Electrical Grids and Storage
Criteria
Development of Eligibility Criteria
under the Climate Bonds
Standard & Certification Scheme

Document version and notable changes
Public release of Criteria (version 1)

Date
August 2021

Climate Bonds Initiative Grids and Storage Background Document

Definitions
Climate Bonds Initiative (CBI): An investor-focused not-for-profit organisation, promoting large-scale investments that will
deliver a global low carbon and climate resilient economy. The Initiative seeks to develop mechanisms to better align theinterests of investors, industry and government so as to catalyse investments at a speed and scale sufficient to avoid
dangerous climate change.
Climate Bond: A climate bond is a bond used to finance – or re-finance - projects needed to address climate change. They
range from wind farms and hydropower plants, to rail transport and building sea walls in cities threatened by rising sea
levels. Only a small portion of these bonds have been labelled as green or climate bonds by their issuers.
Certified Climate Bond: A Climate Bond that is certified by the Climate Bonds Standard Board as meeting the requirementsof the Climate Bonds Standard, as attested through independent verification.
Climate Bonds Standard (CBS): A screening tool for investors and governments that allows them to identify green bonds
where they can be confident that the funds are being used to deliver climate change solutions. This may be through climate
mitigation impact and/ or climate adaptation or resilience. The CBS is made up of two parts: the parent standard (Climate
Bonds Standard V3) and a suite of sector specific eligibility Criteria. The parent standard covers the certification process
and pre- and post-issuance requirements for all certified bonds, regardless of the nature of the capital projects. The Sector
Criteria detail specific requirements for assets identified as falling under that specific sector. The latest version of the CBS
is published on the Climate Bonds Initiative website.
Climate Bonds Standard Board (CBSB): A board of independent members that collectively represents $34 trillion of assets
under management. The CBSB is responsible for approving i) Revisions to the Climate Bonds Standard, including the
adoption of additional sector Criteria, ii) Approved verifiers, and iii) Applications for Certification of a bond under the Climate
Bonds Standard. The CBSB is constituted, appointed and supported in line with the governance arrangements and processes
as published on the Climate Bonds Initiative website.
Climate Bond Certification: allows the issuer to use the Climate Bond Certification Mark in relation to that bond. Climate
Bond Certification is provided once the independent Climate Bonds Standard Board is satisfied the bond conforms with the
Climate Bonds Standard.
Green Bond: A Green Bond is where proceeds are allocated to environmental projects. The term generally refers to bondsthat have been marketed as “Green”. In theory, Green Bonds proceeds could be used for a wide variety of environmental
projects, but in practice they have mostly been the same as Climate Bonds, with proceeds going to climate change projects.
Grid assets and projects: Assets and projects relating to the transmission and distribution, and storage of electricity.
Technical Working Group (TWG): A group of key experts from academia, international agencies, industry and NGOs
convened by the Climate Bonds Initiative. The TWG develops the Sector Criteria - detailed technical criteria for the eligibilityof projects and assets as well as guidance on the tracking of eligibility status during the term of the bond. Their draft
recommendations are refined through engagement with finance industry experts in convened Industry Working Groups
and through public consultation. Final approval of Sector Criteria is given by the CBSB.
Industry Working Group (IWG): A group of key organisations that are potential issuers, verifiers and investors convenedby the Climate Bonds Initiative. The IWG provides feedback on the draft sector Criteria developed by the TWG before they
are released for public consultation.

The Climate Bonds Initiative gratefully acknowledges the Technical and Industry Working Group members
who supported the development of these Criteria. Members are listed in Appendix 1. Special thanks are
given to Ian Walker, the lead specialist coordinating the development of the Criteria through the Technical
Working Group, and Arna Sigurdardottir and Foaad Tahir, also providing support.

Climate Bonds Initiative Grids and Storage Background Document

Table of Contents
Definitions ................................................................................................................................................ 0
Table of Contents ...................................................................................................................................... 1
1

Introduction...................................................................................................................................... 1
1.1
Overview ................................................................................................................................................1
1.2
Funding needs of a low-carbon and climate resilient economy ...........................................................1
1.3
Green bonds are critical to mobilising the capital required ..................................................................2
1.4
Introduction to Climate Bonds Initiative and the Climate Bonds Standard ..........................................3
1.5
Process for Sector Criteria Development ..............................................................................................3
1.6
Revisions to these Criteria .....................................................................................................................42

Sector Overview................................................................................................................................ 5
2.1
What are Electrical Grids and Storage? .................................................................................................5
2.2
Future of electrical grids and storage ....................................................................................................6
2.3
Electrical Grids and climate change.......................................................................................................6
2.4
Electricity storage and climate change ..................................................................................................7
2.5
Investment need....................................................................................................................................8
2.6
Bonds in the sector ................................................................................................................................93

Principles and Boundaries of the Sector Criteria ............................................................................... 11
3.1
Guiding principles ................................................................................................................................11
3.2
Potentially eligible assets ....................................................................................................................12
3.3
Assets out of Scope .............................................................................................................................12

4

Discussion and Eligibility Criteria ..................................................................................................... 13
4.1
Overarching considerations.................................................................................................................13
4.1.1 The overarching principles of the Grids and Storage Criteria .............................................................13
4.2
Definitions and key terms....................................................................................................................14
4.3
Leveraging existing best practice standards........................................................................................14
4.4
Eligibility criteria for Mitigation – assessment of options ...................................................................144.4.1 Adopting the EU taxonomy Criteria for the Transmission and Distribution of Electricity ..................144.4.2 Using historic grid factors and trajectories to determine system eligibility .......................................15
4.4.3 Using the International Finance Institutions (IFI) methodology for grid factor ..................................18
4.4.4 Using generation as a metric rather than capacity .............................................................................18
4.4.5 Forward-looking approaches to system eligibility...............................................................................19
4.4.6 Other criteria options discussed for Grids...........................................................................................19
4.4.7 Criteria options discussed for Storage.................................................................................................20
4.5
Adaptation & Resilience Requirements...............................................................................................20
4.5.1 Adaptation & Resilience in grids and storage......................................................................................21
4.5.2 Climate risk and resilience evaluation tools and methodologies ........................................................22

Appendix 1: Technical Working Group members ...................................................................................... 25
Appendix 2: Industry Working Group members........................................................................................ 25
Appendix 3: Summary of Public Consultation ........................................................................................... 26

Climate Bonds Initiative Grids and Storage Background Document

1 Introduction
1.1 Overview
This Criteria Document provides serves as a reference document to the Criteria Document for the Electrical Grids andStorage Criteria (hereafter referred to as the Grids and Storage Criteria). The purpose of the Background Document is toprovide an overview of the key considerations and issues that were raised during development of the Grids and Storage
Criteria.
The Criteria are developed through a consultative process with Technical Working Groups (TWGs) and Industry Working
Groups (IWGs), and through public consultation. The TWGs comprise academic and research institutions, civil society
organizations, multilateral banks and specialist consultancies whereas IWGs are represented by industry experts including
potential bond issuers and investors. A period of public consultation offers the opportunity to any member of the public tocomment on the Criteria. This document aims to capture these various dialogues and inputs and substantiate the reasoning
behind the Grids and Storage Criteria.
This Background Document begins with an introduction to the challenges in financing a low carbon and climate resilient
world and the role that bonds can play in meeting this challenge, particularly through the standardization of green
definitions. This is followed by Section 2, which introduces the grids (electricity transmission, distribution and storage)
sector and the implications of climate change on the sector in terms of both emissions and climate risks. Section 3 explains
the principles and boundaries of Grids and Storage Criteria development. Section 4 synthesizes the discussions arising fromthe TWGs, IWGs, and public consultation and presents the resulting Criteria.
Supplementary information available in addition to this document include:
1. Grids and Storage Criteria Brochure: a 2-page summary of the Grids and Storage Criteria.
2. Grids and Storage Criteria Document: the complete Criteria requirements.
3. Climate Bonds Standard V3: the umbrella document laying out the common requirements that all Certified Climate
Bonds need to meet, in addition to the sector-specific Criteria (V3 is the most recent update version).
4. Climate Bonds Standard & Certification Scheme Brochure: an overview of the purpose, context and requirementsof the Climate Bonds Standard & Certification Scheme.
For more information on the Climate Bonds Initiative and the Climate Bonds Standard & Certification Scheme, see
https://www.climatebonds.net/standard.
For the documents listed above, see https://www.climatebonds.net/standard/grids

1.2 Funding needs of a low-carbon and climate resilient economy
The current trajectory of climate change, expected to lead to global warming of 2.7 - 3.1°C by 21001, poses an enormousthreat to the future of the world’s nations and economies. The effects of climate change and the risks associated with agreater than 1.5ºC rise in global temperatures by the end of the century are significant: rising sea levels, increased frequency
and severity of hurricanes, droughts, wildfires and typhoons, and changes in agricultural patterns and yields. Avoiding suchcatastrophic climate change requires a dramatic reduction in global greenhouse gas emissions.
To ensure sustainable development and halt climate change, all future infrastructure, both built and nature-based, needs
to be low-carbon and resilient to climate change, without compromising the kind of economic growth needed to improve
the livelihoods and wellbeing of the world’s most vulnerable citizens. Global infrastructure investment is expected toamount to USD 90 trillion over the next 15 years, which is more than the entire current infrastructure stock.2
1 According to Climate Tracker, under current policies we could expect 2.7-3.1ºC. In the absence of policies this rises steeply to 4.1-4.8ºC: http://climateactiontracker.org/global.html
2 New Climate Economy (2016). Better Growth, Better Climate.

1

Climate Bonds Initiative Grids and Storage Background Document

Ensuring that the infrastructure built is low-carbon raises the annual investment needs by 3–4%.3 The IEA further estimatesthat an additional USD 1.1 trillion will need to be invested annually in both supplying power and altering how end users
consume power between now and 2040 to meet the IEA Sustainable Development Scenario (compatible with a 1.5ºC
scenario)4. Climate adaptation needs add another significant amount of investment, which is estimated at USD 280–500
billion per annum by 2050 for a 2ºC scenario.5 These estimates would likely increase in a higher warming scenario.
According to the Task Force on Climate-related Financial Disclosures (TCFD), there are two broad channels through whichclimate change can present risks to business activities and assets6:
1.
2.

