Glossary

Achieving Corporate Sustainability & Operational Goals With Renewable Energy

by: Stephanie Lee | October 25, 2023

Renewable Electricity Drivers for Companies | ClimeCo Blog

In a previous blog, we outlined how renewable electricity purchases factor into greenhouse gas (GHG) accounting calculations and the different levers companies might pursue to purchase renewables. Several exciting developments have happened since then:

• Over 2,000 new companies have formally committed to Net-Zero [1]
• The Inflation Reduction Act (IRA) passed with new incentives for renewables [2]
• Total renewable energy capacity reaching 4,500 gigawatts (GW) of new renewable electricity capacity has come online globally [3]

Naturally, the next question is: How can companies use this information and new developments to advance their climate and operational goals?

This blog builds on the previous post, detailing how companies use corporate renewable energy procurement to achieve their goals and develop a renewable electricity procurement strategy.

Renewable Electricity Drivers for Companies

Our first blog post highlighted the benefits of using renewable electricity to achieve corporate decarbonization goals. However, companies also use renewable electricity to achieve operational, financial, and ESG goals beyond decarbonization. In addition to achieving sustainability goals, top company motives for procuring renewable electricity include achieving an attractive ROI, hedging against increasing electricity prices and enhancing corporate reputation.

Corporate Motives to Pursue Renewables [4]

Renewable electricity can help companies achieve these goals by:

Reducing electricity costs. The levelized cost of energy has dropped over 30% for wind and solar over the past ten years. [5] These declining costs mean that companies can procure renewables that are cost-competitive or cheaper than fossil fuels in many cases. Additionally, utilities and electric suppliers are increasingly developing new, easy-to-enroll programs for commercial and industrial customers to take advantage of declining costs without contracting separately with a renewable energy developer.

Providing long-term operational stability. For companies that want to lock in prices for a longer-term duration, many opt for power purchase agreements (PPAs). PPAs are contractual agreements for energy for 10 to 25 years. These agreements allow companies to budget for long-term pricing without worrying about market volatility.

Increasing brand credibility and supporting social impact goals. As previously mentioned, renewable electricity helps companies decarbonize and, by extension, positively impacts the environment through improved air quality and reduced impacts on water. [6] Procuring renewable electricity and having a specific project to point to can demonstrate a brand’s progress towards its environmental goals and show how companies are making tangible impacts. Additionally, companies can embed social impact goals into their procurement by supporting projects in or near disadvantaged communities, selecting procurement options that support local communities (e.g., community solar), and setting workforce requirements such that the local economy benefits.

Given the wide variety of benefits, corporate renewable electricity procurement has accelerated over the past decade from less than 1 GW before 2014 to over 16 GW in 2022 the United States alone. Additionally, the number and types of companies procuring renewable electricity have continued to diversify. These companies provide valuable case studies for others starting their procurement journeys.

Corporate Renewable Energy Procurement in the U.S. 2008 – 2022 [7]

How to Get Started

Understand your usage. Developing a renewable electricity strategy starts with understanding your existing and planned electric use. Companies should gather utility bills and calculate annual electric usage, costs, and greenhouse gas emissions. Companies should also add assumptions on how usage might change in the future, such as additions to facilities and plans for remote workers to return to offices.

Outline your priorities. Next, companies should outline their procurement priorities, including financial, operational, and ESG goals, with a cross-functional team of impacted parties.

Questions to consider:

• Are there any budget, staffing, or other constraints that the procurement plan should include?
• How important are social impact goals?
• Should specific sites be prioritized over others?
• How soon does the project need to be implemented?

These priorities will help guide decision-making and ensure the resulting strategy meets stakeholder expectations.

Identify feasible options to meet priority criteria. After outlining the company’s priorities, the next step is determining which viable options meet the priority criteria. As described in our previous blog, companies have several options for renewable electricity procurement, including onsite renewables, utility or electric supplier programs, offsite PPAs, and energy attribute certificates (EACs). Companies should assess opportunities for implementing these options and whether they meet the defined priority criteria. The outcome of this step should be a prioritized list of renewable energy opportunities to pursue.

