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Minimize the Impact of Cap and Trade through Energy Efficiency
Damir Naden, P.Eng.
Wednesday, September 21
Ontario Cap and Trade :
Regulation went into place on July 1, 2016
Program starts on Jan 1, 2017
”Caps” province-wide GHG emissions as measured in CO2e
Creates market for “trading” emission allowances:
1 allowance = 1 tonne of CO2e
Cap and Trade Basics
For detailed and latest information on cap and trade visit:
www.ontario.ca/capandtrade
Greenhouse gases (GHG) included as part of Ontario’s cap and trade program are :
Carbon Dioxide CO2
Nitrous Oxide N2O
Methane CH4
Some fluorinated compounds
Fossil fuel combustion by-products
For detailed and latest information on GHG emissions, and reporting rules visit:
www.ontario.ca/page/report-greenhouse-gas-ghg-emissions
Cap and Trade Basics
Generally, emitters under Cap and Trade fall within :
Capped Participants Non-Capped Participants
Mandatory participants (Large final emitters)
Over 25,000 t CO2e/yr
Medium emittersOver 10,000 but less than 25,000 t CO2e/yr
Small emitters
Below 10,000 t CO2e/yr
Many could receive a significant portion of
allowances free of charge.
Will pay the market cost of carbon through
increased fuel costs.
Voluntary participantsOver 10,000 but less than 25,000 t CO2e/yr
Medium emittersOver 10,000 but less than 25,000 t CO2e/yr
Cap and Trade Basics
CO2e limits in terms of natural gas consumption
Some industrial processes are sources of GHG emissions, even though they are not related to natural gas consumption. Those
emissions, along with other fossil-based fuel sources will add to CO2e emissions shown above!
10,000 t CO2e~5,000,000
m3 NG25,000 t CO2e
~13,000,000 m3 NG
Cap and Trade Basics – Natural Gas Perspective
Cost of carbon allowance will depend on the market cost of allowances in Ontario.
1 tonne CO2e~ 533 m3 of
natural gas
1 m3 of natural gas
Cap and Trade Basics
For illustrative purposes only. The Ontario government has estimated the cost of cap and trade on natural gas bills to be about 3.3 cents/m3. This is an estimated allowance cost only and does not include some costs such as administration. Approximate cost per tonne determined by multiplying 533 cubic meteres of natural gas needed to produce 1 tonne of GHGs by the government estimate of 3.3 cents. Actual cost will be determined in the market.
Potential financial impact of cap and trade on your cost structure :
Government estimates a $0.033/m3 cost on natural gas bill for non-capped
participants.
Market price per tonne of carbon:
Fluctuates according to market price
Affected by USD/CAD exchange rate
As those change, the $0.033/m3 will fluctuate.
Cap and Trade and Ontario’s Industrial Sector
The estimate of cap and trade costs presented above is for illustrative and educational purposes only. The estimate above is based on information provided by the Ontario government regarding the estimated cost of cap and trade. For further information regarding estimated cost of cap and trade visit www.fin.gov.on.ca/en/budget/ontario/budgets/2016/ch1a.html#s7
Potential financial impact of cap and trade on your cost structure
Example: Industrial facilities that consume natural gas as a fuel source, and have
NO OTHER sources of GHG.
5,350,000 m3/yr estimated carbon cost $177,000 / year
13,400,000 m3/yr estimated carbon cost $443,000 / year
750,000 m3/yr estimated carbon cost $24,750 / year
Voluntary participant emission range
Cap and Trade and Ontario’s industrial Sector - Natural Gas Perspective
Non-Capped emission example
Potential financial impact of cap and trade on your cost structure
Pay additional cost:
Natural gas is still the most affordable source of energy for most of us.
Combination of cost, reliability of delivery and clean-burning properties.
Risk of exposure to market driven carbon cost fluctuations.
Cap and trade cost of CO2e allowances could change, or CAD fluctuation versus USD.
Cap and Trade and Ontario’s Industrial Sector
These risks can be mitigated by reducing emission levels
1. Use less carbon intensive energy choices which could work in conjunction with
other technologies to provide an integrated, resilient and practical solution :
Cap and Trade and Ontario’s Industrial Sector
Natural gas
• Cleanest burning fossil fuel
available today ➡ lowest carbon
cost.
These risks can be mitigated by reducing emission levels
2. Potential for a new and exciting energy future:
Natural gas as fuel for fleet vehicles (NGV) – already bringing benefits to some customers by
lowering carbon footprint, and reducing costs;
Renewable natural gas (RNG);
Hydrogen in the natural gas distribution stream etc.
Cap and Trade and Ontario’s Industrial Sector
These risks can be mitigated by reducing emission levels
3. Energy efficiency is the best short-to-medium term solution:
Reducing volumetric consumption of natural gas is one way to lower your emissions levels.
Worldwide studies confirm energy efficiency as the least-cost option to lower energy
consumption.
Efficiencies can be gained by upgrading your equipment, but also through smarter, better
ways of using what you have resulting in low implementation costs.
Cap and Trade and Ontario’s Industrial Sector
Natural gas energy efficiency programs
Offered by many major natural gas utilities throughout North America.
In Ontario, offered by both Union Gas and Enbridge Gas Distribution for over 20 years under the
DSM (Demand Side Management) umbrella.
Experience to help you identify the most effective energy efficiency strategy for
your specific application.
Energy Efficiency as a Method of Lowering Your Carbon Costs
Enbridge DSM Programs – Overview
Residentialmarket
Industrialmarket Commercial
market
Mandated by the Ontario Energy Board through to 2020, and covering :
Helped our customers save :
Approx. 110,000,000 m3 of natural gas;
More than 20,000,000 KWh of electricity;
Over 800,000 m3 of water.
In a three year period ALONE.
