Climate Compass Blog

Microgrids: Building tomorrow’s resilient, efficient, low-emissions electricity system

The old definition of a microgrid was usually an electricity source, often a combined heat and power natural gas plant or a reciprocating engine generator, that provided fulltime or backup power for an industrial site, military installation, university, or remote location.

Today’s definition is much broader, incorporating cleaner technologies and more diverse customers, establishing microgrids as a key component of tomorrow’s more resilient, efficient and low-emissions electricity system.

A new brief, Microgrid Momentum: Building Efficient, Resilient Power, by the Center for Climate and Energy Solutions (C2ES) and The George Washington University (GWU) outlines microgrids’ benefits and examines what is standing in the way of accelerating their deployment.

Microgrids currently provide a tiny fraction of U.S. electricity (about 1.6 gigawatts, or less than 0.2 percent), but their capacity is expected to more than double in the next three years.

Three examples of the growing interest:

  • Montgomery County, Maryland, recently entered a public-private partnership to develop two microgrids to power county facilities. Ratepayers won’t have to foot the bill, and the government will get more resilient and affordable power with environmental benefits.
  • In the Denver suburbs at Peña Station Next, a “smart” city is taking shape that will test LED lighting, autonomous vehicles, and a microgrid that uses solar panels and battery storage.
  • In Alaska, the state with the most microgrids, the city of Anchorage is about to deploy a project that will make use of two energy storage technologies and help the area integrate more wind power.

Microgrids not only improve reliability and resilience – keeping the lights on during a widespread disaster that affects the main grid -- but also increase efficiency, better manage electricity supply and demand, and help integrate renewables, creating opportunities to reduce greenhouse gas emissions and save energy.

But financial and legal hurdles stand in the way of accelerating their deployment.

Each microgrid’s unique combination of power source, customer, geography, and market can be confusing for investors. Microgrids can run on renewables, natural gas-fueled turbines, or emerging sources such as fuel cells or even small modular nuclear reactors. They can power city facilities, city neighborhoods, or communities in remote areas. As we heard during our research, “If you’ve seen one microgrid, you’ve seen one microgrid.”

The legal framework can be confusing, too. Most states lack even a legal definition of a microgrid, and regulatory and legal challenges can differ between and within states. Issues include microgrid developers’ access to reasonably priced backup power and to wholesale power markets to sell excess electricity or other services. Also, franchise rights granted to utilities may limit microgrid developers’ access to customers.

The report identifies tools that can help address these challenges.

  • Public-private partnerships could play a growing role in overcoming financial hurdles. Mixed ownership microgrid projects, which can include money from public institutions, utilities, and private entities, have increased from nearly zero in 2013, to a projected 38 percent of the market in 2016. Recent examples include microgrid partnerships at Peña Station Next in Denver, Colorado, and two government facility microgrids in Montgomery County, Maryland.
  • States can also play a key role in facilitating microgrid development. Most existing microgrid projects are concentrated in seven states: Alaska, California, Georgia, Maryland, New York, Oklahoma, and Texas. Some states, including California, Connecticut, Massachusetts, New Jersey, and New York, have created clean energy banks, grants, or other funding opportunities for microgrids. For example, New York established a $40 million grant program (i.e., NY Prize) to create community microgrid projects that can serve as templates for other communities. More state grants or low-cost loans could help launch more microgrids.
  • Linear programming models like the one outlined in the report can help focus a proposed project on cost savings, emissions reductions, or independence from the larger grid; forecast or estimate cash flows and financing needs; and manage power supply and demand.

Microgrids are not a traditional or typical infrastructure investment for utilities, nor has the existing electric power industry been structured to facilitate development of microgrids by non-utilities. We’ll need more dialogue among the finance community, service providers and implementers, and government and regulatory agencies to develop the frameworks and policies needed to foster microgrid development.

EV sales are up, but we still need fuel economy standards

New technologies and industry investments are making electric vehicles (EVs) more affordable and approachable, expanding consumer choice and driving record-breaking U.S. EV sales. However, the continued popularity of pickups and SUVs shows the importance of maintaining federal fuel economy standards to reduce greenhouse gas emissions.

At the recent Washington Auto Show, I test drove the Toyota Prius Prime, the second-generation plug-in hybrid Prius model. The Prime features a larger battery range than its predecessor, is surprisingly roomy, and, once unplugged from the charging station, provides a similar driving experience as a gasoline-powered hybrid.

The Prime is the latest example of automakers developing vehicles that can compete both functionally and financially with traditionally-fueled vehicles.

In the all-electric vehicle market, consumers have had to choose between high costs or low battery.

