Guatemala: El Canada
Hydroelectric Project
A Case Study for Discussion
Contents
• Introduction to the El Canada Hydroelectric Project
• Elements of the El Canada Hydroelectric Project
Baseline
• Proposed New Baseline Methodology
• Application of the Proposed New Baseline Methodology
to the El Canada Hydroelectric Project
Introduction
• Background Information
– Guatemala has interconnected power system: the
National Interconnected System (NIS)
– The Guatemalan power sector is organized by the
wholesale market which establishes clear criteria for merit
order dispatch and thus of injection to the NIS. Dispatch
to the NIS is by strict economic order, considering the
need to supply demand, the opportunity cost of water, and
the operational cost of the thermal units. This results in
older plants with higher fuel and operating costs usually
being dispatched last as peaking plants.
Introduction
• Project Description
– 43 MW peaking run-of-river hydroelectric plant located
on the Samala River, Guatemala
– Project will collect flows from the tailrace of an existing
power plant through a diversion dam. Water will be
conduced to a regulating reservoir and will be conveyed
from the reservoir to the powerhouse by a 2,400 m long
penstock.
– Project is expected to generate electricity of 178Gwh/year.
– Output of the Project to be sold to the Grid through a
commercial distributor on a 10 year Power Purchase
Agreement.
Introduction
• Main Source of Emission Reductions
– Displacement of electricity from fossil fuel thermal
power generation
• Yearly Reductions
– 144,180 tons of CO2 per year
• Projected Reductions in 21 years
– 2,541,840 tons of CO2 (low)
Elements of the Baseline
• Baseline Scenario
– Baseline scenario consists of the current plants in the
NIS plus capacity expansion without the Project.
• Method of Determining Baseline Scenario
– Economic Analysis – Least Cost System Expansion
• The baseline scenario was determined on the basis
of comparison of costs of alternative generation
options.
• Fossil fuel thermal power generation options,
specifically a mid-sized coal fired steam plant, are
currently available to private investors in Guatemala
at lower total generation costs than the proposed
project activity.
Generation Cost $/MWH
Project Additionality Assessment
CDM
Project
Hydro
Baseline:
Lowest
Cost
Coal
Gas
Diesel
Elements of the Baseline
• Leakages
– None
• Boundary
– Geographic Boundary – Guatemala’s National Borders
– System Boundary – NIS
– Time Boundary – 21 years (duration of the Crediting
period)
New Baseline Methodology
• Approach selected to calculate baseline
emissions :
– Option (b) of Par. 48 of Marrakesh Accords: The baseline
is a scenario that represents emissions from a technology
that represents an economically attractive course of
action, taking into account barriers to investment.
• Approach proposed to assess project
additionality:
– “Least Cost Analysis of Power Capacity Expansion”
New Baseline Methodology
• Justification of the Applicability of the
Methodology to the El Canada Hydroelectric
Project:
• A least cost analysis is usually the method of choice in
national power planning, because it minimizes the overall
economic costs of satisfying the national demand for power.
• The private sector invests in power capacity expansion in
order to maximize return on investment. Everything else
being equal, projects and technologies with the lowest costs
per unit of electricity output are likely to yield highest
returns.
New Baseline Methodology
• Justification of Additionality
– The project meets the requirement of environmental
additionality, because its existence and operation will
have the effect of reducing GHG emissions below a
level that would have occurred in the baseline scenario.
(i.e. the Project will significantly reduce the reliance of
the NIS on fossil fuel for power generation and is not
associated with any leakage, therefore it will reduce
emissions as compared to the baseline)
New Baseline Methodology
•
Steps for Applying Baseline Methodology: “Least
Cost Analysis of Power Capacity Expansion”
1.
Confirm that the following conditions are met:
a.
b.
c.
Boundaries can be clearly identified and information on the
characteristics of the system is available
Competitive market for system expansion investments and electricity
sales
Baseline and monitoring methodology are compatible
2.
Determine the geographic and system boundaries
3.
Confirm that there are only two plausible baseline scenarios,
namely the relevant interconnected system and the system’s
expansion over time a) with the project; or b) without the
project
New Baseline Methodology
•
Steps for Applying Baseline Methodology:
4. Define generation characteristics (e.g. base or peak load)
and identify alternative options for power capacity
expansion that are readily available within the baseline
method boundaries
5. Calculate conservative figures showing the: a) total
generation cost of alternative (least) cost power expansion
option with the same generation and operational
characteristics; b) expected total net generation costs of the
project.
New Baseline Methodology
•
Steps for Applying Baseline Methodology:
6. Compare the Project’s expected KwH costs with the least
cost alternative to show that the project is not economically
attractive and therefore not part of the baseline.
 Costs should be adjusted for income from sales of power
and emission reductions to obtain cost figures that are
comparable between power options.
 A standard power planning cost formula should be used.
(nb: an example of cost calculation is the EPRI TAG
method.)
 The same cost formula or general calculation method for
the project and its alternatives must be used to ensure that
cost are comparable and consistent. Calculations must be
conservative.
New Baseline Methodology
•Steps for Applying Baseline Methodology:
7. Describe the baseline scenario and its expected
development over time
8. Determine that, in comparison with the baseline scenario,
the project scenario will have lower emissions, and that,
therefore, the project is environmentally additional.
Application of New Baseline
Methodology
• How Methodology was Applied in the Context of
the El Canada Hydroelectric Project Activity
– Step 1: All Conditions are met
Boundaries of NIS can be clearly identified
Power sector does not feature centralized
expansion planning, but an open market in
which private power producers compete
Selected monitoring methodology includes
collection of data reflecting the relevant system
expansion and the day-to-day operation of the
Power System.
Application of New Baseline
Methodology
• How Methodology was Applied in the Context of
the El Canada Hydroelectric Project Activity
– Step 2: Boundaries were clearly identified
– Step 3: Only two alternative scenarios are plausible,
namely the NIS and its expansion a) with the proposed
project; or b) without the proposed project
– Step 4: As a run-of-river project, it is likely to operate
in the base or intermediate load range based on
economic dispatch A mid-sized (150MW) coal fired
steam plant is readily available as system expansion
option for investors.
Application of New Baseline
Methodology
• How Methodology was Applied in the Context of the
El Canada Hydroelectric Project Activity
– Step 5: Total net generation cost for a mid-sized coal fired
steam plant was calculated at US$38.7/MWh using EPRI
TAG method.Total net generation cost for the Project is
US$48/MWh.
– Step 6: The project is not the least cost option. It is not
economically attractive and therefore not the baseline.
– Step 7: The system currently relies on Thermal plants and
diesel engines to satisfy peak load demand and for general
power dispatch at the margin. This is expected to continue in
the future with or without the El Canada Project. It is likely
that, in the absence of CDM projects, new thermal base load
capacity will be added to the system in the decade.
Application of New Baseline
Methodology
• How Methodology was Applied in the Context of
the El Canada Hydroelectric Project Activity
– Step 8: The project is environmentally additional
because it reduces emissions relative to the baseline
scenario.
Baseline Emissions per year: 144,180 tons of CO2
Emissions reductions per year: 144,180 tons of CO2
Emissions reductions for 21 years : 2,541,840 tons
of CO2 (low)