ESG & Industry Updates

This June, Eversource broke ground on a new pilot program for Geothermal energy in Framingham, Massachusetts. This is the first utility scale networked geothermal network in the country, so it’s pretty exciting stuff.

The pilot program will encompass an estimated 40 homes, apartment complexes, businesses and even a fire station. The program will test if a networked geothermal system is able to meet the heating & cooling demands of grid users in a cost effective and reliable way.

Geothermal systems use water, wells, piping, and pumps to pull heat up in the winter and pump heat down through the same ground bores in the summer to cool the same structures. This is zero-emission technology that uses no fossil fuels to run. The infrastructure for geothermal setups is not insignificant, it involves boring deep holes in the earth to construct pump systems that tap into the warmer earth well below the surface. So despite being self-contained and not requiring fuel (and its associated costs) over lifetime use, geothermal is not a cheap source of energy in terms of upfront cost because of the engineering and drilling construction involved.

It is also somewhat location dependent – some areas are not particularly suitable, and even in areas that are suitable, the construction requires relatively substantial land available for drilling and building. This is part of what is exciting about the Framingham project – if geothermal, which is typically thought of as a more rural based option, is able to be networked such that it can handle the energy needs of a more urban area, that potentially opens up new avenues for projects overtime to move MA toward its clean energy goals.

The video below is from Eversource about how networked geothermal networks like the one being launched in Framingham work. It’s a very helpful, short overview.

You can read more about their project information at this link as well: Eversource - Framingham Geothermal Pilot Program

As we have been discussing, the US National Blueprint for Transportation Decarbonization breaks the Transportation sector into seven categories, each of which has its own targets for emission reduction/elimination, and strategies for how those declines in emissions will be achieved. The next category addressed in the Blueprint by emissions % is the Maritime Sector.

The Maritime sector includes domestic, international, and recreational vessels under its umbrella. All in, there are an estimated 12 million privately owned recreational vessels, and 38 thousand commercial vessels including ferries, tugboats, container ships, etc.

About 20% of emissions in the sector come from recreational vessels, which primarily use gasoline. Domestic shipping and International shipping both contribute around 30% of the emissions share each. This segment primarily runs on diesel, with some percentage coming from heavier residual oils in large international vessels.

An important factor in emissions calculation for the Maritime sector, as well as for how effective efforts to curb them will be is the fact that its very difficult to get exact numbers on emissions given the complicated nature of international vessel traffic and fueling. Additionally, international vessels (including those flagged under the US) fuel up across the globe, often in areas that may not have the same options for less carbon intensive fuels.

The maritime sector, given its multinational presence, will require huge amounts of cooperation and agreement across nations in order to address the sector as a whole. Coordination amongst port owners, vessel operators and local and international governments will be pivotal to success. Part of this process thus far is the DOE “Mission Innovation Zero-Emission Shipping Mission” which aims to ensure that at least 10 ports on 3 continents can supply zero-emission fuel by 2030, and that 5%+ of the global fleet runs on those zero-emission fuels.

Ports are a huge factor in decarbonizing the sector, and international cooperation will be critical to movement forward.

The global nature of the maritime sector is a huge segment needing to be addressed as relates to Environmental Justice concerns, as well. Port communities in some areas are now and have historically been made up of disadvantaged groups that disproportionately bear the brunt of poor air quality and pollution sometimes caused by the industry. Resolving the emissions and pollution issues around port cities globally will need to be part of the long-term strategy on climate.

A major hurdle in addition to the global nature of vessel transport, is the long lifecycle of maritime equipment. When we think of upgrades in technology and emissions regulation adoption, we typically picture cars and trucks – both of whom have a much much shorter lifecycle than maritime vessels. The usual turnover time for large marine vessels is upwards of 30 years, and the cost associated with new vessels can be staggering. All of which is to say that advances likely won’t have substantial impacts in the near term unless they work with existing fuel types and refuel patterns.

Areas of focus include sustainable liquid/gas fuels that are drop-in replacements for the existing fossil fuels being used. This option is likely the most viable interim option, given the long lifetime cycle of the vessels and the existing port infrastructure that keeps them fueled and moving. On smaller boats, there are options for electrification that may or may not prove viable over time but again, where recreational/small vessels are not the major offenders, the offset by this solution seem minimal.

