Adapted from "Climate Positive Business: How You and Your Company Hit Bold Climate Goals and Go Net Zero," by David Jaber, published this month by Routledge. Listen to our recent podcast interview here.
A handful of greenhouse gas-reduction actions have established costs and payback, such as solar and wind, where the hours of sun and speed of wind are known (or can be measured) for a given location, and the costs of installation are relatively fixed. Returns on investment into other actions depend on the context. How often is equipment operating? How much energy waste are we preventing? In exploring the best investment opportunities among these actions, two questions come up:
- Where can we significantly reduce GHG emissions?
- Where do we get the best GHG reduction bang for our buck?
Reduce significant GHG sources
Quantifying Scope 1/Scope 2/Scope 3 helps address the first question, pointing to where your largest GHG contributors are. What you don’t yet know is the impact of any actions, and whether an action will reduce emissions by 10 percent or 50 percent.
Pretend your emissions are those shown in the chart below. Scope 1 totals 6 percent of total emissions, Scope 2 is 22 percent and Scope 3 is the remainder. This chart also shows that you were able to collect electricity information from your supply chain, so it shows up in Scope 3 as well as in Scope 2. Electricity as a category across Scopes 2 and 3 represents 42 percent of total emissions, making it a prime candidate for reductions.
In gathering more details about the sites that use electricity, we can look at geography to help us prioritize further. Most fuels we use are location-agnostic in their GHG emissions. That is to say, burning a gallon of gasoline in the United States has the same footprint as burning that gallon of gasoline in Japan or in Sudan.
With electricity, the impact of using 1 kilowatt-hour (kWh) all depends on what goes into the grid in that area to make that kWh — coal, natural gas, hydro, renewables or nuclear — so not all electricity is created equally. Within different areas of the United States ("NERC sub- regions" in electric grid geek dialect, where the subregions reflect how electricity is managed and often span states), some electricity is cleaner than others, as illustrated and partially annotated in the EPA eGRID subregions map in the map below. In Canada, GHG intensity is reported by province, and in Europe, emission factors for electricity are reported by country.
The largest benefit of efficiency is seen in the dirtiest grids, where you avoid the dirtiest electricity. The dirtiest grids are tagged with the number corresponding to the pounds of CO2-equivalent generated for each MWh of electricity produced.
In the United States, grids in the upper Midwest, in the Rockies and on islands currently stand out, although grid cleanliness changes over time as the mix of energy sources shifts.
The best bang for your buck
It’s not enough to simply understand the magnitude of GHG impact. We also want to understand the financials to make informed investment decisions, leading us into the second question around bang for your buck.
Efficiency is commonly said to be the cheapest source of energy, freeing up energy to be used elsewhere instead of adding generation to provide energy. In addition, efficiency is the second action, after redesign, within the energy GHG reduction hierarchy presented earlier. Within efficiency, different measures have different ROI. Repairs such as plugging the leaks in an electricity-intensive HVAC system will generally have a great return. LED lighting and controls, if properly calibrated and commissioned, have historically shown quick paybacks in commercial buildings when replacing less efficient lighting.
So, projects such as lighting retrofits and HVAC repair in the dirtiest grids emerge as our lead opportunity. (I’m looking at you, Illinois–Missouri.) You can take a similar approach to your business. If you have several sites across the nation, geographic analytics around electricity can help you target facility improvements in terms of climate goals, although clearly other considerations such as facility age, equipment age and capital budgets should also come into play.
Several points of constraint in our fossil fuel use will take concerted effort to overcome. Electricity use is relatively simple to shift away from GHG-intensive coal and natural gas, as so many renewable energies are in the form of electricity, and thus, electrification of gas equipment is now a popular strategy. Building designers are getting the profession to a place where buildings can reliably be built net zero in a relatively affordable manner.
Other areas that require some creativity include:
- Industrial process heating based on natural gas. The high concentration of energy required for activities such as forging metal becomes a challenge in seeking alternatives. One alternative getting attention is hydrogen, which can be generated from renewable electricity. Expect more "renewable hydrogen" to come into the world with further solar proliferation, as one way to store excess power during peak sun hours is to use that power to create hydrogen. Another potential solution for industrial heating supported by investors such as Bill Gates is concentrated solar.
- Financing to make efficiency and renewables even more affordable. Yes, renewables are the cheapest form of electricity, but there are still too many reasons to not retrofit existing facilities. We need to get to a place where the renewable economics are irresistible. The solution could well involve eliminating remaining subsidies for fossil fuels and applying a price on carbon, requiring the policy advocacy we touched on earlier, as those actions go beyond the ability of any one business to enact. You can use a price on carbon for internal investment decisions for your company, and I recommend you do so as a good practice. What that entails is understanding your GHG emission sources, and in any projects (infrastructure, equipment or other) under consideration that change those GHG emissions, factor in a price on carbon. For example, if the project increases your electricity demand at 10 cents per kWh, then factor in not only the higher direct costs of electricity, but also the carbon footprint of that electricity at $15 or $50 per metric ton of CO2-equivalent emitted. A fuller discussion of price on carbon lies ahead.
- Baseload for the electric grid. This is more of an issue for the power grid operator than individual businesses, but the intermittency of renewables means that for grid reliability, a more constant energy source is needed. Currently, that’s primarily supplied by natural gas, nuclear, large hydro and coal. Renewable energy storage is the focus of forward-thinking grid designers and businesses looking beyond their own boundaries for solutions. In addition to the resurgence of interest in hydrogen generated by using excess renewables, solutions include battery storage and other technologies (pumped hydro, compressed air, thermal storage, etc.), but we’re not there yet on implementation. Action on grid resilience might be mostly out of your hands, but it’s good to have on your radar.