Q&A: Carbon credits for LEDs? They’re coming soon
The carbon neutrality plan for the city of Santa Fe, New Mexico, incorporates LED streetlights with the potential to reduce CO2 emissions equal to removal of more than 10,000 cars from the roadways.
According to the International Society of Optical Engineering, replacing incandescent and gas-discharge-based lamps with solid-state lighting is the most successful approach to reducing CO2 emissions from public and private lighting, which accounts for a significant share of overall electric power consumption worldwide.
Despite agreement that solid-state is the right way to go, few in the industry are aware they also have access to a potentially more valuable market: carbon offsets.
Using carbon offsets profitably is well understood by major and minor electric vehicle players. Case in point: Analysts predict Tesla will realize over $2 billion in revenue from carbon offsets this year.
Think your company isn’t large or sophisticated enough to get involved? Think again. Now is the time for solid-state lighting to harness this nascent opportunity.
We talked recently with Sunny Trinh, North American Advisory Board Member for United Nations Smart Cities, about the future of carbon trading and what it means for customers in solid-state lighting and other industries. He is working with many of our customers now as they explore the potential of carbon offsets.
Today, virtually every company has declared a goal to reach carbon neutral or net zero CO2 targets. What is the significance of carbon offsets trading?
This is probably the biggest opportunity that any of us have seen in our lifetimes, mainly because it affects everybody at a global level. Every organization needs to really focus on this.
It’s one of the most impactful areas helping with the whole sustainability/greenhouse gases issue.
The premise is this: Companies that reduce CO2 emissions are awarded credits that they can then sell to other companies The value of these credits is driven by supply and demand, as is any market. This creates financial incentive for companies to innovate more to reduce emissions.
So, it's another way to help fund more sustainability projects in instances where it may have taken longer or not happened at all.
What exactly is a carbon credit? Is there agreement on what a credit is?
The term has moved now to carbon offsets, which is more accurate. The reason is companies like Apple who are generating greenhouse gases need to be able to offset that somehow from companies that are reducing energy usage or have technology that increases sequestering of CO2.
Carbon offsetting is the act of reducing carbon dioxide or greenhouse gasses in order to compensate for emissions that were produced elsewhere.
A carbon credit or carbon offset is the equivalent of one metric ton of CO2 or comparable gas that's emitted into the atmosphere or reduction thereof. Its value is established very much like values on the stock market. There are exchanges that dictate pricing. Right now, the price is roughly $15 per carbon offset.
What we are seeing is that this value is going to change significantly in the next year or two because the of number of companies that will need carbon offsets and will be willing to buy them.
How LEDs can offset carbon footprints
- According to the U.S. Department of Energy, widespread use of LEDs in the U.S. by 2027 could save about 348 terawatt hours of electricity when compared with no LED use of electricity.
- Saving even 1 kilowatt hour of electricity prevents almost a pound (0.92 pounds) of CO2 from entering the atmosphere.
- That equates to a potential reduction of 320 billion pounds (or 160 million tons) of CO2 entering the atmosphere in the U.S.
And Canada has already said that they’re going to tax every metric ton above their baseline, roughly US$24, CAN$30 per metric ton. That's a baseline value right there in Canada for carbon offset, but by the year 2030, that's going to be easily be US$120.
How do we validate the market’s genuine value?
There are a number of voluntary markets in play now.
Right now, it’s very much like the Wild West. These are all voluntary markets. An Apple and a Google and other companies do it because then they can say that they are carbon neutral. That creates huge marketing value. Other companies want to do business with them. It also affects stock valuation because the majority of the institutional investors say that they will not invest in you if you don't have a good sustainability program. The California Pension Fund is one example. It won't invest in any companies that don’t have a good sustainability plan.
What else can be done to validate values?
Blockchain companies can help. The data around carbon information can be inserted onto a blockchain, which is an immutable ledger that allows all parties to see every single transaction. That makes for a more verifiable way to confirm what's happening.
Why should someone in the solid-state lighting industry pay attention to this new market?
Most in the solid-state lighting industry don't even realize that these carbon offsets can benefit them.
They’ve read about it, but they just don’t know what to do with the information.
For solid-state lighting manufacturers, it’s a real opportunity because they can already prove that they are providing an alternative that lowers energy usage. Well, when you run that back up into the power grid, you can calculate how much electricity you're saving and how much in greenhouse gases is being reduced by those power savings.
This is just a matter of collecting the data that they’re already generating, then getting it on a platform that verifies it. To a certain extent, it's almost like mining for gold. There’s no inventory and there’s no capital expense.
How should Avnet customers or partners position themselves for this opportunity?
Avnet can advise companies how to set a carbon offset strategy within the context of their overall energy and sustainability programs.
To begin, customers need to have a very detailed source of data about where the energy savings is coming from. They can often obtain this in real time through the sensors in their equipment.
Lighting companies have control systems and platforms that will monitor. If they have the information, then they can turn that into carbon offsets.
When it comes to being carbon neutral, companies are going to be looking through their entire supply chain for the answers. One example: Restaurant companies can analyze how much of the food they serve is thrown away and wasted. Not producing and serving that food has implications all the way up the supply chain and affects carbon neutrality.
Conclusion
More solid-state lighting companies will turn to partners like Avnet to help them harness this lucrative new market.
Carbon offsets can be sold to governments, companies or individuals seeking to decrease their carbon footprints. Revenue from the sales is channeled to forest countries and communities to support jobs, wildlife, education, clean water and other initiatives that transition local economies away from reliance on the forest.
Join our webinar to learn more about why carbon offsets should be part of your business plan.
Sunny Trinh is North American Advisory Board Member for United Nations Smart Cities. He was previously vice president of strategic partnerships for Avnet.
With more than 25 years in the electronics and semiconductor industry, he has helped numerous companies, from start-ups to large multi-billion dollar companies, move their ideas through design, prototype and production to achieve revenue.
Prior to joining Avnet, Sunny was the Chief Operating Officer for Jooster, a technology company focused on health and wellness. He also served as Vice President of Sales and Regional Technology Manager for Arrow Electronics. During that time, he led the engineering team that re-designed a Corvette Stingray that was driven by a quadriplegic at the Indianapolis Raceway. Sunny also co-founded and served as CEO for 9 Fish Surfboards.
Sunny earned a bachelor’s and master’s degrees in engineering from Harvey Mudd College, and a master’s in business administration from Cal Lutheran University. He served as an adjunct professor for Cal Lutheran’s MBA program, where he started the school’s technology tract. Sunny also holds several patents in electronic accessories for cell phones.
A couple of fun facts about Sunny: He has surfed 20-foot waves off the north shore of Hawaii and was on Wheel of Fortune, where he developed a strategy that enabled him to go all the way and ultimately win the final grand prize.