Enbridge DSM Programs – Large Industrial Program
Program Tailored to Customer
Customized solutions to use your
energy as efficiently as feasible;
Based on personal interaction between
our Energy Solutions Consultants and
your technical staff;
Uncovering and supporting initiatives
tailored to your specific facility.
Program Engaging the Customer
Structured energy management not
prevalent:
Companies lack resources;
Lack of clear-cut payback justification.
Even when implemented, focus on:
Energy cost (commodity contracts, peak
demand, etc.).
Ideal for cooperation between utilities.
Knowledge Development
Arming our customers with information. Opportunity Identification
Testing and energy use analysis.
Measurement
Choosing the right metering methods to quantify key energy inputs.
Engineering Analysis
Analyzing and interpreting data to monetize savings
opportunities.
Action and Implementation
Improve your bottom line.
Reduce C02 emissions.
Program Following Continuous Improvement Principles
Per U.S. Department of Energy publication, in 2008
The industry was:
Using about one-third of total energy produced;
20 – 50 % of this energy was converted into waste heat;
Biggest obstacles in recovery identified as lack of viable end-use, and payback periods.
Examples of how we have found ways to overcome these obstacles by working
with our customers...
Program Driven to Reduce Waste of Resources
Capturing waste heat increases the heating efficiency of your processes
lowering production costs.
$
$$
$$$$$
$
$
$
$
Program Driven to Reduce Waste of Resources
Actual condensing economizer project :
Total InvestmentNew condensing economizer, piping,install
$ 276,530
Savings Natural Gas [ m3/yr ] 657,387
@ $0.25/m3 $ 164,347
Electricity [ kWh/yr ] (24,456)
@ $0.10/kWh $ (2,446)
Savings $ 161,901
Simple payback (Before incentive) [ years ] 1.7
Carbon reduction CO2e [ t/yr ] 1,233
@ $0.033/m3 $ 21,693
Enbridge INCENTIVE = $67,608.84
Program Driven to Reduce Waste of Resources
Total Investment Audit, Design, Install $ 30,111
Savings
Natural Gas [ m3/yr ] 98,358
@ 0.25/m3 $ 24,589
Electricity [ kWh/yr ] (4,630.5)
@ 0.10/kWh $ (464)
Total Savings $ 24,125
Simple payback (Before incentive) [ years ] 1.25
Carbon reduction CO2e [ t/yr ] 184
@ $0.033/m3 $ 3,246
Enbridge INCENTIVE = $15,055.50
Program Driven to Reduce Waste of Resources
Actual oven exhaust heat recovery project :
The heat is actually generated by an energy source you have paid for;
in most cases, this energy source is electricity.
Electricity
User
Make-up Air Unit
$$$
$$$
$$
$$
$$$
$$$
Program Driven to Reduce Waste of Resources
Total Investment New heat exchanger, install $ 21,000
Savings Natural Gas (8,064 hours/yr) [ m3/yr ] 229,104
@ 0.25/m3 $ 57,276
Electricity Reduced load on cooling tower [ kWh/yr ]Not assessed by
Enbridge
Savings (w/o Electricity) $ 57,276
Simple payback (Before incentive) [ years ] 0.4
Carbon reduction CO2e [ t/yr ] 430
@ $0.033/m3 $ 7,560
Enbridge INCENTIVE = $10,500
Program Driven to Reduce Waste of Resources
Actual water cooled air compressor project:
Total Investment Design, Install $ 7,125
Savings Natural Gas [ m3/yr ] 29,562
@ 0.25/m3 $ 7,391
Electricity [ kWh/yr ] N/A
Savings $ 7,391
Simple payback (Before incentive) [ years ] ~1
Carbon reduction CO2e [ t/yr ] 55
@ $0.033/m3 $ 976
Enbridge INCENTIVE = $3,547
Program Driven to Reduce Waste of Resources
Actual air cooled air compressor project:
Total Investment Audit, Design, Install $ 102,472
Savings
Natural Gas [ m3/yr ] 154,114
@ 0.25/m3 $ 38,529
Electricity [ kWh/yr ] 0
@ 0.10/kWh $ 0
Total Savings $ 38,529
Simple payback (Before incentive) [ years ] 2.7
Carbon reduction CO2e [ t/yr ] 289
@ $0.033/m3 $ 5,085
Enbridge INCENTIVE = $15,206
Program Driven to Reduce Waste of Resources
Actual heated air redistribution project:
Total Investment Audit, Design, Install $ 38,877
Savings
Natural Gas [ m3/yr ] 201,887
@ 0.25/m3 $ 50,472
Electricity [ kWh/yr ] 0
@ 0.10/kWh $ 0
Total Savings $ 50,472
Simple payback (Before incentive) [ years ] .8
Carbon reduction CO2e [ t/yr ] 379
@ $0.033/m3 $ 6,662
Program Driven to Reduce Waste of Resources
Enbridge INCENTIVE = $19,439
Actual exhaust reduction project before cap and trade:
Summary
Helping you get from managing energy costs ... ... to managing energy.
$ $$
GHG
GHG
DECISIONSbased onknowledge
ACTIONSbased ondecisions
SAVINGSbased onactions
Summary
Too many other fires to put out, too little time ...
Recovering waste heat – average of six real-life projects :
Average cost $ 64,065
Average annual savings $ 54,530 (15% discounted !)
IRR = 81 % over 5 years
And to help with the first year cash flow - average incentive $ 21,909
In the cap and trade world, average savings of GHG emissions:
428 tonnes of CO2e
Summary
Too many other fires to put out, too little time ...
To paraphrase Henry Ford:
If you don’t invest in reducing your wasted energy now,
you will ultimately find that you have paid as if you did,
and will still be wasting energy.
Summary
Questions, Comments
Thank you !
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