Month: August 2022

Okta tackles electricity emissions with Social RECs

, August 23, 2022

San Francisco-based identity company, Okta, is no stranger to working on impactful renewable energy procurement projects. In 2020, they completed their first renewable energy purchase with 3Degrees in the interest of addressing their scope 1 and 2 emissions in a manner that bestows positive community outcomes.

The organization later decided to focus the majority of their US purchases on Social Renewable Energy Certificates (RECs)—these are RECs with co-benefits outside of solely environmental benefits, like supporting local community-based organizations and projects that are involved in solving the systemic nature of social and environmental issues. 

This focus on impact-based work comes from Okta’s unique style of cross-team collaboration and a strategy to address broader challenges such as sustainability, diversity, equity and inclusion (DEI), and social impact. Okta for Good, the philanthropic arm of the company, plays a central role in this strategy, as it has a commitment to “be a catalyst for those making change at the intersection of humanity and technology.”

In 2020, 3Degrees introduced Okta to various impact projects, like California Bright Schools, while Okta also had prior relationships with other organizations, like Solar Stewards, a women and minority owned business.  Recognizing the importance of weaving equity and impact into its business and climate strategy, Okta met with several climate justice, social enterprise, environmental organizations, and funders as part of a “listening and learning” tour. With takeaways from the tour, additional internal research, and 3Degrees’ recommendations, Okta chose to add a project with Solar Stewards to their next renewable energy procurement. The specific project will support energy equity and advocacy in Salt Lake County, Utah.

Challenges

Despite the good of impact-based projects, they often face challenges getting off the ground due to their small size, longer time commitments, and other complexities related to bespoke projects. The revenue generated from many of these projects contributes directly to the project being built. As a result, these typically necessitate multi-year time commitments with uncertainty around how many megawatt hours (MWh) a project will generate based on panel efficiency, hours of sunlight, time to implement and more.

Another issue with impact-based projects is that the organizations that run these projects are wary of the marketing language that corporations may use. They worry that the language may become exaggerated or discuss the communities they’re helping in a way that is not true.

Okta committed to a multi-year agreement, with the comfort of increased knowledge that they would directly contribute to project viability and Solar Steward’s program costs, since it would not be implemented unless the contract commitment was a minimum of three years. In order to guarantee Okta meets their goals, 3Degrees and Solar Stewards worked together to ensure there were an added  number of RECs in case of under production. 

Solar Stewards, Okta, and 3Degrees have also formed a trusting and respectful relationship where every marketing campaign and data source is reviewed by Solar Stewards prior to publication.

How we helped

3Degrees was in a unique position to help the tailored nature of this transaction for Okta by: 

Having a large portfolio and pipeline of impact-based projects.

This reassured Okta, as they knew that they would still meet reporting requirements for their sustainability goals if they weren’t able to procure the MWh they needed from this project.

 

Turning community co-benefits into a line item on a standard energy procurement contract.

This allowed teams across Okta to merge environmental and impact priorities in one contract.

 

Acting as a backstop, working through the multiple stakeholders and handling the backend work to turn the project into a transactional deal.

This eased difficulty for Okta by having one source to go to when they had project status questions.

 

Results

Through the three-year unbundled REC agreement signed by Okta and Solar Stewards, and facilitated by 3Degrees, Okta was able to support Solar Stewards in their work to support local energy equity work in Salt Lake City.   

The specific project that Okta’s purchase helped to fund is currently underway and expected to be online by the end of 2022.

Inflation Reduction Act sets the stage for more U.S. climate action

, August 17, 2022

The United States is entering a new era of climate action. As the Inflation Reduction Act (IRA) of 2022 becomes law, we mark a historic moment for the advancement of clean energy technologies and decarbonization of the U.S. electric grid. 

This long-awaited, broad-based climate legislation will provide corporate climate leaders in the U.S. with  more support and incentives to accelerate their clean energy investments, and we hope that this legislation will encourage more organizations to take steps to address their emissions and strive toward a low-carbon future. Here’s an overview of the implications for U.S. organizations who are working on climate commitments.  

Implications for corporate climate action in the Inflation Reduction Act

The IRA provisions aim to strengthen innovation with investments in new clean energy technologies, expand domestic clean energy production and manufacturing, and lower energy prices for customers. Early analysis of the IRA indicates that the emissions reduction component of the bill has the potential to put the U.S. within reach of the U.S. Paris Agreement goals. Analysis by The Rhodium Group shows U.S. net greenhouse gas (GHG) emissions declining by 32-42% below 2005 levels in 2030 as a net result of the provisions in the IRA. 

