May 5, 2016: Energy Matters: Conventional

From Eric Vettel, American Energy Society

Conventional

Oil

 - On April 17, key OPEC members will meet in Doha, Qatar. The last time OPEC met, November 2014, agreements broke down, Member nations decided to ignore the impact of fracking, and then production rose to an all-time high. Oil markets have been in free-fall ever since. In advance of the upcoming meeting, Saudi Arabia says it will try again to freeze production ... if all other OPEC nations agree, especially Iran.

 - About 15 years ago, the top 5 oil producing nations were:

   5. China (3.39 mb/d)

   4. Iran (3.44 (mb/d)

   3. United States (5.75 mb/d)

   2. Russia (7.41 mb/d)

   1. Saudi Arabia (7.63 mb/d)

Today, the top 5 oil producing nations are:

   5. Canada (4.4 million barrels per day)

   4. China (4.6 mb/d)

   3. Russia (11 mb/d)

   2. Saudi Arabia (11.9 mb/d)

   1. United States (13.7 mb/d)

-  Featured story: Right now, the total number of active rigs in the US is 484 (down 26 from last quarter), with only 32 waiting to spud (down 9). This is the first time the active rig count has fallen below 500 in a long time. Though "rig count" has always been used to measure the health of the oil industry, the introduction of new techniques ("fracking") and more efficient oil production has created a new model in which its importance is unclear.

- The oil crash has hurt oil producers all over the world, but Latin America has been hit the hardest, especially Venezuela and Brazil, which are exporting 100,000 to 200,000 fewer barrels per day; Mexico, Columbia, and Peru have also been hit hard.

Natural Gas

- Featured story: In the last few years, production of natural gas has overwhelmed the existing infrastructure. However, many are beginning to wonder if pipeline developers are moving too quickly to install new infrastructure. The states most at risk for NG infrastructure overdevelopment are: Florida, Pennsylvania, and Ohio. (Note: in 2014, 26 new pipelines were approved for construction; in 2015, 30 more were approved.)

 Coal

  - One of the most accurate ways to project the near-term future of the coal industry in the US is to measure current rail deliveries. Right now, coal deliveries by rail are down - significantly - and future rail-delivery contracts are declining, too.

 - Average amount of coal produced per employee-hour (in tons):

     Central Appalachia: 2.51 tons of coal per employee-hour

     Illinois Basin: 4.98 tons

     Northern Appalachia: 4.36 tons

     Powder River Basin: 29.24 tons (Note: the PRB in Wyoming is primarily a surface mine)

 Nuclear

  - One reason why nuclear power is struggling right now is the high cost to build a reactor. Small modular reactors (SMRs), which are less expensive to build and produce around 300 MW of power (a third of the power of current reactors) are gaining traction as a possible solution. NuScale, a US firm, is preparing to build 12 SMRs for Utah Associated Municipal Power, and the British Royal Navy is planning to place a "large" order with Rolls Royce for SMRs that can power its nuclear submarines. However, it will take about 10 years to complete these orders.

April 15, 2016: Energy Matters: Renewables

Renewables

 - Top 3 developed nations' investment in renewable energy:
   1. China ($102.9 billion USD)
   2. United States ($44.1 billion)
   3. Japan ($36.2 billion)

Top 3 developing nations investment in renewable energy:
   1. India ($10.2 billion - up 22 percent from the previous year)
   2. South Africa ($4.5 billion - up 329 percent)
   3. Mexico ($4 billion - up 105 percent)
(Note: global investments in renewable power projects totaled $266.0 billion last year, which was more than double the $130.0 billion invested in coal and natural gas-fired power plants in 2015.)

- The World Bank, the largest provider of public finance to developing countries, is going to spend 28% of its investments on projects related to renewable energy.

- Off-shore wind is common in some parts of Europe; in the US, the first off-shore wind project is under construction off the coast of Rhode Island. Virginia will have the next in Virginia Beach. The next 3 currently under review for permits are: Morro Bay in California, followed by South Carolina, and then New Jersey.

- There are about 2.5 million people in the US working in clean-energy jobs; of that total, about 1.9 million are in jobs related to "efficiency."

- In 2016, the solar sector will add more new electricity-generating capacity than any other - including natural gas and wind. Planned installations include 9.5 gigawatts of utility-scale solar, followed by 8 gigawatts of natural gas and 6.8 gigawatts of wind. However, official projections for solar are consistently understated because they only consider large or utility-scale solar arrays and do not account for rooftop solar, which is also substantial.

April 15, 2016: Energy Matters: Conventional

From Eric Vettel of American Energy Society:

On April 17, key OPEC members will meet in Doha, Qatar. The last time OPEC met, November 2014, agreements broke down, Member nations decided to ignore the impact of fracking, and then production rose to an all-time high. Oil markets have been in free-fall ever since. In advance of the upcoming meeting, Saudi Arabia says it will try again to freeze production ... if all other OPEC nations agree, especially Iran.

