Is 24/7 carbon-free energy the right goal?

Last week, I wrote an introduction to the hot new trend in
energy: 24/7 carbon-free energy (CFE), i.e., matching a company
or city’s power consumption with production of clean electricity
throughout the day, every hour of every day. If you haven’t read
it yet, you’ll want to check it out before reading this post.


Today, I want to talk about a big debate around 24/7 CFE,
regarding whether it’s the right goal for companies and cities to
adopt at all. Exploring that debate will help us get our heads
around what 24/7 CFE can and can’t accomplish.


But first, a quick refresher.


Here’s the idea: right now, in addition to generating
electricity, renewable energy projects generate renewable energy
certificates (RECs), one for each megawatt-hour. They can sell
the RECs to any entity looking to buy renewable energy. For
instance, a company or city that wants to go “100 percent
renewable” can simply buy enough RECs to cover its yearly
electricity consumption.


At least two changes would be required to make 24/7 CFE possible.
First, “renewable energy” would expand to “carbon-free energy.”
Any generator putting out electrons without carbon emissions,
including nuclear or natural gas with carbon capture and
sequestration (CCS), would qualify.


And second, RECs, rather than coming in month- or year-long
chunks, would be issued in time-stamped increments of an hour, so
that buyers could target procurement at the particular hours of
the day when they need CFE. Eventually, each hourly REC would
contain information about avoided carbon emissions, so buyers
could tally up the carbon impact of their purchases.


That’s the vision.


In this post, I’m going to discuss an objection to 24/7 and some
counter-arguments to the objection. Then, in my next post (yes,
this is turning into 24/7 Month), I’ll look at some new modeling
of the impact of 24/7 procurement and try to draw some
conclusions. We’re going to have a good time.


Measuring carbon is mostly doable


An intrinsic part of the 24/7 CFE vision is that each hourly REC
will be tagged with a certain amount of avoided carbon. This will
allow buyers to make procurement decisions that take emissions
into account.


There are some issues and controversies around calculating
avoided carbon, though they’re not the ones I’m going to focus on
today. Some carbon counters have proprietary formulas (like
WattTime) and some are trying to develop open-source methods
(like EnergyTag).


The numbers they produce are not radically different, but they do
differ. They vary in how they calculate the marginal (most
expensive) energy source on the grid at a given moment — the
marginal generator is the one that will spin down to make room
when the CFE is produced. They differ in how to draw the
geographic boundary of analysis, which can affect results. And
other stuff like that.


“To go from the generation data to the local carbon emissions
data is not trivial,” says Toby Ferenczi, founder of EnergyTag,
“because you're trying to model the flow of electrons. Until you
can track a single electron through the system, there will always
be different types of approximations.”


There’s also the question of how distributed energy resources
(DERs) are treated. Right now, grid operators tend to have little
visibility into or control over DERs; energy generated locally,
on a distribution grid, is viewed by grid operators as reduced
demand on that grid. Bringing DERs more fully into the picture as
deployable resources is an important long-term challenge.


There are data issues too. If you look at electricityMap, which
seeks to track the carbon intensity of every grid in the world,
at every hour, you will see that there are still big holes, areas
where utilities have not made the data public. New regulations
and laws requiring grid operators to make these numbers available
is another priority.


Anyway, I’m not going to dig into these technical issues. I have
faith that, if an hourly REC market gets going, these kinds of
questions will be ironed out. The general sentiment is that it is
more important to have a common set of numbers than it is for
those numbers to be accurate down to the decimal.


Instead, let’s turn to the more fundamental challenge to 24/7
CFE.


24/7 vs. emissionality


Unlike air pollution, which concentrates where it is emitted,
carbon dioxide diffuses completely into the atmosphere. It
doesn’t matter where it is emitted; all tons are the same, from a
climate perspective. One company or city’s emissions are no
different than any others. There’s nothing about your hourly
emissions that make them special.


It follows that, if you’re a company that wants to reduce carbon
emissions, the thing to do is buy clean energy on the dirtiest
grid possible, wherever it will displace the most
carbon-intensive energy and thus prevent the most emissions. If
you take an international perspective, that will probably be
somewhere overseas, in Asia or Africa; if you take a US
perspective, it will be in states like West Virginia, Wyoming,
and Kentucky.


The best way to do this is with bundled RECS — RECs purchased
together with the energy that produced them, through long-term
power purchase agreements (PPAs) — because that’s the approach
most likely to actually lead to new clean energy projects being
built. But “most organizations are not in a position to sign long
term PPAs,” says Ferenczi. “All they know is: I want to buy good
electricity, not bad electricity.” For them, unbundled RECs are
the only option.


