Transformation of small-scale methodology (AMS-I.A.): Electricity generation by the user
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This article provides a summary of selected revisions (from version 18.0. to version 14.0.), to a small-scale Clean Development Mechanism (CDM) methodology “AMS-I.A.: “Electricity generation by the user” (hereinafter referred to as "AMS-I.A."). It also describes the rationale for such proposed revisions, including those approved, rejected and yet to be decided by the CDM Executive Board. The CDM "requires the application of a baseline and monitoring methodology to determine the amount of Certified Emissions Reductions (CERs) generated by a mitigation CDM project activity in a host country" (UNFCCC, 2021, p. 4). CDM methodologies consist of five categories for its project activities: large-scale; small-scale; large-scale afforestation and reforestation (A/R); small-scale A/R; and carbon capture and storage (CCS) project activities (UNFCCC, 2021). As of March 16, 2022, there were one hundred approved small-scale methodologies (UNFCCC, 2022). In general, the methodology offers provisions for the main elements of a Project Design Document (PDD) in the CDM project cycle, such as a) the evidence of additionality, b) the formation of the baseline scenario and the approximation of emission reductions or net removals, and, finally, c) the monitoring plan (UNFCCC, 2021). The methodologies are vital for ensuring the environmental integrity of the carbon credits issued (Michelowa, 2020).
The analysis is divided into five main sections. After the introduction in Section 1, Section 2 outlines the anatomy of the “AMS-I.A.” methodology. The analysis in Section 3 describes six clarifications/revisions, traced from version 18.0 to version 14.0. Section 4 provides a case study of the “AMS-I.A.” project, Cabo Negro Wind Farm Project (Phase 1), to review the application of methodology. Section 5 concludes and offers suggestions for the future of the methodology. The following section briefly describes the current “AMS-I.A.” methodology (version 18.0, valid from March 11, 2022).
“AMS-I.A.” small-scale CDM methodology has been revised repeatedly, up to eighteen times. The scope of this methodology covers renewable electricity generation units, namely wind, solar photovoltaic, hydro and renewable biomass, which provide electricity either to individual households/users or groups of households/users. The "AMS-I.A" methodology applies to CDM project activities, which are implemented by the users of new installations (greenfield) or users who replace present onsite fossil-fuel-fired generation (UNFCCC, 2022b). The applicability of this methodology is limited to users and individual households in off-(national/regional) grid locations or unique situations, such as weak grids. Furthermore, essential conditions apply for reservoir-based hydro plants. And lastly, all users must be included in the project boundary, which incorporates the physical (geographical) site of the renewable energy generating unit(s) as well as the equipment which utilizes the produced electricity (UNFCCC, 2022b).
The methodology refers to the following approved methodologies and tools, namely a) “AMS-I.D.: Grid-connected renewable energy generation” (hereinafter referred as “AMS-I.D.”); b) “AMS-I.L.: Electrification of rural communities using renewable energy” (hereinafter referred as “AMS-I.L.”); c) “AMS-I.F.: Renewable electricity generation for captive use and mini-grid” (hereinafter referred as “AMS-I.F.”); d) “ACM0002: Consolidated baseline methodology for grid-connected electricity generation from renewable sources”(hereinafter referred as “ACM0002”); e) “Standard: Sampling and surveys for CDM project activities and programme of activities” (hereinafter referred as “Standard”); f) “TOOL5: Baseline, project, and/or leakage emissions from electricity consumption and monitoring of electricity generation” (hereinafter referred as “TOOL5”); and g) “TOOL16: Project and leakage emissions from biomass” (hereinafter referred as “TOOL16”). The methodology also instructs the project participants to follow the General guidelines for SSC CDM methodologies and “TOOL21: Demonstration of additionality of small-scale project activities” (UNFCCC, 2022b).
Besides applicability, every methodology document has other sections, such as baseline methodology and monitoring methodology. Generally, the integrity of the methodology depends on the integrity of these underlying sections. The basic formula for emission reductions (CERs) under a methodology is baseline emissions minus project emissions minus leakage emissions (Hart, 2022a). The “AMS-I.A.” baseline emissions are estimated “based on the fuel consumption of the technology in use, or that would have been used to generate the equivalent quantity of energy in the absence of the project activity. The baseline emissions are calculated using one of the three options: a) Option 1: based on the electricity consumption of the household/user, b) Option 2: based on the annual electricity generation by the project activity, and c) Option 3: based on a trend-adjusted projection of historic fuel consumption, in the case of replacement of existing fossil fuel-based technologies. Furthermore, baseline emissions of project activities, which involve capacity addition at an existing facility or replacement/retrofit of an existing facility, must be calculated using “AMS-I.D.” with the emissions factor (EFCO2) calculated under the “AMS-I.A.” parameters. Baseline emissions for project activities, which offer renewable energy to communities, can be calculated using the "AMS-I.L.” methodology (UNFCCC, 2012b).
