RMI https://rmi.org/ RMI transforms the global energy system to secure a clean, prosperous, zero-carbon future for all. Wed, 27 Mar 2024 22:57:11 +0000 en-US hourly 1 The Case for Placing Drayage Truck Chargers Away from Ports https://rmi.org/the-case-for-placing-drayage-truck-chargers-away-from-ports/ Thu, 28 Mar 2024 10:00:46 +0000 https://rmi.org/?p=39330 Installing drayage truck chargers further away from ports can benefit fleets’ bottom line and operations, avoid grid bottlenecks, and reduce port congestion.

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We would not have most of our everyday goods without drayage trucks. Drayage trucks are responsible for moving goods to and from ports, and today are mostly powered by diesel internal combustion engines. The estimated 60 million drayage movements in North America each year burn billions of gallons of diesel, contributing to poor air quality and poor health outcomes.

Electrifying these trucks would improve local health and reduce climate impacts. However, providing sufficient charging infrastructure in the right locations is challenging. A dearth of robust data and analysis has hampered the development of stakeholders’ electrification strategies. They need to know how many trucks are on the road, how many trips they take, and how many depots will be needed to power them should they be electrified.

That’s why RMI and the Mission Possible Partnership (MPP) analyzed drayage trucking data in Los Angeles (LA) County: to provide stakeholders with a clear understanding of where trucks typically go before and after passing through the Port of LA. The analysis also provides information about where new charging stations should be located.

Why Los Angeles?

Los Angeles County is home to the country’s two busiest ports (LA and Long Beach) and consistently ranks as one of the nation’s most polluted areas. And research shows that people living near these ports experience higher rates of asthma and are more likely to develop cancer than those living in other parts of the county.

To support the electrification of trucks and improve local health, California passed an Advanced Clean Fleets (ACF) regulation requiring that fleets buy only electric drayage trucks beginning in 2024; it also requires that all drayage trucks be zero-emissions vehicles by 2035.

Many Californian fleets, utilities, local governments, and others are worried that they won’t be able to meet these targets. A key concern is the challenges to charging deployment, a vital component of electrification. Retrofitting a site, providing charging to drivers who have their own vehicles and don’t return to a depot, and ensuring the grid can quickly and economically power electric trucks with clean energy are critical to meeting ACF requirements.

Where and How to Install Chargers

Our analysis found that creating well-located charging locations will result in faster deployment and lower grid costs, while accelerating truck, transit, school bus, and car electrification.

This information can help stakeholders direct investment toward projects that will deliver the highest impacts at the lowest costs, at the speed needed to meet ACF requirements.

Below, you’ll find the analysis’ key insights that can help you understand what fleets, policymakers, charging station developers, and others need to consider when developing and implementing their charging infrastructure strategies.

  1. Dispersing charging locations can alleviate congestion at ports and improve fleets’ bottom lines.

Trucks that are charging or waiting to charge take up scarce space in ports. By installing chargers further away from ports, this space can be freed up, thereby relieving congestion.

As illustrated in the map below, most drayage truck trips are within 25 miles of the port and therefore don’t need to return to a central charging depot.  If stakeholders prioritize installing chargers in other areas, fleets can enjoy more operational flexibility, which will likely result in improved bottom lines. Analysis from the North American Council for Freight Efficiency (NACFE) Run on Less Electric DEPOT — a biannual event that demonstrates advances in freight efficiency across the United States — shows that today’s electric trucks can handle many existing return-to-base operations. For example, over 50 percent of drayage operations in LA travel to destinations within LA County.

Current electric truck battery ranges can easily meet fleets’ needs, which means that the transition to zero-emissions vehicles is technologically viable today, if we can use these techniques to unlock charging.

  1. By making chargers publicly available, fleets can help accelerate the electrification of other transportation modes while also saving money.

Charging providers want their chargers to be well-used. High-power chargers and the grid connections they require have high capital and fixed costs. A charger that can serve many types of vehicles is mutually beneficial to users; making chargers accessible to transit buses, garbage trucks, and other commercial fleets makes these fleets more likely to electrify and makes charging more economic. More vehicles help defray the costs of installing and maintaining chargers, as these other customers could take on some of the expense. Using telematics to identify where vehicles stop and start — not just where they begin and end the day — makes siting charging stations easier.

  1. Today’s trucking charging stations are generally concentrated in areas with existing demand. Deploying chargers elsewhere will lessen the likelihood of grid bottlenecks while improving fleet operations.

One of the major barriers to charging deployment is getting power to existing sites: Run on Less participants waited three or more years for utilities to bring power to their sites, a problem that worsens when demand is concentrated in areas with insufficient grid capacity.

Currently, drayage truck charging stations are mostly located in ports and depots. If stakeholders continue to prioritize installing chargers in these areas, power demand will put considerable pressure on local grids, which will likely not be able to reliably support trucks’ growing charging needs, creating grid bottlenecks. These bottlenecks can have significant logistical and financial repercussions.

Stakeholders can help relieve the strain on the grid by distributing chargers over a larger area and further away from ports, in places where there is already trucking activity. RMI and MPP’s analysis shows where trucking destinations are located; this data can help them strategically prioritize where these new chargers should be installed.

For instance: the map below shows that industrial areas such as Carson and Compton have a large amount of drayage truck activity. Installing chargers in these areas would serve trucks’ charging needs while also lessening their dependence on port and depots.

Ideally, these chargers should be located in places where there is already sufficient grid capacity. Thankfully, truck routes tend to end in industrial areas, which often have a higher grid capacity than commercial and residential neighborhoods. And given that industrial zoning regulations, permitting, and approval processes are often less cumbersome than those of other locations, charging deployment projects can move along at a faster pace.

As stakeholders carry out their charging deployment strategies, they also need to consider potential effects on surrounding communities. While it’s true that nearby neighborhoods will benefit from electric trucks, which are quieter than their gas-powered counterparts and produce zero emissions, developers need to remember that new chargers can increase traffic and interfere with residents’ travel if too many trucks queue to charge. These communities need to be involved in the planning process early on to ensure that charging deployment is done in an equitable manner that meets their needs.

Improving the Economy and the Climate

To meet Advanced Clean Fleet requirements, stakeholders need to start strengthening charging infrastructure today. Moreover, drayage trucks are a critical component of port decarbonization — and ports are an indispensable physical asset critical to developing a clean industrial hub (see below). Dispersing chargers, and making them publicly available, will expedite the deployment of these chargers while also reducing the draw on the grid at the ports themselves, saving crucial grid capacity for electrification of other port equipment and onshore ship power. By expanding charger locations, trucking stakeholders can improve the economy and the climate, to the benefit of communities.

About Clean Industrial Hubs

The insights discussed above come from RMI and the Mission Possible Partnership’s Clean Industrial Hub in Los Angeles, California, that accelerates industrial and heavy transportation decarbonization in the region. Clean industrial hubs bring together policymakers, financial institutions, project developers, and community-based organizations to enable groundbreaking decarbonization projects in the hardest-to-abate sectors. In Los Angeles, RMI and MPP’s analyses, convenings, and tools support stakeholders working to advance zero-emissions trucking, low-carbon cement plants, sustainable aviation fuel, and decarbonized ports, by increasing the size, scale, and speed of critical climate investments that benefit the environment, the economy, and communities. This work is done in partnership with the Bezos Earth Fund.

Interested in learning more about truck electrification? Check out these resources:

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Steel Sector Financiers Disclose Climate Alignment for the First Time — and There’s More Work to Do https://rmi.org/steel-finance-climate-portfolios/ Wed, 27 Mar 2024 15:58:03 +0000 https://rmi.org/?p=39321 The journey towards a more sustainable steel sector has reached a new milestone with the publication of the first Sustainable STEEL Principles (SSP) Annual Report. A joint effort led by RMI in collaboration with six pioneering banks — Citi, Crédit Agricole CIB, ING, Société Générale, Standard Chartered, and UniCredit — the report represents a groundbreaking […]

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The journey towards a more sustainable steel sector has reached a new milestone with the publication of the first Sustainable STEEL Principles (SSP) Annual Report. A joint effort led by RMI in collaboration with six pioneering banks — Citi, Crédit Agricole CIB, ING, Société Générale, Standard Chartered, and UniCredit — the report represents a groundbreaking step towards transparency in reporting the climate alignment of steel lending portfolios. With steel production accounting for 8 percent of global emissions, and demand expected to rise a further 30 percent by 2050, this report sets a new standard for disclosing steel portfolio emissions, promoting accountability, and driving the sector towards decarbonization goals.  

