Climate Challenge Participation Accord

DOE's Energy Partnerships for a Strong Economy

CLIMATE CHALLENGE PARTICIPATION ACCORD

This Participation Accord describes the commitments that Minnesota Power and the U. S. Department of Energy (DOE) have made to participate in the Climate Challenge Program in pursuit of the President's goals for reducing greenhouse gas emissions. The Climate Challenge Program is a joint voluntary effort of DOE and the electric utility industry to reduce, avoid, or sequester (collectively referred to as "reduce") greenhouse gas emissions. The framework of the Climate Challenge Program was established in the Climate Challenge Program Memorandum of Understanding and exhibits thereto, dated April 20, 1994, (the Climate Challenge MOU) (See Attachment A to this Participation Accord).

A)

Consistent with Paragraphs II.B.1.a and II.B.1.f of the Climate Challenge Program MOU, Minnesota Power will participate in selected Industry Initiatives and specific project activities which reduce greenhouse gas emissions. Participation in these programs is dependent upon their cost-effectiveness based on standard economic analysis methods without valuing greenhouse gas emissions. Minnesota Power also recognizes that preliminary estimates of greenhouse gas reductions will likely vary from actual year 2000 results due to estimate uncertainty.

The Industry Initiatives (II.B.1.a) in which Minnesota Power will participate include:

Forest Carbon Management Program: Minnesota Power paid the basic program participation fee of $5,000 in 1994 and is committed to payment of the estimated $500 supplemental fee in 1996.

Earth Comfort Geothermal Heat Pump Program: Minnesota Power paid the basic program participation fee of $11,550 in 1995 and is committed to payment of $11,550 in both 1996 and 1997 in conjunction with the Electric Power Research Institute, Tailored Collaboration Program.

EV America Ally: Minnesota Power will promote use of electric vehicles.

Envirotech Venture Capital Investment Fund: invests in projects which result in greenhouse gas emission reductions. Minnesota Power will invest $2,000,000 contingent upon satisfactory review of Fund participation documents and the Fund receiving total investment commitments of at least $20,000,000.

Further financial commitments to these Industry Initiatives will be considered as the programs develop specific participation offerings. These Industry Initiatives are under development, so associated greenhouse gas emission reductions are not yet available.

Minnesota Power will also participate in specific project activities (II.B.1.f) including the following:

1.

Demand Side Management, Process Efficiency Improvements. Minnesota Power has had an Industrial Conservation Pilot Project (ICP) as part of a larger Conservation Improvement Program (CIP) since 1991. The ICP Project includes funding projects which support industrial customer process efficiency improvements. This program is expected to continue through the year 2000. Estimated equivalent carbon dioxide emissions avoided through process efficiency improvements achieved as of 1994 are about 43,000 tons per year, with this value expected to reach approximately 279,000 tons equivalent CO₂ emissions avoided per year, by the year 2000.

2.

Demand Side Management, Energy Conservation. Minnesota Power's Conservation Improvement Program (CIP) also funds residential, commercial and small industrial customer energy conservation efforts. Minnesota Power has expanded CIP since 1991 and will continue this program through the year 2000. Estimated carbon dioxide emissions avoided through expanded energy conservation since 1991 are about 30,000 tons per year as of 1994, and are expected to reach approximately 198,000 tons equivalent CO₂ emissions avoided per year by the year 2000.

3.
Heat Rate Improvements at Existing Coal Generation Facilities. Minnesota Power formed a Heat Rate Improvement Team which has identified and implemented significant improvements in the energy efficiency of Minnesota Power's coal-fired generation facilities since 1991. Estimated equivalent carbon dioxide reductions achieved since January 1, 1991 are approximately 71,000 tons per year as of 1994. Efforts to improve heat rate will continue.

4.
Expanded Use of Renewable Biomass (Wood and Wood Waste). Minnesota Power operates the M.L. Hibbard/Duluth Steam District No. 2 steam plant for the City of Duluth. This facility provides process steam to a paper mill and a recycled fiber plant. Acceptable fuels at the facility include coal, natural gas, wood chips and wood waste. The plant has sought to maximize use of renewable wood chips and wood waste as a fuel since 1991 and will continue this effort to the extent that appropriate fuel is economically available. This effort has resulted in a reduction in the amount of CO₂ emissions per thousand pounds of steam produced by approximately a factor of two since 1990. The net balance of CO₂ emissions from the facility have been reduced by about 22,000 tons per year in 1994, compared to 1990.

