Jon Powers (00:02):

Welcome back to Experts Only. I’m your host, Jon Powers. I’m the co-founder of CleanCapital and serve as President Obama’s chief Sustainability Officer. On this podcast, we explore solutions to climate change by talking to industry leaders about the intersection of energy, innovation and finance. You can get more episodes@cleancapital.com. Welcome back to Experts only podcast. I’m your host, Jon Powers. We have been a little bit of a hiatus of recording episodes, but we are coming back with a vengeance driven by this conversation we’re having today. A lot of us have been following what’s happening in Washington very closely as the tax bill and the Trump administration are trying to drive change to our industry. But there’s a secondary fight that even I wasn’t tracking until I had a conversation with our guests today. Roger Ballantine, as there is looking to be some major changes, the scope to greenhouse gas emission accounting sounds nerdy.

(01:05):

It is, but it is critical in terms of how companies buy and measure the renewable energy. If these changes go forward, it could really be as detrimental to our market as losing the investment tax credit or some of the anti RERA efforts that are being pushed in Washington today. So please give it a listen. There’s going to be a blog along with the podcast on how to take some action and please take that action as soon as you can as we talk through Roger about the timing is really important and it has to happen now. So you can get more information@cleancapital.com and we’ll push this out through social media. I hope you enjoy the conversation. Roger, it’s great to have you back here at Experts only.

Roger Ballentine (01:47):

Jon, it’s great to be back.

Jon Powers (01:49):

We’re not going to dive into your history or green strategies, which we’ve done in previous episodes. We want to get to a really important topic for the listeners. I think a lot of folks today are highly focused on what’s happening in the beltway in Washington. As

(02:03):

Tax legislation moves, the new administration comes in, the battle over the Inflation reduction Act is happening. But there’s a secondary battle happening outside of Washington that I think I wasn’t even truly aware of until you and I last spoke. So when I was working in the White House as the chief sustainability officer, I was just beginning to really understand how greenhouse gas scope emissions were measured, how we did ’em across the agencies, and I think people are not very familiar with that space and the evolution of how we’ve gotten to where we are today as companies are measuring this. Can you talk for a minute about that evolution where this isn’t something that just came out of the sky, there was a process to get us to be able to measure these. Can you talk about that evolution and sort of how it’s managed?

Roger Ballentine (02:56):

Yeah, lemme give just a high level a little bit of the history here because I think it matters About 25 or so years ago, some NGOs and others came up with the great idea that why don’t we ask companies to really do more rigorous accounting of the greenhouse gas emissions for which they are responsible? Responsible. It was set up as a voluntary program at the time. The hope was that it would quickly be used as a regulatory basis for a mandatory program, which of course has not come to fruition. But remarkably, and really to the tremendous credit of the folks who developed this system, the vast majority of companies now track and measure their greenhouse gas emissions and 98 plus percent of them that do so do it according to what I’m referring to, which is the greenhouse gas protocol.

(03:53):

So it’s actually a remarkable success story, but as you indicated, it’s one that’s very much underappreciated I think, or at least people know about it but don’t understand how important it’s because the next stage of the evolution, Jon, from companies starting to track their greenhouse gas emissions and doing so across terms, I think a lot of your listeners will be familiar with scope one direct emissions, scope two indirect emissions from primarily electricity purchasing and Scope three, kind of everything else that a company’s existence and activity are responsible for up and down value chains. The next evolution was for companies to begin setting targets. Either companies set their own targets kind of out of the blue and target could be an emission reduction target or renewable energy target. They started doing that. The metric and methodology by which they set and track those targets was in fact is in fact the greenhouse gas protocol. And that’s now become more formalized with target setting organizations like the Science-Based Target initiative, which basically a third of the world’s market cap has a science-based target. It’s an enormously impactful organization, and those targets are in turn, they sit on top of the greenhouse gas protocol. So the greenhouse gas protocol and its rules are really the most impactful quasi regulatory mechanism that I think people underappreciate.