Positive steps toward low-carbon steel production, but the sector remains misaligned 

The steel sector is at a critical juncture in its journey toward decarbonization. The first steps to net-zero steelmaking are being taken by industry, and coordinated efforts encompassing producers, financial institutions, and policymakers are taking place across the full value chain: 

  • Hydrogen-based direct-reduced iron (DRI) established itself as a core technology for the sector’s transition, with H2 Green Steel serving as a prominent example of its application. Under the leadership of five commercial banks, including half of the signatories to the SSP (ING, Société Générale, and UniCredit), H2 Green Steel signed definitive debt financing agreements for €4.2 billion for the world’s first large-scale green steel plant.
  • The Breakthrough Agenda, launched at the UN Climate Change Conference in November 2018, now has the backing of countries representing more than 50 percent of global emissions. The initiative’s “priority actions” include a commitment to clearly define near-zero-emissions steel to help direct billions of dollars in investments, procurement, and trade to this effort.
  • Key legislation like the European Union’s Green Deal Industrial Plan and the Carbon Border Adjustment Mechanism, along with a US commitment of $5.8 billion under the Inflation Reduction Act for industrial decarbonization projects will provide critical support for the development of pioneering low-carbon projects. 

Despite these positive developments, however, the current pace of transformation falls short of the efforts necessary to meet global climate targets. Approximately two-thirds of all announced steelmaking projects worldwide are not on track to be aligned with 1.5°C and fall into the high-emissions category. Applying the SSP alignment methodology to the steel sector as a whole shows that, on average, the sector is misaligned with both the SPP’s 1.5°C and well-below 2°C benchmarks. 

As major providers of financing to the steel sector, banks can support and enable change. The SSP Annual Report serves as a cornerstone for these efforts, offering an unprecedented level of insight into the financial sector’s engagement with steel producers. With the publication of this report, major lenders to the steel sector are robustly and transparently disclosing where they are on their decarbonization journey. 

Report shows positive alignment, more work to be done in emerging markets 

  • One-third of SSP signatories are aligned with the 1.5°C benchmark, while another half are aligned with the well-below 2°C benchmark.
  • All SSP signatories demonstrated greater alignment with climate goals compared to the broader steel sector.
  • More misaligned scores can be attributed to increased exposure to emerging markets and blast furnace operations — areas where transformation is both challenging and essential, and where the signatories’ engagement is most needed.

 SSP methodology enables more robust individual bank target-setting and strategies 

Beyond the disclosure of climate alignment metrics, the SSP framework equips banks with the insights necessary to set impactful individual targets and to engage with clients to support the decarbonization of the steel sector. This year’s report sheds light on how banks are leveraging insights gained from applying the SSP to better define and pursue their own individual goals and strategies. 

All signatories have leveraged the SSP methodology to set independent robust, sector-specific targets for 2030 and 2050, and have further applied the SSP to develop internal sector strategies. For example:

  • Several banks outline their efforts to mobilize and engage with existing clients toward achieving individually determined short- and long-term decarbonization goals. Société Générale, for instance, highlights that it “aims to (1) support its clients that will face important challenges to transition their assets in line with the [SSP’s IEA and Mission Possible Partnership] scenarios in the short term and (2) develop dedicated financing for brown-to-green and low-carbon steel projects.”
  • Other banks highlight their commitment to financing projects that advance the development of low-carbon compatible technologies, including gas- or hydrogen-based DRI facilities, carbon capture, scrap-based steelmaking, and innovative techniques such as the direct smelting of iron ore. UniCredit, for example, “looks forward to implementing dedicated financing among other current initiatives that aim to support steel clients on their journey to decarbonization.”
  • Finally, banks report that they have embedded the commitments made under the SSP in their internal governance, ensuring that decarbonization goals are clearly defined, progress is regularly assessed, and strategies are adjusted as needed. For example, Crédit Agricole S.A., explains that “[To reach our decarbonization target in the steel sector, we plan to] implement governance at the Group’s highest level to define and follow through with our commitments, with quarterly monitoring.”

For more on the goals and strategies of the SSP signatories, read the Annual Report here 

The steel sector is at a critical juncture that demands contributions from every corner of industry, finance, and policy. As the SSP Annual Report underscores, the steel industry urgently needs to accelerate its transition if it is to align with the global goal of limiting temperature increases to 1.5°C.  

The efforts of the six SSP signatories represent just the first steps taken on the much longer journey towards this goal. Nevertheless, these first steps are crucial, setting a precedent for the proactive role that financial institutions can take to support their industrial clients in their transition. It is now up to the broader sector to embrace a similarly ambitious blueprint for change and rise to the challenges ahead.

A note on the principles: While SSP signatories commit to assessing the alignment of their steel sector lending portfolios against net-zero benchmarks, banks individually set net-zero targets and independently develop the strategies to reach them. In adherence with anti-trust legislation, there is no coordination between the banks around those strategies. 

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Methane Satellites 101: More Eyes Take to the Skies https://rmi.org/methane-satellites-101-more-eyes-take-to-the-skies/ Tue, 26 Mar 2024 10:00:33 +0000 https://rmi.org/?p=39243 Why we need these sky-high sensors, and what we can do with the data.

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We are in a race against time to clean up centuries of pollution in our atmosphere and rebalance our climate. While carbon dioxide rightly receives attention as the prime warming culprit, another greenhouse gas — methane — wreaks more havoc in a shorter timeframe than CO2.

Methane’s effect on our atmosphere cannot be overstated. If CO₂ pollution wraps one blanket around the earth, methane pollution is like wrapping the earth in over 80 blankets. The good news is that cutting methane emissions now, before it super-heats the planet, results in immediate climate and public health benefits.

But methane has proven a challenge to track consistently. It’s invisible, for one, as well as odorless, pressurized, and leaky. But we know where to spot it. Methane’s biggest human-caused sources are oil and gas, coal mines, waste facilities, and agricultural operations like large animal feedlots. These emissions can be persistent, like a landfill that spews methane for months on end, or highly intermittent, like a gas flare. Plus, emissions can be big and concentrated (like a super-emitter event) or less concentrated and diffused over a big geographic area. In short, they are highly complex and therefore really tough to track and quantify.

So, where to start? The first step is to better monitor these emitting events, and the facilities where they happen. Until recently, this tracking has been intermittent, with methane surveys mostly taking place on the ground with handheld devices. Other  strategies, like aerial flyovers, have helped improve transparency but are not up to the task of monitoring the truly planetary scale of methane pollution and in prioritizing actions that can reduce emissions now.

Now, a new generation of nonprofit (NGO) satellite missions is rising to the challenge. With the launch of MethaneSAT in early March by the Environmental Defense Fund, the first by a non-governmental organization (NGO), there are now more than a dozen satellites scanning the Earth to identify key sources of methane and other climate pollutants.

And MethaneSAT is just the first of other NGO satellites to come. RMI is playing a leading role in this quest. Later this year, Carbon Mapper — an NGO spearheading the first-ever public, private, nonprofit coalition — is working with Planet Labs, a satellite developer, and NASA’s Jet Propulsion Laboratory to launch its first hyperspectral satellite which will detect high emissions point sources of methane (and CO2) acting like a zoom lens that can spot leaks down to a specific facility or piece of equipment with unprecedented precision. RMI is a member of the Carbon Mapper Coalition along with Planet, NASA Jet Propulsion Lab, California Air Resources Board, University of Arizona, Arizona State University, and philanthropic partners.

For global emissions, the wave of new sky-high NGO sensors means that we are closer than ever to getting a handle on the methane menace — and putting a stop to it.

Seeing the invisible

Methane is not visible to the human eye, so how can satellites see it?  Fortunately, the technology to allow this is not a giant leap. In fact, it’s available in most college physics labs.

The key sensor, called a spectrometer, works a little like a camera. Point the camera at an area: It will show you an image. Point a spectrometer at an area: It shows the kinds of light that get absorbed by whatever the spectrometer is focused on.

To find methane, we’re looking for a signature pattern that only CH4 — the methane molecule — produces when absorbing sunlight. This pattern is only visible on the infrared spectrum at a particular wavelength.

An imaging spectrometer, which will measure the greenhouse gases methane and carbon dioxide, sits integrated at NASA’s Jet Propulsion Laboratory in August, 2023. Source: Carbon Mapper

Scanning the whole planet

To monitor the scale of methane emitters across planet Earth, the spectrometer needs to go high — very high. After months of tests to prove its spaceworthiness — including subjecting it to intense vibrations to simulate a launch as well as the subzero temperatures it will encounter in the vacuum of space — the methane detector is mounted onto a satellite and rocketed into space.

Once anchored in orbit, satellites can begin to search for methane as they swing around the earth.

