Welcome to the premier issue of Climate Challenge, a quarterly newsletter designed to keep us all up to date on the Climate Challenge Program. As you know, Climate Challenge is a joint utility/ government program to reduce greenhouse gas emissions emphasizing voluntary, cost-effective actions. Utilities across the country are participating. With this newsletter, we can share highlights of these utilities' efforts and their success stories, and pass along new ideas.

We at the Department of Energy (DOE) are heartened by the overwhelming interest shown by the electric utility industry in the Climate Challenge Program. The signed agreements between Climate Challenge and individual utilities represent more than 60% of the electric industry's 1990 kilowatt-hour generation or carbon emissions. That's a very high participation rate.

The tons of carbon to be reduced by the Climate Challenge utilities are important, but just as important is the change in attitude we are seeing among utilities. In contrast to approaches to prior issues such as acid rain, utilities are taking a proactive perspective by being engaged on the issue of climate change. An attitude of cooperation, and also discovery, is clearly evident as utilities learn of the many ways they can reduce carbon emissions in their day-to-day operations and at the same time cut costs, increase profits, and serve customers better--even in these times of industry restructuring. Changes in attitude are hard to quantify and sometimes under-appreciated by those of us in government who are accustomed to a sometimes adversarial relationship with industry. We believe that Climate Challenge efforts will reward everyone involved and will result in a win-win for the U.S. economy and the global environment.

As with the rest of the program, this publication is a joint effort of the DOE and five utility industry trade groups: the Edison Electric Institute, the National Rural Electric Cooperative Association, the Large Public Power Council, the American Public Power Association, and the Tennessee Valley Authority. If you work with a Climate Challenge utility, we want to hear from you. This is your publication. Tell us what is going on, what is working, what isn't, and what kinds of hurdles you have been able to overcome at your utility.

Enjoy this issue. We look forward to hearing from you.

Larry Mansueti
Director, Climate Challenge Program
U.S. Department of Energy
Office of Utility Technologies, EE-10
Washington, DC 20585
202-586-2588
lawrence.mansueti@hq.doe.gov

Actions taken by electric utilities are expected to result in an annual reduction of more than 44 million metric tons of carbon-equivalent emissions in the United States in 2000. That's the conclusion of the U.S. Department of Energy (DOE).

"Our industry has demonstrated that a vigorous, voluntary approach toward curbing greenhouse gas emissions is the way to go," says Thomas Kuhn, president of Edison Electric Institute (EEI), the trade association for investor-owned utilities. "We will continue to put these programs in place while opposing government and international mandates that would cost the U.S. economy thousands of jobs. Utilities have met the challenge and are continuing their leadership role in working with the government to find creative and effective ways to improve the environment."

The source of the reductions, as pledged by individual utilities, is: nuclear plants improvements (12.8 million metric tons of carbon equivalent [MMTCE]); miscellaneous improvements (10 MMTCE); energy efficiency (7.4 MMTCE); fossil plants improvements (7.4 MMTCE); methane recovery, forestry, and fly-ash reuse (3.4 MMTCE); and renewable energy technologies (3.2 MMTCE).

One way utilities can reduce emissions is through involvement with industry-wide initiatives. Among the initiatives that will lead to the reductions are:

"U.S. Urges Binding Accord on Global Warming," said the Wash-ington Post. "U.S. Seeks Target," said the Financial Times. The headlines coming out of the second Conference of Parties (COP-2) created speculation within industry that the U.S. government had lessened its support for voluntary climate change programs, such as Climate Challenge. But in the months following the July conference, discussions and clarifications between the U.S. utility industry and the Clinton administration have served to reaffirm support for the voluntary Climate Challenge program.

What was all the fuss about? The Clinton administration announced a shift in U.S. global climate policy at COP-2, held July 8-19 in Geneva, Switzerland. Undersecretary of State Timothy Wirth, who headed the U.S. delegation, called for future negotiations to focus on an agreement that "sets a realistic, verifiable, and binding medium-term emissions target." Wirth explained the policy shift by noting that, "The science calls upon us to take urgent action; the [Inter-governmental Panel on Climate Change] report is the best science we have, and we should use it." Wirth said that few nations in either the developed or developing world have been successful in meeting the commitments established during the first international conference on climate change in Rio de Janeiro in 1992. In his talking points, Wirth said that "countries treat non-binding goals with varying degrees of effort, seriousness, and success." He stated that "objectives are needed to ensure that all nations will honor their commitments to reduce emissions."

