Action Plan for the Project

Montenegro

Power Sector Policy Reform to Promote Small Hydropower Development in Montenegro

Brief Project description The project will support the Government of Montenegro in realizing its goal of 15 to 20 MW of new small generating capacity by the close of the project 2012, instead of 2015 as declared in Strategy for small hydropower plant development. Furthermore, this project will support the Government in securing that additional capacity in a more cost effective and economically responsible manner, and therefore in a more politically sustainable manner. In so doing the project will avoid 402,360 to 536,480 tons CO 2 eq in Green House Gases emissions over the 20 year life of the new small hydro generating facilities. The project will do this by supporting the Government of Montenegro in:  streamlining and simplifying the application procedures for small renewable independent power producers;  collecting basic data to make investment decisions;  by setting attractive but competitive business terms and conditions for investors; and  providing assistance to the Ministry for Economic Development of Montenegro to role out a streamlined and transparent tendering process. Expect June - 201 May ID ed Key Activities Resp. Partner Dec 2009 2011 0 2012 Output 2008 3 n o 0 i Activity 1 t 7 a 9

4 Simplify tendering and authorization procedures for e 0 n

0 small hydro-power productions e 0 g

r TORs for Legal Specialists (National) prepared and advertised UNDP e Ministry for w

o Economic p - Development o r

d (MED) y

h Existing tender process reviewed, simplified and clarified

UNDP l

a MED m

s Roles, responsibilities and procedures simplified and clarified in order

n to shorted the authorization process i

MED s t

n Workshop to present the findings and measures for improvement

e UNDP organized m

t MED s Business sector e v n i TORs for Construction Specialist prepared and advertised UNDP g n

i MED t c

a Simplified documentation for construction permit for small hydro r

t UNDP t power plant

n Tax legislation to remove import duties and VAT from small power o

i UNDP t i equipment reviewed and proposed to Ministry of Finance for adoption d MED n o

c Activity 2 i r

p Design contractual documentations for small hydro

d power plants n a

l Developed documents for the award of small hydro power plants a sites/concessions to potential investors, including detailed bid UNDP g

l evaluation criteria

a Developed a model Power Purchase Agreement

n UNDP

o i MED t u t i

t Reviewed and improved existing a model Concession Agreement for s UNDP

n Small hydro power plants construction and operation, including

I MED provisions for guarantees and risk mitigation

Activity 3 Develop regulations for connections the small power producers to the power grid

ToR for Public Administration Specialist (International) prepared and UNDP published MED ToR for Energy Economist (International) prepared and published UNDP

MED Existing provisions for priority access to the grid system of electricity UNDP produced from small hydro sources improved MED Existing rules and procedures for connection of small hydro power UNDP plants to the distribution network based on Distribution Code MED reviewed, improved and published Secondary regulation governing relations between small hydro power UNDP plants and transmission and distribution system operators developed MED Legislation to require a single water usage/concession fees revised UNDP

Activity 4 Develop financial incentive scheme for small hydro power producers and regulations for obligatory purchasing electric power produced in small hydro power plants Cost data on small hydro power generation collected and analyzed UNDP

MED Reviewed best practice on incentive based tariffs for small hydro UNDP power producers MED Developed the two most favored options and assess cost and UNDP feasibility implications MED Existing Methodology for calculating the purchase price of electrical UNDP power from small hydro plants reviewed, improved and adopted MED Regulations for purchasing electricity power produced in small hydro UNDP power plants developed and legally adopted MED Workshop for EE and RE Unit and Business community organized UNDP MED Business sector

Review options for the generation and sale of carbon credits from new small hydro capacity

Activity 1 All available small hydro site data collected and posted on web site

ToR for Environmental Impact Assessment prepared and published UNDP

ToR for Water Engineer prepared and published UNDP

MED ToR for Spatial Planner prepared and published UNDP

MED ToR for Database/Web manager prepared and published UNDP

e MED t r

o Assembled available data on 45 small hydro locations UNDP p

p MED u Hydrological and s

r Meteorological e Inst (HMI) w

o Analyzed likely influence of climate change on the hydrological p

UNDP potentional of the 45 locations o MED r

d HMI y h

Additional cadastre data for each site, including: location, existing

l UNDP l infrastructure, geology, hydrology, proximity to grid or buyer, planning a MED designations, ownership, use and access rights prepared

m HMI S Developed Methodology for determing location eligibility criteria

n UNDP i

including spatial, ecological, cultural and water use limitations MED s n

o The 10 eligible small hydro locations with grates potential in

i UNDP

s development filtered i MED c

e For the 4 best selected locations complete pre-investments d documentation, including environmental impact assessment, UNDP s t stakeholder consent, planning permission, access and use permits MED n e Dam location size and construction estimated m UNDP t

s MED e HMI v n i

Conditions in local self-governments to support 4 locations for small

r UNDP hydro development improved e MED c

u Local self-

d governments o r

P Locations data for public access posted UNDP r e MED w

n Activity 2 e

d Hydrological data for additional 4 locations n e

p ToR for Engineer/Hydrologist prepared and published

e d n I Stations to measure water level in 4 locations conducted and UNDP equipped MED HMI Rating curves for 4 locations made and actual discharge at different UNDP water level calculated MED HMI Duration curves for 4 sites made and energy potentional at the UNDP potentional locations calculated MED HMI Hydromet/hydrological engineers trained to make duration curves UNDP MED HMI l l o

r Activity 1 a d

y Train and organize unit in small hydro power plants

S h tendering and contracting process Staff capabilities developed UNDP MED ------DevelopmentProgramme: United Nations

Project results and lessons learnt summarized, power Independent Power Producer concessions operational documented and made publicly available Undertake two Undertake fullyindependent evaluations ofproject andstakeholdersbusiness community a Organized nationallevel seminars to present thelessons learned to promote inMontenegrohydrosmall etc.) (e.g organization ofpublic tenders, economics tomechanisms a Prepared series ofpublications reflecting resultsproject lessons and Monitored GHGemission savings independent power producerto the EEand Unit RE Developed requirements for ofthe submission dataproduction the by locations for which concession agreement is already signed Supervisedtheconstruction and at4 commissioning locationsand attract investments inhydrosmall power plant rehabilitation Reviewed and revised process, the responsibilitiesanddocuments for signed locations and locationsforwhich concessionagreement isalready Monitored thebidding, authorization constructionand forprocess4 agreementpurchase andConcession agreements Evaluated and selected winning offers,negotiated and signed Power Respondedto Independent PowerProducer enquiries plants announcement for 4 locations Operated publishedand concession tender for building hydrosmall visitstoStudy countriesEU organized opportunities policiesinand Montenegro developed activities toinformpotentional investors on powersmall hydroplants Web-siteand other informationdissemination and awareness raising Monitor construction andpower of operationsmall construction hydro Monitor Identification, codification and dissemination of lessonscodification Identification,and of dissemination Tender and contract out the development development 4 selected theand out Tender contract sites for power generation for sitespower learnt and learntbest practices of Montenegro: Activity 2 Activity Activity 2 Activity 1 Activity plants

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Ministry Ministry EconomicDevelopmentfor UNDP UNDP UNDP UNDP UNDP UNDP UNDP UNDP UNDP UNDP UNDP UNDP UNDP MED MED MED MED MED MED MED MED MED MED MED MED MED

Podgorica, Podgorica, 1

st August 2008

Alexander Avanessov Branimir Gvozdenović UNDP Resident Coordinator & Minister for Economic Development UNDP Resident Representative