The latest report from the Sierra Club paints a sobering picture of the U.S. utility sector’s transition to clean energy. The Biden administration set an ambitious goal for the U.S. power sector to fully decarbonize by 2035. However, the report finds that the 50 utility parent companies with the most significant fossil fuel investments are only on track to reach 52% clean energy by that deadline. 

The Sierra Club analysis suggests that the gap between current plans and the federal decarbonization goal could delay efforts to mitigate climate change impacts.

Decarbonization Dreams or Delays?

The Biden administration set a clear target in early 2021, aiming for the U.S. power sector to achieve net-zero emissions by 2035. Achieving this target is crucial for limiting global warming and avoiding the most severe consequences of climate change. 

However, the Sierra Club’s report reveals that utilities currently relying heavily on coal and natural gas are not on track to meet these goals. Instead, many of these companies plan to add significant new natural gas capacity, totaling 93 gigawatts (GW) by 2035.

This expansion is reflected in data from S&P Global Commodity Insights, which indicates an increase in planned natural gas projects in the U.S. As of September 2024, 148 new natural gas-fired power plants were either announced or under development, up from 133 projects recorded in late April. 

This growing investment in natural gas raises concerns about the power sector’s ability to transition away from fossil fuels. It can also impact if the sector can meet its 2035 clean energy target.

RELATED: U.S. Natural Gas Prices to Jump 44%: What’s Driving the Surge?

Utility Report Card: Who’s Leading, Who’s Failing?

The Sierra Club’s report evaluates a wide range of utilities, including investor-owned utilities, public power providers, cooperatives, and large municipal utilities. The analysis focuses on three key metrics: 

plans for phasing out coal by 2030, 
halting the construction of new natural gas plants by 2035, and 
scaling up clean energy resources by 2035. 

Utilities were graded on their progress, with several prominent companies receiving failing marks. Among those receiving an “F” rating were Southern Co., PPL Corp., and Duke Energy Corp. 

Visual from Sierra Club report

According to the Sierra Club, these companies have made inadequate progress toward their decarbonization goals and continue to invest in fossil fuel infrastructure. Xcel Minnesota, on the other hand, gets an “A” for its clean energy transition plan.  

While some utilities acknowledged the findings of the report, they emphasized the complexities of transitioning to a cleaner energy mix.

For example, Duke Energy spokesperson Madison McDonald acknowledged the challenges ahead, noting that the company aims to reduce carbon emissions by at least 50% by 2030, compared to 2005 levels, and reach net-zero emissions by 2050. McDonald highlighted the importance of balancing short-term fluctuations in emissions as the company retires coal plants and brings new energy sources online. 

When State Policy Clashes with Climate Ambitions

The Sierra Club’s analysis also highlights instances where utilities have rolled back previously announced climate targets. FirstEnergy Corp., for example, announced in late 2023 that it would not meet its goal of reducing greenhouse gas emissions by 30% by 2030. The company cited state policies as a significant factor, explaining that it had to extend the operations of its two coal-fired plants in West Virginia to align with local energy policy priorities.

FirstEnergy’s spokesperson, Tricia Ingraham, pointed to West Virginia’s support for maintaining coal generation, emphasizing that reducing coal-fired output for environmental reasons would be inconsistent with state energy policy. This scenario underscores the tension between federal climate goals and state-level policies, which can complicate the path to decarbonization.

Clean Energy Momentum and Barriers

Despite the challenges highlighted in the report, there are some positive trends in the U.S. power sector’s transition to clean energy. According to the U.S. Energy Information Administration (EIA), over 40% of U.S. electricity currently comes from carbon-free resources. These include renewables like wind and solar, as well as nuclear energy. 

This is also echoed by Sarah Durdaller, a spokesperson for the Edison Electric Institute. Durdaller emphasized that achieving the 2035 target will require collaboration between environmental groups, industry leaders, and government entities to overcome obstacles such as building transmission infrastructure.

Another study by the Pacific Northwest National Laboratory (PNNL) suggests that completing 12 high-voltage electric transmission projects in the US West could significantly cut carbon emissions, reducing power-sector emissions by 73% from 2005 levels by 2030.

The study emphasizes the importance of renewable energy and improved transmission infrastructure in achieving national climate targets, including President Biden’s goal of a 100% carbon-free power system by 2035. These projects are seen as vital for connecting renewable energy sources to the grid and accelerating the transition to a cleaner energy future.

