Opportunities in cap trade
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Opportunities in Cap/Trade?. Lon W. House, Ph.D. Water& Energy Consulting 530.676.8956 [email protected] Presented at ACWA Spring Conference Monterey, Ca May 10, 2012. California Carbon Market.

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Opportunities in Cap/Trade?

Lon W. House, Ph.D.

Water& Energy Consulting

530.676.8956

[email protected]

Presented at ACWA Spring Conference

Monterey, Ca

May 10, 2012


California Carbon Market

  •  90 percent of the allowances will be given out free, but 10 percent will be sold on the open market


Europe’s Cap/Trade Prices

  • Gone from high of $47/ton to $8/ton. Now cheaper to pollute than to clean up (carbon capture and storage needs to be about $30/ton, switch from coal to natural gas needs to be about $20/ton)

  • Prediction of sub$5/ton for the near future. 1.99 billion tons allocated, emitted 1.93 billion tons in 2011. Program allows unused allowance to be rolled over to later years: 1.3 billion tons rolled over to this year

  • Recommended “solutions”: set carbon floor price, reduce the amount of emission allowances, add other sectors (transport industry), prop up carbon prices, i.e., do not let the market decide.


Natural Gas Prices: US


California Electricity Prices

  • Generation in California (2012):

    • Natural gas 63%, Hydro 14%, Renewables 13%, Nuclear 8%, 2% Coal/oil

    • Generation is about 40% of electricity cost

  • Utility programs

    • Smartgridand transmission and distribution system upgrades (+2-2.5%/year); Green House Gas reductions (AB32), and cap and trade (+2-2.5%/year), 30% RPSand fuel costs (+1.5-2%/year).


Incentives Available

  • CSI - California Solar Initiative

    • PG&E: Step 10, 2.5 cents/kWh (8.8 cents/kWh governmental)

    • SCE: Step 8, 5 cents/kWh (15 cents/kWh governmental)

    • SDG&E: Step 8, 5 cents/kWh (15 cents/kWh governmental)

  • SGIP – Self Generation Incentive Program

  • Technology Type Incentive ($/W)

    • Renewable and Waste Energy Capture

      • Wind Turbine $1.25

      • Waste Heat to Power Technologies $1.25

      • Pressure Reduction Turbine (hydro)$1.25

    • Conventional Combined Heat and Power

      • Internal Combustion Engine – CHP $0.50

      • Microturbine – CHP $0.50

      • Gas Turbine – CHP $0.50

    • Emerging technologies

      • Advanced Energy Storage $2.00

      • Biogas $2.00

      • Fuel Cell – CHP or Electric Only $2.25

    • PG&E – closed


Conclusions

  • Make any cap/trade investment decisions with eyes wide open

  • Take advantage of any incentives that are available

  • The longer term you can sell your carbon credits for the better off you are

  • Determine minimum carbon price that your investment can sustain, and be prepared to adjust as prices vary


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