On Tuesday President Obama outlined his plan to address the U.S. contribution to climate change. The overarching goal of the Plan is to reduce U.S. greenhouse gas emissions 17% from a 2005 baseline by 2020. The graphic below shows the major sources of carbon pollution in the U.S.
The electricity and transportation sectors account for over 60% of U.S. carbon emissions and will be the focus of much of the plan to reduce U.S. emissions. In 2007 the U.S. Supreme Court ruled that the U.S. Environmental Protection Agency (EPA) had the authority to regulate carbon emissions under the Clean Air Act (CAA). Just a few months ago President Obama stopped the EPA from issuing regulations for new power plants. The release of the Climate Change Action plan signals that the President will have the EPA push forward with regulation for new and existing power plants, but on a longer timeline. It is expected that the new rules will be proposed in a year, finalized a year after that. When they take affect will depend on the level of litigation that takes place around the new rules. So, new regulations and implementation are 3-5 years away. The likely short-term outcome of the plan will be support for the trend of planned retirements of coal-fired power plants that was being driven by low natural gas prices and environmental regulation on mercury emissions.
The President’s Action Plan seeks to continue the momentum around the growth in renewable energy sources. The 2014 budget includes a 30% increase for clean energy technology, with the goal of doubling solar and wind generation by 2020. The Interior Department has also been directed to permit enough renewable electricity by 2020 to power 6 million homes.
In the transportation sector, the Plan calls for improving heavy duty vehicle emission standards after the current standards expire in 2018. The Plan also supports the existing Renewable Fuel Standard, and renewed research efforts to bring about the next generation of biofuels.
The full Action Plan can be found on the White House website here.
A summary of the Action Plan from the New York Times is here; and The Guardian here.
For this Future Friday post were going to look at an old, but key technology for achieving many sustainability goals related to energy and the environment: batteries. The expansion of renewable energy sources such as solar and wind are seen as the key to addressing the environmental and climate concerns from traditional fossil fuel based electric generation. The major roadblock to the expansion of these renewable energy technologies is that they are intermittent by nature, and often don’t produce electricity when it is needed. This means solar and wind resources need to be backed up by a traditional generating resource to pick up slack when the wind isn’t blowing or the sun isn’t shining. The solution to this problem is to store solar and wind energy in times of excess for times when it is needed. Though large scale batteries are currently technically feasible, they can be cost prohibitive in many applications.
Recognizing the pivotal role that innovation in battery technologies will play in the expansion of renewable energy the U.S. Department of Energy (DOE) opened the Joint Center for Energy Storage Research (JCESR) at the end of 2012. JCESR is a collaboration of government, universities and industry to produce breakthroughs in battery technology that will enable reliable, efficient, high-capacity, and low cost batteries. JCESR was established with two national goals in mind:
- By 2025, produce 25% of all electricity consumed in the United States from solar and wind.
- By 2015, have 1 million all-electric, plug-in hybrid (PHEV) vehicles on the road.
For more on JCESR see the New York Times article: Seeking to Start a Silicon Valley for Battery Science.
Though the future of renewable energy may rely on breakthroughs in battery technology there are many examples of innovative technologies being applied today. Two Intercontinental Hotels in the San Francisco Bay Area are using battery systems from Stem to reduce their electricity costs by 15%. The batteries store energy at night when it is cheaper, and discharges during the day when prices are higher. This peak shaving produces the 15% savings. (Stem Energy Optimization Reduces San Francisco Hotel Energy Bill 15%).
Larger scale battery applications are happening as well. The City University of New York recently installed a 100kW zinc-nickel oxide battery from Urban Electric Power. The battery is said to match the performance of lithium ion batteries but at the cost of a traditional lead acid battery. (Zinc Anode 100kW Battery from CUNY, Urban Electric Power). The Yerba Buena Battery Energy Storage System Pilot Project is a 4 MW system installed by Pacific Gas & Electric that is being tested for its ability to help balance demand and maintain grid stability. (PG&E Pilots 4 MW Battery Storage System).
Source: Unlocking American Efficiency, p. 11
A study put out last month by United Technologies and the Rhodium Group finds that investing in building energy efficiency yields an internal rate of return (IRR) greater than 28%. This is four times better than the average equity performance. The study finds that a 30% improvement in building efficiency is possible with current technology, and if applied across all U.S. buildings would yield annual energy savings of $65 billion. The report highlights the role that energy costs play in U.S. economic growth; overall U.S. Energy costs rose to 9.2% of GDP in 2011, up 3% in a decade.
