What is 24/7 carbon free energy matching?

24 7

24/7 carbon free energy (CFE) matching is a new approach to corporate energy procurement, whereby a given volume of electricity demand is matched with an equivalent volume of carbon-free energy generated and injected at the same time.

What makes 24/7 stand out from other procurement strategies is that energy matching occurs on an hourly or sub-hourly basis. To guarantee this timely match, corporates acquire energy certificates with a time stamp of one hour or less, where possible, validated by meter and grid data.  

How did the 24/7 CFE journey start?

Prevailing CO2 and renewable reporting systems used by large energy consumers do not usually account for the actual source and type of energy that is physically consumed.

Today a corporation in one location can take the average annual energy consumption of its assets, purchase that same volumetric amount in the form of unbundled “energy attribute certificates” of renewable energy, which is generated elsewhere and at different times from and theoretically claim to be powered by “100% renewable energy” on paper. When in fact, a part of its actual energy intake could come from a grid mix with electricity generated from fossil fuels.    

A new reporting method started emerging when in 2018 Google published a paper showing how its 100% annual renewable energy match did not mean it matched its electricity consumption in all places and at all times. Google subsequently announced a goal in 2020  to operate its data centres and offices worldwide on carbon-free energy – every hour, every day – by 2030. Microsoft,  and the data centre company Iron Mountain, gradually followed suit. Other companies are now revising their ambitions upward, aiming to maximise their contribution to decarbonisation with their energy procurement strategies by matching more of  their consumption with clean electricity supply on at least an hourly basis.

Corporate buyers and utilities are taking different approaches to these more granular energy procurement strategies, drawing on different portfolios of technologies, transaction criteria, and deal structures.

 

What are the benefits of 24/7 carbon free energy matching?

The potential benefits of moving towards 24/7 matching are:

• Increasing transparency of corporate sustainability claims and potential granularity of carbon accounting;

• Increasing renewable energy investment;

• Accelerating electricity decarbonisation by supporting the development of renewable energy assets to better reflect when and where RES-E generation is most needed;

• Facilitating new business models and innovative technologies;

• More closely aligning markets with the physics and economics of the grid and the variability of supply and demand energy matching

 

How are public authorities picking up on 24/7?

Government institutions in the European Union and the United States have also begun to recognise the need for a more trustworthy and authoritative accounting method that tracks and traces clean energy at a granular level. This system could serve as a valuable solution against perceptions of greenwashing that could undermine public confidence in policies aimed at decarbonising our economy.

The European Commissions’ rule for qualifying green hydrogen is a case in point. To differentiate green hydrogen from fossil-fuel-based “grey” or “blue” hydrogen, the fuel must be produced with electrolysers certifiably matched by renewable electricity coming from the same grid, on a monthly basis until January 2030 and on an hourly basis thereafter.

The United States federal government is considering a similar rule to ensure that grid-connected hydrogen production is provably supplied by clean power around the clock. The United Nations has further spotlighted this trend and convened a 24/7 Carbon-Free Energy Compact that clearly articulates the key principles of 24/7. The goal of the Compact is to work collectively to ensure that energy consumption is verifiably matched with clean energy produced

  • within the same hour;
  • within the same local or regional electricity grid;
  • with any carbon-zero electricity technology;
  • with a drive to add new clean energy generation capacity; and
  • with an impact of displacing fossil fuel electricity generation.

Potentially more consequential to business and industry is the World Resources Institute’s ongoing review of the Greenhouse Gas Protocol (GHG Protocol). This is one of the main internationally recognised standards for measuring and reporting a company’s carbon footprint. The reform of the GHG Protocol may lead to companies finding themselves in a new landscape where they must answer to more accurate reporting requirements on their emissions. This will be the object of a 24/7 Academy training session tailored to suppliers on 19 June on the eve of the Eurelectric Power Summit.

What are the main challenges to adopting a 24/7 CFE method?

Adapting the electricity system is a necessary, yet challenging, task to achieve the required reductions in carbon emissions. The path to 24/7 CFE matching will require several “building blocks” to develop this enhanced procurement strategy. Let’s take a look a look at them.

FLEXIBILITY

As more and more corporate energy users commit to 24/7 CFE, renewables demand will grow exponentially. Connecting massive amounts of variable generation to the grid, however, will increase the level of complexity in balancing electricity loads. System operators will therefore need to source higher flexible resources to maintain balance on the distribution grid, while redistributing these costs via appropriate TSO and DSO tariffs.

