Federal stimulus can incentivize grid decarbonisation by tapping into clean energy 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 incentive-led framework of the federal Inflation Reduction Act (IRA) reinforces the importance of voluntary markets for energy customers to purchase carbon-free electricity (CFE) aimed at accelerating decarbonization of the US grid. The IRA, along with the CHIPS and Science Act (CHIPS) and the Infrastructure Investments and Jobs Act (IIJA), has paved the way for massive technological innovation and market commercialization.

While CHIPS allocates funds for early-stage innovation, IIJA provides support for commercialization of projects. The IRA complements these earlier measures with incentives for clean energy generation and customer acquisition of projects.

With a bottom-up approach, clean energy uptake depends not only on supply-side incentives, but also on demand from states and utilities, as well as energy customers. CFE Voluntary Markets is a strong and proven driver in Accelerate investments In the deployment of conventional armed forces in and complementary policies To achieve network decarbonisation targets. Thousands of companies continue to set voluntary targets for conventional forces procurement in Europe and show progress towards these and other climate goals.

Voluntary CFE markets rely on a complex, multi-stakeholder market system of Energy Attribute Certification (EAC) registries, data providers, customer leadership, goal-setting programs, and GHG accounting standards. Every stakeholder has a role to play in unlocking the full potential of federal clean energy legislation.

The voluntary market system provides the back-end infrastructure that incentivizes and enables energy customers to purchase CFE and verify progress toward their goals, which in turn provides new revenue accelerating CFE investments and deployment. In essence, this market system revolves around a transaction of EACs, each of which represents the entire purchase of 1 MWh of verified CFE generation, through contracts that are bundled or segregated from electricity payments to customers.

Globally, this market system has incentivized voluntary energy customers to buy Over 1 billion EACs annually It generated billions in revenue stimulating decarbonization investments in the network. In the US, customer-led commercial and industrial procurement of wind, solar and battery storage Up to 58 GW of new CFE capacity Since 2014 – accounts for 37 percent of US CFE capacity additions during this time period.

Creating customer markets will help accelerate investments in a broader range of technologies that enhance grid decarbonisation.

It is essential that implementation of the IRA, IIJA, and CHIPS strengthen and build upon the voluntary market system to maximize the use and impact of federal incentives. Wind and solar deployment has benefited greatly from the voluntary markets created by EAC transactions and the resulting additional revenue and market signals they provide. The EAC has not yet been standardized or made available for clean technologies that the IRA prioritizes, such as clean hydrogen, energy storage, carbon utilization and storage (CCUS).

By providing EACs for these technologies, IRAs can help stimulate new markets as customers purchase new clean technology solutions, report resulting verifiable claims about progress toward their clean energy goals and unlock greater returns for clean technologies. Creating customer markets will help accelerate investments in a broader range of technologies that enhance grid decarbonisation.

An IRA can also help fuel developments in a voluntary market system that enables customers to send more powerful and targeted market signals with their purchases. Clean Energy Buyers Institute Carbon-Free Next Generation Electricity Buying Guide Outlines major updates to this market system that will offer a broader list of CFE purchasing options to customers and improve the impact of policies such as the IRA.

First and foremost, EAC records must enrich the EAC with new attributes, including hourly timestamps, a grid average carbon intensity stamp, new tags for all CFE technologies and complementary resources such as storage, tags for storage events, and tags for social and community utility credentials. which further promote carbon removal from the network. These new features will require EAC logs to capture more data from different data sources.

To help motivate customers to get involved in the clean hydrogen, storage, carbon storage and storage (CCS) markets and explain how they communicate that purchase, customer leadership programs—such as RE100, the Science-Based Targets Initiative (SBTi)—and the Greenhouse Gas Protocol should articulate driving goals and report on best practices. . Specifically, the Greenhouse Gas Protocol should expand voluntary markets and the use of market-based instruments. This will broaden customer choice by enabling the widest possible list of CFE purchasing options for customers to reduce greenhouse emissions in Scopes 2 and 3.

We have a tremendous opportunity to unlock the full potential of all the incentives and market effects offered by IRAs, IIJA and CHIPS if we create markets for clients and develop our voluntary market system. Policymakers must prioritize customer market shaping and engage all key voluntary market stakeholders while implementing this legislation to ensure that every incentive dollar spent results in the greatest potential to decarbonize the network and create self-sustaining markets.

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