Expansion of facility greenhouse gas reporting

By Giulia Celli and Ibrahim Syed

The 2017 calendar year is the first year of the phased expansion to the Government of Canada's Greenhouse Gas Reporting Program (GHGRP) for industrial facilities in Canada. Prior to the expansion, the GHGRP required reporting of basic information, such as emissions data only, and had a 50 kilotonnes (kt) threshold.  For the link to the Environment and Climate Change Canada click here. 

The Phase I (2017 data year) changes in the reporting requirements are:

  • The reporting threshold has been lowered to 10 kt. All facilities that emit 10 kt or more of GHGs in carbon dioxide equivalent units (CO2 eq) per year will be required to submit a report.
  • All facilities engaged in carbon capture, transport and geological storage (CCTS), regardless of their annual GHG emissions, will be required to submit a report covering CCTS activities for 2017 and relevant years for the period 2014 to 2016.
  • Expanded data and methodological requirements will apply to manufacturers of lime, cement, iron and steel, and aluminum; and to facilities engaged in CCTS.
  • Removal of some reporting requirements (for example, methane from iron & steel sector)
  • For those facilities subject to expanded federal requirements in the four sectors (cement, lime, iron & steel and aluminum), and who already report to provincial programs based on the WCI framework (British Columbia, Ontario and Quebec), will be given the option to complete the expanded GHGRP reporting, or alternatively, these facilities may submit their provincial GHG reportFootnote6 for compliance with the 2017 GHGRP requirements.
  • Provisionally, facilities subject to the expanded federal requirements regarding CCTS and already reporting similar data to Alberta and Saskatchewan will be offered the option to submit their provincial report for compliance with these GHGRP requirements.
  • Facilities in the remaining provinces will be required to complete the extended federal reporting, as their provincial reporting programs do not collect data that meet the expanded federal requirements. This includes facilities in Alberta and Saskatchewan above the 10kt threshold engaged in activities other than CCTS.

In Phase II (date unknown), the petroleum refining and electricity generation sectors will be subject to expanded requirements and mandatory methods. Phase III will affect additional sectors, which are yet to be determined.

Below is a  workflow to determine if your facility needs to take any action or the appropriate course of action for Phase I (2017 data year).

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For the link to the Environment and Climate Change Canada click here.  For any questions, please contact Giulia Celli at gcelli@ortech.ca or Ibrahim Syed  at ISyed@ortech.ca .

Is it time to take control of your Ontario Electricity Bill with Energy Storage?

Introduction

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There is a significant new opportunity for some electricity users in Ontario.  The Industrial Conservation Initiative (“ICI”) has been expanded.  Incentive programs related to the Global Adjustment (“GA”) were, until recently, only available to large electricity users. Now, small and medium users (down to 500 kW monthly average peak loads) can take advantage of demand response tools like Energy Storage Solutions (“ESS”) to reduce their electricity expenses.  Moving forward, electricity users can take control of their electrical demand with solutions that are flexible and scalable.  This will allow them to reduce their demand or peak charges or give them the ability to shift their electricity use to another time.

The good news is there are a number of factors that now encourage decision makers to consider an ESS.  ESS pricing is trending downward; the GA recently hit an all-time high of 9.75 cents kW/h, and the ICI program has been expanded.  This trifecta now makes investing in an ESS something worth considering. 

For all industrial electricity users, controlling or reducing one’s electricity bill usually comes down to energy conservation.  Utility statements are made up of the Hourly Ontario Energy Price (“HOEP” or “commodity price”), the GA and the delivery charge.  In 2015, the GA on average was 5.28¢ per kilowatt hour*.  The cost of the GA in 2016 and 2017, on average, was 7.92¢ and 9.75¢ per kWh respectively*.  These are significant jumps.  The average HOEP in 2016 and 2017 were 2.36¢ per kWh and 1.66¢ per kWh, respectively*.  Herein lies the challenge but also the opportunity.  How can a user reduce the most significant component of their electricity bill, namely the GA?

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There are industry players who believe an ESS should not be installed solely for reducing the GA or “GA Busting” as it is sometimes referred to. However, the good news is all stakeholders tend to agree that an ESS will have benefits regardless of how electricity is sold in Ontario and thus benefits beyond GA busting alone.  For early adopters, this means the value of an ESS will remain high and the use of an ESS will not become obsolete due to regulatory or market changes. 

This white paper will delve into issues, solutions, and decision making factors for executives and other stakeholders while proving a balanced approach, including the advantages as well as the risks and challenges to users. Overall, it is wise for a user to look at their utility bills and have a financially aware consultant review their situation.  Energy Storage is the present and the future.  It’s time to give it serious consideration.

What is Energy Storage?

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With all the press about Energy Storage including Tesla, Elon Musk, and the Giga factory, Energy Storage has vaulted to the attention of the masses.  It is still widely misunderstood from a business case or financial impact perspective, but Energy Storage is one of the new buzz phrases. 

Energy Storage is a solution that stores electricity and allows users to use this stored electricity when it is of maximum benefit.   Owners can use an ESS for demand response purposes (using less electricity from the grid during high demand, high price periods), peak management (reducing or flattening electricity use peaks and the costs associated with those peaks), or when the grid is having power quality issues (e.g., providing backup power during grid outages).  

The type of technology currently making the most headway in Ontario and worldwide is lithium ion (“Li-ion”) battery solutions.  These batteries have become the most popular type for personal electronics, but the technology is also becoming the most prevalent solution for industrial scenarios, such as grid support, because of reduced cost, greater life compared to conventional lead-acid batteries, and low toxicity.   An industrial ESS usually comes in self-contained units or containers that allow scalability and flexibility in system capacity.  More details about the technology are provided in “What does an Energy Storage solution look like?” below.

An ESS can seem complex but does not have to be overly complicated.  The owner should consider a consultant or solution provider that has the necessary technical, financial and construction management expertise that take both short and long-term factors into account when proposing an ESS.

Why Energy Storage?

ORTECH recognizes that all facilities are different; nevertheless, an ESS will provide flexibility to almost all facilities. The primary benefit of installing an ESS is your ability to control your electricity demand for whatever reason.  Some of the key concepts for this are as follows:

  • The Price of Energy Storage is dropping:  The average price of a lithium-ion battery based system for an industrial installation is currently $700 to $800 per kWh and trending downward.   The cost of lithium-ion batteries has dropped from about $1000 per kWh in 2010 to below $300 per kWh in 2017.
     
  • Demand Management: Consists of using energy storage to store electrical power during off-peak price hours and discharging it to facility loads during higher peak price hours.
     
  • Resilience / Reliability (Backup Power):  An ESS provides these benefits until the problem is fixed or other backup power comes online.  A battery system allows you to shut down gently and keep you running smoothly during a grid outage until your backup generation starts.
     
  • Market Renewal:  Ontario is looking to change the entire electrical market system, but those plans are still being developed. The use of an ESS is supported by the current government (Liberal Party of Ontario) and the official opposition (Conservative Party of Ontario). An ESS will have a beneficial role to play in the future.
     
  • GA Market Risk:   There is potential for significant changes to the GA.  As an example, the recently implemented Fair Hydro Plan refinances a large fraction of the GA so that payments are lower by $2.5 billion per year (about 21% of the total GA for 2017). However, an ESS will continue to provide its owners with benefits regardless of what changes are put in place by the government of the day, and in most of the likely future scenarios, an ESS will continue to allow reductions in the users GA payments.
     
  • Peak Shaving Value to the IESO:  There is value to the Independent Electricity System Operator (“IESO”) if it can entice users to reduce their demand during peak usage (e.g. via an ESS) as it would not have to start up natural gas peaking plants or purchase electricity from neighbouring provinces or US states.

How can Energy Storage help?

If you are a Class A electricity user (monthly average peak demand exceeding 5 MW), an ESS can be effective in reducing your GA and Demand Charges.  Also, non-Class A users may qualify for the Class A as the ICI has lowered the threshold to 500 kW (monthly average peak demand).    The ICI, administered by the IESO, is a form of demand response that allows participating customers to manage their GA costs by reducing their demand during peak periods.  An ESS can be utilized to accomplish this, and the IESO encourages users to participate in the ICI  program as it helps them manage the electrical system during peaks.  Reducing peak demand costs is the fundamental pricing mechanism that will offset the cost of an ESS system.  Although the GA mechanism may change, an ESS will remain useful.  

What is the Industrial Conservation Initiative?

