24/7 carbon-free energy is about to become a reality in California

Five years ago, California community energy provider Peninsula Clean Energy decided that buying enough clean energy to match its average annual electricity demand wasn’t enough. Instead, it wanted to deliver clean energy to its customers during every hour of every day — what it calls ​“24/7 carbon-free energy.” And last week, Peninsula explained how it plans to get there.

The goal of 24/7 carbon-free electricity is also being pursued by corporate giants Google and Microsoft, cities including Los Angeles and Des Moines, Iowa, and a growing number of other companies and communities across the world. But Peninsula Clean Energy appears to be the first energy provider to set a target of getting there by 2025, well ahead of other zero-carbon mandates at the utility or state level.

Achieving 24/7 carbon-free energy is a lot harder than achieving 100 percent carbon-free energy on an annual basis. As climate journalist and Canary Media editor-at-large David Roberts explains in a new Volts podcast on Peninsula Clean Energy, ​“Offsetting 100 percent of your energy use with clean energy mainly involves buying bulk wind and solar wherever and whenever they are cheapest. But matching your energy use with clean energy on an hourly basis means finding sources that can cover for wind and solar when they are not available.” (Here’s a basic primer on 24/7 carbon-free energy.)

But there’s a debate over 24/7 carbon-free energy. Is trying to get clean power to serve every single hour of the year a laudable way to match an energy buyer’s decarbonization commitments with concrete actions? Or is it an excessively expensive pipe dream that sucks investment away from more effective alternatives, like building more solar and wind power in places where the grid is the dirtiest?

Last week, Peninsula Clean Energy unveiled an analysis showing that, at least for the residents of San Mateo County and the town of Los Banos, California that it serves, round-the-clock clean energy by 2025 is not only theoretically possible but well within its technical and financial reach.

Peninsula Clean Energy CEO Jan Pepper said the new white paper, which uses data from a modeling tool PCE developed with partners over the past two years, validates the importance of the 24/7 carbon-free energy goal PCE set back in 2017. PCE’s board of directors is planning to use the findings of the analysis to formally set the 99 percent target into a ​“final procurement strategy” for the coming years, Pepper told Canary Media. ​“This is what we’re after.”

PCE’s modeling shows that procuring enough clean energy to supply its customers 99 percent of the hours of the year by 2025 is expected to cost only 2 percent more than its baseline energy-procurement plans, which deliver carbon-free energy roughly 70 percent of the hours of the year. That’s far less of a cost premium than one might expect for achieving round-the-clock clean energy almost every hour of the year. After making this finding, PCE adopted 99 percent 24/7 carbon-free energy as its official goal starting in 2025.

Cost comparisons for different procurement strategies were calculated using conservative assumptions about energy prices and the costs of contracting a portfolio of solar, wind, geothermal power and lithium-ion batteries, Pepper noted. With more optimistic assumptions, the costs are significantly lower, as this chart indicates. 

Keeping costs in check is vital for PCE, one of California’s many community choice aggregators that have been created with the goal of offering a greater proportion of clean energy at lower prices than the state’s investor-owned utilities.

But the slight cost premium for delivering carbon-free energy nearly every hour of the day will have outsize benefits in reducing the carbon-intensity of the power PCE consumes, the analysis shows. As of 2021, PCE’s average hourly energy consumption contributed roughly 222 pounds of carbon dioxide equivalent per megawatt-hour — less than half the California utility average of 456 pounds per megawatt-hour, but well above the 26 pounds per megawatt-hour that a 99 percent 24/7 clean energy portfolio is expected to enable. 

The resulting impact on carbon emissions is made clear in the following two ​“heat maps” that show the carbon-intensity of electricity purchased across every hour of the year. The first heat map shows the emissions from a portfolio that delivers 100 percent clean energy measured on an annual basis.

And the second heat map shows the emissions impact of a portfolio designed to deliver clean energy in 99 percent of the hours of the year.

“For slightly more cost, we’re able to make these huge impacts on reduced emissions,” Pepper said. 

How securing more clean energy than you need can make economic sense

Moving from a portfolio that provides enough clean power to cover your annual power use on average to one that can deliver clean energy almost every hour of the year is relatively simple — contract for more carbon-free energy than you need for most of the year. The question then becomes how to balance the risks and rewards of managing that portfolio of excess energy.

Consider the following two sets of charts. The first set of four shows PCE’s seasonal supply of clean resources under an annual average procurement strategy, juxtaposed with a black line indicating seasonal demand for power. Any time contracted supplies exceed its demand, PCE must sell that excess power or lose money because it bought power it didn’t use. Any time demand exceeds supply, PCE must obtain the missing power from the wholesale energy market run by state grid operator CAISO.

The next chart, by contrast, shows PCE’s seasonal power supply with a 99 percent hourly clean power strategy. In PCE’s case, this portfolio includes ​“more storage resources, more wind and more geothermal power,” Pepper said. It also includes ​“more solar — but not that much more solar” than what PCE is already buying. As you can see, under this scenario, there are very few times of the year when PCE’s electricity demand exceeds its forecasted supply of carbon-free power.

Contracting for resources that will supply more clean energy than PCE needs during some months is necessary to make sure it has enough during the hardest-to-serve times like winter nights and cloudy, windless days. The question for PCE then becomes what it will do with all that energy it doesn’t need.