The “AMS-I.A.” project emissions for most renewable energy project activities are zero. However, the project developers need to apply the "ACM0002” methodology for emissions connected to water reservoirs of hydropower plants or emissions related to the operation of geothermal plants. The project activities related to cultivated biomass need to be calculated per "TOOL16" with simplifications for small/micro-scale project activities. In terms of leakage emissions, leakage is considered when the energy-generating equipment is transferred from other project activity or when the CDM project utilizes biomass per "TOOL16" (UNFCCC, 2022b). Lastly, the “AMS-I.A.” monitoring methodology stipulates an annual check of all systems or a sample of the systems to ensure the operation or metering of generated electricity. If applicable, consumption of all energy sources and the availability of connected grids must be monitored (UNFCCC, 2021). The methodology also stipulates the “AMS-I.L.” monitoring procedures for all project activities, which determine baseline emissions based on Option 3 (UNFCCC, 2022b). The following section focuses on the revisions to the methodology.
This section discusses clarifications/revisions of the "AMS-I.A.” methodology from the most recent version, 18.0. to version 14.0. (UNFCCC, 2022b; 2022c, 2019a, 2019b; 2012j; 2012k; 2012h; 2012i; 2010a; 2010b). Out of six selected clarifications/ revisions, two requests focus on applicability while the rest clarify the calculation of baseline emissions in the methodology. Usually, the integrity of applicability is crucial for consistency of outcomes across host countries, avoidance of gaming, and clarity of methodology scope. The right design for baseline scenarios has an appropriate baseline setting approach, limits uncertainties, and ensures conservativeness (Michaelowa, 2020). The strong baselines are credible, transparent, and practical. Such baselines do not lead to under/over allocation of credits and help additionality (Hart, 2022a).
The section describes each of the clarifications/revisions by providing details about queries, answers by the small-scale working group (SSC WG) to authors of queries, recommendations to the CDM EB, and analysis of each revision to the methodology.
[Date and number of Panel / WG meeting: 7-11 February 2022 / MP 87]
The Indian project participant seeks clarification about theapplicability of standalone or decentralized solar photovoltaic water pumps for irrigation, which replaces the usage of diesel-operated pumps under the “AMS-I.A.” (version. 17.0) (UNFCCC 2019a; 2019b). The high cost of solar water pumps and inadequate market ecosystem represent the main challenges for implementing this technology. The agricultural field where solar water pumps are/will be used by the small users is not connected to the national grid. The stakeholder also seeks to clarify if Option 3 of “AMS-I.A.” can be utilized in this project activity. If yes, the stakeholder asks about the necessity of a survey to be performed to a) to access the “capacity wise annual hours of operation for diesel pumps and the value/factor to be fixed ex-ante” or b) to access “the capacity wise annual operational hours of solar water pumps and the value to be used for assessing the baseline fuel consumption and estimation of baseline emission in the ex-post scenario [on an annualized basis].” Also, the stakeholder seeks to clarify if the project participant needs to perform a sample survey to measure the continued operation of the project units, per paragraph 33 of “AMS-I.A.” (version 17.0) (UNFCCC, 2019a; 2022a).
The Methodology Panel (Meth Panel) clarifies that, in principle, “AMS-I.A.” is applicable in the project. However, suppose a stakeholder seeks to use Option 3. In that case, the project participant has to submit a request for revision, which explains a conservative and accurate method to estimate "Projected fuel consumption of fuel type j in year y (mass or volume unit) (FC,y), since “AMS-I.A.” (version 17.0) does not explain the intricacies of such a calculation. The Meth Panel recommends a baseline survey to estimate baseline pump type, its emission factor, and capacity. This emission factor can remain fixed during the crediting period. After that, ex-post surveys need to be performed to calculate solar water pumps' capacity-wise annual operational hours (UNFCCC, 2022a).
The baseline and ex-post estimation surveys need to be carried out under the provisions of "Standard." The project participant can also consult "AMS-II.P.: Energy-efficient pump-set for agriculture use similar approaches" to calculate baseline emissions and monitor annual operational hours. The Meth Panel also recommends sampling for determining the retention rates and the operation hours of the project's solar water pumps. And lastly, Meth Panel advises stakeholders to apply a Type-II Methodology (for example, "AMS.II.F.: Energy efficiency and fuel switching measures for agricultural facilities and activities") in concert with "AMS-I.A.," particularly in the circumstances where the project participants want to implement the standalone solar water pumps and an efficient irrigation method during project scenarios (UNFCCC, 2022a).
The clarification regarding the applicability of solar-water pumps for irrigation purposes under the "AMS-I.A." methodology has the following positive and negative implications. As mentioned earlier, the integrity of applicability conditions is crucial for consistency of outcomes across host countries, avoidance of gaming, and clarity of methodology scope.
Here are the positive aspects of the proposed changes. First, the clarification provides consistency of projects outcomes since outcomes will not differ between host countries in similar conditions and with similar ambitions. Second, theoretically, the proposed scenarios for sampling, surveying, and monitoring act as safeguards against gaming by project participants and, thus, promote the environmental integrity of the emissions credits. Third, the clarification provides clarity of the methodological scope by affirming, in principle, the applicability of the project activities implementing standalone solar pumps to replace the use of diesel pumps used for irrigation. Fourth, the clarification of the “AMS-I.A.” methodology (and the allowance to apply a Type-II methodology) for such cases is valuable in light of goals of the CDM, which strives for "real, measurable, and long-term benefits related to the mitigation of the climate change" (Hart, 2022a).