Either way, if you want to reduce emissions with your CFE
procurement, it must be guided not only by what’s most likely to
lead to new projects (“additionality”), but also by what will
reduce the most emissions (“emissionality”).


This word emissionality is a terrible neologism — the latest of
many out of the energy world — but I’m living with it, because
it’s a helpful way to refer to the quantification of carbon
emission reductions.


Now, take note: optimizing your clean-energy procurement for
emissionality is different from optimizing it for your own 24/7
consumption.


The former strategy maximizes emission reductions. The latter
does not. In some cases, optimizing around your own consumption
could fail to reduce emissions or even increase net emissions,
despite increasing your share of CFE.


One simple example: imagine one company has signed a bunch of
solar PPAs and thus has more hourly RECs during the day than it
needs to cover its consumption, but it has a shortage at night;
another company has signed a bunch of wind PPAs and thus has
excess hourly RECs at night, but a shortage during the day. The
companies can simply trade hourly RECs. Each has increased its
CFE score, but no new clean energy was built and no carbon
emissions were reduced.


Another example is how companies choose to deploy batteries. Mark
Dyson, an energy analyst at RMI, explained it to me this way:


A battery optimized for 24/7 would charge when a buyer has
procured “excess” renewable energy in a particular hour, but in
most grids, for the foreseeable future, a fossil generator will
usually be the marginal unit at the system level — so charging
storage increases carbon emissions in that hour.


Discharging the battery later would offset generation from
another fossil generator and reduce emissions, but there’s no
guarantee the difference in efficiency of those power plants is
greater than the round-trip-efficiency penalty of using the
battery, and thus total emissions can actually increase.


In other words, optimizing battery deployment to cover 24/7
consumption will be different from, in some cases contrary to,
deploying them to optimize emission reductions.


Nobody has yet modeled exactly how much these two strategies
would diverge, or how frequent cases like the ones above might
be, but no one disputes that they would diverge. A strategy built
around emissionality would, by definition, reduce more emissions
than any alternative strategy built around any other goal.


And this is the critique of 24/7 CFE: emissions are emissions.
Reducing any one company’s emissions is of no particular benefit
to the climate. Just reduce emissions wherever you can — that’s
the climate imperative.


This same debate expresses itself in several different forms. One
way to think of the distinction is between “attributional” and
“consequential” carbon accounting. Critics (see, e.g., this paper
from WattTime) say attributional accounting — purchasing energy
with a REC attached — is fine for statutory or voluntary
clean-energy requirements. But when it comes to reducing carbon
emissions, companies should use consequential accounting, i.e.,
purchasing energy that has the most short-term emission-reduction
impact.


The same debate crops up again between “hourly average” and
“marginal” carbon measurement. One can either assess a unit of
CFE based on its effect on the hourly average emissions on the
grid in the hour it is produced or based on the carbon intensity
of the marginal generator it displaces. Hourly averages are, for
a variety of reasons, easier to determine, and can be used to
boost your own CFE score, but a marginal approach (measuring
“nodal marginal emissions”) will tell you which energy purchase
will maximize short-term emission reductions.


All these debates are forms of the same question: why not focus
on carbon emissions? As Henry Richardson of WattTime put it to
me, “measure emissions, not megawatt hours.”


The emissionality critique — that emissions, not any company’s
particular emissions, are the proper target for procurement
strategies — is worth taking seriously. Everyone in the space has
wrestled with it. Let’s run through a few possible responses and
counter-arguments.


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Industrial policy vs. carbon policy


When I talked to Princeton energy modeler Jesse Jenkins — who
contributed to the modeling of 24/7 CFE we’ll look at in the next
post — he suggested a helpful analogy to the debate between
emissionality and 24/7: the debate between a carbon tax and more
sector-specific standards and investments, i.e., industrial
policy.


A carbon tax is the most economically efficient way to reduce
emissions — it will go after the cheapest emissions first. But by
doing so, it will leave untouched many sectors of the economy
that we will eventually need to decarbonize to get to 100 percent
net-zero.


If we leave them untouched for too long, we’ll run into a wall.
“We need to be thinking about the total solution,” says Melissa
Lott, research director at the Center on Global Energy Policy.
“Otherwise we're going to get halfway down the road, have to take
a hard left, and it's going to be painful and expensive.”


The emissionality vs. 24/7 debate takes the same form. An
emissionality approach would reduce emissions at a lower per-ton
cost — it would go after the cheapest reductions first, usually
by adding wind and solar to dirty grids.


