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PROJECT DESIGN DOCUMENT FORM


FOR CDM PROJECT ACTIVITIES (F-CDM-PDD)
Version 04.1

PROJECT DESIGN DOCUMENT (PDD)


Title of the project activity
Version number of the PDD
Completion date of the PDD
Project participant(s)
Host Party(ies)
Sectoral scope and selected methodology(ies)

Estimated amount of annual average GHG


emission reductions

Project Lumut Balai Unit 3 4 PT. Pertamina


Geothermal Energy
03.1
06/08/2012
South Pole Carbon Asset Management Ltd.
PT. Pertamina Geothermal Energy
Republic of Indonesia
Sectoral scope: (1) Energy industries
(renewable - / non-renewable sources)
Selected methodology: ACM0002
Consolidated baseline methodology for grid
connected electricity generation from
renewable sources version 12.3.0
581,784 t.CO2e

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SECTION A. Description of project activity


A.1. Purpose and general description of project activity
>>
The Project Lumut Balai Unit 3 4 PT. Pertamina Geothermal Energy (hereafter referred to as Lumut
Balai II1 or the Project) developed by PT. Pertamina Geothermal Energy (PGE), hereafter referred to as
the Project Developer, is a geothermal power plant in South Sumatera, Indonesia (hereafter referred to as
the Host Country). The Projects net installed capacity is 2 x 55 MW2, while its total gross power
output will be 2 x 58 MW. An estimated power generation of 867 GWh per annum (based on the
predicted load factor of 90% multiplied with the net installed capacity) will be supplied to the grid
operator. The Project is a Greenfield project because there have not been any major activity e.g. well
drilling dedicated to supply steam to Lumut Balai II.
The key purpose of the project is to utilise the geothermal resources of the mountain areas surrounding
Lumut Balai to generate electricity to be transmitted to the Sumatera Interconnected grid (hereafter
referred to as the Grid) through the Perusahaan Listrik Negara (PT. PLN (Persero)), state-owned
electricity company) interconnection point in the Lumut Balai geothermal project area. In the absence of
the proposed project activity, electricity would be supplied by the generation mix in the Sumatera
interconnected grid. The project activity will reduce total emissions in the Sumatera grid by supplying
green renewable electricity from geothermal resources in the Lumut Balai geothermal field, instead of
utilizing typical power generation with more carbon intensive technology. Total GHG emission
reductions for the first crediting period (7 years) is estimated to be 4,072,488 tCO2e, with annual average
amount of 581,784 tCO2e.
The project is contributing to sustainable development of the Host Country3. Specifically, the project:

Increasing community development and corporate social responsibility at Lumut Balai geothermal
field, as this project shows great improvement to existing geothermal field operation (social
sustainability)
Enhances the local investment environment and therefore improves the local economy, increases
employment opportunities as 30 40 persons will be permanently employed for the project activity
operation, another 40 persons will be employed for the Lumut Balai geothermal field, and the
construction of the project provides employment in the construction sector (economic sustainability)
Diversifies the sources of electricity generation, which is important for meeting growing energy
demands and facilitates the transition away from diesel and coal-supplied electricity generation
(environmental sustainability)
Makes greater use of geothermal renewable energy generation resources for sustainable energy
production with leading local contractor (technology sustainability)

Lumut Balai II is Lumut Balai Unit 3 4 geothermal power plant that is owned and operated by PT. Pertamina
Geothermal Energy. The Lumut Balai II is distinct and independent from Lumut Balai I (the power plant Lumut
Balai Unit 1 2 geothermal) that is now under request for registration process.
2
As per technical specification documentation that was sent to PLN in October 2010, 2 x 58 MW is Lumut Balai
IIs power output or total gross installed capacity as per turbines nameplate. While 2 x 55 MW is the net installed
capacity, which the project developer used in the Power Purchase Agreement with PLN dated on 11 March 2011.
The difference between power output or total installed capacity and net installed capacity, which is 2 x 3 MW, will
be covering power plant auxiliaries (referred also as the project developers internal consumption).
3

Sustainable Development criteria defined by the National Commission on Climate Change (representative of
Indonesian DNA) http://pasarkarbon.dnpi.go.id/web/index.php/dnacdm/cat/5/sustainable-development-criteria.html

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A.2. Location of project activity


A.2.1. Host Party(ies)
>>
Republic of Indonesia
A.2.2. Region/State/Province etc.
>>
South Sumatera province.
A.2.3. City/Town/Community etc.
>>
Muara Enim regency, Semende Darat Laut sub-district.
A.2.4. Physical/Geographical location
>>

Figure 1 Location of Lumut Balai 3-4 Geothermal Power Plant. Source: Google Earth

Lumut Balai II geothermal power plant is located approximately 400 km east of Palembang, the capital of
South Sumatera province.
The exact location of the geothermal power plant is defined using GPS coordinates -4.2202475 South,
103.6320667 East.
A.3. Technologies and/or measures
>>
The Project uses well-established geothermal power plant technology for electricity generation and
transmission, with total gross power output of 2 x 58 MW and net installed capacity of 2 x 55 MW. The
Project consists of a geothermal power plant with a steam turbine generator, gas extraction system,
switchyard and utility system. The steam for the project will be provided by active geothermal wells from

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the Lumut Balai geothermal field, with condensate re-injection wells to maintain groundwater supply.
The main technical parameters of the proposed project are shown in Table 1.
Table 1 Main technical parameters of the proposed project
Variable
Turbine generator capacity (MW)
Net installed capacity (MW)
Operating time yearly (hours)
Expected annual power generation /
effective supply to the grid (MWh)

Value
2 x 58
2 x 55
7884
(8760 x 90%)
867,240

Source
Power plant technical specification as
sent to PLN, page D-25
Feasibility Study Report, page 12
Calculated based on 90% load factor
as per Feasibility Study Report, page
12
Feasibility Study Report, page 12

The Project will utilise state of the art but known technology in electricity generation and transmission.
The geothermal steam turbine generator systems and other equipments e.g. cooling system must be
imported. All supporting equipments used in the Project are produced domestically, whereby the project
developer is experienced in handling and operating equipment of this nature.
Steam collected from the Lumut Balai geothermal field is sent to the Lumut Balai II power plant, where it
is separated from condensate and fed into steam turbine generator systems (direct steam expansion).
Returning condensate from the turbine and steam separator is then collected and re-injected back into the
geothermal field area. Electricity produced is sold to PLN.

Figure 2 Lumut Balai II Geothermal Power Plant (wells and power plant Unit 3 - 4)

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A.4. Parties and project participants


Party involved
(host) indicates a host Party

Private and/or public


entity(ies) project participants
(as applicable)

Indicate if the Party involved


wishes to be considered as
project participant (Yes/No)

Republic of Indonesia (host)

PT. Pertamina Geothermal


Energy

No

Switzerland

South Pole Carbon Asset


Management Ltd.

No

A.5. Public funding of project activity


>>
The project does not involve public funding from any Annex 1 countries.

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SECTION B. Application of selected approved baseline and monitoring methodology


B.1. Reference of methodology
>>
1. The baseline and monitoring methodology ACM0002 is used: Consolidated baseline
methodology for grid connected electricity generation from renewable sources version 12.3.0, in
effect as of 2 March 2012;
2. The Tool to calculate the emission factor for an electricity system, version 2.2.1, in effect as 29
September 2011;
3. The Tool to calculate project or leakage CO2 emissions from fossil fuel combustion, version
02, in effect as of 2 August 2008;
4. The tool for demonstration and assessment of additionality used is: Tool for demonstration and
assessment of additionality, version 06, in effect as of 25 November 2011.
Further information with regards to the methodology can be obtained at:
http://cdm.unfccc.int/methodologies/PAmethodologies/approved.html
B.2. Applicability of methodology
>>
The Methodology chosen is applicable to the proposed project due to the following reasons:
Table 2 Applicability Conditions of ACM0002
Methodology ACM0002
This methodology is applicable to grid-connected renewable
power generation project activities that (a) install a new power
plant at a site where no renewable power plant was operated
prior to the implementation of the project activity (greenfield
plant); (b) involve a capacity addition; (c) involve a retrofit of
(an) existing plant(s); or (d) involve a replacement of (an)
existing plant(s).
The project activity is the installation, capacity addition,
retrofit or replacement of a power plant/unit of one of the
following types: hydro power plant/unit (either with a run-ofriver reservoir or an accumulation reservoir), wind power
plant/unit, geothermal power plant/unit, solar power plant/unit,
wave power plant/unit or tidal power plant/unit;
In the case of capacity additions, retrofits or replacements
(except for capacity addition projects for which the electricity
generation of the existing power plant(s) or unit(s) is not
affected): the existing plant started commercial operation prior
to the start of a minimum historical reference period of five
years, used for the calculation of baseline emissions and
defined in the baseline emission section, and no capacity
addition or retrofit of the plant has been undertaken between
the start of this minimum historical reference period and the
implementation of the project activity;

CDM Project Activity


The project is a grid-connected
renewable power generation that install
a new power plant at a site where no
renewable power plant was operated
prior to the implementation of the
project activity (greenfield plant).
The project is an installation
geothermal power plant / unit.

of

The project is not a capacity addition,


retrofits or replacements.
It is a development of new power
generation facility.

On the basis of the reasons stated above, the applicability criteria of the methodology are met.

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B.3. Project boundary

Project scenario

Baseline scenario

Source
CO2
emissions
from
electricity
generation
in fossil
fuel fired
power
plants that
is displaced
due to the
project
activity
Fugitive
emissions
of CH4 and
CO2 from
noncondensable
gases
contained in
geothermal
steam
CO2
emissions
from
combustion
of fossil
fuels
required to
operate the
geothermal
power plant

GHGs

Included?

CO2

Included

CH4
N 2O

Excluded
Excluded

CO2

Included

CH4

Included

N 2O

Excluded

CO2

Included

CH4
N 2O

Excluded
Excluded

Justification/Explanation
According to ACM0002 only CO2 emissions from
electricity generation should be accounted for (main
emission source)
According to ACM0002 (minor emission source)
According to ACM0002 (minor emission source)

According to ACM0002: CO2 fugitive emissions from


non-condensable gases should be accounted for (main
emission source)
According to ACM0002: CH4 fugitive emissions from
non-condensable gases should be accounted for (main
emission source)
According to ACM0002 (minor emission source)

According to ACM0002: CO2 emission from fossil


fuels combustion should be accounted for (main
emission source)
According to ACM0002 (minor emission source)
According to ACM0002 (minor emission source)

B.4. Establishment and description of baseline scenario


>>
Lumut Balai II power plant or the Project is an independent, distinct power plant from Lumut Balai I
power plant. Even though both power plants share the same Lumut Balai geothermal field, each of them
has a separate steam supply system with a separated steam header. Under the Power Purchase Agreement
(PPA) between PGE and PLN, Lumut Balai II supplies generated electricity to the Sumatera
interconnected grid. Since this project does not modify or retrofit existing electricity generation facilities
the baseline scenario is the following:
Electricity delivered to the grid by the project would have otherwise been generated by the operation of
grid-connected power plants and by the addition of new generation sources, as reflected in the latest exante combined margin (CM) value, which is available at the time of validation starts, in Table 3.
Table 3 Key Information and Data Used to Determine the Baseline Scenario

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Variable
Operating Margin Emissions factor
Build Margin Emissions Factor
Combined Margin Emissions Factor

0.906 tCO2e / MWh


0.581 tCO2e / MWh
0.743 tCO2e / MWh

Value / Unit

Generation of the project in year y

867,240 MWh

Source
PLN database
(own generation and IPPs)
in cooperation with the Indonesian
DNA and the Ministry of Energy
110 MW x 90% x 24 hours x
365 days

In the absence of the project electricity will continue to be generated by the existing generation mix
operating in the Sumatera grid.
Three realistic and credible alternatives to the project activity are considered to investigate the baseline:

Alternative 1:
The proposed project activity implemented without CDM financing, i.e. the construction of a new
geothermal power plant with net installed capacity of 110 MW connected to the local grid, implemented
without considering CDM revenues. This alternative is in compliance with current laws and regulations of
Indonesia. However, according to the investment analysis in section B.5, the proposed project activity
without CDM revenues is economically unattractive, and therefore is not a realistic baseline scenario. For
a full assessment, please see section B.5.
Alternative 2:
Continuation of the current situation, i.e. electricity will continue to be generated by the existing
generation mix operating in the grid, with capacity additions as planned. This alternative will be
considered as the baseline scenario.
Alternative 3:
Construction of a thermal power plant with the same installed capacity or the same annual power output.
This alternative is in compliance with the existing laws and regulations in Indonesia; there are no laws or
regulations prohibiting the construction of such a thermal power plant (gas, diesel or coal-fired power
plant). Out of these power plants, gas power plants will have technical barriers, since there is no gas
pipeline constructed in the Lumut Balai mountain area. Construction of a diesel power plant will face less
barriers to implement, however, with the increase in fuel price, it is expected that the operational cost of
such a power plant will be very high; thus the generation cost per kWh is expected to be very high. The
construction of a coal-fired power plant could also be considered as a potential baseline. Thus both the
continuation of the current situation (Alternative 2) and the construction of a coal-fired power plant
(Alternative 3) are possible baseline alternatives. In order to be conservative, the baseline scenario with
the lowest emissions is selected for comparison; therefore alternative 3 will not be considered further.
Alternative 4:
Construction of renewable power generation with the same installed capacity or the same annual power
output. This alternative is in compliance with the existing laws and regulations in Indonesia. However it
is not plausible. PGE has no competencies in construction and operation of other renewable power
generation (hydro, wind, solar etc.). Hence, this is not a plausible alternative to the project owner.
In summary, two alternatives remain from this analysis, which will be examined in more detail in section
B.5:
Alternative 1
The proposed project activity implemented without CDM financing, i.e. the construction of a new
geothermal power plant with net installed capacity of 110 MW connected to the local grid, implemented
without considering CDM revenues.

