WattCarbon 2023 Recap and 2024 Look Ahead - Part 1
The Year of the EAC
Only about one percent of buildings in the United States are fully decarbonized. Accounting for nearly 40% of annual emissions nationally, and much higher percentages of emissions in cities, the rest of our buildings represent the greatest opportunity for mitigating climate change available to us today. When we set out to build WattCarbon, we knew that in order for building decarbonization to succeed two things have to happen. First, the current $100 trillion price tag must be reduced to a more manageable number. Second, the 300 year current pace of decarbonization must be dramatically accelerated. Scientists tell us that 30 years is about the timeframe required to decarbonize to keep global warming to within 2 degrees and we can probably afford to spend around $10 trillion.
Reducing the cost of building decarbonization by 90% and accelerating the pace of building decarbonization by 90% means that we can no longer tolerate business as usual. We can no longer outsource responsibility for decarbonizing buildings and we can’t continue to place most of the responsibility for financing the clean energy transition in the hands of ordinary consumers.
At the same time, unlocking private sector capital means that new systems must be built to value the impact of building decarbonization. We need our environmental commodity markets to explicitly value decarbonizing buildings. Reducing emissions in buildings is no longer a luxury. It’s the primary pathway to eliminating our reliance on fossil fuels.
To that end, WattCarbon entered 2023 with three priorities:
Create Energy Attribute Certificates (EACs) that provide the necessary information to track the environmental benefits of building decarbonization;
Build a market for transacting EACs that could provide the type of transparency, auditability, and immutability required for next generation corporate accounting;
Create a procurement vehicle that enables private capital to offtake the risks associated with distributed energy investment.
Over the next three days, we’ll take a close look at each one of these priorities and what will be in store for 2024.
Energy Attribute Certificates (EACs)
We started thinking about EACs back in 2021, as we connected hourly energy consumption to hourly carbon emissions from the grid. For any given hour’s energy use, an amount of carbon emissions would be associated with the production of energy for that hour. We started to match up the energy use of each hour of the day to each hour’s consumed emissions intensity based on the EIA’s hourly grid data to be able to provide an hourly emissions report for every building in the United States. It stood to reason that reducing energy consumption when the grid was particularly dirty would be more valuable than reducing energy consumption when the grid was relatively clean. While there’s been a lot of discussion around whether to use marginal or average emissions, we’ve settled on the practice of using the publicly available EIA data for consumed emissions intensity.
Here you can see what this looks like for my house (using WattCarbon’s dashboard). I have solar panels that power my house during the day and charge a battery that then absorbs load in the evening hours. Most of the electricity that I use from the grid ends up coming from natural gas generation in the overnight hours (admittedly I charge my car during these overnight hours, as my rate from PG&E is far lower overnight than when the sun is shining).
For me to get to net zero energy consumption in my house, I need to offset the 10MWh that I pull from the grid with purchased clean energy. Before I started WattCarbon, I tried to purchase RECs and I have also signed up for my utility’s 100% green energy plan. Purchasing RECs, I was able to find surprisingly inexpensive “national Green-e” certified RECs for 10MWh through a broker. Additionally, my utility charges me extra each month to cover the costs of procuring clean energy on my behalf. Both of these solutions are unsatisfying. The 10 RECs that I purchased most likely came from either Texas or Oklahoma wind farms that were built a decade ago or more (all I know is that they are “certified”). And 50% of the electricity that my utility procures on my half comes from solar that certainly doesn’t move the needle on the overnight natural gas power that I use. Both solutions lack the transparency that I need to be able to feel confident that I could report net zero emissions for my house on the ESG reports that I prepare for WattCarbon.
To make matters worse for my net zero reporting, I’ve also been participating in other parts of the energy transition that are poorly tracked by existing systems. I installed two heat pumps a few years ago and I’ve enrolled in OhmConnect’s demand response program where certain devices in my house automatically turn off during hours of the day in which the grid needs less demand. These investments have clear environmental benefits, but are recognized by my utility only in terms of their energy value (in the case of the heat pumps, it’s likely that my bills have gone up as a result). The challenges that I face quantifying and reducing emissions in my own house are a microcosm of the limitations of our existing environmental commodity markets writ large. It’s no wonder that we’re on a 300 year, $100 trillion pace to decarbonize buildings!