The following are the negative aspects of the proposed changes. First, practically, project developers might still be delayed with the implementation of the project since they might need to submit a follow-up request for revision about their thoughts on FCj,y estimation. Second, suppose they follow the Meth Panel's advice on one of the options of estimating FCj,y. In that case, project developers might incur additional costs for implementing specific baseline and ex-post surveys. Third, although the clarification stimulates the promotion of standalone solar water pumps to replace diesel pumps, the projects might benefit beyond credits and not be additional in all cases. Fourth, the data from sampling during the crediting period might be tampered with by project participants and thus, will not provide an accurate and conservative approach to calculate FCj,y. Fifth, third-party monitors will know less about the true intentions of project participants, so the third-party monitoring data might also become unreliable. The main lessons to inform best practices in offset designs in such cases are robust monitoring and review processes to ensure the accuracy/reliability of sampling/surveying information and improve the tests for additionality.
(submitted by Jiwan Acharya, Asian Development Bank – ADB; SSC_547)
[Date of SSC WG meeting: 22-25 August 2011 / SSC WG 33]
ADB’s Technical Support Facility (Carbon Market Program) presents two requests for clarifications. One of them, which discusses baseline emissions calculation for greenfield projects, is related to the “AMS-I.A.” methodology. This query follows the SSC_537, in which SSG WG is permitted to use “AMS-I.D.” and “AMS-I.F.” methodologies in the Programme of Activity (PoA). The group points out “AMS-I.F.” (version 2.0). does not contain an allowance for calculating baseline emissions if there is no electricity use before the project activity. Instead, “AMS-I.F.” is designed for cases of captive power generation or renewable electricity generation for isolated grids. In such cases, the baseline emissions calculation is likely based on carbon-intensive or fossil fuel-based electricity generation. Therefore, the group asks SSC WG / EB about the possibility to utilize “AMS-I.D.” and “AMS-I.F.” along with the “AMS-I.A.” for a renewable electricity supply PoA (UNFCCC, 2011b)
The SSG WG notifies that the "AMS-I.A." and not “AMS-I.F." methodology should calculate the baseline emissions for greenfield projects. The group clarifies that “the baseline will be determined as the fuel consumption of the technology that would have been used in the absence of the project activity to generate the equivalent quantity of electricity” (UNFCCC, 2011b, p. 3). SSG WG also recommends to the CDM Executive Board to approve the combination of “AMS-I.A.” with “AMS-I.F.” and/or “AMS-I.D.” in a PofA (UNFCCC, 2011b)
In the meeting report (paragraph 23 of SSC WG 33), SSC WG states its agreement to clarify the provisions under "AMS-I.A.," not "AMS-I.F." should be used in cases where is no electricity usage before project activities. Also, the SSC WG makes the recommendation to CDM Executive Board to approve the combination of “AMS-I.A.” with “AMS-I.F.” and /or “AMS-I.D.” in a PoA (UNFCCC, 2011a).
The clarification/revision regarding baseline calculation in the case of a greenfield project has positive and negative implications.
Here are the positive aspects of the proposed changes. First, it provides clarity and consistency to project developers regarding the calculation of baseline emissions and the permission for the usage of a combination of "AMS-I.A." with “AMS-I.F.” and/or “AMS-I.D.” in a PoA. Second, it is appropriate, conservative, and limits uncertainties (all CDM greenfield projects will follow the same guidelines). Third, the clarification/revision may, theoretically, help ensure environmental integrity. For example, under “AMS.-I.F.," the baseline emissions are based on carbon-intensive electricity generation, whereas “AMS-I.A." allows the absence of fossil-fuel-based power in baseline (UNFCCC, 2011b). Such a revision can prevent the issue of “perverse incentives," which usually leads to an artificial maximization of credits for a CDM project (Mukerjee, 2009). As discussed earlier, correct baseline design is critical for determining additionality since the “same project can earn different CERs depending on a grid” (Hart, 2022a). Fourth, the clarification/revision helps the implementation of the renewable energy projects in light of the goal of the CDM, which seeks “[stimulation of] low-emitting projects that wouldn’t have otherwise occurred” (Hart, 2022b).
The following are the negative aspects of the proposed changes. First, practically, the clarification/revision might still provide an incentive for gaming by project participants. For instance, the baseline calculations under “AMS-I.A.” are based on the “fuel consumption of the technology that would have been used in the absence of the project activity to generate the equivalent quantity of electricity” (UNFCCC, 2011b). The Developing Member Countries (DMCs)'s project participants may still propose a fossil-fuel-based technology as a "technology that would have been used in the absence of the project activity"(UNFCCC, 2011b). As mentioned above, the revision, theoretically, eliminates the issue of perverse incentives. However, practically, due to the gaming by the project participants, there might be potential problems with the environmental integrity of the credits. Second, even though the revision stimulates the promotion of renewable energy projects, the projects might benefit beyond credits and not be additional in all cases. Third, the “AMS-I.A.” baseline calculations rely on counterfactual and uncertain information that might impede the measurability and accuracy of the projects’ credits. The main lessons to inform best practices in offset designs are the robust monitoring and review processes to improve the tests for additionality and reduce perverse incentives.
