M-DEV0385: This deviation is requested in order to expand the first applicability criterion of the approved methodology AM0042 - “Grid-connected electricity generation using biomass from newly developed dedicated plantations”, version 02.1, pg 2 -, to which the PDD for the UTE Rondon II project (which is in the validation phase) is to comply. The aforementioned criterion demands that “the project activity involves the installation of a new grid-connected power plant that is mainly fired with renewable biomass from a dedicated plantation (fossil fuels or other types of biomass may be co-fired)”.

AM0042 ver. 2: Grid-connected electricity generation using biomass from newly developed dedicated plantations

PDD is confidential

Although for its project lifetime Thermal Power Unit UTE RONDON II (in the following just called UTE RII) is to be mainly driven by biomass coming from a dedicated energy wood plantation, along its first four years – while plantation grows – it will run on non renewable biomass which will come from the compulsory removal of existing vegetal coverage in the area in which is to be sited the reservoir for a hydroelectric power plant named Hydro Power Unit UHE RONDON II.
If this non renewable biomass is not used as fuel for UTE RII, it will decompose aerobically and anaerobically, emitting significant amounts of methane. According to the inventory of vegetal coverage for this forest area, accounting for Diameter Breast Height DBH > 15 cm trees only, the biomass volume amounts to 800,000m3, totaling 560.000 tones. Non renewable biomass must be removed from UHE RII reservoir area in compliance to Brazilian environmental laws on hydro electrical power plant reservoir areas.
Non renewable biomass to be removed from the reservoir area will not be stored in the UTE RII project area. Project for UTE RII schedules this biomass to be gradually transported from the UHE RONDON II reservoir area to UTE RII as required to fuel its operation, for a maximum 9 month period. Thus, biomass storage at the project area does not take place for periods longer than one year, in compliance to eligibility criterion 4 of the AM0042 methodology.
During the first four years, the plant will operate at 50% of its installed capacity. From its fifth year of operation on, UTE RII will operate at its 24 MW full installed capacity and thus demand 255,000 ton/year of biomass. In order to supply for its annual biomass demand, the project provides for planting of 2,000 hectares/year of dedicated energy wood crops. From project year 5 on, the dedicated plantation will be ready for harvesting.
It is noteworthy that, besides allowing for minimal cost supplying of fuel for its first four years of operation, the UTE RII project also eliminates the methane emissions problem which would accrue from submerged rotting wood. The fact that this project also features characteristics which make it important for the sustainable development of local communities in terms of job and wealth creation, distribution of wealth and technological development is also to be highlighted.
Thus, although usage of this non renewable biomass, originated from the reservoir, to fuel UTE RII is not in full accordance to the first eligibility criterion of methodology AM0042, it does not intrinsically entail non compliance. As a matter of fact, it does not do anything else than expanding its scope in order to cater for specific project implementation conditions. Thus, the sole care to be observed is to assure that the whole non renewable biomass comes from the reservoir. Taking into account that Eletrogoes, by the legal imposition, must prove the origin of any biomass to be used, with the risk of serious penalties, including the loss the concession, the company has to comply rigorously the Brazilian legal prescriptions under this subject. Moreover, this expansion in scope enhances reduction of emissions, adding to those accruing for the substitution for fossil fuels associated to the project baseline. It is also important to underscore the fact that, in a conservative assessment, those emissions avoided by usage of wood from the reservoir area are not accounted for crediting at this PDD.
The rationale behind this deviation proposal is that the UTE RII project is eligible for applying the
AM 0042 methodology, since the project activity involves the installation of a new grid-connected power plant firing renewable biomass from a dedicated plantation and other types of non renewable biomass along its initial years, while the dedicated energy crop grows.
This deviation is requested in order to expand the first applicability criterion of the approved methodology AM0042 - “Grid-connected electricity generation using biomass from newly developed dedicated plantations, version 02.1, pg 2 -, to which the PDD for the UTE RII project (which is in the validation phase) is to comply.

The proposed, project specific deviation does only affect the project in question and does not require an amendment of the methodology.

UTE RONDON II (UTE RII) is to be mainly driven by biomass coming from a dedicated energy wood plantation. However, along its first four years it will run on non renewable biomass which will come from the compulsory removal of existing vegetal coverage in the area in which is to be sited the reservoir for a hydroelectric power plant named UHE RONDON II.
In this case, if the emission reductions with the use of this biomass are not taken into account, what will happen with the strict application of the first criterion of applicability of AM0042, a total amount of 434,845 tCO2e, effectively reduced, will not be eligible to obtain corresponding carbon credits.
In order to estimate the emission reductions with the use of approved methodology as existing, it was calculated the emission reductions with the application of deviation and, then, it was subsequently subtracted from this amount, the emission reductions corresponding to the first four years of operation of the UTE RII. From its fifth year of operation on, UTE RII will operate at its 24 MW full installed capacity and thus demand 255,000 ton/year of biomass. In order to supply for its annual biomass demand, the project provides for planting of 2,000 hectares/year of dedicated energy wood crops. From project year 5 on, the dedicated plantation will be ready for harvesting.
Table 1 displays the results found with the use of deviation, and Table 2 those considering the credits just from the fifth year. Provided project activity emissions, as shown in the PDD, are originated from forest plantations, they are the same in both scenarios, although Table 2 presents the project emissions just from the fifth year, such as baseline emissions.

Table 1: Emissions reductions with the deviation

Please see Enclosure 1

Table 2: Emissions reductions just from the fifth year

Please see Enclosure 2

Reduction of about 23% in the amount of emission reductions will impact directly on the project’s IRR, when calculated taking into account the additional flow of revenues coming from CDM. Thus, without the sale of the carbon credits related to the first four years of the operation of UTE RII Plant, the IRR will drop from 9.49% to 8.33%. If first to fourth year project emissions were considered cumulatively in the fifth year, IRR would be still lower.
A file with a datasheet is attached in Annex 1. The datasheet includes the formulae, input data and parameters used to calculate project’s IRR under three scenarios: (i) without CDM revenues (base case), (ii) with CDM revenues, considering the deviation and (iii) with CDM revenues just from the fifth year.