PCE’s model proposes that it will be able to resell 75 percent of the excess value of the renewable energy and system capacity of its contracted portfolio. (In industry jargon, PCE would be selling the renewable energy certificates for the clean energy in excess of its demand and signing contracts with other utilities, community choice aggregators or other energy providers in California for the resource-adequacy value of the portfolio.)

It’s very hard to forecast just how much that renewable energy and system capacity will be worth in future years, but PCE’s modeling presents scenarios in which it’s able to sell 100 percent, 75 percent or none. In the worst case, being unable to find buyers for any of its excess energy supply could boost the cost premium of its 99 percent portfolio from 2 percent to 9 percent compared to its current portfolio or an annual 100 percent portfolio, as the following chart shows. 

Structuring a 24/7 clean energy strategy: Risks and rewards 

The potential for costs to rise if buyers for excess energy can’t be found indicates one problem with the idea of individual energy buyers going after 24/7 carbon-free energy on their own, said Mark Dyson, a managing director with the Carbon-Free Electricity Program at decarbonization think tank RMI. (Canary Media is an independent affiliate of RMI.)

Dyson has studied the ​“clean power by the hour” approach and found that it offers both potential and pitfalls for those pursuing it. He reviewed PCE’s white paper as part of an advisory board that also included experts from Stanford, Princeton, Google and Lawrence Berkeley National Laboratory, among others.

“Planning to sell 75 percent of your excess doesn’t scale if everyone is doing it,” he said. Simply put, if every other entity in California were striving to reach 24/7 clean energy simultaneously — and building the same mix of resources with the same seasonal generation profiles — each might end up trying to sell excess energy to the others at the same times, leaving nobody to buy it.

But in the 2025 timeframe that PCE is targeting, that’s not as significant a risk, Pepper pointed out. ​“At least initially, not everyone is going to do this, so there will be buyers for the excess,” she said. ​“Over time, as more entities are doing this, it makes sense for us to work together to figure out how our resources are complementary.”

Because PCE’s territory has relatively mild weather, there is a good opportunity for its excess energy to complement the rest of the state, she said. San Mateo County, which occupies most of the San Francisco peninsula south of its namesake city, is much cooler than other parts of the state, which means it will likely have excess solar and battery power to sell to hotter regions during summer months.

In this way, PCE’s 24/7 clean energy push should help ease ongoing strains on California’s grid during hot summer evenings, according to Pepper. California was forced to institute rolling blackouts during an August 2020 heat wave, and over the past three years, it has had to call for emergency load reductions at points in the summer and commit billions of dollars for resources that can meet its summer peak demand.

But eventually, as California builds more batteries to store up solar power generated during the day and discharge it during hot summer evenings, the state will ​“be better able to handle that net peak demand we’re seeing,” Pepper said. At that point, ​“the challenge will be overnight, in winter” — and by contracting for enough renewable energy and energy storage to cover its winter months, PCE may be getting ahead of that problem, she noted.

PCE’s 24/7 strategy could also reduce its exposure to volatile spikes in California’s wholesale energy market prices, the white paper reports. That’s because ​“we’re paying a fixed price for the renewable contracts, compared to the potentially volatile prices in the market, which are based on commodity gas prices” that determine the price of peak power supplied by the state’s fleet of fossil-gas-fired power plants — ​“and…those are outrageous right now,” Pepper said.

The white paper expresses this concept in terms of a ​“risk premium,” or a forecast of the additional cost of power that PCE could be expected to pay under a range of worst-case scenarios such as major spikes in wholesale power prices. As the chart below shows, portfolios that aim to deliver clean energy between 90 to 99 percent of the hours of the year hit a ​“sweet spot” for reducing that risk compared to strategies that rely more on market purchases of power. 

Dyson noted that PCE’s 24/7 strategy is well suited to California’s grid, where decarbonization mandates are driving significant investment in clean energy and the cost of power closely matches the carbon-intensity of the power being generated. In places where there’s much less clean energy available, simply investing in the lowest-cost clean energy available on an annual basis would be far more cost-effective than trying to construct a portfolio of resources that can provide clean energy for every hour of an energy buyer’s needs.

But in PCE’s case, ​“they actually did the math on how their strategy could both support their 24/7 commitment and support decarbonization of the California system overall,” he said. 

Pepper noted that PCE’s analysis didn’t include many resources that will help balance out the mix of clean energy supply and electricity demand in years to come. For example, it didn’t encompass ​“demand-side resources” — such as grid-responsive batteries, electric-vehicle chargers, and home and building heating systems — that can adjust their electricity consumption to match the ebb and flow of clean power on the grid.

“We didn’t include them yet because they’re not at the point where they can provide substantial support,” she said. But PCE is certainly looking ahead to a time when it can tap into EV batteries, heat-pump water heaters and other resources to better match its demand to available supply, she said.

PCE also didn’t factor in the potential for emerging technologies such as offshore wind power or long-duration energy storage, both of which are seen as vital to enabling California to reach its zero-carbon goals in the coming decades.

The open-source modeling tool that PCE developed to do its analysis, dubbed Matching Around-The-Clock Hourly Energy, is available for other California community choice aggregators or energy buyers that are interested in investigating their own 24/7 carbon-free energy opportunities, Pepper said. ​“We would be happy to work with anyone who wants to look at how they can use the model and put their data in,” she added.

For more on Peninsula Clean Energy’s 24/7 push, listen to a Volts podcast featuring David Roberts interviewing PCE CEO Jan Pepper.