GS VALIDATION REPORT The WHR Project In Zhangzhou Kibing ...

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GS VALIDATION REPORT
for the VER Project Activity
The WHR Project in
Zhangzhou Kibing Glass
Group Co., Ltd.
in P. R. China
Report No. 01 997 9105075956 
Version No. 05.0, 2014-01-13
Designated Operational Entity (DOE)
TÜV Rheinland (China) Ltd.
Unit 707, AVIC Building, No. 10B, Central Road, East 3rd Ring Road,
Chaoyang District, Beijing 100022,
People’s Republic of China.
Tel.: +86 10 65 66 66 60 (ext.169)
FAX: +86 1065 66 66 67
E-mail: doe@chn.tuv.com
Version No.: 05.0 Page 2
Validation Report 01 997 9105075956
I. Project description:
Project title: The WHR Project in Zhangzhou Kibing Glass Group Co., Ltd. Report No.: 01 997 9105075956
Host Country: P. R. China Current revision No.: 05.0
Methodology:
AMS-III.Q Version 05.0 Large Scale
Small Scale
Date of current revision: 2014-01-13
Date of first issue: 2013-08-14
Annual average emission reductions (estimate): 48,378 tCO2e/yr
GHG reducing
measure/technology:
Reduction of GHG emissions by energy recovery.
Party Project Participants Contract Project Participant
P. R. China (Host) Zhangzhou Kibing Glass Co., Ltd.
United Kingdom of Great
Britain and Northern Ireland Carbon Invcap International Trading Co., Ltd
II. Validation Team:
Validation Team Role
Full name Affiliation
TÜV Rheinland
Appointed for
Sectoral Scopes
(Technical Areas)
Te am le ad er A
ct in g Te am L
ea de r Lo ca l E
xp er t Te am M
em be r (
A
ud ito
r) Te ch ni cl a E
xp er t A
ct in g T
ec h. E
xp er t Tr ai ne e A
ud ito
r Te ch ni ca l R
ev ie w er E
xp er t t
o TR
Tr ai ne e T
R
Mr. WU Ze China 1.2, 4.3, 4.5, 9.1, 13.1 X
Ms. WANG Guolian China 1.2, 5.1, 11.1, 12.1 X
Mr. Walter TANG China 1.1, 1.2, 2.1, 2.2, 3.1, 4.3, 4.5, 13.1 X
Validation Phases and Validation Status:
Desk Review Follow up interviews Resolution of outstanding issues
Corrective Actions / Clarifications Requested Full Approval and Submission for Registration
Rejected
III. Validation Report:
Final approval Released Distribution
By: Mr. Henri Phan
No distribution without permission from the Client or
responsible organizational unit
Unrestricted distribution
Date: 2014--0114
Version No.: 05.0 Page 3
Validation Report 01 997 9105075956
Abbreviations
ACM Approved Consolidated Methodology
BE Baseline Emissions
BM Build Margin
CAR Corrective Action Request
CDM Clean Development Mechanism
CER Certified Emission Reduction
CR Clarification Request
CO2 Carbon Dioxide
CO2e Carbon Dioxide Equivalent
DNA Designated National Authority
DOE Designated Operational Entity
DR Document Review
EB Executive Board
ECPG East China Power Grid
EIA Environmental Impact Assessment
ER Emission Reduction
FSR Feasibility Study Report
GHG Greenhouse Gas
I Interview
IPCC Intergovernmental Panel on Climate Change
IRR Internal Rate of Return
kW Kilo Watt
kWh Kilo Watt Hours
LoA Letter of Approval
MoV Means of Validation
NDRC National Development and Reform Commission
NGO Non-governmental Organization
ODA Official Development Assistance
OM Operating Margin
O&M Operation and Maintenance
PDD Project Design Document
P. R. China People’s Republic of China
t Tonne
UNFCCC United Nations Framework Convention on Climate Change
VAT Value-added Tax
VVS Validation and Verification Standard
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Validation Report 01 997 9105075956
TABLE OF CONTENTS
1  INTRODUCTION .......................................................................................................................... 5 
1.1  Objective  5 
1.2  Scope  5 
2  METHODOLOGY ......................................................................................................................... 6 
2.1  Desk Review of the Project Design Documentation  6 
2.2  Follow-up Interviews with Project Stakeholders  12 
2.3  Resolution of Outstanding Issues  13 
2.4  Internal Quality Control  14 
2.5  Validation Team  14 
3  VALIDATION FINDINGS ........................................................................................................... 15 
3.1  Project Description  15 
3.2  Baseline and Monitoring Methodology Check  16 
3.3  Project Eligibility  25 
3.4  Additionality  25 
3.5  GHG Emission Reduction Estimation Check  43 
3.6  Sustainability Assessment  51 
3.7  Stakeholder Consultation  58 
3.8  Pre-feasibility Assessment  59 
3.9  Monitoring Requirements and Monitoring Plan  60 
3.10  Environmental Impact Assessment  67 
3.11  Validation Opinion  68 
Appendix A: Validation Protocol
Appendix B: Certificates of Competence
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Validation Report 01 997 9105075956
1 INTRODUCTION
The “Carbon Invcap International Trading Co., Ltd” has commissioned the DOE TÜV
Rheinland (China) Ltd. to perform a validation of the GS VER Project Activity “The WHR
Project in Zhangzhou Kibing Glass Group Co., Ltd.” (hereafter called “the project”) in China.
This report summarises the findings of the validation of the project, performed on the basis of
GS version 2.2 requirements, as well as criteria given to provide for consistent project
operations, monitoring and reporting.
1.1 Objective
The purpose of a validation is to have an independent third party assess the project design.
In particular, the project's baseline, monitoring plan, and the project’s compliance with
relevant Gold Standard and host Party criteria are validated in order to confirm that the
project design, as documented, is sound and reasonable and meets the identified criteria.
Validation is a requirement for all GS projects and is seen as necessary to provide assurance
to stakeholders of the quality of the project and its intended generation of verified emission
reductions (VERs).
1.2 Scope
The validation scope is defined as an independent and objective review of the project design
document (PDD) and Passport. The PDD and Passport are reviewed against the relevant
Gold Standard criteria (see above). The Validation Team has employed a rules-based
approach to ensure that, in accordance with Gold Standard Requirements (version 2.2) and
Gold Standard Toolkit (version 2.2); these rules are compiled with for the project requesting
registration as a proposed GS VER project activity.
The validation is not meant to provide any consulting towards the project participants.
However, stated requests for clarifications and/or corrective actions may have provided input
for improvement of the project design.
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Validation Report 01 997 9105075956
2 METHODOLOGY
The validation consists of the following three phases:
I a desk review of the project design documents and Passport
II on-site visit and follow-up interviews with project stakeholders
III the resolution of outstanding issues and the issuance of the final validation report and
opinion
The following sections outline each step in more detail.
