CDM Project

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. 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 plan

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 2 SECTION A. General description of project activity A.1 Title of the project activity: DEED 6.7MW Waste Heat Recovery Power Generation Project, Version 1 Date: October 17, 2006

A.2. Description of the project activity : The project owner, Dalian East Energy Development Company, Ltd. – hereafter referred to as DEED or the project entity – is a cooperative joint venture headquartered in Dalian, Liaoning Province, in the People’s Republic of China. It is a waste energy recovery power development company that markets, designs, builds, and operates waste energy recovery power plants for on-site power use by the cement and other industrial sectors in China. The proposed CDM project activity supplies waste heat recovery (WHR) power plants to two cement factories, the Xing Bao Long Building Materials Company cement factory and the Du Shan Building Materials Company cement factory, both in Zhejiang Province, China. DEED will provide the financing for the construction of the WHR plants, own the plants, operate them, and (after six years) transfer ownership to the two respective cement factories. DEED will sell the electricity from the WHR plants to the cement factories under the terms of a five-year Energy Services Agreement (ESA), and earn capital also from the sale of CERs from the project activity. The total generating capacity will be 6.7MW. The WHR systems are expected to produce 46,000 megawatt-hours of electricity per year, all of which will be used on-site. After deducting 3,070 MWh utilized by the WHR power generating equipment, the remaining 42,930 MWh per year will be supplied to the cement factories. The project would supply approximately 36%-42% of each cement factory’s onsite electricity requirements. The remainder will continue to be obtained from the East China grid. The project activity will reduce CO2 emissions by an estimated 37,091 tons annually. Prior to the project activity, the cement factories’ electricity needs are met entirely by imports from the East China grid. Neither cement factory has any captive, on-site power generation source, even as back-up generation for use during power outages. The Xing Bao Long cement plant, built in 2004, is a modern facility with a dry process production line of capacity of 1,500 tons per day (t/d) of cement. Currently it uses approximately 33,000 MWh/Yr. The WHR power plant will supply the cement factory with approximately 14,470MWh/Yr. The on-site generator will also reduce power distribution losses by approximately 680MWh/Yr. Prior to the project activity, waste heat is not recovered and is simply exhausted to the atmosphere. The Du Shan cement factory was built in 2005 and uses the dry process technology to produce 2,700 t/d of cement. Currently it uses approximately 78,550 MWh/Yr. The WHR power plant will supply the cement factory with approximately 29,310 MWh/Yr, and the on-site generator will reduce power distribution losses by approximately 850 MWh. Prior to the project activity, waste heat is not recovered and is simply exhausted to the atmosphere.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 3 As mentioned, both cement plants are in Zhejiang Province, which produces about one-eighth of the one billion tons of cement manufactured annually in China. Located to the east of Shanghai, it has a dense population, a booming economy, and a fast-developing transportation and urban infrastructure. Many factories, however, including the two cement plants where the proposed CDM project activity will take place, experience power shortages and high electricity prices due to the inability of the energy infrastructure to keep up with power demand. When its plants are financed and constructed, DEED will be able to provide more secure electricity at a lower cost to the cement factories. The CDM plays a critical role in attracting the needed investment capital, and the innovative structure of the ESA enables the financing of the project activity which would otherwise have been beyond reach. The project activity’s contribution to China’s sustainable development: Social benefits – The project activity – construction and operation of WHR power plants – creates job opportunities for professionals and workers. For Xing Bao Long, the project activity creates full time employment for 24 employees (22 workers and 2 administrative personnel). For Du Shan, the project activity creates full time employment for 18 employees (16 workers and 2 administrative personnel). Organizational management also involves oversight by a power plant general manager, stationmaster, power engineer, and operations engineer. Economic benefits – In addition to creating jobs through plant construction and operation, the project activity will reduce dependence on the East China power grid. Zhejiang Province, which makes up part of this regional grid, has experienced economic constraints caused by insufficient power supply for the past several years despite rapid growth in electricity supply. The situation of shortage is forecast to continue for the foreseeable future. Environmental well-being – Coal-fired power plants provide a large share of the region’s electrical supply. A significant amount of China’s air pollution is attributed to coal combustion for power generation, with pollution taking both a local and long-distance toll on the environment and on human health. 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)

People’s Republic of China

Dalian East Energy Development, Ltd. (DEED)

No

Project participants: Dalian East Energy Development, Ltd. (DEED) Project Owner: DEED is the project owner and developer. It is a cooperative joint venture licensed in June 2006 to operate as a WHR power development company. It is responsible for securing financing and supplying the technology to the cement factories, which will in turn purchase the power for five years according to the terms of an Energy Services Agreement.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 4 The cement production lines in which the WHR power plants will be installed are located at Xing Bao Long cement factory and at Du Shan cement factory. Neither wishes to be considered as a project participant. A.4. Technical description of the project activity: A.4.1. Location of the project activity: Two locations, both in Zhejiang Province, PRC. A.4.1.1. Host Party(ies): People’s Republic of China A.4.1.2. Region/State/Province etc.: Zhejiang Province A.4.1.3. City/Town/Community etc: Xing Bao Long cement factory is in Lijiaxiang town, Changing county, Huzhou, Zhejiang Province. Du Shan cement factory is in Tashi town, Longyou county, Zhejiang Province. A.4.1.4. Detail of physical location, including information allowing the unique identification of this project activity (maximum one page): The geographical coordinates of the two project sites are shown in Table A4.1.4-1. and are graphically depicted in the maps in Figure A4.1.4-1. Table A4.1.4-1 Longitude Latitude Xing Bao Long cement line E119°92΄ N30°02́ Du Shan cement line E119°1΄ N29° Figure A4.1.4-1


A.4.2. Category(ies) of project activity: The project activity is large scale. Sectoral scope 1: Energy industries (renewable/non-renewable sources)

