MARCH 27, 2024

Hello!

In today’s edition:

• Bill Spindle deciphers a cleantech tax provision for us.
• Cat and Amena get you caught up fast on our takeaways from last week’s CERAWeek conference.
• In our Data Dive, I was wowed by China’s cement dominance.

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Send your energy photos, story tips and more to news@ciphernews.com.

Illustration by Nadya Nickels.

Changes in US tax rules provide big boost for renewables

BY: BILL SPINDLE

Tax credit transferability may sound as boring as a clean energy initiative could get. But the idea is turning into one of the blockbuster successes of the Biden administration’s program to address climate change, suddenly generating billions of dollars for renewable energy projects in the United States.

Click here to read Bill’s full explainer on this crucial funding tool for renewable energy projects. Highlights here:

Initially introduced in early 2023, the concept gained traction after guidelines were clarified in June of last year.

The changes generated an estimated $7 to $9 billion over six months, and could reach $83 billion by 2031, according to a report by Crux, a company that advises buyers and sellers in this space. For reference, the same report found about $400 billion was invested overall in clean energy projects in the U.S. last year.

“It’s a big burst. Definitely a big deal,” said Jay Bartlett, a researcher with the energy think tank Resources for the Future who has followed the rapid uptake of this novel new twist to U.S. tax rules.

Tax credit transferability is a variation on tax equity, a method used to finance renewable energy projects by leveraging tax breaks. The 2022 Inflation Reduction Act (IRA) expanded the types of tax breaks available to clean energy companies.

Crucially, the IRA also allows project owners to transfer their tax benefits to any taxpayer without requiring that taxpayer to become a part owner or equity holder in the project. Dropping that requirement vastly expands the pool of companies or financial entities that could take advantage of the tax credits — and hands more money to renewable energy developers in return.

This change has also enabled companies that aren’t pure financial investors, like Schneider Electric, to enter into tax credit transfer deals with renewable energy developers, providing the developers with additional funding while also advancing their own decarbonization goals.

Despite the potential benefits, challenges remain, including the risk of losing the tax benefit if a project fails to meet certain criteria.

Overall, tax credit transferability has emerged as a game-changer in clean energy finance, and could become a mainstay of how renewable energy projects are built in the U.S. going forward.

Read the full article on Cipher’s website.

Lunchtime Reads and Hot Takes

Biden admin plans historic $6 billion industrial carbon offensive — Axios

Amena’s take: Described as the "single largest industrial decarbonization investment" in the country by U.S. Energy Department secretary Jennifer Granholm, the funds will help scale-up solutions for a sector responsible for nearly one-third of U.S. emissions.

NRC releases licensing guidance for advanced reactors — POLITICO (subscription)

Cat’s take: New reactor tech is a key part of the nuclear industry's effort to reinvent itself and be a part of the energy transition. Working productively with regulators is a mission-critical first step.

China opens WTO dispute against US subsidies to protect its EV industry — Reuters

Amena’s take: China wants "a fair level playing field" for its EVs in the global market. What happens though if neither country agrees with the legally binding decision? There is no appeals board at the World Trade Organization.

Dubai’s ‘Sustainable City’ Was Supposed to Start a Trend. It Hasn’t Yet — Bloomberg

Amy’s take: This sounds cool. With all the focus on Masdar City, which I think was meant to be a much larger version of this community, I’m bummed I missed this when I was in Dubai for COP28!

Big Tech’s Latest Obsession Is Finding Enough Energy — The Wall Street Journal

Cat’s take: CEO of U.S. natural-gas producer EQT, Toby Rice, told WSJ that tech firms building data centers were asking him two questions at last week's CERAWeek conference: “How fast can you guys move? How much gas can we get?"

EU must wean itself off Russian nuclear fuel, Belgian prime minister says — Financial Times (subscription)

Anca’s take: The story also points to the challenges of finding alternatives to Russian enriched uranium (lack of investors), with the head of the United Nations nuclear body warning against a good vs bad nuclear dichotomy.

How Toyota, a Laggard on Electric Cars, Got Its Fight Back — The New York Times

Bill’s take: Hybrid vehicles are likely a necessary middle-step for the U.S. car market as it moves inexorably away from traditional engines. I see this as a glass-half-full story.

Unlocking the potential of superhot rocks — Financial Times (subscription)

Amy’s take: Super interesting map. Also, I didn’t know oil and gas companies could drill for geothermal in existing oil and gas leases without needing new permits.

