benchmark when operation hours increased by 8.8% which represents operation time of 8,355 hours a year. This is impossible because the power generation of the project is dependent on waste heat generated by the clinker production which will be influenced directly by the clinker output and equipment operating hours. The annual operation time of clinker production line of CCCCL is about 320 days105, equal to 7,680 hours a year. The maximum operation hours of the project activity should also be the maximum operation hours of clinker production line. Therefore the project IRR would not be above the benchmark in any case. 3. Decrease in construction investment and O&M cost If the construction investments and O&M cost are respectively lowered by 12.2% and 25.8%, the project IRR would be close to the benchmark. However, this is very unlikely to happen due to the trend of increasing prices in Anhui province over last five years. All of the costs in Anhui province where the project is located such as for materials power and labour have been increasing for the last five years as shown in B.5 and sub-step C. Also in 2003, 2004, 2005, 2006 and 2008 (the data in 2007 is not available), the Anhui province total price indices of investment in fixed assets were 3.5%, 6.1%, 1.0%, 1.9%, and 9.43% respectively106. There is clearly a trend of increasing investment costs. Besides, from the year 2004 to 2008, the indices for ex-factory products are 8.2%, 3.3%, 3.1%, 3.6%, 8.4% respectively107, this also shows an upwards trend. Therefore the total cost of this project is extremely unlikely to decrease. A decrease in construction investment and O&M costs is considered to be extremely unlikely. Therefore the project IRR of the project will remain below the benchmark. From the analysis above, it can be seen that the proposed project is not financially attractive to ACCCL. The project will not achieve the financial returns comparable to an investment in clinker production. Without further incentive, in this case from the CDM, ACCCL would not to invest in the proposed project. Step 4. Common Practice Analysis Sub-step 4a. Analyze other activities similar to the proposed Project Activity

105 the Application Report of CCCCL WHR project 106 http://www.stats.gov.cn/ 107 http://www.ahtjj.gov.cn/news/open.asp?id=8661

http://www.ahtjj.gov.cn/tjgb/tjgb2005.htm http://www.ahtjj.gov.cn/tjfx/06gb.doc http://www.ahtjj.gov.cn/tjgb/080228.htm

http://www.ahtjj.gov.cn/news/open.asp?id=30287


The similar projects are defined as the project in the same province, with similar scale, with the same WHR technology. The similar projects should be confined at the time of decision making. However, to assess whether or not the similar projects have been spread over the province since the decision-making, a further analysis to the common practice was conducted up to the end of 2008. The scope of similar projects is defined as follows: 1. Anhui Province is selected as the region for the common practice analysis. The reasons are detailed below: a) The electricity tariff of every province is different. This is the most important factor influencing the

revenue from waste heat power generation, and hence affects the investment analysis of the projects. Cement companies within the same province are therefore selected for the common practice analysis;

The investment environment for each province in China is different. This is due to a variation of available natural resources (including coal), the economic development level, the industrial structure, the fundamental infrastructure, development strategy and the policy framework. These all affect the demand for products in terms of amount as well as the types of products and technologies.

As such a number of key economic factors vary from province to province. These include tariff rates of products, the cost of materials, the cost of electricity and other utilities such as water, the cost of labour and services and the types of loan that can be obtained. These all vary between provinces.

Therefore China cannot be considered to be a homogeneous country, but rather should be considered as a country made up of a number of “smaller countries” comparable in size and diversity to a “large European country”. Accordingly, only projects within the same province can be truly comparable.

b) Also it is well known that cement products are sold within a distance called ‘sales radius’, and the

factors that influence the sales radius includes regional transportation conditions, the cost of production, the mode of transportation and transportation facilities for the product, the distribution of limestone resources, the local economic development level as well as the local consumption level. Therefore, the sales radius of cement products means that the cement industry has distinct regional characteristics. In China, the sales radius of cement product is normally between 250~300km, and the optimum sales radius refers to the regional market that within 200km108. From the perspective of sales radius, cement companies in Anhui Province have a similar background, thus we say they are comparable.

2. The project with installed capacity which varies within a range between -50% and 50% of the proposed project are defined as similar project. This is because the different project scale may lead to variation of investment risky due to discrepancy investment cost and operation cost etc. Relevant installed capacity of WHR project should be above 14.3 MW. Thus, the projects with the installed capacity between 14.3 MW and 42.9 MW should have been included in the range of similar projects. However, we extend the range of similar projects to all sizes due to the limited WHR projects in Anhui province. 3. The projects with low temperature WHR technology including other technology and foreign technology are involved in the range of similar project.

108 The Chinese Cement Sector Current Situation and Development Strategy http://www.ccafm.com.cn/neikan11/xianzhuang.htm


4. According to EB 38 new guidance was issued (paragraph 60) that states “The Board clarified that in the context of conducting common practice analysis, project participants may exclude registered CDM project activities and project activities which have been published on the UNFCCC CDM website for global stakeholder consultation as part of the validation process.” By the end of 2008, there were 54 new dry-process cement production lines with daily output above 2000t/d in Anhui Province109.The clinker lines with daily output below 2000t/d are excluded. This is because the clinker lines with daily output below 2000t/d are restricted to build according to government policy110. There are 26 projects that were built based on 49 clinker lines. Amongst the 26 WHR projects, 16 projects are applying for CDM 111, giving 10 similar projects to the project activity. The similar projects have respectively been identified and listed in Table 12 together with any facilitating circumstance. Table 12 Other similar waste heat recovery projects in Anhui Province

109 Digital Cement, No.2 2009 110 The development policy for cement sector 111 Additional attachment is provided as reference


Sub-step 4b. Discuss any similar options that are occurring: The table 12 listed 10 similar projects to the project activity. However these projects have different background from the project activity. Each project’s circumstance was analyzed as below:

No. Project Name

Installed Capacity of WHR projcet

Facilitating circumstances Public Source / reference

1

Chaodong Cement ltd. Co Chaohu cement plant WHR project 4

A Demonstrate Project in Chaohu City

http://www.chsme.gov.cn/news_list.asp?classid=124&id=376

2 Anhui Runji Cement ltd. Co WHR project 9

861 key project of Anhui province

http://cn.chinagate.cn/economics/2008xm/2009-03/04/content_17376176.htm

3

Chaodong Cement ltd. Co Haichang cement plant WHR project 27


http://www.dcement.com/Article/200902/72106.html

4 Panjing Cement plant WHR project 18


http://bbs.c-bm.com/dispbbs.asp?boardID=3&ID=76777&page=11

5 Anhui Pearl Cement Co. Ltd. WHR project 18

It is financed by SINOMA, which is a large enterprise owned and administered by central government.

http://www.zzsn.net/Root/news/newsShow.asp?id=476&ClassID=CnNews1

6 Longyuan Constrcution WHR project 4.5

Energy saving and technology improving financial support fund of the government

http://www.lycg.com.cn/cn/gsdt/nbdt/news263.html

7 Ningguo Conch WHR project phase I 6.48

financial support from Janapese government

http://www.osti.gov/bridge/servlets/purl/926167-oYrbRc/926167.PDF

8 Guangdetongxing WHR project 3.5


http://www.gddj.gov.cn/news_view.asp?newsid=371

9 Three lions hede WHR project 9


http://www.gdzcc.org/hyqy/ShowArticle.asp?ArticleID=576

10 Langxisute Cement WHR project 4.5

supported by government as one of “eleventh 5 year” project

http://www.xuancheng.gov.cn/xxgkweb/XxgkNewsHtml/PA003/200902/PA003010803200902001.html

http://cn.chinagate.cn/economics/2008xm/2009-03/04/content_17376176.htm�



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http://www.osti.gov/bridge/servlets/purl/926167-oYrbRc/926167.PDF�



http://www.gddj.gov.cn/news_view.asp?newsid=371�

http://www.gddj.gov.cn/news_view.asp?newsid=371�

http://www.gdzcc.org/hyqy/ShowArticle.asp?ArticleID=576�

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Project No.1 was implemented as a demonstrate project in Chaohu City 112 which received financial support from the government. Thus the projects are not in the similar case to the project activity Project No. 2, No. 3, No. 4, No. 8 and No. 9 were all implemented as 861113 key projects of Anhui Province 114 which received financial support from provincial government as the key projects of 861 action plan.115 The proposed project is not included in the key project list of 861 action plan116.Thus the projects are not in the similar case to the project activity Project No. 5 obtained financial and technical support from SINOMA117, China National Materials Group Corporation (SINOMA), which is a large enterprise state owned and administered by central government. The central government owned large enterprises in China are all have strong financial background, and they will usually invest some projects that comply with the national new industrial policy or new economic development policy. Project No. 6 obtained financial reward from Energy saving and technology improving financial support fund of the government.118 Thus the projects are not in the similar case to the project activity. Project No. 7 obtained Japanese government’s grant and received technology support from the Japanese government119.Thus the projects are not in the similar case to the project activity Project No. 10 gets support from government and is listed in the eleventh 5 year plan supporting project120.Thus the projects are not in the similar case to the project activity

