pipeline biomethane market development

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1 Pipeline Biomethane Market Development County of Los Angeles Sanitation Agency October 9, 2009

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Pipeline Biomethane Market Development. County of Los Angeles Sanitation Agency October 9, 2009. Discussion Outline. Pipeline biogas market evolution roadmap Our knowledge base on economic feasibility Market assessment and high-level economics Wastewater Treatment Facilities (WWTFs) - PowerPoint PPT Presentation

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Page 1: Pipeline Biomethane Market Development

1

Pipeline Biomethane Market Development

County of Los Angeles Sanitation Agency

October 9, 2009

Page 2: Pipeline Biomethane Market Development

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Discussion Outline

Pipeline biogas market evolution roadmap

Our knowledge base on economic feasibility

Market assessment and high-level economics

Wastewater Treatment Facilities (WWTFs)

Potential proposals for WWTFs

Landfill Gas Concerns

Page 3: Pipeline Biomethane Market Development

33

Renewable Natural Gas

Green Waste Gasification

Gas Clean-up & ConditioningAnaerobic

Digestion

Renewable, green natural gas to pipeline

Phase #1

Phase #2

Phase #3

Mixed Waste

Raw Biogas

Syngas to Methane

Page 4: Pipeline Biomethane Market Development

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Biogas Clean-up & ConditioningPSA Example

Feed Compression

Pressure Swing Adsorption (PSA) Unit

Product Compression(if required)

Tail GasTo Flare

• Commercially proven equipment for oil field applications and a few biogas installations

• Modular

• Need reference installations in California

Page 5: Pipeline Biomethane Market Development

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Our Knowledge Base18 months of Engineering Analysis

Study Scope Approach Results / Findings

Biogas Composition Assessment Testing & Monitoring Protocol Development• Dairy waste• WWTFs• Organic waste (Note: landfill gas not studied)

Studies conducted by Gas Technology Institute, specialist consultants,internal engineering staff

Defined potential contaminants, test and monitoring options,action levels

Biogas feedstock studied can be conditioned to meet Rule 30 specs

Testing, monitoring and control guidance document distributed to potential producers

Will review annually

Biogas Conditioning Economic Feasibility Study

Black and Veatch study – technology options, conceptual engineering, vendor assessment and economic analysis

Internal engineering analysis Conditioning demonstration design

(Burns and MacDonald)

Several technologies are available that can meet technical requirements Pressure Swing Adsorption Membranes Cryogenic distillation Amine scrubbing

Very scale sensitive -- ~$5/MMBTU -- $20/MMBTU+

Dairy and Dairy Cluster Pipeline Biomethane Economic Feasibility

Specialist consultant study and internal engineering analysis

Full production chain assessment – lagoon digester though injection

Detailed cluster analysis

Very scale sensitive – scale curve flattens at about 10,000 cows

Clustering using gas gathering may be economic but requires a more detailed engineering study and pilot

Page 6: Pipeline Biomethane Market Development

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Study Scope Approach Results / Findings

Large Scale Anaerobic Digester Economic Feasibility Study

Black and Veatch study Vendor RFI

Multiple vendors and technologies technically viable

Mature industry in Europe – nascent in US Generally not economic without tipping fee

(negative fuel cost) ~$25/MMBTU at scale at $0 fuel cost

Waste Gasification and Methanation

Studies by Black and Veatch and Alternative Resources Inc.

Internal engineering study

Not currently economic Some promising technologies on the horizon

in next 2-3 years Lots of development work for gasification –

need more on methanation step

Algae-to-Methane Part of regional collaborative with UCSD and industry partners

Demo projects in planning stage

Huge resource potential (similar to central solar)

Most effort on liquid fuel but co-production of methane promising

5-year commercialization cycle (optimistic) ~10x reduction in cost needed

Our Knowledge Base18 months of Engineering Analysis

Page 7: Pipeline Biomethane Market Development

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Market Gap Analysis and Potential Utility Role

Segment Market Characteristics Gaps and Barriers Potential Utility Role

General Number of reference installations for pipeline biomethane is very small

European market much more mature Capital crunch impacting all segments

Opportunity for utilities to support early market development

Proposals need to address ratepayer risk, competitive issues and regulatory timeline

WWTFs Generally knowledgeable about energy matters but not pipeline injection – significant interest in exploring

Many have on-site gen and air emissions issues Many looking at fuel cell alternatives Do not want to market gas Strong credit

Educate on pipeline option Get initial commercial pilots done quickly using

contracts approved by the Commission Utility owns and operates conditioning facilities

and contracts with host for “capacity” – host owns the gas

Compatible with developer or host participation

Dairies Not in the energy business and don’t want to be Air emission and water quality issues are the

dominant concerns Want end-to-end solution Weak credit

Educate on pipeline option Undertake detailed engineering studies on a

few clusters Utility-lead consortium for commercial pilot

project(s) CEC and CPUC support to address technical

and commercial risks

Large Digester Projects Capital availability/credit strength a major issue Many open to utility participation in projects –

particularly for conditioning

File project applications using Utility Owned Generation model on project-specific basis

Page 8: Pipeline Biomethane Market Development

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Key Findings Across Pipeline Biogas Applications

Rigorous gas quality testing, monitoring and control protocols are important to ensure that gas quality standards are met at all interconnection points: at transmission or distribution levels.