A satellite flight path demonstration (Source: CarbonMapper).

All the methane they can see

As the scale of the methane problem has become known, governments, nonprofits, and private entities have begun to fill the knowledge gap, all launching their own satellites with unique and complementary capabilities.

Some can see at a continent level (called area flux monitors), while others are able to pinpoint leaks right down to the source (these are called point source monitors). Some can view an area multiple times a day (essential to track variability in leaks), while others can check on a weekly or monthly basis.

Below is the current state of methane detection satellite operations, but the field is growing still. The European Space Agency is set to launch Sentinel-5 this year, with its CO2M satellite following in 2025; while MERLIN, a partnership between the French and German space agencies, is slated for a 2027 launch.

What’s new about nonprofit-led satellites — and what can we do with this data?

Nonprofit-led satellite programs like MethaneSAT and Carbon Mapper fill a crucial gap in our detection capabilities by virtue of their owners. Unlike national operators, no government can cut their funding, and unlike commercial operators, no bottom line need be met. The higher sensitivity of their sensors will also allow these new players to provide more actionable, timely, granular data than is currently on offer. MethaneSAT and Carbon Mapper satellites will also be complementary — with the former able to capture wide areas like basins, and the latter able to focus in on point sources.

Carbon Mapper and MethaneSAT also differ from the public and private options in their mission: these satellites are not for private use or scientific research, they are for climate action. They are open-source by design, helping feed methane measurements into a burgeoning field of independent emissions monitors — like RMI’s OCI+ platform and Climate TRACE — and allowing all stakeholders to benefit, and take action, based on the data returned from the satellites.

With all this information public, it will put pressure on emitters to clean up their acts. And with the US government’s methane fee on the horizon, oil and gas facilities have even more incentive to plug the leaks as quickly as possible.

With no time to lose as we reach crucial climate tipping points, these satellites are an essential tool protecting us and our communities from the aftermath of rising global temperatures. As more eyes take to the skies, methane will be invisible no more.

Read more:

Methane-Detecting Satellites 101: The Completeness Quotient

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Overcoming Three Finance Dilemmas for US SAF Producers in 2024 https://rmi.org/overcoming-finance-dilemmas-us-saf-producers-2024/ Fri, 22 Mar 2024 15:12:25 +0000 https://rmi.org/?p=39229 If we are to decarbonize the aviation industry at the speed required, sustainable aviation fuel (SAF) must grow from 0.1 percent of global jet fuel to 10 percent by 2030, implying building 300 SAF plants globally within the next seven years. To meet US climate targets, the Biden administration has set a goal of 3 […]

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If we are to decarbonize the aviation industry at the speed required, sustainable aviation fuel (SAF) must grow from 0.1 percent of global jet fuel to 10 percent by 2030, implying building 300 SAF plants globally within the next seven years. To meet US climate targets, the Biden administration has set a goal of 3 billion gal/year of SAF capacity by 2030 and 35 billion gal/year by 2050. The United States needs to add SAF capacity at an unprecedented rate. While US policy has fortunately tilted in SAF’s favor with federal and state-level incentives, building the first wave of SAF plants in the United States will nonetheless require project financiers to be flexible and creative.

SAF project developers may have little choice over some financing decisions: they’ll need to invest in community engagement, share returns with tax equity partners, and sign up a wide range of offtakers (including potentially sub-investment grade airlines). And yet there are at least three choices within their control — three choices that’ll go a long way in determining how much money they can raise and how cheaply.

Three finance-determining choices US-based SAF developers face in 2024 are: 1) what feedstock (and therefore technology) to choose, 2) whether to apply for a Department of Energy’s Loan Programs Office (DOE LPO) loan guarantee, and 3) how to cobble together insurance, construction guarantees, and equipment warranties in a way that’ll get past banks’ stringent credit committees. As part of our industrial decarbonization work with Mission Possible Partnership, RMI and SidePorch Consulting recently convened a SAF project finance roundtable with experts from banking, private equity, impact investing, venture capital, insurance, law, and public finance to consolidate perspectives from across the financial sector.

Here’s what SAF investors are saying.

The Feedstock Dilemma: Feedstock and technology choice will impact both debt and equity.

The strength of feedstock contracts and technological readiness (including lack of operating data) are different but deeply related risks for investors, which is why they must be addressed together. HEFA is a proven technology but has feedstock limitations. Investors are weary of short feedstock contracts (i.e., “recontracting risk”) and/or sub-investment grade suppliers who may not supply the project as planned. For e-fuels, on the other hand, renewable electricity is theoretically unlimited and is increasingly becoming more economical. Another feedstock — biogenic CO2 — is limited and expensive but can support the development of e-fuels till DAC technology matures.

Infrastructure funds may favor e-fuels since it has more potential to win in the long term. A private equity-backed energy transition fund investing $100+ million will want to know there will be a market for the project/technology in 5-7 years when it needs to exit. On the other hand, lenders may initially favor HEFA because the technology has been widely used in commercial operations. The feedstock choice impacts LCFS revenues since LCFS depends on carbon intensity, whereas the 45Z federal incentive is more technology agnostic. Either way, feedstock contracts need to be as airtight — maybe even more solid — than offtake so that both debt and equity investors can participate. Investors will want contracts that protect their returns in case a project cannot source feedstock across its entire operating life.

Potential solutions: Equity investors and developers worried about losing out to long-term technology trends could diversify across both HEFA and e-fuels. State-level policymakers who want to attract SAF projects should incentivize feedstock production — both abundant green power as well as biogenic CO2 for e-fuels and lipids for HEFA.

The DOE LPO loan guarantee dilemma — is it worth the time? 

Before private capital can finance billion-dollar scale SAF projects on its own, support mechanisms like a DOE LPO loan guarantee may be crucial for overcoming unproven technology and weak feedstock/offtake. The LPO review process, though, can take 6 to 12+ months and approval is uncertain. An LPO applicant’s competitors may gobble up limited feedstock by then. Therefore, it’s likely three financing archetypes will emerge: 1) government loan with government guarantee, 2) commercial loan with government guarantee, and 3) commercial loan with no government guarantee. While option 2 entails two rounds of due diligence (once by LPO and once by commercial banks) and is therefore potentially lengthier, experts suggest that commercial banks stand to gain long-term technology expertise by engaging and negotiating with LPO. Each financing archetype has different implications for cost of capital versus loan approval time.

Potential solutions: Given how uncertain the offtake may be, sponsors could try to get some form of loan guarantee, even if it’s from the USDA or a foreign ECA. To speed up DOE LPO approval times, borrowers should familiarize themselves with resources for borrowers before they apply. Federal agencies can continue improving loan guarantee processing times, while states like California (i.e., states with numerous projects in development) could provide temporary guarantees even for smaller amounts.

The Insurance Dilemma

Guaranteeing construction and performance will be crucial and banks may need to be flexible in how sponsors marry up partial-wraps from EPCs, less-than-ideal warranties from OEMs, and insurance. EPCs may not be able to provide full-wrap construction contracts, OEMs’ warranties may not be long/strong enough for lenders, and simply getting insurance to cover all project risks may be too expensive. Project developers will need to find the economical sweet-spot between those three (or more) sets of de-risking instruments. They’ll need enough risk coverage to placate bankers but at a price that doesn’t kill equity returns.

Potential solutions: Engage early and often with insurers, investment advisors, experienced lawyers, and Aviation CAF banks to determine what combination of guarantees is bankable.


The year 2024 could be a game-changer for aviation decarbonization if the first wave of SAF projects complete the LPO process and secure commercial financing. Many of these projects will be located in clean industrial hubs. Clean industrial hubs bring together policymakers, financial institutions, project developers, and community-based organizations to enable groundbreaking decarbonization projects in the hardest-to-abate sectors, like aviation. RMI and Mission Possible Partnership are working together to support stakeholders with the analyses and tools needed to advance zero-emissions trucking, low-carbon cement plants, sustainable aviation fuel, and decarbonized ports, by increasing the size, scale, and speed of critical climate investments that benefit the environment, the economy, and communities. This work is done in partnership with the Bezos Earth Fund, including convenings like the round table that led to these findings.

Sophisticated investors are evaluating projects and sponsors and pricing risk-return accordingly. According to SAF project finance roundtable participants, a private equity-backed energy transition fund may want ~15 percent levered equity internal rate of return for operating projects (and over 20 percent if there’s development risk), while venture capitalists may want north of 40 percent for pre-offtake projects with novel technology configurations.

LanzaJet’s pioneering 10 million gal/year Freedom Pines facility opened in Georgia in January, financed by a mix of strategic investors and climate-focused investors. Larger SAF plants may need private equity and debt investors too. Equity investors shouldn’t bet on just one technology, while lenders should explore loan guarantees, building relationships with clients while learning how to underwrite newer technologies.