 - About 15 years ago, the top 5 oil producing nations were:

   5. China (3.39 mb/d)

   4. Iran (3.44 (mb/d)

   3. United States (5.75 mb/d)

   2. Russia (7.41 mb/d)

   1. Saudi Arabia (7.63 mb/d)

Today, the top 5 oil producing nations are:

   5. Canada (4.4 million barrels per day)

   4. China (4.6 mb/d)

   3. Russia (11 mb/d)

   2. Saudi Arabia (11.9 mb/d)

   1. United States (13.7 mb/d)

-  Featured story: Right now, the total number of active rigs in the US is 484 (down 26 from last quarter), with only 32 waiting to spud (down 9). This is the first time the active rig count has fallen below 500 in a long time. Though "rig count" has always been used to measure the health of the oil industry, the introduction of new techniques ("fracking") and more efficient oil production has created a new model in which its importance is unclear.

- The oil crash has hurt oil producers all over the world, but Latin America has been hit the hardest, especially Venezuela and Brazil, which are exporting 100,000 to 200,000 fewer barrels per day; Mexico, Columbia, and Peru have also been hit hard

Natural Gas

- Featured story: In the last few years, production of natural gas has overwhelmed the existing infrastructure. However, many are beginning to wonder if pipeline developers are moving too quickly to install new infrastructure. The states most at risk for NG infrastructure overdevelopment are: Florida, Pennsylvania, and Ohio. (Note: in 2014, 26 new pipelines were approved for construction; in 2015, 30 more were approved.)

Coa

- One of the most accurate ways to project the near-term future of the coal industry in the US is to measure current rail deliveries. Right now, coal deliveries by rail are down - significantly - and future rail-delivery contracts are declining, too.

 - Average amount of coal produced per employee-hour (in tons):

•      Central Appalachia: 2.51 tons of coal per employee-hour
•      Illinois Basin: 4.98 tons
•      Northern Appalachia: 4.36 tons
•      Powder River Basin: 29.24 tons (Note: the PRB in Wyoming is primarily a surface mine)

Nuclear

 - One reason why nuclear power is struggling right now is the high cost to build a reactor. Small modular reactors (SMRs), which are less expensive to build and produce around 300 MW of power (a third of the power of current reactors) are gaining traction as a possible solution. NuScale, a US firm, is preparing to build 12 SMRs for Utah Associated Municipal Power, and the British Royal Navy is planning to place a "large" order with Rolls Royce for SMRs that can power its nuclear submarines. However, it will take about 10 years to complete these orders.

March 29, 2016: Energy Matters: Climate

Featured story: Concerns over energy security are spurring branches of the military to get more electricity from renewable sources. But environmental concerns are not a key driver for the DoD, the nation's largest consumer of energy. Instead, military officials say that safer sources of power are needed to enhance national security - a bigger motivation than reducing emissions.

- Featured story: Global greenhouse gas emissions held steady at around 32 billion tons for a second straight year - and it was not tied to an economic downturn.

- The Marshall Institute formed a new non-profit educational organization called the CO2 Coalition that promotes the following ideas:
* more CO2 in the atmosphere will be a net benefit for the world;
* concerns about carbon dioxide being a "pollutant" are not valid;
* climate change is proceeding very slowly;
* the likely increase in temperature for the 21st century has already happened;
* current CO2 levels are far below optimum for the growth of many plants.
AES Premium Members have access to a white paper published by the CO2 Coalition that summarizes its views.

- A new study has found evidence that normal human activity - like animal agriculture, rice cultivation and compost waste disposal - may be contributing more greenhouse gases than the oil and gas industry. AES Premium Members have access to the abstract of this article.

- Concrete is the most widely used synthetic material in the world. For every kilogram of cement produced, around the same amount of CO2 is released into the atmosphere.

- The warming climate has changed the way wine grapes grow - vintners no longer need to rely on late-season heat and drought because temperatures are up already. In the short run, the warmer climate has probably improved wine quality. The bad news: It's not helping all varietals, and the grapes that benefit now probably won't if the climate continues to get warmer.

- Line 5 is an oil pipeline which runs along the bottom of the Straits of Mackinac, connecting Lake Michigan and Lake Huron. It carries more than 500,000 barrels of light crude and natural gas liquids each day. Some wonder if this original pipeline, built in 1953, is still safe.

- Greenland, one of a number of ice floes in the north and south poles, is losing about 287 billion tons of melting ice per year, enough to cause sea levels to rise by about 1 millimeter each year.

- Evan Berry, a professor at American University, is the author of "Devoted to Nature: The Religious Roots of American Environmentalism," an examination of the theological character of American environmental thought. It is a potent corrective to the narrative that religion and environmentalism are separate.

 Courtesy of American Energy Society

March 29, 2016: Energy Matters: US Renewables

- About 8.8 percent of the total amount of energy consumed by the federal government comes from renewable sources; the Department of Defense claims 22 percent of that total, the biggest share of any agency.

- The Clean Power Plan will increase renewable energy more in the Midwestern states than anywhere else in the country because the region has the highest potential for wind and is also most dependent on coal.

- Geothermal energy is growing rapidly around the world. The US has approximately 3,700 MW of installed geothermal capacity and about 1,250 MW of geothermal power under development. The global geothermal power market is about 13,300 MW, with 12,500 MW of planned capacity across 82 countries. AES Premium Members have access to the 2016 Annual US & Global Geothermal Power Production Report.

