As Google, Meta, others ramp up clean energy buying, ‘carbon matching’ offers cheapest path: report

Companies have contracted for 77 GW of clean energy in the U.S., up from about 10 GW in 2017, and are seeking expanded options for buying more emissions-free electricity.

For companies aiming to buy clean energy, the most effective and least expensive procurement strategy is "carbon matching," according to a report by consulting firm Tabors Caramanis Rudkevich, or TCR.

With carbon matching, a company becomes carbon neutral by buying from anywhere more carbon-free electricity than they use in a year, according to TCR. The strategy is based on "locational marginal emission rates," the amount of carbon emissions tied to specific nodes on the grid. Other approaches call for buying clean electricity to offset a company's energy use without regard to the extent those purchases reduce overall emissions.

"If you want to do the best you can for the least money, then shift over and think about marginal emission rates as the metric to use," said Richard Tabors, TCR president and one of the authors of the report.

Under the carbon matching approach, companies buy emissions-free power in areas with high carbon emissions from power plants, such as in the Southwest Power Pool and parts of the upper Midwest, without considering how close those sources are to where the electricity is being used, he said.

Sourcing renewable electricity from those areas will displace more carbon than, for example, purchases from California, which already has a high amount of emissions-free resources, he said.

The TCR study was supported by a grant from Meta Platforms, a leading clean energy corporate user. Meta is part of the Emissions First Partnership, which supports carbon matching. Companies in the group, launched in December, include Amazon, General Motors and Intel.

TCR assessed four clean energy procurement strategies, including the industry standard — annual energy matching under which a customer matches their load with clean energy on a yearly basis.

Besides carbon matching, the firm also considered local energy matching, where clean power is procured from the balancing area where it is used, and hourly energy matching, with clean electricity procurement lining up with the hour it is used from resources within the load's balancing area. Google in 2020 set a goal of hourly energy matching.

The report looked at two load profiles: one representing stand-alone commercial retail buildings and the other representing data centers or industrial customers.

It studied those loads in five areas for geographic and regulatory diversity: the California Independent System Operator; the PJM Interconnection; Duke Energy Carolinas; Portland General Electric; and the Los Angeles Department of Water and Power.

"We found that carbon matching was the only annual matching strategy to consistently achieve carbon neutrality, regardless of customer load profile and location," Tabors and the other authors said in the report.

The study found that local, hourly energy matching is the least efficient strategy for cutting carbon emissions. It fails to achieve carbon neutrality on an hourly basis and only achieves annual carbon neutrality, at a high cost, by buying more than twice as much electricity as needed, according to the report.

In PJM, it would cost a commercial retail company $113/MWh under an hourly energy matching strategy compared to $6.30/MWh under a carbon matching approach, the TCR analysts found.

Solar projects in the Electric Reliability Council of Texas footprint offer the lowest-cost clean energy projects and photovoltaic projects in southern SPP were the most cost-effective at displacing carbon emissions, according to the report.

The report comes amid a surge in corporate clean power procurement.

In the United States, 326 companies had contracted for 77.4 GW of clean energy as of the end of 2022, up from about 10 GW five years earlier, according to a report from the American Clean Power Association, known as ACP. The capacity includes about 45,050 MW of solar, 28,830 MW of land-based wind and 975 MW of battery storage.

The 36 GW of operating clean power for corporate buyers makes up 16% of all operating clean power in the U.S., according to the trade group.

The top 10 corporate clean energy purchasers account for 54% of all U.S. corporate procurements with 41.8 GW of contracted capacity, ACP said.

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Carbon matching is part of an ongoing effort to expand options for companies that want to buy clean energy, according to Doug Miller, director of market and policy innovation for the Clean Energy Buyers Institute, or CEBI, until late last month.

"We don't necessarily need more wind in Texas or solar in California, so the idea is how do we be a bit more strategic with deploying energy so we actually shave off those locations and times that are not yet carbon-free," he said.

CEBI, affiliated with the Clean Energy Buyers Association, last year started the Next Generation Carbon-Free Electricity Procurement Initiative to develop a framework for new procurement options, including carbon matching.

"We want to see hourly solutions, we want to see carbon match solutions, we want to see solutions for small businesses," Miller said. "We think you need an all the above approach in terms of what's available, and then let the market, let the customers decide which best matches what they want."

In its procurement initiative, CEBI identified roadblocks to new clean energy procurement options, including a need for "energy attribute certificates" to contain more data on electricity sources, he said. Additional data on the certificates, such as hourly and sub-hourly time stamps and carbon intensity snapshots, would support new types of clean energy purchases, he said.

Locational marginal emission rates are not widely available, placing hurdles to the carbon matching approach, according to Tabors. PJM has published real-time locational marginal emission rates since late 2021 and ISO New England has started reporting marginal emission rates, he said.

The Federal Energy Regulatory Commission should direct grid operators to report the information in real-time, according to Tabors. The Infrastructure Investment and Jobs Act calls for the U.S. Energy Information Administration to report hourly locational marginal greenhouse gas emission rates, the report noted.