Reactions to the New Policy

Reaction to the U.S. policy change was immediate. The Global Climate Coalition, a leading business group involved in climate change policy, accused the Clinton administration of "pursuing a political agenda. This decision was made without adequate economic facts and is based on uncertain climate science," said Executive Director John Shlaes.

On the other hand, the Sierra Club's Roni Lieberman told Environment Week, "The administration is right to recognize that we need a binding treaty. The science has shown that global warming has begun and that human pollution is the key reason for it."

The utility industry, including the trade associations representing Climate Challenge participants, reacted negatively to Wirth's call for binding targets, with some questioning the impact the change in U.S. position will have on Climate Challenge participation. John Novak, climate change issue manager at the Edison Electric Institute (EEI), said Wirth's remarks "have raised serious concerns in the electric utility industry." He noted that 600 electric utilities have already agreed to reduce, avoid, or sequester 44 million metric tons of carbon-equivalent emissions in the year 2000.

At the same time, Novak made it clear that if targets are agreed to, utilities expect "U.S. policymakers to take into account the greenhouse gas reductions that have--and will be--achieved under this voluntary program." Novak was supportive of U.S. opposition to mandatory and harmonized policies, such as worldwide carbon taxes or caps on specific industries, and agreed with Wirth that we must see actions to reduce emissions in developing nations.

The Administration Clarifies its Position

The Clinton administration moved quickly to assure industry that its support for realistic, verifiable, and binding targets and timetables is not meant to undercut the voluntary Climate Challenge program. In a letter to EEI, Eileen Claussen, assistant secretary of state for oceans and international environmental and scientific affairs, wrote, "Let me say publicly and for the record that the administration greatly values these voluntary programs and strongly supports the continuing efforts of our partners under them. In none of our statements in Geneva did we intend in any way to slight these programs. Despite inadequate funding from Congress, we remain committed to working with our partners in the private sector to continue and enhance voluntary approaches."

Wirth followed up with a letter to EEI Chairman Linn Draper. In it he said, "Over the past several years, your industry has played an extraordinarily constructive role in working with the administration to reduce greenhouse gas emissions. Had industry not responded as vigorously, U.S. emissions would be significantly higher than they are projected to be. Moreover, these partnerships are pointing the way toward economically sensible policies that could become part of the U.S. response to an internationally negotiated, medium-term, and binding treaty target, as outlined in Geneva."

Wirth has also stressed the need for joint implementation, the program by which companies in developed nations would receive credit toward domestic emission-reduction requirements by sponsoring emission-reduction projects in other countries. At a COP-2 press briefing, Wirth said developing countries "will increasingly be looking at investments from the developed world, which has the most advanced technology. [Joint implementation is] going to happen increasingly with the private sector, with enlightened energy companies from the developed world working with companies in the developing countries. Governments can help with policy to guide this, but the implementation is increasingly moving to the private sector. We believe that's the way it should be."

Testifying on behalf of the administration in the Senate this September, Wirth repeated support for joint implementation by stating that "we believe that the U.S. recommendation related to binding medium-term targets and a longer-term concentration goal will help ensure that the international community focuses on more sensible emission reduction goals (knowing that the goal must be met), and on the need for all nations to contribute to the solution over the long-term. In addition, these two ideas are critical prerequisites to enabling important and cost-effective joint implementation and interna-tional emissions trading opportunities,which we believe are essential. ...in response to consultations with key stakeholders, these efforts are intended to make it clear over the long-term where we are going and therefore to help guide corporate planning and investments."

On the economic front, Claussen gave assurance in September testimony before the House Subcommittee on Energy and Power that "the administration believes that any future commitment must be predicated on ensuring that the U.S. economy remains robust and internationally competitive."

Delegates from most of the countries of the world met in Rio de Janeiro in June 1992 to discuss what should be done about global warming. Delegates at that meeting decided that the developed countries should aim to reduce their greenhouse gas emissions for the year 2000 to 1990 levels. The developing countries agreed to do what they could. It was further agreed that the countries that ratified this treaty would meet annually to track progress in emissions reductions and scientific developments, and to make plans for the future.

The first meeting of the Conference of Parties (COP-1) was held in April 1995 in Berlin. Out of that meeting came the Berlin Mandate. The mandate said the post-2000 period needed to be addressed.

Indications from the Intergovernmental Panel on Climate Change - the science body established to monitor global warming - were that global warming wasn’t going away. In addition, most of the developed countries weren’t going to achieve 1990 emission levels by 2000. Of the major countries, only Germany and Britain would go back to earlier emissions levels; Germany was shutting down inefficient power plants in former East Germany, and Britain moved to gas-fired power plants after privatization of the electric industry. The delegates in Berlin agreed, therefore, that by the end of the third meeting of the COP (scheduled for Kyoto, Japan, in December 1997) developed countries must adopt post-2000 measures.