112 http://www.chsme.gov.cn/news_list.asp?classid=124&id=376 113 "861"Action Plan was formulated by Anhui provincial government in order to realize the target which is to

establish eight industrial bases and six major fundamental construction, the GDP per capita can reach 1,000

dollars by 2007, http://www.ahpc.gov.cn/ahpc/indexnew.jsp?xxflid=10000305; http://www.ah.gov.cn/zfgb/gbcontent.asp?id=3815; http://www.ahsww.com/News/Detail-488.html 114 http://cn.chinagate.cn/economics/2008xm/2009-03/04/content_17376176.htm http://www.dcement.com/Article/200902/72106.html http://bbs.c-bm.com/dispbbs.asp?boardID=3&ID=76777&page=11 http://www.gddj.gov.cn/news_view.asp?newsid=371 http://www.gdzcc.org/hyqy/ShowArticle.asp?ArticleID=576 Notice on devote major efforts to promoting “861” Action Plan, No.36 wanzheng (2006) 115 Notice on devote major efforts to promoting “861” Action Plan, No.36 wanzheng (2006) 116 http://cn.chinagate.cn/economics/2008xm/2009-03/04/content_17376241_1.htm; http://www.ahpc.gov.cn/information.jsp?xxnr_id=10018099 http://fgw.wh.cn/uploadfile/200882039967493.xls 2008 117 http://www.zzsn.net/Root/news/newsShow.asp?id=476&ClassID=CnNews1 118 http://www.lycg.com.cn/cn/gsdt/nbdt/news263.html 119 http://www.osti.gov/bridge/servlets/purl/926167-oYrbRc/926167.PDF 120http://www.xuancheng.gov.cn/xxgkweb/XxgkNewsHtml/PA003/200902/PA003010803200902001.html


The list above shows that the cement implemented waste heat recovery projects can enjoy preferential policies and obtain external foreign investments which are not the case the same as the proposed project. If without these special treatments in policies, external financial aid etc., the projects would not have been implemented. Therefore, it can be demonstrated that the waste heat recovery power generation project does not have financial attraction unless the cement companies could obtain external financial supports or preferential policies supports. This demonstrates that ACCCL is not only leading the way in cement waste heat recovery in China. This ambitious programme is being implemented with the support of the CDM that contributes around 20% of the annual revenues for the project. This level of subsidy has been demonstrated to be required to make the project commercially viable by ACCCL at Ningguo. The common practice set out above clearly shows that the proposed project is additional and that the investment analysis and barrier analysis above are justified since there are no comparable projects not only in Anhui Province In summary, this project shows that WHR project will not provide Conch with the returns that are required by the Conch Group (ACCCL) to satisfy the internal hurdle rates specified by the WACC. The WACC has been shown to be an important tool to demonstrate clearly what the requirements of projects are and how they relate to a companies key performance indicators and ultimately Shareholder returns. Consequently projects that fall below the WACC would not be approved by the Board as they would jeopardize such returns. B.6. Emission reductions:

B.6.1. Explanation of methodological choices: I. Baseline Emissions (BEy) The baseline emissions for the year y shall be determined as follows:

yflstyEny BEBEBE ,, += (1) Where: BEy: The total baseline emissions during the year y in tons of CO2; BEEn,y: The baseline emissions from energy generated by project activity during the year y in tons of CO2; BEflst,y: The baseline emissions from generation of steam, if any, using fossil fuel, that would have been used for flaring the waste gas in absence of the project activity (tCO2e per year), calculated as per equation (1c). This is relevant for those project activities where in the baseline steam is used to flare the waste gas. As in the baseline there is no flaring of the waste gas using steam. BEflst,y=0, therefore

yEny BEBE ,= The calculation of baseline emissions depends on the identified baseline scenario, for the proposed project, the Project Activity belongs to scenario 1 therefore:

yTheryElecyEn BEBEBE ,,, += (2)


Where: BEElec,y : baseline emissions from electricity during the year y in tons of CO2; BETher,y: baseline emissions from thermal energy (due to heat generation by element process) during

the year y in tons of CO2 As the project does not involve the use of waste energy resource to provide heat, thus, BETher,y=0. Further,as the project activity involves the generation of electricity only, then according to ACM0012, section (a.i) case 1 a): (a.i) Baseline emissions from electricity (BEelectricity,y) Type-1 activities Case 1: Waste energy is used to generate electricity

∑∑ ×××=j i

yjiElecyjiwcmcapyElec EFEGffBE )( ,,,,,, (3)

Where: BEElec,y baseline emissions due to displacement of electricity during the year y in tons of CO2; EGi,j,y the quantity of electricity supplied to the recipient j by generator, which in the absence of the project activity would have been sourced from ith source (i can be either grid or identified source) during the year y in MWh; and EFElec,i,j,y the CO2 emission factor for the electricity source i (i=gr (grid) or i=is (identified source)), displaced due to the project activity, during the year y in tons CO2/MWh; fwcm Fraction of total electricity generated by the project activity using waste energy. This fraction is 1 if the electricity generation is purely from use of waste energy. If the boiler providing steam for electricity generation uses both waste and fossil fuels, this factor is estimated using equation (1d). If the steam used for generation of the electricity is produced in dedicated boilers but supplied through common header, this factor is estimated using equation (1d/1e). Note: for this project, electricity is purely generated from waste heat, and fwcm = 1 fcap Energy that would have been produced in project year y using waste heat generated in base year expressed as a fraction of total energy produced using waste heat in year y. The ratio is 1 if the waste heat generated in project year y is same or less then that generated in base year. For the proposed project, the displaced electricity is supplied by a connected grid system. According to ACM0012, the CO2 emission factor of the electricity EFElec,i,j,y shall be determined following the guidance provided in the “Tool to calculate the emission factor for an electricity system”. Calculation of EFElec,i,j,y In this section, the latest officially published Emission factor (based on the statistic data from 2005~2007) and the Emission Factor which is published when the Project Activity was firstly submitted (based on the statistic data from 2002~2004) will be calculated respectively. And the lower one will be applied for conservation. Step 1. Identify the relevant electric power system


This is identified in B.3. as the East China Power Grid (ECPG). For the purpose of determining the operating margin emission factor, the methodology provides following four options to determine the CO2 emission factor for net electricity import from the East China Power Grid: (a) 0 tCO2/MWh, or (b) The weighted average operating margin (OM) emission rate of the exporting grid; or (c) The simple operating margin emission rate of the exporting grid; or (d) The simple adjusted operating margin emission rate of the exporting grid. For this project activity, we choose option (b) to calculate the OM emission rate of the East China Power Grid. Step 2. Choose whether to include off-grid power plants in the project electricity system Option I: Only grid power plants are included in the calculation. Optional II: Both grid power plants and off-grid power plants are included in the calculation. Option I corresponds to the procedure contained in earlier versions of the tool. Option II allows the inclusion of off-grid power generation in the grid emission factor. According to Chinese administrative regulation for power plants, all power plants should be connected to power grid. The power grids undertake most of power supply. Therefore, only gird power plants are included in the calculation. Accordingly, Option I is applicable to the project activity. Step3. Select an operating margin (OM) method The calculation of the operating margin emission factor (EFgrid,OM,y) is based on one of the following methods:

b) Simple OM c) Simple adjusted OM d) Dispatch data analysis OM e) Average OM

As shown in table 1 of annex 3, from 2000 to 2007, the low-cost/must-run electricity generation in ECPG account for10.47%, 11.39%, 14.14%, 10.96%, 9.77%, 11.65%, 11.44% and 10.92% respectively 121, Based on these considerations, the OM has been calculated according to the Simple OM. Simple OM is appropriate, because low cost/ must run resources account for far less than 50% of the power generation in the East China Power Grid in most recent years. For simple OM, the emission factor can be calculated using either of the two following data vintages: Ex ante option: A 3-year generation weighted average, based on the most recent data available at the time of submission of the CDM-PDD for validation, without requirement to monitor and recalculate the emissions factor during the crediting period, or

121 《China Electric Power Year Book》from 2001 to 2008


Ex post option: the year in which the Project displaces grid electricity, requiring the emission factor to be updated annually during monitoring. If the data required calculating the emission factor for year y is usually only available later than six months after the end of year y. Ex ante option will be used for OM calculation of the Project Activity. Step4. Calculate the operating margin emission factor according to selected method. According to the “Tool to calculate the emission factor for an electricity system”, the Simple OM emission factor is calculated as the generation-weighted average CO2 emissions per unit net electricity generation (tCO2/MWh) of all generating power plants serving the system, not including low-operating cost and must-run power plants/units. It may be calculated: • Based on data on fuel consumption and net electricity generation of each power plant/unit (Option A) • Based on data on net electricity generation, the average efficiency of each power unit and the fuel

type(s) used in each power unit (Option B) • Based on data on the total net electricity generation of all power plants serving the system and the

fuel types and total fuel consumption of the project electricity system (Option C) According to the Tool, option A should be preferred and must be used if fuel consumption data is available for each power plant/unit. In other cases, option B or option C can be used. For the purpose of calculating the simple OM, Option C should only be used if the necessary data for option A and option B is not available and can only be used if only nuclear and renewable power generation are considered as low-cost/ must-run power sources and if the quantity of electricity supplied to the grid by these sources is known. Data on fuel consumption, power generation and average efficiency of individual power stations is not publicly available in China. Therefore, in the proposed project activity, Option C is used and the following formula is used:

y

yicomi

yiyi

yOMsimplegrid EG

EFNCVFCEF

,,2,

,,

,,

⋅⋅=∑

(4)