- The US Department of Transportation, Amazon Web Services, and Paul Allen's Vulcan Inc. have pledged up to $40 million to help one city become the country's first "Smart City." It will fully integrate innovative technologies - self-driving cars, connected vehicles, and smart sensors - into its transportation network. Out of 78 applicants, the finalists are: Austin; Columbus; Denver; Kansas City, MO; Pittsburgh; Portland; and San Francisco.

- A group of cities in the US announced the launch of the Energy Secure Cities Coalition (ESCC) to shift their municipal fleets from petroleum-fueled vehicles to those powered by alternative fuels, electricity and natural gas. The participating cities are: Atlanta, Charlotte, Indianapolis, Orlando, Rochester, Sacramento, San Diego, and West Palm Beach.

- The US solar market is set to grow 119 percent in 2016. 16 GW of solar will be installed, more than doubling the record-breaking 7.3 GW installed in 2015.

- The US energy storage market had its best quarter and best year - 112 megawatts of energy storage capacity was deployed in the fourth quarter of 2015, bringing the annual total to 221 megawatts of storage capacity.
 

Courtesy of the American Energy Society

Does it matter that there might be 800,000 missing barrels of oil each day?

I got this from Eric Vettel, Ph.D. from the American Energy Society and I thought I would share it.

The world cannot account for 800,000 “missing barrels” of oil every day, the difference between the 1.9 million barrels global oil production and the roughly 1.1 million b/d of oil calculated as being in transit or in storage.

There are many explanations:

a) a production outage in Nigeria
b) a pipeline glitch in Kurdistan
c) a lot of it is in China in the form of stockpiles
d) India has some sitting in pipelines and in ships
e) a normal accounting deviation,
f) all of the above
g) none of the above; it's a myth - the missing barrels simply don’t exist

The better question is this: does it matter that there might be 800,000 missing barrels of oil each day?

A. Probably not, except that it is making the market nervous. One thing is certain: the nervous market won’t pause to reflect.

Large Renewable Procurement Results

Last week, the Independent Electricity System Operator (IESO) announced the successful proposals submitted in the first round of the Large Renewable Procurement process (LRP1). 

What is significant about this announcement is the price.  The province has moved to a competitive bid process for renewable energy.  IESO reports that, for the wind projects selected, the weighted average price was 8.59 cents/kWh, and 15.67 cents/kWh for solar.

The full list of successful projects can be viewed here; while the Canadian Wind Energy press release regarding the announcement can be viewed here.

Information courtesy of Kevin R. Surette, WPD Canada

 

Wind power prices dropping below nuke re-build costs in Ontario

A great article on the Large Renewable Energy procurement process.  While you can argue the cost of nuclear, the trend regarding pricing is intriguing.  ORIGINAL article is by the Clean Air Alliance and located is at  http://www.cleanairalliance.org/wind-power-prices-dropping-below-nuke-re-build-costs-in-ontario/

Today Ontario’s Independent Electricity System Operator (IESO) announced that it has signed five contracts with private sector companies for wind power at costs ranging from 6.45 to 10.55 cents per kWh.

According to Ontario Power Generation (OPG), the cost of electricity from a re-built Darlington Nuclear Station will be 7 to 8 cents per kWh. However, every nuclear project in Ontario’s history has gone massively over budget – on average by 2.5 times. If history repeats itself, the cost of electricity from re-built Darlington reactors will be 15 cents per kWh . That would make even solar power acquired through the new Large Renewable Procurement (LRP) process competitive with nuclear.

And, of course, solar and wind companies are on the hook for any cost overruns on their projects, unlike OPG which expects provincial electricity ratepayers and taxpayers to still pick up the tab for its inevitable cost overruns.

Also, renewable energy costs are projected to continue to fall rapidly so by the time the IESO undertakes its next LRP round a year from now, we will likely see even greater savings over costly and slow nuclear re-build projects. In fact, what the current LRP round has told us is that the Ontario government should be steering toward the off ramps for nuclear re-build projects as quickly as possible given the astonishing – and continuing -- decline in green energy prices.

If we are smart, we will combine energy efficiency and water power imports from Quebec with made-in-Ontario renewable energy to build a much more cost effective, responsive and responsible electricity system for Ontario.

Please pass this message on to your friends.

Angela Bischoff, Outreach Director

ECA & ESDM Report Related Questions

By Terry Lam, P.Eng

Q:  How does my facility show compliance with the MOECC standards? Is outdoor monitoring involved?

Compliance is demonstrated by preparing an Emissions Summary and Dispersion Modelling (ESDM) report meeting the requirements of O. Reg. 419/05. This report includes an estimation of the emissions released from the facility and predicts the off-property concentrations using a computer program called a “dispersion model.” The model results are compared against applicable standards to show compliance.  It is not practical to show compliance using off-property monitoring since this can only be done at a limited number of locations for a limited period of time and is quite expensive. Compliance must be demonstrated at all points off-property under a large range of meteorological conditions which necessitates the use of a model over a monitoring program. It should be noted that O. Reg. 419/05 considers a modelled or exceedance of a standard to have the same impact as a monitored or measured exceedance for most contaminants. 

