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Proceedings The 5th Indonesia International Geothermal Convention & Exhibition (IIGCE) 2017

2 - 4 August 2017, Cendrawasih Hall - Jakarta Convention Center, Indonesia

Darajat Unit 3 Geothermal Clean Development Mechanism (CDM) Program Contribution


in National Greenhouse Gas (GHG) Emission Reduction
Muhyidin, SKM
Star Energy Geothermal Darajat II, Limited
muhyidin@starenergy.co.id

Keywords: Darajat Unit 3, Clean Development Mechanism, Greenhouse Gas, Geothermal, Emission Reduction

ABSTRACT
Climate change and sustainable development currently sources listed in Annex A to the Kyoto Protocol over the
become global challenges. The global countries formed commitment period do not exceed its allowable level of
United Nations Framework Convention on Climate Change emissions (Annex A covers GHG emission from the energy,
(UNFCCC) to respond these challenges and legally binding industrial processes, solvent and other product use,
emission targets under the treaty called Kyoto Protocol. To agriculture and waste sectors). The allowable level of
fulfill this commitment, the protocol allows for three emissions is called the party’s assigned amount (UNFCCC,
flexible mechanism: Emission Trading (ET), Joint 2008).
Implementation (JI) and Clean Development Mechanism Under Kyoto Protocol, there are three flexible
(CDM). Indonesia belongs to the Non-Annex I parties has mechanism to reduce emission: Emission Trading (ET),
ratified the Kyoto Protocol through Law No. 17/2004. Joint Implementation (JI) and Clean Development
Darajat Unit 3 was the pioneer of CDM program in Mechanism (CDM). ET and JI allow Annex I parties to
Indonesia and registered at UNFCCC secretariat with take advantage of lower-cost emission reduction outside
reference number 0673 since 11 Dec 2006. This program their territories. Unlike ET and JI, CDM allow non-Annex I
has contributed in GHG emission reduction with 6,260,609 parties (developing countries) to participate in emission
tonnes CO2 equivalent (CO2) and Darajat Unit 3 as the reduction program. CDM was designed to help Annex I
biggest CDM project in Indonesia for all sectors since 2009 parties to meet their emission reduction target cost-
or about 62.5% of total Certified Emission Reduction effectively and it also will help non-Annex I parties in
(CER) achieved from geothermal sector. Darajat Unit 3 achieving sustainable development as well as transfer of
also pioneer in CDM 2nd renewal crediting period with technology as the benefit of CDM to developing countries.
approval renewal date on 5 September 2015. Indonesia with more than 17,000 islands geographically
Some continual improvements such as through very vulnerable to the impacts of climate change. Climate
eliminate extenal consultant cost especially during renewal change will increase the average sea level as a result of the
& consultancy before external verification audit; capacity increased volume of warmer water and the melting of polar
building improvement through periodic internal refresher ice caps. The combination of rising sea-level and lab
training; standardized process through Standard Operating subsidence will move the coastline inland and will cause
Procedures (SOP); and made new verification audit increase of flooding. A study published in 2007 by
contract using local company with lower price. These Indonesia’s institute for Technology in Bandung, illustrated
improvements have reduced the cost and CDM that with a sea level rise of 0.23, 0.57, and 1.00 cm per year,
implementation can be conducted smoothly & sustainable. the total area of norh Jakarta that will be affected by
Even though currently the CER price is very low, Darajat inundation in the year 2050 would be about 40, 50, and 90
Unit 3 CDM project still continue and have positive square km. The dissappearance of small island due to
revenue from the CERs sales as well as contribute to changing sea levels will also have serious implications for
national GHG emission reduction. the Indonesian state border. At least eight of 92 outermost
small island that serve as a baseline for the Indonesian sea
1. Introduction terriitory (Kepala, Dolangan, Manterawu, Fani, Fanildo,
Most scientists now agree that human activities such as Brass, Laag and Nipah islands) are very vulnerable to a rise
energy usage for electricity and transport comes from fossil in mean sea level (ADB, 2009).
fuel and deforestation are largely responsible for climate Indonesia belongs to the non-Annex I parties has
change. Since the dawn of the Industrial Revolution, this signed and committed on the implementation of United
climate change have risen sharply include increasing Nations Framework Convention on Climate Change in Rio
concentrations of GHG emission. The GHG caused the which was ratified in 1994 through Law No.6/1994. Under
earth to heat up by trapping the sun’s heat in the earth’s this framework, Indonesia has committed to fully
atmosphere and will cause global climate change to be implementing the framework. Indonesia also signed the
warmer. This called the greeenhouse effect. Kyoto Protocol and ratified it through Law No.17/2004.
On 1992, global countries formed UNFCCC to respond In 2009 at the G-20 meeting in Pittsburgh and at
this challenges to begin to consider what can be done to Conference of Parties (COP) in Copenhagen, the President
reduce global warming to cope whatever temperature of the Republic of Indonesia committed to ambitious
increases are inevitable. And then on 1997, number of world-leading target of 26% voluntary reduction in carbon
countries approved an addition to the treaty called Kyoto emission from Business As Usual (BAU) by 2020 and
Protocol which has more legally binding measures. Each further emission reduction of 41% are expected with
Annex I party to ensure that its total emissions from GHG international support. With this commitment, Indonesia will

