Fusion energy and thermal networks, plus some company reporting fundamentals

I started Decarb Diary as a place to publicly capture and share what I learn as I enter into a rapid immersion in climate, energy, decarbonisation, etc, over a 3-6 month period to find the most painful problems that I have the skills to help solve. Ultimately I hope this will lead to starting a globally scalable business that will have real impact in the world. Learn more here.

After 6 weeks of school holidays and everyone home, I've finally been able to get back into it without interruption.

Key Insights and Takeaways:

• This is somewhat a part 2 of a previous edition where I covered other basics like what net zero is, the 1.5C target, the GHG Protocol, how emissions are measured, what scopes 1, 2 and 3 are, and the UN SDGs.
• This week I focused more on some of the basics around company reporting - accounting, targets, regulating and risk... so it's a little dryer than usual. One thing to note though is just how complex this whole area is, I feel that learning this to a point of being fluent would be almost equivalent to getting a degree.
• The GHG Protocol is the standard that underpins GHG accounting, which itself is the basis for how organisations develop their GHG inventory, and ultimately measure and report emissions.
• The basic steps of GHG accounting is to work out which company operations are included, identifying emissions within scope 1, 2 an 3, work out which year you're going to set as a base, then collect data and calculate and report emissions.
• Science-Based Target (SBTs) is one of the main frameworks to help organisations set specific, measurable short-term and long-term goals.
• Australia's mandatory climate reporting came into effect on 1 Jan 2025 with a phased roll-out over 3 years for large companies. SMEs will be indirectly effected as large companies are now mandated to reduce emissions from their supply chains.
• Climate risk remains a significantly growing issue for businesses - businesses that don't adapt could lose up to an average of 7% of earnings by 2035, 20% for the most exposed industries.
• 2024 was a 'Triple COP' year' - climate COP, biodiversity COP and desertification COP.
• While fusion energy won't be ready for at least probably 10 years, it continues to make breakthroughs.
• Thermal Energy Networks are an emerging opportunity that basically connects local thermal and geothermal systems at a 'grid' type scale.

New content this week

• New content source - Solar Insiders podcast
• What are Science Based Targets (SBTs)
• GHG Accounting fundamentals
• Mandatory climate reporting in Australia
• Why Fusion energy is the "holy grail" and how it's getting closer
• An emerging opportunity for "thermal networks"

Science Based Targets

SBTs (Science-Based Targets) are greenhouse gas (GHG) emissions reduction targets that align with the latest climate science to meet the goals of the Paris Agreement. Specifically, they aim to limit global warming to well below 2°C, preferably 1.5°C, above pre-industrial levels.

Companies and organisations commit to SBTs to reduce their emissions in line with what is needed globally to avoid the worst effects of climate change.

Here is the foundation paper.

The Science Based Targets initiative (SBTi) is the organisation that defines and promotes SBTs, as well as validating targets and monitoring progress as submitted by companies. They have developed the Net Zero Standard, which helps companies develop their plans. There are four major elements to it:

• Near-term SBTs - 5-10 year emission reduction targets in line with 1.5C pathways; these are typically 2030 targets
• Long-term SBTs - target to reduce emissions to a residual level in line with 1.5C pathways by no later than 2050
• Neutralisation of residual emissions - after companies have achieved their long-term target, they must counterbalance any GHGs released through the permanent removal and storage of carbon from the atmosphere
• Beyond value chain mitigation - voluntary, where companies should support and take actions to mitigate emissions beyond their value chains;?

There are a couple of key principles:

• Focus on reducing emissions rather than relying on offsets
• Addressing Scope 1, 2 and 3 emissions (1 = direct emissions, such as fuel used in fleet cars; 2 = indirect emissions, which is predominantly from the energy a company uses; 3 = all other emissions, including supply chain, product life-cycle emissions, employee commute, etc).?

This guide is intended for companies to get started with SBTs, but it includes a bunch of links to long papers, so while it’s only about 10 pages, there’s probably thousands of offshoot readings.

GHG Accounting

The Greenhouse Gas (GHG) Protocol is the globally accepted greenhouse gas standard and is used to calculate emissions. This is what’s used by organizations to build a GHG inventory, which is a comprehensive account of all the GHG emissions associated with an organisation over a specific period of time.

So GHG accounting is the foundation of how you categorise, measure and report emissions, which are then used as part of setting specific, measurable SBTs .

There are five accounting and reporting principles: relevance, consistency, accuracy, transparency, and completeness.

It’s important to remember that while carbon dioxide is the “main” greenhouse gas we talk about, and it makes up about 75% of it, there are seven gasses overall, including methane, nitrous oxide and four fluorinated gases. Because carbon is the main one, the other six are converted into a carbon dioxide equivalent, represented as CO2e.