The Industrial Conservation Initiative (“ICI”) is administered by the IESO.  It is a form of demand response that allows participating customers to manage their GA costs by reducing their demand during peak periods.  In summary:  

  • To qualify for the ICI, a customer’s monthly demand peaks must average above 1 MW or 500 kW for industrial facilities, over a one year period.
  • Electricity users are charged based on their percentage contribution during the top 5 peak demand hours in Ontario over a one year period (from May 1 to April 30).
  • Customers must qualify through their Local Distribution Company (“LDC”), based on the previous one year period. If they qualify, they have to opt into the ICI program by June 15th of the year.

What is the Global Adjustment?

For most electricity users, the GA is the difference between the regulated rate of electricity and the wholesale market price. The wholesale market price is the price that the government pays electricity generators (public or private).  However, there are other costs which are paid for by the GA.  These include the expense of building new electrical generation assets, the cost of running the IESO, and delivery of energy efficiency programs to drive conservation.  Although users have little control over these costs overall, an ESS can be of value in managing GA costs on their electricity bill.

To put wholesale (commodity) and global adjustment costs into perspective, the following is a summary for 2015 to 2017.

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How can you reduce your Global Adjustment and Demand Charges?

Global Adjustment: In order to reduce GA charges, facilities need to reduce their demand during the five monthly average peak periods either by shedding load, shifting load or using an alternative source of electricity such as solar, backup generation or energy storage.  An ESS typically has a bank of lithium ion batteries with tools for remote communication and control.  This is ideal for customers who want a “Fire and Forget” solution.  In this scenario, a vendor like ORTECH can provide Engineering, Procurement and Construction solutions and then assist in controlling the system during the various monthly average peaks throughout the year.  In other cases, the system can be scheduled to run during set periods each day to cover every possible peak.  Typically, the five monthly average peaks in Ontario occur between 4 and 6 pm on weekdays. 

Demand Charges:   A review of your current load profile will indicate when your facility has its monthly average peaks. By reducing monthly average peaks, you will reduce your monthly demand charges.

Sample Solution:  Install an ESS based on your initial monthly average peak load.  The ESS is typically sized to reduce your load significantly for a period of 1, 2 or 3 hours.  The system is either turned on automatically each day (e.g. between 4-6 p.m.) or during anticipated facility and provincial monthly average peak periods throughout the year. The facility’s monthly average peaks are determined relative to Ontario’s monthly average peaks (Note:the IESO provides tools to indicate the days when the provincial demand is in the top range for the year). 

What does an Energy Storage solution look like?

At its core, ESS has three major components, each equally important. The Batteries are where the electrical power is stored in DC, the Inverter converts electrical power from DC to AC, and the Battery Management System manages when and how long the system operates.

Batteries are the main consumable item, but it is essential to give careful consideration to the other two components.  Good choices of inverters or battery management systems will lead to better results.  Good performance, decreased lifecycle costs and higher internal rates of return can all result from proper planning and design of your system.

Batteries:

Selecting the right batteries is essential. Li-ion batteries are currently the preferred choice due to cost and performance. However, reviewing other emerging battery types or possibly other storage technologies and asking your solution provider smart questions will assist you in determining the optimum solution.

Inverter:

The inverter will supply the batteries with electrical power to be stored and also convert battery electrical power (DC) to facility electrical power (AC).  The inverter takes electrical power from the grid, preferably during low peak periods.  It must also control or isolate the system when the grid is down or under maintenance, for safety reasons.  The inverter needs to determine where  electrical power is coming from and what critical load needs to be managed using electrical power from the batteries in order to get the best electricity savings and financial return possible.

Battery Management System: 

A battery management system (BMS) helps control parameters such as battery temperature, depth of discharge and state of charge so the batteries are not over- or under-charged, which would reduce their usable lifespan.
The BMS is usually a software function internal to a charge controller or more sophisticated charging device.

What are the risks to consider?

To ensure this white paper presents a balanced approach, some threats or possible challenges regarding energy storage include:

  1. The most significant assumption solution providers make is that the current potential GA savings will be similar over the next five years.  There is a market risk in this assumption.  GA is roughly inversely proportional to the Hourly Ontario Energy Price (“HOEP”), and if HOEP increases, the GA will decrease.  The combined HOEP plus GA (the total commodity price) is likely to increase over time, so there is room for incremental inflationary growth to GA, but since HOEP is already very low, there’s not much room for decrease in the HOEP and resulting increase in GA.  This is a market risk that comes with little potential for further reward.
  2. Potential GA impacting developments are in process.  IESO is engaged in Market Renewal, which is being advertised as saving $2.2 to $5.2 billion over ten years.  These savings will result in lower total commodity prices, so while energy costs will still go down for the facility, the savings from an ESS could also go down.  To be clear, an ESS should still result in lower purchased electricity costs for the facility regardless of what impact Market Renewal has, but the payback period may be longer.
  3. Another potential significant GA impact is nuclear refurbishment and the Pickering site shut down.  As such, a substantial amount of nuclear energy will be removed from the system. Since these facilities typically bid into the Ontario electricity market below zero, removing them will likely increase the HOEP, with a corresponding drop in GA.  Note that the Pickering shutdown is not planned to take effect until 2024 (or later) so some of this impact will not occur until after some of the ESS capital costs have been paid back in utility cost savings.
  4. A mitigating factor for points 2 and 3 is that the IESO is well aware that capital investments are being made for Class A GA reduction.  In addition, reducing Ontario’s five highest monthly average peaks will still provide value to the IESO (likely even more value) after nuclear is taken offline.  It seems doubtful that the IESO will do nothing to mitigate potential losses for facilities with ESS if the GA shrinks by a large amount.

What should you do NOW? 

Contact a consultant with the necessary expertise and start investigating how an energy storage solution can help you.  A potential scope of work includes the following:

  1. Understand your load.
  2. Determine your ability and willingness to shed or shift demand during peaks periods.
  3. Investigate alternatives or combinations of solutions. For example, energy management coupled with using existing backup generation with a smaller energy storage solution.
  4. Determine the financial impact including capital costs, cost savings, incentives, emissions impact, internal rate of return and financing costs.
  5. Generate a report with findings, solutions mixes and low-risk recommendations to get you started.

Conclusions

All companies have competing agendas and areas where capital investment is needed.  A key factor illustrated in this white paper is that overall electricity costs are trending up and becoming more challenging to control from a user point of view. Energy storage solutions can be a useful tool in reducing your overall cost of electricity by reducing your Global Adjustment and through demand management (i.e. charging during off-peak price periods and using this stored electrical power during higher-peak price periods).  Also, an ESS can also provide backup power and stability.

For more information or a FREE assessment of your situation, contact Michael Tingle at 905-822-4120 x 680 or mtingle@ortech.ca.

Guideline for the Implementation of Administrative Penalties under the Climate Change Mitigation and Low-carbon Economy Act, 2016

  • EBR Registry Number:   013-1818
  • Ministry: Ministry of the Environment and Climate Change
  • Date Proposal loaded to the Registry: January 02, 2018

Summary:

We are proposing a draft guideline which we can use to calculate administrative penalties to those who do not comply with the Climate Change Mitigation and Low-carbon Economy Act, 2016 (“CCMLEA”) and its regulations. This will help ensure that the penalties are transparent and appropriate.

Description of Policy:

On September 22, 2017, the Ministry of the Environment and Climate Change posted a regulatory proposal notice on the Environmental Registry that included a number of regulatory changes to the cap and trade program; including, a proposal for the implementation of a new administrative penalties regulation under the Climate Change Mitigation and Low-carbon Economy Act , 2016 (CCMLEA). 

As part of this regulatory proposal notice, the Ministry stated its intent to develop, and post for public comment, guidance material to be used by the Ministry when applying and calculating administrative penalties. This proposal notice fulfils the Ministry's commitment to provide the draft guidance document for public comment in order to help ensure transparent and appropriate application of administrative penalties under the cap and trade program. 

In April 2015, the government announced it would be limiting greenhouse gas pollution by implementing a cap and trade program and its intent to link Ontario’s program with those of Quebec and California.

On May 18, 2016, the CCMLEA received Royal Assent.

On May 19, 2016, two regulations that form the backbone of the cap and trade program became law under the Climate Change Mitigation and Low-carbon Economy Act, 2016 – the Cap and Trade Program Regulation (O. Reg. 144/16) which took effect July 1, 2016 and the Quantification, Reporting and Verification of Greenhouse Gas Emissions Regulation (O. Reg. 143/16) which took effect January 1, 2017. 

Ontario’s cap and trade program came into effect on July 1, 2016, with the first compliance period beginning on January 1, 2017.

