WM Presentation - Houston Renewable Energy Network

Report
Renewable Energy
from
Landfill Gas
Corporate Overview
•
Headquartered in Houston, Texas
•
Operations in 47 states, District of Columbia, Canada and
Puerto Rico
•
Nearly 20 million customers
•
Collect and process around about 115 M tons of waste
•
•
273 active landfills
•
Over 357 collection operations
•
104 recycling facilities
More than 45,000 employees
WM Sustainability Goals
1. Double our waste based energy production
• Power 2 million homes by 2020
2. Triple the tons of recyclable materials processed
• Process 20 million tons by 2020
3. Invest in cleaner technologies
• Direct capital expenditures to reduce emissions and increase
fuel efficiency by 15%
4. Preserve and restore more wildlife habitats across North
America
• Increase the number of WHC certified facilities to 100
Environmental Protection
Regulations governing landfill gas:
–
Off-Site Underground Migration (RCRA Subtitle D)
–
Groundwater Contamination (RCRA Subtitle D)
–
Odor control
–
Organic Carbon Emissions through cap (CAA - NSPS)
The first priority for a renewable energy project is to be
compatible with landfill operations and comply with
all regulations and protect the public and
environment
Source of Landfill Gas
Produced by the natural anaerobic decomposition of
organic waste in the landfill
Typical Landfill Gas Percentages
• Methane (CH4)
45% to 55%
• Carbon dioxide (CO2)
35% to 45%
• Oxygen and nitrogen
5% to 15%
• Minor amounts of other organics and contaminants
Natural gas fossil fuel is methane, so landfill gas can be
used for the same purposes as natural gas
Landfill Gas Well Head
Header Pipe and Flare
Types of Landfill Gas Projects
Electricity Generation
Small on-site plants, off-site plants, or blended with fossil fuel at utility
plant
Heating Fuel (“Medium BTU”)
Medium BTU gas used in steam boilers, kilns, dryers, greenhouses,
liquids disposal, etc.
Process to Natural Gas (“High BTU”)
Remove carbon dioxide, nitrogen, oxygen, and other constituents, and
deliver methane to natural gas pipeline
Vehicle Fuel
Process to natural gas, then compress or liquefy to produce CNG or
LNG for alternative fuel vehicles
Landfill Gas Value:
$/mmbtu
Displaced Energy
Coal
Natural
Gas
Natural
Gas
Wholesale
Electricity
LFG Project Type
Med BTU
Med BTU
High BTU
Electricity
Fossil Fuel Value
$2 - $4
$3 - $12
$3 - $12
$9 - $21
Discount for LFG
0 – 40%
40% - 70%
0%
0%
Conversion
Efficiency
95%
95%
70%
28%
LFG Revenue
$1 - $2
$1 - $5
$2 - $8
$3 - $6
Sec 45 Tax Credits
0
0
0
$1.60
Renewable Energy
Credits
0
0
Maybe
$0.10 - $4+
Power Generation Projects are the Most Common

Renewable energy incentives are directed to electricity

Renewable Portfolio Standards and Renewable Energy Credits

Federal tax credits

State subsidies, grants, and tax credits

Technology for electricity production is low risk

Access to market is universal (power lines)

More amenable to landfill gas quality

Less product quality risk (electricity vs. gas quality)

Electricity prices are less volatile than natural gas prices
Inventory of Landfill Gas Projects
Type of Project
U.S.*
WM
Electricity Generation
310+
85
Medium BTU
110+
22
High BTU
20+
9
2
1
440+
117
Vehicle Fuel
Totals
Renewable Energy Plant
Waste Management Business Model



Currently own 47 power plants
Capital is provided internally for projects meeting minimum Internal
Rate of Return: add 8 – 12 projects per year
Corporate Renewable Energy Group (WMRE) performs centralized
management for all projects:




Design, construction, and commissioning
Plant operations
Accounting and finance
Energy marketing
Landfill business unit supports the plant with backup operators,
compliance management, community relations
 WMRE business unit pays the landfill business unit for the landfill
gas used at the plant
 WMI has appetite for all of the tax credits
Feasibility of Landfill Gas to Energy Plant
Landfill Site Considerations

Sufficient Landfill Gas flow

Availability and Cost of the Utility Interconnect

Constraints of Air Permit
Energy Value

Electricity Price

Renewable Energy Credits

Federal Tax Credits

State Incentives
Renewable Energy Revenue Sources

Energy Pricing: varies with competitive vs.
regulated markets, dominant fossil fuel

Renewable Energy Credits: varies with state
portfolio standards, $3 to >$30

Federal Tax Credits: $11/mwh for 10 years
Federal MACRS accelerated depreciation
State Incentives: investment tax credits, property
tax and sales tax exemptions, grants, loans
Federal Grants - ARRA



