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1 NOx RECLAIM Market “Where is it headed and what should we be doing?” Tom Ishii Project Manager Gas Engineering Dept. October.

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Presentation on theme: "1 NOx RECLAIM Market “Where is it headed and what should we be doing?” Tom Ishii Project Manager Gas Engineering Dept. October."— Presentation transcript:

1 1 NOx RECLAIM Market “Where is it headed and what should we be doing?” Tom Ishii Project Manager Gas Engineering Dept. October 26, 2005

2 2 NOx RTC supplies are plentiful and buying credits are a lot cheaper than installing controls?

3 3 Perhaps…Rule/program changes will reduce the chance of continued credit surpluses (if facilities do not install timely controls)

4 4 SCAQMD RECLAIM Amendments Adopted January 2005 Reduction or Shave in holdings/allocations across the board starting from 2007 of 11.7% and increasing to 22.5% by –Notice of new holdings sent out –Exemptions for certain facilities at BACT Electric Generation facilities allowed to freely trade 2007 and beyond RTCs Future credit supply periodically adjusted

5 5 Large credit surpluses and its impact on emissions controls led to the Shave

6 6 BARCT Equivalency Parameters: Determines Supply of Credits BARCT emission factors updated to reflect lowest achievable control device Economic activity levels reflect gains in energy efficiency Emissions inventory by equipment type adjusted to reflect latest information Updated every three years

7 7 Exemptions from Shave ( Qualifications are very strict) All permitted equipment at BACT No reduction of Initial allocations Certain total cost thresholds met for BACT controls/equipment District application required Exempted quantity of credits will be taken out of holdings from remaining facilities

8 8 NOx Demand vs. Supply Source: SCAQMD

9 9 Where are credit prices headed? Higher for sure, compared to 2003 & 2004, and since the Shave, prices for RTCs have already risen across the board

10 10 Monthly NOx Price by Expiration Date Source: SCAQMD

11 11 Key Market Drivers Power Sector credit demand –New power plants Refinery Sector additions of control equipment Facility closings Economic activity, including weather impacts New rules based on stricter health risk targets

12 12 Since the Shave Trading volume has picked up for continuous streams resulting in higher prices for credits –Today, it is already tough to buy a stream for less than $7.00 per lb per year As the market tightens and the “time” frame lengthens to 2020, securing “all years after 2010” will challenging, and you may need to acquire or pay for more “out” years

13 13 Average NOx Price by Calendar Year Source: SCAQMD

14 14 You can relax … If your credit holdings before the shave were 30% or greater than your current or projected usage

15 15 Otherwise, you have 2 years at most to analyze, plan and implement your longer-term RECLAIM strategy Assuming you see value in achieving least cost (or lowering) compliance.

16 16 Next Steps Calculate your facility’s credit supply and demand balance for the years Begin implementing your compliance strategy –Acquire off-cycle credits –Plan contingencies for permit delays Monitor credit price movements (quarterly at a minimum) –www.aqmd.gov/reclaim/rtc_main/html –Communicate with emission brokers

17 17 Remember this?


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