Two interesting and seemingly easily adoptable options for overall reduction in emissions appear to be the following

• Cold Ironing – this is essentially “plugging in” or running large vessels off electricity during their time in port to offset emissions, particularly those that harm the immediate port city environment.
• Exhaust Treatment and Carbon Capture – there is an idea that post exhaust emissions from vessels could be treated and neutralized (sort of like a reverse DEF process) to mitigate the ultimate CO2 impact. Logistically there seems to be some issues with how exactly the process would work, and what the options for storage and disposal would be in a marine environment.

Much like the other sectors we have discussed, investment in infrastructure will be a huge critical piece of the puzzle. Part of the underlying requirements for success of new regulations is that people are able to access the things that make complying with them possible, whether that is a fuel type or charging station, etc. In the Maritime sector this is more complicated, as discussed. There are however, options being made available through the Inflation Reduction Act (funding for ports to purchase zero-emission equipment, resources for climate planning), and the Port Infrastructure Development Program (grants for terminal infrastructure improvements).

Independent research organization Climate Central published a report recently that showed how the national capacity for solar and wind generated power shot up in 2022. The report comes just as the Biden Administration begins rolling out billions of dollars to renewable energy projects as part of its commitment to decarbonizing the grid completely by 2030 and getting the US to net zero emission by 2050.

Here are some of the key points from the report:

• The US generated over 680K of electricity from solar & wind (combined) in 2022, which equates out to about $82 billion of revenue generation. 
• Solar & Wind capacity increased by 16% year over year from 2021 - that's enough of an increase to cover the electricity generation needs of approximately 64 million American homes. 
• Texas, Oklahoma, and Iowa let the nation in wind production
• A myriad of State incentives helped encourage different states to up production, including a California's mandate on solar panels for new buildings, Iowa's tax credits for wind generation, etc. 
• Larger States had more impressive gains than smaller, more densely populated ones. Smaller, more dense areas are less able to take advantage of space for larger scale generation projects - a good example of this is the growth we see in Texas or Iowa versus New England States, which haven't made similar gains despite also having incentives. 

We wrote an article for Oil & Energy Magazine that goes further into the points, the holdups to progress on renewables, and what the future looks like it might hold. If you are interested, you can read that article in its entirety here: Solar and Wind Growth Soars in 2022

In recent political cycles, we’ve heard a lot of talk about Rail transport in the United States. Most of that talk has been in the context of the US needing more rail accessibility, so it may surprise some to discover that the United States actually has the largest rail network in the world. The catch is, this network is used primarily for freight, not passenger transport, and generally when we speak about rail (at least in politics and on the news), we mean for passengers. Freight made up 91% of all rail-use energy in 2019, so we almost exclusively use it for freight transport, in fact.

Rail accounts for 28% of freight transport by ton-miles, but only resulted in 2% of total transportation emissions. So, given that rail is astonishingly more efficient than both trucking and single vehicle passenger transport (cars), part of the focus on rail is an effort to expand its accessibility, particularly on the passenger side. This would have a two-fold impact on emissions because we would see both an increase in utilization of a lower emission intensive mode of transport, and a simultaneous impact on decreasing traffic related emissions from more intensive transport methods.

Freight rail transport in the US uses diesel locomotive engines almost exclusively, where passenger rail has a mix of diesel and electric. Most intercity transport is diesel, where some light rail and streetcar transport is electrified (think Commuter Rail versus Green Line MBTA lines). Full electrification looks like a near impossible hurdle for US freight transport, because of both the long distances and low traffic levels on most rail lines. Additionally, the current electrification modes in use like overhead lines, or third rails are obviously not at all conducive to long rail lines – emission reductions in this segment would most likely have to come from renewable fuels, hybridization, or new technologies. However, electrification of commuter lines may offer an avenue for further sector emission reductions.

The goals and steps outlined by the Federal Government in the Transportation Blueprint for rail include:

• Infrastructure Investment: electric locomotives and electrification corridors investment, as well as investment in facilitating the availability of clean/renewable fuels.
• Multi-stakeholder Collaboration: enhanced partnerships amongst those in government and industry with a vested interest, in order to accelerate the pace of technology development, adaptation, and accessibility.
• Research & Innovation: investment in research to determine the best and most viable strategies for decarbonization of the sector, particularly through the use of pilot programs to optimize the gathering of real-world data and allow accurate analysis of all the vehicle and environment factors involved to accelerate development in the best clean technologies.

