Year-wise analysis of additionality

Year 2006:
In the year 2006 a total of 19 wind energy projects were registered out of which 14 were small scale projects.
Small scale projects: Additionality of 3 small scale projects has been studied as a sample. These projects are:
1. Generation of electricity from 6.25 MW capacity wind mills by Sun-n-Sand Hotels Pvt. Ltd at Soda Mada Rajasthan
2. 3.75 MW Small Scale Grid Connected “Demonstration Wind Farm Project” at Chalkewadi, District Satara, State Mahararashtra
3. 10.6 MW wind farm at Village Badabagh, District Jaisalmer, Rajasthan.

All the 3 projects demonstrated investment barrier in the additionality. The 6.25 MW and 10.6 MW project showed that the cost of power generation through wind is higher compared to that of coal and fuel oil, whereas. The 3.75 MW project has shown how due to non payment by Maharashtra state electricity board the project participants were not able to repay the loan (50 % of the total project cost). This has also been shown as a regulatory risk by the project proponent. The projects have demonstrated technology barrier faced due to poor penetration of wind energy and uncertainty in power generation through wind. The 6.25 MW project also faced technological barrier by using higher capacity of WTGs (1250 Kw) and other barriers like investment in power evacuation, unskilled manpower and lack of experience due to new technology. The 10.6 MW project in Rajasthan faced regulatory barriers because the policies of the Rajasthan electricity board were uncertain and changed several times and hence not investor friendly.
There were request for reviews for the 6.25 MW and 10.6 MW project whereas, the 3.5 MW was straightaway registered. None of the request for review were related to additionality. For the 6.25 MW project the members of borad questioned the presence of another project by the same project proponent and other wind farms in the nearby area. the project proponent demonstrated that all the projects were in some or other stage of availing CDM benefits and the project was subsequently registered.
For the 10.6 MW project, there were request for reviews on baseline emission factor calculations and the arrangement of ownership of WTGs, which were answered and the project was registered.\
Large scale projects:
The two large scale projects studied are:
1. 56.25 MW bundled wind energy project in Tirunelveli and Coimbatore districts in Tamilnadu
2. 125 MW wind power project in Karnataka
Earlier there were 2 additional steps in the tool to prove additionality for projects under the methodology ACM0002. These were step 0 and step 5, which were as follows:
Step 0: Provide evidence that the starting date of the CDM project activity falls between 1 January 2000 and the date of the registration of a first CDM project activity, bearing in mind that only CDM project activities submitted for registration before 31 December 2005 may claim for a crediting period starting before the date of registration; Provide evidence that the incentive from the CDM was seriously considered in the decision to proceed with the project activity
Step 5: Impact of CDM registration on the project activity.

After completing steps 0 and step 1, both the large scale projects proved additionality through benchmark analysis under investment analysis in step 2. The 125 MW project took the WACC of the project as the benchmark and compared it against the IRR of the project for 10 years(as they were taking CDM benefits for a fixed period of 10 years and the PPA with the state electricity board was also for a period of 10 years) the IRR was found to be lower than the benchmark without CDM benefits. It improved after considering CDM benefit but still remained lower than the benchmark. The sensitivity analysis was conducted by considering variations in annual export and OM expenses.
Common practice analysis was conducetde by demonstrating lower potential realization when compared to gross potential for the state of Karnataka. The project was also at the time of implementation largets wind farm in the state and used WTGs of higher capacity.
There were requests for reviews on the clarity of IRRs calculated for the project, since the doubt was not cleared the project was reviewed for the same, following which corrections were made and the project was registered.
The 56.25 MW project used the benchmark of 16% for the Indian electric utility industry. The sensitivity analysis was conducted through variations in annual sales. Common practice analysis was conducted by demonstrating lower penetration of wind energy in the country compared to other sources.
The project was straight away registered.

Rejected projects:
Two large scale wind energy projects from India were rejected during the year. Both the projects were by Bajaj Auto Pvt Ltd, in Maharashtra. Both the projects had similar PDD, additionality and both were rejected for the same reasons. The projects opted for barrier analysis to demonstrate additionality. Under the technology barriers, reasons like first venture into energy sector by the project proponent, lack of expertise, possible damage by fire were mentioned. These technological barriers were termed general business risks by the board members in the request for review. Under the investment barriers the projects discussed factors like uncertainty of power generation through wind, amount spent on the machinery etc. and demonstrated a lower Debt Service Coverage Ratio(DSCR) with and without CDM benefits against a benchmark DSCR of 1.40. In the request for review the board members were of the opinion that the arguments under investment analysis and investment barriers have been muddled up and also found that the DSCR improved only marginally after considering CDM benefits (form 0.69 to 0.72). The project proponent could not successfully answer the queries and the project was sent for review. The scope of the review was to cover the evidence of consideration of CDM benefits by the project proponents prior to setting up of the project activity and whether the additionality requirements were met. Following the review the projects were rejected because the barrier analysis in the PDD was not convincing and the project proponents failed to substantiate technology and investment barriers or conduct an investment analysis.