24/7 minded buyers can support system operators with flexibility by taking action to ensure their own supply-demand match brings new flexible resources onto the grid.

ACCESSIBLE DATA

Access to metering data is a fundamental need for companies wanting to get started on the 24/7 CFE journey. As the adage goes: “If you can’t measure it, you can’t manage it.” Transparent, accessible metering data (i.e. with limited or no additional investment in hardware devices or complex interfaces for consumers) will accelerate the uptake of 24/7 by providing the data points needed to plan, purchase, adapt, match, certify and report renewable energy production and consumption around the clock.

With the wide-scale deployment of smart meters in Europe mandated by the Electricity Directive (2019/944/EC), several countries are starting to implement solutions to offer access to metering data. However, the systems and processes being adopted present several barriers, are unharmonised across borders, and, in some cases, they are poorly documented.

Europe’s high rate of smart-meter roll-out, along with data exchange infrastructures already existing or planned before 2024, makes it a world leader in metered data exchange according to FlexiDAO white paper. At the same time, service providers still experience several barriers that make the data consent and sharing process quite cumbersome, reducing the efficiency of market party communication.

The most common and recurring barriers are:

Administrative: Lack of legally appointed responsible parties and unified access points, lack of authorisation processes to grant third-party access, without having the VAT number or national ID of the country, no official documentation of the process.

Technical barriers: lack of availability of metered data through a digital data interface (i.e. API), lack of data standards for the energy sector to optimise interoperability, and differences in security and compliance requirements.

Information barriers:
some businesses are still not aware that they can access their electricity consumption without having any device or hardware.

MEASUREMENTS, METRICS AND CERTIFICATES

Businesses aiming for reliable 24/7 require a harmonised scheme for energy certificates and reporting frameworks to measure their efforts and report on their progress. An overarching and consistent scheme of Energy Attribute Certificates (EAC) is essential for the development of 24/7 eligible certificates. EACs, such as GOs in Europe, are the only legal means of consuming energy from a specific source, as power cannot be traced through the power grids.

An EU requirement to disclose the origin of energy covers both European Member States and European Economic Area countries, but as implementation is left to the discretion of each country, some differentiation has occurred.

The Association of Issuing Bodies (AIB) created a voluntary scheme for guarantees of origins called the European Energy Certificate System (EECS) to standardise national guarantees of origin schemes.

However, not all EU single market countries are members of the AIB and some AIB members are not single market countries, such as Serbia. European Single Market countries should explore efforts to standardise and harmonise the GO system by joining the AIB and fully adopting the EECS rules.

What are critiques and rebuttals of 24/7?

The increasing uptake of 24/7 is driven by bottom-up demand for climate action and top-down adoption of rules and strategies for clean energy procurement. Nevertheless, it is not without its fair share of critics and sceptics. Yet rebuttals to these critiques only reinforce the credibility and value of the movement towards 24/7.

Irrelevant to EU climate ambition?

Why do we need 24/7 CFE if the European distribution grid will be decarbonised by 2050 anyways?

Well, what if we could decarbonise the grid even faster and potentially within the next 15 years from now?

A common criticism about 24/7 CFE is that it is irrelevant for a European Union on track to meet its climate objective of achieving net-zero emissions by 2050 with renewables accounting for nearly half of the energy mix by 2030. However, hourly matching is not the be-all and end-all of energy sourcing, but a market means that can expedite grid decarbonisation within a shorter timeframe.

In fact, the Eurelectric Power Barometer 2022 concludes that the European power sector can reach net-zero emissions as early as 2035 though the right combination of enablers. These include the addition of €84 billion worth of new generation capacity per year via a reliable, business-friendly investment framework.

If hourly matching were to gain more market traction beyond the early movers and involve major corporate consumers it would create undeniably strong incentives for energy companies to deploy more clean energy capacity to granularly meet their consumption. As found in grid modeling research by Technical University of Berlin, Princeton University, and the International Energy Agency, hourly matching  leads to lower emissions at a system level.

Costly compared to other solutions?    

Another criticism is that 100% hourly matching is unattainable due to profiles that do not correspond to the intermittency of renewables. Moving towards 100% hourly matching is a journey, and even lower hourly matching percentages (e.g. 80%) can have greater electricity system benefits than annual matching at a similar cost. As consumers approach 100% hourly matching, they will increasingly incentivise the dispatchable clean production, storage, and demand response needed to complement variable renewables, helping to solve a critical part of the deep decarbonisation puzzle.