There are eight steps to develop the GHG inventory:

1. Determine organisational boundary - determines which company operations will be included in the inventory, broken into operations the company controls and those where they have an equity share

2. Determine operational boundary - identifying the emissions associated with a company’s operations, which is where emissions are broken into Scope 1, 2 or 3 (upstream, downstream).

3. Select reporting period and base year - reporting period is the period for which you’re calculating your inventory, and the base year is the baseline from which you track progress over time (eg you might say 2015 is the base year, and the current reporting period is 2024).

4. Identify emission sources - more detail about emissions within scopes 1, 2 and 3.

5. Collect activity data and estimate gaps - use either metered activity data (actual bills, purchases, reports, etc) or estimated activity data, which can be intensity-based (eg kWh per square metre) or company/industry averages. Metered data is best, then intensity-based, then averages. Estimates may be needed if data for the full reporting period isn’t available, for example. Here are some examples for the scopes:

• Scope 1 - fuel (based on fuel receipts), kms driven (based on travel records)
• Scope 2 - kWh of electricity purchased (based on utility bill), kWh of heating purchased (based on heating bill)
• Scope 3 - spend data for purchased goods and services (from procurement/ accounting records), distance travelled by air/rail for business travel (from expense records)

6. Calculate GHG emissions - in simplest terms this is activity data x emissions factor. There are three steps:

• Convert activity data into common units so it’s all consistent (eg Litres, kms, tonnes)
• Multiply that by the emissions factor for each source (every activity has a standard emissions factor - this is part of the GHG Protocol), for example petrol uses an emissions factor of grams of CO2 per km - you would then multiply that by kms driven.
• For non-carbon dioxide gases, convert it to CO2e and then multiply it by the amount of emissions produced from that activity.

For Scope 2, the GHG has published a Guidance doc to help. Basically there are two ways of calculating the emissions from purchased electricity - location-based (average of the local/ national grid) or market-based (uses supplier-specific emission factor)

7. Report GHG emissions - there is an increasing interest from inventors to evaluate investment opportunities and mitigate risks, so this is becoming more important. However, in many jurisdictions, and for generally larger companies, this is now mandated by law (more below). Some of the reporting bodies are the SASB (Sustainability Accounting Standards Board), SBTi, CDP (Climate Disclosure Project), and GRI (Global Reporting Initiative).

8. Manage GHG inventory quality - there should be a system in place to ensure high quality inventory and address the four main components - methods (accurate, consistent, etc), data (as high quality as possible), processes & systems (procedures, teams, resources) and documentation (records of everything).

Mandatory Climate Reporting

In Australia, mandatory climate-related financial disclosures came into effect on 1st of January 2025. It means that companies will increasingly be judged not just on their financial performance but on how they manage environmental and social risks. Businesses that fail to take it seriously will face growing scrutiny from investors, regulators and consumers alike.

They will have to make a range of disclosures that come under governance, strategy, risk management, metrics, and targets.

However, there is a phased roll-out (see below) and most SMEs (small to medium enterprises) won’t be directly impacted.

Companies will need to report Scope 1 and 2 from day one, however they won’t have to start reporting on Scope 3 until their second year.

?It’s worth noting that 75% of the ASX200 have committed to, or are already, voluntarily reporting climate-related information against the TCFD framework (the Task Force on Climate-Related Financial Disclosures is a framework that helps businesses disclose information about climate change).

Given the requirements to fall into Group 1, 2 or 3, it means that the vast majority of businesses in Australia won’t be mandated to report (about 96% of Australian businesses are SMEs). But while they’re not directly impacted, because large companies use SMEs in their supply chains and because they need to start reducing their Scope 3 emissions, it means that SMEs will be indirectly mandated.

Climate risk to companies

In addition to mandatory climate reporting, companies should be really thinking about climate risk. Climate is escalating the risk of reduced corporate profitability, damages to fixed assets, and disruptions to supply chains and societies. Purely from a financial standpoint, businesses that fail to adapt to climate risks could lose up to 7% of earnings by 2035, and up to 20% in the most exposed industries - utilities, telecommunications and travel.

A new report Business on the Edge: Building Industry Resilience to Climate Hazards by the World Economic Forum, provides a comprehensive assessment of risks and resilience strategies for boards, investors, C-Suite executives and operations managers.

In this article they outline 10 ways business leaders can build resilience in the face of climate hazards that include understanding risks and exposure, and building continuity and contingency plans, building climate-smart portfolio strategies that capitalise on risk mitigation opportunities and collaborate with the partners and communities to shape outcomes around things like shared and circular business models, and nature-based solutions.

A separate report - The Cost of Inaction: A CEO Guide to Navigating Climate Risk - found that climate-related disasters have inflicted over US $3.6 trillion in damage since 2000, with risks accelerating.