Given the potential returns of investing in energy efficiency why aren’t we seeing greater investment? The primary barrier to improving building energy efficiency is lack of information. Commercial real-estate markets typically do not provide information on the efficiency of a building as part of a real estate transaction. The report suggests better disclosure, and building labels to help address this problem. A California regulation recently went into effect that requires the disclosure of a buildings Energy Star score as part of any lease, sale or finance transaction ( AB 1103: Nonresidential Building Energy Use Disclosure Program). The other major driver cited is incentives and efficiency finance programs. The growth of Energy Service Corporations (ESCOs) has helped drive energy efficiency, but mostly in the municipal, university, school, and hospital (MUSH) sectors. Utilities are offering more efficiency finance programs, but the report finds there is still a large unmet opportunity for improving efficiency. More detail can be found in the full report: Unlocking American Efficiency.
A good first stop for finding available incentives for energy efficiency and renewable energy is the Database of State Incentives for Renewables & Efficiency (DSIRE). The website catalogs Federal, state and utility incentives for efficiency and renewable energy. It also provides background on Federal and state policy that impacts efficiency and energy.
Source: U.S. Energy Information Administration
The U.S. Energy Information Administration (EIA) published an interesting report yesterday that sheds some light on why we have seen the rise in Renewable Identification Number (RIN) prices for corn ethanol. RINs are tradable instruments used to demonstrate compliance with the Renewable Fuel Standard (RFS), which since 2005 has required the blending of increasing amounts of biofuels into the U.S. transportation fuel supply. Corn ethanol RIN prices rose from their historic average of $.01 – $.05 to just under $1 in March of this year. In short, the report finds that rising RFS blending volume mandates, coupled with a decline in U.S. transportation fuel use, will make it increasingly more costly to meet blending obligations. More details can be found in the report: What caused the run-up in ethanol RIN price during early 2013? For more information on the RFS and how RINs are used to implement it see the EIA report: RINs and RVOs are used to implement the Renewable Fuel Standard.
Staying on top of the changing landscape of energy legislation across all 50 states can be challenging. For example, Minnesota’s legislature recently passed the Solar Energy Jobs Act, which requires private utilities to generate 1.5% of their power from solar energy by 2020; that’s more than 450 MW of solar in the next seven years. These types of legislative changes present opportunities in the form of incentives, and challenges such as potential utility rate increases.
Learning about and tracking these types of proposed changes got easier recently with the introduction of the Advanced Energy Legislation (AEL) Tracker database; a collaboration between Advanced Energy Economy and the Center for the New Energy Economy at Colorado State University. The searchable database provides free access to pending energy legislation in all 50 states. Legislation is searchable by state, or one of the 10 policy categories shown below:
- Electricity Generation
- Energy Efficiency
- Natural Gas
- Economic Development
- Other Energy
The website also identifies trends and provides analysis on advanced energy legislation. For example, a report dated May 20 analyzed legislative activity addressing the financing barrier to the deployment of advanced energy technology. The report finds that of the 551 bills introduced in the 2013 legislative session over 53% focused on providing tax incentives, while 18% provide loans or grants to encourage the adoption of advanced energy technologies.
Is Hydrogen more than the punch line of a joke? At U.S. Energy’s 25th Annual Energy Conference this past May Scott Tinker, the State Geologist of Texas said that hydrogen would be widely available as a fuel source in 10 years. The joke is that if asked 5 years ago when hydrogen would be available, or 5 years from now, the answer would be the same, in 10 years. For all the research and hype around hydrogen as a fuel source, it has remained just over the horizon of commercial viability. Given this, hydrogen is a good candidate for Future Fridays post to see whether new technologies might truly make hydrogen a reality.
Hydrogen is seen by many as the key enabling component of a sustainable future. When used in fuel cells hydrogen produces electricity and steam, an emission free source of energy. Combined with cars and buses hydrogen fuel cells address many of the environmental concerns of hydrocarbon-based transportation. Perhaps even more important, hydrogen is seen as the key to enabling the wider penetration of renewable energy sources such as solar and wind by addressing the intermittency problem. Hydrogen enables the storage of energy during times of abundance for times when it is needed. To date, hydrogen production is too costly to make these sustainable strategies a reality.
Recent breakthroughs in the fields of chemistry and biology suggests that our hydrogen future might be closer than we think. Researchers at Virginia Tech recently announced that they have developed a process to produce hydrogen from Xylose, the most abundant simple plant sugar. The researchers believe the process is both low cost, and able produce high volumes of hydrogen from any source of biomass. For more on their research see: Breakthrough in hydrogen fuel production could revolutionize alternative energy market.
Not to be outdone by the biologists at Virginia Tech, two chemistry professors at the University of Calgary recently announced that they had developed a process for making inexpensive catalysts to produce hydrogen. One of the barriers to hydrogen as a fuel source has been the expensive catalysts required to split hydrogen away from the oxygen in water. The cost of these catalysts are driven by the need to use expensive metals such as platinum. The pair of chemistry professors has found a way to produce inexpensive catalysts from a combination common metals such as iron, nickel, and cobalt. You can read more about their work here: A Cheaper Way to Make Hydrogen from Water. So confident are they in the technology that they have started a company called FireWater, that hopes to have a product available sometime in 2014.
