We need to change the way we count clean energy
A small shift—counting clean energy hourly instead of annually—can have a gigaton impact
Today we get granular. A small shift - counting clean energy hourly instead of annually - can have a gigaton impact. This all started with the Inflation Reduction Act (IRA). Last December, the U.S. Treasury proposed new rules [source] for the 45V hydrogen production tax credit, requiring green hydrogen to be produced from a clean electricity source, every hour, every day. The hydrogen industry is the first sector that will have to meet hourly matching requirements by 2028 in the U.S. (and 2030 in Europe), laying the foundation for the widespread adoption of 24/7 clean energy [source]. We dive into the impact, implications, and opportunities to get involved.
Gigaton Potential
Decarbonizing the grid is hard: the share of clean energy in the global electricity mix has increased from roughly 30% in 2011 to 40% in 2021 [source], largely due to wind and solar growth. A staggering 60% of the electricity we consume every day still comes from burning fossil fuels. Phasing out fossil fuels from the grid alone could save 14 gigatons of CO2 annually.
What You Should Know
However, the way we count energy today is an obstacle to the further decarbonization of the grid. Nowadays, a company aiming to decarbonize its scope 2 emissions (indirect GHG emissions associated with the purchase of electricity) can achieve this by meeting its consumption with clean electricity on an annual basis, as prescribed in the GHG Protocol’s guidance [source]. For instance, a company can offset carbon emissions from electricity consumed at night with solar Renewable Energy Certificates (RECs) generated during the day. Yet this annual matching approach does not take the grid realities into account and fails to address the hardest and most expensive hours to decarbonize, resulting in misleading net zero claims. As sunlight is unavailable at night, the entity would inevitably rely on fossil fuel-based electricity from the grid, regardless of the amount of solar energy it has procured. In addition, an oversupply of solar power generation in daylight hours, without being complemented by dispatchable clean energy sources or adequate storage capacity, would exacerbate grid challenges by widening the gap between electricity demand and supply, as shown by the deepening of the Duck Curve in California [source].
As the grid increasingly relies on renewable energy sources, the shift to hourly accounting is essential to ensure carbon-free energy is generated precisely when it is needed. For this particular reason, the recent GHG Protocol’s call for proposals aimed at updating the Scope 2 guidance showed a strong interest in transitioning from annual matching to hourly matching [source].
What’s the catch? Tracking energy hourly would force companies to buy clean energy at all times of the day - even during peak demand and low supply hours when electricity is more expensive. Thankfully, research from Princeton University [source] and Technical University of Berlin [source] has shown that the cost premium of hourly matching remains relatively small, rising significantly only above 90% matching. For instance, TU Berlin's research reveals that 90-95% hourly matching can be achieved at either the same cost or only a small cost premium compared to 100% annual matching in Denmark, Germany, Ireland, and the Netherlands. In Indonesia, the International Energy Agency (IEA) finds that 90% hourly matching could be met at a 10% cost premium [source].
Opportunities for Innovation
Achieving 100% hourly matching can be more expensive, but the cost increase can be mitigated by relying on a diverse portfolio of carbon-free energy technologies. Leveraging the complementary production profiles of solar and wind power by combining and oversizing their capacity can boost the CFE (Carbon-Free Energy) score. This score represents the average percentage of carbon-free energy consumed hourly. Dispatchable clean energy sources, such as nuclear and hydropower, can load-follow and contribute when the sun doesn’t shine or the wind doesn’t blow. Battery energy storage systems can help manage peak demand and deliver energy when supply is too low. Therefore, adopting hourly matching instead of annual matching will accelerate the adoption and early deployment of advanced clean technologies, while reducing global carbon emissions. Another way to increase the CFE score at no cost is to perform load shifting, i.e., adjusting consumption to coincide with periods of higher clean energy availability.
Transitioning to hourly matching certainly introduces greater granularity and complexity to grid operations. Critics argue that requiring hourly matching for green hydrogen is too stringent and could jeopardize the industry still in its infancy. However, a phased transition to hourly matching by 2028 is deemed both practical and feasible. Central to this transition will be the availability of time-stamped certificates and the capacity to track RECs on an hourly basis. While immediate implementation of hourly tracking in the U.S. may not be feasible, the majority of the existing REC tracking systems anticipate a short phase-in period of 1 to 2 years. Among them, three tracking systems (M-RETS, PJM, and NAR) currently possess the capability to monitor hourly data, while all except one can track monthly data [source].
Until 2028, adopting an interim approach utilizing monthly RECs alongside hourly metering data could offer a temporary solution in areas lacking hourly functionality. This strategy capitalizes on existing technologies that can already automate this process in an optimized and fully auditable way, such as Granular Energy's software solution. This provides a practical transition to hourly matching compliance, offering a viable alternative if hourly RECs are not fully implemented in the U.S. by 2028.
Source: CRS
In 2020, Google set an ambitious goal of achieving 24/7 CFE by 2030. Since then, numerous organizations have followed suit. Over 140 signatories have joined the 24/7 Carbon-Free Energy Compact [source], committing to ensuring that every hour of energy consumption worldwide is matched with a carbon-free energy source, marking a significant milestone for the industry. Companies like FlexiDAO and Granular Energy have designed software solutions enabling immediate implementation of hourly matching. Today, Granular is working with over 30 energy suppliers across 10 countries to assist them in developing 24/7 green tariffs for their customers.
