A deeper dive into 24/7 carbon-free energy

Canary Media’s Down to the Wire column tackles the more complicated challenges of decarbonizing our energy systems. Canary thanks CPower for its support of the column.

Last week, the EnergyTag initiative released standards designed to lay the groundwork for a global system that tracks and trades clean energy on an hour-by-hour basis — in other words, a standard for 24/7 carbon-free energy.

For the growing number of corporate energy buyers, clean-energy producers and energy-trading entities already shifting from annual to hourly clean-energy accounting, that kind of standard can’t come too soon.

Corporate 24/7 clean-energy pioneers such as Google and Microsoft have already signed round-the-clock clean power contracts with power providers including AES and Engie. They’re also tracking clean energy from generation to consumption with European grid operators including Denmark’s Energinet.

To be able to meet the more discerning demands of corporate clean-energy buyers, developers such as Brookfield Renewables and Broad Reach Power and market-makers like Edison Energy are tapping the carbon-tracking capabilities of software and service providers including ClearTrace, REsurety and WattTime.

Meanwhile, renewable energy certificate registries such as the nonprofit Midwest Renewable Energy Tracking System, grid operators including Belgium’s Elia and software providers such as FlexiDAO are developing the tools and techniques to accurately and transparently collect and share the underlying data that can verify these kinds of hourly energy-matching claims.

Governments are getting into the mix as well. The European Commission is mulling a requirement for green hydrogen production to track carbon-free electricity inputs on an hourly basis. In the U.S., the Biden administration has backed up last year’s pledge to move the federal government to clean energy with a January proposal to meet at least half of that demand with 24/7 carbon-free energy by 2030 — although how it will define ​“24/7” in that context is still unclear.

All of these efforts have a common aim: to align the way energy is bought and sold with the imperatives of moving the grid to 100 percent clean energy quickly enough to forestall the worst impacts of climate change.

Simply buying enough clean energy credits to match a company or government’s energy usage on an average annual basis, as voluntary clean-energy purchasing has been structured over the past two decades, ​“is no longer reflecting the physical reality of what’s going on with the grid,” Toby Ferenczi, EnergyTag’s executive director, said in a Thursday webinar introducing the new standard.

Some grids have excess clean power during certain hours and seasons, and not nearly enough during others, he said. Treating every kilowatt-hour of carbon-free energy the same way fails to rectify that imbalance.

Hourly matching, by contrast, ​“sends a razor-sharp price signal that drives investment” in solutions that enable carbon-free renewables around the clock, Ferenczi said. 

But without shared standards, it will be hard to move beyond one-off projects to achieve broader market transformation, he added. That’s why EnergyTag wants to ​“create market-side consensus around a robust tradable instrument, which then becomes a platform for a market ecosystem to develop.”

“This is what we think will be very powerful about this system,” Ferenczi said. But to get there, it will have to be adopted across that market ecosystem — starting with the existing energy attribute certificate (EAC) systems it’s meant to augment and, eventually, replace.

The complications of time-based energy certificates in today’s voluntary markets

EACs — known as renewable energy certificates (RECs) in North America and guarantees of origin (GOs) in Europe — could use hourly energy tracking to connect the physical delivery of energy with the data record that certifies its carbon-emissions value in ways that today’s RECs and GOs do not.

For most of the two-decade history of these voluntary markets, ​“unbundled” RECs have been traded separately from the megawatt-hours of energy they represent. But as wind and solar power costs fell, the price of unbundled RECs in voluntary markets declined, and their value in driving investments in new clean energy projects — also known as their ​“additionality” — has grown increasingly suspect.

Corporate clean-energy purchasers have adjusted accordingly, with many switching to new ​“bundled” structures that committed REC buyers to also buying the underlying energy through long-term contracts. These corporate investments have become a major driver of clean energy growth, accounting for a record-setting 31.1 gigawatts of projects in 2021, 17 gigawatts of it in the United States, according to BloombergNEF data.