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Proceedings The 5th Indonesia International Geothermal Convention & Exhibition (IIGCE) 2017
2 - 4 August 2017, Cendrawasih Hall - Jakarta Convention Center, Indonesia

follow a low carbon development path. To meet these emission reduction from Darajat Unit 3 geothermal project
objectives, Indonesia has set up various programs to reduce is 753,136 tonnes CO2 equivalent per annum. The
its emission in energy sector, industry sector, forestry methodology used was ACM0002 ver.16 – Grid-connected
sector, peatland, agriculture sector and waste. In energy electricity generation from renewable sources with
sector, Indonesia committed to reduce emission through crediting period until 5 Oct 2019.
additional efforts related to energy conservation and new This estimated emission reduction (ER) was different
and renewable energy development.(i.e. enhance compared to the 1st crediting period of PDD, approved 2
geothermal program, micro-hydro, biofuel, biomass waste November 2010, with estimated amount 717,391 tonnes
to energy, wind energy). Indonesia committed to increase CO2 equivalent per annum. The changes due to the
the share of geothermal energy from 2.48% (in 2005 to different method between ACM0002 version 6 and
more than 5%) and to increase the share of other new and ACM0002 version 16.0 mainly due to the changes value of
renewable energy, particularly biomass, nuclear, baseline Emission Factor (EF) at JAMALI grid from 0.754
hydropower, solar and wind to more than 5%. The efforts tCO2 per MWh (1st crediting period) to 0.814 tCO2 per
can be achieved through the CDM scheme and private MWh (2nd crediting period) published by Department of
sector participation (KLH, 2000). This commitment to Energy and Mineral Resources of Indonesia – Directorate
reduce 26% of GHG emission then renew become 29% by General of Electricity and endorsed by Indonesia
2030 (as per Intended Nationally Determined Contribution Designated National Authority (DNA). This EF value will
(INDC) Indonesia submitted before COP-21 Paris) (DJPPI: not change for the each creditiong period after approved by
2015). UNFCCC Executive Board.
Darajat Unit 3 geothermal project was established to The emission reduction was calculated as follow:
contribute to supply of electricity in the JAMALI (Jawa- ERy = BEy – PEy – LEy
Madura-Bali) interconnected grid system and generate from Where:
clean and environmentally-friendly resources. The plant  Baseline Emission (BE) are calculated as the product of
located in Garut, West Java adjacent to the existing Darajat the electricity produced by renewable generation unit,
Unit 2 plant. The plant consisted of a conventional multiplied by an emission factor of the grid (BE = EGPJ *
geothermal condensing steam turbine generator with a EF). EGPJ is the quantity of net electricity generation that
capacity of 121 MW. Construction and operation of Darajat is produced and fed into the grid as the result of the
Unit 3 resulted in over $128 MM foreign direct investment implementation of CDM project activity
in Indonesia (CGI, 2015).  Project Emission (PE) for geothermal power plants are
Darajat Unit 3 geothermal project has received calculated PE from fossil fuel and PE from operation of
endorsement from Indonesian host country on 31 August geothermal power plants due to release of Non-
2006 and registered at UNFCCC secretariat with reference Condensable Gases (NCG). PE from fossil fuel was not
number 0673 since 11 Dec 2006. Darajat Unit 3 geothermal aplicable for this project. PE from operation are
project was a pioneer of CDM program in Indonesia even calculated of average mass fraction of carbon dioxide and
before its Commercial Operating Date (COD) in 2007 methane and Global Warming Potential (GWP) due to
(Dwita, 2006). There was a changes of 1st crediting period release of steam produced (PE = {Wsteam,CO2 + Wsteam,CH4
of Project Design Document (PDD) from 1 December 2006 * GWPCH4})
– 30 Nov 2013 to period 14 June 2007 – 13 June 2014. This  Leakage Emission (LE) was not considered in this project
changes related with the increasing capacity of Darajat Unit according to ACM0002 version 16.0
3 Power Plant from 110 MW to 121 MW and the revised  Since the project is a capacity addition to an existing
PDD (document version number 5) was approved on 2 renewable energy power plant, then the EGPJ is calculated
November 2010. as per formula (EGPJ = EGfacility – (EGhistorical + σhistorical);
until DATEBaselineRetrofit
2. Method
This research is descriptive qualitative method to Tabel 1. Summary of estimates of ER 2nd crediting period
describe and explain the Darajat Unit 3 geothermal project Year BE PE LE ER
by data collection method, review of literature, case study (tCO2e) (tCO2e) (tCO2e) (tCO2e)
and interview with Darajat CDM team. More specifically it
2014 (14 Jun - 31
adressed the following research question: What
Dec 2014) 428,132 13,391 0 414,741
contribution of Darajat Unit 3 CDM program in national
GHG emission reduction? 2015 777,453 24,317 0 753,136
The rationale of this qualitative approach was to
explore and describe the experiences and perspective of 2016 777,453 24,317 0 753,136
Darajat CDM team in implementing CDM project. This 2017 777,453 24,317 0 753,136
study will contribute to the literature on the sources of
Darajat Unit 3 CDM program implementation & best 2018 777,453 24,317 0 753,136
practices in contribution to national GHG emission 2019 (Start 1 Jan -
reduction. 5 Oct 2019) 592,142 18,521 0 573,621

