United States
Environmental Protection
Agency
Office of Air and Radiation
(2176)
EPA-430-F-00-021
December 2000
&EPA Climate Change Solutions /%Si%
Oregon Switches to Cleaner Power
OFFSETS
Ttilities and power plant developers across the
/lation can play a significant role in slowing
^.^ global climate change. In 1996, Oregon took an
important step in this direction when it approved the
construction of a power plant that incorporates measures
to offset its emissions of carbon dioxide, an important
greenhouse gas. The new plant will be located in
Klamath Falls in southern Oregon.
In 1997, Oregon went even further and enacted a
landmark law that establishes a "carbon dioxide
standard" for all new power plants of 25 megawatts or
more. The CO2 standard required natural gas-fired
plants to achieve 0.7 pounds of CO2 emissions for each
kilowatt-hour of power produced—a reduction of 17
percent below the most efficient gas-fired plant then
operating in the United States.
(In January 2000, this
standard was updated to
0.675 pounds of CO2
emissions per kilowatt-
hour to reflect the
construction of a more
efficient plant in
Vancouver,
Washington.) The
standard can be met by
any combination of
efficiency, cogeneration,
offsets from off-site mitigation,
or a contribution of $0.57 per ton
of CO2 plus administrative costs to an
offsets project fund. Funds from the monetary path
are used to finance offset projects implemented by the
Oregon Climate Trust, an independent, nonprofit
organization.
The Klamath Falls plant offered the following portfolio
of mitigation measures to offset emissions from its
proposed 318-megawatt power plant:
EMISSIONS
A high-efficiency generator for cogeneration of
steam that will be used by a lumber mill for kiln-
drying lumber.
Reforestation of 6,250 acres of Douglas fir in
western Oregon.
Expansion of geothermal district heating in the town
of Klamath Falls to 78 additional buildings.
Generation capacity of 32 megawatts from waste
methane recovered from sewage treatment plants
and coal mines in the United States.
Capital support to install 182,000 20- or 35-watt
photovoltaic systems over a 30-year period in
remote households in India, China, or Sri Lanka to
provide electricity to replace kerosene lamps.
According to the Oregon Energy
Facility Siting Council, this is
the first time in the United
States that global warming
has played a role in a major
decision regarding the
regulation of energy
resources.
Historical Background
In 1971 Oregon passed a state
law regulating the certification
of new energy facilities. The law
established a requirement that
developers of new power plants must
prove the need for a new facility. This "need
for facility" or "need for power" standard required utility
developers to demonstrate that present supply is
insufficient to meet energy demand as shown in utility
least-cost plans. A number of additional requirements
must be met as well, including financial, public safety,
and environmental standards such as impacts on wildlife
refuges and other protected areas.
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OVERVIEW OF KLAMATH'S PROJECTED RESULTS
• The plant uses a high-efficiency 484-megawatt
natural gas-fired generator rated at approximately
6,800 Btu's per kilowatt-hour (the most efficient
plant under the original standard was 7,200 Btu/kwh).
• The plant is expected to have gross emissions of
45.8 million metric tons of carbon dioxide during
its projected 30-year life.
• The mitigation measures are predicted to offset
10.3 million metric tons of carbon dioxide over
100 years through photovoltaics, reforestation, and
the other off-site measures, coupled with steam
cogeneration.
• Klamath has committed $4.1 million toward
offsetting CO2 emissions.
• The project is expected to result in offsets
equivalent to taking 2.3 million cars off the road.
Very few power plants were constructed in Oregon
during the 1980s. By 1995, representatives of the utility
industry had persuaded legislators to introduce a bill that
would eliminate the need for power standard. When it
appeared that the governor would veto the bill, a one-
time-only exemption was approved instead. Oregon's
Energy Facility Siting Council established a competition
to select a company to receive the exemption. At the
same time, the governor and legislature created a task
force to review the process of siting power plants.
The Klamath Cogeneration Project
The Klamath Cogeneration Project won the competition
for the one-time exemption from the need for power
standard. The competition was based on a comparative
evaluation of proposed plants' environmental impacts
on air, water, and land resources.
The first test was for air emissions of carbon dioxide,
nitrogen oxides, and particulate matter. To rank the
proposed projects, tons of emissions per kilowatt-hour were
multiplied by a cost value for each pollutant in an effort to
internalize environmental costs. The test employed values
of $10 per short ton of carbon dioxide and $2,000 per short
ton of nitrogen oxides and particulates.
In 1998, Klamath received permission to enlarge
generating capacity to up to 500 megawatts. At this
point the CO2 standard had gone into effect, so Klamath
pledged $1.3 million to the monetary offset fund to
meet its requirement for the additional capacity.
Construction of the re-designed, 484-megawatt plant
began in August 1999, and the plant is expected to begin
operation in 2001.
Klamath is committing a total of $4.1 million to offset
CO2 emissions. The offset projects, along with the steam
cogeneration, should offset 10.3 million metric tons of
CO2 over a period of 100 years, well beyond the 30-year
lifetime of the plant. The offsets will equal a quarter of
the plant's expected emissions—and would be even more
if the methane benefits were factored in. The carbon
dioxide offsets over 100 years are equivalent to taking
2.3 million cars off the road.
The offset projects, along with the
steam cogeneration, should offset
10.3 million metric tons of carbon
dioxide over a period of 100 years.
Lessons Learned
The competition encouraged innovation
The competition encouraged a diversity of proposals
for innovative offset measures. One of the two losing
competitors, for example, proposed guaranteed
sequestration of 1.1 million tons of CO2 through
conservation easements intended to extend the average
life of protected forests. Unlike the Klamath project,
which offset carbon dioxide emissions through new tree
plantings, this proposal offered offsets from managing
growth in existing forested areas. Managing existing
forests is intended to ensure that those trees will
continue to sequester carbon dioxide.