But bundled RECs still track energy on an annual or monthly basis, which fails to account for the significant hour-by-hour discrepancies between generation and consumption. Google, which achieved 100 percent clean energy on an annual basis in 2017, still has data centers that range from 96 percent carbon-free annual energy in wind-power-rich Midwestern U.S. states to well below 50 percent in other states or countries with higher ratios of fossil fuels on their grids.

“As penetration of renewable energy grows higher and higher, it’s really important to understand the value of when that renewable energy is generated,” Maud Texier, Google’s carbon-free energy lead, said in a March interview.

Google upped its goals in 2020 to run its entire business on clean energy every hour of every day by 2030. Since then, it has signed a contract with AES to supply its data centers in Virginia with at least 90 percent 24/7 carbon-free power. It has also invested in carbon-free energy that can be generated around the clock, as with its geothermal power plans with Fervo.

“Those contracts are coming with certain performance guarantees from the energy supplier” to assure that the round-the-clock carbon-free energy needs are being met, Texier said. But that’s ​“very complex and time-consuming.” Clean energy certificates like those EnergyTag hopes to standardize could ​“lower the barrier to entry of this type of clean energy.”

That could help companies that lack Google’s deep pockets and corporate commitment to structure their own deals, but it also allows Google to exchange clean energy that exceeds its own needs with others that could use the power, she said. That’s shown in this chart of a typical 24-hour profile of a data center in Iowa, a state with a surplus of wind power, which is usually most productive at night. 

Google has worked with the Midwest Renewable Energy Tracking System to create the first hourly RECs traded in North America, and it has been working with the APX North American Renewables Registry platform to trade hourly RECs in the energy markets of Midwest U.S. grid operator Southwest Power Pool. Pilot projects with Energinet in Europe and the International REC Standard Foundation in Chile have demonstrated similar capabilities.

These efforts show promise, Texier said. But Google can’t create a standard for trading hourly energy certificates on its own, she said. 

Ben Gerber, president and CEO of the Midwest Renewable Energy Tracking System, agreed that a common standard will be vital to expanding the reach of time-stamped clean energy certificates. The nonprofit retired its first hourly REC with Google last year, and it plans to soon be able to support more granular measurements of hourly energy exchanges down to the watt-hour, Gerber said in an interview.

But without a standard way to collect and process the data underlying these measures, there’s no way to ​“make sure that when you’re making a carbon claim in one part of the world, you’re able to make an apples-to-apples comparison to every other part of the world,” he said.

Tracking carbon-free energy by time and by location

That’s not to say that this kind of data isn’t being collected and used in different ways. Many companies are connecting the dots between grid emissions data and the values that clean-energy developers and customers can derive from it.

Take WattTime, the nonprofit technology provider that correlates emissions data from power plants and energy markets to the time and place where energy is consumed. That data has been used to inform the operations of residential batteries in California, electric-vehicle charging and Google Nest thermostats.

It’s also being used by clean energy developer Silicon Ranch and energy investment adviser GreenFront Energy to assess and compare how much carbon emissions can be avoided by different potential projects. Last month, WattTime announced a similar partnership with Edison Energy, one of several companies with marketplace platforms that link clean energy projects to prospective buyers.

WattTime’s ​“emissionality” approach measures the relative reduction in carbon emissions that a clean energy project can achieve in relation to the overall emissions profile of the grid it’s connected to. In simple terms, the dirtier the grid, the greater the impact of replacing that dirty power with new carbon-free energy.

That kind of analysis is becoming increasingly important to clean-energy developers and customers, said Joey Lange, managing director of Edison Energy’s renewables advisory. ​“Of the last four clients we brought on board, every one of them was asking for carbon emissions analysis as part of the process,” he said.

One recent client is now ​“seriously considering” investing in a wind power project in West Virginia instead of a similarly sized solar farm in Ohio due to the wind project’s more favorable emissions profile, he said.

But these marginal emissions differences between projects can’t yet be monetized because today’s REC structures don’t account for them. Henry Richardson, WattTime’s environmental impact analyst, suggested that the increasing focus of clean-energy buyers on the emissions impacts of their investments will drive REC certification entities and energy market operators to adopt more active methods of accounting for their value.

