Why Copper Prices are Surging and What to Expect

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The surge in copper demand is driven by its pivotal role in renewable energy generation, electric vehicles, and grid infrastructure crucial for achieving net zero emissions. Market dynamics and global supply concerns have propelled copper prices upward, with top companies witnessing significant growth.

Copper Surge and Market Dynamics

One key event that influenced copper market dynamics was the closure of the Cobre Panama mine, a substantial global copper source. This closure shifted market expectations from surplus to deficit, contributing to the upward trajectory of copper prices. 

Additionally, in March, Chinese smelters decided to reduce output amid a concentrate shortage, further boosting prices.

Market analysts attribute this trend to a combination of speculative buying and genuine supply constraints, suggesting the potential for a sustained bullish market for copper. Many copper-focused equities are currently trading at or near their 52-week highs, indicating investor confidence in the sector’s future prospects.

While the rally in copper prices is encouraging for investors, analysts caution that the market needs to validate this trend beyond short-term momentum. The sector’s performance could significantly impact earnings, particularly if copper maintains its price above $4 per pound.

Copper’s significance in the transition to net zero emissions cannot be overstated. Its indispensable properties, including high electrical conductivity, thermal efficiency, and recyclability, make it vital for renewable energy systems, electric vehicles, and infrastructure development.

RELEVANT: Copper’s Price Breakout and Big Role in a Net Zero World

Renewable energy technologies, such as solar photovoltaics and wind turbines, require significant amounts of copper for efficient transmission and distribution of electricity. Electric vehicles also rely heavily on copper for components like motors, inverters, and electrical wiring.

Despite its critical role, the demand for copper is projected to outpace supply growth, leading to concerns about potential shortages. Addressing these challenges requires strategic investments in copper production and recycling to support the global shift toward sustainable energy sources and achieve net zero emissions goals.

Driving Decarbonization Efforts

Despite the availability of more cost-effective alternatives like aluminum, copper remains unparalleled in its efficiency and effectiveness for various applications critical for decarbonization efforts.

From household appliances to EVs and renewable energy infrastructure, copper is everywhere. The average car contains about 65 pounds (29 kilograms) of copper, while a typical household boasts over 400 pounds. 

However, it’s in the construction of advanced grid systems capable of managing electricity from decentralized renewable sources where copper truly shines. Solar and wind farms, covering vast areas, require more copper per unit of power generated compared to traditional power stations.

READ MORE: Copper and the Need to Meet the World’s Rewiring Demand for Energy Transition

To meet ambitious net zero targets by 2035, annual copper demand may need to double to 50 million metric tons, according to industry estimates. Even conservative projections anticipate a one-third increase in demand over the next decade, driven by substantial investments in decarbonization initiatives by both public and private sectors.

However, meeting this escalating demand poses significant challenges. While copper recycling is increasing, it’s unlikely to suffice, leaving primary mining as the primary source. Yet, expanding copper mining faces obstacles. 

Ore grades are declining, necessitating more extensive mining operations to yield the same output. Moreover, environmental concerns surrounding mining activities dampen investment enthusiasm.

Still, the surge in copper prices has heightened speculation about a potential supply crunch. Addressing an expected annual supply shortfall of 8 million tons over the next decade could require a staggering $150 billion investment, according to estimates. However, reaching such investment levels would likely necessitate copper prices to reach record highs.

Market experts further observed that while global demand for copper will rise, growth rates vary significantly across different regions. They underscored that regional macroeconomic conditions typically influence copper demand, as shown in the map below. 

Factors Affecting Copper Prices in 2024 and Beyond

The uncertainties surrounding China’s economic recovery, particularly the challenges in the property sector evidenced by the liquidation order against China Evergrande Group, pose a significant headwind for copper prices in 2024. 

Despite expectations for additional stimulus, the Chinese government opted for a growth target of 5%, emphasizing “high-quality development.” The International Monetary Fund (IMF) projects China’s economic growth to slow to 4.6% in 2024.

Chinese copper smelters have initiated production cuts to address raw material shortages, indicating potential supply constraints. Meanwhile, the US Federal Reserve’s monetary policy decisions are closely monitored, with expectations of rate cuts potentially impacting copper prices.

Analysts forecast an upward trajectory for copper prices in 2024 and beyond, driven by supply-demand imbalances, the US rate-cutting cycle, and increasing demand from the green energy sector.

BMI projects copper to average $8,800 per ton in 2024, while ANZ Research expects $8,950 per ton.

Looking ahead to 2025, analysts anticipate continued price growth, with BMI projecting $9,300 per ton, while ING forecasts around $9,050 per ton. Long-term copper price forecasts are uncertain but are expected to remain high due to increasing demand driven by the energy transition, particularly in EVs and renewable power.

As copper increasingly shapes global economic dynamics, nations are vying for access to limited future supplies, particularly considering that a significant portion of copper ore is mined in Latin America and Africa. This underscores the strategic importance of securing domestic or friendly sourcing and refining capabilities for essential metals like copper.

As renewable energy infrastructure and electric vehicle adoption continues to expand, strategic investments in copper production and recycling are crucial to meet growing demand and achieve net zero emissions goals.

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Constellation Energy to Pursue New Nuclear Power for Data Centers

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Constellation Energy Corporation, the biggest nuclear power operator in the United States, is exploring the possibility of constructing new nuclear capacity at its existing reactor sites to meet the growing demand from data center customers. 

Power Surge: Meeting Data Centers’ Demand

Amid the generative artificial intelligence (AI) gold rush, renewed discussions about longstanding power sources for data centers have emerged. 