Grid-connected electricity generation from renewable sources at Satara by M/s Bajaj Auto Ltd.using wind power 45.2 MW

And

Grid-connected electricity generation from renewable sources at Supa, Taluka Parner using wind power 20 MW

Year 2007

A total of 27 wind energy CDM projects were registered in the year 2007 in India. Out of these 27 projects 2 small scale projects and 2 large scale projects have been studied as a sample.
Small scale projects
The two small scale projects studied are:
1. 4.2 MW Wind power project in Maharashtra, by Bharat Forge Limited
2. 7.25 MW Wind Energy Project of Aruppukottai Sri Jayavilas Ltd, Tamilnadu, India.
3. Grid-connected electricity generation from renewable sources at Kadavakallu, Putluru Mandal

4.25
Investment barrier: IRR against WACC of the project and ROCE of the company, high capital cost per unit of power generation
Technology: lower PLF, remote location – only to assigned customer
Prevailing practice: regulatory risks- unstable govern,ment and state policies

7.25
Investment: Irr around 8 % compared to 16 % specified by CERC. Higher capital cost of per MW compared to thermal, small hydrpo an d biomass, higher interest rate , less CUF
Tech; no spares, higher cap WTRGs, no core business
Prevailing pract; lower penetration of wind energy
Request for review: - corrected
13.5 MW
Tech: Fire
Investment : uncertainity of wind , state policies etc
Financial barrier : low IRR
Prevalance: Lower penetration in Andhra Pradesh capmared to Tamil nadu and Maharashtra
Req for Rev: 1 out of 3 related to additionality: input values IRR.
Large scale projects:
1. Bundled wind power projects in Satara & Supa (Maharashtra in India) managed by TATA Motors Ltd.
2. 37.6 MW bundled wind power project in Nagercoil, Tamilnadu

20 MW
Benchamsrk analysis: campared against WACC which is increased by risk, also demoinstrated tp be lower than the 16 % for Indian Power industry. Sensivity analysis through buy-back rate and tax benefits +
Barrier analysis:
Investment barrier: financing was not readily availiab;e, the depreciation could not be availed because the company suffered heavy loss in that year. Uncertainity of power generation through wind. Higher installation cost / MW lower PLF. Major chunk of total instaaled cap I Maha in that year.
Tech: PLF, fire, unrelated sector
Prevailing prac: verty low captive power utilization in automobile industry compared to others, stil lower is the utilization of wind to provide captive power.

Common prac: lower penetration of wind power in Maharashtra,
Step 2 diofferent from others – losses due to lack of development (in technology) and unavailability of power evacuation facility in initial years. 37.6 MW
Investments analyasi
Benchmark : IRR against 16 % for (IPP CERC report 2003-04) . sensitivity; generation
Barrier: High capital cost installation, lowest tarrif of 2.70 tamil nadu, most parts of WTGs inported so O& M doubt, low CUF against thermal plants.
Common prac: Low installation in TN during that particular period due to barriers

2008
Small scale projecsts
4.5 mw
Regulatory barriers: They were several hurdles in signing the PPA for the project at the end of which the project participants ended up supplying free power to the state electricity board of AP for more than a year. They also had to sign a PPA with a Power Purchase tarrif of 2.70 instead of 3.30, which they would have got.
CUF in AP is less than other states like Karnataka and TN
Investment analysis showed that the IRR for the project was lass than the benchmark return on equity as per Central Electricity Regulaory Commision for Indian IPPs
The project went for review for accuracy of investment analysis and substantiation of regulatorty risks. These pounts were corrected and the project was registered
7.2 MW
Investment Barrier: High capital investment comapared to other ppwer plants, low PLF comapared to thertmal plants, interest rate hike by IREDA, payments delay by state utilities, investment for power evacuation, low Project IRR has been demonstrated for the project Other Barriers;
Regulatory risk : uncertain policies of the state electricity utilities.
An issue on IRR calculations
15 MW
Investment analysis: Govt bond rates increased by risk premium (benchmark). Sensitivity : sales
Barrier analysis
Other barriers: cost of investment high compared to other renewable energy plants. PLF very low compared to a cogen plant. Difficult to avail finances.
Prevailing practice barrier: less installation in mahararashtra in that year (2204) compared to TN and Kar.
A review of the additionality was carried out through a review of investment analysis.
Large scale projects
75 MW
Benchmark analysis: Equity IRR is demonstrated to e lower than 16 % recommended by national poily for win power projects and 16.9 % as the internal hurdle rate for the project. Sensitivity analysis on PLF,
Barrier analysis:
The tarrif doaen account for risks as in the case with thermal and hydro plants.
A part of CDM revenues has to be paid to the state utility.
CPA: Lower penetration in comparison with Karnataka and TN
There aws areview of the completeness of investment analysis, in particular on the validation of the PLF used in the sensitivity analysis.

