Insight — 20 May 2024

Worried About Hourly Matching? Why Your Local Utility May be the Answer

While critics suggest a need to delay 45V implementation, first-mover utilities are stepping up to provide support. In this opinion piece for Latitude Media, our Co-Founder and CEO Toby Ferenczi explains how.

solar panels on green field

Debate over clean energy matching has made the way it’s tracked, sold, and accounted for a central — yet controversial — policy conversation. 

Nowhere is this clearer than in the aftermath of the Department of the Treasury’s proposed 45V guidance on clean hydrogen production. Similar to the European Union’s proposed standards, the guidance will make hydrogen the first industry in the United States required to meet so-called “hourly matching requirements” as soon as 2028. 

Despite the pushback from some hydrogen industry stakeholders, hourly matching requirements are essential to preventing the tax credit from inadvertently causing a significant increase in carbon emissions. And meeting them is feasible — utilities are the key to making hourly matching accessible and affordable at scale. 

An analysis from Wood Mackenzie commissioned by the industry group American Clean Power claims that 45V will stifle clean hydrogen deployment by making it too expensive to compete with other fuel types. However, research from Princeton’s ZERO Lab led by energy systems scholar Jesse Jenkins argues quite the opposite: that the cost of hourly matching would be offset by the 45V tax credit, making compliance profitable in most regions of the country. 

Additional studies from Energy Innovation and the MIT Energy Initiative echo the sentiment that the so-called ‘three pillars’ of additionality, deliverability and time-matching can support the industry in scaling while remaining cost-competitive — and simultaneously encourage decarbonization. 

For the up-and-coming U.S. clean hydrogen industry to deliver on the promise of low- and no-emissions fuel production, electrolyzers must source power from a diverse portfolio of carbon-free energy sources. This involves combining solar and wind with firm carbon-free energy sources like nuclear and hydropower, integrating battery energy storage systems, and adopting load-shifting strategies. Many hydrogen producers are building their energy supply strategies around power purchase agreements and self-owned generation assets. But they may be overlooking another valuable partner: utilities. 

Utilities are already experts at balancing and integrating a diverse portfolio of generation sources to keep the lights on 24/7. The 45V guidance presents an opportunity for utilities to develop new offerings that reward electrolyzer load flexibility with favorable pricing. And they can provide incremental carbon-free electricity for developers to meet the 45V time-matching, deliverability, and additionality requirements. 

For example, policymakers in California have proposed SB 993, the Clean Energy Development Incentive Rate tariff, which advocates for a combination of time-of-use rates, interruptibility, and hourly-matched carbon-free energy. If passed, the CPUC would be required to develop a new energy pricing structure specific to hydrogen production and utilization.

Under the current rules, hourly matching isn’t required until 2028, which is more than enough time to make the transition toward more granular time-matching. While widespread tracking of hourly energy attribute certificates, or EACs, in the U.S. is not immediately feasible, three tracking systems (M-RETS, PJM, and NAR) can already monitor hourly data, and most others anticipate a short phase-in period of one to two years. 

In the interim, using monthly EACs alongside hourly metering data is a stop-gap. EnergyTag, the nonprofit international standards body for granular certificates that I founded in 2020, is developing a framework to support this, while also advocating for existing EAC tracking systems to add the missing time-stamp to EACs. Already, many organizations in the U.S. and around the world are demonstrating hourly matching — including for hydrogen, where a recent EU auction was oversubscribed for over eight gigawatt-hours of three-pillar-compliant projects.

As outlined in a recent paper published by the Regulatory Assistance Project, 24/7 carbon-free energy “transition” tariffs are a powerful tool to accelerate this effort. Take, for example, Entergy Arkansas’ Go ZERO program, which was approved in August 2023 in light of the utility’s MOU to supply the federal government with 24/7 carbon-free energy. The program allows commercial and industrial customers to power their consumption with emissions-free resources on an annual basis, while also providing transparency into their hour-by-hour matching. 

Meanwhile, U.K. energy supplier Good Energy has taken an even bolder step. The company is offering all of their business customers 90% hourly-matched clean energy sourced from a portfolio of hundreds of generators connected to the same grid. Participating customers range from a conservation nonprofit, a skincare brand, and an artificial wave park. 

These examples demonstrate how utility innovation can make hourly matching accessible today for organizations of all sizes and load profiles.

Because today’s clean energy offers are based on annual matching of consumption with renewable energy credits or EACs, clean energy is valued at the same price irrespective of supply and demand at a given time of day. This flat price signal means that, despite the $1.69 billion spent on voluntary RECs last year, the impact of this spending is not as effective as it could be. 

Moving instead to a system of time-stamped EACs, or granular certificates, would enable clean energy prices to reflect its real-world availability. And this would improve the economic viability for technologies capable of delivering clean energy when it's most needed, such as long-duration energy storage or clean-firm generation. 

Investments in these technologies are critical for achieving a zero-carbon energy system. However, insufficient incentives have historically prevented the deployment of these technologies at scale. EnergyTag’s international standards have proven effective at illustrating this potential, and have been supported across the EU by large corporate clean energy buyers like Google and Microsoft, both of which have made public commitments to 24/7 carbon-free energy

We are in a critical period for ramping up and deploying capabilities for precisely tracking, managing, and reporting on clean energy consumption and generation. The 45V rules establish the country’s first definition of clean grid-supplied electricity — one that is shared by the U.K. and EU. I believe that this precedent will be followed by policies for adjacent industries like energy storage and carbon removal, as well as voluntary procurement strategies and Scope 2 accounting. In a few years, the market-driven 24/7 approach to clean energy procurement will become the norm in our industry. 

As the 45V phase-in deadline of 2028 approaches, hydrogen producers and utilities should come together to explore how innovative, voluntary green power programs can unlock a cost-effective path to the three pillars. This period marks a major opportunity for utilities to support customers in their service territories who need access to hourly-matched clean energy. Through these initiatives, utilities can play a critical role in accelerating decarbonization and at the same time, unlock support from their most committed customers. 

Article as published in Latitude Media.

Share article

Ready to discover the next generation of clean energy management?

If you’d like to learn more about our products, just fill in the form and one of our team will be in touch.