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Solar in the Shadows Part 2: A Conversation with Lars Kvale on the How Private Sector Action Can Accelerate America’s Clean Energy Transition

In 2021, the private sector is ready for climate action. Yet once a company has already made efforts to clean up its supply chain, use sustainable materials, and reduce its in-house carbon footprint, how can it truly go beyond to reclaim its carbon footprint and achieve a net-zero future? Clearloop Co-Founder Bob Corney sat down with Lars Kvale, an expert in the field of carbon markets and renewable energy, to break down how companies of all sizes can make a forward thinking, additional impact to accelerate the transition to a 100 percent decarbonized grid.

For a deeper dive on these topics, you can read our latest white paper, “Solar in the Shadows Part 2: Clearing the Pathway for Private Sector Action to Accelerate America’s Clean Energy Transition,” written by Kvale. Below is a transcript of the conversation:

TRANSCRIPT:

Bob Corney: Hi, this is Bob Corney, one of the three co-founders of Clearloop, along with my partners Laura Zapata and former Tennessee Governor Phil Bredesen. I’m pleased to be joined today by the author of a new whitepaper about Clearloop and our program called “Solar in the Shadows Part 2: Clearing the Pathway for Private Sector Action to Accelerate America’s Clean Energy Transition.”  

Lars Kvale, we’re really pleased to be working with you and have you here today. You’ve been involved in the environmental marketing for quite a while, so why don’t you tell us about your background and experience?

Lars Kvale: Sure, and first of all, thanks to you and your team for inviting me to join you today and also to work with you over the last couple of months. So I’ve spent, as you said, 15 years involved in renewable energy, carbon markets, policy, all in the effort of trying to help drive the transition to a cleaner grid, as well as decarbonize the sectors across industries; energy, agriculture and so forth. It’s primarily been around the standards side, setting up markets, figuring out ways that private sector action can drive reductions, or drive renewable energy, in addition to what may be mandated by policy from a federal or state level. That work has both been in the United States, but also international. 

BC: That’s great, it’s a perfect fit for us, we kind of sit between the carbon and renewable energy markets so it’s great alignment. In the paper you really sort of highlight that Clearloop is an innovative evolution of the current market, what really stood out to you about the program, based on your experience and what you’ve seen in the market?

LK: If you look at the U.S. renewable energy market today, about half of the large-scale renewable energy projects are built essentially because companies are signing up for long term offset agreements for that renewable power. That’s been a tremendous change in the market, that’s something that did not take place 10 years ago, and it’s primarily been through the invention of the contract mechanism called a Virtual Power Purchase Agreement or VPPA. 

The problem with that, the downside of that, is that it’s not necessarily simple to do, nor is it feasible to do for most companies. You have to have companies of a certain size, and generally also of certain locations and energy demand characteristics. So on the other hand, if you have a company that’s been looking to try and reduce your impact or at least offset or neutralize some of your impact along with reduction efforts, you look to markets such as the ones around carbon offsets, unfortunately the way that carbon offset market has developed, it has not provided a real driver for renewable energy projects in the United States. 

So what Clearloop has identified through this little bit of a different way of setting up the transactions between companies with an emissions footprint and the companies actually building the renewable energy, is that you combine the simplicity of the carbon offset world with a clear and actionable additionality associated with a Virtual Power Purchase Agreement. So it’s really allowing companies of most sizes to have a direct impact in getting renewable energy built and reducing greenhouse gas emissions in the energy sector in the United States.

BC:  That’s fantastic. You said it better than we did, we really appreciate you kind of highlighting that. You know, as a new approach, we often get asked about things like “additionality” or “assurance.” You kind of dive into that in great detail in the whitepaper. Can you summarize that kind of shortly for us?

LK: Yes. So, what you’re targeting is, you’re targeting companies that are looking to become more sustainable in their operations. And these are generally companies that have already taken efforts to reduce their greenhouse gas emissions across their supply chains, their activities, their processes and so forth, but also realize that in the current marketplace for some parts of their business that there is no solution that is zero emissions, at least not yet. So they may be working towards that goal by 2030, 2040, 2050, but in the meantime they want to offset the impact of those emissions and those processes. In that case it’s really important that they’re going to spend money to support the development of a new carbon project that matters, that is additional, that the greenhouse gas emission reductions that that project is contributing to are additional to what would have happened if they had not done anything. And that’s where we come in with the Clearloop methodology on how exactly to do that. This is not a new concept in the carbon world, but the way that it’s being adopted by Clearloop is really a little bit different than the way it’s been done in the carbon market.

BC: It is interesting, that in working with you over the last couple months on the paper, you’ve really highlighted the importance of time, and the causal connection between the end buyer and the project, you know, as a real, single commitment. Tell us a little more about that, you know, because I think it’s an important concept that sometimes was lost.

LK: Yes, I mean just to go back, not to much of a history on carbon markets, but go back to the Kyoto Protocol and all the concepts that people have heard around carbon trade. The whole concept of carbon offset came from that idea, of having these compliance regulatory markets in different countries, and one of the ways to finally achieve these reductions is to use some of the money that companies would have to pay as part of their cap and trade to source new projects that would reduce greenhouse gas emissions. 

