pv magazine: How did the idea for EnergyTag come about?
Toby Ferenczi, Founder, EnergyTag: My background is in sustainable energy and startups. I completed my PhD in solar energy and then worked for GE. Then I founded a start-up in the UK to finance and install rooftop solar energy. We sold this to Hanergy in 2013. Through my work, I became interested in rebalancing electricity and energy storage and founded another company: a demand response aggregation platform called VCharge. This was taken over by OVO Energy, one of the UK’s largest energy suppliers, about four years ago. I was still interested in issues such as grid balancing, how consumers buy green energy and the huge demand for renewable energy from individuals and businesses. So I started to delve into the difficult question of how it is possible to choose one type of electricity over another, since all power plants are connected to the same electricity grid and you cannot physically distinguish where your electricity comes from.
Sustainable electricity supply
Despite the global pandemic and recession, clean energy purchases by companies are booming. In recognition of this, the UP Initiative will conduct research into sustainable electricity supply in the third quarter of 2021. In the upcoming August edition of PV magazine, we will look at the evolving global landscape of business models. You can also read our already published coverage, including an interview with RE100, and a BNEF opinion on 24/7 RES and net zero goals.
How does EnergyTag fit into the current electricity market system?
There have been established systems of Energy Attribute Certificates (EACs) for over 20 years. These are called Guarantees of Origin (GO) certificates in Europe or Renewable Energy Credits in the US. These systems exist wherever you have a liberalized energy market and are the only legal way to claim that your energy comes from a renewable source.
If you have a power purchase agreement (PPA) with a solar park, but you don’t have the GOs of that park, you can’t say that your electricity comes from there. The reason for this is that you need to be sure that there are no double counting or other forms of fraud. EACs provide a robust tracking and accounting system to prevent this from happening.
PPAs can be very good for helping developers build new factories, if the PPA is long enough, because there is a fixed price and the counterparty is bankable. If the company doesn’t have good credit and can’t take risks, it’s much less valuable to developers, so only a small number of companies can really help developers.
I came to the conclusion that the certificate system is important, but there is quite a bit of confusion in the market, because people think, ‘If I have a PPA, why do I need a GO certificate?’ So what we need to do is to improve the current certificate schemes, and everyone involved, join us in building this market. We don’t want to replace the current system; we want to build a complementary system that will eventually be taken over by the existing system. The current certificate scheme has been so successful in driving the adoption of renewables and so many companies are now signing these certificates. Last year, 700 million certificates were traded in Europe. Now they are ready to evolve as more data becomes available now.
How does EnergyTag work?
The current certificates work by matching annual electricity consumption to annual production. This means that if, for example, as a business consumer you consume 10 MW hours of energy and I purchase 10 MW hours of certificates produced in the same 12-month period, I can declare that I am 100% renewable. You simply match your total annual consumption to the total annual production, without taking into account the time it was produced. In a sense, this means you can claim to use solar energy at night or in winter.
It used to be no problem because there was no problem with the grid balance. Now, there are times when there is massive overproduction of renewables, and other times when there is not, and that is not reflected in the current certificate prices, which are the same regardless of the time of day or time of year. We know the location of the plant, when it was built and what kind of electricity it produces, but not the time when the electricity was produced
So I realized that if you add a timestamp to the certificate and then have consumers match supply and demand on an hourly or half-hourly basis with the energy market, you create a price signal that reflects the true availability of clean energy in the world. . For example, the certificates can be priced based on supply and demand, which means that they are cheap if there is a lot of sustainable supply and expensive if there is less. It is a simple extension of the existing certificate.
It also allows companies and individuals to give a price signal for storage, because if you’re a battery, you can buy these certificates when they’re cheap, when there’s a lot of renewables on the grid, and you can sell when they’re expensive, say overnight.
How do companies respond to the idea?
The question initially comes from companies like Google and Microsoft, who have said: ‘We want to buy clean energy 24/7 and by that we mean we want to demonstrate that our energy comes from renewable sources every hour of the day. They are leading the way because they have a huge demand for data centers. The Biden administration also said they want to buy 24/7 renewable energy for the US federal government. We also have participation from most of the major utilities in Europe and over 100 other key organizations worldwide.
What about the technology behind EnergyTag?
EnergyTag does not develop technology, rather it is a non-profit organization that provides a market framework. There is a slew of software companies that already have the technology to track and manage these certificates. You need access to smart meter data and hourly generation data, which probably wasn’t there a few years ago. But it’s here now.
Some people use blockchain to do this and others don’t, but it’s not really about blockchain. The other nice thing about certificates is that you don’t have to be a big company with a big balance sheet to get involved – anyone can buy them.
You could say that the biggest problem right now is ramping up renewables and the timestamp can wait another five to 10 years. How do you react to this?
It’s not binary that you’re either not green or 100% green, because no one can be 100% renewable 24/7 today – that’s not how the system works. Even Google says they won’t be carbon-free 24/7 until 2030. What companies will start saying is, ‘Today we have 60% renewable energy on a 24/7 basis and next year we want to get to 70% renewable energy, and we pay a little extra to buy renewable energy in the hours when there is less is available.’ That gives the right price signal. The market then not only helps to build more renewable energy sources, but also to storage. And it also has implications for many other things in the energy system, such as scope two emissions reporting.
It is also not only about renewable energy sources and the use of storage, it is also about electrification. The quickest way to go low carbon is to decarbonise the energy sector through renewables and then electrify everything, such as transportation. Detailed certificates can help drive smart device charging, letting EV drivers know, for example, that they are charging their car with renewable energy sources.
And there is a link to green hydrogen. There’s a new suggestion from the EU that says something to be labeled as green hydrogen needs to show it’s produced from renewable electricity, so you need a certificate stating this information, which doesn’t exist today.
You have initiated six demonstration projects. How does that work?
We have six demonstration projects running in the US, Denmark, the Netherlands, Sweden, Norway and Australia. The big companies are involved, like Google and Microsoft, who buy the energy, and the biggest utilities and grid operators in Europe, and some software companies who track and manage the certificates. The market should be operational by the end of this year. We also consult regularly with the European Commission and we hope that the guidelines we write can one day be adopted by the EU system.
How do you see the role of developers of solar energy or renewable energy?
It’s just another revenue stream for them, especially those who are also developing storage. Developers already get money from selling traditional certificates, but it’s not a huge revenue stream compared to selling the power. But we think by moving to this more granular system, electricity certificates should be cheaper in some hours and more expensive in others, creating opportunities.
Although prices of traditional certificates have recently risen from low levels, we believe they will become an increasingly important revenue stream for new projects and especially for developers who use storage and can produce electricity at other times. Now you have price cannibalization issues because you have a lot of solar energy in the grid and the more solar energy you add, the more energy you produce in the middle of the day, which drives down power prices and creates an incentive to generate energy at other times .
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