“Today, all the megawatts are equal, whether in West Virginia or Ohio” under existing REC programs, he said. But ​“there are lots of conversations around how we move those standards toward correctly rewarding the right actions.”

Aligning the interests of grid operators and energy markets 

These calculations aren’t just valuable for energy buyers seeking to maximize their carbon emissions reductions, according to Google’s Texier. They’re also potentially valuable for the entities that oversee transmission grids and the energy markets that organize how they work.

Wind and solar power must often be curtailed on grids where generation exceeds demand, while the shuttering of coal and gas plants required for decarbonization will leave gaps that must be filled by carbon-free alternatives.

California, where solar can provide more power than is needed at midday, is a well-known example of this, as the following chart indicates. 

California regulators have ordered utilities to build gigawatts’ worth of batteries to store the state’s surplus of midday solar power until the evenings, when it sometimes faces supply shortfalls. The state is also seeking out cost-effective long-duration energy storage and geothermal power projects.

Creating a mechanism that allows carbon-free energy at different hours of the day to be assessed at different values could create markets that help California meet those needs, Texier said. ​“It aligns the buyer interest with the system interest and creates incentives on both sides to source technologies that otherwise might not pencil out [economically].”

The same data-driven approach can also help find which parts of the grid are better suited to make the most emissions-effective use of clean energy, said Adam Reeve, senior vice president of software products for energy analytics company REsurety.

REsurety has been providing Microsoft, Hannon Armstrong, Quinbrook Infrastructure Partners and other major clean-energy investors with a ​“locational marginal emissions” product that crunches grid and emissions data to determine the emissions impacts of grid congestion and renewable energy curtailment.

“Not every megawatt-hour is created equal from a carbon impact perspective,” Reeve said. REsurety’s first data set for the Texas grid, for example, revealed that some wind and solar projects abated two times the amount of carbon per year compared to similar-sized projects elsewhere, depending on their location relative to notoriously congested portions of the state’s western grid.

REsurety’s latest data set encompasses the 11-state grid operated by PJM, which stretches from the mid-Atlantic coast to Chicago. That work has been aided by PJM’s publication of marginal emissions rates for its thousands of pricing nodes.

“If you’re a renewable energy developer and you’re building out new solar or wind projects — or new storage projects — knowing where to focus your efforts is a huge decision point,” Reeve said.

Hard-to-calculate emissions values: Energy storage and carbon leakage

Energy storage is an interesting challenge, Reeve pointed out. Every form of energy storage loses at least some of the electricity that’s put into it due to efficiency losses and the device’s own internal power needs. That means that 1 megawatt-hour of clean energy that charges a storage system will end up yielding slightly less than 1 megawatt-hour of discharge capacity.

In other words, ​“storage is going to be a net increaser of emissions,” Reeve said. To get around that, batteries and other storage systems need to make sure that the carbon-intensity of the electricity they use to charge is lower than the carbon-intensity of the grid when they discharge if they want to reduce overall emissions.

Customers including Broad Reach Power and Hannon Armstrong have tapped REsurety’s grid data to assess the emissions impacts of energy storage. That’s an increasingly important calculation for developers hoping to sell such projects since ​“ultimately that value will be, in the eyes of the buyer, the carbon abatement of that project,” he said.

But at present, RECs can’t be linked to stand-alone batteries. EnergyTag is working on guidelines aimed at addressing the unique characteristics of energy storage. 

Similarly, PJM’s energy markets don’t yet value carbon emissions, although the grid operator is exploring incorporating a price on carbon into its markets, as federal regulators have permitted.

Finding ways to fairly price carbon in energy markets won’t be easy, however. One key difficulty for PJM and other multistate grid operators is assessing the relative emissions footprint of a grid that encompasses fossil-fuel-heavy states like Ohio and West Virginia as well as states with aggressive carbon-reduction goals such as Maryland, New Jersey and Illinois.

Without systems to track and account for the relationship between energy pricing and carbon emissions, cheaper and dirtier energy bidding into PJM’s markets could end up outcompeting cleaner but more expensive energy, leading to what’s known as ​“carbon leakage.”

