Can 24X7 CFE Disrupt the Power Industry?

Carbon-free energy 24 hours a day, 7 days a week is more than an ambitious goal.

24×7 CFE is one of the buzzwords whizzing around in the energy industry. It stands for 24×7 carbon-free energy, a new product solution to supply a customer’s entire electric load with carbon-free energy 24 hours a day, 7 days a week.

24×7 CFE’s entrance into the energy market is a testament to the advancement of renewable energy. Today, many companies are starting to supply their electricity usage with 100% renewable on an annualized basis, but they still utilize energy generated from fossil fuels on an hourly basis. Indeed, 24×7 CFE is more than an ambitious goal, it is the practical solution to a 100% renewable target.

While a smattering of innovative leaders has procured this type of solution and more have committed to achieving the 24×7 CFE goal to accelerate decarbonization, how to attain it on a large scale is not clear. In our view, a convergence of technology disruptions and business model innovation that enables multiple value stacking of disruptive technologies is essential to broad adoption of 24/7 CFE and the path to 100% decarbonization, a framework that we will explore in this article.

24×7 CFE Pioneers

Today’s 24×7 CFE pioneers include tech giants like Google and Microsoft as well as utilities like the Sacramento Municipal Utility District and the Los Angeles Department of Water and Power, among others. In September 2021 during COP26, the United Nations formed the 24×7 Carbon-free Energy Compact to provide a platform for energy buyers, energy suppliers, governments, investors, and other organizations to work together to adopt, enable, and advance 24X7 CFE. The compact now has 66 signatories and is rapidly growing.

Despite debate on whether 24×7 CFE is the optimal metric or most efficient approach to achieving a 100% decarbonized grid, the consensus is that it will drive innovation in energy technologies, commercial structures, and policy changes needed to achieve a carbon-free electricity world that will be applied systemically and ultimately reduce carbon emissions.

Current Challenges to Achieving 24×7 CFE

While there have been several 24×7 deals announced in the last couple of years, challenges remain in how to deliver these products to incentivize the adoption of more advanced technologies that are needed for the system’s 100% renewable energy. These include two main obstacles: First, while the cost of renewables, particularly wind and solar, have been declining rapidly in the past decade, they are intermittent, location-dependent, and their production profiles may not match the needs of their load profiles on an hourly basis. Second, the industry only tracks and certifies renewable production at the annual level, but not at the hourly level, which is needed to enable transactions of 24×7 CFE.

Two research institutes, RMI and Princeton, conducted studies last year, both indicating that 24×7 CFE is not cost-effective. For example, the RMI study reported an effective cost of $100/MWh to achieve just 85% CFE by wind, solar, and battery; a challenging contrast when compared to the typical energy price of $30-$40/MWh from renewables today, albeit with a low-capacity factor. Bottom line: delivering 100% 24×7 CFE is still not economically viable yet, which prevents its wide adoption.

Solutions to Enable More 24×7 CFE

How will the energy industry meet new product demand for 24X7 CFE? It will require both the convergence of disruptive technologies and innovative business models that enable multi-use value stacking, in turn driving down costs and further advancing the type of technology innovations necessary for broad adoption of 24/7 CFE and the path to 100% decarbonization. We discuss this idea by applying the disruptive innovation framework developed by Tony Seba, as shown here.

Technology Disruptions

As 100% 24×7 CFE cannot be solely achieved by just solar or wind (due to the inherent intermittency and geographical constraints), hybridization of complementary renewable technologies and storage technologies may be necessary to meet load profiles of 100% 24×7 CFE. For example, Li-ion battery storage can help shift solar energy from the middle of the day to early evening or night within a day. Adding wind to the portfolio would further enhance the delivery of the products since wind blows stronger at night. Nuclear, geothermal, hydro, and biofuels are also examples of complementary renewable technologies that can be added to the mix. Finally, longer-duration storage technologies, such as hydrogen, metal-air, thermal or mechanical storage, can help to address the inter-day or seasonal mismatch between renewable outputs and load. Some longer-duration storage technologies can also provide additional benefits, such as providing resilience and capacity support.

Further, the costs of these emerging technologies are rapidly dropping, as evidenced by solar, wind, and Li-ion battery technologies. Longer-duration storage technologies are also making good progress on technology improvements and cost reductions. Plus, the cost of replacing diesel generators with clean energy storage solutions to help achieve 24×7 CFE can be further optimized by using smart distributed networks that support computing and energy needs in case of a critical outage event that exceeds the storage duration at a particular location.

In addition to disruptive technologies on the supply side, innovative demand response technology can also be a cost-effective option for closing the remaining gap for 24×7 CFE. For example, similar to how it leverages its distributed computing network for data reliability, Google can now shift moveable computing tasks between different data centers based on regional hourly carbon-free energy availability, providing optimal use of the clean energy on the grid. Advanced machine learning and predictive algorithms can also be implemented to run the data centers both efficiently and fast while still using clean energy.

Blockchain technology appears well-suited to address the second challenge with tracking and certifying hourly renewable generation. As a digital ledger of transactions, it enables a faster, more transparent, and cost-effective way to deliver information. In fact, start-up company FlexiDAO developed the solution to track and certify renewable production on an hourly basis, which has been adopted by Google, Microsoft, and Iron Mountain in their 24×7 CFE procurements.

Business Model Innovation

One key issue with battery storage and other disruptive technologies mentioned above is that despite the cost declines in recent years, the cost is still relatively high and results in barriers to adoption of 24×7 CFE. To solve this issue, innovative business models are needed to enable disruptive technologies to capture multiple value streams and consequently offset the cost premium.

As one example, storage technology can offer numerous benefits to electric customers and the grid as a generation, transmission, and distribution asset, such as providing energy, capacity, ancillary services, transmission and distribution deferral, and backup power. If it only offers one of these sources of value, it may render the system too costly. But if solution providers can capture multiple revenue streams, the cost premium of battery storage can be outweighed. This is what Google did in its procurement of a solar plus storage project in Nevada. As Google’s Director of Energy Michael Terrell said in an interview:

“The benefits of the battery system will be shared; when the storage is needed most and is most valuable to the utility in the summer peaking hours, the utility can dispatch it for their system needs to reduce reliance on gas peakers. During the rest of the year, we can use the battery to better match our electricity demand with CFE. This benefit-sharing model is a way to bring down the cost of batteries.”

This model showcases how a product solution is enabled by the broader partnership between different stakeholders (in this case developers, utilities, and corporate customers) to allow multi-value creation and capture for disruptive technology.

Conclusion

While in its infancy, the procurement of 24×7 CFE has already incentivized creativity in the energy industry—driving technology disruptions, business model innovation, multi-value service applications, and new partnership models. More creative and innovative solutions will likely follow, eventually helping to deploy intermittent renewables at a much larger scale, transform how the grid is operated, and turn zero-carbon electricity into reality.

Co-authored by:

Dr. Yingxia Yang, a Senior Fellow at the Boston University Institute for Global Sustainability, is Senior Director of Commercial Strategy at BrightNight Power LLC, where she leads renewable product developments and market strategy for solar, storage, and hydrogen projects.

Dr. Ramkumar Krishnan, Chief Technology Officer at BrightNight Power LLC, leads the technology and engineering group and brings over two decades of education, leadership, and expertise in the areas of renewable energy generation, energy storage, and conversion technologies.

The opinions expressed herein are those of the authors and do not necessarily represent the views of the Boston University Institute for Global Sustainability.

Acknowledgment: The authors would like to thank Peter Fox-Penner, William Graves, Maribeth Sawchuk, and Nimai Shanker for their review, comments, and feedback on this article.