Sustainability 4.0: 24/7 CFE vs. Emissionality
Opinions expressed are solely my own
When it comes to buying renewable energy, the best practices of leading companies have changed over the last decade. First, leading companies were offsetting their carbon footprint with carbon offsets. Carbon offsets were replaced with Renewable Energy Certificates (RECs) so that companies could claim their electricity was 100% renewable. The third shift in sustainability procurement was in the mid-2010’s when leading companies began shifting towards procuring bundled PPAs that included both energy and RECs as these deals were considered to have greater ‘additionality’. Today, as we enter the 2020’s, we are seeing a fourth generation of sustainability procurement best practices emerge with two competing trends: 24/7 carbon-free energy and ‘emissionality’.
24/7 carbon-free energy (“CFE”) is the procurement approach pioneered by Google that aims to match electricity consumption with carbon-free energy generation on an hourly basis. Carbon-free energy is more expansive than renewable energy because it includes nuclear and hydro. Previously, RECs and PPAs had been matched on an annual basis, which led to the uncomfortable realization that companies and organizations could be consuming fossil-generation during certain times of the year even if they are offsetting it in other times of the year. In addition to being time-matched, 24/7 CFE also asserts that generation of CFE be in the same regional electricity grid as where it is being consumed. Here’s a summary from Google’s blog:
Emisisonality, on the other hand, is focused on maximizing the carbon impact of renewable energy purchases regardless of time or location. Emissionality gets its name from combining the words “emissions” and “additionality”, which captures the essence of the idea: create new projects in areas with high emissions. The first example of an emissionality procurement approach was Boston University (“BU”) in 2018 when BU entered into a 15 year PPA to purchase 49 MW of wind generation located in South Dakota. All of BU’s load is in Boston, but they selected South Dakota after concluding that it would avoid 2–3 more carbon than an equivalent purchase in New England based on the grid mix.
Both 24/7 CFE and Emissionality have the same end goal of decarbonizing the electric grid; however, they differ on the method to get there. Here is a summary of both approaches:
Notes: 1: See blog “Should we rethink the additionality of unbundled RECs?”, 2: See RMI paper “Cleaner Power by the Hour”
As you can see from the table above, it’s not obvious which approach is better. My view is that ‘Emissionality’ is probably better from an economist’s point of view in terms of metric tons of carbon reduction per dollar spent. I’m a huge fan of such approaches as seen by my related blog post Applying effective altruism to climate change. However, such an approach ignores one of the key elements of any business decision: risk. If I am procuring a PPA in a grid completely distinct from where my load is, I am effectively betting on a commodity market where I have no position. This is called speculation. One of the key benefits of 24/7 CFE is that if hourly load and generation are well matched, that’s a natural hedge in my electricity market exposure, which minimizes my risk.
It’s also possible that both approaches can be used together. For example, a company may decide to match on a 24/7 CFE basis within a regional grid. Then, when selecting which specific projects within that regional grid, they can prioritize them based on expected emissionality over the lifetime of the projects.
And maybe that’s the perfect ending, rather than becoming enemies, 24/7 CFE and emissionality become friends and save the world together targeting high emissions hours and locations.
