CAR Livestock Methane Protocol & Project Case Study

Scott Subler, Ph.D.Environmental Credit Corp.

CAR Offsets WorkshopHouston, Texas, June 14, 2011

Environmental Credit Corp.

• Leading US carbon offset project developer and ”aggregator”

• ~ 65 projects listed through programs including the Climate Action Reserve (CAR), the Clean Development Mechanism (CDM), and the Chicago Climate Exchange (CCX)

• Project types include:– destruction of ozone depleting substances – agricultural methane destruction– composting– landfill and waste water methane capture– renewable energy production

ECC’s Offset Projects in the US

Livestock methane captureLandfill methane captureCompostingDestruction of Ozone Depleting Substances

ECC ranked as #1 US offset project developer in 2009(PointCarbon)

Case Study: Fessenden Family Dairy• King Ferry, New York (Finger Lakes Region)• 1,100 dairy cows• Liquid manure management (flush system)• Open-air anaerobic manure lagoon

manure lagoon

dairy barns

Dairy Farming

Manure collection

Photos: USEPA AgStar

Animal manure storage is a widespread source of methane emissions

anaerobic decomposition(bacteria)

VOC, NH3, H2S, N2O, CO2, CH4

Odor Greenhouse gases

Open-air manure lagoon

Air Quality Concerns:• Greenhouse gas emissions (Fessenden Farm ~200 metric tons methane/year)• Odor• Ammonia

Covered manure lagoon

Biogas collection system

Generator/flare

Benefits:• Reduced GHG emissions (Fessenden Farm > 4,000 metric tons CO2e/year)• Reduced odor• Improved stormwater management• Potential for biogas use (renewable electricity, heat)

Air-tight membrane cover

anaerobic digestion

biogasCH4

Simple covers can capture methane from lagoons and reduce GHG emissions

• Simple, low-cost technology• U.S. supplier, local jobs• Rapid installation• Reliable operation• Farmer friendly

Lagoon Cover Design & Implementation

Methane Emission Reductions

• Established protocols

• Independently audited

• Formal registration

Renewable Energy Production

Methane Combustion

2nd Stage Effluent Storage

1st Stage Heated Covered Lagoon Digester

Genset & Heat Exchange

Manure &Food waste

Fessenden Dairy -- Anaerobic Digestion to Energy

Anaerobic digesters in US (livestock)Number of operating digesters (Nov. 2010): AgStar Database

Source: USEPA AgStar

(129 Dairy)

Common Technologies for Dairy AD• Ambient Temperature

“Lagoon Covers”

• Plug Flow/Mixed Plug Flow

• Complete Mix

• Other…

Photo: RCM International

Photo: Fair Oaks Farms

ECC Lagoon Cover Program

Rob HilaridesLindsay, CA

• ECC Build/Own/Operate– Permits, insurance, major

maintenance– Carbon monitoring, verification,

registration• Routine oversight by farmer• Farmer compensated with share of

carbon credit value• Farmer can buy out lagoon

cover/biogas collection system to own/operate for a larger share of carbon value

Plug Flow Manure Digester

Mixed Plug Flow Manure Digester

Huckabay Ridge, Texas

Centralized Complete Mix Digester

Typical Livestock Digester Economics• Capital requirements

– High ($1,000 – $1,600) per milk cow– AD systems not always ‘farmer-friendly’

• Electricity prices– Mostly low ($0.04 - $0.06/kWh)

• Renewable energy value– Significant in some states ($0.02 - $0.07/kWh)

• Carbon prices– Have been significant for some projects; uncertain market

• Tipping fees for off-farm organic materials (food waste)– Site specific, but in some cases equal to or greater than

electricity revenues• Separated solids value (nutrients, compost, bedding)

– Variable; often high value for bedding

CAR U.S. Livestock Project Protocol (v3.0)

• Project Definition– The installation of a biogas control system (BCS) that captures and

destroys methane (CH4) gas from manure treatment and/or storage facilities on livestock operations.

• Eligible technologies– Centralized digesters– Co-digestion of organic waste (greenhouse gas [GHG] benefits not

quantified for non-manure waste streams)– Methane destruction onsite (enclosed flare, open flare, electricity

generation, thermal energy production)– Methane destruction offsite (direct use via pipeline)– Methane destroyed as fuel for vehicles (onsite or offsite)– Biogas destruction in fuel cells

CAR Project Eligibility Requirements

• Location– U.S., territories, U.S. tribal lands

• Start Date– Project must be submitted within six months of becoming

operational

• Performance Standard– Installation of one of the technologies accepted in the protocol

• Legal Requirement Test– Project must not be required by law

• Regulatory Compliance– Project must be in compliance with all federal, state and local laws

or regulations

CAR Project Quantification Methodology• Methane emission reductions relative to ‘Baseline’

– Baseline represents “business as usual” or what would have occurred without the BCS installation

– Calculated monthly for each year of the project– For new livestock operations (greenfield sites), baseline is based on

prevailing system type for their region, animal type and farm size

• Monitoring of methane production, destruction and emissions – Biogas flow and methane concentration– Destruction device operation and efficiency– Project equipment and vehicle emissions

• Annual reporting and verification

• Crediting Period– Project is eligible to receive credits for 10 years from start date.

Project may apply for a second 10-year crediting period

Livestock Methane Project Profile

Project Duration Long 10 – 30 years

Relative Credit Yield Low 1,000 – 25,000 per year

Total Available Market Large, stable Thousands of suitable livestock operations;20+ million tons per year

Capital Requirements High Relative to carbon yield

Additional Revenues/Benefits

Many Renewable energy,RECs,Compost/bedding,Environmental benefits

CAR Livestock Methane Projects

2007 2008 2009 2010 20110

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Vintage

CR

Ts

*As of June 2, 2011

CRT Issuances 2007 2008 2009 2010 2011

Number 2 7 14 11 0

Avg. Quantity 18,000 4,700 7,600 11,100 0

Livestock Project Issues/Risks

• Carbon credit value tends to be small compared to other project revenues and benefits– Carbon credits are an important driver for carbon-specific ‘lagoon

cover’ projects– Less important for renewable energy projects (although may ‘tip’

economics favorably)

• Carbon credit certification is currently only feasible for very large livestock operations– Relatively small quantity of emission reductions per project means

that CAR listing and verification expenses, along with required monitoring and sampling costs, tend to exceed the value of the CRTs for all but the largest farms

ARB Implementation of CAR Protocol• Similar in approach and quantification methodologies• Except: 1 CAR CRT is worth only 0.87 ARB offsets?

– Reflects project (biogenic) CO2 emissions from combusted methane• Additional costs for conversion of registered CAR CRTs

– A “desk review” may be possible for some project verification transitions, but the cost of even a “desk review” is likely to be substantial on a per-credit basis

• Future program design changes that could reduce costs– Bundling of projects – CDM-style “small scale” project designation with different

requirements and costs– Allowing conservative default factors in place of direct measurements– Use of electrical production data in lieu of gas flows and gas

composition

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Keys to Success

• Ownership– 3rd party build, own, operate– Farmer focus on area of expertise:

on farm manure management• ‘Bundled’ projects

– Reduced capital costs– More efficient, coordinated O&M

• Supplemental feed stocks– Readily available organic waste sources for enhanced performance– Additional revenues from organic waste tipping fees, compost sales

• Aggressive incentives– New state and federal incentives for renewable energy from dairy

digesters provide attractive project economics

CONFIDENTIAL

ssubler@envcc.com