Physical risk: the risk of impacts from climate- and weather-related events, such as floods and storms that damage
property or disrupt supply chains and trade;
Transition risk: the financial risks that could result from the process of adjustment towards a lower-carbon
economy. These include sudden shifts in demand; legal risk due to parties who have suffered loss or damage
seeking compensation; and changes in policy favouring lower carbon technologies.

These could prompt a reassessment of the value of a large range of assets as costs and opportunities become apparent,
and widespread inadequate information on these risks could even threaten the stability of the financial system. Risks tofinancial stability will be minimised if the transition to a low carbon and climate resilient economy begins early and follows
a predictable path, thereby helping the market anticipate a smooth transition to a 1.5oC warming world.

1.3 Green bonds are critical to mobilising the capital required
Traditional sources of capital for infrastructure investment, such as governments and commercial banks lending, areinsufficient to meet capital requirement needs to 2030. Institutional investors, particularly pension and sovereign wealthfunds, are increasingly looked to as viable actors to fill these financing gaps.
Capital markets enable issuers to tap into large pools of private capital from institutional investors. Bonds are appropriate
investment vehicles for these investors as they are low-risk investments with long-term maturities, making them a good fit
with institutional investors’ liabilities (e.g. pensions to be paid out in several decades).
Bond financing works well for low-carbon and climate-resilient infrastructure, particularly for refinancing projects andassets post-implementation, as capital markets also facilitate risk management. Across investors and financial markets,
different entities face different types and severities of risks related to climate change, depending on many factors including
degree of long-term exposure, likelihood of negative climate impacts, and ability to mitigate impacts or shift positions.
Bonds offer relatively stable and predictable returns, and long-term maturities. This makes them a good fit with institutional
investors’ investment needs. Labelled green bonds are bonds with proceeds used for green projects, mostly climate change
mitigation or adaptation projects, and labelled accordingly. The rapid growth of the labelled green bond market has shownin practice that the bond markets provide a promising channel to finance climate investments.7
The green bond market can reward bond issuers and investors for sustainable investments that accelerate progress towarda low carbon and climate resilient economy. Commonly used as long-term debt instruments, green bonds are issued bygovernments, companies, municipalities, commercial and development banks to finance or re-finance assets or activities
with environmental benefits. Green bonds are in high demand and can help issuers attract new types of investors.
Green bonds are regular bonds with one distinguishing feature: proceeds are earmarked for projects with environmental
benefits, primarily climate change mitigation and adaptation. A green label is a discovery mechanism for investors. It

3 New Climate Economy (2016). The Sustainable Infrastructure Imperative: Financing for Better Growth and Development.
4 International Energy Agency, ‘World Energy Outlook 2018’, (November 2018), available at: https://www.iea.org/weo2018/
5 UNEP (2016). The Adaptation Finance Gap Report.
6 TFCD’s ‘Recommendations of the Task Force on Climate-related Financial Disclosures’: https://www.fsb-tcfd.org/publications/finalrecommendations-report/
7 See Climate Bonds Initiative’s ‘State of the Market’ Report for more information:
https://www.climatebonds.net/files/reports/cbi_sd_sotm_2020_04c.pdf

2

Climate Bonds Initiative Grids and Storage Background Document
enables the identification of climate-aligned investments with limited resources for due diligence. By doings so, a green
bond label reduces friction in the markets and facilitates growth in climate aligned-investments.
However, today it is estimated that green bonds account for only 2% of the total global bonds outstanding8 in a global bondmarket of nearly USD 130 trillion9. The potential for scaling up is tremendous, while more market tools and labels are
becoming commonplace. Social bond and Sustainability bond issuance increased considerably in 2020, for instance10.

1.4 Introduction to Climate Bonds Initiative and the Climate Bonds
Standard
The Climate Bonds Initiative is an investor-focused not-for-profit organisation whose goal is to promote large-scale
investments through green bonds and other debt instruments to accelerate a global transition to a low-carbon and climateresilient economy.
Activating the mainstream debt capital markets to finance and refinance climate-aligned projects and assets is critical toachieving international climate goals, and robust labelling of green bonds is a key requirement for that mainstream
participation. Confidence in the climate objectives and the use of funds intended to address climate change is fundamental
to the credibility of the role that green bonds play in a low carbon and climate resilient economy. Trust in the green label
and transparency to the underlying assets are essential for this market to reach scale but investor capacity to assess green
credentials is limited, especially in the fast-paced bond market. Therefore, the Climate Bonds Initiative created Climate
Bonds Standard & Certification Scheme, which aims to provide the green bond market with the trust and assurance that itneeds to achieve scale.
The Climate Bonds Standard & Certification Scheme is an easy-to-use tool for investors and issuers to assist them inprioritising investments that truly contribute to addressing climate change, both from a resilience and a mitigation point ofview. It is made up of the overarching Climate Bonds Standard detailing management and reporting processes, and a set of
Sector Criteria detailing the requirements assets must meet to be eligible for certification. The Sector Criteria cover a rangeof sectors including solar energy, wind energy, marine renewable energy, geothermal power, low carbon buildings, lowcarbon transport, and water. The Certification Scheme requires issuers to obtain independent verification, pre- and postissuance, to ensure the bond meets the requirements of the Climate Bonds Standard.

1.5 Process for Sector Criteria Development
The Climate Bonds Standard has been developed based on public consultation, road testing, review by the assurance
roundtable and expert support from experienced green bond market actors. The Standard is revisited and amended on anannual basis in response to the growing green bond market. Sector specific Criteria, or definitions of green, are developedby TWGs, made up of scientists, engineers and technical specialists. Draft Criteria are presented to IWGs before being
released for public comment. Finally, Criteria are presented to the Climate Bonds Standard Board for approval (see diagram
below).

8 https://www.fitchratings.com/research/fund-asset-managers/global-green-bond-fund-dashboard-1h20-24-09-2020

9 https://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/Secondary-Markets/bond-market-size/
10 See Climate Bonds Initiative’s ‘State of the Market’ Report for more information:
https://www.climatebonds.net/files/reports/cbi_sd_sotm_2020_04c.pdf

3Climate Bonds Initiative Grids and Storage Background Document
TWG
establishedIWG
established

Research & Development Phase

Draft Criteria released
for public consultation

Climate Bonds Standard
Board reviews

Review Phase

TWG & IWG
meetings to discussand advise on criteria

Approval

TWG revisit criteria
in light of public
consultation

Climate Bonds
Certifications
Market Use

Criteria approvedby the Board andreleased

Regular TWG
review of Criteria

Figure 1: process for developing Climate Bonds Standard Sector Criteria

To date, Sector Criteria for the following sectors are available for certification:• Wind• Solar• Geothermal• Marine renewables• Transport• Water• Buildings• Agriculture and Protected Agriculture• Hydropower• Bioenergy• Waste management• Shipping
Sector Criteria for Cement, Steel and Chemicals are under development.

1.6 Revisions to these Criteria
As part of the Climate Bonds Initiative's goal to accelerate a global transition to a low-carbon, resilient economy, the Grids
and Storage Criteria seek to maximize viable bond issuances with verifiable environmental outcomes. This guidance should
be recognised as the first set of sector-specific guidance for electricity transmission, distribution and storage. All groups andindividuals involved recognise the breadth and complexity of this sector and emphasise that this guidance should be afoundation on which to encourage increased transparency and consistency in application of scientific best practices anddata in the context of bond issuances. Note that Climate Bonds Initiative expects that the Grids and Storage Criteria may be
refined over time, however any approvals given will not be removed or changed retroactively. These eligibility criteria
should be recognized as a starting point.
These Criteria will be reviewed two years after launch, or potentially earlier if the need arises, at which point the TWG willtake stock of issuances that arise in the early stages and any developments in improved methodologies and data that canincrease the climate integrity of future bond issuances. After the first review, the Criteria will be reviewed again periodicallyon a needs basis as technology and the market evolves. As a result, the Criteria are likely to be refined over time, as more
information becomes available.

4

Climate Bonds Initiative Grids and Storage Background Document

2 Sector Overview
2.1 What are Electrical Grids and Storage?
Electrical Grids
Electrical grids, comprising transmission and distribution systems, are the critical infrastructure that connect power
generation with electricity consumers. Transmission systems carry power at high voltage, often over long distances,connecting electricity generators (e.g. power plants) with electricity distribution networks. The majority of end-users, suchas homes and businesses, are connected to the distribution networks, which are more localized and distribute electricity atlower voltages than the transmission system. The transmission and distribution systems each consist of large numbers ofphysical assets. This is principally cables, transformers and switchgear that carry power, convert between voltage levels andprovide connections between different parts of the system and to end-users.
Global investment in electrical grids stood at around $275bn in 2019, the bulk of which was in the distribution network(around 65-70%)11. The US and China accounted for $150bn of this total investment, with around $50bn of spending inEurope and $18bn in India. While conventional network assets as described above still make up the majority of theinvestment, a growing proportion of spending is shifting toward digital grid technologies, which accounted for around 15%
of total investment in 2019.
In addition to the network assets, the wires, transformers and so on, grids are increasingly being monitored and actively
controlled, requiring control devices and communications infrastructure. Grid investments could include investment inmonitoring, control and communication systems.
Transmission and distribution grids are usually considered to be natural monopolies, with high barriers to entry due to highcosts of power generation facilities and transmission lines, and historically large economies of scale. Grids serving different
regions within these systems are usually operated by regulated utilities, which in some countries are privately-owned andin others are state-backed entities. Investment and ownership of the assets making up the transmission and distribution
systems will usually be by these regulated utilities.

