This month, we are looking at how the novel carbon removal space is collaborating as it grows, following up on the water supply situation out west, getting to know electrifying everything’s cool cousin, the virtual power plant, and highlighting recently proposed CO2 emissions rules for power plants.
Novel Carbon Removal
2023 is shaping up to be a big growth year for carbon removal. In May, JP Morgan Chase announced that it was buying $200 million worth of carbon removal from Climeworks, Charm Industrial, and a developer of bioenergy plus carbon capture. The bank also joined the Frontier Climate initiative.
Separately, Frontier announced it was signing its largest deal ever with Charm Industrial, committing $54 million to remove 112,000 tons of carbon by 2030. Also, Microsoft and Orsted announced what may be the largest carbon removal deal to date, for more than 2 million tonnes of carbon removal via a biomass energy and carbon capture project. The new acronym you can learn this month is BECCS: Bioenergy with carbon capture and storage (unlike a thermal power plant using fossil fuels, that emits carbon dioxide, a thermal power plant using biomass as its feedstock that is outfitted with carbon capture and storage can actually generate carbon negative power).
One fantastic thing that is happening (besides early capital flowing to a nascent space) is that the novel carbon removal community has embraced open source community norms. Frontier Climate shared not just who it has funded, but its process for selecting them, the language in the contracts it signed, and current gaps and challenges it observes in the market today. This has enabled the creation of other resources like CDR.FYI which tracks carbon removal commitments and purchases.
It is very early days for carbon removal, but this is a great sign for what is likely to become a gigantic industry over time. People are sharing, learning, participating in a rising tide phenomenon. Companies that compete professionally with one another (like Meta and Alphabet, and Stripe and Shopify) are collaborating in sourcing carbon removal. These transparent norms are important for this nascent industry, especially one that is trying to set itself apart from the scandals and issues that existing voluntary carbon markets have experienced. At the end of the day, these are voluntary actions and rather difficult to independently monitor and validate, so this transparency is an important element for building trust and confidence in this novel carbon removal space.
Water, Water, Anywhere?
We talked about the Western US states grappling with limited water resources from the Colorado river last month; a few weeks later, the states were out with a deal amongst themselves. There is a bit of can kicking involved here (it expires in 2026), but also some real cuts, and enough action for the Federal government to chip in a bunch of incentive money.
On a related note, the state of Arizona recently limited new construction around Phoenix after analysis showed there are insufficient water reservoirs to supply water to planned developments. While there are still tens of thousands of plots of land that can be built on, it may be the beginning of the end for this metro area’s housing boom. Going forward, new developments will not be able to rely on well water and must acquire water through other means (no small effort in a desert). It will be interesting to see what this does to the Phoenix area real estate market over the next decade – another postcard from the (not too distant) future.
Virtual Power Plants: Electrifying Everything’s Cool Cousin
A recent study by the Brattle Group suggested that virtual power plants (VPPs) could provide the same level of resource adequacy as gas peaker plants or battery storage, at a much lower cost. The study was funded by Google, which owns Nest, the smart thermostat maker (who could be a major player in the VPP space). Here’s more from Utility Dive:
The Brattle report describes VPPs as distributed energy resource portfolios that include technologies such as rooftop solar panels, smart thermostats, smart water heaters, electric vehicles, and distributed batteries, which are actively controlled by utilities. Virtual power plants add energy to the grid either by reducing power demand through appliances like smart thermostats, or by tapping batteries that store unneeded electricity when demand is low.
VPPs are like the cool cousin of electrifying everything: once you have a smart thermostat, an electric vehicle, and a heat pump, these become assets that can be used to help manage the grid. Speaking of electrifying everything, friend of Evergreen Energize Ventures is out with their 2023 Electrifying Everything report. In it, they highlight how “Europe is the mad science lab fostering the rapid electrification of everything.”
Power Plants Rule
The Biden Administration proposed what would be the first limits on CO2 emissions from power plants. Based on the tumultuous path carbon emissions regulations have faced in the past, the EPA developed some very focused rules (focusing narrowly on the plants themselves) and providing flexibility so that they didn’t accidentally shut down a bunch of important assets. As described by Inside Climate News:
Large categories of coal and natural gas power plants—those that are going to close soon, or are small, or only run intermittently—will not face new requirements at all. And clean-up of the electricity sector will rely on two technologies—carbon capture and storage, or CCS, and clean hydrogen—that are receiving billions of dollars of federal subsidies approved by Congress over the past two years.
Moreover, no fossil fuel plant will be forced to install those technologies before 2030. Large natural gas plants have until 2035 or 2038 to equip themselves with carbon capture and other technology to cut emissions 90 percent. That suggests the U.S. won’t make it to Biden’s goal of 100 percent carbon-free electricity by 2035 on this rule alone, even if it survives all of the challenges that the industry and states are preparing to launch.
One interesting tidbit from the category of ‘be careful what you wish for’ – because the Obama era Clean Power Plan was struck down, the EPA was essentially starting from scratch in developing these regulations. However, the renewables sector has grown tremendously from when that Obama era rule was being developed (in 2014-2015). So, as a result, the EPA can credibly pursue much deeper emissions cuts than they could have a decade ago, because the price and availability of zero carbon generating resources is in a different place.
Here are some good energy transition charts from RMI.
First Solar, which produces its thin film solar panels in the Toledo, Ohio area, is seeing an uptick in demand following the enactment of the Inflation Reduction Act.
Ford is adding Tesla’s charging port to its new electric vehicles, giving it access to Tesla’s extensive supercharger network (hat tip Future of Transportation).
Globally, investments in solar are now outstripping investments in oil, according to the International Energy Agency.
Silicon Valley Bank is back following its bankruptcy, and is again financing community solar projects.