Develop an implementation plan. Once the priority options are defined, the final step is to develop an implementation plan. This might include developing a request for proposal (RFP) for onsite or offsite PPAs, contacting the local utility, or contacting a broker, like ClimeCo, for EACs. The plan should align closely with the stated priorities regarding timing, budget, and staff resourcing.

ClimeCo supports clients in their efforts to align with renewable energy procurement. To learn more, please reach out to Stephanie Lee.

[1] Science Based Targets – Companies Taking Action
[2] Environmental Protection Agency (EPA) – Summary of Inflation Reduction Act
[3] International Energy Agency (IEA) – Renewable Power on Course to Shatter More Records
[4] Environmental Protection Agency (EPA) – The Benefits and Costs of Green Power
[5] Lazard’s Levelized Cost of Energy Analysis – Version 16.0, April 2023
[6] National Renewable Energy Laboratory (NREL) – A Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards
[7] Clean Energy Buyers Association (CEBA) – CEBA Deal Tracker Q2 2023 Public

About the Author

Stephanie Lee is on ClimeCo’s Sustainability, Policy, and Advisory team. Her background is in energy, renewables, and sustainability. Specifically, her work has included decarbonization planning, renewable energy strategy development for corporates, and go-to-market strategy development for renewable energy developers, asset owners, and utilities. She has worked with various industries, across consumer-facing and industrial clients.

EPA Proposes Emission Limits for Fossil Fuel-Fired Power Plants – Is Industry Up for the Challenge?

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EPA Proposes Emission Limits for Fossil Fuel-Fired Power Plants – Is Industry Up for the Challenge?

by: Noah Gannon | August 16, 2023

Boyertown, Pennsylvania (August 17, 2023) – On August 8, 2023, the public comment period ended for the Environmental Protection Agency (EPA) proposed Clean Air Act emissions limits and decarbonization technology guidance for fossil fuel-fired power plants in the United States. The proposed rule considers how different Electricity Generating Units (EGUs) are used, including the resource type and load capacity, and prescribes control technologies such as Carbon Capture and Storage (CCS) and Hydrogen co-firing to reduce emissions.

Scientists estimate the proposal, if enacted, will reduce 617 million tonnes of CO₂ emissions by 2042. Additionally, economists value potential associated benefits at $64-$85 billion, including health benefits, such as 1,300 avoided premature deaths and 300,000+ cases of asthma symptoms.

In anticipation of potential legal challenges, the EPA structured the current proposal within the context of the recent 2022 West Virginia vs. EPA decision in which the Supreme Court limited the EPA’s rule-making authority.

Client Impacts

The proposed rule presents both challenges and opportunities for the energy industry. Challenges include extensive capital expenditure costs, limited CCS and hydrogen supply and infrastructure, a volatile regulatory climate, and a lack of regulatory frameworks to enable use and large-scale deployment of these projects.

However, CCS and low-GHG hydrogen offer asset owners the opportunity to entrench their existing infrastructure investments within the energy landscape and provide a dispatchable low-carbon energy resource to utilities looking to balance daily and seasonal renewable energy fluctuations.

Alternatively, some asset owners may consider reducing capacity to under 20% to avoid implementing any controls or under 50% to qualify as an intermediate load with less stringent standards. There will be impacts on grid reliability if a mass shutdown of gas-powered resources occurs before the buildout of batteries and other forms of energy storage.

Proposed Technology-Based Standards

The proposal consists of Technology-Based Standards designed to allow the power sector continued resource and operational flexibility, facilitate long-term planning, and consider the cost-effectiveness of emissions controls. Specifically, the proposal requires CO₂ emissions control at fossil fuel-fired power plants starting in 2030 and phases in increasingly stringent CO₂ control requirements over time. The proposed requirements vary by:

The type of unit rather than fuel type (i.e., new or existing, combustion turbine or utility boiler, coal-fired or natural gas-fired)
How frequently it operates (base load, intermediate load, or low load (peaking), and
Its operating horizon (i.e., planned operation after certain future dates).