Zhejiang Province

Xing Bao Long Project

Du Shan Project

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 6 A.4.3. Technology to be employed by the project activity : Waste heat recovery (WHR) power generation is a proven technology that is widely used in Europe and Japan. The project will install WHR power generation equipment to utilize low pressure and low temperature waste heat from cement clinker production lines at the Xing Bao Long cement factory and at the Du Shan cement factory. The WHR process will use no supplemental fuel, only the waste heat that would otherwise be (and currently is) vented to the atmosphere. The generation system of the proposed CDM project activity consists of two heat recovery boilers (i.e., heat recovery steam generators, or HRSG), and a single power generator at each cement plant. At Xing Bao Long, the installed capacity will be 2.2MW; at Du Shan 4.5MW. The suspension preheater boiler (“SP Boiler”) utilizes waste heat that originates from kiln exhaust that results when raw material for clinker manufacturing is heated in the suspension preheater before entering the kiln. The new heat recovery system would re-route the exhaust to an SP boiler where it generates saturated steam at 1.3 megapascal (MPa) and 190.7ºC (13 Atmospheres at 375ºF). A second boiler, the “Air Quencher Cooler” (AQC) steam generator will capture heat during the cooling of clinker as it exits the kiln, which operates at over 1,100ºC. Clinker cooling is necessary before it can be further handled and processed. Heat captured during the cooling process is used to generate steam at temperatures of up to 345ºC. This steam is combined with steam generated by the SP boiler at the steam generator, which turns the power turbine to produce electricity. The following Table A4.3-1 shows the parameters concerning the major equipment to be employed. The following Figure A4.3-1 shows the thermodynamic system of the project activity. Table A4.3-1: General information about technical parameter Device Name Quantity Technical Parameter Xing Bao Long cement lines (2.2MW)

2.2MW Steam Turbine

1

Model: NK32/36/16 Rated rotate speed: 9568r/m Main steam pressure: 1.27MPa Main steam temperature: 340℃

2.2MW Generator 1 Model: QF－3.0—2

Rated rotate speed: 3000r/m Output voltage: 10.5kV

1,500t/d SP boiler 1

Inlet steam parameter: 93627Nm3/h-330℃

Dustiness degree: 80g/Nm3

Steam Outlet temperature: 185℃ Main steam parameter: 8.2t/h－1.3MPa(Saturation)

Air leakage rate: ≤5%

1,500t/d AQC boiler

1



Steam Outlet temperature: 98℃ Main steam parameter: 4.06t/h－1.3MPa (Saturation)


Air leakage rate: ≤5% Du Shan cement lines (4.5MW)

4.5MW Steam Turbine

1

Model: BN4.5-370/23/1.5

Rated rotate speed: 3000r/m Main steam pressure: 2.29MPa Main steam temperature: 370℃

4.5MW Generator 1 Model: QFK-4.5-2 Rated rotate speed: 3000r/m Output voltage: 10.5kV

2,500t/d SP boiler 1



Steam Outlet temperature: 210℃ Main steam parameter: 14t/h－2.5MPa

Air leakage rate: ≤5%

2,500t/d AQC boiler

1



Steam Outlet temperature: 95℃ Part I steam parameter: 5.38t/h－2.5MPa(Saturation)

Part II steam parameter: 2.85t/h－0.25MPa(Saturation)

Air leakage rate: ≤5% Figure A4.3-1: Thermodynamic system


Five stage preheated calciner

SP boiler

Dust collector

Cooler

Chimney

Dust collector AQC Boiler

SH overheater

High Temperature Fan

Oxygen Removed

Steam turbine

Generator

Condenser

Pump

38OC water

Feed water

Feed water pump

The technology has been developed by Dalian East Energy Project Company (DEEP), a DEED shareholder. DEED is licensed to use the technology, and DEEP holds the patent. The WHR plant was designed so that power production would not affect cement production. The cement plants also employ dust suppression filters, the efficacy of which are augmented by the WHR plants. The proposed CDM project activity will promote the take up of a desirable technology that Chinese cement plants would not, without the CDM, be able to adopt.


A.4.4 Estimated amount of emission reductions over the chosen crediting period: The project will reduce an estimated 37,091 tons of CO2equivalent per year. Over a ten year fixed crediting period, the proposed CDM project activity would generate 370,910 tons of CO2e emission reductions.

Years

Annual estimation of emission reductions in tonnes of CO2e

2007 37,091 2008 37,091 2009 37,091 2010 37,091 2011 37,091 2012 37,091 2013 37,091 2014 37,091 2015 37,091 2016 37,091 Total estimated reductions (tonnes of CO2e)

370,910

Total number of crediting years 10 A.4.5. Public funding of the project activity: There is no public funding of the project activity.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 10 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 : ACM0004 (version 2) “Consolidated baseline methodology for waste gas and/or heat and/or pressure for power generation.” and “Consolidated monitoring methodology for waste gas and/or heat and/or pressure for power generation.”. The most recent version (2) of this baseline and monitoring methodology is dated March 3, 2006. ACM0004(Version 02) is available at UNFCCC website: 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: ACM0004 is applicable to project activities that generate electricity from waste heat in industrial facilities. It applies to electricity generation projects that displace electricity generation with fossil fuels in the electricity grid or displace captive electricity generation from fossil fuels, and where no fuel switch is done in the process where the waste heat or pressure or the waste gas is produced after the implementation of the project. The methodology covers both new and existing facilities. For existing facilities, the methodology applies to existing capacity, as well as to planned increases in capacity during the crediting period. If capacity expansion is planned, the added capacity must be treated as a new facility. The proposed project activity will generate electricity from waste heat by installing new WHR power generation equipment. Prior to the project activity, there is no on-site power generation of any kind, including even back-up generation for use during power outages. Prior to the project activity, all power is supplied by the East China grid, which is dominated by power generators that use fossil fuels. The proposed project will displace electricity generated with fossil fuels in the East China grid. The WHR power generation equipment will utilize waste heat produced in the cement production process that would otherwise be exhausted and completely unused; no supplemental fuel will be used. No fuel switch will take place in the process that produces the waste heat. Since the proposed project meets all the requirements specified in the approved methodology ACM0004 (Version 02), the consolidated methodology ACM0004 is fully applicable to the project activity. B.3. Description of the sources and gases included in the project boundary

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 11 The baseline emission sources and gases included in the project boundary are CO2 emissions from power plants serving the East China grid. Because there is no captive electricity generation of any kind in the baseline scenario, there are no captive emission sources. There is no on-site fossil fuel consumption due to the project activity so there are no emission sources from the project activity.