McKinsey’s recent forecast predicts a significant surge in data center power consumption in the U.S., from 17 gigawatts (GW) in 2022 to 35 GW in 2030. This growth is attributed in part to the increasing use of higher-power chips for demanding workloads such as AI. 

The rise in power consumption per rack, from 10 kilowatts to over 60 kilowatts, has led to a doubling of overall campus capacity from 50 megawatts to over 100 megawatts over the past 5 years.

Notably, certain data center hubs like Ashburn in Northern Virginia have reached their power capacity limits. They are no longer able to accommodate requests for additional capacity. Market experts highlighted that power is the industry’s biggest challenge. 

Data centers are notorious energy consumers, with a single hyperscaler’s data center consuming as much power as 80,000 households. This has put huge pressure on the industry to adopt sustainable practices, leading to the imposition of sustainability standards by regulators and governments on newly constructed data centers. 

RELEVANT: Data Centers Power Demand Fuel U.S. Utility Q1 Earnings Discussions

For investors, this presents opportunities to support data centers in securing low-carbon energy supplies. And this is where nuclear power could play a role. 

Constellation Energy CEO Joseph Dominguez mentioned considering small modular reactors (SMRs) or other technologies and expressed interest in a multi-tiered structure with tech companies like Microsoft and Google to fund site development and construction.

The partnership aims to accelerate the development of various projects by developing new commercial structures. These include advanced nuclear, next-generation geothermal, clean hydrogen, and long-duration energy storage.

Tech Giants and Nuclear Solutions

The S&P 500 company plans to perform due diligence and achieve regulatory milestones before the electricity supply is needed. Dominguez said that they have potential projects ramping up by 2026-2028. He further added that: 

“We’re in advanced conversations with multiple clients, large — well-known companies that you all know — about powering their needs… While we’re not done yet, I do expect that we will finalize agreements that will have long-term and transformational value.”

They have customers interested in behind-the-meter capacity and are exploring options with existing assets like the Calvert Cliffs, Salem, LaSalle, Limerick, and Peach Bottom plants. 

Top hyperscalers, including Amazon‘s AWS, Microsoft, Meta, and Alphabet, continue to expand their data center presence. In March, Talen Energy sold a 960-megawatt data center campus to AWS for $650 million on its Pennsylvania nuclear facility.

Constellation Energy’s CEO remarks coincide with the company’s remarkable Q1 earnings, which surged by 858% to $2.78 per share. Despite a revenue decline of 18% to $6.16 billion, adjusted earnings grew by 133% to $1.82 per share. This beat analysts’ expected earnings per share of $1.30 and total sales of $6.62 billion.

The company’s stock is up over 80% in 2024. This year, it’s one of the best-performing stocks in the S&P 500 index, right next to Nvidia and Super Micro Computer.

The U.S.’ largest nuclear power plant operator also reiterated its full-year adjusted earnings guidance of $7.23 to $8.03 per share. The company holds a significant stake, owning 25% of U.S. nuclear power reactors.

Additionally, it serves as an energy provider to over 20% of the major commercial and industrial customers nationwide.

Nuclear’s Role in Data Center Sustainability

To meet their carbon-free energy targets, data center operators increasingly enter into power purchase agreements (PPAs) with renewable energy suppliers. Meanwhile, major cloud providers are taking proactive steps to finance the construction of renewable energy facilities due to rising prices caused by supply constraints. 

For instance, Amazon has backed Scottish Power’s wind farm in the UK and committed to purchasing its entire 50-megawatt output.

However, relying solely on renewables presents challenges. Solar and wind power are intermittent, often requiring fossil fuel backups. Some companies explore “24/7” PPAs, combining carbon-free sources with stored renewable energy, but at a higher cost due to expensive storage technologies. 

While lithium-ion batteries are a developed backup solution, they can be costly over time. Emerging long-duration storage options like hydrogen and green ammonia energy could reduce costs but are still in the early stages.

Nuclear power offers a solution, providing reliable baseload power traditionally supplied by fossil fuels. As the sector commits to carbon neutrality, onsite nuclear power emerges as an ideal choice, meeting the energy needs of data centers efficiently and sustainably.

According to S&P Global Commodity Insights data, the following are the best nuclear plants that could provide power for data centers.

READ MORE: Could Merchant Nuclear Plants be the Savior of Power-Hungry Data Centers?

As data center power demands soar, Constellation Energy’s nuclear ambitions highlight the need for innovative energy solutions to support the digital revolution sustainably.

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Harnessing Carbon Capture: CapturePoint and Glencore’s Groundbreaking CCS Initiatives

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CapturePoint LLC has forged a strategic alliance with Energy Transfer LP to embark on a groundbreaking initiative to capture carbon dioxide (CO2) emissions from Energy Transfer’s gas processing facilities in Louisiana. 

Under the terms of the agreement, CO2 emissions from Energy Transfer’s Haynesville facilities will be directed to CapturePoint’s regional carbon storage project, known as the Central Louisiana Regional Carbon Storage Hub (CENLA Hub).

Capturing Emissions in A Game-Changing Alliance

According to Wood Mackenzie’s analysis last year, the current rate of carbon removal efforts is projected to sequester only 2 billion tonnes of CO2 by 2050, based on the base case scenario. This capacity for carbon capture corresponds with the trajectory outlined in the 2.5°C global warming scenario.

To meet the crucial 1.5°C warming threshold by midcentury, it’s estimated that 7 billion tonnes of carbon capture and removal are necessary. 