Its key points are that climate risks are already becoming material for businesses, and recent public resistance and sentiment against climate change will cause further damage if not addressed. It also shows there is a clear business case for adaptation and mitigation (investment could yield $2-$19 for every dollar invested), and that companies should elevate climate risks and opportunities as a critical component of strategy.

2024 was a triple COP Year

While 2024 seems like an age ago, I learnt that there are actually three COPs (after only recently learning there was two!)

The three COPs are:

• Climate COP, run by the UN Framework Convention on Climate Change (UNFCCC). Annual conference running in Oct-Dec for about 12 days. 2024 was the 29th edition (COP29).
• Biodiversity COP, run by the UN Convention on Biological Diversity (UNCBD). Runs every two years for about 11 days sometime in Oct-Dec. 2024 was the 16th edition (COP16).
• Desertification COP, run by the UN Convention to Combat Desertification (UNCCD). Runs every two years for about 11 days sometime in Sep-Nov. 2024 was the 16th edition (COP16).

So going forward, unless things change, it means every two years we’ll have all three COPs in the same year and around about the same time - a ‘triple COP year’.

All three were agreed upon at the Earth Summit in Rio de Janeiro in 1992, which led them to be called the ‘Rio Conventions’. While there is overlap in the topics and they were meant to all work together, I’ve been reading that up til now they’ve often been working in silos in a sense.

Having all three together hopefully means that there’ll be more focus put on ensuring agreements, topics, decisions, etc, have a combined impact across all areas.

Fusion Energy

It’s worth noting that fusion energy has been making some great in-roads lately.?

It’s long been the 'holy grail' of clean, unlimited energy, but until recently it took more energy input than what you got out from it, and it’s been very hard to contain the 100-million-degrees-celsius plasma for very long.?

As an example of how effective fusion is, a single gram of fuel can produce as much energy as 9 tonnes of coal and could power one home for 850 years - and without any dangerous waste!

Fusion is the process of fusing atomic nuclei, which is the same reaction that powers stars like our Sun. Unlike traditional nuclear power plants, which use fission – which splits atoms and creates dangerous radioactive waste – fusion uses hydrogen isotopes and produces helium as a harmless byproduct.

While this is still years, if not, decades, away from being practical and affordable, there have a couple projects I’ve seen recently worth mentioning:

• In Dec 2024, a US company announced plans to build the world’s first grid-scale fusion power plant. It will produce a continuous 400MW of energy by the early 2030s and could power 150,000 homes.
• In Jan 2025, a Chinese company managed to contain the plasma for 17 mins 46 seconds, which sounds small but is triple the previous best.

Thermal Energy Networks

From the Volts podcast: Thermal Networks Are the Next Big Thing, 2 Jan 2025.

Without purposely going down the rabbit hole, I haven’t been seeing too much about thermal or geothermal energy, but it’s got some huge potential.

Thermal energy storage involves capturing heat from one source, storing it in a medium (like water or rocks), and releasing it later when needed. For example, you can take heat from a warm roof space or solar thermal panels and use it to heat water in a storage tank. Later, the stored heat can be released to warm the house, either directly (as hot water) or indirectly (converted back into warm air via a heat exchanger). This is how solar thermal heating or heat-pumps work.

Geothermal energy is pretty cool too. Usually there is a network of underground pipes (eg in the backyard of a home) which absorbs the relatively constant warmth of the ground (typically 10-15 degrees C even in winter). That heat is transferred into a heat pump, which turns it into warm air or water. It can also work in reverse by pulling heat from the home and transferring it into the cooler ground. Again, basically an unlimited source of heat/cooling.

In this podcast episode, they had a really interesting chat about building ‘thermal networks’.?

Rather than every home have it’s own closed loop system, what if you had a grid-style network of pipes where a whole community (or larger area) could also share thermal energy. They talked about potentially using the gas network infrastructure or the sewer pipes network one day to carry thermal heat instead.

He also mentioned a new term: Coefficient of performance (COP), which is how many units of heat do you get out for each unit of energy put in. 1 is the point where they’re equal.

A company called Excel Energy in Colorado has a system COP of 5.7 annually (so they get 5.7 units out for every 1 unit in), which is amazing efficiency.

As a comparison, with fossil fuels you always get less heat out than energy in; its COP is around 0.9.

I encourage you to reach out if:

• I've said something wrong or partially wrong,
• there's an additional thing I should know about,
• you think it would be valuable to talk to you, or
• you know someone I should talk to!

Note though, if you don't believe in climate change, please don't spread your misinformation here. My newsletters are not a debate about whether climate change is real - that was settled long ago by actual science, with plenty of overwhelming evidence (and a good dose of common sense).

Cheers,

Dan