Five Year Report Presentation to Oregon Energy Facility Siting Council
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The Climate Trust, a mission-driven nonprofit that specializes in climate solutions, delivered a presentation on the findings of their five year performance report to the Oregon Energy Facility Siting Council (EFSC); the body responsible for overseeing The Trust’s activities on behalf of regulated energy facilities. In addition to performance metrics, the report provides insight into policy and carbon market trends that impact the work of The Trust, and offers lessons learned from years of managing this carbon price based standard.
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Five Year Report Presentation to Oregon Energy Facility Siting Council
- 1. Oregon CO2 Standard Third Five Year Report to EFSC Sheldon Zakreski November 21, 2014
- 2. 2 Outline • Purpose of the Report • About the CO2 Standard • About TCT • Facility Overview • Project Selection + Overview • TCT’s Performance • Lessons Learned
- 3. 3 PURPOSE OF THE REPORT
- 4. 4 Qualified Organization Mandate • ORS 469.503(d)(C) • QO must submit a report every 5 years to EFSC on its performance • EFSC can make recommendations to Legislature
- 5. 5 THE OREGON CO2 STANDARD
- 6. 6 What is the OR CO2 Standard? • Applies to new plants – 0.675 lbs. CO2/kWh – 0.504 lbs. CO2/hp-hr. • 30 year life
- 7. 7 How are CO2 Emissions Reduced? 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 lbs CO2/kWh non-base load gas plant baseload gas plant OR CO2 Standard Standard exceeds Best Available Control Technology
- 8. 8 Compliance Options • Cogeneration • Applicant sponsored projects • Monetary Path • To date all facilities have chosen the monetary path under the Standard
- 9. 9 Monetary Pathway Economics • Price-based standard • Payment split in two – 80% purchases – 20% management • Selection & Contracting – Additional 5% (equiv $0.07) • Front-loaded – Carty equiv $0.000075/kWh over 30 years Offset Purchase Funds Offset Management Funds $1.12 $0.28
- 10. 10 Price Comparison $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 Average Market Price Average OR Price Monetary Rate
- 11. 11 Key Monetary Path Features • Eligible GHGs- CO2, CH4, N2O • Timeliness- 2 years to commit 60% • New- offsets are an action that will occur (verification) – earliest vintage = year of construction – Carty- offsets 2014 vintage and later
- 12. 12 ABOUT THE CLIMATE TRUST
- 13. 13 TCT at a glance • Established 1997 • Manage 7 acquisition programs • Focus on ag, forestry, and biogas projects (38 total) • Several firsts- nutrient management offset purchase
- 15. 15 Facility Statistics • 13 monetary payments in 15 years • 8 facilities – 6 gas-fired plants, 3,069 MW – 2 gas storage facilities • Over $30MM in payments – 80% for purchase/20% for management
- 16. 16 Facility Carbon Purchase Current Obligated Current Available Offsets Contracted Offsets Retired KCP (PPM) $958,158 $841,749 $116,409 401,143 86,354 Coyote Springs Unit 2 $2,114,477 $1,448,193 $666,284 464,702 439,731 Klamath Expansion $209,182 $136,590 $72,592 22,090 13,123 Project Mist Facility $18,853.45 $17,023.45 $1,830 3,068 1,147 Hermiston Power Project $3,375,008 $2,336,395 $1,038,613 615,671 455,967 Hermiston True-Up $347,313 $335,856.59 $11,456 82,706 76,918 Port Westward $4,320,452 $3,240,280 $1,080,172 750,973 188,693 Klamath Generation $847 $847 $0 285 285 Peakers Klamath True-Up $400,462 $347,647 $52,815 60,567 33,851 Molalla $26,913 $23,357 $3,556 4,092 2,303 KCP (Iberdrola) $2,649,222 $223,500 $2,425,722 70,904 55,023 Port Westward 2 $3,532,388 $2,661,760 $870,628 340,721 22,984 Carty $6,332,879 $1,192,600 $5,140,279 149,000 Total $24,286,154 $12,805,798 $11,480,356 2,965,922 1,376,379
- 17. 17 PROJECT SELECTION + OVERVIEW
- 18. 18 FUNDING • Facility & TCT sign offset MoU and TCT receives S&C funds • Construction Begins • Offset Funds Sent to TCT DEVELOP-MENT • TCT solicits offset projects • Transaction terms are negotiated • TCT conducts due diligence on counterparty and on project CONTRACT-ING • TCT presents project to Programs Committee • If approved, contract negotiations begin (ERPA) • ERPA presented to the Board of Directors and executed if approved DELIVERY • Project monitored • Offsets verified by third party • TCT retires verified offsets
- 19. 20 Program Considerations • How does the standard drive project selection? – Fixed S&C Budget of 5% – New offsets only – Two year commitment clock
- 20. 21 Selection & Contracting Budget • Budget comparable to mature markets + spot transactions • But new market + forward transactions • S&C- not easily recovered • Implication- – narrow project types + maximize volume