But a 24/7 approach will direct investment toward technologies
that fill the gaps left by wind and solar. “And there are gaps,”
says Lott. “These gaps aren't eight or even 100 hours, which can
be solved with different battery technologies. They're eight to
14 days.”


To cover those gaps will require “clean firm” generation, many
sources of which are still in nascent forms of development. The
pursuit of 24/7 CFE will stimulate innovation and growth in the
entire suite of technologies needed to smooth out variable
renewables — sources all grids will eventually need and many
already do. (California power providers are already putting out
solicitations for clean-firm projects.)


In fact, says Brian Janous, Microsoft’s director of energy and
renewables, even the early talk of 24/7 CFE has gotten people
thinking about solutions. “We're seeing more and more utilities,
and more and more energy service providers, come to us and say,
hey, we think we can solve this problem for you,” he says.


Companies pursuing 24/7 CFE are undertaking voluntary industrial
policy, channeling attention and investment to gaps in current
clean-energy technology, bringing down the costs so that other
companies can use them more easily. That could have impacts well
beyond their own emissions.


Here’s how Jenkins put it to me:


The heart of 24/7 carbon-free procurement is the pursuit of
transformative impact on electricity systems via accelerated
innovation. Think about the indirect emissions impacts from
helping accelerate the time to maturity (or enable in the first
place) one or more clean firm technologies or long-duration
energy storage technologies that can go on to widespread adoption
and make reaching 100 percent carbon-free electricity easier for
the world.


Leadership isn't just about doing one's part. It is about making
it easier for others to follow. For a company, even one as large
as Google, this impact is likely to far outpace any direct
emissions reductions they achieve via procurement.


24/7 CFE needs to be seen in its full context


None of the entities pursuing 24/7 CFE today see their own
achievement of 24/7 CFE as the ultimate end goal. The goal is
grid decarbonization.


“We break it into three pillars,” says Michael Terrell, Google’s
director of energy. “First is transacting,” i.e., contracting
with developers to ensure Google’s own 24/7 supply of CFE.
“Second is advancing technology, both on the demand side and the
supply side,” i.e., the industrial-policy piece. “Lastly is
policy and grid decarbonization,” i.e., advocating for
clean-energy policies before state public utility commissions
(PUCs) and legislatures, to hasten decarbonization of the grids
in which it operates.


“For us, it's not a win if the only way we get to 24/7 in each
place is by transacting,” he says. “We want to get the grids
moving in that direction, too.”


When it comes to the standard way of getting to “100 percent
clean energy,” companies can just buy cheap RECs from distant
grids. They don’t need to get involved beyond that. “That was a
concern of ours,” Terrell says. “Companies were getting to 100
percent without having to consider the future of the grids where
they were operating or do any policy.”


In contrast, if a company is trying to cobble together a 24/7
supply of CFE on its local grid, it becomes much more invested in
the state of that grid. The more CFE is on the grid, the higher
the baseline from which it begins transacting for its own CFE.
That will get companies involved in pushing utilities to make
clean-energy commitments, pushing PUCs to clear away
anachronistic regulations, and pushing legislatures to pass
clean-energy policy.


“We are trying to drive massive system change well beyond
Google,” says Terrell. “The idea behind 24/7 is, you want
corporates to have a stake in every grid where they operate. You
want them to be banging the table, driving system change on these
grids, getting these grids to carbon-free as fast as possible.”


Janous says that Microsoft also wrestled with the 24/7 vs.
emissionality debate as it determined its next steps.
“Ultimately, we determined that local influence is still
important,” he says. “Our ability to influence PUCs and local
utilities, and do that worldwide across dozens and dozens of
different markets, was more important than taking a pure-play
emissionality approach in one market.”


Time will tell how strong that local influence proves to be. What
happens if progress on local grids is slow? Lott thinks the
pursuit of 24/7 will move forward some tough calls. Entities
pursuing 24/7 “are going to have to make a decision here in the
next few years,” she says. “Do we keep our data center in this
location where we don't see a clear path to [24/7], or do we move
it? Do we shift investment somewhere else? This is going to be an
interesting tension that will play out around 2025, ‘26.”


This is an aspect I think critics of 24/7 CFE tend to miss: the
social dynamics. If it becomes the new standard for
climate-conscious companies and cities, there will be dozens,
maybe hundreds of them doing it, spread out across all of
America’s many balkanized grids. Each will have reason to serve
as a local clean-energy emissary. Each will be invested in the
others’ success — one company’s PPA boosts the grid mix for every
other company on that grid.


Companies will be incentivized to pool their resources for
greater impact, as many are already doing through the Clean
Energy Buyers Association (CEBA), which organizes and accelerates
voluntary clean energy procurement. (A telling tidbit: until
quite recently, CEBA was REBA, but “renewables” have given way to
“clean.”)


