Looking forward to 2025

Decarbonization at the tipping point

It’s worth recognizing that the final few months of 2024 were pretty dismal for anyone working in climate. There may have been worse scenarios imaginable, but the trifecta of electoral, policy, and climatological losses were enough to make even the most ardent optimists wonder what the future will entail. The harder truth is that none of these trends seem likely to be reversing in 2025.

Still, there are silver linings in these storm clouds, the most encouraging of which reflect efforts by companies to build enduring competitive advantages by taking advantage of climate-positive technologies like batteries, heat pumps, and distributed solar.

We took notice of this early last year after launching WEATS, which we had intended as a system of record for the OpenEAC Exchange. It turns out that quite a few other companies had been imagining how they could utilize a system of record to prove the impact of their own innovations. I don’t think I had quite realized how much of a problem this was for the broader industry. We definitely weren’t prepared to offer WEATS as a service at the time, as we were pretty focused just on getting transactions to work.

By the middle of 2024, once we were able to deploy revenue-grade granular certificate tracking, we set out to make WEATS the system of record for all types of energy decarbonization projects, not just the transactions of the OpenEAC Exchange, so that the entire industry could have access to better data infrastructure to prove carbon emission reductions.

Now, as we move into 2025, I want to take the opportunity to reflect on the most exciting of the use cases for EACs and where we expect the most progress to be made in the coming year.

1. Selling EACs to fund clean energy projects

The most obvious use case for EACs is selling them to raise money for decarbonization projects. As flawed as the concept of a carbon offset is, and as deeply corrupt as the nature-based carbon-offset-industrial-complex has become, there is a simplicity to the notion that the environmental benefits of a decarbonization project can be quantified and priced. We can either do this through public programs (using taxpayer dollars to fund incentives) or voluntarily through corporate net zero commitments to purchase EACs. Until we put a price on carbon to encourage a shift away from fossil fuels, we have to find carrots to achieve the desired result. Corporate purchases of EACs in the $50-$100/ton range can massively improve the economics of energy decarbonization projects and make it possible to dramatically increase the pace of the energy transition.

2. Using EACs to prove clean energy

Granular certificates that attest to the time and locational generation of electricity (along with details about the renewable energy source or generation mix, the prevailing carbon intensity of the grid at the time, the commercial operation date of the system, and other attributes) are becoming foundational for the clean energy economy. Utilities are providing this data to customers to prove the delivery of clean energy; the federal government has required EACs for green hydrogen producers who want to claim tax credits; and companies who provide services using clean energy are using EACs to ward off claims of greenwashing.

We are most excited about companies that are using clean energy to create competitive differentiation. These companies are doing things like powering their buildings and data centers with 24/7 carbon-free energy, providing electric vehicle charging that’s sourced from clean energy instead of the dirty electricity from the local grid, shifting away from fossil fuels for industrial processes, and more. To avoid greenwashing accusations, these companies are turning to EACs to prove their impact. Imagine running an AI algorithm on 100% carbon-free energy or charging your commercial vehicle fleet from a battery powered by connected solar panels. If you offer a superior product, your customers will reward you with loyalty, especially if that product is genuine in its claims.

3. Leveraging EACs for clean energy finance

More than anything else, the energy transition suffers from a finance problem. Our industry still mostly uses the playbook of asset-backed finance and consumer lending, meaning that risk gets incorporated into interest rates and paid for by the end user. Energy cost savings are often completely wiped out by interest payments made to the lender and the customer ends up seeing very little benefit from doing the project.

The Greenhouse Gas Reduction Fund (GGRF) portion of the Inflation Reduction Act will address this problem by providing substantial liquidity for state green banks, but we need additional trillions of dollars of capital to be deployed in the next decade.

Over the past year we’ve been working on a concept we call Green Equity Finance, which effectively trades the rights to EACs for a deferment of interest payments. If you are a company with a large balance sheet, you can loan money directly to clean energy projects and earn the rights to the EACs instead of taking interest on your loan. This serves to reduce the cost of capital in absolute terms (the corporate rate is substituted for the consumer rate) as well as in relative terms (the project cost goes down by as much as 30%). It also means that the costs of EACs are quite low relative to other options and the “additionality” impact is quite high.

How WattCarbon Fits In

All of these EAC use cases depend on rigorous measurement and verification and a system of record. Without these pieces, there is no way to validate that the action being taken is achieving its intended results, and no way for an organization trying to achieve its decarbonization goals to make a credible claim. Both existing and future decarbonization investments will need to be justified; without a system of record and proof of impact these investments will face scrutiny and face the threat of cancellation.

WattCarbon is working side-by-side with organizations that want to keep pushing forward on the clean energy transition and prove the business case for climate-forward technologies. Our system of record and the M&V behind it are proving critical in the validation of EACs that are sold to raise money for projects; for the claim that clean energy is being delivered; and for the finance innovations that are so critical for making clean energy investment affordable. We are looking forward to 2025!