2.1 Desk Review of the Project Design Documentation
The following table outlines the documentation reviewed during the validation:
/1/ Goldchina Consultancy International Co., Ltd., PDD (version 06, 05/01/2014);
/2/ Goldchina Consultancy International Co., Ltd., IRR Calculation Spreadsheet for
Phase I;
/3/ Goldchina Consultancy International Co., Ltd., IRR Calculation Spreadsheet for
Phase II;
/4/ Goldchina Consultancy International Co., Ltd., Emission Reductions Calculation
Spreadsheet;
/5/ Goldchina Consultancy International Co., Ltd., Passport (version 04, 05/01/2014);
/6/ The Gold Standard Requirements Version 2.2;
/7/ The Gold Standard Toolkit Version 2.2;
/8/ Memorandum of Understanding (MoU) between The Gold Standard Foundation and
Carbon Invcap International Trading Co., Ltd dated 10/07/2013
/9/ CDM Executive Board, Clean Development Mechanism Validation and Verification
Standard, version 04.0;
/10/ CDM Executive Board, Project Standard, version 04.0;
/11/ CDM Executive Board, AMS-III.Q Waste energy recovery (gas/heat/pressure)
projects, Version 05.0;
/12/ CDM Executive Board, Tool to calculate the emission factor for an electricity system,
Version 03.0.0;
/13/ CDM Executive Board, Guidelines on the demonstration of additionality of smallscale project activities, Version 09.0;
/14/ CDM Executive Board, Tool for the demonstration and assessment of additionality,
version 7.0.0;
/15/ CDM Executive Board, Glossary of CDM terms, version 07, 23 November 2012;
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Validation Report 01 997 9105075956
/16/ CDM Executive Board, Guidelines on the Assessment of Investment Analysis,
version 05 (EB62/Annex5), 15 July 2011;
/17/ CDM Executive Board, Guideline on the Demonstration and Assessment of Prior
CDM Consideration, version 04 (EB62/Annex13), 15 July 2011;
/18/ CDM Executive Board, Guidelines for the reporting and validation of plant load
factors, version 01, 17 July 2009;
/19/ CDM Executive Board, Guidelines on assessment of de-bundling for SSC project
activities, version 03, 28 May 2010, EB54;
/20/ CDM Executive Board, Project Design Document Form (CDM-PDD) for small-scale
project activities (F-CDM-SSC-PDD), version 04.1;
http://cdm.unfccc.int/Reference/PDDs_Forms/PDDs/PDD_form04_v03_2.pdf
/21/ CDM Executive Board, Guidelines for completing the project design document form
for small-scale CDM project activities, version 01.1, 1 April 2013;
/22/ CDM Executive Board, Guidance for request for deviation titled “Application of
AM0005 and AMS.I.D in China”, http://cdm.unfccc.int/Projects/deviations
/23/ CDM Executive Board, General Guidelines to SSC CDM methodologies, version
19.0, EB69 Annex 27;
/24/ CDM Executive Board, Tool to Determine the Remaining Lifetime of Equipment.
(Version 01), Annex 15 EB50”
/25/ IPCC 2006 Guidelines for National Greenhouse Gas Inventories;
/26/ China Electric Power Yearbook 2007~2011;
/27/ China Energy Statistics Yearbook 2009~2011;
/28/ China Statistic Yearbook 2009-2011;
/29/ National Development and Reform Commission & Ministry of Housing and UrbanRural Development, Economic Assessment Method and Parameters for
Construction Project (version 03), 3 July 2006;
/30/ Ministry of Housing and Urban-Rural Development of the PRC, Economic Evaluation
Method and Parameters for Projects of Building Material Industry, 2010 
/31/ State Council of the People’s Republic of China, Provisional Regulations on Value
Added Tax, 10 November 2008;
/32/ Chinese Government, Law of Enterprise Income Tax, 16 March 2007;
/33/ State Council of China, Provisional Regulations on City Maintenance and
Construction Tax, 8 February 1985;
/34/ State Council of China, Provisional Regulations on Education Additive Tax, 20
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Validation Report 01 997 9105075956
August 2005;
/35/ Chinese Government, Environment Impact Assessment Law, 28 October, 2002;
/36/ National Development and Reform Commission, 2012 Baseline Emission Factors for
Regional Power Grids in China, 15 October 2012;
/37/ State Administration of Taxation, Notice of State Administration of Taxation on
Identification of Valid Date of Adjusting Fair Value of the Fixed Assets, 14 September
2005;
/38/ State Council of China, Notice of Adjusting Equity Ratio for Investment Project
(GuoFa [2009]27), 25 May 2009;
/39/ Ministry of Industry and Informtion Technology of P.R. China, Access conditions for
Domestic Glass (Gongchanye Policy [2010] No.3), 30 December 2010.
/40/ National People’s Congress, Labour Law of P. R. China
http://www.chinaacc.com/new/63/64/80/2006/2/zh3433185739622600227086-0.htm
/41/ Provisions on Prohibition of Child Labor
http://www.npc.gov.cn/englishnpc/Law/2007‐12
/42/ United Nations Convention against Corruption
http://www.unodc.org/unodc/en/treaties/CAC/signatories.html
/43/ Zhangzhou Kibing Glass Co., Ltd., Business license, 19 June 2007;
/44/ Fujian province Environmental science research institute, Environmental Impact
Assessment (EIA) Report for Phase I, 15 March 2010;
/45/ Fujian Provincial Environmental Protection Bureau, EIA Approval for Phase I, 31
March 2010;
/46/ Fujian province Environmental science research institute, Environmental Impact
Assessment (EIA) Report for Phase II, 10 January 2011;
/47/ Fujian Provincial Environmental Protection Bureau, EIA Approval for Phase II, 24
February 2011;
/48/ CNBM Hangzhou Design & Research Institute, Feasibility Study Report (FSR) for
Phase I, October 2009;
/49/ Dongshan Couty Economy and Trade Bureau, FSR Approval for Phase I, 19
November 2009;
/50/ CNBM Hangzhou Design & Research Institute, Feasibility Study Report (FSR) for
Phase II, January 2011;
/51/ Dongshan Couty Economy and Trade Bureau, FSR Approval for Phase II, 17
February 2011;
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Validation Report 01 997 9105075956
/52/ Energy Balance Sheet of 1# and 2# float glass production line from 01 December
2009 to 30 November 2010.
/53/ Energy Balance Sheet of 3# and 4# float glass production line from 01 September
2010 to 30 August 2011.
/54/ Board Minutes of Investment Decision about application Carbon Financing for Phase
I signed by the owner on 02 November 2009;
/55/ Board Minutes of Investment Decision about application Carbon Financing for Phase
I signed by the owner on 25 February 2011;
/56/ Contracts of construction documents design , installation and technology service for
Phase I singned between Hangzhou Design Insititute of China New Constuction
Materials Industry and the project owner, 05 November 2009
/57/ Complete sets of equipment supply contract of Phase I singned between Hangzhou
Design Insititute of China New Constuction Materials Industry and the project owner,
07 January 2010
/58/ Order contract of Pumps of Phase I singned between Changsha Swan industry
Pump Co., Ltd. and the project owner, 24 December 2009
/59/ Fans Purchase contract of Phase I singned between Anshan No.2 Fans Factory and
the project owner, 03 December 2009
/60/ Boilers purchase contract of Phase I singned between Hangzhou Hangguo Industry
Boilers Co., Ltd. and the project owner, 11 November 2009
/61/ Chemistry water and auxiliary equipment of Phase I singned between Yixing Yadu
Environment Protection Equipment Co., Ltd. and the project owner, 18 December
2009
/62/ Cooling Tower, filters and dosing devices purchase contract of Phase I singned
between Yixing Huanqiu Water Treatment Equipment Co., Ltd. and the project
owner, 20 November 2009
/63/ Steam turbine generator purchase contract of Phase I singned between Luoyang
Zhongzhong Generation Equipement Co., Ltd. and the project owner, 17 November
2009
/64/ EPC contract of Phase I singned between Hunan Industry Equipement Installation
Co., Ltd. and the project owner, 18 November 2009
/65/ EPC contract of Phase II singned between Hangzhou Design Insititute of China New
Constuction Materials Industry and the project owner, 01 March 2011
/66/ Steam turbine generator purchase contract of Phase II singned between Luoyang
Zhongzhong Generation Equipement Co., Ltd. and the project owner, 08 March
2011
/67/ Contracts of construction documents design , installation and technology service for
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Validation Report 01 997 9105075956
Phase II singned between Hangzhou Design Insititute of China New Constuction
Materials Industry and the project owner, 14 March 2011
/68/ High/low voltage power distribution cabinet and transformer purchase contract for
Phase II singned between Hangzhou Design Insititute of China New Constuction
Materials Industry and the project owner, 08 April 2011.