Electricity Storage
Electrical energy storage is the conversion of electrical energy into a different form, such as potential or chemical energy,
in order to convert it back to electrical energy at a point in the future. This can be carried out by a wide array of technologies
or practices. For example, batteries, capacitors, flywheels, compressed air, pumped hydropower, and hydrogen. Section XX
outlines the storage technologies outside the scope of these Criteria. The consideration of electricity storage in the Grids
and Storage criteria is focused on battery, compressed air, and flywheel storage technologies.
The level of investment in energy storage technologies has been steadily increasing over much of the last decade, although
for the first time saw a drop in 2019. Total investment in battery storage exceeded $4bn12, with an approximately evensplit between grid-scale and behind-the-meter battery storage technologies. Europe is a leader in battery storage
investment, in both grid-scale and behind-the-meter technology, with the US, China, Japan, Korea and Australia also strong
markets for battery technology.
Whereas investment in transmission and distribution assets will normally be by regulated utilities, electricity storage tends
to be treated similarly to generation and is not usually a regulated asset. Indeed, in some countries, such as the UK, network
operators are not allowed to own storage assets. There may therefore be a wide variety of organisations that look to usebond proceeds for investment in electricity storage assets.

11 IEA World Energy Investment 2020: Power Sector (https://www.iea.org/reports/world-energy-investment-2020/powersector#abstract)
12 IEA, World Energy Investment Report 2020, https://www.iea.org/reports/world-energy-investment-2020/powersector?utm_content=buffer61c85&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

5

Climate Bonds Initiative Grids and Storage Background Document

2.2 Future of electrical grids and storage
Traditionally grids have been developed as passive systems, designed to transport power in one-direction from large power
stations connected to the transmission system, through the network of cables and transformers to large numbers of endusers, the majority of which will be connected to the distribution network at lower voltage levels.
This is changing with the decarbonisation of electricity grids through the connection of increasing capacities of low carbon
and renewable generation. This often includes smaller, more distributed generators, some of which are embedded in the
distribution networks and include generation installed at customer sites (e.g. rooftop solar installed on the roofs of homes
and businesses).
Decarbonisation of the power sector greatly magnifies the need for electricity networks, which can manage dynamic power
flows. A low-carbon electricity system is typically one which must prepare for a high degree of utility-scale intermittent
renewables penetration and flexibility in matching demand and supply. It may also imply: (i) greater decentralisation ofgeneration resources in the hands of households and municipalities, resulting in the need to manage bi-directional power
flows; (ii) the incorporation of demand response measures.
Utility-scale battery storage is one strategy for dealing with intermittency that has been receiving increasing attention andinvestment. Utility-scale typically refers to batteries of a size from a few MWhs to hundreds of MWh. As lithium-ion battery
prices have tumbled, this technology has taken an increasing share of the global grid-scale battery market, achieving nearly
90% market share by capacity of new additions in 2016 (corresponding to 1.62 GW of added capacity)13. Grid-scale batteries
can be installed to provide a variety of services, including power-oriented applications such as frequency response, which
require high power output for a short duration, to more energy-oriented applications, such as network peak shaving,arbitrage and co-location with intermittent renewables to provide output firming. Behind-the-meter battery systems are
installed at a customer’s site and are significantly smaller in capacity (often installed within commercial premises or in theresidential sector). The most likely use cases for behind-the-meter storage are to maximise own-use of onsite renewableenergy systems, e.g. rooftop solar, arbitrage and for reliability purposes. While behind-the-meter storage is usually ownedby the customer, it can still be beneficial to the network operator. For example, in parts of the network with high penetrationof photovoltaics, distributed behind-the-meter batteries can help to reduce reverse power flows at times of high solar
output and low demand on the low voltage system.
A further strategy for better integration of intermittent renewables is greater connectivity across a large geographicalregion, smoothing out differences in meteorological conditions in different areas. The best renewable resources can often
be located far from population centres; for example, in desert areas, or off remote windy coasts. The UK may one day beconnected to the geothermal and hydropower resources of Iceland via the world’s longest subsea cable. Long-distanceinterconnection or ‘mega-grids’ are frequently discussed as a means of making the best use of renewable resources, andadvances in ultra-high voltage transmission technology have made transcontinental transmission feasible14. While plans forconnecting Europe to the vast solar resource of North Africa have been shelved due to political risk, mega-grids connecting
China with Siberia and Central Asia or even Europe are a current topic of discussion1516.

2.3 Electrical Grids and climate changeElectrical grids are a key enabler of the decarbonisation of energy systems 17 . A wide range of energy uses can bedecarbonized by the use of electricity in place of fossil fuels; for example in transport, heating and industrial processes,
13 IRENA, 2019, Utility-scale batteries: Innovation landscape brief, www.irena.org//media/Files/IRENA/Agency/Publication/2019/Sep/IRENA_Utility-scale-batteries_2019.pdf
14 The economist. 2017. Rise of the supergrid: Electricity now flows across continents, courtesy of direct current. Available from:https://www.economist.com/news/science-and-technology/21714325-transmitting-power-over-thousands-kilometres-requires-newelectricity. Accessed on 17.05.2018.
15 Ardelean, M., & Minnebo, P. 2017. JRC science for policy report; A China-EU electricity transmission link; Assessment of potential
countries and routes. Available from:https://ses.jrc.ec.europa.eu/sites/ses.jrc.ec.europa.eu/files/publications/jrc110333_intercon_report_v03.pdf. Accessed on 17.05.2018.
16 Financial Times. 2017. China plans super-grid for clean power in Asia. Available from: https://www.ft.com/content/e808a542-d6c611e7-8c9a-d9c0a5c8d5c9. Accessed on 17.05.201817 https://www2.deloitte.com/content/dam/Deloitte/ch/Documents/energy-resources/deloitte-ch-en-eurelectric-connecting-thedots-study.pdf

6

Climate Bonds Initiative Grids and Storage Background Document
provided that the electricity is generated from low carbon or renewable resources. Modern electricity transmission anddistribution grids are needed to connect these new sources of generation and to cope with the growing electricity demands
associated with increased electrification. Simultaneously, they must maintain high levels of system security, reliability,
safety and low losses.
The potential for grid investments to contribute to greenhouse gas mitigation largely rests on their ability to:
1. Connect utility-scale renewable resources to the grid;
2. Accommodate and/or encourage low-carbon decentralised resources;
3. Upgrade the grid network with flexibility measures to be able to better handle intermittency, bi-directional flows,demand response measures and more dynamic and finer-grained matching of supply and demand (smart grids,
internet of energy, etc.); and4. Enable electrification of other sectors
The technologies required to achieve these objectives will include traditional grid assets, such as cables and transformers,
to increase capacity for connection of new demands and to carry power from locations of strong renewable resources tothe centres of electricity demand (note that in addition to high-voltage AC transmission, the demand for long-distance, lowloss transmission may lead to an increasing role for HVDC technology). Alongside the build of increased capacity, thetransition to smart grids will require investment in technologies for the automation and control of networks,
communications systems and digitalisation. Smart grids will also be necessary to enable decarbonisation in the mostefficient and cost-effective way.
In general, investment in building sufficient network capacity and facilitating smarter network management is considered
to be crucial to achieving energy system decarbonisation and hence there is a strong rationale for broad eligibility of gridinvestments with respect to the Climate Bonds Grids and Storage Criteria.

2.4 Electricity storage and climate change
The benefits of storage in clean energy systems are regularly discussed (e.g. grid support, balancing intermittency, daily
peak shifting, seasonal storage, etc.). However, it should be acknowledged that research by systems modellers shows thatstorage does not always reduce the GHG emissions of the electrical grid as a whole18. In fact, associated emissions of storage
seem to depend on the relative carbon intensities of: i) the electricity used to charge the storage, and (ii) the generationthat the stored electricity displaces. To determine the impact of storage on emissions in any particular grid is likely to require
modelling of the dispatch of grid generation and the operation of storage within the system. However, the potential forelectricity storage to increase emissions is diminished as the overall carbon intensity of the grid reduces. The benefits ofstorage, in terms of facilitating increased penetration of renewables and managing peak demands, are therefore expected
to outweigh any potential increase in emissions.
There is limited literature on the lifecycle impacts of electricity storage technologies. These indicate that pumped storagehydropower is probably the lowest carbon forms of storage, while batteries have a higher GHG impact, partly due to thelower number of cycles which they are able to withstand19 (see Table 1). Battery lifecycle GHG emissions are highly sensitive
to the carbon intensity of the grid of the country of manufacture. Compressed air has lower GHG emissions when pairedwith fossil fuel energy, and for this reason does not compare well to other storage technologies in low carbon grids20. Notethat these are indicative figures from the few sources we have been able to access to date, and do not constitute a review.
We have presented an interpretation of quantitative results (rather than the figures themselves) for any study which
includes the carbon-intensity of the electricity used to charge the battery, as this would clearly be a dominating factor (righthand column).

18 Hittinger, E., Azevedo, I., 2015, Bulk Energy Storage Increases United States Electricity Systems Emissions, Environ. Sci. Technol.
2015, 49, 3202-3210
19 Hiremath, M., Derendorf K. and Vogt T. 2015. Comparative Life Cycle Assessment of Battery Storage Systems for Stationary
Applications”, Environ. Sci. Technol. 2015, 49, 4825−4833.
20 Denholm, P. and Kulcinski, G.L. 2004. Life cycle energy requirements and greenhouse gas emissions from large scale energy storage
systems’, Energy Conversion and Management 45: 2153–2172.

7

Climate Bonds Initiative Grids and Storage Background Document

Table 1. Energy stored on investment (ESOI) and lifecycle GHG emissions ofdifferent storage technologies21, 22.