These variations hope to achieve the Standard’s goals of cost-effectiveness and operational flexibility. For example, the installation of controls such as CCS for coal and gas plants and low-GHG hydrogen co-firing for gas plants are more cost-effective for power plants that operate at a greater capacity, more frequently, or over extended periods. The table below outlines the Best System of Emissions Reduction (BSER) by phase and unit type.

Low-GHG Hydrogen Pathway

As shown above, the low-GHG hydrogen pathway offers an incremental approach through hydrogen co-firing to reduce emissions with increasing volume as hydrogen supply networks are developed. The proposed carbon intensity of low-GHG hydrogen at 0.45 kgCO₂e/kgH₂, “well-to-gate,” is exceptionally aggressive and much lower than all international Low Carbon Standards, as shown in the graphic below. As a result, this standard may be met with blue (coal/natural gas feedstock) and green (renewable energy feedstock) hydrogen, as well as pink (nuclear-powered) hydrogen.

The International Energy Agency predicts total hydrogen production will need to be 180 MMT by 2030, up from 90 MMT today, to reach net zero emissions by 2050. Currently, low-GHG hydrogen production represents only 1% of total hydrogen production, challenging project developers to increase product while greening their hydrogen process with renewable resources to meet new regulatory requirements, like the EPA’s proposed standards.

At current U.S. power demand and portfolio, about 1.5 trillion kWh is produced annually by gas turbines subject to this ruling [1]. Assuming a standard combined cycle unit has a 60% overall efficiency, 30% hydrogen co-firing would require 747 billion kWh of raw energy, almost 10X current hydrogen production levels. In creating this rule, the EPA attempts to dramatically scale hydrogen demand in the U.S.

The energy needed to produce hydrogen leads to as much or more energy used to produce hydrogen as is recovered when the hydrogen burns.

If project developers can create a supply, hydrogen transportation will present another hurdle. Hydrogen can be transported by pipeline, tanker, rail, and truck, but ammonia and liquefication are the best delivery methods for longer distances and have the biggest impact on costs. Approximately 1,600 miles of hydrogen pipelines are currently operating in the U.S., primarily in the Gulf Coast region, in support of petroleum refineries and chemical plants [2]. Converting the nations existing natural gas pipeline to carry a blend of hydrogen would only require modest upgrades compared to more substantial modifications for pure hydrogen. Industry initiatives and the DOE H2Hubs program take a grassroots approach to increasing regional engagement.

Importantly, the Inflation Reduction Act (IRA) includes Hydrogen Production Tax Credits, which offer producers $3/ kg H₂ for ten years for low-GHG carbon intensity for projects that begin construction by 2033 with retrofit facilities eligible. While direct pay and transferability allow revenue streams for companies with low tax liabilities, the credit cannot be stacked with the Carbon Capture and Sequestration Credit (45Q), which may disincentive co-locating CCS and low-GHG hydrogen controls.

Using electricity to produce hydrogen, only to be re-converted into electricity through co-firing, results in as much or more energy being lost than is recovered for grid use. This makes hydrogen co-firing for electricity a much less efficient process than traditional electricity transmission. We believe hydrogen is better applied in the transportation industry given its quick refueling, easy adoption, and decent conversion efficiency for fuel cells and hydrogen-compatible ICEs. This leaves CCS as the most practical and economically viable control technology for fossil fuel-fired power plants in the U.S.

Carbon Capture and Sequestration (CCS) Pathway

According to the IEA, Carbon Capture and Sequestration projects capture more than 45 million tCO₂ annually from 40 facilities globally. Although CCS deployment has increased with over 500 projects in various stages, the IEA estimates that deployment remains substantially below the level required to achieve net zero emissions by 2050. Similar to low-GHG hydrogen, project developers face a handful of challenges in meeting CCS demand generated from new regulatory requirements:

First, CO₂ lacks national pipeline infrastructure but has a history of industrial uses, primarily enhanced oil recovery (EOR). This infrastructure is primarily in the Gulf Region and the Dakotas. Last month, Exxon Mobile bought Denbury, the largest CO₂ pipeline network in the country, in a bid to accelerate Exxon’s carbon capture goals.