On September 22, 2017 Ontario signed an agreement to integrate and harmonize cap and trade programs, effective January 1, 2018. Regulatory amendments were filed to allow for linking on November 24, 2017 and this will allow all three governments to hold joint auctions of greenhouse gas emission allowances.

Purpose of Policy:

An administrative penalty is a monetary penalty that may be imposed by the Ministry to achieve the following purposes:

  1. To ensure compliance with the CCMELA and its regulations; and,
  2. To prevent a person or entity from deriving economic benefit from non-compliance with the requirements in the CCMLEA and its regulations.

As part of implementing administrative penalties for the cap and trade program, the Ministry is proposing a draft guideline that would guide Directors when calculating and issuing administrative penalties. 

The proposed guideline includes information on the application of administrative penalties, such as:

  1. A step-by-step process for issuing administrative penalties
  2. Considerations taken by the director when determining a base penalty value
  3. How economic benefit will be considered
  4. Process for making requests to the director to consider additional information regarding the contravention

The cap and trade program creates a multi-billion dollar market for emission allowances and credits. As such, it is important that the Ministry have a comprehensive suite of enforcement options to help maintain the integrity of the market and the program itself.

Implementation of administrative penalties will form part of the ministry’s suite of graduated compliance and enforcement tools under the CCMLEA – providing the ministry with the ability to choose the most appropriate and effective compliance tool, or combination of tools, to maximize compliance and prevent or deter future non-compliance.

Public Consultation:

This proposal has been posted for a 45 day public review and comment period starting January 02, 2018. If you have any questions, or would like to submit your comments, please do so by February 16, 2018 to the individual listed under "Contact". Additionally, you may submit your comments on-line.

All comments received prior to February 16, 2018 will be considered as part of the decision-making process by the Ministry if they are submitted in writing or electronically using the form provided in this notice and reference EBR Registry number 013-1818.

Please Note: All comments and submissions received will become part of the public record. Comments received as part of the public participation process for this proposal will be considered by the decision maker for this proposal.

Your personal information may be used in the decision making process on this proposal and it may be used to contact you if clarification of your comment is required. It may be shared (along with your comment) with other Ontario Ministries for use in the decision making process. Questions about this collection should be directed to the contact mentioned on the Proposal Notice page.

Government of Canada releases further details on federal carbon-pollution pricing system

News Release

From Environment and Climate Change Canada

January 15, 2018 – Ottawa, Ontario

Canadians know that pollution isn’t free. They see the costs in droughts, floods, extreme weather events, and the impacts to their health. A price on carbon pollution is one of the most efficient tools we have to fight climate change and drive clean innovation. That’s why the federal government is working with provinces and territories to put a price on carbon across the country.

Today, the Minister of Environment and Climate Change, Catherine McKenna, and the Minister of Finance, Bill Morneau, released draft legislative proposals relating to the proposed federal carbon pricing system for public comment. This system would apply in provinces and territories that request it and in those that don’t have a system in place, which meets the federal standard in 2018.

Minister McKenna also released for comment a regulatory framework describing the proposed federal approach to carbon pricing for large industrial facilities. This component of the federal pricing system would create a price incentive for large industrial facilities to reduce emissions while limiting the potential impacts of carbon pricing on their international competitiveness. The system is designed to reward facilities with efficient operations and support clean innovation.

Right now, carbon pricing is in place in four provinces (Alberta, British Columbia, Ontario and Quebec), covering more than 80 percent of the population. All provinces have committed to adopt some form of carbon pricing.

The Government will continue to engage provincial and territorial governments, Indigenous Peoples, industry, environmental groups, and other stakeholders on the design of the federal carbon pricing system during the winter and spring of 2018.

The draft legislative proposals and the framework released today build on the pan-Canadian approach to carbon pricing, announced in October 2016. The documents represent the next step in the development of the federal system, and they are a follow-up to a technical paper on federal carbon pricing released in May 2017.

Comments on the draft legislative proposals to implement the federal carbon pricing system are welcome until February 12, 2018, at carbonpricing-tarificationcarbone@canada.ca.

Comments on the regulatory framework are welcome until April 9, 2018, at ec.tarificationducarbone-carbonpricing.ec@canada.ca.

The combination of existing provincial carbon pricing systems, new provincial and territorial carbon pricing systems, and the federal system would ensure a price on carbon across Canada.

Global momentum is driving cleaner economic growth, and many Canadian businesses are already taking advantage of this opportunity. In addition to pricing carbon, the federal government is making other significant investments to enable Canadian businesses and workers to participate in the trillion-dollar opportunities offered by the world’s transition to a clean-growth economy.

ORTECH launches new website servicing the Cannabis Market

January 2, 2018

Mississauga, ON.,  ORTECH Consulting ("ORTECH") is pleased to offer its existing services to the emerging Cannabis market via a new website called www.cannabisconsultingservices.ca .  Our core services of Air Quality and Odour Assessment Services provide real value for the new and existing Licensed Producers of Cannabis in Canada." said Hank Van Bakel, President of ORTECH Consulting.  

ORTECH will be also be partnering with its parent company, Kontrol Energy and a sister division Efficiency Engineering to provide energy management and efficiency services and solutions. 

For information, please contact Michael Tingle at mtingle@ortech.ca or visit www.cannabisconsultingservices.ca 

NOx Emissions from Stationary Combustion Turbines MOECC vs. ECCC

Written by: 

ORTECH reviewed the recent changes to the Stationary Combustion Turbine regulations and compared the differences between the Ontario Ministry of Environment and Climate Change ("MOECC") and Environment and Climate Change Canada ("ECCC").  We noted that some facilities might be compliant on a provincial level but not federally.  This posting will help to compare the two regulations. 

ECCC has updated its NOx emission requirements for new natural gas–fuelled stationary combustion turbines with the publication of Guidelines for the Reduction of Nitrogen Oxide Emissions from Natural Gas–fuelled Stationary Combustion Turbines in November 2017. The new Guidelines introduce a NOx emission limit that is up to 50% more stringent than emission limits set out in the National Emission Guidelines for Stationary Combustion Turbines published in 1992. The ECCC suggests various regulatory authorities use the Guidelines as a starting point for NOx from natural gas–fuelled stationary combustion turbines.

The current MOECC policy on emission requirements for new stationary combustion turbines is Guideline A-5 Atmospheric Emissions from Stationary Combustion Turbines published in March 1994. ORTECH compared the differences between the new ECCC guidelines and the current MOECC guidelines. We noted that due to the new, more stringent federal requirements, some facilities may be compliant on a provincial level but not federally. This posting will help to compare the two policies.

The MOECC policy (Guideline A-5 Atmospheric Emissions from Stationary Combustion Turbines) is located here and the ECCC policy (Guidelines for the Reduction of Nitrogen Oxide Emissions from Natural Gas–fuelled Stationary Combustion Turbines) is located here.

Scope

The following table presents a side by side comparison of the scope of both Guidelines, with differences highlighted.

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NOx Emission Limits

The following table presents a side by side comparison of the NOx emission limits of both Guidelines.

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Testing and Monitoring

The following table presents a side by side comparsion of the scope of the testing and monitoring requirements of both Guidelines, with differences highlighted.

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In addition to the testing and monitoring requirements listed in the table above, the MOECC Guideline states that a verification of the average operating thermal efficiency of a Combustion Turbine should be conducted whenever there is source testing or in the case of units equipped with CEM devices initially and thereafter every 2 calendar years. The ECCC guideline has no requirement for verification of thermal efficiency.

If you have any questions about this post, please reach to Giulia Celli at gcelli@ortech.ca

Ontario Cap and Trade Update

A decision has been made to proceed with amendments to the greenhouse gas cap and trade program, which include changes to the:

1.      Cap and Trade Program Regulation (O. Reg. 144/16)

2.      Methodology for Distribution of Ontario Emission Allowances Free of Charge

3.      Quantification, Reporting and Verification of Greenhouse Gas Emissions Regulation (O. Reg. 143/16)

Cannabis Industry and Odour Regulations

At this point, air quality and related permitting regulations in Ontario and the rest of Canada have not been well established for the Cannabis industry but that should not stop the industry from moving forward on anticipated air quality concerns such as odour issues.    Below is some information to consider as you prepare to permit a new cannabis facility which may also be relevant to existing facilities.

One potential path that  Ontario could take is found in  Regulation 1/17 of the Environmental Protection Act which allows many low risk facilities to register and operate under the Environmental Activity and Sector Registry (“EASR”) instead of the more traditional Environmental Compliance Approval (“ECA”) process.  The EASR process is intended to be a more simplified and timely permitting process.  Facilities which register under the EASR must prepare an Emission Summary and Dispersion Modelling (ESDM) Report as well as a Noise Report and an Odour Screening Report.