5.
Tree Planting, Sequestration. Provided that adequate agreements can be reached, Minnesota Power will establish 2800 acres of short rotation woody crops in western Minnesota. Contracts are currently being formed with farmers involved in the Conservation Reserve Program to plant hybrid poplars. By 2000, annual sequestration averaging 9.17 tons CO₂ per acre is expected, providing about 26,000 tons per year in equivalent CO₂ reductions.

6.
Expanded Generation from Existing Hydro Electric Sources. In 1991, Minnesota Power completed conversion of Thomson Unit 1 from 25 cycle to 60 cycle generation, allowing the unit's capacity rating to be increased by 5 megawatts since 1991. Additional hydroelectric generation from this unit displaced coal generation providing an equivalent of about 19,000 tons per year CO₂ emission reduction as of 1994. This level of generation is expected to continue through 2000.

7.
Transmission Upgrade. Minnesota Power will upgrade transmission service to Crow Wing County, Minnesota in 1996, resulting in reduced energy losses and more efficient power supply delivery capability. Installation of a new substation will allow delivery of more power to the area at a higher transmission voltage, resulting in reduced transmission energy loss. Preliminary energy loss reduction estimates are equivalent to offsetting approximately 8,000 tons of CO₂ emissions per year.

8.
Reduce Reactive Power Losses. Minnesota Power will replace approximately three capacitor banks per year, through the year 2000. As a part of its normal maintenance, Minnesota Power replaces capacitor banks, which result in energy savings due to reduced reactive power losses. By the year 2000, the equivalent CO₂ reduction from this energy savings is estimated to be approximately 840 tons per year.

9.
Efficient Light Installation. In 1993, Minnesota Power began to replace light fixtures with energy efficient lighting at its corporate headquarters in Duluth, Minnesota in conjunction with other planned activities. As of 1994, energy savings equivalent to a reduction in CO₂ emissions of approximately 250 tons per year were achieved. Minnesota Power will continue efficient lighting installation, with associated CO₂ reductions expected to increase to approximately 750 tons per year by the year 2000.

If all nine projects are accomplished as planned, Minnesota Power's system CO₂ equivalent greenhouse gas emissions in the year 2000 will be reduced by about 625,000 short tons per year. This projection does not include any greenhouse gas reduction which may result from Minnesota Power's participation in any of the Industry Initiatives.

Minnesota Power will continue to evaluate projects which have merit considering their cost-effectiveness while applying standard economic analysis. methods without valuing greenhouse gas emissions. Some projects which Minnesota Power has under consideration, or has already implemented, for which equivalent CO₂ emission reductions have not been estimated include:

• Electric Vehicle Development. Minnesota Power and Schott Power Systems are cosponsoring the "Inter-City Electric Vehicle Transportation Demonstration." The project recently received a recommendation by the Legislative Commission on Minnesota Resources (LCMR) for funding approval by the Minnesota legislature. Upon approval by the full legislature, Minnesota Power will contribute $30,000 cash and $20,000 of in-kind contributions and Schott Power Systems will make a $10,000 in-kind contribution to a total budget of $210,000 for 1995/1996. This project will be the first demonstration of its kind in the nation to show the feasibility of using electric vehicles for long-distance commuting in a northern climate. Charging stations will be placed at the Minnesota Power corporate office in Duluth, Minnesota, near the Minnesota State Capitol in St. Paul, Minnesota and near Hinckley, Minnesota, which is about half-way between those two cities. Duluth is about 150 miles from St. Paul. The electric vehicle to be demonstrated has a 70 to 90 mile range between charges, can be recharged in fifteen minutes to a half hour, and has a top speed of 80 miles per hour. Additional information about this project is provided as Attachment B to this Participation Accord.
• Waste Paper Recycling Development. Minnesota Power's subsidiary, Synertech and Pentair established operation of the Duluth, Minnesota, Superior Recycled Fiber Industries (SRFI) facility in 1993. This facility converts office waste paper collected from the midwestern United States to recycled fiber pulp which is being used by Minnesota paper manufacturers to help achieve post-consumer recycled fiber content goals. The SRFI facility produces enough pulp to serve the needs of a small, moderate sized papermill, reducing demand for harvest of trees for pulpwood. Another benefit with paper recycling is the avoided placement of the bulky paper in landfills which are experiencing storage capacity problems. Once in the landfill, the paper decomposes, emitting greenhouse gases such as methane and carbon dioxide to the atmosphere.