2.5 Investment need
Substantial investment in electricity grid infrastructure will be required to support increasing electrification of energy
demands, including transport and heating, and greater penetration of renewable energy sources. Investment will be
required to increase network capacity at both transmission and distribution levels, involving the deployment of‘conventional’ grid assets such as transformers and cables. Better utilisation of existing network capacity will also be
required if increased demands on electricity grids are to be met in the most cost-effective way. This is expected to driveincreasing investment in network automation, monitoring, communications and control systems. This will in turn enable
more active management of networks, which have traditionally been operated in a passive way. Flexibility, including
demand side management and electricity storage, is expected to play an increasing role in the management of networks,
resulting in growing investment in flexibility services.
In contrast to the need for investment, the actual investment in grids globally has fallen over recent years. The IEA’s World
Energy Investment 2020 report23 recorded the third consecutive year of declining investment in grids in 2019 with total
investment at around $275bn, a reduction of 7% compared to 2018, with a further fall predicted in 2020 as the Covid-19
pandemic weakens public finances. The drop has largely been driven by declining investment in distribution networks, while
investment in transmission grids, which contributes around 30% of network investment globally, had been growing steadily
over a five-year period to 201824, but also dropped in 2019. Despite the overall reduction, grid investment in the UnitedStates, Europe and India has been increasing, but this has been offset by reduced spending in China and other regions.
The expected shift in investment from conventional grid infrastructure to digital grid technologies has been observed, withincreasing spending on smart meters, network automation and EV charging infrastructure. Investments in smart network
technologies made up more than 15% of total investment in grids in 2019.
The IEA World Energy Investment report notes that the current trajectory of grid spending is at risk of falling short of thatneeded to support growing renewables and electrification. The IEA Net Zero by 2050 report estimates that an annual

21 , S., Schmidt, O. and Gambhir, A. 2016. ‘Electrical energy storage for mitigating climate change’, Grantham Institute Briefing paper
No 20, Imperial College London; 2 Baumann, M., Peters, J.F., Weil, I.M., Grunwald, A. 2016. CO2 Footprint and Life‐Cycle Costs ofElectrochemical Energy Storage for Stationary Grid Applications’, Energy Technology 5(7):1071-1083; 3.
22 Romare, M. and Dahllof, L. 2017. The Life Cycle Energy Consumption and Greenhouse Gas Emissions from Lithium-Ion Batteries’, IVL
Swedish Environmental Research Institute.
23 https://www.iea.org/reports/world-energy-investment-2020/powersector?utm_content=buffer61c85&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
24 https://www.carbonbrief.org/iea-low-carbon-spending-must-more-than-double-to-meet-climate-goals

8Climate Bonds Initiative Grids and Storage Background Document
spending of USD 820 billion on electrical grids will be needed by 2030 to limit global warming to 1.5oC above pre-industrial
levels25, nearly a 300% increase on 2019 levels.

2.6 Bonds in the sector
Of the more than USD 150bn of green bonds that Climate Bonds has Certified since the establishment of the Standard, 46%(USD 69bn) of cumulative issuance relates to energy generation26. Many of the renewable energy projects represented bythis number will include necessary dedicated connections and transmission lines. However, there is considerable further
grid investment that might not directly connect to renewable energy. These might be financing upgrades or extensions to
T&D networks, or development of smart grids and storage facilities. In 2019 alone, there was a total of USD 248bn
investment into T&D infrastructure 27 , although this is not limited to bond financing. In any case, grid infrastructure
represents a pool of assets and activities which can absorb large amounts of finance that can be structured through certified
green bonds.
It is not clear how many outstanding bonds are aligned with grid infrastructure. Issuance of Transmission Line Project Bonds
equalled USD 3.8bn in 2016 alone. Between 2010 and 2017 Transmission Line Project Bonds accounted for approx. 16% of
all Power-related Project Bond issuances by volume, and roughly 4% of the total Project Bond market28. Table 2 meanwhileprovides recent examples of bonds in the grid sector.

Table 2. Examples of recent bonds in the grids sector.
IssuerTenneT
Holdings

Year
2020

National Grid

2020

Niagara
MohawkPower
Corporation(NIMO) /National Grid
Fingrid

2020

Iberdrola

2021

2017

Description
EUR 1.35bn bond, eligible projects for funding: connection oflarge-scale offshore wind to the onshore electricity grid andenhancing the onshore transmission capacity for renewableenergy29
EUR 500mn bond, eligible projects for funding: connection
infrastructure of wind farms to the grid, reduction of electricity
grid losses or financing clean transport infrastructure30
USD 600mn bond, used to finance renewable energy, energy
efficiency, clean transportation, pollution prevention,
environmentally sustainable management of living natural
resources and land use31

Credentials
ISS Corporate
Solutions second
opinion€100mn bond, linked to connections for renewable energy,
reductions in network losses, interconnections, and smart griddevelopment32
EUR 2bn, 15-year green bond to finance the construction,
operation and development of renewable energy, as well as
general financing of smart grids, storage solutions and network
development33

Cicero second
opinion

DNV-GL second
opinionN/A

Vigeo Eiris second
opinion25 https://www.iea.org/reports/net-zero-by-2050
26 https://www.climatebonds.net/2020/11/new-milestone-climate-bond-standard-certifications-pass-150bn-record-24-market-share2020
27 https://www.iea.org/reports/world-energy-investment-2020/power-sector
28 https://www.ca-cib.com/sites/default/files/2017-07/Project%20Bond%20Focus%20-%20Issue%206%20%20Power%20Transmission%20%28VF%29.pdf
29 https://renews.biz/64490/tennet-raises-green-bond-financing-to-10bn/
30 https://www.nationalgrid.com/uk/stories/grid-at-work/national-grid-launches-green-bond-fund-sustainability-projects
31 https://www.nationalgrid.com/stories/grid-at-work-stories/us-green-bond-helps-fund-clean-energy-projects
32 https://www.fingrid.fi/globalassets/dokumentit/en/investors/green-financing/fingrid---green-bonds-framework----3-october2017.pdf
33 https://www.iberdrola.com/press-room/news/detail/iberdrola-completes-largest-green-hybrid-bond-issue-history-billion-euros

9Climate Bonds Initiative Grids and Storage Background Document
Issuer
E.ON

Year
2019

Rural
Electrification
Company
(REC)
NTPC

2017

FlexiGroup
Limited2019

Difebal S.A.
/ Terna

2017

2016

Description
EUR 1.5bn bond, eligible projects for funding: renewable energy
generation and connection, upgrades and refurbishments to its
electrical grids, including smart grid investments, energy
efficient replacements, the deployment of smart meters 34
USD 450mn 10-year bond, funding generation and distributionof solar, wind and biomass assets, as well as sustainable water
and waste management projects35

Credentials
Sustainalytics
second opinion

INR 20bn (USD299mn), 5-year bond, eligible projects forfunding: renewable energy connection and transmission36
AUD 90mn (USD 70mn) green bond issuance to finance thedeployment of rooftop solar PV systems and small-scale energy
storage systems37

Climate Bond
Certified
Climate Bond
Certified

USD 81mn, 30-year green bond used to directly connect
renewable energy and construct and operate transmission lines

Vigeo Eiris

Climate Bond
Certified

34 https://www.eon.com/en/about-us/media/press-release/2019/2019-08-21-eon-successfully-raises-green-bonds.html
35 https://www.climatebonds.net/certification/rural-electrification-corporation
36 https://www.climatebonds.net/certification/ntpc
37 https://www.energy-storage.news/news/important-market-development-energy-storage-included-in-australian-climate

10Climate Bonds Initiative Grids and Storage Background Document

3 Principles and Boundaries of the Sector
Criteria
3.1 Guiding principles
The Climate Bond Standard needs to ensure that the Grid and Storage assets and projects included in Certified Climate
Bonds deliver on GHG mitigation potential and climate resilience benefits, in line with best available scientific knowledge
and compatible with the goals of the Paris Agreement. At the same time, the Grids and Storage Criteria need to be pragmaticand readily usable by stakeholders in the market, to maximise engagement and use. High transaction costs run the risk of
reducing uptake of a Standard in the green bond market. Keeping the costs of assessment down while maintaining robust
implementation of the criteria is important. Table sets out the principles guiding the development of the Grids and Storage
Criteria to meet and balance on these two goals.

Table 3. Key principles for the design of a Climate Bond Standard Grids andElectricity Storage Criteria
Principle

Requirement for the Criteria

Level of ambition

Compatible with meeting the objective of 1.5ºC or less temperature rise above
pre-industrial levels set by the Paris Agreement, and with a rapid transition toa low carbon and climate resilient economy.

Robust system

Scientifically robust to maintain the credibility of the Climate Bond Standard.

“Do not reinvent thewheel”

Harness existing robust, credible tools, methodologies, standards and data toassess the low carbon and climate resilient credentials of any technology,
endorsed by multiple stakeholders where possible.

Level playing field

No discrimination against certain groups of producers or geographies.

Multi-stakeholder support

Supported by key stakeholders; those within the relevant industry, thefinancial community and broader civil society.

Continuous improvement

Subject to an evolving development process with the aim of driving continuous
improvement and credibility in the green bond market.

Technology agnostic

The Climate Bonds Standard avoids picking 'winners and losers’ in terms oftechnologies – a task beyond its mandate and capacity.

In addition to the overarching principles outlined in the table above, the following additional guiding principles for grids andstorage were considered when developing the Criteria.
Any Criteria developed for the Electrical Grids and Storage sector should be:• Inclusive – As a general principle, modern, robust grid infrastructure is an enabler of decarbonisation, hence
eligibility criteria should be broadly inclusive• Simple – Any Criteria developed should be easy to apply• Accessible – Demonstration of eligibility of any Criteria should be accessible by the use of public datasets• Robust – Energy systems across the world are undergoing rapid changes. Criteria developed should allow for thesechanges and not rely on parameters that will become outdated or obsolete in the near future11

Climate Bonds Initiative Grids and Storage Background Document

3.2 Potentially eligible assets
The following grid and storage assets are potentially eligible for inclusion in a Certified Climate Bond, subject to meetingthe eligibility Criteria discussed in this document and summarized in the associated Grids and Storage Criteria document.
•••

Electrical grid networks:• Transmission and distribution lines• Transformers and conductors• Interconnectors• Control, monitoring and communication systems and software
Battery, compressed air and capacitor storage
Dedicated infrastructure such as equipment housing infrastructure

3.3 Assets out of Scope
Pumped Hydropower Storage is out of scope of these criteria. Such assets and activities fall under the scope of the
Climate Bonds Standard Hydropower Criteria.
Hydrogen storage is not within the scope of these Criteria. While hydrogen can act as an electricity storage medium, it has
many other applications and is expected to play a crucial role in decarbonisation of multiple sectors, including industry andtransport. Climate Bonds Initiative acknowledge the diverse role that Hydrogen can play and will therefore develop acomprehensive set of criteria to address Hydrogen in future.

12

Climate Bonds Initiative Grids and Storage Background Document

4 Discussion and Eligibility Criteria
4.1 Overarching considerations
The purpose of the Grids and Storage Criteria, like all Sector Criteria developed for the Climate Bonds Standard &Certification Scheme, is to certify assets and projects that are aligned with a low carbon economy and are climate resilient.
Overarching principles and considerations for alignment with these objectives apply to all Grids and Storage applications in
scope and are discussed in this section.

