Post on 01-Nov-2021
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Valuation of NEM Solar: Environmental Considerations
December 12, 2019
Patrick DurhamRené ToledoEric Rivero-Montes
1. Our Presentation’s Focus
2. Program Overview
a. Greenhouse Gas (GHG)
b. Criteria Pollutants
c. Emission Reduction Distinctions
3. Value of Solar Benefit Considerations
Agenda
2
This presentation focuses on the value of Behind the Meter (BTM) Solar with respect to the Net Energy Metering (NEM) Study.
The presentation also discusses how emissions are impacted by changes to SMUD’s thermal power plant resources as forecasted in the 2018 Integrated Resource Plan (IRP).
These thermal power plants operate with the highest environmental agency oversight.
This presentation does not focus on the methodology used to forecast the emission reductions in the IRP.
Our Presentation’s Focus
3
Key Takeaways
Financial Benefits – The Cap-and-Trade Program allows for quantifiable financial benefits for the reduction of Greenhouse Gas (GHG) emissions. Any monetization of allowances must be used to comply with Assembly Bill 32 (AB-32) objectives.
Societal Benefits – GHG and criteria pollutant reductions result in societal benefits.
RecommendationWe recommend the consultant include these benefits as part of their study.
Emission Reduction Considerations For Value of Solar Study
4
Introductions
5
René ToledoSMUD Environmental Services, Compliance Supervisor
7 years with SMUD, Air Quality Specialist
12 years with Yolo-Solano Air Quality Management District; Air Quality Permitting Engineer
Eric Rivero-MontesSMUD Environmental Services, Greenhouse Gas Reporting Supervisor
6 years with SMUD, Greenhouse Gas Specialist
10 years in Environmental Consulting and Greenhouse Gas Verification
1. Our Presentation’s Focus
2. Program Overview
a. Greenhouse Gas (GHG)
b. Criteria Pollutants
c. Emission Reduction Distinctions
3. Value of Solar Benefit Considerations
Agenda
6
Words to Know
Thermal Power Plant – Refers to SMUD’s natural gas fired power plants.
Generation – The amount of gigawatt-hours of electricity produced by a single thermal power plant or the entire thermal power plant fleet.
Emissions – Generally used to describe either criteria and/or greenhouse gas pollution produced by the thermal power plant fleet as it combusts fuel.
Criteria Pollutant Emissions – Pollution created from the combustion of natural gas fuel. Similar to vehicle tail pipe emissions that include: nitrogen oxides (NOX); volatile organic compound (VOC); particulate matter (PM); sulfur oxides (SOX); and carbon monoxide (CO).
Greenhouse Gas Emissions (Greenhouse Gas) – Greenhouse gases are those gaseous constituents of the atmosphere, both natural and anthropogenic, that absorb and emit radiation at specific wavelengths within the spectrum of thermal infrared radiation emitted by the Earth's surface, the atmosphere itself, and by clouds.
Integrated Resources Plan (IRP) – SMUD’s ambitious road map for lowering greenhouse gas (GHG) emissions in the Sacramento region while maintaining our historically low rates and reliable service to our customers. The IRP explores alternative scenarios for decarbonization in the region.
2018 IRP Load Forecast
7
2018 IRP Load Forecast
8
53%67%
79%13%
4%30%
23%
16%
4%6%
5%
0
5,000
10,000
15,000
20,000
2020 2030 2040
Gig
aWat
t-Ho
urs (
GWh)
Carbon Free Generation/Purchases Other Purchases SMUD Thermal Generation BTM Solar Generation Total Generation
Required Generation is Expected to Increase in the Next 20 Years Due to Electrification Efforts
2018 IRP Load Forecast
9
53%67%
79%13%
4%30%
23%
16%
4%6%
5%
0
5,000
10,000
15,000
20,000
2020 2030 2040
Gig
aWat
t-Ho
urs (
GWh)
Carbon Free Generation/Purchases Other Purchases SMUD Thermal Generation BTM Solar Generation Total Generation
Carbon-Free Generation/Purchases (including renewable purchases & generation)
2018 IRP Load Forecast
10
53%67%
79%13%
4%30%
23%
16%
4%6%
5%
0
5,000
10,000
15,000
20,000
2020 2030 2040
Gig
aWat
t-Ho
urs (
GWh)
Carbon Free Generation/Purchases Other Purchases SMUD Thermal Generation BTM Solar Generation Total Generation
Other Purchases
2018 IRP Load Forecast
11
53%67%
79%13%
4%30%
23%
16%
4%6%
5%
0
5,000
10,000
15,000
20,000
2020 2030 2040
Gig
aWat
t-Ho
urs (
GWh)
Carbon Free Generation/Purchases Other Purchases SMUD Thermal Generation BTM Solar Generation Total Generation
Generation from SMUD Thermal Power Plants
53%67%
79%13%
4%30%
23%
16%
4%6%
5%
0
5,000
10,000
15,000
20,000
2020 2030 2040
Gig
aWat
t-Ho
urs (
GWh)
Carbon Free Generation/Purchases Other Purchases SMUD Thermal Generation BTM Solar Generation Total Generation
2018 IRP Load Forecast
12
Generation from BTM Solar Resources
2018 IRP Load Forecast
13
53%67%
79%13%
4%30%
23%
16%
4%6%
5%
0
5,000
10,000
15,000
20,000
2020 2030 2040
Gig
aWat
t-Ho
urs (
GWh)
Carbon Free Generation/Purchases Other Purchases SMUD Thermal Generation BTM Solar Generation Total Generation
Note: The 4% of BTM Solar corresponds to 7% (~210 MW)
of installed capacity.