  As of 1994, SRFI processes about 120,000 tons of recycled paper annually to produce about 95,000 tons of pulp per year. SRFI recycled fiber pulp production is projected to increase over the next few years. Minnesota Power has not estimated the equivalent greenhouse gas emission offset benefits of this project.

• Tree Planting, Sequestration. Minnesota Power is investigating expanding its 2800 acre commitment for planting of hybrid poplars described above (Project #5).

• Landfill Gas. Minnesota Power is pursuing projects which involve production of electricity from gas collected from landfills. Landfill gas can contain about 50% methane by volume, so collection and combustion of landfill gas reduces methane emissions to the atmosphere.

• Teleconferencing. Minnesota Power installed a teleconferencing facility in 1993 at its corporate headquarters m Duluth, Minnesota. This facility has reduced the need for personnel to travel to meetings, avoiding emissions of greenhouse gases associated with transportation.

B.

Minnesota Power will report annually on activities and achievements under the Climate Challenge Program. Results achieved during each year shall be reported in a clear and understandable manner that is consistent with the guidelines adopted pursuant to Subsection 1605(b) of the Energy Policy Act in the Climate Challenge accounting protocols in Exhibit B of the Climate Challenge Program MOU. The first such report may include a description of the activities and achievements of Minnesota Power prior to its becoming a participant in the program, expressed on an annual basis to the extent possible.

C.

Minnesota Power will confer with DOE on or before January 19, 1997, to evaluate jointly the progress of Minnesota Power in achieving its Climate Challenge Program goals and to discuss possible adjustments to its voluntary commitments.

D.

The Climate Challenge Program representative for Minnesota Power will be David P. Jeronimus, 30 West Superior Street; Duluth, Minnesota 55802. Minnesota Power agrees to notify DOE prior to, or in any event, no later than 30 days after any change in the contact.

A.

DOE's commitments to Minnesota Power are those set out in Section III of the Climate Challenge Program MOU, which are hereby incorporated in this Participation Accord by reference.

DOE will consider Minnesota Power requests to intervene in regulatory proceedings of federal, state and local commissions and boards on issues pertinent to the Climate Challenge Program. Before DOE intervenes in regulatory and other proceedings pertaining to Minnesota Power for purposes of addressing Climate Challenge Program issues, it will provide notice to Minnesota Power.

C.

DOE will provide an annual report to Minnesota Power describing the actions that it has taken to fulfill its commitments under Section III in Exhibit C of the Climate Challenge Program MOU and the results of those actions.

D.

The Climate Challenge Program representative for DOE, who will serve as liaison to Minnesota Power, will be Allan Hoffman, Department of Energy, Room 6B-128 (EE-10), 1000 Independence Avenue S.W., Washington, D.C. 20585. DOE agrees to notify Minnesota Power prior to, or in any event, no later than 30 days after any change in liaison responsibilities or personnel.

A.

Use of DOE-developed materials by Minnesota Power will be governed by the provisions of Section IV of the Climate Challenge Program MOU, which are hereby incorporated in this Participation Accord by reference.

B.

In addition to the foregoing provisions, DOE and Minnesota Power agree to act in accordance with the principles set out in Section I of the Climate Challenge Program MOU and the general provisions set out in Subsections V.A- V.D, V.F and V.G of the Climate Challenge Program MOU, which are hereby incorporated by reference.

C.

Either party may withdraw from this Participation Accord or any of its activities under the Climate Challenge Program without penalty and without being subject to remedies at law or equity.

(Original signed by)
_____________________
Allen D. Harmon
Group Vice President
Electric Utility Operations
Minnesota Power

Date: February, 3, 1995

(Original signed by)
_____________________
Secretary of Energy
U.S. Department of Energy

Date: February 3,1995

Please send comments to:
Lawrence.Mansueti@hq.doe.gov