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Cogeneration and Emissions Trading

Tom Markowitz

www.Enerhope.com

Cogeneration Seminar

Calgary, Alberta

September 1st, 2011 1:30 p.m.

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“Alberta has both a responsibility and an opportunity to take decisive action to reduce greenhouse gas emissions.”

http://environment.gov.ab.ca/info/library/7894.pdf

Alberta’s Climate Change Strategy (2008)

Alberta and Climate Change: Meeting the Challenge – Regulatory Framework Update (June 22, 2009)

http://carbonoffsetsolutions.climatechangecentral.com/files/microsites/Policy_Regulation/Workshop_-_Reg_Framework_Update_-_June_22_09.pdf

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Alberta’s Targets

http://environment.gov.ab.ca/info/library/7894.pdf

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“Specified Gas Emitters” (“SGEs”)

of Greenhouse Gases:

•~90 Large, Direct Emitters in Alberta

•Coal-Fired Electricity, Petroleum Refineries, Oil Sands, Upgraders, Petrochemicals……

•Each Specified Emitter: > 100 kt CO2e/y

•~50% of Alberta’s Greenhouse Gas Emissions

•Emissions growing

http://www.ec.gc.ca/ges-ghg/Default.asp?lang=En&n=040E378D-1

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How to Persuade

Specified Emitters

to Reduce Emissions:

“Command and Control” “Market Forces”

e.g. Emissions Trading

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ALBERTA REGULATION 139/2007Climate Change and Emissions Management Act

SPECIFIED GAS EMITTERS REGULATION

http://www.qp.alberta.ca/574.cfm?page=2007_139.cfm&leg_type=Regs&isbncln=9780779738151&display=html

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BitumenHeater

Delayed

Coking

Unit

Coke

“The Upgrader”Synthetic Crude Oil

“SCO”CO2 in Exhaust

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BitumenHeater

Delayed

Coking

Unit

Coke

Averages, 2003-2005

Production (“P”): 3.125 million Bbl/y

Synthetic Crude Oil“SCO”

250,000 tonnes/y CO2

Total Annual Greenhouse Gas Emissions (“TAE”)

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TECHNICAL GUIDANCE DOCUMENT FOR BASELINE EMISSIONS INTENSITY APPLICATIONS JULY 18, 2007 ALBERTA ENVIRONMENThttp://www.environment.gov.ab.ca/info/library/7811.pdf

“BEI”

FREQUENTLY ASKED QUESTIONSFOR BASELINE EMISSIONS INTENSITY APPLICATIONS ANDCOMPLIANCE REPORTINGFEBRUARY 2008http://environment.alberta.ca/documents/Baseline_FAQ.pdf

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BEI = TAE

P Average, 2003-2005

Calculate the Baseline Emissions Intensity

“BEI”

Baseline Emissions Intensity

= Total Annual Emissions

ProductionAverage, 2003-2005

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BitumenHeater

Delayed

Coking

Unit

Synthetic Crude Oil

Coke

BEI for The Upgrader

250,000 tonnes/y CO2 3.125 million Bbl/y

250,000 x 1000

3.125 x 1,000,000= 80 kg CO2/Bbl SCO

“SCO”

BEI =

TAE

P

BEI = TAE

P Average, 2003-2005

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BitumenHeater

Delayed

Coking

Unit

Synthetic Crude Oil

Coke

2007 and Future:

Net Emissions Intensity Limit: 88% of BEI

The Upgrader’s Net Emissions Intensity Limit

88100

x 80 = 70.4 kg CO2/Bbl SCO

“SCO”

CO2

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BitumenHeater

Delayed

Coking

Unit

Synthetic Crude Oil

Coke

“SCO”

3.3 M Bbl/yIn 2008…..

The Upgrader produced…..

Net Emission Intensity Limit: ______ kg CO2e/Bbl SCO

:____ kg CO2e/Bbl SCO x _____ Bbl SCO = _________t CO2/y

70.4

70.4 3.3 M 232.3 k

How many tonnes of CO2 was the Upgrader allowed to emit?

CO2

Allowed Total Emissions

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During the Year:

Measurement and Monitoring of GHG Emissions

End of Year:

Report Annual Total GHG Emissions to AB Environment

“True-Up” of Reported Emissions with Allowed Total

Verified!

