Month: November 2022

The European Energy Transition: Moving Beyond Fossil Fuels

The need for an energy transition away from fossil fuels has never been more urgent, especially in Europe. Not only are we facing the results of the latest Intergovernmental Panel on Climate Change (IPCC) report that says we are nearly out of time, but we are also in a time crunch to diversify away from Russian sources of energy in response to the crisis being faced by the people of Ukraine. As a result of sanctions imposed by European countries in opposition to this aggression, Russia has retaliated by cutting natural gas supply to the rest of Europe. 

With limited time and vast need, Europe is preparing for a rapid energy transition away from fossil fuels and toward renewable resources. This blog will outline several of the challenges the continent will need to navigate to ensure success along the journey.

Changes to European Renewable Energy Legislation

Image source: “European Council’s Fit for 55 infographic: What is included in the Fit for 55 package?”

The desire to transition away from fossil fuels is not a new pursuit in Europe. The continent has been making changes to legislation and taking small steps for a while now. However, it has not yet faced this level of urgency.

In July 2021, the European Commission initially published the Fit for 55 package as a part of the European Green Deal. The initial goal established plans to reduce greenhouse gas (GHG) emissions by 40% by 2030, but with the enactment of Fit for 55, the GHG reduction goal was increased to 55%. And for renewable energy, the goal increased from 40% to 45%.

As a direct response to Russia, the European Commission rolled out REPowerEU to help liberate Europe from fossil fuels by 2030. The main goals of the plan are to make smarter investment decisions to save energy, produce more clean energy, and diversify energy supplies. With respect to the previous targets, the new legislation expects to raise renewable energy generation capacity by 169 GW to 1,236 GW by 2030.

The key players in the renewable energy space each have their own aggressive installation targets set:

* To increase its competitiveness. New hydrogen legislation is expected from the EU Commission

 
In order to establish this new capacity for renewables, Europe will need to front a sizeable investment — about 210 billion euros between 2022 and 2027. While that number may seem exorbitant, these changes to the energy infrastructure will ultimately create massive savings for the continent. According to the European Commission’s Q&A website, Europe will no longer need to spend 80 billion euros in gas imports, 12 billion euros in oil imports, and 1.7 billion euros in coal imports per year by 2030. In addition to becoming a net cost reduction, these changes will eventually deliver the energy independence that Europe needs.

Current Challenges to a European Energy Transition

While being in step with the European Commission on these changes is a great start, there are still a host of challenges that European countries will face to fully transition their energy sector. First up: how will countries speed up renewable energy production to meet the aggressive targets set forth in the legislation?

A major issue affecting the speed of production is permitting. It has become very difficult to obtain permits for new renewable energy projects due to administrative hurdles across the continent. The European Commission is aware of these difficulties and has published a document with recommendations on how to speed up permitting. Countries like Spain and Poland are establishing proposals of their own to ease permitting. For instance, in Spain, the ministry approved a decree allowing solar projects smaller than 150 MW and wind farms smaller than 75 MW to bypass the Environmental Impact Assessment process, although these projects still must meet preliminary requirements.

Another hurdle is the recent proposal introduced by the European Commission to intervene in the market, putting a revenue cap of 180 euros per MWh on renewable energy generators, which is being levied to protect customers from historically high energy costs heading into winter.  Renewable generators have been targeted because they can earn exorbitant profits by bidding into the market at near zero marginal costs, as they are not exposed to the currently high natural gas prices. While such market interventions have good intentions, European leaders must implement such policies in such a way that does not discourage investment in renewable energy infrastructure and constrain Europe’s ability to achieve its REPowerEU targets.

Other concerns are centred on commodity supply and grid stability. Copper is essential in many renewable energy solutions—building interconnections, electric vehicle chargers, solar panels, wind farms, and more. Copper supply could be in jeopardy as the current supply may not be enough to meet the increased demand from heightened production plans. 

Beyond commodities, there is also the issue of grid stability in Europe. Increasing the number of intermittent sources, like renewables, is expected to challenge the balancing of the grid in the years to come. For example, with coal and gas, you can decide when to turn on/off production, but that is not the case with renewable sources like wind and solar. To solve this, an influx of energy storage solutions is required; however, so far, only five countries in Europe currently have energy storage targets. Another potential solution to help balance the grid could be to increase the interconnection between countries.