Time- and location-based tracking of marginal emissions could serve important roles in clarifying these kinds of barriers to effective carbon pricing, Reeve said. But for that to happen, grid operators will need to agree on how to calculate the relationship between how power grids transmit electricity and how the carbon impact of those power flows should be accounted for — and that’s still a work in progress.

What about voluntary carbon markets? 

Further down the road, Reeve thinks these kinds of calculations could potentially become part of how companies and governments track and confirm their broader greenhouse gas emissions. But he thinks the earliest action on that front will be voluntary, rather than mandated.

That’s because changes to the standards set by the Greenhouse Gas Protocol, the global multi-stakeholder group that oversees how different levels of emissions from energy purchases are calculated, happen very slowly, he said.

“What we’re more likely to see is folks who get ahead of the GHG Protocol” by voluntarily assessing and affirming the time- and location-based emissions values of the energy they’re using, he said.

Under the GHG Protocol, the ​“Scope 2” emissions tied to a company’s energy use are still calculated on an annual basis — but that doesn’t mean that companies can’t start calculating their emissions in a more granular manner for their own purposes.

That’s what Lincoln Payton, CEO of ClearTrace, sees as the future of Scope 2 emissions reporting. ClearTrace’s system tracks electricity metering data from where power is generated to where it’s consumed and makes the information available to clients via dashboards like the one shown below.

This gives clients a much richer and more up-to-date picture of their Scope 2 emissions than older systems that rely on collecting data from disparate sources, even if the more fine-grained data isn’t yet approved for use in Scope 2 greenhouse gas reporting, Payton said. But it also provides the data that could be put to use in standards-based exchanges of carbon credit structures like those EnergyTag is working on, he added.

Some ClearTrace clients are tracking their progress toward 24/7 carbon-free energy goals, such as Iron Mountain for its U.S. data centers, ClearTrace investor JP Morgan Chase for its U.K. operations and Brookfield Asset Management for its One Manhattan West office building in New York City.

ClearTrace is an EnergyTag supporter, Payton noted, and is eager to work on its standardization efforts. ​“Clear, transparent data is the key to everything,” he said. ​“Without it, we go from one form of greenwashing to another, higher form of greenwashing.”

What about government regulations? 

Getting the standards right is particularly important for the U.S. federal government. 

That’s why the nonprofit Clean Air Task Force has asked the Biden administration to push harder on 24/7 clean energy as part of its broader goal of moving the entire U.S. power grid to 100 percent clean energy by 2035.

In February, the General Services Administration solicited public comments on a plan to reach 100 percent carbon-free electricity for federal government and Department of Defense facilities on a net annual basis by 2030, ​“including 50% on a 24/7 (hourly matching) basis.”

“Having the federal government, the largest electricity customer in the country with the biggest footprint, piloting some of these energy time-stamp projects…would be incredible,” said Lindsey Baxter Griffith, CATF’s federal policy director. ​“Not only would it move the federal government forward, [but] it would create opportunity” to set a common standard for the country as a whole.

But in a submission filed this month, CATF warns that a 50 percent target for federal 24/7 clean energy purchases by 2030 might not be high enough to drive the broader market transformation needed to reach an entirely carbon-free grid — or in other words, a 24/7 carbon-free grid — by 2035.

That’s because, according to the document, the costliest part of developing ​“a diverse portfolio of carbon-free technologies, including wind and solar, along with ​‘firm’ CFE and advanced storage technologies,” will come when the grid is approaching that final 10 to 20 percent of emissions to be reduced.

The filing also states that the federal government should adopt carbon-free energy standards that ​“can be replicated by a wide range of non-government buyers and suppliers.” That could add new arrows to the quiver of clean-energy programs now on offer from utilities, retail energy suppliers and community-based energy providers across the country.

“I don’t think there’s any product out there that standardizes all the pieces we think are necessary in a single product,” Baxter Griffith said. If the federal government can play a role in getting ​“all the pieces right in this single product, that would help immensely.” 

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