  • Chevy has begun to change the equation with the low-cost, long-range all-electric Bolt, already released in California and Oregon, and slated for a national release within the next year.
  • Tesla, famous for its luxury vehicles, is preparing to manufacture the more affordable Model 3 that retains the company’s longer battery range.
  • Ford, Volkswagen, and many other major automakers are also developing more affordable EV models, both all-electric and plug-in hybrids, that will compete favorably with traditionally-fueled vehicles.
Figure 1: Range and Cost Comparison of All-Electric Vehicle Models


Consumers are responding to these new models and technologies. The reconfigured Prius Prime jumped from a dozen or so vehicles sold per month earlier in 2016 to more than 1,300 vehicles per month in when it was reintroduced in December and this past January, taking second place in the plug-in hybrid market. Of the five best-selling models since December (Chevy Bolt & Volt, Toyota Prius Prime, Tesla Model S & X), only Tesla’s Model S is not new or redesigned within the past 18 months.

2016 was the highest-selling year in the history of the U.S. EV market, with approximately 150,000 vehicles sold. December set a single-month EV sales record at more than 23,000 vehicles.

However, 2016 was also a record year for the U.S. auto market as a whole. Consequently, EV market share rose only slightly, from 0.67 percent in 2015 to 0.84 percent in 2016. (Some estimates can range higher.) In the same timeframe, light trucks (SUVs, vans, and pickup trucks) accounted for more than 60 percent of the U.S. vehicle market, and are expected to remain popular if oil prices stay low. Although EV purchases are increasing, there are at least 70 new light trucks purchased for each new electric vehicle. Plus, Americans are driving more miles than ever.

That’s why it’s important to maintain the federal fuel economy standards, which require automakers to improve the average emissions of the vehicles they sell over the next decade.

The fuel economy standards allow for consumers to choose SUVs and pickups under a separate “footprint,” but require that the greenhouse gas emissions of the larger footprint improve. The U.S. Environmental Protection Agency and the California Air Resources Board have reviewed the standards and found them to be practical, achievable and affordable. With the transportation sector now the heaviest-polluting sector in the nation, these fuel economy standards are critical to reducing greenhouse gas emissions.

Manufacturers are making great strides to expand the EV consumer base beyond early adopters. Many reputable analysts, such as Bloomberg New Energy Finance and the International Energy Agency, expect that consumer EV adoption will rise rapidly in the coming decades, helping to deeply decarbonize the sector. In the meantime, federal fuel economy standards can help reduce greenhouse gas emissions from all vehicle model and fuel types.

Measuring and managing climate change impacts through financial reporting

carney bloomberg photo

Photo courtesy of Task Force on Climate-related Financial Disclosures

Bank of England Governor Mark Carney and task force chairman Michael Bloomberg at the Task Force on Climate-Related Financial Disclosures recommendations report launch.

Most large companies recognize the risks climate change poses to their facilities, operations, and supply and distribution chains. And many of these companies are letting their stakeholders know how climate risks and opportunities will affect their bottom line.

Currently, much of this information is made public through voluntary reporting to non-profit organizations, in corporate sustainability reports, and, for publicly-traded companies, filings with the Securities and Exchange Commission. In our research on company strategies to manage climate risks and opportunities, we have found that the quality of reporting and level of detail varies extensively from company to company, and sector to sector.

Reflecting the growing importance of climate change as a material set of risks for companies to manage, finance ministers from 20 major economies asked the Financial Stability Board (FSB) to review the financial implications of climate change. The G-20 Finance Ministers established the FSB after the 2008 financial crisis to monitor and make recommendations on the global financial system. The FSB convened an industry-led task force  to develop voluntary recommendations to better, and more consistently, integrate into financial filings the risks and opportunities posed by physical climate impacts and the transition to a lower carbon economy. 

In a speech, “The Tragedy of the Horizon,” describing the impetus for creating the FSB task force, Bank of England Governor Mark Carney said: “We don’t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors – imposing a cost on future generations that the current generation has no direct incentive to fix.”

In December 2016, the task force, chaired by Michael Bloomberg, released recommendations focused on four areas of climate-related financial disclosure:  governance, strategy, risk management, and metrics and targets. 

C2ES commends the task force on its efforts to shine a light on the risks we are already facing from climate change, and to enhance the transparency we need to better understand and address them over the long term. 