Because of its CO₂ mitigation plan, a 305-megawatt natural gas cogeneration plant being developed jointly by PacifiCorp and the city of Klamath Falls, Oregon, has been granted an exemption from having to conduct a conventional needs analysis. The Klamath Cogeneration Project was granted the exemption by the Oregon Energy Facility Siting Council under a special legislative CO₂ mitigation program.

The Klamath project consists of four measures to reduce greenhouse gas emissions:

The $160 million plant will deliver energy over the PacifiCorp transmission system and PacifiCorp will market the power from the project. The plant is scheduled to begin operating in 2001.

Salt River Project (SRP) mowed down pollution last summer. The large Phoenix-based public power agency retired more than 2000 gasoline-powered lawn mowers, replacing them with brand new electric models.

According to the Arizona Department of Environmental Quality, the switch could knock 20 tons of volatile organic compounds (VOCs) out of the air annually. VOCs are ozone precursors, reacting with sunlight and oxides of nitrogen to form urban smog. VOCs are a particular problem in Arizona where Governor Fife Symington was forced to declare an ozone emergency in the Phoenix area last summer.

SRP's project gave customers a $100 rebate toward the immediate purchase of an electric mower when they traded in a gasoline-powered mower. If they elected not to buy a new electric mower on the spot, customers got a $50 rebate on the purchase of an electric mower later. Customers who traded in other gasoline-powered lawn equipment, such as leaf blowers and string trimmers, got $20 rebates.

According to Arizona air regulators, one hour of running a gasoline-powered mower equals about 2000 miles in an automobile in terms of VOC pollution. A 3.5-horsepower gas-powered mower also produces 1560 grams of carbon monoxide (CO), 6 grams of nitrogen oxides (NO_x), and 2900 grams of carbon dioxide (CO₂) per hour, according to Edison Electric Institute. By comparison, an electric mower using 1 kilowatt-hour of electricity produces 0.001 gram of CO, 0.79 gram of NO_x, and 630 grams of CO₂.

"Our customers showed they are committed to cleaning the air," said SRP President William Schrader. Singh Suchdev, chief operating officer of an electric mower company, said, "Because of the tremendous turnout in the Phoenix area, we have been contacted by other utilities across the country and we are considering a national program later this year. The demand for electric mowers is rising as air pollution concerns increase and as consumers learn how advanced the new machines really are."

SRP is also considering holding a similar event next year, said Richard Hayslip, manager of the utility's environmental, land, and risk management programs. "One of the interesting options we are considering includes inviting other corporate planners to join to make the program even larger," he said.

At its June 12 Climate Challenge Update meeting with the Department of Energy (DOE), the South Carolina-based utility, Santee Cooper, was able to deliver some good news to department officials: a 40% increase in its estimate for CO₂ reductions by the year 2000. All Climate Challenge participants are required to make a mid-term report (which can be anytime before 2000) on progress toward their Climate Challenge goal. Santee Cooper is one of the first to report on progress achieved.

The dramatic increase in estimated reductions came largely from two areas: the new Winyah Unit 1 Turbine Efficiency Improvement Project; and an eight-fold increase in fly-ash sales between 1994 and 1996. After it was damaged by fire in December 1994, Santee Cooper committed funds to the Winyah Unit 1 turbine to improve the high and intermediate pressure section efficiencies of the unit. Through the year 2000, the upgrade will reduce CO₂ emissions by 534,000 tons. In the year 2000, the upgrade is expected to reduce emissions by 105,000 tons compared with emissions in 1990.

Santee Cooper's Supervisor of Air Quality, Jay Hudson, calls the project a "Climate Challenge success. The project has deferred future coal-fired generation, therefore saving funds while reducing CO₂ emissions."

The use of coal ash in the production of cement can reduce the amount of CO₂ produced, because the volume of CO₂ emitted during the process is directly proportional to the lime content of the cement. Santee Cooper estimates that its sales of ash will result in savings of 87,188 tons of CO₂ for each year between 1996-2000 (up from a savings of 11,000 tons in 1994).

Other Santee Cooper Climate Challenge projects are efficiency improvements to fossil and nuclear fuel units, demand-side management programs, and tree planting activities. "We think that one of our program's strengths is the breadth of its projects," said Hudson. "Some people think that in a time of deregulation and cost-cutting, utilities can't do good things for the environment. But that's not true. If you look at our projects, you'll see that most of them not only reduce emissions, they also help our bottom line and build customer satisfaction," he said.