The Department of Energy has also prioritized CO₂ transportation and sequestration, with $8.5B earmarked for CCS in the infrastructure package. The bill envisions four regional direct air capture hubs, prioritizing localized networks over a nationwide pipeline.

The IRA included a Carbon Capture and Sequestration Credit (45Q), which offers up to $85 per tonne for storage of CO₂ in deep saline geologic formations. For other uses, such as low-carbon fuels, chemicals, building materials, or enhanced oil recovery (EOR), the credit falls to $60 per tonne, with direct pay for the first five years after the equipment is placed in service.

Implementation

States will have 24 months to submit plans establishing performance standards and transparency requirements for power plants within their state borders if the proposed rule is enacted, as shown in the timeline below. Plans must include an environmental justice analysis of impacted communities and meaningful engagement with affected stakeholders. States are encouraged, but not required, to develop emissions trading and averaging schemes. A less stringent standard may be requested for facilities with long-remaining useful lives.

The future of this legislation is not certain. Four major grid operations — PJM Interconnection, Midcontinent Independent System Operator, Southwest Power Pool, and the Electric Reliability Council of Texas — have filed joint comments that grid reliability will “dwindle to concerning levels.” A coalition of 21 states, led by West Virginia, have also filed comments warning about the legal implications of the rule. With the 2024 presidential election approaching, a Republican administration could repeal this rule before the enforcement period begins. Individual states and joint ISOs/RTOs must decide if they will proactively plan for controls or wait and see, hoping external players derail technology implementation and CO₂ standards.

[1] Regional Clean Hydrogen Hubs | Department of Energy
[2] Electricity data browser – Net generation for all sectors (eia.gov)

About ClimeCo

Over the last 14 years, ClimeCo has supported corporates in hard-to-abate sectors and energy asset owners in decarbonizing their operations by evaluating policy updates and incentives, supporting decarbonization project implementation, leveraging environmental markets, and becoming trusted decarbonization technology experts. Please inquire with the ClimeCo team to learn more about our case studies and service offerings.

Contact us at +1 484.415.0501, info@climeco.com, or through our website climeco.com to learn more. Be sure to follow us on LinkedIn, Facebook, Instagram, and Twitter using our handle, @ClimeCo.

Carbon Capture & Storage: The Need, The Landscape, The Opportunity

by: Jessica Campbell | April 26, 2023

The Need

The scaling of Carbon Capture and Storage (CCS) globally is now widely accepted as necessary (rather than desired) when it comes to achieving net-zero commitments and the targets set out in the Paris Agreement. McKinsey & Company estimated that we need to reach at least 4.2 gigatons of storage per annum (GTPA) by 2050, which represents a growth of 120 times current activity level [1]. Estimates by other groups, including the International Energy Agency (IEA), place the volumetric need anywhere between 3 – 10 GTPA to get us 5 – 10% of the way to net-zero. The International Panel on Climate Change (IPCC) has indicated that under ideal economic conditions, CCS has the potential to contribute between 15–55% of the cumulative mitigation efforts required to stay within 1.5 degrees. However, for this economic potential to be reached (i.e., to achieve economies of scale), “several hundreds of thousands of [carbon dioxide] CO₂ capture systems would need to be installed over the coming century, each capturing some 1 – 5 MTCO2 per year” [2]. This represents a deployment of projects and technology that is unprecedented in its rate and scale. All this to say, no matter which source you look at, the message is clear; we need tremendous amounts of geologic CO2 storage, and we need it at pace.

The Landscape

Despite the scientific consensus on the need for CCS, the path to implementing projects at scale comes with challenges. For one, the regulatory landscape of countries and jurisdictions to deploy CCS at scale are at varying readiness levels, with most falling in the ‘dismally unprepared’ category. Fortunately, there are many regions throughout Europe, the US, and Canada, where the regulatory frameworks are well developed due to decades-long oil and gas activity, including some dedicated geologic CO₂ storage and its relative – Enhanced Oil Recovery (EOR). Even with more advanced regulatory frameworks, CCS projects still face a series of other challenges, including (but not limited to): 1. mineral rights ownership and disputes, 2. back-logs and long lead times for appropriate well permitting (i.e., Class VI in the US), 3. lack of CO₂ transport and pipeline infrastructure, and 4. public opinion/acceptance.

