IEA joins call for hourly renewable energy buying

The International Energy Agency has joined industry calls to overhaul the way companies buy renewable energy to meet their climate goals, and advocates hourly green electricity accounting, it said.

As a growing number of companies make net-zero commitments and pledge to use more renewable energy, accusations of 'greenwashing' have become rife.

Indeed, the way in which companies meet targets can significantly affect actual emissions reductions, the IEA said in a recent report supported by Google.

The current annual accounting favored by most corporates would "not deliver all the technologies that will be needed as power systems decarbonize and reach higher renewables integration phases," the IEA said.

Hourly matching

A key finding of the report was that changing settlement periods to hourly from annual would lead to more emissions reduction and encourage a wider portfolio of green technologies.

"While having clear merits, annual matching can lead to discrepancies in the emissions that a company effectively reduces compared with those for which it is responsible, linked to the fact that solar and wind are variable and uncertain," the IEA said.

The dominant option for corporate buying is through Energy Attribution Certificates (EAC), which are typically annual, and a debate about making those more time and location specific -- which industry players call granularity -- has already been raging.

In Europe, tradeable certificates known as Guarantees or Origin (GO) are issued for renewable energy production. Market players there have been discussing the idea of granularity a lot more since August when ENTSO-E, the organization that joins together system operators across Europe, said it supported the change.

The European Parliament has also been pushing for hourly matching of GOs, and some change could come as the EU negotiates its third flagship Renewable Energy Directive due by the end of 2022.

Google has also pioneered certificates it calls Time-Dependent Energy Attribution Certificates, or T-EACs.

Certificates or PPPs

While certificates have been the main choice for corporates so far, the IEA said there should be a range of options, including on-site generation, power purchase agreements and green tariffs.

Some companies, it said, opted for PPAs as long-term commitments could more clearly support the financing of new renewables. But, with PPAs not suitable for all corporates, particularly smaller players, the IEA welcomed the use of green energy tariffs and certificates.

The issuing of certificates for energy produced by existing plants, a common argument against their use, was not necessarily a negative, it said.

"If the EAC market brings reliable value to existing plants, this expected revenue stream could also help secure financing for new plants. EACs are also an important mechanism in that they may be the only option for some smaller buyers that do not have access to green tariffs and lack the profile to enter into a long-term PPA," the IEA said.

Emissions and double counting fears

With increased use of market-based tools, there is a risk that green benefits are counted more than once, the IEA said, whether by certificates, PPAs, or in voluntary carbon markets.

"To prevent double counting, strong governance of EAC markets should account for the uniqueness of EACs (in terms of geographical boundaries and other attributes) and set clear rules regarding the cancellation of certificates," it said.

What is more, assessing the impact of switching to renewable energy on emissions varied significantly based on accounting method. The IEA recommended reforming current market-based accounting to include a locational aspect and emissions from marginal rather than average energy use.

Companies should then have clearer reporting requirements so they can credibly claim emissions reductions, it said.

"To truly accelerate clean energy transitions, the most critical requirement is that voluntary procurement actually goes beyond existing government mandates and initiatives," the IEA said.