In short, the movement to 24/7 has the potential to drive social
and political change in a way that traditional REC markets never
could and arguably a pure emissionality approach couldn’t either.


Emissionality can inform a hybrid approach


The choice between 24/7 and emissionality does not have to be a
stark either/or. It is possible to use both perspectives for
different jobs, or to blend them.


Take the hourly-average vs. marginal debate. “All of these
accounting systems have their advantages,” says Terrell. If
you’re thinking about offsetting the consumption of a large
facility, “you want to be looking long term, at the 10-to-15-year
roadmap of that grid, and average emissions is fine for that,” he
says.


On the other hand, if you’re thinking about offsetting the
emissions of product supply chains and product use — which are
spread out across the country — there are no local consumption
concentrations to target, so you might take a marginal approach
to seek the cheapest, fastest emission reductions.


Put another way: you can use hourly averages to offset your scope
2 emissions and marginal to offset your scope 3 emissions.


Microsoft, Janous says, takes emissionality very seriously:


The way I think about it is, there are three stages of impact.
The first one is attribution — it's just buying RECS. Then, five
years in, we moved to we would call additionality — it's not good
enough for me to have this attribute, I need to have an attribute
tied to something that I actually did.


We're now getting into this third era, which is what I would deem
consequential — not only do I need to say that I caused it, I
need to be able to demonstrate that I'm materially changing the
makeup of carbon on the grid.


With that in mind, he says, Microsoft has developed a “hybrid
form.”


By pursuing 24/7, “we are going to look at each grid where we
operate and we're going solve for that,” he says. “If we can
achieve 100 percent decarbonization of our energy supply across
our portfolio, we've demonstrated that you can do it just about
anywhere.”


“By virtue of taking that grid-level approach, we are not going
to have perfect optimization for emissionality,” he says, “but
we're going to apply [emissionality] within that grid context.”
In other words, within the grids containing Microsoft’s local
loads, Microsoft will purchase the CFE that reduces the maximum
emissions.


In this hybrid approach, neither 24/7 CFE nor emissionality is
perfectly optimized, but both are pushed forward together.


“We feel like the principle [of emissionality] is still
extraordinarily valuable,” Janous says, “even when you do it in
this hybrid way.”


Other values could supplement 24/7 as well


Janous, Terrell, and pretty much everyone else I spoke to
emphasized that there are other values beyond emission reduction
that are important to integrate into procurement decisions as
well, most notably environmental justice.


Last year, Salesforce released a white paper, “More Than a
Megawatt,” explaining its evolving view on large-scale corporate
procurement. It wants to go beyond emissionality to assess
potential clean-energy projects based on a whole range of
criteria, from equity to land use to impacts on wildlife.


There are always trade-offs among these metrics, so Salesforce
has developed a “procurement matrix” that will help weigh all
these factors and determine which projects best optimize for
multiple values. (A similar whitepaper was recently released by
LevelTen Energy, a renewable energy procurement platform.)


Notice that the more of these values enter your procurement
matrix, the farther you are from a pure 24/7 play. Instead of
optimizing for any single value, you are — as in life generally —
trying to balance multiple competing values under time and
resource constraints.


That can be complicated. It will help if big players like
Salesforce create some standardized tools and metrics that make
it easier for mid-sized companies to follow suit. Individual
companies and cities can decide for themselves how much weight
they want to give to 24/7 CFE relative to other values.


Anyway! This post, like the last one, has gotten way too long. If
you’ve stayed with me this long, you are definitely a Volts
reader and should purchase a subscription!


In my next post, we’ll have a close look at some new modeling of
24/7 procurement from Princeton’s Zero Lab and then see, based on
that and all that has come before, whether we can draw some
provisional conclusions about 24/7 CFE.


Notice that the more of these values enter your procurement
matrix, the farther you are from a pure 24/7 play. Instead of
optimizing for any single value, you are — as in life generally —
trying to balance multiple competing values under time and
resource constraints.


That can be complicated. It will help if big players like
Salesforce create some standardized tools and metrics that make
it easier for mid-sized companies to follow suit. Individual
companies and cities can decide for themselves how much weight
they want to give to 24/7 CFE relative to other values.


Anyway! This post, like the last one, has gotten way too long. If
you’ve stayed with me this long, you are definitely a Volts
reader and should purchase a subscription!


In my next post, we’ll have a close look at some new modeling of
24/7 procurement from Princeton’s Zero Lab and then see, based on
that and all that has come before, whether we can draw some
provisional conclusions about 24/7 CFE.


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