[Date of SSC WG meeting: January 30 - February 2, 2012, / SSC WG 35]
The query describes the project activity, which involves replacing the usage of kerosene lamps with the distribution of LED lighting technology. The project used the "AMS-I.A." methodology since the new methodology "AMS-III A.R.: Substituting fossil fuel-based lighting with LED lighting system” was not approved at the validation. Mr. Tas seeks to clarify the calculation of the project’s baseline emissions. The requestor quotes the definition of energy baseline (para. 8 of “AMS I.A.” version 14.0) and footnote 4 (Annex 1 of EB 08), which states that “Renewable energy lighting applications shall consider the equivalent level of lighting services instead of energy” (UNFCCC, 2012a; 2010b).
Mr. Tas asks whether the energy baseline should be based on a) “the fuel consumption of kerosene lamps to generate the equivalent level of lighting service as provided by the project activity” or b) “the fuel consumption of kerosene lamps to generate the equivalent level of lighting service as provided by the baseline methodology.” The requestor also assumes, due to the commonly used approach, as per paragraph the Guidelines on the consideration of suppressed demand in CDM methodologies (paragraph 12 b, version 1.0), “in the baseline the same service would be provided as under the project activity but with a different technology” (UNFCCC, 2012a). Also, the requestor describes the approach by “AMS III A.R.” (para 12f) to assume that one project lamp replaces one fuel-based lamp. Therefore, the requestor proposes to use the approaches used in AMS-III A.R" and the previous guidance due to the absence of clear guidance from "AMS-I.A." regarding the service level used (UNFCCC, 2012a).
The SSC WG notifies that since Option 3 of “AMS-I.A.” mentions lighting, the energy baseline should be a trend-adjusted projection of historic fuel consumption. The SSC WG reiterates the energy baseline definition and clarifies that footnote 4 refers to the "equivalent level of lighting services the project activity provides." However, it warns that renewable energy lighting application refers to the "equivalent level of lighting services as provided by the project activity," not surpassing the baseline, which is estimated “based on a trend-adjusted projection of historic fuel consumption used for lighting” (UNFCCC, 2012a, p.2).
The SSC WG clarifies that in the case of this project activity, baseline emissions should be based on the fuel consumption of kerosene lamps to produce the equivalent level of lighting service offered by LED lighting technology. However, they should be capped at the baseline value, calculated from the trend-adjusted projection of historic fuel consumption used for lighting. The SSC WG explains that this cap is necessary since the amount of energy required by baseline traditional kerosene technologies to deliver equivalent services on the project lighting level will be substantial and, thus, provide the unrealistic basis of emission reductions. The SSC WG advises using the Guidelines to consider suppressed demand in CDM methodologies (version 1.0.) to estimate the cap by referring to the concept of minimum service level. The SSC WG notifies that “AMS-I.A.” (version 14.0) also has these built-in caveats/cap in options (a) to (c) of paragraph 8. It advises the project proponent to either use “AMS-I.A.” with the aforementioned interpretation or “AMS-III.A.R.” Lastly, the SSG WG advises that “AMS-I.A.” might probably be revised to account for the situations of suppressed demand so that the project participant might wait for such a revision as an alternate option (UNFCCC, 2012a)
In the meeting report (paragraph 37 of SSC WG 35), SSC WG agrees to clarify that the equivalent level of lighting services denotes "the equivalent level of lighting services provided by the project activity.” However, if Option 3 is applied, SSC WG warns about the following caveat: the equivalent level of lighting services cannot exceed the trend-adjusted projection of historic fuel consumption used for lighting. SSC WG also notifies that “AMS-I.A.” most likely will be revised, following the work program about suppressed demand, mentioned in EB 63, annex 30 (UNFCCC, 2012a; 2011c).
The clarification/revision regarding baseline identification for renewable energy lighting applications has positive and negative implications.
Here are the positive aspects of the proposed changes. First, it provides clarity and consistency about baseline identification for renewable energy lighting applications to project developers, who used “AMS-I.A.” at validation when "AMS-III.A.R." was unavailable. Second, the change is appropriate, conservative, and limits uncertainties. For example, SSC WG gives an option to either use "AMS-I.A." with the above interpretation of "AMS-III.A.R." Third, such a clarification/guidance ensures the environmental integrity of the credits since SSC WG advises how to use Option 3 correctly in calculating the energy baseline for the project. It warns about the cap at the baseline value derived from the trend-adjusted projection of historic fuel consumption used for lighting. SSC EG explains that, otherwise, “the amount of energy required by baseline traditional kerosene technologies, to deliver equivalent service levels provided by project facilities (project lighting level) is unrealistically very large that it cannot be used as a realistic basis of emission reduction” (UNFCCC, 2012a, p. 2). Fourth, the clarification/revision also addresses the issue of suppressed demand in its explanation to the project participant by pointing to the built caveats/cap in the "AMS-I.A." methodology. According to Gavaldao et al. (2013), suppressed demand is defined as an “unmet latent demand for basic services” (p. 3). Fifth, the careful clarification of the “AMS-I.A." methodology for renewable energy lighting applications is helpful in light of the goals of the CDM, which strives for "real, measurable, and long-term benefits related to the mitigation of the climate change" (Hart, 2022a).