/69/ Boilers purchase contract of Phase I singned between Hangzhou Hangguo Industry
Boilers Co., Ltd. and the project owner, 10 March 2011.
/70/ Zhangzhou Kibing Glass Co., Ltd., Local Stakeholder Questionnaire and Records
prior to the start date of Phase I, between 12 October 2009 and 9 November 2009.
/71/ Zhangzhou Kibing Glass Co., Ltd., Local Stakeholder Questionnaire and Records
prior to the start date of Phase II, between 25 October 2012 and 10 November 2012.
/72/ Zhangzhou Kibing Glass Co., Ltd., Operation and Maintenance Procedure for Boiler
and Steam Turbine;
/73/ Zhangzhou Kibing Glass Co., Ltd., Monitoring Training Plan and Records for the
proposed project activity;
/74/ Zhangzhou City Economy and Trade Commission, Grid connection approval for
Phase I, 18 June 2010;
/75/ Zhangzhou City Economy and Trade Commission, Grid connection approval for
Phase II, 27 May 2011;
/76/ Attendee signed list of Stakeholder feedback meeting, 01 August 2013;
/77/ The Questionnaire Survey Records at Stakeholder Feedback Meeting, 01 August
2013;
/78/ Ministry of Commerce, Technical administrative code of electric energy metering
(DL/T 448-2000), 03 November 2000;
/79/ Staff handbook of Zhangzhou Kibing Glass Co., Ltd.
/80/ Employee contract of Zhangzhou Kibing Glass Co., Ltd.
/81/ Honesty Commitment issued by the employee of Zhangzhou Kibing Glass Co., Ltd.
/82/ GS Foundation, confirmation email on the starting 2 months SFR process for the
project, 10 July 2013
/83/ Email to NGOs on the stakeholders invitation during SFR process, sent on 11 July
2013
/84/ Pictures on the notification to local stakeholders invitation during SFR process
/85/ Process Diagram of Zhangzhou Kibing Float Glass Production Line prior to the
project
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Validation Report 01 997 9105075956
/86/ Prior consideration of the CDM form” of Phase I was submitted to China DNA on 05
March 2010
/87/ Prior consideration of the CDM form” of Phase I was submitted to CDM EB on 09
March 2010
/88/ Prior consideration of the CDM form” of Phase I was stamped by China DNA on 22
March 2010
/89/ The ERPA of Phase I was signed between VITOL S.A. and the project owner on 11
April 2010
/90/ The China’s LOA of Phase I was issued in November 2010
/91/ The CER buyer of Phase I asked the conversion from the fixed pricing to floating
pricing for CER purchaseon 11 May 2011
/92/ The project owner rejected the conversion from the fixed pricing to floating pricing for
CER purchase on 20 May 2011
/93/ The Article of “Practice to reduce the carbon emission in Zhangzhou Kibing Glass
Co., Ltd.” was published in Fujian Building Material in November 2012
/94/ The ERPA of Phase I was invalid in Jan. 2013
/95/ The project owner decided to develop Phase I as a GS VER project on 25 March
2013
/96/ The project owner informed the former DOE (TUV Nord) of Phase I CDM validation
termination on 15 July 2013.
/97/ The termination contract of Phase I CDM validation was singed between TUV Nord
and the project owner on 03 Jan. 2014
/98/ The CDM development agreement of phase II was signed on 22 July 2011
/99/ The project owner sent emails to CER buyer for CER development fee payment in
advance and CER sales on 10 April 2012
/100/ The project owner decided to develop Phase II as a GS VER project on 25 March
2013
/101/ Statistical Communiqué of the People's Republic of China National Economic and
Social Development issued by National Bureau of Statistics of China from 2003 to
2006.
/102/ Notice to implement the tariff adjustment in East China Power Grid by
NDRC”(document no. MJM[2008]31) issued by Fujian Price Bureau, effective since
01/07/2008
http://wenku.baidu.com/link?url=Pd7_vLekYTeESMFveNxw-wGG21hPgx0hJgcuYB2vrIUBkOTW-ScV-uBGC8gUgop8XkyMOoKoag1OLkxip8my9T5rZPmQTnHA2w9zjCTlW
/103/ Notice of Adjusting electricity sale tariff of Zhangzhou City”(document no.
MJS[2010]78) issued by Fujian Price Bureau, effective since 01/07/2010
http://www.dongshanisland.gov.cn/web/viewbs2.asp?ID=1028
/104/ Notice of Adjusting electricity sale tariff of Cities in Fujian”(document no.
MJS[2012]18) issued by Fujian Price Bureau, effective since 01/02/2012
http://www.fjjg.gov.cn/fjwjj/jgfw/qsjgzc/webinfo/2012/02/1329807748791794.htm
/105/ Notice of Adjusting electricity sale tariff of Cities in Fujian” issued by Fujian Price
Version No.: 05.0 Page 12
Validation Report 01 997 9105075956
Bureau, effective since 01/07/2012
http://www.fzcangshan.gov.cn/item/Print.asp?m=118&ID=2037
/106/ Electric Power Planning & Engineering Institute (EPPEI), Fuel Fired Power Plant
Design in Investment Control (2008 level) published in 03/2009
/107/ Electric Power Planning & Engineering Institute (EPPEI), Fuel Fired Power Plant
design in Investment Control (2008 level) published in 03/2010
/108/ Statistical Communiqué of the People's Republic of China on the 2007 National
Economic and Social Development issued by National Bureau of Statistics of
China on 28 February 2008.
/109/ Statistical Communiqué of the People's Republic of China on the 2008 National
Economic and Social Development issued by National Bureau of Statistics of
China on 26 February 2009.
/110/ The Statement for the Lifetime of Phase I and Phase II signed by CNBM Hangzhou
Design & Research Institute on 15 August 2013.
/111/ State Council of China, Notice of Adjusting Equity Ratio for Investment Project
(GuoFa [2009]27), 25 May 2009;
/112/ Zhangzhou Price Bureau, Notice of Adjusting Tariff , 24 March 2010.
/113/ Operation records of Phase I
/114/ Operation records of Phase II
2.2 Follow-up Interviews with Project Stakeholders
TÜV Rheinland Validation Team carried out an on-site visit dated from 01August 2013 to 02
August 2013, and performed interviews with the project representatives and stakeholders.
Date Name Organization Topic
/i/ 2013-08-02 LUO Xu
Zhangzhou Kibing
Glass Co., Ltd.