Again, as with the other segments being discussed, a successful pivot away from primarily diesel based rail transport in the United States would have longer term impacts on the market in terms of supply & delivery demands for diesel fuel and associated lubricants.

Something to keep in mind, and that we will keep an eye on as the process continues.

As we have been discussing, the US National Blueprint for Transportation Decarbonization breaks the Transportation sector into seven categories, each of which has its own targets for emission reduction/elimination, and strategies for how those declines in emissions will be achieved. The next category addressed in the Blueprint by emissions % is Off-Road Vehicles and Mobile Equipment.

The Off-Road Vehicles and Mobil Equipment segment includes a LOT, from heavy mine drilling equipment and excavators to dirt bikes and lawn mowers. The off-road segment is accountable for approximately 10% of emissions, but where 79% of the segment uses diesel, the changes that would be applicable to the medium and heavy duty (on road) sector would carry over fairly cleanly to the off-road sector, which is why they make sense to address in tandem. We saw a similar approach to this with the transition to ultra low sulfur diesel – the initial priority was on road vehicles, as they are more uniform in fuel technology requirements and also contribute more on emissions. Once the tech is there for on-road, its fairly simple to adopt it down into the off-road sector for diesel fueled equipment.

However, the caveat to the “ease” of transferring the technology is that unlike on road equipment, most off road equipment is multi functional – i.e. a combine harvester both needs to be propelled forward, and work at threshing or harvesting the area it works through simultaneously. That is a lot more difficult equation to account for in terms of optimizing power in a sustainable way than say accounting for a simple weight times distance on-road vehicle requirement. It is likely that the solution on heavier off-road equipment will involve some hybridization to offset emissions, more so than other segments will ultimately see in the final picture.

There is however, a lot of variance within the off road segment and some portions of the market will be a lot less demanding in terms of ability to pivot toward more renewable power. The segment breaks out as follows in order of energy use:

• Construction & Mining Equipment – 36%
• Industrial Equipment – 23%
• Agricultural Equipment – 21%
• Lawn & Garden Equipment – 15%
• Recreational Vehicles – 4%

The smallest two segments (lawn & garden equipment, and recreational vehicles) should be the easiest to pivot, at least in theory, as they are more easily moved to EV power. We are already seeing this in the consumer level equipment for lawn care, etc. The hurdles for larger scale adoption on landscaping equipment is mainly power and length of run issues with electric power. Equipment needs to be reliable through the entire job. The hurdle on the recreational vehicle segment is largely performance and preference related. Like it or not, an electric dirt bike isn’t very appealing, and an electric snow mobile seems like a non starter given both the conditions the battery would be anticipated to perform in, as well as the potential for being stranded in the event of a drained battery.

The stated goals of the Blueprint on this segment are:

“Increase Targeted research and innovation efforts” – this involves both understanding the depth and breadth of off road equipment and its functional goals, and developing targets for battery and fuel cell technology based on understanding more about the performance levels required.

“Implement Policy and Regulations” – as mentioned earlier, off-road regulations and standards generally seem to mirror the standards on on-road vehicles to a large degree. It’s likely safe to assume that what we start to see come out regarding trucks and busses will eventually be applicable to your off road equipment in terms of fuel and emissions requirements.

“Invest in strategic demonstration” for this segment, this portion of the plan is essentially a doubling down on the focus in the on road vehicle portion, which is to say it focuses heavily on infrastructure for EV charging and availability of technology to coincide with regulatory requirements. It goes without saying that clearly the infrastructure for on road EV would be essentially useless for most off-road applications, given sheer geographic factors. Clearly then, they are also looking at options outside what we typically picture as the EV charging network options, but it isn’t clear yet what that might look like. There is an acknowledgement in the blueprint that hydrogen fuel and renewable diesel options may be necessary for the foreseeable future because of the logistical difficulties with both continuously operational off road equipment, and the tendency of much of the sector to be remote, rural, and/or difficult to access.

There is less clarity in this section of the blueprint, as it hasn’t been a major focus of the push to EV and renewable energy as much in recent years as have on road vehicles. We will have to keep watch on this in terms of presumably forthcoming EPA guidance and proposed regulations on the off road equipment markets.