The following are the negative aspects of the proposed changes. First, although the clarification/revision stimulates the promotion of renewable energy projects in lighting applications, the projects might benefit beyond credits and not be additional in all cases. Second, the “AMS-I.A." baseline calculations rely on counterfactual and uncertain information that might impede the measurability and accuracy of the projects' credits. Third, third-party monitors will know less about the true intentions of project participants. The main lessons to inform best practices in offset designs are robust monitoring and review processes to ensure the accuracy of baseline value cap calculations in capturing the issue of suppressed demand and improving the tests for additionality.
[Date of SSC WG meeting: January 30 - February 2, 2012, / SSC WG 35]
The stakeholder requests clarification about the calculation of baseline emissions for off-grid CFL-LED lighting projects in India. The project entails the installation of a power generation facility in off-grid Indian villages (30kW micro-scale biomass-based) and developing power distribution infrastructure. The delivered electricity is being utilized by the users of CFL lamps, which the project participant provides. Such CFLs (AC-based non-rechargeable) are lit as long as the power is given during the day. Households pay a monthly fixed rental fee to pay for the electricity used by these lamps. The project participant may supply users with pre-paid meters and smart monitoring. Each household uses a fuse to stop the illicit usage, other than lighting the CFLs. The baseline emissions represent kerosene-based lamps utilized by the community households in the absence of the CFL lamps. Due to the small capacity of each generation unit, the stakeholder plans to develop such a project as a PoA, which will cover all Indian states (UNFCCC, 2012b).
Mr. Menghwani asks if “AMS-III.A.R. – Substituting fossil-based lighting with LED/CFL lighting systems” methodology (has an extended scope to cover the installation of battery-charged CFLs to replace kerosene lamps) applies to this project. He believes that the "AMS-III.A.R.” methodology’s default factors and other assumptions simplify the calculation of baseline emissions. If the project is not applicable under “AMS-III.A.R.,” then the stakeholder proposes the following revisions to the SSG EB: a) make the “AMS-III.A.R.” applicable for non-rechargeable CFLs or b) make the “AMS-III.A.R.” baseline calculations applicable for “AMS-I.A.” projects (UNFCCC, 2012b).
The SSG WG believes that the following project should be covered under the "AMS-I.A." methodology if the proper measures are adopted to guarantee that the supplied electricity is only used for lighting purposes. The group also does not want to expand "AMS-III. A.R." to cover non-chargeable lighting systems, complicating the methodology. However, SSG WG believes that the provisions under “AMS-I.A.” will probably be revised to account for the suppressed demand. The SSG also advises the stakeholder to consult the response given by the SSG to SSC_581 (mentioned above) or follow the progress on the revision of “AMS-I.A.”
In the meeting report (paragraph 25 of SSC WG 35), SSC WG does not accept the suggested revision to the methodology to simplify baseline emission calculation for off-grid CFL lighting projects. SSC WG recommends checking the response that is provided to SSC_581 (mentioned above) and notifying that “AMS-I.A.” is considered as one of the candidate methodologies under work program on suppressed demand (EB 63, annex 30) (UNFCCC 2011c; 2012c).
The clarification/revision regarding the simplification of baseline emission calculation for off-grid CFL/LED lighting projects has positive and negative implications.
Here are the positive aspects of denial of the revision request. First, the SSC WG’s denial of the revision request provides clarity and consistency to project developers who strive to replace kerosene lighting with LED lighting. Second, such a decision is appropriate, conservative and limits uncertainties about whether "AMS-III.A.R." with an extended scope covering battery-charged CFLs can be used for non-chargeable CFLs. Third, such a clarification/guidance ensures the environmental integrity of the credits generated by the project activity of PoA. For example, SSC WG reiterates the necessity of proper measures (installation of fuses) to ensure that the electricity will only be utilized for lighting purposes. Fourth, the clarification/revision also addresses the issue of suppressed demand in its explanation to the project participant and alerts them to follow the progress on the "AMS-I.A." revision (as mentioned in SSC WG's response to SSC_581). Fifth, the clarification of the "AMS-I.A.” methodology and denial for the expansion of scope “AMS-III.A.R." for renewable energy lighting applications is helpful in light of goals of the CDM, which strives for "real, measurable, and long-term benefits related to the mitigation of the climate change" (Hart, 2022a).
The following are the negative aspects of the denial of the revision request. First, project developers (especially, in this case), perhaps, will incur higher costs to increase further monitoring efforts (third-party /project participant’s human monitoring of each household with a fuse) besides the planned smart monitoring and pre-paid meters to qualify under the “AMS-I.A.” methodology. This biomass-based project is already complicated with the necessity to utilize “TOOL16” and representative sampling, in the specific case of lighting devices, under the "Standard" methodology (UNFCCC, 2012b). Expanding costly and complicated procedures might dissuade the project participant from developing the PoA. Second, even if the project participants still consider promoting renewable energy projects in lighting applications, the projects might benefit beyond credits and not be additional in all cases. Third, the "AMF-I.A." baseline calculations rely on counterfactual and uncertain information that might impede the measurability and accuracy of the projects' credits. Fourth, even though SSC WG confirms the installation of fuses, practically, there is still a possibility for gaming for project participants and households in the project boundary. Fifth, third-party monitors will know less about the true intentions of project participants. The main lessons to inform best practices in offset designs are the robust monitoring and review processes to ensure the accuracy of baseline value calculations in capturing the issue of suppressed demand and improving the tests for additionality.