An Odour Screening Report requires determination of the primary North American Industry Classification System (“NAICS”) code for the facility.  For a Licensed Producer (“LP”), the applicable NAICS code is likely to be 325411 “Medicinal chemicals, uncompounded, manufacturing” or 424210 “Botanical drugs and herbs merchant wholesalers”.  The next step in the odour screening process is to calculate the setback distance from the source of odour emissions to the closest point of odour reception beyond the facility property. This distance is compared with minimum setback distances for specific NAICS codes.  Although the above NAICS codes relevant to cannabis production are not currently included in the screening process, it is possible that regulators will create such set back distances in the coming months.  The screening process defines many types of odour receptors but generally includes places where the public live, work, worship, visit or may otherwise be present. 

A Best Management Practices Plan (“BMPP”) is required if the Odour Screening Report shows that there is insufficient setback distance between an odour emission source and the closest point of odour reception.  A BMPP for odour may be required for facilities whose operations are defined by specific NAICS codes. For each source of odour emissions from a facility, including fugitive sources, the BMPP must identify potential reasons why the odour emissions may increase occasionally, odour control measures already existing at the facility and procedures to ensure that the control measures are properly maintained, operated and monitored. The BMPP also requires that additional measures to control odours are identified and a schedule is prepared for their implementation.

For facilities with specific NAICS codes and insufficient setback distances, an Odour Control Report may also be required.  This report must include a list of odour control measures or process changes which are used at similar facilities with the same NAICS code in Ontario or elsewhere, determine which of those measures are technically applicable to the applicants facility and, if necessary, explain why the list of measures or changes may not be applicable for reducing or eliminating odour emissions. 

The path that regulators will eventually take to address air quality and odour emissions from the cannabis industry is evolving.  In addition to municipalities managing these issues through zoning and bylaws tools, it is still to be seen if and to what extent environmental regulators will engage and whether existing permitting tools such as the EASR process will apply.  We do know that historically odours has been a source of complaints in many communities and it is important for cannabis producers to be viewed as a good corporate citizen.  Whether it is the federal, provincial or municipal government, odour concerns will be part of the permitting process. 

ORTECH has been involved in odour assessments for a broad range of industrial, agricultural and other facilities for over forty years and is experienced in the operation and performance of air pollution control equipment for many different NAICS code operations.   

 

 

Why determining Replacement Costs for your Renewable Energy facility is important?

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As in your personal life with your home or car, your renewable energy facility typically needs to renew its insurance annually.  This might seem routine but the dynamic nature of costs associated with various renewable energy technologies should be considered.  This process is not just about getting the right coverage and affordable premiums but ensuring that should you have to make a claim, you have the correct coverage, limits and information at hand.  Factors to consider when determining the current replacement costs for your renewable energy facility are discussed below.

It is recommended that facility owners review the project as installed to determine the replacement cost based on current industry costs for components, labour, consider any changes in bylaws and debris removal/disposal. An estimate of the removal and disposal costs of the old facility is often overlooked and can run up to 25% of the replacement cost in remote places where transportation costs are much higher.

Some factors to consider the next time you renew insurance for your renewable energy facility:

  1. Is the replacement cost valid?  Do you regularly go to market to obtain more accurate information on the replacement costs as well as removal/disposal costs?  The solar and wind industry has seen a significant downward trend in construction costs while waste removal and disposal costs have been less predictable.  Replacement costs will affect insurance premiums and having current and accurate replacement costs may enhance your ability to collect full funds in the event of a claim and possibly avoid co-insurance penalties. Typically this is done formally every 3 years, similarly to the real estate industry.
     
  2. Following a loss, who owns the damaged equipment during the claims process?  This is an important question to answer.  The system owner may believe they maintain ownership but under the salvage clause within industry standard insurance policies it is the insurance carrier who has control if a claim is paid as they get the funds from the sale of any scrap equipment to recoup some of the losses incurred.   The insurance carrier may share the income associated with the sale of scrap equipment if the owner can do the work.  It is good to have a clear understanding of control over damaged equipment, before you arrange to dispose of it following a loss. Historically, insurers have seen little value in the scrap associated with solar installations as it tends to cost approximately 15% of the overall replacement cost to dispose of the system with not much salvaged.
     
  3. There are advantages to using an independent third party tp assess your replacement costs that is recognized by your insurer and broker.  Typical steps a vendor should use to conduct a thorough review of replacement costs include: 
  • Review of current installation, which may include a site visit,
  • Determine what comparable components would cost in the current market,
  • Estimate the level of effort for removal and the costs of disposal, and
  • Estimate the cost and timeframe for installing a new renewable energy facility.

In the end, getting a better handle on current replacement costs for your renewable energy facility might help reduce premiums at the time of renewal **Side note, check with your lender before reducing replacement costs to ensure compliance with lending agreements.  At the very least, in the event of a claim you will have a better understanding of costs supported by an independent assessment to support your position.  This forward planning will make your life easier should a disaster or other situation out of your control lead to an insurance claim. 

Time to Plan your Path to Compliance with MSAPR – Part 2: Engines

The Multi-Sector Air Pollutants Regulations (MSAPR) was registered by Environment and Climate Change Canada (ECCC) in June 2016 with the objective to achieve consistent Canada-wide performance standards for certain industrial facilities and equipment.   Stationary Spark Ignition Engines are one type of equipment targeted under the MSAPR, specifically Part 2.  MSAPR establishes a process for registering, monitoring, testing and reporting of oxides of nitrogen (NOx) emissions and provides NOx emission intensity limits (g NOx / kWh) which are phased in over time.

Part 2 applies to stationary spark ignition engines that meet the definition in MSAPR that are “pre-existing” (i.e. manufactured, owned or operated before September 2016), are at an “oil and gas facility” (other than an asphalt refinery) as defined, are > 250 kilowatt (kW) rated output capacity (break power) and that combust gaseous fossil fuel.  Part 2 also applies to stationary spark ignition engines that are “modern” (meaning they are not “pre-existing”), are at one (1) of thirteen (13) regulated facilities as defined, are > 75 kW (for an engine deemed “Regular” use) or > 100 kW (for an engine deemed “Low” use) and that combust gaseous fossil fuel.  

Engines that are operated at least one (1) hour per year are considered “Regular” use unless specifically deemed to be “Low” use.  One of the eligibility criteria for the election of an engine as "Low” use is if it is operated ≤ 1314 hrs in 3 year period (i.e. ≤ 5% of the time). 
Part 2 sets out nitrogen oxides (NOx) emission intensity limits (g NOx/kWh) as well as compliance testing, operation and maintenance and reporting requirements.

Impacted stationary spark ignition engines are to be registered by January 1, 2019.  For “pre-existing” and “Regular” use engines, the first phase NOx emission intensity limits apply January 1, 2021 and the second phase limits apply January 1, 2026.  There are no limits for “pre-existing” and “Low” use engines under MSAPR.  The responsible person (owner or operator) can choose a Flat Limit Approach or a Yearly Average Approach when assessing a fleet of “pre-existing” and “Regular” use engines.  The approach can impact the timing or whether mitigation measures are needed at all to meet future NOx emission intensity limits.

For “modern” and “Regular” or “Low” use engines, the NOx emission intensity limit of 2.7 g NOx/kWh applies starting July 1, 2017.  The Flat Limit Approach is the only option available for assessing a fleet of “modern” engines.  

At the time the future limits apply, compliance must be demonstrated by conducting an initial performance test and reporting with the frequency of ongoing performance tests or simplified emission checks impacted by the output capacity and type of engine (rich burn versus lean burn).

What are the Next Steps on the Path to Compliance?:

Now is the time to formulate a Compliance Plan for MSAPR Part 2.  A lower NOx emission intensity limit could apply as early as 2021 for “pre-existing” engines.   Projects to lower the NOx emission intensity can be capital intensive and time consuming so forward planning is highly recommended.  Suggested next steps in the development of a Compliance Plan should consider:

  • A detailed analysis of facilities to confirm pre-existing engines are indeed subject to MSAPR Part 2 as well as historical and expected future time of use as well as availability/suitability of site conditions for future performance testing;
     
  • A detailed analysis of timelines and mitigation or other measures required to ensure compliance including possible implications of choosing the Flat Limit Approach versus the Yearly Average Approach for your fleet of pre-existing engines;
     
  • Baseline emission testing.  Although not specifically required in advance of registration, there are distinct advantages to confirming the NOx emission intensity of pre-existing engines using actual testing as opposed to estimates especially if mitigation may be required to meet the future limits; and
     
  • An assessment of opportunities for synergies or efficiencies of the activities required in support of the MSAPR and other compliance activities such as those required in support of a provincial environmental permit.