We have yet to see how Europe will overcome these challenges, but we know that the continent is actively working on solutions in order to meet the aggressive targets that have been set.

Making the Energy Transition to Renewables a Reality

Europe has faced energy struggles over the past few years, but nothing like the crisis stimulated by the current war in Ukraine. While the situation is dire, it has unequivocally spurred government leaders to establish a real renewable energy transition plan. We have witnessed quick policy changes, ambitious target setting, and an increased focus on much-needed new technologies, like hydrogen.

We will be keeping close tabs on progress and advising our clients on how to build out their own targets in light of the shifting energy landscape in Europe to make the energy transition to renewables a reality. If you would like to discuss your organisation’s renewable energy procurement strategy in Europe, please contact us.

Improving Access to Renewable Energy Markets Worldwide: Insights from the First I-REC Standard Conference

In early November, I met up with several 3Degrees team members from around the globe at the first I-REC Standard Conference (ISC) in Bangkok, Thailand, to discuss the expansion of renewable energy markets worldwide. It was stimulating to engage with so many industry peers from more than 30 countries to discuss a common topic: standardizing global attribute markets to all regions. Asia is often seen as the next frontier, with much interest from companies, governments, market actors, and other stakeholders in the region’s renewable energy expansion, so it was especially fitting to be meeting in Thailand.

The fully-packed schedule provided insights into different topics related to the expansion of access to renewable energy instruments. At the end of a whirlwind two and a half days, I came away with a few key takeaways.

Need for Global Standardization with Local Implementation

Several sessions focused on the theme of “global standardization with local implementation.” In other words, there’s a need for standardizing the process of issuing, transacting, and retiring energy attribute certificates (EACs) worldwide – a practice recognized by companies, governments, advocacy organizations, supply chain partners, and even the general public as proof to back up environmental claims. 

However, regulatory and structural differences in national and regional energy markets will require collaboration with local governments to establish systems and processes to allow the sale of international RECs (I-RECs). Consequently, promoting local issuance of I-RECs brings confidence to renewable energy procurement, helping companies meet their voluntary climate commitments and driving investments in the market. 

In a nutshell, the introduction of the I-REC system in a new country can be a significant driver of new renewable energy development, making it an attractive market for companies to operate in.

Use of Renewables Across the Supply Chain

Hans Goetze from Lock23, Julie Casabianca from 3Degrees, and Valerie Choy from Amazon Web Services discussing “Use of Renewables across the Supply Chain” at ISC 2022. Image courtesy from the International REC Standard

I had the pleasure of presenting on the panel: “Use of renewables across the supply chain”, where the central theme was how organizations are increasingly taking steps to address their supply chain emissions, also known as scope 3 emissions. The panel also discussed emerging solutions for linking a supplier’s scope 2 emissions to a reporting company’s scope 3 accounting.

In setting the scene, I reviewed the drivers and trends in supply chain decarbonization and outlined how addressing electricity use in the supply chain can be an effective way to make material reductions in companies’ scope 3 emissions. However, doing so poses a number of challenges: 

  • Difficulty getting actionable, primary energy use data from suppliers
  • Meaningful engagement with suppliers requires time 
  • Lack of robust guidance on reporting scope 3 electricity emissions
  • Limited guidance on direct action opportunities for reporting companies
  • Limited renewable electricity procurement options in some markets

It’s important to remember that one organization’s electricity-related scope 3 emissions are another’s scope 2 emissions. Just as reporting companies need options for their claims, suppliers need appropriate renewable electricity options to procure in their local markets, and these options may currently be limited. Utilities and power producers can drive new market opportunities by developing products that help companies reach their climate targets for organizations such as RE100, SBTi, and CDP, and meet the following criteria:

Companies can work with the I-REC Standard Foundation and various industry groups to help advocate for government policies that expand the available options for all energy consumers.

Tracking Developing Trends

Other trends addressed at the conference relate to emerging changes in energy markets and how these changes are expected to impact corporate energy buyers.