(PP in host country)
- PP’s background
- Project implementation
- Technical design
- WHR sources
- Public funding
/ii/ 2013-08-02  ZHANG Lu
/iii/ 2013-08-02  WU Guimei
/iv/ 2013-08-02  HONG Zhou
Goldchina
Consultancy
International Co., Ltd.
(Consultant)
- Project design
- Baseline identification
- ER calculation
- Additionality issues
- Monitoring plan
/v/ 2013-08-02  SU Wenjian
Local residents
- Job opportunities
- Opinion on the project
/vi/ 2013-08-02  SUN Xiaoying
/vii/ 2013-08-02  XIE Congdong
/viii/ 2013-08-02  XIE Huadong
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Validation Report 01 997 9105075956
2.3 Resolution of Outstanding Issues
The objective of this phase of the validation is to resolve any outstanding issues which need
be clarified prior to TÜV Rheinland’s positive conclusion on the project design. In order to
ensure transparency a validation protocol is customised for the project. The protocol shows in
transparent manner criteria (requirements), means of validation and the results from
validating the identified criteria. The validation protocol serves the following purposes:
 It organises, details and clarifies the requirements a GS VER project is expected to meet;
 It ensures a transparent validation process where the validator will document how a
particular requirement has been validated and the result of the validation.
The validation protocol consists of two tables. The different columns in these tables are
described in the figure below. The completed validation protocol for this project is enclosed in
Appendix A to this report.
Findings established during the validation can either be seen as a non-fulfilment of GS
criteria or where a risk to the fulfilment of project objectives is identified. Corrective action
requests (CAR) are issued, where:
i) mistakes have been made with a direct influence on project results;
ii) GS and/or methodology specific requirements have not been met; or
iii) there is a risk that the project would not be accepted as a GS VER project or that
emission reductions will not be certified.
A request for clarification (CR) may be used where additional information is needed to fully
clarify an issue.
Validation Protocol Table 1: Validation requirements
Checklist Question Reference Means of
validation (MoV)
Comment Draft and/or Final
Conclusion
The various UNFCCC
requirements as
specified in the VVM are
linked to checklist
questions the project
should meet. The
checklist is organised in
different sections,
following the logic of the
VVM.
Gives
reference to
documents
where the
answer to
the checklist
question or
item is
found.
Explains how
conformance with
the checklist
question is
investigated.
Examples of
means of validation
are document
review (DR) or
interview (I). N/A
means not
applicable.
The section is
used to elaborate
and discuss the
checklist question
and/or the
conformance to
the question. It is
further used to
explain the
conclusions
reached.
This is either acceptable
based on evidence
provided (OK), or a
corrective action
request (CAR) due to
non-compliance with the
checklist question (See
below). A request for
clarification (CR) is used
when the validation team
has identified a need for
further clarification.
Validation Protocol Table 2: List of Requests for Corrective Action (CAR) and Clarification (CR)
Draft report
clarifications and
corrective action
requests
Ref. to checklist
question in table 2
Summary of project
owner response
Validation conclusion
/ix/ 2013-08-02  WONG Xumin
/x/ 2013-08-02  HUANG
Xiaoteng
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Validation Report 01 997 9105075956
If the conclusions from
the draft Validation are
either a CAR or a CR,
these should be listed in
this section.
Reference to the
checklist question
number in Table 2
where the CAR or CR
is explained.
The responses given by
the project participants
during the
communications with the
validation team should
be summarised in this
section.
This section should
summarise the validation
team’s responses and final
conclusions. The conclusions
should also be included in
Table 2, under “Final
Conclusion”.
2.4 Internal Quality Control
The final validation report will undergo a technical review by a qualified independent reviewer
before requesting registration of the project activity. The technical review will be performed by
a technical reviewer qualified in accordance with TÜV Rheinland’s qualification scheme for
Gold Standard validation and verification requirements.
2.5 Validation Team
Validation Team Type of Involvement
Full name Affiliation
TÜV
Rheinland
Appointed for
Sectoral
Scopes
(Technical
Areas)
S
up er vi si ng t he w or k D
es k re vi ew S
ite
V
is it +
In te rv ie w R
ep or t an d pr ot oc ol W
rit
in g Te ch ni ca l E
xp er t In pu t R
ep or tin
g Su pp or t Te ch ni ca l R
ev ie w er Mr. WU Ze China 1.2, 4.3, 4.5, 9.1,13.1 X X X X
Ms. WANG
Guolian China
1.2, 5.1, 11.1,
12.1 X
Mr. Walter TANG China
1.1, 1.2, 2.1, 2.2,
3.1, 4.3, 4.5,
13.1
X
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Validation Report 01 997 9105075956
3 VALIDATION FINDINGS
The findings of the validation are stated in the following sections. The validation criteria
(requirements), the means of validation and the results from validating the identified criteria
are documented in more detail in the validation protocol in Appendix A.
3.1 Project Description
The WHR Project in Zhangzhou Kibing Glass Group Co., Ltd., which consists of Phase I /48/
and Phase II /50/, is sited within the production area of Zhangzhou Kibing Glass Co., Ltd. The
project is also invested and operated by Zhangzhou Kibing Glass Co., Ltd. The waste heat of
flue gas generated during the glass production process will be recovered to produce clean
electricity with zero emission /48//50/. The project implementation won’t impact the float glass
production.
The detailed information about the project are as follows:
Project
name Involved facilities
Installed
capacity
(MW)
Annual feed-in
electricity to the
Kibing (MWh)
VERs
(tCO2 e)
Phase I
1# 900t/d production line
5 32,200 24,363
2# 600t/d production line
Phase II
3# 800t/d production line
5 31,740 24,015
4# 600t/d production line
total - 10 63,940 48,378
For Phase I
As per the FSR for Phase I /48/ and approval /50/, Phase I is proposed to install a waste heat
power generation system with 2 sets of waste heat recovery boiler and one set of 5.0MW
steam turbine generator unit within 1# 900t/d and 2# 600t/d float glass production line. It is
estimated that the annual net electricity supply of Phase I is 32,200MWh, the electricity
produced by Phase I will be sent to 10 KV bus line in the substation of Kibing via a single
round cable circuit, and then delivered to Kibing for its captive consumption. It is estimated
that Phase I can realize an annual emission reduction of 24,363tCO2e by displacing the
fossil-fuel fired power generation supplied by the ECPG under the baseline scenario.
For Phase II
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Validation Report 01 997 9105075956
As per the FSR for Phase II /50/ and approval /51/, Phase II is proposed to install a waste
heat power generation system with 2 sets of waste heat recovery boiler and one set of
5.0MW steam turbine generator unit within 3# 800t/d and 4# 600t/d float glass production
line. It is estimated that the annual net electricity supply of Phase II is 31,740MWh, the
electricity produced by Phase II will be sent to 10 KV bus line in the substation of Kibing via a
single round cable circuit, and then delivered to Kibing for its captive consumption. It is
estimated that Phase II can realize an annual emission reduction of 24,015tCO2e by
displacing the fossil-fuel fired power generation supplied by the ECPG under the baseline
scenario.
The project is located in Kangmei Town, Dongshan County, Zhangzhou City, Fujian Province,
P.R. of China. The site location’s coordinates of Phase I and Phase II are as follows:
Phase I: east longitude of 117°30′01″ and north latitude of 23°44′43″.
Phase II: east longitude of 117°30′01″ and north latitude of 23°44′43″.
