An introduction to energy's hottest new trend: 24/7 carbon-free electricity

When a company or city claims to be “100 percent powered by clean energy,” what it typically means is that it has tallied up its electricity consumption, purchased an equal amount of carbon-free energy (CFE), and called it even.

That’s fine, as far as it goes. But now, the next horizon of voluntary climate action has come into view: a brave few companies and cities aspire, not just to offset their consumption with CFE on a yearly basis, but to match their consumption with CFE production every hour of every day, all year long. Running on clean energy 24/7 — that’s new hotness.

The list of entities in the US that have committed to 24/7 CFE is short: Peninsula Clean Energy (a community choice aggregator in California) has committed to it by 2025; Google, Microsoft, and the Sacramento Municipal Utility District have targeted 2030; the Los Angeles Department of Water and Power and, somewhat anomalously for this California-heavy list, the city of Des Moines, Iowa, have targeted 2035. Ithaca, New York, is rumored to be contemplating something similar.

That’s it for now. But the idea is catching on quickly and drawing tons of attention. In September, a broad international group of more than 40 energy suppliers, buyers, and governments launched the 24/7 Carbon-free Energy Compact, “a set of principles and actions that stakeholders across the energy ecosystem can commit to in order to drive systemic change.”

Biden’s original American Jobs Plan contained a promise to pursue “24/7 clean power for federal buildings.” That language has fallen out of the Build Back Better budget reconciliation bill in Congress, but rumor has it Biden may issue an executive order on the subject soon.

There are already efforts afoot to standardize hourly tracking of clean energy and build it into markets, as well as numerous active discussions about how to update markets and policy to accommodate it.

Anyway, it’s getting to be a big deal. It’s time to wrap our heads around what’s going on. Happily, it turns out to be a fascinating story with all kinds of twists and turns. Let’s dive in!

A history of “powered by clean energy”

To understand what “100 percent powered by clean electricity” has meant to date, you have to understand at least the basics of renewable energy certificates, or RECs.

Originally, RECs were a mechanism that utilities used to comply with statutory requirements for deploying renewable energy. A wind or solar farm that generated 1 megawatt-hour of renewable energy also generated 1 REC, which was submitted to regulators as proof of compliance.

Then voluntary REC markets came along. In a voluntary REC market, a power generator can “unbundle” its REC from the megawatt-hour of energy it generates and sell it into a market where it could be traded numerous times before being retired, or taken off the market. (For accounting purposes, whoever retires the REC gets to claim the environmental benefits.) Corporate, institutional, and government entities could purchase, trade, and retire RECS.

The idea was that the ability to sell RECs as a second income stream would induce developers to build more clean energy projects. And it worked for a while, as long as solar and wind came at a cost premium and RECS were relatively expensive.

But then, wind and solar started getting super-cheap: the cost of an unbundled REC went from $5 in 2008 to under $1 in 2010 (where it stayed through 2019, though it has risen back up to $3-$5 in the last couple years). Voluntary REC markets became quite robust but it became clear at a certain point that all these unbundled RECs were not actually driving many new renewable energy projects. A 2013 study found that “the investment decisions of wind power project developers in the United States are unlikely to have been altered by the voluntary REC market.”

To their credit, corporate and industrial (C&I) buyers took notice. In 2014, Walmart stated that it would no longer offset its energy use with unbundled RECs, and many other buyers followed suit. The market began to trend toward long-term contracts — power purchase agreements (PPAs) — through which a buyer pledged to buy both the energy and the RECs (“bundled” RECs) from a prospective project for 10 to 25 years.

That gave developers more confidence and has prompted a surge of building of clean energy projects. In 2020 alone, C&I buyers in the US procured 10.6 gigawatts of renewable energy, which represents a third of all renewables capacity added in the country. Voluntary procurement by the C&I sector has become a major driver of the energy transition.

There are still plenty of entities buying cheap unbundled RECs and claiming carbon neutrality, but the leaders in the space are generally bundling them under PPAs.

But there is still a problem with RECs, even the good ones.

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The problem with RECS

When a C&I buyer purchases a REC, whether bundled or unbundled, it knows how much renewable energy was generated (a megawatt-hour), but not when it was generated. But it turns out that, when it comes to energy sources that come and go with the weather like wind and solar, the timing of generation matters quite a bit.

If participants in voluntary REC markets continue to buy the cheapest wind and solar RECs, sooner or later, the grid will become imbalanced. During periods of high sunlight or heavy wind, there will be too much renewable energy, pushing prices down.

But in periods when the sun is down or the wind flags, there isn’t enough renewable energy, so demand must be covered by expensive natural gas peaker plants. Prices and supplies swing wildly. Markets don’t like it. And more wind and solar only exacerbate the effect.

What’s needed is CFE that’s available when sun and wind fall short. A megawatt-hour of additional CFE is much more valuable during those times than it is during times of high solar and wind output. The timing matters.

But right now, RECs contain no information about the time of generation. It is impossible for buyers to know if any particular generator covered or will cover any particular hour of consumption. Buyers have no way of buying CFE specifically in the hours that they most need it.

Think of a monthly REC as an extremely low-resolution image of renewable energy production. In temporal terms, it’s one giant month-sized pixel. C&I buyers purchase these low-resolution images, overlay them on their consumption, and hope for the best.

But when you look at a higher resolution image of renewable energy production, one with hour-sized pixels, you see that it does not overlap perfectly with consumption. Not even close.

The mismatch between “100% CFE” and “100% CFE 24/7”

Google broke ground in this area with a 2018 white paper called “The Internet is 24x7. Carbon-free energy should be too.” (See also this 2020 white paper and