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Alternative 2
Continuation of the current situation, i.e. electricity will continue to be generated by the existing
generation mix operating in the grid, with capacity additions as planned.
B.5. Demonstration of additionality
>>
The following steps are used to demonstrate the additionality of the project according to the latest version
of the Tool for the demonstration and assessment of additionality agreed by the Executive Board for the
assessment of alternatives please refer to B.4 :
The start of the crediting period of this project activity is not prior to the date of registration, however for
the assessment of additionality it is important to note that the CDM was taken into account when
investment decisions were considered, and in the planning stages of the project.
PT. Pertamina Geothermal Energy (PGE) is a subsidiary to PT. Pertamina (Persero), incorporated in
December 2006 as a spin-off from Pertamina Upstream Division. Its core business is geothermal steam
exploration and production (E&P), and therefore selling geothermal steam to power plant owners4
currently in 2 major areas and 1 minor area. Lumut Balai I and II, which are located on the same Lumut
Balai geothermal field are distinct and having separate steam systems coming from different identified
wells. Both Lumut Balai I and II will be operating independently as a separate power plant even though
both are located in Lumut Balai geothermal field. The project has not started any major activities e.g. well
drilling, thus considered as a Greenfield project. Based on Lumut Balai II project plan, an estimated date
to sign the contract for the 1st well drilling is in 1 October 2012, which is then applied as the start date of
the project.
The following shows the timeline of historical work on the site, pre-project activity, and project
development:
Table 4 Lumut Balai II geothermal power plant historical progress

Activity
Environmental Impact
Assessment / EIA report
PGE and PLN agreement
facilitated by the National
Development of Planning
Agency (BAPPENAS)
FS report for power plant
development
(electricity generation and
sales to the Grid)
PGE Board of Directors and
Board of Commissioners
agreed to develop Lumut
Balai II geothermal power
plant as a total project.

Date
21 August 2008

Head of Agreement (HoA)

17 February 2010

13 July 2009

Remarks
Approval by the environmental agency of
Muara Enim regency
Signed Minutes of Meeting (MoM) describes
PGE and PLN common interest to develop
several geothermal fields in Indonesia

September 2009

Total investment = USD 276.35 million


(expected electricity price = USD 90/MWh)

21 January 2010

A Minutes of Meeting describes Board of


Directors and Board of Commissioners
decision to develop Lumut Balai II
geothermal power plant. This date is
considered as the investment decision date of
the project
Head of Agreement (HoA) is an agreement

Only in 2008 PGE started operating its own first geothermal power plant, a registered CDM project Kamojang unit
IV geothermal power plant

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between PGE & PLN


(for eight geothermal areas)

CDM Prior consideration


sent to the Indonesian DNA

30 August 2010

Confirmation of CDM prior


consideration from the
Indonesian DNA
CDM Prior consideration
sent to UNFCCC

4 September 2010

PPA signed with PLN

11 March 2011

ERPA signing with South


Pole Carbon Asset
Management Ltd.
Contract for 1st well drilling
work dedicated to supply
steam to Lumut Balai II
Power plant construction
start
Power plant operation start

March 2012

16 September 2010

1 October 2012

between seller e.g. PGE and buyer (e.g.


PLN) before both parties entered into energy
sales contract or steam sales contract such as:
Steam sales = Ulubelu I, Lahendong IV,
Hululais, Kotamobagu I-II, Sungaipenuh
Electricity sales = Ulubelu II, Karaha,
Kamojang, Lahendong V, Lumutbalai I-II
Prior consideration published in the
Indonesian DNA website as following:
http://pasarkarbon.dnpi.go.id/web
/index.php/komnasmpb/cat/4/database/2.html
Letter to President Director of PGE from the
Indonesian DNA regarding CDM prior
consideration
Prior consideration published in the
UNFCCC website on 12 October 2010:
http://cdm.unfccc.int/Projects
/PriorCDM/notifications/index_html
Price = USD 7.53 cent / kWh
(30 years from COD)
Signed ERPA between PGE and SP CAM
Ltd.

1 March 2014

An estimated date of contract signing as per


PGE written statement, which is considered
as the project start date of the project
Lumut Balai II project plan

1 January 2017

Lumut Balai II project plan

Step 1. Identification of alternatives to the project activity consistent with current laws and
regulations
Sub-step 1a. Define alternatives to the project activity:
Two remaining alternatives are considered:
Alternative 1: The proposed project activity without CDM: construction of a new geothermal power plant
with net installed capacity of 110 MW connected to the Grid, implemented without considering CDM
revenues.
Alternative 2: Continuation of the current situation. Electricity will continue to be generated by the
existing generation mix operating in the Grid.
Sub-step 1b. Enforcement of applicable laws and regulations:
All alternatives are in compliance with all applicable legal and regulatory requirements of Indonesia.
STEP 2. Investment Analysis

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According to the Tool for the demonstration and assessment of additionality, three options can be
applied to conduct the investment analysis. These are the simple cost analysis (Option I), the investment
comparison analysis (Option II) and the benchmark analysis (Option III).
Sub-step 2a. Determine appropriate analysis method
Since this project will generate financial / economic benefits other than CDM-related income, through the
sale of generated electricity, Option I (Simple Cost Analysis) is not applicable.
According to the Additionality Tool, if the alternative to the CDM project activity does not include
investments of comparable scale to the project, then Option III must be used.
Given that the Project Developer does not have alternative and comparable investment choices, the
benchmark analysis (Option III) is more appropriate than investment comparison analysis (Option II) for
assessing the financial attractiveness of the project activity.
Sub-step 2b. Option III Application of benchmark analysis
The likelihood of the development of this project, as opposed to the continued generation of electricity by
the existing generation mix operating in the grid (i.e. Alternative 2 the baseline) will be determined by
comparing the project IRR without CDM financing (Alternative 1) with a suitable benchmark that
considers the specific context in which the proposed project activity takes place.
According to the paragraph 13 of the Guidelines on the assessment of investment analysis in the case of
projects, which could be developed by an entity other than the project participant, the benchmark should
be based on publicly available data sources. The project activity could have been developed by any other
entity, as long as this entity had the authorization to do it. This authorization can be transferred from one
company to another, as happened to the project in the past5. For this reason the benchmark has been duly
derived from publicly available data sources.
An appropriate benchmark value represents the minimum required return, which the project should earn
to justify its financial viability. It has been determined according to the Tool for demonstration and
assessment of additionality (hereinafter Tool) and the Guidance on the assessment of investment
analysis (hereinafter Investment Guidance). The benchmark has been derived from government bond
rates, increased by a suitable risk premium to reflect private investment in a particular industry; those
parameters are based on information that is publicly available and standard in the market (Tool, sub-step
2b, para.6a; Investment Guidance para.12). The risk premium applied reflects the risk of the project
activity being assessed as required by the Investment Guidance (para.15) but does not relate to an
internal benchmark that would apply an individuals perception of risk involved in the project activity or
individual profit expectations (Investment Guidance, para.13). The weighted average cost of capital
(WACC) of the project activity is used as most appropriate benchmark to compare with the projects
return (Investment Guidance, para.12 in combination with para.14 WACC is an appropriate benchmark
for a project IRR). The selected approach is widely accepted as a suitable approach among financial
managers to take investment decisions.
Financial data used in the benchmark determination is obtained from Indonesian or US long-term
government bond rates, which are increased by an appropriate risk premium that expresses the additional
(market and financing) risk of equity investments over returns on riskless assets. The Investment
Guidance requires project participant to risk-adjust the benchmark according to the specific risk profile
of the project activity, i.e. its market and financing risk (para.14). All information used in this financial
5

Renewable Energy in Asean: Indonesia-geothermal, refer to Table Suppliers and Manufacturers (PT. Daya
Bumi Lumut Balai tried to negotiate Lumut Balai geothermal development, in 2004)
http://www.aseanenergy.org/icra/indonesia/geothermal/geothermal.htm

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analysis, including specific market risk is based on actual publicly available financial market information
and provided by financial experts.
Considering information available to the project developer, the project WACC was calculated based on
the following inputs:
Table 5 Values taken for benchmark determination

Parameters
Geothermal tax rate
(T)
Cost of Debt (CD)

Value
34 %

Reference
Presidential Decree no. 49 issued in 1991

3.98 %

Risk free rate (Rf)

4.08 %

Total risk premium


(RP)

9.00 %

The lowest cost of debt for investment loans sourced from


Indonesias Central Bank statistic webpage is chosen among cost
of debt of different bank groups prior to the investment decision.
Cost of debt value refers to investment loan rate of foreign and
joint bank in December 2009.
Lowest rate between an Indonesia government bond or US long
term government bond. U.S long-term government bond is
considered as risk free instrument. Bond rate is taken as the 1-year
average (January to December 2009) prior to the investment
decision and for a duration equal to the technical lifetime of the
project activity, link: http://www.treasury.gov/resourcecenter/data-chart-center/interestrates/Pages/TextView.aspx?data=yieldYear&year=2009
The total risk premium includes an Equity Risk Premium and a
Country Risk Premium: The reason behind this premium stems
from the risk-return trade-off, in which a higher rate of return is
required to entice investors to take on riskier investments. These
are risk premiums estimates for other countries outside of the U.S
based upon the country ratings assigned by Moodys, link:
http://pages.stern.nyu.edu/~adamodar/

Beta (unlevered)

1.95

% Debt
% Equity
Post-tax WACC

50 %
50 %
17.92 %

"Risk Premium for other Markets". Value taken for Indonesia for
period January to December 2009, which is publicly available in
Jan 2010, link:
http://www.stern.nyu.edu/~adamodar/pc/archives/ctryprem09.xls
Unlevered Total Beta is calculated based on power sector
individual company data in emerging markets available at Prof.
Aswath Damodaran website (Stern University). Data is taken from
period of January to December 2009 before investment decision
date, link:
http://www.stern.nyu.edu/~adamodar/pc/archives/emergcompfirm
09.xls
As per EB 62, Annex 5, Para 17, 18
As per EB 62, Annex 5, Para 17, 18
Calculated from above values as per ER-IRR-WACC calculation

The formula applied to calculate the WACC is the following:


Post-tax WACC6 =
[Cost of Equity(%) x Equity Proportion(%)] + [Cost of Debt(%) x Debt Proportion(%) x (1 Tax rate)]
Determination of Cost of Equity
6

http://www.investopedia.com/terms/w/wacc.asp

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The cost of equity is determined by utilizing the Capital Asset Pricing Model (CAPM). The CAPM
defines the compensation of investors for investments taken. One part of the formula is related to the time
value of money (risk free rate) compensating for investment over a time period, the other part represents
the risks for investment. This is calculated by taking a risk measure, so called beta (). The beta compares
the returns of the asset to the market over a period of time and to the market premium. The formula
correctly applied is as following:
Total Cost of Equity
Re

= Risk Free Rate + [Total Betalevered x Total Risk Premium]


= Rf + [Total lev x RP]

