Author: Laura Vendetta

Laura Vendetta is Associate Director of Regulatory Affairs on 3Degrees’ Market Intelligence Team. She provides strategic support to 3Degrees and its clients on a range of policy issues related to corporate climate and carbon reduction strategies, leveraging over a decade of experience working alongside energy customers on energy policy and regulatory issues at the state and federal level.

Reflections from the 2022 Renewable Energy Markets Conference

Last month, 3Degrees showed up in full force at the annual Renewable Energy Markets Conference, one of the industry’s most important clean energy events. The event focuses on the states, businesses, organizations and households that choose clean electricity. Each year, industry professionals gather for REM to understand emerging policy trends, exchange market best practices, and gain new tools to excel in retail renewable energy markets.

The Center For Resource Solutions (CRS) hosted this year’s conference, in which themes like green hydrogen, the Inflation Reduction Act, 24/7 carbon-free energy (CFE) procurement, and more were discussed. A personal highlight was participating in a panel discussion on the impact of corporate renewable energy procurement and the various pathways to achieve certain goals alongside other panelists from T-Mobile and the Clean Energy Buyers Association (CEBA).

Participants on the “Power Table” panel joined in a lively and informative conversation about the highly dynamic landscape for renewable energy markets and market growth opportunities.

With two jam-packed days of expansive content, it was nearly impossible to attend every session, but our team made a concerted effort to spread out and cover a variety of topics and we’ve collected our key takeaways below.

Innovative Approches to Procurement

My dialogue with CEBA and T-Mobile on the panel “Impact of Corporate Renewable Energy Procurement: Different Pathways to Achieving Goals,” focused on how corporations are approaching their renewable energy purchasing decisions in terms of impact. The dialogue touched on the diverse types of buyers pursuing these goals (in terms of MWh needs, level of internal expertise, etc.), the pros and cons of certain procurement options, and future trends. A few points discussed during the panel included:

  • Understanding the types of actions companies can take to drive more impactful procurement decisions, while remaining consistent with GHG accounting rules and RE 100 compliance. 
  • Focusing overall on efforts that accelerate grid decarbonization, such as prioritizing procurement at a more localized level where a company has load and where renewable penetration is low. 
  • Aiming to advance a 24/7 CFE grid by moving toward more granular geographic matching to procure clean energy at the places where consumption occurs. 
  • Procuring on behalf of others in your supply chain—knowing how and when you can procure EACs to address your scope 3 emissions and collaborating with suppliers to ensure correct data is gathered.

Realizing the Full Potential of 24/7 Carbon Free Energy

The concept of 24/7 CFE is still relatively new, but the approach comes from the urgency to do more than just purchase clean energy, but to transform electricity systems. The current system of Renewable Energy Certificates (RECs) is based on an annual matching basis—matching a customer’s annual electricity consumption with RECs generated in the same calendar year. 

We heard about a number of organizations that are developing new transactional paths for buying clean energy around the clock, matching RECs on an hourly or even minute-to-minute basis. Proponents of the CFE approach argue that this will better align with actual energy demand curves and promote additional decarbonization impacts. Leading companies, like Google, are focused on creating monitoring systems that can match real-time energy use with clean energy supply.

3Degrees was well-represented at REM ’22 in Minneapolis.

Ensuring clean energy is available where and when it is needed all day and every day is a major challenge and there are ongoing efforts to address it—like organizations promoting solutions for managing energy demand, supporting cutting-edge clean energy technologies in the market, and advocating for policies that advance the power sector. 

Other Key Takeaways

REM featured many other dialogues on developing policies, industry best practices, and emerging trends. Some notable highlights include:

Understanding the Carbon Intensity of RE and Low Carbon Fuels–This presentation focused on the in-depth process and calculations that go into calculating the carbon intensity (CI) of renewable and low carbon fuels. Clean fuel standards across North America are strengthening the CI requirements for fuel types, and providing guidance for how to lower the CI of each fuel type. California’s Low Carbon Fuel Standard (LCFS) has created a demand for low CI fuels in the state and has acted as a market catalyst. The approach of focusing on the CI of a fuel, as opposed to the volumetric quantity that the National Renewable Fuel Standard focuses on, was an innovative approach that is proving successful. Policy makers in other states have taken notice and begun the process to develop similar programs. New policy and market approaches to lowering carbon emissions like these programs will continue to incentivize cleaner fuels in the US and accelerate deep decarbonization areas of the transport sector with hard-to-abate emissions. 

Addressing Equity and Environmental Justice–Another takeaway stemmed from the notion that the power sector has the most significant combination of capital investment opportunities paired with the potential for social and economic progress. This nexus of socioeconomic change was explored on the final day of REM, as the World Resources Institute (WRI) led a case study discussion about how renewable energy programs can improve outcomes for communities.

Major opportunities here included: 

  • Reducing energy burden
  • Expanding clean energy access 
  • Broadening access to low-cost capital
  • Proliferating energy democracy
  • Strengthening energy resilience
  • And multiplying green energy jobs and training

Although there is growing demand for renewable energy, limits to the full expansion of clean energy still exist. Policy barriers, housing, capacity limitation, and lack of customer awareness are important obstacles to address. The discussion generated some implementable solutions, including understanding the needs of target groups, designing programs for specific market segments, leveraging existing energy policies, leading with the financial benefits (instead of environmental) when creating customer-facing marketing materials, and extending information to non-native English speakers. 

While these are the conversations that stood out to our commercial team the most, the conference covered countless other important topics, including discussions on voluntary gas led by a member of our Utility team, Andrea DeWees, Associate Director, Product Innovation. I feel honored to have joined other climate leaders at REM 2022, and look forward to the opportunity to discuss more emerging trends and topics at next year’s conference in Washington D.C. Please connect with us to learn about our work on some of these topics.

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

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.