54572 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No.: Date ISDS PreparedlUpdated: 04/09/10 I. BASIC INFORMATION A. Basic Project Data Country: China Project ID: P116852 Project Name: Power Sector Transformer Efficiency Program Task Team Leader: Leiping Wang Estimated Appraisal Date: May 15, 2010 Estimated Date of ERP A Signing: June 10, 2010 Managing Unit: EASCS Lending Instrument: Carbon Offset Sector: Energy Theme: Climate Change Financing Plan (US$m.) Source Local Foreign Total (US$m) Borrower/Recipient 420 .0 0.0 420.0 IBRDIIDA 0.0 0.0 0.0 Total:420 Environmental Category: B B. Project Objectives The objective of the proposed project is to mitigate GHG emissions of China's power industry by reducing distribution losses. This objective will be achieved by using market-based CDM under the Kyoto Protocol through a corporate program to retire in-service inefficient transformers that are still within the lifetime, and to replace them with more efficient transformers in distribution networks of the State Power Grid of China (SGCC). The key project performance indicators are the actual Emission Reduction (ERs) induced by the replacement of more efficient transformers and verified by an independent verification entity; and (2) the quantity of electricity saved. C. Project Description Currently there are around 150,000 inefficient S7 and S8 1 transformers serving the distribution network of SGCc. Most of these transformers were installed in late 1980s and 1990s and still have remaining lifetime of at least 5-10 years. 1 57, 58, S 11 and S 15 are the model numbers of distribution transfonners in China, the higher number of the series, the more advance technology and the higher efficiency. The proposed project will replace around 100,000 inefficient S7and S8 distribution transformers with more efficient S 11 and S 15 transformers from 2009 to 2011 , with the following schedule. All the transformers to be replaced under the proposed project will be: · 10 kV distribution transformers; · Commissioned after 1985 (including 1985); · Under normal operation conditions (without oil leakages or other insulation problems); and · In locations meeting the environmental, health and safety requirements of the People's Republic of China and related regulations of the SGCC (such as safety distance, etc.). All the new transformers to be installed to replace the existing inefficient transformers will be dry types, modem oil immersed, and other modern types of transformers manufactured to meet current Chinese industrial standards, as well as related environment, health and safety regulations of China. The total project investment cost is estimated at around US$ 420 million equivalent. The project will be fully financed and implemented by the SGCC. This proposed project falls under the small-scale COM project activity category and applies the approved methodology ASM II.A. It is proposed that the Bank purchase, on behalf of the Spanish Carbon Fund (SCF), the certificated emission reductions (CERs) induced by the replacement of much more efficient transformers fi"om 2010 to 2013, estimated at about 1.5 million tons of C02e. The purchase amount will be further estimated during the project preparation and defined in an Emission Reduction Purchase Agreement CERPA) to be reached through negotiation between the Bank and SGCc. When developing the project concept, two more alternatives were considered, in addition to the proposed carbon finance intervention: · A lending operation to finance the SGCC's S7/S8 inefficient transformers early retirement program; and · A technical assistant program to SGCC for the development and implementation of the inefficient transformer early retirement program. Both alternatives were rejected because (1) SGCC has a strong balance-sheet and can easily access to capital market. Debt-financing from the World Bank is not necessary; and (2) only technical assistance would not provide enough financial incentives or ensure a strong commitment by the SGCC to the successful implementation of the program . D. Project Location The project would be implemented in SGCC's power distribution grids involving 24 Provinces, municipalities and autonomous regions where SGCC owns and operates the power grids. The project activities will be implemented along selected existing 10 kV distribution lines owned and 2 operated by the SGCC where eligible inefficient 10 kV distribution transformers are installed, and places where the replaced transformers will be storage, and dismantled. These places are owned by SGCC or by licensed contractors. No land acquisitions, either permanent or temporarily, are required. E. Borrower's Institutional Capacity for Safeguard Policies The SGCC will implement the proposed project. As part of the previous Ministry of Electric Power and the State Power Corporation of China, the SGCC has been involved with many World Bank projects in the past and has a long hi story of addressing World Bank safeguard requirements. Its performance for managing safeguard aspects of their projects has been highly