  • From voluntary emissions reporting and reductions to increased regulation and requirements. Several speakers highlighted this theme, which is exemplified in the U.S. Securities and Exchange Commission’s proposed rule change for corporates to include climate-related disclosures in their financial statements and reporting and the EU’s proposed Carbon Border Adjustment Mechanism (CBAM). There was a common interest in understanding how this shift would impact companies’ and governments’ renewable energy deployment.
  • Update on the GHG scope 2 guidance: With an eye to the anticipated GHG Protocol updates, it was valuable to have robust discussions about what makes impactful procurement and how market-based instruments like I-RECs are essential to a functioning renewable energy market. 
  • From operation-level electricity reductions to product-level tracking of carbon emissions released with the production of a product: In Europe, the CBAM aims to prevent carbon leakage by requiring importers to quantify emissions associated with imported materials and pay a fee on emissions released during the production process of certain carbon-intensive goods. A reporting system for those goods would apply from 2023 and from 2026, importers are expected to begin paying the financial adjustment. Discussions highlighted how EAC systems could support credible electricity emissions accounting for products, if required to be included, allowing companies to better understand and control the embodied emissions of their products. While the European Parliament, Commission and Council have varying positions on the regulation, negotiations on CBAM implementation are set to be completed by the end of the year. 
  • 24/7 and hourly EAC matching: Speakers shared how innovative platforms and tools are enabling more granular tracking and matching of electricity products, allowing companies with this ambitious goal to purchase renewable electricity that is produced at the same hour of each day that they are consuming electricity. Others cautioned that this market evolution should not come at the expense of disruption to the market or restrictions for other companies, particularly those just entering the EAC markets. A shared feeling among participants is that we need to provide standard instruments in markets that increase accessibility for all companies.

The conference demonstrated that demand for renewable energy and, in turn, EACs is growing, particularly in international markets, as companies look to reduce their own emissions, their supply chain emissions, and their product-level emissions. Expanding access to trusted, standardized instruments, like I-RECs, in markets worldwide will help companies reach their goals and drive the global sustainable energy transition. I feel honored to have joined other market leaders, as well as new market participants, at the first I-REC Standard Conference 2022, and I look forward to continuing the discussions at next year’s conference in the UAE.

If you’ve got a question or need assistance with your organization’s renewable energy procurement or supply chain strategy, don’t hesitate to get in touch.

VERGE 22 Debrief: Navigating new frontiers on the path to decarbonize

Staying vigilant in the fight against climate change can be a challenge, especially during a global pandemic that often makes efforts feel siloed. Returning in-person to GreenBiz’s annual VERGE Conference for the first time in three years offered an opportunity to share climate breakthroughs and accelerate climate solutions in real-time. This year, we sent 19 members of the 3Degrees team to join over 4,000 other industry leaders for three days of ideation and collaboration. The team emerged from VERGE week with the glow of intellectual nourishment and many takeaways to share. 

ALL ABOUT CARBON

Carbon was definitely a hot topic at VERGE this year. Amongst the wide cross section of project types in the voluntary carbon market (VCM), nature-based solutions is one that came up in many discussions. Nature-based solutions were analyzed from all angles— from concerns of leakage and lack of additionality to the significant role they play when paired with engineered climate solutions. 

At the center of the carbon discussion was 3Degrees’ Director of Carbon Markets, Steph Harris, who moderated a discussion with sustainability leaders from Microsoft and Salesforce as they detailed case studies of long-term carbon procurement, covering topics like on-going efforts to scale carbon removal technology. “The carbon removal market needs to replicate the way the renewable power market scaled in the past decade,” said Rafael Broze, Microsoft’s Carbon Removal Program Manager. Currently, 99% of its carbon credit market purchases are nature-based removals and 1% are engineered solutions. The group hypothesized that by 2040 they expect this ratio to shift considerably, and that supporting both removal and avoided emissions projects on the path to net zero is worth consideration.

3Degrees’ Director of Carbon Markets, Steph Harris, moderated a discussion with Rafael Broze, Microsoft’s Carbon Removal Program Manager and Patrick Flynn, Salesforce’s Senior Vice President of Sustainability, examining case studies of long-term carbon procurement.

Coinciding with VERGE was Verra’s announcement of a newly-approved methodology for improved forest management. The methodology uses dynamic baselines, which involves using available data to repeatedly and continuously determine the difference in carbon benefit. Although it increases integrity, the new methodology makes it difficult to accurately project volume, so long-term agreements from buyers, volumetric safe guards, and further reliance on a diverse portfolio of carbon avoidance and removal projects may be needed. 