Though greater climate action will be needed for the U.S. to meet our 2030 Paris Agreement goals, this legislation promises significant progress towards meaningful emissions reductions through the development of clean energy technologies, which will help to make progress toward the U.S. climate commitment. The incentives in the IRA pave a path for corporate buyers to step up action and advance climate-related commitments. 

What’s in the Inflation Reduction Act: Climate and clean energy opportunities 

The IRA allocates $369 billion over 10 years to advance clean energy technologies, reduce GHG emissions, and support environmental justice issues. The law expands existing tax incentives and introduces incentives for developing technologies, including clean hydrogen, standalone storage, nuclear, sustainable aviation, and transportation electrification provisions. The law also introduces prevailing wage and apprenticeship program requirements and opportunities for projects to earn bonus credits. 

The IRA has the potential to rapidly transform the U.S. energy grid and spur clean energy innovation that will create more project and financing opportunities for many energy customers. While the law does not directly impact the voluntary market, the climate portions of the IRA represent the biggest investment in clean energy sources in U.S. history and are approximately four times larger than the incentives included in the Obama Administration’s American Recovery and Reinvestment Act of 2009. 

Below is an overview of topline provisions in the IRA that are relevant to U.S. organizations.

  • Clean Energy Tax Credits — The new law offers many new and expanded tax credits, including several that will benefit climate and clean energy development.

Production Tax Credits (PTC)

+ Clean Hydrogen PTC–Creates a new 10-year incentive for clean hydrogen production with four tiers and a maximum of 4 kilograms of CO2 equivalent (CO2e) per kilogram of hydrogen (H2).

+ Advanced Manufacturing PTC–Creates a tax credit for the production of clean energy technology components that are produced in the U.S. or by a U.S. possession. This would include solar components, wind turbines and offshore wind components, battery components, and critical minerals needed to produce these components.

+ Renewable Electricity PTC–Extends the existing production tax credit for applicable renewable energy sources, including solar facilities. This tech-specific PTC ends in 2024 and is replaced by a new tech-neutral Clean Electricity PTC which begins in 2025. The Clean Electricity PTC would create a credit of 1.5 cents per kWh of electricity produced and sold or stored at facilities placed into service after 2024 with zero or negative GHG emissions. 


Investment Tax Credits (ITC)

+ Extension of Energy ITC–Extends the existing investment tax credit for applicable energy projects to 2024 and maintains a 30% credit for solar and energy storage technologies. This tech-specific ITC ends in 2024 for most technologies, and is replaced by the new tech-neutral Clean Electricity ITC beginning in 2025. The Clean Electricity ITC creates a credit of 30% of the investment in the year the facility is placed in service.

+ Advanced Energy Product Credit–Extends the 30% investment credit to clean energy projects to strengthen domestic energy manufacturing and support the production and recycling of clean energy projects. This also includes projects at manufacturing facilities that want to reduce their GHG emissions by at least 20%.


Fuel Tax Credits

+ Sustainable Aviation Fuel (SAF) Credit–Provides a credit starting at $1.25 per gallon for aviation fuel that reduces GHG emissions by 50% and increases by one cent for each additional percent reduction (max $1.75 per gallon). This credit is through 2026. 


Clean Vehicle Tax Credits

+ Commercial Clean Energy Credit–Creates a $7,500 tax credit for the purchase of EVs or other qualified clean vehicles (Class 1-3). A $40,000 credit is provided for class 4 and above.

+ Extension of Alternative Fuel Refueling Property Credit–Extends tax credits for alternative fuel refueling property placed into service before 2033 and increases the tax credit to 30% of the cost of alternative fuel refueling property up to $100,000.

  • Prevailing Wage and Apprenticeship Requirements
    In order for projects to receive the maximum ITC or PTC outlined above, projects must meet a prevailing wage and apprenticeship program requirement for project construction and operation. This applies to facilities 1 megawatt (MW) and above, and would begin 60 days after the IRS issues guidance on this requirement.
  • Bonus Credits
    The IRA provides additional opportunities for projects to receive “bonus credits” for facilities that are placed into service after 2022. An additional 10% credit is available for projects that meet certain domestic content requirements. A facility can receive an additional 10% credit for projects that are located in an energy community.
  • Direct Pay
    Many of the tax credits in the IRA include a direct pay option for tax-exempt entities, including state and local governments, rural electric coops, and Native American tribal governments. This essentially provides certain organizations with the option to treat certain tax credit amounts as payments of tax. Payments in excess of tax liability can be refunded to these organizations, allowing for the credits to be received as direct pay. 