How to Get Involved
While still in its early stages, the 24/7 market presents numerous opportunities to get involved from a wide range of perspectives:
Technology providers: Granular Energy, FlexiDAO, Cleartrace, and WattCarbon are among the companies that provide tools for managing hourly certificates and creating 24/7 offerings.
Energy suppliers: utilities (such as Good Energy, Green Mountain Power, AES), retail electric providers, independent power producers, community choice aggregators (Peninsula Clean Energy), renewable project developers are keen on delivering 24/7 offerings and hourly capabilities to their customers.
Buyers: major corporations like Google and Microsoft have embraced 24/7 CFE to reinforce their existing net-zero pledges, recognizing the importance of hourly matching. Hydrogen developers are another group of stakeholders that will need to adopt hourly matching to qualify for the 45V tax credits.
Policymakers: policymakers will play a pivotal role by facilitating the availability and tracking of time-stamped certificates, revising the Scope 2 guidance, and expanding the mandate for hourly matching beyond the green hydrogen sector. State bills, such as the proposed Clean Energy Development Incentive Rate (CEDIR) Tariff, can support the implementation of hourly matching.
Industry players: the transition to hourly matching stands to benefit numerous players in the clean energy sector. Battery energy storage firms like Antora Energy and Form Energy are positioned to extract more financial value from grid balancing services if hourly matching practices are implemented.
Conclusion
The transition to hourly matching in the context of the 45V hydrogen production tax credit represents a crucial step towards achieving widespread adoption of 24/7 clean energy and accelerating the decarbonization of the grid. While there are challenges to overcome, hourly matching provides a more accurate way of counting carbon-free energy and will accelerate the deployment of advanced clean technologies. Furthermore, the ability of existing registries to track hourly data combined with recent technology developments by innovative startups are making hourly matching more accessible and feasible than ever before. Embracing this change can pave the way for a true energy transition.
About the Author
Arnaud Paquet is an MBA candidate at UC Berkeley and has spent his entire career working on the transition from fossil fuels to clean energy. He developed a keen interest in the concept of 24/7 CFE during his MBA internship at Twelve, a carbon transformation startup. He is now working part-time for Granular Energy, aiming to deepen his knowledge in the field. Arnaud’s passion lies in addressing the challenge of decarbonizing the hard-to-abate sectors, which represent a third of global emissions. Arnaud's idea of a good time? Climate dinners!
All these creative ideas are excellent and we need a broad approach to solving what appears to at times be an insurmountable issue. There are heating elements that cannot be measured by drone or satellite technology, maybe they can. However, there exists man-made physical obstacles in place built by humans, unless they are removed there is a strong possibility that we'll never get ahead of our climate issues. If we continue to not address these vast obstructions our Climate will continue to bake in extreme weather circumstances
The Russians and Canadians 60-70 Years ago constructed some of the largest Hydroelectric dams found on Earth and located them in the Northern Hemisphere's subarctic. Keep in mind that the subarctic remains the home of the largest quantity of freshwaters on planet Earth. Much of this water could be found in the major rivers there that were flowing year-round from Siberia to Labrador.
These waters eventually entered the Arctic Ocean. Also notable decades ago, the subarctic region was a cool dessert often with permafrost .
The dams, constructed from 1950s -1980's, were 400-800 feet tall, many of these major rivers were dammed,many with multiple dams. Rivers that flowed for thousands of years ceased to flow..
It would take a decade to fill many of the huge reservoirs that the dams formed. So the waters held back behind the dams sat stagnant heating in the sun throughout summer. Without it's natural year-round seasonal flows rivers dropped much of their nutrient content that would have made it to the Arctic Ocean to support marine life at the time it is needed most. Waters also lost much of its silica a building bloc for life. In addition, oxygen levels are greatly depleted, migratory fish populations disappear, and waters irradiated by the sun during the summer are warmed, leading to regional increases in humidity and temperatures, which is particularly notable in winter
The hydroelectric model used in the subarctic is a seasonal cycling of water with a Strictly Regulated Discharge model.
Ths model obstructs and stores over 90% of the dam's waters for months at a time in summer. And only in winter months is the hydroelectric energy is generated.
Waters are fed into turbines well below the top of dams, at a discharge rate 5-20 times greater then natural year-round river flows. Waters are also much much warmer than the arctic air outside and forms unlimited amounts of water vapor heat down thru all the former river vallies along the subarctic
Use of this model in the most sensitive regions, like the poles, pose a threat by altering local weather patterns. Repeated over years, this model has lead to regional climate disruptions. This is achieved by forcing huge amounts of warmer fresh waters into the Arctic Ocean(Estuary). More fresh water than ever before in recent 1000'S year history, leading to changes in salinity and major disruption of ocean currents. The dams need to come down ASAP
Globally, there is a rush to build thousands more dams. Presently, there are over 16 million dams including 50,000 large dams. In the subarctic region from Siberia to Labrador there exists the greatest number of Strict Flow Regulated Hydroelectric Plants than anywhere else on the planet. The Gulf of Maine and its fisheries depend on a healthy Arctic Ocean feeding into the Labrador Sea. Although making electricity is important, we need to pause and consider the consequences of how these dams are affecting our oceans, our climate. and our livelihoods