Source Gas Included

or Excluded

Justification / Explanation

CO2 Included Main emission source CH4 Excluded Excluded for simplification. This is conservative Baseline

Grid electricity generation N2O Excluded Excluded for simplification. This is conservative

CO2 Excluded No fossil fuel consumption CH4 Excluded No fossil fuel consumption

Project Activity

On-site fossil fuel consumption due to the project activity

N2O Excluded No fossil fuel consumption

B.4. Description of how the baseline scenario is identified and description of the identified baseline scenario: According to consolidated methodology ACM0004, the baseline scenario alternatives should include all possible options that provide or produce electricity for in-house consumption and/or sale to the grid and/or other consumers. Baseline options that do not comply with legal and regulatory requirements, or that depend on key resources such as fuels, materials or technology that are not available at the project site, shall be excluded. Alternative baseline scenarios are described as follows: (a) The proposed project activity not undertaken as a CDM project activity The cement factories have entered into an Energy Services Agreement with the project entity (DEED) because they are unable to finance more than half of the WHR power plant equipment without DEED assistance. DEED is working to secure needed financing from an equity investor whose criteria require that it invests in projects from which it will be able to buy CERs, which will be supplemented by a loan from a Chinese bank. Without the CDM benefits, this project could not be implemented. This option is not a viable alternative baseline scenario. (b) Import of electricity from the grid This alternative represents the continuation of the current situation. Prior to the project activity, the cement plants import 100% of their electricity from the East China Grid. In the absence of the project activity, the grid would supply 42,280 MWh per year to the cement plants. This alternative complies with all applicable legal and regulatory requirements and is economically attractive as it requires no capital investment. This is a viable alternative baseline scenario. (c) Existing or new captive power generation on-site, using other energy sources than waste heat and/or gas, such as coal, diesel, natural gas, hydro, wind, etc

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 12 There is no existing captive power generation on-site at either cement factory. The possibility of investing in captive power generation using other energy sources than waste heat is unattractive for the following reasons: New captive power generation on-site, using coal: Chinese power regulations prohibit coal-fired power plants with an installed capacity of less than 135MW in areas covered by large grids1, and coal-fired power units with less than 100MW are strictly regulated for installation2. Since the East China Grid covers both project sites, this alternative does not comply with Chinese regulations. Additionally, the high price of coal renders this option economically unattractive. New captive power generation on-site, using diesel: The capital cost that would be required to build a new captive power plant on-site and the high price of diesel fuel renders this option economically prohibitive. For these reasons, neither project location has a diesel generator even for use as back up power during emergencies. This option cannot be considered a viable alternative baseline scenario. New captive power generation on-site, using natural gas: Due to a lack of infrastructure, natural gas is not available at the project locations. Even if it was available, gas is too expensive for this option to be considered a viable alternative baseline scenario. Of the possible alternative baseline scenarios, the one that does not face any prohibitive barrier and is economically the most attractive should be considered as the baseline scenario. The above analysis demonstrates that “Continuation of equivalent import of electricity from East China Grid” is the most likely and credible baseline scenario as it does not face any prohibitive barriers and is the economically most attractive. There are no other alternative baseline scenarios. 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 Marrakech Accords (decision 17/cp.7, paragraph 43) state that a CDM project activity is additional if anthropogenic emissions of greenhouse gases by sources are reduced below those that would have occurred in the absence of the registered CDM project activity. The methodology instructs that the additionality of the project activity be demonstrated and assessed using the latest version of the “Tool for the demonstration and assessment of additionality” agreed by the CDM Executive Board available at the UNFCCC CDM web site. Step 1: Identification of alternatives to the project activity consistent with current laws and regulations As described and justified in section B4, the continued purchase of an equivalent amount of electricity from the East China grid has been determined to be the baseline scenario. This alternative complies with mandatory laws and regulations in China.

1 Source: Notice on Strictly Prohibiting the Installation of Fuel-fired Generators with the Capacity of 135MW or below issued by the State Council http://www.minbank.net/flfg/gwy/200204/1552.html 2 “Provisional Regulations about Installation of Small Scale Coal-fired Power Unit” (August 1997)