For more information on ORTECH MSAPR service offerings, click here.

Is the time right for Solar?

“I do not believe the PRICE of Electricity, in Ontario, will stay the same or drop” 
If you agree with this statement read on.

6 FACTORS TO CONSIDER for Installing a solar system for your manufacturing plant or warehouse! Number 6 talks about FREE Money.

 

1.      The Price of Electricity will rise.

a.      Ontario’s electricity prices have increased by 71 percent from 2008 to 2016, far outpacing electricity price growth in other provinces, income, and inflation* Fraser Institute. The bigger concern is the price of electricity at the whim of the government, and under the current administration, we have seen the cost of electricity explode and be capped.  Politics rules the price of electricity from the grid, which means it is unpredictable.

b.      Another point to consider: in the next ten years, a significant amount of our nuclear generation is going to be shutdown or put offline for refurbished. This means a large amount of our energy load must be replaced.  That can have a significant impact on electricity costs for everybody.

2.      The Cost of Solar will continue to drop.  Adjusting for inflation, it cost $96 per watt for a solar module in the mid-1970s. Process improvements and a very large boost in production have brought that figure down to 68 cents per watt in February 2016, according to data from Bloomberg New Energy Finance. Palo Alto California signed a wholesale purchase agreement in 2016 that secured solar power for 3.7 cents per kilowatt-hour. Moreover, in sunny Dubai large-scale solar generated electricity sold in 2016 for just 2.99 cents per kilowatt-hour -- "competitive with any form of fossil-based electricity — and cheaper than most. *

However, since you are reading this from Ontario, here is some local knowledge. Note:Data from ORTECH’s due diligence engagements.

3.      The nexus between the price of electricity and cost of solar (“Grid Parity”) is almost here, without any incentives.   Grid parity occurs when an alternative energy source can generate power at a levelized cost of electricity (LCOE) that is less than or equal to the price of purchasing power from the electricity grid. The term is most commonly used when discussing renewable energy sources, notably solar power nd wind power. Grid parity depends upon whether you are calculating from the point of view of a utility or of a retail consumer. Reaching grid parity is considered to be the point at which an energy source becomes a contender for widespread development without subsidies or government support. It is widely believed that a wholesale shift in generation to these forms of energy will take place when they reach grid parity. Ontario is not at Grid Party for solar, yet, but its will be in the next couple of years.  If you continue reading, #6 makes it a real possibility.

4.      The Ontario government has mandated that electrical providers, Local Distribution Companies (“LDC”) allow their customers to offset their electricity use by generating renewable energy.  This Ontario regulation has been around since 2005, its just now that a conversation can be had with regards to real economic benefits. Cost reduction or avoidance is the primary purpose of this program.

5.      A lesser benefit from the financial aspect is the reputational boost. By using renewable energy to generate electricity without a contract, your firm will be seen by your investors, clients, employees and neighbours in a positive light.  Other reasons include the following:

  • Little to no global warming emissions,
  • Improved public health and environmental quality,
  • A vast and inexhaustible energy supply,
  • Jobs and other economic benefits,
  • Stable energy prices, and
  • A more reliable and resilient energy system.

Lastly…..FREE MONEY!

6.      The Canadian Manufacturer and Exporters Association (“CME”) has a Smart Green program (“SGP”) providing incentives at many steps through this process. There is up to $500,000 in incentive funds available for manufacturing facilities to bolster the return on investment (“ROI”).

So, what is the Solution? Answer:  Solar Net Metering:

Net metering is a billing mechanism that pays solar energy system owners for the electricity they add to the grid. In its simplest form, a net metering customer will generate their own solar electricity during the day, use what it needs to meet the requirements of the home (or other type of building), injects the rest into the electricity grid, and consumes from the grid when the solar is unavailable. The customer is then only billed for their net electricity use. If they generate more than they use in a month, they receive a credit to apply against next month’s bill. If the solar system generates less than the customer uses, they will see a charge on their bill.

How to get started?

First off, find a consultant that has experience with the Canadian Manufacturers and Exporter (“CME”) Smart Green Program (“SPG”).  This consultant should also be versed in Incentive Management and Solar consulting.   This is where you get to apply for up to $500,000 in incentive money.  You should be able to go through the entire process without any outlay of expense until you have to start building your solar facility.  There are many “Off-ramps” to allow you to stop the process.  Its very “risk-free” in its approach.  That should help with moving forward.

This section is designed to outline each step in the process, so it is clear and concise. Where there is an incentive available, your consultant should apply for and secure the incentive before any work is started.

The following section will outline the entire process.

1.     Incentive Management:  Use an experienced incentive management consultant to manage all the facets of the Smart Green program.  The upfront process will be to collect data on your operations and submit applications for funds at three different phases listed below.  It should be noted that at each stage,  the Client can choose to stop the process.  The graphic to the right provides a visual of the process.  As part of the intake process, the Client should be willing to provide:

  • Detailed Company Information,
  • Financial Information,
  • Building Information,
  • Utility Statements: 1-3 Years of Electricity and Gas bills,
  • Corporate Signing officer information.

2.     Incentive Application for Walk-through Assessment: Your consultant should facilitate applying for the incentive for this step with CME SGP process.

3.     Walk-through Assessment:  Once the incentive is approved, your consultant will conduct a walk-through assessment to determine the feasibility of installing a solar facility on your rooftop.  This assessment cost will be reimbursed by the Smart Green program.  The Walk-through will include:

  • Introduction,
  • Company Overview,
  • Baseline GHG Emissions Overview,
  • Walk-through Notes and Observations, and
  • Potential SMART Green Project (Solar Project).

4.     Incentive Application for Technical Assessment: Your consultant should facilitate applying for the incentive for this step with CME SGP process.

5.     Technical Assessment: Once the incentive is approved, your consultant should conduct the technical assessment.  This will provide you with the information to make your decision to move forward.  If you hire a competent consultant that you trust, it should be straightforward.  You should receive a technical assessment report containing the following items;

  • Facility and Process Background,
  • Facility Baseline GHG Emissions,
  • Process Baseline GHG Emissions, if needed,
  • Description of Energy Efficiency/GHG Reduction Measure (Solar Project),
  • Expected Post-Project GHG Emissions,
  • Capital Costs and Other Eligible Expenses,
  • Additional Benefits, and
  • Conclusion.

6.     Incentive Application for Capital Funding for Project. Your consultant applies for the Capital Funding incentive for this step with CME SPG process. The detailed assessment will include:

  • Introduction,
  • Facility and Process Background,
  • Facility Baseline GHG Emissions,
  • Process Baseline GHG Emissions, if needed,
  • Description of Energy Efficiency/GHG Reduction Measure (Solar Project),
  • Expected Post-Project GHG Emissions,
  • Capital Costs and Other Eligible Expenses,
  • Additional Benefits, and
  • Conclusion.

 

This is the point where you need to decide to spend money.

 

7.     Engineer, Procurement Construction process:  After the Capital Funding is approved, you should go to the market to find a vendor that can develop a comprehensive plan to implement the solar facility.  This will include all the engineering design, electrical connections applications, equipment procurement, installation and commission of facility and provide ongoing operations and maintenance of the facility.

 

Time to Plan your Path to Compliance with MSAPR – Part 1: Boilers and Heaters

Background:

The Multi-Sector Air Pollutants Regulations (MSAPR) was registered by Environment and Climate Change Canada (ECCC) in June 2016 with the objective to achieve consistent Canada-wide performance standards for certain industrial facilities and equipment.   Boilers and heaters are one type of equipment targeted under the MSAPR, specifically Part 1.  MSAPR establishes a process for registering, monitoring, testing and reporting of oxides of nitrogen (NOx) emissions and provides NOx emission intensity limits (g NOx / GJ) which are phased in over time.

Part 1 applies to boilers and heaters that meet the definition in MSAPR, are at regulated industrial sectors including oil and gas facilities, are > 10.5 gigajoules per hour (GJ/hr) of input capacity and that combust gaseous fossil fuel. This includes equipment that is pre-existing, transitional, or modern. Part 1 sets out nitrogen oxides (NOX) emission intensity limits (g NOx/GJ) as well as compliance testing, operation and maintenance and reporting requirements.