Where: EFgrid, OMsimple, y is simple operating margin CO2 emission factor in year y (tCO2/MWh) FCi, y is the amount of fossil fuel type i consumed in the project electricity system in year y (mass or volume unit), NCVi,y is the net calorific value (energy content) of fossil fuel type i in year y (GJ/mass or volume unit) EFCO2,i ,y is the CO2 emission factor of fossil fuel type i in year y (tCO2/GJ) EG y is the net electricity generated and delivered to the grid by all power sources serving the system, no including low-cost / must-run power plants / units in year y (MWh) i is all fossil fuel types combusted in power sources in the project electricity system in year y y is the three most recent years for which data is available at the time of submission of the CDM-PDD to the DOE for validation (ex-ante option)


Based on calculation from the China DNA (see Annex 3), the OM Emission Factors of the ECPG between 2005~2007, and 2002~2004 are 0.8825 and 0.9411 tCO2/MWh respectively122. Step 5: Identify the cohort of power units to be included in the build margin According to the tool to calculate the emission factor for an electricity system, the sample group of power units m used to calculate the build margin could consist of either: (a) the set of five power plants that have been built most recently, or (b) the set of power capacity additions in the electricity system that comprise 20% of the system generation (in MWh) and that have been built most recently; The tool also states that project participants should use the set of power units that comprises the larger annual generation. In this case option (b) is used. In terms of the vintage of the data, two options are given in the tool. In this case Option 1 is chosen: For the first crediting period, the build margin emission factor is calculated ex-ante based on the most recent information available on units already built for sample group m at the time of CDM-PDD submission to the DOE for validation. For the second crediting period, the build margin emission factor should be updated based on the most recent information available on units already built at the time of submission of the request for renewal of the crediting period to the DOE. For the third crediting period, the build margin emission factor calculated for the second crediting period should be used. This option does not require monitoring the emission factor during the crediting period. Step 6: Calculate the build margin emission factor According to the tool, the build margin emission factor is the generation-weighted average emission factor (tCO2/MWh) of all power units m during the most recent year y for which power generation data is available, calculated as follows:

∑∑ ⋅

=

mym

mymELym

yBMgrid EG

EFEGEF

,

,,,

,, (5)

Where: EFgrid,BM,y Build margin CO2 emission factor in year y (tCO2/MWh) EGm,y Net quantity of electricity generated and delivered to the grid by power unit m in year y (MWh) EFEL,m,y CO2 emission factor of power unit m in year y m Power units included in the build margin y Most recent historical years for which power generation data is available Following guidance issued by the CDM Executive Board in response to a request for guidance from an accredited DOE on the determination of the Build Margin in methodology AM0005 in China, EFBM,y is calculated as the capacity weighted average emissions factor of new installed capacity rather than the generation weighted factor. Furthermore, it is suggested in the same guidance note that the efficiency 122 EF calculation spreadsheets are provided to the auditor.


level of the best technology commercially available in the provincial/regional or national grid of China is used as a conservative proxy for each fuel type in estimating the fuel consumption when calculating the Build Margin. The suggested approach is followed in the determination of the Build Margin for the purposes of this project. Because capacities of technologies using coal, oil and gas cannot be separated from the total thermal power generation from available statistics, the following method is used for the calculation: first, use the recent one year available energy balance data and calculate percentages of CO2 emissions of power generation using solid, liquid and gas fuel in the total CO2 emission. Second, calculate grid thermal power emission factors, using the percentages (as weights) and emission factors of technologies corresponding to best available efficiencies. Lastly, the thermal power emission factor is multiplied by the percentage of thermal power in the newest 20% capacity in the grid, and the result is the Build Margin emission factor of the grid. The steps and equations are as follows: Sub-Step 6.1. Calculate the power generation emissions for solid, liquid and gas fuels and the share of each fuel in the total emissions based on the Energy Balance Table of the most recent year

∑∑

××

××= ∈

jiyjiCOyiyji

jCOALiyjiCOyiyji

yCoal EFNCVF

EFNCVF

,,,,,,,

,,,,,,,

,2

2

λ (6)

∑∑

××

××= ∈

jiyjiCOyiyji

jOILiyjiCOyiyji

yOil EFNCVF

EFNCVF

,,,,,,,

,,,,,,,

,2

2

λ (7)

∑∑

××

××= ∈

jiyjiCOyiyji

jGASiyjiCOyiyji

yGas EFNCVF

EFNCVF

,,,,,,,

,,,,,,,

,2

2

λ (8)

Where: Fi ,j, amount of fuel i (tce) consumed by power plants m in year y, COEFi,j y CO2 emission coefficient of fuel i (tCO2 /tce), taking into account the carbon content of the fuels used by power plants m and the oxidation percent of the fuel in year(s) y, COAL, OIL and GAS refer to coal fuel, oil fuel and gas fuel in the subscript set. Sub-Step 6.2 Calculate emission factor for thermal power of the grid based on the result of Step a and the efficiency level of the best technology commercially available in China.

, , ,Thermal Coal Coal Adv Oil Oil Adv Gas Gas AdvEF EF EF EFλ λ λ= × + × + × (9)


Where: EFCoal,Adv, EFOil,Adv and EFGas, Adv are emission factors corresponding to commercially optimal efficient power generation technology using coal, oil and gas. For the EF calculation of the first submission The weighted average of coal consumption per kWh supplied of 14 newly built 600 MW sub critical units in 2005 is adopted to determine the emission factor of the best advanced coal fired generation technology, which is 336.66gce/kWh. In other word, the efficiency of best advanced coal fired generation technology is 36.53%. 200MW combined cycle unit is designated the commercially optimal efficiency technology of gas turbine power plant (including fuel oil and gas). The technology is equivalent to 9E unit of GE. According to the statistics of gas turbine power plants in 2004, gas turbine power plants with maximum electricity supply efficiency in actual operation is chosen as the approximate estimation of commercially optimal efficiency technology. Coal consumption of gas turbine power plants is 268.13gce/kWh that means electricity supply efficiency is 45.87%. The installation capacity, generation data, and average self consumption rate data are from the China Electric Power Yearbooks (1998-2005). The data of fuel consumption per electricity generated and low calorific values of fuels are from the China Energy Statistical Yearbooks (2000-2005). The EFCO2,i and OXIDi data by fuels are from Table 1-2 in P.1.6 and Table 1-4 in P.1.8 in first chapter of “Revised 1996 IPCC Guidelines for National Greenhouse Gas Inventories: Workbook.” For the calculation of latest public available EF The weighted average of coal consumption per kWh supplied of 30 newly built 600 MW sub critical units in 2007 is adopted to determine the emission factor of the best advanced coal fired generation technology, which is 322.5 gce/kWh. In other word, the efficiency of best advanced coal fired generation technology is 38.10%. 200MW combined cycle unit is designated the commercially optimal efficiency technology of gas turbine power plant (including fuel oil and gas). The technology is equivalent to 9E unit of GE. According to the statistics of gas turbine power plants in 2007, gas turbine power plants with maximum electricity supply efficiency in actual operation is chosen as the approximate estimation of commercially optimal efficiency technology. Coal consumption of gas turbine power plants is 246gce/kWh that means electricity supply efficiency is 49.99%. The installation capacity, generation data, and average self consumption rate data are from the China Electric Power Yearbooks (2004-2008). The data of fuel consumption per electricity generated and low calorific values of fuels are from the China Energy Statistical Yearbooks (2004-2008). The EFCO2,i and OXIDi data by fuels are from Volume 2 of “2006IPCC Guidelines for National Greenhouse Gas Inventories”. Sub-Step 6.3. Calculate BM of the grid based on the result of Step b and the share of thermal power in the recent 20% capacity additions.

,Thermal

BM y ThermalTotal

CAPEF EFCAP

= × (10)


Where:

TotalCAP is the new added total capacity, ThermalCAP is the new added thermal power capacity.

Based on calculation from the China DNA (see Annex 3), the BM Emission Factors of the ECPG between 2005~2007, and 2002~2004 are 0.6826 and 0.7869 tCO2/MWh respectively123. Step 7. Calculate the combined margin emissions factor The combined margin emissions factor is calculated as follows:

BMyBMgridOMyOMgridyCMgrid EFEFEF ωω ×+×= ,,,,,, (11) Where: EFgrid,OM,y Operating margin CO2 emission factor in year y (tCO2/MWh) EFgrid,BM,y Build margin CO2 emission factor in year y (tCO2/MWh) ω OM Weighting of operating margin emissions factor (%) ω BM Weighting of build margin emissions factor (%) The following default values are used for ω OM and ω BM, according to the Tool: ω OM = 0.5 and ω BM = 0.5. In this case, for the first crediting period: For the EF calculation of the first submission EFgrid,CM,y = (0.9411× 0.5) + (0.7869 × 0.5) = 0.8640 tCO2e/MWh For the calculation of latest public available EF EFgrid,CM,y = (0.8825× 0.5) + (0.6826 × 0.5) = 0.7825 tCO2e/MWh Therefore, the lower value, which is 0.7825 tCO2e/MWh, is applied on the Emission Calculation for conservation. Capping of baseline emissions As per Methodology ACM0012, the baseline emissions should be capped irrespective of planned/unplanned or actual increase in output of plant, change in operational parameters and practices, etc. The methodology provides with three methods for calculation of cap. The each method should be applied to specific project case. Method 3 is selected to calculate the cap of the project activity the reasons are as follows:

123 EF calculation spreadsheets are provided to the auditor.


1. The project was built based on 3 clinker lines and all of them were built between 2006 and 2007. There is no historic data available therefore method 1 cannot be used.