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 13 Step 2: Investment analysis Or Step 3: Barrier analysis The project entity establishes project additionality by conducting a barrier analysis, as follows. Sub-step 3a. Identify barriers that would prevent the implementation of type of the proposed project activity: Investment barriers: The high upfront cost of WHR power generation equipment and the lack of traditional financing sources, Chinese government tightens Chinese bank to lend money to cement sector in order to limit the development of cement sector3, present substantial investment barriers for the project activity. This is evidenced by the fact that the cement factories are motivated to acquire the WHR plants, but the high capital cost has rendered it impossible for either factory to access more than half of the required cost. The high capital cost is due to the large heat transfer surface that WHR plants require. A larger surface area is necessary for WHR than for conventional thermal power generation because the recovered heat is of lower temperature and pressure than that used in conventional thermal generation. To help overcome the investment barrier, the project employs an innovative financing mechanism. An Energy Services Agreement (ESA) between DEED and each of the cement factories will generate a revenue stream for DEED for a period of five years, during which it is anticipated that DEED would also earn CERs. Because the WHR power plant will enable DEED to generate electricity for substantially less than the cost of electricity from the grid, it can sell electricity to the cement plants for a reduced price while generating income for itself, and reducing CO2 emissions. The value of anticipated CERs to investors along with revenue from the ESA plays a critical role in enabling DEED to secure the financing needed to purchase and construct/install the waste heat recovery equipment. At beginning DEED just wanted to get financial support for WHR projects as normal energy efficiency project. But after long time negotiating with potential investors, DEED find CDM is key issue for investors to invest DEED’s projects. So DEED have to use CDM as a financial tool to get financial support to do waste heat recovery project to improve energy efficiency in Chinese cement sector. This is also consistent with the original idea of CDM: Bringing fund or high technology into developing countries to reduce the GHG emission and help developing countries to achieve sustainable development by CDM. Approximately half of DEED’s anticipated investment capital for the project is expected to be supplied by an equity investor whose primary motivation is to buy the project’s anticipated CERs for the first several years of the project’s operation as a requirement of its investment. The other half of DEED’s capital is from a loan from a Chinese bank. The project’s financing could not have been obtained without the anticipated CERs. For these two projects, these two cement companies only have half capital; DEED is in charge of other half. At the initial financial plan, DEED didn’t use CDM as a financial tool. It slowed down DEED’ work and didn't get the money on time. In this case, DEEP (share holder of DEED) put their own money to 3 http://news.xinhuanet.com/house/2004-02/05/content_1299165.htm

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 14 build the plants to avoid breaking the contract. So this is reason the power generated before CDM application. Technological barriers: There are risks associated with ensuring the necessary rate, pressure, temperature and flow of waste heat and the danger of adversely affecting plant operations, output or product if the WHR generating system does not function smoothly. The highest risk comes from dust. According to the Emission Standard of Air Pollutants for cement industry (GB4915-2004), the dust content of the exit gas is permitted to be as high as 100g/Nm3. This will cause substantial negative impacts for the operation of the WHR plant since the dust will settle upon and choke the heat transfer surface. In this case, the heat transfer efficiency will be decreased. Also, the stability cement kiln lines will strongly affects the stability of heat resource; the stability of heat resource will definitely affect the operation of power plants. Besides the risk of technology, the cement plant owners are inexperienced in power generation as they currently do not have even a back-up captive power generation system. These cement companies lack energy management specialists and qualified technicians to manage and maintain the power plant. To manage and maintain the power plant the technicians need have well knowledge about power generation and cement technology. These kinds of technicians are not easily trained and it takes long time. Barriers due to prevailing practice: Prevailing practice in Chinese cement plants is to use waste heat only to pre-heat raw materials, i.e., to use only high temperature waste heat.4 The China Medium and Long Term Energy Conservation Plan (2004) promotes actively the technology of using low temperature heat for power generation – indicating that this has not happened to date. Nevertheless the Plan does not require cement plants to recover and use low temperature waste heat, calling instead to promote power generating technology by using residual heat recovered from cement kilns.5 Other relevant Chinese laws and regulations, including the Cleaner Production Promotion Law and the Law on Energy Conservation of the People’s Republic of China encourage but do not otherwise enable the use of WHR power generation technology. It is also significant that the cement factories where the WHR plant will be installed are privately owned. They are squeezed by high coal prices and competition from state-owned cement producers. In this highly competitive market environment, the risk of investing in WHR is considerable. Sub-step 3b. Show that the identified barriers would not prevent the implementation of at least one of the alternatives (except the project activity): The high cost of WHR technology, the difficulty in commercializing it, and the lack of conventional financing do not affect the alternative to this project -- continued purchase of electric power from the East China Grid. Step 4. Common practice analysis

4 Source: “Energy Efficiency Financing for Cement Industry in China,” Global Environmental Institute, Beijing, China, February 2005, p. 5 5 China Medium and Long Term Energy Conservation Plan, 2004, p. 18

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 15 Of the approximately 4,700 cement plants operating in China,6 there are only a handful of plants that employ WHR power generation. The Global Environmental Institute’s February 2005 report, “Energy Efficiency Financing for Cement Industry in China” identified the following Chinese cement factories employing waste heat recovery power plants, for which the WHR plants were provided for demonstration purposes:7 • Anhui Ningguo cement plant. The Japanese government donated a whole set of power generation

systems for this plant. Although the project was successful, the technology and equipment have not gained market share in China because of its high cost.8

• Shanghai Jinshan Cement Plant and Guangxi Liuzhou Cement Plant use a power generating system whose technique was provided by Tianjin Design Institute of Cement Industry;

• Zhejiang Sanshi group cooperates with the Zhongxin Heavy Machine Company to provide domestic technology, as does Huaxiao Resource Co. Ltd, whose technology of flash distillation power generation by waste heat will be demonstrated by Taishan Cement Ltd.