And yet finance for clean jet fuel in 2024 will not flow as freely as it does for clean electricity: there’s no juicy 20-year investment grade offtake, there’s more demand for feedstock than supply, and investors are uncertain on which technology will win. So, for the first wave of deals, while the market works itself out, sponsors should seek government support to reduce both real and perceived risks for investors. It may be the only way to get this plane off the ground.

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Caribbean Women Are Making Waves in Clean Energy https://rmi.org/caribbean-women-are-making-waves-in-clean-energy/ Mon, 18 Mar 2024 16:51:21 +0000 https://rmi.org/?p=39102 Meet three women who are leading the clean energy transition through education, mentorship, and community.

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Women have long been underrepresented in the energy sector. In the Caribbean, it often starts at a young age, with girls being discouraged from pursuing science, technology, and engineering. However, a group of passionate dedicated women are set on changing that. The Caribbean-based Women in Renewable Energy (WIRE) Network advocates for increased gender equality across the clean energy sector in government agencies, utilities, regulatory bodies, and the private sector to eventually increase women’s representation in C-suites and boards, through ensuring a pipeline of motivated and experienced women.

One way it does this is through its two-year mentorship program. Twelve women are selected each year and are paired with women in senior leadership positions for guidance in the clean energy sector and advisement on how to make the most of their professional opportunities.

The current WIRE Mentorship Program currently hosts 24 women across 14 nations in the Caribbean. Meet some of these amazing women below.

Indra Haraksingh — Pioneering Renewable Energy Education in the Caribbean

Indra Haraksingh is a visionary educator and a driving force behind the development of the Master of Science in Renewable Energy Technology (MScRET), a groundbreaking program at the University of West Indies in the Caribbean. Based in Trinidad and Tobago, Haraksingh supports the WIRE Network as a senior mentor to the current WIRE Mentorship cohort. She also serves as president of the Caribbean Solar Energy Society and lecturer in the Department of Physics at the university.

The MScRET initiative was born out of the pressing need to address high electricity rates and the environmental impact of fossil fuel dependency in the region. Haraksingh saw the immense potential of harnessing solar and other renewable resources prevalent in the Caribbean and recognized the critical role of education in driving this transition.

In collaboration with universities in Flensburg, Germany, Haraksingh spearheaded the creation of the MScRET to equip Caribbean nations with the knowledge and expertise necessary to embrace renewable energy solutions fully. "For countries to move in this direction, it is important that they are well informed and trained in the technology and use of renewable energy," she explains. The program has been instrumental in training a new generation of experts, with approximately 20 graduates annually over its ten-year history.

By training individuals across various sectors in renewable energy, the MScRET has helped to build a more self-reliant region, reducing the reliance on external experts. Haraksingh emphasizes the importance of mentorship and networks in shaping the future of these students. "Mentorship is crucial to building interest and confidence in students to pursue careers in renewable energy," she says. This dedication to mentorship prompted her to join the WIRE Network’s Mentorship Program. As a senior mentor she provides valuable insights and support to women across the cohort.

She also emphasizes the importance of building strong networks, noting, "Having a strong network is crucial to finding solutions." Her network with international organizations, universities, and experts has been instrumental in advancing her career and the field of renewable energy in the Caribbean.

Indra Haraksingh's work underscores the transformative power of education and collaboration in addressing pressing environmental challenges. Her efforts continue to inspire a new generation of leaders committed to building a sustainable future for the Caribbean and beyond. 

Sheena Gosine — Empowering Women in Energy

Sheena Gosine was hesitant to enter the energy industry as a woman. However, she is now the sustainable energy analyst at the Ministry of Energy and Energy Industries in Trinidad and Tobago and an excellent example of the impact of mentorship and networking for women in the energy sector. She is the first woman to graduate with a distinction from the Master of Science in Renewable Energy Technology at the University of the West Indies, and is a proud participant in the WIRE mentorship program.

Gosine describes her journey through the WIRE program as a transformative experience. "As I continue to navigate the energy space and glean on experiences within the program, one word comes to mind: empowerment," she says. "The power of collaborating with like-minded women and gaining a true appreciation for my place in the energy space has been invaluable. Meeting these women, understanding their experiences from where they sit, was an eye-opening experience which I found indelible."

The importance of a network of women in the energy sector, Gosine shares, cannot be overstated. "As women, we continue to adopt a myriad of roles that men are not expected to, while navigating a male-dominated space," she notes. "The WIRE program represents a safe space for women to be themselves within the context of growth and support."

Gosine has learned a lot from the community of women she has met through WIRE, especially when seeking a Caribbean perspective on energy matters. "The WIRE group of women is always willing to support you in whichever way they can," she says. "This is definitely a professional edge I think we all possess as part of this group."

In addition to her participation in WIRE, Gosine has been mentored through a program in her workplace. "The power of mentorship must not be understated," she emphasizes. "Both programs have shown me the value of always being open to personal and professional growth and expanding horizons."

Through shared experiences in the WIRE program, Gosine shares that she has a deeper understanding of the collective goal, working toward gender equity in the Caribbean energy space. "I was able to gain new perspectives on my role as a female in the energy space, with a renewed understanding that I was not alone in facing certain adversity and challenges," she explains. "The mentorship experience has given me a renewed approach to my work portfolio notwithstanding any gender-specific issues I may face."

Sheena Gosine's journey is a testament to the power of mentorship and networking in empowering women in the energy sector. She encourages others to lean into community for growth and support, ultimately contributing to a more inclusive and diverse industry.

Niebert Blair — Driving Change in Caribbean E-Mobility

Niebert Blair is passionate about electrifying transportation and the delivery of goods. "The application of electricity in the process helps reduce greenhouse gas emissions in the very short to medium term," she shares, highlighting the immediate benefits of vehicle electrification.

As the energy and transport coordinator with GIZ, Blair plays a crucial role in shaping policies and strategies for sustainable energy in the Caribbean, particularly in countries like Antigua and Barbuda, Belize, Grenada, Jamaica, and Saint Lucia. Her passion for this work stems from a deep recognition of how crucial the renewable energy transition is for the region. "My work is important, as well as the work of others, as we not only understand the benefits of the energy transition but as we together generate responses to the challenges faced in our sustainable energy development," she explains.

One of Blair's key achievements is advancing the implementation of the nationally determined contributions (NDCs) in the region. She is proud that several countries have identified and are willing to establish energy, transport, and e-mobility strategies and policies under this guidance. However, she acknowledges that more needs to be done to accelerate the pace of change required for a sustainable future. Blair shares, “In the Caribbean, there are a few donors and financing mechanisms that are targeting the transition, however the rate of change required is far from what is achieved.”

Despite the daunting goals, she is motivated to continue her work. “The drive and passion I have for the transition is embodied in my current work with GIZ in the region, where we are seeking to advance implementation of the NDCs and improve policies and regulations in the energy and transport sectors.” She is also proud to recognize that the impacts of her work can already be felt in the region.

Mentorship has played a significant role in Blair's career, particularly through programs like WIRE, which has connected her with a network of talented individuals in the region and globally. Beyond the value of personal mentorship, Blair shares the strength in building a network and learning from her community. “I have had the opportunity to meet men and women who work in similar and different disciplines and listen to their experiences and advice on chartering my professional development. I have learnt how people from various companies continue to be creative in their work spaces and these stories have definitely inspired me.”

Additionally, when reflecting on her experiences gained through the broader WIRE network, Blair reflects, "While I have been mentoring younger people before WIRE, the experiences and the people I have met have enhanced this process greatly.”

Blair's dedication to advancing sustainable energy solutions in the Caribbean is evident in her work: she is driving sustainable, equitable change throughout the region, and being cheered on by her WIRE community.

To learn more about the WIRE Network and how you can get involved, visit the website.

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Dispatch from the MethaneSAT Launch: A New Era of Emissions Transparency and Accountability https://rmi.org/dispatch-from-the-methanesat-launch-a-new-era-of-emissions-transparency-and-accountability/ Fri, 15 Mar 2024 13:10:42 +0000 https://rmi.org/?p=39087 As more "eyes in the sky" make their way into orbit, methane emissions transparency is no longer a pipe dream.

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Last week, under blue skies in coastal California, I attended an explosive event in global climate action: a rocket launch. This rocket came with a special payload — a new methane-detecting satellite destined to orbit above Earth and patrol for emissions. To say it was a spectacular moment is an understatement.

