FCCC/SB/2000/XX

English
Page 1

SMALL SCALE
PROJECT DESIGN DOCUMENT
BIOMASS RAJASTHAN

Y. Hofman
G.J.M. Phylipsen
R. Janzic
R. Ellenbroek

October 2004
ICC 30076.1

Assigned by Kalpataru
CONTENTS

A. General description of project activity

B. Baseline methodology

C. Duration of the project activity / Crediting period

D. Monitoring methodology and plan

E. Calculation of GHG emission reductions by sources

F. Environmental impacts

G. Stakeholders comments

Annexes

Annex 1: Information on participants in the project activity

Annex 2: Information regarding public funding

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A. General description of project activity

A.1 Title of the project activity:

Biomass in Rajasthan - Electricity generation from mustard crop residues.

A.2 Description of the project activity:

Summary
The project involves the implementation of a biomass-based power generation plant using direct
combustion boiler technology. The installed capacity of the plant is 7.8 MWel. The fuel used is
primarily mustard crop residue, which is abundantly available in the vicinity of the site. The
electricity generated will be sold primarily to the state grid with the balance sold to third parties
(large industrial customers). The generated electricity will replace a mixture of coal and gas-based
power generation. The total amount of CERs to be delivered is expected to be 313,743. The
implementation of the project will also lead to additional income and employment in the region
(approximately 150,000 man days of work per year1).

Chronological description of the project’s background

Biomass based power supply as a new business activity
In the year 2000, Indian company Kalpataru Power Transmission Ltd., a leading firm in the
implementation of power transmission systems, decided to gradually diversify its business
activities with power generation (a description of KPTL is given in A3). Small-scale renewable
energy projects, especially biomass based projects, were targeted by the Board of Directors of
KPTL as a first but definite step into that direction, not at least because of the awareness of the
clear potential of CDM credits as an additional and secure benefit. While preparing a proposal for
the promising Dutch Government’s CERUPT-tender (Expression of Interest submitted in January
2002; project short-listed in May 2002, final proposal submitted in September 2002), a PPA with
RVPN for three future biomass based power projects in the state of Rajasthan (respectively in the
districts Ganganagar, Tonk and Bharatpur) was signed in February 2002.

1
Based on an estimate of at least 100,000 man-days per year for a 5 MW biomass based plant from the Indian
Ministry of Non-Conventional Energy (1999)

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 Figure A.1: Ganganagar plant and its fuel source

Implementation of the first plant (Ganganagar)

Despite several technical and financial risks associated with the project, KPTL decided to start
construction of the first plant in October 2002. The reasonable assurance that the project would be
approved by the Dutch Government and that it could count on carbon credit revenues was one of
the key factors in the decision making, as is stated by KPTL’s Board in its recent Letter of
Evidence (see Annex 4 in the separate Annex document2). Decisions weighing IRR against
securing CDM credits are presented in Section B.3.

Since its commissioning and start-up in August 2003, the Ganganagar plant has been confronted
with several ongoing operational problems related to the behaviour of mustard husk feedstock. As
confirmed in the mentioned letter by the Board, this made KPTL decide to:

§ Reduce the original number of projects from three to two: the Bharatpur project was
cancelled.
§ Take a ‘go/no go’ decision on the Tonk plant on basis of:
- the progress made at the Ganganagar plant;
- the definitive approval of the Ganganagar plant as a CDM-project.

Purpose of the project

The purpose of the Rajasthan biomass project is to contribute to an economically, environmentally
and socially sustainable development in the region through the commercial operation of a power
plant and thereby creating sustainable stakeholder value.

Contribution to sustainable development

The project contributes to the sustainable development of the region and country in the following
ways:

2
Note the separate “Annexes – Supporting Documentation” document contains Annex 3 to 5 as well as the
project’s selected references.

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§ Rajasthan had a peak deficit of 2.9% at the end of the 2003, according to the Ministry of
Power (MoP, 2003b). The biomass units will contribute, though in a small measure, to
bridging the gap between the supply and demand of power in the state.
§ The units are located at dispersed rural locations, which reduces the transmission and
distribution (T&D) losses to some extent. The T&D losses in Rajasthan were about 28% in
2002 (MoP, 2003b).
§ The project is in line with the policies of Ministry of Non Conventional Energy Sources
(MNES) and Government of Rajasthan (GoR). It contributes to achievement of the 11th Plan
target of 10,000 MW renewable energy in 2012 set by MNES. The objective of the
Government of Rajasthan (GoR) is to raise the share of non-conventional energy (excluding
large-scale hydropower) to 10% of total installed capacity in State of Rajasthan by 2005.
§ Contrary to certain fossil fuel-fired plants, the proposed project will not lead to an outflow of
foreign exchange capital, since most capital equipment is locally produced and the biomass
waste does not have to be imported. This is accordance with India’s policy of self-reliance.
§ Rajasthan is often included with the BIMARU states, a group of states considered laggards
regarding development. This is reflected in the per capita income of the state, which is lower
than the national average and the per capita electricity consumption at 302 kWh, which is also
lower than the national average. Social indicators like the literacy rate for the state is 61%
compared to the national average of 65% (Census, 2001), where the project is located
contributes to the economic growth of the region.
§ The plant is situated far from an urban centre, creating rural employment. It is estimated that
the project has to potential to create approximately 150,000 man-days of work per year.
Creation of employment opportunities in rural areas has long been recognised as a major
element of sustainable development and to stem the large-scale migration from rural to urban
areas. This concern has formed the cornerstone of most of the Government of India’s (GOI)
rural development programmes. To this extent, the project directly addresses a core national
concern. Besides creating income for farmers through the purchase of fuels, the supplier will
also engage in capacity building among local farmers and contribute to community
development (health care, education, etc).

A.3 Project participants:

The project participants are:

§ Kalpataru Power Transmission Limited (KPTL): project owner
§ Government of India: host country; the Government of India announced ratified the Kyoto
Protocol in 2002
§ Dutch Government/SenterNovem: purchaser of carbon credits; the Government of the
Netherlands ratified the Kyoto protocol in 2002

Kalpataru Power Transmission Limited (KPTL) – India

Role in the project

Developer of and investor in the biomass power projects and supplier of the carbon credits.

Short company description

Kalpataru Power Transmission Limited (KPTL) is a leading EPC Contractor for Power
Transmission Lines (132 KV to 800 KV) for Power Utilities both in India and overseas. KPTL has
a world-class facility for designing, fabricating, galvanizing and testing of tower structures. It also

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has a full-fledged construction team for civil works, erection and stringing of power transmission
lines. KPTL is a publicly listed company with a gross revenue of approx. Rs. 3.6 Billion (USD 80
Million) and a net worth of approx. Rs. 904 Million (USD 20 Million) in 2003-2004 (respectively
Rs. 1.5 Billion (USD 30 Million) and Rs. 750 Million (USD 15 Million)) in 2001-2002). It is a part
of the diversified Kalpataru Group with promoters now holding 78% of the equity. Being listed on
the stock exchange, its shares are also held by over 5,600 shareholders. It has implemented the
Code of Corporate Governance, including appointment of independent directors and mandatory
disclosure and transparency requirements. It has an impeccable track record with its bankers and a
track record of profits and dividends for its shareholders.

Promoter of the Kalpataru Group is the Munot family, from Jodhpur in Rajasthan. The founder of the group
is Mr. Mofatraj P. Munot. He and his son Mr. Parag M. Munot are considered as Promotor Directors of
Kalpataru Power Transmission Ltd. More about the company is available at www.kalpatarupower.com

SenterNovem, The Hague, on behalf of the Netherlands government.

Role in the project

SenterNovem has signed a contract with Kalpataru concerning the delivery of CERs to the
Netherlands.

Short company description

SenterNovem (a union of the formerly separate organisations of Senter and Novem) is an agency
of the Dutch Ministry of Economic Affairs. SenterNovem has a long track record of involvement
with CDM projects including the Cerupt and Erupt projects where carbon credits are purchased on
behalf of the Dutch Government. More information on SenterNovem can be found on
http://www.senternovem.org/

Contact information of both organizations is included in Annex 1.

A.4 Technical description of the project activity:

A.4.1 Location of the project activity:

A.4.1.1 Host country party: India

A.4.1.2 State: Rajasthan

A.4.1.3 City/Town/Community: Padampur in the Ganganagar District

A.4.1.4 Physical location: See following pages

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Figure A.2: States in India. The Northern grid includes Chandigarh, Delhi, Haryana,
Himachal Pradesh, Jammu & Kashmir, Punjab, Rajasthan, Uttar Pradesh
and Uttaranchal (IEA, 2002)

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The generating unit is located in Padampur Tehsil in the Ganganagar district.

Figure A.3: Ganganagar district, Rajasthan

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A.4.2 Type and category(ies) and technology of project activity

The project falls under the Appendix B of the simplified modalities and procedures for
small scale CDM project activities.