The Taishan Cement Works Waste Heat Recovery and Utilisation for Power Generation Project PDD, a registered CDM project, also identifies: • Guangxi YuFeng Cement Plant • Liaoning Jinggang Cement Works The PDDs of the “25.3MW WHR Project of Zhejiang Leomax Group” and “30MW WHR of Hongshi Group” project activities, both at validation stage, note the difficulty of carrying out an analysis of the common practice among China’s cement industry due to its size and complications presented by data access. However, the PDD developer’s research cites data published in “The Special Edition on Waste Heat Recovery for Power Generation in Cement Industry” in the paper publication of the web-based periodical, www.chinacement.com.cn, p. 34, Edition 5, 2006. This source notes that of 613 PC kiln lines, that only 20 have installed or plan to install waste heat utilization boilers for power generation – i.e., 3%. Given the evidence of the very small percentage of Chinese cement plants that have or plan to install WHR power plants, it can be concluded that this technology does not represent common practice. Step 5. Impact of CDM registration It would not have been possible to secure the necessary financing package without the anticipated CERs. DEED expects to secure financing from two sources, of which one is to purchase the anticipated CERs for the first several years of project’s operation; the CDM benefits on international carbon market were a primary motivator and necessary condition for this investor. Nearly all other prospective investors that DEED negotiated with also required CER purchase agreements as a necessary condition for their investment. DEED found that, if not for the CDM, it would not be possible to complete the project’s

6 Source: identified in the Taishan Cement Works Waste Heat Recovery and Utilisation for Power Generation Project PDD as “Intercem China 2004” 7 Source: GEI cement report p. 5-7 8 “Energy Efficiency Financing for Cement Industry in China,” Global Environmental Institute, Beijing, China, February 2005, , p. 6

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 16 financing package. B.6. Emission reductions:

B.6.1. Explanation of methodological choices: Consolidated methodology ACM0004 defines emission reductions as the difference between the baseline emissions due to the displacement of electricity during a given year in tons of CO2, and the project emissions during the same year in tons of CO2. Because there are no project emissions for the project activity – project emissions are applicable only if auxiliary fuels are fired for generation startup, in emergencies, or to provide additional heat gain before entering the WHR boiler – emission reductions equal the baseline emissions. The baseline scenario is determined to be continuous import of electricity from the East China Grid. According to the methodology, the emission factor for displaced electricity is calculated as described in ACM0002 /Version 06 (dated 19 May 2006), as follows: According to the latest rules on project boundary in version 6 of ACM0002, the delineation of grid boundaries as provided by the DNA of the host country shall be used if available. According to the Chinese DNA, the East China Grid includes Shanghai, and Jiangsu, Zhejiang, Anhui, and Fujian provinces. According to ACM0002, the baseline emission factor (EFy) is calculated as a combined margin (CM), consisting of the combination of operating margin (OM) and build margin (BM) factors according to the following three steps. Calculations for this combined margin must be based on data from an official source (where available) and made publicly available. Power plant capacity additions registered as CDM project activities should be excluded from all calculations. Step 1. Calculate the Operating Margin emission factor(s) (EFOM,y) based on one of the four following methods: (a) Simple OM, (b) Simple adjusted OM, (c) Dispatch Data Analysis OM, or (d) Average OM. While ACM0002 indicates that option (c), dispatch data analysis, should be the first methodological choice, it cannot be used because the information is not available in China. Due to China’s institutional reform of separating plant operation from the operation of the grid, there is no publicly available information for the grids and power plants at all levels. Moreover, the East China grid is a very large regional grid for which it would be difficult and expensive to obtain hourly dispatch data. The simple adjusted OM, option (b), requires the annual load duration curve of the grid. Due to the institutional reform issue stated above, the necessary data to use method (b) are difficult to obtain. The average emission rate method (d) can only be used where low-cost/must run resources constitute more than 50% of total grid generation and detailed data to apply option (b) is not available, and where detailed data to apply option (c) above is unavailable. Table B.6.1 shows the proportion of thermal power is higher than 88% from 2000 to 2004. It is inconceivable that this percentage would fall below 50% in the near future. Method (d) is therefore not applicable.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 17 Table B.6.1 : Annual electricity generation of East China Power Grid of 2000~2004

Power generation (GWh) No Year

Total Thermal Power Hydropower etc. Proportion of

Hydropower etc.

１ 20009 300,003.5 268,590.7 31,412.8 10.47%

2 200110 326,647.8 289,436.7 37,211 11.39% 3 200211 367,443 324,195.1 43,247.9 11.77% 4 200312 429,327 382,112 47,015 11.0% 5 200413 487,986 440,292 47,694 9.77% The Simple OM method (a) can only be used where low-cost/must run resources constitute less than 50% of total grid generation in: 1) average of the five most recent years, or 2) based on long-term normals for hydroelectricity production. Based on the information presented above to explain why method (d) is not applicable, we can also determine that method (a) is applicable. ACM0002 allows the OM to be calculated using one of two data vintages: • (ex ante) the full generation-weighted average for the most recent three years for which data are

available at the time of PDD submission, or • the year in which project generation occurs, if the OM is update based on ex post monitoring. This project calculates the OM emission factor ex ante and does not need to be updated ex post. The Chinese DNA published OM figures and calculation process for different grid areas in China, including for the East China grid system. It made the calculations by applying the simple OM method. All of the data come from “China Electric Power Yearbook" and “China Energy Statistics Yearbook”.

The data for calculating fuel coefficient is drawn from “ Revised 1996 IPCC Guidelines for National

Greenhouse Gas Inventories: Workbook” , first chapter, Table 1-2 in page 1.6 and table 1-4 in

page 1.8 . Since the DNA is the most authorized organization in china about CDM project, we use their data. The value for OM is 0.9411 tCO2/MWh for East China Grid according to Chinese DNA. Step 2: Calculate the Build Margin Emission Factor ACM0002 calculates the Build Margin (BM) emission factor based on sample group “m,” which consists of either the five power plants that have been built most recently, or the power plant capacity additions in the electricity system that comprise 20% of the system generation (in MWh) and that have been built

9 2001 China Electric Power Yearbook page. 667 10 2002 China Electric Power Yearbook page. 625 11 2003 China Electric Power Yearbook page. 593 12 2004 China Electric Power Yearbook page. 709