2. Method 2 could be applied in three clinker lines, all of them were built between 2006 and 2007 and no historic data of waste energy available and the manufacturer’s specification could be used to estimate the waste energy amount. However, method 2 requires monitoring the actual waste heat amount for power generation during the year after the project put into production. This is impossible to directly measure the actual amount of waste heat because the temperature of waste heat in this project is too high, and the diameter of the waste heat pipe is about 3 meters, it is impossible to install flow meter and thermometer on that pipe to monitor the enthalpy of waste heat. Therefore, method 2 cannot be used.

3. To properly monitor the waste heat, additional investment in equipments will be required and also it will take time to monitor and collect the data. If any waste heat would have to be flared during the data collection.

Under method 3, there are two cases: Case-1: The energy is recovered from WECM and converted into final output energy (i.e. electricity in the proposed project) through waste heat recovery equipment. For such cases fcap should be the ratio of maximum theoretical energy recoverable using the project activity waste heat recovery equipment and actual energy recovered under the project activity (using direct measurement). For estimating the theoretical recoverableenergy, manufacturer’s specifications can be used. Alternatively, technical assessment can be conducted by independent qualified/certified external process experts such as chartered engineers. Case-2: The energy is recovered from WECM in intermediate energy recovery equipment using an intermediate source. For example, ,an intermediate source to carry energy from primary WECM may include the source such as water, oil or air to extract waste energy entrapped in chemical(heat of reaction)or solids(sensible heat). This intermediate energy source is finally used to generate the output energy in the final waste heat recovery equipment. For these cases fcap is the ratio of maximum theoretical intermediate energy recoverable from intermediate waste heat recovery equipment and actualintermediate energy recovered under the project activity (using direct measurement). For estimating the theoretical energy, manufacturer’s specifications can be used. Alternatively, technical assessment can be carried out by independent qualified/certified external process experts such as chartered engineers. The Project Activity is the case where waste heat recovered from WECM through intermediate energy recovery equipment i.e PH boiler, AQC boiler, using an intermediate source i.e steam then converted into electricity through turbine-generator. This meets the requirement of case 2. Thus the case-2 is adopted for analysis capping of baseline emission. For estimating the theoretical recoverable energy, manufacturer’s specifications can be used. Under this method, following equations should be used to estimate fcap.

yOE

BLOEcap Q

Qf

,

,= (12)

Where:


QOE, BL Output energy (energy carried by steam) that can be theoretically produced (in TJ), to be is determined on the basis of maximum recoverable energy from the WECM, which would have been released (or WECM would have been flared or energy content of WECM would have been wasted) in the absence of CDM project activity. QOE, y Quantity of actual output energy (energy carried by steam) during year y (in TJ). II. Project Emissions (PEy) Project Emissions are include emissions due to (1) consumption of auxiliary fuel to supplement waste gas/ heat and (2) electricity emissions due to consumption of electricity for cleaning of gas before being used for generation of electricity or other supplementary electricity consumption and (3) emissions due to consumption of imported electricity that in the absence of project activity that in the absence of the project activity would have been supplied by captive electricity generated (only for Type 2 project activities). The proposed project activity does not generate project emissions as:

• No auxiliary fuel will be combusted to supplement waste heat; • No gas will be cleaned as the proposed project utilizes waste heat; • There is no captive electricity generation on site and the proposed project is not a “Type-2

project”. Any auxiliary electricity consumption by the proposed project activity will be measured and deducted from gross electricity supplied by the project to the internal grid of the cement production facility. III. Leakage According to ACM0012, no leakage is applicable under this methodology. IV. Emission Reductions (ERy) The emission reductions, ERy, from the project activity during a given year y is the difference between the baseline emissions and project emissions (PEy), as follows:

yyy PEBEER −= (14)

B.6.2. Data and parameters that are available at validation: Data / Parameter: QOE, BL Data unit: TJ Description: Intermediate energy that can be theoretically produced Source of data used: Calculated based on FSR parameters Value applied: 3,598.88 Justification of the choice of data or description of measurement methods and procedures

Based on equipment specifications and FSR


actually applied : Any comment: None

Data / Parameter: fWCM

Data unit: % Description: Fraction of total energy generated by the project activity using waste energy.

This fraction is 1 if the energy generation is purely from use of waste energy in the project generation unit.

Source of data used: FSR and Ex-ante estimation of intermediate energy produced Value applied: 100% Justification of the choice of data or description of measurement methods and procedures actually applied :

If the generation unit uses steam from both waste and fossil fuels afterwards, this factor shall be adjusted.

Any comment: None

Data / Parameter: FCi Data unit: Varies according to type of fuel Description: Amount of fuel i used to generate power in the East China Power Network

used to calculate the OM Source of data used: China Energy Statistical Yearbook Value applied: Refer to Annex 3 Justification of the choice of data or description of measurement methods and procedures actually applied :

Data presented in China Energy Statistical Yearbook can be considered reliable.

Any comment: No further comments Data / Parameter: NCVi Data unit: GJ/ unit Description: Net Calorific Value (energy content) per mass or volume unit of fuel i used to

generate power in the East China Power Grid used to calculate the OM Source of data used: IPCC 2006, Revised IPCC 1996 Value applied: Refer to Annex 3 Justification of the choice of data or description of measurement methods and procedures actually applied :

Data presented in IPCC can be considered reliable.

Any comment: No further comments Data / Parameter: EFi Data unit: tCO2/TJ


Description: CO2 emission factor per unit energy of fuel i used to generate power in the East China Power Grid used to calculate the OM.

Source of data used: IPCC 2006, Revised IPCC 1996 Value applied: Refer to Annex 3 Justification of the choice of data or description of measurement methods and procedures actually applied :

Emission factor of fuels is not available in China. As such IPCC default values must be used and considered the best approximation for China.

Any comment: No further comments Data / Parameter: GENj,y Data unit: GWh Description: The electricity generated by power plants of each province by source j. Source of data used: China Electric Power Yearbook Value applied: Refer to Annex 3 Justification of the choice of data or description of measurement methods and procedures actually applied :

The data in the China Electric Power Yearbook can be considered reliable.

Any comment: No further comments Data / Parameter: CAPi Data unit: MW Description: Newly installed capacity of different fuel types on the ECPG Source of data used: China Electric Power Yearbook Value applied: Refer to Annex 3 Justification of the choice of data or description of measurement methods and procedures actually applied :

The data in the China Electric Power Yearbook can be considered reliable.

Any comment: No further comments Data / Parameter: Auxiliary power consumption rate of fire power plant

Data unit: % Description: auxiliary electricity consumption rate for power plants of province j in ECPG Source of data used: China Electric Power Yearbook Value applied: Refer to Annex 3 Justification of the choice of data or description of measurement methods and procedures actually applied :

The data is from China Electric Power Yearbook which is reliable


Any comment: None Data / Parameter: Effi Data unit: % Description: Power generation efficiency of current best commercially available technology

of different fuel types on the ECPG Source of data used: China DNA Value applied: Refer to Annex 3 Justification of the choice of data or description of measurement methods and procedures actually applied :

According to EB deviation, best commercially available technology is representative and conservative

Any comment: No further comments

B.6.3. Ex-ante calculation of emission reductions: Step 1 Baseline Emissions (BEy) According to the feasibility study report, the annual net power generation of the proposed project is estimated to be 204,600MWh (all used by the cement plant) According to the formula of the marginal baseline emission factor in part B.6.1, the baseline emission factor of the power grid is 0.7825 tCO2e/MWh Capping of baseline emissions The data in FSR and manufacturer specification are applied to estimate the theoretical heat amount generated and the theoretical electricity According to the feasibility study report of the proposed project and manufacturer’s specification of key equipments. The theoretical waste heat from three clinker lines is presented as the table below. For estimating the theoretical recoverable energy, manufacturer’s specifications can be used. Under this method, following equations should be used to estimate fcap.

Table 13 Calculation of fcap using case 2 of methond-3

Unit PH I PH II AQC I AQC II Total Theoretical intermediate energy produced

Steam flow ton/h 56.58 28.82 36.36 30.41 Flash water flow ton/h 37.18 40.48

Boiler capacity

Feed water flow ton/h 130.12 100.71 Pressure MPa 0.79 0.79 0.79 0.79 Temperature °C 305.00 290.00 345.00 345.00

Energy in steam

Enthanpy kJ/kg 3,066.80 3,035.08 3,151.11 3,151.11


Energy TJ 1,334.71 672.83 881.31 737.09 3,625.93 Pressure MPa 1.00 1.00 Temperature °C 167.00 167.00 Enthanpy kJ/kg 706.34 706.34

Energy in flash water

Energy TJ 202.01 219.93 421.94 Pressure MPa 0.79 0.79 Temperature °C 56.34 65.30 Enthanpy kJ/kg 236.53 274.00

Energy in water

Energy TJ 236.74 212.26 449.00 Ex-ante estimation of

intermediate energy produced (QOE,bl) TJ 1,334.71 672.83 846.57 744.77 3,598.88

Ex-ante estimation of intermediate energy produced Ex-ante estimated as the same as Theoretical Value 3,598.88 Ex-ante estimation of fCAP fcap 1.00

Data source 1: the data for exhaust gas flow is from FSR of Chizhou conch WHR project 2: operation day is from FSR of Chizhou conch clinker lines and FSR of Chizhou conch WHR project 3: all data for ex-ante estimation intermediate energy is from technical agreement of AQC boiler and PH boiler except for enthalpy 4: the data for enthalpy is Looked up using well-known web software ( http://www.spiraxsarco.com/resources/steam-tables.asp) Therefore:

1 3598.88

88.3598

,

, ===yOE

BLOECAP Q

Qf

According to the formula for baseline emissions given in section of B.6, the proposed project’s baseline emissions (BEy) are estimated to be:

yywcmcapy EFEGffBE ×××= = 1×1× 204,600 × 0.7825 ＝160,105tCO2e Step 2 Project Emissions (PEy) No auxiliary fossil fuel will be used in the proposed project No additional electricity will be used to clean the gas in the proposed project Therefore, the proposed project’s annual GHG emission PEy = 0. Step 3 Leakage According to ACM0012, no leakage is applicable under this methodology.


