5 reasons why energy buyers should move toward 24/7 carbon-free energy matching
24/7 carbon-free energy matching (CFE) is not just a novel sustainability goal for corporates. It’s a forward-looking ambitious framework for Europe’s energy ecosystem, it’s an opportunity to invest in industrial competitiveness, spur innovation and drive economic development while making a clearly traceable impact on your carbon footprint.
“We have seen cities across Europe launch 24/7 CFE pilots just recently. We have seen NGOs, countries, and businesses globally signing the 24/7 compact showing that there is demand, understanding, and enthusiasm about this concept.” – says Caroline Golin Global Head of Energy: Markets, Development, and Policy at Google
The journey, however, has just begun. New market products, regulatory frameworks, technologies, and, crucially, players are needed to bring this corporate strategy from niche to mainstream. As with any innovative disruption trying to scale, awareness is key.
At Power Summit 2023, the leading experts in 24/7 corporate sourcing discussed the 5 key benefits of hourly matching and future steps to make 24/7 the new normal for corporate procurement.
Goodbye fossil fuels
A study from Princeton University confirms that only a 100% hourly matching would ensure a fully decarbonised energy supply. On the contrary, 100% renewables pledges, based on annual certificates, are found to only cut emissions by 40% to 70%.
Eliminating carbon emissions via 24/7 CFE would not only maximise corporates’ contribution to grid decarbonisation, but also foster countries’ security of supply by reducing national reliance on fossil fuels. As Ms. Golin affirmed: “we all know that a product made on a clean grid is far more competitive than one made on a dirty one.”
Goodbye price volatility
24/7 sourcing also offers better hedging opportunities for energy buyers against volatile price markets. With vivid memories of last year’s price crisis, hourly matching via hybrid power purchase agreements (PPAs) becomes a compelling argument for many energy buyers seeking better hedging and lower exposure to the spot market.
“A survey from last year showed that although sustainability is a key driver to enter these PPAs, two-thirds of respondents cited the need for protection from volatile prices and long-term price certainty as the main causes for entering a PPA.” – confirms John Dallimore, Head of Corporate PPA and H2 at Pexapark.
These hybrids are usually a combination of several technologies such as wind, solar, hydro and storage, which allow an energy buyer the possibility to hedge higher volumes long-term and purchase lower capacity in the short-term wholesale market.
80% of closed PPA deals in 2022 were made by corporates. The potential hedging benefits can attract more buyers of various profiles and energy needs into the 24/7 CFE movement.
Welcome storage and flexibility
Moving from the market to the wider energy system, the advantages of hourly matching continue. Among them is a clear incentive to develop new technologies for storage and flexibility.
While annual matching allows green certificates from any hour of the year to offset dirty hours with no need for flexibility, hourly matching creates a signal for storage and firm capacity as green certificates must be found within the same hour.
This creates opportunities to develop technologies such as long-duration storage.
“Today when you want to have 24/7 clean power there are still hours of the day that are met with fossil fuels, but what’s great news is that you can replace that also today with long duration energy storage, so that truly every hour of every day of every month of every year is met with long-duration energy storage.” – says Jula Julia Souder CEO at Long Duration Energy Storage Council.
Welcome accurate carbon accounting
To label an energy procurement strategy as 24/7, energy certificates – known in Europe as Guarantees of Origin (GOs) – need to achieve a much higher level of granularity, ideally every hour, thirty or even fifteen minutes.
This is why a key requirement for 24/7 matching is for issuing bodies to “time stamp” the GOs they issue to energy producers, stating the precise moment that the underlying unit of energy was produced. This level of precision and transparency is now required in the Hydrogen Delegated Act to certify green hydrogen.
To avoid double counting, a confirmation framework to ensure accuracy and veracity must also be developed. In the meantime, a voluntary system of Granular Certificates is emerging within the existing scheme, drawing from experience with existing Non-Governmental Certificates – voluntary certificate schemes operated on a commercial and non-legislative basis.
New digital technologies are also emerging to trace electrons to where they are generated as a way to ensure accountable carbon credits.
“The electron not only has a physical side, it has a social side, it has attributes of location and time. We provide visualisation for traceability […] software solutions that are modular, flexible and adaptable to the local environment” – says Dr. Vivek Bhandari, Chief Technology Officer at PowerLedger.
Welcome grid digitalisation
To reach hourly matching and time-stamped certificates, accurate and reliable smart meters at both the point of production and consumption are essential. As more corporates take the 24/7 carbon exit, this will propel a significant push towards grid digitalisation and metering data access. This will be needed to ensure all interested parties can access data with at least hourly granularity in a standardised format and as soon as possible after physical energy flow.
Markets can thus more closely align with the physics and economics of the grid as well as the variability of supply and demand.
Is 24/7 CFE expensive?
A study from the University of Berlin shows that moving towards 85% 24/7 CFE would still be cost-competitive and as technologies reach scale costs are expected to drop. Yet, it’s the journey that counts more than the destination.
Taking that first step into reducing a business's carbon footprint and raising competitiveness is what Eurelectric is committed to facilitating with its European 24/7 CFE Hub.
Get in touch with the Eurelectric team to learn more about the Hub’s activities and next meetings.