3. Result Total 4,130,086 129,180 0 4,000,906


Based on approved 2nd crediting period renewal of
PDD, approved on 5 Sep 2015, estimated amount of Average 777,453 24,317 0 753,136

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Proceedings The 5th Indonesia International Geothermal Convention & Exhibition (IIGCE) 2017
2 - 4 August 2017, Cendrawasih Hall - Jakarta Convention Center, Indonesia

Table 1 shows the estimates total of ERs for 2nd analysis, NCG analysis, internal audit records, status and
crediting period 14 Jun 2014 – 5 Oct 2019 are 4,000,906 follow up of previous verification findings and ER
tonnes CO2 equivalent and total 5,021,734 tonnes CO2 calculation spreadsheet through desk review and on-site
equivalent during 1st crediting period 14 Jun 2007 – 13 Jun assessment including interview with relevant parties.
2014 as per approved PDD (see Table 2). This estimated Closing out of verification findings was conducted to
amount of ER shall be verified by Designated Operational resolve any issues to be clarified prior DOE’s conclusion to
Entity (DOE) on each monitoring period and approved by ensure that project activity was implemented and operated
UNFCCC Executive Board to get Certified Emission in accordance with approved PDD and GHG emission
Reduction (CER) issued by UNFCCC secretariat and reductions data and calculation were correct. Any
published in their website. corrective action request (CAR) or clarification request
(CL) shall be followed up by participants before DOE
Table 2. Summary of estimates of ER 1st crediting period complete the verification / certification report to be
BE PE LE ER submitted to UNFCCC Executive Board to be reviewed and
Year (tCO2e) (tCO2e) (tCO2e) (tCO2e) verified before CER issuance.
Darajat Unit 3 first CERs issuance 90,804 tonnes CO2
Annual 747,261 29,871 0 717,391 equivalent was on 11 June 2009 for the Monitoring Report
1st (MR) #1 period 14 June 2007 – 31 August 2007. Then on
crediting 25 May 2011, CERs of MR #2 and MR #3 were issued for
period period 1 September 2007 – 1 November 2008 and period 2
(7 years) 5,230,828 209,094 0 5,021,734 November 2008 – 31 July 2009. Starting MR #6 until MR
#10 (end of MR of 1st crediting period), MR verification
Every monitoring report period, Darajat Unit 3 project audit by DOE were conducted every 6 months basis (semi
as CDM participant asked DOE to conduct site verfification annual).
audit to verify that GHG emission reduction were Since MR #11, monitoring report verifications audit
calculated correctly on the basis of the approved were conducted on annual basis with first CER issuance
monitoring methodology ACM0002 (version 6 and version 761,593 tonnes CO2 equivalent on the beginning of MR of
16.0). DOE verified all CDM equipments as data points 2nd crediting period. MR #12 field verification audit by
during field audit on-site, include its equipment calibrations, DOE was conducted on 20 – 21 December 2016 and
maintenance history, and institution & personnel currently as of 30 Jun 2017, the status is awaiting issuance
qualifications who conduct the calibration. DOE also request from UNFCCC secretariat. Summary of Darajat
verified the data of monthly electricity generation, steam Unit 3 CER issuance can be seen in the Table 3 below.

