Oregon CO2 Standard Third Five Year Report to EFSC

Sheldon Zakreski

November 21, 2014

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Outline

• Purpose of the Report• About the CO2 Standard• About TCT• Facility Overview• Project Selection + Overview• TCT’s Performance• Lessons Learned

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PURPOSE OF THE REPORT

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Qualified Organization Mandate

• ORS 469.503(d)(C)

• QO must submit a report every 5 years to EFSC on its performance

• EFSC can make recommendations to Legislature

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THE OREGON CO2 STANDARD

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What is the OR CO2 Standard?

• Applies to new plants

– 0.675 lbs. CO2/kWh

– 0.504 lbs. CO2/hp-hr.

• 30 year life

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How are CO2 Emissions Reduced?

Standard exceeds Best Available Control Technology

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

lbs CO2/kWh

non-base load gas plant

baseload gas plant

OR CO2 Standard

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Compliance Options

• Cogeneration

• Applicant sponsored projects

• Monetary Path

• To date all facilities have chosen the monetary path under the Standard

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Monetary Pathway Economics

• Price-based standard

• Payment split in two– 80% purchases

– 20% management

• Selection & Contracting– Additional 5% (equiv $0.07)

• Front-loaded– Carty equiv $0.000075/kWh

over 30 years

$1.12

$0.28

Offset Purchase Funds

Offset Management Funds

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Price Comparison

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

Average Market Price

Average OR Price

Monetary Rate

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Key Monetary Path Features

• Eligible GHGs- CO2, CH4, N2O

• Timeliness- 2 years to commit 60%

• New- offsets are an action that will occur (verification)– earliest vintage = year of construction

– Carty- offsets 2014 vintage and later

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ABOUT THE CLIMATE TRUST

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TCT at a glance• Established 1997

• Manage 7 acquisition programs

• Focus on ag, forestry, and biogas projects (38 total)

• Several firsts- nutrient management offset purchase

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FACILITY OVERVIEW

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Facility Statistics

• 13 monetary payments in 15 years

• 8 facilities– 6 gas-fired plants, 3,069 MW

– 2 gas storage facilities

• Over $30MM in payments– 80% for purchase/20% for management

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Facility Carbon Purchase

Current Obligated

Current Available

Offsets Contracted

Offsets Retired

KCP (PPM) $958,158 $841,749 $116,409 401,143 86,354

Coyote Springs Unit 2 $2,114,477 $1,448,193 $666,284 464,702 439,731

Klamath Expansion Project

$209,182 $136,590 $72,592 22,090 13,123

Mist Facility $18,853.45 $17,023.45 $1,830 3,068 1,147

Hermiston Power Project

$3,375,008 $2,336,395 $1,038,613 615,671 455,967

Hermiston True-Up $347,313 $335,856.59 $11,456 82,706 76,918

Port Westward $4,320,452 $3,240,280 $1,080,172 750,973 188,693

Klamath Generation Peakers

$847 $847 $0 285 285

Klamath True-Up $400,462 $347,647 $52,815 60,567 33,851

Molalla $26,913 $23,357 $3,556 4,092 2,303

KCP (Iberdrola) $2,649,222 $223,500 $2,425,722 70,904 55,023

Port Westward 2 $3,532,388 $2,661,760 $870,628 340,721 22,984

Carty $6,332,879 $1,192,600 $5,140,279 149,000

Total $24,286,154 $12,805,798 $11,480,356 2,965,922 1,376,379

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PROJECT SELECTION + OVERVIEW

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FUNDING

• Facility & TCT sign offset MoU and TCT receives S&C funds

• Construction Begins

• Offset Funds Sent to TCT

DEVELOP-MENT

• TCT solicits offset projects

• Transaction terms are negotiated

• TCT conducts due diligence on counterparty and on project

CONTRACT-ING

• TCT presents project to Programs Committee

• If approved, contract negotiations begin (ERPA)

• ERPA presented to the Board of Directors and executed if approved

DELIVERY

• Project monitored

• Offsets verified by third party

• TCT retires verified offsets

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Program Considerations

• How does the standard drive project selection?

