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When you take a shower, do you wash your feet? Only half of us do, but we all feel “clean” when we step out. Even if you don’t bend down and scrub between your toes, you’ve been standing in soapy water, and that’s more or less the same thing, right?
When a company buys Renewable Energy Certificates (RECs) to match its annual power usage with clean sources, do they offset their carbon output? Or is 24/7 hourly accounting- and more- necessary to ensure their operations are really clean and not just greenwashed?
Tech giants locked in an artificial intelligence arms race are facing a dilemma. They must balance their sustainability goals with powering their data centers, which are driving unprecedented load growth across the United States and spurring the North American Reliability Corporation (NERC) to warn of an urgent need for more energy sources. Companies are clamoring for every available megawatt, and some of the country’s largest power-guzzling tech companies appear willing to tread water (and then some) on their emissions targets to ensure they get the electricity they need.
But going green is still very much en vogue. In addition to onsite clean generation, companies like Meta, Amazon, and Google rely on purchasing the credits from offsite solar and wind projects in pursuit of their still-ambitious decarbonization plans. Some are committed to more complex hourly load-matching initiatives, eyeing a 24/7 clean grid, while others apply an alternative definition to being clean and assign more value to total carbon reduction.
The big power purchasers
Meta Platforms was the largest corporate solar adopter in 2024, according to the Solar Energy Industries Association (SEIA) in its latest Solar Means Business report, offtaking more than 5 gigawatts (GW) of capacity. Amazon (4.6 GW), Google (2.6 GW), Apple (1.1 GW), and Walmart (860 MW) rounded out the top five.
Corporate procurement has emerged as an essential driver of the clean power market, accounting for more than 18% of total U.S. solar capacity. In 2023, 20% of all installations had a corporate offtaker.
“Some of the largest industrial and data operations in the world continue turning to solar and storage as a reliable, low-cost way to power their operations,” noted SEIA president and CEO Abigail Ross Hopper. “These industry giants are investing in solar through a diverse range of applications, including onsite and off-site installations, on carports, paired with storage, or even as an anchor tenant for a community solar project.”
Meta, Google, and Amazon added the most solar to their electricity portfolios through Q1 2024 and also have the most new solar procurements under contract. Amazon has 13.6 GW in the works, while Meta and Google each have nearly 6 GW in the wings. The 10 largest corporate buyers of solar power currently boast a pipeline containing at least 27.8 GW of new generation, more than the capacity of all solar in the U.S. that came online in 2022.
PPAs, RECs, EAPAs, and hourly matching
Via power purchase agreements (PPAs), companies agree to offtake clean power at a fixed price per megawatt hour in exchange for the associated renewable energy credits, which can be traded or sold. For example, Google recently bought every last electron from what would be the Commonwealth of Virginia’s first onshore wind farm, Apex Clean Energy’s Rocky Forge Wind, to power its nearby data center operations.
An Environmental Attributes Purchase Agreement (EAPA) is a contract to purchase RECs, allowing a company to claim the benefits of renewable energy without directly buying the power itself. Meta signed four EAPAs last month with international developer, owner, and operator Invenergy for at least 760 megawatts (MW), bringing Meta’s total clean energy procurement with the Chicago-based company alone to more than 1 GW. Each of the four facilities is in a different state (Ohio, Texas, New Mexico, and Arkansas), strategically located in areas of soaring electricity demand. The projects will power their local grids, not Meta’s operations. Meta will receive clean energy credits for bringing new generation capacity online- intentionally doing so where it can make the most impact, rather than the most convenient spots to put steel in the ground.
Hourly load matching, or 24/7 matching, takes “being clean” a step further, “where a buyer attempts to procure sufficient carbon-free energy to match a given facility’s load in every hour,” as defined by the Rocky Mountain Institute. Microsoft has committed to powering its data centers in Virginia with 24/7 clean energy (a particularly tricky place to do so!) through a 15-year agreement with AES Corporation.
“Overall, we find that hourly load-matching strategies can help lay the groundwork for a decarbonized grid in the long term,” authors of RMI’s Clean Power by the Hour wrote. “But (they) should be carefully tailored to region-specific grid dynamics to also maximize emissions reductions in the near term.”
“Buyers who have not yet offset 100% of their annual electricity use with procured (carbon-free energy) can feel confident that doing so based on annual targets in regions with low renewable energy adoption will continue to create material climate benefits,” the report added.
Two main schools of thought
Microsoft and Google are among the hundreds of global entities to sign the 24/7 Carbon-Free Energy Compact, committing to meeting every kilowatt-hour of electricity demand with carbon-free sources, every hour, every day, everywhere. Founding signatories included: 8 Rivers Capital, AES, ClearTrace, the city of Des Moines, Iowa, EDP, Energy Tag, Fervo Energy, FlexiDAO, Google, the government of Iceland, Iron Mountain, the city of Ithaca, New York, LevelTen Energy, M-RETS, Orsted, Power Ledger, Statkraft, Tomorrow, and X.
Meta and Amazon have not signed the 24/7 compact, choosing instead to rely more heavily on purchasing the environmental attributes of renewable energy projects to offset their carbon output, prioritizing decreasing total emissions above all else.