- 21. 22 The Oregon Clock • Projects can take years – Offsets latter in development stage • Funding requirement > availability • Implication – Maximize search area
- 22. 23 What does this mean for project selection? • What matters: – Size – Reliability – Replicability
- 23. 24 Projects Summary • Totals= 26 projects, $12.8MM, 2.97MM offsets
- 24. 25 Oregon Project Summary •17 commitments •7 active, 7 complete, 3 terminated •Total Obligation= $6,534,572 •Avg. $4.82/offset
- 25. Oregon Projects Project Name Status Contracted Offsets Retired Offsets Shorepower Truckstops Active 90,000 0 Oregon State University Cogeneration Active 338,790 44,342 Roseburg LFG Active 66,000 0 JC Biomethane Active 70,000 0 Farm Power Misty Meadow Active 1,124 0 Farm Power Tillamook Active 7,300 0 TMF Biofuels Active 162,000 0 CarpoolMatchNW Completed 30,000 1,021 BEF Wind Financing Completed 23,178 23,178 Portland Energy Efficiency Completed 240,172 242,408 Portland Traffic Signals Optimization Completed 150,600 157,488 Blue Heron Energy Efficiency Completed 191,232 133,533 Portland Energy Efficiency Momentum Completed 66,666 33,333 Portland Traffic Signals Extension Completed 18 18 Deschutes Reforestation Terminated 233,333 0 Collins Pine Terminated 27,785 0 Biotactics Terminated 12,750 0
- 26. 27 Non-Oregon Project Summary •16 commitments •9 active, 3 complete, 4 terminated •Total= $6,271,226 •Avg. $3.93/offset
- 27. Non-Oregon Projects Project Name Status Location Contracted Offsets Retired Offsets Jatun Sacha Reforestaion Active Ecuador 58,890 52,573 JCI Duluth Steam Plant Retrofit Active Minnesota 210,328 0 John Galt Biogas Van Warmerdam Active California 12,000 0 Camco Afognak Forestry Active Alaska 386,007 233,507 ECC Composting Portfolio Active CO, DE, NV 240,812 37,314 Delta Nutrient Management Active Midwest 30,675 2 WA Beef LLC Organic Digestion Active Washington 75,000 0 AMC Katahdin IMF Active Maine 25,645 25,645 Lummi Sequestration Active Washington 263,159 0 Horst Blended-Cement Completed Nationwide 212,500 212,500 Cedar Grove OWC Completed Washington 33,910 23,018 West Main Cool Climate Concrete Completed Nationwide 300,000 156,499 Klickitat LFG Terminated Washington 342,000 0 Native Energy Terminated Iowa 135,165 0 Sure Power I Terminated Nationwide 800,000 0 CERF/IIEC Terminated Nationwide 350,000 0
- 28. 29 Example 1: Cool Concrete Projects • Large volume – Phase I= 212,500; – Phase II=156,000 • Reliable Partner – Horst led to West Main
- 29. 30 Example 2: Van Warmerdam • Proven track record – Over-delivered in WA • Replicability – 5 projects with principal – 2 in Oregon (Misty Meadow + Tillamook)
- 30. 31 Why non-Oregon Projects? • Partially driven by CO2 Standard criterion • Strong counterparty/ project – Benefit/lessons for Oregon • Project availability
- 32. 33 Performance Criteria Timeliness Financial Oregon Impact Climate Impact
- 34. 35 Financial Performance • Current obligation rate 53% • $5MM in upfront funds • Unrecouped funding – 3.9%
- 35. 36 The Made in Oregon Impact • $6.5MM – $2.1MM for CH4 projects • 635,321 VERs Retired
- 36. 37 OR Program Climate Impact • 2.9MM under contract • 1,376,379 VERs retired • Equivalent to annual GHGs: – Lane County vehicles – All homes in Salem and Gresham
- 38. 39 Lessons Learned • Financial certainty – Facilities can factor rate into construction costs – $0.80/year for avg house • Qualified Org Advantage • Econ Development tool Construction FP Tillamook
- 39. 40 Thank you! Sheldon Zakreski Director of Programs szakreski@climatetrust.org (503)238-1915 x215
Editor's Notes
- Applies to 3 types of facilities Baseload gas- Nonbase load plants Nongenerating facilities that emit CO2 Under OR facilities are gas generating plants. The two nongenerating facilities are NWN’s Mist (pictured here) and Mollala gas storage facilities For generating facilities set at 17% below most efficient baseload plant
- BACT baseload is 0.8 lbs, peaking gas plants are at 1.5 lbs, but OR standard set at 0.675 lbs 17% lower for base-load gas plant 40-45% lower for non-base-load gas plants
- The first site certificate awarded to KCP for 500MW plant on August 1, 1996 initially pursued the applicant sponsored route because it predated the Standard. However, Iberdrola received EFSC approval to modify its certificate and make a monetary payment to TCT in 2008
- The current rate is $1.40/mt. Council last raised it in 2007. Can revisit the rate every 2 years. Original rate was $0.57
- From here you can see the average market price globally has gone from $4 to over $7 and has slid down to $5. TCT’s OR portfolio price has climbed steadily and is now at $4.32.
