March 15, 2022
Market innovation, flexibility will be key to driving 24/7 carbon-free energy
Lauren Regan, Senior Clean Energy Advisor at Edison Energy, discusses the growing corporate interest in 24/7 carbon-free energy and the role of market innovation in breaking down existing barriers.
Over the last decade, an increasing number of organizations across the public and private sectors have stepped up to decarbonize their systems, making commitments to reduce their carbon footprints to achieve carbon neutrality or net zero.
But with time running out to mitigate climate impacts in line with the Paris Agreement, experts say that bolder and more sustained reductions in emissions of CO2 and other greenhouse gasses (GHG) will be needed. This could potentially be achieved via 24/7 carbon-free energy (CFE).
That means that every kilowatt-hour of electricity consumption would be met with carbon-free electricity sources 24 hours a day, seven days a week, on every grid where electricity is consumed, according to the United Nations’ 24/7 Carbon-free Energy Compact, a coalition of energy buyers and suppliers, governments, system operators, and other organizations who aim to drive CFE adoption. The Compact includes a set of actions that stakeholders across the energy ecosystem can take to drive a CFE-enabling framework around energy policies, technologies, and procurement practices.
Around-the-clock, carbon-free electricity procurement has the potential to enable much deeper reductions in CO2 emissions from electricity consumption than 100 percent annual matching, according to a recent Princeton University study. It could also hedge price volatility and risk for electricity buyers by providing long-term fixed price contracts for electricity that match the time and location of electricity consumption.
“A lot of my clients have recently been asking about 24/7 carbon-free energy,” said Lauren Regan, Senior Clean Energy Advisor at Edison Energy. “Moving towards hourly matching rather than annual leads to deeper carbon reductions across the industry in general. Renewable Energy Certificates (RECs) in some form will continue to exist, but the difficulty with RECs right now is that they don’t list time of production on the certificate, preventing them from being an hourly product. The renewable crediting system has been mostly built to meet annual goals. There is a need for innovation in the market, and we are starting to see some companies step up to support this.”
Current renewable energy procurement methods match average supply and demand across the year. This approach can significantly overestimate carbon reductions as the share of wind and solar increases, meaning that organizations following current criteria for being ‘100 percent renewable’ are still relying on fossil fuel electricity many times a day throughout the year.
Adopting a 24/7 hour-by-hour accounting period for certificates enables consumers to know exactly where their energy is coming from and what their carbon emissions are at any moment, according to EnergyTag, a global initiative aimed at building a market for hourly electricity certificates.
The EnergyTag standard is a voluntary set of guidelines that work with existing mechanisms such as GOs (Guarantee of Origin) and RECs and with procurement methods such as power purchase agreements (PPAs).
“Initiatives like EnergyTag have been championing discussions around creating a more granular REC and hourly markets, and that’s ultimately one of the biggest challenges in terms of trying to actually meet your 24/7 carbon-free energy targets today,” Regan said. “There’s also been a big push to implement guidelines for what 24/7 CFE truly means and how you achieve it from companies leading in this space, particularly from an accounting standpoint. What we’re hearing is that there really needs to be consistency in how we do this.”
Regan noted that many companies are increasingly making commitments specifically to 24/7 CFE, as opposed to renewable energy.
“We call it 24/7 CFE purposely,” she said. “The reason for that is because you will likely need to expand your definition of renewable energy to meet 24/7, meaning including cleaner baseload resources like nuclear and hydro. So, in addition to needing to be more granular, energy certificates will likely need to be more technology-inclusive than they are today.”
Google recently announced its plan to decarbonize its total electricity supply and operate on 24/7 carbon-free energy by 2030. To achieve this, the company will invest in hybrid pairings like wind and solar power and battery storage. The company is also piloting a concept known as Time-based Energy Attribute Certificates (T-EACs), a new, hourly approach for verifying clean energy matching at its data centers
“Understanding the role of storage, including the accounting and timing of renewable certificates, will be critical,” Regan said. “Even–and especially–at high levels of penetration, we need options available when the wind isn’t blowing, and the sun isn’t shining. In many of those moments when you don’t have renewable energy to meet demand, it’s because you don’t have a carbon-free baseload unit that is already operating or has the ability to ramp up quickly. That definitely opens up the door to including more technologies like hydro and nuclear and makes storage very valuable.”
In December, President Biden signed an executive order that calls for 100 percent carbon pollution-free electricity by 2030, at least half of which will be locally supplied clean energy to meet 24/7 demand.
“The Biden administration stated that it would meet its goal by focusing on regional grids, and we’re definitely seeing more companies make that local commitment when they’re setting a 24/7 goal,” Regan said. “That said, there’s a lot that still needs to be hammered out as far as how companies are doing this, and how we standardize what’s behind your 24/7 CFE goal. Accounting for emissions is complicated and continues to be a challenge and the granularity of data is a big hurdle, whether that’s around RECs or getting utility data at the hourly level.”
Another challenge is the cost: 24/7 CFE procurement comes at a premium for early leaders. The cost is significantly reduced, however, if a portfolio of clean and reliable resources is procured and/or CFE targets below 100 percent are selected, according to the Princeton study.
“The cost element is a big hurdle—it can be a major barrier to entry and therefore has to be driven by bigger corporations that are willing to lead the charge,” Regan said. “I think part of what we’re seeing is a lot of the companies that can afford to do it are stepping in first and are really paving the way. If this trend continues–and I think it will–it will be critical to help our clients understand the importance of having a portfolio of different types of options and structures that allow for more hourly flexibility. Renewable goals continue to get more aggressive–if you aren’t keeping up, then you’re falling behind.”