SMUD’s 2018 IRP Overview
14
15
16
17
Carson Ice103 MW
Campbell Soup160 MW
Procter & Gamble182 MW
McClellan72 MW
Cosumnes Power Plant
603 MW
1. Our Presentation’s Focus
2. Program Overview
a. Greenhouse Gas (GHG)
b. Criteria Pollutants
c. Emission Reduction Distinctions
3. Value of Solar Benefit Considerations
Agenda
18
Terms to Know
AB-32 – Landmark 2006 legislation requiring California to reduce GHG emissions to 1990 levels by 2020. Also established California’s Cap-and-Trade Program.
Cap-and-Trade – Emissions trading program that sets a limit on total emissions responsible for 85% of California GHG emissions.
Allowance – A limited tradable authorization to emit up to one metric ton of carbon dioxide equivalent (MTCO2e).
Metric Ton – A unit of measurement equal to 1,000 kilogram (kg) used to measure carbon dioxide (CO2).
Auction Reserve Price – Minimum allowance price, per metric ton, allowed in an auction (i.e., price floor).
Auction Settlement Price – Allowance price resulting from sales in a given auction, per metric ton.
Compliance Obligation – The quantity of verified reported emissions or assigned emissions for which an entity must submit compliance instruments to California Air Resources Board (CARB).
Offset Project – All equipment, materials, items, or actions that are directly related to or have an impact upon GHG reductions, project emissions, or GHG removal.
Western Climate Initiative (WCI) – A non-profit corporation formed to provide administrative and technical services to support the implementation of state and provincial greenhouse gas emissions trading programs.
Greenhouse Gas
19
20
21
- SMUD’s Thermal Power Plants
(Natural Gas)
The size of the green circle provides a visual
representation of the magnitude of GHG emissions
relative to other thermal power plants in California
22
-Natural Gas Fired Power
Plants in California
-SMUD’s Thermal Power Plants (Natural Gas)
SMUD represents 5-6% of California’s Total GHG from Natural Gas Power Plants
- SMUD’s Thermal Power Plants
(Natural Gas)
SMUD represents 5-6% of California’s Total GHG from Natural Gas Power Plants
2017 California Greenhouse Gas Emissions
23
Total Emissions = 424.1 MMT CO2e AB-32 Target = 431 MMT CO2e
California Cap and Trade Regulation
24
AB-32 Rewards Facilities that Reduce GHG
Emissions
25
AB-32 Rewards Facilities that Reduce GHG
Emissions
Entities that emit more must purchase more allowances to cover their carbon obligation through quarterly state-administered auctions or the secondary market.• More Emissions = Higher Costs• Less capital to invest in GHG reducing
projects
Entities that reduce emissions can sell extra allowances through quarterly state-administered auctions or the` secondary market.• Lower Emissions = Lower Costs• SMUD invests money from excess
allowance towards projects that reduce GHG emissions including:
• Investments in EV Chargers, Grants for Electric School Buses, Energy Efficiency Projects, Sulfur Hexafluoride (SF6) Fugitive Emission Reductions
California Cap and Trade Regulation
California Cap and Trade Regulation
26
Key Takeaways:
The cap covers approximately 85% of total state-wide
emissions.
Covered entities are sources that emit more than 25,000
metric tons per year.
The cap declines by about 3% per year.
