damir naden, p.eng

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


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


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


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.


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 :


Natural gas

• Cleanest burning fossil fuel

available today ➡ lowest carbon

cost.


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.



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.


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.

$

$$

$$$$$

$

$

$

$


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


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


Carbon reduction CO2e [ t/yr ] 184

@ $0.033/m3 $ 3,246

Enbridge INCENTIVE = $15,055.50


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

$$$

$$$

$$

$$

$$$

$$$


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



@ $0.033/m3 $ 7,560

Enbridge INCENTIVE = $10,500


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


@ $0.033/m3 $ 976



Actual air cooled air compressor project:


Savings


@ 0.25/m3 $ 38,529

Electricity [ kWh/yr ] 0

@ 0.10/kWh $ 0




@ $0.033/m3 $ 5,085



Actual heated air redistribution project:


Savings


@ 0.25/m3 $ 50,472

Electricity [ kWh/yr ] 0

@ 0.10/kWh $ 0


Simple payback (Before incentive) [ years ] .8


@ $0.033/m3 $ 6,662



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 !

damir naden, p.eng

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