Profits Not Prices Drive Renewable Development, New Book Says — Bloomberg

Amy’s take: Hmm, this goes against my understanding, which is that renewable-energy profits aren’t as good compared to fossil-fuel profits, but compared to other kinds, they’re pretty good.

Scientists inch towards holy grail of fusion reactors — Financial Times (subscription)

Anca’s take: One obstacle will be the lack of readiness in supply chains to provide the engineering, materials and expertise required to roll out fusion solution at scale, the article notes.

More of what we're reading:

• US solar factories strike deal to produce 'Made in USA' panels — Reuters

• A coal billionaire is building the world’s biggest clean energy plant and it’s five times the size of Paris — CNN

Power needs, natural gas and AI dominate CERAWeek debate

The Houston skyline is seen from inside the CERAWeek conference center on March 18. Photo credit: Cat Clifford.

BY: CAT CLIFFORD and AMENA H. SAIYID

HOUSTON — The energy transition is going to happen at different speeds across the globe and be made more challenging by the rising demand for electricity coming from power-hungry data centers and increasing electrification.

At the same time, cheap and readily available natural gas will continue to be a critical bridge fuel for the foreseeable future until lower carbon technologies are scaled up and prices come down.

These were among the top takeaways from a massive energy conference, known as CERAWeek by S&P Global, that dominated Houston — and news headlines — last week.

Read Cat and Amena’s full review of the conference here.

Here are their quick highlights:

• AI was everywhere at the conference, both the opportunities and the potential costs.
• Demand for electricity in the U.S. is rising for the first time in decades, giving hydrocarbon companies runway — while the legitimacy of that runway depends on who you talk to.
• Flush with profits, oil major executives set the tone that oil and gas will continue to play a dominate role in the global energy mix.
• Scaling up from innovation to commercialization while also bringing costs down was a topic of urgent focus for more nascent clean energy technologies, like carbon capture tech, clean hydrogen and small nuclear reactors.
• The lack of financing for emerging economies was a top concern expressed by government officials from these types of countries, including several from Latin America and the Caribbean.
• Increasing renewable energy penetration won’t be possible without serious investments made in transmission lines to support the added power load.
• Identifying and locking in supply chains for critical minerals is now a priority for companies engaged in making clean technologies.

Read the full article on Cipher’s website.

With China’s dominance, cement emissions poised to grow

Source: Rhodium Group, United States Geological Survey • OECD stands for Organisation for Economic Co-operation and Development, which includes roughly 38 member nations. Other non-OECD includes all countries in Central and South America, the Middle East and Oceania that are not OECD members.

BY: AMY HARDER

Cement emissions in developing parts of the world could double by the end of this century, the consulting firm Rhodium Group finds in a new report.

Cement is a key ingredient in concrete — the bland gray material that makes up our sidewalks and roads — and is responsible for 6% of global greenhouse gas emissions due to the chemical process by which it’s made.

Beginning around 2000, China blew past the rest of the world in its cement production, as the above chart shows. Cement usage in many wealthier parts of the world has likely peaked (as captured in the chart as member countries of the Organisation for Economic Co-operation and Development, or OECD). But Rhodium predicts demand for infrastructure in lower income nations will drive growth in the coming decades, which poses a problem that new technologies are just beginning to solve.

“There are not yet any mature and cost-competitive solutions for cement decarbonization,” Rhodium states. “Several options are currently under development, however, including carbon capture, hydrogen and electrical kilns, and alternative electrochemical processes.”

Startups innovating on these technologies and more are poised to receive part of an unprecedented $6 billion pot of federal support, announced by the U.S. Energy Department earlier this week, aimed at cutting emissions from the industrial sector. This sector encompasses a wide range of energy-intensive processes and materials, including cement but also steel, aluminum and more.

Read the whole report to learn more about the emissions profile of cement, the most widely used material on the planet after water, Rhodium notes.

AND FINALLY...
Wyoming’s surreal energy landscape

Cipher reader Jared Cherni snapped this photo of the coal-burning Dave Johnson Power Station on the right and wind projects near Glenrock, Wyoming on the left (look closely!). Cherni says driving around this part of the state is surreal; you can see trains hauling coal, oil and gas pump jacks, solar facilities and more wind turbines than you can imagine.

Each week, we feature a photo that is somehow related to energy, the thing we all need but don’t notice until it’s expensive or gone. Email your ideas and photos to news@ciphernews.com.

Editor’s note: In addition to supporting Cipher, Breakthrough Energy also supports and partners with a range of entities working to tackle climate change, including nonprofits, corporations, startups and research firms. For more information on Cipher’s editorial policy, click here.