Q:  How are emissions from my facility quantified? Will sampling and analysis be required?

A: There are several methods that might be used to estimate emissions. Site-specific sampling, while potentially providing the most accurate estimate, is also very expensive and can drive the cost of the approval project up substantially. Generally, more conservative estimates are made based on emission trends published in literature (called “emission factors”) if available. Emission factors are often derived from sampling results at similar sources. Emissions may also be estimated using engineering principles and process information, or a materials mass balance. The general approach is to start with the assessment with cheaper, but more conservative methods to estimate emissions and move towards more accurate methods if required. This approach helps ORTECH control the costs of the project. If source sampling is required, ORTECH maintains one of the largest and most experienced teams in Canada to provide assistance.

Keeping Track of Environmental Compliance & Permitting

Terry Lam, P. Eng.  – Specialist, Compliance & Permitting

October 7, 2015

Like it or not, environmental compliance and permitting (C&P) requirements can often be affected by day-to-day operations. Often, facilities are not aware of these impacts or do not consider environmental compliance in day-to-day decision making. This can lead to unanticipated issues, extra work, or poor quality estimates when addressing end-of-year reporting requirements such as those related to the National Pollutant Release Inventory (NPRI), Toxics Reduction Act (TRA), Greenhouse Gas (GHG) reporting, and preparing Annual Written Summaries (AWS) required by an Environmental Compliance Approval (ECA). Failure to consider C&P requirements can also lead to surprise findings if you are inspected by the Ministry of the Environment and Climate Change (MOECC).

Consider the following examples:

1. A facility switches from a mix of xylene and toluene solvents for cleaning equipment to purely xylene solvent. This change pushes xylene usage above the threshold for TRA requirements. At year end, the facility is shocked to find out that they must prepare a reduction plan and complete in-depth toxics accounting for xylene, a significant and costly effort.
2. A facility makes the minor change of re-ducting an existing paint spray booth exhaust under the Limited Operational Flexibility conditions on their ECA. The plant manager does not remember the continuous assessment requirements imposed by the ECA, and no updated assessment is prepared until the AWS is due. When the assessment is completed, it is determined that the exhaust relocation does not comply with emissions standards due to the close proximity to a neighboring unit’s air intake. There is now a requirement for retroactive abatement.

Other common occurrences include failing to amend an ECA for changes to processes or equipment, or not considering that the expansion of operations may result in exceeding a GHG reporting threshold. Sometimes, only knowing at year end that you are required to report can lead to difficult problems, since not everything can be remedied retroactively (such as the requirement to calibrate certain meters or measure certain parameters for Ontario GHG reporting).

The establishment of an environmental C&P due diligence process, which could be a simple as a checklist of considerations, can save you lots of headaches and costs when a requirement to report or reconcile comes around.

Need assistance? ORTECH can help you:

• Establish an environmental C&P due diligence process
• Report to the NPRI
• Prepare a Toxics Substance Reduction Plan and complete Toxics Substance Accounting
• Apply for an Environmental Compliance Approval with Limited Operational Flexibility
• Prepare and submit an Annual Written Summary

Ambient Air Quality Monitoring Plans

Written by

It is prudent to develop a plan before initiating any ambient air quality monitoring activities.  Monitoring plans are required by most jurisdictions and provide an opportunity for the proponent to ensure that any monitoring data collected is an accurate and reliable assessment of the air quality around the industrial facility or adjacent community.

Important elements of a monitoring plan:

• Objectives of the monitoring program;
• Duration of the monitoring program;
• Expected or suspected sources of air pollution;
• Expected or suspected receptors;
• Number of required monitoring locations;
• Air quality parameters to be measured;
• Monitoring methods or procedures;
• Laboratory services required;
• Quality assurance/quality control activities; and
• Data reporting and archival procedures.

ORTECH can develop an effective monitoring plan that satisfies your particular requirement and that optimizes your resources.

Incoming Dispersion Modelling Updates – What it Means for You

Terry Lam, P. Eng.  – Specialist, Compliance & Permitting
October 1, 2015

The Ministry of the Environment and Climate Change (MOECC) will be updating the approved versions of the AERMOD and ASHRAE method dispersion models later this month through the publication of a notice on the Environmental Registry. A pre-notification of the incoming update was sent to stakeholders earlier this year. The approved versions will now be AERMOD version 14134 and the method described in the AHSRAE 2011 Handbook, chapter 44.  A change in model version has the potential to result in increased point-of-impingement concentration (POI) predictions. This means that on the extreme end of the impacts, a facility could move from compliance to non-compliance as a result of the change, potentially triggering notification and abatement requirements. Other considerations include:

• Facilities required to update an Emissions Summary and Dispersion Modelling (ESDM) report annually (e.g. Schedule 4 or 5 facilities) will need to use the newly approved versions for their updated report due March 31. This might result in additional costs for facilities that do not undergo year-to-year changes and previously updated simply with an administrative note.