13 2005 China Electric Power Yearbook page 474

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 18 most recently. Project participants should use from these two options that sample group that comprises the larger annual generation. ACM0002 offers two options for calculating the BM emission factor: • ex ante, or • ex post and updated annually for the year in which actual project generation and associated emissions

reductions occur. This project calculates the BM emission factor ex ante and does not need to be updated ex post. Same as OM, we use the data published by Chinese DNA. The value of BM according to Chinese DNA for East China Grid is 0.7869 tCO2/MWh. Step 3: Calculate the baseline emission factor This is calculated as the weighted average of the Operating Margin (OM) emission factor and the Build Margin (BM) emission factor. The project activity is not a wind or solar project, and therefore uses the default weights of 0.5 for both the OM and BM. wOM= wBM=0.5 EFy =0.5*EFOM, y +0.5*EFBM, y =0.5*0.9411+0.5*0.7869 =0.864 (tCO2/MWh) According to the data provided by the Chinese DNA, the applicable combined margin emission factor for the East China grid is 0.864 tCO2/MWh. Emission reductions According to ACM0004, the emission reduction (ERy) by the project during a given year y is the difference between the baseline emission (BEy) and project emissions (PEy), as follows: ERy = BEy –PEy In determining the net quantity of electricity supplied, project participants shall subtract the quantity of electricity required for the operation of the power plant. After accounting for electricity used by the power plant, the project activity will supply net electricity in the amount of 42,930 MWh per year ( 14,470 MWh for Xing Bao Long, 28,460 MWh for Du Shan), so:

BEy = BEy×EFy

=42,930 (MWh)×0.864 (tCO2/MWh)

=37,091 tCO2e Since there are no project emissions from this project activity, PEy = 0 Thus, ERy = 37,091 – 0 = 37,091 tCO2e/year. The annual emission reduction generated by the proposed project is 37,091 tCO2e/year.

B.6.2. Data and parameters that are available at validation:

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 19 (Copy this table for each data and parameter) Data / Parameter: CO2 emission factor of the grid (EFy) Data unit: tCO2/MWh Description: Emission factor Source of data used: The Combined Margin emission factor is calculated as an equally weighted sum

of the Operating Margin and Build Margin emission factors, based on data provided by the Chinese Designated National Authority for the East China power grid.

Value applied: According to the OM and BM data provided by the Chinese DNA, the CM emission factor is 0.864 tCO2/MWh.

Justification of the choice of data or description of measurement methods and procedures actually applied:

The CM data are not directly measured. They are published by the Chinese DNA on its website14. The data on which the OM and BM are based come from China Electric Power Yearbook and China Energy Statistics Yearbook.

Any comment: According to ACM0002 methodology, to which ACM0004 refers when the baseline scenario is grid power imports, an equally weighted average of the OM and BM are used since the project activity does not use intermittent technology such as solar or wind.

Data / Parameter: CO2 Operating Margin emission factor of the grid (EFOM,y) Data unit: tCO2/MWh Description: CO2 operating margin emission factor Source of data used: The OM of the East China power grid is published by the Chinese Designated

National Authority based on its website. Value applied: According to the Chinese DNA, the OM value is 0.9411. Justification of the choice of data or description of measurement methods and procedures actually applied:

Suorce data come from the China Electric Power Yearbook, China Energy Statistics Yearbook and Revised1996 IPCC Guidelines for National Greenhouse Gas Inventories: Workbook

Any comment: Detail calculation15. Data / Parameter: CO2 Build Margin emission factor of the grid (EFBM,y)

14 http://cdm.ccchina.gov.cn/WebSite/CDM/UpFile/File1053.pdf 15 http://cdm.ccchina.gov.cn/WebSite/CDM/UpFile/File1052.xls

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 20 Data unit: tCO2/MWh Description: CO2 build margin emission factor Source of data used: The BM of the East China power grid is published by the Chinese Designated

National Authority on its website Value applied: According to the Chinese DNA, the BM value is 0.7869. Justification of the choice of data or description of measurement methods and procedures actually applied:

Suorce data come from the China Electric Power Yearbook and China Energy Statistics Yearbook

Any comment: Detail calculation16 Data / Parameter: Amount of each fossil fuel consumed by each power source/plant (Fi,j,y) Data unit: t or m3/year Description: Fuel quantity Source of data used: China Energy Statistics Yearbook Value applied: N/A Justification of the choice of data or description of measurement methods and procedures actually applied:

Data are published annually in the China Energy Statistical Yearbook.

Any comment: Data / Parameter: CO2 emission coefficient of each fuel type and each power source/plant

(COEFi,k) Data unit: tCO2/t or m3 Description: Emission factor coefficient Source of data used: Revised1996 IPCC Guidelines for National Greenhouse Gas Inventories:

Workbook Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied:

Any comment:

16 http://cdm.ccchina.gov.cn/WebSite/CDM/UpFile/File1051.pdf

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 21 Data / Parameter: Electricity generation of each power source/plant (GENj,y) Data unit: MWh/year Description: Electricity quantity Source of data used: China Electric Power Yearbook Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied:

Data is published annually from China Electric Power Yearbook

Any comment: B.6.3 Ex-ante calculation of emission reductions:

ERy = BEy – PEy = 37,091 – 0 = 37,091 tCO2e / year

Ex-ante calculation of emission reductions is 37,091 tCO2e/year. Over a ten-year crediting period, the project activity will reduce 370,910 tCO2e of greenhouse gases.

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

Year Estimation of project activity emissions (tCO2e)

Estimation of baseline emissions (tCO2e)

Estimation of leakage (tCO2e)

Estimation of overall emission reductions (tCO2e)

2007 0 37,091 0 37,091 2008 0 37,091 0 37,091 2009 0 37,091 0 37,091 2010 0 37,091 0 37,091 2011 0 37,091 0 37,091 2012 0 37,091 0 37,091 2013 0 37,091 0 37,091 2014 0 37,091 0 37,091 2015 0 37,091 0 37,091 2016 0 37,091 0 37,091 Total (tCO2e) 0 370,910 0 370,910

. B.7 Application of the monitoring methodology and description of the monitoring plan:

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 22 For Electricity Generation by the Project Activity

B.7.1 Data and parameters monitored: (Copy this table for each data and parameter) Data / Parameter: Total Electricity Generated (EGGEN) Data unit: MWh/year Description: Total Electricity Generated Source of data to be used:

On-site measurement

Value of data applied for the purpose of calculating expected emission reductions in section B.5

Total electricity generated by the project activity is anticipated to be 46,000MWh per year (gross).