[Date of SSC WG meeting: 20-23 March 2012 / SSC WG 36]
The query's author wants to resubmit a new request for registration of the project “Cabo Negro Wind Farm Project. Reg. 4103” since it was previously rejected by the EB, which decided that Option 3 for baseline emissions could not be applied to the project activity. The project is applicable under the "AMS-I.A." methodology. Ms. Garcia wants to resubmit the PPD by proposing a revision to calculate baseline emissions for wind farm projects, Option 4. This option considers that the fossil-based technology (the existing power generation system) may operate even after implementing a wind farm (proposed project activity). The option can be used only if the project participant can prove that the fossil-fuel generation is displaced by the wind farm energy generation (UNFCCC, 2012d).
Ms. Garcia states that, in the case of wind farm projects, the complete replacement of the existing technology, which provides backup energy for wind generation, is not possible. Consequently, Option 3 cannot be used to calculate baseline emissions calculations. In Option 4, the baseline emissions can also be calculated as a trend-adjusted projection of historic fuel consumption. However, "the replaced fossil fuel consumption will correspond to the division of wind electricity generation with the fossil fuel consumption efficiency calculated considering the energy generation and the fossil fuel consumption of the existing fossil fuel units" (UNFCCC, 2012d, p. 1). Ms. Garcia also points out the project participant, in the calculation of ex-post emissions reductions, must realize that if "ex-post calculated value for fuel consumption efficiency is higher than the ex-ante figure, it shall be used for the calculation of baseline emissions” (UNFCCC, 2012d, p. 2).
The SSC WG recommends the revision of “AMS-I.A.," as described in the SSG WG 36 meeting report (annex 3) (UNFCCC, 2012f).
In the meeting report (paragraph 37 of SSC WG 35), SSC WG agrees to clarify if the project activity displaces existing fossil fuel captive electricity generation, the emission factor of such a generation needs to be estimated using Scenario B of the "Tool to calculate baseline, project and/or leakage emissions from electricity consumption.” This provision was included in the revised version of the methodology (version 15.0.) (UNFCCC, 2012c; 2012h).
The clarification/revision regarding energy baseline calculation in case of project activity concerning partial displacement of fossil fuel consumption by wind generation has the following positive and negative implications.
Here are the positive aspects of the proposed changes. First, the new option provides clarity and consistency about energy baseline calculation in case of partial displacement of fossil fuel power generation by wind farm power generation. Second, the change is appropriate, conservative, and limits uncertainties. For example, the project proponent describes the conservative nature of the rationale in the submission. She reiterates that the calculation of fixed ex-ante fuel consumption efficiency for the whole crediting period is not conservative in such projects. Instead, the monitoring and calculation of ex-post fuel consumption efficiency and the usage of such efficiency, if it is higher than the ex-ante number, will guarantee the most conservative estimation of energy baseline. Thus, revision and provisions ensure the environmental integrity of the credits in the cases of wind power generation partially displacing fossil fuel consumption. Third, the careful clarification of the “AMS-I.A." methodology for such cases is valuable in light of the goals of the CDM, which strives for "real, measurable, and long-term benefits related to the mitigation of the climate change" (Hart, 2022a).
The following are the negative aspects of the proposed changes. First, although the clarification/revision stimulates the promotion of renewable energy projects in wind farm projects, the projects might benefit beyond credits and not be additional in all cases. Second, the "AMF-I.A." baseline calculations rely on counterfactual and uncertain information that might impede the measurability and accuracy of the projects' credits. Third, third-party monitors will know less about the true intentions of project participants. The main lessons to inform best practices in offset designs are robust monitoring and review processes to ensure the accuracy of fuel consumption efficiency (ex-post versus ex-ante) and improve the tests for additionality. Section 4 describes applying "AMS-I.A" methodology to the registered project, Cabo Negro Wind Farm Project, (Phase 1).
[Date of SSC WG meeting: 20-23 March 2012 / SSC WG 36]
The query discusses the interaction between the stakeholder and the SSC EG. Mr. Arnaoudov seeks clarification about a possible project (new hydropower plants not exceeding 1.5MW) in Tajikistan, where the power grid supply is unreliable and does not deliver good services. This situation is observable in other CIS countries. In this case, the baseline emissions will not be grid electricity but instead, potentially, represent the baseline as described by the "AMS-I.A."(version 14.0) (UNFCCC, 2010a; 2010b). In this case, the baseline emissions will come from diesel generation. Some households would have zero access to electricity due to the absence of a grid electricity supply. Mr. Arnaoudov proposes to install simple devices (costing approximately 100 Euros), which can record the time when electricity supply started and stopped. This device can only be accessed by authorized personnel with a built-in memory or memory card. The stakeholder proposed considering the "grid is not available" condition for a particular day when there is no electricity supply from the power grid for more than 12 hours out of 24 hours. The mini-grid and the power grid will not be interconnected during the crediting period. The stakeholder agrees to the strict “AMS-I.A.” applicability condition and monitoring procedures, so the project does not claim emissions reductions during the mini-grid/power grid connection (UNFCCC, 2012e).