The last one, ‘public opinion and acceptance’, often does not receive the attention it deserves as a potential disruptor and real threat to progress on scaling CCS. In just one example, an open letter to the US and Canadian governments was signed by over 500 groups in 2021, calling for a halt to all support for CCS projects [3]. Due to the complex nature of our energy systems, how they interface with society, and an unfortunate history of ecosystem and environmental justice abuses, it should not come as a surprise that CCS is caught in the crosshairs given the size and the wide variety of potential applications for the projects, cross-sectoral and economy-wide. It will take a cohesive, patient, and relationship-based approach to help educate and repair some of the damage done. Unfortunately, it is a common misconception that CCS is a band-aid solution that will distract from the energy transition and investment in alternate fuels. The reality is that CCS will enable the energy transition, with the key word being transition. CCS will allow the production of lower-cost low-CI hydrogen and other alternate fuels needed to reduce emissions in hard-to-abate sectors. Short-term access to these fuels is critical to achieving emission reductions now and allows time for the supply of renewable fuels and energy sources to ramp up to meet the ever-growing demand.

Regarding environmental markets, CCS projects are considered an emissions avoidance rather than a removal since the CO₂ never actually enters the atmosphere. Logically, the prevention emissions should be valued equally compared to removing them after the fact. Nevertheless, a false dichotomy occurs in the market, where removal-based credits are viewed as superior to (i.e., trading at 2–3 times the price) avoidance credits and activities. The value differential is a function of capital cost – direct air capture (DAC) and other carbon removal technologies and activities are currently more expensive to implement. Still, there is also a component associated with optics, which is unfortunate. Analogous to a bathtub full of water, the bath would never drain if one pulled the plug but kept the tap running. Removals are an exciting technology development associated with vital natural system restoration projects and activities. However, we are still too early in the energy transition to focus our attention too squarely on removals – we still need high-quality avoidance projects that have the potential to mitigate emissions on the gigaton scale, which includes CCS. As is a common theme throughout this blog, we need more of both, not either/or.

Despite the regulatory challenges and bumpy road ahead, hundreds of companies have either proposed CCS projects or are evaluating opportunities, including many of ClimeCo’s clients. In this valiant pursuit, ClimeCo has accepted the challenge and is working to support our clients through strategic advisory services and de-risking investment through partnerships and optimization of multiple potential revenue streams.

The Opportunity

The recent changes to the Inflation Reduction Act (IRA) and the opportunities it has created for CCS are generally understood – albeit in theory. Projects that plan to sequester CO₂ in secure, geologic formations can receive up to $85 per tonne of CO₂ injected under the 45Q tax credit. What is often less clear are the opportunities for additional revenue streams, specifically within the voluntary carbon market (VCM), and the rules around stacking the various available incentives. Opportunities for value creation outside of the VCM arise from low-carbon fuel markets and green premiums for low-carbon products. How these fit together within an optimized organizational strategy while achieving broader emission reduction goals can be challenging to navigate. Although ClimeCo takes a holistic approach to value creation via all channels, the paragraphs below will highlight the recent developments that will open pathways in the VCM.

Historically, North America’s only VCM methodologies for generating carbon credits from CO₂ sequestration activities were specifically designed for and limited to EOR. The absence of a methodology for geologic storage was just a symptom of the economic realities of pure geological storage projects – most would just not pencil at previous incentives levels, even with stackable carbon credits. However, the new IRA is a game changer, placing hundreds of millions more tonnes per annum within the realm of potentially economical or marginal. The VCM is ramping up to help projects falling in the ‘uneconomic’ or ‘marginal’ categories to be economic and to de-risk the investments by diversifying the revenue streams. The cost of CCS projects varies widely by industry. Those in hard-to-abate sectors have a particularly high cost of capture to low purity and/or concentration of CO₂ streams. Fortunately, there will be at least one, if not two, new VCM methodologies available in the near term that will allow for the creation of voluntary carbon credits from CCS. This opportunity will be particularly advantageous for those in hard-to-abate sectors where the $85 per tonne alone is not enough.

