Policymakers need to acknowledge the physics of electricity if they want to craft policies that effectively support the development of clean electricity generation.
There is no such thing as clean electricity, and yet it is often for sale. In many states, salespeople will come to your door and offer you the option to switch from “dirty” to “clean” electricity. Similarly, I often hear that hydrogen is beneficial to the climate only if it is “powered” by clean electricity. But both of these statements are fundamentally misleading. Even though electricity can be cleanly produced—that is, produced without emitting greenhouse gases—“clean” electricity cannot be traced across the grid from a generator to a consumer. What you consume is, simply, electricity.
The goal of this blog post is to describe how electric power works and why it is impossible to say that you are purchasing clean electricity. But this is not the end of the story: when you purchase clean electricity, you really are purchasing something more than just electricity, and that can make a difference in emissions. That extra something is called an electricity “attribute.” In the second half of this blog post, I will describe what electricity attributes are and what they might mean for the environment.
Electricity Is Not Just Electrons
The simple idea that electricity is solely about electrons traveling down a wire is wrong, or at least incomplete. Even if you could label the electrons and track them through the grid, you still wouldn’t know where the electricity you consumed came from. In fact, the average speed of an electron in a wire is a few feet per hour. If you had to wait for an electron to come to your house from a wind farm, you’d be waiting a very long time. Moreover, most of the electricity transmitted in the United States today is a type of electric current called alternating current, in which the electrons change direction 120 times per second and, on average, stay in one place.
So, what is really going on? Instead of electrons traveling from generator to consumer, the power borne by electricity is in the electric and magnetic fields that surround a given wire, and these fields move at the speed of light. The movement of the electrons in the wires, which is driven by electricity generators, maintains the electric and magnetic fields. The power that gets consumed is drawn from those surrounding fields.
These electric and magnetic fields power your refrigerator, clothes dryer, or electric car, and the fields don’t come with a label of “clean” or “dirty.” This is what I mean when I say that you can’t purchase clean electricity; the power resides in the fields, and the fields are generated by the electric grid as a whole. Even contractual relationships in which people commonly speak of the “deliverability” of power, such as power purchase agreements, ultimately are merely financial transactions.
Clean Electricity Is a Financial Transaction
Given the physics, one could easily say that all talk of purchasing clean electricity is greenwashing, a fiction of no import. But this conclusion isn’t true. Something actually is being purchased: the “attribute” of clean energy.
This idea, used in chain-of-custody models, separates the attribute of being clean from the actual transmission of electricity. The attributes are embodied as renewable energy credits (for renewable energy) and energy attribute credits (more broadly). These credits can be bought, sold, and tracked, even though tracking the electricity itself is impossible. These credits often are transferred from producer to consumer via contractual relationships such as power purchase agreements, but the credits also can be bought and sold on an open market as “unbundled” credits.
Some of these credits, called “compliance” credits, are purchased to comply with renewable portfolio standards. These standards mandate that utilities purchase compliance credits to demonstrate that a certain fraction of electricity in a state comes from renewable energy sources. In this way, the demand for compliance credits is set by state policy.
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However, many other credits are “voluntary” and not associated with mandatory programs. The demand for these voluntary credits comes from consumers who want to say that they are consuming clean electricity. This set of consumers includes companies that have commitments to reduce indirect emissions associated with, for example, purchases of electricity, known as “Scope 2” emissions, and companies that sell “clean electricity” to residential customers.
While any of these credits—whether for compliance with state policies or in voluntary markets—are associated with the production of clean electricity, they ultimately are pieces of paper, and their sale and purchase are a purely financial transaction. Stating this reality does not denigrate these credits; pieces of paper still can have an impact, especially when the pieces of paper are worth real money. The demand for these credits often is sufficient to give them a nonzero price, and in that case, when someone buys a credit from a generator of clean electricity, that purchase constitutes additional money that’s transferred to developers of clean energy. This money can drive additional deployment of clean energy, although the exact amount of deployment can be difficult to determine.
Conclusions
This blog post only scratches the surface of the challenges and impacts that are associated with the unbundling of electricity and the attributes of electricity. In particular, understanding how unbundled energy attribute credits in voluntary markets may or may not lead to emissions reductions has long been a source of controversy. This controversy has resulted in proposals to impose restrictions that attempt to restrict how energy attribute credits are used to increase the level of certainty for environmental benefits.
More clarity about clean electricity also will be important for the ongoing revision of the guidance for Scope 2 emissions under the Greenhouse Gas Protocol, a widely used framework for measuring greenhouse gas emissions. I will return to the issue of emissions accounting in a future article.
The prominence of energy attribute credits in policymaking has risen in recent years. The value of tax credits such as the 45V tax credit for the production of clean hydrogen, along with the 45Y and 48E tax credits for clean electricity, depend both on the direct emissions from the production of hydrogen or electricity and on any upstream emissions from the production of fuels. How energy attribute credits can help determine the eligibility or value of these tax credits has been the subject of intense debate. The desire to show that electricity is clean may become even stronger in the future, given the emphasis on electrifying the economy as a pathway to decarbonization.
But effective policymaking depends on an understanding of the true nature of things. Electricity is neither clean nor dirty; it’s just electricity. This fact isn’t the end of the story, but it is a good place to start.