Also examined in the “Solving the Carbon Market’s Integrity Problem” breakout session, was REI’s desire to catalyze new solutions. REI signed on as a buyer of The Family Forest Carbon Program, a project that’s putting the dynamic baseline in action to increase confidence and reliability in the value of carbon credits. The dynamic baselines are updated every verification cycle and provide a much more refined approach to matching control sites with project sites. The new approach to project baselines and its dynamic quality of consistently monitoring project site activity, actually de-risks forestry offsets and as a result, may bring in additional demand from corporate buyers that are hesitant to enter the VCM. 

There has been heightened scrutiny and a surge of mainstream media coverage on the lack of standards and varying degrees of carbon project quality. The importance of analyzing every piece of criteria that makes a quality credit was reiterated— factors like additionality, durability and GHG accounting should be closely examined by buyers. We also heard that recent market trends are showing an increased focus on quantifying impact, especially from new carbon credit buyers entering the space. 

Our team digested a considerable amount of carbon content over the course of the three days and came away with the sense that there is a continued need for standardization and a neutral voice within the VCM. This player could offer impartial information about carbon options, best practices for connecting carbon with strategic goals, what pricing trends exist, how to find a carbon advisor, and how to weigh the risks of various strategies. We’ll be looking to forth-coming guidance from SBTi’s beyond value chain mitigation, as well as frameworks developed by the Integrity Council for the Voluntary Carbon Market to build a common approach to determining carbon project quality. 

SCOPE 3 AND RECENT CLIMATE POLICY 

Panelists from JetBlue Airways, Deloitte, Salesforce and Rocky Mountain Institute shared insights on how collaborating on Scope 3 emissions can drive the aviation industry forward. (Photos courtesy of GreenBiz)

Tackling scope 3 emissions continues to be one of the top challenges for organizations pursuing SBTi and net zero targets and was on the minds of presenters and attendees at VERGE this year. One session on sustainable aviation fuel (SAF) explained how SAF certificates are being used to reduce scope 3 emissions. Leaders from World Energy, the Environmental Defense Fund, United Airlines, the Boeing Company, and JetBlue Airways discussed decarbonizing  the future of flight in the “Sustainable Aviation Fuel and Net Zero by 2050: Can the Airline Industry Move Faster?” panel.

As pressure mounts on airlines to cut the roughly billion tons of carbon dioxide this fuel emitted when burned, the industry is developing electric aircrafts and investing in sustainable aviation fuel. We heard that about 1,000 times more SAF than is currently being produced today is needed. Airline executives are aware of this opportunity and are eager to decarbonize fuels, which make up about 95% of total aviation industry emissions. Policies like the IRA and LCFS are helping boost sustainable fuel production, but more hydrogen, power-to-liquid technologies and green feedstock are needed for SAF to really take off, and there is still need for a book and claim system. Infrastructure and feedstock barriers exist and vary by location. 

Other considerations we felt were noteworthy were around the SEC Climate Risk Disclosure Rule, the Inflation Reduction Act, 24/7 carbon free energy (CFE), and green tariffs. Speakers on the “Next Generation Carbon Free Energy Procurement” panel emphasized that without 24/7 CFE implementation, the industry will continue to lock in fossil fuel infrastructure to the detriment of communities. Speakers in the session “Green Tariffs: Benefits and Opportunities for Energy Customers and Utilities” made recommendations for those considering green tariffs. They urged early and frequent engagement with the regulator, breaking the green tariff engagement process into two segments–negotiations and procurement–as a best practice, and having specific goals and timelines to make the process smoother.

CONTINUING THE CONVERSATION 

Our team’s time at VERGE 22 was extremely valuable and inspiring. We intend to further explore these complex, developing concepts amongst our teams, and use the insight we gleaned to better support our customers on their decarbonization journeys. Across the dozens of sessions within VERGE’s six program tracks, it was extremely difficult to narrow down our list of key topics to share. That being said, many of our focus areas were covered at the event, so the 3Degrees team would love to continue the conversation. Please connect with us to learn about our work on these topics.  

