Reducing Emissions Through Offsets and Licensing
Offsetting emissions in Alberta
- In 2012, Capital Power retired 699,076 tonnes of GHG offsets in Alberta, which were created primarily from a variety of agricultural, fuel switching and coal mine methane projects.
Our Alberta plants are subject to the Specified Gas Emitters Regulation (SGER) under the Climate Change and Emissions Management Act (Alberta). SGER requires companies that emit more than 100,000 MT of carbon dioxide to reduce the emission intensity of a facility by 2% per year to a maximum of 12%, compared to the calculated baseline intensity for the specific facility. These companies may choose to purchase carbon offsets equal to their reduction requirements as one of four compliance mechanisms. Alternative compliance strategies would be to physically reduce production, purchase Emission Performance Credits from other companies or pay $15/tonne into the Climate Change and Emissions Management Corporation’s Technology Fund, widely referred to as the “Tech Fund”. As the risk-free compliance option, the price of a Tech Fund contribution sets a cap on the market price for SGER reductions.
Capital Power uses offsets as a primary means for meeting compliance obligations under SGER.
The baseline emission intensity for Genesee 1 and Genesee 2 is the average emissions intensity from 2003-2005. However, for new facilities, such as our Clover Bar Energy Centre, the baseline emission intensity is based on the facility’s third full year of commercial operation. In 2012, under SGER, Genesee 1 and Genesee 2 were subjected to a CO2e intensity reduction target of 12%, and Genesee 3 had a CO2e intensity reduction target of 8%. 2012 was the first year that our Clover Bar Energy Centre was subjected to SGER GHG reduction targets starting at 2%. We retired 83,167 tonnes of Alberta SGER GHG offsets in 2012. These reductions came from a variety of Alberta-based No-/Low-Till Agriculture and Conservation Cropping offset projects.
In addition to SGER, we are also required to reduce our share of Genesee 3’s GHG emissions by approximately 53%, which is to the level of a combined-cycle natural gas plant. Offsets have been retired every year since commissioning in 2005 and will continue to be retired to meet future obligations. In 2012 Capital Power retired 615,909 tonnes of offsets from a variety of agricultural, fuel switching and coal mine methane projects on behalf of Genesee 3, in addition to the offsets already retired under the abovementioned SGER program.
Leading Emission Offset Practices
- In 2012, Capital Power invested $22.5 million in emission offsets. Since 2007, Capital Power has registered nearly 10 million tonnes of carbon offsets for the Alberta market.
We have been acquiring offsets for almost a decade and have entered into more than 35 offset purchase agreements. Approximately $22.5 million was invested in offsets in 2012, which is slightly higher than our investment in 2011.
We have expertise in the origination, purchase, and sale of verified emission offsets. We also developed two of the Alberta Offset System Quantification Protocols.
Our early, active and responsible participation in emission offset practices has delivered nearly six million tonnes of Alberta SGER offsets since 2007, and approximately four million Natural Gas Combined Cycle (NGCC) offsets from 2007 to 2012. Emission offsets are audited and verified by independent third parties.
We continue to invest in emission offset markets and have become an active buyer of Climate Reserve Tonnes (CRT) offsets. We are also an active member of the International Emissions Trading Association.
We have purchased offsets from a variety of Alberta and CRT projects in 2012. Some of these project types include composting, ozone depleting substances, forestry, agricultural methane, no-tillage agriculture and landfill gas.
Licensing emissions in the United States
Our facilities in Connecticut, Maine, and Rhode Island are subject to the Regional Greenhouse Gas Initiative (RGGI). RGGI is a co-operative effort by nine states that have capped CO2 emissions from the power sector and mandated an emissions reduction of 10% by 2018. A limited number of allowances are available for purchase each year, and facilities are required to hold sufficient allowances to equal their CO2 emissions over a three-year control period. Facilities may also meet a portion of their requirement by applying certified offsets from qualifying GHG-reduction projects that are located within one of the RGGI states.
To date, our New England assets have complied with the RGGI regulations through the procurement of allowances in auctions or secondary markets. In 2012, we transferred 2,101,940 tonnes of emissions allowances into asset compliance accounts for the second compliance period, which runs from January 1, 2012 to December 31, 2014.
Future emission reductions from coal unit retirements
- New Canadian regulations will close 14% of Alberta’s coal fired generation by 2019, rising to 28% in 2027 and 59% by 2029, significantly reducing future greenhouse gas emissions.
Capital Power has long supported Canadian targets and regulations to mandate emission reductions from coal-fired power generation, including national and provincial regulations that would significantly reduce GHG and air emissions from coal-fired electricity plants, helping Canada achieve its Copenhagen commitment to lower GHGs.
In 2012, Canadian federal regulations were finalized which will permanently reduce emissions from coal-fired power generation. The regulation mandates the closure of coal-fired generation facilities in Canada once they have reached a defined end of life and prohibits new coal-fired generation after 2015, unless units are either retrofitted or constructed to achieve carbon capture and storage. In the near to medium term, it is anticipated that units will be retired and replaced with alternative forms of generation, including natural-gas fired generation.
The Canadian regulation mandating orderly coal unit retirements provide certainty for generators, accelerates carbon reduction, avoids stranded investment, and facilitates planning of cleaner replacement generation.
In Alberta, for example, the regulation signals the timing and volumes of replacement baseload generation that will be required and provides certainty about greenhouse gas reduction. By capacity, the regulation will close 14% of Alberta’s coal fleet by 2019, rising to 28% in 2027 and 59% by 2029.
Replacement generation for all the pre-2025 coal unit retirements is already in development, and includes the proposed Capital Power Energy Centre at Genesee, a baseload gas-fired facility.
- See
Report Scope
for an explanation of which facilities and offsets are included in these totals. For example, no emissions or offsets are included with respect to Capital Power’s 50% ownership interest in Keephills 3 because Capital Power does not hold the operating permit; however, 100% of emissions and offsets are included from Genesee 3, where Capital Power is the operator, despite Capital Power owning only 50% of Genesee 3. This approach also aligns with Canadian federal reporting requirements, where operators report 100% of facility emissions rather than emissions based on their proportional ownership interest.
- For 2012, offsets by facility and compliance regime were CBEC 22,000 SGER (2012 first year of compliance); Genesee 3 SGER: 100,062 (85,912 in 2011); Genesee 3 Natural Gas Combined Cycle (NGCC): 665,940 (703,841 in 2011); Genesee 1 and 2 SGER: 11,136 (13,489 in 2011); New England facilities under Regional Greenhouse Gas Initiative (RGGI): 2,101,940 (2,096,254 in 2011).