Companies and cities are taking the lead on clean energy purchases. When will market rules catch up?

A new report from the World Resources Institute breaks down the best ways to incentivize smart procurement.

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Simply securing the renewable energy credits needed to cover your annual energy spend is no longer the final goal for companies, cities and other major energy buyers seeking to take tangible steps to combat climate change.

The new goal is investing in clean energy procurements and technologies that can slash carbon emissions as quickly and as deeply as possible, with the ultimate aim of getting to carbon-free power every hour of every day — not just for yourself, but also for the grids you’re connected to.

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That’s the purpose of a host of transformational clean energy procurement” strategies laid out in a new report from the World Resources Institute. Some of them are centered on what companies and cities do with their own clean power purchases, as with the 24/7 matching” goals set by Google and Microsoft, or similar round-the-clock carbon-free procurement efforts being pursued by cities such as Des Moines, Iowa.

Those efforts include investing in energy storage, flexible load controls and firm clean energy such as geothermal power to cover the gaps in variable wind and solar power, according to Lori Bird, director of the World Resources Institute’s U.S. Energy Program, who spoke during a Friday briefing on the report’s findings. Other initiatives are aimed at establishing links that don’t yet exist between the carbon emissions impact of clean energy investments and the economic value of those investments, she said.

We want as much emissions reduction as we can get,” Bird said. We also need to do it in a way that enables the broader adoption of renewables on the grid.”

Those efforts include pressuring utilities and regulators to establish rate structures that allow customers to contract for clean energy and reward them for shifting energy use to maximize their consumption of solar and wind power when it’s most readily available on the grid.

They also include emissions-based procurement” strategies, Bird said. These are built on data that reveals the relative value of new wind and solar based on how much dirty fossil fuel energy they will displace. In order to be effective, these strategies will require market or policy structures that allow investors to reap economic rewards for investments that maximize that reduction.

Finally, there are environmental justice issues to consider, she said — the potential for disadvantaged and disproportionately polluted communities to reap job creation and economic benefits and reduce environmental harms from different investment choices.

Equity needs to be front and center,” she said.

Image credit: World Resources Institute

The common thread connecting these widely varying strategies is the increased focus on the how, when and where” of their impact, she said.

Traditional structures have allowed companies and cities to sign power-purchase agreements and earn renewable energy credits for clean energy that’s generated anywhere and at any time, without reference to the different temporal or locational emissions and equity values they might deliver. Google has already reached 100 percent renewable energy by these measures, and many other corporate clean energy buyers have achieved or are close to hitting similar goals.

But that’s no longer enough for the most climate-oriented corporate and government energy buyers, Bird said. The how, when and where is more important going forward,” she said.

Why corporate and government energy procurement matters

Given the major role that companies including Google, Microsoft, Amazon, Facebook, Apple, Walmart, Target and others with zero-carbon commitments are playing in U.S. clean energy growth, these strategies may have an outsized effect on how the next stage of moving closer to 100 percent clean energy takes shape.

Corporations accounted for about one-fifth of U.S. wind and solar additions last year, and they are projected to drive between 55 and 85 gigawatts of deployment through 2030. That’s still far from the hundreds of gigawatts of renewable energy needed to decarbonize the U.S. grid by 2035, the target that the Biden administration and many environmental groups say must be met to put the country on a path to avert the worst impacts of climate change, according to Bird. 

But corporate procurements have been driving key policy developments to expand the pace of clean energy growth in many parts of the country. Efforts by data center operators such as Google and Apple were a major factor in driving Southeastern U.S. utilities such as Duke Energy and Dominion Energy to offer green tariff” programs that allow big energy buyers to secure a certain percentage of clean power, for example.

Corporate power-purchase agreements are also starting to incorporate energy storage, as with Google’s solar-plus-battery deal with Nevada utility NV Energy and its agreement with AES to supply Google’s data centers in Virginia with 90 percent carbon-free energy as measured on an hourly basis. The latter deal aligns with Google’s 2020 pledge to supply 100 percent of its round-the-clock electricity demand with carbon-free energy by 2030. That commitment by Google was followed up by Microsoft’s 100/100/0” pledge earlier this year.

This is really the last and hardest step in our journey,” Michael Terrell, Google’s director of energy, said during Friday’s briefing. It’s arguably a moonshot for us, but it’s achievable.” Carbon-free electricity now supplies about 60 percent of every hour of Google’s annual global energy demand. In Terrell’s view, the notion of getting entire electricity grids to carbon-free is no longer some lofty goal in the distant future.”

Novel technologies and load-shifting may have a role to play

Google has also been working with geothermal power providers to find ways for that always-available zero-carbon resource to fill gaps when wind and solar aren’t available. Microsoft is exploring green hydrogen as a replacement for the diesel backup generators that it, like all data center operators, relies on. It has also been investing in technologies and land-use efforts that remove carbon from the atmosphere.