READ MORE: Carbon Capture to Urgently Scale to 7 Billion Tonnes/Year to Hit Net Zero

The partnership between CapturePoint and Energy Transfer is more than just the offtake agreement. The companies have also revised a letter of intent outlining a potential joint venture, stating that it,

“…reflect Energy Transfer’s recognition of the CENLA Hub as one of the most promising deep underground CO2 storage sites in the nation.”

In preparation for this ambitious endeavor, CapturePoint is in the process of securing state permits to drill 12 Class VI storage wells in Rapides and Vernon parishes. These wells will serve as the primary infrastructure for injecting CO2 deep underground, contributing to the mitigation of greenhouse gas emissions.

This venture would entail Energy Transfer co-owning and operating the CENLA Hub, signifying a significant commitment to advancing carbon capture and storage initiatives.

CapturePoint holds immense promise as a premier CO2 storage site. It can sequester up to two million tons of CO2 annually. Based on data from test wells, CapturePoint estimates that the hub’s total storage capacity could reach several hundred million tons, positioning it as a pivotal asset in the nation’s efforts to combat climate change.

The costs associated with carbon capture, transportation, and storage vary across different industrial applications. According to a 2023 study by the Energy Futures Initiative, natural gas processing ranks among the most financially viable applications, with a levelized cost of less than $40 per metric ton, further offset by federal tax credits.

Tracy Evans, CEO of CapturePoint, expressed confidence in the project’s potential, emphasizing Energy Transfer’s recognition of the CENLA Hub as a cornerstone of deep underground CO2 storage solutions. 

Laying the Groundwork for CCS in Australia

Over in Australia, Glencore is awaiting approval from Queensland for a significant carbon capture and storage (CCS) project. It aims to bury liquefied carbon dioxide deep underground. 

The proposal, valued at A$210 million (almost US$140), would pump CO2 from a coal-fired power plant into an aquifer, a move essential for achieving net zero goals, according to governments. However, farm groups oppose Glencore’s plan, citing potential risks to water supplies.

The Swiss commodities giant intends to conduct a three-year CCS pilot project, aiming to sequester 330,000 metric tons of CO2 from a local coal-fired power plant deep underground.

According to Glencore spokesperson Francis De Rosa, this initiative serves as a crucial test case for onshore CCS in Australia. He further added that it’s supported by robust data and analysis, with multiple government agencies endorsing the plan.

However, farm groups express concerns about potential groundwater contamination within the Great Artesian Basin, a vital water source for agriculture and communities. They fear that the injected CO2 could interact with the rock, releasing toxic substances like lead and arsenic.

Michael Guerin, representing AgForce farm association, deems the project “unthinkable” and initiated legal action to prompt federal review. Despite Glencore’s insistence on scientific merit, Queensland Premier Steven Miles voices skepticism, raising doubts about compliance with environmental regulations.

Environmental Innovations Down Under

The Queensland government is set to decide on Glencore’s environmental impact assessment by the end of May. If approved, the project would mark a significant step in Australia’s CCS landscape. 

Glencore asserts that its plan could eventually capture up to 90% of emissions from the Millmerran power plant, albeit currently targeting only 2%.

Managed by Glencore subsidiary Carbon Transport and Storage Corporation (CTSCo), the project has garnered investment from Japanese firms Marubeni Corp and J-POWER, indicating international interest and financial backing.

Australia’s CCS endeavors have been limited, with Chevron’s Gorgon LNG project being the sole active operation. However, with two more projects underway and 14 in development, CCS initiatives are gaining momentum. While aquifer storage for CO2 is increasingly adopted, stringent regulatory scrutiny ensures that only suitable sites are chosen.

Ultimately, the partnership between CapturePoint and Energy Transfer represents a significant step forward in pursuing sustainable carbon management strategies.

READ MORE: 2024 Would be a Strong Year for CCUS, Says Wood Mackenzie

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The World Needs $9T Annually by 2030 to Close Climate Finance Gap

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The importance of climate finance in driving green investments has never been more pronounced as highlighted by Avangrid’s True North solar project in Falls County, Texas. The project, benefiting from subsidies under the Inflation Reduction Act, reflects a growing trend towards climate-friendly initiatives supported by government incentives.

However, meeting global climate goals requires significant scaling up of investments in renewable energy, energy efficiency, and ecosystem restoration. The International Renewable Energy Agency estimates that an average of 11,000 gigawatts of renewable power capacity needs to be built annually until 2030, calling for substantial financial commitments.

Bridging the Climate Funding Gap

According to the Climate Policy Initiative, global climate finance needs to increase to about $9 trillion annually by 2030 to limit average global temperature rises in line with the Paris Agreement. Europe alone requires €800 billion in energy infrastructure investment to meet its 2030 climate targets. The region needs a total of €2.5 trillion needed for the green transition by 2050.

In 2021-22, climate financing reached almost $1.3 trillion, a significant increase from $364 billion in 2011-12. Most of this growth is attributed to mitigation finance, particularly in renewable energy and transport sectors. Notable increases are in clean energy investments in China, the United States, Europe, Brazil, Japan, and India. 

RELEVANT: US EPA to Invest $20B in Climate and Clean Energy Projects for Underserved Communities

However, adaptation finance lags behind, reaching only $63 billion in 2021-22. This is far from the estimated $212 billion needed by developing countries alone by 2030. Adaptation finance aims to enhance communities’ resilience to climate hazards, but funding falls short. 

Analysts estimate that the $9 trillion has to rise to over $10 trillion annually from 2031 to 2050.

To address this financing gap, governments are exploring various mechanisms, including wealth taxes, levies on shipping, and corporate taxes. For instance, the US plans to raise $300 billion over a decade through a minimum tax on corporate profits and a stock buyback tax to fund climate initiatives.