Project Category: Renewable Energy Project

Sub category: Renewable electricity generation for a grid

Technology of project activity

The project involves the implementation of a biomass-based power generation plant with an
installed capacity of 7.8 MW using direct combustion boiler technology. The project is a case of
utilizing an existing technology of combusting biomass fuels in a high-pressure steam boiler
(modified Rankine cycle with regenerative feed water heating and water-cooled condensation).

The power plant will be designed for operation with multiple agricultural biomass residues. The
major part of the feedstock will comprise mustard crop residue, together with Juli Flora, cotton
stalk and rice husks. The residues are available in abundance and are presently mostly burnt in the
fields. The project proposes to use less than 33% of the total agricultural residue for generation,
leaving enough for household fuel consumption and other uses while reducing the environmental
effects from burning the biomass in the fields.

The electricity generated is to be supplied primarily to the state grid with an option to deliver the
balance to third parties (large industrial customers) via the state grid.

The technology of biomass based high steam pressure power generation itself is known and in use
in India. However, the use of mustard crop residue as a fuel for power generation is a pioneering
effort by KPTL; this project represents the first time mustard crop residue is used for the
generation of electricity on a commercial scale.

A.4.3 Brief statement on how anthropogenic emissions of greenhouse gases (GHGs) by

sources are to be reduced by the proposed CDM project activity:

The project results in a clear reduction of CO2 emissions: the CO2 neutral biomass based power
supplied to the electricity grid replaces CO2-emitting fossil fuel based power that would be
generated in absence of the project.

A.4.4 Public funding of the project activity:

No public funding is involved in the financing of this project. CERUPT funds are additional to
Dutch Official Development Assistance (ODA) funds. Equity for the project is supplied by KPTL,
debt is supplied by a private Indian bank.

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A.4.5 Confirmation that the small-scale project activity is not a debundled component of a
larger project activity:

As highlighted in Appendix C of the Simplified Modalities and Procedures for Small-Scale CDM
project activities, a proposed small-scale project activity shall be deemed to be a debundled
component of a large project activity if there is a registered small-scale CDM project activity or an
application to register another small-scale CDM project activity:

§ With the same project participants;

§ In the same project category and technology/measure;
§ Registered within the previous 2 years; and
§ Whose project boundary is within 1 km of the project boundary of the proposed small-
scale activity at the closest point.

On basis of the above, the Ganganagar project cannot be considered a debundled component of a
large project: the Ganganagar plant is KPTL’s first and so far only biomass power plant: there is
no application to register the other two other biomass projects in KPTL’s original biomass
portfolio (in Bharatpur and Tonk) as small-scale CDM project activities.

If the situation of the Ganganagar plant proves to become positive and stable, KPTL will review its
plans for the Tonk plant.

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B. Baseline methodology

B.1 Title and reference of the project category applicable to the project activity:

Project category: I.D: Renewable Electricity Generation for a grid

Reference: Appendix B of the simplified M&P for small scale CDM project activities
(UNFCCC, 2003b).

B.2 Project category applicable to the project activity:

According to Article 23 of Appendix B of the simplified M&P for small scale CDM project
activities (UNFCCC, 2003b) category I.D. “comprises renewables, such as photovoltaics, hydro,
tidal/wave, wind, geothermal and biomass, that supply electricity to an electricity distribution
system that is or would have been supplied by at least one fossil fuel or non-renewable biomass
fired generating unit”.

The proposed small-scale CDM project comprises a biomass plant that supplies electricity to the
grid that is now supplied primarily by coal power plants with future plans overwhelmingly in
favour of fossil fuel based generating facilities and is thus applicable for project category 1.D. In
fact, capacity additions in India’s 10th Plan (2002-07) detail only an additional 500 MW being
installed in Rajasthan, all of which are fossil fuel based (GoI, Ministry of Non-Conventional
Energy, Ministry of Non-Conventional Energy, Baseline for Renewable Energy Projects Under
Clean Development Mechanism).

B.3 Description of how the anthropogenic GHG emissions by sources are reduced below
those that would have occurred in the absence of the proposed CDM project activity

Emission reductions

On-site emissions
Construction of power plants
The first direct on-site emissions occur during the construction of the power plants. However,
because there is a shortage of electricity in India it can be assumed that in the baseline situation,
fossil fuel power plants would have been constructed instead which would at least result in similar
emission levels. We can therefore safely assume that the construction of biomass plants does not
result in additional emissions compared to the baseline.

Combustion of biomass
Direct on-site emissions after implementation of the project arise from the burning of biomass in
the boiler. These emissions only include CO2. However, the CO2 released equals the amount of
CO2 taken up by the biomass during growing, therefore no net emissions occur.

Storage of biomass
The harvesting of the mustard crop takes place in the period from February to April every year.
Since mustard crop residues are only available for three to six months a year, adequate storage
facilities are required. In principle N2O and CH4 emissions could arise from storage. However, this
is not expected to generate significant GHG emissions:

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 § In principle nitrous oxide emissions could arise from storage. However, it seems fair to
assume the amount of nitrous oxide emissions formed during biomass storage to be
comparable to the amount of N2O emissions arising from agricultural residues when left on
the field3. As a consequence the N2O emissions will not be influenced by the project and
will therefore not be taken into account.
§ Substantial methane emissions from storage are not anticipated. There are three arguments
for this (see the grey box at the end of this item for a more detailed elaboration on this):
1. The materials are stored in such a way that anaerobic digestion is very unlikely
(dry and with excess oxygen)
2. Methane production from anaerobic digestion only starts after a couple of months
and reaches its peak after 2 years (storage time for the proposed project is on
average six to nine months)
3. The biomass materials used in this project have very little organic components that
are biodegradable under anaerobic conditions.

Moreover, also in the baseline situation some methane emissions will occur because part of the
crop residue is left on the field.

Because there is no accurate data available about methane production during the short-term storage
of crop residues, we will provide a rough estimation of possible methane production based on the
following assumptions:

§ Anaerobic conditions occur in 5 to 10% of the storage volume

§ Anaerobic digestion starts after two months and grows linearly to its peak after two years
lasting for decades. This linear growth is a conservative estimate, since emissions will start
slowly in the beginning, and increase exponentially at later stages.
§ It is assumed that one tonne of crop residue can generate 100 to 150 m3 of methane4 over a
period of several decades, say 20 years. Per year, one tonne of biomass produces 5 to 8 m3
of methane at its peak (say roughly 3 m3 per tonne during the first year)

Therefore, the total possible methane production would be:

total biomass requirements: 50,000 tonnes per year

total volume under anaerobic conditions: 2,500 - 5,000 tonnes per year
average storage time: 6 - 9 months
average methane production: 1.5 m3 per tonne biomass in 1st year
average methane production is: 7,500 - 15,000 m3 per year

And as 1 m3 methane = 0.72 kg this equals to 5 to 10 tonnes of CH4 which has a global warming
value of 100 to 200 tonnes CO2. The total CO2 emission reduction of the project is approximately
313,743 tonnes, so potential methane emissions of 0.3 to 0.6% are negligible and therefore not

3
N2O emissions = Amount of residues x dry matter fraction x N-fraction of dry matter x emission factor x 44/12 x GWP. Assuming 150
kt crop residues (TERI), 92% dry matter with 1.3% of N (AG), and an emission factor of 0.0125 kg N2O-N/kg residue-N and a GWP of
310 (IPCC), total nitrous oxide emissions amount to 22 ktonne CO2-eq., circa 2 % of the avoided emissions.
4
One tonne of grass (with 60% moisture content and an organic fraction of 0.8) can produce in theory, under optimum circumstances,
0.6 m3 biogas per kg dry organic material. If this grass is dried to 10% moisture content the biogas production is 0.9 x 0.8 x 0.6 x 1000=
432 m3 biogas per ton grass or approximately 250 m3 methane per ton grass because the methane fraction in biogas is approximately
60%. Straw will have a much lower methane production because the biodegradable components are much lower, 100 - 150 m3 methane
per tonne.

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taken into account. It should also be noted that methane emissions occurring in the baseline are not
taken into account.

Why there will be limited methane emissions from mustard residue storage?

1. Absence of anaerobic conditions

Storage conditions of the mustard residue and the cotton stalk are aerobic in nature. Methane emissions
only take place during anaerobic conditions. The biomass in this project is stored dry (less than 10-15%
moisture content) and not sealed; in other words, excess oxygen is always present. To protect the biomass
from rain and wind, a covering (e.g. tarpaulin) is sometimes put over the biomass. Therefore, under these
conditions it is very unlikely that anaerobic digestion would occur.

2. Anaerobic digestions starts slowly

To further substantiate this stance we considered what would be the methane emissions if anaerobic
conditions would occur. As no information is available on emissions from the storage of biomass, a
comparison is made with methane emissions from landfill sites. A study from Adviescentrum Stortgas
(centre for landfill gas consulting) describes what the methane emissions are in different phases once waste
has been put in a landfill. After two months, methane starts to be emitted and after two years the share of
methane in the landfill has grown to its maximum level. Considering this, it can be concluded, that even if
anaerobic conditions would occur in the storage of biomass during a wet period, methane emissions would
require at least two months before beginning to be expelled into the atmosphere and would not reach its
top until two years have passed. As the average storage time is six to nine months, there would therefore
only be limited methane production at the biomass installation.