• Facilities with Environmental Compliance Approvals (ECAs) with Limited Operational Flexibility are required to keep an up-to-date ESDM report that demonstrates compliance. This means that the ESDM report would need to be updated to use the new versions once they are in effect. Additionally, increases to POI predictions for contaminants without standards could trigger the requirement to submit a toxicological assessment request to the MOECC depending on interpretation.

• The MOECC has indicated that existing ECA applications which have not yet been approved may be retroactively required to reassess using the new versions. This means that there is a potential for additional unanticipated costs if your facility currently has an ECA application using an older version in queue.  The MOECC has also indicated that they will phase in new versions on an on-going basis. This creates additional uncertainty in the ECA application process as the time in queue is often longer that the lifespan of a model version. There is now a real risk that the assessment you submit in support of your ECA application will be obsolete and require update by the time it gets reviewed.

Need assistance? ORTECH can help you:

• Prepare or update an ESDM report
• Use an approved dispersion model to assess your facility
• Assess the impact of an incoming model update
• Support an existing ECA application that requires updated modelling

Managing your Service Ontario ONe-Source Account

By Terry Lam, P. Eng.  – Specialist, Compliance & Permitting

October 1, 2015

Service Ontario’s ONe-Source for business is an online service made available by the Government of Ontario to provide access to government services, forms and information.  The Ministry of the Environment and Climate Change (MOECC) uses ONe-Source for business to facilitate registrations on the Environmental Activity and Sector Registry (EASR) and section 20.18 order requests for the inclusion of EASR activities in an Environmental Compliance Approval (ECA) application. A section 20.18 order request is commonly required as part of an ECA application – so the use of the ONe-Source is often required as part of a compliance & permitting project. The MOECC has also indicated that they plan to expand services delivered using ONe-Source in the future, for example, the ECA application process itself.

ONe-Source is accessed using an ONe-Key login ID.  To access the MOECC services, the ONe-Key account must be registered with MOECC. This registration process requires the provision of a business number, postal code, and legal name for verification against information on file. Only one ONe-Key account can be registered with the MOECC per business number. For business operations with several facilities in Ontario, it is especially important to keep track of the ONe-Key account information associated with the MOECC, since multiple facilities will need to use it and each facility’s ECA project could be led by different staff. Also, since ONe-Source is used for services not related to the MOECC, such as accessibility reporting requirements, a business may wish to keep all activities consolidated to a single account for convenience. If you are overseeing an ECA application project and are part of a multi-facility business, it is recommended that you coordinate with corporate or administrative staff to ensure that a record of the account is kept on file, or that access to an existing account can be arranged.

If the information for the ONe-Key account registered to your business number with the MOECC is lost, the administrative process of recovering the account can take up to several months resulting in significant days to project timelines.

Need assistance? ORTECH can help you:

•       Assist in creating your ONe-Key account and registering it with the MOECC
•       Register an Activity on the EASR
•       Complete a section 20.18 order request
•       Prepare an ECA application and supporting documentation

8 reasons the low-carbon economy is gaining momentum

1. In 2013, for the first time, the world added more low-carbon electricity capacity than fossil fuel capacity.
2. Global economic growth and CO2 emissions are beginning to decouple. The global economy grew by 3% last year, but CO2 emissions did not rise.
3. 40 countries and 20 sub-national regions have adopted or are planning carbon pricing.
4. Solar PV modules are about 80% cheaper than they were in 2008.
5. Global business networks representing 6.5 million companies have called for strong climate action.
6. Each dollar invested in renewables busy more capacity than ever. US$270 billion invested in renewables in 2014 bought 36% more capacity than US$USD279 billion spent in 2011.
7. Sustainable companies have outperformed their peers by 9.1% over the past 4 years.
8. The global market for low-carbon goods and services is worth more than $5.5 trillion and is growing at 3% per year.

Source: 2015.newclimateeconomy.report  (Note:  you should really follow this firm)

Valuation of a Rooftop Solar Project in Ontario

Note to Reader:  This valuation article is over 15 months old. The cost of equipment has trended downward.  The methodology is correct, but the numbers are high. If you would like to discuss, please contact Ka-Ming Lin at the information to the right.

Valuation of a Rooftop Solar Project in Ontario:

Valuation of a rooftop solar project, participating in the Ontario Power Authority’s (OPA) Feed-in Tariff (FIT) program is a very dynamic and fluid process. The OPA goal was an internal rate of return (IRR) levered ranging between 10-12%. The pricing of a commissioned solar project has dropped considerably over the last 2 years but the IRR has essentially remained the same.

 In determining the value of a project, two other factors must be considered. One, the type of contract, in this case, FIT 2 and FIT 3. ORTECH assumes most of the FIT 1 projects are either built or in the process of being built. The other factor is where the project lies in the lifecycle. Two notable phases, Pre-NTP (financial close) and Commissioned. It is ORTECH’s experience that most term sheets on the equity side use these two timeframes in the lifecycle as acquisition points.