Jon Powers (05:22):

Yeah, I think there’s a misnomer of folks may think this is driven by the EPA or by some regulatory agencies. It is much like US Green Building Council. It was a voluntary effort driven by folks that over time build consensus. And that consensus became something we started a decade ago just beginning to measure, then set goals, and then begin to act on those goals. And now we have a sophisticated system which people are making some decisions in that space, but we are evolving. And I think one of the things that shocked me most about when you and I talked about the problem at hand was that there’s an evolution going being pushed right now, especially in the Scope two space that may have significant ramifications on the market as a whole. And most people are not aware of the risk this is posing. Can you talk a little bit about what’s being

Roger Ballentine (06:15):

Developed? That’s absolutely right. Now it is fair that at this moment a lot of companies are focused on another form of risk and that is what’s happening inside Washington and proposed changes to tax credits and so forth. So I don’t begrudge any company from focusing on that. It’s critically important and I know you know all about that, but this is maybe above a level of a stealth potential change that could have very significant impacts on the voluntary climate action marketplace and particularly the voluntary renewable energy procurement market. Because let’s face it, in this current environment, the voluntary markets are more important than ever.

Jon Powers (07:02):

Absolutely,

Roger Ballentine (07:03):

Because we’re really losing more government-driven incentives to procure and grow clean energy and decarbonize the grid. So the Scope two rules are really the framework now. That’s the rule book that companies are following. And as you’ve said, we are in a process of a once in a decade revisiting and updating of the Scope two rules. This hasn’t happened since 2015 when the world was a very different place, clean energy market, very different place. Those rules were really

Jon Powers (07:39):

Clean. Capital was just starting. That was the first year we got funded in 2015.

Roger Ballentine (07:43):

And back then the goal of all this really was just to commercialize and scale wind and solar, frankly we’re past that. Now it’s commercialized, now it’s about growth. And more than a third of the growth this, well, Jon, more than a third of the growth that we’ve seen in wind and solar in the United States has been directly driven by voluntary corporate procurement.

Jon Powers (08:10):

Absolutely

Roger Ballentine (08:10):

By RPSs, not by anything else, by voluntary corporate procurement. So it’s a remarkable success story. But as you indicated, frankly to me, and in my view, it’s a success story that is now under threat,

Jon Powers (08:23):

Right? So as we think about this, so for a second, looking back over the last decade, as companies looked at buying power, considering how they were going to get this done, the markets began to emerge. We’re at a place today where even when the IRA passed two years ago, the data center AI demand that is absolutely booming. The electricity demand piece did not exist. The threat that the new is bringing to tax credits, everything from permitting to attacking state level goals, it’s a pretty wild front that we’re facing right now from a regulatory perspective and battling the idea of then undercutting the demand because folks won’t understand these new changes could be absolutely detrimental to being able to actually build projects. Right. So can you talk a little bit about some of the changes that are being pursued and how it would undercut projects?

Roger Ballentine (09:28):

So currently under the current system, if I’m a company, I’m able to calculate the emissions associated with my purchase and use of electricity. That’s my scope to inventory. If I want to reduce that, I am able to buy renewable energy and or renewable energy credits in the US recs and other parts of the world. They have a different name, but it’s all the same.

(09:56):

And under the rules of the protocol, I can take those attributes that I acquire through A PPA through a virtual power purchase agreement through some other contractual mechanism. If I own that rec, I am allowed to use that, which is a megawatt hours worth of clean energy, and I’m literally able to take that zero megawatt hour represented by that instrument that I purchased and subtract from my inventory so I can directly reduce my inventory. So companies today who have goals for either it’s the same thing really, either to procure a certain amount of renewable energy or to reduce their scope to footprints by a certain amount. That’s how they do it. And the rules are generally pretty flexible. I can go build a solar facility in Arizona, I can get those wrecks and I can apply it to my load. Even if my load is not in the neighborhood of that solar project that I just financed.