3. Crop residues used do not contain much biodegradable components

Apart from the difference in anaerobic conditions between a landfill site and the storage of mustard and
cotton residues, there is a difference in the type of organic material used. Table B.1 gives the biochemical
composition of two biomass types as well as organic domestic waste. No data on the composition of
mustard stalk is available.

From (de Jager et al, 2001) the following is quoted:

‘Only part of the organic components are biodegradable under anaerobic conditions. In general, smaller
carbohydrates (e.g. simple sugars), proteins, fatty substances and lipids are converted rapidly.
Hemicellulose is converted less rapidly, while cellulose generally degrades rather slowly. Lignin is not
converted to biogas under anaerobe conditions. Since part of the cellulose materials is encapsulated by
lignin, part of the potentially degradable components have to be considered not biodegradable. ‘

Table B.1: Biochemical composition of rye straw, cotton straw and organic domestic waste (ECN, 2002)
Cellulose Hemi- Lignin Lipids Protein
cellulose______________________
Straw, rye 51 21 17 0 0
Cotton straw 42 12 15 0 0
Organic domestic waste 13 10 10 13.8

Mustard crop residue, the main biomass used, has a biochemical composition comparable to cotton straw.
From this information it can be concluded that even if anaerobic digestion occurs, the methane emissions
will be very low.

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Off-site emissions
Transport of biomass
Direct off-site emissions in the proposed project arise from transporting the biomass. The biomass
will be transported by tractor-trolleys and camels. However, in the baseline situation, the transport
of coal and oil from coalmines and oil wells (or ports) has to be taken into account. On average,
the distance over which fuels have to be transported will be substantially larger for fossil fuel-fired
power stations because of the larger distance to coal mines and ports than for the proposed
projects. For example, Rajasthan procures coal from facilities located over 1000 kilometres away
in such coal producing states as Bihar, Chattishgarh and Madhya Pradesh. Therefore, transport
emissions in the baseline will be larger than the transport emissions related to the proposed project.
Because of a lack of data on the average transport distances for coal to power stations in Rajasthan
and the Northern grid, we have not included fuel transport emissions in the system boundary of
both the current situation and the project5. This also provides a conservative estimate of emission
reductions.

Biomass left or burnt on the field

The project will result in reduced direct off-site emissions compared to the current situation, in
which part of the biomass waste stays on the field. This may lead to methane emissions from
decaying biomass. In cases where the biomass is burnt on the field, N2O may be emitted. N2O and
methane have a stronger global warming potential than CO2. These emissions however, are not
taken into account, providing a more conservative estimate of the baseline emissions6.

Since the proposed project uses biomass waste only, no additional biomass is grown on account of
the project. Therefore the project does not result in an additional uptake of CO2 by sinks.

Justification of simplified methodologies

The installed capacity of the biomass plant is 7.8 MW (see Annex 5 for original specifications of
the steam turbine capacity, i.e. gross plant capacity). The proposed project therefore qualifies for a
small-scale project as defined in Appendix B of the M&P of small-scale project activities
(UNFCCC, 2003).

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The fuel efficiency of tractors is 6-7 km/litre. We take 6 km/litre in order to be conservative. Raw material
will be transported over an average distance of 25 km with a minumum load per trip of 4000 kg. Thus,
transporting up to 60,000 tonnes requires 15,000 trips of 50 km (including the return trip). In total, a
maximum of 125,000 litres of diesel oil will be consumed for the 7.8 MW plant per year, with total emissions
amounting to 580 tonne CO2/year. Emissions from transport for the two biomass plants combined, amounts to
approximately 1000 tonnes CO2/year (assuming an emission factor for diesel oil of 20.2 t C/TJ, a caloric
value of 43.33 TJ/ktonne and a density is 0.93 kg/l).
6
A rough estimate of the amount of emissions is based on the IPPC Reference Manual: CH4 emissions =
carbon released x emission ratio x 16/12 x GWP; N2O emissions = carbon released x N/C-ratio x emission
ratio x 44/28 x GWP; The amount of carbon released = total amount of crop residues x average dry matter
fraction x fraction actually burned in the field x fraction oxidised x carbon fraction (t of carbon / t of dry
matter). Assuming a total amount of residues of 150 kt (TERI), an average dry matter of 9% (AG), a fraction
burnt in the field of 100% (conservative assumption), an oxidised fraction of 90% (IPCC), a carbon fraction
of 44.3% (AG), emission ratios of 0.007 for CH4 and 0.009 for N20 (IPCC), a N/C ratio of 0.03 for mustard
residue (AG) and GWPs of 21 fro CH4 and 310 for N2O (IPCC) leads to CH4 emissions of 10.7 kt CO2-eq
and N2O emissions of 7.2 kt CO2-eq per year, in total less than 2% of the emission reductions obtained from
the project.

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Additionality
In this section the additionality of the project will be shown, taking into account the various
barriers (as included in Attachment A to Appendix B of the simplified M&P for small scale CDM
project activities).

In general, the additionality proof of the project is based on the fact that KPTL would not have
taken the final positive investment decision without sufficient assurance that there would be
additional income in the form of carbon credits. In the underlying paragraphs, the investment
decision process of KPTL as well as the main barriers that played a role in this will be described.

Investment decision-making process by KPTL

As mentioned in section A.2, KPTL conducted feasibility studies on the envisaged biomass power
plants in 2001/2002. The feasibility studies showed a.o. that there are a number of associated risks
that should be taken into account (see also the KPTL Board’s Letter in Annex 4):

§ financial risks:
- the project’s expected feasibility (IRR) is moderate, especially compared to alternative
energy systems. Moreover, the project is very sensitive to variations in the Plant Load
Factor (PLF); at the same time, it is very hard to make accurate PLF forecasts, because of
the technological risks mentioned below. This is clear when reviewing actual PLFs
achieved versus what was forecasted in the initial business plan (see Section E.4)
- financial risks due to the prevailing practice and situation with Rajasthan’s State
Electricity Board (SEB).
§ technological risks:
- no experience existed within KPTL (nor anywhere else) on mustard husk based power
generation.

These factors will be elaborated in more detail in the sections below.

On basis of the outcome of the feasibility studies, KPTL decided to go ahead with necessary
preparations, but made the investment decision conditional to a number of factors of which the
perspective on additional income from CDM credits was an important one (see the Letter of
Evidence by the Board in 3):
§ a contract with the Dutch government means a very secure and hard currency revenue stream
in comparison with the revenues from local electricity sales;
§ incorporating the credits has a significant effect on the project’s profitability: the IRR remains
sensitive to the PLF but on average a higher IRR is expected.

Meanwhile, KPTL entered into a PPA with the Rajasthan Rajya Vidyut Vitaran Nigam Ltd
(RVPN) in February 2002, in order to be able to facilitate the process of obtaining a bank loan.
However, as will be explained below (under the heading financial risks), the PPA was not binding
and it did not provide sufficient confidence to the Bank to supply a (non-recourse) loan, nor did it
oblige KPTL to invest in the biomass power plants.

It was until September 2002, when positive feedback from Ecofys and Senter with respect to the
CERUPT-application gave reasonable assurance to KPTL that the projects would count with
carbon revenues. On basis of the expected carbon revenues, KPTL promoters were willing to
accept a Bank loan with recourse to their personal guarantees.

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In the mentioned Letter of Evidence attached as Annex 4, the Board of Directors of KPTL
reiterates the vital importance carbon revenues played in the decision making process for the first
plant.

Financial risks
Moderate feasibility compared to alternative energy systems
In Table B.2a and b, results of feasibility calculations for the biomass project are given without
taking into account carbon credits:
§ Table B.2a shows feasibility results of the original biomass project, consisting of 3 plants. The
calculations are based on the figures from the original business plan by KPTL, of which an
excerpt is attached in Annex 5.
§ Table B.2b shows feasibility results for just the biomass plant in Ganganagar. These data were
derived from the above mentioned business plan and recent experience data provided by KPTL
(see Annex 5 for a consolidated calculation).

Table B.2a: IRR for KPTL’s original biomass project (3 plants) – without carbon credits

Plant type Biomass

Installed capacity 22.6 MW
Initial investment 24 MUS$
Annual cash flow 1 – 5.5 MUS$/yr
IRR (10 yrs) 10.2%

Table B.2b: IRR for the Ganganagar biomass project – without carbon credits

Plant type Biomass

Installed capacity 7.8 MW
Initial investment 7.8 MUS$
Annual cash flow 1.35 MUS$/yr
IRR: (10 yrs) 11.5%

The IRR figures of 10.2% and 11.5% and can be considered rather moderate, especially given the
technological risks associated with the project (see below). KPTL realized that a biomass project
involves certain technological risks and that especially in the first year(s) the projected average
Plant Load Factor (PLF) of 75% for the Ganganagar plant might not be reached. Taking an average
PLF of 65%, the IRR in the above calculation drops from 11.5% to 6%.

