The long-term promise of 24/7 carbon-free electricity

Over the course of the last few days … [checks calendar] … er,
month, I’ve been digging into the new trend in voluntary climate
action: procuring 24/7 carbon-free electricity (CFE), matching
consumption with production every hour of every day.


In my first post, I introduced the idea and explained what
motivates it and what it entails. In my second, I puzzled through
the biggest controversy around it, which is about whether it’s
the right goal at all — whether companies and cities ought
instead to focus solely on reducing emissions (with no regard to
who produced them, or where).


This post will make a great deal more sense to you if you’ve read
those.


Today, in the final post in this series (promise), we’re going to
look at some new modeling of 24/7 procurement from Princeton’s
ZERO Lab and see if it can shed some light on the trade-offs
among different procurement strategies. Then we’ll wrap up with
some provisional conclusions.


The model


ZERO Lab models three scenarios for voluntary corporate
clean-energy procurement, with 10 percent participation from the
commercial and industrial (C&I) sector: no procurement (as a
baseline), procuring for 100 percent annual match on a volumetric
basis, and procuring for 24/7 match.


Each scenario is run in two separate markets, California and the
PJM Interconnection (an electricity balancing area that covers 13
Northeastern states and DC). Modeling in two markets helps tease
out how 24/7 could unfold differently depending on how clean a
grid is to begin with — high penetration of variable renewables
in California vs. a relatively dirty grid in the Northeast.


The model is premised on the idea that participating C&I
customers aggregate their demand and pool their purchasing power,
effectively acting as a miniature balancing authority. This may
or may not be how things play out in the real world. Customers
could act on their own, disaggregated and uncoordinated. The
lab’s going to model that kind of scenario soon.


Note: The lab did not model a procurement strategy optimized to
reduce maximum carbon emissions. (Jesse Jenkins, who leads the
lab, refuses to use the word “emissionality.” He insists on
“carbon-optimized procurement.” Don’t worry, he’ll crack like the
rest of us.) Modeling carbon-optimized procurement would have
been a lot of extra work and the funder of the research, Google,
did not ask or pay them to do it, so if you’re a wealthy
corporate or philanthropy out there reading this, pay the lab to
model it!


Let’s look at a few of the findings.


24/7 procurement reduces the carbon intensity of a company’s
energy portfolio


As companies push their CFE scores higher — meaning, as they
match more and more of their hourly consumption with hourly
production of CFE — they reduce the carbon intensity of their
portfolio. At a certain level of CFE, they reduce it beyond what
they would accomplish with 100 percent annual matching.


Take California. It already has a fairly clean grid — every
company starts with a minimum CFE score of 64 percent, just by
being located there. If a company procures the cheapest clean
energy to match 100 percent of its annual consumption, its CFE
score gets to 75 percent. There are still 25 percent of hours in
which it is drawing on at least some fossil energy.


As a company’s CFE scores rise beyond 75 percent, the emissions
rate of its portfolio falls further, steadily to zero at a CFE
score of 100 percent.


(Another note here: “Current technologies” means wind, solar,
batteries, and, at least in California, conventional geothermal.
“Advanced technologies, no combustion” includes advanced
geothermal and nuclear, along with long-duration energy storage.
“Advanced technologies, full portfolio” includes all of the
above, plus natural gas with carbon capture and sequestration
[CCS] and combustion turbines running on zero-carbon hydrogen
fuels. The reason the green bar never fully reaches a zero
emissions rate is that there are residual emissions associated
with natural gas and CCS.)


PJM is a different story. It’s pretty dirty — participants there
start with a baseline CFE score of just 22 percent. So a simple
strategy of 100 percent annual matching results in a huge drop in
emissions rate, though it only gets participants to a CFE score
of 62 percent. Once again, as participants raise their CFE scores
beyond that, the emission rate declines to zero.


However, 24/7 procurement does not just reduce participants’ own
emissions rates.