A significant fraction of FIT 2 and FIT 3 contracts are currently in the control of developers that are associated with EPC providers or owned directly by EPC contractors. These projects are often developed as turnkey applications where the developer’s upside is in securing the EPC contract and thus are unlikely to be “flipped” pre-NTP. Arrangements between the EPC-developer and the building owner may be for the building owner to acquire the project(s) post commissioning or may be a roof lease arrangement where the EPC-developer retains ownership. Acquiring these projects from either the EPC-developer or the building owner should come at a cost similar to the EPC turnkey cost for the project.

The price ORTECH previously quoted at $0.50-.75 per watt for the contract only is out of date. The sale of these contracts has actually slowed and the rules set out by the OPA prohibit the sale. The only way, prior to commercial operation, to buy into projects is as a new partial equity investor.

The value of operational rooftop solar projects is in their FIT contracts. These contracts are with the OPA and backed by the Ontario government. They are paid out through the Global Adjustment meaning that they automatically get funding from the rate base without any input from OEB. This is because OPA is authorized to do so directly through provincial legislation. As a result, the revenue stream is generally considered reliable.

Determination of the actual value of a project will depend on the evaluator and their perspective on the risks associated with these assets. Since the value is in the contract and the revenues from it, the approach ORTECH often uses in determining a project’s value is to look at the cash flows and determine the net present value (NPV). NPV calculations are a method of discounting future revenues and require a discount rate. For a developer evaluating the NPV of a solar project, the discount rate would be their required rate of return which will depend on their assessment of the risk associated with the cash flow. Again, since the counterparty to the FIT contract has legislative authority to acquire funds from the rate base, the risk associated with not getting paid for energy delivered is considered low. The main risks are associated with the project’s ability to deliver energy, operating costs, and the potential for failing to meet the obligations of the FIT contract. These are the key factors ORTECH considers when executing technical due diligence engagements.

For reference, OPA prices FIT contracts based on what it expects the installed costs to be and allows for an investor rate of return in the neighbourhood of 10%. That rate of return is offered to also offset development costs for some projects which never reach commercial operations. OPA recognizes that there is the cost of developing a project even if it fails prior to construction (i.e. no EPC funds are spent) and that the EPC-developer entities which make up most of the industry need to recoup those lost resources with their successful projects.

The current market has matured and the predominate model is an EPC turnkey solution. The EPC quotes an all in price per watt. The current turnkey cost of projects, commissioned for FIT 2 expected to be projected is in the range of $3.25-$4.00 a watt. For FIT 3, the range is lower at $3.05-3.75 a watt. The changes in domestic content requirements and improvements in manufacturing efficiencies account for the downward pressure on pricing. This is expected to change as the market matures.

The key question remains; what is the value?, to answer the real question; “How much?” There is no general answer here. The question is akin to "how long is a piece of string?" it is all about risk and discount rate. The discount rate is determined on a case by case assessment.

Two examples:
Scenario 1:

• FIT 2.0 (53.6 cents per kWh) – 20 years of contract remaining – 250 kW rooftop with 20% overbuild
• At 1200 kWh per kW (this will vary by location by up to +/- 20% or more) with a total O&M cost of 10 cents per installed Watt DC (which is also highly variable)
• A discount rate of 12% yields an NPV of $897K
• A 50% equity stake would be valued at $449K ($1.79 per watt)

 Scenario 2:

• FIT 3.0 (32.9 cents per kWh) – 20 years of contract remaining – 250 kW rooftop
• With the same operating conditions as previous.
• A discount rate of 10% yields an NPV of $522K
• A 50% equity stake would be valued at $260K ($1.04 per watt)

Changing any one factor will impact everything and by different amounts depending on conditions. For example, dropping O&M to 7 cents changes the FIT 2.0 project NPV from $897K to $958K (up $61K). The FIT 3.0 goes from $522K to $599K (up $77K)

Some other factors may affect the valuation of these projects are as follows:

• Individual equity investor’s discount rate and risk assessment of each project.
• Equity Investor with low cost of capital, especially on the Debt side. A number of Local distribution companies (LDCs) have access to low-cost debt from Infrastructure Ontario.
• New players wanting to build a portfolio of projects quickly, especially from Germany and US, is putting pressure on the prices.
• Tax benefits: Some Canadian firms are using tax credits allowing a high acquisition price in bidding situations.
• Specific circumstances related to individual contracts such as the extent of required roof repairs.

 Disclaimer: The above information is a static description of what in reality is a dynamic environment. This document remains the property of ORTECH Consulting Inc. (ORTECH) and may not be used in whole or in part by any person for any purpose other than that specified without the express written consent of ORTECH. ORTECH will not assume any liability to any Third Party that makes use of this document and the potential client and any Third Party will indemnify and hold ORTECH harmless for any loss, damage or expense from any such use.

If you have any questions about this article, please email us at info@ortech.ca

Summary of ORTECH Experience with the Electroplating Industry

This document outlines ORTECH’s experience with the electroplating industry and identifies ORTECH staff with expertise in this area.

ORTECH continues to do work for the electroplating industry in the areas of environmental air quality consulting and stack emissions testing.  ORTECH is also currently on an advisory committee working with the chromium electroplating industry to negotiate an alternate Industry Standard (including hexavalent chromium) with the Ontario Ministry of the Environment (MOE) before 2016 when more stringent air quality standards for many metals take effect.