Improving grid resilience and expanding transmission capacity are seen as essential steps in making the power sector more sustainable.

Rural Energy Revolution: Will Co-Ops Catch Up?

The report also turned its focus to electric cooperatives, which supply power to many rural communities across the United States. These cooperatives, many of which are still heavily reliant on fossil fuels, generally received low grades in the analysis. 

Still, the increase in renewable energy adoption among cooperatives is a sign that even these smaller players are beginning to embrace cleaner energy solutions.

The Sierra Club’s report highlights a significant disconnect between the U.S. utility sector’s current trajectory and the federal government’s 2035 decarbonization goals. While some progress has been made in adding renewable energy capacity, the planned expansion of natural gas generation poses a major hurdle to achieving a fully decarbonized power sector.

The study underscores the need for more ambitious actions and policies to steer utilities away from fossil fuel dependency and toward a cleaner, more sustainable America.

READ MORE: Powering the West: How Transmission Projects Can Slash Power-Sector Emissions by 73%

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Despite the promising outlook, many hydrogen projects are still in the early stages. Moreover, some face delays or cancellations due to these barriers, including permitting challenges. 

Electrolyzer Expansion: Powering the Future of Green Hydrogen

Analysts from S&P Global Commodity Insights report that 1.2 GW of electrolyzer capacity is operational globally, and 2.1 GW began construction in Q2 2024, with 1.5 GW of this growth happening in China.

The country accounts for over 40% of recent FIDs and is home to 60% of global electrolyzer manufacturing capacity, which currently stands at 25 GW annually.

The IEA projects that by 2030, electrolysis-based hydrogen production in China could be cheaper than hydrogen from coal. This is assuming that the global project pipeline is realized. 

Image from the IEA Report

IEA Executive Director Fatih Birol emphasized the need for stronger demand-side incentives, warning that current demand targets lag far behind government production goals.

The report calls for policies such as carbon contracts for differences and sustainable fuel quotas to stimulate demand. It also warns that the progress made in the hydrogen sector so far is insufficient to meet climate goals, citing stalled cost reductions due to high raw material and energy prices.

Hydrogen production costs could potentially halve to between $2/kg and $9/kg by 2030 under the IEA’s Net-Zero Emissions by 2050 scenario, closing the price gap with “gray” hydrogen. However, under existing policies, the cost is expected to drop by just 30%.

Global hydrogen demand rose to 97 million metric tons in 2023, mostly in refining and chemicals. However, only 1 million metric tons came from low-emission sources. 

The IEA estimates that low-carbon hydrogen production could reach 49 MMt/y by 2030. Yet, achieving this would require an unprecedented annual growth rate of over 90%, a rate even higher than solar power’s fastest growth phase. 

Various challenges like financing, regulatory issues, and permitting delays continue to put the project pipeline at risk. Amid these hydrogen production challenges and projections, a big player in the industry continues to show impressive growth.  

Nikola’s Hydrogen Trucks Hit the Road Amid Industry Challenges

Nikola, a leader in producing zero-emissions hydrogen fuel cell trucks with its HYLA brand, saw a 22% increase in wholesale deliveries of its hydrogen-powered electric trucks during the third quarter. This achievement signals steady demand for the company’s Class 8 hydrogen fuel cell trucks. 

The company delivered 88 trucks to dealers, a record sales quarter, meeting its target of 80 to 100 units. However, it fell short of the 80% surge in deliveries seen in the second quarter. 

The Phoenix, Arizona-based company continues to see demand for its hydrogen-powered trucks. As of the 3rd quarter, Nikola has delivered 200 hydrogen fuel cell trucks in 2024, aiming to meet its full-year target of 300 to 350 trucks. 

Since launching sales in the 4th quarter of 2023, the company has sold a total of 235 trucks. Nikola remains on track to complete the rollout of revamped battery-electric trucks by the end of the year.

RELATED: Nikola’s HYLA Stations Are Supercharging the Hydrogen Revolution

Nikola CEO Steve Girsky highlighted the importance of this achievement, saying:

“Despite overall market headwinds, Nikola remains focused on our mission to pioneer solutions for a zero-emission world, and we’re doing it one truck at a time.”

Economic Setbacks and Project Delays

While the hydrogen fuel cell company strives through market turmoil, some major developers have scaled back or canceled their green hydrogen projects due to economic hurdles. 