If you’ve never seen the launch of a Falcon 9 rocket up close, the experience is visceral and breathtaking. Even though we were set up almost three miles away at the Vandenberg Space Force Base, the anticipation and nervous energy buzzing among the launch partners made us feel like we were in the front row of a grand stage.

As we eagerly awaited signs from the launchpad that the production was underway, a spark of orange quickly turns into a pillar of fire as the rocket slowly lifts from the ground. A few seconds later, a guttural roar fills the landscape as the rocket climbs higher. The distance, as well as the strange relationship between light and sound, begin to play tricks on the naked eye as the rocket arcs South, the exhaust plume creating a swirling vortex of orange and white, and the once deafening sound turns into a deep rumble.

The initial moments of MethaneSAT’s launch aboard a Falcon 9 rocket. Source: Josh Henretig

I had the honor of representing RMI at the Environmental Defense Fund’s (EDF) groundbreaking launch of MethaneSAT, a new high-resolution satellite that is able to map, measure, and track methane emissions on a global basis (fifteen times a day, to be exact) with unprecedented precision, offering a comprehensive view of methane emissions. Methane, a powerful climate pollutant, is over 80 times more powerful than CO2 in heating the planet. It’s also invisible to the human eye and often emitted in high concentrations across many geographies, making it a prime target for satellite imaging.

Josh Henretig at the Vandenberg Space Force Base, host of the MethaneSAT launch. Source: Josh Henretig

Advancing methane emissions visibility

On my team at RMI, we understand that people and organizations around the world have historically lacked the data needed to act decisively to advance net-zero goals. Without the ability to openly identify, quantify, or attribute greenhouse gas emissions, it’s impossible to track progress or hold stakeholders accountable. This is particularly true for methane emissions.

Methane has a few top anthropogenic sources: agriculture, waste, and the energy sector. The energy sector — including oil, natural gas, coal and bioenergy — accounts for nearly 40 percent of man-made methane emissions. It is also one of the main focuses of my work at RMI.

Methane emissions from oil and gas operations can occur from venting and flaring — basically when the gas is inefficiently combusted or released inadvertently or on purpose. Leaks can be large or small, intermittent or persistent, accidental or intentional. Methane can escape from tanks, compressors, pipelines, or other equipment. In part because methane is lighter than air and readily dissipates, it’s hard to measure methane concentrations on the ground, making it advantageous for companies to under-report their climate impacts. As such, these emissions are frequently omitted from self-reported emissions inventories. For example, the International Energy Agency finds that existing oil and gas company reporting is 95 percent lower than estimates for 2023.

Satellite imaging is taking off — quite literally. There are already government satellites, like EMIT and TROPOMI reporting back valuable data. MethaneSAT will add new climate intelligence. And when Carbon Mapper (a first-of-its-kind coalition of public, private, and nonprofit entities — including RMI) launches two satellites for the first time later this year, the spotlight will be on point source methane super emitters. Together, these satellites will form a “system-of-systems” that can help spot and stop methane leakage around the globe.

A digital model of the MethaneSAT instrument. Source: Environmental Defense Fund.

With satellite data, companies, financial actors, regulators, and citizens can advance climate action. This can entail independently certified gas (MiQ), buyers-sellers alliances, new fees on methane exceedances (thanks to the US Inflation Reduction Act), and more. Using visibility, policy, and market activation tools, we can reduce methane leakage to below 0.2 percent, which is critical to meet methane reduction pledges and reduce the risk of runaway climate change.

Why nonprofit satellites matter

The majority of satellites in operation today are public or for-profit. MethaneSAT and Carbon Mapper are different — they stem from nonprofit organizations. Unlike satellites launched for scientific research or commercial application, the mission of nonprofit satellites is first and foremost to advance climate action. Already, public data portals are taking government satellite data to identify, quantify, and chart methane leaks worldwide.

Making methane visible and providing public emissions data that can be independently verified is the key to climate action in this decisive decade. The broader the set of stakeholders who can access methane satellite data, the more robust the market will be for major methane mitigation solutions.

Unlike satellites launched for scientific research or commercial application, the mission of nonprofit satellites is first and foremost to advance climate action.


Different tools for different jobs

Different satellites collect different information, whether that be in geographic scope or granularity — and the number of satellites dedicated to monitoring emissions is growing. In 2026, the European Space Agency plans to launch two satellites dedicated to monitoring atmospheric CO2. This year, there will be two more methane-focused satellites joining the flock: with a Japanese program complementing the aforementioned Carbon Mapper satellites. Carbon Mapper’s planned constellation of satellites will complement MethaneSAT’s ability to capture images spanning larger areas (each picture covers 125 x 125 miles), by specializing in monitoring high priority regions for high emission point sources to provide the granularity needed to pinpoint and fix emissions at individual facilities.

As the data and insights provided by satellites increase, the more nuanced the decision becomes to invoke the capabilities of one satellite over another. To choose the right tool for the right job, one must understand what each satellite is designed to do, and how its data can help decision makers meet their goals (RMI’s Satellite Point source Emissions Completeness Tool (SPECT) can help with that).

Looking forward (and up)

A new chapter in methane emissions transparency is unfolding rapidly. The growing number of eyes in the sky will enable a new wave of accountability, market mechanisms, and collaboration when it comes to addressing methane emissions. Open and accessible emissions data allows for independent verification of findings by researchers and scientists worldwide. Making this data freely available also allows a broader range of users to access it, which can lead to unforeseen applications of the data, such as citizen science projects or innovative solutions for mitigation efforts.

Better data also means faster policy development. With reliable, accessible data, policymakers can accelerate the development of targeted regulations to curb methane emissions.

Finally, open-source emissions data promotes innovation. When emissions data is transparent, businesses and other innovators can use that data to develop new technologies for leak detection, capture, and utilization, leading to a more robust market for methane mitigation solutions.

As I watched the MethaneSAT launch last week, its white-hot exhaust gas trail slowly fading into the sky, I felt a sense of hope for our planet and the next generation that will inhabit it. Getting a handle on methane emissions represents one of the most immediate and cost-effective opportunities we face to curb climate change now, and the new insights that these satellite technologies represent is our best chance of getting us there.

Working in the climate field, a lot of days can feel like an uphill battle, constantly taking two steps forward and one step back. But today, I can tell my kids we didn’t just take a step towards a safe climate future — we launched in the right direction.

Additional resources

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Creating Sustainable Communities through Systems Thinking and Integrative Design https://rmi.org/creating-sustainable-communities-through-systems-thinking-and-integrative-design/ Fri, 15 Mar 2024 10:00:31 +0000 https://rmi.org/?p=39081 Architect and long-time RMI donor Helen J. Kessler finds hope in the future generation of environmental designers and activists.

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RMI is rigorously data-driven, outlandishly creative, and stubbornly whole-systems oriented. So it makes sense that our donors are driven by similar qualities.

Helen J. Kessler has always been a systems thinker. She credits her physicist father and his work on algae with kindling that interest in her. Kessler’s father observed that Dunaliella, a type of alga, uses glycerol to maintain homeostasis in salt water. He also became aware of the fact that sharks use uric acid to maintain the correct amount of water in their bodies. He eventually turned those realizations into a way to convert brackish water into usable water or potable water using forward osmosis.

“He was always thinking outside of the box,” says Kessler of her father. “So much of what we do in academia, in business, and really everywhere, is in silos, everything is fragmented. And it doesn’t make sense. My father got me excited about thinking in systems.”

Kessler, an architect and President of HJKessler Associates, a sustainable design and energy efficiency consulting firm that she founded in 2003, is also a professor at Northwestern University in Evanston, Illinois, and a long-time Solutions Council donor to RMI. From her teaching to her consulting to her support of RMI, systems thinking and integrative design are always top of mind.

Learn more about how the Solutions Council is helping RMI accelerate the energy transition and how you can be a part of it. RMI generates 90 percent of its revenue from philanthropy. Large or small, your donation makes a difference. Make yours today.

Kessler met Amory Lovins in the late 1970s. “I used to go to all of the passive solar energy conferences, and I remember Amory talking about the soft energy path, and I bought all his books back then,” she says. At the time, she was working at the University of Arizona Environmental Research Laboratory (ERL) after having graduated from the University of Arizona College of Architecture.

The ERL — an independent department loosely affiliated with the College of Agriculture — was doing work on the confluence of power, water, and food. They had a cogeneration system that used waste heat to heat the greenhouses. The waste carbon dioxide helped the tomatoes grow more quickly. This was in the 70s and early 80s, when very few people were talking about integrative design. “It was very exciting to me,” she says.