Santee Cooper's presentation to the DOE was divided into four sections:

1) the addition of the Winyah Unit 1 efficiency improvement project to their Climate Challenge Accord; 2) a project-by-project numerical update on year 2000 commitments; 3) a description of each project and its status; and 4) methodologies for each project's emission reduction calculations. For more information, contact Jay Hudson of Santee Cooper at 803-761-8000, extension 5183.

Proving the strength of voluntary greenhouse gas reduction programs, UtiliTree Carbon Company has offered $2.4 million in funding to five forest management projects to help sequester or reduce greenhouse gases. UtiliTree Carbon is a nonprofit company formed by 40 U.S. electric utilities through the Edison Electric Institute (EEI) to support voluntary greenhouse gas reduction programs through forestry. It is one of a number of Climate Challenge industry-wide initiatives (see The Meetings Leading up to COP-2).

The five winners came from a pool of 32 proposals and represent diverse approaches, including rural tree planting, forest preservation, and forest management. The five will produce over 2 million metric tons of CO₂ reductions over the lives of the projects, at a cost of less than $1 per ton of CO₂, according to EEI.

"These projects represent innovative and exciting approaches to managing our natural resources and greenhouse gases," said Gary Kaster, chairman of UtiliTree Carbon and a forestry official with American Electric Power Company. "These projects will demonstrate to the public and policymakers that a voluntary, flexible approach to emissions reductions can work. Forest carbon management opportunities can be among the most economical ways to address CO₂ emissions, often costing only a few dollars per ton. Joint implementation of international projects with developing nations, such as we see here, is certain to be a key option for the future."

The five projects selected are:

ested, nonindustrial land in western Oregon that otherwise would not be replanted. If the stands are eventually harvested, the timber will be used for long-term purposes, such as construction, which will keep the CO₂ sequestered.

The fuel cell is emerging as a legitimate contender in the race for new, low-emission generating technologies, both at the utility scale and, perhaps, in transportation. Fuel cells use electrochemical reactions to generate electricity, with practically none of the emissions associated with combustion generators.

Four garage-size cubes in Santa Clara, California, house what may be the future of utility generation-- the molten carbonate fuel cell that uses natural gas to generate electricity with only minuscule emissions. "We are demonstrating the future of fossil energy," said Robert S. Kripo-wicz of the Department of Energy's (DOE's) fossil energy division, "not a relic of the past but a new era of future fuels made in America, and made environmentally acceptable by American technology."

The Santa Clara 2-megawatt fuel cell demonstration is the first to use the molten-carbonate technology in a utility setting. Molten carbonate uses carbonate salt heated to 649°C (1200°F) to conduct free-flowing electrons in the cell. It is the product of more than 20 years of government-industry research and development. A molten-carbonate fuel cell operates at nearly twice the efficiency of a coal combustion plant, reducing CO₂ emissions by nearly 50%.

Because of their small size, cleanliness, and modularity, fuel cells are particularly attractive for urban locations, close to the users, as part of the movement for distributed generation. They could also become important in export markets.

DOE put some $28 million into the first-of-a-kind project at Santa Clara. Private sponsors, including the Santa Clara municipal utility, put another $23 million into the project. The fuel cell technology was developed by the Energy Research Corporation of Danbury, Connecticut. Other partners in the project include the Electric Power Research Institute, Los Angeles Department of Water and Power, National Rural Electric Cooperative Association, Sacramento Municipal Utility District, Southern California Edison Company, the city of Vernon, California, and the Santa Clara Demonstration Consortium, which includes the Salt River Project and the Northern California Power Agency. The Santa Clara project is the first major milestone in the efforts of the utility-led Fuel Cell Commercializa- tion Group to commercialize molten- carbonate fuel cells for utility use.

Fuel cells also offer promise as a transportation technology, a sector in which achieving greenhouse gas reductions has been elusive. Ballard Power Systems of Vancouver, British Columbia, has developed a small, high-density fuel cell--the proton exchange membrane technology--that has been demonstrated in transit buses.

Attention climate change cybernauts:

The Edison Electric Institute (EEI), with Energy Department support, has launched a site on the World Wide Web devoted to material about joint implementation. Joint implementation is the term used by the United Nations to describe projects involving interests in two or more countries that are designed to reduce greenhouse gas emissions.

Run by EEI's International Utility Efficiency Partnerships program, JI Online provides a wealth of information on what's going on in the world of joint implementation, including meeting schedules, news, and background. The JI Online address is: http://www.ji.org

The folks at JI Online also run a joint implementation mailing list that is quite useful. To subscribe send an e-mail message to: listserver@eei.org

In the message space, enter the words SUBSCRIBE JIOnline. That's it!