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0

50

100

150

200

250

CO

2 E

mis

sio

ns,

kt/

y

Allowed to Emit 232.3 kt/y

In 2008, The Upgrader is allowed to emit 232.3 kt of CO2

In 2008, the Upgrader produces 3.3 million Bbl of SCO.

Net Emission Intensity Limit: ______ kg CO2e/Bbl SCO70.4

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0

50

100

150

200

250

CO

2 E

mis

sio

ns,

kt/

y

Allowed to Emit 232.3 kt/y

2008: If the Upgrader emits exactly 232.3 kt of CO2………

The Upgrader is in compliance with Regulation 139/2007

In 2008, the Upgrader produces 3.3 million Bbl of SCO.

Net Emission Intensity Limit: _70.4_ kg CO2e/Bbl SCO

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0

50

100

150

200

250

CO

2 E

mis

sio

ns,

kt/

y

Allowed to Emit 232.3 kt/y

If, in 2008, The Upgrader emits less than 232.3 kt of CO2

Alberta Environment gives this many Emission Performance Credits to The Upgrader

In 2008, the Upgrader produces 3.3 million Bbl of SCO.

Net Emission Intensity Limit: _70.4_ kg CO2e/Bbl SCO

“True-Up” at the end of the year

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0

50

100

150

200

250

CO

2 E

mis

sio

ns,

kt/

y

Allowed to Emit 232.3 kt/y

If, in 2008, The Upgrader emits more than 232.3 kt of CO2

In 2008, the Upgrader produces 3.3 million Bbl of SCO.

Net Emission Intensity Limit: _70.4_ kg CO2e/Bbl SCO

The Upgrader must give to Environment Alberta (Emission Performance Credits + Fund Credits + Offsets) to equal the extra tonnes.

“True-Up” at the end of the year

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Emission Performance Credits:Awarded to Specified Gas Emitters (“SGEs”) that have emitted less than their Allowed Total Emissions.

Fund Credits:Contributions to the Alberta Climate Change and

Emissions Management (“CCEM”) Fund.

Used to fund emission reduction projects.

One tonne of CO2e Credit for each $15 contributed to Fund

Offsets:Rewards for verified emission reductions by non-Specified Gas Emitters.

e.g. hospitals, transportation, land use, buildings

Units: tonnes of CO2e

All of these “tradeable units” can be bought and sold in Alberta’s emissions trading market.

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BitumenHeater

Delayed

Coking

Unit

Coke

Synthetic Crude Oil

“SCO”

CO2 in Exhaust

What if 2009 Emissions Exceed Allowed Total Emissions!

3.6 million Bbl/y280 kt/y CO2

How to reduce the emissions intensity?

The Upgrader’s total emissions are 26.6 kt/y higher than the allowed total.

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Heater

Delayed

Coking

Unit

Coke

Synthetic Crude Oil

“SCO”Heat

Recovery

Boiler

~

Bitumen Pre-Heater

Steam Turbo-Generator

Cogeneration Retrofit of the Upgrader

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Heater

Delayed

Coking

Unit

Coke

Synthetic Crude Oil

“SCO”Heat

Recovery

Boiler

~

Bitumen Pre-Heater

Steam Turbo-Generator

Cogeneration Retrofit of the Upgrader

Alberta will award 418 kg of Emission Performance Credits for each MWh of cogenerated electricity.

Pre-heating the bitumen with exhaust steam from the turbine increases the efficiency of heating, reduces fuel consumption and air emissions.

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Upgrader: Many opportunities for cogeneration

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SPECIFIED GAS EMITTERS REGULATION : ADDITIONAL GUIDANCE ON COGENERATION FACILITIESOCTOBER 1, 2007

http://www.assembly.ab.ca/lao/library/egovdocs/2007/alen/165318.pdf

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Offsets

Rewards for verified emission reductions by non-Specified Gas Emitters.

e.g. hospitals, transportation, land use, buildings

Diesel Buses: High-GHG

Natural Gas Buses: Low-GHG

Typical Offset Project

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Offsets – Information

Technical Guidance for Offset Project Developers, January, 2011

http://environment.gov.ab.ca/info/library/7915.pdf

Carbon Offset Solutions (Climate Change Central)

http://carbonoffsetsolutions.climatechangecentral.com/

Offsets in Cap-and-Trade (www.Enerhope.com)

http://www.enerhope.com/_blog/Offsets_in_Cap-and-Trade_-_July,_2011

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“I will have 100 kt of extra Credits after True-Up at the end of the year.”