It’s clear that we need better data infrastructure if we are to unlock the environmental benefits of building decarbonization. We need something like the nutritional label that is now ubiquitous on packaged foods; not just the calorie content, but the percentage of recommended daily vitamin intake, ingredients, and even potential allergies. What if we could know similar things about the energy we were consuming and the clean energy that we were trying to purchase to mitigate our carbon emissions? Instead of seeing the calorie content, we would want to know the emissions intensity of the grid at that time of day. Instead of vitamins, we would want to know the fuel mix. Instead of ingredients we’d want to know the source of the energy, the age of the facility, and the contract terms under which the energy was procured.
Why EACs are necessary for measuring impact
The most important shift we can make in our data infrastructure is to move away from a system that merely counts volumetric energy consumption, to a time-based, granular accounting system that accounts for the conditions under which energy is produced. Especially if we want to value distributed energy resources, we need to stop measuring in RECs (volumetric megawatt-hours) and start measuring energy use and production in specific hours of the day.
To highlight this need, take for example a recent OhmConnect event that I participated in. For that particular hour of the day, I had been averaging 0.3 kWh (a pretty low number, mostly because my battery absorbs most of my household energy use at that time of day). But on that specific day I only used 0.02 kWh, so OhmConnect credited me with 285 watt-hours saved. For the sake of comparison, 285 watt-hours is 0.000285 RECs. A REC-based accounting system simply fails at this level, and yet our energy systems are based on this level of granularity.
That said, if all we wanted to do was track our own emissions, the problem of granularity would be relatively trivial to solve with the right accounting software. But actually the bigger challenge is incorporating distributed energy resources into environmental commodity markets. If we care about the environmental benefits of DERs, we also have to be able to transact these resources. Not only do we need the granularity, but we also need to be able to separately identify each individual watt-hour so that they can be transacted across multiple parties. Imagine that I sell my EACs to OhmConnect, but they turn around and resell portions of those EACs to different offtakers. Each buyer needs to know which portion of my EACs they are receiving and they need to be able to retire those EACs against their own net zero goals with confidence that the same EACs are not also being claimed by another party. Each watt-hour needs to get its own serial number so that it can be tracked and retired independently of any other watt-hour.
This level of granularity is the foundation of WattCarbon’s Energy Attribute Certificates, unveiled earlier this year. A stylized version of the certificate appears as an image below, but it contains the essence of the data that we are tracking. For each individual hour of the day, an amount of watt-hours is recorded (could be generated, saved, or consumed) and associated with a particular asset that exists at a particular site. Each watt-hour is assigned a serial number that can be traced back to the asset and the site. Both the asset and site have metadata associated with them, including the grid carbon emissions intensity, the grid fuel mix, the terms of the contracted energy (where relevant), the specific geographical location, the date on which the system became operational, etc. These EACs serve as a form of a receipt for making a claim regarding the environmental impacts of an energy purchase.
Back to the example of my house, WattCarbon’s EACs tell me which of the 10 MWh that I procured have come from which hours of the day and which locations. Even if the EACs were from out of state, I could at least compare the carbon intensity of the grid from which the EACs were sourced to the carbon intensity of my own grid at the times of day that I was using energy to see if my effort to become carbon neutral was adding up. And if I really wanted to hit the highest standards of incrementality, deliverability, and hourly matching, I could make sure that each EAC was from the same grid (CAISO), had come from a new facility with a COD date of 2020 or later, and matched on an hourly basis to my own grid consumption.
We expect that in the near future, every organization trying to meet a net zero energy goal will be using EACs, not RECs, to ensure that the energy they are procuring actually meets the necessary requirements to support their clean energy claims. Our first goal of 2024 will be the release of our first-of-its-kind open source EAC registry, specifically designed to support hourly, watt-hour level tracking, and inclusive of not just conventional renewable generation, but of all types of clean energy resources. We believe that accurate, transparent accounting will be critical to massively accelerate the clean energy transition.