4.1.1 The overarching principles of the Grids and Storage Criteria
The overarching objectives of the Grids and Storage Criteria are as follows:••••

Support the integration of renewable energy into the power grid
Support the transition from carbon-intensive energy supply, via electrification and parallel development of low
carbon power generation capacity
Support grid management technology used for integrating low carbon emission generation and demand side
energy savings
Decrease direct emissions from transmission and distribution (T&D) infrastructure

Electrical grids have limited direct emissions impact. However, they are a key enabler of increased penetration of renewableenergy into a wide variety of energy end uses. The general principle applied in developing the Grids and Storage Criteria isthat electrification can greatly contribute to climate change mitigation and therefore that investment in transmission anddistribution infrastructure is to be encouraged. The criteria are therefore designed to be inclusive, such that the majority
of investments in modern grid infrastructure, including associated control systems, are eligible. The exclusions to this are if
the investment is directly financing infrastructure that increases the capacity of high carbon intensity electricity production
plants connected to the system, where high carbon intensity is defined as generation that exceeds a certain threshold level,or if the grid system as a whole does not demonstrate an adequate rate of decarbonisation.
The same overarching principles are applied to electricity storage, in terms of supporting integration of renewable energy,
supporting transition from carbon intensive energy supply via electrification and supporting grid management technology
used for integrating low carbon generation and demand side energy savings.
Storage can increase carbon emissions in electricity systems.38,39 The efficiency loss in electrical storage systems results in
an increased requirement for generation to meet demand (unless the electricity stored would have otherwise been
curtailed). If the additional generation results in greater emissions than displaced by the discharged electricity, thenemissions will be increased. If the storage is used for arbitrage and is charged by more carbon intensive electricity than theelectricity that is displaced when the storage is discharged, then emissions will also be increased.
Storage can however increase the integration of low carbon energy generation into electricity systems and, as the capacityof renewable generation connected to an electricity system increases with associated increased curtailment, storage canbe expected to reduce emissions. Hence, the overarching principle adopted to storage is that if the storage is deployedwithin a grid that is decarbonising, as defined within the Grids and Storage Criteria, then the storage deployed within thatsystem is also eligible.

38 https://pubs.acs.org/doi/abs/10.1021/es505027p
39 https://www.nature.com/articles/nenergy20171.epdf?sharing_token=ABCsfxS_si1qioORuWP09RgN0jAjWel9jnR3ZoTv0PZncHjYV6mdy8s1m8MlS8Q6iSBxwzscJTnHo0ustfXYEdKYZAdxtcfCIju9HpKsBn74YVf7M760kXn2Fi1elK35plmG_RRuFy5NF32Aah5zTSYaRZn5Yz-zwTkyWGu89g6uQrKz6ymV5t33ptT3jE3H9AD2rDt2OR1czM5kALA%3D%3D&tracking_referrer=www.vox.com

13

Climate Bonds Initiative Grids and Storage Background Document

4.2 Definitions and key terms
SystemThe term System is used in this section to reference the transmission or distribution network control area of the networkor system operator(s) where the discussed activity takes place.
Direct connection or expansion
A direct connection or expansion of an existing direct connection to production plants includes infrastructure that is
indispensable to carry the associated electricity from the power generating facility to a substation or network.

4.3 Leveraging existing best practice standards
In all Climate Bonds Standard Sector Criteria, the aim is to leverage existing schemes and initiatives that are in use in the
sector in question. This is because:•••

Significant industry effort has already gone towards designing and implementing these schemes
Many have been through multi-stakeholder development processes and periods of public consultation
It is very likely that some established schemes and initiatives check similar requirements to those that the Climate
Bonds Standard Grid Criteria require are fulfilled

The EU taxonomy40 was identified as a key industry best practice certification body to be leveraged by the Grids and Storage
criteria. The EU taxonomy define specific Mitigation Criteria for Transmission and Distribution of Electricity and for Storageof Electricity. After careful consideration, the TWG decided to adopt the EU taxonomy as the Climate Bonds Criteria for
Grids, and to adapt the Transmission and Distribution Mitigation Criteria as the basis for the Climate Bonds Storage Criteria.
A detailed discussion on the assessment of options can be found in the following section.

4.4 Eligibility criteria for Mitigation – assessment of options
The Climate Bonds eligibility criteria for Grids and Storage should align with the overarching principles and support atransition from carbon-intensive energy supply to a low-carbon future. Since grids have limited direct emissions impact, theGrids and Storage Criteria should define eligible grids as those that either have a high proportion of renewable generation
connected to it already, are on a trajectory to, or have the ambition to adopt more low-carbon generation. This should
avoid setting overly stringent constraints as investment in T&D infrastructure is to be encouraged in general.
In line with the aim to leverage existing work as far as possible, the EU taxonomy was considered as a baseline for thedevelopment of eligibility criteria. The TWG identified shortcomings of the EU taxonomy and several possible routes were
explored that involved either new alternative methodologies or changes to the EU taxonomy to solve some of the issues
identified. However, the conclusion was that none of these alternative options represented a clear improvement to the EU
taxonomy. Reasons for this varied, either being impractical, overly stringent, or not robust. These alternatives and reasonsare discussed below.

4.4.1 Adopting the EU taxonomy Criteria for the Transmission andDistribution of Electricity
The underlying philosophy of the EU taxonomy is that the electrification of assets and sectors is crucial to meeting Paris
Goals of keeping global warming to 1.5-degrees Celsius. The grid is the key enabler of this41 and therefore generally can be

40 https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en
41 https://www2.deloitte.com/content/dam/Deloitte/ch/Documents/energy-resources/deloitte-ch-en-eurelectric-connecting-thedots-study.pdf

14

Climate Bonds Initiative Grids and Storage Background Document
seen favourably in terms of its role in decarbonisation42. At the same time, grid investment has fallen in recent years43,44.
Some grid infrastructure can be up to 50 years old45. This ageing infrastructure is not sufficient to meet the challenges ofincreasing electrification and renewable energy generation, or to withstand future changes in climate.
The EU taxonomy’s approach recognises that most grid infrastructure can be defined as green, though with notable
exceptions. A list of automatically eligible activities describes pure-play green activities. Additional criteria then determine
whether a system is on a pathway to full decarbonisation. If so, any grid investment in this system is eligible. These Criteria
are as follows:“A System is deemed to be on a trajectory to full decarbonisation if either• more than 67% of newly connected generation capacity in the System is below the generation threshold value of
100 gCO2e/kWh measured on a Product Carbon Footprint46 (PCF) basis, over a rolling five-year period; or• the average System grid emissions factor is below the threshold value of 100 gCO2e/kWh measured on a PCF
basis, over a rolling five-year average period.”This adds to the automatic exclusion of direct connections to plants with emission intensities of 100g CO2e/kWh or greater(in essence, fossil fuel power). The TWG therefore considered that these Criteria have the crucial elements which prevent
certification of grid assets and activities which are likely not contributing to decarbonisation.
This system approach is a realistic and attainable threshold for many countries. However, it still screens out countries or
Systems where changes to the energy system are clearly not aligned with Paris Goals.
The TWG recognised that the system approach does not provide certainty that a particular grid or system is on a trajectory
to Paris alignment or approximately to net zero by 2050. However, the TWG considered that a system can be assumed to
be on a pathway to decarbonisation if a large majority of added generation is clean (i.e. below a threshold emissions factor).
Investment in these decarbonising grids will deliver further decarbonisation as energy end-uses increasingly electrify andwill also facilitate increasing penetration of renewable generation in future.
The conclusion was to adopt the EU taxonomy criteria for the transmission and distribution of electricity.

The EU taxonomy list of automatically eligible assets
The EU taxonomy includes a list of activities that are always eligible, irrespective of whether the System is on a pathway tofull decarbonisation. The TWG were in agreement that this list captured key activities that would be considered climatealigned but discussed some proposed additions to the list. These included activities dedicated to diminishing technical losses
and/or improving the efficiency of grids, as well as avoidance of nontechnical losses. In all cases, the TWG emphasised the
difficulty and ambiguity of determining if a standalone investment into these issues were beyond improvements expectedfrom business-as-usual replacements. A threshold for efficiency improvements could be set, but such Criteria would not berobust as standards vary between countries.
The conclusion was to adopt the EU taxonomy whitelist of activities that are always eligible.

4.4.2 Using historic grid factors and trajectories to determine systemeligibility
A principle of Climate Bonds Criteria is that they align with the Paris Agreement. That is, they identify assets and activitiesaligned with a 1.5-degree warming scenario as set out by the IPCC. Hence, one option explored by the TWG would be to

42 https://www.act.is/macro-forum-the-street-view/street-view-articles/grid-modernisation-a-key-enabler-for-energy-transition/
43 https://www.carbonbrief.org/iea-low-carbon-spending-must-more-than-double-to-meet-climate-goals
44 https://www.iea.org/reports/world-energy-investment-2020/powersector?utm_content=buffer61c85&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
45 https://www.greenbiz.com/article/time-right-rethink-grid46 For electricity and heat generation activities, an ISO 14067 or a GHG Protocol Product Lifecycle Standard compliant Product Carbon
Footprint (PCF) assessment including measurement of fugitive emissions is required.

15

Climate Bonds Initiative Grids and Storage Background Document
distinguish between those systems that are on a pathway to full decarbonisation from systems that are decarbonising more
slowly. Such a feature would recognise how clean the system already is and how quickly it is decarbonising, to test alignment
with the Paris agreement.
A proposed solution was to use a grid emissions factor as a metric to determine a grid’s eligibility. The grid factor was
defined as the CO2 emissions from coal, gas and oil associated with the generation of 1 kWh of electricity and heat,measured in gCO2/kWh. The IEA provided various data47 including:
a)
b)
c)
d)

CO2 emissions from electricity and heat by energy source (coal, oil, and gas), by year and by country
Total electricity and heat production, by year and by country
CO2 intensity of power indices, by year and by country
Trajectories for the grid factor for certain regions and countries aligned with their Sustainable Development
Scenario (SDS), which reflects a 1.5-degree warming scenario48

The proposed methodology used these data to determine a country’s historic grid factor trajectory and extrapolate this to2040. At the same time, a target trajectory was set for a country by using the same percentage target set by the IEA in their
SDS (point d) for the World (83% reduction compared to 2019 values by 2040). If the country’s trajectory was as ambitious
as this trajectory, then the system would be determined to be Paris-aligned.
Several countries were tested against this methodology by considering their grid factor over the past 10 years and a linear
extrapolation of that trajectory to 2040. Figure 2 demonstrates the eligibility of eight examples tested. Should a grid factor’s
actual rate-of-change exceed the target rate-of-change, the grid is deemed eligible. Of the eight examples shown in the
figure, only three were eligible, the United Kingdom, Kenya, and Norway.

