What were some of the challenges of this particular project, and what excited you about this work?

Lucas: The challenge with this work was to demonstrate two critical components of our theory of change: 1) that the energy DPV and energy efficiency investments were sufficient to offset the initial cost of the loan within a reasonable time period for MiPyMEs and 2) that we could successfully de-risk lending to applicants with minimal or no credit history through this alternative credit mechanism.

Pastor: It definitely took a while for us to land on the root cause of the energy access issue in the Peninsula, and we did a lot of technical scoping work early in the process, and those co-creation workshops where we got input and feedback from partners on the ground was critical for us to finally read that, “ah, ha” moment.

We eventually realized that the key issue was not a lack of technical options, but rather a lack of access to affordable finance to invest in these interventions. We also realized that most businesses are connected to the grid and as such, while some will benefit from distributed solar generation systems, this will not be the case in general. Instead, focusing on bringing awareness and introducing energy efficiency and conservation measures is key to helping more businesses lower their electricity bill burden. The cheapest megawatt, after all, the one you don’t use.

In the year you’ve been working with NREL, how has this project grown and changed? What’s are some of the victories? What areas are you still working to make better?

Pastor: When we started this project, we had no idea what it would turn out to be. It was a class project, a challenge that we had to come up with a solution for. I don’t think any of us thought we would get to actually implement our idea. But today MIPyMEs in the Yucatan are able to get a free energy audit and apply to MicroYuc Verde for an affordable line of credit that enables them to both reduce their energy consumption and grow their business.

Lucas: I also see the multi-stakeholder coalition we’ve built as a major team victory – working with local government leaders, researchers, and changemakers in this space is really encouraging.

Pastor: We are also working to scale up the program and develop energy audit training modules that other local institutions across Mexico will be able to use to offer free energy audits to businesses. Receiving the endorsement of the Governor of Yucatan was a great win for the program. And as Hallie mentions, the multi-stakeholder coalition we have built is a true victory, and something that makes me confident that the program will continue.

How do you hope to see this project continue to develop in the coming years?

Lucas: In the next phase of this project, NREL, IYEM, and ITSP are working to develop a robust technical training curriculum for university students to conduct energy efficiency audits for local businesses seeking to reduce their energy consumption. Student and university-led technoeconomic analysis will support data-driven decisions on investment and lending and will equip students with the advanced skill set they need to succeed in a clean energy futures workforce. These targeted training materials and analytical tools will be made publicly available when complete.

Pastor: I would love to see this project grow in its pilot phase to offer more audits and microloans to MIPyMEs in the Yucatan, and even go beyond Yucatan to other Peninsula states, as I truly think it can make a different.

And at a higher-level, I am really looking forward to seeing whether our theory of change is legitimate – if we can prove that SMEs can leverage affordable financing to access clean energy that would be consequential for broader energy transition efforts around the globe.

How did having the chance to work on a project like this as a Ford Dorsey Master’s in International Policy student impact your studies and how you think about your role and future in the world of policy and international development?

Pastor: Getting the chance to work on a project like this has definitely shaped the type of work and impact I want to have. I am currently working in the sustainable finance space, as I really believe that part of the key to achieving our climate goals lies with closing the mitigation and adaptation finance gap, and especially focusing on bringing financing solutions to those who are often left behind by the system.

Lucas: I’ve been prompted to reflect more about institutionalized and systemic barriers to energy equity, as well, and to think more critically about what inclusive clean energy transitions look like in practice. The next several decades are humanity’s most critical – as the entire world mobilizes to combat the climate crisis, global energy and economic structures will be fundamentally transformed. In this, we have an unparallel opportunity to choose – and create – a better, more inclusive, more sustainable, future.

What are each of you hoping to do next in your careers?

Pastor: I hope to keep growing my knowledge of climate finance and to keep working to make an impact and accelerate climate transition efforts around the world. It’s been so moving to see the passion and commitment everyone we have worked with has shown. The fact that some of the Yucatan participants would take two days out of their busy schedules to come together to discuss what could be done to solve this problem is very inspiring. And even since our initial investigations have ended, they have continued to show up for the project, and are very much driving it forward at this point. It is truly great to see them believe in our vision for a clean energy future

Lucas: I agree. I want to keep doing what I am doing now!

China and the United States are the two biggest carbon-emitting countries in the world. Decarbonization in these two countries will have material impacts on a global scale and is timelier than ever, according to a recent report from Stanford University’s Precourt Institute for Energy, Stanford Center at Peking University, APARC's China Program, and Peking University’s Institute of Energy.

The report is the product of a roundtable series, held in October 2021 that brought together leading American and Chinese current and former officials, and experts in the public and private sectors working on energy, climate, the environment, industry, transportation, and finance. The roundtables promoted discussion around how China and the United States can accelerate decarbonization and cooperate with one another to meet their carbon neutrality goals by mid-century.

The thematic areas of the roundtables included U.S.- China collaboration on climate change, global sustainable finance, corporate climate pledges, and the opportunities and challenges for the acceleration of decarbonization in both countries in general, as well as specifically for the power, transportation, and industry sectors.