Step 4 Emission Reductions (ERy) Therefore, the annual emission reduction (ERy) of the proposed project are estimated to be

yyy PEBEER −= = 160,105-0 ＝160,105 tCO2e

B.6.4 Summary of the ex-ante estimation of emission reductions:

The estimated emission reductions over 10 years will be 1,601,049 tonnes. The estimated emission reductions of each year are as follows:

Year Estimation of

project activity emissions (tonnes of CO2e)

Estimation of baseline emissions (tonnes of CO2e)

Estimation of leakage (tonnes of CO2e)

Estimation of overall emission reductions (tonnes of CO2e)

01/01/2011 -31/12/2012

0 160,105 0 160,105

01/01/2012 -31/12/2013

0 160,105 0 160,105

01/01/2013 -31/12/2014

0 160,105 0 160,105

01/01/2014 -31/12/2015

0 160,105 0 160,105

01/01/2015 -31/12/2016

0 160,105 0 160,105

01/01/2016 -31/12/2017

0 160,105 0 160,105

01/01/2017 -31/12/2018

0 160,105 0 160,105

01/01/2018 -31/12/2019

0 160,105 0 160,105

01/01/2019 -31/12/2020

0 160,105 0 160,105

01/01/2020 -31/12/2021

0 160,105 0 160,105

Total (tonnes of CO2e)

0 1,601,049 0 1,601,049

B.7. Application of the monitoring methodology and description of the monitoring plan: Data / Parameter: QOE, y Data unit: TJ Description: Quantity of actual output/intermediate energy during year y Source of data to be used: Generation plant measurement records Value of data applied for 3,598.88


the purpose of calculating expected emission reductions in section B.5 Description of measurement methods and procedures to be applied:

The parameter will be directly measured continuously using appropriate metering device. The WECM for the proposed project activity is water/steam. The actual intermediate energy recovered is the difference between the energy contained in the steam and hot water if any generated from the HRSG (heat recovery steam generator) system and that contained in water fed to HRSG system. The energy contained in water/steam equals to the quantity of water/steam times their enthalpy. The quantity of water/steam will be directly monitored by measuring the flow, temperature, and pressure of water/steam, while the enthalpy of water/steam can be calculated from the metered pressure and temperature in either of the following ways:

On-line calculation Off-line calculation

Monitoring frequency Continuously QA/QC procedures to be applied:

The accuracy of flow meters is 2.5% or better. The accuracy of temperature and pressure meter is 1% or better. The metering instrument will undergo regular maintenance/calibration(at least once a year).

Any comment: N/A Data / Parameter: EGj,y Data unit: MWh/yr Description: Quantity of electricity supplied to the cement plant by the project activity

during year y in MWh Source of data to be used: Cement plant and generation plant measurement records Value of data applied for the purpose of calculating expected emission reductions in section B.5

204,600

Description of measurement methods and procedures to be applied:

The electricity supplied to the cement plant by the project will be monitored by standard electricity energy meters at the cement plant and the power generation plant.

QA/QC procedures to be applied:

The data will be recorded and checked by staff in the CDM workgroup. The electricity energy meter(s) at the power generation plant will be used as the primary data source. In case of primary meter(s) failure, data from meter(s) at the cement plant will be used. The accuracy of the meter(s) will be 0.5% or better. The meters will undergo maintenance/calibration to the industry standards (at least once a year).

Any comment: 1 Data will be measured at the cement plant and at the generation plant for cross check. As the electricity will be consumed by the project owner, who owns both the cement plant and the generation plant, there will be no receipts available.

2 The auxiliary systems and the power generation sets are considered to be integrated during the power plant’s normal operation period, because the power generator can’t generate power without other auxiliary systems.

3 Bi-direction power meters will be used, which can measure both


electricity supplied to the cement plant and electricity imported from the power grid.

Data / Parameter: EGPJ,import,y Data unit: MWh/yr Description: Additional electricity consumed by the power plant in year y Source of data to be used: Measurement records Value of data applied for the purpose of calculating expected emission reductions in section B.5

0

Description of measurement methods and procedures to be applied:

The additional electricity consumed by the project will be determined by monitoring of electricity imported from grid, using meter 1(or 2),3,4. EGpj,import,y equals to the sum of readings of meter 3,4 and importing directional readings of meter 1(or 2)..

Monitoring frequency Continuously QA/QC procedures to be applied:

The data will be recorded and checked by staff in the CDM workgroup. The electricity energy meter(s) at the power generation plant will be used as the primary data source. In case of primary meter(s) failure, data from meter(s) at the cement plant will be used. The accuracy of the meter(s) will be 0.5% or better. The meters will undergo maintenance/calibration to the industry standards (at least once a year). .

Any comment: If the electricity consumed by any auxiliary equipment could not be included in the direct monitoring of electricity imported, then, this part of additional electricity will be monitored by additional meters.

B.7.2. Description of the monitoring plan: The monitoring plan aims to ensure that all the emission reductions can be successfully realised during crediting period, and will be implemented by the project owner 1. Monitoring organization The project owner will set up a special CDM group to take charge of data collection, supervision, verification and recording. The group director will be trained and supported in technology by the CDM consultation. The organization of the monitoring group is as follows:


2. Monitoring system design This project has two power generation units,unit I and II. For each meter of unit I, the meter number is followed by a symbol ‘I’; and for unit II, the symbol is ‘II’. Monitoring ECpj,imoort,y and EGj,y For each power generation unit (I and II), the ECpj,imoort,y and EGj,y will be measured and calculated respectively, the total emission reduction is the sum of the two units. As shown in annex 4, meter 1-I(II),2-I(II) with bidirectional reading. As for meter 1-I(II) and 2-I(II), meter 1-I(II) as the main meter will be installed at the cement plant, meter2-I(II) as a back-up meter of meter 1-I(II), will be installed at the power generation plant .Data measured by these two meters will be used for cross check. The electricity supplied to the cement plant by the Project (EGj,y) could be measured by meter 1-I(II) and/or meter 2-I(II), recorded by exporting directional reading. Eectricity imported to the proposed project from the grid ( ECpj,imoort,y) should be also directly recorded by meter 1-I(II) and 2-I(II). Both ECpj,import, yand EG,j,y will be monitored continuously, the readings will be record everyday. Net electricity applied to calculate emission reduction (EGy) will be the difference between Electricity exported to the cement plant from the proposed project in year y (EGj,y) and Electricity imported to the proposed project from the grid in year y ( ECpj,imoort,y). Calculation of (EGy) will be based on data recorded by the meter 1-I(II),. In case of malfunction of meter 1-I(II), the readings from meter 2-I(II) will be used instead. Both Meter 1-I(II) and Meter 2-I(II) are bidirectional electric energy meters. The accuracy of all power meters is 0.5% or better. As the electricity will be consumed by the project owner, who owns both the cement plant and the generation plant, there will be no receipts available.

General Manager of Chizhou Conch

Data collector

Data Validator Meter Maintainer

CDM workgroup

General Manager of

Chizhou Conch

Data collector Data Validator Meter Maintainer

CDM workgroup

General Manager of

Chizhou Conch

Data collector Data Validator Meter Maintainer

CDM workgroup


Monitoring Actual intermediate energy （QOE, y） For each power generation unit (I and II),the QOE, y will be measured and calculated respectively. The actual intermediate energy will be monitored by measuring:

Flow, temperature, and pressure of steam generated from HRSG system Flow, temperature, and pressure of water fed into the HRSG system

Meters of flow, temperature, and pressure will be installed respectively on the water supply pipe(s) to the HRSG system and the steam pipes from the HRSG system (see also in Annex 4). Based on the monitored data, the enthalpy of water/steam is then decided in either of the following ways:

On-line calculation Enthalpy of water/steam is calculated on-line using monitored pressure and temperature Energy in water/steam equals mass flow of water/steam times enthalpy The energy is accumulated continuously

Off-line calculation

Record the water/steam temperature and pressure at a certain frequency, typically on a daily basis

Average the water/steam temperature and pressure over a certain period, typically on a monthly basis

Look the enthalpy up in published steam table (ex. ASME steam table) or calculate the enthalpy using well-known web software (for example, http://www.spiraxsarco.com/resources/steam-tables.asp)

With the enthalpy, the energy contained in water/steam for a certain period of time (one month) is obtained as:

The energy of water/steam = Quantity of water/steam Enthalpy×

Finally, the actual intermediate energy recovered is calculated as the difference between the energy contained in the steam generated from the HRSG system and that contained in water fed to HRSG system. 3. Training, Record Keeping, Error handling and Reporting Procedures Training Members of staff who are involved in the CDM project will be given training on the CDM and reporting requirements, prior to registration of the project. New members of staff joining the CDM project team will also be given training in relation to their responsibilities. Full training procedures and a training plan will be detailed in the CDM Manual. Record Keeping and Internal Reporting Procedure The CDM group appointed by the project owner should keep the monitoring data in electronic archives at the end of every month, CDM officer will check the data and error handling procedure will be carried on if there are any problems in the record. Electronic documents should also be printed, to archive as a written document. Written documents, such as maps, forms, EIA reports etc, should be used with a

http://www.spiraxsarco.com/resources/steam-tables.asp�


monitoring plan to check the authenticity of the data. All of the written data and information should be kept in the archives by the CDM group; all of the documents should have a backup copy. All of the data should be saved for 2 years after the crediting period. Error Handling Procedure In the event that a meter has lost calibration over the allowable error limit then this shall be corrected at the earliest opportunity and re-calibrated and the data recorded from this meter since the last successful calibration shall be ignored. In the event that there is uncertainty over the accuracy of the data set for net electricity generated from the main meter (e.g. the meter has lost calibration over the acceptable error limit) then the data from the back-up meter shall be used. The check of the CDM Project Officer and then the third party verifier prior to issuance of the CERs is considered adequate for errors in the calculations. Where errors in the calculations are discovered by either of these Parties, the monitoring report shall be modified and the corrected version shall be resubmitted to the verifier. External Reporting Procedure After signing by the CDM Project Officer, the report is sent to the 3rd party verifier who is contracted to verify the emissions reductions during the crediting period of the project. Procedure for corrective actions arising The CDM Project Officer is responsible for identifying corrective actions arising from the above procedures and for liaising with the purchaser, the 3rd party verifiers and other stakeholders to take necessary steps to implement the corrective actions. B.8. Date of completion of the application of the baseline study and monitoring methodology and the name of the responsible person(s)/entity(ies): Date of completion of the application of the methodology to the project activity study: 13/07/ 2009 Contact information of person/entity in charge of application of the baseline methodology and the monitoring methodology to the project activity

Is organisation a Project Participant Yes/No


Maureen MO(Zhihan) and Melody LIU (Yanan) Camco International Limited 14th Floor, Lucky Tower A, No. 3 North Road, East 3rd Ring Road, Chaoyang District, Beijing 100027, China Tel: (86 10) 8448 3025/3049/1385/1623 Fax：(86 10) 8448 2499/2432 Email: [email protected] Melody.liu @camcoglobal.com Website: www.camcoglobal.com

Yes

http://www.camcoglobal.com/�


SECTION C. Duration of the project activity / Crediting period C.1． Duration of the project activity: C.1.1. Starting date of the project activity: The starting date of the project is 17/01/2005 (Signed purchase equipment agreement) C.1.2. Expected operational lifetime of the project activity: 20 years. C.2． Choice of the crediting period and related information: C.2.1. Renewable crediting period C.2.1.1. Starting date of the first crediting period: C.2.1.2. Length of the first crediting period: C.2.2. Fixed crediting period: C.2.2.1. Starting date: The starting date of the crediting period is 01/01/2011, or the date of registration whichever come later. C.2.2.2. Length: 10 years.


SECTION D. Environmental impacts D.1. Documentation on the analysis of the environmental impacts, including transboundary impacts: The cement production lines involved in the Project Activity has undergone and passed full Environmental Impact Assessments (EIA) in line with the requirements of the Chinese Government, all of which are available for review. The Project Activity is an internal project to the general company and has entrusted “Assessment department of Technology Consulting Centre of An Hui Province” to undergo a separate EIA and has obtained the official reply from Anhui Environmental Protection Bureau. The main conclusions are as follows: Noise impacts

Table 14 The noise status of existing projects at the site of the project activity:

The site of the project activity

Plant boundary noise standard Situation of exceeding standard/ sensitive point

Chizhou

The noise of the project in the daytime in the directions of east, west, south and north of the plant accords with Category II standards of Noise Standards for Industry and Enterprise（GB12348-90 ） . The noise to the south of the plant at night accords with Category II standards.

The noise exceeds the standard at night. The reasons are the impacts of the three production lines and insects cry is one of the reasons leading to the noise exceeding the standards.

The boilers used by the cement plant of the project are all static equipment without noise. The major sources of noise pollution are the power equipment (for example steam turbine, generator, and water pump and so on), whose noise is small. According to the on-site inspection, the noises of steam turbine and generator are 90dB(A) and 84dB(A). In order to reduce noise pollution, steam turbine is located in a closed workshop, the noise pollution is minimal outside the workshop and it has few impacts on the plant boundary noise. The water pump will be installed below ground level and therefore the noise pollution is minimal. Thus it can be seen from the noise impacts analysis that the plant boundary noise and sensitivity outside the plant boundary will not be impacted after implementation of the project and will accord with the National Noise Standards for Industry and Enterprise.

Air Quality Impacts

Initially air quality impacts are limited to increased level of dust from use and movement of construction equipment. The project applies the technology of waste heat recovery for power generation without fuel supplement facilities and new pollution sources and new dust emission site. Instead, the implementation of the project can improve the dust removing effect of the already existing electro static precipitator, so the project will not add dust removing equipment and dust emissions will be less than before. Once the project is operational it is expected to lead to reductions in air pollutant such as dust, CO2 and SO2 and so on due to the avoidance of fossil fuel for generation. This will have a positive impact on local air quality.


For coal fuel for power generation project versus the project of the waste heat recovery for power generation, SO2 in the coal is calculated by 0.8% and the emissions of CO2 and SO2 will be increased annually. Some emission reductions due to the implementation of the project are shown as follows:

Table 15 Partial emission reductions due to the implementation of the project

CO2 emission reductions t/a SO2 emission reductions t/a 185,102 1372.8

Water Usage Impacts

The waste water added newly caused by the implementation of the project are mainly living liquid waste and waste water from chemical disposal in the production process, which are separately 4.8 t/d and 17 t/d.

The living liquid waste caused by the implementation of the project will be put into the existing treatment system for living liquid waste of the plant and will be drained off after the water disposed of reaches the standard. Waste water from chemical disposal system will be disposed of in the acid-base neutralization equipment proposed by the plant to reach the standard and then will be drained off. The cement plant designed by the project uses a circulating water system, through which the waste water is drained cleanly without pollution and used as the water for evaporation. The water impact of the project is minimal.

Other environmental impacts Visual Impacts

The visual impact of the Project Activity is minimal as the major equipment is fitted within the middle of the existing cement works and the equipment is lower than the main stacks.

Interference with Communications

There is not expected to be an increase in interference with communications as a result of the Project Activity.

Land Use Impacts

There are no land use impacts as the Project Activity is within the existing sites which have already been converted to industrial use for the construction of the cement plants of the Conch Group.

The project will therefore have a net environmental benefit in addition to the greenhouse gas emissions reductions. D.2. If environmental impacts are considered significant by the project participants or the host Party, please provide conclusions and all references to support documentation of an environmental impact assessment undertaken in accordance with the procedures as required by the host Party: The Environmental impacts of the Project are considered to be positive and not significantly negative.


SECTION E. Stakeholders’ comments E.1. Brief description how comments by local stakeholders have been invited and compiled: In order to seek comments of local stakeholders on the proposed project, the project owner posted the notification of stakeholder meeting in public place to invite local residents who are involved in the project to attend the meeting. The project owner also sent a notification to government bodies and entities to invite them to attend the meeting. As a result, the Project owner organized a an open public stakeholders meeting in a meeting room on the second floor of the office building of Chizhou Conch Cement Company Limited on July.12th, 2006. 17 representatives of local stakeholders including representatives of local residents, government bodies, and entities attended the meeting. Mr. Sunhai, who is a vice director of Development Department of the Project, made a presentation to the local stakeholders regarding the brief introduction to the objectives, plan, the process diagram of the project, and the reason to apply for CDM registration. The emphasis of the presentation and discussion was on the dust emissions, water resources and the local environment as these were the main concerns of the local population. mainly concerned by the local population. After the presentation, all the participants are invited to give their comments on the following issues: 1. Stakeholders concern the proposed project 2. Attitude of stakeholders to the project 3. Impact on the environment 4. Improvment to local employment opportunities E.2. Summary of the comments received: The comments from the local population mainly concerned expropriation of land, impacts on water resources and the local environment. Regarding these concerns, the project owner gave a thorough and clear explanation, which is summarized as follows:

The Project Activity occurs in the Chizhou Conch Cement Company Limited and does not need to occupy new land. The Project Activity will reduce the emission of contamination, such as dust, NOx, SO2. The water use of company will be decreased by decreasing the water supply of humidifying equipment. After hearing about the CDM and the Project’s positive environmental benefits (including zero impact with regard land expropriation and positive impact on water resource usage and conservation), all were supportive of the Project. E.3. Report on how due account was taken of any comments received: As there are no adverse comments to the Project Activity and all are supportive of the project, the proponents have completed this Project Design Document for being examined and approved by the relevant authorities.


