The production and consumption of carbon-free energy (CFE) has accelerated worldwide in recent years, driven by large private energy consumers who have been leading this transition.

For example, Google has been matching 100% of its global annual electricity consumption with purchases of renewable energy since 2017. The public sector is also an increasing driver, as federal agencies (including the U.S. Dept. of Energy) and local power utilities commit to growing their use of renewable energy sources. This market-driven trend is projected to continue regardless of geopolitics.

COMMENTARY

But there are two primary reasons why matching 100% of a household’s or company’s annual electricity consumption with purchases of renewable energy does not necessarily result in 100% CFE usage. First, not all renewable energy sources are completely carbon-free. Second, some renewable energy resources cannot reliably supply CFE at all times that consumer demand requires, which increases reliance on traditional fossil fuel resources (and the resulting emissions) at certain times of the day. The chart below illustrates this concept: During a given day, when energy demand (the orange line) exceeds CFE production (the blue line), fossil fuel-derived energy must fill the gap.

How can power generators and utilities more effectively reduce emissions while transitioning to 100% CFE production? First, they can diversify their use of renewable energy resources, where available, and strategically deploy carbon capture technology at traditional fossil assets. In addition to widely adopted wind and solar technologies, other promising sources of renewable energy–such as geothermal, small hydropower and biomass–should be further explored and developed.

Second, power generators and utilities can increase energy storage capacity to store any excess CFE that has been produced by renewable energy sources (i.e., where the blue line is above the orange line in the above chart). This CFE is then available for later distribution at times when energy demand exceeds available CFE production.

Finally, accurate energy demand modeling is needed at a more granular level to deploy CFE sources on grids as and when needed, helping to provide needed background information to address the issues discussed above. While large-scale energy modeling can help predict how much energy a given grid may require on a monthly or annual basis, small-scale modeling can help predict when sources of CFE production are able to satisfy energy demand. When they fall short, market participants can explore alternative CFE production sources and battery storage solutions to prevent CFE energy from being lost during times of low demand.

The transition to 100% true CFE production will require shifts in the legal and financing industries. This will range from regulatory developments that will need to be interpreted and applied to financing, and energy contracting structures that will be developed to assist in making sure CFE reaches grids and is delivered to consumers.

Electricity demand is only projected to increase in the coming years, as the growth of artificial intelligence and advanced computing will require immense amounts of energy. In addition, as the market demands that CFE make up a greater proportion of overall energy production, innovations in the renewable energy sector will arise to meet this demand and help create the technologies needed to utilize multiple sources of renewable energy, energy storage and electric grid modeling.

—Joshua Belcher is a partner with Holland & Knight LLP,  focused on energy and natural resources. Blaine Remmick and Nikolai Hood are corporate associates with Holland & Knight LLP.