Enhancing the significance of a groundbreaking government clean energy investment programme

Enhancing the Significance of A Groundbreaking Government Clean Energy Investment Program

The roughly $500 billion in renewable energy investments outlined in the Infrastructure Investment and Jobs Act and Inflation Reduction Act represent a significant first step toward achieving the United States’ climate goals. Analysts are now wondering, “How can we guarantee the most effective use of these funds?”

One urgent issue that has been addressed is the need for new regulations on permits. We argue, however, that a wider range of policy initiatives is required, the sequencing of which is crucial to catalyze the speed and scale of deployment necessary to reach net-zero emissions by 2050. We call this strategy method of identifying and prioritizing this broader range of actions “reverse-engineering.”

Through reverse engineering, developers can gain insight into the outcomes of predicted energy situations. Mid-century net-zero goals can be accomplished by several scenarios, such as the installation of 3–4 terawatts of solar and wind power or the production of 100 million tonnes of clean hydrogen annually. From these degrees of full-scale deployment, reverse engineering can pinpoint the most pressing bottlenecks, sources of friction, and unknowns that could drive cautious developers to postpone making investments that keep up with the model’s predicted future state.

Enhancing the significance of a groundbreaking government clean energy investment programme

To illustrate, we think about how a developer might evaluate a scenario where 1 billion tonnes per year of carbon capture and storage (CCS) is delivered in the United States by 2050, as indicated by a middle-of-the-road scenario in Princeton’s “Net-Zero America” study as likely being required to achieve economy-wide net-zero emissions.

The level of coordination required to reach this objective is an immediate concern; CO2 must be transferred from thousands of point sources around the country to areas where it may be safely stored underground. This poses a catch-22, as industrial and bioenergy facility owners are hesitant to invest in CO2 capture unless they are assured of reliable, low-cost CO2 transit and storage options in the future. In many cases, this trust will need to be backed up by a third-party agreement to assume complete responsibility for the CO2 throughout the economic life of the capture project and for a specified time afterward. CO2 storage businesses are similarly hesitant to spend money developing commercial capacity unless they are certain of a reliable supply of the gas at a price that would generate an adequate return on their investment. Meanwhile, those who work on constructing pipelines find themselves in the midst.

Who Goes First?

Inverse engineering reveals that this chicken-or-egg conundrum is a major roadblock to achieving the aforementioned CCS goal. A project investment choice cannot be made by CO2 capture developers without dependable access to CO2 transit and storage, regardless of how advantageous the permitting reforms may be.

Enhancing the significance of a groundbreaking government clean energy investment programme

To overcome this challenge, we suggest prioritizing CO2 storage and transport in public investments in CCS before 2030. This includes, but is not limited to, storage characterization (i.e. technical work that facilitates high-quality, development-ready storage sites) and national trunk pipeline development. Policy support from state and local governments can come in the form of, among other things, the clarification of subsurface pore-space rights; the authorization of key right-of-ways; the facilitation of consensus-building and land-owner access negotiations with local communities; and the provision of matching funds and supportive financing for priority projects (e.g., CO2 storage hubs). All of these government-wide initiatives working together can pave the way for a rapid increase in the number of CO2 capture plants, the vast majority of which would enter service after 2030.

The more ambitious 45Q carbon sequestration tax credit secured by the Inflation Reduction Act, therefore, necessitates augmentation. Despite the significance of the increased credit worth, it is highly doubtful that this will prompt the near-term pre-commercial expenditures in storage characterization and pipeline construction that are essential to accelerating the objective of 1 billion tonnes of CCS per year by 2050. Because 45Q financially benefits projects while CO2 is sequestered underground. To realize a CCS objective on a big scale, it is anticipated that new initiatives geared toward the aforementioned pre-commercial operations will be required.

Enhancing the significance of a groundbreaking government clean energy investment programme

It should be obvious that this line of reasoning can be widely utilized to guide policy, particularly in the service of achieving lofty objectives in the distribution of renewable energy, energy storage, and clean fuels. Reverse engineering is a solution to a problem with existing policy analysis tools by including private developer decision-making. For instance, analysts frequently use least-cost optimizing models, which materialize many projects with a single command (e.g., a new utility-scale solar farm [first project] connected to ready transmission [second] and the electricity grid [third]). In reality, risk-averse developers are much more cautious in their decision to execute projects due to uncertainty around a wide range of variables. These include future technology costs and performance, the durability of policies, the timing of interdependent capacity, offtake volumes and prices, supply chain constraints, litigation threats, public acceptance of the project or technology, and more. With the help of reverse engineering, we can identify the factors that will affect the rate and depth of decarbonization in the actual world, and use that knowledge to guide policy and investment decisions.

Energy Secretary Jennifer Granholm has said that in order to meet climate change goals set for 2030 and 2050, the United States needs “deploy, deploy, deploy” new clean energy projects and infrastructure. We feel the same way about this. To make the most of available resources, we recommend that analysts pay close attention to the specifics of developer decision-making processes.

Currently, Chris Greig occupies the role of Theodora D. senior research scientist at Princeton University’s Andlinger Center for Energy and the Environment since 1978 along with William H. Walton III, who earned his undergraduate degree in 1974.

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Sam Uden leads Conservation Strategy Group, LLC as its director of climate and energy policy. Robert Socolow is a retired professor from Princeton University’s Mechanical and Aerospace Engineering Department.

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