24/7 procurement drives more system-level carbon reductions


In California, if 10 percent of the C&I sector participates,
24/7 procurement would reduce more system-level (as opposed to
participant-level) emissions than a 100 percent annual matching
strategy, starting at a collective CFE score of 88 percent.


There are two explanations for this. The first is a volume effect
— participants doing 24/7 matching simply have to buy more CFE,
and with more CFE, more fossil generation is displaced. The
second is a timing effect — participants doing 24/7 matching
procure resources that better match demand patterns, thus
displacing more fossil generation.


Here’s PJM:


PJM starts out with much less solar and wind. That means that,
while the volume effect does advantage 24/7 once CFE scores reach
90 percent, the timing effect isn’t very pronounced (the marginal
generator is basically always fossil), and the net difference
doesn’t amount to much.


So 24/7 procurement reduces more system-level emissions than 100
percent annual matching, but only at relatively high CFE scores
and not by a huge amount.


24/7 procurement comes at a relatively steep cost premium


There’s no two ways about it: 24/7 procurement costs more. And
the costs rise as CFE scores get closer to 100 percent,
especially if only current technologies are available.


Here’s California.


Note that covering that last 10 percent, getting from 90 to 100
percent CFE, sees costs rapidly escalate, especially for the last
2 percent.


If only commercially available technologies are put to use, 24/7
CFE is 64 percent more expensive than 100 percent annual
matching. If a full portfolio of technologies is available, it’s
only 39 percent more expensive.


The current technology costs are easy to explain: it’s extremely
expensive to cover the last 10 percent of consumption with only
wind, solar, batteries, and conventional geothermal. But why is
the green line so much lower than the blue line?


The difference between blue and green comes down to which
clean-firm sources are available. The “no combustion” set —
long-duration energy storage, advanced geothermal, and advanced
nuclear — has high fixed costs (labor and construction) and low
variable costs (operation and maintenance).


But the “full portfolio” set includes combustion-based sources
like natural gas with CCS and turbines running hydrogen fuels,
which have lower fixed costs but higher variable costs, and that
turns out to be much cheaper when the sources are run at low
utilization rates, as these will be.


In PJM, the cost differential is even greater:


With only currently available technologies — which, remember, do
not include geothermal in PJM — the cost of 24/7 procurement is
139 percent higher than the cost of 100 percent annual matching.
Yikes.


But with the full portfolio, 24/7 is only 54 percent more
expensive. In PJM, “procuring clean firm generation or long
duration energy storage technologies can significantly lower
marginal abatement costs, particularly at higher CFE scores.” It
really helps, on a dirty grid, to have some clean-firm sources
that cover the last few percent.


OK, let’s pause here and assess what we’ve learned. We know that
24/7 procurement can reduce and eventually zero out the carbon
intensity of a participant’s own portfolio, though of course,
from a climate perspective, that’s basically irrelevant. In
system terms, 24/7 procurement reduces emissions more than 100
percent annual matching, but only a modest amount — and that
modest amount comes at a substantial cost premium.


Here the emissionality perspective taps us on the shoulder. It
points out that, in either case (100 percent annual or 24/7)
companies could reduce more emissions with the same amount of
money by directing that money to dirtier grids. Companies are
spending extra money to reduce “their own” emissions when the
atmosphere doesn’t care whose emissions are whose.


Emissionaries (ha ha, another new word!) might ask, what’s so
great about 24/7 over and above 100 percent annual matching? Why
are the companies procuring for 24/7 willing to spend so much
more money for so little additional emission reduction? Why don’t
they spend that money on dirty grids where it will reduce more
emissions?


The main answer from proponents is that 24/7 procurement will do
more to prepare the way for, and reduce the cost of, full grid
decarbonization. It is playing the long game.