The resultant report reviews the key themes and takeaways that emerged from the closed-door discussions. It builds on the “U.S.-China Joint Statement Addressing the Climate Crisis” released by the U.S. Department of State on April 17, 2021 and shares some common themes with the “U.S.-China Joint Glasgow Declaration on Enhancing Climate Action in the 2020s” released on November 10, 2021. Shiran Victoria Shen of the Hoover Institution authored the report, with contributions by Yi Cui of the Precourt Institute for Energy, Zhijun Jin of the Institute of Energy and Jean Oi, Director of APARC's China Program. 

The report suggests that tensions in U.S.-China relations have hindered the acceleration of decarbonization and that open science in fundamental research areas must be encouraged. Universities can educate future leaders, advance knowledge, and foster U.S.-China collaboration on open-science R&D, regardless of the political environment. The report argues that the most promising strategy to decarbonize energy is to electrify consumption now served by fossil fuels as much as possible while decarbonizing electricity generation. 

The roundtables identified six areas where the U.S. and China could collaborate: global green finance, carbon capture and storage, low-carbon agriculture and food processing, methane leak reduction, grid integration and greater use of intermittent renewables, and governance, including at the subnational level. The report further identifies more concrete and additional promising areas for accelerated decarbonization and bilateral collaboration, as well as the obstacles to be tackled, including institutional, political, and financial constraints. 

Stanford's Program on Energy and Sustainable Development (PESD) is collaborating with the California Public Utilities Commissions (CPUC) on an Impact Lab that tackles an urgent policy question: How do we make sure the lights stay on as the electricity mix climbs towards state targets of 50% renewable energy in 2026 and 60% in 2030? Wind and solar are essential zero-carbon energy sources, but they are only available when the wind blows and the sun shines. Blackouts in Northern California last August were a warning that system reliability is at risk if the state doesn't act quickly to implement policies that ensure backup generation is available when needed.

The existing regulatory instrument for ensuring long-term resource adequacy, capacity payments, is not well-adapted to a high-renewables future. Capacity payments aim to ensure enough "firm capacity" is always available to keep the lights on, but the firm capacity construct is not applicable to wind and solar, which cannot be turned on and increased at the system operator’s discretion. 

The PESD/CPUC Impact Lab has proposed an alternative resource adequacy mechanism that is robust to a world of high and solar generation: auctions of Standardized Fixed-Price Forward Contracts (SFPFCs) that ensure every megawatt-hour of energy consumed in the state is hedged through long-term financial contracts. Unlike capacity payments, the SFPFCs provide a strong financial incentive for generators to meet their commitments to supply reliable energy wherever and whenever it is needed. PESD research suggests this novel policy mechanism can provide enhanced reliability and major cost savings relative to the capacity payment approach.

The CPUC has initiated a stakeholder process to consider possible implementation of this proposal, and PESD is assisting with research, policy outreach, and development of market simulation games that will allow stakeholders to gain hands-on experience with how the SFPFC mechanism would work in a realistic electricity market.

Recent record-breaking heat waves followed by rolling blackouts in California have sparked renewed discussion about the state’s options to address future power outages. Program on Energy and Sustainable Development Director Frank Wolak spoke to Bloomberg about power market reforms as one option where California could open up its electricity to retail competition.  While pricing would better reflect grid supply and demand, it’s unlikely this option would have backing given today’s political climate.   Read more (may require subscription)

Today, the Sacramento Bee and San Jose Mercury News both quoted Program on Energy and Sustainable Development Director Frank Wolak in their stories about California’s recent blackouts.  In the Sacramento Bee’s article about the California Independent System Operator declaring a temporary ban on “convergency bidding,” Wolak came out in support of the system comprised of power generators and traders saying that it sends the proper price signals to drive supply. The San Jose Mercury News article said that California electricity shortages will be more common during major heat waves due to the state’s shift away from fossil fuels providing more consistent power to cleaner but more intermittent sources such as solar and wind energy.  “We have a much more risky supply of energy now because the sun doesn’t always shine when we want and the wind doesn’t always blow when we want,” said Wolak. “We need more tools to manage that risk. We need more insurance against the supply shortfalls.”

On June 3, Program on Energy and Sustainable Development (PESD) Director Frank Wolak participated as one of three energy experts in a virtual panel discussion evaluating the pros and cons of proposed “reach codes”  banning natural gas in the city of Los Altos, California.  The panel discussion - "Mandating All Electric:  Is Banning Natural Gas Really The Answer?" - was organized by a group of Los Altos residents who believe city residents’ voices need to be considered in government decisions. 

Reach codes are being considered for all new residential and commercial building construction, and all “scrape” remodels in the city.  A reach code is a local building energy code that reaches beyond the state minimum requirements for energy and its use in building design and construction. These codes facilitate local government’s efforts focused on clean air, climate solutions, and renewable energy economics.

Recorded discussion