The American Carbon Registry (ACR) is in the process of finalizing its methodology that would allow for carbon credits created from the following activities: geologic storage, direct air capture (DAC), EOR, and bioenergy with CCS (BECCS). We expect the methodology to be available by the end of 2023.

Verra is working with the CCS+ Initiative to develop a series of modules for CCS projects for credit creation in the VCM. Verra has indicated that the first module will allow for crediting of the same activities as under the ACR methodology; however, it needs to be clarified as to whether any negative emissions (i.e., removals) associated with BECCS will be included in the first release.

For organizations at various stages in the CCS project development journey, it will be necessary to understand all the potential revenue streams associated with the project, including voluntary carbon credits as well as other value-creation opportunities in low-carbon fuel markets, compliance markets, and additional government grants and funding and the associated value, risks, challenges, and optimization opportunities. It is also important to understand how utilizing the VCM fits within the broader organizational strategy, emission reduction targets, and a product’s value in the market (i.e., green premiums).

[1] McKinsey & Company, Scaling the CCUS Industry to Achieve Net-Zero Emissions
[2] Intergovernmental Panel on Climate Change (IPCC), Carbon Dioxide Capture and Storage
[3] Oil Change International, Open Letter to US and Canadian Governments

About the Author

Jessica Campbell, Director of Energy Innovations, leads ClimeCo’s CCS and Low Carbon Fuels Program. She is passionate about the power of utilizing environmental markets to expedite decarbonization goals and supporting our clients through the energy transition.

ClimeCo Speaking at HARC’s “Risk in The Power Sector” Webinar

ClimeCo is thrilled to be speaking at HARC’s ’Risk in the Power Sector: A Discussion on the Resilience of the Texas Power System’’ virtual event held on June 15th at 11 AM. The panel will include Amanda Hsieh, ClimeCo’s VP of Environmental, Social, and Governance (ESG), Dr. Gavin Dillingham, VP of Energy at HARC, Maya Velis, Climate Risk & Resilience Lead at HARC, and Prof. Ethan Yang, Assistant Professor in Civil & Environmental Engineering at Lehigh University.

We invite you to join ClimeCo at the free virtual event to hear from these energy experts as they discuss climate risk perceptions and management approaches in the power sector.

Registration deadline is June 13th, you can register now by visiting: https://harcresearch.networkforgood.com/events/43865-risk-in-the-power-sector-a-discussion-on-the-resilience-of-texas-power-system

About ClimeCo

ClimeCo is a respected global advisor, transaction facilitator, trader, and developer of environmental commodity market products, projects, and related services. We specialize in voluntary carbon, regulated carbon, renewable energy credits, plastics credits, and regional criteria pollutant trading programs. Complementing these programs is a team of professionals skilled in providing sustainability program management services, and developing and financing of GHG abatement and mitigation systems.

For more information or to discuss how ClimeCo can drive value for your organization, contact us at 484.415.0501, info@climeco.com, or through our website climeco.com. Follow us on LinkedIn, Facebook, Instagram, and Twitter using our handle, @ClimeCo.

Glossary

EPA Proposes Emission Limits for Fossil Fuel-Fired Power Plants – Is Industry Up for the Challenge?

EPA Proposes Emission Limits for Fossil Fuel-Fired Power Plants – Is Industry Up for the Challenge?

Carbon Capture & Storage: The Need, The Landscape, The Opportunity

Carbon Capture & Storage: The Need, The Landscape, The Opportunity

ClimeCo Speaking at HARC’s “Risk in The Power Sector” Webinar

ClimeCo Speaking at HARC’s “Risk in The Power Sector” Webinar

Sources

Additional Resources