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Federal incentives can catalyze grid decarbonization by leveraging clear power markets

[GreenBiz publishes a range of perspectives on the transition to a clean economy. The views expressed in this article do not necessarily reflect the position of GreenBiz.]

The incentives-led framework of the federal Inflation Discount Act (IRA) reinforces the significance of voluntary markets for power clients to acquire carbon-free electrical energy (CFE) geared toward accelerating US grid decarbonization. The IRA, along with the CHIPS and Science Act (CHIPS) and the Infrastructure Funding and Jobs Act (IIJA), have set the stage for large technological innovation and market commercialization.

Whereas CHIPS allocates cash for early-stage innovation, IIJA offers assist for commercialization of tasks. The IRA enhances these earlier measures with incentives for clear power era and buyer offtake from the tasks.

With a bottom-up strategy, clear power uptake depends not simply on supply-side incentives, but additionally on demand from states and utilities, in addition to power clients. Voluntary CFE markets are a confirmed, highly effective driver in accelerating investments in CFE deployment and complementing insurance policies to realize grid decarbonization targets. 1000’s of corporations proceed to set voluntary CFE procurement objectives and show progress towards these and different local weather targets.

Voluntary CFE markets rely on a fancy, multi-stakeholder market system of power attribute certificates (EAC) registries, knowledge suppliers, buyer management and goal-setting applications and greenhouse gasoline accounting requirements. Every stakeholder has a task to play in unleashing the complete potential of federal clear power laws.

The voluntary market system offers the back-end infrastructure that motivates and allows power clients to acquire CFE and confirm progress towards their objectives, which in flip offers new income that accelerates CFE investments and deployment. At its core, this market system revolves across the transaction of EACs, which every signify the finished buy of 1 megawatt-hour of verified CFE era, via contracts which might be both bundled with or unbundled from clients’ electrical energy funds.

Globally, this market system has catalyzed voluntary power clients to acquire over 1 billion EACs yearly and generated billions in revenues that catalyze grid decarbonization investments. In the US, industrial and industrial customer-led procurement of wind, photo voltaic and battery storage quantities to 58 gigawatts of recent CFE capability since 2014 — representing 37 % of US CFE capability additions over this time interval.

Creating buyer markets will assist hasten investments in a broader portfolio of applied sciences that advance grid decarbonization.

It’s crucial that implementation of the IRA, IIJA and CHIPS leverages and builds upon the voluntary market system to maximise the use and affect of the federal incentives. Wind and photo voltaic deployment have benefited tremendously from voluntary markets cultivated by EAC transactions and the ensuing further income and market indicators they supply. EACs are usually not but standardized or out there for the clear applied sciences that the IRA prioritizes, like clear hydrogen, power storage and carbon seize utilization and storage (CCUS).

By making EACs out there for these applied sciences, the IRA might help activate new markets the place clients procure new clear know-how options, report the ensuing verifiable claims about progress towards their respective clear power objectives and unlock better revenues for clear applied sciences. Creating buyer markets will assist hasten investments in a broader portfolio of applied sciences that advance grid decarbonization.

The IRA may also assist promote evolutions to the voluntary market system that allow clients to ship extra highly effective and focused market indicators with their procurement. The Clear Vitality Consumers Institute’s Subsequent Era Carbon-Free Electrical energy Procurement Information specifies key updates to this market system that may introduce a broader menu of CFE procurement choices for purchasers and optimize the affect of insurance policies just like the IRA.

At the start, EAC registries ought to enrich EACs with new attributes, together with hourly timestamps, common grid carbon depth stamp, new tags for all CFE applied sciences and complementary sources like storage, tags for storage occasions and tags for social and group profit credentials that promote additional decarbonization of the grid. These new attributes would require EAC registries to seize extra knowledge from completely different knowledge sources.

To assist encourage clients to have interaction in rising clear hydrogen, storage and CCUS markets and make clear how they need to report this procurement, buyer management applications — reminiscent of RE100 and the Science-Based mostly Targets Initiative (SBTi) — and the Greenhouse Fuel Protocol ought to make clear management targets and reporting greatest practices. Particularly, the Greenhouse Fuel Protocol ought to broaden voluntary markets and using market-based devices. This could broaden buyer alternative by enabling the broadest potential menu of CFE procurement choices for purchasers to cut back their Scopes 2 and three greenhouse emissions.

We have now an incredible alternative to unleash the complete potential of all of the incentives and market impacts that the IRA, IIJA and CHIPS provide if we create buyer markets and evolve the voluntary market system. Policymakers ought to prioritize the formation of buyer markets and have interaction all key voluntary market stakeholders through the rollout of this laws to make sure that each greenback of incentives spent leads to the best grid decarbonization potential and creates self-sustaining markets.

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