Decarbonizing the Built Environment: What’s working? What isn’t?
Combatting the challenges of climate change requires a concerted effort towards decarbonization. A big part of that effort involves a complete overhaul of our energy system - from our legacy, rigid grid to a resilient, distributed system able to accommodate the demands of electrification and clean energy asset integration.
With technological advances, favorable regulatory shifts, and a MASSIVE influx of capital, energy transition is undoubtedly here.
It’s an exciting time for energy advocates (and for Blueprint Power)! With so much happening at once - literally daily - we wanted to share some thoughts on what’s working...and what’s not.
What’s Working…
#1 Commercialization of DERs. Solar power is cheap. In fact, in certain situations, solar PV is the cheapest source of electricity in history [1] - and it is expected to get cheaper. Batteries - a major factor towards unlocking the potential of distributed generation - are expected to plummet in price as well over the next few years. Development of global supply chains and heavy investment, largely spurred by expanding electric vehicle markets, are driving this trend.
#2 Demand. Clean energy has gone mainstream with energy consumers becoming substantially more environmentally conscious [2]. Consumers want an electric car in their garage and solar panels on their roof. More generally, they want their suppliers, whether their local utility or their landlord, to share in their concern as well. As the demand for “green” solutions increase, so too does the demand for the infrastructural buildout needed to support it.
#3 Capital. Public and private investment in the space is through the roof. President Biden’s clean energy plan alone calls for the deployment of over $2 trillion towards clean infrastructure, energy, and technology over the next four years. From the private perspective, we’ve seen a “who’s who” of new entrants/ventures in the past year alone - from major financial institutions (Macquarie, BlackRock, Blackstone, Carlyle, etc.) to old-guard industrial energy companies (Shell, Siemens, GE, etc.). In April, JP Morgan announced goals to finance more than $2.5 trillion over the next ten years towards climate change solutions and sustainable development. Also in April, BlackRock’s ESG ETF broke capital raise records - luring in about $1.25 billion in its first day. All of this capital needs to be deployed - now. This will hasten project development and apply pressure to lingering regulatory hurdles.
#4 Policy. A dry subject for many, but critically important. The milestone FERC Orders 841 and 2222 signal a concerted federal effort to boost distributed energy assets by affording fair market participation. More recently, we’ve seen President Biden announce highly ambitious goals of 50% GHG reductions by 2030. These sentiments and goals have been echoed, or perhaps even inspired, by many at the state and local level (hello New York). Moreover, recent events have made those resisting such efforts look a bit foolish (hello Texas).
One recent regulatory initiative to keep an eye on is the proposed expansion of the federal ITC tax credit to standalone storage projects (see https://www.utilitydive.com/news/legislation-standalone-storage-itc/596431/).
What Isn’t…
#1 Jargon. With new stakeholders and technologies entering the space (which is great), we’ve noticed that we have a bit of a jargon problem. We are dealing with novel and complex technologies, each of which are using new metrics to describe their efficacy and impact: heat rates, roundtrip efficiencies, carbon coefficients. This industry will likely see a wild flurry of synergistic partnerships over the next few years - we all need to be on the same page with common metric goals and means of speaking to each other.
#2 Local Permitting and Interconnection. Getting energy projects off the ground still requires a lengthy, arduous, and costly process to secure proper permitting and interconnection with the local grid. In order to meet the aforementioned policy goals, projects need to be able to move a LOT faster. It is a complicated problem that likely needs greater policy attention (see https://www.njspotlight.com/2021/05/interconnection-delays-big-problem-impeding-solar-growth-new-jersey-state-wants-fix/).
#3 Market Design. The big one. FERC has unambiguously instructed grid operators to open the doors to distributed energy assets - but they didn’t specifically mandate how (frankly, they likely don’t have authority to). For better or worse, our grid is a web of fragmented distribution systems governed by diverse and complex rules. Each of these jurisdictions is now tasked with overhauling a system that has existed as a one-way, “generator to consumer” structure for a century. Let’s just say some are more willing than others.
Willingness aside, each jurisdiction must figure out how to accommodate and price new technologies and the new services and value streams that they offer - each of which are changing daily.
The uncertainty and complexity associated with this task opens the door for opponents to substantially delay this process. We can’t let that happen.
