By Winston Vaughan, Clearloop Head of Climate Policy
US carbon emissions are finally beginning to fall, but nowhere near fast enough to achieve America’s climate goals. Accelerating the pace of clean energy deployment is the foundation of rapid decarbonization and achieving it will mean addressing some of the barriers and inequalities that exist in today’s renewable energy market. Focusing on equity is a tall challenge, but an essential one, and if we get this right, we will not only accelerate decarbonization, but can make our country’s future healthier, more equitable, and more prosperous – and that is an opportunity we cannot afford to miss.
2023 marked a major milestone in US efforts to address climate change. Last year was the first since the COVID-19 pandemic began that greenhouse gas (GHG) emissions dropped at the same time as our economy grew. An estimate by the Rhodium Group shows that GHG emissions in the US fell by 1.9% at the same time the economy expanded by 2.4%. This is evidence that the massive growth of renewable energy investments by major companies, along with government policies to incentivize clean energy technologies such as EVs, heat pumps, and clean energy, have finally put the US economy on a path to grow and prosper while reducing pollution that harms our health and our environment.
This is an important milestone, and one worth celebrating, but it is important to note that emissions will need to fall three times as fast for the next 10 years for our country to do our part in beating climate change. So how do we supercharge this success? For Clearloop, the key to accelerating emissions reductions is equity.
The growth of reliable, cost-effective, clean power sources like solar around the country is an impressive success story. The American Clean Power Association (ACP) estimates that America has built over 243 GW of renewable energy and battery storage capacity, enough to power 64.8 million homes. These clean energy sources are now providing 15.3% of the total electricity generated in the US and their continued growth is poised to power America’s economy of the future.
When you look behind those headline numbers however, you will see one major reason that emissions are not falling fast enough—the growth in renewable energy around the country is impressive, but also deeply inequitable. According to ACP, renewable energy sources already make up huge, and growing, parts of some state’s electricity mix—33.1% in California, 35.4% in Colorado, 29.2% in Minnesota, and 23.7% in Texas, while in Tennessee that number is 1.3% and in states like Alabama, Mississippi and Louisiana, renewables are less than 1% of the total. This means that businesses and residents of some parts of our country are not sharing in the benefits—economic, health, and environmental—that affordable clean power is already bringing to others. It also means that the GHG intensity of the electric grid in those areas remains high, and communities in those regions—especially low-income communities and communities of color, may continue to confront disproportionate health impacts as a result of higher pollution levels.
Equity in Access
The growth of corporate renewable energy is one of the biggest climate success stories in recent decades. The Clean Energy Buyers Association (CEBA) estimates that corporate buyers have voluntarily procured over 71 GW of clean power since 2014, and the growth of corporate clean energy buys continues to accelerate. The commitment and innovation of sustainability leaders in the private sector has overcome market obstacles, shifting political winds, and supply chain constraints to drive the greening of the electric grid.
One of the key technical innovations that has enabled this success is the virtual power purchase agreement (VPPA). This mechanism has empowered companies to overcome market obstacles to renewable energy procurement, bring a huge amount of new renewable energy capacity on to the grid, and drive economies of scale by aggregating demand from multiple locations and facilities. VPPAs have empowered companies to get big renewable energy deals done at lower cost and advance their ambitious climate goals.
VPPAs are powerful tools but have limitations. They allow buyers to circumvent market obstacles, but those obstacles remain, and as a result, geographic disparities to renewable energy persist. Further, VPPAs are complex deals that require buyers to have strong credit ratings, a tolerance for risk, and the expertise to participate in wholesale electric markets. The result is that many corporate energy buyers who are interested in renewable energy, particularly smaller and less creditworthy companies, do not have access to the same tools to decarbonize as their larger counterparts. This issue has become a big obstacle for the growing number of companies that are seeking to reduce emissions in their supply chain. Innovative deal structures such as aggregated PPAs can be part of the solution, but their complexity has limited their role in the market.
A Path to Scaling Decarbonization
Increasing the pace of emissions reductions requires removing obstacles to renewable energy growth across the country, especially in the most carbon-intensive parts of our grid. That means giving companies incentives to focus their decarbonization efforts on the communities where they will do the most good by measuring—and valuing—the carbon emissions associated with renewable energy investments, not just the amount of energy they produce. Getting these incentives right can help companies maximize the climate impact of their clean energy investments and can begin to address historical inequities that contribute to unequal health outcomes today.
Focusing on carbon also gives us an opportunity to create new products that can serve buyers who are unable to access renewable energy markets today. Carbon products like those offered by Clearloop can help everyone from Fortune 500s to smaller businesses, educational institutions, and small and mid-sized suppliers to major companies achieve their carbon goals by investing in projects that deliver impactful carbon reductions today, expand equitable access to clean energy, and help create the clean energy foundation that will fuel the EV fleets, heat pumps, and other clean technologies that will power America’s economy of the future.