While the majority of businesses would not be eligible for this option, the IRA includes a transferability option that could increase flexibility and options for energy buyers to access this credit. 

Inflation Reduction Act impact on voluntary clean energy buyers

The IRA will put the U.S. on a pathway to transform the electric grid and rapidly reduce GHG emissions. For voluntary buyers and corporates, the IRA will: 

  • Increase project availability and create new project financing options–With the significant number of tax credits and options for bonus credits in the IRA, voluntary buyers can anticipate more project supply and new financing options that take advantage of either the Clean Electricity ITC or PTC as well as the bonus credit incentives.
  • Incentivize a broader suite of clean energy technologies–The IRA introduces new tax credits and clean energy financing for a range of clean energy technologies, including clean hydrogen, nuclear, storage, carbon capture and sequestration, and electric vehicles. These incentives will not only drive investment into the development and deployment of new, emerging technologies needed to drive grid decarbonization, but also provide voluntary buyers with more options to meet their own climate and sustainability goals. 
  • Enable more impactful procurement decisions–In order to take advantage of the increased tax credits and bonus credits outlined in the IRA, voluntary buyers should anticipate how to address the IRA’s prevailing wage and apprenticeship program requirements and costs into their procurement decisions. Additionally, voluntary buyers should consider how their procurement and/or siting decisions could leverage the domestic content requirements or meet the energy community requirements.

What’s next for the Inflation Reduction Act

President Biden signed the IRA into law on August 16, 2022. The Internal Revenue Service and other agencies will need to provide additional guidance on how the IRA will be implemented. The extension of the existing ITC and PTC incentives can be retroactively applied to projects put into place as early as January 1, 2022. Bonus credits and new tax credits apply only to projects put into place in 2023 or later. 

The 3Degrees team will continue to analyze this legislation and engage with our clients on how the IRA will impact their specific climate action plans in the coming years. Though the IRA is imperfect, it is another tool in the toolkit of climate action, and we hope it galvanizes many Americans and global citizens to accelerate their fight to reduce the impact of climate change for all. 

 

Finding new value for electricity from livestock digesters in transportation markets

, August 18, 2022

Incentives to decarbonize transportation fuels from “clean fuels standards” like California’s Low Carbon Fuel Standard (LCFS) and Oregon’s Clean Fuels Program have transformed the livestock digester industry. The number of livestock digesters doubled last year, and is set to double again based on the number of projects that are planned or under construction, according to estimates from the Coalition for Renewable Natural Gas. The Wall Street Journal and others have dubbed this a gold rush for private capital to build new projects.

To date, the rush has focused on livestock digesters making renewable natural gas to fuel compressed natural gas vehicles. More quietly, clean fuels standards have introduced rules for how to fuel electric vehicles (EVs) with renewable electricity–including electricity (not gas!) from livestock and food waste digesters, which are credited for the same avoided methane emissions as renewable natural gas projects. Under these clean fuels standards, electricity-generating livestock digesters can generate up to $500/MWh for the environmental attributes (not including the value of the electricity). The actual value for facilities highly depends upon the final carbon intensity of a project, and most facilities fall into a range of $150 to $400 per MWh, depending on their avoided methane emissions.

Electricity generating projects are taking advantage of this incentive. 3Degrees alone is currently working with five biogas to electricity projects, with more under development. This incentive can be a lifeline for livestock digesters aging off their original power purchase agreement, which were often subsidized at high prices, that are unable to cover their operating costs at the lower avoided cost rates. 3Degrees recently pre-purchased clean fuels standard credits to repower one of these projects.