In contrast, a standard power-purchasing agreement (PPA) - by which a buyer directly contracts a multi-year fixed supply of clean energy from a single project - only supplies clean energy to the consumer either part of the time, if the generator and consumer are on the same grid, or none at all, if the consumer and project are located on different grids.

Under today’s annual accounting, the corporate off-taker can maintain its business-as-usual load profile while claiming to be powered by 100% clean energy, while in reality the availability and fluctuations of carbon-free energy on the grid vary and oblige the buyer to source some carbon-intensive electricity from the grid during times when renewables are not abundant, exposing them to prices which tend to be higher. In short, the standard approach does not provide the right incentives for companies to seek solutions to this volatility problem, as compared with hourly matching.

Unattainable for smaller energy buyers?    

Another criticism is that hourly matching is only possible by well-resourced corporates with sophisticated energy procurement operations. Yet this need not be the case, and much work is underway as part of the EU 24/7 Hub and Academy to enable more companies to take steps toward hourly matching.

Several solutions are already emerging. New clean energy supply products that can match more consumer demand hourly is one of them. Another key enabler is the adoption of granular guarantees of origin (GOs), which provide tracking and certification of clean energy production in each hour and location. GOs could be traded by companies who have purchased more clean energy than they require to match the energy use of those who have purchased less.

Moreover, every company that buys clean energy already has an hourly matching “CFE score”, but they may not know it yet. Calculating this baseline CFE score is the first step toward planning procurement for maximum decarbonization impact.

Legislation is also enabling the shift to hourly matching. Under the soon-to-be-finalised Renewable Energy Directive, consumers will be able to request GOs for the electricity they produce. The European rules on renewable hydrogen mentioned above will also help accelerate the growing ecosystem and solutions to enable hourly matching for all energy consumers.

What about “Carbon Matching?”

Finally, a school of thought presenting itself as a more economic alternative to hourly matching is “carbon matching”. Carbon matching is a form of carbon offsetting whereby a buyer claims to have become carbon-neutral by purchasing clean energy from a specifically carbon-intensive location on the grid.

Theoretically, the clean energy intervention by the buyer would have a greater impact in displacing fossil fuels and reducing emissions at that node, than were the buyer to only account for the emissions from energy physically consumed in their own vicinity. The buyer can pick and choose renewable energy projects à la carte that offer the greatest carbon abatement value, which allows the buyer to reach carbon neutrality. A buyer in sunny Spain, for instance, could lay claim to the CO2-reducing impacts of a new renewable power project in a predominately coal-powered grid region in Poland.

However, this carbon matching approach once again raises greenwashing concerns. There is a locational and temporal discrepancy between the emissions associated with the energy physically consumed by the buyer versus those claimed by the same buyer.

Moreover, short-term carbon matching must be continuously reassessed because it uses fixed carbon abatement values of a specific region at a certain point in time and neglects long-term structural changes in electricity demand and the electricity supply mix. This could reduce confidence that the claimed carbon offset doesn’t represent an emissions reduction equivalent to emissions created by the electricity consumption.

There are also double counting challenges - for instance if multiple companies claim the same carbon abatement value, which itself may differ based on the amount of clean energy purchased. In contrast to carbon offsetting, hourly matching ensures greater accountability and higher system-level impact, by ensuring that electricity supply does not cause emissions in the first place

 

What’s the next step for 24/7 CFE journey?

The movement towards 24/7 matching of clean and renewable energy represents a significant step towards transparency, accountability, and a sustainable energy future, aligning with ambitious climate goals. It is gaining momentum as an approach that accelerates grid decarbonisation, incentivises the deployment of green tech innovations at greater scale, and answers the demands raised by a climate-conscious younger generation that expects nothing else than real changes.

Despite criticisms, hourly matching remains distinct from less effective approaches like carbon matching and offsetting in that its granular certifiability more accurately reflects the physical reality of clean energy moving from production to consumption in time and space.

The next steps are for more major energy consumers with varying load profiles to recognise that hourly matching has the highest system-level impact on decarbonisation, and to join the movement by driving the demand. These are all goals that the 24/7 CFE Hub is working towards closely with partners.