– Fixed S&C Budget of 5%

– New offsets only

– Two year commitment clock

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Selection & Contracting Budget

• Budget comparable to mature markets + spot transactions

• But new market + forward transactions

• S&C- not easily recovered• Implication-

– narrow project types + maximize volume

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The Oregon Clock

• Projects can take years– Offsets latter in

development stage

• Funding requirement > availability

• Implication– Maximize search area

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What does this mean for project selection?

• What matters:

– Size

– Reliability

– Replicability

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Projects Summary

• Totals= 26 projects, $12.8MM, 2.97MM offsets

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Oregon Project Summary

•17 commitments

•7 active, 7 complete, 3 terminated

•Total Obligation= $6,534,572

•Avg. $4.82/offset

Oregon ProjectsProject Name Status

Contracted

Offsets

Retired

Offsets

Shorepower Truckstops Active 90,000 0

Oregon State University Cogeneration Active 338,790 44,342

Roseburg LFG Active 66,000 0

JC Biomethane Active 70,000 0

Farm Power Misty Meadow Active 1,124 0

Farm Power Tillamook Active 7,300 0

TMF Biofuels Active 162,000 0

CarpoolMatchNW Completed 30,000 1,021

BEF Wind Financing Completed 23,178 23,178

Portland Energy Efficiency Completed 240,172 242,408

Portland Traffic Signals Optimization Completed 150,600 157,488

Blue Heron Energy Efficiency Completed 191,232 133,533

Portland Energy Efficiency Momentum Completed 66,666 33,333

Portland Traffic Signals Extension Completed 18 18

Deschutes Reforestation Terminated 233,333 0

Collins Pine Terminated 27,785 0

Biotactics Terminated 12,750 0

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Non-Oregon Project Summary

•16 commitments

•9 active, 3 complete, 4 terminated

•Total= $6,271,226

•Avg. $3.93/offset

Non-Oregon ProjectsProject Name Status Location

Contracted Offsets

Retired Offsets

Jatun Sacha Reforestaion Active Ecuador 58,890 52,573

JCI Duluth Steam Plant Retrofit Active Minnesota 210,328 0

John Galt Biogas Van Warmerdam Active California 12,000 0

Camco Afognak Forestry Active Alaska 386,007 233,507

ECC Composting Portfolio Active CO, DE, NV 240,812 37,314

Delta Nutrient Management Active Midwest 30,675 2

WA Beef LLC Organic Digestion Active Washington 75,000 0

AMC Katahdin IMF Active Maine 25,645 25,645

Lummi Sequestration Active Washington 263,159 0

Horst Blended-Cement Completed Nationwide 212,500 212,500

Cedar Grove OWC Completed Washington 33,910 23,018

West Main Cool Climate Concrete Completed Nationwide 300,000 156,499

Klickitat LFG Terminated Washington 342,000 0

Native Energy Terminated Iowa 135,165 0

Sure Power I Terminated Nationwide 800,000 0

CERF/IIEC Terminated Nationwide 350,000 0

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Example 1: Cool Concrete Projects

• Large volume

– Phase I= 212,500;

– Phase II=156,000

• Reliable Partner

– Horst led to West Main

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Example 2: Van Warmerdam

• Proven track record– Over-delivered in WA

• Replicability– 5 projects with

principal

– 2 in Oregon (Misty Meadow + Tillamook)

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Why non-Oregon Projects?

• Partially driven by CO2 Standard criterion

• Strong counterparty/ project

– Benefit/lessons for Oregon

• Project availability

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PERFORMANCE METRICS

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Performance Criteria

Timeliness

Financial

Oregon Impact

Climate Impact

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Timeliness Performance

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Financial Performance

• Current obligation rate 53%

• $5MM in upfront funds

• Unrecouped funding– 3.9%

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The Made in Oregon Impact

• $6.5MM

– $2.1MM for CH4 projects

• 635,321 VERs Retired

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OR Program Climate Impact

• 2.9MM under contract

• 1,376,379 VERs retired

• Equivalent to annual GHGs:

– Lane County vehicles

– All homes in Salem and Gresham

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Lessons Learned

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Lessons Learned

• Financial certainty

– Facilities can factor rate into construction costs

– $0.80/year for avg house

• Qualified Org Advantage

• Econ Development tool

Construction FP Tillamook

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Thank you!

Sheldon Zakreski

Director of Programs

szakreski@climatetrust.org

(503)238-1915 x215