The Validation Team has verified the location during the period of on-site validation using
GPS equipmens
In the absence of the Project, the waste heat from the float glass line is directly released to
the atmosphere and electricity produced will be supplied by the East China Power Grid which
is dominated by fossil fuel fired electricity. It is also the baseline scenario.
The Project will achieve greenhouse gas emission reductions by avoiding CO2 emissions
from the business-as-usual scenario electricity generation of those fossil fuel-fired power
plants connected into the East China Power Grid. The average annual emission reductions of
the Project are estimated to be 48,378tCO2e.
3.2 Baseline and Monitoring Methodology Check
3.2.1 Applicability of the selected methodology to the project activity
The project activity applies the AMS-III.Q Version 05.0 /11/. The applicability of the
methodology to the project is presented as follows:
No. Applicability conditions The project
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1 The methodology is for project activities that
utilize waste gas and/or waste heat at existing
facilities and convert the waste energy carried
in the identified WECM stream(s) into useful
energy. The WECM stream may be an energy
source for:
(a) Cogeneration; or
(b)Generation of electricity; or
(c)Direct use as process heat; or
(d)Generation of heat in an element process;
or (e)Generation of mechanical energy.
As per the FSR of Phase I /48//50/
and Phase II /50//51/, the two sub
projects both utilize waste heat at
existing facilities as an energy source
for generation of electricity, which is
in line with the paragraph 1(b) of the
methodology /11/.
2 The recovery of waste energy should be a new
initiative (no waste energy was recovered from
the project activity source prior to the
implementation of the project activity).
As per the FSR of Phase I /48//49/
and Phase II /50//51/, the two sub
projects both are new initiative, only
energy that was otherwise wasted
through venting to atmosphere is
utilized, which is in line with the
paragraph 2 of the methodology /11/.
3 Measures are limited to those that result in
emission reductions of less than or equal to 60
kt CO2 equivalent annually.
As per the FSR for Phase I /48/ and
approval /49/, it is estimated that the
annual net electricity supply of Phase
I is 32,200MWh and the annual
emission reduction of 24,363tCO2e
accordingly.
As per the FSR for Phase II /50/ and
approval /51/, it is estimated that the
annual net electricity supply of Phase
II is 31,740MWh and the annual
emission reduction of 24,015tCO2e
accordingly.
Therefore, the estimated average
annual emission reductions of the
Project are estimated to be
48,378tCO2e, which is less than 60 kt
CO2e, which is in line with the
paragraph 3 of the methodology /11/.
4 The methodology is applicable under the
following conditions:
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(a) Regulations do not require the project
facility to recover and/or utilize the waste
energy prior to the implementation of the
project activity;
(b) Energy generated in the project activity
may be used within the industrial facility
or exported to other industrial facilities
(included in the project boundary);
(c) A WECM stream that is released under
abnormal operations (for example:
emergencies, shutdown etc.) of the
project facility shall not be included in the
emission reduction calculations;
(a) By reviewing the “Access
conditions for Domestic Glass”
/39/, the Vaidation Team
confirmed that no regulation is
required the project facility to
recover and/or utilize the waste
energy prior to the
implementation of the project
activity . Therefore, the project
is in line with the paragraph
4(a) of the methodology /11/.
(b) By reviewing FSR of Phase I
/48//49/ and Phase II /50//51/,
the electricity generated by
Phase I is only used within the
1# 900t/d and 2# 600t/d float
glass production line, and
Phase II is only used within the
3# 800t/d and 4# 600t/d float
glass production line. The
Valiation Team also confirmed
this through “Energy Balance
Sheet” /52//53/. Therefore, the
project is in line with paragraph
4(b) of the methodology /11/.
(c) Yes, A WECM stream that is
released under abnormal
operations of the project facility
couldn’t be used for electricity
generation. Therefeore, no
emission reduction could be
produced through electricity
genrereation, and no ER could
be included in the emission
reduction calculations.
Therefore, the project is in line
with paragraph 4(c) of the
methodology /11/.
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(d) Electricity generated in the project
activity may be exported to the grid or
used for captive purposes.
However, the methodology is not
applicable to projects where the waste
gas/heat/pressure recovery project is
implemented in a single-cycle power
plant (e.g. gas turbine or diesel
generator) where heat (energy)
generated on-site is not utilizable for any
other purposes on-site except to generate
power. Such project activities shall
consider AMS-III.AL “Conversion from
single cycle to combined cycle power
generation”. Projects recovering waste
energy from such power plants for the
purpose of generation of heat only can
apply this methodology;
(e) For a project activity that recovers waste
energy for power generation from
multiple sources (e.g. a kiln and a singlecycle power plant), this methodology can
be used in combination with AMS-III.AL
provided that:
(i) Within the project activity it is
possible to distinguish two distinct
waste energy sources such that:
Waste energy source   -I (e.g. the
kiln) belongs to such waste heat
sources which are eligible under AMSIII.Q;
Waste energy source   -II (e.g. the
single-cycle power unit) belongs to
such waste heat sources which are
eligible under AMS-III.AL;
(ii) For waste energy source-II eligible
under AMS-III.AL, all requirements
that relate to baseline, project
emissions and monitoring shall apply;
(iii) It is possible to determine the
baseline for each waste energy
source, according to the specific
methodology being used;
(iv) It is possible to objectively allocate
(d) As per the FSR of Phase I
/48//49/ and Phase II /50//51/,
the electricity generated in the
project activity is used for
captive purposes, and the
Project does not fall into the
type of waste gas/heat
recovery project which is
implemented in a single-cycle
power plant. Therefore, the
project is in line with paragraph
4(d) of the methodology /11/.
(e) As per the FSR of Phase I
/48//49/ and Phase II /50//51/,
Phase I and Phase II both
recovers waste heat from
single source, i.e. the waste
heat of flue gas generated
during the glass production
process. Thus this application
condition is not relevant.
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the electricity produced in the project
activity to each waste energy source,
by means of one of the following
methods:
Through separate measurements   
of the electricity produced by utilizing
waste energy from each waste
energy source; or
Through separate measurements   
of the energy content of the WECM
streams used for electricity
production; or
Through separate measure   ments
of the energy content of the WECM
streams that are associated with each
waste energy source and used for
electricity production or for the
WECM generation in a common
waste heat recovery system (e.g. if
steam is generated by waste heat
from a kiln and waste heat from an
internal combustion engine in a
common waste heat recovery boiler);
(f) In cases where the energy is exported to
other facilities included in the project
boundary, a contractual agreement exists
between the owners of the project facility
and the recipient plant(s) to avoid the
potential double counting of emission
reductions by involved parties. These
procedures shall be described in the
Project Design Document.
(g) For those facilities and recipients which
are included in the project boundary, that
prior to implementation of the project
activity (current situation) generated
energy on-site (sources of energy in the
baseline), the credits can be claimed for
minimum of the following time periods:
(i) The remaining lifetime of equipment
currently being used; and
(ii) Crediting period;
(f) As per the FSR of Phase I
/48//49/ and Phase II /50//51/,
the electricity generated in the
project activity is used for
captive purposes. Thus this
application condition is not
relevant.
(g) The 10 years fixed crediting
period was adopted, which is
shorter than the remaining
lifetime of equipment currently
being used.