47 https://www.iea.org/data-and-statistics?country=CHINAREG&fuel=Energy%20supply&indicator=TPESbySource
48 https://www.iea.org/data-and-statistics/charts/carbon-intensity-of-electricity-generation-in-selected-regions-in-the-sustainabledevelopment-scenario-2000-2040

16

Climate Bonds Initiative Grids and Storage Background Document

Figure 2: Testing of alternative criteria: Historic grid factors and trajectories
to determine system eligibility. Three countries out of eight examples are
eligible, i.e., the actual rate-of-change exceeds the target rate-of-change.
The TWG decided this was an unsuitable methodology to use for these Criteria for the following reasons:••Overly stringent: the TWG were supportive of an approach which facilitates grids being generally eligible except
for clear unacceptable cases. However, the reality is that many if not most national grid factors are not on therequired pathway to Paris-aligned levels. This is down to a lack of added renewable energy capacity and existinghigher carbon power infrastructure with higher capacity factors in places49. If few grids would meet the criteria,
this would be contrary to the principle of being inclusive.
Inaccurate projections of future grid emission factors: the TWG stressed that energy systems are experiencing aperiod of rapid and, crucially, unpredictable change50,51. The plummeting cost of renewable energy today52 hasmeant that they are exceeding expectations from even 5 years ago. In other words, drawing a straight-line
trajectory to 2040 using historic changes in grid factor would likely not be the trajectory of change witnessed. This
goes the other way, too. As grids get cleaner, it becomes harder to lower the grid factor further. This is because
the very high carbon plants such as coal, where decommissioning brings the greatest emissions savings, will havealready been closed. After this, gas plant closures would bring smaller reductions due to their lower emissions
compared to coal. Therefore, determining eligibility with such a methodology would not be robust.

49 https://www.energy.gov/ne/articles/what-generation-capacity
50 https://www.mpg.de/11825144/socio-technical-energy-systems
51 https://www.iea.org/reports/world-energy-outlook-2020
52 https://www.irena.org/newsroom/articles/2020/Jun/How-Falling-Costs-Make-Renewables-a-Cost-effective-Investment

17

Climate Bonds Initiative Grids and Storage Background Document•

Lack of robust target: applying an 83% reduction target based on the IEA’s world target trajectory would be an
approximate target for other countries. The same IEA model shows that certain regions differ in their percentagechange, with differing rates of change down to 2040.

4.4.3 Using the International Finance Institutions (IFI) methodology forgrid factor
IFIs utilise a methodology 53 for determining a country grid factor for the purposes of then determining an individual
project’s impact on grid emissions. The rationale for consideration of this approach was that it provides open access androbust data, reliably sourced from the IEA and based on CDM methodologies.
Publicly available data provides the Operating Margin (OM) and Combined Margin (CM) for virtually all countries. The CM
is calculated by combining the OM and the Build Margin (BM). The BM is not available publicly as it is sourced by the IFIs
from proprietary IEA data. The OM represents the emissions factors of the most carbon intensive plants (usually coal) in
the country, with the average taken from the years 2013 – 2015. The BM represents the average emissions factor of a grid
between the years 2018 – 2025 based on the IEA’s Stated Policies Scenario. The logic was thus that the OM provides somehistoric grid emissions data, while the BM defines how the emissions of the grid are changing over time out to 2025. Inother words, there is a starting point and a rate of change (or a trajectory).
The TWG decided this was unsuitable for the following reasons:••

Not robust: OM is not representative of the entire emissions intensity of a country’s energy system, being marginal
power. It doesn’t provide a full representation of the merit order and how the system as a whole develops. It is
restricted by assumptions made based on capacity factors, when in reality this is also changing. Certain offshore
wind farms have much higher capacity factors than previously seen54. In systems with high amounts of wind andsolar power, marginal power becomes even more problematic.
Lack of robust trajectory: the reality of using this approach to plot a trajectory similar to the methodology discussed
in section Error! Reference source not found. means that the historic grid emissions (OM) will appear higher than t
he reality. Meanwhile, the CM would be more representative (and lower) and therefore result in a country’s
trajectory appearing steeper towards decarbonisation than is the case.

4.4.4 Using generation as a metric rather than capacity
The TWG were in strong agreement that capacity (in MW, for example) does not provide a full picture of an energy system.
Fossil fuel power generally has higher capacity factors than renewable energy. In other words, an installed capacity of 100
MW of gas and 100 MW of wind energy does not mean there is equal generation of both – there will likely be moregeneration using gas which typically has a higher capacity factor.
With reference to the EU taxonomy, this means that 67% of added capacity being low carbon energy does not equal 67%
of added generation being low carbon. A proposed solution was to consider added generation (for example MWh) rather
than added capacity (MW).
The TWG determined that while these differences are important to note, the methodology was deemed unsuitable for anumber of reasons:••Overly stringent: due to the characteristics of generation vs capacity noted above, a system will be far less likely
to meet a threshold based on generation. This would be the case if the same threshold was kept (67%). Therefore,
fewer countries that need grid investment would likely meet these Criteria. The objective of inclusivity would
therefore not be met.
Difficulty in determining an alternative threshold: Determining a lower threshold also based on generation would
make the threshold less stringent, but there is little precedent for what number could be chosen. Equally, choosing

53 https://unfccc.int/climate-action/sectoral-engagement/ifis-harmonization-of-standards-for-ghg-accounting/ifi-twg-list-ofmethodologies
54 https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2019/Oct/IRENA_Future_of_wind_2019.pdf

18

Climate Bonds Initiative Grids and Storage Background Document•

a lower threshold for this reason would essentially do the same thing as capacity – filter out the systems that aregoing in the wrong direction.
Based on what was found in testing the EU taxonomy, capacity data is generally slightly more recent: there is agreater delay in data reporting for generation as opposed to capacity. In most cases, generation data from publicly
available sources is not present for the most recent two to three years. For capacity, on the other hand, there is
still a delay but seemingly there is usually an additional recent year available. With the rapid change in capacities
and generation being seen in many countries, this extra year of data could be crucial to a system being eligible. A
country that might meet the criteria because its most recent year included a large increase in solar capacity, forexample, would not meet the criteria if the data for that year were not available. The Criteria should aim to avoid
unfairly penalising such systems.

4.4.5 Forward-looking approaches to system eligibility
Considering national commitments to decarbonisation
Many of the options discussed for the Grids and Storage criteria included reference to past performance and somesuggestions (such as that in Section Error! Reference source not found.) included future trajectories based on historic values. T
he TWG agreed that past performance is not necessarily an indicator for the future and therefore, an approach thatconsiders national commitments to decarbonisation was discussed. Such Criteria would compare these commitments tospecific targets to test alignment to the Paris agreement.
Such Criteria alone would not meet the CBI principle to rely on ‘action, not promises’ and was therefore deemed unsuitableby the TWG. Moreover, not many countries have such commitments and for that reason, such criteria would be unfair togrid operators in those countries.
It was discussed whether certain systems might not be on a pathway to decarbonisation as defined by these Criteria yethave sufficient renewable energy projects to be completed in the coming years that they would become eligible soon.
Emerging economies are cited as examples where this could be the case. A forward-looking approach to determining
whether a system is on a pathway to decarbonisation could give extra opportunity to such systems. For example, insteadof added generation capacity over the most recent historic 5 years (as a rolling average), this 5-year period could extend
forward, pairing with decarbonisation commitments.
However, this presents similar problems to the other criteria options discussed in this paper. Firstly, a potential lack ofrobustness. The typical development cycle for smaller renewable projects is 2-3 years. With a 5 year forward horizon thisleaves large uncertainties for projects in later years. When looking at connection requests, at an early stage, project
developers also often submit multiple competing projects to grid operators. Some of these are expected to fail, so there isa risk of overestimating Renewable Energy System (RES) development when taking a forward-looking approach.
Secondly, there is again a data consistency issue. Historical capacity additions are a clear and easily available metric that is
hard to misinterpret. If forward-looking data is added, potentially from multiple other sources, there is a risk of data
inconsistency or manipulation.
These complex issues will be looked at more closely by the TWG when these Criteria are next reviewed. There is a growing
body of work which seeks to evaluate country and entity commitments to decarbonisation. If there is sufficientunderstanding in the future of when a commitment to decarbonisation is dependable and robust, some of the issues
discussed above could be mitigated.

4.4.6 Other criteria options discussed for Grids
All grid infrastructure as automatically eligible
As the TWG were supportive of an inclusive approach which generally recognises grid infrastructure and electrification asa green enabler, there were suggestions that this could even set all T&D infrastructure as eligible.
However, such Criteria would be weaker than the EU taxonomy and therefore would not meet the CBI principle of being
best practice in the market. As such, the Criteria would need to be at least as strong if not stronger than the EU taxonomy.

19Climate Bonds Initiative Grids and Storage Background Document

Considering transmission and distribution separately
The TWG discussed considering transmission systems and distribution systems separately due to their different natures.
Improvements on the distribution side are vital for the electrification of economies and it can be argued that suchelectrification will assist in the climate goals. On the other hand, the transmission network can either transport electricity
generated from high-polluting fossil fuel power stations or electricity from renewable (or other low carbon) sources andcould either be beneficial to the climate or not. Criteria were discussed that considered all distribution grid activities to beeligible but set some constraints on transmission grids.
While the TWG agreed that in some cases these sectors could be considered separately, such Criteria would be weaker
than the EU taxonomy and therefore would not meet the CBI principle of being best practice in the market.

