Why Implement A 24/7 Carbon-free Energy Strategy
This is going to be the electric decade, the decade when the vast majority of human activities will be turned into electricity-fuelled activities. But how are we going to make sure that widespread electrification will lead to the necessary decarbonization impact?
As we discussed in the first and second articles of this series on Next-Generation corporate energy procurement strategies, also dubbed Carbon-aware Energy procurement strategies, the current energy paradigm is not prepared for preventing the electrification from being a bust carbon-wise. Luckily, new energy trends such as 24/7 Carbon-free Energy (CFE) are carving the path toward a new way to approach corporate energy procurement by providing robust market signals, which help to invest in the right technologies that can fill the carbon-intensive periods in the right grid zones, by fostering new carbon accounting methodologies backed by new, standardized granular energy certification instruments.
However, besides the aforementioned structural need to decarbonize our electrical grids around the world, are there any other benefits stakeholders should be aware of? In this article, we discuss this important aspect. Why implement a 24/7 Carbon-free Energy strategy? Why is it the choice for businesses committed to contributing to and achieving true decarbonization? Finally, we highlight the reasons why organizations (private and public) and regulators must work together to establish a clear framework to enable the adoption of 24/7 Carbon-Free Energy.
24/7 CFE - Benefits for corporate energy buyers
Corporate energy buyers can benefit greatly from a 24/7 CFE strategy. Learn what those top benefits are.
- Monitoring Performance - The main driver for 24/7 Carbon-Free Energy (CFE) is the ability to match the time period of consumption and the time period of production of the corresponding procured electricity. As a result, 24/7 requires a clear understanding of your consumption patterns, the grid around you, and how your current sourcing strategy relates to these two. A 24/7 strategy implies a much greater knowledge and control of your energy and environmental performance.
- Increasing transparency of corporate sustainability claims and ESG scores - A 24/7 CFE strategy provides the highest form of credibility in the market. It enables corporate consumers to report their sustainability commitments and progress to net-zero goals with the highest credibility and accuracy possible. Higher ESG scores could also provide access to cheaper capital in a financial market eager to greenify investment portfolios.
- Demonstrate commitment to local communities - the concept of deliverability, which is part of the 24/7 CFE bedrock, tends to foster the collaboration between corporate energy buyers and the authorities of the geographies where they operate. Having both the private sector and the public authorities working closely toward the same decarbonization goal may speed up the much-needed policy reforms which will facilitate investments in clean generation, and therefore play in favor of the local grid decarbonization. As a result, stigmatized industries, such as datacenters and green H2 producers, may benefit from this abundance of clean power to avoid being depicted as the ones that “steal all the electricity from the grid”.
- Demonstrate higher ambition and climate leadership - 24/7 CFE is the choice of companies that want to spearhead the societal journey towards net-zero. This gives businesses the opportunity to distinguish from their competitors on climate action - to be seen as true energy transition champions.
- Mitigate shape risk and hedge against volatile wholesale market prices - A 24/7 CFE strategy can help to reduce energy procurement pricing risk and in return negotiate a lower PPA strike price. Optimising the timing of procured energy as it relates to both system prices and hourly facility load in a given region can provide a hedge against volatile wholesale market prices and existing PPA positions.This will result in better stabilisation of a buyers’ net electricity costs better than a standard PPA.
- Managing the long-term risk of regulatory changes in carbon accounting - FlexiDAO’s recent article The Nº1 Long-Term Corporate PPA Risk You Missed - highlights the opportunity for corporates to reduce regulatory risks. Future regulatory changes to carbon accounting may include the need for more granular energy reporting requirements.
24/7 CFE benefits the greater society
Our society can benefit greatly from a 24/7 CFE too. Learn what those top benefits are.
- Decarbonisation of global economies - The UN has emphasized that the world must cut carbon emissions by 50 percent from 2010 levels by 2030, then achieve net-zero emissions economies by 2050. According to the most recent report Tracking SDG7: The Energy Progress Report 2021, we remain far off-track from achieving those targets. Companies that adopt a 24/7 Carbon-Free Energy strategy will help to proactively eliminate carbon emissions in the grid where they operate, accelerating the decarbonization of the electricity grid and progress toward SDG7.
- Facilitate new business models and innovative technologies - A large-scale switch to 24/7 Carbon-Free Energy will be a complex challenge. This will lead to innovations and open the door to opportunities to rethink market design through the lens of emerging technologies, decentralization, and interoperability.
- Aligning markets with the physics and economics of the grid - Energy market players will be better positioned to understand how the electrical grid works, offering transparency in where the energy flows and building trust between energy stakeholders.
- Market-driven signals for the optimal deployment of carbon-free resources - 24/7 CFE ensures incentives for market participants to evenly spread the deployment of carbon-free projects according to supply and demand within certain geographical constraints. It also incentivizes the growth of critical and complementary carbon-free generation technologies and solutions that the industry wants and needs to fully decarbonize its operations.
24/7 CFE for suppliers, retailers, and developers
At this point, something must be said upfront: approaching the 24/7 Carbon-free Energy era, suppliers that can offer a large portfolio, which counts with a mix of technology, will likely gain more competitiveness in the eyes of the market. Having set the stage with this premise, let's learn what the top benefits for energy suppliers, retailers, and developers are.
- Add value to energy supply offerings e.g. green tariffs and PPAs - Energy suppliers could offer a 24/7 Carbon-Free Energy solution to consumers to enhance the value of their energy supply proposals. With the upcoming publication of the first global standard for hourly certification (April 2022), suppliers will finally have a framework to prove to their customers the percentage of synchronicity between their production portfolio and their clients. This is the energy contract of the future.
- Increasing renewable energy investment - With 24/7 CFE strategies, corporate energy consumers will better understand their carbon-based electricity consumption. They will know how to adjust their energy procurement strategy to understand what, where, and when to procure renewables. This will result in the 24/7 CFE strategy creating more demand for alternative sources of baseload carbon-free supply (hydro, nuclear, geothermal) and storage. These technologies are struggling in the market today compared to wind and solar due to competitiveness and other issues. 24/7 CFE will give these technologies a renewed appeal to energy buyers, driving increased investment in the renewable space.
- Add value to your funding applications - When applying for EU or private funding for new renewable energy/green hydrogen projects, it’s increasingly important to prove that the energy consumed is coming from renewable sources. Thus, including 24/7 hourly matching in pre-feasibility studies will enhance the credibility and value of a funding application.
Time to embrace 24/7 Carbon-Free Energy
Traction around 24/7 CFE is growing. This has culminated in the recent launch of the 24/7 Carbon-Free Energy Compact - which FlexiDAO has committed to supporting as an early signatory of the initiative. Companies are beginning to recognize the many benefits of this new strategy. It will help companies get a better understanding of their energy use, reduce their energy cost and avoid carbon risk, which is a major proxy for cost. 24/7 CFE is going to provide an important contribution to reducing emissions and the worst impacts of climate change while ensuring powerful and scrutiny-proof sustainability claims.
After all, adopting a 24/7 Carbon-free Energy strategy is a win-win for both business and the planet.
In the next article, we will be discussing how your business can get started with a 24/7 Carbon-free Energy strategy by providing an actionable framework.