Power Pools
H&C
NG
C
NG
C & NG
NG
Marginal Fuel
Fuel used at
normal load
NG - Natural Gas
C - Coal
H - Hydro
C & NG
C & NG
C
NG
Renewable Energy Credits (RECs)
Renewable Energy Portfolio Standards (RPS)
Value range = $3 - $55 per mwh
State policy that requires electricity producers to obtain a minimum
percentage of their power from renewable energy resources.
Producers purchase (RECs) from qualified resources in amount needed to
comply with standard. Sales may cross state lines.
Voluntary Utility Renewable Energy Programs
Value range = $1 - $10 per mwh
Customers pay a premium for blocks of renewable energy, and the utility
purchases RECs from renewable resources, resulting in premium
payment by utility to renewable resource.
Voluntary Corporate Renewable Energy Programs
Value range = $0.50 - $5 per mwh
Corporations purchase RECs to support renewable energy development.
Renewable Portfolio Standards
Regulated Markets

PURPA rules: utility must buy power, but at their avoided cost rate

Avoided cost is approved by the state PUC

Avoided cost is driven by the marginal fuel cost

In many regulated markets, the marginal fuel is coal, so the avoided
cost is often less than $30/mwh

Rates are recalculated periodically, so there is no certainty of future
pricing

Usually sell to the distribution line owner, but may be able to wheel
power to a co-op or municipal utility

With no competition and low avoided cost rates coinciding with no
RPS, renewable energy has been slow to develop in some
regulated markets
Competitive Markets







Texas, PJM, New York, New England, MISO
Competitive bidding by Retail Energy Providers
Short-term contracts: 1 to 3 years
Price is based on forward curve of marginal fuel, which
in most competitive markets is natural gas
$1/mmbtu change in natural gas can result in $3/mwh to
$6/mwh change in market price of power
Need for Renewable Energy Credits often is the
incentive for buyers, so RECs are almost always
bundled with power purchase
LFG is attractive because of its high capacity factor (high
confidence in output)
Long-term, Fixed Price Contracts





Buyers may be utilities, municipal utilities, or co-ops.
Buyer’s incentive is to lock in energy rates, obtain
renewable energy credits, or both
Renewable Energy Credits are almost always bundled
with power purchase
Utilities in states with no RPS are initiating RFPs for
renewable energy
Negotiated rate must be approved by PUC, City council,
or power co-op board of directors, and deemed
beneficial or protective of the electricity customers
Federal Production Tax Credits
“Section 45” Federal tax credit of $11/mwh can be claimed
by the owner of a renewable energy generation facility
which uses landfill gas as fuel.
Tax credit can be claimed for a period of 10 years after the
placed in service date.
Facility must be placed in service prior to January 1, 2013
to qualify.
To be eligible, no entity could have claimed previous
Section 29 (45k) tax credits at the landfill
Conceptual Project
Conceptual Project: 4.8 MW
Capital Cost: 4.8 MW x $1.5 million/MW = $7.2 million
Capacity Factor: 5% parasitic load, 95% run rate = 90% CF
Output: 38,000 mwh per year
Combined State & Federal tax rate = 39%
Section 45 tax credits: 38,000 x $11 = $418,000 / year
Landfill Gas in the Total Energy Portfolio
Drawbacks

Total resource is finite

Individual plant size is typically less than 10 MW
Advantages

Distributed energy: typically located in population centers
and connected to distribution lines

Base load resource: capacity factor is typically >90%

Peak load generation
LFGTE compared to Wind & Solar
Type
Type
TotalResource
Resource
Total
Wind
Wind
High
High
Solar
Solar
High
High
LFG
LFG
Finite
Finite
CapacityFactor
Factor
Capacity
BaseLoad
LoadResource
Resource
Base
25%--45%
45%
25%
No
No
10%--20%
20%
10%
No
No
>90%
>90%
Yes
Yes
DistributedGeneration
Generation No
No
Distributed
PeakLoad
LoadGeneration
Generation Poor-Mod
Poor-Mod
Peak
Excellent
Excellent
Good
Good
Good
Good
Excellent
Excellent
TransmissionCost
Cost
Transmission
None
None
Negative
Negative
CanBe
Be
Can
High
High
Solar can be a great opportunity
Solar can be a great opportunity
10 Megawatts = 60 Acres
Branding and Advertising Campaign
Educate our customers that we are proud
to be a garbage company, but we are also
• An energy company
• A technology company
• An environmental company
• A people company
Landfill Gas to Energy is a Key Point
in the Sustainable Growth Goals
•
Double our waste based energy production by 2020
•
Short-term initiative to build 60 new renewable
energy facilities by 2013
Improves Perception of Landfills
•
2006 National Focus Group Research:
Knowledge of landfills’ electric generation capability
moves opinion in a positive direction, with 72% of
respondents having a more positive opinion
•
2008 Individual Site Survey:
Knowledge of a planned electric generation plant made
87% of respondents more likely to favor a landfill
expansion
Curbside to Power

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