Origin Energy, for example, scrapped a hydrogen project in Australia, citing slow market development and high input costs. CEO Frank Calabria explained that technological advancements are still needed to make the investment viable. 

Similarly, Norway’s Nel ASA saw a large U.S. order canceled by Hy Stor Energy, reflecting broader industry hesitation. Michael Liebreich, an industry analyst and investor, sees this as a healthy shift, with unfeasible projects being abandoned to focus on more economically sound ventures. 

Despite the setbacks, clean hydrogen production is expected to grow by over 40% in 2024, though it will still account for just 1% of global hydrogen demand. While the long-term potential remains, the industry is recalibrating expectations as it faces significant financial and technological challenges.

What’s The Road Ahead for Green Hydrogen?

The hesitation around green hydrogen is partly due to uncertainty regarding the U.S. Treasury’s rules for the 45V hydrogen production tax credits. These credits were created under the Inflation Reduction Act (IRA) to incentivize clean hydrogen production. Developers have delayed their commitments to green hydrogen until these rules are finalized. 

Initially, green hydrogen advocates saw the IRA as a significant opportunity, believing that its clean fuel tax credits would make electrolysis-based hydrogen production cheaper than conventional methods. Yet, nearly all of today’s hydrogen supply is derived from natural gas without carbon capture technology, highlighting the slow transition to green hydrogen. 

A study by McKinsey & Co., commissioned by the Hydrogen Council, found that 85% of committed hydrogen production capacity in North America through 2030 is tied to carbon capture projects.

While the 45V tax credit is technology-neutral, analysts have noted that incentives for electrolysis are more attractive than those for carbon capture. However, developers of blue hydrogen projects have benefited from carbon capture tax credits under the expanded 45Q program. It offers up to $85 per metric ton of CO2 captured.

While blue hydrogen is gaining ground, the global pipeline for green hydrogen is also expanding, particularly outside the U.S. 

Companies like Air Products and CF Industries have proposed green hydrogen projects in the U.S. but have yet to make final investment decisions. Interestingly, Air Products supports the Biden administration’s proposed tax credit requirements, which mandate that hydrogen plants source electricity from new zero-carbon generation facilities. Nonetheless, the company has delayed its $4 billion green hydrogen project in Texas pending the final tax credit rules.

Despite the promising growth in electrolyzer capacity and hydrogen production, significant challenges like regulatory uncertainty and economic hurdles persist. While companies like Nikola are making progress, the road to large-scale green hydrogen adoption remains complex and uncertain. The future will depend on clearer policies and more competitive technologies.

SEE MORE: Microsoft and ESB Launch Groundbreaking Green Hydrogen Pilot to Decarbonize Dublin Data Centers

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The mining industry faces a critical supply shortage of key metals, despite growth in supply over the past decade. According to BloombergNEF’s Transition Metals Outlook, the world needs $2.1 trillion in new mining investments by 2050 to meet the demand for clean energy technologies. It further illustrates that essential metals like aluminum, copper, and lithium could face deficits as early as this year, which might make EVs, wind turbines, and other low-carbon technologies more expensive.

Kwasi Ampofo, head of metals and mining at BNEF and lead author of the report said,

“The prolonged deficit of these metals will lead to higher prices for raw materials, which increases the cost of clean energy technologies. High costs could slow their adoption, and the energy transition at large”

Interestingly, BloombergNEF’s Economic Transition Scenario (ETS) highlights, that between 2024 and 2050, the world will need about 3 billion metric tons of metals to drive the global energy transition. It further estimates that achieving net zero emissions by 2050 could push that demand to 6 billion metric tons. This means this can spike metal prices and slow the progress of green technologies.

Recycling Metals, A Viable Solution for Supply and Emissions

However, BNEF says recycling metals can ease supply pressures. Sooner, recycled materials will play a crucial role in the supply chain, which will also reduce overall emissions from production.

According to Allan Ray Restauro, a metals and mining associate at BNEF,

“Good government policies are crucial to the industry’s success. For batteries and stationary storage, governments need to establish collection networks, set the requirements for recovery rates, develop the frameworks to trace individual cells and provide the principles on second-life battery management. These actions can build a robust system that oversees the full lifecycle of battery metals.”

Decarbonizing Mining for a Low-Carbon Future

As the world moves toward a low-emissions economy, resource-rich countries face a tough challenge: reducing emissions while developing their mining sectors. This is because the mining industry is significant for supplying minerals needed for clean energy technologies. Sadly, mining still contributes to global emissions, especially in coal extraction.