Total lev=Total Betaunlevered x [1 + ((1-T) x (D/E))]


Where:
Re: Cost of equity
Rf: Risk free rate
Total lev: Total Beta levered
RP: Total Risk Premium
T: Tax rate applied in the proposed project activity
D/E; Debt/Equity ratio
The applied model is internationally known7 and applied in making investment decision.
Explanation of input values to the Cost of Equity
Rf: 4.08 %
The risk free rate is determined from a 1-year average data (January to December 2009) of US
government rate (long term, 30 years corresponding to the start date and the expected lifetime of the
proposed project activity). These bond rates were available at the time of making the investment decision.
The data for the Risk free rate is sourced from US Central Bank webpage8, and the value of the Risk free
rate can be found in the Risk free rate tab in Lumut Balai II ER-IRR-WACC calculation spreadsheet.
Total unlevered: 1.95
The unlevered total beta value is calculated based on individual company information in emerging
markets for power sector information, as provided by Prof. Aswath Damodaran, a professor at Stern
University. Data used in the calculation from January to December 2009 is the latest data available at the
time of investment decision.
The unlevered total beta is calculated from beta value of each company in small Asia region (exclude
China and India), being unlevered with available company data for Tax rate and Book D/E ratio
values, and subsequently the formula for Cash-adjusted Beta is applied to the resulting unlevered beta
corrected for cash (with available company data for Cash/Firm value), according to formula below9:
Unlevered Beta = company Beta / [1 + ((1Tax rate) x (Debt/Equity))]
Unlevered Beta corrected for cash = Unlevered Beta / (1 Cash/ Firm Value)
The value for each company unlevered Beta corrected for cash is then divided by available company
data for Correlation with Market, to produce unlevered Total Beta corrected for cash.

http://www.investopedia.com/terms/c/capm.asp
http://www.treasury.gov/resource-center/data-chart-center/interestrates/Pages/TextView.aspx?data=yieldYear&year=2009
9
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/TenQs/TenQsBottomupBetas.htm
8

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Unlevered Total Beta = unlevered Beta corrected for cash / Correlation with Market
Finally, average value for unlevered Total Beta is calculated from all companies in the Power sector and
Small Asia region. The value of the unlevered Total Beta can be found in the Beta unlevered tab in
Lumut Balai II ER-IRR-WACC calculation spreadsheet.
RP: 9.00%
The total risk premium10 includes an Equity Risk Premium and a Country Risk Premium: The reason
behind this premium stems from the risk-return trade-off, in which a higher rate of return is required to
entice investors to take on riskier investments. These are risk premiums estimates for other countries
outside of the U.S based upon the country ratings assigned by Moodys. Risk premium value is taken from
period of January to December 2009, which can be found in the Country premiums tab in Lumut Balai
II ER-IRR-WACC calculation spreadsheet.
Cost of Equity as per CAPM approach:
Re
= Rf + [Total lev x RP]
= 4.08% + [3.24 x 9%]
= 33.24 %
Cost of Debt: 3.98 %
The interest rates / the lending rates statistics data by the Indonesian Central Bank (Bank Indonesia) are
used as the cost of debt to calculate the WACC. The cost of debt has therefore been taken from the
official data source. The Bank Indonesia11 can be considered as credible and suitable data source for the
purpose of the determination of the debt cost. The value corresponds to the lowest and most conservative
investment loan rate in 2009, which refers to investment loan rate of foreign and joint bank in December
2009 (3.98 %, foreign and joint banks investment loan, from Table I.27 Interest Rate of US Dollar Loans
by Group of Banks).
Geothermal tax rate: 34 %
The reference used for Geothermal tax rate is the Presidential Decree which is a government regulation
according to which the Geothermal projects are obliged to pay the 34% Tax, as per the Presidential
Decree no. 49 / 1991. This tax rate has to be applied for geothermal projects in Indonesia. This tax rate
was valid at the time of decision-making.
Applying the above mentioned formulas and input values; the post-tax WACC is calculated as 17.92 %.
This value is used as the project IRR benchmark.
Sub-step 2c. Calculation and comparison of financial indicators
Upon obtaining the WACC, a financial analysis with Tax calculation of the project activity was carried
out. Table 5 shows the input data as well as the key parameters used in the financial analysis. Every input
value had a reasonable and reliable source, and was backed up by third party information, showing the
reasonableness of the numbers applied, as follows:
Electricity Tariff
PGE expected to be able to sell generated electricity to PLN at the price of US$ 90 / MWh, in the
Feasibility Study for Lumut Balai II power plant development. However, in March 2011 the Power
10

http://pages.stern.nyu.edu/~adamodar/, "Risk Premium for other Markets". Value taken for Indonesia. Most recent
available Jan 2010, link: http://www.stern.nyu.edu/~adamodar/pc/archives/ctryprem09.xls
11
http://www.bi.go.id/web/en/Statistik/Statistik+Ekonomi+dan+Keuangan+Indonesia/Versi+HTML/Sektor+Monete
r/Sektor+Moneter.htm

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Purchase Agreement (PPA) was finally signed with significantly lower price than expected, US$ 75.3 /
MWh. The highest price is used for PDD calculation, giving more conservative results to the IRR
calculation.
Annual operating costs
The applied value is taken from the Feasibility Study: Upstream (steam field) O&M: US$ 30,000 / MW
and Power Plant O&M: US$ 50,000 / MW, this is equivalent to US$ 8,800,000 / year or US$ 10.15 /
MWh. Specifically for Power Plant O & M costs (US$ 5,500,000 / year or US$ 6.3 / MWh) are
significantly lower than the geothermal power plant O&M costs found in the study published by PT.
Indonesia Power, an Indonesian geothermal power plant operator12, and considerably lower than in
international literature13. However, the O & M cost does not yet include make-up wells maintenance cost
in year 4, 10, 16 and 22 as per Table 6.
Table 6 Financial Parameters for Lumut Balai II power plant

Financial Parameter
Total Investment
Annual
Operation
and
Maintenance (O & M) Costs
Annual power generation

Project lifetime
Electricity tariff
Geothermal Income Taxes
Depreciation for upstream
Depreciation for downstream
Make-up wells maintenance cost
in year 4 & 16
Make-up wells maintenance cost
in year 10 & 22
Residual make-up well (Year 22)
Annual interest payment

Unit
US $
US $ / year

Value
276,350,000
8,800,000

References
Feasibility Study page 18
Feasibility Study page 19

MWh / year

867,240

years
US $ / MWh
%
%
%
US $

30
90.00
34.00
10.00
5.00
12,250,000

Calculated based on net installed


capacity 2 x 55 MW with capacity
factor of 90%; Feasibility Study
page 19
Feasibility Study page 15
Feasibility Study page 19
Presidential Decree no. 49 / 1991
Feasibility Study page 19
Feasibility Study page 19
Feasibility Study page 23

US $

15,940,000

Feasibility Study page 23

US $

3,188,000

Calculated, depreciation sheet

3.98

Investment rate value for foreign and


joint bank from Central Bank of
Indonesia statistic webpage

Table 7 Summary of Project Financial Analysis

Post-tax IRR
Benchmark

Without CDM
16.08
17.92

Sub-step 2d. Sensitivity analysis


A sensitivity analysis was undertaken using assumptions that are conservative from the point of view of
analysing additionality, i.e. the best-case conditions for the project IRR were assumed. It was supposed
12

Kemampuan Sumper Daya Domestik Bindang Pembangkitan Dalam Mendukung Peningkatan Penyediaan Tenaga
Listrik, published by PT Indonesia Power 2002 (Paper Indonesia Power O&M Costs comparison.pdf) Operational Cost for a geothermal power plant equivalent to 8.93 US$/MWh)
13
Cost of geothermal power and factors that affect it Subir K. Sanyal (2004) - This document states operational
costs of 2.0 to 1.4 cents US$ per kWh (14US$/MWh)

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that the Project experienced a) no change of original assumptions; b) increasing revenue (increase of
electricity tariff or operating hours); c) capital costs decreased; d) operation and maintenance costs
decreased. The results are shown in the table below. Deviations of 10% have been taken into account in
the above decisive assumptions. The summary table is shown below.
Table 8 Summary of project sensitivity analysis

Scenario
a) no change in original assumptions
b) increase in project revenues
c) decrease in investment costs
d) decrease in O & M costs

% change

10 %
10 %
10 %

IRR (%)
16.08
17.58
17.57
16.29

The variation in key parameters above were considered to be conservative because the parameters were
not expected to vary by more than this amount (and are in fact not expected to vary in favour of the
project at all) for the following reasons:
A) Project revenue is unlikely to increase that much. Instead, final signed PPA price was 16 % lower
than expected when PGE decided to develop the project. The PPA contract signed between PGE
and PLN is unlikely to be revised upward during contract period, increasing the electricity price.
It is not a common practice in the country neither in the sector. Revenues could be increased only
by increasing the hours of operation. Assuming an increase in electricity generation through an
increase of the overall load factor above, the IRR would increase but still below the benchmark.
Even this increase is difficult to accomplish given the engineering constraints of a geothermal
power plant, which requires regular and sufficient maintenance to ensure safe operation and
performance over the lifetime of the equipment. Increasing the load factor above 90 % would
jeopardise power plant maintenance. Therefore increasing revenues by 12.30 % to breach the
benchmark is not possible to happen.
B) Investment costs are unlikely to decrease the amount necessary to make the project profitable by
the time of decision-making. The short-term trend of investment costs is to continue this
escalation. In addition to that, an increase of raw material and fuel price globally results in
upward price pressure for equipment. To further justify that total investment cost will unlikely to
decrease is a higher average cost of well drillings that have been developed by PGE at Lumut
Balai geothermal field for Lumut Balai I geothermal power plant compare to PGE assumption in
the Feasibility Study of Lumut Balai II geothermal power plant. The average cost of already
drilled wells in Lumut Balai I geothermal power plant is 4.3 Mill USD per well, while cost
assumption used in the Feasibility Study of Lumut Balai II geothermal power plant is only 4 Mill
USD per well. In addition to that, as a comparison with other similar geothermal projects that also
consider upstream and downstream costs, which are now under validation such as Rantau
Dedap14 (USD 3,434/kW), Gunung Rajabasa15 (USD 2,986/kW), Liki Pinangawan Muaralaboh16
(USD 3,592/kW), Lumut Balai II (USD 2,512/kW) investment cost is much more lower. Besides
that, based on International Energy Agency study in 201017, Lumut Balai II cost per kW is lower
than their average indicative cost, which is USD 4,000/kW. Therefore decreasing investment

14

Rantau Dedap geothermal power plant,


http://cdm.unfccc.int/Projects/Validation/DB/KLFI1FEFBAI39NTVTY2GAB0F7AODZ4/view.html
15
Gunung Rajabasa geothermal power plant,
http://cdm.unfccc.int/Projects/Validation/DB/VFB91YBBHSJHDSQP7P8EKD9CC6FK75/view.html
16
Liki Pinangawan Muaralaboh geothermal power plant,
http://cdm.unfccc.int/Projects/Validation/DB/BSBA7OIEMD12DICFOHA5HHQUDB6WNL/view.html
17
Geothermal Heat and Power, International Energy Agency ETSAP, May 2010

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costs by 12.15 % to breach the benchmark is quite unlikely to happen for Lumut Balai II as the
investment cost is already very low.
C) Operation and maintenance costs including make-up wells are also unlikely to significantly
decrease during the operation period. The costs presented on the feasibility study include only
fixed costs based on the installed capacity of the equipment. The fixed costs include the Power
Plant O&M and the upstream costs on the geothermal field (US$ 30 / kW for upstream costs and
US$ 50 / kW for power plant O&M, totalizing US$ 8,800,000 / year). Even with decreasing
operation and maintenance costs by 89.50% the project remains still unattractive.
These results show that even under very favourable, although unreasonable, circumstances the Project
IRR is still not higher than the benchmark for similar investments under similar conditions in the host
country. Therefore we can conclude that the Best Case IRR is not financially attractive, and the proposed
project without CDM (alternative 1 Baseline Scenario) overall is also not financially attractive.
STEP 3. Barrier Analysis
Barrier analysis was not performed for this project activity.
STEP 4. Common Practice Analysis
Sub-step 4a. Analyse other activities similar to the proposed project activity
Indonesia is defined as the geographical scope for the common practice analysis, and all geothermal
power plants operational at the time of decision-making are considered in the analysis. Indonesia has
significant geothermal energy potential due to the volcanic zone, which stretches along the southern coast
of Sumatera and Java. Geological Agency conducted surveys to have an insight of geothermal potential in
all location in Indonesia. Until November 2007, a total of 27,441 MW geothermal potential calculated
from 256 prospects area with 62.1% of them are still on preliminary survey stage, while 32.04% on
detailed survey stage, 3.13% are ready to be developed and only 2.73% are producing18. Total geothermal
potential until November 2007 is 27,441 MWe, of this potential, 13,273 MWe are located in Sumatera
Island, 9,556 MWe are scattered across Java Island and remaining 4,612 MWe geothermal potential are
divided between other Islands19.
Despite this potential, however, only a small proportion of the geothermal resource has been exploited.
The proportion of grid electricity coming from geothermal in Indonesia is very low, accounting for less
than 5% of electricity generation in Indonesia in 201020. The geothermal capacity addition of 1% to total
generation in the last 9 years, all were developed as CDM projects. The reasons for this are generally low
rate of return and increased risks associated with geothermal plants when compared to other technologies,
but economic uncertainties also play a role. Prior to the 1997-1998 financial crisis, the Indonesian
government awarded contracts for 11 geothermal projects that would have had a generating capacity of
3,417 MW21. Due to the tight fiscal constraints imposed by the crisis and the political change that
followed, 7 of the above projects were suspended.