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When considering carbon credits as additional revenues, the IRR increases as shown below:

Table B.3a: IRR for KPTL’s original biomass project (3 plants) – with carbon credits

Plant type Biomass

Installed capacity 22.6 MW
Initial investment 24 MUS$
Annual cash flow 1.1 – 6.2 MUS$/yr
IRR: (10 yrs) 13.2%

Table B.3b: IRR for the Ganganagar biomass project – with carbon credits

Plant type Biomass

Installed capacity 7.8 MW
Initial investment 7.8 MUS$
Annual cash flow 1.5 MUS$/yr
IRR: (10 yrs) 14.1%

Instead of biomass, KPTL could have invested in alternative energy options. In Rajasthan, the
most logical available options would have been the following:

Coal/petcoal based power plant

A likely alternative investment decision would have been for the implementation of a coal/petcoal
plant. In fact, at the time the investment decision was being made, between 1999 and 2002, a
number of coal plants were commissioned:
§ 2x18 MW Captive PP by Shree Cements, Beawar, Rajasthan at an estimated project cost of Rs
96 Crores (approximately $22 Million US). No sale of power is envisaged and hence no tariff
is available. The fuel for the CPP is petcoke and imported coal.
§ Aditya Cements Chittorgarh has a coal based Power Plant of 23 MW capacity

The following table provides the financial aspects of the coal option (see Annex 5 for a
consolidated calculation).
Table B.4: IRR for coal plant

Plant type Coal

Installed capacity 23 MW
Initial investment 16 MUS$
Annual cash flow 3.5 MUS$/yr
IRR: (10 yrs) 17.0%

17
Heavy fuel oil or diesel based plant
Heavy fuel oil or diesel based installations can also be considered as an alternative scenario. For
instance, the Hindustan Zinc Ltd, Udaipur has implemented DG sets of 35.32 MW operating on
HFO/HSD. However, this option is only interesting for internal power supply/emergency, and not
for grid supply. Financial data are as follows (see Annex 5 for consolidated calculation):

Table B.5: IRR for heavy fuel oil or diesel based plant

Plant type: Heavy fuel oil or diesel based plant

Installed capacity: 8 MW
Initial investment: 5 MUS$
Annual cash flow 0.18 MUS$/yr
IRR: (10 yrs): Unprofitable

On basis of the above it can be concluded that KPTL could have considered a coal based plant
instead of the biomass plant, which in terms of financial feasibility would be clearly more
attractive than a biomass plant. However, dependence on (imported) coal was considered as a
mayor drawback as no coal stocks are available in Rajasthan, compared to the locally available and
cheap biomass residues.

Prevailing practise and situation with the Rajya Vidyut Vitaran Nigam (RVPN)
On top of the above, KPTL considers the Power Purchase Agreement (PPA) with the RVPN as
risky:
§ The sanctity of contracts (PPA/WBA) and their enforceability. Most Indian PPA’s have
clauses on ‘deemed generation’ and on the accepted time period to achieve commercial
operation, i.e. indicating that the generator must generate and the purchaser must purchase
from a certain moment on. Being aware of the technical and financial uncertainties of the
project, KPTL and RVPN agreed not to include any clause on ‘deemed generation’ in the PPA,
meaning that its sanctity and enforceability is rather limited. Although on the one hand this
gives KPTL less supply obligations, it imposes additional financial risks to the project: SEB is
allowed to the refrain from purchasing.

§ Uncertainty on tariff stability/regulatory intervention. As stated in the Board’s Letter (Annex

4), KPTL projected to sell part of its electricity directly to third party consumers. However,
since the beginning of the project, there has been the uncertainty about whether the
RVPN/Regulatory Commision would give the required permissions. On top of that, KPTL has
always had to take into consideration the realistic chance that the SEB would introduce
additional charges and surcharges (wheeling and banking) which would make third party sales
unattractive.

As a direct consequence of that, KPTL always counted with the possibility that it might end up
with the SEB being the sole client. Given the precarious financial state of the SEB (see below) this
implied an additional financial risk factor. In light of this, KPTL considered additional hard
currency carbon revenues, to be sold to a secure client being the Dutch government to be vital. To
date though, there has been no serious issue with the SEB.

18
Technological risks
To assess the technical feasibility and risks of the project, KPTL contracted Avant Garde
Engineers and Consultants (AGEC), an Indian company with a broad expertise on providing
technical consultancy services for biomass based power plants. Being aware of the difficult
combustion characteristics of mustard residues (especially its alkaline and chloride content,
accounting for approximately 25% of its composition), AGEC took specific precautions with
respect to the design (larger furnace, convective heat transfer surfaces, efficient soot blowers and
conservative furnace outlet temperature). Moreover it recommended KPTL to contract Thermax
Ltd. as boiler supplier, being a leading Indian company in the field of biomass combustion systems
with an (inter)national track record.

As such, KPTL was aware of the serious technological risk associated with the combustion of
mustard residues. Additional revenues through carbon credits were considered essential to
counterbalance the risks.

Experiences so far with the Ganganagar plant

During its first months of operation, the Ganganagar plant has experienced several operational
problems due to the difficult behaviour of mustard residues:
§ The mustard husks themselves are extremely light in weight making a major portion of the fuel
source burning while in suspension. High super-heater temperatures together with the mustard
crop’s chemical composition continues to result in scaling, fouling and corrosion in the
fireside of the super-heater tubes in the boiler. This has resulted in the frequent failure of the
super-heater. Figure B.1 details the amount of corrosion that can occur, as well as the heavy
deposits in the furnace and super-heater.
§ Effects are further compounded by the fact that local conditions ensure a significant amount of
dust and fine particles from the arid fields remain imbedded within the mustard residue;
§ Under the impact of the problems faced, the performance, guarantees for the plant have not
been established even after one year of operation

Figure B.1: Corrosion, deposits and scale formation on super-heater tubes

Low plant load factors in the initial months of power generation are testimony to the serious
corrosion problem that was faced. All these issues necessitated the premature replacement of the
super-heater (within eight months of the initial commissioning date) made from a special steel
alloy (T22). Further design modifications were made to the system, including adjustments to the
furnace to increase the time fuel spends in combustion and the installation of additional over-fire
air nozzles to prevent any unburned fuel from escaping to the redesigned super-heater area (which

19
itself is designed to accommodate a more accurate control of temperature). These modifications
resulted in large expenditures and outages that included a one month outage from the 22nd of
March to the 22nd of April 2004. Overall, the installation’s Plant Load Factor was about 55%..
There was another shutdown from June 29, 2004 to July 23 ,2004 for other plant problem. It is
expected that the plant will be shut down again for a similar period in the first quarter of 2005:
further modifications to the boiler will be incorporated in order to obtain improved performance.

However, KPTL is confident that the problems will be finally conquered. The current design
envisaged application of a special zirconium-based refractory paint in the last stage of secondary
super-heater to reduce the negative effects of corrosion. However, the paint could not sustain the
effect of temperature and corrosion and got peeled off in no time. Further investigation in
international literature on similar corrosion problems gathered that the permanent solution lies in
using the special alloy inconel for the super-heater. Anticipated costs are estimated in the tens of
millions of rupees, which a small project like this cannot afford. Further modifications are
proposed by Thermax , the boiler supplier, to improve performance and efficiency of the boiler.
Trials continue to be performed to determine the optimum operating parameters and ways to more
efficiently process the mustard crop residue. The most recent months of operation (August and
September 2004) show a PLF of 87% and 75% respectively and to recent modifications and
refinements prove to be satifactory.

B.4 Description of the project boundary for the project activity:

Figure B.2 shows the flow chart of the project and its boundaries. The project boundary
encompasses the physical, geographical site of the biomass plant including auxiliary electricity use
of the plant and the storage of biomass. Auxiliary consumption refers to the small portion of the
generated electricity that is consumed for own use. Transport of the biomass, the electricity
generation and the electricity grid are not included in the project boundary.

Biomass Biomass Electricity Electricity transport

source and storage generation and consumption
transport

Auxiliary
consumption

Figure B.2: Flow chart and project boundary

20
B.5 Details of the baseline and its development:

B.5.1 Specify the baseline for the proposed project activity using a methodology specified in the
applicable project category for small-scale CDM project activities contained in Appendix B of the
simplified M&P for small-scale CDM project activities:

The general approach for the baseline is based on the baseline formula as included in Appendix B,
ID category: Renewable electricity generation for a grid (UNFCCC, 2003b). The baseline
proposed here is

option (b): The weighted average emissions of the current generation mix.