Ramping Up Climate Finance

The urgency of climate finance has been underscored by international commitments to phase out fossil fuels and triple renewable energy capacity by 2030. 

READ MORE: IEA’s 2023 Net Zero Roadmap: Tripling Renewables and Electrifying the Energy Transition

The upcoming COP29 conference in Baku, Azerbaijan, is expected to focus extensively on climate finance, particularly establishing global goals to support developing nations’ transition efforts.

The private sector has a significant role in financing the green transition (70%), but the public sector must also contribute. The International Energy Agency suggests that public finance will need to cover about 30% of global climate finance. Public funds should primarily focus on critical infrastructure and adaptation measures.

Governments are exploring various revenue-raising options, including carbon pricing mechanisms and taxes on fossil fuel extraction. Ireland’s carbon tax, for example, allocates increased revenues to climate-related investments and fuel poverty prevention.

Other countries are considering innovative financing approaches, such as windfall taxes on oil and gas companies and tourism taxes. Additionally, efforts are underway to phase out fossil fuel subsidies, redirecting funds towards climate action initiatives.

Navigating the Climate Financing Maze

Despite the financing challenges, energy strategist Kingsmill Bond argues that capital is available but must be deployed effectively. Intelligent regulation and incentives like the EU’s REPowerEU strategy can mobilize private investments in renewables and drive sustainable growth.

In developing countries, where financial constraints are more pronounced, international cooperation and concessional financing are crucial. Sovereign green bonds and climate finance frameworks aim to mobilize private sector investment and support green projects in emerging economies.

The authors of the CPI’s Global Landscape of Climate Finance 2023 report suggest that closing the funding gap is theoretically feasible, particularly given global spending trends. They point out that while global military spending reached $2.2 trillion in 2022 (SIPRI, 2023), emergency fiscal measures totaling $11.7 trillion were announced globally in response to the COVID-19 pandemic in 2020, according to the International Monetary Fund.

Source: CPI report

Moving forward, the CPI recommends addressing inequalities in current climate finance distribution. Despite agriculture and industry being significant emission sources, they received disproportionately low funding in 2021-22 relative to their mitigation potential. The report also emphasizes the importance of investing in emerging technologies like battery storage and hydrogen, highlighting untapped investment opportunities.

Ultimately, achieving a sustainable and resilient future requires concerted efforts from governments, businesses, and financial institutions. By shifting financial resources towards climate-friendly investments, the global community can accelerate the transition to a greener economy and mitigate the impacts of climate change.

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DOE Sets Eyes on Cutting Clean Hydrogen Cost, $1/Kilo by 2031

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The US Department of Energy (DOE) has outlined its research and development (R&D) priorities to achieve the ambitious cost targets for clean hydrogen set by the Biden administration. Renewable hydrogen production and storage, as well as technology for trucking applications, are among the key focus areas identified by the DOE’s Hydrogen and Fuel Cell Technologies Office in its Multiyear Program Plan.

Sunita Satyapal, director of the said Office, stated in a forward to the program plan:

“While the progress in clean hydrogen today is encouraging, it is also clear that more is needed… and the actions taken must be well-planned, deliberate, carefully executed with measurable outcomes, and they must come without delay.”

DOE’s Clean Hydrogen Roadmap 

The Inflation Reduction Act, enacted in August 2022, introduced tax credits of up to $3/kg for clean hydrogen producers over the initial decade of a project’s lifespan, depending on its carbon emissions lifecycle. This incentivizes clean or green hydrogen production, positioning it competitively against grey hydrogen from fossil fuels. 

The U.S. leads in green hydrogen production due to these tax credits and a $9.5 billion subsidy from the Infrastructure Investment and Jobs Act. The subsidy includes $8 billion to establish at least 4 regional clean hydrogen hubs.

Projections anticipate the cost of green hydrogen to decrease significantly by 2050, signaling its long-term viability, and encouraging further investment.

Source: KPMG International

The DOE aims to significantly reduce the cost of zero-emission hydrogen by targeting a price of $1/kilogram by 2031. This price includes production, delivery, and dispensation at fueling stations. An interim target of $2 per kilogram by 2026 has been set. 

The agency’s plan centers around the DOE’s “Hydrogen Shot” objective. It also seeks to decrease the cost of electrolyzer systems to $250-500/kW, lower the cost of fuel cell systems for heavy-duty transportation to $80/kW, and achieve a final dispensed cost of hydrogen fuel below $7/kg.

RELEVANT: Truck Companies Are Shifting to Hydrogen Fuel for Long-Haul Trips

Currently, hydrogen produced by electrolysis can cost at least $5 per kilogram, or up to $12 per kilogram when accounting for delivery and fueling station costs. Conventional hydrogen production from natural gas costs about $1.50 per kilogram but comes with a significant carbon footprint.

The near-term priorities outlined by the DOE include improving electrolyzer technology to achieve lower systemwide costs and increased durability. Additionally, research and development efforts will focus on hydrogen storage and transportation for heavy-duty vehicle applications, aiming to reduce costs and minimize leakage.

DOE Clean Hydrogen Production Pathways in the RD&D Portfolio

From DOE website

In the long term, the DOE sees opportunities in advanced hydrogen production methods that require minimal or no electricity input. These include solar photoelectrical chemical production and biological conversion. Materials-based hydrogen storage, utilizing absorbents or chemical carriers, is also a focus area for long-term research and development.

