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Eye-witness account of non-additional project compared to TÜV SÜD validation report (Newsletter #6)

Currently, around 1380 hydro projects are seeking CDM support. 130 projects are already generating CERs and have so far received 15.335 Million CERs, amounting to more than 184 Mill. €. But a large number of hydro power projects are not additional, as highlighted many times by several civil society organisations. The estimated number from experts reaches between 40-80% for large hydro but also small scale hydro projects (capacity up to 20 MW) are under scrutiny.

The European Union, which buys a large part of these credits, has reacted to concerns about the social integrity of large hydro power projects with additional quality assessment requirements for CER compliance within the European Union´s EU ETS. However, there are no additional assessment criteria for the more than 500 small scale hydro power projects in the pipeline and concerns about additionality remain.

During this EB meeting, the Board reacts to these concerns when reviewing 39 hydro power projects which expect to produce 22 million CERs by 2013. Amongst these projects is the 24 MW Bhilangana – III Hydro Power Project which was validated by TÜV SÜD. Until 2012 the 24 MW project should be running a total of 5613 hours and is supposed to reduce 102.000 tonnes of CO2 adding up to more than 1 Mill tCO2 by 2020. CDM Watch visited the Bhilangana project that is currently being established at the Bhilangana River in the Tehri District, Northern India and invites the Board to read a first-hand account of this project compared with the validation report of TÜV SÜD:

TÜV SÜD Validation Report CDM Watch eye-witness Report
3.6 Additionality
The assessment team has reviewed all the documents provided by the project participants to prove the additionality. The proofs for the early consideration of applying for CDM to support project activities have been verified: the project participant have demonstrated that the decision was taken in an early stage. In particular has been verified that the Directorate Decision to apply for CDM (February 2006) has been taken on the basis of the Preliminary Design Report, finalized on January 2006. The purchasing contract for the main equipments (turbine and generator) has followed on July 2007. The project participants have demonstrated through evidences and official documents that the sequence of the events is coherent and reliable under the additionality point of view. Hence, we are confident that CDM has been considered before the starting date of the project. Allocation of the project to Bhilangana Hydro Power Limited (BHPL) happened in November 2003. Given that this was still one year before it was clear that the Kyoto Protocol would enter into force, and before the first CDM project had registered, it is extremely unlikely that BHPL’s decision in November 2003 took the CDM seriously into account. The validation report does not mention any of these dates although they were chronologically listed in the PDD.
3.6.4 Barrier analysis
The investment risk had been assessed by an independent third party, namely“Credit Analysis and Research Ltd (CARE)” resulting in a BBB (minus) rating for a portion ofBhilanganas’ funding. Because of the BBB (minus) rating, PP had to face difficulties in achieving financial closure. The PP has approached various banks for funding of the project. However, there were lukewarm responses from most of the bankers. This can be confirmed from the correspondences with various bankers, which were shown to DOE during on-site audit. (The validation report cites a couple of reference letters). If the CDM had influenced bank decisions to lend to the project, the developer should have included the IRR analyses on which those considerations were based. Just mentioning this influence is not evidence enough.It certainly is possible that the high project risks could have caused the developer to abandon their bid for the project. But simply listing barriers which are also faced by many small hydropower developers in India does not prove that the developer would have abandoned the project.
3.8 Sustainable development
The project will lead to sustainable development through employment generation, generation of   clean energy and reducing the electricity supply-demand gap. The project has received the hostcountry approval letter which indicates that the project will contribute to the sustainable development in India. The “contribution for sustainable development” of large hydro projects remains questionable most of the times. Bhilangana project proponents argued that the construction and maintenance of the projects have generated job opportunities and that the power generated by these projects has increased the life style of the villages in the surrounding areas. When we asked the villagers they said that no local people were working for the construction of the site. Instead, Nepalese people who get lower wages than local people were contracted. They live now in shags next to construction site and will move on to the next projects, once Bhilangana- III Small Hydro Power Project is finished.
3.9  Local stakeholder consultation
Relevant stakeholders have been consulted for the project, dated 29.11.2007. Appropriate media,i.e., local newspaper has been used to invite the local stakeholders for a meeting. There were noadverse comments received for the project. The stated information in the PDD has been validated

based on the submitted documents as follows:

1.  Invitation for stakeholder consultation meeting in the local newspaper [IRL # 27]

2.  List of the participants in the local stakeholder consultation meeting [IRL # 29]

3.  Minutes of meeting of the stakeholder consultation meeting [IRL # 30]

As a result, TÜV SÜD considers the applied process for the local stakeholder consultation as adequate and appropriate.