In the proposed baseline, the Northern Region’s grid is used as the reference region for estimating
the current generation mix. Although Rajasthan has its own dispatch centre – as do all the states in
India – and decisions pertaining to the state are primarly made on the state level, Rajasthan
remains integrated with the regional grid. It is true that hardly any exchange of electricity takes
place between states in India, and Rajasthan is relatively self-supporting (it had an electricity
deficit of 2.1%,7 MoP, 2003), but it is the regional dispatch centre that makes decisions on intra-
state transmissions. Therefore the Northern Region’s generation mix is used as the reference
region in our baseline. Even if we were to take the Rajasthan grid as our baseline, the carbon
intensity of emissions would significantly increase given the predominance of coal in satisfying
Rajasthan’s electricity requirement. In Rajasthan’s case, approximately 83.9% of its energy
requirement is supplied by coal installations while the percentage in the Northern Grid as a whole
is about half, only 50.9%, with the remainder taken up by hydro, nuclear and gas installations.

B.5.2 Date of completing the final draft of this baseline section: 01/10/2004

B.5.3 Name of person/entity determining the baseline:

The baseline has been prepared by Ecofys bv in consultation with Kalpataru.

Company name: Ecofys bv

Visiting address: Kanaalweg 16-G
3526 KL Utrecht
The Netherlands
Postal address: P.O. Box 8408
3503 RK Utrecht
The Netherlands
Contact person: Ms. Y. Hofman
Telephone number: +31.30.2808300
Fax number: +31.30.2808398
E-mail: y.hofman@ecofys.nl

Ecofys is not a project participant as meant in Annex 1.

7
Electricity deficit in past years: 2,5 % in 1998/99; 4,4 % in 99/00 in 3,6 % 00/01; 1.2 % in 2001/02 and 2.1
% in 2002/03; Source: http://www.powermin.nic.in/power-profile-NR_files/v3_document.htm slide 64.

21
C. Duration of the project activity and crediting period

C.1 Duration of the project activity:

C.1.1 Starting date of the project activity:

The starting date of the CDM project is 01-08-2003.

C.1.2 Expected operational lifetime of the project activity: 10 years.

C.2 Choice of the crediting period and related information:

C.2.1 Renewable crediting period (at most seven (7) years per crediting period)

C.2.1.1 Starting date of the first crediting period: N/A

C.2.1.2 Length of the first crediting period: N/A

C.2.2 Fixed crediting period (at most ten (10) years):

C.2.2.1 Starting date: 01/08/2003

C.2.2.2 Length (max 10 years): 10 years

22
D. Monitoring methodology and plan

D.1 Name and reference of approved methodology applied to the project activity:

The monitoring methodology as defined in Appendix B (UNFCCC, 2003b) for the category:
‘renewable electricity generation for a grid’ is applied in this PDD. This methodology involves
metering of the electricity generated by the renewable technology. Although the proposed project
does not involve co-fired plants, the monitoring of the amount of biomass input and its energy
content is included as well in the methodology.

D.2 Justification of the choice of the methodology and why it is applicable to the project
activity:

The proposed project is eligible as a small-scale project (see section B.3), category ‘Renewable
electricity generation for a grid’ (1.D.). The monitoring methodology is consistent with the
methodology as required in Appendix B (UNFCCC, 2003b). The proposed methodology thus
provides measured data on the amount of electricity generated, the biomass input and the fossil
fuel input. With this information, a reliable estimate of the amount of emission reductions can be
made.

23
D.3 Data to be monitored:

The table below includes the variables that will be monitored for this project. No emissions from the project activity are foreseen.

ID Data Data Data Measured (m), Recording Proportion of How will the data be For how long is Comment
num type variable unit calculated (c), frequency data to be archived? archived data to be
ber estimated (e) monitored (Electronic/paper) kept?

A Electricity kWh m Continuously 100 % Electronic and paper 2 years after end of Data from invoices are
Energy
generated crediting period recorded on a monthly basis.
B Biomass m Continuously 100 % Electronic and paper 2 years after end of Biomass deliveries are
Fuel Tonne
crediting period weighted and billed upon
receipt at the plants.
C Fuel Fossil fuel m Continuously 100 % Electronic and paper 2 years after end of Monitoring of fossil fuels is
Tonne
crediting period only relevant if there is
insufficient biomass (e.g.
severe drought).
D Fuel Energy m Fortnightly n/a Electronic and paper 2 years after end of Monitoring of energy content
MJ/kg
Content of crediting period will serve useful if/when fossil
Biomass fuel sources are used.

24
Explanation of data collection
The data will be collected as follows:
§ The amount of biomass purchased will be based on invoices/receipts from farmers and the
fuel contractor as well as with the weighbridge log. This will be audited in regular, annual
tax and shareholder audits. If required the DOE will be given access to the audit and
monitoring reports.
§ Electricity production will be measured and monitored through invoices to RVPN and
invoice to Third Party, if any. The invoices (based on meter readings, complying to Indian
Standards) are also covered in the regular audit.
§ The purchase and use of fossil fuels would of course cancel a measure of emission
reductions. The purchase of fossil fuels, if made, will be tracked through the audit report
and reflected in final emission reduction calculations. To date, the need to use fossil fuels
has not occurred in the Ganganagar site.
§ The energy content of the biomass is measured on a fortnightly basis with results used to
determine the share of energy produced via biomass input in the event of fossil fuels being
used.

Missing data
Missing data is only relevant on the level of electricity meters being temporarily out of order. At
the sub-stations of RVPN/VVN there are two meters: the main metering system and a back-up
meter. If the main meter is out of order or under repair, the back-up meter will provide redundancy.
Besides the two meters there will be a meter from KPTL within the plants themselves. However
these meters are for internal use only and RVPN may not accept these readings for billing
purposes. Electricity fed into the grid and unable to be metered will not be registered and invoiced.
This will result in less registered emission reductions than actually generated.

Quality assurance and quality control procedures on monitoring

The following procedures will be applied:
§ The main monitoring parameter is the electricity fed into the grid. As this is done by sealed
and certified meters, appropriate assurance is provided to ensure that this is done in an
accurate way. These meters cannot be manipulated. The Rajasthan Electricity Regulatory
Commission (RERC) requires utilities to provide a monitoring scheme to include monthly
meter readings. Daily generation of electricity and export of electricity to the State utility is
followed. Monthly joint measurements with the utility authorities for the import and export of
electricity are mandatory for the sale of electricity to the utility. Maintenance of the electricity
generation monitoring equipment is done by the appropriate agency within the utility. See
Article 3 of the Power Purchase Agreement signed with RVPNL presented in Annex 5 for full
detail, but repeating what is stated in clause number 3.3.2:

“When the Main Meter and/or Backup Meter and/or component thereof is found to be outside
the acceptable limits of accuracy or otherwise not functioning properly, it shall be repaired, re-
calibrated or replaced by RVPN and/or the Company, as the case may be, as soon as possible."

Furthermore, invoices to RVPN form the basis of emission reduction calculations. These
invoices are part of the annual audit reports carried out by accountants.

A sample of the readings taken for the tracking of import/export of energy is also presented in
the Annex.

§ Environmental monitoring equipment shall be calibrated on an annual basis. In-house calorific

value measurements (Bomb Calorimeter made by MICROSIL INDIA LTD) are also now being

25
 carried out on a fortnightly basis. Measured values are in line with results obtained from the
accredited testing house. Equipment performance will also be reviewed by statutory authorities
once a year.

§ Biomass input is monitored through the weighbridge log and the bills/invoices to the biomass
traders. This is also subject to the annual audit. Currently the annual maintenance contract for
the weighbridge is in place. The process flow chart for the Fuel Transportation System is
presented in Figure D.1.

Figure D.1: Process Flow Chart for Fuel Transportation System

§ To address all O&M issues, the project has recruited an experienced (fourteen year
experience) Manager for Fuel Procurement under the guidance of the V.P. (Comm.). Together
they have recruited and groomed a team of Supervisors and Field Representatives to
effectively control and monitor the complete process of fuel procurement, quality issues, and
the handling and storage of material in the plant area:
- All have undergone classroom sessions by respective experts coupled with “on the job”
training all performed by the Vendor's engineers. The routine O&M procedure prescribed
by suppliers are adhered to. Sulzer generator and pump procedures are detailed in Annex
5. Similar O&M procedures and schedules for other vendors’ equipment are also available.
- Along with maintenance information for the high volume sampler, a proper record of
checks is also maintained and presented in Annex 5. Also enclosed are examples of the
boiler and electrical logbooks. Random checks are carried out to monitor the quality of the
biomass fuels received (moisture content, purity of the material).
- The monitoring parameters relevant for the CDM activity (see D.3), i.e. biomass input
flow, biomass energy content, electricity production (and eventual fossil fuel input) are
part of the regular monitoring scheme of the plant: no additional CDM related training was

26
 required. The monitoring data required for the CDM verification are taken from the
regular digital and manual logs.
§ Additional training was given to the surrounding farmers in their local villages, educating them
on the benefits of selling their agricultural waste to KPTL rather than burning it on the fields,
and ways of transporting their biomass to the site. Qualified local villagers were employed
who were aware of local areas and issues and are from agricultural backgrounds. All training
was performed on site.

