Electricity Grid Displacement Factor Draft Discussion Paper

Transcription

1 Electricity Grid Displacement Factor Draft Discussion Paper Draft for Comment December 01

2 Title: Electricity Grid Displacement Factor Draft Discussion Paper Number: 1.0 Program Name: Effective Date: This document was updated on: ISBN No.: Disclaimer: Alberta Emission Offset System TBD December 01 TBD This document is not a substitute for the legal requirements. Consult the Carbon Competitiveness Incentive Regulation and the legislation for all purposes of interpreting and applying the law. In the event there is a difference between this document and the Carbon Competitiveness Incentive Regulation or legislation, the Carbon Competitiveness Incentive Regulation or the legislation prevails. Dec 01 Electricity Grid Displacement Factor Draft Discussion Paper Page of

3 Table of Contents 1.0 Introduction....0 Review Methodology....1 Previously used method Operating Margin (OM) Build Margin (BM) Line Losses.... Other methods reviewed.... Revised method Operating margin (OM)..... Build Margin..... Line Losses....0 Review Frequency....0 Application of update EGDF to new and existing projects....0 References....0 Appendix 1 - Calculation of the Grid Emission Intensity Factor for Alberta (EDC Associates)... Dec 01 Electricity Grid Displacement Factor Draft Discussion Paper Page of

4 Introduction The Alberta Climate Change Office (ACCO) publishes the Electricity Grid Displacement Factor (EGDF) for use within the Alberta Emission Offset System. This factor is used to quantify emission offsets from projects that follow an approved quantification protocol and supply electricity to Alberta s electrical grid, reduce electricity used from the grid, or to adjust emissions offsets from projects that increase the use of electricity from the grid (resulting in additional emissions attributable to that incremental additional electricity use). The EGDF is intended to estimate the greenhouse gas emissions intensity of the MWh of marginal generation that will be impacted by the project activity. The EGDF has been reviewed every five years, with the last review occurring in 01. The current EGDF is listed in the Offset Emissions Factor Handbook, which will be updated with the revised EGDF once the review is complete. The revised EGDF will apply to new projects or projects entering their extension period as of February 1, 01. This discussion paper will outline the review of the EGDF calculation methodology, including an overview of the previous method, other methods considered, and the proposed approach. This paper will also outline the review frequency moving forward, and the application of an updated EGDF for new and existing projects..0 Review Methodology.1 Previously used method This section describes the calculation methodology of the previously approved grid factor. The previously used methodology involves the calculation and weighted combination of two determinants: the operating margin and the build margin. EEEEEEEE = (ωω BBBB) + ((1 ωω) OOOO) Where, EGDF Electricity Grid Displacement Factor ω Weighting Factor (0.) BM Build Margin OM Operating Margin.1.1 Operating Margin (OM) The operating margin was calculated using the annual per cent of time generation types are the marginal price setter in Alberta s hourly auctions and production-weighted average emissions intensity for each generation type. For the last EGDF review the OM was determined to be 0. tcoe/mwh. This was determined as the arithmetic average of the OM for each year of the five year data period. Per cent of time on the margin for each generation type was taken from the publically available Annual Market Statistics report data file from the Alberta Electric System Operator (AESO). A production weighted average emissions intensity factor for each generation type was calculated based on data from facilities collected under the Specified Gas Emitters Regulation (SGER). The emissions intensity for cogenerated electricity was determined using each facility s cogeneration emissions less the deemed heat emissions (as described by and reported under the SGER) and the production of cogen electricity (as described and reported under SGER, i.e. total generation net of station load). Dec 01 Electricity Grid Displacement Factor Draft Discussion Paper Page of