18

Kasbani, et. al., Kesiapan Data Potensi Panas Bumi Indonesia Dalam Mendukung Penyiapan Wilayah Kerja,
Proceeding Pusat Sumber Data Geologi, page 1
19
Kasbani, et. al., page 5
20
Darma, Surya, et. al., Geothermal in Indonesia: Government Regulations and Power Utilities, Opportunities and
Challenges of its Development, Proceedings World Geothermal Congress 2010, Bali, Indonesia 2010.
21
US Embassy Report, Indonesias Geothermal Development, Jakarta, Indonesia, 2002

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All geothermal power plants operational at the time of decision-making are considered in the analysis. By
201022 , geothermal electric power generation capacity in Indonesia was 1,187.3 MWe. This figure
includes currently operating facilities at Sibayak (12 MWe) in the Sumatera grid. This also represents just
4.3 % of the estimated geothermal potential of 27,441 MW23.
Table 9 Operational Geothermal Power Plants in Indonesia
No
1
2
3

5
6
7
8

22

Power Plant24
<Location>
(Capacity)
Kamojang25 unit I, II, III
<Jawa>
(140 MW)
Kamojang26 unit IV
<Jawa>
(60 MW)
Salak27
phase 1
<Jawa>
(165 MW)
Salak28
phase 2
<Jawa>
(165 MW)

Commencement
date

Steam Field
Operator

Power Plant Operator

With or Without CDM


Activity

Unit 1 1982

Pertamina (state
owned company)

PLN (state owned


electricity company)

Without CDM activity

Pertamina (state
owned company)

Pertamina (state owned


company)

CDM activity

Unocal / Chevron
(IPP)

PLN (state owned


electricity company)

Without CDM activity

1997

Unocal / Chevron
(IPP)

Without CDM activity

Darajat29 phase 1
<Jawa>
(55 MW)
Darajat30 phase 2
<Jawa>
(70 MW)
Darajat31 phase 3
<Jawa>
(110 MW)
Dieng32 unit 1
<Jawa>
(60 MW)

1994

Chevron (IPP)

2000

Chevron (IPP)

Unocal built and operated


for 15 years, then transfer
operations to PLN (stateowned) under BOT
scheme
Indonesia Power
(subsidiary of PLN, stateowned)
Chevron (IPP)

2006

Chevron (IPP)

Chevron (IPP)

CDM activity

1998

California Energy
(IPP) developed,
then transferred to
Geo Dipa Energi (JV
between Pertamina
and PLN, both state-

California Energy (IPP)


developed, then
transferred to Geo Dipa
Energi (JV between
Pertamina and PLN, both
state-owned)

Without CDM activity

Unit 2,3 1987


December 2007
Unit 1,2 1994
Unit 3 1997

Without CDM activity


Without CDM activity

Darma, et. al, Geothermal in Indonesia: Government Regulations and Power Utilities, Opportunities and
Challenges of its Development, page 1
23
Kasbani, et. al., Kesiapan Data Potensi Panas Bumi Indonesia Dalam Mendukung Penyiapan Wilayah Kerja,
Proceeding Pusat Sumber Data Geologi, page 1
24
US Embassy Report, Indonesias Geothermal Development, Jakarta, Indonesia,
25
Registered CDM Project: Kamojang Geothermal Project PDD,
http://cdm.unfccc.int/Projects/DB/RWTUV1255101629.04/view
26
Registered CDM Project: Kamojang Geothermal Project PDD,
http://cdm.unfccc.int/Projects/DB/RWTUV1255101629.04/view
27
Registered CDM Project: Darajat Unit III Geothermal Project PDD,
http://cdm.unfccc.int/Projects/DB/KPMG1159285050.32/view
28
Registered CDM Project: Darajat Unit III Geothermal Project PDD,
http://cdm.unfccc.int/Projects/DB/KPMG1159285050.32/view
29
Registered CDM Project: Darajat Unit III Geothermal Project PDD,
http://cdm.unfccc.int/Projects/DB/KPMG1159285050.32/view
30
Registered CDM Project: Darajat Unit III Geothermal Project PDD,
http://cdm.unfccc.int/Projects/DB/KPMG1159285050.32/view
31
Registered CDM Project: Darajat Unit III Geothermal Project PDD,
http://cdm.unfccc.int/Projects/DB/KPMG1159285050.32/view

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No

Power Plant24
<Location>
(Capacity)

Commencement
date

Steam Field
Operator

Wayang Windu33 phase 1


<Jawa>
(110 MW)
Wayang Windu34 phase 2
<Jawa>
(110 MW)
Lahendong35 I
<Sulawesi>
(20 MW)
Lahendong II36 <Sulawesi>
(20 MW)
Lahendong37 III
<Sulawesi> (20 MW)

1997

Sibayak I38 <Sumatera> (2


MW)
Sibayak II and III39
<Sumatera> (11.3 MW)
Ulumbu40 <East Nusa
Tenggara> (5 MW)

2000

10
11
12
13

14
15
16

Power Plant Operator

With or Without CDM


Activity

owned)
Mandala Magma
Nusantara (IPP)

Mandala Magma
Nusantara (IPP)

Without CDM activity

2009

Mandala Magma
Nusantara (IPP)

Mandala Magma
Nusantara (IPP)

CDM activity

2001

Pertamina (state
owned company)

PLN (state owned


electricity company)

Without CDM activity

2007

Pertamina (state
owned company)
Pertamina (state
owned company)

PLN (state owned


electricity company)
PLN (state owned
electricity company)

CDM activity

Pertamina (state
owned company)
Pertamina (state
owned company)
Pertamina (state
owned company)

Pertamina (state owned


company)
PT. Dizamatra Powerindo
(IPP)
PLN (state owned
electricity company)

2009

2008
2011

CDM activity as LoA


has been approved and
prior consideration has
been sent.
Without CDM activity
CDM Activity
CDM activity as prior
consideration has been
sent41.

Sub-step 4b. Discuss any similar options that are occurring


Based on the above step, there is no activity similar to the proposed project activity in the defined region.
It is thus concluded that the realistic baseline scenario is the continuation of the current situation, where
electricity will continue to be generated by the existing generation mix operating in the grid, with capacity
additions as planned (Alternative 2).
Based on the Tool for the demonstration and assessment of additionality (version 6), the applicable
geographical area covers the entire country of Indonesia. The steps outlined in the Tool is followed:

32

Geodipa, http://www.geodipa.co.id/index.php?option=com_content&view=article&id=72&Itemid=110&lang=en
Registered CDM Project: Wayang Windu phase 2 Geothermal PowerProject PDD,
http://cdm.unfccc.int/Projects/DB/TUEV-SUED1260194062.48/view
34
Registered CDM Project: Wayang Windu phase 2 Geothermal PowerProject PDD,
http://cdm.unfccc.int/Projects/DB/TUEV-SUED1260194062.48/view
35
Registered CDM project Lahendong II-20 MW Geothermal Project PDD,
http://cdm.unfccc.int/Projects/DB/TUEV-SUED1249404911.81/view
36
Registered CDM project Lahendong II-20 MW Geothermal Project PDD,
http://cdm.unfccc.int/Projects/DB/TUEV-SUED1249404911.81/view
37
Indonesian DNA Letter of Approval for 20 MW Lahendong III was granted in February 2009
http://pasarkarbon.dnpi.go.id/web/index.php/komnasmpb/cat/4/database/4/7.html
38
Sibayak 1 is a 2 MW mono-block geothermal power plant,
http://www.pgeindonesia.com/index.php?option=com_content&view=article&id=70&Itemid=47
39
Under validation Sibayak geothermal power plant,
http://cdm.unfccc.int/Projects/Validation/DB/O2CE1RL2JNZWXYHS7BRF66PQXYNKJ0/view.html
40
Ulumbu geothermal has been generating electricity, http://www.pln.co.id/eng/?p=2756 (retrieved on 7 December
2011)
41
Prior consideration under 6 MW Geothermal Project in Ulumbu, Flores, Indonesia,
http://cdm.unfccc.int/Projects/PriorCDM/notifications/index_html
33

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Step 1: calculate applicable output range as +/-50% of the design output or capacity of the
proposed project activity
Outcome of Step 1: The project activity has an installed capacity of 110 MW, therefore the output range
is 55 165 MW.
Step 2: In the applicable geographical area, identify all plants that deliver the same output or
capacity, within the applicable output range calculated in Step 1, as the proposed project activity
and have started commercial operation before the start date of the project. Note their number Nall.
Registered CDM project activities shall not be included in this step
The power plants that deliver the same capacity are listed in the following table.
Table 10 All Power Plants delivering the same capacity as the project activity
No

Power Plant4243
Lau Renun 1,2 Hydro

Location
<Province>
North Sumatera

Capacity
(MW)
82

Power Plant
Operator
PLN

1
2

Koto Panjang Hydro

Riau

114

PLN

In operation, with Voluntary


Scheme activity
In operation, without CDM activity

Maninjau Hydro

West Sumatera

68

PLN

In operation, without CDM activity

Singkarak Hydro

West Sumatera

131

PLN

In operation, without CDM activity

Besai 1,2 Hydro

Lampung

90

PLN

In operation, without CDM activity

Bakaru Hydro

South Sulawesi

126

PLN

In operation, without CDM activity

Karang Kates Hydro

East Java

105

PJB

In operation, without CDM activity

Jatiluhur Hydro

West Java

150

IPP

In operation, without CDM activity

Dieng44

Central Java

60

In operation since 1998, without


CDM activity

10

Salak Geothermal

West Java

165

California Energy
(IPP) developed, then
transferred to Geo
Dipa Energi (JV
between Pertamina
and PLN, both stateowned)
Indonesia Power

11

Salak IPP Geothermal

West Java

165

12

West Java

110

13

Wayang Windu
Geothermal (Phase 1)
Kamojang Geothermal

West Java

140

14

Drajat IPP Geothermal

West Java

70

15

Drajat Geothermal

West Java

55

Chevron Geothermal
Indonesia
Indonesia Power

16

Belawan 1,2 Steam

North Sumatera

130

PLN

In operation since 1994 (Unit 1,2)


and 1997 (Unit 3), with Voluntary
Scheme activity
In operation since 1997, without
CDM activity
In operation since 1997, without
CDM activity
In operation since 1982 (Unit 1)
and 1987 (Unit 2,3), without CDM
activity
In operation since 2000, without
CDM activity
In operation since 1994, without
CDM activity
In operation, without CDM activity

17

Belawan 3,4 Steam

North Sumatera

130

PLN

In operation, without CDM activity

18

Air Anyer Steam

Bangka-Belitung

60

PLN

In operation, without CDM activity

19

Asam Asam 1,2 Steam

South Kalimantan

130

PLN

42

Geothermal

Chevron Geothermal
Indonesia
Magma Nusantara
Limited
Indonesia Power

Remarks

US Embassy Report, Indonesias Geothermal Development, Jakarta, Indonesia,


Statistic of Electricity and Energy No. 24 issued in 2011, Ministry of Energy and Mineral Resources
44
Geodipa, http://www.geodipa.co.id/index.php?option=com_content&view=article&id=72&Itemid=110&lang=en
43