Tabel 3. Summary of Darajat Unit 3 CER Issuance


Category Cover Period CERs (tCO2e)
Monitoring Report #1 (CER issued on 11 Jun 2009) 14 Jun 2007 – 31 Aug 2007 90,804
Monitoring Report #2 (CER issued on 25 May 2011) 1 Sep 2007 – 1 Nov 2008 737,846
Monitoring Report #3 (CER issued on 25 May 2011) 2 Nov 2008 – 31 Jul 2009 501,310
Monitoring Report #4 (CER issued on 17 Apr 2012) 1 Aug 2009 – 31 Oct 2010 889,337
Monitoring Report #5 (CER issued on 11 Dec 2012) 1 Nov 2010 – 31 Dec 2011 838,969
Monitoring Report #6 (CER issued on 15 Apr 2013) 1 Jan 2012 – 30 June 2012 362,546
Monitoring Report #7 (CER issued on 16 Jun 2013) 1 July 2012 – 31 Dec 2012 345,420
Monitoring Report #8 (CER issued on 13 Jun 2014) 1 Jan 2013 – 30 Jun 2013 346,094
Monitoring Report #9 (CER issued on 15 Aug 2014) 1 Jul 2013 – 31 Dec 2013 263,040
Monitoring Report #10 (CER issued on 4 Dec 2015) 1 Jan 2014 - 13 Jun 2014 322,539
Monitoring Report #11 (CER issued on 5 Jan 2017) 14 Jun 2014 - 30 Jun 2015 761,593
Monitoring Report #12 (awaiting issuance request) 1 Jul 2015 - 30 Jun 2016 801,111
Total CERs 6,260,609

According to UNFCCC CDM activities database as of CERs contribution from Darajat Unit 3 is 62,5% of total
27 June 2017, with total CERs issued 5,459,498 tCO2e CERs achieved from geothermal sectors and 19,6% of total
from MR #1 until MR #11 has made Darajat Unit 3 CERs achieved from all sectors (solar, biomass energy,
geothermal project as the biggest CERs contributor from methane avoidance, cement, fugitive, landfill gas, hydro,
geothermal sectors around the world or about 49% CERs etc) (UNFCCC, 2017).
issued from this sectors. In Indonesia, the amount of total

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Proceedings The 5th Indonesia International Geothermal Convention & Exhibition (IIGCE) 2017
2 - 4 August 2017, Cendrawasih Hall - Jakarta Convention Center, Indonesia