In our comments submitted on the recommendations, we suggested that the task force:

  • Provide additional guidance on the timeframes companies would use for conducting scenario analysis of their business models and portfolios. For example, if a company is reviewing an investment with a short time horizon, a scenario running out to 2050 or longer might not be helpful.
  • Provide additional guidance for companies on how to select the appropriate scenario tools to assess climate risks.
  • Provide additional guidance on how mainstream financial filings can interact with corporate sustainability reports in a consistent way given that financial data and sustainability data have different levels of precision and timelines.
  • Consider how implementation of the recommendations could involve a “maturity model” that would allow companies to self-assess their progress, benchmark against peers, and influence executive decision-making. An example of this type of model is the Electric Power Research Institute’s Electric Power Sustainability Maturity Model.
  • Provide additional implementation guidance for sectors that the recommendations currently do not reference specifically, such as for information technology, telecommunications, health care, consumer products, and professional services.  Translating climate risks and opportunities into material financial impacts on income statements and balance sheets requires sector-specific guidance. As a starting point, the recommendations provide sector-specific guidance for sectors with high greenhouse gas emissions and energy and water use. Climate-related financial disclosures will be more helpful if they are adopted economy-wide so additional sector-specific guidance may be useful.
  • Engage with stakeholders to identify ways to promote consistency across voluntary reporting regimes to reduce the burden on data preparers.

Many companies will be interested in demonstrating to investors and stakeholders that they are reviewing their corporate sustainability reports and environmental, social, and governance disclosures in line with the task force’s recommendations. An iterative process for enhancing climate-related financial disclosure will likely be needed to make this possible.

We believe the task force recommendations will help ensure that companies take a long view and avoid the “tragedy of the horizon.”

 

Year Ahead: We must strengthen climate action wherever possible

When I wrote a blog a year ago taking stock of the strengthening climate change effort, I reflected on a year of unprecedented progress, capped by the Paris Agreement, and outlined ways we could build on those successes.

At the beginning of the new U.S. administration, the outlook is unfortunately far different.  Now, our challenge is to preserve as much of this progress as we can, and to devise new strategies to continue strengthening climate action wherever possible.

Despite coming setbacks, it’s worth reminding ourselves that we have a solid base to work from. Thanks in part to strong policies, but also to growing market forces, the U.S. is on the path to a clean-energy transition, and the continued momentum is strong.

A few examples, just since the election:

·      Some of the world’s wealthiest entrepreneurs, including Bill Gates, Richard Branson, and Mark Zuckerberg, launched a billion-dollar fund to invest in cutting-edge clean energy technologies.

The new policy landscape won’t be clear for some time and is likely to evolve. But as we monitor the early signs, and take soundings with policymakers and stakeholders around the country and around the world, we are coming to a clearer view of immediate imperatives, and of opportunities that may lie ahead.

One imperative is ensuring that the United States remains a reliable partner in the global climate effort – by staying in the Paris Agreement, and by working constructively with other countries to establish sound rules for its implementation. 

We were encouraged to hear Secretary of State nominee Rex Tillerson note the importance of the United States staying at the table. Indeed, the Paris Agreement reflects long-standing bipartisan principles. It fully preserves national sovereignty while providing a means of holding other countries accountable. U.S. businesses benefit from full access to the clean energy markets the agreement helps drive.

We were encouraged also to hear EPA Administrator nominee Scott Pruitt express respect for the “endangerment finding” underpinning the regulation of greenhouse gases under the Clean Air Act. What is critical is how EPA chooses to fulfill the inherent legal obligation to regulate emissions, starting with the power sector.

While the Clean Power Plan appears unlikely to survive, decarbonization of the power sector is already underway. Thanks to improved energy efficiency and a more diverse energy mix, emissions dropped more than 20 percent over the last decade. Last year was the third in a row that renewables accounted for more than half of new U.S. power capacity.

Continued tax credits enjoying strong bipartisan support will help sustain that growth.  State-level conversations on lower carbon energy policies are continuing as states, cities and utilities find economic opportunity in modernizing the power sector. But the imperative remains: We need an overarching federal framework to deliver sustained, cost-effective emission reductions. We urge the new administration and Congress to get on with the job.

In the near term, we see opportunities for bipartisan steps that benefit both the climate and the economy and strengthen the foundation for a longer-term clean energy transition. These include:

Incentivizing carbon capture, use and storage.

Carbon capture technologies like those deployed this month in Texas are essential to meeting the climate challenge. Senate Majority Leader Mitch McConnell was among the bipartisan sponsors of a bill last year to help advance these technologies by supporting the use of captured CO2 in enhanced oil recovery, as recommended by a coalition of industry, labor, and environmental groups we help lead. We expect similar legislation in this Congress.

Advancing nuclear energy.