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20

Asam Asam 3,4 Steam

South Kalimantan

130

PLN

In operation, without CDM activity

21

Pulau Pisau (FTP1) Steam

120

PLN

22

100

PLN

23

Sulsel Barru (FTP1)


Steam
Tambak Lorok 1,2 Steam

Central
Kalimantan
South Sulawesi
Central Java

100

Indonesia Power

COD is planned in 2012, without


CDM activity
COD is planned in 2012, without
CDM activity
In operation, without CDM activity

24

Perak Steam

East Java

100

Indonesia Power

In operation, without CDM activity

25

Priok Steam

DKI Jakarta

100

Indonesia Power

In operation, without CDM activity

26

Nanggroe Aceh
Darussalam
North Sumatera

70

PLN

In operation, without CDM activity

27

Sewa Lhokseumawe
Diesel
Sewa Belawan Diesel

65

PLN

In operation, without CDM activity

28

Kep. Riau Diesel

Riau Island

80.9

PLN

In operation, without CDM activity

29

Batang Hari Diesel

Jambi

62

PLN

In operation, without CDM activity

30

Sei Raya & Sinatan Diesel

West Kalimantan

100

PLN

In operation, without CDM activity

31

Sewa Diesel

West Kalimantan

117

PLN

In operation, without CDM activity

32

Trisakti Diesel

South Kalimantan

90

PLN

In operation, without CDM activity

33

Bitung Diesel

North Sulawesi

56.52

PLN

In operation, without CDM activity

34

Suppa Diesel

South Sulawesi

64.8

IPP

In operation, without CDM activity

35

Pesanggaran Diesel

Bali

75.8

Indonesia Power

In operation, without CDM activity

36

Sewa Lombok Diesel

58

PLN

In operation, without CDM activity

37

Aceh Gas

66

IPP

38

Belawan Gas

West Nusa
Tenggara
Nanggroe Aceh
Darussalam
North Sumatera

105

PLN

COD is planned in 2012-2013,


without CDM activity
In operation, without CDM activity

39

Duri 1 Gas

Riau

60

PLN

40

Duri Gas

Riau

100

PLN

41

Pauh Limo Gas

West Sumatera

64

PLN

COD is planned in 2011-2012,


without CDM activity
COD is planned in 2012, without
CDM activity
In operation, without CDM activity

42

Sewa Payo Selincah Gas

Jambi

100

PLN

In operation, without CDM activity

43

Payo Selincah Gas

Jambi

100

PLN

44

Sengeti Gas

Jambi

80

PLN

45

Keramasan 1,2,3,4 Gas

South Sumatera

64.9

PLN

COD is planned in 2011-2012,


without CDM activity
COD is planned in 2012-2013,
without CDM activity
In operation, without CDM activity

46

South Sumatera

60

PLN

In operation, without CDM activity

47

Sewa Beli Talang Duku


Gas
Sewa Beli Borang Gas

South Sumatera

60

PLN

In operation, without CDM activity

48

Keramasan AKE 1,2 Gas

South Sumatera

100

PLN

In operation, without CDM activity

49

Talang Duku Gas

South Sumatera

60

PLN

In operation, without CDM activity

50

Borang Gas

South Sumatera

60

PLN

51

Sewa Bontang Gas

East Kalimantan

100

PLN

52

Tello Gas

South Sulawesi

122.8

PLN

COD is planned in 2011-2012,


without CDM activity
COD is planned in 2012, without
CDM activity
In operation, without CDM activity

53

Gresik Gas

East Java

61.6

PJB

In operation, without CDM activity

54

C. Listrindo Gas

West Java

150

Cikarang Listrindo

In operation, without CDM activity

55

Pesanggaran Gas

Bali

125.5

Indonesia Power

In operation, without CDM activity

56

Gilimanuk Gas

Bali

133.8

Indonesia Power

In operation, without CDM activity

57

Pemaron Gas

Bali

97.6

Indonesia Power

In operation, without CDM activity

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58
59
60
61
62
63
64
65
66
67

Page 22

Belawan GT 1,1
Combined Cycle
Belawan GT 1,2
Combined Cycle
Belawan GT 1,0
Combined Cycle
Belawan GT 2,1
Combined Cycle
Belawan GT 2,2
Combined Cycle
Belawan GT 2,0
Combined Cycle
Duri Combined Cycle

North Sumatera

118

PLN

In operation, without CDM activity

North Sumatera

129

PLN

In operation, without CDM activity

North Sumatera

149

PLN

In operation, without CDM activity

North Sumatera

130

PLN

In operation, without CDM activity

North Sumatera

130

PLN

In operation, without CDM activity

North Sumatera

163

PLN

In operation, without CDM activity

Riau

100

IPP

Sengkang Blok I
Combined Cycle
Sengkang Blok II
Combined Cycle
Cikarang Listrindo
Combined Cycle

South Sulawesi

135

IPP

COD is planned in 2012, without


CDM activity
In operation, without CDM activity

South Sulawesi

60

IPP

In operation, without CDM activity

West Java

150

Cikarang Listrindo

In operation, without CDM activity

Nall = 67
Step 3: Within plants identified in Step 2, identify those that apply technologies different that the
technology applied in the proposed project activity. Note their number Ndiff
With reference to the definition set in the Guidelines on Common Practice, different technologies are
technologies that deliver the same output and differ by at least one of the following:
(i) Energy source/ fuel
(ii) Feed stock
(iii) Size of installation
a. Micro
b. Small
c. Large
(iv) Investment climate in the date of investment decision, inter-alia
a. Access to technology
b. Subsidies or other financial flows
c. Promotional policies
d. Legal regulations
(v) Other features, inter alia:
a. Unit cost of output
For the projects listed above, the first significance difference is energy source/fuel. Power plants that are
fuelled by gas, diesel or combined cycle gas are different with the proposed project activity that is using
geothermal energy to generate electricity.
While for the second significant difference related to geothermal power plants that have been built can be
attributed to the legal regulations changes. All of power plants listed commissioned prior to the two
important milestones took place in electricity generation and geothermal power plant development
sectors. These are the Electricity sector regulation (Electricity Law No 20/2002) and Geothermal Energy
no. 27/2003. Law on Geothermal Energy no.27/2003 allows private companies to develop geothermal
projects based on a tendering process45.
45

Market Study: Geothermal Sector in Indonesia Potential, Development, and Perspectives dated 2008
http://www.renewablesb2b.com/data/ahk_indonesia/publications/files/Geothermal_Market_Study_B2B.pdf,
retrieved on 14 November 2011

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Based on Electricity Law No 20/2002, the Government of Indonesia accommodates a long-term future
trend towards an open market, based on ideal conditions for maintaining a multi buyer-multi seller
system. The electricity supply business was unbundled into subsystems such as generation, transmission,
distribution, exchange and market operation, and last mile (or retail) sales. The Government also
established in 2003 a regulator, the Electricity Market Supervisory Body, EMSB, to regulate and monitor
the electricity market to ensure fair competition and promote consumer interests. The new oil and gas law
passed in October 2001 removed geothermal energy from the umbrella of oil and gas regulation, and
precipitated the Indonesia Geothermal Law No. 27/2003. Therefore, projects developed pre-2003, which
are not considered to be developed under a similar regulatory environment or legal regulations, are not
comparable with the proposed project activity.
The difference in energy source/fuel is applicable to power plants no. 1-8 and 16-67 (listed in Table 10
above). On the other hand, those two regulations mentioned above are applicable to power plants no. 915. This results in
Ndiff = 67
Step 4: Calculate factor F=1-Ndiff/Nall representing the share of plants using technology similar to
the technology used in the proposed project activity in all plants that deliver the same output or
capacity as the proposed project activity.
F = 1 67/67 = 0 and
Nall Ndiff = 67 67 = 0
Since the factor F is less than 0.2 and Nall Ndiff is less than 3, the proposed project activity is not a
common practice.
Conclusion
All steps in the additionality assessment above conclude that the project is additional.
B.6. Emission reductions
B.6.1. Explanation of methodological choices
>>
Tool to calculate the emission factor for an electricity system, version 02.2.1 describes that:
for determining the electricity emission factors, if the DNA of the host country has published a
delineation of the project electricity system and connected electricity systems, these delineations should
be used.
The Agency for the Assessment and Application of Technology (BPPT) and Directorate General of
Electricity and Energy Utilization (DJLPE), under the Ministry of Environment of Indonesia as
Indonesian DNA46 has published emissions factor for Sumatera grid on 19 January 2009. Below is the
summarized parameter.
Parameter
Operating margin
Build margin
Combined margin
46

Value (in tCO2/MWh)


0.906
0.581
0.743

Sumatera EF grid published by the Indonesian DNA,


http://pasarkarbon.dnpi.go.id/web/index.php/dnacdm/cat/6/other-information.html

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However, for the proposed project activity, Sumatera EF Grid is re-calculated as per Tool to calculate the
emission factor for an electricity system version 2.2.1 by using available data from the calculation
published by the Indonesian DNA. The detailed calculations are presented in the Appendix 4.
Project Emissions
Project emissions for geothermal power plants are calculated as follows:

where:
PEy
PEFF,y
PEGP,y

Project emissions in year y (tCO2e)


Project emissions from fossil fuel consumption in year y (tCO2)
Project emissions from the operation of geothermal power plants due to the release of noncondensable gases in year y (tCO2e)

a) Fossil Fuel Combustion (PEFF,y)


PEFF,y is calculated as per the latest version of the Tool to calculate project or leakage CO2 emissions
from fossil fuel combustion as follows:

where:
PEFF,y
PEFC,j,y

Project emissions from fossil fuel consumption in year y (tCO2)


CO2 emissions from fossil fuel combustion for electricity generation using diesel genset j
during the year y (tCO2e / year).

For electricity generation, a diesel gen-set is to be used for emergency power supply to critical
instruments only during shutdown and trip operation, where its project emission is calculated using the
latest Tool to calculate project or leakage CO2 emissions from fossil fuel combustion using Option B:
the CO2 emission coefficient COEFi,y is calculated based on net calorific value and CO2 emission factor
of the fuel type i,

where:
PEFF,y
PEFC,j,y
FCi,j,y
COEFi,y
NCVi,y
EFCO2,i,y
i

Project emissions from fossil fuel consumption in year y (tCO2)


CO2 emissions from fossil fuel combustion for electricity generation in diesel genset j
during the year y (tCO2e / year)
Quantity of fuel type i combusted for electricity generation in diesel genset j during the
year y (mass or volume unit)
CO2 emissions coefficient of fuel type i in year y (tCO2e / mass or volume unit)
Weighted average net calorific value of the fuel type i in year y (GJ / mass or volume)
Weighted average CO2 emission factor of fuel type i in year y (tCO2 / GJ)
the fuel type combusted for electricity generation in diesel genset j during the year y

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b) Emissions of non-condensable gases from the operation of geothermal power plants (PEGP,y)
PEGP,y is calculated as follows:

Where:
PEGP,y
wsteam,CO2,y
wsteam,CH4,y
GWPCH4
Msteam,y

Project emissions from the operation of geothermal power plants due to the release of
non-condensable gases in year y (tCO2e)
Average mass fraction of carbon dioxide in the produced steam in year y
(tCO2/t steam)
Average mass fraction of methane in the produced steam in year y (tCH4/t steam)
Global warming potential of methane valid for the relevant commitment period
(tCO2e/tCH4)
Quantity of steam produced in year y (t steam)

Lumut Balai II utilises a direct steam expansion turbine from the geothermal field steam supply. It has no
supplementary firing for additional steam supply. Estimated amount of NCG is 0.89467023 % of steam
weight for CO2 and 0.00097278 % of steam weight for CH4.
Leakage Emissions
According to ACM0002, the leakage of the proposed project is not considered. No leakage is expected.

