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Carbon credits could soon help fund distributed clean…


Canary Media’s Down to the Wire column tackles the more complicated challenges of decarbonizing our energy systems.

McGee Young, CEO of WattCarbon, believes he has a solution to two tricky climate challenges. Challenge No. 1: Carbon-offset markets are filled with dubious or allegedly fraudulent projects that don’t really reduce carbon emissions. Challenge No. 2: More investment is needed in distributed clean energy projects.

The answer? Create a new class of carbon offsets that fund investments to cut carbon emissions across hundreds or thousands of sites — and make this new offset market a model of transparency. 

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After all, why shouldn’t corporations be able to earn carbon-cutting credit for investments that help replace hundreds of residential fossil-gas furnaces with electric heat pumps? What about investments in helping homes and businesses avoid using electricity when fossil-fueled power makes up most of the grid mix, or building community solar projects in places with the heaviest reliance on fossil-fueled generation? 

These kinds of distributed-energy investments are not part of today’s multibillion-dollar voluntary carbon-offset markets. But Young thinks they’re a much better option than, say, putting money into forest-conservation projects that don’t actually conserve forests, or into utility-scale wind and solar projects that have already been built or likely would have been built without the extra cash — two of the more common, and more problematic, types of offsets that corporate giants buy today in order to claim they’re making progress toward net-zero goals. 

Residential and commercial buildings account for roughly 40 percent of U.S. carbon emissions, both from the fossil fuels they burn for heating, cooking and other purposes, and from the carbon emissions associated with the electricity they use. That means they should be a massive target for carbon-cutting investments, Young said. How do we do that? I think we do it by turning buildings into decarbonization assets.” 

In January, WattCarbon raised $4.5 million from venture investors to bring this new concept for a carbon-credit market to the next stage of development. Over the coming months, the company hopes to sign up the first corporate buyers for what it’s calling clean energy credits,” Young said. 

Initial partner companies planning to offer investment opportunities in the market include community-solar and renewable-energy developer Pivot Energy, demand-response aggregator Leap, home-electrification startup Elephant Energy and energy retailer Branch Energy. These companies are putting portfolios of projects into our marketplace,” Young said. You can buy 15 hours of demand response from Leap, or the RECs [renewable energy certificates] from a community solar project in the Midwest, or for heat-pump projects in Colorado.” 

None of the projects that will appear on the marketplace have been built yet, and only those that need additional investment to move forward will be listed, he said. That assures that the investments provide additionality” — a key term in the world of carbon offsets and renewable energy that means projects wouldn’t have happened without the investment. In other words, they’re adding new carbon-cutting value. 

In return, investors will receive credits for future carbon-emission reductions from these projects, Young said. Replacing a gas furnace with an electric heat pump eliminates emissions from burning gas and replaces them with a smaller amount of emissions from the electricity used by the heat pump, for example. A community solar project replaces grid power of varying carbon intensities with carbon-free solar power, and a demand-response company’s dispatch signal for customers to reduce electricity use also reduces their share of the emissions of the generation fleet that’s providing electricity to the grid during the hours of reduction. 

WattCarbon’s marketplace is a novel concept that pushes the boundaries of how carbon offsets are accounted for today. Its clean-energy credits could potentially be converted into carbon-offset equivalents for voluntary carbon accounting or adapted to future iterations of accounting for renewable energy certificates. 

It’s unclear whether the entities that operate the world’s existing carbon-offset markets, both the compliance-based markets and the voluntary ones, will embrace WattCarbon’s credits. In the compliance markets, the methodologies for measuring just how clean or dirty a kilowatt-hour of electricity consumption is at a particular place and time on the power grid are still being developed by government and private-sector consortiums. 

But unlike in the opaque and increasingly suspect universe of voluntary carbon offsets traded today, anyone who wants to know how WattCarbon and its partners are calculating their carbon-cutting impact can delve into the data and methodology behind the marketplace, he said. 

We call this the world’s first open-source decarbonization program,” Young said. In a world of sketchy carbon offsets, we want to provide the good-faith path.” 

The data science behind calculating carbon impacts at the building level

Young has spent much of the past decade working on technology to bring clarity and transparency to the tricky data and methodological challenges associated with measuring the real-world impacts of changing energy use. 

As CTO at Recurve (formerly OpenEE) from 2019 to 2021, Young helped lead the development of the first open-source software to use smart-meter data to calculate avoided energy use,” or energy saved through efficiency and electrification investments, specific to a place and time. That measurement-and-verification methodology has become the basis of pay-for-performance” efficiency programs such as California’s Market Access program and similar ones in Massachusetts, New York and Oregon. 

Young founded WattCarbon in August 2021 to put this experience to work measuring the hourly carbon-emissions footprint of buildings — data it now makes available for individual addresses across the country.

A screenshot of WattCarbon's power supply carbon emissions tracker
WattCarbon’s software tracks carbon emissions across U.S. power grids and cross-references them with building energy consumption data to yield carbon footprint data sets down to individual addresses. (WattCarbon)

Buildings’ emissions can be reduced by investing in energy efficiency, shifting the time of power use, replacing fossil-fueled heating with electric heat pumps, putting solar panels on roofs or nearby properties, and buying clean power from another source, to name some key options. 

Today, companies that have made carbon-cutting pledges can make progress toward them by reducing carbon emissions at the buildings they own, but they have no such opportunities at buildings they don’t own. Young sees this as an artificial barrier to companies making investments in some of the most effective technologies for cutting emissions. 

Shifting buildings from fossil fuels to (cleaner) electricity

Building-electrification projects will be one type of carbon offset available on WattCarbon’s market, with the aim of eliminating fossil fuels from buildings, especially for heating. These are the kinds of projects that Colorado-based home-electrification startup Elephant Energy is planning to offer up to offset buyers.

WattCarbon is the first one who’s approached us about how could we collectively monetize the decarbonization benefits of the assets” Elephant Energy is deploying in homes, said D.R. Richardson, Elephant’s CEO. It’s an attractive concept, but it comes with a lot of complications. 

It’s really hard to measure the additionality of something like a heat-pump carbon credit,” he said, mainly because of the uncertainty of the variables involved. How much gas would a home’s furnace have burned over the next decade if it hadn’t been replaced with a heat pump? How should the carbon-intensity of the electricity powering the heat pump that replaces it be measured? 

But at the end of the day, I am a believer in Don’t let the perfect be the enemy of the good,’” Richardson said. Corporate investments in the carbon-cutting potential of Elephant Energy’s portfolio of future home-electrification projects could allow the company to reduce the cost of switching out furnaces for heat pumps and make it more affordable for a wider group of homeowners, he noted. We’ll use every tool we have to drive that price down, to grow our business, and more importantly, to enable a clean energy transition.” 

Similar opportunities and complications apply to another of WattCarbon’s offset categories: demand response. Today, the value of reducing energy use during certain hours of the day is based on shifting demand away from times when grid power is scarce and costly. In some parts of the country, those correspond to times when more fossil-fueled power plants are running than usual — but that’s not always the case. 

No U.S. grid operator or utility has yet put a price on the carbon-intensity of the power exchanged over the wires they manage, said Doug Middleton, head of business development at demand-response aggregator Leap. But there’s a growing body of analysis that indicates that the demand flexibility” provided by companies like Leap can shift a significant amount of load away from the grid’s most carbon-intensive hours of operation. Those are the kinds of offset opportunities that Leap will be offering on WattCarbon’s marketplace. 

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