(10:54):

I’m allowed to use those wrecks because again, they represent that zero emission attribute and I’m able to subtract from my Scope two inventory. So you see some of these transactions still get complicated as you know, but there’s tremendous flexibility on both where these projects can be built and when they actually produce power. Because what companies are allowed to do today is at the end of the year, add up all the attributes they have acquired and match it against their load, which they’ve calculated the emissions from their load that they’ve calculated for that year and match those two things. So that’s how you make progress against goals and it provides really strong incentives for companies to go find places to build renewable energy and finance renewable energy. It’s a very effective system. It has some flaws which we’ll talk about, which is one of the reasons the reform process is going forward. But what has happened over the last two years is there are two schools of thought that have formulated among those

Jon Powers (12:03):

Who, can I pause you for a second before we get to the last two years? I think it’s important for folks that don’t think about this survey data even reflect what’s happened in the last 10 years. So when you fell back to 2000 12, 13, 14 companies bought their power from utilities,

Roger Ballentine (12:18):

Correct?

Jon Powers (12:18):

There was an energy manager likely at a facility who did that. Now you have sophisticated energy procurement shops at large corporations, the tech companies, the Amazons of the world, Walmart and others that are not only finding ways to leverage and address buying power within the company, but actually adjusting policy at the state level, et cetera. We’re going to bring data centers to Virginia. We can’t do that without a hundred percent renewable goal. Voila, a hundred percent renewable goal in Virginia. So those type of the mechanisms have really emerged over the last 10 years. There’s that bucket of leaders, but there’s a bucket of followers that are just now really beginning to understand the rules and figuring out how they can, even in the diverse types of companies out there within their operations, can they do community solar and be an anchor tenant? Can they do A-V-P-P-A?

(13:12):

Can they do rooftop understand that? And just two weeks ago, the Clean Energy Buyers Alliance in Minnesota, one of my colleagues Jessica Johnson and Connor Murphy were there with you. This topic that you’re talking about was probably the hottest topic of conversation because folks were not aware of the changes that you’re about to talk about. And I think what came out of that, and one of the reasons we’re doing this podcast is we need to raise the alarm that this is happening. So folks know that we probably need to take some actions to make sure that these markets continue to work the way they’re working. But can you talk about that evolution over the last two years?

Roger Ballentine (13:49):

Yeah, so in the last two years there’s been a couple of different approaches. One is growing recognition, which is true that as we’ve now had tremendous penetration of renewable energy, there are some places where frankly there’s a lot wind in west Texas, solar in California. And the realization became that if I add more renewable in those places, am I really displacing a lot of fossil emissions at the end of the day or really kind of cannibalizing other renewables? And it’s just a simple fact that if I build a solar farm in California or I build the same solar farm in West Virginia, I get the same amount of wrecks from either one. My inventory goes down the same, either one, but one actually has a lot more real world climate impact. So there’s folks that start to look at that and said, shouldn’t we have some ability or incentive under the accounting rules for a company to ask the question, where do I want to build this to have more impact?

(14:51):

And what that led to was at a more formal level, a group called the Emissions First Partnership, which was founded by Meta and Amazon and General Motors and some other companies. And their proposal, which is on the table now, is to include for the first time some sort of what we call consequential accounting disclosure, whereby a company would say, here’s the procurement we did and we did an estimate of the actual emissions that project reduced and we’re going to disclose those. And that is one of the proposals on the table. In part, Jon, that effort was a reaction to a proposal and movement driven primarily by one or two tech companies to take an entirely different approach to the current system, an entirely different approach to what I just explained, and that is what they call time and location matching or commonly referred to folks may have heard this term 24 7 accounting.

(15:56):

Now at one level, that’s very, very attractive in the sense that our goal, everyone’s goal who cares about climate, electricity sector, is to get to a grid that is clean every day, all the time, all year long. We know that’s the goal. The question, however, is what’s the best way to get there? The question of applying a 24 7 accounting metric is a different question. Let me just briefly explain what that 24 7 accounting proposal looks like. It would require a buyer to match their load on an hourly basis, not an annual basis, an hourly basis in real time to procurements of clean energy, which are generated during that same hour. Okay, that’s interesting. It’s hard and it gets particularly hard when you add the other component of 24 7 accounting, which is a much tighter location restriction. So let me just tell you where things stand today.

(16:57):

The current proposal being promoted at the protocol in something called the technical working group. This is the group of stakeholders that puts together what they propose the change to the protocol B, and then that will go up through an approval process inside the protocol. The current proposal requires companies to do time and location matched procurement. Okay, so what does that mean? Well, what it means is I have to look for renewable energy development opportunities within a narrow geographic region from where my load is, depending on where your load is. Particularly, for example, if you’re in maybe the US Southeast, for example, your options for procuring clean energy that is located in a narrow region balancing kind of the term that’s used, but just think of it as it is a narrow region options would be very, very limited.