22.5 MW
Benchmark analysis: Project IRR has been compared against the Rate of return used by Rajasthan (state elect regulatory tariif commission to determine tariff for power generators. Sensitivity based on tariff and PLF
Barrier analysis:
Rajasthan PLF among the lowest, wheeling among the highest, frequent change of tariffs,
CPA: small portion in rajasthan compared to other states, 1 % of total wind is captive, insignificant portion when compared to other resources to generate elec.
Review was conducted on appropriateness of benchmark, sensitivity analysis and prior consideration of CDM was reqd.
Withdrawn projects Green energy to grid at Dhule, Maharashtra
Investmenst analysis: benchmark : industrial benchmark or required rate of return.
Senesitivity analysis: o&M expenses, annual export .
CPA: lower budget for min of non conventional resourcesc comapared to min of power
Lower penetration of wind en energy in India and Maharashtra.
Req for review:
Appropriateness of benchmark, common prac barrier, delay in project submission for validation questions CDM consideration , a schedule is reqd.
Did not respond: withdrawn.

15 MW Grid Connected Wind Turbine Project in Karnataka
Investment barrier: 16 % equity benchmark (not acceptable by UNFCCC for Indian CDM projects) CERC, KERC. Variations in PIRR due to with the extent of tax shelter availed.
Prevailing prac baeerrier: fossil fuel plants common, higher returns.
Barrier due to uncerytains policy: PPA and Tariff
Lack of experience.

Req f Rev: Definition of actual predicted IRR taking account of available tax shelter.
Using benchmark of 16 % rendered unsuitable for indai CDM projects EB 40 para 40.
Prior consideration of CDM
No response; withdrawn

Rejected projects:
1042
Investments analysis: 16 % benchmark CERC, sensitivity Elec generation
Barrier: lower PLF compared to thermal plants, changing policies
CPA low captive proportion by renewable enrgy in Tamiol nadu, investment during lean period in TN.
Rejected: Did not mention that a part WTGs received Technology Upgradation fund scheme. The board wanted PP to conduct investment analysis separately for the project (with w/o TUFS) using appropriate benchmark (16 % not applicable)
Failed and so rejected

1132
Investment barrier and first of its kind in the region. – 16 % benchmark, assumptions in calculating IRR
Regulatory barrier- policy of rajasthan
1131
Investment barrier: mainly investment barrier against Requiresd rate of return. Other barriers: grid availability, low PLF, availability of funds.
Prior CDM consideration,
Benchmark
Values used to calculate IRR

2009
45 MW wind – 2092
Investment ana: benchmark 16 % MERC, and commercial lending rate 12.75 %
Sensitive: project cost, PLF, o & M
Barrier analnysis:
Tarrif risk single part compared to fossil fuels and hydro
CPA: has demonstrated that alarge portion of capacity installed between 2002-2007 in Maharashtra is bein covered under CDM (2202 india ratifies Kyoto) also there were no projects of similar sacle in the region.
4.5 MW
Investment barrier: benchmark of term lending rate of 11.75 %- prior consideration
42.5 MW
Prior consideration
Benchmark govt bond rates increased by suitable risk premium- 16.72 %
Sensitive: units sold
CPA: less than 10 % of gross potential installed in the year of conceptualization, around 4 % installed compared to other sources I that year, similar stats for Karnataka. There are 4 other farms greater than 15 mw all under CDM
13.25
Invest barr: govt bond rate+ risk premium - CAPM- benchmark. Sensitivity CUF, project cost, o& M cost
CPA; lower penetration in GUJ compared to other states
Other barriers: sinfg;le part tariff not accounting for risk, earthquake zone
CDM consideration
Req f Rev : on 10 % variability in sensitivity analysis and actions taken towards CDM- both were demonstrated

8.5 MW

Investment barrier ; same as above. , high capital cost, erratic power generation, low returns from PA
Other barrier: low penetration in MP, no prior experience,
CDM consideration.
Req for rev: PLF validation and 10 % in sensitivity.

Rejected
Invest barrier: benchmark WACC, sensitive: elect generation
Regulatory risk: CDM benefit sharing with MERC if registered, PPA for 13 years only,
CDM consideration
REQ f REV:
1. B value higher than other CDM projects
2. Tariif after 13 years and PLF
3. CDM consideration
Rejectec due to reason of B high value