The requirements and timelines that apply to a boiler or heater depend on its commissioning date (pre-existing, transitional, or modern), its type of fuel (natural gas or alternative gaseous fossil fuel), capacity, and for pre-existing equipment, one (1) of three (3) classes based on NOX emission intensity, specifically:

  • Class 40: ≤ 70 g NOx/GJ – no specific future NOx emission intensity limit will apply
  • Class 70: > 70 but ≤ 80 g NOx/GJ – generally a future limit of 26 g NOx/GJ will apply starting 2036*
  • Class 80: > 80 g NOx/GJ – generally a future limit of 26 g NOx/GJ will apply starting 2026*

Note: * certain actions including Major Modifications may trigger a speed-up, there is also the potential for some relief (i.e. slightly higher future limit) provided specific documentation is submitted

The boiler or heater classification can be determined by a number of options including but not limited to stack testing or an arbitrary election as Class 80.  The first compliance benchmark of Part 1 was to submit on-line a classification report for pre-existing boilers and heaters by June 17, 2017.  At the time the future limits apply, compliance must be demonstrated by conducting an initial stack test and reporting and ongoing annual compliance stack testing and reporting requirements may also apply.

Modern and transitional boilers and heaters are subjected to emission intensity limits of 16-40 g NOx/GJ depending on circumstance and equipment type. Modern and transitional equipment must have an initial stack test on or after the date on which it begins to combust gaseous fossil fuel and before the earlier of the passing of six (6) months or May 25 of the following year. Ongoing annual compliance stack testing requirements may also apply.

What are the Next Steps on the Path to Compliance?:

Now is the time to formulate a Compliance Plan for MSAPR Part 1.  A lower NOx emission intensity limit could apply in 2026 or earlier if Major Modifications are planned.   Projects to lower the NOx emission intensity can be capital intensive and time consuming so forward planning is highly recommended.  Suggested next steps in the development of a Compliance Plan should consider:

  • A detailed analysis of facilities to confirm pre-existing boilers or heaters are indeed subject to MSAPR Part 1 as well as availability/suitability of site conditions for future stack testing;
  • A detailed analysis of timelines and mitigation or other measures required to ensure compliance including possible implications and actions required in the event of future Trigger Events such as changes in fuel or Major Modifications such as replacement of burners;
  • An assessment of opportunities for synergies or efficiencies of the activities required in support of the MSAPR and other compliance activities such as those required in support of a provincial environmental permit;  and   
  • Facilities which have chosen to arbitrarily elect pre-existing boilers or heaters as Class 80 have an opportunity to reclassify by conducting stack testing or by means of a Continuous Emission Monitoring (CEM) test before December 2022.  There are distinct advantages should this reclassification testing confirm a class lower than Class 80 (i.e. Class 70 would have 10 more years to meet the future limit and Class 40 has no specific limit).   Reclassification testing should be conducted sooner rather than waiting until 2022 as should the testing confirm that the boiler or heater is indeed Class 80, this would provide only approximately four (4) years (from 2022 to 2026) to implement a strategy to meet the future lower NOx emission intensity limit.

Look for the next ORTECH newsletter which will discuss MSAPR Part 2 – Spark Ignition Engines.         

For more information on ORTECH MSAPR service offerings, click here.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What is the difference between an EASR and an ECA?

Introduction 

Your business must have an environmental approval from the Ministry of Environment and Climate Change (“MOECC”), if it releases pollutants into the air, land or water or stores, transports or disposes of waste. The aim of environmental approvals is to set rules for these activities in a way that helps protect the natural environment.  There are a number of approvals to assist you with your path to compliance.  Depending on the nature of your business activities, you will apply or register for one of the following:

  • Environmental Compliance Approval (ECA)
  • Environmental Activity and Sector Registry (EASR)
  • Renewable Energy Approval

The first two compliance tools result in the same outcome - an approval to discharge contaminants into the environment, which naturally leads us to the question:

What is the difference between an EASR and an ECA?

At a high level, an EASR is associated with virtually instantaneous approval and less ongoing annual requirements as compared to the traditional ECA.  But let’s back up and define each compliance path.  Environmental Compliance Approval (“ECA”) and Environmental Activity and Sector Registry (“EASR”), these hyperlinks will take you directly to the MOECC website specific to each path to compliance. Determining which compliance path is right for you is dependent on the complexity and uniqueness of the operation.  For more complicated operations, with higher potential for environmental impacts, an ECA is required and the EASR is used for more common activities or operations with less potential impact.  The following helps define these different levels of complexityoutlined in the regulations.

 

One of the fastest ways to determine your compliance path is to use the industry NAICS codes.  The default MOECC approach is that all activities and sectors go through the EASR process unless specifically excluded by the Regulation.  The following NAICS codes are specifically excluded from the EASR process:

 

 

EASR eligible activities

The MOECC has developed a process to determine those activities suitable for the EASR process; businesses meeting the eligibility requirements are required to register under the EASR process.  The EASR covers activities that are low risk to the environment and human health and use equipment and/or processes that are considered to be “standard” or have known environmental impacts.

Here is a link to the MOECC page with a summary of EASR eligible activities below:

  • automotive refinishing facilities
  • commercial printing facilities – lithographic, screen and digital
  • non-hazardous waste transportation systems (e.g. trucks and other motor vehicles, including vans and cars on public roads)
  • small ground-mounted solar facilities
  • facilities processing end-of-life vehicles
  • specific construction-related water-taking activities

What are the steps  for an ECA application?

  1. Evaluate the pros and cons of an ECA with Limited Operational Flexibility,
  2. Compile information required to complete the application,
  3. Schedule a consultant to complete a site visit; if required,
  4. Review your current Emission Summary and Dispersion Modelling (ESDM) Report, if available, and update to include any changes,
  5. Complete dispersion modelling and compare results to MOECC Point-of-Impingement Limits,
  6. Complete primary or secondary noise screening and coordinate an Acoustic Assessment Report (AAR), if required,
  7. Assemble the ECA application, including the ESDM Report, required MOECC forms and supporting information and pay the applicable fee.
  8. Regularly follow up with the MOECC to check the status of the application;
  9. Assist in answering any questions the MOECC review engineer may have; and
  10. Review the draft and final ECA.

How to apply for an ECA?

  1. Use the checklist for technical requirements for a complete ECA submission,
  2. Read the guide to applying for an ECA or hire an air quality consultant familiar with the process,
  3. Complete the ECA application form,
  4. Make sure you include copies of all required supporting documents, and
  5. Submit your application.

What are the steps for the EASR process?

  1. Assess all emissions from the facility.
  2. Assess all substances that have no MOECC limits and conduct a toxicology assessment, if needed.
  3. Assess noise and odour emissions.
  4. Develop and implement noise and odour mitigation control plans (i.e. odour control reports), if required.
  5. Develop maintenance and operational procedures as well as complaints and record management procedures.

How to apply for an EASR?

The applicant must register the activity on the MOECC website, here.  All the information from the ESDM report, odour and noise screenings, toxic substances review must be registered online. Your consultant can help you or you can call the MOECC directly for support.

If you have any questions, please contact ORTECH or visit our pages specific to each compliance path: EASR or ECA application .

 

    How Does Ontario's Cap and Trade System Affect my Business?

    In conjunction with the Canadian Independent Petroleum Marketers Association during their Canadian Fuel Marketing Conference , Ciara De Jong, Principal Consulting at ORTECH Consulting Inc will be conducting a one hour workshop on How Does Ontario's Cap and Trade System Affect my Business?

    ABSTRACT: Ontario’s first Auction under the Cap-and-Trade program is scheduled for March 22, 2017. The format of the auction has created a high degree of uncertainty amongst participants, not only related to the workings of the auction platform but also regarding the price and quantity to bid.   This workshop will provide a summary of what took place at the March Auction including lessons learned and key developments.  Were auction participants in a “buying mood” or do the results indicate a more of a “wait and see approach”?  Although not intended as auction advice, the workshop will also delve into what your business may consider in moving forward which such topics as reporting and Cap and Trade strategies.

    To register, please click here.

    Kontrol Energy Completes Acquisition of Ortech Consulting Inc.

    TORONTO, Feb. 10, 2017 /CNW/ - Kontrol Energy Corp. (CSE:KNR) (the "Company") announces that it has completed the acquisition of Ortech Consulting Inc. ("ORTECH"). ORTECH is a leading engineering consulting firm specializing in Green House Gas ("GHG") reporting, air quality testing, emission testing and renewable energy/power consulting.

    ORTECH has a 20-year successful operating history and has a stable client base, including some of Canada's largest integrated oil and gas companies. A material portion of ORTECH's annual revenue is from multi-year recurring contracts. For the last fiscal year ending March 31, 2016, ORTECH reported audited gross revenues of $5.3 Million and normalized EBITDA of $940,000.