5 Build Margin (BM) The build margin was calculated from the total energy production (MWh) and associated greenhouse gas emissions for projects that were commissioned for service during the data period. For the last review the BM was determined to be 0. tcoe/mwh. The AESO provided the capacity of new generators, fuel type, generation volume and year of commissioning. A production-weighted average of emissions intensity was then calculated using the same generation and emissions intensity by fuel type that was calculated for the operating margin. There are zero emissions allocated for wind projects..1. Line Losses Line losses are the difference between all of the generated and imported power in the province and all of the power consumed in the province, owing mostly to electricity lost as heat due to electrical resistance in transmission and distribution wires. Here, line losses are used to calculate the factor that is applied to the EGDF for offset projects that not only displace grid-connected generation, but avoid the electricity line losses between generation and point of use, such as a reduction in grid electricity, or generation at point of use, the factor is also used in situations where the project condition increases the use of grid electricity. In the previous review of the EGDF the line losses were taken from a 00 report for the Clean Air Strategic Alliance that was conducted by Jem Energy. The line losses for Alberta in that report were.%, which led to a line loss factor of 1.0. The methodology of the line loss calculations are detailed in section.., below.. Other methods reviewed In the review of the EGDF, ACCO has considered a number of different methodologies including: Applying a heavier weighting on the build margin This method was considered in an effort to make the EGDF more responsive to system changes that are currently underway in Alberta s electricity sector by giving heavier weighting to the emissions intensity of newer units in the BM compared to the older average age of units in the OM. However, this technique is better suited to designing a grid factor more applicable to a specific generation profile where heavier weighting on the BM indicate a project that displaces power at times better aligned with peak demand, thereby reducing the demand for new generation capacity. Replacing the build margin with a forecast build that is consistent with the 0 by 0 target This method was considered in an effort to anticipate changes that would be required to meet the legislated 0 per cent renewables by 00 target. However, this technique introduces a level of temporal uncertainty associated with relying on a forecast and results in a factor that represents, in part, a grid that does not yet exist. Using the electricity benchmark in the Carbon Competitiveness Incentive Regulation (CCIR) This method was considered due to the simplicity and symmetry that would be created by alignment with the CCIR. However, the electricity benchmark and the EGDF serve two different functions that are best served by two different methods. Using the United Nation Framework Convention on Climate Change (UNFCCC) method The UN method was examined due to its recent publication date (version.0 came into effect in November 01) and its global scope. The method is sophisticated and accurate in terms of displaced emissions, however it comes at a high administrative burden, and the ex-post nature would not offer certainty to project developers and investors.. Revised method The revised method is structurally consistent with the previously used method. However, a revision has been made related to the years of data that are used (the study period). Instead of using data from the most recent available five years, the study period is composed of the three most recent available years; this has been done to increase the responsiveness of the grid factor to the current changes in Alberta s grid. The weighting remains an even 0/0 on the OM and BM. Dec 01 Electricity Grid Displacement Factor Draft Discussion Paper Page of

6 The revised electricity grid displacement factor, calculated using data is 0. tco e/mwh. The methodology and values for the OM and BM are outlined below...1 Operating margin (OM) OOOO = 01 ii=01 OOOO ii OOOO ii operating margin calculated for each year, i, in the study period OOMM ii = nn EEEE tttttttt,ii tttttttt=1 TTTTTT tttttttt,ii EEEE tttttttt,ii emissions intensity for each type of generation, type, in each year, i, being calculated, where there are n types of generation, and, TTTTTT tttttttt,ii time on the margin for each type of generation, type, in each year, i, being calculated, where there are n types of generation. EEEE tttttttt,ii = mm jj=1 mm jj=1 PP jj EEEE jj PP jj PP jj production of each individual power plant, j, within a generation type in the year, i, the emissions intensity is being calculated, and m number of plants of each generation type, and EEEE jj emissions intensity of each individual power plant, j, within a generation type, in the year, i, the emissions intensity is being calculated. The emissions intensity for individual cogeneration and non-cogeneration power plants are calculated differently than other power plants. This is due to cogeneration producing two products (heat and power) and so the emissions from the heat production needs to be removed from the emissions of the cogenerating unit to determine the emissions intensity of the electricity produced. Emissions intensity for cogeneration, EEEE cccccccccc = GG tt DD h PP cccccccccc GG tt total carbon dioxide equivalent emissions of the cogen, DD h deemed heat emissions associated with heat production, and PP cccccccccc cogen electricity as reported under provincial emissions regulation. Dec 01 Electricity Grid Displacement Factor Draft Discussion Paper Page of

