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Renewable Energy & Cleantech

A Trend to Watch: 24/7 Carbon-Free Renewable Electricity

A new tool in the climate crisis fight is getting a lot of recent attention: 24/7 carbon-free renewable energy (CFE). Spearheaded by Google and its role in the creation of the UN’s 24/7 Carbon-free Energy Compact, the idea of evolving the energy marketplace to ensure that all electricity consumption is met with a carbon-free energy source every hour of the day is a new frontier for the energy market.

While most organizations are still advancing their renewable energy progress, the movement of the market in favor of real-time renewable energy matching – typically orchestrated with blockchain – has garnered a lot of interest and created even more questions for organizations who want to innovate in their use of renewable electricity.

What is 24/7 renewable electricity – and how does it differ from today’s practices?

In most energy markets today, electricity generation and consumption, and renewable energy matching, are asynchronous. The generation of renewable power is unlikely to directly align to the consumption of grid-sourced electricity in a business’s operation. And, despite the significant growth in corporate renewable energy procurement, globally, the majority of the offtakers of renewable power generation are still not taking direct delivery of that power due to a variety of market, transmission, and grid restraints. Instead, the power is added to an overall grid mix, and the offtaker takes possession of the energy attribute certificates (EACs) that are associated with that generation, either through direct, unbundled purchase or a synthetic, or virtual, power purchase agreement (PPA).

Learn more in our white paper: The Global Guide to Energy Attribute Certificates (EACs)

By standard industry practice, the generation/consumption/certificate matching equation balances on an annual basis, and there are key mechanisms in place to ensure that it does, such as auditing processes by organizations like the Center for Resource Solutions. However, because of the asynchronous nature of this reconciliation, there has – until recently – been no efficient way to account for and match renewable generation to consumption at a granular, near real-time level. The 24/7 scenario gets us closer to real-time accounting by using a digital ledger for that reconciliation.

The opportunities – and challenges – of the 24/7 model

The 24/7 model more closely matches the time and place of renewable energy generation and power consumption. This has several benefits including:

  • Greater specificity and more real-time understanding of energy consumption and renewable energy matching than the EAC-matching model, providing the ability to fully decarbonize energy supply at the system level.
  • Price hedging value allows for closer real-time management of energy budgets and volatility.
  • Heightened demand for renewable power in all hours when electricity is being used, which sends a strong market signal to generators for the growth of CFE.
  • Hastened grid transformation from fossil-based to renewable energy-based (which in turn will drive fewer emissions and faster decarbonization).
  • Additional innovation through the accelerated growth of renewable, fixed generation power plants in technologies outside of traditional wind and solar power, as well as long-term energy storage (learn more from Princeton University, here).

“Leadership isn’t just about doing one’s part or eliminating one’s own emissions…it’s also about making it easier for others to follow the path of leaders…and I think that’s what this 24/7 procurement is most about.” – Jesse Jenkins, Princeton University Zero Lab

Despite these potential benefits, however, the model is not a realistic solution for renewable procurement for all companies today. Some challenges with 24/7 CFE-for-all:

  • Due to a price premium for adoption, the 24/7 CFE model isn’t viable for most companies – rather, like previous voluntary market movements, it is being driven by early adopters, predominantly tech giants. This price premium can vary widely depending on how an organization defines “24/7” from a timing standpoint (e.g. annual matching, monthly, hourly, intra-second) and a location standpoint (e.g. do projects need to be in the same connected national grid, regional grid, utility service territory, etc.).  The price premium also goes up significantly as organizations approach 100% matching vs. some lower targets like 60% or 80%.
  • Many companies today still don’t track energy use at a granular level, making it impossible to match renewable energy production with consumption.
  • CFE is currently an unregulated/unstandardized practice – unlike EACs, which are tracked globally to ensure no double-counting.  Specific standards or regulations do not exist to validate the precision of 24/7 accounting.
  • A perverse impact of the CFE model may be that it discourages companies early in their sustainability journeys from acting themselves, on the presumption that a 100% renewable grid is coming sooner than it is, or that if they can’t achieve 24/7 matching, they should do nothing.
  • As the grid continues to transition to renewable power, utilities and power generators will increasingly be pushed to monitor and report on the type of information that CFE seeks to provide, eclipsing the need for a voluntary mechanism.

The highest value of the 24/7 model for C&I buyers is the ability to claim 100% CFE and for that realized decarbonization to mean that no new fossil-based plants are needed to support their power needs. The transparency of digital ledger technology can motivate businesses to incorporate long-term storage, microgrids, and other dispatchable renewables into their clean portfolio. This technology ensures that as both grid and operational demands ebb and flow, the business can account for not only its grid-sourced generation (which will include a steadily increasing volume of renewables) but also those electrons that come from distributed energy resources like fuel cells and batteries and other fixed clean power sources like geothermal generation.

Right-sizing renewable energy

The 24/7 model is an advanced solution for organizations seeking to lead, as evidenced by the predominant interest and investment from tech giants. These companies have been at the vanguard of the energy transition; they were among the very first to utilize large-scale EAC purchases, and some of the earliest to contract for 100% renewables via PPA. As a group, they have innovated for new approaches and technologies that often may take 5-10 years to fully scale.

While valuable as a mechanism to drive deeper decarbonization in total, the 24/7 model is not at a stage of maturity (and affordability) appropriate for most companies. Instead, there are many other easily adoptable, voluntary solutions that earlier stage companies may consider as building blocks for their program, which will eventually enable them to deploy 24/7 CFE practices.

Many renewable energy buyers want their purchase to have the greatest impact possible – often going above and beyond the zero-emissions electricity claims that EACs naturally convey. These impacts may include:

  • Additionality – the idea that “but for my action” a project will not be built
  • Social or environmental co-benefits, such as delivering economic development to an underserved population or increasing or preserving biodiversity
  • Sourcing from local grids or where the grid mix is carbon-intensive
  • Ensuring that only new renewables are supported (instead of older sources of generation that no longer have as direct an impact on carbon reduction)
  • 24/7 CFE matching

When considering ways to increase the impact of renewable energy purchasing, time-matching can be part of the conversation. But it cannot be considered in isolation, and the maturity of the buyer must be weighed. For example, if a company develops a 24/7 CFE goal, but sources that power from existing (rather than new, additional) assets, the value of the matching as a change driver is questionable. Some fixed generation power sources – like nuclear, for instance – aren’t considered “renewable” electricity, and may not qualify for renewable energy claims under prevailing guidance.

Steadily greening the grid is what will win this race

We cannot allow perfect to be the enemy of progress when it comes to the energy transition. Unbundled EACs remain a credible, legitimate way for companies to buy into the renewable energy market – and they have formed the basis for the market demand signals that have shaped today’s progress for more than two decades. Bundled EACs, whether as part of an onsite solution, an offsite PPA, or a grid-sourced green power contract, remain a highly validated and authentic way to source renewables and “match” them to power consumption. And, more importantly, are still the best mechanism for most companies to use now.

24/7 CFE has a significant role to play, as many other voluntary movements for decarbonization have before now. The CFE model will inspire us, magnetize us, and encourage innovation and the acceleration of the grid transition. In the end, we will owe a debt of gratitude to the leaders at the forefront of CFE for their role in evolving the market. But the role of CFE must be evaluated in the context of a holistic sustainability strategy to understand its value to an organization as it seeks to decarbonize.

We’re proud to be the energy advisory partner to more than 30% of the Fortune 500. To learn more about all your energy procurement options and how you can develop a holistic and integrated strategy that includes renewables, contact us.