Fulton County Mud Road Landfill Gas Capture (VCS 834)

[hai-yr]

Creating a thread to investigate the Fulton County Mud Road Landfill Gas Capture project in Johnstown, New York and its associated carbon credits. The project details can be seen here: https://registry.verra.org/app/projectDetail/VCS/834

[hai-yr]

Project Summary:

"The Fulton County Department of Solid Waste (FCDSW) owns and operates a landfill gas collection and control
system at the Mud Road Sanitary Landfill located in the Town of Johnstown, New York. The project activity
consists of the installation of an active gas collection and control system which collects landfill gas and sends it
to a landfill gas to energy facility for destruction. The destruction of methane in LFG that otherwise would be
vented to the atmosphere results in a net reduction in CO2-equivalents."

Other points:

• Project start date of June 4, 2010
• The project verification applies the CDM baseline and monitoring methodology, ACM0001
• The first crediting period is June 4, 2010 to June 3, 2020
• The estimated emission reductions during the first crediting period are 365,720 mt CO2e
• No credits were sought for displaced grid emissions for the power generated by the LFGTE facility.
• The project technology consists of the collection system (landfill gas extraction wells, horizontal collection piping, air operated dewatering pumps) and two Caterpillar G3520C internal combustion engine-generator sets, including associated monitoring equipment. Prior to the project, LFG was collected and destroyed in an open flare.
• Baseline emissions are calculated as the total quantity of methane destroyed by the Project (MDproject,)
  minus the quantity of methane that would have been destroyed in the baseline scenario in the year 2006
  (MDBL,2006), multiplied by the global warming potential for methane.

[hai-yr]

Initial Research Questions on Project:

• How might recent/upcoming legislation on methane affect the additionality of projects like this in the future?
• What GWP (global warming potential) was used for methane on the project?
  [Edit: Global Warming Potential value for methane for the first commitment period is 21
  tCO2e / tCH4]
• How long did it take to return the initial investment and is running the plant now profitable without the credits?

Potentially applicable known issues with landfill gas capture:
https://ec.europa.eu/clima/system/files/2017-04/clean_dev_mechanism_en.pdf

• Default assumptions for the rate of methane captured under pre-existing collection systems or regulations are unjustified and have the potential to overestimate emission reductions “CDM landfill methane projects, for example, realize just 35% of their projected emissions reductions.” https://www.offsetguide.org/avoiding-low-quality-offsets/vetting-offset-projects/methane-capture/
  https://www.scsengineers.com/wp-content/uploads/2015/03/Stege_Methane_Emission_Reductions_LFG_Projects_Developing_Countries.pdf

• Potential for perverse incentives for policy makers not to regulate landfills or enforcing regulations in place

• Perverse incentives for project developers to manage landfills in ways that increase methane generation

• Perverse incentives for policy makers not to pursue less GHG-intensive waste treatment methods, such as composting or incineration

• Some landfill gas projects exclude waste pickers and informal sector recycling, reducing overall rates of reuse and recycling

[sichen1234]

The one I'm most concerned about is “CDM landfill methane projects, for example, realize just 35% of their projected emissions reductions." How is that happening? Does this project address that issue adequately?

Of the others, I feel:

1. "Potential for perverse incentives for policy makers not to regulate landfills or enforcing regulations in place" and "Perverse incentives for policy makers not to pursue less GHG-intensive waste treatment methods, such as composting or incineration" --> This is a common concern. For example, is it better to recycle more plastic or use less plastic?
2. Perverse incentives for project developers to manage landfills in ways that increase methane generation --> This could happen. For example, carbon credits to reduce HFC-23 refrigerant gas caused more HFC-22 gas production. But in reality, but how easy is that to do, and is it worth it for the developer to do this?
3. Some landfill gas projects exclude waste pickers and informal sector recycling, reducing overall rates of reuse and recycling. --> Has this actually happened? How do we know if it is happening specifically at this project?