To explain integrative design and whole systems thinking to her students, Kessler uses a building systems analogy: “It’s all about how different systems interact with each other. So a great example of integrative design is what color paint you choose for the interior of a building. If it’s a dark paint, how does that affect the lighting system? If you need more lighting, because it’s dark paint, and the lights put out more heat, how does that affect the HVAC system? If it’s a light paint, how does that affect lighting and the HVAC system?”

Creating Sustainable Communities

That integrative approach is one reason Kessler supports RMI. One of the things she appreciates about the early days of RMI was the work the organization was doing with communities. RMI had a Sustainable Communities Practice for 20 years, focused on fostering sustainable local economic development and collaborative decision-making. Now, community engagement is a core value of all of RMI’s work from cities in the United States to rural communities in the Global South. “The idea that you could do what we’re talking about here with integrative design and technology, and do that work with communities, was fascinating,” she explains. “I think that you can’t get anywhere without that community work. I mean, the technology can only go so far. At the end of the day, it’s all about people and how we work together.”

The technology can only go so far. At the end of the day, it’s all about people and how we work together.

Helen Kessler

Kessler tries to keep the community aspect in mind in all of her work too. About six years ago, Kessler and a colleague started a new company called Upfront Regenerative Design, to help build inspiring vibrant communities and ecosystems. “Our idea there is to understand wholistic living systems thinking while being much more involved with community,” she explains. “We want to know the story of a place so we can really understand the context of what we’re building.”

Making a Difference

Kessler’s community focus is represented in some of her favorite projects that she worked on as a sustainability consultant. One of these is the synagogue for the Jewish Reconstructionist Congregation in Evanston, Illinois. The congregation wanted the new building to reflect their core value of environmentalism. Once built, it was the first house of worship in the world to achieve the highest “platinum level” by the US Green Building Council’s Leadership in Energy and Environmental Design (LEED) green building rating system. “It provided incredible connections with the community,” says Kessler. “While most religious communities have been shrinking, after the project was built, that community actually grew.”

The exterior and interior of the JRC synagogue in Evanston, Illinois

Another project Kessler worked on, the 61,000 square foot Legacy Charter School, which serves pre-kindergarten through eighth grade, is also a LEED platinum building. In this low-income, inner-city Chicago neighborhood, institutional-looking buildings often have negative connotations. So the team needed to come up with something not only efficient, but also inviting, engaging, and fun. “It’s not just about the building, the building is static, it’s just there. It’s about the people inside the building, and how the people interact with the building, and how the community interacts with the building,” says Kessler. In addition to her work on the building, Kessler also worked with the faculty to create an energy efficiency curriculum using the school as a teaching tool.

The Legacy Charter School in Chicago

Passing on the Torch

Kessler says she is most optimistic about the number of young people interested and excited in her chosen field. And she is proud to be teaching them about integrative design and whole systems thinking.

“I want students to actually see the silos that we created for ourselves, see how fragmented we are, and then see how we can look at things from a point of view of larger nested systems,” she says. “I want them to see how we can come to a reconciliation by delving deeply into what everyone ‘wants’ rather than settling for compromise and fragmentation.”

Much like Kessler to her students, RMI challenges its experts to do the same, discovering ways to disrupt the systemic inertia that is holding the energy transition back. We work as both agitators and collaborators within systems, and our ability to do that drives impact. We count ourselves lucky to have long-time donors like Helen Kessler who understand and support that.

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How the Right Emissions Data Can Drive Decarbonization in High-Emitting Industries https://rmi.org/how-the-right-emissions-data-can-drive-decarbonization-in-high-emitting-industries/ Wed, 13 Mar 2024 10:00:20 +0000 https://rmi.org/?p=38934 These pilot projects provide a blueprint for improving emissions transparency and driving cuts.

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For years, companies have been collecting data — on customers, on operations, on transactions — to optimize profits. Now, corporate buyers of commodities like steel and aluminum are increasingly collecting emissions data to gain insight into the carbon footprints of products they buy and sell. The emissions data — and transparency into how that data is collected and calculated — is a first step. The second step is for the data to catalyze corporate action to decarbonize.

For emissions data to effectively drive action, we’ve proposed that it must be specific, high quality, and standardized. To put this theory to the test, we collaborated with steel and aluminum industry leaders, as well as supply chain stakeholders in the automobile and building sectors, to pilot test RMI guidance and tools designed to improve emissions data and transparency — and produce meaningful decarbonization efforts.

Addressing industry barriers to decarbonization with emissions transparency

The pilot series tested how RMI guidance and tools could help companies address challenges in accessing and using emissions data to inform emissions reduction decisions in their supply chains. The challenges companies face in this area are many. Modern supply chains are complex and multi-tiered; collecting emissions data from suppliers is rarely straightforward, and inconsistent methodologies to calculate product-level emissions make product comparisons difficult. As companies move upstream beyond the suppliers they directly purchase from, this only becomes more arduous.

There is also a lack of standardization in data transfer, with formats ranging from simple PDFs and emails to sophisticated proprietary software. The types of data reported also vary, presenting challenges for companies trying to collate data from hundreds of suppliers. Even with high-quality emissions data, companies’ ability to apply it to drive emissions cuts is limited. The graphic below highlights how these challenges manifest along the supply chain, and how RMI guidance and tools address them.

Each pilot, while unique in industry and product, followed a consistent structure to address barriers to emissions transparency. As outlined in the illustration, buyers requested that suppliers report emissions following RMI’s Steel and Aluminum Emissions Reporting Guidance to address challenges of data specificity, quality, and transparency. The data was calculated using the Excel tool and reported in standard data exchange formats to address standardization challenges. Participants also explored opportunities to use emissions data to drive decarbonization strategies.

How these pilots demonstrated that improving emissions transparency can enable decarbonization action

The pilots supported our hypothesis that the standardized exchange of specific, high-quality emissions data can enable more effective decarbonization action. The guidance established a common reporting method and standard data format to enable consistency and comparability. As noted by Norsk Hydro, “A significant advantage is that the pilot and the tool could establish a standardized methodology for carbon footprint accounting in the aluminum industry.”

Across all pilots, participants gained an improved understanding of the benefits of emissions transparency and additional emissions metrics in reflecting decarbonization efforts. Oldcastle BuildingEnvelope shared that the pilots provided “a huge step forward to enable aluminum buyers to access quality carbon emissions data to make more informed buying decisions.” They continued, “This type of detailed and accurate reporting for aluminum is critical to the decarbonization of façade products in the building industry.”

The pilots also helped companies identify ways to incorporate emissions data into decarbonization strategy, target setting, and sustainable procurement. As a result of the pilots, participants prioritized next steps including enhancing supplier surveys to improve emissions data collection and supporting target setting in alignment with 1.5°C-degree pathways. Jaguar Land Rover noted that “the work undertaken by RMI could potentially accelerate the steel industry’s decarbonization journey, ensuring transparency and collaboration along the way.” Toyota underlined that “this pilot is a good ‘first-step’ for a more complicated purchasing process.” BXP, a property developer, is using the aluminum specifications from the pilot in an ongoing project to compare curtain wall manufacturers. The specifications will help the contractor evaluate whether potential suppliers can provide Environmental Product Declarations and meet minimum global warming potential limits for aluminum.

The work undertaken by RMI could potentially accelerate the steel industry’s decarbonization journey, ensuring transparency and collaboration along the way.

Jaguar Land Rover

Perhaps most importantly, the pilots promoted constructive supplier-customer conversations, enabling collaboration and joint problem solving on decarbonization. Alcoa said of their experience, “Participation in the pilot was beneficial for us, as it allowed us to gain a better understanding of the needs and challenges of other value chain participants.” Tata Steel also highlighted, “Efforts like this help create a dialogue in the supply chain around carbon accounting and strategies for reducing emissions.”

Challenges to emissions transparency remain, but can be overcome through supply chain collaboration and widespread implementation

The pilots demonstrated that emissions data can drive decarbonization, but challenges remain in achieving industry-wide emissions transparency. Across the entire supply chain, companies must build capacity in collecting data, calculating emissions footprints, and using emissions data to decarbonize. These processes are time consuming, requiring dedicated resources and ongoing sharing of industry best practices. There is also a need for scalable digital solutions to aid in efficient, interoperable, secure data transfers.

These challenges are manageable. Collaborative efforts within supply chains, as demonstrated in the pilots, can improve shared understanding and generate opportunities to jointly reduce emissions. Widespread implementation of standardized reporting methodologies and formats will enable the generation and use of higher quality emissions data. This empowers companies to comply with emissions regulations and ultimately deliver decarbonization impacts to the steel and aluminum industries.