    "ORTECH is a leader and recognized brand in the Ontario GHG reporting and power generation market," says Paul Ghezzi, CEO of Kontrol Energy. "We are excited about the closing of this acquisition and we look forward to expanding ORTECH's unique services and solutions across Canada. With the recently announced Canadian Federal Government carbon tax, large emitters of GHG will be required to better track and verify their emissions. The ORTECH acquisition provides the Company with a leadership position in a rapidly growing market. Further, the acquisition aligns strategically with our intention to create carbon reduction and monetization programs for our customers," continues Paul Ghezzi.

    The aggregate purchase price for the acquisition is $4.6 Million of which the Company has paid $4.6 Million in cash on closing. No common shares were issued as part of the acquisition. Ten (10%) of the purchase price will be held in escrow and be subject to any post-closing adjustments. In conjunction with the acquisition, the Company has closed on a $4 Million secured bridge loan with the Pinnacle Absolute Return Trust. The bridge loan has a term of 6 months and is secured by the assets of the Company and of ORTECH. It is anticipated that the bridge loan will be replaced by long-term senior secured debt financing over the next 6 months. Darvin Zurfluh, CEO of Pinnacle Absolute Return Trustee Corp., as Trustee of the Pinnacle Absolute Return Trust, says, "We are pleased to have completed a successful financing with Kontrol Energy Corp."

    Following the acquisition the Company anticipates consolidated annual revenues for 2017 will be in the range of $10 to $11 Million and annual EBITDA in the range of $1.3 to $1.5 Million.

    About Kontrol Energy Corp.

    Kontrol Energy Corp. (CSE:KNR) is a leader in energy efficiency solutions and technology. Through a disciplined mergers and acquisition strategy, combined with organic growth, Kontrol Energy Corp. provides market-based energy solutions to our customers designed to reduce their overall cost of energy while providing a corresponding reduction in Green House Gas (GHG) emissions.

    Additional information about Kontrol Energy Corp. can be found on its website at www.kontrolenergy.com and by reviewing its profile on SEDAR at www.sedar.com 

    Neither IIROC nor any stock exchange or other securities regulatory authority accepts responsibility for the adequacy or accuracy of this release.

    Caution Regarding Forward Looking Statements:

    Certain information included in this press release, including information relating to future payments of holdback amounts,  possible future acquisitions, anticipated consolidated revenue and anticipated annual EBITDA; the provision of solutions to customers to reduce overall energy costs and greenhouse gas emissions reductions, carbon reduction and monetization programs, growth strategy, the replacement of the secured bridge loan with long-term senior secured debt financing and other statements that express the expectations of management or estimates of future performance constitute "forward-looking statements". The forward-looking statements in this press release are presented for the purpose of providing information about management's current expectations and plans and such information may not be appropriate for other purposes. The forward-looking statements. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief are based on assumptions made in good faith and believed to have a reasonable basis. Such assumptions include, without limitation, that the ORTECH will be successfully integrated into the Company and that its revenues will be consistent with the Company's expectations, that suitable businesses and technologies for acquisition and/or investment will be available, that such acquisitions and or investment transactions will be concluded, that sufficient capital will be available to the Company, that technology will be as effective as anticipated, that organic growth will occur, that the Company will succeed in obtaining long-term senior secured debt financing, and others. However, forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements. Such risks include, but are not limited to, lack of acquisition and investment opportunities or that such opportunities may not be concluded on reasonable terms, or at all, that sufficient capital and financing cannot be obtained on reasonable terms, or at all, that technologies will not prove as effective as expected that customers and potential customers will not be as accepting of the Company's (including ORTECH's) product and service offering as expected, and government and regulatory factors impacting the energy conservation industry. Accordingly, undue reliance should not be placed on forward-looking statements and the forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement. The forward-looking statements contained herein are made as at the date hereof and the Company does not undertake any obligation to update publicly or revise any such forward-looking statements or any forward-looking statements contained in any other documents whether as a result of new information, future events or otherwise, except as required under applicable securities law.

    SOURCE Kontrol Energy Corp.

    For further information: Paul Ghezzi, CEO, paul@kontrolenergy.com; Kontrol Energy Corp., 5045 Orbitor Drive, Bldg. 9, Suite 401, Mississauga, ON L4W 4Y4, Tel: 905.766.0400, Toll free: 1.844.866.8123

    ORTECH Comments on Long-Term Energy Plan

    ORTECH Comments on Long-Term Energy Plan

    ORTECH Consulting Inc. (ORTECH), renewable energy, energy storage, greenhouse gas (GHG) and air emissions consulting, auditing and testing experts, would like to thank the Ministry for the opportunity to provide our view on the Long-Term Energy Plan (LTEP) and for providing substantive supporting documentation such as the Ontario Planning Outlook (OPO) to allow us to formulate a meaningful response.

    ORTECH commend the government as well as their agencies and their partners in industry in pursuing the goal of a supply of energy that is sustainable both environmentally and economically.  Energy is fundamental to all forms of activity today and many take for granted its reliability and convenience of access.  Energy is the fuel which drives not only our economic activities but also much of what we do in our everyday lives.  A LTEP in today’s changing world must be broad and far reaching, and touch on many different areas.

    The breadth of the LTEP is important for Ontario to continue driving down GHG emissions.  As clearly identified in the Fuels Technical Report (FTR), the GHG emissions associated with electricity have been falling for some time and are now a very small contributor to Ontario’s total GHG emissions.  Electrification of other energy uses such as heating and transportation will allow the use of decarbonized electricity to displace more GHG in these other energy use categories. This represents a new approach to energy planning as previous LTEPs have had a very dominant focus on electricity. Such an approach will require coordinated action from multiple Ministries and agencies.

    ORTECH comments on the LTEP are structured to follow the Discussion Guide and are provided in the order of the subject areas presented in that document.

    Distribution and Grid Modernization

    The global trend towards behind-the-meter generation will have substantial impacts on the utility sector.  With the continually falling cost of photovoltaic solar and the steadily increasing retail cost of electricity, the push to self-generation is constantly increasing.  ORTECH is encouraged to see that the Ministry is embracing these changes with proposed updates to the net metering regulation such as Single Entity Virtual Net Metering, removal of the 500 kW cap, and explicitly acknowledging the role of energy storage in net metering type applications.

    One concern with distributed generation is the phenomenon referred to as the “Utility Death Spiral”.  As rooftop solar reaches grid parity customers begin to switch towards self-generation.  This reduces the amount of energy delivered by the local distribution company (LDC) which is at least partially compensated on a per kWh delivered basis. Rates are often increased to make up for lost revenue, however higher rates only serve to further incentivize self-generation, resulting in a feedback loop or Utility Death Spiral.

    One possible way to avoid the Utility Death Spiral is by having the LDCs play a larger role in distributed generation.  LDC’s understand their customers and dealing with distributed electrical infrastructure is their core business.  They are ideally positioned to facilitate further uptake of distributed generation, increase the penetration rates of clean energy, and alleviate the need to bring power from distant centralized generators to the load centres where it is needed. Powerstream’s award winning Power House pilot program is an example of this and shows how utility-customer partnerships may work in the future.

    Microgrids

    Microgrid solutions are not only for remote communities.  Microgrids can operate in parallel with the grid, providing the advantages of resiliency and robust infrastructure.  Combining microgrids with district energy or community energy resources can create strong nodes where energy can be supplied even in extreme circumstances. Many applications demand very high reliability of energy supply resulting in mission critical equipment with high costs for low utilization.  A microgrid approach to these applications can enable those systems to provide other benefits allowing for better use of existing equipment.

    Microgrids can also be used to provide alternate benefits such as improved power quality, load shifting and peak shaving, amongst others.  Using microgrids in this way can provide more reliability than traditional fossil fired back-up generators as microgrid systems will essentially be continuously tested.

    Energy Storage

    Achieving Balance stated that the government was to include energy storage technologies in its procurement process starting with 50 MW and assessing engagement on an ongoing basis.  This was to include: “commissioning an independent study to establish the value of energy storage’s many applications throughout the system; examining the opportunities for net metering and conservation policies to support energy storage; and providing opportunities for storage to be included in large renewable procurements.”