Factors currently limiting electricity development are set to change

The gold rush seen in renewable natural gas hasn’t yet hit livestock digesters making electricity at the same scale. Two primary factors have limited this development:

  1. RINs. Renewable Identification Numbers under the federal Renewable Fuel Standard have been another essential incentive, stacked on top of the clean fuels standard credits, to promote renewable natural gas digester development. While RINs from electricity or “eRINs” have been written into the Renewable Fuel Standard legislation, EPA has not been approving eRIN pathways. The EPA is clear this is changing. While the date keeps getting pushed out, the industry now expects EPA to release rules for eRIN generation in November this year. Two major sources of uncertainty remain – how the introduction of eRINs will affect overall RIN pricing and whether or not EPA will integrate critical “energy economy ratio” calculations into the overall calculation of eRINs that recognize the increased efficiency of using electricity for transportation.

    Table: eRINs have the potential to put the environmental attributes from electricity projects on par with RNG    . This is indicative of an environmental attribute value of a swine digester making 400 MWh or 3,600 MMBTU per month, for example. The “with eRINs” scenario assumes an energy economy ratio, similar to the LCFS, is applied to the RIN calculation and RIN pricing remains stable despite the introduction of significant new RIN supply. Both of these assumptions have significant uncertainty, and the RIN value could fall significantly. All scenarios use current LCFS and RIN pricing.
    While eRINs have the potential to put the value of environmental attributes from electricity projects on par with RNG, there are many reasons to implement electricity projects even if the gross attribute value is lower. Electricity projects, in particular for smaller projects far from natural gas pipelines, have significantly lower capital costs because they do not require the same gas clean up and new pipeline construction. In addition, downstream fueling with compressed natural gas will not grow at the same rate as electric fueling; electricity will clearly power the light and medium duty vehicles in the future, so there will be more than sufficient EV charging for digester projects to supply.     
  2. Geography. Given current rules in clean fuels standards, only projects in the Western United States are able to wheel power to the required balancing authorities to match with EV charging in Oregon or California. As clean fuels standards proliferate across the United States, opportunities will open for projects throughout the United States. 

How It Works

3Degrees provides an end-to-end service to generate revenue from transportation market-based incentives for digester projects by:

  • Assessing the potential carbon intensity and incentive value of each facility and mapping prospective transmission paths for wheeling power;
  • Matching electricity to electric vehicle charging in eligible states, including wheeling power when necessary;
  • Ensuring proper contracting to meet the evolving requirements of each states’ transportation incentive markets;
  • Managing the registration, monitoring, and verification of the pathway needed to generate credits; 
  • Preparing pathways and contracts for facilities to generate additional revenue under the federal Renewable Fuel Standard by generating eRINs; and 
  • Generating and monetizing transportation market-based incentives and managing all payments to digester facilities. 

To understand how to capitalize on this growth opportunity and learn more about our deep expertise in avoiding methane emissions under compliance climate programs, please contact us today.

Low Carbon Fuel Standard program explained (video)

, August 15, 2022

In this video, we unpack the role of California’s Low Carbon Fuel Standard (LCFS) and similar programs around the country. Clean fuels standards aim to decarbonize the transportation sector and remove the barrier to entry for clean transportation technologies. 

Learn how these tools can support your fleet electrification efforts.

Watch the video
 

 

Willits Woods – Improved Forest Management

, August 31, 2022

Willits Woods IFM Project

Mendocino County is a quiet and secluded community nestled between the rocky coastline of Northwestern California, and the wooded terrain of old-growth redwood groves. In the heart of Mendocino County is the 19,000-acre Willits Woods project area which is home to a wide variety of natural communities, including redwood, Douglas fir, coastal oak, mixed chaparral, montane hardwood, grassland, and coastal sage scrubland.

Forest management practices of this area have varied over the years as ownership of the land has changed. Heavily forested in the nineteenth and early twentieth centuries, Northern California woods such as this often incur the negative impacts of excessive logging—loss of wildlife habitat, reduced carbon storage potential, and heavy erosion which deposits sediment into waterways. 

For years, local timber companies had subjected this landscape to unsustainable harvest practices. Since the development of the Willits Woods IFM Project, there have been no commercial timber harvesting activities. Willits Woods’ forest plan provides a full range of improved watershed benefits. Its conservation efforts focus on fostering the health of  migratory birds, riparian forest, streams, springs and wetland ecosystems. The project’s use of sustainable forest management practices increases the amount of carbon that can be absorbed and stored. The Willits Woods forest, like many other improved forest management projects, serves as a critical nature-based solution to climate change by avoiding carbon emissions from over-harvesting as well as removing carbon from the atmosphere through sequestration. Because the project is crediting new growth, the credits being offered from the project are considered carbon removals.