Toyota’s Renewable Hydrogen System

Over in California, FuelCell Energy and Toyota Motor North America recently celebrated the inauguration of the groundbreaking “Tri-gen” system at the Port of Long Beach. This innovative system uses biogas to generate renewable electricity, renewable hydrogen, and usable water.

The Tri-gen system was specifically constructed to support the vehicle processing and distribution center for Toyota at Long Beach. The facility is Toyota’s largest in North America, receiving about 200,000 new Toyota and Lexus vehicles annually.

The system showcases scalable hydrogen-based technology that reduces emissions and minimizes reliance on natural resources. Tri-gen’s fuel cell technology converts renewable biogas into electricity, hydrogen, and usable water with high efficiency and minimal pollution.

Moreover, Tri-gen produces up to 1,200 kg/day of hydrogen to fuel Toyota’s incoming light-duty fuel cell electric vehicle (FCEV) Mirai. It also supplies hydrogen to the adjacent heavy-duty hydrogen refueling station, supporting TLS logistics and drayage operations at the port.

California’s Advanced Clean Fleet Regulation mandates zero-emission trucks for newly registered drayage trucks. And Tri-gen is well-positioned to support the transition to zero-emission trucks, including FCEV Class 8 trucks. The system’s hydrogen production can be adjusted based on demand, facilitating the migration to zero-emission vehicles by 2035.

Generating 2.3 megawatts of renewable electricity, Tri-gen also supplies excess electricity to the local utility, Southern California Edison. As such, it will contribute to the renewable energy grid under the California Bioenergy Market Adjustment Tariff (BioMAT) program.

Pioneering Innovative Carbon Reduction Solutions

Overall, Tri-gen is expected to help reduce more than 9,000 tons of CO₂ emissions annually from the power grid. It can also avoid over 6 tons of grid nitrogen oxide emissions, while potentially reducing diesel consumption by 420,000 gallons/year. This aligns with both Toyota’s carbon reduction goals and the Port of Long Beach’s commitment to innovative CO2 reduction solutions.

In summary, the DOE’s plan underscores the importance of continued innovation and investment in clean hydrogen technologies to accelerate the transition toward a low-carbon economy.

RELATED: Indian Government Announces Massive New Green Hydrogen Project

The collaboration between FuelCell Energy and Toyota is an example of how innovative and sustainable solutions through hydrogen can help reduce carbon emissions in business operations while promoting renewable energy sources. 

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Deep Sky and Carbfix Make History with CO2 Mineralization Storage in Canada

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Deep Sky, a carbon removal project developer based in Montreal, and Carbfix, the world’s first operator of CO2 mineralization, have partnered to investigate CO2 mineral storage in Canada.

The press release mentions the pre-feasibility study examining potential reservoirs in Quebec for CO2 mineral storage will conclude in June.

The Role of Deep Sky

Deep Sky, renowned for its commitment to developing cutting-edge environmental technologies aims to revolutionize carbon capture and storage practices with this groundbreaking project.

Phil De Luna, Chief Carbon Scientist, Head of Engineering at Deep Sky noted, 

 At Deep Sky, we’re constantly on the lookout for new technologies that can capture carbon dioxide from the air or the ocean. The principle of engineered carbon dioxide removal (CDR) is relatively simple, separating a gas (CO2) from other gases (air) at very low concentrations. However, there are myriad ways and chemistries to make that separation happen.

RELATED: Deep Sky and Svante Partner for Gigaton-Scale CDR in Canada (carboncredits.com)

Understanding CO2 Mineralization

CO2 mineralization, also known as carbon capture and storage (CCS) through mineralization. It involves the conversion of CO2 into stable mineral forms through chemical reactions with certain rocks. This process mimics and accelerates the natural geological carbon sequestration process, locking away CO2 for thousands of years. 

Notably, Carbfix is a pioneer in “converting CO2 into stone”. The unique technique involves injecting CO2 into basaltic rock formations. Subsequently, reacting with minerals to form stable carbonates, effectively trapping the CO2 underground.

According to Carbfix, the company has injected 103, 273.5 MTs of CO2 since 2014. 

It believes Europe alone can “theoretically” store at least 4,000 billion tons of CO2 in rocks while the United States can store at least 7,500 billion tons.

source: Carbfix

Let’s understand how the joint venture will help implement the process.

Project Implementation

In this partnership, the companies will screen geological and geochemical data of the selected subsurface. They will conduct laboratory work on ultramafic rock formations in various Quebec regions of Canada.  

The CO2 mineralization storage project will involve the following key steps:

1. Site Selection: Identifying suitable basaltic rock formations for CO2 injection based on geological characteristics and proximity to emission sources.

2. Injection Process: Injecting CO2 captured from industrial sources into the selected basaltic reservoirs at controlled pressures and temperatures to initiate the mineralization reaction.

3. Monitoring and Verification: Implementing rigorous monitoring and verification protocols to assess the effectiveness of CO2 mineralization, track carbon storage volumes, and ensure the long-term integrity of storage sites.

4. Scaling Up: Scaling up the project to demonstrate its feasibility for large-scale deployment across various industrial sectors and geographical regions.

Subsequently, this data will assess the formations’ potential for in-situ carbon mineralization and safe, permanent CO2 sequestration. This is how their unique process transforms CO2 into stone underground within a couple of years.

Image of CO2 mineralization at an industrial scale 

Source: Carbfix

Potential Impact of Deep Sky-Carbfix Collaboration

The successful implementation of the Deep Sky-Carbfix CO2 mineralization storage project holds immense promise for addressing the global climate crisis. Some key anticipated impacts include:

Carbon Emission Reduction: It can significantly reduce carbon emissions from industrial sources by capturing and storing CO2 in mineral form. Thereby helping to meet emission reduction targets outlined in international climate agreements.