Description of measurement methods and procedures to be applied:

Data to be measured continuously, online, by electricity meters at the plant. Assigned monitoring staff will be responsible for the regular calibration of the meter.

QA/QC procedures to be applied:

The uncertainty level of the data is low because the data will be directly metered by the electricity meter. The installation, calibration and maintenance of the meter will all be undertaken by professional staff and in the compliance of relevant standards and rules.

Any comment: Data to be archived electronically for the duration of the crediting period, plus two years.

Data / Parameter: Auxiliary Electricity (EGAUX) Data unit: MWh/year Description: Auxiliary Electricity (including the electrical energy utilized by the WHR power

generating equipment) Source of data to be used:

On-site measurement


Total auxiliary electricity utilized by the WHR power generating equipment is anticipated to be 3,070 MWh per year


Data to be measured continuously, online, by electricity meter at the plant. Assigned monitoring staff will be responsible for the regular calibration of the meter.

QA/QC procedures to The uncertainty level of the data is low because the data will be directly metered

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 23 be applied: metered by the electricity meter. The installation, calibration and maintenance of

the meter will all be undertaken by professional staff and in the compliance of relevant standards and rules.


Data / Parameter: Net Electricity supplied to facility (EGy) Data unit: MWh/year Description: Net Electricity supplied to facility Source of data to be used:

Data will be calculated from the above measured parameters (EGGEN and EGAUX)


Total electricity supplied to the facility is anticipated to be 42,930MWh per year.


This will be calculated based on data that is measured continuously, online, from meters at the plant.

QA/QC procedures to be applied:

This will be calculated based on data from meters at the plants that are taken and calibrated regularly.


B.7.2 Description of the monitoring plan: The monitoring plan is summarized as follows. Additional information will be provided in Annex 4. Monitoring Plan Monitoring is the measuring and recording of parameters related to calculation of emission reductions resulting from the CDM project activity. These emission reductions must be verified by a DOE on a periodic, independent, and ex post basis. The DOE will also verify whether the project’s monitoring plan has been strictly followed and relevant measures carried out. Monitored information should be real, measurable and reproducible so as to provide a DOE with real, reliable and transparent emission reduction calculation data, and ensure that the DOE will effectively verify the project. The monitoring measures should also ensure that the emission reductions are real and reliable. The project will replace part of the electric power purchased from the fossil fuel-intensive East China grid, thereby leading to reduced CO2 emissions. Hence, the net power supply from the project is the key parameter in monitoring. The ACM0004 monitoring methodology requires monitoring of the following:

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 24 1. Net electricity generation from the proposed project activity; 2. Data needed to calculate CO2 emissions from fossil fuel consumption due to the project activity; 3. Data needed to recalculate the operating margin (OM) emission factor, if needed, based on the choice

of the method to determine the OM, consistent with the consolidated methodology ACM0002. 4. Data needed to recalculate the build margin (BM) emission factor, if needed, based on the choice of

the method to determine the BM, consistent with the consolidated methodology ACM0002. 5. Data needed to calculate the emissions factor of captive power generation. The project activity does not need to monitor (3) and (4) due to the choice of ex ante estimation. Monitoring of (5) is not applicable because there is no captive power generation in the baseline scenario. Calibration and measurement Xing Bao Long and Du Shan cement factories will contract with an independent entity qualified in calibration of measuring facilities to ensure the accuracy of the monitoring equipment. Meters and devices measuring the electricity generation and consumption will be calibrated at least once annually to ensure the reliability of the system and the accuracy of the readings. Records of the calibration shall be provided to DEED and a nominated third party. Monitoring The following parameters will be monitored by a qualified technician or statistician at each of the cement factories. Parameters to be monitored: The total power generation of the WHR power plant (MWh/year) Auxiliary power used by the WHR power plant (MWh/year) Net power generation of the WHR power plant (MWh/year) Data Management System Information and data collected from the original data source to the final results shall all be archived in paper. For data or information obtained via internet, the site must be recorded for checking. A qualified entity or the CDM developer will also check the credibility and reliability of information obtained from the website. Under the reasonable request of the DOE performing the verification, the person responsible for monitoring will provide the DOE with other necessary additional data in a timely manner. The person responsible for monitoring will also provide an index of relevant materials and monitoring information to facilitate the verification DOE to obtain the necessary documents and information. All paper records of data and information will be archived by DEED, and there should be at least one backup duplicate. Verification Verification by a DOE will be done periodically, e.g., once a year for the duration of the Energy Services Agreement between DEED and Xing Bao Long cement factory and Du Shan cement factory. 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)

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 25 Chen Shiping Global Environmental Institute (One party of DEED) Tel: 86-10-67083192-225 Fax: 86-10-67083193 Email: [email protected] Participants: Sophie Chou Steven Kaufman Green Markets International, Inc. (USA) 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: 1/7/2006

C.1.2. Expected operational lifetime of the project activity: The expected operational lifetime of the WHR power plant equipment is 15-20 years. C.2 Choice of the crediting period and related information: C.2.1. Renewable crediting period N/A C.2.1.1. Starting date of the first crediting period: N/A C.2.1.2. Length of the first crediting period: N/A C.2.2. Fixed crediting period: C.2.2.1. Starting date: 1/1/2007