D.4 Name of person/entity determining the monitoring methodology:

Ecofys bv (see also section B.5)

27
E. Calculation of GHG emission reductions by sources

E.1 Formulae used:

E.1.1 Selected formulae as provided in Appendix B:

Not applicable, as no formula is included in Appendix B.

E.1.2 Description of formulae when not provided in Appendix B:

E.1.2.1 Describe the formulae used to estimate anthropogenic emissions by

sources of GHGs due to the project activity within the project boundary: (for
each gas, source, formulae/algorithm, emissions in units of CO2 equivalent)

The project is a CO2 neutral biomass-based power plant designed to supply

electricity to the grid. Therefore, no additional anthropogenic emissions of GHGs
due to the project activity are expected to be generated within the project
boundary. For further information, see section B.3.

E.1.2.2 Describe the formulae used to estimate leakage due to the project
activity, where required, for the applicable project category in appendix B of
the simplified modalities and procedures for small-scale CDM project
activities (for each gas, source, formulae/algorithm, emissions in units of CO2
equivalent)

Leakage could occur in the event agricultural waste would lead to a switch in
household fuel from agricultural waste to fossil fuels. However, because only a
small part of the available biomass residues will be used in the proposed projects
no switch in household fuel is anticipated a concern alleviated in part through the
positive feedback of shareholder commentary. Therefore, no leakage is taken into
account (L = 0).

E.1.2.3 The sum of E.1.2.1 and E.1.2.2 represents the project activity
emissions:

No greenhouse gas emissions are expected within the project activity.

E.1.2.4 Describe the formulae used to estimate the anthropogenic emissions

by sources of GHG’s in the baseline using the baseline methodology for the
applicable project category in appendix B of the simplified modalities and
procedures for small-scale CDM project activities: (for each gas, source,
formulea/algorithm, emissions in units of CO2 equivalent)

The proposed baseline taken from Appendix B of the simplified modalities and
procedures for small-scale CDM project activities (UNFCCC, 2003b)
comprises Option (b): The weighted average emissions of the current generation
mix (in t CO2/GWh).

The following formula is used to estimate the total emissions were the project to
not take place:

28
 Equation 1:

Gtotal = ∑i Ebaseline × CEFbl [t CO2]

in which
E baseline = Et − E pl
Et = C pl × PLFpl × T

where:
§ Σi = sum over the project’s 10 year duration
§ Ebaseline = total electricity from the grid
§ Et = amount of electricity generated from the Ganganagar plant (GWh)
§ Epl = amount of electricity required by the Ganganagar plant (GWh)
§ CEFbl = carbon emission factor in the baseline scenario (tonnes CO2
/GWh)
§ Cpl = capacity of the Ganganagar plant in million Watts (MW)
§ PLFpl = plant load factor in % for the Ganganagar plant
§ T = total hours of operation in a year (8760 hours)

The following formula is used for the calculation of carbon emission factor in the
baseline case:

Equation 2:

CEFbl =
∑ (E × CEF )
i i i
[tCO2 /GWh]
∑E i i

where:
§ Σi = sum over the group of “i” electricity generating technologies in the
current generation mix
§ Ei= total generation per source
§ CEFi = carbon emission factor in tonnes CO2/GWh per source

E.1.2.5 Difference between E.1.2.4 and E.1.2.3 represents the emission

reductions due to the project activity during a given period:

Total resulting emissions from E.1.2.4 is estimated at 313,743 tonnes of CO2 over
the course of 10 years.

E.2 Table providing values obtained when applying formulae above:

The formula included above is used to calculate the amount of emission reductions per MWh for
each of the states. The input data for these formulas are:

§ Generating capacity in the Northern Grid;

§ Carbon Emission Factor of the technologies;
§ Plant Load Factor of the Ganganagar plant.

29
Generating capacity in the Northern Grid
Data on the current total installed capacity (31-03-2004), derived from the Northern Regional Load
Despatch Center’s Annual Grid Report 2003-2004, is presented in Table E.1.

Table E.1 Installed Capacity (MW) in the Northern Grid as of 31-03-2004 (Source:
http://www.nrldc.org/docs/An03-04.pdf)
Source8 Hydro Coal Gas Wind Nuclear Total
NTPC 5,840 2,344 8,184
NHPC 2,310 2,310
NPC 1350 1,350
SJVNL 1,500 1,500
BBMB 2,876 2,876
DELHI 398 612 1,010
HARYANA 48 1,040 25 1,113
HIMCHAL 712 712
J&K 312 184 496
PUNJAB 1,145 2,130 3,275
RAJASTHAN 435 2,334 14 2,782
UP 501 4,192 4,693
UTTRANCHAL 999 999
TOTAL 10,838 15,933 3,165 14 1,350 31,300

Corresponding gross energy production figures from the above installations are presented in Table
E.2. Energy production figures were again summarised from the 2003-2004 data for the Northern
Regional Load Despatch Center’s Annual Grid Report 2003-2004
(http://www.nrldc.org/docs/An03-04.pdf).

Table E.2: Capacity, Generated Electricity, and CO2 emission figures for facilities in
the Northern Grid (Source: http://www.nrldc.org/docs/An03-04.pdf)

Source Generating Capacity (MW) Energy Generation (GWh)

Hydro 10,838 38,592
Coal 15,933 103,142
Gas 3,165 18,793
Wind 14 105
Nuclear 1,350 7,324
Total 31,300 167,956

Carbon Emission Factors

Since no corresponding emission data for the 2003-04 period was available at the time of this
PDD’s preparation, CO2 emission figures per generating source are taken from the Ministry of
Power’s Baseline for Renewable Energy Projects Under Clean Development Mechanism, 20029,
prepared in conjunction with TERI. These values concern the 2001-2002 year, but still paint an

8
Notwithstanding its relatively small size, the 2 MW installation at Chandigarh was omitted from Table 5.1
as energy generation figures were not available
9
Annex II of the report; Source: http://www.mnes.nic.in/

30
accurate picture of the present situation. As confirmation, our extrapolated value for 2003 will be
compared to the 2003-2004 projection as estimated in the above reports. The corresponding CEFs
from the report are as follows:

Table E.3: Capacity, Generated Electricity, and CO2 emission figures for facilities in
the Northern region 2001-2002 (Source: http://www.mnes.nic.in/)

Installed Capacity Generation CO2 Emissions

Source (MW) (Gross GWh) (t) CEF
Coal 14,522 96,159 103,815,207 1,080
Gas 2,530 17,629 8,693,100 493
Hydro 8,574 29,233 0 0
Nuclear 1,230 8,006 0 0

In the Ministry of Power’s Baseline for Renewable Energy Projects Under Clean Development
Mechanism (2002), the 2003-2004 projected emission factor for the Northern Region is 745
tCO2/GWh. Our baseline of 718 tCO2/GWh (see therefore serves as a conservative and accurate
estimate of the emission factor in the baseline case.

To further verify the emission figures , we will review data available from IPCC and IEA. To
begin with, the following energy balances for India in 2001 are presented (IEA, 2003) as follows:

Table E.4: Energy balances for India, 2001 figures (IEA, 2003)
CO2 factor Total CO2 Electricity CEF (tonnes
Input (ktoe) Input (TJ) (TC/TJ) (tonnes) output (GWh) CO2/GWh) Efficiency
Coal 136014 5692186 25.8 538970314 451598 1193 29%
Oil 2373 99310 20.0 7289358 6897 1057 25%
Gas 7627 319190 15.3 17922835 20910 857 24%

Calculations based on the Energy Balances from IEA (2003) suggest that the CEF for coal-fired
power generation in India is 1193 tonnes CO2/GWh. This corresponds to an energy-efficiency of
29%. The CEF for gas-fired power generation is, according to calculations based on the same
source, 857 tonnes CO2/GWh, which corresponds to an energy-efficiency of 24%. The conversion
factors for tonnes C per TJ primary energy are taken from IPCC.

IEA does not provide specific data for the different regions in India. Except for the TERI database,
no such statistics were found to be available for India in this research. We can therefore only say
that the numbers given in Table E.4 are more likely to be too low than too high. However, it may
very well be that power generation capacity in the Northern region is relatively newer than the
capacity installed in other regions. The energy-efficiencies are then likely to be higher. This seems
to be confirmed by the data in Table 2.8 in the report “Baseline for renewable energy projects
under clean development mechanism” by the Government of India. The Northern region has
together with the Western and Southern regions the lowest CO2 factor; 1020 tonnes CO2/GWh.
The Eastern and North Eastern region have higher CEFs of respectively 1380 and 1800 tonnes
CO2/GWh.

The CEF figure of 493 tonnes/GWh for Northern India reported by TERI for gas-fired power
generation suggests an energy-efficiency of 41%. This may be correct for gas-fired power
generation, especially for fairly new gas turbines. Efficiencies of gas turbines are generally

31
between 35 and 42%. New combined-cycle gas turbines may reach even efficiencies of more than
50%.

India as a whole however uses a lot of small capacity steam turbines with relatively low Plant Load
Factors (IEA 2002, Electricity in India). The overall energy-efficiency for gas-fired power
generation in India will therefore almost certainly be lower than 41%. Typical energy-efficiencies
for steam turbines are around 30%, but may be reduced by low PLFs.