4.4.7 Criteria options discussed for Storage
In the EU taxonomy, all electricity storage activities are eligible with the rationale that electricity storage can support the
integration of renewable energy systems into electricity grids, balance electricity generation, contribute to energy security,
supplement demand response and flexible generation, complement grid development and contribute to thedecarbonisation of other economic sectors. According to the EU taxonomy, all additional storage capacity should be
beneficial to the EU climate mitigation objectives. While this may be true in theory, the TWG raised concerns over the
climate impacts associated with the addition of storage to grids that are not yet fully decarbonised, where the deployment
of energy storage can in fact increase emissions5556.
Instead of adopting the EU taxonomy for Electricity Storage, the TWG concluded to take a conservative approach, applying
constraints to the storage activities that would be eligible under the Criteria. The resulting Criteria are based on the EU
taxonomy for Transmission and Distribution grids, with the rationale that any electricity storage activity in a grid that is on
a trajectory towards decarbonisation should be eligible, otherwise not.

4.5 Adaptation & Resilience Requirements
The IPCC defines adaptation as: “The process of adjustment to actual or expected climate and its effects. In human systems,
adaptation seeks to moderate or avoid harm or exploit beneficial opportunities. In some natural systems, human intervention
may facilitate adjustment to expected climate and its effects.” 57.
The IPCC defines resilience as: “The capacity of social, economic and environmental systems to cope with a hazardous eventor trend or disturbance, responding or reorganizing in ways that maintain their essential function, identity and structure,
while also maintaining the capacity for adaptation, learning and transformation.” Capacity for adaptation and for resilience
will depend on available assets and their distribution within a population as well as institutional infrastructure.
The Climate Resilience Principles further offers the below definition to inspire investors and issuer engagement:
Climate resilience investments improve the ability of assets and systems to persist, adapt and/or transform in a timely,
efficient, and fair manner that reduces risk, avoids maladaptation, unlocks development and creates benefits, including forthe public good, against the increasing prevalence and severity of climate-related stresses and shocks.
To meet the requirements for Climate Bonds Certification, bond issuers must demonstrate that they have consider the
climate risks associated with their investment over the operational lifetime of the assets, taken appropriate measures to
55 Hittinger and Azevedo (2015). Bulk energy storage increases United States electricity system emissions.
56 Arciniegas and Hittinger (2018). Tradeoffs between revenue and emissions in energy storage operation.
57 Summary for policymakers. In: Climate Change 2014: Impacts, Adaptation, and Vulnerability.Part A: Global and Sectoral Aspects.
Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Field CB et al.
(eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, pp. 1-32. http://www.ipcc.ch/pdf/assessmentreport/ar5/wg2/ar5_wgII_spm_en.pdf

20

Climate Bonds Initiative Grids and Storage Background Document
mitigate those risks in the face of the uncertain impacts of climate change and have assessed the resilience benefits thatthe investment can provide to the wider system. Furthermore, the assessment should demonstrate that the investment
will maximise climate resilience benefits to the system itself.
Specifically, issuers must demonstrate that for the assets and activities finance via the bond they:
•
•

•
•

Understand the climate risks faced by the asset, activity or system in question;
Have addressed those risks by undertaking risk-reduction measures and adopting flexible management plans thattake account of inherent uncertainties around climate change, ensuring that the asset, activity or system is robust,
flexible and fit-for-purpose in the face of that uncertainty;
Can deliver resilience benefits over and above addressing identified risks (for system-focused investments); andAre undertaking regular (re)evaluation of the asset and/or system’s climate resilience performance, adjusting torisk reduction measures over time as needed.

4.5.1 Adaptation & Resilience in grids and storage
Grids and storage will need to adapt and be resilient to climate change to ensure stable provision of electricity to different
facets of society into the future. Climate is a major factor affecting the smooth running of transmission and distribution
infrastructure, with temperature highly affecting the efficiency of electricity transfer. Equally, T&D infrastructure is highly
susceptible to storm events.

Climate risks
Climate Bond Standard Sector Criteria focus on resilience to physical climate risks. Climate-related risks58 can be expressedas the probability of a climate hazard occurring, i.e. the variability or uncertainty of an expected outcome. Climate hazards
vary in terms of severity and frequency and include both chronic (associated with long-term shifts in climate patterns, suchas rising sea levels from higher temperatures) and acute (event-driven, such as extreme weather events).59
Investments particularly susceptible to climate risk are those with60:• long-lived, fixed assets;• locations or operations in climate-sensitive regions (e.g., coastal and flood zones);• reliance on availability of water; and• value chains exposed to the above.
The Climate Resilience Principles provide the definitive minimum list of physical climate hazards to be considered for the
Grids and Storage Criteria (Table 6).61

58 See also the general classification of climate risks by European Bank for Reconstruction & Development (EBRD) and Global Centre on
Adaptation (GCA). “Advancing TCFD Guidance on Physical Climate Risk and Opportunities”. 2018. https://s3.euwest2.amazonaws.com/ebrd-gceca/EBRD-GCECA_draft_final_report_full_2.pdf
59 Climate Resilience Principles: A framework for assessing climate resilience investments. Climate Bonds Initiative.
https://www.climatebonds.net/files/files/climate-resilience-principles-climate-bonds-initiative-20190917.pdf
60 https://www.fsb-tcfd.org/wp-content/uploads/2017/06/FINAL-2017-TCFD-Report-11052018.pdf
61 https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/190618-sustainable-financetegreport- taxonomy_en.pdf and https://www.climatebonds.net/files/files/climate-resilience-principles-climate-bonds-initiative20190917.pdf

21

Climate Bonds Initiative Grids and Storage Background Document
Table 6. Classification of climate-related hazards

4.5.2 Climate risk and resilience evaluation tools and methodologies
No standard methodologies or tools for climate risk assessment and evaluation of resilience measures that are specific toelectricity grids and storage have been identified. There are a range of global climate models that simulate key aspects ofthe Earth’s climate and make predictions of likely outcomes, for example in terms of temperature change, under different
emissions scenarios62. These models, some of which provide predictions at reasonably high spatial resolution, could be
used to provide predictions of the increase in average and extreme temperatures to feed into climate impact assessments.
For example, in the UK, National Grid (the transmission network operator) used future climate scenario projections
produced by the UK Met Office (UKCP0963) to feed into their assessment of climate risks to the UK transmission system andreporting to government64.
In the absence of specific methodologies for the assessment of climate change risk & resilience impacts and benefits related
to assets and activities in the Grids and Electricity Storage sector, bond issuers may wish to explore the use of more

62 Hayhoe et al., Climate Models, Scenarios, and Projections, in CLIMATE SCIENCE SPECIAL REPORT: FOURTH NATIONAL CLIMATEASSESSMENT, VOLUME I 133, 134 (D.J. Wuebbles et al., eds., 2017), https://perma.cc/HB9P-F8EL.
63 UKCP09: Land and marine past climate and future scenario projections data for the UK, Centre for Environmental Data Analysis,data.gov.uk/dataset/fd2b1c2d-3156-4eed-98c1-12155878cdc2/ukcp09-land-and-marine-past-climate-and-future-scenario-projectionsdata-for-the-uk
64 National Grid, 2016, Climate Change Adaptation Reporting: Second Round Response

22

Climate Bonds Initiative Grids and Storage Background Document
generalised climate risk assessment tools, such as those provided in the Climate Bond Initiative Climate
Resilience Principles (CRP) Technical Annex65.

Box 1. Optional Guidance for item 2 in the checklist: Key physical climate hazards assessment.
•
•
•

•
•

Users can choose to apply climate scenarios based on representative concentration pathway (RCP) 4.5 and8.5 or similar scenarios to ensure consideration for worst case scenario.
A broad range of models can be used to generate climate scenarios.
Time horizons for assessing climate risk in grids can be based on annual seasonal forecasts and every ten
years for the lifetime of the assets and projects. Where accurate assessments of climate variability forspecific locations are not possible, use worst-case scenarios.
Risks can be characterized by the associated annual probability of failure or annual costs of loss or damage.
For risk assessment, the TCFD The Use of Scenario Analysis in Disclosure of Climate Related Risks andOpportunities is recommended.

Resources for carrying out a risk assessment:
Platforms• EU Climate Adapt and GRaBS Assessment Tool
• World Bank Climate Change Knowledge Portal
Tools and frameworks• Climate Change in Los Angeles County: Grid Vulnerability to Extreme Heat66• USAID Climate Risk Screening and Management Tools• African Development Bank Climate screening and adaptation review and evaluation procedures• CEDRIG tool (Climate, Environment and Disaster Risk Reduction Integration Guidance) of the Swiss
Development Corporation• WWF Water risk filter• WRI Aqueduct atlas• WBCSD Water tool
• SASB Good practice standards
Climate data
• IRI Climate Data Library• Global Circulation Model GCM) Downscaled Data Portal: http://ccafsclimate.org/data_spatial_downscaling/• MarkSim GCM, http://gismap.ciat.cgiar.org/MarkSimGCM/, which can provide characteristic daily data for
current or future conditions (using Coupled Model Intercomparison Project Phase 5 (CMIP5) GCM data) bypointing and clicking on the map and choosing the GHG scenario/model/year.
• IPCC Working Group 1 is producing an online atlas. Until that is available the CIAT climate Wizard is a
resource, although it uses older CMIP3 data.

65 https://www.climatebonds.net/files/files/CBI%20Climate%20Resilience%20Principles%20-%20Technical%20Annex.pdf

23

Climate Bonds Initiative Grids and Storage Background Document
66

Box 2. Optional guidance for item 4 in the checklist: Monitoring and evaluation in Adaptation andResilience Checklist for grid and storage infrastructure.
Resources for indicators of climate risks include: Papic et al. (2020).
Resources for monitoring and evaluation of adaptation include• Monitoring and Evaluation Framework, NAMA (Nationally Appropriate Mitigation Action) Facility www.namafacility.org/fileadmin/user_upload/publications/documents/2018-11_doc_nama-facility_me-framework.pdf.
Guidance for NAMA Support Projects funded by the NAMA facility for formative evaluation for relevance,
efficiency, effectiveness, sustainability and impact.
• Making Adaptation Count: Concepts and options for monitoring and evaluation of climate change adaptationwww.wri.org/publication/making-adaptation-count. Report providing a theory-of-change-based and“learning by doing” framework for tracking adaptation achievements and setbacks for projects with
development objectives.
• Sendai Framework for Disaster Risk reduction.