In late 2022, Meta, Amazon, and a few other big tech companies launched the Emissions First Partnership, targeting purchases with maximum carbon reduction regardless of “grid or market boundaries.” The Emissions First Partnership grants that the emissions impact of a megawatt-hour of electricity consumption or generation varies based on time and location and embraces enhanced accounting practices that can more accurately quantify the emissions impact of each megawatt-hour. However, the organization also takes a global view of the problem, recognizing that all greenhouse gas (GHG) emissions impact the atmosphere and recommending clean energy procurement based on the specific emissions impact on the affected grid.
Since 2017, Google has matched 100% of the electricity consumption of its global operations with purchases of renewable energy on an annual basis. However, analysts argue RECs are prime for “greenwashing” because the act of purchasing attributes doesn’t actually produce new energy, rather it incentivizes others to do it instead.
While Meta touted its aforementioned EAPAs with Invenergy, the parent company of Facebook and Instagram also selected northeast Louisiana as its home for a new $10 billion AI data center on the Entergy grid, one of the dirtiest in the United States. Meta said it will match its electricity use with 100% clean and renewable energy, but it’s a logical leap to argue a solar farm in New Mexico cancels out the emissions pumped out in a place with a generation mix saturated in fossil fuel sources.
Is one way better?
On its face, 24/7 load matching appears to be the most mindful method. As Scott Burger of Form Energy pointed out in a recent post on LinkedIn, a net-zero grid ultimately requires it.
“Take a very simple perspective,” he recommends. “If all buyers were to match their demand to clean energy supply 24×7, the grid would be (net) zero emissions. If all buyers were to match their demand annually, the grid would be very far from (net) zero emissions. If we want to decarbonize, the grid needs to be 24×7 clean, full stop.”
Burger says companies like Google (which is aiming for 2030) genuinely working toward 24/7 load matching are providing much-needed leadership and deserve credit for their efforts.
However, research from consulting firm Energy + Environmental Economics (E3) partially funded by Meta indicates we may not need to lather our little piggies to achieve our goals (sorry if you already forgot about the shower metaphor at the top of the article, this is probably really weird then). Rather, 24/7 accounting doesn’t actually produce superior environmental outcomes compared to conventional clean energy accounting, except under narrow and implausible circumstances.
One of the authors of E3’s report, Arne Olson, contends this is a case “where the cure is much worse than the disease.” He argues that 24/7 accounting requires a durable and cheap REC surplus, which in itself is unlikely. Hourly load matching also introduces additional problems that dramatically increase the difficulty and cost of clean energy procurement, requiring companies to procure significantly more clean energy to ensure enough to meet demand during the worst hours of the year.
“This exposes the buyer to substantial market risk for selling excess procurement in the energy market,” E3’s authors point out, also noting secondary markets for hourly RECs are likely to be unworkable or non-existent. Meeting load with clean energy during every hour is very difficult even for the largest and most diverse power systems, and at smaller scales, it’s next to impossible.
So what does that mean?
Coming to a consensus?
More than two dozen signatories working in academia, climate, and energy recently published an open letter pushing back at the idea of an expert consensus on the best way to mitigate carbon impact.
“Several recent policy-related publications have stated or implied that the academic and expert community are in consensus that corporate-level hourly carbon-free matching (“24/7 energy matching”) is the only approach that is effective at reducing system-level emissions,” the letter reads.
“We, the 26 listed signatories representing experts in energy systems modeling, carbon impact analysis, and carbon accounting across academic, non-governmental organizations, and commercial organizations, dispute this statement.”
The letter goes on to say no expert consensus has been established that 24/7 load matching is the only (or even most effective) method for incentivizing real-world carbon reduction decisions and measuring their impact. The signatories agreed upon three core points:
- The current Scope 2 carbon accounting methodologies defined by the GHG Protocol, which have motivated considerable corporate procurement of carbon-free energy, likely require changes to recognize the fact that the environmental impact of carbon-free energy varies significantly in time and place.
- 24/7 energy matching may be an important tool in an improved carbon accounting toolkit, but it is far from the only method by which rigorous carbon impact can be effectively incentivized and accurately measured.
- 24/7 energy matching has significant shortcomings that limit its real-world applicability, as its modeled impacts tend to rely on simplified assumptions that do not reflect the economic or physical realities of project development or grid operations. Importantly, 24/7 energy matching ignores the lessons learned from the development of Locational Marginal Prices (LMPs): in power systems, it is not possible to match individual production and consumption at different locations.
Ultimately, the signatories of the open letter, the RMI report, and E3’s research all seem to point to the same conclusion, the one Meta, Amazon, and others are banking on- that total emission reduction should be the priority right now, as carbon pollution knows no time or borders. Direct apples-to-apples hourly matching is mostly something we’re making up in our heads, and it’s an unrealistic standard to adhere to when there are bigger problems to tackle.
Conveniently, that line of thinking also allows those who don’t 24/7 match their power consumption much more flexibility in powering their short-term aspirations. After all, some electric grids have a lot more wiggle room than others. If a major tech company can secure power– even if it comes from fossil fuels- they’re probably going to snatch it up and worry about the details later.
Will the lather make it all come out in the wash?