Climate Mitigation: It would contribute to climate mitigation efforts by removing CO2 from the atmosphere and preventing its release. Thus, mitigating the adverse effects of global warming and climate change.

Technology Adoption: It can enhance the adoption of CO2 mineralization technology as a cost-effective and sustainable CCS solution across various industries.

The company aims to rapidly and permanently store one billion tons of CO2 (1GtCO2) to play a pivotal role in addressing the climate crisis. 

Quebec’s Geological Heritage

Quebec boasts a rich and diverse geological history, with a wide variety of rocks shaped by volcanic activity, erosion, tectonic movements, and other geological processes over millions of years. The province’s geological heritage serves as a testament to the immense power of nature and a potential site for CO2 mineralization projects. 

Edda Aradottir, Carbfix CEO commented, 

“Our partnership with Deep Sky demonstrates Carbfix’s dedication to pioneering sustainable value chains and solutions for safe and permanent carbon storage. This collaboration in Québec is a key step towards realizing global net-zero ambitions, illustrating our shared commitment towards climate recovery.” 

By partnering with Carbfix, we believe Deep Sky has combined its innovative approach with the former’s state-of-the-art CO2 mineralization technology. 

FURTHER READING: Deep Sky & Mission Zero Partner to Turn Canada into A Carbon Removal Hub (carboncredits.com)

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Brookfield’s Renewable Solutions to Power Data Centers

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Brookfield Renewable Partners LP, a major player in the renewable energy sector, strategically positions itself to meet the soaring demand for electricity from data centers by leveraging its robust development pipeline and acquisition strategy. This strategy empowers the renewable energy giant to provide comprehensive supply solutions to data center clients requiring continuous power.

Data centers are power-hungry and are projected to expand massively, needing more electricity to cope with the artificial intelligence boom. Industry reports forecast that the increasing demand for AI power will continue to rise at an annual rate of 70% through 2027. 

Estimates also project that data centers’ power use could increase by up to 13% by 2030, alongside a predicted share of global carbon emissions reaching 6% by the same year.

Consequently, power companies, especially those operating under regulation, are investing heavily in renewable energy initiatives to accommodate this surging demand.

Brookfield’s Renewable Energy Solution for Data Centers

Brookfield’s Renewable Power & Transition arm manages $102 billion in assets and operates 7,000+ power facilities. As one of the world’s biggest investors in renewable and climate transition assets, the company boasts 33,000 megawatts of power generation capacity. 

The renewable giant operates across 5 continents and manages a diverse portfolio of solar, wind, hydro, and sustainable solutions. 

Brookfield Renewable’s parent company, Brookfield Asset Management, will develop over 10.5 GW of new renewable energy capacity globally over the next 5 years to meet its global energy demands. Microsoft Corp. has joined Brookfield in this initiative. 

Microsoft has already contracted 5.7 GW of US renewables capacity as of Feb. 28, with renewables developers securing contracts for over 4,012.6 MW of capacity in the 12 months ended Feb. 1 for data center use. Other hyperscalers (large-scale, highly optimized, and efficient facilities), such as Google and Amazon, have also pledged to curb their emissions. 

RELEVANT: US Corporations Ramp Up Renewable Energy, Amazon Leads the Pack

The recently announced framework agreement with Microsoft outlines the provision of renewable energy by Brookfield Renewable, commencing in the US and Europe between 2026 and 2030.

Since the announcement of this agreement, Brookfield Renewable’s stock surged by 17% to close at $24.66 on May 2.

Brookfield Renewable’s first-quarter 2024 funds from operations totaled $296 million, or 45 cents per unit. That’s a slight increase compared to $275 million, or 43 cents per unit, in the prior-year period. The consensus estimate for funds from operations by S&P Capital IQ was 42 cents per unit.

Partnering with Microsoft and Beyond

CEO Connor Teskey highlighted that a significant portion of this capacity will be in the U.S., where Brookfield Renewable has acquired development pipelines from various companies in recent years. These include Scout Clean Energy LLC, Standard Solar Inc., Duke Energy Corp., and Exelon Corp. 

Furthermore, Teskey noted that Brookfield Renewable has sufficient projects in development to accommodate multiple similar agreements and to expand its partnership with Microsoft. He projected that by 2026 to 2030, the company could potentially generate well over 10 GW of renewable energy annually. He said that:

“When you have such strong visibility on tens or multiple tens of gigawatts of offtake… it allows you to lean into looking to source equipment, looking to source financing because you know that demand is going to be there.”

Teskey’s sentiment seems to be in the right direction as the U.S. and Canada also witness an expansion in renewable energy generation.

Sustainable Growth: Meeting Energy Demands

In March, both countries saw an expansion in generating capacity by 450 MW, as reported by S&P Global Market Intelligence data, with the addition of three generation units. Wind energy accounted for the majority of completed capacity, comprising 71.6%, or 322 MW. Notably, there were no plant retirements during the month.

Additionally, 8 new power plant units with a combined capacity of 1,246 MW were announced, with solar energy representing the majority at 54.2%. Among these announcements was a gas-fired facility.

As of April 25, the total operating capacity for the US and Canada reached 1,398 GW. Here are some of the largest completed and newly tracked projects. 

Completed Projects:

The 190-MW Paintearth Wind Project in Alberta under a 15-year power supply contract with Microsoft. Project owners are Potentia Renewables Inc., Greengate Power Corp., and Pansolo Holding Inc. 
The 132-MW South Fork Offshore Wind Project off the coast of Long Island, NY – jointly owned by Eversource Energy and Ørsted A/S.