Jon Powers (17:58):

Yeah, I mean those states don’t even have the ability to net meter your solar for instance,

Roger Ballentine (18:04):

Hundred

Jon Powers (18:05):

Percent. So how would you even get projects built

Roger Ballentine (18:07):

Hundred in those regions?

Jon Powers (18:09):

The GHG emission protocol is not enough to drive that type of incentive at the state level if the policies are in place.

Roger Ballentine (18:19):

Accessing that data, both in terms of your own consumption and the generation of clean energy is a real challenge. Take example, and it certainly should be of great concern to smaller companies, a lot of added expense here. It should be of great concern to any company that has aggressive renewable energy and or climate goals because the fact is your options for procurement are going to be greatly restricted.

Jon Powers (18:47):

So

Roger Ballentine (18:48):

Aggressive renewable energy goals are going to be much, much harder to meet. So that is of tremendous concern or should be of tremendous concern in my view of any company really with renewable energy goals. I’ll just give you an example on why this is not just a concern for small companies. Think of a Walmart. Walmart has 80,000 points of load. They have 800 different utility providers for them to go to every 80,000 point of load, start measuring that hourly, then work across 800 different utilities to get data and even assuming they can even do the procurements that are near that load, it’s an overwhelming task, which is going to raise costs significantly ultimately to customers and rate payers. So it’s not if

Jon Powers (19:35):

You in states where they literally can’t build the product

Roger Ballentine (19:38):

In states where you just can’t do it.

Jon Powers (19:40):

Yeah.

Roger Ballentine (19:42):

So I’ll tell you one thing we did at Green Strategies. We did the first of its kind survey of corporate buyers to really two purposes. One, we wanted to educate them about the proposals that are on the table. And we really wanted to know if those proposals became the, and I’ll put this term in quote law because it’s pretty close to what would it do to their procurement activity. And the results were pretty clear. We asked them about three scenarios, each of which I’ve mentioned. One of which is what would requiring hourly matching, just hourly matching due to your procurement goal, what would’ve greatly restricted geographic boundary for your ability to procure clean energy due to your renewable energy procurement activity? And then we ask them to be fair, we wanted to ask about all the scenarios on the table. How would you feel about disclosing some sort of impact calculation of the procurements that you did do? The results were pretty staggering. Over 80% of companies responded that their current approach, the projects they’ve already done, they would no longer pursue under an hourly and location matched

Jon Powers (21:03):

80%,

Roger Ballentine (21:04):

80%, 70% said their existing goals just wouldn’t work. They’d have to change them. 80% said that they really are not confident at all that they would be able to execute under that regime and a number of companies. These were more anecdotal, and by the way we presented this, we released and presented this survey at the SIBA conference that you mentioned, and we were really inundated with folks who were interested in these results and didn’t know about it. And we had companies, a number of companies say, well, if this happens, we’re either going to abandon our goals or some have said, we’ll abandon the greenhouse gas protocol and try to figure out another way to do this. That’s not a good outcome because as I’ve said, this current system, if we get the rules right of a protocol and then the target setting entity sitting on top of it has had tremendous positive impact.

Jon Powers (22:00):

Absolutely. But

Roger Ballentine (22:01):

That is from what we hear from companies, all that is in jeopardy. Now, we did also ask about the impact disclosure as well, and one of the aspects of what they like about that proposal, because under the impact proposal, which just says report the impact from your procurement, one of the rules there is that there’s literally no or very limited geographic restrictions on where you do procurement. Why? Because from a climate perspective, we want companies to go build projects on the dirtiest grids wherever they may be the most emission reduction. So there was general openness to the consequential side of it, but there were significant concerns about what a time and location matched requirement would do to their continued engagement in renewable energy marketplace. And it’s real concern expressed that it really could undercut, which I think is a soft term, undercut current voluntary market. And again, as we said at a time when we need it more than ever.