As we have been discussing, the US National Blueprint for Transportation Decarbonization breaks the Transportation sector into seven categories, each of which has its own targets for emission reduction/elimination, and strategies for how those declines in emissions will be achieved. The second segment by emission % is Medium- and Heavy-Duty Vehicles.

For the purposes of the Decarbonization Blueprint, “Medium and Heavy Duty On-Road Trucks and Buses” includes everything from heavy-duty pickup trucks to long haul semi’s (and everything in between). MHDV make up approximately 5% of vehicles, but they are responsible for 21% of transportation emissions. A further 50% of those emissions are from heavy duty trucks that make up about 10% of the total MHDV category. So when we are talking about this category’s emissions, most of the effective action that can be taken should be focused on a small segment of the total. The other simultaneous focus for MHDV category is the social and environmental justice issue. Where the emissions from light duty vehicles are more ubiquitous, the emissions from MHDV are often concentrated in major urban areas and along disadvantaged corridors within the country.

In terms of the numbers, 81% of the MHDV segment is diesel powered, and unlike light duty vehicles, there is not really a clear ability to easily pivot to EV or hydrogen options (outside of potentially in some of the lighter vehicles that run smaller ranges without heavy freight – like postal trucks). So the suite of zero emission options for the MHDV segment will necessarily be more varied than LDV or other segments where there is less variation in use and function for the vehicles in question. That means a LOT of research & development. Additionally, turnover and replacement timelines for heavy duty vehicles are substantially longer than those for light vehicles, so all the proposed new changes would end up slow rolling out on newer vehicles over time. This is where renewable diesel options will likely become a key factor in pushing MHDV toward hitting emissions goals.

In November of 2022, the US joined the “Global Memorandum of Understanding on Zero Emission Medium- and Heavy-Duty Vehicles” introduced at COP26 which agrees that we will be on a path to 100% new zero-emission MHDV by 2040 at the latest, with a target of 30% by 2030. In January 2023, the EPA announced their “Final Rule and Related Materials for Control of Air Pollution from New Motor Vehicles: Heavy Duty Engine and Vehicle Standards” that sets new emission standards for HD vehicles in line with the Decarbonization plan (you can read that EPA rule here: Control of Air Pollution From New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards )

All of this to say that despite the lack of current technology with which to make the changes required to hit emissions targets, it appears all the rules and regulations coming out across Federal Agencies are intending to follow through on the goals set. This portion of the policy obviously carries serious implications for trucking and transportation companies across the board in terms of their equipment purchasing, maintenance of current options, etc. This is definitely a portion of the plan that is still very much unsettled in terms of immediate and longer range impacts. We will keep a close eye on developments and continue to keep you informed of major changes that impact the industry.

The US National Blueprint for Transportation Decarbonization splits the Transportation sector into seven categories of focus: Light-Duty Vehicles, Medium- and Heavy-Duty Vehicles, Off-Road, Rail, Maritime, Aviation, and Pipelines. We will discuss the major items involved in each of these, from largest % of carbon share to least, starting with Light Duty Vehicles.

Light-Duty Vehicles produce 49% of current transportation emissions (of note, for the purposes of the Blueprint “current” refers to 2019 levels due to the pandemic and related shutdowns making 2020 & 2021 data unreliable/useless).

The United States has over 280 million light duty vehicles on the road and these vehicles:

• Account for 75% of passenger transport miles,
• Account for 50% of total transportation energy use and emissions
• Consume over 120 billion gallons of gasoline annually
• Emit over 1,000 MMT CO2 annually

As we are all aware, Light Duty Vehicles (LDV) in the US have been subject to increasingly strict emissions requirements over the past few decades, and we have seen a massive increase in the availability of electric vehicles (EV) as well. To put specific numbers on it, in the past 15 years, LDVs have seen a 30% improvement in fuel economy (some of the ultimate impact of this however was mitigated by the trend toward larger, more fuel intensive passenger vehicles during that time period). EV have seen an explosion in popularity, it used to be you’d see a Prius or Volt here or there, now you would be hard pressed to drive to Boston without getting stuck behind a Tesla or two. Again, in terms of specific numbers, EV sales reached over half a million vehicles sold, bringing the total to 4.5% of market share in 2021 (18% in California!).