The agreement between the Government of Uttarakhand and Polyplex Corporation Ltd as the constructor of the project was signed in November 2003. But villagers of Dewlang told us that they were neither consulted nor informed about the project but had only noticed because their houses started trembling as a result of the explosions for the tunnel construction when construction commenced in May 2007.Ever since, an emotional battle of representatives of 14 villagers is ongoing. Villagers keep protesting against the construction of the run-of-river project but are being ignored. Following empty promises about compensation of suffered losses and witnessing bribes between local government and project proponents, one villager even went on hunger strike for 56 days. Another representative of the village has now gone to court to claim the relocation of affected individuals to suitable places.People in the village are desperate. “We don’t want this project. It is ruining our life”, they told us when we departed.
3.10 Environmental impacts
An environmental impact assessment (EIA) study has been carried out for the project as per thegovernment regulations. There are no significant environmental impacts of the project. The samehas been validated based on the EIA study submitted for the project. The project has received the environmental approval [IRL # 32] When approaching the village, we were forced to stop 1 km downhill of the village because landslides caused by the construction had made the road impossible to pass.Villagers claim that due to the construction of the Bhilangana- III Small Hydro Power Project, life in Dewlang village has been made impossible and that the life of hundreds of people inhabiting neighbouring 14 villages has been negatively affected. Because of the explosions caused by the tunnel construction, a large part of the houses suffered severe cracks and some houses even collapsed.  Cracks are visible throughout the whole hill and have shifted the natural path of groundwater, diverting the fresh water sources that once nourished the villages. Classes in the local school have to be held outside because parents fear the collapse of the building. Moreover, neighbouring villages suffer similar damages, including barren fields caused by the polluting dust from the construction site.
4 Comments By Parties, Stakeholders And NGOs
TÜV SÜD published the project documents on UNFCCC website by installing a link to TÜV SÜD’s own website and invited comments by Parties, stakeholders and non-governmental organisations during a period of 30 days.The following table presents all key information on this process: (empty) Inhabitants of the Tehri District do not speak English and have no internet access. Therefore, no individuals directly affected of the project were able to respond to the call. For other organisations like CDM Watch it was unfortunately not possible to respond since information about a new project under validation is only online from the first day of the 30 day period. Often too short for a comment.
Action to be taken by the Board:
The review of the project design documentation, the subsequent follow-up interviews and the further cross check of references have provided TÜV SÜD with sufficient evidence to determine the fulfilment of stated criteria in the protocol. In our opinion, the project meets all relevant UNFCCC requirements for the CDM. Hence TÜV SÜD will recommend the project for registration by the CDM Executive Board. The additionality of the project is unlikely, and not convincingly proven.  Bhilanghana III should never be registered as a CDM project as it fails to comply with the rules of the World Commission of Dams (WCD) and undermines the goals of the CDM as laid out in decisions by the COP/MOP Kyoto Protocol Article 12(b): “the purpose of the clean development mechanism is to assist Parties not included in Annex I to the Convention in achieving sustainable development and in contributing to the ultimate objective of the Convention”. However, the project developers should be held responsible for relocating the villagers to a suitable place so that they can continue their lives.

Hydro power projects are seriously undermining the objectives of the CDM. The vast majority of CDM hydro power projects have not contributed to any sustainable development. On the contrary, they are destroying homes and lives on a daily basis. When it comes to their environmental effectiveness, similar questions concerning additionality remain.The majority of hydro power projects are implemented in China and India where hydro power is business as usual and therefore require particularly careful scrutiny when assessing additionality. Given that the majority of hydro projects were validated by DOEs that have faced suspensions and spot-checks in the past, questions as to how many non-additional credits have already been issued remain.  TÜV SÜD is amongst the DOEs that might face suspension during this meeting further to a recent spot-check


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