Wednesday, 17 March 2021
As nations across the globe pledge to fully decarbonise by 2050 the pressure is on for corporations to take a stand and commit to furthering the energy transition. This has caused an ever-increasing number of companies to join initiatives like the RE100 and pledging to source only 100% renewable energy for their operations and finding ways to decarbonise their value chains.
Energy attribute certificates (EACs) of which there are different types such as Guarantees of Origin (GOs), Renewable Energy Certificates (RECs) and I-RECs are tools that can be used to verify the source of electricity consumed. When a corporation is seeking to offset Scope 2 emissions related to electricity consumption, EACs can be used to verify the sourcing of qualified renewable electricity to increase the corporation's sustainability rating.
As this market has developed over the years, there has been a growing interest in making these tools more sophisticated to accurately represent electricity consumption on the hour.
At the beginning of March 2021, tech giant Google announced that in their bid to be carbon neutral by 2030, the company will work in advancing the tools corporations use to better track and certify their clean electricity. Google has partnered with the non-profit Midwest Renewable Energy Tracking System (M-RETS) in piloting a new concept called Time-based Energy Attribute Certificates (T-EACs) which is planned to match renewable energy credits to its electricity consumption on an hourly basis as opposed to the monthly standard that is currently in place.
What is the current standard?
Corporations can purchase RECS (US) or GOs (Europe) bundled with the electricity consumed or unbundled where the energy certificate and the electricity are sold separately. Currently, corporations have the option to voluntarily meet their renewable energy targets through purchasing EACs that offset their annual electricity usage rather than pairing those purchases at the exact moment when the electricity is consumed.
RECs/GOs vs T-EACs
Annually, companies calculate their final energy consumption and purchase the equivalent amount in EACs to show that the same amount of renewable energy was at some point injected into the grid. While EACs indicates how much energy is produced from a power plant in a given month what they lack is when exactly this energy was generated, they also don't take into account that renewable electricity on the grid varies substantially during the day due to an array of variables like time of day, location and weather conditions.
In slight contrast T-EACs aim at solving this issue whereby each hour in a month has a T-EAC with a corresponding amount of electricity produced providing data on a more granular level. This is so that corporations are better able to map out whether or not they do consume renewable energy every hour irrespective of having claimed 100% renewable use over a given year. This is supposed to help companies accurately visualize and tackle their carbon footprint.
“We think that the traditional process of RECs is totally fine, and we want to be very clear that we’re not saying that the current market is deficient,” said Ben Gerber, CEO at M-RETS. “But there’s a whole new level of data that we can incorporate and layer onto the existing framework.”
In a press release from CEO of Google Sundar Pichai stated that "Not long ago, it was hard to imagine a 24/7 carbon-free electricity supply—at a simple level, the wind doesn’t always blow, and the sun doesn’t shine at night. But thanks to trends in technology, and with the right government policies, the promise of 24/7 clean energy will soon be within reach. To get there, Google will invest in approaches that make it possible for us to source reliable carbon-free energy in all locations, at all times of the day."
Some of the solutions that Google has in place to address the intermittencies of renewable energy include further investment in energy storage. Last year the company unveiled its plans for energy storage technologies to install its first backup battery at a data center, with ambitions to use the project as a test case for grid service applications.
Google has also begun work with the Danish grid operator Energinet to test their Project Origin platform, which simulates transactions of hourly GO certificates for the carbon-free energy projects supporting the company's data center in Denmark.
Monthly Disclosure in France
Meanwhile in France, since 1st January 2021, an update to the French Energy Code (L'Article R314-66 du Code de L'Energie) launching monthly disclosure periods has been in force. Part of the law states that to certify the renewable source of the electricity consumed, the Guarantee of Origin must come from production in the same month as the month of consumption that it certifies except in the case where the production does not reach the megawatt-hour threshold in that month.
This regulatory change that will be on a voluntary basis is expected to bring more transparency and accuracy in the declaration of electricity production and consumption, it is also meant to reinforce the French GO market who auction roughly between 1-3 TWh of GOs on a monthly basis.
Accurately accounting for electricity produced and consumed is a hot topic in the market at the moment. Countries such as France and big corporations around the world are working to improve EACs to showcase electricity production and consumption on a more granular level.
In France, It will be interesting to see whether we see the impact of these regulatory changes in the upcoming French Auctions in April 2021 as they will represent January 2021 production GOs. It is important to note that the sentiment from some market participants so far is that it is a bit early to state whether or not an impact of this law will be seen but in a few months it is expected.
On-time tracking of electricity production and consumption could potentially cause price variations of EACs between months and hours. For instance, the price of a renewable EAC could be higher if it is generated at an hour where renewable energy production is low. Additionally, it could be assumed that having more real-time claiming of consumption would result in more even issuance and cancellation curves over the year as opposed to the spikes witnessed in certain times of the year such as March or October partly due to disclosure deadlines.