0
100
200
300
400
500
2020 2022 2024 2026 2028 2030
Mill
ion
Met
ric T
ons o
f CO
2e
California Cap: 2020-2030(Million Metric Tons CO2)
GHG Emissions
2014-2019 Carbon Allowance Price
27
2018Carbon Obligation
~$30 MM
Source: Western Climate Initiative (WCI)
SMUD’s Power Plant GHG Emissions
28
0.0
0.5
1.0
1.5
2.0
2020 2030 2040
GHG
Emiss
ions
(Mill
ion
Met
ric To
ns o
f CO
2e)
Key Takeaways:
Less power coming from fossil fuels; more power coming from carbon free
sources.
This will result in less carbon intensive power
and fewer emissions.
BiogasEmissions
1. Our Presentation’s Focus
2. Program Overview
a. Greenhouse Gas (GHG)
b. Criteria Pollutants
c. Emission Reduction Distinctions
3. Value of Solar Benefit Considerations
Agenda
29
Terms to Know
Criteria Pollutant Emissions – Pollution created from the combustion of natural gas fuel. Similar to vehicle tail pipe emissions that include: nitrogen oxides (NOX); volatile organic compound (VOC); particulate matter (PM); sulfur oxides (SOX); and carbon monoxide (CO).
Emission Reduction Credits (ERCs) – Emission credits needed to be supplied to governing agencies in order to offset the pollution from power plants before they begin operation. These credits are certified by the air district as real, quantifiable, and surplus.
Nitrogen Oxides (NOX) – Highly reactive gases that form quickly from fuel combustion sources. Contributes to the formation of ground-level ozone (O3) and fine particle pollution. Is also associated with adverse effects on the human respiratory system.
Maximum Potential to Emit – Maximum permitted emission limits of each applicable air quality permit.
Short Tons – A unit of measurement equal to 2,000 pounds used to measure criteria pollutants.
Criteria Pollutants
30
SMUD’s Power Plant Criteria Emissions
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0
20
40
60
80
100
2020 2030 2040
Annu
al To
ns (s
hort
tons
/yea
r)
Thermal Plant NOx Emissions (Short Tons)
NOx Emissions (Short Tons)
Key Takeaways:
Less generation, less fuel combusted, less emissions.
Thermal power plant generation and emissions
trend downward over the next 20 years.
Variable Cost for Value of Solar Study
32
SMUD believes that the Value of Solar Study should evaluate the following variable operating costs that are highly dependent on thermal production:
• Cooling Tower Chemicals
• Ammonia Consumption for NOx Control
• Solid Waste Disposal Fees
• Water Usage - Potable Water, Recycled Water
• Sewer Discharge Fees
Key Takeaway:
Variable costs are driven by generation demand.
Less annual generation; lowerannual variable costs
Increased power plant cycling on a daily/hourly basis; higherpower plant standby/station power and operation and maintenance (O&M) costs
1. Our Presentation’s Focus
2. Program Overview
a. Greenhouse Gas (GHG)
b. Criteria Pollutants
c. Emission Reduction Distinctions
3. Value of Solar Benefit Considerations
Agenda
33
“Pay-As-You-Go”The GHG programs are designed as “Pay-as-You-Go”• There are quantifiable financial benefits to reducing GHG emissions• Less GHG emissions generated; less allowances needed
“Pay-Ahead”The criteria pollutant programs are primarily designed as “Pay-Ahead”• SMUD bought and surrendered all potential emissions using emission
reduction credits (ERCs) at the time of permitting• ERC costs are an established “sunk cost” that allow our plants to run
Emission Reduction Considerations
34
Key Takeaways
Financial Benefits – The Cap-and-Trade Program allows for quantifiable financial benefits for the reduction of GHG emissions. Any monetization of allowances must be used to comply with AB-32 objectives.
Societal Benefits – Both GHG and criteria pollutant reductions result in difficult to quantify societal benefits.
RecommendationWe recommend the consultant include these benefits as part of their study.
Emission Reduction Considerations
35
1. Our Presentation’s Focus
2. Program Overview
a. Greenhouse Gas (GHG)
b. Criteria Pollutants
c. Emission Reduction Distinctions
3. Value of Solar Benefit Considerations
Agenda
36
Closing – Environmental Benefits Perspectives
37
GHG Emission Reductions
Benefit: Decreased GHG allowances required per decreased thermal power plant generation
Variable Operating Cost
Reductions
Benefit: Decreased thermal power plant generation will decrease variable operating costs (i.e., water, waste, etc.)
Cost: Increased power plant standby/station power costs and higher operation and maintenance (O&M) costs due to cycling
Criteria Emission Reductions
Benefit: Overall decreased emissions contribute to societal benefits
Neutral: Assigned criteria pollutant ERCs are sunk cost (no financial impact)