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(h) The category is also applicable to project
activities that use waste pressure to
generate electricity only and the
electricity produced from waste pressure
is measurable;
(i) It shall be demonstrated by using one of
the following options that the waste
energy utilized in the project activity
would have been flared or released into
the atmosphere in the absence of the
project activity: this shall be proven by
one of the following options:
(i) By direct measurements of
energy content and amount of the
waste gas/heat/pressure for at least
three years prior to the start of the
project activity;
(ii) Energy balance of relevant
sections of the plant to prove that the
waste gas/heat/pressure was not a
source of energy before the
implementation of the project activity.
For the energy balance representative
process parameters are required. The
energy balance shall demonstrate that
the waste gas/heat/pressure was not
used and also provide conservative
estimations of the energy content and
amount of waste gas/heat/pressure
released;
(iii) Energy bills (electricity, fossil
fuel) to demonstrate that all the
energy required for the process (e.g.
based on specific energy consumption
specified by the manufacturer) has
been procured commercially. Project
participants are required to
demonstrate through the financial
documents (e.g. balance sheets, profit
and loss statement) that no energy
was generated by waste
gas/heat/pressure and sold to other
facilities and/or the grid. The bills and
financial statements should be audited
by competent authorities;
(iv) Process plant manufacturer’s
original specification/information,
(h) the project activity use waste
heat to generate electricity.
Thus this application condition
is not relevant.
(i) .option (iv) Process plant was
selected. The Validation Team
checked “Process Diagram of
Zhangzhou Kibing Float Glass
Production Line prior to the
project” /85/, and confirmed
that the waste heat utilized in
the project activity would have
been released into the
atmosphere in the absence of
the project activity.
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Validation Report 01 997 9105075956
schemes and diagrams from the
construction of the facility could be
used as an estimate of quantity and
energy content of waste
gas/heat/pressure produced for rated
plant capacity per unit of product
produced;
(v) On-site checks prior to project
implementation by the DOE to confirm
that no equipment for waste energy
recovery and utilisation had been
installed on the specific WECM
stream prior to the implementation of
the CDM project activity.
Debundling Checking
As indicated in Annex C to Simplified modalities and procedures for small-scale clean
development mechanism project activities, determining the occurrence of debundling is
required. It is indicated in the section A.6 of the PDD /1/ that the Project is not a de-bundled
component of a larger project activity. This is also confirmed by interview with the project
owner Mr. LUOxu /i/ that this is the first CDM project activity applied by the project owner.
Also the Validation Team has carried out a search regarding the similar small scale waste
heat recovery projects using AMS-III.Q. from ‘CDM Projects in Pipeline’, the latest version
available at ‘http://www.cdmpipeline.org/’. No similar small scale waste heat recovery projects
were registered as CDM projects by the project owner. In conclusion, the Validation Team
confirms the proposed project activity is not a debundled one. A sper Guidelines on
assessment of debundling for SSC project activities, Version 03, the the Project is not a debundled component of a larger project activity.
3.2.2 Project Boundary
As per CDM methodology AMS-III.Q Version 05.0 /11/, the geographical extent shall include
the relevant WECM stream(s), equipment and energy distribution system in following
facilities:
(a) Project facility;
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Validation Report 01 997 9105075956
(b) Recipient facility(ies), which is the same as the “project facility”.
(c) All power plants connected to the East China Power Grid.
The electricity generated by the project will be supplied to Zhangzhou Kibing Glass Group
Co., Ltd. for captive use, which replaces electricity imported from ECPG that covers
Shanghai City, Jiangsu Province, Zhejiang Province, Anhui Province and Fujian Province in
accordance with the latest guidance issued by China DNA on 15th October 2012.
The system boundary and the selected sources and gases are justified transparently and
arepresented as below:
sources gas Included? Justification/explanation
Baseline
emissions
Electricity
generation
of ECPG
CO2 included Main emission source
CH4 excluded Excluded for simplification.
N2O excluded Excluded for simplification.
Project
emissions
Auxiliary
electricity
consumption
CO2 included Main emission source
CH4 excluded Excluded for simplification.
N2O excluded Excluded for simplification.
3.2.3 Baseline Identification
As per the CDM methodology AMS-III.Q Version 05.0 /11/, baseline determination shall be
based on relevant operational data from immediately prior three years to the start date of the
project activity (or the start date of validation with due justification). For existing facilities,
which has three years of operation history but do not have sufficient operational data for the
purpose of determining baseline, all historic information shall be available (a minimum of one
year operational data is required)”.
For the project, one year operational data prior to the start date shall be adopted for the
baselin determination.
For phase I, the Validation Team confirmed that the waste heat is released to atmosphere
directly, and the electricity used by the 1# and 2# float glass production line is supplied by the
ECPG according to “Energy Balance Sheet of 1# and 2# float glass production line from 01
December 2009 to 30 November 2010” /52/.
For phase II, the Validation Team confirmed that the waste heat is released to atmosphere
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Validation Report 01 997 9105075956
directly, and the electricity used by the 3# and 4# float glass production line is supplied by the
ECPG according to “Energy Balance Sheet of 3# and 4# float glass production line from 01
September 2010 to 30 August 2011” /53/.
Therefore, the baseline scenario of the project is “the waste heat is released to atmosphere
directly, and the electricity used by the facilities is supplied by the ECPG”. The ECPG as
reflected in the combined margin (CM) calculations described in the “Tool to calculate the
emission factor for an electricity system”/12/.
The baseline determination is considered as transparent and reasonable. The Validation
Team has checked the following in accordance with the latest version of CDM Validation and
Verification Standard /10/ and the results are tabulated as follows.
Summary of Baseline Discussion.
The approved baseline methodology
applicable to the project
- explicit criteria
- implicit criteria (e.g. available
scenarios, applicability of formulas for
BE/PE/LE calculations)
Yes
No Details in Section 3.2.1.
PDD includes all assumptions and
data used by project participants
Yes
No As per paragraph 9 and 10 of the AMSIII.Q Version 05.0 /11/, the baseline
scenario is prescribed.
All the references and documents
used are relevant for establishing the
baseline scenario
Yes
No As per paragraph 9 and 10 of the AMSIII.Q Version 05.0 /11/, the baseline
scenario is prescribed.
All the references and documents
used are correctly quoted and
conservatively interpreted in the PDD
Yes
No As per paragraph 9 and 10 of the AMSIII.Q Version 05.0 /11/, the baseline
scenario is prescribed.
All relevant policies / regulations
considered are listed in the PDD
Yes
No As per paragraph 9 and 10 of the AMSIII.Q Version 05.0 /11/, the baseline
scenario is prescribed.
Identified potential baseline scenarios
reasonably represent what
would/could occur in the absence of
the proposed project activity
Yes
No As per paragraph 9 and 10 of the AMSIII.Q Version 05.0 /11/, the baseline
scenario is prescribed.
The baseline scenario selection is
appropriate and determined
according to the methodology
Yes
No As per paragraph 9 and 10 of the AMSIII.Q Version 05.0 /11/, the baseline
scenario is prescribed.
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Validation Report 01 997 9105075956
The approved methodology used is
applicable to the identified baseline
scenario
Yes
No As per paragraph 9 and 10 of the AMSIII.Q Version 05.0 /11/, the baseline
scenario is prescribed.
In the Validation Team’s opinion, the baseline scenario is determined according to the
methodology and is reasonable.
