For the past few years, there’s been a great deal of discussion about the role of man-made CO2 emissions in global warming and even whether global warming is real. No matter what we personally believe, greenhouse gas emissions reductions are now being mandated by the 10 states in the Regional Greenhouse Gas Initiative (RGGI). The ten RGGI states are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont.

RGGI covers states with significant population centers and numerous fossil-fuel fired power stations. The RGGI plan for the power segment includes capping the emissions levels for greenhouse gasses through 2014 with an associated cap and trade mechanism for allowances. Starting in 2015 through 2018 the allowed emissions cap will be reduced by 2.5 percent per year for a 10 percent total reduction.

Demand for allowances increasing
In mid-December RGGI held the second auction for CO2 emissions allowances. The results were interesting. A total of 31,505,898 allowances were offered in the auction. Bids were received for a total of 108,709,000 – approximately 3.5 times the number offered – from 69 entities. Eighty percent of the successful bidders were compliance entities in the region but 20 percent of the bidders were financial institutions and environmental organizations. The bids ranged from $1.86 (the minimum bid allowed) to $7.20. The auction raised $106.5 million which will be used by the states to invest in energy efficiency, renewable energy technologies, and other programs to benefit energy consumers. The demand for these allowances increased significantly from the first auction held in September 2008, and most experts expect the demand to grow and allowance costs to increase.

RGGI’s greenhouse gas allowances trade at roughly the same price as those on the Chicago Climate Exchange. The Exchange’s total trading volume for 2008 (with prices ranging from $1.90 to $4.50/ton) was approximately $60 million.
There’s widespread speculation that once Congress sets regulations for reducing greenhouse emissions (which is expected this year), RGGI will become the de facto model for the Federal legislation. There’s also been discussion about RGGI allowances being applicable to the other two regional initiatives (WCI and the Midwest Accord), which is why some generators covered by these two newer regional initiatives are buying RGGI credits while the prices are low. These generators realize that RGGI allowances bought now can be used in either the newer regional initiatives or a federal program.

Boiler optimization ROI in a few months
For the power producers in RGGI, boiler optimization systems are becoming more compelling due to this added benefit from efficiency improvements. Considering both the increasing fuel costs and the values of the CO2 allowances, the payback for a comprehensive boiler optimization system is a matter of months. No other solution for NOx reduction can compete with integrated boiler optimization for speed of implementation, thus realizing benefits quickly and the cost per ton of reduction.