Baseline Emissions
The baseline emissions are to be calculated as follows:

Where:
BEy
EGPJ,y
EFgrid,CM,y

Baseline emissions in year y (tCO2)


Quantity of net electricity generation that is produced and fed into the grid as a result
of the implementation of the CDM project activity in year y (MWh)
Combined margin CO2 emission factor for grid connected power generation in year y
calculated using the latest version of the Tool to calculate the emission factor for an
electricity system (tCO2/MWh)

Calculation of EGPJ,y
The calculation of EGPJ,y is different for (a) greenfield plants, (b) retrofits and replacements, and (c)
capacity additions.
Lumut Balai II is a greenfield geothermal power plant, therefore option (a) is to be used here:
(a) Greenfield renewable energy power plants
If the project activity is the installation of a new grid-connected renewable power plant/unit at a site
where no renewable power plant was operated prior to the implementation of the project activity, then:

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Where:
EGPJ,y

Page 26

Quantity of net electricity generation that is produced and fed into the grid as a result
of the implementation of the CDM project activity in year y (MWh)
Quantity of net electricity generation supplied by the project plant/unit to the grid in
year y (MWh)

EGfacility,y

Lumut Balai II geothermal power plant is not a modified, or retrofit facility nor an additional power unit
at an existing grid-connected renewable power plant. Lumut Balai II is a new grid connected renewable
power plant, with a Power Purchase Agreement for its electricity sales to the Sumatera grid system.
Emission reductions
Emissions reduction calculations are as follows:

Where:
ERy
BEy
PEy

Emission reductions in year y (t CO2e)


Baseline emissions in year y (t CO2)
Project emissions in year y (t CO2e)

B.6.2. Data and parameters fixed ex ante


Following are data and parameters not monitored:

Data / Parameter

GWPCH4

Unit

tCO2 / tCH4

Description
Source of data

Global warming potential of methane, valid for the relevant commitment


period
2006 IPCC Guidelines for National Greenhouse Gas Inventories

Value(s) applied

Default value for the first commitment period = 21 tCO2 / tCH4

Choice of data
or
Measurement methods
and procedures

Data used is a default value for the first commitment period published by
IPCC

Purpose of data

Project emission calculation

Additional comment

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Data / Parameter

NCVi,y

Unit

GJ / kg

Description

Weighted average net calorific value of the diesel fuel in year y

Source of data

2006 IPCC Guidelines for National Greenhouse Gas Inventories:


Workbook volume 2 chapter 1 Table 1.2, page 1.18
0.043

Value(s) applied
Choice of data
or
Measurement methods
and procedures

Data used is a default value published by IPCC

Purpose of data

Project emission calculation

Additional comment

Data / Parameter

Unit

kg / litre

Description

Density of diesel fuel

Source of data

Pertamina diesel fuel specification47

Value(s) applied

0.84

Choice of data
or
Measurement methods
and procedures

Data used is a default value published by Pertamina, the state-owned


company that produces and sells diesel fuels.

Purpose of data

Project emission calculation

Additional comment

Data / Parameter

EFCO2,i,y

Unit

tCO2 / GJ

Description

Weighted average CO2 emission factor of diesel fuel in year y

Source of data

2006 IPCC Guidelines for National Greenhouse Gas Inventories:


Workbook volume 2 chapter 1 Table 1.4, page 1.23
0.074

Value(s) applied

47

Page 27

Choice of data
or
Measurement methods
and procedures

Data used is a default value published by IPCC

Purpose of data

Project emission calculation

Additional comment

Diesel fuel specification from Pertamina, http://www.pertamina.com/index.php/detail/read/minyak-diesel


(retrieved on 9 November 2011)

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Data / Parameter

EFgrid,CM,y

Unit

tCO2 / MWh

Description

Combined margin CO2 emission factor for grid connected power


generation (Sumatera Interconnected Grid) in year y calculated using the
latest version of the Tool to calculate the emission factor for an
electricity system version 2.2.1
Grid calculation published by Department of Energy and Mineral
Resources of Indonesia - Directorate General of Electricity and Energy
Utilization and endorsed by Indonesia DNA on 19 January 2009.
0.743

Source of data

Value(s) applied
Choice of data
or
Measurement methods
and procedures

The Sumatera EF Grid is calculated ex-ante using the latest available data
from 2005 to 2007 by Directorate General under Ministry of Energy and
Mineral Resources and published by the Indonesia DNA on 19 January
2009 as per Tool to calculate the emission factor for an electricity system
version 2.2.1

Purpose of data

Baseline emission calculation

Additional comment

B.6.3. Ex ante calculation of emission reductions


>>
Project Emissions
PEy

=
=
=
=

PEGP,y + PEFF,y
(wsteam,CO2,y + wsteam,CH4,y x GWPCH4 ) x Msteam,y + FCi,j,y x NCVi,y x EFCO2,i,y
(0.0089467023 + 0.0000097278 x 21) x 6,838,000 + (120 x 0.84) x 0.043 x 0.074
62,575 t.CO2e / year

Leakage Emissions
LEy

= 0

Baseline Emissions
BEy

= EGPJ,y x EFgrid,CM,y
= 867,240 x 0.743
= 644,359 t.CO2e / year

Emissions Reduction
The ex-ante emission reductions calculations are as follows

Please see the table bellow for a summary of the values used and the results of the calculation.

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B.6.4. Summary of ex ante estimates of emission reductions

Year
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Total
Total number of
crediting years
Annual
average over the
crediting period

Baseline
emissions
(t CO2 e)
644,359
644,359
644,359
644,359
644,359
644,359
644,359
4,510,513
7
644,359

62,575
62,575
62,575
62,575
62,575
62,575
62,575
438,025

0
0
0
0
0
0
0
0

Emission
reductions
(t CO2 e)
581,784
581,784
581,784
581,784
581,784
581,784
581,784
4,072,488

62,575

581,784

Project emissions
(t CO2 e)

B.7. Monitoring plan


B.7.1. Data and parameters to be monitored
Following are data and parameters to be monitored:

Leakage
(t CO2 e)

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Data / Parameter
Unit
Description
Source of data
Value(s) applied
Measurement methods
and procedures

Monitoring frequency
QA/QC procedures
Purpose of data
Additional comment

Data / Parameter
Unit
Description
Source of data
Value(s) applied

Measurement methods
and procedures

Monitoring frequency
QA/QC procedures
Purpose of data
Additional comment

Page 30

Msteam,y
t steam
Quantity of steam produced in year y
Project Developer main inlet steam flow-meter
6,838,000 ton of steam / year
as referred to the Feasibility Study page 9
The steam quantity discharged from the geothermal wells should be
measured with a venturi flow meter (or other equipment with at least the
same accuracy). Pressure and temperature upstream of the venture meter is
measured using the same venturi flow meter to define the steam properties.
The measurement of steam quantities will be conducted on a continuous
basis, where daily total flow measurement will be available. The
measurement results will be summarised transparently in regular
production reports.
Meter accuracy and uncertainty level will be as per manufacturer
specification.
Daily continuous measurement
Meters will be calibrated according to the manufacturer standard
Project emission calculation
Continuous measurement, subsequently, the data will be aggregated
monthly.
wsteam,CO2,y
tCO2/t steam
Average mass fraction of carbon dioxide in the produced steam in year y
The NCG data is taken from sampling and analysis as prescribed in the
methodology
0.0089467023 or 0.89467023 %
as referred to Monitoring Report (page 9) of the registered Kamojang
Geothermal Project that is operated by PGE.
Link:
http://cdm.unfccc.int/Projects/DB/RWTUV1255101629.04/view
Non-condensable gases sampling and analysis should be carried out every
three months at the steam field-power plant interface using ASTM
Standard Practice E1675 for Sampling 2-Phase Geothermal Fluid for
Purposes of Chemical Analysis (as applicable to sampling single phase
steam only) by a third party or internal laboratory.
Every three months
NCG sampling and analysis will be carried out according to ASTM
Standard Practice E1675
Project emission calculation
As a conservative approach, it is assumed that all non-condensable gases
entering the power plant are discharged to atmosphere via the cooling
tower. Measurement of quantity of steam during well testing and well
bleeding, and non-condensable gases sampling at wells, are not required as
fugitive carbon dioxide and methane emissions due to well testing and well
bleeding are not considered, as they are negligible, as specified in the
methodology.

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Data / Parameter
Unit
Description
Source of data
Value(s) applied

Measurement methods
and procedures

Monitoring frequency
QA/QC procedures
Purpose of data
Additional comment

Page 31

wsteam,CH4,y
tCH4/t steam
Average mass fraction of methane in the produced steam in year y
The NCG data is taken from sampling and analysis as prescribed in the
methodology
0.0000097278 (or 0.00097278 %)
as referred to Monitoring Report (page 10) of the registered Kamojang
Geothermal Project that is operated by PGE.
Link:
http://cdm.unfccc.int/Projects/DB/RWTUV1255101629.04/view
Non-condensable gases sampling and analysis should be carried out every
three months at the steam field-power plant interface using ASTM
Standard Practice E1675 for Sampling 2-Phase Geothermal Fluid for
Purposes of Chemical Analysis (as applicable to sampling single phase
steam only) by a third party or internal laboratory.
Every three months
NCG sampling and analysis will be carried out according to ASTM
Standard Practice E1675
Project emission calculation
As a conservative approach, it is assumed that all non-condensable gases
entering the power plant are discharged to atmosphere via the cooling
tower. Measurement of quantity of steam during well testing and well
bleeding, and non-condensable gases sampling at wells, are not required as
fugitive carbon dioxide and methane emissions due to well testing and well
bleeding are not considered, as they are negligible, as specified in the
methodology.

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Data / Parameter
Unit
Description
Source of data
Value(s) applied
Measurement methods
and procedures

Monitoring frequency
QA/QC procedures

Purpose of data
Additional comment

Page 32

EGfacility,y
MWh/yr
Quantity of net electricity generation supplied by the project plant/unit to
the grid in year y
Project Developer revenue meter (electricity sales)
867,240 MWh
Electricity produced will be measured by a watthour meter (connected to a
digital control system and recorded continuously), which can measure both
power delivered to the grid and received from the grid. Net electricity
generation will be calculated from an electricity export to the grid
(electricity supplied by Lumut Balai II to the Sumatera grid) deducted with
electricity import from the grid.
The measurement of electricity export and import will be conducted on a
continuous basis and will be summarised and recorded transparently in
monthly production reports.
In the case of main revenue meter failure, a cross-check meter will be used
as a back-up meter to measure both power delivered to the grid and
received from the grid.
Meter accuracy and uncertainty level will be as per manufacturer
specification.
Continuous basis with monthly reports
The QA/QC will be conducted through cross checking with electricity sales
receipts. Meters will be calibrated according to the Standard Operation
Procedures (SOPs) signed between PGE and PLN. The QA/QC will also be
applied to both revenue and back-up meters.
Baseline emission calculation
Standard Operation Procedures (SOPs) or other documents, which replace
the SOPs, signed between PGE and PLN.

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Data / Parameter
Unit
Description
Source of data
Value(s) applied

Measurement methods
and procedures

Monitoring frequency
QA/QC procedures
Purpose of data
Additional comment

Page 33

FCi,j,y
litres / year
Amount of diesel fuel used for electricity generation
Project Developer diesel fuel flow-meter
120 litres
as referred to Monitoring Report (page 12) of the registered Kamojang
Geothermal Project that is operated by PGE.
Link:
http://cdm.unfccc.int/Projects/DB/RWTUV1255101629.04/view
Fuel consumption will be recorded monthly, specifically for each fuel
(currently only diesel consumption is expected).
Measurement will be made in litres and converted to tonnes using a
constant for fuel specific density or scientifically proven fuel densities.
Meter accuracy and uncertainty level will be as per manufacturer
specification.
Monthly recording
Project emission calculation
Fuel consumption will only occur in emergencies when power plant is not
operational and the grid is also not available, a confluence of events which
is expected to be very rare; at other times the plant will run on grid
electricity.
Emergency diesel gen-set is only for critical instruments / control system
during turbine trip and shutdown.

B.7.2. Sampling plan


>>
Not applicable as there is no sampling or survey for any of monitored parameters.
B.7.3. Other elements of monitoring plan
>>
This section details the steps taken to monitor on a regular basis the GHG emissions reductions from the
Lumut Balai II Geothermal power plant in Indonesia.
The Monitoring Plan for this project has been developed to ensure that from the start, the project is well
organised in terms of the collection and archiving of complete and reliable data.
1. Monitoring organisation
Prior to the start of the crediting period, the organisation of the monitoring team will be established. Clear
roles and responsibilities will be assigned to all staff and the power plant manager involved in the CDM
project, who will have the overall responsibility for the monitoring system on this project, ensuring the
trained staff perform the monitoring duties and that where trained monitoring staff are absent, the
integrity of the monitoring system is maintained by other trained staff. Initial training will be conducted
and regular check performed to ensure adequacy of monitoring data.

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CDM Consultant

PT. Pertamina Geothermal Energy


(PGE), CDM team, Head Office

1. Verify monitoring process and data


2. Calculation of emissions reduction
3. Point of reference for CDM related matters

1. Consistency check of reported data


2. Documentation management
3. CDM Monitoring Report development

CDM Manager
1.
2.
3.
4.
5.