 

CO-BENEFITS:

Environmental:

The implemented forest management plan at Willits Woods protects biodiversity and provides habitat for sensitive species, such as the Yellow-Legged Frog, Marbled Murrelet, Red Tree Vole, and the Pacific Fisher. Sustainable management of Willits Woods improves landscape ecological health, safeguards water purification, and strengthens soil stabilization. Conservation efforts help sustain critical ecosystems for coho, pink and chinook salmon as well as steelhead fish populations.

 

Social:

Protected forest within the project area offers the local community a place to enjoy numerous recreational opportunities, such as hiking, camping, swimming, and horseback riding.

3Degrees + carbon offsets

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Guoluo Grassland Sustainable Management – AFOLU

, August 4, 2022

Sustainable grassland management provides local employment 

Decades of overgrazing and the compounding  effects of climate change have desolated the  Qinghai’s Three River Source Region, leaving it fragile with little hope of improvement. Continued degradation of its grassland ecosystem not only posed a threat to the area’s environment and biodiversity, but the livelihoods of local herders.

In an effort to revitalize the area, the Guoluo Grassland Sustainable Management Project aims to restore the local degraded grassland ecosystem, increase grassland coverage and soil carbon stock, and implement sustainable grassland management. As the project’s primary activity, local workers have planted grass seeds on a degraded black soil beach. Once restored, the healthy grassland ecosystem is expected to generate GHG emission removals of 17,664,275 tCO2e, with an average annual GHG emissions reductions of 456,953 tCO2e. It will also serve as an attractive landscape with the potential to benefit local touristic resources and the local economy.

The project will boost the local economy by providing training and job opportunities in rodent control and grass seeding. Through this program, local community members will develop the technical skills necessary to sustainably manage the grassland. Local wildlife also stands to benefit from the project via an increase in soil organics.

 

CO-BENEFITS:

Environmental:

The project is estimated to generate over 17 million tCO2e in net estimated emissions removals and over 400,000 tCO2e in average annual GHG emissions reductions. Increased soil organics will improve life for 3 species of endangered animals (birds and mammals) and 9 species of vulnerable animals. 

 

Health:

Project implementation can purify water sources and ensure the water safety of nearby residents. 

 

Economic:

Nearly 12,000 members of the local community are expected to gain improved skills and/or knowledge resulting from training provided as part of project activities. The project is expected to create 3,386 full-time jobs.  Approximately 6,000 herders will become employed as grassland guardians. 

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Somalia Street Lights Peace REC Project

, August 25, 2022

First P-RECs from Somalia will boost electrification and safety in Abudwak City

Peace Renewable Energy Credits (P-RECs) have the potential to expand the renewable energy revolution to vulnerable regions, improve quality of life, and create economic opportunities. A P-REC is an International Renewable Energy Certificate (I-REC) with an additional certification  by Energy Peace Partners (EPP) of the social and economic co-benefits associated with the  project. 

Developers like Dayah Electric Power Company (DEPCO) are extending the benefits of solar energy to countries in Africa, where energy attribute certificate (EAC) markets have yet to be fully developed. Currently, DEPCO owns and operates a diesel-powered mini-grid in Somalia’s Abudwak City, the largest city in Galmudug State, which it plans to convert to a solar-plus-storage hybrid system. To reduce reliance on diesel-powered generators, DEPCO will install a 400kWp solar power plant. 

Starting in 2022, approximately 700 P-RECs are projected to be issued each year, although energy production estimates will be confirmed upon final system build. These would be the first EACs and P-RECs to be issued and sold from Somalia. P-REC purchases from the Abuduwak solar plant will fund the phased implementation of a community solar street light project that delivers a significant positive impact on quality of life and safety for Abudwak residents.

Co-benefits

Environmental

+ The solar mini grids reduce the need for carbon intensive forms of energy that are typical in Somalia. This has a direct climate mitigation impact by reducing local air pollution and decreasing carbon emissions.

Economic

+ DEPCO’s solar sites will provide power to rural households in Somalia, a nation that has been characterized by underdevelopment for decades, with approximately half its population lacking access to electricity. 

Health/Social

+ The P-REC-funded community streetlights will increase safety and security, and allow local businesses to stay open longer. The electricity connections enabled by the solar mini grids will increase overall quality of life for rural Somali households. 

Photos courtesy of Dayah Electric Power Company

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