Even though the price of natural gas has rallied of late and the diesel prices have fallen there is still a significant spread between the two fuel prices that make a compelling economic case for Compressed Natural Gas (CNG) as a transportation fuel. As of late April the spread between a gallon of diesel fuel and the CNG Diesel Gallon Equivalent (DGE) was around $2.75. This per gallon price spread is large enough to achieve a quick payback on the premium for CNG engines and fueling stations when usage is high. If $1.50/gallon of the savings goes to paying off the average $30,000 premium for a new CNG engine then a two year payback is achieved at 65,000 miles per year.
The momentum around CNG as a transportation fuel continues to grow in the U.S. The Federal excise tax credit of $.50/gallon, effective through 2013, provides an incentive for the installation of new CNG stations. Innovation is also helping to drive down the cost of CNG stations. In October, 2012 GE and Peake Fuel Solutions introduced their CNG In A Box system. CNG In A Box is a modular 8×20 foot container with all the components needed to dispense CNG other than the pump itself. Financing for CNG In A Box is also available through GE.
CNG as a transportation fuel also has significant environmental advantages. CNG can lower the transportation carbon footprint 20-30%. Cleaner burning CNG also reduces air pollutant emissions such as particulate matter (PM) by 95%; carbon monoxide (CO) emissions 70-90%; and hydrocarbon (HC) emissions 50-75%. This makes CNG vehicles particularly useful in urban and other environments where air pollution and smog are a concern.
To learn more about how to evaluate CNG as a transportation fuel check out the whitepaper: Opportunities and Risks related to CNG as a Transportation Fuel: A Fuel Manager’s Perspective by U.S. Energy’s Vice President of Strategic Initiatives, Casey Whelan.
Columbia University, Veolia Water, and Growing Blue have released a report that provides a new perspective on water risk in the U.S. While other tools look at the water supply and demand imbalances to measure risk, this report also adds in the impact of climate variations such as drought. In America’s Water Risk: Water Stress and Climate Variability two new metrics were developed:
Normalized Deficit Index (NDI) – measures the influence of within-year dry periods
Normalized Deficit Cumulated (NDC) – measures the influence of drought across the years
Each metric was computed across all 3,111 U.S. counties for 61 years (1949 – 2009). The report indicates the potential for severe water stress “over much of the agricultural belt of the mid west USA as well as the arid regions of California and Arizona.” Many of these high stress areas would require 2-5 times the average annual rainfall to meet demand. Click the thumbnail on the right to see the full map of areas with the greatest water risk.
Continuing water scarcity in the Midwest has far reaching impacts. In 2012 drought reduced corn yields and drove up prices. This led a group of states and representatives from the livestock, poultry and food industries to petition the EPA to waive the mandate to blend corn-based ethanol into the nation’s gasoline supply. Though the EPA rejected the waiver request, continuing drought will keep the food vs. fuel debate alive and pressure on the EPA to adjust the blending mandates in the Renewable Fuel Standard (RFS).
Business also faces water scarcity risk. The report indicates that water scarcity risk can take many forms and occur at many points along the industrial supply chain. As outlined in a previous post, many S&P 500 companies have already experience negative impacts due to water related issues.
Just four months into the first compliance period California’s greenhouse gas Cap and Trade program is set to expand at the beginning of 2014. On Friday, April 19 the California Air Resources Board (CARB) voted to approve the linkage of the state’s program with that of Québec’s (see the news release here). Linking of the two programs will create a larger market for carbon allowances, the primary currency for program compliance. The larger, more liquid market should make achieving carbon reductions more economically efficient as well.
California’s first of its kind in the nation Cap and Trade Program (Program) covers major sources in California that emit 25,000 metric tons or more of CO2 equivalents (CO2e); more commonly known as greenhouse gases (GHGs). The Program is a key component of California’s Global Warming Solutions Act (AB 32), which set a goal to reduce California’s GHG emissions to 1990 levels by 2020. The Program caps statewide emissions from major sources and over time lowers the cap to help meet the 2020 GHG reduction goal. The base year for the cap is 2012, and will decrease by 2% in 2013 and 2014, and 3% per year from 2015 to 2020.
To be in compliance major sources must obtain an allowance for each metric ton of GHG emissions. An allowance is a tradable permit to emit 1 metric ton of GHGs. Currently, allowances are sold in quarterly auctions held by the California EPA, with the next auction scheduled for May 16. A date has not been set for the first joint California-Québec auction.
Major sources also have the option of meeting up to 8% of their compliance obligation through offset projects. Currently, offsets are independently verified U.S. emission reduction projects, which are limited to the following areas: 1) forestry, 2) urban forestry, 3) dairy digesters, and 4) destruction of ozone-depleting substances. It remains to be seen what impact the linkage with Québec will have on the market for allowances and offsets.