Power plant operator


1. Electricity sales to the grid
2. Steam main inlet flow
3. Electricity consumption for trip & shutdown

Supervision of staff (data recording)


Review of monitoring systems
Consistency check of reported data
CDM documentation on-site
Coordinate calibration

CDM Coordinator, power plant office


Reports
1. Electricity sales to the grid
2. Steam main inlet flow
3. Steam sampling procedure & results
4. Electricity consumption for start-up

Chemical Laboratory
Steam sampling procedures & results

Figure 3 Monitoring Organisation Chart

QA
The Project Developer has developed procedures that will ensure consistent quality of all data collection,
recording, storage and reporting. The Project Developer has assigned a CDM manager, with the overall
responsibility regarding the CDM monitoring process. The CDM manager cooperates with on-site CDM
coordinator and collects all the monitored data required for the CDM. Monthly reports are prepared for
the power plant manager that has the overall quality control.
2. Monitoring equipment and installation
Metering of Electricity Supplied to the Grid
This electricity meter will be the revenue meter that measures the quantity of electricity that the project
will be paid for. As this meter provides the main CDM measurement, it will be the key part of the
verification process. This meter is located at the interconnection point of Lumut Balai II geothermal
power plant.
To ensure maximum availability of CDM data and to introduce quality controls of the CDM data, a crosscheck meter will be installed in addition to the revenue meter. This meter will also be located at the
interconnection point of Lumut Balai II geothermal power plant. Both revenue and cross-check meters
will be measuring the electricity exported and imported from and to the project

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Electricity meters will meet the relevant local standards at the time of installation. Before the installation
of the meters, it will be factory calibrated by the manufacturer. Records of the meter (type, make, model
and calibration documentation) will be retained in the quality control system on-site.
Electricity measurements will be taken in accordance with PPA or SOP signed between PGE and PLN or
other documents, which updates and replaces this SOP. In case of meter malfunction, corrective
maintenance would be performed (verification, accuracy inspection, resetting or non-routine calibration).

Figure 4 Monitoring Equipments

Metering of geothermal steam flow


Available at local meter and remote (Central Control Room, CCR) where all data will be recorded,
printed report will be submitted to the Operation Steam Field of Area Lumut Balai for daily steam
production report.
Lab test of geothermal steam sampling procedure
Steam sampling will be carried out by a third party or internal laboratory in accordance with ASTM
Standard Practice E1675. Report will be submitted to Manager of Lumut Balai II power plant and
Operations Steam Field of Area Lumut Balai.
All equipment will be calibrated by the manufacturer according to relevant local standards at the time of
installation and maintained in accordance to the manufacturers recommendations to ensure accuracy of
measurements. Records of the meter (type, make, model, calibration and maintenance documentation)
will be retained as part of the CDM monitoring system.
3. Data recording procedure

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All relevant data will be archived electronically, and backed up regularly. Uncertainty will be considered
to achieve conservative results. Moreover, it will be kept for the full crediting period, plus two years after
the end of the crediting period or the last issuance of CERs for this project activity (whichever occurs
later). The Monitoring Plan has been developed to ensure that the project has robust data collection,
processing and archiving procedures.
Other data for CDM procedure will be managed by power plant operation assistant manager.
4. Document management
PGE will keep electricity sale and purchase invoices. All written documentation such as specifications,
maps, drawings, will be stored for the crediting period and two years afterwards, and be made available to
the verifier so that the reliability of the information may be checked.
The document management system will be developed to ensure adequate document control for CDM
purposes. Monitoring report and supporting workbook will be provided for verification.

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SECTION C. Duration and crediting period


C.1. Duration of project activity
C.1.1. Start date of project activity
>>
01/10/2012 (Estimated date of contract signing for 1st well drilling work dedicated to supply steam to
Lumut Balai II)48
C.1.2. Expected operational lifetime of project activity
>>
30 years49
C.2. Crediting period of project activity
C.2.1. Type of crediting period
>>
Renewable, first crediting period
C.2.2. Start date of crediting period
>>
01/01/201750
C.2.3. Length of crediting period
>>
7 years

48

PGE written statement Lumut Balai II project plan


Lumut Balai II Feasibility Study Report in September 2009, which then confirmed by the Power Purchase
Agreement (PPA) between PLN and Pertamina (11 March 2011)
50
Lumut Balai II project plan
49

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SECTION D. Environmental impacts


D.1. Analysis of environmental impacts
>>
Based on the Environmental Ministry Decree no. 8 and 11 year 2006, an Environmental Impact
Assessment (EIA) has to be conducted for electric power development activities in the Exploitation and
Development of Geothermal power plants greater than 55 MW in capacity, in order to assess the
environmental impacts that will occur from these geothermal field activities, and to prepare mitigation
strategies to address impacts, if any. An EIA was completed in August 21, 2008 for the Lumut Balai II
geothermal power plant (developed by PGE), approved by the Head of Muara Enim Regency (Mayor
decree no. 758/KPTS/BLH-I/2008).
The proposal for development of Lumut Balai II geothermal power plant was presented to the
Environmental Agency Office of Muara Enim regency in order to obtain inputs from the EIA
commission. The project Developer, together with the Sriwijaya University conducted a study to develop
this Environmental Impact Assessment (EIA) and presented the results to the provincial EIA commission.
This commission invited stakeholders, among others the academics / university, related government
agencies of the Muara Enim regency, the Environmental Health Laboratory, etc, to provide comments and
input to the plan. During the consultation process, the stakeholders provided their comments to the
provincial EIA commission, as summarised in the letter no. 224.K/Bapdedalda-II/2008 from the
Environmental Agency Office (Bapedalda) of Muara Enim regency to the project developer.
The EIA report generally describes pre-construction, construction and operational stages to the project.
Several environmental impacts were assessed with regard to physical/chemical (ambient air, noise, air
quality), biological, and socio-economic aspects.
D.2. Environmental impact assessment
>>
The environmental impact assessment51 with regard to evaluation of significant impact and the objectives
of environment management and monitoring plan, Lumut Balai geothermal field and power plant is
feasible in terms of environmental aspect. There are a several activities which potentially producing
significant negative impact, and those need to be managed to minimize the effect of the negative impact.
In particular for the land clearing, air quality reduction, noise, and reduce of surface air quality. Besides,
there are positive impact resulted from those activities. Therefore these positive activities need to improve
to the optimize level for the community welfare and especially for the local people around the plant.

51

EIA Report (ANDAL) for Lumut Balai Geothermal Field and Power Plant, 2008 (page VI-45 Environmental
Assessment Recommendation)

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SECTION E. Local stakeholder consultation


E.1. Solicitation of comments from local stakeholders
>>
The forum was hosted by PT. Pertamina Geothermal Energy, at local elementary school building nearby
Lumut Balai PGE project office on 5 May 2011. 24 local stakeholders attended the meeting, from 22
invitations that were distributed to 2 village offices and Semende Darat Laut sub-district office. From
each village, invitations were received by the head of village, local academics, community representative
body (BPD) and women community.
The meeting was opened with a welcoming speech by Harjana, PGE, and then Arrie Tjahyo Setiawan
delivered his presentation on the climate change and Clean Development Mechanism. A question and
answer session follows, hosted by Harjana and other PGE staff members.
E.2. Summary of comments received
>>
In general, all participated stakeholders in the forum support the development of PGE Lumut Balai II
power plant project. However, there are still many questions raised regarding the CDM process itself. The
comments received from stakeholders could be categorized into two categories as follows: (1) inquiries
on the CDM process; and (2) inquiries on the Lumut Balai II geothermal power plant CDM project,
especially regarding community development.
Below are the comments received by stakeholders:
Comment 1 (C1):
Sahlan, secretary of Semende Darat Laut sub-district office
- This construction of the geothermal project has already started. Construction stopped for about four
months and restarted in April 2011 after an official permit on forest utilization was received. In the near
future, near the helipad area, more drilling activity for re-injection wells will take place.
Answer 1 (A1):
Harjana, PGE
- Thank you, your comments are noted. PT. PGE will move forward with the development of the
geothermal project
Suggestion 2 (S2):
Sudiono head of Penindaian village office
- PGE should send report of visitor or workers from outside this region to the Village Office to avoid
misperceptions from local villagers.
A2:
Made, PGE
- Thank you for your suggestion. We will assign officer to send to report soon. PGE is also continuously
enhancing its safety and security process to enter or exit the PGE project activity zone.
Question 3 (Q3):
Malison resident of Babatan village
- Some drilling activities caused water pollution in the nearby river. Please explain what will be done to
address this problem.
A3:
Made, PGE
- PGE has to comply with all environmental regulations, including those related to drilling. Detailed work
specifications and designs are available to the public. Wastewater from the project activities is treated in
a treatment pond that was built during the construction phase. It is, however, difficult to predict what is
happening underneath the ground during a drilling operation. In order to avoid any negative event, PGE

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emphasizes environmental safety in the project activity area. Please do not hesitate to provide input to
PGE regarding any construction work issues so that we can follow-up and mitigate them.
S4:
Rasyid head of Babatan village office
- There have been several consultation events for PGE activities (e.g. EIA). It would be better if results
can be written down and signed to ensure that all inputs will be taken into account.
A4:
Made, PGE
- Thank you for your comments on past consultations and processes. Several points were pointed out
during those consultation events, such as environmental requirements for EIA document, permit, license
and CSR programs. The EIA document was approved and it includes environmental management and
monitoring plans. With this approval, PGE must perform and comply with environmental requirements
and regulations. PGE head office is coordinating with PGE field staff to work closely with local
communities related to CSR activities. For the CSR activities, PGE plans 0.5% up to 2 % of net operating
profit to be disbursed to the local stakeholders. In the past, PGE has performed local CSR activities such
as infrastructure improvements (e.g. road construction), which would not have occurred without PGEs
presence in the area. Currently, as a subsidiary company, PGE must coordinate with Pertamina Corporate
for any local CSR activities conducted in the area.
Q5:
Sumantri, Penindaian village representative
- Some earlier drilling activities resulted in the release of foamy wastewater that caused concern among
members of the local community. Will there be any improved living standard?
A5.1: Made, PGE
- Foamy wastewater from drilling is not man-made waste. It is natural soil from underground mixed with
water and steam, which typically occurs in geothermal sites. This natural substance should not be
considered as harmful. To treat the foamy wastewater, PGE has already collected the water and contained
it inside a blue plastic sheet. In addition, for added safety, an additional concrete pond was constructed to
retain such water.
A5.2: Syaiful, Muara Enim regency house of representative
- Water samples should be taken for analysis, and PGE should make the sample results available to the
local communities.
S6:
Indarwan, Penindaian village secretary
- PGE has explained the company CSR program for surrounding villages involves street lighting and
lighting for mosques. Those are good programs. Please also provide individual house lighting for people
within the PGE project site to improve the quality of life in the local community.
A6:
Harjana, PGE
- Thank you for your input. At this moment, PGE is only able to distribute a limited amount of lighting
that is already installed (e.g. in the street and mosque). Your suggestion is noted and will be brought to
the attention of management at both PGE and Pertamina, with the suggestion that it be incorporated into a
future CSR program after the power plant becomes operational.
E.3. Report on consideration of comments received
>>
The comments received were either questions concerning the project, or broad statements in support of
the activity. General concern on community development plan for local people nearby project area was
also raised. Several community development programmes have been performed by PGE (described in the
project EIA documents).

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No negative comments have been received on the project.

SECTION F. Approval and authorization


>>
Letter of Approvals from Republic of Indonesia as the Host Country and Switzerland as the Annex 1
Country are available.
-----

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Appendix 1: Contact information of project participants


Organization name
Street/P.O.Box
Building
City
State/Region
Postfix/ZIP
Country
Telephone
Fax
E-Mail
Website
Contact person
Title
Salutation
Last name
Middle name
First name
Department
Mobile
Direct fax
Direct tel.
Personal e-mail

PT. Pertamina Geothermal Energy


Jalam M.H. Thamrin 9
15th fl. Menara Cakrawala
Jakarta

Organization name
Street/P.O.Box
Building
City
State/Region
Postfix/ZIP
Country
Telephone
Fax
E-Mail
Website
Contact person
Title
Salutation
Last name
Middle name
First name
Mobile:
Direct fax
Direct tel.
Personal e-mail:

South Pole Carbon Asset Management Ltd.