Annex 1

CONTACT INFORMATION ON PARTICIPANTS IN THE PROJECT ACTIVITY

Organization: Anhui Chizhou Conch Cement Company limited Street/P.O.Box: Niutoushan Town Building: City: Chizhou City State/Region: Anhui Province Postfix/ZIP: 247115 Country: P.R. China Telephone: FAX: +86 (0) 5538399065 E-Mail: URL: Represented by: Peilin Yang Title: Director Salutation: Mr. Last Name: Yang Middle Name: First Name: Peilin Department: Developmental Department Mobile: +86 136 0553 5831 Direct FAX: +86 (0) 5538399065 Direct tel: +86 (0)553 8399405 Personal E-Mail: [email protected]

Organization: Cargill International SA Street/P.O.Box: 14 Chemin de Normandie Building: City: Geneva 12 State/Region: Postcode/ZIP: P.O Box 383 CH-1211 Country: Switzerland Telephone: +41 22 703 2290 FAX: +41 22 703 2030 E-Mail: [email protected] URL: Represented by: Olivier demierre Title: Financial Controller Salutation: Mr. Last name: Demierre Middle name: First name: Olivier


Department: Financial Department Mobile: Direct FAX: +41 22 703 2030 Direct tel: +41 22 703 2290 Personal e-mail: [email protected]

Organization: Camco International Limited Street/P.O.Box: Green Street Building: Channel House City: St Helier State/Region: Jersey Postfix/ZIP: JE2 4UH Country: Channel Islands Telephone: +44 (0)1534 834 618 FAX: +44 (0)1534 834 601 E-Mail: URL: www.camcoglobal.com Represented by: (Primary Signatory) Title: Mrs Salutation: Qualification Director Last Name: Rawlins Middle Name: First Name: Madeleine Department: Mobile: Direct FAX: +86 10 8448 2432 Direct tel: +86 10 8448 1623 Personal E-Mail: [email protected] Represented by: (Secondary Signatory) Title: Ms Salutation: Carbon Development Director Last Name: Urgel Esteban Middle Name: First Name: Beatriz Department: Mobile: Direct FAX: +44 207 1216 101 Direct tel: +44 207 1216 121 Personal E-Mail: [email protected]

http://www.camcoglobal.com/�

mailto:[email protected]�

mailto:[email protected]�


Annex 2

INFORMATION REGARDING PUBLIC FUNDING There is no public funding of the Project Activity.


Annex 3 BASELINE INFORMATION

As mentioned in the Section B of the PDD, the latest Baseline Emission Factor of ECPG which is published by the Office of National Coordination Committee on Climate Change , National Development and Reform Commission (NDRC) of China (DNA of China) on July 6th, 2009 is applied. And the calculation is detailed as below.

The following tables summarise the numerical results from the equations listed in the approved methodology ACM0002 (version 6). The information provided by the tables includes data, data sources and the underlying calculations.

Table A1. Fuel-fired electricity generation of the East China Power Grid in 2005

Electricity generation

(MWh)

Auxiliary electricity

consumption (%)

Electricity delivered to the grid

(MWh)

Shanghai 74,606,000 5.05 70,838,397 Jiangsu Province 211,429,000 5.96 198,827,832

Zhejiang Province 108,110,000 5.59 102,066,651 Anhui Province 62,918,000 5.90 59,205,838 Fujian Province 48,600,000 4.57 46,378,980

Total 477,317,698 Data source: China Electric Power Yearbook 2006.

Table A2. Fuel-fired electricity generation of the East China Power Grid in 2006


(MWh)


consumption (%)

Electricity delivered to the grid

(MWh)

Shanghai 72,033,000 5.06 68,388,130 Jiangsu Province 251,258,000 5.69 236,961,420

Zhejiang Province 140,349,000 5.62 132,461,386 Anhui Province 71,867,000 6.05 67,519,047 Fujian Province 55,580,000 4.51 53,073,342

Total 558,403,325 Data source: China Electric Power Yearbook 2007.

TableA3. Fuel-fired electricity generation of the East China Power Grid in 2007


(MWh)


consumption (%)

Electricity delivered to the grid (MWh)

Shanghai 72,600,000 4.72 69,173,280 Jiangsu Province 270,900,000 5.55 255,865,050 Zhejiang rovince 172,300,000 5.83 162,254,910 Anhui Province 84,800,000 5.92 79,779,840 Fujian Province 72,300,000 5.59 68,258,430

Total 635,331,510 Data source: China Electric Power Yearbook 2008


TableA4 Calculation of simple OM emission factor of the East China Power Grid in 2005

Fuel sort unit Shanghai Jiangsu Zhejiang Anhui Fujian subtotal Emission

factor（tc/TJ）

Oxidation rate

lower limit of 95% confidence interval of the

EFCO2

Average caloric value

Emission of CO2（tCO2e）

（%）（MJ/t,km3）I=G*H*F*E*44/12/100

00（quality）

A B C D E F=A+B+C+D+E G H I I=G*H*F*E*44/12/100

0 (volume) Raw coal 2847.31 9888.06 4801.52 3082.9 2107.69 22727.48 25.8 100 87,300 20,908 414,837,511

Wash extractive coal 0 25.8 100 87,300 26,344 0

Other wash coal 0 25.8 100 87,300 8,363 0

Coke

Ten thousand

ton

0.03 0.03 29.2 100 95,700 28,435 816

Coke oven gas 1.68 1.38 1.71 4.77 12.1 100 37,300 16,726 297,591

Other coal gasHundred

million m383.72 24.97 0.06 30 138.75 12.1 100 37,300 5,227 2,705,169

Crude oil 27.01 27.01 20 100 71,100 41,816 803,039

Gasoline 0 18.9 100 67,500 43,070 0

Diesel oil 1.25 16 4.52 1.67 23.44 20.2 100 72,600 42,652 725,828

Fuel oil 59.39 13.22 153.22 7.45 233.28 21.1 100 75,500 41,816 7,364,902

LPG 0 17.2 100 61,600 50,179 0

Refine dry gas

Ten thousand

ton

0.57 0.83 1.4 15.7 100 48,200 46,055 31,078

Nature gas Hundred million m3 1.09 1.85 0.62 3.56 15.3 100 54,300 38,931 752,567

Other oil production 21 8.38 34.8 64.18 20 100 75,500 41,816 2,026,232

Other coke production

Ten thousand

ton 0 25.8 100 95,700 28,435 0

Other energy Ten

thousand tce

12.36 15.29 27.65 0 0 0 0 0

Total 429,544,732

Data source: 2006 China Energy statistics yearbook


TableA5. Calculation of simple OM emission factor of the East China Power Grid in 2006


factor（tc/TJ）

Oxidation rate


EFCO2



（%）（MJ/t,km3）I=G*H*F*E*44/12/100

00（quality）


0 (volume) Raw coal 2744.45 10945.42 6065 3455.2 2369.63 25579.7 25.8 100 87,300 20,908 466,898,181


Other wash coal 150.54 23.06 173.6 25.8 100 87,300 8,363 1,267,436

Coke

Ten thousand

ton

39.07 39.07 29.2 100 95,700 28,435 1,063,184

Coke oven gas 1.71 3.13 0.23 0.71 5.78 12.1 100 37,300 16,726 360,603


million m384.64 106.54 3.28 25.12 219.58 12.1 100 37,300 5,227 4,281,088

Crude oil 20.3 20.3 20 100 71,100 41,816 603,543

Gasoline 0 18.9 100 67,500 43,070 0

Diesel oil 2.13 3.7 4.11 1.21 1.11 12.26 20.2 100 72,600 42,652 379,635

Fuel oil 44.51 3.77 71.98 0.02 4.5 124.78 21.1 100 75,500 41,816 3,939,439

LPG 0 17.2 100 61,600 50,179 0

Refine dry gas

Ten thousand

ton

0.29 0.4 2.95 3.64 15.7 100 48,200 46,055 80,803

Nature gas Hundred million m3 3.2 13.5 9.18 25.88 15.3 100 54,300 38,931 5,470,911

Other oil production 18.82 3.57 22.39 20 100 75,500 41,816 706,876


Ten thousand

ton 0 25.8 100 95,700 28,435 0

Other energy Ten

thousand tce

6.66 2.8 27.45 3.21 40.12 0 0 0 0 0

Total 485,051,699



TableA6. Calculation of simple OM emission factor of the East China Power Grid in 2007


factor（tc/TJ）

Oxidation rate


EFCO2



（%）（MJ/t,km3）I=G*H*F*E*44/12/100

00（quality）


0 (volume) Raw coal 2754.04 11060.78 7350 3929.9 3097.87 28192.59 25.8 100 87,300 20,908 514,590,436


Other wash coal 459.17 29.32 488.49 25.8 100 87,300 8,363 3,566,416

Coke

Ten thousand

ton

35.06 35.06 29.2 100 95,700 28,435 954,063

Coke oven gas 0.89 9.73 0.22 1.56 0.75 13.15 12.1 100 37,300 16,726 820,402


million m398.92 70.45 3.41 36.3 1.71 210.79 12.1 100 37,300 5,227 4,109,712

Crude oil 15.15 15.15 20 100 71,100 41,816 450,427

Gasoline 0 18.9 100 67,500 43,070 0

Diesel oil 1.23 5.37 2.76 1.01 10.37 20.2 100 72,600 42,652 321,111

Fuel oil 40.76 1.55 29.52 2.04 73.87 21.1 100 75,500 41,816 2,332,156

LPG 0 17.2 100 61,600 50,179 0

Refine dry gas

Ten thousand

ton

0.2 0.63 2.55 3.38 15.7 100 48,200 46,055 75,031

Nature gas Hundred million m3 4.61 19.17 11.01 34.79 15.3 100 54,300 38,931 7,354,444

Other oil production 20.39 2.78 23.17 20 100 75,500 41,816 731,502


Ten thousand

ton 0 25.8 100 95,700 28,435 0

Other energy Ten

thousand tce

6.89 28.88 44.93 7.52 9.43 97.65 0 0 0 0 0

Total 535,305,699



This template shall not be altered. It shall be completed without modifying/adding headings or logo, format or font.