Bipartisan bills have already been introduced in the House and Senate to spur advanced nuclear technologies. Nuclear is our largest source of zero-carbon energy and the only one that provides continuous baseload power. It will have to play a significant role in any realistic long-term climate strategy.

Modernizing our infrastructure.

A viable infrastructure package could open significant opportunities to address climate change while creating jobs and growth. Examples include:

  • A modernized electric grid that can better distribute renewable power and is more climate-resilient.
  • Expanded charging and refueling networks for electric, natural gas and hydrogen vehicles.
  • Roads and bridges that can better withstand more frequent extreme weather.

One reason we’re confident of continued momentum is that the vast majority of the American people support it. In a Yale survey conducted after the election, nearly 70 percent favored staying in the Paris Agreement. And 70 percent – including a majority of Republicans – supported strict carbon limits on existing coal plants.

Business leaders, too, recognize the growing risks of climate impacts, and the opportunities to create new products, services and jobs.

And a growing number of cities are finding they can save money and create jobs by encouraging energy efficiency and clean energy and transportation.

At C2ES, while we are bracing for setbacks, and are prepared to defend against reversing course, we also will continue working as hard as ever to bring diverse interests together to make progress wherever we can. We face significant new challenges. But from the local to the global level, we’ve got strong momentum. And we can’t turn back.

 

How about using that captured carbon?

carbon shoes

These "shoes without a footprint" were made from carbon that was captured from power production.

Photo courtesy NRG

Imagine if the carbon dioxide (CO2) that emerges from smokestacks at coal- and natural gas-fired power plants and steel and cement facilities could actually be used for something.

Some innovators are imagining just that.

For even more creative ideas, just look at the semi-finalists for the $20 million NRG COSIA Carbon X Prize.

Research teams from around the world submitted ideas for using CO2 in building materials, paint, fertilizers, plastics, and even toothpaste. Other ideas include CO2-based fuels and carbon nanotubes that could be used to make environmentally sustainable lithium-ion and sodium-ion batteries. The prize will be awarded in 2020 after the top ideas are tested in real-world conditions.

Carbon dioxide from burning fossil fuels is contributing to a changing climate that is bringing more frequent and intense heat waves, downpours, and drought and rising sea levels. Capturing CO2 from power plants and industrial sources will help reduce these harmful emissions.

In the U.S., we have been capturing CO2 from manmade sources such as commercial-scale natural gas processing plants since the early 1970s. We can offset the costs of capturing and storing carbon dioxide and increase the number of carbon capture projects if we put the CO2 to work.

One way this is already being done is with carbon dioxide enhanced oil recovery (CO2-EOR), where pressurized CO2 is pumped into already developed oil fields to get out more of the oil. CO2-EOR boosts domestic energy production, makes use of already developed oil fields, and stores carbon dioxide underground.

C2ES co-convenes a coalition of industry, labor, and environmental groups encouraging greater deployment of carbon capture technology for CO2-EOR. There’s bipartisan support for incentivizing technologies to capture carbon dioxide from manmade sources and put it to use in marketable ways.

The U.S. produces 300,000 barrels per day, or nearly 3.5 percent of our annual domestic oil production, through CO2-EOR. But we’re mostly using CO2 that isn’t from manmade sources.

For every barrel of oil produced using manmade CO2, there is a net CO2 storage of 0.19 metric tons even considering the emissions from the oil, according to the International Energy Agency and Clean Air Task Force. In other words, EOR using power plant CO2 results in a 63 percent net reduction of the total injected volume of CO2 or a 37 percent reduction in the life cycle emissions from oil.

At the end of 2016, NRG completed construction on Petra Nova, the first American retrofit of a coal-fired power plant to capture CO2 emissions, which are then used for EOR. The Texas project was on schedule and on budget. It’s capturing more than 90 percent of the CO2 from a 240 MW slipstream of flue gas from an existing coal unit at the WA Parish plant. It’s now the largest project of its kind in the world.

Finding more ways to turn carbon dioxide from an energy and industrial sector waste product to a useful commodity could spur the development of new technologies and products while limiting climate-altering pollutants. There’s promise, but also scientific, regulatory, and market challenges.

The Global CO2 Initiative, which advocates a mix of policy, research funding, collaboration, and infrastructure improvements to accelerate commercial deployment, estimates that the size of the global CO2 non-EOR utilization market could be as large as $700 billion by 2030. Aside from EOR, we could be using 7 billion metric tons of CO2 per year for fuels, concrete, polymers and more. That’s about 15 percent of current global CO2 emissions.

The new administration and new Congress need to consider how best to incentivize continued research, development, and commercial-scale application of CO2 utilization. With the right policy incentives, the U.S. can take a leadership role in this vital technology.