Creative Renewable Solutions Helps Businesses Achieve Their Clean Energy Goals

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It’s impossible for any major business not to have a climate change mitigation plan. From Amazon and Microsoft proposing to be carbon-neutral and carbon negative, respectively, to local cities working to decrease their environmental footprint, America is working towards a greener future. Yet, not all institutions have the budget or resources to set and track their progress towards their clean energy goals. Andres Alvarez understood the challenges that these institutions face. He and three others at Creative Renewable Solutions help these entities create and achieve their sustainability targets. Creative Renewable Solutions is based in Portland, Oregon.

Frederick Daso: What is preventing the U.S. from making adequate progress on its climate change mitigation goals?

Andres Alvarez: The scientific community has long established that greenhouse gas (GHG) emissions are the primary human-influenced driver of climate change. There are various greenhouse gases, but climate mitigation activities in the U.S. have been primarily focused on reducing CO2 emissions. In 2018, the Environmental Protection Agency (EPA) reported that CO2 emissions in the U.S. reached 5,424 million metric tons of CO2 (approximately 81% of total U.S. GHG emissions). That is equivalent to about ten times the amount of carbon sequestered annually by all the forests in the U.S. Globally, the U.S. is the second-largest contributor of carbon emissions (15% of global CO2), and progress in climate change mitigation will require the cooperation and leadership of the United States.  

Pre-COVID-19, progress in reducing U.S. CO2 emissions in carbon-intensive industries was mixed. Between 2005 and 2018, total CO2 emissions in the U.S. were reduced by 11%. However, this progress has not been steady, and we have seen upward and downward cycles in CO2 emissions in recent years (+3% increase between 2017 and 2018.) The electric power sector, traditionally the largest emitter of CO2, has been responsible for most of the CO2 emission reductions seen in the U.S. so far. Between 2005 and 2018, CO2 emissions from the power sector have fallen by 27%, driven by an increase in renewable generation, expanded use of natural gas, and coal plant closures. 

We have only seen CO2 emissions decline by 2% and 1% from the transportation and industrial sectors during this same period, respectively. In the transportation sector–now the largest source of U.S. CO2 emissions— improvements in motor vehicle fuel efficiency are well offset by a more significant overall travel volume. In the industrial sector, vigorous economic activity has kept emissions growing steadily. Most importantly, as you dive deeper into the drivers behind these CO2 trends, it becomes clear that climate change mitigation progress only moves as fast as the emission reduction targets set by states, cities, local communities and corporate entities. 

Post-COVID-19, the U.S. has an opportunity to accelerate its climate change mitigation efforts and become a leading economic green power. COVID-19 has shaken the energy world, causing demand for oil to drop and forcing fossil fuel companies and investors to reconsider their risks. Globally, capital investment is gradually shifting away from fossil fuels and more towards sustainable technologies such as wind, solar, hydrogen and electric vehicles. Countries are starting to position themselves for the new energy order, establishing their green supply chains. The U.S. has begun to develop its green supply chain driven by technological innovation, market structures, state policy, and grassroots community movements. These clean technologies can drive deeper decarbonization and create new "green" economic opportunities within the U.S., yet efforts to deploy these technologies have been decentralized to date.

Daso: What are the top priorities of renewable developers when creating green products for their enterprise or consumer customers?

Alvarez: Like most customer-centric industries, renewable developers aim to construct the best product for their specific customer's needs. The majority of renewable energy customers are either utilities or corporate entities. In general, there are four main things that renewables consider when developing green products:

Energy Price: Electricity is a commodity, and at the end of the day, consumers still want the lowest-cost electricity. Since 2011, the levelized cost of wind and solar has dropped -47% and -84%, respectively. Renewables are now cost-competitive with natural gas, and renewable developers continuously look at ways to optimize their facilities' production to further lower energy costs. 

Renewable Energy Credits (RECs): RECs are a way for renewable energy developers to certify each unit of energy generated as "green" and are typically sold alongside energy to customers in a power purchase agreement (PPA). Utilities are interested in RECs to comply with state policy goals, such as renewable portfolio standards. Corporate entities are also interested in RECs and buy them as part of corporate sustainability programs to offset carbon emissions. 

Energy Shape: Many customers will buy 100% of the energy and REC output of a given renewable project. However, in certain circumstances, a client may only want a portion of output or would like guaranteed power during certain hours. This is an area where renewable developers can add value and leverage market instruments to create an energy product that meets their customer's individual needs.

Location: The location of a renewable project is of particular importance to customers. For utilities, renewable projects are ideally located near significant load areas, such as cities, to bring energy to where people need it most. For wind projects specifically, location determines whether your wind blows when electric utility demand is most significant and most valuable. For corporates, location influences power purchase agreement contract terms and structures. 

Daso: What are the high growth segments of the clean energy markets?

Alvarez: Without a doubt, the highest growth segment in the U.S. clean energy space today is wind and solar. The EIA reported that wind and solar represented 76% of all new U.S. capacity additions in 2020 (~32 GW in total). Those renewable additions roughly represent around $45 billion in clean energy investment. The majority of that solar capacity is coming online in Texas and California, while most wind capacity is coming online in Texas and mid-western states.

At Creative Renewable Solutions (CRS), we have been investigating interconnection queues across the U.S. We can confirm that there is over 170 GW of utility-scale wind and solar in development stages just in the western interconnect alone. For reference, the western interconnect queue has slightly more renewables capacity than the current operating U.S. fleet of utility-scale wind and solar. All signs point to the wind and solar continuing to dominate future capacity additions in the U.S. 

