Host: David Roberts
Category: ⚡Renewable Energy
Podcast’s Essential Bites:
[0:28] “When a company or city claims to be 100% powered by clean energy, what it typically means is that it has tallied up its electricity consumption, purchased an equal amount of carbon free energy or CFE and called it even. That's fine as far as it goes. But now, the next horizon of voluntary climate action has come into view. A […] few companies and cities aspire not just to offset their consumption with CFE on a yearly basis, but to match their consumption with CFE production every hour of every day all year long. Running on clean energy 24/7 […] is the new hotness.”
[3:14] “To understand what 100% powered by clean electricity has meant to date, you have to understand at least the basics of renewable energy certificates or RECs. Originally, RECs were a mechanism that utilities used to comply with statutory requirements for deploying renewable energy. A wind or solar farm that generated one megawatt of renewable energy also generated one REC, which was submitted to regulators as proof of compliance. Then voluntary REC markets came along. In a voluntary REC market, a power generator can unbundle its REC from the megawatt of energy it generates and sell it into a market where it can be traded numerous times before being retired or taken off the market. For accounting purposes, whoever retires the REC gets to claim the environmental benefit.”
[4:07] “Corporate, institutional and government entities could purchase trade and retire RECs. The idea was that the ability to sell RECs as a second income stream would induce developers to build more clean energy projects. And it worked for a while as long as solar and wind came at a cost premium and RECs were relatively expensive. But then wind and solar started getting super cheap. The cost of an unbundled REC went from $5 in 2008, to under $1 in 2010, where it has stayed since. Voluntary REC markets became quite robust, but it became clear at a certain point that all these unbundled RECs were not actually driving many new renewable energy projects.”
[5:06] “To their credit corporate and industrial buyers took notice. In 2014, Walmart stated that it would no longer offset its energy use with unbundled RECs and many other buyers followed suit. The market began to trend toward more long term contracts, power purchase agreements or PPAs, through which a buyer pledged to buy both the energy and the RECs, ie bundled RECs, from a prospective project for 10 to 25 years. These PPAs gave developers more confidence and has prompted a surge of building of clean energy projects. In 2020 alone, corporate and industrial buyers in the US procured 10.6 gigawatts of renewable energy, which represents a third of all renewable capacity added in the country.”
[6:24] “When a CNI buyer purchases a REC whether bundled or unbundled, it knows how much renewable energy was generated, ie a megawatt, but not when it was generated. But it turns out that when it comes to energy sources that come and go with the weather like wind and solar, the timing of generation matters quite a bit. If participants in voluntary REC markets continue to buy the cheapest wind and solar RECs sooner or later, the grid will become imbalanced. During periods of high sunlight or heavy wind, there'll be too much renewable energy pushing prices down. But in periods when the sun is down or the wind flags, there isn't enough renewable energy, so demand must be covered by expensive natural gas peaker plants. Prices and supplies swing wildly. Markets don't like it. And more wind and solar will only exacerbate the effect. What's needed is carbon free energy that's available when sun and wind fall short. A megawatt of additional carbon free energy is much more valuable during those times than it is during times of high solar and wind output. […] Buyers have no way of buying carbon free energy specifically in the hours that they most need it.”
[8:38] “Google broke ground in this area with a 2018 white paper called “The Internet is 24/7, carbon-free energy should be too”. It has produced some visuals that allow us to clearly see the mismatch between renewable energy supply and demand. Google has dozens of data centers, it tracks energy supply and demand by the hour and gives each data center a CFE score a carbon free energy score. How many hours of its operation were powered in real time by CFE?”
[13:20] “Part of the great promise of the movement to 24/7 CFE is that it will draw attention and investment to all those things needed to balance out cheap wind and solar. For big consumers like Google there are roughly speaking three ways to smooth out the fluctuations in wind and solar and maintain a steady hourly supply of CFE. They are from least to most expensive: demand management, energy storage and clean firm generation.”
[17:43] “One reason energy nerds are excited about the 24/7 trend is that it's going to pull forward in time a bunch of questions and investment decisions that we're going to face grids trying to reach 100% CFE anyway. Perhaps the biggest and most important of those questions is how far will we be able to get with demand response and batteries? How much clean firm generation will we need in the end? With a bunch of companies and cities competing to reach 24/7 CFE we'll find out sooner than we otherwise would have. And the clean firm sources that are necessary will receive much needed investment, bringing their costs down and benefiting other decarbonizing grids across the world.”
[19:19] “Working with Google Emirates is pioneering and testing a product called time based energy attribute certificates or T-EACs, which are effectively hourly RECs. One monthly rec would be replaced for a 31 day month with 744 T-EACs each representing one hour of the month, each encoding exactly how much CFE was generated in that hour. For now in the Midwest T-EACs are being offered alongside RECs and Google is buying and retiring them. But there's a long way to go between that test and a fundamental restructuring of REC markets.”
[23:49] “Is 24/7 CFE, the next step in carbon commitments or a distraction? Let's be honest, governments ought to be doing this through policy. The federal government should pass a clean energy standard or say a CEP, targeting a netzero electricity sector by 2035, like Biden wanted. On some level, all of this voluntary stuff is a suboptimal response to government failure. Nonetheless, the CNI sector deserves credit for pushing things forward even when governments won't. It is responsible for enormous amounts of new renewable energy on the grid over the last decade. Now it is trying to focus attention on filling the gaps left by wind and solar to achieve full around the clock clean energy. This is a challenge every decarbonizing grid will face eventually.”
[24:53] “Nevertheless, there are real questions about whether this is the best climate strategy. A company procuring CFE to raise its own 24/7 CFE score is not necessarily going to procure in a way that maximizes carbon reductions. Those two goals rarely overlap perfectly. Critics of the 24/7 trend say that companies ought to be focused on reducing the most carbon possible as quickly as possible, and that hourly T-EACs are in some ways a return to unbundled RECs with all the same risks that accounting gimmicks will substitute for real emission reductions.”
Rating: ⚡⚡⚡⚡
🎙️ Full Episode: Apple | Spotify
🕰️ 26 min | 🗓️ 11/12/2021
✅ Time saved: 23 min
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