3Degrees partners with Merge Electric Fleet Solutions to craft a data-driven fleet electrification roadmap for MA-based solar company

 

Solect Energy is one of the top 10 commercial photovoltaic (PV) solar installers in the United States. Built with a mission to turn energy into business opportunities for their customers, the company works tirelessly to find smart, clean energy solutions with a bankable return. Solect deploys a modest commercial fleet of just under 50 light-to-medium duty PV installation and operations vehicles. Given the nature of its business and the size of its fleet, Solect Energy was an ideal candidate for 3Degrees to pilot a fleet advisory engagement with EV analytics partner, Merge Electric Fleet Solutions (Merge).

The Opportunity 

As EV technology has reached fleet-capable vehicle classes including pickups and vans, and local, state, and federal incentives continue to scale, companies around the world are assessing when and how to transition to electric fleets in order to accelerate progress toward overarching climate targets and bring down total cost of ownership.

For Solect Energy, employing a dedicated in-house professional to analyze and optimize their fleet performance isn’t its central priority. However, to understand the business case for fleet electrification, the company joined forces with 3Degrees and Merge to conduct an EV advisory engagement that would assess the current driving pattern of its fleet, optimize current performance, analyze the viability of vehicle electrification vehicle-by-vehicle, calculate the total cost of ownership impacts, and identify immediate next steps.

How We Helped

Leveraging its partnership with Merge, the team utilized existing telematics data collection across Solect Energy’s fleet. By analyzing the real-world driving and locational data, 3Degrees and Merge unlocked a deeper understanding of factors unique to Solect’s electrification opportunity, such as where each vehicle is stored overnight, how far each vehicle is driving daily and annually, how much a vehicle idles, and the consistency or variability of each vehicle’s usage. Discovery calls led by 3Degrees brought to light unique business considerations such as the average vehicle lifespan, the business requirements of each vehicle, and the requirements of the vehicle’s driver.

First, 3Degrees and Merge scrubbed the data to remove errors, ensure accuracy, and fill in any data gaps. Once the data was validated, the team conducted a thorough analysis of the fleet to help prioritize which vehicles to electrify and when. The team developed a precursory EV procurement plan and presented it to the Solect Energy management team. Merge also forecast charging infrastructure and energy needs, including home, depot, and public, for early to late phase deployment. Deeper-level discussions between the companies helped 3Degrees present realistic actionable next steps.


The Results

The analysis determined that 50% of Solect’s fleet could be electrified over the next six years, bringing with it an average total cost of ownership benefit of approximately $7,300 per electric vehicle and avoiding 50MT of CO2e per vehicle from being emitted into the atmosphere.

These findings helped Solect Energy identify the lowest-risk and most costeffective course of action. Solect Energy now has a customized plan that details how electric vehicles can be phased in as the fleet turns over in a way that minimizes the impact to operations and is financially beneficial. Clean fuels programs, which provide financial incentives to organizations reducing the carbon intensity of a state’s fuel pool, have been rolled out in many regions across North America. If Massachusetts adopts its own clean fuels program, 3Degrees can help monetize on behalf of Solect to further improve the ROI. Additionally, with many of 3Degrees’ clients, EV charging is matched with RECs to ensure that it is consuming decarbonized power.

Transitioning to new technologies isn’t without its challenges and risks. This engagement provided Solect Energy with a clear starting point on their journey to fleet electrification, and the peace of mind of knowing that the road ahead will be a smooth one.

 

“3Degrees and Merge did a great job of understanding our business and providing us with actionable advice. We now have a roadmap to electrifying our fleet and know when and how to transition each vehicle.”

– KEN DRISCOLL, CEO, Solect

Using greenhouse gas accounting to evaluate your organization’s scope 3 emissions

As corporations start on a path to setting sustainability goals and climate targets, understanding current baseline emissions is a critical first step. A comprehensive greenhouse gas (GHG) inventory will offer insights into the specific areas to focus an effective emissions reduction strategy. 

Depending on your organization, measuring scopes 1 and 2 emissions can be relatively straightforward as they fall within your direct control and data can typically be more easily accessed. Scope 3 emissions – also known as your value chain emissions – are a bit more complicated. While your company does have some level of influence on Scope 3 emissions, they are outside of your organization’s direct control. Scope 3 emissions typically make up the largest share of an organization’s total emissions because it includes your upstream (supply chain) emissions and those downstream of your organization (customers). Therefore, it is essential to include your scope 3 emissions in your greenhouse gas accounting and climate goals in order to make it credible.