Minerals used in selected clean energy technologies

Source: IEA, 2022, p. 6. CC BY 4.0

Countries like Chile are showing progress by using renewable energy in mining operations, but many developing nations struggle to balance growth, sustainability, and emissions goals. In this regard, governments must adopt policies that decarbonize mining while ensuring economic growth and meeting Paris Agreement targets. Countries that implement strong climate policies along with robust financing are the ones to succeed in their global commitments.

RELATED: Driving Decarbonization: Rio Tinto and Green Lithium to Boost EU Lithium Supply 

Southeast Asia Set to Lead in Metal Demand Growth

Certainly, the demand for energy transition metals will vary by region. The research indicated that Southeast Asia is poised to become the fastest-growing market for these materials in the 2030s. The region’s vast mining industry could benefit from this demand surge, helping to accelerate industrialization while contributing to global emissions reductions. Conversely, China’s consumption outpaced the global average between 2020 and 2023. The country’s consumption of transition metals is expected to peak by 2030.

In summary, a $2.1 trillion investment in mining is crucial to meet the global push for clean energy. As metal supplies tighten and prices rise, recycling and supportive policies will be essential to keeping the energy transition on track.

MUST READ: Alaska Energy Metals Pioneers A Model of Carbon-Neutral Mining 

Silver Surges as Coeur Mining Acquires SilverCrest

Coeur Mining is making a strategic move to strengthen silver in the industry. In a $1.7 billion all-share deal, Coeur is set to acquire Canadian silver producer SilverCrest, adding the high-grade, low-cost Las Chispas mine in Mexico to its portfolio.

With this acquisition, Coeur has all the potential to become a major global silver producer, aiming to produce 21 million ounces of silver and 432,000 ounces of gold annually. The Las Chispas mine, which began production in late 2022, has over 10.25 million silver equivalent ounces produced in its first full year of operations. Coeur’s CEO Mitchell J. Krebs highlighted the mine’s strong operational performance and low cash costs of $7.73 per ounce.

The press release reported, that in this partnership Coeur will have a 63% share, and SilverCrest will hold 37%. The acquisition price of $11.34 per share offers an 18% premium to SilverCrest’s recent trading levels. Both companies’ boards have endorsed the deal, which is expected to close in Q1 2025 as regulatory and shareholder approval is pending.

Rising Silver Demand and Market Consolidation

According to the United States Geological Survey (USGS), Mexico led global silver production in 2022, producing an estimated 6,300 metric tons of silver. This output far surpassed China, the second-largest producer, with 3,600 metric tons.

While Mexico dominates in production, Peru holds the largest silver reserves globally, with 98,000 metric tons. Australia follows closely, with reserves totaling 92,000 metric tons. Peru’s stable silver output is supported by its vast reserves and advanced mining infrastructure.

In 2023, silver prices jumped nearly 35% due to heightened demand for solar energy and electronics. This surge has triggered significant mergers in the silver mining sector, including Coeur Mining’s $1.7 billion acquisition of SilverCrest and First Majestic’s $970 million purchase of Gatos Silver. Despite these moves, the market grapples with supply shortages, intensifying the race for reserves. On a positive note, Coeur’s acquisition should be a ray of hope for the global silver industry.

RELATED: Silver Lining: Soaring Demand Outstrips Supply, Pushing Prices to The Roof 

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Fortescue Metals Group is forging ahead with its bold plan to achieve “real zero” emissions by 2030, a move that could generate substantial financial rewards under the Australian government’s new carbon credit scheme. This initiative, known as Safeguard Mechanism Credits (SMCs), is part of the Albanese government’s broader strategy to incentivize businesses to cut emissions and meet the country’s climate targets. 

If Fortescue succeeds in meeting its ambitious emissions goals, it could earn between $50 million and $150 million annually from selling the carbon credits.

Fortescue’s Bold “Real Zero” Ambition

Chairman Andrew Forrest has made it clear that Fortescue’s ultimate goal is to achieve “real zero” by eliminating all Scope 1 and Scope 2 emissions from its iron ore mining operations by 2030. This is distinct from “net zero,” where companies can rely on carbon offsets to balance out hard-to-abate or unavoidable emissions. 

Forrest is a long-time critic of carbon offsets and suggests they do little to drive actual reductions in emissions. Instead, Fortescue’s focus is on achieving genuine emissions reductions through the transformation of its operations.

