Biomethane - FortisBC

Biomethane
Linking customers to supply
October 2011

Outline
1. Some market perspective
2. Why renewable natural gas?
3. What is renewable natural gas?
4. FortisBC role
5. Supply project structure
6. Recommendations
7. How do I get started?

Market perspective

Some perspective
• Germany 1
• Injecting biomethane since 2006
• 70 plants expected operational by end of 2010
• 4300 biogas plants total – momentum shift toward injection
• USA
• 31 Grid injection plants on Landfills 2
• Limited number of dairy and other
• Canada
• Union Gas/Enbridge – Application this fall to regulator
• Gaz Metro – actively evaluating grid injection
• 1. Dena – Biogas Grid Injection In Germany and Europe
• 2. US EPA, LMOP Website

Why renewable natural gas?

Why renewable natural gas?
• Demand from customers
• Customers in BC expect utilities to play a role in sustainability
• RNG is a way to provide a new way for customers to make a
contribution to GHG reduction
• Cooperate with BC government energy policy
• Practical way to make energy policy a reality
• Climate action goals GHG’s
• FortisBC is right for the job
• An area for investment and growth
• It is a natural extension of existing competency
• Part of a company shift to become an energy company

Market research results
Should FortisBC offer a
biogas program?
• Residential:
• 65% Yes
• 30% Maybe
• 1% No
• Commercial
• 71% Yes
• 22% Maybe
• 2% No
What type of program
should FortisBC have?
• Renewable Energy
preferred over Carbon
Offset
• 2.8: 1 for Commercial
• 3.2: 1 for Residential

Strong market potential for a user-pay
renewable energy-based program

Product offering
• Residential first – increase reach & participation
• Eligible customers designate 10% of the natural gas their households use as
renewable natural gas.
• This option will cost an extra $0.53 GJ or $4 per month
• The additional cost helps support biogas projects that FortisBC undertakes
• Only the cost of gas line item will change on the bill
Cost of gas as of Apr 1, 2011 (adjusted quarterly) $4.568 GJ x 90%
RNG cost as of Jan 1, 2011 (adjusted annually) $9.904 GJ x 10%
RNG rate subtotal: $5.102 GJ

Benefits
Feel good about contributing to renewable natural gas
development in BC and reducing your carbon footprint.
• Displace conventional natural gas with RNG
• A single household on the program:
• Reduces emissions by 0.5 tonne CO 2e per year. This is roughly equal
to o diverting 400 lbs of waste from our landfills
• All projects are located in BC
• Prevent waste from going to waste
• Collective savings of 5000 tonnes CO2e in first year, equivalent to
keeping 3.8 million lbs of waste from our landfills

What is RNG (or biomethane)?

Biogas vs. biomethane
• Gas generated from organic material
• Primarily consists of methane – 50% - 60% typically
• Potential Sources:
• Anaerobic Digester (AD) Gas
• Landfill Gas:
• Biomethane:
• Methane from a renewable source – “Upgraded Gas”
Raw Biogas Biomethane
40% - 60% CH 4
30% - 50% CO 2
0% - 2% O 2
>96% CH 4

Biomethane is carbon neutral

Biogas
Source
Biomethane – a better end-use
65% Loss
35 % Remaining
Raw Biogas
9% Loss
91 % Remaining
Generation
6% Loss
33 % Remaining
3% Loss
88 % Remaining
Transmission
No Loss
End Use
8% Loss
81 % Remaining
33%
Remaining
Energy
81%
Remaining
Energy

FortisBC biogas supply model
Biogas
Source
Voluntary
Customers
Upgrading
Plant
Asset recovery costs go
into Biomethane rate
FortisBC may invest in “upgrading” plant,
interconnection assets and main extension
increasing asset base
Metering,
Monitoring,
Odourizing
FortisBC
Transmission and
Distribution System
Asset recovery costs
from all customers
All Gas
Customers

FortisBC infrastructure
• Fortis BC plays a critical role in linking supply to customers
• Existing Natural Gas infrastructure is key to multiple end-uses

FortisBC role

Biomethane supply framework
Project Economics
• Total cost of biomethane < Approved biomethane rate
Injection Location
• Adequate load must located nearby *note variation between
summer and winter
Gas-Processing Technology
• Gas Quality meets specification & technology proven
Partner
• Partner must demonstrate technical and business competence
Risk mitigation
• Business risks covered through contract terms and design