Summary of Experience: Air Quality Consulting

ORTECH’s air quality consulting group has over fifty years of experience, with specialties in preparing emissions inventories for federal and provincial reporting programs, and conducting air quality compliance assessments to support provincial approval applications.  ORTECH has provided consulting assistance in the following service areas:

•    National Pollutant Release Inventory (NPRI) and O. Reg. 127/01 emission inventories
•    O. Reg. 455/09 Toxics Substance Accounting (TSA)
•    Toxics Substance Reduction Plans (TRSPs)
•    Environmental Compliance Approval (ECA) applications
•    Emissions Summary and Dispersion Modelling (ESDM) reports
•    Industry Standard negotiation

Facilities serviced included various processes including electropolishing, chromium electroplating, zing electroplating, stainless steel passivation, and bright dip anodizing.

Summary of Experience: Stack Testing

ORTECH maintains one of the largest and most experienced teams in Canada for compliance emission testing.  ORTECH has done extensive work for the chromium plating industry related to compliance testing programs to address Environment Canada’s Chromium Electroplating, Chromium Anodizing, and Reverse Etching Regulations.  In the recent past, ORTECH’s stack testing group has completed testing programs at eight (8) chromium plating facilities.

Frequently Asked Questions – Ontario Air Approvals

By Terry Lam (tlam@ortech.ca)

Some common questions that our clients ask us about the approvals process in Ontario are answered below.

General Approvals Process Questions

Q: Are there any exemptions from approval requirements?
A: Yes. Section 9 (3) of the Ontario Environmental Protection Act, R. S. O. 1990, (the EPA) and O. Reg. 524/98 specify the (limited) types of equipment, activities, and operations that are exempt from needing an Environmental Compliance Approval (ECA). These exemptions include things such as equipment used for food and beverage preparation at retail locations, low capacity natural gas comfort heating systems, and items associated with low occupancy dwellings.
In general, these activities are also exempt from needing a registration on the Environmental Activity and Sector Registry (EASR) as well.

Q: Does the Ministry of the Environment (MOE) charge any fees?
A: Yes. For the ECA process, the MOE requires that both an administrative process fee and a technical review fee be included with any application. This fee must be included (paid) with the submission of the application and not after the ECA has been issued. The fee amount is generally determined based on the number, size, and nature of the air & noise sources at a facility.
For the EASR process, the MOE requires that a fee of $1,190 be paid before they will issue the confirmation of registration.

Q: What happens if I have both EASR eligible activities and sources requiring an ECA at my facility?
A: This is a very common occurrence. When this happens, the facility can choose to either complete both the ECA and the EASR processes, or instead submit a “section 20.18 order request” which, if granted, would allow the EASR eligible activities to be included in the ECA process.

ECA Related Questions

Q: What happens after I submit an ECA Application?
A: Once submitted, the MOE first screens the application for completeness. After screening, the MOE issues an “Acknowledgment Letter” which confirms their receipt of the application. In this letter, the MOE occasionally requests additional information or application fees that they will require.
With a few exceptions, a notice regarding the application will be posted on Ontario’s Environmental Registry (http://www.ebr.gov.on.ca/ERS-WEB-External/) for a minimum of 45 days for public review and comment. After screening, the application will be assigned to a queue where it awaits a technical review from MOE engineers. Once the technical review process begins, the MOE engineer will typically contact ORTECH to resolve and questions or concerns that they have with the submission. Once the MOE engineer is satisfied, the MOE will proceed to issue the ECA. The MOE may or may not provide the applicant with the opportunity to review the draft.

Q: How long does it take for the MOE to issue an ECA?
A: The time it takes the MOE to make a decision on an ECA application varies. At present, most ECAs are issued within one to two years of application submission.

Q: I have my ECA - do I need to do anything else? What if I need to modify my process or equipment?
A: An ECA will generally contain terms and conditions requiring that maintenance and complaint tracking procedures be put into place. Upon receipt of an ECA, the holder should review the conditions carefully and make sure that they prepare any documents and implement any procedures required.
A typical ECA does not cover any modifications. If, after receiving an ECA, the holder wishes to add or modify sources at their facility, an amendment application must be submitted. The exception to this is if the ECA includes “Limited Operational Flexibility” (LOF) conditions. These conditions allow certain modifications to be made without an ECA amendment. Contact ORTECH to learn more about ECAs with LOF.

EASR Related Questions

Q: Is there any hard-copy (paper) alternative to completing the EASR process or submitting a “section 20.18 order request?”
A: Unfortunately no. At present, there is no paper route to registering on the EASR or requesting a 20.18 order. These items must be completed on the Service Ontario website using an ONe-Key account that is registered with the MOE.

Q: I have received a confirmation of registration from the MOE. Do I need to do anything else?
A: Yes. Once registered, it must be ensured that the activity continues to conform to EASR eligibility requirements and performance requirements. Certain activities also have certain record keeping requirements (for example, maintenance logs) that must be complied with on an on-going basis. Finally, the registration information submitted must be kept up-to-date. For example, if a company where to change its head office address, this information would need to be updated.