With estimated annual CERs achieved from Darajat To make Darajat Unit 3 CDM project running smoothly,
Unit 3 geothermal project were 717,391 tCO2e and more competitive and sustainable, some continual
estimated average CER price USD 11 per tCO2e, it was improvements are taken such as through:
expected the revenue USD 7,8 million from CERs sells 1) Eliminate external consultant cost
annually. In the approved 1st crediting period PDD, it was On the beginning, Darajat Unit 3 CDM project engaged
stated that value of CERs obtained through the CDM external consultant to have baseline study in the early stage
process has a strong influence on the project’s economics of project’s planning. External consultant also engaged in
and help to overcome some of the barriers / risks. The establishment of 1st crediting period of PDD until the MR
CERs could increase the annual revenue of the project up to #1 verification audit from DOE.
11%, the IRR of the project by up to 240 basis point, and Transfer of knowledge from external consultant to
the NPF by up to 20% (values as at investment funding Darajat CDM team through formal training, coaching,
decision in October 2004). The return will help to forming report template and field engagement were
overcome the barriers to investment by improving the conducted. So, after MR #1 was completed and first CERs
project’s economics and CDM component of the project were issued, hand over from project team to Darajat Unit 3
was an important aspect in investment decision (CGI: operational team was transfered smoothly. MR #2 onward
2015). up to date including during establishment of 2nd crediting
The CERs achieved from MR #1 with 90,804 tCO2e period of PDD, Darajat Unit 3 was able to run CDM
was sold on July 2009 with the price USD 16,88 of activity independently without external consultant. Through
CER/ton during sales (net after transaction fee). While this elimination of external consultant, Darajat Unit 3 was
CERs achieved from MR #2 with 737,846 tCO2e and able to reduce CDM operational cost.
CERs achieved from MR #3 with 501,310 tCO2e were sold 2) Improve capacity building
on July 2011 with the price USD 6,33 of CER/ton during Darajat Unit 3 CDM concerned on the capacity
sales. The CERs achieved MR #4 and MR #5 sold on 2015 building of all team members. Regular refresher training
with the price less than USD 1 of CER/ton. The next CERs was conducted to all members. If any new team members
achieved from MR#6 onward have not been sold and join, CDM introduction, coaching and on the job training
awaiting for better CER price. were delivered by other team member who expertise on
Some costs that need to be consider in running CDM each area to new member. All leader of team member shall
project such as 1) Adaptation fund with total 2% CERs acknowledge and sign their members competency on
deducted by UNFCCC at issuance, 2) Registration fee to certain CDM topics. Eventhough company organization
UNFCCC, 3) CER verification charges of fee payable to structure changed dinamically, this process has made the
DOE for every verification, 4) Documentation cost include Darajat Unit 3 CDM activity was running smoothly.
consultant’s fee, 5) Monitoring cost such as for NCG Team building actvity was conducted among CDM
analysis and equipment calibrations, 6) Validation cost of team members to improve team performance. Team
fee payable to DOE for PDD validation. The CERs sales building through informal outdoor activity, fun games
from Darajat Unit 3 still have positive revenue and able to including recognition and award program are designed to
cover the monitoring and verification cost eventhough the make all CDM team members more excited and keep in
CERs price was fallen deeply (DNPI: 2014). good motivation.
The fallen of CERs price because of the reduced 3) Standardized process
emissions and the cap on the use of CERs for compliance To standardized the Darajat Unit 3 implementation,
by European Union Emission Trading System (EU ETS). Standard Operating Procedures (SOPs) and guidelines were
The recession during 2009 and 2010 led to reduction in EU established. There are 11 main SOPs as reference standard
ETS installations’s emission, thus reducing the demand for in running the CDM implementation to meet approved
European Union Allowances (EUAs), CER and other PDD, starting from SOP #1 on Monitoring Report Review
compliance units such as Emission Reduction Units until SOP #11 on Equipment Calibrations. Specific
(ERUs). Growh in the issuance of CERs (and ERUs) has equipment calibration procedures of 23 CDM data points
increased the supply of compliance units. The price of are integrated with the procedures from maintenance SOP.
CERs has fallen more because use of CERs and ERUs for 4) Re-new verification audit contract
compliance is capped and the EU has announced that this Starting from MR #1 until MR #9 verification audit,
cap will apply up to 2020. Thus the demand for CERs for Darajat Unit 3 engaged DOE from overseas. The selection
use for compliance by EU ETS installations is fixed, while of DOE was conducted by corporate. Darajat Unit 3 team
the supply is increasing (Spalding-Fecher, 2012). reviewed this opportunity to reduce the operational cost on
To date, EU ETS installations have used 1.45 GtCO2e verification audit. Darajat Unit 3 team began to find out
of CERs and ERUs to help them meet their compliance candidates of next DOE through direct selection process
obligations, or 90% of the total 1.6 GtCO2e allowed under and invited DOEs candidates from national & overseas
that system between 2008 and 2020. If this trend persists. companies since 2013. On 2014, new DOE from Indonesia
EU ETS installations are likely to exhaust their Kyoto was selected to change the existing DOE.
credit quota in the next few years, leaving seller of Kyoto The new contract stated the monitoring period
credits without their historically largest buyer (World Bank verification audit to be conducted on annual basis. The
and Ecofys, 2015). Use of CERs by installations in the EU changes of verification audit period from semi annnual
ETS for compliance has been the dominant use of CERs to basis to annual basis has reduced the DOE verification
date, accounting for almost half of the CERs issued audit cost. The total verification cost from new DOE was
(Spalding-Fecher, 2012). 45% much lower compared the previous DOE and it

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Proceedings The 5th Indonesia International Geothermal Convention & Exhibition (IIGCE) 2017
2 - 4 August 2017, Cendrawasih Hall - Jakarta Convention Center, Indonesia

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