7 D h is the deemed emissions from an 0 percent efficient boiler with the specific fuel mix used by that boiler; here we assume natural gas: DD h = HHHHHHHH 0.0 tco e/gj Heat heat production of the cogeneration unit in gigajoules, and 0.0 tco e/gj deemed emissions from an 0 percent efficient natural gas fired boiler. Emissions intensity for non-cogenerating units, EEEE nnnnnn cccccccccc = EE PP E emissions of the non-cogenerating power plant, and P production of the non-cogenerating power plant. The revised operating margin, using data is 0.1 tco e/mwh... Build Margin BBBB = pp kk=1 EEEE tttttttt,01 PP kk,01 pp kk=1 PP kk,01 PP kk,01 01 production of each plant, k, that entered production between 01-01, and p number of new power plants that began generation during the study period, and EEEE tttttttt,01 emissions intensity of each type of plant in 01 as calculated during the determination of the OM The revised build margin, calculated using the 01 of generation from plants that began generating electricity between data is 0. tco e/mwh... Line Losses The calculation of line losses is dependent on transmission losses (TL) and distribution losses (DL). Transmission losses are calculated as the percentage of losses in the Alberta transmission system (tabulated via downloadable AESO hourly data) divided by the total net-to-grid generation (calculated from the 01 AESO Market Statistics data file). Transmission losses for average.%. Distribution losses are calculated via the publicly available Market Surveillance Administrator (MSA) retail statistics and publicly available distribution loss data. In essence, for each year, the distribution loss analysis takes the consumption share by rate class (COM, FRM, IND, RES) and service area (ATCO, ENMAX, EPCOR, Fortis, Other) combined and uses those 0 values to Dec 01 Electricity Grid Displacement Factor Draft Discussion Paper Page of

8 weight the most applicable loss factors and come up with a single estimated distribution loss number for the province. Distribution losses for average.%. Line losses are calculated as the compounding losses from the transmission and distribution systems using the following formula: TL transmission system losses, and DL distribution system losses. LLLL = 1 ((1 TTTT)(1 DDDD)) The revised line loss factor, calculated using data is. per cent. The line loss factor (LLF) is then calculated as: LLLLLL = 1 (1 LLLL) Finally, the line loss factor is applied to the EGDF for applications where it is appropriate such as an increase or decrease in use of grid electricity or displaced grid electricity generated at point of use. The revised line loss factor, calculated using data is 1.0; when applied to the EGDF of 0. tco e/mwh the result is 0. tco e/mwh..0 Review Frequency Historically, the EGDF has been reviewed every five years. This current review follows that five year cycle. The EGDF and line loss factor determined by this review will come into effect for new projects and project extensions from February 1, 01 onwards. The revised review frequency will apply to EGDF reviews going forward. Under the revised approach an update of the EGDF will occur every two years. This increased frequency is intended to make the grid factor more responsive to changes that are currently underway in Alberta s electricity system. To maintain certainty for project proponents and investors looking to make decisions on offset project development the revised EGDF will be in effect two years after it is approved and published. For example, the next EGDF review will occur in 01 with the factor being published at that time coming come into force in 01. At the same time in 01, the EGDF will be reviewed and revised to come into force in 0..0 Application of update EGDF to new and existing projects Existing projects will continue to use the EGDF that was in place at the beginning of their current crediting period or extension period. Once the current crediting or extension period expires, the project will update to the most current EGDF providing the project is approved for an extension. New projects will use the EGDF that is current at the beginning of their crediting period for the duration of their crediting period. Dec 01 Electricity Grid Displacement Factor Draft Discussion Paper Page of

9 References Alberta Electricity System Operator (AESO) Historical metered volumes (all): ets.aeso.ca 01 Annual market statistics data file: EDC Associates Calculation of the Grid Emission Intensity Factor for Alberta. (Attached as Appendix 1) Jem Energy A Study on the Efficiency of Alberta s Electrical Supply System _The_Efficiency_of_Alberta%s_Electrical_Supply_System_EEEC-0-0.pdf United Nations Framework Convention on Climate Change (UNFCCC) Methodological Tool to calculate the emission factor for an electricity system: World Resources Institute and the World Business Council for Sustainable Development Guidelines for Quantifying GHG Reductions from Grid-Connected Electricity Projects: Dec 01 Electricity Grid Displacement Factor Draft Discussion Paper Page of

10 .0 Appendix 1 - Calculation of the Grid Emission Intensity Factor for Alberta (EDC Associates) Dec 01 Electricity Grid Displacement Factor Draft Discussion Paper Page of