Purchasing renewable energy is a means to an end: decarbonization. Yet, renewable energy projects are not all equal when it comes to cutting carbon.
At REsurety, we’re developing a new carbon impact measurement tool called Locational Marginal Emissions (LMEs) that measure carbon emission reductions at the granular level: the electrical node where the carbon-free energy is injected into the grid.
What becomes clear when working at this level of granularity is that one clean energy project can have dramatically more carbon abatement impact than another—even when they are located just a few miles apart. For example, we assessed the Locational Marginal Emissions of two otherwise comparable solar projects in west Texas and found that one displaces twice the carbon emissions as the other.
Our team sees better measurement of carbon impact as an urgent need. Over 300 companies have joined the RE100 initiative, committing to 100% renewable energy. These companies have increasingly turned to virtual Power Purchase Agreements (vPPAs) to meet their sustainability targets. But when a corporation purchases off-site renewable energy through a vPPA to offset a portion or all of its energy usage, it typically measures its carbon impact in megawatt-hours (MWh) which—depending on the project—can dramatically over- or underestimate the true carbon impact of that project’s operations.
A shift is now underway from 100% renewable to carbon zero—which is quite a different goal. Renewable purchases are easy to measure, while measuring the carbon they eliminate has been challenged by a lack of data.
Nevertheless, two dozen tech firms and environmental groups appealed to the Biden administration to adopt a 24/7 Carbon-Free energy approach like the one Google is employing to achieve “clean energy every hour, every day, everywhere.” In March, the Biden administration in its American Jobs Plan agreed to apply that standard to federal buildings.
More recently, on Earth Day 2021, President Biden doubled down on the U.S. carbon-cutting commitment, promising world leaders to put the U.S. on a path to cut its carbon emissions in half by 2030.
The ultimate goal is clear: to reduce our carbon emissions as quickly and cost-effectively as possible to avoid further impacts of climate change. Which projects get us there the fastest and at the lowest dollar per ton avoided to date has been far from clear. As Google—which initiated the 24/7 Carbon-Free initiative in 2017— has highlighted, the necessary data to track progress accurately “is generally unavailable.” We believe that LMEs solve that problem.
Our latest white paper, “Locational Marginal Emissions: The Force Multiplier for Amplifying the Carbon Impact of Clean Energy Programs,” co-authored by Dr. David Luke Oates of REsurety and Dr. Kathleen Spees of The Brattle Group, dives into exactly why some renewable energy projects mitigate more carbon than others, and may thus be a better investment decision for meeting sustainability goals. “LME-based accounting can form the basis of more cost-effective public policies and corporate sustainability strategies,” Spees says, “by guiding the development of clean energy projects that maximize the carbon abatement value of every program dollar spent.”
The name Locational Marginal Emissions comes from the power-price corollary: Locational Marginal Price— the cost to serve one MWh of incremental load at a given location. In other words: if you’re going to consume one incremental MWh at that location, what generator or set of generators is that energy going to come from, and how much does that “marginal” generator need to be paid to produce that incremental MWh?
The Locational Marginal Emissions metric uses the same fundamental concept, but it incorporates the marginal generator’s emissions rates. By calculating the LME, we can accurately measure the carbon impact, or the emissions reductions, of generating clean power at any given moment at any given location on the grid.
Referring back to our example of the two west Texas solar projects, when we analyzed the data for those otherwise comparable projects, we found that available transmission led to one project displacing coal in the peak of the day’s sunshine, while transmission constraints resulted in the other causing the curtailment of another nearby solar project.
The Need is Pressing
Tackling climate change at a massive scale requires us to maximize the carbon impact of every dollar spent on clean energy. And not every megawatt or megawatt-hour is created equal. We need transparency around the actual carbon emissions avoided by a given renewable energy project in order to select and invest in renewable energy projects with the greatest carbon-reducing impact on a dollars-per-ton basis.
We are not alone—companies and their stakeholders are calling for more accountability around their sustainability targets and investments, ensuring that the scale of their impact matches the scale of their good intentions.
Right now we’re working on what these corporate ESG leaders have been asking for: clearer, more transparent answers on how many tons of carbon emissions are actually avoided by the renewable energy projects they’re buying energy from.
Data-driven insights made possible by Locational Marginal Emissions will allow companies to select and invest in renewable energy projects with the greatest carbon-reducing impact.
If companies are serious about reducing their Scope 2 emissions from energy use, they need better data—data that reflects the actual carbon-intensive units their clean energy megawatt-hours are displacing.
—Lee Taylor is Founder and CEO of REsurety Inc., the leading analytics firm empowering the clean energy-fueled future. Operating at the intersection of weather, power markets and financial modeling, the company empowers the industry’s key decision makers with best-in-class value and risk intelligence, and tools to act on it. With the industry’s leading developers, buyers, investors and advisors as clients and 7,000 MW of transactions closed, REsurety empowers our clients to thrive in the dynamic, complex clean energy-fueled future.