Scope 3 guidance from the Greenhouse Gas Protocol

The Greenhouse Gas Protocol (GHGP)  provides the most widely used standard for measuring and reporting scope 3 GHG emissions across 15 categories: the Corporate Value Chain (Scope 3) Standard. This standard provides helpful guidance for measuring scope 3 emissions and – more importantly – it enables uniform measurement and reporting of progress toward climate goals for companies worldwide. While the use of the GHGP’s standard is not mandatory, the majority of organizations follow it to measure and report their emissions.

The first step in measuring scope 3 emissions is gathering the necessary data from various business units within your company and potentially from suppliers. If the data collection required to complete a full scope 3 inventory is overwhelming, a scope 3 screen is a great place to start. Conducting a screen instead of a full inventory allows organizations to start measuring emissions using more readily available data. The resulting insights are less granular than that of an inventory, but reveals which categories have the largest emissions, i.e. your emissions hotspots, so that you know where to focus your efforts for both reduction activities and improving emissions measurement in the future.

Graphic outlining Scope 3 indirect emissions outside of the reporting company divided by upstream and downstream emissions.

Graphic outlining Scope 3 indirect emissions outside of the reporting company divided by upstream and downstream emissions.

In general, emissions are calculated by evaluating your organization’s activities and the carbon intensity of those activities. Depending on what kind of activity data and carbon intensity data is available, you can choose to calculate emissions with primary data or secondary data. Primary data, such as supplier-specific emissions for the activities they perform, is preferred if it is available as it will be more granular and accurate. However, this data is often not available because suppliers have not measured their GHG impacts directly. Many companies use secondary data, such as industry average data, because it is more widely available and accessible. Industry average data applies assumptions about your organization’s activities and emissions factors based on the average emissions within your organization’s industry. Organizations typically start with industry average data and work towards supplier-based data over time, prioritizing collection of primary data for hotspot categories first.

You will need to work across various teams to collect and collate the right data. Some categories may be easier than others to gather the required data. For example, you may have direct access to the internal systems and sources for some categories (e.g. travel booking software for business travel) while other categories will require engaging with other business units and/or your suppliers to acquire data. Where supplier-specific data is lacking, there are public databases such as US EPA, ADEME, and DEFRA that offer industry-average emissions factors that can be used to estimate your emissions.

Once you’ve gathered your emissions data for each of the scope 3 categories, you will have a baseline of your scope 3 emissions footprint that you can use to plan and prioritize your reduction initiatives.

Using your greenhouse gas inventory to build your reduction plan

The biggest challenge with scope 3 reduction planning is that your organization does not have direct control over these activities. While there are reduction programs that you can implement immediately to reduce emissions in your scope 3, such as switching to less carbon-intensive products or putting a cap on employee travel, it will be imperative to work closely with your internal and external stakeholders to develop a robust plan. Your organization’s partners, suppliers, and employees will all need to be involved in order for your business to make impactful reductions. This is why a thoughtful supplier engagement strategy is a cornerstone of your overall reduction strategy.

To help narrow your focus and determine which reduction programs to prioritize, your organization can apply a multi-prong approach:

  • Prioritize reductions in the scope 3 categories with the highest volume of emissions
  • Consider reduction programs that align with your unique business objectives
  • Choose to highlight reduction programs that engage employees to build buy-in

Each organization’s emissions reduction plan will look different, but developing a strategy based on data will allow you to engage the right stakeholders at the right time to begin making meaningful changes.

Make scope 3 greenhouse gas accounting a priority

Tracking and addressing value chain emissions is undoubtedly a complex process. Furthermore, standards, requirements, and carbon accounting software tools are rapidly evolving. As it typically makes up the vast majority of an organization’s emissions, it is essential to understand who and what constitute your value chain. This is why scope 3 GHG accounting is a foundational starting point for building your organization’s broader climate strategy and emissions reduction goals.

If you’re interested in understanding your organization’s scope 3 footprint or learning more about scope 3 GHG accounting, we offer advanced training and support, so contact us today.