Technoparkstrasse 1

10340
Indonesia
+62 21 398 33 222
+62 21 398 33 230
www.pgeindonesia.com
CEO
Mr.
Riadhy
Slamet

+62 21 398 33 230


+62 21 398 33 222
cdm.pge@pertamina.com

Zurich
8005
Switzerland
+41 43 501 35 50
+41 43 501 35 99
www.southpolecarbon.com
CEO
Mr.
Heuberger
Renat
+41 43 501 35 99
+41 43 501 35 50
registration@southpolecarbon.com

Page 42

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Appendix 2: Affirmation regarding public funding


The project does not involve any public funding from Annex 1 countries.

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Appendix 3: Applicability of selected methodology


Please refer to PDD Section B.1 and B.2

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Appendix 4: Further background information on ex ante calculation of emission reductions


Please also refer to PDD Section B.4 and B.6
Sumatera Interconnected Grid Emission Factor
The data of emission factor of Sumatera grid is published by Indonesia DNA, which was calculated by
BPPT. The calculation of emission factor of Sumatera Grid was conducted based on Tool to calculate
the emission factor for an electricity system Version 02.2.1. The determination of the emission factor is
performed by following the steps below:
Step 1. Identify the relevant electricity systems.
According to PLNs actual grid structure, Sumatera grid covers NAD Province, North Sumatera Province,
Riau Province, Jambi Province, West Sumatera Province, South Sumatera Province and Lampung
Province. The project activity is located in South Sumatera province, which is covered by Sumatera
Power Grid. Thus, the relevant electric power system is Sumatera Power Grid.
Step 2. Choose whether to include off-grid power plants in the project electricity system (optional).
Option I is chosen in this calculation which is only grid power plants are included in it.
Step 3. Select a method to determine the operating margin (OM).
The Tool to calculate the emission factor for an electricity system Version 02.2.1 offers four methods to
calculate the operating margin (OM):
a.
b.
c.
d.

Simple OM; or
Simple adjusted OM; or
Dispatch data analysis OM; or
Average OM

From 2003 to 2007, the low-cost / must-run resources in Sumatera grid were 20.95%, 17.90%, 17.28%
and 21.99% respectively. All were accounted less than 50% of the total amount in the Sumatera grid.
According to the data, the simple OM method is selected for calculating the emission factor. For the
simple OM, the emission factor can be calculated using either of the two following data vintages:
1. Ex ante option: this option does not require monitoring and recalculation of the emission factor
during the crediting period because the emission factor is determined once at the validation stage.
A 3-year generation-weighted average, based on the most recent data available at the time of the
submission of the CDM-PDD to the DOE for validation.
2. Ex post option: the emission factor is determined for the year in which the project activity
displaces grid electricity, requiring the emission factor to be updated annually during monitoring.
If the data required calculating the emission factor for year y is usually only available later than
six months after the end of the year y, alternatively the emission factor of the previous year y-1
may be used. If the data is usually only available 18 months after the end of year y, the emission
factor of the year preceding the previous y-2 may be used. The same data vintage (y, y-1 or y-2)
should be used throughout all crediting periods.
Ex ante option: A 3-year generation-weighted average has been selected for the calculation of this
project activity.
Step 4. Calculate the operating margin emission factor according to the selected method.

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The simple OM emission factor is calculated as the generation-weighted average CO2 emissions per unit
net electricity generation (tCO2 / MWh) of all generating power plants serving the system, not including
low-cost / must-run power plants/units. The simple OM may be calculated by choosing one of these
below two options:
Option A:
Based on the net electricity generation and a CO2 emission factor of each power unit; or
Option B:
Based on the total net electricity generation of all power plants serving the system and the
fuel types and total fuel consumption of the project electricity system.
Option B can only be used if:
(a) The necessary data for option A is not available; and
(b) Only nuclear and renewable power generation are considered as low-cost / must-run power
sources and the quantity of electricity supplied to the grid by these sources is known; and
(c) Off-grid power plants are not included in the calculation (i.e., if Option I has been chosen in Step
2).
The calculation of the simple OM emission factor uses option B, based on the total net electricity
generation of all power plants serving the system and the fuel types and total fuel consumption of the
project electricity system. The reason of choosing option B is because the necessary data needed in
Option A is not available for all power plants in the Sumatera grid. Data on fuel consumption of each
power plant owned by Independent Power Producer (IPP) is not publicly available. Thus, option B is
selected.
The simple OM emission factor is calculated based on the net electricity supplied to the grid by all power
plants serving the system, not including low-cost / must-run power plants / units, and based on the fuel
type(s) and total fuel consumption of the project electricity system, as follows :

Where :
EFgrid, OM simple,y = Simple operating margin CO2 emission factor in year y (tCO2/MWh)
FCi,y
= Amounts of fossil fuel type i consumed in the project electricity system in year y
(Mass or volume unit)
NCVi,y
= Net calorific value (energy content) of fossil fuel type i in year y (GJ / mass or
volume unit)
EFCO2,i,y
= CO2 emission factor of fossil fuel type i in year y (tCO2/GJ)
EGy
= Net electricity generated and delivered to the grid by all power sources serving the
system, not including low-cost / must-run power plants / units, in year y (MWh)
i
= All fossil fuel types combusted in power sources in the project electricity system in
year y
y
= The relevant year as per the data vintage chosen in step 3

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Step 5. Calculate the build margin emission factor.


In terms of vintage of data, project participants can choose between one of the following two options:
Option 1:
For the first crediting period, calculate the build margin emission factor ex ante based on the most recent
information available on units already built for sample group m at the time of CDM-PDD submission to
the DOE for validation. For the second crediting period, the build margin emission factor should be
updated based on the most recent information available on units already built at the time of submission of
the request for renewal of the crediting period to the DOE. For the third crediting period, the build

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margin emission factor calculated for the second crediting period should be used. This option does not
require monitoring the emission factor during the crediting period.
Option 2:
For the first crediting period, the build margin emission factor shall be updated annually, ex post,
including those units built up to the year of registration of the project activity or, if information up to the
year of registration is not yet available, including those units built up to the latest year for which
information is available. For the second crediting period, the build margin emissions factor shall be
calculated ex ante, as described in Option 1 above. For the third crediting period, the build margin
emission factor calculated for the second crediting period should be used.
Ex-ante calculation applying Option 1 data has been selected for the purpose of emission reductions
calculation for the proposed project activity.
The sample group of power units m used to calculate the build margin should be determined as per the
following procedure, consistent with the data vintage selected above:
(a) Identify the set of five power units, excluding power units registered as CDM project activities, that
started to supply electricity to the grid most recently (SET5-units) and determine their annual electricity
generation (AEGSET-5-units, in MWh);
(b) Determine the annual electricity generation of the project electricity system, excluding power units
registered as CDM project activities (AEGtotal, in MWh). Identify the set of power units, excluding power
units registered as CDM project activities, that started to supply electricity to the grid most recently and
that comprise 20% of AEGtotal (if 20% falls on part of the generation of a unit, the generation of that unit
is fully included in the calculation) (SET20%) and determine their annual electricity generation (AEGSET20%, in MWh);
(c) From SET5-units and SET20% select the set of power units that comprises the larger annual electricity
generation (SETsample);
Identify the date when the power units in SETsample started to supply electricity to the grid.
If none of the power units in SETsample started to supply electricity to the grid more than 10 years ago, then
use SETsample to calculate the build margin. Ignore steps (d), (e) and (f).
Otherwise:
(d) Exclude from SETsample the power units which started to supply electricity to the grid more than
10 years ago. Include in that set the power units registered as CDM project activity, starting with power
units that started to supply electricity to the grid most recently, until the electricity generation of the new
set comprises 20% of the annual electricity generation of the project electricity system (if 20% falls on
part of the generation of a unit, the generation of that unit is fully included in the calculation) to the extent
is possible. Determine for the resulting set (SETsample-CDM) the annual electricity generation (AEGSET-sampleCDM, in MWh);
If the annual electricity generation of that set is comprises at least 20% of the annual electricity generation
of the project electricity system (i.e. AEGSET-sample-CDM 0.2 AEGtotal), then use the sample group
SETsample-CDM to calculate the build margin. Ignore steps (e) and (f).
Otherwise:
(e) Include in the sample group SETsample-CDM the power units that started to supply electricity to the grid
more than 10 years ago until the electricity generation of the new set comprises 20% of the annual
electricity generation of the project electricity system (if 20% falls on part of the generation of a unit, the
generation of that unit is fully included in the calculation);
(f) The sample group of power units m used to calculate the build margin is the resulting set (SETsampleCDM->10yrs).
The Group of Power Units to be included in the Build Margin (BM)

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No
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

Power station
PLTU Tarahan 1
PLTU Tarahan 2
PLTG Riau Power (r)
PLTD Sewa Arti Duta (r)
PLTG Meppogen (IPP)
PLTG Apung
PLTA Renun 1
PLTA Musi 1
PLTA Musi 2
PLTA Musi 3
PLTD 12 Gunung Sitoli
PLTD 13 Gunung Sitoli
PLTD Teluk Dalam
PLTA Renun 2
PLTG Indralaya II
PLTG Truck Mounted 1
PLTG Truck Mounted 2
PLTG Talang Duku (r)
PLTD 12 Lueng Bata
PLTD 13 Lueng Bata
PLTD 14 Lueng Bata
PLTGU Borang (IPP)

Page 49

Installed capacity (kW)


100,000
100,000
20,000
15,000
80,000
30,000
41,000
71,825
71,825
71,825
1,010
1,010
1,010
41,000
40,000
20,000
20,000
20,000
3,450
3,450
3,450
150,000

Commissioning year
2007
2007
2007
2007
2007
2007
2006
2006
2006
2006
2005
2005
2005
2005
2004
2004
2004
2004
2004
2004
2004
2004

Fuel type
Coal & HSD
Coal & HSD
Gas
HSD
Gas
HSD
Hydro
Hydro
Hydro
Hydro
HSD
HSD
HSD
Hydro
Gas & HSD
Gas
Gas
HSD
HSD
HSD
HSD
Gas

The build margin emission factor is the ex-ante generation-weighted average emission factor
(tCO2/MWh) of all power units m during the most recent year y for which power generation data is
available, calculated as follows:

Where:
EFgrid,BM,y
EGm,y
y (MWh)
EFEL,m,y
m
y

= Build margin CO2 emission factor in year y (tCO2/MWh)


= Net quantity of electricity generated and delivered to the grid by power unit m in year
= Emission factor of power station included in the build margin
= Power stations included in the build margin
= Most recent historical year for which power generation data is available

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Step 6. Calculate the combined margin (CM) emissions factor.


The calculation of the combined margin (CM) emission factor (EFgrid,CM,y) is based on one of the
following methods:
(a) Weighted average CM; or
(b) Simplified CM.
The weighted average CM method (option a) should be used as the preferred option.
The simplified CM method (option b) can only be used if:
The project activity is located in a Least Developed Country (LDC) or in a country with less than
10 registered projects at the starting date of validation; and
The data requirements for the application of step 5 above cannot be met.
a. Weighted average CM

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The combined margin emissions factor is calculated as follows :

Where:
EFgrid,BM,y = Build margin CO2 emission factor in year y (tCO2/MWh)
EFgrid,OM,y = Operating margin CO2 emission factor in year y (tCO2/MWh)
wOM
= Weighting of operating margin emissions factor (%)
wBM
= Weighting of build margin emissions factor (%)
b, Simplified CM
The combined margin is calculated using equation above with the following conditions:
wBM = 0;
wOM = 1;
Under the simplified CM, the operating margin emission factor (EFgrid,OM,y) must be calculated using the
average OM (option (d) in step 3).
This Sumatera grid OM is calculated using weighted average CM.

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Appendix 5: Further background information on monitoring plan


Please refer to PDD Section B.6 and B.7

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Appendix 6: Summary of post registration changes


Not applicable

-----

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History of the document


Version
04.1

Date
11 April 2012

04.0

EB 66
13 March 2012

EB 25, Annex 15
26 July 2006
02
EB 14, Annex 06b
14 June 2004
01
EB 05, Paragraph 12
03 August 2002
Decision Class: Regulatory
Document Type: Form
Business Function: Registration

Nature of revision
Editorial revision to change version 02 line in history box from Annex 06 to
Annex 06b.
Revision required to ensure consistency with the Guidelines for completing
the project design document form for CDM project activities (EB 66, Annex
8).

03

Initial adoption.