- New is defined as vintage verified
- Note over $30MM in monetary payments
- The two program considerations that really drive our project selection strategy are transaction cost and timing constraints.
- We have a 5% transaction cost budget comparable to what real estate agents get for home purchases or sales. The difference is housing is a mature market and a spot transaction whereas offsets are a new market, and a forward transaction. In other words, we’re compensated like someone who is finding a known commodity, but our S&C job is like making a draft pick. And like my beloved SD Chargers sometimes we pick projects that are like Dan Fouts and produces and other times we pick projects like Ryan Leaf who doesn’t bring anything but costs. Where we don’t know how successful our selection efforts are until at least decade after we enter into them. And once this money is gone its gone so we have to be very mindful that our S&C dollars that are spent translate into offsets that are delivered over the next several years translate into purchase dollars going out as expected.
- Patience is not a virtue. The intent of this criteria is to commit sooner rather than later, but offset projects involve many sources of funding. The digester projects we focus on also depend on power sales, REC sales, tax credits, and tipping fees. It can time to put these funding sources together. By way of example, the owner TMF Biofuels project, which is part of the Carty portfolio, began looking at installing a digester and producing energy in 2005, but one didn’t come online until January 2013. For Carty, TCT needs to enter into $4.7MM of contracts in the next 12 months. We got $1.1MM under our belt and out of the $3.6MM left we have $2.4MM in opportunities in Oregon. Response is to find project types we know in other states or consider projects where OR companies are exporting its knowledge and technology.
- - This map shows the 33 Or program projects: 16 are active, 10 are complete, and 7 were terminated
- Range $3.00-$8.75/offset. 1,355,172 contracted offsets
- - Summary points=
- Range $0.56-$8.75/offset 1,607,033 contracted offsets
- S&C goes along way with large volume projects A key factor to go with Horst for Phase I was he had the direct relationships necessary to enroll participants; suggested they’d deliver the contracted volume, which they did When Horst wound down, it successor company West Main, already had the infrastructure and network in place so we re-upped them because they demonstrated
- S&C, new, and timeliness requirements drive a project selection process. CP strength and project quality are also big determinants This can have spill over benefits for OR Point on strong counterparty is they can come to OR. Example here is Farm Power. Started working with them in WA and brought expertise to install two digesters in Tillamook. Point on strong project is can import lessons learned. Last update, I noted the nutrient management project we’re working on in the Midwest. Very early but we’re looking at a couple of projects involving applicable crops. Because we’ve done due diligence on this project type before, we’re coming from a position of experience on how to quantify and how to target growers who might be interested in this project type. Lastly project availability plays a role. Sometimes projects aren’t there or they choose other partners
- The only outstanding one is Carty, which expires Jan 2016 KCP is an exception because they predated the standard, had offset projects in original site certificate and got an exemption from EFSC in 2008 to transfer the obligation to us via a Monetary path payment Its take us on average 16 months, which was about the time for the last one, PW 2. Under current program design, this is a doable criterion to meet as the maturation of market and 3rd party standards really help to cut down on time needed to evaluate projects
- Obligated $12.8 of $24.3MM purchase funds received Effective rate is 73% when factor in $4.8MM in deobligations, means 30% of funds received to date need to be reobligated. This reflective of the early days of the market and expect this to go down because market has matured. Another important metric is upfront funding. We’ve disbursed about $5MM in upfront funds. And sometimes we don’t get in return what we paid. Blue Heron is an example, upfront funding was given so they could invest in EE technology that would make them more competitive. Ultimately, competition from China proved too much and they went bankrupt. We were able to get 70% of the contracted offsets. Overall we haven’t recouped about $480,000, but given our total obligations to date, this is an unrecouped rate of less than 4 cents for every dollar we commit to offset projects using OR funds
- 51 cents on the dollar for made in Oregon projects