Monetizing Utility Grid Reliability & Resilience for EVs and Renewables in the ESG Era

Synopsis

So what's this going to cost? EVs are here to stay along with proposed initiatives that compel utilities to concomitantly deploy renewables for power generation. Outsiders should appreciate a utility's reluctance to jump into this fray with unbridled enthusiasm. The ominous spectre of ESG potentially casts a confusing influence on industry leaders regarding embracing the initiative of adapting to EV proliferation while diversifying power generation by using renewable energy production. Nevertheless, there are opportunities for utilities to prosper as long as engineering fundamentals are followed as a driving force for system and operations modifications. And not ESG. This approach creates unexpected opportunities for utilities while substantially concomitantly bolstering ESG metrics that will be palpable, obvious, and glaringly transparent,which, most importantly, means that ESG conclusions will be much less vulnerable to argumentative interpretation.

Introduction

The writing is on the wall. Like it, or not, EVs are here to stay along with initiatives that compel the concomitant deployment of renewables for power generation. So, utilities can either shuffle along grudgingly or embrace this new situation as an opportunity to diversify revenue production. However, it needs to be emphasized that one should appreciate a utility's reluctance to jump into this fray with unbridled enthusiasm. Especially as the inevitable spectre of ESG formidably lurks in background imposing a perplexing haze on senior management decision-making involving both OPEX and CAPEX and the company's public relations optics. It is problematic that ESG is crippled with evaluation procedures that are prone to producing results that are subject to wide interpretation by individual ESG consulting firms and their staff. One must deal, however, deal with this reality one way or another. In this era of armchair quarterbacks that infest social media, utilities may find themselves open to criticism no matter what course of action they choose and "damned if they do and damned if they don't".

But the answer may be actually fairly simple:

Have Engineering Lead ESG, Not Vice-Versa

Understanding the Origins of ESG

ESG which stands for Environmental, Social, and Governance is a semi-quantitative, but supposedly benign, process that seeks to utilize non-financial factors for grading investor risk and rewards with various initiatives, particularly in the sustainability space. However, it is unfortunately fraught with problematic features largely created by the United Nations, the process originator, that tend to ameliorate its intended positive impact, particularly regarding the broader systemic calculus associated with sustainability efforts.

The bewildering reality is that UN operational ESG dogma seems to deliberately subordinate the value of authentic sustainability initiatives. If that's the case, why would organizations and businesses embrace the latest trend that is ESG?

Probably because they feel they must in order to ensure getting their participation trophy. In other words, it may be a case of malicious obedience as organizations likely perceive they have no choice given the current Realpolitik in the environmental and sustainability space.

According to Fortune, there are several problems with ESG. First, as previously noted there's satisfying the investor who has the expectation that their investment is a "good thing" and that investment returns resulted because capital was put into a "good cause" that presumably has measurable performance metrics. That's the case - sort of. The reality is not that simple. Unfortunately, ESG has an investment approach is crippled by the lack of standardized criteria for what makes an investment sustainable.

Consequently, there is a conspicuously wide range of interpretation for what qualifies as an "authentic ESG" initiative. Thus, how does one "audit" the veracity of ESG metrics, claims, and conclusions? Just imagine having the Internal Revenue Service (IRS) audit your tax returns without rigorous accounting protocols.

Understanding the Sustainability EV Value Proposition

A key aspect that needs to be understood is that EVs are primarily an energy efficiency play.

Inman performed a detailed analysis of energy needs for gasoline cars and EVs. It showed that gasoline vehicles need 263 BTUs per mile while EVs only require 146 BTUs per mile. Substituting EVs for gas vehicles potentially can achieve an 11% reduction in US energy footprint. It should be noted that other sources provide different values for both EVs and gasoline cars. Therefore, detailed analyses should have a range for these values.

It is difficult to find any sectors of the economy where such a large reduction in energy footprint for the US is possible with one focused and profitable initiative. Interestingly, the impact on CO2 emissions is even more dramatic, particularly if one uses a renewable energy source such as RNG as an energy source, the US can reduce US GHG emissions by a colossal 25%.

Monetization of CO2 credits even at modest pricing of $20/ton of carbon dioxide would potentially realize about $15 billion in revenue annually. And the rationale for these credits is solid in comparison to other carbon credit scenarios.

Engineering a Utilities Solution with Attractive ESG Metrics - Biomass and Bioconversion

The bioconversion of biomass, a plentiful resource in the US where more than 600 million dry tons is generated every year that is derived from biological material from living or recently deceased organisms, the byproducts of those organisms, and byproducts or emissions resulting from human activity. Biomass sources are plentiful and diverse; they include wood products, dried vegetation, crop residues, agricultural byproducts, aquatic plants, food wastes, organic sludge from wastewater operations, municipal solid wastes and more.

When advanced bioconversion systems are deployed, they can process biomass with the ability to create robust revenue feature by being a “multitasking” renewable which produces energy, fertilizer, and, many cases, water. Already

some utilities have already launched programs to accommodate EVs energy needs with renewables.

The technology architecture is based on the premise that properly operated bioconversion systems for processing biomass can achieve high conversion rates of 90% or more with concomitant production of renewable products compared to conventional anaerobic digester systems. Background on this technology, called AFC, is given elsewhere.

When multiple systems are installed, as will be the case will be for utilities, there is a dramatic multiplicative impact on both renewables production (4 or 5 different products) and subsequent revenue production as depicted in the figure below. It should be noted that the

technology architecture can be largely implemented using using anaerobic digesters using a plug 'n' play approach. It is notable that some utilities such as Florida, Power, & Light (FPL) are already looking at renewables options.

Given the multi-tasking attributes of advanced anaerobic digesters and the potential economics, they should merit consideration in the overall calculus to enable Utilities to prosper while addressing resilience and reliability challenges in the EV-ESG era.