The other applicant proposed a mitigation fund of $7.5
million without specifying measures. The council
selected the Klamath package because it had significantly
greater offsets. It also offered greater innovation,
cogeneration, reforestation, geothermal heating, methane
recovery, and photovoltaics.
The council required guarantees of offsets in those areas
that are within the developer's control. The developer is
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required to live up to the representations made. If the
Klamath plant fails to achieve the estimated efficiency
or cogeneration goal and the actual emissions are greater
than the projections, the developer is required to
compensate through new offsets. The council did not
require guarantees for off-site projects.
Competitions reduce the time for siting power plants,
but setting a standard is preferable
The competition was a unique situation that fit the
circumstances at the time. Under the usual siting process,
the Energy Facility Siting Council can negotiate with the
developer if the proposal fails to meet the standards and
suggest amendments so that it complies. A developer who
does not accept the amendments can withdraw. With a
competition, however, no amendments or modifications
were allowed. "Because it was a competition," says Sam
Sadler, an energy analyst with the Oregon Office of
Energy, "the council had to take a hard line and make
them stick to what was first proposed."
Architect's rendering of the Klamath Falls power plant,
which is expected to go into operation in 2001.
Proposals can be reviewed fairly
In addition to encouraging a diversity of proposals, the
competition showed that it is possible to apply consistent
evaluation standards for reviewing diverse projects. In
quantifying offsets, for example, the council established
conventions such as considering all three plants as
operating at 100 percent capacity for a 30-year life.
Carbon dioxide offsets are financially viable
All three developers who participated are independent
power producers who must produce energy at a
competitive rate in order to sell it in the marketplace
to utilities or large industrial customers. The fact that
the independent power producers were willing to offer
offsets showed that it is feasible to address global climate
change and still remain competitive.
The offsets from the Klamath
plant are equivalent to taking
2.3 million cars off the road.
The Task Force
The Energy Facility Siting Task Force created by the
governor and legislature was charged with reviewing the
process of siting power plants. The task force included
seven members with diverse perspectives. Among them
were a state senator and professor of political science,
who was appointed by the president of the Senate; a
state representative and businessman, appointed by the
speaker of the House; a professor of economics and
former Public Utility Commission chairman; an eastern
Oregon county planning director; a labor union official
and former state representative; a state environmental
policy coordinator and former law school professor
currently assigned to a federal natural resource agency;
and a business council president and former state
official—the last five appointed by the governor.
In the task force's final report, the chairman, Mike Katz,
wrote: "The issues considered by the task force are
contentious, to put it mildly. Parties at interest include
utilities, environmentalists, power plant developers,
consumer representatives, the Oregon Office of Energy,
and the Energy Facility Siting Council." He concluded,
"Here is something notable: the task force's
recommendations are unanimous."
In a landmark decision, the task force called for a law
requiring all new power plants to offset their carbon
dioxide emissions. The task force's recommendation was
incorporated in the law passed in 1997 to revise the siting
standards for energy facilities. The law mandates that
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As the task force report states, Oregon has sent a signal to
the nation that the state "is prepared to do its fair share"
to address global climate change.
Klamath Falls City Hall uses geothermal district heating.
natural gas-fired generating facilities intended for base-load
use achieve a reduction of 17 percent below the emissions
of the most efficient, combined cycle, combustion turbine,
gas-fired plant commercially operating in the United
States. Utilities, developers, environmentalists, and state
energy agencies all supported the law.
The task force, in a quid pro quo with power plant developers,
also recommended jettisoning the need for power standard,
having concluded that it is outdated. Developers today choose
to build plants that bum natural gas and are less polluting and
cheaper than large-scale nuclear and coal-fired plants. The
task force decided that these market forces rather than
consideration of cost-effectiveness should determine the need
for new power plants.
Additional Global Warming Activities
Oregon started in 1988 laying the foundation for these
historic decisions. First, the state inventoried its carbon
dioxide emissions and analyzed the potential impacts of
global warming on Oregon. Next, the state received
financial and technical support from the U.S.
Environmental Protection Agency's State and Local
Climate Change Program for an updated inventory of
emissions and an action plan of cost-effective strategies.
Oregon's latest plan was completed in 1995.
The state laid the groundwork through these studies, and
then citizens' panels took action. In 1992, the Oregon
Progress Board adopted a benchmark requiring that the
state's emissions be held to 1990 levels. Then in 1995
and 1996, the Oregon Energy Facility Siting Task Force
and the Oregon Energy Facility Siting Council—both
citizens' panels—provided the leadership that set the
carbon dioxide standard and conducted the competition
that inspired the innovative Klamath project.
For More Information
For a description of the Energy Facility Siting
Standards or the CO2 Standard, visit the Oregon
Office of Energy's website at
www. energy.state, or. us
To learn about the Oregon Climate Trust's role in
implementing offset projects, visit
www. climatetrust. org
Contacts
Sam Sadler
Oregon Office of Energy
625 NE Marion Street
Salem, OR 97310
Phone: 503-373-1034 Fax: 503-373-7806
E-mail: samuel.r.sadler@state. or. us
Michael Burnett
Oregon Climate Trust
Phone: 503-238-1915
E-mail: mbumett@climatetrust. org
U.S. Environmental Protection Agency
State and Local Climate Change Program
Ariel Rios Building (2176)
1200Pennsylvania Ave, NW
Washington, DC 20460
Phone: 202-260-3354 Fax: 202-260-0290
Website: http://www. epa.go v/globalwarming/
actions/state
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