3.3 Project Eligibility
1. The project is a small-scale GS-VER project.
2. The host country is china.
3. End-use Energy Efficiency Improvement project. The Project is a ‘waste heat recovery for
electricity generation’ project. The electricity produced by the Project will be delivered to
Kibing for its captive consumption, which is eligible for Gold Standard registration
according to Revised Annex C, GS Toolkit. (Activities involving waste heat recovery in
industrial processes shall be eligible for emission reductions related to on-site energy
consumption)
4. The project activity was not previously announced without carbon revenues.
5. The greenhouse gases (GHGs) involved in the project is CO2.
6. The project is retroactive project. The project proponent has applied fast-track options as
confirmed in the Memorandum of Understanding (MoU) /8/ signed between The Gold
Standard Foundation and Carbon Invcap International Trading Co., Ltd on 10 July 2013.
As demonstrated above, the project is a small-scale End-use Energy Efficiency Improvement
project under GS rules. The validation team confirmed the relevant GS eligibility criterions of
the proposed project have been fulfilled.
3.4 Additionality
3.4.1 Carbon revenue consideration
As per Glossary of CDM terms, the starting date of the project activity is the earliest date at
which either the implementation or construction or real action of a project activity begins. The
implementation or construction or real actions of the project are as follows:
For Phase I:
Project Implementation and Carbon Revenue Consideration timeline
Date Event Reference
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Validation Report 01 997 9105075956
10/2009 Compilation of the FSR of Phase I was finished. /48/
02/11/2009
The board of the project owner
decided to invest the project with
CDM revenue.
/54/
05/11/2009
The contracts of construction
documents design , installation and
technology service were signed
/56/
19/11/2009 Phase I was approved /49/
05/03/2010 Prior consideration of the CDM
form” of Phase I was submitted to
China DNA
/86/
09/03/2010 Prior consideration of the CDM
form” of Phase I was submitted to
CDM EB
/87/
22/03/2010 Prior consideration of the CDM
form” of Phase I was stamped by
China DNA
/88/
11/04/2010 The ERPA of Phase I was signed /89/
11/2010 The China’s LOA of Phase I was
issued
/90/
01/12/2010 Phase I was commissioned /113/
11/05/2011 The CER buyer of Phase I asked
the conversion from the fixed pricing
to floating pricing for CER purchase
/91/
20/05/2011 The project owner rejected the
conversion from the fixed pricing to
floating pricing for CER purchase
/92/
11/2012 The staffs of Zhangzhou Kibing
Glass Co., Ltd. published a paper,
named “the Practice to reduce the
carbon emission in Zhangzhou
Kibing Glass Co., Ltd.” in Fujian
Building Material to introduce the
technical process, technical
barriers, carbon emission reduction
of the Project, and discuss the
possible CER revenue.
/93/
01/01/2013 The ERPA of Phase I was invalid
automatically.
/94/
25/02/2013 The project owner decided to
develop Phase I as a GS VER
project
/95/
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Validation Report 01 997 9105075956
15/07/2013 The project owner informed the
former DOE (TUV Nord) of Phase I
CDM validation termination
/96/
03/01/2014 The termination contract of Phase I
CDM validation was singed between
TUV Nord and the project owner
/97/
As the table above shown, the first investment decision about CDM revenue consideration
was made on 02 November 2009 /54/ and the starting date is 05 November 2009 according
to “Contracts of construction documents design , installation and technology service” /56/,
whcih was the earliest implementation or construction or real action.
The project owner informed the China’ DNA and CDM EB for prior to CDM consideration in
March 2011 /86//87//88/. Being a project with a start date on or after 2 August 2008, the PPs
has informed the DNA and CDM EB in writing of the commencement of the project activity
and of their intention to seek CDM status within six months, which is in line with “Guideline
on the Demonstration and Assessment of Prior CDM Consideration” /17/.
Starting date of project Date of Carbon revenue consideration
05 November 2009, on which “Contracts of
construction documents design , installation
and technology service” /56/ was signed
On 02 November 2009, the investment
decision about carbon revenue
consideration was made /54/. Prior
consideration of the CDM form” of Phase I
was submitted to China DNA on 05 March
2010 /86/. Prior consideration of the CDM
form” of Phase I was submitted to CDM EB
on 09 March 2010 /87/.
The ERPA of CER /89/ was signed on 11 April 2010. The China’s LOA /90/ of Phase I was
issued in November 2010. On 11 May 2011, the CER buyer of Phase I asked the conversion
from the fixed pricing to floating pricing for CER purchase /92/. But the project owner rejected
the conversion from the fixed pricing to floating pricing for CER purchase on 20 May
2011/93/. The ERPA Phase I was invalid automatically on 01 Jan. 2013 /94/. On 25 Feb.
2013, the project owner decided to develop Phase I as a GS VER project /95/. On 15 July
2013, the project owner informed the former DOE (TUV Nord) of Phase I CDM validation
termination /96/. On 03 Jan. 2014, the termination contract of Phase I CDM validation was
singed between TUV Nord and the project owner /97/. The Validation Team also checked the
website “http://cdm.unfccc.int/Projects/Validation/index.html” and confirmed the project of
Phase I is in the status of “Validation contract has been terminated”. The Validation Team
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Validation Report 01 997 9105075956
confirmed that the project of Phase I won’t be double counting.
For Phase II:
Project Implementation and Carbon Revenue Consideration timeline
Date Event Reference
01/2011 Compilation of the FSR of Phase II was finished. /50/
17/02/2011 Phase II was approved /51/
25/02/2011
The board of the project owner
decided to invest the project with
ER revenue.
/55/
01/03/2011 The EPC contract of Phase II was signed /65/
22/07/2011 The CDM development agreement
of phase II was signed
/98/
08/10/2011 Phase II was commissioned /114/
04/2012 The project owner sent emails to
CER buyer for CER development
fee payment in advance and CER
sales.
/99/
25/02/2013 The project owner decided to
develop Phase II as a GS VER
project
/100/
As the table above shown, the investment decision about carbon revenue consideration was
made on 25 February 2011 and the starting date is 01 March 2011 according to “EPC
contract of Phase II” /65/, whcih was the earliest implementation or construction or real
action.
Starting date of project Date of Carbon revenue consideration
01 March 2011, on which “EPC contract of
Phase II” /65/ was signed
On 25 February 2011, the investment
decision about carbon revenue
consideration was made /55/.
3.4.2 Alternatives
The output of the project is power. The list of alternatives to supply the above mentioned
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Validation Report 01 997 9105075956
results, which are also presented in the PDD, includes the project activity undertaken without
carbon revenue. The remaining alternatives presented do include all plausible scenarios
taking into account the local and sectoral situations for the mentioned results. The list of
alternatives is therefore considered complete.
3.4.3 Investment analysis
The additionality of the project is demonstrated by applying “Attachment A to the Appendix B
of the simplified modalities” and procedures for small-scale CDM project activities” /13/ and
“Tools for the demonstration and assessment of additionality” /14/.