SoCalGas/SDG&E provided specific guidance to biogas producers on interconnection requirements and monitoring protocols (excluding landfill gas).

Pipeline injection reduces local air emissions, allows renewable biogas assignment to highest value use.

Economies of scale are critical – driven mostly by the gas conditioning stage of the process.

WWTFs provide best vehicle for early deployment of conditioning systems for pipeline injection and critical live-project experience for other applications such as dairies and ultimately landfills.

Small biogas producers (dairies and WWTF) not generally interested in being primary participants in energy markets or technologies. Looking for partners.

Credit and technology risk issues also pose challenges.

Joint action and streamlined processes needed to move pipeline biomethane markets forward.

Page 9: Pipeline Biomethane Market Development

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Estimated Gas Conditioning Cost

$0

$2

$4

$6

$8

$10$12

$14

0 2000 4000 6000 8000 10000

Flowrate scfm

$/M

MB

tu

WWTF Gas Conditioning Preliminary Data 9/14/2009

0

20

40

60

80

100

120

1500 -4000

650 -1499

300 -649

150-299

50 -149

5 - 49

Small

Large Largest

MPR Range

Conventional gas producer scale

Waste Water Treatment Facility (WWTF) Demographics - SoCalGas / SDG&E Territory

Size -- scfm raw Count Avg. MMsfd* Total MMscfd* MMBTU/yr1500 - 4000 4 1.7 6.9 2,497,651650 - 1499 0 N/A 0.0 0300 - 649 10 0.4 4.1 1,482,980150-299 19 0.2 3.7 1,334,68250 - 149 46 0.1 4.0 1,436,149

5 - 49 99 0.02 2.1 772,711Total 178 2.4 20.8 7,524,174

Page 10: Pipeline Biomethane Market Development

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Recommendations for WWTF Biogas Development

Approve utility participation in no less than 2 WWTF commercial pilot project contracts

To refine protocols and expand knowledge base on gas monitoring and control To validate feasibility study results on technical, economic and commercial issues To demonstrate commercial viability and improve financeability of later projects To provide a knowledge base that can feed into dairy and digester projects & inform long-term state biogas policy

Potential Projects of Interest (preliminary and subject to utility due diligence)

Point Loma WWTF - largest in the San Diego area Biogas to fuel 8 MW of fuel cells at UCSD and City’s South Bay Power Plant – contracts in place Original bottle truck gas transport to UCSD/South Bay opposed by community leaders SDG&E evaluating technical/economic feasibility of pipeline biogas delivery. Strong City/UCSD interest. UCSD fuel cell received largest SGIP grant in history – must be in service by 4/2011. Expeditious Commission

approval would be an issue should SDG&E propose to provide pipeline biogas conditioning.

Escondido WWTF Demonstration Project - 1/5 the size of Point Loma WWTF Originally ERRP proposal: scope revisions/alternative funding (SoCalGas RD&D) allowed design stage City of Escondido interested in conversion to commercial operation at end of demonstration

Orange County Sanitation Agency (Plant 1 and Plant 2)County of Los Angeles Sanitation Agency (JWPCP)City of Los Angeles (Hyperion)

Page 11: Pipeline Biomethane Market Development

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Key Contract Elements

Utility contracts with the host (or developer) to provide gas conditioning service under contract similar to a lease arrangement – effectively a capacity contract

Contract revenue provides full revenue requirement for the conditioning facility capital and operating costs

Contract contains fee component to cover utility services (i.e. contracting, billing). No cross subsidy.

Utility takes no commodity risk but may assist with gas sales transaction and/or gas management.

Commercial risk is born by shareholders, not by ratepayers. Credit risk is minimized through specific security provisions that may include credit rating of the

counter party, claim on gas sales revenue, step-in rights, letters of credit, parent guarantees Technical and operating risk mitigated through supplier warranties and operating agreements

Contracts submitted to CPUC for approval*

Page 12: Pipeline Biomethane Market Development

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Biomethane Capture From Landfills

Landfill gas contains the widest spectrum of contaminants to be removed in order to meet stringent gas quality specifications for interconnection to So Cal Gas, and use of such gas is not included in this effort at this time.

Declining biogas production in older landfills Siloxane concerns with some landfills Volatile Organic Compounds Hazardous Air Pollutants

– Benzene – Vinyl Chloride– Methyl Ethyl Ketone

Persistant Bioaccumulative Toxics– Mercury