“I will need 100 kt more Credits at True-Up at the end of the year.”

Trading of Credits

100 kt of Credits

$

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Alberta: 2010 greenhouse gas emission reduction results

Results 2010 Cumulative totals (since July 1, 2007)

Facility improvements to target 0.68 Mt 5.60 Mt

Carbon offsets 3.86 Mt 11.70 Mt

Emission performance credits generated 1.96 Mt 6.48 Mt

Emission reductions (from business as usual) 6.50 Mt 23.78 Mt

Climate Change and Emissions Management Fund payments

$70.0 million

$256.9 million

http://alberta.ca/acn/201105/30322B6FFB035-F686-76DE-835193EEE98AC9B2.html

Results

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Alberta’s Emissions Trading System:

A Success?

Yes!....

First Greenhouse Gas Emissions Trading System in North America

Demonstrates the Mechanics of Emissions Trading

Has Reduced Emissions below Forecasts

No Scandals: No speculative investors

However…..

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Need for ImprovementNo declaration of the emission reduction Target for SGEs.

Impossible to define Production "P", year-after-year

No public record of Credits and their history

Baseline formula rewards polluters, punishes efficiency

Alberta Environment does not verify offsets

CCEM Fund has not reduced emissions significantly

Overall sector emissions continue to rise

In a recession, emissions intensity goes up, is penalized.

2014: SGE Regulation ends.

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Cogeneration in AlbertaLife Cycle Assessment Comparison of North American and Imported Crudes

Jacobs – Life Cycle Associates Report to AERI (July, 2009)

http://www.albertainnovates.ca/media/15753/life%20cycle%20analysis%20jacobs%20final%20report.pdf

•Cogeneration in the North

•Replacing Coal-Fired Generation in the South

•Massive GHG ReductionsEmissions trading?

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Emissions Trading

Baseline and Credit Cap and Trade

(Alberta)

Specifies allowed total emissions from each “SGE” regulated facility.

Each SGE must monitor and report its emissions.

Government awards Credits to under-emitters.

Demands Credits from over-emitters.

SGEs can trade Credits with each other.

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Emissions Trading

Baseline and Credit Cap and Trade

(e.g. European Union)

Specifies the Cap, the group total tonnes of pollution allowed for all regulated (“capped”) facilities together.

Creates Allowances (Permits), one Allowance for each tonne in the Cap.

Distributes the Allowances to capped facilities according to some fair scheme.

Each capped facility must monitor and report its emissions.

Each capped facility must return to government one Allowance for each tonne it emitted.

Capped facilities may trade allowances with each other.

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Some Cap and Trade SystemsActive:

European Union, New Zealand

http://ec.europa.eu/clima/policies/ets/index_en.htm

Regional Greenhouse Gas Incentive (NE US States)

http://www.rggi.org/

NOx and SO2 Cap and Trade Systems

http://www.epa.gov/airmarkets/progsregs/nox/sip.html

http://www.epa.gov/airmarkets/progsregs/arp/index.html

Future: (?)

Western Climate Initiative (10 States and Provinces)

http://www.westernclimateinitiative.org/

Japan, China, India, Korea, Australia, California

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Further Information• EMISSIONS TRADING PRIMER: Pollution Probe, Toronto, 2003,

ISBN 0-919764-54-1: http://www.pollutionprobe.org/Publications/emissionstradingdwnldpage.htm

• TOOLS OF THE TRADE,USEPA, 2003: http://www.epa.gov/airmarkt/resource/docs/tools.pdf

• EU emissions trading: an open system promoting global innovation: European Communities, 2007, ISBN 978-92-79-06862-1: http://ec.europa.eu/environment/climat/pdf/emission_trading2_en.pdf

• CLIMATE CHANGE 101- Cap and Trade: Pew Center on Global Climate Change, Arlington, VA, 2009: http://www.pewclimate.org/docUploads/Climate101-CapTrade-Jan09.pdf

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www.Enerhope.com

Emissions Trading Course: Video and .pdf

Monthly Emissions Trading News Update

Monthly In-Depth Articles and Commentarye.g. “Cogeneration and Emissions Trading”(January, 2011)

http://enerhope.advancedwebsites.ca/_blog/January_2011_-_Cogeneration_and_Emissions_Trading

Consulting Services:

Energy, Environment, Engineering

and Emissions Trading