How the new GHG rules could drive companies out of clean energy

The opinions expressed here by Trellis expert contributors are their own, not those of Trellis.

Never in my lifetime has energy been this fraught. America’s war with Iran and surging power demand here at home are roiling energy politics and markets alike. However, this turmoil obscures a remarkable success story in clean energy: Today, a staggering 90 percent of all new electricity generation capacity in the U.S. comes from clean sources. Voluntary corporate procurement has been a key driver of this growth, accounting for more than 40 percent of this capacity that‘s keeping the grid afloat.

But there’s a brewing, highly technical battle over how corporations account for their sustainability progress that threatens to sabotage deployment at the worst possible time. The standards that dictate how companies track, offset and report their carbon emissions are set to be overhauled by the Greenhouse Gas Protocol (GHGP) this summer.

The GHGP is weighing a proposed standard known as “24/7” or “hourly matching” which would require a company to prove that its power consumption is matched by clean energy generation on an hour-by-hour basis within the exact same geographic region. In practice, most companies will move away from signing contracts for new clean energy than bother with a complicated standard.

Creating more friction

Under the existing system, a company can cover its carbon footprint by financing new wind or solar projects that match its annual energy use. While not perfect, this approach has undoubtedly contributed to a surge of clean energy development across the country. When a company agrees to buy power from a wind or solar farm for the next 10 to 15 years, it equips clean energy developers with the guarantees needed to secure financing and put shovels in the ground. And they can do so in the areas of the country where it’s most cost-effective, impactful and feasible to build.

While improvements should be made so that companies cannot average usage across a single continent, most companies will abandon their clean energy goals during this anti-ESG moment rather than subject themselves to expensive tracking software and short-term certificates from already-built projects to reconcile hourly gaps in their energy use. This project-by-project, hour-by-hour approach is similar to the “three pillars” methodology that ultimately doomed the clean hydrogen industry in 2023 and 2024 because of all the added expense. The only difference: the GHGP dropped the “additionality” pillar that would ensure all the added expense actually builds new projects.

This change would create more friction on top of the federal headwinds facing clean energy. Given hostile, partisan politics and the squeeze on supply chains from AI load growth, this is exactly the wrong moment to overhaul a system that is working. We should instead be focused on growing the coalition of corporate buyers looking to hedge against riding wholesale power costs.

The danger of an ‘island’ approach

Proponents of 24/7 argue that pushing companies to match their power hourly will create the necessary market demand to commercialize technologies like next-generation nuclear, advanced geothermal and long-duration storage that can deliver power when the sun isn’t shining and the wind isn’t blowing. These technologies often come at a premium that is out of reach for most companies. And for many businesses, like those in fully-regulated markets, it would force them into complicated negotiations with an often-hostile monopoly utility company. 

Making the procurement strategies of a few highly-profitable corporations the mandatory standard for everyone is a fatal miscalculation. Most Fortune 500 companies have tighter margins and as a result need more flexibility in their sustainability goals. For them, this will make it more likely that they stop participating in the greenhouse gas protocol altogether instead of signing a contract for nuclear and geothermal power. 

If we regulate corporate buyers out of the market, the consequences for everyday Americans could be severe. Clean energy projects would continue to get built, but more slowly and at higher costs, ultimately passing costs to ratepayers and driving residential electricity bills up by as much as 26 percent.

24/7 also encourages an “island” approach to power whereby companies build and buy energy to precisely match their own load, rather than optimizing their procurement for what might be best for the overall grid. For example, companies would dispatch their battery storage systems to meet their own load requirements instead of helping to shave peak demand on the overall system to increase electricity sales and reduce bills for everyone. It’s estimated that this would increase grid volatility, congestion and curtailment by 47 percent. 

Voluntary corporate climate action is just that — voluntary. The private sector has proven it can drive clean energy deployment at an unprecedented scale when the rules and incentives make sense. The 24/7 model would significantly slow clean energy deployment precisely when adding electricity to the grid should be accelerating.