Jon Powers (23:12):

Yeah, I think that’s a great point. I mean it is the demand for our product and renewable energy that’s going to keep us moving through the next four years of a administration is trying to kill it. Really, if you think about the first Trump administration, when they pulled out of the Paris negotiations, it was the corporate America stepping up and we are all in. And the other campaigns that happened, making those commitments, pushing the demand, if we eliminate that demand kiss, a lot of those climate goals go by because we’re not going to be able to build the products. And I mean just alone or the rec market alone would get absolutely crushed in this space and make a lot of projects on Financeable. So with that in mind, just one process question. When this goes in front of, it’s the World Resource Institute, right? WRI that sort of manages this, those that what we

Roger Ballentine (24:01):

Call the secretariat? Yeah,

Jon Powers (24:03):

The secretariat. Do they take testimony? Will you be able to go in and testify and provide that type of data to them?

Roger Ballentine (24:12):

No. So the government, it’s like

Jon Powers (24:16):

Your congressional hearing where you’re sitting there and

Roger Ballentine (24:19):

You don’t have that. You don’t have rights to appeal, not due process requirements. It’s a much more opaque process than that. Formally, they started this process by issuing a broad request for comments on what folks think should happen to Scope two accounting.

Jon Powers (24:36):

And that happened last year, right before the election, before

Roger Ballentine (24:39):

A hundred percent.

(24:41):

And that was, they got thousands of responses. They’ve taken all those responses, they’ve now formed these technical working groups and the technical working groups are tasked with coming up with reform proposals. That’s where we are right now. And that process is not concluded to be clear, but the current proposal, and they try to be transparent on where the proposals stand at any given point in time, they do release publicly the proceedings from these technical working groups, which is how we know at the moment, mandatory 24 7 time and location matching is the proposal that is currently that to be recommended by the technical working group. And that’s what really

Jon Powers (25:33):

Make that happen in 2040. Don’t make that happen now if it’s no way it’s possible. So with that in mind, I think one thing you told me that sort of scared me is how the 24 7 efforts have stacked the working group to get folks that support that initiative on there. One, how do we stop this? And two, I want to talk a little bit about what people who are listening can do to do that.

Roger Ballentine (26:00):

So again, there’s not a formal beyond these public comment periods, the one I already spoke about, which is long since closed, when this proposal is finalized and approved within WRI, then there will be another formal comment period sometime this fall where folks can comment. The protocol will put out and say, this is what we propose, comment on it. The problem there is in the view of many, it may be too late time to really be able to have significant impact. So what is happening now, Jon, is a much more informal, for lack of a better term, lobbying process going on. And this is allowed, there’s nothing that says a company or a group of companies, and there are coalitions doing this. I’m happy to talk about, to weigh in with the technical working group with its oversight committee, which is called the Independent Standards Board,

(26:58):

And to express these concerns about what these changes might do to the voluntary market. That is a process which is available. The time to do that is now really between now and the end of the summer, but even more now than that. And you’re seeing companies do that. So there’s associations have weighed in aco, ciba, others like that. Individual companies have weighed in with the independent standards board on this and a lot more are preparing to do that. So even though there’s not a formal comment process open, that does not mean that there’s not a process available for interested stakeholders, be they developers or buyers to talk about and explain what this means to the actual marketplace. Because one of the criticisms you hinted at this of the technical working group that was put together was there were too few representatives of actual practitioners in the marketplace,

Jon Powers (27:55):

Right?

Roger Ballentine (27:56):

A lot of academics and some NGOs and others and some who do have a vested interest in a time and location matched regime around the working group. But I think it’s fair to say it was underrepresented by a larger scope of market participants, the folks who actually make the voluntary renewable market work. But all those folks be they developers, be they buyers, be they customers. There is an opportunity, and frankly in my view, a need for those voices to be heard soon over at the protocol.