If the experiences of participants in the pilots resonate with you, join us in advancing emissions transparency: RMI is currently developing supplier training materials and a Scope 3 Buyers’ Handbook to help buyers of steel and aluminum:

  • Engage suppliers to improve visibility into supply chain emissions by strengthening their reporting capabilities
  • Effectively manage uncertainty in setting climate targets and tracking progress by integrating emission data into business strategies
  • Drive decarbonization through green procurement and informed decision-making

To get involved, please contact Hao Wu (hwu@rmi.org) and Wenjuan Liu (Wliu@rmi.org).

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Transition Credits Are Gearing Up to Support Global Energy Transformation https://rmi.org/transition-credits-are-gearing-up-to-support-global-energy-transformation/ Tue, 12 Mar 2024 10:00:54 +0000 https://rmi.org/?p=38994 A new type of carbon credit for the global energy transition could work. Here’s how.

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The idea of buying and selling carbon credits — permits that represent one ton of carbon dioxide removed from the atmosphere — to incentivize climate change mitigation activities has been around for almost 50 years. However, as global attention continues to focus on the climate mitigation impact of the phase out of fossil fuel-fired power generation, a new type of carbon credit to drive the energy transition is being developed. So called “transition credits” monetize the reduction or avoidance of future emissions from a project (like the early retirement of a coal plant) or even an entire jurisdiction.

If done right, transition credits could fill a critical funding gap for emerging markets and developing economies in their shift to a rapidly deploying, global clean energy economy.

The need for energy transition credits

In emerging markets, high costs of capital, inflexible regulatory environments, and young coal fleets with significant remaining asset value hinder the financial viability of early coal plant retirement and replacement. Innovative financial mechanisms can accelerate early coal retirement and support their replacement with low-carbon solutions, while mitigating the impacts on coal workers and communities.

However, in many cases the available commercial and public finance alone is not enough to incentivize impactful early retirement. Coal plants are often under contracts meant to maximize profits, and these typically outweigh the financial and public policy benefits of early retirement and emissions reductions to key stakeholders. This is where energy transition credits could come in. At the right price, they could provide the finance needed for early retirement.

These credits could be monetized through the global voluntary carbon market (VCM) or through national and international compliance markets, including the Paris Agreement Article 6 trading mechanisms that allow for trading climate ambition between countries and companies based on a country’s performance against their nationally determined contribution.

The state of play for the different transition credit initiatives is complicated, so we’ve broken it down using the graphic below. There are four big developments underway, including the refinement and stress testing of two different methodologies.

Click to enlarge

Where we are now
1. Project-based voluntary carbon credit methodologies

Two of the largest carbon standards, Verra and Gold Standard, have released methodologies for the project-based generation of voluntary carbon credits to support the early retirement and replacement of coal plants with renewable energy. RMI provided technical support to the Rockefeller Foundation-led Coal to Clean Credit Initiative responsible for developing the Verra methodology. These approaches quantify the net emissions reductions or avoided emissions within a specified project boundary — the early retirement of a coal plant and its replacement with new renewable power and/or the grid.

Ensuring a high level of integrity and quality of the transition credit, in line with the core carbon principles, has been a key design objective.

The retirement of a coal plant can only be additional if regulatory, financial, or economic incentives for retirement do not exist. Therefore, the technical life of the plant may not be a reasonable baseline scenario, particularly when renewable energy replacements become cheaper for a system operator than early retirement of a coal plant (including contract termination fees), or public or private coal transition financing is already available. This also means carbon credits are more likely to be financially additional in markets where coal plants are not in direct competition on a marginal cost basis with cheaper renewables.

Methodologies must also consider that it is likely that at least some of the replacement power for a coal plant will come from the wider grid, especially if the replacement resources are variable (i.e., wind or solar) or smaller in size. The emissions impact of this additional grid generation, or leakage, must be included in emissions reduction calculations. In these cases, requiring coal plant retirement to be in line with a jurisdictional integrated resource plan with a clear decarbonization pathway can also mitigate some of the risk that the retirement perversely incentivizes and “locks in” future gas plants as a dispatchable replacement resource.

Finally, early coal plant retirement can have a significant negative impact on workers and surrounding communities. To ensure alignment with sustainable development, methodologies must embed a robust approach to evaluate and mitigate the potential negative socio-economic impacts of the retirement. By requiring a minimum standard of just transition activities, transition credits can ensure that the projects provide protection and support for workers and communities.

The development of multiple methodologies at similar times and by different organizations has the potential to cause market confusion and undermine integrity goals, particularly where market players have misaligned incentives around the stringency of emissions reduction estimations. However, it also creates an opportunity for the methodologies to harmonize on sector-specific core integrity principles. Promoting market alignment on stringency can avoid a race to the bottom and protect the integrity of the credits. Frequent iterations of the methodologies and related public consultations will facilitate improvements in integrity as the market develops best practices on data collection, assessment techniques, and just transitions.

2. A jurisdictional framework (and how it compares with the project-based approach)

The US Department of State, Bezos Earth Fund, and Rockefeller Foundation have presented the core framework of the Energy Transition Accelerator (ETA) to support a jurisdictional, power-sector-wide crediting approach. This differs from a project-based approach by quantifying and monetizing the emissions reductions across a jurisdiction’s entire power sector over time, rather than just within a project boundary. As a result, it can incentivize a wide variety of transition activities including public policies and regulation, coal-to-clean power plant replacement, and grid infrastructure investment.

Project and jurisdictional approaches do not need to be mutually exclusive, however both approaches must carefully consider how they mitigate the risk of double counting emissions. Where there is a jurisdictional crediting scheme and transition credit projects operating at the same time, it is critical that the project methodology does not credit for emissions reductions driven by wider decarbonization policies that are incentivized under the jurisdictional approach.

3. Pilots

At COP28, five pilots were announced: two potential pilot projects for early coal plant retirement and replacement in South Luzon (SLTEC) and Mindanao in the Philippines and three pilot countries to the ETA (Nigeria, Chile, and the Dominican Republic).

These pilots can provide critical lessons to build confidence in these approaches if strong, transparent, independent structures for shared learning and iteration are put in place.  Carbon credit financing may not be appropriate for all coal plants and pilot projects will be important to help the global community understand the opportunities and risks of this financing approach.

However, the socio-economic impact of the energy transition is likely to be significant and nuanced, and the pilots will need to consider advanced financing and strict monitoring and governance processes. Many just transition-related costs will need to be disbursed in advance of coal plant retirement to be effective. It will take extensive coordination and mutual agreement of responsibility across various stakeholders, and strong KPI monitoring, reporting, and verification processes to ensure effective implementation.

4. Buyer interest

Nine companies — Bank of America, Boston Consulting Group, Mastercard, McDonald’s, Morgan Stanley, PepsiCo, Salesforce, Standard Chartered Bank, and Schneider Electric — have signed a letter of interest in the ETA as an opportunity to support large-scale power sector transformation, while accelerating progress toward their own climate goals. In Asia, the TRACTION coalition led by the Monetary Authority of Singapore includes financiers and advisors with a focus on exploring avenues to build buyers’ confidence in high-integrity credits in Asia.

Buyers — both corporate entities and countries — have shown a willingness to pay for high-quality credits with a rigorous, verified data package, and are increasingly wary of credits that could expose them to allegations of greenwashing. The energy transition credit methodologies consider the parameters that yield high-quality credits, so, if implemented correctly, transition credits could meet buyer’s priorities and growing demand for high-quality, permanent, and additional credits.

Buyer demand is likely to hinge on the success of the initial pilot projects. Demonstrating the climate and socio-economic impacts of transition credits will go a long way toward alleviating buyers’ perceived risks and attracting more buyers. Restricting private sector buyers from participating in transition credit schemes based on their level of climate ambition also mitigates the risk of greenwashing claims and leakage (e.g., the ETA is excluding fossil fuel producers and those without 2050 net-zero goals).

There has been significant attention on voluntary carbon markets recently, with questions being asked around the credibility of credit claims, the integrity of market actors, and the ability of the market to deliver impact. However, steps are being taken to improve the capacity of VCMs to finance the required climate transition in a trusted and reliable manner. RMI and Climate Collective recently released the Voluntary Carbon Market Landscape Guide to provide perspective on the core challenges the market faces and demonstrate its potential. It could be a powerful conduit for climate remediation if data and process integrity can be maintained through credit generation, monitoring, reporting, and verification.

There’s plenty of work still to do, but transition credits could help fill the financing gap for emerging markets and developing economies

Energy transition credits should be considered as one possible mechanism among many to support the global decarbonization of the power sector and will be most effective when implemented in alignment with other financial and policy levers. Transition credits need to be quantified and generated with care and transparency, or they risk channeling limited climate finance to plants that already have the financial incentive to retire. If they aren’t executed in partnership with good-faith public partners and in consideration of impacted communities, they could exacerbate potential negative social impacts of the energy transition on vulnerable workers and their families.