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 26 C.2.2.2. Length: Ten years SECTION D. Environmental impacts >> D.1. Documentation on the analysis of the environmental impacts, including transboundary impacts: The cement production lines at Xing Bao Long and Du Shan have undergone and passed full Environmental Impact Assessments (EIA) in line with the requirements of the Chinese government, which are available for the validation DOE to review. The Project Activities are internal projects at these cement production facilities and have also undergone separate EIAs. The Project Activities have obtained all needed government permits, which are also available for review. There will be some minor negative environmental impacts due to water consumption and use of salt for water treatment (see below); however, these impacts will be minimal. The overall environmental impacts of the Project Activity will be substantially positive. By displacing electricity from the East China Power Grid, the project will reduce GHG and ambient air pollution emissions related to firing of fossil fuels in the power plants supplying electricity to the grid, including carbon dioxide, sulphur oxides, nitrogen oxides, particulates, etc. As a result, the project will generate regional as well as global environmental benefits. To illustrate environmental impacts of the project activity, the following phases of project implementation have been considered:

� Construction Phase and � Operation and Maintenance Phase

Construction Phase During the construction period, the project will produce short-term and localized environmental impacts such as dust, noise, and solid waste. The magnitude of these environmental impacts, however, will be negligible. Operation and Maintenance Phase The environmental impacts from the project’s operation and maintenance are will be as follows: Air Quality Impact: With the project, the cement factories would decrease electricity purchases from the East China Power Grid. This will result in reduced emissions of carbon dioxide, sulphur oxides, nitrogen oxides, and other air pollutants. Additionally, subsequent to the project’s implementation, the flue gas will pass through the waste heat boiler and a dust precipitator before being vented to an electrostatic precipitator for further settlement. The boiler and precipitator will suppress dust emissions, so the project activity would have a significant positive impact on ambient air quality.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 27 Water Quality Impact: Cooling water will be discharged periodically from the cooling system in order to control the concentration of Ca2+ and Mg2+ to avoid scaling. The discharged water can be treated as clean water and will be emitted into an impounding reservoir. Chemical waste water will be emitted into an impounding reservoir after proper treatment: neutralization and depositing chemicals. Waste water would not be discharged to surrounding rivers. Negative water quality impacts from the project will be minor. Acoustic Impact: Noise will come mainly from the turbine, cooling tower, fans, centrifugal pumps, electric motors etc. The noise would be kept below the permissible level17 by proper design: � Noise from the blast blowers and the induction draft fans will be reduced by providing silencers in

the duct � The power generation room will be sealed in order to reduce noise pollution � A high-power pump will be buried underground to reduce noise pollution � Noise damping measures would be adopted to protect works during the operation and management Solid Waste Impact: The project activity will not have any significant effects as regards solid waste generation. Ecology The project activity will be carried out inside the premises of the cement plant, and will thus not impact ecosystems in the surrounding area. Moreover, there are on endangered species or cultural artifacts located in and around the plant area. In order to improve the local environment, the project entity would plant trees in areas surrounding the facility. Social The Xing Bao Long project will provide 24 job positions for local people. The Du Shan project will provide 18 job positions for local people. Conclusion As a whole, the net impact with regard to environmental pollution would be positive, and any negative impacts will be minimized as all necessary abatement measures would be adopted and periodically monitored. 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: As discussed above, the environmental impacts of the project activity are considered to be positive SECTION E. Stakeholders’ comments E.1. Brief description how comments by local stakeholders have been invited and compiled:

17 http://www.envir.gov.cn/law/standard/indnoise.htm

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03 .1. CDM – Executive Board page 28 To date, stakeholder comments have been requested through the environmental permitting process. For Xing Bao Long project, the comments are collected from represents and experts from governments and research institute: Environmental Protection Agencies, Economic and Trade Committee, Project Environmental Asset Center, Environmental Science Institute and so on. Besides the above experts, this project also collects comments from local stakeholders: 10 organization/company and 40 local residents from surrounding area. For Du Shan project, the comments are collected from represents and experts from governments and research institute: Local People’s Government, Local People’s Congress, Environmental Protection Agencies and local Villager Committee. E.2. Summary of the comments received: For Xing Bao Long project, all the organization and almost all local residents believe that the WHR project is environmental-friendly project and can significantly approve local environmental situation and support the implementation of this project. They only concern about the noise issue. For Du Shan project, all the organization believe that the WHR project is environmental-friendly project and can significantly approve local environmental situation and support the implementation of this project. Most worried about the air pollution impact. E.3. Report on how due account was taken of any comments received: For Xing Bao Long project, the cement plant will choose all necessary measures to decrease the noise impact which is explained section D.1. For Long You project, the WHR project wouldn’t let the local air quality be worse, it just approve the local air quality.


Annex 1

CONTACT INFORMATION ON PARTICIPANTS IN THE PROJECT ACTIVITY Organization: Dalian East Energy Development Company, Ltd. (DEED) Street/P.O.Box: Building: Building5#, Suite 1-401, The New World Villa City: Beijing State/Region: Beijing Postfix/ZIP: 100062 Country: P.R.China Telephone: 86-10-67083192-224 FAX: 86-10-67083193 E-Mail: [email protected] URL: Represented by: Jin Jiaman Title: Board Member Salutation: Ms Last Name: Jin Middle Name: First Name: Jiaman Department: Mobile: Direct FAX: Direct tel: 86-10-67080746 Personal E-Mail:


Annex 2

INFORMATION REGARDING PUBLIC FUNDING This project receives no public funding by Annex I Parties or from any other public sources.

Annex 3

BASELINE INFORMATION

Please check section B.4.

Annex 4

MONITORING INFORMATION Please check section B.7.

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CDM Project

Documents

project activity annex

project owner

project entity

respective cement factories

power outages

whr plants

onsite power use

day td of cement