[hai-yr]

I am looking at this paper https://www.scsengineers.com/wp-content/uploads/2015/03/Stege_Methane_Emission_Reductions_LFG_Projects_Developing_Countries.pdf

1. Right, I just saw some news about how much investment is going into these projects: https://www.bizjournals.com/houston/news/2022/04/28/waste-management-rng-landfill-gas-investments.html#:~:text=Classified%20%26%20Legals-,Waste%20Management%20investing%20%24825M%20to%20add,natural%20gas%20plants%20at%20landfills&text=Jim%20Fish%2C%20president%20and%20CEO%20of%20Waste%20Management.&text=The%20investments%20will%20help%20WM,fleet%20with%20RNG%20by%202026.
   This is also an interesting article, because it highlights that there are also business interests in separating food waste for more efficient conversion to gases.
   https://www.wastedive.com/news/vanguard-renewables-neil-smith-blackrock-food-waste-rng/627871/

2. That is a good point... I will need to look into it more.

3. I have a feeling there are less waste pickers in the US in New York than in developing countries. The only way to know for sure would likely be if it were in the project docs or in contacting someone at the project directly.

[hai-yr]

"The project has elected to use the US EPA LandGEM Landfill Gas Emissions model instead of the CDM Tool... This is more accurate for projecting landfill emissions in the future for landfills in the United States and was used in the ex ante emissions reductions analysis."

[sichen1234]

This is pretty interesting. Does this mean that the equipment will capture the methane at a landfill and then combust it, instead of letting it leak into the atmosphere? Is the calculation the difference of combusted versus leaked methane? This should be in the original project description as well as the verification reports.

Yes, that GWP factor is too low now. Even the 100 year GWP is now 29, and 20 year GWP is over 80x. So that's very good for these credits.

On the other hand, how is it really monitored? You can find this in the verification reports. Are they reviewing the data? Do they address the potential issues with the project?

Finally where can you buy these credits, and what vintages are available?

There's also the interesting question of buying very old vintage years -- are they just as effective as buying current year offsets?

[hai-yr]

"Immediately prior to the project being installed, the landfill gas collection and destruction system included a central candle stick flare unit, a Hauck blower, and extensive monitoring equipment." So before, the methane was solely flared through the central candle (maybe also leaked it separately?).

"The project achieves greenhouse gas emissions reductions through the collection and destruction of methane from the landfill, which converts the methane to carbon dioxide and prevents the methane from being vented to the atmosphere." The project generates electricity which is connected to the grid but not factored into the credits calculations.

"Because the landfill and the methane it generates would exist with or without the project and the project itself generates no new greenhouse gas emissions, the project was clearly not implemented to generate GHG emissions for the purpose of their subsequent reduction, removal or destruction." I think this is valid, but it does raise questions about future projects that have come after carbon markets have grown, and how the incentives could change.

Flow meters and a Siemens analyzer monitor the quantity of landfill gas and the fraction of methane that is sent to the engines that run on the gas. Measurements from the SCADA system (connected to the engines) and manual operator logs when plant is operational. Plant operations from the first 6 months implied the plant is running 98.9% of the time.

The credits are available on Patch. The vintage available is from 2020.

[sichen1234]

Interesting. So a few questions based on this:

1. Does this mean that before the project, methane was flared with the central candle stick flare, and afterwards, methane is burnt to generate electricity and fed back to the grid?
2. How is the amount of methane destroyed/combusted in absence of project obtained?
3. Where do they get the CO2 emissions intensity of baseline electricity displaced?
4. How do they justify that this project is "additional"?

Also, does any third party research on landfill gas capture point to potential issues about these measurements?

[sichen1234]

The baseline and additionality of a voluntary offset are a little different than those for an instrument based purely on values of energy produced or methane captured. This is even different than a compliance carbon credit, which is just based on the amount of measured emissions.

Baseline for an offset is the amount of emissions before the project, ie how much methane was coming out of the landfill without the gas capture project.

Additionality for an offset is whether the project would've happened without the carbon offset. It is super important that a project is additional, or the buyer of the offset really shouldn't be able to claim the emissions reduction on their account.

You're right that issuing credits over shorter, one year horizons is better. It's important to reassess additionality and baseline more regularly.

It's not correct to use old methane CO2 equivalents. It's really not good to waive the requirement for reassessing additionality ten years after a project started. Ten years is probably too long to start with, and then being able to renew offsets after that is relying on assumptions that are very outdated.

[hai-yr]

Regarding CEF(elec,BL,y) in the larger equation: "No emission reductions are being claimed for grid-connected electricity generation that is offset by electricity produced from landfill gas destructed at the IES facility. Also, no thermal energy is produced using the landfill gas and the pre-project baseline year is 2006, so equation (1) is reduced to:
BEy = ( MDproject,y – MDBL,2006) * GWPCH4 "

Yes, in regards to the economics of the project, after 10 years it is really unclear what the profitability is. To me it would make sense if the project disclosed its return on investment so far and current economics of keeping the plant open... to show it still needs to sell credits to keep the project going.