The high CO2 emissions factor for coal-fired power generation can be explained by the poor
quality of Indian coal. More than 73% of the raw coal extracted has an ash content from 30% to
55% (IEA 2002, Electricity in India).

Using our CEFs values calculated above and substituting them into Equation 2 with generation
levels from Table E.2, the baseline value for the carbon emission factor is calculated as follows:

CEFbl =
∑ (E × CEF )
i i i

∑E i i

(103142 × 1080) + (18793 × 493) + (38592 × 0) + (7324 × 0) + (105 × 0)

=
103142 + 18793 + 38592 + 7324 + 105

= 718 tCO2/GWh

Plant Load Factor in Ganganagar

The initial business plan to CERUPT for the project’s financial analysis (see Annex 5) held the
first year of operation would achieve a 63.29% plant load factor, the second 72.33% and the third
and following years 81.37%. The net capacity of the site was expected to be 6.9 MW due to an
estimated auxiliary power consumption of 11.5%. Plant performance figures from August 2003 to
August of 2004 are detailed in the following tables:

Table E.5: 2003 plant performance figures (Source: Kalpataru Power Transmission Ltd)
Plant Cumm. Power
Month Plant Run Outage Generation Gen. Aux.Power Cumm. Aux. Export to Cumm.Power PLF
(Hrs.) (Hrs.) (KWH) (KWH) Cons.(KWH) Cons.(KWH) Grid(KWH) Export to Grid(KWH)
AUG '03 528.20 215.80 2955000 2955000 216675 216675 2738325 2738325 51%
SEP '03 630.68 89.32 4392670 7347670 259795 476470 4132875 6871200 78%
OCT '03 375.52 368.48 1936000 9283670 148955 625425 1787045 8658245 33%
NOV '03 609.92 110.08 3290460 12574130 207885 833310 3082575 11740820 59%
DEC '03 517.82 226.18 3208510 15782640 189030 1022340 3019480 14760300 55%
Total 2003 15782640 1022340 14760300 55%

32
Table E.6: 2004 plant performance figures (Source: Kalpataru Power Transmission Ltd)

Plant Cumm. Power

Month Plant Run Outage Generation Gen. Aux.Power Cumm. Aux. Export to Cumm.Power PLF
(Hrs.) (Hrs.) (KWH) (KWH) Cons.(KWH) Cons.(KWH) Grid(KWH) Export to Grid(KWH)
JAN '04 482.63 261.37 2544190 2544190 189640 189640 2354550 2354550 44%
FEB '04 407.58 288.42 2171700 4715890 142650 332290 2029050 4383600 40%
MAR '04 341.95 402.05 1709300 22607662 121250 453540 1588050 5971650 29%
APR '04 165.52 554.48 644429 644429 97679 551219 546750 6518400 11%
MAY '04 694.47 49.53 2962364 3606793 441764 992983 2520600 9039000 51%
JUN '04 632.58 87.42 3755028 7361821 462078 1455061 3292950 12331950 67%
JUL '04 197.43 546.57 1117609 8479430 128509 1583570 989100 13321050 19%
AUG '04 731.2 12.8 5021352 13500782 542427 2125997 4478925 17799975 87%
Total 2004 19925972 2125997 17799975 44%

As can be seen, the overall PLF for 2003 year was 55%. Despite the problems described
previously, especially the outage in March to April of 2004 and the outages seen in July of 2004,
the most recent improvements have brought positive results. August of 2004 achieved a PLF of
87% with more than 5 GWh of electricity being generated. Assuming September to December of
2004 achieve similar results – assuming 18 GWh of electricity is generated over the four months,
4.5 GWh per month – we estimate the following PLF for 2004 (from Equation 1):

E pl
PLF pl =
C pl × T

19925.972 MWh + 18000 MWh

PLF pl 2004 =
7.8MW × 8760hours

PLF pl 2004 = 56%

Therefore, based on plant performance figures measured thus far, our total emission reduction
calculations will assume a PLF of 55% for the first year, 56% for the second year, and an
estimated 75% for the third and following years. Again, although modifications have resulted in a
monthly PLF high of 87% and the business plan estimated 81.37%, a level of 75% is chosen to
remain practical, also in light of the further modifications expected in first quarter of 2005.

Furthermore, 11.5% of the generated electricity was expected to be used for auxiliary power
consumption. To date, the installation has generated 35,708,612 KWh of electricity, of which
3,148,337 KWh or 8.8% of the total has been used for auxiliary power requirements. To remain
conservative, we assume the original 11.5% figure for electricity used in auxiliary power
consumption.

Total Emission Reductions

Using Equation 2 above, the emission reductions attributed to the project are presented on the
following page. In total, the project is expected to result in a reduction of 313,743 tonnes of CO2
over the course of 10 years.

33
 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Baseline
CEF [tCO2/GWh] 718 718 718 718 718 718 718 718 718 718 718
Plant Operational data
Gross capacity [MW] 7.8 7.8 7.8 7.8 7.8 7.8 7.8 7.8 7.8 7.8 7.8
PLF [%] 55% 56% 75% 75% 75% 75% 75% 75% 75% 75% 75%
Days of operation [days] 153 365 365 365 365 365 365 365 365 365 212
Hours of operation [hours] 3672 8760 8760 8760 8760 8760 8760 8760 8760 8760 5088
Electricity generation [GWh/yr] 15.8 38.3 51.2 51.2 51.2 51.2 51.2 51.2 51.2 51.2 29.8
Auxiliary consumption [GWh/yr] 1.8 4.4 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 3.4
Electricity exported [GWh/yr] 13.9 33.9 45.4 45.4 45.4 45.4 45.4 45.4 45.4 45.4 26.3
Plant emissions data
Operating Emissions* [tCO2] 0 0 0 0 0 0 0 0 0 0 0
Leakage [tCO2] 0 0 0 0 0 0 0 0 0 0 0
Emission reductions
Emission reduction [ton CO2/yr] 10,010 24,314 32,563 32,563 32,563 32,563 32,563 32,563 32,563 32,563 18,913
Total Emission reductions (tons) 313,743
*Assumed 0, but if emissions do occur, such as the need to use a fossil fuel in place of the biomass, this will adjust ER totals accordingly

Table E.7: Total Emission Reductions due to project

Uncertainties
There are two primary areas of uncertainty in the baseline:
§ The production output of the plant assumes actual values obtained in 2003 and 2004, but
assumes a PLF value of 75% for the remainder of the project’s ten year duration. Given
progress to date has been below expectations and the PLF for 2004 is expected to be
approximately 58%, there exists the possibility of not reaching the proposed export of
electricity in 2005 and beyond. It should be stressed though that the majority of the
technological challenges appear to have been resolved and the last months of operation
(August and September 2004) achieved a PLF of 87% and 75% respectively

§ Emissions from the generation of electricity – i.e. when a fossil fuel source must be used in the
event that insufficient biomass material is available – may be another situation where current
assumptions prove incorrect. What can be said is that to date there has been no need to use
fossil fuels in place of the biomass material initially envisaged. In the event that this changes,
appropriate monitoring procedures are in place to track the reduced emission reductions.

Therefore, given the conservative nature of our baseline carbon emission factor (718 tonnes
CO2/GWh) and the slightly updated and reduced PLF factors from 2003-2013, the project is
expected to achieve a reduction of 313,743 tonnes of CO2.

34
F. Environmental impacts

F.1 If required by the host Party, documentation on the analysis of the environmental
impacts of the project activity:

According to Indian regulation, the implementation of biomass plants do not require an

Environmental Impact Assessment. The Ministry of Environment and Forests (MOEF),
Government of India notification dated June 13, 2002 regarding the requirement of EIA studies as
per the Environment Protection Rule, 1986 (MOEF, 2002) states that any project developer in
India needs to file an application to the Ministry of Environment and Forests (including a public
hearing and an EIA) in case the proposed industry or project is listed in a predefined list. Thermal
Power Plants with an investment of less than Rs. 1 billion (US$ 21.7 million) are excluded from
this list. As the investment of each of the proposed biomass projects (being a Thermal Power
Plant) is less than Rs. 1 billion (US$ 21.7 million), an EIA is not required (neither is a public
hearing).

In absence of a full EIA requirement, possible environmental impacts of the proposed project are
described here. The following environmental aspects are addressed:

§ emissions to air
§ bottom ash
§ water use
§ emissions to water

Source: PWC, 2002

Emissions to air
Biomass emits considerably less NOx in comparison to coal, oil and natural gas and SOx than that
of coal and oil. An air sampling report from the Rajasthan State Pollution Control Board for 2004
is available and presented in Annex 5. The report showed that the biomass installation at
Ganganagar had a particulate matter content of 141 mg/Nm3.