SSC WG clarifies that "AMS-I.A." applies only to users/households connected to the grid before the start of the project activity. Still, the electricity is not available for users/households for less than 36 hours per calendar month during the crediting period. Also, in such conditions, the applicability of the project activity will be ascertained with continuous power monitoring during any given calendar month. The CERs calculation under “AMS-I.A.” will be possible for users/households who receive power from the grid for less than 36 hours for any given calendar month. The CERs calculation is not allowed for any hours when power is available from the grid for users/households. “AMS-I.A.” will not be applicable if the project activity gets connected to the grid during the crediting period (UNFCCC, 2012e).
In the meeting report (paragraph 28 of SSC WG 36), SSC WG agreed to clarify the “AMS-I.A.” applicability, based on actual monitoring, if users/households involved in project activity receive grid power for less than 36 hours (or about 5% of the time) in any given calendar month. The CER calculations can include the months during which users/households sustain such conditions. A special provision for this approach was included in the revised version 15.0. of this methodology (Annex 3 of SSC WG 36) (UNFCC, 2012f, 2012g).
The clarification/revision regarding the applicability of "AMS-I.A." for off-grid projects, which involves end-users connected to a grid with recurrent blackouts/brownouts, has positive and negative implications. As mentioned earlier, the integrity of applicability conditions is crucial for consistency of outcomes across host countries, avoidance of gaming, and clarity of methodology scope.
Here are the positive aspects of the proposed changes. First, the proposed revision provides consistent outcomes since outcomes will not differ between host countries (especially CIS countries) in similar conditions and with similar ambitions. Second, theoretically, the provision outlines strict and continuous monitoring procedures during any calendar month as safeguards against gaming by the project participants and, thus, promoting the environmental integrity of the emissions credits. Third, the revision clearly defines project types and specific applicability conditions (end-users connected to a grid with frequent blackouts/brownouts) that fall under the “AMS.-I.A.” methodology scope. Fourth, the careful clarification of the “AMS-I.A." methodology for such cases is helpful in light of the goals of the CDM, which strives for "real, measurable, and long-term benefits related to the mitigation of the climate change" (Hart, 2022a).
The following are the negative aspects of the proposed changes. First, although the clarification/revision stimulates the promotion of renewable energy projects (in this case, mini-hydro plants projects), the projects might benefit beyond credits and not be additional in all cases. Second, the data (from the simple devices with built-in memory/memory card) for the continuous power monitoring required to verify the applicability of the project under the "AMS-I.A." might become unreliable due to data tampering by corrupt authorized personnel. Hart (2022c) also describes common problems with the equipment since it can be not installed correctly, is not performing, or is not appropriately calibrated. Third, third-party monitors will know less about the true intentions of project participants so that the third-party monitoring data might also become unreliable. The main lessons to inform best practices in offset designs are strong monitoring and review processes to ensure the accuracy/reliability of continuous power monitoring information and improve the tests for additionality. The following section briefly describes a case study, focusing on applying the “AMS- I.A” methodology to the actual CDM small-scale project.
The project involves wind farm generation, replacing electricity generated onsite by natural gas (fossil-fuel-based generation) in Methanex Chile S.A.'s facilities. Methanex is the largest global supplier of methanol to various international markets. The Cabo Negro wind farm project is a pioneer wind generation project both in the region and for Methanex. It is located in the south of Chile, in the Cabo Negro industrial complex in the Magallanes Province in the 12thRegion of Chile. The Methanex industrial complex does not have a grid connection. All electricity needed for the methanol production is produced onsite. The project considers the operation of three wind turbine generators, each with a capacity of 850 kW. The GHG reductions (estimated at 10,436 tCO2) depend on the variable performance of the wind power generation (UNFCC, 2012l). The project satisfies the following conditions under “AMS-I.A.” methodology (version 15.0) (UNFCCC, 2012h):
a) the project activity supplies energy to users that do not have grid connection; b) the project is not a cogeneration system or a hydropower plant with reservoirs; c) the project only considers the addition of a renewable component to the system; and d) the project’s installed capacity is estimated to be 2.55MW, which should not exceed the limit for CDM small-scale projects.
a) Baseline – natural gas (fossil-fuel) power units in Methanex facilities with inclusion of CO2 and exclusion of CH4 and N20.
b) Project Activity: wind power electricity generation through three generators and associated equipment in the Methanex facilities.
a) The project uses Option 2 of the "AMS-I.A." methodology, where the baseline scenario is based on the energy baseline multiplied by the emission factor. Since the project activity displaces existing fossil fuel captive electricity generation, the emission factor is estimated based on Scenario B of “Tool to calculate baseline, project and/or leakage emissions from electricity consumption” (version 1.0).