Flexible loads that can shift their electricity needs to maximize clean energy and minimize dirty energy use are also an important part of the equation, Bird said. Google has been experimenting with shifting data-center loads to match when clean energy is available on the grids they’re connected to. Utility rates and energy market structures will be vital to expose less savvy energy consumers to the economic signals that allow them to take part in this type of activity, Bird explained.

Cities are also an important force in this process, she said. More than 180 U.S. cities and counties have made zero-carbon energy commitments, and clean energy procurements from local governments exceeded 13 gigawatts as of last year.

Des Moines Councilmember Josh Mandelbaum highlighted his city’s efforts to push Iowa utility MidAmerican Energy to enable the city’s new goal of achieving 24/7 clean energy by 2035. MidAmerican has a huge wind power fleet that provides a majority of the power it supplies its customers on an annual basis. But it also relies on coal plants that it has not yet committed to retiring at a specific date, he said.

We’re going to be pushing them to retire their coal [and] build more renewable assets on the grid in Iowa,” Mandelbaum said. There’s an inherent tension there. They want to be doing it on their timeline.”

Google’s Terrell emphasized that the company’s corporate clean energy strategy is built not just on cleaning up its own data centers’ energy use, but also on enabling cleaner grids everywhere. I think this report helps provide a good roadmap to do that from a purchasing standpoint.”

What’s missing: Emissions data and the structures to value it

Figuring out which combination of strategies offers the biggest bang for the energy-procurement buck is a complex undertaking, however. It’s made even more challenging by the lack of clear standards to determine the carbon-reduction value of one choice over another — and the absence of market structures and policies to offer economic rewards for making the right choices.

If you want to do hourly purchasing of clean energy, you can be very limited in your ability to do that because of the lack of products,” Bird said. Today’s methods of accounting for the emissions impacts of renewable energy purchases rely on annual or monthly averages. There’s no clear consensus on how to properly assess the relative emissions reduction value of different energy purchasing decisions.

Image credit: World Resources Institute

When we got started with [our] 24/7 [clean energy goal], we were surprised that none of the renewable energy credit tracking systems around the world tracked on an hourly basis,” Google’s Terrell said. To change that, Google is working with the nonprofit Midwest Renewable Energy Tracking System to assign hourly emissions values to the renewable energy credits that Google buys across the U.S. Midwest.

It’s also involved with EnergyTag, a joint effort of more than 100 companies including Microsoft and European energy companies Vattenfall, Centrica, Energinet, Statkraft and Eneco, to develop similar hourly emissions metrics for energy markets across North America and Europe. The consortium plans to release the findings from its first pilot projects by the end of 2021.

Another milestone on the minds of corporate energy purchasers is being able to track the location-based emissions value of renewable energy projects. Last month, REsurety, a provider of renewable energy risk management analytics, announced the release of its Locational Marginal Emissions tool, co-developed with Microsoft. The tool can assess how much carbon reduction different clean energy projects can achieve over time. WattTime, which provides grid emissions data to utilities and corporate energy buyers such as Salesforce, is working with Nashville, Tenn.-based Clearloop to calculate emissions reduction value for backers of its first solar project. (WattTime and Canary Media are both supported by RMI.)

But it’s going to be challenging to change the rules about how companies and government agencies account for their renewable energy contracts. The Greenhouse Gas Protocol, a global multistakeholder group whose members include the World Resources Institute, sets the rules for how different levels of emissions from energy purchases are calculated. But its framework isn’t really set up to support hourly emissions” or the locational emissions value of different resources, Bird said.

Will new rules make a difference?

Whether or not those rules should be changed — and the positive or negative consequences of doing so — will be up to the stakeholders involved, Bird said. Any new rules will have to work with a range of customers and a range of abilities to take action,” including the vast majority of energy buyers that lack the knowledge and resources of a Google or Microsoft to make the most of these complex valuations.

Most companies, by contrast, are pretty much locked into either taking whatever clean power offers may exist from their local utilities or buying into standard-issue renewable power purchase agreements that don’t precisely match the emissions reduction value to each megawatt of clean energy they supply.

As a city, we don’t have the same type of capacity to engage on these kinds of things,” Mandelbaum said. Des Moines is interested in being able to tap into the hourly emissions data that Google and the Midwest Renewable Energy Tracking System are making available. Iowa happens to be located in the territory of the Midcontinent Independent System Operator, the same grid operator that’s providing data to the pilot project.

Some locational emissions impact is linked to building wind and solar in markets where those resources aren’t already plentiful, as solar power is in California or wind power is in West Texas, for instance. Another major variable is how often renewable energy must be curtailed, or prevented from generating, due to transmission constraints or lack of demand for their energy. This underscores the importance of building more transmission capacity to expand clean energy, something no single energy buyer has control over, Bird said.

The solution is going to change across buyers and across grids,” she said. We may need to change some of the institutional processes and products to make this change.”

(Lead image: Thomas Richter)

Jeff St. John is the editor-in-chief of Canary Media. He covers the technology, economic and regulatory issues influencing the global transition to low-carbon energy. He served as managing editor and senior grid edge editor of Greentech Media.