One of the major focuses of the blueprint in the LDV sector is the promotion of EV and zero emission vehicles, with an obvious preference for EV adoption. In tandem with EV adoption, there is a necessary push for charging infrastructure to make them a more feasible option for consumers. The goal is to have 50% new light duty EV sales by 2030, which would be a major step down the road to the ultimate goal of 100% EV adoption.

There is also an included focus on “Funding Research and Innovation” in this section of the Blueprint, which largely functions as an acknowledgement that we aren’t quite there on battery life and battery cost. Part of the legislative language in the Bipartisan Infrastructure Bill (BIL) and Inflation Reduction Act (IRA) included large investments toward the development of a reliable EV manufacturing supply chain. The legislation also references research and development aimed at achieving price parity between EV and traditional combustion engine vehicles to make them more accessible to the average consumer in terms of price, practicality, and maintenance costs over time. Studies indicate that battery cost has dropped 90% from 2010 to 2020, and projections indicate that when the price reaches $100/kwh the MSRP on EV will hit parity with combustion engine vehicles. The legislation mentioned above intends to fund the research on battery technology to make those price levels reality.

So that is the overview, the major takeaways being that the major goals for this section are:

• “Achieve 50% of new vehicle sales being zero-emission by 2030, supporting a pathway for full adoption, and ensure that new internal combustion engines are as efficient as possible.”
• “Deploy 500,000 EV chargers by 2030”
• “Ensure 100% of Federal Fleet procurement be zero-emission by 2027”

Obviously, for the purposes of energy suppliers, particularly at the consumer level, the growth of EV adoption implies a longer-term shift in the mix of gasoline demand and delivery, especially to stations and municipalities. Actual changes in market share of EV and zero-emission vehicles is something to watch.

Next up, medium- and heavy-duty trucks and buses.

Stay Tuned!

January 10^th, 2023 the Biden Administration released the US National Blueprint for Transportation Decarbonization.

The Blueprint is an interagency developed framework of strategies and actions to take carbon emissions out of the Transportation sector by 2050, developed by the Department of Energy (DOE), the Department of Transportation (DOT), Housing and Urban Development (HUD), and the Environmental Protection Agency (EPA). It’s the conclusion essentially of the memorandum of understanding (MOU) between those departments that they would develop the outline to drive policy decisions and regulatory updates focused on the goal of decarbonization in the sector through 2050 in a cooperative manner between federal agencies.

Another way to think about it is the blueprint is basically what the plan is for implementing actions for the investments created by the Bipartisan Infrastructure Law (BIL) from November 2022, and the Inflation Reduction Act (IRA) from August 2022. These bills established billions in funding for infrastructure and outlined aggressive action on climate change (respectively). The blueprint developed is part of the process for allocating where investment and change happens to push the country toward the enormous mitigations in emissions that the BIL and IRA legislation attempted to make possible.

As we’ve discussed previously, the Transportation sector is the nations largest source of greenhouse gas, and accounts for a third of all domestic GHG emissions, so emissions mitigation/elimination across this sector is obviously a goal in the context of Climate Change. The blueprint additionally sought to develop action plans for the sector with environmental justice in mind – the concentration of emissions and negative impacts from the transportation sector have historically been concentrated in low income, urban, and minority areas of the country and that is an additional factor that needs to be addressed.

The strategies in the blueprint are aimed at ensuring the US hits both the President’s stated commitments on emissions reduction, and the US Nationally Determined Contribution under the Paris Agreement. In order to hit both 2030 targets and 2050 goals, there is a mix of short- and long-term recommendations.

The report specifically seeks to

1. “Increase convenience by Implementing System Level and Design Solutions”
2. “Improve Efficiency through mode shift and More Efficient Vehicles”
3. “Transition to Clean Options by Deploying Zero-Emission Vehicles and Fuels”

The method for doing so is split into strategies, goals, and action plans by transportation subset (or mode). They are:

1. Light-Duty Vehicles (49% of current emissions)
2. Medium- and Heavy-Duty On-Road Trucks and Buses (21% of current emissions)
3. Off-Road Vehicles and Mobile Equipment (10% of current emissions)
4. Rail (2% of current emissions)
5. Maritime Vessels (3% of current emissions)
6. Aviation (11% of current emissions)
7. Pipelines (4% of current emissions)

We will go through each mode individually, and highlight what we think the important takeaways are for each in terms of what things may impact energy suppliers either directly or via end users (customers) over the upcoming weeks.

