Primer on Definitions and Acronyms

For those not as familiar with the clean energy space, here are a few important concepts

CapEx – Capital Expenditures. The cost of buying equipment or plants and building or installing them. Upfront costs before operations start

OpEx – operating expenditures. Often broken up into Fixed OpEx – things that don’t change much with increased production volume like maintenance, land rent, etc vs Variable OpEx which usually are inputs that increase with higher production rate. Variable OpEx in a power plant would be the fuel to produce power – to make more power in a natural gas plant, you need to

Discount Rate – the rate at which future cashflows are discounted

Cost of Capital – Technically the rate of return required to make a project go forward, but often used to mean “how much the company pays to borrow money” and also often used interchangeably with discount rate

Emissions - most writing uses this to mean emissions from operations. IE emissions produced while operating a piece of equipment.

Embodied emissions – emissions that come from making or building a product or plant. These usually aren’t counted as part of emissions, but they are a very important consideration – a Battery Electric Vehicle has much more embodied emissions than an Internal Combustion Engine vehicle. Theoretically if the entire grid is zero emissions, many embodied emissions would go to zero as well.

Net zero – This is a term to mean that carbon emissions are offset by some other purchase. Examples include companies buying carbon offsets such as planting trees. Unfortunately many of these offsets are up to 90% fake. Right now this largely only applies to operating emissions, not embodied emissions.

True zero – using energy sources that never emit anything, have negative emissions, or capture all emissions. 100% of the time. This is extremely rare, because it either requires massive energy storage onsite or shutting down when renewables aren’t available. The only way to easily do this is nuclear power – keeping in mind that all the concrete used in nuclear plants still has embodied emissions associated with it. Right now this largely only applies to operating emissions, not embodied emissions.

Levelized Cost – the cost of something, like a kwh of energy, after considering CapEx and OpEx over a period of time. This calculation applied a discount rate to future cash flows, sums up all costs, then divides it by the number of goods produces (kwh of energy, kg of H2, etc) to arrive at the Levelized Cost - it the all-in cost or break-even price for a good.

Dispatchable power - power that can be ramped up or down based on demand. This is pretty much natural gas and hydro power, but it can be other types. Grid scale batteries can be dispatchable power as well, but it is very expensive relative to other dispatchable power

Standard Acronyms

BEV – Battery Electric Vehicle 

ICE – Internal Combustion Engine Vehicle

PPA – Power Purchase Agreement. These typically apply to renewable resources. The power from the solar or wind is pre-purchased and the buyer has certified clean power