Another interesting Web site is the World Business Council for Sustainable Development (WBCSD) at:

http://www.wbcsd.ch/

WBCSD is a coalition of more than 120 international companies concerned about the environment, economic growth, and sustainable development.

Finally, don't miss DOE's Climate Challenge Web site: http://www.eren.doe.gov/climatechallenge

The site provides general information about Climate Challenge, including the memorandum of understanding, participation accords, and letters of commitment. A workbook posted on the site offers greenhouse gas reduction, avoidance, and sequestration techniques for utilities.

News Briefs

NU Looks at Landfill Methane for Fuel Cells

Northeast Utilities (NU) and the Connecticut town of Groton are partnering in research on how to reduce methane, a powerful greenhouse gas, coming from a local landfill. The experiment will use methane from the town dump to fuel a fuel cell and convert the gas into electricity. NU has put approximately $8 million into fuel cell research over the past quarter of a century.

The unit planned for installation at the landfill will produce about 140 kilowatts of power, which will be put onto the Connecticut Light & Power Company (CL&P) distribution system. CL&P is an NU subsidiary. The project is running for 18 months and should be completed this fall. The project is costing NU approximately $150,000 for installation and maintenance of the cell. The equipment itself is worth about $1.5 million and is owned by the Environ-mental Protection Agency.

28 million square feet. The utility estimates the program will save the Navy $2-$3 million in annual energy costs. The Navy, working through the SDG&E program, gave SDG&E's Big Navy Lighting Program

San Diego Gas & Electric (SDG&E) has done a $17 million lighting retro- fit for the U.S. Navy that includes 1700 buildings and covers nearly $5 million in incentives and was also able to take advantage of the Defense Depart-ment's Federal Energy Management funds. Through the program, more than 280,000 lighting fixtures were retrofitted. SDG&E says the project will prevent at least 17,700 tons per year of sulfur dioxide, nitrogen oxide, and carbon dioxide emissions. The project retrofitted hundreds of buildings at a time.

Voluntary Programs Work

Voluntary utility greenhouse gas emission reduction programs work. That's the word from the Department of Energy's (DOE's) Energy Infor-mation Administration (EIA), which collects reduction data for DOE's Voluntary Reporting program, including the Climate Challenge program. According to EIA, some 70% of the projects identified in the reporting program involved electricity. Collec-tively, more than 14 million metric tons of carbon-equivalent reductions were reported for calendar year 1994. More than 600 utilities, working with DOE, have agreed to reduce, avoid, or sequester 44 million metric tons of carbon-equivalent emissions in the year 2000. That far exceeds DOE's projections for both utility participation and environmental benefits.

Photovoltaic System Powers Bronx Bus Depot

The New York Power Authority (NYPA) has installed a 300-kilowatt photovoltaic power system on the roof of the New York City Transit Gun Hill Road Bus Depot in the Bronx. The system, the size of four football fields, can produce about half of the Gun Hill depot's electric load.

"This solar project will provide the best of all worlds," said C.D. Rappleyea, NYPA Chief Executive Officer. "It will reduce the transit authority's energy bills while producing electricity that is absolutely pollution free and noiseless, and it requires little or no maintenance."

The project had a total cost of $2.6 million and NYPA was assisted by a $370,000 grant from the Department of Energy through the Utility Photo-Voltaic Group Team-Up program, formed in 1992 to promote use of photovoltaics by utilities.

Produced for the
U.S. Department of Energy
1000 Independence Avenue, SW
Washington, DC 20585

by the
National Renewable Energy Laboratory, a DOE national laboratory

DOE/GO-10096-273
November 1996

For more information on the Climate Challenge Program

U.S. Department of Energy
Larry Mansueti
202-586-2588

Edison Electric Institute
John Novak
202-508-5655

American Public Power Association
Rebecca Blood
202-467-2929

National Rural Electric Cooperative Association
Rae Cronmiller
703-907-5791

Large Public Power Council
Steve Fotis
202-298-1908

Tennessee Valley Authority
Jerry Golden
423-751-6779

Climate Challenge, a quarterly publication for the Climate Challenge Program, is produced by the U.S. Department of Energy. It is written by Kennedy Maize, under contract to DOE, and designed and formatted by DOE's National Renewable Energy Laboratory. Reproduction and distribution are provided through the courtesies of the Edison Electric Institute, the American Public Power Association, the National Rural Electric Cooperative Association, and the Large Public Power Council. Please direct comments and story ideas to Kennedy Maize, 301-834-8098, or via Internet at: kmaize@IX.netcom.com.

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