Jon Powers (28:34):

Yeah, absolutely. And we’re going to make so much like clean capital. I bet a lot of folks out there, even if you had a policy shop, but a lot of folks don’t, are focused on Washington, right? If you’ve ever been to a hockey game and you hit a goal, they score. Usually there’s a big red siren that goes off. I wish we could do this on the online as we’re putting this podcast out. So folks pay attention to it as equally dangerous to what we’re doing as what’s happening in Washington today. So we’re going to publish a blog that’s on clean capital.com. We’re going to push it on LinkedIn, Roger and his team at Green Strategies as well. It’ll have some pointed directions on what you can do and maybe some easy actions you can take to help sort of raise the alarm with the folks making the decisions here to make sure that they’re making the right decisions. This is a critical time. We can’t wait until plus and September to raise the alarms. We need to be doing it all summer long. So once this is out, please share the podcast. Please share the blog. Hopefully there’ll be some easy actions you can take, whether it be emails or letters, et cetera, to engage and make sure that our market can continue. We’re facing enough headwinds already. We don’t need to shoot ourselves in the foot.

Roger Ballentine (29:50):

And I will do want to say, I think the folks who are promoting the current proposal, they think they’re doing the right thing. Their intentions I think are pure. But as our survey revealed, and in the many, many conversations I’ve had with folks in the marketplace like you, there’s great concern that that is in fact a dire wrong direction to move at this particular point in

Jon Powers (30:18):

Time. Yeah, I mean, look, there’s a single ear voice. When you have the demand side, the folks buying the power, they can demand certain things for sure, but when you’re as large without getting into their big company, it’s much easier them to say, Hey, we want a project in this space and we’ll pay this price for it. Most renewable buyers don’t have that. They’re looking for price. They’re looking for you to make it easy for them. The harder we make it, the less this will get done, and we’re going to be counter to all the climate efforts we’ve been pushing for the last decade, and we’re

Roger Ballentine (30:54):

Already, it’s time to make this easier, not harder. We really need it.

Jon Powers (30:58):

Absolutely. Any last words for folks in terms of timing?

Roger Ballentine (31:04):

Timing is now to soon. We expect to see some sort of update coming out of the technical working group in the next month or so. But deliberations are happening now and again, the ultimate authority here is not the working group, it’s whom they report to, which is the independent standards board. And that’s really where you see a lot of these communications going. It’s not hard to do to get a letter into them. Many companies are asking for personal meetings, and again, there’s nothing that stops the company from doing that as well.

But we need to hear more voices on this and we need to hear ’em soon.

Jon Powers (31:48):

Well lend your voice. This is being recorded just before Memorial Day 2025, and we’ll come out just probably after as we do a little social, push ’em around it. So action at the beginning of the summer, before you head on your summer break with your kids. We need to do this. As much as we’re lobbying in Washington today, we need to bring and look, as someone who’s been to DC every other week right now, bringing a voice of finance and developers, and that voice really matters to policymakers because as Roger mentioned, a lot of the folks that are doing this type of policymaking aren’t practitioners and often aren’t thinking about the implications beyond what they understand. So those voices can make a really big impact. So

Roger Ballentine (32:28):

Yeah, I agree.

Jon Powers (32:30):

Roger, thank you for raising this and thanks for championing it. We’ll continue to talk and share information out to folks. For folks that aren’t familiar with Green Strategies, can you tell me where they can learn more?

Roger Ballentine (32:40):

Yeah, sure. Green strategies.com. We are a strategic boutique sustainability consulting firm with a particular focus on clean energy and helping companies set energy and climate goals and execute on them. And boy, it wouldn’t be good if that gets harder to do. We want to help companies move forward. And I just want to say thanks to you, Jon, and the thought leadership and market leadership that Clean Capital provides because you guys are very, very important and credible voice on this. So thank you for what you’re doing.

Jon Powers (33:14):

Thanks, I appreciate that, Roger. You can always get more episodes@cleancapital.com of experts only. I know we’ve been a little bit of a hiatus and we’ve got a bunch of recordings coming out over the summer because it’s a busy time for us. We’ll be posting that blog as well and pushing it out on social media and LinkedIn. Wanted to thank Jessica Johnson on our team who’s been working with Roger to raise awareness within the buyers community. And Colleen Young, who’s our producer and experts only for all the work she does, putting this together. Roger, thanks so much for being here.

Roger Ballentine (33:44):

Thank them as well. Thank you, John. Thanks for having me.

Jon Powers (33:46):

Absolutely. I look forward to continuing the conversation. I do as well. Thanks.