Faisal Vellani Austin Berliner Sharda Sharma Mariana Nardon Sinan Pismisoglu July 20, 2009

Used by dairy farmers to  store & dispose of manure  reduce waste odor  create fertilizer  burn methane  produce renewable energy Process:  A hollow container fed by organic material, e.g., animal manure  Resulting anaerobic bacteria eat & digest the organic material  After digesting its “food,” the anaerobic bacterium emits its waste: methane, CO 2, and nitrous oxide The methane and CO 2 combine to create the ultimate end product: biogas

With a cap-and-trade scheme, regulated entities will be “capped” at a set amount When regulated entities cannot meet this requirement, they turn to a carbon offset market An unregulated entity may undertake a project to reduce carbon emissions and receive a number of carbon offset credits

Reductions must be... 1.Measurable 2.Verifiable 3.Permanent 4.Additional  Is the project business-as-usual?  Source of contention to be discussed later in the presentation

Biodigesters are Measurable  EPA provides formulas for calculating tons reduced 2. Verifiable  3 rd parties can use meters to verify reductions 3. Permanent  Digests methane and converts it into CO 2, thereby reducing the amount of CO 2 emission 4. Additional

Key Question:  Is the project business-as-usual?  Would the project have occurred if the project was not implemented as a carbon offset project? Currently recognized as additional  High costs make business-as-usual unlikely Need access to a carbon offset market to overcome the costs

Biodigesters can produce renewable energy, creating further financial incentives But, current regulations cause roadblocks for making biodigesters economically feasible Today’s proposed changes can improve financial profitability as well as accomplish the goal of reducing emissions  These changes will present challenges to the Additionality requirement  However, this requirement should overlooked to promote goal of reducing GHG emissions

Interconnection fees Demand charges Net Metering Renewable Energy Certificates (RECs)

Amount paid to utility for connecting to the power grid  Initial connection fees Protective measure for the safety of the farm and utility personnel  To ensure that the entity has electricity at all time  E.g., if a power line near the farm is broken Proposed change – eliminate or reduce interconnection fees for biodigester projects

Incurred during biodigester downtime Biodigester owners required to shut-off the system for maintenance, mechanical failures, etc.  Average: 3 days out of the year During downtime, system receives electricity from utility Maximum amount of energy the owner would demand in any fifteen-minute interval  The highest recorded demand is used to determine the demand charge for the month  Substantial fee charged by utility

Example, California dairy farm  Before biodigester = $180,000  Ater biodigester = $90,000 3 days of energy usage in 1 year Farm produced 25% surplus & contributed to the power grid Proposed change – eliminate demand charges and charge based on actual energy usage

Selling surplus energy from a renewable energy source is a necessary financial incentive Act promotes:  Use of renewable energy and energy efficiency  Reduction of dependence on foreign oil  Diversification of the electric power industry Requires electric utility companies to purchase renewable power from non-utililites  Biodigesters are qualified facilities Act sets the ground work for state net metering and REC regulation

Occurs when the renewable energy source provides electricity to the utility company The “net” =  Difference between the electricity supplied back by this customer & the electricity supplied by the utility to the qualified customer States regulate the agreement made between the utility and the customer Issue – vast variation in net metering laws state-to-state  Some states require utilities to purchase surplus of renewable energy at an “avoided cost”  Other states allow overage to be zeroed out at the end of the year Proposed change – consistent, favorable net metering laws; customer should be compensated for energy they contribute

Certificates issued for clean power production from a renewable energy source By purchasing a REC, an entity pays the difference between the market rate for clean energy and the production cost of clean energy. Only a few states address the issue & those that do vary on their treatment of RECs Issue – REC ownership Proposed change – allow project owners (dairy farmers) to retain REC ownership

Proposed changes challenge the carbon offset requirement that projects be Additional In general, biodigester projects present many profit-generating avenues Changes proposed will provide financial benefits that may adequately outweigh start-up & maintenance costs So, will biodigester projects become business-as- usual?  Would the project have occurred but for its certification as an offset project?  If the project would have been undertaken regardless of its ability to generate offsets, then it is not additional

Carbon offsets Reduction in interconnection fees Reduction in demand charges Renewable energy production  For on-farm use, avoiding electricity costs  Compensation for surplus sale with net metering agreement REC ownership Sale of fertilizer Reduction in odor maintenance costs

Goal: Reduce GHG Emissions Biodigesters provide tremendous environment benefits  Reduce GHG emissions from dairy farms by 96%  Produce 100% clean-burning energy  PERMANENTLY eliminate GHGs, compared to other carbon offsets Emissions reduction outweigh Additionality requirement  Technicality should not discourage carbon offset certification of biodigester projects Promotion of biodigesters needs immediate attention,  To reduce emissions  To increase a sustainable source of renewable energy

Example: Vander Haak Dairy Farm  Washington  10,000 square-feet, capable of handing 1,500 cows  $1.2 million Biodigester  Financial support up to 50% of cost  15-year investment  $16,000 carbon offsets in 2006  Capable of serving electricity to 180 homes Sold to the power grid  Manure obtained from neighboring farms to make it cost-efficient  Supplemental income from fertilizer, tipping fees, bedding for cows

Faisal Vellani Austin Berliner Sharda Sharma Mariana Nardon Sinan Pismisoglu July 20, 2009 Contact Info: Faisal Vellani: Austin Berliner: