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Why equity divestment doesn’t drive decarbonization — and can even backfire | GreenBiz

Adapted from GreenBiz’s GreenFin Weekly, a free newsletter. Subscribe here.

Research shows that divestment doesn’t achieve the goal of decarbonization. Yet in September, Harvard became the latest on a growing list of prestigious universities to fully divest fossil fuel assets from its bigger-than-all-others $53 billion endowment.

Pressured by students and alums, U.S. universities pioneered fossil fuel divestment starting back around 2011. Since then, such commitments have spread widely, with religious endowments, major philanthropies, big insurance companies, municipalities and a growing cohort of sovereign wealth and pension funds all vowing to yank their funds from coal, oil and gas.

Divestment-Aston

Over the past year, the divestment tally has more than doubled to nearly $40 trillion. “With this growth, divestment has proven successful at its core goal of helping to delegitimize fossil fuel companies as political players,” writes the advocacy nonprofit Stand.earth, which has been tracking divestment trends since 2014, in its most recent update.

Note the emphasis on reducing political power — a worthy goal in its own right. Yet for ESG investors and their fund managers who imagine financial pressure will push Big Oil to decarbonize, it’s worth revisiting why the strategy is ineffective at best and counterproductive at worst.

For fund managers facing multiplying mandates to decarbonize their holdings — including political pressure and legal action as well as regulatory shifts and customer preference — divestment offers a quick way to lower their portfolio’s carbon intensity. But such actions merely shift the carbon from one balance sheet to another, and can undermine deeper decarbonization efforts.

“Beyond the allure of scoring political points, there’s a dearth of levers available to fund managers facing pressure to align with ESG goals.“

“For one investor to sell a share, another must buy it. Period. An unhappy shopper can complain to management or take his business elsewhere, but an unhappy shareholder simply replaces herself with someone who cares less,” write Michael O’Leary and Warren Valdmanis in “Accountable: The Rise of Citizen Capitalism.” O’Leary is managing director of Engine No. 1, an investment firm. 

A long line of research backs this critique, most recently an October paper by Jonathan B. Berk of Stanford and Jules H. van Binsbergen of the University of Pennsylvania. The authors examine ESG priorities broadly — including energy — to test the premise that “for divestitures to have impact they must change the cost of capital of affected firms.” Their findings: The impact is de minimis, “too small to meaningfully affect real investment decisions.”

Domino effect

Equity divestment can also backfire. By thinning out the ranks of shareholders who might pressure boards, divestment concentrates ownership among those “who are at best agnostic about climate impacts,” said Edward Sun, a portfolio manager of Engine No. 1. That means less likelihood of pro-climate shareholder activism.

Equity sell-offs can also trigger an unwanted domino effect. As a company’s share price falls, it becomes a more attractive acquisition target for private equity or state-owned national oil companies, or NOCs — such as those in Mexico, Saudi Arabia and Venezuela — which already control 55 percent of global oil and gas and 90 percent of reserves. Shifting from public to private ownership reduces disclosure and insulates a company from external pressure.

In the energy space, this kind of devolution is happening already. As the New York Timesrecently reported, secretive investment companies are pumping billions into legacy fossil fuel projects, “buying up offshore platforms, building new pipelines and extending lifelines to coal power plants.” The new owners are decidedly not funding transition investment. In the United Kingdom, two-thirds of North Sea oil production has shifted into private hands.

To be sure, private ownership isn’t necessarily a step backward for decarbonization efforts. There is an emerging line of reasoning that private equity could offer a better model to help key sectors transition. Yet private equity’s track record is biased towards cost-cutting, disinvestment and loading up on debt. In the energy space, such austerity could be a death knell for the sorts of costly, long-range transition plans the sector faces.

Dearth of levers

But if equity divestment is not the answer, then what should an ESG-minded investor do instead? In 2019, Bill Gates famously told the Financial Times, “Divestment, to date, probably has reduced about zero tons of emissions. It’s not like you’ve capital-starved [the companies] making steel and gasoline.”

Options are, for now, limited. Beyond the allure of scoring political points, there’s a dearth of levers available to fund managers facing pressure to align with ESG goals. For many, the option is binary: buy or sell. And as ESG compliance pressures rise, absent more effective levers, more managers are likely to default to the sell option.

More nuanced tools, including active shareholder engagement and using debt and loans as a tool to influence companies, are emerging but remain complex for investors to deploy and manage:

Active engagement. For ESG investors to catalyze a transition to net zero, they’ll have to push for real strategy change, rather than just offload heavy emitters from their balance sheets. “We’re looking at how [investors] can use engagement, stewardship and advocacy — along with lending and investing levers in ways that change the cost of and access to capital,” said Whitney Mann, a senior associate at RMI’s Center for Climate-Aligned Finance.

In “Breaking the Code,” its 2020 assessment of decarbonization strategies for the financial sector, RMI recommends that “financial institutions must go beyond divestment alone to develop a more sophisticated approach to actively influencing the real economy that relies on all available levers of influence.”

Engagement is no easy feat though, and remains the exception. Witness the titanic victory Engine No. 1 eked out over ExxonMobil in its bid to seat three climate-focused board directors. If more investment managers were to lean in, similar bids could multiply.

Debt markets. If equity divestment doesn’t work, tougher debt standards could. Lenders, ratings agencies and bond buyers have greater leverage to set tough terms for borrowers, complete with measurable carbon reduction targets. A growing roster of top banks are publicizing goals to decarbonize lending practices.

To be sure, as author and activist Bill McKibben points out, banks’ credibility for carbon commitments is dubious at best. Even so, a carbon premium is emerging for fossil fuel borrowers. Oil projects are seeing an unprecedented increase in cost of capital. At Bloomberg Green, Tim Quinson observed that the threshold of projected return to financially justify a new oil project has risen to around 20 percent for long-cycle developments. For renewables, the rate has fallen to between 3 percent and 5 percent.

Pressure from ESG investors is the best explanation for the widening differential. “Oil companies are finding it increasingly difficult to raise financing amid rising ESG and sustainability concerns,” Will Hares, an analyst at Bloomberg Intelligence, told Quinson, “while banks are under pressure from their own investors to reduce or eliminate fossil-fuel financing.”

Published before Harvard’s big announcement, “Accountable: The Rise of Citizen Capitalism” includes a behind-the-scenes account of the tactics critics used to push university leaders to divest. In every case, the players emphasize the political promise of such a move: the hyper-tweetable spectacle of the world’s largest university endowment dissing Big Oil.

As tactics go, the question is whether the political gain of drawing more attention to decarbonizing our financial system outweighs the risk of driving big emitters into private ownership. But with the pressure to take climate action reaching a fever pitch, “the divestment discourse will be with us indefinitely,” said Thomas O’Neill, cofounder of Universal Owner, a U.K.-based think tank and investment advisory service. “The salient question now: What type of divestment is it, towards what affirmative end?”

Keep in mind that “even if public capital pumps everything it has into green investments, it won’t be enough to fund the climate transition,” said RMI’s Mann. Beyond green investment, “the world needs private investment managers to help transition existing-high emitting stock.”

Neither investors nor activists can afford to squander limited time — or capital — on sub-optimal tactics.

See the original at GreenBiz.com, https://www.greenbiz.com/article/why-divestment-doesnt-work-and-just-wont-die

GreenBiz

Could a ‘carbon coin’ solve the climate crisis? | GreenBiz

Dealing with climate change can seem impossibly costly. By all accounts, the toll will be many trillions of dollars annually for many years to come.

So far, efforts have been patchy and painful. Washington is momentarily engaged in a high-wire act to fund a multitrillion-dollar, climate-focused package that could make or break Uncle Sam’s decarbonization effort.

Even more modest sums are tough. To date, rich-world pledges to subsidize poor countries’ climate costs  — to the tune of just $100 billion per year — remain unmet after a decade. Far tougher challenges and much higher costs lay ahead, so the prospects look grim.

What if there was a way we could fund the climate transition by creating a new global currency, off the books of national and corporate accounts?

The currency could be used to reward each ton of carbon abated, whether via cleaner energy, cleaner business or direct carbon removal and sequestration. Such a regime could not only turbocharge public and private climate investment. It could also pay to protect ecosystems, which today struggle to find funding. This regime would also be politically transformative. Corporate boards and policy makers could shift from fighting over funding to planning action.

What if there was a way to fund the climate transition by creating a new global currency, off the books of national and corporate accounts?

From today’s system based mostly on sticks — taxes and rules — a reward would incentivize decarbonization (carrots). Just like people, global economic systems change faster with a mix of carrots and sticks.

If any of this is sounding familiar, a similar system plays a central role in Kim Stanley Robinson’s latest work of climate fiction, The Ministry for the Future, a novel tipped as a top read by Barack Obama and Ezra Klein, among others.

In the story, as the climate crisis worsens, the world’s top central banks go from cautious recalcitrance to urgent collaboration to create a global “carbon coin” to fund decarbonization. Robinson name checks the inspiration for this financial solution as “the Chen paper.”

Carbon rewards

Turns out, Delton Chen is a real person, who co-authored the real academic paper that inspired Robinson and that informs an increasingly ambitious vision to overhaul the world’s economy: the Global Carbon Reward.

Chen’s academic roots start in Australia with a Ph.D. in engineering. Around 2013, he shifted his focus to explore the barriers to addressing climate change. Clear as the science seemed, economics emerged as the key problem. Something was not working.

At a high level, he describes the global economy as an incomplete system, missing a key price — for risk — that could help resolve the climate problem. Activists like Greta Thunberg, says Chen, argue that we already have all the facts and solutions to solve the climate crisis: “I’m saying that’s not true. We don’t have all the answers because the funda­mental economics of carbon pricing appear to be incomplete.”

To fill this gap, Chen proposes a new digital global currency, created by central banks to fund a wave of global monetary policy that he calls Carbon Quantitative Easing, or CQE. That new currency is used to pay out Global Carbon Rewards, a flow of incentive payments to permanently fund the mitigation of greenhouse gases.

Chen’s theory is complex, and much of it exceeds my financial fluency — for deeper details, see links at the end of this note. That said, its high-level features are accessible and link to real world developments.

They include:

Carbon currency. One wouldn’t use Chen’s carbon coin day to day to buy groceries or gas. Rather, each virtual coin is “struck” based on the value of one metric ton of CO2 equivalent mitigated for a century. Central banks will manage the rate of conversion — into dollars, Euros, renminbi, etc. — to appreciate annually.

Because its value rises, the coin creates a reliable price signal to help companies finance costly transition plans — such as the shift from oil to green hydrogen — that are hard to finance today absent a known future value of carbon removal.

Governance and knowledge base. This system would require the transformation of existing institutions and the development of new ones too. Longer term decisions about setting the target value of the coin would be set by an authority, guided by a cost abatement curve for the planet. As the value of the coin goes up, year after year, markets would have a rising incentive to tackle increasingly gnarly decarbonization challenges.

To manage the award of coins, this system would include a registry of registries, tracking worldwide claims on carbon abatement to avoid double counting and related abuses. Such a library of methods and successes promises other benefits, too: a global, open-source repository of best practices to accelerate mitigation.

Social benefits. Today’s carbon frameworks fail profoundly to price in harder-to-quantify damage to people, culture, and ecosystems — from the extinction of a species to the desertification of rain forest. As part of the coin’s governance system, stakeholders — from indigenous peoples to environmentalists — would have input into the valuation of reward allotments.

Precursors

As Chen’s plans gain attention, real-world financial trends that are moving in a similar direction:

Central banking. Chen’s CQE stems in part from the emergence of quantitative easing (QE) around 2008. In response to the mortgage-backed securities crisis, the Federal Reserve deployed a then new approach, which — at the risk of oversimplification — let central banks issue new debt with one hand while buying it back with the other, thereby creating new assets, and keeping credit flowing into an economy at risk of freezing up.

Skeptics howled the tactic would unleash a tsunami of inflation. They were wrong. And since then, QE has become a favorite of the world’s central banks. To date, they have funneled over $25 trillion in QE funds into the global economy, including some $9 trillion in response to COVID-19 economic disruptions, per an Atlantic Council tracker.

At a few trillion dollars per year, the river of money already created through QE is in the ballpark of the anticipated price tag for climate adjustment. And as central banks adopt the technique, they are beginning to harmonize efforts.

Chartered to maintain financial stability, sometimes measured by unemployment and inflation, central bankers are beginning to regard climate in the same frame, Chen contends. From implicitly defending housing lenders in 2008, it’s not a far leap to imagine bankers recognizing climate collapse as a fundamental systemic risk.

There are early signs of such a shift. The Network of Central Banks and Supervisors for Greening the Financial System (NGFS), launched in 2017, is a group of 80-plus central banks and supervisors, including the Federal Reserve. Besides advancing finance sector practices around climate risk management, NGFS members are working “to mobilize mainstream finance to support the transition toward a sustainable economy.”

Verification. The elements necessary to validate a global carbon currency are also coming together. Such a regime would require a platform of trusted technologies to assess and track carbon remotely in order to allocate payments.

Verification technologies are multiplying quickly. Startups such as NCX today use satellite imaging and AI processing to better monetize forestry carbon credits. A new generation of satellites able to remotely assess methane emissions is already outing previously unidentified mega-sources of GHGs. And these same systems can likewise pinpoint the growth of CO2-sequestering greenery.

Precedents for a coordinated global currency action exist.

Meanwhile, the technical and regulatory infrastructure of carbon offset tracking — however imperfect — is improving. In North America alone, a half dozen or more have emerged, including the Alberta Emission Offset System Registry and the California Air Resources Board.

Precedents for a coordinated global currency action exist, points out Frank Van Gansbeke, professor of the practice at Middlebury College, where he focuses on finance and capital markets. Though he developed his work independently from Chen’s, the two now regularly review and discuss developments.

Where Chen approaches the financial problem as a science-based outsider, Van Gansbeke comes to it as an former investment banker, focused more on working with existing financial institutions. He considers the planet’s finite carbon reserve the ultimate monetary policy target, from which all other debt instruments should be priced.

Van Gansbeke points to Special Drawing Rights as a possible precursor. Created in 1969 by the International Monetary Fund, as a kind of meta-currency, the IMF uses SDRs today to support national economies suffering balance of trade or other economic crises.

Used together with other reserves on the IMF balance sheet, SDRs could be used as collateral to create a climate coin. Designed as an anchor currency, the IMF unit would be a “stablecoin”: a blockchain-supported currency backed by a share of real assets in land and forestry, new climate technology ventures and the top 150 ESG compliant companies.

With a modified remit, says Van Gansbeke, the IMF has the operational capacity and expertise to take such a step. For their third-party verified GHG reductions, emerging market countries would receive a settlement in IMF climate coins.

The proceeds could then be used either as collateral, as means to repay debt or as a tool to undertake debt restructurings or foreign exchange intervention. The IMF climate coin would not only impart strong pricing signals across all market segments, but also facilitate capital allocation in a carbon adjusted manner.

For more Van Ganspeke’s plan, check out his detailed post at Forbes.com,

What next?

Could a carbon currency make the leap from science fiction to reality? When Chen’s seminal paper was published a few years ago, it might’ve been easy to wave it away as deeply researched wishful thinking.

But in the years since, much has changed: climate urgency is rising and the financial zeitgeist is shifting, as economists and financiers ponder the once-imponderable, such as minting a trillion-dollar coin.

Rewriting the rules of the global economy to manage a risky transition isn’t all that rare, either. In the 20th century, it happened twice: once, with the 44-nation agreement at Bretton Woods to reboot the world’s economies after World War II; and again, in the 1970s, with a shift away from the gold standard. Today, the rise of digital currencies and growing risks of climate change are so disruptive that another transformative moment seems likely.

Both Chen and Van Gansbeke are moving forward with implementation plans:

  • At the upcoming COP26 in Glasgow, Van Gansbeke and a team of finance experts will announce the Rethinking Bretton Woods initiative, in which a climate coin will be a track.
  • For his part, Chen is focusing on testing. His nonprofit is seeking sponsorship and grants to create a proof-of-concept demonstration in California. The demo will include a few other countries and will last a few years to showcase a variety of technological innovations. Central banks are not essential to this trial, says Chen, because their monetary role will be simulated.

In the realm of carbon currency, reality is beginning to overtake the hypothetical, as Kim Stanley Robinson put it in an interview with Bill McKibben:

It's one of several things that’s happened since my novel came out that made me realize that in some ways, I was behind the curve in Ministry for the Future.... I found it very encouraging because we need these things. And there’s a general tendency over social media to doom and despair. We cannot get into doom. We have to actually look at all of the good work that's already being done.

For more on Chen’s work, start with the news page at his GCR site. To hear him explain the program in de-tail, check out episode 57 of the Carbotnic podcast before diving deeper into Chen’s writings. 

Originally published at GreenBiz.com https://www.greenbiz.com/article/could-carbon-coin-solve-climate-crisis

GreenBiz

PG&E is first utility client for Mainspring’s novel ‘linear generator’ | GreenBiz

Mainspring technicians workl the assembly line to build linear generators.

Mainspring Energy was founded in 2010 by a trio of Stanford Ph.D.s, born not out of the university’s legendary coding schools but rather from its thermodynamics lab. Back at a time when the startup world was growing wary of cleantech, the team targeted a tough task: to drive down emissions by reinventing one of the grid’s most fundamental technologies. 

Their target? The nearly 200-year-old design of the electric generator. Where practically all mechanical generators spin in a circle, relying on rotating magnets to generate current, Mainspring engineered a design that moves back and forth in a line. 

It’s a simple physical reorientation with potentially dramatic impact. The resulting “linear generator” delivers efficiencies that co-founder and chief executive Shannon Miller says produce electricity more cleanly, at a lower cost and more flexibly than can a multi-billion-dollar market of incumbents, including turbines, reciprocating engines and fuel cells.

And after a decade of development, the Menlo Park (Calif.) firm’s linear generator is scaling into commercial production at a time of sharply growing demand for flexible options that can support the grid sustainably. “Extreme weather events and the rise of electrification are driving increasing demands on the electric grid for affordable resiliency,” Miller said. “At the same time, we need to be moving rapidly toward a net-zero-carbon grid.” 

A utility milestone

Following a handful of corporate and institutional deployments beginning in 2020, Mainspring’s first utility project was announced this week in Angwin, California. 

The town is a crucial node on Pacific Gas & Electric’s network in Napa County, a microgrid distribution point where a generator is positioned to stabilize the daily ebbs and flows of power, as well as to supply downstream customers if transmission into the area goes down. And during California’s epic drought and record wildfire season, that’s been happening more often, as PG&E resorts to public safety power shutoff (PSPS) events to avoid sparking new fires.  

Occupying a footprint about the size of a parking space, the 240-kilowatt linear generator will initially run in tandem with a conventional diesel reciprocating engine, while PG&E commissions the unit. Multiple Mainspring units can be paired to increase output. In time, Miller expects the linear generator to take over fully, as it does things the diesel cannot.

For example, thanks to precise power electronics, the Mainspring unit can ramp up and down almost instantaneously, to better match microsecond grid fluctuations. And as renewables multiply, power supplies are growing more variable and less stable overall, so increased responsiveness is good for the grid. 

And its low emissions should be good for nearby communities. As utilities have increased their reliance on portable diesel generators to stabilize the grid, rising air pollution is hitting nearby populations, often in disadvantaged communities. 

Compared with the nearby diesel engine, Mainspring’s generator cuts nitrogen oxide (NOx) emissions by more than 90 percent and lowers particulate pollutants proportionately. Fueled by biogas, it emits virtually no carbon. And in the future, the unit can run on practically any gaseous fuel, Miller said, including emerging zero-carbon fuels such as renewable propane or green hydrogen.  

The Mainspring linear generator’s core assembly.

How it works

Mainspring’s performance edge arises from the architecture of its design, combined with the benefits of its state-of-the-art power electronics, an area of technology that, thanks to the scaling of renewables, has advanced rapidly during Mainspring’s decade of development. “Those systems allow us to do all the control, to achieve fuel flexibility, dispatchability and efficiency,” Miller said.

Physically, the design reorients familiar elements of an electric generator — magnets moving through loops of copper wire. Rather than spinning in circular motion like most generators, in Mainspring’s design, the magnets slide to and fro along a horizontal axis with precision that varies by less than the width of a piece of paper.

When a mix of fuel and air enters the central reaction zone, it is not combusted. Rather, via a low-temperature reaction, pressure directly converts thermochemical energy into motion which pushes two pistons — Mainspring calls them oscillators — outward from the center. 

Power is produced as magnets mounted on the oscillators pass through copper coils embedded in the shell.

When the oscillators reach the limit of their travel, they compress air at the far end of the cylinder, creating a spring-like pressure that rebounds them back toward the center, generating more power on the return journey.

With only two moving parts, Mainspring’s design can generate more power per unit of fuel than other mechanical generators. Miller said. At the same time, its simplicity incurs lower maintenance and material costs. Unlike turbines or engines, its innovative air bearing system needs no oil or routine parts replacement. And unlike fuel cells, no costly catalysts need be replaced. 

By operating at relatively low heat, the design virtually eliminates NOx emissions and other harmful byproducts of combustion. Taken together, the design advances “can deliver the high efficiency and low emissions of fuel cells with the low cost and dispatchability of engines and microturbines,” Miller said. 

Mainspring linear generator at a test site (not the PG&E implementation).

Financing growth

This bundle of advantages has attracted a wave of blue chip investors. In May, Mainspring capped a Series D round of $95 million, led by Fine Structure Ventures (previously Devonshire Investors), the private equity firm affiliated with Fidelity Investments’ parent company FMR, along with support from 40 North Ventures, Chevron Technology Ventures and Princeville Capital. 

The D round brings to $228 million the total raised by the startup to date, building on earlier commitments from Khosla Ventures in Round A and Bill Gates in Round B. The Series C included a mix of strategic energy industry partners: AEP, Centrica, ClearSky Power & Technology and Equinor. 

In March, Mainspring announced a partnership with U.S. utility and renewables giant NextEra Energy — the world’s largest private-sector generator of renewable energy. 

Via its business services arm NextEra Energy Resources, the deal commits $150 million to help Mainspring’s customers buy, finance and deploy the new generators, principally via arrangements like power purchase agreements (PPAs), where customers need not buy the asset outright and can instead pay recurring fees. 

NextEra also offers the startup a strong partner with which to scale up green hydrogen. In July 2020, NextEra announced a pilot green hydrogen project with Florida Power & Light. For Mainspring, NextEra’s expertise in deploying emerging renewables into the grid offers a leg up and a fast track to partner with new clients. “Our strategy is find partners that understand where the grid is going and can really help us scale,” said Miller.  

Mainspring’s two publicly disclosed customers, PG&E and Kroger, both opted for PPA-style financing via NextEra. For Kroger, the deal offered a way to improve the reliability of energy supply at one of its Los Angeles-area stores, while cutting costs and lowering emissions — all with minimal upfront commitment.  ​​

“We’re not spending capital on this. That’s for other companies to do. We’re not maintaining it. That’s for other companies to do,” said Denis George, energy manager at The Kroger Co. “That puts us on a very equivalent basis to buying power from the utility.” 

The grocer is facing an increasingly common bind: the squeeze of rising costs for grid-supplied electricity along with pressure to cut emissions from onsite power sources. 

“We’ve already done practically everything we can on efficiency,” George said. The linear generator helps Kroger improve sustainability by moving towards its enterprise-wide goal of cutting greenhouse gas emissions by 30 percent.

Reliability vs. climate 

Kroger’s priorities mirror those of a growing number of big energy users for whom decarbonization goals are running up against the challenges of climate change and grid instability. 

Along with California, much of the west is in a similar predicament, as rising temperatures are driving electricity demand, just as drought is diminishing hydropower output and fire is threatening major transmission lines. 

The pressure is pushing governments, utilities and companies alike to boost spending on backup power, even when it may not meet green goals. In July, despite supporting some of the nation’s most ambitious decarbonization targets, California’s governor declared an emergency, a move that permitted rapid deployment of fossil-fueled backup solutions and sped the rollout of new clean energy projects. 

The following month, the state energy commission OK’d five temporary gas-fired generators to reduce blackout risks. As GreenBiz’s Sarah Golden noted in her weekly newsletter, “[California] officials are faced with the difficult choice of alleviating suffering today or curbing catastrophe tomorrow.” 

Mainspring offers a way to meet both priorities. Near term, it can responsively generate low-emissions, affordable energy. And into the future, its fuel flexibility enables it to handle tomorrow’s clean fuels, Miller said. Compared with a decade ago, “The tailwinds for us keep getting stronger.”

Originally published at Greenbiz.com: https://www.greenbiz.com/article/pge-first-utility-client-mainsprings-novel-linear-generator

GreenBiz

The challenges of building electrification — or, the parable of flameless wok hei | GreenBiz

By Adam Aston

Consider the humble wok. Little more than a wide metal bowl, a good wok can transmute high heat and simple ingredients into sublime flavors. Peek in the back of your favorite Chinese hole-in-the-wall and you may spy a chef calmly working the mix as flames engulf the wok and powerful jet burners roar below. A chef can spend years perfecting this fusion of fire and heat, oil and spice — or wok hei, the “breath of the wok.” 

Elemental as they may be to Chinese cuisine, gas-fired woks are wildly inefficient. More of their heat is wasted than is used. Harmful combustion byproducts, such as carbon monoxide, can spike to levels far higher than allowed by safety codes. And much of the excess cooking heat radiates beyond the kitchen, boosting costs to cool and vent neighboring spaces.

The tension between gas-fired woks’ unique capabilities and the challenge of finding a good substitute given their outsize climate footprint is evocative of the wider challenges to decarbonize commercial buildings. And the urgency to find workable solutions is rising. 

More regions are advancing plans to curtail natural gas, a powerful greenhouse gas. Since 2019, when Berkeley, California, became the first U.S. city to pass a ban to discourage the use of natural gas in new homes and buildings, big cities including Denver, New York, Seattle and San Francisco either have introduced or approved similar rules. 

Homes and businesses account for about 13 percent of U.S. greenhouse gas emissions, with a large share of that coming directly from the combustion of natural gas to cook food, fire furnaces and heat water, as well as to wash and dry laundry. Methane — the main ingredient in natural gas which frequently leaks — traps 80 times more heat than carbon dioxide in the atmosphere. Curtailing the installation of new natural gas capacity, let alone retrofitting the millions of buildings that rely on it today, amounts to a monumental challenge. 

But the consensus view from a group of building professionals who gathered virtually for VERGE Electrify last month reflected progress for electrification. Efforts are advancing, whether for new construction (easier), retrofits (harder) or even restaurant electrification (among the hardest) — including, yes, those woks. Here are some highlights:

Bigger, taller, better buildings. Just five or 10 years ago, green building pros frequently faced fundamental doubts about electrification, those “Can it be done?” sorts of questions. “We’ve passed that,” said Shawn Hesse, business development director at the International Living Future Institute (ILFI), a nonprofit that established the Living Building Challenge in 2007. “Today we get questions about scale and complexity.” From tens of thousands of square feet a few years ago, “We’re seeing projects come through that are a million square feet or more today.” 

Advancing ambitions. In that earlier era, advanced buildings often were at the bleeding edge of technology. Milestone net-zero energy projects helped to prove viability, refine learning and inspire further advances. “We’re not being guinea pigs anymore,” said Calina Ferraro, a principal at Integral Group’s San Diego office, “we’re building taller and more challenging facilities.” At one pioneering project, Seattle’s self-powered Bullitt Center, “Our main goal was to be a replicable model,” so others could follow in its footsteps, said Jim Hanford, a principal at Miller Hull, which designed the building. To boost its solar potential in cloudy Seattle, the center’s distinctive solar canopy cantilevers out beyond the building’s edges. 

Integration drives innovation. Early successes opened the door to more ambitious building system integration and higher overall performance goals, said John Elliott, chief sustainability officer at Lawrence Berkeley National Laboratory (LBNL). By setting whole-building performance targets — instead of just trying to beat energy codes — LBNL’s newest high-performance building achieves deep efficiency, using a little less than a third of the energy of the facility it replaced. “We integrate the building to a campus-wide operating system and build applications on top of that,” Elliott said. “We’re seeing a drastic increase in our ability to scale energy management and be much more innovative.”

Good enough can still be great. Keep in mind that not every project can hit the high bar of complete electrification — and that’s OK. Whether to score certification or hit a standard, a “kind of tunnel vision” can take over on some projects, Ferraro noted. “Some feel that if we can’t hit that, then we’re going to scrap it.” Such perfectionism can derail good-enough approaches that take a step in the right direction and set the stage for greater impact later. For example, quicker upgrades that reduce demand — such as lighting improvements — cut overall building demand load, making electrification easier when it happens.

Incrementalism accelerates retrofits. In fact, step-by-step incrementalism is often the only way existing facilities can be electrified. At San Francisco International Airport (SFO), the challenge of financing upfront conversion costs, questions about technology maturity and the staggered timeline of tenant lease renewals are just a few variables influencing the rollout of the airport’s complex electrification plans across a campus of 103 buildings, according to Amy Nagengast, energy program manager at SFO. 

An audit of its menagerie of hangers, mechanical facilities and passenger spaces is giving SFO a deeper understanding of the challenge ahead. Most of the airport’s energy (56 percent) already comes from electricity; natural gas supplies 44 percent. And of all the buildings using natural gas, four-fifths are tenant-occupied. “We’re really trying to figure out what equipment uses that natural gas,” said Nagengast, along with where it’s located, what electric alternatives are available and how best to finance a conversion. The audit is helping SFO sequence a conversion plan for both its own facilities and those occupied by tenants.

Electrifying restaurants is getting easier. SFO found that among its food and beverage tenants, natural gas consumption was concentrated in a short list of kitchen equipment: deep fryers, ovens and ranges. Swaying those restaurants to electrify is as much about education as it is about picking the best alternative gear. 

Once chefs start using electric induction ranges, they tend to like them, said Christopher Galarza, a pro chef who has electrified commercial kitchens and now runs Forward Dining Solutions. But preconceived beliefs can make conversion tough: “Chefs are, by nature, stubborn. We don’t like change.” Some of those doubts are founded on past experience, from underpowered ’50s-era electric coil stoves to vendors that can’t yet support the latest induction cooktops. 

But today, commercial kitchen suppliers have rolled out a full range of like-sized electric induction gear, which by many measures are better than their gas counterparts. Since electric induction cooktops are so efficient, much less energy is wasted. Food can cook more quickly and more consistently, thanks to more precise temperature control. And because kitchens are cooler overall, staff are less stressed and diners can be brought in closer to the cooking experience. Even skeptical kitchen vets are often “blown away by how this equipment can improve the restaurant experience,” Galarza said.

A CookTek commercial induction range. Via Cooktek.com.

About those woks

For all the advantages electric induction offers, development of new cooking equipment has followed a familiar arc. Early commercial induction stovetops and ovens arrived at high prices, beset with occasional performance glitches. Increasing scale is helping suppliers to work out those kinks, improve reliability and drive down costs.

Today, you’ll still find more natural gas cookers in supplier catalogs, but electric induction options are multiplying as prices fall and more chefs and restaurant managers discover their sometimes surprising advantages. Electric induction deep fryers, for example, use about half the oil of gas-heated versions, and the oil can last days longer. 

Woks have been trickier to convert but are tracing a similar path. When placed on a flat induction surface, too little of the wok heats up. The solution? A design that nestles the wok in a concave induction cavity delivers all of the heat — if none of the flame — using a fraction of the energy.

A quick scan of commercial kitchen supply houses shows induction woks remain costly but the price tags are coming down — lately to around $2,000 per station, about twice the price of a conventional pro rig. 

What’s next?

Don’t worry — your favorite stir fry isn’t going away. The parable of the wok illuminates an uneven path ahead for wider electrification. Change is hard and will take time, but it is underway. The technology is increasingly ready, but it will be pricey at first, which can make convincing skeptical stakeholders — from wok hei masters to big property developers — that much tougher. 

For their part, property developers are finding that as the barriers to electrification shrink, priorities are changing. “I would frame it as: What’s the cost of not electrifying?” said Becca Rushin, vice president of sustainability and social responsibility at Jamestown, a global real estate investment and management company. “In the grand scheme, the increased costs of electrification ends up being incremental. And you’re insulating yourself from the transition risk of being unprepared when legislation is passed.”

Published at GreenBiz.com on June 7, 2021. See the original here: https://www.greenbiz.com/article/challenges-building-electrification-or-parable-flameless-wok-hei

GreenBiz

Jigar Shah Is Making the DOE’s loans office mighty again. Here’s how | GreenBiz

By Adam Aston

Maybe you first knew him as chief executive of the Carbon War Room or as the co-founder of Generate Capital. Or maybe you came across him as a LinkedIn mega-influencer, GreenBiz contributor or even as a former co-host of The Energy Gang podcast — he’s the one with the ready laugh and the sharp takes.

Chances are, you already know Jigar Shah. He’s spent the past two decades making a compelling case for the climate-fixing, profit-generating potential of clean energy, all the while batting down ill-informed skeptics and bad business models.

Now, as part of the Biden administration’s effort to jump-start economy-wide decarbonization, Shah has been granted more capital — and a bigger platform — than he might ever have thought possible. 

The total: $46 billion, according to Shah. That’s the lending capacity he can mobilize at the Department of Energy’s Loan Programs Office (LPO), which he was appointed to oversee in March. 

To make the “once-mighty” office — as his boss, Energy Secretary Jennifer Granholm, put it — mighty again, Shah faces big challenges. The office has been all but dormant for much of the past decade, due in part to Trump-era deprioritization but also hampered by a lingering reputation for bureaucratic dysfunction. 

Barely three months into his new role, Shah joined this week’s VERGE Electrify virtual event to kick off the conference and share his plans to get the loans flowing once again, in a keynote conversation with GreenBiz Group’s Senior Transportation Analyst Katie Fehrenbacher, who co-chaired the event. 

Re-booting the LPO. Following a decade of dormancy, the office has moved into a fast-forward mode, fueled by Biden’s climate agenda and Shah’s contacts — he’s reached out to over 100 CEOs since he joined. “People are starting to realize that we’re open for business,” he said. “If we got maybe three applications all of last year, we’ve gotten three a week recently. That comes from people trusting the program will be there for them.” 

A catalytic role. Deep as LPO’s loan pool may be, Shah sees his office’s role as narrowly targeted — providing catalytic funding at a key stage, before companies are able to access commercial debt. Consider the example of nuclear energy innovators such as Oklo, NuScale or Holtect. “Small modular reactors are going to be built across the country,” said Shah. But they’re not likely to be able to raise commercial debt until the technology is de-risked. Shah sees LPO’s role as building a bridge to bankability: “Then, we’re done.”

Streamlining the process. By pushing an easier, more user-friendly approach, Shah is tackling head-on the office’s lingering reputation for being too costly, too complex and too long-odds. “We’ve dropped all the application fees,” he said. “And we don’t charge any of the other fees that we used to until you’ve received the loan and started to draw it down.”

Energizing climate justice. Shah sees a space where the LPO has the potential to both modernize the grid and benefit historically disenfranchised communities. Virtual power plants offer an opportunity to advance grid-scale energy services while helping cities and communities upgrade energy infrastructure and cut energy costs. That could mean building solar with storage on low-income housing or affordably financing grid-responsive smart air conditioners or water heaters. Models such as these promise to “not only get essential appliances affordably into the hands of people who need them,” said Shah, “you’re also able to get higher utilization rates from the existing distribution infrastructure.” 

Swings at bat. To the vexing question of how to pick winners from among emerging technologies, Shah brings the perspective of a seasoned climate tech entrepreneur. “We have to take a lot of swings at bat,” said Shah, “and we are going to have misses.” But misses — with a nod to the failure of Solyndra, a Obama-era solar startup — can be offset by towering successes, such as Tesla, to which the DOE lent $465 million in 2010, a moment when the then-nascent EV maker was far closer to failure than world domination. Today, it’s the world’s most valuable carmaker and has sparked a competitive race to electrify the automotive industry. “That’s what the president has talked about,” said Shah. “We want to make sure from a technology standpoint, we’re leading the pack worldwide.”

Tips for loan candidates. “Don’t be scared! Come in early,” advised Shah. To be sure: There will be many forms, but Shah’s team is working to ensure that the process is easier to navigate than before. Over the past month, the office has added more than 10 people to escort applicants through the loan process. “We want every person who thinks they have a good idea that deserves funding to have a shot.”

If you’re one of those people, the initial review process takes six weeks, typically. Once qualified, getting the approval stage takes four to five months of diligence.

By that timeline, Shah’s office will announce the first batch of new loans under the Biden administration by autumn, if not sooner. 

Published May 28, 2021 at https://www.greenbiz.com/article/how-jigar-shah-sees-making-energy-departments-loans-office-mighty-again.

GreenBiz

How tenants continue to press for greener commercial buildings, despite COVID-19 | GreenBiz

Manhattan’s once incandescent skyline is still dimmed, its office buildings emptied of workers. And Silicon Valley’s corporate campuses remain islanded, surrounded by seas of empty parking lots, as a nation of commuters continues to log in from home. 

The COVID-19 pandemic has altered office life — and the commercial building sector — in ways few could have dreamt of just a year ago. Yet as companies begin to map out tentative plans for a post-pandemic return to cubicles, the emphasis on greening those buildings hasn’t receded.

If anything, industry leaders say, COVID-19 has intensified the urgency of making buildings more energy efficient and healthy for workers. 

For Workday, with some 12,300 employees worldwide, decisions are still being made of how and when to return to its mix of owned and leased office spaces. But this hasn’t diminished the software company’s plans to add onsite solar panels and battery storage at its headquarters in the Bay Area in California.COVID-19 has intensified the urgency of making buildings more energy efficient and healthy for workers.

“Our focus on sustainability in our office buildings has remained strong. Leadership agreed we should be making this a priority and gave us their full support to make our buildings more environmentally friendly,” said Erik Hansen, Workday’s director of sustainability at a breakout session during GreenBiz Group’s clean economy conference last week, VERGE 20.

Landlords are seeing similar trends. “My tenants are very concerned about the erosion of environmental gains because of COVID,” said Sara Neff, senior vice president of sustainability at Kilroy Realty Corp., a Los Angeles-based landlord and developer with properties in San Diego, Los Angeles, the San Francisco Bay Area and the Pacific Northwest. 

It’s not just renewable energy anymore

Tenant concerns go well beyond energy issues. “Tenants are worried about things like, ‘What happens to our scope 3 emissions when nobody takes public transit? What happens to building energy consumption if we are constantly running the ventilation systems? What happens when our waste diversion numbers tank because we’re throwing away so much PPE and are back to single-use plastics in our kitchens?’” Neff added, referring to recent client conversations. 

“But nobody has backed off,” she added. “We’ve had [tenant] companies make new commitments since COVID began.”

As more companies engage in this process, they’re learning that making green upgrades can be more complicated when they lease, rather than own. Historically, inflexible, standard lease terms can make it difficult for a tenant to influence green building factors such as the kind of energy their landlord taps into, or even accessing detailed data on resource consumption. Workday has found that when setting up offices in multi-tenant buildings, negotiating technical lease terms early offers the best opportunity for success.

Workday has found that when setting up offices in multi-tenant buildings, negotiating technical lease terms early offers the best opportunity for success. “It’s best to have a dialogue with the landlord early on — while the lease is being negotiated — so that key language about procuring renewable energy can make it into the contract,” said Hansen.

The more tenants push, the more landlords can begin to drive change. “When a tenant asks about [things such as renewable energy or energy performance data] that’s when landlords start hiring people to run sustainability programs. Investments start getting made,” said Neff. “I can’t emphasize enough the importance of asking these questions and getting key terms into the lease.”

Rising expectations

Sure enough, tenants are beginning to do so. Momentum for change has been building since before COVID-19. “Starting 12 or 18 months ago, we started to see tenants really push us, and to collaborate on environmental projects, which has been great,” said Neff. 

As she sees it, tenants’ expectations have increased as more companies staff up to support their sustainability commitments. “Some of our big tenants are just now starting to hire heads of sustainability, so their sophistication is rising. Tenants who have been on the sidelines are now in the game,” she explained.

With tenants such as Workday and landlords such as Kilroy getting smarter about green building upgrades, gains can compound as trust deepens. “There tends to be more transparency and collaboration with landlord-tenant green building transactions,” said Rob Federighi, vice president of sales at Edison Energy, a global energy advisor based in Newport Beach, California. 

In practice, to make green building investments succeed, landlords need the right tenant, and vice versa. Tenant commitment can help landlords finance the investment necessary for major upgrades, such as solar plus storage. Tenants, meanwhile, need landlord support to achieve the sorts of zero-carbon energy goals more and more are committing to, Federighi added. 

Resources to help you green your lease

For both tenants and landlords exploring greener leases, libraries of standard lease terms have been developed and refined to help avoid common pitfalls. “There’s no need to reinvent the wheel,” said Neff. The panelists recommended these resources: 

And as more players steer into this space, Neff emphasizes that climate urgency dictates pragmatism. For instance, green project developers should not shy away from offsite renewables. There can be a bias towards doing as much onsite efficiency investment as possible, followed by as much onsite renewable as possible, but off-site renewable energy is sometimes regarded as less impactful.

“We have nine years to solve climate change,” Neff said. “Let’s first get fossil fuels off the grid.’”

View the original story at Greenbiz.com here.

GreenBiz

Why wholesale POWER markets matter SO MUCH to big ENERGY buyers | GreenBiz

When a big brand such as Google, General Motors or Walmart unveils an eye-popping commitment to use more renewable energy, the news usually gets attention. And as these pledges have multiplied in number and scale, corporate energy buyers are having impacts beyond the headlines. They’re reshaping larger U.S. power trends by pulling investment into renewables.

Already, roughly half of the Fortune 500 have climate and clean energy goals; over 250 large companies have committed to using 100 percent renewable energy. Corporate buyers have collectively deployed over 23 gigawatts (GW) of new renewable energy over the past five years, according to the Renewable Energy Buyers Alliance (REBA). Over the next decade, renewable energy demand from Fortune 1000 companies could add 85 GW.

To speed progress, REBA and its membership of 200-plus energy buyers and sellers have launched a set of guiding principles to standardize wholesale electricity markets across the U.S. 

By making it easier for big power buyers to synchronize terms with utilities and project developers, the principles should stimulate investment, drive down renewable energy prices and, the alliance hopes, boost market competition while growing supply. REBA’s goal is to catalyze 60 GW of new renewable energy projects over the next five years.

Wholesale power markets already serve most U.S. consumers. The largest of these — such as the middle-Atlantic’s PJM or MISO, which spans Louisiana to Minnesota — straddle multiple states and coordinate the intricate flow of power from thousands of power plants, across millions of miles of wires, to tens of millions of customers. Today, roughly 80 percent of corporate power purchase agreements take place within existing wholesale energy markets, according to REBA. 

The principles are significant because American businesses are making wholesale market design a central priority not just to meet their own clean energy goals but also to shape the market structures …

Yet large swaths of the economy remain outside these regions. So standardizing rules for all the participants and extending wholesale markets across the entire country could enable even more deals. 

In a document released during a breakout session at last week’s VERGE 20 event, REBA laid out key principles to organize extant and new wholesale markets. According to this roadmap, well-functioning wholesale energy markets are defined by three core principles which should:

  • Unlock wholesale market competition to catalyze clean energy by ensuring a level playing field, large energy buyer participation, and services that provide actual value for energy customers.
  • Safeguard market integrity through independent and responsive governance structures, transparency and broad stakeholder engagement and representation.
  • Design to scale to the future by ensuring operational scale, customer-oriented options to meet decarbonization goals, alignment with federal and state public policy and predictable investment decisions.

Improving wholesale markets

“The principles are significant because American businesses are making wholesale market design a central priority not just to meet their own clean energy goals but also to shape the market structures that are critical to help decarbonize the entire power most affordably, for everyone,” said Bryn Baker, director of policy innovation at REBA.

Operators should ensure customers have pathways to engage in decision-making, which is not always the case today, Baker explained. “Energy buyers can and want to have a seat at the table. It’s going to be really important that a broad cross-section of customer voices are present in these markets.” 

From the perspective of a big buyer such as GM, an effective wholesale market can capture supply from a larger geographical area. This can help optimize for price, by buying wind one day in one region and switching to solar in another area on another day. 

Diversity of sources reinforces grid resiliency, said Rob Threlkeld, GM’s global manager of sustainable energy, supply and reliability. In one region, solar power may be surging, while in another wind output is waning.

“A wholesale market allows you to really match that generation with the load at the lowest cost possible,” Threlkeld said.A wholesale market allows you to really match that generation with the load at the lowest cost possible.

“As we think about the wholesale markets, we want to drive toward a clean and lean grid,” Threlkeld added. “We’re moving from big, centralized plants to more decentralized operations … It allows us to optimize the grid itself, matching generation with load.”

GM has accelerated its commitment to renewable energy, aiming to power 100 percent of U.S. facilities by 2030 and global operations by 2040. Wholesale markets can help, Threlkeld said, by hastening the deployment and procurement of cost-effective clean energy. 

Energy consumers take the lead

REBA’s efforts reflect wider trends in the energy industry, where households and big businesses alike are pushing energy companies to respond to their needs. “The conversation is shifting from a production focus to one where consumers are driving the next wave. It’s about what customers want and how they’re consuming power,” said Miranda Ballantine, REBA’s chief executive. 

Localization of renewable energy is also guiding REBA’s agenda. In the past, companies had little choice but to contract renewable capacity from far-off markets. Today, more are seeking to procure renewable energy near their facilities on the same grid they operate. “More companies are saying that they want to time match those renewable electrons with their consumption,” Ballantine said. 

Google recently unveiled plans that highlight the challenges corporate energy buyers face in upgrading their renewables sourcing from such a first-generation approach, where they may still use local fossil-generated energy but net that out against purchases elsewhere. In April, the internet goliath unveiled complex software-based plans to dynamically match its actual minute-by-minute consumption with low-carbon electricity supplies by region, a technical challenge no other large company has yet solved.

For other companies, simply accessing regional grids with sufficient low-carbon energy remains a challenge. Somewhere between 30 and 40 percent of corporate assets are not in the kinds of regional transmission organizations (RTOs) that can draw and balance power from a wider region, Ballentine said. 

“Those customers have very little opportunity in those markets to actually make choices to drive zero-carbon electrons to power their facilities,” Ballantine added. Absent organized wholesale markets, companies can’t really use their demand signals to drive change in the type of electricity they’re consuming. 

—

Originally published at Greenbiz.com.

GreenBiz

As crises collide, can California meet its climate goals? | GreenBiz

Climate. Heatwaves. Wildfires. Blackouts. Pandemic. Recession. Unemployment. Social unrest. Climate, again. 

The tangle of troubles California is struggling with has no precedent. Against a backdrop of rising environmental anxiety, with wildfires lasting longer, spreading further and damaging more acreage and communities than ever before, the pandemic triggered a sharp recession and spike in unemployment. With COVID-19 and joblessness hitting low-income and minority communities especially hard, police killings sparked months of protests against systemic racism and economic inequity. And just as the need for public safety-net programs couldn’t be higher, California faces a crippling collapse in tax revenue. 

For Mary Nichols, chair of the California Air Resources Board — the state’s key architect of climate and environmental policy — these near-term problems may be worse than we’ve seen, but they are not new, and the fix will come from commitment:

We’ve been shouting it from the rooftops for a long time that we were headed in this direction, although we hoped we wouldn’t get here quite so quickly, or quite so drastically. I have seen that people can think their way out of amazingly difficult traps if they decide to. We have the human capital and intelligence, if we have the will… You can’t fix one thing without the other. If we don’t come up with solutions that are multi-factored, we won’t get very far. 

To explore how California can solve these interlinked problems, Nichols was joined by Southern California Edison’s Carla Peterman in a dialogue moderated by Sarah Golden, GreenBiz’s senior energy analyst, during a breakout session at last week’s VERGE 20 conference. 

Nichols, a veteran of state and federal environmental and energy policy since the 1970s, is retiring from CARB soon and is a contender for a top environmental role in a Biden administration, as GreenBiz Senior Writer Katie Fehrenbacher recently reported.

As senior vice president of strategies and regulatory affairs at Southern California Edison (SCE), Peterman manages a business that serves more than 15 million Californians and more than 280,000 businesses across 15 counties, including much of Los Angeles and a swath of the state that stretches to the Nevada border. 

Double duty

For Peterman, who also served as a commissioner at the California Public Utilities Commission, which regulates the state’s electricity, water and natural gas services, the economic crisis has exacerbated troubles stemming from the wildfires. Utilities have been pushed not just to stabilize a damaged grid but also to maintain energy services to some customers who are suddenly less able to pay. As Peterman said:

To give you an example of how these things all collide, we’re seeing the impact of climate change from severe heat on grid reliability. Dealing with these issues is complicated by the pandemic. It’s more difficult to help people in emergency situations. We’ve seen an increase in electricity usage during COVID of 8 percent because people are at home. We also saw an increase in use during the heatwave a couple of months ago. And we’ve seen an increase in need for our customer assistance programs of 18 percent. Utilities have stopped disconnecting anyone who’s not able to pay. It’s so important to be in a state that has those safety nets for individuals. 

Funding the recovery will be a challenge. “The pandemic has had an impact on our ability to roll out any kind of new programs until we can get the state budget back in shape,” Nichols said. Yet much of the investment necessary to transition California away from fossil fuels can do double duty, helping hard-hit communities restore jobs while also improving energy services. 

SCE is seeing wildfire mitigation and grid investment as opportunities to invest in local businesses, and to cultivate more diverse partners, including a scholarship program to bring more Blacks into the skilled energy workforce, Peterman said. 

The shift to electric vehicles (EVs), accelerated by a recent state order curtailing sales of fossil fuel-powered vehicles by 2035, creates a need for investment that can rebuild and upgrade the grid in underserved communities, Peterman explained: 

We believe that a significant amount of electrification ultimately is the lowest-cost way to reach California’s climate targets. But it’s important to make sure that everyone can access all of those EVs, having access to renewable energy and building electrification. It can oftentimes be those in disadvantaged communities who don’t make that transition as quickly and then end up paying more. Ultimately, we want to make sure electricity stays affordable because we want people to use it more. 

Towards this goal, SCE recently got the OK to launch a $436 million buildout of EV charging infrastructure, the most ambitious of any U.S. utility, Peterman said. The plan calls for half of chargers to be installed in disadvantaged communities. It’s our job to set the bar high and to show the fortitude.

If all goes to plan, SCE will be able to both improve electrical service to those communities while also improving its business. This kind of synergy — with private companies innovating pragmatic strategies that help advance climate policy and benefit the public — are crucial to recovering and moving towards net-zero emissions. And the scale of the crisis demands more collaboration, faster. But not all businesses are there yet, Nichols said: 

What I see as a major impediment is the lack of willingness on the part of at least some of our business ecosystem to come to the table with their most constructive contribution. I am going to call out — because I think I have to — the debate over what we mean by zero, whether we’re going to zero or “near zero.” It boils down to: Are we going to continue to subsidize somewhat cleaner technologies versus setting our sights out on the ultimate goal and doing everything we can to get there? 

Promising precedents

By this measure, California’s track record of pioneering climate technologies offers promising precedents. From solar panel materials to EVs and grid management software, homegrown technologies are rapidly remaking California’s energy, transportation and economic systems. Yet in the next phase of recovery and decarbonization, affordability and accessibility will be a higher priority. Peterman is hopeful that innovation can help drive down costs. She said: 

I’m starting to geek out thinking about things like sensors and technologies that help to reduce latency. How do we allow devices to communicate with each other? And how do we really bring customers’ distributed resources forward to support grid resiliency? … With technology advancements and the need for affordability, it’s important to keep pushing the envelope. That’s my shout-out to all the techie people out there: We still need your ingenuity! 

From a policy perspective, Nichols is adamant the state will continue to lead. “It’s our job to set the bar high and to show the fortitude that says we’re going to stick with these goals even if somebody gets a little bent out of shape along the way, and we have to figure out how to accommodate them,” Nichols said. “Maybe we need to be flexible about the means for getting there. But we got to be willing to say, ‘We know we can get there.’ We’ve got to set that goal.”

After all, the Golden State is already home to the largest cap-and-trade program in the United States. More recently, Sacramento has unveiled ambitious goals to be carbon-neutral by 2045, to shift the grid and its nation’s largest fleet of cars to be zero-emission by 2035. Along the way, the state has emerged as a hothouse of climate-focused businesses, from innovative manufacturers such as Tesla to renewable energy giants such as Sunrun to efficiency standard-setters such as Google.  

No state can match California’s challenges, or the scale of its possibilities, in untangling this knot of problems. “But if anyone can do it, it’s California,” GreenBiz’s Golden said. 

—

Originally published at Greenbiz.com.

GreenBiz

How to value solar plus storage | GREENBIZ

In the wake of California’s summer of wildfires, blackouts and planned outages, many consumers and businesses are clamoring for more resilient options. The crisis has turbocharged interest in systems that deliver power even when the grid is down. Solar plus storage is fast emerging as a top choice, both at scale on the grid and also “behind the meter,” installed in a home, apartment or commercial building. 

“Solar plus battery storage can provide value in two ways: first, energy reliability for customers during emergency power outages, and second, during non-emergencies, to help the grid balance demand and generation,” said Dawn Weisz, chief executive of California utility MCE, during a breakout session at last week’s virtual VERGE 20 event. 

Founded in 2008 as California’s first not-for-profit, community choice aggregation program, MCE today serves over 1 million residents and businesses in four San Francisco Bay area counties: Contra Costa; Marin; Napa; and Solano.

When it comes to reliability, solar-with-storage systems offer the ability to charge a battery that can keep the power on during an outage. “It’s worth a lot to know you can keep your power on, especially for customers that have medical needs that rely on electricity,” Weisz said. “And those that need electricity for heating, cooling, and to keep food fresh.” 

Solar plus storage also helps the wider grid and environment by letting consumers shift the time when they consume solar power: by storing solar energy when it’s abundant during the day, and using it at night, in place of power generated from fossil fuels.

“Behind-the-meter storage lets you optimize solar consumption, taking up excess output during the day, and discharging it in the evening, when demand spikes,” explained Michael Norbeck, director of grid services business development at Sunrun, a San Francisco-based provider of residential solar systems and services. 

Indeed, absent storage, too much solar can become a challenge, when supply exceeds demand. In California, “We started to see so much solar going onto the grid that our ability to use it was diminishing,” Weisz said. 

In extreme cases, that can mean curtailing output: switching off the excess power flowing from solar farms. Storage can put that excess output to good use, flowing it back onto the grid when needed. “It’s in California’s best interest to be sure we’re using as much of those electrons as we can,” she said. “More batteries will help eliminate curtailment.” 

It’s no secret that the cost of solar energy has plummeted. In an October analysis of the levelized cost of energy — a measure that blends the full cost to finance, build and fuel an energy system over time — investment bank Lazard calculated that large-scale grid solar beats all fossil fuel options on cost, even absent any subsidies. Even rooftop solar, installed on homes or commercial buildings, is close to par with power from conventional sources such as natural gas peaker plants, coal and nuclear. 

Meanwhile, battery costs have followed a similar downward path. Average market prices for battery packs plunged by 87 percent in real terms in the decade to 2019, reports Bloomberg New Energy Finance (BNEF).

MCE commercial battery storage project in partnership with Tesla and the College of Marin. The installation is estimated to save the college $10,000 per month on electricity bills. Courtesy of MCE.

Yet even as prices continue to fall, making these systems accessible to more consumers and businesses, concerns persist about equal access. Weisz noted that even as prices for combined systems fall, the market is following in the footsteps of early solar, when panels were installed first by wealthy customers but lower-income customers couldn’t afford the systems. 

As a not-for-profit dedicated to community energy services, MCE has tapped state subsidy programs, grants and other funding sources to extend the benefit of solar plus storage. “We don’t want to replicate the same patterns of disenfranchising our lower-income customers,” Weisz said. 

For its part, Sunrun has pioneered a pricing strategy that often results in power prices below the grid average, thereby reducing customers’ long-term costs. For instance, to minimize both installation costs and monthly fees, Sunrun’s most popular plan, BrightSave Monthly, leases panels to homeowners for $0 down, paid for via a long-term, stable price. 

With wildfires emerging as a nearly year-round threat to western states, the resilience that solar plus storage offers is growing in importance. Sunrun’s systems have grown increasingly responsive to remote management. When grid conditions grow unstable, Sunrun’s systems can island themselves and call on a reserve portion of the battery to support critical needs. 

Panels recharge batteries during the day, which can then discharge at night, even when blackouts can stretch from hours to days or even weeks. “During the wildfires last year, we had a customer on uninterrupted power for over 142 consecutive hours,” or nearly six days, Norbeck said. 

—

Originally published in Greenbiz.com.

GreenBiz

This carbon challenge is bigger than cars, aviation and shipping combined | GreenBiz

You may not know it, but you rely on industrial heat every day. It helped make the bricks that hold up your home; the cement underfoot. It forged the steel and glass in your car, and it also cooked the aluminum, plastic and silicon in the very screen on which you may be reading these words.

Industrial heat is essential but largely invisible. To transform basic inputs into stuff we need, manufacturers constantly heat (and cool) minerals, ores and other raw materials to extreme temperatures. And for all the magic of this everyday alchemy, industrial heat poses a growing threat to the climate. The world’s kilns, reactors, chillers and furnaces are powered mostly by fossil fuels.

High-temperature industrial heat, over 932 degrees F, poses a particular challenge because that’s the point at which fuels beyond electricity become the mainstay. Overall, industrial thermal energy accounts for about a tenth of global emissions, according to a December study by Innovation for Cool Earth Forum (ICEF, a Japan-backed multinational expert group). At 10 percent, industrial heat ranks on par with the combined emissions of cars (about 6 percent), planes (about 2 percent) and ships (about 2 percent).

Yet while those transport sectors are advancing towards low-carbon solutions — with promising technologies cultivated by multilateral accords — industrial heat lacks any consensus plan and has a long to-do list to develop low-carbon alternatives.

The options include biodiesel, renewable electricity, renewable natural gas, solar thermal, geothermal, thermal storage and hydrogen. Yet as a best guess, if these were market-ready today, renewable thermal solutions would cost from two times to over 10 times more than fossil fuels, according to an October report from the Center for Global Energy Policy (CGEP) at Columbia University.

Making natural gas renewable

In time, decarbonizing industrial heat is likely to require an all-of-the above mix of solutions. But for now, renewable natural gas (RNG) may offer a fix soonest. Chemically similar to the fossil gas piped to our kitchens, RNG is instead generated from the breakdown of organic matter at landfills (the biggest current source), municipal sewage treatment plants, farm waste and similar sites. RNG also can be blended into regular natural gas pipelines with minimal modification, much the way that input from windmills can flow onto the same grid as power generated by a coal plant.

In fact, the wind example can help illustrate how early efforts to decarbonize industrial thermal energy are shaping up. In the 2000s, when wind and solar weren’t yet cost-competitive, market players pioneered ways to sell renewable energy indirectly. The solution was a set of standards and trading rules known as renewable energy credits, or RECs. The credits let a business in, say, Pittsburgh buy wind power generated in California, even before renewables were yet available on Pennsylvania’s grid.

What’s more, RECs allow a wind farm to sell both the power it generated and the renewable attributes of that power. As consumer and corporate demand for renewables grew, the value of the RECs rose, thereby incenting new wind and solar projects. Over time, RECs let companies source the renewable energy they needed, even when it wasn’t available locally, which made it easier for companies and states to slowly boost their targets for renewables.

Certifying renewable thermal solutions

Fast forward to 2020, and a team of collaborators is hoping to adapt learnings pioneered with RECs to nurture a nascent market for zero-carbon fuels, such as RNG, that buyers including L’Oréal USA and the University of California System are already using to generate renewable thermal energy.

Today, RNG is held back in part by a Catch-22 financial trap. Costs add up quickly: equipment to collect biogas (the unprocessed methane-rich vapor given off by waste); upgrade the gas to pipeline quality; and connect to existing gas pipelines.

Capital needs for smaller landfill projects run from $5 million to $25 million. Larger projects — such as agriculture and wastewater plants — can hit $100 million, according to Jade Patterson, BloombergNEF’s analyst covering RNG. On average, each RNG project requires $17 million of capital investment, based on data from the RNG Coalition.

At that price, most farms or town dumps can’t afford to develop biogas collection on their own. “An effective certification program could give lenders the confidence to fund new installations,” Patterson said. And if farms see reliable demand for their RNG, more are likely to make the investment: supply grows; prices fall; and the Catch-22 can be broken.


“Companies are trying to decarbonize the heat piece of their Scope 1 carbon footprint,” explained Blaine Collison, an Environmental Protection Agency veteran and senior vice president at David Gardiner and Associates, a co-convener – along with the World Wildlife Fund and the Center for Climate and Energy Solutions – of the Washington, D.C.-based Renewable Thermal Collaborative. “Creating renewable thermal attributes and trading instruments is critical to enable companies to act, to show the actions they’re taking and to demonstrate the reductions they’re achieving.”

The effort to extend a REC model to renewable thermal energy is being co-led by the Center for Resource Solutions (CRS), a San Francisco based non-governmental organization that’s been advancing sustainable energy via policy and market-based innovations since 1997.

The first step? CRS is building a set of rules that meet the highest environmental standards and ensure that when customers buy green fuel, such as RNG, they can verify its lower carbon intensity, said Rachael Terada, CRS’ director of technical projects, in a recent webinar. 

Now in its first draft, CRS’ Green-e certified fuel certificate standard is focusing initially on RNG, already being produced and sold on a small scale across North America. The standard can be extended to other renewable fuels in time. (Watch out for more news in this space at CRS’ Renewable Energy Markets 2020, convening online Sept. 21-24.)

Covering the U.S. and Canada, CRS’s Green-e certification program will include rules for registries such that each dekatherm (equal to 1 million British thermal units) is unique and cannot be double-counted, Terada said.

There’s already demand from industry to buy more RNG, said Benjamin Gerber, chief executive of Minneapolis-based M-RETS (formerly Midwest Renewable Energy Tracking System), which is working to develop a registry to track RNG certificates. 

“Having clear standards for renewable thermal products along with robust trading platforms will help drive greenhouse gas reductions,” Collison said. “We know that there’s a growing corporate need for these solutions.”

Thermal energy, in the long run

CRS’ Green-e initiative has the potential to accelerate investment in renewable fuels, and thereby open up ways to decarbonize industrial energy markets.

Before then, companies can take some basic first steps, such as auditing their thermal energy use. “A lot of organizations simply haven’t done the work to understand how they’re heating and cooling their operations,” said Meredith Annex, who heads BloombergNEF’s heating decarbonization research team.

The urgency is growing. As industrialization accelerates in China, India and other emerging markets, global demand for industrial heat has grown by 50 percent since 2000, estimates BloombergNEF, and without lower carbon options, will continue to rise. 

Without a fix, global climate goals may not be achievable. “Decarbonizing industrial heat production will be essential to meeting the Paris Agreement goals,” notes David Sandalow, a former Obama administration official and lead author of ICEP’s roadmap to decarbonize industrial heat. 

Published 2020-08-13 https://www.greenbiz.com/article/carbon-challenge-bigger-cars-aviation-and-shipping-combined