Definitely a topic to keep an eye on, because if the U.S. intends to hit the lofty goals on emissions reduction it set itself, there will likely need to be some big big changes out there in the market.

Stay tuned!

Another avenue being looked into for decarbonization in the US is hydrogen blending. Hydrogen blending would use existing natural gas infrastructure for transport, which obviously makes it very appealing from an infrastructure & logistics standpoint as the majority would already be in place.

However, it isn’t clear exactly what impacts hydrogen might have on said infrastructure, and if it would behave similarly to pure natural gas, or we would see issues with pipeline degradation or operational risks like leaks. California is looking into the issue thoroughly.

The “Hydrogen Impacts Study” commissioned by the CPUC (California Public Utilities Commission) published its results on hydrogen blending impacts in July. The study found that:

• Hydrogen blends of up to 5% in the natural gas stream are generally safe, but higher blends result in a greater chance of pipeline leaks and embrittlement of steel pipes.
• Blends of above 5% would require modification of existing appliances to avoid malfunctions, and blends of more than 20% would raise the risk of plastic pipe leaks and subsequent ignition of gas outside the pipeline
• Due to the lower energy content of hydrogen, more hydrogen-blended natural gas would need to be supplied to consumers to deliver the same amount of energy that they currently use with pure natural gas.

The study concluded that real world demonstrations will be necessary to determine safe levels, and ensure that risks like ignition are eliminated. Southern California Gas, San Diego Gas & Electric, and Southwest Gas filed a joint application with CPUC to implement demonstration projects. The projects seek to use a phased up approach to determine safe levels and assess if hydrogen blending is a feasible next step towards decarbonization for California.

I wrote an article for Oil & Energy Magazine last month on Hydrogen Blended Natural Gas and the projects in California. If you would like to read more details on the blending and the pilot demonstration programs you can read that article in its entirety here: Study on 'Hydrogen Blending Impacts' Reveals Potential Obstacles

In August of this year, Massachusetts Governor Charlie Baker signed into law House Bill 5060 “An Act Driving Clean Energy and Offshore Wind” into law

A controversial part of the bill was a provision allowing for a pilot program of 10 cities and towns to require all new building projects to be electric (with the exception of hospitals and labs). The Boston City Council in September voted to become one of those cities, after the proposal was introduced by Mayor Wu.

How the provision works is it would allow individual cities to develop local ordinances preventing new building projects (or large scale renovation/rehab projects) from using fossil fuels and enforce those ordinances by denying permits. (As an aside, you may remember that Brookline MA, one of the ten pilot cities, one night at a town meeting voted to ban oil and gas infrastructure in town in 2019 – a provision that was ultimately struck down. Essentially, the policy Brookline attempted to enact in 2019 is in some ways the blueprint for how the ordinances in the new pilot program work.)

It's unclear whether Boston will be allowed to join the program, as there are already 10 slated participants (Acton, Aquinnah, Arlington, Brookline, Cambridge, Concord, Lexington, Lincoln, Newton and West Tisbury). Conceptually, cities and towns that are not the size and population of Boston would seem to be a better fit for a pilot program of any kind – it is possible they will get approved however, because a requirement of participation is that the town meet the States 10% affordable housing target, and West Tisbury looks like it will fall short.

Speaking of affordable housing, one of the main concerns around the pilot program is that it would drive up costs for construction and extend timelines for building (particularly as multifamily dwellings are non exempt from the ordinances) which could further exacerbate Boston’s existing housing crisis, as well as continue to push lower SES community members out of the City, something that has already picked up steam post pandemic. The other half of that coin is serious reservations about the impact to union jobs in the program cities, particularly for pipefitters. 

On the other hand, 70% of Boston’s carbon emissions are from buildings, according to the City’s latest Climate Action Report, so in that sense going right to the source makes sense on some level.

I wrote an article for Oil & Energy Magazine that goes into more detail on the bill and its support/objections. You can read that article in its entirety here: Boston Seeks to Ban Fossil Fuels in New Buildings