[sichen1234]

So I wonder what "collects landfill gas and sends it to a landfill gas to energy facility for destruction" means?

What is "destruction" of landfill gas at a "landfill gas to energy facility"?

I suppose we could find out, if the project were credible to start with.

[hai-yr]

from this article:
https://www.powermag.com/the-clean-and-dirty-of-landfill-gas-power/

[sichen1234]

That's what I thought landfill gas collection systems would do. It generates some kind of energy. So where did it go? If it's not sent to the grid, did it get used at a county facility? Was it to replace some grid energy, or for a new building or use that wasn't connected before?

This is not making sense to me. Before the project, there already was a flare candle. Was it not capturing all the methane, so that a lot more was being vented? So now they are capturing the methane and burning it to make electricity, which reduces the emissions because burning the methane to CO2 is better than venting it directly. That's great, but it doesn't mean the methane is "destructed." It's just burnt, like flaring (righ @brioux?) So they have to count the CO2 emissions of the methane being used for electricity.

[hai-yr]

Here is the written justification for the 10% discount rate:

[hai-yr]

From searching the project documents for some commentary on "debt": "The County has not issued General Obligations Bonds since 2001 except for refunding bonds. This is evidence of the County's very low tolerance for borrowing money to invest in discretionary projects and their reluctance to incur additional debt service expenses. Municipal governments have significant mandatory expenditures that are built into the tax rate. Political pressure may impact the municipalities' appetite for incurring more or less debt. A recent New York Times article detailed many of the most severe cases of municipal financial problems and was provided to the validator for review." - So it seems unclear/unlikely that they made an effort to try to secure debt for the project, but rather provided evidence of the difficulty/rareness of obtaining a loan.

[brioux]

@hai-yr your point makes a lot of sense…

@sichen1234, the discount rate should refer to present value of cash raised for investment and the associated risk.

this is not the interest rate, which could reflec efforts by governments or investors to minimize financial risk of project by linking rates to environmental performance.

There is not a lot of history on the impact of sustainable financing for the risk of a project. So far these kinds of instruments have not had a significant impact on cost of capital. This needs to change

[hai-yr]

@brioux so do you think they had a reasonable expectation that they would not be able to secure debt, or that in not trying to go through the process of securing debt that they compromised the additionality of the credits they produced?

[brioux]

@hai-yr their assumption is based on perceived risk of the project as its own business unit consistent with that of a private company. I guess this is the basis of the 10% rate taken from the referenced handbook.

Need to understand why they assume debt is unavailable when assessing their discount rate using a weighted average of cost of capital...

I don't think this compromised additionality. By applying a private sector discount rate they may have overestimated risk and expected return (value of credits) required by the project. However, I imagine this was a realistic assumption for the nature of the project. Sustainable financing initiatives should be considered, and related public policy initiatives, such as included in the Inflation Reduction Act mentioned by @NothingToContribute (Colin/agorafiliax)

[sichen1234]

Actually their line of reasoning goes against some fundamental theories of modern finance, such as the Capital Asset Pricing Model and Modigliani Miller. What these theories say is that the required rate of return on an investment can be objectively determined from the market, not subjectively based on a particular investor (in this case a county government)'s preference for risk or using debt versus equity.

I don't think this project was additional back in 2006, and it wasn't even re-evaluated for additionality in 2020.

My conclusion here is that energy-related projects, including this one and the Badhla solar project, require too many economic assumptions about their additionality. It's better, as @brioux suggests, to finance them with sustainability linked bonds and then try to get a premium for the energy output based on their renewable attributes.

[sichen1234]

I don't think this project was additional back in 2006, and it wasn't even re-evaluated for additionality in 2020, when the technology was much more prevalent.

Both this project and the Badhla solar project relied on a lot of complex reasoning to justify their additionality. They involved assumptions which were very specific to the projects but did not consider the overall market for the technologies.

I think a simpler and better test of additionality would be like what the Gold Standard adopted for renewable energy projects in 2021: Is this technology already 5% of the market? If so then it cannot be considered additional any more.

[hai-yr]

My take is that there should definitely not have been a renewal of credits in 2020 without an assessment of the economics of running the project, and the amount of due diligence done on the possibility of securing debt in 2006 puts the original project's additionality into question.