The mining giant’s commitment to decarbonization includes an extensive plan to overhaul its energy sources, transitioning from fossil fuels to renewable energy to power its operations. Fortescue estimated in 2022 that achieving “real zero” in its Pilbara mining district would require an investment of $US6+ billion. 

The company’s strategy also involves the electrification of its mining fleet, investments in green hydrogen, and innovative technology solutions to reduce its carbon footprint.

Despite Forrest’s aversion to carbon offsets, Fortescue’s progress toward “real zero” could lead to the company becoming a major beneficiary of the Safeguard Mechanism Credits program. 

RELEVANT: ASX Debuts Environmental Futures Contracts for Carbon Markets

The Clean Energy Regulator will allow companies to earn carbon credits if they exceed their mandated emissions reduction targets. For Fortescue, this could mean generating around 1.4 million SMCs by 2030. This is because its projected emissions could be significantly lower than the regulatory allowance for its iron ore production.

What is The Safeguard Mechanism Credits Scheme?

The Safeguard Mechanism, set to begin in 2024, is a key component of the Albanese government’s strategy to reduce national greenhouse gas emissions. The program rewards companies that cut their emissions beyond the required levels by granting them SMCs. These credits can then be sold to other companies that fail to meet their emissions reduction targets, creating a market-based approach to driving climate action. 

Analysts project that the value of these credits could be substantial, with a government-imposed ceiling price of $75 per tonne.

If Fortescue succeeds in its decarbonization plans, it could generate tens of millions of dollars by selling SMCs to companies struggling to meet their own emissions reduction targets. According to projections, the miner will be permitted to emit around 1.4 million tonnes of carbon dioxide by 2030. 

However, if the company manages to achieve its “real zero” goal, it will have cut all emissions. And thus, it could earn 1.4 million credits in that year alone. Given the price of $75/tonne, that could total about $105 million worth of carbon credits. 

While the financial windfall from selling SMCs is attractive, Fortescue hasn’t yet decided whether to participate in this carbon market. 

Andrew Forrest said that Fortescue is still finalizing its position on the Safeguard Mechanism, noting that:

“We will do this consistent with our broader approach to voluntary and compliance carbon markets, which is that the core focus must always be the delivery of real reductions in emissions.”

He reiterated that Fortescue’s core focus remains on achieving genuine emissions reductions, not on offsets or carbon capture technologies.

Decarbonization Challenges Amid Rising Emissions

Fortescue’s path to achieving “real zero” is fraught with challenges. While the company is making strides in decarbonizing its operations, it still has a long way to go. 

In the year to June 2024, Fortescue’s Scope 1 and Scope 2 emissions—the direct emissions from its mining activities and those associated with its energy use—rose by about 7%. This increase in emissions led to the company exceeding its government-mandated emissions cap by about 120,000 tonnes. Therefore, the iron miner was forced to purchase $4.2 million worth of Australian Carbon Credit Units (ACCUs) to comply with the law.

Visual from Fortescue Climate Transition Plan report

Despite the setbacks, Fortescue has reaffirmed its commitment to decarbonization and has emphasized that it will only purchase carbon offsets when legally required. The company insists that it will not rely on carbon credits to achieve its 2030 target. It will remain focused on reducing emissions at the source. 

The company has also pledged not to rely on carbon capture and storage (CCS) technologies, which it views as an insufficient solution for addressing the climate crisis.

Rival Approaches in the Mining Industry

Fortescue’s aggressive push toward “real zero” stands in contrast to some of its competitors in the mining industry. Rival miner Rio Tinto, for instance, has set a target to halve its carbon emissions by 2030, at an estimated cost of $US6 billion. 

Rio Tinto has been in major partnerships recently with its lithium expansion. Still, though Rio Tinto’s plans are substantial, they do not match the level of ambition shown by Fortescue, which is aiming for complete decarbonization in the same time frame.

Fortescue Metals Group’s “real zero” target is a landmark initiative that could set a new standard for the mining industry. It can also generate significant financial benefits through Australia’s Safeguard Mechanism Credits program. The company’s commitment to genuine emissions reductions, combined with its potential to earn millions from selling carbon credits, makes Fortescue a key player in the global transition to a low-carbon economy. 

READ MORE: Fortescue Launches Innovative Green Metal Project in Australia, Fueled by Green Hydrogen!

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