    At the end of 2016, it appears that energy storage procurement started and ended with 50 MW.  The Large Renewable Procurement (LRP) was to have “mechanisms to encourage innovative technologies and approaches, including considering proposals that integrate energy storage with renewable energy generation for upcoming procurement cycles”.  While an on-peak/off-peak pricing mechanism was included in LRP 1, it did little to encourage energy storage integration.  The benefit and capability of energy storage to smooth variable generation as well as provide additional reliability was not valued by the LRP 1 RFP.  The sole mechanism for incorporating energy storage was for power shifting.  However, this one application discounted the benefits provided by energy storage.  As an explanation, the LRP 1 RFP determined the “effective capacity value” of various generation technologies which represented “the amount of capacity that can be counted on at the time of system peak”.  Adding energy storage to a variable generator for the purposes of power shifting would significantly increase this value, but the RFP scoring rubric did not allocate any benefit for this.

    ORTECH would like to commend the Ministry on moving forward with the first 50 MW of procurement.  This program put Ontario at the forefront of the emerging industry of grid scale energy storage and marked the province as a global leader in the space.  However, a lack of additional support for energy storage will pose the risk of being surpassed by other jurisdictions.

    Innovation and Economic Growth

    Start-stop procurements can be quite disruptive to industry.  Gearing up for major RFPs followed by long periods of no activity hinders private sector planning and exacerbates the boom-bust cycle.  The Feed in Tariff (FIT) program is a good example of how programs can operate more smoothly with similar sized procurements that are repeated over short time frames. However, even with FIT procurement, program windows are announced one at a time resulting in considerable uncertainty as to future market opportunities.  Smaller procurements that are repeated more frequently will smooth out the roller-coaster type activity level in the Ontario industry, and greater certainty in future procurements and activity will help the industry develop the right level of capabilities to address needs.

    Climate change is a global concern.  Clear and effective long term programs will allow Ontario industry to refine the expertise to address these challenges providing a basis to assist other jurisdictions reduce their environmental footprint, and to benefit from these export opportunities.  However, a healthy domestic market that supports renewable energy and energy storage industries is required.

    It is generally acknowledged that environmental permitting is slowing down the development of projects.  This year’s Burden Reduction Act introduces the possibility of streamlining the permitting process.  However, it’s not yet clear if this will have appreciable benefit for energy projects. 

    Clean Energy Supply

    The OPO identified potential scenarios where electrical demand is increased.  These are related to electrification and a shift away from fossil fuel usage in transportation and heating.  It is important that additional electricity generated to meet these needs is clean energy otherwise no GHG benefit would realized from electrification.  For example, if higher electrical demand is mostly met by natural gas fired generators, the benefit of displacing natural gas fired heating with electrical heating is diminished.

    Since the Green Energy and Economy Act of 2009 came into effect, Ontario has aggressively pursued renewable energy development resulting in substantial amounts of renewable generation capacity being installed. This domestic demand for wind, solar and other forms of renewable generation allowed a strong industry to develop in the province. With advances in generating technologies and a strong local industry that is ready to deliver projects, Ontario is in a position to build wind and solar projects at competitive rates.

    The LRP 1 (in 2015) procured wind energy for a capacity weighted average of $86 per MWh and solar for $157 per MWh.  These rates are competitive with other generation technologies, with wind being one of the lowest cost forms of generation in the province and solar rapidly closing the gap.  This is supported by the OPO Data Tables which list current technology characteristics and show the range of levelized unit costs of electricity for wind and solar to be cost competitive with all other forms of generation. It should also consider that wind and solar are still experiencing significant cost declines as the technology matures and the industry increases in scale. While Conservation First remains the strongest economic performer in the province, Ontario’s supply of clean energy will be most efficiently procured from wind and solar.

    Summary

    ORTECH recognizes the importance of the LTEP to the Province of Ontario and thanks the Ministry for the opportunity to provide comments.  ORTECH comments are summarized in pint form below:

    • Have the LDCs play a larger role in distributed generation
    • Combine microgrids with district energy or community energy resources
    • Assess the full value and expand the support for energy storage to ensure Ontario remains at the forefront of this evolving technology
    • Expand clear and consistent procurement programs (e.g. FIT) to ensure market certainty which will lead to the development of the right level of capabilities to address needs
    • Further streamline the environmental permitting process
    • Wind and solar are becoming increasingly more cost competitive and thus represent an opportunity for expanded development while addressing further reductions GHG emissions from the overall energy supply system  

    A strong domestic clean energy industry will allow for GHG reductions beyond our borders through clean energy trade.  Ontario is already a net exporter of electricity and the jurisdictions where our clean electricity is being sold include regions that still rely heavily on coal-fired power plants. While the GHG emissions associated with the electricity used in province is already very low, additional low carbon electricity still has the potential to reduce GHG emissions on a global scale.

     

    Is Net Metering with Solar PV the RIGHT choice for your company in Ontario?

    Written by Michael Tingle and Ka-Ming Lin

    The answer depends on your view of the trend in future electricity pricing.  If you feel the price of electricity is going to drop or stay the same, this may not be for you.  However, if the price of electricity for Commercial and Industrial (“C&I”) users will continue to rise in the next 5-15 years, net metering with solar photovoltaic (PV) may be of interest.

    Ontario Electricity Prices vs Cost of Solar PV

    This graphic depicts the historic, and forecasted price of electricity versus the install price for a solar PV facility. Although there are many variables, this serves as a reasonable guide.

    Other assumptions considered in the preparation of this graphic are:

    Price of solar based on a typical < 100 kW Feed-in-Tarrif (FIT) rooftop facility,
    Price of solar (forecast) is based on a 4% annual reduction in costs,
    Electricity prices are the time of use (TOU) rates based on 50% on-peak, 30% mid-peak and 20% off-peak plus typical local distribution company (LDC) delivery charges,
    The delivery charge benefit would only apply to load displaced, you do not get delivery charges back on energy returned to the system under net metering, and
    The electricity price (forecast) is based on the Bank of Canada’s target 2% rate of inflation.

    What is Net Metering with Solar PV?  Net metering allows an electricity user to install a solar PV facility onsite (or close to it) to generate electricity which can be used with any access delivered to the grid with compensation in the form of a credit on a future electricity bill.   Net metering has been an option since 2015 and is governed under an Ontario Regulation (O. Reg. 541/05: Net Metering).  However, only more recently has the price of electricity and the cost of installing a solar PV facility made net metering with solar PV more worthy of consideration.

    As shown in the graphic above, even if you were to install the solar PV facility today, the price of solar exceeds current electricity prices.  However, looking forward not too far in the future, price parity and beyond are possible. Some key business drivers you should consider when evaluating whether Net Metering with solar PV makes sense now (2017), instead of waiting until 2020 are described below.

    1. Cost Certainty of Electricity: Electricity prices are expected to rise in the short and long term.  When you factor in all the components of your electricity bill, the type of power user you are (time of use, class A/B) and global adjustment, you might want to lock in the price of electricity in the future. A Net Metering solution with solar PV can help you do that.
       
    2. Time Sensitivity:  Your Local Distribution Company (“LDC”) has a limit on the percentage of net metering solutions with PV they can manage on their distribution network.  Once they hit that level, you will not be able to participate in the net metering program although you could still be a “Behind the Meter” generator.  When it comes to net metering “the early bird has the best chance of getting the worm”. 
       
    3. Speed to Operation:  This solution has advantages over other renewable energy procurement processes as there is no environmental permitting unless you decide to go for a ground mount solar PV facility for which there is a simplified permitting process. Securing the connection with the LDC is likely to be the main hurdle.
       
    4. Greenhouse Gas (GHG) Emissions: If you generate emissions, as a course of operating your company or plant, net metering with solar PV will allow you to reduce or offset your emissions. This solution will enable you to retain your emission reduction credits. (currently emitters above 25MT only)
       
    5. Saving Money:  The benefit of net metering is that when you are not using electricity at your plant, you are allowed to inject power back into the grid and receive a credit on your next bill. Currently, you can bank this credit for 11 months which can help balance cash flow.
       
    6. Reputation: In addition to future cost saving, there are marketing and promotional advantages to be realized. Maybe your owners, board of directors or shareholders have given you a mandate to “GO GREEN”.  Generating your own electricity using renewable energy such as solar PV fits the bill. 

    Whats Next?  Making a decision on net metering with solar PV requires a level of analysis. You will need to understand how you pay for electricity and review monthly bills (1 or more years of history) to determine your peak demand and load profile. This in combination with an assessment of which of the above drivers are most important to you should assist in the decision making process.  The solar industry

    in Ontario is flush with capable and knowledge firms and individuals, reach out to them for assistance and advice to determine whether net metering with solar PV may be right for you now.

    For more information on ORTECH's Net Metering with Solar PV, click here.