# Presentation: 685176

## Federal Emissions Trading Project

- Chandra Shah
- NREL FEMP
- 303-384-7557, chandra_shah@nrel.gov

## Overview

- Emissions Trading Project Activities
- Federal Trade Examples
- DOD Navy SWDiv (NOx ERC)
- Massachusetts (NOx EERE Set-Aside pilot)

## FEMP/EPA Emissions  Trading Project Activities

- Research emissions markets
- Evaluate EERE project emissions trading opportunities
- Potential source of revenue, improve project cost effectiveness, reduce project payback
- Emissions opportunity paper, FEMP Focus article (Spring 2004), other communications
- Emissions trading pilot projects

## Federal Emissions Trading Project Steps

- Complete EERE project
- Document emissions reductions according to program rules
- Apply for emission allowances, register/certify emission reduction credits
- Utility, ESCO, Building Owner, GSA/Other Federal Agency, State Agency, Other?
- Project aggregation may be required

## Federal Emissions Trading Project Steps

- Sell allowances/credits - probably through broker
- Ensure site receives financial benefit
- One option - broker purchases Renewable Energy
- 	Certificates (RECs) for site
- Bill credit
- Realize the value of the ERCs into the value of the existing construction contract (Navy example)

## Naval Medical Center San Diego 

- $16M Cogeneration Upgrade project
- UESC with San Diego Gas & Electric
- Replace 3 old 1985 turbines with one cleaner unit and 2 standby diesel generators
- NOX reduction - 10 to 20 tons/year with estimated worth $1-1.5M
- Resulting Emissions Reduction Credits (ERC) can be sold in the local air quality district market
- Considered 3 approaches:
- Salvage Value Approach
- Pilot Program Approach using DOD Authority
- Region to Apply for and Bank ERCs (for use by
- 	other DOD site)

**Notes:**

Bank option - for use on other Navy/Marine Corps projects in San Diego air basin that need ERCs

## DOD Emissions Pilot Authority

- DOD facilities could sell emissions "economic incentives” and retain up to $500,000 total nation-wide/year
- FY98 National Defense Authorization Act, Pub. L. No. 105-85
- Extended by FY00 and FY02 National Defense Authorization Acts
**Expired end of FY03**
- Chain-of-Command Approval (All Services)
- Limited use - only March AFB, $84k revenues

## Naval Medical Center San Diego 

- Process
- SDG&E submit ERC application to the San Diego Air Pollution Control District (SDAPCD)
-  Note the government does not initially relinquish right to ERCs
- SDAPCD determine quantity of ERCs established by replacement of old equipment with new
- SDG&E establish ERC market value
- Proceeded with Salvage Value Approach
- Legal review
- ERC value incorporated into UESC contract by redefining the turbine salvage value to include the value of the ERCs

## Naval Medical Center San Diego 

- Legal authority - 40 U.S.C. 486(c) and its implementing regulations 41 CFR Part 101-46
- Allows proceeds of old turbine sale to be used to buy the new turbines (or exchange old turbines to save money on new turbines)
- The consideration the contractor includes in the contract for the salvage value of these turbines can reflect the value of these ERCs

## Naval Medical Center San Diego 

- Results
- Reduce NMCSD's utility bill by $200K to $400K/year for the life of the 6 year financed UESC contract
- Plan to complete ERC salvage value transaction in June 2004
- Federal installations have the ability to immediately realize ERCs available from equipment replacements and apply these credits against project costs
- Contacts:
- 	David. B. Deiranieh - david.deiranieh@navy.mil, (619) 532-3308
- 	Ed Thibodo - thibodoed@efdsw.navfac.navy.mil, (619) 532-4243

## Massachusetts Pilot Project - EPA Chelmsford & Other Sites

- Massachusetts NOx Cap & Trade
- EERE project set-aside
- 1 ton emissions minimum
- EPA Chelmsford – New laboratory with sustainable design
- Emissions reduction documentation difficult
- Chelmsford emissions reductions < 1 ton
- Need 1333 MWh for 1 ton, using 1.5 lbs NOx/MWh emissions factor
- Aggregation required, but limited federal/private sector options
- Project on hold, pending final EERE Rule
- Should emissions allowances be retired?

## Federal Emissions Project Issues Summary

- Identify attractive  projects
- Proactive approach best
- Large projects in high value & active emissions markets
- Document emissions reductions/M&V
- Ensure site retains value
- Minimize implementation costs
- May require significant emissions market expertise
- Should emissions be retired?
- Emissions market uncertainty – possible policy changes