Regulatory comments
External agencies
• Depending on project multiple government ministries may be involved
• Depending on location permits may be required from municipalities
• FortisBC will be responsible for permitting related to its assets
BC Utilities Commission
• Two year test period approved, upgrade ownership
• Supply cap: 250,000 GJ/year first 2 years
• Approval to recover asset investment – two pools
• Interconnection assets – all customers
• Upgrade assets – voluntary customers only
Regulator wants to
see demand
materialize
Regulator cautious
about utility owning
gas processing
equipment
• Assets need to be accounted for separately (upgrading vs. interconnect)

Catalyst Project
Waste Collection Digester Gas Collection FortisBC
Infrastructure
• FortisBC
85-90% of
Investment
• Interconnection equipment and main
• Infrastructure capital added to rate base for all customers
• FortisBC purchases Biomethane at higher price
10-15% of
Investment

Catalyst Project
• Partner Catalyst Power Inc
• Digester Project
• On/Off farm waste
• Average 110,000 GJ/year
• FortisBC owns interconnect
equipment only
• Commissioned Sep 2010
• Price above market for NG
• Long Term Gas Supply
Contract

Salmon Arm Landfill Project
• FortisBC
Landfill
Gas Collection
And Flare
65-70% of
Investment
FortisBC
Infrastructure
30-35% of
Investment
• Upgrade plant, interconnection equipment and main
• Interconnection & main capital added to rate base for all customers
• FortisBC purchases Biogas at low price
• Upgrade capital covered in biomethane rate = capital recovery +gas price

Salmon Arm Project
• Partner CSRD
• Landfill Gas project
• Average 30,000 GJ/year
• FortisBC owns upgrade equipment
• Commissioning Winter 2011/2012
• 15 year contract

Key considerations for developers

Lessons learned
Patience
• Permitting/Regulatory bodies need time - be
aware that this may be new to them!
• Many interested stakeholders
• Municipal & Provincial governments
• Neighbors
• Utility & Regulator
• Expect 2 years from concept to gas on-line
Feedstock
• Understand your feedstock & get good data to
estimate plant size and gas production
• Secure your feedstock sources

Lessons learned cont’d
Integration
• You will be running a system – all the parts must work
together
• Get good help to oversee integration of components
• Agree on flows, pressures, temperatures, control schemes etc.
• Don’t be ashamed to ask for help
• Get equipment suppliers talking with each other early
Start-up and commissioning
• Give yourself time to get the system running optimally
• Be aware that you are dealing with a living and complex
system

Lessons Learned cont’d
What the Utility needs
• The utility is responsible to protect customers
• Be prepared to prove your system is safe
• The gas MUST meet specification
• Security of Supply – we need to know that your supply will be
there when you say it will be there
• The utility has processes and procedures that need to be
followed

Purchase Agreement Process
Initial
Evaluation
• Interconnect
Request
• System Feasibility
• Demand
Evaluation
Detailed
Evaluation
• Sign MOU
• Technical Review
• Economic Review
Business
Terms
• Define
Responsibility
• Negotiate
Terms
Time: estimated at 4 – 6 months
Finalize
Contract
• Write
Agreement
• Partners sign
• Submit to
BCUC

Project Development
BCUC
Review
Initiate
Project
• Assemble FortisBC
Team
• Refine Schedule
• Refine Budget
Project
Execution
• Detailed
Design
• Procurement
• Fabrication
Time: estimated at 12 – 18 months
Deliver
Gas
• Commissioning
• Testing/Validation

New project process
• Initial evaluation
• Screening process to identify possible projects before a significant
amount of time and money is spent
• Typically about 4 – 6 weeks
• Start with Biogas Application Form (on website)
• Detailed evaluation
• Increase confidence in preliminary evaluation
• MOU prior to starting this stage
• Provides basis to initiate contract negotiation (scope, price, timing)
• Typical outcome: contract term sheet, project budget

New project process
• Term sheet
• Negotiate basic terms of future agreement
• Non-binding
• 6 – 8 weeks
• Market Development
• Preliminary engineering
• Further refine costs and begin engineering
• Budget costs at this point will be used as input to Agreement
• 8 -10 weeks
• Outcome – defined responsibilities, refined project budget supported
by quotes
• PMO

New project process
• Contract
• Final contract negotiation
• 8 weeks
• Regulatory review
• 8-12 weeks
• Project go

Key Contacts
• Email firstname.lastname@fortisbc.com
• Program Management Arvind Ramakrishnan
• Business Model | Bulk Purchase Janet Devaney
• New Supply Scott Gramm
Andrew McVie