Newly Tracked Projects:

The 445-MW gas-powered Ripley Energy Center Plant facility in Payne County, Okla, owned by the Associated Electric Cooperative. 
IP Quantum LLC’s proposed 374-MW Solace Solar Project in Haskell County, Texas.

As data center power needs surge amid the AI boom, Brookfield Renewable’s extensive renewable energy portfolio and partnerships with industry giants like Microsoft underscore its pivotal role in supplying sustainable solutions to meet the evolving energy demands of the digital age.

READ MORE: America to See a Surge in Renewable Capacity in 2024

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Weathering the Storm: The Rise of $25B Weather Derivatives Market

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As companies and investors grapple with climate risks, a niche segment of Wall Street is gaining attention for offering protection against weather-related disruptions. 

The surge in demand for weather derivatives is driven by rising climate volatility and regulatory pressures, with average trading volumes soaring more than 260% in 2023, according to the CME Group. This reflects a growing awareness of the potential impact of weather events on businesses’ bottom lines.

The Meteoric Surge in Weather Derivatives

Weather derivatives, which provide a hedge against less severe but more common meteorological threats, are experiencing significant growth compared to better-known weather bets like catastrophe bonds. 

Unlike catastrophe bonds, which typically cover extreme events like 100-year storms, weather derivatives offer protection against a range of weather conditions such as excessive rainfall or high temperatures, which can impact industries like tourism, agriculture, and energy.

With weather derivatives, the seller assumes the risk associated with adverse weather conditions in exchange for a premium. Should no adverse weather events occur before the contract’s expiration, the seller stands to make a profit. Conversely, if unexpected or unfavorable weather conditions arise, the buyer of the derivative can claim the agreed-upon amount.

The expansion of weather derivative offerings by exchanges like the CME Group underscores the increasing demand for these products. Traders and companies now have access to options covering a variety of locations, reflecting the global reach of weather-related risks. 

In 2023, the average trading volumes for listed products experienced a remarkable surge of over 260%, as reported by the CME Group. Additionally, the number of outstanding contracts is currently 48% higher compared to the previous year. 

Despite this significant increase in publicly traded activity, industry estimates suggest that this segment represents only a fraction of the overall market, potentially accounting for as little as 10% of all activity. The outstanding derivatives in this sector may hold a notional value of up to $25 billion.

This growth trajectory is fueled by corporations’ growing recognition of their exposure to weather-related risks, driven by operational impacts, regulatory requirements, and investor pressures.

Forecasting Financial Climate Change

Regulators in jurisdictions like Europe and the US are increasingly requiring companies to disclose climate-related risks and mitigation strategies. This regulatory push, coupled with investor expectations, is compelling businesses to assess and address their exposure to weather-related risks. 

RELEVANT: SEC Finalizes New Climate Disclosure Rule: Here’s What’s New

As a result, industries ranging from energy to agriculture are turning to weather derivatives to manage their risk exposure.

The energy sector, in particular, is embracing weather derivatives to mitigate the impact of weather fluctuations on demand and supply. Companies use weather hedges to offset the effects of warm weather on heating oil sales, while renewable energy producers seek to manage the intermittency of solar and wind power generation through weather derivatives.

In particular, Star Group LP, a US-based provider of home heating and air conditioning products and a distributor of heating oil, employs hedging strategies to minimize the impact of warm weather on its cash flows. 

As per its financial statements, the company has entered into contracts that allow it to potentially receive up to $12.5 million if temperatures recorded during the coverage period from November through March surpass specific thresholds. 

Following payouts received in recent financial years, including the full benefit in 2023, the maximum payment under these contracts has increased to $15 million for those payable in 2025. 

Advancements in meteorological science and technology are driving the development of more sophisticated weather derivative products. 

Companies like Syngenta are leveraging derivatives to offer innovative solutions to farmers, such as cash refunds for crop failures due to adverse weather conditions. These programs, underpinned by derivatives, demonstrate the potential for weather derivatives to protect individual end-users from climate-related risks.

For example, Syngenta’s AgriClime program offers a unique proposition to farmers, pledging a cash refund for up to 30% of their purchase of specific crops if nature fails to provide suitable growing conditions. This initiative aims to provide a safety net for farmers in the event of adverse weather conditions, ensuring that their livelihoods are not jeopardized. 

During the UK’s last planting season, such payouts were made to 99% of Syngenta’s hybrid barley customers, underscoring the program’s effectiveness in supporting farmers during challenging times. Syngenta said that its AgriClime program extends to cover a variety of crops across over 50,000 farms spanning 17 countries. 

Navigating the Climate Economy: Challenges and Opportunities in Weather Derivatives

However, the growth of the weather derivatives market raises questions about moral hazard and the effectiveness of financial solutions in addressing climate change. 

Critics argue that mitigating the financial impact of weather events may reduce incentives for corporations to address their contributions to climate change. Despite these concerns, industry practitioners emphasize the positive role of weather derivatives in funding renewable energy projects and protecting communities from climate challenges.

Challenges such as basis risk and lack of secondary trading liquidity have historically hindered the growth of the weather derivatives market. Basis risk, in particular, poses challenges in effectively hedging against localized weather risks. 

However, market players remain optimistic about the future of weather derivatives, citing their growing relevance in addressing climate-related risks and their increasing integration into mainstream financial markets.

In conclusion, the weather derivatives market is experiencing rapid growth as businesses seek to mitigate the financial impact of climate-related risks. While challenges remain, the increasing demand for weather derivatives underscores their importance in managing weather-related uncertainties in an era of climate change.

