Qualifying Energy Efficiency Projects in Market-Based Carbon Offset Programs: A Case Study

Transcription

1 Qualifying Energy Efficiency Projects in Market-Based Carbon Offset Programs: A Case Study 2007 National Symposium on Market Transformation ACEEE and CEE March 21, 2007 Matt Tidwell, The Climate Trust

2 Presentation Overview Introduction: The Climate Trust What is a greenhouse gas offset? Three major requirements that need to be met for energy efficiency projects to generate GHG offsets: Additionality of projects Ownership of offsets Quantification and Verification of emission reductions A Case Study: Duluth, MN Steam Plant Upgrade Conclusions 2

3 Who is The Climate Trust? One of the largest, most experienced offset buyers in US and world markets Diverse portfolio of high quality offset projects: 18 projects, $9 million, 2.7 million metric tons CO 2 A Portland, Or.-based 501(c)(3) non-profit 1997: Oregon passed first CO 2 legislation in the US and The Climate Trust was created Only state-recognized offset provider 3

4 What is a Greenhouse Gas Offset? A greenhouse gas offset displaces, avoids or sequesters GHG emissions through the implementation of a specific project It is a compensating equivalent for GHG emission reductions occurring at another source with an end effect as if the cancelled emissions had not occurred 4

5 The Promise of GHG Reduction Projects A Compensating Equivalent to Facility Reductions Onsite Reduction Offsite Reduction Baseline Total GHG Emissions BEFORE AFTER BEFORE AFTER Reduction Target 5 Facility Offset Project

6 Project Requirement: Additionality Projects must generate emission reductions that are in addition to the business as usual scenario Must be regulatory surplus Must be in addition to common practice Projects must face barriers prior to implementation that can be addressed through offset funding Types of barriers offset funding overcomes: Technological, e.g. bridging the market cap for new technologies Financial, e.g. capital constraint and internal rate of return Institutional, e.g. project falls outside the purview of a company 6

7 Project Requirement: Ownership of Offsets 7 Seller of the offsets must have the right to claim ownership and sell the GHG offsets The Challenge of Indirect Reductions: If an end-user claims a reduction for a gridconnected project it also shows up at the stack Double claim: power system & end-user Need to investigate approaches for allowing end user investments to participate in trading without double counting

8 Project Requirement: Quantification and Verification Energy efficiency projects must generate emission reductions that are real, quantifiable and verifiable Monitoring & Verification Plan Measurement technique Baseline calculation using experts in the project s sector Periodic measurement 3 rd party verification Each M&V Plan is project-specific Results are used to verify contractual delivery 8

9 9 How to Determine the GHG Benefit of an Energy Efficiency Project Determine baseline energy usage (the w/o project scenario) No standard protocols exist Baseline calculation is different for each project Determine project year energy usage Use standard protocols, e.g. IPMVP Baseline usage Project usage = annual energy savings Energy savings x emissions factor = GHG benefit

10 Determining the GHG Benefit of Energy Efficiency Projects CO 2 emissions The baseline case Baseline emissions Offsets Project emissions The project case / monitoring & verification Project begins Project ends 10 Years

11 Case Study: Duluth Steam Plant Upgrade Project description: installation of 3 energy efficiency measures to allow the plant to produce the same amount of steam with less coal consumption #1: Distribution piping insulation #2 Water softening system #3 Boiler controls upgrade Estimated annual energy savings: 189,000 MMBtus) 11

12 Additionality and Ownership Requirements Offset funding from The Climate Trust covered the shortfall in capital between the total costs of the energy efficiency upgrades and the amount the City of Duluth could afford to spend on the upgrades Project partner: Johnson Controls, Inc. The City of Duluth is the owner of the steam plant and has ownership rights to the emission reductions no double claim 12

13 Quantification and Verification Requirement: M&V Plan Measurement technique: Baseline energy usage: based on historical data Project year energy usage: purchasing documentation Offsets calculator determines MMBtu savings Distribution savings, boiler efficiency, weather normalization, etc. Benefit = MMBtu savings x carbon ratio (metric tons CO 2 /MMBtu) Annual measurement and reporting 3 rd Party Verifier: to be determined 13

14 Conclusions Relatively easy to generate offsets from energy efficiency projects Important requirements to keep in mind: Additionality of the projects Ownership of offsets Quantification and Verification Standardized M&V Plans for energy efficiency offset projects would be helpful but should err on the side of high quality and environmental integrity even if at the expense of cost-effectiveness 14

15 Contact Information Matt Tidwell Offset Portfolio Coordinator