In Brief

Following a year-long trial with Google, LevelTen Energy will introduce its standardized PPA bidding process, known as LEAP (LevelTen Energy’s Accelerated Process), to all platform buyers this week. The process allows developers to “build [portfolios] of clean energy projects faster.” Trading the conventional open-ended process for a standardized contract cut Google’s PPA negotiation time by 80%.

The nascent direct air capture industry received a significant boost when Amazon joined the race to commercialize machines that can remove carbon dioxide from the air, offering the industry one of its largest customers and investors to date.

Emerging firm and peaking clean energy technologies (such as hydrogen, advanced nuclear, long-duration storage, CCS and next-gen geothermal) lower carbon-free power costs, Google said Thursday, encouraging companies to sign PPAs and work with utilities and regulators on green tariffs.

As utilities expand the amount of renewable energy into their fuel supply mixes, the subsequent need for a boost in resource reserves could result in an oversupply, destabilizing power prices and grid reliability expenses, Moody’s Investors Service warns. Clean energy groups say there are solutions to the concerns Moody’s analysis posed, which Advanced Energy United Senior Fellow Ryan Katofsky said took a “somewhat narrow view of how renewable energy is changing wholesale electricity market dynamics.”

Clean energy firms seek higher electricity rates from regulators due to pandemic’s economic fallout (inflation, supply-chain woes, and rising interest rates) which threatens planned projects, potentially reshaping state climate goals.

The IRA lets companies sell their clean energy tax credits for the first time, and the market for them is booming. The legislation allows developers without tax liabilities to exchange their credits for cash from companies with tax burdens to finance their projects.

This year’s rooftop solar installations are projected to shatter the record set last year. The number of residential solar setups keeps on rising annually, setting new record-breaking figures.

In a bid to prevent power outages, the California Legislature has endorsed a proposal to acquire additional wind energy. The legislation grants the Department of Water Resources the power to procure this electricity.

Google Changes the Game for PPAs

Big Tech companies like Amazon and Google are increasingly asserting themselves directly in new energy industries.

Standardizing PPAs with LEAP

Google recently made significant but quiet move by pioneering and publishing a new model for negotiating power purchasing agreements (PPAs) alongside LevelTen Energy.

Following a year-long trial with Google, LevelTen Energy will introduce its standardized PPA bidding process, known as LEAP (LevelTen Energy’s Accelerated Process), to all platform buyers this week. The process allows developers to “build [portfolios] of clean energy projects faster.” Trading the conventional open-ended process for a standardized contract cut Google’s PPA negotiation time by 80%.

CFE Manager Model

In 2022, Google developed a new electricity purchasing model, called the “CFE Manager” model.

The Carbon-Free Energy (CFE) Manager – a new kind of entity that acts as a single point of contact for clean electricity procurement – sits at the center of this model. The CFE Manager takes on the energy modeling and design work, provides carbon-intensity guarantees, and takes on most of the shaping and firming risks usually passed on to PPA buyers.

The idea is that the buyer sets its requirements, and the CFE Manager designs and models the right mix of grid, renewable, and battery storage assets to fulfill those requirements.

In its September 2022 white paper, The CFE Manager: A New Model for Driving Decarbonization Impact, Google identifies 5 benefits:

1. Predictable price
2. Scalability
3. Additionality
4. Full service
5. Hourly certification

Google goes into more depth:

Predictable Price: In each example, Google purchases retail electricity provided by a portfolio of projects at a predictable price (either fixed or indexed) from the CFE Manager for the duration of the supply contract. This preserves a key benefit of purchasing clean energy—accessing competitively priced power and mitigating exposure to electricity price volatility. The CFE Manager is able to lock in long-term, predictable pricing for the customer mainly because their back-end exposure is largely hedged by the hourly matching of fixed price wind and solar PPAs.

Scalability: Google’s electricity demand, especially at our data centers, tends to grow steadily over time. Any supply structure should include the ability to match future load growth with additional CFE generation over time to ensure it meets CFE performance thresholds. We also seek to work with suppliers to build solutions that are scalable and replicable beyond Google.

Additionality: As discussed in Google’s detailed 24/7 CFE methodology paper, additionality is an important principle of our energy procurement. By ‘additionality’, we mean that Google’s actions directly support an increase in the amount of CFE in the electricity grid mix. This could include enabling deployment of clean electricity that is new to the grid, repowering existing assets to increase their output, or extending the lives of clean energy assets that might otherwise be retired.

Full Service: We expect the CFE Manager to act as our all-in retail energy supplier for the duration of the contract. This means providing energy shaping, firming, and balancing services and continuously monitoring the market for potential new projects to add to the CFE portfolio. Many CFE Managers also provide added customer features such as real-time CFE dashboards, invoice auditing, market settlement validation, and bespoke analytics.

Hourly Certification: Significant progress has been made in recent years to create new systems to track and certify carbon-free energy at an hourly level through Time-based Energy Attribute Certificates (T-EACs). We include a requirement in each CFE Manager agreement that, once T-EACs systems are created within a particular market, they will be used to certify our CFE purchases at an hourly level.

CFE Manager Model and Hydrogen

For anyone operating in the hydrogen industry awaiting Treasury guidance on Section 45V, and specifically whether and how the three pillars of additionality, regionality, and time-matching will be included, this should all sound very familiar.

Google’s approach solves several problems confronting h2 producers who want to capture the full $3.00/kg value of the 45V production tax credit.

• First, it provides a fixed or indexed price to the buyer. Sensitivity analyses show that electricity costs account for 60% or more of projected OPEX for hydrogen producers. A known price greatly helps manage those costs.
• Second, the model shifts additionality and hourly time-matching compliance to the CFE Manager – an entity better equipped to handle those complexities. We don’t yet know what rules Treasury will apply regarding additionality and time-matching, but I guarantee that every renewable h2 producer would love to offload compliance to another entity.
• Third, it allows for scalability. While some h2 projects (specifically those that are their own offtaker) may be able to build out capacity all at once, others will need to scale with market demand. Building additional electrolyzer capacity is relatively straightforward; current lead times are 18-24 months and not much additional land is needed. Planning for additional renewable generation is another thing entirely with large land requirements, long interconnection queues, and supply chain issues all potentially putting renewables expansion out of sync with electrolyzer expansion. Offloading those concerns to a CFE Manager will it make it much more feasible for h2 producers to scale over time.

Companies and Contracts

Google published the results of three case studies, which give a window into the kind of contract terms the CFE Manager model is capable of delivering, and the companies able fill the Manager role.

AES, a large energy company, took the role of CFE Manager for three Google datacenters in Virginia, providing 500 MW of new-to-the-grid renewables + batteries with a guarantee of 90% carbon-free energy calculated on an hourly basis. In exchange, Google will pay AES a fixed price for energy for 10 years.

ENGIE, a French utility, is Google’s CFE Manager for German operations powered by 23 renewable projects. ENGIE committed to a minimum carbon free energy target, calculated annually, and is responsible for any penalties under the EU Emissions Trading Scheme. Google retains the right to procure renewable energy separately and then “sleeve” that power to ENGIE to manage on Google’s behalf.

Silicon Valley Clean Energy (SVCE), a community choice energy aggregation (CCA) entity, is the CFE Manager for Google’s main campus in California. SVCE will procure PPAs for Google, increase Google’s carbon-free energy share up to 92% by 2027, and maintain the agreed upon CFE share as Google’s needs scale.

Going Forward

The LevelTen’s LEAP PPA process in combination with Google’s CFE Manager model could seriously accelerate projects that depend on a high renewable energy share for success – like renewable hydrogen projects.