66 Climate Change in Los Angeles County: Grid Vulnerability to Extreme Heat

24

Climate Bonds Initiative Grids and Storage Background Document

Appendix 1: Technical Working Group members
Members of the Grids Technical Working Group
•
•
•
•
•
•
•
•
•
•
•

Ian Walker, Element Energy, Lead Specialist
John Sinner, Independent, formerly of the European Investment Bank (EIB)Mark Barrett, University College London (UCL)
Eric Hittinger, Rochester Institute of Technology (RIT)
Oleg Bulanyi, European Bank of Reconstruction and Development (EBRD)
Andreas Biermann, Globalfields
David Gonzalez, EIB
Claudio Alatorre, InterAmerican Development Bank (IDB)
Carel Cronenberg, EBRD
Federico Ferrario, EIB
Lorcan Lyons, European Commission

Appendix 2: Industry Working Group members
Members of the Grids Industry Working Group
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

Cindy Thyfault, Global Biofuture Solutions (USA)
Enno Dykmann, Alliander (The Netherlands)
Richard Molke, Wells Fargo (USA)
Eugene Montoya, Wells Fargo (USA)Rajiv Srivastava, Indian Energy Exchange (India)
Pedro Luiz de Oliveira Jatoba, International Hydropower Association (IHA) / Electrobras (Brazil)
Jeroen Dicker, TenneT Holdings (The Netherlands)
Inese Vilcina, Latvenergo As (Latvia)
Juta Naglina, Latvenergo As (Latvia)
Timothy Olson, Wells Fargo (USA)Evelyn Hartwick, Asian Infrastructure Investment Bank (AIIB) (China)
Elvis Mendes, Electrobras (Brazil)
Carla Schuchmann, SITAWI (Brazil)
Isabella Coutinho, SITAWI (Brazil)
Kiran Kumaraswamy, Fluence Energy (India)
Steve Jackman, CTC Global (UK)Alexandre Marty, EDF (France)
Robert Weigert, Eurogrid (Germany)

25

Climate Bonds Initiative Grids and Storage Background Document

Appendix 3: Summary of Public Consultation
No.
1

2

3

Feedback Received
We saw that CBI have separate criteria
under the Transmission and Distributionsector that is pending, another question
we have in terms of eligibility is whether
OFTOs assets will be covered by thementioned pending sector or will be still
sit in the currently Marine Renewablesector criteria?

Response
Make explicit that:

I noted that the criteria for the eligible
grids while focusing on emission intensity,
it does not specify the source of electric
generation. Would it be possible to makeexplicit in the standard that while
calculating the average grid intensity it isagnostic of how the electron is produced(or use words similar to that effect)?
There are questions that we are receiving
particularly for nuclear electrons, which if
I recollect from our conversation would
qualify based on it being emission free.
In the Table 1: scope of eligible projects
and assets for Climate Bonds Certification
under the Grids and Storage Criteria, insection construction, upgrade and/or
operation of Nuclear energy is missing.
Based on our research on public available
information we consider Nuclear energy
should be included similarly to thefollowing technologies :This is the intended case with the Criteria, so will
make more explicit that the key is the threshold– not how the electricity is produced.

•
•
•
•
•

Wind energy
Solar energy
Marine Renewable energy(including offshore wind)
Geothermal energy
Hydropower energy

1. Transmission assets to renewables (e.g.,
offshore) are eligible already and this will
not change with these Criteria. However, it
is intended certification of such assets will
fall under the Grids and Storage Criteria as
the most logical place.
2. The new criteria will essentially broaden
inclusion to just about everything in thegrids and transmission sector, subject to an
over-arching grid qualification. But direct-torenewables will continue to be eligible even
if a general grid is not on a pathway todecarbonisation.

As above. Nuclear is not outright excluded inthese Criteria, as the criteria take a technology
agnostic approach.
Assets and activities directly supporting energy
generation that are eligible under the various
renewable energy criteria are automaticallyeligible. If CBI do not have existing criteria for aparticular energy source, it comes down solely
to the emissions meeting the threshold.

Merits to include Nuclear energy:
1) CBI has already categorized deals
issued by nuclear energy companies asstrongly and fully climate aligned bonds.
Please see below definition:

26

Climate Bonds Initiative Grids and Storage Background Document
Fully-aligned climate issuers: Bond issuersthat derive >95% of revenues fromclimate-aligned assets and green businesslines. These are also referred to as ‘fullyaligned’ issuers.
Strongly-aligned climate issuers: Bondissuers where 75%-95% of revenues arederived from climate- aligned assets andgreen business lines. For bonds fromstrongly-aligned issuers, we analyzed a
pro rata amount corresponding to green
revenue rather than the full outstanding
value.1
1) Nuclear energy will impact directly
SDG7.
SDG7 is central to enabling progress
across the full range of SDGs.2
Despite the focus on electricity, limited
progress has been made to date. In 2017,
worldwide, 50% more electricity was
generated from fossil fuels than 20 years
earlier.22) CO2 equivalent per kWh of electricity:
On a life-cycle basis, nuclear power emits
just a few grams of CO2 equivalent per
kWh of electricity produced. A medianvalue of 12g CO2 equivalent/kWh has
been estimated for nuclear, similar towind, and lower than all types of solar.3
3) Relative Land in Use: A large two-unit
nuclear power plant can provide
electricity for 4-5 million people from agenerating footprint of just 2 square
kilometres. However, the land use of allenergy-generating technologies extends
beyond their generating footprint, andincludes the required mining of raw
materials and, for conventional sourcesof power, their fuel cycle. Taking this into
account, the land use of biomass, hydro,
wind and solar are between one andthree orders of magnitude greater than
nuclear.4
4) Resource in use: Among low-carbon
technologies, nuclear has by far thelowest life-cycle requirements forstructural materials.4
5) Electric grid reliability and interface
with Nuclear Energy: The interface has
been documented comprehensively and27

Climate Bonds Initiative Grids and Storage Background Document

4

guidelines have proven successful
already.
In the document Technical assessment of
nuclear energy with respect to the ‘do no
significant harm’ criteria of Regulation(EU) 2020/852 (‘Taxonomy Regulation’).
‘The Technical Expert Group (TEG), in its
Taxonomy Report Technical Annex [3.26], clearly recognised that nuclear energy
has near-to-zero greenhouse gas
emissions in the energy generation
phase, and it did not express any doubtsthat nuclear energy can make a
substantial contribution to climatechange mitigation’.6
Just under European Taxonomy twentyone sources in which lifecycle GHG
emissions of different electricity
generation technologies have beenassessed to prove what are mitigationenergy of different types of energy.7

As with the previous comment.

Other key arguments:“From the wider system perspective,
nuclear contributes further to climatechange mitigation through synergy withrenewable energy technologies. In aninterconnected electricity system, eachpower plant interacts with others throughthe same grid. Nuclear is the major
dispatchable low carbon source ofelectricity next to hydro. Being used asbaseload technology, it provides flexible
operation to complement theintermittent renewable energy sources.
Thus, wind and solar deploy more
efficiently. On the one hand, this avoids
use of highly carbon-intensive generation
technologies often used for a backup. On
the other hand, this integration, together
with the electricity storage, brings
benefits to the electricity grid, by
minimizing short-term disruptions”.8
Few relevant Scientific studies related to
Do not significant harm category:
DNSH to the sustainable use andprotection of water and marine resources
See below some of the sustainability
indicators for comparing chemical
pollution and its potential impacts on

28

Climate Bonds Initiative Grids and Storage Background Document

5

6

7

14

water ecosystems have been used inlifecycle assessments.
Emissions of nitrous oxides (NOx) and
Sulphur dioxide (SO2):
Among the technologies included in the
proposed framework, wind, solar andhydro all have similar or more lifecycle
emissions of both NOx and SO2
compared to nuclear energy.9 In addition
nuclear energy provides the lowest
contribution to acidification compared toWind and Solar technology.10
DNSH to the transition to a circular
economy, including waste prevention &recycling
Abiotic Depletion Potential (ADP)11:
According to different studies describedin the technical assessment document,
nuclear and gas the lowest ADP followedby coal, solar and wind.12
According to the document, “ there is noevidence that nuclear energy does more
harm to the transition to a circular
economy, including waste prevention andrecycling, than other energy technologies
included in the Taxonomy”
Radioactive waste management has been
largely documented showing scientificallythat waste management can be safely
managed by nuclear plant.13
Section 3.2 – table:
Justification: The list mentions twice“Equipment to allow for exchange of
renewable electricity between users”.
Proposed change: Delete second mention
Section 3.3 – 1st paragraph:
Justification: “…do no significant harm tothe climate resilience itself” is not easily
understandable.
Proposed change: “… do no significant
harm to the wider system climate
resilience. “Appendix 3, Table 3, item 1.2:
Justification: The numeration of adverse
impacts used twice the number (2)Proposed change: Correct thenumeration of adverse impacts
Can we consider organisations effort/
funding to offset project carbon footprint
so that asset created is net zero. Provide
impetus /criteria for low carbon asset
creation

Amended as proposed

Amended as proposed

Amended as proposed

Offsets are not accepted as a means ofcompliance with Climate Bonds sector criteria, inline with the Overarching Principles that govern
criteria development. No change proposed.
29

Climate Bonds Initiative Grids and Storage Background Document
16

Can we include – funding of assets torestore transmission line due todisruptions due to climate related risksuch as flooding, severe cyclones……Ex:Hot Maintenance, Emergency
restoration…

Such assets and activities are within scope ofthese criteria. However, they are not exempt
from the mitigation component of these criteria.
For example, if the system(s) on which theassets will be located on is meeting is on a
trajectory to decarbonization, as stipulated inthese criteria, such assets would be eligible.
In future iterations of these Criteria the TWG
may explore the possibility of assets andprojects with clear, quantifiable Adaptation &Resilience benefits forgoing the mitigation
requirements of these Criteria.

30