NOx RECLAIM Market

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NOx RECLAIM MarketWhere is it headed and what
should we be doing?

• Tom Ishii
• tishii_at_semprautilities.com
• Project Manager
• Gas Engineering Dept.
• October 26, 2005

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NOx RTC supplies are plentiful and buying credits
are a lot cheaper than installing controls?
3
PerhapsRule/program changes will reduce the
chance of continued credit surpluses(if
facilities do not install timely controls)
4
SCAQMD RECLAIM AmendmentsAdopted January 2005

• Reduction or Shave in holdings/allocations across
  the board starting from 2007 of 11.7 and
  increasing to 22.5 by 2011.
• 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

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Large credit surpluses and its impact on
emissions controls led to the Shave
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BARCT Equivalency ParametersDetermines 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

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Exemptions from Shave(Qualifications are very
strict)

• All permitted equipment at BACT
• No reduction of 2007 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

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NOx Demand vs. SupplySource SCAQMD
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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

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Monthly NOx Price by Expiration DateSource
SCAQMD
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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

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Since the Shave

• Trading volume has picked up for continuous
  streams resulting in higher prices for 2007
  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

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Average NOx Price by Calendar YearSource SCAQMD
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You can relax

• If your credit holdings before the shave were 30
  or greater than your current or projected usage

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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.

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Next Steps

• Calculate your facilitys credit supply and
  demand balance for the years 2007-2011
• 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

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Remember this?