Based on the “Guidelines on the demonstration of small-scale project activities” (version 9.0), the project participants need to prove the project activity would not have occurred due to at least one of the barriers: investment barrier, technological barrier, barriers due to prevailing practice, or other barriers.
The project participant outlines two barriers: a) barrier due to a prevailing practice (barrier due to first of its kind) and b) investment barrier. Regarding the investment barrier, the project participant provides an economic assessment and feasibility analysis, which prove not very promising economic results for the wind farm compared to the country’s economic standards. The project participant calculates the IRR (internal rate of return) using a study based on the Capital Asset Pricing Model (CAPM): R= Rf+β (Rm-Rf). Since the analysis used the value of β from the US Chemical Specific Industries, Chile’s country risk (2.1%) is also included in the equation, resulting in R= Rf+β (Rm-Rf) + country. Based on the project's Excel model reflected in Appendix 1 – 8097 CER Calculation (UNFCCC, 2012), Project IRR (8.8%) is less than a national benchmark (14.9%) for this type of industry as of December 2, 2009.
Additional sensitivity analysis and breakeven points for benchmark analysis (without the sale of CERs) present the parameters based on a) natural gas price, b) plant load factor, c) investment cost. The Excel model’s results prove that the project’s IRR does not exceed the benchmark minimum. Thus, such results affirm the project’s additionality due to an investment barrier (UNFCCC, 2012m).
The project participant asserts that a) the wind electricity does not generate GHG and b) there is no leakage, according to the "AMS-I.A." methodology. So, in this case, emissions reductions (ERy) are equal to baseline emissions (BECO2,y), where baseline emissions are calculated based on Option 2 of the “AMS-I.A.” methodology (version 15.0)
Here are the emission factors and baseline emissions per year (2006-2009) are shown in the following table:
The emissions reductions are calculated based on the following formula: Baseline emissions minus project emissions minus leakage emissions (Hart, 2022a). Due to the absence of project or leakage emissions, the emissions reductions are equal to the baseline emissions, equivalent to 10,436tCO2 (annual average over the crediting period).
The following parameters are measured and monitored:
a) EBL,y (annual output of Cabo Negro Wind Farm Project, Phase 1), in MWh. Source: project participant.
b) EG n,t (quantity of electricity generated in captive power plant n in the period t), in MWh. Source: SCADA database.
c) NCVt (average net Calorific Value for natural gas in year y), in GJ/m3. Source: ENAP (fuel supplier) and the project developer.
d) HGn,t (quantity of heat co-generated in captive power plant n in the period t), in GJ. Source of data: onsite measurements of steam generation of the boiler times the enthalpy of vaporization.
e) FCn,t (quantity of natural gas (fossil-fuel-fired) in the captive power plant n in the time period t), in m3. Source of data: onsite measurements.
Other PDD sections include the details about the monitoring organization, equipment, and installation; data recording procedure; data and records management; environmental impacts; local stakeholder consultation; and approval and authorization.
This study describes and analyzes selected revisions by the CDM Executive Board (from version 18.0. to version 14.0.), to a small-scale Clean Development Mechanism (CDM) methodology “AMS-I.A.: “Electricity generation by the user.” Structurally, the paper describes the recent version of the methodology, outlines selected six clarifications/revisions about the project applicability and the calculation of baseline emissions, and presents a case study of the project per the "AMS-I.A." methodology. The analysis of each clarification/revision describes the positive and negative aspects of the proposed changes, including implications of these changes to project developers, the changes in light of the CDM and environmental integrity goals, and lessons to inform potential best practices in an offset design.
Besides the selected changes, the methodology has undergone additional revisions and editorial adjustments, which further improved the clarity and presentation of the methodology. Michaelowa et al. (2020) state that “methodologies should be designed both to increase stringency over time and to preserve investment security” (p. 6). In general, the clarifications/revisions by the CDM Executive Board increased the conservativeness of the “AMS-I.A.” methodology in applicability and baseline emissions sections, ultimately strengthening requirements for additionality. However, the analyses of the proposed changes reveal similar concerning issues still facing the CDM EB in regards to the “AMS-I.A” methodology. For example, such negative aspects are possible gaming by project participants, significant transactions costs (time and money) to develop ex-post and ex-ante reliable datasets, perverse incentives, lingering uncertainty about suppressed demand issues, and problems with third-party monitoring services. Therefore, researchers stress that CDM administration needs to learn to minimize the cost of compliance while safeguarding environmental integrity (Wara and Victor, 2008).
Notwithstanding such challenges, CDM methodologies represent a vast knowledge base, which is extremely useful for emissions reduction projects, requiring reliable procedures to verify and credit emissions reductions. Thus far, nothing has been produced under the Paris Agreement to replace the CDM methodologies. Therefore, "CDM methodologies, tools and standards can be taken as a basis for developing methodologies applicable to Article 6 market-based cooperation" (Michaelowa et al., 2020, p. 8). However, the CDM methodologies, namely, the "AMS-I.A." methodology, need to continue to be revised to reflect the regime change from the Kyoto Protocol to the Paris Agreement in the context of sustainable development.
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