And so generally that’s the vision of a very large tradable market where you have originators that can drive these projects and create offsets that can then be monetized in a market, similar to a commodity for, you know, corn or soy or something else you would have a carbon offset commodity that will then be transacted. And that works, you know, if that market is of a significant size, and is stable. Unfortunately, what you’ve seen with the carbon compliance markets is a lot of changes, from when they set out, in certain cases markets didn’t develop, the Kyoto Protocol, as an example. So, as a project developer it’s been very difficult to finance your projects with the expectation of a given carbon price that you’ll receive in the future compliance market. 

What Clearloop does, is you shrink that gap between the project developer and the eventual buyer of the offsets. So by having the two of them meet at the very beginning of a project, and having a transaction that happens up front, means that the buyer of the offsets provides the money up front to the project developer, a renewable energy project developer in this case. You’re basically making sure that that is what’s driving the development of this project, that’s what’s making it happen. Right, without that the renewable energy developer would not be able to go out and build the project. Renewable energy projects, like many other carbon reduction projects, have most of the cost up front. And the minute you can put steel in the ground, you can get solar up, or you can get a windmill going or whatever it may be, then that’s going to reduce emissions over the lifetime of that project. By having a methodology like this, that can get the financing directly to the developer, in front of when the construction happens, is really what determines, and to a large extent demonstrates a real additional project; and from a company perspective, demonstrates that indeed, the money that I’ve spent, was spent on reducing greenhouse gas emissions in this electricity grid over the next 10, 15, 20 years. 

BC: Great. I think that there’s often concern that, you know, programs like ours would somehow go away, or be necessary if there is some form of cap. And while that’s, you know, a bit of a debate, over whether that will happen in a timely fashion to really address climate change. You kind of tackle that head on in the paper, and that’s the issue of baseline. Could you briefly tell us a little bit about that as well?

LK: Yeah. I mean, briefly, I think anybody who’s involved in this market, certainly hopes that there will be more consistent carbon and climate policy in the United States, for example. There are many different ways that can be done, whether it’s around cap and trade, carbon tax incentives, standards and so forth. But the point of what is being done here is, by building these projects now, this helps accelerate that energy transition, in advance of any kind of policies instituted by the state or by the federal government, and the way it’s structured will essentially be additional to any climate policy. So as an example, if there’s a mandate in a given region to reduce greenhouse gas emissions by 30 percent, by, let’s say 2035. Then, what Clearloop is doing, is they’re adding to that, it’s 30 percent plus by getting more projects built, the way it’s structured. And I think that’s really important to understand, is it’s not “instead of” policy, this is really in addition to that policy I hope is forthcoming.

BC: Yeah, I mean, it’s interesting, given where we are in time, and the crisis that we face as a global community. You know, we need it all to happen. We need greater emphasis on all kinds of projects whether they be natural solutions, renewable energy. I think that that’s been the ethos from the very beginning of Clearloop, is really around the concept of how do we add to that, how do we accelerate action today for companies that are working to go beyond what they’ve been doing and to provide solutions that make it easier for companies of all sizes to do that. 

You know, I think that another thing that really strikes me about your work and where it sort of dovetails with our first white paper on emissionality, is really the idea of clean energy access in the United States. Because of certain market conditions, solar is very concentrated in a few areas in the United States, solar and all renewable, but there are great opportunities to do that, and, you know, I think what your work kind of illustrated to us is that there is a strong technical foundation for what we’re doing, in terms of adding that level of assurance and accuracy. When you look at the landscape of the options that are available to companies, you know, where does Clearloop fit into that option pool when you think about it?

LK: Yeah, I mean, it’s adding to the options, right? And I think it’s really trying to address a gap in the marketplace. While reducing one ton- anywhere- is equivalent to reducing that ton somewhere else, there is still a preference for also having co-benefits of associated carbon projects. So, you know, there’s a natural tendency from companies to say, “we would like to do projects that are close to where we’re located, close to where our customers are located, our stakeholders, maybe close to where we source our materials from, we have an interest in having additional benefits,” just as economic development benefits by situating the development in regions that maybe have been bypassed by the policies that are in place or the incentives. 

And then finally, and then that’s what you bring up with emissionality, there’s the idea of trying to build more projects where the grid is the dirtiest, and not just focus on where you have the highest capacity factor, or the best natural resources for something like solar as an example. So, really, how do you get the highest impact? And again, this is not about saying, “this is it, there’s only the Clearloop way, other ways don’t work,” it’s really about additional tools. And clearly there’s a gap in the marketplace currently, where you have companies that want to drive the development of new renewable energy, they’re not big enough, they don’t have the balance sheet required, to go into a Virtual Purchase Power Agreement. On the other hand, they’re not necessarily too enamored with going in and sourcing carbon offsets from a variety of different projects, but they are interested in renewable energy where they are.  

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