Q: Once registered on the EASR, can I make changes to my activity?
A: Yes. Modifications to the registered activity are permitted as long as the activity continues to conform to the EASR eligibility and performance requirements.

How Engineering Students (or anybody) can find a job using LinkedIn®

Here is ORTECH's white paper on "How Engineering Students (or anybody) can find a job using LinkedIn®".

If you have any questions, please email Michael Tingle.

Renewable Energy Approval Lessons Learned: Start Talking and Don’t Stop!

By Andrea McDowell

The Renewable Energy Approval (“REA”) process was introduced along with the Feed-In Tariff program in 2009, with the intent of streamlining approvals for renewable energy projects in Ontario. In the legislation, it sounded so simple, but in reality it was anything but.  This “Lessons Learned” document was written by Andrea McDowell, who has worked on 13 REAs in the last 2.5 years.

Public Consultation According to Chris Turner, a Canadian environmental journalist and author, public opposition alone makes Ontario the most challenging jurisdiction for wind energy development in the world. While the regulations state that only two public meetings are required for approvals, in practice, many more opportunities for consultation will be needed, particularly in areas of high opposition, in order to demonstrate a sincere effort to establish relationships and address all issues of concern. Workshops, toll-free telephone lines, Community Liaison Committees and more are all tools you may want to consider. With the eventual release of the new request for proposal ("RFP") process and its emphasis on “willing host” communities, municipal and public consultation are likely to be even more important—even before a contract is awarded.

First Nations Consultation The approach used to aboriginal consultation can make the difference between project success and failure. While many First Nations communities are active participants in and even developers of renewable energy projects, others are less supportive of such projects, and often the difference is the frequency, timing and content of communications over the project life cycle.

Municipal Consultation Premier Wynne’s commitment to ensuring that renewable energy projects must be sited within “willing host” communities will add further complexity to what was already a complex process. While the regulation commits developers only to communicating with municipalities through written notices, documents, and the Municipal Consultation Form, in practice, this is far from sufficient to reassure the MOE that the municipalities’ needs and interests have been properly taken into account. Indeed, in the future, developers will receive bonus points on contract applications for documented efforts to engage with municipalities before the contract is even awarded.

Natural Heritage Assessments The regulations state only that an investigation must be done of the lands and waters within 120 metres of your project location. However, since the Ontario Ministry of Natural Resources ("MNR") must approve of that investigation in writing, they have a lot of discretion in determining what constitutes a good-enough investigation. A lot of little pieces need to be put together in just the right way to make sure all of the required site visits are carried out at the right time and in the right order to make sure precious time is not wasted in obtaining your approvals.

Archaeological and Cultural Heritage Assessments
Archaeology and Cultural Heritage Studies are not the same thing. Different experts with
different qualifications will be required to complete a study that meets with the approval of the
Ministry of Tourism, Culture and Sport ("MTCS").

Noise Receptor Crystallization
In order to balance a community’s right to know the proposed location of project infrastructure
with the developer’s right not to have that used against them, the Ontario Ministry of
Environment ("MOE") developed a process where wind developers could release a draft site
plan to the public and freeze or “crystallize” the locations of noise receptors to be considered in the noise report. This critical step, properly managed, can significantly reduce developmental
risk. However, any mistake can lead to new noise receptors that can eliminate proposed turbine
locations or your entire project. The notice, Draft Site Plan, and supporting documents must all
be prepared with the greatest care to ensure a positive outcome.

Toxic Reduction Act Feedback Top 10 take aways

By Scott Manser

I am a registered Toxic Reduction Planner.  ORTECH has worked on over 100 reports for our various clients.  I wanted to provide you with some feedback  from this training session I attended recently.

“From Planning to Implementation (Toxic Reduction Workshop; March 19th, 2014, Toronto, Ontario)

My summary of the top 10 key points summarizing the recent Ministry of Environment hosted workshop for Toxic Reduction Planners:

• Most facilities had to report 5 or fewer Toxic substances,
• 1,010 total facilities reporting to TRA,
• Approximately 40% of the reporting facilities indicated they will implement at least one reduction option,
• Top 3 Categories for Implementation (Equipment/Process Modification; Operating Practice; On-site Reuse / Recycling),
• Criteria Air Contaminants – Particulate.  The MOECC has agreed to the definition that for the purpose of the Toxic Reduction Act particulate (PM, PM10, PM2.5) refers to airborne particulate,
• A number of planners shared their experiences with the Toxic Reduction Planning process.  Most planners reported results / experiences similar to that of ORTECH,
• One workshop presenter indicated consistent success in identifying options for implementation, however reduction quantities were generally less than 1,
• Some excellent presentations on Green Chemistry and research work that is due to come onto market within the next 3-5 years.   (Queen’s and Trent University),
• Based upon the general Question and Answer period following the presentations it would appear that the majority of Planners are frustrated by the process and didn’t really feel they had much success in making significant inroads towards Toxic Reductions, and
• The MOECC has created an interactive map showing the location of reporting facilities with a link to the annual accounting and plan summaries ( http://www.ontario.ca/environment-and-energy/toxics-reduction-program ).