Two emerging clean energy technologies worth tracking are energy storage and green hydrogen. As more variable renewable energy gets added to the grid, there will be a growing need for rapidly dispatch technologies to balance electricity supply and demand. Energy storage is a leading contender for this role due to its operational flexibility, commercial maturity, and rapidly declining capital costs. Wood Mackenzie forecasts that the U.S. energy storage market will grow from 1.2 GW in 2020 to over 7 GW in 2025, representing a sixfold growth.

Green hydrogen – a nickname for hydrogen production powered by wind and solar – is back in the global spotlight thanks to a surplus of cheap renewable electricity, advancements in hydrogen turbine technology, and electrolyzer cost reductions. Green hydrogen is seen as a low-carbon fuel that could take the place of today's fossil fuels, bringing emissions down for carbon-intensive industries such as steelmaking, maritime transport and aviation. In the U.S. and abroad, we are seeing big energy players such as NextEra, Iberdrola, Shell, BP and Engie invest millions into new hydrogen pilot projects. 

Daso: Which countries have gotten the most bang-for-their-buck for their clean energy investments on a global basis?

Alvarez: There are various lenses to consider when looking at the value of clean energy in a specific country. Experts in different fields will look at metrics such as renewable project rate of returns, the number of reduced externalities due to air pollution, the direct economic benefits related to lower-cost electricity, and more. I look at a country's investment in clean energy to gauge the current economic opportunity and to look at historical investment trends. A recent 2020 report by the Frankfurt School and the United Nations Environment Programme (UNEP) indicates that the world invested $282.2 billion in new renewable energy capacity in 2019. In that same year, China and the U.S. accounted for ~30% and ~20% of renewable energy investment. Historically, China and the U.S. have been the largest buyers of renewable energy. By the end of 2019, they added ~582 GW of wind and solar capacity (~48% of global renewable capacity based on International Renewable Energy Agency data) and reaped the economic, workforce, and health benefits.  

Like Chile, some countries see more explosive growth thanks to the country's exceptional resources and healthy economy. Between 2018 and 2019, clean energy investment in Chile grew +302%, totaling around $4.9B. Chile's electricity production from wind and solar has increased +478% from 2014 to 2019, and renewable sources now represent 14% of the country's electricity supply (up +11% from 2014). Overall, the investment in renewables is expanding geographically far beyond Europe, China, and the U.S. This indicates that renewable energy is becoming more economically viable in many regions, and we should expect to see countries shift more capital into these technologies. 

Moving forward, the declining cost of clean energy could be a transformative opportunity for emerging markets to reap the benefits of distributed energy capabilities.

Daso: In what ways does CRS leverage data science to augment its solutions to customer problems?

Alvarez: Renewable developers have specialized teams that perform critical analyses–financial, operational, risk—for their renewable energy projects. Evaluating one or two project configurations is a straightforward process. Still, even that can take several weeks to complete by the time the data and models are transferred and verified across the various teams. If you attempt to analyze over 20 hybrid renewable system configurations, excel models break, and your workflow is not achievable. For renewable originators working to sell green products to potential customers, not having this analysis can make it difficult to know exactly what system (wind, solar, storage) offers. Often, developers will submit multiple bid provides to potential customers, incurring steep fees with each additional bid (up to $10,000 per). 

The team at Creative Renewable Solutions (CRS) is keenly aware of these challenges. We leverage our 75 years of combined experience in the renewable energy space to create an internal tool that integrates the models and datasets needed to test the economic value of different renewable and storage systems at scale. Our tool uses advances in data science to efficiently process gigabytes of operational and market data and optimize the economic dispatch of the wind, solar, and storage. 

By rapidly narrowing and customizing green energy product offerings, we help our clients reduce the time and cost needed to secure a power purchase agreement. Most importantly, we leverage our commercial experience to make sure value streams are realistic and applicable to the studied projects. We have leveraged our tool to help our clients assess their projects' competitiveness, determine the value of energy and capacity services, identify potential development areas, and customize their energy market products. 

Daso: What led to the formation of CRS?

Alvarez: Renewable systems in isolation have seen great cost reductions and growth in deployment. The easy projects were getting built. Value and returns, therefore, started to diminish. Many in the industry were looking at the individual pieces; less were looking at the whole picture. Full deployment at the scale needed to replace conventional baseload power (coal, etc.) - and curb climate disruption - requires the interaction of the combined renewable plants. That's where we excel.  

Creative Renewable Solutions' goal is to accelerate the deployment of hybrid renewable systems (i.e., systems that combine wind power, solar power, energy storage, hydrogen and other emerging technologies). Individually, each member of the CRS team held the belief that renewable power would need to become dispatchable (available at any given time of day when people want to use energy). For wind or solar to become more reliably dispatchable, these resources need to be combined with either energy storage or low carbon fuels (such as hydrogen). We knew that the complexity associated with combining these technologies would require a concerted effort. We came together as a team in 2020 because we wanted to leverage our combined experience selling, integrating, modeling, and financing renewable projects to speed up the adoption of these emerging hybrid systems and to explore further opportunities available in this burgeoning piece of the clean energy space.

Want news on the hottest startups delivered to your inbox? Subscribe to my mailing list, Founder to Founder (F2F): f2f.substack.com. Check out my latest F2F stories: 

• Startup Spotlight #100: Convictional
• Case Study: Finary's Product-Market Fit Journey Starts With 'Building For Yourself' To Build Something Useful For Others