24/7 procurement drives early deployment of clean-firm sources


While procuring for 100 percent annual matching generally means
buying only wind and solar, procuring for 24/7 matching will
necessarily include, depending on local prices and technology
availability, not only batteries but “conventional and advanced
geothermal, advanced nuclear, natural gas power plants with CCS,
gas plants using zero-carbon fuels, and/or long duration energy
storage.”


Here’s 24/7 procurement in California with 10 percent C&I
participation in 2030 with current tech, advanced tech with no
combustion, and the full portfolio:


In the first and second cases, the story is about solar,
geothermal, and batteries. But with the full portfolio,
geothermal drops out almost entirely, replaced by natural gas
with CCS (and a few zero-carbon-fuel turbines), which will be
considerably cheaper.


This is not likely to be a popular result — I can’t say I like it
— but it looks like, on grids with high penetration of variable
renewables that need some low-utilization clean-firm generation
to fill the gaps, natural gas with CCS may be the cheapest
option.


Here’s PJM:


In the current-technologies case, it’s all about solar and
batteries — and as we saw above, it’s expensive AF. In the
advanced-tech-no-combustion case, advanced nuclear steps in and
vastly reduces the total amount of CFE required, thus shaving off
a big chunk of the cost.


In the full-portfolio case, natural gas with CCS once again
replaces most other clean-firm generation, including nuclear,
reducing costs further.


Summing up: “If 10% of C&I customers participate and reach
100% CFE, 1.9-2.3 GW of clean firm generation and long-duration
storage capacity is deployed in California and 5.9-7.1 GW in PJM
by 2030.”


That’s a lot! Enough to kickstart those markets.


“Just as 100% annual matching helped transform wind and solar PV
from expensive ‘alternative energy sources’ to mainstream,
affordable options for the world,” the report says, “24/7
procurement is likely to have similar transformative impacts on
clean firm resources.”


Here’s a chart of what different procurement strategies can
accomplish:


What’s the right time horizon for voluntary climate policy?


So where does this leave us on the debate between 24/7 and
emissionality? Should companies reduce their own hour-to-hour
emissions or should they just reduce the most emissions they can,
regardless of location and timing?


Of course, there’s no real reason to pit them against one
another. Companies can do one or the other or a mix, depending on
their particular values. Nonetheless, it’s an intriguing
question, and I admit to remaining torn.


I frequently argue that post-2030 decarbonization is, if
anything, drawing too much attention from policymakers,
corporates, and tech types, at least relative to the prime
directive of climate policy: rapidly reducing emissions in the
coming decade by driving fossil fuel power plants off the grid
with cheap wind and solar.


That core task is by no means accomplished. Most grids in the US
remain much dirtier than California’s, with plenty of room for
more wind and solar. Before they get too excited about advanced
nuclear and CCS, everyone needs to make sure that wind and solar
are growing fast enough to mostly decarbonize the grid by 2030.


I worry that 24/7 procurement is part of this trend: turning our
eyes to the 2040-2050 horizon, the last 10 to 20 percent of grid
decarbonization, before we have the first 80 percent locked in.


That said, I don’t worry about that too much. Getting to 24/7 CFE
will involve buying plenty of wind and solar along the way.
Long-term power purchase agreements will remain the gold
standard; hourly trading of renewable energy certificates will be
used to fill in the gaps with balancing resources. And all the
companies pursuing 24/7 procurement will be invested in their
local grids building more wind and solar — it raises their CFE
baseline.


What’s more, I think the socio-technological process of
stimulating innovation and development in these gap-filling
clean-energy technologies is going to turn over all kinds of
rocks and uncover all kinds of insights. We’re still somewhat
guessing about which technologies will best play the clean-firm
role. Reality could surprise us. The sooner we run that
investigation, the sooner we’ll have a better grasp of exactly
what we need and how to craft policy around it.


So for now, I remain excited about 24/7 CFE and I can’t wait to
see more companies and cities jump on the bandwagon. People are
beginning to think about full decarbonization now. The engineers
and accountants are running the numbers. We’re going to see some
really cool stuff happen soon.


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