Table A7. Weighted average OM emission factor of the East China Power Grid

2005 2006 2007 Weighted average OM emission factorTotal emission

(tCO2) 472,977,179 523,119,600 582,797,047

Total power supply (MWh) 515,638,698 593,583,295 679,928,440

OM emission factor

(tCO2/MWh) 0.9173 0.8813 0.8571 0.8825

Data source: the Notification on Determining Baseline Emission Factor of China’s Grid for the East China Power Grid 2009 Calculation of the Build Margin Emission Factor (EFgrid,BM,y) The Emission Factor, Oxidation, Average Low Caloric Value applied in the calculation of the Operating Margin and Build Margin emission factor are listed in table 8.

Table 8 Related Parameters

Fuel Emission Factor 1

（tc/TJ） Oxidation 2（%）lower limit of 95% confidence

interval of the EFCO2 (kgCO2/TJ) Average Low Caloric Value

3 (MJ/t,km3) Raw Coal 25.8 100 87,300 20,908

Cleaned Coal 25.8 100 87,300 26,344 Other Washed Coal 25.8 100 87,300 8,363

Moulded Coal 26.6 100 87,300 20,908 Coke 29.2 100 95,700 28,435

Coke Oven Gas 12.1 100 37,300 16,726 Other Gas 12.1 100 37,300 5,227 Crude Oil 20 100 71,100 41,816 Gasoline 18.9 100 67,500 43,070

Diesel Oil 20.2 100 72,600 42,652 Fuel Oil 21.1 100 75,500 41,816

LPG 17.2 100 61,600 50,179 Refinery Gas 15.7 100 48,200 46,055 Natural Gas 15.3 100 54,300 38,931



Other Petroleum Products 20 100 75,500 41,816 Other Coking Chemical

Products 25.8 100 95,700 28,435

Other Energy 0 0 0 0 1,2 2006 IPCC Guidelines for National Greenhouse Gas Inventories， Volume 2 Energy 3 China Energy Statistical Yearbook 2008



Sub-Step 5a. Calculating the percentages of CO2 emissions from the coal-fired, oil-fired and gas-fired power plants in total fuel-fired CO2 emissions. Table 9 the percentages of CO2 emissions from the coal-fired, oil-fired and gas-fired power plants in total fuel-fired CO2 emissions of ECPG

Fuel Unit Shanghai Zhejiang Jiangsu Anhui Fujian Subtotal

Average Low

Caloric Value

Emission Factor Oxidation CO2 Emission（tCO2e）

A B C D E F=A+…+E G H I J=F*G*H*I*44/12/100

Raw Coal 104 t 2,754.04 11,060.80 7,350 3,929.90 3,097.87 28,192.59 20,908 87,300 1 514,590,436

Cleaned Coal 104 t 0 0 0 0 0 0 26,344 87,300 1 0 Other Washed Coal 104 t 0 459.17 0 29.32 0 488.49 8,363 87,300 1 3,566,416

Moulded coal 104 t 0 0 0 0 0 20,908 87,300 1 0 Coke 104 t 0 0 35.06 0 0 35.06 28,435 95,700 1 954,063

Other Coke fuel 104 t 0 0 0 0 0 0 28,435 95,700 1 0 Subtotal 519,110,916 Crude Oil 104 t 0 0 15.15 0 0 15.15 41,816 71,100 1 450,427 Gasoline 104 t 0 0 0 0 0 0 43,070 67,500 1 0

Diesel Oil 104 t 1.23 5.37 2.76 0 1.01 10.37 42,652 72,600 1 321,111 Fuel Oil 104 t 40.76 1.55 29.52 0 2.04 73.87 41,816 75,500 1 2,332,156

Other Petroleum Products 104 t 20.39 2.78 0 0 0 23.17 41,816 75,500 1 731,502 Subtotal 3,835,196

Natural Gas 107m3 46.1 191.7 110.1 0 0 347.9 38,931 54,300 1 7,354,444 Coke Oven Gas 107m3 8.9 97.3 2.2 15.6 7.5 131.5 16,726 37,300 1 820,402

Other Gas 107m3 989.2 704.5 34.1 363 17.1 2,107.90 5,227 37,300 1 4,109,712 LPG 104 t 0 0 0 0 0 0 50,179 61,600 1 0

Refinery Gas 104 t 0.2 0.63 0 2.55 0 3.38 46,055 48,200 1 75,031 Subtotal 12,359,588

Total 535,305,699 Sources: China Energy Statistical Yearbook 2008 The result from the above table: λCoal,y=96.97%, λOil,,y =0.72%, λGas,y =2.31%

PROJECT DESIGN DOCUMENT FORM (CDM PDD) – Version 03.1 CDM – Executive Board page 88


Sub-Step 2b. Calculating 0the fuel-fired emission factor

AdvGasGasAdvOilOilAdvCoalCoalThermal EFEFEFEF ,,, ×+×+×= λλλ Where: EFThermal is the fuel-fired emission factor; EFCoal,Adv，EFOil,Adv and EFGas ，Adv are corresponding to the emission factors of coal, oil and gas fired power plants which are applied by the most advanced commercialized technologies. According to the announcement “China's Regional Grid Baseline Emission Factors Renewed”, the weighted average of coal consumption per kWh supplied of 30 newly built 600 MW sub critical units in 2007 is adopted to determine the emission factor of the best advanced coal fired generation technology, which is 322.5 gce/kWh. In other word, the efficiency of best advanced coal fired generation technology is 38.10%. 200MW combined cycle unit is designated the commercially optimal efficiency technology of gas turbine power plant (including fuel oil and gas). The technology is equivalent to 9E unit of GE. According to the statistics of gas turbine power plants in 2007, gas turbine power plants with maximum electricity supply efficiency in actual operation is chosen as the approximate estimation of commercially optimal efficiency technology. Coal consumption of gas turbine power plants is 246gce/kWh that means electricity supply efficiency is 49.99%. These data were show as below:

Table 10 Emission factors of Coal, Oil and Gas with the most advanced commercialized technologies applied by the fuel-fired power plants

Parameters Fuel

consumption rate

Fuel Emission

Factor（tc/TJ）

Oxidation Emission Factor（tCO2/MWh）

A B C D=3.6/A/1,000,000×B×CCoal-fired

plant EFCoal,Adv 38.10% 87,300 1 0.8249

Oil-fired plant EFoil,Adv 49.99% 75,500 1 0.5437

Gas-fired plant EFgas,Adv 49.99% 54,300 1 0.3910

Sources: The Baseline Emission Factors of Chinese Power Grids, NRDC, 2009. Then, calculating

AdvGasGasAdvOilOilAdvCoalCoalThermal EFEFEFEF ,,, ×+×+×= λλλ =0.8129 tCO2/MWh Sub-Step 2c. Calculating the Build Margin Emission Factor.

ThermalTotal

ThermalyBM EF

CAPCAP

EF ×=,



Where: EFBM,y is the Build Margin emission factor with advanced commercialized technologies for year y; CAPTotal is the new capacity additions; CAPThermal is the new fuel-fired capacity additions.

Table 11 Installed Capacities of East China Grid 2005

Installed Capacity Unit Shanghai Jiangsu Zhejiang Anhui Fujian Total

Fuel-fired MW 13,114 42,506 27,688 11,423 9,345 104,077

Hydro MW 0 143 6,952 750 8,225 16,069

Nuclear MW 0 0 3,066 0 0 3,066

Wind & Others MW 253 59 37 0 52 401

Total MW 13,367 42,708 37,743 12,173 17,622 123,613 Sources：China Electric Power Yearbook 2006 Table 12 Installed Capacities of East China Grid 2006 Installed Capacity Unit Shanghai Jiangsu Zhejiang Anhui Fujian Total

Fuel-fired MW 14,526 51,776 35,391 14,134 13,001 128,828

Hydro MW 0 136 8,369 1,001 8,957 18,463

Nuclear MW 0 0 3,066 0 0 3,066

Wind & Others MW 253 162 43 0 89 547

Total MW 14,779 52,074 46,869 15,135 22,047 150,904 Sources：China Electric Power Yearbook 2007 Table 13 Installed Capacities of East China Grid 2007 Installed Capacity Unit Shanghai Jiangsu Zhejiang Anhui Fujian Total

Fuel-fired MW 14,150 53,340 39,490 17,760 13,910 138,650

Hydro MW 0 140 8,520 1,510 9,800 19,970

Nuclear MW 0 2,000 3,070 0 0 5,070

Wind & Others MW 269 518 40 0 269 1,096

Total MW 14,419 55,998 51,120 19,270 23,979 164,786 Sources：China Electric Power Yearbook 2008



Table14 Change Installed Capacity from 2005-2007

Capacities in year 2005



2005-2007 New Capacity

Percentage of New Capacity

Additions 104,077 128,828 138,650 34,573 83.97%

Fuel-fired (MW) 16,069 18,463 19,970 3,901 9.47%

Hydro (MW) 3,066 3,066 5,070 2,004 4.87% Nuclear (MW) 401 547 1,096 694 1.69%

Wind(MW) 123,613 150,904 164,786 41,172 100.00% Total 75.01% 91.58% 100.00%

Percentage of Year 2007 104,077 128,828 138,650 34,573 83.97%

EFgrid,BM,y = 0.8129×83.97%=0.6826 tCO2/MWh

Step 6. Calculate the combined margin Emission Factor (EFy) EFy=0.5×EFOM，y+0.5×EFBM，y=0.5×0.8825 +0.5×0.6826=0.7825 tCO2/MWh

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1 CDM – Executive Board page 91

Annex 4

MONITORING INFORMATION

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