Table F.1: Characteristics of the fuel [PWC, 2002]

Sl. No. Characteristics (%) Mustard Crop residue Cotton Stalk

1. Carbon 40.26 41.2
2. Hydrogen 3.61 6.24
3. Oxygen 37.91 40.23
4. Moisture 9.04 5.20
5. Sulphur 0.48 0.30
6. Ash 7.48 6.10
7. Nitrogen 1.22 0.73
Chlorine is approximately 0.18%-0.20% in the characteristics of the fuels.

Bottom ash
The biomass mustard residue has only 5-7% ash compared to 30-40% of ash in coal. Ash
disposal is one of the most significant concerns associated with power generation. The above
reduction of ash generated per megawatt of installed capacity is a quantum leap in addressing this
concern. Leading coal-based power units on an average generate 1,368 tonnes/year/ MW of

35
installed capacity of ash. In comparison, each of the proposed units shall generate ash to the
extent of 420 tonnes/year/MW of installed capacity (approximately a third of coal based units).
The high alkaline content in the ash nearly 73.82% of potassium oxide, 12.66% of sodium oxide
and 10.71% of calcium oxide may require the ash to be disposed in secure landfill areas to
prevent groundwater salinity and contamination. The ash can also be sold to brick and cement
manufacturers.

Table F.2 Characteristics of Mustard Stalk Ash

Sl. No. Characteristic Percentage

1. Silica 0.35%
2. Alumina 0.18%
3. Iron Oxide 0.64%
4. Titanium dioxide 0.05%
5. Calcium Oxide 10.71%
6. Magnesium Oxide 0.57%
7. Sodium Oxide 12.66%
8. Potassium Oxide 73.82%
9. Manganese Oxide 0.10%
10. Sulphur Trioxide 0.78%
11. Phosphorous Pentaoxide 0.13%
Mustard Ash rate – 308 kg/hr
Cotton Stalk Ash rate – 444 kg/hr
Source: Lab Test reports

Water use
Each unit has a consumption rate of 154 m3/day/MW of installed capacity compared to 130.8
m3/day/MW of installed capacity for large coal based plants. This is to be expected since the
proposed units are small and do not have the advantages of economies of scale. Furthermore, the
seasonal fluctuations are not significant (0 – 3 m) and since treated effluents will be used for
irrigation on the premises (part of this would result in recharge of ground water), the slightly
higher specific water consumption may not be considered unsustainable. In Ganganagar, the unit is
proposed to be located close to the Gang Canal (BB distributory) such that the canal seepage water
will be used. This should therefore not impact water availability in the region.

Emission to water
In the condenser cooling water, residual chlorine of about 0.2 ppm is maintained at the condenser
outlet. This chlorine dosing is done mainly to prevent biological growth in the cooling tower
system. This value would not result in any chemical pollution of water and also meets the national
standards for the liquid effluent.

36
G. Stakeholders comments

G.1 Brief description of the process by which comments by local stakeholders have been
invited and compiled:

Public participation requirements in India

To design, construct and operate a small-scale thermal power plant like the Biomass plants
proposed in this project, there are no specific public consultation requirements. Of course the
normal formal procedures need to be followed in order to obtain the required land and operational
licenses and permits.

Initial approval from the Rajasthan Renewable Energy Corporation (RREC, earlier called REDA)
was essential because it is the single agency for the Government of Rajasthan (GOR) to permit
such renewable energy ventures

Thereafter but prior to the construction and operation of the power project, the following
permissions are required:

Before the plant’s construction start date:

§ Conversion of land from Agricultural to Non Agricultural – from respective District Collector.
§ Department of Factories and Boilers under Department of Industries, GOR.
§ Rajasthan Pollution Control Board – Initially Consent to Establish (separately for Water and
Air).
§ Construction Power –From respective Distribution Companies/Vidyut Vitran Nigams

Before the plant’s operation date:

§ Irrigation Department, GOR, if the Project seeks water allocation from Irrigation
canals/networks
§ Rajasthan Pollution Control Board –Consent to Operate the Plant
§ Electrical Inspectorate (from Electrical Wing of Public Works Department) before the start
generating power.

Most of these permissions have already been obtained. Note that none of the above permissions
include public participation, as is common in Europe (i.e. public hearing or publication of the
plans and possibility to comment on the plans or to file a complaint or objection). Public hearings
may be necessary if an Environmental Impact Assessment (EIA) is required. However for smaller
thermal plants (below investment of Rs 1 Billion), this is not required (see Chapter 6).

Stakeholder consultation
KPTL checked the opinion on the project through consultation of stakeholders. The following
stakeholders were identified:
§ The rural population living in the neighbourhood of the plant
§ RREC and RVPN
§ Government of Rajasthan

Rural local population

The rural population is directly involved with the project. First of all they will be confronted with
the construction and operation of a power plant in their direct environment. When selecting the site
and designing the project, attention was given to maintain a very good relationship with the local

37
population. The project depends on the supply of biomass from the rural farmers and therefore a
good and mutually beneficial relation is essential.

Quote from the business plan of KPTL:

A key ingredient for the Biomass Developer would be to become a ‘friend of the farmer
community’. This would require community development schemes and / or rural education
programmes to be conducted, which are also part of the social responsibility of Corporates. There
should be a genuine desire to pay ‘fair’ prices and not exploit the farmers.

The biomass resource assessment studies carried out for this project indicated a strong willingness
from the farmers to supply biomass residues to the power plant. The farmers will greatly benefit
from this project because the mustard crop residues have little commercial value at the moment
and are not used to a large extent. Moreover, the plants will create numerous jobs in the rural
areas, where jobs are most wanted and needed. During all field surveys (done by Progressive
Research Aids (PRA, 2001), ORG-MARG/ VNU Group (ORG, 2001), TERI) interviews were held
with the over 200 contacts (farmers, biomass traders, transporters etc) at each location and
nowhere were objections raised against the project.

To further prove this we obtained and enclose a No Objection Certificate (Annex 3) from Gram
Panchayat of Padampur. This is the village level body formed out of local farmers and residents.
This body met and issued a certificate stating that they are aware of the project and have no
objection.

RREC and RVPN

As the main stakeholders in the electricity sector, the approval from RREC is essential for the
project. RVPN’s acceptance and support to the project appears clear from the Power Purchase
Agreement (PPA) and Wheeling & Banking Agreements (WBA) with regard to this project (for
copies of the contracts see Annex 3).

Government of Rajasthan
The Government of Rajasthan was of course first to be consulted via the formal procedures to
obtain all necessary licenses and permits. The Bureau of Investment Promotion (BIP) offers a
single window for all clearance in time bound manner for large projects and KPTL is seeking their
active assistance.

A number of relevant institutions were also asked for their opinion of the project.
§ Secretary of the Government, Department of Energy. Responsible for Energy Sector in the
entire Rajasthan State (covering RVPN, RPUVN, VVN’s, RREC etc.) and strongly promoting
the use of Renewables.
§ Collector /Administrator in charge of the Sri Ganganagar District. Highest Administrative
Officer in the district where the first biomass power plant is installed

G.2 Summary of the comments received:

So far only positive comments have been received. The project is welcomed by all stakeholders
because it is environmentally benign, it generates income and jobs, it supports the development of
the rural districts and the state, it helps bridging the gap between the demand and supply of
electricity, reduces T&D losses, among other benefits. Annex 3 includes all the stakeholder
comments that were received.

38
G.3 Report on how due account was taken of any comments received:

As no negative comments have been received, there was no need to address any particular
concerns.

39
 Annex 1

CONTACT INFORMATION ON PARTICIPANTS IN THE PROJECT ACTIVITY

Organization: Kalpataru Power Transmission Limited (Supplier of credits)

Street/P.O.Box: 111, Maker Chambers IV, Nariman Point
Building:
City: Mumbai
State/Region: Maharashtra
Postcode/ZIP: 400021
Country: India
Telephone: +91 22 22884780 / 22822888
FAX: +91 22 22041548
E-mail: mktg@kalpatarupower.com
URL: http://www.kalpatarupower.com/
Represented by:
Title: Director
Salutation: Mr.
Last Name: Munot
Middle Name:
First Name: Ajay
Department:
Mobile: +91 9821025290
Direct FAX: +91 22 22041548
Direct tel: +91 22 22884780 / 22822888
Personal E-mail: ajaymunot@kalpataru.com

Organization: SenterNovem (Purchaser of credits)

Street/P.O.Box: Juliana van Stolberglaan 3, PO Box 93144
Building:
City: The Hague
State/Region: South Holland
Postcode/ZIP: 2509 AC
Country: The Netherlands
Telephone: +31 70 37 35 000
FAX: +31 70 37 35 100
E-mail:
URL: http://www.senternovem.org/
Represented by:
Title: Project Officer
Salutation: Mr.
Last Name: Mulder
Middle Name:
First Name: Gerhard
Department: Carboncredits.nl
Mobile: +31 6 512 09 777
Direct FAX: +31 70 37 35 605
Direct tel: +31 70 373 5 240
Personal E-mail: g.j.mulder@senter.nl

40
 Annex 2

INFORMATION REGARDING PUBLIC FUNDING

Not applicable

41