satisfactory. The company system for environmental management is well established and their staff is aware and experienced in complying with World Bank safeguard policies. F. Environmental and Social Safeguards Specialists Mr. Bernard Baratz (EASIN) Mr. Youxuan Zhu (EASIN) II. SAFEGUARD POLICIES THAT MIGHT APPLY As the proposed project will only replace existing distribution transformers with same types of, but more efficient transformers in SGCC's 10 kV distribution system and there are no civil works required for the proposed project, no significant negative environmental or social impacts of the project are expected. sa ~eguardPo rICICS T' ' nggere db t h e P rOject 'y . Y es N0 TBO Envi ronm ental Assessment (OPIBP 4.01) IXI r1 Natural Habitats (OPIBP 4.04) II IXI The project will not significantly conven or degrade any protected areas, known natural habitats, or estab lished or proposed critical natural habitats as defined in the policy. Pest Manaeement (OP 4.0<)) r1 IXI The project will not procure any pesticides, nor will an increase usc of pesticides resu lt from the project. Physical Cultural Resources (OPIBP 4.11) II IXI The project will not adversely affect sites with archeo logical, historical, religious, or unique natural values. Appropriate clauses will be included in all construction contracts regarding the procedures to be followed in the event of "chance finds" of culturally significant ani facts or sites. Involuntary Resettlement tOPfBP 4.12) 11 IXj No temporary or permanent land acquisition or resett lement wi ll be involved because the project will involve the rem oval of existing distribution transformers at existing sites and their replacement with higher efficiency transfonners at the same existing sites. Indigenous Peoples ( OPfBP 4.10) 11 IXj The project will not affect indigenous people as defined in the 3 policy, and project activities will not limit or prevent access to natural resources vital to the sustainability of their culture and livelihoods. Forests (OPIBP 4.36) [I [XI The project will not finance activities that would involve significant conversion or degradation of critical forest areas or related critical natu ral habitats as defin ed in the policy. No ac tion is required under this policy. Safety of Dams (OPIBP 4.37) II [XI The project will not finance construction or rehabi litation of any large dams as defined under this policy. Proiects in Disputed Areas (OPIBP 7.60)' [I [Xl The project is not located in any known d isputed areas as defined under the policy. No action is required under this policy. Projects on International Waterways lOPIBP 7.50) [] IX] There are no known project co mponents involv ing int ernational waterways as defined under the policy. No action is requi red under this policy. Piloting the Use of Borrower Systems to Address Environmental and Social Issues in Bank-Supported Projects [I [XI (OPIBP 4.00) EnVironmental Category: B The main issues are minor and short lived, associated with replacement, dismantling and disposal of the old transformers (noise, traffic disruption, oil leakage of oil immersed transformers, management of old transformer materials-di sposal, recycle reuse etc.). Since all the transformers involved were made in China after 1980s, none of the transformers contain polychlorinated biphenyls (PCBs), so there are no issues of PCB disposal. SGCC also indicated that the possibility of oil leakages of the distri bution transformers to be replaced is extremely low. Transformers with oil leakage will not be qualified to the project. No resettlement or land acquisition will be involved because the project will involve the removal of existing transformers at existing sites and their replacement with higher efficiency transformers at the same existing sites. III. SAFEGUARD PREPARATION PLAN An environmental management plan (EMP) will be prepared by SGCC as the primary safeguards instrument. The EMP will include, but not limited to, the follow ings: · A process for due diligence reviews of transformer locations to confirm the transformers continue to be in safe locations; · Measures to mitigate soil contamination caused by transfo rmer oil leakages, if any; By supporting the proposed project, the Bank does nOl intend to prejudice the final determination of the parl ies' claims on the disputed areas 4 · Implementation arrangements, including institutional capacity building and training, if needed; · Monitoring and reporting procedures; In addition, The EMP will include appropriate safeguards measures or refer to the standard procedure of SGCC where appropriate. The Bank will review the adequacy of the SGCC's environment and emergency preparedness and response policies and procedures directly related to activities under the Project. The EMP will also reference the IFC's guidelines on occupational health and safety, as relevant. IV. APPROVALS Signed _d submitted by: Task Team Leader: Mr Approved by: Regional Safeguards Coordinator: Mr. Panneer' Ivam /~ Comments: Act) 'Y~ £CJ:11 v , Sector Manager: Comments: Mr. EdeJorge Ijjasz.vasqu~ h AprilZhOlO 5