According to “Attachment A to the Appendix B of the simplified modalities” and procedures for
small-scale CDM project activities” /13/, the project participants shall provide an explanation
to show that the project activity would not have occurred anyway due to at least one of the
following barriers:
(a) Investment barrier;
(b) Technological barrier;
(c) Barrier due to prevailing practice;
(d) Other barriers
(1) Determine appropriate analysis method
Investment barrier is chosen to demonstrate the additionality of the project. As per “Tools for
the demonstration and assessment of additionality” /14/, three analysis methods, which are
simple cost analysis (Option I), investment comparison analysis (Option II) and benchmark
analysis (Option III), shall be chosed. Since the Project will earn the revenues by displacing
the electricity from the grid, the simple cost analysis method is not appropriate. Investment
comparison analysis method is only applicable to projects whose alternatives are similar
investment projects. The baseline scenario of the Project is the electricity obtained from
ECPG rather than a new investment project, therefore Option II is not appropriate. As per
“Guidelines on the assessment of investment analysis” Version 05 (Annex 5, EB62) /16/, the
Project will use benchmark analysis method (Option III).
(2) Determine the benchmark
As per “Economic Assessment Method and Parameters for Construction Project (version 03)”
/29/ issued by National Development and Reform Commission (NDRC) , the waste heat is
from the glass production lines of Kibing, and the electricity produced by the Project is for
captive use in the glass production lines of the project owner, the project benchmark IRR of
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Validation Report 01 997 9105075956
13% (before tax)for glass industry is used as the benchmark of the Project to carry out the
calculation and comparison of financial indicators.
(3) IRR Calculation
For Phase I: The Validation Team has assessed the IRR calculation sheet for Phase I /2/. The
Validation Team compared the input value in the IRR calculation sheet and confirmed that all
values are quoted from the FSR /48/. The FSR /48/ was developed by CNBM Hangzhou
Design & Research Institute, which is certified to compile design reports for power projects
with the highest grade A issued by Ministry of Housing and Urban-Rural Development
P.R.China. The FSRs /48/ was approved by Dongshan Couty Economy and Trade Bureau.
The investment decision was made on 02 November 2009 /54/ base on the FSR /48/, the
starting date is considered to be 05 November 2009. Hence to the Audit Team’s opinion, the
FSR /48/ was deemed to be the foundation of Phase I investment decision and the period of
time between the finalization of the FSR /48//50/ and the investment decision /54/ were
sufficiently short and they are unlikely input values would have materially changed.
For Phase II: The Validation Team has assessed the IRR calculation sheet for Phase II /2//3/.
The Validation Team compared the input value in the IRR calculation sheet and confirmed
that all values are quoted from the FSR /50/. The FSR /50/ was developed by CNBM
Hangzhou Design & Research Institute, which is certified to compile design reports for power
projects with the highest grade A issued by Ministry of Housing and Urban-Rural
Development P.R.China. The FSR /50/ was approved by Dongshan Couty Economy and
Trade Bureau. The investment decision was made on 25 Febraury 2011 /55/ base on the
FSR /50/, the starting date is considered to be 01 March 2011. Hence to the Audit Team’s
opinion, the FSR/50/ was deemed to be the foundation of Phase II investment decision. And
the period of time between the finalization of the FSR /50/ and the investment decision /55/
were sufficiently short and they are unlikely input values would have materially changed.
The project IRR (pre-tax) was selected as a reference to demonstrate the financial viability in
the PDD, because the selected benchmark is prescribed as project IRR (pre-tax). The cost of
financing expenditures (i.e. loan repayments and interest) has been excluded in the
calculation of project IRR, which is confirmed to be in line with the requirement of Para 9 of
“Guidelines on Assessment of Investment Analysis version 05/16/
1. Period of assessment
For both Phase I and Phase II, the lifetime of the project applied in the FSRs /48//50/ are 16
years (including 1 year construction period), which is also evidenced by “The Statement for
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Validation Report 01 997 9105075956
the Lifetime of Phase I and Phase II” /110/.
As per “Economic Evaluation Method and Parameters for Projects of Building Material
Industry” /30/ issued by Ministry of Housing and Urban-Rural Development of the PRC in
2010, 1 year construction period and 15 years operation time is suitable for the float glass
industry.
Therefore, the lifetime adopted by the bundled project meets the requirement of “Tool to
Determine the Remaining Lifetime of Equipment. (Version 01), Annex 15 EB50”/24/, the
lifetime for the project was defined correctly.
2. Fair values
As per the artivcle 59 of “Law of Enterprise Income Tax” /32/, the enterpirse may determine
the fair values rate. Once the fair values rate has been determined, which couldn’t be
changed any more. For both Phase I and Phase II, the fair value rate of zero has been
determined in the FSRs /47//49/, which also has been expressed as cash inflow in the final
year of the IRR Calculation Spreadsheet /2//3/. The Validation Team confirmed which is in
line with the requirement of Para 4 of “Guidelines on Assessment of Investment Analysis
(version 05)” /16/.
3. Depreciation
As justified above, the operation lifetime of both Phase I and Phase II are 15 years, and
therefore the depreciation period for the project is selected as 15 years, which is deemed
appropriate by the Validation Team.
The annual depreciation rate for the project is calculated as 6.67% (i.e. 100%/15 = 6.67%).
The depreciation cost has not been treated as an expense in estimating net profits for the
purpose of calculating project IRR in the IRR Calculation Spreadsheet /2//3/. Therefore, the
Validation Team confirms the depreciation has been appropriately calculated in line with Para
5 of the “Guidelines on Assessment of Investment Analysis (version 05)” /16/.
4. Taxes & Interest rate
The Validation Team confirms that the relevant taxes applied in the IRR Calculation
Spreadsheet /2//3/ are consistent with the FSR s /48//50/. Taxation was not included as an
expense since the selected benchmark is intended for pre-tax comparison. According to the
PDD, the income tax is identified as 25% in compliance with the “Law of Enterprise Income
Tax” /32/ dated on 16th March 2007. The Value Added Tax (VAT) rate is determined as 17%
and the paid VAT for the fixed assets has been offset as input VAT in line with the “Provisional
Version No.: 05.0 Page 32
Validation Report 01 997 9105075956
Regulations on Value Added Tax” /31/ dated on 10th November 2008. The City Maintenance
and Construction Tax rate is identified as 7% in compliance with the “Provisional Regulations
on City Maintenance and Construction Tax” /33/ dated on 8th February 1985. The Education
Additive rate is determined as 3% according to the “Provisional Regulations on Education
Additive Tax” /34/. Therefore, the Validation Team confirms that the tax rates have been
appropriately determined and applied correctly in the IRR calculation.
For Phase I, the interest rate for the project is selected as 5.94% for long-term loan (more
than 5 years) and 5.31% for short-term loan (6 months to 1 year) in the IRR Calculation
Spreadsheet /2/, which are consistent with the FSR /48/. To be conservative, Phase I’s
investment decision was deemed as the starting date i.e. 05 November 2009, by which the
latest official long-term interest rate is 5.94% and short-term interest rate is 5.31% by
checking the official website of Bank of China, which is consistent with the rates specified in
the FSR /48/. Therefore, the Validation Team confirms that the applied interest rates for longterm (5.94%) and short-term (5.31%) are valid and applicable for the investment analysis at
the time of investment decision for Phase I.
For Phase II, the interest rate is selected as 6.40% for long-term loan (more than 5 years)
and 5.81% for short-term loan (6 months to 1 year) in the IRR Calculation Spreadsheet /3/,
which are consistent with the FSR /49/. To be conservative, Phase II’s investment decision
was deemed as the starting date i.e.01 March 2011, by which the latest official long-term
interest rate is 6.40% and short-term interest rate is 5.81% by checking the official website of
Bank of China, which is consistent with the rates specified in the FSR /49/. Therefore, the
Validation Team confirms that the applied interes

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