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Opportunities in Cap/Trade?

Opportunities in Cap/Trade?. Lon W. House, Ph.D. Water& Energy Consulting 530.676.8956 lonwhouse@waterandenergyconsulting.com Presented at ACWA Spring Conference Monterey, Ca May 10, 2012. California Carbon Market.

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Opportunities in Cap/Trade?

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  1. Opportunities in Cap/Trade? Lon W. House, Ph.D. Water& Energy Consulting 530.676.8956 lonwhouse@waterandenergyconsulting.com Presented at ACWA Spring Conference Monterey, Ca May 10, 2012

  2. California Carbon Market •  90 percent of the allowances will be given out free, but 10 percent will be sold on the open market

  3. 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.

  4. Natural Gas Prices: US

  5. 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).

  6. 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

  7. 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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