This year, we’ll be looking out for 1) alignment on the stringency of core concepts across the project-based methodologies and stakeholder coalitions, 2) coordination on double counting risks between project and jurisdictional approaches, and 3) the transparent development of stronger community-focused monitoring and governance processes through the pilots to protect workers and communities. Moving forward on these pieces can provide the robust support that transition credits need to effectively mobilize and channel private and public finance to where it is most needed in the global energy transition.

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Q&A: Why We Need Hydrogen Hubs https://rmi.org/why-we-need-hydrogen-hubs/ Tue, 12 Mar 2024 10:00:25 +0000 https://rmi.org/?p=38990 An interview with RMI Principal Nabil Bennouna about the role regional clean hydrogen hubs will play in advancing the clean energy transition.

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Last year, the US Department of Energy selected seven regional clean hydrogen hubs to receive $7 billion in federal funding. Funded by the Bipartisan Infrastructure Bill, the hubs are a part of the Biden administration’s efforts to jump-start the market for low-cost clean hydrogen, which it sees as key to achieving climate goals.

Building on more than fifteen years of experience in the execution of large-scale infrastructure projects and corporate strategy, Nabil Bennouna, an energy and finance expert on RMI’s Climate Aligned Industries Team, focuses on catalyzing the economy for clean hydrogen, which has low or zero carbon emissions associated with its production, storage, and distribution. To advance this market, Nabil provides advisory support to regional hydrogen hubs, works to develop international clean hydrogen trade, and designs novel counterparty arrangements between supply, demand, and finance to facilitate project development.

Nabil thinks of hydrogen hubs as more than just pipes and wires: hubs will be a layered system of human interactions, economic policy, and cross-regional collaboration. I sat down with him to get his take on hydrogen hubs, why they are needed, and what a successful rollout could look like.

What are hydrogen hubs?

Hydrogen hubs are organized networks where people and facilities involved in making and using clean hydrogen work together efficiently. These hubs aim to speed up the production and usage of clean hydrogen by taking advantage of the benefits that come from having everything closely connected in an industrial cluster.

But they are not only a web of shared physical structures connecting hydrogen suppliers to users, they are also something more intangible: a platform of information that will align common infrastructure requirements, shape basic terms, create resource exchanges, optimize efficiencies, and leverage competitive advantages to accelerate the clean hydrogen industry.

Hubs concentrate opportunity and distribute risk, allowing producers and consumers to expand their supplier and purchaser base, splitting and diversifying risk across several market participants to help ensure that supply chains maintain resilience as underlying technologies mature.

Why are hydrogen hubs part of the US strategy for the energy transition?

Clean hydrogen is a promising lever to decarbonize some of the trickiest and most essential parts of our economy, such as chemicals, shipping fuel, fertilizer, and steel production. But the fact is, clean hydrogen isn’t currently widely available nor cost effective enough to take on this role in the energy transition. To achieve decarbonization ambitions, we urgently need investment in project development.

To finance a project, investors need to understand that the full supply chain is built out. In other words, projects can only attract investors if they prove someone is going to buy their products at the scale they plan to produce them — that’s business model 101. In the case of a nascent, complex commodity like clean hydrogen, building out a new supply chain takes time. But to meet our climate objectives, we don’t have time to wait around. Hubs jump-start supply chain development by concentrating infrastructure and markets in a single geography.

The hydrogen hubs are the start of the beginning, a pathway for clean hydrogen projects to go from conceptual to feasible to operational.

Concretely, how do federally supported hubs help achieve this?

Converting entire supply chains to run on hydrogen will be expensive, particularly for the first few projects before technology has matured.

Hubs can be structured as public–private partnerships, granting them the unique position to unlock vital fund matching from federal and state governments while also enticing first-mover private sector capital. This is coupled with the fact that stacking together firm commitments across a diverse set of hubs participants lends credibility to the vision of a well-functioning clean hydrogen ecosystem, also stimulating investment.

Individual projects can find other ways to access capital, but convincing mainstream investors that investment is flowing into a region from several sources is a really effective way to drive down perceived risk and in turn, long-term costs.

Why are the hubs important for industrial decarbonization more generally, not just for hydrogen but for other emerging low-emissions fuels and feedstocks?

RMI believes that the majority of industrial decarbonization projects will occur in clusters or “hubs” – not just for hydrogen but for all types of commodities.

When it comes to decarbonization projects, hubs are crucial because of their unique ability to geographically concentrate the development of low-emissions fuels and feedstocks with the industrial consumers who can use them to decarbonize industry, ranging from steel and aluminum mills to cement plants, chemical refineries, and so much more. For example, the Kalundborg Eco Industrial Park, a hub connecting nine companies in Denmark, is a waste-sharing network, in which one manufacturer’s waste provides a resource for another: power plants give excess heat to factories, waste processing plants transfer biogas to refineries, and pharmaceutical manufacturers donate waste to farmers for use in fertilizer. By connecting these processes in a hub, the companies are reducing carbon dioxide emissions, water, and energy use.

Hubs are not exclusive to one decarbonization vector. Instead, they are an organizational framework that can be used to turn local decarbonization successes into global impact.

Why can’t projects use existing hydrogen infrastructure and markets to reach consumers and attract investment?

It’s true that fossil-based hydrogen has a well-developed supply chain in the United States – approximately 10 million metric tons is produced annually and consumed mainly in the chemicals, fertilizer, and refining industries. There are two things that make clean hydrogen different, however: the number of new kinds of industrial consumers for it, and the sheer volume that we’ll need of the product to reach climate goals.

Take a step back and think about all the sectors that need clean hydrogen to decarbonize: not just fertilizer but steel, shipping, aviation, and potentially more. These sectors don’t necessarily have a common supply chain element — an airline doesn’t buy jet fuel from the same place that a fertilizer producer buys its natural gas for ammonia — but they do share a common goal of decarbonizing their operations. Because these sectors aren’t naturally using the same supply chain, we need to devote time and resources to connect them. Regional infrastructure clusters like hydrogen hubs will facilitate that.

The Department of Energy has set the goal of producing 50 million metric tons of clean hydrogen fuel by 2050. To ensure these investments happen now and happen successfully — in other words, achieve the decarbonization urgently needed — we need hubs.

This must happen globally, too. Worldwide, we’ll need in the order of 300 sustainable aviation fuel plants, 200 zero-emissions deep-water vessels, seven million net-zero trucks, 100 net-zero steel plants, 60 zero-emissions ammonia plants, 40 new net-zero aluminum facilities, and 20 net-zero cement plants with carbon capture by 2030 to meet sector-specific decarbonization goals. Most of these projects will happen in hubs.

The hydrogen hubs announcement includes detailed guidance on the community benefits requirements that each hub must meet prior to receiving funding. What are the broader implications of including community benefits requirements in a federal funding opportunity this large?

The clean regional hydrogen hubs and their community benefits plan requirements facilitate information sharing, balance the needs of local communities, and help projects reach their greatest potential to reduce emissions.

Heavy industry facilities are often located in or near marginalized low-income communities, and when it comes to project development, residents of these communities are not always invited to provide input to shape the policies and practices that impact them. This needs to change. To help developers initiate meaningful, two-way community engagement, RMI has published case studies and best practices from advising developers of the DOE’s $7 billion Regional Clean H2Hubs program.

Meaningful two-way community engagement can lead to mutually beneficial relationships between project developers and local communities, and incorporating community input in both community benefits and project design will be critical to accelerating and executing a just energy transition in the United States.

What would effective implementation of the hydrogen hubs look like?

In this arena, we have a lot to learn from Europe. The European Hydrogen Backbone (EHB) initiative, a coordinated approach to identifying hydrogen infrastructure needs, has found success in early-stage deployment plans, shared visions focusing on the most needed infrastructure corridors, and systemic approaches to planning that engage multiple stakeholders to better understand what an optimal rollout looks like.

Inspired by the EHB, Guidehouse and RMI are initiating a North American Hydrogen Backbone collaborative to create a framework for infrastructure development, drawing from the experience of Europe to ensure hydrogen hubs can bypass midstream barriers and focus on growing supply and demand-side adoption.

I think a critical objective is that “hubbing up” will spur coordination, especially on elements like infrastructure. Hydrogen hubs are trying to avoid scenarios in which two pipelines get built in one area where only one is needed or zero pipelines get built in an area where one is desperately needed. The long-term success of hubs is foundationally reliant on effective communication to sequence and plan projects in a coordinated manner.

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