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Unraveling US EPA’s Bold Emission Rule for Fossil Fuel Power Plants

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The debate over new carbon dioxide limits for power plants has centered on carbon capture technology, with the US Environmental Protection Agency (EPA) defending its readiness despite industry skepticism.

The EPA had finalized a rule establishing carbon emissions standards for coal- and new gas-fired generation, effectively requiring carbon capture technology for many power plants. This climate policy was first revealed in April last year.

READ MORE: EPA to Regulate Gas-Fired Power Plants with Carbon Capture

Under the new EPA mandate, coal plants must implement carbon capture and storage (CCS) technology. This technology involves capturing CO2 from power plant emissions and then storing it underground to prevent it from entering the atmosphere. 

The EPA’s New Mandate for Coal Plants

The directive is a bold ultimatum for coal-fired power plants to either capture their smoketstack emissions or face shut down. The new rule aligns with President Joe Biden’s pledge to combat carbon pollution from fossil fuel-fired electric plants by 2035 and economy-wide by 2050. 

The latest restrictions on GHG emissions represent the Biden administration’s most aggressive stance to fight global warming. President Biden’s National Climate Advisor Ali Zaidi, made a promise that,  

“This year, the United States is projected to build more new electric generation capacity than we have in two decades – and 96 percent of that will be clean,” 

Here are the main points of the EPA’s new carbon emissions rule for power plants: 

Existing coal-fired plants intending long-term operation and all new baseload gas-fired plants must control 90% of their carbon pollution.
Boost the Mercury and Air Toxics Standards (MATS) for coal-fired power plants, tightening toxic metal emissions standards by 67% and finalizing a 70% reduction in mercury emissions from existing lignite-fired sources
Cut pollutants discharged through wastewater from coal-fired power plants by over 660 M pounds/year, guaranteeing cleaner water for impacted communities, particularly those with environmental justice concerns facing disproportionate impacts.
Safe management of coal ash in previously unregulated areas, including disposal sites prone to leakage and groundwater contamination.

Coal remains the largest energy source for electricity generation, steelmaking, and cement production. However, it’s also the largest source of man-made carbon dioxide (CO2) emissions.

The Rule’s Climate Impact and Benefits

The EPA’s finalized rule on carbon emissions standards for power plants is projected to have significant financial and climate impacts.

According to EPA estimates, industry compliance with the rule could cost between $7.5 billion and $19 billion through 2047. However, the agency also anticipates substantial climate and public health benefits, totaling to $370 billion over the next two decades. 

In terms of emissions reductions, the rule is forecasted to prevent 38 million metric tons of CO2 emissions in 2028 and 123 million metric tons in 2035.

Mona Dajani, global co-chair of energy, infrastructure, and hydrogen at Baker Botts, emphasized that the rule sends a clear message to power plant operators about the end of unlimited carbon pollution. While carbon capture technology will contribute to emissions reductions, the EPA projects that the greatest impact will come from coal plant retirements prompted by the rule.

By 2035, the agency expects US coal-fired capacity to decrease to about 20 GW, comprising 19 GW with carbon capture and 1 GW with natural gas co-firing. This contrasts with a scenario without the regulations, where coal-fired capacity would consist of 11 GW with carbon capture and 41 GW of unabated coal plants.

Regarding gas-fired generation, the EPA anticipates 1GW of capacity with carbon capture and 484 GW without carbon capture by 2035. Additionally, the EPA announced plans to set carbon limits for existing gas-fired power plants in a future rulemaking process.

However, this decision has ignited debate from industrialists and environmental stalwarts. Trade groups also criticized the standards, questioning the feasibility of capturing and storing CO2 emissions, echoing concerns raised after the EPA’s initial proposal in May 2023.

Challenges and Controversies

Dan Brouillette, president and CEO of the Edison Electric Institute (EEI), stated that CCS is not yet ready for full-scale deployment and that there isn’t enough time to develop the necessary infrastructure for compliance by 2032.

While CCS involves scrubbing CO2 from emissions sources like power plants for underground storage, operational implementations are not enough. Currently, only one utility-scale US power plant, W.A. Parish 5-8, utilizes carbon capture technology, with the captured gas used for oil extraction. The abandonment of another project in Kemper County, Miss., led to significant costs for Southern Co., raising doubts about CCS.

Some industry groups, such as the National Rural Electric Cooperative Association (NRECA), have challenged the legality of the rule. NRECA CEO Jim Matheson criticized the rule as unlawful, unrealistic, and unachievable, arguing that it undermines electric reliability and poses risks to an already strained electric grid. 

However, the EPA highlighted technological advancements and federal incentives making CCS more economically viable in its final rule.

The expansion of tax credits for carbon capture under the US Inflation Reduction Act in 2022, now valued at up to $85 per metric ton of CO2 stored, has bolstered support. Additionally, process improvements from previous CCS deployments have contributed to cost reductions.

The EPA noted that some companies have already planned to install CCS on their units independent of regulatory requirements, indicating growing industry interest in the technology’s potential.

The new rule’s first provision allows units to respond to declared grid emergencies without being held accountable for their CO2 emissions, providing a short-term mechanism to address urgent situations. The second provision permits US states to delay compliance measures for certain units in the event of unanticipated grid reliability issues. 

States have the option to include both reliability exceptions in the plans they submit to the EPA for implementing the new rule.

RELATED: US EPA to Invest $20B in Climate and Clean Energy Projects for Underserved Communities

As the debate rages on, the EPA’s carbon emission standards mark a pivotal moment in the nation’s energy transition, highlighting the delicate balance between environmental goals and industry realities.

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