US government uses 52-TWh purchasing power to 'drive impact,' decarbonize grid

The largest user of energy in the US is flexing its muscles to push more carbon-free electricity onto the grid with help from some of the nation's major power utilities.

Buoyed by 52 TWh of annual electricity consumption, the federal government is finalizing several first-of-a-kind power purchase agreements with large companies such as Xcel Energy Inc., Southern Co. and Tennessee Valley Authority. The utilities are on board to help agencies source 100% carbon-pollution-free electricity (CFE) on a net annual and hourly basis by 2030. Entergy Arkansas LLC is the first company to sign a procurement contract.

Federal facilities in 18 states are covered by CFE agreements, the General Services Administration (GSA) announced in mid-April. The US government's reliance on CFE will increase to 48% once electricity is delivered under those agreements, according to the GSA, which procures energy and other services for the federal government.

"It's really the first time that 25-or-so executive agencies are working together as a group to use our purchasing power as a consumer of electricity to go before these utilities and other suppliers and say, 'Hey, we want to negotiate a good deal that's good for the agency and for the federal taxpayer,'" said Rishi Garg, the White House Council on Environmental Quality's director for clean energy and regulatory innovation. "And the industry has taken notice."

The federal government is trying new contract models to ensure they work for both utilities and agencies and to "drive impact," he said during an April 26 speech before the Energy Bar Association.

That effort includes a recent "sleeved" PPA the US Department of Defense signed with Duke Energy Progress LLC. Under this contract, a first for the government, the power company serves as an intermediary between the Defense Department and a renewable energy developer, handling the transfer and energy to reduce buyer risk, Garg said.

Entergy Arkansas the 'first win'

In consultation with Garg's team, Entergy Arkansas developed a new "zero-emissions" tariff that state regulators approved in mid-2023. The program helps federal and large industrial customers access regionally sourced CFE from the utility's nuclear, hydroelectric and solar resources. The tariff also pushes the utility to expand its renewable offerings, per the US government's objective.

"In our mind, it absolutely checks that box," David Palmer, Entergy Arkansas' vice president of regulatory affairs, said in an interview.

With a finite amount of carbon-pollution-free electricity in the utility's current portfolio, "as more customers sign up and show up, that's going to put more pressure on the need for more CFE," Palmer said. "We’re moving toward more carbon-free resources because our customers demand it."

So far, 80% of some 15 federal agencies with offices or operations in Arkansas have signed up. The remaining ones are expected to join in October, Ventrell Thompson, Entergy Arkansas' vice president of customer service, said during the same interview.

Entergy Arkansas recently updated its 2021 integrated resource plan to account for new renewable generation that must come online earlier than planned to accommodate the new CFE contracts, Thompson and other executives said.

The utility "was a really good first win because it is something that we can go out and deploy where it makes sense, across the country," Garg said.

Clean power by the hour

President Joe Biden spelled out the federal government's 2030 procurement goal in a 2021 executive order to establish the federal government "as a leader in sustainability." The order also requires the federal government to procure 50% of its hourly power consumption from carbon-fee sources all week long, which means half of its power must come directly from a regional or onsite clean power source.

Garg said such hourly matching departs from the traditional renewable energy certificates (RECs) that federal agencies used to buy to meet their clean energy goals. RECs incentivized the development of renewables in certain regions but left other areas with few opportunities to source clean energy locally.

"Those days of just going for an unbundled REC buy and saying, 'Oh, we're matching our load, we're done' — that doesn't qualify anymore," Garg said. "We want to get new, clean resources onto the system so we can increase the hourly match score and really work toward full decarbonization."

Xcel Energy formalized memorandums of understanding (MOUs) with the US government in the spring of 2023 for its Colorado and Upper Midwest service territories. Xcel is now "working on road maps for implementation," utility spokesperson Kevin Coss said in an email.

"The challenges of matching hourly demand with clean energy resources that are not available every hour underscores the need for new, 24/7 carbon-free resources such as long-duration energy storage and hydrogen," Coss wrote.

Coss added that the utility also wants to make sure it prevents "cost shifting" between the federal government and the rest of its customer base. At the same time, Coss said the new federal contract could serve as a blueprint for commercial and industrial customers wanting to track their energy usage closely.

Southern Co. said it is also on track to develop a plan and implementation schedule — due May 31 — to deliver annual and hourly CFE to its 50-some federal power customers.

"This is an opportunity to display our commitment to the customers that look to us for guidance on meeting their decarbonization goals," Michael Quirk, a spokesperson for the company, said in an email.

As word about the federal contracts spread, other utilities have been reaching out to Entergy Arkansas for tips and guidance, Palmer said.

Callers included the El Paso Electric Co., the latest power company to sign an agreement with the GSA. That mid-April MOU calls for an initial delivery of carbon-free electricity in 2026 "to demonstrate the parties' ability to execute on CFE."

In the meantime, the US government is soliciting interest in what might be one of its largest clean energy procurement deals to date. The contract for 2.7 TWh of electricity annually would serve federal civilian and defense facilities in the PJM Interconnection LLC territory, which spans 13 states and the District of Columbia.

For each contract that is finalized and executed, the massive effort to bring clean energy to thousands of federal facilities nationwide will get a little easier, US officials predict.

"You do it once, and it's really hard," Garg told the energy lawyers attending his speech in late April. "And then it becomes more of a habit, and you're able replicate across the country."